MEMORANDUM OF CHANGES
INSURED MUNICIPALS INCOME TRUST
230TH INSURED MULTI-SERIES
This Prospectus filed with Amendment No. 1 of the Registration
Statement on Form S-6 has been revised to reflect information regarding the
deposit of the California IM-IT, New York IM-IT and Colorado IM-IT Trusts. Such
information has been blacklined in the marked counterpart of the Prospectus
submitted with the Amendment. All page numbers below refer to Prospectus Part I.
Page 1. The Trusts in the Fund have been named and the date of the prospectus
has been added.
Page 2. The Summary of Essential Financial Information has been completed.
Pages 3-12. Information relating to the Trusts comprising the Fund is set forth.
Pages 13 and 14. The "Notes to Portfolios" section has been completed.
Pages 15 and 16. The Report of Independent Certified Public Accountants and
Statements of Condition have been completed.
Pages 17 and 18. The "Other Matters - Equivalent Taxable Estimated Current
Return Tables" have been updated.
Pages 19-21. The "Other Matters - Estimated Cash Flows to Unitholders" section
has been completed.
Pages 22 and 23. The Underwriters have been named in the "Other Matters -
Underwriting" section.
Back Cover. The names and series numbers of the Trusts and the date of the
prospectus have been changed.
<PAGE>
FILE NO. 333-45171
CIK #896376
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
AMENDMENT NO. 1
TO
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: INSURED MUNICIPALS INCOME TRUST
230th INSURED MULTI-SERIES
B. Name of Depositor: VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
CHAPMAN AND CUTLER VAN KAMPEN AMERICAN CAPITAL
Attention: Mark J. Kneedy DISTRIBUTORS, INC.
111 W. Monroe Street Attention: Don G. Powell, Chairman
Chicago, Illinois 60603 One Parkview Plaza
Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of fractional undivided
beneficial interest.
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT
/ X / Check box if it is proposed that this filing will become effective on
- ---- April 23, 1998 pursuant to Rule 487.
<TABLE>
<CAPTION>
INSURED MUNICIPALS INCOME TRUST,
230TH 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
<S> <C>
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Part I Front Cover Page
2. Name and address of Depositor ) Part II-Introduction
) Part I-Summary of Essential Financial
) Information
) Part II-Trust Administration
3. Name and address of Trustee ) Part II-Introduction
) Part I-Summary of Essential Financial
) Information
) Part II-Trust Administration
4. Name and address of principal ) Part I-Other Matters-Underwriting
underwriter )
5. Organization of trust ) Part II-Introduction
6. Execution and termination of ) Part II-Introduction
Trust Indenture and Agreement ) Part II-Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
<CAPTION>
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
<S> <C>
10. General information regarding ) Part II-Introduction
trust's securities and rights ) Part II-Unitholder Explanations
of security holders ) Part II-Trust Administration
11. Type of securities comprising ) Part II-Introduction
units ) Part I-Trust Information
) Part I-Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Part II-Introduction
expenses ) Part I-Summary of Essential Financial
) Information
) Part II-Unitholder Explanations
) Part I-Trust Information
) Part II-Trust Administration
(b) Certain information regard- ) *
ing periodic payment plan )
certificates )
(c) Certain percentages ) Part I-Summary of Essential Financial
) Information
) Part II-Unitholder Explanations
(d) Certain other fees, ) Part II-Unitholder Explanations
expenses or charges ) Part II-Trust Administration
payable by holders )
(e) Certain profits to be ) Part II-Unitholder Explanations
received by depositor, ) Part I-Other Matters-Underwriting
principal underwriter, ) Part I-Notes to Portfolios
trustee or affiliated )
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Part II-Unitholder Explanations
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Part II-Introduction
underlying securities ) Part II-Unitholder Explanations
) Part II-Trust Administration
17. Withdrawal or redemption ) Part II-Unitholder Explanations
) Part II-Trust Administration
18. (a) Receipt and disposition ) Part II-Introduction
of income ) Part II-Unitholder Explanations
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Part II-Unitholder Explanations
) Part II-Trust Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Part II-Unitholder Explanations
) Part II-Trust Administration
20. Certain miscellaneous provisions ) Part II-Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Part I-Portfolios
) Part II-Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
<CAPTION>
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
<S> <C>
25. Organization of Depositor ) Part II-Trust Administration
26. Fees received by Depositor ) Part II-Trust Administration
27. Business of Depositor ) Part II-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 ) Part II-Unitholder Explanations
<CAPTION>
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
<S> <C>
35. Distribution of trust's ) Part II-Introduction
securities by states ) Part II-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 ) Part II-Unitholder Explanations
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Part II-Trust Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Part II-Trust Administration
underwriter )
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of the ) *
trust )
43. Certain brokerage commissions )
received by principal ) *
underwriter )
44. (a) Method of valuation ) Part II-Introduction
) Part I-Summary of Essential Financial
) Information
) Part II-Unitholder Explanations
) Part II-Trust Administration
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) Part II-Unitholder Explanations
to certain persons )
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Part II-Unitholder Explanations
) Part II-Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Part II-Unitholder Explanations
in underlying securities ) Part II-Trust Administration
<CAPTION>
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C>
48. Organization and regulation of ) Part II-Trust Administration
trustee )
49. Fees and expenses of trustee ) Part I-Summary of Essential Financial
) Information
) Part II-Trust Administration
50. Trustee's lien ) Part II-Trust Administration
<CAPTION>
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
<S> <C>
51. Insurance of holders of trust's )
securities ) *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agree- )
ment with respect to )
replacement or elimi- ) Part II-Trust Administration
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitu- ) Part II-Trust Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Part I-Trust Information
) Part II-Federal Tax Status
<CAPTION>
VIII. Financial and Statistical Information
<S> <C>
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Part I-Other Matters
tions 1(c) to Form S-6) )
- ----------------------------------
* Inapplicable, omitted, answer negative or not required
</TABLE>
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART I
CALIFORNIA INSURED MUNICIPALS INCOME TRUST, SERIES 173
- --------------------------------------------------------------------------------
California Insured Municipals Income Trust, Series 173 (the "Trust")
(included in Insured Municipals Income Trust, 230th Insured Multi-Series (the
"Fund")) consists of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is, in
the opinion of bond counsel to the issuer, exempt from all Federal income taxes
under existing law and exempt to the extent described herein from California
state and local taxes when held by residents of California (the "Bonds"). The
objective of the Trust is Federal and California tax-exempt income and
conservation of capital through an investment in a diversified portfolio of
tax-exempt bonds. The Units of the Trust are rated "AAA" by Standard & Poor's.
The Trust is referred to herein as the "State Trust" or "Insured Trust".
The Trust consists of 9 issues of Bonds. None of the Bonds are general
obligations of the governmental entities issuing them or are backed by the
taxing power thereof. All of the issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: General Purpose, 3 (50%); Water and Sewer, 2
(14%); Certificate of Participation, 1 (13%); Health Care, 1 (12%); Public
Building, 1 (8%) and Transportation, 1 (3%). The dollar weighted average
maturity of the Bonds is 29 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.70% 4.74%
Estimated Long Term Return: 4.75% 4.79%
CUSIP: 13033P-78-5 13033P-79-3
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
APRIL 23, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Initial Date of Deposit: April 23, 1998 Principal Amount of Bonds per Unit (1): $ 1,001.33
Principal Amount of Bonds: $ 3,005,000 Number of Units: 3,001
</TABLE>
- ----------------------------------------------------------
PUBLIC OFFERING PRICE
- ----------------------------------------------------------
Aggregate Offering Price of Bonds $ 2,853,961
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.62
- ----------------------------------------------------------
- ----------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- ----------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 49.30 $ 49.30
Less Estimated Expenses (4) $ 2.30 $ 1.89
Less Estimated Insurance
Expenses $ -- $ --
Estimated Net Interest Income $ 47.00 $ 47.41
- ----------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- ----------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 1.56 on $ 9.48 on
May 25, 1998 July 25, 1998
Normal
Distribution (3) $ 3.91 $ 23.70
Record Dates 10th day of July 10 and
each month January 10
Distribution Dates 25th day of July 25 and
each month January 25
- -----------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.84 $ 0.83
----------- -----------
Total Annual Expenses per Unit $ 2.30 $ 1.89
=========== ===========
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (April 28, 1998), Unitholders will pay
accrued interest from such date to the settlement date less distributions
from the Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
<TABLE>
<CAPTION>
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
CALIFORNIA
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 250,000 San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds, Series A (FGIC Insured) 2007 @ 101
#5.25% Due 05/15/2022................................ AAA 2018 @ 100 S.F. $ 250,562
350,000 California, Health Facilities Financing Authority, Revenue
Refunding Bonds (Sutter Health System) Series C
(FSA Insured) 2007 @ 102
#5.125% Due 08/15/2022............................... AAA 2018 @ 100 S.F. 343,406
100,000 San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road, Revenue Capital Appreciation Refunding Bonds,
Series A (MBIA Insured)
#0.00% Due 01/15/2025................................ AAA 25,144
225,000 San Francisco, California, City and County Redevelopment
Agency, Hotel Tax Revenue Bonds (FSA Insured) 2008 @ 102
#5.00% Due 07/01/2025................................ AAA 2019 @ 100 S.F. 217,069
180,000 East Bay, California, Municipal Utility District, Water System
Revenue Refunding Bonds (FGIC Insured) 2006 @ 102
#5.00% Due 06/01/2026................................ AAA 2022 @ 100 S.F. 173,986
500,000 Colton, California, Public Financing Authority, Tax Allocation
Revenue Bonds, Series 1998A (Redevelopment Agency
for the City of Colton Redevelopment Project) MBIA Insured
#5.00% Due 08/01/2027................................ AAA 2008 @ 102 480,995
400,000 Campbell, California, Certificate of Participation Refunding
Bonds, Civic Center Project (MBIA Insured) 2007 @ 102
#5.25% Due 10/01/2028................................ AAA 2020 @ 100 S.F. 397,784
500,000 Pomona, California, Public Financing Authority, 1998 Refunding
Revenue Bonds, Series W (Southwest Pomona Redevelopment
Project) MBIA Insured 2008 @ 102
#5.00% Due 02/01/2030................................ AAA 2025 @ 100 S.F. 480,135
500,000 San Mateo County, California, Joint Powers Authority, Lease
Revenue Bonds, Capital Projects, Series A (FSA Insured) 2008 @ 101
#5.125% Due 07/15/2032............................... AAA 2029 @ 100 S.F. 484,880
- --------------- ------------
$ 3,005,000 $ 2,853,961
=============== ============
- --------------------------------------------------------------------------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from April 20, 1998 to
April 21, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 2,838,303 $ 15,658
The breakdown of the Preinsured Bond Insurers is as follows: Financial
Guaranty 14%, MBIA 50% and FSA 36%.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
CALIFORNIA RISK FACTORS. The financial condition of the State of California
is affected by various national, economic, social and environmental policies and
conditions. Additionally, limitations imposed by constitutional amendments,
legislative measures, or votor initiatives on the State and its local
governments concerning taxes, bond indebtedness and other matters may constrain
the revenue-generating capacity of the State and its local governments and,
therefore, the ability of the issuers of the Bonds to satisfy their obligations.
The State faces a structural imbalance in its budget with the largest programs
supported by the General Fund (education, health, welfare and corrections)
growing at rates higher than the growth rates for the principal revenue sources
of the General Fund.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors, such as natural disasters, complications with
exports and industry deregulation. The California economy continues to show
weakness in manufacturing, particularly aerospace as well as in the telephone,
communications and public utility industries. California's population increase
has resulted in traffic congestion, school overcrowding and high housing costs
which have caused an increase demand for government services and which may
impede future economic growth.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations. On December 7, 1994, Orange
County, California, together with its pooled investment fund (the "Pooled Fund")
filed for protection under Chapter 9 of the federal Bankruptcy Code. Many
governmental entities kept moneys in the Pooled Fund.
All outstanding general obligation bonds of the State are rated "A+" by
Standard and Poor's and "A1" by Moody's.
Further information concerning California risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. For a discussion of the Federal tax status of income earned on
California IM-IT Trust Units, see "Federal Tax Status" in Prospectus Part II.
In the opinion of Chapman and Cutler, special counsel for the California
IM-IT Trust for California tax matters, under existing California law: We
have examined the income tax laws of the State of California to determine its
applicability to the California IM-IT Trust and to the holders of Units
in the California IM-IT Trust who are full-time residents of the State of
California ("California Unitholders"). The assets of the California IM-IT Trust
will consist of bonds issued by the State of California or a local government of
California (the "California Bonds") or by the Commonwealth of Puerto Rico or its
authority (the "Possession Bonds") (collectively, the "Bonds"). For purposes of
the following opinions, it is assumed that each asset of the California IM-IT
Trust is debt, the interest on which is excluded from gross income for federal
income tax purposes.
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the California IM-IT Trust. However, although
Chapman and Cutler expresses no opinion with respect to the issuance of the
Bonds, in rendering its opinion expressed herein, it has assumed that: (i) the
Bonds were validly issued; (ii) the interest thereon is excludable from gross
income for federal income tax purposes; and (iii) interest on the Bonds, if
received directly by a California Unitholder, would be exempt from the income
tax imposed by the State of California that is applicable to individuals, trusts
and estates (the "California Personal Income Tax"). This opinion does not
address the taxation of persons other than full time residents of California. We
have assumed that, at the respective times of issuance of the Bonds, opinions
that the Bonds were validly issued and that interest on the Bonds is excluded
from gross income for Federal income tax purposes were rendered by bond counsel
to the respective issuing authorities. In addition, we have assumed that, with
respect to the California Bonds, bond counsel to the issuing authorities
rendered opinions that the interest on the California Bonds is exempt from the
California Personal Income Tax and, with respect to the Possession Bonds, bond
counsel to the issuing authorities rendered opinions that the Possession Bonds
and the interest thereon is exempt from all state and local income taxation.
Neither the Sponsor nor its counsel has made any review for the California IM-IT
Trust of the proceedings relating to the issuance of the Bonds or of the basis
for the opinions rendered in connection therewith.
Based upon the foregoing, and upon an investigation of such matters of law as
we considered to be applicable, we are of the opinion that, under existing
provisions of the law of the State of California as of the date hereof:
1. The California IM-IT Trust is not an association taxable as a
corporation for purposes of the California Bank and Corporation Tax
Law, and each California Unitholder will be treated as the owner of a
pro rata portion of the California IM-IT Trust, and the income of such
portion of the California IM-IT Trust will be treated as the income of
the California Unitholders under the California Personal Income Tax.
2. Interest on the Bonds which is exempt from tax under the California
Personal Income Tax when received by the California IM-IT Trust and
which would be excludable from California taxable income for purposes
of the California Personal Income Tax if received directly by a
California Unitholder, will be excludable from California taxable
income for purposes of the California Personal Income Tax when received
by the California IM-IT Trust and distributed to a California
Unitholder.
3. Each California Unitholder of the California IM-IT Trust will generally
recognize gain or loss for California Personal Income Tax purposes if
the Trustee disposes of a Bond (whether by redemption, sale or
otherwise) or when the California Unitholder redeems or sells Units of
the California IM-IT Trust, to the extent that such a transaction
results in a recognized gain or loss to such California Unitholder for
federal income tax purposes. However, there are certain differences
between the recognition of gain or loss for federal income tax purposes
and for California Personal Income Tax purposes, and California
Unitholders are advised to consult their own tax advisors. Tax basis
reduction requirements relating to amortization of bond premium may,
under some circumstances, result in a California Unitholder realizing
taxable gain for California Personal Income Tax purposes when a Unit is
sold or redeemed for an amount equal to or less than its original cost.
4. Under the California Personal Income Tax, interest on indebtedness
incurred or continued by a California Unitholder to purchase Units in
the California IM-IT Trust is not deductible for purposes of the
California Personal Income Tax.
This opinion relates only to California Unitholders subject to the California
Personal Income Tax. No opinion is expressed with respect to the taxation of
California Unitholders subject to the California Bank and Corporation Tax Law
and such California Unitholders are advised to consult their own tax advisors.
Please note, however, that interest on the underlying Bonds attributed to a
California Unitholder that is subject to the California Bank and Corporation Tax
Law may be includible in its gross income for purposes of determining its
California franchise tax. We have not examined any of the Bonds to be deposited
and held in the California IM-IT Trust or the proceedings for the issuance
thereof or the opinions of bond counsel with respect thereto, and we express no
opinion with respect to taxation under any other provisions of the California
law. Ownership of the Units may result in collateral California tax consequences
to certain taxpayers. Prospective investors should consult their tax advisors as
to the applicability of any such collateral consequences.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,501
Crowell, Weedon & Company One Wilshire Boulevard, Los Angeles, California 90017 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 & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
McLaughlin, Piven, Vogel Securities, Inc. 30 Wall Street, 5th Floor, New York, New York 10005 100
-----------------
3,001
=================
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen American Capital
unit investment trusts may qualify for a reduced sales charge by signing a
nonbinding Letter of Intent with any single broker-dealer. After signing a
Letter of Intent, at the date total purchases, less redemptions, of units of any
combination of series of Van Kampen American Capital unit investment trusts by a
purchaser (including units purchased in the name of the spouse of a purchaser or
in the name of a child of such purchaser under 21 years of age) exceed $500,000,
the selling broker-dealer, bank or other will credit the unitholder with cash as
a retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen Capital
unit investment trusts must equal or exceed $100,000.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors,
Inc. and the Unitholders of California Insured Municipals Income Trust,
Series 173 (included in Insured Municipals Income Trust, 230th Insured
Multi-Series):
We have audited the accompanying statement of condition and the portfolio of
California Insured Municipals Income Trust, Series 173 (included in Insured
Municipals Income Trust, 230th Insured Multi-Series) as of April 23, 1998. The
statement of condition and portfolio are the responsibility of the Sponsor.
Our responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of California Insured Municipals
Income Trust, Series 173 (included in Insured Municipals Income Trust, 230th
Insured Multi-Series) as of April 23, 1998, in conformity with generally
accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
April 23, 1998
STATEMENT OF CONDITION
AS OF APRIL 23, 1998
INVESTMENT IN BONDS
Contracts to purchase Bonds (1)(2) $ 2,853,961
Accrued interest to the First Settlement Date (1)(2) 32,005
--------------
Total $ 2,885,966
==============
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 32,005
Interest of Unitholders--
Cost to investors 3,001,000
Less: Gross underwriting commission 147,039
--------------
Net interest to Unitholders (1)(2) 2,853,961
--------------
Total $ 2,885,966
==============
- ---------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
PROSPECTUS
PART I
APRIL 23, 1998
INSURED MUNICIPALS INCOME TRUST,
230TH INSURED MULTI-SERIES
CALIFORNIA INSURED MUNICIPALS INCOME TRUST, SERIES 173
------ A Wealth of Knowledge oA Knowledge of Wealthsm ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART I
COLORADO INSURED MUNICIPALS INCOME TRUST, SERIES 86
- --------------------------------------------------------------------------------
Colorado Insured Municipals Income Trust, Series 86 (the "Trust") (included
in Insured Municipals Income Trust, 230th Insured Multi-Series (the "Fund"))
consists of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is, in
the opinion of bond counsel to the issuer, exempt from all Federal income taxes
under existing law and exempt to the extent described herein from Colorado state
and local taxes when held by residents of Colorado (the "Bonds"). The objective
of the Trust is Federal and Colorado tax-exempt income and conservation of
capital through an investment in a diversified portfolio of tax-exempt bonds.
The Units of the Trust are rated "AAA" by Standard & Poor's. The Trust is
referred to herein as the "State Trust" or "Insured Trust".
The Trust consists of 9 issues of Bonds. Two of the Bonds are general
obligations of the governmental entities issuing them and are backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: General Obligation, 2 (27%); Health Care, 2 (17%);
Airport, 1 (12%); Certificate of Participation, 1 (12%); Higher Education, 1
(12%); Transportation, 1 (12%) and General Purpose, 1 (8%). The dollar weighted
average maturity of the Bonds is 25 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.62% 4.66%
Estimated Long Term Return: 4.64% 4.68%
CUSIP: 196497-18-4 196497-19-2
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
APRIL 23, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Initial Date of Deposit: April 23, 1998 Principal Amount of Bonds per Unit (1): $ 989.86
Principal Amount of Bonds: $ 2,050,000 Number of Units: 2,071
</TABLE>
- ----------------------------------------------------------
PUBLIC OFFERING PRICE
- ----------------------------------------------------------
Aggregate Offering Price of Bonds $ 1,969,531
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.67
- ----------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- ----------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 48.59 $ 48.59
Less Estimated Expenses (4) $ 2.39 $ 1.98
Less Estimated Insurance
Expenses $ -- $ --
Estimated Net Interest Income $ 46.20 $ 46.61
- ---------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- ---------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 1.53 on $ 9.32 on
May 25, 1998 July 25, 1998
Normal
Distribution (3) $ 3.85 $ 23.30
Record Dates 10th day of July 10 and
each month January 10
Distribution Dates 25th day of July 25 and
each month January 25
- ----------------------------------------------------------
EXPENSES
- ----------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public
Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.93 $ 0.92
----------- -----------
Total Annual Expenses per Unit $ 2.39 $ 1.98
=========== ===========
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (April 28, 1998), Unitholders will pay
accrued interest from such date to the settlement date less distributions
from the Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
<TABLE>
<CAPTION>
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
COLORADO
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 250,000 Colorado Springs, Colorado, School District No. 11,
Certificate of Participation (MBIA Insured)
#5.00% Due 12/01/2017................................ AAA 2008 @ 100 $ 245,435
250,000 Jefferson County, Colorado, School District No. R-001,
General Obligation Bonds, Series A (FGIC Insured) 2008 @ 101
#5.00% Due 12/15/2017................................ AAA 2016 @ 100 S.F. 247,848
300,000 St. Vrain Valley School District No. RE-1J (Boulder, Larimer
and Weld Counties, Colorado) General Obligation Bonds,
Series 1997 (FGIC Insured) 2007 @ 101
#5.00% Due 12/15/2022................................ AAA 2020 @ 100 S.F. 293,193
250,000 Denver, Colorado, City and County Airport Revenue Bonds,
Series E (MBIA Insured) 2007 @ 101
#5.25% Due 11/15/2023................................ AAA 2018 @ 100 S.F. 249,503
250,000 University of Northern Colorado, Revenue Refunding Bonds,
Auxiliary Facilities System, Series A (AMBAC Assurance
Insured) 2008 @ 100
#5.00% Due 06/01/2024................................ AAA 2019 @ 100 S.F. 245,142
50,000 Colorado, Health Facilities Authority, Retirement Facilities,
Remarketed Revenue Zero Coupon Bonds (Liberty Hospital)
Series B (FSA Insured)
#0.00% Due 07/15/2024................................ AAA 12,741
300,000 Colorado, Health Facilities Authority, Revenue Bonds (Sisters
of Charity Leavenworth) MBIA Insured 2008 @ 101
#5.00% Due 12/01/2025................................ AAA 2019 @ 100 S.F. 290,286
250,000 E-470 Public Highway Authority, Colorado, Senior Revenue
Bonds, Series A (MBIA Insured) 2007 @ 101
#5.00% Due 09/01/2026................................ AAA 2024 @ 100 S.F. 240,292
150,000 Puerto Rico, Commonwealth Infrastructure Financing Authority,
Revenue Bonds, Special Series A (AMBAC Assurance Insured) 2008 @ 101
#5.00% Due 07/01/2028................................ AAA 2022 @ 100 S.F. 145,091
- --------------- ------------
$ 2,050,000 $ 1,969,531
=============== ============
- ---------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from April 6, 1998 to
April 21, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$1,960,266 $ 9,265
- -----------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
20%, Financial Guaranty 27%, MBIA 51% and FSA 2%.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
COLORADO RISK FACTORS. The financial condition of the State of Colorado is
affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations. Colorado has an expenditure limitation which it
breached in fiscal year 1997.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The economy of the State continues to be dependent
on services and trade, with construction reporting large gains in recent years.
These sectors tend to be cyclical. Rapid job growth has kept unemployment low.
There is no guarantee that such conditions will continue.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
Further information concerning Colorado risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. For a discussion of the Federal tax status of income earned on
Colorado IM-IT Trust Units, see "Federal Tax Status" in Prospectus Part II.
The assets of the Colorado Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Colorado ("Colorado") or counties,
municipalities, authorities or political subdivisions thereof (the "Colorado
Bonds") or by the Commonwealth of Puerto Rico (the "Puerto Rico Bonds")
(collectively, the "Bonds") the interest on which is expected to qualify as
exempt from Colorado income taxes.
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the Trust. However, although Chapman and Cutler
expresses no opinion with respect to the issuance of the Bonds, in rendering its
opinion expressed herein, it has assumed that: (i) opinions relating to the
validity thereof and to the exemption of interest thereon from Federal income
tax were rendered by bond counsel to the respective issuing authorities; (ii)
with respect to the Colorado Bonds, bond counsel to the issuing authorities
rendered opinions as to the exemption of interest from the income tax imposed by
the State of Colorado that is applicable to individuals and corporations (the
"State Income Tax") and, (iii) with respect to the Possession Bonds, bond
counsel to the issuing authorities rendered opinions as to the exemption from
all state and local income taxation of the Possession Bonds and the interest
thereon. Neither the Sponsor nor its counsel has made any review for the
Colorado Trust of the proceedings relating to the issuance of the Bonds or of
the bases for the opinions rendered in connection therewith. This opinion does
not address the taxation of persons other than full time residents of Colorado.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
Colorado law:
Because Colorado income tax law is based upon the Federal law, the Colorado
IM-IT Trust is not an association taxable as a corporation for purposes of
Colorado income taxation.
With respect to Colorado Unitholders, in view of the relationship between
Federal and Colorado tax computations described above:
Each Colorado Unitholder will be treated as owning a pro rata share of each
asset of the Colorado IM-IT Trust for Colorado income tax purposes in the
proportion that the number of Units of such Trust held by the Unitholder bears
to the total number of outstanding Units of the Colorado IM-IT Trust, and the
income of the Colorado IM-IT Trust will therefore be treated as the income of
each Colorado Unitholder under Colorado law in the proportion described and an
item of income of the Colorado IM-IT Trust will have the same character in the
hands of a Colorado Unitholder as it would have in the hands of the Trustee;
Interest on Colorado Bonds that would not be includable in income for
Colorado income tax purposes when paid directly to a Colorado Unitholder will be
exempt from Colorado income taxation when received by the Colorado IM-IT Trust
and attributed to such Colorado Unitholder and when distributed to such Colorado
Unitholder;
To the extent that interest income derived from the Colorado Trust by a
Unitholder with respect to Puerto Rico Bonds is exempt from state taxes pursuant
to 48 U.S.C. 745, such interest will not be subject to the Colorado State Income
Tax.
Any proceeds paid under an insurance policy or policies issued to the
Colorado IM-IT Trust with respect to the Bonds in the Colorado IM-IT Trust which
represent maturing interest on defaulted Bonds held by the Trustee will be
excludable from Colorado adjusted gross income if, and to the same extent as,
such interest is so excludable for federal income tax purposes if paid in he
normal course by the issuer notwithstanding that the source of payment is from
insurance proceeds provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the Bonds, rather than the insurer,
will pay debt service on the Bonds.
Each Colorado Unitholder will realize taxable gain or loss when the Colorado
IM-IT Trust disposes of a Bond (whether by sale, exchange, redemption, or
payment at maturity) or when the Colorado Unitholder redeems or sells Units at a
price that differs from original cost as adjusted for amortization of bond
discount or premium and other basis adjustments (including any basis reduction
that may be required to reflect a Colorado Unitholder's share of interest, if
any, accruing on Bonds during the interval between the Colorado Unitholder's
settlement date and the date such Bonds are delivered to the Colorado IM-IT
Trust, if later);
Tax basis reduction requirements relating to amortization of bond premium
may, under some circumstances, result in Colorado Unitholders realizing taxable
gain when their Units are sold or redeemed for an amount equal to or less than
their original cost; and
If interest on indebtedness incurred or continued by a Colorado Unitholder to
purchase Units in the Colorado IM-IT Trust is not deductible for federal income
tax purposes, it also will be non-deductible for Colorado income tax purposes.
Unitholders should be aware that all tax-exempt interest, including their
share of interest on the Bonds paid to the Colorado IM-IT Trust, is taken into
account for purposes of determining eligibility for the Colorado Property
Tax/Rent/Heat Rebate.
Chapman and Cutler has expressed no opinion with respect to taxation under
any other provision of Colorado law. Ownership of the Units may result in
collateral Colorado tax consequences to certain taxpayers. Prospective investors
should consult their tax advisors as to the applicability of any such collateral
consequences.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
<S> <C> <C>
NAME ADDRESS UNITS
-----------------
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,871
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Company, L.L.C.. 14 Wall Street, New York, New York 10005 100
-----------------
2,071
=================
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen American Capital
unit investment trusts may qualify for a reduced sales charge by signing a
nonbinding Letter of Intent with any single broker-dealer. After signing a
Letter of Intent, at the date total purchases, less redemptions, of units of any
combination of series of Van Kampen American Capital unit investment trusts by a
purchaser (including units purchased in the name of the spouse of a purchaser or
in the name of a child of such purchaser under 21 years of age) exceed $500,000,
the selling broker-dealer, bank or other will credit the unitholder with cash as
a retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen Capital
unit investment trusts must equal or exceed $100,000.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors,
Inc. and the Unitholders of Colorado Insured Municipals Income Trust,
Series 86 (included in Insured Municipals Income Trust, 230th Insured
Multi-Series):
We have audited the accompanying statement of condition and the portfolio of
Colorado Insured Municipals Income Trust, Series 86 (included in Insured
Municipals Income Trust, 230th Insured Multi-Series) as of April 23, 1998. The
statement of condition and portfolio are the responsibility of the Sponsor.
Our responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Colorado Insured Municipals
Income Trust, Series 86 (included in Insured Municipals Income Trust, 230th
Insured Multi-Series) as of April 23, 1998, in conformity with generally
accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
April 23, 1998
STATEMENT OF CONDITION
AS OF APRIL 23, 1998
INVESTMENT IN BONDS
Contracts to purchase Bonds (1)(2) $ 1,969,531
Accrued interest to the First Settlement Date (1)(2) 23,894
-----------------
Total $ 1,993,425
=================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 23,894
Interest of Unitholders--
Cost to investors 2,071,000
Less: Gross underwriting commission 101,469
-----------------
Net interest to Unitholders (1)(2) 1,969,531
-----------------
Total $ 1,993,425
=================
- ----------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
PROSPECTUS
PART I
APRIL 23, 1998
INSURED MUNICIPALS INCOME TRUST, 230TH INSURED MULTI-SERIES
COLORADO INSURED MUNICIPALS INCOME TRUST, SERIES 86
------ A Wealth of Knowledge oA Knowledge of Wealthsm ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART I
NEW YORK INSURED MUNICIPALS INCOME TRUST, SERIES 145
- --------------------------------------------------------------------------------
New York Insured Municipals Income Trust, Series 145 (the "Trust") (included
in Insured Municipals Income Trust, 230th Insured Multi-Series (the "Fund"))
consists of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is, in
the opinion of bond counsel to the issuer, exempt from all Federal income taxes
under existing law and exempt to the extent described herein from New York state
and local taxes when held by residents of New York (the "Bonds"). The objective
of the Trust is Federal and New York tax-exempt income and conservation of
capital through an investment in a diversified portfolio of tax-exempt bonds.
