0000891804-08-001663.txt : 20120802
0000891804-08-001663.hdr.sgml : 20120802
20080605100847
ACCESSION NUMBER: 0000891804-08-001663
CONFORMED SUBMISSION TYPE: S-6/A
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20080605
DATE AS OF CHANGE: 20080624
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: Van Kampen Unit Trusts Series 778
CENTRAL INDEX KEY: 0001402931
IRS NUMBER: 000000000
FILING VALUES:
FORM TYPE: S-6/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-150557
FILM NUMBER: 08882099
BUSINESS ADDRESS:
STREET 1: ONE PARKVIEW PLAZA
CITY: OAKBROOK TERRACE
STATE: IL
ZIP: 60181
BUSINESS PHONE: 201-830-5109
MAIL ADDRESS:
STREET 1: ONE PARKVIEW PLAZA
CITY: OAKBROOK TERRACE
STATE: IL
ZIP: 60181
S-6/A
1
file002.txt
VEOT 778
FILE NO: 333-145371
CIK #1402931
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
ON
AMENDMENT NO. 1
TO
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: VAN KAMPEN UNIT TRUSTS, SERIES 778
B. Name of Depositor: VAN KAMPEN FUNDS INC.
C. Complete address of Depositor's principal executive offices:
522 Fifth Avenue
New York, New York 10036
D. Name and complete address of agents for service:
Mark J. Kneedy Amy R. Doberman
Chapman and Cutler LLP Managing Director
111 West Monroe Street Van Kampen Investments Inc.
Chicago, Illinois 60603 522 Fifth Avenue
New York, New York 10036
E. Title of securities being registered: Units of undivided fractional
beneficial interest.
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
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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.
The information in this prospectus is not complete and may be changed. No one
may sell Units of the Portfolio until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell Units and is not soliciting an offer to buy Units in any state where the
offer or sale is not permitted.
Preliminary Prospectus Dated June 5, 2008
Subject to Completion
Balanced Market Allocation Strategy 2008-2
(Van Kampen Unit Trusts, Series 778)
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The Portfolio seeks above-average capital appreciation. The Portfolio seeks
to achieve its objective by investing in a portfolio of stocks and
exchange-traded funds ("ETFs") that invest in stocks and fixed income
securities. Of course, we cannot guarantee that the Portfolio will achieve its
objective.
______ , 2008
You should read this prospectus and retain it for future reference.
--------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved of
the Units or passed upon the adequacy or accuracy of this prospectus.
Any contrary representation is a criminal offense.
Van Kampen
Investments
Balanced Market Allocation Strategy
Investment Objective. The Portfolio seeks above-average capital appreciation.
Principal Investment Strategy. The Portfolio seeks to achieve its objective
by investing in a portfolio of stocks and exchange-traded funds ("ETFs") that
invest in stocks and fixed income securities. The Portfolio provides broad
market exposure to focused equity and fixed income styles through ETFs as well
individual foreign and domestic equity exposure through four separate stock
selection investment strategies. The four investment strategies are: the Large
Cap Growth Strategy, the Large Cap Value Strategy, the "SMID" Strategy and the
EAFE Select 20 Strategy. The EAFE Select 20 Strategy selection model was
developed by the Sponsor. The Large Cap Growth Strategy, Large Cap Value
Strategy and "SMID" Strategy use proprietary, quantitative stock selection
models developed by Lightstone Capital Management LLC, Portfolio Consultant to
the Portfolio for these strategies. The selection date for the strategies was
____, 2008.
ETFs. In selecting the ETFs for the Portfolio, the Sponsor sought to choose
ETFs that would provide broad asset class exposure to each particular investment
style. The Sponsor selected equity ETFs to complement each equity investment
strategy's investment style. Considerations for selection included the index
from which each of the four equity investment strategies was based, as well as
the market capitalization and liquidity of the ETF. The Sponsor's fixed income
ETF allocations considered factors such as economic outlook, current interest
rates, credit risk and the yield curve as well as the term of the Portfolio. The
Sponsor selected ETFs based on the term and types of bonds that make up each
fixed income ETF and how these particular ETFs fit into the fixed income
allocation of the Portfolio.
Approximately ____% of the Portfolio consists of ETFs that are funds
classified as "non-diversified" under the Investment Company Act of 1940. These
funds have the ability to invest more than 5% of their assets in securities of a
single issuer and may also own more than 10% of the outstanding voting
securities of an issuer. These factors could reduce diversification.
EAFE Select 20 Strategy. The Sponsor begins this strategy with the stocks in
the Morgan Stanley Capital International Europe, Australasia and Far East Index,
one of the most widely-used benchmarks for international investing. Stocks
traded in Singapore are eliminated from the strategy to help limit exposure to
uncertain political and economic conditions. The stocks are screened to include
only those companies with positive one- and three-year sales and earnings growth
and three years of positive dividend growth. The remaining stocks are ranked by
market capitalization and the top 75% are retained. The strategy selects the
twenty highest dividend-yielding stocks for the Portfolio.
Large Cap Growth Strategy. The Portfolio Consultant begins with the Standard
& Poor's 500 Index and eliminates all stocks with a share price less than $5.
The remaining stocks are ranked based on price momentum. The price momentum of a
stock is calculated by comparing its current price with the price of the stock 6
months and 12 months before the stock selection date. The 75 companies with the
highest price momentum are selected. The model next ranks these 75 stocks by
Earnings Pressure. Earnings Pressure is a proprietary formula which uses the
increase in estimates of future earnings by analysts that follow each stock. The
strategy selects the 15 stocks with the highest Earnings Pressure, provided that
no more than six stocks may be selected from any single industry (as defined by
Zacks Investment Research), no more than two stocks may have a market
capitalization of less than $5 billion dollars and provided that the stock of
any affiliate of Van Kampen Investments Inc. or any of its affiliates will be
excluded and replaced with the stock with the next highest Earnings Pressure. In
addition, a stock will be excluded and such stock will be replaced with the
stock with the next highest Earnings Pressure if, based on publicly available
information as of the selection date, the company is the target of an announced
business acquisition which the Sponsor expects will close within six months of
the date of this prospectus.
The Standard & Poor's 500 Index is an unmanaged index generally considered
representative of the U.S. stock market.
Large Cap Value Strategy. This strategy seeks to identify 15 "dividend yield"
stocks and 15 "dividend growth" stocks from the Russell 1000 Index by
alternately applying the "Dividend Yield Component" and then the "Dividend
Growth Component" described below. The strategy selects one stock from the
Dividend Yield Component and then one stock from the Dividend Growth Component
until 30 stocks are selected, provided that no more than 50%, by weight, of the
initial selection may be selected from any single industry (as defined by Zacks
Investment Research) and no more than 20%, by weight, of the initial selection
may have a market cap of less than $5 billion. If, applying either strategy
component, a stock is selected that causes either condition to fail, the stock
is not selected and the stock from that component with the next highest Earnings
Pressure is selected. The 15 Dividend Yield Component stocks constitute
approximately 60% of the initial selection and the 15 Dividend Growth Component
stocks constitute approximately 40% of the initial selection.
o Dividend Yield Component. Beginning with the Russell 1000 Index,
eliminate all stocks with a share price less than $5. The 20% of
companies with the highest indicated dividend yield are selected. The
model next ranks the remaining stocks by Earnings Pressure and selects
the 15 stocks with the highest Earnings Pressure provided that the
stock of any affiliate of Van Kampen Investments Inc. or any of its
affiliates will be excluded and replaced with the stock with the next
highest Earnings Pressure. In addition, a stock will be excluded and
such stock will be replaced with the stock with the next highest
Earnings Pressure if, based on publicly available information as of
the selection date, the company is the target of an announced business
acquisition which the Sponsor expects will close within six months of
the date of this prospectus. The stocks are weighted approximately
equally within this component.
o Dividend Growth Component. Beginning with the Russell 1000 Index,
eliminate all stocks with a share price less than $5. The strategy
then selects the stocks with a three-year history of increasing
dividends. The model next ranks these stocks by Earnings Pressure and
selects the 15 stocks with the highest Earnings Pressure provided that
the stock of any affiliate of Van Kampen Investments Inc. or any of
its affiliates will be excluded and replaced with the stock with the
next highest Earnings Pressure. In addition, a stock will be excluded
and such stock will be replaced with the stock with the next highest
Earnings Pressure if, based on publicly available information as of
the selection date, the company is the target of an announced business
acquisition which the Sponsor expects will close within six months of
the date of this prospectus. The stocks are weighted approximately
equally within this component.
If a stock is selected in the Dividend Growth Component and that stock has
previously been selected in the Dividend Yield Component, the Dividend Growth
stock is not selected again. Instead the stock in the Dividend Growth Component
with the next highest Earnings Pressure is selected. Similarly, if a stock is
selected in the Dividend Yield Component and that stock has previously been
selected in the Dividend Growth Component, the Dividend Yield stock is not
selected again. Instead the stock in the Dividend Yield Component with the next
highest Earnings Pressure is selected subject to the sector and market cap
constraints discussed above.
The Russell 1000 Index is a widely used index that seeks to provide a measure
of the risk and return characteristics of large cap companies in the United
States. A company's stock will generally be considered large cap if the
company's market capitalization equals or exceeds $5 billion. However, the
strategy may include a limited number of stocks with lower market
capitalizations.
"SMID" Strategy. This strategy seeks to identify 15 "Mid Cap Value" stocks
and 25 "Small Cap Growth" stocks from the Standard & Poor's MidCap 400 Index and
the Russell 2000 Index, respectively, by alternately applying the "Mid Cap Value
Component" and then the "Small Cap Growth Component" described below. The
strategy selects one stock from the Mid Cap Value Component and then one stock
from the Small Cap Growth Component until 15 stocks are selected for the Mid Cap
Value Component and 25 stocks are selected for the Small Cap Growth Component.
The 15 Mid Cap Value Component stocks constitute approximately two-thirds of the
initial selection and the 25 Small Cap Growth Component stocks constitute
approximately one-third of the initial selection.
o Mid Cap Value Component. Beginning with the S&P MidCap 400 Index,
eliminate all stocks with a share price less than $5. The remaining
stocks are ranked based on price to book value (current stock price
divided by the book value per share). A low price to book ratio can be
considered one of the ratios used to identify a value stock. The 100
companies with the lowest price to book ratio are selected. The model
next ranks these 100 stocks by Earnings Pressure. The strategy selects
the 15 stocks with the highest Earnings Pressure provided that a stock
will be excluded and such stock will be replaced with the stock with
the next highest Earnings Pressure if, based on publicly available
information as of the selection date, the company is the target of an
announced business acquisition which the Sponsor expects will close
within six months of the date of this prospectus. The stocks are
weighted approximately equally within this component.
o Small Cap Growth Component. Beginning with the Russell 2000 Index,
eliminate all stocks with a share price less than $5. The model next
ranks the remaining stocks by Earnings Pressure. The strategy selects
the 25 stocks with the highest Earnings Pressure provided that a stock
will be excluded and such stock will be replaced with the stock with
the next highest Earnings Pressure if, based on publicly available
information as of the selection date, the company is the target of an
announced business acquisition which the Sponsor expects will close
within six months of the date of this prospectus. The stocks are
weighted approximately equally within this component.
If a stock is selected in the Small Cap Growth Component and that stock has
previously been selected in the Mid Cap Value Component, the Small Cap Growth
stock is not selected again. Instead the stock in the Small Cap Growth Component
with the next highest Earnings Pressure is selected. Similarly, if a stock is
selected in the Mid Cap Value Component and that stock has previously been
selected in the Small Cap Growth Component, the Mid Cap Value stock is not
selected again. Instead the stock in the Mid Cap Value Component with the next
highest Earnings Pressure is selected.
The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index. The Russell 3000 Index measures the
performance of the 3,000 largest U.S. companies based on total market
capitalization. A company's stock will be considered small-cap if the company is
included in the Russell 2000 Index as of the strategy selection date.
The S&P MidCap 400 Index is a widely used index for mid-sized companies. The
index seeks to provide a measure of the risk and return characteristics of
mid-sized companies in the United States. It covers approximately 7% of the U.S.
equities market. A company's stock will generally be considered mid-cap for the
purpose of selecting stocks for the strategy if the company is included in the
S&P MidCap 400 Index as of the strategy selection date even if it is no longer
included in such index during the life of the strategy.
Principal Risks. As with all investments, you can lose money by investing in
this Portfolio. The Portfolio also might not perform as well as you expect. This
can happen for reasons such as these:
o Security prices will fluctuate. The value of your investment may fall
over time.
o The value of fixed income securities in the ETFs will generally fall
if interest rates, in general, rise. No one can predict whether
interest rates will rise or fall in the future.
o An issuer may be unwilling or unable to make interest and/or principal
payments or declare dividends in the future, or may reduce the level
of dividends declared. This may result in a reduction in the value of
your Units.
o The financial condition of an issuer may worsen or its credit ratings
may drop, resulting in a reduction in the value of your Units. This
may occur at any point in time, including during the initial offering
period.
o The Portfolio invests in shares of ETFs. You should understand the
section titled "ETFs" before you invest. In particular, shares of ETFs
tend to trade at a discount from their net asset value and are subject
to risks related to factors such as the manager's ability to achieve a
fund's objective, market conditions affecting a fund's investments and
use of leverage. The Portfolio and the underlying funds have
management and operating expenses. You will bear not only your share
of the Portfolio's expenses, but also the expenses of the underlying
funds. By investing in other funds, the Portfolio incurs greater
expenses than you would incur if you invested directly in the funds.
o Stocks of foreign companies held by the Portfolio or the funds in the
Portfolio present risks beyond those of U.S. issuers. These risks may
include market and political factors related to the company's foreign
market, international trade conditions, less regulation, smaller or
less liquid markets, increased volatility, differing accounting
practices and changes in the value of foreign currencies.
o We do not actively manage the portfolio. Except in limited
circumstances, the Portfolio will hold, and continue to buy, shares of
the same securities even if their market value declines.
