VAN KAMPEN
PROSPECTUS PART I
COLORADO INSURED MUNICIPALS INCOME TRUST, SERIES 88
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Colorado Insured Municipals Income Trust, Series 88 (the "Trust") (included
in Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 308 (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 Colorado state and local taxes when held by residents of Colorado
(the "Bonds"). The objective of the Trust is Federal and Colorado 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. 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: Certificate of Participation, 3 (29%); Transportation, 2
(20%); Airport, 1 (15%); General Obligation, 1 (12%); Health Care, 1 (12%) and
Higher Education, 1 (12%). The dollar weighted average maturity of the Bonds is
26 years.
Monthly Semi-Annual
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ESTIMATED CURRENT RETURN: 4.45% 4.50%
ESTIMATED LONG TERM RETURN: 4.48% 4.53%
CUSIP: 196497-22-6 196497-23-4
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.
DECEMBER 23, 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
Initial Date of Deposit: December 23, 1998
Principal Amount of Bonds: $ 2,045,000
Principal Amount of Bonds per Unit (1): $ 1,000.00
Number of Units: 2,045
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PUBLIC OFFERING PRICE
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Aggregate Offering Price of Bonds $ 1,944,805
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 $ 943.69
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ESTIMATED ANNUAL INCOME PER UNIT
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Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 46.88 $ 46.88
Less Estimated Expenses (4) $ 2.38 $ 1.88
Less Estimated Insurance
Expenses $ -- $ --
Estimated Net Interest Income $ 44.50 $ 45.00
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ESTIMATED DISTRIBUTIONS
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Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 1.35 on $ 1.37 on
January 25, 1999 January 25, 1999
Normal Distribution (3) $ 3.70 $ 22.50
Record Dates 10th day of January 10 and
each month July 10
Distribution Dates 25th day of January 25 and
each month July 25
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EXPENSES
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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 $ 0.92 $ 0.82
----------- -----------
Total Annual Expenses per Unit $ 2.38 $ 1.88
=========== ===========
(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 (December 29, 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
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OFFERING
PRICE TO
COLORADO
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 Arapahoe County School District No. 1 (Englewood Schools)
Arapahoe County, Colorado, General Obligation Bonds,
Series 1998 (FSA Insured)
#4.50% Due 12/01/2016 AAA 2008 @ 100 $ 240,842
300,000 Englewood, Colorado, Certificates of Participation Bonds
(Civic Center Project) MBIA Insured
#5.10% Due 06/01/2023 AAA 2008 @ 100 301,500
150,000 Moffat County, Colorado, Certificates of Participation Bonds
(Public Safety Center Project) Series 1998
(AMBAC Assurance Insured) 2008 @ 101
#5.125% Due 06/01/2023 AAA 2014 @ 100 S.F. 151,681
300,000 City and County of Denver, Colorado, Department of Aviation,
Airport System Revenue Bonds, Series 1998B (FSA Insured)
#5.00% Due 11/15/2025 AAA 2008 @ 101 297,594
250,000 Colorado, Health Facilities Authority, Revenue Bonds (Sisters
of Charity of Leavenworth Health Services Corporation)
MBIA Insured 2008 @ 101
#5.00% Due 12/01/2025 AAA 2019 @ 100 S.F. 248,323
145,000 Westminster, Colorado, Certificates of Participation Bonds,
Series 1998 (MBIA Insured)
#5.00% Due 12/01/2025 AAA 2008 @ 100 144,870
300,000 E-470 Public Highway Authority, Colorado, Senior Revenue
Bonds, Series 1997A (MBIA Insured) 2007 @ 101
#5.00% Due 09/01/2026 AAA 2024 @ 100 S.F. 295,314
100,000 E-470 Public Highway Authority, Colorado, Senior Revenue
Bonds, Series 1997B (MBIA Insured)
#0.00% Due 09/01/2026 AAA 24,918
250,000 Colorado, Educational and Cultural Facilities Authority,
Tax-Exempt Revenue Bonds (The Auraria Foundation/The
Regents of the University of Colorado Project)
Series 1998B (AMBAC Assurance Insured) 2008 @ 100
#4.75% Due 09/01/2028 AAA 2024 @ 100 S.F. 239,763
- --------------- ------------
$ 2,045,000 $ 1,944,805
=============== ============
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</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 December 21, 1998
to December 22, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 1,936,216 $ 8,589
- -----------------------------------------------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
20%, MBIA 53% and FSA 27%.
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.
COLORADO RISK FACTORS. The financial condition of the State of Colorado 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. Colorado has an expenditure limitation which it
breached in fiscal year 1997.
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 economy of the State continues to be dependent
on services and trade, with construction reporting large gains in recent years.
These sectors tend to be cyclical. Rapid job growth has kept unemployment low.
There is no guarantee that such conditions will continue.
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.
Further information concerning Colorado 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. 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 Colorado IM-IT Trust Units, see "Federal Tax Status" in
Prospectus Part II.
The assets of the Colorado Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Colorado ("Colorado") or counties,
municipalities, authorities or political subdivisions thereof (the "Colorado
Bonds") or by the Commonwealth of Puerto Rico (the "Puerto Rico Bonds")
(collectively, the "Bonds") the interest on which is expected to qualify as
exempt from Colorado income taxes.
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the Trust. However, although Chapman and Cutler
expresses no opinion with respect to the issuance of the Bonds, in rendering its
opinion expressed herein, it has assumed that: (i) opinions relating to the
validity thereof and to the exemption of interest thereon from Federal income
tax were rendered by bond counsel to the respective issuing authorities; (ii)
with respect to the Colorado Bonds, bond counsel to the issuing authorities
rendered opinions as to the exemption of interest from the income tax imposed by
the State of Colorado that is applicable to individuals and corporations (the
"State Income Tax") and, (iii) with respect to the Possession Bonds, bond
counsel to the issuing authorities rendered opinions as to the exemption from
all state and local income taxation of the Possession Bonds and the interest
thereon. Neither the Sponsor nor its counsel has made any review for the
Colorado Trust of the proceedings relating to the issuance of the Bonds or of
the bases for the opinions rendered in connection therewith. This opinion does
not address the taxation of persons other than full time residents of Colorado.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
Colorado law:
Because Colorado income tax law is based upon the Federal law, the Colorado
IM-IT Trust is not an association taxable as a corporation for purposes of
Colorado income taxation.
With respect to Colorado Unitholders, in view of the relationship between
Federal and Colorado tax computations described above: Each Colorado Unitholder
will be treated as owning a pro rata share of each asset of the
Colorado IM-IT Trust for Colorado income
tax purposes in the proportion that the number of Units of such Trust held by
the Unitholder bears to the total number of outstanding Units of the Colorado
IM-IT Trust, and the income of the Colorado IM-IT Trust will therefore be
treated as the income of each Colorado Unitholder under Colorado law in the
proportion described and an item of income of the Colorado IM-IT Trust will have
the same character in the hands of a Colorado Unitholder as it would have in the
hands of the Trustee;
Interest on Colorado Bonds that would not be includable in income for
Colorado income tax purposes when paid directly to a Colorado Unitholder will be
exempt from Colorado income taxation when received by the Colorado IM-IT Trust
and attributed to such Colorado Unitholder and when distributed to such Colorado
Unitholder;
To the extent that interest income derived from the Colorado Trust by a
Unitholder with respect to Puerto Rico Bonds is exempt from state taxes pursuant
to 48 U.S.C. 745, such interest will not be subject to the Colorado State Income
Tax.
Any proceeds paid under an insurance policy or policies issued to the
Colorado IM-IT Trust with respect to the Bonds in the Colorado IM-IT Trust which
represent maturing interest on defaulted Bonds held by the Trustee will be
excludable from Colorado adjusted gross income if, and to the same extent as,
such interest is so excludable for federal income tax purposes if paid in he
normal course by the issuer notwithstanding that the source of payment is from
insurance proceeds 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.
Each Colorado Unitholder will realize taxable gain or loss when the Colorado
IM-IT Trust disposes of a Bond (whether by sale, exchange, redemption, or
payment at maturity) or when the Colorado Unitholder redeems or sells Units at a
price that differs from original cost as adjusted for amortization of bond
discount or premium and other basis adjustments (including any basis reduction
that may be required to reflect a Colorado Unitholder's share of interest, if
any, accruing on Bonds during the interval between the Colorado Unitholder's
settlement date and the date such Bonds are delivered to the Colorado IM-IT
Trust, if later);
Tax basis reduction requirements relating to amortization of bond premium
may, under some circumstances, result in Colorado Unitholders realizing taxable
gain when their Units are sold or redeemed for an amount equal to or less than
their original cost; and
If interest on indebtedness incurred or continued by a Colorado Unitholder to
purchase Units in the Colorado IM-IT Trust is not deductible for federal income
tax purposes, it also will be non-deductible for Colorado income tax purposes.
Unitholders should be aware that all tax-exempt interest, including their
share of interest on the Bonds paid to the Colorado IM-IT Trust, is taken into
account for purposes of determining eligibility for the Colorado Property
Tax/Rent/Heat Rebate.
Chapman and Cutler has expressed no opinion with respect to taxation under
any other provision of Colorado law. Ownership of the Units may result in
collateral Colorado tax consequences to certain taxpayers. Prospective investors
should consult their tax advisors as to the applicability of any such collateral
consequences.
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.). American Portfolio
Evaluation Services, a division of 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. The first three sentences of the last
paragraph on page 9 of Prospectus Part II do not apply to the Trust.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,845
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
-----------------
2,045
=================
</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.
