File No. 33-17110
CIK #821224
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 12
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 65
(Exact Name of Trust)
Van Kampen American Capital Distributors, Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
Van Kampen American Capital Distributors, Inc. Chapman and Cutler
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on December 24, 1997 pursuant to paragraph (b) of Rule 485.
MULTI-SERIES 65
IM-IT/9th Discount Series
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.Please retain both parts of this Prospectus for future reference.
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is exempt under existing law from all 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 issuer of Bonds in such Trust are
located. Capital gains, if any, are subject to Federal tax.
THE FUND
The above-named series of Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust (the "Fund" ) consists of a number of
underlying separate unit investment trusts. The various trusts in the Fund are
collectively referred to herein as the "Trusts" . Each Trust consists
of a portfolio of interest-bearing obligations (the "Bonds" or "
Securities" ) 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 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. Each Unit represents a fractional
undivided interest in the principal and net income of the respective Trust
(see "Summary of Essential Financial Information" in this Part One and
"The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Fund.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units of each Trust during the secondary
market will include the aggregate bid price of the Securities in such Trust,
an applicable sales charge, cash, if any, in the Principal Account held or
owned by such Trust, and accrued interest, if any. See "Summary of
Essential Financial Information" in this Part One.
ESTIMATED CURRENT AND LONG-TERM RETURNS
Estimated Current and Long-Term Returns to Unitholders are indicated under
"Summary of Essential information" in this Part One. The methods of
calculating Estimated Current Returns and Estimated Long-Term Return are set
forth in Part Two of this Prospectus.
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.
The Date of this Prospectus is November 21, 1997
Van Kampen American Capital
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 65
Summary of Essential Financial Information
As of September 26, 1997
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
The income, expense and distribution data set forth below have been calculated
for Unitholders electing to receive monthly distributions. Unitholders
choosing distributions semi-annually will receive a slightly higher net annual
interest income because of the lower Trustee's fees and expenses under such
plan.
<TABLE>
<CAPTION>
IM-IT Discount
------------------
<S> <C>
General Information
Principal Amount (Par Value) of Securities.................................................................... $ 3,720,000
Number of Units............................................................................................... 6,776
Fractional Undivided Interest in Trust per Unit............................................................... 1/6,776
Public Offering Price: .......................................................................................
Aggregate Bid Price of Securities in Portfolio............................................................... $ 3,304,958.00
Aggregate Bid Price of Securities per Unit................................................................... $ 487.74
Sales charge 4.384% (4.20% of Public Offering Price excluding principal cash) for the IM-IT Discount Trust... $ 21.38
Principal Cash per Unit...................................................................................... $ 108.20
Public Offering Price per Unit <F1>.......................................................................... $ 617.32
Redemption Price per Unit..................................................................................... $ 595.94
Excess of Public Offering Price per Unit over Redemption Price per Unit....................................... $ 21.38
Minimum Value of the Trust under which Trust Agreement may be terminated...................................... $ 1,600,000.00
Annual Premium on Portfolio Insurance......................................................................... $ 2,795.50
Evaluator's Annual Fee <F4>................................................................................... $ 2,584
Special Information
Calculation of Estimated Net Annual Unit Income: .............................................................
Estimated Annual Interest Income per Unit.................................................................... $ 30.17
Less: Estimated Annual Expense excluding Insurance........................................................... $ 2.24
Less: Annual Premium on Portfolio Insurance.................................................................. $ .41
Estimated Net Annual Interest Income per Unit................................................................ $ 27.52
Calculation of Estimated Interest Earnings per Unit: .........................................................
Estimated Net Annual Interest Income......................................................................... $ 27.52
Divided by 12................................................................................................ $ 2.29
Estimated Daily Rate of Net Interest Accrual per Unit......................................................... $ .07643
Estimated Current Return Based on Public Offering Price <F2><F3>.............................................. 5.41%
Estimated Long-Term Return <F2><F3>........................................................................... 4.38%
- ----------
<FN>
<F1>Plus accrued interest to the date of settlement (three business days after
purchase) of $8.36 for the IM-IT Discount Trust.
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge.
<F3>The Estimated Current Return and Estimated Long-Term Return on an identical
portfolio without the insurance obtained by the IM-IT Discount Trust would
have been slightly higher.
<F4>Notwithstanding information to the contrary in Part Two of this Prospectus,
the Trust Indenture provides that as compensation for its services, the
Evaluator shall receive a fee of $.30 per $1,000 principal amount of Bonds per
Trust annually. This fee may be adjusted for increases in consumer prices for
services under the category "All Services Less Rent of Shelter" in the
Consumer Price Index.
</TABLE>
Summary of Essential Financial Information (continued)
Evaluations for purpose of sales, 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.
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution.......$1.00 per Unit
Date of Deposit......................December 3, 1987
Mandatory Termination Date...........December 31, 2016
Evaluator's Annual Supervisory Fee...Maximum of $0.25 per Unit
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
TENTH day of the month as follows: monthly - each month; quarterly - March, June, September and
Record and Computation Dates...December for the IM-IT Discount Trust; semi-annual - June and December for the IM-IT Discount Trust
TWENTY-FIFTH day of the month as follows: monthly - each month; quarterly - March, June, September
and December for the IM-IT Discount Trust; semi-annual - June and December for the IM-IT Discount
Distribution Dates.............Trust
$1.24, $.69 per $1,000 principal amount of Bonds respectively, for those portions of the Trust
under the monthly and semi-annual distribution plans and $0.98 per $1,000 principal amount of Bonds
Trustee's Annual Fee...........for the portions of the IM-IT Discount Trust under the quarterly distribution plans.
</TABLE>
PORTFOLIO
In selecting Bonds for the Insured Municipals Income Trust, Discount Series 9,
the following facts, among others, were considered: (i) either the Standard &
Poor's, A Division of The McGraw-Hill Companies rating of the Bonds was in no
case less than "BBB-" , or the Moody's Investors Service, Inc. rating
of the Bonds was in no case less than "Baa" , including provisional or
conditional ratings, respectively (see "Description of Securities
Ratings" in Part Two), (ii) the prices of the Bonds relative to other
bonds of comparable quality and maturity, (iii) the availability and cost of
insurance for the prompt payment of principal and interest on the Bonds and
(iv) the diversification of Bonds as to purpose of issue and location of
issuer. As of August 31, 1997, the Trust consists of 9 issues which are
payable from the income of a specific project or authority. The portfolio is
divided by purpose of issue as follows: Escrowed to Maturity, 2 (24%); Health
Care, 1 (4%); Miscellaneous, 1 (8%); Pre-refunded, 4 (44%); and Water and
Sewer, 1 (20%). The portfolio consists of 9 Bond issues in 5 states. See "
Bond Portfolio" herein and "Description of Securities Ratings" in
Part Two.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1989 1990 1991 1992
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net asset value per Unit at beginning of period................................... $ 815.14 $ 884.13 $ 852.65 $ 836.18
=========== ============ =========== ===========
Net asset value per Unit at end of period......................................... $ 884.13 $ 852.65 $ 836.18 $ 890.57
=========== ============ =========== ===========
Distributions to Unitholders of investment income including accrued interest to
carry paid on Units redeemed (average Units outstanding for entire period) <F1>... $ 60.30 $ 61.10 $ 58.37 $ 55.35
=========== ============ =========== ===========
Distributions to Unitholders from Bond redemption proceeds (average Units
outstanding for entire period).................................................... $ -- $ -- $ 64.54 $ --
=========== ============ =========== ===========
Unrealized appreciation (depreciation) of Bonds (per Unit outstanding at end of
period)........................................................................... $ 68.66 $ (34.29) $ 43.43 $ 54.22
=========== ============ =========== ===========
Distributions of investment income by frequency of payment <F1>
Monthly.......................................................................... $ 60.00 $ 60.01 $ 57.79 $ 55.20
Quarterly........................................................................ $ 60.40 $ 60.47 $ 58.95 $ 55.52
Semiannual....................................................................... $ 60.70 $ 60.74 $ 59.23 $ 55.82
Units outstanding at end of period................................................ 7,984 7,696 7,670 7,670
- ----------
<FN>
<F1>Unitholders may elect to receive distributions on a monthly, quarterly or
semi-annual basis.
</TABLE>
PER UNIT INFORMATION (continued)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value per Unit at beginning of period......................... $ 890.57 $ 935.18 $ 884.09 $ 893.80 $ 811.26
=========== =========== ========== =========== ===========
Net asset value per Unit at end of period............................... $ 935.18 $ 884.09 $ 893.80 $ 811.26 $ 821.64
=========== =========== ========== =========== ===========
Distributions to Unitholders of investment income including accrued
interest to carry paid on Units redeemed (average Units outstanding for
entire period) <F1>..................................................... $ 55.52 $ 55.35 $ 55.46 $ 55.73 $ 50.59
=========== =========== ========== =========== ===========
Distributions to Unitholders from Bond redemption proceeds (average
Units outstanding for entire period).................................... $ -- $ -- $ -- $ 80.78 $ ----
=========== =========== ========== =========== ===========
Unrealized appreciation (depreciation) of Bonds (per Unit outstanding
at end of period)....................................................... $ 44.81 $ (51.06) $ 8.91 $ (29.56) $ (13.39)
=========== =========== ========== =========== ===========
Distributions of investment income by frequency of payment <F1>
Monthly................................................................ $ 55.20 $ 55.20 $ 55.08 $ 54.37 $ 49.83
Quarterly.............................................................. $ 55.52 $ 55.52 $ 55.52 $ 55.49 $ 50.17
Semiannual............................................................. $ 55.82 $ 55.82 $ 55.82 $ 55.89 $ 50.55
Units outstanding at end of period...................................... 7,665 7,656 7,576 7,219 6,951
- ----------
<FN>
<F1>Unitholders may elect to receive distributions on a monthly, quarterly or
semi-annual basis.
