File No. 33-
CIK #896312
Securities and Exchange Commission
Washington, D.C. 20549-1004
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Insured Municipals Income Trust,
177th Insured Multi-Series
B. Name of Depositor: Van Kampen American Capital Distributors,Inc.
C. Executive offices: Complete address of Depositor's principal
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital
Attention: Mark J. Kneedy Distributors, Inc.
111 West Monroe Street Attention: Don G. Powell, Chariman
Chicago, Illinois 60603 One Parkview Plaza
Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: 1,000* Units
F. Proposed maximum offering price to the public of the securities
being registered: ($1020 per Unit**):
$1,020,000
G. Amount of filing fee, computed at one twenty-nineth of 1 percent of
the proposed maximum aggregate offering price to the public: $351.72
H. Approximate date of proposed sale to the public:
As soon as practicable after the effective date of the Registration
Statement
________________________________________________________________________
* 500 Units registered for primary distribution.
500 Units registered for resale by Depositor of Units previously
sold in primary distribution.
** Estimated solely for the purpose of calculating the registration
fee.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Insured Municipals Income Trust,
177th Insured Multi-Series
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust) )
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) Underwriting
underwriter )
5. Organization of trust ) Introduction
6. Execution and termination of ) Introduction
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and Securities of the Trust
10. General information regarding ) Introduction
trust's securities and rights ) Unitholder Explanations
of security holders ) Trust Information
) Trust Administration
11. Type of securities comprising ) Introduction
units ) Trust Information
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and expenses ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
Trust Information
Trust Administration
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
(d) Certain other fees, expenses or ) Unitholder Explanations
charges payable by holders ) Trust Administration
(e) Certain profits to be received ) Unitholder Explanations
by depositor, principal ) Underwriting
underwriter, trustee or ) Notes to Portfolios
affiliated persons )
(f) Ratio of annual charges to income ) *
)
14. Issuance of trust's securities ) Unitholder Explanations
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Introduction
underlying securities ) Unitholder Explanations
) Trust Administration
17. Withdrawal or redemption ) Unitholder Explanations
) Trust Administration
18. (a) Receipt and disposition ) Introduction
of income ) Unitholder Explanations
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Unitholder Explanations
) Trust Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Unitholder Explanations
Trust Administration )
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolios
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) Trust Administration
27. Business of Depositor ) Trust Administration
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Directors ) *
32. Compensation of Directors ) *
33. Compensation of Employees ) *
34. Compensation to other persons ) Unitholder Explanations
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities Introduction
by states Settlement of Bonds in the Trusts
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to distribute ) *
38. (a) Method of distribution )
(b) Underwriting agreements ) Unitholder Explanations
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Trust Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal underwriter ) Trust Administration
)
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal underwriter ) *
)
42. Ownership of securities of the trust ) *
)
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
) Trust Administration
(b) Schedule as to offering price ) *
(c) Variation in offering price ) Unitholder Explanations
to certain persons )
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Unitholder Explanations
) Trust Administration
(b) Schedule as to redemption price ) *
)
47. Purchase and sale of interests ) Unitholder Explanations
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of trustee ) Trust Administration
)
49. Fees and expenses of trustee ) Summary of Essential Financial
) Information
) Trust Administration
50. Trustee's lien ) Trust Administration
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's )
securities ) *
VII. Policy of Registrant
52. (a) Provisions of trust agreement ) Trust Administration
with respect to replacement or )
elimination of portfolio securities)
(b) Transactions involving elimination)
of underlying securities ) *
(c) Policy regarding substitution or ) Trust Administration
elimination of underlying securities)
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Trust Information
) Other Matters
VIII. Financial and Statistical Information
54. Trust's securities during last ten years) *
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Other Matters
1(c) to Form S-6) )
_________________________________
* Inapplicable, omitted, answer negative or not required
Preliminary Prospectus Dated March 24, 1995
Insured Municipals Income Trust
177th Insured Multi-Series
1,000 Units 177th Insured Multi-Series
(A Unit Investment Trust)
The attached final Prospectus for a prior Series of the Fund is
hereby used as a preliminary Prospectus for the above stated Series. The
narrative information and structure of the attached final Prospectus will
be substantially the same as that of the final Prospectus for this
Series. Information with respect to pricing, the number of Units, dates
and summary information regarding the characteristics of securities to be
deposited in this Series is not now available and will be different since
each Series has a unique Portfolio. Accordingly the information
contained herein with regard to the previous Series should be considered
as being included for informational purposes only. Ratings of the
securities in this Series are expected to be comparable to those of the
securities deposited in the previous Series. However, the Estimated
Current Return for this Series will depend on the interest rates and
offering prices of the securities in this Series and may vary materially
from that of the previous Series.
A registration statement relating to the units of this Series will
be filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to completion
or amendment. Such Units may not be sold nor may offer to buy be
accepted prior to the time the registration statement becomes effective.
This Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the Units in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
Preliminary Prospectus Dated March 23, 1995
Subject To Completion
March 23, 1995
Insured Municipals
Income Trust, 174th
Insured Multi-Series
California IM-IT Intermediate Laddered Maturity Series 18
California IM-IT 138
Florida IM-IT Intermediate Laddered Maturity Series 12
New Jersey IM-IT 101
New York IM-IT 125
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is excludable under existing law from gross income for
Federal income taxes. In addition, the interest income of each State Trust is,
in the opinion of counsel, exempt to the extent indicated from state and local
taxes, when held by residents of the state where the issuers of Bonds in such
Trust are located. Capital gains, if any, are subject to Federal tax.
The Fund. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an
investment in a diversified portfolio of tax-exempt bonds. The Fund consists
of five underlying separate unit investment trusts designated as California
IM-IT Intermediate Laddered Maturity Series 18 (the "California IM-IT
Intermediate Laddered Maturity Trust"), California Insured Municipals
Income Trust, Series 138 (the "California IM-IT Trust"), Florida IM-IT
Intermediate Laddered Maturity Series 12 (the "Florida IM-IT Intermediate
Laddered Maturity Trust"), New Jersey Insured Municipals Income Trust,
Series 101 (the "New Jersey IM-IT Trust") and New York Insured
Municipals Income Trust, Series 125 (the "New York IM-IT Trust"). The
various trusts are collectively referred to herein as the "Trusts".
The California IM-IT Intermediate Laddered Maturity, California IM-IT, Florida
IM-IT Intermediate Laddered Maturity, New Jersey IM-IT and New York IM-IT
Trusts are sometimes collectively referred to herein as the "State
Trusts", while the California IM-IT Intermediate Laddered Maturity,
California IM-IT, Florida IM-IT Intermediate Laddered Maturity, New Jersey
IM-IT and New York IM-IT Trusts are sometimes collectively referred to herein
as the "Insured Trusts"and the California IM-IT Intermediate Laddered
Maturity and Florida IM-IT Intermediate Laddered are sometimes referred to
herein as the "State Intermediate Laddered Maturity Trusts". Each
Trust initially consists of delivery statements relating to contracts to
purchase securities and, thereafter, will consist of such securities as may
continue to be held (the "Bonds"or "Securities"). Such
Securities are interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is,
in the opinion of recognized bond counsel to the issuing governmental
authority, exempt from all Federal income taxes under the existing law. In
addition, the interest income of each State Trust is, in the opinion of
counsel, exempt to the extent indicated from state and local taxes, when held
by residents of the state where the issuers of Bonds in such Trust are
located.
"AAA"Rating for the Insured Trusts. Insurance guaranteeing the
payments of principal and interest, when due, on the Securities in the
portfolio of each Insured Trust has been obtained from a municipal bond
insurance company either by such Trust or by the issuer of the Bonds involved,
by a prior owner of the Bonds or by the Sponsor prior to the deposit of such
Bonds in an Insured Trust. See "Unitholder Explanations--Insurance on the
Bonds in the Insured Trusts"on page 20. Insurance obtained by an Insured
Trust applies only while Bonds are retained in such Trust while insurance
obtained on Preinsured Bonds is effective so long as such Bonds are
outstanding. The Trustee, upon the sale of a Bond insured under an insurance
policy obtained by an Insured Trust, has a right to obtain from the insurer
involved permanent insurance for such Bond upon the payment of a single
predetermined insurance premium and any expenses related thereto from the
proceeds of the sale of such Bond. Insurance relates only to the Bonds in a
Trust and not to the Units offered hereby or to the market value thereof. As a
result of such insurance, the Units of each Insured Trust have received a
rating of "AAA"by Standard & Poor's Ratings Group. Standard & Poor's
Ratings Group has indicated that this rating is not a recommendation to buy,
hold or sell Units nor does it take into account the extent to which expenses
of each Insured Trust or sales by each Insured Trust of Bonds for less than
the purchase price paid by such Trust will reduce payments to Unitholders of
the interest and principal required to be paid on such Bonds. See "
Unitholder Explanations--Insurance on the Bonds in the Insured Trusts". No
representation is made as to any insurer's ability to meet its commitments.
Public Offering Price. The Public Offering Price of the Units of each Trust
during the initial offering period is equal to the aggregate offering price of
the Securities in such Trust's portfolio and cash, if any, in the Principal
Account held or owned by such Trust Fund plus the applicable sales charge plus
accrued interest, if any. After the initial public offering period, the
secondary market Public Offering Price of each Trust will be equal to the
aggregate bid price of the Securities in such Trust and cash, if any, in the
Principal Account held or owned by such Trust Fund plus the applicable sales
charge plus accrued interest, if any. Sales charges for the Trusts in the
initial market, expressed both as a percentage of the Public Offering Price
and as a percentage of the aggregate offering price of the Securities, are set
forth in footnote (2) under "Summary of Essential Financial
Information". For sales charges in the secondary market, see "
Unitholder Explanations--Public Offering". If the Securities in each Trust
were available for direct purchase by investors, the purchase price of the
Securities would not include the sales charge included in the Public Offering
Price of the Units. During the initial offering period, the sales charge is
reduced on a graduated scale for sales involving at least 100 Units. If Units
were available for purchase at the close of business on the day before the
Date of Deposit, the Public Offering Price per Unit would have been that
amount set forth in the "Summary of Essential Financial Information"
for each Trust. See "Unitholder Explanations--Public Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Estimated Current Return and Estimated Long-Term Return. The annual Estimated
Current Returns and Estimated Long-Term Returns to Unitholders as of the close
of business on the day before the Date of Deposit under the monthly and
semi-annual distribution plans were as set forth under "Per Unit
Information"for each Trust. The methods of calculating Estimated Current
Return and Estimated Long-Term Return are set forth in the footnotes to the
"Per Unit Information"for each Trust.
Objectives of The Fund. The objectives of the Fund are income exempt from
Federal income tax and, in the case of a State Trust, Federal and state income
tax (if any) and conservation of capital through an investment in diversified
portfolios of Federal and state tax-exempt obligations. There is, of course,
no guarantee that the Fund will achieve its objectives. The Fund may be an
appropriate investment vehicle for investors who desire to participate in a
portfolio of tax-exempt fixed income securities with greater diversification
than they might be able to acquire individually. In addition, securities of
the type deposited in the Fund are often not available in small amounts. Units
of the Trust are not deposits or obligations of, or guaranteed or endorsed by,
any bank and are not federally insured or otherwise protected by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency
and involve investment risk, including the possible loss of principal.
Distribution Options. Purchasers of Units who desire to receive distributions
on a monthly or semi-annual basis may elect to do so at the time of settlement
during the initial public offering period. See "Unitholder
Explanations--Settlement of Bonds in the Trusts--Change of Distribution
Option". The plan of distribution selected by such purchasers will remain
in effect until changed. Those indicating no choice will be deemed to have
chosen the monthly distribution plan. Record dates for monthly distributions
will be the first day of each month and record dates for semi-annual
distributions will be the first day of the months idicated under "Per Unit
Information"for the applicable Trust. Distributions will be made on the
fifteenth day of the month subsequent to the respective record dates.
Market for Units. Although not obligated to do so, the Sponsor, Van Kampen
American Capital Distributors, Inc., intends to, and certain of the other
Underwriters may, maintain a secondary market for the Units at prices based
upon the aggregate bid prices of the Securities in the respective Trusts plus
interest accrued to the date of settlement; however, during the initial
offering period such prices will be based upon the aggregate offering prices
of the Securities plus interest accrued to the date of settlement. If such a
market is not maintained and no other over-the-counter market is available, a
Unitholder will be able to dispose of his Units only through redemption at
prices based upon the bid prices of the underlying Securities plus interest
accrued to the date of settlement (see "Unitholder Explanations--Public
Offering--Redemption of Units"and "Unitholder Explanations--Public
Offering--Market for Units").
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. See "Unitholder Explanations--Public
Offering--Reinvestment Option".
Risk Factors. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the
inability of the issuer or an insurer to pay the principal of or interest on a
bond when due, volatile interest rates, early call provisions, and changes to
the tax status of the Bonds. See "Unitholder Explanations--Settlement of
Bonds in the Trusts--Risk Factors".
<TABLE>
INSURED MUNICIPALS INCOME TRUST
174th Insured Multi-Series
Summary of Essential Financial Information
At the Close of Business on the day before the Date of Deposit:
March 22, 1995
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
California Florida
IM-IT IM-IT
Intermediate Intermediate
Laddered California Laddered
GENERAL INFORMATION Maturity Trust IM-IT Trust Maturity Trust
<S> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust....................... $ 3,000,000 $ 3,035,000 $ 3,000,000
Number of Units........................................................... 3,000 3,060 3,000
Fractional Undivided Interest in the Trust per Unit....................... 1/3,000 1/3,060 1/3,000
Principal Amount (Par Value) of Securities per Unit <F1>.................. $ 1,000.00 $ 991.83 $ 1,000.00
Public Offering Price: ...................................................
Aggregate Offering Price of Securities in Portfolio...................... $ 2,973,287 $ 2,910,074 $ 2,992,205
Aggregate Offering Price of Securities per Unit.......................... $ 991.10 $ 951.00 $ 997.40
Sales Charge <F2>........................................................ $ 30.64 $ 49.00 $ 30.84
Public Offering Price per Unit <F3>...................................... $ 1,021.74 $ 1,000.00 $ 1,028.24
Redemption Price per Unit <F3>............................................ $ 983.58 $ 943.21 $ 990.22
Secondary Market Repurchase Price per Unit <F3>........................... $ 991.10 $ 951.00 $ 997.40
Excess of Public Offering Price per Unit Over Redemption Price per Unit... $ 38.16 $ 56.79 $ 38.02
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit........................................................... $ 7.52 $ 7.79 $ 7.18
Minimum Value of the Trust under which Trust Agreement may be
terminated............................................................... $ 600,000 $ 607,000 $ 600,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution..........$1.00 per Unit
First Settlement Date...................March 30, 1995
Evaluator's Annual Supervisory Fee......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee<F4>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a number
of units such that each unit represents approximately $1,000 principal amount
of underlying securities. The Sponsor, on the other hand, in determining the
number of Units for each Trust, other than IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short
Intermediate Trusts, has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price per Unit of $1,000. For IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, on the other hand, each unit represents
$1,000 principal amount of underlying securities in such Trust on the Date of
Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and in parenthesis as a percentage of the aggregate offering
price of the Securities, are as follows: a State Trust (other than a State
Intermediate Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT Limited
Maturity Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9% (4.058%);
an IM-IT Short Intermediate Trust or a State Intermediate Laddered Maturity
Trust - 3.0% (3.093%).
<F3>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally five
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units."
<F4>Such fee is based on the outstanding principal amount of Securities in each
Trust on the Date of Deposit for the first year and as of the close of
business on January 1 for each year thereafter.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
174th Insured Multi-Series
Summary of Essential Financial Information (Continued)
At the Close of Business on the day before the Date of Deposit:
March 22, 1995
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
New Jersey New York
GENERAL INFORMATION IM-IT Trust IM-IT Trust
<S> <C> <C>
Principal Amount (Par Value) of Securities in Trust.................................... $ 3,030,000 $ 2,985,000
Number of Units........................................................................ 3,091 3,036
Fractional Undivided Interest in the Trust per Unit.................................... 1/3,091 1/3,036
Principal Amount (Par Value) of Securities per Unit <F1>............................... $ 980.27 $ 983.20
Public Offering Price: ................................................................
Aggregate Offering Price of Securities in Portfolio................................... $ 2,939,571 $ 2,887,251
Aggregate Offering Price of Securities per Unit....................................... $ 951.01 $ 951.00
Sales Charge <F2>..................................................................... $ 48.99 $ 49.00
Public Offering Price per Unit <F3>................................................... $ 1,000.00 $ 1,000.00
Redemption Price per Unit <F3>......................................................... $ 943.57 $ 943.16
Secondary Market Repurchase Price per Unit <F3>........................................ $ 951.01 $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit................ $ 56.43 $ 56.84
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit... $ 7.44 $ 7.84
Minimum Value of the Trust under which Trust Agreement may be terminated.............. $ 606,000 $ 597,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution..........$1.00 per Unit
First Settlement Date...................March 30, 1995
Evaluator's Annual Supervisory Fee......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee<F4>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a number
of units such that each unit represents approximately $1,000 principal amount
of underlying securities. The Sponsor, on the other hand, in determining the
number of Units for each Trust, other than IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short
Intermediate Trusts, has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price per Unit of $1,000. For IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, on the other hand, each unit represents
$1,000 principal amount of underlying securities in such Trust on the Date of
Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and in parenthesis as a percentage of the aggregate offering
price of the Securities, are as follows: a State Trust (other than a State
Intermediate Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT Limited
Maturity Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9% (4.058%);
an IM-IT Short Intermediate Trust or a State Intermediate Laddered Maturity
Trust - 3.0% (3.093%).
<F3>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally five
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units."
<F4>Such fee is based on the outstanding principal amount of Securities in each
Trust on the Date of Deposit for the first year and as of the close of
business on January 1 for each year thereafter.
</TABLE>
SETTLEMENT OF BONDS IN THE TRUSTS
The Fund. Insured Municipals Income Trust, 174th Insured Multi-Series (the
"Fund"), was created under the laws of the State of New York pursuant
to a Trust Indenture and Agreement (the "Trust Agreement"), dated the
Date of Deposit, among Van Kampen American Capital Distributors, Inc., as
Sponsor, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., as Evaluator, and The Bank of New
York, as Trustee.
The Fund consists of five separate portfolios of delivery statements relating
to contracts to purchase interest-bearing obligations issued by or on behalf
of states and territories of the United States, and political subdivisions and
authorities thereof, the interest on which is, in the opinion of recognized
bond counsel to the issuing authorities, excludable from gross income for
Federal income tax under existing law. All issuers of Securities in a State
Trust are located in the State for which such Trust is named or in United
States territories or possessions and their public authorities; consequently,
in the opinion of recognized bond counsel to such State issuers, the related
interest earned on such Securities is exempt to the extent indicated from
state and local taxes of such State. With the exception of the New York and
Pennsylvania Trusts, Units of such Trusts may be purchased only by residents
of the State for which such Trust is named. Units of a New York Trust may be
purchased by residents of New York, Connecticut, Florida and Massachusetts.
Units of a Pennsylvania Trust may be purchased by residents of Pennsylvania,
Connecticut, Florida, Maryland, New York, Ohio and West Virginia. On the Date
of Deposit, the Sponsor deposited with the Trustee the aggregate principal
amount of Securities in each Trust as indicated under "General
Information--Principal Amount (Par Value) of Securities in Trust"in the
"Summary of Essential Financial Information". Such Securities consist
of delivery statements relating to contracts for the purchase of certain
interest-bearing obligations and cash, cash equivalents and/or irrevocable
letters of credit issued by a financial institution in the amount required for
such purchases. Thereafter, the Trustee, in exchange for the Securities so
deposited, delivered to the Sponsor the certificates evidencing the ownership
of the number of Units in each Trust as indicated under "Summary of
Essential Financial Information."Unless otherwise terminated as provided
herein, the Trust Agreement for any State Trust (other than a State
Intermediate Laddered Maturity Trust) will terminate at the end of the
calendar year prior to the fiftieth anniversary of its execution, and the
Trust Agreement for any IM-IT Limited Maturity Trust, IM-IT Intermediate
Trust, State Intermediate Laddered Maturity Trust or IM-IT Short Intermediate
Trust will terminate at the end of the calendar year prior to the twentieth
anniversary of its execution.
The portfolio of any State Trust (other than a State Intermediate Laddered
Maturity Trust) consists of Bonds maturing approximately 15 to 40 years from
the Date of Deposit. The approximate range of maturities from the Date of
Deposit for Bonds in any IM-IT Limited Maturity Trust, IM-IT Intermediate
Trust, State Intermediate Laddered Maturity Trust and IM-IT Short Intermediate
Trust is 12 to 15 years, 5 to 15 years, 5 to 10 years and 3 to 7 years,
respectively. The dollar-weighted average maturity of the Bonds in any IM-IT
Intermediate Trust, State Intermediate Laddered Maturity Trust and IM-IT Short
Intermediate Trust is less than or equal to 10 years, 10 years and 5 years,
respectively.
The portfolio of any State Intermediate Laddered Maturity Trust is structured
so that approximately 20% of the Bonds contained in such portfolio will mature
each year, commencing in approximately the fifth year of the Trust, entitling
each Unitholder to a return of principal. This return of principal may offer
Unitholders the opportunity to respond to changing economic conditions and to
specific financial needs that may arise between the fifth and tenth years of a
State Intermediate Laddered Maturity Trust. However, the flexibility provided
by the return of principal may at the same time eliminate a Unitholder's
ability to reinvest the amount returned at a rate as high as the implicit
yield on the obligations which matured.
The portfolios of the Trusts may consist of bonds that were acquired at a
market discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in such 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 bonds and the prepayment benefit
for lower yielding, discount bonds will be reduced. A bond purchased at a
market discount and held to maturity will have a larger portion of its total
return in the form of taxable income and capital gain and less in the form of
tax-exempt interest income than a comparable bond newly issued at current
market rates. See "Other Matters--Federal Tax Status."Market discount
attributable to interest changes does not indicate a lack of market confidence
in the issue. 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 in certain of the Trusts may be "zero coupon"
bonds. See footnote (6) in "Notes to Portfolios". 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 in certain of the Trusts may have been purchased on a
"when, as and if issued"or "delayed delivery"basis. See
footnote (5) in "Notes to Portfolios". The delivery of any such
Securities may be delayed or may not occur. Interest on these Securities
begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Securities are actually delivered to the Fund
after their respective expected dates of delivery, Unitholders who purchase
their Units prior to the date such Securities 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 Securities during the interval
between their purchase of Units and the actual delivery of such Securities. As
a result of any such adjustment, the Estimated Current Returns during the
first year would be slightly lower than those stated herein 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 under "Per Unit
Information"for the applicable Trust. Holders of the Units will be "
at risk"with respect to all Securities in the portfolios including "
when, as and if issued"and "delayed delivery"Securities (i.e.,
may derive either gain or loss from fluctuations in the evaluation of such
Securities) from the date they commit for Units. For a discussion of the
Sponsor's obligations in the event of the failure of any contract for the
purchase of any of the Securities and limited right to substitute other
tax-exempt bonds to replace any failed contract, see "Replacement
Bonds"below.
Each Unit initially offered represents the fractional undivided interest in
the principal and net income of a Trust indicated under "Summary of
Essential Financial Information". To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in a Trust
represented by each unredeemed Unit will increase, although the actual
interest in such Trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the Trustee by
Unitholders, which may include the Sponsor or the Underwriters, or until the
termination of the Trust Agreement.
Objectives and Securities Selection. The objectives of the Fund are income
exempt from Federal income taxation and, in the case of a State Trust, Federal
and state income taxation and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. A State
Intermediate Laddered Maturity Trust has additional objectives of providing
protection against changes in interest rates and investment flexibility
through an investment in a laddered portfolio of intermediate-term
interest-bearing obligations with maturities ranging from approximately 5 to
10 years in which roughly 20% of the obligations contained in such portfolio
will mature each year commencing in approximately the fifth year of the Trust.
There is, of course, no guarantee that the Trusts will achieve their
respective objectives. The Fund may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed income
securities with greater diversification than they might be able to acquire
individually. In addition, securities of the type deposited in the Fund are
often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Insured Trust has been obtained by such Trust
from either AMBAC Indemnity Corporation ("AMBAC Indemnity"), Financial
Guaranty Insurance Company ("Financial Guaranty"or "FGIC") or
a combination thereof (collectively, the "Portfolio Insurers"), or by
the issuer of such Bonds, by a prior owner of such Bonds, or by the Sponsor
prior to the deposit of such Bonds in such Trust from (1) AMBAC Indemnity or
one of its subsidiaries, American Municipal Bond Assurance Corporation ("
AMBAC") or MGIC Indemnity Corporation ("MGIC Indemnity"), (2)
Financial Guaranty, (3) Municipal Bond Investors Assurance Corporation ("
MBIA"), (4) Bond Investors Guaranty Insurance Company ("BIG"), (5)
National Union Fire Insurance Company of Pittsburgh, PA. ("National
Union"), (6) Capital Guaranty Insurance Company ("Capital Guaranty"
), (7) Capital Markets Assurance Corporation ("CapMAC") and/or (8)
Financial Security Assurance Inc. ("Financial Security"or "
FSA") (collectively, the "Preinsured Bond Insurers") (see "
Unitholder Explanations--Insurance on the Bonds in the Insured Trusts").
Insurance obtained by an Insured Trust is effective only while the Bonds thus
insured are held in such Trust. The Trustee has the right to acquire permanent
insurance from a Portfolio Insurer with respect to each Bond insured by the
respective Portfolio Insurer under a Trust portfolio insurance policy.
Insurance relating to Bonds insured by the issuer, by a prior owner of such
Bonds or by the Sponsor is effective so long as such Bonds are outstanding.
Bonds insured under a policy of insurance obtained by the issuer, by a prior
owner of such Bonds or by the Sponsor from one of the Preinsured Bond Insurers
(the "Preinsured Bonds") are not additionally insured by an Insured
Trust. No representation is made as to any insurer's ability to meet its
commitments.
Neither the Public Offering Price nor any evaluation of Units for purposes of
repurchases or redemptions reflects any element of value for the insurance
obtained by an Insured Trust, if any, unless Bonds are in default in payment
of principal or interest or in significant risk of such default. See "
Unitholder Explanations--Public Offering--Offering Price". On the other
hand, the value, if any, of Preinsured Bond insurance is reflected and
included in the market value of such Bonds.
In order for bonds to be eligible for insurance, they must have credit
characteristics which would qualify them for at least the Standard & Poor's
Ratings Group ("Standard & Poor's") rating of "BBB-"or at
least the Moody's Investors Service, Inc. rating of "Baa", which in
brief represent the lowest ratings for securities of investment grade (see
"Other Matters--Description of Securities Ratings"). Insurance is not
a substitute for the basic credit of an issuer, but supplements the existing
credit and provides additional security therefor. If an issue is accepted for
insurance, a non-cancellable policy for the prompt payment of interest and
principal on the bonds, when due, is issued by the insurer. Any premium or
premiums relating to Preinsured Bond insurance is paid by the issuer, by a
prior owner of such Bonds or by the Sponsor and a monthly premium is paid by
an Insured Trust for the portfolio insurance, if any, obtained by such Trust.
The Trustee has the right to obtain permanent insurance from a Portfolio
Insurer in connection with the sale of a Bond insured under the insurance
policy obtained from the respective Portfolio Insurer by an Insured Trust upon
the payment of a single predetermined insurance premium 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. All Bonds insured by the Portfolio Insurers
and the Preinsured Bond Insurers receive a "AAA"rating by Standard &
Poor's. See "Unitholder Explanations--Insurance on the Bonds in the
Insured Trusts".
In selecting Securities for the Trusts the following facts, among others, were
considered by the Sponsor: (a) either the Standard & Poor's rating of the
Securities was in no case less than "BBB-"in the case of the Insured
Trusts, or the Moody's Investors Service, Inc. rating of the Securities was in
no case less than "Baa"in the case of the Insured Trusts, including
provisional or conditional ratings, respectively, or, if not rated, the
Securities had, in the opinion of the Sponsor, credit characteristics
sufficiently similar to the credit characteristics of interest-bearing
tax-exempt obligations that were so rated as to be acceptable for acquisition
by the Fund (see "Other Matters--Description of Securities Ratings"),
(b) the prices of the Securities relative to other bonds of comparable quality
and maturity, (c) the diversification of Securities as to purpose of issue and
location of issuer and (d) with respect to the Insured Trusts, the
availability and cost of insurance for the prompt payment of principal and
interest, when due, on the Securities. Subsequent to the Date of Deposit, a
Security may cease to be rated or its rating may be reduced below the minimum
required as of the Date of Deposit. Neither event requires elimination of such
Security from the portfolio of a Trust but may be considered in the Sponsor's
determination as to whether or not to direct the Trustee to dispose of the
Security (see "Trust Administration--Fund Administration and
Expenses--Portfolio Administration").
To the best knowledge of the Sponsor, there is no litigation pending as of the
Date of Deposit in respect of any Securities 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 Securities 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
Securities 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 Security on the date of issuance to the effect that such Securities
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 Securities.
Risk Factors. Certain of the Bonds in certain of the Trusts may be general
obligations of a governmental entity that are backed by the taxing power of
such entity. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which
such an investment may entail. 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. See
"General"for each Trust.
Certain of the Bonds in certain of the Trusts 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. In view of this an investment in such a
Trust should be made with an understanding of the characteristics of such
issuers and the risks which such an investment may entail. 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. See "
General"for each Trust.
Certain of the Bonds in certain of the Trusts may be health care revenue
bonds. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. Ratings of bonds issued for health care facilities
are often based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net income
available for debt service may be affected by future events and conditions
including, among other things, demand for services and the ability of the
facility to provide the services required, physicians' confidence in the
facility, management capabilities, competition with other health care
facilities, efforts by insurers and governmental agencies to limit rates,
legislation establishing state rate-setting agencies, expenses, the cost and
possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, government regulation
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar third
party payor programs. Pursuant to recent Federal legislation, Medicare
reimbursements are currently calculated on a prospective basis utilizing a
single nationwide schedule of rates. Prior to such legislation Medicare
reimbursements were based on the actual costs incurred by the health facility.
The current legislation may adversely affect reimbursements to hospitals and
other facilities for services provided under the Medicare program. Such
adverse changes also may adversely affect the ratings of Securities held in
the portfolios of the Fund; however, because of the insurance obtained by each
of the Insured Trusts, the "AAA"rating of the Units of each of the
Insured Trusts would not be affected. See "General"for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of public
utility issuers, including those selling wholesale and retail electric power
and gas. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. General problems of such issuers would include the
difficulty in financing large construction programs in an inflationary period,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital market in
absorbing utility debt, the difficulty in obtaining fuel at reasonable prices
and the effect of energy conservation. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds in the portfolio to make
payments of principal and/or interest on such Bonds. See "General"for
each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
whose revenues are derived from the sale of water and/or sewerage services. In
view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. 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. All of such issuers have been
experiencing certain of these problems in varying degrees. See "
General"for each Trust.
Certain of the Bonds in certain of the Trusts may be industrial revenue bonds
("IRBs"). In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. 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. See "General"for each Trust.
Certain of the Bonds in certain of the Trusts 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. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. 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. See "General"for each Trust.
Certain of the Bonds in certain of the Trusts 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. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which
such an investment may entail. 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. All of such
issuers have been experiencing certain of these problems in varying degrees.
See "General"for each Trust.