Fee Table
The amounts below are estimates of the direct and indirect expenses that
you may incur based on a $10 Public Offering Price per Unit. Actual expenses may
vary.
As a % of
Public Amount
Offering Per 100
Sales Charge Price Units
--------- ---------
Initial sales charge 1.000% $10.000
Deferred sales charge in first year 1.450 14.500
Creation and development fee 0.500 5.000
------ ------
Maximum first year sales charge 2.950% $29.500
====== ======
Deferred sales charge in second year 1.550 15.500
------ ------
Total sales charge 4.500% $45.000
====== ======
Maximum sales charge on
reinvested dividends 0.000% $ 0.000
====== ======
As a % Amount
of Net Per 100
Assets Units
--------- ---------
Organization Costs % $
====== ======
Annual Expenses
Trustee's fee and operating expenses $
Supervisory, bookkeeping
and administrative fees 0.400
Aquired fund fees and expenses
------ ------
Total % $
====== ======
Example
This example helps you compare the cost of the Portfolio with other unit
trusts and mutual funds. In the example we assume that the expenses do not
change and that the Portfolio's annual return is 5%. Your actual returns and
expenses will vary. Based on these assumptions, you would pay the following
expenses for every $10,000 you invest in the Portfolio. This example assumes
that you continue to follow the Portfolio strategy and roll your investment,
including all distributions, into a new trust every two years subject to the
applicable reduced rollover sales charge.
1 year $
3 years
5 years
10 years
The maximum sales charge is 4.50% of the Public Offering Price per Unit.
The initial sales charge is the difference between the total first year sales
charge (maximum of 2.95% of the Public Offering Price) and the sum of the
remaining first year deferred sales charge and the total creation and
development fee. The first year deferred sales charge is fixed at $0.145 per
Unit and accrues daily from _______ 10, 2008 through _______ 9, 2008. The second
year deferred sales charge is a maximum of $0.155 per Unit (but in no case will
it exceed 1.55% of the Public Offering Price per Unit) and accrues daily from
_______ 10, 2009 through _______ 9, 2009. Your Portfolio pays a proportionate
amount of these charges on the 10th day of each month beginning in the accrual
period until paid in full. The combination of the initial and deferred sales
charges comprises the "transactional sales charge". The creation and development
fee is fixed at $0.05 per Unit and is paid at the earlier of the end of the
initial offering period (anticipated to be three months) or six months following
the Initial Date of Deposit. The Portfolio will bear the management and
operating expenses and investor fees of the underlying funds. While the
Portfolio will not pay these expenses directly out of its assets, these expenses
are shown in the Portfolio's annual expenses above to illustrate the impact of
these expenses. The Trustee or Sponsor will waive fees otherwise payable by the
Portfolio in an amount equal to any 12b-1 fees or other compensation the
Trustee, the Sponsor or an affiliate receives from the funds in connection with
the Portfolio's investment in the funds, including license fees receivable by an
affiliate of the Sponsor from a fund.
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Essential Information
Unit Price at Initial Date of Deposit $10.0000
Initial Date of Deposit _______ , 2008
Special Redemption Date _______ , 2009
Mandatory Termination Date _______ , 2010
Estimated Net Annual Income* $_______ per Unit
Estimated Initial Distribution* $_____ per Unit
Record Dates 10th day of _______ 2008.
_______ 2009 and _______ 2009
Distribution Dates 25th day of _______ 2008,
_______ 2009 and _______ 2009
CUSIP Numbers Cash - 92119_____
Reinvest - 92119_____
Classic Cash - 92119_____
Classic Reinvest - 92119_____
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* As of close of business day prior to Initial Date of Deposit. See
"Rights of Unitholders -- Estimated Distributions."
Balanced Market Allocation Strategy 2008-2
Portfolio
------------------------------------------------------------------------------------------------------------------
Current Cost of
Number Market Value Dividend Securities to
of Shares Name of Issuer (1) per Share (2) Yield (3) Portfolio (2)
---------- ----------------------------------- --------------- ----------- -------------
---------- -------------
$
========== =============
See "Notes to Portfolio".
Notes to Portfolio
(1) The Securities are initially represented by "regular way" contracts for
the performance of which an irrevocable letter of credit has been deposited with
the Trustee. Contracts to acquire Securities were entered into on _______ , 2008
and have a settlement date of _______ , 2008 (see "The Portfolio").
(2) The value of each Security is determined on the bases set forth under
"Public Offering--Unit Price" as of the close of the New York Stock Exchange on
the business day before the Initial Date of Deposit. Other information regarding
the Securities, as of the Initial Date of Deposit, is as follows:
Profit
Cost to (Loss) To
Sponsor Sponsor
-------------- -------------
$ $
"+" indicates that the security was issued by a foreign company.
(3) Current Dividend Yield for each Security is based on the estimated annual
dividends per share and the Security's value as of the most recent close of
trading on the New York Stock Exchange on the business day before the Initial
Date of Deposit. Estimated annual dividends per share are calculated by
annualizing the most recently declared regular dividends or by adding the most
recent regular interim and final dividends declared and reflect any foreign
withholding taxes.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Unitholders of Van Kampen Unit Trusts, Series 778:
We have audited the accompanying statement of condition including the related
portfolio of Balanced Market Allocation Strategy 2008-2 (included in Van Kampen
Unit Trusts, Series 778) as of ______ , 2008. The statement of condition is the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such statement of condition based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the statement
of condition is free of material misstatement. The trust is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of condition, assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the overall
statement of condition presentation. Our procedures included confirmation with
The Bank of New York, Trustee, of cash or an irrevocable letter of credit
deposited for the purchase of Securities as shown in the statement of condition
as of ______ , 2008. We believe that our audit of the statement of condition
provides a reasonable basis for our opinion.
In our opinion, the statement of condition referred to above presents fairly,
in all material respects, the financial position of Balanced Market Allocation
Strategy 2008-2 (included in Van Kampen Unit Trusts, Series 778) as of ______ ,
2008, in conformity with accounting principles generally accepted in the United
States of America.
GRANT THORNTON LLP
New York, New York
______ , 2008
STATEMENT OF CONDITION
As of _______ , 2008
INVESTMENT IN SECURITIES
Contracts to purchase Securities (1) $
-----------
Total $
===========
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities--
Organization costs (2) $
Deferred sales charge liability (3)
Creation and development fee liability (4)
Interest of Unitholders--
Cost to investors (5)
Less: initial sales charge (5)(6)
Less: deferred sales charge, creation and
development fee and organization costs (2)(4)(5)(6)
-----------
Net interest to Unitholders (5)
-----------
Total $
===========
Units outstanding
===========
Net asset value per Unit $
===========
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(1)The value of the Securities is determined by the Trustee on the bases set
forth under "Public Offering--Unit Price". The contracts to purchase
Securities are collateralized by separate irrevocable letters of credit which
have been deposited with the Trustee.
(2)A portion of the Public Offering Price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing the Portfolio.
The amount of these costs are set forth in the "Fee Table". A distribution
will be made as of the earlier of the close of the initial offering period
(approximately three months) or six months following the Initial Date of
Deposit to an account maintained by the Trustee from which the organization
expense obligation of the investors will be satisfied. To the extent that
actual organization costs of the Portfolio are greater than the estimated
amount, only the estimated organization costs added to the Public Offering
Price will be reimbursed to the Sponsor and deducted from the assets of the
Portfolio.
(3)Represents the amount of mandatory distributions from the Portfolio on the
bases set forth under "Public Offering".
(4)The creation and development fee is payable by the Portfolio on behalf of
Unitholders out of the assets of the Portfolio as of the close of the initial
offering period. If Units are redeemed prior to the close of the initial
public offering period, the fee will not be deducted from the proceeds.
(5)The aggregate public offering price and the aggregate mandatory sales charge
are computed on the bases set forth under "Public Offering".
(6) Assumes the maximum first year sales charge.
THE PORTFOLIO
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The Portfolio was created under the laws of the State of New York pursuant to
a Trust Indenture and Trust Agreement (the "Trust Agreement"), dated the date of
this prospectus (the "Initial Date of Deposit"), among Van Kampen Funds Inc., as
Sponsor, Van Kampen Asset Management, as Supervisor, and The Bank of New York,
as Trustee.
On the Initial Date of Deposit, the Sponsor deposited delivery statements
relating to contracts for the purchase of the Securities and an irrevocable
letter of credit in the amount required for these purchases with the Trustee. In
exchange for these contracts the Trustee delivered to the Sponsor documentation
evidencing the ownership of Units of the Portfolio. Unless otherwise terminated
as provided in the Trust Agreement, the Portfolio will terminate on the
Mandatory Termination Date and any remaining Securities will be liquidated or
distributed by the Trustee within a reasonable time. As used in this prospectus
the term "Securities" means the securities (including contracts to purchase
these securities) listed in the "Portfolio" and any additional securities
deposited into the Portfolio.
Additional Units of the Portfolio may be issued at any time by depositing in
the Portfolio (i) additional Securities, (ii) contracts to purchase Securities
together with cash or irrevocable letters of credit or (iii) cash (or a letter
of credit or the equivalent) with instructions to purchase additional
Securities. As additional Units are issued by the Portfolio, the aggregate value
of the Securities will be increased and the fractional undivided interest
represented by each Unit will be decreased. The Sponsor may continue to make
additional deposits into the Portfolio following the Initial Date of Deposit
provided that the additional deposits will be in amounts which will maintain, as
nearly as practicable, the same percentage relationship among the number of
shares of each Security in the Portfolio that existed immediately prior to the
subsequent deposit. Investors may experience a dilution of their investments and
a reduction in their anticipated income because of fluctuations in the prices of
the Securities between the time of the deposit and the purchase of the
Securities and because the Portfolio will pay the associated brokerage or
acquisition fees. Purchases and sales of Securities by your Portfolio may impact
the value of the Securities. This may especially be the case during the initial
offering of Units, upon Portfolio termination and in the course of satisfying
large Unit redemptions.
Each Unit of the Portfolio initially offered represents an undivided interest
in the Portfolio. At the close of the New York Stock Exchange on the Initial
Date of Deposit, the number of Units may be adjusted so that the Public Offering
Price per Unit equals $10. The number of Units, fractional interest of each Unit
in the Portfolio and the estimated distributions per Unit will increase or
decrease to the extent of any adjustment. 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 Portfolio represented by each unredeemed Unit will increase or decrease
accordingly, although the actual interest in the Portfolio will remain
unchanged. Units will remain outstanding until redeemed upon tender to the
Trustee by Unitholders, which may include the Sponsor, or until the termination
of the Trust Agreement.
The Portfolio consists of (a) the Securities (including contracts for the
purchase thereof) listed under the "Portfolio" as may continue to be held from
time to time in the Portfolio, (b) any additional Securities acquired and held
by the Portfolio pursuant to the provisions of the Trust Agreement and (c) any
cash held in the related Income and Capital Accounts. Neither the Sponsor nor
the Trustee shall be liable in any way for any failure in any of the Securities.
OBJECTIVE AND SECURITIES SELECTION
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The Portfolio seeks above-average capital appreciation. The Portfolio seeks
to achieve its objective by investing in a portfolio of stocks and
exchange-traded funds ("ETFs") that invest in stocks and fixed income
securities. There is no assurance that the Portfolio will achieve its objective.
The Portfolio Consultant is not an affiliate of the Sponsor. The Sponsor did
not select the securities for the portion of the Portfolio represented by the
Large Cap Growth Strategy, Large Cap Value Strategy or SMID Strategy. The
Portfolio Consultant may use these strategies in its independent capacity as an
investment adviser and distribute this information to various individuals and
entities. The Portfolio Consultant may recommend or effect transactions in the
Securities. This may have an adverse effect on the prices of the Securities.
This also may have an impact on the price the Portfolio pays for the Securities
and the price received upon Unit redemptions or Portfolio termination. The
Portfolio Consultant may act as agent or principal in connection with the
purchase and sale of securities, which may include the Securities. The Portfolio
Consultant may also issue reports and make recommendations on the Securities.
Neither the Portfolio Consultant nor the Sponsor manage the Trust. You should
note that the selection criteria were applied to the Securities for inclusion in
the Portfolio prior to the Initial Date of Deposit. After the initial selection,
the Securities may no longer meet the selection criteria. Should a Security no
longer meet the selection criteria, we will generally not remove the Security
from the Portfolio. In offering the Units to the public, neither the Sponsor nor
any broker-dealers are recommending any of the individual Securities but rather
the entire pool of Securities in the Portfolio, taken as a whole, which are
represented by the Units.
RISK FACTORS
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All investments involve risk. This section describes the main risks that can
impact the value of the securities in your Portfolio and the underlying
securities in the funds in the Portfolio. You should understand these risks
before you invest. If the value of the securities falls, the value of your Units
will also fall. We cannot guarantee that your Portfolio will achieve its
objective or that your investment return will be positive over any period.
Market Risk. Market risk is the risk that the value of securities in your
Portfolio or in the underlying ETFs will fluctuate. This could cause the value
of your Units to fall below your original purchase price. Market value
fluctuates in response to various factors. These can include changes in interest
rates, inflation, the financial condition of a security's issuer, perceptions of
the issuer, or ratings on a security. Even though your Portfolio is supervised,
you should remember that we do not manage your Portfolio. Your Portfolio will
not sell a security solely because the market value falls as is possible in a
managed fund.
