File No. 33-63125
CIK #896924
Securities And Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 264
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 Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 W. Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: 53,741* Units
F. Proposed maximum offering price to the public of the securities being
registered: ($1020 per Unit**): $54,815,820
G. Amount of filing fee, computed at one twenty-ninth of 1 percent of proposed
maximum aggregate offering
price to the public: $18,902.01 ($351.72 previously paid)
H. 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
December 13, 1995 pursuant to Rule 487.
35,827 Units registered for primary distribution.
17,914 Units registered for resale by Depositor of
Units previously sold in primary distribution.
** Estimated solely for the purpose of calculating the registration fee.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 264
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) Underwriting
underwriter )
5. Organization of trust ) Introduction
6. Execution and termination of ) Introduction
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and Securities of the Trust
10. General information regarding ) Introduction
trust's securities and rights ) Unitholder Explanations
of security holders ) Trust Information
) Trust Administration
11. Type of securities comprising ) Introduction
units ) Trust Information
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Introduction
expenses ) Summary of Essential Financial
) Information
) Unitholder Explanations
) Trust Information
) Trust Administration
(b) Certain information regard- ) *
ing periodic payment plan )
certificates )
(c) Certain percentages ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
(d) Certain other fees, ) Unitholder Explanations
expenses or charges ) Trust Administration
payable by holders )
(e) Certain profits to be ) Unitholder Explanations
received by depositor, ) Underwriting
principal underwriter, ) Notes to Portfolios
trustee or affiliated )
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Unitholder Explanations
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Introduction
underlying securities ) Unitholder Explanations
) Trust Administration
17. Withdrawal or redemption ) Unitholder Explanations
) Trust Administration
18. (a) Receipt and disposition ) Introduction
of income ) Unitholder Explanations
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Unitholder Explanations
) Trust Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Unitholder Explanations
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolios
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) Trust Administration
27. Business of Depositor ) Trust Administration
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Directors ) *
32. Compensation of Directors ) *
33. Compensation of Employees ) *
34. Compensation to other persons ) Unitholder Explanations
IV. Distribution and Redemption of Securities
35. Distribution of trust's ) Introduction
securities by states ) Settlement of Bonds in the Trusts
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Unitholder Explanations
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Trust Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) 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 ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
) Trust Administration
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) Unitholder Explanations
to certain persons )
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Unitholder Explanations
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Unitholder Explanations
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
trustee )
49. Fees and expenses of trustee ) Summary of Essential Financial
) Information
) Trust Administration
50. Trustee's lien ) Trust Administration
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's )
securities ) *
VII. Policy of Registrant
52. (a) Provisions of trust agree- )
ment with respect to )
replacement or elimi- ) Trust Administration
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitu- ) Trust Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Trust Information
) Other Matters
VIII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Other Matters
tions 1(c) to Form S-6) )
__________________________________
* Inapplicable, omitted, answer negative or not required
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
December 13, 1995
Van Kampen American Capital
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 264
IM-IT 362 Connecticut IM-IT 29 New York IM-IT Intermediate
IM-IT 86th Intermediate Georgia IM-IT 78 Laddered Maturity Series 17
California IM-IT 148 Michigan IM-IT 134 Maryland Quality 75
Virginia Quality 68
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is excludable under existing law from gross income for
Federal income taxes. In addition, the interest income of each State Trust is,
in the opinion of counsel, exempt to the extent indicated from state and local
taxes, when held by residents of the state where the issuers of Bonds in such
Trust are located. Capital gains, if any, are subject to Federal tax.
The Fund. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an
investment in a diversified portfolio of tax-exempt bonds. The Fund consists
of nine underlying separate unit investment trusts designated as Insured
Municipals Income Trust, Series 362 (the "IM-IT"), Insured Municipals
Income Trust, 86th Intermediate Series (the "IM-IT Intermediate Trust"
), California Insured Municipals Income Trust, Series 148 (the "California
IM-IT Trust"), Connecticut Insured Municipals Income Trust, Series 29 (the
"Connecticut IM-IT Trust"), Georgia Insured Municipals Income Trust,
Series 78 (the "Georgia IM-IT Trust"), Michigan Insured Municipals
Income Trust, Series 134 (the "Michigan IM-IT Trust"), New York IM-IT
Intermediate Laddered Maturity Series 17 (the "New York IM-IT Intermediate
Laddered Maturity Trust"), Maryland Investors' Quality Tax-Exempt Trust,
Series 75 (the "Maryland Quality Trust") and Virginia Investors'
Quality Tax-Exempt Trust, Series 68 (the "Virginia Quality Trust").
The various trusts are collectively referred to herein as the "Trusts".
The California IM-IT, Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT, New
York IM-IT Intermediate Laddered Maturity, Maryland Quality and Virginia
Quality Trusts are sometimes collectively referred to herein as the "State
Trusts" , while the IM-IT, IM-IT Intermediate, California IM-IT,
Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT and New York IM-IT
Intermediate Laddered Maturity Trusts are sometimes collectively referred to
herein as the "Insured Trusts" , the New York IM-IT Intermediate
Laddered Maturity Trust is sometimes referred to herein as the "State
Intermediate Laddered Maturity Trust" and the Maryland Quality and
Virginia Quality Trusts are sometimes referred to herein as the "Quality
Trusts". Each Trust initially consists of delivery statements relating to
contracts to purchase securities and, thereafter, will consist of such
securities as may continue to be held (the "Bonds" or "
Securities"). Such Securities are interest-bearing obligations issued by
or on behalf of municipalities and other governmental authorities, the
interest on which is, in the opinion of recognized bond counsel to the issuing
governmental authority, exempt from all Federal income taxes under the
existing law. In addition, the interest income of each State Trust is, in the
opinion of counsel, exempt to the extent indicated from state and local taxes,
when held by residents of the state where the issuers of Bonds in such Trust
are located.
"AAA" Rating for the Insured Trusts Only. Insurance guaranteeing the
payments of principal and interest, when due, on the Securities in the
portfolio of each Insured Trust has been obtained from a municipal bond
insurance company either by such Trust or by the issuer of the Bonds involved,
by a prior owner of the Bonds or by the Sponsor prior to the deposit of such
Bonds in an Insured Trust. See "Unitholder Explanations--Insurance on the
Bonds in the Insured Trusts" on page 26. Insurance obtained by an Insured
Trust applies only while Bonds are retained in such Trust while insurance
obtained on Preinsured Bonds is effective so long as such Bonds are
outstanding. The Trustee, upon the sale of a Bond insured under an insurance
policy obtained by an Insured Trust, has a right to obtain from the insurer
involved permanent insurance for such Bond upon the payment of a single
predetermined insurance premium and any expenses related thereto from the
proceeds of the sale of such Bond. Insurance relates only to the Bonds in a
Trust and not to the Units offered hereby or to the market value thereof. As a
result of such insurance, the Units of each Insured Trust have received a
rating of "AAA" by Standard & Poor's, A Division of the McGraw-Hill
Companies. Standard & Poor's has indicated that this rating is not a
recommendation to buy, hold or sell Units nor does it take into account the
extent to which expenses of each Insured Trust or sales by each Insured Trust
of Bonds for less than the purchase price paid by such Trust will reduce
payments to Unitholders of the interest and principal required to be paid on
such Bonds. See "Unitholder Explanations--Insurance on the Bonds in the
Insured Trusts". No representation is made as to any insurer's ability to
meet its commitments.
Public Offering Price. The Public Offering Price of the Units of each Trust
during the initial offering period is equal to the aggregate offering price of
the Securities in such Trust's portfolio and cash, if any, in the Principal
Account held or owned by such Trust Fund plus the applicable sales charge plus
accrued interest, if any. After the initial public offering period, the
secondary market Public Offering Price of each Trust will be equal to the
aggregate bid price of the Securities in such Trust and cash, if any, in the
Principal Account held or owned by such Trust Fund plus the applicable sales
charge plus accrued interest, if any. Sales charges for the Trusts in the
initial market, expressed both as a percentage of the Public Offering Price
and as a percentage of the aggregate offering price of the Securities, are set
forth in footnote (2) under "Summary of Essential Financial
Information". For sales charges in the secondary market, see
"Unitholder Explanations--Public Offering". If the Securities in each Trust
were available for direct purchase by investors, the purchase price of the
Securities would not include the sales charge included in the Public Offering
Price of the Units. During the initial offering period, the sales charge is
reduced on a graduated scale for sales involving at least 100 Units. If Units
were available for purchase at the close of business on the day before the
Date of Deposit (except for the IM-IT as of 8:00 A.M. Central Time on the Date
of Deposit), the Public Offering Price per Unit would have been that amount
set forth in the "Summary of Essential Financial Information" for each
Trust. The minimum purchase requirement is one Unit except for certain
transactions described under "Trust Administration--Unit Distribution".
See "Unitholder Explanations--Public Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Estimated Current Return and Estimated Long-Term Return. The annual Estimated
Current Returns and Estimated Long-Term Returns to Unitholders as of the close
of business on the day before the Date of Deposit (except for the IM-IT as of
8:00 A.M. Central Time on the Date of Deposit) under the monthly and
semi-annual distribution plans were as set forth under "Per Unit
Information" for each Trust. The methods of calculating Estimated Current
Return and Estimated Long-Term Return are set forth in the footnotes to the
"Per Unit Information" for each Trust.
Objectives of The Fund. The objectives of the Fund are income exempt from
Federal income tax and, in the case of a State Trust, Federal and state income
tax (if any) and conservation of capital through an investment in diversified
portfolios of Federal and state tax-exempt obligations. There is, of course,
no guarantee that the Fund will achieve its objectives. The Fund may be an
appropriate investment vehicle for investors who desire to participate in a
portfolio of tax-exempt fixed income securities with greater diversification
than they might be able to acquire individually. In addition, securities of
the type deposited in the Fund are often not available in small amounts. Units
of the Trust are not deposits or obligations of, or guaranteed or endorsed by,
any bank and are not federally insured or otherwise protected by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency
and involve investment risk, including the possible loss of principal.
Distribution Options. Purchasers of Units who desire to receive distributions
on a monthly or semi-annual basis may elect to do so at the time of settlement
during the initial public offering period. See "Unitholder
Explanations--Settlement of Bonds in the Trusts--Change of Distribution
Option". The plan of distribution selected by such purchasers will remain
in effect until changed. Those indicating no choice will be deemed to have
chosen the monthly distribution plan. Record dates for monthly distributions
will be the first day of each month and record dates for semi-annual
distributions will be the first day of the months indicated under "Per
Unit Information" for the applicable Trust. Distributions will be made on
the fifteenth day of the month subsequent to the respective record dates.
Market for Units. Although not obligated to do so, the Sponsor, Van Kampen
American Capital Distributors, Inc., intends to, and certain of the other
Underwriters may, maintain a secondary market for the Units at prices based
upon the aggregate bid prices of the Securities in the respective Trusts plus
interest accrued to the date of settlement; however, during the initial
offering period such prices will be based upon the aggregate offering prices
of the Securities plus interest accrued to the date of settlement. If such a
market is not maintained and no other over-the-counter market is available, a
Unitholder will be able to dispose of his Units only through redemption at
prices based upon the bid prices of the underlying Securities plus interest
accrued to the date of settlement (see "Unitholder Explanations--Public
Offering--Redemption of Units" and "Unitholder Explanations--Public
Offering--Market for Units").
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. See "Unitholder Explanations--Public
Offering--Reinvestment Option".
Risk Factors. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the
inability of the issuer or an insurer to pay the principal of or interest on a
bond when due, volatile interest rates, early call provisions, and changes to
the tax status of the Bonds. See "Unitholder Explanations--Settlement of
Bonds in the Trusts--Risk Factors".
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST
Multi-Series 264
Summary of Essential Financial Information
At the Close of Business on the day before the Date of Deposit:
December 12, 1995
(except for the IM-IT as of 8:00 A.M. Central Time
on the Date of Deposit: December 13, 1995)
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
IM-IT
Intermediate California
GENERAL INFORMATION IM-IT Trust IM-IT Trust
<S> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust <F1>............................... $ 9,000,000 $ 5,000,000 $ 2,970,000
Number of Units........................................................................ 9,082 5,000 3,033
Fractional Undivided Interest in the Trust per Unit.................................... 1/9,082 1/5,000 1/3,033
Principal Amount (Par Value) of Securities per Unit <F2>............................... $ 990.97 $ 1,000.00 $ 979.23
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio................................... $ 8,637,016 $ 4,914,270 $ 2,884,400
Aggregate Offering Price of Securities per Unit....................................... $ 951.00 $ 982.85 $ 951.01
Sales Charge <F3>..................................................................... $ 49.00 $ 39.89 $ 48.99
Public Offering Price per Unit <F4>................................................... $ 1,000.00 $ 1,022.74 $ 1,000.00
Redemption Price per Unit <F4>......................................................... $ 943.78 $ 975.35 $ 943.73
Secondary Market Repurchase Price per Unit <F4>........................................ $ 951.00 $ 982.85 $ 951.01
Excess of Public Offering Price per Unit Over Redemption Price per Unit................ $ 56.22 $ 47.39 $ 56.27
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit... $ 7.22 $ 7.50 $ 7.28
Minimum Value of the Trust under which Trust Agreement may be terminated............... $ 1,800,000 $ 1,000,000 $ 594,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution...........$1.00 per Unit
First Settlement Date....................December 18, 1995
Evaluator's Annual Supervisory Fee.......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee <F5>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Because certain of the Securities in certain Trusts 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 the respective Trusts' termination will be equal to the Principal
Amount (Par Value) of Securities per Unit stated above.
<F2>Many unit investment trusts comprised of municipal securities issue a number
of units such that each unit represents approximately $1,000 principal amount
of underlying securities. The Sponsor, on the other hand, in determining the
number of Units for each Trust, other than IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short
Intermediate Trusts, has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price per Unit of $1,000. For IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, on the other hand, each unit represents
$1,000 principal amount of underlying securities in such Trust on the Date of
Deposit.
<F3>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and in parenthesis as a percentage of the aggregate offering
price of the Securities, are as follows: an IM-IT or a State Trust (other than
a State Intermediate Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT
Limited Maturity Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9%
(4.058%); a State Intermediate Laddered Maturity Trust - 3.0% (3.093%); or an
IM-IT Short Intermediate Trust - 2.0% (2.041%).
<F4>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units."
<F5>Such fee is based on the outstanding principal amount of Securities in each
Trust on the Date of Deposit for the first year and as of the close of
business on January 1 for each year thereafter.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST
Multi-Series 264
Summary of Essential Financial Information
At the Close of Business on the day before the Date of Deposit:
December 12, 1995
(except for the IM-IT as of 8:00 A.M. Central Time
on the Date of Deposit: December 13, 1995)
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
Connecticut Georgia Michigan
GENERAL INFORMATION IM-IT Trust IM-IT Trust IM-IT Trust
<S> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust <F1>............................... $ 3,045,000 $ 3,085,000 $ 3,025,000
Number of Units........................................................................ 3,115 3,155 3,087
Fractional Undivided Interest in the Trust per Unit.................................... 1/3,115 1/3,155 1/3,087
Principal Amount (Par Value) of Securities per Unit <F2>............................... $ 977.53 $ 977.81 $ 979.92
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio................................... $ 2,962,380 $ 3,000,418 $ 2,935,751
Aggregate Offering Price of Securities per Unit....................................... $ 951.00 $ 951.00 $ 951.00
Sales Charge <F3>..................................................................... $ 49.00 $ 49.00 $ 49.00
Public Offering Price per Unit <F4>................................................... $ 1,000.00 $ 1,000.00 $ 1,000.00
Redemption Price per Unit <F4>......................................................... $ 943.79 $ 943.85 $ 943.84
Secondary Market Repurchase Price per Unit <F4>........................................ $ 951.00 $ 951.00 $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit................ $ 56.21 $ 56.15 $ 56.16
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit... $ 7.21 $ 7.15 $ 7.16
Minimum Value of the Trust under which Trust Agreement may be terminated............... $ 609,000 $ 617,000 $ 605,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution...........$1.00 per Unit
First Settlement Date....................December 18, 1995
Evaluator's Annual Supervisory Fee.......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee <F5>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Because certain of the Securities in certain Trusts 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 the respective Trusts' termination will be equal to the Principal
Amount (Par Value) of Securities per Unit stated above.
<F2>Many unit investment trusts comprised of municipal securities issue a number
of units such that each unit represents approximately $1,000 principal amount
of underlying securities. The Sponsor, on the other hand, in determining the
number of Units for each Trust, other than IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short
Intermediate Trusts, has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price per Unit of $1,000. For IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, on the other hand, each unit represents
$1,000 principal amount of underlying securities in such Trust on the Date of
Deposit.
<F3>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and in parenthesis as a percentage of the aggregate offering
price of the Securities, are as follows: an IM-IT or a State Trust (other than
a State Intermediate Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT
Limited Maturity Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9%
(4.058%); a State Intermediate Laddered Maturity Trust - 3.0% (3.093%); or an
IM-IT Short Intermediate Trust - 2.0% (2.041%).
<F4>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units."
<F5>Such fee is based on the outstanding principal amount of Securities in each
Trust on the Date of Deposit for the first year and as of the close of
business on January 1 for each year thereafter.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST
Multi-Series 264
Summary of Essential Financial Information
At the Close of Business on the day before the Date of Deposit:
December 12, 1995
(except for the IM-IT as of 8:00 A.M. Central Time
on the Date of Deposit: December 13, 1995)
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
New York
IM-IT
Intermediate
Laddered
Maturity Maryland Virginia
GENERAL INFORMATION Trust Quality Trust Quality Trust
<S> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust <F1>............................... $ 3,150,000 $ 3,020,000 $ 3,040,000
Number of Units........................................................................ 3,150 3,093 3,112
Fractional Undivided Interest in the Trust per Unit.................................... 1/3,150 1/3,093 1/3,112
Principal Amount (Par Value) of Securities per Unit <F2>............................... $ 1,000.00 $ 976.40 $ 976.86
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio................................... $ 3,103,992 $ 2,941,454 $ 2,959,524
Aggregate Offering Price of Securities per Unit....................................... $ 985.39 $ 951.00 $ 951.00
Sales Charge <F3>..................................................................... $ 30.47 $ 49.00 $ 49.00
Public Offering Price per Unit <F4>................................................... $ 1,015.86 $ 1,000.00 $ 1,000.00
Redemption Price per Unit <F4>......................................................... $ 978.23 $ 943.76 $ 943.68
Secondary Market Repurchase Price per Unit <F4>........................................ $ 985.39 $ 951.00 $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit................ $ 37.63 $ 56.24 $ 56.32
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit... $ 7.16 $ 7.24 $ 7.32
Minimum Value of the Trust under which Trust Agreement may be terminated............... $ 630,000 $ 604,000 $ 608,000
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<CAPTION>
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Minimum Principal Distribution...........$1.00 per Unit
First Settlement Date....................December 18, 1995
Evaluator's Annual Supervisory Fee.......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee <F5>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Because certain of the Securities in certain Trusts 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 the respective Trusts' termination will be equal to the Principal
Amount (Par Value) of Securities per Unit stated above.
<F2>Many unit investment trusts comprised of municipal securities issue a number
of units such that each unit represents approximately $1,000 principal amount
of underlying securities. The Sponsor, on the other hand, in determining the
number of Units for each Trust, other than IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short
Intermediate Trusts, has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price per Unit of $1,000. For IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, on the other hand, each unit represents
$1,000 principal amount of underlying securities in such Trust on the Date of
Deposit.
<F3>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and in parenthesis as a percentage of the aggregate offering
price of the Securities, are as follows: an IM-IT or a State Trust (other than
a State Intermediate Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT
Limited Maturity Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9%
(4.058%); a State Intermediate Laddered Maturity Trust - 3.0% (3.093%); or an
IM-IT Short Intermediate Trust - 2.0% (2.041%).
<F4>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units."
<F5>Such fee is based on the outstanding principal amount of Securities in each
Trust on the Date of Deposit for the first year and as of the close of
business on January 1 for each year thereafter.
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SETTLEMENT OF BONDS IN THE TRUSTS
The Fund. Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 264 (the "Fund"), was created under the laws of
the State of New York pursuant to a Trust Indenture and Agreement (the "
Trust Agreement"), dated the Date of Deposit, among Van Kampen American
Capital Distributors, Inc., as Sponsor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory Corp.,
as Evaluator, and The Bank of New York, as Trustee.
The Fund consists of nine separate portfolios of delivery statements relating
to contracts to purchase interest-bearing obligations issued by or on behalf
of states and territories of the United States, and political subdivisions and
authorities thereof, the interest on which is, in the opinion of recognized
bond counsel to the issuing authorities, excludable from gross income for
Federal income tax under existing law. All issuers of Securities in a State
Trust are located in the State for which such Trust is named or in United
States territories or possessions and their public authorities; consequently,
in the opinion of recognized bond counsel to such State issuers, the related
interest earned on such Securities is exempt to the extent indicated from
state and local taxes of such State. With the exception of the New York and
Pennsylvania Trusts, Units of such Trusts may be purchased only by residents
of the State for which such Trust is named. Units of a New York Trust may be
purchased by residents of New York, Connecticut, Florida and Massachusetts.
Units of a Pennsylvania Trust may be purchased by residents of Pennsylvania,
Connecticut, Florida, Maryland, New York, Ohio and West Virginia. Offerees in
the States of Illinois, Indiana and Washington may purchase Units of the IM-IT
and IM-IT Intermediate Trusts only. Offerees in the State of Virginia may
purchase Units of the IM-IT, IM-IT Intermediate and Virginia Quality Trusts
only. On the Date of Deposit, the Sponsor deposited with the Trustee the
aggregate principal amount of Securities in each Trust as indicated under "
General Information--Principal Amount (Par Value) of Securities in Trust"
in the "Summary of Essential Financial Information". Such Securities
consist of delivery statements relating to contracts for the purchase of
certain interest-bearing obligations and cash, cash equivalents and/or
irrevocable letters of credit issued by a financial institution in the amount
required for such purchases. Thereafter, the Trustee, in exchange for the
Securities so deposited, delivered to the Sponsor the certificates evidencing
the ownership of the number of Units in each Trust as indicated under "
Summary of Essential Financial Information." Unless otherwise terminated
as provided herein, the Trust Agreement for any IM-IT or State Trust (other
than a State Intermediate Laddered Maturity Trust) will terminate at the end
of the calendar year prior to the fiftieth anniversary of its execution, and
the Trust Agreement for any IM-IT Limited Maturity Trust, IM-IT Intermediate
Trust, State Intermediate Laddered Maturity Trust or IM-IT Short Intermediate
Trust will terminate at the end of the calendar year prior to the twentieth
anniversary of its execution.
The portfolio of any IM-IT or State Trust (other than a State Intermediate
Laddered Maturity Trust) consists of Bonds maturing approximately 15 to 40
years from the Date of Deposit. The approximate range of maturities from the
Date of Deposit for Bonds in any IM-IT Limited Maturity Trust, IM-IT
Intermediate Trust, State Intermediate Laddered Maturity Trust and IM-IT Short
Intermediate Trust is 12 to 15 years, 5 to 15 years, 5 to 10 years and 3 to 7
years, respectively. The dollar-weighted average maturity of the Bonds in any
IM-IT Intermediate Trust, State Intermediate Laddered Maturity Trust and IM-IT
Short Intermediate Trust is less than or equal to 10 years, 10 years and 5
years, respectively.
The portfolio of any State Intermediate Laddered Maturity Trust is structured
so that approximately 20% of the Bonds contained in such portfolio will mature
each year, commencing in approximately the fifth year of the Trust, entitling
each Unitholder to a return of principal. This return of principal may offer
Unitholders the opportunity to respond to changing economic conditions and to
specific financial needs that may arise between the fifth and tenth years of a
State Intermediate Laddered Maturity Trust. However, the flexibility provided
by the return of principal may at the same time eliminate a Unitholder's
ability to reinvest the amount returned at a rate as high as the implicit
yield on the obligations which matured.
The portfolios of the Trusts may consist of bonds that were acquired at a
market discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in such Trust
were lower than the current market interest rates for newly issued bonds of
comparable rating and type. If such interest rates for newly issued comparable
bonds increase, the market discount of previously issued bonds will become
greater, and if such interest rates for newly issued comparable bonds decline,
the market discount of previously issued bonds will be reduced, other things
being equal. Investors should also note that the value of bonds purchased at a
market discount will increase in value faster than bonds purchased at a market
premium if interest rates decrease. Conversely, if interest rates increase,
the value of bonds purchased at a market discount will decrease faster than
bonds purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium bonds and the prepayment benefit
for lower yielding, discount bonds will be reduced. A bond purchased at a
market discount and held to maturity will have a larger portion of its total
return in the form of taxable income and capital gain and less in the form of
tax-exempt interest income than a comparable bond newly issued at current
market rates. See "Other Matters--Federal Tax Status." Market discount
attributable to interest changes does not indicate a lack of market confidence
in the issue. Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds.
Certain of the Bonds in certain of the Trusts may be "zero coupon"
bonds. See footnote (6) in "Notes to Portfolios". Zero coupon bonds
are purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable
to reinvest the income on such obligation at a rate as high as the implicit
yield on the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason, zero
coupon bonds are subject to substantially greater price fluctuations during
periods of changing market interest rates than are securities of comparable
quality which pay interest.
Certain of the Bonds in certain of the Trusts may have been purchased on a
"when, as and if issued" or "delayed delivery" basis. See
footnote (5) in "Notes to Portfolios". The delivery of any such
Securities may be delayed or may not occur. Interest on these Securities
begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Securities are actually delivered to the Fund
after their respective expected dates of delivery, Unitholders who purchase
their Units prior to the date such Securities are actually delivered to the
Trustee would be required to adjust their tax basis in their Units for a
portion of the interest accruing on such Securities during the interval
between their purchase of Units and the actual delivery of such Securities. As
a result of any such adjustment, the Estimated Current Returns during the
first year would be slightly lower than those stated herein which would be the
returns after the first year, assuming the portfolio of a Trust and estimated
annual expenses other than that of the Trustee (which may be reduced in the
first year only) do not vary from that set forth under "Per Unit
Information" for the applicable Trust. Holders of the Units will be "
at risk" with respect to all Securities in the portfolios including "
when, as and if issued" and "delayed delivery" Securities (i.e.,
may derive either gain or loss from fluctuations in the evaluation of such
Securities) from the date they commit for Units. For a discussion of the
Sponsor's obligations in the event of the failure of any contract for the
purchase of any of the Securities and limited right to substitute other
tax-exempt bonds to replace any failed contract, see "Replacement
Bonds" below.
Each Unit initially offered represents the fractional undivided interest in
the principal and net income of a Trust indicated under "Summary of
Essential Financial Information". To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in a Trust
represented by each unredeemed Unit will increase, although the actual
interest in such Trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the Trustee by
Unitholders, which may include the Sponsor or the Underwriters, or until the
termination of the Trust Agreement.
Objectives and Securities Selection. The objectives of the Fund are income
exempt from Federal income taxation and, in the case of a State Trust, Federal
and state income taxation and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. A State
Intermediate Laddered Maturity Trust has additional objectives of providing
protection against changes in interest rates and investment flexibility
through an investment in a laddered portfolio of intermediate-term
interest-bearing obligations with maturities ranging from approximately 5 to
10 years in which roughly 20% of the obligations contained in such portfolio
will mature each year commencing in approximately the fifth year of the Trust.
There is, of course, no guarantee that the Trusts will achieve their
respective objectives. The Fund may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed income
securities with greater diversification than they might be able to acquire
individually. In addition, securities of the type deposited in the Fund are
often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Insured Trust has been obtained by such Trust
from either AMBAC Indemnity Corporation ("AMBAC Indemnity"), Financial
Guaranty Insurance Company ("Financial Guaranty" or "FGIC") or
a combination thereof (collectively, the "Portfolio Insurers"), or by
the issuer of such Bonds, by a prior owner of such Bonds, or by the Sponsor
prior to the deposit of such Bonds in such Trust from (1) AMBAC Indemnity or
one of its subsidiaries, American Municipal Bond Assurance Corporation ("
AMBAC") or MGIC Indemnity Corporation ("MGIC Indemnity"), (2)
Financial Guaranty, (3) MBIA Insurance Corporation ("MBIA"), (4) Bond
Investors Guaranty Insurance Company ("BIG"), (5) National Union Fire
Insurance Company of Pittsburgh, PA. ("National Union"), (6) Capital
Guaranty Insurance Company ("Capital Guaranty"), (7) Capital Markets
Assurance Corporation ("CapMAC") and/or (8) Financial Security
Assurance Inc. ("Financial Security" or "FSA") (collectively,
the "Preinsured Bond Insurers") (see "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts"). Insurance
obtained by an Insured Trust is effective only while the Bonds thus insured
are held in such Trust. The Trustee has the right to acquire permanent
insurance from a Portfolio Insurer with respect to each Bond insured by the
respective Portfolio Insurer under a Trust portfolio insurance policy.
Insurance relating to Bonds insured by the issuer, by a prior owner of such
Bonds or by the Sponsor is effective so long as such Bonds are outstanding.
Bonds insured under a policy of insurance obtained by the issuer, by a prior
owner of such Bonds or by the Sponsor from one of the Preinsured Bond Insurers
(the "Preinsured Bonds") are not additionally insured by an Insured
Trust. No representation is made as to any insurer's ability to meet its
commitments.
Neither the Public Offering Price nor any evaluation of Units for purposes of
repurchases or redemptions reflects any element of value for the insurance
obtained by an Insured Trust, if any, unless Bonds are in default in payment
of principal or interest or in significant risk of such default. See "
Unitholder Explanations--Public Offering--Offering Price". On the other
hand, the value, if any, of Preinsured Bond insurance is reflected and
included in the market value of such Bonds.
In order for bonds to be eligible for insurance, they must have credit
characteristics which would qualify them for at least the Standard & Poor's
rating of "BBB-" or at least the Moody's Investors Service, Inc.
rating of "Baa" , which in brief represent the lowest ratings for
securities of investment grade (see "Other Matters--Description of
Securities Ratings"). Insurance is not a substitute for the basic credit
of an issuer, but supplements the existing credit and provides additional
security therefor. If an issue is accepted for insurance, a non-cancellable
policy for the prompt payment of interest and principal on the bonds, when
due, is issued by the insurer. Any premium or premiums relating to Preinsured
Bond insurance is paid by the issuer, by a prior owner of such Bonds or by the
Sponsor and a monthly premium is paid by an Insured Trust for the portfolio
insurance, if any, obtained by such Trust. The Trustee has the right to obtain
permanent insurance from a Portfolio Insurer in connection with the sale of a
Bond insured under the insurance policy obtained from the respective Portfolio
Insurer by an Insured Trust upon the payment of a single predetermined
insurance premium from the proceeds of the sale of such Bond. Accordingly, any
Bond in an Insured Trust is eligible to be sold on an insured basis. All Bonds
insured by the Portfolio Insurers and the Preinsured Bond Insurers receive a
"AAA" rating by Standard & Poor's. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
In selecting Securities for the Trusts the following facts, among others, were
considered by the Sponsor: (a) either the Standard & Poor's rating of the
Securities was in no case less than "BBB-" in the case of the Insured
Trusts and "A-" in the case of the Quality Trusts, or the Moody's
Investors Service, Inc. rating of the Securities was in no case less than "
Baa" in the case of the Insured Trusts and "A" in the case of the
Quality Trusts, including provisional or conditional ratings, respectively,
or, if not rated, the Securities had, in the opinion of the Sponsor, credit
characteristics sufficiently similar to the credit characteristics of
interest-bearing tax-exempt obligations that were so rated as to be acceptable
for acquisition by the Fund (see "Other Matters--Description of Securities
Ratings"), (b) the prices of the Securities relative to other bonds of
comparable quality and maturity, (c) the diversification of Securities as to
purpose of issue and location of issuer and (d) with respect to the Insured
Trusts, the availability and cost of insurance for the prompt payment of
principal and interest, when due, on the Securities. Subsequent to the Date of
Deposit, a Security may cease to be rated or its rating may be reduced below
the minimum required as of the Date of Deposit. Neither event requires
elimination of such Security from the portfolio of a Trust but may be
considered in the Sponsor's determination as to whether or not to direct the
Trustee to dispose of the Security (see "Trust Administration--Fund
Administration and Expenses--Portfolio Administration").
To the best knowledge of the Sponsor, there is no litigation pending as of the
Date of Deposit in respect of any Securities which might reasonably be
expected to have a material adverse effect upon the Fund or any of the Trusts.
At any time after the Date of Deposit, litigation may be initiated on a
variety of grounds with respect to Securities in the Fund. Such litigation,
as, for example, suits challenging the issuance of pollution control revenue
bonds under environmental protection statutes, may affect the validity of such
Securities or the tax-free nature of the interest thereon. While the outcome
of litigation of such nature can never be entirely predicted, the Fund has
received or will receive opinions of bond counsel to the issuing authorities
of each Security on the date of issuance to the effect that such Securities
have been validly issued and that the interest thereon is exempt from Federal
income tax. In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to meet obligations undertaken
with respect to the Securities.
Risk Factors. Certain of the Bonds in certain of the Trusts may be general
obligations of a governmental entity that are backed by the taxing power of
such entity. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which
such an investment may entail. All other Bonds in the Trusts are revenue bonds
payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source. There are, of course, variations in the
security of the different Bonds in the Fund, both within a particular
classification and between classifications, depending on numerous factors. See
"General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which derive
their payments from mortgage loans. Certain of such housing bonds may be FHA
insured or may be single family mortgage revenue bonds issued for the purpose
of acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned by
persons of low or moderate income. In view of this an investment in such a
Trust should be made with an understanding of the characteristics of such
issuers and the risks which such an investment may entail. Mortgage loans are
generally partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default, condemnation
or casualty loss. Because these bonds are subject to extraordinary mandatory
redemption in whole or in part from such prepayments of mortgage loans, a
substantial portion of such bonds will probably be redeemed prior to their
scheduled maturities or even prior to their ordinary call dates. Extraordinary
mandatory redemption without premium could also result from the failure of the
originating financial institutions to make mortgage loans in sufficient
amounts within a specified time period. Additionally, unusually high rates of
default on the underlying mortgage loans may reduce revenues available for the
payment of principal of or interest on such mortgage revenue bonds. These
bonds were issued under Section 103A of the Internal Revenue Code, which
Section contains certain requirements relating to the use of the proceeds of
such bonds in order for the interest on such bonds to retain its tax-exempt
status. In each case the issuer of the bonds has covenanted to comply with
applicable requirements and bond counsel to such issuer has issued an opinion
that the interest on the bonds is exempt from Federal income tax under
existing laws and regulations. Certain issuers of housing bonds have
considered various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In connection with the housing bonds
held by the Fund, the Sponsor at the Date of Deposit is not aware that any of
the respective issuers of such Bonds are actively considering the redemption
of such Bonds prior to their respective stated initial call dates. See "
General" for each Trust.
Certain of the Bonds in certain of the Trusts may be health care revenue
bonds. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. Ratings of bonds issued for health care facilities
are often based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net income
available for debt service may be affected by future events and conditions
including, among other things, demand for services and the ability of the
facility to provide the services required, physicians' confidence in the
facility, management capabilities, competition with other health care
facilities, efforts by insurers and governmental agencies to limit rates,
legislation establishing state rate-setting agencies, expenses, the cost and
possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, government regulation
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar third
party payor programs. Pursuant to recent Federal legislation, Medicare
reimbursements are currently calculated on a prospective basis utilizing a
single nationwide schedule of rates. Prior to such legislation Medicare
reimbursements were based on the actual costs incurred by the health facility.
The current legislation may adversely affect reimbursements to hospitals and
other facilities for services provided under the Medicare program. Such
adverse changes also may adversely affect the ratings of Securities held in
the portfolios of the Fund; however, because of the insurance obtained by each
of the Insured Trusts, the "AAA" rating of the Units of each of the
Insured Trusts would not be affected. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of public
utility issuers, including those selling wholesale and retail electric power
and gas. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. General problems of such issuers would include the
difficulty in financing large construction programs in an inflationary period,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital market in
absorbing utility debt, the difficulty in obtaining fuel at reasonable prices
and the effect of energy conservation. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds in the portfolio to make
payments of principal and/or interest on such Bonds. See "General" for
each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
whose revenues are derived from the sale of water and/or sewerage services. In
view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. Such Bonds are generally payable from user fees. The
problems of such issuers include the ability to obtain timely and adequate
rate increases, population decline resulting in decreased user fees, the
difficulty of financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, the increasing difficulty of obtaining or discovering new
supplies of fresh water, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. All of such issuers have been
experiencing certain of these problems in varying degrees. See "
General" for each Trust.
Certain of the Bonds in certain of the Trusts may be industrial revenue bonds
("IRBs"). In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. IRBs have generally been issued under
bond resolutions pursuant to which the revenues and receipts payable under the
arrangements with the operator of a particular project have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the corporate
operator of the project or corporate guarantor. Corporate operators or
guarantors may be affected by many factors which may have an adverse impact on
the credit quality of the particular company or industry. These include
cyclicality of revenues and earnings, regulatory and environmental
restrictions, litigation resulting from accidents or environmentally-caused
illnesses, extensive competition and financial deterioration resulting from a
corporate restructuring pursuant to a leveraged buy-out, takeover or
otherwise. Such a restructuring may result in the operator of a project
becoming highly leveraged which may impact on such operator's creditworthiness
which in turn would have an adverse impact on the rating and/or market value
of such Bonds. Further, the possibility of such a restructuring may have an
adverse impact on the market for and consequently the value of such Bonds,
even though no actual takeover or other action is ever contemplated or
effected. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations that are
secured by lease payments of a governmental entity (hereinafter called "
lease obligations"). Lease obligations are often in the form of
certificates of participation. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. Although the lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to appropriate for and make
the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. A governmental
entity that enters into such a lease agreement cannot obligate future
governments to appropriate for and make lease payments but covenants to take
such action as is necessary to include any lease payments due in its budgets
and to make the appropriations therefor. A governmental entity's failure to
appropriate for and to make payments under its lease obligation could result
in insufficient funds available for payment of the obligations secured
thereby. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
which are, or which govern the operation of, schools, colleges and
universities and whose revenues are derived mainly from ad valorem taxes or
for higher education systems, from tuition, dormitory revenues, grants and
endowments. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which
such an investment may entail. General problems relating to school bonds
include litigation contesting the State constitutionality of financing public
education in part from ad valorem taxes, thereby creating a disparity in
educational funds available to schools in wealthy areas and schools in poor
areas. Litigation or legislation on this issue may affect the sources of funds
available for the payment of school bonds in the Trusts. General problems
relating to college and university obligations include the prospect of a
declining percentage of the population consisting of "college" age
individuals, possible inability to raise tuitions and fees sufficiently to
cover increased operating costs, the uncertainty of continued receipt of
Federal grants and state funding, and government legislation or regulations
which may adversely affect the revenues or costs of such issuers. All of such
issuers have been experiencing certain of these problems in varying degrees.
See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation
of facilities such as airports, bridges, turnpikes, port authorities,
convention centers and arenas. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. The major portion of an
airport's gross operating income is generally derived from fees received from
signatory airlines pursuant to use agreements which consist of annual payments
for leases, occupancy of certain terminal space and service fees. Airport
operating income may therefore be affected by the ability of the airlines to
meet their obligations under the use agreements. The air transport industry is
experiencing significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing severe
financial difficulties. The Sponsor cannot predict what effect these industry
conditions may have on airport revenues which are dependent for payment on the
financial condition of the airlines and their usage of the particular airport
facility. Similarly, payment on Bonds related to other facilities is dependent
on revenues from the projects, such as user fees from ports, tolls on
turnpikes and bridges and rents from buildings. Therefore, payment may be
adversely affected by reduction in revenues due to such factors as increased
cost of maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents. See
"General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the operation of resource
recovery facilities. In view of this an investment in such a Trust should be
made with an understanding of the characteristics of such issuers and the
risks which such an investment may entail. Resource recovery facilities are
designed to process solid waste, generate steam and convert steam to
electricity. Resource recovery bonds may be subject to extraordinary optional
redemption at par upon the occurrence of certain circumstances, including but
not limited to: destruction or condemnation of a project; contracts relating
to a project becoming void, unenforceable or impossible to perform; changes in
the economic availability of raw materials, operating supplies or facilities
necessary for the operation of a project or technological or other unavoidable
changes adversely affecting the operation of a project; administrative or
judicial actions which render contracts relating to the projects void,
unenforceable or impossible to perform; or impose unreasonable burdens or
excessive liabilities. The Sponsor cannot predict the causes or likelihood of
the redemption of resource recovery bonds in such a Trust prior to the stated
maturity of the Bonds. See "General" for each Trust.
Replacement Bonds. Because certain of the Securities in the Fund may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can be
given that any Trust will retain for any length of time its present size and
composition. Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Security. In the event of a failure
to deliver any Security that has been purchased for the Fund under a contract,
including those Securities purchased on a "when, as and if issued"
basis ("Failed Bonds"), the Sponsor is authorized under the Trust
Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds") to make up the original corpus of the Fund.
The Replacement Bonds must be purchased within 20 days after delivery of the
notice of the failed contract and the purchase price (exclusive of accrued
interest) may not exceed the amount of funds reserved for the purchase of the
Failed Bonds. The Replacement Bonds (i) must be tax-exempt bonds issued by
states or territories of the United States or political subdivisions thereof
and, in the case of replacement of bonds in a State Trust, shall have the
benefit of an exemption from state taxation of interest to an extent equal to
or greater than that of the bonds they replace, (ii) must have a fixed
maturity date of at least 10 years in the case of an IM-IT or a State Trust
(other than a State Intermediate Laddered Maturity Trust) or, in the case of
an IM-IT Limited Maturity, IM-IT Intermediate, State Intermediate Laddered
Maturity or IM-IT Short Intermediate Trust, must have a fixed maturity date
within the range set forth under "Unitholder Explanations--Settlement of
Bonds in the Trusts--The Fund" , (iii) must be purchased at a price that
results in a yield to maturity and in a current return, in each case as of the
Date of Deposit, at least equal to that of the Failed Bonds, (iv) shall not be
"when, as and if issued" bonds, (v) must be rated "BBB-" or
better in the case of the Insured Trusts and "A-" or better in the
case of the Quality Trusts by Standard & Poor's or "Baa" or better in
the case of the Insured Trusts and "A" or better in the case of the
Quality Trusts by Moody's Investors Service, Inc. and (vi) with respect to
each Insured Trust, must be insured by one of the Preinsured Bond Insurers or
be eligible for (and when acquired be insured under) the insurance obtained by
such Insured Trust. Whenever a Replacement Bond has been acquired for the
Fund, the Trustee shall, within five days thereafter, notify all Unitholders
of the affected Trust of the acquisition of the Replacement Bond and shall, on
the next monthly distribution date which is more than 30 days thereafter, make
a pro rata distribution of the amount, if any, by which the cost to the
affected Trust of the Failed Bond exceeded the cost of the Replacement Bond
plus accrued interest. Once the original corpus of a Trust is acquired, the
Trustee will have no power to vary the investment of the Trust; i.e., the
Trust will have no managerial power to take advantage of market variation to
improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Bonds to all Unitholders of the affected Trust and distribute the principal
and accrued interest (at the coupon rate of such Failed Bonds to the date the
Failed Bonds are removed from the Fund) attributable to such Failed Bonds not
more than 30 days after such removal or such earlier time as the Trustee in
its sole discretion deems to be in the interest of the Unitholders. All such
interest paid to a Unitholder which accrued after the expected date of
settlement for purchase of his Units will be paid by the Sponsor and
accordingly will not be treated as tax-exempt income. In the event a
Replacement Bond should not be acquired by the Fund, the Estimated Net Annual
Interest Income per Unit for the affected Trust would be reduced and the
Estimated Current Return and Estimated Long-Term Return thereon might be
lowered. In addition, Unitholders should be aware that they may not be able at
the time of receipt of such principal to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such proceeds
were earning to Unitholders in the affected Trust.
Bond Redemptions. Certain of the Bonds in certain of the Trusts may be subject
to redemption prior to their stated maturity date pursuant to sinking fund
provisions, call provisions or extraordinary optional or mandatory redemption
provisions or otherwise. A sinking fund is a reserve fund accumulated over a
period of time for retirement of debt. A callable debt obligation is one which
is subject to redemption or refunding prior to maturity at the option of the
issuer. A refunding is a method by which a debt obligation is redeemed, at or
before maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation is
at a premium over par than when it is at a discount from par. The exercise of
redemption or call provisions will (except to the extent the proceeds of the
called Bonds are used to pay for Unit redemptions) result in the distribution
of principal and may result in a reduction in the amount of subsequent
interest distributions; it may also affect the current return on Units of the
Trust involved. Each Trust portfolio contains a listing of the sinking fund
and call provisions, if any, with respect to each of the debt obligations.