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. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. The major portion of an
airport's gross operating income is generally derived from fees received from
signatory airlines pursuant to use agreements which consist of annual payments
for leases, occupancy of certain terminal space and service fees. Airport
operating income may therefore be affected by the ability of the airlines to
meet their obligations under the use agreements. The air transport industry is
experiencing significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing severe
financial difficulties. The Sponsor cannot predict what effect these industry
conditions may have on airport revenues which are dependent for payment on the
financial condition of the airlines and their usage of the particular airport
facility. Similarly, payment on Bonds related to other facilities is dependent
on revenues from the projects, such as user fees from ports, tolls on
turnpikes and bridges and rents from buildings. Therefore, payment may be
adversely affected by reduction in revenues due to such factors as increased
cost of maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents. See
"General"for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the operation of resource
recovery facilities. In view of this an investment in such a Trust should be
made with an understanding of the characteristics of such issuers and the
risks which such an investment may entail. 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; 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 such a Trust prior to the stated
maturity of the Bonds. See "General"for each Trust.
Replacement Bonds. Because certain of the Securities in the Fund may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can be
given that any Trust will retain for any length of time its present size and
composition. Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Security. In the event of a failure
to deliver any Security that has been purchased for the Fund under a contract,
including those Securities purchased on a "when, as and if issued"
basis ("Failed Bonds"), the Sponsor is authorized under the Trust
Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds") to make up the original corpus of the Fund.
The Replacement Bonds must be purchased within 20 days after delivery of the
notice of the failed contract and the purchase price (exclusive of accrued
interest) may not exceed the amount of funds reserved for the purchase of the
Failed Bonds. The Replacement Bonds (i) must be tax-exempt bonds issued by
states or territories of the United States or political subdivisions thereof
and, in the case of replacement of bonds in a State Trust, shall have the
benefit of an exemption from state taxation of interest to an extent equal to
or greater than that of the bonds they replace, (ii) must have a fixed
maturity date of at least 10 years in the case of a State Trust (other than a
State Intermediate Laddered Maturity Trust) or, in the case of an IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity or
IM-IT Short Intermediate Trust, must have a fixed maturity date within the
range set forth under "Unitholder Explanations--Settlement of Bonds in the
Trusts--The Fund", (iii) must be purchased at a price that results in a
yield to maturity and in a current return, in each case as of the Date of
Deposit, at least equal to that of the Failed Bonds, (iv) shall not be "
when, as and if issued"bonds, (v) must be rated "BBB-"or better
in the case of the Insured Trusts by Standard & Poor's or "Baa"or
better in the case of the Insured Trusts by Moody's Investors Service, Inc.
and (vi) with respect to each Insured Trust, must be insured by one of the
Preinsured Bond Insurers or be eligible for (and when acquired be insured
under) the insurance obtained by such Insured Trust. Whenever a Replacement
Bond has been acquired for the Fund, the Trustee shall, within five days
thereafter, notify all Unitholders of the affected Trust of the acquisition of
the Replacement Bond and shall, on the next monthly distribution date which is
more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to the affected Trust of the Failed Bond exceeded the
cost of the Replacement Bond plus accrued interest. Once the original corpus
of a Trust is acquired, the Trustee will have no power to vary the investment
of the Trust; i.e., the Trust will have no managerial power to take advantage
of market variation to improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Bonds to all Unitholders of the affected Trust and distribute the principal
and accrued interest (at the coupon rate of such Failed Bonds to the date the
Failed Bonds are removed from the Fund) attributable to such Failed Bonds not
more than 30 days after such removal or such earlier time as the Trustee in
its sole discretion deems to be in the interest of the Unitholders. All such
interest paid to a Unitholder which accrued after the expected date of
settlement for purchase of his Units will be paid by the Sponsor and
accordingly will not be treated as tax-exempt income. In the event a
Replacement Bond should not be acquired by the Fund, the Estimated Net Annual
Interest Income per Unit for the affected Trust would be reduced and the
Estimated Current Return and Estimated Long-Term Return thereon might be
lowered. In addition, Unitholders should be aware that they may not be able at
the time of receipt of such principal to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such proceeds
were earning to Unitholders in the affected Trust.
Bond Redemptions. Certain of the Bonds in certain of the Trusts 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 "Portfolio"for each Trust and footnote (3)
in the "Notes to Portfolios". See also the discussion of single family
mortgage and multi-family revenue bonds above for more information on the call
provisions of such bonds.
Distributions. Distributions of interest received by the Fund, pro rated on an
annual basis, will be made on a monthly basis, unless the Unitholder elects to
receive them semi-annually. The first such distribution will be in the amount
indicated under "Per Unit Information"for the applicable Trust and
will be made on the fifteenth day of the month indicated under "Initial
Distribution"therein to Unitholders of record on the first day of such
month. The first distribution of funds from the Principal Account, if any,
will be made on the first semi-annual distribution date to Unitholders of
record on the first semi-annual record date, and thereafter such distributions
will be made on a semi-annual basis, except under certain special
circumstances (see "Unitholder Explanations--Public Offering
-Distributions of Interest and Principal").
Change of Distribution Option. The plan of distribution selected by a
Unitholder will remain in effect until changed. Unitholders purchasing Units
in the secondary market will initially receive distributions in accordance
with the election of the prior owner. Unitholders may change the plan of
distribution in which they are participating. For convenience of Unitholders,
the Trustee will furnish a card for this purpose; cards may also be obtained
upon request from the Trustee. Unitholders desiring to change their plan of
distribution may so indicate on the card and return it together with their
certificate and such other documentation that the Trustee may then require, to
the Trustee. Certificates should only be sent by registered or certified mail
to minimize the possibility of their being lost or stolen. If the card and
certificate are properly presented to the Trustee, the change will become
effective as of the opening of buisness on the first day after the next
succeeding semi-annual record date and will be effective, unless further
changed, for all subsequent distributions.
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of each Trust is evidenced by separate registered
certificates executed by the Trustee and the Sponsor. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unitholder
must sign exactly as his name appears on the face of the certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guaranty program
in addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. In certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority. Certificates will be issued in denominations of one Unit or any
multiple thereof. Certificates for Units will bear appropriate notations on
their face indicating which plan of distribution has been selected in respect
thereof. If a change in the plan of distribution is made, the existing
certificate must be surrendered to the Trustee and a new certificate will be
issued, at no charge to the Unitholder, to reflect the currently effective
plan of distribution.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate re-issued (other than
as a result of a change in plan of distribution) or transferred and to pay any
governmental charge that may be imposed in connection with each such transfer
or interchange. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity, evidence of
ownership and payment of expenses incurred. Mutilated certificates must be
surrendered to the Trustee for replacement.
ESTIMATED CURRENT RETURNS AND ESTIMATED LONG-TERM RETURNS
As of the close of business on the day before the Date of Deposit the
Estimated Current Returns and the Estimated Long-Term Returns, under the
monthly and semi-annual distribution plans, were as set forth in the "Per
Unit Information"for each Trust. Estimated Current Return is calculated
by dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. Estimated
Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in a Trust and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of a Trust will change, there
is no assurance that the present Estimated Long-Term Return will be realized
in the future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while the
Estimated Current Return calculation includes only net annual interest income
and Public Offering Price.
In order to acquire certain of the Securities contracted for by the Sponsor
for deposit in the Fund, it may be necessary for the Sponsor or Trustee to pay
on the settlement dates for delivery of such Securities amounts covering
accrued interest on such Securities which exceed the amounts which will be
made available through cash furnished by the Sponsor on the Date of Deposit,
which amount of cash may exceed the interest which would accrue to the First
Settlement Date. The Trustee has agreed to pay for any amounts necessary to
cover any such excess and will be reimbursed therefor, when funds become
available from interest payments on the particular Securities with respect to
which such payments may have been made. Also, since interest on any "when,
as and if issued"Securities does not begin accruing as tax-exempt
interest income to the benefit of Unitholders until their respective dates of
delivery, the Trustee may, in order to maintain (or in some cases approach)
for the Unitholders the same estimated net annual interest incomes during the
first year of the Trusts' operations as is indicated under "Per Unit
Information"for the applicable Trust, reduce its fee (and to the extent
necessary pay Trust expenses) in an amount equal to that indicated under "
Per Unit Information"for the applicable Trust.
INTEREST EARNING SCHEDULE
Calculation of Estimated Net Annual Interest Income. The estimated net annual
interest income is based on 360 days. To account for the estimated net annual
interest income per Unit in a Trust, it is necessary to use the following
information.
The beginning interest date for each Trust is March 30, 1995. The first record
date for each Trust (May 1, 1995) is 31 days from such date. The daily rates
of estimated net annual interest income per Unit accrued on a monthly basis
are $.12893, $.15314, $.12829, $.15153 and $.15283 for the California IM-IT
Intermediate Laddered Maturity, California IM-IT, Florida IM-IT Intermediate
Laddered Maturity, New Jersey IM-IT and New York IM-IT Trusts, respectively.
This amounts to $4.00, $4.75, $3.98, $4.70 and $4.74 for the California IM-IT
Intermediate Laddered Maturity, California IM-IT, Florida IM-IT Intermediate
Laddered Maturity, New Jersey IM-IT and New York IM-IT Trusts, respectively.
Utilizing the preceding information assuming the monthly payment option, the
following procedure illustrates the calculation of first year estimated net
annual interest income per Unit for the California IM-IT Trust:
The California IM-IT Trust accrues
$4.75 to the first record date plus
$46.00 which is 10 normal distributions at $4.60, and finally adding
$4.39 which has accrued from March 1, 1996 until March 30, 1996 which
completes the 360 day cycle (29 days times the daily factor)
Total $55.14 interest earned /$1,000.00 (Date of Deposit Public Offering
Price) = 5.51% Estimated Current Return as of the Date of Deposit.
ACCRUED INTEREST
Accrued Interest. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling subsequent to the First Settlement Date, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of the Trust the amount, if any, of accrued interest
paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid by Unitholders, the Trustee will advance the amount of accrued
interest to the Sponsor as the Unitholder of record as of the First Settlement
Date. Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. See "Public
Offering--Distributions of Interest and Principal."
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholder
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the funds held in the Interest Account
for distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits thereby.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the offering prices of
the Securities in each Trust and includes a sales charge of 4.9% of the Public
Offering Price (5.152% of the aggregate offering price of the Securities) for
a State Trust (other than a State Intermediate Laddered Maturity Trust), 4.3%
of the Public Offering Price (4.493% of the aggregate offering price of the
Securities) for an IM-IT Limited Maturity Trust, 3.9% of the Public Offering
Price (4.058% of the aggregate offering price of the Securities) for an IM-IT
Intermediate Trust and 3.0% of the Public Offering Price (3.093% of the
aggregate offering price of the Securities) for an IM-IT Short Intermediate
Trust or a State Intermediate Laddered Maturity Trust. After the initial
public offering period, the secondary market Public Offering Price is based on
the bid prices of the Securities in each Trust and includes a sales charge
determined in accordance with the table set forth below, which is based upon
the dollar weighted average maturity of each Trust plus in each case accrued
interest, if any. For purposes of computation, Bonds will be deemed to mature
on their expressed maturity dates unless: (a) the Bonds have been called for
redemption or funds or securities have been placed in escrow to redeem them on
an earlier call date, in which case such call date will be deemed to be the
date upon which they mature; or (b) such Bonds are subject to a "mandatory
tender", in which case such mandatory tender will be deemed to be the date
upon which they mature.
The effect of this method of sales charge computation will be that different
sales charge rates will be applied to each Trust based upon the dollar
weighted average maturity of such Trust's Portfolio, in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years To Maturity Sales Charge Years To Maturity Sales Charge
<S> <C> <C> <C>
1 1.523 % 9 4.712%
2 2.041 10 4.932
3 2.564 11 4.932
4 3.199 12 4.932
5 3.842 13 5.374
6 4.058 14 5.374
7 4.275 15 5.374
8 4.493 16 to 30 6.045
</TABLE>
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Securities in a Trust. Expressed as a percent of
the Public Offering Price, the sales charge on a Trust consisting entirely of
a portfolio of Bonds with 15 years to maturity would be 5.10%. The sales
charge applicable to quantity purchases during the initial offering period is,
however, reduced on a graduated basis to any person acquiring 100 or more
Units as follows:
<TABLE>
<CAPTION>
Dollar Amount of Sales
Charge Reduction Per Unit
State
(other than a
State Intermediate
Laddered Maturity
Aggregate Number of Trust) and National
Units Purchased Quality Trusts Other Trusts
<S> <C> <C>
100-249 Units......... $ 4.00 $ 4.00
250-499 Units......... $ 6.00 $ 6.00
500-999 Units......... $ 14.00 $ 9.00
1,000 or more Units... $ 19.00 $ 11.00
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for such quantity purchases. See "Public
Offering--Unit Distribution". This reduced sales charge structure will
apply on all purchases by the same person from any one Underwriter or dealer
of units of Van Kampen American Capital-sponsored unit investment trusts which
are being offered in the initial offering period (a) on any one day (the "
Initial Purchase Date") or (b) on any day subsequent to the Initial
Purchase Date, if (1) the units purchased are of a unit investment trust
purchased on the Initial Purchase Date, and (2) the person purchasing the
units purchased a sufficient amount of units on the Initial Purchase Date to
qualify for a reduced sales charge on such date. In the event units of more
than one trust are purchased on the Initial Purchase Date, the aggregate
dollar amount of such purchases will be used to determine whether purchasers
are eligible for a reduced sales charge. Such aggregate dollar amount will be
divided by the public offering price per unit (on the day preceding the date
of purchase) of each respective trust purchased to determine the total number
of units which such amount could have purchased of each individual trust.
Purchasers must then consult the applicable trust's prospectus to determine
whether the total number of units which could have been purchased of a
specific trust would have qualified for a reduced sales charge and, if so
qualified, the amount of such reduction. Assuming a purchaser qualifies for a
sales charge reduction or reductions, to determine the applicable sales charge
reduction or reductions it is necessary to accumulate all purchases made on
the Initial Purchase Date and all purchases made in accordance with (b) above.
Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser under 21 years of age
will be deemed for the purposes of calculating the applicable sales charge to
be additional purchases by the purchaser. The reduced sales charges will also
be applicable to a trustee or other fiduciary purchasing securities for one or
more trust estate or fiduciary accounts. Employees of Van Kampen American
Capital Distributors, Inc. and its subsidiaries may purchase Units of the
Trust at the current Public Offering Price less the underwriting commission
during the initial offering period, and less the dealer's concession for
secondary market transactions. Registered representatives of selling
Underwriters may purchase Units of the Fund at the current Public Offering
Price less the underwriting commission during the initial offering period, and
less the dealer's concession for secondary market transactions. Registered
representatives of selling brokers, dealers, or agents may purchase Units of
the Fund at the current Public Offering Price less the dealer's concession
during the initial offering period and for secondary market transactions.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Trust
Administration--General--Unit Distribution") by (1) investors who purchase
Units through registered investment advisers, certified financial planners and
registered broker-dealers who in each case either charge periodic fees for
financial planning, investment advisory or asset management services, or
provide such services in connection with the establishment of an investment
account for which a comprehensive "wrap fee"charge is imposed, (2)
bank trust departments investing funds over which they exercise exclusive
discretionary investment authority and that are held in a fiduciary, agency,
custodial or similar capacity, (3) any person who for at least 90 days, has
been an officer, director or bona fide employee of any firm offering Units for
sale to investors or their immediate family members (as described above) and
(4) officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything
to the contrary in this Prospectus, such investors, bank trust departments,
firm employees and bank holding company officers and directors who purchase
Units through this program will not receive sales charge reductions for
quantity purchases.
Offering Price. Public Offering Price of the Units will vary from the amounts
stated under "Summary of Essential Financial Information"in
accordance with fluctuations in the prices of the underlying Securities in
each Trust.
As indicated above, the price of the Units as of the date the Securities were
deposited in each Trust was determined by adding to the aggregate offering
price of the Securities of a Trust an amount equal to the applicable sales
charge expressed as a percentage of the aggregate offering price of the
Securities and dividing the sum so obtained by the number of Units
outstanding. This computation produced a gross underwriting commission equal
to such sales charge expressed as a percentage of the Public Offering Price.
Such price determination as of the close of business on the day before the
Date of Deposit was made on the basis of an evaluation of the Securities in
each Trust prepared by Interactive Data Services, Inc., a firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities. After the close of business on the day before the Date of Deposit
and during the period of initial offering, the Evaluator will appraise or
cause to be appraised daily the value of the underlying Securities of each
Trust as of 4:00 P.M. Eastern time on days the New York Stock Exchange is open
for business and will adjust the Public Offering Price of the Units
commensurate with such appraisal. Such Public Offering Price will be effective
for all orders received at or prior to 4:00 P.M. Eastern time on each such
day. Orders received by the Trustee, Sponsor or any Underwriter for purchases,
sales or redemptions after that time, or on a day when the New York Stock
Exchange is closed, will be held until the next determination of price. For
secondary market sales the Public Offering Price per Unit will be equal to the
aggregate bid price of the Securities in the Trust plus an amount equal to the
applicable secondary market sales charge expressed as a percentage of the
aggregate bid price of the Securities and dividing the sum so attained by the
number of Units then outstanding. This computation produces a gross commission
equal to such sales charge expressed as a percentage of the Public Offering
Price. For secondary market purposes such appraisal and adjustment with
respect to a Trust will be made by the Evaluator as of 4:00 P.M. Eastern time
on days in which the New York Stock Exchange is open for each day on which any
Unit of such Trust is tendered for redemption, and it shall determine the
aggregate value of any Trust as of 4:00 P.M. Eastern time on such other days
as may be necessary.
The aggregate price of the Securities in each Trust has been and will be
determined on the basis of bid prices or offering prices, as is appropriate,
(a) on the basis of current market prices for the Securities obtained from
dealers or brokers who customarily deal in bonds comparable to those held by
the Fund; (b) if such prices are not available for any particular Securities,
on the basis of current market prices for comparable bonds; (c) by causing the
value of the Securities to be determined by others engaged in the practice of
evaluation, quoting or appraising comparable bonds; or (d) by any combination
of the above. Market prices of the Securities will generally fluctuate with
changes in market interest rates. Unless Bonds are in default in payment of
principal or interest or in significant risk of such default, the Evaluator
will not attribute any value to the insurance obtained by an Insured Trust, if
any.
The Evaluator will consider in its evaluation of Bonds which are in default in
payment of principal or interest or, in the Sponsor's opinion, in significant
risk of such default (the "Defaulted Bonds") the value of the
insurance guaranteeing interest and principal payments. The value of the
insurance will be equal to the difference between (i) the market value of
Defaulted Bonds assuming the exercise of the right to obtain Permanent
Insurance (less the insurance premiums and related expenses attributable to
the purchase of Permanent Insurance) and (ii) the market value of such
Defaulted Bonds not covered by Permanent Insurance. In addition, the Evaluator
will consider the ability of the affected Portfolio Insurer to meet its
commitments under any Trust insurance policy, including the commitments to
issue Permanent Insurance. It is the position of the Sponsor that this is a
fair method of valuing the Bonds and the insurance obtained by an Insured
Trust and reflects a proper valuation method in accordance with the provisions
of the Investment Company Act of 1940.
No value has been ascribed to insurance obtained by an Insured Trust, if any,
as of the date of this Prospectus.
The initial or primary Public Offering Price of the Units is equal to the
offering price per Unit of the underlying Securities in each Trust plus the
applicable sales charge plus interest accrued but unpaid from the First
Settlement Date to the date of settlement. The secondary market Public
Offering Price is equal to the bid price per Unit of the Securities in each
Trust plus the applicable sales charge plus accrued interest. The offering
price of Securities in each Trust may be expected to average approximately
0.5%-1% more than the bid price of such Securities. On the Date of Deposit,
the offering side evaluations of the Securities in the Trusts were higher than
the bid side evaluations of such Securities by the respective amounts
indicated under footnote (5) in "Notes to Portfolios".
Although payment is normally made five business days following the order for
purchase, payment may be made prior thereto. A person will become the owner of
Units on the date of settlement provided payment has been received. Cash, if
any, made available to the Sponsor prior to the date of settlement for the
purchase of Units may be used in the Sponsor's business and may be deemed to
be a benefit to the Sponsor, subject to the limitations of the Securities
Exchange Act of 1934. Delivery of certificates representing Units so ordered
will be made five business days following such order or shortly thereafter.
See "Redemption of Units"below for information regarding the ability
to redeem Units ordered for purchase.
Market for Units. During the initial public offering period, the Sponsor
and/or certain of the Underwriters intend to offer to purchase Units at a
price equivalent to the Public Offering Price which is based upon the
aggregate offering price per Unit of the underlying Securities in each Trust
plus accrued interest to the date of settlement less the related sales
commission. Afterward, although they are not obligated to do so, the Sponsor
intends to, and certain of the other Underwriters may, maintain a market for
the Units offered hereby and to offer continuously to purchase such Units at
prices, subject to change at any time, based upon the aggregate bid prices of
the Securities in the portfolio of each Trust plus interest accrued to the
date of settlement and plus any principal cash on hand, less any amounts
representing taxes or other governmental charges payable out of the Trust and
less any accrued Trust expenses. If the supply of Units exceeds demand or if
some other business reason warrants it, the Sponsor and/or the Underwriters
may either discontinue all purchases of Units or discontinue purchases of
Units at such prices. In the event that a market is not maintained for the
Units and the Unitholder cannot find another purchaser, a Unitholder of any
Trust desiring to dispose of his Units may be able to dispose of such Units
only by tendering them to the Trustee for redemption at the Redemption Price,
which is based upon the aggregate bid price of the Securities in the portfolio
of such Trust plus any accrued interest. The aggregate bid prices of the
underlying Securities in a Trust are expected to be less than the related
aggregate offering prices. See "Redemption of Units"below. A
Unitholder who wishes to dispose of his Units should inquire of his broker as
to current market prices in order to determine whether there is in existence
any price in excess of the Redemption Price and, if so, the amount thereof.
Distributions of Interest and Principal. Interest received by the Fund,
including that part of the proceeds of any disposition of Securities which
represents accrued interest, is credited by the Trustee to the Interest
Account for the appropriate Trust. Other receipts are credited to the
Principal Account for the appropriate Trust. Interest received by the Fund
after deduction of amounts sufficient to reimburse the Trustee, without
interest, for any amounts advanced and paid to the Sponsor as the Unitholder
of record as of the First Settlement Date (see "Public Offering--Offering
Price"above) will be distributed on or shortly after the fifteenth day of
each month on a pro rata basis to Unitholders of record of a Trust as of the
preceding record date who are entitled to distributions at that time under the
plan of distibutions chosen. All distributions will be net of applicable
expenses. The pro rata share of cash in the Principal Account of a Trust will
be computed as of the date set forth under "Per Unit Information"for
the applicable Trust, and thereafter as of the semi-annual record date, and
distributions to the Unitholders as of such record date will be made on or
shortly after the fifteenth day of such month. Proceeds received from the
disposition of any of the Securities after such record date and prior to the
following distribution date will be held in the Principal Account and not
distributed until the next distribution date. The Trustee is not required to
pay interest on funds held in any Principal or Interest Account (but may
itself earn interest thereon and therefore benefits from the use of such
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution therein shall equal at least $1.00 per Unit.
However, should the amount available for distribution in the Principal Account
equal or exceed $10.00 per Unit, the Trustee will make a special distribution
from the Principal Account on the next succeeding monthly distribution date to
holders of record on the related monthly record date.
The distribution to the Unitholders of a Trust as of each record date after
the First Settlement Date will be made on the following distribution date or
shortly thereafter and shall consist of an amount substantially equal to such
portion of the Unitholder's pro rata share of the estimated net annual
interest income in the Interest Account of such Trust after deducting
estimated expenses attributable as is consistent with the distribution plan
chosen. Because interest payments are not received by the Fund at a constant
rate throughout the year, such interest distribution may be more or less than
the amount credited to such Interest Account as of the record date. For the
purpose of minimizing fluctuations in the distributions from an Interest
Account, the Trustee is authorized to advance such amounts as may be necessary
to provide interest distributions of approximately equal amounts. The Trustee
shall be reimbursed for any such advances from funds in the applicable
Interest Account on the ensuing record date. Persons who purchase Units
between a record date and a distribution date will receive their first
distribution on the second distribution date after the purchase, under the
applicable plan of distribution.
As of the first day of each month, the Trustee will deduct from the Interest
Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Fund (as
determined on the basis set forth under "Trust Administration--Fund
Administration and Expenses"). The Trustee also may withdraw from said
Accounts such amounts, if any, as it deems necessary to establish a reserve
for any governmental charges payable out of the Fund. Amounts so withdrawn
shall not be considered a part of the Fund's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
Accounts. In addition, the Trustee may withdraw from the Interest and
Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Bonds and redemptions of Units by the Trustee.
Reinvestment Option. Unitholders of all unit investment trusts sponsored by
Van Kampen American Capital Distributors, Inc. (except Unitholders of a New
York IM-IT Trust or a New York IM-IT Intermediate Laddered Maturity Trust),
may elect to have each distribution of interest income, capital gains and/or
principal on their Units automatically reinvested in shares of any of the open
ended mutual funds (except for B shares) listed under "Trust
Administration--Sponsor"which are registered in the Unitholder's state of
residence. New York IM-IT Trust and New York IM-IT Intermediate Laddered
Maturity Trust Unitholders, other than those residing in the Commonwealth of
Massachusetts, may elect to have each distribution of interest income, capital
gains and/or principal on their Units automatically reinvested in shares of
First Investors New York Insured Tax Free Fund, Inc., a fund which invests
primarily in securities exempt from federal and New York state and city income
tax. Such mutual funds are hereinafter collectively referred to as the "
Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each
Reinvestment Fund describes the investment policies of such fund and sets
forth the procedures to follow to commence reinvestment. A Unitholder may
obtain a prospectus for the respective Reinvestment Funds from Van Kampen
American Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181. Texas residents who desire to reinvest may request that a
broker-dealer registered in Texas send the prospectus relating to the
respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units
will, on the applicable distribution date, automatically be applied, as
directed by such person, as of such distribution date by the Trustee to
purchase shares (or fractions thereof) of the applicable Reinvestment Fund at
a net asset value as computed as of the close of trading on the New York Stock
Exchange on such date, plus a sales charge of $1.00 per $100 of reinvestment
except if the participant selects the First Investors New York Insured Tax
Free Fund, Inc., in which case the sales charge will be $1.50 per $100 of
reinvestment, or except if the participant selects the Van Kampen Merritt
Money Market Fund, the Van Kampen Merritt Tax Free Money Fund, the Van Kampen
Merritt Florida Insured Tax Free Income Fund, the Van Kampen Merritt New
Jersey Tax Free Income Fund, or the Van Kampen Merritt New York Tax Free
Income Fund, in which case no sales charge applies. A minimum of one-half of
such sales charge would be paid to Van Kampen American Capital Distributors,
Inc. for all Reinvestment Funds except First Investors New York Insured Tax
Free Fund, Inc., in which case such sales charge would be paid to First
Investors Management Company, Inc.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next succeeding
distribution date, by so notifying the Trustee in writing, elect to terminate
his or her reinvestment plan and receive future distributions of his or her
Units in cash. There will be no charge or other penalty for such termination.
Each Reinvestment Fund, its sponsor and investment adviser shall have the
right to terminate at any time the reinvestment plan relating to such fund.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee, at its Unit Investment Trust Division, 101 Barclay
Street, 20th Floor, New York, New York 10286, of the certificates representing
the Units to be redeemed, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
as in connection with lost, stolen or destroyed certificates) and by payment
of applicable governmental charges, if any. Thus, redemption of Units cannot
be effected until certificates representing such Units have been delivered to
the person seeking redemption or satisfactory indemnity provided. No
redemption fee will be charged. On the seventh calendar day following such
tender, or if the seventh calendar day is not a business day, on the first
business day prior thereto, the Unitholder will be entitled to receive in cash
an amount for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date of
tender"is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after 4:00 P.M. Eastern time on
days of trading on the New York Stock Exchange, the date of tender is the next
day on which such Exchange is open for trading and such Units will be deemed
to have been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day.
Under regulations issued by the Internal Revenue Service, the Trustee will be
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, such Unitholder should provide a tax identification
number to the Trustee in order to avoid this possible "back-up
withholding"in the event the Trustee has not been previously provided
such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of such Trust or, if the balance therein is insufficient, from the
Principal Account of such Trust. All other amounts will be withdrawn from the
Principal Account of such Trust. The Trustee is empowered to sell underlying
Securities of a Trust in order to make funds available for redemption. Units
so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the bid price of the Securities in
each Trust, while the initial and primary Public Offering Price of Units will
be determined on the basis of the offering price of the Securities in each
Trust, as of 4:00 P.M. Eastern time on days of trading on the New York Stock
Exchange on the date any such determination is made. On the Date of Deposit
the Public Offering Price per Unit (which is based on the offering prices of
the Bonds in each Trust and includes the sales charge) exceeded the value at
which Units could have been redeemed (based upon the current bid prices of the
Securities in such Trust) by the amount shown under "Summary of Essential
Financial Information". While the Trustee has the power to determine the
Redemption Price per Unit when Units are tendered for redemption, such
authority has been delegated to the Evaluator which determines the price per
Unit on a daily basis. The Redemption Price per Unit is the pro rata share of
each Unit in each Trust on the basis of (i) the cash on hand in such Trust or
moneys in the process of being collected, (ii) the value of the Securities in
such Trust based on the bid prices of the Securities therein, except for cases
in which the value of insurance has been included, (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental charges
payable out of such Trust and (b) the accrued expenses of such Trust. The
Evaluator may determine the value of the Securities in each Trust by employing
any of the methods set forth in "Public Offering--Offering Price". In
determining the Redemption Price per Unit no value will be assigned to the
portfolio insurance maintained on the Bonds in an Insured Trust unless such
Bonds are in default in payment of principal or interest or in significant
risk of such default. For a description of the situations in which the
Evaluator may value the insurance obtained by the Insured Trusts, see "
Public Offering--Offering Price"above.
The price at which Units may be redeemed could be less than the price paid by
the Unitholder and may be less than the par value of the Securities
represented by the Units so redeemed. As stated above, the Trustee may sell
Securities to cover redemptions. When Securities are sold, the size and
diversity of the affected Trust will be reduced. Such sales may be required at
a time when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or during which the Securities and Exchange
Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the
Securities in the Trusts is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
Reports Provided. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and
the amount of other receipts (received since the preceding distribution), if
any, being distributed expressed in each case as a dollar amount representing
the pro rata share of each Unit of a Trust outstanding. For as long as the
Trustee deems it to be in the best interests of the Unitholders, the accounts
of each Trust shall be audited, not less frequently than annually, by
independent certified public accountants and the report of such accountants
shall be furnished by the Trustee to Unitholders of such Trusts upon request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a registered Unitholder of a Trust a statement (i) as to the Interest
Account: interest received (including amounts representing interest received
upon any disposition of Securities) and the percentage of such interest by
states in which the issuers of the Securities are located, deductions for
applicable taxes and for fees and expenses of such Trust, for purchases of
Replacement Bonds and for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar year;
(ii) as to the Principal Account: the dates of disposition of any Securities
and the net proceeds received therefrom (excluding any portion representing
accrued interest), the amount paid for purchases of Replacement Bonds and for
redemptions of Units, if any, deductions for payment of applicable taxes and
fees and expenses of the Trustee, the amount of "when issued"interest
treated as a return of capital, if any, and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit based upon the last computation
thereof made during such calendar year; and (v) amounts actually distributed
during such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in a Trust furnished to it by the Evaluator.