The Units of the Trust are rated "AAA" by Standard & Poor's. The Trust is
referred to herein as the "State Trust" or "Insured Trust".
The Trust consists of 9 issues of Bonds. None of the Bonds are general
obligations of the governmental entities issuing them or are backed by the
taxing power thereof. All of the issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: Higher Education, 3 (41%); Water and Sewer, 2
(32%); Transportation, 1 (13%); Health Care, 1 (8%) and General Purpose, 2 (6%).
The dollar weighted average maturity of the Bonds is 29 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.70% 4.75%
Estimated Long Term Return: 4.74% 4.79%
CUSIP: 64949F-30-4 64949F-31-2
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
APRIL 23, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<S> <C> <C> <C>
Initial Date of Deposit: April 23, 1998 Principal Amount of Bonds per Unit (1): $ 991.09
Principal Amount of Bonds: $ 3,045,628 Number of Units: 3,073
</TABLE>
- ----------------------------------------------------------
PUBLIC OFFERING PRICE
- ----------------------------------------------------------
Aggregate Offering Price of Bonds $ 2,922,438
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.65
- ----------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- ----------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 49.46 $ 49.46
Less Estimated Expenses (4) $ 2.44 $ 1.96
Less Estimated Insurance
Expenses $ -- $ --
Estimated Net Interest Income $ 47.02 $ 47.50
- ----------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- ----------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 1.56 on $ 1.58 on
May 25, 1998 May 25, 1998
Normal
Distribution (3) $ 3.91 $ 23.75
Record Dates 10th day of May 10 and
each month November 10
Distribution Dates 25th day of May 25 and
each month November 25
- ----------------------------------------------------------
EXPENSES
- ----------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public
Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.98 $ 0.90
----------- -----------
Total Annual Expenses per Unit $ 2.44 $ 1.96
=========== ===========
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (April 28, 1998), Unitholders will pay
accrued interest from such date to the settlement date less distributions
from the Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
<TABLE>
<CAPTION>
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
NEW YORK
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 100,000 New York, Local Government Assistance Corporation, Revenue
Refunding Bonds, Series B (MBIA Insured) 2008 @ 101
#5.00% Due 04/01/2021................................ AAA 2020 @ 100 S.F. $ 96,798
65,628 Municipal Assistance Corporation, Troy, New York,
Capital Appreciation Revenue Bonds, Series C (MBIAInsured)
#0.00% Due 07/15/2021................................ AAA 19,859
400,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series B (AMBAC Assurance Insured) 2007 @ 102
#5.125% Due 07/01/2024............................... AAA 2021 @ 100 S.F. 390,464
250,000 New York State Dormitory Authority, City University System
Revenue Bonds (FGIC Insured) 2008 @ 102
#5.00% Due 07/01/2026................................ AAA 2025 @ 100 S.F. 241,025
500,000 New York State Dormitory Authority, Revenue Bonds (University of
Rochester) Series A (MBIA Insured) 2007 @ 102
#5.125% Due 07/01/2027............................... AAA 2023 @ 100 S.F. 489,540
500,000 New York State Dormitory Authority, Mental Health
Services Facilities Improvement Revenue Bonds, Series D
(FSA Insured) 2007 @ 101
#5.125% Due 08/15/2027............................... AAA 2018 @ 100 S.F. 485,905
480,000 Buffalo, New York, Municipal Finance Authority, Water System
Revenue Bonds, Series 1998A (FGIC Insured) 2008 @ 101
#5.00% Due 07/01/2028................................ AAA 2020 @ 100 S.F. 463,747
500,000 New York City, Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Series B
(AMBAC Assurance Insured) 2007 @ 101
#5.25% Due 06/15/2029................................ AAA 2028 @ 100 S.F. 496,420
250,000 New York State Dormitory Authority, Revenue Bonds, FHA Hospital
(New York and Presbyterian) AMBAC Assurance Insured 2008 @ 101
#5.00% Due 08/01/2032................................ AAA 2028 @ 100 S.F. 238,680
- --------------- ------------
$ 3,045,628 $ 2,922,438
=============== ============
- --------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from April 21, 1998 to
April 22, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 2,906,483 $ 15,955
- -----------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
38%, Financial Guaranty 24%, MBIA 22% and FSA 16%.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
NEW YORK RISK FACTORS. The financial condition of the State of New York is
affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations. Historically, the State has been one of the
wealthiest states in the nation; however, for decades the State economy has
grown more slowly than that of the nation as a whole, gradually eroding the
State's relative economic affluence.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The economy of the State continues to be
influenced by the financial health of the City of New York, which faces greater
competition as other major cities develop financial and business capabilities.
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.
The State is party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations. On January 21, 1994, the State
entered into a settlement with Delaware with respect to State of Delaware v.
State of New York. The State made an immediate $35 million payment and agreed to
make a $33 million annual payment in each of the next five fiscal years. The
State has not settled with other parties to the litigation and will continue to
incur litigation expenses as to those claims.
All outstanding general obligation bonds of the State are rated "A" by
Standard and Poor's and "Aa2" by Moody's.
Further information concerning New York risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. For a discussion of the Federal tax status of income earned on
New York IM-IT Trust Units, see "Federal Tax Status" in Prospectus Part II.
In the opinion of 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.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,373
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 300
Advest, Inc. 90 State House Square, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Company, L.L.C. 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
-----------------
3,073
=================
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen American Capital
unit investment trusts may qualify for a reduced sales charge by signing a
nonbinding Letter of Intent with any single broker-dealer. After signing a
Letter of Intent, at the date total purchases, less redemptions, of units of any
combination of series of Van Kampen American Capital unit investment trusts by a
purchaser (including units purchased in the name of the spouse of a purchaser or
in the name of a child of such purchaser under 21 years of age) exceed $500,000,
the selling broker-dealer, bank or other will credit the unitholder with cash as
a retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen Capital
unit investment trusts must equal or exceed $100,000.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors,
Inc. and the Unitholders of New York Insured Municipals Income Trust,
Series 145 (included in Insured Municipals Income Trust, 230th Insured
Multi-Series):
We have audited the accompanying statement of condition and the portfolio of
New York Insured Municipals Income Trust, Series 145 (included in Insured
Municipals Income Trust, 230th Insured Multi-Series) as of April 23, 1998. The
statement of condition and portfolio are the responsibility of the Sponsor.
Our responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New York Insured Municipals
Income Trust, Series 145 (included in Insured Municipals Income Trust, 230th
Insured Multi-Series) as of April 23, 1998, in conformity with generally
accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
April 23, 1998
STATEMENT OF CONDITION
AS OF APRIL 23, 1998
INVESTMENT IN BONDS
Contracts to purchase Bonds (1)(2) $ 2,922,438
Accrued interest to the First Settlement Date (1)(2) 50,786
-------------
Total $ 2,973,224
=============
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 50,786
Interest of Unitholders--
Cost to investors 3,073,000
Less: Gross underwriting commission 150,562
-------------
Net interest to Unitholders (1)(2) 2,922,438
-------------
Total $ 2,973,224
=============
- ---------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
PROSPECTUS
PART I
APRIL 23, 1998
INSURED MUNICIPALS INCOME TRUST, 230TH INSURED MULTI-SERIES
NEW YORK INSURED MUNICIPALS INCOME TRUST, SERIES 145
------ A Wealth of Knowledge oA Knowledge of Wealthsm ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
<PAGE>
February 1998
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART II
INSURED MUNICIPALS INCOME TRUST, INSURED MULTI-SERIES AND
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES
- --------------------------------------------------------------------------------
THE FUND. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an investment
in a diversified portfolio of tax-exempt bonds. The Fund consists of the
underlying separate unit investment trusts set forth in Prospectus Part I. The
Bonds are interest-bearing obligations issued by or on behalf of municipalities
and other governmental authorities, the interest on which is exempt from all
Federal income taxes under existing law in the opinion of bond counsel to the
issuer. In addition, the interest income of each State Trust is, in the opinion
of bond counsel to the issuer, exempt to the extent indicated from state and
local taxes, when held by residents of the state where the issuers of the Bonds
are located. Except in specific instances as noted in Prospectus Part I, the
information contained in this Prospectus Part II shall apply to each Trust in
its entirety.
"AAA" RATING FOR THE INSURED TRUSTS. Insurance guaranteeing the payments of
principal and interest, when due, on the Bonds in each Insured Trust has been
obtained from a municipal bond insurance company. See "Insurance on the Bonds in
the Insured Trusts". Insurance relates only to the Bonds and not to the Units or
to the market value thereof. As a result of such insurance, the Units of each
Insured Trust have received a rating of "AAA" by Standard & Poor's, A Division
of the McGraw-Hill Companies ("Standard & Poor's"). Units of the Trusts are not
insured by the FDIC, are not deposits or other obligations of, or guaranteed by,
any government agency and are subject to investment risk, including possible
loss of the principal amount invested.
PUBLIC OFFERING PRICE. The Public Offering Price of Units during the initial
offering period includes the aggregate offering price of the Bonds, the
applicable sales charge, cash, if any, in the Principal Account of the Trust,
and accrued interest, if any. Sales charges for the Trusts are set forth under
"Public Offering--General." During the initial offering period, the sales charge
is reduced for sales involving at least 100 Units.
ESTIMATED CURRENT AND LONG-TERM RETURNS. The Estimated Current Returns and
Estimated Long-Term Returns to Unitholders are described on the cover of
Prospectus Part I. See "Estimated Current and Long-Term Returns."
DISTRIBUTION OPTIONS. Unitholders may elect to receive distributions on a
monthly or semi-annual basis. See "Rights of Unitholders--Distributions of
Interest and Principal". Those indicating no choice will be deemed to have
chosen the monthly distribution plan.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends to,
and certain of the other Underwriters may, maintain a secondary market for the
Units. If a secondary market is not available, a Unitholder will always be able
to redeem his Units through the Trustee on any business day. See "Rights of
Unitholders--Redemption of Units" and "Public Offering--Market for Units".
REINVESTMENT OPTION. Unitholders may reinvest their distributions into Van
Kampen American Capital or Morgan Stanley mutual funds. See "Rights of
Unitholders--Reinvestment Option". Unitholders may also have the option of
exchanging their investment for units of other Van Kampen American Capital unit
investment trusts at a reduced sales charge. Unitholders may obtain a prospectus
for such trusts from the Sponsor.
RISK FACTORS. An investment in Units should be made with an understanding of
certain risks, including, among other factors, the inability of the issuer or an
insurer, if any, to pay the principal of or interest on a bond when due,
volatile interest rates, early call provisions, and changes to the tax status of
the Bonds. See "The Trusts--Risk Factors".
THIS PROSPECTUS PART II MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART I.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
An Information Supplement has been filed with the Securities and Exchange
Commission ("SEC") and can be obtained without charge by calling (800) 856-8487
or is available along with other related materials at the SEC's Internet site
(http://www.sec.gov). This Prospectus incorporates by reference the entire
Information Supplement.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE TRUSTS
- --------------------------------------------------------------------------------
THE FUND. This series of the Insured Municipals Income Trust or the
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust (the
"Fund"), consists of the underlying separate unit investment trusts described in
Prospectus Part I. The Fund was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement (the "Trust Agreement"), dated the
date of Prospectus Part I (the "Date of Deposit") among Van Kampen American
Capital Distributors, Inc., as Sponsor, American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee.
The Fund consists of separate portfolios of interest-bearing
obligations issued by or on behalf of states and territories of the United
States, and political subdivisions and authorities thereof, the interest on
which is, in the opinion of recognized bond counsel to the issuing authorities,
excludable from gross income for Federal income tax purposes under existing law.
All issuers of Bonds in a State Trust are located in the state for which the
Trust is named or in United States territories or possessions and their public
authorities; consequently, in the opinion of recognized bond counsel to the Bond
issuers, the interest earned on the Bonds is exempt to the extent indicated in
Prospectus Part I from state and local taxes. Further, in the opinion of bond
counsel to the respective issuers, the interest income of each Bond in a U.S.
Territorial IM-IT Trust is exempt from state, Commonwealth of Puerto Rico and
local income taxation. With the exception of New York and Pennsylvania Trusts,
Units of a State Trust may be purchased only by residents of the state for which
the Trust is named. Units of a New York Trust may be purchased by residents of
New York, Connecticut and Florida. Units of a Pennsylvania Trust may be
purchased by residents of Pennsylvania, Connecticut, Florida, Maryland, New
York, Ohio and West Virginia. State Trusts, other than State Intermediate
Laddered Maturity Trusts or State Intermediate Trusts, are referred to herein as
"Long-Term State Trusts".
On the Date of Deposit, the Sponsor deposited with the Trustee the
aggregate principal amount of Bonds indicated in the "Summary of Essential
Financial Information" in Prospectus Part I. The Bonds initially consist of
delivery statements relating to contracts for their purchase and cash, cash
equivalents and/or irrevocable letters of credit issued by a financial
institution. Thereafter, the Trustee, in exchange for the Bonds, delivered to
the Sponsor evidence of ownership of the number of Units indicated under
"Summary of Essential Financial Information" in Prospectus Part I.
The portfolio of any IM-IT, IM-IT Discount, U.S. Territorial IM-IT,
Long-Term State or National Quality Trust consists of Bonds maturing
approximately 15 to 40 years from the Date of Deposit. The approximate range of
maturities from the Date of Deposit for Bonds in any IM-IT Limited Maturity
Trust, IM-IT Intermediate Trust, State Intermediate Laddered Maturity Trust and
IM-IT Short Intermediate Trust is 12 to 15 years, 5 to 15 years, 5 to 10 years
and 3 to 7 years, respectively. The portfolio of any State Intermediate Laddered
Maturity Trust is structured so that approximately 20% of the Bonds will mature
each year, beginning in approximately the fifth year of the Trust, entitling
each Unitholder to a return of principal. This return of principal may offer
Unitholders the opportunity to respond to changing economic conditions and to
specific financial needs that may arise between the fifth and tenth years of the
Trust. However, the flexibility provided by the return of principal may also
eliminate a Unitholder's ability to reinvest at a rate as high as the yield on
the Bonds which matured.
Each Unit initially offered represents a fractional undivided interest
in the principal and net income of a Trust. To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in a Trust
represented by each Unit will increase, although the actual interest in the
Trust will remain unchanged. Units will remain outstanding until redeemed by
Unitholders or until the termination of the Trust Agreement.
OBJECTIVES AND BOND SELECTION. The objectives of the Fund are income
exempt from Federal income taxation and, in the case of a State Trust, Federal
and state income taxation and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. A State
Intermediate Laddered Maturity Trust has additional objectives of providing
protection against changes in interest rates and investment flexibility through
an investment in a laddered portfolio of intermediate-term interest-bearing
obligations with maturities ranging from approximately 5 to 10 years in which
roughly 20% of the Bonds mature each year beginning in approximately the fifth
year of the Trust. There is, of course, no guarantee that the Trusts will
achieve their objectives. The Fund may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed income
bonds with greater diversification than they might be able to acquire
individually. Insurance guaranteeing the timely payment, when due, of all
principal and interest on the Bonds in each Insured Trust has been obtained from
a municipal bond insurance company. For information relating to insurance on the
Bonds, see "Insurance on the Bonds in the Insured Trusts". In addition, these
bonds are often not available in small amounts.
<PAGE>
In selecting Bonds for the Trusts, the Sponsor considered the following
factors, among others: (a) either the Standard & Poor's rating of the Bonds was
not less than "BBB-" for Insured Trusts and "A-" for Quality Trusts, or the
Moody's Investors Service, Inc. ("Moody's") rating of the Bonds was not less
than "Baa" for Insured Trusts and "A" for the Quality Trusts, including
provisional or conditional ratings, respectively, (or, if not rated, the Bonds
had credit characteristics sufficiently similar to the credit characteristics of
interest-bearing tax-exempt bonds that were so rated as to be acceptable for
acquisition by the Fund in the opinion of the Sponsor), (b) the prices of the
Bonds relative to other bonds of comparable quality and maturity, (c) the
diversification of Bonds as to purpose of issue and location of issuer and (d)
with respect to the Insured Trusts, the availability and cost of insurance.
After the Date of Deposit, a Bond may cease to be rated or its rating may be
reduced below the minimum required as of the Date of Deposit. Neither event
requires elimination of a Bond from a Trust but may be considered in the
Sponsor's determination as to whether or not to direct the Trustee to dispose of
the Bond (see "Fund Administration--Portfolio Administration").
RISK FACTORS. The Trusts include certain types of bonds as described on
the cover of Prospectus Part I. An investment in Units should be made with an
understanding of the characteristics of and risks associated with such bonds.
The following is a brief summary of certain of these risks. Additional
information is included in Prospectus Part I and in the Information Supplement.
See "Additional Information". Neither the Sponsor nor the Trustee are liable for
any default, failure or defect in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental
entity that are backed by the taxing power of the entity. All other Bonds are
revenue bonds payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds, both within a particular classification and between
classifications, depending on numerous factors.
Mortgage loan obligations may be FHA insured or may be single family
mortgage revenue bonds issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income. Mortgage
loans are generally partially or completely prepaid prior to their final
maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. A substantial portion of these bonds
will probably be redeemed prior to their scheduled maturities or even prior to
their ordinary call dates. Additionally, unusually high rates of default on the
underlying mortgage loans may reduce revenues available for the payment of
principal of or interest on mortgage revenue bonds.
Health care revenue bonds have ratings issued for health care
facilities that are often based on feasibility studies that contain projections
of occupancy levels, revenues and expenses. A facility's gross receipts and net
income available for debt service may be affected by future events and
conditions including, among other things, demand for services and the ability of
the facility to provide the services required, competition with other health
care facilities, efforts by insurers and governmental agencies to limit rates
and legislation establishing state rate-setting agencies.
Public utility bond issuers sell wholesale and retail electric power
and gas. General problems of these issuers include difficulty in financing large
construction programs in an inflationary period, costs and delays attributable
to environmental considerations, the difficulty of the capital market in
absorbing utility debt, difficulty in obtaining fuel at reasonable prices, the
effect of energy conservation and government regulations.
Water and/or sewerage revenue bonds are generally payable from user
fees. The problems of these issuers include the ability to obtain rate
increases, population decline resulting in decreased user fees, financing,
environmental considerations, discovering fresh water and the impact of
"no-growth" zoning ordinances.
Industrial revenue bonds ("IRBs") have generally been issued under bond
resolutions under which the revenues and receipts payable have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure, payment
of IRBs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor which may be affected by such things as
cyclicality of revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents, extensive competition and financial
deterioration resulting from a corporate restructuring.
Lease bonds are secured by lease payments of a governmental entity and
are often in the form of certificates of participation. Although the lease bonds
do not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease bond is ordinarily backed by the
municipality's covenant to appropriate for and make the payments due under the
lease bond. However, certain lease bonds contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease payments in
future years unless money is appropriated for such purpose on a yearly basis. A
governmental entity that enters into such a lease agreement cannot obligate
future governments to appropriate for and make lease payments but covenants to
take such action as is necessary to include any lease payments due in its
budgets and to make the appropriations therefor. A governmental entity's failure
to appropriate for and to make payments under its lease bond could result in
insufficient funds available for payment of the bonds secured thereby. Although
"non-appropriation" lease bonds are secured by the leased property, disposition
of the property in the event of foreclosure might prove difficult.
<PAGE>
Education bond issuers govern the operation of schools, colleges and
universities and revenues are derived mainly from ad valorem taxes or from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the financing of public education, a
declining percentage of the population consisting of "college" age individuals,
inability to raise tuitions and fees sufficiently and government legislation or
regulations which may adversely affect the revenues or costs of the issuers.
Transportation bonds are payable from revenues derived from the
ownership and operation of facilities such as airports, bridges, turnpikes, port
authorities, convention centers and arenas. Airport operating income may be
affected by the ability of the airlines to meet their obligations under use
agreements. Payment on bonds related to other facilities may be adversely
affected by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative modes of
transportation, scarcity of fuel and reduction or loss of rents.
Certain Bonds are payable from revenues derived from the operation of
resource recovery facilities which are designed to process solid waste, generate
steam and convert steam to electricity. Resource recovery bonds may be subject
to extraordinary optional redemption at par upon the occurrence of circumstances
such as destruction or condemnation of a project, void or unenforceable
contracts, changes in the economic availability of raw materials, and operating
supplies or facilities, or other unavoidable changes adversely affecting the
operation of a project.
Certain Bonds may have been acquired at a market discount from par
value at maturity. The interest rates on these bonds are lower than current
market interest rates for newly issued bonds of comparable rating and type.
Generally, if interest rates for newly issued comparable bonds increase, the
market discount of previously issued bonds will increase, and if interest rates
for newly issued comparable bonds decline, the market discount of previously
issued bonds will decrease. The value of bonds purchased at a market discount
will generally increase in value faster than bonds purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase, the value of
bonds purchased at a market discount will generally decrease faster than bonds
purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium bonds and the prepayment benefit for
lower yielding, discount bonds will be reduced. A bond purchased at a market
discount and held to maturity will have a larger portion of its total return in
the form of taxable income and capital gain and less in the form of tax-exempt
interest income than a comparable bond newly issued at current market rates. See
"Federal Tax Status." Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue.
Certain Bonds may be "original issue discount" bonds which were issued
with interest rates less than rates offered by comparable bonds and were
originally sold at a discount from their par value. These bonds may include
"zero coupon" bonds which are described below. In a stable interest rate
envronment, the market value of an original issue discount bond would tend to
increase more slowly in the early years and in greater increments as the bond
approached maturity. These bonds may be subject to redemption at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus some premium, if applicable. Under these call provisions, these
bonds may be called prior to maturity at a price less than par value. See
"Federal Tax Status" for a discussion of the tax consequenses of owning these
bonds.
Certain Bonds may be "zero coupon" bonds. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning these bonds is that a fixed
yield is earned not only on the original investment but also, in effect, on all
discount earned during the life of the bond. This implicit reinvestment of
earnings at the same rate eliminates the risk of being unable to reinvest income
at a rate as high as the implicit yield on the discount bond, but at the same
time eliminates the ability to reinvest at higher rates in the future. For this
reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are bonds of
comparable quality which pay interest.
Certain Bonds may have been purchased on a "when, as and if issued" or
"delayed delivery" basis. The delivery of these Bonds may be delayed or may not
occur. Interest on these Bonds begins accruing to the benefit of Unitholders on
their respective dates of delivery. To the extent any Bonds are actually
delivered to a Trust after the expected dates of delivery, Unitholders who
purchase their Units prior to the actual delivery date would be required to
adjust their tax basis in their Units for a portion of the interest accruing on
those Bonds during the interval between their purchase of Units and the actual
delivery of the Bonds. As a result of any adjustment, the Estimated Current
Return during the first year would be slightly lower than stated herein.
Unitholders will be "at risk" with respect to all Bonds (i.e., may derive either
gain or loss from fluctuations in the value of the Bonds) from the date they
order Units.
<PAGE>
Certain Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by which
a debt obligation is redeemed, at or before maturity, by the proceeds of a new
debt obligation. In general, call provisions are more likely to be exercised
when the bond price is at a premium over par than when it is at a discount from
par. The exercise of redemption or call provisions generally will result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions; it may also affect the current return on
Units. See "Portfolio" in Prospectus Part I for a list of the sinking fund and
call provisions, if any, with respect to the Bonds. The Sponsor is unable to
predict all of the circumstances which may result in redemption of a Bond.
To the best knowledge of the Sponsor, there is no litigation pending as
of the Date of Deposit in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trusts. At any time after
the Date of Deposit, litigation may be initiated on a variety of grounds with
respect to the Bonds. Such litigation may affect the validity of the Bonds or
the tax-free nature of interest payments. While the outcome of litigation can
never be predicted, the Fund has received or will receive opinions of bond
counsel to the issuers of each Bond on the date of issuance to the effect that
the Bonds have been validly issued and interest payments are exempt from Federal
income tax. In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to meet obligations undertaken
with respect to the Bonds.
Like other investment companies, financial and business organizations
and individuals around the world, the Trusts could be adversely affected if the
computer systems used by the Sponsor, Evaluator or Trustee or other service
providers to the Trusts do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." While the Sponsor, Evaluator and Trustee are taking
steps that they believe are reasonably designed to address the Year 2000
Problem, there can be no assurance that these steps will be sufficient to avoid
any adverse impact to the Trusts. The Year 2000 Problem may impact certain
issuers of the Bonds to varying degrees, however, the Sponsor is unable to
predict what impact, if any, the Year 2000 Problem will have on any issuer.
ESTIMATED CURRENT AND LONG-TERM RETURNS
- --------------------------------------------------------------------------------
The Estimated Current Returns and the Estimated Long-Term Returns as of
the Date of Deposit are set forth on the cover of the Prospectus Part I.
Estimated Current Return is calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net annual
interest income per Unit will vary with changes in fees and expenses of the
Trust and with the principal prepayment, redemption, maturity, exchange or sale
of Bonds. The Public Offering Price will vary with changes in the price of the
Bonds. Accordingly, there is no assurance that the present Estimated Current
Return will be realized in the future. Estimated Long-Term Return is calculated
using a formula which (1) takes into consideration, and determines and factors
in the relative weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of the Bonds and (2) takes into account the expenses and
sales charge associated with Units. Since the value and estimated retirements of
the Bonds and the expenses of a Trust will change, there is no assurance that
the present Estimated Long-Term Return will be realized in the future. The
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of Estimated Long-Term Return reflects the estimated
date and amount of principal returned while the Estimated Current Return
calculation includes only net annual interest income and Public Offering Price.
In order to acquire certain Bonds, it may be necessary for the Sponsor
or Trustee to pay amounts covering accrued interest on the Bonds which exceed
the amounts which will be made available through cash furnished by the Sponsor
on the Date of Deposit. This cash may exceed the interest which would accrue to
the First Settlement Date. The Trustee has agreed to pay for any amounts
necessary to cover any excess and will be reimbursed when funds become available
from interest payments on the related Bonds. Also, since interest on any "when,
as and if issued" Bonds does not begin accruing as tax-exempt interest income to
the benefit of Unitholders until the date of delivery, the Trustee may reduce
its fee and pay Trust expenses in order to maintain or approach the same
estimated net annual interest income during the first year of the Trust's
operations as described under "Summary of Essential Financial Information" in
Prospectus Part I.
<PAGE>
PUBLIC OFFERING
- --------------------------------------------------------------------------------
GENERAL. Units are offered at the Public Offering Price. During the
initial offering period the Public Offering Price is based on the aggregate
offering price of the Bonds, the sales charge described below, cash, if any, in
the Principal Account and accrued interest, if any. After the initial public
offering period, the secondary market public offering price is based on the bid
prices of the Bonds, the sales charge described below, cash, if any, in the
Principal Account and accrued interest, if any. The minimum purchase in the
primary and secondary market is one Unit.
The initial offering period sales charges are as follows:
<TABLE>
<CAPTION>
INITIAL OFFERING PERIOD SALES CHARGE
AS PERCENT OF
--------------------------------------
PUBLIC OFFERING OFFERING PRICE
TRUST PRICE OF BONDS
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
IM-IT, U.S. Territorial IM-IT, Long-Term State and National
Quality Trusts 4.900% 5.152%
IM-IT Limited Maturity Trusts 4.300 4.493
IM-IT Discount Trusts 4.000 4.167
IM-IT Intermediate Trusts 3.900 4.058
State Intermediate Laddered Maturity Trusts 3.000 3.093
IM-IT Short Intermediate Trusts 2.000 2.041
</TABLE>
The sales charge applicable to quantity purchases during the initial
offering period is reduced as follows:
<TABLE>
<CAPTION>
SALES CHARGE REDUCTION PER UNIT
-----------------------------------------------------------------------------------
IM-IT, U.S.
TERRITORIAL IM-IT,
LONG-TERM STATE
AGGREGATE NUMBER OF AND NATIONAL IM-IT SHORT IM-IT
UNITS PURCHASED* QUALITY TRUSTS INTERMEDIATE TRUST DISCOUNT TRUST OTHER TRUSTS
- ----------------------------- -------------------- -------------------- ---------------- -------------
<S> <C> <C> <C> <C>
100-249 Units $ 4.00 $ 2.00 $ 2.00 $ 4.00
250-499 Units $ 6.00 $ 3.00 $ 4.00 $ 6.00
500-999 Units $ 14.00 $ 4.00 $ 6.00 $ 9.00
1,000 or more Units $ 19.00 $ 6.00 $ 8.00 $ 11.00
- -----------------------------
</TABLE>
* The breakpoint sales charges are also applied on a dollar basis
utilizing a breakpoint equivalent in the above table of $1,000 per Unit and will
be applied on whichever basis is more favorable to the investor. The breakpoints
will be adjusted to take into consideration purchase orders stated in dollars
which cannot be completely fulfilled due to the Trusts' requirement that only
whole Units be issued.
The secondary market sales charge is computed as described in the
following table based upon the estimated long-term return life of a Trust's
portfolio:
<TABLE>
<CAPTION>
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
1 1.010% 8 3.627% 15 5.042%
2 1.523 9 4.167 16 5.152
3 2.041 10 4.384 17 5.263
4 2.302 11 4.603 18 5.374
5 2.564 12 4.712 19 5.485
6 2.828 13 4.822 20 5.597
7 3.093 14 4.932 21 to 30 5.708
</TABLE>
<PAGE>
For purposes of computation of the estimated long-term return life,
Bonds will be deemed to mature on their expressed maturity dates unless: (a) the
Bonds have been called for redemption or are subject to redemption at an earlier
call date, in which case this call date will be deemed to be the maturity date;
or (b) the Bonds are subject to a "mandatory tender", in which case the
mandatory tender will be deemed to be the maturity date. The sales charges in
the above table are expressed as a percentage of the aggregate bid prices of the
Bonds. Expressed as a percent of the Public Offering Price, the sales charge on
a Trust consisting entirely of Bonds with 15 years to maturity would be 4.80%.
The sales charges in the table above do not apply to IM-IT Discount Trusts. The
applicable secondary market sales charges for an IM-IT Discount Trust are set
forth in the applicable Prospectus Part I.
