MEMORANDUM OF CHANGES
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY
TAX-EXEMPT TRUST, MULTI-SERIES 307
This Prospectus filed with Amendment No. 1 of the Registration Statement on
Form S-6 has been revised to reflect information regarding the deposit of the
Trust. All page numbers below refer to Prospectus Part I.
Cover Page. The Trust name, Estimated Current Return, Estimated Long-Term
Return, CUSIP number and date of the prospectus have been completed.
Page 2. The "Summary of Essential Financial Information" has been completed.
Pages 3-4. The "Portfolio" and the notes thereto have been completed.
Page 6. The Underwriters have been named.
Page 7. The "Report of Independent Certified Public Accountants and
"Statement of Condition" has been completed.
Back Cover Page. The name of the Fund, Trust and date of the prospectus has
been completed.
FILE NO. 333-59225
CIK #1024823
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
AMENDMENT NO. 1
TO
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: INSURED MUNICIPALS INCOME TRUST AND INVESTORS'
QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 307
B. Name of Depositor: VAN KAMPEN FUNDS INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
CHAPMAN AND CUTLER VAN KAMPEN FUNDS INC.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 W. Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of fractional undivided
beneficial interest.
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
/ X / Check box if it is proposed that this filing will become effective on
- ---- October 16, 1998 at 2:00 p.m. pursuant to Rule 487.
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 307
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Part I Front Cover Page
2. Name and address of Depositor ) Part II-The Trust
) Part I-Summary of Essential Financial
) Information
) Part II-Fund Administration
3. Name and address of Trustee ) Part II-The Trust
) Part I-Summary of Essential Financial
) Information
) Part II-Trust Administration
4. Name and address of principal ) Part I-Underwriting
underwriter )
5. Organization of trust ) Part II-The Trust
6. Execution and termination of ) Part II-The Trust
Trust Indenture and Agreement ) Part II-Fund Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. General information regarding ) Part II-The Trust
trust's securities and rights ) Part II-Rights of Unitholders
of security holders ) Part II-Fund Administration
11. Type of securities comprising ) Part II-The Trust
units ) Part I-Cover Page
) Part I-Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Part II-The Trust
expenses ) Part I-Summary of Essential Financial
) Information
) Part II-Expenses
) Part II-Public Offering
)
(b) Certain information regard- ) *
ing periodic payment plan )
certificates )
(c) Certain percentages ) Part I-Summary of Essential Financial
) Information
) Part II-Public Offering
(d) Certain other fees, ) Par II-Rights of Unitholders
expenses or charges ) Part II-Expenses
payable by holders )
(e) Certain profits to be ) Part II-Public Offering
received by depositor, )
principal underwriter, ) Part I-Notes to Portfolio
trustee or affiliated )
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Part II-Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Part II-The Trust
underlying securities ) Part II-Unitholder Explanations
) Part II-Fund Administration
17. Withdrawal or redemption ) Part II-Rights of Unitholders
) Part II-Fund Administration
18. (a) Receipt and disposition )
of income ) Part II-Rights of Unitholders
(b) Reinvestment of distribu- ) Part II-Rights of Unitholders
tions )
(c) Reserves or special funds ) Part II-Rights of Unitholders
) Part II-Fund Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Part II-Rights of Unitholders
) Part II-Fund Administration
20. Certain miscellaneous provisions ) Part II-Fund Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Part I-Portfolio
) Part II-Fund Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of Depositor ) Part II-Fund Administration
26. Fees received by Depositor ) Part II-Fund Administration
27. Business of Depositor ) Part II-Fund Administration
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Directors ) *
32. Compensation of Directors ) *
33. Compensation of Employees ) *
34. Compensation to other persons ) Part II-Public Offering
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's ) Part I-Cover Page
securities by states ) Part II-Public Offering
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Part II-Public Offering
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Part II-Fund Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Part II-Fund Administration
underwriter )
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of the ) *
trust )
43. Certain brokerage commissions )
received by principal ) *
underwriter )
44. (a) Method of valuation )
) Part I-Summary of Essential Financial
) Information
) Part II-Rights of Unitholders
) Part II-Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) Part II-Public Offering
to certain persons )
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Part II-Rights of Unitholders
) Part II-Public Offering
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Part II-Public Offering
in underlying securities ) Part II-Fund Administration
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of ) Part II-Fund Administration
trustee )
49. Fees and expenses of trustee ) Part I-Summary of Essential Financial
) Information
) Part II-Expenses
50. Trustee's lien ) Part II-Expenses
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's )
securities ) *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agree- )
ment with respect to )
replacement or elimi- ) Part II-Fund Administration
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitu- ) Part II-Fund Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust )
) Part II-Federal Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Part I-Statement of Condition
tions 1(c) to Form S-6) )
- ----------------------------------
* Inapplicable, omitted, answer negative or not required
VAN KAMPEN
PROSPECTUS PART I
CONNECTICUT INSURED MUNICIPALS INCOME TRUST, SERIES 38
- -------------------------------------------------------------------------------
Connecticut Insured Municipals Income Trust, Series 38 (the "Trust")
(included in Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 307 (the "Fund")) consists of interest-bearing obligations
issued by or on behalf of municipalities and other governmental authorities, the
interest on which is, in the opinion of bond counsel to the issuer, exempt from
all Federal income taxes under existing law and exempt to the extent described
herein from Connecticut state and local taxes when held by residents of
Connecticut (the "Bonds"). The objective of the Trust is Federal and Connecticut
tax-exempt income and conservation of capital through an investment in a
diversified portfolio of tax-exempt bonds. The Units of the Trust are rated
"AAA" by Standard & Poor's. The Trust is referred to herein as the "State Trust"
or "Insured Trust."
The Trust consists of 9 issues of Bonds. Three of the Bonds are general
obligations of the governmental entities issuing them and are backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: General Obligation, 3 (27%); Higher Education, 2
(25%); Retail Electric/Gas/Telephone, 1 (15%); Public Education, 1 (13%);
Transportation, 1 (13%) and General Purpose, 1 (7%). Approximately 28% of the
principal amount of Bonds are issued by Puerto Rico issuers. The dollar weighted
average maturity of the Bonds is 25 years.
Monthly Semi-Annual
------------- ------------
ESTIMATED CURRENT RETURN: 4.21% 4.26%
ESTIMATED LONG TERM RETURN: 4.21% 4.26%
CUSIP: 207588-84-9 207588-85-6
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
OCTOBER 16, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED
UNLESS ACCOMPANIED BY PART II. BOTH PARTS OF
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Initial Date of Deposit: October 16, 1998 Principal Amount of Bonds per Unit (1): $ 972.09
Principal Amount of Bonds: $ 1,985,000 Number of Units: 2,042
</TABLE>
- -------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- -------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 1,941,951
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.89
- -------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- -------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 44.32 $ 44.32
Less Estimated Expenses (4) $ 2.18 $ 1.72
Less Estimated Insurance Expenses $ -- $ --
Estimated Net Interest Income $ 42.14 $ 42.60
- -------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- -------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 2.22 on $ 9.34 on
November 25, 1998 January 25, 1999
Normal Distribution (3) $ 3.51 $ 21.30
Record Dates 10th day of January 10 and
each month July 10
Distribution Dates 25th day of January 25 and
each month July 25
- -------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
SALES CHARGE (% OF PUBLIC
OFFERING PRICE) 4.90% 4.90%
ESTIMATED ANNUAL EXPENSES PER UNIT
Trustee's Fee (5) (6) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.94 $ 0.88
----------- -----------
Total Annual Expenses per Unit $ 2.40 $ 1.94
=========== ===========
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (October 21, 1998), Unitholders will pay
accrued interest from such date to the settlement date less distributions
from the Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
(6) During the first year the Trustee will reduce its fee by approximately $.22
per Unit (which is the estimated interest to be earned prior to the expected
delivery dates for the "when, as and if issued" Bonds). Should the interest
exceed this amount, the Trustee will reduce its fee up to its annual fee.
After the first year, the Trustee's fee will be the amount indicated above.
Estimated interest income will increase to $44.54. Estimated Expenses will
increase to $2.40 and $1.94 under the monthly and semi-annual distribution
plans, respectively. Estimated Net Interest Income will remain as shown.
<TABLE>
<CAPTION>
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
CONNECTICUT
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 100,000 Commonwealth of Puerto Rico, Capital Appreciation Refunding
General Obligation-Unlimited Tax Bonds, Public Improvement
(MBIA Insured)
#0.00% Due 07/01/2015 AAA $ 46,145
435,000 Ansonia, Connecticut, General Obligation-Unlimited Tax Bonds,
Series 1998 (FGIC Insured)
185M-#4.70% Due 10/15/2017## AAA 2009 @ 102
250M-#4.70% Due 10/15/2018## AAA 2009 @ 102 434,580
250,000 Connecticut, Special Tax Obligation Revenue Refunding Bonds,
Transportation Infrastructure Issue, Series 1998B (FSA
Insured)
#4.75% Due 11/01/2018 AAA 2008 @ 101 249,333
300,000 Puerto Rico, Electric Power Authority, Power Revenue Refunding
Bonds, Series EE (MBIA Insured) 2008 @ 101.50
#4.75% Due 07/01/2024 AAA 2019 @ 100 S.F. 297,099
250,000 Connecticut, Health and Educational Facilities Authority,
Revenue Refunding Bonds (Choate Rosemary Hall Issue)
Series 1997B (MBIA Insured) 2007 @ 101
#5.00% Due 07/01/2027 AAA 2018 @ 100 S.F. 256,227
250,000 University of Connecticut, Revenue Bonds, Student Fee, Series
1998A (MBIA Insured) 2008 @ 101
#4.75% Due 11/15/2027 AAA 2025 @ 100 S.F. 248,475
250,000 Connecticut, Health and Higher Educational Facilities
Authority, Revenue Bonds, Trinity College Issue, Series
1998F (MBIA Insured) 2008 @ 102
#5.00% Due 07/01/2028 AAA 2022 @ 100 S.F. 256,307
150,000 Commonwealth of Puerto Rico, Infrastructure Financing
Authority, Special Tax Revenue Bonds, Series 1997A (AMBAC
Assurance Insured) 2008 @ 101
#5.00% Due 07/01/2028 AAA 2022 @ 100 S.F. 153,785
- --------------- -----------
$ 1,985,000 $ 1,941,951
=============== ===========
</TABLE>
- --------------------------------------------------------------------------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from October 13, 1998
to October 15, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 1,915,178 $ 26,773
- -----------------------------------------------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
7%, Financial Guaranty 22%, MBIA 58% and FSA 13%. The Sponsor may have
entered into contracts which hedge interest rate fluctuations on certain
Bonds. The cost of any such contracts and the corresponding gain or loss is
included in the Cost to Sponsor. Bonds marked by "##" following the maturity
date have been purchased on a "when, as and if issued" or "delayed delivery"
basis. Interest on these Bonds begins accruing to the benefit of Unitholders
on their respective dates of delivery. Delivery is expected to take place at
various dates after the First Settlement Date. "#" prior to the coupon rate
indicates that the Bond was issued at an original issue discount. See "The
Trusts--Risk Factors" in Prospectus Part II. The tax effect of Bonds issued
at an original issue discount is described in "Federal Tax Status" in
Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
CONNECTICUT RISK FACTORS. The financial condition of the State of Connecticut
is affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The State's economic base is diversified,
consisting of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. The State has a relatively
high wage labor market which has resulted in the State's business sector
becoming more vulnerable to competitive pressures.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
The State of Connecticut currently maintains a "AA", "Aa3" and "AA" bond
rating from Standard & Poor's, Moody's and Fitch IBCA, Inc. (formerly Fitch
Investors Service, L.P.), respectively, on its general obligation indebtedness.
Further information concerning Connecticut risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. The Internal Revenue Service Restructuring and Reform Act of 1998
provides that for taxpayers other than corporations, net capital gain (which is
defined as net long-term capital gain over net short-term capital loss for the
taxable year) realized from property (with certain exclusions) is subject to a
maximum marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). Capital gain or loss is long-term if the holding period
for the asset is more than one year, and is short-term if the holding period for
the asset is one year or less. The date on which a Unit is acquired (i.e., the
"trade date") is excluded for purposes for determining the holding period of the
Unit. The legislation is generally effective retroactively for amounts properly
taken into account on or after January 1, 1998. Capital gains realized from
assets held for one year or less are taxed at the same rates as ordinary income.
For a discussion of the Federal tax status of income earned on Units, see
"Federal Tax Status" in Prospectus Part II.
The assets of the Connecticut IM-IT Trust will consist of obligations (the
"Bonds"); certain of the Bonds have been issued by or on behalf of the State of
Connecticut or its political subdivisions or other public instrumentalities,
state or local authorities, districts, or similar public entities created under
the laws of the State of Connecticut ("Connecticut Bonds") and the balance of
the Bonds have been issued by or on behalf of entities classified for the
relevant purposes as territories or possessions of the United States, including
one or more of Puerto Rico, Guam, or the Virgin Islands, the interest on the
obligations of which Federal law would prohibit Connecticut from taxing if
received directly by the Unitholders. Certain Connecticut Bonds in the
Connecticut IM-IT Trust were issued prior to the enactment of the Connecticut
income tax on the Connecticut taxable income of individuals, trusts, and estates
(the "Connecticut Income Tax"); therefore, bond counsel to the issuers of such
Bonds did not opine as to the exemption of the interest on such Bonds from such
tax. However, the Sponsor and special counsel to the Trusts for Connecticut tax
matters believe that such interest will be so exempt. Interest on Bonds in the
Connecticut IM-IT Trust issued by other issuers, if any, is, in the opinion of
bond counsel to such issuers, exempt from state taxation.
Generally, a Unitholder recognizes gain or loss for purposes of the
Connecticut Income Tax to the same extent as the Unitholder recognizes gain or
loss for Federal income tax purposes. Ordinarily this would mean that gain or
loss would be recognized by a Unitholder upon the maturity, redemption, sale, or
other disposition by the Connecticut IM-IT Trust of a Bond held by it, or upon
the redemption, sale or other disposition of a Unit of the Connecticut IM-IT
Trust held by the Unitholder. However, gains and losses from the sale or
exchange of Connecticut Bonds held as capital assets are not taken into account
for purposes of this tax. Regulations indicate that this rule would apply to
gain or loss recognized by a Unitholder holding a Unit of the Connecticut IM-IT
Trust as a capital asset upon the maturity, redemption, sale, or other
disposition of a Connecticut Bond held by the Connecticut IM-IT Trust. However,
it is not clear whether this rule would also apply, to the extent attributable
to Connecticut Bonds held by the Connecticut IM-IT Trust, to gain or loss
recognized by a Unitholder upon the redemption, sale, or other disposition of a
Unit of the Connecticut IM-IT Trust held by such Unitholder. Unitholders are
urged to consult their own tax advisors concerning these matters.
In the opinion of Day, Berry & Howard LLP, special counsel to the Fund for
Connecticut tax matters, which relies explicitly on the opinion of Chapman and
Cutler regarding Federal income tax matters, under existing Connecticut law:
The Connecticut IM-IT Trust is not liable for any tax on or measured by net
income imposed by the State of Connecticut. Interest income of the Connecticut
IM-IT Trust from a Bond issued by or on behalf of the State of Connecticut, any
political subdivision thereof, or public instrumentality, state or local
authority, district, or similar public entity created under the laws of the
State of Connecticut (a "Connecticut Bond"), or from a Bond issued by United
States territories or possessions the interest on which Federal law would
prohibit Connecticut from taxing if received directly by a Unitholder from the
issuer thereof, is not taxable under the Connecticut tax on the Connecticut
taxable income of individuals, trusts, and estates (the "Connecticut Income
Tax"), when any such interest is received by the Connecticut IM-IT Trust or
distributed by it to such a Unitholder.
Insurance proceeds received by the Connecticut IM-IT Trust representing
maturing interest on defaulted Bonds held by the Connecticut IM-IT Trust are not
taxable under the Connecticut Income Tax if, and to the same extent as, such
interest would not be taxable thereunder if paid directly to the Connecticut
IM-IT Trust by the issuer of such Bonds.
Gains and losses recognized by a Unitholder for Federal income tax purposes
upon the maturity, redemption, sale, or other disposition by the Connecticut
IM-IT Trust of a Bond held by the Connecticut IM-IT Trust or upon the
redemption, sale, or other disposition of a Unit of the Connecticut IM-IT Trust
held by a Unitholder are taken into account as gains or losses, respectively,
for purposes of the Connecticut Income Tax, except that, in the case of a
Unitholder holding a Unit of the Connecticut IM-IT Trust as a capital asset,
such gains and losses recognized upon the maturity, redemption, sale, or
exchange of a Connecticut Bond held by the Connecticut IM-IT Trust are excluded
from gains and losses taken into account for purposes of such tax, and no
opinion is expressed as to the treatment for purposes of such tax of gains and
losses recognized, to the extent attributable to Connecticut Bonds, upon the
redemption, sale, or other disposition by a Unitholder of a Unit of the
Connecticut IM-IT Trust held by him.
The portion of any interest income or capital gain of the Connecticut IM-IT
Trust that is allocable to a Unitholder that is subject to the Connecticut
corporation business tax is includable in the gross income of such Unitholder
for purposes of such tax.
An interest in a Unit of the Connecticut IM-IT Trust that is owned by or
attributable to a Connecticut resident at the time of his death is includable in
his gross estate for purposes of the Connecticut succession tax and the
Connecticut estate tax.
THE SPONSOR. Van Kampen Funds Inc. (formerly Van Kampen American Capital
Distributors, Inc.) is the Sponsor of the Trust. The Sponsor is an indirect
subsidiary of Van Kampen Investments Inc. (formerly VK/AC Holding, Inc.). Van
Kampen Investments Inc. is a wholly-owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
(formerly Morgan Stanley, Dean Witter, Discover & Co.). Van Kampen Investment
Advisory Corp. (formerly Van Kampen American Capital Investment Advisory Corp.)
is the Evaluator of the Trust and is an affiliate of the Sponsor.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
NAME ADDRESS UNITS
------
<S> <C> <C>
Van Kampen Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,742
Gruntal & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
Morgan Stanley Dean Witter & Co. 2 World Trade Center, 59th Floor, New York, New York 10048 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
------
2,042
======
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen unit investment
trusts may qualify for a reduced sales charge by signing a nonbinding Letter of
Intent with any single broker-dealer. After signing a Letter of Intent, at the
date total purchases, less redemptions, of units of any combination of series of
Van Kampen unit investment trusts by a purchaser (including units purchased in
the name of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age) exceed $500,000, the selling broker-dealer,
bank or other will credit the unitholder with cash as a retroactive reduction of
the sales charge on such units equal to the amount which would have been paid
for the total aggregated sale amount. If a purchaser does not complete the
required purchases under the Letter of Intent within the 13 month period, no
such retroactive sales charge reduction shall be made.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF VAN KAMPEN FUNDS INC. AND THE UNITHOLDERS OF
CONNECTICUT INSURED MUNICIPALS INCOME TRUST, SERIES 38 (INCLUDED IN INSURED
MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES
307):
We have audited the accompanying statement of condition and the portfolio of
Connecticut Insured Municipals Income Trust, Series 38 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
307) as of October 16, 1998. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Connecticut Insured Municipals
Income Trust, Series 38 (included in Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 307) as of October 16, 1998,
in conformity with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
October 16, 1998
STATEMENT OF CONDITION
AS OF OCTOBER 16, 1998
INVESTMENT IN BONDS
Contracts to purchase Bonds (1)(2) $ 1,941,951
Accrued interest to the First Settlement Date (1)(2) 24,084
--------------------
Total $ 1,966,035
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 24,084
Interest of Unitholders--
Cost to investors 2,042,000
Less: Gross underwriting commission 100,049
--------------------
Net interest to Unitholders (1)(2) 1,941,951
--------------------
Total $ 1,966,035
====================
- --------------------------------------------------------------------------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the
Sponsor as the Unitholder of record as of such date.
PROSPECTUS PART I
OCTOBER 16, 1998
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 307
CONNECTICUT INSURED MUNICIPALS INCOME TRUST, SERIES 38
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
VAN KAMPEN
PROSPECTUS PART I
NEW JERSEY INSURED MUNICIPALS INCOME TRUST, SERIES 124
- --------------------------------------------------------------------------------
New Jersey Insured Municipals Income Trust, Series 124 (the "Trust")
(included in Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 307 (the "Fund")) consists of interest-bearing obligations
issued by or on behalf of municipalities and other governmental authorities, the
interest on which is, in the opinion of bond counsel to the issuer, exempt from
all Federal income taxes under existing law and exempt to the extent described
herein from New Jersey state and local taxes when held by residents of New
Jersey (the "Bonds"). The objective of the Trust is Federal and New Jersey
tax-exempt income and conservation of capital through an investment in a
diversified portfolio of tax-exempt bonds. The Units of the Trust are rated
"AAA" by Standard & Poor's. The Trust is referred to herein as the "State Trust"
or "Insured Trust."
The Trust consists of 8 issues of Bonds. One of the Bonds is a general
obligation of the governmental entity issuing it and is backed by the taxing
power thereof. The remaining issues are payable from the income of a specific
project or authority and are not supported by the issuer's power to levy taxes.
These issues are divided by purpose of issues (and percentage of principal
amount) as follows: Health Care, 2 (33%); Certificate of Participation, 3 (30%);
General Obligation, 1 (13%); General Purpose, 1 (12%) and Transportation, 1
(12%).
The dollar weighted average maturity of the Bonds is 25 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.34% 4.38%
Estimated Long Term Return: 4.30% 4.34%
CUSIP: 64579L-22-5 64579L-23-3
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
OCTOBER 16, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<S> <C> <C> <C>
Initial Date of Deposit: October 16, 1998 Principal Amount of Bonds per Unit (1): $ 992.06
Principal Amount of Bonds: $ 2,000,000 Number of Units: 2,016
</TABLE>
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 1,917,225
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.75
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 45.73 $ 45.73
Less Estimated Expenses (4) $ 2.33 $ 1.92
Less Estimated Insurance Expenses $ -- $ --
Estimated Net Interest Income $ 43.40 $ 43.81
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 2.29 on $ 9.61 on
November 25, 1998 January 25, 1999
Normal Distribution (3) $ 3.61 $ 21.90
Record Dates 10th day of January 10 and
each month July 10
Distribution Dates 25th day of January 25 and
each month July 25
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.87 $ 0.86
----------- -----------
Total Annual Expenses per Unit $ 2.33 $ 1.92
=========== ===========
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (October 21, 1998), Unitholders will pay
accrued interest from such date to the settlement date less distributions
from the Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
<TABLE>
<CAPTION>
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
NEW JERSEY
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 250,000 Middlesex County, New Jersey, Certificates of Participation
Refunding Bonds (MBIA Insured) 2008 @ 101
#5.00% Due 02/15/2019 AAA 2014 @ 100 S.F. $ 253,842
250,000 Hudson County, New Jersey, Improvement Authority Facility,
Lease Revenue Refunding Bonds, Hudson County Lease
Project (FGIC Insured) 2008 @ 100
#4.75% Due 10/01/2019 AAA 2015 @ 100 S.F. 249,602
400,000 New Jersey, Health Care Facilities Financing Authority,
Revenue and Refunding Bonds, Hackensack University
Medical Center Issue, Series 1998 (MBIA Insured) 2008 @ 101
#5.00% Due 01/01/2021 AAA 2019 @ 100 S.F. 404,772
250,000 Montgomery Township, New Jersey, Board of Education,
Certificates of Participation Bonds (MBIA Insured) 2008 @ 101
#4.875% Due 09/01/2023 AAA 2019 @ 100 S.F. 250,000
250,000 Delaware River Port Authority, Pennsylvania and New Jersey Port
District Project, Revenue Bonds, Series B (MBIA Insured) 2008 @ 101
#5.00% Due 01/01/2026 AAA 2020 @ 100 S.F. 253,218
100,000 East Orange, New Jersey, Board of Education, Certificates of
Participation, Capital Appreciation Bonds (FSA Insured)
#0.00% Due 02/01/2026 AAA 27,158
250,000 New York and New Jersey Port Authority, General Obligation
Bonds, Consolidated 116th Series (FGIC Insured) 2005 @ 101
#4.25% Due 10/01/2026 AAA 2019 @ 100 S.F. 226,303
250,000 Camden County, New Jersey, Improvement Authority, Health
System Revenue Bonds (Catholic Healthcare East) Series B
(AMBAC Assurance Insured) 2008 @ 102
#5.00% Due 11/15/2028 AAA 2019 @ 100 S.F. 252,330
- --------------- -----------
$ 2,000,000 $ 1,917,225
=============== ===========
</TABLE>
- --------------------------------------------------------------------------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from October 7, 1998
to October 15, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 1,906,864 $ 10,361
- -----------------------------------------------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
12%, Financial Guaranty 25%, MBIA 58% and FSA 5%. The Sponsor may have
entered into contracts which hedge interest rate fluctuations on certain
Bonds. The cost of any such contracts and the corresponding gain or loss is
included in the Cost to Sponsor. Bonds marked by "##" following the maturity
date have been purchased on a "when, as and if issued" or "delayed delivery"
basis. Interest on these Bonds begins accruing to the benefit of Unitholders
on their respective dates of delivery. Delivery is expected to take place at
various dates after the First Settlement Date. "#" prior to the coupon rate
indicates that the Bond was issued at an original issue discount. See "The
Trusts--Risk Factors" in Prospectus Part II. The tax effect of Bonds issued
at an original issue discount is described in "Federal Tax Status" in
Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
NEW JERSEY RISK FACTORS. The financial condition of the State of New Jersey
is affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The State's economic base is diversified,
consisting of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. The State has a relatively
high wage labor market which has resulted in the State's business sector
becoming more vulnerable to competitive pressures.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
All outstanding general obligation bonds to the State are rated "AA+" by
Standard and Poor's and "Aa1" by Moody's.
Further information concerning New Jersey risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. The Internal Revenue Service Restructuring and Reform Act of 1998
(the "1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) realized from property (with certain
exclusions) is subject to a maximum marginal stated tax rate of 20% (10% in the
case of certain taxpayers in the lowest tax bracket). Capital gain or loss is
long-term if the holding period for the asset is more than one year, and is
short-term if the holding period for the asset is one year or less. The date on
which a Unit is acquired (i.e., the "trade date") is excluded for purposes for
determining the holding period of the Unit. The legislation is generally
effective retroactively for amounts properly taken into account on or after
January 1, 1998. Capital gains realized from assets held for one year or less
are taxed at the same rates as ordinary income. For a discussion of the Federal
tax status of income earned on New Jersey IM-IT Trust Units, see "Federal Tax
Status" in Prospectus Part II.
In the opinion of Pitney, Hardin, Kipp & Szuch, special counsel to the Fund
for New Jersey tax matters, under existing law:
(1) The New Jersey IM-IT Trust will be recognized as a trust and not an
association taxable as a corporation. The New Jersey IM-IT Trust will not be
subject to the New Jersey Corporation Business Tax or the New Jersey Corporation
Income Tax.
(2) With respect to the non-corporate Unitholders who are residents of New
Jersey, the income of the New Jersey IM-IT Trust which is allocable to each such
Unitholder will be treated as the income of such Unitholder under the New Jersey
Gross Income Tax. Interest on the underlying Bonds which would be exempt from
New Jersey Gross Income Tax if directly received by such Unitholder will retain
its status as tax-exempt interest when received by the New Jersey IM-IT Trust
and distributed to such Unitholder. Any proceeds paid under the insurance policy
issued to the Trustee of the New Jersey IM-IT Trust with respect to the Bonds or
under individual policies obtained by issuers of Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be exempt from New
Jersey Gross Income Tax if, and to the same extent as, such interest would have
been so exempt if paid by the issuer of the defaulted obligations.
(3) A non-corporate Unitholder will not be subject to the New Jersey Gross
Income Tax on any gain realized either when the New Jersey IM-IT Trust disposes
of a Bond (whether by sale, exchange, redemption, or payment at maturity), when
the Unitholder redeems or sells his Units or upon payment of any proceeds under
the insurance policy issued to the Trustee of the New Jersey IM-IT Trust with
respect to the Bonds or under individual policies obtained by issuers of Bonds
which represent maturing principal on defaulted obligations held by the Trustee.
Any loss realized on such disposition may not be utilized to offset gains
realized by such Unitholder on the disposition of assets the gain on which is
subject to the New Jersey Gross Income Tax.
(4) Units of the New Jersey IM-IT Trust may be taxable on the death of a
Unitholder under the New Jersey Transfer Inheritance Tax Law or the New Jersey
Estate Tax Law.
(5) If a Unitholder is a corporation subject to the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, interest from the Bonds in
the New Jersey IM-IT Trust which is allocable to such corporation will be
includable in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, less any interest expense
incurred to carry such investment to the extent such interest expense has not
been deducted in computing Federal taxable income. Net gains derived by such
corporation on the disposition of the Bonds by the New Jersey IM-IT Trust or on
the disposition of its Units will be included in its entire net income for
purposes of the New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax. Any proceeds paid under the insurance policy issued to the Trustee
of the New Jersey IM-IT Trust with respect to the Bonds or under individual
policies obtained by issuers of Bonds which represent maturing interest or
maturing principal on defaulted obligations held by the Trustee will be included
in its entire net income for purposes of the New Jersey Corporation Business Tax
or New Jersey Corporation Income Tax if, and to the same extent as, such
interest or proceeds would have been so included if paid by the issuer of the
defaulted obligations.