Extraordinary optional redemptions and mandatory redemptions result from the
happening of certain events. Generally, events that may permit the
extraordinary optional redemption of Bonds or may require the mandatory
redemption of Bonds include, among others: a final determination that the
interest on the Bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the Bonds were
used; an exercise by a local, state or Federal governmental unit of its power
of eminent domain to take all or substantially all of the project for which
the proceeds of the Bonds were used; changes in the economic availability of
raw materials, operating supplies or facilities or technological or other
changes which render the operation of the project for which the proceeds of
the Bonds were used uneconomic; changes in law or an administrative or
judicial decree which renders the performance of the agreement under which the
proceeds of the Bonds were made available to finance the project impossible or
which creates unreasonable burdens or which imposes excessive liabilities,
such as taxes, not imposed on the date the Bonds are issued on the issuer of
the Bonds or the user of the proceeds of the Bonds; an administrative or
judicial decree which requires the cessation of a substantial part of the
operations of the project financed with the proceeds of the Bonds; an
overestimate of the costs of the project to be financed with the proceeds of
the Bonds resulting in excess proceeds of the Bonds which may be applied to
redeem Bonds; or an underestimate of a source of funds securing the Bonds
resulting in excess funds which may be applied to redeem Bonds. The issuer of
certain Bonds in a Trust may have sold or reserved the right to sell, upon the
satisfaction of certain conditions, to third parties all or any portion of its
rights to call Bonds in accordance with the stated redemption provisions of
such Bonds. In such a case the issuer no longer has the right to call the
Bonds for redemption unless it reacquires the rights from such third party. A
third party pursuant to these rights may exercise the redemption provisions
with respect to a Bond at a time when the issuer of the Bond might not have
called a Bond for redemption had it not sold such rights. The Sponsor is
unable to predict all of the circumstances which may result in such redemption
of an issue of Bonds. See "Portfolio" for each Trust and footnote (3)
in the "Notes to Portfolios". See also the discussion of single family
mortgage and multi-family revenue bonds above for more information on the call
provisions of such bonds.
Distributions. Distributions of interest received by the Fund, pro rated on an
annual basis, will be made on a monthly basis, unless the Unitholder elects to
receive them semi-annually. The first such distribution will be in the amount
indicated under "Per Unit Information" for the applicable Trust and
will be made on the fifteenth day of the month indicated under "Initial
Distribution" therein to Unitholders of record on the first day of such
month. The first distribution of funds from the Principal Account, if any,
will be made on the first semi-annual distribution date to Unitholders of
record on the first semi-annual record date, and thereafter such distributions
will be made on a semi-annual basis, except under certain special
circumstances (see "Unitholder Explanations--Public Offering
- -Distributions of Interest and Principal").
Change of Distribution Option. The plan of distribution selected by a
Unitholder will remain in effect until changed. Unitholders purchasing Units
in the secondary market will initially receive distributions in accordance
with the election of the prior owner. Unitholders may change the plan of
distribution in which they are participating. For convenience of Unitholders,
the Trustee will furnish a card for this purpose; cards may also be obtained
upon request from the Trustee. Unitholders desiring to change their plan of
distribution may so indicate on the card and return it together with their
certificate and such other documentation that the Trustee may then require, to
the Trustee. Certificates should only be sent by registered or certified mail
to minimize the possibility of their being lost or stolen. If the card and
certificate are properly presented to the Trustee, the change will become
effective as of the opening of business on the first day after the next
succeeding semi-annual record date and will be effective, unless further
changed, for all subsequent distributions.
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of each Trust is evidenced by separate registered
certificates executed by the Trustee and the Sponsor. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unitholder
must sign exactly as his name appears on the face of the certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guaranty program
in addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. In certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority. Certificates will be issued in denominations of one Unit or any
multiple thereof. Certificates for Units will bear appropriate notations on
their face indicating which plan of distribution has been selected in respect
thereof. If a change in the plan of distribution is made, the existing
certificate must be surrendered to the Trustee and a new certificate will be
issued, at no charge to the Unitholder, to reflect the currently effective
plan of distribution.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate re-issued (other than
as a result of a change in plan of distribution) or transferred and to pay any
governmental charge that may be imposed in connection with each such transfer
or interchange. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity, evidence of
ownership and payment of expenses incurred. Mutilated certificates must be
surrendered to the Trustee for replacement.
ESTIMATED CURRENT RETURNS AND ESTIMATED LONG-TERM RETURNS
As of the close of business on the day before the Date of Deposit (except for
the IM-IT as of 8:00 A.M. Central Time on the Date of Deposit) the Estimated
Current Returns and the Estimated Long-Term Returns, under the monthly and
semi-annual distribution plans, were as set forth in the "Per Unit
Information" for each Trust. Estimated Current Return is calculated by
dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. Estimated
Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in a Trust and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of a Trust will change, there
is no assurance that the present Estimated Long-Term Return will be realized
in the future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while the
Estimated Current Return calculation includes only net annual interest income
and Public Offering Price.
In order to acquire certain of the Securities contracted for by the Sponsor
for deposit in the Fund, it may be necessary for the Sponsor or Trustee to pay
on the settlement dates for delivery of such Securities amounts covering
accrued interest on such Securities which exceed the amounts which will be
made available through cash furnished by the Sponsor on the Date of Deposit,
which amount of cash may exceed the interest which would accrue to the First
Settlement Date. The Trustee has agreed to pay for any amounts necessary to
cover any such excess and will be reimbursed therefor, when funds become
available from interest payments on the particular Securities with respect to
which such payments may have been made. Also, since interest on any "when,
as and if issued" Securities does not begin accruing as tax-exempt
interest income to the benefit of Unitholders until their respective dates of
delivery, the Trustee may, in order to maintain (or in some cases approach)
for the Unitholders the same estimated net annual interest incomes during the
first year of the Trusts' operations as is indicated under "Per Unit
Information" for the applicable Trust, reduce its fee (and to the extent
necessary pay Trust expenses) in an amount equal to that indicated under "
Per Unit Information" for the applicable Trust.
INTEREST EARNING SCHEDULE
Calculation of Estimated Net Annual Interest Income. The estimated net annual
interest income is based on 360 days. To account for the estimated net annual
interest income per Unit in a Trust, it is necessary to use the following
information.
The beginning interest date for each Trust is December 18, 1995. The first
monthly record date for each Trust (January 1, 1996) is 13 days from such
date. The daily rates of estimated net annual interest income per Unit accrued
on a monthly basis are $.13895, $.12278, $.13721, $.13202, $.13248, $.13717,
$.11484, $.13416 and $.14006 for the IM-IT, IM-IT Intermediate, California
IM-IT, Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT, New York IM-IT
Intermediate Laddered Maturity, Maryland Quality and Virginia Quality Trusts,
respectively. This amounts to $1.81, $1.60, $1.78, $1.72, $1.72, $1.78, $1.49,
$1.74 and $1.82 for the IM-IT, IM-IT Intermediate, California IM-IT,
Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT, New York IM-IT Intermediate
Laddered Maturity, Maryland Quality and Virginia Quality Trusts, respectively.
Utilizing the preceding information assuming the monthly payment option, the
following procedure illustrates the calculation of first year estimated net
annual interest income per Unit for the California IM-IT Trust:
The California IM-IT Trust accrues
$1.78 to the first record date plus
$45.32 which is 11 normal distributions at $4.12, and finally adding
$2.30 which has accrued from December 1, 1996 until December 18, 1996 which
completes the 360 day cycle (17 days times the daily factor)
Total $49.40 interest earned /$1,000.00 (Date of Deposit Public Offering
Price) = 4.94% Estimated Current Return as of the Date of Deposit.
ACCRUED INTEREST
Accrued Interest. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling subsequent to the First Settlement Date, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of the Trust the amount, if any, of accrued interest
paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid by Unitholders, the Trustee will advance the amount of accrued
interest to the Sponsor as the Unitholder of record as of the First Settlement
Date. Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. See "Public
Offering--Distributions of Interest and Principal."
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholder
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the funds held in the Interest Account
for distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits thereby.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the offering prices of
the Securities in each Trust and includes a sales charge of 4.9% of the Public
Offering Price (5.152% of the aggregate offering price of the Securities) for
an IM-IT or a State Trust (other than a State Intermediate Laddered Maturity
Trust), 4.3% of the Public Offering Price (4.493% of the aggregate offering
price of the Securities) for an IM-IT Limited Maturity Trust, 3.9% of the
Public Offering Price (4.058% of the aggregate offering price of the
Securities) for an IM-IT Intermediate Trust, 3.0% of the Public Offering Price
(3.093% of the aggregate offering price of the Securities) for a State
Intermediate Laddered Maturity Trust and 2.0% of the Public Offering Price
(2.041% of the aggregate offering price of the Securities) for an IM-IT Short
Intermediate Trust. After the initial public offering period, the secondary
market Public Offering Price is based on the bid prices of the Securities in
each Trust and includes a sales charge determined in accordance with the table
set forth below, which is based upon the dollar weighted average maturity of
each Trust plus in each case accrued interest, if any. For purposes of
computation, Bonds will be deemed to mature on their expressed maturity dates
unless: (a) the Bonds have been called for redemption or funds or securities
have been placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they mature; or
(b) such Bonds are subject to a "mandatory tender" , in which case such
mandatory tender will be deemed to be the date upon which they mature.
The effect of this method of sales charge computation will be that different
sales charge rates will be applied to each Trust based upon the dollar
weighted average maturity of such Trust's Portfolio, in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years To Maturity Sales Charge Years To Maturity Sales Charge
<S> <C> <C> <C>
1 1.010% 12 4.167%
2 1.266 13 4.275
3 1.579 14 4.384
4 1.781 15 4.493
5 2.041 16 4.603
6 2.302 17 4.712
7 2.564 18 4.822
8 3.093 19 4.932
9 3.627 20 5.042
10 4.058 21 to 30 5.152
11 4.112
</TABLE>
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Securities in a Trust. Expressed as a percent of
the Public Offering Price, the sales charge on a Trust consisting entirely of
a portfolio of Bonds with 15 years to maturity would be 4.30%. The sales
charge applicable to quantity purchases during the initial offering period is,
however, reduced on a graduated basis to any person acquiring 100 or more
Units as follows:
<TABLE>
<CAPTION>
Dollar Amount of Sales
Charge Reduction Per Unit
IM-IT, State
(other than a
State Intermediate
Laddered Maturity
Trust) and
Aggregate Number of National Quality IM-IT Short
Units Purchased Trusts Intermediate Trust Other Trusts
<S> <C> <C> <C>
100-249 Units......... $ 4.00 $ 2.00 $ 4.00
250-499 Units......... $ 6.00 $ 3.00 $ 6.00
500-999 Units......... $ 14.00 $ 4.00 $ 9.00
1,000 or more Units... $ 19.00 $ 6.00 $ 11.00
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for such quantity purchases. See "Public
Offering--Unit Distribution". This reduced sales charge structure will
apply on all purchases by the same person from any one Underwriter or dealer
of units of Van Kampen American Capital-sponsored unit investment trusts which
are being offered in the initial offering period (a) on any one day (the "
Initial Purchase Date") or (b) on any day subsequent to the Initial
Purchase Date, if (1) the units purchased are of a unit investment trust
purchased on the Initial Purchase Date, and (2) the person purchasing the
units purchased a sufficient amount of units on the Initial Purchase Date to
qualify for a reduced sales charge on such date. In the event units of more
than one trust are purchased on the Initial Purchase Date, the aggregate
dollar amount of such purchases will be used to determine whether purchasers
are eligible for a reduced sales charge. Such aggregate dollar amount will be
divided by the public offering price per unit (on the day preceding the date
of purchase) of each respective trust purchased to determine the total number
of units which such amount could have purchased of each individual trust.
Purchasers must then consult the applicable trust's prospectus to determine
whether the total number of units which could have been purchased of a
specific trust would have qualified for a reduced sales charge and, if so
qualified, the amount of such reduction. Assuming a purchaser qualifies for a
sales charge reduction or reductions, to determine the applicable sales charge
reduction or reductions it is necessary to accumulate all purchases made on
the Initial Purchase Date and all purchases made in accordance with (b) above.
Units purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser under 21 years of age will be deemed for the purposes
of calculating the applicable sales charge to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a trustee or
other fiduciary purchasing securities for one or more trust estate or
fiduciary accounts. Employees of Van Kampen American Capital Distributors Inc.
and its subsidiaries may purchase Units of the Trust at the current Public
Offering Price less the underwriting commission or less the dealer's
concession in the absence of an underwriting commission. Registered
representatives of selling Underwriters may purchase Units of the Fund at the
current Public Offering Price less the underwriting commission during the
initial offering period, and less the dealer's concession for secondary market
transactions. Registered representatives of selling brokers, dealers, or
agents may purchase Units of the Fund at the current Public Offering Price
less the dealer's concession during the initial offering period and for
secondary market transactions.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Trust
Administration--General--Unit Distribution") by (1) investors who purchase
Units through registered investment advisers, certified financial planners and
registered broker-dealers who in each case either charge periodic fees for
financial planning, investment advisory or asset management services, or
provide such services in connection with the establishment of an investment
account for which a comprehensive "wrap fee" charge is imposed, (2)
bank trust departments investing funds over which they exercise exclusive
discretionary investment authority and that are held in a fiduciary, agency,
custodial or similar capacity, (3) any person who for at least 90 days, has
been an officer, director or bona fide employee of any firm offering Units for
sale to investors or their immediate family members (as described above) and
(4) officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything
to the contrary in this Prospectus, such investors, bank trust departments,
firm employees and bank holding company officers and directors who purchase
Units through this program will not receive sales charge reductions for
quantity purchases.
Offering Price. Public Offering Price of the Units will vary from the amounts
stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in
each Trust.
As indicated above, the price of the Units as of the date the Securities were
deposited in each Trust was determined by adding to the aggregate offering
price of the Securities of a Trust an amount equal to the applicable sales
charge expressed as a percentage of the aggregate offering price of the
Securities and dividing the sum so obtained by the number of Units
outstanding. This computation produced a gross underwriting commission equal
to such sales charge expressed as a percentage of the Public Offering Price.
Such price determination as of the close of business on the day before the
Date of Deposit (except for the IM-IT as of 8:00 A.M. Central Time on the Date
of Deposit) was made on the basis of an evaluation of the Securities in each
Trust prepared by Interactive Data Corporation, a firm regularly engaged in
the business of evaluating, quoting or appraising comparable securities. After
the close of business on the day before the Date of Deposit (except for the
IM-IT as of 8:00 A.M. Central Time on the Date of Deposit) and during the
period of initial offering, the Evaluator will appraise or cause to be
appraised daily the value of the underlying Securities of each Trust as of
4:00 P.M. Eastern time on days the New York Stock Exchange is open for
business and will adjust the Public Offering Price of the Units commensurate
with such appraisal. Such Public Offering Price will be effective for all
orders received at or prior to 4:00 P.M. Eastern time on each such day. Orders
received by the Trustee, Sponsor or any Underwriter for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price. For secondary
market sales the Public Offering Price per Unit will be equal to the aggregate
bid price of the Securities in the Trust plus an amount equal to the
applicable secondary market sales charge expressed as a percentage of the
aggregate bid price of the Securities and dividing the sum so attained by the
number of Units then outstanding. This computation produces a gross commission
equal to such sales charge expressed as a percentage of the Public Offering
Price. For secondary market purposes such appraisal and adjustment with
respect to a Trust will be made by the Evaluator as of 4:00 P.M. Eastern time
on days in which the New York Stock Exchange is open for each day on which any
Unit of such Trust is tendered for redemption, and it shall determine the
aggregate value of any Trust as of 4:00 P.M. Eastern time on such other days
as may be necessary.
The aggregate price of the Securities in each Trust has been and will be
determined on the basis of bid prices or offering prices, as is appropriate,
(a) on the basis of current market prices for the Securities obtained from
dealers or brokers who customarily deal in bonds comparable to those held by
the Fund; (b) if such prices are not available for any particular Securities,
on the basis of current market prices for comparable bonds; (c) by causing the
value of the Securities to be determined by others engaged in the practice of
evaluation, quoting or appraising comparable bonds; or (d) by any combination
of the above. Market prices of the Securities will generally fluctuate with
changes in market interest rates. Unless Bonds are in default in payment of
principal or interest or in significant risk of such default, the Evaluator
will not attribute any value to the insurance obtained by an Insured Trust, if
any.
The Evaluator will consider in its evaluation of Bonds which are in default in
payment of principal or interest or, in the Sponsor's opinion, in significant
risk of such default (the "Defaulted Bonds") the value of the
insurance guaranteeing interest and principal payments. The value of the
insurance will be equal to the difference between (i) the market value of
Defaulted Bonds assuming the exercise of the right to obtain Permanent
Insurance (less the insurance premiums and related expenses attributable to
the purchase of Permanent Insurance) and (ii) the market value of such
Defaulted Bonds not covered by Permanent Insurance. In addition, the Evaluator
will consider the ability of the affected Portfolio Insurer to meet its
commitments under any Trust insurance policy, including the commitments to
issue Permanent Insurance. It is the position of the Sponsor that this is a
fair method of valuing the Bonds and the insurance obtained by an Insured
Trust and reflects a proper valuation method in accordance with the provisions
of the Investment Company Act of 1940.
No value has been ascribed to insurance obtained by an Insured Trust, if any,
as of the date of this Prospectus.
The initial or primary Public Offering Price of the Units is equal to the
offering price per Unit of the underlying Securities in each Trust plus the
applicable sales charge plus interest accrued but unpaid from the First
Settlement Date to the date of settlement. The secondary market Public
Offering Price is equal to the bid price per Unit of the Securities in each
Trust plus the applicable sales charge plus accrued interest. The offering
price of Securities in each Trust may be expected to average approximately
0.5%-1% more than the bid price of such Securities. On the Date of Deposit,
the offering side evaluations of the Securities in the Trusts were higher than
the bid side evaluations of such Securities by the respective amounts
indicated under footnote (5) in "Notes to Portfolios".
Although payment is normally made three business days following the order for
purchase, payment may be made prior thereto. A person will become the owner of
Units on the date of settlement provided payment has been received. Cash, if
any, made available to the Sponsor prior to the date of settlement for the
purchase of Units may be used in the Sponsor's business and may be deemed to
be a benefit to the Sponsor, subject to the limitations of the Securities
Exchange Act of 1934. Delivery of certificates representing Units so ordered
will be made three business days following such order or shortly thereafter.
See "Redemption of Units" below for information regarding the ability
to redeem Units ordered for purchase.
Market for Units. During the initial public offering period, the Sponsor
and/or certain of the Underwriters intend to offer to purchase Units at a
price equivalent to the Public Offering Price which is based upon the
aggregate offering price per Unit of the underlying Securities in each Trust
plus accrued interest to the date of settlement less the related sales
commission. Afterward, although they are not obligated to do so, the Sponsor
intends to, and certain of the other Underwriters may, maintain a market for
the Units offered hereby and to offer continuously to purchase such Units at
prices, subject to change at any time, based upon the aggregate bid prices of
the Securities in the portfolio of each Trust plus interest accrued to the
date of settlement and plus any principal cash on hand, less any amounts
representing taxes or other governmental charges payable out of the Trust and
less any accrued Trust expenses. If the supply of Units exceeds demand or if
some other business reason warrants it, the Sponsor and/or the Underwriters
may either discontinue all purchases of Units or discontinue purchases of
Units at such prices. In the event that a market is not maintained for the
Units and the Unitholder cannot find another purchaser, a Unitholder of any
Trust desiring to dispose of his Units may be able to dispose of such Units
only by tendering them to the Trustee for redemption at the Redemption Price,
which is based upon the aggregate bid price of the Securities in the portfolio
of such Trust plus any accrued interest. The aggregate bid prices of the
underlying Securities in a Trust are expected to be less than the related
aggregate offering prices. See "Redemption of Units" below. A
Unitholder who wishes to dispose of his Units should inquire of his broker as
to current market prices in order to determine whether there is in existence
any price in excess of the Redemption Price and, if so, the amount thereof.
Distributions of Interest and Principal. Interest received by the Fund,
including that part of the proceeds of any disposition of Securities which
represents accrued interest, is credited by the Trustee to the Interest
Account for the appropriate Trust. Other receipts are credited to the
Principal Account for the appropriate Trust. Interest received by the Fund
after deduction of amounts sufficient to reimburse the Trustee, without
interest, for any amounts advanced and paid to the Sponsor as the Unitholder
of record as of the First Settlement Date (see "Public Offering--Offering
Price" above) will be distributed on or shortly after the fifteenth day of
each month on a pro rata basis to Unitholders of record of a Trust as of the
preceding record date who are entitled to distributions at that time under the
plan of distributions chosen. All distributions will be net of applicable
expenses. The pro rata share of cash in the Principal Account of a Trust will
be computed as of the date set forth under "Per Unit Information" for
the applicable Trust, and thereafter as of the semi-annual record date, and
distributions to the Unitholders as of such record date will be made on or
shortly after the fifteenth day of such month. Proceeds received from the
disposition of any of the Securities after such record date and prior to the
following distribution date will be held in the Principal Account and not
distributed until the next distribution date. The Trustee is not required to
pay interest on funds held in any Principal or Interest Account (but may
itself earn interest thereon and therefore benefits from the use of such
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution therein shall equal at least $1.00 per Unit.
However, should the amount available for distribution in the Principal Account
equal or exceed $10.00 per Unit, the Trustee will make a special distribution
from the Principal Account on the next succeeding monthly distribution date to
holders of record on the related monthly record date.
The distribution to the Unitholders of a Trust as of each record date after
the First Settlement Date will be made on the following distribution date or
shortly thereafter and shall consist of an amount substantially equal to such
portion of the Unitholder's pro rata share of the estimated net annual
interest income in the Interest Account of such Trust after deducting
estimated expenses attributable as is consistent with the distribution plan
chosen. Because interest payments are not received by the Fund at a constant
rate throughout the year, such interest distribution may be more or less than
the amount credited to such Interest Account as of the record date. For the
purpose of minimizing fluctuations in the distributions from an Interest
Account, the Trustee is authorized to advance such amounts as may be necessary
to provide interest distributions of approximately equal amounts. The Trustee
shall be reimbursed for any such advances from funds in the applicable
Interest Account on the ensuing record date. Persons who purchase Units
between a record date and a distribution date will receive their first
distribution on the second distribution date after the purchase, under the
applicable plan of distribution.
As of the first day of each month, the Trustee will deduct from the Interest
Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Fund (as
determined on the basis set forth under "Trust Administration--Fund
Administration and Expenses"). The Trustee also may withdraw from said
Accounts such amounts, if any, as it deems necessary to establish a reserve
for any governmental charges payable out of the Fund. Amounts so withdrawn
shall not be considered a part of the Fund's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
Accounts. In addition, the Trustee may withdraw from the Interest and
Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Bonds and redemptions of Units by the Trustee.
Reinvestment Option. Unitholders of all unit investment trusts sponsored by
Van Kampen American Capital Distributors, Inc. may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of certain Van Kampen American Capital
mutual funds (except for B shares) which are registered in the Unitholder's
state of residence. In addition, Unitholders of a New York IM-IT Trust or New
York IM-IT Intermediate Laddered Maturity Trust, other than those residing in
the Commonwealth of Massachusetts, may elect to have each distribution of
interest income, capital gains and/or principal on their Units automatically
reinvested in shares of First Investors New York Insured Tax Free Fund, Inc.,
a fund which invests primarily in securities exempt from federal and New York
state and city income tax. Such mutual funds are hereinafter collectively
referred to as the "Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each
Reinvestment Fund describes the investment policies of such fund and sets
forth the procedures to follow to commence reinvestment. A Unitholder may
obtain a prospectus for the respective Reinvestment Funds from Van Kampen
American Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181. Texas residents who desire to reinvest may request that a
broker-dealer registered in Texas send the prospectus relating to the
respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units
will, on the applicable distribution date, automatically be applied, as
directed by such person, as of such distribution date by the Trustee to
purchase shares (or fractions thereof) of the applicable Reinvestment Fund at
a net asset value as computed as of the close of trading on the New York Stock
Exchange on such date, plus a sales charge of $1.00 per $100 of reinvestment
except if the participant selects the First Investors New York Insured Tax
Free Fund, Inc., in which case the sales charge will be $1.50 per $100 of
reinvestment, or except if the participant selects the Van Kampen American
Capital Reserve Fund, the Van Kampen American Capital Tax Free Money Fund, the
Van Kampen American Capital Florida Insured Tax Free Income Fund, the Van
Kampen American Capital New Jersey Tax Free Income Fund, or the Van Kampen
American Capital New York Tax Free Income Fund, in which case no sales charge
applies. A minimum of one-half of such sales charge would be paid to Van
Kampen American Capital Distributors, Inc. for all Reinvestment Funds except
First Investors New York Insured Tax Free Fund, Inc., in which case such sales
charge would be paid to First Investors Management Company, Inc.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next succeeding
distribution date, by so notifying the Trustee in writing, elect to terminate
his or her reinvestment plan and receive future distributions of his or her
Units in cash. There will be no charge or other penalty for such termination.
Each Reinvestment Fund, its sponsor and investment adviser shall have the
right to terminate at any time the reinvestment plan relating to such fund.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee, at its Unit Investment Trust Division, 101 Barclay
Street, 20th Floor, New York, New York 10286, of the certificates representing
the Units to be redeemed, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
as in connection with lost, stolen or destroyed certificates) and by payment
of applicable governmental charges, if any. Thus, redemption of Units cannot
be effected until certificates representing such Units have been delivered to
the person seeking redemption or satisfactory indemnity provided. No
redemption fee will be charged. On the third business day following such
tender the Unitholder will be entitled to receive in cash an amount for each
Unit equal to the Redemption Price per Unit next computed after receipt by the
Trustee of such tender of Units. The "date of tender" is deemed to be
the date on which Units are received by the Trustee, except that as regards
Units received after 4:00 P.M. Eastern time on days of trading on the New York
Stock Exchange, the date of tender is the next day on which such Exchange is
open for trading and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the Redemption Price computed on that
day.
Under regulations issued by the Internal Revenue Service, the Trustee will be
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, such Unitholder should provide a tax identification
number to the Trustee in order to avoid this possible "back-up
withholding" in the event the Trustee has not been previously provided
such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of such Trust or, if the balance therein is insufficient, from the
Principal Account of such Trust. All other amounts will be withdrawn from the
Principal Account of such Trust. The Trustee is empowered to sell underlying
Securities of a Trust in order to make funds available for redemption. Units
so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the bid price of the Securities in
each Trust, while the initial and primary Public Offering Price of Units will
be determined on the basis of the offering price of the Securities in each
Trust, as of 4:00 P.M. Eastern time on days of trading on the New York Stock
Exchange on the date any such determination is made. On the Date of Deposit
the Public Offering Price per Unit (which is based on the offering prices of
the Bonds in each Trust and includes the sales charge) exceeded the value at
which Units could have been redeemed (based upon the current bid prices of the
Securities in such Trust) by the amount shown under "Summary of Essential
Financial Information". While the Trustee has the power to determine the
Redemption Price per Unit when Units are tendered for redemption, such
authority has been delegated to the Evaluator which determines the price per
Unit on a daily basis. The Redemption Price per Unit is the pro rata share of
each Unit in each Trust on the basis of (i) the cash on hand in such Trust or
moneys in the process of being collected, (ii) the value of the Securities in
such Trust based on the bid prices of the Securities therein, except for cases
in which the value of insurance has been included, (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental charges
payable out of such Trust and (b) the accrued expenses of such Trust. The
Evaluator may determine the value of the Securities in each Trust by employing
any of the methods set forth in "Public Offering--Offering Price". In
determining the Redemption Price per Unit no value will be assigned to the
portfolio insurance maintained on the Bonds in an Insured Trust unless such
Bonds are in default in payment of principal or interest or in significant
risk of such default. For a description of the situations in which the
Evaluator may value the insurance obtained by the Insured Trusts, see "
Public Offering--Offering Price" above.
The price at which Units may be redeemed could be less than the price paid by
the Unitholder and may be less than the par value of the Securities
represented by the Units so redeemed. As stated above, the Trustee may sell
Securities to cover redemptions. When Securities are sold, the size and
diversity of the affected Trust will be reduced. Such sales may be required at
a time when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or during which the Securities and Exchange
Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the
Securities in the Trusts is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
Reports Provided. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and
the amount of other receipts (received since the preceding distribution), if
any, being distributed expressed in each case as a dollar amount representing
the pro rata share of each Unit of a Trust outstanding. For as long as the
Trustee deems it to be in the best interests of the Unitholders, the accounts
of each Trust shall be audited, not less frequently than annually, by
independent certified public accountants and the report of such accountants
shall be furnished by the Trustee to Unitholders of such Trusts upon request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a registered Unitholder of a Trust a statement (i) as to the Interest
Account: interest received (including amounts representing interest received
upon any disposition of Securities) and the percentage of such interest by
states in which the issuers of the Securities are located, deductions for
applicable taxes and for fees and expenses of such Trust, for purchases of
Replacement Bonds and for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar year;
(ii) as to the Principal Account: the dates of disposition of any Securities
and the net proceeds received therefrom (excluding any portion representing
accrued interest), the amount paid for purchases of Replacement Bonds and for
redemptions of Units, if any, deductions for payment of applicable taxes and
fees and expenses of the Trustee, the amount of "when issued" interest
treated as a return of capital, if any, and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit based upon the last computation
thereof made during such calendar year; and (v) amounts actually distributed
during such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in a Trust furnished to it by the Evaluator.
Each distribution statement of a Trust will reflect pertinent information in
respect of the other plan of distribution so that Unitholders may be informed
regarding the results of such other plan of distribution.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust or by the issuer of such
Bonds, or by a prior owner of such Bonds, or by the Sponsor prior to the
deposit of such Bonds in a Trust guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in such Trust. See "
Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection". An insurance policy obtained by an Insured Trust,
if any, is non-cancellable and will continue in force so long as such Trust is
in existence, the respective Portfolio Insurer referred to below is still in
business and the Bonds described in such policy continue to be held by such
Trust (see "Portfolio" for the respective Insured Trust). Any
portfolio insurance premium for an Insured Trust, which is an obligation of
such Trust, is paid by each Trust on a monthly basis. Non-payment of premiums
on a policy obtained by an Insured Trust will not result in the cancellation
of insurance but will force the insurer to take action against the Trustee to
recover premium payments due it. The Trustee in turn will be entitled to
recover such payments from such Trust. Premium rates for each issue of Bonds
protected by a policy obtained by an Insured Trust, if any, are fixed for the
life of the Trust. The premium for any Preinsured Bond insurance has been paid
by such issuer, by a prior owner of such Bonds or the Sponsor and any such
policy or policies are non-cancellable and will continue in force so long as
the Bonds so insured are outstanding and the respective Preinsured Bond
Insurer remains in business. If the provider of an original issuance insurance
policy is unable to meet its obligations under such policy or if the rating
assigned to the claims-paying ability of any such insurer deteriorates, the
Portfolio Insurers have no obligation to insure any issue adversely affected
by either of the above described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds as they
fall due. For the purposes of insurance obtained by an Insured Trust, "
when due" generally means the stated maturity date for the payment of
principal and interest. However, in the event (a) an issuer of a Bond defaults
in the payment of principal or interest on such Bond, (b) such issuer enters
into a bankruptcy proceeding or (c) the maturity of such Bond is accelerated,
the affected Portfolio Insurer has the option, in its sole discretion, after
receiving notice of the earliest to occur of such a default, bankruptcy
proceeding or acceleration to pay the outstanding principal amount of such
Bond plus accrued interest to the date of such payment and thereby retire the
Bond from the affected Trust prior to such Bond's stated maturity date. The
insurance does not guarantee the market value of the Bonds or the value of the
Units. Insurance obtained by an Insured Trust, if any, is only effective as to
Bonds owned by and held in such Trust. In the event of a sale of any such Bond
by the Trustee, such insurance terminates as to such Bond on the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the Trustee,
upon the sale of a Bond covered under a portfolio insurance policy obtained by
an Insured Trust, has the right to obtain permanent insurance with respect to
such Bond (i.e., insurance to maturity of the Bonds regardless of the identity
of the holder thereof) (the "Permanent Insurance") upon the payment of
a single predetermined insurance premium and any expenses related thereto from
the proceeds of the sale of such Bond. Accordingly, any Bond in an Insured
Trust is eligible to be sold on an insured basis. It is expected that the
Trustee would exercise the right to obtain Permanent Insurance only if upon
such exercise the affected Trust would receive net proceeds (sale of Bond
proceeds less the insurance premium and related expenses attributable to the
Permanent Insurance) from such sale in excess of the sale proceeds if such
Bonds were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance would be determined based upon the
insurability of each Bond as of the Date of Deposit and would not be increased
or decreased for any change in the creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an advantage
to an Insured Trust in that each Bond insured by a Trust insurance policy may
be sold out of the affected Trust with the benefits of the insurance attaching
thereto. Thus, the value of the insurance, if any, at the time of sale, can be
realized in the market value of the Bond so sold (which is not the case in
connection with any value attributable to an Insured Trust's portfolio
insurance). See "Public Offering--Offering Price". Because any such
insurance value may be realized in the market value of the Bond upon the sale
thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it
is much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Public Offering--Redemption of Units") and (b) at the
time of termination of an Insured Trust, if such Trust were holding defaulted
Bonds or Bonds in significant risk of default such Trust would not need to
hold such Bonds until their respective maturities in order to realize the
benefits of such Trust's portfolio insurance (see "Trust
Administration--Amendment or Termination").
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value for such insurance (including the right
to obtain Permanent Insurance) for the purpose of computing the price or
redemption value of Units if the Bonds covered by such insurance are in
default in payment of principal or interest or in significant risk of such
default. The value of the insurance will be the difference between (i) the
market value of a Bond which is in default in payment of principal or interest
or in significant risk of such default assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium and related expenses
attributable to the purchase of Permanent Insurance) and (ii) the market value
of such Bonds not covered by Permanent Insurance. See "Public
Offering--Offering Price". It is also the present intention of the Trustee
not to sell such Bonds to effect redemptions or for any other reason but
rather to retain them in the portfolio because value attributable to the
insurance cannot be realized upon sale. See "Public Offering--Offering
Price" herein for a more complete description of an Insured Trust's method
of valuing defaulted Bonds and Bonds which have a significant risk of default.
Insurance obtained by the issuer of a Bond is effective so long as such Bond
is outstanding. Therefore, any such insurance may be considered to represent
an element of market value in regard to the Bonds thus insured, but the exact
effect, if any, of this insurance on such market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust, if
any, with respect to the Bonds in such Trust were issued by one or more of the
Portfolio Insurers. Any other Preinsured Bond insurance policy (or commitment
therefor) was issued by one of the Preinsured Bond Insurers. See "
Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection".
AMBAC Indemnity Corporation ("AMBAC Indemnity") is a
Wisconsin-domiciled stock insurance corporation regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin and licensed to do
business in 50 states, the District of Columbia and the Commonwealth of Puerto
Rico, with admitted assets of approximately $2,145,000,000 (unaudited) and
statutory capital of approximately $782,000,000 (unaudited) as of December 31,
1994. Statutory capital consists of AMBAC Indemnity's policyholders' surplus
and statutory contingency reserve. AMBAC Indemnity is a wholly owned
subsidiary of AMBAC Inc., a 100% publicly-held company. Moody's Investors
Service, Inc. and Standard & Poor's have both assigned a triple-A
claims-paying ability rating to AMBAC Indemnity.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Indemnity. The address of AMBAC
Indemnity's administrative offices and its telephone number are One State
Street Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Indemnity has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Indemnity has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
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 a limited
liability corporation rather than a several liability association. MBIA is
domiciled in the State of New York and licensed to do business in all fifty
states, the District of Columbia, the Commonwealth of the Northern Mariana
Islands, the Commonwealth of Puerto Rico, the Virgin Islands of the United
States and the Territory of Guam. As of September 30, 1995 MBIA had admitted
assets of $3.7 billion (unaudited), total liabilities of $2.5 billion
(unaudited), and total capital and surplus of $1.2 billion (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. As of December 31, 1994, the
Insurer had admitted assets of $3.4 billion (audited), total liabilities of
$2.3 billion (audited), and total capital and surplus of $1.1 billion
(audited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. Copies of MBIA's
year end financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King Street,
Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group, Inc. On
January 5, 1990, MBIA acquired all of the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company (BIG),
now known as MBIA Insurance Corp. of Illinois. Through a reinsurance
agreement, BIG has ceded all of its net insured risks, as well as its unearned
premium and contingency reserves, to MBIA and MBIA has reinsured BIG's net
outstanding exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA "
Aaa" and short term loans "MIG 1," both designated to be of the
highest quality.
Standard & Poor's rates all new issues insured by MBIA "AAA" Prime
Grade.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's rating of MBIA. No application has been
made to any other rating agency in order to obtain additional ratings on the
Bonds. The ratings reflect the respective rating agency's current assessment
of the creditworthiness of MBIA and its ability to pay claims on its policies
of insurance. Any further explanation as to the significance of the above
ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds, and
such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds.
Financial Guaranty Insurance Company ("Financial Guaranty" or "
FGIC") is a wholly-owned subsidiary of FGIC Corporation (the "
Corporation"), a Delaware holding company. The Corporation is a
wholly-owned subsidiary of General Electric Capital Corporation ("GECC"
). Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of September 30, 1995, the total capital and surplus
of Financial Guaranty was approximately $994,500,000. Copies of Financial
Guaranty's financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared on the basis
of generally accepted accounting principles, may be obtained by writing to
Financial Guaranty at 115 Broadway, New York, New York 10006, Attention:
Communications Department, telephone number: (212) 312-3000 or to the New York
State Insurance Department at 160 West Broadway, 18th Floor, New York, New
York 10013, Attention: Property Companies Bureau, telephone number: (212)
621-0389.
In addition, Financial Guaranty Insurance Company is currently licensed to
write insurance in all 50 states and the District of Columbia.
Financial Security Assurance, Inc. ("Financial Security" or "
FSA") is a monoline insurance company incorporated on March 16, 1984 under
the laws of the State of New York. The operations of Financial Security
commenced on July 25, 1985, and Financial Security received its New York State
insurance license on September 23, 1985. Financial Security and its two wholly
owned subsidiaries are licensed to engage in the financial guaranty insurance
business in 49 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. In general, financial guaranty insurance consists of the issuance
of a guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of those securities, in consideration for payment
of a premium to the insurer.
Financial Security is approximately 91.6% owned by U S WEST, Inc. and 8.4%
owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine").
Neither U S WEST, Inc. nor Tokio Marine is obligated to pay the debts of or
the claims against Financial Security. Financial Security is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of March 31, 1993, the total policyholders' surplus
and contingency reserves and the total unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were, in accordance
with generally accepted accounting principles, approximately $479,110,000
(unaudited) and $220,078,000 (unaudited), and the total shareholders' equity
and the total unearned premium reserve, respectively, of Financial Security
and its consolidated subsidiaries were, in accordance with generally accepted
accounting principles, approximately $628,119,000 (unaudited) and $202,493,000
(unaudited). Copies of Financial Security's financial statements may be
obtained by writing to Financial Security at 350 Park Avenue, New York, New
York, 10022, Attention: Communications Department. Its telephone number is
(212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written by Financial Security or either of its subsidiaries are
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc., and "AAA" by Standard & Poor's, Nippon
Investors Service Inc., Duff & Phelps Inc. and Australian Ratings Pty. Ltd.
Such ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company ("Capital Guaranty") is a
"Aaa/AAA" rated monoline stock insurance company incorporated in the State
of Maryland, and is a wholly owned subsidiary of Capital Guaranty Corporation,
a Maryland insurance holding company. Capital Guaranty Corporation is a
publicly owned company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, Guam and the U.S.
Virgin Islands. Capital Guaranty focuses on insuring municipal securities and
our policies guaranty the timely payment of principal and interest when due
for payment on new issue and secondary market issue municipal bond
transactions. Capital Guaranty's claims-paying ability is rated
"Triple-A" by both Moody's and Standard & Poor's. Therefore, if Capital
Guaranty insures an issue with a stand alone rating of less than
"Triple-A," such issue would be "upgraded" to "Aaa/AAA" by
virtue of Capital Guaranty's Insurance.
As of September 30, 1995, Capital Guaranty had more than $19.0 billion in net
exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$204,642,000, and the total admitted assets were $326,802,226 as reported to
the Insurance Department of the State of Maryland as of September 30, 1995.
Financial statements for Capital Guaranty Insurance Company, that have been
prepared in accordance with statutory insurance accounting standards, are
available upon request. The address of Capital Guaranty's headquarters and its
telephone number are Steuart Tower, 22nd Floor, One Market Plaza, San
Francisco, CA 94105-1413 and (415) 995-8000.
CapMAC is a New York-domiciled monoline stock insurance company which engages
only in the business of financial guarantee and surety insurance. CapMAC is
licensed in 50 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the territory of Guam. CapMAC insures
structured asset-backed, corporate, municipal and other financial obligations
in the 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., "AAA" by Standard & Poor's, "AAA" by Duff &
Phelps Credit Rating Co. 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.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a company
that is owned by a group of institutional and other investors, including
CapMAC's management and employees. Neither Holdings nor any of its
stockholders is obligated to pay any claims under any policy issued by CapMAC
or any debts of CapMAC or to make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance
departments of the other jurisdictions in which it is licensed. 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 at December 31, 1994 and 1993, CapMAC had qualified statutory capital
(which consists of policyholders' surplus and contingency reserve) of
approximately $170 million and $168 million, respectively, and had not
incurred any debt obligations. Article 69 of the New York State Insurance Law
requires CapMAC to establish and maintain the contingency reserve, which is
available to cover claims under policies issued by CapMAC.
Copies of CapMAC's financial statements prepared in accordance with statutory
accounting standards, which differ from generally accepted accounting
principles, and filed with the Insurance Department of the State of New York
are available upon request. CapMAC is located at 885 Third Avenue, New York,
New York 10022, and its telephone number is (212) 755-1155.
In order to be in an Insured Trust, Bonds must be insured by one of the
Preinsured Bond Insurers or be eligible for the insurance being obtained by
such Trust. In determining eligibility for insurance, the Preinsured Bond
Insurers, AMBAC Indemnity and Financial Guaranty have applied their own
standards which correspond generally to the standards they normally use in
establishing the insurability of new issues of municipal bonds and which are
not necessarily the criteria used in the selection of Bonds by the Sponsor. To
the extent the standards of the Preinsured Bond Insurers, AMBAC Indemnity and
Financial Guaranty are more restrictive than those of the Sponsor, the
previously stated Trust investment criteria have been limited with respect to
the Bonds. This decision is made prior to the Date of Deposit, as debt
obligations not eligible for insurance are not deposited in an Insured Trust.
Thus, all of the Bonds in the portfolios of the Insured Trusts in the Fund are
insured either by the respective Trust or by the issuer of the Bonds, by a
prior owner of such Bonds or by the Sponsor prior to the deposit of such Bonds
in a Trust.
Because the Bonds are insured by one of the Portfolio Insurers or one of the
Preinsured Bond Insurers as to the timely payment of principal and interest,
when due, and on the basis of the various reinsurance agreements in effect,
Standard & Poor's has assigned to the Units of each Insured Trust its "
AAA" investment rating. See "Description of Securities Ratings".
The obtaining of this rating by an Insured Trust should not be construed as an
approval of the offering of the Units by Standard & Poor's or as a guarantee
of the market value of such Trust or of the Units.
On the date of this Prospectus, the Estimated Current Returns on the
Securities in the IM-IT, Connecticut IM-IT Trust and Georgia IM-IT Trust were
5.00%, 4.75% and 4.77%, respectively, based on the monthly plan of
distribution after payment of the insurance premium or premiums payable by
each Trust, while the Estimated Long-Term Returns on such Trusts were 5.02%,
4.78% and 4.75%, respectively. The Estimated Current Returns on identical
portfolios without the insurance obtained by the above mentioned Trusts would
have been 5.01%, 4.76% and 4.80%, respectively, based on the monthly plan of
distribution on such date, while the Estimated Long-Term Returns on identical
portfolios without the insurance obtained by the above mentioned Trusts would
have been 5.03%, 4.79% and 4.78%, respectively.