Any reduced sales charge is the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for quantity purchases. The reduced sales charge
structure in the initial offering period sales charge table above will apply on
all purchases by the same person from any one Underwriter or dealer of units of
Van Kampen American Capital-sponsored unit investment trusts which are being
offered in the initial offering period (a) on any one day (the "Initial Purchase
Date") or (b) on any day subsequent to the Initial Purchase Date, if (1) the
units purchased are of a unit investment trust purchased on the Initial Purchase
Date, and (2) the person purchasing the units purchased a sufficient amount of
units on the Initial Purchase Date to qualify for a reduced sales charge on such
date. In the event units of more than one trust are purchased on the Initial
Purchase Date, the aggregate dollar amount of such purchases will be used to
determine whether purchasers are eligible for a reduced sales charge. Such
aggregate dollar amount will be divided by the public offering price per unit
(on the day preceding the date of purchase) of each respective trust purchased
to determine the total number of units which such amount could have purchased of
each individual trust. Purchasers must then consult the applicable trust's
prospectus to determine whether the total number of units which could have been
purchased of a specific trust would have qualified for a reduced sales charge
and, if so qualified, the amount of such reduction. Assuming a purchaser
qualifies for a sales charge reduction or reductions, to determine the
applicable sales charge reduction or reductions it is necessary to accumulate
all purchases made on the Initial Purchase Date and all purchases made in
accordance with (b) above. Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser ("immediate family
members") will be deemed for the purposes of calculating the applicable sales
charge to be additional purchases by the purchaser. The reduced sales charges
will also be applicable to a trustee or other fiduciary purchasing Units for one
or more trust, estate or fiduciary accounts.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons (collectively referred to herein as "related
purchasers")) of Van Kampen American Capital Distributors, Inc. and its
affiliates and Underwriters and their affiliates may purchase Units at the
Public Offering Price less the applicable underwriting commission or less the
applicable dealer concession in the absence of an underwriting commission.
Employees, officers and directors (including related purchasers) of dealers and
their affiliates and vendors providing services to the Sponsor may purchase
Units at the Public Offering Price less the applicable dealer concession.
Purchasers of units of any two consecutive series of a Trust may
aggregate purchases of units of such series for purposes of the sales charge
reduction for quantity purchases, provided that at the time of the initial
purchase of units such purchaser submitted a purchase order for at least 100
units that was partially unfulfilled due to a lack of units of such Trust series
available for sale at such time. The sales charge reduction shall be applied to
the subsequent purchase of units such that the aggregate sales charge reduction
applicable to both purchases will equal the amount described in the initial
offering period sales charge table above.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge reduction
for quantity purchases) less the concession the Sponsor typically allows to
brokers and dealers for purchases by (1) investors who purchase Units through
registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management services, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed, (2) bank trust departments
investing funds over which they exercise exclusive discretionary investment
authority and that are held in a fiduciary, agency, custodial or similar
capacity, (3) any person who for at least 90 days, has been an officer, director
or bona fide employee of any firm offering Units for sale to investors or their
immediate family members (as described above) and (4) officers and directors of
bank holding companies that make Units available directly or through
subsidiaries or bank affiliates. Notwithstanding anything to the contrary in
this Prospectus, such investors, bank trust departments, firm employees and bank
holding company officers and directors who purchase Units through this program
will not receive sales charge reductions for quantity purchases.
<PAGE>
OFFERING PRICE. The Public Offering Price of Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Prospectus
Part I in accordance with fluctuations in the prices of the Bonds. The price of
Units on the Date of Deposit was determined by adding the applicable sales
charge to the aggregate offering price of the Bonds and dividing the sum by the
number of Units outstanding. This price determination was made on the basis of
an evaluation of the Bonds prepared by Interactive Data Corporation, a firm
regularly engaged in the business of evaluating, quoting or appraising
comparable securities. During the initial offering period, the Evaluator will
value the Bonds as of the Evaluation Time on days the New York Stock Exchange is
open for business and will adjust the Public Offering Price of Units
accordingly. This Public Offering Price will be effective for all orders
received at or prior to the Evaluation Time on each such day. The "Evaluation
Time" is the close of trading on the New York Stock Exchange on each day that
the Exchange is open for trading. Orders received by the Trustee, Sponsor or any
Underwriter for purchases, sales or redemptions after that time, or on a day
when the New York Stock Exchange is closed, will be held until the next
determination of price. The secondary market Public Offering Price per Unit will
be equal to the aggregate bid price of the Bonds plus the applicable secondary
market sales charge and dividing the sum by the number of Units outstanding. For
secondary market purposes, this computation will be made by the Evaluator as of
the Evaluation Time for each day on which any Unit is tendered for redemption
and as necessary. The offering price of Bonds may be expected to average
approximately 0.5%-1% more than the bid price.
The aggregate price of the Bonds is determined on the basis of bid
prices or offering prices, as is appropriate, (a) on the basis of current market
prices obtained from dealers or brokers who customarily deal in bonds comparable
to those held by the Fund; (b) if these prices are not available, on the basis
of current market prices for comparable bonds; (c) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (d) by any combination of the above. Market
prices of the Bonds will generally fluctuate with changes in market interest
rates. Unless Bonds are in default in payment of principal or interest or in
significant risk of default, the Evaluator will not attribute any value to the
insurance obtained by an Insured Trust, if any.
The Evaluator will consider in its evaluation of Bonds which are in
default in payment of principal or interest or, in the Sponsor's opinion, in
significant risk of default (the "Defaulted Bonds") the value of any insurance
guaranteeing interest and principal payments. The value of the insurance will be
equal to the difference between (i) the market value of Defaulted Bonds assuming
the exercise of the right to obtain Permanent Insurance (less the insurance
premiums and related expenses attributable to the purchase of Permanent
Insurance) and (ii) the market value of Defaulted Bonds not covered by Permanent
Insurance. In addition, the Evaluator will consider the ability of a Portfolio
Insurer to meet its commitments under any insurance policy, including
commitments to issue Permanent Insurance. No value has been ascribed to
insurance obtained by an Insured Trust, if any, as of the date of this
Prospectus.
A person will become the owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the Sponsor
prior to the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor, subject to
the limitations of the Securities Exchange Act of 1934.
ACCRUED INTEREST. Accrued interest is an accumulation of unpaid
interest on securities which generally is paid semi-annually, although each
Trust accrues interest daily. Because of this, a Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling after the First Settlement Date, the proportionate
share of accrued interest to the settlement date is added to the Public Offering
Price of Units. Unitholders will receive the amount of accrued interest paid on
their Units on the next distribution date. In an effort to reduce the accrued
interest which would have to be paid by Unitholders, the Trustee will advance
the amount of accrued interest to the Sponsor as the Unitholder of record as of
the First Settlement Date. Consequently, the accrued interest added to the
Public Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account after the First Settlement Date. Because of the varying
interest payment dates of the Bonds, accrued interest at any point in time will
be greater than the amount of interest actually received by a Trust and
distributed to Unitholders. If a Unitholder sells or redeems all or a portion of
his Units, he will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his Units.
UNIT DISTRIBUTION. Units will be distributed to the public by
Underwriters, broker-dealers and others at the Public Offering Price, plus
accrued interest. The Sponsor intends to qualify Units for sale in a number of
states. Broker-dealers or others will be allowed a concession or agency
commission in connection with the distribution of Units during the initial
offering period for any single transaction as described in the following table,
provided that the Units are acquired from the Sponsor.
<PAGE>
<TABLE>
<CAPTION>
IM-IT, U.S.
TERRITORIAL
IM-IT, LONG- IM-IT STATE
IM-IT TERM STATE AND IM-IT SHORT IM-IT LIMITED INTERMEDIATE
DISCOUNT NATIONAL INTERMEDIATE INTERMEDIATE MATURITY LADDERED
TRUST QUALITY TRUSTS TRUST TRUST TRUST MATURITY TRUST
----------- -------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units $ 18.00 $ 30.00 $ 10.00 $ 25.00 $ 27.00 $ 20.00
100 - 249 Units $ 19.00 $ 32.00 $ 11.00 $ 28.00 $ 30.00 $ 21.00
250 - 499 Units $ 20.00 $ 34.00 $ 11.00 $ 27.00 $ 30.00 $ 21.00
500 - 999 Units $ 20.00 $ 35.00 $ 12.00 $ 30.00 $ 32.00 $ 23.00
1,000 - 1,499 Units $ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
1,500 or more Units $ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
</TABLE>
The increased concession or agency commission is a result of the
discount given to purchasers for quantity purchases. See "Public
Offering--General". In addition to the concessions and agency commissions
described in the table, volume concessions or agency commissions of an
additional $5.00 per Unit of an IM-IT, a U.S. Territorial IM-IT, a Long-Term
State or a National Quality Trust and $2.00 per Unit of all other Trusts will be
given to any broker/dealer or agent (other than Underwriters) who purchases from
the Sponsor at least 250 Units of such Trust during the initial offering period.
These additional concessions will be allowed at the time of purchase, provided,
however, the additional concession applicable to initial purchases totaling less
than 250 Units will be paid retroactively at the end of the initial offering
period. The breakpoint concessions or agency commissions are also applied on a
dollar basis utilizing a breakpoint equivalent of $1,000 per Unit and will be
applied on whichever basis is more favorable to the distributor. The breakpoints
will be adjusted to take into consideration purchase orders stated in dollars
which cannot be completely fulfilled due to the requirement that only whole
Units be issued. Certain commercial banks may be making Units available to their
customers on an agency basis. A portion of the sales charge paid by these
customers (equal to the agency commission referred to above) is retained by or
remitted to the banks. Any discount provided to investors will be borne by the
selling dealer or agent. For secondary market transactions, the concession or
agency commission will amount to 70% of the applicable sales charge. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units and to change the amount of the concession or agency commission to dealers
and others from time to time.
SPONSOR AND UNDERWRITER COMPENSATION. The Underwriters will receive a
gross sales commission equal to the sales charge applicable to the transaction
involved. "Public Offering--General". The Sponsor will receive from the
Underwriters the excess of this gross sales commission over the amounts set
forth in the following table, as of the Date of Deposit. For a list of the
Underwriters that have purchased Units from the Sponsor, see "Underwriting" in
Prospectus Part I.
<TABLE>
<CAPTION>
IM-IT, U.S.
TERRITORIAL
IM-IT, LONG- IM-IT STATE
IM-IT TERM STATE AND IM-IT SHORT IM-IT LIMITED INTERMEDIATE
DISCOUNT NATIONAL INTERMEDIATE INTERMEDIATE MATURITY LADDERED
TRUST QUALITY TRUSTS TRUST TRUST TRUST MATURITY TRUST
----------- -------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units $ 20.00 $ 35.00 $ 12.00 $ 27.00 $ 29.00 $ 22.00
100 - 249 Units $ 21.00 $ 37.00 $ 13.00 $ 30.00 $ 32.00 $ 23.00
250 - 499 Units $ 22.00 $ 39.00 $ 13.50 $ 29.50 $ 32.00 $ 23.00
500 - 999 Units $ 22.00 $ 40.00 $ 14.00 $ 32.50 $ 34.50 $ 25.00
1,000 - 1,499 Units $ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
1,500 or more Units $ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
</TABLE>
A. G. Edwards & Sons, Inc. which acts as a Managing Underwriter of
Units of the various series of the IM-IT or National Quality Trust, will receive
from the Sponsor reimbursement for certain costs and further compensation in the
amount of $5.00 for each Unit of the IM-IT or National Quality Trust it
underwrites. In addition, the Sponsor will receive from the Managing
Underwriters of any National Quality, (who underwrite 15% of the Trust involved
or 1,000 Units of such Trust, whichever is greater) the excess of such gross
sales commission over $38.00 per Unit of any such Trust, as of the Date of
Deposit. Also, any such Managing Underwriter that sells a total of 25% or 1,500
Units, whichever is greater, of any individual series of such Trusts will
receive an additional $2.00 per each such Unit. In connection with quantity
sales to purchasers of any Pennsylvania IM-IT Trust the Underwriters will
receive from the Sponsor commissions totalling $35.00 per Unit for any single
transaction of 100 to 249 Units, $36.00 per Unit for any single transaction of
250 to 499 units, $37.00 per Unit for any single transaction of 500 to 999 Units
and $38.00 per Unit for any single transaction of 1,000 or more Units. In
addition, any Underwriter that sells a total of 25% or 1,500 Units, whichever is
greater, of any Pennsylvania IM-IT Trust will receive an additional $2.00 per
each such Unit. In addition, the Sponsor has entered into agreements with
Advest, Inc. ("Advest") and Gruntal & Co., Inc. ("Gruntal") whereby Advest and
Gruntal will receive an additional $2.00 per Unit in connection with a minimum
commitment of 1,500 Units of any New York IM-IT Trust. In addition, the Sponsor
and J. J. B. Hilliard, W. L. Lyons, Inc. ("Hilliard, Lyons") have entered into
an agreement under which Hilliard, Lyons may receive an additional $2.00 for
each Unit of the Kentucky Quality Trust which it underwrites, provided it
underwrites a minimum of 400 Units of such Trust. Further, each Underwriter who
underwrites 1,000 or more Units in any Trust will receive additional
compensation from the Sponsor of $1.00 for each Unit it underwrites. The
breakpoints listed herein will also be applied on a dollar basis utilizing a
breakpoint equivalent of $1,000 per Unit and will be applied on whichever basis
is more favorable to the Underwriter.
<PAGE>
In addition, the Sponsor and certain Underwriters will realize a profit
or loss, as a result of the difference between the price paid for the Bonds by
the Sponsor and the cost of the Bonds to a Trust. See "Portfolio" and "Notes to
Portfolio" in Prospectus Part I. Underwriters may also realize profits or losses
with respect to Bonds which were acquired by the Sponsor from underwriting
syndicates of which they were members. The Sponsor has not participated as sole
underwriter or as manager or as a member of the underwriting syndicates from
which the Bonds in the Trusts were acquired. Underwriters may further realize
profit or loss during the initial offering period as a result of possible
fluctuations in the market value of the Bonds since all proceeds received from
purchasers of Units (excluding dealer concessions or agency commissions allowed,
if any) will be retained by the Underwriters. Affiliates of an Underwriter are
entitled to the same dealer concessions or agency commissions that are available
to the Underwriter. In addition to any other benefits Underwriters may realize
from the sale of Units, the Sponsor will share on a pro rata basis among senior
Underwriters (those who underwrite at least 250 Units) 50% of any gain (less
deductions for accrued interest and certain costs) represented by the difference
between the cost of the Bonds to the Sponsor and the evaluation of the Bonds on
the Date of Deposit. The Sponsor and certain of the other Underwriters will also
realize profits or losses in the amount of any difference between the price at
which Units are purchased and the price at which Units are resold in connection
with maintaining a secondary market for Units and will also realize profits or
losses resulting from a redemption of repurchased Units at a price above or
below the purchase price.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor during
a specified time period. In addition, at various times the Sponsor may implement
other programs under which the sales forces of such firms may be eligible to win
other nominal awards for certain sales efforts, or under which the Sponsor will
reallow to any such firms that sponsor sales contests or recognition programs
conforming to criteria established by the Sponsor, or participate in sales
programs sponsored by the Sponsor, an amount not exceeding the total applicable
sales charges on the sales generated by such persons at the public offering
price during such programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor pay fees to
qualifying firms for certain services or activities which are primarily intended
to result in sales of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts. These programs
will not change the price Unitholders pay for their Units or the amount that the
Trusts will receive from the Units sold. Approximately every eighteen months the
Sponsor holds a business seminar which is open to Underwriters that sell units
of trusts it sponsors. The Sponsor pays substantially all costs associated with
the seminar, excluding Underwriter travel costs. Each Underwriter is invited to
send a certain number of representatives based on the gross number of units such
firm underwrites during a designated time period.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends
to, and certain of the other Underwriters may, maintain a market for Units and
offer to purchase Units at prices, subject to change at any time, based upon the
aggregate bid prices of the Bonds plus accrued interest and any principal cash
on hand, less any amounts representing taxes or other governmental charges
payable out of the Trust and less any accrued Trust expenses. If the supply of
Units exceeds demand or if some other business reason warrants it, the Sponsor
and/or the Underwriters may either discontinue all purchases of Units or
discontinue purchases of Units at these prices. If a market is not maintained
and the Unitholder cannot find another purchaser, a Unitholder will be able to
dispose of Units by tendering them to the Trustee for redemption at the
Redemption Price. See "Rights of Unitholders--Redemption of Units". A Unitholder
who wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in any price in excess of
the Redemption Price and, if so, the amount thereof. The Trustee will notify the
Sponsor of any tender of Units for redemption. If the Sponsor's bid in the
secondary market at that time equals or exceeds the Redemption Price per Unit,
it may purchase the Units not later than the day on which the Units would
otherwise have been redeemed by the Trustee.
<PAGE>
RIGHTS OF UNITHOLDERS
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DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by a Trust,
pro rated on an annual basis, will be distributed monthly unless a Unitholder
elects to receive semi-annual distributions. The amount and time of the first
distribution is described in Prospectus Part I under "Summary of Essential
Financial Information". The plan of distribution selected by a Unitholder will
remain in effect until changed. Unitholders who purchase Units in the secondary
market will receive distributions in accordance with the election of the prior
owner. Unitholders may change their distribution plan by indicating the change
on a card which may be obtained from the Trustee and return the card to the
Trustee with their certificates and other documentation required by the Trustee.
Certificates should be sent by registered or certified mail to avoid their being
lost or stolen. If the card and certificate are properly presented to the
Trustee, the change will become effective on the first day after the next
semi-annual record date and will remain effective until changed.
Interest received by a Trust, including that part of the proceeds of
any disposition of Bonds which represents accrued interest, is credited by the
Trustee to the Interest Account. Other receipts are credited to the Principal
Account. After deduction of amounts sufficient to reimburse the Trustee, without
interest, for any amounts advanced and paid to the Sponsor as the Unitholder of
record as of the First Settlement Date, interest received will be distributed on
each distribution date to Unitholders of record as of the preceding record date.
All distributions will be net of estimated expenses. Funds in the Principal
Account will be distributed on each semi-annual distribution date to Unitholders
of record as of the preceding semi-annual record date. The Trustee is not
required to pay interest on funds held in the Principal or Interest Account (but
may itself earn interest thereon and therefore benefits from the use of these
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution therein shall equal at least $1.00 per Unit. However,
should the amount available for distribution in the Principal Account equal or
exceed $10.00 per Unit, the Trustee will make a special distribution from the
Principal Account on the next monthly distribution date to Unitholders of record
on the related monthly record date.
Because interest payments are not received by a Trust at a constant
rate throughout the year, interest distributions may be more or less than the
amount credited to the Interest Account as of the record date. For the purpose
of minimizing fluctuations in interest distributions, the Trustee is authorized
to advance amounts necessary to provide interest distributions of approximately
equal amounts. The Trustee is reimbursed for these advances from funds in the
Interest Account on the next record date. Persons who purchase Units between a
record date and a distribution date will receive their first distribution on the
second distribution date after the purchase, under the applicable plan of
distribution.
REINVESTMENT OPTION. Unitholders may elect to have distributions on
their Units automatically reinvested in shares of certain Van Kampen American
Capital or Morgan Stanley mutual funds which are registered in the Unitholder's
state of residence (the "Reinvestment Funds"). Each Reinvestment Fund has
investment objectives that differ from those of the Trusts. The prospectus
relating to each Reinvestment Fund describes its investment policies and the
procedures to follow to begin reinvestment. A Unitholder may obtain a prospectus
for the Reinvestment Funds from Van Kampen American Capital Distributors, Inc.
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
After becoming a participant in a reinvestment plan, each Trust
distribution will automatically be applied on the applicable distribution date
to purchase shares of the applicable Reinvestment Fund at a net asset value
computed on such date. Unitholders with an existing Guaranteed Reinvestment
Option (GRO) Program account (whereby a sales charge is imposed on distribution
reinvestments) may transfer their existing account into a new GRO account which
allows purchases of Reinvestment Fund shares at net asset value. Confirmations
of all reinvestments will be mailed to the Unitholder by the Reinvestment Fund.
A participant may elect to terminate his or her reinvestment plan and receive
future distributions in cash by notifying the Trustee in writing at least five
days before the next distribution date. Each Reinvestment Fund, its sponsor and
investment adviser have the right to terminate its reinvestment plan at any
time. Unitholders of New York Trusts who are New York residents may elect to
have distributions reinvested in shares of First Investors New York Insured Tax
Free Fund, Inc. subject to a sales charge of $1.50 per $100 reinvested (paid to
First Investors Management Company, Inc.).
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his
Units by tender to the Trustee, at its Unit Investment Trust Division, 101
Barclay Street, 20th Floor, New York, New York 10286, of the certificates
representing the Units to be redeemed, duly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing satisfactory
indemnity, such as in connection with lost, stolen or destroyed certificates)
and by payment of applicable governmental charges, if any. Redemption of Units
cannot occur until certificates representing the Units or satisfactory indemnity
have been received by the Trustee. No later than seven calendar days following
satisfactory tender, the Unitholder will receive an amount for each Unit equal
to the Redemption Price per Unit next computed after receipt by the Trustee of
the tender of Units. The "date of tender" is deemed to be the date on which
Units are received by the Trustee, except that as regards Units received after
the Evaluation Time on days of trading on the New York Stock Exchange, the date
of tender is the next day on which that Exchange is open and the Units will be
deemed to have been tendered to the Trustee on that day for redemption at the
Redemption Price.
<PAGE>
Under Internal Revenue Service regulations, the Trustee is required to
withhold a specified percentage of a Unit redemption if the Trustee has not
received the Unitholder's tax identification number as required by such
regulations. Any amount withheld is transmitted to the Internal Revenue Service
and may be recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, the Unitholder should provide a tax identification number
to the Trustee in order to avoid this possible "back-up withholding".
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the Bonds as
of the Evaluation Time on days of trading on the New York Stock Exchange on the
date any such determination is made. The Evaluator determines the Redemption
Price per Unit on days Units are tendered for redemption. The Redemption Price
per Unit is the pro rata share of each Unit on the basis of (i) the cash on hand
in the Trust or moneys in the process of being collected, (ii) the value of the
Bonds based on the bid prices of the Bonds, except for cases in which the value
of insurance has been included, (iii) accrued interest, less (a) amounts
representing taxes or other governmental charges and (b) the accrued Trust
expenses. The Evaluator may determine the value of the Bonds by employing any of
the methods set forth in "Public Offering--Offering Price". In determining the
Redemption Price per Unit no value will be assigned to the portfolio insurance
maintained on the Bonds in an Insured Trust unless the Bonds are in default in
payment of principal or interest or in significant risk of default. For a
description of the situations in which the Evaluator may value the insurance
obtained by the Insured Trusts, see "Public Offering--Offering Price". Accrued
interest paid on redemption shall be withdrawn from the Interest Account or, if
the balance therein is insufficient, from the Principal Account. All other
amounts will be withdrawn from the Principal Account. Units so redeemed shall be
cancelled.
The price at which Units may be redeemed could be less than the price
paid by the Unitholder and may be less than the par value of the Bonds
represented by the Units redeemed. The Trustee may sell Bonds to cover
redemptions. When Bonds are sold, the size and diversity of the Trust will be
reduced. Sales may be required at a time when Bonds would not otherwise be sold
and might result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the SEC determines that
trading on that Exchange is restricted or an emergency exists, as a result of
which disposal or evaluation of the Bonds is not reasonably practicable, or for
other periods as the SEC may by order permit. Under certain extreme
circumstances the Sponsor may apply to the SEC for an order permitting a full or
partial suspension of the right of Unitholders to redeem their Units.
CERTIFICATES. Ownership of Units is evidenced by certificates unless a
Unitholder makes a written request to the Trustee that ownership be in book
entry form. Units are transferable by making a written request to the Trustee
and, in the case of Units in certificate form, by presentation and surrender of
the certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign the written
request, or certificate transfer instrument, exactly as his name appears on the
records of the Trustee and on the face of any certificate with the signature
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or a signature guaranty program accepted by the Trustee. The Trustee
may require additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority. Certificates will be issued in denominations of one Unit
or any multiple thereof. Although no such charge is now made, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate re-issued or
transferred and to pay any governmental charge that may be imposed in connection
with each transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
REPORTS PROVIDED. Unitholders will receive a statement of interest and
other receipts received for each distribution. For as long as the Sponsor deems
it to be in the best interest of Unitholders, the accounts of each Trust will be
audited annually by independent certified public accountants and the report of
the accountants will be furnished to Unitholders upon request. Within a
reasonable period of time after the end of each year, the Trustee will furnish
to each person who was a registered Unitholder during that year a statement
describing the interest and principal received on the Bonds, actual Trust
distributions, Trust expenses, a list of the Bonds and other Trust information.
Unitholders will be furnished the Evaluator's evaluations of the Bonds upon
request.
<PAGE>
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
- --------------------------------------------------------------------------------
Insurance has been obtained guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in each Insured Trust. An insurance
policy obtained by an Insured Trust, if any, is non-cancellable and will
continue in force so long as the Trust is in existence, the respective Portfolio
Insurer is still in business and the Bonds described in the policy continue to
be held by the Trust. Any portfolio insurance premium for an Insured Trust is
paid by the Trust on a monthly basis. The premium for any Preinsured Bond
insurance has been paid by the issuer, by a prior owner of the Bonds or the
Sponsor and any policy is non-cancellable and will continue in force so long as
the Bonds so insured are outstanding and the Preinsured Bond Insurer remains in
business. The Portfolio Insurers and the Preinsured Bond Insurers are described
in "Portfolio" and the notes thereto in Prospectus Part I. The Portfolio
Insurers are either AMBAC Assurance Corporation or Financial Guaranty Insurance
Company. More detailed information regarding insurance on the Bonds and the
Preinsured Bond and Portfolio Insurers is included in the Information
Supplement. See "Additional Information".
The portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds when they
fall due. For this purpose, "when due" generally means the stated payment or
maturity date for the payment of principal and interest. However, in the event
(a) an issuer defaults in the payment of principal or interest, (b) an issuer
enters into a bankruptcy proceeding or (c) the maturity of the Bond is
accelerated, the affected Portfolio Insurer has the option to pay the
outstanding principal amount of the Bond plus accrued interest to the date of
payment and thereby retire the Bond from the Trust prior to the Bond's stated
maturity date. The insurance does not guarantee the market value of the Bonds or
the value of the Units. The Trustee, upon the sale of a Bond covered under a
portfolio insurance policy has the right to obtain permanent insurance with
respect to the Bond (i.e., insurance to maturity of the Bond regardless of the
identity of the holder) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium and expenses from the proceeds of the sale of
the Bond. It is expected that the Trustee would exercise the right to obtain
Permanent Insurance only if upon exercise the Trust would receive net proceeds
in excess of the sale proceeds if the Bonds were sold on an uninsured basis.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE>
<CAPTION>
FINANCIAL INFORMATION (IN MILLIONS OF DOLLARS)
-------------------------------------------------
ADMITTED POLICYHOLDERS'
NAME ASSETS SURPLUS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMBAC Assurance Corporation (at 6/30/97) $ 2,736 $ 1,548
Capital Markets Assurance Corporation (at 9/30/97) 351 192
Financial Guaranty Insurance Company (at 9/30/97) 2,531 1,247
Financial Security Assurance, Inc. (at 9/30/97) 1,404 517
MBIA Insurance Corporation (at 9/30/97) 5,100 1,700
</TABLE>
Because the Bonds are insured by Portfolio Insurers or Preinsured Bond
Insurers as to the timely payment of principal and interest, when due, and on
the basis of the various reinsurance agreements in effect, Standard & Poor's has
assigned to the Units of each Insured Trust its "AAA" investment rating. This
rating will be in effect for a period of thirteen months from the Date of
Deposit and will, unless renewed, terminate at the end of such period. See
"Description of Ratings" in the Information Supplement. This rating should not
be construed as an approval of the offering of the Units by Standard & Poor's or
as a guarantee of the market value of the Trust or of the Units.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made. At the date
hereof, it is reported that no claims have been submitted or are expected to be
submitted to any of the Portfolio Insurers which would materially impair the
ability of any such company to meet its commitment pursuant to any contract of
insurance. The information relating to each Portfolio Insurer has been furnished
by such companies. The financial information with respect to each Portfolio
Insurer appears in reports filed with state insurance regulatory authorities and
is subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates thereof.
<PAGE>
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
SPONSOR. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect subsidiary
of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM
Holdings II, Inc., which in turn is a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization
of more than $21 billion, which was created by the merger of Morgan Stanley
Group Inc. with Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in a
wide range of financial services through three primary businesses: securities,
asset management and credit services. These principal businesses include
securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; global custody, securities clearance services and securities lending;
and credit card services. As of June 2, 1997, MSDWD, together with its
affiliated investment advisory companies, had approximately $270 billion of
assets under management, supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the
underwriting and distribution of unit investment trusts and mutual funds with
roots in money management dating back to 1926. The Sponsor is a member of the
National Association of Securities Dealers, Inc. and has offices at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak
Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not to
the Fund or to any other Series thereof. The information is included herein only
for the purpose of informing investors as to the financial responsibility of the
Sponsor and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
As of March 31, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $58.45 billion of investment
products, of which over $10.85 billion is invested in municipal bonds. The
Sponsor and its Van Kampen American Capital affiliates managed $47 billion of
assets, consisting of $29.23 billion for 59 open-end mutual funds (of which 46
are distributed by Van Kampen American Capital Distributors, Inc.) $13.4 billion
for 37 closed-end funds and $4.97 billion for 106 institutional accounts. The
Sponsor has also deposited approximately $26 billion of unit investment trusts.
All of Van Kampen American Capital's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and not
exceeding amounts prescribed by the SEC, (ii) terminate the Trust Agreement and
liquidate the Fund as provided therein or (iii) continue to act as Trustee
without terminating the Trust Agreement.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, telephone
(800) 221-7668. The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law. Additional
information regarding the Trustee is set forth in the Information Supplement,
including the Trustee's qualifications and duties, its ability to resign, the
effect of a merger involving the Trustee and the Sponsor's ability to remove and
replace the Trustee. See "Additional Information".
PORTFOLIO ADMINISTRATION. The Trusts are not managed funds and, except
as provided in the Trust Agreement, Bonds generally will not be sold or
replaced. The Sponsor may, however, direct that Bonds be sold in certain limited
situations to protect to the Trust based on advice from the Evaluator. These
situations may include default in interest or principal payments on the Bonds or
other obligations of an issuer, an advanced refunding or institution of certain
legal proceedings. In addition, the Trustee may sell Bonds designated by the
Evaluator for purposes of redeeming Units or payment of expenses. The Evaluator
will consider a variety of factors in designating Bonds to be sold including
interest rates, market value and marketability. Except in limited circumstances,
the Trustee must reject any offer by an issuer to issue bonds in exchange or
substitution for the Bonds (such as a refunding or refinancing plan). The
Trustee will promptly notify Unitholders of any exchange or substitution. The
Information Supplement contains a more detailed description of circumstances in
which Bonds may be sold or replaced. See "Additional Information".