THE SPONSOR. Van Kampen Funds Inc. (formerly Van Kampen American Capital
Distributors, Inc.) is the Sponsor of the Trusts. The Sponsor is an indirect
subsidiary of Van Kampen Investments Inc. (formerly VK/AC Holding, Inc.). Van
Kampen Investments Inc. is a wholly-owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
(formerly Morgan Stanley, Dean Witter, Discover & Co.). Van Kampen Investment
Advisory Corp. (formerly Van Kampen American Capital Investment Advisory Corp.)
is the Evaluator of the Trusts and is an affiliate of the Sponsor.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----
<S> <C> <C>
Van Kampen Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,716
Gruntal & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
Morgan Stanley Dean Witter & Co. 2 World Trade Center, 59th Floor, New York, New York 10048 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
-----
2,016
=====
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen unit investment
trusts may qualify for a reduced sales charge by signing a nonbinding Letter of
Intent with any single broker-dealer. After signing a Letter of Intent, at the
date total purchases, less redemptions, of units of any combination of series of
Van Kampen unit investment trusts by a purchaser (including units purchased in
the name of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age) exceed $500,000, the selling broker-dealer,
bank or other will credit the unitholder with cash as a retroactive reduction of
the sales charge on such units equal to the amount which would have been paid
for the total aggregated sale amount. If a purchaser does not complete the
required purchases under the Letter of Intent within the 13 month period, no
such retroactive sales charge reduction shall be made.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of
New Jersey Insured Municipals Income Trust, Series 124 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
307):
We have audited the accompanying statement of condition and the portfolio of
New Jersey Insured Municipals Income Trust, Series 124 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
307) as of October 16, 1998. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New Jersey Insured
Municipals Income Trust, Series 124 (included in Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 307) as of October 16,
1998, in conformity with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
October 16, 1998
STATEMENT OF CONDITION
AS OF OCTOBER 16, 1998
INVESTMENT IN BONDS
Contracts to purchase Bonds (1)(2) $ 1,917,225
Accrued interest to the First Settlement Date (1)(2) 21,684
--------------------
Total $ 1,938,909
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 21,684
Interest of Unitholders--
Cost to investors 2,016,000
Less: Gross underwriting commission 98,775
--------------------
Net interest to Unitholders (1)(2) 1,917,225
--------------------
Total $ 1,938,909
====================
- --------------------------------------------------------------------------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the First
Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
PROSPECTUS PART I
OCTOBER 16, 1998
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 307
NEW JERSEY INSURED MUNICIPALS INCOME TRUST, SERIES 124
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
VAN KAMPEN
PROSPECTUS PART I
MARYLAND INVESTORS' QUALITY TAX-EXEMPT TRUST, SERIES 87
- --------------------------------------------------------------------------------
Maryland Investors' Quality Tax-Exempt Trust, Series 87 (the "Trust")
(included in Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 307 (the "Fund")) consists of interest-bearing obligations
issued by or on behalf of municipalities and other governmental authorities, the
interest on which is, in the opinion of bond counsel to the issuer, exempt from
all Federal income taxes under existing law and exempt to the extent described
herein from Maryland state and local taxes when held by residents of Maryland
(the "Bonds"). The objective of the Trust is Federal and Maryland tax-exempt
income and conservation of capital through an investment in a diversified
portfolio of tax-exempt bonds. The Trust is referred to herein as the "State
Trust" or "Quality Trust."
The Trust consists of 10 issues of Bonds. Two of the Bonds are general
obligations of the governmental entities issuing them and are backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: Health Care, 3 (31%); General Purpose, 2 (17%);
General Obligation, 2 (15%); Higher Education, 1 (13%); Retail
Electric/Gas/Telephone, 1 (12%) and Water and Sewer, 1 (12%). The dollar
weighted average maturity of the Bonds is 27 years.
Monthly Semi-Annual
------------------ ------------------
Estimated Current Return: 4.27% 4.31%
Estimated Long Term Return: 4.24% 4.29%
CUSIP: 574080-18-0 574080-19-8
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation on an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
OCTOBER 16, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<S> <C> <C> <C>
Initial Date of Deposit: October 16, 1998 Principal Amount of Bonds per Unit (1): $ 969.44
Principal Amount of Bonds: $ 2,030,000 Number of Units: 2,094
</TABLE>
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 1,991,403
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.92
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 44.92 $ 44.92
Less Estimated Expenses $ 2.22 $ 1.78
Estimated Net Interest Income $ 42.70 $ 43.14
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- ------------------
Initial Distribution $ 2.25 on $ 2.27 on
November 25, 1998 November 25, 1998
Normal Distribution (3) $ 3.55 $ 21.57
Record Dates 10th day of November 10 and
each month May 10
Distribution Dates 25th day of November 25 and
each month May 25
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (4) (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (4) $ 0.30 $ 0.30
Other Operating Expenses $ 0.78 $ 0.74
----------- -----------
Total Annual Expenses per Unit $ 2.24 $ 1.80
=========== ===========
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (October 21, 1998), Unitholders will pay
accrued interest from such date to the settlement date less distributions
from the Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
(5) During the first year the Trustee will reduce its fee by approximately $.02
per Unit (which is the estimated interest to be earned prior to the expected
delivery dates for the "when, as and if issued" Bonds). Should the interest
exceed this amount, the Trustee will reduce its fee up to its annual fee.
After the first year, the Trustee's fee will be the amount indicated above.
Estimated interest income will increase to $44.94. Estimated Expenses will
increase to $2.24 and $1.80 under the monthly and semi-annual distribution
plans, respectively. Estimated Net Interest Income will remain as shown.
<TABLE>
<CAPTION>
PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
RATING(3) MARYLAND
-------------------
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND STANDARD REDEMPTION QUALITY
PRINCIPAL MATURITY DATE OF BONDS (1)(2) & POORS MOODY'S FEATURE(4) TRUST(2)
- ------------ ------------------------------------------------------ ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
$ 50,000 Commonwealth of Puerto Rico, Capital Appreciation Refunding
General Obligation-Unlimited Tax Bonds, Public Improvement
(MBIA Insured)
#0.00% Due 07/01/2015............................. AAA Aaa $ 23,073
55,000 Maryland, Health and Higher Educational Facilities Authority,
Revenue Bonds (John Hopkins Hospital)
#0.00% Due 07/01/2019............................. AA- Aa3 2016 @ 80.41 S.F. 20,252
300,000 Maryland, Health and Higher Educational Facilities Authority,
Revenue Bonds (Memorial Hospital at Easton Issue) MBIA
Insured
#4.70% Due 07/01/2019##........................... AAA N/R 2008 @ 101 298,413
250,000 Puerto Rico, Electric Power Authority, Power Revenue Refunding
Bonds, Series EE (MBIA Insured) 2008 @ 101.50
#4.75% Due 07/01/2024............................. AAA Aaa 2019 @ 100 S.F. 247,583
150,000 Calvert County, Maryland, Economic Development Revenue
Bonds (Asbury-Solomons) MBIA Insured 2008 @ 102
#5.00% Due 01/01/2027............................. AAA Aaa 2018 @ 100 S.F. 153,945
250,000 Howard County, Maryland, Refunding Bonds, Metropolitan
District Project, General Obligation Bonds, Series A 2008 @ 100
#4.75% Due 02/15/2027............................. AAA Aaa 2019 @ 100 S.F. 248,545
250,000 Baltimore, Maryland, Project Revenue Refunding Bonds,
Wastewater Project, Series B (FGIC Insured) 2008 @ 101
#5.00% Due 07/01/2028............................. AAA Aaa 2019 @ 100 S.F. 257,100
275,000 Maryland, Health and Higher Educational Facilities Authority,
Revenue Bonds (Calvert Memorial Hospital) 2008 @ 102
#5.00% Due 07/01/2028............................. N/R A2 2020 @ 100 S.F. 281,066
200,000 Commonwealth of Puerto Rico, Infrastructure Financing
Authority, Special Tax Revenue Bonds, Series 1997A
(AMBAC Assurance Insured) 2008 @ 101
#5.00% Due 07/01/2028............................. AAA Aaa 2022 @ 100 S.F. 205,046
250,000 Maryland, Health and Higher Education Facilities Authority,
Revenue Bonds (Maryland Institute-College of Art Issue)
FSA Insured 2008 @ 101
#5.00% Due 06/01/2029............................. N/R Aaa 2020 @ 100 S.F. 256,380
- ------------ ----------
$ 2,030,000 $1,991,403
============ ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from September 3, 1998
to October 15, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 1,975,963 $ 15,440
- -----------
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
MARYLAND RISK FACTORS. The financial condition of the State of Maryland is
affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The State's economic base is diversified,
consisting of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. The State has a relatively
high wage labor market which has resulted in the State's business sector
becoming more vulnerable to competitive pressures.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
The State of Maryland currently maintains a "triple A" bond rating from
Standard & Poor's and Moody's on its general obligation indebtedness.
Further information concerning Maryland risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. The Internal Revenue Service Restructuring and Reform Act of 1998
provides that for taxpayers other than corporations, net capital gain (which is
defined as net long-term capital gain over net short-term capital loss for the
taxable year) realized from property (with certain exclusions) is subject to a
maximum marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). Capital gain or loss is long-term if the holding period
for the asset is more than one year, and is short-term if the holding period for
the asset is one year or less. The date on which a Unit is acquired (i.e., the
"trade date") is excluded for purposes for determining the holding period of the
Unit. The legislation is generally effective retroactively for amounts properly
taken into account on or after January 1, 1998. Capital gains realized from
assets held for one year or less are taxed at the same rates as ordinary income.
For a discussion of the Federal tax status of income earned on Units, see
"Federal Tax Status" in Prospectus Part II.
In the opinion of Saul, Ewing, Remick & Saul LLP, special counsel to the Fund
for Maryland tax matters, under existing Maryland income tax law applicable to
taxpayers whose income is subject to Maryland income taxation:
(1) For Maryland State and local income tax purposes, the Maryland Quality
Trust will not be recognized as an association taxable as a corporation, but
rather as a fiduciary whose income will not be subject to Maryland State and
local income taxation.
(2) To the extent that interest derived from the Maryland Quality Trust by a
Unitholder with respect to the obligations of the State of Maryland, the
Government of Puerto Rico and their political subdivisions is excludable from
Federal gross income, such interest will not be subject to Maryland State or
local income taxes. Interest paid to a "financial institution" will be subject
to the Maryland State franchise tax on financial institutions.
(3) In the case of taxpayers who are individuals, Maryland presently imposes
an income tax on items of tax preference with reference to such items as defined
in the Internal Revenue Code, as amended from time to time, for purposes of
calculating the federal alternative minimum tax. Interest paid on certain
private activity bonds constitutes a tax preference item for the purpose of
calculating the federal alternative minimum tax. Accordingly, if the Maryland
Quality Trust holds such bonds, 50% of the interest on such bonds in excess of a
threshold amount is taxable in Maryland.
(4) Capital gain, including gain realized by a Unitholder from the
redemption, sale or other disposition of a Unit, will be included in the
Maryland taxable base of Unitholders for Maryland State and local income
taxation purposes. However, Maryland defines the taxable net income of
individuals as Federal adjusted gross income with certain modifications.
Likewise, the Maryland taxable net income of corporations is Federal taxable
income with certain modifications. There is available to Maryland income
taxpayers a modification which allows those taxpayers to subtract from the
Maryland taxable base the gain included in Federal adjusted gross income or
Federal taxable income, as the case may be, which is realized from the
disposition of obligations issued by the State of Maryland or its political
subdivisions by the Maryland Quality Trust. Consequently, by making that
modification, a Unitholder who is entitled to make the subtraction modification
will not be subject to Maryland State or local income tax with respect to gain
realized upon the disposition of obligations issued by the State of Maryland or
its political subdivisions by the Maryland Quality Trust. Profit realized by a
"financial institution" from the sale or exchange of Bonds will be subject to
the Maryland Franchise Tax.
These opinions relate only to the treatment of the Maryland Quality Trust and
the Units under the Maryland State and local income tax laws and Maryland
franchise tax laws. Unitholders should consult tax counsel as to other Maryland
tax consequences not specifically considered in these opinions. For example, no
opinion is expressed as to the treatment of the Units under the Maryland
inheritance and estate tax laws.
THE SPONSOR. Van Kampen Funds Inc. (formerly Van Kampen American Capital
Distributors, Inc.) is the Sponsor of the Trust. The Sponsor is an indirect
subsidiary of Van Kampen Investments Inc. (formerly VK/AC Holding, Inc.). Van
Kampen Investments Inc. is a wholly-owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
(formerly Morgan Stanley, Dean Witter, Discover & Co.). Van Kampen Investment
Advisory Corp. (formerly Van Kampen American Capital Investment Advisory Corp.)
is the Evaluator of the Trust and is an affiliate of the Sponsor.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----
<S> <C> <C>
Van Kampen Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,694
Gruntal & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
Morgan Stanley Dean Witter & Co. 2 World Trade Center, 59th Floor, New York, New York 10048 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Wheat First Union River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 100
-----
2,094
=====
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen unit investment
trusts may qualify for a reduced sales charge by signing a nonbinding Letter of
Intent with any single broker-dealer. After signing a Letter of Intent, at the
date total purchases, less redemptions, of units of any combination of series of
Van Kampen unit investment trusts by a purchaser (including units purchased in
the name of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age) exceed $500,000, the selling broker-dealer,
bank or other will credit the unitholder with cash as a retroactive reduction of
the sales charge on such units equal to the amount which would have been paid
for the total aggregated sale amount. If a purchaser does not complete the
required purchases under the Letter of Intent within the 13 month period, no
such retroactive sales charge reduction shall be made.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of
Maryland Investors' Quality Tax-Exempt Trust, Series 87 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
307):
We have audited the accompanying statement of condition and the portfolio of
Maryland Investors' Quality Tax-Exempt Trust, Series 87 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
307) as of October 16, 1998. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Maryland Investors' Quality
Tax-Exempt Trust, Series 87 (included in Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 307) as of October 16, 1998,
in conformity with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
October 16, 1998
STATEMENT OF CONDITION
AS OF OCTOBER 16, 1998
INVESTMENT IN BONDS
Contracts to purchase Bonds (1)(2) $ 1,991,403
Accrued interest to the First Settlement Date (1)(2) 25,478
--------------------
Total $ 2,016,881
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 25,478
Interest of Unitholders--
Cost to investors 2,094,000
Less: Gross underwriting commission 102,597
--------------------
Net interest to Unitholders (1)(2) 1,991,403
--------------------
Total $ 2,016,881
====================
- --------------------------------------------------------------------------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the First
Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
PROSPECTUS PART I
OCTOBER 16, 1998
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 307
MARYLAND INVESTORS' QUALITY TAX-EXEMPT TRUST, SERIES 87
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
February 1998
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART II
INSURED MUNICIPALS INCOME TRUST, INSURED MULTI-SERIES AND
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES
- --------------------------------------------------------------------------------
THE FUND. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an investment
in a diversified portfolio of tax-exempt bonds. The Fund consists of the
underlying separate unit investment trusts set forth in Prospectus Part I. The
Bonds are interest-bearing obligations issued by or on behalf of municipalities
and other governmental authorities, the interest on which is exempt from all
Federal income taxes under existing law in the opinion of bond counsel to the
issuer. In addition, the interest income of each State Trust is, in the opinion
of bond counsel to the issuer, exempt to the extent indicated from state and
local taxes, when held by residents of the state where the issuers of the Bonds
are located. Except in specific instances as noted in Prospectus Part I, the
information contained in this Prospectus Part II shall apply to each Trust in
its entirety.
"AAA" RATING FOR THE INSURED TRUSTS. Insurance guaranteeing the payments of
principal and interest, when due, on the Bonds in each Insured Trust has been
obtained from a municipal bond insurance company. See "Insurance on the Bonds in
the Insured Trusts". Insurance relates only to the Bonds and not to the Units or
to the market value thereof. As a result of such insurance, the Units of each
Insured Trust have received a rating of "AAA" by Standard & Poor's, A Division
of the McGraw-Hill Companies ("Standard & Poor's"). Units of the Trusts are not
insured by the FDIC, are not deposits or other obligations of, or guaranteed by,
any government agency and are subject to investment risk, including possible
loss of the principal amount invested.
PUBLIC OFFERING PRICE. The Public Offering Price of Units during the initial
offering period includes the aggregate offering price of the Bonds, the
applicable sales charge, cash, if any, in the Principal Account of the Trust,
and accrued interest, if any. Sales charges for the Trusts are set forth under
"Public Offering--General." During the initial offering period, the sales charge
is reduced for sales involving at least 100 Units.
ESTIMATED CURRENT AND LONG-TERM RETURNS. The Estimated Current Returns and
Estimated Long-Term Returns to Unitholders are described on the cover of
Prospectus Part I. See "Estimated Current and Long-Term Returns."
DISTRIBUTION OPTIONS. Unitholders may elect to receive distributions on a
monthly or semi-annual basis. See "Rights of Unitholders--Distributions of
Interest and Principal". Those indicating no choice will be deemed to have
chosen the monthly distribution plan.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends to,
and certain of the other Underwriters may, maintain a secondary market for the
Units. If a secondary market is not available, a Unitholder will always be able
to redeem his Units through the Trustee on any business day. See "Rights of
Unitholders--Redemption of Units" and "Public Offering--Market for Units".
REINVESTMENT OPTION. Unitholders may reinvest their distributions into Van
Kampen American Capital or Morgan Stanley mutual funds. See "Rights of
Unitholders--Reinvestment Option". Unitholders may also have the option of
exchanging their investment for units of other Van Kampen American Capital unit
investment trusts at a reduced sales charge. Unitholders may obtain a prospectus
for such trusts from the Sponsor.
RISK FACTORS. An investment in Units should be made with an understanding of
certain risks, including, among other factors, the inability of the issuer or an
insurer, if any, to pay the principal of or interest on a bond when due,
volatile interest rates, early call provisions, and changes to the tax status of
the Bonds. See "The Trusts--Risk Factors".
THIS PROSPECTUS PART II MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART I.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
An Information Supplement has been filed with the Securities and Exchange
Commission ("SEC") and can be obtained without charge by calling (800) 856-8487
or is available along with other related materials at the SEC's Internet site
(http://www.sec.gov). This Prospectus incorporates by reference the entire
Information Supplement.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE TRUSTS
- --------------------------------------------------------------------------------
THE FUND. This series of the Insured Municipals Income Trust or the Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust (the "Fund"),
consists of the underlying separate unit investment trusts described in
Prospectus Part I. The Fund was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement (the "Trust Agreement"), dated the
date of Prospectus Part I (the "Date of Deposit") among Van Kampen American
Capital Distributors, Inc., as Sponsor, American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee.
The Fund consists of separate portfolios of interest-bearing obligations
issued by or on behalf of states and territories of the United States, and
political subdivisions and authorities thereof, the interest on which is, in the
opinion of recognized bond counsel to the issuing authorities, excludable from
gross income for Federal income tax purposes under existing law. All issuers of
Bonds in a State Trust are located in the state for which the Trust is named or
in United States territories or possessions and their public authorities;
consequently, in the opinion of recognized bond counsel to the Bond issuers, the
interest earned on the Bonds is exempt to the extent indicated in Prospectus
Part I from state and local taxes. Further, in the opinion of bond counsel to
the respective issuers, the interest income of each Bond in a U.S. Territorial
IM-IT Trust is exempt from state, Commonwealth of Puerto Rico and local income
taxation. With the exception of New York and Pennsylvania Trusts, Units of a
State Trust may be purchased only by residents of the state for which the Trust
is named. Units of a New York Trust may be purchased by residents of New York,
Connecticut and Florida. Units of a Pennsylvania Trust may be purchased by
residents of Pennsylvania, Connecticut, Florida, Maryland, New York, Ohio and
West Virginia. State Trusts, other than State Intermediate Laddered Maturity
Trusts or State Intermediate Trusts, are referred to herein as "Long-Term State
Trusts".
On the Date of Deposit, the Sponsor deposited with the Trustee the aggregate
principal amount of Bonds indicated in the "Summary of Essential Financial
Information" in Prospectus Part I. The Bonds initially consist of delivery
statements relating to contracts for their purchase and cash, cash equivalents
and/or irrevocable letters of credit issued by a financial institution.
Thereafter, the Trustee, in exchange for the Bonds, delivered to the Sponsor
evidence of ownership of the number of Units indicated under "Summary of
Essential Financial Information" in Prospectus Part I.
The portfolio of any IM-IT, IM-IT Discount, U.S. Territorial IM-IT,
Long-Term State or National Quality Trust consists of Bonds maturing
approximately 15 to 40 years from the Date of Deposit. The approximate range of
maturities from the Date of Deposit for Bonds in any IM-IT Limited Maturity
Trust, IM-IT Intermediate Trust, State Intermediate Laddered Maturity Trust and
IM-IT Short Intermediate Trust is 12 to 15 years, 5 to 15 years, 5 to 10 years
and 3 to 7 years, respectively. The portfolio of any State Intermediate Laddered
Maturity Trust is structured so that approximately 20% of the Bonds will mature
each year, beginning in approximately the fifth year of the Trust, entitling
each Unitholder to a return of principal. This return of principal may offer
Unitholders the opportunity to respond to changing economic conditions and to
specific financial needs that may arise between the fifth and tenth years of the
Trust. However, the flexibility provided by the return of principal may also
eliminate a Unitholder's ability to reinvest at a rate as high as the yield on
the Bonds which matured.
Each Unit initially offered represents a fractional undivided interest in
the principal and net income of a Trust. To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in a Trust
represented by each Unit will increase, although the actual interest in the
Trust will remain unchanged. Units will remain outstanding until redeemed by
Unitholders or until the termination of the Trust Agreement.
OBJECTIVES AND BOND SELECTION. The objectives of the Fund are income exempt
from Federal income taxation and, in the case of a State Trust, Federal and
state income taxation and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. A State
Intermediate Laddered Maturity Trust has additional objectives of providing
protection against changes in interest rates and investment flexibility through
an investment in a laddered portfolio of intermediate-term interest-bearing
obligations with maturities ranging from approximately 5 to 10 years in which
roughly 20% of the Bonds mature each year beginning in approximately the fifth
year of the Trust. There is, of course, no guarantee that the Trusts will
achieve their objectives. The Fund may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed income
bonds with greater diversification than they might be able to acquire
individually. Insurance guaranteeing the timely payment, when due, of all
principal and interest on the Bonds in each Insured Trust has been obtained from
a municipal bond insurance company. For information relating to insurance on the
Bonds, see "Insurance on the Bonds in the Insured Trusts". In addition, these
bonds are often not available in small amounts.
In selecting Bonds for the Trusts, the Sponsor considered the following
factors, among others: (a) either the Standard & Poor's rating of the Bonds was
not less than "BBB-" for Insured Trusts and "A-" for Quality Trusts, or the
Moody's Investors Service, Inc. ("Moody's") rating of the Bonds was not less
than "Baa" for Insured Trusts and "A" for the Quality Trusts, including
provisional or conditional ratings, respectively, (or, if not rated, the Bonds
had credit characteristics sufficiently similar to the credit characteristics of
interest-bearing tax-exempt bonds that were so rated as to be acceptable for
acquisition by the Fund in the opinion of the Sponsor), (b) the prices of the
Bonds relative to other bonds of comparable quality and maturity, (c) the
diversification of Bonds as to purpose of issue and location of issuer and (d)
with respect to the Insured Trusts, the availability and cost of insurance.
After the Date of Deposit, a Bond may cease to be rated or its rating may be
reduced below the minimum required as of the Date of Deposit. Neither event
requires elimination of a Bond from a Trust but may be considered in the
Sponsor's determination as to whether or not to direct the Trustee to dispose of
the Bond (see "Fund Administration--Portfolio Administration").
RISK FACTORS. The Trusts include certain types of bonds as described on the
cover of Prospectus Part I. An investment in Units should be made with an
understanding of the characteristics of and risks associated with such bonds.
The following is a brief summary of certain of these risks. Additional
information is included in Prospectus Part I and in the Information Supplement.
See "Additional Information". Neither the Sponsor nor the Trustee are liable for
any default, failure or defect in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental entity
that are backed by the taxing power of the entity. All other Bonds are revenue
bonds payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds, both within a particular classification and between
classifications, depending on numerous factors.
Mortgage loan obligations may be FHA insured or may be single family
mortgage revenue bonds issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income. Mortgage
loans are generally partially or completely prepaid prior to their final
maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. A substantial portion of these bonds
will probably be redeemed prior to their scheduled maturities or even prior to
their ordinary call dates. Additionally, unusually high rates of default on the
underlying mortgage loans may reduce revenues available for the payment of
principal of or interest on mortgage revenue bonds.
Health care revenue bonds have ratings issued for health care facilities
that are often based on feasibility studies that contain projections of
occupancy levels, revenues and expenses. A facility's gross receipts and net
income available for debt service may be affected by future events and
conditions including, among other things, demand for services and the ability of
the facility to provide the services required, competition with other health
care facilities, efforts by insurers and governmental agencies to limit rates
and legislation establishing state rate-setting agencies.
Public utility bond issuers sell wholesale and retail electric power and
gas. General problems of these issuers include difficulty in financing large
construction programs in an inflationary period, costs and delays attributable
to environmental considerations, the difficulty of the capital market in
absorbing utility debt, difficulty in obtaining fuel at reasonable prices, the
effect of energy conservation and government regulations.
Water and/or sewerage revenue bonds are generally payable from user fees.
The problems of these issuers include the ability to obtain rate increases,
population decline resulting in decreased user fees, financing, environmental
considerations, discovering fresh water and the impact of "no-growth" zoning
ordinances.
Industrial revenue bonds ("IRBs") have generally been issued under bond
resolutions under which the revenues and receipts payable have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure, payment
of IRBs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor which may be affected by such things as
cyclicality of revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents, extensive competition and financial
deterioration resulting from a corporate restructuring.
Lease bonds are secured by lease payments of a governmental entity and are
often in the form of certificates of participation. Although the lease bonds do
not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease bond is ordinarily backed by the
municipality's covenant to appropriate for and make the payments due under the
lease bond. However, certain lease bonds contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease payments in
future years unless money is appropriated for such purpose on a yearly basis. A
governmental entity that enters into such a lease agreement cannot obligate
future governments to appropriate for and make lease payments but covenants to
take such action as is necessary to include any lease payments due in its
budgets and to make the appropriations therefor. A governmental entity's failure
to appropriate for and to make payments under its lease bond could result in
insufficient funds available for payment of the bonds secured thereby. Although
"non-appropriation" lease bonds are secured by the leased property, disposition
of the property in the event of foreclosure might prove difficult.
Education bond issuers govern the operation of schools, colleges and
universities and revenues are derived mainly from ad valorem taxes or from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the financing of public education, a
declining percentage of the population consisting of "college" age individuals,
inability to raise tuitions and fees sufficiently and government legislation or
regulations which may adversely affect the revenues or costs of the issuers.
Transportation bonds are payable from revenues derived from the ownership
and operation of facilities such as airports, bridges, turnpikes, port
authorities, convention centers and arenas. Airport operating income may be
affected by the ability of the airlines to meet their obligations under use
agreements. Payment on bonds related to other facilities may be adversely
affected by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative modes of
transportation, scarcity of fuel and reduction or loss of rents.
Certain Bonds are payable from revenues derived from the operation of
resource recovery facilities which are designed to process solid waste, generate
steam and convert steam to electricity. Resource recovery bonds may be subject
to extraordinary optional redemption at par upon the occurrence of circumstances
such as destruction or condemnation of a project, void or unenforceable
contracts, changes in the economic availability of raw materials, and operating
supplies or facilities, or other unavoidable changes adversely affecting the
operation of a project.
Certain Bonds may have been acquired at a market discount from par value at
maturity. The interest rates on these bonds are lower than current market
interest rates for newly issued bonds of comparable rating and type. Generally,
if interest rates for newly issued comparable bonds increase, the market
discount of previously issued bonds will increase, and if interest rates for
newly issued comparable bonds decline, the market discount of previously issued
bonds will decrease. The value of bonds purchased at a market discount will
generally increase in value faster than bonds purchased at a market premium if
interest rates decrease. Conversely, if interest rates increase, the value of
bonds purchased at a market discount will generally decrease faster than bonds
purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium bonds and the prepayment benefit for
lower yielding, discount bonds will be reduced. A bond purchased at a market
discount and held to maturity will have a larger portion of its total return in
the form of taxable income and capital gain and less in the form of tax-exempt
interest income than a comparable bond newly issued at current market rates. See
"Federal Tax Status." Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue.
Certain Bonds may be "original issue discount" bonds which were issued
with interest rates less than rates offered by comparable bonds and were
originally sold at a discount from their par value. These bonds may include
"zero coupon" bonds which are described below. In a stable interest rate
envronment, the market value of an original issue discount bond would tend to
increase more slowly in the early years and in greater increments as the bond
approached maturity. These bonds may be subject to redemption at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus some premium, if applicable. Under these call provisions, these
bonds may be called prior to maturity at a price less than par value. See
"Federal Tax Status" for a discussion of the tax consequenses of owning these
bonds.
Certain Bonds may be "zero coupon" bonds. Zero coupon bonds are purchased at
a deep discount because the buyer receives only the right to receive a final
payment at the maturity of the bond and does not receive any periodic interest
payments. The effect of owning these bonds is that a fixed yield is earned not
only on the original investment but also, in effect, on all discount earned
during the life of the bond. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest income at a rate as high as
the implicit yield on the discount bond, but at the same time eliminates the
ability to reinvest at higher rates in the future. For this reason, zero coupon
bonds are subject to substantially greater price fluctuations during periods of
changing market interest rates than are bonds of comparable quality which pay
interest.
Certain Bonds may have been purchased on a "when, as and if issued" or
"delayed delivery" basis. The delivery of these Bonds may be delayed or may not
occur. Interest on these Bonds begins accruing to the benefit of Unitholders on
their respective dates of delivery. To the extent any Bonds are actually
delivered to a Trust after the expected dates of delivery, Unitholders who
purchase their Units prior to the actual delivery date would be required to
adjust their tax basis in their Units for a portion of the interest accruing on
those Bonds during the interval between their purchase of Units and the actual
delivery of the Bonds. As a result of any adjustment, the Estimated Current
Return during the first year would be slightly lower than stated herein.
Unitholders will be "at risk" with respect to all Bonds (i.e., may derive either
gain or loss from fluctuations in the value of the Bonds) from the date they
order Units.
Certain Bonds may be subject to redemption prior to their stated maturity
date pursuant to sinking fund provisions, call provisions or extraordinary
optional or mandatory redemption provisions or otherwise. A sinking fund is a
reserve fund accumulated over a period of time for retirement of debt. A
callable bond is one which is subject to redemption or refunding prior to
maturity at the option of the issuer. A refunding is a method by which a debt
obligation is redeemed, at or before maturity, by the proceeds of a new debt
obligation. In general, call provisions are more likely to be exercised when the
bond price is at a premium over par than when it is at a discount from par. The
exercise of redemption or call provisions generally will result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions; it may also affect the current return on
Units. See "Portfolio" in Prospectus Part I for a list of the sinking fund and
call provisions, if any, with respect to the Bonds. The Sponsor is unable to
predict all of the circumstances which may result in redemption of a Bond.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect upon the Trusts. At any time after the Date of
Deposit, litigation may be initiated on a variety of grounds with respect to the
Bonds. Such litigation may affect the validity of the Bonds or the tax-free
nature of interest payments. While the outcome of litigation can never be
predicted, the Fund has received or will receive opinions of bond counsel to the
issuers of each Bond on the date of issuance to the effect that the Bonds have
been validly issued and interest payments are exempt from Federal income tax. In
addition, other factors may arise from time to time which potentially may impair
the ability of issuers to meet obligations undertaken with respect to the Bonds.