Dividend Payment Risk. Dividend payment risk is the risk that an issuer of a
security, a fund or an underlying security in a fund is unwilling or unable to
pay income on a security. Stocks represent ownership interests in the issuers
and are not obligations of the issuers. Common stockholders have a right to
receive dividends only after the company has provided for payment of its
creditors, bondholders and preferred stockholders. Common stocks do not assure
dividend payments. Dividends are paid only when declared by an issuer's board of
directors and the amount of any dividend may vary over time.
Credit Risk. Credit risk is the risk that a borrower is unable to meet its
obligation to pay principal or interest on a fixed income security held by an
ETF. This may reduce the level of dividends an ETF pays which would reduce your
income and could cause the value of your Units to fall.
Interest Rate Risk. Interest rate risk is the risk that the value of
securities will fall if interest rates increase. In particular, fixed income
securities typically fall in value when interest rates rise and rise in value
when interest rates fall. Fixed income securities with longer periods before
maturity are often more sensitive to interest rate changes.
Exchange-Traded Funds. The Portfolio invests in shares of ETFs. You should
understand the section titled "ETFs" before you invest. Shares of ETFs
frequently trade at a discount from their net asset value in the secondary
market. This risk is separate and distinct from the risk that the net asset
value of fund shares may decrease. The amount of such discount from net asset
value is subject to change from time to time in response to various factors.
ETFs are subject to various risks, including management's ability to meet the
fund's investment objective, and to manage the fund portfolio when the
underlying securities are redeemed or sold, during periods of market turmoil and
as investors' perceptions regarding funds or their underlying investments
change. The Portfolio and the underlying funds have operating expenses. You will
bear not only your share of the Portfolio's expenses, but also the expenses of
the underlying funds. By investing in other funds, the Portfolio incurs greater
expenses than you would incur if you invested directly in the funds.
Index Correlation Risk. Index correlation risk is the risk that the
performance of an ETF in the Portfolio will vary from the actual performance of
the fund's target index, known as "tracking error." This can happen due to
transaction costs, market impact, corporate actions (such as mergers and
spin-offs) and timing variances. Some ETFs use a technique called
"representative sampling," which means that the fund invests in a representative
sample of securities in its target index rather than all of the index
securities. This could increase the risk of a tracking error.
Strategy Risk. The Portfolio Consultant's theories and portfolio selection
strategies may not be successful in identifying stocks that appreciate in value.
The Portfolio may not achieve its objective if this happens.
Foreign Issuer Risk. Some of the securities in the Portfolio and underlying
securities held by certain of the funds in the Portfolio may be issued by
foreign issuers. This subjects the Portfolio to more risks than if it invested
in securities linked solely to domestic securities.
These risks include the risk of losses due to future political and economic
developments, international trade conditions, foreign withholding taxes and
restrictions on foreign investments or exchange of securities, foreign currency
fluctuations or restriction on exchange or repatriation of currencies.
The political, economic and social structures of some foreign countries may
be less stable and more volatile than those in the U.S. Investments in these
countries may be subject to the risks of internal and external conflicts,
currency devaluations, foreign ownership limitations and tax increases. It is
possible that a government may take over the assets or operations of a company
or impose restrictions on the exchange or export of currency or other assets.
Diplomatic and political developments, including rapid and adverse political
changes, social instability, regional conflicts, terrorism and war, could affect
the economies, industries, and securities and currency markets, and the value of
an investment, in non-U.S. countries. No one can predict the impact that these
factors could have on the value of foreign securities.
The purchase and sale of the foreign securities may occur in foreign
securities markets. Certain of the factors stated above may make it impossible
to buy or sell them in a timely manner or may adversely affect the value
received on a sale of securities. In addition, round lot trading requirements
exist in certain foreign securities markets. Brokerage commissions and other
fees generally are higher for foreign securities. Government supervision and
regulation of foreign securities markets, currency markets, trading systems and
brokers may be less than in the U.S. The procedures and rules governing foreign
transactions and custody also may involve delays in payment, delivery or
recovery of money or investments.
Foreign companies may not be subject to the same disclosure, accounting,
auditing and financial reporting standards and practices as U.S. companies.
Thus, there may be less information publicly available about foreign companies
than about most U.S. companies. Certain foreign securities may be less liquid
(harder to sell) and more volatile than many U.S. securities.
Because securities of foreign issuers not listed on a U.S. securities
exchange generally pay dividends and trade in foreign currencies, the U.S.
dollar value of these securities and dividends will vary with fluctuations in
foreign exchange rates. Most foreign currencies have fluctuated widely in value
against the U.S. dollar for various economic and political reasons and foreign
currency exchange markets can be quite volatile depending on the activity of the
large international commercial banks, various central banks, large
multi-national corporations, speculators and other buyers and sellers of foreign
currencies.
Emerging Market Risk. The Portfolio may be exposed to securities issued by
entities located in emerging markets through its investment in stocks or the
underlying funds. Emerging markets are generally defined as countries in the
initial states of their industrialization cycles with low per capita income. The
markets of emerging markets countries are generally more volatile than the
markets of developed countries with more mature economies. All of the risks of
investing in foreign securities described above are heightened by investing in
emerging markets countries.
Value-Style Investment Risk. Certain of the securities held by the Portfolio
or by the funds in the Portfolio are issued by issuers which, based upon their
relatively lower than average price/book ratios, may be undervalued or
inexpensive relative to other issuers in the same industry or the economy as a
whole. These securities are generally selected on the basis of factors such as
an issuer's business and economic fundamentals or the securities' current and
projected credit profiles, relative to current market price. Such securities are
subject to the risk of inaccurately estimating certain fundamental factors and
will generally underperform during periods when value style investments are out
of favor. In addition, securities believed to be undervalued are subject to the
risks such as the issuer's potential business prospects not being realized;
their potential values not being recognized by the market; and the risk that
they were appropriately priced (or overpriced) when acquired due to
unanticipated or unforeseen problems associated with the issuer or industry.
Growth-Style Investment Risk. Certain of the securities held by the Portfolio
or by the funds in the Portfolio are issued by issuers that are considered to be
"growth" companies which have relatively higher than average price/book ratios
or are believed to have potential to experience greater earnings growth rates
relative to other issuers in the same industry or the economy as a whole.
Securities of growth companies may be more volatile than other securities. If
the perception of an issuer's growth potential is not realized, the securities
may not perform as expected, reducing the Portfolio's return. Because different
types of securities tend to shift in and out of favor depending on market and
economic conditions, growth securities may perform differently from the market
as a whole and other types of securities. In addition, due to their relatively
high valuations, growth-themed securities are often more volatile than
value-themed securities. Also, because the value of growth issuers is generally
a function of their expected earnings growth, there is a risk that such earnings
growth may not occur or cannot be sustained.
Small-cap Companies. The Portfolio may be exposed to stocks issued by small
companies through its investment in the securities or the underlying securities
held in the funds. The share prices of these small-cap companies are often more
volatile than those of larger companies as a result of several factors common to
many such issuers, including limited trading volumes, products or financial
resources, management inexperience and less publicly available information.
No FDIC Guarantee. An investment in your Portfolio is not a deposit of any
bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
ETFs
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Exchange-traded funds are investment pools that hold other securities. The
ETFs in the Portfolio are passively-managed index funds that seek to replicate
the performance or composition of a recognized securities index. The ETFs held
by the Portfolio are either open-end management investment companies or unit
investment trusts registered under the Investment Company Act of 1940. Unlike
typical open-end funds or unit investment trusts, ETFs generally do not sell or
redeem their individual shares at net asset value. ETFs generally sell and
redeem shares in large blocks (often known as "Creation Units"), however, the
Sponsor does not intend to sell or redeem ETF shares in this manner. In
addition, securities exchanges list ETF shares for trading, which allows
investors to purchase and sell individual ETF shares among themselves at market
prices throughout the day. The Portfolio will purchase and sell ETF shares on
these securities exchanges. ETFs therefore possess characteristics of
traditional open-end funds and unit investment trusts, which issue redeemable
shares, and of corporate common stocks, which generally issue shares that trade
at negotiated prices on securities exchanges and are not redeemable.
ETFs can provide exposure to broad-based indices, growth and value styles,
market cap segments, sectors and industries, and specific countries or regions
of the world. The securities comprising ETFs may be common equity securities or
fixed income securities although the Portfolio consists of equity ETFs. Each ETF
contains a number of equity securities. In general, equity ETFs contain anywhere
from fewer than 20 equity securities up to more than 1000 equity securities. As
a result, investors in ETFs (and investors in the Portfolio) obtain exposure to
a much greater number of securities than an individual investor would typically
be able to obtain on their own. The performance of ETFs is generally highly
correlated with the indices or sectors which they are designed to track.
PUBLIC OFFERING
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General. Units are offered at the Public Offering Price which includes the
net asset value per Unit plus organization costs plus the sales charge. The net
asset value per Unit is the value of the securities, cash and other assets in
your Portfolio reduced by the liabilities of the Portfolio divided by the total
Units outstanding. The maximum sales charge equals 4.50% of the Public Offering
Price per Unit at the time of purchase.
You pay the initial sales charge at the time you buy Units. The initial sales
charge is the difference between the total first year sales charge percentage
(maximum of 2.95% of the Public Offering Price per Unit) and the sum of the
remaining fixed dollar first year deferred sales charge and the total fixed
dollar creation and development fee. The initial sales charge will be
approximately 1.00% of the Public Offering Price per Unit depending on the
Public Offering Price per Unit. The first year deferred sales charge is $0.145
per Unit and the second year deferred sales charge is a maximum of $0.155 but in
no event will it exceed 1.55% of any investor's Public Offering Price per Unit.
Your Portfolio pays the deferred sales charges in installments as described in
the "Fee Table." If any deferred sales charge payment date is not a business
day, we will charge the payment on the next business day. If you purchase Units
after the initial deferred sales charge payment, you will only pay that portion
of the payments not yet collected. If you redeem or sell your Units prior to
collection of the total deferred sales charge, you will pay any remaining first
year deferred sales charge upon redemption or sale of your Units. If you redeem
Units of the Portfolio prior to the related Special Redemption Date set forth
under "Essential Information," you will not pay any remaining second year
deferred sales charge. The initial and deferred sales charges are referred to as
the "transactional sales charge." The transactional sales charge does not
include the creation and development fee which compensates the Sponsor for
creating and developing your Portfolio and is described under "Expenses." The
creation and development fee is fixed at $0.05 per Unit. Your Portfolio pays the
creation and development fee at the close of the initial offering period as
described in the "Fee Table." If you redeem or sell your Units prior to
collection of the creation and development fee, you will not pay the creation
and development fee upon redemption or sale of your Units. Because the deferred
sales charges imposed during the first year and the creation and development fee
are fixed dollar amounts per Unit, the actual charges will exceed the
percentages shown in the "Fee Table" if the Public Offering Price per Unit falls
below $10 and will be less than the percentages shown in the "Fee Table" if the
Public Offering Price per Unit exceeds $10. In no event will the maximum total
sales charge exceed 4.50% of the Public Offering Price per Unit.
Since the deferred sales charge imposed during the first year and the
creation and development fee are fixed dollar amounts per Unit, your Portfolio
must charge these amounts per Unit regardless of any decrease in net asset
value. However, if the Public Offering Price per Unit falls to the extent that
the maximum sales charge percentage results in a dollar amount that is less than
the combined fixed dollar amounts of the deferred sales charge imposed during
the first year and creation and development fee, your initial sales charge will
be a credit equal to the amount by which these fixed dollar charges exceed your
sales charge at the time you buy Units. In such a situation, the value of
securities per Unit would exceed the Public Offering Price per Unit by the
amount of the initial sales charge credit and the value of those securities will
fluctuate, which could result in a benefit or detriment to Unitholders that
purchase Units at that price. The initial sales charge credit is paid by the
Sponsor and is not paid by the Portfolio. The "Fee Table" shows the sales charge
calculation at a $10 Public Offering Price per Unit and the following examples
illustrate the sales charge at prices below and above $10.
The following examples illustrate the sales charge. If the Public Offering
Price per Unit fell to $6, the maximum first year sales charge would be $0.1770
(2.95% of the Public Offering Price per Unit), which consists of an initial
sales charge of -$0.0180, a first year deferred sales charge of $0.145 and a
creation and development fee of $0.05. Because the second year deferred sales
charge is $0.155 per Unit but may not exceed 1.55% of any investor's Public
Offering Price per Unit, the second year deferred sales charge in this case
would be $0.0930 (1.55% of the Public Offering Price per Unit). Due to the
percentage limitation on the second year deferred sales charge, this amount
would be the amount per Unit collected by the Sponsor from all Unitholders,
including those Unitholders that purchased Units at prices above $6. As a
result, if the Public Offering Price per Unit falls below $10, no Unitholder
will pay the full $0.155 per Unit second year deferred sales charge and
Unitholders that purchase Units at a price above the lowest Public Offering
Price during the offering period will also pay less than 1.55% of their original
purchase price. If the Public Offering Price per Unit rose to $14, the maximum
first year sales charge would be $0.4130 (2.95% of the Public Offering Price per
Unit), consisting of an initial sales charge of $0.2180, a first year deferred
sales charge of $0.145 and the creation and development fee of $0.05. Assuming
that the Public Offering Price per Unit never fell below $10, the second year
deferred sales charge would be $0.155 because the maximum dollar amount of
$0.155 would not exceed 1.55% of any Public Offering Price. If the Public
Offering Price per Unit fell below $10, however, the second year deferred sales
charge for all investors would be limited as described above.
The actual sales charge that may be paid by an investor may differ slightly
from the sales charges shown herein due to rounding that occurs in the
calculation of the Public Offering Price and in the number of Units purchased.