<PAGE>
REPLACEMENT BONDS. No assurance can be given that a Trust will retain
its present size or composition because Bonds may be sold, redeemed or mature
from time to time and the proceeds will be distributed to Unitholders and will
not be reinvested. In the event of a failure to deliver any Bond that has been
purchased under a contract ("Failed Bonds"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds") to make up the original portfolio of a Trust. Replacement Bonds must be
purchased within 20 days after delivery of the notice of the failed contract and
the purchase price (exclusive of accrued interest) may not exceed the amount of
funds reserved for the purchase of the Failed Bonds. The Replacement Bonds must
be substantially identical to the Failed Bonds in terms of (i) the exemption
from federal and state taxation, (ii) maturity, (iii) yield to maturity and
current return, (iv) Standard & Poor's or Moody's ratings, and (v) insurance in
an Insured Trust. The Trustee shall notify all Unitholders of a Trust within
five days after the acquisition of a Replacement Bond and shall make a pro rata
distribution of the amount, if any, by which the cost of the Failed Bond
exceeded the cost of the Replacement Bond plus accrued interest. If Failed Bonds
are not replaced, the Sponsor will refund the sales charge attributable to the
Failed Bonds to all Unitholders of the Trust and distribute the principal and
accrued interest (at the coupon rate of the Failed Bonds to the date of removal
from the Trust) attributable to the Failed Bonds within 30 days after removal.
All interest paid to a Unitholder which accrued after the expected date of
settlement for Units will be paid by the Sponsor and accordingly will not be
treated as tax-exempt income. If Failed Bonds are not replaced, the Estimated
Net Annual Interest Income per Unit would be reduced and the Estimated Current
Return and Estimated Long-Term Return might be lowered. Unitholders may not be
able to reinvest their proceeds in other securities at a yield equal to or in
excess of the yield of the Failed Bonds.
AMENDMENT OF TRUST AGREEMENT. The Sponsor and the Trustee may amend the
Trust Agreement without the consent of Unitholders to correct any provision
which may be defective or to make other provisions that will not adversely
affect the interest of the Unitholders (as determined in good faith by the
Sponsor and the Trustee). The Trust Agreement may not be amended to increase the
number of Units or to permit the acquisition of Bonds in addition to or in
substitution for any of the Bonds initially deposited in the Trust, except for
the substitution of certain refunding Bonds. The Trustee will notify Unitholders
of any amendment.
TERMINATION OF TRUST AGREEMENT. A Trust will terminate upon the
redemption, sale or other disposition of the last Bond held in the Trust. A
Trust may also be terminated at any time by consent of Unitholders of 51% of the
Units then outstanding or by the Trustee when the value of the Trust is less
than 20% of the original principal amount of Bonds. The Trustee will notify each
Unitholder of any termination within a reasonable time and will then liquidate
any remaining Bonds. The sale of Bonds upon termination may result in a lower
amount than might otherwise be realized if sale were not required at that time.
For this reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount of Bonds per Unit or value at
the time of purchase. The Trustee will distribute to each Unitholder his share
of the balance of the Interest and Principal Accounts after deduction of costs,
expenses or indemnities. The Unitholder will receive a final distribution
statement with this distribution. When the Trustee in its sole discretion
determines that any amounts held in reserve are no longer necessary, it will
distribute these amounts to Unitholders. The Information Supplement contains
further information regarding termination of a Trust.
See "Additional Information".
LIMITATION ON LIABILITIES. The Sponsor, Evaluator and Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence (negligence in the case of the Trustee) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of the
Bonds. In the event of the failure of the Sponsor to act under the Trust
Agreement, the Trustee may act thereunder and shall not be liable for any action
taken by it in good faith under the Trust Agreement. The Trustee is not liable
for any taxes or governmental charges imposed on the Bonds, on it as Trustee
under the Trust Agreement or on the Fund which the Trustee may be required to
pay under any present or future law of the United States of America or of any
other taxing authority having jurisdiction. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the Trustee. The
Trustee and Sponsor may rely on any evaluation furnished by the Evaluator and
have no responsibility for the accuracy thereof. Determinations by the Evaluator
shall be made in good faith upon the basis of the best information available to
it; provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor or Unitholders for errors in judgment.
<PAGE>
FEDERAL TAX STATUS
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At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal gross
income were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Trusts, where applicable, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds when held by residents of the State in which the issuers of such Bonds are
located from state income taxes and certain state or local intangibles and local
income taxes. Neither the Sponsor nor Chapman and Cutler have made any review of
the Trust proceedings relating to the issuance of the Bonds or of the basis of
such opinions. If the interest on a Bond should be determined to be taxable, the
Bond would generally have to be sold at a substantial discount. In addition,
investors could be required to pay income tax on interest received prior to the
date on which interest is determined to be taxable. Gain realized on the sale or
redemption of the Bonds by the Trustee or of a Unit by a Unitholder is
includible in gross income for Federal income tax purposes and may be includible
in gross income for state tax purposes. Such gain does not include any amounts
received in respect of accrued interest or accrued original issue discount, if
any. If a Bond is acquired with accrued interest, that portion of the price paid
for the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and reduces
the tax basis of the Bond. If a Bond is purchased for a premium, the amount of
the premium is added to the tax basis of the Bond. Bond premium is amortized
over the remaining term of the Bond, and the tax basis of the Bond is reduced
each tax year by the amount of the premium amortized in that tax year. For
purposes of the following opinions, it is assumed that each asset of the Trust
is debt, the interest on which is excluded for Federal income tax purposes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law as of the date of this Prospectus:
(1) Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Internal Revenue
Code of 1986 (the "Code") will retain its status for Federal income tax
purposes, when received by a Trust and when distributed to Unitholders;
however such interest may be taken into account in computing the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below;
(2) Each Unitholder is considered to be the owner of a pro rata portion of
each asset of the respective Trust under subpart E, subchapter J of
chapter 1 of the Code and will have a taxable event when such Trust
disposes of a Bond, or when the Unitholder redeems or sells his Units.
If the Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all assets of the Trust
involved including his pro rata portion of all the Bonds represented by
a Unit. Legislative proposals have been made that would treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain as constructive sales for purposes of recognition
of gain (but not loss). Unitholders should consult their own tax
advisors with regard to any such constructive sale rules. Unitholders
must reduce the tax basis of their Units for their share of accrued
interest received by the respective Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on such Bonds before the date the Trust acquired
ownership of the Bonds (and the amount of this reduction may exceed the
amount of accrued interest paid to the seller) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale
or redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with the Unitholder's basis for
his or her fractional interest in the asset disposed of. In the case of
a Unitholder who purchases Units, such basis (before adjustment for
accrued original issue discount and amortized bond premium, if any) is
determined by apportioning the cost of the Units among each of the Trust
assets ratably according to value as of the valuation date nearest the
date of acquisition of the Units. It should be noted that certain
legislative proposals have been made which could affect the calculation
of basis for Unitholders holding securities that are substantially
identical to the Bonds. Unitholders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unitholder
realizing a taxable gain when his Units are sold or redeemed for an
amount less than or equal to his original cost;
(3) Any proceeds paid under an insurance policy or policies dated the Date
of Deposit, issued to an Insured Trust with respect to the Bonds which
represent maturing interest on defaulted obligations held by the Trustee
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been so excludable if paid in the normal
course by the issuer of the defaulted obligations provided that, at the
time such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations; and
<PAGE>
(4) Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted Bonds held by the Trustee
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been excludable if paid in the normal
course by the issuer of the defaulted Bonds provided that, at the time
such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Bonds, rather than the insurer, will pay debt
service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "adjusted
issue price") to prior owners. If a Bond is acquired with accrued interest, that
portion of the price paid for the accrued interest is added to the tax basis of
the Bond. When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased for a
premium, the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax basis of
the Bond is reduced each tax year by the amount of the premium amortized in that
tax year. The application of these rules will also vary depending on the value
of the Bond on the date a Unitholder acquires his Units and the price the
Unitholder pays for his Units. Unitholders should consult with their tax
advisers regarding these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued), subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust pays for
Bonds or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law the
accretion had been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Unitholder elects to include market discount in taxable income
as it accrues. The market discount rules are complex and Unitholders should
consult their tax advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and
the Superfund Tax for taxable years beginning after December 31, 1986 depends
upon the corporation's alternative minimum taxable income, which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income and the Superfund
Tax of a corporation (other than an S Corporation, Regulated Investment Company,
Real Estate Investment Trust, or REMIC) is an amount equal to 75% of the excess
of such corporation's "adjusted current earnings" over an amount equal to its
alternative minimum taxable income (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax exempt interest, including interest on all of the Bonds in the
Fund. Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. Legislative proposals have been
introduced which would extend the Superfund Tax. Under the provisions of Section
884 of the Code, a branch profits tax is levied on the "effectively connected
earnings and profits" of certain foreign corporations which include tax-exempt
interest such as interest on the Bonds in the Trust. Unitholders should consult
their tax advisers with respect to the particular tax consequences to them
including the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry Units
of a Trust is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase or
improve a personal residence). Also, under Section 265 of the Code, certain
financial institutions that acquire Units would generally not be able to deduct
any of the interest expense attributable to ownership of such Units. Legislative
proposals have been made that would extend the financial institution rules to
all corporations. Investors with questions regarding these issues should consult
their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or related
person, will not be excludible from Federal gross income, although interest on
such Bonds received by others would be excludible from Federal gross income.
"Substantial user" and "related person" are defined under the Code and U.S.
Treasury Regulations. Any person who believes that he or she may be a
"substantial user" or a "related person" as so defined should contact his or her
tax adviser.
<PAGE>
In the opinion of special counsel to the Fund for New York tax matters,
under existing law, the Fund and each Trust are not associations taxable as
corporations and the income of each Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross
income for Federal, state or other tax purposes are the opinions of counsel and
are to be so construed.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains realized
in taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains (which are defined as net long-term capital gain
over net short-term capital loss for a taxable year) are subject to a maximum
marginal stated tax rate of 28%. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates and could
affect relative differences at which ordinary income and capital gains are
taxed. Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year. For purposes of
computing the alternative minimum tax for individuals and corporations and the
Superfund Tax for corporations, interest on certain private activity bonds
(which includes most industrial and housing revenue bonds) issued on or after
August 8, 1996 is included as an item of tax preference. Except as otherwise
noted in Prospectus Part I, the Trusts do not include any such private activity
bonds issued on or after that date.
Section 86 of the Code provides that 50% of Social Security benefits
are includible in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of the Social Security benefits received exceeds a "base
amount". The base amount is $25,000 for unmarried taxpayers, $32,000 for married
taxpayers filing a joint return and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Modified adjusted gross income is adjusted gross income determined without
regard to certain otherwise allowable deductions and exclusions from gross
income and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any other item
of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus 50%
of Social Security benefits received exceeds an "adjusted base amount." The
adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for married
taxpayers filing a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from a Trust, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his Social Security benefits in
gross income whether or not he receives any tax-exempt interest. A taxpayer
whose modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security benefits in
gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers who
may be deemed to have incurred (or continued) indebtedness to purchase or carry
tax-exempt obligations. Prospective investors should consult their tax advisors
as to the applicability of any collateral consequences.
For a discussion of the state tax status of income earned on Units of a
Trust and recent changes in Federal tax law, see Prospectus Part I. Except as
noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The laws of
the several states vary with respect to the taxation of such obligations.
<PAGE>
EXPENSES
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The Sponsor will not receive any fees in connection with its activities
relating to the Fund. However, American Portfolio Evaluation Services, a
division of Van Kampen American Capital Investment Advisory Corp., which is an
affiliate of the Sponsor, will receive the annual supervisory fee indicated
under "Summary of Essential Financial Information" in Prospectus Part I for
providing portfolio supervisory services for the Fund. In addition, the
Evaluator will receive the annual evaluation fee indicated under "Summary of
Essential Financial Information" in Prospectus Part I for evaluating each
Trust's portfolio. These fees may exceed the actual costs of providing these
services for a Trust but the total amount received by the Evaluator for
providing these services to all Van Kampen American Capital unit investment
trusts will not exceed the total cost of providing the services in any calendar
year. For its services the Trustee will receive the fee indicated under "Summary
of Essential Financial Information" in Prospectus Part I (which may be reduced
as described therein). Part of the Trustee's compensation for its services is
expected to result from the use of the funds being held in the Principal and
Interest Accounts for future distributions, payment of expenses and redemptions
since these Accounts are non-interest bearing to Unitholders. These fees are
based on the outstanding principal amount of Bonds and Units on the Date of
Deposit for the first year and as of the close of business on January 1 for each
year thereafter.
Premiums for any portfolio insurance are obligations of each Insured
Trust and are payable monthly by the Trustee on behalf of the Trust. As Bonds in
an Insured Trust are redeemed by their respective issuers or are sold by the
Trustee, the amount of the premium will be reduced in respect of those Bonds. If
the Trustee exercises the right to obtain permanent insurance, the premiums
payable for such permanent insurance will be paid solely from the proceeds of
the sale of the related Bonds.
The following additional charges are or may be incurred by the Trusts:
(a) fees of the Trustee for extraordinary services, (b) expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (c) various governmental charges, (d) expenses and costs of any action
taken by the Trustee to protect the Trusts and the rights and interests of
Unitholders, (e) indemnification of the Trustee for any loss, liability or
expenses incurred by it in the administration of the Fund without negligence,
bad faith or willful misconduct on its part, (f) any special custodial fees
payable in connection with the sale of any of the Bonds in a Trust, (g)
expenditures incurred in contacting Unitholders upon termination of the Trusts
and (h) costs incurred to reimburse the Trustee for advancing funds to the
Trusts to meet scheduled distributions (which costs may be adjusted periodically
in response to fluctuations in short-term interest rates). The fees and expenses
set forth herein are payable out of the Trusts. When such fees and expenses are
paid by or owing to the Trustee, they are secured by a lien on the portfolio of
the applicable Trust. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by a Trust, the Trustee has the
power to sell Bonds to pay such amounts.
On or before the twenty-fifth day of each month, the Trustee will
deduct from the Interest Account and, to the extent funds are not sufficient
therein, from the Principal Account, amounts necessary to pay the expenses of
the Fund. The Trustee also may withdraw from these Accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of the Fund. Amounts so withdrawn shall not be considered a part of
the Fund's assets until such time as the Trustee shall return all or any part of
such amounts to the appropriate Accounts. All costs and expenses incurred in
creating and establishing the Fund, including the cost of the initial
preparation, printing and execution of the Trust Agreement and the certificates,
legal and accounting expenses, advertising and selling expenses, expenses of the
Trustee, initial evaluation fees and other out-of-pocket expenses have been
borne by the Sponsor at no cost to the Fund.
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
This Prospectus does not contain all the information set forth in the
Registration Statement filed by the Fund with the SEC. The Information
Supplement, which has been filed with the SEC, includes more detailed
information concerning the Bonds, investment risks and general information about
the Fund. This Prospectus incorporates by reference the entire Information
Supplement. The Information Supplement may be obtained by contacting the Trustee
or is available along with other related materials at the SEC's Internet site
(http://www.sec.gov).
OTHER MATTERS
- -------------------------------------------------------------------------------
LEGAL MATTERS. The legality of the Units offered hereby and certain
matters relating to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Winston & Strawn has acted as counsel to the Trustee and Special counsel to the
Fund for New York tax matters. Special counsel to the Fund for certain state tax
matters are named under "Tax Status" appearing in Prospectus Part I.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition
and the related portfolio at the Date of Deposit included in Prospectus Part I
have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report in Prospectus Part I, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
<PAGE>
TABLE OF CONTENTS
TITLE PAGE
The Trusts 2
The Fund 2
Objectives and Bond Selection 2
Risk Factors 3
Estimated Current and Long-Term Returns 5
Public Offering 6
General 6
Offering Price 7
Accrued Interest 8
Unit Distribution 8
Sponsor and Underwriter Compensation 9
Market for Units 10
Rights of Unitholders 11
Distributions of Interest and Principal 11
Reinvestment Option 11
Redemption of Units 11
Certificates 12
Reports Provided 12
Insurance on the Bonds in the Insured Trusts 13
Fund Administration 14
Sponsor 14
Trustee 14
Portfolio Administration 14
Replacement Bonds 15
Amendment of Trust Agreement 15
Termination of Trust Agreement 15
Limitation on Liabilities 15
Federal Tax Status 16
Expenses 18
Additional Information 19
Other Matters 19
Legal Matters 19
Independent Certified Public Accountants 19
- ------------
No person is authorized to give any information or to make any
representations not contained in this Prospectus; and any information or
representation not contained herein must not be relied upon as having been
authorized by the Fund, the Sponsor or the Underwriters. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy,
securities in any state to any person to whom it is not lawful to make such
offer in such state.
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
<PAGE>
PROSPECTUS
PART II
- -------------------------------------------------------------------------------
FEBRUARY 1998
INSURED MUNICIPALS
INCOME TRUST,
INSURED MULTI-SERIES
AND
INSURED MUNICIPALS
INCOME TRUST AND
INVESTORS' QUALITY TAX-
EXEMPT TRUST,
MULTI-SERIES
------ A Wealth of Knowledge oA Knowledge of Wealthsm ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
INFORMATION SUPPLEMENT
INSURED MUNICIPALS INCOME TRUST, 230TH INSURED MULTI-SERIES
- --------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Fund which is not described in the Prospectus for
the Fund. This Information Supplement should be read in conjunction with the
Fund's prospectus. This Information Supplement is not a prospectus (but is
incorporated into the Prospectus by reference), does not include all of the
information that an investor should consider before investing in a Trust and may
not be used to offer or sell Units without the Prospectus. Copies of the
Prospectus can be obtained by contacting the Sponsor at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 or by contacting your broker. This Information
Supplement is dated as of the date of Prospectus Part I and all capitalized
terms have been defined in the Prospectus.
TABLE OF CONTENTS
PAGE
Municipal Bond Risk Factors.......................................... 2
Insurance on the Bonds in the Insured Trusts......................... 6
Portfolio Administration............................................. 12
Trustee Information.................................................. 13
Termination of the Trust Agreement................................... 14
Description of Ratings............................................... 14
Equivalent Taxable Estimated Current Return Tables................... 16
California Risk Factors.............................................. 18
Colorado Risk Factors................................................ 24
New York Risk Factors................................................ 26
Estimated Cash Flows to Unitholders.................................. 34
MUNICIPAL BOND RISK FACTORS
The Trusts include certain types of bonds described below. Accordingly, an
investment in a Trust should be made with an understanding of the
characteristics of and risks associated with such bonds. The types of bonds
included in each Trust are described on the cover of the related Prospectus Part
I. Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental entity that
are backed by the taxing power of such entity. All other Bonds in the Trusts are
revenue bonds payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds in the Fund, both within a particular classification and between
classifications, depending on numerous factors.
Certain of the Bonds may be obligations which derive their payments from
mortgage loans. Certain of such housing bonds may be FHA insured or may be
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities as a result of events such as sale of the mortgaged
premises, default, condemnation or casualty loss. Because these bonds are
subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period. Additionally,
unusually high rates of default on the underlying mortgage loans may reduce
revenues available for the payment of principal of or interest on such mortgage
revenue bonds. These bonds were issued under Section 103A of the Internal
Revenue Code, which Section contains certain requirements relating to the use of
the proceeds of such bonds in order for the interest on such bonds to retain its
tax-exempt status. In each case the issuer of the bonds has covenanted to comply
with applicable requirements and bond counsel to such issuer has issued an
opinion that the interest on the bonds is exempt from Federal income tax under
existing laws and regulations. Certain issuers of housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In connection with the housing bonds held by
the Fund, the Sponsor at the Date of Deposit is not aware that any of the
respective issuers of such bonds are actively considering the redemption of such
bonds prior to their respective stated initial call dates.
Certain of the Bonds may be health care revenue bonds. Ratings of bonds
issued for health care facilities are often based on feasibility studies that
contain projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service may be affected by
future events and conditions including, among other things, demand for services
and the ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with other
health care facilities, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the cost
and possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, government regulation and
the termination or restriction of governmental financial assistance, including
that associated with Medicare, Medicaid and other similar third party payor
programs.
Certain of the Bonds may be obligations of public utility issuers, including
those selling wholesale and retail electric power and gas. General problems of
such issuers would include the difficulty in financing large construction
programs in an inflationary period, the limitations on operations and increased
costs and delays attributable to environmental considerations, the difficulty of
the capital market in absorbing utility debt, the difficulty in obtaining fuel
at reasonable prices and the effect of energy conservation. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds to make payments of principal
and/or interest on such Bonds.
Certain of the Bonds may be obligations of issuers whose revenues are derived
from the sale of water and/or sewerage services. Such bonds are generally
payable from user fees. The problems of such issuers include the ability to
obtain timely and adequate rate increases, population decline resulting in
decreased user fees, the difficulty of financing large construction programs,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the increasing difficulty of obtaining or
discovering new supplies of fresh water, the effect of conservation programs and
the impact of "no-growth" zoning ordinances.
Certain of the Bonds may be industrial revenue bonds ("IRBs"). IRBs have
generally been issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a particular
project have been assigned and pledged to purchasers. In some cases, a mortgage
on the underlying project may have been granted as security for the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon the
creditworthiness of the corporate operator of the project or corporate
guarantor. Corporate operators or guarantors may be affected by many factors
which may have an adverse impact on the credit quality of the particular company
or industry. These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a corporate restructuring pursuant to a leveraged
buy-out, takeover or otherwise. Such a restructuring may result in the operator
of a project becoming highly leveraged which may impact on such operator's
creditworthiness which in turn would have an adverse impact on the rating and/or
market value of such bonds. Further, the possibility of such a restructuring may
have an adverse impact on the market for and consequently the value of such
bonds, even though no actual takeover or other action is ever contemplated or
effected.
Certain of the Bonds may be obligations that are secured by lease payments of
a governmental entity (hereinafter called "lease obligations"). Lease
obligations are often in the form of certificates of participation. Although the
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to appropriate for and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. A governmental entity that enters into such
a lease agreement cannot obligate future governments to appropriate for and make
lease payments but covenants to take such action as is necessary to include any
lease payments due in its budgets and to make the appropriations therefor. A
governmental entity's failure to appropriate for and to make payments under its
lease obligation could result in insufficient funds available for payment of the
obligations secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult.
Certain of the Bonds may be obligations of issuers which are, or which govern
the operation of, schools, colleges and universities and whose revenues are
derived mainly from ad valorem taxes or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby creating a
disparity in educational funds available to schools in wealthy areas and schools
in poor areas. Litigation or legislation on this issue may affect the sources of
funds available for the payment of school bonds in the Trusts. General problems
relating to college and university obligations include the prospect of a
declining percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal grants and
state funding, and government legislation or regulations which may adversely
affect the revenues or costs of such issuers.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income is
generally derived from fees received from signatory airlines pursuant to use
agreements which consist of annual payments for leases, occupancy of certain
terminal space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under the use
agreements. From time to time the air transport industry has experienced
significant variations in earnings and traffic, due to increased competition,
excess capacity, increased costs, deregulation, traffic constraints and other
factors, and several airlines have experienced severe financial difficulties.
Similarly, payment on bonds related to other facilities is dependent on revenues
from the projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of transportation,
scarcity of fuel and reduction or loss of rents.
Certain of the Bonds may be obligations which are payable from and secured by
revenues derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation of a
project; contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of a project or
technological or other unavoidable changes adversely affecting the operation of
a project; and administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform or impose
unreasonable burdens or excessive liabilities. The Sponsor cannot predict the
causes or likelihood of the redemption of resource recovery bonds in a Trust
prior to the stated maturity of the Bonds.
Certain of the Bonds may have been acquired at a market discount from par
value at maturity. The coupon interest rates on discount bonds at the time they
were purchased and deposited in a Trust were lower than the current market
interest rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable bonds increase, the market discount
of previously issued bonds will become greater, and if such interest rates for
newly issued comparable bonds decline, the market discount of previously issued
bonds will be reduced, other things being equal. Investors should also note that
the value of bonds purchased at a market discount will increase in value faster
than bonds purchased at a market premium if interest rates decrease. Conversely,
if interest rates increase, the value of bonds purchased at a market discount
will decrease faster than bonds purchased at a market premium. In addition, if
interest rates rise, the prepayment risk of higher yielding, premium Securities
and the prepayment benefit for lower yielding, discount bonds will be reduced. A
bond purchased at a market discount and held to maturity will have a larger
portion of its total return in the form of taxable income and capital gain and
less in the form of tax-exempt interest income than a comparable bond newly
issued at current market rates. See "Federal Tax Status" in Prospectus Part II.
Market discount attributable to interest changes does not indicate a lack of
market confidence in the issue.
Certain of the Bonds may be "zero coupon" bonds. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligation at a rate as high as the implicit yield
on the discount obligation, but at the same time eliminates the holder's ability
to reinvest at higher rates in the future. For this reason, zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality which
pay interest.
Certain of the Bonds may have been purchased on a "when, as and if issued" or
"delayed delivery" basis. See "Notes to Portfolio" in Prospectus Part I. The
delivery of any such Bonds may be delayed or may not occur. Interest on these
Bonds begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Bonds are actually delivered to the Fund after their
respective expected dates of delivery, Unitholders who purchase their Units
prior to the date such Bonds are actually delivered to the Trustee would be
required to adjust their tax basis in their Units for a portion of the interest
accruing on such Bonds during the interval between their purchase of Units and
the actual delivery of such Bonds. As a result of any such adjustment, the
Estimated Current Returns during the first year would be slightly lower than
those stated in the Prospectus which would be the returns after the first year,
assuming the portfolio of a Trust and estimated annual expenses other than that
of the Trustee (which may be reduced in the first year only) do not vary from
that set forth in Prospectus Part I. Unitholders will be "at risk" with respect
to all Bonds in the portfolios including "when, as and if issued" and "delayed
delivery" Bonds (i.e., may derive either gain or loss from fluctuations in the
evaluation of such Bonds) from the date they commit for Units.
Certain of the Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is a method
by which a debt obligation is redeemed, at or before maturity, by the proceeds
of a new debt obligation. In general, call provisions are more likely to be
exercised when the offering side valuation is at a premium over par than when it
is at a discount from par. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called bonds are used to pay for Unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions; it may also affect
the current return on Units of the Trust involved. Each Trust portfolio contains
a listing of the sinking fund and call provisions, if any, with respect to each
of the debt obligations. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. Generally, events that
may permit the extraordinary optional redemption of bonds or may require the
mandatory redemption of bonds include, among others: a final determination that
the interest on the bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the bonds were
used; an exercise by a local, state or Federal governmental unit of its power of
eminent domain to take all or substantially all of the project for which the
proceeds of the bonds were used; changes in the economic availability of raw
materials, operating supplies or facilities or technological or other changes
which render the operation of the project for which the proceeds of the bonds
were used uneconomic; changes in law or an administrative or judicial decree
which renders the performance of the agreement under which the proceeds of the
bonds were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes, not
imposed on the date the bonds are issued on the issuer of the bonds or the user
of the proceeds of the bonds; an administrative or judicial decree which
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the bonds; an overestimate of the costs of the
project to be financed with the proceeds of the bonds resulting in excess
proceeds of the bonds which may be applied to redeem bonds; or an underestimate
of a source of funds securing the bonds resulting in excess funds which may be
applied to redeem bonds. The issuer of certain bonds in a Trust may have sold or
reserved the right to sell, upon the satisfaction of certain conditions, to
third parties all or any portion of its rights to call bonds in accordance with
the stated redemption provisions of such bonds. In such a case the issuer no
longer has the right to call the bonds for redemption unless it reacquires the
rights from such third party. A third party pursuant to these rights may
exercise the redemption provisions with respect to a bond at a time when the
issuer of the bond might not have called a bond for redemption had it not sold
such rights. The Sponsor is unable to predict all of the circumstances which may
result in such redemption of an issue of Bonds. See also the discussion of
single family mortgage and multi-family revenue bonds above for more information
on the call provisions of such bonds.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect upon the Fund or any of the Trusts. At any
time after the Date of Deposit, litigation may be initiated on a variety of
grounds with respect to Bonds in the Fund. Such litigation, as, for example,
suits challenging the issuance of pollution control revenue bonds under
environmental protection statutes, may affect the validity of such Bonds or the
tax-free nature of the interest thereon. While the outcome of litigation of such
nature can never be entirely predicted, the Fund has received or will receive
opinions of bond counsel to the issuing authorities of each Bond on the date of
issuance to the effect that such Bonds have been validly issued and that the
interest thereon is exempt from Federal income tax. In addition, other factors
may arise from time to time which potentially may impair the ability of issuers
to meet obligations undertaken with respect to the Bonds.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust, by the issuer of Bonds in
an Insured Trust, by a prior owner of such Bonds, or by the Sponsor prior to the
deposit of such Bonds in a Trust guaranteeing prompt payment of interest and
principal, when due, in respect of the bonds in such Trust. See Settlement of
Bonds in "The Trusts--Objectives and Bond Selection" in Prospectus Part II. The
Portfolio Insurers and the Preinsured Bond Insurers are described under
"Portfolio" and "Notes to Portfolio" in Prospectus Part I. The Portfolio
Insurers are either AMBAC Assurance Corporation or Financial Guaranty Insurance
Company. An insurance policy obtained by an Insured Trust, if any, is
non-cancellable and will continue in force so long as such Trust is in
existence, the respective Portfolio Insurer is still in business and the Bonds
described in such policy continue to be held by such Trust (see "Portfolio" for
the respective Insured Trust in Prospectus Part I). Any portfolio insurance
premium for an Insured Trust, which is an obligation of such Trust, is paid by
such Trust on a monthly basis. Non-payment of premiums on a policy obtained by
an Insured Trust will not result in the cancellation of insurance but will force
the insurer to take action against the Trustee to recover premium payments due
it. The Trustee in turn will be entitled to recover such payments from such
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
an Insured Trust, if any, are fixed for the life of the Trust. The premium for
any Preinsured Bond insurance has been paid by such issuer, by a prior owner of
such Bonds or the Sponsor and any such policy or policies are non-cancellable
and will continue in force so long as the Bonds so insured are outstanding and
the respective Preinsured Bond Insurer remains in business. If the provider of
an original issuance insurance policy is unable to meet its obligations under
such policy or if the rating assigned to the claims-paying ability of any such
insurer deteriorates, the Portfolio Insurers have no obligation to insure any
issue adversely affected by either of the above described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds when they
fall due. For the purposes of insurance obtained by an Insured Trust, "when due"
generally means the stated payment or maturity date for the payment of principal
and interest. However, in the event (a) an issuer of a Bond defaults in the
payment of principal or interest on such Bond, (b) such issuer enters into a
bankruptcy proceeding or (c) the maturity of such Bond is accelerated, the
affected Portfolio Insurer has the option, in its sole discretion, after
receiving notice of the earliest to occur of such a default, bankruptcy
proceeding or acceleration to pay the outstanding principal amount of such Bond
plus accrued interest to the date of such payment and thereby retire the Bond
from the affected Trust prior to such Bond's stated maturity date. The insurance
does not guarantee the market value of the Bonds or the value of the Units.