</TABLE>
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 65:
We have audited the accompanying statements of condition (including the
analyses of net assets) and the related portfolio of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 65 (IM-IT Discount
Series Trust) as of August 31, 1997, and the related statements of operations
and changes in net assets for the three years ended August 31, 1997. These
statements are the responsibility of the Trustee and the Sponsor. Our
responsibility is to express an opinion on such 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 tax-exempt securities owned at August 31,
1997 by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
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 65 (IM-IT Discount
Series Trust) as of August 31, 1997, and the results of operations and changes
in net assets for the three years ended August 31, 1997, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
October 17, 1997
<TABLE>
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 65
Statements of Condition
August 31, 1997
<CAPTION>
IM-IT
Discount
Trust
---------------
<S> <C>
Trust property
Cash................................................................................ $ 1,510,082
Tax-exempt securities at market value, (cost $3,164,817) (note 1)................... 4,143,365
Accrued interest.................................................................... 57,792
Receivable for securities sold...................................................... --
$ 5,711,239
===============
Liabilities and interest to Unitholders
Cash overdraft...................................................................... $ --
Redemptions payable................................................................. --
Interest to Unitholders............................................................. 5,711,239
$ 5,711,239
===============
Analyses of Net Assets
Interest of Unitholders (6,951 Units of fractional undivided interest outstanding)
Cost to original investors of 8,000 Units (note 1).................................. $ 6,452,000
Less initial underwriting commission (note 3)....................................... 316,116
---------------
6,135,884
Less redemption of 1,049 Units...................................................... 868,006
---------------
5,267,878
Undistributed net investment income
Net investment income............................................................... 4,179,215
Less distributions to Unitholders................................................... 4,078,403
---------------
100,812
Realized gain (loss) on Bond sale or redemption..................................... 459,392
Unrealized appreciation (depreciation) of Bonds (note 2)............................ 978,548
Distributions to Unitholders of Bond sale or redemption proceeds.................... (1,095,391)
Net asset value to Unitholders...................................................... $ 5,711,239
===============
Net asset value per Unit (6,951 Units outstanding)................................... $ 821.64
===============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
INSURED MUNICIPALS INCOME TRUST, DISCOUNT SERIES 9
Statements of Operations
Years ended August 31,
<CAPTION>
1995 1996 1997
----------- ------------- -------------
<S> <C> <C> <C>
Investment income
Interest income................................................ $ 441,591 $ 406,740 $ 368,682
Expenses
Trustee fees and expenses...................................... 9,818 9,255 8,905
Evaluator fees................................................. 2,770 2,919 2,584
Insurance expense.............................................. 6,413 5,360 4,759
Supervisory fees............................................... 1,593 1,900 2,481
----------- ------------- -------------
Total expenses................................................. 20,594 19,434 18,729
----------- ------------- -------------
Net investment income.......................................... 420,997 387,306 349,953
Realized gain (loss) from Bond sale or redemption
Proceeds....................................................... 70,014 892,315 1,685,749
Cost........................................................... 65,325 677,773 1,515,917
----------- ------------- -------------
Realized gain (loss)........................................... 4,689 214,542 169,832
Net change in unrealized appreciation (depreciation) of Bonds... 67,478 (213,367) (93,050)
----------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.$ 493,164 $ 388,481 $ 426,735
=========== ============= =============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Years ended August 31,
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................................................................... $ 420,997 $ 387,306 $ 349,953
Realized gain (loss) on Bond sale or redemption......................................... 4,689 214,542 169,832
Net change in unrealized appreciation (depreciation) of Bonds........................... 67,478 (213,367) (93,050)
------------- ------------- -------------
Net increase (decrease) in net assets resulting from operations......................... 493,164 388,481 426,735
Distributions to Unitholders from:
Net investment income................................................................... (422,356) (413,762) (358,007)
Bonds sale or redemption proceeds....................................................... -- (599,688) --
Redemption of Units (67,971) (289,917) (214,006)
------------- ------------- -------------
Total increase (decrease)............................................................... 2,837 (914,886) (145,278)
Net asset value to Unitholders
Beginning of period..................................................................... 6,768,566 6,771,403 5,856,517
------------- ------------- -------------
End of period (including undistributed net investment income of $135,322, $108,866 and
$100,812, respectively).................................................................. $ 6,771,403 $ 5,856,517 $ 5,711,239
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
(IM-IT and QUALITY MULTI-SERIES 65)
INSURED MUNICIPALS INCOME TRUST DISCOUNT
PORTFOLIO as of August 31, 1997
<CAPTION>
August 31,
1997
Port- Redemption Market
folio Aggregate Rating Feature Value
Item Principal Name of Issuer, Title, Interest Rate and Maturity Date (Note 2) (Note 2) (Note 1)
- --------- -------------- -------------------------------------------------------- ------------ -------------------- ---------------
<S> <C> <C> <C> <C> <C>
A $ 390,000 Wisconsin Municipal Mutual Insurance Company Revenue 1997 @ 100
Bonds, Series 1987-A 8.500% Due 12/01/07 ............... A1* 2002 @ 100 S.F. $ 390,507
- -----------------------------------------------------------------------------------------------------------------------------------
B 930,000 City of Austin, Texas, Combined Utilities Systems 2002 @ 100
Revenue Bonds, Series 1987 (BIG Insured) 8.625% Due 2002 @ 100 P.R.
11/15/12................................................ AAA 2008 @ 100 S.F. 1,089,160
- -----------------------------------------------------------------------------------------------------------------------------------
C - 0 - Illinois Health Facilities Authority Revenue Refunding
Bonds, Series 1987 (West Suburban Hospital Medical
Center) Oak Park, Illinois (BIG Insured) 8.250% Due
08/01/13................................................ - 0 -
- -----------------------------------------------------------------------------------------------------------------------------------
D 500,000 Texas Public Building Authority Building Revenue
Refunding Bonds, Series 1986 (MBIA Insured) 6.000% Due
08/01/14**.............................................. AAA 537,365
- -----------------------------------------------------------------------------------------------------------------------------------
E 600,000 Cobb County Kennestone Hospital Authority (Georgia)
Revenue Certificates, Series 1986A (MBIA Insured)
0.000% Due 08/01/15**................................... AAA 195,120
- -----------------------------------------------------------------------------------------------------------------------------------
F 200,000 City of Thornton, Adams County, Colorado, General 2001 @ 30.15 P.R.
Obligation Water Refunding and Improvement Bonds, 2001 @ 30.15
Series 1986 (FGIC Insured) 55M-0.000% Due 12/01/15 AAA 2001 @ 30.15 P.R. 13,638
145M-0.000% Due 12/01/15................................ AAA 2011 @ 71 S.F. 35,954
- -----------------------------------------------------------------------------------------------------------------------------------
G - 0 - City of Chicago, Illinois, Multi-Family Housing Revenue
Refunding Bonds (FHA Insured Mortgage Loan Presidential
Towers Project) Series 1987A 7.625% Due 04/01/16........ - 0 -
- -----------------------------------------------------------------------------------------------------------------------------------
H 920,000 New York City Municipal Water Finance Authority Water
and Sewer System Revenue Bonds, Series A 5.000% Due 1997 @ 100
06/15/17................................................ A- 2015 @ 100 S.F. 836,841
- -----------------------------------------------------------------------------------------------------------------------------------
I - 0 - Washington State Health Care Facilities Authority
Revenue Bonds (Virginia Mason Medical Center) MBIA
Insured 7.000% Due 07/01/17............................. - 0 -
- -----------------------------------------------------------------------------------------------------------------------------------
J - 0 - Greenwood County, South Carolina, Self Memorial
Hospital, Hospital Facilities Revenue Bonds, Series
1987A (BIG Insured) 8.375% Due 10/01/17................. - 0 -
- -----------------------------------------------------------------------------------------------------------------------------------
K 180,000 Travis County (Texas) Health Facilities Development
Corporation Insured Hospital Revenue Bonds (St. David's
Community Hospital Project) Series 1987 A (AMBAC 1997 @ 102
Indemnity Insured) 8.375% Due 11/01/17.................. AAA 2008 @ 100 S.F. 183,006
- -----------------------------------------------------------------------------------------------------------------------------------
L 865,000 Municipal Electric Authority of Georgia General Power
Revenue Bonds, 1986A Series 6.000% Due 01/01/20......... A 1997 @ 100 P.R. 861,774
- -----------------------------------------------------------------------------------------------------------------------------------
M - 0 - Intermountain Power Agency (A Political Subdivision of
The State of Utah) Power Supply Revenue Refunding
Bonds, 1985 Series C 6.000% Due 07/01/21 .............. - 0 -
- -----------------------------------------------------------------------------------------------------------------------------------
N - 0 - Oklahoma Municipal Power Authority Power Supply System
Revenue Bonds, Series 1986 C 6.000% Due 01/01/23 ...... - 0 -
------------- --------------
$ 4,585,000 ........................................................ $ 4,143,365
============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
**The issuer of these Bonds has placed funds or securities in escrow against
payment of the issue on the date or dates indicated.
