File No. 333-08681
CIK #896348
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
To
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Insured Municipals Income Trust
205th Insured Multi-Series
B. Name of Depositor: Van Kampen American Capital
Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital
Attention: Mark J. Kneedy Distributors, Inc.
111 W. Monroe Street Attention: Don G. Powell, Chairman
Chicago, Illinois 60603 One Parkview Plaza
Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered:
40,506* Units
F. Proposed maximum offering price to the public of the securities
being registered: ($1020 per Unit**):
$41,316,120
G. Amount of filing fee, computed at one twenty-ninth of 1 percent
of proposed maximum aggregate offering price to the public:
$14,246.94 ($351.72 previously paid)
H. Approximate date of proposed sale to the public:
As Soon As Practicable After The Effective Date Of The
Registration Statement
____
/ X :/Check box if it is proposed that this filing will become effective
on August 29, 1996 at 2:00 P.M. pursuant to Rule 487.
* 27,004 Units registered for primary distribution.
13,502 Units registered for resale by Depositor of Units
previously sold in primary distribution.
** Estimated solely for the purpose of calculating the
registration fee.
Insured Municipals Income Trust,
205th Insured Multi-Series
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Part I Front Cover
) Page
2. Name and address of Depositor ) Part II-Introduction
) Part I-Summary of Essential
) Financial Information
) Part II-Trust Administration
3. Name and address of Trustee ) Part II-Introduction
) Part I-Summary of Essential
) Financial Information
) Part II-Trust Administration
4. Name and address of principal ) Part I-Other Matters-
underwriter ) Underwriting
5. Organization of trust ) Part II-Introduction
6. Execution and termination of ) Part II-Introduction
Trust Indenture and Agreement ) Part II-Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and Securities of the Trust
10. General information regarding ) Part II-Introduction
trust's securities and rights ) Part II-Unitholder
of security holders ) Explanations
) Part II-Trust Administration
11. Type of securities comprising ) Part II-Introduction
units ) Part I-Trust Information
) Part I-Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Part II-Introduction
expenses ) Part I-Summary of Essential
) Financial Information
) Part II-Unitholder Explanations
) Part I-Trust Information
) Part II-Trust Administration
(b) Certain information regard-) *
ing periodic payment plan )
certificates )
(c) Certain percentages ) Part I-Summary of Essential
) Financial Information
) Part II-Unitholder Explanations
(d) Certain other fees, ) Part II-Unitholder Explanations
expenses or charges ) Part II-Trust Administration
payable by holders )
(e) Certain profits to be ) Part II-Unitholder Explanations
received by depositor, ) Part I-Other Matters-
principal underwriter, ) Underwriting
trustee or affiliated ) Part I-Notes to Portfolios
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Part II-Unitholder Explanations
15. Receipt and handling of payments) *
from purchasers )
16. Acquisition and disposition of ) Part II-Introduction
underlying securities ) Part II-Unitholder Explanations
) Part II-Trust Administration
17. Withdrawal or redemption ) Part II-Unitholder Explanations
) Part II-Trust Administration
18. (a) Receipt and disposition ) Part II-Introduction
of income ) Part II-Unitholder Explanations
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Part II-Unitholder Explanations
) Part II-Trust Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Part II-Unitholder Explanations
) Part II-Trust Administration
20. Certain miscellaneous provisions) Part II-Trust
of Trust Agreement ) Administration
21. Loans to security holders ) *
22. Limitations on liability ) Part I-Portfolios
) Part II-Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of Depositor ) Part II-Trust Administration
26. Fees received by Depositor ) Part II-Trust Administration
27. Business of Depositor ) Part II-Trust Administration
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor) *
31. Compensation of Directors ) *
32. Compensation of Directors ) *
33. Compensation of Employees ) *
34. Compensation to other persons ) Part II-Unitholder Explanations
IV. Distribution and Redemption of Securities
35. Distribution of trust's ) Part II-Introduction
securities by states ) Part II-Settlement of Bonds in
) the Trusts
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Part II-Unitholder Explanations
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Part II-Trust Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Part II-Trust Administration
underwriter )
(b) Branch offices of principal) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of the ) *
trust )
43. Certain brokerage commissions )
received by principal ) *
underwriter )
44. (a) Method of valuation ) Part II-Introduction
) Part I-Summary of Essential
) Financial Information
) Part II-Unitholder Explanations
) Part II-Trust Administration
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) Part II-Unitholder Explanations
to certain persons )
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Part II-Unitholder Explanations
) Part II-Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Part II-Unitholder Explanations
in underlying securities ) Part II-Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Part II-Trust Administration
trustee )
49. Fees and expenses of trustee ) Part I-Summary of Essential
) Financial Information
) Part II-Trust Administration
50. Trustee's lien ) Part II-Trust Administration
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's )
securities ) *
VII. Policy of Registrant
52. (a) Provisions of trust agree- )
ment with respect to )
replacement or elimi- ) Part II-Trust Administration
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying) *
securities )
(c) Policy regarding substitu- ) Part II-Trust Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Part I-Trust Information
) Part II-Federal Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Part I-Other Matters
tions 1(c) to Form S-6) )
__________________________________
* Inapplicable, omitted, answer negative or not required
August 29, 1996
Van Kampen American Capital
Prospectus Part I
Insured Municipals Income Trust, 205th Insured Multi-Series
IM-IT 88th Intermediate
Colorado IM-IT 81
Louisiana IM-IT 17
Massachusetts IM-IT 34
Missouri IM-IT 98
New Jersey IM-IT 114
New York IM-IT 136
Tennessee IM-IT 37
This Part I of the Prospectus may not be distributed unless accompanied by
Part II. Both parts of this Prospectus should be retained for future reference.
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is excludable under existing law from gross income for
Federal income taxes. In addition, the interest income of each State Trust is,
in the opinion of counsel, exempt to the extent indicated from state and local
taxes, when held by residents of the state where the issuers of Bonds in such
Trust are located. Capital gains, if any, are subject to Federal tax.
The Fund. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an
investment in a diversified portfolio of tax-exempt bonds. The Fund consists
of eight underlying separate unit investment trusts designated as Insured
Municipals Income Trust, 88th Intermediate Series (the "IM-IT Intermediate
Trust" ), Colorado Insured Municipals Income Trust, Series 81 (the "
Colorado IM-IT Trust" ), Louisiana Insured Municipals Income Trust, Series
17 (the "Louisiana IM-IT Trust" ), Massachusetts Insured Municipals
Income Trust, Series 34 (the "Massachusetts IM-IT Trust" ), Missouri
Insured Municipals Income Trust, Series 98 (the "Missouri IM-IT Trust"
), New Jersey Insured Municipals Income Trust, Series 114 (the "New Jersey
IM-IT Trust" ), New York Insured Municipals Income Trust, Series 136 (the
"New York IM-IT Trust" ) and Tennessee Insured Municipals Income Trust,
Series 37 (the "Tennessee IM-IT Trust" ). The various trusts are
collectively referred to herein as the "Trusts" or the "Insured
Trusts" . The Colorado IM-IT, Louisiana IM-IT, Massachusetts IM-IT,
Missouri IM-IT, New Jersey IM-IT, New York IM-IT and Tennessee IM-IT Trusts
are sometimes collectively referred to herein as the "State Trusts" .
Each Trust initially consists of delivery statements relating to contracts to
purchase securities and, thereafter, will consist of such securities as may
continue to be held (the "Bonds" or "Securities" ). Such
Securities are interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is,
in the opinion of recognized bond counsel to the issuing governmental
authority, exempt from all Federal income taxes under 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.
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.
<TABLE>
INSURED MUNICIPALS INCOME TRUST
205th Insured Multi-Series
Summary of Essential Financial Information
At the Close of Business on the day before the Date of Deposit: August 28, 1996
(except for the Tennessee IM-IT Trust as of 8:00 A.M. Central Time)
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
<CAPTION>
IM-IT Colorado Louisiana Massachusetts
Intermediate IM-IT IM-IT IM-IT
GENERAL INFORMATION Trust Trust Trust Trust
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust <F1>................... $ 5,000,000 $ 3,040,000 $ 3,025,000 $ 3,000,000
Number of Units............................................................ 5,000 3,092 3,071 3,014
Fractional Undivided Interest in the Trust per Unit ....................... 1/5,000 1/3,092 1/3,071 1/3,014
Principal Amount (Par Value) of Securities per Unit........................ $ 1,000.00 $ 983.18 $ 985.02 $ 995.36
Public Offering Price: ....................................................
Aggregate Offering Price of Securities in Portfolio....................... $ 4,890,293 $ 2,940,503 $ 2,920,534 $ 2,866,327
Aggregate Offering Price of Securities per Unit........................... $ 978.06 $ 951.00 $ 951.00 $ 951.00
Sales Charge <F2>......................................................... $ 39.69 $ 49.00 $ 49.00 $ 49.00
Public Offering Price per Unit <F3>....................................... $ 1,017.75 $ 1,000.00 $ 1,000.00 $ 1,000.00
Redemption Price per Unit <F3>............................................. $ 970.75 $ 943.63 $ 943.74 $ 943.54
Secondary Market Repurchase Price per Unit <F3>............................ $ 978.06 $ 951.00 $ 951.00 $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit.... $ 47.00 $ 56.37 $ 56.26 $ 56.46
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit............................................................. $ 7.31 $ 7.37 $ 7.26 $ 7.46
Minimum Value of the Trust under which Trust Agreement may be terminated... $ 1,000,000 $ 608,000 $ 605,000 $ 600,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date................September 4, 1996
Evaluator's Annual Supervisory Fee...Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee....$0.30 per $1,000 principal amount of Bonds
Evaluation Time......................4:00 p.m. Eastern Time
- ----------
<FN>
<F1>Because certain of the Securities in certain Trusts may from time to time
under certain circumstances be sold or redeemed or will be called or mature in
accordance with their terms (including the call or sale of zero coupon bonds
at prices less than par value), there is no guarantee that the value of each
Unit at the respective Trust's termination will be equal to the Principal
Amount (Par Value) of Securities per Unit stated above.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and as a percentage of the aggregate offering price of the
Securities are set forth under "Public Offering--General" in Part II
of this Prospectus. In addition, purchasers of units of any two consecutive
series of a Trust may aggregate purchases of units of such series for purposes
of the sales charge reduction for quantity purchases, provided that at the
time of the initial purchase of units such purchaser submitted a purchase
order for at least 100 units that was partially unfulfilled due to a lack of
units of such Trust series available for sale at such time. The sales charge
reduction shall be applied to the subsequent purchase of units such that the
aggregate sales charge reduction applicable to both purchases will equal the
amount described in the table on page 12 of Prospectus Part II.
<F3>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units" in Part II of this Prospectus.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
205th Insured Multi-Series
Summary of Essential Financial Information (Continued)
At the Close of Business on the day before the Date of Deposit: August 28, 1996
(except for the Tennessee IM-IT Trust as of 8:00 A.M. Central Time)
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
<CAPTION>
Missouri New Jersey New York Tennessee
IM-IT IM-IT IM-IT IM-IT
GENERAL INFORMATION Trust Trust Trust Trust
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust <F1>................... $ 3,515,000 $ 3,050,000 $ 3,055,000 $ 3,000,000
Number of Units............................................................ 3,576 3,090 3,095 3,066
Fractional Undivided Interest in the Trust per Unit ....................... 1/3,576 1/3,090 1/3,095 1/3,066
Principal Amount (Par Value) of Securities per Unit........................ $ 982.94 $ 987.06 $ 987.08 $ 978.47
Public Offering Price: ....................................................
Aggregate Offering Price of Securities in Portfolio....................... $ 3,400,791 $ 2,938,621 $ 2,943,360 $ 2,915,779
Aggregate Offering Price of Securities per Unit........................... $ 951.00 $ 951.01 $ 951.00 $ 951.00
Sales Charge <F2>......................................................... $ 49.00 $ 48.99 $ 49.00 $ 49.00
Public Offering Price per Unit <F3>....................................... $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Redemption Price per Unit <F3>............................................. $ 943.63 $ 943.61 $ 943.59 $ 943.67
Secondary Market Repurchase Price per Unit <F3>............................ $ 951.00 $ 951.01 $ 951.00 $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit.... $ 56.37 $ 56.39 $ 56.41 $ 56.33
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit............................................................. $ 7.37 $ 7.40 $ 7.41 $ 7.33
Minimum Value of the Trust under which Trust Agreement may be terminated... $ 703,000 $ 610,000 $ 611,000 $ 600,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date................September 4, 1996
Evaluator's Annual Supervisory Fee...Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee....$0.30 per $1,000 principal amount of Bonds
Evaluation Time......................4:00 p.m. Eastern Time
- ----------
<FN>
<F1>Because certain of the Securities in certain Trusts may from time to time
under certain circumstances be sold or redeemed or will be called or mature in
accordance with their terms (including the call or sale of zero coupon bonds
at prices less than par value), there is no guarantee that the value of each
Unit at the respective Trust's termination will be equal to the Principal
Amount (Par Value) of Securities per Unit stated above.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit and as a percentage of the aggregate offering price of the
Securities are set forth under "Public Offering--General" in Part II
of this Prospectus. In addition, purchasers of units of any two consecutive
series of a Trust may aggregate purchases of units of such series for purposes
of the sales charge reduction for quantity purchases, provided that at the
time of the initial purchase of units such purchaser submitted a purchase
order for at least 100 units that was partially unfulfilled due to a lack of
units of such Trust series available for sale at such time. The sales charge
reduction shall be applied to the subsequent purchase of units such that the
aggregate sales charge reduction applicable to both purchases will equal the
amount described in the table on page 12 of Prospectus Part II.
<F3>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Market for Units" in Part II of this Prospectus.
</TABLE>
IM-IT INTERMEDIATE TRUST
- --------------------------------------------------------------------------
General. The IM-IT Intermediate Trust consists of 9 issues of Securities. One
of the Bonds in the IM-IT Intermediate Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are located in 9 states or territories, divided by purpose of issues
(and percentage of principal amount to total IM-IT Intermediate Trust) as
follows: Water and Sewer, 2 (24%); Public Building, 2 (19%); Certificates of
Participation, 1 (15%); Health Care, 1 (15%); Retail Electric/Gas, 1 (15%);
General Obligations, 1 (7%) and General Purpose, 1 (5%). No Bond issue has
received a provisional rating. All of the obligations in the IM-IT
Intermediate Trust mature within 5-15 years of the Date of Deposit. The dollar
weighted average maturity of the Bonds in the Trust is 9.7 years.
Tax Status. For a discussion of the Federal tax status of income earned on
IM-IT Intermediate Trust Units, see "Federal Tax Status" in Part II of
this Prospectus..
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 47.64 $ 47.64
Less: Estimated Annual Expense per Unit <F2>...................... $ 1.70 $ 1.24
Less: Annual Premium on Portfolio Insurance per Unit.............. -- --
Estimated Net Annual Interest Income per Unit..................... $ 45.94 $ 46.40
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 45.94 $ 46.40
Divided by 12 and 2, respectively................................. $ 3.83 $ 23.20
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .12763 $ .12890
Estimated Current Return Based on Public Offering Price <F1><F3>... 4.51% 4.56%
Estimated Long-Term Return <F3>.................................... 4.41% 4.46%
Estimated Initial Monthly Distribution (October 1996).............. $ 4.59
Estimated Initial Semi-annual Distribution (December 1996)......... $ 12.38
Estimated Normal Distribution per Unit <F3>........................ $ 3.83 $ 23.20
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1><F4>... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the IM-IT
Intermediate Trust under the monthly and semi-annual distribution plans
Record and Computation Dates.... TENTH day of the month as follows: monthly--each month; semi-annual--June and December
Distribution Dates.............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
June and December
- ----------
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.56
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $48.20. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.26 and $1.80 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns" in Part II of
this Prospectus.
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F4>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $2,550. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $4,550.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
88th INTERMEDIATE SERIES (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To
IM-IT
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption Intermediate
Principal<F1> either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- --------------------------------------------------------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 750,000 Washington Public Power Supply System, Nuclear Project No. 3
Refunding Revenue Bonds, Series 1993C (FSA Insured) #5.00%
Due 7/1/2005 .................................................. AAA $ 742,245
500,000 City of Laredo, Texas (Webb County) Waterworks System Revenue
Refunding Bonds, New Series 1996 (AMBAC Indemnity Insured)**
5.15% Due 4/1/2006 .......................................... AAA 501,875
250,000 North Slope Borough Authority, Alaska, General Obligation
Capital Appreciation Bonds, Series 1995A (MBIA Insured)
#0.00% Due 6/30/2006 .......................................... AAA 148,357 <F6>
700,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Bonds, Series 1995A (MBIA Insured) #5.00% Due 7/1/2006 ...... AAA 2005 @ 101 697,214
220,000 Pawtucket Public Buildings Authority, Rhode Island, Refunding
Revenue Bonds, Series 1996 (FSA Insured) 5.30% Due 7/1/2006 . AAA 223,331
750,000 Delaware County Authority (Commonwealth of Pennsylvania)
Hospital Revenue Bonds (Delaware County Memorial Hospital)
Series 1995 (MBIA Insured) #5.125% Due 8/15/2006 ............ AAA 2005 @ 102 751,350
330,000 Town of East Haven, Connecticut, General Obligation Bonds
(Unlimited Tax) FGIC Insured #4.90% Due 9/1/2006 ............ AAA 2005 @ 100 326,116
750,000 Johnston County, North Carolina, Certificates of
Participation, Judicial Annex and Health Care Projects (MBIA
Insured) 5.10% Due 9/1/2006 ................................. AAA 749,903
750,000 South Dakota Building Authority, Lease Revenue Bonds, Series
1996C (AMBAC Indemnity Insured)** 5.10% Due 9/1/2006 ........ AAA 749,902
$ 5,000,000 $ 4,890,293
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
COLORADO IM-IT TRUST
- --------------------------------------------------------------------------
General. The Colorado IM-IT Trust consists of 8 issues of Securities. Three of
the Bonds in the Colorado IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Colorado IM-IT Trust) as follows: General Obligations, 3 (33%); Health
Care, 2 (33%); Airport, 1 (18%) and Higher Education, 2 (16%). No Bond issue
has received a provisional rating.
Risk Factors. The State Constitution requires that expenditures for any fiscal
year not exceed revenues for such fiscal year. By statute, the amount of
General Fund revenues available for appropriation is based upon revenue
estimates which, together with other available resources, must exceed annual
appropriations by the amount of the unappropriated reserve (the "
Unappropriated Reserve" ). The Unappropriated Reserve requirement for
fiscal year 1991, 1992 and 1993 was set at 3% of total appropriations from the
General Fund. For fiscal years 1994 and thereafter, the Unappropriated Reserve
requirement is set at 4%. In addition to the Unappropriated Reserve, a
constitutional amendment approved by Colorado voters in 1992 requires the
State and each local government to reserve a certain percentage of its fiscal
year spending (excluding bonded debt service) for emergency use (the "
Emergency Reserve" ). The minimum Emergency Reserve is set at 2% for 1994
and 3% for 1995 and later years. For fiscal year 1992 and thereafter, General
Fund appropriations are also limited by statute to an amount equal to the cost
of performing certain required reappraisals of taxable property plus an amount
equal to the lesser of (i) five percent of Colorado personal income or (ii)
106% of the total General Fund appropriations for the previous fiscal year.
This restriction does not apply to any General Fund appropriations which are
required as a result of a new federal law, a final state or federal court
order or moneys derived from the increase in the rate or amount of any tax or
fee approved by a majority of the registered electors of the State voting at
any general election. In addition, the statutory limit on the level of General
Fund appropriations may be exceeded for a given fiscal year upon the
declaration of a State fiscal emergency by the State General Assembly.
According to the Colorado Economic Perspective, Fourth Quarter, Fiscal Year
1996, June 20, 1996 (the "1996 Economic Report" ), which is published
by the Office of the State Planning and Budgeting, the fiscal year 1995 ending
General Fund balance was $488.5 million, which was $262.4 million over the
combined Unappropriated Reserve and Emergency Reserve requirement. The 1994
fiscal year ending General Fund balance was $405.1 million, or $234.0 million
over the required Unappropriated Reserve and Emergency Reserve. Based on the
1996 Economic Report estimates, the fiscal year 1996 ending General Fund
balance is expected to be approximately $315.2 million or $158.6 million over
the required Unappropriated Reserve and Emergency Reserve.
On November 3, 1992, voters in Colorado approved a constitutional amendment
(the "Amendment" ) which, in general, became effective December 31,
1992, and which could restrict the ability of the State and local governments
to increase revenues and impose taxes. The Amendment applies to the State and
all local governments, including home rule entities ("Districts" ).
Enterprises, defined as government-owned businesses authorized to issue
revenue bonds and receiving under 10% of annual revenue in grants from all
Colorado state and local governments combined, are excluded from the
provisions of the Amendment.
The provisions of the Amendment are unclear and have required judicial
interpretation. Among other provisions, beginning November 4, 1992, the
Amendment requires voter approval prior to tax increases, creation of debt, or
mill levy or valuation for assessment ratio increases. The Amendment also
limits increases in government spending and property tax revenues to specified
percentages. The Amendment requires that District property tax revenues yield
no more than the prior year's revenues adjusted for inflation, voter approved
changes and (except with regard to school districts) local growth in property
values according to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment. Pursuant to
the Amendment, local government spending is to be limited by the same formula
as the limitation for property tax revenues. The Amendment limits increases in
expenditures from the State General Fund and program revenues (cash funds) to
the growth in inflation plus the percentage change in State population in the
prior calendar year. The basis for initial spending and revenue limits are
fiscal year 1992 spending and 1991 property taxes collected in 1992. The basis
for spending and revenue limits for fiscal year 1994 and later years will be
the prior fiscal year's spending and property taxes collected in the prior
calendar year. Debt service changes, reductions and voter-approved revenue
changes are excluded from the calculation basis. The Amendment also prohibits
new or increased real property transfer tax rates, new State real property
taxes and local District income taxes.
Litigation concerning several issues relating to the Amendment has been
brought in the Colorado courts. The litigation deals with three principal
issues: (i) whether Districts can increase mill levies to pay debt service on
general obligation bonds without obtaining voter approval; (ii) whether a
multi-year lease purchase agreement subject to annual appropriations is an
obligation which requires voter approval prior to execution of the agreement;
and (iii) what constitutes an "enterprise" which is excluded from the
provisions of the Amendment. In September, 1994, the Colorado Supreme Court
held that Districts can increase mill levies to pay levies to pay debt service
on general obligation bonds issued after the effective date of the Amendment;
in June, 1995 the Colorado Supreme Court validated mill levy increases to pay
general obligation bonds issued prior to the Amendment. In late 1994, the
Colorado Court of Appeals held that multi-year lease-purchase agreements
subject to annual appropriation do not require voter approval. The time to
file an appeal in that case has expired. Finally, in May, 1995, the Colorado
Supreme Court ruled that entities with the power to levy taxes may not
themselves be "enterprises" for purposes of the Amendment; however,
the Court did not address the issue of how valid enterprises may be created.
Future litigation in the "enterprise" arena may be filed in the future
to clarify these issues. Litigation is currently pending before the Colorado
Supreme Court as to whether voters can authorize a government to keep and
spend all revenues received in excess of the spending limits. Other aspects of
the spending limit are being litigated in district court actions.
According to the 1996 Economic Report, for fiscal year 1994, general fund
revenues (adjusted for cash funds that are exempt from the Amendment) were
$3,681.4 million and program revenues (cash funds) were $1,708.7 million, for
revenues totaling $5,385.1 million. During the calendar year 1993, population
and inflation grew at rates of 4.2% and 2.9%, respectively, for a combined
total limit of 7.1%. Accordingly, under the Amendment, increases in State
expenditures during the 1995 fiscal year could not have exceed $5,767.5
million and the actual 1995 general fund and program revenues of $5,757.3
million were under the limit. The limitation for fiscal year 1996 is 7.0% over
revenues during the 1995 fiscal year; accordingly, 1996 fiscal year revenues
cannot exceed $6,160.3 million. Fiscal year 1996 revenues are estimated to be
$6,087.2 million which is $73.2 million under the limitation. The limitation
for the 1997 fiscal year is currently projected to be 6.6% which translates to
a revenue limit of approximately $6,488.9 million for fiscal year 1997.
There is also a statutory restriction on the amount of annual increases in
taxes that the various taxing jurisdictions in Colorado can levy without
electoral approval. This restriction does not apply to taxes levied to pay
general obligation debt.
As the State experienced revenue shortfalls in the mid-1980s, it adopted
various measures, including impoundment of funds by the Governor, reduction of
appropriations by the General Assembly, a temporary increase in the sales tax,
deferral of certain tax reductions and inter-fund borrowings. On a GAAP basis,
the State had unrestricted General Fund balances at June 30 of approximately
$16.3 million in fiscal year 1991, $133.3 million in fiscal year 1992, $326.6
million in fiscal year 1993, $320.4 million in fiscal year 1994 and $408.0
million for fiscal year 1995. The 1996 Economic Report projects the
unrestricted General Fund ending balance to be approximately $315.2 million
for fiscal year 1996.
For fiscal year 1995, the following tax categories generated the following
percentages of the State's $3,996.4 million total revenues (accrual basis);
individual income taxes represented 52.7% of gross fiscal year 1995 receipts;
sales, use, and other excise taxes represented 32.9% of gross fiscal year 1995
receipts; and corporate income taxes represented 4.8% of gross fiscal year
1995 receipts. For fiscal year 1996, General Fund revenues of approximately
$4,239.9 million are projected, and appropriations of approximately $4,413.2
million are projected. The percentages of General Fund revenue generated by
type of tax for fiscal year 1996 are not expected to be significantly
different from fiscal year 1995 percentages.
Under its constitution, the State of Colorado is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions which are subject to annual
renewal at the option of the State. In addition, the State is authorized to
issue short-term revenue anticipation notes. Local governmental units in the
State are also authorized to incur indebtedness. The major source of financing
for such local government indebtedness is an ad valorem property tax. In
addition, in order to finance public projects, local governments in the State
can issue revenue bonds payable from the revenues of a utility or enterprise
or from the proceeds of an excise tax, or assessment bonds payable from
special assessments. Colorado local governments can also finance public
projects through leases which are subject to annual appropriation at the
option of the local government. Local governments in Colorado also issue tax
anticipation notes. The Amendment requires prior voter approval for the
creation of any multiple fiscal year debt or other financial obligation
whatsoever, except for refundings at a lower rate or obligations of an
enterprise.