Like other investment companies, financial and business organizations and
individuals around the world, the Trusts could be adversely affected if the
computer systems used by the Sponsor, Evaluator or Trustee or other service
providers to the Trusts do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." While the Sponsor, Evaluator and Trustee are taking
steps that they believe are reasonably designed to address the Year 2000
Problem, there can be no assurance that these steps will be sufficient to avoid
any adverse impact to the Trusts. The Year 2000 Problem may impact certain
issuers of the Bonds to varying degrees, however, the Sponsor is unable to
predict what impact, if any, the Year 2000 Problem will have on any issuer.
ESTIMATED CURRENT AND LONG-TERM RETURNS
- --------------------------------------------------------------------------------
The Estimated Current Returns and the Estimated Long-Term Returns as of the
Date of Deposit are set forth on the cover of the Prospectus Part I. Estimated
Current Return is calculated by dividing the estimated net annual interest
income per Unit by the Public Offering Price. The estimated net annual interest
income per Unit will vary with changes in fees and expenses of the Trust and
with the principal prepayment, redemption, maturity, exchange or sale of Bonds.
The Public Offering Price will vary with changes in the price of the Bonds.
Accordingly, there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of the Bonds and (2) takes into account the expenses and sales
charge associated with Units. Since the value and estimated retirements of the
Bonds and the expenses of a Trust will change, there is no assurance that the
present Estimated Long-Term Return will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ because the
calculation of Estimated Long-Term Return reflects the estimated date and amount
of principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
In order to acquire certain Bonds, it may be necessary for the Sponsor or
Trustee to pay amounts covering accrued interest on the Bonds which exceed the
amounts which will be made available through cash furnished by the Sponsor on
the Date of Deposit. This cash may exceed the interest which would accrue to the
First Settlement Date. The Trustee has agreed to pay for any amounts necessary
to cover any excess and will be reimbursed when funds become available from
interest payments on the related Bonds. Also, since interest on any "when, as
and if issued" Bonds does not begin accruing as tax-exempt interest income to
the benefit of Unitholders until the date of delivery, the Trustee may reduce
its fee and pay Trust expenses in order to maintain or approach the same
estimated net annual interest income during the first year of the Trust's
operations as described under "Summary of Essential Financial Information" in
Prospectus Part I.
PUBLIC OFFERING
- --------------------------------------------------------------------------------
GENERAL. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the aggregate offering
price of the Bonds, the sales charge described below, cash, if any, in the
Principal Account and accrued interest, if any. After the initial public
offering period, the secondary market public offering price is based on the bid
prices of the Bonds, the sales charge described below, cash, if any, in the
Principal Account and accrued interest, if any. The minimum purchase in the
primary and secondary market is one Unit.
The initial offering period sales charges are as follows:
<TABLE>
<CAPTION>
INITIAL OFFERING PERIOD SALES CHARGE
AS PERCENT OF
------------------------------------
PUBLIC OFFERING OFFERING PRICE
TRUST PRICE OF BONDS
------------------------------------------------------------------------------------------------------
<S> <C> <C>
IM-IT, U.S. Territorial IM-IT, Long-Term State and National
Quality Trusts 4.900% 5.152%
IM-IT Limited Maturity Trusts 4.300 4.493
IM-IT Discount Trusts 4.000 4.167
IM-IT Intermediate Trusts 3.900 4.058
State Intermediate Laddered Maturity Trusts 3.000 3.093
IM-IT Short Intermediate Trusts 2.000 2.041
</TABLE>
The sales charge applicable to quantity purchases during the initial
offering period is reduced as follows:
<TABLE>
<CAPTION>
SALES CHARGE REDUCTION PER UNIT
-----------------------------------------------------------------------------------
IM-IT, U.S.
TERRITORIAL IM-IT,
LONG-TERM STATE
AGGREGATE NUMBER OF AND NATIONAL IM-IT SHORT IM-IT
UNITS PURCHASED* QUALITY TRUSTS INTERMEDIATE TRUST DISCOUNT TRUST OTHER TRUSTS
- ----------------------------- -------------------- -------------------- ---------------- -------------
<S> <C> <C> <C> <C>
100-249 Units $ 4.00 $ 2.00 $ 2.00 $ 4.00
250-499 Units $ 6.00 $ 3.00 $ 4.00 $ 6.00
500-999 Units $ 14.00 $ 4.00 $ 6.00 $ 9.00
1,000 or more Units $ 19.00 $ 6.00 $ 8.00 $ 11.00
- -----------------------------
</TABLE>
* The breakpoint sales charges are also applied on a dollar basis
utilizing a breakpoint equivalent in the above table of $1,000 per Unit and will
be applied on whichever basis is more favorable to the investor. The breakpoints
will be adjusted to take into consideration purchase orders stated in dollars
which cannot be completely fulfilled due to the Trusts' requirement that only
whole Units be issued.
The secondary market sales charge is computed as described in the following
table based upon the estimated long-term return life of a Trust's portfolio:
<TABLE>
<CAPTION>
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
1 1.010% 8 3.627% 15 5.042%
2 1.523 9 4.167 16 5.152
3 2.041 10 4.384 17 5.263
4 2.302 11 4.603 18 5.374
5 2.564 12 4.712 19 5.485
6 2.828 13 4.822 20 5.597
7 3.093 14 4.932 21 to 30 5.708
</TABLE>
For purposes of computation of the estimated long-term return life, Bonds
will be deemed to mature on their expressed maturity dates unless: (a) the Bonds
have been called for redemption or are subject to redemption at an earlier call
date, in which case this call date will be deemed to be the maturity date; or
(b) the Bonds are subject to a "mandatory tender", in which case the mandatory
tender will be deemed to be the maturity date. The sales charges in the above
table are expressed as a percentage of the aggregate bid prices of the Bonds.
Expressed as a percent of the Public Offering Price, the sales charge on a Trust
consisting entirely of Bonds with 15 years to maturity would be 4.80%. The sales
charges in the table above do not apply to IM-IT Discount Trusts. The applicable
secondary market sales charges for an IM-IT Discount Trust are set forth in the
applicable Prospectus Part I.
Any reduced sales charge is the responsibility of the selling Underwriter,
broker, dealer or agent. The Sponsor will, however, increase the concession or
agency commission for quantity purchases. The reduced sales charge structure in
the initial offering period sales charge table above will apply on all purchases
by the same person from any one Underwriter or dealer of units of Van Kampen
American Capital-sponsored unit investment trusts which are being offered in the
initial offering period (a) on any one day (the "Initial Purchase Date") or (b)
on any day subsequent to the Initial Purchase Date, if (1) the units purchased
are of a unit investment trust purchased on the Initial Purchase Date, and (2)
the person purchasing the units purchased a sufficient amount of units on the
Initial Purchase Date to qualify for a reduced sales charge on such date. In the
event units of more than one trust are purchased on the Initial Purchase Date,
the aggregate dollar amount of such purchases will be used to determine whether
purchasers are eligible for a reduced sales charge. Such aggregate dollar amount
will be divided by the public offering price per unit (on the day preceding the
date of purchase) of each respective trust purchased to determine the total
number of units which such amount could have purchased of each individual trust.
Purchasers must then consult the applicable trust's prospectus to determine
whether the total number of units which could have been purchased of a specific
trust would have qualified for a reduced sales charge and, if so qualified, the
amount of such reduction. Assuming a purchaser qualifies for a sales charge
reduction or reductions, to determine the applicable sales charge reduction or
reductions it is necessary to accumulate all purchases made on the Initial
Purchase Date and all purchases made in accordance with (b) above. Units
purchased in the name of the spouse of a purchaser or in the name of a child of
such purchaser ("immediate family members") will be deemed for the purposes of
calculating the applicable sales charge to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a trustee or
other fiduciary purchasing Units for one or more trust, estate or fiduciary
accounts.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons (collectively referred to herein as "related
purchasers")) of Van Kampen American Capital Distributors, Inc. and its
affiliates and Underwriters and their affiliates may purchase Units at the
Public Offering Price less the applicable underwriting commission or less the
applicable dealer concession in the absence of an underwriting commission.
Employees, officers and directors (including related purchasers) of dealers and
their affiliates and vendors providing services to the Sponsor may purchase
Units at the Public Offering Price less the applicable dealer concession.
Purchasers of units of any two consecutive series of a Trust may aggregate
purchases of units of such series for purposes of the sales charge reduction for
quantity purchases, provided that at the time of the initial purchase of units
such purchaser submitted a purchase order for at least 100 units that was
partially unfulfilled due to a lack of units of such Trust series available for
sale at such time. The sales charge reduction shall be applied to the subsequent
purchase of units such that the aggregate sales charge reduction applicable to
both purchases will equal the amount described in the initial offering period
sales charge table above.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge reduction
for quantity purchases) less the concession the Sponsor typically allows to
brokers and dealers for purchases by (1) investors who purchase Units through
registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management services, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed, (2) bank trust departments
investing funds over which they exercise exclusive discretionary investment
authority and that are held in a fiduciary, agency, custodial or similar
capacity, (3) any person who for at least 90 days, has been an officer, director
or bona fide employee of any firm offering Units for sale to investors or their
immediate family members (as described above) and (4) officers and directors of
bank holding companies that make Units available directly or through
subsidiaries or bank affiliates. Notwithstanding anything to the contrary in
this Prospectus, such investors, bank trust departments, firm employees and bank
holding company officers and directors who purchase Units through this program
will not receive sales charge reductions for quantity purchases.
OFFERING PRICE. The Public Offering Price of Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Prospectus
Part I in accordance with fluctuations in the prices of the Bonds. The price of
Units on the Date of Deposit was determined by adding the applicable sales
charge to the aggregate offering price of the Bonds and dividing the sum by the
number of Units outstanding. This price determination was made on the basis of
an evaluation of the Bonds prepared by Interactive Data Corporation, a firm
regularly engaged in the business of evaluating, quoting or appraising
comparable securities. During the initial offering period, the Evaluator will
value the Bonds as of the Evaluation Time on days the New York Stock Exchange is
open for business and will adjust the Public Offering Price of Units
accordingly. This Public Offering Price will be effective for all orders
received at or prior to the Evaluation Time on each such day. The "Evaluation
Time" is the close of trading on the New York Stock Exchange on each day that
the Exchange is open for trading. Orders received by the Trustee, Sponsor or any
Underwriter for purchases, sales or redemptions after that time, or on a day
when the New York Stock Exchange is closed, will be held until the next
determination of price. The secondary market Public Offering Price per Unit will
be equal to the aggregate bid price of the Bonds plus the applicable secondary
market sales charge and dividing the sum by the number of Units outstanding. For
secondary market purposes, this computation will be made by the Evaluator as of
the Evaluation Time for each day on which any Unit is tendered for redemption
and as necessary. The offering price of Bonds may be expected to average
approximately 0.5%-1% more than the bid price.
The aggregate price of the Bonds is determined on the basis of bid prices or
offering prices, as is appropriate, (a) on the basis of current market prices
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Fund; (b) if these prices are not available, on the basis of
current market prices for comparable bonds; (c) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (d) by any combination of the above. Market
prices of the Bonds will generally fluctuate with changes in market interest
rates. Unless Bonds are in default in payment of principal or interest or in
significant risk of default, the Evaluator will not attribute any value to the
insurance obtained by an Insured Trust, if any.
The Evaluator will consider in its evaluation of Bonds which are in default
in payment of principal or interest or, in the Sponsor's opinion, in significant
risk of default (the "Defaulted Bonds") the value of any insurance guaranteeing
interest and principal payments. The value of the insurance will be equal to the
difference between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance premiums and
related expenses attributable to the purchase of Permanent Insurance) and (ii)
the market value of Defaulted Bonds not covered by Permanent Insurance. In
addition, the Evaluator will consider the ability of a Portfolio Insurer to meet
its commitments under any insurance policy, including commitments to issue
Permanent Insurance. No value has been ascribed to insurance obtained by an
Insured Trust, if any, as of the date of this Prospectus.
A person will become the owner of Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used in the Sponsor's
business and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934.
ACCRUED INTEREST. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although each Trust accrues
interest daily. Because of this, a Trust always has an amount of interest earned
but not yet collected by the Trustee. For this reason, with respect to sales
settling after the First Settlement Date, the proportionate share of accrued
interest to the settlement date is added to the Public Offering Price of Units.
Unitholders will receive the amount of accrued interest paid on their Units on
the next distribution date. In an effort to reduce the accrued interest which
would have to be paid by Unitholders, the Trustee will advance the amount of
accrued interest to the Sponsor as the Unitholder of record as of the First
Settlement Date. Consequently, the accrued interest added to the Public Offering
Price of Units will include only accrued interest from the First Settlement Date
to the date of settlement, less any distributions from the Interest Account
after the First Settlement Date. Because of the varying interest payment dates
of the Bonds, accrued interest at any point in time will be greater than the
amount of interest actually received by a Trust and distributed to Unitholders.
If a Unitholder sells or redeems all or a portion of his Units, he will be
entitled to receive his proportionate share of the accrued interest from the
purchaser of his Units.
UNIT DISTRIBUTION. Units will be distributed to the public by Underwriters,
broker-dealers and others at the Public Offering Price, plus accrued interest.
The Sponsor intends to qualify Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period for
any single transaction as described in the following table, provided that the
Units are acquired from the Sponsor.
<TABLE>
<CAPTION>
IM-IT, U.S.
TERRITORIAL
IM-IT, LONG- IM-IT STATE
IM-IT TERM STATE AND IM-IT SHORT IM-IT LIMITED INTERMEDIATE
DISCOUNT NATIONAL INTERMEDIATE INTERMEDIATE MATURITY LADDERED
TRUST QUALITY TRUSTS TRUST TRUST TRUST MATURITY TRUST
----------- -------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units $ 18.00 $ 30.00 $ 10.00 $ 25.00 $ 27.00 $ 20.00
100 - 249 Units $ 19.00 $ 32.00 $ 11.00 $ 28.00 $ 30.00 $ 21.00
250 - 499 Units $ 20.00 $ 34.00 $ 11.00 $ 27.00 $ 30.00 $ 21.00
500 - 999 Units $ 20.00 $ 35.00 $ 12.00 $ 30.00 $ 32.00 $ 23.00
1,000 - 1,499 Units $ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
1,500 or more Units $ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
</TABLE>
The increased concession or agency commission is a result of the discount
given to purchasers for quantity purchases. See "Public Offering--General". In
addition to the concessions and agency commissions described in the table,
volume concessions or agency commissions of an additional $5.00 per Unit of an
IM-IT, a U.S. Territorial IM-IT, a Long-Term State or a National Quality Trust
and $2.00 per Unit of all other Trusts will be given to any broker/dealer or
agent (other than Underwriters) who purchases from the Sponsor at least 250
Units of such Trust during the initial offering period. These additional
concessions will be allowed at the time of purchase, provided, however, the
additional concession applicable to initial purchases totaling less than 250
Units will be paid retroactively at the end of the initial offering period. The
breakpoint concessions or agency commissions are also applied on a dollar basis
utilizing a breakpoint equivalent of $1,000 per Unit and will be applied on
whichever basis is more favorable to the distributor. The breakpoints will be
adjusted to take into consideration purchase orders stated in dollars which
cannot be completely fulfilled due to the requirement that only whole Units be
issued. Certain commercial banks may be making Units available to their
customers on an agency basis. A portion of the sales charge paid by these
customers (equal to the agency commission referred to above) is retained by or
remitted to the banks. Any discount provided to investors will be borne by the
selling dealer or agent. For secondary market transactions, the concession or
agency commission will amount to 70% of the applicable sales charge. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units and to change the amount of the concession or agency commission to dealers
and others from time to time.
SPONSOR AND UNDERWRITER COMPENSATION. The Underwriters will receive a gross
sales commission equal to the sales charge applicable to the transaction
involved. "Public Offering--General". The Sponsor will receive from the
Underwriters the excess of this gross sales commission over the amounts set
forth in the following table, as of the Date of Deposit. For a list of the
Underwriters that have purchased Units from the Sponsor, see "Underwriting" in
Prospectus Part I.
<TABLE>
<CAPTION>
IM-IT, U.S.
TERRITORIAL
IM-IT, LONG- IM-IT STATE
IM-IT TERM STATE AND IM-IT SHORT IM-IT LIMITED INTERMEDIATE
DISCOUNT NATIONAL INTERMEDIATE INTERMEDIATE MATURITY LADDERED
TRUST QUALITY TRUSTS TRUST TRUST TRUST MATURITY TRUST
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<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units $ 20.00 $ 35.00 $ 12.00 $ 27.00 $ 29.00 $ 22.00
100 - 249 Units $ 21.00 $ 37.00 $ 13.00 $ 30.00 $ 32.00 $ 23.00
250 - 499 Units $ 22.00 $ 39.00 $ 13.50 $ 29.50 $ 32.00 $ 23.00
500 - 999 Units $ 22.00 $ 40.00 $ 14.00 $ 32.50 $ 34.50 $ 25.00
1,000 - 1,499 Units $ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
1,500 or more Units $ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
</TABLE>
A. G. Edwards & Sons, Inc. which acts as a Managing Underwriter of Units of
the various series of the IM-IT or National Quality Trust, will receive from the
Sponsor reimbursement for certain costs and further compensation in the amount
of $5.00 for each Unit of the IM-IT or National Quality Trust it underwrites. In
addition, the Sponsor will receive from the Managing Underwriters of any
National Quality, (who underwrite 15% of the Trust involved or 1,000 Units of
such Trust, whichever is greater) the excess of such gross sales commission over
$38.00 per Unit of any such Trust, as of the Date of Deposit. Also, any such
Managing Underwriter that sells a total of 25% or 1,500 Units, whichever is
greater, of any individual series of such Trusts will receive an additional
$2.00 per each such Unit. In connection with quantity sales to purchasers of any
Pennsylvania IM-IT Trust the Underwriters will receive from the Sponsor
commissions totalling $35.00 per Unit for any single transaction of 100 to 249
Units, $36.00 per Unit for any single transaction of 250 to 499 units, $37.00
per Unit for any single transaction of 500 to 999 Units and $38.00 per Unit for
any single transaction of 1,000 or more Units. In addition, any Underwriter that
sells a total of 25% or 1,500 Units, whichever is greater, of any Pennsylvania
IM-IT Trust will receive an additional $2.00 per each such Unit. In addition,
the Sponsor has entered into agreements with Advest, Inc. ("Advest") and Gruntal
& Co., Inc. ("Gruntal") whereby Advest and Gruntal will receive an additional
$2.00 per Unit in connection with a minimum commitment of 1,500 Units of any New
York IM-IT Trust. In addition, the Sponsor and J. J. B. Hilliard, W. L. Lyons,
Inc. ("Hilliard, Lyons") have entered into an agreement under which Hilliard,
Lyons may receive an additional $2.00 for each Unit of the Kentucky Quality
Trust which it underwrites, provided it underwrites a minimum of 400 Units of
such Trust. Further, each Underwriter who underwrites 1,000 or more Units in any
Trust will receive additional compensation from the Sponsor of $1.00 for each
Unit it underwrites. The breakpoints listed herein will also be applied on a
dollar basis utilizing a breakpoint equivalent of $1,000 per Unit and will be
applied on whichever basis is more favorable to the Underwriter.
In addition, the Sponsor and certain Underwriters will realize a profit or
loss, as a result of the difference between the price paid for the Bonds by the
Sponsor and the cost of the Bonds to a Trust. See "Portfolio" and "Notes to
Portfolio" in Prospectus Part I. Underwriters may also realize profits or losses
with respect to Bonds which were acquired by the Sponsor from underwriting
syndicates of which they were members. The Sponsor has not participated as sole
underwriter or as manager or as a member of the underwriting syndicates from
which the Bonds in the Trusts were acquired. Underwriters may further realize
profit or loss during the initial offering period as a result of possible
fluctuations in the market value of the Bonds since all proceeds received from
purchasers of Units (excluding dealer concessions or agency commissions allowed,
if any) will be retained by the Underwriters. Affiliates of an Underwriter are
entitled to the same dealer concessions or agency commissions that are available
to the Underwriter. In addition to any other benefits Underwriters may realize
from the sale of Units, the Sponsor will share on a pro rata basis among senior
Underwriters (those who underwrite at least 250 Units) 50% of any gain (less
deductions for accrued interest and certain costs) represented by the difference
between the cost of the Bonds to the Sponsor and the evaluation of the Bonds on
the Date of Deposit. The Sponsor and certain of the other Underwriters will also
realize profits or losses in the amount of any difference between the price at
which Units are purchased and the price at which Units are resold in connection
with maintaining a secondary market for Units and will also realize profits or
losses resulting from a redemption of repurchased Units at a price above or
below the purchase price.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor during
a specified time period. In addition, at various times the Sponsor may implement
other programs under which the sales forces of such firms may be eligible to win
other nominal awards for certain sales efforts, or under which the Sponsor will
reallow to any such firms that sponsor sales contests or recognition programs
conforming to criteria established by the Sponsor, or participate in sales
programs sponsored by the Sponsor, an amount not exceeding the total applicable
sales charges on the sales generated by such persons at the public offering
price during such programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor pay fees to
qualifying firms for certain services or activities which are primarily intended
to result in sales of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts. These programs
will not change the price Unitholders pay for their Units or the amount that the
Trusts will receive from the Units sold. Approximately every eighteen months the
Sponsor holds a business seminar which is open to Underwriters that sell units
of trusts it sponsors. The Sponsor pays substantially all costs associated with
the seminar, excluding Underwriter travel costs. Each Underwriter is invited to
send a certain number of representatives based on the gross number of units such
firm underwrites during a designated time period.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends to,
and certain of the other Underwriters may, maintain a market for Units and offer
to purchase Units at prices, subject to change at any time, based upon the
aggregate bid prices of the Bonds plus accrued interest and any principal cash
on hand, less any amounts representing taxes or other governmental charges
payable out of the Trust and less any accrued Trust expenses. If the supply of
Units exceeds demand or if some other business reason warrants it, the Sponsor
and/or the Underwriters may either discontinue all purchases of Units or
discontinue purchases of Units at these prices. If a market is not maintained
and the Unitholder cannot find another purchaser, a Unitholder will be able to
dispose of Units by tendering them to the Trustee for redemption at the
Redemption Price. See "Rights of Unitholders--Redemption of Units". A Unitholder
who wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in any price in excess of
the Redemption Price and, if so, the amount thereof. The Trustee will notify the
Sponsor of any tender of Units for redemption. If the Sponsor's bid in the
secondary market at that time equals or exceeds the Redemption Price per Unit,
it may purchase the Units not later than the day on which the Units would
otherwise have been redeemed by the Trustee.
RIGHTS OF UNITHOLDERS
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DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by a Trust, pro
rated on an annual basis, will be distributed monthly unless a Unitholder elects
to receive semi-annual distributions. The amount and time of the first
distribution is described in Prospectus Part I under "Summary of Essential
Financial Information". The plan of distribution selected by a Unitholder will
remain in effect until changed. Unitholders who purchase Units in the secondary
market will receive distributions in accordance with the election of the prior
owner. Unitholders may change their distribution plan by indicating the change
on a card which may be obtained from the Trustee and return the card to the
Trustee with their certificates and other documentation required by the Trustee.
Certificates should be sent by registered or certified mail to avoid their being
lost or stolen. If the card and certificate are properly presented to the
Trustee, the change will become effective on the first day after the next
semi-annual record date and will remain effective until changed.
Interest received by a Trust, including that part of the proceeds of any
disposition of Bonds which represents accrued interest, is credited by the
Trustee to the Interest Account. Other receipts are credited to the Principal
Account. After deduction of amounts sufficient to reimburse the Trustee, without
interest, for any amounts advanced and paid to the Sponsor as the Unitholder of
record as of the First Settlement Date, interest received will be distributed on
each distribution date to Unitholders of record as of the preceding record date.
All distributions will be net of estimated expenses. Funds in the Principal
Account will be distributed on each semi-annual distribution date to Unitholders
of record as of the preceding semi-annual record date. The Trustee is not
required to pay interest on funds held in the Principal or Interest Account (but
may itself earn interest thereon and therefore benefits from the use of these
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution therein shall equal at least $1.00 per Unit. However,
should the amount available for distribution in the Principal Account equal or
exceed $10.00 per Unit, the Trustee will make a special distribution from the
Principal Account on the next monthly distribution date to Unitholders of record
on the related monthly record date.
Because interest payments are not received by a Trust at a constant rate
throughout the year, interest distributions may be more or less than the amount
credited to the Interest Account as of the record date. For the purpose of
minimizing fluctuations in interest distributions, the Trustee is authorized to
advance amounts necessary to provide interest distributions of approximately
equal amounts. The Trustee is reimbursed for these advances from funds in the
Interest Account on the next record date. Persons who purchase Units between a
record date and a distribution date will receive their first distribution on the
second distribution date after the purchase, under the applicable plan of
distribution.
REINVESTMENT OPTION. Unitholders may elect to have distributions on their
Units automatically reinvested in shares of certain Van Kampen American Capital
or Morgan Stanley mutual funds which are registered in the Unitholder's state of
residence (the "Reinvestment Funds"). Each Reinvestment Fund has investment
objectives that differ from those of the Trusts. The prospectus relating to each
Reinvestment Fund describes its investment policies and the procedures to follow
to begin reinvestment. A Unitholder may obtain a prospectus for the Reinvestment
Funds from Van Kampen American Capital Distributors, Inc. at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181.
After becoming a participant in a reinvestment plan, each Trust distribution
will automatically be applied on the applicable distribution date to purchase
shares of the applicable Reinvestment Fund at a net asset value computed on such
date. Unitholders with an existing Guaranteed Reinvestment Option (GRO) Program
account (whereby a sales charge is imposed on distribution reinvestments) may
transfer their existing account into a new GRO account which allows purchases of
Reinvestment Fund shares at net asset value. Confirmations of all reinvestments
will be mailed to the Unitholder by the Reinvestment Fund. A participant may
elect to terminate his or her reinvestment plan and receive future distributions
in cash by notifying the Trustee in writing at least five days before the next
distribution date. Each Reinvestment Fund, its sponsor and investment adviser
have the right to terminate its reinvestment plan at any time. Unitholders of
New York Trusts who are New York residents may elect to have distributions
reinvested in shares of First Investors New York Insured Tax Free Fund, Inc.
subject to a sales charge of $1.50 per $100 reinvested (paid to First Investors
Management Company, Inc.).
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his Units
by tender to the Trustee, at its Unit Investment Trust Division, 101 Barclay
Street, 20th Floor, New York, New York 10286, of the certificates representing
the Units to be redeemed, duly endorsed or accompanied by proper instruments of
transfer with signature guaranteed (or by providing satisfactory indemnity, such
as in connection with lost, stolen or destroyed certificates) and by payment of
applicable governmental charges, if any. Redemption of Units cannot occur until
certificates representing the Units or satisfactory indemnity have been received
by the Trustee. No later than seven calendar days following satisfactory tender,
the Unitholder will receive an amount for each Unit equal to the Redemption
Price per Unit next computed after receipt by the Trustee of the tender of
Units. The "date of tender" is deemed to be the date on which Units are received
by the Trustee, except that as regards Units received after the Evaluation Time
on days of trading on the New York Stock Exchange, the date of tender is the
next day on which that Exchange is open and the Units will be deemed to have
been tendered to the Trustee on that day for redemption at the Redemption Price.
Under Internal Revenue Service regulations, the Trustee is required to
withhold a specified percentage of a Unit redemption if the Trustee has not
received the Unitholder's tax identification number as required by such
regulations. Any amount withheld is transmitted to the Internal Revenue Service
and may be recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, the Unitholder should provide a tax identification number
to the Trustee in order to avoid this possible "back-up withholding".
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the Bonds as
of the Evaluation Time on days of trading on the New York Stock Exchange on the
date any such determination is made. The Evaluator determines the Redemption
Price per Unit on days Units are tendered for redemption. The Redemption Price
per Unit is the pro rata share of each Unit on the basis of (i) the cash on hand
in the Trust or moneys in the process of being collected, (ii) the value of the
Bonds based on the bid prices of the Bonds, except for cases in which the value
of insurance has been included, (iii) accrued interest, less (a) amounts
representing taxes or other governmental charges and (b) the accrued Trust
expenses. The Evaluator may determine the value of the Bonds by employing any of
the methods set forth in "Public Offering--Offering Price". In determining the
Redemption Price per Unit no value will be assigned to the portfolio insurance
maintained on the Bonds in an Insured Trust unless the Bonds are in default in
payment of principal or interest or in significant risk of default. For a
description of the situations in which the Evaluator may value the insurance
obtained by the Insured Trusts, see "Public Offering--Offering Price". Accrued
interest paid on redemption shall be withdrawn from the Interest Account or, if
the balance therein is insufficient, from the Principal Account. All other
amounts will be withdrawn from the Principal Account. Units so redeemed shall be
cancelled.
The price at which Units may be redeemed could be less than the price paid
by the Unitholder and may be less than the par value of the Bonds represented by
the Units redeemed. The Trustee may sell Bonds to cover redemptions. When Bonds
are sold, the size and diversity of the Trust will be reduced. Sales may be
required at a time when Bonds would not otherwise be sold and might result in
lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the SEC determines that
trading on that Exchange is restricted or an emergency exists, as a result of
which disposal or evaluation of the Bonds is not reasonably practicable, or for
other periods as the SEC may by order permit. Under certain extreme
circumstances the Sponsor may apply to the SEC for an order permitting a full or
partial suspension of the right of Unitholders to redeem their Units.