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST, 65th MULTI-SERIES
Notes to Financial Statements
August 31, 1995, 1996 and 1997
- --------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Tax-exempt municipal securities are stated at the value
determined by the Evaluator, American Portfolio Evaluation Services (a
division of an affiliate of the Sponsor). The Evaluator may determine the
value of the Bonds (1) on the basis of current bid prices of the Bonds
obtained from dealers or brokers who customarily deal in Bonds comparable to
those held by each of the Trusts, (2) on the basis of bid prices for
comparable Bonds, (3) by determining the value of the Bonds by appraisal or
(4) by any combination of the above. The IM-IT Discount Trust maintains
insurance which provides for the timely payment when due, of all principal and
interest on Bonds owned by it. Except in cases in which Bonds are in default,
or significant risk of default, the valuation of the Bonds in such Trusts does
not include any value attributable to this insurance feature since the
insurance terminates as to any Bond at the time of its disposition.
Security Cost - The original cost of the Trust was based on the determination
by Interactive Data Corporation of the offering prices of the Bonds on the
date of deposit (December 3, 1987). Since the valuation is based upon the bid
prices, the Trust recognized a downward adjustment of $61,465 on the date of
deposit resulting from the difference between the bid and offering prices.
This downward adjustment was included in the aggregate amount of unrealized
appreciation (depreciation) reported in financial statements for the Trust for
the period ended August 31, 1988.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit in each Trust based upon (1) the cash on hand in such Trust or monies in
the process of being collected, (2) the Bonds in such Trust based on the value
determined by the Evaluator and (3) interest accrued thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - The Trust is not taxable for Federal income tax
purposes. Each Unitholder is considered to be the owner of a pro rata portion
of such Trust and, accordingly, no provision has been made for Federal income
taxes.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an identified cost basis.
NOTE 2 - PORTFOLIO
Ratings - The source of all ratings, exclusive of those designated N/R or * is
Standard & Poor's, A Division of the McGraw-Hill Companies. Ratings marked *
are by Moody's Investors Service, Inc. as these Bonds are not rated by
Standard & Poor's, A Division of the McGraw-Hill Companies. N/R indicates that
the Bond is not rated by Standard & Poor's, A Division of the McGraw-Hill
Companies or Moody's Investors Service, Inc. The ratings shown represent the
latest published ratings of the Bonds. For a brief description of rating
symbols and their related meanings, see "Description of Securities
Ratings" in Part Two.
Redemption Feature - 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.
"P.R." indicates a bond has been prerefunded. 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
evaluation which represents a premium over par. To the extent that the Bonds
were deposited in the 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 Bonds and there will be distributed to Unitholders the principal
amount in excess of $1 per Unit semi-annually and any premium received on such
redemption. However, should the amount available for distribution in the
Principal Account 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
Estimated Current 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 (3) under "Federal Tax Status of the
Trusts" and "Annual Unit Income and Estimated Current Returns" in
Part Two.
NOTE 2 - PORTFOLIO (continued)
Insurance - Insurance coverage providing for the timely payment when due of
all principal and interest on the Bonds in the IM-IT Discount Trust has been
obtained by the Trusts or by one of the Preinsured Bond Insurers (as indicated
in the Bond name). Such insurance does not guarantee the market value of the
Bonds or the value of the Units. For Bonds covered under the Trust's insurance
policy the insurance is effective only while Bonds thus insured are held in
the Trust and the insurance premium, which is a Trust obligation, is paid on a
monthly basis. The premium for insurance which has been obtained from various
insurance companies by the issuer of the Bond involved is payable by the
issuer. Insurance expense for the period reflects adjustments for redeemed or
sold Bonds.
An Accounting and Auditing Guide issued by the American Institute of Certified
Public Accountants states that, for financial reporting purposes, insurance
coverage of the type acquired by the Trust does not have any measurable value
in the absence of default of the underlying Bonds or indication of the
probability of such default. In the opinion of the Evaluator, there is no
indication of a probable default of Bonds in the portfolio as of the date of
these financial statements.
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at August 31, 1997 is as follows:
<TABLE>
<CAPTION>
IM-IT
Discount
Trust
------------
<S> <C>
Unrealized Appreciation $ 978,548
Unrealized Depreciation --
------------
$ 978,548
============
</TABLE>
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Sponsor intends to
maintain a market for Units and to continuously offer to purchase Units at
prices, subject to change at any time, based upon the aggregate bid price of
the Bonds in the portfolio of each Trust, plus interest accrued to the date of
settlement. If the supply of Units exceeds demand, or for other business
reasons, the Sponsor may discontinue purchases of Units at such prices. In the
event that a market is not maintained for the Units, a Unitholder desiring to
dispose of his Units may be able to do so only by tendering such Units to the
Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the
Evaluator's determination of the aggregate offering price of the Bonds per
Unit on the date of an investor's purchase, plus a sales charge of 4.9% of the
public offering price which is equivalent to 5.152% of the aggregate offering
price of the Bonds for the IM-IT Discount. The secondary market cost to
investors is based on the Evaluator's determination of the aggregate bid price
of the Bonds per Unit on the date of an investor's purchase plus a sales
charge based upon the years to average maturity of the Bonds in the portfolio.
The sales charge ranges from 1.0% of the public offering price (1.010% of the
aggregate bid price of the Bonds) for a Trust with a portfolio with less than
two years to average maturity to 5.40% of the public offering price (5.708% of
the aggregate bid price of the Bonds) for a Trust with a portfolio with
twenty-one or more years to average maturity.
Compensation of Evaluator - The Evaluator receives a fee for providing
portfolio supervisory services for each of the Trusts ($.25 per Unit, not to
exceed the aggregate cost of the Evaluator for providing such services to all
applicable Trusts). In addition, the Evaluator receives an annual fee for
regularly evaluating each of the Trust's portfolios. Both fees may be adjusted
for increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index.
NOTE 4 - REDEMPTION OF UNITS
During the three years ended August 31, 1995, 1996 and 1997, 80 Units, 357
Units and 268 Units, respectively, were presented for redemption.
INSURED MUNICIPALS INCOME TRUST
PROSPECTUS
Part Two
In the opinion of counsel, interest income to the Trust and to Unitholders,
with certain exceptions, is excludable under existing law from gross income
for Federal income taxes, but may be subject to state and local taxes. Capital
gains, if any, are subject to Federal tax.
The Trust. The Trust consists of a series of unit investment trusts issued
under the name Insured Municipals Income Trust (and including the various
series of the Discount Series, the Limited Maturity Series, the Intermediate
Series and the Short Intermediate Series) or under the name The First National
Dual Series Tax-Exempt Bond Trust. Each Trust consists of interest-bearing
obligations issued by or on behalf of municipalities and other governmental
authorities or issued by certain United States territories or possessions and
their public 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 existing law (the "Bonds" or "
Securities" ). The objectives of the Trust are Federally tax-exempt income
and conservation of capital through an investment in a diversified, insured
portfolio of tax-exempt Bonds. The payment of interest and the preservation of
principal are, of course, dependent upon the continuing ability of the issuers
and/or obligors of the Bonds and of the insurers thereof to meet their
respective obligations. There is no assurance that the Trust's objectives will
be met. The Securities in the Discount Series were acquired at prices which
resulted in each Discount Series portfolio, as a whole, being purchased at a
deep discount from the aggregate par value of such Securities. Gains based
upon the difference, if any, between the value of the Securities at maturity,
redemption or sale and their purchase price at a market discount (plus earned
original issue discount) will constitute taxable ordinary income with respect
to a Unitholder.
The Trust and "AAA" Rating. Insurance guaranteeing the payments of
principal and interest, when due, on the Securities in the portfolio of the
Trust has been obtained from a municipal bond insurance company either by the
Trust, by a prior owner of the Bonds, by the issuer of the Bonds involved or
by the Sponsor prior to the deposit of the Bonds in the Trust. All issues of
the Trust are insured under one or more insurance policies obtained by the
Trust, except for certain issues of certain Trusts for which insurance has
been obtained 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 the Trust.
Insurance obtained by the Trust, if any, applies only while Bonds are retained
in the Trust while insurance obtained by a Bond issuer is effective so long as
such Bonds are outstanding. The Trustee, upon the sale of a Bond insured under
an insurance policy obtained by the 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
the Trust and not to the Units offered hereby or to the market value thereof.
As a result of such insurance, the Units of the Trust received a rating of
"AAA" by Standard & Poor's, a division of the McGraw-Hill Companies,
Inc. ("Standard & Poor's" ) on the date the Trust was created. 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
the Trust or sales by the Trust of Bonds for less than the purchase price paid
by the Trust will reduce payment to Unitholders of the interest and principal
required to be paid on such Bonds. See "Insurance on the Bonds" . No
representation is made as to any insurer's ability to meet its commitments.
Public Offering Price. The secondary market Public Offering Price of each
Trust will include the aggregate bid price of the Securities in such Trust, an
applicable sales charge, cash, if any, in the Principal Account held or owned
by such Trust, accrued interest and Purchased Interest, if any. If the Bonds
in the Trust were available for direct purchase by investors, the purchase
price of the Bonds would not include the sales charge included in the Public
Offering Price of the Units.
Units of the Trusts are not insured by the FDIC, are not deposits or other
obligations of, or guaranteed by, any depository institution or any government
agency and are subject to investment risk, including possible loss of the
principal amount invested.