An objective of portfolio insurance obtained by an Insured Trust is to obtain
a higher yield on the portfolio of such Trust than would be available if all
the Securities in such portfolio had Standard & Poor's "AAA" rating
and yet at the same time to have the protection of insurance of prompt payment
of interest and principal, when due, on the Bonds. There is, of course, no
certainty that this result will be achieved. Preinsured Bonds in an Insured
Trust (all of which are rated "AAA" by Standard & Poor's) may or may
not have a higher yield than uninsured bonds rated "AAA" by Standard &
Poor's. In selecting such Bonds for an Insured Trust, the Sponsor has applied
the criteria hereinbefore described.
In the event of nonpayment of interest or principal, when due, in respect of a
Bond, AMBAC Indemnity shall make such payment not later than 30 days and
Financial Guaranty shall make such payment within one business day after the
respective insurer has been notified that such nonpayment has occurred or is
threatened (but not earlier than the date such payment is due). The insurer,
as regards any payment it may make, will succeed to the rights of the Trustee
in respect thereof. All policies issued by the Portfolio Insurers and the
Preinsured Bond Insurers are substantially identical insofar as obligations to
an Insured Trust are concerned.
The Internal Revenue Service has issued a letter ruling which holds in effect
that insurance proceeds representing maturing interest on defaulted municipal
obligations paid to holders of insured bonds, under policy provisions
substantially identical to the policies described herein, will be excludable
from Federal gross income under Section 103(a)(1) of the Internal Revenue Code
to the same extent as if such payments were made by the issuer of the
municipal obligations. Holders of Units in an Insured Trust should discuss
with their tax advisers the degree of reliance which they may place on this
letter ruling. However, Chapman and Cutler, counsel for the Sponsor, has given
an opinion to the effect such payment of proceeds would be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations. See
"Other Matters--Federal Tax Status".
Each Portfolio Insurer is subject to regulation by the department of insurance
in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform
on its contract of insurance in the event a claim should be made thereunder at
some time in the future. At the date hereof, it is reported that no claims
have been submitted or are expected to be submitted to any of the Portfolio
Insurers which would materially impair the ability of any such company to meet
its commitment pursuant to any contract of bond or portfolio insurance.
The information relating to each Portfolio Insurer has been furnished by such
companies. The financial information with respect to each Portfolio Insurer
appears in reports filed with state insurance regulatory authorities and is
subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates
thereof.
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
Bonds insured Bonds insured
under AMBAC under Financial
Trust Indemnity Guaranty Preinsured Total
portfolio insurance portfolio insurance Bonds
<S> <C> <C> <C> <C>
IM-IT........................................... 5% -- 95% 100%
IM-IT Intermediate.............................. -- -- 100% 100%
California IM-IT................................ -- -- 100% 100%
Connecticut IM-IT............................... 3% -- 97% 100%
Georgia IM-IT................................... 25% -- 75% 100%
Michigan IM-IT.................................. -- -- 100% 100%
New York IM-IT Intermediate Laddered Maturity... -- -- 100% 100%
</TABLE>
The breakdown of the Preinsured Bonds is as follows: IM-IT--AMBAC Indemnity
11%, Financial Guaranty 19%, MBIA 37%, FSA 17% and CapMAC 11%; IM-IT
Intermediate Trust--AMBAC Indemnity 9%, Financial Guaranty 14%, MBIA 52%, FSA
10% and CapMAC 15%; California IM-IT Trust--AMBAC Indemnity 17%, Financial
Guaranty 10%, MBIA 29% and FSA 44%; Connecticut IM-IT Trust--AMBAC Indemnity
25%, Financial Guaranty 36%, MBIA 20% and FSA 16%; Georgia IM-IT Trust--AMBAC
Indemnity 14%, Financial Guaranty 16% and MBIA 45%; Michigan IM-IT
Trust--AMBAC Indemnity 19%, Financial Guaranty 43%, MBIA 21% and FSA 17%; New
York IM-IT Intermediate Laddered Maturity Trust--AMBAC Indemnity 22%,
Financial Guaranty 24% and MBIA 54%.
IM-IT
General. The IM-IT consists of 13 issues of Securities. None of the Bonds in
the IM-IT 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 located in 9 states or
territories, divided by purpose of issues (and percentage of principal amount
to total IM-IT) as follows: Water and Sewer, 3 (29%); Health Care, 4 (28%);
Public Building, 2 (14%); Higher Education, 1 (11%); Retail Electric/Gas, 1
(11%); Multi-Family Mortgage Revenue, 1 (5%) and General Purpose, 1 (2%). No
Bond issue has received a provisional rating. The dollar weighted average
maturity of the Bonds in the Trust is 26 years.
Tax Status. For a discussion of the Federal tax status of income earned on
IM-IT Trust Units, see "Other Matters--Federal Tax Status".
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 51.43 $ 51.43
Less: Estimated Annual Expense per Unit <F2>.............................. $ 1.35 $ .88
Less: Annual Premium on Portfolio Insurance per Unit...................... $ .06 $ .06
Estimated Net Annual Interest Income per Unit............................. $ 50.02 $ 50.49
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 50.02 $ 50.49
Divided by 12 and 2, respectively......................................... $ 4.17 $ 25.25
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .13895 $ .14025
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 5.00% 5.05%
Estimated Long-Term Return <F3><F4><F5>.................................... 5.02% 5.07%
Estimated Initial Monthly Distribution (January 1996)...................... $ 1.81
Estimated Initial Semi-annual Distribution (June 1996)..................... $ 22.86
Estimated Normal Distribution per Unit <F5>................................ $ 4.17 $ 25.25
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the IM-IT
Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--June and December
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--June
and December commencing January 15, 1996
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.79
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $52.22. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.14 and $1.67 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST SERIES 362
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Name of Issuer, Title, Interest Rate and Maturity Offering
Aggregate Date of either Bonds Deposited or Bonds Contracted Redemption Price To
Principal<F1> for<F1><F5> Rating<F2> Feature<F3> IM-IT<F4>
<S> <C> <C> <C> <C>
$ 1,000,000 Greenfield-Central Community Building Corporation,
Indiana, First Mortgage Revenue Bonds, Series 1995 2004 @ 101
(AMBAC Indemnity Insured)** 5.50% Due 1/15/2015. AAA 2014 @ 100 S.F. $ 1,002,500
500,000 Michigan Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Port Huron Hospital
Obligated Group) Series 1995 (FSA Insured) #5.50% 2005 @ 102
Due 7/1/2015........................................ AAA 2013 @ 100 S.F. 500,000
1,030,000 Moon Township Municipal Authority, Allegheny
County, Pennsylvania, Water and Sewer Revenue
Refunding Bonds, Series 1995 (MBIA Insured)** 2005 @ 100
#5.50% Due 12/1/2019................................ AAA 2016 @ 100 S.F. 1,028,331
50,000 Loudoun County, Virginia, Industrial Development
Authority, Hospital Revenue Bonds (Loudoun Hospital
Center Issue) Series 1995 (FSA Insured) #5.80% 2005 @ 102
Due 6/1/2020........................................ AAA 2011 @ 100 S.F. 50,874
265,000 Metropolitan Pier and Exposition Authority
(Illinois) McCormick Place Expansion Project
Refunding Revenue Bonds, Series 1994A (MBIA
Insured) #0.00% Due 6/15/2020..................... AAA 67,136 <F6>
1,000,000 Norman Utilities Authority, Norman, Oklahoma,
Utility Revenue Bonds, Series 1995 (FGIC Insured)** 2005 @ 101
5.55% Due 11/1/2020............................... AAA 2016 @ 100 S.F. 1,005,000
135,000 Municipal Authority of Westmoreland County
(Westmoreland County, Pennsylvania) Municipal
Service Revenue Bonds, Series 1993C (FGIC Insured)
#0.00% Due 8/15/2021............................... AAA 32,845 <F6>
1,000,000 Indiana Health Facility Financing Authority,
Hospital Revenue Refunding and Improvement Bonds,
Series 1995 (Community Hospitals Projects) MBIA 2006 @ 102
Insured** #5.70% Due 5/15/2022.................... AAA 2015 @ 100 S.F. 1,009,430
1,000,000 Dormitory Authority of the State of New York,
Canisius College, Insured Revenue Bonds, Series 2005 @ 102
1995 (CapMac Insured)** 5.60% Due 7/1/2023........ AAA 2016 @ 100 S.F. 1,005,000
600,000 City of Chicago (Illinois) Water Revenue Bonds,
Series 1995 (FGIC Insured)** #5.00% Due 2005 @ 102
11/1/2025........................................... AAA 2021 @ 100 S.F. 555,090
1,000,000 West Virginia Water Development Authority, Water
Development Revenue Refunding Bonds (Loan Program
II) Series 1995B (FSA Insured)** #5.375% Due 2005 @ 102
11/1/2025........................................... AAA 2016 @ 100 S.F. 972,470
1,000,000 Illinois Health Facilities Authority, Revenue
Refunding Bonds (Rush Presbyterian-St. Luke's
Medical Center Obligated Group) Series 1993 (MBIA 2003 @ 102
Insured) #5.50% Due 11/15/2025.................... AAA 2021 @ 100 S.F. 986,240
Name of Issuer, Title, Interest Rate and Maturity Offering
Aggregate Date of either Bonds Deposited or Bonds Contracted Price To
Principal<F1> for<F1><F5> Rating<F2> Redemption Feature<F3> IM-IT<F4>
$ 420,000 Industrial Development Board of the County of Knox,
Tennessee, Multi-Family Mortgage Revenue Refunding
Bonds (FHA Insured Mortgage Loan-Waterford Village
Appartments Project) Series 1995A 5.95% Due 2005 @ 102
3/1/2028............................................ AAA 2015 @ 100 S.F. $ 422,100
$ 9,000,000 $ 8 ,637,016
</TABLE>
All of the Bonds in the portfolio are insured by either one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
IM-IT INTERMEDIATE TRUST
General. The IM-IT Intermediate Trust consists of 11 issues of Securities. One
of the Bonds in the IM-IT Intermediate Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are located in 8 states or territories, divided by purpose of issues
(and percentage of principal amount to total IM-IT Intermediate Trust) as
follows: Health Care, 3 (26%); Higher Education, 2 (24%); Certificates of
Participation, 2 (19%); Transportation, 1 (14%); Water and Sewer, 1 (10%);
General Obligations, 1 (5%) and Other Care, 1 (2%). No Bond issue has received
a provisional rating. All of the obligations in the IM-IT Intermediate Trust
mature within 5-15 years of the Date of Deposit. The dollar weighted average
maturity of the Bonds in the Trust is 9.7 years.
Tax Status. For a discussion of the Federal tax status of income earned on
IM-IT Intermediate Trust Units, see "Other Matters--Federal Tax Status".
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 45.84 $ 45.84
Less: Estimated Annual Expense per Unit <F2>.............................. $ 1.64 $ 1.18
Less: Annual Premium on Portfolio Insurance per Unit...................... -- --
Estimated Net Annual Interest Income per Unit............................. $ 44.20 $ 44.66
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 44.20 $ 44.66
Divided by 12 and 2, respectively......................................... $ 3.68 $ 22.33
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .12278 $ .12406
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 4.32% 4.37%
Estimated Long-Term Return <F3><F4><F5>.................................... 4.18% 4.22%
Estimated Initial Monthly Distribution (January 1996)...................... $ 1.60
Estimated Initial Semi-annual Distribution (June 1996)..................... $ 20.22
Estimated Normal Distribution per Unit <F5>................................ $ 3.68 $ 22.33
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the IM-IT
Intermediate Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--June and December
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--June
and December commencing January 15, 1996
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.58
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $46.42. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.22 and $1.76 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST 86th INTERMEDIATE SERIES
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
IM-IT
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption Intermediate
Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 235,000 City of Williston, North Dakota, Health Facilities Revenue Bonds
(Catholic Health Corporation) Series 1995C (MBIA Insured)
#4.90% Due 11/15/2004............................................ AAA $ 236,713
460,000 Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1995 (MBIA
Insured)** #4.80% Due 12/1/2004................................ AAA 460,060
750,000 Dormitory Authority of the State of New York, Canisius College
Insured Revenue Bonds, Series 1995 (CapMac Insured)** 4.95%
Due 7/1/2005..................................................... AAA 755,625
455,000 Dormitory Authority of the State of New York, City University
System, Consolidated Third General Resolution Revenue Bonds,
Series 1995-1 (AMBAC Indemnity Insured) #4.875% Due 7/1/2005... AAA 457,553
675,000 Washington, D.C., Metropolitan Area Transportation Authority,
Gross Revenue Refunding Bonds, Series 1993 (FGIC Insured)
#4.90% Due 7/1/2005.............................................. AAA 2004 @ 102 677,531
250,000 Harris County, Texas, Toll Road Unlimited Tax and Subordinate
Lien Revenue Refunding Bonds, Series 1995A (MBIA Insured)
#0.00% Due 8/15/2005............................................. AAA 155,350 <F6>
120,000 Galveston County Health Facilities Development Corporation
(Texas) Revenue Bonds (The Devereux Foundation) Series 1995
(MBIA Insured)** #4.80% Due 11/1/2005.......................... AAA 119,513
500,000 West Virginia Water Development Authority, Water Development
Revenue Refunding Bonds (Loan Program II) Series 1995A (FSA
Insured)** #4.80% Due 11/1/2005................................ AAA 497,965
750,000 Allegheny County Hospital Development Authority (Pennsylvania)
Health Center Revenue Bonds, Series 1995 (University of
Pittsburgh Medical Center System) MBIA Insured** #4.80% Due
12/1/2005........................................................ AAA 749,857
500,000 The School District of Berkeley County, South Carolina, Berkeley
School Facilities Group, Inc., Certificates of Participation,
Series 1995 (MBIA Insured)** #4.90% Due 2/1/2006............... AAA 497,910
305,000 Indiana Health Facility Financing Authority, Hospital Revenue
Refunding Bonds, Series 1995 (Community Hospitals Project) MBIA
Insured ** 5.20% Due 5/15/2006................................. AAA 306,193
$ 5,000,000 $ 4,914,270
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
CALIFORNIA IM-IT TRUST
General. The California IM-IT Trust consists of 8 issues of Securities. None
of the Bonds in the California IM-IT Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. All
of the issues are payable from the income of a specific project or authority
and are not supported by the issuer's power to levy taxes. These issues are
divided by purpose of issues (and percentage of principal amount to total
California IM-IT Trust) as follows: Certificates of Participation, 3 (43%);
Water and Sewer, 2 (20%); Public Building, 1 (17%); Public Education, 1 (17%)
and General Purpose, 1 (3%). No Bond issue has received a provisional rating.
Risk Factors. The Trust will invest substantially all of its assets in
California Municipal Obligations. The Trust is therefore susceptible to
political, economic or regulatory factors affecting issuers of California
Municipal Obligations. These include the possible adverse effects of certain
California constitutional amendments, legislative measures, voter initiatives
and other matters that are described below. The following information provides
only a brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are
generally available to investors and are believed to be accurate. No
independent verification has been made of the accuracy or completeness of any
of the following information. It is based in part on information obtained from
various State and local agencies in California or contained in official
statements for various California Municipal Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of California Municipal
Obligations held in the portfolio of the Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
California's economy is the largest among the 50 states and one of the largest
in the world. The State's population of almost 32 million represents 12.3% of
the total United States population and grew by 27% in the 1980s. While the
State's substantial population growth during the 1980s stimulated local
economic growth and diversification and sustained a real estate boom between
1984 and 1990, it has increased strains on the State's limited water resources
and its infrastructure. Resultant traffic congestion, school over-crowding and
high housing costs have increased demands for government services and may
impede future economic growth. Population growth has slowed between 1991 and
1993 even while substantial immigration has continued, due to a significant
increase in outmigration by California residents. Generally, the household
incomes of new residents have been departing households, which may have a
major long-term socioeconomic and fiscal impact. However, with the California
economy improving, the recent net outmigration within the Continental U.S. is
expected to decrease or be reversed.
From mid-1990 to late 1993, the State's economy suffered its worst recession
since the 1930s, with recovery starting later than for the nation as a whole.
The State has experienced the worst job losses of any post-war recession.
Prerecession job levels may not be realized until near the end of the decade.
The largest job losses have been in Southern California, led by declines in
the aerospace and construction industries. Weakness statewide occurred in
manufacturing, construction, services and trade. Additional military base
closures will have further adverse effects on the State's economy later in the
decade.
Since the start of 1994, the California economy has shown signs of steady
recovery and growth. The State Department of Finance reports net job growth,
particularly in construction and related manufacturing, wholesale and retail
trade, transportation, recreation and services. This growth has offset the
continuing but slowing job losses in the aerospace industry and restructuring
of the finance and utility sectors, Unemployment in the State was down
substantially in 1994 from its 10% peak in January, 1994, but still remains
higher than the national average rate. Retail sales were up strongly in 1994
from year-earlier figures. Delay or slowdown in recovery will adversely affect
State revenues.
Certain California Municipal Obligations may be obligations of issuers which
rely in whole or in part, directly or indirectly, on ad valorem property taxes
as a source of revenue. The taxing powers of California local governments and
districts are limited by Article XIIIA of the California Constitution, enacted
by the voters in 1978 and commonly known as "Proposition 13." Briefly,
Article XIIIA limits to 1% of full cash value the rate of ad valorem property
taxes on real property and generally restricts the reassessment of property to
2% per year, except upon new construction or change of ownership (subject to a
number of exemptions). Taxing entities may, however, raise ad valorem taxes
above the 1% limit to pay debt service on voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13, and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special
tax." Court decisions, however, allowed non-voter approved levy of "
general taxes" which were not dedicated to a specific use. In response to
these decisions, the voters of the State in 1986 adopted an initiative statute
which imposed significant new limits on the ability of local entities to raise
or levy general taxes, except by receiving majority local voter approval.
Significant elements of this initiative, "Proposition 62," have been
overturned in recent court cases. An initiative proposed to re-enact the
provisions of Proposition 62 as a constitutional amendment was defeated by the
voters in November 1990, but such a proposal may be renewed in the future.
California and its local governments are subject to an annual "
appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending "
appropriations subject to limitation" in excess of the appropriations
limit imposed. "Appropriations subject to limitation" are
authorizations to spend "proceeds of taxes," which consists of tax
revenues and certain other funds, including proceeds from regulatory licenses,
user charges or other fees, to the extent that such proceeds exceed the cost
of providing the product or service, but "proceeds of taxes" excludes
most State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such as
reasonable user charges or fees and certain other non-tax funds, including
bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for
certain capital outlay projects, (4) appropriations by the State of post-1989
increases in gasoline taxes and vehicle weight fees, and (5) appropriations
made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 by Proposition 111 to follow more closely
growth in California's economy.
"Excess" revenues are measured over a two-year cycle. 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 on the ability of
California or local governments to pay debt service on such California
Municipal Obligations. It is not presently possible to predict the outcome of
any pending litigation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or the impact of
any such determinations upon State agencies or local governments, or upon
their ability to pay debt service on their obligations. Future initiative or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
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. Total
outstanding general obligation bond and lease purchase debt of the State
increased from $9.4 billion at June 30, 1987 to $23.5 billion at June 30,
1994. In FY 1993-94, debt service on general obligation bonds and lease
purchase debt was approximately 5.2% of General Fund revenues.
The principal sources of General Fund revenues in 1993-94 were the California
personal income tax (44% of total revenues), the sales tax (35%), bank and
corporation taxes (12%), and the gross premium tax on insurance (3%).
California maintains a Special Fund for Economic Uncertainties (the "
Economic Uncertainties Fund"), derived from General Fund revenues, as a
reserve to meet cash needs of the General Fund.
Throughout the 1980s, State spending increased rapidly as the State population
and economy also grew rapidly, including increased spending for many
assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to
local public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about
33%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse economic,
fiscal and budget conditions. The economic recession seriously affected State
tax revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget with
the largest programs supported by the General Fund (education, health, welfare
and corrections) growing at rates significantly higher than the growth rates
for the principal revenue sources of the General Fund. These structural
concerns will be exacerbated in coming years by the expected need to
substantially increase capital and operating funds for corrections as a result
of a "Three Strikes" law enacted in 1994.
As a result of these factors, among others, from the late 1980's until
1992-1993, the State had a period of nearly chronic budget imbalance, with
expenditures exceeding revenues in four out of six years, and the State
accumulated and sustained a budget deficit in the budget reserve, the Special
Fund for Economic Uncertainties ("SFEU") approaching $2.8 billion at
its peak at June 30, 1993. Starting in the 1990-91 Fiscal Year and for each
year thereafter, each budget required multibillion dollar actions to bring
projected revenues and expenditures into balance and to close large "
budget gaps" which were identified. The Legislature and Governor
eventually agreed on a number of different steps to produce Budget Acts in the
years 1991-92 to 1994-95, including: significant cuts in health and welfare
program expenditures; transfers of program responsibilities and funding from
the State to local governments, coupled with some reduction in mandates on
local government; transfer of about $3.6 billion in annual local property tax
revenues from cities, counties, redevelopment agencies and some other
districts to local school districts, thereby reducing State funding for
schools; reduction in growth of support for higher education programs, coupled
with increases in student fees; revenue increases (particularly in the 1992-92
Fiscal Year budget), most of which were for a short duration; increased
reliance on aid from the federal government to offset the costs of
incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less federal
aid than the State Administration has requested) and various on-time
adjustments and accounting changes.
Despite these budget actions, the effects of the recession led to large,
unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of the 1993-94 Fiscal Year, the accumulated deficit was
so large (almost $2.8 billion) that it was impractical to budget to retire it
in one year, so a two-year program was implemented, using the issuance of
revenue anticipation warrants to carry a portion of the deficit over the end
of the fiscal year. When the economy failed to recover sufficiently in
1993-94, a second two-year plan was implemented in 1994-95, to carry the final
retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy by late 1993, finally led to the restoration of
positive financial results. While General Fund revenues and expenditures were
essentially equal in FY 1992-93 (following two years of excess expenditures
over revenues), the General Fund had positive operating results in FY 1993-94
and 1994-95, which have reduced the accumulated budget deficit to around $600
million as of June 30, 1995.
A consequence of the accumulated budget deficits in the early 1990's, together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources available to
pay its ongoing obligations. When the Legislature and the Governor failed to
adopt a budget for the 1992-93 Fiscal Year by July 1, 1992, which would have
allowed the State to carry out its normal annual cash flow borrowing to
replenish its cash reserves, the State Controller was forced to issue
registered warrants ("IOUs") to pay a variety of obligations
representing prior years' or continuing appropriations, and mandates from
court orders. Available funds were used to make constitutionally-mandated
payments, such as debt service on bonds and warrants. Between July 1 and
September 4, 1992 the State Controller issued a total of approximately $3.8
billion of registered warrants. After that date, all remaining outstanding
registered warrants (about $2.9 billion) were called for redemptions from
proceeds of the issuance of 1992 Interim Notes after the budget was adopted.
The State's cash condition became so serious in late spring of 1992 that the
State Controller was required to issue revenue anticipation warrants maturing
in the following fiscal year in order to pay the State's continuing
obligations. The State was forced to rely increasingly on external debt
markets to meet its cash needs, as a succession of notes and warrants (both
forms of short-term cash flow financing) were issued in the period from June
1992 to July 1994, often needed to pay previously-maturing notes or warrants.
These borrowings were used also in part to spread out the repayment of the
accumulated budget deficit over the end of a fiscal year.
The State issued $7.0 billion of short-term debt in July, 1994 to meet its
cash flow needs and to finance the deferral of part of the accumulated budget
deficit to the 1995-96 fiscal year. In order to assure repayment of the $4
billion, 22-month part of this borrowing, the State enacted legislation (the
"Trigger Law") which can lead to automatic, across-the-board cuts in
General Fund expenditures in either the 1994-95 or 1995-96 fiscal years if
cash flow projections made at certain times during those years show
deterioration from the projections made in July 1994 when the borrowings were
made. On November 15, 1994, the State Controller as part of the Trigger Law
reported that the cash position of the General Fund on June 30, 1995 would be
about $580 million better than earlier projected, so no automatic budget
adjustments were required in 1994-95. The Controller's report showed that loss
of federal funds was offset by higher revenues, lower expenditures, and
certain other increases in cash resources.
For the first time in four years, the State entered the 1995-96 fiscal year
with strengthening revenues based on an improving economy. The major feature
of the Governor's proposed Budget, a 15% phased tax cut, was rejected by the
Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34 days
after the start of the fiscal year. The Budget Act projects General Fund
revenues and transfers of $44.1 billion. Expenditures are budgeted at $43.4
billion. The Department of Finance projects that, after repaying the last of
the carryover budget deficit, there will be positive balance of less than $30
million in the budget reserve, the Special Fund for Economic Uncertainties, at
June 30, 1996, providing no margin for adverse results during the year.
The Department of Finance projects cash flow borrowings in the 1995-96 Fiscal
Year will be the smallest in many years, comprising about $2 billion of notes
to be issued in April, 1996, and maturing by June 30, 1996. With full payment
of $4 billion of revenue anticipation warrants on April 25, 1996, the
Department sees no further need for borrowing over the end of the fiscal year.
The Department projects that available cash resources to pay State obligations
will be almost $2 billion at June 30, 1996. This "cushion" will be
re-examined by the State Controller on October 15, 1995, in the third step in
the Budget Adjustment Law process. If the Controller believes the available
cash resources on June 30, 1996 will, in fact, be zero or less, her report
would start a process which could lead to automatic budget cuts starting in
December, 1995.
The principal features of the 1995-96 Budget Act, in addition to those noted
above, are additional cuts in health and welfare expenditures (some of which
are subject to approvals or waivers by the federal government); assumed
further federal aid for illegal immigrant costs; and an increase in per-pupil
funding for public schools and community colleges, the first such significant
increase in four years.
State general obligation bonds ratings were reduced in July, 1994 to "
A1" by Moody's and "A" by S&P. Both of these ratings were reduced
from "AAA" levels which the State held until late 1991. There can be
no assurance that such ratings will be maintained in the future. It should be
noted that the creditworthiness of obligations issued by local California
issuers may be unrelated to the creditworthiness of obligations issued by the
State of California, and that there is no obligation on the part of the State
to make payment on such local obligations in the event of default.
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues. Trial courts have recently entered tentative decisions or
injunctions which would overturn several parts of the State's recent budget
compromises. The matters covered by these lawsuits include a deferral of
payments by the State to the Public Employees Retirement System, reductions in
welfare payments, and the use of certain cigarette tax funds for health costs.
All of these cases are subject to further proceedings and appeals, and if the
State eventually loses, the final remedies may not have to be implemented in
one year.
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.
Property tax revenues received by local governments declined more than 50%
following passage of Proposition 13. Subsequently, the California Legislature
enacted measures to provide for the redistribution of the State's General Fund
surplus to local agencies, the reallocation of certain State revenues to local
agencies and the assumption of certain governmental functions by the State to
assist municipal issuers to raise revenues. Total local assistance from the
State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing reductions
in certain aid programs. To reduce State General Fund support for school
districts, the 1992-93 and 1993-94 Budget Acts caused local governments to
transfer $3.9 billion of property tax revenues to school districts,
representing loss of the post-Proposition 13 "bailout" aid. The
largest share of these transfers came from counties, and the balance from
cities, special districts and redevelopment agencies. In order to make up this
shortfall, the Legislature proposed and voters approved in 1993 dedicating
0.5% of the sales tax to counties and cities for public safety purposes. In
addition, the Legislature has changed laws to relieve local governments of
certain mandates, allowing them to reduce costs.
To the extent the State should be constrained by its Article XIII
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 lease 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 have been 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 has 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 has implemented stringent cuts in services and has laid off
workers.
California Municipal Obligations which are assessment bonds may be adversely
affected by a general decline in real estate values or a slowdown in real
estate sales activity. In many cases, such bonds are secured by land which is
undeveloped at the time of issuance but anticipated to be developed within a
few years after issuance. In the event of such reduction or slowdown, such
development may not occur or may be delayed, thereby increasing the risk of a
default on the bonds. Because the special assessments or taxes securing these
bonds are not the personal liability of the owners of the property assessed,
the lien on the property is the only security for the bonds. Moreover, in most
cases the issuer of these bonds is not required to make payments on the bonds
in the event of delinquency in the payment of assessments or taxes, except
from amounts, if any, in a reserve fund established for the bonds.
Certain California long-term lease obligations, though typically payable from
the general fund of the municipality, are subject to "abatement" in
the event the facility being leased is unavailable for beneficial use and
occupancy by the municipality during the term of the lease. Abatement is not a
default, and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement occurs.
The most common cases of abatement are failure to complete construction of the
facility before the end of the period during which lease payments have been
capitalized and uninsured casualty losses to the facility (e.g., due to
earthquake). In the event abatement occurs with respect to a lease obligation,
lease payments may be interrupted (if all available insurance proceeds and
reserves are exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District"
) entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were
taken over by a State receiver (including a brief period under bankruptcy
court protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was a named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the original lease transaction. The trial
court has upheld the validity of the District's lease, and the case has been
settled. Any judgment in any future case against the position asserted by the
Trustee in the Richmond case may have adverse implications for lease
transactions of a similar nature by other California entities.
The repayment of industrial development securities secured by real property
may be affected by California laws limiting foreclosure rights of creditors.
Securities backed by health care and hospital revenues may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds
are secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g., because of a major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after the
enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are the
Issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to determine the impact of any
such legislation on California Municipal Obligations in which the Fund may
invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Northern California in 1989 and Southern California in
1994 experienced major earthquakes causing billions of dollars in damages. The
federal government provided more than $1.8 billion in aid for both
earthquakes, and neither event is expected to have any long-term negative
economic impact. Any California Municipal Obligation in the Portfolio could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained
by the inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its contracts of
insurance in the event of widespread losses; or (iii) the Federal or State
government to appropriate sufficient funds within their respective budget
limitations.
On January 17, 1994, a major earthquake with an estimated magnitude 6.8 on the
Richter scale struck the Los Angeles area, causing significant property damage
to public and private facilities, presently estimated at $15-20 billion. While
over $9.5 billion of federal aid, and a projected $1.9 billion of State aid,
plus insurance proceeds, will reimburse much of that loss, there were bill be
come ultimate loss of health and income in the region, in addition to costs of
the disruption caused by the event. Short-term economic projections are
generally neutral, as the infusion of aid will restore billions of dollars to
the local economy within a few months; already the local construction industry
has picked up. Although the earthquake will hinder recovery from the recession
in Southern California, already hard-hit, its long-term impact is not expected
to be material in the context of the overall wealth of the region. Almost five
years after the event, there are few remaining effects of the 1989 Loma Prieta
earthquake in northern California (which, however, caused less severe damage
than Northridge).
On December 7, 1994, Orange County, California (the "County"),
together with its pooled investment fund (the "Pools") filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports that
the Pools had suffered significant market losses in its investments caused a
liquidity crisis for the Pools and the County. Approximately 180 other public
entities, most but not all located in the County, were also depositors in the
Pools. The County estimated the Pools' loss at about $1.64 billion, or 23%, of
its initial deposits of around $7.5 billion. Many of the entities which kept
moneys in the Pools, including the County, faced cash flow difficulties
because of the bankruptcy filing and may be required to reduce programs or
capital projects. Moody's and Standard & Poor's have suspended, reduced to
below investment grade levels, or placed on "Credit Watch" various
securities of the County and the entities participating in the Pools.
On May 2, 1995, the Bankruptcy Court approved a settlement agreement covering
claims of the other participating entities against the County and the Pools.
Most participants have received in cash 80% (90% for school districts) of
their Pools' investment; the balance is to be paid in the future. The County
succeeded in deferring, by consent, until June 30, 1996, the repayment of $800
million of short-term obligations due in July and August, 1995; these notes
are, however, considered to be in default by Moody's and S&P. On June 27,
1995, County voters turned down a proposal for a temporary 0.5% increase in
the local sales tax, making the County's fiscal recovery much harder.
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. All school districts were
able to meet their obligations in the 1994-95 Fiscal Year.
Tax Status. For a discussion of the Federal tax status of income earned on
California IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Orrick, Herrington & Sutcliffe, special counsel to the Fund
for California tax matters, under existing California income and property tax
law applicable to individuals who are California residents:
(1)the California IM-IT Trust is not an association taxable as a corporation
and the income of the California IM-IT Trust will be treated as the income of
the Unitholders under the income tax laws of California;
(2)amounts treated as interest on the underlying Securities in the California
IM-IT Trust which are exempt from tax under California personal income tax and
property tax laws when received by the California IM-IT Trust will, under such
laws, retain their status as tax-exempt interest when distributed to
Unitholders. However, interest on the underlying Securities attributed to a
Unitholder which is a corporation subject to the California franchise tax laws
may be includable in its gross income for purposes of determining its
California franchise tax. Further, certain interest which is attributable to a
Unitholder subject to the California personal income tax and which is treated
as an item of tax preference for purposes of the federal alternative minimum
tax pursuant to Section 57(a)(5) of the Internal Revenue Code of 1986 may also
be treated as an item of tax preference that must be taken into account in
computing such Unitholder's alternative minimum taxable income for purposes of
the California alternative minimum tax enacted by 1987 California Statutes,
chapter 1138. However, because of the provisions of the California
Constitution exempting the interest on bonds issued by the State of
California, or by local governments within the state, from taxes levied on
income, the application of the new California alternative minimum tax to
interest otherwise exempt from the California personal income tax in some
cases may be unclear;
(3)under California income tax law, each Unitholder in the California IM-IT
Trust will have a taxable event when the California IM-IT Trust disposes of a
Security (whether by sale, exchange, redemption, or payment at maturity) or
when the Unitholder redeems or sells Units. Because of the requirement that
tax cost basis be reduced to reflect amortization of bond premium, under some
circumstances a Unitholder may realize taxable gains when Units are sold or
redeemed for an amount equal to, or less than, their original cost. The total
cost of each Unit in the California IM-IT Trust to a Unitholder is allocated
among each of the Bond issues held in the California IM-IT Trust (in
accordance with the proportion of the California IM-IT Trust comprised by each
Bond issue) in order to determine his per Unit tax cost for each Bond issue;
and the tax cost reduction requirements relating to amortization of bond
premium will apply separately to the per Unit tax cost of each Bond issue.
Unitholders' bases in their units, and the bases for their fractional interest
in each Trust asset, may have to be adjusted for their pro rata share of
accrued interest received, if any, on Securities delivered after the
Unitholders' respective settlement dates;
(4)under the California personal property tax laws, bonds (including the
Securities in the California IM-IT Trust) or any interest therein is exempt
from such tax;
(5)any proceeds paid under the insurance policy issued to the California IM-IT
Trust with respect to the Securities which represent maturing interest on
defaulted obligations held by the Trustee will be exempt from California
personal income tax if, and to the same extent as, such interest would have
been so exempt if paid by the issuer of the defaulted obligations; and
(6)under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry Units of
the California IM-IT Trust is not deductible for the purposes of the
California personal income tax. While there presently is no California
authority interpreting this provision, Section 17280(b)(2) directs the
California Franchise Tax Board to prescribe regulations determining the proper
allocation and apportionment of interest costs for this purpose. The Franchise
Tax Board has not yet proposed or prescribed such regulations. In interpreting
the generally similar Federal provision, the Internal Revenue Service has
taken the position that such indebtedness need not be directly traceable to
the purchase or carrying of Units (although the Service has not contended that
a deduction for interest on indebtedness incurred to purchase or improve a
personal residence or to purchase goods or services for personal consumption
will be disallowed). In the absence of conflicting regulations or other
California authority, the California Franchise Tax Board generally has
interpreted California statutory tax provisions in accord with Internal
Revenue Service interpretations of similar Federal provisions.
At the respective times of issuance of the Securities, opinions relating to
the validity thereof and to the exemption of interest thereon from Federal
income tax and California personal income tax are rendered by bond counsel to
the respective issuing authorities. Except in certain instances in which
Orrick, Herrington & Sutcliffe acted as bond counsel to issuers of Securities,
and as such made a review of proceedings relating to the issuance of certain
Securities at the time of their issuance, Orrick, Herrington & Sutcliffe has
not made any special review for the California IM-IT Trust of the proceedings
relating to the issuance of the Securities or of the basis for such opinions.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 51.70 $ 51.70
Less: Estimated Annual Expense per Unit <F2>.............................. $ 2.30 $ 1.81
Less: Annual Premium on Portfolio Insurance per Unit...................... -- --
Estimated Net Annual Interest Income per Unit............................. $ 49.40 $ 49.89
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 49.40 $ 49.89
Divided by 12 and 2, respectively......................................... $ 4.12 $ 24.95
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .13721 $ .13857
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 4.94% 4.99%
Estimated Long-Term Return <F3><F4><F5>.................................... 4.94% 4.99%
Estimated Initial Monthly Distribution (January 1996)...................... $ 1.78
Estimated Initial Semi-annual Distribution (January 1996).................. $ 1.80
Estimated Normal Distribution per Unit <F5>................................ $ 4.12 $ 24.95
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
California IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
January and July commencing January 15, 1996
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.02
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $51.72. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.32 and $1.83 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
CALIFORNIA INSURED MUNICIPALS INCOME TRUST SERIES 148
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
California
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 310,000 Desert Sands Unified School District, California,
Certificates of Participation (Capital Projects Program) 2005 @ 102
Series 1995 (FSA Insured) #5.625% Due 3/1/2015............. AAA 2012 @ 100 S.F. $ 314,731
460,000 San Bernardino County, California, Certificates of
Participation (Medical Center Financing Project) Series 1995 2005 @ 102
(MBIA Insured) #5.50% Due 8/1/2015........................... AAA 2011 @ 100 S.F. 459,535
100,000 Sacramento City Financing Authority, California, 1993 Tax
Allocation Revenue Bonds, Series B (Merged Downtown
Sacramento, Alkali Flat, Del Paso Heights and Oak Park
Redevelopment Project Areas) MBIA Insured #0.00% Due
11/1/2017..................................................... AAA 29,969 <F6>
500,000 State Public Works Board of California, Lease Revenue Bonds
(Department of Justice Building) Series 1995A (FSA Insured) 2005 @ 101
#5.625% Due 5/1/2020.......................................... AAA 2016 @ 100 S.F. 508,215
500,000 California Statewide Communities Development Authority,
Certificates of Participation, St. Joseph Health System 2003 @ 102
Obligated Group (AMBAC Indemnity Insured) #5.50% Due 7/1/2023 AAA 2015 @ 100 S.F. 495,505
300,000 Encinitas Public Financing Authority (California) 1993 Water
Revenue Bonds, Series A (San Dieguito Water District) MBIA 2003 @ 102
Insured #5.25% Due 10/1/2023................................. AAA 2014 @ 100 S.F. 290,856
500,000 Palmdale Elementary School District (California) Community
Facilities District No. 90-1, Special Tax Revenue Bonds, 2005 @ 102
Series 1995 (FSA Insured)** #5.40% Due 8/1/2025.............. AAA 2015 @ 100 S.F. 495,195
300,000 Department of Water and Power of the City of Los Angeles,
California, Electric Plant Refunding Revenue Bonds, Second 2003 @ 102
Issue of 1993 (FGIC Insured) #5.25% Due 11/15/2026........... AAA 2020 @ 100 S.F. 290,394
$ 2,970,000 $ 2,884,400
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
CONNECTICUT IM-IT TRUST
General. The Connecticut IM-IT Trust consists of 11 issues of Securities. Two
of the Bonds in the Connecticut IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Connecticut IM-IT Trust) as follows: Health Care, 4 (41%); Water and
Sewer, 2 (28%); Transportation, 1 (13%); Multi-Family Mortgage Revenue, 1
(8%); General Obligations, 2 (7%) and General Purpose, 1 (3%). No Bond issue
has received a provisional rating.
Risk Factors. The following information is only a summary of risk factors
associated with Connecticut. It has been compiled from official government
statements and other publicly available documents. Although the Sponsor has
not independently verified the information, it has no reason to believe that
it is not correct in all material respects.
Connecticut's manufacturing industry, which has historically been of prime
economic importance to the State, its municipalities and its residents, has
been in decline for several years. Although Connecticut's manufacturing
industry is diversified between transportation equipment (primarily aircraft
engines, helicopters and submarines), non-electrical machinery, fabricated
metal products and electrical machinery, defense-related business represents a
relatively high proportion of manufacturing receipts. As a result, reductions
in defense spending have had a substantial adverse effect on Connecticut's
manufacturing industry.
Connecticut's manufacturing employment peaked in 1970 at over 441,000 workers
but had declined 35.4% by 1994. Although the loss of manufacturing jobs was
partially offset by a 66.3% rise in other non-agricultural employment during
the same period, Connecticut's growth in non-manufacturing employment has
lagged behind the New England region and the nation as a whole. Moreover,
Connecticut's largest defense contractors have announced plans to reduce their
labor forces substantially over the next four years.
From 1986 through 1994, Connecticut's unemployment rate was generally lower
than the unemployment rate for the U.S. as a whole, and average per capita
personal income of Connecticut residents was higher than that of residents of
other states. The average unemployment rate (seasonally adjusted) in
Connecticut increased from a low of 3.0% in 1988 to 7.5% in 1992 and, after a
number of important changes in the method of calculation, was reported to be
5.6% in 1994. Average per capita personal income of Connecticut residents
increased in every year from 1985 to 1994, rising from $18,268 to $29,044.
However, pockets of significant unemployment and poverty exist in some
Connecticut cities and towns, and Connecticut is now in a recession, the depth
and duration of which are uncertain.
For the four fiscal years ended June 30, 1991, the General Fund ran operating
deficits of approximately $115,600,000, $28,000,000, $259,000,000 and
$808,500,000, respectively. At the end of the 1990-1991 fiscal year, the
General Fund had an accumulated unappropriated deficit of $965,712,000. For
the four fiscal years ended June 30, 1995, the General Fund ran operating
surpluses of approximately $110,200,000, $113,500,000, $19,700,000 and
$80,500,000, respectively. General Fund budgets for the biennium ending June
30, 1997, were adopted in 1995. General Fund expenditures and revenues are
budgeted to be approximately $9,800,000,000 and $10,150,000,000, for the
1995-1996 and 1996-1997 fiscal years, respectively.
In 1991, to address the General Fund's growing deficit, legislation was
enacted by which the State imposed an income tax on individuals, trusts and
estates for taxable years generally commencing in 1992. For each fiscal year
starting with the 1991-1992 fiscal year, the General Fund has operated at a
surplus with over 60% of the State's tax revenues being generated by the
income tax and the sales and use tax. However, the State's budgeted
expenditures have more than doubled from approximately $4,300,000 for the
1986-1987 fiscal year to approximately $10,150,000,000 for the 1996-1997
fiscal year.
The 1991 legislation also authorized the State Treasurer to issue Economic
Recovery Notes to fund the General Fund's accumulated deficit of $965,712,000
as of June 30, 1991, and during 1991 the State issued a total of $965,710,000
Economic Recovery Notes, of which $315,710,000 were outstanding as of
September 15, 1995. The notes were to be payable no later than June 30, 1996,
but as part of the budget adopted for the biennium ending June 30, 1997,
payment of the remaining notes scheduled to be paid over the four fiscal years
ending June 30, 1999.
The State's primary method for financing capital projects is through the sale
of general obligation bonds. As of September 15, 1995, the State had
authorized general obligation bonds totaling $10,513,394,000, of which
$9,068,876,000 had been approved for insurance by the State Bond Commission,
$7,715,675,000 had been issued, and $6,186,518,000 were outstanding.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The improvements are to be financed by $18 million of general
obligation bonds of the State and $962 million bonds of the University. The
University's bonds will be secured by a State debt service commitment, the
aggregate amount of which is limited to $382 million for the three fiscal
years ending June 30, 1999, and $580 million for the four fiscal years ending
June 30, 2005.
In addition to the bonds described above, the State also has limited or
contingent liability on a significant amount of other bonds. Such bonds have
been issued by the following quasi-public agencies: the Connecticut Higher
Education Supplemental Loan Authority, the Connecticut Resources Recovery
Authority and the Connecticut Health and Education Facilities Authority. Such
bonds have also been issued by the cities of Bridgeport and West Haven and the
Southeastern Connecticut Water Authority. As of September 15, 1995, the amount
of bonds outstanding on which the State has limited or contingent liability
totaled $3,755,500,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2000, is currently estimated to be
$11.2 billion, to be met from federal, state, and local funds. The State
expects to finance most of its $4.7 billion share of such cost by issuing $4.2
billion of special tax obligation ("STO") bonds. The STO bonds are
payable solely from specified motor fuel taxes, motor vehicle receipts, and
license, permit and fee revenues pledged therefor and credited to the Special
Transportation Fund, which was established to budget and account for such
revenues.