Each distribution statement of a Trust will reflect pertinent information in
respect of the other plan of distribution so that Unitholders may be informed
regarding the results of such other plan of distribution.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust or by the issuer of such
Bonds, or 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 "
Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection". 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 referred to below 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). Any
portfolio insurance premium for an Insured Trust, which is an obligation of
such Trust, is paid by each 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 as they
fall due. For the purposes of insurance obtained by an Insured Trust, "
when due"generally means the stated 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 Bonds regardless of the identity
of the holder thereof) (the "Permanent Insurance") upon the payment of
a single predetermined insurance premium and any expenses related thereto from
the proceeds of the sale of such Bond. Accordingly, any Bond in 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". 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 "Public Offering--Redemption of Units") 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 Bonds until their respective maturities in order to realize the
benefits of such Trust's portfolio insurance (see "Trust
Administration--Amendment or Termination").
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". 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"herein 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 "
Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection".
AMBAC Indemnity Corporation ("AMBAC Indemnity") 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 $1,988,000,000 (unaudited) and
statutory capital of approximately $1,148,000,000 (unaudited) as of March 31,
1994. Statutory capital consists of AMBAC Indemnity's policyholders' surplus
and statutory contingency reserve. AMBAC Indemnity is a wholly owned
subsidiary of AMBAC 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 Indemnity.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Indemnity. The address of AMBAC
Indemnity's administrative offices and its telephone number are One State
Street Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Indemnity has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Indemnity has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
Municipal Bond Investors Assurance 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 a limited liability corporation rather than a several liability
association. MBIA is domiciled in the State of New York and licensed to do
business in all fifty states, the District of Columbia and the Commonwealth of
Puerto Rico. As of September 30, 1994 MBIA had admitted assets of $3.3 billion
(unaudited), total liabilities of $2.2 billion (unaudited), and total capital
and surplus of $1.1 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's year end 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.
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
Bonds. 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 Bonds, 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 Bonds.
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 ("GECC"
). Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of December 31, 1994, the total capital and surplus
of Financial Guaranty was approximately $893,700,000. Copies of Financial
Guaranty's financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared on the basis
of generally accepted accounting principles, 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 160 West Broadway, 18th Floor, New York, New
York 10013, Attention: Property Companies Bureau, telephone number: (212)
621-0389.
In addition, Financial Guaranty Insurance Company 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 on March 16, 1984 under
the laws of the State of New York. The operations of Financial Security
commenced on July 25, 1985, and Financial Security received its New York State
insurance license on September 23, 1985. Financial Security and its two wholly
owned subsidiaries are licensed to engage in the financial guaranty insurance
business in 49 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. 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 is approximately 91.6% owned by U S WEST, Inc. and 8.4%
owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine"
). Neither U S WEST, Inc. nor Tokio Marine is obligated to pay the debts of or
the claims against Financial Security. Financial Security is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of March 31, 1993, 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 generally accepted accounting principles, approximately $479,110,000
(unaudited) and $220,078,000 (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 $628,119,000 (unaudited) and $202,493,000
(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 by Financial Security or either of its subsidiaries 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
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance
policy.
Financial Security's claims-paying ability is rated "Aaa"by Moody's
Investors Service, Inc., and "AAA"by Standard & Poor's, Nippon
Investors Service Inc., Duff & Phelps Inc. and Australian Ratings 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 ("Capital Guaranty") is a "
Aaa/AAA"rated monoline stock insurance company incorporated in the State
of Maryland, and is a wholly owned subsidiary of Capital Guaranty Corporation,
a Maryland insurance holding company. Capital Guaranty Corporation is a
publicly owned company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, Guam, and the U.S.
Virgin Islands. Capital Guaranty focuses on insuring municipal securities and
our policies guaranty the timely payment of principal and interest when due
for payment on new issue and secondary market issue municipal bond
transactions. Capital Guaranty's claims-paying ability is rated "
Triple-A"by both Moody's and Standard & Poor's. Therefore, if Capital
Guaranty insures an issue with a stand alone rating of less than "
Triple-A,"such issue would be "upgraded"to "Aaa/AAA"by
virtue of Capital Guaranty's insurance.
As of December 31, 1994, Capital Guaranty had more than $15.7 billion in
net exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$196,529,000, and the total admitted assets were $383,723,316 as reported to
the Insurance Department of the State of Maryland as of December 31, 1994.
Financial statements for Capital Guaranty Insurance Company, that have been
prepared in accordance with statutory insurance accounting standards, are
available upon request. The address of Capital Guaranty's headquarters and its
telephone number are Steuart Tower, 22nd Floor, One Market Plaza, San
Francisco, CA 94105-1413 and (415) 995-8000.
CapMAC is a New York-domiciled monoline stock insurance company which engages
only in the business of financial guarantee and surety insurance. CapMAC is
licensed in 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 domestic and foreign capital markets. CapMAC may also provide financial
guarantee reinsurance for structured asset-backed, corporate and municipal
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, Inc. ("Duff & Phelps") and "AAA"by
Nippon Investors 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.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a company
that is owned by a group of institutional and other investors, including
CapMAC's management and employees.
Neither Holdings 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.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance
departments of the other jurisdictions in which it is licensed. CapMAC is
subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC is bound by insurance laws and regulations regarding capital transfers,
limitations upon dividends, investment of assets, changes in control,
transactions with affiliates and consolidations and acquisitions. The amount
of exposure per risk that CapMAC may retain, after giving effect to
reinsurance, collateral or other security, is also regulated. Statutory and
regulatory accounting practices may prescribe appropriate rates at which
premiums are earned and the levels of reserves required. In addition, various
insurance laws restrict the incurrence of debt, regulate permissible
investments of reserves, capital and surplus, and govern the form of policies.
CapMAC's obligations under the Policies 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, 1993 and 1992, CapMAC had qualified statutory capital
(which consists of policyholders' surplus and contingency reserve) of
approximately $168 million and $163 million, respectively, 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.
In addition to its qualified statutory capital and other reinsurance available
to pay claims under its Policies, CapMAC has entered into a Stop Loss
Reinsurance Agreement (the "Stop Loss Agreement") with Winterthur
Swiss Insurance Company (the "Reinsurer"), which is rated AAA by
Standard & Poor's and Aaa by Moody's, pursuant to which the Reinsurer will be
required to pay any losses incurred by CapMAC during the term of the Stop Loss
Agreement on the Policies covered under the Stop Loss Agreement in excess of a
specified amount of losses incurred by CapMAC under such Policies (such
specified amount initially being $100 million and increasing annually by an
amount equal to 66 2/3% of the increase in CapMAC's statutory capital and
surplus) up to an aggregate limit payable under the Stop Loss Agreement of $50
million. The Stop Loss Agreement has a term of seven years, is extendable for
one-year periods and is subject to early termination upon the occurrence of
certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity facility
(the "Liquidity Facility") provided by a syndicate of banks rated
A1+/P1 by Standard & Poor's and Moody's, respectively. The Liquidity Facility
is currently scheduled to expire in June 1997 and may be extended from time to
time. Under the Liquidity Facility CapMAC will be able, subject to satisfying
certain conditions, to borrow funds from time to time in order to enable it to
fund any claim payments or payments made in settlement or mitigation of claims
payments under its policies, including the Policy.
Copies of CapMAC's financial statements prepared in accordance with statutory
accounting standards, which differ from generally accepted accounting
principles, and filed with the Insurance Department of the State of New York
are available upon request. CapMAC is located at 885 Third Avenue, New York,
New York 10022, and its telephone number is (212) 755-1155.
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, AMBAC Indemnity and Financial Guaranty 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, AMBAC Indemnity and
Financial Guaranty 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. See "Description of Securities 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.
On the date of this Prospectus, the Estimated Current Return on the Securities
in the Florida IM-IT Intermediate Laddered Maturity Trust was 4.49% based on
the monthly plan of distribution after payment of the insurance premium or
premiums payable by such Trust, while the Estimated Long-Term Return on such
Trust was 4.61%. The Estimated Current Return on an identical portfolio
without the insurance obtained by the above mentioned Trust would have been
4.51% based on the monthly plan of distribution on such date, while the
Estimated Long-Term Return on an identical portfolio without the insurance
obtained by the above mentioned Trust would have been 4.62%.
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 Securities 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 Indemnity 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 if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations. See
"Other Matters--Federal Tax Status".
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.
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
Bonds insured Bonds insured
under AMBAC under Financial
Trust Indemnity Guaranty Preinsured
portfolio insurance portfolio insurance Bonds Total
<S> <C> <C> <C> <C>
California IM-IT Intermediate Laddered Maturity... -- -- 100% 100%
California IM-IT.................................. -- -- 83% 100%
Florida IM-IT Intermediate Laddered Maturity...... 17% -- 100% 100%
New Jersey IM-IT.................................. -- -- 100% 100%
New York IM-IT.................................... -- -- 100% 100%
</TABLE>
The breakdown of the Preinsured Bonds is as follows: California IM-IT
Intermediate Laddered Maturity Trust-- AMBAC Indemnity 47%, Financial Guaranty
13% and MBIA 40%; California IM-IT Trust--AMBAC Indemnity 12%, Capital
Guaranty 16%, Financial Guaranty 20% and MBIA 52%; Florida IM-IT Intermediate
Laddered Maturity Trust--AMBAC Indemnity 59%, MBIA 23% and FSA 1%; New Jersey
IM-IT Trust--AMBAC Indemnity 12%, Capital Guaranty 13%, Financial Guaranty
26%, MBIA 33% and FSA 16%; New York IM-IT Trust--AMBAC Indemnity 7%, Capital
Guaranty 8%, Financial Guaranty 23% and MBIA 62%.
CALIFORNIA IM-IT INTERMEDIATE LADDERED MATURITY TRUST
General. The California IM-IT Intermediate Laddered Maturity Trust consists of
9 issues of Securities. Five of the Bonds in the California IM-IT Intermediate
Laddered Maturity Trust are general obligations of the governmental entities
issuing them and are backed by the taxing power thereof. The remaining issues
are payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. These issues are divided by
purpose of issues (and percentage of principal amount to total California
IM-IT Intermediate Laddered Maturity Trust) as follows: General Obligations, 5
(43%); Health Care, 2 (34%); Public Building, 1 (20%) and Retail Electric/Gas,
1 (3%). No Bond issue has received a provisional rating. All of the
obligations in the California IM-IT Intermediate Laddered Maturity Trust
mature within 5-10 years of the Date of Deposit. Commencing in approximately
the fifth year of the Trust, roughly 20% of the Bonds contained in the Trust
will mature each year. The dollar weighted average maturity of the Bonds in
the Trust is 6.30 years.
Risk Factors. The Trust will invest substantially all of its assets in
California Municipal Obligations. The Trust is therefore susceptible to
political, economic or regulatory factors affecting issuers of California
Municipal Obligations. These include the possible adverse effects of certain
California constitutional amendments, legislative measures, voter initiatives
and other matters that are described below. The following information provides
only a brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are
generally available to investors and are believed to be accurate. No
independent verification has been made of the accuracy or completeness of any
of the following information. It is based in part on information obtained from
various State and local agencies in California or contained in official
statements for various California Municipal Obligations.
There can be no assurance that 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 California Municipal
Obligations held in the portfolio of the Fund or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
California's economy is the largest among the 50 states and one of the largest
in the world. The State's population of over 30 million represents 12% of the
total United States population and grew by 27% in the 1980s. Total personal
income in the State, at an estimated $662 billion in 1991, accounts for 13% of
all personal income in the nation. Total employment is almost 14 million, the
majority of which is in the service, trade and manufacturing sectors.
Reports issued by the State Department of Finance and other sources indicate
that the State's economy is suffering its worst recession since the 1930s,
with prospects for recovery slower than for the nation as a whole. The State
has lost over 800,000 jobs since the start of the recession in mid 1990 and
additional job losses are expected before an upturn begins. The largest job
losses have been in Southern California, led by declines in the aerospace and
construction industries. Weaknesses statewide occurred in manufacturing,
construction, services and trade and will be hurt in the next few years by
continued cuts in federal defense spending and base closures. Unemployment is
expected to remain well above the national average in 1994. The State's
economy is only expected to pull out of the recession slowly, following the
national recovery which has begun. Delay in recovery will exacerbate
shortfalls in State revenues.
Certain California Municipal Obligations may be obligations of issuers which
rely in whole or in part, directly or indirectly, on ad valorem property taxes
as a source of revenue. The taxing powers of California local governments and
districts are limited by Article XIIIA of the California Constitution, enacted
by the voters in 1978 and commonly known as "Proposition 13." Briefly,
Article XIIIA limits to 1% of full cash value the rate of ad valorem property
taxes on real property and generally restricts the reassessment of property to
2% per year, except upon new construction or change of ownership (subject to a
number of exemptions). Taxing entities may, however, raise ad valorem taxes
above the 1% limit to pay debt service on voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13, and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special
tax."Court decisions, however, allowed non-voter approved levy of "
general taxes"which were not dedicated to a specific use. In response to
these decisions, the voters of the State in 1986 adopted an initiative statute
which imposed significant new limits on the ability of local entities to raise
or levy general taxes, except by receiving majority local voter approval.
Significant elements of this initiative, "Proposition 62", have been
overturned in recent court cases. An initiative proposed to re-enact the
provisions of Proposition 62 as a constitutional amendment was defeated by the
voters in November 1990, but such a proposal may be renewed in the future.
California and its local governments are subject to an annual "
appropriations limit"imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending "
appropriations subject to limitation"in excess of the appropriations
limit imposed. "Appropriations subject to limitation"are
authorizations to spend "proceeds of taxes,"which consists of tax
revenues and certain other funds, including proceeds from regulatory licenses,
user charges or other fees, to the extent that such proceeds exceed the cost
of providing the product or service, but "proceeds of taxes"excludes
most State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes,"such as
reasonable user charges or fees and certain other non-tax funds, including
bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for
certain capital outlay projects, (4) appropriations by the State of post-1989
increases in gasoline taxes and vehicle weight fees, and (5) appropriations
made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 by Proposition 111 to follow more closely
growth in California's economy.
"Excess"revenues are measured over a two-year cycle. Local
governments must return any excess to taxpayers by rate reduction. The State
must refund 50% of any excess, with the other 50% paid to schools and
community colleges. With more liberal annual adjustment factors since 1988,
and depressed revenues since 1990 because of the recession, few governments
are currently operating near their spending limits, but this condition may
change over time. Local governments may by voter approval exceed their
spending limits for up to four years.
During fiscal year 1986-87, State receipts from proceeds of taxes exceeded its
appropriations limit by $1.1 billion, which was returned to taxpayers. Since
that year, appropriations subject to limitation have been under the State
limit. State appropriations are expected to be $3.7 billion under the limit
for Fiscal Year 1993-94.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution, the ambiguities and possible inconsistencies in their terms, and
the impossibility of predicting future appropriations or changes in population
and cost of living, and the probability of continuing legal challenges, it is
not currently possible to determine fully the impact of Article XIIIA or
Article XIIIB on California Municipal Obligations or on the ability of
California or local governments to pay debt service on such California
Municipal Obligations. It is not presently possible to predict the outcome of
any pending litigation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or the impact of
any such determinations upon State agencies or local governments, or upon
their ability to pay debt service on their obligations. Future initiative or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
As of April 1, 1994, California had approximately $18.1 billion of general
obligation bonds outstanding, and $5.6 billion remained authorized but
unissued. In addition, at June 30, 1993, the State had lease-purchase
obligations, payable from the State's General Fund, of approximately $4.0
billion. Of the State's outstanding general obligation debt, approximately 28%
is presently self-liquidating (for which program revenues are anticipated to
be sufficient to reimburse the General Fund for debt service payments). Four
general obligation bond propositions, totalling $5.9 billion, will be on the
June, 1994 ballot. In Fiscal Year 1992-93, debt service on general obligation
bonds and lease-purchase debt was approximately 4.1% of General Fund revenues.
The State has paid the principal of and interest on its general obligation
bonds, lease-purchase debt and short-term obligations when due.
The principal sources of General Fund revenues in 1992-93 were the California
personal income tax (44% of total revenues), the sales tax (38%), bank and
corporation taxes (12%), and the gross premium tax on insurance (3%).
California maintains a Special Fund for Economic Uncertainties (the "
Economic Uncertainties Fund"), derived from General Fund revenues, as a
reserve to meet cash needs of the General Fund, but which is required to be
replenished as soon as sufficient revenues are available. Year-end balances in
the Economic Uncertainties Fund are included for financial reporting purposes
in the General Fund balance. In most recent years, California has budgeted to
maintain the Economic Uncertainties Fund at around 3% of General Fund
expenditures but essentially no reserve has been budgeted in 1992-93 or
1993-1994 because reserves have been reduced by the recession.
Throughout the 1980s, State spending increased rapidly as the State population
and economy also grew rapidly, including increased spending for many
assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to
local public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about
34%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse economic,
fiscal and budget conditions. The economic recession seriously affected State
tax revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget with
the largest programs supported by the General Fund (education, health, welfare
and corrections) growing at rates significantly higher than the growth rates
for the principal revenue sources of the General Fund. As a result, the State
entered a period of budget imbalance, with expenditures exceeding revenues for
four of the last five fiscal years through 1991-92.
As the State fell into a deep recession in the summer of 1990, the State
budget fell sharply out of balance in the 1990-91 and 1991-92 fiscal years,
despite significant expenditure cuts and tax increases. The State had
accumulated a $2.8 billion budget deficit by June 30, 1992. This deficit also
severely reduced the State's cash resources, so that it had to rely on
external borrowing in the short-term markets to meet its cash needs.
With the failure to enact a budget by July 1, 1992, the State had no legal
authority to pay many of its vendors until the budget was passed;
nevertheless, certain obligations (such as debt service, school
apportionments, welfare payments and employee salaries) were payable because
of continuing or special appropriations or court orders. However, the State
Controller did not have enough cash to pay all of these ongoing obligations as
they came due, as well as valid obligations incurred in the prior fiscal year.
Starting on July 1, 1992, the Controller was required to issue "registered
warrants"in lieu of normal warrants backed by cash to pay many State
obligations. Available cash was used to pay constitutionally mandated and
priority obligations. Between July 1 and September 3, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants, all
of which were called for redemption by September 4, 1992 following enactment
of the 1992-93 Budget Act and issuance by the State of $3.3 billion of Interim
Notes.
The 1992-93 Budget Act, when finally adopted, was projected to eliminate the
State's accumulated deficit, with additional expenditure cuts and a $1.3
billion transfer of State education funding costs to local governments by
shifting local property taxes to school districts. However, as the recession
continued longer and deeper than expected, revenues once again were far below
projections, and only reached a level just equal to the amount of
expenditures. Thus, the State continued to carry its $2.8 billion budget
deficit at June 30, 1993.
The 1993-94 Budget Act was similar to the prior year, in reliance on
expenditure cuts and an additional $2.6 billion transfer of costs to local
government, particularly counties. A major feature of the budget was a
two-year plan to eliminate the accumulated deficit by borrowing into the
1994-95 fiscal year. With the recession still continuing longer than expected,
the 1994-95 Governor's Budget now projects that in the 1993-94 Fiscal Year,
the General Fund will have $900 million less revenue and $800 million higher
expenditures than budgeted. As a result revenues will only exceed expenditures
by about $400 million. If this projection is met, it will be the first
operating surplus in four years; however, some budget analysts outside the
Department of Finance project revenues in the balance of 1993-94 will not even
meet the revised, lower projection. In addition, the General Fund may have
some unplanned costs for relief related to the January, 17, 1994 Northridge
earthquake.
The State has implemented its short-term borrowing as part of the deficit
elimination plan, and has also borrowed additional sums to cover cash flow
shortfalls in the spring of 1994, for a total of $3.2 billion, coming due in
July and December, 1994. Repayment of these short-term notes will require
additional borrowing, as the State's cash position continues to be adversely
affected.
The Governor's 1994-95 Budget proposal recognizes the need to bridge a gap of
around $5 billion by June 30, 1995. Over $3.1 billion of this amount is being
requested from the federal government as increased aid, particularly for costs
associated with incarcerating, educating and providing health and welfare
services to undocumented immigrants. However, President Clinton has not
included these costs in his proposed Fiscal 1995 Budget. The rest of the
budget gap is proposed to be closed with expenditure cuts and projected $600
million of new revenue assuming the State wins a tax case presently pending in
the U.S. Supreme Court. Thus the State will once again face significant
uncertainties and very difficult choices in the 1994-95 budget, as tax
increases are unlikely and many cuts and budget adjustments have been made in
the past three years.
The State's severe financial difficulties for the current and upcoming budget
years will result in continued pressure upon various local governments,
particularly school districts and counties which depend on State aid. Despite
efforts in recent years to increase taxes and reduce governmental
expenditures, there can be no assurance that the State will not face budget
gaps in the future.
State general obligation bonds are currently rated "A1"by Moody's and
"A"by S&P. Both of these ratings were recently reduced from "
Aa"and "A+"levels, respectively. There can be no assurance that
such ratings will be maintained in the future. It should be noted that the
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues.
On December 7, 1994, Orange County, California (the "County"),
together with its pooled investment fund (the "Fund") filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports that
the Fund had suffered significant market losses in its investments which
caused a liquidity crisis for the Fund and the County. Approximately 180 other
public entities, most but not all located in the County, were also depositors
in the Fund. As of December 13, 1994, the County indicated that the Fund had
lost about 27% of its initial deposits of approximately $7.4 billion. The
County may suffer further losses as it sells investments to restructure the
Fund. Many of the entities which kept moneys in the Fund, including the
County, are facing cash flow difficulties because of the bankruptcy filing and
may be required to reduce programs or capital projects. In the opinion of the
Sponsor and based on information publicly available, none of the bonds in this
portfolio have any present known exposure to the aforementioned difficulties
related to Orange County. The Sponsor, however, is unable to predict the
ultimate impact of the circumstances regarding the County described above on
other issuers located in California.
The State of California has no obligations with respect to any bonds or other
securities of the County or any of the other participating entities, although
under existing legal precedents, the State may be obligated to ensure that
school districts have sufficient funds to operate.
Property tax revenues received by local governments declined more than 50%
following passage of Proposition 13. Subsequently, the California Legislature
enacted measures to provide for the redistribution of the State's General Fund
surplus to local agencies, the reallocation of certain State revenues to local
agencies and the assumption of certain governmental functions by the State to
assist municipal issuers to raise revenues. Total local assistance from the
State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing reductions
in certain aid programs. To reduce State General Fund support for school
districts, the 1992-93 and 1993-94 Budget Acts caused local governments to
transfer $3.9 billion of property tax revenues to school districts,
representing loss of the post-Proposition 13 "bailout"aid. Local
governments have in return received greater revenues and greater flexibility
to operate health and welfare programs. To the extent the State should be
constrained by its Article XIIIB appropriations limit, or its obligation to
conform to Proposition 98, or other fiscal considerations, the absolute level,
or the rate of growth, of State assistance to local governments may be
reduced. Any such reductions in State aid could compound the serious fiscal
constraints already experienced by many local governments, particularly
counties. The Richmond Unified School District (Contra Costa County) entered
bankruptcy proceedings in May 1991, but the proceedings have been dismissed.
California Municipal Obligations which are assessment bonds may be adversely
affected by a general decline in real estate values or a slowdown in real
estate sales activity. In many cases, such bonds are secured by land which is
undeveloped at the time of issuance but anticipated to be developed within a
few years after issuance. In the event of such reduction or slowdown, such
development may not occur or may be delayed, thereby increasing the risk of a
default on the bonds. Because the special assessments or taxes securing these
bonds are not the personal liability of the owners of the property assessed,
the lien on the property is the only security for the bonds. Moreover, in most
cases the issuer of these bonds is not required to make payments on the bonds
in the event of delinquency in the payment of assessments or taxes, except
from amounts, if any, in a reserve fund established for the bonds.
Certain California long-term lease obligations, though typically payable from
the general fund of the municipality, are subject to "abatement"in
the event the facility being leased is unavailable for beneficial use and
occupancy by the municipality during the term of the lease. Abatement is not a
default, and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement occurs.
The most common cases of abatement are failure to complete construction of the
facility before the end of the period during which lease payments have been
capitalized and uninsured casualty losses to the facility (e.g., due to
earthquake). In the event abatement occurs with respect to a lease obligation,
lease payments may be interrupted (if all available insurance proceeds and
reserves are exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District"
) entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were
taken over by a State receiver (including a brief period under bankruptcy
court protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was a named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the original lease transaction. The trial
court has upheld the validity of the District's lease, and the case has been
settled. Any judgment in any future case against the position asserted by the
Trustee in the Richmond case may have adverse implications for lease
transactions of a similar nature by other California entities.
The repayment of industrial development securities secured by real property
may be affected by California laws limiting foreclosure rights of creditors.
Securities backed by health care and hospital revenues may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation"bonds issued by California redevelopment agencies. Such bonds
are secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g., because of a major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after the
enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are the
Issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to determine the impact of any
such legislation on California Municipal Obligations in which the Fund may
invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Any California Municipal Obligation in the Portfolio
could be affected by an interruption of revenues because of damaged
facilities, or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could be
constrained by the inability of (i) an issuer to have obtained earthquake
insurance coverage at reasonable rates; (ii) an insurer to perform on its
contracts of insurance in the event of widespread losses; or (iii) the Federal
or State government to appropriate sufficient funds within their respective
budget limitations.
Tax Status. For a discussion of the Federal tax status of income earned on
California IM-IT Intermediate Laddered Maturity Trust Units, see "Other
Matters--Federal Tax Status".
In the opinion of Orrick, Herrington & Sutcliffe, special counsel to the Fund
for California tax matters, under existing California income and property tax
law applicable to individuals who are California residents:
(1)the California IM-IT Intermediate Laddered Maturity Trust is not an
association taxable as a corporation and the income of the California IM-IT
Intermediate Laddered Maturity Trust will be treated as the income of the
Unitholders under the income tax laws of California;
(2)amounts treated as interest on the underlying Securities in the California
IM-IT Intermediate Laddered Maturity Trust which are exempt from tax under
California personal income tax and property tax laws when received by the
California IM-IT Intermediate Laddered Maturity Trust will, under such laws,
retain their status as tax-exempt interest when distributed to Unitholders.
However, interest on the underlying Securities attributed to a Unitholder
which is a corporation subject to the California franchise tax laws may be
includable in its gross income for purposes of determining its California
franchise tax. Further, certain interest which is attributable to a Unitholder
subject to the California personal income tax and which is treated as an item
of tax preference for purposes of the federal alternative minimum tax pursuant
to Section 57(a)(5) of the Internal Revenue Code of 1986 may also be treated
as an item of tax preference that must be taken into account in computing such
Unitholder's alternative minimum taxable income for purposes of the California
alternative minimum tax enacted by 1987 California Statutes, chapter 1138.
However, because of the provisions of the California Constitution exempting
the interest on bonds issued by the State of California, or by local
governments within the state, from taxes levied on income, the application of
the new California alternative minimum tax to interest otherwise exempt from
the California personal income tax in some cases may be unclear;
(3)under California income tax law, each Unitholder in the California IM-IT
Intermediate Laddered Maturity Trust will have a taxable event when the
California IM-IT Intermediate Laddered Maturity Trust disposes of a Security
(whether by sale, exchange, redemption, or payment at maturity) or when the
Unitholder redeems or sells Units. Because of the requirement that tax cost
basis be reduced to reflect amortization of bond premium, under some
circumstances a Unitholder may realize taxable gains when Units are sold or
redeemed for an amount equal to, or less than, their original cost. The total
cost of each Unit in the California IM-IT Intermediate Laddered Maturity Trust
to a Unitholder is allocated among each of the Bond issues held in the
California IM-IT Intermediate Laddered Maturity Trust (in accordance with the
proportion of the California IM-IT Intermediate Laddered Maturity Trust
comprised by each Bond issue) in order to determine his per Unit tax cost for
each Bond issue; and the tax cost reduction requirements relating to
amortization of bond premium will apply separately to the per Unit tax cost of
each Bond issue. Unitholders' bases in their units, and the bases for their
fractional interest in each Trust asset, may have to be adjusted for their pro
rata share of accrued interest received, if any, on Securities delivered after
the Unitholders' respective settlement dates;
(4)under the California personal property tax laws, bonds (including the
Securities in the California IM-IT Intermediate Laddered Maturity Trust) or
any interest therein is exempt from such tax;
(5)any proceeds paid under the insurance policy issued to the California IM-IT
Intermediate Laddered Maturity Trust with respect to the Securities which
represent maturing interest on defaulted obligations held by the Trustee will
be exempt from California personal income tax if, and to the same extent as,
such interest would have been so exempt if paid by the issuer of the defaulted
obligations; and
(6)under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry Units of
the California IM-IT Intermediate Laddered Maturity Trust is not deductible
for the purposes of the California personal income tax. While there presently
is no California authority interpreting this provision, Section 17280(b)(2)
directs the California Franchise Tax Board to prescribe regulations
determining the proper allocation and apportionment of interest costs for this
purpose. The Franchise Tax Board has not yet proposed or prescribed such
regulations. In interpreting the generally similar Federal provision, the
Internal Revenue Service has taken the position that such indebtedness need
not be directly traceable to the purchase or carrying of Units (although the
Service has not contended that a deduction for interest on indebtedness
incurred to purchase or improve a personal residence or to purchase goods or
services for personal consumption will be disallowed). In the absence of
conflicting regulations or other California authority, the California
Franchise Tax Board generally has interpreted California statutory tax
provisions in accord with Internal Revenue Service interpretations of similar
Federal provisions.
At the respective times of issuance of the Securities, opinions relating to
the validity thereof and to the exemption of interest thereon from Federal
income tax and California personal income tax are rendered by bond counsel to
the respective issuing authorities. Except in certain instances in which
Orrick, Herrington & Sutcliffe acted as bond counsel to issuers of Securities,
and as such made a review of proceedings relating to the issuance of certain
Securities at the time of their issuance, Orrick, Herrington & Sutcliffe has
not made any special review for the California IM-IT Intermediate Laddered
Maturity Trust of the proceedings relating to the issuance of the Securities
or of the basis for such opinions.