Based on data published by the State of Colorado, Office of State Planning and
Budgeting as presented in the 1996 Economic Report, nearly 55% of
non-agricultural employment in Colorado in 1995 was concentrated in the retail
and wholesale trade and service sectors, reflecting the importance of tourism
to the State's economy and of Denver as a regional economic and
transportation hub. The government and manufacturing sectors followed as the
next largest employment sectors in the State, representing approximately 16.5%
and 10.4%, respectively, of non-agricultural employment in the State in 1995.
The Office of Planning and Budgeting projects similar concentrations for 1996
and 1997.
According to the 1996 Economic Report, the unemployment rate remained
unchanged from an average of 4.2% from calendar years 1994 to 1995 and total
retail sales increased by 5.1% during 1995. Colorado continued to surpass the
job growth rate of the U.S. with a 4.7% rate of growth projected for Colorado
in 1995, as compared with 2.3% for the nation as a whole. However, the rate of
job growth in Colorado is expected to be lower in 1996 than the 1995 rate as a
result of layoffs at various companies.
Personal income rose 7.7% in Colorado during 1995 as compared with 6.1% for
the nation as a whole.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in the
Colorado IM-IT Trust), which, to varying degrees, have also experienced
reduced revenues as a result of recessionary conditions and other factors.
Tax Status. For a discussion of the Federal tax status of income earned on
Colorado IM-IT Trust Units, see "Federal Tax Status" in Part II of
this Prospectus.
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the Trust. However, although Chapman and Cutler
expresses no opinion with respect to the issuance of the Bonds, in rendering
its opinion expressed herein, it has assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon is excludable from gross income for federal
income tax purposes, and (iii) interest on the Bonds, if received directly by
a Unitholder, would be exempt from the income tax imposed by the State that is
applicable to individuals and corporations (the "State Income Tax" ).
This opinion does not address the taxation of persons other than full time
residents of Colorado.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
Colorado law:
Because Colorado income tax law is based upon the Federal law, the Colorado
IM-IT Trust is not an association taxable as a corporation for purposes of
Colorado income taxation.
With respect to Colorado Unitholders, in view of the relationship between
Federal and Colorado tax computations described above:
Each Colorado Unitholder will be treated as owning a pro rata share of each
asset of the Colorado IM-IT Trust for Colorado income tax purposes in the
proportion that the number of Units of such Trust held by the Unitholder bears
to the total number of outstanding Units of the Colorado IM-IT Trust, and the
income of the Colorado IM-IT Trust will therefore be treated as the income of
each Colorado Unitholder under Colorado law in the proportion described and an
item of income of the Colorado IM-IT Trust will have the same character in the
hands of a Colorado Unitholder as it would have in the hands of the Trustee;
Interest on Bonds that would not be includable in income for Colorado income
tax purposes when paid directly to a Colorado Unitholder will be exempt from
Colorado income taxation when received by the Colorado IM-IT Trust and
attributed to such Colorado Unitholder and when distributed to such Colorado
Unitholder;
Any proceeds paid under an insurance policy or policies issued to the Colorado
IM-IT Trust with respect to the Bonds in the Colorado IM-IT Trust which
represent maturing interest on defaulted obligations held by the Trustee will
be excludable from Colorado adjusted gross income if, and to the same extent
as, such interest would have been so excludable if paid by the issuer of the
defaulted obligations provided that, at the time such policies are purchased,
the amounts paid for such policies are reasonable, customary and consistent
with the reasonable expectation that the issuer of the obligations, rather
than the insurer, will pay debt service on the obligations;
Any proceeds paid under individual policies obtained by issuers of Bonds in
the Colorado IM-IT Trust which represent maturing interest on defaulted
obligations held by the Trustee will not be includable in income for Colorado
income tax purposes if, and to the same extent as, such interest would not
have been so includable if paid by the issuer of the defaulted obligations
provided that, at the time such policies are purchased, the amounts paid for
such policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations;
Each Colorado Unitholder will realize taxable gain or loss when the Colorado
IM-IT Trust disposes of a Bond (whether by sale, exchange, redemption, or
payment at maturity) or when the Colorado Unitholder redeems or sells Units at
a price that differs from original cost as adjusted for amortization of bond
discount or premium and other basis adjustments (including any basis reduction
that may be required to reflect a Colorado Unitholder's share of interest, if
any, accruing on Bonds during the interval between the Colorado Unitholder's
settlement date and the date such Bonds are delivered to the Colorado IM-IT
Trust, if later);
Tax basis reduction requirements relating to amortization of bond premium may,
under some circumstances, result in Colorado Unitholders realizing taxable
gain when their Units are sold or redeemed for an amount equal to or less than
their original cost; and
If interest on indebtedness incurred or continued by a Colorado Unitholder to
purchase Units in the Colorado IM-IT Trust is not deductible for federal
income tax purposes, it also will be non-deductible for Colorado income tax
purposes.
Unitholders should be aware that all tax-exempt interest, including their
share of interest on the Bonds paid to the Colorado IM-IT Trust, is taken into
account for purposes of determining eligibility for the Colorado Property
Tax/Rent/Heat Rebate.
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provision of Colorado law. Ownership of the Units may result in
collateral Colorado tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any
such collateral consequences.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit..................... $ 53.22 $ 53.22
Less: Estimated Annual Expense per Unit <F1>.................. $ 2.28 $ 1.92
Less: Annual Premium on Portfolio Insurance per Unit.......... -- --
Estimated Net Annual Interest Income per Unit................. $ 50.94 $ 51.30
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit................. $ 50.94 $ 51.30
Divided by 12 and 2, respectively............................. $ 4.25 $ 25.65
Estimated Daily Rate of Net Interest Accrual per Unit.......... $ .14149 $ .14250
Estimated Current Return Based on Public Offering Price <F2>... 5.09% 5.13%
Estimated Long-Term Return <F2>................................ 5.11% 5.15%
Estimated Initial Monthly Distribution (October 1996).......... $ 5.09
Estimated Initial Semi-annual Distribution (January 1997)...... $ 17.96
Estimated Normal Distribution per Unit <F2>.................... $ 4.25 $ 25.65
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F3>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Colorado IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... TENTH day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
January and July
- ----------
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F3>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,550. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,766.
</TABLE>
<TABLE>
COLORADO INSURED MUNICIPALS INCOME TRUST
SERIES 81 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To
Colorado
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption IM-IT
Principal<F1> Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- ----------------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 240,000 Colorado Colleges Board of Trustees, Auxiliary Facilities
System-Enterprise Revenue Bonds, Mesa State College, Series 2004 @ 101
1994B (MBIA Insured) #5.70% Due 5/15/2014...................... AAA 2010 @ 100 S.F. $ 243,850
250,000 Roaring Fork School District RE-1, Garfield, Pitkin and Eagle
Counties, Colorado, General Obligation Refunding Bonds, Series 2005 @ 102
1995A (MBIA Insured) #5.20% Due 12/15/2014 .................... AAA 2011 @ 100 S.F. 241,255
250,000 Highlands Ranch Metropolitan District No. 2, Colorado, General 2006 @ 101
Obligation Refunding Bonds (FSA Insured) #5.00% Due 6/15/2016 . AAA 2013 @ 100 S.F. 233,425
500,000 Durango School District No. 9-R, La Plata County, Colorado,
General Obligation (Unlimited Tax) Refunding Bonds (MBIA 2006 @ 100
Insured) #5.25% Due 11/1/2017 ................................. AAA 2014 @ 100 S.F. 479,665
250,000 Auraria Higher Education Center, Colorado, Student Fee Revenue
Refunding Bonds, Series 1996 (AMBAC Indemnity Insured) #5.30% 2006 @ 101
Due 5/1/2021 .................................................... AAA 2016 @ 100 S.F. 239,037
500,000 Colorado Health Facilities Authority, Hospital Revenue
Improvement and Refunding Bonds (Boulder Community Hospital 2004 @ 102
Project) Series 1994B (MBIA Insured) #5.875% Due 10/1/2023 .... AAA 2010 @ 100 S.F. 505,950
550,000 Denver, Colorado, City and County Airport Revenue Bonds, 2006 @ 101
Series 1996A (MBIA Insured) #5.50% Due 11/15/2025 ............. AAA 2017 @ 100 S.F. 530,426
500,000 Colorado Health Facilities Authority, Hospital Revenue Bonds
(The Children's Hospital Association Project) Series 1996 2006 @ 101
(MBIA Insured) #5.25% Due 10/1/2026 ........................... AAA 2016 @ 100 S.F. 466,895
$ 3,040,000 ................................................................. $ 2,940,503
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
LOUISIANA IM-IT TRUST
- --------------------------------------------------------------------------
General. The Louisiana IM-IT Trust consists of 9 issues of Securities. Two of
the Bonds in the Louisiana IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Louisiana IM-IT Trust) as follows: Higher Education, 2 (33%); Public
Building, 2 (33%); General Obligations, 2 (12%); Health Care, 1 (10%); Retail
Electric/Gas, 1 (8%) and General Purpose, 1 (4%). No Bond issue has received a
provisional rating.
Risk Factors. The following discussion regarding the financial condition of
the state government may not be relevant to general obligation or revenue
bonds issued by political subdivisions of and other issuers in the State of
Louisiana (the "State" ). Such information, and the following
discussion regarding the economy of the State, is based upon information about
general economic conditions that may or may not affect issuers of the
Louisiana obligations. The Sponsor has not independently verified any of the
information contained in such publicly available documents, but is not aware
of any facts which would render such information inaccurate.
On December 19, 1990 the State received a rating upgrade on its general
obligation bonds to the current Standard & Poor's rating of A from BBB-plus
and was placed on Standard & Poor's Corporation's positive credit watch.
Standard & Poor's cited improvements in the State's cash flow and fiscal
reforms approved by voters in the fall of 1990. The current Moody's rating on
the State's general obligation bonds remains unchanged at BBB-plus. There can
be no assurance that the economic conditions on which these ratings were based
will continue or that particular bond issues may not be adversely affected by
changes in economic or political conditions.
The Revenue Estimating Conference (the "Conference" ) was established
by Act No. 814 of the 1987 Regular Session of the State Legislature. The
Conference was established by the Legislature to provide an official estimate
of anticipated State revenues upon which the executive budget shall be based,
to provide for a more stable and accurate method of financial planning and
budgeting and to facilitate the adoption of a balanced budget as is required
by Article VII, Section 10(B) of the State Constitution. Act No. 814 provides
that the Governor shall cause to be prepared an executive budget presenting a
complete financial and programmatic plan for the ensuing fiscal year based
only upon the official estimate of anticipated State revenues as determined by
the Revenue Estimating Conference. Act No. 814 further provides that at no
time shall appropriations or expenditures for any fiscal year exceed the
official estimate of anticipated State revenues for that fiscal year. During
the 1990 Regular Session of the Louisiana Legislature a constitutional
amendment was approved (Act No. 1096), which, was approved by the State
electorate, granting constitutional status to the existence of the Revenue
Estimating Conference without altering its structure, powers, duties and
responsibilities which are currently provided by statute.
The State General Fund is the principal operating fund of the State, and was
established administratively to provide for the distribution of funds
appropriated by the State Legislature for the ordinary expenses of the State
government. Revenue is provided from the direct deposit of federal grants and
the transfer of State revenues from the Bond Security and Redemption Fund
after general obligation debt requirements are met. The Revenue Estimating
Conference met in February of 1991 and reported a projected $437.5 million
State General Fund surplus for the fiscal year ending June 30, 1991. This
surplus will be available for expenditures during the Fiscal Year 1991-92. The
beginning State General Fund surplus for fiscal year 1990-1991 was $702.3
million. The official recurring State General Fund estimate for Fiscal Year
1990-91 (Revenue Estimating Conference February 1991 as revised April 1991) is
$4,173.5 million.
The Transportation Trust Fund was established pursuant to (i) Section 27 of
Article VII of the State Constitution and (ii) Act No. 16 of the First
Extraordinary Session of the Louisiana Legislature for the year 1989,
(collectively the "Act" ) for the purpose of funding construction and
maintenance of state and federal roads and bridges, the statewide
flood-control program, ports, airports, transit and state police traffic
control projects and to fund the Parish Transportation Fund. The
Transportation Trust Fund is funded by a levy of $0.20 per gallon on gasoline
and motor fuels and on special fuels (diesel, propane, butane and compressed
natural gas) used, sold or consumed in the state (the "Gasoline and Motor
Fuels Taxes and Special Fuels Taxes" ). This levy was increased from $0.16
per gallon (the "Existing Taxes" ) to the current $0.20 per gallon
pursuant to Act No. 16 of the First Extraordinary Session of the Louisiana
Legislature for the year 1989, as amended. The additional tax of $0.04 per
gallon (the "Act 16 Taxes" ) became effective January 1, 1990 and will
expire on the earlier of January 1, 2005 or the date on which obligations
secured by the Act No. 16 taxes are no longer outstanding. The Transportation
Infrastructure Model for Economic Development Account (the "TIME
Account" ) was established in the Transportation Trust Fund. Moneys in the
TIME Account will be expended for certain projects identified in the Act
aggregating $1.4 billion and to fund not exceeding $160 million of additional
capital transportation projects. The State issued $263,902,639.95 of Gasoline
and Fuels Tax Revenue Bonds, 1990 Series A, dated April 15, 1990 payable from
the (i) Act No. 16 Taxes, (ii) any Act No. 16 Taxes and Existing Taxes
deposited in the Transportation Trust Fund, and (iii) any additional taxes on
gasoline and motor fuels and special fuels pledged for the payment of said
Bonds.
The Louisiana Recovery District (the "Recovery District" ) was created
pursuant to Act No. 15 of the First Extraordinary Session of the Legislature
of Louisiana of 1988 to assist the State in the reduction and elimination of a
deficit existing at that time and the delivery of essential services to its
citizens and to assist parishes, cities and other units of local government
experiencing cash flow difficulties. The Recovery District is a special taxing
district the boundaries of which are coterminous with the State and is a body
politic and corporate and a political subdivision of the State. The Recovery
District issued $979,125,000 of Louisiana Recovery District Sales Tax Bonds,
Series 1988, dated July 1, 1988, secured by (i) the revenues derived from the
District's 1% statewide sales and use tax remaining after the costs of
collection and (ii) all funds and accounts held under the Recovery District's
General Bond Resolution and all investment earnings on such funds and
accounts. As of June 30, 1990, the principal amount outstanding was
$851,880,000.
The Legislature passed tax measures which are projected to raise approximately
$418 million in additional revenues for Fiscal Year 1990-91, the most
important of which include the following: sales tax--$328.3 million; hazardous
waste tax--$41.3 million; severance tax--$39.2 million; income tax--$14.9
million; and tobacco tax-- $14.0 million. The Legislature also passed several
constitutional amendments which were approved by the state electorate,
resulting in comprehensive budgetary reforms mandating that: both proposed and
adopted budgets be balanced in accordance with the official forecast of the
Revenue Estimating Conference; any new tax proposal be tied to specific
expenditures; all mineral revenues earned by the State in excess of $750
million be placed in the Revenue Stabilization Mineral Trust Fund, to be used
as a "rainy day fund" ; and, the regular legislative session must end
prior to the completion of the fiscal year in order to streamline budgetary
reporting and planning. The Legislature also adopted a proposed constitutional
amendment which was approved by the State electorate permitting the creation
of a Louisiana lottery. The lottery is projected to generate approximately
$111 million per year in net revenues for the State.
Only local governmental units levy ad valorem taxes at present. Under the 1921
State Constitution a 5.75 mills ad valorem tax was being levied by the State
until January 1, 1973 at which time a constitutional amendment to the 1921
Constitution abolished the ad valorem tax. Under the 1974 State Constitution a
State ad valorem tax of up to 5.75 mills was provided for but is not presently
being levied. The property tax is underutilized at the parish level due to a
constitutional homestead exemption from the property tax applicable to the
first $75,000 of the full market value of single family residences. Homestead
exemptions do not apply to ad valorem property taxes levied by municipalities,
with the exception of the City of New Orleans. Since local governments are
also prohibited from levying an individual income tax by the constitution,
their reliance on State government is increased under the existing tax
structure.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions
to which the issuers of the Louisiana IM-IT Trust are subject. Additionally,
many factors including national economic, social and environmental policies
and conditions, which are not within the control of the issuers of Bonds,
could affect or could have an adverse impact on the financial condition of the
State and various agencies and political subdivisions located in the State.
The Sponsor is unable to predict whether or to what extent such factors may
affect the issuers of Bonds, the market value or marketability of the Bonds or
the ability of the respective issuers of the Bonds acquired by the Louisiana
IM-IT Trust to pay interest on or principal of the Bonds.
Tax Status. For a discussion of the Federal tax status of income earned on
Louisiana IM-IT Trust Units, see "Federal Tax Status" in Part II of
this Prospectus.
In the opinion of The Carmouche Law Firm, special counsel to the Fund for the
Louisiana tax matters, under existing Louisiana law:
(1) The Louisiana IM-IT Trust will be treated as a trust for Louisiana
income tax purposes and not as an association taxable as a corporation.
(2) The Louisiana income tax on resident individuals is imposed upon the
"tax table income" of resident individuals. The calculation of the
"tax table income" of a resident individual begins with federal
adjusted gross income. Certain modifications are specified, but no such
modification requires the addition of interest on obligations of the State of
Louisiana and its political subdivisions, public corporations created by them
and constitutional authorities thereof authorized to issue obligations on
their behalf. Accordingly, amounts representing interest excludable from gross
income for federal income tax purposes received by the Louisiana IM-IT Trust
with respect to such obligations will not be taxed to the Louisiana IM-IT
Trust, or, except as provided below, to the resident individual Unitholder,
for Louisiana income tax purposes. In addition to the foregoing, interest on
the respective Securities may also be exempt from Louisiana income taxes
pursuant to the statutes authorizing their issuance.
(3) To the extent that gain from the sale, exchange or other disposition of
obligations held by the Louisiana IM-IT Trust (whether as a result of a sale
or exchange of such obligations by the Louisiana IM-IT Trust or as a result of
a sale or exchange of a Unit by a Unitholder) is includable in the federal
adjusted gross income of a resident individual, such gain will be included in
the calculation of the Unitholder's Louisiana taxable income.
(4) Gain or loss on the Unit or as to underlying bonds for Louisiana income
tax purposes would be determined by taking into account the basis adjustments
for federal income tax purposes described in this Prospectus.
As no opinion is expressed regarding the Louisiana tax consequences of
Unitholders other than individuals who are Louisiana residents, tax counsel
should be consulted by other prospective Unitholders. The Internal Revenue
Code of 1986, as amended (the "1986 Code" ), contains provisions
relating to investing in tax-exempt obligations (including, for example,
corporate minimum tax provisions which treat certain tax-exempt interest and
corporate book income which may include tax-exempt interest, as tax preference
items, provisions affecting the deductibility of interest expense by financial
institutions) which could have a corresponding effect on the Louisiana tax
liability of the Unitholders.
In rendering the opinions expressed above, counsel has relied upon the opinion
of Chapman and Cutler that the Louisiana IM-IT Trust is not an association
taxable as a corporation for Federal income tax purposes, that each Unitholder
of the Louisiana IM-IT Trust will be treated as the owner of a pro rata
portion of such Louisiana IM-IT Trust under the 1986 Code and that the income
of the Louisiana IM-IT Trust will be treated as income of the Unitholders
under the 1986 Code.
Tax counsel should be consulted as to the other Louisiana tax consequences not
specifically considered herein, and as to the Louisiana tax status of
taxpayers other than Louisiana resident individuals who are Unitholders in the
Louisiana IM-IT Trust. In addition, no opinion is being rendered as to
Louisiana tax consequences resulting from any proposed or future federal or
state tax legislation.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 54.04 $ 54.04
Less: Estimated Annual Expense per Unit <F2>...................... $ 2.14 $ 1.70
Less: Annual Premium on Portfolio Insurance per Unit.............. -- --
Estimated Net Annual Interest Income per Unit..................... $ 51.90 $ 52.34
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 51.90 $ 52.34
Divided by 12 and 2, respectively................................. $ 4.33 $ 26.17
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .14417 $ .14537
Estimated Current Return Based on Public Offering Price <F1><F3>... 5.19% 5.23%
Estimated Long-Term Return <F3>.................................... 5.23% 5.27%
Estimated Initial Monthly Distribution (October 1996).............. $ 5.19
Estimated Initial Semi-annual Distribution (January 1997).......... $ 18.32
Estimated Normal Distribution per Unit <F3>........................ $ 4.33 $ 26.17
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1><F4>... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Louisiana IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates.... TENTH day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates.............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
January and July
- ----------
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.18
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $54.22. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.32 and $1.88 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns" in Part II of
this Prospectus.
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F4>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,543. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,753.
</TABLE>
<TABLE>
LOUISIANA INSURED MUNICIPALS INCOME TRUST
SERIES 17 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To
Louisiana
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
Principal<F1> either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- ---------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
$ 100,000 City of New Orleans, Louisiana, General Obligation
Refunding Bonds, Series 1991 (AMBAC Indemnity Insured)
#0.00% Due 9/1/2015 ...................................... AAA $ 34,153 <F6>
250,000 Slidell, Louisiana, Utilities Revenue Bonds (AMBAC 2006 @ 101.5
Indemnity Insured) #5.55% Due 4/1/2016 ................. AAA 2007 @ 100 S.F. 248,295
125,000 East Baton Rouge Parish, Louisiana, Sales and Use Tax
Revenue Bonds, Series 1996-ST (FGIC Insured) #5.50% Due
2/1/2020 ................................................. AAA 2006 @ 101.5 121,624
250,000 City of New Orleans, Louisiana, Unlimited Tax-General
Obligation Public Improvement Bonds, Issue of 1995 (FGIC 2005 @ 100
Insured) 5.90% Due 11/1/2020 ............................ AAA 2016 @ 100 S.F. 253,870
300,000 Ouachita Parish, Louisiana, Hospital Service District
No.1, Revenue Refunding Bonds (Glenwood Regional Medical 2010 @ 100
Center) Series 1996 (FSA Insured) #5.75% Due 5/15/2021 . AAA 2017 @ 100 S.F. 296,037
500,000 Louisiana Stadium and Exposition District, Hotel
Occupancy Tax and Stadium Revenue Bonds, Series A (FSA 2005 @ 102
Insured) 6.05% Due 7/1/2024 ............................ AAA 2010 @ 100 S.F. 513,010
500,000 Ernest N. Morial - New Orleans Exhibition Hall Authority,
Louisiana, Special Tax Bonds, Series C (MBIA Insured) 2006 @ 101
#5.60% Due 7/15/2025 ..................................... AAA 2019 @ 100 S.F. 483,885
500,000 Board of Supervisors of Louisiana State University and
Agricultural and Mechanical College, Revenue Bonds
(University of New Orleans Projects) Series 1996A (MBIA 2005 @ 102
Insured)** #5.60% Due 5/1/2026 ......................... AAA 2017 @ 100 S.F. 488,370
500,000 Board of Supervisors of Louisiana State University and
Agricultural and Mechanical College, Auxiliary Revenue
Bonds, Series 1996 (MBIA Insured)** #5.50% Due 2006 @ 102
7/1/2026 ................................................. AAA 2017 @ 100 S.F. 481,290
$ 3,025,000 $ 2,920,534
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
MASSACHUSETTS IM-IT TRUST
- --------------------------------------------------------------------------
General. The Massachusetts IM-IT Trust consists of 8 issues of Securities. One
of the Bonds in the Massachusetts IM-IT Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Massachusetts IM-IT Trust) as follows: Health Care, 3 (33%); Higher
Education, 2 (30%); Industrial Revenue, 1 (17%); Transportation, 1 (17%) and
General Obligations, 1 (3%). No Bond issue has received a provisional rating.
Risk Factors. As described above, the Massachusetts IM-IT Trust will invest
substantially all of its net assets in obligations issued by or on behalf of
the Commonwealth of Massachusetts, political subdivisions thereof, or agencies
or instrumentalities of the Commonwealth or its political subdivisions (the
"Bonds" ). The Massachusetts IM-IT Trust is therefore susceptible to
general or particular political, economic, or regulatory factors that may
affect issuers of such Massachusetts Investments. The following information
constitutes only a brief summary of some of the many complex factors that may
have an effect. The information may not be applicable to "conduit"
obligations on which the public issuer itself has no financial responsibility.
This information is derived from official statements of the Commonwealth and
certain of its agencies or instrumentalities in connection with the issuance
of securities, and from other publicly available documents, and is believed to
be accurate. No independent verification has been made of any of the following
information.
The Massachusetts Economy. After declining since 1987, Massachusetts
employment has shown positive annual growth in 1993, 1994 and 1995.
Nonagricultural employment grew at a rate of 2.4% in 1995.
From 1980 to 1989, Massachusetts' unemployment rate was significantly lower
than the national average. By 1990, however, unemployment reached 6.0%,
exceeding the national average for the first time since 1977. The
Massachusetts unemployment rate peaked in 1991 at 9.0% and dropped to 6.9% in
1993, declining since 1993 faster than the national average.
In recent years, per capita personal income growth in Massachusetts has
slowed, after several years during which it was among the highest in the
nation. From 1992 to 1993, nominal per capita income in Massachusetts
increased 3.6% as compared to 3.2% for the nation as a whole. In 1994, real
per capita income in Massachusetts increased by 3.6%.
The Commonwealth, while the third most densely populated state according to
the 1990 census, has experienced only a modest increase in population from
1980 to 1990 at a rate equal to less than one-half the rate of increase in the
United States population as a whole.
Massachusetts possesses a diversified economic base which includes traditional
manufacturing, high technology and service industries, served by an extensive
transportation system and related facilities. The Massachusetts service
sector, at approximately 34.9% of the state's non-agricultural work force in
February 1996, is the largest sector in the Massachusetts economy. Government
employment is below the national average, representing less than 14% of the
Massachusetts work force. In recent years, the construction, manufacturing and
trade sectors have experienced the greatest decreases in employment in
Massachusetts, with more modest declines taking place in the government,
finance, insurance and real estate, and service sectors. From 1990 to November
of 1994, manufacturing employment in Massachusetts declined by some 15.5%.
Since 1992, however, manufacturing is the only employment sector that did not
grow in 1993 and 1994. Total non-agricultural employment in Massachusetts grew
at a rate of 2.4% in 1995.
Over the next decade, Massachusetts has a very full public construction agenda
which is expected not only to improve mobility, but to provide a substantial
number of construction and related employment opportunities, including the
major Central Artery/Tunnel project involving the construction of a third
tunnel under Boston Harbor linking the MassPike and downtown Boston with Logan
International Airport, and the depression into tunnels of the Central Artery
that traverses the City of Boston.