CERTIFICATES. Ownership of Units is evidenced by certificates unless a
Unitholder makes a written request to the Trustee that ownership be in book
entry form. Units are transferable by making a written request to the Trustee
and, in the case of Units in certificate form, by presentation and surrender of
the certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign the written
request, or certificate transfer instrument, exactly as his name appears on the
records of the Trustee and on the face of any certificate with the signature
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or a signature guaranty program accepted by the Trustee. The Trustee
may require additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority. Certificates will be issued in denominations of one Unit
or any multiple thereof. Although no such charge is now made, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate re-issued or
transferred and to pay any governmental charge that may be imposed in connection
with each transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
REPORTS PROVIDED. Unitholders will receive a statement of interest and other
receipts received for each distribution. For as long as the Sponsor deems it to
be in the best interest of Unitholders, the accounts of each Trust will be
audited annually by independent certified public accountants and the report of
the accountants will be furnished to Unitholders upon request. Within a
reasonable period of time after the end of each year, the Trustee will furnish
to each person who was a registered Unitholder during that year a statement
describing the interest and principal received on the Bonds, actual Trust
distributions, Trust expenses, a list of the Bonds and other Trust information.
Unitholders will be furnished the Evaluator's evaluations of the Bonds upon
request.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
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Insurance has been obtained guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in each Insured Trust. An insurance
policy obtained by an Insured Trust, if any, is non-cancellable and will
continue in force so long as the Trust is in existence, the respective Portfolio
Insurer is still in business and the Bonds described in the policy continue to
be held by the Trust. Any portfolio insurance premium for an Insured Trust is
paid by the Trust on a monthly basis. The premium for any Preinsured Bond
insurance has been paid by the issuer, by a prior owner of the Bonds or the
Sponsor and any policy is non-cancellable and will continue in force so long as
the Bonds so insured are outstanding and the Preinsured Bond Insurer remains in
business. The Portfolio Insurers and the Preinsured Bond Insurers are described
in "Portfolio" and the notes thereto in Prospectus Part I. The Portfolio
Insurers are either AMBAC Assurance Corporation or Financial Guaranty Insurance
Company. More detailed information regarding insurance on the Bonds and the
Preinsured Bond and Portfolio Insurers is included in the Information
Supplement. See "Additional Information".
The portfolio insurance obtained by an Insured Trust, if any, guarantees the
timely payment of principal and interest on the Bonds when they fall due. For
this purpose, "when due" generally means the stated payment or maturity date for
the payment of principal and interest. However, in the event (a) an issuer
defaults in the payment of principal or interest, (b) an issuer enters into a
bankruptcy proceeding or (c) the maturity of the Bond is accelerated, the
affected Portfolio Insurer has the option to pay the outstanding principal
amount of the Bond plus accrued interest to the date of payment and thereby
retire the Bond from the Trust prior to the Bond's stated maturity date. The
insurance does not guarantee the market value of the Bonds or the value of the
Units. The Trustee, upon the sale of a Bond covered under a portfolio insurance
policy has the right to obtain permanent insurance with respect to the Bond
(i.e., insurance to maturity of the Bond regardless of the identity of the
holder) (the "Permanent Insurance") upon the payment of a single predetermined
insurance premium and expenses from the proceeds of the sale of the Bond. It is
expected that the Trustee would exercise the right to obtain Permanent Insurance
only if upon exercise the Trust would receive net proceeds in excess of the sale
proceeds if the Bonds were sold on an uninsured basis.
The following summary information relating to the listed insurance companies
has been obtained from publicly available information:
<TABLE>
<CAPTION>
FINANCIAL INFORMATION (IN MILLIONS OF DOLLARS)
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ADMITTED POLICYHOLDERS'
NAME ASSETS SURPLUS
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AMBAC Assurance Corporation (at 6/30/97) $ 2,736 $ 1,548
Capital Markets Assurance Corporation (at 9/30/97) 351 192
Financial Guaranty Insurance Company (at 9/30/97) 2,531 1,247
Financial Security Assurance, Inc. (at 9/30/97) 1,404 517
MBIA Insurance Corporation (at 9/30/97) 5,100 1,700
</TABLE>
Because the Bonds are insured by Portfolio Insurers or Preinsured Bond
Insurers as to the timely payment of principal and interest, when due, and on
the basis of the various reinsurance agreements in effect, Standard & Poor's has
assigned to the Units of each Insured Trust its "AAA" investment rating. This
rating will be in effect for a period of thirteen months from the Date of
Deposit and will, unless renewed, terminate at the end of such period. See
"Description of Ratings" in the Information Supplement. This rating should not
be construed as an approval of the offering of the Units by Standard & Poor's or
as a guarantee of the market value of the Trust or of the Units.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made. At the date
hereof, it is reported that no claims have been submitted or are expected to be
submitted to any of the Portfolio Insurers which would materially impair the
ability of any such company to meet its commitment pursuant to any contract of
insurance. The information relating to each Portfolio Insurer has been furnished
by such companies. The financial information with respect to each Portfolio
Insurer appears in reports filed with state insurance regulatory authorities and
is subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates thereof.
FUND ADMINISTRATION
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SPONSOR. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect subsidiary
of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM
Holdings II, Inc., which in turn is a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization
of more than $21 billion, which was created by the merger of Morgan Stanley
Group Inc. with Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in a
wide range of financial services through three primary businesses: securities,
asset management and credit services. These principal businesses include
securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; global custody, securities clearance services and securities lending;
and credit card services. As of June 2, 1997, MSDWD, together with its
affiliated investment advisory companies, had approximately $270 billion of
assets under management, supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the
underwriting and distribution of unit investment trusts and mutual funds with
roots in money management dating back to 1926. The Sponsor is a member of the
National Association of Securities Dealers, Inc. and has offices at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak
Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not to
the Fund or to any other Series thereof. The information is included herein only
for the purpose of informing investors as to the financial responsibility of the
Sponsor and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
As of March 31, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $58.45 billion of investment
products, of which over $10.85 billion is invested in municipal bonds. The
Sponsor and its Van Kampen American Capital affiliates managed $47 billion of
assets, consisting of $29.23 billion for 59 open-end mutual funds (of which 46
are distributed by Van Kampen American Capital Distributors, Inc.) $13.4 billion
for 37 closed-end funds and $4.97 billion for 106 institutional accounts. The
Sponsor has also deposited approximately $26 billion of unit investment trusts.
All of Van Kampen American Capital's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or 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 SEC, (ii) terminate the Trust Agreement and
liquidate the Fund 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 unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, telephone
(800) 221-7668. The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law. Additional
information regarding the Trustee is set forth in the Information Supplement,
including the Trustee's qualifications and duties, its ability to resign, the
effect of a merger involving the Trustee and the Sponsor's ability to remove and
replace the Trustee. See "Additional Information".
PORTFOLIO ADMINISTRATION. The Trusts are not managed funds and, except as
provided in the Trust Agreement, Bonds generally will not be sold or replaced.
The Sponsor may, however, direct that Bonds be sold in certain limited
situations to protect to the Trust based on advice from the Evaluator. These
situations may include default in interest or principal payments on the Bonds or
other obligations of an issuer, an advanced refunding or institution of certain
legal proceedings. In addition, the Trustee may sell Bonds designated by the
Evaluator for purposes of redeeming Units or payment of expenses. The Evaluator
will consider a variety of factors in designating Bonds to be sold including
interest rates, market value and marketability. Except in limited circumstances,
the Trustee must reject any offer by an issuer to issue bonds in exchange or
substitution for the Bonds (such as a refunding or refinancing plan). The
Trustee will promptly notify Unitholders of any exchange or substitution. The
Information Supplement contains a more detailed description of circumstances in
which Bonds may be sold or replaced. See "Additional Information".
REPLACEMENT BONDS. No assurance can be given that a Trust will retain its
present size or composition because Bonds may be sold, redeemed or mature from
time to time and the proceeds will be distributed to Unitholders and will not be
reinvested. In the event of a failure to deliver any Bond that has been
purchased under a contract ("Failed Bonds"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds") to make up the original portfolio of a Trust. Replacement Bonds must be
purchased within 20 days after delivery of the notice of the failed contract and
the purchase price (exclusive of accrued interest) may not exceed the amount of
funds reserved for the purchase of the Failed Bonds. The Replacement Bonds must
be substantially identical to the Failed Bonds in terms of (i) the exemption
from federal and state taxation, (ii) maturity, (iii) yield to maturity and
current return, (iv) Standard & Poor's or Moody's ratings, and (v) insurance in
an Insured Trust. The Trustee shall notify all Unitholders of a Trust within
five days after the acquisition of a Replacement Bond and shall make a pro rata
distribution of the amount, if any, by which the cost of the Failed Bond
exceeded the cost of the Replacement Bond plus accrued interest. If Failed Bonds
are not replaced, the Sponsor will refund the sales charge attributable to the
Failed Bonds to all Unitholders of the Trust and distribute the principal and
accrued interest (at the coupon rate of the Failed Bonds to the date of removal
from the Trust) attributable to the Failed Bonds within 30 days after removal.
All interest paid to a Unitholder which accrued after the expected date of
settlement for Units will be paid by the Sponsor and accordingly will not be
treated as tax-exempt income. If Failed Bonds are not replaced, the Estimated
Net Annual Interest Income per Unit would be reduced and the Estimated Current
Return and Estimated Long-Term Return might be lowered. Unitholders may not be
able to reinvest their proceeds in other securities at a yield equal to or in
excess of the yield of the Failed Bonds.
AMENDMENT OF TRUST AGREEMENT. The Sponsor and the Trustee may amend the
Trust Agreement without the consent of Unitholders to correct any provision
which may be defective or to make other provisions that will not adversely
affect the interest of the Unitholders (as determined in good faith by the
Sponsor and the Trustee). The Trust Agreement may not be amended to increase the
number of Units or to permit the acquisition of Bonds in addition to or in
substitution for any of the Bonds initially deposited in the Trust, except for
the substitution of certain refunding Bonds. The Trustee will notify Unitholders
of any amendment.
TERMINATION OF TRUST AGREEMENT. A Trust will terminate upon the redemption,
sale or other disposition of the last Bond held in the Trust. A Trust may also
be terminated at any time by consent of Unitholders of 51% of the Units then
outstanding or by the Trustee when the value of the Trust is less than 20% of
the original principal amount of Bonds. The Trustee will notify each Unitholder
of any termination within a reasonable time and will then liquidate any
remaining Bonds. The sale of Bonds upon termination may result in a lower amount
than might otherwise be realized if sale were not required at that time. For
this reason, among others, the amount realized by a Unitholder upon termination
may be less than the principal amount of Bonds per Unit or value at the time of
purchase. The Trustee will distribute to each Unitholder his share of the
balance of the Interest and Principal Accounts after deduction of costs,
expenses or indemnities. The Unitholder will receive a final distribution
statement with this distribution. When the Trustee in its sole discretion
determines that any amounts held in reserve are no longer necessary, it will
distribute these amounts to Unitholders. The Information Supplement contains
further information regarding termination of a Trust. See "Additional
Information".
LIMITATION ON LIABILITIES. The Sponsor, Evaluator and Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence (negligence in the case of the Trustee) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of the
Bonds. In the event of the failure of the Sponsor to act under the Trust
Agreement, the Trustee may act thereunder and shall not be liable for any action
taken by it in good faith under the Trust Agreement. The Trustee is not liable
for any taxes or governmental charges imposed on the Bonds, on it as Trustee
under the Trust Agreement or on the Fund which the Trustee may be required to
pay under any present or future law of the United States of America or of any
other taxing authority having jurisdiction. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the Trustee. The
Trustee and Sponsor may rely on any evaluation furnished by the Evaluator and
have no responsibility for the accuracy thereof. Determinations by the Evaluator
shall be made in good faith upon the basis of the best information available to
it; provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor or Unitholders for errors in judgment.
FEDERAL TAX STATUS
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At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Trusts, where applicable, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds when held by residents of the State in which the issuers of such Bonds are
located from state income taxes and certain state or local intangibles and local
income taxes. Neither the Sponsor nor Chapman and Cutler have made any review of
the Trust proceedings relating to the issuance of the Bonds or of the basis of
such opinions. If the interest on a Bond should be determined to be taxable, the
Bond would generally have to be sold at a substantial discount. In addition,
investors could be required to pay income tax on interest received prior to the
date on which interest is determined to be taxable. Gain realized on the sale or
redemption of the Bonds by the Trustee or of a Unit by a Unitholder is
includible in gross income for Federal income tax purposes and may be includible
in gross income for state tax purposes. Such gain does not include any amounts
received in respect of accrued interest or accrued original issue discount, if
any. If a Bond is acquired with accrued interest, that portion of the price paid
for the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and reduces
the tax basis of the Bond. If a Bond is purchased for a premium, the amount of
the premium is added to the tax basis of the Bond. Bond premium is amortized
over the remaining term of the Bond, and the tax basis of the Bond is reduced
each tax year by the amount of the premium amortized in that tax year. For
purposes of the following opinions, it is assumed that each asset of the Trust
is debt, the interest on which is excluded for Federal income tax purposes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law as of the date of this Prospectus:
(1) Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Internal Revenue
Code of 1986 (the "Code") will retain its status for Federal income tax
purposes, when received by a Trust and when distributed to Unitholders;
however such interest may be taken into account in computing the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below;
(2) Each Unitholder is considered to be the owner of a pro rata portion of
each asset of the respective Trust under subpart E, subchapter J of
chapter 1 of the Code and will have a taxable event when such Trust
disposes of a Bond, or when the Unitholder redeems or sells his Units.
If the Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all assets of the Trust
involved including his pro rata portion of all the Bonds represented by
a Unit. Legislative proposals have been made that would treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain as constructive sales for purposes of recognition
of gain (but not loss). Unitholders should consult their own tax
advisors with regard to any such constructive sale rules. Unitholders
must reduce the tax basis of their Units for their share of accrued
interest received by the respective Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on such Bonds before the date the Trust acquired
ownership of the Bonds (and the amount of this reduction may exceed the
amount of accrued interest paid to the seller) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale
or redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with the Unitholder's basis for
his or her fractional interest in the asset disposed of. In the case of
a Unitholder who purchases Units, such basis (before adjustment for
accrued original issue discount and amortized bond premium, if any) is
determined by apportioning the cost of the Units among each of the Trust
assets ratably according to value as of the valuation date nearest the
date of acquisition of the Units. It should be noted that certain
legislative proposals have been made which could affect the calculation
of basis for Unitholders holding securities that are substantially
identical to the Bonds. Unitholders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unitholder
realizing a taxable gain when his Units are sold or redeemed for an
amount less than or equal to his original cost;
(3) Any proceeds paid under an insurance policy or policies dated the Date
of Deposit, issued to an Insured Trust with respect to the Bonds which
represent maturing interest on defaulted obligations held by the Trustee
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been so excludable if paid in the normal
course by the issuer of the defaulted obligations provided that, at the
time such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations; and
(4) Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted Bonds held by the Trustee
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been excludable if paid in the normal
course by the issuer of the defaulted Bonds provided that, at the time
such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Bonds, rather than the insurer, will pay debt
service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price") to
prior owners. If a Bond is acquired with accrued interest, that portion of the
price paid for the accrued interest is added to the tax basis of the Bond. When
this accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium, the
amount of the premium is added to the tax basis of the Bond. Bond premium is
amortized over the remaining term of the Bond, and the tax basis of the Bond is
reduced each tax year by the amount of the premium amortized in that tax year.
The application of these rules will also vary depending on the value of the Bond
on the date a Unitholder acquires his Units and the price the Unitholder pays
for his Units. Unitholders should consult with their tax advisers regarding
these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued), subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust pays for
Bonds or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law the
accretion had been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Unitholder elects to include market discount in taxable income
as it accrues. The market discount rules are complex and Unitholders should
consult their tax advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 depends upon
the corporation's alternative minimum taxable income, which is the corporation's
taxable income with certain adjustments. One of the adjustment items used in
computing the alternative minimum taxable income and the Superfund Tax of a
corporation (other than an S Corporation, Regulated Investment Company, Real
Estate Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to its
alternative minimum taxable income (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax exempt interest, including interest on all of the Bonds in the
Fund. Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. Legislative proposals have been
introduced which would extend the Superfund Tax. Under the provisions of Section
884 of the Code, a branch profits tax is levied on the "effectively connected
earnings and profits" of certain foreign corporations which include tax-exempt
interest such as interest on the Bonds in the Trust. Unitholders should consult
their tax advisers with respect to the particular tax consequences to them
including the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase or improve a
personal residence). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of the
interest expense attributable to ownership of such Units. Legislative proposals
have been made that would extend the financial institution rules to all
corporations. Investors with questions regarding these issues should consult
their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or related
person, will not be excludible from Federal gross income, although interest on
such Bonds received by others would be excludible from Federal gross income.
"Substantial user" and "related person" are defined under the Code and U.S.
Treasury Regulations. Any person who believes that he or she may be a
"substantial user" or a "related person" as so defined should contact his or her
tax adviser.
In the opinion of special counsel to the Fund for New York tax matters,
under existing law, the Fund and each Trust are not associations taxable as
corporations and the income of each Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross
income for Federal, state or other tax purposes are the opinions of counsel and
are to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains realized
in taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains (which are defined as net long-term capital gain
over net short-term capital loss for a taxable year) are subject to a maximum
marginal stated tax rate of 28%. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates and could
affect relative differences at which ordinary income and capital gains are
taxed. Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year. For purposes of
computing the alternative minimum tax for individuals and corporations and the
Superfund Tax for corporations, interest on certain private activity bonds
(which includes most industrial and housing revenue bonds) issued on or after
August 8, 1996 is included as an item of tax preference. Except as otherwise
noted in Prospectus Part I, the Trusts do not include any such private activity
bonds issued on or after that date.
Section 86 of the Code provides that 50% of Social Security benefits are
includible in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of the Social Security benefits received exceeds a "base
amount". The base amount is $25,000 for unmarried taxpayers, $32,000 for married
taxpayers filing a joint return and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Modified adjusted gross income is adjusted gross income determined without
regard to certain otherwise allowable deductions and exclusions from gross
income and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any other item
of gross income.
In addition, under the Tax Act, for taxable years beginning after December
31, 1993, up to 85% of Social Security benefits are includible in gross income
to the extent that the sum of "modified adjusted gross income" plus 50% of
Social Security benefits received exceeds an "adjusted base amount." The
adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for married
taxpayers filing a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does not
exceed the base amount need not include any Social Security benefits in gross
income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers who
may be deemed to have incurred (or continued) indebtedness to purchase or carry
tax-exempt obligations. Prospective investors should consult their tax advisors
as to the applicability of any collateral consequences.
For a discussion of the state tax status of income earned on Units of a
Trust and recent changes in Federal tax law, see Prospectus Part I. Except as
noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The laws of
the several states vary with respect to the taxation of such obligations.
EXPENSES
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The Sponsor will not receive any fees in connection with its activities
relating to the Fund. However, American Portfolio Evaluation Services, a
division of Van Kampen American Capital Investment Advisory Corp., which is an
affiliate of the Sponsor, will receive the annual supervisory fee indicated
under "Summary of Essential Financial Information" in Prospectus Part I for
providing portfolio supervisory services for the Fund. In addition, the
Evaluator will receive the annual evaluation fee indicated under "Summary of
Essential Financial Information" in Prospectus Part I for evaluating each
Trust's portfolio. These fees may exceed the actual costs of providing these
services for a Trust but the total amount received by the Evaluator for
providing these services to all Van Kampen American Capital unit investment
trusts will not exceed the total cost of providing the services in any calendar
year. For its services the Trustee will receive the fee indicated under "Summary
of Essential Financial Information" in Prospectus Part I (which may be reduced
as described therein). Part of the Trustee's compensation for its services is
expected to result from the use of the funds being held in the Principal and
Interest Accounts for future distributions, payment of expenses and redemptions
since these Accounts are non-interest bearing to Unitholders. These fees are
based on the outstanding principal amount of Bonds and Units on the Date of
Deposit for the first year and as of the close of business on January 1 for each
year thereafter.
Premiums for any portfolio insurance are obligations of each Insured
Trust and are payable monthly by the Trustee on behalf of the Trust. As Bonds in
an Insured Trust are redeemed by their respective issuers or are sold by the
Trustee, the amount of the premium will be reduced in respect of those Bonds. If
the Trustee exercises the right to obtain permanent insurance, the premiums
payable for such permanent insurance will be paid solely from the proceeds of
the sale of the related Bonds.
The following additional charges are or may be incurred by the Trusts: (a)
fees of the Trustee for extraordinary services, (b) expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (c) various governmental charges, (d) expenses and costs of any action
taken by the Trustee to protect the Trusts and the rights and interests of
Unitholders, (e) indemnification of the Trustee for any loss, liability or
expenses incurred by it in the administration of the Fund without negligence,
bad faith or willful misconduct on its part, (f) any special custodial fees
payable in connection with the sale of any of the Bonds in a Trust, (g)
expenditures incurred in contacting Unitholders upon termination of the Trusts
and (h) costs incurred to reimburse the Trustee for advancing funds to the
Trusts to meet scheduled distributions (which costs may be adjusted periodically
in response to fluctuations in short-term interest rates). The fees and expenses
set forth herein are payable out of the Trusts. When such fees and expenses are
paid by or owing to the Trustee, they are secured by a lien on the portfolio of
the applicable Trust. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by a Trust, the Trustee has the
power to sell Bonds to pay such amounts.
On or before the twenty-fifth day of each month, the Trustee will deduct
from the Interest Account and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the Fund.
The Trustee also may withdraw from these Accounts such amounts, if any, as it
deems necessary to establish a reserve for any governmental charges payable out
of the Fund. Amounts so withdrawn shall not be considered a part of the Fund's
assets until such time as the Trustee shall return all or any part of such
amounts to the appropriate Accounts. All costs and expenses incurred in creating
and establishing the Fund, including the cost of the initial preparation,
printing and execution of the Trust Agreement and the certificates, legal and
accounting expenses, advertising and selling expenses, expenses of the Trustee,
initial evaluation fees and other out-of-pocket expenses have been borne by the
Sponsor at no cost to the Fund.
ADDITIONAL INFORMATION
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This Prospectus does not contain all the information set forth in the
Registration Statement filed by the Fund with the SEC. The Information
Supplement, which has been filed with the SEC, includes more detailed
information concerning the Bonds, investment risks and general information about
the Fund. This Prospectus incorporates by reference the entire Information
Supplement. The Information Supplement may be obtained by contacting the Trustee
or is available along with other related materials at the SEC's Internet site
(http://www.sec.gov).
OTHER MATTERS
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LEGAL MATTERS. The legality of the Units offered hereby and certain matters
relating to Federal tax law have been passed upon by Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor. Winston
& Strawn has acted as counsel to the Trustee and Special counsel to the Fund for
New York tax matters. Special counsel to the Fund for certain state tax matters
are named under "Tax Status" appearing in Prospectus Part I.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition and the
related portfolio at the Date of Deposit included in Prospectus Part I have been
audited by Grant Thornton LLP, independent certified public accountants, as set
forth in their report in Prospectus Part I, and are included herein in reliance
upon the authority of said firm as experts in accounting and auditing.
TABLE OF CONTENTS
TITLE PAGE
The Trusts 2
The Fund 2
Objectives and Bond Selection 2
Risk Factors 3
Estimated Current and Long-Term Returns 5
Public Offering 6
General 6
Offering Price 7
Accrued Interest 8
Unit Distribution 8
Sponsor and Underwriter Compensation 9
Market for Units 10
Rights of Unitholders 11
Distributions of Interest and Principal 11
Reinvestment Option 11
Redemption of Units 11
Certificates 12
Reports Provided 12
Insurance on the Bonds in the Insured Trusts 13
Fund Administration 14
Sponsor 14
Trustee 14
Portfolio Administration 14
Replacement Bonds 15
Amendment of Trust Agreement 15
Termination of Trust Agreement 15
Limitation on Liabilities 15
Federal Tax Status 16
Expenses 18
Additional Information 19
Other Matters 19
Legal Matters 19
Independent Certified Public Accountants 19
- ------------
No person is authorized to give any information or to make any
representations not contained in this Prospectus; and any information or
representation not contained herein must not be relied upon as having been
authorized by the Fund, the Sponsor or the Underwriters. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy,
securities in any state to any person to whom it is not lawful to make such
offer in such state.
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
PROSPECTUS PART II
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FEBRUARY 1998
INSURED MUNICIPALS INCOME TRUST, INSURED MULTI-SERIES
AND
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
VAN KAMPEN
INFORMATION SUPPLEMENT
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES 307
- --------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Fund which is not described in the Prospectus for
the Fund. This Information Supplement should be read in conjunction with the
Fund's prospectus. This Information Supplement is not a prospectus (but is
incorporated into the Prospectus by reference), does not include all of the
information that an investor should consider before investing in a Trust and may
not be used to offer or sell Units without the Prospectus. Copies of the
Prospectus can be obtained by contacting the Sponsor at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 or by contacting your broker. This Information
Supplement is dated as of the date of Prospectus Part I and all capitalized
terms have been defined in the Prospectus.
TABLE OF CONTENTS
PAGE
Municipal Bond Risk Factors............................................... 2
Insurance on the Bonds in the Insured Trusts.............................. 6
Portfolio Administration.................................................. 12
Trustee Information....................................................... 13
Termination of the Trust Agreement........................................ 14
Description of Ratings.................................................... 14
Equivalent Taxable Estimated Current Return Tables........................ 16
Connecticut Risk Factors.................................................. 18
New Jersey Risk Factors................................................... 20
Maryland Risk Factors..................................................... 23
Estimated Cash Flows to Unitholders....................................... 26
MUNICIPAL BOND RISK FACTORS
The Trusts include certain types of bonds described below. Accordingly, an
investment in a Trust should be made with an understanding of the
characteristics of and risks associated with such bonds. The types of bonds
included in each Trust are described on the cover of the related Prospectus Part
I. Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental entity that
are backed by the taxing power of such entity. All other Bonds in the Trusts are
revenue bonds payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds in the Fund, both within a particular classification and between
classifications, depending on numerous factors.
Certain of the Bonds may be obligations which derive their payments from
mortgage loans. Certain of such housing bonds may be FHA insured or may be
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities as a result of events such as sale of the mortgaged
premises, default, condemnation or casualty loss. Because these bonds are
subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period. Additionally,
unusually high rates of default on the underlying mortgage loans may reduce
revenues available for the payment of principal of or interest on such mortgage
revenue bonds. These bonds were issued under Section 103A of the Internal
Revenue Code, which Section contains certain requirements relating to the use of
the proceeds of such bonds in order for the interest on such bonds to retain its
tax-exempt status. In each case the issuer of the bonds has covenanted to comply
with applicable requirements and bond counsel to such issuer has issued an
opinion that the interest on the bonds is exempt from Federal income tax under
existing laws and regulations. Certain issuers of housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In connection with the housing bonds held by
the Fund, the Sponsor at the Date of Deposit is not aware that any of the
respective issuers of such bonds are actively considering the redemption of such
bonds prior to their respective stated initial call dates.
Certain of the Bonds may be health care revenue bonds. Ratings of bonds
issued for health care facilities are often based on feasibility studies that
contain projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service may be affected by
future events and conditions including, among other things, demand for services
and the ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with other
health care facilities, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the cost
and possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, government regulation and
the termination or restriction of governmental financial assistance, including
that associated with Medicare, Medicaid and other similar third party payor
programs.
Certain of the Bonds may be obligations of public utility issuers, including
those selling wholesale and retail electric power and gas. General problems of
such issuers would include the difficulty in financing large construction
programs in an inflationary period, the limitations on operations and increased
costs and delays attributable to environmental considerations, the difficulty of
the capital market in absorbing utility debt, the difficulty in obtaining fuel
at reasonable prices and the effect of energy conservation. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds to make payments of principal
and/or interest on such Bonds.
Certain of the Bonds may be obligations of issuers whose revenues are derived
from the sale of water and/or sewerage services. Such bonds are generally
payable from user fees. The problems of such issuers include the ability to
obtain timely and adequate rate increases, population decline resulting in
decreased user fees, the difficulty of financing large construction programs,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the increasing difficulty of obtaining or
discovering new supplies of fresh water, the effect of conservation programs and
the impact of "no-growth" zoning ordinances.
Certain of the Bonds may be industrial revenue bonds ("IRBs"). IRBs have
generally been issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a particular
project have been assigned and pledged to purchasers. In some cases, a mortgage
on the underlying project may have been granted as security for the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon the
creditworthiness of the corporate operator of the project or corporate
guarantor. Corporate operators or guarantors may be affected by many factors
which may have an adverse impact on the credit quality of the particular company
or industry. These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a corporate restructuring pursuant to a leveraged
buy-out, takeover or otherwise. Such a restructuring may result in the operator
of a project becoming highly leveraged which may impact on such operator's
creditworthiness which in turn would have an adverse impact on the rating and/or
market value of such bonds. Further, the possibility of such a restructuring may
have an adverse impact on the market for and consequently the value of such
bonds, even though no actual takeover or other action is ever contemplated or
effected.
Certain of the Bonds may be obligations that are secured by lease payments of
a governmental entity (hereinafter called "lease obligations"). Lease
obligations are often in the form of certificates of participation. Although the
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to appropriate for and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. A governmental entity that enters into such
a lease agreement cannot obligate future governments to appropriate for and make
lease payments but covenants to take such action as is necessary to include any
lease payments due in its budgets and to make the appropriations therefor. A
governmental entity's failure to appropriate for and to make payments under its
lease obligation could result in insufficient funds available for payment of the
obligations secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult.
Certain of the Bonds may be obligations of issuers which are, or which govern
the operation of, schools, colleges and universities and whose revenues are
derived mainly from ad valorem taxes or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby creating a
disparity in educational funds available to schools in wealthy areas and schools
in poor areas. Litigation or legislation on this issue may affect the sources of
funds available for the payment of school bonds in the Trusts. General problems
relating to college and university obligations include the prospect of a
declining percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal grants and
state funding, and government legislation or regulations which may adversely
affect the revenues or costs of such issuers.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income is
generally derived from fees received from signatory airlines pursuant to use
agreements which consist of annual payments for leases, occupancy of certain
terminal space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under the use
agreements. From time to time the air transport industry has experienced
significant variations in earnings and traffic, due to increased competition,
excess capacity, increased costs, deregulation, traffic constraints and other
factors, and several airlines have experienced severe financial difficulties.
Similarly, payment on bonds related to other facilities is dependent on revenues
from the projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of transportation,
scarcity of fuel and reduction or loss of rents.
Certain of the Bonds may be obligations which are payable from and secured by
revenues derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation of a
project; contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of a project or
technological or other unavoidable changes adversely affecting the operation of
a project; and administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform or impose
unreasonable burdens or excessive liabilities. The Sponsor cannot predict the
causes or likelihood of the redemption of resource recovery bonds in a Trust
prior to the stated maturity of the Bonds.