<TABLE>
<CAPTION>
Semi-
Monthly Annual
<S> <C> <C>
Per Unit Information:
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 49.02 $ 49.02
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.60 $ 2.14
Less: Annual Premium on Portfolio Insurance per Unit.................. -- --
Estimated Net Annual Interest Income per Unit......................... $ 46.42 $ 46.88
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 46.42 $ 46.88
Divided by 12 and 2, respectively..................................... $ 3.87 $ 23.44
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .12893 $ .13021
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 4.54% 4.59%
Estimated Long-Term Return <F2><F3><F4>................................ 4.73% 4.78%
Estimated Initial Monthly Distribution (May 1995)...................... $ 4.00 $ --
Estimated Initial Semi-annual Distribution (May 1995).................. -- $ 4.03
Estimated Normal Distribution per Unit <F4>............................ $ 3.87 $ 23.44
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
California IM-IT Intermediate Laddered Maturity Trust under the monthly and semi-annual
distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--May
and November commencing May 15, 1995
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
CALIFORNIA IM-IT INTERMEDIATE LADDERED MATURITY
SERIES 18
(174TH INSURED MULTI-SERIES)
PORTFOLIO As of
March 23, 1995
<CAPTION>
Offering
Price To
California
IM-IT
Intermediate
Laddered
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of either Bonds Redemption Maturity
Principal<F1> Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 600,000 State Public Works Board of the State of California, Lease Revenue
Refunding Bonds (Department of Corrections) Series 1993A, Various
State Prisons (AMBAC Indemnity Insured)
#4.50% Due 12/1/1999 ................................................. AAA $ 589,428
100,000 Sacramento Municipal Utility District (California) Electric System
Revenue Bonds, Series 1993E (MBIA Insured)
#4.90% Due 5/15/2000 ................................................. AAA 99,921
500,000 California Health Facilities Financing Authority, Insured Health
Facility Refunding Revenue Bonds (Catholic Healthcare West) Series
1994B (AMBAC Indemnity Insured)
#4.25% Due 7/1/2000 .................................................. AAA 478,160
500,000 City of Bakersfield, California, Hospital Revenue Refunding Bonds
(Adventist Health System/West Issue) Series 1993 (MBIA Insured) AAA 496,795
#4.90% Due 3/1/2001 .................................................. AAA 104,969
400,000 State of California, Various Purpose General Obligation Bonds (FGIC
Insured)
#100M-6.10% Due 11/1/2001
300M-5.40% Due 3/1/2003 .............................................. AAA 303,030
300,000 The City of Los Angeles, California, General Obligation Bonds, Series
1993A (AMBAC Indemnity Insured)
4.80% Due 9/1/2002 ................................................... AAA 291,075
600,000 Victor Valley Union High School District (County of San Bernardino,
California) General Obligations Bonds (1994 Election) MBIA Insured AAA 304,767
300M-5.40% Due 9/1/2002
300M-5.50% Due 9/1/2003 .............................................. AAA 305,142
$ 3,000,000 $ 2,973,287
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
CALIFORNIA IM-IT TRUST
General. The California IM-IT Trust consists of 8 issues of Securities. One of
the Bonds in the California IM-IT Trust 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 to
total California IM-IT Trust) as follows: Retail Electric/Gas, 2 (28%);
Public Education, 1 (17%); Tax District, 1 (17%); Certificates of
Participation, 1 (16%); General Obligations, 1 (12%); Multi-Family Mortgage
Revenue, 1 (7%) and Water and Sewer, 1 (3%). No Bond issue has received a
provisional rating.
Risk Factors. The Trust will invest substantially all of its assets in
California Municipal Obligations. The Trust is therefore susceptible to
political, economic or regulatory factors affecting issuers of California
Municipal Obligations. These include the possible adverse effects of certain
California constitutional amendments, legislative measures, voter initiatives
and other matters that are described below. The following information provides
only a brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are
generally available to investors and are believed to be accurate. No
independent verification has been made of the accuracy or completeness of any
of the following information. It is based in part on information obtained from
various State and local agencies in California or contained in official
statements for various California Municipal Obligations.
There can be no assurance that 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 California Municipal
Obligations held in the portfolio of the Fund or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
California's economy is the largest among the 50 states and one of the largest
in the world. The State's population of over 30 million represents 12% of the
total United States population and grew by 27% in the 1980s. Total personal
income in the State, at an estimated $662 billion in 1991, accounts for 13% of
all personal income in the nation. Total employment is almost 14 million, the
majority of which is in the service, trade and manufacturing sectors.
Reports issued by the State Department of Finance and other sources indicate
that the State's economy is suffering its worst recession since the 1930s,
with prospects for recovery slower than for the nation as a whole. The State
has lost over 800,000 jobs since the start of the recession in mid 1990 and
additional job losses are expected before an upturn begins. The largest job
losses have been in Southern California, led by declines in the aerospace and
construction industries. Weaknesses statewide occurred in manufacturing,
construction, services and trade and will be hurt in the next few years by
continued cuts in federal defense spending and base closures. Unemployment is
expected to remain well above the national average in 1994. The State's
economy is only expected to pull out of the recession slowly, following the
national recovery which has begun. Delay in recovery will exacerbate
shortfalls in State revenues.
Certain California Municipal Obligations may be obligations of issuers which
rely in whole or in part, directly or indirectly, on ad valorem property taxes
as a source of revenue. The taxing powers of California local governments and
districts are limited by Article XIIIA of the California Constitution, enacted
by the voters in 1978 and commonly known as "Proposition 13." Briefly,
Article XIIIA limits to 1% of full cash value the rate of ad valorem property
taxes on real property and generally restricts the reassessment of property to
2% per year, except upon new construction or change of ownership (subject to a
number of exemptions). Taxing entities may, however, raise ad valorem taxes
above the 1% limit to pay debt service on voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13, and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special
tax."Court decisions, however, allowed non-voter approved levy of "
general taxes"which were not dedicated to a specific use. In response to
these decisions, the voters of the State in 1986 adopted an initiative statute
which imposed significant new limits on the ability of local entities to raise
or levy general taxes, except by receiving majority local voter approval.
Significant elements of this initiative, "Proposition 62", have been
overturned in recent court cases. An initiative proposed to re-enact the
provisions of Proposition 62 as a constitutional amendment was defeated by the
voters in November 1990, but such a proposal may be renewed in the future.
California and its local governments are subject to an annual "
appropriations limit"imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending "
appropriations subject to limitation"in excess of the appropriations
limit imposed. "Appropriations subject to limitation"are
authorizations to spend "proceeds of taxes,"which consists of tax
revenues and certain other funds, including proceeds from regulatory licenses,
user charges or other fees, to the extent that such proceeds exceed the cost
of providing the product or service, but "proceeds of taxes"excludes
most State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes,"such as
reasonable user charges or fees and certain other non-tax funds, including
bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for
certain capital outlay projects, (4) appropriations by the State of post-1989
increases in gasoline taxes and vehicle weight fees, and (5) appropriations
made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 by Proposition 111 to follow more closely
growth in California's economy.
"Excess"revenues are measured over a two-year cycle. Local
governments must return any excess to taxpayers by rate reduction. The State
must refund 50% of any excess, with the other 50% paid to schools and
community colleges. With more liberal annual adjustment factors since 1988,
and depressed revenues since 1990 because of the recession, few governments
are currently operating near their spending limits, but this condition may
change over time. Local governments may by voter approval exceed their
spending limits for up to four years.
During fiscal year 1986-87, State receipts from proceeds of taxes exceeded its
appropriations limit by $1.1 billion, which was returned to taxpayers. Since
that year, appropriations subject to limitation have been under the State
limit. State appropriations are expected to be $3.7 billion under the limit
for Fiscal Year 1993-94.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution, the ambiguities and possible inconsistencies in their terms, and
the impossibility of predicting future appropriations or changes in population
and cost of living, and the probability of continuing legal challenges, it is
not currently possible to determine fully the impact of Article XIIIA or
Article XIIIB on California Municipal Obligations or on the ability of
California or local governments to pay debt service on such California
Municipal Obligations. It is not presently possible to predict the outcome of
any pending litigation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or the impact of
any such determinations upon State agencies or local governments, or upon
their ability to pay debt service on their obligations. Future initiative or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
As of April 1, 1994, California had approximately $18.1 billion of general
obligation bonds outstanding, and $5.6 billion remained authorized but
unissued. In addition, at June 30, 1993, the State had lease-purchase
obligations, payable from the State's General Fund, of approximately $4.0
billion. Of the State's outstanding general obligation debt, approximately 28%
is presently self-liquidating (for which program revenues are anticipated to
be sufficient to reimburse the General Fund for debt service payments). Four
general obligation bond propositions, totalling $5.9 billion, will be on the
June, 1994 ballot. In Fiscal Year 1992-93, debt service on general obligation
bonds and lease-purchase debt was approximately 4.1% of General Fund revenues.
The State has paid the principal of and interest on its general obligation
bonds, lease-purchase debt and short-term obligations when due.
The principal sources of General Fund revenues in 1992-93 were the California
personal income tax (44% of total revenues), the sales tax (38%), bank and
corporation taxes (12%), and the gross premium tax on insurance (3%).
California maintains a Special Fund for Economic Uncertainties (the "
Economic Uncertainties Fund"), derived from General Fund revenues, as a
reserve to meet cash needs of the General Fund, but which is required to be
replenished as soon as sufficient revenues are available. Year-end balances in
the Economic Uncertainties Fund are included for financial reporting purposes
in the General Fund balance. In most recent years, California has budgeted to
maintain the Economic Uncertainties Fund at around 3% of General Fund
expenditures but essentially no reserve has been budgeted in 1992-93 or
1993-1994 because reserves have been reduced by the recession.
Throughout the 1980s, State spending increased rapidly as the State population
and economy also grew rapidly, including increased spending for many
assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to
local public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about
34%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse economic,
fiscal and budget conditions. The economic recession seriously affected State
tax revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget with
the largest programs supported by the General Fund (education, health, welfare
and corrections) growing at rates significantly higher than the growth rates
for the principal revenue sources of the General Fund. As a result, the State
entered a period of budget imbalance, with expenditures exceeding revenues for
four of the last five fiscal years through 1991-92.
As the State fell into a deep recession in the summer of 1990, the State
budget fell sharply out of balance in the 1990-91 and 1991-92 fiscal years,
despite significant expenditure cuts and tax increases. The State had
accumulated a $2.8 billion budget deficit by June 30, 1992. This deficit also
severely reduced the State's cash resources, so that it had to rely on
external borrowing in the short-term markets to meet its cash needs.
With the failure to enact a budget by July 1, 1992, the State had no legal
authority to pay many of its vendors until the budget was passed;
nevertheless, certain obligations (such as debt service, school
apportionments, welfare payments and employee salaries) were payable because
of continuing or special appropriations or court orders. However, the State
Controller did not have enough cash to pay all of these ongoing obligations as
they came due, as well as valid obligations incurred in the prior fiscal year.
Starting on July 1, 1992, the Controller was required to issue "registered
warrants"in lieu of normal warrants backed by cash to pay many State
obligations. Available cash was used to pay constitutionally mandated and
priority obligations. Between July 1 and September 3, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants, all
of which were called for redemption by September 4, 1992 following enactment
of the 1992-93 Budget Act and issuance by the State of $3.3 billion of Interim
Notes.
The 1992-93 Budget Act, when finally adopted, was projected to eliminate the
State's accumulated deficit, with additional expenditure cuts and a $1.3
billion transfer of State education funding costs to local governments by
shifting local property taxes to school districts. However, as the recession
continued longer and deeper than expected, revenues once again were far below
projections, and only reached a level just equal to the amount of
expenditures. Thus, the State continued to carry its $2.8 billion budget
deficit at June 30, 1993.
The 1993-94 Budget Act was similar to the prior year, in reliance on
expenditure cuts and an additional $2.6 billion transfer of costs to local
government, particularly counties. A major feature of the budget was a
two-year plan to eliminate the accumulated deficit by borrowing into the
1994-95 fiscal year. With the recession still continuing longer than expected,
the 1994-95 Governor's Budget now projects that in the 1993-94 Fiscal Year,
the General Fund will have $900 million less revenue and $800 million higher
expenditures than budgeted. As a result revenues will only exceed expenditures
by about $400 million. If this projection is met, it will be the first
operating surplus in four years; however, some budget analysts outside the
Department of Finance project revenues in the balance of 1993-94 will not even
meet the revised, lower projection. In addition, the General Fund may have
some unplanned costs for relief related to the January, 17, 1994 Northridge
earthquake.
The State has implemented its short-term borrowing as part of the deficit
elimination plan, and has also borrowed additional sums to cover cash flow
shortfalls in the spring of 1994, for a total of $3.2 billion, coming due in
July and December, 1994. Repayment of these short-term notes will require
additional borrowing, as the State's cash position continues to be adversely
affected.
The Governor's 1994-95 Budget proposal recognizes the need to bridge a gap of
around $5 billion by June 30, 1995. Over $3.1 billion of this amount is being
requested from the federal government as increased aid, particularly for costs
associated with incarcerating, educating and providing health and welfare
services to undocumented immigrants. However, President Clinton has not
included these costs in his proposed Fiscal 1995 Budget. The rest of the
budget gap is proposed to be closed with expenditure cuts and projected $600
million of new revenue assuming the State wins a tax case presently pending in
the U.S. Supreme Court. Thus the State will once again face significant
uncertainties and very difficult choices in the 1994-95 budget, as tax
increases are unlikely and many cuts and budget adjustments have been made in
the past three years.
The State's severe financial difficulties for the current and upcoming budget
years will result in continued pressure upon various local governments,
particularly school districts and counties which depend on State aid. Despite
efforts in recent years to increase taxes and reduce governmental
expenditures, there can be no assurance that the State will not face budget
gaps in the future.
State general obligation bonds are currently rated "A1"by Moody's and
"A"by S&P. Both of these ratings were recently reduced from "
Aa"and "A+"levels, respectively. There can be no assurance that
such ratings will be maintained in the future. It should be noted that the
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues.
On December 7, 1994, Orange County, California (the "County"),
together with its pooled investment fund (the "Fund") filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports that
the Fund had suffered significant market losses in its investments which
caused a liquidity crisis for the Fund and the County. Approximately 180 other
public entities, most but not all located in the County, were also depositors
in the Fund. As of December 13, 1994, the County indicated that the Fund had
lost about 27% of its initial deposits of approximately $7.4 billion. The
County may suffer further losses as it sells investments to restructure the
Fund. Many of the entities which kept moneys in the Fund, including the
County, are facing cash flow difficulties because of the bankruptcy filing and
may be required to reduce programs or capital projects. In the opinion of the
Sponsor and based on information publicly available, none of the bonds in this
portfolio have any present known exposure to the aforementioned difficulties
related to Orange County. The Sponsor, however, is unable to predict the
ultimate impact of the circumstances regarding the County described above on
other issuers located in California.
The State of California has no obligations with respect to any bonds or other
securities of the County or any of the other participating entities, although
under existing legal precedents, the State may be obligated to ensure that
school districts have sufficient funds to operate.
Property tax revenues received by local governments declined more than 50%
following passage of Proposition 13. Subsequently, the California Legislature
enacted measures to provide for the redistribution of the State's General Fund
surplus to local agencies, the reallocation of certain State revenues to local
agencies and the assumption of certain governmental functions by the State to
assist municipal issuers to raise revenues. Total local assistance from the
State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing reductions
in certain aid programs. To reduce State General Fund support for school
districts, the 1992-93 and 1993-94 Budget Acts caused local governments to
transfer $3.9 billion of property tax revenues to school districts,
representing loss of the post-Proposition 13 "bailout"aid. Local
governments have in return received greater revenues and greater flexibility
to operate health and welfare programs. To the extent the State should be
constrained by its Article XIIIB appropriations limit, or its obligation to
conform to Proposition 98, or other fiscal considerations, the absolute level,
or the rate of growth, of State assistance to local governments may be
reduced. Any such reductions in State aid could compound the serious fiscal
constraints already experienced by many local governments, particularly
counties. The Richmond Unified School District (Contra Costa County) entered
bankruptcy proceedings in May 1991, but the proceedings have been dismissed.
California Municipal Obligations which are assessment bonds may be adversely
affected by a general decline in real estate values or a slowdown in real
estate sales activity. In many cases, such bonds are secured by land which is
undeveloped at the time of issuance but anticipated to be developed within a
few years after issuance. In the event of such reduction or slowdown, such
development may not occur or may be delayed, thereby increasing the risk of a
default on the bonds. Because the special assessments or taxes securing these
bonds are not the personal liability of the owners of the property assessed,
the lien on the property is the only security for the bonds. Moreover, in most
cases the issuer of these bonds is not required to make payments on the bonds
in the event of delinquency in the payment of assessments or taxes, except
from amounts, if any, in a reserve fund established for the bonds.
Certain California long-term lease obligations, though typically payable from
the general fund of the municipality, are subject to "abatement"in
the event the facility being leased is unavailable for beneficial use and
occupancy by the municipality during the term of the lease. Abatement is not a
default, and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement occurs.
The most common cases of abatement are failure to complete construction of the
facility before the end of the period during which lease payments have been
capitalized and uninsured casualty losses to the facility (e.g., due to
earthquake). In the event abatement occurs with respect to a lease obligation,
lease payments may be interrupted (if all available insurance proceeds and
reserves are exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District"
) entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were
taken over by a State receiver (including a brief period under bankruptcy
court protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was a named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the original lease transaction. The trial
court has upheld the validity of the District's lease, and the case has been
settled. Any judgment in any future case against the position asserted by the
Trustee in the Richmond case may have adverse implications for lease
transactions of a similar nature by other California entities.
The repayment of industrial development securities secured by real property
may be affected by California laws limiting foreclosure rights of creditors.
Securities backed by health care and hospital revenues may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation"bonds issued by California redevelopment agencies. Such bonds
are secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g., because of a major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after the
enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are the
Issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to determine the impact of any
such legislation on California Municipal Obligations in which the Fund may
invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Any California Municipal Obligation in the Portfolio
could be affected by an interruption of revenues because of damaged
facilities, or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could be
constrained by the inability of (i) an issuer to have obtained earthquake
insurance coverage at reasonable rates; (ii) an insurer to perform on its
contracts of insurance in the event of widespread losses; or (iii) the Federal
or State government to appropriate sufficient funds within their respective
budget limitations.
Tax Status. For a discussion of the Federal tax status of income earned on
California IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Orrick, Herrington & Sutcliffe, special counsel to the Fund
for California tax matters, under existing California income and property tax
law applicable to individuals who are California residents:
(1)the California IM-IT Trust is not an association taxable as a corporation
and the income of the California IM-IT Trust will be treated as the income of
the Unitholders under the income tax laws of California;
(2)amounts treated as interest on the underlying Securities in the California
IM-IT Trust which are exempt from tax under California personal income tax and
property tax laws when received by the California IM-IT Trust will, under such
laws, retain their status as tax-exempt interest when distributed to
Unitholders. However, interest on the underlying Securities attributed to a
Unitholder which is a corporation subject to the California franchise tax laws
may be includable in its gross income for purposes of determining its
California franchise tax. Further, certain interest which is attributable to a
Unitholder subject to the California personal income tax and which is treated
as an item of tax preference for purposes of the federal alternative minimum
tax pursuant to Section 57(a)(5) of the Internal Revenue Code of 1986 may also
be treated as an item of tax preference that must be taken into account in
computing such Unitholder's alternative minimum taxable income for purposes of
the California alternative minimum tax enacted by 1987 California Statutes,
chapter 1138. However, because of the provisions of the California
Constitution exempting the interest on bonds issued by the State of
California, or by local governments within the state, from taxes levied on
income, the application of the new California alternative minimum tax to
interest otherwise exempt from the California personal income tax in some
cases may be unclear;
(3)under California income tax law, each Unitholder in the California IM-IT
Trust will have a taxable event when the California IM-IT Trust disposes of a
Security (whether by sale, exchange, redemption, or payment at maturity) or
when the Unitholder redeems or sells Units. Because of the requirement that
tax cost basis be reduced to reflect amortization of bond premium, under some
circumstances a Unitholder may realize taxable gains when Units are sold or
redeemed for an amount equal to, or less than, their original cost. The total
cost of each Unit in the California IM-IT Trust to a Unitholder is allocated
among each of the Bond issues held in the California IM-IT Trust (in
accordance with the proportion of the California IM-IT Trust comprised by each
Bond issue) in order to determine his per Unit tax cost for each Bond issue;
and the tax cost reduction requirements relating to amortization of bond
premium will apply separately to the per Unit tax cost of each Bond issue.
Unitholders' bases in their units, and the bases for their fractional interest
in each Trust asset, may have to be adjusted for their pro rata share of
accrued interest received, if any, on Securities delivered after the
Unitholders' respective settlement dates;
(4)under the California personal property tax laws, bonds (including the
Securities in the California IM-IT Trust) or any interest therein is exempt
from such tax;
(5)any proceeds paid under the insurance policy issued to the California IM-IT
Trust with respect to the Securities which represent maturing interest on
defaulted obligations held by the Trustee will be exempt from California
personal income tax if, and to the same extent as, such interest would have
been so exempt if paid by the issuer of the defaulted obligations; and
(6)under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry Units of
the California IM-IT Trust is not deductible for the purposes of the
California personal income tax. While there presently is no California
authority interpreting this provision, Section 17280(b)(2) directs the
California Franchise Tax Board to prescribe regulations determining the proper
allocation and apportionment of interest costs for this purpose. The Franchise
Tax Board has not yet proposed or prescribed such regulations. In interpreting
the generally similar Federal provision, the Internal Revenue Service has
taken the position that such indebtedness need not be directly traceable to
the purchase or carrying of Units (although the Service has not contended that
a deduction for interest on indebtedness incurred to purchase or improve a
personal residence or to purchase goods or services for personal consumption
will be disallowed). In the absence of conflicting regulations or other
California authority, the California Franchise Tax Board generally has
interpreted California statutory tax provisions in accord with Internal
Revenue Service interpretations of similar Federal provisions.
At the respective times of issuance of the Securities, opinions relating to
the validity thereof and to the exemption of interest thereon from Federal
income tax and California personal income tax are rendered by bond counsel to
the respective issuing authorities. Except in certain instances in which
Orrick, Herrington & Sutcliffe acted as bond counsel to issuers of Securities,
and as such made a review of proceedings relating to the issuance of certain
Securities at the time of their issuance, Orrick, Herrington & Sutcliffe has
not made any special review for the California IM-IT Trust of the proceedings
relating to the issuance of the Securities or of the basis for such opinions.
<TABLE>
<CAPTION>
Semi-
Monthly Annual
<S> <C> <C>
Per Unit Information:
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 57.45 $ 57.45
Less: Estimated Annual Expense per Unit <F2>.............................. $ 2.31 $ 1.95
Less: Annual Premium on Portfolio Insurance per Unit...................... -- --
Estimated Net Annual Interest Income per Unit............................. $ 55.14 $ 55.50
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 55.14 $ 55.50
Divided by 12 and 2, respectively......................................... $ 4.60 $ 27.75
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .15314 $ .15415
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 5.51% 5.55%
Estimated Long-Term Return <F3><F4><F5>.................................... 5.57% 5.61%
Estimated Initial Monthly Distribution (May 1995).......................... $ 4.75 $ --
Estimated Initial Semi-annual Distribution (July 1995)..................... $ -- $ 14.02
Estimated Normal Distribution per Unit <F5>................................ $ 4.60 $ 27.75
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
California IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
January and July commencing May 15, 1995
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.08
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued"Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $57.53. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.39 and $2.03 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
CALIFORNIA INSURED MUNICIPALS INCOME TRUST
SERIES 138
(174TH INSURED MULTI-SERIES)
PORTFOLIO As of March 23, 1995
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of either Redemption California
Principal<F1> Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F
<S> <C> <C> <C> <C>
$ 500,000 Brea Redevelopment Agency (Orange County, California) 1993 Tax
Allocation Refunding Revenue Bonds (Redevelopment Project AB)
MBIA Insured** 2003 @ 102
6.125% Due 8/1/2013 .............................................. AAA 2009 @ 100 S.F. $ 502,500
500,000 Alameda County Water District, California, Revenue Certificates of
Participation (1995 Water System Project) FGIC Insured
#6.00% Due 2004 @ 102 2004 @ 102
Due 6/1/2020 ..................................................... AAA 2016 @ 100 S.F. 494,160
350,000 M-S-R Public Power Agency (California) San Juan Refunding Revenue
Bonds, Series F (AMBAC Indemnity Insured) 2003 @ 102
#6.00% Due 7/1/2020 .............................................. AAA 2014 @ 100 S.F. 345,020
370,000 Santa Margarita/Dana Point Authority, Orange County, California,
Revenue Bonds, Series B (1994 Improvement Districts Nos. 3, 3A, 4
and 4A General Obligation Bond Refinancing) MBIA Insured 2004 @ 102
#5.75% Due 8/1/2020 .............................................. AAA 2015 @ 100 S.F. 350,671
215,000 City of Los Angeles, California, Tax-Exempt Mortgage Revenue
Refunding Bonds, Series 1993II-C (FHA Insured Mortgage
Loans-Section 8 Assisted Projects) MBIA Insured 2003 @ 100
#5.35% Due 1/1/2023 .............................................. AAA 2004 @ 100 S.F. 190,700
100,000 City of Fresno, Water System Revenue Bonds, Water Remediation
Project II (FGIC Insured) 2004 @ 101
#6.00% Due 6/1/2024 .............................................. AAA 2021 @ 100 S.F. 98,733
500,000 Mt. Diablo Unified School District, Community Facilities District
No. 1 (Contra Costa County, California) Special Tax Bonds, Series
1995 (Capital Guaranty Insured) 2005 @ 102
#6.00% Due 8/1/2024 .............................................. AAA 2020 @ 100 S.F. 494,375
500,000 Department of Water and Power of the City of Los Angeles,
California, Electric Plant Revenue Bonds, Second Issue of 1993
(MBIA Insured) 2003 @ 102
#5.125% Due 10/15/2024 ........................................... AAA 2021 @ 100 S.F. 433,915
$ 3,035,000 $ 2,910,074
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
FLORIDA IM-IT INTERMEDIATE LADDERED MATURITY TRUST
General. The Florida IM-IT Intermediate Laddered Maturity Trust consists of 10
issues of Securities. None of the Bonds in the Florida IM-IT Intermediate
Laddered Maturity Trust 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 to total Florida IM-IT
Intermediate Laddered Maturity Trust) as follows: General Purpose, 3 (37%);
Water and Sewer, 2 (20%); Certificates of Participation, 1 (18%); Retail
Electric/Gas, 1 (17%); Public Building, 2 (6%) and Airport, 1 (2%). No Bond
issue has received a provisional rating. All of the obligations in the Florida
IM-IT Intermediate Laddered Maturity Trust mature within 5-10 years of the
Date of Deposit. Commencing in approximately the fifth year of the Trust,
roughly 20% of the Bonds contained in the Trust will mature each year. The
dollar weighted average maturity of the Bonds in the Trust is 6.29 years.
Risk Factors. Florida's economy has in the past been highly dependent on the
construction industry and construction related manufacturing. This dependency
has declined in recent years and continues to do so as a result of continued
diversification of the State's economy. For example, in 1980 total contract
construction employment as a share of total non-farm employment was just over
seven percent and in 1993 the share had edged downward to five percent. This
trend is expected to continue as Florida's economy continues to diversify.
Florida, nevertheless, has a dynamic construction industry with single and
multi-family housing starts accounting for 8.5% of total U.S. housing starts
in 1993 while the State's population is 5.3% of the U.S. total population.
Florida's housing starts since 1980 have represented an average of 11.0% of
the U.S.'s total annual starts, and since 1980 total housing starts have
averaged 156,450 a year.
A driving force behind the State's construction industry has been the State's
rapid rate of population growth. Although Florida currently is the fourth most
populous state (with an estimated population of 13.4 million), its annual
population growth is now projected to decline as the number of people moving
into the State is expected to hover near the mid 250,000 range annually
throughout the 1990s. This population trend should provide fuel for business
and home builders to keep construction activity lively in Florida for some
time to come. However, other factors do influence the level of construction in
the State. For example, Federal tax reform in 1986 and other changes to the
Federal income tax code have eliminated tax deductions for owners of two or
more residential real estate properties and have lengthened depreciation
schedules on investment and commercial properties. Economic growth and
existing supplies of homes also contribute to the level of construction
activity in the State.
Since 1980, the State's job creation rate is almost twice the rate for the
nation as a whole, and its growth rate in new non-agricultural jobs is the
fastest of the 11 most populous states and second only to California in the
total number of new jobs created. Contributing to the State's rapid rate of
growth in employment and income is international trade. Since 1980, the
State's unemployment rate has generally been below that of the U.S. In recent
years, however, as the State's economic growth has slowed from its previous
highs, the State's unemployment rate has tracked above the national average.
The average in Florida since 1980 has been 6.5% while the national average is
7.1%. According to the U.S. Department of Commerce, the Florida Department of
Labor and Employment Security, and the Florida Consensus Economic Estimating
Conference (together the "Organization") the State's unemployment rate
was 8.2% during 1992. As of January, 1994, the Organization estimates that the
unemployment rate will be 6.7% for 1993-94 and 6.1% in 1994-95.
The rate of job creation in Florida's manufacturing sector has exceeded that
of the U.S. From the beginning of 1980 through 1993, the State added over
50,100 new manufacturing jobs, an 11.7% increase. During the same period,
national manufacturing employment declined ten out of the fourteen years, for
a loss of 2,977,000 jobs.
Total non-farm employment in Florida is expected to increase 2.7% in 1993-94
and rise 3.8% in 1994-95. Trade and services, the two largest figures, account
for more than half of the total non-farm employment. Employment in the service
sectors should experience an increase of 3.9% in 1993-94, while growing 4.9%
in 1994-95. Trade is expected to expand 2.2% in 1994 and 3.4% in 1995. The
service sector is now the State's largest employment category.
Tourism is one of Florida's most important industries. Approximately 41.1
million tourists visited the State in 1993, as reported by the Florida
Department of Commence. In terms of business activities and state tax
revenues, tourists in Florida in 1993 represented an estimated 4.5 million
additional residents. Visitors to the State tend to arrive equally by air and
car. The State's tourism industry over the years has become more
sophisticated, attracting visitors year-round and, to a degree, reducing its
seasonality. Tourist arrivals are expected to decline by almost two percent
this year, but are expected to recover next year with 5.0% growth. By the end
of the State's current fiscal year, 41.0 million domestic and international
tourists are expected to have visited the State. In 1994-95, tourist arrivals
should approximate 43.0 million.
The State's per capita personal income in 1992 of $19,711 was slightly below
the national average of $20,105 and significantly ahead of that for the
southeast United States, which was $17,296. Real personal income in the State
is estimated to increase 5.5% in 1993-94 and 4.7% in 1994-95. By the end of
1994-95, real personal income per capita in the State is projected to average
6.7% higher than its 1992-93 level.
Compared to other states, Florida has a proportionately greater retirement age
population which comprises 18.3% (as of April 1, 1991) of the State's
population and is forecast to grow at an average annual rate of over 1.96%
through the 1990s. Thus, property income (dividends, interest, and rent) and
transfer payments (Social Security and pension benefits, among other sources
of income) are a relatively more important source of income. For example,
Florida's total wages and salaries and other labor income in 1993 was 62% of
total income, while a similar figure for the nation for 1992 was 72.0%.
Transfer payments are typically less sensitive to the business cycle than
employment income and, therefore, act as stabilizing forces in weak economic
periods. While many of the U.S.'s senior citizens choose the State as their
place of retirement, the State is also recognized as attracting a significant
number of working age people. Since 1982, the prime working age population
(18-44) has grown at an average annual rate of 3.3%.
In fiscal year 1991-92, approximately 64% of the State's total direct revenue
to its three operating funds was derived from State taxes, with federal grants
and other special revenue accounting for the balance. State sales and use tax,
corporate income tax, and beverage tax amounted to 68%, 7% and 5%,
respectively, of total receipts by the General Revenue Fund during fiscal year
1991-92. In that same year, expenditures for education, health and welfare,
and public safety amounted to 53%, 30% and 13.3%, respectively, of total
expenditures from the General Revenue Fund.
Hurricane Andrew left some parts of south Florida devastated. Post-Hurricane
Andrew clean up and rebuilding have changed the outlook for the State's
economy. Single and multi-family housing starts in 1993-94 are projected to
reach a combined level of 118,000, increasing to 134,300 next year. Lingering
recessionary effects on consumers and tight credit are two of the reasons for
relatively slow core construction activity, as well as lingering effects from
the 1986 tax reform legislation discussed above. However, construction is one
of the sectors most severely affected by Hurricane Andrew. Low interest rates
and pent up demand combined with improved consumer confidence should lead to
improved housing starts. The construction figures above include additional
housing starts as a result of destruction by Hurricane Andrew. Total
construction expenditures are forecasted to increase 15.6% this year and
increase 13.3% next year.
The State Constitution and statutes mandate that the State budget, as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. If the Governor or Comptroller
believes a deficit will occur in any State fund, by statute, he must certify
his opinion to the Administrative Commission, which then is authorized to
reduce all State agency budgets and releases by a sufficient amount to prevent
a deficit in any fund. Additionally, the State Constitution prohibits issuance
of State obligations to fund State operations.