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE
Both parts of this Prospectus should be retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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.
This Prospectus is dated as of the date of the Prospectus Part I accompanying
this Prospectus Part II.
Van Kampen American Capital
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 date of the "Summary of Essential Financial
Information" were as set forth under "Per Unit Information" for
each Trust in Part one of this Prospectus. The methods of calculating
Estimated Current Return and Estimated Long-Term Return are set forth under
"Estimated Current Returns and Estimated Long-Term Returns."
Objectives of The Fund. The objectives of the Fund are income exempt from
Federal income tax and conservation of capital through an investment in
diversified portfolios of Federal 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
that they might be able to acquire individually. In addition, securities of
the type deposited in the Fund are often not available in small amounts.
Market for Units. Although not obligated to do so, the Sponsor, Van Kampen
American Capital Distributors, Inc., intends to 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. 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 "Rights of
Unitholders--Redemption of Units" and "Public Offering--Market for
Units" ).
Reinvestment Option. Unitholders of any Van Kampen American Capital-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase units of any other Van Kampen American Capital trust in the initial
offering period accepting rollover investments subject to a reduced sales
charge to the extent stated in the related prospectus (which may be deferred
in certain cases).
Unitholders have the opportunity to have their distributions reinvested into
an open-end, management investment company as described herein. See "
Rights of Unitholders--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 "Risk Factors" .
THE TRUST
Each series of Insured Municipals Income Trust and The First National Dual
Series Tax-Exempt Bond Trust (Insured Series) (the "Trust" ) was
created under the laws of the State of New York pursuant to a Trust Agreement
(the "Trust Agreement" ), between 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, or their respective
predecessors.
The Trust consists of a portfolio of interest-bearing obligations issued by or
on behalf of states and territories of the United States, and political
subdivisions and authorities thereof, the interest on which is, in the opinion
of recognized bond counsel to the issuing authorities, excludable from gross
income for Federal income tax under existing law, but may be subject to state
and local taxes. Unless otherwise terminated as provided therein, the Trust
Agreement for all series except the Limited Maturity, Intermediate and Short
Intermediate Series will terminate at the end of the calendar year prior to
the fiftieth anniversary of its execution, while the Trust Agreement for the
Limited Maturity, Intermediate and Short Intermediate Series will terminate at
the end of the calendar year prior to the twentieth anniversary of its
execution.
The portfolio of certain Trusts (including the Discount Series) may consist of
bonds that were purchased 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 "
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 the Trust are "zero coupon" bonds. Zero coupon
bonds are purchased at a deep discount because the buyer receives only the
right to receive a final payment at the maturity of the bond and does not
receive any periodic interest payments. The effect of owning deep discount
bonds which do not make current interest payments (such as the zero coupon
bonds) is that a fixed yield is earned not only on the original investment but
also, in effect, on all discount earned during the life of such obligation.
This implicit reinvestment of earnings at the same rate eliminates the risk of
being unable to reinvest the income on such obligation at a rate as high as
the implicit yield on the discount obligation, but at the same time eliminates
the holder's ability to reinvest at higher rates in the future. For this
reason zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
securities of comparable quality which pay interest currently.
Each Unit initially offered represents a fractional undivided interest in the
principal and net income of the Trust. To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in the Trust
represented by each unredeemed Unit will increase, although the actual
interest in the 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 Trust are income exempt from Federal income taxation and
conservation of capital through an investment in a diversified, insured
portfolio of Federal tax-exempt obligations. There is, of course, no guarantee
that the Trust will achieve its objective. The Trust 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 Trust are often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in the Trust has been obtained by the Trust from either
AMBAC Indemnity Corporation ("AMBAC Indemnity" ), Financial Guaranty
Insurance Company ("Financial Guaranty" ) 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 the 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 Guarantee
Insurance Company ("Capital Guaranty" ), (7) Capital Market Assurance
Corporation ("CapMAC" ) and/or (8) Financial Security Assurance Inc.
("Financial Security" or "FSA" ) (collectively, the "
Preinsured Bond Insurers" ) (see "Insurance on the Bonds" ).
Insurance obtained by the Trust is effective only while the Bonds thus insured
are held in the 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, or by the Sponsor from one of the Preinsured Bond Insurers (the "
Preinsured Bonds" ) are not additionally insured by the 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 the Trust, if any, unless Bonds are in default in payment of
principal or interest or in significant risk of such default. See "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 "Description of Bond 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 Insurer by the
Trust upon the payment of a single predetermined insurance premium from the
proceeds of the sale of such Bond. Accordingly, any Bond in the Trust is
eligible to be sold on an insured basis. All bonds insured by the Portfolio
Insurers and the Preinsured Bond Insurers received a "AAA" rating by
Standard & Poor's on the date such bonds were deposited in the Trust. See "
Insurance on the Bonds" .
In selecting Bonds for the Trust, the following facts, among others, were
considered by the Sponsor: (a) either the Standard & Poor's rating of the
Bonds was in no case less than "BBB-" or the Moody's Investors
Service, Inc. rating of the Bonds was in no case less than "Baa"
including provisional or conditional ratings, respectively, or, if not rated,
the Bonds 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 Trust (see "Description of Bond Ratings" ), (b) the prices of
the Bonds relative to other bonds of comparable quality and maturity, (c) the
diversification of Bonds as to purpose of issue and location of issuer, and
(d) the availability and cost of insurance for the prompt payment of principal
and interest, when due, on the Bonds. Subsequent to the Date of Deposit, a
Bond may cease to be rated or its rating may be reduced below the minimum
required as of the Date of Deposit. Neither event requires elimination of such
Bond from the portfolio but may be considered in the Sponsor's determination
as to whether or not to direct the Trustee to dispose of the Bond (see "
Trust Administration--Portfolio Administration" ).
To the best knowledge of the Sponsor, there was 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.
TRUST PORTFOLIO
Risk Factors. Certain of the Bonds in the Trust 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 the 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 Trust are revenue bonds payable from the
income of a specific project or authority and are not supported by the
issuer's power to levy taxes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds, on the other hand, are payable only
from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds in the Fund, both within a particular classification and
between classifications, depending on numerous factors.
Certain of the Bonds in the Trust may be obligations which derive their
payment 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 the 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 Trust, the Sponsor at the Date of Deposit was not aware that any
of the respective issuers of such Bonds were actively considering the
redemption of such Bonds prior to their respective stated initial call dates.
Certain of the Bonds in the Trust may be health care revenue bonds. In view of
this an investment in the 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 may
service 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 the Securities held in the portfolio of the Trust;
however, because of the insurance obtained by the Trust, the "AAA"
rating of the Units of the Trust would not be affected.
Certain of the Bonds in the Trust may be obligations of public utility
issuers, including those selling wholesale and retail electric power and gas.
In view of this an investment in the 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.
Certain of the Bonds in the Trust 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 the 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.
Certain of the Bonds in the Trust may be industrial revenue bonds ("
IRBs" ). In view of this an investment in the 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.
Certain of the Bonds in the Trust 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 the 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 lease is ordinarily
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. A governmental
entity that enters into such a lease agreement cannot obligate future
governments to appropriate for and make lease payments but covenants to take
such action as is necessary to include any lease payments due in its budgets
and to make the appropriations therefor.A governmental entity's failure to
appropriate for and to make payments under its lease obligation could result
in insufficient funds available for payment of the obligations secured
thereby. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult.
Certain of the Bonds in the Trust 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 the 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 Trust. 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.
Certain of the Bonds in the Trust 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 the 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.
Certain of the Bonds in the Trust 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 the 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.
Bond Redemptions. Because certain of the Bonds in the Trust 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 the 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 Bond.
Certain of the Bonds in the Trust 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 and it may also offset the current return on Units of
the Trust. The 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" and the notes thereto in Part
One of this Prospectus. See also the discussion of single family mortgage and
multi-family revenue bonds above for more information on the call provisions
of such bonds.
ESTIMATED CURRENT RETURNS AND ESTIMATED LONG-TERM RETURNS
As of the opening of business on the date indicated therein, the Estimated
Current Returns and the Estimated Long-Term Returns for each Trust under the
various distribution plans were as set forth under "Per Unit
Information" for the applicable Trust in Part One of this Prospectus.
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 and with
changes in Purchased Interest for those series which contain Purchased
Interest; therefore, there is no assurance that the present Estimated Current
Returns will be realized in the future. 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 will be realized in the future.
Estimated Current Returns and Estimated Long-Term Returns are expected to
differ because the calculation of Estimated Long-Term Returns reflects the
estimated date and amount of principal returned while Estimated Current
Returns calculations include only Net Annual Interest Income and Public
Offering Price.
TRUST OPERATING EXPENSES
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, in
connection with certain series of the Trust, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp.,which is an affiliate of the Sponsor (the "Evaluator" ), will
receive an annual supervisory fee, which is not to exceed the amount set forth
under "Summary of Essential Financial Information" in Part One of this
Prospectus, for providing portfolio supervisory services for such series. Such
fee (which is based on the number of Units outstanding in the Trust on January
1 of each year) may exceed the actual costs of providing such supervisory
services for such series, but at no time will the total amount received for
portfolio supervisory services rendered to all series of Insured Municipals
Income Trust 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 in the amount set forth in "Summary of
Essential Financial Information" in Part One of this Prospectus (which is
based on the outstanding principal amount of Securities on January 1 of each
year) for regularly evaluating the 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 dealers will receive sales
commissions and may realize other profits (or losses) in connection with the
sale of Units as described under "Public Offering" .