State Finances. In fiscal years 1987 through 1991, Commonwealth spending
exceeded revenues. Spending in five major expenditure categories--Medicaid,
debt service, public assistance, group health insurance and transit
subsidies--grew at rates well in excess of the rate of inflation for the
comparable period. During the same period, the Commonwealth's tax revenues
repeatedly failed to meet official forecasts. That revenue shortfall combined
with steadily escalating costs contributed to serious budgetary and financial
difficulties which have affected the credit standing and borrowing abilities
of Massachusetts and certain of its public bodies and municipalities, and
which have contributed to higher interest rates on debt obligations issued by
them.
More conservative revenue forecasting for fiscal 1992 together with
significant efforts to restrain spending during fiscal 1991 and reductions in
budgeted program expenditures for fiscal 1992, 1993, 1994 and 1995 have
moderated these difficulties, and the Commonwealth has shown significant
surpluses of revenues and other sources over expenditures and other uses in
the Commonwealth's budgeted operating funds for those years. For fiscal 1996,
the Executive Office of Administration and Finance projects a 4.2% increase in
spending over fiscal 1995 spending, with the largest spending increase being
for the continued funding of comprehensive education reform legislation
enacted in 1993.
The foregoing information constitutes only a brief summary of some of the
general factors which may impact certain issuers of Bonds and does not purport
to be a complete or exhaustive description of all adverse conditions to which
the issuers of obligations held by the Massachusetts IM-IT Trust are subject.
Additionally, many factors including national economic, social and
environmental policies and conditions, which are not within the control of the
issuers of Bonds, could affect or could have an adverse impact on the
financial condition of the Commonwealth and various agencies and political
subdivisions located in the Commonwealth. The Sponsor is unable to predict
whether or to what extent such factors or other factors may affect the issuers
of the Bonds, the market value or marketability of the Bonds or the ability of
the respective issuers of the Bonds acquired by the Massachusetts IM-IT Trust
to pay interest on or principal of the Bonds.
Tax Status. For a discussion of the Federal tax status of income earned on
Massachusetts IM-IT Trust Units, see "Federal Tax Status" in Part II
of this Prospectus.
In the opinion of Peabody & Arnold, special counsel to the Fund, under
existing Massachusetts law:
(1)For Massachusetts income tax purposes, the Massachusetts IM-IT Trust will
be treated as a corporate trust under Section 8 of Chapter 62 of the
Massachusetts General Laws and not as a grantor trust under Section 10(e) of
Chapter 62 of the Massachusetts General Laws.
(2)The Massachusetts IM-IT Trust will not be held to be engaging in business
in Massachusetts within the meaning of said Section 8 and will, therefore, not
be subject to Massachusetts income tax.
(3)Massachusetts Unitholders who are subject to Massachusetts income taxation
under Chapter 62 of Massachusetts General Laws will not be required to include
their respective shares of the earnings of or distributions from the
Massachusetts IM-IT Trust in their Massachusetts gross income to the extent
that such earnings or distributions represent tax-exempt interest for federal
income tax purposes received by the Massachusetts IM-IT Trust on obligations
issued by Massachusetts, its counties, municipalities, authorities, political
subdivisions or instrumentalities, or issued by United States territories or
possessions.
(4)Any proceeds of insurance obtained by the Trustee of the Trust or by the
issuer of a Bond held by the Massachusetts IM-IT Trust which are paid to
Massachusetts Unitholders and which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Massachusetts gross
income of a Massachusetts Unitholder if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of the defaulted
Bond.
(5)The Massachusetts IM-IT Trust's capital gains and/or capital losses
realized upon disposition of Bonds held by it will be includable pro rata in
the federal gross income of Massachusetts Unitholders who are subject to
Massachusetts income taxation under Chapter 62 of the Massachusetts General
Laws, and such gains and/or losses will be included as capital gains and/or
losses in the Massachusetts Unitholders' Massachusetts gross income, except
where capital gain is specifically exempted from income taxation under acts
authorizing issuance of said Bonds.
(6)Gains or losses realized upon sale or redemption of Units by Massachusetts
Unitholders who are subject to Massachusetts income taxation under Chapter 62
of the Massachusetts General Laws will be includable in their Massachusetts
gross income.
(7)In determining such gain or loss Massachusetts Unitholders will, to the
same extent required for Federal tax purposes, have to adjust their tax bases
for their Units for accrued interest received, if any, on Bonds delivered to
the Trustee after the Unitholders pay for their Units and for amortization of
premiums, if any, on obligations held by the Massachusetts IM-IT Trust.
(8)The Units of the Massachusetts IM-IT Trust are not subject to any property
tax levied by Massachusetts or any political subdivision thereof, nor to any
income tax levied by any such political subdivision. They are includable in
the gross estate of a deceased Massachusetts Unitholder who is a resident of
Massachusetts for purposes of the Massachusetts Estate Tax.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 53.85 $ 53.85
Less: Estimated Annual Expense per Unit <F2>...................... $ 2.21 $ 1.75
Less: Annual Premium on Portfolio Insurance per Unit.............. -- --
Estimated Net Annual Interest Income per Unit..................... $ 51.64 $ 52.10
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 51.64 $ 52.10
Divided by 12 and 2, respectively................................. $ 4.30 $ 26.05
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .14343 $ .14470
Estimated Current Return Based on Public Offering Price <F1><F3>... 5.16% 5.21%
Estimated Long-Term Return <F3>.................................... 5.21% 5.26%
Estimated Initial Monthly Distribution (October 1996).............. $ 5.16
Estimated Initial Semi-annual Distribution (January 1997).......... $ 18.23
Estimated Normal Distribution per Unit <F3>........................ $ 4.30 $ 26.05
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1><F4>... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Massachusetts IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates.... TENTH day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates.............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
January and July
- ----------
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.17
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $54.02. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.38 and $1.92 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns" in Part II of
this Prospectus.
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F4>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,530. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,730.
</TABLE>
<TABLE>
MASSACHUSETTS INSURED MUNICIPALS INCOME TRUST
SERIES 34 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption Massachusetts
Principal<F1> Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT<F4>
- -------------- ----------------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 250,000 Massachusetts Health and Educational Facilities Authority,
Revenue Refunding Bonds (Emerson Hospital Issue) Series 1995D 2005 @ 100
(FSA Insured) #5.80% Due 8/15/2018 ............................ AAA 2013 @ 100 S.F. $ 249,708
500,000 Massachusetts Industrial Finance Authority, Revenue Refunding
Bonds (Milton Academy) Series 1993B (MBIA Insured) #5.25% Due 2003 @ 102
9/1/2019 ........................................................ AAA 2014 @ 100 S.F. 470,820
500,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds
(College of the Holy Cross) Series 1996 (MBIA Insured) #5.50% 2006 @ 102
Due 3/1/2020 .................................................... AAA 2017 @ 100 S.F. 486,495
500,000 Massachusetts Turnpike Authority, Turnpike Revenue Bonds, 2003 @ 102
Series 1993A (FGIC Insured) #5.125% Due 1/1/2023 .............. AAA 2021 @ 100 S.F. 457,530
250,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Series G-1 (New England Medical Center Hospitals 2004 @ 102
Issue) MBIA Insured #5.375% Due 7/1/2024 ...................... AAA 2019 @ 100 S.F. 235,005
500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Cooley Dickinson Hospital Issue, Series B (AMBAC 2005 @ 101
Indemnity Insured) #5.50% Due 11/15/2025 ...................... AAA 2019 @ 100 S.F. 478,085
100,000 Massachusetts Water Resources Authority, Revenue Bonds, Series B 2005 @ 102
(MBIA Insured) #5.00% Due 12/1/2025 ........................... AAA 2022 @ 100 S.F. 89,544
400,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Stonehill College, Series F (AMBAC Indemnity 2006 @ 101
Insured)** #5.750% Due 7/1/2026 ................................ AAA 2022 @ 100 S.F. 399,140
$ 3,000,000 $ 2,866,327
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
MISSOURI IM-IT TRUST
- --------------------------------------------------------------------------
General. The Missouri IM-IT Trust consists of 9 issues of Securities. None of
the Bonds in the Missouri IM-IT Trust are general obligations of the
governmental entities issuing them or are backed by the taxing power thereof.
All of the issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Missouri IM-IT Trust) as follows: Health Care, 2 (21%); Higher
Education, 2 (21%); Retail Electric/Gas, 1 (18%); Multi-Family Mortgage
Revenue, 1 (17%); Public Building, 2 (16%) and General Purpose, 1 (7%). No
Bond issue has received a provisional rating.
Risk Factors. The following discussion regarding constitutional limitations
and the economy of the State of Missouri is included for the purpose of
providing general information that may or may not affect issuers of the Bonds
in Missouri.
Currently, Missouri has a population of over 5 million people. Missouri's
population has climbed steadily upward, averaging an increase of approximately
6% each decade. Population projections indicate by the year 2010, there will
be about 5.5 million people in Missouri, a continuation of the steady,
moderate growth which has been the trend. Farming plays a vital role in
Missouri's economy. Cash receipts from sales of crops and livestock average
nearly $4 billion annually. These cash receipts come from a variety of
agricultural commodities produced in the State. The largest portion of the
State's agricultural income comes from the production of meat animals. Oil
crops account for 18.9%; feed crops 13.3%; dairy products 8.6%; poultry and
eggs 11.2%; food grains 4.0%; miscellaneous crops 3.3%; cotton 3.4% and
miscellaneous 0.7%.
According to data obtained by the Missouri Division of Employment Security, in
1996 over 2.5 million workers had nonagricultural jobs in Missouri. Over 27%
of these workers were employed in services, approximately 24% were employed in
wholesale and retail trade, and 16.7% were employed in manufacturing. In the
last ten years, Missouri has experienced a significant increase in employment
in the service sector and in wholesale and retail trade. In 1993, per capita
personal income in Missouri was $19,463, a 2.6% increase over the 1992 figure
of $18,970. For the United States as a whole, per capita income in 1993 was
$20,817, a 3.6% increase over the 1992 per capita income of $20,105.
The total value of Missouri's annual mineral production in 1993 was
approximately $832 million. The State ranks first nationally in the production
of lead. Lead production in 1993 was valued at over $193 million. Missouri
also ranks first in the production of refractory clay, third in barite, fourth
in production of zinc and is a leading producer of lime, cement and stone.
Although the June 1993 revenue estimate had been revised downward by $27.5
million, the State budget for Fiscal Year 1993 remained balanced due primarily
to delayed spending for desegregation capital projects. The downward revision
in revenues was considered necessary because of weak economic performance, and
more importantly an economic outlook for the second half of Fiscal Year 1993
which projected slower growth than was anticipated in June 1992.
For Fiscal Year 1994, the majority of revenues for the State of Missouri were
obtained from individual income taxes (53.1%), sales and use taxes (30.0%),
corporate income taxes (5.9%) and county foreign insurance taxes (3.0%). Major
expenditures for Fiscal Year 1994 included elementary and secondary education
(30.6%), human services (25.4%), higher education (14.8%), desegregation
(8.9%), corrections and public safety (5.1%) and judiciary and general
assembly (2.7%).
The Fiscal Year 1994 budget balanced resources and obligations based on the
consensus revenue and refund estimate and an opening balance resulting from
continued withholdings and delayed spending for desegregation capital
projects. The total general revenue operating budget for Fiscal Year 1994
exclusive of desegregation is $3,844.6 million. The court-ordered
desegregation estimate in $377.7 million, an increase of $30.7 million over
the revised Fiscal Year 1993 estimate.
For Fiscal Year 1995 revenues are projected at $5,225.5 million. This does not
include $64 million in transfers or a carryover balance of approximately
$274.6 million. Expenditures are projected at $5,270.8 million, including $58
million reserved for supplemental appropriations for Fiscal Year 1995.
Legislation enacted in 1989 required any surplus resulting from revenues
raised net of refunds and revenues lost to be deposited in the Budget
Stabilization (Rainy Day) Fund. The fund was used to pay general revenue costs
associated with the floods of 1993 and will be replenished (subject to
appropriation) to the pre-flood level of $28.4 million.
Legislation enacted in 1983 and a Constitutional Amendment passed in 1986
created a Cash Operating Reserve Fund to meet cash flow requirements of the
State. A total of $130 million in general revenue was transferred to the Fund
in Fiscal Year 1985 beginning balance was $202.2 million.
According to the United States Bureau of Labor Statistics, the 1993
unemployment rate in Missouri was 6.4% and the 1994 rate was 4.9%. Although
not strictly comparable, the preliminary seasonally adjusted rate for July of
1995 was 5.0%. The projected rate for 1996 is 5.4%.
Currently, Moody's Investors Service rates Missouri general obligation bonds
"Aaa" and Standard & Poor's rates Missouri general obligation bonds
"AAA" . Although these ratings indicate that the State of Missouri is
in relatively good economic health, there can be, of course, no assurance that
this will continue or that particular bond issues may not be adversely
affected by changes in the State or local economic or political conditions.
The foregoing information constitutes only a brief summary of some of the
general factors which may impact certain issuers of Bonds and does not purport
to be a complete or exhaustive description of all adverse conditions to which
the issuers of obligations held by the Missouri IM-IT Trust are subject.
Additionally, many factors including national economic, social and
environmental policies and conditions, which are not within the control of the
issuers of the Bonds, could affect or could have an adverse impact on the
financial condition of the State and various agencies and political
subdivisions located in the State. The Sponsor is unable to predict whether or
to what extent such factors or other factors may affect the issuers of the
Bonds, the market value or marketability of the Bonds or the ability of the
respective issuers of the Bonds acquired by the Missouri IM-IT Trust to pay
interest on or principal of the Bonds.
Tax Status. For a discussion of the Federal tax status of income earned on
Missouri IM-IT Trust Units, see "Federal Tax Status" in Part II of
this Prospectus.
The assets of the Missouri IM-IT Trust will consist of debt obligations issued
by or on behalf of the State of Missouri (the "State" ) or counties,
municipalities, authorities or political subdivisions thereof (the "
Missouri Bonds" ) or by the Commonwealth of Puerto Rico, Guam and the
United States Virgin Islands (the "Possession Bonds" ) (collectively,
the "Bonds" ).
Neither the Sponsor nor its counsel have independently examined the Bonds to
be deposited in and held in the Missouri IM-IT Trust. However, although no
opinion is expressed herein regarding such matters, it is assumed that: (i)
the Bonds were validly issued, (ii) the interest thereon is excludable from
gross income for Federal income tax purposes and (iii) interest on the Bonds,
if received directly by a Unitholder, would be exempt from the Missouri income
tax applicable to individuals and corporations ("Missouri state income
tax" ). The opinion set forth below does not address the taxation of
persons other than full time residents of Missouri.
In the opinion of Chapman and Cutler, counsel to the Sponsor under existing
law:
(1)The Missouri IM-IT Trust is not an association taxable as a corporation for
Missouri income tax purposes, and each Unitholder of the Missouri IM-IT Trust
will be treated as the owner of a pro rata portion of the Missouri IM-IT Trust
and the income of such portion of the Missouri IM-IT Trust will be treated as
the income of the Unitholder for Missouri state income tax purposes.
(2)Interest paid and original issue discount, if any, on the Bonds which would
be exempt from the Missouri state income tax if received directly by a
Unitholder will be exempt from the Missouri state income tax when received by
the Missouri IM-IT Trust and distributed to such Unitholder; however, no
opinion is expressed herein regarding taxation of interest paid and original
issue discount, if any, on the Bonds received by the Missouri IM-IT Trust and
distributed to Unitholders under any other tax imposed pursuant to Missouri
law, including but not limited to the franchise tax imposed on financial
institutions pursuant to Chapter 148 of the Missouri Statutes.
(3)Each Unitholder of the Missouri IM-IT Trust will recognize gain or loss for
Missouri state income tax purposes if the Trustee disposes of a bond (whether
by redemption, sale, or otherwise) or if the Unitholder redeems or sells Units
of the Missouri IM-IT Trust to the extent that such a transaction results in a
recognized gain or loss to such Unitholder for Federal income tax purposes.
Due to the amortization of bond premium and other basis adjustments required
by the Internal Revenue Code, a Unitholder under some circumstances, may
realize taxable gain when his or her Units are sold or redeemed for an amount
less than or equal to their original cost.
(4)Any insurance proceeds paid under policies which represent maturing
interest on defaulted obligations which are excludable from gross income for
Federal income tax purposes will be excludable from the Missouri state income
tax to the same extent as such interest would have been so excludible if paid
by the issuer of such Bonds held by the Missouri IM-IT Trust; however, no
opinion is expressed herein regarding taxation of interest paid and original
issue discount, if any, on the Bonds received by the Missouri IM-IT Trust and
distributed to Unitholders under any other tax imposed pursuant to Missouri
law, including but not limited to the franchise tax imposed on financial
institutions pursuant to Chapter 148 of the Missouri Statutes.
(5)The Missouri state income tax does not permit a deduction of interest paid
or incurred on indebtedness incurred or continued to purchase or carry Units
in the Trust, the interest on which is exempt from such Tax.
(6)The Missouri IM-IT Trust will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of the Bonds
held by the Missouri IM-IT Trust will not generally be subject to the Kansas
City, Missouri Earnings and Profits Tax or the City of St. Louis Earnings Tax
(except that no opinion is expressed in the case of certain Unitholders,
including corporations, otherwise subject to the St. Louis City Earnings Tax).
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provision of Missouri law. Ownership of the Units may result in
collateral Missouri tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any
such collateral consequences.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit..................... $ 54.10 $ 54.10
Less: Estimated Annual Expense per Unit <F1>.................. $ 2.33 $ 1.88
Less: Annual Premium on Portfolio Insurance per Unit.......... $ .23 $ .23
Estimated Net Annual Interest Income per Unit................. $ 51.54 $ 51.99
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit................. $ 51.54 $ 51.99
Divided by 12 and 2, respectively............................. $ 4.30 $ 26.00
Estimated Daily Rate of Net Interest Accrual per Unit.......... $ .14317 $ .14440
Estimated Current Return Based on Public Offering Price <F2>... 5.15% 5.20%
Estimated Long-Term Return <F2>................................ 5.16% 5.20%
Estimated Initial Monthly Distribution (October 1996).......... $ 5.15
Estimated Initial Semi-annual Distribution (January 1997)...... $ 18.20
Estimated Normal Distribution per Unit <F2>.................... $ 4.30 $ 26.00
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F3>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Missouri IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... TENTH day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
January and July
- ----------
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F3>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,793. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $3,199.
</TABLE>
<TABLE>
MISSOURI INSURED MUNICIPALS INCOME TRUST
SERIES 98 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To
Missouri
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption IM-IT
Principal<F1> Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- ----------------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 250,000 Missouri Development Finance Board, Limited Obligation Leasehold
Revenue Bonds (Kansas City, Missouri, Ilus W. Davis Park 2005 @ 101
Project) Series 1995 (FSA Insured) #5.50% Due 12/1/2015 ....... AAA 2011 @ 100 S.F. $ 246,860
250,000 OTC Public Building Corporation, Missouri, Leasehold Revenue
Bonds (Ozarks Technical Community College Project) Series 1995 2005 @ 100
(FSA Insured) #5.75% Due 3/1/2016 ............................. AAA 2011 @ 100 S.F. 253,137
250,000 Kansas City Municipal Assistance Corporation, Missouri,
Leasehold Refunding Revenue Bonds (H. Roe Bartle Convention
Center Project) Series 1995A (MBIA Insured) #5.60% Due 2005 @ 101
4/15/2016 ....................................................... AAA 2011 @ 100 S.F. 248,302
500,000 Missouri Health and Educational Facilities Authority, Health and
Educational Facilities Refunding Revenue Bonds (St. Louis
University) Series 1993 (AMBAC Indemnity Insured) #4.75% Due 2003 @ 102
10/1/2016 ....................................................... AAA 2011 @ 100 S.F. 444,855
300,000 Land Clearance Redevelopment Authority of Kansas City, Missouri,
Lease Revenue Bonds (Municipal Auditorium and Muehlebach Hotel
Redevelopment Projects) Series 1995A (FSA Insured) 5.90% Due 2005 @ 102
12/1/2018 ....................................................... AAA 2011 @ 100 S.F. 304,215
590,000 Hannibal, Missouri, Industrial Development Authority, Health
Facilities Revenue Bonds, Hannibal Regional Hospital, Series 2006 @ 102
1996A (FSA Insured) #5.75% Due 3/1/2022 ....................... AAA 2017 @ 100 S.F. 587,569
625,000 City of Sikeston, Missouri, Electric System Revenue Refunding 2006 @ 101
Bonds, Series 1996 (MBIA Insured) #5.00% Due 6/1/2022 ......... AAA 2017 @ 100 S.F. 565,488
150,000 Health and Educational Facilities Authority of Missouri,
Educational Facilities Revenue Bonds (St. Louis University) 2006 @ 102
Series 1996 (AMBAC Indemnity Insured) #5.20% Due 10/1/2026..... AAA 2017 @ 100 S.F. 139,637
600,000 Industrial Development Authority of the City of Hazelwood,
Missouri, Multi-Family Housing Revenue Refunding Bonds (GNMA
Collateralized-The Lakes Apartment Project) Series 1996A 2006 @ 102
6.15% Due 9/20/2031 ............................................. AAA 2027 @ 100 S.F. 610,728
$ 3,515,000 $ 3,400,791
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
NEW JERSEY IM-IT TRUST
- --------------------------------------------------------------------------
General. The New Jersey IM-IT Trust consists of 8 issues of Securities. Three
of the Bonds in the New Jersey IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New Jersey IM-IT Trust) as follows: Transportation, 2 (33%); General
Obligations, 3 (30%); Health Care, 1 (17%); Higher Education, 1 (16%) and
Public Education, 1 (4%). No Bond issue has received a provisional rating.
Risk Factors. As described above, the New Jersey IM-IT Trust consists of a
portfolio of Bonds. The Trust is therefore susceptible to political, economic
or regulatory factors affecting issuers of the Bonds. The following
information provides only a brief summary of some of the complex factors
affecting the financial situation in New Jersey (the "State" ) and is
derived from sources that are generally available to investors and is believed
to be accurate. It is based in part on information obtained from various State
and local agencies in New Jersey. No independent verification has been made of
any of the following information.
New Jersey is the ninth largest state in population and the fifth smallest in
land area. With an average of 1,062 people per square mile, it is the most
densely populated of all the states. The state's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries,
supplemented by rural areas with selective commercial agriculture.
Historically, New Jersey's average per capita income has been well above the
national average, and in 1994 the State ranked second among states in per
capita personal income ($27,742).
The New Jersey Economic Policy Council, a statutory arm of the New Jersey
Department of Commerce and Economic Development, has reported in New Jersey
Economic Indicators, a monthly publication of the New Jersey Department of
Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from
the export boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost momentum. In
the meantime, the prolonged fast growth in the State in the mid 1980s resulted
in a tight labor market situation, which has led to relatively high wages and
housing prices. This means that, while the incomes of New Jersey residents are
relatively high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration
of New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities and trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an estimated 6.1%
in May 1996, which is higher than the national average of 5.6% in May 1996.
Economic recovery is likely to be slow and uneven in New Jersey, with
unemployment receding at a correspondingly slow pace, due to the fact that
some sectors may lag due to continued excess capacity. In addition, employers
even in rebounding sectors can be expected to remain cautious about hiring
until they become convinced that improved business will be sustained. Also,
certain firms will continue to merge or downsize to increase profitability.
Debt Service. The primary method for State financing of capital projects is
through the sale of the general obligation bonds of the State. These bonds are
backed by the full faith and credit of the State tax revenues and certain
other fees are pledged to meet the principal and interest payments and if
provided, redemption premium payments, if any, required to repay the bonds. As
of June 30, 1995, there was a total authorized bond indebtedness of
approximately $9.48 billion, of which $3.65 billion was issued and
outstanding, $4.0 billion was retired (including bonds for which provision for
payment has been made through the sale and issuance of refunding bonds) and
$1.83 billion was unissued. The appropriation for the debt service obligation
on such outstanding indebtedness was $466.3 million for fiscal year 1996.
New Jersey's Budget and Appropriation System. The State operates on a fiscal
year beginning July 1 and ending June 30. At the end of fiscal year 1989,
there was a surplus in the State's general fund (the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made) of $411.2 million. At the end of fiscal year 1990,
there was a surplus in the general fund of $1 million. At the end of fiscal
year 1991, there was a surplus in the general fund of $1.4 million. New Jersey
closed its fiscal year 1992 with a surplus of $760.8 million and fiscal year
1993 with a surplus of $937.4 million. It is estimated that New Jersey closed
its fiscal year 1994 with a surplus of $926.0 million and fiscal year 1995
with a surplus of $569 million.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes (consisting
of $1.5 billion in sales and use taxes and $1.3 billion in income taxes), the
biggest tax hike in New Jersey history. There can be no assurance that
receipts and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the increase
in the State's sales and use tax rate from 6% to 7% and the elimination of
exemptions for certain products and services not previously subject to the
tax, such as telephone calls, paper products (which has since been
reinstated), soaps and detergents, janitorial services, alcoholic beverages
and cigarettes. At the time of enactment, it was projected that these taxes
would raise approximately $1.5 billion in additional revenue. Projections and
estimates of receipts from sales and use taxes, however, have been subject to
variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the form of
an increased state income tax on individuals. At the time of enactment, it was
projected that this increase would raise approximately $1.3 billion in
additional income taxes to fund a new school aid formula, a new homestead
rebate program and state assumption of welfare and social services costs.
Projections and estimates of receipts from income taxes, however, have also
been subject to variance in recent fiscal years. Under the legislation, income
tax rates increased from their previous range of 2% to 3.5% to a new range of
2% to 7%, with the higher rates applying to married couples with incomes
exceeding $70,000 who file joint returns, and to individuals filing single
returns with incomes of more than $35,000.
The Florio administration had contended that the income tax package will help
reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation the State will assume
approximately $289 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition,
under the new formula for funding school aid, an extra $1.1 billion was
proposed to be sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased from 7%
to 6%. Effective January 1, 1994, an across-the-board 5% reduction in the
income tax rates was enacted and effective January 1, 1995 further reductions
ranging from 1% up to 10% in income tax rates took effect. Governor Whitman
recently signed into law further reductions up to 15% for some taxpayers
effective January 1, 1996, completing her campaign promise to reduce income
taxes by up to 30% for most taxpayers within three years.
On June 28, 1996, Governor Whitman signed the New Jersey Legislature's $16.5
billion budget for Fiscal Year 1997. The balanced budget, which includes $550
million in surplus, is slightly less than the 1996 budget. Whether the State
can achieve a balanced budget depends on its ability to enact and implement
expenditure reductions and to collect the estimated tax revenues.