Estimated fiscal year 1993-94 General Revenue plus Working Capital funds
available total $13,582.7 million, an 8.4% increase over 1992-93. This
reflects a transfer of $190 million, out of an estimated $220.0 million in
non-recurring revenue due to Andrew, to a hurricane relief trust fund. Of the
total General Revenue plus Working Capital funds available to the State,
$12,943.5 million of that is Estimated Revenues (excluding the Andrew impact)
which represents an increase of 7.3% over the previous year's Estimated
Revenues. With effective General Revenues plus Working Capital Fund
appropriations at $13,276.9 million, unencumbered reserves at the end of
1993-94 are estimated at $302.8 million. Estimated, fiscal year 1994-95
General Revenue plus Working Capital and Budget Stabilization funds available
total $14,573.7 million, a 7.3% increase over 1993-94. This amount reflects a
transfer of $159.00 million in non-recurring revenue due to Hurricane Andrew,
to a hurricane relief trust fund. The $13,860.8 million in Estimated Revenues
(excluding the Hurricane Andrew impact) represent an increase of 7.1% over the
previous year's Estimated Revenues. The massive effort to rebuild and replace
destroyed or damaged property in the wake of Andrew is responsible for the
substantial positive revenue impacts shown here. Most of the impact is in the
increase in the State's sales tax.
In fiscal year 1992-93, approximately 62% of the State's total direct revenue
to its three operating funds were derived from State taxes, with Federal
grants and other special revenue accounting for the balance. State sales and
use tax, corporate income tax, intangible personal property tax, and beverage
tax amounted to 68%, 7%, 4%, and 4%, respectively, of total General Revenue
Funds available during fiscal 1992-93. In that same year, expenditures for
education, health and welfare, and public safety amounted to approximately
49%, 30%, and 11%, respectively, of total expenditures from the General
Revenue Fund.
The State's sales and use tax (6%) currently accounts for the State's single
largest source of tax receipts. Slightly less than 10% of the State's sales
and use tax is designated for local governments and is distributed to the
respective counties in which collected for such use by such counties and the
municipalities therein. In addition to this distribution, local governments
may (by referendum) assess a 0.5% or a 1.0% discretionary sales tax within
their county. Proceeds from this local option sales tax are earmarked for
funding local infrastructure programs and acquiring land for public recreation
or conservation or protection of natural resources as provided under Florida
law. Certain charter counties have other taxing powers in addition, and
non-consolidated counties with a population in excess of 800,000 may levy a
local option sales tax to fund indigent health care. It alone cannot exceed
0.5% and when combined with the infrastructure surtax cannot exceed 1.0%. For
the fiscal year ended June 30, 1993, sales and use tax receipts (exclusive of
the tax on gasoline and special fuels) totalled $9,426.0 million, an increase
of 12.5% over fiscal year 1991-92.
The second largest source of State tax receipts is the tax on motor fuels.
However, these revenues are almost entirely dedicated trust funds for specific
purposes and are not included in the State's General Revenue Fund.
The State imposes an alcoholic beverage wholesale tax (excise tax) on beer,
wine, and liquor. This tax is one of the State's major tax sources, with
revenues totalling $442.2 million in fiscal year ending June 30, 1993.
Alcoholic beverage tax receipts declined 1.6% over the previous year. The
revenues collected from this tax are deposited into the State's General
Revenue Fund.
The State imposes a corporate income tax. All receipts of the corporate income
tax are credited to the General Revenue Fund. For the fiscal year ended June
30, 1993, receipts from this source were $846.6 million, an increase of 5.6%
from fiscal year 1991-92.
The State imposes a documentary stamp tax on deeds and other documents
relating to realty, corporate shares, bonds, certificates of indebtedness,
promissory notes, wage assignments, and retail charge accounts. The
documentary stamp tax collections totaled $639.0 million during fiscal year
1992-93, a 27.0% increase from the previous fiscal year. Beginning in fiscal
year 1992-93, 71.29% of these taxes are to be deposited to the General Revenue
Fund.
The State imposes a gross receipts tax on electric, natural gas, and
telecommunications services. All gross receipts utilities tax collections are
credited to the State's Public Education Capital Outlay and Debt Service Trust
Fund. In fiscal year 1992-93, this amounted to $447.9 million.
The State imposes an intangible personal property tax on stocks, bonds,
including bonds secured by liens in Florida real property, notes, governmental
leaseholds, and certain other intangibles not secured by a lien on Florida
real property. The annual rate of tax is 2 mils. Second, the State imposes a
non-recurring 2 mil tax on mortgages and other obligations secured by liens on
Florida real property. In fiscal year 1992-93, total intangible personal
property tax collections were $783.4 million, a 33% increase over the prior
year. Of the tax proceeds, 66.5% are distributed to the General Revenue Fund.
The State began its own lottery in 1988. State law requires that lottery
revenues be distributed 50% to the public in prizes, 38% for use in enhancing
education, and the balance, 12.0% for costs of administering the lottery.
Fiscal year 1992-93 lottery ticket sales totalled $2.13 billion, providing
education with $810.4 million.
The State's severance tax applies to oil, gas, and sulphur production, as well
as the severance of phosphate rock and other solid minerals. Total collections
from severance taxes total $64.5 million during fiscal year 1992-93, down 4.0%
from the previous year. Currently, 60.0% of this amount is transferred to the
General Revenue Fund.
The State has continuously been dependent on the highly cyclical construction
and construction related manufacturing industries. While that dependency has
decreased, the State is still somewhat at the mercy of the construction and
construction related manufacturing industries. The construction industry is
driven to a great extent by the State's rapid growth in population. There can
be no assurance that population growth will in fact continue throughout the
1990's in which case there could be an adverse impact on the State's economy
through the loss of construction and construction related manufacturing jobs.
Also, while interest rates remain low currently, an increase in interest rates
could significantly adversely impact the financing of new construction within
the State, thereby adversely impacting unemployment and other economic factors
within the State. In addition, available commercial office space has tended to
remain high over the past few years. So long as this glut of commercial rental
space continues, construction of this type of space will likely continue to
remain slow.
At the end of fiscal 1993, approximately $5.61 billion in principal amount of
debt secured by the full faith and credit of the State was outstanding. In
addition, since July 1, 1993, the State issued about $1.13 billion in
principal amount of full faith and credit bonds.
The State Constitution and statutes mandate that the State budget, as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. If the Governor or Comptroller
believe a deficit will occur in any State fund, by statute, he must certify
his opinion to the Administrative Commission, which then is authorized to
reduce all State agency budgets and releases by a sufficient amount to prevent
a deficit in any fund. Additionally, the State Constitution prohibits issuance
of State obligations to fund State operations.
Currently under litigation are several issues relating to State actions or
State taxes that put at risk substantial amounts of General Revenue Fund
monies. Accordingly, there is no assurance that any of such matters,
individually or in the aggregate, will not have a material adverse affect on
Florida's financial position.
Florida law provides preferential tax treatment to insurers who maintain a
home office in the State. Certain insurers challenged the constitutionality of
this tax preference and sought a refund of taxes paid. Recently, the State
Supreme Court ruled in favor of the State. This case and others, along with
pending refund claims, total about $150 million.
The State imposes a $295 fee on the issuance of certificates of title for
motor vehicles previously titled outside the State. The State has been sued by
plaintiffs alleging that this fee violates the Commerce Clause of the U.S.
Constitution. The Circuit Court in which the case was filed has granted
summary judgment for the plaintiffs and has enjoined further collection of the
impact fee and has ordered refunds to all those who have paid the fee since
the collection of the fee went into effect. The State has appealed the lower
Court's decision and an automatic stay has been granted to the State allowing
it to continue to collect the fee. The potential refund exposure to the State
if it should lose the case may be in excess of $100 million.
Florida maintains a bond rating of Aa and AA from Moody's Investors Service
and Standard & Poor's, respectively, on the majority of its general obligation
bonds, although the rating of a particular series of revenue bonds relates
primarily to the project, facility, or other revenue sources from which such
series derives funds for repayment. While these ratings and some of the
information presented above indicate that Florida is in satisfactory economic
health, there can be no assurance that there will not be a decline in economic
conditions or that particular Municipal Obligations purchased by the Fund will
not be adversely affected by any such changes.
The sources for the information presented above include official statements
and financial statements of the State of Florida. While the Sponsor has not
independently verified this information, the Sponsor has no reason to believe
that the information is not correct in all material respects.
Tax Status. For a discussion of the Federal tax status of income earned on
Florida IM-IT Intermediate Laddered Maturity Trust units, see "Other
Matters--Federal Tax Status".
The Bonds were accompanied by opinions of Bond Counsel to the respective
issuers thereof to the effect that the Bonds were exempt from the Florida
intangibles tax. Neither the Sponsor nor its counsel have independently
reviewed such opinions or examined the Bonds to be deposited in and held by
the Florida IM-IT Intermediate Laddered Maturity Trust and have assumed the
correctness as of the date of deposit of the opinions of Bond Counsel.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
law:
For Florida state income tax purposes, the Florida IM-IT Intermediate Laddered
Maturity Trust will not be subject to the Florida income tax imposed by
Chapter 220, Florida Statutes. In addition, Florida does not impose any income
taxes at the local level.
Because Florida does not impose an income tax on individuals, non-corporate
Unitholders residing in Florida will not be subject to any Florida income
taxation on income realized by the Florida IM-IT Intermediate Laddered
Maturity Trust. Any amounts paid to the Florida IM-IT Intermediate Laddered
Maturity Trust or to non-corporate Unitholders residing in Florida under an
insurance policy issued to the Florida IM-IT Intermediate Laddered Maturity
Trust or the Sponsor which represent maturing interest on defaulted
obligations held by the Trustee will not be subject to the Florida income tax
imposed by Chapter 220, Florida Statutes to the extent not included in gross
income for Federal income tax purposes.
Corporate Unitholders with commercial domiciles in Florida will be subject to
Florida income or franchise taxation on income realized by the Florida IM-IT
Intermediate Laddered Maturity Trust and on payments of interest pursuant to
any insurance policy. Other corporate Unitholders will be subject to Florida
income or franchise taxation on income realized by the Florida IM-IT
Intermediate Laddered Maturity Trust (or on payments of interest pursuant to
any insurance policy) only to the extent that the income realized does not
constitute "non-business income"as defined by Chapter 220.
Units will be subject to Florida estate tax only if held by Florida residents.
However, the Florida estate tax is limited to the amount of the credit for
state death taxes provided for in Section 2011 of the Internal Revenue Code.
Neither the Bonds nor the Units will be subject to the Florida ad valorem
property tax, the Florida intangibles personal property tax or Florida sales
or use tax.
<TABLE>
<CAPTION>
Semi-
Monthly Annual
<S> <C> <C>
Per Unit Information:
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 48.64 $ 48.64
Less: Estimated Annual Expense per Unit <F2>.............................. $ 2.29 $ 1.83
Less: Annual Premium on Portfolio Insurance per Unit...................... $ 17 $ .17
Estimated Net Annual Interest Income per Unit............................. $ 46.18 $ 46.64
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 46.18 $ 46.64
Divided by 12 and 2, respectively......................................... $ 3.85 $ 23.32
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .12829 $ .12956
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 4.49% 4.54%
Estimated Long-Term Return <F3><F4><F5>.................................... 4.61% 4.65%
Estimated Initial Monthly Distribution May 1995)........................... $ 3.98 $ --
Estimated Initial Semi-annual Distribution (May 1995)...................... $ -- $ 4.01
Estimated Normal Distribution per Unit <F5>................................ $ 3.85 $ 23.32
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Florida IM-IT Intermediate Laddered Maturity Trust under the monthly and semi-annual distribution
plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--May
and November commencing May 15, 1995
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.15
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued"Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $48.79. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.44 and $1.98 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
FLORIDA IM-IT INTERMEDIATE LADDERED MATURITY
SERIES 12 (174TH INSURED MULTI-SERIES)
PORTFOLIO As of March 23, 1995
<CAPTION>
Offering
Price To
Florida
IM-IT
Intermediate
Name of Issuer, Title, Interest Rate and Laddered
Aggregate Maturity Date of either Bonds Deposited or Redemption Maturity
Principal<F1> Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 180,000 City of Jacksonville, Florida, Capital Improvement Revenue Bonds,
Series 1995 (Gator Bowl Project) AMBAC Indemnity Insured**
100M-4.80% Due 10/1/1999 AAA $ 100,375
80M-5.00% Due 10/1/2001 ........................................... AAA 80,300
500,000 Jacksonville Electric Authority (Jacksonville, Florida) Electric
System Revenue Bonds, Series Three 1993B
#4.20% Due 10/1/1999 .............................................. AA 483,705
100,000 Hillsborough County, Florida, Utility Refunding Revenue Bonds,
Series 1993 (MBIA Insured)
4.70% Due 8/1/2000 ................................................ AAA 99,475
500,000 Broward County, Florida, Water and Sewer Utility Revenue
Refunding Bonds, Series 1993 (AMBAC Indemnity Insured)
#4.30% Due 10/1/2000 .............................................. AAA 484,555
20,000 State of Florida, Department of Natural Resources, Preservation
2000 Revenue Bonds, Series 1993A (FSA Insured)
#4.875% Due 7/1/2001 .............................................. AAA 19,950
500,000 State of Florida, Department of Management Services, Division of
Facilities Management, Florida Facilities Pool Revenue
Refunding Bonds, Series 1992 (AMBAC Indemnity Insured)
4.80% Due 9/1/2001 ................................................ AAA 496,715
600,000 Indian Trace Community Development District, Florida, Water
Management Special Benefit Refunding General Obligation
Bonds, Series 1995A (MBIA Insured)
#5.20% Due 5/1/2002 ............................................... AAA 605,748
540,000 State of Florida, Department of Corrections, Certificates of
Participation, Okeechobee Correctional Institution Project,
Series 1995 (AMBAC Indemnity Insured)
#5.80% Due 3/1/2003 ............................................... AAA 562,815
60,000 Broward County, Florida, Airport System Revenue Refunding
Bonds, Series 1993C (AMBAC Indemnity Insured)
#4.80% Due 10/1/2003 ............................................... AAA 58,567
$ 3,000,000 $ 2,992,205
</TABLE>
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
NEW JERSEY IM-IT TRUST
General. The New Jersey IM-IT Trust consists of 8 issues of Securities. Two of
the Bonds in the New Jersey IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New Jersey IM-IT Trust) as follows: Health Care, 3 (33%); General
Obligations, 2 (26%); Retail Electric/Gas, 2 (25%) and Water and Sewer, 1
(16%). No Bond issue has received a provisional rating.
Risk Factors. As described above, the New Jersey IM-IT Trust consists of a
portfolio of Bonds. The Trust is therefore susceptible to political, economic
or regulatory factors affecting issuers of the Bonds. The following
information provides only a brief summary of some of the complex factors
affecting the financial situation in New Jersey (the "State") and is
derived from sources that are generally available to investors and is believed
to be accurate. It is based in part on information obtained from various State
and local agencies in New Jersey. No independent verification has been made of
any of the following information.
New Jersey is the ninth largest state in population and the fifth smallest in
land area. With an average of 1,062 people per square mile, it is the most
densely populated of all the states. The state's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries,
supplemented by rural areas with selective commercial agriculture.
Historically, New Jersey's average per capita income has been well above the
national average, and in 1993 the State ranked second among states in per
capita personal income ($26,967).
The New Jersey Economic Policy Council, a statutory arm of the New Jersey
Department of Commerce and Economic Development, has reported in New Jersey
Economic Indicators, a monthly publication of the New Jersey Department of
Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from
the export boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost momentum. In
the meantime, the prolonged fast growth in the State in the mid 1980s resulted
in a tight labor market situation, which has led to relatively high wages and
housing prices. This means that, while the incomes of New Jersey residents are
relatively high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration
of New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities and trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an estimated 6.1%
in February 1995, which is higher than the national average of 5.4% in
February 1995. Economic recovery is likely to be slow and uneven in New
Jersey, with unemployment receding at a correspondingly slow pace, due to the
fact that some sectors may lag due to continued excess capacity. In addition,
employers even in rebounding sectors can be expected to remain cautious about
hiring until they become convinced that improved business will be sustained.
Also, certain firms will continue to merge or downsize to increase
profitability.
Debt Service. The primary method for State financing of capital projects is
through the sale of the general obligation bonds of the State. These bonds are
backed by the full faith and credit of the State tax revenues and certain
other fees are pledged to meet the principal and interest payments and if
provided, redemption premium payments, if any, required to repay the bonds. As
of June 30, 1993, there was a total authorized bond indebtedness of
approximately $8.98 billion, of which $3.6 billion was issued and outstanding,
$4.0 billion was retired (including bonds for which provision for payment has
been made through the sale and issuance of refunding bonds) and $1.38 billion
was unissued. The appropriation for the debt service obligation on such
outstanding indebtedness was $103.5 million for fiscal year 1994.
New Jersey's Budget and Appropriation System. The State operates on a fiscal
year beginning July 1 and ending June 30. At the end of fiscal year 1989,
there was a surplus in the State's general fund (the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made) of $411.2 million. At the end of fiscal year 1990,
there was a surplus in the general fund of $1 million. At the end of fiscal
year 1991, there was a surplus in the general fund of $1.4 million. New Jersey
closed its fiscal year 1992 with a surplus of $760.8 million. It is estimated
that New Jersey closed its fiscal year 1993 with a surplus of $937.4 million.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes (consisting
of $1.5 billion in sales and use taxes and $1.3 billion in income taxes), the
biggest tax hike in New Jersey history. There can be no assurance that
receipts and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the increase
in the State's sales and use tax rate from 6% to 7% and the elimination of
exemptions for certain products and services not previously subject to the
tax, such as telephone calls, paper products (which has since been
reinstated), soaps and detergents, janitorial services, alcoholic beverages
and cigarettes. At the time of enactment, it was projected that these taxes
would raise approximately $1.5 billion in additional revenue. Projections and
estimates of receipts from sales and use taxes, however, have been subject to
variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the form of
an increased state income tax on individuals. At the time of enactment, it was
projected that this increase would raise approximately $1.3 billion in
additional income taxes to fund a new school aid formula, a new homestead
rebate program and state assumption of welfare and social services costs.
Projections and estimates of receipts from income taxes, however, have also
been subject to variance in recent fiscal years. Under the legislation, income
tax rates increased from their previous range of 2% to 3.5% to a new range of
2% to 7%, with the higher rates applying to married couples with incomes
exceeding $70,000 who file joint returns, and to individuals filing single
returns with incomes of more than $35,000.
The Florio administration had contended that the income tax package will help
reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation the State will assume
approximately $289 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition,
under the new formula for funding school aid, an extra $1.1 billion was
proposed to be sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased from 7%
to 6%. Effective January 1, 1994, an across-the-board 5% reduction in the
income tax rates was enacted and effective January 1, 1995 further reductions
ranging from 1% up to 10% in income tax rates took effect.
On June 30, 1994, Governor Whitman signed the New Jersey Legislature's $15.7
billion budget for Fiscal Year 1995. The balanced budget, which includes $455
million in surplus, is $141 million less than the 1994 budget. Whether the
State can achieve a balanced budget depends on its ability to enact and
implement expenditure reductions and to collect the estimated tax revenues.
Litigation. The State is a party in numerous legal proceedings pertaining to
matters incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are cases challenging the following: the
formula relating to State aid to public schools, the method by which the State
shares with its counties maintenance recoveries and costs for residents in
State institutions, unreasonably low Medicaid payment rates for long-term
facilities in New Jersey, the obligation of counties to maintain Medicaid or
Medicare eligible residents of institutions and facilities for the
developmentally disabled, taxes paid into the Spill Compensation Fund (a fund
established to provide money for use by the State to remediate hazardous waste
sites and to compensate other persons for damages incurred as a result of
hazardous waste discharge) based on Federal preemption, various provisions,
and the constitutionality of the Fair Automobile Insurance Reform Act of 1990,
the State's role in a consent order concerning the construction of a resource
facility in Passaic County, actions taken by the New Jersey Bureau of
Securities against an individual, the State's actions regarding alleged
chromium contamination of State-owned property in Hudson County, the issuance
of emergency redirection orders and a draft permit by the Department of
Environmental Protection and Energy, the adequacy of Medicaid reimbursement
for services rendered by doctors and dentists to Medicaid eligible children,
the Commissioner of Health's calculation of the hospital assessment required
by the Health Care Cost Reduction Act of 1991, refusal of the State to share
with Camden County federal funding the State recently received for
disproportionate share hospital payments made to county psychiatric
facilities, and the constitutionality of annual A-901 hazardous and solid
waste licensure renewal fees collected by the Department of Environmental
Protection and Energy. Adverse judgments in these and other matters could have
the potential for either a significant loss of revenue or a significant
unanticipated expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The State is unable to estimate its exposure for
these claims.
Debt Ratings. For many years, both Moody's Investors Service, Inc. and
Standard and Poor's Corporation rated New Jersey general obligation bonds "
Aaa"and "AAA", respectively. On July 3, 1991, however, Standard
and Poor's Corporation downgraded New Jersey general obligation bonds to "
AA+."On June 4, 1992, Standard and Poor's Corporation placed New Jersey
general obligation bonds on CreditWatch with negative implications, citing as
its principal reason for its caution the unexpected denial by the federal
government of New Jersey's request for $450 million in retroactive Medicaid
payments for psychiatric hospitals. These funds were critical to closing a $1
billion gap in the State's $15 billion budget for fiscal year 1992 which ended
on June 30, 1992. Under New Jersey state law, the gap in the budget was
required to be closed before the new budget year began on July 1, 1992.
Standard and Poor's suggested the State could close fiscal 1992's budget gap
and help fill fiscal 1993's hole by a reversion of $700 million of pension
contributions to its general fund under a proposal to change the way the State
calculates its pension liability.
On July 6, 1992, Standard and Poor's Corporation reaffirmed its "AA+"
rating for New Jersey general obligation bonds and removed the debt from its
CreditWatch list, although it stated that New Jersey's long-term financial
outlook was negative. Standard and Poor's Corporation was concerned that the
State was entering fiscal 1993 with only a $26 million surplus and remained
concerned about whether the State economy would recover quickly enough to meet
lawmakers' revenue projections. It also remained concerned about the recent
federal ruling leaving in doubt how much the State was due in retroactive
Medicaid reimbursements and a ruling by a federal judge, now on appeal, of the
State's method for paying for uninsured hospital patients. However, on July
27, 1994, Standard and Poor's announced that it was changing the State's
outlook from negative to stable due to a brightening of the State's prospects
as a result of Governor Whitman's effort to trim spending and cut taxes,
coupled with an improving economy. Standard and Poor's reaffirmed its "
AA+"rating at the same time.
On August 24, 1992, Moody's Investors Service, Inc. downgraded New Jersey
general obligation bonds to "Aa1,"stating that the reduction
reflected a developing pattern of reliance on nonrecurring measures to achieve
budgetary balance, four years of financial operations marked by revenue
shortfalls and operating deficits, and the likelihood that serious financial
pressures will persist. On August 5, 1994, Moody's reaffirmed its "Aa1"
rating, citing on the positive side New Jersey's broad-based economy, high
income levels, history of maintaining a positive financial position and
moderate (albeit rising) debt ratios, and on the negative side, a continued
reliance on one-time revenue and a dependence on pension-related savings to
achieve budgetary balance.
Tax Status. For a discussion of the Federal tax status of income earned on New
Jersey IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Pitney, Hardin, Kipp & Szuch, special counsel to the Fund
for New Jersey tax matters, under existing law:
(1)The New Jersey IM-IT Trust will be recognized as a trust and not an
association taxable as a corporation. The New Jersey IM-IT Trust will not be
subject to the New Jersey Corporation Business Tax or the New Jersey
Corporation Income Tax.
(2)With respect to the non-corporate Unitholders who are residents of New
Jersey, the income of the New Jersey IM-IT Trust which is allocable to each
such Unitholder will be treated as the income of such Unitholder under the New
Jersey Gross Income Tax. Interest on the underlying Bonds which would be
exempt from New Jersey Gross Income Tax if directly received by such
Unitholder will retain its status as tax-exempt interest when received by the
New Jersey IM-IT Trust and distributed to such Unitholder. Any proceeds paid
under the insurance policy issued to the Trustee of the New Jersey IM-IT Trust
with respect to the Bonds or under individual policies obtained by issuers of
Bonds which represent maturing interest on defaulted obligations held by the
Trustee will be exempt from New Jersey Gross Income Tax if, and to the same
extent as, such interest would have been so exempt if paid by the issuer of
the defaulted obligations.
(3)A non-corporate Unitholder will not be subject to the New Jersey Gross
Income Tax on any gain realized either when the New Jersey IM-IT Trust
disposes of a Bond (whether by sale, exchange, redemption, or payment at
maturity), when the Unitholder redeems or sells his Units or upon payment of
any proceeds under the insurance policy issued to the Trustee of the New
Jersey IM-IT Trust with respect to the Bonds or under individual policies
obtained by issuers of Bonds which represent maturing principal on defaulted
obligations held by the Trustee. Any loss realized on such disposition may not
be utilized to offset gains realized by such Unitholder on the disposition of
assets the gain on which is subject to the New Jersey Gross Income Tax.
(4)Units of the New Jersey IM-IT Trust may be taxable on the death of a
Unitholder under the New Jersey Transfer Inheritance Tax Law or the New Jersey
Estate Tax Law.
(5)If a Unitholder is a corporation subject to the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, interest from the Bonds in
the New Jersey IM-IT Trust which is allocable to such corporation will be
includable in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, less any interest expense
incurred to carry such investment to the extent such interest expense has not
been deducted in computing Federal taxable income. Net gains derived by such
corporation on the disposition of the Bonds by the New Jersey IM-IT Trust or
on the disposition of its Units will be included in its entire net income for
purposes of the New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax. Any proceeds paid under the insurance policy issued to the Trustee
of the New Jersey IM-IT Trust with respect to the Bonds or under individual
policies obtained by issuers of Bonds which represent maturing interest or
maturing principal on defaulted obligations held by the Trustee will be
included in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax if, and to the same extent
as, such interest or proceeds would have been so included if paid by the
issuer of the defaulted obligations.
<TABLE>
<CAPTION>
Semi-
Monthly Annual
<S> <C> <C>
Per Unit Information:
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 57.02 $ 57.02
Less: Estimated Annual Expense per Unit <F2>.............................. $ 2.47 $ 2.02
Less: Annual Premium on Portfolio Insurance per Unit...................... -- --
Estimated Net Annual Interest Income per Unit............................. $ 54.55 $ 55.00
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 54.55 $ 55.00
Divided by 12 and 2, respectively......................................... $ 4.55 $ 27.50
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .15153 $ .15279
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 5.46% 5.50%
Estimated Long-Term Return <F3><F4><F5>.................................... 5.46% 5.51%
Estimated Initial Monthly Distribution (May 1995).......................... $ 4.70 $ --
Estimated Initial Semi-annual Distribution (July 1995)..................... $ -- $ 13.90
Estimated Normal Distribution per Unit <F5>................................ $ 4.55 $ 27.50
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
New Jersey IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
January and July commencing May 15, 1995
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.06
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued"Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $57.08. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.53 and $2.08 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
NEW JERSEY INSURED MUNICIPALS INCOME TRUST
SERIES 101 (174TH INSURED MULTI-SERIES)
PORTFOLIO As of March 23, 1995
<CAPTION>
Offering
Name of Issuer, Title, Interest Rate and Price To
Aggregate Maturity Date of either Bonds Deposited or Redemption New Jersey
Principal<F1> Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F4
<S> <C> <C> <C> <C>
$ 100,000 New Jersey Health Care Facilities Financing Authority, Jersey
Shore Medical Center Obligated Group Issue, Revenue Bonds,
Series 1994 (AMBAC Indemnity Insured) 2004 @ 102
#6.25% Due 7/1/2016 ............................................ AAA 2015 @ 100 S.F. $ 101,859
275,000 Township of Delran, Burlington County, New Jersey, General
Improvement Bonds, Unlimited Tax-General Obligation, Series
1995 (FGIC Insured)**
6.00% Due 1/1/2019 ............................................. AAA 2006 @ 100 276,375
500,000 New Jersey Economic Development Authority, Water Facilities
Revenue Refunding Bonds (Hackensack Water Company
Project) Series 1994A (MBIA Insured)
#5.80% Due 3/1/2024 ............................................ AAA 2004 @ 102 487,485
400,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds (Monmouth Medical Center Issue) Series 1994C
(Capital Guaranty Insured) 2004 @ 102
#6.25% Due 7/1/2024 ............................................ AAA 2017 @ 100 S.F. 406,788
500,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds (Newark Beth Israel Medical Center Issue) Series 1994
(FSA Insured) 2004 @ 102
#6.00% Due 7/1/2024 ............................................ AAA 2017 @ 100 S.F. 497,500
255,000 New Jersey Economic Development Authority, Natural Gas
Facilities Refunding Revenue Bonds, Series 1994A (New
Jersey Natural Gas Company Project) AMBAC Indemnity
Insured
6.25% Due 8/1/2024 ............................................. AAA 2004 @ 102 260,424
500,000 The Essex County Improvement Authority (Essex County, New
Jersey) County of Essex, General Obligation Lease Revenue
Bonds (Gibraltar Building Project) Series 1994 (FGIC Insured) 2004 @ 101
#5.20% Due 12/1/2024 ........................................... AAA 2015 @ 100 S.F. 447,325
500,000 Pollution Control Financing Authority of Salem County (New
Jersey) Pollution Control Revenue Refunding Bonds (Public
Service Electric and Gas Company Project) Series 1993C
(MBIA Insured)
5.55% Due 11/1/2033 ............................................ AAA 2003 @ 102 461,815
$ 3,030,000 $ 2,939,571
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
NEW YORK IM-IT TRUST
General. The New York IM-IT Trust consists of 11 issues of Securities. One of
the Bonds in the New York IM-IT Trust 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 to
total New York IM-IT Trust) as follows: Transportation, 3 (33%); Higher
Education, 3 (30%); Other Care, 2 (17%); Retail Electric/Gas, 1 (8%); Water
and Sewer, 1 (7%) and General Obligations, 1 (5%). No Bond issue has received
a provisional rating.
Risk Factors. A resident of New York State (or New York City) will be subject
to New York State (or New York City) personal income tax with respect to gains
realized when New York Obligations held in the New York IM-IT Trust are sold,
redeemed or paid at maturity or when his Units are sold or redeemed, such gain
will equal the proceeds of sale, redemption or payment less the tax basis of
the New York Obligation or Unit (adjusted to reflect (a) the amortization of
premium or discount, if any, on New York Obligations held in the Trust, (b)
accrued original issue discount, with respect to each New York Obligation
which, at the time the New York Obligation was issued had original issue
discount, and (c) the deposit of New York Obligations with accrued interest in
the Trust after the Unitholder's settlement date).
Interest or gain from the New York IM-IT Trust derived by a Unitholder who is
not a resident of New York State (or New York City) will not be subject to New
York State (or New York City) personal income tax, unless the Units are
property employed in a business, trade, profession or occupation carried on in
New York State (or New York City).
Amounts paid on defaulted New York Obligations held by the Trustee under
policies of insurance issued with respect to such New York Obligations will be
excludable from income for New York State and New York City income tax
purposes, if and to the same extent as, such interest would have been
excludable if paid by the respective issuer.
For purposes of the New York State and New York City franchise tax on
corporations, Unitholders which are subject to such tax will be required to
include in their entire net income any interest or gains distributed to them
even though distributed in respect of New York obligations.