The minimum purchase is 100 Units (25 Units for retirement accounts) but may
vary by selling firm. Certain broker-dealers or selling firms may charge an
order handling fee for processing Unit purchases.
Reducing Your Sales Charge. The Sponsor offers a variety of ways for you to
reduce the sales charge that you pay. It is your financial professional's
responsibility to alert the Sponsor of any discount when you purchase Units.
Before you purchase Units you must also inform your financial professional of
your qualification for any discount or of any combined purchases to be eligible
for a reduced sales charge. You may not combine discounts. Since the deferred
sales charges and creation and development fee are fixed dollar amounts per
Unit, your Portfolio must charge these amounts per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that your
total sales charge is less than the fixed dollar amounts of the deferred sales
charges and creation and development fee, you will receive a credit equal to the
difference between your total sales charge and these fixed dollar charges at the
time you buy Units.
Large Quantity Purchases. You can reduce your sales charge by increasing the
size of your investment. If you purchase Units of the Portfolio in the amounts
shown in the table below during the initial offering period, the first year
sales charge will be as follows:
Transaction First Year
Amount Sales Charge
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Less than $25,000 2.95%
$25,000 - $49,999 2.75
$50,000 - $99,999 2.50
$100,000 - $249,999 2.25
$250,000 - $499,999 2.00
$500,000 - $999,999 1.50
$1,000,000 or more 1.00
Except as described below, these quantity discount levels apply only to
purchases of a single Portfolio made by the same person on a single day from a
single broker-dealer. We apply these sales charges as a percent of the Public
Offering Price per Unit at the time of purchase. We also apply the different
purchase levels on a Unit basis using a $10 Unit equivalent. For example, if you
purchase between 2,500 and 4,999 Units of the Portfolio, your sales charge will
be 2.75% of your Public Offering Price per Unit. These sales charge discounts
are applied to the first year sales charge only and do not affect the second
year deferred sales charge.
For purposes of achieving these levels, you may combine purchases of Units of
the Portfolio offered in this prospectus with purchases of units of any other
Van Kampen-sponsored unit investment trust in the initial offering period. In
addition, Units purchased in the name of your spouse or children under 21 living
in the same household as you will be deemed to be additional purchases by you
for the purposes of calculating the applicable quantity discount level. The
reduced sales charge levels will also be applicable to a trustee or other
fiduciary purchasing Units for a single trust, estate (including multiple trusts
created under a single estate) or fiduciary account. To be eligible for
aggregation as described in this paragraph, all purchases must be made on the
same day through a single broker-dealer or selling agent. You must inform your
broker-dealer of any combined purchases before your purchase to be eligible for
a reduced sales charge.
Fee Accounts. Investors may purchase Units through registered investment
advisers, certified financial planners and registered broker-dealers who in each
case either charge periodic fees for brokerage services, financial planning,
investment advisory or asset management services, or provide such services in
connection with the establishment of an investment account for which a
comprehensive "wrap fee" charge ("Wrap Fee") is imposed ("Fee Accounts"). If
Units of a Portfolio are purchased for a Fee Account and the Portfolio is
subject to a Wrap Fee (i.e., the Portfolio is "Wrap Fee Eligible"), then the
purchase will not be subject to the transactional sales charge but will be
subject to the creation and development fee that is retained by the Sponsor.
Please refer to the section called "Fee Accounts" for additional information on
these purchases. The Sponsor reserves the right to limit or deny purchases of
Units described in this paragraph by investors or selling firms whose frequent
trading activity is determined to be detrimental to a Portfolio.
Exchanges. During the initial offering period of the Portfolio, unitholders
of any Van Kampen-sponsored unit investment trusts and unitholders of
unaffiliated unit investment trusts may utilize their redemption or termination
proceeds from such a trust to purchase Units of the Portfolio at the Public
Offering Price per Unit less 1.00%. In order to be eligible for the sales charge
discounts applicable to Unit purchases made with redemption or termination
proceeds from other unit investment trusts, the termination or redemption
proceeds used to purchase Units of the Portfolio must be derived from a
transaction that occurred within 30 days of your Unit purchase. In addition, the
discounts will only be available for investors that utilize the same
broker-dealer (or a different broker-dealer with appropriate notification) for
both the Unit purchase and the transaction resulting in the receipt of the
termination or redemption proceeds used for the Unit purchase. You may be
required to provide appropriate documentation or other information to your
broker-dealer to evidence your eligibility for these reduced sales charge
discounts.
Employees. Employees, officers and directors (including their spouses and
children under 21 living in the same household, and trustees, custodians or
fiduciaries for the benefit of such persons) of Van Kampen Funds Inc. and its
affiliates, and dealers and their affiliates may purchase Units at the Public
Offering Price less the applicable dealer concession. All employee discounts are
subject to the policies of the related selling firm. Only employees, officers
and directors of companies that allow their employees to participate in this
employee discount program are eligible for the discounts.
Distribution Reinvestments. We do not charge any sales charge when you
reinvest distributions from your Portfolio into additional Units of your
Portfolio. Since the deferred sales charges and creation and development fee are
fixed dollar amounts per unit, your Portfolio must charge these amounts per unit
regardless of this discount. If you elect to reinvest distributions, the Sponsor
will credit you with additional Units with a dollar value sufficient to cover
the amount of any remaining deferred sales charge and creation and development
fee that will be collected on such Units at the time of reinvestment. The dollar
value of these Units will fluctuate over time.
Unit Price. The Public Offering Price of Units will vary from the amounts
stated under "Essential Information" in accordance with fluctuations in the
prices of the underlying Securities in the Portfolio. The initial price of the
Securities was determined by the Trustee. The Trustee will generally determine
the value of the Securities as of the Evaluation Time on each business day and
will adjust the Public Offering Price of Units accordingly. The Evaluation Time
is the close of the New York Stock Exchange on each business day. The term
"business day", as used herein and under "Rights of Unitholders--Redemption of
Units", excludes Saturdays, Sundays and holidays observed by the New York Stock
Exchange. The Public Offering Price per Unit will be effective for all orders
received prior to the Evaluation Time on each business day. Orders received by
the Sponsor prior to the Evaluation Time and orders received by authorized
financial professionals prior to the Evaluation Time that are properly
transmitted to the Sponsor by the time designated by the Sponsor, are priced
based on the date of receipt. Orders received by the Sponsor after the
Evaluation Time, and orders received by authorized financial professionals after
the Evaluation Time or orders received by such persons that are not transmitted
to the Sponsor until after the time designated by the Sponsor, are priced based
on the date of the next determined Public Offering Price per Unit provided they
are received timely by the Sponsor on such date. It is the responsibility of
authorized financial professionals to transmit orders received by them to the
Sponsor so they will be received in a timely manner.
The value of portfolio securities is based on the securities' market price
when available. When a market price is not readily available, including
circumstances under which the Trustee determines that a security's market price
is not accurate, a portfolio security is valued at its fair value, as determined
under procedures established by the Trustee or an independent pricing service
used by the Trustee. In these cases, the Portfolio's net asset value will
reflect certain portfolio securities' fair value rather than their market price.
With respect to securities that are primarily listed on foreign exchanges, the
value of the portfolio securities may change on days when you will not be able
to purchase or sell Units. The value of any foreign securities is based on the
applicable currency exchange rate as of the Evaluation Time. The Sponsor will
provide price dissemination and oversight services to the Portfolio.
During the initial offering period, part of the Public Offering Price
represents an amount that will pay the costs incurred in establishing your
Portfolio. These costs include the costs of preparing documents relating to the
Portfolio (such as the registration statement, prospectus, trust agreement and
legal documents), federal and state registration fees, the security selection
fee of the Portfolio Consultant, the initial fees and expenses of the Trustee
and the initial audit. Your Portfolio will sell securities to reimburse us for
these costs at the end of the initial offering period or after six months, if
earlier. The value of your Units will decline when the Portfolio pays these
costs.
Unit Distribution. Units will be distributed to the public by the Sponsor,
broker-dealers and others at the Public Offering Price. Units repurchased in the
secondary market, if any, may be offered by this prospectus at the secondary
market Public Offering Price in the manner described above.
The Sponsor intends to qualify Units for sale in a number of states. Brokers,
dealers and others will be allowed a regular concession or agency commission in
connection with the distribution of Units during the initial offering period as
described in the following table:
Concession
Transaction or Agency
Amount* Commission
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Less than $25,000 2.20%
$25,000 - $49,999 2.10
$50,000 - $99,999 1.90
$100,000 - $249,999 1.70
$250,000 - $499,999 1.50
$500,000 - $999,999 1.10
$1,000,000 or more 0.75
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* The breakpoint concessions or agency commissions are also applied on a Unit
basis using a breakpoint equivalent of $10 per Unit and are applied on
whichever basis is more favorable to the distributor.
For transactions involving unitholders of other unit investment trusts who
use their redemption or termination proceeds to purchase Units of a Portfolio,
this regular concession or agency commission will amount to 1.30% per Unit.
For transactions involving Unitholders who hold Units of a Portfolio
designated with a Regular CUSIP number after the Special Redemption Date set
forth in the "Essential Information," the regular concession or agency
commission will include an additional amount equal to the lesser of $0.12 per
Unit or 1.20% of the lowest Public Offering Price per Unit at which Units were
sold during the initial offering period. This amount will be paid by the Sponsor
to broker-dealers and selling firms following the Special Redemption Date with
respect each Unit designated with a Regular CUSIP number sold by such
broker-dealer or selling firm which remains outstanding after the Special
Redemption Date.
In addition to the regular concession or agency commission set forth above,
all broker-dealers and other selling firms will be eligible to receive
additional compensation based on total initial offering period sales of all
eligible Van Kampen unit investment trusts during a Quarterly Period as set
forth in the following table:
Initial Offering Period Volume
Sales During Quarterly Period Concession
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$2 million but less than $5 million 0.025%
$5 million but less than $10 million 0.050
$10 million but less than $50 million 0.075
$50 million or more 0.100
"Quarterly Period" means the following periods: December - February; March -
May; June - August; and September - November. Broker-dealers and other selling
firms will not receive these additional volume concessions on the sale of units
which are not subject to the transactional sales charge, however, such sales
will be included in determining whether a firm has met the sales level
breakpoints set forth in the table above. Secondary market sales of all unit
investment trusts are excluded for purposes of these volume concessions.
Notwithstanding the foregoing, Wachovia Securities, LLC will receive the maximum
volume concession set forth in the table above for all eligible unit sales. The
Sponsor will pay these amounts out of the transactional sales charge received on
units within a reasonable time following each Quarterly Period. For a trust to
be eligible for this additional compensation for Quarterly Period sales, the
trust's prospectus must include disclosure related to this additional
compensation; a trust is not eligible for this additional compensation if the
prospectus for such trust does not include disclosure related to this additional
compensation.
Except as provided in this section, any sales charge discount provided to
investors will be borne by the selling broker-dealer or agent. For all secondary
market transactions the total concession or agency commission will amount to 80%
of the sales charge. Notwithstanding anything to the contrary herein, in no case
shall the total of any concessions, agency commissions and any additional
compensation allowed or paid to any broker, dealer or other distributor of Units
with respect to any individual transaction exceed the total sales charge
applicable to such transaction. 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.
We may provide, at our own expense and out of our own profits, additional
compensation and benefits to broker-dealers who sell Units of this Portfolio and
our other products. This compensation is intended to result in additional sales
of our products and/or compensate broker-dealers and financial advisors for past
sales. We may make these payments for marketing, promotional or related
expenses, including, but not limited to, expenses of entertaining retail
customers and financial advisors, advertising, sponsorship of events or
seminars, obtaining shelf space in broker-dealer firms and similar activities
designed to promote the sale of the Portfolio and our other products. Fees may
include payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives for meetings or seminars
of a business nature. These arrangements will not change the price you pay for
your Units.
Sponsor Compensation. The Sponsor will receive the total sales charge
applicable to each transaction. Except as provided under "Unit Distribution"
above, any sales charge discount provided to investors will be borne by the
selling dealer or agent. In addition, the Sponsor will realize a profit or loss
as a result of the difference between the price paid for the Securities by the
Sponsor and the cost of the Securities to the Portfolio on the Initial Date of
Deposit as well as on subsequent deposits. See "Notes to Portfolio". The Sponsor
has not participated as sole underwriter or as manager or as a member of the
underwriting syndicates or as an agent in a private placement for any of the
Securities. The Sponsor may realize profit or loss as a result of fluctuations
in the market value of Units held by the Sponsor for sale to the public. In
maintaining a secondary market, the Sponsor will realize profits or losses in
the amount of any difference between the price at which Units are purchased and
the price at which Units are resold (which price includes the applicable sales
charge) or from a redemption of repurchased Units at a price above or below the
purchase price. 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.
Affiliated companies of the Sponsor may receive license fees from certain
ETFs in the Portfolio for use of certain trademarks, service marks or other
property related to indices maintained by these companies. The ETFs are not
sponsored, endorsed, sold or promoted by these affiliates. These affiliates make
no representation or warranty, express or implied, to the owners of these funds
or any member of the public regarding the advisability of investing in funds or
in these funds particularly or the ability of the indices to track general stock
market performance. The indices are determined, composed and calculated without
regard to the issuer of these funds or their owners, including the Portfolio.
The Sponsor, an affiliate or their employees may have a long or short
position in these Securities or related securities. An affiliate may act as a
specialist or market maker for these Securities. An officer, director or
employee of the Sponsor or an affiliate may be an officer or director for
issuers of the Securities.