Insurance obtained by an Insured Trust, if any, is only effective as to Bonds
owned by and held in such Trust. In the event of a sale of any such Bond by the
Trustee, such insurance terminates as to such Bond on the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the Trustee,
upon the sale of a Bond covered under a portfolio insurance policy obtained by
an Insured Trust, has the right to obtain permanent insurance with respect to
such Bond (i.e., insurance to maturity of the Bond regardless of the identity of
the holder thereof) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium and any expenses related thereto from the
proceeds of the sale of such Bond. Accordingly, any Bond in an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee would
exercise the right to obtain Permanent Insurance only if upon such exercise the
affected Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium and related expenses attributable to the Permanent Insurance)
from such sale in excess of the sale proceeds if such Bonds were sold on an
uninsured basis. The insurance premium with respect to each Bond eligible for
Permanent Insurance would be determined based upon the insurability of each Bond
as of the Date of Deposit and would not be increased or decreased for any change
in the creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an
advantage to an Insured Trust in that each Bond insured by a Trust insurance
policy may be sold out of the affected Trust with the benefits of the insurance
attaching thereto. Thus, the value of the insurance, if any, at the time of
sale, can be realized in the market value of the Bond so sold (which is not the
case in connection with any value attributable to an Insured Trust's portfolio
insurance). See Public Offering--Offering Price" in Prospectus Part II. Because
any such insurance value may be realized in the market value of the Bond upon
the sale thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it is
much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Rights of Unitholders--Redemption of Units" in Prospectus Part II)
and (b) at the time of termination of an Insured Trust, if such Trust were
holding defaulted Bonds or Bonds in significant risk of default such Trust would
not need to hold such Securities until their respective maturities in order to
realize the benefits of such Trust's portfolio insurance (see "Fund
Administration--Termination of Trust Agreement" in Prospectus Part II).
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention of
the Evaluator to attribute a value for such insurance (including the right to
obtain Permanent Insurance) for the purpose of computing the price or redemption
value of Units if the Bonds covered by such insurance are in default in payment
of principal or interest or in significant risk of such default. The value of
the insurance will be the difference between (i) the market value of a bond
which is in default in payment of principal or interest or in significant risk
of such default assuming the exercise of the right to obtain Permanent Insurance
(less the insurance premium and related expenses attributable to the purchase of
Permanent Insurance) and (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering--Offering Price" in Prospectus Part
II. It is also the present intention of the Trustee not to sell such Bonds to
effect redemptions or for any other reason but rather to retain them in the
portfolio because value attributable to the insurance cannot be realized upon
sale. See "Public Offering--Offering Price" in Prospectus Part II for a more
complete description of an Insured Trust's method of valuing defaulted Bonds and
Bonds which have a significant risk of default. Insurance obtained by the issuer
of a Bond is effective so long as such Bond is outstanding. Therefore, any such
insurance may be considered to represent an element of market value in regard to
the Bonds thus insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust, if
any, with respect to the Bonds in such Trust were issued by one or more of the
Portfolio Insurers. Any other Preinsured Bond insurance policy (or commitment
therefor) was issued by one of the Preinsured Bond Insurers. See "The
Trusts--Objectives and Bond Selection" in Prospectus Part II.
Capital Markets Assurance Corporation ("CapMAC") is a New York-domiciled
monoline stock insurance company which engages only in the business of financial
guaranty and surety insurance. CapMAC is licensed in all 50 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and the territory
of Guam. CapMAC insures structured asset-backed, corporate, municipal and other
financial obligations in the U.S. and international capital markets. CapMAC also
provides financial guarantee reinsurance for structured asset-backed, corporate,
municipal and other financial obligations written by other major insurance
companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors Service,
Inc. ("Moody's"), "AAA" by Standard & Poor's, "AAA" by Duff & Phelps Credit
Rating Co. ("Duff & Phelps") and "AAA" by Nippon Investors Service, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Pursuant to a merger of a subsidiary of MBIA Inc. with and into CapMAC
Holdings Inc., CapMAC became an indirect wholly-owned subsidiary of MBIA Inc. on
February 17, 1998. MBIA Inc., through its wholly-owned subsidiary, MBIA
Insurance Corporation, is a financial guaranty insurer of municipal bonds and
structured finance transactions. MBIA Insurance Corporation has a claims paying
rating of triple-A from Moody's Investor Service, Inc., Standard & Poor's
Ratings Services and Fitch Investors Service. Pursuant to a reinsurance
agreement, it is anticipated that CapMAC will cede all of its net insured risks,
as well as its unearned premiums and contingency reserves, to MBIA Insurance
Corporation and that MBIA Insurance Corporation will reinsure CapMAC's net
outstanding exposure. NEITHER MBIA INC. NOR ANY OF ITS STOCKHOLDERS IS OBLIGATED
TO PAY ANY CLAIMS UNDER ANY POLICY ISSUED BY CAPMAC OR ANY DEBTS OF CAPMAC OR TO
MAKE ADDITIONAL CAPITAL CONTRIBUTIONS TO CAPMAC.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance laws and
regulations of the other jurisdictions in which it is licensed. Such insurance
laws regulate, among other things, the amount of net exposure per risk that
CapMAC may retain, capital transfers, dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and acquisitions.
CapMAC is subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC's obligations under the Policy(s) may be reinsured. Such reinsurance
does not relieve CapMAC of any of its obligations under the Policy(s). THE
POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED
IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. As of December 31, 1995 and 1996,
CapMAC had qualified statutory capital (which consists of policyholders'
surplus, statutory capital, and contingency reserves) of approximately $260
million and $240 million, respectively, and had not incurred any debt
obligations. As of September 30, 1997, CapMAC had qualified statutory capital of
$278.6 million and had not incurred any debt obligations. Article 69 of the New
York State Insurance Law requires CapMAC to establish and maintain the
contingency reserve, which is available to cover claims under policies issued by
CapMAC.
Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which differ from generally accepted accounting
principles, are filed with the Insurance Department of the State of New York and
are available upon request. CapMAC is located at 885 Third Avenue, New York, New
York 10022, and its telephone is (212) 755-1155.
Effective July 14, 1997, AMBAC Indemnity Corporation changed its name to
AMBAC Assurance Corporation ("AMBAC Assurance"). AMBAC Assurance is a
Wisconsin-domiciled stock insurance corporation regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin and licensed to do business
in 50 states, the District of Columbia and the Commonwealth of Puerto Rico, with
admitted assets of $2,735,772,668 (unaudited) and statutory capital of
$1,547,693,950 (unaudited) as of June 30, 1997. Statutory capital consists of
AMBAC Assurance's policyholders' surplus and statutory contingency reserve.
AMBAC Assurance is a wholly owned subsidiary of AMBAC Financial Group, Inc., a
100% publicly-held company. Moody's Investors Service, Inc. and Standard &
Poor's have both assigned a triple-A claims-paying ability rating to AMBAC
Assurance.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Assurance. The address of AMBAC
Assurance's administrative offices and its telephone number are One State Street
Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Assurance has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Assurance has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of
MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is not obligated
to pay the debts of or claims against MBIA. MBIA is domiciled in the State of
New York and licensed to do business in and subject to regulation under the laws
of all fifty states, the District of Columbia, the Commonwealth of the Northern
Mariana Islands, the Commonwealth of Puerto Rico, the Virgin Islands of the
United States and the Territory of Guam. MBIA has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
Effective February 17, 1998, MBIA, Inc. acquired all of the outstanding
stock of CapMAC, through a merger with its parent, CapMAC Holdings, Inc. MBIA,
Inc. then contributed the common stock of CapMAC to MBIA. Pursuant to a
reinsurance agreement, CapMAC has ceded all of its net insured risks as well as
its unearned premiums and contingency reserves to MBIA and MBIA has reinsured
CapMAC's net outstanding exposure. MBIA, Inc. is not obligated to pay debts of
or claims against CapMAC.
As of December 31, 1996, the insurer had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total capital and
surplus of $1.4 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of September 30, 1997, MBIA had admitted assets of $5.1 billion
(unaudited), total liabilities of $3.4 billion (unaudited), and total capital
and surplus of $1.7 billion (unaudited), determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's financial statements prepared in accordance with
statutory accounting practices are available from MBIA. The address of MBIA is
113 King Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc.
On January 5, 1990, MBIA acquired all of the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company (BIG), now
known as MBIA Insurance Corp. of Illinois. Through a reinsurance agreement, BIG
has ceded all of its net insured risks, as well as its unearned premium and
contingency reserves, to MBIA and MBIA has reinsured BIG's net outstanding
exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG-1," both designated to be of the highest quality.
Standard & Poor's rates all new issues insured by MBIA "AAA" Prime Grade.
Moody's, Standard & Poor's and Fitch IBCA, Inc. (formerly Fitch Investors
Service, L.P.), all rate the claims paying ability of MBIA as "Triple A."
Moody's and Standard & Poor's rate the claims paying ability of CapMAC "Triple
A." CapMAC has not requested a rating from Fitch IBCA, Inc.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's rating of MBIA. No application has been
made to any other rating agency in order to obtain additional ratings on the
Obligations. The ratings reflect the respective rating agency's current
assessment of the creditworthiness of MBIA and its ability to pay claims on its
policies of insurance. Any further explanation as to the significance of the
above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Obligations and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of either or
both ratings may have an adverse effect on the market price of the Obligations.
Financial Guaranty Insurance Company ("Financial Guaranty" or "FGIC") is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a 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 a
monoline financial guaranty insurer domiciled in the State of New York and
subject to regulation by the State of New York Insurance Department. As of
December 31, 1997, the total capital and surplus of Financial Guaranty was
$1,255,590,411. 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 25 Beaver Street, New
York, New York 10004-2319, Attention: Financial Condition Property/Casualty
Bureau, telephone number: (212) 480-5187.
In addition, Financial Guaranty is currently licensed to write insurance in
all 50 states and the District of Columbia.
Financial Security Assurance Inc. ("Financial Security" or "FSA") is a
monoline insurance company incorporated in 1984 under the laws of the State of
New York. Financial Security is licensed to engage in the financial guaranty
insurance business in all 50 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities, thereby enhancing the credit rating of those securities, in
consideration for payment of a premium to the insurer. Financial Security and
its subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
Financial Security insures both newly issued securities sold in the primary
market and outstanding securities sold in the secondary market that satisfy
Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Financial Security is obligated to pay any debt of Financial
Security or its subsidiaries or any claim under any insurance policy issued by
Financial Security or its subsidiaries or to make any additional contribution to
the capital of Financial Security or its subsidiaries. As of September 30, 1997,
the total policyholders' surplus and contingency reserves and the total unearned
premium reserve, respectively, of Financial Security and its consolidated
subsidiaries were, in accordance with statutory accounting principles,
approximately $788,108,000 (unaudited) and $461,203,000 (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 $894,461,000 (unaudited)
and $401,251,000 (unaudited). Copies of Financial Security's financial
statements may be obtained by writing to Financial Security at 350 Park Avenue,
New York, New York, 10022, Attention: Communications Department.
Its telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries (including FSA
Maryland) are reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective capital, surplus and reserves,
subject to applicable statutory risk limitations. In addition, Financial
Security and FSA Maryland reinsure a portion of their liabilities under certain
of their financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. Such
reinsurance is utilized as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit the
obligations of Financial Security or FSA Maryland under any financial guaranty
insurance policy.
The claims-paying ability of Financial Security and FSA Maryland is rated
"Aaa" by Moody's Investors Service, Inc., and "AAA" by Standard & Poor's Ratings
Services, Nippon Investors Service Inc. and Standard & Poor's (Australia) Pty.
Ltd. Such ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to revision
or withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company was involved in a merger in 1995. On
December 20, 1995, Capital Guaranty Corporation ("CGC") merged with a subsidiary
of Financial Security Assurance Holdings Ltd. and Capital Guaranty Insurance
Company, CGC's principal operating subsidiary, changed its name to Financial
Security Assurance of Maryland Inc. ("FSA Maryland") and became a wholly owned
subsidiary of Financial Security Assurance Inc. For further description, see
"Financial Security Assurance Inc." herein.
The address of FSA Maryland and its telephone number are Steuart Tower, One
Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000. In order to be in
an Insured Trust, Bonds must be insured by one of the Preinsured Bond Insurers
or be eligible for the insurance being obtained by such Trust. In determining
eligibility for insurance, the Preinsured Bond Insurers and the Portfolio
Insurers have applied their own standards which correspond generally to the
standards they normally use in establishing the insurability of new issues of
municipal bonds and which are not necessarily the criteria used in the selection
of Bonds by the Sponsor. To the extent the standards of the Preinsured Bond
Insurers and the Portfolio Insurers are more restrictive than those of the
Sponsor, the previously stated Trust investment criteria have been
limited with respect to the Bonds. This decision is made prior to the Date of
Deposit, as debt obligations not eligible for insurance are not deposited in an
Insured Trust. Thus, all of the Bonds in the portfolios of the Insured Trusts in
the Fund are insured either by the respective Trust or by the issuer of the
Bonds, by a prior owner of such Bonds or by the Sponsor prior to the deposit of
such Bonds in a Trust.
Because the Bonds are insured by one of the Portfolio Insurers or one of the
Preinsured Bond Insurers as to the timely payment of principal and interest,
when due, and on the basis of the various reinsurance agreements in effect,
Standard & Poor's has assigned to the Units of each Insured Trust its "AAA"
investment rating. Such rating will be in effect for a period of thirteen months
from the Date of Deposit and will, unless renewed, terminate at the end of such
period. See "Description of Ratings". The obtaining of this rating by an Insured
Trust should not be construed as an approval of the offering of the Units by
Standard & Poor's or as a guarantee of the market value of such Trust or of the
Units.
An objective of portfolio insurance obtained by an Insured Trust is to obtain
a higher yield on the portfolio of such Trust than would be available if all the
Bonds in such portfolio had Standard & Poor's "AAA" rating and yet at the same
time to have the protection of insurance of prompt payment of interest and
principal, when due, on the Bonds. There is, of course, no certainty that this
result will be achieved. Preinsured Bonds in an Insured Trust (all of which are
rated "AAA" by Standard & Poor's) may or may not have a higher yield than
uninsured bonds rated "AAA" by Standard & Poor's. In selecting such Bonds for an
Insured Trust, the Sponsor has applied the criteria hereinbefore described.
In the event of nonpayment of interest or principal, when due, in respect of
a Bond, AMBAC 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 to the extent described under "Federal Tax Status" in Prospectus Part II.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made thereunder at some
time in the future. At the date hereof, it is reported that no claims have been
submitted or are expected to be submitted to any of the Portfolio Insurers which
would materially impair the ability of any such company to meet its commitment
pursuant to any contract of bond or portfolio insurance.
The information relating to each Portfolio Insurer has been furnished by such
companies. The financial information with respect to each Portfolio Insurer
appears in reports filed with state insurance regulatory authorities and is
subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates thereof.
PORTFOLIO ADMINISTRATION
The Trustee is empowered to sell, for the purpose of redeeming Units tendered
by any Unitholder, and for the payment of expenses for which funds may not be
available, such of the Bonds designated by the Evaluator as the Trustee in its
sole discretion may deem necessary. The Evaluator, in designating such Bonds,
will consider a variety of factors including (a) interest rates, (b) market
value and (c) marketability. The Sponsor, in connection with the Quality Trusts,
may direct the Trustee to dispose of Bonds upon default in payment of principal
or interest, institution of certain legal proceedings, default under other
documents adversely affecting debt service, default in payment of principal or
interest or other obligations of the same issuer, decline in projected income
pledged for debt service on revenue bonds or decline in price or the occurrence
of other market or credit factors, including advance refunding (i.e., the
issuance of refunding securities and the deposit of the proceeds thereof in
trust or escrow to retire the refunded securities on their respective redemption
dates), so that in the opinion of the Sponsor the retention of such Bonds would
be detrimental to the interest of the Unitholders. In connection with the
Insured Trusts to the extent that Bonds are sold which are current in payment of
principal and interest in order to meet redemption requests and defaulted Bonds
are retained in the portfolio in order to preserve the related insurance
protection applicable to said Bonds, the overall quality of the Bonds remaining
in such Trust's portfolio will tend to diminish. Except as described in this
section and in certain other unusual circumstances for which it is determined by
the Trustee to be in the best interests of the Unitholders or if there is no
alternative, the Trustee is not empowered to sell Bonds from an Insured Trust
which are in default in payment of principal or interest or in significant risk
of such default and for which value has been attributed for the insurance
obtained by such Insured Trust. Because of restrictions on the Trustee under
certain circumstances, the Sponsor may seek a full or partial suspension of the
right of Unitholders to redeem their Units in an Insured Trust. See "Rights of
Unitholders--Redemption of Units" in Prospectus Part II. The Sponsor is
empowered, but not obligated, to direct the Trustee to dispose of Bonds in the
event of an advanced refunding.
The Sponsor is required to instruct the Trustee to reject any offer made by
an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
(1) the issuer is in default with respect to such Bond or (2) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Bond in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder of the Trust thereby affected, identifying the
Bonds eliminated and the Bonds substituted therefor. Except as stated herein and
under "Fund Administration--Replacement Bonds" in Prospectus Part II regarding
the substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Fund of any securities other than the Bonds initially deposited is not
permitted.
If any default in the payment of principal or interest on any Bonds occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bonds within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
TRUSTEE INFORMATION
The Trustee is The Bank of New York, a trust company organized under the laws
of New York. The Bank of New York has its unit investment trust division offices
at 101 Barclay Street, New York, New York 10286, telephone (800) 221-7668. The
Bank of New York is subject to supervision and examination by the Superintendent
of Banks of the State of New York and the Board of Governors of the Federal
Reserve System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Fund. Such records
shall include the name and address of, and the certificates issued by the Fund
to, every Unitholder of the Fund. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or Federal statute, rule or
regulation. The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Bonds held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all Fund
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon receiving
notice of such resignation is obligated to appoint a successor trustee promptly.
If, upon such resignation, no successor trustee has been appointed and has
accepted the appointment within 30 days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee. Any
corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
TERMINATION OF THE TRUST AGREEMENT
A Trust may be terminated at any time by consent of Unitholders of 51% of the
Units of such Trust then outstanding or by the Trustee when the value of such
Trust, as shown by any semi-annual evaluation, is less than 20% of the original
principal amount of Bonds. A Trust will be liquidated by the Trustee in the
event that a sufficient number of Units not yet sold are tendered for redemption
by the Underwriters, including the Sponsor, so that the net worth of such Trust
would be reduced to less than 40% of the initial principal amount of such Trust.
If a Trust is liquidated because of the redemption of unsold Units by the
Underwriters, the Sponsor will refund to each purchaser of Units the entire
sales charge paid by such purchaser. The Trust Agreement provides that each
Trust shall terminate upon the redemption, sale or other disposition of the last
Bond held in such Trust, but in no event shall it continue beyond the end of the
year preceding the fiftieth anniversary of the Trust Agreement in the case of an
IM-IT Discount, a U.S. Territorial IM-IT, a Long-Term State or a National
Quality Trust, or beyond the end of the year preceding the twentieth anniversary
of the Trust Agreement in the case of IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short Intermediate
Trusts. In the event of termination of any Trust, written notice thereof will be
sent by the Trustee to each Unitholder of such Trust at his address appearing on
the registration books of the Fund maintained by the Trustee. Within a
reasonable time thereafter the Trustee shall liquidate any Bond then held in
such Trust and shall deduct from the funds of such Trust any accrued costs,
expenses or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and costs of liquidation and any amounts required as
a reserve to provide for payment of any applicable taxes or other government
charges. The sale of Bonds in the Trust upon termination may result in a lower
amount than might otherwise be realized if such sale were not required at such
time. For this reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount or par amount of Bonds
represented by the Units held by such Unitholder. The Trustee shall then
distribute to each Unitholder his share of the balance of the Interest and
Principal Accounts. With such distribution the Unitholder shall be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion shall determine that any amounts held in reserve
are no longer necessary, it shall make distribution thereof to Unitholders in
the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so insured
are held by such Trust, the price to be received by such Trust upon the
disposition of any such Bond which is in default, by reason of nonpayment of
principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for the
Trustee to, and the Trustee does not currently intend to, dispose of any Bond or
Bonds if retention of such Bond or Bonds, until due, shall be deemed to be in
the best interest of Unitholders, including, but not limited to, situations in
which a Bond or Bonds so insured have deteriorated market prices resulting from
a significant risk of default. Since the Preinsured Bonds will reflect the value
of the related insurance, it is the present intention of the Sponsor not to
direct the Trustee to hold any of such Preinsured Bonds after the date of
termination. All proceeds received, less applicable expenses, from insurance on
defaulted Bonds not disposed of at the date of termination will ultimately be
distributed to Unitholders of record as of such date of termination as soon as
practicable after the date such defaulted Bond or Bonds become due and
applicable insurance proceeds have been received by the Trustee.
DESCRIPTION OF RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES. A Standard &
Poor's municipal bond rating is a current assessment of the creditworthiness of
an obligor with respect to a specific debt obligation. This assessment of
creditworthiness may take into consideration obligors such as guarantors,
insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
II.Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Provisional Ratings: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion,
makes no comment on the likelihood of, or the risk of default upon failure of,
such completion. Accordingly, the investor should exercise his own judgment with
respect to such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable Moody's
rating symbols and their meanings follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large, or by an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. With the occasional
exception of oversupply in a few specific instances, the safety of obligations
of this class is so absolute that their market value is affected solely by money
market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. These Aa bonds are high grade, their market value virtually immune
to all but money market influences, with the occasional exception of oversupply
in a few specific instances.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as higher medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. The market
value of A-rated bonds may be influenced to some degree by credit circumstances
during a sustained period of depressed business conditions. During periods of
normalcy, bonds of this quality frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few specific
instances.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the high
end of its category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Con--Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of the Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under combined Federal and State taxes
(where applicable) using the published Federal and State tax rates (where
applicable) scheduled to be in effect in 1998. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you would
have to earn on taxable investments to equal the tax-exempt estimated current
return in your income tax bracket. The tables assume that Federal taxable income
is equal to State income subject to tax, and for cases in which more than one
State rate falls within a Federal bracket, the State rate corresponding to the
highest income within that Federal bracket is used. The combined State and
Federal tax rates shown reflect the fact that State tax payments are currently
deductible for Federal tax purposes. The tables do not reflect any local taxes
or any taxes other than personal income taxes. The tables do not show the
approximate taxable estimated current returns for individuals that are subject
to the alternative minimum tax. The taxable equivalent estimated current returns
may be somewhat higher than the equivalent returns indicated in the following
tables for those individuals who have adjusted gross incomes in excess of
$124,500. The tables do not reflect the effect of Federal or State limitations
(if any) on the amount of allowable itemized deductions and the deduction for
personal or dependent exemptions or any other credits. These limitations were
designed to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the marginal maximum Federal tax
rate to approximately 44 percent for taxpayers filing a joint return and
entitled to four personal exemptions and to approximately 41 percent for
taxpayers filing a single return entitled to only one personal exemption. These
limitations are subject to certain maximums, which depend on the number of
exemptions claimed and the total amount of taxpayer's itemized deductions. For
example, the limitation on itemized deductions will not cause a taxpayer to lose
more than 80% of his allowable itemized deductions, with certain exceptions. See
"Federal Tax Status" in Prospectus Part II for a more detailed discussion of
recent Federal tax legislation.
<TABLE>
<CAPTION>
CALIFORNIA
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET* EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25.35 $ 0 - 42.35 20.1% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
25.35 - 61.40 42.35 - 102.30 34.7 6.13 6.89 7.66 8.42 9.19 9.95 10.72
61.40 - 128.10 102.30 - 155.95 37.4 6.39 7.19 7.99 8.79 9.58 10.38 11.18
128.10 - 278.45 155.95 - 278.45 42.0 6.90 7.76 8.62 9.48 10.34 11.21 12.07
Over 278.45 Over 278.45 45.2 7.30 8.21 9.12 10.04 10.95 11.86 12.77
- -------------------
*The State tax brackets are those for 1997. The 1998 brackets will be adjusted
to take into account changes in the California Consumer Price Index. These
adjustments have not yet been released.
<CAPTION>
COLORADO
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25.35 $ 0 - 42.35 19.3% 4.96% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67%
25.35 - 61.40 42.35 - 102.30 31.6 5.85 6.58 7.31 8.04 8.77 9.50 10.23
61.40 - 128.10 102.30 - 155.95 34.5 6.11 6.87 7.63 8.40 9.16 9.92 10.69
128.10 - 278.45 155.95 - 278.45 39.2 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over 278.45 Over 278.45 42.6 6.97 7.84 8.71 9.58 10.45 11.32 12.20
<CAPTION>
NEW YORK
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET* EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 25.35 $ 0 - 42.35 20.8% 5.05% 5.68% 6.31% 6.94% 7.58% 8.21% 8.84%
25.35 - 61.40 42.35 - 102.30 32.9 5.96 6.71 7.45 8.20 8.94 9.69 10.43
61.40 - 128.10 102.30 - 155.95 35.7 6.22 7.00 7.78 8.55 9.33 10.11 10.89
128.10 - 278.45 155.95 - 278.45 40.4 6.71 7.55 8.39 9.23 10.07 10.91 11.74
Over 278.45 Over 278.45 43.7 7.10 7.99 8.88 9.77 10.66 11.55 12.43
</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.
A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns on
the Trusts and returns over specified periods on other similar Van Kampen
American Capital sponsored unit investment trusts with inflation rates and with
returns on taxable investments such as corporate or U.S. Government bonds, bank
CDs and money market accounts or money market funds, each of which has
investment characteristics that may differ from those of the Trusts. U.S.
Government bonds, for example, are backed by the full faith and credit of the
federal government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the condition
of the short-term debt market. The investment characteristics of the Trusts are
described more fully in the Prospectus.
CALIFORNIA RISK FACTORS
Economic Factors. Each California Trust is susceptible to political, economic
or regulatory factors affecting issuers of California municipal obligations (the
"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 a Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
Since the recession in California in the early 1990's, California has made a
significant recovery. Deep cuts in the nation's defense budget were the main
reason that California's downturn was so severe. By 1996, nearly 60% of
California's more than 385,000 aerospace jobs had been eliminated. In addition,
California suffered more than two-thirds of all of the nation's job losses
resulting from military base closures. Federal Department of Defense civilian
employment in California is down more than 60,000 from the late 1980s peak and
is still falling.
Yet, in 1997, California's economy outperformed the national economy due to
strong growth in high-technology manufacturing and services. Employment growth
was 3.1% in 1997, adding approximately 400,000 new jobs. Since 1995,
California's rate of job growth has been roughly one and one-half times the
national average rate of increase. Among industries, business services is the
leading job producer adding close to 70,000 jobs in 1997. One-third of that
increase was concentrated in computer software. Construction was California's
second leading source of new jobs in 1997, adding nearly 50,000 jobs, driven by
a 28% increase in nonresidential building activity. California's large labor
force, at 15,873,000 in 1997, had an unemployment rate of 6.3% in 1997. In
comparison, the 1997 unemployment rate for the United States was 4.9%.
Personal income grew by 7.2% in 1997. Personal income exceeded the national
rate of increase by a considerable margin. Wage and salary increased by 7.7%;
proprietors' growth was 7.9%; and an increase in property income (dividends,
interest, and rent) was over 9.3%. In contrast, transfer payments (including
unemployment insurance, welfare, Social Security, and Medicare) were up only 2%
in 1997, the smallest gain in more than 60 years.
California is the nation's leading export state, with shipments of
California-made goods to other countries exceeding $100 billion in 1996.
California exports 15 to 16% of its trillion dollar domestic product to other
countries, compared to less than 11% for the U.S. as a whole. Events in Asia
could have implications for California. Over half of California-made goods
exports are sold to Asia, and the state has already seen declines in cargoes
destined for Japan, South Korea, Singapore and Malaysia. At the same time,
strong growth continues in exports to Taiwan, Hong Kong, and Mexico. Overall,
exports of California-made goods slowed to 2% growth in the first half of 1997,
from over 8% the year before. Strong export growth was a major element during
the initial stages of the state's recovery in 1994 and 1995. The upturn has
broadened sufficiently over the last two years, to the point that California is
now posting solid gains in employment and income despite the slowing of exports.
For 1998, California's economy should continue to see robust growth. Nonfarm
employment is expected to increase 2.8% or 365,000 jobs. Unemployment is
expected to drop to 5.6% in 1998. Personal income is projected to drop slightly
to a 6.3% increase in 1998.
During 1997, several tax reform and business measures were enacted.
California's Workers' Compensation system which previously had some of the
highest premiums and lowest benefits in the nation, was reformed with a 40%
premium reduction, saving employers more than $4 billion per year. The Bank and
Corporation tax was cut by 5% to 8.84%, thus lowering the cost of doing business
in California by $300 million per year. The tax rate on Subchapter "S"
corporations was reduced from 2.5% to 1.5%, and the requirements for
qualification for Subchapter "S" status were conformed to recent federal law
changes. Personal income taxes were reduced by $1.1 billion in 1997 and when the
tax package is fully implemented in 1999-2000, the personal income tax cut will
total $800 million.
CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS
Limitation on Taxes. 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 the rate of inflation, not to exceed 2% per year or
decline in value, 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.
Appropriations Limits. 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
consist 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" exclude 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. With respect to local
governments, excess revenues must be returned by a revision of tax rates or fee
schedules within the two subsequent fiscal years. The appropriations limit for a
local government may be overridden by referendum under certain conditions for up
to four years at a time. With respect to the State, 50% of any excess revenues
is to be distributed to K-12 school districts and community college districts
(collectively, "K-14 districts") and the other 50% is to be refunded to
taxpayers. With more liberal annual adjustment factors since 1988, and depressed
revenues since 1990 because of the recession, few governments, including the
State, 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.
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 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 initiatives or legislative changes in laws or the
California Constitution may also affect the ability of the State or local
issuers to repay their obligations.
Obligations of the State of California. Under the California Constitution,
debt service on outstanding general obligation bonds is the second charge to the
General Fund after support of the public school system and public institutions
of higher education. The State had $14.9 billion aggregate principal amount of
non-self liquidating general obligation bonds outstanding, and $6.4 billion
authorized and unissued, as of December 31, 1997. Outstanding lease revenue
bonds totaled $7.2 billion as of December 31, 1997, and are estimated to total
$7.5 billion as of June 30, 1998.
From July 1, 1996 to July 1, 1997, the State issued approximately $1.03
billion in non-self liquidating general obligation bonds and $1.26 billion in
revenue bonds. Refunding bonds, which are used to refinance existing long-term
debt, accounted for none of the general obligation bonds and $841.38 million of
the revenue bonds.
General Fund general obligation debt service expenditures for fiscal year
1996-97 were $1.92 billion, and are estimated at $1.89 billion for fiscal year
1997-98.