As of September 15, 1995, the General Assembly had authorized $4,157,900,000
of such STO bonds, of which $3,269,700,000 had been issued. It is anticipated
that additional STO bonds will be authorized annually in amounts necessary to
finance and to complete the infrastructure program. Such additional bonds may
have equal rank with the outstanding bonds provided certain pledged revenue
coverage requirements are met. The State expects to continue to offer bonds
for this program.
On March 29, 1990, Standard & Poor's reduced its ratings of the State's
general obligation bonds from AA+ to AA, and on April 9, 1990, Moody's reduced
its ratings from Aa1 to Aa. On September 13, 1991, Standard & Poor's further
reduced its ratings of the State's general obligation bonds and certain
obligations that depend in part on the creditworthiness of the State to AA-.
On March 17, 1995, Fitch reduced its ratings of the State's general obligation
bonds from AA+ to AA.
The State, its officers and its employees are defendants in numerous lawsuits.
Although it is not possible to determine the outcome of these lawsuits, the
Attorney General has opined that an adverse decision in any of the following
cases might have a significant impact on the State's financial position: (i)
an action by inmates of the Department of Correction seeking damages and
injunctive relief with respect to alleged violations of statutory and
constitutional rights as a result of the monitoring and recording of their
telephone calls from the State's correctional institutions; (ii) litigation on
behalf of black and Hispanic school children in the City of Hartford seeking
"integrated education" within the Greater Hartford metropolitan area;
(iii) litigation involving claims by Indian tribes to less than 1/10 of 1% of
the State's land area; (iv) litigation challenging the State's method of
financing elementary and secondary public schools on the ground that it denies
equal access to education; (v) an action on behalf of all persons with
retardation or traumatic brain injury, claiming that their constitutional
rights are violated by placement in State hospitals alleged not to provide
adequate treatment and training, and seeking placement in community
residential settings with appropriate support services; (vi) an action by the
Connecticut Hospital Association and 3 hospitals seeking to require the State
to reimburse hospitals for in-patient medical services on a basis more
favorable to them; (vii) a class action by the Connecticut Criminal Defense
Lawyers Association claiming a campaign of illegal surveillance activity and
seeking damages and injunctive relief; and (viii) an action to enforce the
spending cap provision of the State's constitution by seeking to require that
the General Assembly define certain terms used therein and to enjoin certain
increases in "general budget expenditures" until this is done. In
addition, a number of corporate taxpayers have filed refund requests for
corporation business tax, asserting that interest on federal obligations may
not be included in the measure of that tax, on the grounds that to do so
allegedly violates federal law because interest on certain obligations of the
State is not included in the measure of the tax. The State has attempted to
eliminate the basis for these refund requests by enacting legislation that
takes by eminent domain the rights of corporate holders to exclude the
interest on such obligations. The State will compensate such corporate holders.
General obligation bonds issued by municipalities are payable primarily from
ad valorem taxes on property tax base is subject to many factors outside the
control of the municipality, including the decline in Connecticut's
manufacturing industry. In addition to general obligation bonds backed by the
full faith and credit of the municipality, certain municipal authorities
finance projects by issuing bonds that are not considered to be debts of the
municipality. Such bonds may be repaid only from revenues of the financed
project, the revenues from which may be insufficient to service the related
debt obligations.
In recent years, certain Connecticut municipalities have experienced severe
fiscal difficulties and have reported operating and accumulated deficits. The
most notable of these is the City of Bridgeport, which filed a bankruptcy
petition on June 7, 1991. The State opposed the petition. The United States
Bankruptcy Court for the District of Connecticut held that Bridgeport has
authority to file such a petition but that its petition should be dismissed on
the grounds that Bridgeport was not insolvent when the petition was filed.
Regional economic difficulties, reductions in revenues and increases in
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt
service on borrowings could result in declines, possibly severe, in the value
of their outstanding obligations, increases in their future borrowing costs,
and impairment of their ability to pay debt service on their obligations.
Tax Status. For a discussion of the Federal tax status of income earned on
Connecticut IM-IT Trust Units, see "Other Matters--Federal tax Status"
.
The assets of the Connecticut IM-IT Trust will consist of obligations (the
"Bonds"); certain of the Bonds have been issued by or on behalf of the
State of Connecticut or its political subdivisions or other public
instrumentalities, state or local authorities, districts, or similar public
entities created under the laws of the State of Connecticut ("Connecticut
Bonds") and the balance of the Bonds have been issued by or on behalf of
entities classified for the relevant purposes as territories or possessions of
the United States, including one or more of Puerto Rico, Guam, or the Virgin
Islands, the interest on the obligations of which Federal law would prohibit
Connecticut from taxing if received directly by the Unitholders. Certain
Connecticut Bonds in the Connecticut IM-IT Trust were issued prior to the
enactment of the Connecticut income tax on the Connecticut taxable income of
individuals, trusts, and estates (the "Connecticut Income Tax");
therefore, bond counsel to the issuers of such Bonds did not opine as to the
exemption of the interest on such Bonds from such tax. However, the Sponsor
and special counsel to the Trusts for Connecticut tax matters believe that
such interest will be so exempt. Interest on Bonds in the Connecticut IM-IT
Trust issued by other issuers, if any, is, in the opinion of bond counsel to
such issuers, exempt from state taxation.
The Connecticut Income Tax was enacted in August, 1991. Generally, a
Unitholder recognizes gain or loss for purposes of this tax to the same extent
as he recognizes gain or loss for Federal income tax purposes. Ordinarily this
would mean that gain or loss would be recognized by a Unitholder upon the
maturity, redemption, sale, or other disposition by the Connecticut IM-IT
Trust of a Bond held by it, or upon the redemption, sale or other disposition
of a Unit of the Connecticut IM-IT Trust held by the Unitholder.
However, on June 19, 1992, Connecticut legislation was adopted that provides
that gains and losses from the sale or exchange of Connecticut Bonds held as
capital assets will not be taken into account for purposes of the Connecticut
Income Tax for taxable years starting on or after January 1, 1992. Regulations
effective for taxable years starting on or after January 1, 1994, clarify that
this provision also applies to gain or loss recognized by a Unitholder upon
the maturity or redemption of a Connecticut Bond held by the Connecticut IM-IT
Trust. However, it is not clear whether this provision would apply, to the
extent attributable to Connecticut Bonds held by the Connecticut IM-IT Trust,
to gain or loss recognized by a Unitholder upon the redemption, sale, or other
disposition of a Unit of the Connecticut IM-IT Trust held by the Unitholder.
Unitholders are urged to consult their own tax advisors concerning these
matters.
In the opinion of Day, Berry & Howard, special counsel to the Fund for
Connecticut tax matters, which relies explicitly on the opinion of Chapman and
Cutler regarding Federal income tax matters, under existing Connecticut law:
The Connecticut IM-IT Trust is not liable for any tax on or measured by net
income imposed by the State of Connecticut.
Interest income of the Connecticut IM-IT Trust from a Bond issued by or on
behalf of the State of Connecticut, any political subdivision thereof, or
public instrumentality, state or local authority, district, or similar public
entity created under the laws of the State of Connecticut (a "Connecticut
Bond"), or from a Bond issued by United States territories or possessions
the interest on which Federal law would prohibit Connecticut from taxing if
received directly by a Unitholder from the issuer thereof, is not taxable
under the Connecticut tax on the Connecticut taxable income of individuals,
trusts, and estates (the "Connecticut Income Tax"), when any such
interest is received by the Connecticut IM-IT Trust or distributed by it to
such a Unitholder.
Insurance proceeds received by the Connecticut IM-IT Trust representing
maturing interest on defaulted Bonds held by the Connecticut IM-IT Trust are
not taxable under the Connecticut Income Tax if, and to the same extent as,
such interest would not be taxable thereunder if paid directly to the
Connecticut IM-IT Trust by the issuer of such Bonds.
Gains and losses recognized by a Unitholder for Federal income tax purposes
upon the maturity, redemption, sale, or other disposition by the Connecticut
IM-IT Trust of a Bond held by the Connecticut IM-IT Trust or upon the
redemption, sale, or other disposition of a Unit of the Connecticut IM-IT
Trust held by a Unitholder are taken into account as gains or losses,
respectively, for purposes of the Connecticut Income Tax, except that, in the
case of a Unitholder holding a Unit of the Connecticut IM-IT Trust as a
capital asset, such gains and losses recognized upon the maturity, redemption,
sale or exchange of a Connecticut Bond held by the Connecticut IM-IT Trust are
excluded from gains and losses taken into account for purposes of such tax and
no opinion is expressed as to the treatment for purposes of such tax of gains
and losses recognized to the extent attributable to Connecticut Bonds upon the
redemption, sale, or other disposition by a Unitholder of a Unit of the
Connecticut IM-IT Trust held by him.
The portion of any interest income or capital gain of the Connecticut IM-IT
Trust that is allocable to a Unitholder that is subject to the Connecticut
corporation business tax is includable in the gross income of such Unitholder
for purposes of such tax.
An interest in a Unit of the Connecticut IM-IT Trust that is owned by or
attributable to a Connecticut resident at the time of his death is includable
in his gross estate for purposes of the Connecticut succession tax and the
Connecticut estate tax.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 49.93 $ 49.93
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.36 $ 1.90
Less: Annual Premium on Portfolio Insurance per Unit.................. $ .04 $ .04
Estimated Net Annual Interest Income per Unit......................... $ 47.53 $ 47.99
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 47.53 $ 47.99
Divided by 12 and 2, respectively..................................... $ 3.96 $ 24.00
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .13202 $ .13330
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 4.75% 4.80%
Estimated Long-Term Return <F2><F3><F4>................................ 4.78% 4.83%
Estimated Initial Monthly Distribution (January 1996).................. $ 1.72
Estimated Initial Semi-annual Distribution (January 1996).............. $ 1.73
Estimated Normal Distribution per Unit <F4>............................ $ 3.96 $ 24.00
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Connecticut IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
January and July commencing January 15, 1996
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
CONNECTICUT INSURED MUNICIPALS INCOME TRUST SERIES 29
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
Connecticut
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 110,000 State of Connecticut, General Obligation Capital
Appreciation Bonds (College Savings Plan, Series 1989B)
#0.00% Due 11/1/2009......................................... AA- $ 54,060 <F6>
100,000 Connecticut Special Tax Obligation Revenue Bonds,
Transportation Infrastructure, Series 1995B (FGIC Insured)
#5.625% Due 10/1/2014........................................ AAA 2004 @ 101 101,904
250,000 Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Nursing Home Program Issue, Series 1994
(St. Joseph Living Center Project) AMBAC Indemnity Insured 2004 @ 102
#4.75% Due 11/1/2014......................................... AAA 2010 @ 100 S.F. 236,375
100,000 Windham, Connecticut, Unlimited Tax-General Obligation Bonds
(FGIC Insured) #5.00% Due 12/15/2014....................... AAA 2005 @ 102 97,517
400,000 Connecticut Special Tax Obligation Revenue Bonds,
Transportation Infrastructure, Series 1995A (FGIC Insured)
#5.60% Due 6/1/2015.......................................... AAA 2005 @ 101 407,052
250,000 Connecticut Health and Educational Facilities Authority,
Revenue Bonds (Kent School Issue) Series 1995B (MBIA 2005 @ 101
Insured) #5.50% Due 7/1/2015............................... AAA 2011 @ 100 S.F. 252,302
500,000 Connecticut Health and Educational Facilities Authority,
Revenue Bonds (Day Kimball Hospital) Series 1995A (FSA 2006 @ 102
Insured) #250M-5.375% Due 7/1/2016 #250M-5.375% Due AAA 2006 @ 102 251,250
7/1/2026 .................................................... AAA 2017 @ 100 S.F. 249,063
485,000 Connecticut Health and Educational Facilities Authority,
Revenue Bonds (Saint Francis Hospital and Medical Center 2003 @ 102
Issue) Series 1993C (FGIC Insured) #5.00% Due 7/1/2023..... AAA 2014 @ 100 S.F. 463,737
350,000 Connecticut Development Authority, Water Facilities Revenue
Bonds (Bridgeport Hydraulic Company Project) Series 1993B
(MBIA Insured) #5.50% Due 6/1/2028......................... AAA 2003 @ 102 354,305
500,000 Connecticut Development Authority, Water Facilities Revenue
Refunding Bonds (Stamford Water Company Project) Series
1993 (AMBAC Indemnity Insured) #5.30% Due 9/1/2028......... AAA 2003 @ 102 494,815
$ 3,045,000 $ 2,962,380
</TABLE>
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
ExplanationsInsurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
GEORGIA IM-IT TRUST
General. The Georgia IM-IT Trust consists of 10 issues of Securities. Three of
the Bonds in the Georgia IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Georgia IM-IT Trust) as follows: Health Care, 2 (32%); General
Obligations, 3 (28%); Water and Sewer, 1 (16%); Multi-Family Mortgage Revenue,
1 (9%); Transportation, 1 (8%); Wholesale Electric, 1 (4%) and Retail
Electric/Gas, 1 (3%). No Bond issue has received a provisional rating.
Risk Factors. The following brief summary regarding the economy of Georgia is
based upon information drawn from publicly available sources and is included
for purposes of providing information about general economic conditions that
may or may not affect issuers of the Georgia obligations. The Sponsor has not
independently verified any of the information contained in such publicly
available documents.
Constitutional Considerations. The Georgia Constitution permits the issuance
by the State of general obligation debt and of certain guaranteed revenue
debt. The State may in our guaranteed revenue debt by guaranteeing the payment
of certain revenue obligations issued by an instrumentality of the State. The
Georgia Constitution prohibits the incurring of any general obligation debt or
guaranteed revenue debt if the highest aggregate annual debt service
requirement for the then current year or any subsequent fiscal year for
outstanding general obligation debt and guaranteed revenue debt, including the
proposed debt, exceed 10 percent of the total revenue receipts, less refunds,
of the State treasury in the fiscal year immediately preceding the year in
which any such debt is to be incurred.
The Georgia Constitution also permits the State to incur public debt to supply
a temporary deficit in the State treasury in any fiscal year created by a
delay in collecting the taxes of that year. Such debt must not exceed, in the
aggregate, 5% of the total revenue receipts, less refunds, of the State
treasury in the fiscal year immediately preceding the year in which such debt
is incurred. The debt incurred must be repaid on or before the last day of the
fiscal year in which it is to be incurred to supply a temporary deficit in the
State treasury. No such short-term debt has been incurred under this provision
since the inception of the constitutional authority referred to in this
paragraph.
Virtually all of the issues of long-term debt obligations issued by or on
behalf of the State of Georgia and counties, municipalities and other
political subdivisions and public authorities thereof are required by law to
be validated and confirmed in a judicial proceeding prior to issuance. The
legal effect of an approved validation in Georgia is to render incontestable
the validity of the pertinent bond issue and the security therefor.
The State and Its Economy. The State operates on a fiscal year beginning July
1 and ending June 30. Thus, the 1994 fiscal year ended June 30, 1994. Based on
data from the Georgia Department of Revenue, estimated receipts of the State
from income tax and sales tax for the 1992 fiscal year comprised approximately
48.8% and 37.5%, respectively, of the total State tax revenues. Such data
shows that total estimated State treasury receipts for the 1992 fiscal year
increased by approximately 2.16% over such collections in the 1991 fiscal
year. The estimated 1993 fiscal year figures indicate that receipts of the
State from income tax and sales tax for the 1993 fiscal year comprised
approximately 48.1% and 38%, respectively, of the total State tax revenues.
Total estimated State tax revenue collections for the 1993 fiscal year
indicated an increase of approximately 9.89% over such collections in the 1992
fiscal year. The estimated 1994 fiscal year figures indicate that receipts of
the State from income tax and sales tax for the 1994 fiscal year will comprise
approximately 48.8% and 37.9%, respectively, of the total State tax revenues.
Total estimated State tax revenue collections for the 1994 fiscal year
indicate an increase of approximately 9.56% over such collections in the 1993
fiscal year.
Georgia experienced an economic slowdown in the late 1980s that continued into
1992. The 1991 fiscal year ended with a balanced budget, but only because the
State had borrowed approximately $90 million from surpluses maintained for
special uses. In light of weaker. than expected monthly revenue collections in
May and June of 1991, Georgia lawmakers, in a special legislative session, cut
budgeted expenditures for the 1992 fiscal year by $415 million. Georgia ended
its 1992 fiscal year, however, with strong monthly revenue collections. For
the last four months of fiscal year 1992, Georgia's revenues were more than 6%
higher than revenues reported one year earlier for the same time period. By
year-end, revenue collections fell only.1% short of that expected to cover
1992 expenditures. This shortfall was made up from funds allocated to but not
used by state agencies. The authorized 1993 fiscal year budget consists of an
$8.3 billion spending plan and approximately $750 million in new general
obligation debt. On March 23, 1993. The Georgia General Assembly approved an
$8.9 billion budget for the 1994 fiscal year which includes authorization for
$792 million of general obligation borrowing.
The Georgia economy has performed relatively well during recent years and
generally has expanded at a rate greater than the national average during that
period. However, growth in 1988 through 1992 slowed somewhat and was modest
compared to the pace of the early 1980's. Georgia's economy, however, has made
a robust recovery through the 1993 and 1994 fiscal years. Total estimated
State tax revenue collections for the 1994 fiscal year indicate an increase of
approximately 9.56% over such collections in the 1993 fiscal year. The 1992
annual average unemployment rate for Georgia was 6.9% as compared to the 1992
national annual average unemployment rate of 7.4%. The 1993 annual average
unemployment rate for Georgia was 5.7% as compared to the 1993 national annual
average unemployment rate of 6.7%. Throughout 1994, the monthly unemployment
rate for Georgia (not seasonally adjusted) has remained below the national
average monthly unemployment rate (not seasonally adjusted). In April and May
1994, the two most current months for which information is available,
Georgia's unemployment rate of 6.2% and 5.9%. In July, 1994, widespread
flooding in central and southern Georgia caused extensive damage and
destruction of farmland, private residences, businesses and local and state
government facilities. As of July 12, 1994, Governor Zell Miller refused to
estimate the dollar value of the damage but other sources estimate that damage
could exceed $300 million. Thirty-one counties have been declared federal
disaster areas. Moody's Investors Service, Inc. and Standard and Poor's
Corporation are observing the situation in Georgia, but neither rating agency
has expressed any immediate credit concerns.
Bond Ratings. Currently, Moody's Investors Service, Inc. rates Georgia general
obligation bonds Aaa and Standard & Poor's rates such bonds AA+.
Legal Proceedings. Georgia is involved in certain legal proceedings that, if
decided against the State, may require the State to make significant future
expenditures or may substantially impair revenues. Several lawsuits have been
filed against Georgia asserting that the decision in Davis v. Michigan
Department of Treasury, 489 U.S. 803 (1989), invalidating Michigan's practice
of taxing retirement benefits paid by the federal government while exempting
state retirement benefits, also invalidates Georgia's tax treatment of Federal
Retirement Benefits for years prior to 1989. Under Georgia's applicable 3 year
statute of limitation the maximum potential liability under these suits
calculated to August 15, 1993 would appear to be no greater than 100 million
dollars. The plaintiffs in these suits, however, have requested refunds for a
period from 1980 to 1988 which could result in a maximum potential liability
in the range of 591 million dollars. Any such liability would be predicated on
a holding by the State of Georgia Supreme Court or the United States Supreme
Court that the Davis decision is applicable to Georgia's prior method of
taxing Federal Retirement Benefits and that the Davis decision is to be given
a retroactive effect, i.e., that the decision affects prior tax years and that
a refund remedy is appropriate. In Georgia's "test case" , the Georgia
Supreme Court held that no refunds are due. The plaintiff's petition to the
U.S. Supreme Court for a writ of certiorari was granted on February 22, 1994.
Three suits have been filed against the State of Georgia seeking refunds of
liquor taxes under O.C.G.A. Section 48-2-35, in light of Bacchus Imports, Ltd.
v. Dias, 468 U.S. 263 (1984) under Georgia's pre-Bacchus statute. In the Beam
case, 501 U.S. 529 (decided June 20, 1991) the Supreme Court indicated that
Bacchus was retroactive, but only within the bounds of State statutes of
limitations and procedural bars, and left State courts to determine any remedy
in light of reliance interests, equitable considerations, and other defenses.
Georgia's statute of limitations in O.C.G.A. Section 48-2-35 has run on all
pre-Bacchus claims for refund except five pending claims seeking 31.7 million
dollars in tax plus interest. On remand, the Fulton County Superior Court has
ruled that procedural bars and other defenses bar any recovery by taxpayers on
Beam's claims for refund. The Georgia Supreme Court has affirmed, and Beam has
petitioned the United States Supreme Court for a writ of certiorari.
Two additional suits have been filed with the State of Georgia by foreign
producers of alcoholic beverages seeking $96 million in refunds of alcohol
import taxes imposed under O.C.G.A. Section 3-4-60. These claims constitute
99% of all such taxes paid during the preceding three years.
In Board of Public Education for Savannah/Chatham County v. State of Georgia,
the local school board claimed that the State should finance the major portion
of the costs of its desegregation program. The Savannah Board originally
requested restitution in the amount of $30 million, but the Federal District
Court set forth a formula which would require a State payment in the amount of
approximately $6 million. Both sides have moved for reconsideration. In a
similar complaint, DeKalb County has requested restitution in the amount of
$90 million, and there are approximately five other school districts which
could file similar claims. It is not possible to quantify such potential
claims at this time.
The foregoing information does not purport to be a complete or exhaustive
description of all conditions to which the issuers of Bonds in the Georgia
Insured Trust are subject. Many factors including national economic, social
and environmental policies and conditions, which are not within the control of
the issuers of Bonds could affect or could have an adverse impact on the
financial condition of the State and various agencies and political
subdivisions located in the State. Since Georgia Bonds in the Georgia Insured
Trust (other than general obligation bonds issued by the State) are payable
from revenue derived from a specific source or authority, the impact of a
pronounced decline in the national economy or difficulties in significant
industries within the State could result in a decrease in the amount of
revenues realized from such source or by such authority and thus adversely
affect the ability of the respective issuers of the Georgia Bonds in the
Georgia Insured Trust to pay the debt service requirements on the Georgia
Bonds. Similarly, such adverse economic developments could result in a
decrease in tax revenues realized by the State and thus could adversely affect
the ability of the State to pay the debt service requirements of any Georgia
general obligation bonds in the Georgia Insured Trust.
Tax Status. For a discussion of the Federal tax status of income earned on
Georgia IM-IT Trust Units, see "Federal Tax Status".
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
Georgia law:
(1)For Georgia income tax purposes, the Georgia IM-IT Trust is not an
association taxable as a corporation, and the income of the Georgia IM-IT
Trust will be treated as the income of the Unitholders. Interest on the
Georgia Bonds which is exempt from Georgia income tax when received by the
Georgia IM-IT Trust, and which would be exempt from Georgia income tax if
received directly by a Unitholder, will retain its status as tax-exempt
interest when distributed by the Georgia IM-IT Trust and received by the
Unitholders.
(2)If the Trustee disposes of a Georgia Bond (whether by sale, exchange,
payment on maturity, retirement or otherwise) or if a Unitholder redeems or
sells his Unit, the Unitholder will recognize gain or loss for Georgia income
tax purposes to the same extent that gain or loss would be recognized for
federal income tax purposes (except in the case of Georgia Bonds issued before
March 11, 1987 issued with original issue discount owned by the Georgia IM-IT
Trust in which case gain or loss for Georgia income tax purposes may differ
from the amount recognized for federal income tax purposes because original
issue discount on such Georgia Bonds may be determined by accruing said
original issue discount on a ratable basis). Due to the amortization of bond
premium and other basis adjustments required by the Internal Revenue Code, a
Unitholder, under some circumstances, may realize taxable gain when his or her
Units are sold or redeemed for an amount less than or equal to their original
cost.
(3)Because obligations or evidences of debt of Georgia, its political
subdivisions and public institutions are exempt from the Georgia intangible
personal property tax, the Georgia IM-IT Trust will not be subject to such tax
as the result of holding such obligations, evidences of debt or bonds.
(4)Amounts paid under an insurance policy or policies issued to the Georgia
IM-IT Trust, if any, with respect to the Georgia Bonds in the Georgia IM-IT
Trust which represent maturing interest on defaulted obligations held by the
Trustee will be exempt from State income taxes if, and to the extent as, such
interest would have been so exempt if paid by the issuer of the defaulted
obligations provided that, at the time such policies are purchased the amounts
paid for such policies are reasonable and customary and consistent with the
reasonable expectation that the issuer of the obligations, rather than the
insurer, will pay debt service on the obligations.
(5)We express no opinion regarding whether a Unitholder's ownership of an
interest in the Georgia IM-IT Trust is subject to the Georgia intangible
personal property tax. Although the application of the Georgia intangible
property tax to the ownership of the Units by the Unitholders is not clear,
representatives of the Georgia Department of Revenue have in the past advised
us orally that, for purposes of the intangible property tax, the Department
considers a Unitholder's ownership of an interest in the Georgia IM-IT Trust
as a whole to be taxable intangible property separate from any ownership
interest in the underlying tax-exempt Georgia Bonds.
(6)Neither the Georgia Bonds nor the Units will be subject to Georgia sales or
use tax.
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provision of Georgia law. Ownership of the Units may result in
collateral Georgia tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any
such collateral consequences.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 50.31 $ 50.31
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.36 $ 1.93
Less: Annual Premium on Portfolio Insurance per Unit.................. $ .25 $ .25
Estimated Net Annual Interest Income per Unit......................... $ 47.70 $ 48.13
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 47.70 $ 48.13
Divided by 12 and 2, respectively..................................... $ 3.98 $ 24.07
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .13248 $ .13368
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 4.77% 4.81%
Estimated Long-Term Return <F2><F3><F4>................................ 4.75% 4.80%
Estimated Initial Monthly Distribution (January 1996).................. $ 1.72
Estimated Initial Semi-annual Distribution (January 1996).............. $ 1.74
Estimated Normal Distribution per Unit <F4>............................ $ 3.98 $ 24.07
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Georgia IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
January and July commencing January 15, 1996
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
GEORGIA INSURED MUNICIPALS INCOME TRUST SERIES 78
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
Georgia
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 125,000 Municipal Electric Authority of Georgia, Power Revenue
Bonds, Series U (MBIA Insured) #0.00% Due 1/1/2010......... AAA $ 60,494 <F6>
275,000 Housing Authority of Cobb County (Georgia) Multi-Family
Mortgage Revenue Refunding Bonds (FHA Insured Mortgage
Loan-Garrison Plantation Development) Series 1994A 5.75% 2004 @ 102
Due 7/1/2014................................................. Aaa* 2009 @ 100 S.F. 276,375
100,000 Jones County, Georgia, School District, Unlimited
Tax-General Obligation Bonds (AMBAC Indemnity Insured) ** 2006 @ 102
5.30% Due 1/1/2015........................................... AAA 2011 @ 100 S.F. 100,500
500,000 Gordon County, Georgia, Hospital Authority, Hospital Revenue
Anticipation Certificates (Adventist Health) MBIA Insured 2005 @ 102
#5.50% Due 11/15/2015........................................ AAA 2011 @ 100 S.F. 505,465
250,000 Forsyth County, Georgia, School District, General
Obligation-Unlimited Tax Bonds, Series 1995 (MBIA Insured) 2005 @ 102
5.55% Due 7/1/2016........................................... AAA 2013 @ 100 S.F. 256,587
250,000 Metropolitan Atlanta Rapid Transit Authority (Georgia) Sales
Tax Revenue Bonds (Second Indenture Series) Series 1993A
(AMBAC Indemnity Insured) 5.125% Due 7/1/2018............. AAA 2003 @ 102 245,525
495,000 Fulton-DeKalb Hospital Authority (Georgia) Hospital Revenue
Refunding Certificates, Series 1993 (MBIA Insured) #5.50% 2003 @ 102
Due 1/1/2020................................................. AAA 2013 @ 100 S.F. 497,475
500,000 Chatham County, Georgia, School District, General Obligation
Refunding Bonds, Series 1995B (FGIC Insured) #5.50% Due 2004 @ 101
8/1/2020..................................................... AAA 2017 @ 100 S.F. 505,000
500,000 Atlanta, Georgia, Water and Sewer Revenue Bonds, Series 1993 2004 @ 102
#4.75% Due 1/1/2023........................................ AA- 2019 @ 100 S.F. 463,205
90,000 Georgia Municipal Electric Authority, Power Revenue Bonds,
Series 1994EE (AMBAC Indemnity Insured) #5.50% Due 1/1/2026 AAA 2004 @ 100 89,792
$ 3,085,000 $ 3,000,418
</TABLE>
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
MICHIGAN IM-IT TRUST
General. The Michigan IM-IT Trust consists of 8 issues of Securities. Four of
the Bonds in the Michigan IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Michigan IM-IT Trust) as follows: General Obligations, 4 (36%); Health
Care, 1 (17%); Transportation, 1 (17%); Water and Sewer, 1 (16%) and General
Purpose, 1 (14%). No Bond issue has received a provisional rating.
Risk Factors. Investors should be aware that the economy of the State of
Michigan has, in the past, proven to be cyclical, due primarily to the fact
that the leading sector of the State's economy is the manufacturing of durable
goods. While the State's efforts to diversify its economy have proven
successful, as reflected by the fact that the share of employment in the State
in the durable goods sector has fallen from 33.1 percent in 1960 to 17.9
percent in 1990, durable goods manufacturing still represents a sizable
portion of the State's economy. As a result, any substantial national economic
downturn is likely to have an adverse effect on the economy of the State and
on the revenues of the State and some of its local governmental units.
In July 1995, Moody's Investors Service, Inc. raised the State's general
obligation bond rating to "Aa". In October 1989, Standard & Poor's
raised its rating on the State's general obligation bonds to "AA".
The State's economy could continue to be affected by changes in the auto
industry, notably consolidation and plant closings resulting from competitive
pressures and over-capacity. Such actions could adversely affect State
revenues and the financial impact on the local units of government in the
areas in which plants are closed could be more severe.
In recent years, the State has reported its financial results in accordance
with generally accepted accounting principles. For the fiscal years ended
September 30, 1990 and 1991, the State reported negative year-end balances in
the General Fund/School Aid Fund of $310.4 million and $169.4 million,
respectively. The State ended each of the 1992, 1993 and 1994 fiscal years
with its General Fund/School Aid Fund in balance, after having made
substantial transfers to the Budget Stabilization Fund in 1993 and 1994. A
positive cash balance in the combined General Fund/School Aid Fund was
recorded at September 30, 1990. In the 1991 through 1993 fiscal years, the
State experienced deteriorating cash balances which necessitated short-term
borrowing and the deferral of certain scheduled cash payments. The State did
not borrow for cash flow purposes in 1994, but borrowed $500 million on March
9, 1995, which is due for repayment on September 29, 1995. The State's Budget
Stabilization Fund received year-end transfers from the General Fund of $283
million in 1993 and $464 million in 1994, bringing the balance in the Budget
Stabilization Fund to $779 million at September 30, 1994.
The Michigan Constitution of 1963 limits the amount of total revenues of the
State raised from taxes and certain other sources to a level for each fiscal
year equal to a percentage of the State's personal income for the prior
calendar year. In the event that the State's total revenues exceeds the limit
by 1 percent or more, the Michigan Constitution of 1963 requires that the
excess be refunded to taxpayers.
On March 15, 1994, Michigan voters approved a school finance reform amendment
to the State's Constitution which, among other things, increased the State
sales tax rate from 4% to 6% and placed a cap on property assessment increases
for all property taxes. Concurrent legislation cut the State's income tax rate
from 4.6% to 4.4%, reduced some property taxes and altered local school
funding sources to a combination of property taxes and state revenues, some of
which is provided from other new or increased State taxes. The legislation
also contained other provisions that alter (and, in some cases, may reduce)
the revenues of local units of government, and tax increment bonds could be
particularly affected. While the ultimate impact of the constitutional
amendment and related legislation cannot yet be accurately predicted,
investors should be alert to the potential effect of such measures upon the
operations and revenues of Michigan local units of government.
In addition, the State Legislature recently adopted a package of state tax
cuts, including a phase out of the intangibles tax, an increase in exemption
amounts for personal income tax, and reductions in single business tax.
Although all or most of the Bonds in the Michigan IM-IT Trust are revenue
obligations or general obligations of local governments or authorities rather
than general obligations of the State of Michigan itself, there can be no
assurance that any financial difficulties the State may experience will not
adversely affect the market value or marketability of the Bonds or the ability
of the respective obligors to pay interest on or principal of the Bonds,
particularly in view of the dependency of local governments and other
authorities upon State aid and reimbursement programs and, in the case of
bonds issued by the State Building Authority, the dependency of the State
Building Authority on the receipt of rental payments from the State to meet
debt service requirements upon such bonds. In the 1991 fiscal year, the State
deferred certain scheduled cash payments to municipalities, school districts,
universities and community colleges. While such deferrals were made up at
specified later dates, similar future deferrals could have an adverse impact
on the cash position of some local governmental units. Additionally, the State
reduced revenue sharing payments to municipalities below that level provided
under formulas by $10.9 million in the 1991 fiscal year, up $34.4 million in
the 1992 fiscal year, $45.5 million in the 1993 fiscal year, $54.5 million in
the 1994 fiscal year, and $67.0 million (budgeted) in the 1995 fiscal year.
The Michigan IM-IT Trust may contain general obligation bonds of local units
of government pledging the full faith and credit of the local unit which are
payable from the levy of ad valorem taxes on taxable property within the
jurisdiction of the local unit. Such bonds issued prior to December 22, 1978,
or issued after December 22, 1978 with the approval of the electors of the
local unit, are payable from property taxes levied without limitation as to
rate or amount. With respect to bonds issued after December 22, 1978, and
which were not approved by the electors of the local unit, the tax levy of the
local unit for debt service purposes is subject to constitutional, statutory
and charter tax rate limitations. In addition, several major industrial
corporations have instituted challenges of their ad valorem property tax
assessments in a number of local municipal units in the State. If successful,
such challenges could have an adverse impact on the ad valorem tax bases of
such units which could adversely affect their ability to raise funds for
operation and debt service requirements.
Tax Status. For a discussion of the Federal tax status of income earned on
Michigan IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., special counsel
to the Fund for Michigan tax matters, under existing Michigan law:
The Michigan IM-IT Trust and the owners of Units will be treated for purposes
of the Michigan income tax laws and the Single Business Tax in substantially
the same manner as they are for purposes of the Federal income tax laws, as
currently enacted. Accordingly, we have relied upon the opinion of Messrs.
Chapman and Cutler as to the applicability of Federal income tax under the
Internal Revenue Code of 1986 to the Michigan IM-IT Trust and the Holders of
Units.
Under the income tax laws of the State of Michigan, the Michigan IM-IT Trust
is not an association taxable as a corporation; the income of the Michigan
IM-IT Trust will be treated as the income of the Unitholders and be deemed to
have been received by them when received by the Michigan IM-IT Trust. Interest
on the underlying Bonds which is exempt from tax under these laws when
received by Michigan IM-IT Trust will retain its status as tax exempt interest
to the Unitholders.
For purposes of the foregoing Michigan tax laws, each Unitholder will be
considered to have received his pro rata share of Bond interest when it is
received by the Michigan IM-IT Trust, and each Unitholder will have a taxable
event when the Michigan IM-IT Trust disposes of a Bond (whether by sale,
exchange, redemption or payment at maturity) or when the Unitholder redeems or
sells his Certificate to the extent the transaction constitutes a taxable
event for Federal income tax purposes. The tax cost of each unit to a
Unitholder will be established and allocated for purposes of these Michigan
tax laws in the same manner as such cost is established and allocated for
Federal income tax purposes.
Under the Michigan Intangibles Tax, the Michigan IM-IT Trust is not taxable
and the pro rata ownership of the underlying Bonds, as well as the interest
thereon, will be exempt to the Unitholders to the extent the Michigan IM-IT
Trust consists of obligations of the State of Michigan or its political
subdivisions or municipalities, or of obligations of possessions of the United
States. The Intangibles Tax is being phased out, with reductions of
twenty-five percent (25%) in 1994 and 1995, fifty percent (50%) in 1996, and
seventy-five percent (75%) in 1997, with total repeal effective January 1,
1998.
The Michigan Single Business Tax replaced the tax on corporate and financial
institution income under the Michigan Income Tax, and the Intangible Tax with
respect to those intangibles of persons subject to the Single Business Tax the
income from which would be considered in computing the Single Business Tax.
Persons are subject to the Single Business Tax only if they are engaged in
"business activity" , as defined in the Act. Under the Single Business
Tax, both interest received by the Michigan IM-IT Trust on the underlying
Bonds and any amount distributed from the Michigan IM-IT Trust to a
Unitholder, if not included in determining taxable income for Federal income
tax purposes, is also not included in the adjusted tax base upon which the
Single Business Tax is computed, of either the Michigan IM-IT Trust or the
Unitholders. If the Michigan IM-IT Trust or the Unitholders have a taxable
event for Federal income tax purposes when the Michigan IM-IT Trust disposes
of a Bond (whether by sale, exchange, redemption or payment at maturity) or
the Unitholder redeems or sells his Certificate, an amount equal to any gain
realized from such taxable event which was included in the computation of
taxable income for Federal income tax purposes (plus an amount equal to any
capital gain of an individual realized in connection with such event but
excluded in computing that individual's Federal taxable income) will be
included in the tax base against which, after allocation, apportionment and
other adjustments, the Single Business Tax is computed. The tax base will be
reduced by an amount equal to any capital loss realized from such a taxable
event, whether or not the capital loss was deducted in computing Federal
taxable income in the year the loss occurred. Unitholders should consult their
tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee of the
Trust, or paid under individual policies obtained by issuers of Bonds, which,
when received by the Unitholders, represent maturing interest on defaulted
obligations held by the Trustee, will be excludable from the Michigan income
tax laws and the Single Business Tax if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of the defaulted
obligations. While treatment under the Michigan Intangibles Tax is not
premised upon the characterization of such proceeds under the Internal Revenue
Code, the Michigan Department of Treasury should adopt the same approach as
under the Michigan income tax laws and the Single Business Tax.
As the Tax Reform Act of 1986 eliminates the capital gain deduction for tax
years beginning after December 31, 1986, the federal adjusted gross income,
the computation base for the Michigan Income Tax, of a Unitholder will be
increased accordingly to the extent such capital gains are realized when the
Michigan IM-IT Trust disposes of a Bond or when the Unitholder redeems or
sells a Unit, to the extent such transaction constitutes a taxable event for
Federal income tax purposes.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 51.73 $ 51.73
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.35 $ 1.91
Less: Annual Premium on Portfolio Insurance per Unit.................. -- --
Estimated Net Annual Interest Income per Unit......................... $ 49.38 $ 49.82
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 49.38 $ 49.82
Divided by 12 and 2, respectively..................................... $ 4.12 $ 24.91
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .13717 $ .13840
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 4.94% 4.98%
Estimated Long-Term Return <F2><F3><F4>................................ 4.92% 4.97%
Estimated Initial Monthly Distribution (January 1996).................. $ 1.78
Estimated Initial Semi-annual Distribution (January 1996).............. $ 1.80
Estimated Normal Distribution per Unit <F4>............................ $ 4.12 $ 24.91
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Michigan IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
January and July commencing January 15, 1996
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
MICHIGAN INSURED MUNICIPALS INCOME TRUST SERIES 134
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
Michigan
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 500,000 Michigan Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Port Huron Hospital Obligated Group) Series 2005 @ 102
1995 (FSA Insured) #5.50% Due 7/1/2015...................... AAA 2013 @ 100 S.F. $ 500,000
150,000 Imlay City Community Schools, Lapeer County, Michigan,
Unlimited Tax-General Obligation Refunding Bonds, Series 2006 @ 100
1994 (AMBAC Indemnity Insured) #5.40% Due 5/1/2017.......... AAA 2015 @ 100 S.F. 149,250
425,000 Michigan Municipal Bond Authority, Local Government Loan
Program Revenue Bonds, Series 1995B (AMBAC Indemnity 2005 @ 102
Insured) #5.375% Due 11/1/2017.............................. AAA 2011 @ 100 S.F. 420,385
150,000 Okemos Public Schools, County of Ingham, Michigan, 1993
Refunding Bonds (General Obligation-Unlimited Tax) MBIA
Insured #0.00% Due 5/1/2018................................. AAA 43,261 <F6>
500,000 Michigan State Trunk Line Fund Revenue Bonds, Series 1994A 2004 @ 102
(FGIC Insured) #5.75% Due 11/15/2020........................ AAA 2017 @ 100 S.F. 510,575
300,000 Holly Area School District, County of Oakland, Michigan,
1995 School Building and Site Bonds (General 2005 @ 101
Obligation-Unlimited Tax) FGIC Insured #5.625% Due 5/1/2025. AAA 2021 @ 100 S.F. 303,870
500,000 Paw Paw Public School District, County of Van Buren,
Michigan, 1995 School Building and Site Bonds (General 2005 @ 100
Obligation-Unlimited Tax) FGIC Insured #5.625% Due 5/1/2025 AAA 2016 @ 100 S.F. 506,995
500,000 City of Detroit, Michigan, Water Supply System Revenue
Bonds, Second Lien Bonds, Series 1995A (MBIA Insured)
#5.50% Due 7/1/2025.......................................... AAA 2005 @ 101 501,415
$ 3,025,000 $ 2,935,751
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
NEW YORK IM-IT INTERMEDIATE LADDERED MATURITY TRUST
General. The New York IM-IT Intermediate Laddered Maturity Trust consists of
12 issues of Securities. One of the Bonds in the New York IM-IT Intermediate
Laddered Maturity Trust is a general obligation of the governmental entity
issuing it and is backed by the taxing power thereof. The remaining issues are
payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. These issues are divided by
purpose of issues (and percentage of principal amount to total New York IM-IT
Intermediate Laddered Maturity Trust) as follows: Health Care, 4 (32%); Higher
Education, 2 (19%); Water and Sewer, 1 (19%); Other Care, 2 (17%); General
Obligations, 1 (5%); Public Education, 1 (5%) and Transportation, 1 (3%). No
Bond issue has received a provisional rating. All of the obligations in the
New York IM-IT Intermediate Laddered Maturity Trust mature within 5-10 years
of the Date of Deposit. Commencing in approximately the fifth year of the
Trust, roughly 20% of the Bonds contained in the Trust will mature each year.
The dollar weighted average maturity of the Bonds in the Trust is 6.45 years.
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 Intermediate
Laddered Maturity 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 Intermediate Laddered Maturity 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 Intermediate Laddered Maturity Trust
includes obligations issued by New York State (the "State"), by its
various public bodies (the "Agencies"), and/or by other entities
located within the State, including the City of New York (the "City").
Some of the more significant events relating to the financial situation in New
York are summarized below. This section provides only a brief summary of the
complex factors affecting the financial situation in New York and is based in
part on Official Statements issued by, and on other information reported by
the State, the City and the Agencies in connection with the issuance of their
respective securities.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of New York Municipal
Obligations held in the portfolio of the Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State economy has grown more slowly than that of the
nation as a whole, gradually eroding the State's relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high state and local tax burden
relative to other states. The burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
A national recession commenced in mid-1990. The downturn continued throughout
the State's 1990-91 fiscal year and was followed by a period of weak economic
growth during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to grow faster
than 1992, but still at a very moderate rate, as compared to other recoveries.
The national recession has been more severe in the State because of factors
such as a significant retrenchment in the financial services industry,
cutbacks in defense spending, and an overbuilt real estate market.
1993-94 Fiscal Year. On April 5, 1993, the State Legislature approved a $32.08
billion budget. Following enactment of the budget the 1993-94 State Financial
Plan was formulated on April 16, 1993. This Plan projects General Fund
receipts and transfers from other funds at $32.367 billion and disbursements
and transfers to other funds at $32.300 billion. In comparison to the
Governor's recommended Executive Budget for the 1993-94 fiscal year, as
revised on February 18, 1993, the 1993-94 State Financial Plan reflects
increases in both receipts and disbursements in the General Fund of $811
million.