Market for Units. Although it is not obligated to do so, the Sponsor may
maintain a market for Units and to purchase Units at the secondary market
repurchase price (which is described under "Right of Unitholders--Redemption of
Units"). The Sponsor may discontinue purchases of Units or discontinue purchases
at this price at any time. In the event that a secondary market is not
maintained, a Unitholder will be able to dispose of Units by tendering them to
the Trustee for redemption at the Redemption Price. See "Rights of
Unitholders--Redemption of Units". Unitholders should contact their broker to
determine the best price for Units in the secondary market. Units sold prior to
the time the entire deferred sales charge has been collected will be assessed
the amount of any remaining deferred sales charge at the time of sale. The
Trustee will notify the Sponsor of any Units tendered for redemption. If the
Sponsor's bid in the secondary market equals or exceeds the Redemption Price per
Unit, it may purchase the Units not later than the day on which Units would have
been redeemed by the Trustee. The Sponsor may sell repurchased Units at the
secondary market Public Offering Price per Unit.
RETIREMENT ACCOUNTS
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Units are available for purchase in connection with certain types of
tax-sheltered retirement plans, including Individual Retirement Accounts for
individuals, Simplified Employee Pension Plans for employees, qualified plans
for self-employed individuals, and qualified corporate pension and profit
sharing plans for employees. The minimum purchase for these accounts is reduced
to 25 Units but may vary by selling firm. The purchase of Units may be limited
by the plans' provisions and does not itself establish such plans.
FEE ACCOUNTS
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As described above, Units may be available for purchase by investors in Fee
Accounts where the Portfolio is Wrap Fee Eligible. You should consult your
financial professional to determine whether you can benefit from these accounts.
This table illustrates the sales charge you will pay if the Portfolio is Wrap
Fee Eligible as a percentage of the initial Public Offering Price per Unit on
the Initial Date of Deposit (the percentage will vary thereafter).
Initial sales charge 0.00%
Deferred sales charge 0.00
------
Transactional sales charge 0.00%
======
Creation and development fee 0.50%
------
Total sales charge 0.50%
======
You should consult the "Public Offering--Reducing Your Sales Charge" section
for specific information on this and other sales charge discounts. That section
governs the calculation of all sales charge discounts. The Sponsor reserves the
right to limit or deny purchases of Units in Fee Accounts by investors or
selling firms whose frequent trading activity is determined to be detrimental to
the Portfolio.
RIGHTS OF UNITHOLDERS
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Distributions. Dividends, net of expenses, and any net proceeds from the sale
of Securities received by the Portfolio will generally be distributed to
Unitholders on each Distribution Date to Unitholders of record on the preceding
Record Date. These dates appear under "Essential Information". In addition, the
Portfolio will generally make required distributions at the end of each year
because it is structured as a "regulated investment company" for federal tax
purposes. Unitholders will also receive a final distribution of dividends when
their Portfolio terminates. A person becomes a Unitholder of record on the date
of settlement (generally three business days after Units are ordered).
Unitholders may elect to receive distributions in cash or to have distributions
reinvested into additional Units.
Dividends received by the Portfolio are credited to the Income Account of the
Portfolio. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, etc.) are credited to the Capital Account. Proceeds received on the
sale of any Securities, to the extent not used to meet redemptions of Units or
pay deferred sales charges, fees or expenses, will be distributed to
Unitholders. Proceeds received from the disposition of any Securities after a
Record Date and prior to the following Distribution Date will be held in the
Capital Account and not distributed until the next Distribution Date. Any
distribution to Unitholders consists of each Unitholder's pro rata share of the
available cash in the Income and Capital Accounts as of the related Record Date.
Estimated Distributions. The estimated initial distribution and estimated net
annual income per Unit may be shown under "Essential Information." The estimate
of the income the Portfolio may receive is based on the most recent ordinary
quarterly dividends declared by an issuer, the most recent interim and final
dividends declared for certain foreign issuers, or scheduled income payments (in
all cases accounting for any applicable foreign withholding taxes). The actual
net annual distributions are expected to decrease after the first year because a
portion of the Securities included in the Portfolio will be sold during the
first year to pay for organization costs, deferred sales charge and creation and
development fee. Securities may also be sold to pay regular fees and expenses
during the Portfolio's life. Dividend and income conventions for certain
companies and/or certain countries differ from those typically used in the
United States and in certain instances, dividends/income paid or declared over
several years or other periods may be used to estimate annual distributions. The
actual net annual income distributions you receive will vary from the estimated
amount due to changes in the Portfolio's fees and expenses, in actual income
received by the Portfolio, currency fluctuations and with changes in the
Portfolio such as the acquisition, call, maturity or sale of Securities. Due to
these and various other factors, actual income received by the Portfolio will
most likely differ from the most recent dividends or scheduled income payments.
Reinvestment Option. Unitholders may have distributions automatically
reinvested in additional Units without a sales charge (to the extent Units may
be lawfully offered for sale in the state in which the Unitholder resides). The
CUSIP numbers are set forth under "Essential Information". Brokers and dealers
can use the Dividend Reinvestment Service through Depository Trust Company or
purchase a Reinvest CUSIP, if available. To participate in this reinvestment
option, a Unitholder must file with the Trustee a written notice of election,
together with any certificate representing Units and other documentation that
the Trustee may then require, at least five days prior to the related Record
Date. A Unitholder's election will apply to all Units owned by the Unitholder
and will remain in effect until changed by the Unitholder. The reinvestment
option is not offered during the 30 days prior to termination. If Units are
unavailable for reinvestment or this reinvestment option is no longer available,
distributions will be paid in cash.
A participant may elect to terminate his or her reinvestment plan and receive
future distributions in cash by notifying the Trustee in writing no later than
five days before a Distribution Date. The Sponsor shall have the right to
suspend or terminate the reinvestment plan at any time. The reinvestment plan is
subject to availability or limitation by each broker-dealer or selling firm.
Broker-dealers may suspend or terminate the offering of a reinvestment plan at
any time. Please contact your financial professional for additional information.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at Unit Investment Trust Division, 111 Sanders Creek
Parkway, East Syracuse, New York 13057. Certificates must be tendered to the
Trustee, duly endorsed or accompanied by proper instruments of transfer with
signature guaranteed (or by providing satisfactory indemnity in connection with
lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. No later than the seventh day following the
tender, the Unitholder will be entitled to receive in cash an amount for each
Unit equal to the Redemption Price per Unit next computed on the date of tender.
The "date of tender" is deemed to be the date on which Units are received by the
Trustee, except that with respect to Units received by the Trustee after the
Evaluation Time or on a day which is not a Portfolio business day, the date of
tender is deemed to be the next business day. Redemption requests received by
the Trustee after the Evaluation Time, and redemption requests received by
authorized financial professionals after the Evaluation Time or redemption
requests received by such persons that are not transmitted to the Trustee until
after the designated by the Trustee, are priced based on the date of the next
determined redemption price provided they are received timely by the Trustee on
such date. It is the responsibility of authorized financial professionals to
transmit redemption requests received by them to the Trustee so they will be
received in a timely manner. Certain broker-dealers or selling firms may charge
an order handling fee for processing redemption requests. Units redeemed
directly through the Trustee are not subject to such fees.
Unitholders tendering 1,000 or more Units of the Portfolio (or such higher
amount as may be required by your broker-dealer or selling agent) for redemption
may request an in kind distribution of Securities equal to the Redemption Price
per Unit on the date of tender. Unitholders may not request an in kind
distribution of Securities within thirty days of the Portfolio's termination.
The Portfolio generally does not offer in kind distributions of portfolio
securities that are held in foreign markets. An in kind distribution will be
made by the Trustee through the distribution of each of the Securities in
book-entry form to the account of the Unitholder's broker-dealer at Depository
Trust Company. Amounts representing fractional shares will be distributed in
cash. The Trustee may adjust the number of shares of any Security included in a
Unitholder's in kind distribution to facilitate the distribution of whole
shares. The in kind distribution option may be modified or discontinued at any
time without notice. Notwithstanding the foregoing, if the Unitholder requesting
an in kind distribution is the Sponsor or an affiliated person of the Portfolio,
the Trustee may make an in kind distribution to such Unitholder provided that no
one with a pecuniary incentive to influence the in kind distribution may
influence selection of the distributed securities, the distribution must consist
of a pro rata distribution of all portfolio securities (with limited exceptions)
and the in kind distribution may not favor such affiliated person to the
detriment of any other Unitholder.
The Trustee may sell Securities to satisfy Unit redemptions. To the extent
that Securities are redeemed in kind or sold, the size of the Portfolio will be,
and the diversity of the Portfolio may be, reduced. Sales may be required at a
time when Securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. The price received upon redemption may be more
or less than the amount paid by the Unitholder depending on the value of the
Securities at the time of redemption. Special federal income tax consequences
will result if a Unitholder requests an in kind distribution. See "Taxation".
The Redemption Price per Unit and the secondary market repurchase price per
Unit are equal to the pro rata share of each Unit in the Portfolio determined on
the basis of (i) the cash on hand in the Portfolio, (ii) the value of the
Securities in the Portfolio and (iii) dividends receivable on the Securities in
the Portfolio trading ex-dividend as of the date of computation, less (a)
amounts representing taxes or other governmental charges payable out of the
Portfolio, (b) the accrued expenses of the Portfolio and (c) any unpaid deferred
sales charge payments. During the initial offering period, the redemption price
and the secondary market repurchase price will not be reduced by estimated
organization costs or the creation and development fee. For these purposes, the
Trustee will determine the value of the Securities as described under "Public
Offering--Unit Price."
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 any period during which the SEC determines that
trading on that Exchange is restricted or an emergency exists, as a result of
which disposal or evaluation of the Securities is not reasonably practicable, or
for other periods as the SEC may permit.
Special Redemption for Classic CUSIPs. On the Special Redemption Date set
forth in the "Essential Information," the Trustee will automatically redeem
Units designated with a Classic CUSIP number. Some Portfolios do not offer
Classic CUSIP numbers. CUSIP means Committee on Uniform Security Identification
Procedures. CUSIP numbers are used by the financial industry to process
securities transactions. Unitholders who hold Classic CUSIP Units will receive a
cash distribution of their redemption proceeds as described in the previous
section in connection with this special redemption unless the Unitholder elects
to receive an in kind distribution of portfolio securities as described above
five business days prior to the Special Redemption Date. Of course, all
Unitholders may tender their Units for redemption on any business day.
You should consider a Classic CUSIP if you intend to hold your investment for
15 months or less. You should consider a Regular CUSIP if you intend to hold
your investment for the entire term of the Portfolio. Regular CUSIP Units in the
Portfolio will remain outstanding after this special redemption unless tendered
for redemption by a Unitholder. Unitholders may request a change in the CUSIP
number of their Units at any time provided that the request is received by the
Trustee or Sponsor no less than five business days prior to the Special
Redemption Date.
Exchange Option. When you redeem Units of your Portfolio or when your
Portfolio terminates, you may be able to exchange your Units for units of other
Van Kampen unit trusts at a reduced sales charge. You should contact your
financial professional for more information about trusts currently available for
exchanges. Before you exchange Units, you should read the prospectus of the new
trust carefully and understand the risks and fees. You should then discuss this
option with your financial professional to determine whether your investment
goals have changed, whether current trusts suit you and to discuss tax
consequences. We may discontinue this option at any time with 60 days notice.
Units. Ownership of Units is evidenced in book-entry form unless a Unitholder
makes a written request to the Trustee that ownership be in certificate form.
Units are transferable by making a written request to the Trustee and, in the
case of Units in certificate form, by presentation of the certificate to the
Trustee properly endorsed or accompanied by a written instrument or instruments
of transfer. A Unitholder must sign the written request, and certificate or
transfer instrument, exactly as his name appears on the records of the Trustee
and on the face of any certificate with the signature guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("STAMP") or a
signature guarantee program accepted by the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator or
certificates of corporate authority. Fractional certificates will not be issued.
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 transfer or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee of
satisfactory indemnity, evidence of ownership and payment of expenses incurred.
Mutilated certificates must be surrendered to the Trustee for replacement.
Reports Provided. Unitholders will receive a statement of dividends and other
amounts received by a Portfolio for each distribution. Within a reasonable time
after the end of each year, each person who was a Unitholder during that year
will receive a statement describing dividends and capital received, actual
Portfolio distributions, Portfolio expenses, a list of the Securities and other
Portfolio information. Unitholders may obtain evaluations of the Securities upon
request to the Trustee. If you have questions regarding your account or your
Portfolio, please contact your financial advisor or the Trustee. The Sponsor
does not have access to individual account information.
PORTFOLIO ADMINISTRATION
--------------------------------------------------------------------------------
Portfolio Administration. The Portfolio is not a managed fund and, except as
provided in the Trust Agreement, Securities generally will not be sold or
replaced. The Sponsor may, however, direct that Securities be sold in certain
limited circumstances to protect the Portfolio based on advice from the
Supervisor. These situations may include events such as the issuer having
defaulted on payment of any of its outstanding obligations or the price of a
Security has declined to such an extent or other credit factors exist so that in
the opinion of the Supervisor retention of the Security would be detrimental to
the Portfolio. If a public tender offer has been made for a Security or a merger
or acquisition has been announced affecting a Security, the Trustee may either
sell the Security or accept an offer if the Supervisor determines that the sale
or exchange is in the best interest of Unitholders. The Trustee will distribute
any cash proceeds to Unitholders. In addition, the Trustee may sell Securities
to redeem Units or pay Portfolio expenses or deferred sales charges. If
securities or property are acquired by the Portfolio, the Sponsor may direct the
Trustee to sell the securities or property and distribute the proceeds to
Unitholders or to accept the securities or property for deposit in the
Portfolio. Should any contract for the purchase of any of the Securities fail,
the Sponsor will (unless substantially all of the moneys held in the Portfolio
to cover the purchase are reinvested in substitute Securities in accordance with
the Trust Agreement) refund the cash and sales charge attributable to the failed
contract to all Unitholders on or before the next Distribution Date.