Litigation. The State is a party in numerous legal proceedings pertaining to
matters incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are cases challenging the following: the
funding of teachers' pension funds, the adequacy of medicaid reimbursement for
hospital services, the hospital assessment authorized by the Health Care
Reform Act of 1992, various provisions, and the constitutionality of the Fair
Automobile Insurance Reform Act of 1990, the State's role in a consent order
concerning the construction of a resource facility in Passaic County, actions
taken by the New Jersey Bureau of Securities against an individual, the
State's actions regarding alleged chromium contamination of State-owned
property in Hudson County, the issuance of emergency redirection orders and a
draft permit by the Department of Environmental Protection and Energy, refusal
of the State to share with Camden County federal funding the State recently
received for disproportionate share hospital payments made to county
psychiatric facilities, and the constitutionality of annual A-901 hazardous
and solid waste licensure renewal fees collected by the Department of
Environmental Protection and Energy. Adverse judgments in these and other
matters could have the potential for either a significant loss of revenue or a
significant unanticipated expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The State is unable to estimate its exposure for
these claims.
Debt Ratings. For many years, both Moody's Investors Service, Inc. and
Standard and Poor's Corporation rated New Jersey general obligation bonds "
Aaa" and "AAA" , respectively. On July 3, 1991, however, Standard
and Poor's Corporation downgraded New Jersey general obligation bonds to "
AA+." On June 4, 1992, Standard and Poor's Corporation placed New Jersey
general obligation bonds on CreditWatch with negative implications, citing as
its principal reason for its caution the unexpected denial by the federal
government of New Jersey's request for $450 million in retroactive Medicaid
payments for psychiatric hospitals. These funds were critical to closing a $1
billion gap in the State's $15 billion budget for fiscal year 1992 which ended
on June 30, 1992. Under New Jersey state law, the gap in the budget was
required to be closed before the new budget year began on July 1, 1992.
Standard and Poor's suggested the State could close fiscal 1992's budget gap
and help fill fiscal 1993's hole by a reversion of $700 million of pension
contributions to its general fund under a proposal to change the way the State
calculates its pension liability.
On July 6, 1992, Standard and Poor's Corporation reaffirmed its "AA+"
rating for New Jersey general obligation bonds and removed the debt from its
CreditWatch list, although it stated that New Jersey's long-term financial
outlook was negative. Standard and Poor's Corporation was concerned that the
State was entering fiscal 1993 with only a $26 million surplus and remained
concerned about whether the State economy would recover quickly enough to meet
lawmakers' revenue projections. It also remained concerned about the recent
federal ruling leaving in doubt how much the State was due in retroactive
Medicaid reimbursements and a ruling by a federal judge, now on appeal, of the
State's method for paying for uninsured hospital patients. However, on July
27, 1994, Standard and Poor's announced that it was changing the State's
outlook from negative to stable due to a brightening of the State's prospects
as a result of Governor Whitman's effort to trim spending and cut taxes,
coupled with an improving economy. Standard and Poor's reaffirmed its "
AA+" rating at the same time.
On August 24, 1992, Moody's Investors Service, Inc. downgraded New Jersey
general obligation bonds to "Aa1," stating that the reduction
reflected a developing pattern of reliance on nonrecurring measures to achieve
budgetary balance, four years of financial operations marked by revenue
shortfalls and operating deficits, and the likelihood that serious financial
pressures will persist. On August 5, 1994, Moody's reaffirmed its "Aa1"
rating, citing on the positive side New Jersey's broad-based economy, high
income levels, history of maintaining a positive financial position and
moderate (albeit rising) debt ratios, and on the negative side, a continued
reliance on one-time revenue and a dependence on pension-related savings to
achieve budgetary balance.
Tax Status. For a discussion of the Federal tax status of income earned on New
Jersey IM-IT Trust Units, see "Federal Tax Status" in Part II of this
Prospectus.
In the opinion of Pitney, Hardin, Kipp & Szuch, special counsel to the Fund
for New Jersey tax matters, under existing law:
(1)The New Jersey IM-IT Trust will be recognized as a trust and not an
association taxable as a corporation. The New Jersey IM-IT Trust will not be
subject to the New Jersey Corporation Business Tax or the New Jersey
Corporation Income Tax.
(2)With respect to the non-corporate Unitholders who are residents of New
Jersey, the income of the New Jersey IM-IT Trust which is allocable to each
such Unitholder will be treated as the income of such Unitholder under the New
Jersey Gross Income Tax. Interest on the underlying Bonds which would be
exempt from New Jersey Gross Income Tax if directly received by such
Unitholder will retain its status as tax-exempt interest when received by the
New Jersey IM-IT Trust and distributed to such Unitholder. Any proceeds paid
under the insurance policy issued to the Trustee of the New Jersey IM-IT Trust
with respect to the Bonds or under individual policies obtained by issuers of
Bonds which represent maturing interest on defaulted obligations held by the
Trustee will be exempt from New Jersey Gross Income Tax if, and to the same
extent as, such interest would have been so exempt if paid by the issuer of
the defaulted obligations.
(3)A non-corporate Unitholder will not be subject to the New Jersey Gross
Income Tax on any gain realized either when the New Jersey IM-IT Trust
disposes of a Bond (whether by sale, exchange, redemption, or payment at
maturity), when the Unitholder redeems or sells his Units or upon payment of
any proceeds under the insurance policy issued to the Trustee of the New
Jersey IM-IT Trust with respect to the Bonds or under individual policies
obtained by issuers of Bonds which represent maturing principal on defaulted
obligations held by the Trustee. Any loss realized on such disposition may not
be utilized to offset gains realized by such Unitholder on the disposition of
assets the gain on which is subject to the New Jersey Gross Income Tax.
(4)Units of the New Jersey IM-IT Trust may be taxable on the death of a
Unitholder under the New Jersey Transfer Inheritance Tax Law or the New Jersey
Estate Tax Law.
(5)If a Unitholder is a corporation subject to the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, interest from the Bonds in
the New Jersey IM-IT Trust which is allocable to such corporation will be
includable in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, less any interest expense
incurred to carry such investment to the extent such interest expense has not
been deducted in computing Federal taxable income. Net gains derived by such
corporation on the disposition of the Bonds by the New Jersey IM-IT Trust or
on the disposition of its Units will be included in its entire net income for
purposes of the New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax. Any proceeds paid under the insurance policy issued to the Trustee
of the New Jersey IM-IT Trust with respect to the Bonds or under individual
policies obtained by issuers of Bonds which represent maturing interest or
maturing principal on defaulted obligations held by the Trustee will be
included in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax if, and to the same extent
as, such interest or proceeds would have been so included if paid by the
issuer of the defaulted obligations.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 53.51 $ 53.51
Less: Estimated Annual Expense per Unit <F2>...................... $ 2.31 $ 1.82
Less: Annual Premium on Portfolio Insurance per Unit.............. -- --
Estimated Net Annual Interest Income per Unit..................... $ 51.20 $ 51.69
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 51.20 $ 51.69
Divided by 12 and 2, respectively................................. $ 4.27 $ 25.85
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .14223 $ .14358
Estimated Current Return Based on Public Offering Price <F1><F3>... 5.12% 5.17%
Estimated Long-Term Return <F3>.................................... 5.15% 5.20%
Estimated Initial Monthly Distribution (October 1996).............. $ 5.12
Estimated Initial Semi-annual Distribution (January 1997).......... $ 18.09
Estimated Normal Distribution per Unit <F3>........................ $ 4.27 $ 25.85
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1><F4>... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
New Jersey IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates.... TENTH day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates.............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
January and July
- ----------
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.22
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $53.73. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.53 and $2.04 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns" in Part II of
this Prospectus.
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F4>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,556. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,776.
</TABLE>
<TABLE>
NEW JERSEY INSURED MUNICIPALS INCOME TRUST
SERIES 114 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To New
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption Jersey IM-IT
Principal<F1> Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- ----------------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 125,000 Board of Education of the Southern Regional High School
District, County of Ocean, New Jersey, Revenue School Bonds
(MBIA Insured)** #5.50% Due 9/1/2015........................... AAA 2006 @ 100 $ 122,434
350,000 Board of Education of the Township of Tabernacle in the County
of Burlington, New Jersey, General Obligation-Unlimited Tax
School Bonds (Bank Qualified) FGIC Insured** 5.625% Due
9/1/2019 ........................................................ AAA 2006 @ 100 348,407
500,000 New Jersey Educational Facilities Authority, Revenue Bonds,
Trenton State College Issue, Series 1996A (MBIA Insured) #5.10% 2006 @ 101
Due 7/1/2021 .................................................... AAA 2017 @ 100 S.F. 459,770
115,000 Board of Education of the Township of Pohatcong in the County of
Warren, New Jersey, Unlimited Tax-General Obligation School
Bonds (FSA Insured) 5.95% Due 7/15/2021 ....................... AAA 2006 @ 102 117,525
460,000 Branchburg Township, New Jersey, School District General
Obligation-Unlimited Tax Bonds (FGIC Insured) #5.625% Due
2/1/2023 ........................................................ AAA 2007 @ 100 457,590
500,000 New Jersey Economic Development Authority Revenue Bonds (Clara
Maass Health System Obligated Group Project) Series 1996 (FSA 2006 @ 102
Insured) #5.00% Due 7/1/2025 .................................. AAA 2017 @ 100 S.F. 448,715
500,000 Delaware River Port Authority, Pennsylvania and New Jersey, 2006 @ 102
Revenue Bonds, Series 1995 (FGIC Insured) #5.50% Due 1/1/2026 . AAA 2017 @ 100 S.F. 484,835
500,000 Port Authority of New York and New Jersey, Consolidated Revenue 2005 @ 101
Bonds, One Hundredth Series (MBIA Insured) #5.75% Due 6/15/2030 AAA 2021 @ 100 S.F. 499,345
$ 3,050,000 $ 2,938,621
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
NEW YORK IM-IT TRUST
- --------------------------------------------------------------------------
General. The New York IM-IT Trust consists of 8 issues of Securities. None of
the Bonds in the New York IM-IT Trust are general obligations of the
governmental entities issuing them or are backed by the taxing power thereof.
All of the issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New York IM-IT Trust) as follows: Higher Education, 3 (33%); Health
Care, 2 (25%); Transportation, 1 (18%); Public Building, 1 (16%) and Water and
Sewer, 1 (8%). No Bond issue has received a provisional rating.
Risk Factors. A resident of New York State (or New York City) will be subject
to New York State (or New York City) personal income tax with respect to gains
realized when New York Obligations held in the New York IM-IT Trust are sold,
redeemed or paid at maturity or when his Units are sold or redeemed, such gain
will equal the proceeds of sale, redemption or payment less the tax basis of
the New York Obligation or Unit (adjusted to reflect (a) the amortization of
premium or discount, if any, on New York Obligations held in the Trust, (b)
accrued original issue discount, with respect to each New York Obligation
which, at the time the New York Obligation was issued had original issue
discount, and (c) the deposit of New York Obligations with accrued interest in
the Trust after the Unitholder's settlement date).
Interest or gain from the New York IM-IT Trust derived by a Unitholder who is
not a resident of New York State (or New York City) will not be subject to New
York State (or New York City) personal income tax, unless the Units are
property employed in a business, trade, profession or occupation carried on in
New York State (or New York City).
Amounts paid on defaulted New York Obligations held by the Trustee under
policies of insurance issued with respect to such New York Obligations will be
excludable from income for New York State and New York City income tax
purposes, if and to the same extent as, such interest would have been
excludable if paid by the respective issuer.
For purposes of the New York State and New York City franchise tax on
corporations, Unitholders which are subject to such tax will be required to
include in their entire net income any interest or gains distributed to them
even though distributed in respect of New York obligations.
If borrowed funds are used to purchase Units in the Trust, all (or part) of
the interest on such indebtedness will not be deductible for New York State
and New York City tax purposes. The purchase of Units may be considered to
have been made with borrowed funds even though such funds are not directly
traceable to the purchase of Units in any New York Trust.
The Portfolio of the New York IM-IT Trust includes obligations issued by New
York State (the "State" ), by its various public bodies (the "
Agencies" ), and/or by other entities located within the State, including
the City of New York (the "City" ).
Some of the more significant events relating to the financial situation in New
York are summarized below. This section provides only a brief summary of the
complex factors affecting the financial situation in New York and is based in
part on Official Statements issued by, and on other information reported by
the State, the City and the Agencies in connection with the issuance of their
respective securities.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of New York Municipal
Obligations held in the portfolio of the Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State economy has grown more slowly than that of the
nation as a whole, gradually eroding the State's relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high state and local tax burden
relative to other states. The burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
A national recession commenced in mid-1990. The downturn continued throughout
the State's 1990-91 fiscal year and was followed by a period of weak economic
growth during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to grow faster
than 1992, but still at a very moderate rate, as compared to other recoveries.
The national recession has been more severe in the State because of factors
such as a significant retrenchment in the financial services industry,
cutbacks in defense spending, and an overbuilt real estate market.
1993-94 Fiscal Year. On April 5, 1993, the State Legislature approved a $32.08
billion budget. Following enactment of the budget the 1993-94 State Financial
Plan was formulated on April 16, 1993. This Plan projects General Fund
receipts and transfers from other funds at $32.367 billion and disbursements
and transfers to other funds at $32.300 billion. In comparison to the
Governor's recommended Executive Budget for the 1993-94 fiscal year, as
revised on February 18, 1993, the 1993-94 State Financial Plan reflects
increases in both receipts and disbursements in the General Fund of $811
million.
While a portion of the increased receipts was the result of a $487 million
increase in the State's 1992-93 positive year-end margin at March 31, 1993 to
$671 million, the balance of such increased receipts is based upon (i) a
projected $269 million increase in receipts resulting from improved 1992-93
results and the expectation of an improving economy, (ii) projected additional
payments of $200 million from the Federal government as reimbursements for
indigent medical care, (iii) the early payment of $50 million of personal tax
returns in 1992-93 which otherwise would have been paid in 1993-94; offset by
(iv) the State Legislature's failure to enact $195 million of additional
revenue-raising recommendations proposed by the Governor. There can be no
assurances that all of the projected receipts referred to above will be
received.
Despite the $811 million increase in disbursements included in the 1993-94
State Financial Plan, a reduction in aid to some local government units can be
expected. To offset a portion of such reductions, the 1993-94 State Financial
Plan contains a package of mandate relief, cost containment and other
proposals to reduce the costs of many programs for which local governments
provide funding. There can be no assurance, however, that localities that
suffer cuts will not be adversely affected, leading to further requests for
State financial assistance.
There can be no assurance that the State will not face substantial potential
budget gaps in the future resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions
to align recurring receipts and disbursements.
1992-93 Fiscal Year. Before giving effect to a 1992-93 year-end deposit to the
refund reserve account of $671 million, General Fund receipts in 1992-93 would
have been $716 million higher than originally projected. This year-end deposit
effectively reduced 1992-93 receipts by $671 million and made those receipts
available for 1993-94.
The State's favorable performance primarily resulted from income tax
collections that were $700 million higher than projected which reflected both
stronger economic activity and tax-induced one-time acceleration of income
into 1992. In other areas larger than projected business tax collections and
unbudgeted receipts offset the loss of $200 million of anticipated Federal
reimbursement and losses of, or shortfalls in, other projected revenue
sources.
For 1992-93, disbursements and transfers to other funds (including the deposit
to the refund reserve account discussed above) totalled $30.829 billion, an
increase of $45 million above projections in April 1992.
Fiscal year 1992-93 was the first time in four years that the State did not
incur a cash-basis operating deficit in the General Fund requiring the
issuance of deficit notes or other bonds, spending cuts or other revenue
raising measures.
Indebtedness. As of March 31, 1993, the total amount of long-term State
general obligation debt authorized but unissued stood at $2.4 billion. As of
the same date, the State had approximately $5.4 billion in general obligation
bonds. The State issued $850 million in tax and revenue anticipation notes
("TRANS" ) on April 28, 1993. The State does not project the need to
issue additional TRANS during the State's 1993-94 fiscal year.
The State projects that its borrowings for capital purposes during the State's
1993-94 fiscal year will consist of $460 million in general obligation bonds
and $140 million in new commercial paper issuances. In addition, the State
expects to issue $140 million in bonds for the purpose of redeeming
outstanding bond anticipation notes. The Legislature has authorized the
issuance of up to $85 million in certificates of participation during the
State's 1993-94 fiscal year for personal and real property acquisitions during
the State's 1993-94 fiscal year. The projection of the State regarding its
borrowings for the 1993-94 fiscal year may change if actual receipts fall
short of State projections or if other circumstances require.
In June 1990, legislation was enacted creating the "New York Local
Government Assistance Corporation" ("LGAC" ), a public benefit
corporation empowered to issue long-term obligations to fund certain payments
to local governments traditionally funded through the State's annual seasonal
borrowing. To date, LGAC has issued its bonds to provide net proceeds of $3.28
billion. LGAC has been authorized to issue additional bonds to provide net
proceeds of $703 million during the State's 1993-94 fiscal year.
Ratings. The $850 million in TRANS issued by the State in April 1993 were
rated SP-1-Plus by S&P on April 26, 1993, and MIG-1 by Moody's on April 23,
1993, which represents the highest ratings given by such agencies and the
first time the State's TRANS have received these ratings since its May 1989
TRANS issuance. Both agencies cited the State's improved fiscal position as a
significant factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at A on April 23,
1993, and S&P's rating stood at A- with a stable outlook on April 26, 1993, an
improvement from S&P's negative outlook prior to April 1993. Previously,
Moody's lowered its rating to A on June 6, 1990, its rating having been A1
since May 27, 1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992, AA- from August
1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's, in confirming its rating of the State's general obligation bonds, and
S&P, in improving its outlook on such bonds from negative to stable, noted the
State's improved fiscal condition and reasonable revenue assumptions contained
in the 1993-94 State budget.
The City accounts for approximately 41% of the State's population and personal
income, and the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other
actions, the State Legislature (i) created MAC to assist with long-term
financing for the City's short-term debt and other cash requirements and (ii)
created the State Financial Control Board (the "Control Board" ) to
review and approve the City's budgets and City four-year financial plans (the
financial plans also apply to certain City-related public agencies (the "
Covered Organizations" ).
In February 1975, the New York State Urban Development Corporation ("
UDC" ), which had approximately $1 billion of outstanding debt, defaulted
on certain of its short-term notes. Shortly after the UDC default, the City
entered a period of financial crisis. Both the State Legislature and the
United States Congress enacted legislation in response to this crisis. During
1975, the State Legislature (i) created MAC to assist with long-term financing
for the City's short-term debt and other cash requirements and (ii) created
the State Financial Control Board (the "Control Board" ) to review and
approve the City's budgets and City four-year financial plans (the financial
plans also apply to certain City-related public agencies (the "Covered
Organizations" )).
Over the past three years, the rate of economic growth in the City has slowed
substantially, and the City's economy is currently in recession. The City
projects, and its current four-year financial plan assumes, a recovery early
in the 1993 calendar year. The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial plan. The
City Comptroller has issued reports concluding that the recession of the
City's economy will be more severe and last longer than is assumed in the
financial plan.
Fiscal Year 1993 and 1993-1996 Financial Plan. The City's 1993 fiscal year
results are projected to be balanced in accordance with generally accepted
accounting principles ("GAAP" ). The City was required to close
substantial budget gaps in its 1990, 1991 and 1992 fiscal years in order to
maintain balanced operating results.
The City's modified Financial Plan dated February 9, 1993 covering fiscal
years 1993-1996 projects budget gaps for 1994 through 1996. The Office of the
State Deputy Controller for the City of New York has estimated that under the
modified Financial Plan budget gaps will be $102 million for fiscal year 1994,
$196 million for fiscal year 1995 and $354 million for fiscal year 1996,
primarily due to anticipated higher spending on labor costs.
However, the City's modified Plan is dependent upon a gap-closing program,
certain elements of which the staff of Control Board identified on March 25,
1993 to be at risk due to projected levels of State and Federal aid and
revenue and expenditures estimates which may not be achievable. The Control
Board indicated that the City's modified Financial Plan does not make progress
towards establishing a balanced budget process. The Control Board's report
identified budget gap risks of $1.0 billion, $1.9 billion, $2.3 billion and
$2.6 billion in fiscal years 1994 through 1997, respectively.
On June 3, 1993, the Mayor announced that State and federal aid for Fiscal
Year 1993-1994 would be $280 million less than projected and that in order to
balance the City's budget $176 million of previously announced contingent
budget cuts would be imposed. The Mayor indicated that further savings would
entail serious reductions in services. The State Comptroller on June 14, 1993
criticized efforts by the Mayor and City Council to balance the City's budget
which rely primarily on one-shot revenues. The Comptroller added that the
City's budget should be based on "recurring revenues that fund recurring
expenditures." Given the foregoing factors, there can be no assurance that
the City will continue to maintain a balanced budget, or that it can maintain
a balanced budget without additional tax or other revenue increases or
reductions in City services, which could adversely affect the City's economic
base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to
submit its financial plans to review bodies, including the Control Board. If
the City were to experience certain adverse financial circumstances, including
the occurrence or the substantial likelihood and imminence of the occurrence
of an annual operating deficit of more than $100 million or the loss of access
to the public credit markets to satisfy the City's capital and seasonal
financial requirements, the Control Board would be required by State law to
exercise certain powers, including prior approval of City financial plans,
proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. As a result of the national and
regional economic recession, the State's projections of tax revenues for its
1991 and 1992 fiscal years were substantially reduced. For its 1993 fiscal
year, the State, before taking any remedial action reflected in the State
budget enacted by the State Legislature on April 2, 1992 reported a potential
budget deficit of $4.8 billion. If the State experiences revenue shortfalls or
spending increases beyond its projections during its 1993 fiscal year or
subsequent years, such developments could also result in reductions in
projected State aid to the City. In addition, there can be no assurance that
State budgets in future fiscal years will be adopted by the April 1 statutory
deadline and that there will not be adverse effects on the City's cash flow
and additional City expenditures as a result of such delays.
The City's projections set forth in its financial plan are based on various
assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and
contingencies include the timing of any regional and local economic recovery,
the absence of wage increases in excess of the increases assumed in its
financial plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets, levels of
education expenditures as may be required by State law, adoption of future
City budgets by the New York City Council, and approval by the Governor or the
State Legislature and the cooperation of MAC with respect to various other
actions proposed in such financial plan.
The City's ability to maintain a balanced operating budget is dependent on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional
expenditure reductions and revenue sources to achieve balanced operating
budgets for fiscal years 1994 and thereafter. Any such proposed expenditure
reductions will be difficult to implement because of their size and the
substantial expenditure reductions already imposed on City operations in the
past two years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
financing program for fiscal years 1993 through 1996 contemplates issuance of
$15.7 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In
addition, the City issues revenue and tax anticipation notes to finance its
seasonal working capital requirements. The terms and success of projected
public sales of City general obligation bonds and notes will be subject to
prevailing market conditions at the time of the sale, and no assurance can be
given that the credit markets will absorb the projected amounts of public bond
and note sales. In addition, future developments concerning the City and
public discussion of such developments, the City's future financial needs and
other issues may affect the market for outstanding City general obligation
bonds and notes. If the City were unable to sell its general obligation bonds
and notes, it would be prevented from meeting its planned operating and
capital expenditures.
The City Comptroller, the staff of the Control Board, the Office of the State
Deputy Comptroller for the City of New York (the "OSDC" ) and other
agencies and public officials have issued reports and made public statements
which, among other things, state that projected revenues may be less and
future expenditures may be greater than those forecast in the financial plan.
In addition, the Control Board and other agencies have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet
the costs of its expenditure increases and to provide necessary services. It
is reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
Fiscal Years 1990, 1991 and 1992. The City achieved balanced operating results
as reported in accordance with GAAP for the 1992 fiscal year. During the 1990
and 1991 fiscal years, the City implemented various actions to offset a
projected budget deficit of $3.2 billion for the 1991 fiscal year, which
resulted from declines in City revenue sources and increased public assistance
needs due to the recession. Such actions included $822 million of tax
increases and substantial expenditure reductions.
The quarterly modification to the City's financial plan submitted to the
Control Board on May 7, 1992 (the "1992 Modification" ) projected a
balanced budget in accordance with GAAP for the 1992 fiscal year after taking
into account a discretionary transfer of $455 million to the 1993 fiscal year
as the result of a 1992 fiscal year surplus. In order to achieve a balanced
budget for the 1992 fiscal year, during the 1991 fiscal year, the City
proposed various actions for the 1992 fiscal year to close a projected gap of
$3.3 billion in the 1992 fiscal year.
On November 19, 1992, the City submitted to the Control Board the Financial
Plan for the 1993 through 1996 fiscal years, which is a modification to a
financial plan submitted to the Control Board on June 11, 1992 (the "June
Financial Plan" ), and which relates to the City, the Board of Education
("BOE" ) and the City University of New York ("CUNY" ). The
1993-1996 Financial Plan projects revenues and expenditures of $29.9 billion
each for the 1993 fiscal year balanced in accordance with GAAP.
During the 1992 fiscal year, the City proposed various actions to close a
previously projected gap of approximately $1.2 billion for the 1993 fiscal
year. The gap-closing actions for the 1993 fiscal year proposed during the
1992 fiscal year and outlined in the City's June Financial Plan included $489
million of discretionary transfers from the 1992 fiscal year. The 1993-1996
City Financial Plan includes additional gap-closing actions to offset an
additional potential $81 million budget gap.
The 1993-1996 Financial Plan also sets forth projections and outlines a
proposed gap-closing program for the 1994 through 1996 fiscal years to close
projected budget gaps of $1.7 billion, $2.0 billion and $2.6 billion,
respectively, in the 1994 through 1996 fiscal years. On February 9, 1993, the
City issued a modification to the 1993-1996 Financial Plan (the "February
Modification" ). The February Modification projects budget gaps for fiscal
years 1994, 1995 and 1996 of $2.1 billion, $3.1 billion and $3.8 billion,
respectively.
Various actions proposed in the 1993-1996 Financial Plan are subject to
approval by the Governor and approval by the State Legislature, and the
proposed increase in Federal aid is subject to approval by Congress and the
President. The State Legislature has in the past failed to approve certain
proposals similar to those that the 1993-1996 Financial Plan assumes will be
approved by the State Legislature during the 1993 fiscal year. If these
actions cannot be implemented, the City will be required to take other actions
to decrease expenditures or increase revenues to maintain a balanced financial
plan.
On March 9, 1993, OSDC issued a report on the February Modification. The
report expressed concern that the budget gaps projected for fiscal years 1994
through 1996 are the largest the City has faced at this point in the financial
planning cycle in at least a decade, and concluded that the February
Modification represented a step backward in the City's efforts to bring
recurring revenues into line with recurring expenditures.