YEAR 2000 READINESS DISCLOSURE. The following two paragraphs constitute "Year
2000 Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act of 1998. The Trust could be negatively impacted if
computer systems used by the Sponsor, Evaluator, Trustee or other service
providers to the Trust do not properly process date-related information after
December 31, 1999. This is commonly known as the "Year 2000 Problem". The
Sponsor, Evaluator and Trustee are taking steps to address this problem and to
obtain reasonable assurances that other service providers to the Trust are
taking comparable steps. We cannot guarantee that these steps will be sufficient
to avoid any adverse impact on the Trust. This problem is expected to impact
issuers or insurers to varying degrees based on factors such as issuer type and
degree of technological sophistication. We cannot predict what impact, if any,
this problem will have on the issuers or insurers of the Bonds.
In addition, it is possible that the markets for the Bonds may be
detrimentally affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading systems may
result in settlement problems and liquidity issues. Moreover, corporate and
governmental data processing errors may adversely affect issuers or insurers and
overall economic uncertainties. The ability of individual issuers or insurers to
make payments on the Bonds will be affected by remediation costs. Accordingly,
the Bonds may be adversely affected.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF VAN KAMPEN FUNDS INC. AND THE UNITHOLDERS OF
COLORADO INSURED MUNICIPALS INCOME TRUST, SERIES 88 (INCLUDED IN INSURED
MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES
308):
We have audited the accompanying statement of condition and the portfolio of
Colorado Insured Municipals Income Trust, Series 88 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
308) as of December 23, 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 Colorado Insured Municipals
Income Trust, Series 88 (included in Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 308) as of December 23, 1998,
in conformity with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
December 23, 1998
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF DECEMBER 23, 1998
INVESTMENT IN BONDS
<S> <C>
Contracts to purchase Bonds (1)(2) $ 1,944,805
Accrued interest to the First Settlement Date (1)(2) 14,296
--------------------
Total $ 1,959,101
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 14,296
Interest of Unitholders--
Cost to investors 2,045,000
Less: Gross underwriting commission 100,195
--------------------
Net interest to Unitholders (1)(2) 1,944,805
--------------------
Total $ 1,959,101
====================
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</TABLE>
(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
DECEMBER 23, 1998
INSURED MUNICIPALS INCOME TRUST AND INVESTORS'
UALITY TAX-EXEMPT TRUST, MULTI-SERIES 308
COLORADO INSURED MUNICIPALS
INCOME TRUST, SERIES 88
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.
<PAGE>
VAN KAMPEN
PROSPECTUS PART I
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST, SERIES 240
- --------------------------------------------------------------------------------
Pennsylvania Insured Municipals Income Trust, Series 240 (the "Trust")
(included in Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 308 (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 Pennsylvania state and local taxes when held by residents of
Pennsylvania (the "Bonds"). The objective of the Trust is Federal and
Pennsylvania 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. None of the Bonds are general
obligations of the governmental entities issuing them or are backed by the
taxing power thereof. All of the 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%); Higher Education, 2 (30%);
Retail Electric/Gas/Telephone, 1 (16%); Transportation, 1 (12%) and Water and
Sewer, 2 (9%). The dollar weighted average maturity of the Bonds is 28 years.
Monthly Semi-Annual
------------- ------------
ESTIMATED CURRENT RETURN: 4.62% 4.67%
ESTIMATED LONG TERM RETURN: 4.66% 4.71%
CUSIP: 70884F-12-6 70884F-13-4
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.
DECEMBER 23, 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
Initial Date of Deposit: December 23, 1998
Principal Amount of Bonds: $ 3,015,000
Principal Amount of Bonds per Unit (1): $ 1,003.33
Number of Units: 3,005
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 2,887,812
Aggregate Offering Price of Bonds per Unit $ 961.00
Plus Sales Charge per Unit $ 39.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 953.60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 48.51 $ 48.51
Less Estimated Expenses (4) $ 2.31 $ 1.81
Less Estimated Insurance Expenses $ -- $ --
Estimated Net Interest Income $ 46.20 $ 46.70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 1.41 on $ 1.42 on
January 25, 1999 January 25, 1999
Normal Distribution (3) $ 3.85 $ 23.35
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)3.90% 3.90%
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 $ 0.85 $ 0.75
----------- -----------
Total Annual Expenses per Unit $ 2.31 $ 1.81
=========== ===========
- --------------------------------------------------------------------------------
(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 (December 29, 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
PENNSYLVANIA
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>
$ 350,000 Erie, Pennsylvania, Parking Authority, Guaranteed Parking
Revenue Refunding Bonds, Series 1998B (MBIA Insured) 2008 @ 100
#5.125% Due 09/01/2020 AAA 2018 @ 100 S.F. $ 351,750
165,000 Bethlehem, Pennsylvania, Water Authority, Guaranteed
Revenue Bonds (FSA Insured) 2008 @ 100
#5.125% Due 11/15/2023 AAA 2019 @ 100 S.F. 165,825
500,000 Delaware County, Pennsylvania, Catholic Health East, Health
System Revenue Bonds, Series 1998A
(AMBAC Assurance Insured) 2008 @ 102
#4.875% Due 11/15/2026 AAA 2019 @ 100 S.F. 481,525
400,000 Washington County Authority, Washington County,
Pennsylvania, Revenue Bonds (The Girard College Project)
Series 1998 (MBIA Insured) 2008 @ 100
5.00% Due 05/15/2028 AAA 2019 @ 100 S.F. 394,000
500,000 Philadelphia, Pennsylvania, Gas Works, Revenue Bonds, First
Series B (FSA Insured) 2008 @ 100
#5.00% Due 07/01/2028 AAA 2019 @ 100 S.F. 491,180
500,000 South Fork Municipal Authority, Pennsylvania, Hospital Revenue
Bonds (Conemaugh Valley Memorial Hospital Project)
Series 1998B (MBIA Insured) 2008 @ 101
#5.00% Due 07/01/2028 AAA 2023 @ 100 S.F. 488,895
100,000 Pittsburgh, Pennsylvania, Water and Sewer System, First Lien
Revenue Bonds, Series B (FGIC Insured)
#0.00% Due 09/01/2028 AAA 22,867
500,000 Pennsylvania, Higher Educational Facilities Authority, Revenue
Bonds (Temple University) First Series of 1998
(MBIA Insured) 2008 @ 101
#5.00% Due 04/01/2029 AAA 2022 @ 100 S.F. 491,770
- --------------- ------------
$ 3,015,000 $ 2,887,812
=============== ============
- ---------------------------------------------------------------------------------------------------------------------
</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 December 18, 1998
to December 22, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 2,874,941 $ 12,871
- -----------------------------------------------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
17%, Financial Guaranty 3%, MBIA 58% and FSA 22%. 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.
PENNSYLVANIA RISK FACTORS. The financial condition of the Commonwealth of
Pennsylvania 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 Commonwealth and its local governments and, therefore, the ability of the
issuers of the Bonds to satisfy their obligations.
Historically, the Commonwealth has experienced significant revenue shortfalls.
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. Historically, the economy of the Commonwealth has
been dependent on heavy industry and manufacturing. Growth in the Commonwealth
economy has more recently been in the service sector, including trade, health
services and educational institutions. Growth in these sectors may be affected
by federal funding and state legislation.
The Commonwealth is a party to numerous lawsuits in which an adverse final
decision could materially affect the Commonwealth's governmental operations and
consequently its ability to pay debt service on its obligations.
All outstanding general obligation bonds of the Commonwealth are rated AA-
by Standard and Poor's and Aa3 by Moody's. Further information concerning
Pennsylvania 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. 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 Pennsylvania IM-IT
Trust Units, see "Federal Tax Status" in Prospectus Part II.
In the opinion of Chapman and Cutler, special counsel for the Pennsylvania
IM-IT Trust for Pennsylvania tax matters, under existing law:
We have examined certain laws of the State of Pennsylvania (the "State") to
determine their applicability to the Pennsylvania IM-IT Trust and to the holders
of Units in the Pennsylvania IM-IT Trust who are residents of the State of
Pennsylvania (the "Unitholders"). The assets of the Pennsylvania IM-IT Trust
will consist of interest-bearing obligations issued by or on behalf of the
State, any public authority, commission, board or other agency created by the
State or a political subdivision of the State, or political subdivisions thereof
(the "Bonds"). Distributions of income with respect to the Bonds received by the
Pennsylvania IM-IT Trust will be made monthly.
Although we express no opinion with respect thereto, in rendering the opinion
expressed herein, we have assumed that: (i) the Bonds were validly issued by the
State or its municipalities, as the case may be, (ii) the interest thereon is
excludable from gross income for federal income tax purposes, (iii) the interest
thereon is exempt from Pennsylvania State and local taxes and (iv) the Bonds are
exempt from county personal property taxes. This opinion does not address the
taxation of persons other than full-time residents of Pennsylvania.
Based on the foregoing, and review and consideration of existing State laws
as of this date, it is our opinion, and we herewith advise you, as follows:
(1) The Pennsylvania IM-IT Trust will have no tax liability for purposes of
the personal income tax (the "Personal Income Tax"), the corporate
income tax (the "Corporate Income Tax") and the capital stock-franchise
tax (the "Franchise Tax"), all of which are imposed under the
Pennsylvania Tax Reform Code of 1971, or the Philadelphia School
District Investment Net Income Tax (the "Philadelphia School Tax")
imposed under Section 19-1804 of the Philadelphia Code of Ordinances.
(2) Interest on the Bonds, net of Pennsylvania IM-IT Trust expenses, which
is exempt from the Personal Income Tax when received by the
Pennsylvania IM-IT Trust and which would be exempt from such tax if
received directly by a Unitholder, will retain its status as exempt
from such tax when received by the Pennsylvania IM-IT Trust and
distributed to such Unitholder. Interest on the Bonds which is exempt
from the Corporate Income Tax and the Philadelphia School Tax when
received by the Pennsylvania IM-IT Trust and which would be exempt from
such taxes if received directly by a Unitholder, will retain its status
as exempt from such taxes when received by the Pennsylvania IM-IT Trust
and distributed to such Unitholder.