The Sponsor may direct the reinvestment of proceeds of the sale of Securities
if the sale is the direct result of serious adverse credit factors which, in the
opinion of the Sponsor, would make retention of the Securities detrimental to
the Portfolio. In such a case, the Sponsor may, but is not obligated to, direct
the reinvestment of sale proceeds in any other securities that meet the criteria
for inclusion in the Portfolio on the Initial Date of Deposit. The Sponsor may
also instruct the Trustee to take action necessary to ensure that the Portfolio
continues to satisfy the qualifications of a regulated investment company and to
avoid imposition of tax on undistributed income of the Portfolio.
The Trust Agreement requires the Trustee to vote all shares of the funds held
in the Portfolio in the same manner and ratio on all proposals as the owners of
such shares not held by the Portfolio. The Sponsor will instruct the Trustee how
to vote the stocks held in the Portfolio. The Trustee will vote the stocks in
the same general proportion as shares held by other shareholders if the Sponsor
fails to provide instructions.
When your Portfolio sells Securities, the composition and diversity of the
Securities in the Portfolio may be altered. However, if the Trustee sells or
redeems fund shares to redeem Units or to pay Portfolio expenses or sales
charges, the Trustee will do so, as nearly as practicable, on a pro rata basis.
In order to obtain the best price for the Portfolio, it may be necessary for the
Supervisor to specify minimum amounts in which blocks of Securities are to be
sold. In effecting purchases and sales of portfolio securities, the Sponsor may
direct that orders be placed with and brokerage commissions be paid to brokers,
including brokers which may be affiliated with the Portfolio, the Sponsor or
dealers participating in the offering of Units.
Pursuant to an exemptive order, the Portfolio may be permitted to sell
Securities to a new trust when it terminates if those Securities are included in
the new trust. The exemption may enable the Portfolio to eliminate commission
costs on these transactions. The price for those securities will be the closing
sale price on the sale date on the exchange where the Securities are principally
traded, as certified by the Sponsor.
Amendment of the Trust Agreement. The Trustee and the Sponsor may amend the
Trust Agreement without the consent of Unitholders to correct any provision
which may be defective or to make other provisions that will not materially
adversely affect Unitholders (as determined in good faith by the Sponsor and the
Trustee). The Trust Agreement may not be amended to increase the number of Units
or permit acquisition of securities in addition to or substitution for the
Securities (except as provided in the Trust Agreement). The Trustee will notify
Unitholders of any amendment.
Termination. The Portfolio will terminate on the Mandatory Termination Date
or upon the sale or other disposition of the last Security held in the
Portfolio. The Portfolio may be terminated at any time with consent of
Unitholders representing two-thirds of the outstanding Units or by the Trustee
when the value of the Portfolio is less than $500,000 ($3,000,000 if the value
of the Portfolio has exceeded $15,000,000) (the "Minimum Termination Value").
The Portfolio will be liquidated by the Trustee in the event that a sufficient
number of Units of the Portfolio not yet sold are tendered for redemption by the
Sponsor, so that the net worth of the Portfolio would be reduced to less than
40% of the value of the Securities at the time they were deposited in the
Portfolio. If the Portfolio is liquidated because of the redemption of unsold
Units by the Sponsor, the Sponsor will refund to each purchaser of Units the
entire sales charge paid by such purchaser. Unitholders will be notified of any
termination. The Trustee may begin to sell Securities in connection with a
Portfolio termination nine business days before, and no later than, the
Mandatory Termination Date. Approximately forty-five days before this date, the
Trustee will notify Unitholders of the termination and provide a form enabling
qualified Unitholders to elect an in kind distribution of Securities, provided
that Unitholders may not request an in kind distribution of Securities within
thirty days of the Portfolio's termination. Any in kind distribution of
Securities will be made in the manner and subject to the restrictions described
under "Rights of Unitholders--Redemption of Units". Unitholders will receive a
final cash distribution within a reasonable time after the Mandatory Termination
Date. All distributions will be net of Portfolio expenses and costs. Unitholders
will receive a final distribution statement following termination. The
Information Supplement contains further information regarding termination of the
Portfolio. See "Additional Information".
Limitations on Liabilities. The Sponsor, Supervisor and Trustee are under no
liability for taking any action or for refraining from taking any action in good
faith pursuant to the Trust Agreement, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith or gross negligence
(negligence in the case of the Trustee) in the performance of their duties or by
reason of their reckless disregard of their obligations and duties hereunder.
The Trustee is not 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 is
not liable for any action taken by it in good faith under the Trust Agreement.
The Trustee is not liable for any taxes or other governmental charges imposed on
the Securities, on it as Trustee under the Trust Agreement or on the Portfolio
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 Sponsor and Supervisor may rely on any
evaluation furnished by the Trustee and have no responsibility for the accuracy
thereof. Determinations by the Trustee shall be made in good faith upon the
basis of the best information available to it.
Sponsor. Van Kampen Funds Inc. is the Sponsor of the Portfolio. The Sponsor
is a wholly owned subsidiary of Van Kampen Investments Inc. ("Van Kampen
Investments"). Van Kampen Investments is a diversified asset management company
that services more than three million retail investor accounts, has extensive
capabilities for managing institutional portfolios and has more than $111
billion under management or supervision as of January 31, 2008. Van Kampen
Investments has more than 50 open-end funds, more than 30 closed-end funds and
more than 2,700 unit investment trusts that are distributed by authorized
dealers nationwide. Van Kampen Investments is an indirect wholly owned
subsidiary of Morgan Stanley, a preeminent global financial services firm that
provides a wide range of investment banking securities, investment management
and wealth management services. Morgan Stanley is a full service securities firm
engaged in securities trading and brokerage activities as well as providing
investment banking, research and analysis, financing and financial advisory
services. The Sponsor's principal office is located at 522 Fifth Avenue, New
York, New York 10036. As of January 31, 2008, the total stockholders' equity of
Van Kampen Funds Inc. was $144,724,857 (unaudited).
Van Kampen Funds Inc. and your Portfolio have adopted a code of ethics
requiring Van Kampen's employees who have access to information on Portfolio
transactions to report personal securities transactions. The purpose of the code
is to avoid potential conflicts of interest and to prevent fraud, deception or
misconduct with respect to your Portfolio.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Portfolio 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 principal unit investment
trust division offices at 2 Hanson Place, 12th Floor, Brooklyn, New York 11217,
(800) 221-7668. If you have questions regarding your account or your Portfolio,
please contact the Trustee at its principal unit investment trust division
offices or your financial adviser. The Sponsor does not have access to
individual account information. The Bank of New York is subject to supervision
and examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
Additional information regarding the Trustee is set forth in the Information
Supplement, including the Trustee's qualifications and duties, its ability to
resign, the effect of a merger involving the Trustee and the Sponsor's ability
to remove and replace the Trustee. See "Additional Information".
TAXATION
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This section summarizes some of the main U.S. federal income tax consequences
of owning Units of the Portfolio. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example, these
summaries generally do not describe your situation if you are a corporation, a
non-U.S. person, a broker/dealer, or other investor with special circumstances.
In addition, this section does not describe your state, local or foreign tax
consequences.
This federal income tax summary is based in part on the advice of counsel to
the Sponsor. The Internal Revenue Service could disagree with any conclusions
set forth in this section. In addition, our counsel was not asked to review, and
has not reached a conclusion with respect to the federal income tax treatment of
the assets to be deposited in the Portfolio. This may not be sufficient for you
to use for the purpose of avoiding penalties under federal tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
Portfolio Status. The Portfolio intends to qualify as a "regulated investment
company" under the federal tax laws. If the Portfolio qualifies as a regulated
investment company and distributes its income as required by the tax law, the
Portfolio generally will not pay federal income taxes.
Distributions. Portfolio distributions are generally taxable. After the end
of each year, you will receive a tax statement that separates your Portfolio's
distributions into two categories, ordinary income distributions and capital
gains dividends. Ordinary income distributions are generally taxed at your
ordinary tax rate, however, as further discussed below, certain ordinary income
distributions received from the Portfolio may be taxed at the capital gains tax
rates. Generally, you will treat all capital gains dividends as long-term
capital gains regardless of how long you have owned your Units. To determine
your actual tax liability for your capital gains dividends, you must calculate
your total net capital gain or loss for the tax year after considering all of
your other taxable transactions, as described below. In addition, the Portfolio
may make distributions that represent a return of capital for tax purposes and
thus will generally not be taxable to you. The tax status of your distributions
from your Portfolio is not affected by whether you reinvest your distributions
in additional Units or receive them in cash. The income from your Portfolio that
you must take into account for federal income tax purposes is not reduced by
amounts used to pay a deferred sales charge, if any. The tax laws may require
you to treat distributions made to you in January as if you had received them on
December 31 of the previous year.
Dividends Received Deduction. A corporation that owns Units generally will
not be entitled to the dividends received deduction with respect to many
dividends received from the Portfolio because the dividends received deduction
is generally not available for distributions from regulated investment
companies. However, certain ordinary income dividends on Units that are
attributable to qualifying dividends received by the Portfolio from certain
corporations may be designated by the Portfolio as being eligible for the
dividends received deduction.
Sale or Redemption of Units. If you sell or redeem your Units, you will
generally recognize a taxable gain or loss. To determine the amount of this gain
or loss, you must subtract your tax basis in your Units from the amount you
receive in the transaction. Your tax basis in your Units is generally equal to
the cost of your shares, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your Units.
Capital Gains and Losses and Certain Ordinary Income Dividends. If you are an
individual, the maximum marginal federal tax rate for net capital gain is
generally 15% (generally 5% for certain taxpayers in the 10% and 15% tax
brackets). These new capital gains rates are generally effective for taxable
years beginning before January 1, 2011. For later periods, if you are an
individual, the maximum marginal federal tax rate for net capital gain is
generally 20% (10% for certain taxpayers in the 10% and 15% tax brackets). The
20% rate is reduced to 18% and the 10% rate is reduced to 8% for long-term
capital gains from most property acquired after December 31, 2000 with a holding
period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the date you
purchase your Units to determine your holding period. However, if you receive a
capital gain dividend from your Portfolio and sell your Units at a loss after
holding it for six months or less, the loss will be recharacterized as long-term
capital loss to the extent of the capital gain dividend received. The tax rates
for capital gains realized from assets held for one year or less are generally
the same as for ordinary income. The Internal Revenue Code treats certain
capital gains as ordinary income in special situations.
Ordinary income dividends received by an individual shareholder from a
regulated investment company such as the Portfolio are generally taxed at the
same rates that apply to net capital gain (as discussed above), provided certain
holding period requirements are satisfied and provided the dividends are
attributable to qualifying dividends received by the Portfolio itself. These
special rules relating to the taxation of ordinary income dividends from
regulated investment companies generally apply to taxable years beginning before
January 1, 2011. The Portfolio will provide notice to its Unitholders of the
amount of any distribution which may be taken into account as a dividend which
is eligible for these capital gains tax rates.
In Kind Distributions. Under certain circumstances, as described in this
prospectus, you may receive an in kind distribution of Portfolio securities when
you redeem Units. This distribution will be treated as a sale for federal income
tax purposes and you will generally recognize gain or loss, generally based on
the value at that time of the securities and the amount of cash received. The
Internal Revenue Service could, however, assert that a loss could not be
currently deducted.
Rollovers and Exchanges. If you elect to have your proceeds from your
Portfolio rolled over into a future trust, it is considered a sale for federal
income tax purposes and any gain on the sale will be treated as a capital gain,
and any loss will be treated as a capital loss. However, any loss realized on a
sale or exchange will be disallowed to the extent that Units disposed of are
replaced (including through reinvestment of dividends) within a period of 61
days beginning 30 days before and ending 30 days after disposition of Units or
to the extent that the Unitholder, during such period, acquires or enters into
an option or contract to acquire, substantially identical stock or securities.
In such a case, the basis of the Units acquired will be adjusted to reflect the
disallowed loss.
Deductibility of Portfolio Expenses. Generally, expenses incurred by your
Portfolio will be deducted from the gross income received by your Portfolio and
only your share of the Portfolio's net income will be paid to you and reported
as taxable income to you. However, if the Units of your Portfolio are held by
fewer than 500 Unitholders at any time during a taxable year, your Portfolio
will generally not be able to deduct certain expenses from income, thus
resulting in your reported share of the Portfolio's taxable income being
increased by your share of those expenses, even though you do not receive a
corresponding cash distribution. In this case you may be able to take a
deduction for these expenses; however, certain miscellaneous itemized
deductions, such as investment expenses, may be deducted by individuals only to
the extent that all of these deductions exceed 2% of the individual's adjusted
gross income.
Foreign Tax Credit. If your Portfolio invests in any foreign securities, the
tax statement that you receive may include an item showing foreign taxes your
Portfolio paid to other countries. In this case, dividends taxed to you will
include your share of the taxes your Portfolio paid to other countries. You may
be able to deduct or receive a tax credit for your share of these taxes.
Foreign Investors. If your are a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from the Portfolio will be characterized as dividends for federal
income tax purposes (other than dividends which the Portfolio designates as
capital gain dividends) and will be subject to U.S. income taxes, including
withholding taxes, subject to certain exceptions described below. However
distributions received by a foreign investor from the Portfolio that are
properly designated by the trust as capital gain dividends may not be subject to
U.S. federal income taxes, including withholding taxes, provided that the
Portfolio makes certain elections and certain other conditions are met.