The City is a defendant in a significant number of lawsuits. Such litigation
includes, but is not limited to, actions commenced and claims asserted against
the City arising out of alleged constitutional violations, torts, breaches of
contracts, and other violations of law and condemnation proceedings. While the
ultimate outcome and fiscal impact, if any, on the proceedings and claims are
not currently predictable, adverse determinations in certain of them might
have a material adverse effect upon the City's ability to carry out its
financial plan. As of June 30, 1992, legal claims in excess of $341 billion
were outstanding against the City for which the City estimated its potential
future liability to be $2.3 billion.
As of the date of this prospectus, Moody's rating of the City's general
obligation bonds stood at Baa1 and S&P's rating stood at A-. On February 11,
1991, Moody's had lowered its rating from A.
On March 30, 1993, in confirming its Baa1 rating, Moody's noted that:
The financial plan for fiscal year 1994 and beyond shows an ongoing imbalance
between the City's expenditures and revenues. The key indication of this
structural imbalance is not necessarily the presence of sizable out-year
budget gaps, but the recurring use of one-shot actions to close gaps.
One-shots constitute a significant share of the proposed gap-closing program
for fiscal year 1994, and they represent an even larger share of those
measures which the City seems reasonably certain to attain. Several major
elements of the program, including certain state actions, federal counter
cyclical aid and part of the city's tax package, remain uncertain. However,
the gap closing plan may be substantially altered when the executive budget is
offered later this spring.
On March 30, 1993, S&P affirmed its A- rating with a negative outlook, stating
that:
The City's key credit factors are marked by a high and growing debt burden,
and taxation levels that are relatively high, but stable. The City's economy
is broad-based and diverse, but currently is in prolonged recession, with slow
growth prospects for the foreseeable future.
The rating outlook is negative, reflecting the continued fiscal pressure
facing the City, driven by continued weakness in the local economy, rising
spending pressures for education and labor costs of city employees, and
increasing costs associated with rising debt for capital construction and
repair.
The current financial plan for the City assumes substantial increases in aid
from national and state governments. Maintenance of the current rating, and
stabilization of the rating outlook, will depend on the City's success in
realizing budgetary aid from these governments, or replacing those revenues
with ongoing revenue-raising measures or spending reductions under the City's
control. However, increased reliance on non-recurring budget balancing
measures that would support current spending, but defer budgetary gaps to
future years, would be viewed by S&P as detrimental to New York City's
single-'A-' rating.
Previously, Moody's had raised its rating to A in May, 1988, to Baa1 in
December, 1985, to Baa in November, 1983 and to Ba1 in November, 1981. S&P had
raised its rating to A- in November, 1987, to BBB+ in July, 1985 and to BBB in
March, 1981.
On May 9, 1990, Moody's revised downward its rating on outstanding City
revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
Notes then being sold MIG-2. On April 30, 1991 Moody's confirmed its MIG-2
rating for the outstanding revenue anticipation notes and for the $1.25
billion in notes then being sold. On April 29, 1991, S&P revised downward its
rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1992, the City and MAC had, respectively, $20.3 billion and
$4.7 billion of outstanding net long-term indebtedness.
Certain Agencies of the State have faced substantial financial difficulties
which could adversely affect the ability of such Agencies to make payments of
interest on, and principal amounts of, their respective bonds. The
difficulties have in certain instances caused the State (under so-called "
moral obligation" provisions which are non-binding statutory provisions
for State appropriations to maintain various debt service reserve funds) to
appropriate funds on behalf of the Agencies. Moreover, it is expected that the
problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse effect on investor confidence
in, and therefore the market price of, obligations of the defaulting Agencies.
In addition, any default in payment on any general obligation of any Agency
whose bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal
guarantees of City and MAC obligations and could thus jeopardize the City's
long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen Agencies
that each had outstanding debt of $100 million or more. These eighteen
Agencies had an aggregate of $62.2 billion of outstanding debt, including
refunding bonds, of which the State was obligated under lease-purchase,
contractual obligation or moral obligation provisions on $25.3 billion.
The State is a defendant in numerous legal proceedings pertaining to matters
incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are a number of cases challenging the
constitutionality or the adequacy and effectiveness of a variety of
significant social welfare programs primarily involving the State's mental
hygiene programs. Adverse judgments in these matters generally could result in
injunctive relief coupled with prospective changes in patient care which could
require substantial increased financing of the litigated programs in the
future.
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the Indians in
violation of various treaties and agreements during the eighteenth and
nineteenth centuries. The claimants seek recovery of approximately six million
acres of land as well as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993 referred to a Special Master for
determination of damages in an action by the State of Delaware to recover
certain unclaimed dividends, interest and other distributions made by issuers
of securities held by New York based-brokers incorporated in Delaware. (State
of Delaware v. State of New York.) The State had taken such unclaimed property
under its Abandoned Property Law. The State expects that it may pay a
significant amount in damages during fiscal year 1993-94 but it has indicated
that it has sufficient funds on hand to pay any such award, including funds
held in contingency reserves. The State's 1993-94 Financial Plan includes the
establishment of a $100 million contingency reserve fund which would be
available to fund such an award which some reports have estimated at $100-$800
million.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz 1993"
), petitioners have challenged the constitutionality of mass transportation
bonding programs of the New York State Thruway Authority and the Metropolitan
Transportation Authority. On May 24, 1993, the Supreme Court, Albany County,
temporarily enjoined the State from implementing those bonding programs. In
previous actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation and the
New York Local Government Assistance Corporation. While there have been no
decisions on the merits in such previous actions, by an opinion dated May 11,
1993, the New York Court of Appeals held in a proceeding commenced on April
29, 1991 in the Supreme Court, Albany County (Schulz v. State of New York),
that petitioners had standing as voters under the State Constitution to bring
such action.
Petitioners in Schulz 1993 have asserted that issuance of bonds by the two
Authorities is subject to approval by statewide referendum. At this time there
can be no forecast of the likelihood of success on the merits by the
petitioners, but a decision upholding this constitutional challenge could
restrict and limit the ability of the State and its instrumentalities to
borrow funds in the future. The State has not indicated that the temporary
injunction issued by the Supreme Court in this action will have any immediate
impact on its financial condition or interfere with projects requiring
immediate action.
Adverse developments in the foregoing proceedings or new proceedings could
adversely affect the financial condition of the State in the future.
Certain localities in addition to New York City could have financial problems
leading to requests for additional State assistance. Both the Revised
1992-1993 State Financial Plan and the recommended 1993-94 State Financial
Plan includes a significant reduction in State aid to localities in such
programs as revenue sharing and aid to education from projected base-line
growth in such programs. It is expected that such reductions will result in
the need for localities to reduce their spending or increase their revenues.
The potential impact on the State of such actions by localities is not
included in projections of State receipts and expenditures in the State's
1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers" )
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board" ) by the State in 1984. The Yonkers Board
is charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the State Legislature to assist Yonkers could result
in allocation of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. In 1991, the total indebtedness of all localities in the
State was approximately $31.6 billion, of which $16.8 billion was debt of New
York City (excluding $6.7 billion in MAC debt). State law requires the
Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City authorized by State law to
issue debt to finance deficits during the period that such deficit financing
is outstanding. Fifteen localities had outstanding indebtedness for state
financing at the close of their fiscal year ending in 1991. In 1992, an
unusually large number of local government units requested authorization for
deficit financings. According to the Comptroller, ten local government units
have been authorized to issue deficit financing in the aggregate amount of
$131.1 million.
Certain proposed Federal expenditure reductions could reduce, or in some cases
eliminate, Federal funding of some local programs and accordingly might impose
substantial increased expenditure requirements on affected localities. If the
State, New York City or any of the Agencies were to suffer serious financial
difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State, including notes or bonds in the New York IM-IT Trust, could be
adversely affected. Localities also face anticipated and potential problems
resulting from certain pending litigation, judicial decisions, and long-range
economic trends. The longer-range potential problems of declining urban
population, increasing expenditures, and other economic trends could adversely
affect localities and require increasing State assistance in the future.
Tax Status. For a discussion of the Federal tax status of income earned on New
York IM-IT Trust Units, see "Federal Tax Status" in Part II of this
Prospectus.
In the opinion of Kroll & Tract, special counsel to the Fund for New York tax
matters, under existing New York law:
The New York IM-IT Trust is not an association taxable as a corporation and
the income of the New York IM-IT Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York.
Individuals who reside in New York State or City will not be subject to State
and City tax on interest income which is exempt from Federal income tax under
section 103 of the Internal Revenue Code of 1986 and derived from obligations
of New York State or a political subdivision thereof, although they will be
subject to New York State and City tax with respect to any gains realized when
such obligations are sold, redeemed or paid at maturity or when any such Units
are sold or redeemed.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit..................... $ 54.61 $ 54.61
Less: Estimated Annual Expense per Unit <F1>.................. $ 2.38 $ 1.92
Less: Annual Premium on Portfolio Insurance per Unit.......... -- --
Estimated Net Annual Interest Income per Unit................. $ 52.23 $ 52.69
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit................. $ 52.23 $ 52.69
Divided by 12 and 2, respectively............................. $ 4.35 $ 26.35
Estimated Daily Rate of Net Interest Accrual per Unit.......... $ .14508 $ .14635
Estimated Current Return Based on Public Offering Price <F2>... 5.22% 5.27%
Estimated Long-Term Return <F2>................................ 5.26% 5.31%
Estimated Initial Monthly Distribution (October 1996).......... $ 5.22
Estimated Initial Semi-annual Distribution (November 1996)..... $ 9.66
Estimated Normal Distribution per Unit <F2>.................... $ 4.35 $ 26.35
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F3>...... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
New York IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates... TENTH day of the month as follows: monthly--each month; semi-annual--May and November
Distribution Dates............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
May and November
- ----------
<FN>
<F1>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F2>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus. These figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and expenses,
with changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F3>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,558. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,780.
</TABLE>
<TABLE>
NEW YORK INSURED MUNICIPALS INCOME TRUST
SERIES 136 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To New
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Redemption York IM-IT
Principal<F1> Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- ----------------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 250,000 New York State Dormitory Authority, City University System
Consolidated Revenue Bonds (City University Issue) Series 2003 @ 100
1993F (FGIC Insured) #5.00% Due 7/1/2020 ...................... AAA 2015 @ 100 S.F. $ 223,720
500,000 Dormitory Authority of the State of New York, Revenue Bonds
(Department of Education of the State of New York Issue) Series 2006 @ 102
1996 (CapMAC Insured) #5.75% Due 7/1/2021 ..................... AAA 2012 @ 100 S.F. 494,695
250,000 New York State Dormitory Authority, State University Educational
Facilities Revenue Bonds, Series 1993C (FGIC Insured) #5.40% 2004 @ 102
Due 5/15/2023 ................................................... AAA 2014 @ 100 S.F. 236,117
500,000 New York State Medical Care Facilities Finance Agency, Revenue
Bonds, Mental Health Services, Series 1993D (FSA Insured) 2003 @ 102
#5.25% Due 8/15/2023 ............................................ AAA 2014 @ 100 S.F. 461,410
500,000 Dormitory Authority of the State of New York, United Cerebral
Palsy of New York City, Inc., Insured Revenue Bonds, Series 2006 @ 102
1996 (MBIA Insured) #5.50% Due 7/1/2024 ........................ AAA 2017 @ 100 S.F. 483,950
555,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds (Grand Central Terminal) Series 2005 @ 101
1995-1 (FSA Insured) #5.70% Due 7/1/2024 ...................... AAA 2016 @ 100 S.F. 547,280
250,000 New York State Dormitory Authority, Revenue Bonds, St. Vincent
Hospital and Medical Center (AMBAC Indemnity Insured) #5.80%
Due 8/1/2025 .................................................... AAA 2005 @ 102 248,470
250,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series B (MBIA Insured) 2006 @ 101
#5.75% Due 6/15/2026 ........................................... AAA 2021 @ 100 S.F. 247,718
$ 3,055,000 $ 2,943,360
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
TENNESSEE IM-IT TRUST
- --------------------------------------------------------------------------
General. The Tennessee IM-IT Trust consists of 8 issues of Securities. Three
of the Bonds in the Tennessee IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Tennessee IM-IT Trust) as follows: General Obligations, 3 (30%); Health
Care, 2 (25%); Higher Education, 1 (17%); Water and Sewer, 1 (16%) and Retail
Electric/Gas, 1 (12%). No Bond issue has received a provisional rating.
Risk Factors. The following brief summary regarding the economy of Tennessee
is based upon information drawn from publicly available sources and is
included for the purpose of providing information about general economic
conditions that may or may not affect issuers of the Tennessee obligations.
The Sponsor has not independently verified any of the information contained in
such publicly available documents.
The State Constitution of Tennessee requires a balanced budget. No legal
authority exists for deficit spending from operating purposes beyond the end
of a fiscal year. Tennessee law permits tax anticipation borrowing but any
amount borrowed must be repaid during the fiscal year for which the borrowing
was done. Tennessee has not issued any debt for operating purposes during
recent years with the exception of some advances which were made from the
Federal Unemployment Trust Fund in 1984. No such advances are now outstanding
nor is borrowing of any type for operating purposes contemplated.
The State Constitution of Tennessee forbids the expenditure of the proceeds of
any debt obligation for a purpose other than the purpose for which it was
authorized by statute. Under State law, the term of bonds authorized and
issued cannot exceed the expected life of the projects being financed.
Furthermore, the amount of a debt obligation cannot exceed the amount
authorized by the General Assembly. The recommended State budget for Fiscal
Year 1994-95 is $12,570,380,800. State revenues are scheduled to be obtained
from taxes, each of which will generate a certain percentage of the total
revenues as follows: sales (54%); franchise and excise (12%); gasoline (11%);
gross receipts and privilege (4%); motor vehicle (3%); income and inheritance
(3%); insurance and banking (3%); tobacco, beer, and alcoholic beverages (2%)
and all other taxes (8%).
For Fiscal Year 1994-95, State revenues are scheduled to be allocated in the
following percentages: education (44%); health and social services (22%);
transportation (11%); law, safety and correction (9%); cities and counties
(8%); general government (3%); resources and regulation (2%) and business and
economic development (1%).
Overall, the economic indicators were positive for Tennessee for 1993. After a
slow start, inflation-adjusted personal income in Tennessee rebounded in the
second quarter, resulting in overall growth of 4.4% from the second quarter of
1992 to the second quarter of 1993. Tennessee's employment also grew in 1993,
although its growth was not as impressive as income growth. Third-quarter
statistics for 1993 show that Tennessee nonagricultural employment was 1.7%
above the same quarter in 1992. In 1994, the Tennessee economy continued to
expand. From December, 1993 to December, 1994 Tennessee's seasonally adjusted
employment grew from 2,395,100 people to 2,567,300 people, while its
unemployment rate decreased from 4.6% to 3.8% over that same period.
An increase in consumer spending is reflected in Tennessee taxable sales,
which grew 10.4% from the third quarter of 1992 to the third quarter of 1993.
Long-term average growth for taxable sales 8.5%, but the distinction between
this figure and the recent 10.4% figure is more substantial than first
appearances suggest because the long-term average includes some periods of
significantly higher inflation than the most resent quarters. Adjusted for
inflation, taxable sales grew by 7.5% from the third quarter of 1992 to the
third quarter of 1993, which is triple the long-term inflation-adjusted
average of 2.5%.
The largest contributor to Tennessee's employment growth is services,
accounting for 40.9% of the employment growth that occurred from the third
quarter of 1992 to the third quarter of 1993. While it is still the most
substantial source of employment growth for Tennessee, services has
historically grown at a higher rate. Similarly, the large trade sector is not
as dominant, contributing 27.8% of employment growth from the third quarter of
1992 to the third quarter of 1993. Another sector that has become less
influential on total employment growth in Tennessee is the finance, insurance,
and real estate industry, which contributed nothing to employment growth
during the year ending in the third quarter of 1993.
Tennessee's general obligation bonds are rated Aaa by Moody's and AA+ by
Standard & Poor's. Tennessee's smallest counties have Moody's lowest rating
due to these rural counties' limited economies that make them vulnerable to
economic downturns.
Tennessee is involved in certain legal proceedings that, if decided against
the State, may require the State to make significant future expenditures or
may substantially impair revenues. The Tennessee Supreme Court currently is
reviewing a case in which the lower court found that the Tennessee Department
of Revenue improperly defined non-business earnings for tax purposes. Although
this case involves only $925,000, its outcome could affect at least five other
cases and could have a detrimental impact to Tennessee's revenue base. If the
case is affirmed, Tennessee could lose an estimated $80 million to $100
million a year in corporate income taxes. The Tennessee Supreme Court also may
hear a similar case in which the lower court found that the taxpayer's partial
sale of business holdings resulted in taxable business income. A ruling in
favor of the taxpayer could result in a $10 million tax refund.
Two other tax related cases could also affect the State's financial condition.
A recently filed class-action suit seeks damages in excess of $25 million for
the allegedly illegal collection of sales taxes paid on extended warranty
contracts on motor vehicles. In addition, a coalition of more than a dozen
hospitals is considering a class-action suit to challenge the legality of
Tennessee's Medicaid service tax. Tennessee's hospitals currently pay
approximately $504 million dollars in special taxes.
The foregoing information does not purport to be a complete or exhaustive
description of all the conditions to which the issuers of Bonds in the
Tennessee IM-IT Trust are subject. Many factors including national economic,
social and environmental policies and conditions, which are not within the
control of the issuers of Bonds, could affect or could have an adverse impact
on the financial condition of the State and various agencies and political
subdivisions located in the State. Since certain Bonds in the Tennessee IM-IT
Trust (other than general obligation bonds issued by the State) are payable
from revenue derived from a specific source or authority, the impact of a
pronounced decline in the national economy or difficulties in significant
industries within the State could result in a decrease in the amount of
revenues realized from such source or by such authority and thus adversely
affect the ability of the respective issuers of the Bonds in the Tennessee
IM-IT Trust to pay the debt service requirements on the Bonds. Similarly, such
adverse economic developments could result in a decrease in tax revenues
realized by the State and thus could adversely affect the ability of the State
to pay the debt service requirements of any Tennessee general obligation bonds
in the Tennessee IM-IT Trust. The Sponsor is unable to predict whether or to
what extent such factors or other factors may affect the issuers of Bonds, the
market value or marketability of the Bonds or the ability of the respective
issuers of the Bonds acquired by the Tennessee IM-IT Trust to pay interest on
or principal of the Bonds.
Tax Status. For a discussion of the federal tax status of income earned on
Tennessee IM-IT Trust Units, see "Federal Tax Status" in Part II of
this Prospectus.
The assets of the Tennessee IM-IT Trust will consist of bonds issued by the
State of Tennessee (the "State" ) or any county or any municipality or
political subdivision thereof, including any agency, board, authority or
commission, the interest on which is exempt from the Hall Income Tax imposed
by the State of Tennessee ("Tennessee Bonds" ) or by the Commonwealth
of Puerto Rico (the "Puerto Rico Bonds" ) (collectively, the "
Bonds" ).
Under Tennessee law, a unit investment trust taxable as a grantor trust for
federal income tax purposes is entitled to special Tennessee State tax
treatment (as more fully described below) with respect to its proportionate
share of interest income received or accrued with respect to the Tennessee
Bonds. Tennessee law also provides an exemption for distributions made by a
unit investment trust or mutual fund that are attributable to "bonds or
securities of the United States government or any agency or instrumentality
thereof" ("U.S. Government, Agency or Instrumentality Bonds" ). If
it were determined that the Trust held assets other than Tennessee Bonds or
U.S. Government, Agency or Instrumentality Bonds, a proportionate share of
distributions from the Trust would be taxable to Unitholders for Tennessee
Income Tax purposes.
Further, this provision appears only to provide an exemption for distributions
that relate to interest income, distributions by the Trust that relate to
capital gains realized from the sale or redemption of Tennessee Bonds or U.S.
Government, Agency or Instrumentality Bonds are likely to be treated as
taxable dividends for purposes of the Hall Income Tax. However, capital gains
realized directly by a Unitholder when the Unitholder sells or redeems his
Unit will not be subject to the Hall Income Tax. The opinion set forth below
assumes that the interest on the Tennessee Bonds, if received directly by a
Unitholder, would be exempt from the Hall Income Tax under Tennessee State
law. This opinion does not address the taxation of persons other than
full-time residents of the State of Tennessee.
Because this provision only provides an exemption for distributions
attributable to interest on Tennessee Bonds or U.S. Government, Agency or
Instrumentality Bonds, it must be determined whether bonds issued by the
Government of Puerto Rico qualify as U.S. Government, Agency or
Instrumentality Bonds. For Hall Income Tax purposes, there is currently no
published administrative interpretation or opinion of the Attorney General of
Tennessee dealing with the status of distributions made by unit investment
trusts such as the Tennessee Trust that are attributable to interest paid on
bonds issued by the Government of Puerto Rico. However, in a letter dated
August 14, 1992 (the "Commissioner's Letter" ), the Commissioner of
the State of Tennessee Department of Revenue advised that Puerto Rico would be
an "instrumentality" of the U.S. Government and treated bonds issued
by the Government of Puerto Rico as U.S. Government, Agency or Instrumentality
Bonds. Based on this conclusion, the Commissioner advised that distributions
from a mutual fund attributable to investments in Puerto Rico Bonds are exempt
from the Hall Income Tax. Both the Sponsor and Chapman and Cutler, for
purposes of its opinion (as set forth below), have assumed, based on the
Commissioner's Letter, that bonds issued by the Government of Puerto Rico are
U.S. Government, Agency or Instrumentality Bonds. However, it should be noted
that the position of the Commissioner is not binding, and is subject to
change, even on a retroactive basis.
The Sponsor cannot predict whether new legislation will be enacted into law
affecting the tax status of Tennessee IM-IT Trusts. The occurrence of such an
event could cause distributions of interest income from the Trust to be
subject to the Hall Income Tax. Investors should consult their own tax
advisors in this regard.
In the opinion of Chapman and Cutler, Counsel to the Sponsor, under existing
Tennessee State law as of the date of this prospectus:
For purposes of the Hall Income Tax, the Tennessee Excise Tax imposed by
Section 67-4-806 (the "State Corporate Income Tax" ), and the Tennessee
Franchise Tax imposed by Section 67-4-903, the Tennessee IM-IT Trust will not
be subject to such taxes.
For Hall Income Tax purposes, a proportionate share of such distributions from
the Tennessee IM-IT Trust to Unitholders, to the extent attributable to
interest on the Tennessee Bonds (based on the relative proportion of interest
received or accrued attributable to Tennessee Bonds) will be exempt from the
Hall Income Tax when distributed to such Unitholders. Based on the
Commissioner's Letter, distributions from the Trust to Unitholders, to the
extent attributable to interest on the Puerto Rico Bonds (based on the
relative proportion of interest received or accrued attributable to the Puerto
Rico Bonds) will be exempt from the Hall Income Tax when distributed to such
Unitholders. A proportionate share of distributions from the Tennessee IM-IT
Trust attributable to assets other than the Bonds would not, under current
law, be exempt from the Hall Income Tax when distributed to Unitholders.
For Tennessee State Corporate Income Tax Purposes, Tennessee law does not
provide an exemption for interest on Tennessee Bonds and requires that all
interest excludible from Federal gross income must be included in calculating
"net earnings" subject to the State Corporate Income Tax. No opinion
is expressed regarding whether such tax would be imposed on the earnings or
distributions of the Tennessee IM-IT Trust (including interest on the Bonds or
gain realized upon the disposition of the Bonds by the Tennessee IM-IT Trust)
attributable to Unitholders subject to the State Corporate Income Tax.
However, based upon prior written advice from the Tennessee Department of
Revenue, earnings and distributions from the Tennessee IM-IT Trust (including
interest on the Tennessee Bonds or gain realized upon the disposition of the
Tennessee Bonds by the Tennessee IM-IT Trust) attributable to the Unitholders
should be exempt from the State Corporate Income Tax. The position of the
Tennessee Department of Revenue is not binding, and is subject to change, even
on a retroactive basis.
Each Unitholder will realize taxable gain or loss for State Corporate Income
Tax purposes when the Unitholder redeems or sells his Units, at a price that
differs from original cost as adjusted for accretion or any discount or
amortization of any premium and other basis adjustments, including any basis
reduction that may be required to reflect a Unitholder's share of interest,
if any, accruing on Bonds during the interval between the Unitholder's
settlement date and the date such Bonds are delivered to the Tennessee IM-IT
Trust, if later. Tax basis reduction requirements relating to amortization of
bond premium may, under some circumstances, result in Unitholders realizing
taxable gain when the Units are sold or redeemed for an amount equal to or
less than their original cost.
For purposes of the Tennessee Property Tax, the Tennessee IM-IT Trust will be
exempt from taxation with respect to the Bonds it holds. As for the taxation
of the Units held by the Unitholders, although intangible personal property is
not presently subject to Tennessee taxation, no opinion is expressed with
regard to potential property taxation of the Unitholders with respect to the
Units because the determination of whether property is exempt from such tax is
made on a county by county basis.
No opinion is expressed herein regarding whether insurance proceeds paid in
lieu of interest on the Bonds held by the Tennessee IM-IT Trust (including the
Tennessee Bonds) are exempt from the Hall Income Tax. Distributions of such
proceeds to Unitholders may be subject to the Hall Income Tax.
The Bonds and the Units held by the Unitholder will not be subject to
Tennessee sales and use taxes.
We have not examined any of the Bonds to be deposited and held in the
Tennessee Trust or the proceedings for the issuance thereof or the opinions of
bond counsel with respect thereto, and therefore express no opinion as to the
exemption from State income taxes of interest on the Bonds if received
directly by a Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provision of Tennessee law. Ownership of the Units may result in
collateral Tennessee tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any
such collateral consequences.