Trustee's Fee. For its services, the Trustee will receive a fee from the Trust
based on the aggregate outstanding principal amount of Securities in the 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 in Part
One of this Prospectus. Such fee will be computed at the amounts set forth in
Part One to this Prospectus for that portion of the Trust under the
semi-annual distribution plan and for those portions of the Trust representing
monthly and quarterly distribution plans. The Trustee's fees are payable
monthly on or before the twenty-fifth day of each month from the Interest
Account to the extent funds are available and then from the Principal Account.
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. 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 the Trust is expected to result from the use of these
funds. For a discussion of the services rendered by the Trustee pursuant to
its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration" .
Insurance Premiums. The cost of the portfolio insurance obtained by the Trust,
if any, is the amount shown in "Summary of Essential Financial
Information" in Part One of this Prospectus. The premium is payable each
year that the Trust retains the Bonds. Premiums, if any, which are Trust
obligations, are payable monthly by the Trustee on behalf of the Trust. As
Bonds in the portfolio 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 the 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. The Trust does not incur any expense
for insurance which has been obtained by an issuer of a Bond, since the
premium or premiums for such insurance have been paid by the respective
issuers of such bonds. Bonds for which insurance has been obtained by the
issuer from one of the Preinsured Bond Insurers are not additionally insured
by the Trust. See "Objectives and Securities Selection" .
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trust: (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 Trust 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 Trust
without negligence, bad faith or willful misconduct on its part, (f) any
special custodial fees payable in connection with the sale of any Bonds in a
Trust and (g) expenditures incurred in contacting Unitholders upon termination
of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When such
fees and expenses are paid by or owing to the Trustee, they are secured by a
lien on the portfolio of the Trust. If the balances in the Interest and
Principal Accounts are insufficient to provide for amounts payable by the
Trust, the Trustee has the power to sell Securities to pay such amounts.
INSURANCE ON THE BONDS
Insurance has been obtained by the 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 the Trust guaranteeing prompt payment of interest and principal, when
due, in respect of the Bonds in the Trust. See "Objectives and Securities
Selection" . An insurance policy obtained by the Trust, if any, is
non-cancellable and will continue in force so long as the Trust is in
existence, the respective Portfolio Insurer is still in business and the Bonds
described in such policy continue to be held by the Trust. Any portfolio
insurance premium for the Trust, which is an obligation of the Trust, is paid
by the Trust on a monthly basis. Non-payment of premiums on a policy obtained
by the 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 the
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
the 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 the 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 the 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 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 the Trust, if any, is only effective as to Bonds owned
by and held in the 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
the Trust, has the right to obtain permanent insurance with respect to such
Bond (i.e., insurance to maturity of the Bonds regardless of the indemnity 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 the 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 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 creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an advantage
to the Trust in that each Bond insured by a Trust insurance policy may be sold
out of the 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 the Trust were to be comprised of a substantial percentage of Bonds in
default or significant risk of default, it is much less likely that the Trust
would need at some point in time to seek a suspension of redemptions of Units
than if the Trust were to have no such option and (b) at the time of
termination of the Trust, if the Trust were holding defaulted Bonds or Bonds
in significant risk of default the Trust would not need to hold such Bonds
until their respective maturities in order to realize the benefits of the
Trust's portfolio insurance.
Except as indicated below, insurance obtained by the Trust, if any, 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. 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 the
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 the Trust, if any, with
respect to the Bonds in the 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 "Objectives and
Securities Selection" .
Capital Markets Assurance Corporation ("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. ("Moody's" ), "AAA" by Standard & Poor's, "
AAA" by Duff & Phelps Credit Rating Co. ("Duff & Phelps" ) and "
AAA" by Nippon Investors Service Inc. Such ratings reflect only the views
of the respective rating agencies, are not recommendations to buy, sell or
hold securities and are subject to revision or withdrawal at any time by such
rating agencies.
CapMAC is a wholly-owned subsidiary of CapMAC Holdings Inc. ("Holdings"
). In December of 1995, in connection with an initial public offering of its
common stock, Holdings became a public company with its common stock listed on
the New York Stock Exchange under the symbol "KAP." 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 to CapMAC.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance laws and
regulations of 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.
At September 30, 1996, CapMAC had qualified statutory capital (which consists
of policyholders' surplus, statutory capital, and contingency reserve) of
approximately $254.2 million, up from $239.9 million at December 31, 1995, 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.
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 $2,440,000,000 (unaudited) and
statutory capital of approximately $1,387,000,000 (unaudited) as of March 31,
1996. 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, 1996, the insurer had
admitted assets of $4.3 billion (unaudited), total liabilities of $2.9 billion
(unaudited), and total capital and surplus of $1.4 billion (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. As of March 31, 1996, MBIA had
admitted assets of $4.0 billion (unaudited), total liabilities of $2.7 billion
(unaudited), and total capital and surplus of $1.3 (unaudited), determined in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. Copies of MBIA's year end financial
statements prepared in accordance with statutory accounting practices are
available from MBIA. The address of MBIA is 113 King Street, Armonk, New York
10504.
Effective December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc. On
January 5, 1990, MBIA acquired all of the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company (BIG),
now known as MBIA Insurance Corp. of Illinois. Through a reinsurance
agreement, BIG has ceded all of its net insured risks, as well as its unearned
premium and contingency reserves, to MBIA and MBIA has reinsured BIG's net
outstanding exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA "
Aaa" and short-term loans "MIG-1," both designated to be of the
highest quality.
Standard & Poor's rates all new issues insured by MBIA "AAA" Prime
Grade.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's rating of MBIA. No application has
been made to any other rating agency in order to obtain additional ratings on
the Obligations. The ratings reflect the respective rating agency's current
assessment of the creditworthiness of MBIA and its ability to pay claims on
its policies of insurance. Any further explanation as to the significance of
the above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Obligations
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Obligations.
Financial Guaranty Insurance Company ("Financial Guaranty" or "
FGIC" ) is a wholly-owned subsidiary of FGIC Corporation (the "
Corporation" } a Delaware holding company. The Corporation is a
wholly-owned subsidiary of General Electric Capital Corporation ("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 June 30, 1996, the total capital and surplus of
Financial Guaranty was approximately $1,069,597,000. 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 is currently licensed to write insurance in
all 50 states and the District of Columbia.
Financial Security Assurance Inc. ("Financial Security" or "
FSA" ) is a monoline insurance company incorporated in 1984 under the laws
of the State of New York. Financial Security is licensed to engage in the
financial guaranty insurance business in all 50 states, the District of
Columbia, Puerto Rico and the United Kingdom.
Financial Security and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance
consists of the issuance of a guaranty of scheduled payments of an issuer's
securities, thereby enhancing the credit rating of those securities, in
consideration for payment of a premium to the insurer. Financial Security and
its subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets
having an ascertainable cash flow or market value. Collateralized securities
include public utility first mortgage bonds and sale/leaseback obligation
bonds. Municipal securities consist largely of general obligation bonds,
special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in
the primary market and outstanding securities sold in the secondary market
that satisfy Financial Security's underwriting criteria.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings" }) a New York Stock Exchange listed
company. Major shareholders of Holdings include Fund American Enterprises
Holdings, Inc., U S WEST Capital Corporation and The Tokio Marine and Fire
Insurance Co., Ltd. No shareholder of Holdings is obligated to pay any debt of
Financial Security or its subsidiaries or any claim under any insurance policy
issued by Financial Security or its subsidiaries or to make any additional
contribution to the capital of Financial Security or its subsidiaries. As of
March 31, 1996 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 $650,053,000 (unaudited) and $387,239,000
(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 $779,177,000 (unaudited) and $340,226,000
(unaudited). Copies of Financial Security's financial statements may be
obtained by writing to Financial Security at 350 Park Avenue, New York, New
York, 10022, Attention: Communications Department. Its telephone number is
(212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries (including FSA
Maryland) are reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective capital, surplus and reserves,
subject to applicable statutory risk limitations. In addition, Financial
Security and FSA Maryland reinsure a portion of their liabilities under
certain of their financial guaranty insurance policies with other reinsurers
under various quota share treaties and on a transaction-by-transaction basis.
Such reinsurance is utilized as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
the obligations of Financial Security under any financial guaranty insurance
policy.
The claims-paying ability of Financial Security and FSA Maryland is rated "
Aaa" by Moody's Investors Service, Inc., and "AAA" by Standard &
Poor's Ratings Services, Nippon Investors Service Inc. and Standard & Poor's
(Australia) Pty. Ltd. Such ratings reflect only the views of the respective
rating agencies, are not recommendations to buy, sell or hold securities and
are subject to revision or withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company was involved in a merger in 1995. On
December 20, 1995, Capital Guaranty Corporation ("CGC" ) merged with a
subsidiary of Financial Security Assurance Holdings Ltd. and Capital Guaranty
Insurance Company, CGC's principal operating subsidiary, changed its name to
Financial Security Assurance of Maryland Inc. ("FSA Maryland" ) and
became a wholly owned subsidiary of Financial Security Assurance Inc. For
further description, see "Financial Security Assurance Inc." herein.
The address of FSA Maryland and its telephone number are Steuart Tower, One
Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000.