While a portion of the increased receipts was the result of a $487 million
increase in the State's 1992-93 positive year-end margin at March 31, 1993 to
$671 million, the balance of such increased receipts is based upon (i) a
projected $269 million increase in receipts resulting from improved 1992-93
results and the expectation of an improving economy, (ii) projected additional
payments of $200 million from the Federal government as reimbursements for
indigent medical care, (iii) the early payment of $50 million of personal tax
returns in 1992-93 which otherwise would have been paid in 1993-94; offset by
(iv) the State Legislature's failure to enact $195 million of additional
revenue-raising recommendations proposed by the Governor. There can be no
assurances that all of the projected receipts referred to above will be
received.
Despite the $811 million increase in disbursements included in the 1993-94
State Financial Plan, a reduction in aid to some local government units can be
expected. To offset a portion of such reductions, the 1993-94 State Financial
Plan contains a package of mandate relief, cost containment and other
proposals to reduce the costs of many programs for which local governments
provide funding. There can be no assurance, however, that localities that
suffer cuts will not be adversely affected, leading to further requests for
State financial assistance.
There can be no assurance that the State will not face substantial potential
budget gaps in the future resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions
to align recurring receipts and disbursements.
1992-93 Fiscal Year. Before giving effect to a 1992-93 year-end deposit to the
refund reserve account of $671 million, General Fund receipts in 1992-93 would
have been $716 million higher than originally projected. This year-end deposit
effectively reduced 1992-93 receipts by $671 million and made those receipts
available for 1993-94.
The State's favorable performance primarily resulted from income tax
collections that were $700 million higher than projected which reflected both
stronger economic activity and tax-induced one-time acceleration of income
into 1992. In other areas larger than projected business tax collections and
unbudgeted receipts offset the loss of $200 million of anticipated Federal
reimbursement and losses of, or shortfalls in, other projected revenue
sources.
For 1992-93, disbursements and transfers to other funds (including the deposit
to the refund reserve account discussed above) totalled $30.829 billion, an
increase of $45 million above projections in April 1992.
Fiscal year 1992-93 was the first time in four years that the State did not
incur a cash-basis operating deficit in the General Fund requiring the
issuance of deficit notes or other bonds, spending cuts or other revenue
raising measures.
Indebtedness. As of March 31, 1993, the total amount of long-term State
general obligation debt authorized but unissued stood at $2.4 billion. As of
the same date, the State had approximately $5.4 billion in general obligation
bonds. The State issued $850 million in tax and revenue anticipation notes
("TRANS") on April 28, 1993. The State does not project the need to
issue additional TRANS during the State's 1993-94 fiscal year.
The State projects that its borrowings for capital purposes during the State's
1993-94 fiscal year will consist of $460 million in general obligation bonds
and $140 million in new commercial paper issuances. In addition, the State
expects to issue $140 million in bonds for the purpose of redeeming
outstanding bond anticipation notes. The Legislature has authorized the
issuance of up to $85 million in certificates of participation during the
State's 1993-94 fiscal year for personal and real property acquisitions during
the State's 1993-94 fiscal year. The projection of the State regarding its
borrowings for the 1993-94 fiscal year may change if actual receipts fall
short of State projections or if other circumstances require.
In June 1990, legislation was enacted creating the "New York Local
Government Assistance Corporation" ("LGAC"), a public benefit
corporation empowered to issue long-term obligations to fund certain payments
to local governments traditionally funded through the State's annual seasonal
borrowing. To date, LGAC has issued its bonds to provide net proceeds of $3.28
billion. LGAC has been authorized to issue additional bonds to provide net
proceeds of $703 million during the State's 1993-94 fiscal year.
Ratings. The $850 million in TRANS issued by the State in April 1993 were
rated SP-1-Plus by S&P on April 26, 1993, and MIG-1 by Moody's on April 23,
1993, which represents the highest ratings given by such agencies and the
first time the State's TRANS have received these ratings since its May 1989
TRANS issuance. Both agencies cited the State's improved fiscal position as a
significant factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at A on April 23,
1993, and S&P's rating stood at A- with a stable outlook on April 26, 1993, an
improvement from S&P's negative outlook prior to April 1993. Previously,
Moody's lowered its rating to A on June 6, 1990, its rating having been A1
since May 27, 1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992, AA- from August
1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's, in confirming its rating of the State's general obligation bonds, and
S&P, in improving its outlook on such bonds from negative to stable, noted the
State's improved fiscal condition and reasonable revenue assumptions contained
in the 1993-94 State budget.
The City accounts for approximately 41% of the State's population and personal
income, and the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other
actions, the State Legislature (i) created MAC to assist with long-term
financing for the City's short-term debt and other cash requirements and (ii)
created the State Financial Control Board (the "Control Board") to
review and approve the City's budgets and City four-year financial plans (the
financial plans also apply to certain City-related public agencies (the "
Covered Organizations").
In February 1975, the New York State Urban Development Corporation ("
UDC"), which had approximately $1 billion of outstanding debt, defaulted
on certain of its short-term notes. Shortly after the UDC default, the City
entered a period of financial crisis. Both the State Legislature and the
United States Congress enacted legislation in response to this crisis. During
1975, the State Legislature (i) created MAC to assist with long-term financing
for the City's short-term debt and other cash requirements and (ii) created
the State Financial Control Board (the "Control Board") to review and
approve the City's budgets and City four-year financial plans (the financial
plans also apply to certain City-related public agencies (the "Covered
Organizations")).
Over the past three years, the rate of economic growth in the City has slowed
substantially, and the City's economy is currently in recession. The City
projects, and its current four-year financial plan assumes, a recovery early
in the 1993 calendar year. The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial plan. The
City Comptroller has issued reports concluding that the recession of the
City's economy will be more severe and last longer than is assumed in the
financial plan.
Fiscal Year 1993 and 1993-1996 Financial Plan. The City's 1993 fiscal year
results are projected to be balanced in accordance with generally accepted
accounting principles ("GAAP"). The City was required to close
substantial budget gaps in its 1990, 1991 and 1992 fiscal years in order to
maintain balanced operating results.
The City's modified Financial Plan dated February 9, 1993 covering fiscal
years 1993-1996 projects budget gaps for 1994 through 1996. The Office of the
State Deputy Controller for the City of New York has estimated that under the
modified Financial Plan budget gaps will be $102 million for fiscal year 1994,
$196 million for fiscal year 1995 and $354 million for fiscal year 1996,
primarily due to anticipated higher spending on labor costs.
However, the City's modified Plan is dependent upon a gap-closing program,
certain elements of which the staff of Control Board identified on March 25,
1993 to be at risk due to projected levels of State and Federal aid and
revenue and expenditures estimates which may not be achievable. The Control
Board indicated that the City's modified Financial Plan does not make progress
towards establishing a balanced budget process. The Control Board's report
identified budget gap risks of $1.0 billion, $1.9 billion, $2.3 billion and
$2.6 billion in fiscal years 1994 through 1997, respectively.
On June 3, 1993, the Mayor announced that State and federal aid for Fiscal
Year 1993-1994 would be $280 million less than projected and that in order to
balance the City's budget $176 million of previously announced contingent
budget cuts would be imposed. The Mayor indicated that further savings would
entail serious reductions in services. The State Comptroller on June 14, 1993
criticized efforts by the Mayor and City Council to balance the City's budget
which rely primarily on one-shot revenues. The Comptroller added that the
City's budget should be based on "recurring revenues that fund recurring
expenditures." Given the foregoing factors, there can be no assurance that
the City will continue to maintain a balanced budget, or that it can maintain
a balanced budget without additional tax or other revenue increases or
reductions in City services, which could adversely affect the City's economic
base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to
submit its financial plans to review bodies, including the Control Board. If
the City were to experience certain adverse financial circumstances, including
the occurrence or the substantial likelihood and imminence of the occurrence
of an annual operating deficit of more than $100 million or the loss of access
to the public credit markets to satisfy the City's capital and seasonal
financial requirements, the Control Board would be required by State law to
exercise certain powers, including prior approval of City financial plans,
proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. As a result of the national and
regional economic recession, the State's projections of tax revenues for its
1991 and 1992 fiscal years were substantially reduced. For its 1993 fiscal
year, the State, before taking any remedial action reflected in the State
budget enacted by the State Legislature on April 2, 1992 reported a potential
budget deficit of $4.8 billion. If the State experiences revenue shortfalls or
spending increases beyond its projections during its 1993 fiscal year or
subsequent years, such developments could also result in reductions in
projected State aid to the City. In addition, there can be no assurance that
State budgets in future fiscal years will be adopted by the April 1 statutory
deadline and that there will not be adverse effects on the City's cash flow
and additional City expenditures as a result of such delays.
The City's projections set forth in its financial plan are based on various
assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and
contingencies include the timing of any regional and local economic recovery,
the absence of wage increases in excess of the increases assumed in its
financial plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets, levels of
education expenditures as may be required by State law, adoption of future
City budgets by the New York City Council, and approval by the Governor or the
State Legislature and the cooperation of MAC with respect to various other
actions proposed in such financial plan.
The City's ability to maintain a balanced operating budget is dependent on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional
expenditure reductions and revenue sources to achieve balanced operating
budgets for fiscal years 1994 and thereafter. Any such proposed expenditure
reductions will be difficult to implement because of their size and the
substantial expenditure reductions already imposed on City operations in the
past two years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
financing program for fiscal years 1993 through 1996 contemplates issuance of
$15.7 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In
addition, the City issues revenue and tax anticipation notes to finance its
seasonal working capital requirements. The terms and success of projected
public sales of City general obligation bonds and notes will be subject to
prevailing market conditions at the time of the sale, and no assurance can be
given that the credit markets will absorb the projected amounts of public bond
and note sales. In addition, future developments concerning the City and
public discussion of such developments, the City's future financial needs and
other issues may affect the market for outstanding City general obligation
bonds and notes. If the City were unable to sell its general obligation bonds
and notes, it would be prevented from meeting its planned operating and
capital expenditures.
The City Comptroller, the staff of the Control Board, the Office of the State
Deputy Comptroller for the City of New York (the "OSDC") and other
agencies and public officials have issued reports and made public statements
which, among other things, state that projected revenues may be less and
future expenditures may be greater than those forecast in the financial plan.
In addition, the Control Board and other agencies have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet
the costs of its expenditure increases and to provide necessary services. It
is reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
Fiscal Years 1990, 1991 and 1992. The City achieved balanced operating results
as reported in accordance with GAAP for the 1992 fiscal year. During the 1990
and 1991 fiscal years, the City implemented various actions to offset a
projected budget deficit of $3.2 billion for the 1991 fiscal year, which
resulted from declines in City revenue sources and increased public assistance
needs due to the recession. Such actions included $822 million of tax
increases and substantial expenditure reductions.
The quarterly modification to the City's financial plan submitted to the
Control Board on May 7, 1992 (the "1992 Modification") projected a
balanced budget in accordance with GAAP for the 1992 fiscal year after taking
into account a discretionary transfer of $455 million to the 1993 fiscal year
as the result of a 1992 fiscal year surplus. In order to achieve a balanced
budget for the 1992 fiscal year, during the 1991 fiscal year, the City
proposed various actions for the 1992 fiscal year to close a projected gap of
$3.3 billion in the 1992 fiscal year.
On November 19, 1992, the City submitted to the Control Board the Financial
Plan for the 1993 through 1996 fiscal years, which is a modification to a
financial plan submitted to the Control Board on June 11, 1992 (the "June
Financial Plan"), and which relates to the City, the Board of Education
("BOE") and the City University of New York ("CUNY"). The
1993-1996 Financial Plan projects revenues and expenditures of $29.9 billion
each for the 1993 fiscal year balanced in accordance with GAAP.
During the 1992 fiscal year, the City proposed various actions to close a
previously projected gap of approximately $1.2 billion for the 1993 fiscal
year. The gap-closing actions for the 1993 fiscal year proposed during the
1992 fiscal year and outlined in the City's June Financial Plan included $489
million of discretionary transfers from the 1992 fiscal year. The 1993-1996
City Financial Plan includes additional gap-closing actions to offset an
additional potential $81 million budget gap.
The 1993-1996 Financial Plan also sets forth projections and outlines a
proposed gap-closing program for the 1994 through 1996 fiscal years to close
projected budget gaps of $1.7 billion, $2.0 billion and $2.6 billion,
respectively, in the 1994 through 1996 fiscal years. On February 9, 1993, the
City issued a modification to the 1993-1996 Financial Plan (the "February
Modification"). The February Modification projects budget gaps for fiscal
years 1994, 1995 and 1996 of $2.1 billion, $3.1 billion and $3.8 billion,
respectively.
Various actions proposed in the 1993-1996 Financial Plan are subject to
approval by the Governor and approval by the State Legislature, and the
proposed increase in Federal aid is subject to approval by Congress and the
President. The State Legislature has in the past failed to approve certain
proposals similar to those that the 1993-1996 Financial Plan assumes will be
approved by the State Legislature during the 1993 fiscal year. If these
actions cannot be implemented, the City will be required to take other actions
to decrease expenditures or increase revenues to maintain a balanced financial
plan.
On March 9, 1993, OSDC issued a report on the February Modification. The
report expressed concern that the budget gaps projected for fiscal years 1994
through 1996 are the largest the City has faced at this point in the financial
planning cycle in at least a decade, and concluded that the February
Modification represented a step backward in the City's efforts to bring
recurring revenues into line with recurring expenditures.
The City is a defendant in a significant number of lawsuits. Such litigation
includes, but is not limited to, actions commenced and claims asserted against
the City arising out of alleged constitutional violations, torts, breaches of
contracts, and other violations of law and condemnation proceedings. While the
ultimate outcome and fiscal impact, if any, on the proceedings and claims are
not currently predictable, adverse determinations in certain of them might
have a material adverse effect upon the City's ability to carry out its
financial plan. As of June 30, 1992, legal claims in excess of $341 billion
were outstanding against the City for which the City estimated its potential
future liability to be $2.3 billion.
As of the date of this prospectus, Moody's rating of the City's general
obligation bonds stood at Baa1 and S&P's rating stood at A-. On February 11,
1991, Moody's had lowered its rating from A.
On March 30, 1993, in confirming its Baa1 rating, Moody's noted that:
The financial plan for fiscal year 1994 and beyond shows an ongoing imbalance
between the City's expenditures and revenues. The key indication of this
structural imbalance is not necessarily the presence of sizable out-year
budget gaps, but the recurring use of one-shot actions to close gaps.
One-shots constitute a significant share of the proposed gap-closing program
for fiscal year 1994, and they represent an even larger share of those
measures which the City seems reasonably certain to attain. Several major
elements of the program, including certain state actions, federal counter
cyclical aid and part of the city's tax package, remain uncertain. However,
the gap closing plan may be substantially altered when the executive budget is
offered later this spring.
On March 30, 1993, S&P affirmed its A- rating with a negative outlook, stating
that:
The City's key credit factors are marked by a high and growing debt burden,
and taxation levels that are relatively high, but stable. The City's economy
is broad-based and diverse, but currently is in prolonged recession, with slow
growth prospects for the foreseeable future.
The rating outlook is negative, reflecting the continued fiscal pressure
facing the City, driven by continued weakness in the local economy, rising
spending pressures for education and labor costs of city employees, and
increasing costs associated with rising debt for capital construction and
repair.
The current financial plan for the City assumes substantial increases in aid
from national and state governments. Maintenance of the current rating, and
stabilization of the rating outlook, will depend on the City's success in
realizing budgetary aid from these governments, or replacing those revenues
with ongoing revenue-raising measures or spending reductions under the City's
control. However, increased reliance on non-recurring budget balancing
measures that would support current spending, but defer budgetary gaps to
future years, would be viewed by S&P as detrimental to New York City's
single-'A-' rating.
Previously, Moody's had raised its rating to A in May, 1988, to Baa1 in
December, 1985, to Baa in November, 1983 and to Ba1 in November, 1981. S&P had
raised its rating to A- in November, 1987, to BBB+ in July, 1985 and to BBB in
March, 1981.
On May 9, 1990, Moody's revised downward its rating on outstanding City
revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
Notes then being sold MIG-2. On April 30, 1991 Moody's confirmed its MIG-2
rating for the outstanding revenue anticipation notes and for the $1.25
billion in notes then being sold. On April 29, 1991, S&P revised downward its
rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1992, the City and MAC had, respectively, $20.3 billion and
$4.7 billion of outstanding net long-term indebtedness.
Certain Agencies of the State have faced substantial financial difficulties
which could adversely affect the ability of such Agencies to make payments of
interest on, and principal amounts of, their respective bonds. The
difficulties have in certain instances caused the State (under so-called "
moral obligation" provisions which are non-binding statutory provisions
for State appropriations to maintain various debt service reserve funds) to
appropriate funds on behalf of the Agencies. Moreover, it is expected that the
problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse effect on investor confidence
in, and therefore the market price of, obligations of the defaulting Agencies.
In addition, any default in payment on any general obligation of any Agency
whose bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal
guarantees of City and MAC obligations and could thus jeopardize the City's
long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen Agencies
that each had outstanding debt of $100 million or more. These eighteen
Agencies had an aggregate of $62.2 billion of outstanding debt, including
refunding bonds, of which the State was obligated under lease-purchase,
contractual obligation or moral obligation provisions on $25.3 billion.
The State is a defendant in numerous legal proceedings pertaining to matters
incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are a number of cases challenging the
constitutionality or the adequacy and effectiveness of a variety of
significant social welfare programs primarily involving the State's mental
hygiene programs. Adverse judgments in these matters generally could result in
injunctive relief coupled with prospective changes in patient care which could
require substantial increased financing of the litigated programs in the
future.
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the Indians in
violation of various treaties and agreements during the eighteenth and
nineteenth centuries. The claimants seek recovery of approximately six million
acres of land as well as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993 referred to a Special Master for
determination of damages in an action by the State of Delaware to recover
certain unclaimed dividends, interest and other distributions made by issuers
of securities held by New York based-brokers incorporated in Delaware. (State
of Delaware v. State of New York.) The State had taken such unclaimed property
under its Abandoned Property Law. The State expects that it may pay a
significant amount in damages during fiscal year 1993-94 but it has indicated
that it has sufficient funds on hand to pay any such award, including funds
held in contingency reserves. The State's 1993-94 Financial Plan includes the
establishment of a $100 million contingency reserve fund which would be
available to fund such an award which some reports have estimated at $100-$800
million.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz 1993"
), petitioners have challenged the constitutionality of mass transportation
bonding programs of the New York State Thruway Authority and the Metropolitan
Transportation Authority. On May 24, 1993, the Supreme Court, Albany County,
temporarily enjoined the State from implementing those bonding programs. In
previous actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation and the
New York Local Government Assistance Corporation. While there have been no
decisions on the merits in such previous actions, by an opinion dated May 11,
1993, the New York Court of Appeals held in a proceeding commenced on April
29, 1991 in the Supreme Court, Albany County (Schulz v. State of New York),
that petitioners had standing as voters under the State Constitution to bring
such action.
Petitioners in Schulz 1993 have asserted that issuance of bonds by the two
Authorities is subject to approval by statewide referendum. At this time there
can be no forecast of the likelihood of success on the merits by the
petitioners, but a decision upholding this constitutional challenge could
restrict and limit the ability of the State and its instrumentalities to
borrow funds in the future. The State has not indicated that the temporary
injunction issued by the Supreme Court in this action will have any immediate
impact on its financial condition or interfere with projects requiring
immediate action.
Adverse developments in the foregoing proceedings or new proceedings could
adversely affect the financial condition of the State in the future.
Certain localities in addition to New York City could have financial problems
leading to requests for additional State assistance. Both the Revised
1992-1993 State Financial Plan and the recommended 1993-94 State Financial
Plan includes a significant reduction in State aid to localities in such
programs as revenue sharing and aid to education from projected base-line
growth in such programs. It is expected that such reductions will result in
the need for localities to reduce their spending or increase their revenues.
The potential impact on the State of such actions by localities is not
included in projections of State receipts and expenditures in the State's
1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by the State in 1984. The Yonkers Board
is charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the State Legislature to assist Yonkers could result
in allocation of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. In 1991, the total indebtedness of all localities in the
State was approximately $31.6 billion, of which $16.8 billion was debt of New
York City (excluding $6.7 billion in MAC debt). State law requires the
Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City authorized by State law to
issue debt to finance deficits during the period that such deficit financing
is outstanding. Fifteen localities had outstanding indebtedness for state
financing at the close of their fiscal year ending in 1991. In 1992, an
unusually large number of local government units requested authorization for
deficit financings. According to the Comptroller, ten local government units
have been authorized to issue deficit financing in the aggregate amount of
$131.1 million.
Certain proposed Federal expenditure reductions could reduce, or in some cases
eliminate, Federal funding of some local programs and accordingly might impose
substantial increased expenditure requirements on affected localities. If the
State, New York City or any of the Agencies were to suffer serious financial
difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State, including notes or bonds in the New York IM-IT Intermediate Laddered
Maturity Trust, could be adversely affected. Localities also face anticipated
and potential problems resulting from certain pending litigation, judicial
decisions, and long-range economic trends. The longer-range potential problems
of declining urban population, increasing expenditures, and other economic
trends could adversely affect localities and require increasing State
assistance in the future.
Tax Status. For a discussion of the Federal tax status of income earned on New
York IM-IT Intermediate Laddered Maturity Trust Units, see "Other
Matters--Federal Tax Status".
In the opinion of Tanner Propp & Farber, special counsel to the Fund for New
York tax matters, under existing New York law:
The New York IM-IT Intermediate Laddered Maturity Trust is not an association
taxable as a corporation and the income of the New York IM-IT Intermediate
Laddered Maturity Trust will be treated as the income of the Unitholders under
the income tax laws of the State and City of New York. Individuals who reside
in New York State or City will not be subject to State and City tax on
interest income which is exempt from Federal income tax under section 103 of
the Internal Revenue Code of 1986 and derived from obligations of New York
State or a political subdivision thereof, although they will be subject to New
York State and City tax with respect to any gains realized when such
obligations are sold, redeemed or paid at maturity or when any such Units are
sold or redeemed.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit................................. $ 43.57 $ 43.57
Less: Estimated Annual Expense per Unit <F2>.............................. $ 2.23 $ 1.77
Less: Annual Premium on Portfolio Insurance per Unit...................... -- --
Estimated Net Annual Interest Income per Unit............................. $ 41.34 $ 41.80
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit............................. $ 41.34 $ 41.80
Divided by 12 and 2, respectively......................................... $ 3.45 $ 20.90
Estimated Daily Rate of Net Interest Accrual per Unit...................... $ .11484 $ .11612
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>... 4.07% 4.11%
Estimated Long-Term Return <F3><F4><F5>.................................... 3.85% 3.90%
Estimated Initial Monthly Distribution (January 1996)...................... $ 1.49
Estimated Initial Semi-annual Distribution (May 1996)...................... $ 15.44
Estimated Normal Distribution per Unit <F5>................................ $ 3.45 $ 20.90
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
New York IM-IT Intermediate Laddered Maturity Trust under the monthly and semi-annual
distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--May
and November commencing January 15, 1996
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.07
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $43.64. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.30 and $1.84 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See
"Estimated Current Returns and Estimated Long-Term Returns."
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses").
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F5>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
NEW YORK INTERMEDIATE LADDERED MATURITY SERIES 17
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
New York
IM-IT
Intermediate
Laddered
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption Maturity
Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C>
$ 500,000 Dormitory Authority of the State of New York, City University
System Consolidated Revenue Bonds, Series 1995B (AMBAC
Indemnity Insured) #4.40% Due 7/1/2000......................... AAA $ 501,010
100,000 Metropolitan Transit Authority, New York, Transportation
Facilities Revenue Refunding Bonds, Series M (AMBAC Indemnity
Insured) #4.50% Due 7/1/2000................................... AAA 100,612
600,000 Dormitory Authority of the State of New York, Ellis Hospital,
FHA-Insured Mortgage Hospital Revenue Bonds, Series 1995 (MBIA AAA 501,110
Insured) #500M-4.50% Due 2/1/2001 #100M-4.60% Due 2/1/2002.... AAA 100,260
100,000 Dormitory Authority of the State of New York, City University
System, Consolidated Third General Resolution Revenue Bonds,
Series 1995-1 (AMBAC Indemnity Insured) #4.50% Due 7/1/2001.... AAA 100,241
150,000 County of Nassau, New York, General Obligation Refunding Bonds,
Serial General Improvement Refunding Bonds, Series 1993H (MBIA
Insured) #4.75% Due 6/15/2002.................................. AAA 151,674
550,000 Dormitory Authority of the State of New York, The Devereux
Foundation, Insured Revenue Bonds, Series 1995 (MBIA AAA 99,717
Insured)** #100M-4.50% Due 7/1/2002 #450M-4.70% Due 7/1/2004.. AAA 448,421
400,000 Dormitory Authority of the State of New York, Long Beach Medical
Center, FHA-Insured Mortgage Hospital Revenue Bonds, Series 1995
(MBIA Insured) #250M-4.60% Due 8/1/2002 150M-5.00% Due AAA 250,695
2/1/2004......................................................... AAA 152,494
600,000 Suffolk County Industrial Development Agency (Suffolk County,
New York) Southwest Sewer System Revenue Bonds, Series 1994
(FGIC Insured) #4.60% Due 2/1/2003............................. AAA 598,158
150,000 Puerto Rico Public Buildings Authority, Public Education and
Health Facilities Refunding Bonds, Series 1989-I (FGIC
Insured) #0.00% Due 7/1/2004................................... AAA 99,600 <F6>
$ 3,150,000 $ 3,103,992
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
MARYLAND QUALITY TRUST
General. The Maryland Quality Trust consists of 9 issues of Securities. One of
the Bonds in the Maryland Quality Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Maryland Quality Trust) as follows: Health Care, 3 (32%); Water and
Sewer, 2 (21%); Public Building, 1 (20%); Retail Electric/Gas, 1 (13%);
General Obligations, 1 (10%) and Transportation, 1 (4%). No Bond issue has
received a provisional rating.
Risk Factors. The public indebtedness of the State of Maryland, its
instrumentalities and its local governments is divided into three basic types.
The State, and the counties and municipalities of the State, issue general
obligation bonds for capital improvements and for various projects to the
payment of which an ad valorem property tax is exclusively pledged.
Certain authorities of the State and certain local governments issue
obligations payable solely from specific non-tax, enterprise fund revenues and
for which the issuer has no liability and has given no moral obligation
assurance. The principal of and interest on bonds issued by these bodies are
payable solely from various sources, principally fees generated from use of
the facilities or enterprises financed by the bonds.
The special authorities of the State and local government entities have
outstanding bonds backed exclusively by revenues derived from projects and
facilities financed by the bond issue. The holders of these bonds have no
claim against the general credit of the State or any governmental unit for the
payment of those bonds.
There is no general debt limit imposed on the State of Maryland by the State
Constitution or public general laws, but a special committee created by
statute annually makes an estimate of the maximum amount of new general
obligation debt that the State may prudently authorize.
There can be no assurance that particular bond issues may not be adversely
affected by changes in State or local economic or political conditions.
Investors are, therefore, advised to study with care the Portfolio for the
Maryland Quality Trust appearing elsewhere in this Prospectus and consult
their own investment advisers as to the merits of particular issues in that
Portfolio.
Tax Status. For a discussion of the Federal tax status of income earned on
Maryland Quality Trust Units, see "Other Matters-Federal Tax Status".
In the opinion of Weinberg and Green, special counsel to the Fund for Maryland
tax matters, under existing Maryland income tax law applicable to taxpayers
whose income is subject to Maryland income taxation:
(1)For Maryland State and local income tax purposes, the Maryland Quality
Trust will not be recognized as an association taxable as a corporation, but
rather as a fiduciary whose income will not be subject to Maryland State and
local income taxation.
(2)To the extent that interest derived from the Maryland Quality Trust by a
Unitholder with respect to the obligations of the State of Maryland and its
political subdivisions is excludable from Federal gross income, such interest
will not be subject to Maryland State or local income taxes. Interest paid to
a "financial institution" will be subject to the Maryland State
franchise tax on financial institutions.
(3)In the case of taxpayers who are individuals, Maryland presently imposes an
income tax on items of tax preference with reference to such items as defined
in the Internal Revenue Code, as amended from time to time, for purposes of
calculating the federal alternative minimum tax. Interest paid on certain
private activity bonds constitutes a tax preference item for the purpose of
calculating the federal alternative minimum tax. Accordingly, if the Maryland
Quality Trust holds such bonds, 50% of the interest on such bonds in excess of
a threshold amount is taxable in Maryland.
(4)Capital gain, including gain realized by a Unitholder from the redemption,
sale or other disposition of a Unit, will be included in the Maryland taxable
base of Unitholders for Maryland State and local income taxation purposes.
However, Maryland defines the taxable net income of individuals as Federal
adjusted gross income with certain modifications. Likewise, the Maryland
taxable net income of corporations is Federal taxable income with certain
modifications. There is available to Maryland income taxpayers a modification
which allows those taxpayers to subtract from the Maryland taxable base the
gain included in Federal adjusted gross income or Federal taxable income, as
the case may be, which is realized from the disposition of Securities by the
Maryland Quality Trust. Consequently, by making that modification, a
Unitholder who is entitled to make the subtraction modification will not be
subject to Maryland State or local income tax with respect to gain realized
upon the disposition of Securities by the Maryland Quality Trust. Profit
realized by a "financial institution" from the sale or exchange of
Bonds will be subject to the Maryland Franchise Tax.
These opinions relate only to the treatment of the Maryland Quality Trust and
the Units under the Maryland State and local income tax laws and Maryland
franchise tax laws. Unitholders should consult tax counsel as to other
Maryland tax consequences not specifically considered in these opinions. For
example, no opinion is expressed as to the treatment of the Units under the
Maryland inheritance and estate tax laws.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 50.68 $ 50.68
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.38 $ 1.89
Estimated Net Annual Interest Income per Unit......................... $ 48.30 $ 48.79
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 48.30 $ 48.79
Divided by 12 and 2, respectively..................................... $ 4.03 $ 24.40
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .13416 $ .13552
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 4.83% 4.88%
Estimated Long-Term Return <F2><F3><F4>................................ 4.78% 4.83%
Estimated Initial Monthly Distribution (January 1996).................. $ 1.74
Estimated Initial Semi-annual Distribution (May 1996).................. $ 18.02
Estimated Normal Distribution per Unit <F4>............................ $ 4.03 $ 24.40
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Maryland Quality Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--May
and November commencing January 15, 1996
<FN>
<F1>The estimated annual expenses are expected to fluctuate periodically (see "
Trust Administration--Fund Administration and Expenses--Miscellaneous
Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
MARYLAND INVESTORS' QUALITY TAX-EXEMPT TRUST SERIES 75
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
Name of Issuer, Title, Interest Rate and Maturity Maryland
Date of either Bonds Deposited or Bonds Contracted Standard Rating<F2> Redemption Quality
Aggregate for<F1><F5> & Poor's Moody's Feature<F3> Trust<F4>
<S> <C> <C> <C> <C> <C>
$ 250,000 Maryland Water Quality Finance Administration,
Revolving Loan Fund Refunding Revenue Bonds, Series
1995A #5.50% Due 9/1/2012......................... AA Aa 2005 @ 100 $ 254,985
315,000 City of Baltimore, Maryland (Mayor and City Council
of Baltimore) General Obligation Consolidated
Public Improvement Bonds, Series 1993A (AMBAC 2003 @ 100
Indemnity Insured) #5.375% Due 10/15/2013......... AAA Aaa 2011 @ 100 S.F. 318,046
110,000 Washington, D.C., Metropolitan Area Transportation
Authority, Gross Revenue Transit Refunding Bonds, 2004 @ 102
Series 1993 (FGIC Insured) #5.25% Due 7/1/2014.... AAA Aaa 2011 @ 100 S.F. 109,902
65,000 Maryland Health and Higher Educational Facilities
Authority, Revenue Bonds (Johns Hopkins Hospital
Issue) Series 1990 #0.00% Due 7/1/2015............ AA- Aa 23,672 <F6>
600,000 Maryland Stadium Authority, Lease Revenue Bonds
(Ocean City Convention Center Project) Series 2005 @ 101
1995 #5.375% Due 12/15/2015...................... AA Aa 2014 @ 100 S.F. 600,324
375,000 City of Baltimore, Maryland, Refunding Revenue
Bonds (Wastewater Projects) Series 1994A (FGIC
Insured) #5.00% Due 7/1/2022...................... AAA Aaa 2016 @ 100 S.F. 363,517
500,000 Maryland Health and Higher Educational Facilities
Authority, Revenue Bonds (Montgomery General
Hospital Issue) Series 1993 (Connie Lee Insured) 2003 @ 100
#5.00% Due 7/1/2023................................ AAA A 2019 @ 100 S.F. 474,485
400,000 Maryland Health and Higher Educational Facilities
Authority, Project and Refunding Revenue Bonds
(Peninsula Regional Medical Center Issue) Series 2003 @ 102
1993 #5.00% Due 7/1/2023......................... A A 2013 @ 100 S.F. 373,784
405,000 Anne Arundel County, Maryland, Pollution Control
Revenue Refunding Bonds (Baltimore Gas and Electric
Company Project) Series 1994 #6.00% Due 4/1/2024.. A A2 2004 @ 102 422,739
$ 3,020,000 $ 2,941,454
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
VIRGINIA QUALITY TRUST
General. The Virginia Quality Trust consists of 11 issues of Securities. None
of the Bonds in the Virginia Quality Trust are general obligations of the
governmental entities issuing them or are backed by the taxing power thereof.
All of the issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Virginia Quality Trust) as follows: Industrial Revenue, 2 (33%); Water
and Sewer, 4 (29%); Health Care, 2 (16%); Public Building, 1 (16%);
Multi-Family Mortgage Revenue, 1 (3%) and Single Family Mortgage Revenue, 1
(3%). No Bond issue has received a provisional rating.
Risk Factors. The Commonwealth's financial condition is supported by a
broad-based economy, including manufacturing, tourism, agriculture, ports,
mining and fisheries. Manufacturing continues to be a major source of
employment, ranking behind only services, wholesale and retail trade, and
government (Federal, state and local). The Federal government is a major
employer in Virginia due to the heavy concentration of Federal employees in
the metropolitan Washington, D.C. segment of northern Virginia and the
military employment in the Hampton Roads area, which houses the nation's
largest concentration of military installations, although civilian defense
employment has been affected by the retrenchment of the military sector and is
likely to decrease further.
Although the Commonwealth enjoyed an economic boom in the mid-1980's, the
Commonwealth's economy began to slow toward the end of the decade, and went
into a recession with the rest of the nation after July, 1990. Gradual
recovery has continued since the recession's end in March, 1991, with the
Virginia economy providing reason for restrained optimism in fiscal year 1994.
Employment figures furnished more encouragement than did income data. The
state unemployment rates continued to be a bright spot, dropping to 4.9
percent for fiscal year 1994, compared to 6.4 percent nationally. However, the
possibility of more defense cutbacks and additional plant downsizings provided
two cautionary notes. Real taxable sales have nearly reached the pre-recession
level of fiscal year 1990.
The impact of national trends on the Commonwealth is clearly seen in personal
income figures. While year-to-year percentage changes in the Commonwealth
personal income generally parallel those at the national level, the
Commonwealth figures were higher during the first half of the 1980's. The
differential has narrowed since 1988. In the first quarter of 1994, the most
recent available, Virginia's growth rate was 6.1 percent compared to 3.9
percent for the nation. While Virginia's real per capita personal income
surpassed the national figure in 1982 and has continued to exceed it, the
relative differential has been narrowing since 1989 and is now the smallest
since 1985. Virginia's 1989 maximum was 106 percent of national per capita
income while the 1993 figure was 104 percent. In comparison with the South
Atlantic region, Virginia's real per capita income has declined from a peak of
108 percent in 1989 to 106 percent in 1993.
Virginia's nonagricultural employment figure has also mirrored the national
economy. For fiscal year 1994 Virginia's nonagricultural employment rose 2.9
percent, comparable to the pre-recession rate. Total nonagricultural
employment for Virginia in June 1994 was a record high. During the period
1988-1990, the Commonwealth substantially outpaced the nation in growth of
nonagricultural employment, with 4.1 percent average annual growth compared to
2.8 percent nationally; however, the trend lines for both have been nearly
parallel since 1990. For the period 1985-1990, the Commonwealth went ahead of
the South Atlantic region, but was hit harder by the recession in 1990 and the
defense adjustment. Since then, the region has outperformed the Commonwealth.
With respect to unemployment, Virginia's unemployment rate has consistently
been below that of the nation. For the decade of 1980 to 1990, the
differential has been two percentage points, although it decreased to below
one percentage point in 1991 and 1992. For the first six months of fiscal year
1994, the Commonwealth's unemployment rate was 4.9 percent, compared to the
national rate of 6.4 percent.
Employment trends in Virginia have varied from sector to sector and from
region to region. Most sectors showed dramatic improvement compared to the
anemic performance in fiscal year 1993. Employment grew in seven of ten
categories. This past fiscal year's growth was led by a 5.4 percent employment
jump in the construction sector and 5.3 percent in services. Federal civilian
employment slipped 3 percent, the result of continued defense cutbacks and an
effort to downsize. Once again, the greatest percent loss was in mining, which
suffered a 7.7 percent drop, a 40 percent greater loss than the previous year.
The service sector continued to grow and mining and manufacturing are now at
lower levels than in 1980. Employment trends also varied among regions. All of
the Commonwealth's metropolitan statistical areas showed increased employment
from fiscal year 1993 to fiscal year 1994, ranging from 1.1 percent to 4.3
percent, with most employment increases being experienced in metropolitan
areas.
Highest rates of unemployment were found in southwest Virginia where mining
jobs have been lost and the lowest unemployment rates were seen in northern
Virginia where much federally-related employment is concentrated. As would be
expected, there was great overlap between areas of lowest unemployment and
those of highest per capita income.
Virginia appears to have fully participated in the national economic recovery,
which has been slow by historic standards. The State has not yet returned to
pre-recession growth rates for several measures, particularly real per capita
personal income. The next round of defense cutbacks and the uncertain duration
of the economic recovery are continuing sources of concern. A growing
diversification of the State's export base is encouraging for the long-term
but will not insulate the State from vulnerability to increased competition
against its major products and to economic conditions abroad.
The Commonwealth of Virginia has historically operated on a fiscally
conservative basis and is required by its Constitution to have a balanced
biennial budget. At the end of the June 30, 1994, fiscal year, the General
Fund had an ending fund balance computed on a budgetary cash basis of $518.7
million, of which $81 million was in required reserve; Approximately $430
million thereof was designated for expenditure during the next fiscal year,
leaving an undesignated, unreserved fund balance of $7.6 million, the third
consecutive such undesignated fund balance. Computed on a modified accrual
basis in accordance with generally accepted accounting principles, the General
Fund balance at the end of the fiscal year ended June 30, 1994, was $185.3
million, compared with a General Fund balance at the end of the fiscal year
ended June 30, 1993, of minus $78.8 million. This is the second year since
1989 that the General Fund, measured on a modified accrual basis, has shown a
positive fund balance.
As of June 30, 1994, total debt of the Commonwealth aggregated $8.4 billion.
Of that amount, $2.5 billion was tax-supported. Outstanding general obligation
debt backed by the full faith and credit of the Commonwealth was $792 million
at June 30, 1994. Of that amount, $500 million was also secured by revenue
producing capital projects.
The Virginia Constitution contains limits on the amount of general obligation
bonds which the Commonwealth can issue. These limits are substantially in
excess of current levels of outstanding bonds, and at June 30, 1994 would
permit an additional total of approximately $5.6 billion of bonds secured by
revenue-producing projects and approximately $5.8 billion of unsecured general
obligation bonds, with not more than approximately $921 million of the latter
to be issued in any four-year period. Bonds which are not secured by
revenue-producing projects must be approved in a state-wide election.
The Commonwealth of Virginia maintains a "triple A" rating from
Standard & Poor's, Moody's and Fitch Investors Service on its general
obligation indebtedness, reflecting in part its sound fiscal management,
diversified economic base and low debt ratios. There can be no assurance that
these conditions will continue. Nor are these same conditions necessarily
applicable to securities which are not general obligations of the
Commonwealth. Securities issued by specific municipalities, governmental
authorities or similar issuers may be subject to economic risks or
uncertainties peculiar to the issuers of such securities or the sources from
which they are to be paid.
Tax Status. For a discussion of the Federal tax status of income earned on
Virginia Quality Trust Units see "Other Matters--Federal Tax Status".
The assets of the Trust will consist of interest-bearing obligations issued by
or on behalf of the Commonwealth of Virginia ("Virginia") or counties,
municipalities, authorities or political subdivisions thereof (the "
Bonds").
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the Trust. However, although no opinion is
expressed herein regarding such matters, it is assumed that: (i) the Bonds
were validly issued, (ii) the interest thereon is excludible from gross income
for federal income tax purposes and (iii) the interest thereon is exempt from
income tax imposed by Virginia that is applicable to individuals and
corporations (the "Virginia Income Tax"). The opinion set forth below
does not address the taxation of persons other than full time residents of
Virginia.
In the opinion of Chapman and Cutler, special counsel to the Fund for Virginia
tax matters, under existing law as of the date of this prospectus and based
upon the assumptions set forth above:
The Virginia Quality Trust is not an association taxable as a corporation for
purposes of the Virginia Income Tax and each Unitholder of the Trust will be
treated as the owner of a pro rata portion of each of the assets held by the
Trust and the income of such portion of the Virginia Quality Trust will be
treated as income of the Unitholder for purposes of the Virginia Income Tax.
Income on the Bonds which is exempt from Virginia Income Tax when received by
the Virginia Quality Trust, and which would be exempt from Virginia Income Tax
if received directly by a Unitholder, will retain its status as exempt from
such tax when received by the Trust and distributed to such Unitholder.
Each Unitholder will recognize gain or loss for purposes of the Virginia
Income Tax if the Trustee disposes of a bond (whether by redemption, sale or
otherwise) or if the Unitholder redeems or sells Units of the Trust to the
extent that such a transaction results in a recognized gain or loss to such
Unitholder for federal income tax purposes, except as described in this
paragraph. Virginia has by law provided that all income from certain
tax-exempt obligations issued under the laws of Virginia, including any
profits made from the sale of such Bonds, shall be exempt from all taxation by
Virginia. Although we express no opinion, the Virginia Department of Taxation
has indicated that the gain on the sale of such tax-exempt obligations,
recognized for federal income tax purposes, would not be subject to Virginia
income taxation. Accordingly, any such gain relating to the disposition of any
Bond that would not be subject to Virginia Income Tax if the Bond was held
directly by a Unitholder will retain its tax-exempt status for purposes of the
Virginia Income Tax when the Bond is disposed of by the Virginia Quality Trust
or when the Unitholder is deemed to have disposed of his pro rata portion of
such Bond upon the disposition of his Unit, provided that such gain can be
determined with reasonable certainty and substantiated.
The Virginia Income Tax does not permit a deduction of interest paid on
indebtedness incurred or continued to purchase or carry Units in the Virginia
Quality Trust to the extent that interest income related to the ownership of
Units is exempt from the Virginia Income Tax.
In the case of Unitholders subject to the Virginia Bank Franchise Tax, the
income derived by such a Unitholder from his pro rata portion of the Bonds
held by the Virginia Quality Trust may affect the determination of such
Unitholder's Bank Franchise Tax. Prospective investors subject to the Virginia
Bank Franchise Tax should consult their tax advisors. Chapman and Cutler has
expressed no opinion with respect to taxation under any other provisions of
Virginia law. Ownership of the Units may result in collateral Virginia tax
consequences to certain taxpayers. Prospective investors should consult their
tax advisors as to the applicability of any such collateral consequences.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit............................. $ 52.79 $ 52.79
Less: Estimated Annual Expense per Unit <F1>.......................... $ 2.36 $ 1.90
Estimated Net Annual Interest Income per Unit......................... $ 50.43 $ 50.89
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit......................... $ 50.43 $ 50.89
Divided by 12 and 2, respectively..................................... $ 4.20 $ 25.45
Estimated Daily Rate of Net Interest Accrual per Unit.................. $ .14006 $ .14134
Estimated Current Return Based on Public Offering Price <F2><F3><F4>... 5.04% 5.09%
Estimated Long-Term Return <F2><F3><F4>................................ 5.02% 5.06%
Estimated Initial Monthly Distribution (January 1996).................. $ 1.82
Estimated Initial Semi-annual Distribution (May 1996).................. $ 18.80
Estimated Normal Distribution per Unit <F4>............................ $ 4.20 $ 25.45
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee........... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Virginia Quality Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... FIRST day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. FIFTEENTH day of the month as follows: monthly--each month; semi-annual--
May and November commencing January 15, 1996
<FN>
<F1>The Estimated Annual Expenses are expected to fluctuate periodically (see "
Trust Administration--Fund Administration and Expenses--Miscellaneous
Expenses").