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 52.91 $ 52.91
Less: Estimated Annual Expense per Unit <F2>...................... $ 1.89 $ 1.44
Less: Annual Premium on Portfolio Insurance per Unit.............. $ .08 $ .08
Estimated Net Annual Interest Income per Unit..................... $ 50.94 $ 51.39
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 50.94 $ 51.39
Divided by 12 and 2, respectively................................. $ 4.25 $ 25.70
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .14149 $ .14274
Estimated Current Return Based on Public Offering Price <F1><F3>... 5.09% 5.14%
Estimated Long-Term Return <F3>.................................... 5.08% 5.12%
Estimated Initial Monthly Distribution (October 1996).............. $ 5.09
Estimated Initial Semi-annual Distribution (January 1997).......... $ 17.99
Estimated Normal Distribution per Unit <F3>........................ $ 4.25 $ 25.70
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1><F4>... $.91 and $.51 per $1,000 principal amount of Bonds, respectively, for those portions of the
Tennessee IM-IT Trust under the monthly and semi-annual distribution plans
Record and Computation Dates.... TENTH day of the month as follows: monthly--each month; semi-annual--January and July
Distribution Dates.............. TWENTY-FIFTH day of the month as follows: monthly--each month; semi-annual--
January and July
- ----------
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.48
per Unit (which amount is the estimated interest to be earned per Unit prior
to the expected delivery dates for the "when, as and if issued" Bonds
included in this Trust). Should such estimated interest exceed such amount,
the Trustee will reduce its fee up to its annual fee. After the first year,
the Trustee's fee will be that amount indicated above. Estimated Annual
Interest Income per Unit will be increased to $53.39. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.37 and $1.92 under the
monthly and semi-annual distribution plans, respectively; and Estimated Net
Annual Interest Income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns" in Part II of
this Prospectus.
<F2>Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Administration--Fund Administration and
Expenses--Miscellaneous Expenses" in Part II of this Prospectus).
<F3>The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General" in Part II of this Prospectus. For
a discussion of how these returns are calculated, see "Unitholder
Explanations--Estimated Current Returns and Estimated Long-Term Returns"
in Part II of this Prospectus; notwithstanding anything to the contrary in
Part II of this Prospectus, the Estimated Current Returns and Estimated
Long-Term Returns set forth above were calculated as of 8:00 A.M. Central Time
on the Date of Deposit. These figures are based on estimated per Unit cash
flows. Estimated cash flows will vary with changes in fees and expenses, with
changes in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Other
Matters--Estimated Cash Flows to Unitholders" .
<F4>Based on the size of the Trust on the Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fees for ordinary recurring services would initially amount
to $1,530. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,730.
</TABLE>
<TABLE>
TENNESSEE INSURED MUNICIPALS INCOME TRUST
SERIES 37 (205TH INSURED MULTI-SERIES)
PORTFOLIO As of August 29, 1996
<CAPTION>
Offering
Price To
Tennessee
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
Principal<F1> either Bonds Deposited or Bonds Contracted for<F1> <F5> Rating<F2> Feature<F3> Trust<F4>
- -------------- ----------------------------------------------------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 250,000 Jackson, Tennessee, Hospital Revenue Refunding and Improvement
Bonds, Jackson-Madison County General Hospital, Series 1995 2005 @ 102
(AMBAC Indemnity Insured) #5.625% Due 4/1/2015 ................ AAA 2011 @ 100 S.F. $ 249,882
350,000 Dickson, Tennessee, Electric System Revenue Bonds (MBIA 2008 @ 102
Insured) #5.50% Due 9/1/2016 .................................. AAA 2012 @ 100 S.F. 345,506
250,000 Shelby County, Tennessee, Public Improvement Unlimited
Tax-General Obligation Bonds, Series 1996A #5.875% Due
6/1/2019 ........................................................ AA+ 2006 @ 100 252,603
500,000 Northeast Knox, Tennessee, Utility District Water Revenue
Refunding Bonds (AMBAC Indemnity Insured)** #5.60% Due 2006 @ 100
1/1/2020 ........................................................ AAA 2017 @ 100 S.F. 496,045
500,000 Health and Educational Facilities Board of the City of Bristol,
Tennessee, Hospital Revenue Refunding Bonds, Series 1993 2003 @ 102
(Bristol Memorial Hospital) FGIC Insured #5.25% Due 9/1/2021 .. AAA 2014 @ 100 S.F. 470,285
250,000 Commonwealth of Puerto Rico, Public Improvement General
Obligation Bonds, Series 1995 (MBIA Insured) #5.375% Due 2005 @ 101.5
7/1/2022 ........................................................ AAA 2016 @ 100 S.F. 242,603
400,000 Hollow Rock-Bruceton Special School District (Carroll County,
Tennessee) General Obligation School Bonds, Series 1996 (Bank 2006 @ 102
Qualified) FSA Insured** #5.75% Due 4/1/2024 .................. AAA 2017 @ 100 S.F. 402,000
500,000 Metropolitan Government of Nashville and Davidson County,
Tennessee, Health and Educational Facilities Board, Refunding
and Improvement Revenue Bonds (Meharry Medical College Issue) 2009 @ 100
AMBAC Indemnity Insured** #5.00% Due 12/1/2024 ................ AAA 2020 @ 100 S.F. 456,855
$ 3,000,000 $ 2,915,779
============== ==============
</TABLE>
- ----------
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts" in Part II of
this Prospectus.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
As of the Date of Deposit: August 29, 1996
- --------------------------------------------------------------------------
(1)All Securities are represented by "regular way" or "when
issued" contracts for the performance of which an irrevocable letter of
credit, obtained from an affiliate of the Trustee, has been deposited with the
Trustee. At the Date of Deposit, Securities may have been delivered to the
Sponsor pursuant to certain of these contracts; the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into during the period from
August 2,1996 to August 29,1996. These Securities have expected settlement
dates ranging from August 29,1996 to September 24,1996 (see "Unitholder
Explanations" in Part II of this Prospectus).
(2)All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. The ratings represent
the latest published ratings by the respective rating agency or, if not
published, represent private letter ratings or those ratings expected to be
published by the respective rating agency. "Y" indicates that such
rating is contingent upon physical receipt by the respective ratings agency of
a policy of insurance obtained by the issuer of the bonds involved and issued
by the Preinsured Bond Insurer named in the bond's title. A commitment for
insurance in connection with these bonds has been issued by the Preinsured
Bond Insurer named in the bond's title. "N/R" indicates that the
applicable rating service did not provide a rating for that particular
Security. For a brief description of the rating symbols and their related
meanings, see "Description of Ratings" in Part II of this Prospectus.
(3)There is shown under this heading the year in which each issue of Bonds is
initially or currently callable and the call price for that year. Each issue
of Bonds continues to be callable at declining prices thereafter (but not
below par value) except for original issue discount bonds which are redeemable
at prices based on the issue price plus the amount of original issue discount
accreted to redemption date plus, if applicable, some premium, the amount of
which will decline in subsequent years. "S.F." indicates a sinking
fund is established with respect to an issue of Bonds. Certain Bonds may be
subject to redemption without premium prior to the date shown pursuant to
extraordinary optional or mandatory redemptions if certain events occur. For a
general discussion of certain of these events, see "Unitholder
Explanations--Risk Factors" in Part II of this Prospectus. Distributions
will generally be reduced by the amount of the income which would otherwise
have been paid with respect to redeemed Securities and there will be
distributed to Unitholders the principal amount and any premium received on
such redemption. The Estimated Current Return and Estimated Long-Term Return
in this event may be affected by such redemptions. For the Federal tax effect
on Unitholders of such redemptions and resultant distributions, see "
Federal Tax Status" in Part II of this Prospectus.
(4)Evaluation of Securities is made on the basis of current offering prices
for the Securities. The offering prices are greater than the current bid
prices of the Securities which is the basis on which Unit value is determined
for purposes of redemption of Units (see "Unitholder Explanations--Public
Offering--Offering Price" in Part II of this Prospectus).
(5)Other information regarding the Bonds in each Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Annual
Annual Profit Interest Bid Side
Insurance Cost to (Loss) to Income to Evaluation
Trust Cost Sponsor Sponsor Trust of Bonds
------------ ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
IM-IT Intermediate.... $ -- $ 4,872,358 $ 17,935 $ 241,018 $ 4,853,731
Colorado IM-IT........ $ -- $ 2,915,902 $ 24,601 $ 164,555 $ 2,917,703
Louisiana IM-IT....... $ -- $ 2,907,628 $ 12,906 $ 166,500 $ 2,898,221
Massachusetts IM-IT... $ -- $ 2,841,813 $ 24,514 $ 162,813 $ 2,843,827
Missouri IM-IT........ $ 810 $ 3,369,086 $ 31,705 $ 193,450 $ 3,374,429
New Jersey IM-IT...... $ -- $ 2,936,402 $ 2,219 $ 166,030 $ 2,915,746
New York IM-IT........ $ -- $ 2,921,565 $ 21,795 $ 169,010 $ 2,920,407
Tennessee IM-IT....... $ 250 $ 2,891,237 $ 24,542 $ 163,688 $ 2,893,279
</TABLE>
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
Bonds insured Bonds insured
under AMBAC under Financial
Trust Indemnity Guaranty Preinsured Total
portfolio insurance portfolio insurance Bonds
----------------------- ----------------------- ------------- --------
<S> <C> <C> <C> <C>
IM-IT Intermediate.... -- -- 100% 100%
Colorado IM-IT........ -- -- 100% 100%
Louisiana IM-IT....... -- -- 100% 100%
Massachusetts IM-IT... -- -- 100% 100%
Missouri IM-IT........ 17% -- 83% 100%
New Jersey IM-IT...... -- -- 100% 100%
New York IM-IT........ -- -- 100% 100%
Tennessee IM-IT....... 8% -- 92% 100%
</TABLE>
The breakdown of the Preinsured Bond Insurers is as follows: IM-IT
Intermediate Trust-- AMBAC Indemnity 25%, Financial Guaranty 7%, MBIA 49% and
FSA 19%; Colorado IM-IT Trust-- AMBAC Indemnity 8%, MBIA 84% and FSA 8%;
Louisiana IM-IT Trust-- AMBAC Indemnity 12%, Financial Guaranty 12%, MBIA 50%
and FSA 26%; Massachusetts IM-IT Trust-- AMBAC Indemnity 30%, Financial
Guaranty 17%, MBIA 45% and FSA 8%; Missouri IM-IT Trust-- AMBAC Indemnity 18%,
MBIA 25% and FSA 40%; New Jersey IM-IT Trust-- Financial Guaranty 43%, MBIA
37% and FSA 20%; New York IM-IT Trust-- AMBAC Indemnity 8%, Financial Guaranty
16%, MBIA 25%, FSA 35% and CapMAC 16%; Tennessee IM-IT Trust-- AMBAC Indemnity
42%, Financial Guaranty 17%, MBIA 20% and FSA 13%.
On the date of this Prospectus, the Estimated Current Returns on the
Securities in the Missouri IM-IT Trust and Tennessee IM-IT Trust were 5.15%
and 5.09%, respectively, based on the monthly plan of distribution after
payment of the insurance premium or premiums payable by each Trust, while the
Estimated Long-Term Returns on such Trusts were 5.16% and 5.08%, respectively.
The Estimated Current Returns on identical portfolios without the insurance
obtained by the above mentioned Trusts would have been 5.18% and 5.10%,
respectively, based on the monthly plan of distribution on such date, while
the Estimated Long-Term Returns on identical portfolios without the insurance
obtained by the above mentioned Trusts would have been 5.18% and 5.09%,
respectively.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in certain Portfolios. The cost of any such
contracts and the corresponding gain or loss is included in the Cost to
Sponsor. Certain Securities in the Fund, if any, marked by a double asterisk
(**), have been purchased on a "when, as and if issued" or "
delayed delivery" basis. Interest on these Securities begins accruing to
the benefit of Unitholders on their respective dates of delivery. Delivery is
expected to take place at various dates after the First Settlement Date as
follows:
<TABLE>
<CAPTION>
Percent of
Aggregate Principal Range of Days Subsequent to
Trust Amount First Settlement Date
---------------------- -------------------------------
<S> <C> <C>
IM-IT Intermediate.... 25% 13 to 20 days
Colorado IM-IT........ -- --
Louisiana IM-IT....... 33% 1 to 6 days
Massachusetts IM-IT... 13% 8 days
Missouri IM-IT........ -- --
New Jersey IM-IT...... 16% 8 to 12 days
New York IM-IT........ -- --
Tennessee IM-IT....... 47% 1 to 12 days
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities in the
IM-IT Intermediate, Colorado IM-IT, Louisiana IM-IT, Massachusetts IM-IT,
Missouri IM-IT, New Jersey IM-IT, New York IM-IT and Tennessee IM-IT Trusts
were higher than the bid side evaluations of such Securities by 0.73%, 0.75%,
0.74%, 0.75%, 0.75%, 0.75%, 0.75% and 0.75%, respectively, of the aggregate
principal amounts of such Securities.
"#" indicates that such Bond was issued at an original issue discount.
The tax effect of Bonds issued at an original issue discount is described in
"Federal Tax Status" in Part II of this Prospectus.
(6)This Bond has been purchased at a deep discount from the par value because
there is little or no stated interest income thereon. Bonds which pay no
interest are normally described as "zero coupon" bonds. Over the life
of bonds purchased at a deep discount the value of such bonds will increase
such that upon maturity the holders of such bonds will receive 100% of the
principal amount thereof. To the extent that zero coupon bonds are sold or
called prior to maturity, there is no guarantee that the value of the proceeds
received therefrom by the Trust will equal or exceed the par value that would
have been obtained at maturity of such zero coupon bonds. Approximately 5% and
3% of the aggregate principal amount of the Securities in the IM-IT
Intermediate Trust and Louisiana IM-IT Trust, respectively, are "zero
coupon" bonds. See "Unitholder Explanations--Settlement of Bonds in
the Trusts--Risk Factors" in Part II of this Prospectus for a discussion
of zero coupon bonds.
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, 205th Insured
Multi-Series (IM-IT Intermediate, Colorado IM-IT, Louisiana IM-IT,
Massachusetts IM-IT, Missouri IM-IT, New Jersey IM-IT, New York IM-IT and
Tennessee IM-IT Trusts):
We have audited the accompanying statements of condition and the related
portfolios of Insured Municipals Income Trust, 205th Insured Multi-Series
(IM-IT Intermediate, Colorado IM-IT, Louisiana IM-IT, Massachusetts IM-IT,
Missouri IM-IT, New Jersey IM-IT, New York IM-IT and Tennessee IM-IT Trusts)
as of August 29, 1996. The statements of condition and portfolios are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of irrevocable letters of credit deposited to
purchase tax-exempt securities by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipals Income
Trust, 205th Insured Multi-Series (IM-IT Intermediate, Colorado IM-IT,
Louisiana IM-IT, Massachusetts IM-IT, Missouri IM-IT, New Jersey IM-IT, New
York IM-IT and Tennessee IM-IT Trusts) as of August 29, 1996, in conformity
with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
August 29, 1996
<TABLE>
INSURED MUNICIPALS INCOME TRUST
205th INSURED MULTI-SERIES
Statements of Condition
As of August 29, 1996
<CAPTION>
IM-IT Colorado Louisiana Massachusetts
INVESTMENT IN SECURITIES Intermediate IM-IT IM-IT IM-IT
Trust Trust Trust Trust
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F3>... $ 4,890,293 $ 2,940,503 $ 2,920,534 $ 2,866,327
Accrued interest to the First Settlement Date <F1><F3>..... 23,147 60,935 28,107 44,359
------------- ------------- ------------- -------------
Total...................................................... $ 4,913,440 $ 3,001,438 $ 2,948,641 $ 2,910,686
============= ============= ============= =============
LIABILITY AND INTEREST OF UNITHOLDERS
Liability-- ...............................................
Accrued interest payable to Sponsor <F1><F3> $ 23,147 $ 60,935 $ 28,107 $ 44,359
Interest of Unitholders-- .................................
Cost to investors <F4>..................................... 5,088,750 3,092,000 3,071,000 3,014,000
Less: Gross underwriting commission <F4>................... 198,457 151,497 150,466 147,673
------------- ------------- ------------- -------------
Net interest to Unitholders <F1><F3><F4>................... 4,890,293 2,940,503 2,920,534 2,866,327
------------- ------------- ------------- -------------
Total...................................................... $ 4,913,440 $ 3,001,438 $ 2,948,641 $ 2,910,686
============= ============= ============= =============
==========
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Corporation on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
in Part II of this Prospectus. The contracts to purchase tax-exempt Securities
are collateralized by irrevocable letters of credit which have been deposited
with the Trustee in and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Principal Offering Accrued
Amount of Amount of Price of Interest to
Letter of Bonds Under Bonds Under Expected
Credit Contracts Contracts Delivery Dates
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
IM-IT Intermediate Trust.... $4,914,221 $5,000,000 $4,890,293 $23,928
Colorado IM-IT Trust........ $2,999,635 $3,040,000 $2,940,503 $59,132
Louisiana IM-IT Trust....... $2,947,834 $3,025,000 $2,920,534 $27,300
Massachusetts IM-IT Trust... $2,909,423 $3,000,000 $2,866,327 $43,096
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The Trustee will advance to the Trust the amount of net interest accrued to
September 4, 1996, the First Settlement Date, for distribution to the Sponsor
as the Unitholder of record as of the First Settlement Date.
<F4>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price" and "Trust
Administration--General--Sponsor and Underwriter Compensation" in Part II
of this Prospectus and assume all single transactions involve less than 100
Units. For single transactions involving 100 or more Units, the sales charge
is reduced (see "Unitholder Explanations--Public Offering--General" in
Part II of this Prospectus) resulting in an equal reduction in both the Cost
to investors and the Gross underwriting commission while the Net interest to
Unitholders remains unchanged.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
205th INSURED MULTI-SERIES
Statements of Condition (Continued)
As of August 29, 1996
<CAPTION>
Missouri New Jersey New York Tennessee
INVESTMENT IN SECURITIES IM-IT IM-IT IM-IT IM-IT
Trust Trust Trust Trust
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F3>... $ 3,400,791 $ 2,938,621 $ 2,943,360 $ 2,915,779
Accrued interest to the First Settlement Date <F1><F3>..... 46,694 23,484 24,099 33,683
------------- ------------- ------------- -------------
Total...................................................... $ 3,447,485 $ 2,962,105 $ 2,967,459 $ 2,949,462
============= ============= ============= =============
LIABILITY AND INTEREST OF UNITHOLDERS
Liability-- ...............................................
Accrued interest payable to Sponsor <F1><F3> $ 46,694 $ 23,484 $ 24,099 $ 33,683
Interest of Unitholders-- .................................
Cost to investors <F4>..................................... 3,576,000 3,090,000 3,095,000 3,066,000
Less: Gross underwriting commission <F4>................... 175,209 151,379 151,640 150,221
------------- ------------- ------------- -------------
Net interest to Unitholders <F1><F3><F4>................... 3,400,791 2,938,621 2,943,360 2,915,779
------------- ------------- ------------- -------------
Total...................................................... $ 3,447,485 $ 2,962,105 $ 2,967,459 $ 2,949,462
============= ============= ============= =============
==========
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" for
each Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Corporation on the bases set
forth under "Unitholder Explanations--Public Offering--Offering Price"
in Part II of this Prospectus. The contracts to purchase tax-exempt Securities
are collateralized by irrevocable letters of credit which have been deposited
with the Trustee in and for the following amounts:
</TABLE>
<TABLE>
<CAPTION>
Principal Offering Accrued
Amount of Amount of Price of Interest to
Letter of Bonds Under Bonds Under Expected
Credit Contracts Contracts Delivery Dates
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Missouri IM-IT Trust..... $3,444,972 $3,515,000 $3,400,791 $44,181
New Jersey IM-IT Trust... $2,961,001 $3,050,000 $2,938,621 $22,380
New York IM-IT Trust..... $2,965,689 $3,055,000 $2,943,360 $22,329
Tennessee IM-IT Trust.... $2,950,015 $3,000,000 $2,915,779 $34,236
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained either by
such Trusts, by a prior owner of the Bonds, by the Sponsor prior to the
deposit of such Bonds or by the issuers of the Bonds involved. Such insurance
does not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by the Insured Trusts is effective only while Bonds
thus insured are held in such Trusts. Neither the bid nor offering prices of
the underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by such
Trusts.
<F3>The Trustee will advance to the Trust the amount of net interest accrued to
September 4, 1996, the First Settlement Date, for distribution to the Sponsor
as the Unitholder of record as of the First Settlement Date.
<F4>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge are computed on the bases set forth under "Unitholder
Explanations--Public Offering--Offering Price" and "Trust
Administration--General--Sponsor and Underwriter Compensation" in Part II
of this Prospectus and assume all single transactions involve less than 100
Units. For single transactions involving 100 or more Units, the sales charge
is reduced (see "Unitholder Explanations--Public Offering--General" in
Part II of this Prospectus) resulting in an equal reduction in both the Cost
to investors and the Gross underwriting commission while the Net interest to
Unitholders remains unchanged.
</TABLE>
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
- --------------------------------------------------------------------------
As of the date of this Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under combined Federal and State taxes
(where applicable) using the published Federal and State tax rates (where
applicable) scheduled to be in effect in 1996. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you
would have to earn on taxable investments to equal the tax-exempt estimated
current return in your income tax bracket. The table assumes that Federal
taxable income is equal to State income subject to tax, and for cases in which
more than one State rate falls within a Federal bracket, the State rate
corresponding to the highest income within that Federal bracket is used. The
combined State and Federal tax rates shown reflect the fact that State tax
payments are currently deductible for Federal tax purposes. The table does not
reflect any local taxes or any taxes other than personal income taxes. The
tables do not show the approximate taxable estimated current returns for
individuals that are subject to the alternative minimum tax. The taxable
equivalent estimated current returns may be somewhat higher than the
equivalent returns indicated in the following tables for those individuals who
have adjusted gross incomes in excess of $117,950. The tables do not reflect
the effect of Federal or State limitations (if any) on the amount of allowable
itemized deductions and the deduction for personal or dependent exemptions or
any other credits. These limitations were designed to phase out certain
benefits of these deductions for higher income taxpayers. These limitations,
in effect, raise the marginal maximum Federal tax rate to approximately 44
percent for taxpayers filing a joint return and entitled to four personal
exemptions and to approximately 41 percent for taxpayers filing a single
return entitled to only one personal exemption. These limitations are subject
to certain maximums, which depend on the number of exemptions claimed and the
total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions. See "
Federal Tax Status" in Part II of this Prospectus for a more detailed
discussion of recent Federal tax legislation, including a discussion of
provisions affecting corporations.
INTERMEDIATE
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- ------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 15% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
24.00 - 58.15 40.10 - 96.90 28 5.56 6.25 6.94 7.64 8.33 9.03 9.72
58.15 - 121.30 96.90 - 147.70 31 5.80 6.52 7.25 7.97 8.70 9.42 10.14
121.30 - 263.75 147.70 - 263.75 36 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over 263.75 Over 263.75 39.6 6.62 7.45 8.28 9.11 9.93 10.76 11.59
</TABLE>
COLORADO
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 19.3% 6.20% 6.82% 7.43% 8.05% 8.67% 9.29% 9.91%
24.00 - 58.15 40.10 - 96.90 31.6 7.31 8.04 8.77 9.50 10.23 10.96 11.70
58.15 - 121.30 96.90 - 147.70 34.5 7.63 8.40 9.16 9.92 10.69 11.45 12.21
121.30 - 263.75 147.70 - 263.75 39.2 8.22 9.05 9.87 10.69 11.51 12.34 13.16
Over 263.75 Over 263.75 42.6 8.71 9.58 10.45 11.32 12.20 13.07 13.94
</TABLE>
LOUISIANA
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket* 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 17.9% 6.09% 6.70% 7.31% 7.92% 8.53% 9.14% 9.74%
40.10 - 96.90 30.1 7.15 7.87 8.58 9.30 10.01 10.73 11.44
24.00 - 58.15 31.2 7.27 7.99 8.72 9.45 10.17 10.90 11.63
58.15 - 121.30 96.90 - 147.70 33.9 7.56 8.32 9.08 9.83 10.59 11.35 12.10
121.30 - 263.75 147.70 - 263.75 38.5 8.13 8.94 9.76 10.57 11.38 12.20 13.01
Over 263.75 Over 263.75 41.8 8.59 9.45 10.31 11.17 12.03 12.89 13.75
</TABLE>
- ----------
* Combined State and Federal tax bracket was computed by taking into account
the deductibility of State tax in determining Federal tax and the
deductibility of Federal tax in determining State tax.
MASSACHUSETTS
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 25.2% 6.68% 7.35% 8.02% 8.69% 9.36% 10.03% 10.70%
24.00 - 58.15 40.10 - 96.90 36.6 7.89 8.68 9.46 10.25 11.04 11.83 12.62
58.15 - 121.30 96.90 - 147.70 39.3 8.24 9.06 9.88 10.71 11.53 12.36 13.18
121.30 - 263.75 147.70 - 263.75 43.7 8.88 9.77 10.66 11.55 12.43 13.32 14.21
Over 263.75 Over 263.75 46.8 9.40 10.34 11.28 12.22 13.16 14.10 15.04
</TABLE>
MISSOURI
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket* 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 19.4% 6.20% 6.82% 7.44% 8.06% 8.68% 9.31% 9.93%
24.00 - 58.15 40.10 - 96.90 32.3 7.39 8.12 8.86 9.60 10.34 11.08 11.82
58.15 - 121.30 96.90 - 147.70 35.1 7.70 8.47 9.24 10.02 10.79 11.56 12.33
121.30 - 263.75 147.70 - 263.75 39.8 8.31 9.14 9.97 10.80 11.63 12.46 13.29
Over 263.75 Over 263.75 43.2 8.80 9.68 10.56 11.44 12.32 13.20 14.08
</TABLE>
- ----------
*Combined State and Federal tax bracket was computed by taking into account
the deductibility of State tax in determining Federal tax and the limited
deductibility of Federal tax in determining State tax. Specifically, the
deduction allowed for Federal income tax liability may not exceed $5,000 and
$10,000 for single and joint taxpayers, respectively. Accordingly, the
combined tax bracket reflects the cross-deductibility of each tax in
determining the other only for levels of income corresponding to the 15%
Federal tax bracket.
NEW JERSEY
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$0 - 24.00 $ 0 - 40.10 16.5% 5.99% 6.59% 7.19% 7.78% 8.38% 8.98% 9.58%
24.00 - 58.15 40.10 - 96.90 32 7.35 8.09 8.82 9.56 10.29 11.03 11.76
96.90 - 147.70 34.8 7.67 8.44 9.20 9.97 10.74 11.50 12.27
58.15 - 121.30 35.4 7.74 8.51 9.29 10.06 10.84 11.61 12.38
121.30 - 263.75 147.70 - 263.75 40.1 8.35 9.18 10.02 10.85 11.69 12.52 13.36
Over 263.75 Over 263.75 43.4 8.83 9.72 10.60 11.48 12.37 13.25 14.13
</TABLE>
NEW YORK
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket* 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 21.1% 6.34% 6.97% 7.60% 8.24% 8.87% 9.51% 10.14%
24.00 - 58.15 40.10 - 96.90 33.1 7.47 8.22 8.97 9.72 10.46 11.21 11.96
58.15 - 121.30 96.90 - 147.70 35.9 7.80 8.58 9.36 10.14 10.92 11.70 12.48
121.30 - 263.75 147.70 - 263.75 40.6 8.42 9.26 10.10 10.94 11.78 12.63 13.47
Over 263.75 Over 263.75 43.9 8.91 9.80 10.70 11.59 12.48 13.37 14.26
</TABLE>
- ----------
* The table assumes that federal taxable income is equal to state income
subject to tax, and in cases where more than one state rate falls within a
federal bracket, the highest state rate corresponding to the highest income
within that federal bracket is used. Further, the table does not reflect the
New York State supplemental income tax based upon a taxpayer's New York State
taxable income and New York State adjusted gross income. This supplemental tax
results in an increased marginal state income tax rate to the extent a
taxpayer's New York State adjusted gross income ranges between $100,000 and
$150,000.