Recent Financial Results. 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. As of November
30, 1997, the General Fund had outstanding internal loans from Special Funds of
$2.8 billion (in addition, there are $3 billion of external loans represented by
the 1997 Revenue Anticipation Notes, which mature on June 30, 1998). The revised
projected 1997-98 fiscal year balance in the General Fund Reserve for Economic
Uncertainties is $329 million. Special Fund revenues are estimated at $14.2
billion for the 1997-98 fiscal year and appropriated Special Fund expenditures
at $14.4 billion.
The Budget. California's solid economic performance during 1997 led to
healthy revenue growth. General Fund collections grew by over 6% in fiscal year
1996-97 to reach $49.2 billion, an increase of $2.9 billion from the prior year.
Revenue for the 1997-98 and 1998-99 fiscal years is expected to reach $52.9
billion and $55.4 billion, respectively. This represents annual growth of $3.7
billion (7.5%) for 1997-98 and $2.5 billion (4.7%) for 1998-99.
Overall, General Fund revenues and transfers represent nearly 80% of total
revenues. The remaining 20% are special funds dedicated to specific programs.
The three largest revenue sources (personal income, sales, and bank and
corporation) account for about 75% of total revenues with personal income
comprising 50% of the total. The personal income tax in fiscal year 1997 was
$23,273 million and is expected to increase 11.6% for 1997-98 and 6.4% for
1998-99. The enactment of the Federal Taxpayer Relief Act of 1997 is expected to
result in changes in taxpayer behavior that will generate additional state
revenue (from increased capital gains realizations), adding $480 million to
personal income tax receipts in 1997-98 and $560 million in 1998-99.
Expenditures for the 1996-97 fiscal year were $49.1 billion, an 8% increase.
Expenditures for the 1997-98 fiscal year are estimated at $53 billion. As of
June 30, 1997, the General Fund balance was $906 million. The estimate for June
30, 1998 is $773.8 million.
Proposed 1998-99 Budget. The Governor's proposed budget for fiscal year
1998-99 is designed to further economic growth, educational reform, public
safety, and maintain government and environmental quality. K-12 education
remains the State's top funding priority. The Budget includes $350 million to
lengthen the school year to 180 days. The Budget fully funds the fourth and
final year of the Governor's "Compact with Higher Education" and calls for the
development of a new compact with UC and CSU. The Budget provides $50 million in
General Fund and $200 million in a proposed bond to capitalize the
Infrastructure and Development Bank, while will help businesses locate and
expand in California. The Budget also proposes a $7 billion investment plan to
maintain and build the State's school system, water supply, prisons, natural
resources, and other important infrastructure.
Bond Rating. The State's general obligation bonds have received ratings of
"A1" by Moody's Investors Service, "A+" by Standard & Poor's Ratings Group and
"A+" by Fitch IBCA, Inc. (formerly Fitch Investors Service, L.P.). 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.
Cash Management Policies. Cash temporarily idle during each fiscal year is
invested in the Pooled Money Investment Account (PMIA). The investment of PIMA
is restricted by law to the following categories: U.S. Government securities,
securities of federally sponsored agencies, domestic corporate bonds, bank
notes, interest-bearing time deposits in California banks and savings and loan
associations, prime commercial paper, repurchase and reverse repurchase
agreements, security loans, bankers' acceptances, negotiable certificates of
deposit, and loans to various bond funds. The average daily investment balance
for the year ended June 30, 1997, amounted to $28.3 billion, with an average
effective yield of 5.6%. For the year ended June 30, 1996, the average daily
investment was $26.6 billion and the average effective yield was 5.71%. Total
earnings of the PMIA for fiscal year 1996-97 amounted to $1.6 billion.
Legal Proceedings. 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. In January of 1997, California experienced major
flooding in six different areas with current estimates of property damage to be
approximately $1.6 to $2 billion. One lawsuit has been filed by 500 homeowners
and more lawsuits are expected. Exposure from all of the anticipated cases
arising from these floods could total approximately $2 billion.
The primary government is a defendant in Ceridian Corporation v. Franchise
Tax Board, a suit which challenges the validity of two sections of the
California tax laws. The first relates to deduction from corporate taxes for
dividends received fro insurance companies to the extent the insurance companies
have California activities. The second relates to corporate deduction of
dividends to the extent the earnings of the dividend paying corporation have
already been included in the measure of their California tax. If both sections
of the California Tax law are invalidated, and all dividends become deductible,
then the General fund can become liable for approximately $200-$250 million
annually.
OBLIGATIONS OF OTHER ISSUERS
Other Issuers of California Municipal Obligations. There are a number of
state agencies, instrumentalities and political subdivisions of the State that
issue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of the
obligations backed by the full faith and credit of the State.
State Assistance. 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.
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 further reduced. Any such reductions in
State aid could compound the serious fiscal constraints already experienced by
many local governments, particularly counties. At least one rural county (Butte)
publicly announced that it might enter bankruptcy proceedings in August 1990,
although such plans were put off after the Governor approved legislation to
provide additional funds for the county. Other counties have also indicated that
their budgetary condition is extremely grave. The Richmond Unified School
District (Contra Costa County) entered bankruptcy proceedings in May 1991 but
the proceedings were dismissed. Los Angeles County, the largest in the State,
has reported severe fiscal problems, leading to a nominal $1.2 billion deficit
in its $11 billion budget for the 1995-96 fiscal year. To balance the budget,
the county imposed severe cuts in services, particularly for health care. The
Legislature is considering actions to help alleviate the County's fiscal
problems, but none were completed before August 15, 1995. As a result of its
bankruptcy proceedings (discussed further below) Orange County also implemented
stringent cuts in services and laid off workers.
Assessment Bonds. 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.
California Long-Term Lease Obligations. 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 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 District's lease. The trial court has
upheld the validity of the lease and the case has been settled. Any judgment in
a 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.
Other Considerations. 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 predict the extent to which any such legislation
will be enacted. Nor is it 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. Northern California, in 1989, and southern
California, in 1994, experienced major earthquakes causing billions of dollars
in damages. The federal government provided more than $13 billion in aid for
both earthquakes, and neither event is expected to have any long-term negative
economic impact. Any California Municipal Obligation in a California Trust 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.
On December 7, 1994, Orange County, California (the "County"), together with
its pooled investment fund (the "County Pooled Fund") filed for protection under
Chapter 9 of the federal Bankruptcy Code, after reports that the County Pooled
Fund had suffered significant market losses in its investments caused a
liquidity crisis for the County Pooled Fund and the County. More than 180 other
public entities, most but not all located in the County, were depositors in the
County Pooled Fund. As of mid-January 1995, the County estimated that the County
Pooled Fund had lost about $1.64 billion, or 23%, of its initial deposits of
around $7.5 billion. The Pooled Fund has been almost completely restructured to
reduce its exposure to changes in County interest rates. Many of the entities
which kept moneys in the County Pooled Fund, including the County, faced cash
flow difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. The County and some of these entities have, and
others may in the future, default in payment of their obligations. At that time,
Moody's and Standard & Poor's suspended, reduced to below investment grade
levels, or placed on "Credit Watch" various securities of the County and the
entities participating in the Pooled Fund.
The State of California has no obligation with respect to any obligations or
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.
COLORADO RISK FACTORS
Restrictions on Appropriations and Revenues. The State Constitution requires
that expenditures for any fiscal year not exceed revenues for such fiscal year.
By statute, the amount of General Fund revenues available for appropriation is
based upon revenue estimates which, together with other available resources,
must exceed annual appropriations by the amount of the unappropriated reserve
(the "Unappropriated Reserve"). The Unappropriated Reserve requirement for
fiscal year 1991, 1992 and 1993 was set at 3% of total appropriations from the
General Fund. For fiscal years 1994 and thereafter, the Unappropriated Reserve
requirement is set at 4%. In addition to the Unappropriated Reserve, a
constitutional amendment approved by Colorado voters in 1992 requires the State
and local government to reserve a certain percentage of its fiscal year spending
(excluding bonded debt service) for emergency use (the "Emergency Reserve"). The
minimum Emergency Reserve is set at 2% for 1994 and 3% for 1995 and later years.
For fiscal year 1992 and thereafter, General Fund appropriations are also
limited by statute to an amount equal to the cost of performing certain required
reappraisals of taxable property plus an amount equal to the lesser of (i) 5% of
Colorado personal income or (ii) 106% of the total General Fund appropriations
for the previous fiscal year. This restriction does not apply to any General
Fund appropriations which are required as a result of a new federal law, a final
state or federal court order or moneys derived from the increase in the rate or
amount of any tax or fee approved by a majority of the registered electors of
the State voting at any general election. In addition, the statutory limit on
the level of General Fund appropriations may be exceeded for a given fiscal year
upon the declaration of a State fiscal emergency by the State General Assembly.
The 1997 fiscal year ending General Fund balance was $375.1 million, which
was $208.4 million over the combined Unappropriated Reserve and Emergency
Reserve requirement. Based on March 20, 1998 estimates, the 1998 fiscal year
ending General Fund balance is expected to be $320.0 million, or $143.1 million
over the required Unappropriated Reserve and Emergency Reserve.
On November 3, 1992, voters in Colorado approved a constitutional amendment
(the "Amendment") which, in general, became effective December 31, 1992, and
which could restrict the ability of the State and local governments to increase
revenues and impose taxes. The Amendment applies to the State and all local
governments, including home rule entities ("Districts"). Enterprises, defined as
government-owned businesses authorized to issue revenue bonds and receiving
under 10% of annual revenue in grants from all Colorado state and local
governments combined, are excluded from the provisions of the Amendment.
The provisions of the Amendment are unclear and have required judicial
interpretation. Among other provisions, beginning November 4, 1992, the
Amendment requires voter approval prior to tax increases, creation of debt, or
mill levy or valuation for assessment ratio increases. The Amendment also limits
increases in government spending and property tax revenues to specified
percentages. The Amendment requires that District property tax revenues yield no
more than the prior year's revenues adjusted for inflation, voter approved
changes and (except with regard to school districts) local growth in property
values according to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment. Pursuant to the
Amendment, local government spending is to be limited by the same formula as the
limitation for property tax revenues. The Amendment limits increases in
expenditures from the State General Fund and program revenues (cash funds) to
the growth in inflation plus the percentage change in state population in the
prior calendar year. The basis for spending and revenue limits for each fiscal
year is the prior fiscal year's spending and property taxes collected in the
prior calendar year. Debt service changes, reductions and voter-approved revenue
changes are excluded from the calculation bases. The Amendment also prohibits
new or increased real property transfer tax rates, new state real property taxes
and local district income taxes.
Litigation concerning several issues relating to the Amendment was filed in
the Colorado courts. The litigation dealt with three principal issues: (i)
whether Districts can increase mill levies to pay debt service on general
obligation bonds without obtaining voter approval; (ii) whether a multi-year
lease purchase agreement subject to annual appropriations is an obligation which
requires voter approval prior to execution of the agreement; and (iii) what
constitutes an "enterprise" which is excluded from the provisions of the
Amendment. In September 1994, the Colorado Supreme Court held that Districts can
increase mill levies to pay debt service on general obligation bonds issued
after the effective date of the Amendment; in June, 1995, the Colorado Supreme
Court validated mill levy increases to pay general obligation bonds issued prior
to the Amendment. In late 1994, the Colorado Court of Appeals held that
multi-year lease-purchase agreements subject to annual appropriation do not
require voter approval. The time to file an appeal in that case has expired.
Finally, in May, 1995, the Colorado Supreme Court ruled that entities with the
power to levy taxes may not themselves be "enterprises" for purposes of the
Amendment; however, the Court did not address the issue of how valid enterprises
may be created. Litigation in the "enterprise" arena may be filed in the future
to clarify these issues.
According to the Colorado Economic Perspective, Third Quarter, FY 1997-98,
March 20, 1998 (the "Economic Report"), inflation for 1995 was 4.3% and
population grew at the rate of 2.3% in Colorado. Accordingly, under the
Amendment, increases in State expenditures during the 1997 fiscal year were
limited to 6.6% over expenditures during the 1996 fiscal year. The 1996 fiscal
year is the base year for calculating the limitation for the 1997 fiscal year.
The limitation for the 1998 fiscal year is 5.5%, based on inflation of 3.5% and
population growth of 2.0% during 1996. For the 1996 fiscal year, General Fund
revenues totaled $4,230.8 million and program revenues (cash funds) totaled
$1,893.5 million, resulting in total base revenues of $6,124.3 million.
Expenditures for the 1997 fiscal year, therefore, could not exceed $6,508.6
million. The 1997 fiscal year General Fund and program revenues (cash funds)
totaled $6,647.6 million, or $139.0 million more than expenditures allowed under
the spending limitation. This is the first time the state breached the limit
since its implementation in 1992. This excess revenue of $139.0 million will be
refunded to Colorado taxpayers during the 1998 tax filing season. The Economic
Report estimates that the limit will be breached by $416.1 million in fiscal
year 1997-98.
There is also a statutory restriction on the amount of annual increases in
taxes that the various taxing jurisdictions in Colorado can levy without
electoral approval. This restriction does not apply to taxes levied to pay
general obligation debt.
State Finances. As the State experienced revenue shortfalls in the mid-1980s,
it adopted various measures, including impoundment of funds by the Governor,
reduction of appropriations by the General Assembly, a temporary increase in the
sales tax, deferral of certain tax reductions and inter-fund borrowings. On a
GAAP basis, the State had General Fund balances (before reserves) at June 30 of
approximately $405.1 million in fiscal year 1994, $486.7 million in fiscal year
1995, $368.5 million in fiscal year 1996 and $375.1 million in fiscal year 1997.
The fiscal year 1998 ending General Fund balance (before reserves) is projected
at $320.0 million.
Revenues for the fiscal year ending June 30, 1997, showed Colorado's general
fund increasing after a slowdown in 1996. Revenues grew by $410.7 million to
$4,679.4 million, a 9.6% increase from 1996. This figure was higher than the
fiscal year 1996 pace of 6.8%. General Fund revenues exceeded expenditures by
$145.0 million. The turnaround in fiscal year 1997 came as a result of surging
corporate, use and individual income taxes, which rose 15.3%, 11.0% and 12.6%,
respectively.
For fiscal year 1997, the following tax categories generated the following
respective revenue percentages of the State's $4,679.4 million total gross
receipts: individual income taxes represented 55% of gross fiscal year 1997
receipts; sales, use and excise taxes represented 30.5% of gross fiscal year
1997 receipts; and corporate income taxes represented 5.1% of gross fiscal year
1997 receipts. The percentages of General Fund revenue generated by type of tax
for fiscal year 1998 are not expected to be significantly different from fiscal
year 1997 percentages.
For fiscal year 1998, General Fund revenues are projected at $5,230.6
million. Revenue growth is expected to increase 11.8% over FY 1997 actual
revenues. General fund expenditures are estimated at $4,716.2 million. The
ending General Fund balance for fiscal year 1998, after reserve set-asides, is
$143.1 million.
State Debt. Under its constitution, the State of Colorado is not permitted to
issue general obligation bonds secured by the full faith and credit of the
State. However, certain agencies and instrumentalities of the State are
authorized to issue bonds secured by revenues from specific projects and
activities. The State enters into certain lease transactions which are subject
to annual renewal at the option of the State. In addition, the State is
authorized to issue short-term revenue anticipation notes. Local governmental
units in the State are also authorized to incur indebtedness. The major source
of financing for such local government indebtedness is an ad valorem property
tax. In addition, in order to finance public projects, local governments in the
State can issue revenue bonds payable from the revenues of a utility or
enterprise or from the proceeds of an excise tax, or assessment bonds payable
from special assessments. Colorado local governments can also finance public
projects through leases which are subject to annual appropriation at the option
of the local government. Local governments in Colorado also issue tax
anticipation notes. The Amendment requires prior voter approval for the creation
of any multiple fiscal year debt or other financial obligation whatsoever,
except for refundings at a lower rate or obligations of an enterprise.
State Economy. Based on data published by the Colorado Department of Labor
and Employment, total wage and salary employment in 1997 was 1,977,000
(seasonally adjusted). This was an increase of 76,600 from 1996. Services and
trade were the number one and two largest growing industries in Colorado in
1997, followed by the finance, insurance, and real estate sector. Construction
was the fourth largest source of employment growth in 1997.
The annual average unemployment rate in Colorado from 1994 to 1996 remained
stable at 4.2%. In 1997, the unemployment rate in Colorado dropped to 3.3% while
the nation's unemployment rate was 5.0%. Colorado's job growth rate increased
4.0% in 1997, an increase from the 3.6% growth rate in 1996. In comparison, the
job growth rate for the United States in 1996 and 1997 was 2.0% and 2.3%,
respectively. Total nonagricultural employment in Colorado is expected to
increase 3.4% in 1998.
Personal income rose 7.0% in Colorado during 1997 as compared with 5.8% for
the nation as a whole. In 1998, Colorado's personal income is expected to drop
to 5.8%, yet outpacing the nation's 1998 estimated rate of 5.2%.
The year 1998 will look much like 1997. There will be some slowing of
population, housing starts and employment, but the outlook is still strong.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in the
Colorado Trust), which, to varying degrees, have also experienced reduced
revenues as a result of recessionary conditions and other factors.
NEW YORK 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.
(1) The State: 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. However, the State's 1995-96 budget reflected
significant actions to reduce the burden of State taxation, including adoption
of a 3-year, 20% reduction in the State's personal income tax. During 1996-97,
New York led the nation in tax cuts, at 54.1%, bringing the total value of tax
reductions in effect for the 1997 year to over $6 billion. Annual savings are
intended to grow to $12 billion by 2001-02. When measured as a percentage of
personal income, state-imposed taxes in New York should be below the national
median in 1998. The budget for fiscal year 1998-99 proposes an additional $700
million in tax reductions.
Slowdown of Regional Economy. A national recession commenced in mid-1990.
Economic recovery started considerably later in the State than in the nation as
a whole due in part to the significant retrenchment in the banking and financial
services industries, downsizing by several major corporations, cutbacks in
defense spending, and an oversupply of office buildings. In the last few years,
New York has shown signs of economic resurgence. New York has gone from last in
the nation in percentage of private sector employment growth to a level that is
on par with the national average, gaining 250,000 private sector jobs since
December 1994. Overall employment growth was close to 1.4% for 1997. National
employment growth in 1997 was estimated at 2.3%. The New York economy in 1998 is
expected to grow at about the same rate as in 1997. Many uncertainties exist in
forecasts of both the national and State economies and there can be no assurance
that the State economy will perform at a level sufficient to meet the State's
projections of receipts and disbursements. Personal income is expected to
increase 6.1% in 1997 and 4.5% in 1998.
1997-98 Fiscal Year. The 1997-98 General Fund Financial Plan continues to be
balanced, with a projected surplus of $1.83 billion. This will be the third
consecutive budget surplus generated by the Governor's administration. Of this
amount, $700 million is being used to finance one-time costs related to an extra
27th payroll and 53rd Medicaid cycle ($282 million) due to the cyclical timing
of these payments and to provide "hard-dollar" financing for capital projects of
the Community Enhancement Facilities Assistance Program which were previously
anticipated to be supported with bond proceeds. Proposed tax cut accelerations
account for the use of another $685 million of the surplus. Of the remainder,
$365 million is being used to finance 1998-99 Executive Budget recommendations,
and $68 million is being deposited into the Tax Stabilization Reserve Fund (the
State's "rainy day" fund) as provided by the Constitution. This is the third
consecutive extraordinary deposit in the rainy day fund and increases the size
of that fund to $400 million by the end of 1997-98, the highest balance ever
achieved.
The surplus results primarily from growth in projected receipts. As compared
to the enacted budget, revenues increased by $1.28 billion, while disbursements
increased by only $565 million. These changes from Mid-Year Financial Plan
projections reflect actual results through December 1997 as well as modified
economic and caseload projections for the balance of the fiscal year.
The General Fund is projected to be balanced on a cash basis for the 1997-98
fiscal year. Total receipts and transfers from other funds are projected to be
$35.197 billion, an increase of $216 billion from total receipts in the prior
fiscal year. Total General Fund disbursements and transfers to other funds are
projected to be $35.165 billion, an increase of $2.26 billion from the total
amount disbursed in the prior fiscal year.
The General Fund closing balance is expected to be $465 million at the end of
1997-98. Of this amount, $400 million will be on deposit in the Tax
Stabilization Reserve Fund (TSRF), while another $65 million will be on deposit
in the Contingency Reserve Fund (CRF) after a $24 million deposit in 1997-98.
The TSRF had an opening balance of $317 million to be supplemented by a required
payment of $15 million and an extraordinary maximum deposit of $68 million from
surplus 1997-98 monies.
In recent years, State actions affecting the level of receipts and
disbursements, as well as the relative strength of the State and regional
economy, actions of the Federal government and other factors, have created
structural gaps for the State. These gaps resulted from a significant disparity
between recurring revenues and the costs of maintaining or increasing the level
of support for State programs. As noted, the 1997-98 enacted budget combines
significant tax and program reductions which will, in the current and future
years, lower both the recurring receipts base (before the effect of any economic
stimulus from such tax reductions) and the historical annual growth in State
program spending. Notwithstanding these changes, the State can expect to
continue to confront structural deficits in future years.
One major uncertainty to the 1997-98 State Financial Plan continues to be
risks related to the economy and tax collections, which could produce either
favorable or unfavorable variances during the balance of the year. It is
possible that recent changes could produce slower economic growth and a
deterioration in State receipts. An additional risk to the 1997-98 State
Financial Plan arises from the potential impact of certain litigation now
pending against the State, which could produce adverse effects on the State's
projections of receipts and disbursements.
1998-99 Fiscal Year. General Fund receipts in 1998-99 will reflect the
initial phases of the STAR property tax reduction program as well as the
continuing impact of other 1997 and earlier tax reduction accomplishments. In
addition, the 1998-99 budget reflects several tax reduction proposals that will
reduce receipts available to the General Fund by about $700 million during the
fiscal year. Recurring growth in the State General Fund tax base is projected to
be nearly 6% during 1998-99. That growth rate is lower than that achieved in
1996-97 or currently estimated for 1997-98 and roughly equivalent to the rate
experienced in 1995-96. Total General Fund receipts for 1998-99 are projected at
$36.22 billion, an increase of more than $1 billion from the revised 1997-98
estimate. The largest source of receipts is the sales and use tax which accounts
for nearly 80% of projected receipts.
Total General Fund spending in the 1998-99 Executive Budget is projected to
increase $1.02 billion of 2.89% from the current year. The average annual
increase since 1994-95 is 1.85%. This rate is below the rate of inflation and
much lower than the average annual increase of 5.4% prior to 1994-95.
Education's recommended share of General Fund spending is 30% in 1998-99 and
criminal justice spending is 6.5%. Medicaid and welfare spending growth has been
reduced, reflecting Medicaid and welfare reforms implemented since 1995.
The 1998-99 Financial Plan includes approximately $62 million in
non-recurring resources, the lowest projected level ever recorded. In fiscal
year 1986-87 through 1994-95, the average annual level of one-timers was
approximately $819 million.
The projected 1998-99 closing fund balance of $500 million in the General
Fund is composed of monies available in the TSRF and the CRF. An additional
deposit of $35 million will supplement the $65 million balance in the CRF,
increasing that amount available for possible litigation risks to $100 million
in 1998-99.
On November 16, 1993, the Court of Appeals, the State's highest court,
affirmed the decision of a lower court in three actions, which declared
unconstitutional State actuarial funding methods for determining State and local
contributions to the State employee retirement system. Following the decision,
the State Comptroller developed a plan to phase in a constitutional funding
method and to restore prior funding levels of the retirement systems over a
four-year period. The plan is not expected to require the State to make
additional contributions with respect to the 1993-94 fiscal year nor to
materially and adversely affect the State's financial condition thereafter.
Through fiscal year 1998-99, the State expects to contribute $643 million more
to the retirement plans that would have been required under the prior funding
method.
Future Fiscal Years. 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.
Indebtedness. As of March 31, 1997, the total amount of long-term State
general obligation debt authorized but unissued stood at $2.767 billion. As of
the same date, the State had approximately $5.03 billion in outstanding general
obligation debt, including $294 million of Bond Anticipation Notes ("BANS")
outstanding.
As of March 31, 1997, $22.499 billion of bonds, issued in connection with
lease-purchase and contractual obligation financings of State capital programs,
were outstanding. The total amount of outstanding State-supported debt as of
March 31, 1997 was $32.766 billion. As of March 31, 1997, total State-related
debt (which includes the State-supported debt, moral obligation and certain
other financings and State-guaranteed debt) was $37.114 billion.
The State anticipates that its borrowings for capital purposes during the
State's 1997-98 fiscal year will consist of $605 million in general obligation
bonds and BANS and $140 million in general obligation commercial paper. The
Legislature has also authorized the issuance of $311 million in certificates of
participation (including costs of issuance, reserve funds and other costs)
during the State's 1997-98 fiscal year for equipment purchases. The projection
of the State regarding its borrowings for the 1997-98 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. As of June,
1995, LGAC had issued bonds and notes to provide net proceeds of $4.7 billion,
and has been authorized to issue its bonds to provide net proceeds of up to $529
million during the State's 1995-96 fiscal year to redeem notes sold in June
1995. The LGAC program was completed in 1995-96 with the issuance of the last
installment of authorized bond sales. As of March 31, 1997, $5.239 billion
remained outstanding of the LGAC.
Ratings. Moody's rating of the State's general obligation bonds is Aa2 and
S&P's rating is A. Previously, Moody's lowered its rating to A on June 6, 1990,
its rating having been A1 since May 27, 1986. S&P's previous rating was A- on
January 13, 1992. S&P's ratings were A from March 1990 to January 1992, AA- from
August 1987 to March 1990 and A+ from November 1982 to August 1987.
(2) The City and the Municipal Assistance Corporation ("MAC"): 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")).
From 1993 to 1996, the rate of economic growth in the City slowed
substantially. The City's economic improvement significantly accelerated in
fiscal year 1997, resulting in an unusually high, across-the-board increase in
tax receipts. Much of the increase can be traced to the performance of the
securities industry, but the City's economy has produced gains in retail trade,
tourism, and in business services. In 1997, the City experienced the largest
private sector job growth in the last 13 years.
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. If the State experiences
revenue shortfalls or spending increases beyond its projections during its
1997-98 fiscal year or subsequent years, such developments could 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 Mayor is responsible for preparing the City's four-year financial plan,
including the City's current financial plan. The City 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 condition of the regional and local
economies, 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.
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 1996 through 1999 contemplates the issuance
of $9.7 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. In addition, the City issues revenue and tax anticipation notes to
finance its seasonal work 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. 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.
1996-99 Financial Plan. On July 11, 1995, the City submitted to the Control
Board the 1996-99 Financial Plan, which relates to the City, the Board of
Education and the City University of New York. The 1996-99 Financial Plan is
based on the City's expense and capital budgets for the City's 1996 fiscal year,
which were adopted on June 14, 1995, and sets forth proposed actions by the City
for the 1996 fiscal year to close substantial projected budget gaps resulting
from lower than projected tax receipts and other revenues and greater than
projected expenditures. In addition to substantial proposed agency expenditure
reductions and productivity, efficiency and labor initiatives negotiated with
the City's labor unions, the 1996-99 Financial Plan reflects a strategy to
substantially reduce spending for entitlements for the 1996 and subsequent
fiscal years.
1998-2002 Financial Plan. In January, 1998, the New York City mayor announced
the City's Financial Plan for Fiscal Years 1998-2002. For the second year in a
row, the New York City four-year financial plan contains a record surplus of
more than $1 billion. Since the adoption of the fiscal year 1998 budget, the
City is now forecasting additional resources of $3.1 billion. Approximately 73%
will be used to reduce the out-year gaps, 19% will fund targeted educational,
public safety and other initiatives, and 8% will be used to reduce taxes
further.
To reduce the out-year gaps, the City has imposed fiscal discipline on the
rate of growth of City spending which has, over the last four years, been held
below the rate of inflation. For fiscal year 1999, the proposed City-funded
spending increase will be held to 0.6%. The budget stabilization account,
established for the first time in 1997, will be maintained in fiscal year 1999
at $210 million with an additional $210 million created for fiscal year 2000. As
a result of this fiscal planning, the out-year gaps have been cut in half
compared to six years ago: fiscal year 1993 was $13.3 billion and fiscal year
1998 is $6.75 billion.
According to recent staff reports, while economic recovery in New York City
has been slower than in other regions of the country, a surge in Wall Street
profitability resulted in increased tax revenues and generated a substantial
surplus for the City in City fiscal year 1996-97. Although several sectors of
the City's economy have expanded recently, especially tourism and business and
professional services, City tax revenues remain heavily dependent on the
continued profitability of the securities industry and the course of the
national economy. These reports have also indicated that recent City budgets
have been balanced in part through the use of non-recurring resources; that the
City's Financial Plan tends to rely on actions outside its direct control; that
the City has not yet brought its long-term expenditure growth in line with
recurring revenue growth; and that the City is therefore likely to continue to
face substantial gaps between forecast revenues and expenditures in future years
that must be closed with reduced expenditures and/or increased revenues.
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.
Litigation. 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. The 1996-99 Financial Plan includes provisions for
judgments and claims of $279 million, $236 million, $251 million and $264
million for the 1996 through 1999 fiscal years, respectively.
Ratings. As of March 1996, Moody's rating of the City's general obligation
bonds stood at Baa1. S&P's current rating of the City's general obligation bonds
is BBB+. S&P's previous rating of the City's general obligation bonds was A-.
On July 10, 1995, S&P revised downward its rating on City general obligation
bonds from A- to BBB+ and removed City bonds from CreditWatch. S&P stated that
"structural budgetary balance remains elusive because of persistent softness in
the City's economy, highlighted by weak job growth and a growing dependence on
the historically volatile financial services sector." Other factors identified
by S&P in lowering its rating on City bonds included a trend of using one-time
measures, including debt refinancings, to close projected budget gaps,
dependence on unratified labor savings to help balance financial plans,
optimistic projections of additional Federal and State aid or mandate relief, a
history of cash flow difficulties caused by State budget delays and continued
high debt levels. Fitch IBCA Inc. (formerly Fitch Investors Service, L.P.)
continues to rate the City general obligation bonds A-.
On February 11, 1991, Moody's had lowered its rating from A. Previously,
Moody's had raised its rating to A in May 1988, to Baa1 in December 1986, 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.
Indebtedness. As of June 30, 1997, the City had $3.671 billion of outstanding
debt service of which $3.515 billion was net long-term indebtedness.
(3) The State Agencies: 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.
(4) State Litigation: 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. In 1997, a civil rights claim alleging intentional school
segregation in Yonkers has resulted in a $9 million judgment for plaintiffs that
the State must pay.
Adverse developments in the foregoing proceedings or new proceedings could
adversely affect the financial condition of the State in the future.