(3) Distributions from the Pennsylvania IM-IT Trust attributable to capital
gains recognized by the Pennsylvania IM-IT Trust upon its disposition
of a Bond issued on or after February 1, 1994, will be taxable for
purposes of the Personal Income Tax and the Corporate Income Tax. No
opinion is expressed with respect to the taxation of distributions from
the Pennsylvania IM-IT Trust attributable to capital gains recognized
by the Pennsylvania IM-IT Trust upon its disposition of a Bond issued
before February 1, 1994.
(4) Distributions from the Pennsylvania IM-IT Trust attributable to capital
gains recognized by the Pennsylvania IM-IT Trust upon its disposition
of a Bond will be exempt from the Philadelphia School Tax if the Bond
was held by the Pennsylvania IM-IT Trust for a period of more than six
months and the Unitholder held his Unit for more than six months before
the disposition of the Bond. If, however, the Bond was held by the
Pennsylvania IM-IT Trust or the Unit was held by the Unitholder for a
period of less than six months, then distributions from the
Pennsylvania IM-IT Trust attributable to capital gains recognized by
the Pennsylvania IM-IT Trust upon its disposition of a Bond issued on
or after February 1, 1994 will be taxable for purposes of the
Philadelphia School Tax; no opinion is expressed with respect to the
taxation of any such gains attributable to Bonds issued before February
1, 1994.
(5) Insurance proceeds paid under policies which represent maturing
interest on defaulted obligations will be exempt from the Corporate
Income Tax to the same extent as such amounts are excluded from gross
income for federal income tax purposes. No opinion is expressed with
respect to whether such insurance proceeds are exempt from the Personal
Income Tax or the Philadelphia School Tax.
(6) Each Unitholder will recognize gain for purposes of the Corporate
Income Tax if the Unitholder redeems or sells Units of the Pennsylvania
IM-IT Trust to the extent that such a transaction results in a
recognized gain to such Unitholder for federal income tax purposes and
such gain is attributable to Bonds issued on or after February 1, 1994.
No opinion is expressed with respect to the taxation of gains realized
by a Unitholder on the sale or redemption of a Unit to the extent such
gain is attributable to Bonds issued prior to February 1, 1994.
(7) A Unitholder's gain on the sale or redemption of a Unit will be subject
to the Personal Income Tax, except that no opinion is expressed with
respect to the taxation of any such gain to the extent it is
attributable to Bonds issued prior to February 1, 1994.
(8) A Unitholder's gain upon a redemption or sale of Units will be exempt
from the Philadelphia School Tax if the Unitholder held his Unit for
more than six months and the gain is attributable to Bonds held by the
Pennsylvania IM-IT Trust for a period of more than six months. If,
however, the Unit was held by the Unitholder for less than six months
or the gain is attributable to Bonds held by the Pennsylvania IM-IT
Trust for a period of less than six months, then the gains will be
subject to the Philadelphia School Tax; except that no opinion is
expressed with respect to the taxation of any such gains attributable
to Bonds issued before February 1, 1994.
(9) The Bonds will not be subject to taxation under the County Personal
Property Tax Act of June 17, 1913 (the "Personal Property Tax").
Personal property taxes in Pennsylvania are imposed and administered
locally, and thus no assurance can be given as to whether Units will be
subject to the Personal Property Tax in a particular jurisdiction.
However, in our opinion, Units should not be subject to the Personal
Property Tax.
Unitholders should be aware that, generally, interest on indebtedness
incurred or continued to purchase or carry Units is not deductible for purposes
of the Personal Income Tax, the Corporate Income Tax or the Philadelphia School
Tax.
We have not examined any of the Bonds to be deposited and held in the
Pennsylvania IM-IT Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no opinion
as to the exemption from federal or state income taxation of interest on the
Bonds if interest thereon had been received directly by a Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation under
any other provision of Pennsylvania law. Ownership of the Units may result in
collateral Pennsylvania tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any such
collateral consequences.
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.
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.
PUBLIC OFFERING AND UNIT DISTRIBUTION. Notwithstanding anything to the
contrary in Prospectus Part II, the sales charges and the concession or agency
commission allowed to broker-dealers or selling agents in connection with the
distribution of Units are as described in the following tables. The three tables
on page 6 of Prospectus Part IIdo not apply to the Trust. The second and third
sentences of the first paragraph on page 7 of Prospectus Part II do not apply to
the Trust. In addition, the first table and the first three sentences of the
first paragraph on page 9 of Prospectus Part II do not apply to the Trust. The
following tables replace these tables.
<TABLE>
<CAPTION>
Sales Charge
As Percent Of
------------------------
Public Offering Concession or
Offering Price of Agency
Dollar Amount of Units Purchased Price Bonds Commission
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000................................. 3.90% 4.058% 3.00%
$50,000 - $99,999................................. 3.50 3.627 2.60
$100,000 - $249,999............................... 2.90 2.987 2.00
$250,000 - $499,999............................... 2.50 2.564 1.60
$500,000 - $999,999............................... 1.90 1.937 1.00
$1 million or more................................ 1.25 1.266 0.75
</TABLE>
Notwithstanding anything to the contrary in Prospectus Part IIand in addition
to the amounts above, any broker-dealer or selling agent that distributes the
following amounts of Units of the Trust during the time periods indicated below
will receive the volume concession or agency commission shown in the table
below. The maximum distribution period refers to the first ten or the first
twenty business days of the initial offering period.
<TABLE>
<CAPTION>
Maximum Additional Volume
Distribution Concession or Agency
Minimum Units Distributed Period Commission
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$250,000 - $499,999............................... 10 days 0.15%
$500,000 or more.................................. 10 0.30
$250,000 - $499,999............................... 20 0.10
$500,000 or more.................................. 20 0.25
</TABLE>
The Sponsor will pay the additional volume concession or agency commission
out of its own assets after the 20th business day of the initial offering
period. The breakpoints in the tables above also apply on a Unit basis using a
breakpoint equivalent in the tables of $1,000 per Unit and will be applied on
whichever basis is more favorable to the investor or broker-dealer.
Notwithstanding anything to the contrary in Prospectus Part II, the secondary
market sales charge is computed as described in the following table based upon
the estimated long-term return life of the Trust's portfolio. The sales charges
are expressed as a percentage of the Public Offering Price per Unit.
<TABLE>
<CAPTION>
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
-------------------------------- ------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 0.00% 8 2.50% 15 3.80%
2 0.50 9 3.00 16 3.90
3 1.00 10 3.20 17 4.00
4 1.25 11 3.40 18 4.10
5 1.50 12 3.50 19 4.20
6 1.75 13 3.60 20 4.30
7 2.00 14 3.70 21 to 30 4.40
</TABLE>
UNDERWRITING. The Sponsor is the only Underwriter for the Trust. The first
three sentences of the last paragraph on page 9 of Prospectus Part II do not
apply to the Trust.
YEAR 2000 READINESS DISCLOSURE. The following two paragraphs constitute "Year
2000 Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act of 1998. The Trust could be negatively impacted if
computer systems used by the Sponsor, Evaluator, Trustee or other service
providers to the Trust do not properly process date-related information after
December 31, 1999. This is commonly known as the "Year 2000 Problem". The
Sponsor, Evaluator and Trustee are taking steps to address this problem and to
obtain reasonable assurances that other service providers to the Trust are
taking comparable steps. We cannot guarantee that these steps will be sufficient
to avoid any adverse impact on the Trust. This problem is expected to impact
issuers or insurers to varying degrees based on factors such as issuer type and
degree of technological sophistication. We cannot predict what impact, if any,
this problem will have on the issuers or insurers of the Bonds.
In addition, it is possible that the markets for the Bonds may be
detrimentally affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading systems may
result in settlement problems and liquidity issues. Moreover, corporate and
governmental data processing errors may adversely affect issuers or insurers and
overall economic uncertainties. The ability of individual issuers or insurers to
make payments on the Bonds will be affected by remediation costs. Accordingly,
the Bonds may be adversely affected.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF VAN KAMPEN FUNDS INC. AND THE UNITHOLDERS OF
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST, SERIES 240 (INCLUDED IN INSURED
MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES
308):
We have audited the accompanying statement of condition and the portfolio of
Pennsylvania Insured Municipals Income Trust, Series 240 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
308) as of December 23, 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 Pennsylvania Insured Municipals
Income Trust, Series 240 (included in Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 308) as of December 23, 1998,
in conformity with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
December 23, 1998
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF DECEMBER 23, 1998
INVESTMENT IN BONDS
<S> <C>
Contracts to purchase Bonds (1)(2) $ 2,887,812
Accrued interest to the First Settlement Date (1)(2) 43,548
--------------------
Total $ 2,931,360
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 43,548
Interest of Unitholders--
Cost to investors 3,005,000
Less: Gross underwriting commission 117,188
--------------------
Net interest to Unitholders (1)(2) 2,887,812
--------------------
Total $ 2,931,360
====================
- --------------------------------------------------------------------------------------------
</TABLE>
(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
DECEMBER 23, 1998
INSURED MUNICIPALS INCOME TRUST AND INVESTORS'
QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 308
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST, SERIES 240
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.