PORTFOLIO OPERATING EXPENSES
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General. The fees and expenses of your Portfolio will generally accrue on a
daily basis. Portfolio operating fees and expenses are generally paid out of the
Income Account to the extent funds are available, and then from the Capital
Account. The deferred sales charge, creation and development fee and
organization costs are generally paid out of the Capital Account of your
Portfolio. It is expected that Securities will be sold to pay these amounts
which will result in capital gains or losses to Unitholders. See "Taxation".
These sales will reduce future income distributions. The Sponsor's, Supervisor's
and Trustee's 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 or, if this category is not
published, in a comparable category.
Organization Costs. You and the other Unitholders will bear all or a portion
of the organization costs and charges incurred in connection with the
establishment of your Portfolio. These costs and charges will include the cost
of the preparation, printing and execution of the trust agreement, registration
statement and other documents relating to your Portfolio, federal and state
registration fees and costs, the Portfolio Consultant's security selection fee,
the initial fees and expenses of the Trustee, and legal and auditing expenses.
The Public Offering Price of Units includes the estimated amount of these costs.
The Trustee will deduct these expenses from your Portfolio's assets at the end
of the initial offering period.
Creation and Development Fee. The Sponsor will receive a fee from your
Portfolio for creating and developing the Portfolio, including determining the
Portfolio's objectives, policies, composition and size, selecting service
providers and information services and for providing other similar
administrative and ministerial functions. The creation and development fee is a
charge of $0.05 per Unit. The Trustee will deduct this amount from your
Portfolio's assets as of the close of the initial offering period. No portion of
this fee is applied to the payment of distribution expenses or as compensation
for sales efforts. This fee will not be deducted from proceeds received upon a
repurchase, redemption or exchange of Units before the close of the initial
public offering period.
Trustee's Fee. For its services the Trustee will receive the fee from your
Portfolio set forth in the "Fee Table" (which includes the estimated amount of
miscellaneous Portfolio expenses). The Trustee benefits to the extent there are
funds in the Capital and Income Accounts since these Accounts are non-interest
bearing to Unitholders and the amounts earned by the Trustee are retained by the
Trustee. Part of the Trustee's compensation for its services to your Portfolio
is expected to result from the use of these funds.
Compensation of Sponsor and Supervisor. The Sponsor and the Supervisor, which
is an affiliate of the Sponsor, will receive the annual fees for providing
bookkeeping and administrative services and portfolio supervisory services set
forth in the "Fee Table". These fees may exceed the actual costs of providing
these services to your Portfolio but at no time will the total amount received
for these services rendered to all Van Kampen unit investment trusts in any
calendar year exceed the aggregate cost of providing these services in that
year.
Miscellaneous Expenses. The following additional charges are or may be
incurred by your Portfolio: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of the
Portfolio, (b) fees of the Trustee for extraordinary services, (c) expenses of
the Trustee (including legal and auditing expenses) and of counsel designated by
the Sponsor, (d) various governmental charges, (e) expenses and costs of any
action taken by the Trustee to protect the Portfolio and the rights and
interests of Unitholders, (f) indemnification of the Trustee for any loss,
liability or expenses incurred in the administration of the Portfolio without
negligence, bad faith or wilful misconduct on its part, (g) foreign custodial
and transaction fees, (h) costs associated with liquidating the securities held
in the Portfolio, (i) any offering costs incurred after the end of the initial
offering period and (j) expenditures incurred in contacting Unitholders upon
termination of the Portfolio. The Portfolio may pay the expenses of updating its
registration statement each year.
Fund Expenses. The Portfolio will also bear the expenses of the ETFs. While
the Portfolio will not pay these expenses directly out of its assets, these
expenses are shown in the Portfolio's annual operating expenses in the "Fee
Table" to illustrate the impact of these expenses.
OTHER MATTERS
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Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler LLP. Dorsey &Whitney LLP has acted as counsel to the
Trustee.
Independent Registered Public Accounting Firm. The statement of condition and
the related portfolio included in this prospectus have been audited by Grant
Thornton LLP, independent registered public accounting firm, as set forth in
their report in this prospectus, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
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This prospectus does not contain all the information set forth in the
registration statement filed by the Portfolio with the SEC. The Information
Supplement, which has been filed with the SEC and is incorporated herein by
reference, includes more detailed information concerning the Securities,
investment risks and general information about the Portfolio. Information about
your Portfolio (including the Information Supplement) can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You may obtain
information about the Public Reference Room by calling 1-202-551-8090. Reports
and other information about your Portfolio are available on the EDGAR Database
on the SEC's Internet site at http://www.sec.gov. Copies of this information may
be obtained, after paying a duplication fee, by electronic request at the
following e-mail address: publicinfo@sec.gov or by writing the SEC's Public
Reference Section, Washington, D.C. 20549.
TABLE OF CONTENTS
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Title Page
----- ----
Balanced Market Allocation Strategy......... 2
Notes to Portfolio.......................... 8
Report of Independent Registered
Public Accounting Firm................... 9
Statement of Condition ..................... 10
The Portfolio............................... A-1
Objective and Securities Selection.......... A-1
Risk Factors................................ A-2
ETFs........................................ A-4
Public Offering............................. A-5
Retirement Accounts......................... A-10
Fee Accounts................................ A-10
Rights of Unitholders....................... A-11
Portfolio Administration.................... A-14
Taxation.................................... A-16
Portfolio Operating Expenses................ A-18
Other Matters............................... A-19
Additional Information...................... A-20
--------------
When Units of the Portfolio are no longer available this prospectus may be used
as a preliminary prospectus for a future Portfolio. If this prospectus is used
for future Portfolios you should note the following:
The information in this prospectus is not complete with respect to future
Portfolio series and may be changed. No person may sell Units of future
Portfolios until a registration statement is filed with the Securities and
Exchange Commission and is effective. This prospectus is not an offer to sell
Units and is not soliciting an offer to buy Units in any state where the offer
or sale is not permitted.
EMSPRO778
PROSPECTUS
--------------------------------------------------------------------------------
______ , 2008
Balanced Market Allocation Strategy 2008-2
Van Kampen Funds Inc.
Please retain this prospectus for future reference.
Van Kampen
Investments
Information Supplement
Van Kampen Unit Trusts, Series 778
--------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Portfolio which is not described in the prospectus.
You should read this Information Supplement in conjunction with the prospectus.
This Information Supplement is not a prospectus (but is incorporated into the
prospectus by reference). It does not include all of the information that you
should consider before investing in the Portfolio. This Information Supplement
may not be used to offer or sell Units without the prospectus. You can obtain
copies of the prospectus by contacting the Sponsor's unit investment trust
division at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois
60181-5555 or by contacting your broker. This Information Supplement is dated as
of the date of the prospectus. All capitalized terms have been defined in the
prospectus.
Table of Contents
Page
Risk Factors 2
Sponsor Information 3
Taxation 4
Trustee Information 5
Portfolio Termination 6
Van Kampen
Investments
RISK FACTORS
The securities in the Portfolio represent shares of common stock and ETFs. As
such, an investment in Units of the Portfolio should be made with an
understanding of the risks of investing in these types of securities.
Price Volatility. Because the Portfolio and certain funds in the Portfolio
invest in stocks, you should understand the risks of investing in stocks before
purchasing Units. These risks include the risk that the financial condition of
the company or the general condition of the stock market may worsen and the
value of the stocks (and therefore Units) will fall. Stocks are especially
susceptible to general stock market movements. The value of stocks often rises
or falls rapidly and unpredictably as market confidence and perceptions of
companies change. These perceptions are based on factors including expectations
regarding government economic policies, inflation, interest rates, economic
expansion or contraction, political climates and economic or banking crises. The
value of Units will fluctuate with the value of the stocks in the Portfolio and
the underlying stocks in the funds in the Portfolio and may be more or less than
the price you originally paid for your Units. As with any investment, we cannot
guarantee that the performance of the Portfolio will be positive over any period
of time. Because the Portfolio is unmanaged, the Trustee will not sell stocks in
response to market fluctuations as is common in managed investments.
Dividends. Stocks represent ownership interests in a company and are not
obligations of the company. Common stockholders have a right to receive payments
from the company that is subordinate to the rights of creditors, bondholders or
preferred stockholders of the company. This means that common stockholders have
a right to receive dividends only if a company's board of directors declares a
dividend and the company has provided for payment of all of its creditors,
bondholders and preferred stockholders. If a company issues additional debt
securities or preferred stock, the owners of these securities will have a claim
against the company's assets before common stockholders if the company declares
bankruptcy or liquidates its assets even though the common stock was issued
first. As a result, the company may be less willing or able to declare or pay
dividends on its common stock.
Foreign Stocks. Because the Portfolio and certain funds in the Portfolio may
invest in foreign stocks, the Portfolio involves additional risks that differ
from an investment in domestic stocks. Investments in foreign securities may
involve a greater degree of risk than those in domestic securities. There is
generally less publicly available information about foreign companies in the
form of reports and ratings similar to those that are published about issuers in
the United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers. With respect to certain foreign countries,
there is the possibility of adverse changes in investment or exchange control
regulations, expropriation, nationalization or confiscatory taxation,
limitations on the removal of funds or other assets of the funds in the
Portfolio, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, industrial
foreign economies may differ favorably or unfavorably from the United States'
economy in terms of growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Foreign securities markets are generally not as developed or efficient as those
in the United States. While growing in volume, they usually have substantially
less volume than the New York Stock Exchange, and securities of some foreign
issuers are less liquid and more volatile than securities of comparable United
States issuers. Fixed commissions on foreign exchanges are generally higher than
negotiated commissions on United States exchanges. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed issuers than in the United States.
Foreign Currencies. The Portfolio may also involve the risk that fluctuations
in exchange rates between the U.S. dollar and foreign currencies may negatively
affect the value of the stocks. For example, if a foreign stock rose 10% in
price but the U.S. dollar gained 5% against the related foreign currency, a U.S.
investor's return would be reduced to about 5%. This is because the foreign
currency would "buy" fewer dollars or, conversely, a dollar would buy more of
the foreign currency. Many foreign currencies have fluctuated widely against the
U.S. dollar for a variety of reasons such as supply and demand of the currency,
investor perceptions of world or country economies, political instability,
currency speculation by institutional investors, changes in government policies,
buying and selling of currencies by central banks of countries, trade balances
and changes in interest rates. The Portfolio's foreign currency transactions
will be conducted with foreign exchange dealers acting as principals on a spot
(i.e., cash) buying basis. These dealers realize a profit based on the
difference between the price at which they buy the currency (bid price) and the
price at which they sell the currency (offer price). The Trustee will estimate
the currency exchange rates based on current activity in the related currency
exchange markets, however, due to the volatility of the markets and other
factors, the estimated rates may not be indicative of the rate the Portfolio
might obtain had the Trustee sold the currency in the market at that time.
Liquidity. Whether or not the securities in the Portfolio are listed on an
exchange, the securities may delist from the exchange or principally trade in an
over-the-counter market. As a result, the existence of a liquid trading market
could depend on whether dealers will make a market in the securities. We cannot
guarantee that dealers will maintain a market or that any market will be liquid.
The value of the securities could fall if trading markets are limited or absent.
Additional Units. The Sponsor may create additional Units of the Portfolio by
depositing into the Portfolio additional securities or cash with instructions to
purchase additional securities. A deposit could result in a dilution of your
investment and anticipated income because of fluctuations in the price of the
securities between the time of the deposit and the purchase of the securities
and because the Portfolio will pay brokerage fees.
Voting. Only the Trustee may sell or vote the securities in the Portfolio.
While you may sell or redeem your Units, you may not sell or vote the securities
in your Portfolio. The Trust Agreement requires the Trustee to vote all shares
of the funds held in the Portfolio in the same manner and ratio on all proposals
as the owners of such shares not held by the Portfolio. The Sponsor will
instruct the Trustee how to vote the stocks held in the Portfolio. The Trustee
will vote the stocks in the same general proportion as shares held by other
shareholders if the Sponsor fails to provide instructions.
SPONSOR INFORMATION
Van Kampen Funds Inc. is the Sponsor of the Portfolio. The Sponsor is a
wholly owned subsidiary of Van Kampen Investments Inc. ("Van Kampen
Investments"). Van Kampen Investments is a diversified asset management company
that services more than three million retail investor accounts, has extensive
capabilities for managing institutional portfolios and has more than $111
billion under management or supervision as of January 31, 2008. Van Kampen
Investments has more than 50 open-end funds, more than 30 closed-end funds and
more than 2,700 unit investment trusts that are distributed by authorized
dealers nationwide. Van Kampen Investments is an indirect wholly owned
subsidiary of Morgan Stanley, a preeminent global financial services firm that
provides a wide range of investment banking securities, investment management
and wealth management services. Morgan Stanley is a full service securities firm
engaged in securities trading and brokerage activities as well as providing
investment banking, research and analysis, financing and financial advisory
services. The Sponsor's principal office is located at 522 Fifth Avenue, New
York, New York 10036. As of January 31, 2008, the total stockholders' equity of
Van Kampen Funds Inc. was $144,724,857 (unaudited). (This paragraph relates only
to the Sponsor and not to the Portfolio or to any other Series thereof. The
information is included herein only for the purpose of informing investors as to
the financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be made
available by the Sponsor upon request).
Van Kampen Funds Inc. and your Portfolio have adopted a code of ethics
requiring Van Kampen's employees who have access to information on Portfolio
transactions to report personal securities transactions. The purpose of the code
is to avoid potential conflicts of interest and to prevent fraud, deception or
misconduct with respect to your Portfolio.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Portfolio as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
TAXATION
The prospectus contains a discussion of certain U.S. federal income tax
issues concerning the Portfolio and the purchase, ownership and disposition of
Portfolio Units. The discussion below supplements the prospectus discussion and
is qualified in its entirety by the prospectus discussion. Prospective investors
should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Portfolio Units, as
well as the tax consequences arising under the laws of any state, locality,
non-U.S. country, or other taxing jurisdiction.