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3>The Estimated Current Returns are calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. The Estimated
Net Annual Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns as indicated
above will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
<F4>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
</TABLE>
<TABLE>
VIRGINIA INVESTORS' QUALITY TAX-EXEMPT TRUST SERIES 68
(IM-IT AND QUALITY MULTI-SERIES 264)
PORTFOLIO As of December 13, 1995
<CAPTION>
Offering
Price To
Virginia
Name of Issuer, Title, Interest Rate and Maturity Date of Standard Rating<F2> Redemption Quality
Aggregate either Bonds Deposited or Bonds Contracted for<F1><F5> & Poor's Moody's Feature<F3> Trust<F4>
<S> <C> <C> <C> <C> <C>
$ 500,000 City of Hampton, Virginia, Museum Revenue Refunding 2004 @ 102
Bonds, Series 1994 #5.25% Due 1/1/2014.................. A- N/R 2010 @ 100 S.F. $ 482,790
150,000 Augusta County Service Authority (Virginia) Water and
Sewer System Revenue Bonds, Series 1994 (MBIA Insured) 2009 @ 100
#5.125% Due 11/1/2014.................................... AAA Aaa 2010 @ 100 S.F. 145,895
450,000 Rivanna Water and Sewer Authority (Virginia) Regional
Water and Sewer System Revenue Refunding Bonds, Series 2003 @ 101.5
1993 #4.80% Due 10/1/2015............................... A+ Aa 2014 @ 100 S.F. 417,055
150,000 Industrial Development Authority of the City of Hampton,
Virginia, Hospital Revenue and Refunding Bonds (Sentara
General Hospital Issue) Series 1994A #5.125% Due 2004 @ 102
11/1/2016................................................. N/R A 2013 @ 100 S.F. 141,156
500,000 Prince William County, Virginia, Industrial Development
Authority, Hospital Revenue Refunding Bonds (Prince 2003 @ 102
William Hospital Issue) Series 1993 #5.25% Due 4/1/2019. N/R A 2013 @ 100 S.F. 473,640
350,000 Loudoun County, Virginia, Industrial Development
Authority, Hospital Revenue Bonds (Loudoun Hospital
Center Issue) Series 1995 (FSA Insured) #5.80% Due 2005 @ 102
6/1/2020.................................................. AAA Aaa 2011 @ 100 S.F. 356,125
80,000 Virginia Housing Development Authority, Commonwealth 2003 @ 102
Mortgage Bonds, Series 1993H 5.25% Due 7/1/2023....... AA+ Aa1 2017 @ 100 S.F. 76,490
150,000 City of Norfolk, Virginia, Water Revenue Bonds, Series 2003 @ 102
1993 (AMBAC Indemnity Insured) #5.375% Due 11/1/2023.... AAA Aaa 2014 @ 100 S.F. 149,136
500,000 Industrial Development Authority of the City of Richmond,
Virginia, Elderly Residential Facility Mortgage Revenue
Refunding Bonds (Beaufont Towers II-FHA Insured Project) 2005 @ 103
Series 1995 6.15% Due 6/1/2025.......................... AAA N/R 2016 @ 100 S.F. 509,170
Offering
Price To
Virginia
Name of Issuer, Title, Interest Rate and Maturity Date of Standard Rating<F2> Redemption Quality
Aggregate either Bonds Deposited or Bonds Contracted for<F1><F5> & Poor's Moody's Feature<F3> Trust<F4>
$ 130,000 Virginia Resources Authority, Water and Sewer System
Revenue Bonds, Series 1995A (Sussex County Project) 2005 @ 102
#5.60% Due 10/1/2025...................................... AA N/R 2011 @ 100 S.F. $ 130,650
80,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, Series 1993H (AMBAC Indemnity Insured) 2003 @ 102
#5.25% Due 7/1/2027....................................... AAA Aaa 2024 @ 100 S.F. 77,417
$ 3,040,000 $ 2,959,524
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
As of the Date of Deposit: December 13, 1995
(1)All Securities are represented by "regular way" or "when
issued" contracts for the performance of which an irrevocable letter of
credit, obtained from an affiliate of the Trustee, has been deposited with the
Trustee. At the Date of Deposit, Securities may have been delivered to the
Sponsor pursuant to certain of these contracts; the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into during the period from
November 1,1995 to December 12,1995. These Securities have expected settlement
dates ranging from December 13,1995 to January 9,1996 (see "Unitholder
Explanations").
(2)All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's Investors Service, Inc.
The ratings represent the latest published ratings by the respective ratings
agency or, if not published, represent private letter ratings or those ratings
expected to be published by the respective ratings agency. "Y"
indicates that such rating is contingent upon physical receipt by the
respective ratings agency of a policy of insurance obtained by the issuer of
the bonds involved and issued by the Preinsured Bond Insurer named in the
bond's title. A commitment for insurance in connection with these bonds has
been issued by the Preinsured Bond Insurer named in the bond's title. "
N/R" indicates that the applicable rating service did not provide a rating
for that particular Security. For a brief description of the rating symbols
and their related meanings, see "Other Matters--Description of Securities
Ratings".
(3)There is shown under this heading the year in which each issue of Bonds is
initially or currently callable and the call price for that year. Each issue
of Bonds continues to be callable at declining prices thereafter (but not
below par value) except for original issue discount bonds which are redeemable
at prices based on the issue price plus the amount of original issue discount
accreted to redemption date plus, if applicable, some premium, the amount of
which will decline in subsequent years. "S.F." indicates a sinking
fund is established with respect to an issue of Bonds. Redemption pursuant to
call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed bonds have an offering side
valuation which represents a premium over par. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to extraordinary
optional or mandatory redemptions if certain events occur. Single family
mortgage revenue bonds and housing authority bonds are most likely to be
called subject to such provisions, but other bonds may have similar call
features. Notwithstanding any provisions to the contrary, certain bond issuers
have in the past and others may in the future attempt to redeem Bonds prior to
their initially scheduled call dates and at prices which do not include any
premiums. For a general discussion of certain of these events, see "
Unitholder Explanations--Bond Redemptions". To the extent that the
Securities were deposited in a Trust at a price higher than the price at which
they are redeemed, this will represent a loss of capital when compared with
the original Public Offering Price of the Units. Conversely, to the extent
that the Bonds were acquired at a price lower than the redemption price, this
will represent an increase in capital when compared with the original Public
Offering Price of the Units. Distributions will generally be reduced by the
amount of the income which would otherwise have been paid with respect to
redeemed Securities and there will be distributed to Unitholders the principal
amount and any premium received on such redemption. The Estimated Current
Return and Estimated Long-Term Return in this event may be affected by such
redemptions. For the Federal tax effect on Unitholders of such redemptions and
resultant distributions, see paragraph (2) under "Other Matters--Federal
Tax Status".
(4)Evaluation of Securities is made on the basis of current offering prices
for the Securities. The offering prices are greater than the current bid
prices of the Securities which is the basis on which Unit value is determined
for purposes of redemption of Units (see "Unitholder Explanations--Public
Offering--Offering Price").
(5)Other information regarding the Bonds in each Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Annual
Profit Interest Bid Side
Trust Annual Cost to (Loss) to Income to Evaluation
Insurance Sponsor Sponsor Trust of Bonds
<S> <C> <C> <C> <C> <C>
IM-IT........................................... $ 563 $ 8,582,079 $ 54,937 $ 474,290 $ 8,571,411
IM-IT Intermediate.............................. $ -- $ 4,892,726 $ 21,544 $ 232,096 $ 4,876,756
California IM-IT................................ $ -- $ 2,868,771 $ 15,629 $ 156,863 $ 2,862,335
Connecticut IM-IT............................... $ 110 $ 2,910,991 $ 51,389 $ 155,525 $ 2,939,894
Georgia IM-IT................................... $ 803 $ 2,960,201 $ 40,217 $ 158,725 $ 2,977,863
Michigan IM-IT.................................. $ -- $ 2,921,522 $ 14,229 $ 159,694 $ 2,913,626
New York IM-IT Intermediate Laddered Maturity... $ -- $ 3,088,472 $ 15,520 $ 137,475 $ 3,081,438
Maryland Quality................................ $ -- $ 2,909,560 $ 31,894 $ 156,756 $ 2,919,051
Virginia Quality................................ $ -- $ 2,910,818 $ 48,706 $ 164,268 $ 2,936,732
</TABLE>
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in certain Portfolios. The cost of any such
contracts and the corresponding gain or loss is included in the Cost to
Sponsor. Certain Securities in the Fund, if any, marked by a double asterisk
(**), have been purchased on a "when, as and if issued" or "
delayed delivery" basis. Interest on these Securities begins accruing to
the benefit of Unitholders on their respective dates of delivery. Delivery is
expected to take place at various dates after the First Settlement Date as
follows:
<TABLE>
<CAPTION>
Percent of
Trust Aggregate Principal Range of Days Subsequent
Amount to First Settlement Date
<S> <C> <C>
IM-IT........................................... 74% 1 to 21 days
IM-IT Intermediate.............................. 68% 1 to 21 days
California IM-IT................................ 17% 1 day
Connecticut IM-IT............................... -- --
Georgia IM-IT................................... 3% 1 day
Michigan IM-IT.................................. -- --
New York IM-IT Intermediate Laddered Maturity... 17% 3 days
Maryland Quality................................ -- --
Virginia Quality................................ -- --
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities in the
IM-IT, IM-IT Intermediate, California IM-IT, Connecticut IM-IT, Georgia IM-IT,
Michigan IM-IT, New York IM-IT Intermediate Laddered Maturity, Maryland
Quality and Virginia Quality Trusts were higher than the bid side evaluations
of such Securities by 0.73%, 0.75%, 0.74%, 0.74%, 0.73%, 0.73%, 0.72%, 0.74%
and 0.75%, respectively, of the aggregate principal amounts of such Securities.
"#" indicates that such Bond was issued at an original issue discount.
The tax effect of Bonds issued at an original issue discount is described in
"Other Matters--Federal Tax Status".
(6)This Bond has been purchased at a deep discount from the par value because
there is little or no stated interest income thereon. Bonds which pay no
interest are normally described as "zero coupon" bonds. Over the life
of bonds purchased at a deep discount the value of such bonds will increase
such that upon maturity the holders of such bonds will receive 100% of the
principal amount thereof. To the extent that zero coupon bonds are sold or
called prior to maturity, there is no guarantee that the value of the proceeds
received therefrom by the Trust will equal or exceed the par value that would
have been obtained at maturity of such zero coupon bonds. Approximately 4%,
5%, 3%, 4%, 4%, 5%, 5% and 2% of the aggregate principal amount of the
Securities in the IM-IT, IM-IT Intermediate Trust, California IM-IT Trust,
Connecticut IM-IT Trust, Georgia IM-IT Trust, Michigan IM-IT Trust, New York
IM-IT Intermediate Laddered Maturity Trust and Maryland Quality Trust,
respectively, are "zero coupon" bonds.
Underwriting. The Underwriters named below have severally purchased Units in
the following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
Name IM-IT
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,432
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 1,000
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 600
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 500
Fidelity Capital Markets 164 Northern Avenue, Boston, Massachusetts 02210 250
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 250
Oppenheimer & Co., Inc. World Financial Center, 8th Floor, New York, New York 10281 250
Principal Financial Securities, Inc. Fountain Place, 1445 Ross Avenue, Suite 2300, Dallas, Texas 75201 250
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 250
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
J.J.B. Hilliard, W.L. Lyons, Inc. 501 South Fourth Street, Louisville, Kentucky 40202 100
William R. Hough & Company 100 Second Avenue South, 8th Floor, St. Petersburg, Florida 33701 100
Huntleigh Securities Corporation 222 South Central, 3rd Floor, St. Louis, Missouri 63105 100
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, Florida 33733 100
Roosevelt & Cross Inc. 20 Exchange Place, New York, New York 10005 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
US Clearing Corp. 26 Broadway, New York, New York 10004 100
B.C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 100
9,082
</TABLE>
<TABLE>
<CAPTION>
IM-IT
Name Intermediate
Address Trust Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,400
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Roney & Co. One Griswold, Detroit, Michigan 48226 100
5,000
</TABLE>
<TABLE>
<CAPTION>
Name California
Address IM-IT Trust Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,033
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Stephens Inc. 111 Center Street, Little Rock, Arkansas 72201 250
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Crowell, Weedon & Company One Wilshire Boulevard, Los Angeles, California 90017 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
3,033
</TABLE>
<TABLE>
<CAPTION>
Name Connecticut
Address IM-IT Trust Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,615
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,115
</TABLE>
<TABLE>
<CAPTION>
Name Georgia IM-IT
Address Trust Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,755
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,155
</TABLE>
<TABLE>
<CAPTION>
Name Michigan IM-IT
Address Trust Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,387
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
First of Michigan Corporation 100 Renaissance Center, 26th Floor, Detroit, Michigan 48243 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Roney & Co. One Griswold, Detroit, Michigan 48226 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,087
</TABLE>
<TABLE>
<CAPTION>
New York IM-IT
Intermediate
Laddered
Name Maturity Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,750
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Oppenheimer & Co., Inc. World Financial Center, 8th Floor, New York, New York 10281 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
3,150
</TABLE>
<TABLE>
<CAPTION>
Maryland
Name Quality Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,768
Wheat First Butcher Singer River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 125
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
3,093
</TABLE>
<TABLE>
<CAPTION>
Virginia
Name Quality Trust
Address Units
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,312
Anderson & Strudwick, Inc. 1108 East Main Street, Richmond, Virginia 23219 100
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
Wheat First Butcher Singer River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 100
3,112
</TABLE>
Units may also be sold to broker-dealers and others at prices representing the
per Unit concession or agency commission stated under "Trust
Administration--General--Unit Distribution". However, resales of Units by
such broker-dealers and others to the public will be made at the Public
Offering Price described in the Prospectus. The Sponsor reserves the right to
reject, in whole or in part, any order for the purchase of Units and the right
to change the amount of the concession or agency commission from time to time.
In addition to any other benefits the Underwriters may realize from the sale
of the Units of the Fund, the Agreement Among Underwriters provides that the
Sponsor will share on a pro rata basis among those Underwriters who underwrite
at least 250 Units 50% of the aggregate gain, if any, represented by the
difference between the Sponsor's cost of the Securities in connection with
their acquisition and the evaluation thereof on the Date of Deposit less
deductions for certain accrued interest and certain other costs. See "
Trust Administration--General--Sponsor and Underwriter Compensation" and
"Portfolio" for the applicable Trust.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by
the Sponsor, or participate in sales programs sponsored by the Sponsor, an
amount not exceeding the total applicable sales charges on the sales generated
by such persons at the public offering price during such programs. Also, the
Sponsor in its discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying underwriters, brokers,
dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trusts. These programs will not change the price Unitholders pay for their
Units or the amount that the Trusts will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to Underwriters that sell units of trusts it sponsors. The Sponsor
pays substantially all costs associated with the seminar, excluding
Underwriter travel costs. Each Underwriter is invited to send a certain number
of representatives based on the gross number of units such firm underwrites
during a designated time period.
FUND ADMINISTRATION AND EXPENSES
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Effective
December 20, 1994, the parent of Van Kampen Merritt Inc. acquired American
Capital Management & Research, Inc. As a result, Van Kampen Merritt Inc., has
changed its name to Van Kampen American Capital Distributors, Inc. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas, 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
September 30, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,413,000 (unaudited). (This paragraph
relates only to the Sponsor and not to the Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust or to any Multi-Series thereof or to any
other Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor and its
ability to carry out its contractual obligations. More detailed financial
information will be made available by the Sponsor upon request.)
As of June 30, 1995, the Sponsor and its affiliates managed or supervised
approximately $54 billion of investment products, of which over $25.3 billion
is invested in municipal securities. The Sponsor and its affiliates managed
$40.95 billion of assets, consisting of $25.2 billion for 42 open end mutual
funds, $9.9 billion for 38 closed-end funds and $5.9 billion for 87
institutional accounts. The Sponsor has also deposited approximately $26
billion of unit investment trusts. Based on cumulative assets deposited, the
Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R)trust. The Sponsor also provides
surveillance and evaluation services at cost for approximately $13 billion of
unit investment trust assets outstanding. Since 1976, the Sponsor has serviced
over 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 Securities and Exchange Commission,
(ii) terminate the Trust Agreement and liquidate the Fund as provided therein
or (iii) continue to act as Trustee without terminating the Trust Agreement.
All costs and expenses incurred in creating and establishing the Fund,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses,
advertising and selling expenses, expenses of the Trustee, initial evaluation
fees and other out-of-pocket expenses have been borne by the Sponsor at no
cost to the Fund.
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Fund. However, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., which is a wholly-owned subsidiary corporation of
the Sponsor, will receive an annual supervisory fee as indicated under "
Summary of Essential Financial Information" for providing portfolio
supervisory services for the Fund. Such fee (which is based on the number of
Units outstanding in each Trust on January 1 of each year) may exceed the
actual costs of providing such supervisory services for this Fund, but at no
time will the total amount received for portfolio supervisory services
rendered to Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 1 and subsequent series and to any other unit investment
trusts sponsored by the Sponsor for which the Evaluator provides portfolio
supervisory services in any calendar year exceed the aggregate cost to the
Evaluator of supplying such services in such year. In addition, the Evaluator
shall receive an annual evaluation fee as indicated under "Summary of
Essential Financial Information" for regularly evaluating each Trust's
portfolio. Both of the foregoing fees may be increased without approval of the
Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor or, if such category
is no longer published, in a comparable category. The Sponsor and the
Underwriters will receive sales commissions and may realize other profits (or
losses) in connection with the sale of Units and the deposit of the Securities
as described under "General--Sponsor and Underwriter Compensation"
below.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Fund. Such
records shall include the name and address of, and the certificates issued by
the Fund to, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or Federal statute,
rule or regulation (see "Unitholder Explanations--Public Offering--Reports
Provided"). The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Securities held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of the trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all Fund
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Trustee's Fee. For its services the Trustee will receive a fee based on the
aggregate outstanding principal amount of Securities in each Trust as of the
opening of business on January 2 and July 2 of each year as set forth under
"Per Unit Information" for the applicable Trust. During the first year
the Trustee may agree to reduce its fee (and to the extent necessary pay
miscellaneous expenses of a Trust) as stated under "Per Unit
Information" for the applicable Trust. After the first year such fee will
be computed at $.51 per $1,000 principal amount of Securities for that portion
of each Trust under the semi-annual distribution plan and $.91 per $1,000
principal amount of Securities for that portion of each Trust under the
monthly distribution plan. Based on the size of the Trust on the Date of
Deposit and assuming all Unitholders had chosen the semi-annual distribution
plan, the Trustee's estimated annual fees for ordinary recurring services
would initially amount to $4,590, $2,550, $1,515, $1,553, $1,573, $1,543,
$1,607, $1,540 and $1,550 for the IM-IT, IM-IT Intermediate, California IM-IT,
Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT, New York IM-IT Intermediate
Laddered Maturity, Maryland Quality and Virginia Quality Trusts, respectively.
Assuming in the alternative that all Unitholders had elected the monthly
distribution plan such fees would have initially amount to $8,190, $4,550,
$2,703, $2,771, $2,807, $2,753, $2,867, $2,748 and $2,766 for the above
mentioned Trusts, respectively. The Trustee's fees are payable monthly on or
before the fifteenth day of each month from the Interest Account of each Trust
to the extent funds are available and then from the Principal Account of each
Trust, with such payments being based on each Trust's portion of such
expenses. Since the Trustee has the use of the funds being held in the
Principal and Interest Accounts for future distributions, payment of expenses
and redemptions and since such Accounts are non-interest bearing to
Unitholders, the Trustee benefits thereby. Part of the Trustee's compensation
for its services to each Trust is expected to result from the use of these
funds. Such fees may be increased without approval of the Unitholders by
amounts not exceeding proportionate increases under the category "All
Services Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor or, if such category is no longer
published, in a comparable category. The Trustee's fees will not be increased
in future years in order to make up any reduction in the Trustee's fees
described under "Per Unit Information" for the applicable Trust. For a
discussion of the services rendered by the Trustee pursuant to its obligations
under the Trust Agreement, see "Unitholder Explanations--Public
Offering--Reports Provided" and "Trustee" above.
Portfolio Administration. The Trustee is empowered to sell, for the purpose
of redeeming Units tendered by any Unitholder, and for the payment of expenses
for which funds may not be available, such of the Bonds designated by the
Evaluator as the Trustee in its sole discretion may deem necessary. The
Evaluator, in designating such Securities, will consider a variety of factors,
including (a) interest rates, (b) market value and (c) marketability. The
Sponsor, in connection with the Quality Trusts, may direct the Trustee to
dispose of Securities 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
on 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
Securities 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 such restrictions on the Trustee under certain circumstances, the
Sponsor may seek a full or partial suspension of the right of Unitholders to
redeem their Units in an Insured Trust. See "Unitholder
Explanations--Public Offering--Redemption of Units". The Sponsor is
empowered, but not obligated, to direct the Trustee to dispose of Bonds in the
event of an advanced refunding.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new obligations in exchange or
substitution for any Security pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the Sponsor may deem
proper if (1) the issuer is in default with respect to such Security or (2) in
the written opinion of the Sponsor the issuer will probably default with
respect to such Security in the reasonably foreseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after the deposit
of obligations in exchange or substitution for underlying Securities, the
Trustee is required to give notice thereof to each Unitholder of the Trust
thereby affected, identifying the Securities eliminated and the Securities
substituted therefor. Except as stated herein and under "Unitholder
Explanations--Settlement of Bonds in the Trusts" regarding the
substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Fund of any securities other than the Securities initially deposited is not
permitted.
If any default in the payment of principal or interest on any Security occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Security within 30 days after notification by
the Trustee to the Sponsor of such default, the Trustee may in its discretion
sell the defaulted Security and not be liable for any depreciation or loss
thereby incurred.
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord with
the Public Offering Price described in the then currently effective prospectus
describing such Units. Any profit resulting from the resale of such Units will
belong to the Sponsor which likewise will bear any loss resulting from a lower
offering or Redemption Price subsequent to its acquisition of such Units.
Insurance Premiums. The cost of the portfolio insurance obtained by the
respective Trusts, if any, is that amount shown in footnote (5) in "Notes
to Portfolios" , so long as such Trust retains the Bonds. Premiums, which
are obligations of each Insured Trust, are payable monthly by the Trustee on
behalf of the respective Trust. As Bonds in the portfolio of an Insured Trust
are redeemed by their respective issuers or are sold by the Trustee, the
amount of the premium will be reduced in respect of those Bonds no longer
owned by and held in such Trust. If the Trustee exercises the right to obtain
permanent insurance, the premiums payable for such permanent insurance will be
paid solely from the proceeds of the sale of the related Bonds. The premiums
for such permanent insurance with respect to each Bond will decline over the
life of the Bond. A Trust does not incur any expense for Preinsured Bond
insurance, since the premium or premiums for such insurance have been paid by
the issuer or the Sponsor prior to the deposit of such Preinsured Bonds in a
Trust. Preinsured Bonds are not additionally insured by an Insured Trust.
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trusts: (a) fees of the Trustee for extraordinary services,
(b) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trusts
and the rights and interests of Unitholders, (e) indemnification of the
Trustee for any loss, liability or expenses incurred by it in the
administration of the Fund without negligence, bad faith or willful misconduct
on its part, (f) any special custodial fees payable in connection with the
sale of any of the Bonds in a Trust, (g) expenditures incurred in contacting
Unitholders upon termination of the Trusts and (h) costs incurred to reimburse
the Trustee for advancing funds to the Trusts to meet scheduled distributions
(which costs may be adjusted periodically in response to fluctuations in
short-term interest rates).
The fees and expenses set forth herein are payable out of the Trusts. When
such fees and expenses are paid by or owing to the Trustee, they are secured
by a lien on the portfolio or portfolios of the applicable Trust or Trusts. If
the balances in the Interest and Principal Accounts are insufficient to
provide for amounts payable by the Fund, the Trustee has the power to sell
Securities to pay such amounts.
GENERAL
Amendment or Termination. The Sponsor and the Trustee have the power to amend
the Trust Agreement without the consent of any of the Unitholders when such an
amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein or (b) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee), provided that the Trust Agreement
may not be amended to increase the number of Units issuable thereunder or to
permit the deposit or acquisition of securities either in addition to or in
substitution for any of the Securities initially deposited in the Fund, except
for the substitution of certain refunding securities for such Securities. In
the event of any amendment, the Trustee is obligated to notify promptly all
Unitholders of the substance of such amendment.
A Trust may be terminated at any time by consent of Unitholders of 51% of the
Units of such Trust then outstanding or by the Trustee when the value of such
Trust, as shown by any semi-annual evaluation, is less than that indicated
under "Summary of Essential Financial Information". A Trust will be
liquidated by the Trustee in the event that a sufficient number of Units not
yet sold are tendered for redemption by the Underwriters, including the
Sponsor, so that the net worth of such Trust would be reduced to less than 40%
of the initial principal amount of such Trust. If a Trust is liquidated
because of the redemption of unsold Units by the Underwriters, the Sponsor
will refund to each purchaser of Units the entire sales charge paid by such
purchaser. The Trust Agreement provides that each Trust shall terminate upon
the redemption, sale or other disposition of the last Security held in such
Trust, but in no event shall it continue beyond the end of the year preceding
the fiftieth anniversary of the Trust Agreement in the case of an IM-IT or a
State Trust (other than a State Intermediate Laddered Maturity Trust), or
beyond the end of the year preceding the twentieth anniversary of the Trust
Agreement in the case of IM-IT Limited Maturity, IM-IT Intermediate, State
Intermediate Laddered Maturity and IM-IT Short Intermediate Trusts. In the
event of termination of the Fund or any Trust, written notice thereof will be
sent by the Trustee to each Unitholder of such Trust at his address appearing
on the registration books of the Fund maintained by the Trustee. Within a
reasonable time thereafter the Trustee shall liquidate any Securities then
held in such Trust and shall deduct from the funds of such Trust any accrued
costs, expenses or indemnities provided by the Trust Agreement, including
estimated compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to provide for payment of any applicable taxes or other
governmental charges. The sale of Securities in the Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were
not required at such time. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the principal amount or par
amount of Securities represented by the Units held by such Unitholder. The
Trustee shall then distribute to each Unitholder his share of the balance of
the Interest and Principal Accounts. With such distribution the Unitholder
shall be furnished a final distribution statement of the amount distributable.
At such time as the Trustee in its sole discretion shall determine that any
amounts held in reserve are no longer necessary, it shall make distribution
thereof to Unitholders in the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so
insured are held by such Trust, the price to be received by such Trust upon
the disposition of any such Bond which is in default, by reason of nonpayment
of principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for
the Trustee to, and the Trustee does not currently intend to, dispose of any
Bond or Bonds if retention of such Bond or Bonds, until due, shall be deemed
to be in the best interest of Unitholders, including, but not limited to,
situations in which a Bond or Bonds so insured are in default and situations
in which a Bond or Bonds so insured have deteriorated market prices resulting
from a significant risk of default. Since the Preinsured Bonds will reflect
the value of the related insurance, it is the present intention of the Sponsor
not to direct the Trustee to hold any of such Preinsured Bonds after the date
of termination. All proceeds received, less applicable expenses, from
insurance on defaulted Bonds not disposed of at the date of termination will
ultimately be distributed to Unitholders of record as of such date of
termination as soon as practicable after the date such defaulted Bond or Bonds
become due and applicable insurance proceeds have been received by the Trustee.
Limitation on Liabilities. The Sponsor, the Evaluator and the Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
their reckless disregard of their obligations and duties hereunder. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Securities. In the event of the failure of
the Sponsor to act under the Trust Agreement, the Trustee may act thereunder
and shall not be liable for any action taken by it in good faith under the
Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Fund
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see "
Underwriting") at the Public Offering Price, plus interest accrued but
unpaid from the First Settlement Date to the date of settlement as described
above under "Unitholder Explanations--Accrued Interest--Accrued
Interest". Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this Prospectus at the
secondary Public Offering Price plus interest accrued to the date of
settlement in the manner described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of $25.00 per Unit for less than 100 Units, $29.00 per Unit for any single
transaction of 100 to 249 Units, $28.50 per Unit for any single transaction of
250 to 499 Units, $31.50 per Unit for any single transaction of 500 to 999
Units and $31.00 per Unit for any single transaction of 1,000 or more Units of
an IM-IT Intermediate Trust, $20.00 per Unit for less than 100 Units, $22.00
per Unit for any single transaction of 100 to 249 Units, $21.50 per Unit for
any single transaction of 250 to 499 Units, $24.50 per Unit for any single
transaction of 500 to 999 Units and $24.00 per Unit for any single transaction
of 1,000 or more Units of a State Intermediate Laddered Maturity Trust, and in
the case of an IM-IT or a State Trust (other than a State Intermediate
Laddered Maturity Trust) $30.00 per Unit for less than 100 Units, $36.00 per
Unit for any single transaction of 100 to 249 Units, $38.00 per Unit for any
single transaction of 250 to 499 Units, $39.00 per Unit for any single
transaction of 500 to 999 Units and $39.00 per Unit for any single transaction
of 1,000 or more Units, provided that such Units are acquired either from the
Sponsor (in the case of dealer transactions) or through the Sponsor (in the
case of transactions involving brokers or others). The increased concession or
agency commission is a result of the discount given to purchasers for quantity
purchases. See "Unitholder Explanations--Public Offering--General".
Certain commercial banks are making Units of the Fund available to their
customers on an agency basis. A portion of the sales charge paid by these
customers (equal to the agency commission referred to above) is retained by or
remitted to the banks. Under the Glass-Steagall Act, banks are prohibited from
underwriting Units of the Fund; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have not indicated that
these particular agency transactions are not permitted under such Act. In
addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. Any
quantity discount (see "Unitholder Explanations--Public
Offering--General") provided to investors will be borne by the selling
dealer or agent. For secondary market transactions, such concession or agency
commission will amount to 70% of the applicable sales charge as determined
using the table found in "Unitholder Explanations--Public Offering".
Except as stated hereinafter, the minimum purchase requirement in the initial
offering period and in the secondary market is one Unit. In connection with
fully disclosed transactions with the Sponsor, the minimum purchase
requirement will be that number of Units set forth in the contract between the
Sponsor and the related broker or agent.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units and to change the amount of the concession or agency
commission to dealers and others from time to time. See "Underwriting".
Sponsor and Underwriter Compensation. The Underwriters will receive a gross
sales commission equal to that percentage of the Public Offering Price of the
Units as indicated under "Unitholder Explanations--Public
Offering--Offering Price" less any reduced sales charges for quantity
purchases as described under "Unitholder Explanations--Public
Offering--General".
The Sponsor will receive from the Underwriters the excess of such gross sales
commission over $35.00, $29.00, $27.00, $12.00, $22.00 and $35.00 per Unit of
any Quality, IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short
Intermediate, State Intermediate Laddered Maturity Trust and other Insured
Trusts, respectively, as of the Date of Deposit. In connection with quantity
sales to purchasers of any IM-IT or State Trust (other than a State
Intermediate Laddered Maturity Trust) the Underwriters will receive from the
Sponsor commissions totalling $37.00 per Unit for any single transaction of
100 to 249 Units, $39.00 per Unit for any single transaction of 250 to 499
Units, $40.00 per Unit for any single transaction of 500 to 999 Units and
$39.00 per Unit for any single transaction of 1,000 or more Units. In
connection with quantity sales to purchasers of any IM-IT Intermediate Trust
the Underwriters will receive from the Sponsor commissions totalling $30.00
per Unit for any single transaction of 100 to 249 Units, $29.50 per Unit for
any single transaction of 250 to 499 Units, $32.50 per Unit for any single
transaction of 500 to 999 Units and $31.00 per Unit for any single transaction
of 1,000 or more Units. In connection with quantity sales to purchasers of any
State Intermediate Laddered Maturity Trust the Underwriters will receive from
the Sponsor commissions totalling $23.00 per Unit for any single transaction
of 100 to 249 Units, $23.00 per Unit for any single transaction of 250 to 499
Units, $24.75 per Unit for any single transaction of 500 to 999 Units and
$24.00 per Unit for any single transaction of 1,000 or more Units. A. G.
Edwards & Sons, Inc. ("Edwards"), which acts as a Managing Underwriter
of Units of the various series of the IM-IT, 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 it underwrites. Also, if The Principal
Financial Securities, Inc. commits (on the Date of Deposit) to underwrite a
total of 4,000 or more Units of this series of the IM-IT, any other series of
the IM-IT and/or any series of Texas Insured Municipals Income Trust during
any calendar month, then The Principal Financial Securities, Inc. will receive
an additional $1.00 per Unit for each of the Units of such Trust it commits to
underwrite in said month. Also, the Sponsor will receive from the Managing
Underwriters of the California IM-IT Trust (who underwrite 15% of the
respective Trusts or 1,000 Units, whichever is greater) the excess of such
gross sales commission over $38.00 per Unit of the respective trusts, as of
the Date of Deposit. Also, any such Managing Underwriter that sells a total of
25% or 1500 Units, whichever is greater, of any California IM-IT Trust will
receive an additional $2.00 per each such Unit. In addition, the Sponsor will
receive from the Managing Underwriters of the Connecticut IM-IT Trust (who
underwrite 15% of the Trust involved or 1,000 Units of the Trust, whichever is
greater) the excess of such gross sales commission over $38.00 per Unit of the
Trust, as of the Date of Deposit. Also, any such Managing Underwriter that
sells a total of 25% or 1,500 Units, whichever is greater, of the Connecticut
IM-IT Trust will receive an additional $2.00 per each such Unit. In addition,
the Sponsor will receive from the Managing Underwriters of the Michigan IM-IT
Trust (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 Michigan IM-IT Trust will receive an additional $2.00 per each
such Unit. Also, the Sponsor will receive from the Managing Underwriters of
the Maryland Quality Trust (who underwrite 15% of the respective Trusts or
1,000 Units, whichever is greater) the excess of such gross sales commission
over $38.00 per Unit of the respective trusts, as of the Date of Deposit.
Also, any such Managing Underwriter that sells a total of 25% or 1500 Units,
whichever is greater, of any Maryland Quality Trust will receive an additional
$2.00 per each such Unit. See "Unitholder Explanations--Public
Offering--General." Further, each Underwriter who underwrites 1,000 or
more Units in any Trust will receive additional compensation from the Sponsor
of $1.00 for each Unit it underwrites. In addition, the Sponsor and certain of
the Underwriters will realize a profit or the Sponsor will sustain a loss, as
the case may be, as a result of the difference between the price paid for the
Securities by the Sponsor and the cost of such Securities to a Trust (which is
based on the determination by Interactive Data Corporation of the aggregate
offering price of the underlying Securities in such Trust on the Date of
Deposit). See "Underwriting" and "Portfolio" for the
applicable Trust and "Notes to Portfolios". The Sponsor and the
Underwriters may also realize profits or sustain losses with respect to
Securities deposited in each Trust which were acquired by the Sponsor from
underwriting syndicates of which they were members. The Sponsor has
participated as sole underwriter or as manager or as a member of the
underwriting syndicates from which none of the aggregate principal amount of
the Securities in the portfolios of the Fund were acquired. The Underwriters
may further realize additional profit or loss during the initial offering
period as a result of the possible fluctuations in the market value of the
Securities in each Trust after the Date of Deposit, since all proceeds
received from purchasers of Units (excluding dealer concessions or agency
commissions allowed, if any) will be retained by the Underwriters. Affiliates
of an Underwriter are entitled to the same dealer concessions or agency
commissions that are available to the Underwriter.
As stated under "Unitholder Explanations--Public Offering--Market for
Units", the Sponsor intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units of the Fund. In so maintaining a
market, such person or persons will also realize profits or sustain losses in
the amount of any difference between the price at which Units are purchased
and the price at which Units are resold (which price is based on the bid
prices of the Securities in such Trust and includes a sales charge). In
addition, such person or persons will also realize profits or sustain losses
resulting from a redemption of such repurchased Units at a price above or
below the purchase price for such Units, respectively.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby and certain matters
relating to Federal, Georgia and Virginia tax law have been passed upon by
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Orrick, Herrington & Sutcliffe has acted as special
counsel to the Fund for California tax matters. Day, Berry & Howard has acted
as special counsel to the Fund for Connecticut tax matters. Weinberg and Green
has acted as special counsel to the Fund for Maryland tax matters. Miller,
Canfield, Paddock and Stone, P.L.C. has acted as special counsel to the Fund
for Michigan tax matters. Tanner Propp & Farber has acted as counsel for the
Trustee and as special counsel to the Fund for New York tax matters. None of
the special counsel for the Fund has expressed any opinion regarding the
completeness or materiality of any matters contained in this Prospectus other
than the tax opinion set forth under "Tax Status" relating to the
Trust for which it has provided an opinion.
Independent Certified Public Accountants. The statements of condition and the
related securities portfolios at the Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
(1)Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on Bonds
which is excludable from gross income under the Internal Revenue Code of 1986
(the "Code") will retain its status when distributed to Unitholders;
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 the
respective Trust under subpart E, subchapter J of chapter 1 of the Code and
will have a taxable event when such Trust disposes of a Bond, or when the
Unitholder redeems or sells his Units. Unitholders must reduce the tax basis
of their Units for their share of accrued interest received by the respective
Trust, if any, on Bonds delivered after the Unitholders pay for their Units to
the extent that such interest accrued on such Bonds during the period from the
Unitholder's settlement date to the date such Bonds are delivered to the
respective Trust and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such Units.
Gain or loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the Units. If
the Trustee disposes of Bonds (whether by sale, payment on maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder. The
amount of any such gain or loss is measured by comparing the Unitholder's pro
rata share of the total proceeds from such disposition with the Unitholder's
basis for his or her fractional interest in the asset disposed of. In the case
of a Unitholder who purchases Units, such basis (before adjustment for earned
original issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets ratably
according to value as of the valuation date nearest the date of acquisition of
the Units. 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 by AMBAC Indemnity, Financial Guaranty or
a combination thereof with respect to the Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations; and
(4)Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted obligations held by the Trustee
will be excludable from Federal gross income if, and to the same extent as,
such interest would have been excludable if paid in the normal course by the
issuer of the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
obligations, rather than the insurer, will pay debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Bond, depending on the date the Bond was
issued. In addition, special rules apply if the purchase price of a Bond
exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "
adjusted issue price") to prior owners. The application of these rules
will also vary depending on the value of the Bond on the date a Unitholder
acquires his Units and the price the Unitholder pays for his Units.
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 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. Investors with
questions regarding this issue should consult with their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user"
of the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or
related person, will not be excludible from Federal gross income, although
interest on such Bonds received by others would be excludible from Federal
gross income. "Substantial user" and "related person" are
defined under the Code and U.S. Treasury Regulations. Any person who believes
that he or she may be a "substantial user" or a "related
person" as so defined should contact his or her tax adviser.
In the opinion of Tanner Propp & Farber, special counsel to the Fund for New
York tax matters, under existing law, the Fund and each Trust are not
associations taxable as corporations and the income of each Trust will be
treated as the income of the Unitholders under the income tax laws of the
State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35%, effective for long-term capital gains realized in
taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of "
modified adjusted gross income" plus 50% of the Social Security benefits
received exceeds a "base amount". The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85% of Social Security benefits are includible in gross income to
the extent that the sum of "modified adjusted gross income" plus 50%
of Social Security benefits received exceeds an "adjusted base amount."
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for
married taxpayers filing a joint return, and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does
not exceed the base amount need not include any Social Security benefits in
gross income.
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,
see "Tax Status" for the applicable Trust. Except as noted therein,
the exemption of interest on state and local obligations for Federal income
tax purposes discussed above does not necessarily result in exemption under
the income or other tax laws of any State or City. The laws of the several
States vary with respect to the taxation of such obligations.
DESCRIPTION OF SECURITIES RATINGS
Standard & Poor's, A Division of the McGraw-Hill Companies. A Standard &
Poor's corporate or municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific debt obligation.
This assessment of creditworthiness may take into consideration obligors such
as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard & Poor's by
the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangements under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit quality,
the ratings from "AA" to "BBB" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to
completion, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
Moody's Investors Service, Inc. A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings
follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "
gilt edge". Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
With the occasional exception of oversupply in a few specific instances, the
safety of obligations of this class is so absolute that their market value is
affected solely by money market fluctuations.
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.
As published by the rating companies.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264 (IM-IT, IM-IT Intermediate, California
IM-IT, Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT, New York IM-IT
Intermediate Laddered Maturity, Maryland Quality and Virginia Quality Trusts):
We have audited the accompanying statements of condition and the related
portfolios of Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264 (IM-IT, IM-IT Intermediate, California
IM-IT, Connecticut IM-IT, Georgia IM-IT, Michigan IM-IT, New York IM-IT
Intermediate Laddered Maturity, Maryland Quality and Virginia Quality Trusts)
as of December 13, 1995. The statements of condition and portfolios are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of irrevocable letters of credit deposited to
purchase tax-exempt securities by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 264 (IM-IT, IM-IT
Intermediate, California IM-IT, Connecticut IM-IT, Georgia IM-IT, Michigan
IM-IT, New York IM-IT Intermediate Laddered Maturity, Maryland Quality and
Virginia Quality Trusts) as of December 13, 1995, in conformity with generally
accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
December 13, 1995
<TABLE>
INSURED MUNICIPALS INCOME TRUST
and
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 264
Statements of Condition
As of December 13, 1995
<CAPTION>
IM-IT
INVESTMENT IN SECURITIES Intermediate California
IM-IT Trust IM-IT Trust
<S> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F4>... $ 8,637,016 $ 4,914,270 $ 2,884,400
Accrued interest to the First Settlement Date <F1><F4>..... 33,333 31,592 35,874
Total...................................................... $ 8,670,349 $ 4,945,862 $ 2,920,274
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor <F1><F4> $ 33,333 $ 31,592 $ 35,874
Interest of Unitholders--
Cost to investors <F3>..................................... 9,082,000 5,113,700 3,033,000
Less: Gross underwriting commission <F3>................... 444,984 199,430 148,600
Net interest to Unitholders <F1><F3><F4>................... 8,637,016 4,914,270 2,884,400
Total...................................................... $ 8,670,349 $ 4,945,862 $ 2,920,274
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Corporation on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
. The contracts to purchase tax-exempt Securities are collateralized by
irrevocable letters of credit which have been deposited with the Trustee in
and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Principal Offering Accrued
Amount of Amount of Price of Interest to
Letter of Bonds Under Bonds Under Expected
Credit Contracts Contracts Delivery Dates
<S> <C> <C> <C> <C>
IM-IT...................... $ 8,676,030 $ 9,000,000 $ 8,637,016 $ 39,014
IM-IT Intermediate Trust... $ 4,947,823 $ 5,000,000 $ 4,914,270 $ 33,553
California IM-IT Trust..... $ 2,918,633 $ 2,970,000 $ 2,884,400 $ 34,233
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price" and "Trust
Administration--General--Sponsor and Underwriter Profits" and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while the
Net interest to Unitholders remains unchanged.
<F4>The Trustee will advance to the Trust the amount of net interest accrued to
December 18, 1995, the First Settlement Date, for distribution to the Sponsor
as the Unitholder of record as of the First Settlement Date.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
and
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 264
Statements of Condition (Continued)
As of December 13, 1995
<CAPTION>
INVESTMENT IN SECURITIES Connecticut Georgia Michigan
IM-IT Trust IM-IT Trust IM-IT Trust
<S> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F4>... $ 2,962,380 $ 3,000,418 $ 2,935,751
Accrued interest to the First Settlement Date <F1><F4>..... 34,244 47,395 18,509
Total...................................................... $ 2,996,624 $ 3,047,813 $ 2,954,260
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor <F1><F4> $ 34,244 $ 47,395 $ 18,509
Interest of Unitholders--
Cost to investors <F3>..................................... 3,115,000 3,155,000 3,087,000
Less: Gross underwriting commission <F3>................... 152,620 154,582 151,249
Net interest to Unitholders <F1><F3><F4>................... 2,962,380 3,000,418 2,935,751
Total...................................................... $ 2,996,624 $ 3,047,813 $ 2,954,260
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Corporation on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
. The contracts to purchase tax-exempt Securities are collateralized by
irrevocable letters of credit which have been deposited with the Trustee in
and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Principal Offering Accrued
Amount of Amount of Price of Interest to
Letter of Bonds Under Bonds Under Expected
Credit Contracts Contracts Delivery Dates
<S> <C> <C> <C> <C>
Connecticut IM-IT Trust... $ 2,994,491 $ 3,045,000 $ 2,962,380 $ 32,111
Georgia IM-IT Trust....... $ 3,045,697 $ 3,085,000 $ 3,000,418 $ 45,279
Michigan IM-IT Trust...... $ 2,952,274 $ 3,025,000 $ 2,935,751 $ 16,523
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price" and "Trust
Administration--General--Sponsor and Underwriter Profits" and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while the
Net interest to Unitholders remains unchanged.