Certain of the Bonds may have been acquired at a market discount from par
value at maturity. The coupon interest rates on discount bonds at the time they
were purchased and deposited in a Trust were lower than the current market
interest rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable bonds increase, the market discount
of previously issued bonds will become greater, and if such interest rates for
newly issued comparable bonds decline, the market discount of previously issued
bonds will be reduced, other things being equal. Investors should also note that
the value of bonds purchased at a market discount will increase in value faster
than bonds purchased at a market premium if interest rates decrease. Conversely,
if interest rates increase, the value of bonds purchased at a market discount
will decrease faster than bonds purchased at a market premium. In addition, if
interest rates rise, the prepayment risk of higher yielding, premium Securities
and the prepayment benefit for lower yielding, discount bonds will be reduced. A
bond purchased at a market discount and held to maturity will have a larger
portion of its total return in the form of taxable income and capital gain and
less in the form of tax-exempt interest income than a comparable bond newly
issued at current market rates. See "Federal Tax Status" in Prospectus Part II.
Market discount attributable to interest changes does not indicate a lack of
market confidence in the issue.
Certain of the Bonds may be "zero coupon" bonds. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligation at a rate as high as the implicit yield
on the discount obligation, but at the same time eliminates the holder's ability
to reinvest at higher rates in the future. For this reason, zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality which
pay interest.
Certain of the Bonds may have been purchased on a "when, as and if issued" or
"delayed delivery" basis. See "Notes to Portfolio" in Prospectus Part I. The
delivery of any such Bonds may be delayed or may not occur. Interest on these
Bonds begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Bonds are actually delivered to the Fund after their
respective expected dates of delivery, Unitholders who purchase their Units
prior to the date such Bonds are actually delivered to the Trustee would be
required to adjust their tax basis in their Units for a portion of the interest
accruing on such Bonds during the interval between their purchase of Units and
the actual delivery of such Bonds. As a result of any such adjustment, the
Estimated Current Returns during the first year would be slightly lower than
those stated in the Prospectus which would be the returns after the first year,
assuming the portfolio of a Trust and estimated annual expenses other than that
of the Trustee (which may be reduced in the first year only) do not vary from
that set forth in Prospectus Part I. Unitholders will be "at risk" with respect
to all Bonds in the portfolios including "when, as and if issued" and "delayed
delivery" Bonds (i.e., may derive either gain or loss from fluctuations in the
evaluation of such Bonds) from the date they commit for Units.
Certain of the Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is a method
by which a debt obligation is redeemed, at or before maturity, by the proceeds
of a new debt obligation. In general, call provisions are more likely to be
exercised when the offering side valuation is at a premium over par than when it
is at a discount from par. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called bonds are used to pay for Unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions; it may also affect
the current return on Units of the Trust involved. Each Trust portfolio contains
a listing of the sinking fund and call provisions, if any, with respect to each
of the debt obligations. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. Generally, events that
may permit the extraordinary optional redemption of bonds or may require the
mandatory redemption of bonds include, among others: a final determination that
the interest on the bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the bonds were
used; an exercise by a local, state or Federal governmental unit of its power of
eminent domain to take all or substantially all of the project for which the
proceeds of the bonds were used; changes in the economic availability of raw
materials, operating supplies or facilities or technological or other changes
which render the operation of the project for which the proceeds of the bonds
were used uneconomic; changes in law or an administrative or judicial decree
which renders the performance of the agreement under which the proceeds of the
bonds were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes, not
imposed on the date the bonds are issued on the issuer of the bonds or the user
of the proceeds of the bonds; an administrative or judicial decree which
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the bonds; an overestimate of the costs of the
project to be financed with the proceeds of the bonds resulting in excess
proceeds of the bonds which may be applied to redeem bonds; or an underestimate
of a source of funds securing the bonds resulting in excess funds which may be
applied to redeem bonds. The issuer of certain bonds in a Trust may have sold or
reserved the right to sell, upon the satisfaction of certain conditions, to
third parties all or any portion of its rights to call bonds in accordance with
the stated redemption provisions of such bonds. In such a case the issuer no
longer has the right to call the bonds for redemption unless it reacquires the
rights from such third party. A third party pursuant to these rights may
exercise the redemption provisions with respect to a bond at a time when the
issuer of the bond might not have called a bond for redemption had it not sold
such rights. The Sponsor is unable to predict all of the circumstances which may
result in such redemption of an issue of Bonds. See also the discussion of
single family mortgage and multi-family revenue bonds above for more information
on the call provisions of such bonds.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect upon the Fund or any of the Trusts. At any
time after the Date of Deposit, litigation may be initiated on a variety of
grounds with respect to Bonds in the Fund. Such litigation, as, for example,
suits challenging the issuance of pollution control revenue bonds under
environmental protection statutes, may affect the validity of such Bonds or the
tax-free nature of the interest thereon. While the outcome of litigation of such
nature can never be entirely predicted, the Fund has received or will receive
opinions of bond counsel to the issuing authorities of each Bond on the date of
issuance to the effect that such Bonds have been validly issued and that the
interest thereon is exempt from Federal income tax. In addition, other factors
may arise from time to time which potentially may impair the ability of issuers
to meet obligations undertaken with respect to the Bonds.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust, by the issuer of Bonds in
an Insured Trust, by a prior owner of such Bonds, or by the Sponsor prior to the
deposit of such Bonds in a Trust guaranteeing prompt payment of interest and
principal, when due, in respect of the bonds in such Trust. See Settlement of
Bonds in "The Trusts--Objectives and Bond Selection" in Prospectus Part II. The
Portfolio Insurers and the Preinsured Bond Insurers are described under
"Portfolio" and "Notes to Portfolio" in Prospectus Part I. The Portfolio
Insurers are either AMBAC Assurance Corporation or Financial Guaranty Insurance
Company. An insurance policy obtained by an Insured Trust, if any, is
non-cancellable and will continue in force so long as such Trust is in
existence, the respective Portfolio Insurer is still in business and the Bonds
described in such policy continue to be held by such Trust (see "Portfolio" for
the respective Insured Trust in Prospectus Part I). Any portfolio insurance
premium for an Insured Trust, which is an obligation of such Trust, is paid by
such Trust on a monthly basis. Non-payment of premiums on a policy obtained by
an Insured Trust will not result in the cancellation of insurance but will force
the insurer to take action against the Trustee to recover premium payments due
it. The Trustee in turn will be entitled to recover such payments from such
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
an Insured Trust, if any, are fixed for the life of the Trust. The premium for
any Preinsured Bond insurance has been paid by such issuer, by a prior owner of
such Bonds or the Sponsor and any such policy or policies are non-cancellable
and will continue in force so long as the Bonds so insured are outstanding and
the respective Preinsured Bond Insurer remains in business. If the provider of
an original issuance insurance policy is unable to meet its obligations under
such policy or if the rating assigned to the claims-paying ability of any such
insurer deteriorates, the Portfolio Insurers have no obligation to insure any
issue adversely affected by either of the above described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds when they
fall due. For the purposes of insurance obtained by an Insured Trust, "when due"
generally means the stated payment or maturity date for the payment of principal
and interest. However, in the event (a) an issuer of a Bond defaults in the
payment of principal or interest on such Bond, (b) such issuer enters into a
bankruptcy proceeding or (c) the maturity of such Bond is accelerated, the
affected Portfolio Insurer has the option, in its sole discretion, after
receiving notice of the earliest to occur of such a default, bankruptcy
proceeding or acceleration to pay the outstanding principal amount of such Bond
plus accrued interest to the date of such payment and thereby retire the Bond
from the affected Trust prior to such Bond's stated maturity date. The insurance
does not guarantee the market value of the Bonds or the value of the Units.
Insurance obtained by an Insured Trust, if any, is only effective as to Bonds
owned by and held in such Trust. In the event of a sale of any such Bond by the
Trustee, such insurance terminates as to such Bond on the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the Trustee,
upon the sale of a Bond covered under a portfolio insurance policy obtained by
an Insured Trust, has the right to obtain permanent insurance with respect to
such Bond (i.e., insurance to maturity of the Bond regardless of the identity of
the holder thereof) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium and any expenses related thereto from the
proceeds of the sale of such Bond. Accordingly, any Bond in an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee would
exercise the right to obtain Permanent Insurance only if upon such exercise the
affected Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium and related expenses attributable to the Permanent Insurance)
from such sale in excess of the sale proceeds if such Bonds were sold on an
uninsured basis. The insurance premium with respect to each Bond eligible for
Permanent Insurance would be determined based upon the insurability of each Bond
as of the Date of Deposit and would not be increased or decreased for any change
in the creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an
advantage to an Insured Trust in that each Bond insured by a Trust insurance
policy may be sold out of the affected Trust with the benefits of the insurance
attaching thereto. Thus, the value of the insurance, if any, at the time of
sale, can be realized in the market value of the Bond so sold (which is not the
case in connection with any value attributable to an Insured Trust's portfolio
insurance). See Public Offering--Offering Price" in Prospectus Part II. Because
any such insurance value may be realized in the market value of the Bond upon
the sale thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it is
much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Rights of Unitholders--Redemption of Units" in Prospectus Part II)
and (b) at the time of termination of an Insured Trust, if such Trust were
holding defaulted Bonds or Bonds in significant risk of default such Trust would
not need to hold such Securities until their respective maturities in order to
realize the benefits of such Trust's portfolio insurance (see "Fund
Administration--Termination of Trust Agreement" in Prospectus Part II).
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention of
the Evaluator to attribute a value for such insurance (including the right to
obtain Permanent Insurance) for the purpose of computing the price or redemption
value of Units if the Bonds covered by such insurance are in default in payment
of principal or interest or in significant risk of such default. The value of
the insurance will be the difference between (i) the market value of a bond
which is in default in payment of principal or interest or in significant risk
of such default assuming the exercise of the right to obtain Permanent Insurance
(less the insurance premium and related expenses attributable to the purchase of
Permanent Insurance) and (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering--Offering Price" in Prospectus Part
II. It is also the present intention of the Trustee not to sell such Bonds to
effect redemptions or for any other reason but rather to retain them in the
portfolio because value attributable to the insurance cannot be realized upon
sale. See "Public Offering--Offering Price" in Prospectus Part II for a more
complete description of an Insured Trust's method of valuing defaulted Bonds and
Bonds which have a significant risk of default. Insurance obtained by the issuer
of a Bond is effective so long as such Bond is outstanding. Therefore, any such
insurance may be considered to represent an element of market value in regard to
the Bonds thus insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust, if
any, with respect to the Bonds in such Trust were issued by one or more of the
Portfolio Insurers. Any other Preinsured Bond insurance policy (or commitment
therefor) was issued by one of the Preinsured Bond Insurers. See "The
Trusts--Objectives and Bond Selection" in Prospectus Part II.
Capital Markets Assurance Corporation ("CapMAC") is a New York-domiciled
monoline stock insurance company which engages only in the business of financial
guaranty and surety insurance. CapMAC is licensed in all 50 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and the territory
of Guam. CapMAC insures structured asset-backed, corporate, municipal and other
financial obligations in the U.S. and international capital markets. CapMAC also
provides financial guarantee reinsurance for structured asset-backed, corporate,
municipal and other financial obligations written by other major insurance
companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors Service,
Inc. ("Moody's"), "AAA" by Standard & Poor's, "AAA" by Duff & Phelps Credit
Rating Co. ("Duff & Phelps") and "AAA" by Nippon Investors Service, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Pursuant to a merger of a subsidiary of MBIA Inc. with and into CapMAC
Holdings Inc., CapMAC became an indirect wholly-owned subsidiary of MBIA Inc. on
February 17, 1998. MBIA Inc., through its wholly-owned subsidiary, MBIA
Insurance Corporation, is a financial guaranty insurer of municipal bonds and
structured finance transactions. MBIA Insurance Corporation has a claims paying
rating of triple-A from Moody's Investor Service, Inc., Standard & Poor's
Ratings Services and Fitch IBCA, Inc. (formerly Fitch Investors Service, L.P.).
Pursuant to a reinsurance agreement, it is anticipated that CapMAC will cede all
of its net insured risks, as well as its unearned premiums and contingency
reserves, to MBIA Insurance Corporation and that MBIA Insurance Corporation will
reinsure CapMAC's net outstanding exposure. NEITHER MBIA INC. NOR ANY OF ITS
STOCKHOLDERS IS OBLIGATED TO PAY ANY CLAIMS UNDER ANY POLICY ISSUED BY CAPMAC OR
ANY DEBTS OF CAPMAC OR TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS TO CAPMAC.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance laws and
regulations of the other jurisdictions in which it is licensed. Such insurance
laws regulate, among other things, the amount of net exposure per risk that
CapMAC may retain, capital transfers, dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and acquisitions.
CapMAC is subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC's obligations under the Policy(s) may be reinsured. Such reinsurance
does not relieve CapMAC of any of its obligations under the Policy(s). THE
POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED
IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. As of December 31, 1995 and 1996,
CapMAC had qualified statutory capital (which consists of policyholders'
surplus, statutory capital, and contingency reserves) of approximately $260
million and $240 million, respectively, and had not incurred any debt
obligations. As of September 30, 1997, CapMAC had qualified statutory capital of
$278.6 million and had not incurred any debt obligations. Article 69 of the New
York State Insurance Law requires CapMAC to establish and maintain the
contingency reserve, which is available to cover claims under policies issued by
CapMAC.
Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which differ from generally accepted accounting
principles, are filed with the Insurance Department of the State of New York and
are available upon request. CapMAC is located at 885 Third Avenue, New York, New
York 10022, and its telephone is (212) 755-1155.
Effective July 14, 1997, AMBAC Indemnity Corporation changed its name to
AMBAC Assurance Corporation ("AMBAC Assurance"). AMBAC Assurance is a
Wisconsin-domiciled stock insurance corporation regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin and licensed to do business
in 50 states, the District of Columbia and the Commonwealth of Puerto Rico, with
admitted assets of approximately $2,967,246,831 (unaudited) and statutory
capital of approximately $1,715,481,691 (unaudited) as of March 31, 1998.
Statutory capital consists of AMBAC Assurance's policyholders' surplus and
statutory contingency reserve. AMBAC Assurance is a wholly owned subsidiary of
AMBAC Financial Group, Inc., a 100% publicly-held company. Moody's Investors
Service, Inc. and Standard & Poor's have both assigned a triple-A claims-paying
ability rating to AMBAC Assurance.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Assurance. The address of AMBAC
Assurance's administrative offices and its telephone number are One State Street
Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Assurance has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Assurance has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of
MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is not obligated
to pay the debts of or claims against MBIA. MBIA is domiciled in the State of
New York and licensed to do business in and subject to regulation under the laws
of all fifty states, the District of Columbia, the Commonwealth of the Northern
Mariana Islands, the Commonwealth of Puerto Rico, the Virgin Islands of the
United States and the Territory of Guam. MBIA has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
Effective February 17, 1998, MBIA, Inc. acquired all of the outstanding
stock of CapMAC, through a merger with its parent, CapMAC Holdings, Inc.
Pursuant to a reinsurance agreement, CapMAC has ceded all of its net insured
risks (including any amounts due but unpaid from third party reinsurers), as
well as its unearned premiums and contingency reserves to MBIA. MBIA, Inc. is
not obligated to pay debts of or claims against CapMAC.
As of December 31, 1997, the insurer had admitted assets of $5.3 billion
(audited), total liabilities of $3.5 billion (audited), and total capital and
surplus of $1.8 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of June 30, 1998, MBIA had admitted assets of $6.0 billion
(unaudited), total liabilities of $4.0 billion (unaudited), and total capital
and surplus of $2.0 billion (unaudited), determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's financial statements prepared in accordance with
statutory accounting practices are available from MBIA. The address of MBIA is
113 King Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc.
On January 5, 1990, MBIA acquired all of the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company (BIG), now
known as MBIA Insurance Corp. of Illinois. Through a reinsurance agreement, BIG
has ceded all of its net insured risks, as well as its unearned premium and
contingency reserves, to MBIA and MBIA has reinsured BIG's net outstanding
exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG-1," both designated to be of the highest quality.
Standard & Poor's rates all new issues insured by MBIA "AAA" Prime Grade.
Moody's, Standard & Poor's and Fitch IBCA, Inc. (formerly Fitch Investors
Service, L.P.), all rate the claims paying ability of MBIA as "Triple A."
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's rating of MBIA. No application has been
made to any other rating agency in order to obtain additional ratings on the
Obligations. The ratings reflect the respective rating agency's current
assessment of the creditworthiness of MBIA and its ability to pay claims on its
policies of insurance. Any further explanation as to the significance of the
above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Obligations and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of either or
both ratings may have an adverse effect on the market price of the Obligations.
Financial Guaranty Insurance Company ("Financial Guaranty" or "FGIC") is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a wholly-owned subsidiary of General
Electric Capital Corporation ("GE Capital"). Neither the Corporation nor GE
Capital is obligated to pay the debts of or the claims against Financial
Guaranty. Financial Guaranty is a monoline financial guaranty insurer domiciled
in the State of New York and subject to regulation by the State of New York
Insurance Department. As of June 30, 1998, the total capital and surplus of
Financial Guaranty was $1,282,692,798. Financial Guaranty prepares financial
statements on the basis of both statutory accounting principles, and generally
accepted accounting principles. Copies of such financial statements may be
obtained by writing to Financial Guaranty at 115 Broadway, New York, New York
10006, Attention: Communications Department, telephone number: (212) 312-3000 or
to the New York State Insurance Department at 25 Beaver Street, New York, New
York 10004-2319, Attention: Financial Condition Property/Casualty Bureau,
telephone number: (212) 480-5187.
In addition, Financial Guaranty is currently licensed to write insurance in
all 50 states and the District of Columbia. Financial Security Assurance Inc.
("Financial Security" or "FSA") is a monoline insurance company incorporated in
1984 under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities, thereby enhancing the credit rating of those securities, in
consideration for payment of a premium to the insurer. Financial Security and
its subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
Financial Security insures both newly issued securities sold in the primary
market and outstanding securities sold in the secondary market that satisfy
Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Financial Security is obligated to pay any debt of Financial
Security or its subsidiaries or any claim under any insurance policy issued by
Financial Security or its subsidiaries or to make any additional contribution to
the capital of Financial Security or its subsidiaries. As of March 31, 1998, the
total policyholders' surplus and contingency reserves and the total unearned
premium reserve, respectively, of Financial Security and its consolidated
subsidiaries were, in accordance with statutory accounting principles,
approximately $808,603,000 (unaudited) and $503,683,000 (unaudited), and the
total shareholders' equity and the total unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately $923,047,000 (unaudited)
and $428,158,000 (unaudited). Copies of Financial Security's financial
statements may be obtained by writing to Financial Security at 350 Park Avenue,
New York, New York, 10022, Attention: Communications Department. Its telephone
number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries (including FSA
Maryland) are reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective capital, surplus and reserves,
subject to applicable statutory risk limitations. In addition, Financial
Security and FSA Maryland reinsure a portion of their liabilities under certain
of their financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. Such
reinsurance is utilized as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit the
obligations of Financial Security or FSA Maryland under any financial guaranty
insurance policy.
The claims-paying ability of Financial Security and FSA Maryland is rated
"Aaa" by Moody's Investors Service, Inc., and "AAA" by Standard & Poor's Ratings
Services, Nippon Investors Service Inc. and Standard & Poor's (Australia) Pty.
Ltd. Such ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to revision
or withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company was involved in a merger in 1995. On
December 20, 1995, Capital Guaranty Corporation ("CGC") merged with a subsidiary
of Financial Security Assurance Holdings Ltd. and Capital Guaranty Insurance
Company, CGC's principal operating subsidiary, changed its name to Financial
Security Assurance of Maryland Inc. ("FSA Maryland") and became a wholly owned
subsidiary of Financial Security Assurance Inc. For further description, see
"Financial Security Assurance Inc." herein.
The address of FSA Maryland and its telephone number are Steuart Tower, One
Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000.
In order to be in an Insured Trust, Bonds must be insured by one of the
Preinsured Bond Insurers or be eligible for the insurance being obtained by such
Trust. In determining eligibility for insurance, the Preinsured Bond Insurers
and the Portfolio Insurers have applied their own standards which correspond
generally to the standards they normally use in establishing the insurability of
new issues of municipal bonds and which are not necessarily the criteria used in
the selection of Bonds by the Sponsor. To the extent the standards of the
Preinsured Bond Insurers and the Portfolio Insurers are more restrictive than
those of the Sponsor, the previously stated Trust investment criteria have been
limited with respect to the Bonds. This decision is made prior to the Date of
Deposit, as debt obligations not eligible for insurance are not deposited in an
Insured Trust. Thus, all of the Bonds in the portfolios of the Insured Trusts in
the Fund are insured either by the respective Trust or by the issuer of the
Bonds, by a prior owner of such Bonds or by the Sponsor prior to the deposit of
such Bonds in a Trust.
Because the Bonds are insured by one of the Portfolio Insurers or one of the
Preinsured Bond Insurers as to the timely payment of principal and interest,
when due, and on the basis of the various reinsurance agreements in effect,
Standard & Poor's has assigned to the Units of each Insured Trust its "AAA"
investment rating. Such rating will be in effect for a period of thirteen months
from the Date of Deposit and will, unless renewed, terminate at the end of such
period. See "Description of Ratings". The obtaining of this rating by an Insured
Trust should not be construed as an approval of the offering of the Units by
Standard & Poor's or as a guarantee of the market value of such Trust or of the
Units.
An objective of portfolio insurance obtained by an Insured Trust is to obtain
a higher yield on the portfolio of such Trust than would be available if all the
Bonds in such portfolio had Standard & Poor's "AAA" rating and yet at the same
time to have the protection of insurance of prompt payment of interest and
principal, when due, on the Bonds. There is, of course, no certainty that this
result will be achieved. Preinsured Bonds in an Insured Trust (all of which are
rated "AAA" by Standard & Poor's) may or may not have a higher yield than
uninsured bonds rated "AAA" by Standard & Poor's. In selecting such Bonds for an
Insured Trust, the Sponsor has applied the criteria hereinbefore described.
In the event of nonpayment of interest or principal, when due, in respect of
a Bond, AMBAC Assurance shall make such payment not later than 30 days and
Financial Guaranty shall make such payment within one business day after the
respective insurer has been notified that such nonpayment has occurred or is
threatened (but not earlier than the date such payment is due). The insurer, as
regards any payment it may make, will succeed to the rights of the Trustee in
respect thereof. All policies issued by the Portfolio Insurers and the
Preinsured Bond Insurers are substantially identical insofar as obligations to
an Insured Trust are concerned.
The Internal Revenue Service has issued a letter ruling which holds in effect
that insurance proceeds representing maturing interest on defaulted municipal
obligations paid to holders of insured bonds, under policy provisions
substantially identical to the policies described herein, will be excludable
from Federal gross income under Section 103(a)(1) of the Internal Revenue Code
to the same extent as if such payments were made by the issuer of the municipal
obligations. Holders of Units in an Insured Trust should discuss with their tax
advisers the degree of reliance which they may place on this letter ruling.
However, Chapman and Cutler, counsel for the Sponsor, has given an opinion to
the effect such payment of proceeds would be excludable from Federal gross
income to the extent described under "Federal Tax Status" in Prospectus Part II.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made thereunder at some
time in the future. At the date hereof, it is reported that no claims have been
submitted or are expected to be submitted to any of the Portfolio Insurers which
would materially impair the ability of any such company to meet its commitment
pursuant to any contract of bond or portfolio insurance.
The information relating to each Portfolio Insurer has been furnished by such
companies. The financial information with respect to each Portfolio Insurer
appears in reports filed with state insurance regulatory authorities and is
subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates thereof.
PORTFOLIO ADMINISTRATION
The Trustee is empowered to sell, for the purpose of redeeming Units tendered
by any Unitholder, and for the payment of expenses for which funds may not be
available, such of the Bonds designated by the Evaluator as the Trustee in its
sole discretion may deem necessary. The Evaluator, in designating such Bonds,
will consider a variety of factors including (a) interest rates, (b) market
value and (c) marketability. The Sponsor, in connection with the Quality Trusts,
may direct the Trustee to dispose of Bonds upon default in payment of principal
or interest, institution of certain legal proceedings, default under other
documents adversely affecting debt service, default in payment of principal or
interest or other obligations of the same issuer, decline in projected income
pledged for debt service on revenue bonds or decline in price or the occurrence
of other market or credit factors, including advance refunding (i.e., the
issuance of refunding securities and the deposit of the proceeds thereof in
trust or escrow to retire the refunded securities on their respective redemption
dates), so that in the opinion of the Sponsor the retention of such Bonds would
be detrimental to the interest of the Unitholders. In connection with the
Insured Trusts to the extent that Bonds are sold which are current in payment of
principal and interest in order to meet redemption requests and defaulted Bonds
are retained in the portfolio in order to preserve the related insurance
protection applicable to said Bonds, the overall quality of the Bonds remaining
in such Trust's portfolio will tend to diminish. Except as described in this
section and in certain other unusual circumstances for which it is determined by
the Trustee to be in the best interests of the Unitholders or if there is no
alternative, the Trustee is not empowered to sell Bonds from an Insured Trust
which are in default in payment of principal or interest or in significant risk
of such default and for which value has been attributed for the insurance
obtained by such Insured Trust. Because of restrictions on the Trustee under
certain circumstances, the Sponsor may seek a full or partial suspension of the
right of Unitholders to redeem their Units in an Insured Trust. See "Rights of
Unitholders--Redemption of Units" in Prospectus Part II. The Sponsor is
empowered, but not obligated, to direct the Trustee to dispose of Bonds in the
event of an advanced refunding.
The Sponsor is required to instruct the Trustee to reject any offer made by
an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
(1) the issuer is in default with respect to such Bond or (2) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Bond in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder of the Trust thereby affected, identifying the
Bonds eliminated and the Bonds substituted therefor. Except as stated herein and
under "Fund Administration--Replacement Bonds" in Prospectus Part II regarding
the substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Fund of any securities other than the Bonds initially deposited is not
permitted.
If any default in the payment of principal or interest on any Bonds occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bonds within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
TRUSTEE INFORMATION
The Trustee is The Bank of New York, a trust company organized under the laws
of New York. The Bank of New York has its unit investment trust division offices
at 101 Barclay Street, New York, New York 10286, telephone (800) 221-7668. The
Bank of New York is subject to supervision and examination by the Superintendent
of Banks of the State of New York and the Board of Governors of the Federal
Reserve System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Fund. Such records
shall include the name and address of, and the certificates issued by the Fund
to, every Unitholder of the Fund. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or Federal statute, rule or
regulation. The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Bonds held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all Fund
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon receiving
notice of such resignation is obligated to appoint a successor trustee promptly.
If, upon such resignation, no successor trustee has been appointed and has
accepted the appointment within 30 days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and 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.
TERMINATION OF THE TRUST AGREEMENT
A Trust may be terminated at any time by consent of Unitholders of 51% of the
Units of such Trust then outstanding or by the Trustee when the value of such
Trust, as shown by any semi-annual evaluation, is less than 20% of the original
principal amount of Bonds. A Trust will be liquidated by the Trustee in the
event that a sufficient number of Units not yet sold are tendered for redemption
by the Underwriters, including the Sponsor, so that the net worth of such Trust
would be reduced to less than 40% of the initial principal amount of such Trust.
If a Trust is liquidated because of the redemption of unsold Units by the
Underwriters, the Sponsor will refund to each purchaser of Units the entire
sales charge paid by such purchaser. The Trust Agreement provides that each
Trust shall terminate upon the redemption, sale or other disposition of the last
Bond held in such Trust, but in no event shall it continue beyond the end of the
year preceding the fiftieth anniversary of the Trust Agreement in the case of an
IM-IT Discount, a U.S. Territorial IM-IT, a Long-Term State or a National
Quality Trust, or beyond the end of the year preceding the twentieth anniversary
of the Trust Agreement in the case of IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short Intermediate
Trusts. In the event of termination of any Trust, written notice thereof will be
sent by the Trustee to each Unitholder of such Trust at his address appearing on
the registration books of the Fund maintained by the Trustee. Within a
reasonable time thereafter the Trustee shall liquidate any Bond then held in
such Trust and shall deduct from the funds of such Trust any accrued costs,
expenses or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and costs of liquidation and any amounts required as
a reserve to provide for payment of any applicable taxes or other government
charges. The sale of Bonds in the Trust upon termination may result in a lower
amount than might otherwise be realized if such sale were not required at such
time. For this reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount or par amount of Bonds
represented by the Units held by such Unitholder. The Trustee shall then
distribute to each Unitholder his share of the balance of the Interest and
Principal Accounts. With such distribution the Unitholder shall be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion shall determine that any amounts held in reserve
are no longer necessary, it shall make distribution thereof to Unitholders in
the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so insured
are held by such Trust, the price to be received by such Trust upon the
disposition of any such Bond which is in default, by reason of nonpayment of
principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for the
Trustee to, and the Trustee does not currently intend to, dispose of any Bond or
Bonds if retention of such Bond or Bonds, until due, shall be deemed to be in
the best interest of Unitholders, including, but not limited to, situations in
which a Bond or Bonds so insured have deteriorated market prices resulting from
a significant risk of default. Since the Preinsured Bonds will reflect the value
of the related insurance, it is the present intention of the Sponsor not to
direct the Trustee to hold any of such Preinsured Bonds after the date of
termination. All proceeds received, less applicable expenses, from insurance on
defaulted Bonds not disposed of at the date of termination will ultimately be
distributed to Unitholders of record as of such date of termination as soon as
practicable after the date such defaulted Bond or Bonds become due and
applicable insurance proceeds have been received by the Trustee.