The federal income tax summary below and in the prospectus is based in part
on the advice of counsel to the Portfolio. The Internal Revenue Service could
disagree with any conclusions set forth in these discussions. In addition, our
counsel was not asked to review, and has not reached a conclusion with respect
to the federal income tax treatment of the assets to be held by the Portfolio.
This may not be sufficient for prospective investors to use for the purpose of
avoiding penalties under federal tax law.
The Portfolio intends (i) to elect and (ii) to qualify annually as a
regulated investment company under the Code and to comply with applicable
distribution requirements so that it will not pay federal income tax on income
and capital gains distributed to its Unitholders.
To qualify for the favorable U.S. federal income tax treatment generally
accorded to regulated investment companies, the Portfolio must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies, and net income from certain publicly traded
partnerships; (b) diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the Portfolio's assets
is represented by cash and cash items (including receivables), U.S. government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer generally limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Portfolio's total assets and not greater than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities (other than U.S. government
securities or the securities of other regulated investment companies) of any one
issuer, or two or more issuers which the Portfolio controls and are engaged in
the same, similar or related trades or businesses, or the securities of certain
publicly traded partnerships; and (c) distribute at least 90% of its investment
company taxable income (which includes, among other items, dividends, interest
and net short-term capital gains in excess of net long-term capital losses but
excludes net capital gain, if any) and at least 90% of its net tax-exempt
interest income each taxable year.
As a regulated investment company, the Portfolio generally will not be
subject to U.S. federal income tax on its investment company taxable income (as
that term is defined in the Code, but without regard to the deduction for
dividends paid) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss), if any, that it distributes to Unitholders.
The Portfolio intends to distribute to its Unitholders, at least annually,
substantially all of its investment company taxable income and net capital gain.
If the Portfolio retains any net capital gain or investment company taxable
income, it will generally be subject to federal income tax at regular corporate
rates on the amount retained. In addition, amounts not distributed on a timely
basis in accordance with a calendar year distribution requirement are subject to
a nondeductible 4% excise tax unless, generally, the Portfolio distributes
during each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of the calendar year, and (3) any ordinary income and capital gains
for previous years that were not distributed during those years. To prevent
application of the excise tax, the Portfolio intends to make its distributions
in accordance with the calendar year distribution requirement. Further, if the
Portfolio retains any net capital gain, the Portfolio may designate the retained
amount as undistributed capital gains in a notice to Unitholders who, if subject
to federal income tax on long-term capital gains (i) will be required to include
in income for federal income tax purposes, as long-term capital gain, their
share of such undistributed amount, and (ii) will be entitled to credit their
proportionate share of the tax paid by the Portfolio against their federal
income tax liabilities if any, and to claim refunds to the extent the credit
exceeds such liabilities. A distribution will be treated as paid on December 31
of the current calendar year if it is declared by the Portfolio in October,
November or December with a record date in such a month and paid by the
Portfolio during January of the following calendar year. These distributions
will be taxable to Unitholders in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are
received.
If the Portfolio failed to qualify as a regulated investment company or
failed to satisfy the 90% distribution requirement in any taxable year, the
Portfolio would be taxed as an ordinary corporation on its taxable income (even
if such income were distributed to its Unitholders) and all distributions out of
earnings and profits would be taxed to Unitholders as ordinary dividend income.
If the Portfolio is treated as holding directly or indirectly 10 percent or
more of the combined voting power of the stock of a foreign corporation, and all
U.S. shareholders collectively own more than 50 percent of the vote or value of
the stock of such corporation, the foreign corporation may be treated as a
"controlled foreign corporation" (a "CFC") from a U.S. tax perspective. In such
circumstances, the Portfolio will be required to include certain types of
passive income and certain other types of income relating to insurance, sales
and services with related parties and oil related income in the Portfolio's
taxable income whether or not such income is distributed.
If the Portfolio holds an equity interest in any "passive foreign investment
companies" ("PFICs"), which are generally certain foreign corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rents and royalties or capital gains) or that hold
at least 50% of their assets in investments producing such passive income, the
Portfolio could be subject to U.S. federal income tax and additional interest
charges on gains and certain distributions with respect to those equity
interests, even if all the income or gain is timely distributed to its
Unitholders. The Portfolio will not be able to pass through to its Unitholders
any credit or deduction for such taxes. The Portfolio may be able to make an
election that could ameliorate these adverse tax consequences. In this case, the
Portfolio would recognize as ordinary income any increase in the value of such
PFIC shares, and as ordinary loss any decrease in such value to the extent it
did not exceed prior increases included in income. Under this election, the
Portfolio might be required to recognize in a year income in excess of its
distributions from PFICs and its proceeds from dispositions of PFIC stock during
that year, and such income would nevertheless be subject to the distribution
requirement and would be taken into account for purposes of the 4% excise tax
(described above). Dividends paid by PFICs will not be treated as qualified
dividend income.
TRUSTEE INFORMATION
The Trustee is The Bank of New York, a trust company organized under the laws
of New York. The Bank of New York has its principal unit investment trust
division offices at 2 Hanson Place, 12th Floor, Brooklyn, New York 11217, (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 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 Portfolio. Such
records shall include the name and address of, and the number of Units of the
Portfolio held by, every Unitholder. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute, rule or
regulation. The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Securities held in the Portfolio.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities 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.
PORTFOLIO TERMINATION
The Portfolio may be liquidated at any time by consent of Unitholders
representing 66 2/3% of the Units of the Portfolio then outstanding or by the
Trustee when the value of the Securities owned by the Portfolio, as shown by any
evaluation, is less than $500,000 ($3,000,000 if the value of the Portfolio has
exceeded $15,000,000). The Portfolio will be liquidated by the Trustee in the
event that a sufficient number of Units of the Portfolio not yet sold are
tendered for redemption by the Sponsor, so that the net worth of the Portfolio
would be reduced to less than 40% of the value of the Securities at the time
they were deposited in the Portfolio. If the Portfolio is liquidated because of
the redemption of unsold Units by the Sponsor, the Sponsor will refund to each
purchaser of Units the entire sales charge paid by such purchaser. The Trust
Agreement will terminate upon the sale or other disposition of the last Security
held thereunder, but in no event will it continue beyond the Mandatory
Termination Date.
Commencing during the period beginning nine business days prior to, and no
later than, the Mandatory Termination Date, Securities will begin to be sold in
connection with the termination of the Portfolio. The Sponsor will determine the
manner, timing and execution of the sales of the Securities. The Sponsor shall
direct the liquidation of the Securities in such manner as to effectuate orderly
sales and a minimal market impact. In the event the Sponsor does not so direct,
the Securities shall be sold within a reasonable period and in such manner as
the Trustee, in its sole discretion, shall determine. At least 45 days before
the Mandatory Termination Date the Trustee will provide written notice of any
termination to all Unitholders of the Portfolio. Unitholders will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
following the Mandatory Termination Date. The Trustee will deduct from the funds
of the Portfolio any accrued costs, expenses, advances or indemnities provided
by the Trust Agreement, including estimated compensation of the Trustee, costs
of liquidation and any amounts required as a reserve to provide for payment of
any applicable taxes or other governmental charges. Any sale of Securities in
the Portfolio upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. The Trustee will then
distribute to each Unitholder of the Portfolio his pro rata share of the balance
of the Income and Capital Accounts of the Portfolio.
The Sponsor may, but is not obligated to, offer for sale units of a
subsequent series of the Portfolio. There is, however, no assurance that units
of any new series of the Portfolio will be offered for sale at that time, or if
offered, that there will be sufficient units available for sale to meet the
requests of any or all Unitholders.
Within 60 days of the final distribution Unitholders will be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in the
same manner.
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Trust Agreement (to be filed by amendment).
1.1.1 Standard Terms and Conditions of Trust. Reference is made to Exhibit
1.1.1 to the Registration Statement on Form S-6 of Van Kampen Focus
Portfolios, Series 284 (File No. 333-57836) dated May 2, 2001.
1.2 Certificate of Incorporation of Van Kampen Funds Inc. Reference is
made to Exhibit 1.2 to the Registration Statement on Form S-6 of Van
Kampen Focus Portfolios, Series 320 (File No. 333-75548) dated January
2, 2002.
1.3 By-laws of Van Kampen Funds Inc. Reference is made to Exhibit 1.3 to
the Registration Statement on Form S-6 of Van Kampen Focus Portfolios,
Series 320 (File No. 333-75548) dated January 2, 2002.
1.4 Form of Dealer Agreement. Reference is made to exhibit 1.4 to the
Registration Statement on Form S-6 of Van Kampen Unit Trusts,
Municipal Series 666 (File No. 333-122799) dated May 18, 2005.
2.1 Form of Code of Ethics. Reference is made to Exhibit 2.1 to the
Registration Statement on Form S-6 of Van Kampen Unit Trusts, Series
439 (File No. 333-113234) dated April 27, 2004.
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be filed by amendment).
3.2 Opinion and consent of counsel as to the federal income and New York
tax status of securities being registered (to be filed by amendment).
3.3 Opinion of counsel as to the Trustee and the Trust (to be filed by
amendment).
4.1 Consent of initial evaluator (to be filed by amendment).
4.3 Consent of independent registered public accounting firm (to be filed
by amendment).
6.1 List of Officers and Directors of Van Kampen Funds Inc. Reference is
made to Exhibit 6.1 to the Registration Statement on Form S-6 of Van
Kampen Unit Trusts, Series 744 (file No. 333-149060) dated March 18,
2008.
7.1 Power of Attorney. Reference is also made to Exhibit 7.1 to the
Registration Statement on Form S-6 of Van Kampen Unit Trusts, Series
744 (File No. 333-149060) dated March 18, 2008.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen Unit Trusts, Series 778 has duly caused this Amendment
No.1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and State of
Illinois on the 5th day of June, 2008.
Van Kampen Unit Trusts, Series 778
By Van Kampen Funds Inc.
By /s/ JOHN F. TIERNEY
------------------------
Executive Director
Pursuant to the requirements of the Securities Act of 1933, the Amended
Registration Statement has been signed below on June 5, 2008 by the following
persons who constitute a majority of the Board of Directors of Van Kampen Funds
Inc.
SIGNATURE TITLE
Jerry Miller Managing Director )
Edward C. Wood, III Managing Director )
/s/ JOHN F. TIERNEY
----------------------
(Attorney-in-fact*)
--------------------------------------------------------------------------------
* An executed copy of each of the related powers of attorney is filed
herewith or incorporated herein by reference.
COVER
2
filename2.txt
June 5, 2008
Securities and Exchange Commission
100 F Street NE
Washington D.C. 20549
Re: Van Kampen Unit Trusts, Series 778 (the "Fund")
(SEC# 333-150557) (CIK# 1402931)
--------------------------------------------------------------------------------
Ladies/Gentlemen:
Transmitted herewith on behalf of Van Kampen Funds Inc. (the "Sponsor"),
depositor, sponsor and principal underwriter of the Fund, is Amendment No. 1 to
the Registration Statement on Form S-6 for the registration under the Securities
Act of 1933 of units representing the ownership of interests in the Fund. The
Fund consists of one underlying unit investment trust, Balanced Market
Allocation Strategy 2008-2 (the "Portfolio"), which will invest in
exchange-traded funds ("ETFs") and common stocks.1 The Registration Statement on
Form S-6 relating to the subject Fund was initially filed with the Securities
and Exchange Commission (the "Commission") on May 1, 2008. We received comments
from the staff of the Commission in a letter dated May 16, 2008 from Vincent J.
Di Stefano. This letter responds to those comments. For convenience, we have
structured our response to address each of your comments in the order they
appeared in your letter.
FEE TABLE
1. The staff requested that the line item "Underlying fund expenses" be
changed to "Acquired Fund Fees and Expenses".
Response: Revisions have been made to page 6 in accordance with
the staff's comments.
RISKS
2. The staff requested that the prospectus provide disclosure on the
risks of value and growth style investing and the attendant risks of
investing in emerging market securities.
Response: Revisions have been made to pages A-3 through A-4, as
applicable, in accordance with the staff's comments.
The staff also requested that the registrant represent in writing that it
will not use the staff's comment process as a defense in any securities related
litigation against it (i.e., a "Tandy" letter). These representations will be
made in connection with a subsequent Amendment to the Registration Statement at
which time the registrant will request acceleration of the effective date of the
Registration Statement.
We have been advised that the Sponsor would like to be able to create the
Fund and have the Registration Statement declared effective by the Commission on
June 24, 2008.
If you have any questions, please do not hesitate to contact Scott R.
Anderson at (312) 845-3834 or the undersigned at (312) 845-3787.
Very truly yours,
CHAPMAN AND CUTLER LLP
By________________
Mark J. Kneedy
-----------------
1 The Portfolio's investment in the underlying funds will be made in
reliance on an order of the Commission pursuant to Section 12(d)(1)(J)
of the Investment Company Act of 1940 (the "Act") exempting series of
the Fund and its depositor, Van Kampen Funds Inc., from the provisions
of Section 12(d)(1)(A), (B) and (C) of the Act to the extent necessary
to permit trusts to acquire shares of registered investment companies
and to permit such investment companies to sell such shares to a trust
in excess of the percentage limitations set forth therein. Van Kampen
Funds Inc. and Van Kampen Focus Portfolios, Investment Company Act
Rel. Nos. 24548 (June 29, 2000) (notice) and 24566 (July 25, 2000)
(order).