<F4>The Trustee will advance to the Trust the amount of net interest accrued to
December 18, 1995, the First Settlement Date, for distribution to the Sponsor
as the Unitholder of record as of the First Settlement Date.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
and
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 264
Statements of Condition (Continued)
As of December 13, 1995
<CAPTION>
New York
IM-IT
Intermediate
Laddered
INVESTMENT IN SECURITIES Maturity Maryland Virginia
Trust Quality Trust Quality Trust
<S> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F4>... $ 3,103,992 $ 2,941,454 $ 2,959,524
Accrued interest to the First Settlement Date <F1><F4>..... 29,285 50,754 34,096
Total...................................................... $ 3,133,277 $ 2,992,208 $ 2,993,620
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor <F1><F4> $ 29,285 $ 50,754 $ 34,096
Interest of Unitholders--
Cost to investors <F3>..................................... 3,199,959 3,093,000 3,112,000
Less: Gross underwriting commission <F3>................... 95,967 151,546 152,476
Net interest to Unitholders <F1><F3><F4>................... 3,103,992 2,941,454 2,959,524
Total...................................................... $ 3,133,277 $ 2,992,208 $ 2,993,620
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Corporation on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
. The contracts to purchase tax-exempt Securities are collateralized by
irrevocable letters of credit which have been deposited with the Trustee in
and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Accrued
Principal Offering Interest to
Amount of Amount of Price of Expected
Letter of Bonds Under Bonds Under Delivery
Credit Contracts Contracts Dates
<S> <C> <C> <C> <C>
New York IM-IT Intermediate Laddered Maturity Trust... $ 3,131,990 $ 3,150,000 $ 3,103,992 $ 27,998
Maryland Quality Trust................................ $ 2,990,077 $ 3,020,000 $ 2,941,454 $ 48,623
Virginia Quality Trust................................ $ 2,991,339 $ 3,040,000 $ 2,959,524 $ 31,815
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price" and "Trust
Administration--General--Sponsor and Underwriter Profits" and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while the
Net interest to Unitholders remains unchanged.
<F4>The Trustee will advance to the Trust the amount of net interest accrued to
December 18, 1995, the First Settlement Date, for distribution to the Sponsor
as the Unitholder of record as of the First Settlement Date.
</TABLE>
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of this prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under combined Federal and State taxes
(where applicable) using the published Federal and State tax rates (where
applicable) scheduled to be in effect in 1995. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you
would have to earn on taxable investments to equal the tax-exempt estimated
current return in your income tax bracket. For cases in which more than one
State bracket falls within a Federal bracket, the highest State bracket is
combined with the Federal bracket. The combined State and Federal tax rates
shown reflect the fact that State tax payments are currently deductible for
Federal tax purposes. The tables do not show the approximate taxable estimated
current returns for individuals that are subject to the alternative minimum
tax. The taxable equivalent estimated current returns may be somewhat higher
than the equivalent returns indicated in the following tables for those
individuals who have adjusted gross incomes in excess of $114,700. The tables
do not reflect the effect of limitations on itemized deductions and the
deduction for personal exemptions. They were designed to phase out certain
benefits of these deductions for higher income taxpayers. These limitations,
in effect, raise the marginal maximum Federal tax rate to approximately 44
percent for taxpayers filing a joint return and entitled to four personal
exemptions and to approximately 41 percent for taxpayers filing a single
return entitled to only one personal exemption. These limitations are subject
to certain maximums, which depend on the number of exemptions claimed and the
total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions. See "
Other Matters--Federal Tax Status" for a more detailed discussion of
recent Federal tax legislation, including a discussion of provisions affecting
corporations.
IM-IT
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Joint Tax
Single Return Return Bracket 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
23.35 - 56.55 39.00 - 94.25 28 6.25 6.94 7.64 8.33 9.03 9.72 10.42
56.55 - 117.95 94.25 - 143.60 31 6.52 7.25 7.97 8.70 9.42 10.14 10.87
117.95 - 256.50 143.60 - 256.50 36 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 256.50 Over 256.50 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
INTERMEDIATE
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax
Return Return Bracket 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 15% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
23.35 - 56.55 39.00 - 94.25 28 5.56 6.25 6.94 7.64 8.33 9.03 9.72
56.55 - 117.95 94.25 - 143.60 31 5.80 6.52 7.25 7.97 8.70 9.42 10.14
117.95 - 256.50 143.60 - 256.50 36 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over 256.50 Over 256.50 39.6 6.62 7.45 8.28 9.11 9.93 10.76 11.59
</TABLE>
CALIFORNIA
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Joint Tax
Single Return Return Bracket* 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 20.1% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39%
23.35 - 56.55 39.00 - 94.25 34.7 6.89 7.66 8.42 9.19 9.95 10.72 11.49
94.25 - 143.60 37.4 7.19 7.99 8.79 9.58 10.38 11.18 11.98
56.55 - 117.95 37.9 7.25 8.05 8.86 9.66 10.47 11.27 12.08
117.95 - 214.93 143.60 - 256.50 42.4 7.81 8.68 9.55 10.42 11.28 12.15 13.02
214.93 - 256.50 43 7.89 8.77 9.65 10.53 11.40 12.28 13.16
256.50 - 429.86 45.6 8.27 9.19 10.11 11.03 11.95 12.87 13.79
Over 256.50 Over 429.86 46.2 8.36 9.29 10.22 11.15 12.08 13.01 13.94
</TABLE>
* The State tax rates assumed take into account recent adjustments of tax
brackets based on changes in the Consumer Price Index. The table reflects
California income tax laws that increase State income tax rates for high
income taxpayers. However, the table does not reflect the limitation on
itemized deductions and the phase out of the benefit for the personal
exemption credit and the dependent exemption credit that are imposed by the
California income tax laws in a manner similar to Federal tax law.
CONNECTICUT
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax
Return Return Bracket* 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 39.00 17.5% 5.45% 6.06% 6.67% 7.27% 7.88% 8.48% 9.09%
$ 0 - 23.35 18.3 5.51 6.12 6.73 7.34 7.96 8.57 9.18
23.35 - 56.55 39.00 - 94.25 30.8 6.50 7.23 7.95 8.67 9.39 10.12 10.84
56.55 - 117.95 94.25 - 143.60 34.1 6.83 7.59 8.35 9.10 9.86 10.62 11.38
117.95 - 256.50 143.60 - 256.50 38.9 7.36 8.18 9.00 9.82 10.64 11.46 12.27
Over 256.50 Over 256.50 42.3 7.80 8.67 9.53 10.40 11.27 12.13 13.00
</TABLE>
* The table takes into account the Connecticut income tax. The Connecticut
income tax is based on Connecticut taxable income, which is not tied to
Federal taxable income. Connecticut taxable income is equal to Connecticut
adjusted gross income ("CAGI") (which is Federal adjusted gross income
with certain modifications) minus the allowable personal exemption ($12,000 in
the case of single individuals; $24,000 for married persons filing jointly).
Although not reflected in the table, the Connecticut income tax provides for a
personal exemption phase-out, which essentially doubles the effective marginal
Connecticut income tax rate for single taxpayers whose CAGI is between $24,000
and $35,001 at which point the personal exemption is completely phased out.
For married taxpayers filing a joint return, the effective marginal
Connecticut income tax rate is doubled where CAGI is between $48,000 and
$71,001, at which point the personal exemption is completely phased out. In
addition, as reflected in the rates shown, the Connecticut income tax provides
for a tax credit (at varying percentages depending on the taxpayer's CAGI)
against the income tax which is based on CAGI and, in effect, varies the
income tax rate for taxpayers. Investors should consult their own tax advisors
regarding the effect of the credit on marginal tax rates at specific CAGI
levels.
GEORGIA
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax
Return Return Bracket 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 20.1% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39%
23.35 - 56.55 39.00 - 94.25 32.3 6.65 7.39 8.12 8.86 9.60 10.34 11.08
56.55 - 117.95 94.25 - 143.60 35.1 6.93 7.70 8.47 9.24 10.02 10.79 11.56
117.95 - 256.50 143.60 - 256.50 39.8 7.48 8.31 9.14 9.97 10.80 11.63 12.46
Over 256.50 Over 256.50 43.2 7.92 8.80 9.68 10.56 11.44 12.32 13.20
</TABLE>
MICHIGAN
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax
Return Return Bracket* 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 21.7% 5.70% 6.33% 6.96% 7.59% 8.23% 8.86% 9.49%
23.35 - 56.55 39.00 - 94.25 33.7 6.73 7.47 8.22 8.97 9.72 10.46 11.21
56.55 - 117.95 94.25 - 143.60 36.5 7.02 7.80 8.58 9.36 10.14 10.92 11.70
117.95 - 256.50 143.60 - 256.50 41.1 7.56 8.40 9.24 10.08 10.92 11.76 12.61
Over 256.50 Over 256.50 44.4 8.01 8.90 9.79 10.68 11.57 12.46 13.35
</TABLE>
*The combined State and Federal tax brackets reflect Federal and State income
and State intangibles taxes but do not reflect the effect of the exemption
from local income taxes; accordingly, Michigan residents subject to such local
income taxes would need a somewhat higher taxable estimated current return
than those shown to equal the tax-exempt estimated current return of the Trust.
NEW YORK INTERMEDIATE LADDERED MATURITY
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax
Return Return Bracket* 3 1/2% 4% 4 1/2% 5% 5 1/2% 6% 6 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 21.5% 4.46% 5.10% 5.73% 6.37% 7.01% 7.64% 8.28%
23.35 - 56.55 39.00 - 94.25 33.5 5.26 6.02 6.77 7.52 8.27 9.02 9.77
56.55 - 117.95 94.25 - 143.60 36.2 5.49 6.27 7.05 7.84 8.62 9.40 10.19
117.95 - 256.50 143.60 - 256.50 40.9 5.92 6.77 7.61 8.46 9.31 10.15 11.00
Over 256.50 Over 256.50 44.2 6.27 7.17 8.06 8.96 9.86 10.75 11.65
</TABLE>
* Combined Federal and State tax bracket was computed assuming that the
investor is not subject to local income taxes, such as New York City taxes.
Should a Unitholder reside in a locality which imposes an income tax, the
Unitholder's equivalent taxable estimated current return would be greater than
the equivalent taxable estimated current returns indicated in the table. The
table does not reflect the New York State supplemental income tax based upon a
taxpayer's New York State taxable income and New York State adjusted gross
income. This supplemental tax results in an increased marginal State income
tax rate to the extent a taxpayer's New York State adjusted gross income
ranges between $100,000 and $150,000. In addition, the table does not reflect
the amendments to the New York State income tax law that impose limitations on
the deductibility of itemized deductions. The application of the New York
State supplemental income tax and limitation on itemized deductions may result
in a higher combined Federal, State and local tax rate than indicated in the
table.
MARYLAND
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Joint Tax
Single Return Return Bracket* 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 19.3% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67% 9.29%
23.35 - 56.55 39.00 - 94.25 31.6 6.58 7.31 8.04 8.77 9.50 10.23 10.96
94.25 - 143.60 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
56.55 - 117.95 35.1 6.93 7.70 8.47 9.24 10.02 10.79 11.56
117.95 - 256.50 143.60 - 256.50 39.8 7.48 8.31 9.14 9.97 10.80 11.63 12.46
Over 256.50 Over 256.50 43.2 7.92 8.80 9.68 10.56 11.44 12.32 13.20
</TABLE>
*The table does not reflect the effect of the exemption of the Trust from
local, county and city taxes. Residents of most Maryland localities, including
Montgomery County and the City and County of Baltimore, are subject to taxes
and therefore would need a somewhat higher taxable estimated current return
than those shown to equal the tax-exempt estimated current return of the
Trust.
VIRGINIA
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax
Return Return Bracket 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
Equivalent Taxable Estimated Current Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 19.9% 6.24% 6.87% 7.49% 8.11% 8.74% 9.36% 9.99%
23.35 - 56.55 39.00 - 94.25 32.1 7.36 8.10 8.84 9.57 10.31 11.05 11.78
56.55 - 117.95 94.25 - 143.60 35 7.69 8.46 9.23 10.00 10.77 11.54 12.31
117.95 - 256.50 143.60 - 256.50 39.7 8.29 9.12 9.95 10.78 11.61 12.44 13.27
Over 256.50 Over 256.50 43.1 8.79 9.67 10.54 11.42 12.30 13.18 14.06
</TABLE>
A comparison of tax-free and equivalent taxable estimated current returns with
the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns on
the Trusts and returns over specified periods on other similar Van Kampen
American Capital sponsored unit investment trusts 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 U.S.
Government and bank CDs and money market accounts are insured by an agency 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 elsewhere in this Prospectus.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated monthly and semi-annual
distributions of interest and principal to Unitholders. The tables assume no
changes in expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Securities prior to
maturity or expected retirement date and the receipt of principal upon
maturity or expected retirement date. To the extent the foregoing assumptions
change actual distributions will vary.
IM-IT
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.81 $ 1.81
February 1996 - July 2006 4.17 4.17
August 2006 3.91 $ 110.10 114.01
September 2006 - May 2007 3.68 3.68
June 2007 3.68 5.51 9.19
July 2007 3.65 110.11 113.76
August 2007 3.15 3.15
September 2007 3.15 46.24 49.39
October 2007 2.94 2.94
November 2007 2.94 110.11 113.05
December 2007 - May 2008 2.44 2.44
June 2008 2.17 110.11 112.28
July 2008 - June 2015 1.93 1.93
July 2015 1.93 55.05 56.98
August 2015 - November 2019 1.69 1.69
December 2019 1.69 113.41 115.10
January 2020 - June 2020 1.18 1.18
July 2020 1.18 29.18 30.36
August 2020 - August 2021 1.18 1.18
September 2021 1.18 14.87 16.05
October 2021 - October 2025 1.18 1.18
November 2025 1.18 176.17 177.35
December 2025 .18 110.11 110.29
</TABLE>
IM-IT (Continued)
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
June 1996 $ 22.86 $ 22.86
December 1996 - June 2006 25.25 25.25
August 2006 $ 110.10 110.10
December 2006 23.01 23.01
June 2007 22.28 5.51 27.79
July 2007 110.11 110.11
September 2007 46.24 46.24
November 2007 110.11 110.11
December 2007 18.46 18.46
June 2008 14.53 110.11 124.64
December 2008 - June 2015 11.74 11.74
July 2015 55.05 55.05
December 2015 10.50 10.50
June 2016 - June 2019 10.26 10.26
December 2019 10.26 113.41 123.67
June 2020 7.21 7.21
July 2020 29.18 29.18
December 2020 - June 2021 7.21 7.21
September 2021 14.87 14.87
December 2021 - June 2025 7.21 7.21
November 2025 176.17 176.17
December 2025 6.21 110.11 116.32
</TABLE>
IM-IT Intermediate Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.60 $ 1.60
February 1996 - November 2004 3.68 3.68
December 2004 3.58 $ 139.00 142.58
January 2005 - June 2005 3.14 3.14
July 2005 3.14 376.00 379.14
August 2005 1.65 1.65
September 2005 1.65 50.00 51.65
October 2005 1.65 1.65
November 2005 1.65 124.00 125.65
December 2005 1.18 150.00 151.18
January 2006 .60 .60
February 2006 .60 100.00 100.60
March 2006 - May 2006 .20 .20
June 2006 .07 61.00 61.07
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
June 1996 $ 20.22 $ 20.22
December 1996 - June 2004 22.33 22.33
December 2004 22.23 $ 139.00 161.23
June 2005 19.05 19.05
July 2005 376.00 376.00
September 2005 50.00 50.00
November 2005 124.00 124.00
December 2005 11.07 150.00 161.07
February 2006 100.00 100.00
June 2006 1.92 61.00 62.92
</TABLE>
California IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.78 $ 1.78
February 1996 - February 2007 4.12 4.12
March 2007 4.12 $ 102.20 106.32
April 2007 3.65 3.65
May 2007 3.65 164.86 168.51
June 2007 - July 2015 2.90 2.90
August 2015 2.90 151.66 154.56
September 2015 - October 2017 2.22 2.22
November 2017 2.22 32.97 35.19
December 2017 - June 2023 2.22 2.22
July 2023 2.22 164.86 167.08
August 2023 - September 2023 1.49 1.49
October 2023 1.49 98.91 100.40
November 2023 - July 2025 1.07 1.07
August 2025 1.07 164.85 165.92
September 2025 - November 2026 .35 .35
December 2026 .13 98.91 99.04
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.80 $ 1.80
July 1996 - January 2007 24.95 24.95
March 2007 $ 102.20 102.20
May 2007 164.86 164.86
July 2007 21.56 21.56
January 2008 - July 2015 17.59 17.59
August 2015 151.66 151.66
January 2016 14.19 14.19
July 2016 - July 2017 13.51 13.51
November 2017 32.97 32.97
January 2018 - January 2023 13.51 13.51
July 2023 13.51 164.86 178.37
October 2023 98.91 98.91
January 2024 7.82 7.82
July 2024 - July 2025 6.55 6.55
August 2025 164.85 164.85
January 2026 2.92 2.92
July 2026 2.20 2.20
December 2026 1.60 98.91 100.51
</TABLE>
Connecticut IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.72 $ 1.72
February 1996 - May 2005 3.96 3.96
June 2005 3.96 $ 112.35 116.31
July 2005 - September 2006 3.46 3.46
October 2006 3.46 32.11 35.57
November 2006 - May 2007 3.32 3.32
June 2007 3.32 128.41 131.73
July 2007 2.73 80.26 82.99
August 2007 - June 2008 2.38 2.38
July 2008 2.38 80.25 82.63
August 2008 - October 2009 2.03 2.03
November 2009 2.03 35.31 37.34
December 2009 - October 2014 2.03 2.03
November 2014 2.03 80.26 82.29
December 2014 1.73 1.73
January 2015 1.66 32.10 33.76
February 2015 - June 2023 1.60 1.60
July 2023 1.60 155.70 157.30
August 2023 - June 2026 .97 .97
July 2026 .97 80.26 81.23
August 2026 - August 2028 .62 .62
September 2028 .62 160.51 161.13
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.73 $ 1.73
July 1996 - January 2005 24.00 24.00
June 2005 $ 112.35 112.35
July 2005 23.49 23.49
January 2006 - July 2006 20.98 20.98
October 2006 32.11 32.11
January 2007 20.53 20.53
June 2007 128.41 128.41
July 2007 19.51 80.26 99.77
January 2008 14.42 14.42
July 2008 14.42 80.25 94.67
January 2009 - July 2009 12.31 12.31
November 2009 35.31 35.31
January 2010 - July 2014 12.31 12.31
November 2014 80.26 80.26
January 2015 11.66 32.10 43.76
July 2015 - January 2023 9.70 9.70
July 2023 9.70 155.70 165.40
January 2024 - January 2026 5.91 5.91
July 2026 5.91 80.26 86.17
January 2027 - July 2028 3.80 3.80
September 2028 1.27 160.51 161.78
</TABLE>
Georgia IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.72 $ 1.72
February 1996 - June 2005 3.98 3.98
July 2005 3.98 $ 156.89 160.87
August 2005 3.28 158.48 161.76
September 2005 - December 2005 2.57 2.57
January 2006 2.57 87.16 89.73
February 2006 - June 2007 2.18 2.18
July 2007 2.18 79.24 81.42
August 2007 - November 2007 1.82 1.82
December 2007 1.44 158.48 159.92
January 2008 1.12 31.69 32.81
February 2008 - December 2009 .98 .98
January 2010 .98 39.62 40.60
February 2010 - June 2018 .98 .98
July 2018 .98 79.24 80.22
August 2018 - December 2022 .66 .66
January 2023 .66 158.48 159.14
February 2023 - December 2025 .06 .06
January 2026 .06 28.53 28.59
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.74 $ 1.74
July 1996 - January 2005 24.07 24.07
July 2005 24.07 $ 156.89 180.96
August 2005 158.48 158.48
January 2006 16.30 87.16 103.46
July 2006 - January 2007 13.19 13.19
July 2007 13.19 79.24 92.43
December 2007 158.48 158.48
January 2008 9.95 31.69 41.64
July 2008 - July 2009 5.96 5.96
January 2010 5.96 39.62 45.58
July 2010 - January 2018 5.96 5.96
July 2018 5.96 79.24 85.20
January 2019 - July 2022 4.00 4.00
January 2023 4.00 158.48 162.48
July 2023 - July 2025 .41 .41
January 2026 .41 28.53 28.94
</TABLE>
Michigan IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.78 $ 1.78
February 1996 - April 2005 4.12 4.12
May 2005 4.12 $ 161.96 166.08
June 2005 - June 2006 3.38 3.38
July 2006 3.38 161.97 165.35
August 2006 - November 2006 2.66 2.66
December 2006 2.26 161.97 164.23
January 2007 - April 2007 1.90 1.90
May 2007 1.90 97.19 99.09
June 2007 - June 2015 1.46 1.46
July 2015 1.46 161.96 163.42
August 2015 - April 2017 .74 .74
May 2017 .74 48.60 49.34
June 2017 - October 2017 .53 .53
November 2017 .53 137.67 138.20
May 2018 48.59 48.59
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.80 $ 1.80
July 1996 - January 2005 24.91 24.91
May 2005 $ 161.96 161.96
July 2005 23.43 23.43
January 2006 20.46 20.46
July 2006 20.46 161.97 182.43
December 2006 161.97 161.97
January 2007 14.94 14.94
May 2007 97.19 97.19
July 2007 10.66 10.66
January 2008 - January 2015 8.87 8.87
July 2015 8.87 161.96 170.83
January 2016 - January 2017 4.52 4.52
May 2017 48.60 48.60
July 2017 4.09 4.09
November 2017 137.67 137.67
January 2018 2.03 2.03
May 2018 48.59 48.59
</TABLE>
New York IM-IT Intermediate Laddered Maturity Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.49 $ 1.49
February 1996 - June 2000 3.45 3.45
July 2000 3.45 $ 190.47 193.92
August 2000 - January 2001 2.77 2.77
February 2001 2.77 158.73 161.50
March 2001 - June 2001 2.19 2.19
July 2001 2.19 31.75 33.94
August 2001 - January 2002 2.08 2.08
February 2002 2.08 31.74 33.82
March 2002 - June 2002 1.96 1.96
July 2002 1.86 79.37 81.23
August 2002 1.66 79.36 81.02
September 2002 - January 2003 1.37 1.37
February 2003 1.37 190.48 191.85
March 2003 - January 2004 .66 .66
February 2004 .66 47.62 48.28
March 2004 - June 2004 .47 .47
July 2004 .47 190.48 190.95
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1996 $ 15.44 $ 15.44
November 1996 - May 2000 20.90 20.90
July 2000 $ 190.47 190.47
November 2000 18.17 18.17
February 2001 158.73 158.73
May 2001 15.06 15.06
July 2001 31.75 31.75
November 2001 12.86 12.86
February 2002 31.74 31.74
May 2002 12.27 12.27
July 2002 79.37 79.37
August 2002 79.36 79.36
November 2002 9.73 9.73
February 2003 190.48 190.48
May 2003 6.20 6.20
November 2003 4.06 4.06
February 2004 47.62 47.62
May 2004 3.48 3.48
July 2004 .97 190.48 191.45
</TABLE>
Maryland Quality Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.74 $ 1.74
February 1996 - October 2003 4.03 4.03
November 2003 3.79 $ 101.84 105.63
December 2003 - August 2005 3.58 3.58
September 2005 3.58 80.83 84.41
October 2005 - March 2006 3.22 3.22
April 2006 3.22 130.94 134.16
May 2006 - December 2006 2.59 2.59
January 2007 2.14 193.98 196.12
February 2007 - June 2014 1.75 1.75
July 2014 1.75 35.57 37.32
August 2014 - June 2015 1.59 1.59
July 2015 1.59 21.01 22.60
August 2015 - June 2022 1.59 1.59
July 2022 1.59 121.24 122.83
August 2022 - June 2023 1.11 1.11
July 2023 1.11 290.98 292.09
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1996 $ 18.02 $ 18.02
November 1996 - May 2003 24.40 24.40
November 2003 24.16 $ 101.84 126.00
May 2004 - May 2005 21.72 21.72
September 2005 80.83 80.83
November 2005 21.00 21.00
April 2006 130.94 130.94
May 2006 18.91 18.91
November 2006 15.71 15.71
January 2007 193.98 193.98
May 2007 11.86 11.86
November 2007 - May 2014 10.62 10.62
July 2014 35.57 35.57
November 2014 10.01 10.01
May 2015 9.70 9.70
July 2015 21.01 21.01
November 2015 - May 2022 9.70 9.70
July 2022 121.24 121.24
November 2022 7.74 7.74
May 2023 6.76 6.76
July 2023 2.25 290.98 293.23
</TABLE>
Virginia Quality Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
January 1996 $ 1.82 $ 1.82
February 1996 - May 2007 4.20 4.20
June 2007 4.20 $ 112.46 116.66
July 2007 - September 2007 3.67 3.67
October 2007 3.67 41.78 45.45
November 2007 - November 2008 3.48 3.48
December 2008 3.48 160.67 164.15
January 2009 - December 2013 2.68 2.68
January 2014 2.68 160.66 163.34
February 2014 - October 2014 2.00 2.00
November 2014 2.00 48.20 50.20
December 2014 - September 2015 1.80 1.80
October 2015 1.80 144.61 146.41
November 2015 - October 2016 1.24 1.24
November 2016 1.24 48.20 49.44
December 2016 - March 2019 1.04 1.04
April 2019 1.04 160.66 161.70
May 2019 - June 2023 .36 .36
July 2023 .36 25.71 26.07
August 2023 - October 2023 .25 .25
November 2023 .25 48.20 48.45
December 2023 - June 2027 .04 .04
July 2027 .04 25.71 25.75
</TABLE>
Virginia Quality Trust (Continued)
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
May 1996 $ 18.80 $ 18.80
November 1996 - May 2007 25.45 25.45
June 2007 $ 112.46 112.46
October 2007 41.78 41.78
November 2007 22.59 22.59
May 2008 - November 2008 21.11 21.11
December 2008 160.67 160.67
May 2009 17.07 17.07
November 2009 - November 2013 16.27 16.27
January 2014 160.66 160.66
May 2014 13.52 13.52
November 2014 12.15 48.20 60.35
May 2015 10.94 10.94
October 2015 144.61 144.61
November 2015 10.38 10.38
May 2016 7.56 7.56
November 2016 7.56 48.20 55.76
May 2017 - November 2018 6.35 6.35
April 2019 160.66 160.66
May 2019 5.66 5.66
November 2019 - May 2023 2.23 2.23
July 2023 25.71 25.71
November 2023 1.79 48.20 49.99
May 2024 - May 2027 .30 .30
July 2027 .10 25.71 25.81
</TABLE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
<TABLE>
<CAPTION>
Title
Page
<S> <C>
INTRODUCTION 2
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION 3
UNITHOLDER EXPLANATIONS 9
Settlement of Bonds in the Trusts 9
The Fund 9
Objectives and Securities Selection 10
Risk Factors 12
Replacement Bonds 15
Bond Redemptions 16
Distributions 16
Change of Distribution Option 16
Certificates 17
Estimated Current Returns and Estimated Long-Term Returns 17
Interest Earning Schedule 18
Calculation of Estimated Net Annual Interest Income 18
Accrued Interest 18
Accrued Interest 18
Public Offering 19
General 19
Offering Price 21
Market for Units 22
Distributions of Interest and Principal 22
Reinvestment Option 23
Redemption of Units 24
Reports Provided 25
Insurance on the Bonds in the Insured Trusts 26
IM-IT TRUST 33
IM-IT INTERMEDIATE TRUST 37
CALIFORNIA IM-IT TRUST 40
CONNECTICUT IM-IT TRUST 50
GEORGIA IM-IT TRUST 56
MICHIGAN IM-IT TRUST 62
NEW YORK IM-IT INTERMEDIATE LADDERED
MATURITY TRUST 67
MARYLAND QUALITY TRUST 77
VIRGINIA QUALITY TRUST 81
NOTES TO PORTFOLIOS 87
UNDERWRITING 89
TRUST ADMINISTRATION 92
Fund Administration and Expenses 92
Sponsor 92
Compensation of Sponsor and Evaluator 92
Trustee 93
Trustee's Fee 93
Portfolio Administration 94
Sponsor Purchases of Units 95
Insurance Premiums 95
Miscellaneous Expenses 95
General 95
Amendment or Termination 95
Limitation on Liabilities 96
Unit Distribution 97
Sponsor and Underwriter Compensation 97
OTHER MATTERS 99
Legal Opinions 99
Independent Certified Public Accountants 99
FEDERAL TAX STATUS 99
DESCRIPTION OF SECURITIES RATINGS 103
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS 105
STATEMENTS OF CONDITION 106
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
TABLES 109
ESTIMATED CASH FLOWS TO UNITHOLDERS 113
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
December 13, 1995
Insured MunicipalsIncome TrustandInvestors' Quality Tax-Exempt
Trust,Multi-Series 264
IM-IT 362
IM-IT 86th Intermediate
California IM-IT 148
Connecticut IM-IT 29
Georgia IM-IT 78
Michigan IM-IT 134
New York IM-IT Intermediate Laddered Maturity Series 17
Maryland Quality 75
Virginia Quality 68
A Wealth of Knowledge A Knowledge of Wealth (sm)
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
Contents of Registration Statement
This Amendment of Registration Statement comprises the following papers
and documents:
The facing sheet and the Cross-Reference sheet
The Prospectus and the signatures
The consents of independent public accountants, ratings services
and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.4 Copy of Municipal Bond Investment
Trust Insurance Policy issued by AMBAC Indemnity Corporation
Company and/or Financial Guaranty Insurance Company for each
Insured Trust.
1.5 Form of Master Agreement Among Underwriters.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to the Federal,
Georgia and Virginia income tax status of securities being
registered.
3.3 Opinion and consent of counsel as to New York income tax status of
the Fund under New York law and as to income tax status to New
York residents of Units of the New York IM-IT Intermediate
Laddered Maturity Trust.
3.4 Opinion and consent of counsel as to income tax status to
California residents of Units of the California IM-IT Trust.
3.5 Opinion and consent of counsel as to income tax status to
Connecticut residents of Units of the Connecticut IM-IT Trust.
3.6 Opinion and consent of counsel as to income tax status to Michigan
residents of Units of the Michigan IM-IT Trust.
3.7 Opinion and consent of counsel as to income tax status to Maryland
residents of Units of the Maryland Quality Trust.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Standard & Poor's with respect to the Insured Trusts.
4.3 Consent of Grant Thornton LLP.
4.4 Financial Data Schedule.
Signatures
The Registrant, Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 264, hereby identifies Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-
Series 189 and Multi-Series 213 for purposes of the representations
required by Rule 487 and represents the following: (1) that the portfolio
securities deposited in the series as to the securities of which this
Registration Statement is being filed do not differ materially in type or
quality from those deposited in such previous series; (2) that, except to
the extent necessary to identify the specific portfolio securities
deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration
Statement is being filed, this Registration Statement does not contain
disclosures that differ in any material respect from those contained in
the registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and (3)
that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 264 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 13th day of December, 1995.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt
Trust, Multi-Series 264
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons, in the capacities indicated on December 13, 1995.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
* A copy of each of the related powers of attorney was
filed with the Securities and Exchange Commission in connection with
the Registration Statement on Form S-6 of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File
No. 33-65744) and with the Registration Statement on From S-6 of
Insured Municipals Income Trust, 170th Insured Multi-Series (File No.
33-55891) and the same are hereby incorporated herein by this
reference.
Exhibit 1.1
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 264
Trust Agreement
Dated: December 13,
1995
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 the Prospectus.
(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 the Prospectus 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 the Prospectus.
(e) The First Settlement Date shall be the date set forth
under "Summary of Essential Financial Information-First Settlement
Date" in the Prospectus.
(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
the Prospectus.
(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 the Prospectus.
(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 the Prospectus.
(k) The Trustee's annual compensation as set forth under
Section 6.04, under each distribution plan shall be that amount as
specified in the Prospectus 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 purchse 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
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., Depositor
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. Mcdonnell
President
Attest:
By Scott E. Martin
Secretary
The Bank Of New York
By Jeffrey Bieselin
Vice President
Attest:
By Norbert Loney
Assistant Treasurer
Schedules to Trust Agreement
Securities Initially Deposited
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 264
(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 1.4
AMBAC AMBAC Indemnity Corporation
c/o CT Corporation Systems
Municipal Bond Investment 44 East Mifflin Street
Trust Insurance Policy Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 264
(Connecticut Insured Municipals Income Trust, Series 29
Van Kampen American Capital Distributors, Inc.
("Investment Trust") the insured, the payment of that portion of the
principal of and interest on each of the Bonds which shall be due during
the Policy Period but is unpaid by reason of Nonpayment by the Issuer, in
consideration of the insurance premium paid and subject to the terms and
conditions contained herein or added hereto.
Policy No. FE014080 Policy Date: December 13, 1995
Trustee: The Bank of New York
101 Barclay Street, 17flW
New York, New York 10286
In Witness Whereof, the Insurer has caused this Policy to be affixed
with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal
and signatures and binding upon the Insurer by virtue of the
countersignature of its duly authorized representative.
P. Lassiter
President@AMBAC Indemnity Corporation
Stephen D. Cooke
Secretary
/w/Holly A. Walters
Authorized Representative@
AMBAC AMBAC Indemnity Corporation
c/o CT Corporation Systems
Municipal Bond Investment 44 East Mifflin Street
Trust Insurance Policy Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 264
(Georgia Insured Municipals Income Trust, Series 78
Van Kampen American Capital Distributors, Inc.
("Investment Trust") the insured, the payment of that portion of the
principal of and interest on each of the Bonds which shall be due during
the Policy Period but is unpaid by reason of Nonpayment by the Issuer, in
consideration of the insurance premium paid and subject to the terms and
conditions contained herein or added hereto.
Policy No. FE014099 Policy Date: December 13, 1995
Trustee: The Bank of New York
101 Barclay Street, 17flW
New York, New York 10286
In Witness Whereof, the Insurer has caused this Policy to be affixed
with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal
and signatures and binding upon the Insurer by virtue of the
countersignature of its duly authorized representative.
P. Lassiter
President@AMBAC Indemnity Corporation
Stephen D. Cooke
Secretary
/w/Holly A. Walters
Authorized Representative@
AMBAC AMBAC Indemnity Corporation
c/o CT Corporation Systems
Municipal Bond Investment 44 East Mifflin Street
Trust Insurance Policy Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York
10004
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 264
(Insured Municipals Income Trust, Series 362
Van Kampen American Capital Distributors, Inc.
("Investment Trust") the insured, the payment of that portion of the
principal of and interest on each of the Bonds which shall be due during
the Policy Period but is unpaid by reason of Nonpayment by the Issuer, in
consideration of the insurance premium paid and subject to the terms and
conditions contained herein or added hereto.
Policy No. FE014106 Policy Date: December 13, 1995
Trustee: The Bank of New York
101 Barclay Street, 17flW
New York, New York 10286
In Witness Whereof, the Insurer has caused this Policy to be affixed
with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal
and signatures and binding upon the Insurer by virtue of the
countersignature of its duly authorized representative.
P. Lassiter
President@AMBAC Indemnity Corporation
Stephen D. Cooke
Secretary
w/Holly A. Walters
Authorized Representative@
1. Definitions
(a) "Policy" is this policy of insurance and all applications and
schedules for Municipal Bond Investment Trust Insurance relating hereto,
all of which are hereby incorporated by reference herein.
(b) "Bonds" are the specific securities covered by this Policy and
are identified and described in the Schedule attached hereto and hereby
made a part hereof.
(c) "Issuer" is each respective issuer, identified in the Schedule,
of the Bonds.
(d) "Investment Trust" is the entity represented to have an
insurable interest in the Bonds insured under this Policy, identified on
the face of this Policy.
(e) "Trustee" is the Trustee of the Investment Trust, or any
successor Trustee thereto or Co-Trustee therewith.
(f) "Sponsor" is the firm or entity responsible for creating the
Investment Trust and thereafter performing the services to it required of
its sponsor, or any successor Sponsor thereof or Co-Sponsor therewith.
(g) "Insured Instrument" is any instrument evidencing all or any
part of the principal or of interest on a Bond which is Due for Payment.
(h) "Policy Period" is the period during which this Policy of
insurance is effective. The Policy Period commences at 12:01 A.M.
(i) "Premium Installment Period" is the period for which
installments of the annual insurance premium are payable monthly,
quarterly or semiannually, as determined initially for the Investment
Trust.
(j) "Nonpayment" is the failure of an Issuer to provide sufficient
funds to the payment agent for payment in full of all principal and
interest on a Bond which is Due for Payment.
(k) "Due for Payment," when referring to principal of a Bond (or
Insured Instrument evidencing such principal), is when the stated
maturity date has been reached, and does not refer to any earlier date on
which payment is due by reason of call for redemption, acceleration or
other advancement of maturity; and when referring to interest on a Bond
(or Insured Instrument evidencing such interest), is when the stated date
for payment has been reached.
(l) "Bond Proceedings" are the legal proceedings by which each of
the Bonds has been authorized, issued or secured, including the governing
statutes, the pertinent resolutions and ordinances of the Issuer, and any
trust indenture, mortgage, lease agreement or other contract relating to
the Bond or its security.
2. Noncancellability and Termination-Refunds of Premium
This Policy cannot be cancelled by AMBAC. The insurance provided by
this Policy shall remain in force throughout the Policy period. This
Policy provides for payment to the Trustee as a result of Nonpayment of
the Bonds. In the event the Trustee sells any of the Bonds, then this
Policy shall be terminated as to any such Bond on the date of said sale,
and AMBAC shall not have any liability under t his Policy on account of
Nonpayment of any such Bond occurring thereafter. This Policy shall be
terminated as to any Bond which AMBAC has been notified by the Sponsor or
by the Trustee has been redeemed from or sold by the Investment Trust, or
was not deposited by the Sponsor, or the contract to purchase which has
failed, on the date such notice is received by AMBAC, and AMBAC shall not
have any liability under this Policy on account of Nonpayment of any such
Bond occurring thereafter. When AMBAC is notified by the Trustee or the
Sponsor that any of the Bonds have been redeemed or sold from the
Investment Trust, or were not deposited into it, or a contract to
purchase any such Bonds has failed, a refund of any prepaid premium
thereof shall be made to the Investment Trust or the Sponsor, as the case
may be. Such notification to AMBAC must specify the amount of Bonds
affected, identify each by its Item Number in an Application identified
by its date and designate the date of such disposal or failure.
3. payment by Insurer-Amount, When and How Payable
(a) Amount-Payment by AMBAC of the aggregate of the face amount of
all Insured Instruments of the Investment Trust as to which there has
been a Nonpayment, reduced by the aggregate of: (i) the amount which the
Issuer shall have provided for payment of Insured Instruments by the time
of Nonpayment; and (ii) the amount which has been received from any other
source to pay Insured Instruments; such payment shall fully discharge
AMBAC from any further liability on account of the Nonpayment.
(b) When Payable-The payment due the Investment Trust shall be made
not later than thirty days after notice from the Trustee is received by
AMBAC that Nonpayment has occurred, but not earlier than the date on
which the Insured Instruments are Due for Payment.
(c) How Payable-The payment due the Investment Trust shall be paid
by AMBAC in exchange for delivery of Insured Instruments, not less in
face amount than the amount of the payment, in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where an
Insured Instrument is issuable only in a form whereby principal is
payable to registered holders or their assigns, AMBAC shall pay principal
only upon presentation and surrender of the unpaid Insured Instrument,
uncancelled and free of any adverse claim, together with an instrument of
assignment, in satisfactory form, so as to permit ownership of such
Insured Instrument to be registered in the name of AMBAC or its nominee.
In cases where an Insured Instrument is issuable only in a form whereby
interest is payable to registered holders or their assigns, AMBAC shall
pay interest only upon presentation of proof that the claimant is the
person entitled to the pa shall pay interest only upon presentation of
proof that the claimant is the person entitled to the payment of interest
on the Insured Instrument and delivery of an instrument of assignment, in
satisfactory form, transferring to AMBAC all rights under such Insured
Instrument to receive the interest in respect of which the insurance
payment was made.
4. Rights of AMBAC
(a) Subrogation-When AMBAC has made payment with respect to an
Insured Instrument, it shall be subrogated to all of the rights to
payment of the Investment Trust thereon or in relation thereto to the
extent of such payment.
(b) Vesting of Rights and Powers-When AMBAC has made the payment
due to the Investment Trust as described in Condition 3, and until the
full amount of such payment has been recovered, AMBAC shall be vested
with all of the Investment Trust's options, votes, rights, powers and the
like under the Bond Proceedings. AMBAC shall not be liable to the
Investment Trust for any loss or damage resulting from the exercise of or
failure to exercise any of such options, votes, rights, powers and the
like.
(c) Exercise of Rights and Powers-AMBAC may, in its absolute
discretion, exercise or fail to exercise any option, vote, right, power
or the like it may have as holder or registered owner of an Insured
Instrument with respect to which it has made payment. AMBAC shall not be
liable to the Investment Trust for any loss or damage resulting therefrom
(d) Securing of Rights-The Trustee shall execute and deliver
instruments and do whatever else is necessary to secure the foregoing
rights for AMBAC, and will do nothing to prejudice them.
5. Payment of Insurance Premium Installments
The Trustee shall pay, when due, successively, the full amount of
each installment of the insurance premium. Each installment of the
insurance premium is due on or before the last day of the expiring
Premium Installment Period.
If AMBAC has not received such payment on or before such last day,
it shall give notice to the Sponsor to that effect. Such installment
shall be deemed to have been paid when due if AMBAC receives such payment
within ten days after it has given such notice.
The Trustee shall, with each payment, notify AMBAC of all Bonds
which, during the expiring Premium Installment period, were redeemed from
or sold by the Investment Trust, or the contract to purchase which
failed, or which have not been deposited by the Sponsor. Such
notification to AMBAC must specify the amounts of Bonds affected and
identify each by its Item Number in an Application identified by date.
No such notice need be given as to Bonds with respect to which AMBAC has
previously been notified to the same effect.
6. Where Notice is Given
All submissions, designations, payments, notices, reports and other
data or documents required to be submitted shall be mailed to AMBAC at
its administrative office, or to the Investment Trust at its address
shown on the face of this Policy or such other address as it shall
designate.
7. Waiver of Conditions
No permission affecting this insurance shall exist, or waiver of any
condition be valid, unless expressed in writing added hereto. Each of
the conditions of this Policy is hereby made severable, and waiver of one
condition is not a waiver of any other condition.
8. Suite
No suit or action on this Policy for the recovery of any amount
shall be sustained in any court of law or equity unless all of the
conditions of this Policy shall have been complied with (unless
specifically waived by AMBAC in writing) and unless commended within two
years after a Nonpayment.
9. Conflict of Laws
Any provision of this Policy which is on conflict with the laws of
the jurisdiction in which it is effective is hereby amended to conform
with the minimum requirements of such laws.