If borrowed funds are used to purchase Units in the Trust, all (or part) of
the interest on such indebtedness will not be deductible for New York State
and New York City tax purposes. The purchase of Units may be considered to
have been made with borrowed funds even though such funds are not directly
traceable to the purchase of Units in any New York Trust.
The Portfolio of the New York IM-IT Trust includes obligations issued by New
York State (the "State"), by its various public bodies (the "
Agencies"), and/or by other entities located within the State, including
the City of New York (the "City").
Some of the more significant events relating to the financial situation in New
York are summarized below. This section provides only a brief summary of the
complex factors affecting the financial situation in New York and is based in
part on Official Statements issued by, and on other information reported by
the State, the City and the Agencies in connection with the issuance of their
respective securities.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of New York Municipal
Obligations held in the portfolio of the Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State economy has grown more slowly than that of the
nation as a whole, gradually eroding the State's relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high state and local tax burden
relative to other states. The burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
A national recession commenced in mid-1990. The downturn continued throughout
the State's 1990-91 fiscal year and was followed by a period of weak economic
growth during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to grow faster
than 1992, but still at a very moderate rate, as compared to other recoveries.
The national recession has been more severe in the State because of factors
such as a significant retrenchment in the financial services industry,
cutbacks in defense spending, and an overbuilt real estate market.
1993-94 Fiscal Year. On April 5, 1993, the State Legislature approved a $32.08
billion budget. Following enactment of the budget the 1993-94 State Financial
Plan was formulated on April 16, 1993. This Plan projects General Fund
receipts and transfers from other funds at $32.367 billion and disbursements
and transfers to other funds at $32.300 billion. In comparison to the
Governor's recommended Executive Budget for the 1993-94 fiscal year, as
revised on February 18, 1993, the 1993-94 State Financial Plan reflects
increases in both receipts and disbursements in the General Fund of $811
million.
While a portion of the increased receipts was the result of a $487 million
increase in the State's 1992-93 positive year-end margin at March 31, 1993 to
$671 million, the balance of such increased receipts is based upon (i) a
projected $269 million increase in receipts resulting from improved 1992-93
results and the expectation of an improving economy, (ii) projected additional
payments of $200 million from the Federal government as reimbursements for
indigent medical care, (iii) the early payment of $50 million of personal tax
returns in 1992-93 which otherwise would have been paid in 1993-94; offset by
(iv) the State Legislature's failure to enact $195 million of additional
revenue-raising recommendations proposed by the Governor. There can be no
assurances that all of the projected receipts referred to above will be
received.
Despite the $811 million increase in disbursements included in the 1993-94
State Financial Plan, a reduction in aid to some local government units can be
expected. To offset a portion of such reductions, the 1993-94 State Financial
Plan contains a package of mandate relief, cost containment and other
proposals to reduce the costs of many programs for which local governments
provide funding. There can be no assurance, however, that localities that
suffer cuts will not be adversely affected, leading to further requests for
State financial assistance.
There can be no assurance that the State will not face substantial potential
budget gaps in the future resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions
to align recurring receipts and disbursements.
1992-93 Fiscal Year. Before giving effect to a 1992-93 year-end deposit to the
refund reserve account of $671 million, General Fund receipts in 1992-93 would
have been $716 million higher than originally projected. This year-end deposit
effectively reduced 1992-93 receipts by $671 million and made those receipts
available for 1993-94.
The State's favorable performance primarily resulted from income tax
collections that were $700 million higher than projected which reflected both
stronger economic activity and tax-induced one-time acceleration of income
into 1992. In other areas larger than projected business tax collections and
unbudgeted receipts offset the loss of $200 million of anticipated Federal
reimbursement and losses of, or shortfalls in, other projected revenue
sources.
For 1992-93, disbursements and transfers to other funds (including the deposit
to the refund reserve account discussed above) totalled $30.829 billion, an
increase of $45 million above projections in April 1992.
Fiscal year 1992-93 was the first time in four years that the State did not
incur a cash-basis operating deficit in the General Fund requiring the
issuance of deficit notes or other bonds, spending cuts or other revenue
raising measures.
Indebtedness. As of March 31, 1993, the total amount of long-term State
general obligation debt authorized but unissued stood at $2.4 billion. As of
the same date, the State had approximately $5.4 billion in general obligation
bonds. The State issued $850 million in tax and revenue anticipation notes
("TRANS") on April 28, 1993. The State does not project the need to
issue additional TRANS during the State's 1993-94 fiscal year.
The State projects that its borrowings for capital purposes during the State's
1993-94 fiscal year will consist of $460 million in general obligation bonds
and $140 million in new commercial paper issuances. In addition, the State
expects to issue $140 million in bonds for the purpose of redeeming
outstanding bond anticipation notes. The Legislature has authorized the
issuance of up to $85 million in certificates of participation during the
State's 1993-94 fiscal year for personal and real property acquisitions during
the State's 1993-94 fiscal year. The projection of the State regarding its
borrowings for the 1993-94 fiscal year may change if actual receipts fall
short of State projections or if other circumstances require.
In June 1990, legislation was enacted creating the "New York Local
Government Assistance Corporation"("LGAC"), a public benefit
corporation empowered to issue long-term obligations to fund certain payments
to local governments traditionally funded through the State's annual seasonal
borrowing. To date, LGAC has issued its bonds to provide net proceeds of $3.28
billion. LGAC has been authorized to issue additional bonds to provide net
proceeds of $703 million during the State's 1993-94 fiscal year.
Ratings. The $850 million in TRANS issued by the State in April 1993 were
rated SP-1-Plus by S&P on April 26, 1993, and MIG-1 by Moody's on April 23,
1993, which represents the highest ratings given by such agencies and the
first time the State's TRANS have received these ratings since its May 1989
TRANS issuance. Both agencies cited the State's improved fiscal position as a
significant factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at A on April 23,
1993, and S&P's rating stood at A- with a stable outlook on April 26, 1993, an
improvement from S&P's negative outlook prior to April 1993. Previously,
Moody's lowered its rating to A on June 6, 1990, its rating having been A1
since May 27, 1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992, AA- from August
1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's, in confirming its rating of the State's general obligation bonds, and
S&P, in improving its outlook on such bonds from negative to stable, noted the
State's improved fiscal condition and reasonable revenue assumptions contained
in the 1993-94 State budget.
The City accounts for approximately 41% of the State's population and personal
income, and the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other
actions, the State Legislature (i) created MAC to assist with long-term
financing for the City's short-term debt and other cash requirements and (ii)
created the State Financial Control Board (the "Control Board") to
review and approve the City's budgets and City four-year financial plans (the
financial plans also apply to certain City-related public agencies (the "
Covered Organizations").
In February 1975, the New York State Urban Development Corporation ("
UDC"), which had approximately $1 billion of outstanding debt, defaulted
on certain of its short-term notes. Shortly after the UDC default, the City
entered a period of financial crisis. Both the State Legislature and the
United States Congress enacted legislation in response to this crisis. During
1975, the State Legislature (i) created MAC to assist with long-term financing
for the City's short-term debt and other cash requirements and (ii) created
the State Financial Control Board (the "Control Board") to review and
approve the City's budgets and City four-year financial plans (the financial
plans also apply to certain City-related public agencies (the "Covered
Organizations")).
Over the past three years, the rate of economic growth in the City has slowed
substantially, and the City's economy is currently in recession. The City
projects, and its current four-year financial plan assumes, a recovery early
in the 1993 calendar year. The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial plan. The
City Comptroller has issued reports concluding that the recession of the
City's economy will be more severe and last longer than is assumed in the
financial plan.
Fiscal Year 1993 and 1993-1996 Financial Plan. The City's 1993 fiscal year
results are projected to be balanced in accordance with generally accepted
accounting principles ("GAAP"). The City was required to close
substantial budget gaps in its 1990, 1991 and 1992 fiscal years in order to
maintain balanced operating results.
The City's modified Financial Plan dated February 9, 1993 covering fiscal
years 1993-1996 projects budget gaps for 1994 through 1996. The Office of the
State Deputy Controller for the City of New York has estimated that under the
modified Financial Plan budget gaps will be $102 million for fiscal year 1994,
$196 million for fiscal year 1995 and $354 million for fiscal year 1996,
primarily due to anticipated higher spending on labor costs.
However, the City's modified Plan is dependent upon a gap-closing program,
certain elements of which the staff of Control Board identified on March 25,
1993 to be at risk due to projected levels of State and Federal aid and
revenue and expenditures estimates which may not be achievable. The Control
Board indicated that the City's modified Financial Plan does not make progress
towards establishing a balanced budget process. The Control Board's report
identified budget gap risks of $1.0 billion, $1.9 billion, $2.3 billion and
$2.6 billion in fiscal years 1994 through 1997, respectively.
On June 3, 1993, the Mayor announced that State and federal aid for Fiscal
Year 1993-1994 would be $280 million less than projected and that in order to
balance the City's budget $176 million of previously announced contingent
budget cuts would be imposed. The Mayor indicated that further savings would
entail serious reductions in services. The State Comptroller on June 14, 1993
criticized efforts by the Mayor and City Council to balance the City's budget
which rely primarily on one-shot revenues. The Comptroller added that the
City's budget should be based on "recurring revenues that fund recurring
expenditures."Given the foregoing factors, there can be no assurance that
the City will continue to maintain a balanced budget, or that it can maintain
a balanced budget without additional tax or other revenue increases or
reductions in City services, which could adversely affect the City's economic
base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to
submit its financial plans to review bodies, including the Control Board. If
the City were to experience certain adverse financial circumstances, including
the occurrence or the substantial likelihood and imminence of the occurrence
of an annual operating deficit of more than $100 million or the loss of access
to the public credit markets to satisfy the City's capital and seasonal
financial requirements, the Control Board would be required by State law to
exercise certain powers, including prior approval of City financial plans,
proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. As a result of the national and
regional economic recession, the State's projections of tax revenues for its
1991 and 1992 fiscal years were substantially reduced. For its 1993 fiscal
year, the State, before taking any remedial action reflected in the State
budget enacted by the State Legislature on April 2, 1992 reported a potential
budget deficit of $4.8 billion. If the State experiences revenue shortfalls or
spending increases beyond its projections during its 1993 fiscal year or
subsequent years, such developments could also result in reductions in
projected State aid to the City. In addition, there can be no assurance that
State budgets in future fiscal years will be adopted by the April 1 statutory
deadline and that there will not be adverse effects on the City's cash flow
and additional City expenditures as a result of such delays.
The City's projections set forth in its financial plan are based on various
assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and
contingencies include the timing of any regional and local economic recovery,
the absence of wage increases in excess of the increases assumed in its
financial plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets, levels of
education expenditures as may be required by State law, adoption of future
City budgets by the New York City Council, and approval by the Governor or the
State Legislature and the cooperation of MAC with respect to various other
actions proposed in such financial plan.
The City's ability to maintain a balanced operating budget is dependent on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional
expenditure reductions and revenue sources to achieve balanced operating
budgets for fiscal years 1994 and thereafter. Any such proposed expenditure
reductions will be difficult to implement because of their size and the
substantial expenditure reductions already imposed on City operations in the
past two years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
financing program for fiscal years 1993 through 1996 contemplates issuance of
$15.7 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In
addition, the City issues revenue and tax anticipation notes to finance its
seasonal working capital requirements. The terms and success of projected
public sales of City general obligation bonds and notes will be subject to
prevailing market conditions at the time of the sale, and no assurance can be
given that the credit markets will absorb the projected amounts of public bond
and note sales. In addition, future developments concerning the City and
public discussion of such developments, the City's future financial needs and
other issues may affect the market for outstanding City general obligation
bonds and notes. If the City were unable to sell its general obligation bonds
and notes, it would be prevented from meeting its planned operating and
capital expenditures.
The City Comptroller, the staff of the Control Board, the Office of the State
Deputy Comptroller for the City of New York (the "OSDC") and other
agencies and public officials have issued reports and made public statements
which, among other things, state that projected revenues may be less and
future expenditures may be greater than those forecast in the financial plan.
In addition, the Control Board and other agencies have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet
the costs of its expenditure increases and to provide necessary services. It
is reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
Fiscal Years 1990, 1991 and 1992. The City achieved balanced operating results
as reported in accordance with GAAP for the 1992 fiscal year. During the 1990
and 1991 fiscal years, the City implemented various actions to offset a
projected budget deficit of $3.2 billion for the 1991 fiscal year, which
resulted from declines in City revenue sources and increased public assistance
needs due to the recession. Such actions included $822 million of tax
increases and substantial expenditure reductions.
The quarterly modification to the City's financial plan submitted to the
Control Board on May 7, 1992 (the "1992 Modification") projected a
balanced budget in accordance with GAAP for the 1992 fiscal year after taking
into account a discretionary transfer of $455 million to the 1993 fiscal year
as the result of a 1992 fiscal year surplus. In order to achieve a balanced
budget for the 1992 fiscal year, during the 1991 fiscal year, the City
proposed various actions for the 1992 fiscal year to close a projected gap of
$3.3 billion in the 1992 fiscal year.
On November 19, 1992, the City submitted to the Control Board the Financial
Plan for the 1993 through 1996 fiscal years, which is a modification to a
financial plan submitted to the Control Board on June 11, 1992 (the "June
Financial Plan"), and which relates to the City, the Board of Education
("BOE") and the City University of New York ("CUNY"). The
1993-1996 Financial Plan projects revenues and expenditures of $29.9 billion
each for the 1993 fiscal year balanced in accordance with GAAP.
During the 1992 fiscal year, the City proposed various actions to close a
previously projected gap of approximately $1.2 billion for the 1993 fiscal
year. The gap-closing actions for the 1993 fiscal year proposed during the
1992 fiscal year and outlined in the City's June Financial Plan included $489
million of discretionary transfers from the 1992 fiscal year. The 1993-1996
City Financial Plan includes additional gap-closing actions to offset an
additional potential $81 million budget gap.
The 1993-1996 Financial Plan also sets forth projections and outlines a
proposed gap-closing program for the 1994 through 1996 fiscal years to close
projected budget gaps of $1.7 billion, $2.0 billion and $2.6 billion,
respectively, in the 1994 through 1996 fiscal years. On February 9, 1993, the
City issued a modification to the 1993-1996 Financial Plan (the "February
Modification"). The February Modification projects budget gaps for fiscal
years 1994, 1995 and 1996 of $2.1 billion, $3.1 billion and $3.8 billion,
respectively.
Various actions proposed in the 1993-1996 Financial Plan are subject to
approval by the Governor and approval by the State Legislature, and the
proposed increase in Federal aid is subject to approval by Congress and the
President. The State Legislature has in the past failed to approve certain
proposals similar to those that the 1993-1996 Financial Plan assumes will be
approved by the State Legislature during the 1993 fiscal year. If these
actions cannot be implemented, the City will be required to take other actions
to decrease expenditures or increase revenues to maintain a balanced financial
plan.
On March 9, 1993, OSDC issued a report on the February Modification. The
report expressed concern that the budget gaps projected for fiscal years 1994
through 1996 are the largest the City has faced at this point in the financial
planning cycle in at least a decade, and concluded that the February
Modification represented a step backward in the City's efforts to bring
recurring revenues into line with recurring expenditures.
The City is a defendant in a significant number of lawsuits. Such litigation
includes, but is not limited to, actions commenced and claims asserted against
the City arising out of alleged constitutional violations, torts, breaches of
contracts, and other violations of law and condemnation proceedings. While the
ultimate outcome and fiscal impact, if any, on the proceedings and claims are
not currently predictable, adverse determinations in certain of them might
have a material adverse effect upon the City's ability to carry out its
financial plan. As of June 30, 1992, legal claims in excess of $341 billion
were outstanding against the City for which the City estimated its potential
future liability to be $2.3 billion.
As of the date of this prospectus, Moody's rating of the City's general
obligation bonds stood at Baa1 and S&P's rating stood at A-. On February 11,
1991, Moody's had lowered its rating from A.
On March 30, 1993, in confirming its Baa1 rating, Moody's noted that:
The financial plan for fiscal year 1994 and beyond shows an ongoing imbalance
between the City's expenditures and revenues. The key indication of this
structural imbalance is not necessarily the presence of sizable out-year
budget gaps, but the recurring use of one-shot actions to close gaps.
One-shots constitute a significant share of the proposed gap-closing program
for fiscal year 1994, and they represent an even larger share of those
measures which the City seems reasonably certain to attain. Several major
elements of the program, including certain state actions, federal counter
cyclical aid and part of the city's tax package, remain uncertain. However,
the gap closing plan may be substantially altered when the executive budget is
offered later this spring.
On March 30, 1993, S&P affirmed its A- rating with a negative outlook, stating
that:
The City's key credit factors are marked by a high and growing debt burden,
and taxation levels that are relatively high, but stable. The City's economy
is broad-based and diverse, but currently is in prolonged recession, with slow
growth prospects for the foreseeable future.
The rating outlook is negative, reflecting the continued fiscal pressure
facing the City, driven by continued weakness in the local economy, rising
spending pressures for education and labor costs of city employees, and
increasing costs associated with rising debt for capital construction and
repair.
The current financial plan for the City assumes substantial increases in aid
from national and state governments. Maintenance of the current rating, and
stabilization of the rating outlook, will depend on the City's success in
realizing budgetary aid from these governments, or replacing those revenues
with ongoing revenue-raising measures or spending reductions under the City's
control. However, increased reliance on non-recurring budget balancing
measures that would support current spending, but defer budgetary gaps to
future years, would be viewed by S&P as detrimental to New York City's
single-'A-' rating.
Previously, Moody's had raised its rating to A in May, 1988, to Baa1 in
December, 1985, to Baa in November, 1983 and to Ba1 in November, 1981. S&P had
raised its rating to A- in November, 1987, to BBB+ in July, 1985 and to BBB in
March, 1981.
On May 9, 1990, Moody's revised downward its rating on outstanding City
revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
Notes then being sold MIG-2. On April 30, 1991 Moody's confirmed its MIG-2
rating for the outstanding revenue anticipation notes and for the $1.25
billion in notes then being sold. On April 29, 1991, S&P revised downward its
rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1992, the City and MAC had, respectively, $20.3 billion and
$4.7 billion of outstanding net long-term indebtedness.
Certain Agencies of the State have faced substantial financial difficulties
which could adversely affect the ability of such Agencies to make payments of
interest on, and principal amounts of, their respective bonds. The
difficulties have in certain instances caused the State (under so-called "
moral obligation"provisions which are non-binding statutory provisions
for State appropriations to maintain various debt service reserve funds) to
appropriate funds on behalf of the Agencies. Moreover, it is expected that the
problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse effect on investor confidence
in, and therefore the market price of, obligations of the defaulting Agencies.
In addition, any default in payment on any general obligation of any Agency
whose bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal
guarantees of City and MAC obligations and could thus jeopardize the City's
long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen Agencies
that each had outstanding debt of $100 million or more. These eighteen
Agencies had an aggregate of $62.2 billion of outstanding debt, including
refunding bonds, of which the State was obligated under lease-purchase,
contractual obligation or moral obligation provisions on $25.3 billion.
The State is a defendant in numerous legal proceedings pertaining to matters
incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are a number of cases challenging the
constitutionality or the adequacy and effectiveness of a variety of
significant social welfare programs primarily involving the State's mental
hygiene programs. Adverse judgments in these matters generally could result in
injunctive relief coupled with prospective changes in patient care which could
require substantial increased financing of the litigated programs in the
future.
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the Indians in
violation of various treaties and agreements during the eighteenth and
nineteenth centuries. The claimants seek recovery of approximately six million
acres of land as well as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993 referred to a Special Master for
determination of damages in an action by the State of Delaware to recover
certain unclaimed dividends, interest and other distributions made by issuers
of securities held by New York based-brokers incorporated in Delaware. (State
of Delaware v. State of New York.) The State had taken such unclaimed property
under its Abandoned Property Law. The State expects that it may pay a
significant amount in damages during fiscal year 1993-94 but it has indicated
that it has sufficient funds on hand to pay any such award, including funds
held in contingency reserves. The State's 1993-94 Financial Plan includes the
establishment of a $100 million contingency reserve fund which would be
available to fund such an award which some reports have estimated at $100-$800
million.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz 1993"
), petitioners have challenged the constitutionality of mass transportation
bonding programs of the New York State Thruway Authority and the Metropolitan
Transportation Authority. On May 24, 1993, the Supreme Court, Albany County,
temporarily enjoined the State from implementing those bonding programs. In
previous actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation and the
New York Local Government Assistance Corporation. While there have been no
decisions on the merits in such previous actions, by an opinion dated May 11,
1993, the New York Court of Appeals held in a proceeding commenced on April
29, 1991 in the Supreme Court, Albany County (Schulz v. State of New York),
that petitioners had standing as voters under the State Constitution to bring
such action.
Petitioners in Schulz 1993 have asserted that issuance of bonds by the two
Authorities is subject to approval by statewide referendum. At this time there
can be no forecast of the likelihood of success on the merits by the
petitioners, but a decision upholding this constitutional challenge could
restrict and limit the ability of the State and its instrumentalities to
borrow funds in the future. The State has not indicated that the temporary
injunction issued by the Supreme Court in this action will have any immediate
impact on its financial condition or interfere with projects requiring
immediate action.
Adverse developments in the foregoing proceedings or new proceedings could
adversely affect the financial condition of the State in the future.
Certain localities in addition to New York City could have financial problems
leading to requests for additional State assistance. Both the Revised
1992-1993 State Financial Plan and the recommended 1993-94 State Financial
Plan includes a significant reduction in State aid to localities in such
programs as revenue sharing and aid to education from projected base-line
growth in such programs. It is expected that such reductions will result in
the need for localities to reduce their spending or increase their revenues.
The potential impact on the State of such actions by localities is not
included in projections of State receipts and expenditures in the State's
1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by the State in 1984. The Yonkers Board
is charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the State Legislature to assist Yonkers could result
in allocation of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. In 1991, the total indebtedness of all localities in the
State was approximately $31.6 billion, of which $16.8 billion was debt of New
York City (excluding $6.7 billion in MAC debt). State law requires the
Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City authorized by State law to
issue debt to finance deficits during the period that such deficit financing
is outstanding. Fifteen localities had outstanding indebtedness for state
financing at the close of their fiscal year ending in 1991. In 1992, an
unusually large number of local government units requested authorization for
deficit financings. According to the Comptroller, ten local government units
have been authorized to issue deficit financing in the aggregate amount of
$131.1 million.
Certain proposed Federal expenditure reductions could reduce, or in some cases
eliminate, Federal funding of some local programs and accordingly might impose
substantial increased expenditure requirements on affected localities. If the
State, New York City or any of the Agencies were to suffer serious financial
difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State, including notes or bonds in the New York IM-IT Trust, could be
adversely affected. Localities also face anticipated and potential problems
resulting from certain pending litigation, judicial decisions, and long-range
economic trends. The longer-range potential problems of declining urban
population, increasing expenditures, and other economic trends could adversely
affect localities and require increasing State assistance in the future.
Tax Status. For a discussion of the Federal tax status of income earned on New
York IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Tanner Propp & Farber, special counsel to the Fund for New
York tax matters, under existing New York law:
The New York IM-IT Trust is not an association taxable as a corporation and
the income of the New York IM-IT Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York.
Individuals who reside in New York State or City will not be subject to State
and City tax on interest income which is exempt from Federal income tax under
section 103 of the Internal Revenue Code of 1986 and derived from obligations
of New York State or a political subdivision thereof, although they will be
subject to New York State and City tax with respect to any gains realized when
such obligations are sold, redeemed or paid at maturity or when any such Units
are sold or redeemed.
<TABLE>
<CAPTION>
Semi-
Monthly Annual
<S> <C> <C>
Per Unit Information:
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 57.53 $ 57.53
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.51 $ 2.04
Less: Annual Premium on Portfolio Insurance per Unit.................. -- --
Estimated Net Annual Interest Income per Unit......................... $ 55.02 $ 55.49
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 55.02 $ 55.49
Divided by 12 and 2, respectively..................................... $ 4.59 $ 27.75
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .15283 $ .15412
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 5.50% 5.55%
Estimated Long-Term Return <F2><F3><F4>................................ 5.55% 5.60%
Estimated Initial Monthly Distribution (May 1995)...................... $ 4.74 $ --
Estimated Initial Semi-annual Distribution (May 1995).................. $ -- $ 4.77
Estimated Normal Distribution per Unit <F4>............................ $ 4.59 $ 27.75
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
New York IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--May
and November commencing May 15, 1995
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
NEW YORK INSURED MUNICIPALS INCOME TRUST
SERIES 125 (174TH INSURED MULTI-SERIES)
PORTFOLIO As of March 23, 1995
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of either Redemption New York
Principal<F1> Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F
<S> <C> <C> <C> <C>
$ 250,000 New York Medical Care Facilities Finance Agency, Mental Health
Services Facilities Improvement Revenue Bonds, Series 1993C
(Capital Guaranty Insured) 2003 @ 102
#5.75% Due 2/15/2014 ............................................. AAA 2009 @ 100 S.F. $ 240,958
225,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series 1994A (MBIA Insured) 2004 @ 101.5
#6.125% Due 7/1/2014 ............................................. AAA 2011 @ 100 S.F. 226,550
255,000 New York Power Authority, Revenue and General Purpose Bonds,
Refunding Series 1993CC (MBIA Insured) 2003 @ 102
#5.25% Due 1/1/2018 .............................................. AAA 2015 @ 100 S.F. 228,334
200,000 New York City, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Series 1994B (AMBAC Indemnity
Insured) 2004 @ 101
#5.375% Due 6/15/2019 ............................................ AAA 2015 @ 100 S.F. 181,590
500,000 Dormitory Authority of the State of New York, City University of
New York Revenue Bonds, 3rd General Resolution, Series 1994-2
(MBIA Insured) 2004 @ 100
#6.25% Due 7/1/2019 .............................................. AAA 2015 @ 100 S.F. 506,895
155,000 Dormitory Authority of the State of New York, Mount Sinai School
of Medicine, Insured Revenue Bonds, Series 1994A (MBIA Insured) 2004 @ 102
#5.00% Due 7/1/2021 .............................................. AAA 2017 @ 100 S.F. 132,685
250,000 Dormitory Authority of the State of New York, Colgate University,
Insured Revenue Bonds, Series 1993 (FGIC Insured) 2003 @ 102
#5.625% Due 7/1/2023 ............................................. AAA 2014 @ 100 S.F. 233,735
300,000 Metropolitan Transportation Authority, New York, Transportation
Facilities Revenue Bonds, Series 1994O (MBIA Insured) 2004 @ 101.5
#6.00% Due 7/1/2024 .............................................. AAA 2021 @ 100 S.F. 295,392
150,000 City of New Rochelle, Westchester County, New York, Unlimited
Tax-General Obligation Public Improvement Bonds (MBIA Insured)
6.20% Due 8/15/2024 .............................................. AAA 2004 @ 102 151,955
450,000 New York State Thruway Authority, General Revenue Bonds, Series
1995C (FGIC Insured) 2005 @ 102
#6.00% Due 1/1/2025 .............................................. AAA 2016 @ 100 S.F. 443,029
250,000 New York Medical Care Facilities Finance Agency, Mental Health
Services Facilities Improvement Revenue Bonds, Series 1995A (MBIA
Insured) 2005 @ 102
#6.00% Due 2/15/2025 ............................................. AAA 2016 @ 100 S.F. 246,128
$ 2,985,000 $ 2,887,251
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
As of the Date of Deposit: March 23, 1995
(1)All Securities 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. At the Date of Deposit, Securities may have been delivered to the
Sponsor pursuant to certain of these contracts; the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into during the period from March
6,1995 to March 22,1995. These Securities have expected settlement dates
ranging from March 23,1995 to April 19,1995 (see "Unitholder
Explanations").
(2)All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's Investors Service, Inc.
The ratings represent the latest published ratings by the respective ratings
agency or, if not published, represent private letter ratings or those ratings
expected to be published by the respective ratings agency. "Y"
indicates that such rating is contingent upon physical receipt by the
respective ratings agency of a policy of insurance obtained by the issuer of
the bonds involved and issued by the Preinsured Bond Insurer named in the
bond's title. A commitment for insurance in connection with these bonds has
been issued by the Preinsured Bond Insurer named in the bond's title. "
N/R"indicates that the applicable rating service did not provide a rating
for that particular Security. For a brief description of the rating symbols
and their related meanings, see "Other Matters--Description of Securities
Ratings".
(3)There is shown under this heading the year in which each issue of Bonds is
initially or currently callable and the call price for that year. Each issue
of Bonds 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. Redemption pursuant to
call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed bonds have an offering side
valuation which represents a premium over par. 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. Single family
mortgage revenue bonds and housing authority bonds are most likely to be
called subject to such provisions, but other bonds may have similar call
features. Notwithstanding any provisions to the contrary, certain bond issuers
have in the past and others may in the future attempt to redeem Bonds prior to
their initially scheduled call dates and at prices which do not include any
premiums. For a general discussion of certain of these events, see "
Unitholder Explanations--Bond Redemptions". To the extent that the
Securities were deposited in a Trust at a price higher than the price at which
they are redeemed, this will represent a loss of capital when compared with
the original Public Offering Price of the Units. Conversely, to the extent
that the Bonds were acquired at a price lower than the redemption price, this
will represent an increase in capital when compared with the original Public
Offering Price of the Units. Distributions will generally be reduced by the
amount of the income which would otherwise have been paid with respect to
redeemed Securities and there will be distributed to Unitholders the principal
amount and any premium received on such redemption. The Estimated Current
Return and Estimated Long-Term Return in this event may be affected by such
redemptions. For the Federal tax effect on Unitholders of such redemptions and
resultant distributions, see paragraph (2) under "Other Matters--Federal
Tax Status".
(4)Evaluation of Securities is made on the basis of current offering prices
for the Securities. The offering prices are greater than the current bid
prices of the Securities which is the basis on which Unit value is determined
for purposes of redemption of Units (see "Unitholder Explanations--Public
Offering--Offering Price").
(5)Other information regarding the Bonds in each Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Annual
Annual Profit Interest Bid Side
Trust Insurance Cost to (Loss) to Income to Evaluation of
Cost Sponsor Sponsor Trust Bonds
<S> <C> <C> <C> <C> <C>
California IM-IT Intermediate Laddered Maturity... $ -- $ 2,936,892 $ 36,395 $ 147,050 $ 2,950,750
California IM-IT.................................. $ -- $ 2,893,448 $ 16,626 $ 176,028 $ 2,886,231
Florida IM-IT Intermediate Laddered Maturity...... $ 500 $ 2,974,300 $ 17,905 $ 146,375 $ 2,970,650
New Jersey IM-IT.................................. $ -- $ 2,922,635 $ 16,936 $ 176,438 $ 2,916,569
New York IM-IT.................................... $ -- $ 2,869,994 $ 17,257 $ 174,656 $ 2,863,437
</TABLE>
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in certain Portfolios. The cost of any such
contracts and the corresponding gain or loss is included in the Cost to
Sponsor. Certain Securities in the Fund, if any, marked by a double asterisk
(**), have been purchased on a "when, as and if issued"or "
delayed delivery"basis. Interest on these Securities 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 as
follows:
<TABLE>
<CAPTION>
Percent of
Trust Aggregate Principal Range of Days Subsequent
Amount to First Settlement Date
<S> <C> <C>
California IM-IT Intermediate Laddered Maturity... -- --
California IM-IT.................................. 16% 3 days
Florida IM-IT Intermediate Laddered Maturity...... 6% 19 days
New Jersey IM-IT.................................. 9% 4 days
New York IM-IT.................................... -- --
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities in the
California IM-IT Intermediate Laddered Maturity, California IM-IT, Florida
IM-IT Intermediate Laddered Maturity, New Jersey IM-IT and New York IM-IT
Trusts were higher than the bid side evaluations of such Securities by 0.75%,
0.79%, 0.72%, 0.76% and 0.80%, respectively, of the aggregate principal
amounts of such Securities.