DESCRIPTION OF RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES. A Standard &
Poor's municipal bond rating is a current assessment of the creditworthiness of
an obligor with respect to a specific debt obligation. This assessment of
creditworthiness may take into consideration obligors such as guarantors,
insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price. The ratings are based on
current information furnished to Standard & Poor's by the issuer and obtained by
Standard & Poor's from other sources it considers reliable. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
II.Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangements under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Provisional Ratings: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion,
makes no comment on the likelihood of, or the risk of default upon failure of,
such completion. Accordingly, the investor should exercise his own judgment with
respect to such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's rating symbols and their meanings follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large, or by an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. With the occasional
exception of oversupply in a few specific instances, the safety of obligations
of this class is so absolute that their market value is affected solely by money
market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. These Aa bonds are high grade, their market value virtually immune
to all but money market influences, with the occasional exception of oversupply
in a few specific instances.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as higher medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. The market
value of A-rated bonds may be influenced to some degree by credit circumstances
during a sustained period of depressed business conditions. During periods of
normalcy, bonds of this quality frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few specific
instances.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the high
end of its category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Con--Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of the Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under combined Federal and State taxes
(where applicable) using the published Federal and State tax rates (where
applicable) scheduled to be in effect in 1998. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you would
have to earn on taxable investments to equal the tax-exempt estimated current
return in your income tax bracket. The tables assume that Federal taxable income
is equal to State income subject to tax, and for cases in which more than one
State rate falls within a Federal bracket, the State rate corresponding to the
highest income within that Federal bracket is used. The combined State and
Federal tax rates shown reflect the fact that State tax payments are currently
deductible for Federal tax purposes. The tables do not reflect any local taxes
or any taxes other than personal income taxes. The tables do not show the
approximate taxable estimated current returns for individuals that are subject
to the alternative minimum tax. The taxable equivalent estimated current returns
may be somewhat higher than the equivalent returns indicated in the following
tables for those individuals who have adjusted gross incomes in excess of
$124,500. The tables do not reflect the effect of Federal or State limitations
(if any) on the amount of allowable itemized deductions and the deduction for
personal or dependent exemptions or any other credits. These limitations were
designed to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the marginal maximum Federal tax
rate to approximately 44 percent for taxpayers filing a joint return and
entitled to four personal exemptions and to approximately 41 percent for
taxpayers filing a single return entitled to only one personal exemption. These
limitations are subject to certain maximums, which depend on the number of
exemptions claimed and the total amount of taxpayer's itemized deductions. For
example, the limitation on itemized deductions will not cause a taxpayer to lose
more than 80% of his allowable itemized deductions, with certain exceptions. See
"Federal Tax Status" in Prospectus Part II for a more detailed discussion of
recent Federal tax legislation.
<TABLE>
<CAPTION>
CONNECTICUT
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25.35 $ 0-42.35 18.3% 4.90% 5.51% 6.12% 6.73% 7.34% 7.96% 8.57%
25.35 - 61.40 42.35 - 102.30 31.2 5.81 6.54 7.27 7.99 8.72 9.45 10.17
61.40 - 128.10 102.30 - 155.95 34.1 6.07 6.83 7.59 8.35 9.10 9.86 10.62
128.10 - 278.45 155.95 - 278.45 38.9 6.55 7.36 8.18 9.00 9.82 10.64 11.46
Over 278.45 Over 278.45 42.3 6.93 7.80 8.67 9.53 10.40 11.27 12.13
</TABLE>
<TABLE>
<CAPTION>
NEW JERSEY
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25.35 $ 0 - 42.35 16.5% 4.79% 5.39% 5.99% 6.59% 7.19% 7.78% 8.38%
25.35 - 61.40 42.35 - 102.30 32.0 5.88 6.62 7.35 8.09 8.82 9.56 10.29
61.40 - 128.10 102.30 - 155.95 35.4 6.19 6.97 7.74 8.51 9.29 10.06 10.84
128.10 - 278.45 155.95 - 278.45 40.1 6.68 7.51 8.35 9.18 10.02 10.85 11.69
Over 278.45 Over 278.45 43.4 7.07 7.95 8.83 9.72 10.60 11.48 12.37
</TABLE>
<TABLE>
<CAPTION>
MARYLAND
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25.35 $ 0 - 42.35 19.10% 4.94% 5.56% 6.18% 6.80% 7.42% 8.03% 8.65%
25.35 - 61.40 42.35 - 102.30 31.50 5.84 6.57 7.30 8.03 8.76 9.49 10.22
61.40 - 128.10 102.30 - 155.95 34.40 6.10 6.86 7.62 8.38 9.15 9.91 10.67
128.10 - 278.45 155.95 - 278.45 39.10 6.57 7.39 8.21 9.03 9.85 10.67 11.49
Over 278.45 Over 278.45 42.50 6.96 7.83 8.70 9.57 10.43 11.30 12.17
- -----------------
*The table does not reflect county income taxes.
</TABLE>
A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns on
the Trusts and returns over specified periods on other similar Van Kampen
sponsored unit investment trusts with inflation rates and with returns on
taxable investments such as corporate or U.S. Government bonds, bank CDs and
money market accounts or money market funds, each of which has investment
characteristics that may differ from those of the Trusts. U.S. Government bonds,
for example, are backed by the full faith and credit of the federal government.
Money market accounts and money market funds provide stability of principal, but
pay interest at rates that vary with the condition of the short-term debt
market. The investment characteristics of the Trusts are described more fully in
the Prospectus.
CONNECTICUT RISK FACTOR
The following information is only a summary of risk factors associated with
Connecticut. It has been compiled from official government statements and other
publicly available documents. Although the Sponsor has not independently
verified the information, it has no reason to believe that it is not correct in
all material respects.
Manufacturing has historically been of prime economic importance to
Connecticut (sometimes referred to as the "State"). The manufacturing industry
is diversified, with transportation equipment (primarily aircraft engines,
helicopters and submarines) the dominant industry, followed by non-electrical
machinery, fabricated metal products and electrical machinery. As a result of a
rise in employment in service-related industries and a decline in manufacturing
employment, however, manufacturing accounted for only 17.39% of total
non-agricultural employment in Connecticut in 1996. Defense-related business
represents a relatively high proportion of the manufacturing sector. On a per
capita basis, defense awards to Connecticut have traditionally been among the
highest in the nation, and reductions in defense spending have had a substantial
adverse impact on Connecticut's economy.
The average annual unemployment rate in Connecticut increased from a low of
3.0% in 1988 to 7.6% in 1992 and, after a number of important changes in the
method of calculation, was reported to be 5.8% in 1996. Average per capita
personal income of Connecticut residents increased in every year from 1987 to
1996, rising from $21,592 to $33,875. However, pockets of significant
unemployment and poverty exist in several Connecticut cities and towns.
At the end of the 1990-1991 fiscal year, the General Fund had an accumulated
unappropriated deficit of $965,712,000. For the six fiscal years ended June 30,
1997, the General Fund ran operating surpluses, based on the State's budgetary
method of accounting, of approximately $110,200,000, $113,500,000, $19,700,000,
$80,500,000, $250,000,000 and $262,600,000, respectively. General Fund budgets
for the biennium ending June 30, 1999, were adopted in 1997. General Fund
expenditures and revenues are budgeted to be approximately $9,550,000,000 and
$9,700,000,000 for the 1997-1998 and 1998-1999 fiscal years, respectively, an
increase of more than 35% from the budgeted expenditures of approximately
$7,008,000,000 for the 1991-1992 fiscal year.
During 1991, the State issued a total of $965,710,000 Economic Recovery
Notes. The notes were to be payable no later than June 30, 1996, but as part of
the budget adopted for the biennium ending June 30, 1997, payment of the notes
scheduled to be paid during the 1995-1996 fiscal year was rescheduled to be made
over the four fiscal years ending June 30, 1999. The outstanding notes were
$157,055,000 as of December 1, 1997.
The State's primary method for financing capital projects is through the sale
of general obligation bonds. These bonds are backed by the full faith and credit
of the State. As of December 1, 1997, the State had authorized direct general
obligation bond indebtedness totaling $11,460,239,000, of which $10,159,950,000
had been approved for issuance by the State Bond Commission and $9,181,272,000
had been issued. As of December 1, 1997, State direct general obligation
indebtedness outstanding was $6,475,986,251.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The University is authorized to issue bonds totaling $962,000,000
to finance the improvements. The University's bonds will be secured by a State
debt service commitment, the aggregate amount of which is limited to $382
million for the four fiscal years ending June 30, 1999, and $580 million for
bonds issued in the six fiscal years ending June 30, 2005.
In addition, the State has limited or contingent liability on a significant
amount of other bonds. Such bonds have been issued by the following quasi-public
agencies: the Connecticut Housing Finance Authority, the Connecticut Development
Authority, the Connecticut Higher Education Supplemental Loan Authority, the
Connecticut Resources Recovery Authority and the Connecticut Health and
Educational Facilities Authority. Such bonds have also been issued by the cities
of Bridgeport and West Haven and the Southeastern Connecticut Water Authority.
As of March 3, 1998, the amount of bonds outstanding on which the State has
limited or contingent liability totaled $4,000,900,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2002, is currently estimated to be
$12.3 billion, to be met from federal, state, and local funds. The State expects
to finance most of its $5.1 billion share of such cost by issuing $4.6 billion
of special tax obligation ("STO") bonds. The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license, permit and fee
revenues pledged therefor and credited to the Special Transportation Fund, which
was established to budget and account for such revenues.
As of December 1, 1997, the General Assembly had authorized $4,302,700,000 of
such STO bonds, of which $3,894,700,000 of new money borrowings had been issued.
It is anticipated that additional STO bonds will be authorized annually in
amounts necessary to finance and to complete the infrastructure program. Such
additional bonds may have equal rank with the outstanding bonds provided certain
pledged revenue coverage requirements are met. The State expects to continue to
offer bonds for this program.
The State's general obligation bonds are rated Aa3 by Moody's. On March 17,
1995, Fitch reduced its ratings of the State's general obligation bonds from AA+
to AA. On October 8, 1998, Standard & Poor's upgraded the State's general
obligation bond rating from AA- to AA.
The State, its officers and its employees are defendants in numerous
lawsuits. Although it is not possible to determine the outcome of these
lawsuits, the Attorney General has opined that an adverse decision in any of the
following cases might have a significant impact on the State's financial
position: (i) a class action by the Connecticut Criminal Defense Lawyers
Association claiming a campaign of illegal surveillance activity and seeking
damages and injunctive relief; (ii) an action on behalf of all persons with
traumatic brain injury, who have been placed in certain State hospitals,
claiming that their constitutional rights are violated by placement in State
hospitals alleged not to provide adequate treatment and training, and seeking
placement in community residential settings with appropriate support services;
(iii) litigation involving claims by Indian tribes to a portion of the State's
land area; and (iv) an action in the name of several public school students and
the Connecticut municipalities in which the students reside, seeking a
declaratory judgment that the State's current system of financing public
education violates the Connecticut Constitution.
As a result of litigation on behalf of black and Hispanic school children in
the City of Hartford seeking "integrated education" within the Greater Hartford
metropolitan area, on July 9, 1996, the State Supreme Court directed the
legislature to develop appropriate measures to remedy the racial and ethnic
segregation in the Hartford public schools. The fiscal impact of this decision
might be significant but is not determinable at this time.
General obligation bonds issued by municipalities are payable primarily from
ad valorem taxes on property located in the municipality. A municipality's
property tax base is subject to many factors outside the control of the
municipality, including the decline in Connecticut's manufacturing industry.
Certain Connecticut municipalities have experienced severe fiscal difficulties
and have reported operating and accumulated deficits. The most notable of these
is the City of Bridgeport, which filed a bankruptcy petition on June 7, 1991.
The State opposed the petition. The United States Bankruptcy Court for the
District of Connecticut held that Bridgeport has authority to file such a
petition but that its petition should be dismissed on the grounds that
Bridgeport was not insolvent when the petition was filed. State legislation
enacted in 1993 prohibits municipal bankruptcy filings without the prior written
consent of the Governor.
In addition to general obligation bonds backed by the full faith and credit
of the municipality, certain municipal authorities finance projects by issuing
bonds that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed project, the revenues from which may
be insufficient to service the related debt obligations.
Regional economic difficulties, reductions in revenues and increases in
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.
NEW JERSEY RISK FACTORS
The New Jersey IM-IT Trust consists of a portfolio of Bonds. The Trust is
therefore susceptible to political, economic or regulatory factors affecting
issuers of the Bonds. The following information provides only a brief summary of
some of the complex factors affecting the financial situation in New Jersey (the
"State") and is derived from sources that are generally available to investors
and is believed to be accurate. It is based in part on information obtained from
various State and local agencies in New Jersey. No independent verification has
been made of any of the following information.
New Jersey is the ninth largest state in population and the fifth smallest in
land area. With an average of 1,071 people per square mile, it is the most
densely populated of all the states. The State's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries,
supplemented by rural areas with selective commercial agriculture. Historically,
New Jersey's average per capita income has been well above the national average,
and in 1995, the State ranked second among the states in per capita personal
income ($29,248).
The New Jersey Economic Policy Council, a statutory arm of the New Jersey
Department of Commerce and Economic Development, has reported in New Jersey
Economic Indicators, a monthly publication of the New Jersey Department of
Labor, Division of Labor Market and Demographic Research, that in 1988 and 1989,
employment in New Jersey's manufacturing sector failed to benefit from the
export boom experienced by many Midwest states and the State's service sectors,
which had fueled the State's prosperity since 1982, lost momentum. In the
meantime, the prolonged fast growth in the State in the mid 1980s resulted in a
tight labor market situation, which has led to relatively high wages and housing
prices. This means that, while the incomes of New Jersey residents are
relatively high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration of
New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities and trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State rose
from a low of 3.6% during the first quarter of 1989 to an estimated 4.9% in
December 1997, which is higher than the national average of 4.6% in December
1997. Economic recovery is likely to be slow and uneven in New Jersey, with
unemployment receding at a correspondingly slow pace, due to the fact that some
sectors may lag due to continued excess capacity. In addition, employers even in
rebounding sectors can be expected to remain cautious about hiring until they
become convinced that improved business will be sustained. Also, certain firms
will continue to merge or downsize to increase profitability.
Debt Service. The primary method for State financing of capital projects is
through the sale of the general obligation bonds of the State. These bonds are
backed by the full faith and credit of the State tax revenues and certain other
fees are pledged to meet the principal and interest payments and if provided,
redemption premium payments, if any, required to repay the bonds. As of June 30,
1996, there was a total authorized bond indebtedness of approximately $10.31
billion, of which $3.69 billion was issued and outstanding, $4.76 billion was
retired (including bonds for which provision for payment has been made through
the sale and issuance of refunding bonds) and $1.86 billion was unissued. The
appropriation for the debt service obligation on such outstanding indebtedness
is $446.9 million for Fiscal Year 1997.
New Jersey's Budget and Appropriation System. The State operates on a fiscal
year beginning July 1 and ending June 30. At the end of Fiscal Year 1993, there
was a surplus in the State's general fund (the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made) of $937.4 million. At the end of Fiscal Year 1994,
there was a surplus in the general fund of $926.0 million. At the end of Fiscal
Year 1995, there was a surplus in the general fund of $569.2 million. It is
estimated that New Jersey closed its Fiscal Year 1996 with a surplus of $442
million and Fiscal Year 1997 with a surplus of $276.2 million.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes (consisting of
$1.5 billion in sales and use taxes and $1.3 billion in income taxes), the
biggest tax hike in New Jersey history. There can be no assurance that receipts
and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the increase
in the State's sales and use tax rate from 6% to 7% and the elimination of
exemptions for certain products and services not previously subject to the tax,
such as telephone calls, paper products (which has since been reinstated), soaps
and detergents, janitorial services, alcoholic beverages and cigarettes. At the
time of enactment, it was projected that these taxes would raise approximately
$1.5 billion in additional revenue. Projections and estimates of receipts from
sales and use taxes, however, have been subject to variance in recent fiscal
years.
The second part of the tax hike took effect on January 1, 1991, in the form
of an increased state income tax on individuals. At the time of enactment, it
was projected that this increase would raise approximately $1.3 billion in
additional income taxes to fund a new school aid formula, a new homestead rebate
program and state assumption of welfare and social services costs. Projections
and estimates of receipts from income taxes, however, have also been subject to
variance in recent fiscal years. Under the legislation, income tax rates
increased from their previous range of 2% to 3.5% to a new range of 2% to 7%,
with the higher rates applying to married couples with incomes exceeding $70,000
who file joint returns, and to individuals filing single returns with incomes of
more than $35,000.
The Florio administration had contended that the income tax package will help
reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation, the State will assume
approximately $289 million in social services costs that previously were paid by
counties and municipalities and funded by property taxes. In addition, under the
new formula for funding school aid, an extra $1.1 billion is proposed to be sent
by the State to school districts beginning in 1991, thus reducing the need for
property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased from 7%
to 6%. Effective January 1, 1994, an across-the-board 5% reduction in the income
tax rates was enacted and effective January 1, 1995, further reductions ranging
from 1% up to 10% in income tax rates took effect. Governor Whitman recently
signed into law further reductions up to 15% for some taxpayers effective
January 1, 1996, completing her campaign promise to reduce income taxes by up to
30% within three years for most taxpayers.
In June 1997, Governor Whitman signed the New Jersey Legislature's $16.8
billion budget for Fiscal Year 1998. The balanced budget, which includes $442
million in surplus, is $800 million more than the 1997 budget. Whether the State
can achieve a balanced budget depends on its ability to enact and implement
expenditure reductions and to collect estimated tax revenues.
Litigation. The State is a party in numerous legal proceedings pertaining to
matters incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included in
the State's outstanding litigation are cases challenging the following: the
funding of teachers' pension funds; the hospital assessment authorized by the
Health Care Reform Act of 1992; the State's role in a consent order concerning
the construction of a resource facility in Passaic County; the State's actions
regarding alleged chromium contamination of State-owned property in Hudson
County; the constitutionality of annual A-901 hazardous and solid waste
licensure renewal fees collected by the Department of Environmental Protection
and Energy; the State's funding formula that attempts to close the spending gap
between poor urban school districts and wealthy suburban districts; the use by
the State of assessments on certain insurers to retire debt of the Market
Transition Fund, the manner in which mental health services are provided to
inmates with serious mental disorders who are confined within the facilities of
the Department of Corrections; the spousal impoverishment provisions of the
Medicare Catastrophic Coverage Act; Medicaid hospital reimbursements since
February, 1995; and the efforts to revitalize Atlantic City through the design
and construction of a highway and tunnel. Adverse judgments in these and other
matters could have the potential for either a significant loss of revenue or a
significant unanticipated expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees, seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various
numbers of contract claims against the State and State agencies seeking recovery
of monetary damages. The State is unable to estimate its exposure for these
claims.
Debt Ratings. For many years prior to 1991, both Moody's Investors Service,
Inc. and Standard and Poor's Corporation had rated New Jersey general obligation
bonds "Aaa" and "AAA," respectively. On July 3, 1991, however, Standard and
Poor's Corporation downgraded New Jersey general obligation bonds to "AA+." On
June 4, 1992, Standard and Poor's Corporation placed New Jersey general
obligation bonds on CreditWatch with negative implications, citing as its
principal reason for its caution the unexpected denial by the Federal Government
of New Jersey's request for $450 million in retroactive Medicaid payments for
psychiatric hospitals. These funds were critical to closing a $1 billion gap in
the State's $15 billion budget for fiscal year 1992 which ended on June 30,
1992. Under New Jersey state law, the gap in the current budget must be closed
before the new budget year began on July 1, 1992. Standard and Poor's
Corporation suggested the State could close fiscal 1992's budget gap and help
fill fiscal 1993's hole by a reversion of $700 million of pension contributions
to its general fund under a proposal to change the way the State calculates its
pension liability. On July 6, 1992, Standard and Poor's Corporation reaffirmed
its "AA+" rating for New Jersey general obligation bonds and removed the debt
from its CreditWatch list, although it stated that New Jersey's long-term
financial outlook was negative. Standard & Poor's Corporation was concerned that
the State was entering the 1993 fiscal year that began July 1, 1992, with a slim
$26 million surplus and remained concerned about whether the sagging State
economy would recover quickly enough to meet lawmakers' revenue projections. It
also remained concerned about the recent federal ruling leaving in doubt how
much the State was due in retroactive Medicaid reimbursements and a ruling by a
federal judge, now on appeal, of the State's method for paying for uninsured
hospital patients. However, on July 27, 1994, S&P announced that it was changing
the State's outlook from negative to stable due to a brightening of the State's
prospects as a result of Governor Whitman's effort to trim spending and cut
taxes, coupled with an improving economy. S&P reaffirmed its "AA+" rating at the
same time.
On August 24, 1992, Moody's Investors Service, Inc. downgraded New Jersey
general obligation bonds to "Aa1," stating that the reduction reflected a
developing pattern of reliance on nonrecurring measures to achieve budgetary
balance, four years of financial operations marked by revenue shortfalls and
operating deficits, and the likelihood that serious financial pressures would
persist. On August 5, 1994, Moody's reaffirmed its "Aa1" rating, citing on the
positive side New Jersey's broad-based economy, high income levels, history of
maintaining a positive financial position and moderate (albeit rising) debt
ratios, and, on the negative side, a continued reliance on one-time revenues and
a dependence on pension-related savings to achieve budgetary balance.
MARYLAND RISK FACTORS
Economic Outlook. Since 1989, Maryland has consistently ranked among the
bottom states in job creation. Employment in Maryland increased 1.1% in calendar
1996, and since late 1992, only about 160,000 new jobs have been created. During
the 1990's the weakest employment areas were banking, federal government and
manufacturing. Growth has been heavily concentrated in business and health
services, transportation, construction and trade.
The service sector accounts for 31.1% of total employment in the State, but
provided more than 62% of the new jobs during 1996. Employment in the computer
and data processing industry grew by 4.9% in 1996 and is expected to continue to
grow at a steady rate. Employment in health services increased by 3.6% annually
between 1991 and 1993 before slowing to an average annual gain of 2.0% between
1994 and 1996.
In December 1997, overall employment was estimated to have increased by 2.2%
or 48,000 new jobs during calendar 1997. Job growth in the services,
construction and retail trade sectors lead this expansion. Maryland's State
Comptroller projects that employment in Maryland will increase by 1.6% in 1998
and 1.3% in 1999.
While Maryland's overall tax burden is below the national average, the State
and local personal income tax is among the highest in the nation. Economic data
indicate that most jobs are created by small businesses, and nearly 80% of
Maryland's companies are small businesses. Since many small businesses pay the
personal income tax, higher State taxes directly reduce their profitability and
negatively affect business decisions about location, expansion and creation of
new jobs.
During 1996, the State ranked 6th in the nation in per capita income, with an
average per capita income of $27,618 as compared to the national average of
$24,426. In 1997, Maryland's General Assembly enacted new laws providing for a
personal income tax reduction. According to the State's November 1997
Comprehensive Annual Financial Report ("CAFR"), total personal income is
expected to rise by 5.4%, 5.1% and 4.8% in 1997, 1998 and 1999, respectively.
During 1995 and 1996, Maryland implemented substantial regulatory reform,
eliminated or reduced ten business taxes, and significantly increased funding
for the Sunny Day Fund and other business incentive programs to improve the
State's business climate and increase competitiveness. As a result of these
actions, the total number of jobs in Maryland is at an all time high and
unemployment remains below the national average.
Maryland's economy has been influenced recently by structural changes in the
national economy: less national defense spending and defense subcontract work;
reductions in federal employment; and corporate acquisition. Major Maryland
employment sectors, such as finance, insurance and professional service, have
restructured and downsized. Due in part to defense downsizing and international
competition, realignments in manufacturing have also affected the State's
economy.
Despite these setbacks, the State's healthy consumer confidence, a solid
economy and robust gains in the stock market have translated into steady
increases in consumer spending in Maryland. Drawn by the high per capita wealth
of the area, new retailers continue to enter this market. Employment gains are
expected to be modest during the next three years, constrained in part by a lack
of workers.
Revenue and Expenditures. Income and sales taxes comprise over 80% of the
State's general fund revenue. These taxes, along with transportation revenues,
make up over 55% of the State's total revenue. These revenue sources are highly
sensitive to economic conditions. For this reason, the State's budget is
dependent on the health of Maryland's economy.
Maryland's State Comptroller reported in the CAFR that revenues totaled
$13.476 billion for the fiscal year ending June 30, 1997. This figure represents
an increase of 5.9% over revenues for Fiscal Year 1996. Income tax, the largest
source of revenue, produced 30.3% of general governmental revenues in Fiscal
1997, compared to 29.8% in Fiscal 1996. Individual income tax revenues increased
7.6% over Fiscal 1996 due to continued gains in employment and personal income,
and corporate income tax revenues increased by 10.3% in Fiscal 1997, reflecting
strong gains in total corporate profitability.
The State's total expenditures reached $13.386 billion in Fiscal 1997. This
figure represents a $561.7 million or 4.4% increase over Fiscal 1996. Revenues
exceeded expenditures by $90.1 million, the first positive balance since 1994.
The actual fund balance for the State's general fund on June 30, 1997 was $1.059
billion, an increase of $298.7 million over the Fiscal Year 1996 general fund
balance.
Maryland's State Reserve Fund contains funds set aside to protect against
unexpected revenue declines and to finance future expenses. In addition,
Maryland law establishes a target of 5% of general fund revenues for its Revenue
Stabilization Account to protect against revenue downturns and maintain the
State's bond ratings. At the close of Fiscal Year 1997, the State Reserve Fund
balance was $865 million, up $54.9 million over Fiscal Year 1996.
Fiscal year 1998 represents the first full year of the income tax reduction
enacted in 1997. This tax cut, Maryland's first in over thirty years, will be
phased-in over fiscal years 1998-2002, reducing the State's current 5% income
tax rate by 10% overall. The first phase of the proposed income tax cut will
reduce general fund revenues by $39 million, but a proposed cigarette tax
increase will add $99 million for allocation to the Reserve Fund to help pay for
future years of this tax reduction.
Maryland's Board of Revenue Estimates expects general fund revenues, which
represent approximately 55-60% of each year's total budget, to reach $7.887
billion during Fiscal Year 1998, an increase of 3.4% or $198 million above the
last official estimate for that fiscal year in March 1997. The State projects
that it will finish Fiscal 1998 with a general fund surplus of $283 million. The
Fiscal 1998 budget estimates that $554 million or 7% of general fund revenues
will be set aside for the State Reserve Fund.
During Fiscal Year 1999, the Board projects general fund revenues of $8.095
billion, a 2.8% increase. Net of the income tax reduction, the growth in general
fund revenues is projected to equal 3.9%. Maryland's budget for Fiscal 1999
totals $16.5 billion, a 5.1% increase over Fiscal 1998. This increase includes
$100 million in reserve funding to pay for the cost of the State's scheduled 10%
income tax cut.
The State Reserve Fund is expected to increase to $695.8 million at the end
of Fiscal Year 1999. The Fiscal 1999 budget anticipates using its entire
budgetary surplus for payments to the State's Reserve Fund and for one-time
expenditures-not for ongoing expenses that would contribute to long-term
deficits. The one-time expenditures include the costs of the upcoming tax
reduction, school construction, a Med-Evac helicopter, and technology costs
incurred for Year 2000 compliance.
State Debt. The public indebtedness of the State of Maryland and its
instrumentalities is divided into three general types. The State itself issues
general obligation bonds for capital improvements and for various State
projects, for which the State ad valorem property tax is exclusively pledged for
payment. In addition, for transportation purposes the Maryland Department of
Transportation issues limited, special obligation bonds payable primarily from
specific, fixed-rate excise taxes and other revenues related mainly to highway
use. Certain authorities issue obligations payable solely from specific non-tax,
enterprise fund revenues and for which the State has no liability and has given
no moral obligation assurance.
In 1978, the Capital Debt Affordability Committee was created to study the
State's debt structure and to recommend maximum limitations on annual debt
authorizations so that the State's bond ratings can be maintained. Although the
recommendations of the Committee are not binding on Maryland's General Assembly,
the amounts of annual general obligation bond authorization effective for 1997
were within the limits established by the Committee. For Fiscal Year 1997, new
general obligation bond authorizations totaled $399,991,000 (net of
deauthorization of $12.1 million from prior projects).
During Fiscal Year 1997, the following new general obligation bonds were
issued by the State of Maryland: $170 million on October 9, 1996 and $240
million on February 26, 1997. Outstanding general obligation bonds totaled
$2.860 billion in 1996 and $3.025 billion in 1997. In addition, the State
Department of Transportation and the Maryland Transportation Authority had
$935.6 million and $391.9 million, respectively, in outstanding limited
obligation bonds at the close of Fiscal Year 1997.
General obligation bonds totaling $415 million were authorized for the Fiscal
Year 1998 budget, consistent with the State's Capital Debt Affordability
Committee. General funds in the capital budget total $78.2 million for Fiscal
1998. The use of general funds to supplement the capital budget is generally
limited to certain programs which cannot be prudently funded with tax-exempt
bonds. Federal funds in the capital budget total $17.6 million. In Fiscal 1998,
these monies will be used primarily for prison construction, developing Canal
Place in Cumberland and construction of military facilities for National Guard
units. Special funds in the capital budget total $184.6 million and consist of
dedicated revenues for improvements such as open space, agricultural land
preservation and law enforcement training facilities. Revenue bonds total $45
million in Fiscal 1998 and are designated for capital improvements to academic
facilities at the University of Maryland system and for local governments to
fund infrastructure and environmental improvements.
The Committee has authorized $430 million in new general obligation bonds for
Fiscal Year 1999. An additional $11.6 million from projects that have been
completed, canceled or rescheduled is expected to be deauthorized and used for
other purposes.
Ratings. The general obligation bonds of the State of Maryland have been
rated by Moody's Investors Service, Inc. as Aaa; by Standard & Poor's Rating
Services as AAA; and by Fitch IBCA, Inc. (formerly known as Fitch Investors
Service, L.P.) as AAA, making Maryland one of several states with three triple-A
ratings.
There can be no assurance that particular bond issues may not be adversely
affected by changes in State or local economic or political conditions.
Investors are, therefore, advised to study with care the Portfolio for the
Maryland Quality Trust appearing elsewhere in this Prospectus and consult their
own investment advisers as to the merits of particular issues in that Portfolio.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated monthly and semi-annual
distributions of interest and principal to Unitholders. The tables assume no
changes in expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Bonds prior to maturity or
expected retirement date and the receipt of principal upon maturity or expected
retirement date. To the extent the foregoing assumptions change actual
distributions will vary.