In order to be in the Trust, Bonds must be insured by one of the Preinsured
Bond Insurers or be eligible for the insurance being obtained by the 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 the Trust. Thus, all Bonds in the
portfolio are insured either by the 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 the 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, on
the Date of Deposit of each Trust Standard & Poor's assigned to the Units of
the Trust its "AAA" investment rating., Such rating will be in effect
for a period of thirteen months from the Date of Deposit and will, unless
renewed, terminate at the end of such period. See "Description of Bond
Ratings" . The obtaining of this rating by the 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 the Trust or of the Units.
The Estimated Current Return and the Estimated Long-Term Return on an
identical portfolio without the insurance obtained by the Trust would have
been higher than the Estimated Current Return and the Estimated Long-Term
Return on the Securities in the Trust after payment of the insurance premium.
An objective of portfolio insurance obtained by the Trust is to obtain a
higher yield on the Trust portfolio 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 the Trust
which have been insured by the issuer (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 the
portfolio, 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
the 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 the 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
"Tax Status" .
Each Portfolio Insurer is subject to regulation by the department of insurance
in each 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 contracts 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 such company to meet its
commitments 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.
FEDERAL TAX STATUS OF THE TRUSTS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under the
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 each
asset of the respective Trust under subpart E, subchapter J of chapter 1 of
the Code and will have a taxable event when such Trust disposes of a Bond, or
when the Unitholder redeems or sells his Units. Unitholders must reduce the
tax basis of their Units for their share of accrued interest received by the
respective Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such Bonds before the
date the Trust acquired ownership of the Bonds (and the amount of this
reduction may exceed the amount of accrued interest paid to the seller) and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing the proceeds of
such sale or redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder (subject to various
non-recognition provisions of the Code). The amount of any such gain or loss
is measured by comparing the Unitholder's pro rata share of the total proceeds
from such disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who purchases
Units, such basis (before adjustment for 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 in the normal course by the issuer of the defaulted
obligations provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent with
the reasonable expectation that the issuer of the obligations, rather than the
insurer, will pay debt service on the obligations; and
(4)Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted 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. If a Bond is acquired with accrued
interest, that portion of the price paid for the accrued interest is added to
the tax basis of the Bond. When this accrued interest is received, it is
treated as a return of capital and reduces the tax basis of the Bond. If a
Bond is purchased for a premium, the amount of the premium is added to the tax
basis of the Bond. Bond premium is amortized over the remaining term of the
Bond, and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules will
also vary depending on the value of the Bond on the date a Unitholder acquires
his Units and the price the Unitholder pays for his Units. Unitholders should
consult with their tax advisers regarding these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act" )
subjects tax-exempt bonds to the market discount rules of the Code effective
for bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds an
investor's purchase price (except to the extent that such difference, if any,
is attributable to original issue discount not yet accrued), subject to a
statutory de minimis rule. Market discount can arise based on the price a
Trust pays for Bonds or the price a Unitholder pays for his or her Units.
Under the Tax Act, accretion of market discount is taxable as ordinary income;
under prior law the accretion had been treated as capital gain. Market
discount that accretes while a Trust holds a Bond would be recognized as
ordinary income by the Unitholders when principal payments are received on the
Bond, upon sale or at redemption (including early redemption), or upon the
sale or redemption of his or her Units, unless a Unitholder elects to include
market discount in taxable income as it accrues. The market discount rules are
complex and Unitholders should consult their tax advisers regarding these
rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31,1986 depends upon
the corporation's alternative minimum taxable income, which is the
corporation's taxable income uncertain 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 REM IC) is an amount
equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its alternative minimum taxable income
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax exempt
interest, including interest on all of the Bonds in the Fund. Under current
Code provisions, the Superfund Tax does not apply to tax years beginning on or
after January 1, 1996. However, the Superfund Tax could be extended
retroactively. 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. The U.S.
Treasury Department has proposed extending the financial institution rules to
all corporations. 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 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 FacIera4 state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35%, effective for long-term capital gains realized in
taxable years beginning on or after January 1,1993. For taxpayers other than
corporations, net capital gains (which are defined as net long-term capital
gain over net short-term capital loss for a taxable year) are subject to a
maximum marginal stated tax rate of 28%. However, it should be noted that
legislative proposals are introduced from time to time that affect tax rates
and could affect relative differences at which ordinary income and capital
gains are taxed. Under the Code, taxpayers must disclose to the Internal
Revenue Service the amount of tax-exempt interest earned during the year.
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.
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.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. The secondary market
public offering price is based on the bid prices of the Securities in each
Trust, an applicable sales charge as determined in accordance with the table
set forth below, which is based upon the estimated long-term return life of
each Trust, cash, if any, in the Principal Account held or owned by such
Trust, accrued interest and Purchased Interest, if any. For purposes of this
computation, Bonds will be deemed to mature on their expressed maturity dates
unless: (a) the Bonds have been called for redemption or are subject to
redemption 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 estimated long term return life 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 4.712%
2 1.523 13 4.822
3 2.041 14 4.932
4 2.302 15 5.042
5 2.564 16 5.152
6 2.828 17 5.263
7 3.093 18 5.374
8 3.627 19 5.485
9 4.167 20 5.597
10 4.384 21 to 30 5.708
11 4.603
</TABLE>
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the securities in the Trust. Expressed as a percent of
the Public Offering Price (excluding Purchased Interest for those Trusts which
contain Purchased Interest), the sales charge on a Trust consisting entirely
of a portfolio of Bonds with 15 years to maturity would be 4.80%.
Accrued Interest (Accrued Interest To Carry). Accrued interest to carry
consists of two elements. The first element arises as a result of accrued
interest which is the accumulation of unpaid interest on a bond from the last
day on which interest thereon was paid. Interest on Securities in each Trust
is actually paid either monthly, quarterly, if applicable, or semi-annually to
such Trust. However, interest on the Securities in each Trust is accounted for
daily on an accrual basis. Because of this, each Trust always has an amount of
interest earned but not yet collected by the Trustee because of coupons that
are not yet due. For this reason, the Public Offering Price will have added to
it the proportionate share of accrued and undistributed interest to the date
of settlement.
The second element of accrued interest to carry arises because of the
structure of the Interest Account. The Trustee has no cash for distribution to
Unitholders of a Trust until it receives interest payments on the Securities
in such Trust. The Trustee is obligated to provide its own funds, at times, in
order to advance interest distributions. The Trustee will recover these
advancements when such interest is received. Interest Account balances are
established so that it will not be necessary on a regular basis for the
Trustee to advance its own funds in connection with such interest
distributions. The Interest Account balances are also structured so that there
will generally be positive cash balances and since the funds held by the
Trustee may be used by it to earn interest thereon, it benefits thereby. If a
Unitholder sells or redeems all or a portion of his Units or if the Bonds in a
Trust are sold or otherwise removed or if a Trust is liquidated, he will
receive at that time his proportionate share of the accrued interest to carry
computed to the settlement date in the case of sale or liquidation and to the
date of tender in the case of redemption.
Purchased and Accrued Interest. Included in the Public Offering Price for
Insured Municipals Income Trust, 152nd-173rd Insured Multi-Series and Insured
Municipals Income Trust and Investor's Quality Tax-Exempt Trust, Multi-Series
213-246 is Purchased Interest and accrued interest.
Purchased Interest. Purchased Interest is a portion of the unpaid interest
that has accrued on the Securities from the later of the last payment date on
the Securities or the date of issuance thereof through the First Settlement
Date and is included in the calculation of the Public Offering Price.
Purchased Interest will be distributed to Unitholders as Units are redeemed or
Securities mature or are called. See "Summary of Essential Financial
Information" in Part One of this Prospectus for the amount of Purchased
Interest per Unit for each Trust. Purchased Interest is an element of the
price Unitholders will receive in connection with the sale or redemption of
Units prior to the termination of a Trust.
Accrued Interest. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although a Trust accrues
such interest daily. Because of this, a Trust always has an amount of interest
earned but not yet collected by the Trustee. For this reasons, 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 a Trust the amount, if any, of accrued interest paid
on their Units.
As indicated in "Purchased Interest" , accrued interest as of the First
Settlement Date includes Purchased Interest. In an effort to reduce the amount
of Purchased Interest which would otherwise have to be paid by Unitholders,
the Trustee may advance a portion of such 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 (other than the Purchased Interest already included therein),
less any distributions from the Interest Account subsequent to the First
Settlement Date.
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 Purchased Interest and accrued interest from
the purchaser of his Units. Since the Trustee has the use of the funds
(including Purchased Interest) held in the Interest Account for distributions
to Unitholders and since such Account is non-interest-bearing to Unitholders,
the Trustee benefits thereby.
Accrued Interest. Included in the Public Offering Price for Insured Municipals
Income Trust, 174th Insured Multi-Series and subsequent series and Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
247 and subsequent series is accrued interest. Accrued Interest is an
accumulation of unpaid interest on securities which generally is paid
semi-annually, although a Trust accrues such interest daily. Because of this,
a Trust always has an amount of interest earned but not yet collected by the
Trustee. For this reason, with respect to sales settling 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 may 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.