"#"indicates that such Bond was issued at an original issue discount.
The tax effect of Bonds issued at an original issue discount is described in
"Other Matters--Federal Tax Status".
(6)This Bond has been purchased at a deep discount from the par value because
there is little or no stated interest income thereon. Bonds which pay no
interest are normally described as "zero coupon"bonds. Over the life
of bonds purchased at a deep discount the value of such bonds will increase
such that upon maturity the holders of such bonds will receive 100% of the
principal amount thereof.
Underwriting. The Underwriters named below have severally purchased Units in
the following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
California
IM-IT
Intermediate
Laddered
Name Maturity Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,300
Stephens Inc. 111 Center Street, Little Rock, Arkansas 72201 1,000
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 500
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
3,000
</TABLE>
<TABLE>
<CAPTION>
California
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,410
Stephens Inc. 111 Center Street, Little Rock, Arkansas 72201 1,000
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
3,060
</TABLE>
<TABLE>
<CAPTION>
Florida
IM-IT
Intermediate
Laddered
Name Maturity Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,700
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
3,000
</TABLE>
<TABLE>
<CAPTION>
New Jersey
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,241
R. Seelaus & Co., Inc. The Atrium @ 47 Maple Street, Summit, New Jersey 07901 300
Nori Hennion Walsh Inc 3799 Route 46, Parsippany, New Jersey 07054 250
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 250
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 250
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Fidelity Capital Markets 164 Northern Avenue, Boston, Massachusetts 02215 100
Janney Montgomery Scott Inc. 1801 Market Street, 11th Floor, Philadelphia, Pennsylvania 19103 100
Oppenheimer & Co., Inc. World Financial Center, 8th Floor, New York, New York 10281 100
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
3,091
</TABLE>
<TABLE>
<CAPTION>
New York
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,136
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Fidelity Capital Markets 164 Northern Avenue, Boston, Massachusetts 02215 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Roosevelt & Cross Inc. 20 Exchange Place, New York, New York 10005 100
3,036
</TABLE>
Units may also be sold to broker-dealers and others at prices representing the
per Unit concession or agency commission stated under "Trust
Administration--General--Unit Distribution". However, resales of Units by
such broker-dealers and others to the public will be made at the Public
Offering Price described in the Prospectus. The Sponsor reserves the right to
reject, in whole or in part, any order for the purchase of Units and the right
to change the amount of the concession or agency commission from time to time.
In addition to any other benefits the Underwriters may realize from the sale
of the Units of the Fund, the Agreement Among Underwriters provides that the
Sponsor will share on a pro rata basis among those Underwriters who underwrite
at least 250 Units 50% of the aggregate gain, if any, represented by the
difference between the Sponsor's cost of the Securities in connection with
their acquisition and the evaluation thereof on the Date of Deposit less
deductions for certain accrued interest and certain other costs. See "
Trust Administration--General--Sponsor and Underwriter Compensation"and
"Portfolio"for the applicable Trust.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by
the Sponsor, or participate in sales programs sponsored by the Sponsor, an
amount not exceeding the total applicable sales charges on the sales generated
by such persons at the public offering price during such programs. Also, the
Sponsor in its discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying underwriters, brokers,
dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trusts. These programs will not change the price Unitholders pay for their
Units or the amount that the Trusts will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to Underwriters that sell units of trusts it sponsors. The Sponsor
pays substantially all costs associated with the seminar, excluding
Underwriter travel costs. Each Underwriter is invited to send a certain number
of representatives based on the gross number of units such firm underwrites
during a designated time period.
FUND ADMINISTRATION AND EXPENSES
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Effective
December 20, 1994, the parent of Van Kampen Merritt Inc. acquired American
Capital Management & Research, Inc. As a result, Van Kampen Merritt Inc., has
changed its name to Van Kampen American Capital Distributors, Inc. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas, 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
December 31, 1994 the total stockholders' equity of Van Kampen Merritt Inc.
was $117,357,000 (audited). (This paragraph relates only to the Sponsor and
not to the Insured Municipals Income Trust or to any Insured Multi-Series
thereof or to any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility of
the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
As of December 31, 1994, and without giving effect to the merger, the Sponsor
and its affiliates managed or supervised approximately $33.7 billion of
investment products, of which over $22.8 billion is invested in municipal
securities. The Sponsor and its affiliates managed $21.8 billion of assets,
consisting of $7.3 billion for 20 open end mutual funds, $8.3 billion for 34
closed-end funds and $5.2 billion for 75 institutional accounts. The Sponsor
has also deposited approximately $26 billion of unit investment trusts. Based
on cumulative assets deposited, the Sponsor believes that it is the largest
sponsor of insured municipal unit investment trusts, primarily through the
success of its Insured Municipals Income Trust(R)or the IM-IT(R)trust.
The Sponsor also provides surveillance and evaluation services at cost for
approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over one million retail investor accounts,
opened through retail distribution firms. Van Kampen American Capital
Distributors, Inc. is the sponsor of the various series of the trusts listed
below and the distributor of the mutual funds and closed-end funds listed
below. Unitholders may only invest in the trusts, mutual funds and closed-end
funds which are registered for sale in the state of residence of such
Unitholder. In order for a Unitholder to invest in the trusts, mutual funds
and closed-end funds listed below, such Unitholder must obtain a prospectus
relating to the trust or fund involved. A prospectus is the only means by
which an offer can be delivered to investors.
<TABLE>
Name of Trust
Trust Investment Objective
<CAPTION>
<S> <C>
Insured Municipals Income Trust..................................... Tax-exempt income by investing in insured municipal securities
Double tax-exemption for California residents by investing in
California Insured Municipals Income Trust.......................... insured California municipal securities
Double and in certain cases triple tax-exemption for New York
residents by investing in insured New York municipal
New York Insured Municipals Income Trust............................ securities
Double and in certain cases triple tax-exemption for
Pennsylvania residents by investing in insured Pennsylvania
Pennsylvania Insured Municipals Income Trust........................ municipal securities
Insured Municipals Income Trust, Insured Multi-Series
(Premium Bond Series, National, Limited Maturity, Intermediate,
Short Intermediate, Discount, Alabama, Arizona, Arkansas,
California, California Intermediate, California Intermediate
Laddered Maturity, California Premium, Colorado, Connecticut,
Florida, Florida Intermediate, Florida Intermediate Laddered
Maturity, Georgia, Louisiana, Massachusetts, Massachusetts
Premium, Michigan, Michigan Intermediate, Michigan
Intermediate Laddered Maturity, Michigan Premium, Minnesota,
Missouri, Missouri Intermediate Laddered Maturity, Missouri
Premium, New Jersey, New Jersey Intermediate Laddered
Maturity, New Mexico, New York, New York Intermediate, New Tax-exempt income by investing in insured municipal
York Intermediate Laddered Maturity, New York Limited securities; all issuers of bonds in a state trust are located
Maturity, Ohio, Ohio Intermediate, Ohio Intermediate Laddered in such state or in territories or possessions of the United
Maturity, Ohio Premium, Oklahoma, Pennsylvania, Pennsylvania States-- providing exemptions from all state income tax for
Intermediate, Pennsylvania Intermediate Laddered Maturity, residents of such state (except for the Oklahoma IM-IT Trust
Pennsylvania Premium, Tennessee, Texas, Texas Intermediate where a portion of the income of the Trust may be subject to
Laddered Maturity, Washington, West Virginia)...................... the Oklahoma state income tax)
Insured Tax Free Bond Trust......................................... Tax-exempt income by investing in insured municipal securities
Tax-exempt income by investing in insured municipal
securities; all issuers of bonds in a state trust are located
Insured Tax Free Bond Trust, Insured Multi-Series in such state--providing exemptions from state income tax for
(National Limited Maturity, New York).............................. residents of such state
Investors' Quality Tax-Exempt Trust................................. Tax-exempt income by investing in municipal securities
Investors' Quality Tax-Exempt Trust, Multi-Series
(National, National AMT, Intermediate, Alabama, Arizona,
Arkansas, California, Colorado, Connecticut, Delaware, Tax-exempt income by investing in municipal securities; all
Florida, Georgia, Hawaii, Kansas, Kentucky, Maine, Maryland, issuers of bonds in a state trust are located in such state
Massachusetts, Michigan, Minnesota, Missouri, Nebraska, or in territories or possessions of the United
New Jersey, New York, North Carolina, Ohio, Oregon, States--providing exemptions from state income tax for
Pennsylvania, South Carolina, Virginia)............................ residents of such state
Tax-exempt income for investors not subject to the
alternative minimum tax by investing in municipal securities,
some or all of which are subject to the Federal alternative
Investors' Quality Municipals Trust, AMT Series......................minimum tax
Investors' Corporate Income Trust....................................Taxable income by investing in corporate bonds
Taxable income by investing in government-backed GNMA
Investors' Governmental Securities--Income Trust.................... securities
High current income through an investment in a diversified
portfolio of foreign currency denominated corporate debt
Van Kampen Merritt International Bond Income Trust...................obligations
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of
insured, long-term or intermediate-term corporate debt
Van Kampen Merritt Insured Income Trust..............................securities
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of
insured, long-term or intermediate-term corporate debt
Van Kampen American Capital Insured Income Trust.....................securities
High dividend income and capital appreciation by investing in
Van Kampen Merritt Utility Income Trust..............................common stock of electric utilities
Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of the
Van Kampen Merritt Select Equity Trust...............................Dow Jones Industrial Average*
Protect Unitholders' capital and provide the potential for
capital appreciation and income by investing a portion of its
portfolio in "zero coupon"U.S. Treasury obligations
and the remainder of the trust's portfolio in the identical
Van Kampen Merritt Select Equity and Treasury Trust..................equity securities which comprise the Select Equity Trust
Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of the
Van Kampen Merritt Blue Chip Opportunity Trust.......................Dow Jones Industrial Average*
Protect Unitholders' capital and provide the potential for
capital appreciation and income by investing a portion of its
portfolio in "zero coupon"U.S. Treasury obligations
and the remainder of the trust's portfolio in actively
traded, New York Stock Exchange listed equity securities
Van Kampen Merritt Blue Chip Opportunity and which at the time of the creation of the trust were
Treasury Trust......................................................components of the Dow Jones Industrial Average*
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio
primarily consisting of Brady Bonds of emerging market
countries that have restructured sovereign debt pursuant to
Van Kampen Merritt Emerging Markets Income Trust.....................the framework of the Brady Plan
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities which provide
Van Kampen Merritt Global Telecommunications Trust...................equipment for or services to the telecommunications industry
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities diversified
Van Kampen Merritt Global Energy Trust...............................within the energy industry
Provide an above average total return through a combination
of potential capital appreciation and dividend income,
consistent with preservation of invested capital, by
investing in a portfolio of common stocks of the ten
Strategic Ten Trust companies in a recognized stock exchange index having the
(United States, United Kingdom, and Hong Kong Portfolios)...........highest dividend yields
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities diversified
Van Kampen Merritt Brand Name Equity Trust...........................within the non-durable consumer products industry
</TABLE>
*The Dow Jones Industrial Average is the property of Dow Jones & Company, Inc.
Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
<TABLE>
Name of Mutual Fund
Fund Investment Objective
<CAPTION>
<S> <C>
Van Kampen Merritt U.S. Government Fund....................High current income by investing in U.S. Government securities
High current income exempt from Federal income taxes by investing in
Van Kampen Merritt Insured Tax Free Income Fund............insured municipal securities
High level of current income exempt from Federal income tax, consistent
Van Kampen Merritt Municipal Income Fund...................with preservation of capital
High current income exempt from Federal income taxes by investing in
Van Kampen Merritt Tax Free High Income Fund...............medium and lower grade municipal securities
High current income exempt from Federal and California income taxes by
Van Kampen Merritt California Insured Tax Free Fund........investing in insured California municipal securities
Provide a high level of current income by investing in medium and lower
grade domestic and foreign government and corporate debt securities.
Van Kampen Merritt High Yield Fund.........................The Fund will seek capital appreciation as a secondary objective
Long-term growth of both capital and dividend income by investing in
Van Kampen Merritt Growth and Income Fund..................dividend paying common stocks
High current income exempt from Federal and Pennsylvania state and
local income taxes by investing in medium and lower grade Pennsylvania
Van Kampen Merritt Pennsylvania Tax Free Income Fund.......municipal securities
High current income by investing in a broad range of money market
Van Kampen Merritt Money Market Fund.......................instruments that will mature within twelve months
High current income exempt from Federal income taxes by investing in a
broad range of municipal securities that will mature within twelve
Van Kampen Merritt Tax Free Money Fund.....................months
High current income by investing in a global portfolio of high quality
debt securities denominated in various currencies having remaining
Van Kampen Merritt Short-Term Global Income Fund...........maturities of not more than three years
High level of current income with a relatively stable net asset value
Van Kampen Merritt Adjustable Rate U.S. Government Fund....investing in U.S. Government securities
High level of current income exempt from Federal income tax, consistent
Van Kampen Merritt Limited Term Municipal Income Fund......with preservation of capital
Provide capital appreciation and current income by investing in a
diversified portfolio of common stocks and income securities issued by
Van Kampen Merritt Utility Fund............................companies engaged in the utilities industry
Provide shareholders with high current income. The Fund will seek
Van Kampen Merritt Strategic Income Fund...................capital appreciation as a secondary objective
High level of current income exempt from Federal income tax and Florida
intangible personal property taxes consistent with preservation of
Van Kampen Merritt Florida Insured Tax Free Income Fund....capital
High level of current income exempt from Federal income tax and New
Van Kampen Merritt New Jersey Tax Free Income Fund.........Jersey gross income tax consistent with preservation of capital
High level of current income exempt from Federal as well as New York
State and New York City income taxes, consistent with preservation of
Van Kampen Merritt New York Tax Free Income Fund...........capital
To provide shareholders current income while also seeking to provide
Van Kampen Merritt Balanced Fund...........................capital growth
</TABLE>
<TABLE>
Name of Closed-end Fund
Fund Investment Objective
<CAPTION>
<S> <C>
High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment grade
Van Kampen Merritt Municipal Income Trust...................municipal securities
High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt California Municipal Trust...............investment grade California municipal securities
High current income while seeking to preserve shareholders' capital by
investing in a diversified portfolio of high yield fixed income
Van Kampen Merritt Intermediate Term High Income Trust......securities
High current income while seeking to preserve shareholders' capital by
investing in a diversified portfolio of high yield fixed income
Van Kampen Merritt Limited Term High Income Trust...........securities
High current income, consistent with preservation of capital by
Van Kampen Merritt Prime Rate Income Trust..................investing in interests in floating or variable rate senior loans
High current income exempt from Federal income tax, consistent with
Van Kampen Merritt Investment Grade Municipal Trust.........preservation of capital
High level of current income exempt from Federal income tax,
Van Kampen Merritt Municipal Trust..........................consistent with preservation of capital
High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt California Quality Municipal Trust.......investment grade California municipal securities
High current income exempt from Federal income taxes and Florida
intangible personal property taxes with safety of principal by
investing in a diversified portfolio of investment grade Florida
Van Kampen Merritt Florida Quality Municipal Trust..........municipal securities
High current income exempt from Federal as well as New York State and
New York City income taxes with safety of principal by investing in a
Van Kampen Merritt New York Quality Municipal Trust.........diversified portfolio of investment grade New York municipal securities
High current income exempt from Federal and Ohio income taxes with
safety of principal by investing in a diversified portfolio of
Van Kampen Merritt Ohio Quality Municipal Trust.............investment grade Ohio municipal securities
High current income exempt from Federal and Pennsylvania income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt Pennsylvania Quality Municipal Trust.....investment grade Pennsylvania municipal securities
High level of current income exempt from Federal income tax,
Van Kampen Merritt Trust for Investment Grade Municipals....consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a diversified
portfolio of municipal securities which are covered by insurance with
Van Kampen Merritt Trust for Insured Municipals.............respect to timely payment of principal and interest
High level of current income exempt from Federal and California income
Van Kampen Merritt Trust for Investment Grade CA taxes, consistent with preservation of capital by investing in a
Municipals.................................................diversified portfolio of California municipal securities
High level of current income exempt from Federal income taxes,
consistent with preservation of capital. The Fund also seeks to offer
Van Kampen Merritt Trust for Investment Grade FL its Shareholders the opportunity to own securities exempt from Florida
Municipals.................................................intangible personal property taxes
Van Kampen Merritt Trust for Investment Grade NJ
Municipals High level of current income exempt from Federal income taxes and New
..........................................................Jersey gross income taxes, consistent with preservation of capital
High level of current income exempt from Federal as well as from New
Van Kampen Merritt Trust for Investment Grade NY York State and New York City income taxes, consistent with
Municipals.................................................preservation of capital
High level of current income exempt from Federal and Pennsylvania
Van Kampen Merritt Trust for Investment Grade PA income taxes and, where possible under local law, local income and
Municipals.................................................property taxes, consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a diversified
Van Kampen Merritt Municipal Opportunity Trust..............portfolio of municipal securities
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a diversified
Van Kampen Merritt Advantage Municipal Income Trust.........portfolio of municipal securities
High level of current income exempt from Federal and Pennsylvania
Van Kampen Merritt Advantage Pennsylvania Municipal income taxes and, where possible under local law, local income and
Income Trust...............................................property taxes, consistent with preservation of capital
Provide common shareholders with a high level of current income exempt
Van Kampen Merritt Strategic Sector Municipal Trust.........from Federal income taxes, consistent with preservation of capital
High level of current income exempt from Federal income taxes,
Van Kampen Merritt Value Municipal Income Trust.............consistent with preservation of capital
Van Kampen Merritt California Value Municipal High level of current income exempt from Federal and California income
Income Trust...............................................taxes, consistent with preservation of capital
High level of current income exempt from Federal income taxes and
Van Kampen Merritt Massachusetts Value Municipal Massachusetts personal income taxes, consistent with preservation of
Income Trust..............................................capital
Van Kampen Merritt New Jersey Value Municipal High level of current income exempt from Federal income taxes and New
Income Trust...............................................Jersey gross income tax, consistent with preservation of capital
High level of current income exempt from Federal as well as New York
Van Kampen Merritt New York Value Municipal State and New York City income taxes, consistent with preservation of
Income Trust...............................................capital
Van Kampen Merritt Ohio Value Municipal Income High level of current income exempt from Federal and Ohio income
Trust......................................................taxes, consistent with preservation of capital
Van Kampen Merritt Pennsylvania Value Municipal High level of current income exempt from Federal and Pennsylvania
Income Trust..............................................income taxes, consistent with preservation of capital
High level of current income exempt from Federal income tax,
Van Kampen Merritt Municipal Opportunity Trust II...........consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital. The Fund seeks to offer its
common shareholders the opportunity to own securities exempt from
Van Kampen Merritt Florida Municipal Opportunity Trust .....Florida intangible personal property taxes
Provide common shareholders with a high level of current income exempt
Van Kampen Merritt Advantage Municipal Income Trust II......from Federal income tax, consistent with preservation of capital
To provide common shareholders with a high level of current income
Van Kampen Merritt Select Sector Municipal Trust............exempt from Federal income tax, consistent with preservation of capital
</TABLE>
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and
not exceeding amounts prescribed by the Securities and Exchange Commission,
(ii) terminate the Trust Agreement and liquidate the Fund as provided therein
or (iii) continue to act as Trustee without terminating the Trust Agreement.
All costs and expenses incurred in creating and establishing the Fund,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses,
advertising and selling expenses, expenses of the Trustee, initial evaluation
fees and other out-of-pocket expenses have been borne by the Sponsor at no
cost to the Fund.
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Fund. However, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., which is a wholly-owned subsidiary corporation of
the Sponsor, will receive an annual supervisory fee as indicated under "
Summary of Essential Financial Information"for providing portfolio
supervisory services for the Fund. Such fee (which is based on the number of
Units outstanding in each Trust on January 1 of each year) may exceed the
actual costs of providing such supervisory services for this Fund, but at no
time will the total amount received for portfolio supervisory services
rendered to Insured Municipals Income Trust, 1st Insured Multi-Series and
subsequent series and to any other unit investment trusts sponsored by the
Sponsor for which the Evaluator provides portfolio supervisory services in any
calendar year exceed the aggregate cost to the Evaluator of supplying such
services in such year. In addition, the Evaluator shall receive an annual
evaluation fee as indicated under "Summary of Essential Financial
Information"for regularly evaluating each Trust's portfolio. Both of the
foregoing fees may be increased without approval of the Unitholders by amounts
not exceeding proportionate increases under the category "All Services
Less Rent of Shelter"in the Consumer Price Index published by the United
States Department of Labor or, if such category is no longer published, in a
comparable category. The Sponsor and the Underwriters will receive sales
commissions and may realize other profits (or losses) in connection with the
sale of Units and the deposit of the Securities as described under "
General--Sponsor and Underwriter Compensation"below.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of 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 (see "Unitholder Explanations--Public Offering--Reports
Provided"). The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Securities held in the 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.
Trustee's Fee. For its services the Trustee will receive a fee based on the
aggregate outstanding principal amount of Securities in each Trust as of the
opening of business on January 2 and July 2 of each year as set forth under
"Per Unit Information"for the applicable Trust. During the first year
the Trustee may agree to reduce its fee (and to the extent necessary pay
miscellaneous expenses of a Trust) as stated under "Per Unit
Information"for the applicable Trust. After the first year such fee will
be computed at $.51 per $1,000 principal amount of Securities for that portion
of each Trust under the semi-annual distribution plan and $.91 per $1,000
principal amount of Securities for that portion of each Trust under the
monthly distribution plan. Based on the size of the Trust on the Date of
Deposit and assuming all Unitholders had chosen the semi-annual distribution
plan, the Trustee's estimated annual fees for ordinary recurring services
would initially amount to $1,530, $1,548, $1,530, $1,545 and $1,522, for the
California IM-IT Intermediate Laddered Maturity, California IM-IT, Florida
IM-IT Intermediate Laddered Maturity, New Jersey IM-IT and New York IM-IT
Trusts, respectively. Assuming in the alternative that all Unitholders had
elected the monthly distribution plan such fees would have initially amount to
$2,730, $2,762, $2,730, $2,757 and $2,716, for the above mentioned Trusts,
respectively. The Trustee's fees are payable monthly on or before the
fifteenth day of each month from the Interest Account of each Trust to the
extent funds are available and then from the Principal Account of each Trust,
with such payments being based on each Trust's portion of such expenses. Since
the Trustee has the use of the funds being held in the Principal and Interest
Accounts for future distributions, payment of expenses and redemptions and
since such Accounts are non-interest bearing to Unitholders, the Trustee
benefits thereby. Part of the Trustee's compensation for its services to each
Trust is expected to result from the use of these funds. Such fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter"in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a
comparable category. The Trustee's fees will not be increased in future years
in order to make up any reduction in the Trustee's fees described under "
Per Unit Information"for the applicable Trust. For a discussion of the
services rendered by the Trustee pursuant to its obligations under the Trust
Agreement, see "Unitholder Explanations--Public Offering--Reports
Provided"and "Trustee"above.
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 Securities, will consider a variety of factors,
including (a) interest rates, (b) market value and (c) marketability. 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 such 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 "Unitholder Explanations--Public
Offering--Redemption of Units". 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 Securities to issue new obligations in exchange or
substitution for any Security pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the Sponsor may deem
proper if (1) the issuer is in default with respect to such Security or (2) in
the written opinion of the Sponsor the issuer will probably default with
respect to such Security in the reasonably foreseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after the deposit
of obligations in exchange or substitution for underlying Securities, the
Trustee is required to give notice thereof to each Unitholder of the Trust
thereby affected, identifying the Securities eliminated and the Securities
substituted therefor. Except as stated herein and under "Unitholder
Explanations--Settlement of Bonds in the Trusts"regarding the
substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Fund of any securities other than the Securities initially deposited is not
permitted.
If any default in the payment of principal or interest on any Security occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Security within 30 days after notification by
the Trustee to the Sponsor of such default, the Trustee may in its discretion
sell the defaulted Security and not be liable for any depreciation or loss
thereby incurred.
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord with
the Public Offering Price described in the then currently effective prospectus
describing such Units. Any profit resulting from the resale of such Units will
belong to the Sponsor which likewise will bear any loss resulting from a lower
offering or Redemption Price subsequent to its acquisition of such Units.
Insurance Premiums. The cost of the portfolio insurance obtained by the
respective Trusts, if any, is that amount shown in footnote (5) in "Notes
to Portfolios", so long as such Trust retains the Bonds. Premiums, which
are obligations of each Insured Trust, are payable monthly by the Trustee on
behalf of the respective Trust. As Bonds in the portfolio of an Insured Trust
are redeemed by their respective issuers or are sold by the Trustee, the
amount of the premium will be reduced in respect of those Bonds no longer
owned by and held in such Trust. If the Trustee exercises the right to obtain
permanent insurance, the premiums payable for such permanent insurance will be
paid solely from the proceeds of the sale of the related Bonds. The premiums
for such permanent insurance with respect to each Bond will decline over the
life of the Bond. A Trust does not incur any expense for Preinsured Bond
insurance, since the premium or premiums for such insurance have been paid by
the issuer or the Sponsor prior to the deposit of such Preinsured Bonds in a
Trust. Preinsured Bonds are not additionally insured by an Insured Trust.
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trusts: (a) fees of the Trustee for extraordinary services,
(b) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trusts
and the rights and interests of Unitholders, (e) indemnification of the
Trustee for any loss, liability or expenses incurred by it in the
administration of the Fund without negligence, bad faith or willful misconduct
on its part, (f) any special custodial fees payable in connection with the
sale of any of the Bonds in a Trust, (g) expenditures incurred in contacting
Unitholders upon termination of the Trusts and (h) costs incurred to reimburse
the Trustee for advancing funds to the Trusts to meet scheduled distributions
(which costs may be adjusted periodically in response to fluctuations in
short-term interest rates).
The fees and expenses set forth herein are payable out of the Trusts. When
such fees and expenses are paid by or owing to the Trustee, they are secured
by a lien on the portfolio or portfolios of the applicable Trust or Trusts. If
the balances in the Interest and Principal Accounts are insufficient to
provide for amounts payable by the Fund, the Trustee has the power to sell
Securities to pay such amounts.
GENERAL
Amendment or Termination. The Sponsor and the Trustee have the power to amend
the Trust Agreement without the consent of any of the Unitholders when such an
amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein or (b) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee), provided that the Trust Agreement
may not be amended to increase the number of Units issuable thereunder or to
permit the deposit or acquisition of securities either in addition to or in
substitution for any of the Securities initially deposited in the Fund, except
for the substitution of certain refunding securities for such Securities. In
the event of any amendment, the Trustee is obligated to notify promptly all
Unitholders of the substance of such amendment.
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 that indicated
under "Summary of Essential Financial Information". 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 Security 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 a State Trust
(other than a State Intermediate Laddered Maturity 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 the Fund or 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 Securities 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
governmental charges. The sale of Securities in the Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were
not required at such time. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the principal amount or par
amount of Securities represented by the Units held by such Unitholder. The
Trustee shall then distribute to each Unitholder his share of the balance of
the Interest and Principal Accounts. With such distribution the 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 are in default and 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.
Limitation on Liabilities. The Sponsor, the Evaluator and the Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
their reckless disregard of their obligations and duties hereunder. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Securities. In the event of the failure of
the Sponsor to act under the Trust Agreement, the Trustee may act thereunder
and shall not be liable for any action taken by it in good faith under the
Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Fund
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see "
Underwriting") at the Public Offering Price, plus interest accrued but
unpaid from the First Settlement Date to the date of settlement as described
above under "Unitholder Explanations--Accrued Interest--Accrued
Interest". Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this Prospectus at the
secondary Public Offering Price plus interest accrued to the date of
settlement in the manner described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of $20.00 per Unit for less than 100 Units, $22.00 per Unit for any single
transaction of 100 to 249 Units, $21.50 per Unit for any single transaction of
250 to 499 Units, $24.50 per Unit for any single transaction of 500 to 999
Units and $24.00 per Unit for any single transaction of 1,000 or more Units of
a State Intermediate Laddered Maturity Trust, and in the case of a State Trust
(other than a State Intermediate Laddered Maturity Trust) $30.00 per Unit for
less than 100 Units, $36.00 per Unit for any single transaction of 100 to 249
Units, $38.00 per Unit for any single transaction of 250 to 499 Units, $39.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units, provided that such Units
are acquired either from the Sponsor (in the case of dealer transactions) or
through the Sponsor (in the case of transactions involving brokers or others).
The increased concession or agency commission is a result of the discount
given to purchasers for quantity purchases. See "Unitholder
Explanations--Public Offering--General". Certain commercial banks are
making Units of the Fund available to their customers on an agency basis. A
portion of the sales charge paid by these customers (equal to the agency
commission referred to above) is retained by or remitted to the banks. Under
the Glass-Steagall Act, banks are prohibited from underwriting Units of the
Fund; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. Any quantity discount (see "
Unitholder Explanations--Public Offering--General") provided to investors
will be borne by the selling dealer or agent. For secondary market
transactions, such concession or agency commission will amount to 70% of the
applicable sales charge as determined using the table found in "Unitholder
Explanations--Public Offering".
To facilitate the handling of transactions during the initial offering period,
sales of Units shall normally be limited to transactions involving a minimum
of five Units. Further purchases may be made in multiples of one Unit. The
minimum purchase in the secondary market will be one Unit.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units and to change the amount of the concession or agency
commission to dealers and others from time to time. See "Underwriting".
Sponsor and Underwriter Compensation. The Underwriters will receive a gross
sales commission equal to that percentage of the Public Offering Price of the
Units as indicated under "Unitholder Explanations--Public
Offering--Offering Price"less any reduced sales charges for quantity
purchases as described under "Unitholder Explanations--Public Offering
--General".
The Sponsor will receive from the Underwriters the excess of such gross sales
commission over $35.00, $29.00, $27.00, $22.00, $22.00 and $35.00 per Unit of
any IM-IT, IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short
Intermediate, State Intermediate Laddered Maturity Trust and other Insured
Trusts, respectively, as of the Date of Deposit. In connection with quantity
sales to purchasers of any State Trust (other than a State Intermediate
Laddered Maturity Trust) the Underwriters will receive from the Sponsor
commissions totalling $37.00 per Unit for any single transaction of 100 to 249
Units, $39.00 per Unit for any single transaction of 250 to 499 Units, $40.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units. In connection with
quantity sales to purchasers of any State Intermediate Laddered Maturity
Trust the Underwriters will receive from the Sponsor commissions totalling
$23.00 per Unit for any single transaction of 100 to 249 Units, $23.00 per
Unit for any single transaction of 250 to 499 Units, $24.75 per Unit for any
single transaction of 500 to 999 Units and $24.00 per Unit for any single
transaction of 1,000 or more Units. The Sponsor will receive from the
Managing Underwriters of the California IM-IT Trust (who underwrite 15% of
the Trust or 1,000 Units of the Trust, whichever is greater) the excess of
such gross sales commission over $38.00 per Unit of the Trust, as of the
Date of Deposit. Also, any such Managing Underwriter that sells a total of
25% or 1,500 Units, whichever is greater, of the California IM-IT Trust will
receive an additional $2.00 per each such Unit. The Sponsor and First Investors
Corporation ("First Investors") have entered into an agreement under which
First Investors will receive an additional $5.00 per Unit in connection with a
minimum commitment of 17.5% of the total Units of the New York IM-IT Trust,
provided that the New York IM-IT Trust does not exceed 10,000 Units. If the
New York IM-IT Trust exceeds 10,000 Units, First Investors will receive an
additional $5.00 per Unit if First Investors underwrites the lesser of 3,000
Units or 20% of the New York IM-IT Trust. In addition, the Sponsor has entered
into agreements with Advest, Inc. ("Advest") and Gruntal & Co., Inc.