<PAGE>
VAN KAMPEN
PROSPECTUS PART I
VIRGINIA INVESTORS' QUALITY TAX-EXEMPT TRUST, SERIES 83
- --------------------------------------------------------------------------------
Virginia Investors' Quality Tax-Exempt Trust, Series 83 (the "Trust")
(included in Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 308 (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 Virginia state and local taxes when held by residents of Virginia
(the "Bonds"). The objective of the Trust is Federal and Virginia 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 8 issues of Bonds. None of the Bonds are general
obligations of the governmental entities issuing them or are backed by the
taxing power thereof. All of the 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: Water and Sewer, 3 (39%); Higher Education, 2
(25%); General Purpose, 2 (24%) and Health Care, 1 (12%). The dollar weighted
average maturity of the Bonds is 28 years.
Monthly Semi-Annual
------------------ ------------------
ESTIMATED CURRENT RETURN: 4.52% 4.57%
ESTIMATED LONG TERM RETURN: 4.51% 4.55%
CUSIP: 927837-14-6 927837-15-3
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 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.
DECEMBER 23, 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
Initial Date of Deposit: December 23, 1998
Principal Amount of Bonds: $ 2,040,000
Principal Amount of Bonds per Unit (1): $ 977.48
Number of Units: 2,087
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 1,984,744
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 $ 943.67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 47.53 $ 47.53
Less Estimated Expenses $ 2.29 $ 1.83
Estimated Net Interest Income $ 45.24 $ 45.70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 1.38 on $ 16.62 on
January 25, 1999 May 25, 1999
Normal Distribution (3) $ 3.77 $ 22.85
Record Dates 10th day of May 10 and
each month November 10
Distribution Dates 25th day of May 25 and
each month November 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 $ 0.85 $ 0.79
----------- -----------
Total Annual Expenses per Unit $ 2.31 $ 1.85
=========== ===========
- --------------------------------------------------------------------------------
(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 (December 29, 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 $47.55. Estimated General
Expenses will increase to $2.31 and $1.85 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) VIRGINIA
- ----------------------------------------------------------------------------------------------------------------------
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>
$ 190,000 Russell County, Virginia, Industrial Development Authority,
Appalachian Power Company Project, Revenue Bonds,
Series H (MBIA Insured)
5.00% Due 11/01/2021.............................. AAA Aaa 2008 @ 101 $ 188,643
250,000 Virginia Beach, Virginia, Development Authority, Healthcare
Facilities, Revenue Refunding Bonds, Sentara
Health Systems 2008 @ 100
#4.75% Due 11/01/2021............................. AA Aa2 2019 @ 100 S.F. 240,483
250,000 Virginia College Building Authority, Educational Facilities
Revenue and Refunding Bonds (Marymount University
Project) Series 1998 2008 @ 101
#5.125% Due 07/01/2023............................ AA N/R 2019 @ 100 S.F. 251,070
250,000 University of Virginia, University Revenue Bonds, Series A 2008 @ 101
#5.00% Due 06/01/2024............................. AA Aa1 2019 @ 100 S.F. 248,755
250,000 Prince William County, Virginia, Service Authority, Water
and Sewer Revenue Refunding Bonds (FGIC Insured) 2008 @ 101
#4.75% Due 07/01/2029............................. AAA Aaa 2023 @ 100 S.F. 239,642
300,000 Virginia, Resource Authority, Water and Sewer System
Revenue Bonds, Sussex Service Authority 2008 @ 100
#4.50% Due 10/01/2029............................. AA N/R 2026 @ 100 S.F. 276,729
300,000 Henrico County, Virginia, Industrial Development Authority,
Revenue Bonds (Educational Facilities - Collegiate School) 2008 @ 102
#5.10% Due 10/15/2029##........................... A N/R 2020 @ 100 S.F. 300,237
250,000 Loudoun County, Virginia, Sanitation Authority, Water
and Sewer System Revenue Bonds, Series 1998
(MBIA Insured) 2009 @ 102
#4.75% Due 01/01/2030............................. AAA Aaa 2022 @ 100 S.F. 239,185
- ------------ ----------
$ 2,040,000 $ 1,984,744
============ ==========
</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 December 15, 1998
to December 22, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 1,975,609 $ 9,135
- -----------------------------------------------
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.
VIRGINIA RISK FACTORS. The financial condition of the Commonwealth of
Virginia is affected by various national, economic, social and environmental
policies and conditions. The Virginia Constitution requires a balanced biennial
budget and contains limits on the amount of general obligation bonds which the
Commonwealth can issue. Additionally, Constitutional and statutory limitations
concerning taxes, bond indebtedness and other matters may constrain the
revenue-generating capacity of the Commonwealth and its local governments and,
therefore, the ability of the issuers of the Bonds to satisfy their obligations.
The economic vitality of the Commonwealth and its various regions and,
therefore, the ability of the Commonwealth and its local governments to satisfy
the Bonds, are affected by numerous factors. The employment in the Commonwealth
has been and continues to be significantly and adversely affected by the
cutbacks in federal government spending, particularly defense, and the reduction
of jobs in the mining industry.
The Commonwealth is a party to numerous lawsuits in which an adverse final
decision could materially affect the Commonwealth's governmental operations and
consequently, its ability to pay debt service on its obligations.
The Commonwealth of Virginia currently maintains a "triple A" bond rating
from Standard & Poor's, Moody's and Fitch IBCA, Inc. (formerly Fitch Investors
Service, L.P.).
Further information concerning Virginia 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. 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 Virginia Quality Trust Units, see "Federal Tax Status" in Part
II of this Prospectus.
The assets of the Trust will consist of interest-bearing obligations issued
by or on behalf of the Commonwealth of Virginia or counties, municipalities,
authorities or political subdivisions thereof (the "Virginia Bonds") and certain
bonds issued by Puerto Rico authorities (the "Possession Bonds," and
collectively with the Virginia Bonds, the "Bonds").
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the Trust. However, although no opinion is expressed
herein regarding such matters, it is assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon is excludible from gross income for federal
income tax purposes and (iii) the interest thereon is exempt from income tax
imposed by Virginia that is applicable to individuals and corporations (the
"Virginia Income Tax") and, with respect to the Possession Bonds, bond counsel
to the issuing authorities rendered opinions as to the exemption from all state
and local taxation. The opinion set forth below does not address the taxation of
persons other than full time residents of Virginia.
In the opinion of Chapman and Cutler, special counsel to the Fund for
Virginia tax matters, under existing law as of the date of this prospectus and
based upon the assumptions set forth above:
(1) The Virginia Quality Trust is not an association taxable
as a corporation for purposes of the Virginia Income Tax and each
Unitholder of the Trust will be treated as the owner of a pro rata
portion of each of the assets held by the Trust and the income of
such portion of the Virginia Quality Trust will be treated as income
of the Unitholder for purposes of the Virginia Income Tax.
(2) Interest on the Virginia Bonds which is exempt from
Virginia Income Tax when received by the Virginia Quality Trust, and
which would be exempt from Virginia Income Tax if received directly
by a Unitholder, will retain its status as exempt from such tax when
received by the Trust and distributed to such Unitholder.
(3) Interest on the Possession Bonds which is excludible from
gross income for federal income tax purposes and is exempt from
state and local taxation pursuant to federal law when received by
the Trust will be exempt from Virginia income taxation and therefore
will not be includible in the income of the Unitholder for Virginia
income tax purposes when distributed by the Trust and received by
the Unitholders.
(4) The Virginia legislature has enacted a law, effective July
1, 1997, that would exempt from the Virginia Income Tax income
derived on the sale or exchange of obligations of the Commonwealth
of Virginia or any political subdivision or instrumentality of the
Commonwealth of Virginia. However, Virginia law does not address
whether this exclusion would apply to gains recognized through
entities such as the Virginia Quality Trust. Accordingly, we express
no opinion as to the treatment for Virginia Income Tax purposes of
any gain or loss recognized by a Unitholder for federal income tax
purposes.
(5) The Virginia Income Tax does not permit a deduction of
interest paid on indebtedness incurred or continued to purchase or
carry Units in the Virginia Quality Trust to the extent that
interest income related to the ownership of Units is exempt from the
Virginia Income Tax.
In the case of Unitholders subject to the Virginia Bank Franchise Tax, the
income derived by such a Unitholder from his pro rata portion of the Bonds held
by the Virginia Quality Trust may affect the determination of such Unitholder's
Bank Franchise Tax. Prospective investors subject to the Virginia Bank Franchise
Tax should consult their tax advisors. Chapman and Cutler has expressed no
opinion with respect to taxation under any other provisions of Virginia law.
Ownership of the Units may result in collateral Virginia tax consequences to
certain taxpayers. Prospective investors should consult their tax advisors to
the applicability of any such collateral consequences.
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.). American Portfolio
Evaluation Services, a division of 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. The first three sentences of the last
paragraph on page 9 of Prospectus Part II do not apply to the Trust.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,537
Morgan Stanley Dean Witter & Co. 2 World Trade Center, 59th Floor, New York, New York 10048 250
Branch Cabell & Co. 919 East Main, 17th Floor, Richmond, Virginia 23219 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
-----------------
2,087
=================
</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.
YEAR 2000 READINESS DISCLOSURE. The following two paragraphs constitute "Year
2000 Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act of 1998. The Trust could be negatively impacted if
computer systems used by the Sponsor, Evaluator, Trustee or other service
providers to the Trust do not properly process date-related information after
December 31, 1999. This is commonly known as the "Year 2000 Problem". The
Sponsor, Evaluator and Trustee are taking steps to address this problem and to
obtain reasonable assurances that other service providers to the Trust are
taking comparable steps. We cannot guarantee that these steps will be sufficient
to avoid any adverse impact on the Trust. This problem is expected to impact
issuers or insurers to varying degrees based on factors such as issuer type and
degree of technological sophistication. We cannot predict what impact, if any,
this problem will have on the issuers or insurers of the Bonds.