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.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
Part One of this Prospectus in accordance with fluctuations in the prices of
the underlying Securities in the Trust. The price of the Units as of the
opening of business on the date of Part One of this Prospectus was determined
by adding to the determination of the aggregate bid price of the Bonds the
amount of the sales charge expressed as a percentage of the aggregate bid
price of the Securities plus Purchased Interest, if any, and dividing the sum
so obtained by the number of Units outstanding. This computation produced a
gross profit equal to the sales charge expressed as a percentage of the Public
Offering Price (excluding Purchased Interest). For secondary market purposes
an appraisal and adjustment with respect to the Trust will be made by the
Evaluator as of 4:00 P.M. Eastern time on days on which the New York Stock
Exchange is open for each day on which any Unit of the Trust is tendered for
redemption, and it shall determine the aggregate value of the Trust as of 4:00
P.M. Eastern time on such other days as may be necessary.
The aggregate price of the Securities in the Trust has been and will be
determined on the basis of bid prices: (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 Trust; (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 the Trust.
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 the Trust and
reflects a proper valuation method in accordance with the provisions of the
Investment Company Act of 1940.
Although payment is normally made three business days following the order for
purchase, payment may be made prior thereto. However, delivery of certificates
representing Units so ordered will be made three business days following such
order or shortly thereafter. 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. See "Rights of Unitholders--Redemption of Units" for information
regarding the ability to redeem Units ordered for purchase.
Unit Distribution. Units repurchased in the secondary market, if any, may be
offered by this Prospectus at the secondary Public Offering Price in the
manner described.
Broker-dealers or others will be allowed a concession or agency commission in
connection with secondary market transactions in the amount of 70% of the
applicable sales charge as determined using the table found in "Public
Offering--General" . Certain commercial banks are making Units of the Trust
available to their customers on an agency basis. A portion of the sales charge
(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 Trust Units; 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. The minimum purchase in
the secondary market will be one Unit.
Broker-dealers of the Trusts and/or others may be eligible to participate in a
program in which such firms receive from the Sponsor a nominal award for each
of their registered 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 brokers, dealers, 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 brokers, dealers, 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 brokers, dealers or others
for certain services or activities which are primarily intended to result in
sales of Units of the Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of the Trust. These programs will not
change the price Unitholders pay for their Units or the amount that the Trust
will receive from the Units sold.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units and to change the amount of the concession or agency
commission to dealers and others from time to time.
Sponsor and Dealer Profits. Dealers will receive the gross sales commission as
described under "Public Offering--General" above.
As stated under "Market for Units" below, the Sponsor intends to, and
certain of the dealers may, maintain a secondary market for the Units of the
Trust. In so maintaining a market, the Sponsor or any such dealer will 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. In
addition, the Sponsor or any such dealer 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.
Market for Units. Although they are not obligated to do so, the Sponsor
intends to, and certain of the dealers 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 the Trust, plus Purchased Interest, if any,
plus interest accrued to the date of settlement 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 dealers 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 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 Purchased Interest, if any, and any accrued
interest. The aggregate bid prices of the underlying Securities in the Trust
are expected to be less than the related aggregate offering prices. See "
Rights of Unitholders--Redemption of Units." A Unitholder who wishes to
dispose of his Units should inquire of his broker as to current market prices
in order to determine whether there is in existence any price in excess of the
Redemption Price and, if so, the amount thereof.
RIGHTS OF UNITHOLDERS
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 unless a Unitholder or
the Unitholder's registered broker-dealer makes a written request to the
Trustee that ownership be in book entry form. Units are transferable by making
a written request to the Trustee and, in the case of Units evidenced as a
certificate, by presentation and surrender of such certificate to the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer. A Unitholder must sign such written request, or such certificate
transfer instrument exactly as his name appears on the records of the Trustee,
and on the face of any certificate representing Units to be transferred, 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 tot he 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 reissued (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.
Distributions of Interest and Principal. Interest received by the Trust,
including that part of the proceeds of any disposition of Securities which
Purchased Interest and/or represents accrued interest, is credited by the
Trustee to the Interest Account. Other receipts are credited to the Principal
Account. All distributions will be net of applicable expenses. The pro rata
share of cash in the Principal Account will be computed 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 twenty-fifth 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 the Principal or Interest
Accounts (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.
The distribution to the Unitholders as of each record 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 Unitholders' pro rata share
of the Estimated Net Annual Unit Income in the Interest Account after
deducting estimated expenses attributable as is consistent with the
distribution plan chosen. Only monthly distributions are available for Insured
Municipals Income Trust, 152nd-173rd Insured Multi-Series and for Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series
213-246. Because interest payments are not received by the Trust at a constant
rate throughout the year, such interest distribution may be more or less than
the amount credited to the Interest Account as of the record date. For the
purpose of minimizing fluctuation in the distributions from the 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, without interest, for any such advances from funds in the
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.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the Interest Account and, to the extent funds are not sufficient therein, from
the Principal Account, amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating 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 Trust. Amounts so withdrawn shall not be considered a part of the
Trust'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 redemptions of Units by the Trustee.
Distribution. Distributions of interest received by the Trust, prorated on an
annual basis, will be made monthly unless the Unitholder has elected to
receive them semi-annually or quarterly, if such options are available.
Distributions of funds from the Principal Account will be made on a
semi-annual basis, except under the special circumstances outlined in "
Rights of Unitholders--Distribution of Interest and Principal" above.
Record dates for monthly distributions will be the tenth day of each month,
record dates for quarterly distributions will be the tenth day of March, June,
September and December, and record dates for semi-annual distributions will be
the tenth day of June and December. Distributions will be made on the
twenty-fifth day of the month subsequent to the respective record dates.
Unitholders of Insured Municipals Income Trust, 152nd-173rd Insured
Multi-Series, and Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi- Series 213-246 will receive distributions of income
and principal, if any, on a monthly basis.
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 the 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 be sent only 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 for all subsequent distributions.
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 any Van Kampen American Capital mutual
funds (except for B shares) which are registered in the Unitholder's state of
residence. 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. Unitholders with an existing Guaranteed Reinvestment
Option (GRO) Program account (whereby a sales charge is imposed on
distribution reinvestments) may transfer their existing account into a new GRO
account which allows purchases of Reinvestment Fund shares at net asset value
as described above.
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.
Reports to Unitholders. The Trustee shall furnish Unitholders in connection
with each distribution a statement of the amount of interest and, if any, the
amount of other receipts (received since the preceding distribution) being
distributed expressed in each case as a dollar amount representing the pro
rata share of each Unit outstanding. For as long as the Trustee deems it to be
in the best interests of the Unitholders, the accounts of the 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 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 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,
the amount of Purchased Interest, deductions for applicable taxes and for fees
and expenses of the Trust (including insurance costs), 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
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 the Trust furnished to it by the Evaluator.
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.
Purchased Interest, if applicable, and accrued interest paid on redemption
shall be withdrawn from the Interest Account of the Trust or, if the balance
therein is insufficient, from the Principal Account. All other amounts will be
withdrawn from the Principal Account. The Trustee is empowered to sell
underlying Securities in order to make funds available for redemption. Units
so redeemed shall be cancelled.
The Redemption Price per Unit will be determined on the basis of the bid price
of the Securities in the 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.
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 the Trust
determined on the basis of (i) the cash on hand in the Trust or monies in the
process of being collected, (ii) the value of the Securities in the Trust
based on the bid prices of the Securities, except for those cases in which the
value of insurance has been included, (iii) Purchased Interest, if any, and
(iv) interest accrued thereon, less (a) amounts representing taxes or other
governmental charges payable out of the Trust and (b) the accrued expenses of
the Trust. The Evaluator may determine the value of the Securities in the
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 by the Trust on
the Bonds in the Trust unless such Bonds are in default in payment of
principal or interest or in significant risk of such default. On the other
hand, Bonds insured under a policy obtained by the issuer thereof are entitled
to the benefits of such insurance at all times and such benefits are reflected
and included in the market value of such Bonds. For a description of the
situations in which the Evaluator may value the insurance obtained by the
Trust, see "Public Offering--Offering Price" .
The price at which Units may be redeemed could be less than the price paid by
the Unitholder. As stated above, the Trustee may sell Securities to cover
redemptions. When Securities are sold, the size and diversity of the 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 Trust 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.
TRUST ADMINISTRATION
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.
Portfolio Administration. The Trustee is empowered to sell, for the purpose of
redeeming Units tendered by any Unitholder, and for the payment of expenses
for which funds may not be available, such of the Bonds designated by the
Evaluator as the Trustee in its sole discretion may deem necessary. The
Evaluator, in designating such Bonds, will consider a variety of factors,
including (a) interest rates, (b) market value and (c) marketability. 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 the
Trust's portfolio will tend to diminish. Except as described below 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 which are in default in payment of
principal or interest or in such significant risk of such default and for
which value has been attributed for the insurance obtained by the 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. See "Rights of Unitholders--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 Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper
if (1) the issuer is in default with respect to such Bond or (2) in the
written opinion of the Sponsor the issuer will probably default with respect
to such Bond in the reasonably foreseeable future. Any obligation so received
in exchange or substitution will be held by the Trustee subject to the terms
and conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder, identifying the Bonds eliminated and the
Bonds substituted therefor. Except as stated herein, the acquisition by the
Trust of any securities other than the Bonds initially deposited is not
permitted.
If any default in the payment of principal or interest on any Bond occurs and
no provision for payment is made therefor either pursuant to the portfolio
insurance, or otherwise, 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 Bond within 30 days after notification by the Trustee to the Sponsor
of such default, the Trustee may in its discretion sell the defaulted Bond and
not be liable for any depreciation or loss thereby incurred.
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 Trust,
except for the substitution of certain refunding securities for such Bonds. In
the event of any amendment, the Trustee is obligated to notify promptly all
Unitholders of the substance of such amendment.