(5) Other Municipalities: Certain localities in addition to New York City
could have financial problems leading to requests for additional State
assistance and the need 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 1997-98 fiscal
year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the re-establishment 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 increased State
expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the City
of Troy in 1994. The Supervisory Board's powers were increased in 1995, when
Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the City of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued
bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities, aid that was largely continued in 1997. Twenty-eight
municipalities are scheduled to share the more than $32 million in targeted
unrestricted aid allocated in the 1997-98 budget. An additional $21 million will
be dispersed among all cities, towns and villages, a 3.97% increase in General
Purpose State Aid.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1995, the total indebtedness of all localities in
the State other than New York City was approximately $19.0 billion.
Approximately $102.3 million of that indebtedness represented borrowing to
finance budgetary deficits and was issued pursuant to State enabling
legislation. 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. Eighteen
localities had outstanding indebtedness for deficiting financing at the close of
their fiscal year ending in 1995.
From time to time, 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 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 long
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.
(6) Other Issuers of New York Municipal Obligations. There are a number of
other agencies, instrumentalities and political subdivisions of the State that
issue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of
obligations backed by the full faith and credit of the State.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated monthly and semi-annual
distributions of interest and principal to Unitholders. The tables assume no
changes in expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Bonds prior to maturity or
expected retirement date and the receipt of principal upon maturity or expected
retirement date. To the extent the foregoing assumptions change actual
distributions will vary.
<TABLE>
<CAPTION>
CALIFORNIA
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 1998 $ 1.56 $ 1.56
June 1998 - May 2009 3.91 3.91
June 2009 3.62 $ 83.30 86.92
July 2009 - August 2022 3.56 3.56
September 2022 3.15 116.63 119.78
October 2022 - January 2025 3.07 3.07
February 2025 3.07 33.32 36.39
March 2025 - June 2025 3.07 3.07
July 2025 2.99 74.98 77.97
August 2025 - May 2026 2.78 2.78
June 2026 2.70 59.98 62.68
July 2026 - July 2027 2.53 2.53
August 2027 2.33 166.61 168.94
September 2027 - September 2028 1.86 1.86
October 2028 1.69 133.29 134.98
November 2028 - January 2030 1.29 1.29
February 2030 1.09 166.61 167.70
March 2030 - July 2032 .62 .62
August 2032 .05 166.61 166.66
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 9.48 $ 9.48
January 1999 - January 2009 23.70 23.70
June 2009 $ 83.30 83.30
July 2009 23.04 23.04
January 2010 - July 2022 21.56 21.56
September 2022 116.63 116.63
January 2023 19.21 19.21
July 2023 - January 2025 18.64 18.64
February 2025 33.32 33.32
July 2025 18.56 74.98 93.54
January 2026 16.82 16.82
June 2026 59.98 59.98
July 2026 16.50 16.50
January 2027 - July 2027 15.35 15.35
August 2027 166.61 166.61
January 2028 11.76 11.76
July 2028 11.29 11.29
October 2028 133.29 133.29
January 2029 9.40 9.40
July 2029 - January 2030 7.86 7.86
February 2030 166.61 166.61
July 2030 4.27 4.27
January 2031 - July 2032 3.80 3.80
August 2032 .05 166.61 166.66
<CAPTION>
COLORADO
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 1998 $ 1.53 $ 1.53
June 1998 - November 2017 3.85 3.85
December 2017 3.70 $120.71 124.41
January 2018 2.95 120.71 123.66
February 2018 - December 2022 2.87 2.87
January 2023 2.38 144.86 147.24
February 2023 - November 2023 2.29 2.29
December 2023 1.86 120.72 122.58
January 2024 - May 2024 1.78 1.78
June 2024 1.63 120.71 122.34
July 2024 1.29 1.29
August 2024 1.29 24.14 25.43
September 2024 - November 2025 1.29 1.29
December 2025 1.12 144.86 145.98
January 2026 - August 2026 .71 .71
September 2026 .56 120.72 121.28
October 2026 - June 2028 .22 .22
July 2028 .13 72.42 72.55
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 9.32 $ 9.32
January 1999 - July 2017 23.30 23.30
December 2017 $120.71 120.71
January 2018 22.25 120.71 142.96
July 2018 - July 2022 17.41 17.41
January 2023 16.92 144.86 161.78
July 2023 13.88 13.88
December 2023 120.72 120.72
January 2024 12.93 12.93
June 2024 120.71 120.71
July 2024 10.15 10.15
August 2024 24.14 24.14
January 2025 - July 2025 7.85 7.85
December 2025 144.86 144.86
January 2026 7.09 7.09
July 2026 4.32 4.32
September 2026 120.72 120.72
January 2027 2.21 2.21
July 2027 - January 2028 1.37 1.37
July 2028 1.29 72.42 73.71
<CAPTION>
NEW YORK
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 1998 $ 1.56 $ 1.56
June 1998 - March 2021 3.91 3.91
April 2021 3.87 $ 32.54 36.41
May 2021 - July 2021 3.78 3.78
August 2021 3.78 21.35 25.13
September 2021 - June 2024 3.78 3.78
July 2024 3.62 130.17 133.79
August 2024 - June 2026 3.25 3.25
July 2026 3.15 81.35 84.50
August 2026 - June 2027 2.92 2.92
July 2027 2.72 162.71 165.43
August 2027 2.25 2.25
September 2027 1.69 162.71 164.40
October 2027 - June 2028 1.57 1.57
July 2028 1.39 156.20 157.59
August 2028 - June 2029 .95 .95
July 2029 .37 162.70 163.07
August 2029 - July 2032 .26 .26
August 2032 .16 81.36 81.52
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH MAY AND ESTIMATED ESTIMATED ESTIMATED
NOVEMBER UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 1998 $ 1.58 $ 1.58
November 1998 - November 2020 23.75 23.75
April 2021 $ 32.54 32.54
May 2021 23.57 23.57
August 2021 21.35 21.35
November 2021 - May 2024 22.96 22.96
July 2024 130.17 130.17
November 2024 20.63 20.63
May 2025 - May 2026 19.71 19.71
July 2026 81.35 81.35
November 2026 18.29 18.29
May 2027 17.73 17.73
July 2027 162.71 162.71
September 2027 162.71 162.71
November 2027 12.89 12.89
May 2028 9.59 9.59
July 2028 156.20 156.20
November 2028 6.87 6.87
May 2029 5.79 5.79
July 2029 162.70 162.70
November 2029 2.43 2.43
May 2030 - May 2032 1.62 1.62
August 2032 .71 81.36 82.07
</TABLE>
CONTENTS OF REGISTRATION STATEMENT
This Amendment of 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, ratings services
and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.5 Copy of Agreement Among Underwriters.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal, California and Colorado income tax
status of securities being registered.
3.3 Opinions and consent of counsel as to New York income tax status of
the Fund under New York law.
4.1 Consent of Interactive Data Corp.
4.2 Consent of Standard & Poor's.
4.3 Consent of Independent Certified Public Accountants.
EX-27 Financial Data Schedules
<PAGE>
SIGNATURES
The Registrant, Insured Municipals Income Trust, 230th Insured
Multi-Series hereby identifies Insured Municipals Income Trust, 77th Insured
Multi-Series and Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 189 for purposes of the representations required
by Rule 487 and represents the following: (1) that the portfolio securities
deposited in the series as to the securities of which this Registration
Statement is being filed do not differ materially in type or quality from those
deposited in such previous series; (2) that, except to the extent necessary to
identify the specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to the securities
of which this Registration Statement is being filed, this Registration Statement
does not contain disclosures that differ in any material respect from those
contained in the registration statements for such previous series as to which
the effective date was determined by the Commission or the staff; and (3) that
it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust, 230th Insured Multi-Series has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Chicago and State
of Illinois on the 23rd day of April, 1998.
INSURED MUNICIPALS INCOME TRUST
230th
INSURED MULTI-SERIES
By VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By GINA M. COSTELLO
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on April 23, 1998
by the following persons who constitute a majority of the Board of Directors of
Van Kampen American Capital Distributors, Inc.
SIGNATURE TITLE
Don G. Powell Chairman and Chief Executive )
Officer )
John H. Zimmerman President and Chief )
Operating Officer
Ronald A. Nyberg Executive Vice President and )
General Counsel
William R. Rybak Executive Vice President and )
Chief Financial Officer )
GINA M. COSTELLO
(Attorney-in-fact*)
- --------------------------------------------------------------------------------
* An executed copy of each of the related powers of attorney was filed with the
Securities and Exchange Commission in connection with the Registration Statement
on Form S-6 of Van Kampen American Capital Equity Opportunity Trust, Series 64
(file No. 33-33087) and Van Kampen American Capital Equity Opportunity Trust,
Series 87 (file No. 333-44581).
EXHIBIT 1.1
INSURED MUNICIPALS INCOME TRUST
230TH INSURED MULTI-SERIES
TRUST AGREEMENT
Dated: April 23, 1998
This Trust Agreement between Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of Van
Kampen American Capital Investment Advisory Corp., as Evaluator, and The Bank of
New York, as Trustee, sets forth certain provisions in full and incorporates
other provisions by reference to the document entitled "Standard Terms and
Conditions of Trust, For Van Kampen American Capital Distributors, Inc.
Tax-Exempt Trust, Dated March 16, 1995" (herein called the "Standard Terms and
Conditions of Trust"), and such provisions as are set forth in full and such
provisions as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(4), listed in the
Schedules hereto, have been deposited in the Trusts under this Trust
Agreement.
(b) The fractional undivided interest in and ownership of the
various Trusts represented by each Unit thereof is the amount set forth
under "Summary of Essential Financial Information-Fractional Undivided
Interest in the Trust per Unit" in Prospectus Part I.
(c) The approximate amounts, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid to the
Depositor pursuant to Section 3.05 shall be the amount per Unit that
the Trustee agreed to reduce its fee or pay Trust expenses set forth in
the footnotes to the "Per Unit Information" for each Trust in
Prospectus Part I times the number of units in such Trust referred to
in Part II (b) of this Trust Agreement.
(d) The First General Record Date and the amount of the
second distribution of funds from the Interest Account of each Trust
shall be the record date for the Interest Account and the amount set
forth under "Per Unit Information" for each Trust in Prospectus Part I.
(e) The First Settlement Date shall be the date set forth
under "Summary of Essential Financial Information--First Settlement
Date" in Prospectus Part I.
(f) Any monies held to purchase "when issued" bonds will be
held in noninterest bearing accounts.
(g) The Evaluation Time for purpose of sale, purchase or
redemption of Units shall be 4:00 P.M. Eastern time.
(h) As set forth in Section 3.05, the Record Dates and
Distribution Dates for each Trust are those dates set forth in the
section entitled "Per Unit Information" for each Trust as appears in
Prospectus Part I.
(i) As set forth in Section 3.15, the Evaluator's Annual
Supervisory Fee shall be that amount set forth in "Summary of Essential
Financial Information-Evaluator's Annual Supervisory Fee" in Prospectus
Part I.
(j) As set forth in Section 4.03, the Evaluator's Annual
Evaluation Fee shall be that amount, and computed on that basis, set
forth in "Summary of Essential Financial Information-Evaluator's Annual
Evaluation Fee" in Prospectus Part I
(k) The Trustee's annual compensation as set forth under
Section 6.04, under each distribution plan shall be that amount as
specified in Prospectus Part I under the section entitled "Per Unit
Information" for each Trust and will include a fee to induce the
Trustee to advance funds to meet scheduled distributions.
(l) The sixth paragraph of Section 3.05 is hereby revoked and
replaced by the following paragraph:
Unitholders desiring to receive semi-annual
distributions and who purchase their Units prior to the Record
Date for the second distribution under the monthly plan of
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Unitholders desiring to receive semi-annual distributions and
who purchase their Units prior to the Record Date for the
first distribution may elect at the time of purchase to
receive distributions on a semi-annual basis by notice to the
Trustee. Such notice shall be effective with respect to
subsequent distributions until changed by further notice to
the Trustee. Changes in the plan of distribution will become
effective as of opening of business on the day after the next
succeeding semi-annual Record Date and such distributions will
continue until further notice.
(m)Sections 8.02(d) and 8.02(e) are hereby revoked and
replaced with the following:
(d) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Interest Account
of such Trust;
(e) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Principal
Account of such Trust; and
<PAGE>
IN WITNESS WHEREOF, Van Kampen American Capital Distributors, Inc. has
caused this Trust Agreement to be executed by one of its Vice Presidents or
Assistant Vice Presidents and its corporate seal to be hereto affixed and
attested by its Secretary or one of its Vice Presidents or Assistant
Secretaries, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., has caused this Trust Indenture and
Agreement to be executed by its President or one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by its Secretary, its
Assistant Secretary or one of its Assistant Vice Presidents and The Bank of New
York, has caused this Trust Agreement to be executed by one of its Vice
Presidents and its corporate seal to be hereto affixed and attested to by one of
its Vice Presidents, Assistant Vice Presidents or Assistant Treasurers; all as
of the day, month and year first above written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By JAMES J. BOYNE
Vice President, Associate General Counsel
and Assistant Secretary
(SEAL)
Attest:
By CATHY NAPOLI
Assistant Secretary
AMERICAN PORTFOLIO EVALUATION SERVICE, a division of Van Kampen American
Capital Investment Advisory Corp.
By DENNIS J. MCDONNELL
President
(SEAL)
Attest:
By JAMES J. BOYNE
Assistant Secretary
THE BANK OF NEW YORK
By JEFFREY BIESELIN
Vice President
(SEAL)
Attest:
By JEFFREY COHEN
Assistant Treasurer
<PAGE>
SCHEDULES TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
INSURED MUNICIPALS INCOME TRUST, 230TH INSURED MULTI-SERIES
(Note: Incorporated herein and made a part hereof as indicated below are the
corresponding "Portfolios" of each of the Trusts as set forth in the
Prospectus.)
EXHIBIT 1.5
Dated: June 1, 1992
April 22, 1998
MASTER AGREEMENT AMONG UNDERWRITERS
FOR UNIT INVESTMENT TRUSTS SPONSORED BY
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Gentlemen:
1. The Trust. We understand that you, Van Kampen American Capital
Distributors, Inc. (the "Sponsor"), are entering into this agreement (the
"Agreement") in counterparts with us and other firms who may be underwriters for
issues of various series of unit investment trusts for which you will act as
Sponsor. This Agreement shall apply to any offering after May 1, 1992 of units
of fractional undivided interest in such various series unit investment trusts
in which we elect to act as an underwriter (underwriters with respect to each
such trust being hereinafter called "Underwriters") after receipt of a notice
from you stating the name and size of the trust and that our participation as an
Underwriter in the proposed offering shall be subject to the provisions of this
Agreement. The issuer of the units of fractional undivided interests in a series
of a unit investment trust offered in any offering of units made pursuant to
this Agreement is hereinafter referred to as the "Trust" and the reference to
"Trust" in this Agreement applies only to such Trust, and such units of such
Trust offered are hereinafter called the "Units". Each Trust is or will be
registered as a "unit investment trust" under the Investment Company Act of 1940
(the "1940 Act") by appropriate filings with the Securities and Exchange
Commission (the "Commission"). Additionally, each Trust is or will be registered
with the Commission under the Securities Act of 1933 (the "1933 Act") on Form
S-6 or its successor forms, including a proposed form of prospectus (the
"Preliminary Prospectus").
The registration statement as finally amended and revised at the time
it becomes effective is herein referred to as the "Registration Statement" and
the related prospectus is herein referred to as the "Prospectus", except that if
the prospectus filed by the Trust pursuant to Rule 424(b) under the 1933 Act
shall differ from the prospectus on file at the time the Registration Statement
shall become effective, the term "Prospectus" shall refer to the prospectus
filed pursuant to Rule 424(b) from and after the date on which it shall have
been filed.
The following provisions of this Agreement shall apply separately to
each individual offering of Units by a Trust.
We understand that as of the date upon which we have agreed to
underwrite Units of the Trust the Commission shall not have issued any order
preventing or restraining the use of any Preliminary Prospectus and, further,
that each Preliminary Prospectus shall conform in all material respects to the
requirements of the 1933 Act and the Rules and Regulations thereunder and, as of
its date, shall not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading;
and when the Registration Statement becomes effective, it and the Prospectus,
and any amendments or supplements thereto, will contain all statements that are
required to be stated therein in accordance with the 1933 Act and the Rules and
Regulations thereunder and will in all material respects conform to the
requirements of the 1933 Act and the Rules and Regulations thereunder, and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that you make no
representation or warranty as to information contained in or omitted from any
Preliminary Prospectus, the Registration Statement, the Prospectus or any such
amendment or supplement, in reliance upon and in conformity with, written
information furnished to you by or on behalf of any Underwriter specifically for
use in the preparation thereof.
2. Designation and Authority of Representative. You are hereby
authorized to act as our representative (the "Representative") in connection
with all matters to which this Agreement relates and to take the action provided
herein to be taken by you as you may otherwise deem necessary or advisable. We
understand that we have no obligations under this Agreement with respect to any
Trust in which we choose not to participate as an Underwriter.
You will be under no liability to us for any act or omission except for
obligations expressly assumed by you herein and no obligations on your part will
be implied or inferred herefrom. The rights and liabilities of the respective
parties hereto are several and not joint, and nothing herein or hereunder will
constitute then a partnership, association or separate entity.
3. Profit or Loss in Acquisition of Securities. It is understood
that the acquisition of securities (the "Securities") for deposit in the
portfolio of the Trust shall be at your cost and risk. We acknowledge that you
will share with us any net deposit profits in the amounts and to the extent, if
any, indicated under "Sponsor and Underwriter Compensation" in the Prospectus.
For the purposes of determining the number of Units underwritten, we understand
that we will be credited for that number of Units set forth opposite our name in
the section entitled "Underwriting" in the prospectus.
We agree that you shall have no liability (as Representative or
otherwise) with respect to the issue form, validity, legality, enforceability,
value of, or title to the Securities, except for the exercise of due care in
determining the genuineness of such Securities and the conformance thereof with
the descriptions and qualifications appearing in the Prospectus.
4. Purchase of Units. Promptly after you make a determination to
offer Units of a Trust and you inquire as to whether we desire to participate in
such offering, we will advise you promptly as to the number of Units which we
will purchase or of our decision not to participate in such offering. Such
advice may be written or oral. The delivery to the Sponsor of a completed
Schedule A to this Agreement shall constitute adequate written advice. Oral
advice shall be binding but shall be promptly confirmed in writing by us by
means of telegraph, telegram or other form of wire or facsimile transmission.
Such written confirmation shall contain the information requested by Schedule A
to this Agreement. You may rely on and we hereby commit on the terms and
conditions of this Agreement to purchase and pay for the number of Units of the
Trust set forth in such advice (the "Unit Commitment"). Our Unit Commitment may
be increased only by mutual agreement between us and you at any time prior to
the date as of which the Trust Agreement for the Trust is executed (the "Date of
Deposit"). We agree that you in your sole discretion reserve the right to
decrease our Unit Commitment at any time prior to the Date of Deposit and if you
so elect to make such a decrease, you will notify us of such an election by
telephone and promptly confirm the same in writing.
The price to be paid for such Units shall be the Public Offering Price
per Unit (as defined in the Prospectus) as first determined on the Date of
Deposit or such later determination on such Date of Deposit as you shall advise
us, less the sum per Unit indicated under "Sponsor and Underwriter Compensation"
in the Prospectus. Further, each Underwriter who underwrites that number of
Units indicated under "Sponsor and Underwriter Compensation" in the Prospectus
will receive from the Sponsor that additional compensation indicated under such
section of the Prospectus for each Unit it underwrites, providing the Trust size
is in excess of that number of Units, if any, indicated under such section of
the Prospectus. At the Date of Deposit, we will become the owner of the Units
and be entitled to the benefits (except for interest, if any, accruing from the
Date of Deposit to the First Settlement Date) as well as the risks inherent
therein. We acknowledge that those persons, if any, named in the Prospectus
under "Sponsor and Underwriter Compensation" are Managing or Co-Managing
Underwriters of the Trust, as indicated therein, and we acknowledge that those
persons specifically named therein will receive as additional compensation those
respective per Unit amounts set forth in such section of the Prospectus.
You are authorized to retain custody of our Units until the
Registration Statement relating thereto has become effective under the 1933 Act
and you shall have received payment from us for such Units.
You are authorized to file an amendment to said Registration Statement
describing the Securities and furnishing information based thereon or relating
thereto and any further amendments or supplements to the Registration Statement
or Prospectus which you may deem necessary or advisable. We will furnish to you
upon your request such information as will be required to insure that the
Registration Statement and Prospectus are current insofar as they relate to us
and we thereafter continue to furnish you with such information as may be
necessary to keep current and correct the information previously supplied.
We understand that the Trust will also take action with respect to the
offering and sale of Units in accordance with the Blue Sky or securities laws of
certain states in which it is proposed that the Units may be offered and sold.
5. Public Offering. You agree that you will advise us promptly when
the Registration Statement has become effective, and we agree that when we are
advised that the Units are released for public offering, we will make a public
offering thereof by means of the Prospectus under the 1933 Act, as amended,
which describes the deposit of Securities and related information. The Public
Offering Price and the terms and conditions of the public offering shall be as
set forth in the Prospectus and shall rely with respect to the offering price of
the Securities upon the determination of the Evaluator named in the Prospectus.
Public advertisement of the offering, if any, shall be made by you on behalf of
the Underwriters on such date as you shall determine. We agree that before we
use any Trust advertising material which we have created, we will obtain your
prior approval to use such advertising materials.
6. Public Offering Price. We agree that each day while this
Agreement is in effect and the evaluation of the Trust is made by the Evaluator
named in the Prospectus, we will contact you for such evaluation and of the
resultant Public Offering Price for the purpose of the offering and sale of the
respective Units to the public. We agree as required by Section 22(d) of the
1940 Act to offer and sell our Units at the current Public Offering Price
described in the Prospectus.
7. Permitted Transactions. It is agreed that part or all of the
Units purchased by us may be sold to dealers, or other entities with whom we can
legally grant a concession or agency commission, only at the then effective
Public Offering Price, less the concession described in the Prospectus.
From time to time prior to the termination of this Agreement, at your
Request, we will advise you of the number of our Units which remain unsold and,
at your request, we agree to deliver to you any of such unsold Units to be sold
for our account to retail accounts or, less the concession or agency commission
then effective, to dealers or others.
If prior to the termination of this Agreement, or such earlier date as
you may determine and advise us thereof in writing, you shall purchase or
contract to purchase any of our Units or any Units issued in exchange therefor,
in the open market or otherwise, or if any such Units shall be tendered to the
Trustee for redemption because not effectively placed for investment by us, we
agree to repurchase such Units at a price equal to the total cost of such
purchase, including accrued interest and commissions, if any, and transfer taxes
on redelivery. Regardless of the amount paid on the repurchase of any such
Units, it is agreed that they may be resold by us only at the then effective
Public Offering Price.
Until the termination of this Agreement, we agree that we will make no
purchase of Units other than (i) purchases provided for in this Agreement, (ii)
purchases approved by you and (iii) purchases as broker in executing unsolicited
orders.
8. Compliance With Commission Order. We hereby agree as follows: (a)
we will refund all sales charges to purchasers of Units from us or any dealer
participating in the distribution of Units who purchased such Units from us if,
within ninety days from the time that the Registration Statement of the
respective Units under the 1933 Act shall have become effective, (i) the net
worth of the trust shall be reduced to less than 20% of the principal amount of
Securities originally deposited therein or (ii) the Trust shall have been
terminated; (b) you may instruct the Trustee on the Date of Deposit that, in the
event that redemption by any Underwriters of Units constituting part of any
unsold allotment of Units shall result in the Trust having a net worth of less
than 40% of the principal amount of Securities originally deposited therein, the
Trustee shall terminate the Trust in the manner provided in the Trust Indenture
and Agreement (as defined in the Prospectus) and distribute the Securities and
other assets of the Trust pursuant to the provisions of the Trust Indenture and
Agreement; and (c) in the event that the Trust shall have been terminated
pursuant to (b) above, we will refund any sales charges to any purchaser of such
Units who purchased from us, or purchased from a dealer participating in the
distribution of such Units who purchased such Units from us. We authorize you to
charge our account for all refunds of sales charges in respect to our Units.
9. Substitution of Underwriters. We authorize you to arrange for the
substitution hereunder of other persons, who may include you and us, for all or
any part of the commitment of any nondefaulting Underwriter with the consent of
such Underwriter, and of any defaulting Underwriter without the consent thereof,
upon such terms and conditions as you may deem advisable, provided that the
number of Units to be purchased by us shall not be increased without our consent
and that such substitution shall not in any way affect the liability of any
defaulting Underwriter to the other Underwriters for damages from such default,
nor relieve any other Underwriter of any obligation under this Agreement. The
expenses chargeable to the account of any defaulting Underwriter and not paid
for by it or by a person substituted for such Underwriter and any additional
losses or expenses arising from such default shall be considered to be expenses
under this Agreement and shall be charged against the accounts of the
nondefaulting Underwriters in proportion to their respective commitments.
10. Termination. This Agreement shall terminate with respect to each
Trust which we have agreed to underwrite 30 days after the date on which the
public offering of the Units of such Trust is made in accordance with Section 5
hereof unless sooner terminated by you, provided that you may extend this
Agreement for not more than eleven successive periods of 30 days each upon
notice to us and each of the other Underwriters.
Notwithstanding any settlement on the termination of this Agreement, we
agree to pay our share of any amount payable on account of any claim, demand or
liability which may be asserted against the Underwriters, or any of them, based
on the claim that the Underwriters constitute an association, unincorporated
business or other separate entity and our share of any expenses incurred by you
in defending against any such claim, demand or liability. We also agree to pay
any stamp taxes which may be assessed and paid after such settlement on account
of any Units received or sold hereunder for our account.
Notwithstanding any termination of this Agreement, no sales of the
Units shall be made by us at any time except in conformity with the provisions
of Section 22(d) of the 1940 Act.
11. Default by Other Underwriters. Default by any one or more of the
other Underwriters in respect of their several obligations under this Agreement
shall neither release you nor us from any of our respective obligations
hereunder.
12. Notices. Notices hereunder shall by deemed to have been duly
given if mailed or telegraphed to us at our address set forth below, in the case
of notices to us, or to you at your address set forth at the head of this
Agreement, in the case of notices to you.
13. Net Capital. You represent that you, and we represent that we,
are in compliance with the capital requirements of Rule 15c-3-1 promulgated by
the Commission under the Securities and Exchange Act of 1934, and we may, in
accordance with and pursuant to such Rule 15c-3-1, agree to purchase the amount
of Units to be purchased by you and us, respectively, under the Agreement.
14. Miscellaneous. We confirm that we are a member in good standing
of the National Association of Securities Dealers, Inc.
We confirm that we will take reasonable steps to provide the
Preliminary Prospectus or final Prospectus to any person making written request
therefor to us and to make the Preliminary Prospectus or the final Prospectus
available to each person associated with us expected to solicit customers'
orders for the Units prior to the effective registration date and the final
Prospectus if he is expected to offer the Units after the effective date. We
understand that you will supply us upon our request with sufficient copies of
such prospectuses to comply with the foregoing.
<PAGE>
This Agreement is being executed by us and delivered to you in
duplicate. Upon your confirmation hereof and of agreements in identical form
with each of the other Underwriters, this Agreement shall constitute a valid and
binding contract between us.
Very truly yours,
- --------------------------------------------------------------------------------
Confirmed as of the date set forth at the Indicated below our firm name and
head of this Agreement address exactly as we wish to appear
in the Prospectus
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By____________________________ __________________________________
Title__________________________ __________________________________
----------------------------------
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
April 23, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: INSURED MUNICIPALS INCOME TRUST, 230TH INSURED MULTI-SERIES
Gentlemen:
We have served as counsel for Van Kampen American Capital Distributors,
Inc., as Sponsor and Depositor of Insured Municipals Income Trust, 230th Insured
Multi-Series (hereinafter referred to as the "Fund"), in connection with the
preparation, execution and delivery of a Trust Agreement dated April 23, 1998
between Van Kampen American Capital Distributors, Inc., as Depositor, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, and The Bank of New York, as Trustee,
pursuant to which the Depositor has delivered to and deposited Bonds listed in
the Schedules to the Trust Agreement with the Trustee and pursuant to which the
Trustee has issued to or on the order of the Depositor a certificate or
certificates representing Units of fractional undivided interest in and
ownership of the several Trusts of said Fund (hereinafter referred to as the
"Units") created under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the Units in the
several Trusts of the Fund have been duly authorized; and
2. The certificates evidencing the Units in the several
Trusts of the Fund when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust Agreement,
will constitute valid and binding obligations of such Trusts and the
Depositor in accordance with the terms thereof.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-45171) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
April 23, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: INSURED MUNICIPALS INCOME TRUST, 230TH INSURED MULTI-SERIES
Gentlemen:
We have acted as counsel for Van Kampen American Capital Distributors,
Inc., Depositor of Insured Municipals Income Trust, 230th Insured Multi-Series
(the "Fund"), in connection with the issuance of Units of fractional undivided
interest in the several trusts of said Fund (the "Trusts") under a Trust
Agreement dated April 23, 1998 (the "Indenture") between Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory Corp.,
as Evaluator, and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we have
deemed pertinent. For purposes of the following opinions, it is assumed that
each asset of the Trusts is debt the interest on which is excluded from gross
income for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
trusts) of Chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that the
number of Units of such Trust held by him bears to the total number of
Units outstanding of such Trust. Under Subpart E, Subchapter J of
Chapter 1 of the Code, income of each Trust will be treated as income
of each Unitholder of the respective Trust in the proportion described,
and an item of Trust income will have the same character in the hands
of a Unitholder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of a Trust consists of
interest and original issue discount excludable from gross income under
Section 103 of the Code, such income will be excludable from Federal
gross income of the Unitholders, except in the case of a Unitholder who
is a substantial user (or a person related to such user) of a facility
financed through issuance of any industrial development bonds or
certain private activity bonds held by the respective Trust. In the
case of such Unitholder who is a substantial user (and no other)
interest received with respect to his Units attributable to such
industrial development bonds or such private activity bonds is
includable in his gross income. In the case of certain corporations,
interest on the Bonds is included in computing the alternative minimum
tax pursuant to Section 56(c) of the Code, and the branch profits tax
imposed by Section 884 of the Code with respect to U.S.
branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. If a Bond is
acquired with accrued interest, that portion of the price paid for the
accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a
premium, the amount of the premium is added to the tax basis of the
Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. Accordingly, Unitholders must
reduce the tax basis of their Units for their share of accrued interest
received by the respective Trust, if any, on Bonds delivered after the
Unitholders pay for their Units to the extent that such interest
accrued on such Bonds before the date the Trust acquired ownership of
the Bonds (and the amount of this reduction may exceed the amount of
accrued interest paid to the seller) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in
capital loss upon the disposition of such Units. In addition, such
basis will be increased by the Unitholder's aliquot share of the
accrued original issue discount (and market discount, if the Unitholder
elects to include market discount in income as it accrues) with respect
to each Bond held by the Trust with respect to which there was original
issue discount at the time the Bond was issued (or which was purchased
with market discount) and reduced by the annual amortization of bond
premium, if any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by
sale, payment on maturity, redemption or otherwise) gain or loss is
recognized to the Unitholder and the amount thereof is measured by
comparing the Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the asset
disposed of. Such basis is ascertained by apportioning the tax basis
for his Units among each of the Trust assets (as of the date on which
his Units were acquired) ratably according to their values as of the
valuation date nearest the date on which he purchased such Units. A
Unitholder's basis in his Units and of his fractional interest in each
Trust asset must be reduced by the amount of his aliquot share of
accrued interest received by the Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on the Bonds before the date the Trust acquired
ownership of the Bonds (and the amount of this reduction may exceed the
amount of accrued interest paid to the seller), must be reduced by the
annual amortization of bond premium, if any, on Bonds held by the Trust
and must be increased by the Unitholder's share of the accrued original
issue discount (and market discount, if the Unitholder elects to
include market discount in income as it accrues) with respect to each
Bond which, at the time the Bond was issued, had original issue
discount (or which was purchased with market discount).