In addition, it is possible that the markets for the Bonds may be
detrimentally affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading systems may
result in settlement problems and liquidity issues. Moreover, corporate and
governmental data processing errors may adversely affect issuers or insurers and
overall economic uncertainties. The ability of individual issuers or insurers to
make payments on the Bonds will be affected by remediation costs. Accordingly,
the Bonds may be adversely affected.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF VAN KAMPEN FUNDS INC. AND THE UNITHOLDERS OF
VIRGINIA INVESTORS' QUALITY TAX-EXEMPT TRUST, SERIES 83 (INCLUDED IN INSURED
MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES
308):
We have audited the accompanying statement of condition and the portfolio of
Virginia Investors' Quality Tax-Exempt Trust, Series 83 (included in Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
308) as of December 23, 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 Virginia Investors' Quality
Tax-Exempt Trust, Series 83 (included in Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 308) as of December 23, 1998,
in conformity with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
December 23, 1998
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF DECEMBER 23, 1998
INVESTMENT IN BONDS
<S> <C>
Contracts to purchase Bonds (1)(2) $ 1,984,744
Accrued interest to the First Settlement Date (1)(2) 19,335
--------------------
Total $ 2,004,079
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 19,335
Interest of Unitholders--
Cost to investors 2,087,000
Less: Gross underwriting commission 102,256
--------------------
Net interest to Unitholders (1)(2) 1,984,744
--------------------
Total $ 2,004,079
====================
- ------------------------------------------------------------------------------------------
</TABLE>
(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
DECEMBER 23, 1998
INSURED MUNICIPALS INCOME TRUST AND INVESTORS'
QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 308
VIRGINIA INVESTORS' QUALITY
TAX-EXEMPT TRUST, SERIES 83
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.
<PAGE>
VAN KAMPEN
INFORMATION SUPPLEMENT
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES 308
- --------------------------------------------------------------------------------
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
Colorado Risk Factors.............................................. 18
Pennsylvania Risk Factors.......................................... 20
Virginia 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 September 30, 1998, MBIA had admitted assets of $6.3 billion
(unaudited), total liabilities of $4.1 billion (unaudited), and total capital
and surplus of $2.2 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 September 30, 1998, the total capital and surplus of
Financial Guaranty was $1,288,640,899. 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 September 30, 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 $843,099,000 (unaudited) and $567,000,000 (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 $965,441,000 (unaudited)
and $448,500,000 (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>
COLORADO
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> <C> <C> <C>
$ 0 - 25.35 $ 0 - 42.35 19.3% 4.96% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67%
25.35 - 61.40 42.35 - 102.30 31.6 5.85 6.58 7.31 8.04 8.77 9.50 10.23
61.40 - 128.10 102.30 - 155.95 34.5 6.11 6.87 7.63 8.40 9.16 9.92 10.69
128.10 - 278.45 155.95 - 278.45 39.2 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over 278.45 Over 278.45 42.6 6.97 7.84 8.71 9.58 10.45 11.32 12.20
<CAPTION>
PENNSYLVANIA
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> <C> <C> <C>
$ 0-25.35 $ 0-42.35 17.4% 4.84% 5.45% 6.05% 6.66% 7.26% 7.87% 8.47%
25.35-61.40 42.35-102.30 30.0 5.71 6.43 7.14 7.86 8.57 9.29 10.00
61.40-128.10 102.30-155.95 32.9 5.96 6.71 7.45 8.20 8.94 9.69 10.43
128.10-278.45 155.95-278.45 37.8 6.43 7.23 8.04 8.84 9.65 10.45 11.25
Over 278.45 Over 278.45 41.3 6.81 7.67 8.52 9.37 10.22 11.07 11.93
<CAPTION>
VIRGINIA
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> <C> <C> <C>
$ 0-25.35 $ 0-42.35 19.9% 4.99% 5.62% 6.24% 6.87% 7.49% 8.11% 8.74%
25.35-61.40 42.35-102.30 32.1 5.89 6.63 7.36 8.10 8.84 9.57 10.31
61.40-128.10 102.30-155.95 35.0 6.15 6.92 7.69 8.46 9.23 10.00 10.77
128.10-278.45 155.95-278.45 39.7 6.63 7.46 8.29 9.12 9.95 10.78 11.61
Over 278.45 Over 278.45 43.1 7.03 7.91 8.79 9.67 10.54 11.42 12.30
</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.
COLORADO RISK FACTORS
RESTRICTIONS ON APPROPRIATIONS AND REVENUES. The State Constitution requires
that expenditures for any fiscal year not exceed revenues for such fiscal year.
By statute, the amount of General Fund revenues available for appropriation is
based upon revenue estimates which, together with other available resources,
must exceed annual appropriations by the amount of the unappropriated reserve
(the "Unappropriated Reserve"). The Unappropriated Reserve requirement for
fiscal year 1991, 1992 and 1993 was set at 3% of total appropriations from the
General Fund. For fiscal years 1994 and thereafter, the Unappropriated Reserve
requirement is set at 4%. In addition to the Unappropriated Reserve, a
constitutional amendment approved by Colorado voters in 1992 requires the State
and local government to reserve a certain percentage of its fiscal year spending
(excluding bonded debt service) for emergency use (the "Emergency Reserve"). The
minimum Emergency Reserve is set at 2% for 1994 and 3% for 1995 and later years.
For fiscal year 1992 and thereafter, General Fund appropriations are also
limited by statute to an amount equal to the cost of performing certain required
reappraisals of taxable property plus an amount equal to the lesser of (i) 5% of
Colorado personal income or (ii) 106% of the total General Fund appropriations
for the previous fiscal year. This restriction does not apply to any General
Fund appropriations which are required as a result of a new federal law, a final
state or federal court order or moneys derived from the increase in the rate or
amount of any tax or fee approved by a majority of the registered electors of
the State voting at any general election. In addition, the statutory limit on
the level of General Fund appropriations may be exceeded for a given fiscal year
upon the declaration of a State fiscal emergency by the State General Assembly.
The 1997 fiscal year ending General Fund balance was $375.1 million prior to
legislative change HB 98-1414. The restated 1997 ending fund balance will be
$514.1 million or $347.4 million over the combined Unappropriated Reserve and
Emergency Reserve requirement. As required by the new law, the revised ending
fund balance does not net out the state's first TABOR rebate. The new measure
directs the state controller's office to show TABOR refunds in the year they are
to be refunded, rather than the year they were incurred. Based on June 12, 1998
estimates, the 1998 fiscal year ending General Fund balance is expected to be
$823.6 million, or $646.6 million over the required Unappropriated Reserve and
Emergency Reserve.
On November 3, 1992, voters in Colorado approved a constitutional amendment
(the "Amendment") which, in general, became effective December 31, 1992, and
which could restrict the ability of the State and local governments to increase
revenues and impose taxes. The Amendment applies to the State and all local
governments, including home rule entities ("Districts"). Enterprises, defined as
government-owned businesses authorized to issue revenue bonds and receiving
under 10% of annual revenue in grants from all Colorado state and local
governments combined, are excluded from the provisions of the Amendment.
The provisions of the Amendment are unclear and have required judicial
interpretation. Among other provisions, beginning November 4, 1992, the
Amendment requires voter approval prior to tax increases, creation of debt, or
mill levy or valuation for assessment ratio increases. The Amendment also limits
increases in government spending and property tax revenues to specified
percentages. The Amendment requires that District property tax revenues yield no
more than the prior year's revenues adjusted for inflation, voter approved
changes and (except with regard to school districts) local growth in property
values according to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment. Pursuant to the
Amendment, local government spending is to be limited by the same formula as the
limitation for property tax revenues. The Amendment limits increases in
expenditures from the State General Fund and program revenues (cash funds) to
the growth in inflation plus the percentage change in state population in the
prior calendar year. The basis for spending and revenue limits for each fiscal
year is the prior fiscal year's spending and property taxes collected in the
prior calendar year. Debt service changes, reductions and voter-approved revenue
changes are excluded from the calculation bases. The Amendment also prohibits
new or increased real property transfer tax rates, new state real property taxes
and local district income taxes.
Litigation concerning several issues relating to the Amendment was filed in
the Colorado courts. The litigation dealt with three principal issues: (i)
whether Districts can increase mill levies to pay debt service on general
obligation bonds without obtaining voter approval; (ii) whether a multi-year
lease purchase agreement subject to annual appropriations is an obligation which
requires voter approval prior to execution of the agreement; and (iii) what
constitutes an "enterprise" which is excluded from the provisions of the
Amendment. In September 1994, the Colorado Supreme Court held that Districts can
increase mill levies to pay debt service on general obligation bonds issued
after the effective date of the Amendment; in June, 1995, the Colorado Supreme
Court validated mill levy increases to pay general obligation bonds issued prior
to the Amendment. In late 1994, the Colorado Court of Appeals held that
multi-year lease-purchase agreements subject to annual appropriation do not
require voter approval. The time to file an appeal in that case has expired.
Finally, in May, 1995, the Colorado Supreme Court ruled that entities with the
power to levy taxes may not themselves be "enterprises" for purposes of the
Amendment; however, the Court did not address the issue of how valid enterprises
may be created. Litigation in the "enterprise" arena may be filed in the future
to clarify these issues.
According to the Colorado Economic Perspective, Fourth Quarter, FY 1997-98,
June 12, 1998 (the "Economic Report"), inflation for 1996 was 3.5% and
population grew at the rate of 2.0% in Colorado. Accordingly, under the
Amendment, increases in State expenditures during the 1998 fiscal year are
limited to 5.5% over expenditures during the 1997 fiscal year. The 1997 fiscal
year is the base year for calculating the limitation for the 1998 fiscal year.