All Trusts other than those indicated in the next sentence may be terminated
at any time by consent of Unitholders representing 100% of the Units of the
Trust then outstanding. Each series of Insured Municipals Income Trust, Series
98 and subsequent series may be terminated at any time by consent of the
Unitholders representing 51% of the Units of such Trust then outstanding. In
addition, a Trust may be terminated by the Trustee when the value of the
Trust, as shown by any semi-annual evaluation, is less than that indicated
under "Summary of Essential Financial Information" in Part One of this
Prospectus.
The Trust Agreement provides that the Trust shall terminate upon the
redemption, sale or other disposition of the last Security held in the Trust,
but in no event shall it continue beyond the end of the year indicated under
"The Trust" . In the event of termination of the Trust, written notice
thereof will be sent by the Trustee to each Unitholder thereof at his address
appearing on the registration books of the Trust maintained by the Trustee.
Within a reasonable time thereafter the Trustee shall liquidate any Securities
then held in the Trust and shall deduct from the funds of the 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 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
Unitholders 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, it should be noted that because the portfolio insurance obtained
by the Trust is applicable only while Bonds so insured are held by the Trust,
the price to be received by the 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 a deteriorated market price resulting from a significant risk of default.
Since the Bonds which are insured by insurance obtained by the Bond issuer
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 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 (negligence in the case of the Trustee) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the 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
Trust which the Trustee maybe 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 of 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 to its obligations and duties.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect
subsidiary of VK/AC Holding, Inc. Prior to October 31, 1996, VK/AC Holding,
Inc. was controlled, through the ownership of a substantial majority of its
common stock, by The Clayton & Dubilier Private Equity IV Limited Partnership.
On October 31, 1996, VK/AC Holding, Inc. became a wholly owned indirect
subsidiary of Morgan Stanley Group Inc. pursuant to the closing of an
Agreement and Plan of Merger among Morgan Stanley Group Inc., MSAM Holdings
II, Inc. and MSAM Acquisition Inc., whereby MSAM Acquisition Inc. was merged
with and into VK/AC Holding, Inc. and VK/AC Holding, Inc. was the surviving
corporation (the "Acquisition" ).
As a result of the Acquisition, VK/AC Holding, Inc. became a wholly owned
subsidiary of MSAM Holdings II, Inc. which, in turn, is a wholly owned
subsidiary of Morgan Stanley Group Inc. Morgan Stanley Group Inc. and various
of its directly or indirectly owned subsidiaries, including Morgan Stanley
Asset Management Inc., an investment adviser (MSAM" ), Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and Morgan
Stanley International, are engaged in a wide range of financial services.
Their principal businesses include securities underwriting, distribution and
trading; merger, acquisition, restructuring and other corporate finance
advisory activities; merchant banking; stock brokerage and research services;
asset management; trading of futures, options, foreign exchange commodities
and swaps (involving foreign exchange, commodities, indices and interest
rates); real estate advice, financing and investing; and global custody,
securities clearance services and securities lending. As of September 30,
1996, MSAM, together with its affiliated investment advisory companies, had
approximately $103.5 billion of assets under management and fiduciary advice.
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions
being met, it is currently anticipated that the transaction will close in
mid-1997. Thereafter, Van Kampen American Capital Distributors, Inc. will be
an indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three major
businesses: full service brokerage, credit services and asset management.
Van Kampen American Capital Distributors, Inc. specializes in the underwriting
and distribution of unit investment trusts and mutual funds with roots in
money management dating back to 1926. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has offices at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Trust or to any other Series thereof. The information is included
herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of December 31, 1996, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $59 billion of investment
products, of which over $11.88 billion is invested in municipal securities.
The Sponsor and its Van Kampen American Capital affiliates managed $48 billion
of assets, consisting of $29.9 billion for 59 open end mutual funds (of which
46 are distributed by Van Kampen American Capital Distributors, Inc.), $13.1
billion for 38 closed-end funds and $4.99 billion for 106 institutional
accounts. The Sponsor has also deposited approximately $26 billion of unit
investment trusts. All of Van Kampen American Capital's open-end funds,
closed-end funds and unit investment trusts are professionally distributed by
leading financial firms nationwide. Based on cumulative assets deposited, the
Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R)trust. The Sponsor also provides
surveillance and evaluation services at cost for approximately $13 billion of
unit investment trust assets outstanding. Since 1976, the Sponsor has serviced
over two million investor accounts, opened through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rate 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 Trust as provided therein or
(iii) continue to act as Trustee without terminating the Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, New York, New York 10286 (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 Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the certificates issued by
the Trust to, every Unitholder of the Trust. 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 "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 Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of the Trust 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
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.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Various counsel have acted as counsel for the Trustee
and as special counsel for the Trust for New York tax matters.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio included in Part One of this Prospectus have been
audited by Grant Thornton LLP, independent certified public accountants, as
set forth in their report in Part One of this Prospectus, and are included
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
DESCRIPTION OF BOND RATINGS
Standard & Poor's. 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:
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.
Nature of and provisions of the obligation.
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 fluctuation.
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.
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
Trust, the Sponsor or any dealer. 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>
Table of Contents Page
<S> <C>
The Trust...................................................2
Objectives and Securities Selection.........................2
Trust Portfolio.............................................3
Risk Factors................................................3
Bond Redemptions............................................5
Estimated Current Returns and Estimated Long-Term Returns...5
Trust Operating Expenses....................................5
Compensation of Sponsor and Evaluator.......................5
Trustee's Fee...............................................5
Insurance Premiums..........................................5
Miscellaneous Expenses......................................6
Insurance on the Bonds......................................6
Federal Tax Status Of The Trusts............................9
Public Offering.............................................10
General.....................................................10
Accrued Interest (Accrued Interest To Carry)................10
Purchased and Accrued Interest..............................11
Accrued Interest............................................11
Offering Price..............................................11
Unit Distribution...........................................12
Sponsor and Dealer Profits..................................12
Market for Units............................................12
Rights of Unitholders.......................................12
Certificates................................................12
Distributions of Interest and Principal.....................12
Distribution................................................13
Change of Distribution Option...............................13
Reinvestment Option.........................................13
Reports to Unitholders......................................13
Redemption of Units.........................................14
Trust Administration........................................14
Sponsor Purchases of Units..................................14
Portfolio Administration....................................14
Amendment or Termination....................................15
Limitation on Liabilities...................................15
Sponsor.....................................................15
Trustee.....................................................16
Other Matters...............................................16
Legal Opinions..............................................16
Independent Certified Public Accountants....................16
Description of Bond Ratings.................................16
Standard & Poor's...........................................16
Moody's Investors Service, Inc..............................17
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust 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.
INSURED MUNICIPALS INCOME TRUST
PROSPECTUS PART TWO
Note: This Prospectus May Be Used Only
When Accompanied by Part One. Both
Parts of this Prospectus should be
retained for future reference.
Dated as of the date of the Prospectus
Part I accompanying this Prospectus
Part II.
Sponsor: VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
A Wealth of Knowledge A Knowledge of Wealth
VAN KAMPEN AMERICAN CAPITAL
Contents of Post-Effective Amendment
to Registration Statement
This Post-Effective Amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 65, certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized, and its seal to
be hereunto affixed and attested, all in the City of Chicago and State of
Illinois on the 24th day of December, 1997.
Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 65
(Registrant)
By Van Kampen American Capital Distributors,
Inc.
(Depositor)
By Gina Costello
Assistant Secretary
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on December
24, 1997 by the following persons who constitute a majority of the Board
of Directors of Van Kampen American Capital Distributors, Inc.:
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
William R. Molinari President and Chief Operating)
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Gina Costello ) (Attorney in Fact)*
____________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Van Kampen American Capital
Equity Opportunity Trust, Series 64 (File No. 333-33087) and the
same are hereby incorporated herein by this reference.
Consent of Independent Certified Public Accountants
We have issued our report dated October 17, 1997 accompanying the
financial statements of Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 65 as of August 31, 1997, and for
the period then ended, contained in this Post-Effective Amendment No. 12
to Form S-6.
We consent to the use of the aforementioned report in the Post-
Effective Amendment and to the use of our name as it appears under the
caption "Auditors".
Grant Thornton LLP
Chicago, Illinois
December 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> IMDS
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 3164817
<INVESTMENTS-AT-VALUE> 4143365
<RECEIVABLES> 0
<ASSETS-OTHER> 57792
<OTHER-ITEMS-ASSETS> 1510082
<TOTAL-ASSETS> 5711239
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5711239
<SHARES-COMMON-STOCK> 6951
<SHARES-COMMON-PRIOR> 7219
<ACCUMULATED-NII-CURRENT> 100812
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 978548
<NET-ASSETS> 5711239
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 368682
<OTHER-INCOME> 0
<EXPENSES-NET> 18729
<NET-INVESTMENT-INCOME> 349953
<REALIZED-GAINS-CURRENT> 169832
<APPREC-INCREASE-CURRENT> (93050)
<NET-CHANGE-FROM-OPS> 426735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (358007)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 268
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (145278)
<ACCUMULATED-NII-PRIOR> 108866
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2481
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18729
<AVERAGE-NET-ASSETS> 5783878
<PER-SHARE-NAV-BEGIN> 811.26
<PER-SHARE-NII> 50.346
<PER-SHARE-GAIN-APPREC> 11.046
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 821.643
<EXPENSE-RATIO> 0.003
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