<TABLE>
<CAPTION>
CONNECTICUT
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
November 1998 $ 2.22 $ 2.22
December 1998 - June 2008 3.51 3.51
July 2008 3.36 $122.42 125.78
August 2008 - December 2009 3.01 3.01
January 2010 2.92 73.46 76.38
February 2010 - June 2010 2.72 2.72
July 2010 2.57 122.43 125.00
August 2010 - June 2015 2.22 2.22
July 2015 2.22 48.97 51.19
August 2015 - October 2017 2.22 2.22
November 2017 1.94 90.60 92.54
December 2017 - October 2018 1.89 1.89
November 2018 1.36 244.86 246.22
December 2018 - June 2024 .95 .95
July 2024 .79 146.91 147.70
August 2024 - November 2027 .39 .39
December 2027 122.43 122.43
</TABLE>
<TABLE>
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
January 1999 $ 9.34 $ 9.34
July 1999 - January 2008 21.30 21.30
July 2008 21.15 $122.42 143.57
January 2009 - July 2009 18.31 18.31
January 2010 18.22 73.46 91.68
July 2010 16.37 122.43 138.80
January 2011 - January 2015 13.54 13.54
July 2015 13.54 48.97 62.51
January 2016 - July 2017 13.54 13.54
November 2017 90.60 90.60
January 2018 12.58 12.58
July 2018 11.48 11.48
November 2018 244.86 244.86
January 2019 9.07 9.07
July 2019 - January 2024 5.85 5.85
July 2024 5.68 146.91 152.59
January 2025 - July 2027 2.45 2.45
December 2027 1.65 122.43 124.08
</TABLE>
<TABLE>
<CAPTION>
NEWJERSEY
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
November 1998 $ 2.29 $ 2.29
December 1998 - December 2008 3.61 3.61
January 2009 3.22 $322.42 325.64
February 2009 2.31 2.31
March 2009 1.89 124.00 125.89
April 2009 - May 2010 1.81 1.81
June 2010 1.39 124.01 125.40
July 2010 - September 2019 1.31 1.31
October 2019 1.17 124.01 125.18
November 2019 - August 2023 .83 .83
September 2023 .69 124.01 124.70
October 2023 - January 2026 .35 .35
February 2026 .35 49.60 49.95
March 2026 - September 2026 .35 .35
October 2026 .22 124.01 124.23
</TABLE>
<TABLE>
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
January 1999 $ 9.61 $ 9.61
July 1999 - July 2008 21.90 21.90
January 2009 21.51 $322.42 343.93
March 2009 124.00 124.00
July 2009 11.59 11.59
January 2010 11.00 11.00
June 2010 124.01 124.01
July 2010 10.08 10.08
January 2011 - July 2019 7.97 7.97
October 2019 124.01 124.01
January 2020 6.39 6.39
July 2020 - July 2023 5.10 5.10
September 2023 124.01 124.01
January 2024 2.99 2.99
July 2024 - January 2026 2.15 2.15
February 2026 49.60 49.60
July 2026 2.15 2.15
October 2026 .95 124.01 124.96
</TABLE>
<TABLE>
<CAPTION>
MARYLAND
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
November 1998 $ 2.25 $ 2.25
December 1998 - May 2009 3.55 3.55
June 2009 3.41 $119.38 122.79
July 2009 - December 2009 3.07 3.07
January 2010 2.87 167.15 170.02
February 2010 - June 2010 2.39 2.39
July 2010 2.09 250.71 252.80
August 2010 - June 2015 1.38 1.38
July 2015 1.38 23.88 25.26
August 2015 - June 2019 1.38 1.38
July 2019 1.22 169.53 170.75
August 2019 - June 2024 .84 .84
July 2024 .70 119.39 120.09
August 2024 - February 2027 .38 .38
March 2027 119.39 119.39
</TABLE>
<TABLE>
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH MAY AND ESTIMATED ESTIMATED ESTIMATED
NOVEMBER UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
November 1998 $ 2.27 $ 2.27
May 1999 - May 2009 21.57 21.57
June 2009 $119.38 119.38
November 2009 18.99 18.99
January 2010 167.15 167.15
May 2010 15.72 15.72
July 2010 250.71 250.71
November 2010 10.16 10.16
May 2011 - May 2015 8.42 8.42
July 2015 23.88 23.88
November 2015 - May 2019 8.42 8.42
July 2019 169.53 169.53
November 2019 6.08 6.08
May 2020 - May 2024 5.15 5.15
July 2024 119.39 119.39
November 2024 3.17 3.17
May 2025 - November 2026 2.38 2.38
March 2027 1.20 119.39 120.59
</TABLE>
S-1
CONTENTS OF REGISTRATION STATEMENT
This Amendment of Registration Statement comprises the following papers and
documents: The facing sheet and the Cross-Reference sheet The Prospectus and the
signatures The consents of independent public accountants, ratings services and
legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.4 Copy of municipal bond insurance policy (if applicable).
1.5 Form of Master Agreement Among Underwriters. Reference is made to Exhibit
1.5 to the Registration Statement on Form S-6 for Insured Municipals Income
Trust, 228th Insured Multi-Series (File No. 333-36891) as filed on January
29, 1998.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to the Federal income tax status of securities being
registered.
3.3 Opinion and consent of counsel as to New York income tax status of the Fund
under New York law.
3.4 Opinion and consent of counsel as to income tax status to Connecticut
residents of Units of the Connecticut IM-IT Trust.
3.5 Opinion and consent of counsel as to income tax status to New Jersey
residents of Units of the New Jersey IM-IT Trust.
3.6 Opinion and consent of counsel as to income tax status to Maryland
residents of Units of the Maryland Quality Trust.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Standard & Poor's with respect to the Insured Trust.
4.3 Consent of Grant Thornton LLP.
EX-27 Financial Data Schedules.
SIGNATURES
The Registrant, Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 307, hereby identifies Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 300, Multi Series
189 and Multi-Series 213 for purposes of the representations required by Rule
487 and represents the following: (1) that the portfolio securities deposited in
the series as to the securities of which this Registration Statement is being
filed do not differ materially in type or quality from those deposited in such
previous series; (2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those contained in
the registration statements for such previous series as to which the effective
date was determined by the Commission or the staff; and (3) that it has complied
with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 307 has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Chicago and State of Illinois on the 16th day of October, 1998.
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-
SERIES 307
By GINA M. COSTELLO
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on October 16, 1998 by the
following persons who constitute a majority of the Board of Directors of Van
Kampen Funds Inc.
SIGNATURE TITLE
Don G. Powell Chairman and Chief Executive )
Officer )
John H. Zimmerman President and Chief Operating )
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Executive Vice President and )
Chief Financial Officer )
GINA M. COSTELLO
(Attorney-in-fact*)
- --------------------------------------------------------------------------------
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the Registration
Statement on Form S-6 of Van Kampen American Capital Equity Opportunity Trust,
Series 64 (File No. 333-33087) and Van Kampen American Capital Equity
Opportunity Trust, Series 87 (File No. 333-44581) and the same are hereby
incorporated herein by this reference.
EXHIBIT 1.1
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 307
TRUST AGREEMENT
Dated: October 16, 1998
This Trust Agreement between Van Kampen Funds Inc., as Depositor,
American Portfolio Evaluation Services, a division of Van Kampen Investment
Advisory Corp., as Evaluator, and The Bank of New York, as Trustee, sets forth
certain provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust For Van Kampen
American Capital Distributors, Inc. Tax-Exempt Trust, Dated March 16, 1995"
(herein called the "Standard Terms and Conditions of Trust"), and such
provisions as are set forth in full and such provisions as are incorporated by
reference constitute a single instrument. All references herein to Articles and
Sections are to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(4), listed in the
Schedules hereto, have been deposited in the Trusts under this Trust
Agreement.
(b) The fractional undivided interest in and ownership of the
various Trusts represented by each Unit thereof is a fractional amount,
the numerator of which is one and the denominator of which is the
amount set forth under "Summary of Essential Financial
Information__Number of Units" in the related Prospectus Part I.
(c) The approximate amounts, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid to the
Depositor pursuant to Section 3.05 shall be the amount per Unit that
the Trustee agreed to reduce its fee or pay Trust expenses set forth in
the footnotes in the related Prospectus Part I times the number of
units in such Trust referred to in Part II (b) of this Trust Agreement.
(d) The First General Record Date and the amount of the
second distribution of funds from the Interest Account of each Trust
shall be the record date for the Interest Account and the amount set
forth under "Summary of Essential Financial Information-Estimated
Distributions - Initial Distribution" in the related Prospectus Part I.
(e) The First Settlement Date shall be the date set forth in
the footnotes to the "Summary of Essential Financial Information" in
the related Prospectus Part I.
(f) Any monies held to purchase "when issued" bonds will be
held in noninterest bearing accounts.
(g) The Evaluation Time for purpose of sale, purchase or
redemption of Units shall be the close of the New York Stock Exchange.
(h) As set forth in Section 3.05, the Record Dates and
Distribution Dates for each Trust are those dates set forth under
"Summary of Essential Financial Information - Estimated Distributions"
in the related Prospectus Part I.
(i) As set forth in Section 3.15, the Evaluator's Annual
Supervisory Fee shall be that amount set forth in "Summary of Essential
Financial Information-Expenses-Evaluator's Supervisory Fee" in
Prospectus Part I.
(j) As set forth in Section 4.03, the Evaluator's Annual
Evaluation Fee shall be that amount, and computed on that basis, set
forth in "Summary of Essential Financial
Information-Expenses-Evaluator's Evaluation Fee" in the related
Prospectus Part I
(k) The Trustee's annual compensation as set forth under
Section 6.04, under each distribution plan shall be that amount as
specified in the related Prospectus Part I under the section entitled
"Summary of Essential Financial Information-Expenses-Trustee's Fee" and
will include a fee to induce the Trustee to advance funds to meet
scheduled distributions.
(l) The sixth paragraph of Section 3.05 is hereby revoked and
replaced by the following paragraph:
Unitholders desiring to receive semi-annual
distributions and who purchase their Units prior to the Record
Date for the second distribution under the monthly plan of
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Unitholders desiring to receive semi-annual distributions and
who purchase their Units prior to the Record Date for the
first distribution may elect at the time of purchase to
receive distributions on a semi-annual basis by notice to the
Trustee. Such notice shall be effective with respect to
subsequent distributions until changed by further notice to
the Trustee. Changes in the plan of distribution will become
effective as of opening of business on the day after the next
succeeding semi-annual Record Date and such distributions will
continue until further notice.
(m) Sections 8.02(d) and 8.02(e) are hereby revoked and
replaced with the following:
(d) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Interest Account
of such Trust;
(e) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Principal
Account of such Trust; and
(n) Section 1.01(1) and (3) shall be replaced in their
entirety by the following:
(1) "Depositor" shall mean Van Kampen Funds Inc. and
its successors in interest, or any successor depositor
appointed as hereinafter provided.
(3) "Evaluator" shall mean American Portfolio
Evaluation Services (a division of Van Kampen Investment
Advisory Corp.) and its successors in interest, or any
successor evaluator appointed as hereinafter provided.
IN WITNESS WHEREOF, the undersigned have caused this Trust Agreement to
be executed and their corporate seals to be hereto affixed and attested; all as
of the day, month and year first above written.
VAN KAMPEN FUNDS INC.
By JAMES J. BOYNE
Vice President
(SEAL)
Attest:
By NICOLAUS DALMASO
Assistant Secretary
AMERICAN PORTFOLIO EVALUATION SERVICE,
a division of Van Kampen Investment
Advisory Corp.
By DENNIS J. MCDONNELL
Vice President
(SEAL)
Attest:
By NICOLAUS DALMASO
Assistant Secretary
THE BANK OF NEW YORK
By JEFFREY COHEN
Vice President
(SEAL)
Attest:
By ROBERT WEIR
Assistant Treasurer
SCHEDULES TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 307
(Note: Incorporated herein and made a part hereof as indicated below are the
corresponding "Portfolio" of each of the Trusts as set forth in the related
Prospectus Part I.)
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 West Monroe Street
Chicago, Illinois 60603
October 16, 1998
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 307
Gentlemen:
We have served as counsel for Van Kampen Funds Inc., Sponsor and Depositor
of Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 307 (hereinafter referred to as the "Fund"), in connection with the
preparation, execution and delivery of a Trust Agreement dated October 16, 1998
between Van Kampen Funds Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen Investment Advisory Corp., as Evaluator, and
The Bank of New York, as Trustee, pursuant to which the Depositor has delivered
to and deposited Bonds listed in the Schedules to the Trust Agreement with the
Trustee and pursuant to which the Trustee has issued to or on the order of the
Depositor a certificate or certificates representing Units of fractional
undivided interest in and ownership of the several Trusts of said Fund
(hereinafter referred to as the "Units") created under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the execution and
issuance of certificates evidencing the Units in the several Trusts of
the Fund have been duly authorized; and
2. The certificates evidencing the Units in the several Trusts of the Fund
when duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will constitute valid
and binding obligations of such Trusts and the Depositor in accordance
with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-59225) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
October 16, 1998
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
Unit Investment Trust Division
101 Barclay Street
New York, New York 10286
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 307
------------------------------------------------------
Gentlemen:
We have acted as counsel for Van Kampen Funds Inc., Depositor of Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
307 (the "Fund"), in connection with the issuance of Units of fractional
undivided interest in the several Trusts of said Fund under a Trust Agreement
dated October 16, 1998 (the "Indenture") between Van Kampen Funds Inc., as
Depositor, American Portfolio Evaluation Services, a division of Van Kampen
Investment Advisory Corp., as Evaluator, and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the form of
Prospectus proposed to be filed with the Securities and Exchange Commission, the
Indenture and such other instruments and documents as we have deemed pertinent.
For purposes of the following opinions, it is assumed that each asset of the
Trusts is debt, the interest on which is excluded from gross income for federal
income tax purposes.
Based upon the foregoing and upon an investigation of such matters of law as
we consider to be applicable, we are of the opinion that, under existing Federal
income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
trusts) of Chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that the
number of Units of such Trust held by him bears to the total number of
Units outstanding of such Trust. Under Subpart E, Subchapter J of
Chapter 1 of the Code, income of each Trust will be treated as income
of each Unitholder of the respective Trust in the proportion described,
and an item of Trust income will have the same character in the hands
of a Unitholder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of a Trust consists of
interest and original issue discount excludable from gross income under
Section 103 of the Code, such income will be excludable from Federal
gross income of the Unitholders, except in the case of a Unitholder who
is a substantial user (or a person related to such user) of a facility
financed through issuance of any industrial development bonds or
certain private activity bonds held by the respective Trust. In the
case of such Unitholder who is a substantial user (and no other)
interest received with respect to his Units attributable to such
industrial development bonds or such private activity bonds is
includable in his gross income. In the case of certain corporations,
interest on the Bonds is included in computing the alternative minimum
tax pursuant to Section 56(c) of the Code and the branch profits tax
imposed by Section 884 of the Code with respect to U.S.
branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units. If a Bond is acquired with accrued interest, that
portion of the price paid for the accrued interest is added to the tax
basis of the Bond. When this accrued interest is received, it is
treated as a return of capital and reduces the tax basis of the Bond.
If a Bond is purchased for a premium, the amount of the premium is
added to the tax basis of the Bond. Bond premium is amortized over the
remaining term of the Bond, and the tax basis of the Bond is reduced
each tax year by the amount of the premium amortized in that tax year.
Accordingly, Unitholders must reduce the tax basis of their Units for
their share of accrued interest received by the respective Trust, if
any, on Bonds delivered after the Unitholders pay for their Units to
the extent that such interest accrued on such Bonds before the date the
Trust acquired ownership of the Bonds (and the amount of this reduction
may exceed the amount of accrued interest paid to the seller) and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. In
addition, such basis will be increased by the Unitholder's aliquot
share of the accrued original issue discount (and market discount, if
the Unitholder elects to include market discount in income as it
accrues) with respect to each Bond held by the Trust with respect to
which there was original issue discount at the time the Bond was issued
(or which was purchased with market discount) and reduced by the annual
amortization of bond premium, if any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by
sale, payment on maturity, liquidation, redemption or otherwise) gain
or loss is recognized to the Unitholder and the amount thereof is
measured by comparing the Unitholder's aliquot share of the total
proceeds from the transaction with his basis for his fractional
interest in the asset disposed of. Such basis is ascertained by
apportioning the tax basis for his Units among each of the Trust assets
(as of the date on which his Units were acquired) ratably according to
their values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced by the amount
of his aliquot share of accrued interest received by the Trust, if any,
on Bonds delivered after the Unitholders pay for their Units to the
extent that such interest accrued on the Bonds before the date the
Trust acquired ownership of the Bonds (and the amount of this reduction
may exceed the amount of accrued interest paid to the seller), must be
reduced by the annual amortization of bond premium, if any, on Bonds
held by the Trust and must be increased by the Unitholder's share of
the accrued original issue discount (and market discount, if the
Unitholder elects to include market discount in income as it accrues)
with respect to each Bond which, at the time the Bond was issued, had
original issue discount (or which was purchased with market discount).
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price", such
excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the original
issuance of Bonds held by the Trust, Section 1272(a)(7) of the Code
provides for a reduction in the accrued "daily portion" of such
original issue discount upon the purchase of a Bond subsequent to the
Bond's original issue, under certain circumstances. In the case of any
Bond held by the Trust the interest on which is excludable from gross
income under Section 103 of the Code, any original issue discount which
accrues with respect thereto will be treated as interest which is
excludable from gross income under Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance policies, if any, issued to certain of the Trusts on the Date
of Deposit by AMBAC Indemnity Corporation, Financial Guaranty Insurance
Corporation or a combination thereof. Each such policy, or a
combination of such policies, insures all bonds held by the Trustee for
that particular Trust (other than bonds described in paragraph (vii))
against default in the prompt payment of principal and interest. In our
opinion, any amount paid under each said policy, or a combination of
said policies, which represents maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if,
and to the same extent as, such interest would have been so excludable
if paid in normal course by the Issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for
such policies are reasonable, customary and consistent with the
reasonable expectation that the Issuer of the Bonds, rather than the
insurer, will pay debt service on the Bonds. Paragraph (ii) of this
opinion is accordingly applicable to insurance proceeds representing
maturing interest.
(vii) Certain bonds in the portfolios of certain of the Insured
Trusts have been insured by the issuers thereof against default in the
prompt payment of principal and interest (the "Insured Bonds").
Insurance has been obtained for such Insured Bonds, or, in the case of
a commitment, the Bonds will be ultimately insured under the terms of
such an insurance policy, which are designated as issuer Insured Bonds
on the portfolio pages of the respective Trusts in the prospectus for
the Fund, by the issuer of such Insured Bonds. Insurance on Insured
Bonds is effective so long as such Insured Bonds remain outstanding.
For each of these Insured Bonds, we have been advised that the
aggregate principal amount of such Insured Bonds listed on the
portfolio page for the respective Trust was acquired by the applicable
Trust and are part of the series of such Insured Bonds listed in the
aggregate principal amount. Based upon the assumption that the Insured
Bonds of the Trust are part of the series covered by an insurance
policy or, in the case of a commitment, will be ultimately insured
under the terms of such an insurance policy, it is our opinion that any
amounts received by the applicable Trust representing maturing interest
on such Insured Bonds will be excludable from federal gross income if,
and to the same extent as, such interest would have been so excludable
if paid in normal course by the Issuer provided that, at the time such
policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Insured Bonds, rather than the insurer, will pay
debt service on the Insured Bonds. Paragraph (ii) of this opinion is
accordingly applicable to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the Bond on
the date a Unitholder acquires his Units, and the price the Unitholder pays for
his Units.
Because the Trusts do not include any "private activity" bonds within the
meaning of Section 141 of the Code issued on or after August 8, 1986, none of
the Trust Funds' interest income shall be treated as an item of tax preference
when computing the alternative minimum tax. In the case of corporations, for
taxable years beginning after December 31, 1986, the alternative minimum tax
depends upon the corporation's alternative minimum taxable income ("AMTI") which
is the corporation's taxable income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used in
computing AMTI of a corporation (other than an S corporation, Regulated
Investment Company, Real Estate Investment Trust or REMIC) for taxable years
beginning after 1989, is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its AMTI
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trust, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers are
required to disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year of 100
percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986, will
generally be the amount that bears the same ratio to the interest deduction
otherwise allowable (determined without regard to Section 265) to the taxpayer
for the taxable year as the taxpayer's average adjusted basis (within the
meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer.
Legislative proposals have been made that would extend the financial institution
rules to all corporations.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects tax-exempt
bonds to the market discount rules of the Code effective for bonds purchased
after April 30, 1993. In general, market discount is the amount (if any) by
which the stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable to
original issue discount not yet accrued) subject to a statutory de minimis rule.
Market discount can arise based on the price a Trust pays for Bonds or the price
a Unitholder pays for his or her Units. Under the Tax Act, accretion of market
discount is taxable as ordinary income; under prior law, the accretion had been
treated as capital gain. Market discount that accretes while a Trust holds a
Bond would be recognized as ordinary income by the Unitholders when principal
payments are received on the Bond, upon sale or at redemption (including early
redemption), or upon the sale or redemption of his or her Units, unless a
Unitholder elects to include market discount in taxable income as it accrues.
Very truly yours,
CHAPMAN AND CUTLER
EXHIBIT 3.3
WINSTON & STRAWN
200 Park Avenue
New York, New York 10166-4193
October 16, 1998
The Bank of New York,
As Trustee of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 307
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 307 (the "Fund") consisting of
Connecticut Insured Municipals Income Trust, Series 38, New Jersey Insured
Municipals Income Trust, Series 124, and Maryland Investors' Quality Tax-Exempt
Trust, Series 87 (in the aggregate "Trusts" and individually "Trust") for the
purposes of determining the applicability of certain New York taxes under the
circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"), dated
as of today (the "Date of Deposit") among Van Kampen Funds Inc. (the
"Depositor"), American Portfolio Evaluation Services, a division of Van Kampen
Investment Advisory Corp., an affiliate of the Depositor, as Evaluator, and The
Bank of New York as Trustee (the "Trustee"). As described in the prospectus
relating to the Fund dated today to be filed as an amendment to a registration
statement previously filed with the Securities and Exchange Commission (File No.
333-59225) under the Securities Act of 1933, as amended (the "Prospectus" and
the "Registration Statement"), the objectives of the Fund are the generation of
income exempt from Federal taxation and as regards each of the Trusts exempt, to
the extent indicated in the Prospectus, from income tax, if any, of the State
denominated in the name of that Trust. No opinion is expressed herein with
regard to the Federal or State tax aspects (other than New York) of the bonds,
the Fund, the Trusts, units of each Trust (the "Units"), or any interest, gains
or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee with
respect to each of the Trusts, the total principal amount of interest bearing
obligations and/or contracts for the purchase thereof together with an
irrevocable letter of credit in the amount required for the purchase price and
accrued interest, if any, and an insurance policy purchased by the Depositor
evidencing the insurance guaranteeing the timely payment of principal and
interest of the obligations comprising the corpus of such Trusts other than
those obligations the timely payment of principal and interest of which are
guaranteed by an insurance policy purchased by the issuer thereof or a prior
owner, which may be the Depositor prior to the Date of Deposit, as more fully
set forth in the Prospectus and the Registration Statement.
We understand with respect to the obligations described in the preceding
paragraph that all insurance, whether purchased by the Depositor, a prior owner
or the issuer, provides, or will provide, that the amount paid by the insurer in
respect of any bond may not exceed the amount of principal and interest due on
the bond and such payment will in no event relieve the issuer from its
continuing obligation to pay such defaulted principal and interest in accordance
with the terms of the obligation.
The Trustee will not participate in the selection of the obligations to be
deposited in the Fund, and, upon the receipt thereof, will deliver to the
Depositor a registered certificate for the number of Units representing the
entire capital of each of the Trusts as more fully set forth in the Prospectus
and the Registration Statement. The Units, which are represented by certificates
("Certificates"), will be offered to the public by the Prospectus upon the
effectiveness of the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will consist
primarily of crediting the appropriate accounts with interest received by each
of the Trusts and with the proceeds from the disposition of obligations held in
each of the Trusts and the distribution of such interest and proceeds to the
Unit holders of that Trust. The Trustee will also maintain records of the
registered holders of Certificates representing an interest in each Trust and
administer the redemption of Units by such Certificate holders and may perform
certain administrative functions with respect to an automatic investment option.
Generally, obligations held in the Fund may be removed therefrom by the
Trustee only upon redemption prior to their stated maturity, at the direction of
the Depositor in the event of an advance refunding or upon the occurrence of
certain other specified events which adversely affect the sound investment
character of the Fund, such as default by the issuer in payment of interest or
principal on the obligation and no provision for payment is made therefor either
pursuant to the portfolio insurance or otherwise and the Depositor fails to
instruct the Trustee, within thirty (30) days after notification, to hold such
obligation.
Prior to the termination of the Fund, the Trustee is empowered to sell
Bonds, from a list furnished by the Evaluator, only for the purpose of redeeming
Units tendered to it and of paying expenses for which funds are not available.
The Trustee does not have the power to vary the investment of any Unit holder in
the Fund, and under no circumstances may the proceeds of sale of any obligations
held by the Fund be used to purchase new obligations to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on business
corporations, and, for purposes of that Article, Section 208 defines the term
"corporation" to include, among other things, "any business conducted by a
trustee or trustees wherein interest or ownership is evidenced by certificate or
other written instrument."
The Regulations promulgated under Section 208 provide as follows:
The term "trust" includes any business conducted by a trustee
or trustees in which interest or ownership is evidenced by
certificate or other written instrument. Such a trust
includes, but is not limited to, an association commonly
referred to as a "business trust" or "Massachusetts trust". In
determining whether a trustee or trustees are conducting a
business, the form of the agreement is of significance but is
not controlling. The actual activities of the trustee or
trustees, not their purposes and powers, will be regarded as
decisive factors in determining whether a trust is subject to
tax under Article 9-A. The mere investment of funds and the
collection of income therefrom, with incidental replacement of
securities and reinvestment of funds, does not constitute the
conduct of a business in the case of a trust. 20 NYCRR
1-2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be subject
to the franchise tax have also delineated the general rule that where a trustee
merely invests funds and collects and distributes the income therefrom, the
trust is not engaged in business and is not subject to the franchise tax.
BURRELL v. LYNCH, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept. 1948), ORDER
RESETTLED, 274 A.D. 1073, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an opinion of the Attorney General of the State of New York, 47 N.Y.
Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making up
the trust only upon the happening of certain specified events or the existence
of certain specified conditions, the trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to, and we assume
will not, sell obligations contained in the corpus of the Fund and reinvest the
proceeds therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the obligation is in
question or in which cash is needed to pay redeeming Unit holders or to pay
expenses, or where the Fund is liquidated pursuant to the termination of the
Indenture. Only in circumstances in which the issuer of an obligation attempts
to refinance it can the Trustee exchange an obligation for a new security. In
substance, the Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to vary the
investment of any Unit holder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal Revenue
Code of 1986, as amended (the "Code"), the grantor of a trust will be deemed to
be the owner of the trust under certain circumstances, and therefore taxable on
his proportionate interest in the income thereof. Where this Federal tax rule
applies, the income attributed to the guarantor will also be income to him for
New York income tax purposes. See TSB-M-78(9)(c), New York Department of
Taxation and Finance, June 23, 1978.
Article 22 (Personal Income Tax) of the New York Tax Law imposes a tax on a
New York State resident individual's State adjusted gross income. Such amount is
defined by Section 612 as his Federal adjusted gross income, with an addition
for interest income on the obligations of a State or political subdivision of a
state other than New York, is excluded from his federal adjusted gross income.
Such amount is defined by Section T46-112 of the Administrative Code of the City
of New York as his Federal adjusted gross income, with an addition for interest
income on the obligations of a state or political subdivision of a state other
than New York, if excluded from his federal adjusted gross income. 48 U.S.C.
Section 745 exempts interest on a bond issued by the Government of Puerto Rico
or a political subdivision thereof from tax of the United States, of any State,
and of any state's county, municipality, or municipal subdivision thereof. 48
U.S.C. Section 1423a exempts interest on a bond issued by the Government of Guam
or by its authority from taxation by the United States, any state or political
subdivision. The New York Trust holds only obligations issued by New York State
or a political subdivision thereof or by the Government of Puerto Rico or a
political subdivision thereof, or by the Government of Guam or by its authority.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of a Trust will be
considered as owning a share of each asset of that Trust in the proportion that
the number of Units held by such holder bears to the total number of Units
outstanding and the income of a Trust will be treated as the income of each Unit
holder of that Trust in said proportion pursuant to Subpart E of Part E,
subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and Cutler,
counsel for the Depositor, dated today, upon which we specifically rely, we are
of the opinion that under existing laws, rulings and court decisions
interpreting the laws of the State and City of New York.
1. Each of the Trusts will not constitute an association taxable as
a corporation under New York law, and, accordingly, will not be subject to tax
on its income under the New York State franchise tax or the New York City
general corporation tax.
2. The income of each of the Trusts will be treated as the income
of the Unit holders under the income tax laws of the State and City of
New York.
3. Resident individuals of New York State and City will not be
subject to the State or City personal income taxes on interest income on their
proportionate shares of interest income earned by a Trust on any obligation of
New York State or a political subdivision thereof or of the Government of Puerto
Rico or a political subdivision thereof or of the Government of Guam or by its
authority, to the extent such income is excludable from Federal gross income
under Code Section 103.
4. Any amounts paid under the insurance policies purchased by the
Depositor and deposited with the Trustee, as more fully described above,
representing maturing interest on defaulted obligations held by the Trustee will
not be subject to New York State or City income taxes if, and to the same extent
as, such amounts would have been excludable from New York State or City income
taxes if paid by the issuer. Paragraph 3 of this opinion is accordingly
applicable to such policy proceeds representing maturing interest.
5. Any amounts paid under an insurance policy purchased by the
issuer of an obligation or a prior owner, as more fully described above,
representing maturing interest on such defaulting obligation held by the Trustee
will not be subject to New York State or City income taxes if, and to the same
extent as, such amounts would have been excludable from New York State or City
income taxes if paid by the issuer. Paragraph 3 of this opinion is accordingly
applicable to such policy proceeds representing maturing interest.