The limitation for the 1999 fiscal year is 5.3%, based on inflation of 3.3% and
population growth of 2.0% during 1997. For the 1997 fiscal year, General Fund
revenues totaled $4,639.9 million and program revenues (cash funds) totaled
$2,007.7 million, resulting in total base revenues of $6,647.6 million.
Expenditures for the 1998 fiscal year, therefore, cannot exceed $6,866.6
million. The 1998 fiscal year General Fund and program revenues (cash funds) are
expected to total $7,395.4 million, or $528.8 million more than expenditures
allowed under the spending limitation. This will be the second time the state
has breached the limit since its implementation in 1992. The first breach was in
1997 and the excess revenue of $139.0 million was refunded to Colorado taxpayers
during the 1998 tax filing season. A measure will be placed on the November 1998
ballot to deal with the excess revenue in fiscal year 1998. The measure proposes
spending the excess revenue either $200 million per year or $1 billion for five
years for highway construction and repair, K-12, safety needs, and higher
education building. The Economic Report estimates that the limit will be
breached by $494.1 million in fiscal year 1998-99.
There is also a statutory restriction on the amount of annual increases in
taxes that the various taxing jurisdictions in Colorado can levy without
electoral approval. This restriction does not apply to taxes levied to pay
general obligation debt.
STATE FINANCES. As the State experienced revenue shortfalls in the mid-1980s,
it adopted various measures, including impoundment of funds by the Governor,
reduction of appropriations by the General Assembly, a temporary increase in the
sales tax, deferral of certain tax reductions and inter-fund borrowings. On a
GAAP basis, the State had General Fund balances (before reserves) at June 30 of
approximately $405.1 million in fiscal year 1994, $486.7 million in fiscal year
1995, $368.5 million in fiscal year 1996 and $514.1 million in fiscal year 1997.
The fiscal year 1998 ending General Fund balance (before reserves) is projected
at $823.6 million.
Revenues for the fiscal year ending June 30, 1997, showed Colorado's general
fund increasing after a slowdown in 1996. Revenues grew by $410.7 million to
$4,679.4 million, a 9.6% increase from 1996. This figure was higher than the
fiscal year 1996 pace of 6.8%. General Fund revenues exceeded expenditures by
$145.0 million. The turnaround in fiscal year 1997 came as a result of surging
corporate, use and individual income taxes, which rose 15.3%, 11.0% and 12.6%,
respectively.
For fiscal year 1997, the following tax categories generated the following
respective revenue percentages of the State's $4,679.4 million total gross
receipts: individual income taxes represented 55% of gross fiscal year 1997
receipts; sales, use and excise taxes represented 30.5% of gross fiscal year
1997 receipts; and corporate income taxes represented 5.1% of gross fiscal year
1997 receipts. The percentages of General Fund revenue generated by type of tax
for fiscal year 1998 are not expected to be significantly different from fiscal
year 1997 percentages.
For fiscal year 1998, General Fund revenues are projected at $5,339.7
million. Revenue growth is expected to increase 14.1% over FY 1997 actual
revenues. General fund expenditures are estimated at $4,733.7 million. The
ending General Fund balance for fiscal year 1998, after reserve set-asides, is
$646.6 million.
STATE DEBT. Under its constitution, the State of Colorado is not permitted to
issue general obligation bonds secured by the full faith and credit of the
State. However, certain agencies and instrumentalities of the State are
authorized to issue bonds secured by revenues from specific projects and
activities. The State enters into certain lease transactions which are subject
to annual renewal at the option of the State. In addition, the State is
authorized to issue short-term revenue anticipation notes. Local governmental
units in the State are also authorized to incur indebtedness. The major source
of financing for such local government indebtedness is an ad valorem property
tax. In addition, in order to finance public projects, local governments in the
State can issue revenue bonds payable from the revenues of a utility or
enterprise or from the proceeds of an excise tax, or assessment bonds payable
from special assessments. Colorado local governments can also finance public
projects through leases which are subject to annual appropriation at the option
of the local government. Local governments in Colorado also issue tax
anticipation notes. The Amendment requires prior voter approval for the creation
of any multiple fiscal year debt or other financial obligation whatsoever,
except for refundings at a lower rate or obligations of an enterprise.
STATE ECONOMY. Based on data published by the Colorado Department of Labor
and Employment, total wage and salary employment in 1997 was 1,977,000
(seasonally adjusted). This was an increase of 76,600 from 1996. Services and
trade were the number one and two largest growing industries in Colorado in
1997, followed by the finance, insurance, and real estate sector. Construction
was the fourth largest source of employment growth in 1997.
The annual average unemployment rate in Colorado from 1994 to 1996 remained
stable at 4.2%. In 1997, the unemployment rate in Colorado dropped to 3.3% while
the nation's unemployment rate was 5.0%. Colorado's job growth rate increased
4.0% in 1997, an increase from the 3.6% growth rate in 1996. In comparison, the
job growth rate for the United States in 1996 and 1997 was 2.0% and 2.3%,
respectively. Total nonagricultural employment in Colorado is expected to
increase 3.9% in 1998.
Personal income rose 7.2% in Colorado during 1997 as compared with 5.8% for
the nation as a whole. In 1998, Colorado's personal income is expected to
increase 6.7%, outpacing the nation's 1998 estimated rate of 5.4%.
The year 1998 will look much like 1997. There will be some slowing of
population, housing starts and employment, but the outlook is still strong.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in the
Colorado Trust), which, to varying degrees, have also experienced reduced
revenues as a result of recessionary conditions and other factors.
PENNSYLVANIA RISK FACTORS
Investors should be aware of certain factors that might affect the financial
conditions of the Commonwealth of Pennsylvania. Pennsylvania historically has
been identified as a heavy industry state although that reputation has changed
recently as the industrial composition of the Commonwealth diversified when the
coal, steel and railroad industries began to decline. A more diversified economy
was necessary as the traditionally strong industries in the Commonwealth
declined due to a long-term shift in jobs, investment and workers away from the
northeast part of the nation. The major sources of growth in Pennsylvania are in
the service sector, including trade, medical and the health services, education
and financial institutions. Pennsylvania's agricultural industries are also an
important component of the Commonwealth's economic structure, particularly in
crop and livestock products as well as agribusiness and food related industries.
Strong growth experienced in Pennsylvania in 1997 was unanticipated and is
unlikely to continue. The peak growth was reached during the first quarter and
growth in subsequent quarters has been lower. Due to Pennsylvania's improved
competitive position, the Commonwealth should experience economic growth rates
close to the national average. The annual rate of job growth, ranked 45th in
1995, is currently ranked 17th nationwide.
Non-manufacturing employment has increased in recent years to 82.8% of total
Commonwealth employment as of May 1998. Consequently, manufacturing employment
constitutes a diminished share of total employment within the Commonwealth.
Manufacturing, contributing 17.2% of non-agricultural employment as of May 1998,
has fallen behind both the services sector and the trade sector as the largest
single source of employment within the Commonwealth. In May 1998, the services
sector accounted for 31.8% of all non-agricultural employment while the trade
sector accounted for 22.4%.
Preliminary results from the Pennsylvania Department of Labor and Industry
show Pennsylvania's total non-farm jobs increased by 61,400 or almost 1.1% from
May 1997 to May 1998, a stark difference from the 106,200 gain between December
1996 and December 1997. The services industry was responsible for over one-half
of all new jobs created during this period. Retail trade increased 1% or 10,000
jobs. Construction employment increased 4.6% or 9,900 jobs. Manufacturing growth
decreased .3% or 2,300 jobs from May 1997 to May 1998. As of May 1998, the
seasonally adjusted unemployment rate for both the Commonwealth and the United
States was 4.3%.
More jobs in 1997 brought faster growing personal income. For the four
quarters ending with the first quarter of 1997, personal income in Pennsylvania
rose at a rate of over 6%. This healthy advance contributed to a 6.1% increase
in General Fund tax revenue for fiscal year 1996-97 due to similar increases in
collections for personal income tax and the sales and use tax.
Financial information for the principal operating funds of the Commonwealth
is maintained on a budgetary basis of accounting. A budgetary basis of
accounting is used for the purpose of ensuring compliance with the enacted
operating budget and is governed by applicable statutes of the Commonwealth and
by administrative procedures. The Commonwealth also prepares annual financial
statements in accordance with generally accepted accounting principles ("GAAP").
The budgetary basis financial information maintained by the Commonwealth to
monitor and enforce budgetary control is adjusted at fiscal year-end to reflect
appropriate accruals for financial reporting in conformity with GAAP.
Fiscal 1997 Financial Results. At June 30, 1997, the Commonwealth reported an
unreserved/undesignated fund balance (budgetary basis) of $402.7 million in the
General Fund. This compares to a budgetary basis fund balance of $158.5 million
at June 30, 1996. The budgetary basis fund balance for the fiscal year ended
June 30, 1997 was the result of revenue collections totaling $26,149.6 million
less appropriation authorizations totaling $25,835.7 million, less other net
financing uses totaling $69.7 million. Included in the $25,835.7 million
appropriation authorizations are $164.3 million of state supplemental
appropriations and $207.0 million in federal supplemental appropriations
authorized during the fiscal year.
On a GAAP basis, at June 30, 1997, the Commonwealth's General Fund reported a
fund balance of $1,364.9 million, an increase of $729.7 million from the $635.2
million fund balance at June 30, 1996. Total assets increased by $563.4 million
to $4,268.5 million.
Liabilities decreased $166.3 million to $2,903.6 million.
For fiscal year 1996-97, revenues of the Commonwealth's General, Special
Revenue, Debt Service and Capital Projects Funds (collectively, the governmental
funds) totaled $32,073 million, an increase of $1,147 million or 3.7% from
fiscal year 1995-96. Taxes accounted for 56.6% of the total general governmental
revenues. Their combined fund balances at June 30, 1997 increased by $914.6
million to $2,900.9 million. The unreserved/undesignated fund balance was $699.2
million compared to $378.2 million from the previous year.