TENNESSEE
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Joint Tax
Return Return Bracket 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
------------------ ------------------ --------
Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- --------------------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 20.1% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39% 10.01%
24.00 - 58.15 40.10 - 96.90 32.3 7.39 8.12 8.86 9.60 10.34 11.08 11.82
58.15 - 121.30 96.90 - 147.70 35.1 7.70 8.47 9.24 10.02 10.79 11.56 12.33
121.30 - 263.75 147.70 - 263.75 39.8 8.31 9.14 9.97 10.80 11.63 12.46 13.29
Over 263.75 Over 263.75 43.2 8.80 9.68 10.56 11.44 12.32 13.20 14.08
</TABLE>
A comparison of tax-free and equivalent taxable estimated current returns with
the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns on
the Trusts and returns over specified periods on other similar Van Kampen
American Capital sponsored unit investment trusts with inflation rates and
with returns on taxable investments such as corporate or U.S. Government
bonds, bank CDs and money market accounts or money market funds, each of which
has investment characteristics that may differ from those of the Trusts. U.S.
Government bonds, for example, are backed by the full faith and credit of the
U.S. Government and bank CDs and money market accounts are insured by an
agency of the federal government. Money market accounts and money market funds
provide stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics of the
Trusts are described more fully elsewhere in this Prospectus.
ESTIMATED CASH FLOWS TO UNITHOLDERS
- --------------------------------------------------------------------------
The tables below set forth the per Unit estimated monthly and semi-annual
distributions of interest and principal to Unitholders. The tables assume no
changes in expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Securities prior to
maturity or expected retirement date and the receipt of principal upon
maturity or expected retirement date. To the extent the foregoing assumptions
change actual distributions will vary.
IM-IT Intermediate Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $4.59 $4.59
November 1996 - June 2005 3.83 3.83
July 2005 3.65 $150.00 153.65
August 2005 - March 2006 3.22 3.22
April 2006 3.10 100.00 103.10
May 2006 - June 2006 2.81 2.81
July 2006 2.58 234.00 236.58
August 2006 2.06 2.06
September 2006 1.10 516.00 517.10
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- ------------------------------------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
December 1996 $12.38 $12.38
June 1997 - June 2005 23.20 23.20
July 2005 $150.00 150.00
December 2005 19.97 19.97
April 2006 100.00 100.00
June 2006 18.58 18.58
July 2006 234.00 234.00
September 2006 5.81 516.00 521.81
</TABLE>
Colorado IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ---------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $ 5.09 $ 5.09
November 1996 - May 2006 4.25 4.25
June 2006 3.95 $ 77.61 81.56
July 2006 - September 2006 3.89 3.89
October 2006 3.66 161.71 165.37
November 2006 - December 2014 3.12 3.12
January 2015 2.83 80.86 83.69
February 2015 - June 2016 2.78 2.78
July 2016 2.51 80.85 83.36
August 2016 - October 2017 2.45 2.45
November 2017 2.25 161.71 163.96
December 2017 - April 2021 1.77 1.77
May 2021 1.66 80.85 82.51
June 2021 - November 2025 1.42 1.42
December 2025 .76 177.88 178.64
January 2026 - September 2026 .63 .63
October 2026 .42 161.71 162.13
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- -------------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 1997 $ 17.96 $ 17.96
July 1997 - January 2006 25.65 25.65
June 2006 $ 77.61 77.61
July 2006 24.99 24.99
October 2006 161.71 161.71
January 2007 20.93 20.93
July 2007 - July 2014 18.84 18.84
January 2015 18.55 80.86 99.41
July 2015 - January 2016 16.78 16.78
July 2016 16.51 80.85 97.36
January 2017 - July 2017 14.81 14.81
November 2017 161.71 161.71
January 2018 13.22 13.22
July 2018 - January 2021 10.66 10.66
May 2021 80.85 80.85
July 2021 9.86 9.86
January 2022 - July 2025 8.57 8.57
December 2025 177.88 177.88
January 2026 7.11 7.11
July 2026 3.79 3.79
October 2026 1.69 161.71 163.40
</TABLE>
Louisiana IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- --------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $5.19 $5.19
November 1996 - October 2005 4.33 4.33
November 2005 4.21 $81.40 85.61
December 2005 - June 2007 3.94 3.94
July 2007 3.70 162.82 166.52
August 2007 - August 2015 3.14 3.14
September 2015 3.14 32.56 35.70
October 2015 - March 2016 3.14 3.14
April 2016 3.03 81.40 84.43
May 2016 - January 2020 2.77 2.77
February 2020 2.72 40.71 43.43
March 2020 - May 2021 2.59 2.59
June 2021 2.21 97.69 99.90
July 2021 - July 2025 2.14 2.14
August 2025 1.52 162.81 164.33
September 2025 - April 2026 1.40 1.40
May 2026 1.18 162.81 163.99
June 2026 .66 .66
July 2026 .44 162.82 163.26
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- --------------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 1997 $18.32 $18.32
July 1997 - July 2005 26.17 26.17
November 2005 $81.40 81.40
January 2006 25.27 25.27
July 2006 - January 2007 23.82 23.82
July 2007 23.57 162.82 186.39
January 2008 - July 2015 18.99 18.99
September 2015 32.56 32.56
January 2016 18.99 18.99
April 2016 81.40 81.40
July 2016 17.79 17.79
January 2017 - January 2020 16.79 16.79
February 2020 40.71 40.71
July 2020 15.82 15.82
January 2021 15.70 15.70
June 2021 97.69 97.69
July 2021 14.85 14.85
January 2022 - July 2025 12.94 12.94
August 2025 162.81 162.81
January 2026 8.61 8.61
May 2026 162.81 162.81
July 2026 6.55 162.82 169.37
</TABLE>
Massachusetts IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ---------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $ 5.16 $ 5.16
November 1996 - August 2018 4.30 4.30
September 2018 3.98 $ 82.94 86.92
October 2018 - August 2019 3.91 3.91
September 2019 3.70 165.89 169.59
October 2019 - February 2020 3.21 3.21
March 2020 2.99 165.90 168.89
April 2020 - December 2022 2.47 2.47
January 2023 2.27 165.89 168.16
February 2023 - June 2024 1.78 1.78
July 2024 1.68 82.95 84.63
August 2024 - November 2025 1.42 1.42
December 2025 .77 199.07 199.84
January 2026 - June 2026 .55 .55
July 2026 .37 132.71 133.08
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- --------------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 1997 $ 18.23 $ 18.23
July 1997 - July 2018 26.05 26.05
September 2018 $ 82.94 82.94
January 2019 24.15 24.15
July 2019 23.69 23.69
September 2019 165.89 165.89
January 2020 20.64 20.64
March 2020 165.90 165.90
July 2020 16.24 16.24
January 2021 - July 2022 14.97 14.97
January 2023 14.77 165.89 180.66
July 2023 - January 2024 10.82 10.82
July 2024 10.71 82.95 93.66
January 2025 - July 2025 8.64 8.64
December 2025 199.07 199.07
January 2026 7.10 7.10
July 2026 3.18 132.71 135.89
</TABLE>
Missouri IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ---------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $ 5.15 $ 5.15
November 1996 - February 2005 4.30 4.30
March 2005 4.20 $ 69.91 74.11
April 2005 - September 2008 3.97 3.97
October 2008 3.43 167.78 171.21
November 2008 - November 2009 3.15 3.15
December 2009 3.03 83.89 86.92
January 2010 - November 2015 2.75 2.75
December 2015 2.66 69.91 72.57
January 2016 - April 2016 2.44 2.44
May 2016 2.18 69.91 72.09
June 2016 - September 2016 2.12 2.12
October 2016 1.96 139.83 141.79
November 2016 - February 2022 1.59 1.59
March 2022 1.36 164.98 166.34
April 2022 - May 2022 .82 .82
June 2022 .61 174.78 175.39
July 2022 - September 2026 .12 .12
October 2026 .06 41.95 42.01
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- -------------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 1997 $ 18.20 $ 18.20
July 1997 - January 2005 26.00 26.00
March 2005 $ 69.91 69.91
July 2005 24.59 24.59
January 2006 - July 2008 24.03 24.03
October 2008 167.78 167.78
January 2009 21.01 21.01
July 2009 19.09 19.09
December 2009 83.89 83.89
January 2010 18.57 18.57
July 2010 - July 2015 16.67 16.67
December 2015 69.91 69.91
January 2016 16.26 16.26
May 2016 69.91 69.91
July 2016 13.89 13.89
October 2016 139.83 139.83
January 2017 11.10 11.10
July 2017 - January 2022 9.64 9.64
March 2022 164.98 164.98
June 2022 174.78 174.78
July 2022 5.39 5.39
January 2023 - July 2026 .74 .74
October 2026 .32 41.95 42.27
</TABLE>
New Jersey IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ---------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $ 5.12 $ 5.12
November 1996 - July 2008 4.27 4.27
August 2008 4.12 $ 37.21 41.33
September 2008 - August 2015 4.09 4.09
September 2015 4.03 40.45 44.48
October 2015 - August 2019 3.91 3.91
September 2019 3.75 113.27 117.02
October 2019 - June 2021 3.39 3.39
July 2021 3.20 161.82 165.02
August 2021 - January 2023 2.73 2.73
February 2023 2.53 148.86 151.39
March 2023 - June 2025 2.05 2.05
July 2025 1.86 161.82 163.68
August 2025 - December 2025 1.40 1.40
January 2026 1.19 161.81 163.00
February 2026 - June 2030 .69 .69
July 2030 .06 161.81 161.87
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- --------------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 1997 $ 18.09 $ 18.09
July 1997 - July 2008 25.85 25.85
August 2008 $ 37.21 37.21
January 2009 24.79 24.79
July 2009 - July 2015 24.76 24.76
September 2015 40.45 40.45
January 2016 23.99 23.99
July 2016 - July 2019 23.68 23.68
September 2019 113.27 113.27
January 2020 21.45 21.45
July 2020 - January 2021 20.57 20.57
July 2021 20.37 161.82 182.19
January 2022 - January 2023 16.55 16.55
February 2023 148.86 148.86
July 2023 12.95 12.95
January 2024 - January 2025 12.47 12.47
July 2025 12.27 161.82 174.09
January 2026 8.31 161.81 170.12
July 2026 - January 2030 4.19 4.19
July 2030 3.56 161.81 165.37
</TABLE>
New York IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- -------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $ 5.22 $ 5.22
November 1996 - June 2020 4.35 4.35
July 2020 4.25 $ 80.77 85.02
August 2020 - June 2021 4.03 4.03
July 2021 3.80 161.55 165.35
August 2021 - May 2023 3.27 3.27
June 2023 2.98 80.78 83.76
July 2023 - August 2023 2.92 2.92
September 2023 2.35 161.55 163.90
October 2023 - June 2024 2.24 2.24
July 2024 1.77 340.87 342.64
August 2024 - July 2025 .69 .69
August 2025 .58 80.78 81.36
September 2025 - June 2026 .31 .31
July 2026 80.77 80.77
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each May and November Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- ----------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
November 1996 $ 9.66 $ 9.66
May 1997 - May 2020 26.35 26.35
July 2020 $ 80.77 80.77
November 2020 24.93 24.93
May 2021 24.37 24.37
July 2021 161.55 161.55
November 2021 21.11 21.11
May 2022 - May 2023 19.83 19.83
June 2023 80.78 80.78
September 2023 161.55 161.55
November 2023 15.80 15.80
May 2024 13.55 13.55
July 2024 340.87 340.87
November 2024 6.85 6.85
May 2025 4.20 4.20
August 2025 80.78 80.78
November 2025 2.94 2.94
May 2026 1.91 1.91
July 2026 .32 80.77 81.09
</TABLE>
Tennessee IM-IT Trust
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ---------------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
October 1996 $ 5.09 $ 5.09
November 1996 - May 2006 4.25 4.25
June 2006 4.13 $ 81.53 85.66
July 2006 - March 2008 3.86 3.86
April 2008 3.68 130.47 134.15
May 2008 - March 2015 3.26 3.26
April 2015 3.15 81.54 84.69
May 2015 - August 2016 2.89 2.89
September 2016 2.73 114.15 116.88
October 2016 - December 2019 2.38 2.38
January 2020 2.16 163.08 165.24
February 2020 - August 2021 1.64 1.64
September 2021 1.43 163.08 164.51
October 2021 - June 2022 .95 .95
July 2022 .84 81.54 82.38
August 2022 - November 2024 .59 .59
December 2024 .40 163.08 163.48
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each January and July Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- --------------------------------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 1997 $ 17.99 $ 17.99
July 1997 - January 2006 25.70 25.70
June 2006 $ 81.53 81.53
July 2006 25.20 25.20
January 2007 - January 2008 23.39 23.39
April 2008 130.47 130.47
July 2008 21.37 21.37
January 2009 - January 2015 19.72 19.72
April 2015 81.54 81.54
July 2015 18.49 18.49
January 2016 - July 2016 17.48 17.48
September 2016 114.15 114.15
January 2017 15.28 15.28
July 2017 - July 2019 14.41 14.41
January 2020 14.19 163.08 177.27
July 2020 - July 2021 9.94 9.94
September 2021 163.08 163.08
January 2022 6.95 6.95
July 2022 5.65 81.54 87.19
January 2023 - July 2024 3.62 3.62
December 2024 2.82 163.08 165.90
</TABLE>
UNDERWRITING
- --------------------------------------------------------------------------
The Underwriters named below have severally purchased Units in the following
respective amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Unitholder
Explanations--Underwriting" in Part II of this Prospectus.
<TABLE>
<CAPTION>
IM-IT
Name Intermediate
Address Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,600
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
5,000
=================
</TABLE>
<TABLE>
<CAPTION>
Colorado
IM-IT
Name Trust
Address Units
---------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,492
Dain Bosworth Incorporated Dain Bosworth Plaza, 60 South Sixth Street, P15C, Minneapolis, Minnesota 55402 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,092
=========
</TABLE>
<TABLE>
<CAPTION>
Name Louisiana IM-IT
Address Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,421
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,071
=================
</TABLE>
<TABLE>
<CAPTION>
Name Massachusetts
Address IM-IT Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,364
Advest, Inc. 90 State House Square, Hartford, Connecticut 06103 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,014
=================
</TABLE>
<TABLE>
<CAPTION>
Name Missouri IM-IT
Address Trust Units
----------------
<S> <C> <C>
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 1,000
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 676
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 500
Huntleigh Securities Corporation 222 South Central, 3rd Floor, St. Louis, Missouri 63105 250
Oppenheimer & Co., Inc. World Financial Center, 8th Floor, New York, New York 10281 250
Peacock, Hislop, Staley, & Given, Inc. 122 North Kirkwood Road, St. Louis, Missouri 63122 250
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
3,576
================
</TABLE>
<TABLE>
<CAPTION>
Name New Jersey
Address IM-IT Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,390
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
First Investors Corporation 95 Wall Street, 22nd Floor New York, New York 10005 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Oppenheimer & Co., Inc. World Financial Center, 8th Floor, New York, New York 10281 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Ryan, Beck & Co. 80 Main Street, West Orange, New Jersey 07052 100
3,090
=================
</TABLE>
<TABLE>
<CAPTION>
Name New York IM-IT
Address Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,845
B.C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 500
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 250
Advest, Inc. 90 State House Square, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
3,095
=================
</TABLE>
<TABLE>
<CAPTION>
Name Tennessee IM-IT
Address Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,066
J.C. Bradford & Co. 330 Commerce Street, Nashville, Tennessee 37201 250
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
J.J.B. Hilliard, W.L. Lyons, Inc. 501 South Fourth Street, Louisville, Kentucky 40202 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
3,066
=================
</TABLE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
<TABLE>
<CAPTION>
Title
Page
<S> <C>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION 2
IM-IT INTERMEDIATE TRUST 4
COLORADO IM-IT TRUST 6
LOUISIANA IM-IT TRUST 11
MASSACHUSETTS IM-IT TRUST 16
MISSOURI IM-IT TRUST 21
NEW JERSEY IM-IT TRUST 25
NEW YORK IM-IT TRUST 31
TENNESSEE IM-IT TRUST 41
NOTES TO PORTFOLIOS 47
OTHER MATTERS 50
Report of Independent Certified Public Accountants 50
Statements of Condition 51
Equivalent Taxable Estimated Current Return Tables 53
Estimated Cash Flows to Unitholders 57
Underwriting 65
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
PART I
August 29, 1996
Insured Municipals Income Trust, 205th Insured Multi-Series
IM-IT 88th Intermediate
Colorado IM-IT 81
Louisiana IM-IT 17
Massachusetts IM-IT 34
Missouri IM-IT 98
New Jersey IM-IT 114
New York IM-IT 136
Tennessee IM-IT 37
A Wealth of Knowledge A Knowledge of Wealth (sm)
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
This Part I of the Prospectus may not be distributed unless accompanied by
Part II. Both Parts of this Prospectus should be retained for future reference.
July 1996
Van Kampen American Capital
Prospectus Part II
Insured Municipals Income Trust, Insured Multi-Series and
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series
This Part II of the Prospectus may not be distributed unless accompanied by
Part I. Both Parts of this Prospectus should be retained for future reference.
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is excludable under existing law from gross income for
Federal income taxes. In addition, the interest income of each State Trust is,
in the opinion of counsel, exempt to the extent indicated from state and local
taxes, when held by residents of the state where the issuers of Bonds in such
Trust are located. Capital gains, if any, are subject to Federal tax.
The Fund. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an
investment in a diversified portfolio of tax-exempt bonds. The Fund consists
of the underlying separate unit investment trusts set forth in Part I of this
Prospectus. Each Trust initially consists of delivery statements relating to
contracts to purchase securities and, thereafter, will consist of such
securities as may continue to be held (the "Bonds" or "
Securities" ). Such Securities are interest-bearing obligations issued by
or on behalf of municipalities and other governmental authorities, the
interest on which is, in the opinion of recognized bond counsel to the issuing
governmental authority, exempt from all Federal income taxes under the
existing law. In addition, the interest income of each State Trust is, in the
opinion of counsel, exempt to the extent indicated from state and local taxes,
when held by residents of the state where the issuers of Bonds in such Trust
are located. The Bonds in an IM-IT Discount Trust were acquired at prices
which results in an IM-IT Discount Trust portfolio, as a whole, being
purchased at a deep discount from the aggregate par value of such Bonds. Gains
based upon the difference, if any, between the value of the Bonds at maturity,
redemption or sale and their purchase price at a discount (plus earned
original issue discount) will constitute taxable ordinary income with respect
to a Unitholder who is not a dealer with respect to his Units. Except in
specific instances as noted in Part I of this Prospectus, the information
contained in this Part II shall apply to each Trust in its entirety.
"AAA" Rating for the Insured Trusts Only. Insurance guaranteeing the
payments of principal and interest, when due, on the Securities in the
portfolio of each Insured Trust has been obtained from a municipal bond
insurance company either by such Trust or by the issuer of the Bonds involved,
by a prior owner of the Bonds or by the Sponsor prior to the deposit of such
Bonds in an Insured Trust. See "Unitholder Explanations--Insurance on the
Bonds in the Insured Trusts" . Insurance obtained by an Insured Trust
applies only while Bonds are retained in such Trust while insurance obtained
on Preinsured Bonds is effective so long as such Bonds are outstanding. The
Trustee, upon the sale of a Bond insured under an insurance policy obtained by
an Insured Trust, has a right to obtain from the insurer involved permanent
insurance for such Bond upon the payment of a single predetermined insurance
premium and any expenses related thereto from the proceeds of the sale of such
Bond. Insurance relates only to the Bonds in a Trust and not to the Units
offered hereby or to the market value thereof. As a result of such insurance,
the Units of each Insured Trust have received a rating of "AAA" by
Standard & Poor's, A Division of the McGraw-Hill Companies ("Standard &
Poor's" ). Standard & Poor's has indicated that this rating is not a
recommendation to buy, hold or sell Units nor does it take into account the
extent to which expenses of each Insured Trust or sales by each Insured Trust
of Bonds for less than the purchase price paid by such Trust will reduce
payments to Unitholders of the interest and principal required to be paid on
such Bonds. See "Unitholder Explanations--Insurance on the Bonds in the
Insured Trusts" . No representation is made as to any insurer's ability to
meet its commitments.
Units of the Trust are not deposits or obligations of, or guaranteed or
endorsed by, any bank and are not federally insured or otherwise protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency and involve investment risk, including the possible loss of
principal.
Public Offering Price. The Public Offering Price of the Units of each Trust
during the initial offering period includes the aggregate offering price of
the Securities in such Trust's portfolio, an applicable sales charge, cash, if
any, in the Principal Account held or owned by such Trust, and accrued
interest, if any. After the initial public offering period, 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, and accrued
interest, if any. Sales charges for the Trusts in the initial market,
expressed both as a percentage of the Public Offering Price and as a
percentage of the aggregate offering price of the Securities, are set forth
under "Unitholder Explanations--Public Offering--General." For sales
charges in the secondary market, see "Unitholder Explanations--Public
Offering" . If the Securities in each Trust were available for direct
purchase by investors, the purchase price of the Securities would not include
the sales charge included in the Public Offering Price of the Units. During
the initial offering period, the sales charge is reduced on a graduated scale
for sales involving at least 100 Units. If Units were available for purchase
at the close of business on the day before the Date of Deposit (except for an
IM-IT, an IM-IT Discount or a Pennsylvania IM-IT Trust as of 8:00 A.M. Central
Time on the Date of Deposit), the Public Offering Price per Unit would have
been that amount set forth in the "Summary of Essential Financial
Information" in Part I of this Prospectus for each Trust. The minimum
purchase requirement is one Unit except for certain transactions described
under "Trust Administration--Unit Distribution" . See "Unitholder
Explanations--Public Offering" .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Estimated Current Return and Estimated Long-Term Return. The annual Estimated
Current Returns and Estimated Long-Term Returns to Unitholders as of the close
of business on the day before the Date of Deposit (except for an IM-IT, an
IM-IT Discount or a Pennsylvania IM-IT Trust as of 8:00 A.M. Central Time on
the Date of Deposit) under the monthly and semi-annual distribution plans were
as set forth under "Per Unit Information" for each Trust in Part I of
this Prospectus. The methods of calculating Estimated Current Return and
Estimated Long-Term Return are set forth under "Unitholder
Explanations--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, in the case of a State Trust, Federal and state income
tax (if any) and conservation of capital through an investment in diversified
portfolios of Federal and state tax-exempt obligations. There is, of course,
no guarantee that the Fund will achieve its objectives. The Fund may be an
appropriate investment vehicle for investors who desire to participate in a
portfolio of tax-exempt fixed income securities with greater diversification
than they might be able to acquire individually. In addition, securities of
the type deposited in the Fund are often not available in small amounts.
Distribution Options. Purchasers of Units who desire to receive distributions
on a monthly or semi-annual basis may elect to do so at the time of settlement
during the initial public offering period. See "Unitholder
Explanations--Settlement of Bonds in the Trusts--Change of Distribution
Option" . The plan of distribution selected by such purchasers will remain
in effect until changed. Those indicating no choice will be deemed to have
chosen the monthly distribution plan. Record dates for monthly distributions
will be the tenth day of each month and record dates for semi-annual
distributions will be the tenth day of the months indicated under "Per
Unit Information" for the applicable Trust in Part I of this Prospectus.
Distributions will be made on the twenty-fifth day of the month subsequent to
the respective record dates.
Market for Units. Although not obligated to do so, the Sponsor, Van Kampen
American Capital Distributors, Inc., intends to, and certain of the other
Underwriters may, maintain a secondary market for the Units at prices based
upon the aggregate bid prices of the Securities in the respective Trusts plus
interest accrued to the date of settlement; however, during the initial
offering period such prices will be based upon the aggregate offering prices
of the Securities plus interest accrued to the date of settlement. If such a
market is not maintained and no other over-the-counter market is available, a
Unitholder will be able to dispose of his Units only through redemption at
prices based upon the bid prices of the underlying Securities plus interest
accrued to the date of settlement (see "Unitholder Explanations--Public
Offering--Redemption of Units" and "Unitholder Explanations--Public
Offering--Market for Units" ).
Reinvestment Option. Unitholders 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 "
Unitholder Explanations--Public Offering--Reinvestment Option" .
Risk Factors. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the
inability of the issuer or an insurer to pay the principal of or interest on a
bond when due, volatile interest rates, early call provisions, and changes to
the tax status of the Bonds. See "Unitholder Explanations--Settlement of
Bonds in the Trusts--Risk Factors" .
SETTLEMENT OF BONDS IN THE TRUSTS
The Fund. This series of the Insured Municipals Income Trust or the Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust (the "
Fund" ), consists of the underlying separate unit investment trusts
described in Part I of this Prospectus. The Fund was created under the laws of
the State of New York pursuant to a Trust Indenture and Agreement (the "
Trust Agreement" ), dated the Date of Deposit, among Van Kampen American
Capital Distributors, Inc., as Sponsor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory Corp.,
as Evaluator, and The Bank of New York, as Trustee.
The Fund consists of separate portfolios of delivery statements relating to
contracts to purchase interest-bearing obligations issued by or on behalf of
states and territories of the United States, and political subdivisions and
authorities thereof, the interest on which is, in the opinion of recognized
bond counsel to the issuing authorities, excludable from gross income for
Federal income tax under existing law. All issuers of Securities in a State
Trust are located in the State for which such Trust is named or in United
States territories or possessions and their public authorities; consequently,
in the opinion of recognized bond counsel to such State issuers, the related
interest earned on such Securities is exempt to the extent indicated from
state and local taxes of such State. With the exception of the New York and
Pennsylvania Trusts, Units of such Trusts may be purchased only by residents
of the State for which such Trust is named. Units of a New York Trust may be
purchased by residents of New York, Connecticut, Florida and Massachusetts.