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price," such
excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the original
issuance of Bonds held by the Trust, Section 1272(a)(7) of the Code
provides for a reduction in the accrued "daily portion" of such
original issue discount upon the purchase of a Bond subsequent to the
Bond's original issue, under certain circumstances. In the case of any
Bond held by the Trust the interest on which is excludable from gross
income under Section 103 of the Code, any original issue discount which
accrues with respect thereto will be treated as interest which is
excludable from gross income under Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance Policies, if any, issued to certain of the Trusts on the Date
of Deposit by AMBAC Assurance Corporation, Financial Guaranty Insurance
Corporation or a combination thereof. Each such policy, or a
combination of such policies, insures all bonds held by the Trustee for
that particular Trust (other than bonds described in paragraph (vii))
against default in the prompt payment of principal and interest. In our
opinion, any amount paid under each said policy, or a combination of
said policies, which represents maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal gross
income if, and to the same extent as, such interest would have been so
excludable if paid in normal course by the issuer of the defaulted
Bonds provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent
with the reasonable expectation that the issuer of the Bonds, rather
than the insurer, will pay debt service on the Bonds. Paragraph (ii) of
this opinion is accordingly applicable to insurance proceeds
representing maturing interest.
(vii) Certain Bonds in the portfolios of certain of the Trusts
have been insured by the issuers thereof against default in the prompt
payment of principal and interest (the "Insured Bonds"). Insurance has
been obtained for such Insured Bonds, or, in the case of a commitment,
the Bonds will be ultimately insured under the terms of such an
insurance policy, which are designated as issuer Insured Bonds on the
portfolio pages of the respective Trusts in the Prospectus for the
Fund, by the issuer of such Insured Bonds. Insurance on Insured Bonds
is effective so long as such Insured Bonds remain outstanding. For each
of these Insured Bonds, we have been advised that the aggregate
principal amount of such Insured Bonds listed on the portfolio page for
the respective Trust was acquired by the applicable Trust and are part
of the series of such Insured Bonds listed in the aggregate principal
amount. Based upon the assumption that the Insured Bonds of the Trust
are part of the series covered by an insurance policy or, in the case
of a commitment, will be ultimately insured under the terms of such an
insurance policy, it is our opinion that any amounts received by the
applicable Trust representing maturing interest on such Insured Bonds
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been so excludable if paid in normal
course by the issuer provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
Insured Bonds, rather than the insurer, will pay debt service on the
Insured Bonds. Paragraph (ii) of this opinion is accordingly applicable
to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "adjusted
issue price"). The application of these rules will also vary depending on the
value of the Bonds on the date a Unitholder acquires his Units, and the price
the Unitholder pays for his Units.
Because the Trusts do not include any "private activity" bonds within
the meaning of Section 141 of the Code issued on or after August 8, 1986, none
of the Trust Funds' interest income shall be treated as an item of tax
preference when computing the alternative minimum tax. In the case of
corporations, for taxable years beginning after December 31, 1986, the
alternative minimum tax depends upon the corporation's alternative minimum
taxable income ("AMTI") which is the corporation's taxable income with certain
adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used
in computing AMTI of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust or REMIC) for taxable years
beginning after 1989, is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its AMTI
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trust, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers
are required to disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year
of 100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986, will
generally be the amount that bears the same ratio to the interest deduction
otherwise allowable (determined without regard to Section 265) to the taxpayer
for the taxable year as the taxpayer's average adjusted basis (within the
meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued) subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust pays for
Bonds or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law, the
accretion had been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Unitholder elects to include market discount in taxable income
as it accrues.
We have also examined the income tax laws of the State of California to
determine its applicability to the California Insured Municipals Income Trust,
(the "California Trust") being created as part of the Fund and to the holders of
Units in the California Trust who are full-time residents of the State of
California ("California Unitholders").
In connection therewith, we have examined the Registration Statement,
the form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other documents as we have deemed pertinent.
The assets of the California Trust will consist of bonds issued by the State of
California or a local government of California (the "California Bonds") or by
the Commonwealth of Puerto Rico or its authority (the "Possession Bonds")
(collectively, the "Bonds"). For purposes of the following opinions, it is
assumed that each asset of the California Trust is debt, the interest on which
is excluded from gross income for federal income tax purposes.
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited in and held in the California Trust. However, although we
express no opinion with respect to the issuance of the Bonds, in rendering our
opinion expressed herein, we have assumed that: (i) the Bonds were validly
issued; (ii) the interest thereon is excludable from gross income for federal
income tax purposes; and (iii) interest on the Bonds, if received directly by a
California Unitholder, would be exempt from the income tax imposed by the State
of California that is applicable to individuals, trusts and estates (the
"California Personal Income Tax"). This opinion does not address the taxation of
persons other than full time residents of California. We have assumed that, at
the respective times of issuance of the Bonds, opinions that the Bonds were
validly issued and that interest on the Bonds is excluded from gross income for
Federal income tax purposes were rendered by bond counsel to the respective
issuing authorities. In addition, we have assumed that, with respect to the
California Bonds, bond counsel to the issuing authorities rendered opinions that
the interest on the California Bonds is exempt from the California Personal
Income Tax and, with respect to the Possession Bonds, bond counsel to the
issuing authorities rendered opinions that the Possession Bonds and the interest
thereon is exempt from all state and local income taxation. Neither the Sponsor
nor its counsel has made any review for the California Trust of the proceedings
relating to the issuance of the Bonds or of the basis for the opinions rendered
in connection therewith.
Based upon the foregoing, and upon an investigation of such matters of
law as we considered to be applicable, we are of the opinion that, under
existing provisions of the law of the State of California as of the date hereof:
1. The California Trust is not an association taxable as a
corporation for purposes of the California Bank and Corporation Tax
Law, and each California Unitholder will be treated as the owner of a
pro rata portion of the California Trust, and the income of such
portion of the California Trust will be treated as the income of the
California Unitholders under the California Personal Income Tax.
2. Interest on the Bonds which is exempt from tax under the
California Personal Income Tax when received by the California Trust
and which would be excludable from California taxable income for
purposes of the California Personal Income Tax if received directly by
a California Unitholder, will be excludable from California taxable
income for purposes of the California Personal Income Tax when received
by the California Trust and distributed to a California Unitholder.
3. Each California Unitholder of the California Trust will
generally recognize gain or loss for California Personal Income Tax
purposes if the Trustee disposes of a Bond (whether by redemption, sale
or otherwise) or when the California Unitholder redeems or sells Units
of the California Trust, to the extent that such a transaction results
in a recognized gain or loss to such California Unitholder for federal
income tax purposes. However, there are certain differences between the
recognition of gain or loss for federal income tax purposes and for
California Personal Income Tax purposes, and California Unitholders are
advised to consult their own tax advisors. Tax basis reduction
requirements relating to amortization of bond premium may, under some
circumstances, result in a California Unitholder realizing taxable gain
for California Personal Income Tax purposes when a Unit is sold or
redeemed for an amount equal to or less than its original cost.
4. Under the California Personal Income Tax, interest on
indebtedness incurred or continued by a California Unitholder to
purchase Units in the California Trust is not deductible for purposes
of the California Personal Income Tax.
This opinion relates only to California Unitholders subject to the
California Personal Income Tax. No opinion is expressed with respect to the
taxation of California Unitholders subject to the California Bank and
Corporation Tax Law and such California Unitholders are advised to consult their
own tax advisors. Please note, however, that interest on the underlying Bonds
attributed to a California Unitholder that is subject to the California Bank and
Corporation Tax Law may be includible in its gross income for purposes of
determining its California franchise tax. We have not examined any of the Bonds
to be deposited and held in the California Trust or the proceedings for the
issuance thereof or the opinions of bond counsel with respect thereto, and we
express no opinion with respect to taxation under any other provisions of the
California law. Ownership of the Units may result in collateral California tax
consequences to certain taxpayers. Prospective investors should consult their
tax advisors as to the applicability of any such collateral consequences.
We have also examined the income tax law of the State of Colorado,
which is based upon the Federal Law, to determine its applicability to the
Colorado IM-IT Trust (the "Colorado Trust") being created as part of the Fund
and to the holders of Units in the Colorado Trust who are residents of the State
of Colorado ("Colorado Unitholders"). The assets of the Colorado Trust will
consist of interest-bearing obligations issued by or on behalf of the State of
Colorado ("Colorado") or counties, municipalities, authorities or political
subdivisions thereof (the "Colorado Bonds") or by the Commonwealth of Puerto
Rico (the "Puerto Rico Bonds") (collectively, the "Bonds"). Although we express
no opinion with respect to the issuance of the Bonds, in rendering our opinion
expressed herein, we have assumed that: (i) opinions relating to the validity
thereof and to the exemption of interest thereon from Federal income tax were
rendered by bond counsel to the respective issuing authorities; (ii) with
respect to the Colorado Bonds, bond counsel to the issuing authorities rendered
opinions as to the exemption of interest from the income tax imposed by the
State of Colorado that is applicable to individuals and corporations (the "State
Income Tax") and, (iii) with respect to the Possession Bonds, bond counsel to
the issuing authorities rendered opinions as to the exemption from all state and
local income taxation of the Possession Bonds and the interest thereon. Neither
the Sponsor nor its counsel has made any review for the Colorado Trust of the
proceedings relating to the issuance of the Bonds or of the bases for the
opinions rendered in connection therewith. This opinion does not address the
taxation of persons other than full time residents of Colorado. Based upon the
foregoing it is our opinion that under Colorado income tax law, as presently
enacted and construed:
a) The Colorado Trust is not an association taxable as a
corporation for purposes of Colorado income taxation.
(b) Each Colorado Unitholder will be treated as owning a
pro-rata share of each asset of the Colorado Trust for Colorado income
tax purposes in the proportion that the number of Units of such Trust
held by him bears to the total number of outstanding Units of the
Colorado Trust, and the income of the Colorado Trust will therefore be
treated as the income of each Colorado Unitholder under Colorado law in
the proportion described and an item of income of the Colorado Trust
will have the same character in the hands of a Colorado Unitholder as
it would have in the hands of the Trustee.
(c) Gain or loss will be recognized by a Colorado Unitholder
upon redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. Before adjustment,
such basis would normally be cost if the Colorado Unitholder has
acquired his Units by purchase, plus his aliquot share of advances by
the Trustee to the Colorado Trust to pay interest on Bonds delivered
after the Colorado Unitholder's settlement date to the extent that such
interest accrued on such Bonds during the period from the Colorado
Unitholder's settlement date to the date such Bonds are delivered to
the Colorado Trust, but only to the extent that such advances are to be
repaid to the Trustee out of interest received by such Trust with
respect to such Bonds. In addition, such basis will be increased by the
Colorado Unitholder's aliquot share of the accrued original issue
discount with respect to each Bond held by such Trust with respect to
which there was an original issue discount at the time such Bond was
issued and reduced by the annual amortization of Bond premium, if any,
on the Bonds held by the Colorado Trust.
(d) If the Trustee disposes of a Bond (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Colorado Unitholder and the amount thereof is
measured by comparing the Colorado Unitholder's aliquot share of the
total proceeds from the transaction with his basis for his fractional
interest in the bond disposed of. Such basis is ascertained by
apportioning the tax basis for his Units among each of the Bonds (as of
the date on which his units were acquired) ratably according to their
values as of the valuation date nearest the date on which he purchased
such Units. A Colorado Unitholder's basis in his Units and of his
fractional interest in each Bond must be reduced by the amount of his
aliquot share of interest received by the Colorado Trust, if any, in
Bonds delivered after the Colorado Unitholder's settlement date to the
extent that such interest accrued on such Bonds during the period from
the Colorado Unitholder's settlement date to the date such Bonds are
delivered to the Colorado Trust, must be reduced by the annual
amortization of Bond premium, if any, on Bonds held by such Trust and
must be increased by the Colorado Unitholder's share of the accrued
original issue discount with respect to each Bond which, at the time
such Bond was issued, had original issue discount.
(e) If interest on indebtedness incurred or continued by a
Colorado Unitholder to purchase Units in the Colorado Trust is not
deductible for Federal income tax purposes, it will also be
nondeductible for Colorado income tax purposes.
(f) So long as the Colorado Trust holds Colorado Bonds
issued, on or after May 1, 1980, then to the extent the interest on the
Colorado Bonds is excludable from Federal gross income of a Colorado
Unitholder pursuant to Section 103 of the Code, such interest will be
excludable from Colorado adjusted gross income of such Unitholder.
(g) To the extent that interest income derived from the
Colorado Trust by a Unitholder with respect to Puerto Rico Bonds is
exempt from state taxes pursuant to 48 U.S.C. ss.745, such interest
will not be subject to the Colorado State Income Tax.
(h) Any amounts paid under an insurance policy issued to the
Colorado Trust which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Colorado adjusted gross
income if, and to the same extent as, such interest is excludable for
Federal income tax purposes. Paragraph (f) of this opinion is
accordingly applicable to insurance proceeds representing maturing
interest.
(i) Certain of the Bonds in the Colorado Trust have been
insured by the issuers thereof against default in the prompt payment of
principal and interest. Based upon the exemptions and assumptions
referred to above, it is our opinion that any amounts received by the
Colorado Trust representing maturing interest on such Bonds will be
excludable from Colorado adjusted gross income if, and to the same
extent as, such interest is so excludable for Federal income tax
purposes if paid in the normal course by the issuer notwithstanding
that the source of the payment is from insurance proceeds provided
that, at the time such insurance policies are purchased, the amounts
paid for such insurance policies are reasonable, customary and
consistent with the reasonable expectation that the issuer of the
Bonds, rather than the insurer will pay debt service on the Bonds.
Paragraph (f) of this opinion is accordingly applicable to such
payment, representing maturing interest.
We have not examined any of the Bonds to be deposited and held in the
Colorado Trust or the proceedings for the issuance thereof or the opinions of
bond counsel with respect thereto, and therefore express no opinion with respect
to taxation under any other provisions of the Colorado law. Ownership of the
Units may result in collateral Colorado tax consequences to certain taxpayers.
Prospective investors should consult their tax advisors as to the applicability
of any such collateral consequences.
Very truly yours,
CHAPMAN AND CUTLER
IMIT Multi 230
The Bank of New York
April 23, 1998
Page 1
EXHIBIT 3.3
WINSTON & STRAWN
200 PARK AVENUE
NEW YORK, NEW YORK 10166-4193
April 23, 1998
Insured Municipals Income Trust,
230th Insured Multi-Series
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Insured Municipals Income
Trust, 230th Insured Multi-Series (the "Fund") consisting of California Insured
Municipals Income Trust, Series 173, New York Insured Municipals Income Trust,
Series 145 and Colorado Insured Municipals Income Trust, Series 86 (in the
aggregate "Trusts" and individually "Trust") for the purposes of determining the
applicability of certain New York taxes under the circumstances hereinafter
described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"),
dated as of today (the "Date of Deposit") among Van Kampen American Capital
Distributors, Inc. (the "Depositor"), American Portfolio Evaluation Services, a
division of Van Kampen American Capital Investment Advisory Corp., an affiliate
of the Depositor, as Evaluator, and The Bank of New York as Trustee (the
"Trustee"). As described in the prospectus relating to the Fund dated today to
be filed as an amendment to a registration statement previously filed with the
Securities and Exchange Commission (File No. 333-45171) under the Securities Act
of 1933, as amended (the "Prospectus" and the "Registration Statement"), the
objectives of the Fund are the generation of income exempt from Federal taxation
and as regards each of the Trusts denominated with the name of a State exempt,
to the extent indicated in the Prospectus, from income tax, if any, of that
State. No opinion is expressed herein with regard to the Federal or State tax
aspects (other than New York) of the bonds, the Fund, the Trusts, units of each
Trust (the "Units"), or any interest, gains or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each of the Trusts, the total principal amount of interest
bearing obligations and/or contracts for the purchase thereof together with an
irrevocable letter of credit in the amount required for the purchase price and
accrued interest, if any, and an insurance policy purchased by the Depositor
evidencing the insurance guaranteeing the timely payment of principal and
interest of the obligations comprising the corpus of such Trusts other than
those obligations the timely payment of principal and interest of which are
guaranteed by an insurance policy purchased by the issuer thereof or a prior
owner, which may be the Depositor prior to the Date of Deposit, as more fully
set forth in the Prospectus and the Registration Statement.
We understand with respect to the obligations described in the
preceding paragraph that all insurance, whether purchased by the Depositor, a
prior owner or the issuer, provides, or will provide, that the amount paid by
the insurer in respect of any bond may not exceed the amount of principal and
interest due on the bond and such payment will in no event relieve the issuer
from its continuing obligation to pay such defaulted principal and interest in
accordance with the terms of the obligation.
The Trustee will not participate in the selection of the obligations to
be deposited in the Fund, and, upon the receipt thereof, will deliver to the
Depositor a registered certificate for the number of Units representing the
entire capital of each of the Trusts as more fully set forth in the Prospectus
and the Registration Statement. The Units, which are represented by certificates
("Certificates"), will be offered to the public by the Prospectus upon the
effectiveness of the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with interest received
by each of the Trusts and with the proceeds from the disposition of obligations
held in each of the Trusts and the distribution of such interest and proceeds to
the Unit holders of that Trust. The Trustee will also maintain records of the
registered holders of Certificates representing an interest in each Trust and
administer the redemption of Units by such Certificate holders and may perform
certain administrative functions with respect to an automatic investment option.
Generally, obligations held in the Fund may be removed therefrom by the
Trustee only upon redemption prior to their stated maturity, at the direction of
the Depositor in the event of an advance refunding or upon the occurrence of
certain other specified events which adversely affect the sound investment
character of the Fund, such as default by the issuer in payment of interest or
principal on the obligation and no provision for payment is made therefor either
pursuant to the portfolio insurance or otherwise and the Depositor fails to
instruct the Trustee, within thirty (30) days after notification, to hold such
obligation.
Prior to the termination of the Fund, the Trustee is empowered to sell
Bonds, from a list furnished by the Evaluator, only for the purpose of redeeming
Units tendered to it and of paying expenses for which funds are not available.
The Trustee does not have the power to vary the investment of any Unit holder in
the Fund, and under no circumstances may the proceeds of sale of any obligations
held by the Fund be used to purchase new obligations to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on business
corporations, and, for purposes of that Article, Section 208 defines the term
"corporation" to include, among other things, "any business conducted by a
trustee or trustees wherein interest or ownership is evidenced by certificate or
other written instrument."
The Regulations promulgated under Section 208 provide as follows:
The term "trust" includes any business conducted by a trustee
or trustees in which interest or ownership is evidenced by
certificate or other written instrument. Such a trust
includes, but is not limited to, an association commonly
referred to as a "business trust" or "Massachusetts trust". In
determining whether a trustee or trustees are conducting a
business, the form of the agreement is of significance but is
not controlling. The actual activities of the trustee or
trustees, not their purposes and powers, will be regarded as
decisive factors in determining whether a trust is subject to
tax under Article 9-A. The mere investment of funds and the
collection of income therefrom, with incidental replacement of
securities and reinvestment of funds, does not constitute the
conduct of a business in the case of a trust. 20 NYCRR
1-2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that where
a trustee merely invests funds and collects and distributes the income
therefrom, the trust is not engaged in business and is not subject to the
franchise tax. BURRELL V. LYNCH, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept. 1948),
ORDER RESETTLED, 274 A.D. 1073, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an opinion of the Attorney General of the State of New York, 47 N.Y.
Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making up
the trust only upon the happening of certain specified events or the existence
of certain specified conditions, the trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to, and we
assume will not, sell obligations contained in the corpus of the Fund and
reinvest the proceeds therefrom. Further, the power to sell such obligations is
limited to circumstances in which the creditworthiness or soundness of the
obligation is in question or in which cash is needed to pay redeeming Unit
holders or to pay expenses, or where the Fund is liquidated pursuant to the
termination of the Indenture. Only in circumstances in which the issuer of an
obligation attempts to refinance it can the Trustee exchange an obligation for a
new security. In substance, the Trustee will merely collect and distribute
income and will not reinvest any income or proceeds, and the Trustee has no
power to vary the investment of any Unit holder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust will be
deemed to be the owner of the trust under certain circumstances, and therefore
taxable on his proportionate interest in the income thereof. Where this Federal
tax rule applies, the income attributed to the guarantor will also be income to
him for New York income tax purposes. See TSB-M-78(9)(c), New York Department of
Taxation and Finance, June 23, 1978.
Article 22 (Personal Income Tax) of the New York Tax Law imposes a tax
on a New York State resident individual's State adjusted gross income. Such
amount is defined by Section 612 as his Federal adjusted gross income, with an
addition for interest income on the obligations of a State or political
subdivision of a state other than New York, is excluded from his federal
adjusted gross income. Such amount is defined by Section T46-112 of the
Administrative Code of the City of New York as his Federal adjusted gross
income, with an addition for interest income on the obligations of a state or
political subdivision of a state other than New York, if excluded from his
federal adjusted gross income. 48 U.S.C. Section 745 exempts interest on a bond
issued by the Government of Puerto Rico or a political subdivision thereof from
tax of the United States, of any State, and of any state's county, municipality,
or municipal subdivision thereof. 48 U.S.C. Section 1423a exempts interest on a
bond issued by the Government of Guam or by its authority from taxation by the
United States, any state or political subdivision. The New York Trust holds only
obligations issued by New York State or a political subdivision thereof or by
the Government of Puerto Rico or a political subdivision thereof, or by the
Government of Guam or by its authority.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of a Trust will be
considered as owning a share of each asset of that Trust in the proportion that
the number of Units held by such holder bears to the total number of Units
outstanding and the income of a Trust will be treated as the income of each Unit
holder of that Trust in said proportion pursuant to Subpart E of Part E,
subchapter J of Chapter 1 of the Code.
Based on the foregoing and of the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we specifically rely,
we are of the opinion that under existing laws, rulings, and court decisions
interpreting the laws of the State and City of New York:
1. Each of the Trusts will not constitute an association taxable as
a corporation under New York law, and, accordingly, will not be subject to tax
on its income under the New York State franchise tax or the New York City
general corporation tax.
2.The income of each of the Trusts will be treated as the income of
the Unit holders under the income tax laws of the State and City of New York.
3. Resident individuals of New York State and City will not be
subject to the State or City personal income taxes on interest income on their
proportionate shares of interest income earned by a Trust on any obligation of
New York State or a political subdivision thereof or of the Government of Puerto
Rico or a political subdivision thereof or of the Government of Guam or by its
authority, to the extent such income is excludable from Federal gross income
under Code Section 103.
4. Any amounts paid under the insurance policies purchased by the
Depositor and deposited with the Trustee, as more fully described above,
representing maturing interest on defaulted obligations held by the Trustee will
not be subject to New York State or City income taxes if, and to the same extent
as, such amounts would have been excludable from New York State or City income
taxes if paid by the issuer. Paragraph 3 of this opinion is accordingly
applicable to such policy proceeds representing maturing interest.
5. Any amounts paid under an insurance policy purchased by the
issuer of an obligation or a prior owner, as more fully described above,
representing maturing interest on such defaulting obligation held by the Trustee
will not be subject to New York State or City income taxes if, and to the same
extent as, such amounts would have been excludable from New York State or City
income taxes if paid by the issuer. Paragraph 3 of this opinion is accordingly
applicable to such policy proceeds representing maturing interest.
6. Resident individuals of New York State and City who hold Units
will recognize gain or loss, if any, under the State or City personal income tax
law if the Trustee disposes of a Fund asset. The amount of such gain or loss is
measured by comparing the Unit holder's aliquot share of the total proceeds from
the transaction with his basis for his fractional interest in the asset disposed
of. Such basis is ascertained by apportioning the tax basis for his Units among
each of the Trust's assets (as of the date on which his Units were acquired)
ratably according to their values as of the valuation date nearest the date on
which he purchased such Units. A Unit holder's basis in his Units and of his
fractional interest in the Trust's assets must be reduced by the amount of his
aliquot share of interest received by the Trust, if any, on bonds delivered
after the settlement date to the extent that such interest accrued on the Bonds
during the period from the Unit holder's settlement date to the date such Bonds
are delivered to that Trust and must be adjusted for amortization of bond
premium or accretion of original issue discount, if any, on tax-exempt
obligations held by the Trust.
7. Resident individuals of New York State and City who hold Units
will recognize gain or loss, if any, under the State or City personal income tax
law if the Unit holder sells or redeems any Units. Such gain or loss is measured
by comparing the proceeds of such redemption or sale with the adjusted basis of
the Units redeemed or sold. Before adjustment, such basis would normally be cost
if the Unit holder had acquired his Units by purchase, plus his aliquot share of
advances by the Trustee to the Fund to pay interest on Bonds delivered after the
Unit holder's settlement date to the extent that such interest accrued on the
Bonds during the period from the settlement date to the date such Bonds are
delivered to the Fund, but only to the extent that such advances are to be
repaid to the Trustee out of interest received by the Fund with respect to such
Bonds.
8. Unit holders who are not residents of New York State are not
subject to the personal income tax law thereof with respect to any interest or
gain derived from a Trust or any gain from the sale or other disposition of the
Units, except to the extent that such interest or gain is from property employed
in a business, trade, profession or occupation carried on in New York State.
In addition, we are of the opinion that no New York State stock
transfer tax will be payable in respect of any transfer of the Certificates by
reason of the exemption contained in paragraph (a) of Subdivision 8 of Section
270 of the New York Tax Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and the
reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
WINSTON & STRAWN
EXHIBIT 4.1
Interactive Data
14 Wall Street
New York, NY 10005
April 23, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Insured Municipals Income Trust, 230th Insured Multi-Series
(A Unit Investment Trust) Registered Under the Securities Act of 1933
FILE NO. 333-45171
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation, as the
Evaluator, and to the use of the obligations prepared by us which are referred
to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
April 23, 1998
Page 1
Exhibit 4.2
Standard & Poor's
A division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust, 230th Insured Multi-Series - consisting of:
California Insured Municipals Income Trust, Series 173
New York Insured Municipals Income Trust, Series 145
Colorado Insured Municipals Income Trust, Series 86
Pursuant to your request for a Standard & Poor's rating on the units of
the above-captioned trust, SEC #333-45171, we have reviewed the information
presented to us and have assigned a `AAA' rating to the units of the trust and a
`AAA' rating to the securities contained in the trust for as long as they remain
in the trust. The ratings are direct reflections, of the portfolio of the trust,
which will be composed solely of securities covered by bond insurance policies
that insure against default in the payment of principal and interest on the
securities so long as they remain in the trust. Since such policies have been
issued by one or more insurance companies which have been assigned a `AAA'
claims paying ability rating by S&P, S&P has assigned a `AAA' rating to the
units of the trust and to the securities contained in the trust for as long as
they remain in the trust.
Standard & Poor's will maintain surveillance on the "AAA" Rating Until
May 23, 1999. On this date, the rating will be automatically withdrawn by
Standard & Poor's unless a post effective letter is requested by the trust.
You have permission to use the name of Standard & Poor's Corporation
and the above-assigned ratings in connection with your dissemination of
information relating to these units, provided that it is understood that the
ratings are not "market" ratings nor recommendations to buy, hold, or sell the
units of the trust or the securities contained in the trust. Further, it should
be understood the rating on the units does not take into account the extent to
which fund expenses or portfolio asset sales for less than the fund's purchase
price will reduce payment to the unit holders of the interest and principal
required to be paid on the portfolio assets. S&P reserves the right to advise
its own clients, subscribers, and the public of the ratings. S&P relies on the
sponsor and its counsel, accountants, and other experts for the accuracy and
completeness of the information submitted in connection with the ratings. S&P
does not independently verify the truth or accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Corporation in connection with the rating assigned to the units in the
registration statement or prospectus relating to the units or the trust.
However, this letter should not be construed as a consent by us, within the
meaning of Section 7 of the Securities Act of 1933, to the use of the name of
Standard & Poor's Corporation in connection with the ratings assigned to the
securities contained in the trust. You are hereby authorized to file a copy of
this letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made to
us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If we can
be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
EXHIBIT 4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We have issued our report dated April 23, 1998 on the statements of
condition and related bond portfolios of Insured Municipals Income Trust, 230th
Insured Multi-Series (California IM-IT, New York IM-IT and Colorado IM-IT
Trusts) as of April 23, 1998 contained in the Registration Statement on Form S-6
and Prospectus. We consent to the use of our report in the Registration
Statement and Prospectus and to the use of our name as it appears under the
caption "Trust Administration-Independent Certified Public Accountants" in Part
II of the Prospectus.
GRANT THORNTON LLP
Chicago, Illinois
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on April 23, 1998
it is unaudited
</LEGEND>
<SERIES>
<NUMBER> 173
<NAME> California
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-23-1998
<PERIOD-END> APR-23-1998
<INVESTMENTS-AT-COST> 2,853,961
<INVESTMENTS-AT-VALUE> 2,853,961
<RECEIVABLES> 32,005
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,885,966
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,005
<TOTAL-LIABILITIES> 32,005
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,853,961
<SHARES-COMMON-STOCK> 3,001
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,853,961
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on April 23, 1998
it is unaudited
</LEGEND>
<SERIES>
<NUMBER> 86
<NAME> Colorado
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-23-1998
<PERIOD-END> APR-23-1998
<INVESTMENTS-AT-COST> 1,969,531
<INVESTMENTS-AT-VALUE> 1,969,531
<RECEIVABLES> 23,894
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,993,425
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,894
<TOTAL-LIABILITIES> 23,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,969,531
<SHARES-COMMON-STOCK> 2,071
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,969,531
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on April 23, 1998
it is unaudited
</LEGEND>
<SERIES>
<NUMBER> 145
<NAME> New York
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-23-1998
<PERIOD-END> APR-23-1998
<INVESTMENTS-AT-COST> 2,922,438
<INVESTMENTS-AT-VALUE> 2,922,438
<RECEIVABLES> 50,786
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,973,224
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50,786
<TOTAL-LIABILITIES> 50,786
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,922,438
<SHARES-COMMON-STOCK> 3,073
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,922,438
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