Fiscal 1998 Budget. Total receipts for fiscal year 1997-98 are projected at
$17,077 million. Appropriations are estimated at $17,269 million. The closing
balance in the General Fund (after adding the beginning balance of $403 billion
and deducting lapses of $120 million) is $331 million. After a transfer to the
Rainy Day Fund of $50 million, the ending balance in the General Fund for fiscal
year 1997-98 is estimated at $281 million.
Estimated revenues for 1997-98 have been raised $231.1 million due to
substantial upward revisions to personal income and inheritance revenues and
downward revisions to sales and use and insurance premiums taxes. The personal
income tax has provided almost all of the revenue surplus. Through December
1997, fiscal year 1997-98 revenues have increased 2.8% over the same period in
the prior fiscal year. Revised estimates for 1997-98 project a 2.1% increase in
General Fund revenues. Total revenues, excluding proposed tax changes, are
projected to increase by 2.9%.
Proposed Fiscal 1999 Budget. The Governor's 1998-99 Budget continues a
four-year record of tax cuts and fiscal discipline. The proposed 1998-99 General
Fund Budget is $17.8 billion, an increase of $518 million or 3%. The total
recommended budget for 1998-99 is $35.8 billion. Approximately $10.16 billion is
from federal funds.
General Fund revenue is estimated to be generated in the following
percentages: 34.7% from sales tax, 34.2% from personal income tax, 12.5% from
business tax, 9.3% from corporate net income tax, 5.4% from other revenues, and
3.9% from the inheritance tax. Total expenditures for fiscal year 1998-99 are
estimated in the following percentages: 44.3% for education, 34.4% for health
and human services, 11.3% for protection, 3.8% for direction programs, 3.1% for
other programs, and 3.1% for economic development.
Budgets for the past four years have proposed an average spending growth of
2.0%. The average growth in the enacted budgets during the previous ten-year
period was 5.4%. Over $128 million in tax reductions are proposed in 1998-99 to
help working families and to stimulate job creation and retention.
After an estimated $2 million transfer to the Rainy Day Fund in 1998-99, the
ending fund balance for the General Fund for fiscal year 1998-99 is estimated at
$9 million. With the projected transfer at the end of 1998-99, the reserve
balance in the Commonwealth's Rainy Day Fund will exceed $500 million, more than
seven times the balance in 1994-95.
Debt Administration. The Constitution of the Commonwealth of Pennsylvania
permits the incurrence of debt, without approval of the electorate, for capital
projects specifically authorized in a capital budget. Capital project debt
outstanding cannot exceed one and three quarters (1.75) times the average of the
annual tax revenues deposited in all funds during the previous five fiscal
years. The certified constitutional debt limit at August 29, 1997 was $34.3
billion. Outstanding capital project debt at August 29, 1997 amounted to $3.7
billion.
In addition to constitutionally authorized capital project debt, the
Commonwealth may incur debt for electorate approved programs, such as economic
revitalization, land and water development, and water facilities restoration;
and for special purposes approved by the General Assembly, such as disaster
relief. The total general obligation bond indebtedness outstanding at June 30,
1997 was $4,842 million. Total debt service transfers paid from General Fund and
Motor License Fund appropriations during the fiscal year ended June 30, 1997
amounted to $781.5 million.
All outstanding general obligation bonds of the Commonwealth are rated AA- by
S&P and Aa3 by Moody's. Any explanation concerning the significance of such
ratings must be obtained from the rating agencies. There is no assurance that
any ratings will continue for any period of time or that they will not be
revised or withdrawn.
In addition to general obligation bonds, the Commonwealth issues tax
anticipation notes ("TANS") to meet operating cash needs during certain months
of the fiscal year. The Commonwealth anticipates issuance of $225 million in
General Fund TANS during the 1997-98 fiscal year. During fiscal year 1996-97,
$550 million TANS were issued.
The City of Philadelphia ("Philadelphia") is the largest city in the
Commonwealth, with an estimated population of 1,478,002 in 1996, according to
the U.S. Bureau of the Census. Philadelphia functions both as a city of the
first class and a county for the purpose of administering various governmental
programs.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities in
remedying fiscal emergencies was enacted by the General Assembly and approved by
the Governor in June 1991. PICA is designed to provide assistance through the
issuance of funding debt to liquidate budget deficits and to make factual
findings and recommendations to the assisted city concerning its budgetary and
fiscal affairs. An intergovernmental cooperation agreement between Philadelphia
and PICA was approved by City Council on January 3, 1992, and approved by the
PICA Board and signed by the Mayor on January 8, 1992. At this time,
Philadelphia is operating under a five-year fiscal plan approved by PICA on
April 30, 1996.
As of February 28, 1997, PICA has issued approximately $1,761.7 million of
its Special Tax Revenue Bonds to provide financial assistance to Philadelphia,
to liquidate the cumulative General Fund balance deficit, to refund certain
general obligation bonds of the City and to fund additional capital projects. No
further PICA bonds are to be issued by PICA for the purpose of financing a
capital project or deficit as the authority for such bond sales expired on
December 31, 1994. PICA's authority to issue debt for the purpose of financing a
cash flow deficit expired on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted. PICA had $1,102.4 million in Special Tax
Revenue Bonds outstanding as of June 30, 1997.
The audited General fund balance of the City as of June 30, 1995, 1996, and
1997 showed a surplus of approximately $80.5 million, $118.5 million, and $128.8
million, respectively.
S&P's rating on Philadelphia's general obligation bonds is "BBB" and Moody's
rating is "Baa2." Any explanation concerning the significance of such ratings
must be obtained from the rating agencies. There is no assurance that any
ratings will continue for any period of time or that they will not be revised or
withdrawn.
It should be noted that the creditworthiness of obligations issued by local
Pennsylvania issuers may be unrelated to the creditworthiness of obligations
issued by the Commonwealth of Pennsylvania, and there is no obligation on the
part of the Commonwealth to make payment on such local obligations in the event
of default.
VIRGINIA RISK FACTORS
A Virginia Trust is susceptible to political, economic or regulatory factors
affecting issuers of Virginia Bonds. Without intending to be complete, the
following briefly summarizes some of these matters, as well as some of the
factors affecting the financial situation in the Commonwealth of Virginia (the
"Commonwealth" or "Virginia"). This information is derived from sources that are
generally available to investors and is based in part on information obtained
from various agencies in Virginia. No independent verification has been made of
the accuracy or completeness of the following information.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local governmental
finances generally will not adversely affect the market value of Virginia Bonds
held in the portfolio of a Virginia Trust or the ability of particular obligors
to make timely payments of debt service on (or relating to) those obligations.
The Commonwealth's financial condition is supported by a broad-based economy,
including manufacturing, tourism, agriculture, ports, mining and fisheries.
Manufacturing continues to be a major source of employment, ranking behind only
services, wholesale and retail trade and government (federal, state and local).
Defense activity is an important component of Virginia's economy.
The Virginia economy experienced solid growth in fiscal year 1997. Both total
nonagricultural employment and personal income growth were much stronger than
expected. Virginia nonagricultural employment grew by 2.9%, increasing by 90,600
jobs during fiscal year 1997, close to doubling the amount of new jobs created
in fiscal year 1996. All the employment sectors, with the exception of wholesale
and retail trade, recorded stronger job growth than forecast. Although job
losses continued in the manufacturing and federal government sectors, they were
less severe than forecast. Strong job growth pushed Virginia's unemployment rate
down to 4.3% in fiscal year 1997, the lowest since fiscal year 1990.
The Virginia standard forecast expects the Commonwealth to slightly
outperform the nation in both job growth and personal income growth in the next
few years. Total personal income in Virginia is forecast to grow at 5.8%, 6.0%
and 6.1%, respectively, in fiscal years 1998 through 2000. In fiscal year 1998,
Virginia should add 76,800 nonagricultural jobs for growth of 2.4%. The services
sector is expected to again lead job growth with gains of 42,600 jobs or 4.5%
growth, less than the 5.2% growth rate achieved in fiscal year 1997. Wholesale
and retail trade should add almost 16,500 jobs, a slow steady growth consistent
with fiscal year 1997. Construction employment is expected to slow from its
brisk pace of fiscal year 1997, growing by only 2.2%, 1.1% and 1.2%,
respectively, in fiscal years 1998, 1999, and 2000. Virginia's manufacturing
employment is expected to improve slightly over the next three fiscal years. The
forecast calls for an increase of 2,100 jobs in fiscal year 1998, followed by
0.8% and 0.7% growth in fiscal years 1999 and 2000, respectively. Job growth is
forecast to continue to slow over the next biennium, growing by 2.2% in fiscal
year 1999 and 1.8% in fiscal year 2000.
The magnitude of job losses from federal government downsizing on the
Virginia economy is considerably smaller than it has been in the past six fiscal
years. From fiscal year 1991 to fiscal year 1997, job losses from federal
government downsizing were more than 60,000, nearly a typical year's job growth.
From fiscal year 1998 to 2000, job losses in the federal sector are expected to
total only 4,000. Most job losses resulted from continued defense downsizing and
federal government cutbacks in Northern Virginia and Hampton Roads.
Total retail sales rose 5.4% in Virginia during fiscal year 1997, well above
the 4.2% national average and stronger than the Commonwealth's fiscal year 1996
growth of 4.6%.
The Commonwealth's total revenue comprises two types of resources: the
general fund and non-general funds. More than half of the state's revenues (53%)
are "non-general funds" or funds earmarked by law for specific purposes. For
example, motor vehicle and gasoline taxes must pay for transportation programs,
student tuition and fees must support higher education, and federal grants are
designated for specific activities. General fund revenues are derived from
general taxes paid by citizens and businesses in Virginia.