("Gruntal") whereby Advest and Gruntal will receive an additional $2.00 per
Unit in connection with a minimum commitment of 1,500 Units of any New York
IM-IT Trust. Also, the Sponsor will receive from the Managing Underwriters of
the New York IM-IT Trust (who underwrite 15% of the Trust or 1,000 Units of
the Trust, whichever is greater) the excess of such gross sales commission
over $38.00 per Unit of the Trust, as of the Date of Deposit. Also, any such
Managing Underwriter that sells a total of 25% or 1,500 Units, whichever is
greater, of the New York IM-IT Trust will receive an additional $2.00 per each
such Unit. See "Unitholder Explanations--Public Offering--General."
Further, each Underwriter who underwrites 1,000 or more Units in any Trust
will receive additional compensation from the Sponsor of $1.00 for each Unit
it underwrites. In addition, the Sponsor and certain of the Underwriters will
realize a profit or the Sponsor will sustain a loss, as the case may be, as a
result of the difference between the price paid for the Securities by the
Sponsor and the cost of such Securities to a Trust (which is based on the
determination by Interactive Data Services, Inc. of the aggregate offering
price of the underlying Securities in such Trust on the Date of Deposit). See
"Underwriting"and "Portfolio"for the applicable Trust and
"Notes to Portfolios". The Sponsor and the Underwriters may also
realize profits or sustain losses with respect to Securities deposited in each
Trust which were acquired by the Sponsor from underwriting syndicates of which
they were members. The Sponsor has participated as sole underwriter or as
manager or as a member of the underwriting syndicates from which none of the
aggregate principal amount of the Securities in the portfolios of the Fund
were acquired. The Underwriters may further realize additional profit or loss
during the initial offering period as a result of the possible fluctuations in
the market value of the Securities in each Trust after the Date of Deposit,
since all proceeds received from purchasers of Units (excluding dealer
concessions or agency commissions allowed, if any) will be retained by the
Underwriters. Affiliates of an Underwriter are entitled to the same dealer
concessions or agency commissions that are available to the Underwriter.
As stated under "Unitholder Explanations--Public Offering--Market for
Units", the Sponsor intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units of the Fund. In so maintaining a
market, such person or persons will also realize profits or sustain losses in
the amount of any difference between the price at which Units are purchased
and the price at which Units are resold (which price is based on the bid
prices of the Securities in such Trust and includes a sales charge). In
addition, such person or persons will also realize profits or sustain losses
resulting from a redemption of such repurchased Units at a price above or
below the purchase price for such Units, respectively.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby and certain matters
relating to Federal and Florida tax law have been passed upon by Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as counsel for the
Sponsor. Orrick, Herrington & Sutcliffe has acted as special counsel to the
Fund for California tax matters. Pitney, Hardin, Kipp & Szuch has acted as
special counsel to the Fund for New Jersey tax matters. Tanner Propp & Farber
has acted as counsel for the Trustee and as special counsel to the Fund for
New York tax matters. None of the special counsel for the Fund has expressed
any opinion regarding the completeness or materiality of any matters contained
in this Prospectus other than the tax opinion set forth under "Tax
Status"relating to the Trust for which it has provided an opinion.
Independent Certified Public Accountants. The statements of condition and the
related securities portfolios at the Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
(1)Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on Bonds
which is excludable from gross income under the Internal Revenue Code of 1986
(the "Code") will retain its status when distributed to Unitholders
subject to the alternative minimum tax, an additional tax on branches of
foreign corporations and the environmental tax (the "Superfund Tax"),
as noted below;
(2)Each Unitholder is considered to be the owner of a pro rata portion of the
respective Trust under subpart E, subchapter J of chapter 1 of the Code and
will have a taxable event when such Trust disposes of a Bond, or when the
Unitholder redeems or sells his Units. Unitholders must reduce the tax basis
of their Units for their share of accrued interest received by the respective
Trust, if any, on Bonds delivered after the Unitholders pay for their Units to
the extent that such interest accrued on such Bonds during the period from the
Unitholder's settlement date to the date such Bonds are delivered to the
respective Trust and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such Units.
Gain or loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the Units. If
the Trustee disposes of Bonds (whether by sale, payment on maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder. The
amount of any such gain or loss is measured by comparing the Unitholder's pro
rata share of the total proceeds from such disposition with the Unitholder's
basis for his or her fractional interest in the asset disposed of. In the case
of a Unitholder who purchases Units, such basis (before adjustment for earned
original issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets ratably
according to value as of the date of acquisition of the Units. The tax cost
reduction requirements of the Code relating to amortization of bond premium
may, under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to his original
cost;
(3)Any proceeds paid under an insurance policy or policies dated the Date of
Deposit, issued to an Insured Trust by AMBAC Indemnity, Financial Guaranty or
a combination thereof with respect to the Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations; and
(4)Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted obligations held by the Trustee
will be excludable from Federal gross income if, and to the same extent as,
such interest would have been excludable if paid in the normal course by the
issuer of the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
obligations, rather than the insurer, will pay debt service on the
obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Bond, depending on the date the Bond was
issued. In addition, special rules apply if the purchase price of a Bond
exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "
adjusted issue price") to prior owners. The application of these rules
will also vary depending on the value of the Bond on the date a Unitholder
acquires his Units and the price the Unitholder pays for his Units. Investors
with questions regarding these Code sections should consult with their tax
advisers.
"The Revenue Reconciliation Act of 1993"(the "Tax Act")
subjects tax-exempt bonds to the market discount rules of the Code effective
for bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds an
investor's purchase price (except to the extent that such difference, if any,
is attributable to original issue discount not yet accrued), subject to a
statutory de minimis rule. Market discount can arise based on the price a
Trust pays for Bonds or the price a Unitholder pays for his or her Units.
Under the Tax Act, accretion of market discount is taxable as ordinary income;
under prior law the accretion had been treated as capital gain. Market
discount that accretes while a Trust holds a Bond would be recognized as
ordinary income by the Unitholders when principal payments are received on the
Bond, upon sale or at redemption (including early redemption), or upon the
sale or redemption of his or her Units, unless a Unitholder elects to include
market discount in taxable income as it accrues. The market discount rules are
complex and Unitholders should consult their tax advisers regarding these
rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 depends upon
the corporation's alternative minimum taxable income, which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income and the
Superfund Tax of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust, or REMIC) is an amount equal
to 75% of the excess of such corporation's "adjusted current earnings"
over an amount equal to its alternative minimum taxable income (before such
adjustment item and the alternative tax net operating loss deduction). "
Adjusted current earnings"includes all tax exempt interest, including
interest on all of the Bonds in the Fund. Unitholders are urged to consult
their tax advisers with respect to the particular tax consequences to them
including the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase or improve
a personal residence). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of
the interest expense attributable to ownership of such Units. Investors with
questions regarding this issue should consult with their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user"
of the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or
related person, will not be excludible from Federal gross income, although
interest on such Bonds received by others would be excludible from Federal
gross income. "Substantial user"and "related person"are
defined under U.S. Treasury Regulations. Any person who believes that he or
she may be a "substantial user"or a "related person"as so
defined should contact his or her tax adviser.
In the opinion of Tanner Propp & Farber, special counsel to the Fund for New
York tax matters, under existing law, the Fund and each Trust are not
associations taxable as corporations and the income of each Trust will be
treated as the income of the Unitholders under the income tax laws of the
State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35%, effective for long-term capital gains realized in
taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of "
modified adjusted gross income"plus 50% of the Social Security benefits
received exceeds a "base amount". The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85% of Social Security benefits are includible in gross income to
the extent that the sum of "modified adjusted gross income"plus 50%
of Social Security benefits received exceeds an "adjusted base amount."
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for
married taxpayers filing a joint return, and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does
not exceed the base amount need not include any Social Security benefits in
gross income.
For a discussion of the state tax status of income earned on Units of a Trust,
see "Tax Status"for the applicable Trust. Except as noted therein,
the exemption of interest on state and local obligations for Federal income
tax purposes discussed above does not necessarily result in exemption under
the income or other tax laws of any State or City. The laws of the several
States vary with respect to the taxation of such obligations.
DESCRIPTION OF SECURITIES RATINGS
Standard & Poor's Ratings Group. A Standard & Poor's Ratings Group ("
Standard & Poor's") corporate or 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
Investors Service, Inc. ("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.
*As published by the rating companies.
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.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Insured Municipals Income Trust, 174th Insured
Multi-Series (California IM-IT Intermediate Laddered Maturity, California
IM-IT, Florida IM-IT Intermediate Laddered Maturity, New Jersey IM-IT and New
York IM-IT Trusts):
We have audited the accompanying statements of condition and the related
portfolios of Insured Municipals Income Trust, 174th Insured Multi-Series
(California IM-IT Intermediate Laddered Maturity, California IM-IT, Florida
IM-IT Intermediate Laddered Maturity, New Jersey IM-IT and New York IM-IT
Trusts) as of March 23, 1995. The statements of condition and portfolios 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 irrevocable letters of credit deposited to
purchase tax-exempt securities by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipals Income
Trust, 174th Insured Multi-Series (California IM-IT Intermediate Laddered
Maturity, California IM-IT, Florida IM-IT Intermediate Laddered Maturity, New
Jersey IM-IT and New York IM-IT Trusts) as of March 23, 1995, in conformity
with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
March 23, 1995
<TABLE>
INSURED MUNICIPALS INCOME TRUST 174th INSURED MULTI-SERIES
Statements of Condition As of March 23, 1995
<CAPTION>
California Florida
IM-IT IM-IT
Intermediate Intermediate
INVESTMENT IN SECURITIES Laddered California Laddered
Maturity Trust IM-IT Trust Maturity Trust
<S> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F4>... $ 2,973,287 $ 2,910,074 $ 2,992,205
Accrued interest to the First Settlement Date <F1><F4>..... 24,342 36,603 33,854
Total...................................................... $ 2,997,629 $ 2,946,677 $ 3,026,059
LIABILITY AND INTEREST OF UNITHOLDERS
Liability-- ...............................................
Accrued interest payable to Sponsor <F1><F4> $ 24,342 $ 36,603 $ 33,854
Interest of Unitholders-- .................................
Cost to investors <F3>..................................... 3,065,220 3,060,000 3,084,720
Less: Gross underwriting commission <F3>................... 91,933 149,926 92,515
Net interest to Unitholders <F1><F3><F4>................... 2,973,287 2,910,074 2,992,205
Total...................................................... $ 2,997,629 $ 2,946,677 $ 3,026,059
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio"for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Services, Inc. on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
. The contracts to purchase tax-exempt Securities are collateralized by
irrevocable letters of credit which have been deposited with the Trustee in
and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Accrued
Principal Offering Interest to
Amount of Amount of Price of Expected
Letter of Bonds Under Bonds Under Delivery
Credit Contracts Contracts Dates
<S> <C> <C> <C> <C>
California IM-IT Intermediate Laddered
Maturity Trust........................... $ 2,994,770 $ 3,000,000 $ 2,973,287 $ 21,483
California IM-IT Trust.................... $ 2,945,511 $ 3,035,000 $ 2,910,074 $ 35,437
Florida IM-IT Intermediate Laddered
Maturity Trust........................ $ 3,024,295 $ 3,000,000 $ 2,992,205 $ 32,090
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price"and "Trust
Administration--General--Sponsor and Underwriter Profits"and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while the
Net interest to Unitholders remains unchanged.
<F4>The Trustee will advance to the Trust the amount of net interest accrued to
March 30, 1995, the First Settlement Date, for distribution to the Sponsor as
the Unitholder of record as of the First Settlement Date.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
174th INSURED MULTI-SERIES
Statements of Condition (Continued)
As of
March 23, 1995
<CAPTION>
INVESTMENT IN SECURITIES New Jersey New York
IM-IT Trust IM-IT Trust
<S> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F4>... $ 2,939,571 $ 2,887,251
Accrued interest to the First Settlement Date <F1><F4>..... 39,530 44,656
Total...................................................... $ 2,979,101 $ 2,931,907
LIABILITY AND INTEREST OF UNITHOLDERS
Liability-- ...............................................
Accrued interest payable to Sponsor <F1><F4> $ 39,530 $ 44,656
Interest of Unitholders-- .................................
Cost to investors <F3>..................................... 3,091,000 3,036,000
Less: Gross underwriting commission <F3>................... 151,429 148,749
Net interest to Unitholders <F1><F3><F4>................... 2,939,571 2,887,251
Total...................................................... $ 2,979,101 $ 2,931,907
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio"for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Services, Inc. on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
. The contracts to purchase tax-exempt Securities are collateralized by
irrevocable letters of credit which have been deposited with the Trustee in
and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Accrued
Principal Offering Interest to
Amount of Amount of Price of Expected
Letter of Bonds Under Bonds Under Delivery
Credit Contracts Contracts Dates
<S> <C> <C> <C> <C>
New Jersey IM-IT Trust... $ 2,978,258 $ 3,030,000 $ 2,939,571 $ 38,687
New York IM-IT Trust..... $ 2,930,268 $ 2,985,000 $ 2,887,251 $ 43,017
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price"and "Trust
Administration--General--Sponsor and Underwriter Profits"and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while the
Net interest to Unitholders remains unchanged.
<F4>The Trustee will advance to the Trust the amount of net interest accrued to
March 30, 1995, the First Settlement Date, for distribution to the Sponsor as
the Unitholder of record as of the First Settlement Date.
</TABLE>
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of this 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 1995. 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. For cases in which more than one
State bracket falls within a Federal bracket, the highest State bracket is
combined with the Federal bracket. 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 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 $114,700. The tables
do not reflect the effect of limitations on itemized deductions and the
deduction for personal exemptions. They 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 the 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 "
Other Matters--Federal Tax Status"for a more detailed discussion of
recent Federal tax legislation, including a discussion of provisions affecting
corporations.
CALIFORNIA INTERMEDIATE LADDERED MATURITY
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax 5 1/2% 6% 6 1/2% 7% 7 1/2% 8% 8 1/2%
Return Return Bracket* Equivalent Taxable Estimated Current Return
$ 0 - 23.35 $ 0 - 39.00 20.1% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39%
23.35 - 56.55 39.00 - 94.25 34.7 6.89 7.66 8.42 9.19 9.95 10.72 11.49
94.25 - 143.60 37.4 7.19 7.99 8.79 9.58 10.38 11.18 11.98
56.55 - 117.95 37.9 7.25 8.05 8.86 9.66 10.47 11.27 12.08
117.95 - 214.93 143.60 - 256.50 42.4 7.81 8.68 9.55 10.42 11.28 12.15 13.02
214.93 - 256.50 43 7.89 8.77 9.65 10.53 11.40 12.28 13.16
256.50 - 429.86 45.6 8.27 9.19 10.11 11.03 11.95 12.87 13.79
Over 256.50 Over 429.86 46.2 8.36 9.29 10.22 11.15 12.08 13.01 13.94
</TABLE>
*The State tax rates assumed do not take into account possible adjustment of
tax brackets based on changes in the Consumer Price Index. The table reflects
California income tax laws that increase State income tax rates for high
income taxpayers. However, the table does not reflect the limitation on
itemized deductions and the phase out of the benefit for the personal
exemption credit and the dependent exemption credit that are imposed by the
California income tax laws in a manner similar to Federal tax law.
CALIFORNIA
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
Return Return Bracket* Equivalent Taxable Estimated Current Return
$ 0 - 23.35 $ 0 - 39.00 20.1% 6.88% 7.51% 8.14% 8.76% 9.39% 10.01% 10.64%
23.35 - 56.55 39.00 - 94.25 34.7 8.42 9.19 9.95 10.72 11.49 12.25 13.02
94.25 - 143.60 37.4 8.79 9.58 10.38 11.18 11.98 12.78 13.58
56.55 - 117.95 37.9 8.86 9.66 10.47 11.27 12.08 12.88 13.69
117.95 - 214.93 143.60 - 256.50 42.4 9.55 10.42 11.28 12.15 13.02 13.89 14.76
214.93 - 256.50 43 9.65 10.53 11.40 12.28 13.16 14.04 14.91
256.50 - 429.86 45.6 10.11 11.03 11.95 12.87 13.79 14.71 15.63
Over 256.50 Over 429.86 46.2 10.22 11.15 12.08 13.01 13.94 14.87 15.80
</TABLE>
* The State tax rates assumed take into account recent adjustments of tax
brackets based on changes in the Consumer Price Index. The table reflects
California income tax laws that increase State income tax rates for high
income taxpayers. However, the table does not reflect the limitation on
itemized deductions and the phase out of the benefit for the personal
exemption credit and the dependent exemption credit that are imposed by the
California income tax laws in a manner similar to Federal tax law.
FLORIDA INTERMEDIATE LADDERED MATURITY
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
Return Return Bracket* Equivalent Taxable Estimated Current Return
$ 0 - 23.35 $ 0 - 39.00 15% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
23.35 - 56.55 39.00 - 94.25 28 5.56 6.25 6.94 7.64 8.33 9.03 9.72
56.55 - 117.95 94.25 - 143.60 31 5.80 6.52 7.25 7.97 8.70 9.42 10.14
117.95 - 256.50 143.60 - 256.50 36 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over 256.50 Over 256.50 39.6 6.62 7.45 8.28 9.11 9.93 10.76 11.59
</TABLE>
* The State of Florida imposes no income tax on individuals; accordingly, the
table reflects only the exemption from Federal income taxes. The table does
not reflect the exemption of Units of the Florida Trust from the State's
intangible tax; accordingly, Florida residents subject to such tax would need
a somewhat higher taxable estimated current return than those shown to equal
the tax-exempt estimated current return of the Florida Trust.
NEW JERSEY
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
Return Return Bracket* Equivalent Taxable Estimated Current Return
$ 0 - 23.35 $ 0 - 39.00 16.8% 6.01% 6.61% 7.21% 7.81% 8.41% 9.01% 9.62%
23.35 - 56.55 39.00 - 94.25 32.3 7.39 8.12 8.86 9.60 10.34 11.08 11.82
94.25 - 143.60 35.2 7.72 8.49 9.26 10.03 10.80 11.57 12.35
56.55 - 117.95 35.5 7.75 8.53 9.30 10.08 10.85 11.63 12.40
117.95 - 256.50 143.60 - 256.50 40.2 8.36 9.20 10.03 10.87 11.71 12.54 13.38
Over 256.50 Over 256.50 43.6 8.87 9.75 10.64 11.52 12.41 13.30 14.18
</TABLE>
NEW YORK
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
Return Return Bracket* Equivalent Taxable Estimated Current Return
$ 0 - 23.35 $ 0 - 39.00 21.5% 6.37% 7.01% 7.64% 8.28% 8.92% 9.55% 10.19%
23.35 - 56.55 39.00 - 94.25 33.5 7.52 8.27 9.02 9.77 10.53 11.28 12.03
56.55 - 117.95 94.25 - 143.60 36.2 7.84 8.62 9.40 10.19 10.97 11.76 12.54
117.95 - 256.50 143.60 - 256.50 40.9 8.46 9.31 10.15 11.00 11.84 12.69 13.54
Over 256.50 Over 256.50 44.2 8.96 9.86 10.75 11.65 12.54 13.44 14.34
</TABLE>
* Combined Federal and State tax bracket was computed assuming that the
investor is not subject to local income taxes, such as New York City taxes.
Should a Unitholder reside in a locality which imposes an income tax, the
Unitholder's equivalent taxable estimated current return would be greater than
the equivalent taxable estimated current returns indicated in the table. The
table does not reflect the New York State supplemental income tax based upon a
taxpayer's New York State taxable income and New York State adjusted gross
income. This supplemental tax results in an increased marginal State income
tax rate to the extent a taxpayer's New York State adjusted gross income
ranges between $100,000 and $150,000. In addition, the table does not reflect
the amendments to the New York State income tax law that impose limitations on
the deductibility of itemized deductions. The application of the New York
State supplemental income tax and limitation on itemized deductions may result
in a higher combined Federal, State and local tax rate than indicated in the
table.
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 Securities prior to
maturity or expected retirement date and the receipt of principal upon
maturity or expected retirement date. To the extent the foregoing assumptions
change actual distributions will vary.
California IM-IT Intermediate Laddered Maturity Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.00 $ 4.00
June 1995 - November 1999 3.87 3.87
December 1999 3.87 $ 200.00 203.87
January 2000 - May 2000 3.19 3.19
June 2000 3.12 33.33 36.45
July 2000 3.05 166.67 169.72
August 2000 - February 2001 2.48 2.48
March 2001 2.48 166.66 169.14
April 2001 - October 2001 1.82 1.82
November 2001 1.82 33.34 35.16
December 2001 - August 2002 1.65 1.65
September 2002 1.65 200.00 201.65
October 2002 - February 2003 .82 .82
March 2003 .82 100.00 100.82
April 2003 - August 2003 .38 .38
September 2003 .38 100.00 100.38
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.03 $ 4.03
November 1995 - November 1999 23.44 23.44
December 1999 $ 200.00 200.00
May 2000 20.00 20.00
June 2000 33.33 33.33
July 2000 166.67 166.67
November 2000 16.26 16.26
March 2001 166.66 166.66
May 2001 13.70 13.70
November 2001 11.02 33.34 44.36
May 2002 10.02 10.02
September 2002 200.00 200.00
November 2002 8.35 8.35
March 2003 100.00 100.00
May 2003 4.11 4.11
September 2003 1.56 100.00 101.56
</TABLE>
California IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.75 $ 4.75
June 1995 - July 2005 4.60 4.60
August 2005 4.60 $ 163.39 167.99
September 2005 - May 2020 3.82 3.82
June 2020 3.82 163.40 167.22
July 2020 3.02 114.38 117.40
August 2020 2.46 120.92 123.38
September 2020 - December 2022 1.89 1.89
January 2023 1.89 70.26 72.15
February 2023 - May 2024 1.58 1.58
June 2024 1.58 32.68 34.26
July 2024 1.42 1.42
August 2024 1.42 163.40 164.82
September 2024 - October 2024 .62 .62
November 2024 .26 163.40 163.66
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
July 1995 $ 14.02 $ 14.02
January 1996 - July 2005 27.75 27.75
August 2005 $ 163.39 163.39
January 2006 23.84 23.84
July 2006 - January 2020 23.06 23.06
June 2020 163.40 163.40
July 2020 22.25 114.38 136.63
August 2020 120.92 120.92
January 2021 11.98 11.98
July 2021 - July 2022 11.41 11.41
January 2023 11.41 70.26 81.67
July 2023 - January 2024 9.56 9.56
June 2024 32.68 32.68
July 2024 9.40 9.40
August 2024 163.40 163.40
November 2024 2.94 163.40 166.34
</TABLE>
Florida IM-IT Intermediate Laddered Maturity Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 3.98 $ 3.98
June 1995 - September 1999 3.85 3.85
October 1999 3.85 $ 200.00 203.85
November 1999 - July 2000 3.20 3.20
August 2000 3.20 33.33 36.53
September 2000 3.07 3.07
October 2000 3.07 166.67 169.74
November 2000 - July 2001 2.49 2.49
August 2001 2.47 2.47
September 2001 2.47 173.33 175.80
October 2001 1.82 26.67 28.49
November 2001 - April 2002 1.71 1.71
May 2002 1.71 200.00 201.71
June 2002 - February 2003 .86 .86
March 2003 .86 180.00 180.86
April 2003 - September 2003 .01 .01
October 2003 .01 20.00 20.01
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.01 $ 4.01
November 1995 - May 1999 23.32 23.32
October 1999 $ 200.00 200.00
November 1999 22.67 22.67
May 2000 19.40 19.40
August 2000 33.33 33.33
October 2000 166.67 166.67
November 2000 18.43 18.43
May 2001 15.12 15.12
September 2001 173.33 173.33
October 2001 26.67 26.67
November 2001 13.59 13.59
May 2002 10.37 200.00 210.37
November 2002 5.25 5.25
March 2003 180.00 180.00
May 2003 3.53 3.53
October 2003 .08 20.00 20.08
</TABLE>
New Jersey IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.70 $ 4.70
June 1995 - December 2005 4.55 4.55
January 2006 4.55 $ 88.96 93.51
February 2006 - June 2006 4.16 4.16
July 2006 4.16 161.76 165.92
August 2006 3.33 3.33
September 2006 3.33 82.50 85.83
October 2006 - February 2024 2.91 2.91
March 2024 2.91 161.76 164.67
April 2024 - June 2024 2.14 2.14
July 2024 2.14 161.76 163.90
August 2024 - November 2024 1.35 1.35
December 2024 1.35 161.76 163.11
January 2025 - October 2033 .67 .67
November 2033 .67 161.76 162.43
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
July 1995 $ 13.90 $ 13.90
January 1996 - July 2005 27.50 27.50
January 2006 27.50 $ 88.96 116.46
July 2006 25.14 161.76 186.90
September 2006 82.50 82.50
January 2007 18.46 18.46
July 2007 - January 2024 17.61 17.61
March 2024 161.76 161.76
July 2024 14.53 161.76 176.29
December 2024 161.76 161.76
January 2025 7.51 7.51
July 2025 - July 2033 4.06 4.06
November 2033 2.70 161.76 164.46
</TABLE>
New York IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.74 $ 4.74
June 1995 - June 2004 4.59 4.59
July 2004 4.59 $ 164.69 169.28
August 2004 - June 2006 3.79 3.79
July 2006 3.79 74.11 77.90
August 2006 3.42 3.42
September 2006 3.29 49.40 52.69
October 2006 - February 2014 3.17 3.17
March 2014 2.96 82.35 85.31
April 2014 - December 2017 2.78 2.78
January 2018 2.78 83.99 86.77
February 2018 - June 2019 2.42 2.42
July 2019 2.27 65.88 68.15
August 2019 - June 2021 2.14 2.14
July 2021 2.14 51.05 53.19
August 2021 - June 2023 1.93 1.93
July 2023 1.93 82.35 84.28
August 2023 - June 2024 1.55 1.55
July 2024 1.55 98.81 100.36
August 2024 - December 2024 1.07 1.07
January 2025 1.07 148.22 149.29
February 2025 .34 .34
March 2025 .12 82.35 82.47
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1995 $ 4.77 $ 4.77
November 1995 - May 2004 27.75 27.75
July 2004 $ 164.69 164.69
November 2004 24.54 24.54
May 2005 - May 2006 22.94 22.94
July 2006 74.11 74.11
September 2006 49.40 49.40
November 2006 20.81 20.81
May 2007 - November 2013 19.19 19.19
March 2014 82.35 82.35
May 2014 18.20 18.20
November 2014 - November 2017 16.85 16.85
January 2018 83.99 83.99
May 2018 15.41 15.41
November 2018 - May 2019 14.68 14.68
July 2019 65.88 65.88
November 2019 13.36 13.36
May 2020 - May 2021 12.94 12.94
July 2021 51.05 51.05
November 2021 12.10 12.10
May 2022 - May 2023 11.68 11.68
July 2023 82.35 82.35
November 2023 10.16 10.16
May 2024 9.40 9.40
July 2024 98.81 98.81
November 2024 7.45 7.45
January 2025 148.22 148.22
March 2025 2.64 82.35 84.99
</TABLE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
<TABLE>
<CAPTION>
Title
Page
<S> <C>
INTRODUCTION 2
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION 3
UNITHOLDER EXPLANATIONS 4
Settlement of Bonds in the Trusts 5
The Fund 5
Objectives and Securities Selection 6
Risk Factors 8
Replacement Bonds 10
Bond Redemptions 11
Distributions 11
Change of Distribution Option 12
Certificates 12
Estimated Current Returns and Estimated Long-Term Returns 12
Interest Earning Schedule 13
Calculation of Estimated Net Annual Interest Income 13
Accrued Interest 13
Accrued Interest 13
Public Offering 14
General 14
Offering Price 15
Market for Units 16
Distributions of Interest and Principal 17
Reinvestment Option 17
Redemption of Units 18
Reports Provided 19
Insurance on the Bonds in the Insured Trusts 20
CALIFORNIA IM-IT INTERMEDIATE LADDERED
MATURITY TRUST 26
CALIFORNIA IM-IT TRUST 34
FLORIDA IM-IT INTERMEDIATE LADDERED
MATURITY TRUST 42
NEW JERSEY IM-IT TRUST 48
NEW YORK IM-IT TRUST 53
NOTES TO PORTFOLIOS 62
UNDERWRITING 64
TRUST ADMINISTRATION 67
Fund Administration and Expenses 67
Sponsor 67
Compensation of Sponsor and Evaluator 71
Trustee 71
Trustee's Fee 72
Portfolio Administration 72
Sponsor Purchases of Units 73
Insurance Premiums 73
Miscellaneous Expenses 73
General 73
Amendment or Termination 73
Limitation on Liabilities 74
Unit Distribution 75
Sponsor and Underwriter Compensation 75
OTHER MATTERS 76
Legal Opinions 76
Independent Certified Public Accountants 76
FEDERAL TAX STATUS 76
DESCRIPTION OF SECURITIES RATINGS 80
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS 81
STATEMENTS OF CONDITION 82
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
TABLES 84
ESTIMATED CASH FLOWS TO UNITHOLDERS 87
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
March 23, 1995
Van Kampen American Capital
Insured Municipals Income Trust, 174th Insured Multi-Series
California IM-IT Intermediate Laddered Maturity Series 18
Florida IM-IT Intermediate Laddered Maturity Series 12
New Jersey IM-IT 101
New York IM-IT 125
California IM-IT 138
A Wealth of Knowledge A Knowledge of Wealth(sm)
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
Contents of Registration Statement
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services and
legal counsel
The following exhibits:
1.1 Copy of Trust Agreement (to be supplied by amendment).
1.4 Copy of Municipal Bond Fund Portfolio Insurance Policy issued by
AMBAC Indemnity Corporation and/or Financial Guaranty Insurance
Company for each IM-IT Trust (to be supplied by amendment).
1.5 Copy of Master Agreement Among Underwriters (to be supplied by
amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be supplied by amendment).
3.2 Opinion and consent of counsel as to Federal income tax status of
securities being registered (to be supplied by amendment).
3.3 Opinion and consent of counsel as to income tax status of the Fund
under New York law (to be supplied by amendment).
4.1 Consent of Interactive Data Services, Inc. (to be supplied by
amendment).
4.2 Consent of Standard & Poor's Ratings Group (to be supplied by
amendment).
4.3 Consent of Grant Thornton LLP (to be supplied by amendment).
4.4 Financial Data Schedule (to be supplied by amendment).
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust, 177th Insured Multi-Series
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Chicago and
State of Illinois on the 24th day of March, 1995.
Insured Municipals Income Trust,
177th Insured Multi-Series
(Registrant)
By Van Kampen American Capital
Distributors, Inc.
(Depositor)
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on March 24, 1995.
Signature Title
Don G. Powell Chairman and Chief )
ExecutiveOfficer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
By Sandra A. Waterworth
(Attorney-in-fact*)
_______________________________________________________________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-
65744) and with the Registration Statement on From S-6 of Insured
Municipals Income Trust, 170th Insured Multi-Series (File No. 33-55891)
and the same are hereby incorporated herein by this reference.