6. Resident individuals of New York State and City who hold Units
will recognize gain or loss, if any, under the State or City personal income tax
law if the Trustee disposes of a Fund asset. The amount of such gain or loss is
measured by comparing the Unit holder's aliquot share of the total proceeds from
the transaction with his basis for his fractional interest in the asset disposed
of. Such basis is ascertained by apportioning the tax basis for his Units among
each of the Trust's assets (as of the date on which his Units were acquired)
ratably according to their values as of the valuation date nearest the date on
which he purchased such Units. A Unit holder's basis in his Units and of his
fractional interest in the Trust's assets must be reduced by the amount of his
aliquot share of interest received by the Trust, if any, on bonds delivered
after the settlement date to the extent that such interest accrued on the Bonds
during the period from the Unit holder's settlement date to the date such Bonds
are delivered to that Trust and must be adjusted for amortization of bond
premium or accretion of original issue discount, if any, on tax-exempt
obligations held by the Trust.
7. Resident individuals of New York State and City who hold Units
will recognize gain or loss, if any, under the State or City personal income tax
law if the Unit holder sells or redeems any Units. Such gain or loss is measured
by comparing the proceeds of such redemption or sale with the adjusted basis of
the Units redeemed or sold. Before adjustment, such basis would normally be cost
if the Unit holder had acquired his Units by purchase, plus his aliquot share of
advances by the Trustee to the Fund to pay interest on Bonds delivered after the
Unit holder's settlement date to the extent that such interest accrued on the
Bonds during the period from the settlement date to the date such Bonds are
delivered to the Fund, but only to the extent that such advances are to be
repaid to the Trustee out of interest received by the Fund with respect to such
Bonds.
8. Unit holders who are not residents of the State of New York are
not subject to the personal income tax law thereof with respect to any interest
or gain derived from a Trust or any gain from the sale or other disposition of
the Units, except to the extent that such interest or gain is from property
employed in a business, trade, profession or occupation carried on in New York
State.
In addition, we are of the opinion that no New York State stock transfer tax
will be payable in respect of any transfer of the Certificates by reason of the
exemption contained in paragraph (a) of Subdivision 8 of Section 270 of the New
York Tax Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and the
reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
` WINSTON & STRAWN
EXHIBIT 3.4
DAY, BERRY & HOWARD
City Place
Hartford, Connecticut 06103-3499
October 16, 1998
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality Tax Exempt
Trust Multi-Series 307
Gentlemen:
You have requested that we act as special counsel with respect to certain
Connecticut tax aspects of Connecticut Insured Municipals Income Trust, Series
38 (the "Connecticut IM-IT Trust"), being created as part of Insured Municipals
Income Trust and Investors's Quality Tax-Exempt Trust, Multi-Series 307 (the
"Fund").
The Fund is created under a Trust Agreement dated the date hereof and
Standard Terms and Conditions of Trust to which it refers, both among Van Kampen
Funds Inc., as Depositor, American Portfolio Evaluation Services, a division of
Van Kampen Investment Advisory Corp., as Evaluator, and The Bank of New York, as
Trustee. The Fund will issue units in several state trusts, one of which is the
Connecticut IM-IT Trust. Each unit of the Connecticut IM-IT Trust (a "Unit")
represents a fractional undivided interest in the principal and net income of
the Connecticut IM-IT Trust. The Connecticut IM-IT Trust and the trust for any
other state included in the Fund will each be administered as a separate and
distinct entity for all purposes, each having its own separate assets, expenses,
accounts, and certificates.
You have informed us that, upon the sale of Units of the Connecticut IM-IT
Trust to investors (the "Unitholders"), the assets of the Connecticut IM-IT
Trust will consist of certain obligations (the "Bonds"); that certain of the
Bonds have been issued by or on behalf the State of Connecticut or its political
subdivisions or other public bodies created under the laws of the State of
Connecticut, and the balance of the Bonds have been issued by or on behalf of
entities classified for the relevant purposes as territories or possessions of
the United States, including one or more of Puerto Rico, Guam, or the Virgin
Islands, the interest on the obligations of which Federal law would prohibit
Connecticut from taxing if received directly by the Unitholders; that, in the
opinion of bond counsel to the issuers of each of the Bonds, the interest
thereon is exempt from Federal income taxation; that distributions to
Unitholders of interest received by the Connecticut IM-IT Trust and of amounts
received thereby upon the maturity, redemption, sale, or other disposition of
the Bonds will be made semi-annually except in the case of Unitholders who have
elected a shorter distribution period; and that the Connecticut IM-IT Trust will
obtain insurance guaranteeing the payment of principal and interest on all Bonds
when due while the Bonds are held by the Connecticut IM-IT Trust, except for
Bonds, if any, as to which the issuer thereof or another person has arranged for
such insurance.
You have informed us that, in the opinion of Messrs. Chapman and Cutler, for
Federal income tax purposes (i) the Connecticut IM-IT Trust will not be
classified as an association, but will be governed by the provisions of
subchapter J of chapter 1 of the Internal Revenue Code of 1986, relating to
trusts; (ii) pursuant to subpart E of said subchapter J, each Unitholder will be
considered to be the owner of a portion of each asset of the Connecticut IM-IT
Trust and to have a portion of each item of income of the Connecticut IM-IT
Trust, in each case such portion being equal to the part of the whole thereof
that the number of Units of the Connecticut IM-IT Trust held by him bears to the
total number of outstanding Units of the Connecticut IM-IT Trust; (iii) each
such item of income will have the same character in the hands of a Unitholder as
in the hands of the Trustee; (iv) such income will be excludable from a
Unitholder's Federal gross income to the extent it consists of interest
excludable therefrom for Federal income tax purposes; (v) gain or loss will be
recognized by a Unitholder upon the redemption or sale of his Units or upon the
maturity, redemption, sale, or other disposition of a Bond held by the
Connecticut IM-IT Trust; and (vi) any amounts received by the Connecticut IM-IT
Trust representing maturing interest on a defaulted Bond will be excludable from
gross income if, and to the same extent as, such interest would have been so
excludable if paid by its issuer.
Based on the foregoing, and relying explicitly on the opinion of Messrs.
Chapman and Cutler regarding Federal income tax matters, we are of the opinion
that, under existing Connecticut law:
1. The Connecticut IM-IT Trust is not subject to any tax on
or measured by net income imposed by the State of Connecticut.
2. Interest income of the Connecticut IM-IT Trust from a
Bond issued by or on behalf of the State of Connecticut, any political
subdivision thereof, or public instrumentality, state or local
authority, district, or similar public entity created under the laws of
the State of Connecticut (a "Connecticut Bond"), or from a Bond issued
by United States territories or possessions the interest on which
Federal law would prohibit Connecticut from taxing if received directly
by a Unitholder from the issuer thereof, is not taxable under the
Connecticut tax on the Connecticut taxable income of individuals,
trusts, and estates (the "Connecticut Income Tax"), when any such
interest is received by the Connecticut IM-IT Trust or distributed by
it to such a Unitholder.
3. Insurance proceeds received by the Connecticut IM-IT
Trust representing maturing interest on defaulted Bonds held by the
Connecticut IM-IT Trust are not taxable under the Connecticut Income
Tax if, and to the same extent as, such interest would not be taxable
thereunder if paid directly to the Connecticut IM-IT Trust by the
issuer of such Bonds.
4. Gains and losses recognized by a Unitholder for Federal
income tax purposes upon the maturity, redemption, sale, or other
disposition by the Connecticut IM-IT Trust of a Bond held by the
Connecticut IM-IT Trust or upon the redemption, sale, or other
disposition of a Unit of the Connecticut IM-IT Trust held by a
Unitholder are taken into account as gains or losses, respectively, for
purposes of the Connecticut Income Tax, except that, in the case of a
Unitholder holding a Unit of the Connecticut IM-IT Trust as a capital
asset, such gains and losses recognized upon the maturity, redemption,
sale or exchange of a Connecticut Bond held by the Connecticut IM-IT
Trust are excluded from gains and losses taken into account for
purposes of such tax, and no opinion is expressed as to the treatment
for purposes of such tax of gains and losses recognized, to the extent
attributable to Connecticut Bonds, upon the redemption, sale, or other
disposition by such Unitholder of a Unit of the Connecticut IM-IT Trust
held by him.
5. The portion of any interest income or capital gain of the
Connecticut IM-IT Trust that is allocable to a Unitholder that is
subject to the Connecticut corporation business tax is includable in
the gross income of such Unitholder for purposes of such tax.
6. An interest in a Unit of the Connecticut IM-IT Trust that
is owned by or attributable to a Connecticut resident at the time of
his death is includable in his gross estate for purposes of the
Connecticut succession tax and the Connecticut estate tax.
We hereby consent, without admitting that we are in the category of persons
whose consent is required, to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the reference to our firm as
special Connecticut tax counsel in such Registration Statement and the
Prospectus contained therein.
We understand that you may deliver a copy of this opinion to the Trustee and
hereby consent to the Trustee's relying on this opinion as though it were
addressed to the Trustee.
Very truly yours,
DAY, BERRY & HOWARD
EXHIBIT 3.5
PITNEY, HARDIN, KIPP & SZUCH
P.O. Box 1945
Morristown, New Jersey 07962-1945
October 16, 1998
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust Multi-Series 307
(New Jersey Insured Municipals Income Trust, Series 124)
Gentlemen:
We have acted as special counsel, with respect to New Jersey state tax
matters, to Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust Multi-Series 307 (the "Fund") concerning a Registration Statement (No.
333-59225) on Form S-6 under the Securities Act of 1933, as amended, covering
the issuance by the Fund of units of fractional undivided interest (the "Units")
in several state trusts (the "State Trusts"), one of which is New Jersey Insured
Municipals Income Trust, Series 124 included as a part of the Fund (the "New
Jersey Trust"). Such Units will be purchased by various investors
("Certificateholders").
The Fund is organized under a Trust Indenture and Agreement (the
"Indenture") of even date herewith (the "Date of Deposit") between Van Kampen
Funds Inc. (the "Depositor") and The Bank of New York through its Wall Street
Trust division (the "Trustee"). Each Unit of the New Jersey Trust represents a
fractional undivided interest in the principal and net income of the New Jersey
Trust. The New Jersey Trust will be comprised of that number of units which will
establish as close as possible as of the Date of Deposit a Public Offering Price
(as defined in the Prospectus) per Unit of $1,000. The New Jersey Trust will be
administered as a distinct entity with separate certificates, investments,
expenses, books and records.
In acting as special counsel, we have examined such documents and records
with respect to a prior series, Insured Municipals Income Trust, 229th Insured
Multi-Series, as we deem necessary, including, but not limited to, the Trust
Indenture and Agreement (the "229th Insured Multi-Series Indenture") and the
Prospectus. You have advised that the Indenture is identical in all material
respects to the 229th Insured Multi-Series Indenture. You have also advised that
the opinion of Messrs. Chapman and Cutler with respect to the Federal income tax
status of the Fund, its constituent State Trusts and its Certificateholders, is
in all material respects identical to the opinion issued by Messrs. Chapman and
Cutler for the Insured Municipals Income Trust, 229th Insured Multi-Series.
We note that the assets of the New Jersey Trust will consist of
interest-bearing obligations issued by or on behalf of the State of New Jersey,
and counties, municipalities, authorities and other political subdivisions
thereof, and certain territories of the United States (the "Bonds").
Distributions of the interest received by the New Jersey Trust will be made to
each Certificateholder semi-annually unless the Certificateholder elects to
receive such distributions on a monthly basis. In the opinion of bond counsel to
each issuer, the interest on all Bonds in the New Jersey Trust is exempt from
Federal income tax under existing law.
We understand that on the Date of Deposit the Depositor has deposited with
the Trustee the total principal amount of interest-bearing obligations and/or
contracts for the purchase thereof together with an irrevocable letter of credit
in the amount required for the purchase price and accrued interest, if any, and
an insurance policy purchased by the Depositor evidencing the insurance
guaranteeing the timely payment of principal and interest of some of the
obligations comprising the corpus of the Fund, as more fully set forth in the
Preliminary Prospectus. All other obligations included in the deposit described
above will be covered by insurance obtained by the issuer of such obligations
guaranteeing timely payment of principal and interest. Such insurance will
provide that the amount paid by the insurer in respect of any Bond may not
exceed the amount of principal and interest due on the Bond and such payment
will in no event relieve the issuer from its continuing obligation to pay such
defaulted principal and interest in accordance with the terms of the obligation.
Section 2.04 of the Indenture provides that each State Trust is a separate
and distinct trust for all purposes, the assets of one State Trust may not be
commingled with the assets of any other State Trust, and the expenses of one
State Trust shall not be charged against any other State Trust. Section 2.04
further provides that the certificates representing the ownership of an
undivided fractional interest in one State Trust shall not be exchangeable for
certificates representing the ownership of an undivided fractional interest in
any other State Trust.
The Indenture provides further, among other things, that the Trustee shall:
(a) collect all interest and monies payable to the New Jersey
Trust, and hold the funds collected in trust on behalf of the
Certificateholders of the New Jersey Trust;
(b) set aside from such funds any amounts necessary for the
reimbursement of advances and for the payment of expenses, taxes and
governmental charges in respect of the New Jersey Trust;
(c) distribute all remaining amounts semi-annually, or
monthly if so elected by a Certificateholder, to the Certificateholders
in proportion to their interest in the New Jersey Trust;
(d) redeem any certificates tendered for redemption by a
Certificateholder provided that the Trustee has notified the Depositor
of the tender and the Depositor has failed to indicate within a time
specified in the Indenture that it will purchase the tendered
certificates from the tendering Certificateholder;
(e) sell or liquidate any or all Bonds at the sole direction
of the Depositor and at such price and time and in such manner as shall
be determined by the Depositor, provided that the Depositor has
determined that any one or more of certain conditions specified in the
Indenture exists;
(f) in connection with an offer made by an obligor of any of
the Bonds to issue new obligations, in exchange and substitution for
any issue of Bonds pursuant to a plan for the refunding or refinancing
of such Bonds, pursuant to the sole instruction of the Depositor in
writing, reject such offer and either hold or sell such Bonds, or
accept or reject such offer or to take any other action with respect
thereto as the Depositor may deem proper; and
(g) at the direction of the Depositor, acquire Replacement
Bonds, as defined in the Prospectus, to make up the original corpus of
the New Jersey Trust in the event of a failure to deliver any Bond that
has been purchased for the New Jersey Trust under a contract, including
those Bonds purchased on a "when, as and if issued" basis.
The Trustee has no power of sale except (a) on order of the Depositor as
stated herein, (b) to provide funds, not otherwise available, to pay taxes,
charges, expenses, fees or indemnities, (c) in case of default on any of the
Bonds, but only after notification of the Depositor, and provided that the
Depositor has not, within 30 days of such notification, given any instructions
to sell or to hold, or has not taken any other action in connection with, such
Bonds, or (d) for the purpose of redeeming certificates tendered by any
Certificateholder. The Trustee has no power to reinvest, except as stated in
Section 3.08 of the Indenture. Such limited power of reinvestment is in
furtherance of the Trustee's obligation to protect the trust assets, and does
not constitute power to vary investments.
The Indenture provides further, among other things, that the
Certificateholders:
(a) may tender their certificate or certificates to the
Trustee for redemption except in limited circumstances;
(b) will not have any right to vote or in any manner
otherwise control the operation and management of the Fund, the New
Jersey Trust, or the obligations of the Depositor or Trustee;
(c) may elect to receive distributions from the New Jersey
Trust on a monthly basis;
(d) may terminate the New Jersey Trust at any time by written
consent of Certificateholders representing 51% of the then outstanding
Units of the New Jersey Trust; and
(e) shall be under no liability to any third persons by
reason of any action taken by the Depositor or Trustee or any other
Certificateholder, or any other cause whatsoever.
You have advised that, in the opinion of Messrs. Chapman and Cutler, for
Federal income tax purposes the Fund and New Jersey Trust will not be taxable as
a corporation or association but will be governed by the provisions of
Subchapter J (relating to trusts) of Chapter 1 of the Internal Revenue Code of
1986, as amended. Each Certificateholder will be considered the owner of a pro
rata portion of the New Jersey Trust and will be subject to tax on the income
therefrom under the provisions of Subpart E of Subchapter J of Chapter 1 of the
Internal Revenue Code of 1986, as amended. The New Jersey Trust itself will not
be subject to Federal income taxes. For Federal income tax purposes, each item
of trust income will have the same character in the hands of the
Certificateholder as it would have in the hands of the Trustee. Accordingly, to
the extent that the income of the New Jersey Trust consists of interest
excludable from gross income under Section 103 of the Internal Revenue Code of
1986, as amended, such income will be excludable from Federal gross income of
the Certificateholder. Furthermore, any proceeds paid under the insurance policy
issued to the Trustee of the Fund which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal gross income if,
and to the same extent as, such interest would have been so excludable if paid
by the issuer of the defaulted obligations and the excludability from Federal
gross income of interest on Bonds which may be insured by policies issued
directly to the respective Bond issuers will not be affected if the source of
any interest payment is from policy proceeds.
Based on our examination of the 229th Insured Multi-Series Indenture, your
advice that the Indenture is identical in all material respects to the 229th
Insured Multi-Series Indenture, your advice that the opinion of Messrs. Chapman
and Cutler with respect to the Federal income tax status of the Fund, its
constituent State Trusts and its Certificateholders dated as of the date hereof
is identical in all material respects to its counterpart in the prior issue of
Insured Municipals Income Trust, 229th Insured Multi-Series, and, with respect
to Federal income tax matters, with your approval, relying solely upon the
opinion of Messrs. Chapman and Cutler, and our examination of such other
documents, records and matters of law as we deem necessary, we are of the
opinion that for New Jersey state and local tax purposes:
1. The New Jersey Trust will be recognized as a trust and
not an association taxable as a corporation. The New Jersey Trust will
not be subject to the New Jersey Corporation Business Tax or the New
Jersey Corporation Income Tax.
2. With respect to the non-corporate Certificateholders who
are residents of New Jersey, the income of the New Jersey Trust which
is allocable to each such Certificateholder will be treated as the
income of such Certificateholder under the New Jersey Gross Income Tax.
Interest on the underlying Bonds which would be exempt from New Jersey
Gross Income Tax if directly received by such Certificateholder will
retain its status as tax-exempt interest when received by the New
Jersey Trust and distributed to such Certificateholder. Any proceeds
paid under the insurance policy issued to the Trustee of the Fund with
respect to the Bonds or under individual policies obtained by issuers
of Bonds which represent maturing interest on defaulted obligations
held by the Trustee will be exempt from New Jersey Gross Income Tax if,
and to the same extent as, such interest would have been so exempt if
paid by the issuer of the defaulted obligations.
3. A non-corporate Certificateholder will not be subject to
the New Jersey Gross Income Tax on any gain realized either when the
New Jersey Trust disposes of a Bond (whether by sale, exchange,
redemption, or payment at maturity) or when the Certificateholder
redeems or sells his Units, or upon payment of any proceeds under the
insurance policy issued to the Trustee of the Fund with respect to the
Bonds or under individual policies obtained by issuers of Bonds which
represent maturing principal on defaulted obligations held by the
Trustee. Any loss realized on such disposition may not be utilized to
offset gains realized by such Certificateholder on the disposition of
assets the gain on which is subject to the New Jersey Gross Income Tax.
4. Units of the New Jersey Trust may be taxable on the death
of a Certificateholder under the New Jersey Transfer Inheritance Tax
law or the New Jersey Estate Tax Law.
5. If a Certificateholder is a corporation subject to the
New Jersey Corporation Business Tax or New Jersey Corporation Income
Tax, interest from the Bonds in the New Jersey Trust which is allocable
to such corporation will be includable in its entire net income for
purposes of the New Jersey Corporation Business Tax or New Jersey
Corporation Income Tax, less any interest expense incurred to carry
such investment to the extent such interest expense has not been
deducted in computing Federal taxable income. Net gains derived by such
corporation on the disposition of the Bonds by the New Jersey Trust or
on the disposition of its Units will be included in its entire net
income for purposes of the New Jersey Corporation Business Tax or New
Jersey Corporation Income Tax. Any proceeds paid under the insurance
policy issued to the Trustee of the Fund with respect to the Bonds or
under individual policies obtained by issuers of Bonds which represent
maturing interest or maturing principal on defaulted obligations held
by the Trustee will be included in its entire net income for purposes
of the New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax if, and to the same extent as, such interest or proceeds
would have been so included if paid by the issuer of the defaulted
obligations.
We have not examined any of the obligations to be deposited in the Fund, and
express no opinion as to whether the interest on any such obligations would in
fact be tax-exempt if directly received by a Certificateholder; nor have we made
any review of the proceedings relating to the issuance of Bonds or the basis for
bond counsel opinions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm and a summary of this
opinion included in such Registration Statement and the related Prospectus. In
giving such consent we do not thereby admit that we are in the category of
persons whose consent is required by Section 7 of the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
Except as indicated in the immediately preceding paragraph hereof and except
with our prior written consent, this opinion may not be quoted in whole or in
part or otherwise referred to in any document or instrument or be furnished to
or relied upon by any person other than the addressee and The Bank of New York
through its Wall Street Trust division, as Trustee (including any successor
trustee). Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
EXHIBIT 3.6
SAUL, EWING, WEINBERG &GREEN
100 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201-2773
October 16, 1998
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 307
(Maryland Investors' Quality Tax-Exempt Trust, Series 87)
Ladies and Gentlemen:
We have acted as special Maryland counsel to you as sponsor (the "Sponsor")
of the Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 307 (the "Fund") which contains an individual trust consisting of
Maryland securities (the "Bonds") designated as Maryland Investors' Quality
Tax-Exempt Trust, Series 87 (the "Maryland Trust"). You have asked that we,
acting in such capacity, render an opinion to you with respect to certain
matters relating to the tax treatment, under the state and local income tax laws
of Maryland, of the Maryland Trust and of the units of fractional undivided
interest in the Maryland Trust (the "Units") to be issued pursuant to a
Registration Statement on Form S-6 filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (File No. 333-59225)
(the "Registration Statement").
As a basis for our opinions, we have examined such provisions of Maryland
law as we considered relevant. We are relying on the opinion of Chapman and
Cutler, counsel to the Sponsor, as to the federal income tax consequences of an
investment in the Maryland Trust of the Fund.
Each Unit represents a fractional undivided interest in the Maryland Trust.
In the opinion of Chapman and Cutler, for federal tax purposes:
(a) interest and accrued original issue discount on Bonds
which is excludable from gross income under the Internal Revenue Code
of 1986 will retain its status when distributed to holders of Units
("Unitholders");
(b) each Unitholder is considered to be the owner of a pro
rata portion of the Maryland Trust under subpart E, subchapter J of
chapter 1 of the Internal Revenue Code of 1986, as amended; and
(c) each Unitholder will have a taxable event when the
Maryland Trust disposes of a Bond or when the Unitholder redeems or
sells his Units.
It is our understanding, and the following opinions assume, that the
Maryland Trust consists of debt obligations issued by the State of Maryland, the
Government of Puerto Rico, and their political subdivisions or authorities and
that, in the opinion of recognized bond counsel (delivered on the date of
issuance of the obligations), the interest on such obligations generally would
not be includable in gross income for federal income tax purposes (except in
certain limited circumstances referred to in the Prospectus included within the
Registration Statement) if paid directly to a Unitholder. The term "Bonds" as
used in the following opinions means only those obligations. We have not made
any review of the proceedings relating to the issuance of the Bonds or the basis
of the opinions of bond counsel with respect to the exclusion of the interest
thereon from gross income for federal income tax purposes.
It is our further understanding, and the following opinions assume, that the
Maryland Trust will have no income other than (i) interest income on the Bonds
and (ii) gain on the disposition of the Bonds, and that all of the income of the
Maryland Trust, less expenses and fees, will be distributed currently to the
Unitholders.
Based on the foregoing, it is our opinion that:
1. For Maryland State and local income tax purposes, the
Maryland Trust will not be recognized as an association taxable as a
corporation, but rather as a fiduciary whose income distributed to
Unitholders will not be subject to Maryland State and local income
taxation.
2. To the extent that interest and accrued original issue
discount derived from the Maryland Trust by a Unitholder with respect
to the Bonds is excludable from federal gross income, such interest
will not be subject to Maryland state or local income taxes. Subject to
a three-year phase in period, interest paid to a "financial
institution" will not be subject to the Maryland Franchise Tax.
3. In the case of taxpayers who are individuals, Maryland
presently imposes an income tax on items of tax preference with
reference to such items as defined in the Internal Revenue Code, as
amended from time to time, for purposes of calculating the federal
alternative minimum tax. Interest paid on certain private activity
bonds constitutes a tax preference item for the purpose of calculating
the federal alternative minimum tax. Accordingly, if the Maryland Trust
holds such bonds, 50% of the interest on such bonds in excess of a
threshold amount is taxable in Maryland.
4. Capital gain, including gain realized by a Unitholder
from the redemption, sale or other disposition of a Unit, will be
included in the taxable base of Unitholders for Maryland state and
local income taxation purposes. However, Maryland defines the taxable
net income of individuals as federal adjusted gross income with certain
modifications. Likewise, the Maryland taxable net income of
corporations is federal taxable income with certain modifications.
There is available to Maryland income taxpayers a modification which
allows those taxpayers to subtract from the Maryland taxable base the
gain included in federal adjusted gross income or federal taxable
income, as the case may be, which is realized from the disposition of
Bonds by the Maryland Trust. Consequently, by making that modification,
a Unitholder who is entitled to make the subtraction modification will
not be subject to Maryland state or local income tax with respect to
gain realized upon the disposition of Bonds by the Maryland Trust.
Subject to a three-year phase-in period, profit realized by a
"financial institution" from the sale or exchange of Bonds will be
subject to the Maryland Franchise Tax.
We have not been asked for, nor are we rendering, any opinion as to the
treatment of the Maryland Trust and of the Units under the Maryland inheritance
and estate tax laws.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm in the Prospectus
included in the Registration Statement. Very truly yours,
SAUL, EWING, WEINBERG & GREEN
EXHIBIT 4.1
Interactive Data
14 Wall Street
New York, New York 10005
October 16, 1998
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Combined Multi-Series 307 (A Unit Investment Trust)
Registered Under the Securities Act of 1933, File No. 333-59225
- --------------------------------------------------------------------------------
Gentlemen:
We have examined the Registration Statement for the above captioned Fund,
copy of which is attached hereto.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation, as the
Evaluator, and to the use of the obligations prepared by us which are referred
to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities and
Exchange Commission.
Very truly yours,
James Perry
Vice President
EXHIBIT 4.2
Standard & Poor's
A Division of The McGraw-Hill Corporation
25 Broadway
New York, New York 10004-1064
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 307, consisting of: Connecticut Insured Municipals
Income Trust, Series 38 and New Jersey Insured Municipals Income
Trust, Series 124
Pursuant to your request for a Standard & Poor's rating on the units of the
above-captioned trust, SEC #333-59225 we have reviewed the information presented
to us and have assigned a `AAA' rating to the units of the trust and a `AAA'
rating to the securities contained in the trust for as long as they remain in
the trust. The ratings are direct reflections, of the portfolio of the trust,
which will be composed solely of securities covered by bond insurance policies
that insure against default in the payment of principal and interest on the
securities so long as they remain in the trust. Since such policies have been
issued by one or more insurance companies which have been assigned a `AAA'
claims paying ability rating by S&P, S&P has assigned a `AAA' rating to the
units of the trust and to the securities contained in the trust for as long as
they remain in the trust.
Standard & Poor's will maintain surveillance on the "AAA" Rating until
November 16, 1999. On this date, the rating will be automatically withdrawn by
Standard & Poor's unless a post effective letter is requested by the Trust.
You have permission to use the name of Standard & Poor's Corporation and the
above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings are not
"market" ratings nor recommendations to buy, hold, or sell the units of the
trust or the securities contained in the trust. Further, it should be understood
the rating on the units does not take into account the extent to which fund
expenses or portfolio asset sales for less than the fund's purchase price will
reduce payment to the unit holders of the interest and principal required to be
paid on the portfolio assets. S&P reserves the right to advise its own clients,
subscribers, and the public of the ratings. S&P relies on the sponsor and its
counsel, accountants, and other experts for the accuracy and completeness of the
information submitted in connection with the ratings. S&P does not independently
verify the truth or accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Corporation in connection with the rating assigned to the units in the
registration statement or prospectus relating to the units or the trust.
However, this letter should not be construed as a consent by us, within the
meaning of Section 7 of the Securities Act of 1933, to the use of the name of
Standard & Poor's Corporation in connection with the ratings assigned to the
securities contained in the trust. You are hereby authorized to file a copy of
this letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as soon
as it becomes available. Should we not receive them within a reasonable time
after the closing or should they not conform to the representations made to us,
we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford Bragg
EXHIBIT 4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We have issued our report dated October 16, 1998 on the statements of
condition and related bond portfolios of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 307 (Connecticut IM-IT, New
Jersey IM-IT and Maryland Quality Trust) as of October 16, 1998 contained in the
Registration Statement on Form S-6 and in the Prospectus. We consent to the use
of our report in the Registration Statement and in the Prospectus and to the use
of our name as it appears under the caption "Other Matters-Independent Certified
Public Accountants" in Prospectus Part II.
GRANT THORNTON LLP
Chicago, Illinois
October 16, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on October 16, 1998.
It is unaudited
</LEGEND>
<SERIES>
<NUMBER> 38
<NAME> I-CT
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-16-1998
<PERIOD-END> OCT-16-1998
<INVESTMENTS-AT-COST> 1,941,951
<INVESTMENTS-AT-VALUE> 1,941,951
<RECEIVABLES> 24,084
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,966,035
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,084
<TOTAL-LIABILITIES> 24,084
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,941,951
<SHARES-COMMON-STOCK> 2,042
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,941,951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on October 16, 1998.
It is unaudited
</LEGEND>
<SERIES>
<NUMBER> 124
<NAME> I-NJ
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-16-1998
<PERIOD-END> OCT-16-1998
<INVESTMENTS-AT-COST> 1,917,225
<INVESTMENTS-AT-VALUE> 1,917,225
<RECEIVABLES> 21,684
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,938,909
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,684
<TOTAL-LIABILITIES> 21,684
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,917,225
<SHARES-COMMON-STOCK> 2,016
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,917,225
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on October 16, 1998.
It is unaudited
</LEGEND>
<SERIES>
<NUMBER> 87
<NAME> Q-MD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-16-1998
<PERIOD-END> OCT-16-1998
<INVESTMENTS-AT-COST> 1,991,403
<INVESTMENTS-AT-VALUE> 1,991,403
<RECEIVABLES> 25,478
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,016,881
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,478
<TOTAL-LIABILITIES> 25,478
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,991,403
<SHARES-COMMON-STOCK> 2,094
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,991,403
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