In fiscal year 1997, total revenues grew 8.1% to $7,949.3 million, exceeding
the official forecast of $7,751.0 million (5.4% growth) by $198.3 million. This
marked the seventh consecutive year that actual revenue collections exceeded the
official forecast.
In five of those seven years, revenue collections were within one percent of the
forecast.
Collections of net individual income taxes contributed $141.8 million to the
revenue surplus in fiscal year 1997. Receipts of corporate income taxes and
sales and use taxes also exceeded their estimates. Collections of insurance
company premiums taxes and public service gross receipts taxes, however, fell
short of expectations. Collectively, the five major sources ended the year with
a surplus of $179.7 million. The forecast for general fund revenue shows growth
of 7.1% for fiscal year 1998, 5.8% for fiscal year 1999 and 6.0% growth for
fiscal year 2000.
General Fund - Cash Basis. The Commonwealth of Virginia has historically
operated on a fiscally conservative basis and is required by its Constitution to
have a balanced biennial budget. During fiscal year 1997, the General Fund
received $8.6 billion in resources. Individual income taxes accounted for 55% of
General Fund resources, while sales taxes made up 21%. These revenues plus other
direct revenues from outside sources totaled $8.1 billion, or 95%. The remaining
monies totaling $427 million came through transfers from other funds, including
alcoholic beverage sales and lottery profits.
Revenues (not including transfers) increased by $850 million over fiscal year
1996. Individual income tax revenues, which grew by 10% compared to fiscal year
1996, played a major role in this growth.
General Fund disbursements including transfers for fiscal year 1997 totaled
$8.1 billion. Expenditures totaled $6.8 billion and transfers to other funds
were $1.3 billion. Education accounted for 50%, while social services, Medicaid,
public health and mental health accounted for 23% of the General Fund.
Expenditures, not including transfers, increased by $358 million over the prior
year. Of the total increase, education accounted for 74%, while public safety
accounted for another 20%.
General Fund revenues exceeded expenditures and net transfers by $460.9
million in fiscal year 1997. In other words, the General Fund had an operating
profit for the year. The profit resulted from increased tax receipts coupled
with expenditures that were less than budgeted.
The General Fund balance on a cash basis has fluctuated in previous years. In
fiscal year 1993, Virginia had just come out of a severe recession. Over the
next year, economic conditions continued to improve and the balance again
increased. A $168 million operating deficit in fiscal year 1995, caused
primarily by payments made to settle a lawsuit filed by federal retirees,
reduced the General Fund balance at the end of fiscal year 1995 to $350.7
million. Fiscal year 1996's $126 million profit restored the balance of $476.3
million. Fiscal year 1997 showed a strong balance of $937.2 million.
Balances are "committed" if there are plans in place for their use.
"Available" balances may be used by the Governor and General Assembly for new
projects or programs. At the end of fiscal year 1997, there was an available
balance of $76.3 million, compared to an available balance of $1.1 million at
the end of fiscal year 1996.
The "rainy day" fund is required by an amendment to the State Constitution
which was approved by the voters on November 7, 1992. This fund is a reserve of
fund balance which can only be used if state revenues decline sharply from the
previous year. Reserved funds must be appropriated by the General Assembly when
revenue collections are strong compared to the average for the previous six
years. The total amount reserved in fiscal year 1997 is $214.9 million. The
1998-2000 budget makes deposits to the rainy day fund totaling $211 million,
bringing the amount currently available to $426.4 million, or roughly 4.5% of
annual general fund revenues.
General Fund - GAAP Basis. When the General Fund was accounted for on a GAAP
basis, the fund had a positive balance of $491.8 million in fiscal year 1997,
compared to a balance of $180.4 million in fiscal year 1996. Virginia fully
adopted GAAP financial reporting in fiscal year 1983, and experienced GAAP
deficits from fiscal year 1990-92 as a result of a recession. The deficit in
fiscal year 1995 was primarily the result of the federal retiree lawsuit noted
earlier. GAAP deficits may occur in Virginia without violating the state
Constitution or statutes which prohibit deficit spending. However, if a General
Fund GAAP deficit were to continue over time, agencies that rate state debt
would view this as a problem for state finances.
Debt Administration. The total outstanding debt of the Commonwealth as of the
end of fiscal year 1997 was $10.7 billion. Long term bonds and notes represent
97% of all debt, with the remaining 3% consists of capital leases, installment
purchase contracts and various other payables. A total of $1.1 billion, or 10.7%
of all debt, is a general obligation of Virginia taxpayers and supported by a
pledge of all tax revenues and other monies of the Commonwealth. Other tax
supported debt (limited obligations) totaled $2.3 billion and was outstanding at
the end of fiscal year 1997. This accounted for 21.3% of all debt on the books
of the Commonwealth. Non-tax supported debt makes up 68% of all debt in the
Commonwealth. The majority of this debt is issued by various authorities that
are created under state law to issue bonds to finance various programs
considered to provide a benefit to the public. Total debt in this category at
the end of fiscal year 1997 was $7.3 billion.
The Commonwealth of Virginia maintains a "triple A" bond rating from Standard
& Poor's, Moody's Investors Service, Inc. and Fitch IBCA, Inc. (formerly Fitch
Investors Service, L.P.) on its general obligation indebtedness, reflecting in
part its sound fiscal management, diversified economic base and low debt ratios.
There can be no assurances that these conditions will continue. Nor are these
same conditions necessarily applicable to securities which are not general
obligations of the Commonwealth. Securities issued by specific municipalities,
governmental authorities or similar issuers may be subject to the economic risks
or uncertainties peculiar to the issuers of such securities or to the sources
from which they are to be paid.
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>
COLORADO
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
----------------------------------------- ----------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
January 1999 $ 1.35 $ 1.35
February 1999 - November 2008 3.70 3.70
December 2008 3.52 $146.69 150.21
January 2009 - May 2009 3.10 3.10
June 2009 3.01 73.35 76.36
July 2009 - November 2016 2.80 2.80
December 2016 2.66 122.25 124.91
January 2017 - November 2025 2.35 2.35
December 2025 1.63 339.86 341.49
January 2026 - August 2026 .98 .98
September 2026 .81 195.60 196.41
October 2026 - August 2028 .39 .39
September 2028 .25 122.25 122.50
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JANUARY AND ESTIMATED ESTIMATED ESTIMATED
JULY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
----------------------------------------- ----------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
January 1999 $ 1.37 $ 1.37
July 1999 - July 2008 22.50 22.50
December 2008 $146.69 146.69
January 2009 21.70 21.70
June 2009 73.35 73.35
July 2009 18.44 18.44
January 2010 - July 2016 17.00 17.00
December 2016 122.25 122.25
January 2017 16.42 16.42
July 2017 - July 2025 14.32 14.32
December 2025 339.86 339.86
January 2026 12.21 12.21
July 2026 6.03 6.03
September 2026 195.60 195.60
January 2027 3.47 3.47
July 2027 - July 2028 2.46 2.46
September 2028 .68 122.25 122.93
<CAPTION>
PENNSYLVANIA
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
----------------------------------------- ----------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
January 1999 $ 1.41 $ 1.41
February 1999 - August 2008 3.85 3.85
September 2008 3.70 $116.47 120.17
October 2008 - November 2008 3.36 3.36
December 2008 3.17 54.91 58.08
January 2009 - November 2026 3.14 3.14
December 2026 2.59 166.39 168.98
January 2027 - May 2028 2.48 2.48
June 2028 2.03 133.11 135.14
July 2028 1.54 332.78 334.32
August 2028 .60 .60
September 2028 .60 33.27 33.87
October 2028 - March 2029 .60 .60
April 2029 .40 166.39 166.79
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JANUARY AND ESTIMATED ESTIMATED ESTIMATED
JULY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
----------------------------------------- ----------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
January 1999 $ 1.42 $ 1.42
July 1999 - July 2008 23.35 23.35
September 2008 $116.47 116.47
December 2008 54.91 54.91
January 2009 20.83 20.83
July 2009 - July 2026 19.05 19.05
December 2026 166.39 166.39
January 2027 17.84 17.84
July 2027 - January 2028 15.09 15.09
June 2028 133.11 133.11
July 2028 13.69 332.78 346.47
September 2028 33.27 33.27
January 2029 3.71 3.71
April 2029 1.65 166.39 168.04
<CAPTION>
VIRGINIA
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
----------------------------------------- ----------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
January 1999 $ 1.38 $ 1.38
February 1999 - June 2010 3.77 3.77
July 2010 3.62 $119.78 123.40
August 2010 - October 2010 3.27 3.27
November 2010 2.77 143.75 146.52
December 2010 - October 2021 2.68 2.68
November 2021 2.43 210.83 213.26
December 2021 - May 2024 1.85 1.85
June 2024 1.70 119.79 121.49
July 2024 - June 2029 1.37 1.37
July 2029 1.23 119.79 121.02
August 2029 - September 2029 .91 .91
October 2029 .75 143.75 144.50
November 2029 - December 2029 .38 .38
January 2030 .25 119.78 120.03
<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> <C>
May 1999 $16.62 $ 16.62
November 1999 - May 2010 22.85 22.85
July 2010 $119.78 119.78
November 2010 20.19 143.75 163.94
May 2011 - May 2021 16.26 16.26
November 2021 16.01 210.83 226.84
May 2022 - May 2024 11.25 11.25
June 2024 119.79 119.79
November 2024 8.67 8.67
May 2025 - May 2029 8.33 8.33
July 2029 119.79 119.79
October 2029 143.75 143.75
November 2029 5.65 5.65
January 2030 .66 119.78 120.44
</TABLE>