Exhibit 1.4
<TABLE>
<CAPTION>
AMBAC AMBAC Indemnity Corporation
c/o CT Corporation Systems
Schedule of Bonds (a part of the Application and Policy) 44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 264
(Insured Municipals Income Trust , Series 362) Date of Application: December 13, 1995
Item Par Full Name Purpose of Annual Initial
No. Value of Issuer Bonds Interest Date of Maturity Premium Annual
Rate Bonds Date Rate Premium
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $420M Industrial Multi-Family Mortgage 5.950% 12/01/95 03/01/28 .1340% $562.80
Development Revenue Refunding Bonds (FHA
Board of the Insured Mortgage Loan-
County of Waterford Village Apartments
Knox, Project) Series 1995A (SMIP
Tennessee Option Premium Rate: .60%)
</TABLE>
<TABLE>
<CAPTION>
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 264
(Georgia Insured Municipals Income Trust , Series 78) Date of Application: December 13, 1995
Item Par Full Name Purpose of Annual Initial
No. Value of Issuer Bonds Interest Date of Maturity Premium Annual
Rate Bonds Date Rate Premium
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $275M Housing Multi-Family Mortgage 5.750% 01/01/94 07/01/14 .1100% $302.50
Authority of Revenue Refunding Bonds (FHA
Cobb County Insured Mortgage Laon-
(Georgia) Garrison Plantation
Development) Series 1994A
(SMIP Option Premium Rate:
.60%)
2. $500M Atlanta, Water and Sewer Revenue 4.750% 10/10/93 01/01/23 .1000% $500.00
Georgia Bonds, Series 1993 (SMIP
Option Premium Rate: .60%)
</TABLE>
<TABLE>
<CAPTION>
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 264
(Connecticut Insured Municipals Income Trust , Series 29) Date of Application: December 13, 1995
Item Par Full Name Purpose of Annual Initial
No. Value of Issuer Bonds Interest Date of Maturity Premium Annual
Rate Bonds Date Rate Premium
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $110M State of General Obligation Capital 0.000% 11/14/89 11/01/09 .1000% $110.00
Connecticut Appreciation Bonds (College
Savings Plan, Series 1989B)
(SMIP Option Premium Rate:
.60%)
</TABLE>
Exhibit 1.5
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.
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 Indicated below our firm
set forth at the head of name and address exactly
this Agreement 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
December 13, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc., Sponsor and Depositor of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 264
(hereinafter referred to as the "Fund"), in connection with the
preparation, execution and delivery of a Trust Agreement dated December
13, 1995 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.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-63125) 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
MJK/cjw
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
December 13, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
Unit Investment Trust Division
101 Barclay Street
New York, New York 10286
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264
______________________________________________
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 264 (the "Fund"), in
connection with the issuance of Units of fractional undivided interest in
the several Trusts of said Fund under a Trust Agreement dated December
13, 1995 (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.
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 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 (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, the environmental tax (the
"Superfund Tax") imposed by Section 59A 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. Before
adjustment, such basis would normally be cost if the Unitholder had
acquired his Units by purchase, plus his aliquot share of advances
by the Trustee to the Trust to pay interest on Bonds delivered after
the Unitholder's settlement date to the extent that such interest
accrued on the Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the
respective 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 Unitholder's aliquot share of the accrued original issue
discount with respect to each Bond held by the Trust with respect to
which there was an original issue discount at the time the Bond was
issued 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 interest received by the Trust, if
any, on Bonds delivered after the Unitholder's settlement date to
the extent that such interest accrued on the Bonds during the period
from the Unitholder's settlement date to the date such Bonds are
delivered to the Trust, 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 with respect to each Bond which, at the time the Bond was
issued, had original issue discount.
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price",
such excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the
original issuance of Bonds held by the Trust, Section 1272(a)(7) of
the Code provides for a reduction in the accrued "daily portion" of
such original issue discount upon the purchase of a Bond subsequent
to the Bond's original issue, under certain circumstances. In the
case of any Bond held by the Trust the interest on which is
excludable from gross income under Section 103 of the Code, any
original issue discount which accrues with respect thereto will be
treated as interest which is excludable from gross income under
Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance policies, if any, issued to certain of the Trusts on the
Date of Deposit by AMBAC Indemnity Corporation, Financial Guaranty
Insurance Corporation or a combination thereof. Each such policy,
or a combination of such policies, insures all bonds held by the
Trustee for that particular Trust (other than bonds described in
paragraph (vii)) against default in the prompt payment of principal
and interest. In our opinion, any amount paid under each said
policy, or a combination of said policies, which represents maturing
interest on defaulted obligations held by the Trustee will be
excludable from federal gross income if, and to the same extent as,
such interest would have been so excludable if paid by the issuer of
the defaulted bonds provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the
issuer of the bonds, rather than the insurer, will pay debt service
on the bonds. Paragraph (ii) of this opinion is accordingly
applicable to insurance proceeds representing maturing interest.
(vii) Certain bonds in the portfolios of certain of the Insured
Trusts have been insured by the issuers thereof against default in
the prompt payment of principal and interest. Insurance has been
obtained for such 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 bonds. Insurance obtained by the issuer
is effective so long as such bonds remain outstanding. For each of
these bonds, we have been advised that the aggregate principal
amount of such bonds listed on the portfolio page for the respective
Trust was acquired by the applicable Trust and are part of the
series of such bonds listed on the portfolio page for the respective
Trust in the aggregate principal amount listed on the portfolio page
for the respective Trust. Based upon the assumption that the bonds
acquired by the applicable 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 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
notwithstanding the source of the payment is from policy proceeds.
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") to prior owners. The
application of these rules will also vary depending on the value of the
bond on the date a Unitholder acquires his Units, and the price the
Unitholder pays for his Units.
Because the Trusts do not include any "private activity" bonds
within the meaning of Section 141 of the Code issued on or after August
15, 1986, none of the Trust Fund's 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 and the Superfund Tax depend upon the
corporation's taxable income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items
used in computing alternative minimum taxable income ("AMTI") and the
Superfund Tax 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 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, unless such financial institution can otherwise
establish, under regulations, to be prescribed by the Secretary of the
Treasury, the amount of interest on indebtedness incurred or continued to
purchase or carry such obligations.
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).
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 certain laws of the State of Georgia (the
"State"), to determine their applicability to the Georgia IM-IT Trust
(the "Georgia Trust") being created as part of the Fund and to the
holders of Units in the Georgia Trust who are residents of the State of
Georgia ("Unitholders"). The assets of the Georgia Trust will consist of
interest-bearing obligations issued by or on behalf of the State or
counties, municipalities, authorities or political subdivisions thereof
(the "Georgia Bonds"). Distributions of interest on the Bonds received
by the Georgia Trust will be made semi-annually unless a Unitholder
elects to receive them monthly. Although we express no opinion with
respect thereto, in rendering the opinion expressed herein, we have
assumed that the Georgia Bonds were validly issued by the State or its
instrumentalities or municipalities, as the case may be. Based on the
foregoing, and review and consideration of existing State laws, it is our
opinion, and we herewith advise you, as follows:
(a) For purposes of income taxation by the State or any of its
counties or municipalities:
(1) The Georgia Trust is not an association taxable as a
corporation and each Unitholder of the Georgia Trust will be
treated as the owner of a pro-rata portion of the Georgia
Trust, and the income of the Georgia Trust will therefore be
treated as the income of the Unitholder;
(2) Interest on the Georgia Bonds which are excludable
from gross income for federal income tax purposes when received
by the Georgia Trust will be exempt from Georgia income
taxation and therefore will not be includible in the income of
the Unitholder for income tax purposes when distributed by the
Georgia Trust and received by the Unitholders;
(3) Each Unitholder of the Georgia Trust will recognize
gain or loss for income tax purposes if the Trustee disposes of
a Georgia Bond (whether by sale, exchange, payment on maturity,
retirement or otherwise) or if the Unitholder redeems or sells
Units of the Georgia Trust to the extent that such transaction
results in a recognized gain or loss for federal income tax
purposes;
(4) Due to the amortization of bond premium and the basis
adjustments required by the Internal Revenue Code, a
Unitholder, under some circumstances, may realize taxable gain
when his or her Units are sold or redeemed prior to the
maturity of Georgia Bonds held by the Georgia Trust for an
amount less than or equal to such Units' original cost;
(5) In the case of Georgia Bonds issued before March 11,
1987 with original issue discount the amount of gain or loss
recognized for income tax purposes upon such sale or redemption
of Georgia Bonds or Units may differ from the amount recognized
for federal income tax purposes because original issue discount
on such Georgia Bonds may accrue on a ratable basis under
Georgia law; and
(6) Interest on indebtedness incurred by a Unitholder to
purchase or carry Units in the Georgia Trust and Trustee fees
and related expenses incurred by the Georgia Trust which are
not deductible for federal income tax purposes are also not
deductible under Georgia law.
(b) Units of the Georgia Trust are not subject to sales or use
taxation by the State or any political subdivision thereof;
(c) Georgia Bonds are not subject to intangible personal
property taxation by the State or any political subdivision thereof;
(d) No opinion is expressed regarding whether Units in the
Georgia Trust are subject to intangible personal property taxation
by the State, however, according to discussions with the Georgia
Department of Revenue, it is the Department's view that Units in the
Georgia Trust would be subject to such tax;
(e) Georgia Bonds are not subject to sales or use taxation by
the State or any political subdivision thereof; and
(f) In the case of Trusts for which an insurance policy or
policies with respect to the payment of principal and interest on
the Georgia Bonds has been obtained by the Depositor, any proceeds
paid under such policy or policies issued to the Georgia Trust, if
any, with respect to the Georgia Bonds in the Georgia Trust which
represent maturing interest on defaulted obligations held by the
Trustee will be exempt from State income taxes if, and to the same
extent as, such interest would have been so exempt if paid by the
issuer of the defaulted obligations provided that, at the time such
policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Georgia Bonds, rather than the insurer, will
pay debt service on the Georgia Bonds. Paragraph a(2) of this
opinion is accordingly applicable to policy proceeds representing
maturing interest.
We have not examined any of the Georgia Bonds to be deposited and
held in the Georgia Trust or the proceedings for the issuance thereof or
the opinions of bond counsel with respect thereto, and therefore express
no opinion as to the exemption from State income taxes of interest on the
Georgia Bonds if received directly by a Unitholder.
We have also examined the income tax law of the Commonwealth of
Virginia ("Virginia"), which is based upon the Federal Law, to determine
its applicability to the Virginia Quality Trust (the "Virginia Trust")
being created as part of the Fund and to the holders of Units in the
Virginia Trust who are residents of the Commonwealth of Virginia
("Virginia Unitholders").
The assets of the Virginia Trust will consist of interest-bearing
obligations issued by or on behalf of Virginia ("Virginia") or counties,
municipalities, authorities or political subdivisions thereof (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) the Bonds were validly issued, (ii) the interest thereon is
excludable from gross income for federal income tax purposes and (iii)
the interest thereon is exempt from income tax imposed by Virginia that
is applicable to individuals and corporations (the "Virginia Income
Tax"). This opinion does not address the taxation of persons other than
full time residents of Virginia. Based upon the foregoing it is our
opinion that under Virginia income tax law, as presently enacted and
construed:
(a) The Virginia Trust is not an association taxable as a
corporation for Virginia income tax purposes and each Unitholder of
the Virginia Trust will be treated as the owner of a pro rata
portion of the assets held by the Virginia Trust and the income of
such portion of the assets held by the Virginia Trust will be
treated as income of the Unitholder for purposes of the Virginia
Income Tax.
(b) Income on the Bonds which is exempt from Virginia Income
Tax when received by the Virginia Trust, and which would be exempt
from Virginia Income Tax if received directly by a Unitholder, will
retain its status as exempt from such tax when received by the
Virginia Trust and distributed to such Unitholder.
(c) Each Unitholder will recognize gain or loss for purposes
of the Virginia Income Tax if the Trustee disposes of a bond
(whether by redemption, sale or otherwise) or if the Unitholder
redeems or sells Units of the Virginia Trust to the extent that such
a transaction results in a recognized gain or loss to such
Unitholder for federal income tax purposes, except as described in
this paragraph. Virginia law provides that all income from certain
tax-exempt obligations issued under the laws of Virginia, including
any profits made from the sale of such Bonds, shall be exempt from
all taxation by Virginia. Although we express no opinion, the
Virginia Department of Taxation has indicated that the gains
recognized for federal income tax purposes on such tax-exempt
obligations would not be subject to Virginia Income Taxation.
Accordingly, any such gain relating to the disposition of any Bond
that would not be subject to Virginia Income Tax if the Bond was
held directly by a Unitholder will retain its tax-exempt status for
purposes of the Virginia Income Tax when the Bond is disposed of by
the Virginia Trust or when the Unitholder is deemed to have disposed
of his pro rata portion of such Bond upon the disposition of his
Unit provided that such gain can be determined with reasonable
certainty and subtantiated.
(d) The Virginia Income Tax does not permit a deduction of
interest paid on indebtedness incurred or continued to purchase or
carry Units in the Virginia Trust to the extent that interest income
related to the Ownership of Units is exempt from Virginia Income
Tax.
In the case of Unitholders subject to the Virginia Bank Franchise
Tax, the income derived by such a Unitholder from his pro rata portion of
the Bonds held by the Virginia Trust may affect the determination of such
Unitholder's Bank Franchise Tax. Prospective investors should consult
their tax advisors.
We have not examined any of the Bonds to be deposited and held in
the Virginia Trust or the proceedings for the issuance thereof or the
opinions of the bond counsel with respect thereto, and therefore express
no opinion as to the exemption from Virginia Income Tax of interest on
the Virginia Bonds if received directly by a Unitholder. In addition, we
express no opinion with respect to any taxes or items other than those
described above.
Very truly yours,
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Tanner Propp & Farber
99 Park Avenue
New York, New York 10016
December 13, 1995
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust,
Multi-Series 264
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 and Investors' Quality Tax-Exempt Trust, Multi-Series 264 (the
"Fund") consisting of Insured Municipals Income Trust, Series 362,
Insured Municipals Income Trust, 86th Intermediate Series, California
Insured Municipals Income Trust, Series 148, Connecticut Insured
Municipals Income Trust, Series 29, Georgia Insured Municipals Income
Trust, Series 78, Michigan Insured Municipals Income Trust, Series 134,
New York Insured Municipals Income Trust, Intermediate Laddered Maturity
Series 17, Maryland Investors' Quality Tax-Exempt Trust, Series 75 and
Virginia Investors' Quality Tax-Exempt Trust, Series 68 and (in the
aggregate the "Trusts" and individually "Trusts") for the purpose 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., 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 number 33-63125)
under the Securities Act of 1933, as amended (the "Prospectus"), the
objectives of the Fund are the generation of income exempt from Federal
taxation and as regards each Trust denominated with the name of a state
exempt from income tax, if any, of the denominated in the name of that
Trust to the extent indicated in the Prospectus. No opinion is expressed
herein with regard to the Federal or State tax aspects of the bonds, the
Fund, and units of the 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 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, in the case of Trusts
denominated as "Insured," 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 that Trust 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 include the Depositor prior to the
Date of Deposit, as more fully set forth in the Prospectus with respect
to each Trust.
We understand with respect to the obligations described in the
preceding paragraph that all insurance, whether purchased by the
Depositor, the issuer or a prior owner, 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(l)
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 business conducted by the
trustee or trustees. 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 (1949).
An opinion of the Attorney General of the State of New York, 47 N.Y.
Atty. 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 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 a Trust.
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 grantor 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.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of a Trust will
be considered as owning a share of each asset of that Trust in the
proportion that the number of Units held by such holder bears to the
total number of Units outstanding and the income of a Trust will be
treated as the income of each Unit holder of that Trust in said
proportion pursuant to Subpart E of Part E, subchapter J of Chapter 1 of
the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York.
1. Each Trust 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 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. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund 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 the State of New York.
In addition, we are of the that opinion 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,
Tanner Propp & Farber
MJK:cjw
Exhibit 3.4
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
December 13, 1995
The Bank of New York
through its Wall Street Trust Division
101 Barclay Street
New York, New York 10286
Re: California Insured Municipals Income Trust, Series 148
Dear Sirs:
We have acted as special California counsel for Van Kampen American
Capital Distributors, Inc., as Sponsor and Depositor of California
Insured Municipals Income Trust, Series 148, (the "Fund"), in connection
with the issuance under the Trust Indenture and Agreement dated December
13, 1995, among Van Kampen American Capital Distributors, Inc., as
Sponsor and Depositor, American Portfolio Evaluation Services, a division
of Van Kampen American Capital Investment Advisory Corp., as Evaluator,
and The Bank of New York through its Wall Street Trust division, as
Trustee, of 3,033 Units of fractional undivided interest in the Fund
(the "Units") in exchange for certain bonds, as well as "regular-way" and
"when-issued" contracts for the purchase of bonds (such bonds and
contracts are hereinafter referred to collectively as the "Securities").
In connection therewith, we have examined such corporate records,
certificates and other documents and such questions of law as we have
deemed necessary or appropriate for the purpose of this opinion, and, on
the basis of such examination, and upon existing provisions of the
Revenue and Taxation Code of the State of California, we are of the
opinion that:
1. The Fund is not an association taxable as a corporation
and the income of the Fund will be treated as the income of the
certificateholders under the income tax laws of California.
2. Amounts treated as interest on the underlying securities
which are exempt from tax under California personal income tax and
property tax laws when received by the Fund will, under such laws,
retain their status as tax-exempt interest when distributed to
certificateholders. However, interest on the underlying securities
attributed to a certificateholder which is a corporation subject to
the California franchise tax laws may be includable in its gross
income for purposes of determining its California franchise tax.
3. Under California income tax law, each certificateholder in
the Fund will have a taxable event when the Fund disposes of a
security (whether by sale, exchange, redemption, or payment at
maturity) or when the certificateholder redeems or sells Units.
Because of the requirement that tax cost basis be reduced to reflect
amortization of bond premium, under some circumstances a
certificateholder may realize taxable gain when Units are sold or
redeemed for an amount equal to, or less than, their original cost.
The total tax cost of each Unit to a certificateholder is allocated
among each of the bond issues held in the Fund (in accordance with
the proportion of the Fund comprised by each bond issue) in order to
determine his per unit tax cost for each bond issue; and the tax
cost reduction requirements relating to amortization of bond premium
will apply separately to the per unit cost of each bond issue.
Certificateholders' bases in their Units, and the bases for their
fractional interest in each Fund asset, may have to be adjusted for
their pro rata share of accrued interest received, if any, on
securities delivered after the certificateholders' respective
settlement dates.
4. Under the California personal property tax laws, bonds
(including the Securities) or any interest therein is exempt from
such tax.
5. Any proceeds paid under the insurance policy issued to the
Trustee of the fund with respect to the Securities which represent
maturing interest on defaulted obligations held by the Trustee will
be exempt from California personal income tax if, and to the same
extent as, such interest would have been so exempt if paid by the
issuer of the defaulted obligations.
6. Under Section 17280(b)(2) of the California Revenue and
Taxation Code, interest on indebtedness incurred or continued to
purchase or carry Units of the Trust is not deductible for the
purposes of the California personal income tax. While there
presently is no California authority interpreting this provision,
Section 17280(b)(2) directs the California Franchise Tax Board to
prescribe regulations determining the proper allocation and
apportionment of interest costs for this purpose. The Franchise Tax
Board has not yet proposed or prescribed such regulations. In
interpreting the generally similar Federal provision, the Internal
Revenue Service has taken the position that such indebtedness need
not be directly traceable to the purchase or carrying of Units
(although the Service has not contended that a deduction for
interest on indebtedness incurred to purchase or improve a personal
residence or to purchase goods or services for personal consumption
will be disallowed). In the absence of conflicting regulations or
other California authority, the California Franchise Tax Board
generally has interpreted California statutory tax provisions in
accord with Internal Revenue Service interpretations of similar
Federal provisions.
Opinions relating to the validity of securities and the exemption of
interest thereon from State of California income tax are rendered by bond
counsel to the issuing authority at the time securities are issued and we
have relied solely upon such opinions, or, as to securities not yet
delivered, forms of such opinions contained in official statements
relating to such securities. Except in certain instances in which we
acted as bond counsel to issuers of securities, and as such made a review
of proceedings relating to the issuance of certain securities at the time
of their issuance, we have not made any review of proceedings relating to
the issuance of securities or the bases of bond counsels' opinions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (SEC No. 33-63125) 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.
Very truly yours,
Orrick, Herrington & Sutcliffe
Exhibit 3.5
Day, Berry & Howard
City Place
Hartford, Connecticut 06103-3499
December 13, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 264
Gentlemen:
You have requested that we act as special counsel with respect to
certain Connecticut tax aspects of Connecticut Insured Municipals Income
Trust, Series 29 (the "Connecticut IM-IT Trust"), being created as part
of Insured Municipals Income Trust and Investors' Qualify Tax-Exempt
Trust, Multi-Series 264 (the "Fund").
The Fund is created under a Trust Agreement dated the date hereof
and Standard Terms and Conditions of Trust to which it refers, both among
Van Kampen American Capital Distributors, Inc., as Depositor, American
Portfolio Advisory Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, and The Bank of New York, as
Trustee. The Fund will issue units in several state trusts, one of which
is the Connecticut IM-IT Trust. Each unit of the Connecticut IM-IT Trust
(a "Unit") represents a fractional undivided interest in the principal
and net income of the Connecticut IM-IT Trust. The Connecticut IM-IT
Trust and the trust for any other state included in the Fund will each be
administered as a separate and distinct entity for all purposes, each
having its own separate assets, expenses, accounts, and certificates.
You have informed us that, upon the sale of Units of the Connecticut
IM-IT Trust to investors (the "Unitholders"), the assets of the
Connecticut IM-IT Trust will consist of certain obligations (the
"Bonds"); that certain of the Bonds have been issued by or on behalf the
State of Connecticut or its political subdivisions or other public bodies
created under the laws of the State of Connecticut, and the balance of
the Bonds have been issued by or on behalf of entities classified for the
relevant purposes as territories or possessions of the United States,
including one or more of Puerto Rico, Guam, or the Virgin Islands, the
interest on the obligations of which Federal law would prohibit
Connecticut from taxing if received directly by the Unitholders; that, in
the opinion of bond counsel to the issuers of each of the Bonds, the
interest thereon is exempt from Federal income taxation; that
distributions to Unitholders of interest received by the Connecticut
IM-IT Trust and of amounts received thereby upon the maturity,
redemption, sale, or other disposition of the Bonds will be made semi-
annually except in the case of Unitholders who have elected a shorter
distribution period; and that the Connecticut IM-IT Trust will obtain
insurance guaranteeing the payment of principal and interest on all Bonds
when due while the Bonds are held by the Connecticut IM-IT Trust, except
for Bonds, if any, as to which the issuer thereof or another person has
arranged for such insurance.
You have informed us that, in the opinion of Messrs. Chapman and
Cutler, for Federal income tax purposes (i) the Connecticut IM-IT Trust
will not be classified as an association, but will be governed by the
provisions of subchapter J of chapter 1 of the Internal Revenue Code of
1986, relating to trusts; (ii) pursuant to subpart E of said subchapter
J, each Unitholder will be considered to be the owner of a portion of
each asset of the Connecticut IM-IT Trust and to have a portion of each
item of income of the Connecticut IM-IT Trust, in each case such portion
being equal to the part of the whole thereof that the number of Units of
the Connecticut IM-IT Trust held by him bears to the total number of
outstanding Units of the Connecticut IM-IT Trust; (iii) each such item of
income will have the same character in the hands of a Unitholder as in
the hands of the Trustee; (iv) such income will be excludable from a
Unitholder's Federal gross income to the extent it consists of interest
excludable therefrom for Federal income tax purposes; (v) gain or loss
will be recognized by a Unitholder upon the redemption or sale of his
Units or upon the maturity, redemption, sale, or other disposition of a
Bond held by the Connecticut IM-IT Trust; and (vi) any amounts received
by the Connecticut IM-IT Trust representing maturing interest on a
defaulted Bond will be excludable from gross income if, and to the same
extent as, such interest would have been so excludable if paid by its
issuer.
Based on the foregoing, and relying explicitly on the opinion of
Messrs. Chapman and Cutler regarding Federal income tax matters, we are
of the opinion that, under existing Connecticut law:
1. The Connecticut IM-IT Trust is not liable for any tax on
or measured by net income imposed by the State of Connecticut.
2. Interest income of the Connecticut IM-IT Trust from a Bond
issued by or on behalf of the State of Connecticut, any political
subdivision thereof, or public instrumentality, state or local
authority, district, or similar public entity created under the laws
of the State of Connecticut (a "Connecticut Bond"), or from a Bond
issued by United States territories or possessions the interest on
which Federal law would prohibit Connecticut from taxing if received
directly by a Unitholder from the issuer thereof, is not taxable
under the Connecticut tax on the Connecticut taxable income of
individuals, trusts, and estates (the "Connecticut Income Tax"),
when any such interest is received by the Connecticut IM-IT Trust or
distributed by it to such a Unitholder.
3. Insurance proceeds received by the Connecticut IM-IT Trust
representing maturing interest on defaulted Bonds held by the
Connecticut IM-IT Trust are not taxable under the Connecticut Income
Tax if, and to the same extent as, such interest would not be
taxable thereunder if paid directly to the Connecticut IM-IT Trust
by the issuer of such Bonds.
4. Gains and losses recognized by a Unitholder for Federal
income tax purposes upon the maturity, redemption, sale, or other
disposition by the Connecticut IM-IT Trust of a Bond held by the
Connecticut IM-IT Trust or upon the redemption, sale, or other
disposition of a Unit of the Connecticut IM-IT Trust held by a
Unitholder are taken into account as gains or losses, respectively,
for purposes of the Connecticut Income Tax, except that, in the case
of a Unitholder holding a Unit of the Connecticut IM-IT Trust as a
capital asset, such gains and losses recognized upon the maturity,
redemption, sale or exchange of a Connecticut Bond held by the
Connecticut IM-IT Trust are excluded from gains and losses taken
into account for purposes of such tax, and no opinion is expressed
as to the treatment for purposes of such tax of gains and losses
recognized to the extent attributable to Connecticut Bonds, upon the
redemption, sale, or other disposition by a Unitholder of a Unit of
the Connecticut IM-IT Trust held by him.
5. The portion of any interest income or capital gain of the
Connecticut IM-IT Trust that is allocable to a Unitholder that is
subject to the Connecticut corporation business tax is includable in
the gross income of such Unitholder for purposes of such tax.
6. An interest in a Unit of the Connecticut IM-IT Trust that
is owned by or attributable to a Connecticut resident at the time of
his death is includable in his gross estate for purposes of the
Connecticut succession tax and the Connecticut estate tax.
We hereby consent, without admitting that we are in the category of
persons whose consent is required, to the filing of this opinion as an
exhibit to the Registration Statement relating to the Units and to the
reference to our firm as special Connecticut tax counsel in such
Registration Statement and the Prospectus contained therein.
We understand that you may deliver a copy of this opinion to the
Trustee and hereby consent to the Trustee's relying on this opinion as
though it were addressed to the Trustee.
Very truly yours,
Day, Berry & Howard
Exhibit 3.6
Miller, Canfield, Paddock and Stone
1400 North Woodward Avenue, Suite 100
Bloomfield Hills, Michigan 48303-2014
December 13, 1995
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 264
In care of
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York through
its Wall Street Trust division
as Trustee of the Insured Municipals
Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264
101 Barclay Street
New York, New York 10286
Re: Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 264
(Michigan Insured Municipals Income Trust, Series 134)
Gentlemen:
We have acted as special Michigan counsel to you as sponsors and
trustees of Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 264 (Michigan Insured Municipals Income Trust,
Series 134 referred to above (the "Fund"). You have asked that we,
acting in such capacity, render an opinion to you with respect to certain
matters relating to the issuance of the units of fractional undivided
interest in the Fund (the "Units") pursuant to a Registration Statement
on Form S-6 filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Registration Statement").
You have requested our opinion as to the applicability to the
Michigan Insured Municipals Income Trust (the "Michigan Trust") and the
holders of Units (the "Holders"), each of which Units represents the
ownership of a specified fractional undivided interest in the assets of
the Michigan Trust, of the Michigan Income Tax Act (M.C.L.A. 206.1 et
seq.; M.S.A. 7.557 (101) et seq.) (the "Michigan Income Tax"), the City
Income Tax Act (M.C.L.A. 141.501 et seq.; M.S.A. 5.3194 (1) et seq.),
which incorporates the "Uniform City Income Tax Ordinance," the First
Class School District excise tax upon income (M.C.L.A. 380.451; M.S.A.
SS15.4451) (collectively, the "income tax laws"), the Michigan Single
Business Tax Act (M.C.L.A. 208.1 et seq.; M.S.A. 7.558(1) et seq.)
(the "Single Business Tax") and the Michigan Tax on ownership of
Intangible Personal Property (M.C.L.A. 205.131 et seq.; M.S.A.
7.556(1) et seq.) (the "Intangibles Tax"). You have also requested our
opinion regarding the tax status of proceeds payable from an insurance
policy to be obtained by either the Fund or by the issuer of the Bonds
involved, guaranteeing prompt payment of principal and interest on all
Bonds in the portfolio of the Fund.
The Michigan Trust, its formation, its proposed method of operation,
the rights of owners of Certificates representing Units, the nature of
such ownership and the portfolio of investments of the Michigan Trust are
described and set forth in the Prospectus dated December 136, 1995, filed
with the Securities and Exchange commission in Registration No. 33-63125.
In giving our opinion set forth hereunder, we have relied upon the facts
contained in such Registration Statement, including the fact that, at the
respective dates of issuance of the underlying Debt obligations, opinions
of bond counsel to the respective Michigan authorities issuing such Debt
Obligations were given with respect to the validity of the Debt
Obligations and the exemption of the same, and of the interest thereon,
from Michigan taxation.
Based on the above, it is our opinion that:
The Michigan Trust and the owners of Units will, in our opinion, be
treated for purposes of the Michigan income tax laws and the Single
Business Tax in substantially the same manner as they are for purposes of
the Federal income tax laws, as currently enacted. Accordingly, we have
relied upon the opinion of Messrs. Chapman and Cutler as to the
applicability of Federal income tax under the Internal Revenue Code of
1986, as currently amended, to the Michigan Trust and the Holders of
Units.
Under the income tax laws of the State of Michigan, the Michigan
Trust is not an association taxable as a corporation; the income of the
Michigan Trust will be treated as the income of the Holders of Units of
the Michigan Trust and be deemed to have been received by them when
received by the Michigan Trust. Interest on the Debt Obligations in the
Michigan Trust which is exempt from tax under the Michigan income tax
laws when received by the Michigan Trust will retain its status as tax
exempt interest to the Holders of Units of the Michigan Trust.
For purposes of the Michigan income tax laws, each Holder of Units
of the Michigan Trust will be considered to have received his pro rata
share of interest on each Debt Obligation in the Michigan Trust when it
is received by the Michigan Trust, and each Holder will have a taxable
event when the Michigan Trust disposes of a Debt Obligation (whether by
sale, exchange, redemption or payment at maturity) or when the Unit
Holder redeems or sells his Unit, to the extent the transaction
constitutes a taxable event for Federal income tax purposes. The tax
cost of each Unit to a Unit Holder will be established and allocated for
purposes of the Michigan income tax laws in the same manner as such cost
is established and allocated for Federal income tax purposes.
Under the Michigan Intangibles Tax, the Michigan Trust is not
taxable and the pro rata ownership of the underlying Debt obligations, as
well as the interest thereon, will be exempt to the Holders of Units to
the extent the Michigan Trust consists of obligations of the State of
Michigan or its political subdivisions or municipalities, or of
obligations of possessions of the United States.
The Michigan Single Business Tax replaced the tax on corporate and
financial institution income under the Michigan Income Tax, and the
intangible tax with respect to those intangibles of persons subject to
the Single Business Tax the income from which would be considered in
computing the Single Business Tax. Persons are subject to the Single
Business Tax only if they are engaged in "business activity," as defined
in the Act. Under the Single Business Tax, both interest received by the
Michigan Trust on the underlying Debt Obligations and any amount
distributed from the Michigan Trust to a Unit Holder, if not included in
determining taxable income for Federal income tax purposes, is also not
included in the adjusted tax base upon which the Single Business Tax is
computed, of either the Michigan Trust or the Unit Holders. If the
Michigan Trust or the Unit Holders have a taxable event for Federal
income tax purposes when the Michigan Trust disposes of a Debt Obligation
(whether by sale, exchange, redemption or payment at maturity) or the
Holder redeems or sells his Unit, an amount equal to any gain realized
from such taxable event which was included in the computation of taxable
income for Federal income tax purposes (plus an amount equal to any
capital gain of an individual realized in connection with such event but
excluded in computing that individual's Federal taxable income) will be
included in the tax base against which, after allocation, apportionment
and other adjustments, the Single Business Tax is computed. The tax base
will be reduced by an amount equal to any capital loss realized from such
a taxable event, whether or not the capital loss was deducted in
computing Federal taxable income in the year the loss occurred. Holders
should consult their tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee of
the Fund, or paid under individual policies obtained by issuers of Bonds,
which, when received by the Unit Holders, represent maturing interest on
defaulted obligations held by the Trustee, will be excludable from the
Michigan income tax laws and the Single Business Tax if, and to the same
extent as, such interest would have been so excludable if paid by the
issuer of the defaulted obligations. While treatment under the Michigan
Intangibles Tax is not premised upon the characterization of such
proceeds under the Internal Revenue Code, the Michigan Department of
Treasury should adopt the same approach as under the Michigan income tax
laws and the Single Business tax.
Chapman and Cutler of 111 West Monroe Street, Chicago, Illinois
60603, are entitled to rely on this opinion as though it were addressed
to them.
We also advise you that, as the Tax Reform Act of 1986 eliminates
the capital gain deduction for tax years beginning after December 31,
1986, the federal adjusted gross income, the computation base for the
Michigan Income Tax, of a Unit Holder will be increased accordingly to
the extent such capital gains are realized when the Michigan Trust
disposes of a Debt Obligation or when the Unit Holder redeems or sells a
Unit, to the extent such transaction constitutes a taxable event for
Federal income tax purposes.
We hereby consent to the reference to Miller, Canfield, Paddock and
Stone under the heading "Michigan Tax Status" in the Prospectus relating
to the Michigan Trust which is part of the Registration Statement in
Registration No. 33-63125 filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and to the
filing of this opinion as an exhibit to said registration statement.
Yours very truly,
Miller, Canfield, Paddock And Stone
Exhibit 3.7
Weinberg and Green
100 South Charles Street
Baltimore, Maryland 21201-2773
December 13, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264
(Maryland Investors' Quality Tax-Exempt Trust, Series 75)
Ladies and Gentlemen:
We have acted as special Maryland counsel to you as sponsor (the
"Sponsor") of the Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264 (the "Fund") which contains an
individual trust consisting of Maryland securities (the "Bonds")
designated as Maryland Investors' Quality Tax-Exempt Trust, Series 75
(the "Maryland Trust"). You have asked that we, acting in such capacity,
render an opinion to you with respect to certain matters relating to the
tax treatment, under the state and local income tax laws of Maryland, of
the Maryland Trust and of the units of fractional undivided interest in
the Maryland Trust (the "Units") to be issued pursuant to a Registration
Statement on Form S-6 filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (File No. 33-63125) (the
"Registration Statement").
As a basis for our opinions, we have examined such provisions of
Maryland law as we considered relevant. We are relying on the opinion of
Chapman and Cutler, counsel to the Sponsor, as to the federal income tax
consequences of an investment in the Maryland Trust of the Fund.
Each Unit represents a fractional undivided interest in the Maryland
Trust. In the opinion of Chapman and Cutler, for federal tax purposes:
(a) interest and accrued original issue discount on Bonds
which is excludable from gross income under the Internal Revenue
Code of 1986 will retain its status when distributed to holders of
Units ("Unitholders");
(b) each Unitholder is considered to be the owner of a pro
rata portion of the Maryland Trust under subpart E, subchapter J of
chapter 1 of the Internal Revenue Code of 1986, as amended; and
(c) each Unitholder will have a taxable event when the
Maryland Trust disposes of a Bond or when the Unitholder redeems or
sells his Units.
It is our understanding, and the following opinions assume, that the
Maryland Trust consists of debt obligations issued by the State of
Maryland, its political subdivisions or authorities and that, in the
opinion of recognized bond counsel (delivered on the date of issuance of
the obligations), the interest on such obligations generally would not be
includable in gross income for federal income tax purposes (except in
certain limited circumstances referred to in the Prospectus included
within the Registration Statement) if paid directly to a Unitholder. The
term "Bonds" as used in the following opinions means only those
obligations. We have not made any review of the proceedings relating to
the issuance of the Bonds or the basis of the opinions of bond counsel
with respect to the exclusion of the interest thereon from gross income
for federal income tax purposes.
It is our further understanding, and the following opinions assume,
that the Maryland Trust will have no income other than (i) interest
income on the Bonds and (ii) gain on the disposition of the Bonds, and
that all of the income of the Maryland Trust, less expenses and fees,
will be distributed currently to the Unitholders.
Based on the foregoing, it is our opinion that:
1. For Maryland State and local income tax purposes, the
Maryland Trust will not be recognized as an association taxable as a
corporation, but rather as a fiduciary whose income distributed to
Unitholders will not be subject to Maryland State and local income
taxation.
2. To the extent that interest and accrued original issue
discount derived from the Maryland Trust by a Unitholder with
respect to the Bonds is excludable from federal gross income, such
interest will not be subject to Maryland state or local income
taxes. Subject to a three-year phase in period, interest paid to a
"financial institution" will not be subject to the Maryland
Franchise Tax..
3. In the case of taxpayers who are individuals, Maryland
presently imposes an income tax on items of tax preference with
reference to such items as defined in the Internal Revenue Code, as
amended from time to time, for purposes of calculating the federal
alternative minimum tax. Interest paid on certain private activity
bonds constitutes a tax preference item for the purpose of
calculating the federal alternative minimum tax. Accordingly, if
the Maryland Trust holds such bonds, 50% of the interest on such
bonds in excess of a threshold amount is taxable in Maryland.
4. Capital gain, including gain realized by a Unitholder from
the redemption, sale or other disposition of a Unit, will be
included in the taxable base of Unitholders for Maryland state and
local income taxation purposes. However, Maryland defines the
taxable net income of individuals as federal adjusted gross income
with certain modifications. Likewise, the Maryland taxable net
income of corporations is federal taxable income with certain
modifications. There is available to Maryland income taxpayers a
modification which allows those taxpayers to subtract from the
Maryland taxable base the gain included in federal adjusted gross
income or federal taxable income, as the case may be, which is
realized from the disposition of Bonds by the Maryland Trust.
Consequently, by making that modification, a Unitholder who is
entitled to make the subtraction modification will not be subject to
Maryland state or local income tax with respect to gain realized
upon the disposition of Bonds by the Maryland Trust. Profit
realized by a "financial institution" from the sale or exchange of
Bonds will be subject to the Maryland Franchise Tax. Subject to a
three-year phase in period, profit realized by a "financial
institution" from the sale or exchange of Bonds will not be subject
to the Maryland Franchise Tax..
We have not been asked for, nor are we rendering, any opinion as to
the treatment of the Maryland Trust and of the Units under the Maryland
inheritance and estate tax laws.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm in the
Prospectus included in the Registration Statement.
Very truly yours,
Weinberg and Green
Exhibit 4.1
Interactive Data
14 Wall Street
New York, New York 10005
December 11, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 264 (A Unit Investment Trust)
Registered Under the Securities Act of 1933, File No. 33-63125
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund, copy of which is attached hereto.
We hereby consent to the reference in the Prospectus and
Registration Statement for the above captioned Fund to Interactive Data
Services, Inc., as the Evaluator, and to the use of the Obligations
prepared by us which are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Standard & Poor's
A Division of The McGraw-Hill Corporation
25 Broadway
New York, New York 10004-1064
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 264, consisting of: Insured Municipals Income
Trust , Series 362, Insured Municipals Income Trust, Intermediate
Series 86, California Insured Municipals Income Trust, Series 148,
Connecticut Insured Municipals Income Trust, Series 29, Georgia
Insured Municipals Income Trust, Series 78, Michigan Insured
Municipals Income Trust, Series 134 and New York Insured Municipals
Income Trust, Intermediate Laddered Maturity Series 17
Pursuant to your request for a Standard & Poor's rating on the units
of the above-captioned trust, SEC #33-63125 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.
You have permission to use the name of Standard & Poor's Corporation
and the above-assigned ratings in connection with your dissemination of
information relating to these units, provided that it is understood that
the ratings are not "market" ratings nor recommendations to buy, hold, or
sell the units of the trust or the securities contained in the trust.
Further, it should be understood the rating on the units does not take
into account the extent to which fund expenses or portfolio asset sales
for less than the fund's purchase price will reduce payment to the unit
holders of the interest and principal required to be paid on the
portfolio assets. S&P reserves the right to advise its own clients,
subscribers, and the public of the ratings. S&P relies on the sponsor
and its counsel, accountants, and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
S&P does not independently verify the truth or accuracy of any such
information.
This letter evidences our consent to the use of the name of Standard
& Poor's Corporation in connection with the rating assigned to the units
in the registration statement or prospectus relating to the units or the
trust. However, this letter should not be construed as a consent by us,
within the meaning of Section 7 of the Securities Act of 1933, to the use
of the name of Standard & Poor's Corporation in connection with the
ratings assigned to the securities contained in the trust. You are
hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Please be certain to send us three copies of your final prospectus
as soon as it becomes available. Should we not receive them within a
reasonable time after the closing or should they not conform to the
representations made to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you.
If we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford Bragg
Exhibit 4.3
Independent Certified Public Accountants' Consent
We have issued our report dated December 13, 1995 on the statements
of condition and related bond portfolios of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 264 (IM-IT,
IM-IT Intermediate, California IM-IT, Connecticut IM-IT, Georgia IM-IT,
Michigan IM-IT, New York IM-IT Intermediate Laddered Maturity, Maryland
Quality and Virginia Quality Trusts) as of December 13, 1995 contained in
the Registration Statement on Form S-6 and in the Prospectus. We consent
to the use of our report in the Registration Statement and in the
Prospectus and to the use of our name as it appears under the caption
"Other Matters-Independent Certified Public Accountants."
Grant Thornton LLP
Chicago, Illinois
December 13, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on December 13, 1995 it
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<TABLE> <S> <C>
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This report reflects the current period taken from 487 on December 13, 1995 it
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</LEGEND>
<SERIES>
<NUMBER> 86
<NAME> IMIN
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> DEC-13-1995
<PERIOD-END> DEC-13-1995
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<INVESTMENTS-AT-VALUE> 4914270
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<TABLE> <S> <C>
<ARTICLE> 6
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This report reflects the current period taken from 487 on December 13, 1995 it
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</LEGEND>
<SERIES>
<NUMBER> 148
<NAME> I-CA
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
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<LEGEND>
This report reflects the current period taken from 487 on December 13, 1995 it
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</LEGEND>
<SERIES>
<NUMBER> 29
<NAME> I-CT
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on December 13, 1995 it
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</LEGEND>
<SERIES>
<NUMBER> 78
<NAME> I-GA
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-13-1995
<PERIOD-END> DEC-13-1995
<INVESTMENTS-AT-COST> 3000418
<INVESTMENTS-AT-VALUE> 3000418
<RECEIVABLES> 47395
<ASSETS-OTHER> 0
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<SENIOR-LONG-TERM-DEBT> 0
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<OVERDISTRIBUTION-GAINS> 0
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<EXPENSES-NET> 0
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<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 period taken from 487 on December 13, 1995 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 134
<NAME> I-MI
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-13-1995
<PERIOD-END> DEC-13-1995
<INVESTMENTS-AT-COST> 2935751
<INVESTMENTS-AT-VALUE> 2935751
<RECEIVABLES> 18509
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2954260
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18509
<TOTAL-LIABILITIES> 18509
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2935751
<SHARES-COMMON-STOCK> 3087
<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> 2935751
<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 period taken from 487 on December 13, 1995 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 17
<NAME> ILNY
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-13-1995
<PERIOD-END> DEC-13-1995
<INVESTMENTS-AT-COST> 3103992
<INVESTMENTS-AT-VALUE> 3103992
<RECEIVABLES> 29285
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3133277
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29285
<TOTAL-LIABILITIES> 29285
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3103992
<SHARES-COMMON-STOCK> 3150
<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> 3103992
<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 period taken from 487 on December 13, 1995 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 75
<NAME> Q-MD
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-13-1995
<PERIOD-END> DEC-13-1995
<INVESTMENTS-AT-COST> 2941454
<INVESTMENTS-AT-VALUE> 2941454
<RECEIVABLES> 50754
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2992208
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50754
<TOTAL-LIABILITIES> 50754
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2941454
<SHARES-COMMON-STOCK> 3093
<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> 2941454
<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 period taken from 487 on December 13, 1995 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 68
<NAME> Q-VA
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> DEC-13-1995
<PERIOD-END> DEC-13-1995
<INVESTMENTS-AT-COST> 2959524
<INVESTMENTS-AT-VALUE> 2959524
<RECEIVABLES> 34096
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2993620
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34096
<TOTAL-LIABILITIES> 34096
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2959524
<SHARES-COMMON-STOCK> 3112
<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> 2959524
<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>