Units of a Pennsylvania Trust may be purchased by residents of Pennsylvania,
Connecticut, Florida, Maryland, New York, Ohio and West Virginia. Offerees in
the States of Illinois, Indiana, Virginia and Washington may only purchase
Units of a Trust named for their respective state of residence or an IM-IT,
IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short Intermediate, IM-IT
Discount Series or a National Quality Trust. On the Date of Deposit, the
Sponsor deposited with the Trustee the aggregate principal amount of
Securities in each Trust as indicated under "General
Information--Principal Amount (Par Value) of Securities in Trust" in the
"Summary of Essential Financial Information" in Part I of this
Prospectus. Such Securities consist of delivery statements relating to
contracts for the purchase of certain interest-bearing obligations and cash,
cash equivalents and/or irrevocable letters of credit issued by a financial
institution in the amount required for such purchases. Thereafter, the
Trustee, in exchange for the Securities so deposited, delivered to the Sponsor
the certificates evidencing the ownership of the number of Units in each Trust
as indicated under "Summary of Essential Financial Information" in
Part I of this Prospectus. Unless otherwise terminated as provided herein, the
Trust Agreement for any IM-IT, IM-IT Discount, State (other than a State
Intermediate Laddered Maturity Trust) or National Quality Trust will terminate
at the end of the calendar year prior to the fiftieth anniversary of its
execution, and the Trust Agreement for any IM-IT Limited Maturity Trust, IM-IT
Intermediate Trust, State Intermediate Laddered Maturity Trust or IM-IT Short
Intermediate Trust will terminate at the end of the calendar year prior to the
twentieth anniversary of its execution.
The portfolio of any IM-IT, IM-IT Discount, State (other than a State
Intermediate Laddered Maturity Trust) or National Quality Trust consists of
Bonds maturing approximately 15 to 40 years from the Date of Deposit. The
approximate range of maturities from the Date of Deposit for Bonds in any
IM-IT Limited Maturity Trust, IM-IT Intermediate Trust, State Intermediate
Laddered Maturity Trust and IM-IT Short Intermediate Trust is 12 to 15 years,
5 to 15 years, 5 to 10 years and 3 to 7 years, respectively. The
dollar-weighted average maturity of the Bonds in any IM-IT Intermediate Trust,
State Intermediate Laddered Maturity Trust and IM-IT Short Intermediate Trust
is less than or equal to 10 years, 10 years and 5 years, respectively.
Substantially all of the Bonds in an IM-IT Discount Trust are obligations
which were originally issued at a discount, including "zero coupon"
bonds. See "Federal Tax Status" for a discussion of the tax
consequences of original issue discount.
The portfolio of any State Intermediate Laddered Maturity Trust is structured
so that approximately 20% of the Bonds contained in such portfolio will mature
each year, commencing in approximately the fifth year of the Trust, entitling
each Unitholder to a return of principal. This return of principal may offer
Unitholders the opportunity to respond to changing economic conditions and to
specific financial needs that may arise between the fifth and tenth years of a
State Intermediate Laddered Maturity Trust. However, the flexibility provided
by the return of principal may at the same time eliminate a Unitholder's
ability to reinvest the amount returned at a rate as high as the implicit
yield on the obligations which matured.
Each Unit initially offered represents the fractional undivided interest in
the principal and net income of a Trust indicated under "Summary of
Essential Financial Information" in Part I of this Prospectus. To the
extent that any Units are redeemed by the Trustee, the fractional undivided
interest in a Trust represented by each unredeemed Unit will increase,
although the actual interest in such Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor or the Underwriters,
or until the termination of the Trust Agreement.
Objectives and Securities Selection. The objectives of the Fund are income
exempt from Federal income taxation and, in the case of a State Trust, Federal
and state income taxation and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. A State
Intermediate Laddered Maturity Trust has additional objectives of providing
protection against changes in interest rates and investment flexibility
through an investment in a laddered portfolio of intermediate-term
interest-bearing obligations with maturities ranging from approximately 5 to
10 years in which roughly 20% of the obligations contained in such portfolio
will mature each year commencing in approximately the fifth year of the Trust.
There is, of course, no guarantee that the Trusts will achieve their
respective objectives. The Fund may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed income
securities with greater diversification than they might be able to acquire
individually. In addition, securities of the type deposited in the Fund are
often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Insured Trust has been obtained by such Trust
from either AMBAC Indemnity Corporation ("AMBAC Indemnity" ), Financial
Guaranty Insurance Company ("Financial Guaranty" or "FGIC" ) or
a combination thereof (collectively, the "Portfolio Insurers" ), or by
the issuer of such Bonds, by a prior owner of such Bonds, or by the Sponsor
prior to the deposit of such Bonds in such Trust from certain of the "
Preinsured Bond Insurers" described herein. Insurance obtained by an
Insured Trust is effective only while the Bonds thus insured are held in such
Trust. For information relating to insurance on the bonds, see "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts."
In selecting Securities for the Trusts the following factors, among others,
were considered by the Sponsor: (a) either the Standard & Poor's rating of the
Securities was in no case less than "BBB-" in the case of the Insured
Trusts and "A-" in the case of the Quality Trusts, or the Moody's
Investors Service, Inc. ("Moody's" ) rating of the Securities was in no
case less than "Baa" in the case of the Insured Trusts and "A"
in the case of the Quality Trusts, including provisional or conditional
ratings, respectively, or, if not rated, the Securities had, in the opinion of
the Sponsor, credit characteristics sufficiently similar to the credit
characteristics of interest-bearing tax-exempt obligations that were so rated
as to be acceptable for acquisition by the Fund (see "Description of
Ratings" ), (b) the prices of the Securities relative to other bonds of
comparable quality and maturity, (c) the diversification of Securities as to
purpose of issue and location of issuer and (d) with respect to the Insured
Trusts, the availability and cost of insurance for the prompt payment of
principal and interest, when due, on the Securities. Subsequent to the Date of
Deposit, a Security may cease to be rated or its rating may be reduced below
the minimum required as of the Date of Deposit. Neither event requires
elimination of such Security from the portfolio of a Trust but may be
considered in the Sponsor's determination as to whether or not to direct the
Trustee to dispose of the Security (see "Trust Administration--Fund
Administration and Expenses--Portfolio Administration" ).
Risk Factors. The Trusts include certain types of bonds described below.
Accordingly, an investment in a Trust should be made with an understanding of
the characteristics of and risks associated with such bonds. See "
General" for each Trust in Part I of this Prospectus. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure or defect
in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental entity that
are backed by the taxing power of such entity. All other Bonds in the Trusts
are revenue bonds payable from the income of a specific project or authority
and are not supported by the issuer's power to levy taxes. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue bonds, on the other hand,
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source. There are, of course, variations in the
security of the different Bonds in the Fund, both within a particular
classification and between classifications, depending on numerous factors.
Certain of the Bonds may be obligations which derive their payments from
mortgage loans. Certain of such housing bonds may be FHA insured or may be
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities as a result of events such as sale of the mortgaged
premises, default, condemnation or casualty loss. Because these bonds are
subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will
probably be redeemed prior to their scheduled maturities or even prior to
their ordinary call dates. Extraordinary mandatory redemption without premium
could also result from the failure of the originating financial institutions
to make mortgage loans in sufficient amounts within a specified time period.
Additionally, unusually high rates of default on the underlying mortgage loans
may reduce revenues available for the payment of principal of or interest on
such mortgage revenue bonds. These bonds were issued under Section 103A of the
Internal Revenue Code, which Section contains certain requirements relating to
the use of the proceeds of such bonds in order for the interest on such bonds
to retain its tax-exempt status. In each case the issuer of the bonds has
covenanted to comply with applicable requirements and bond counsel to such
issuer has issued an opinion that the interest on the bonds is exempt from
Federal income tax under existing laws and regulations. Certain issuers of
housing bonds have considered various ways to redeem bonds they have issued
prior to the stated first redemption dates for such bonds. In connection with
the housing bonds held by the Fund, the Sponsor at the Date of Deposit is not
aware that any of the respective issuers of such Bonds are actively
considering the redemption of such Bonds prior to their respective stated
initial call dates.
Certain of the Bonds may be health care revenue bonds. Ratings of bonds issued
for health care facilities are often based on feasibility studies that contain
projections of occupancy levels, revenues and expenses. A facility's gross
receipts and net income available for debt service may be affected by future
events and conditions including, among other things, demand for services and
the ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with other
health care facilities, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the
cost and possible unavailability of malpractice insurance, the funding of
Medicare, Medicaid and other similar third party payor programs, government
regulation and the termination or restriction of governmental financial
assistance, including that associated with Medicare, Medicaid and other
similar third party payor programs.
Certain of the Bonds may be obligations of public utility issuers, including
those selling wholesale and retail electric power and gas. General problems of
such issuers would include the difficulty in financing large construction
programs in an inflationary period, the limitations on operations and
increased costs and delays attributable to environmental considerations, the
difficulty of the capital market in absorbing utility debt, the difficulty in
obtaining fuel at reasonable prices and the effect of energy conservation. In
addition, Federal, state and municipal governmental authorities may from time
to time review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Bonds in the
portfolio to make payments of principal and/or interest on such Bonds.
Certain of the Bonds may be obligations of issuers whose revenues are derived
from the sale of water and/or sewerage services. Such Bonds are generally
payable from user fees. The problems of such issuers include the ability to
obtain timely and adequate rate increases, population decline resulting in
decreased user fees, the difficulty of financing large construction programs,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the increasing difficulty of obtaining or
discovering new supplies of fresh water, the effect of conservation programs
and the impact of "no-growth" zoning ordinances.
Certain of the Bonds may be industrial revenue bonds ("IRBs" ). IRBs
have generally been issued under bond resolutions pursuant to which the
revenues and receipts payable under the arrangements with the operator of a
particular project have been assigned and pledged to purchasers. In some
cases, a mortgage on the underlying project may have been granted as security
for the IRBs. Regardless of the structure, payment of IRBs is solely dependent
upon the creditworthiness of the corporate operator of the project or
corporate guarantor. Corporate operators or guarantors may be affected by many
factors which may have an adverse impact on the credit quality of the
particular company or industry. These include cyclicality of revenues and
earnings, regulatory and environmental restrictions, litigation resulting from
accidents or environmentally-caused illnesses, extensive competition and
financial deterioration resulting from a corporate restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may result in
the operator of a project becoming highly leveraged which may impact on such
operator's creditworthiness which in turn would have an adverse impact on the
rating and/or market value of such Bonds. Further, the possibility of such a
restructuring may have an adverse impact on the market for and consequently
the value of such Bonds, even though no actual takeover or other action is
ever contemplated or effected.
Certain of the Bonds may be obligations that are secured by lease payments of
a governmental entity (hereinafter called "lease obligations" ). Lease
obligations are often in the form of certificates of participation. Although
the lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to appropriate
for and make the payments due under the lease obligation. However, certain
lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease payments in future years
unless money is appropriated for such purpose on a yearly basis. A
governmental entity that enters into such a lease agreement cannot obligate
future governments to appropriate for and make lease payments but covenants to
take such action as is necessary to include any lease payments due in its
budgets and to make the appropriations therefor. A governmental entity's
failure to appropriate for and to make payments under its lease obligation
could result in insufficient funds available for payment of the obligations
secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult.
Certain of the Bonds may be obligations of issuers which are, or which govern
the operation of, schools, colleges and universities and whose revenues are
derived mainly from ad valorem taxes or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems relating
to school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby creating a
disparity in educational funds available to schools in wealthy areas and
schools in poor areas. Litigation or legislation on this issue may affect the
sources of funds available for the payment of school bonds in the Trusts.
General problems relating to college and university obligations include the
prospect of a declining percentage of the population consisting of "
college" age individuals, possible inability to raise tuitions and fees
sufficiently to cover increased operating costs, the uncertainty of continued
receipt of Federal grants and state funding, and government legislation or
regulations which may adversely affect the revenues or costs of such issuers.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation
of facilities such as airports, bridges, turnpikes, port authorities,
convention centers and arenas. The major portion of an airport's gross
operating income is generally derived from fees received from signatory
airlines pursuant to use agreements which consist of annual payments for
leases, occupancy of certain terminal space and service fees. Airport
operating income may therefore be affected by the ability of the airlines to
meet their obligations under the use agreements. From time to time the air
transport industry has experienced significant variations in earnings and
traffic, due to increased competition, excess capacity, increased costs,
deregulation, traffic constraints and other factors, and several airlines have
experienced severe financial difficulties. Similarly, payment on Bonds related
to other facilities is dependent on revenues from the projects, such as user
fees from ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in revenues due to
such factors as increased cost of maintenance, decreased use of a facility,
lower cost of alternative modes of transportation, scarcity of fuel and
reduction or loss of rents.
Certain of the Bonds may be obligations which are payable from and secured by
revenues derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation of a
project; contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of a project or
technological or other unavoidable changes adversely affecting the operation
of a project; administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform; or
impose unreasonable burdens or excessive liabilities. The Sponsor cannot
predict the causes or likelihood of the redemption of resource recovery bonds
in a Trust prior to the stated maturity of the Bonds.
Certain of the Bonds may have been acquired at a market discount from par
value at maturity. The coupon interest rates on the discount bonds at the time
they were purchased and deposited in a Trust were lower than the current
market interest rates for newly issued bonds of comparable rating and type. If
such interest rates for newly issued comparable bonds increase, the market
discount of previously issued bonds will become greater, and if such interest
rates for newly issued comparable bonds decline, the market discount of
previously issued bonds will be reduced, other things being equal. Investors
should also note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value of bonds
purchased at a market discount will decrease faster than bonds purchased at a
market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium bonds and the prepayment benefit for lower yielding,
discount bonds will be reduced. A bond purchased at a market discount and held
to maturity will have a larger portion of its total return in the form of
taxable income and capital gain and less in the form of tax-exempt interest
income than a comparable bond newly issued at current market rates. See "
Federal Tax Status." Market discount attributable to interest changes does
not indicate a lack of market confidence in the issue.
Certain of the Bonds may be "zero coupon" bonds. See footnote (6) in
"Notes to Portfolios" in Part I of this Prospectus. Zero coupon bonds
are purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable
to reinvest the income on such obligation at a rate as high as the implicit
yield on the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason, zero
coupon bonds are subject to substantially greater price fluctuations during
periods of changing market interest rates than are securities of comparable
quality which pay interest.
Certain of the Bonds may have been purchased on a "when, as and if
issued" or "delayed delivery" basis. See footnote (5) in "
Notes to Portfolios" in Part I of this Prospectus. The delivery of any
such Securities may be delayed or may not occur. Interest on these Securities
begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Securities are actually delivered to the Fund
after their respective expected dates of delivery, Unitholders who purchase
their Units prior to the date such Securities are actually delivered to the
Trustee would be required to adjust their tax basis in their Units for a
portion of the interest accruing on such Securities during the interval
between their purchase of Units and the actual delivery of such Securities. As
a result of any such adjustment, the Estimated Current Returns during the
first year would be slightly lower than those stated herein which would be the
returns after the first year, assuming the portfolio of a Trust and estimated
annual expenses other than that of the Trustee (which may be reduced in the
first year only) do not vary from that set forth under "Per Unit
Information" for the applicable Trust in Part I of this Prospectus.
Unitholders will be "at risk" with respect to all Securities in the
portfolios including "when, as and if issued" and "delayed
delivery" Securities (i.e., may derive either gain or loss from
fluctuations in the evaluation of such Securities) from the date they commit
for Units. For a discussion of the Sponsor's obligations in the event of the
failure of any contract for the purchase of any of the Securities and limited
right to substitute other tax-exempt bonds to replace any failed contract, see
"Replacement Bonds" .
Certain of the Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for
retirement of debt. A callable debt obligation is one which is subject to
redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a debt obligation is redeemed, at or before
maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation is
at a premium over par than when it is at a discount from par. The exercise of
redemption or call provisions will (except to the extent the proceeds of the
called Bonds are used to pay for Unit redemptions) result in the distribution
of principal and may result in a reduction in the amount of subsequent
interest distributions; it may also affect the current return on Units of the
Trust involved. Each Trust portfolio contains a listing of the sinking fund
and call provisions, if any, with respect to each of the debt obligations.
Extraordinary optional redemptions and mandatory redemptions result from the
happening of certain events. Generally, events that may permit the
extraordinary optional redemption of Bonds or may require the mandatory
redemption of Bonds include, among others: a final determination that the
interest on the Bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the Bonds were
used; an exercise by a local, state or Federal governmental unit of its power
of eminent domain to take all or substantially all of the project for which
the proceeds of the Bonds were used; changes in the economic availability of
raw materials, operating supplies or facilities or technological or other
changes which render the operation of the project for which the proceeds of
the Bonds were used uneconomic; changes in law or an administrative or
judicial decree which renders the performance of the agreement under which the
proceeds of the Bonds were made available to finance the project impossible or
which creates unreasonable burdens or which imposes excessive liabilities,
such as taxes, not imposed on the date the Bonds are issued on the issuer of
the Bonds or the user of the proceeds of the Bonds; an administrative or
judicial decree which requires the cessation of a substantial part of the
operations of the project financed with the proceeds of the Bonds; an
overestimate of the costs of the project to be financed with the proceeds of
the Bonds resulting in excess proceeds of the Bonds which may be applied to
redeem Bonds; or an underestimate of a source of funds securing the Bonds
resulting in excess funds which may be applied to redeem Bonds. The issuer of
certain Bonds in a Trust may have sold or reserved the right to sell, upon the
satisfaction of certain conditions, to third parties all or any portion of its
rights to call Bonds in accordance with the stated redemption provisions of
such Bonds. In such a case the issuer no longer has the right to call the
Bonds for redemption unless it reacquires the rights from such third party. A
third party pursuant to these rights may exercise the redemption provisions
with respect to a Bond at a time when the issuer of the Bond might not have
called a Bond for redemption had it not sold such rights. The Sponsor is
unable to predict all of the circumstances which may result in such redemption
of an issue of Bonds. See "Portfolio" for each Trust and footnote (3)
in the "Notes to Portfolios" in Part I 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.
To the best knowledge of the Sponsor, there is no litigation pending as of the
Date of Deposit in respect of any Securities which might reasonably be
expected to have a material adverse effect upon the Fund or any of the Trusts.
At any time after the Date of Deposit, litigation may be initiated on a
variety of grounds with respect to Securities in the Fund. Such litigation,
as, for example, suits challenging the issuance of pollution control revenue
bonds under environmental protection statutes, may affect the validity of such
Securities or the tax-free nature of the interest thereon. While the outcome
of litigation of such nature can never be entirely predicted, the Fund has
received or will receive opinions of bond counsel to the issuing authorities
of each Security on the date of issuance to the effect that such Securities
have been validly issued and that the interest thereon is exempt from Federal
income tax. In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to meet obligations undertaken
with respect to the Securities.
Replacement Bonds. Because certain of the Securities in the Fund may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can be
given that any Trust will retain for any length of time its present size and
composition. Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Security. In the event of a failure
to deliver any Security that has been purchased for the Fund under a contract,
including those Securities purchased on a "when, as and if issued"
basis ("Failed Bonds" ), the Sponsor is authorized under the Trust
Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds" ) to make up the original corpus of the Fund.
The Replacement Bonds must be purchased within 20 days after delivery of the
notice of the failed contract and the purchase price (exclusive of accrued
interest) may not exceed the amount of funds reserved for the purchase of the
Failed Bonds. The Replacement Bonds (i) must be tax-exempt bonds issued by
states or territories of the United States or political subdivisions thereof
and, in the case of replacement of bonds in a State Trust, shall have the
benefit of an exemption from state taxation of interest to an extent equal to
or greater than that of the bonds they replace, (ii) must have a fixed
maturity date of at least 10 years in the case of an IM-IT, IM-IT Discount,
State (other than a State Intermediate Laddered Maturity Trust) or National
Quality Trust or, in the case of an IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity or IM-IT Short Intermediate
Trust, must have a fixed maturity date within the range set forth under "
Unitholder Explanations--Settlement of Bonds in the Trusts--The Fund" ,
(iii) must be purchased at a price that results in a yield to maturity and in
a current return, in each case as of the Date of Deposit, at least equal to
that of the Failed Bonds, (iv) shall not be "when, as and if issued"
bonds, (v) must be rated "BBB-" or better in the case of the Insured
Trusts and "A-" or better in the case of the Quality Trusts by
Standard & Poor's or "Baa" or better in the case of the Insured Trusts
and "A" or better in the case of the Quality Trusts by Moody's and
(vi) with respect to each Insured Trust, must be insured by one of the
Preinsured Bond Insurers or be eligible for (and when acquired be insured
under) the insurance obtained by such Insured Trust. Whenever a Replacement
Bond has been acquired for the Fund, the Trustee shall, within five days
thereafter, notify all Unitholders of the affected Trust of the acquisition of
the Replacement Bond and shall, on the next monthly distribution date which is
more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to the affected Trust of the Failed Bond exceeded the
cost of the Replacement Bond plus accrued interest. Once the original corpus
of a Trust is acquired, the Trustee will have no power to vary the investment
of the Trust; i.e., the Trust will have no managerial power to take advantage
of market variation to improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Bonds to all Unitholders of the affected Trust and distribute the principal
and accrued interest (at the coupon rate of such Failed Bonds to the date the
Failed Bonds are removed from the Fund) attributable to such Failed Bonds not
more than 30 days after such removal or such earlier time as the Trustee in
its sole discretion deems to be in the interest of the Unitholders. All such
interest paid to a Unitholder which accrued after the expected date of
settlement for purchase of his Units will be paid by the Sponsor and
accordingly will not be treated as tax-exempt income. In the event a
Replacement Bond should not be acquired by the Fund, the Estimated Net Annual
Interest Income per Unit for the affected Trust would be reduced and the
Estimated Current Return and Estimated Long-Term Return thereon might be
lowered. In addition, Unitholders should be aware that they may not be able at
the time of receipt of such principal to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such proceeds
were earning to Unitholders in the affected Trust.
Distributions. Distributions of interest received by the Fund, pro rated on an
annual basis, will be made on a monthly basis unless the Unitholder elects to
receive them semi-annually. The first such distribution will be in the amount
indicated under "Per Unit Information" for the applicable Trust in
Part I of this Prospectus and will be made on the twenty-fifth day of the
month indicated under "Initial Distribution" therein to Unitholders of
record on the tenth day of such month. The first distribution of funds from
the Principal Account, if any, will be made on the first semi-annual
distribution date to Unitholders of record on the first semi-annual record
date, and thereafter such distributions will be made on a semi-annual basis,
except under certain special circumstances (see "Unitholder
Explanations--Public Offering--Distributions of Interest and Principal" ).
Change of Distribution Option. The plan of distribution selected by a
Unitholder will remain in effect until changed. Unitholders purchasing Units
in the secondary market will initially receive distributions in accordance
with the election of the prior owner. Unitholders may change the plan of
distribution in which they are participating. For convenience of Unitholders,
the Trustee will furnish a card for this purpose; cards may also be obtained
upon request from the Trustee. Unitholders desiring to change their plan of
distribution may so indicate on the card and return it together with their
certificate and such other documentation that the Trustee may then require, to
the Trustee. Certificates should only be sent by registered or certified mail
to minimize the possibility of their being lost or stolen. If the card and
certificate are properly presented to the Trustee, the change will become
effective as of the opening of business on the first day after the next
succeeding semi-annual record date and will be effective, unless further
changed, for all subsequent distributions.
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of each Trust is evidenced by separate registered
certificates executed by the Trustee and the Sponsor 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 to the Trustee and a new certificate will be
issued, at no charge to the Unitholder, to reflect the currently effective
plan of distribution.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate re-issued (other than
as a result of a change in plan of distribution) or transferred and to pay any
governmental charge that may be imposed in connection with each such transfer
or interchange. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity, evidence of
ownership and payment of expenses incurred. Mutilated certificates must be
surrendered to the Trustee for replacement.
ESTIMATED CURRENT RETURNS AND ESTIMATED LONG-TERM RETURNS
As of the close of business on the day before the Date of Deposit (except for
an IM-IT, an IM-IT Discount or a Pennsylvania IM-IT Trust as of 8:00 A.M.
Central Time on the Date of Deposit) the Estimated Current Returns and the
Estimated Long-Term Returns, under the monthly and semi-annual distribution
plans, were as set forth in the "Per Unit Information" for each Trust
in Part I of this Prospectus. Estimated Current Return is calculated by
dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. Estimated
Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in a Trust and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of a Trust will change, there
is no assurance that the present Estimated Long-Term Return will be realized
in the future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while the
Estimated Current Return calculation includes only net annual interest income
and Public Offering Price.
In order to acquire certain of the Securities contracted for by the Sponsor
for deposit in the Fund, it may be necessary for the Sponsor or Trustee to pay
on the settlement dates for delivery of such Securities amounts covering
accrued interest on such Securities which exceed the amounts which will be
made available through cash furnished by the Sponsor on the Date of Deposit,
which amount of cash may exceed the interest which would accrue to the First
Settlement Date. The Trustee has agreed to pay for any amounts necessary to
cover any such excess and will be reimbursed therefor when funds become
available from interest payments on the particular Securities with respect to
which such payments may have been made. Also, since interest on any "when,
as and if issued" Securities does not begin accruing as tax-exempt
interest income to the benefit of Unitholders until the date of delivery, the
Trustee may reduce its fee (and to the extent necessary pay Trust expenses) in
order to maintain (or in some cases approach) the same estimated net annual
interest incomes during the first year of the Trusts' operations as described
under "Per Unit Information" for the applicable Trust in Part I of
this Prospectus.
ACCRUED INTEREST
Accrued interest is an accumulation of unpaid interest on securities which
generally is paid semi-annually, although each 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
a Trust the amount, if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid by Unitholders, the Trustee will advance the amount of accrued
interest to the Sponsor as the Unitholder of record as of the First Settlement
Date. Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. See "Public
Offering--Distributions of Interest and Principal."
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholder
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the funds held in the Interest Account
for distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits thereby.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the aggregate offering
price of the Securities in such Trust's portfolio, a sales charge of 4.9% of
the Public Offering Price (5.152% of the aggregate offering price of the
Securities) for an IM-IT, a State (other than a State Intermediate Laddered
Maturity Trust) or a National Quality Trust, 4.3% of the Public Offering Price
(4.493% of the aggregate offering price of the Securities) for an IM-IT
Limited Maturity Trust, 4.0% of the Public Offering Price (4.167% of the
aggregate offering price of the Securities) for an IM-IT Discount Trust, 3.9%
of the Public Offering Price (4.058% of the aggregate offering price of the
Securities) for an IM-IT Intermediate Trust, 3.0% of the Public Offering Price
(3.093% of the aggregate offering price of the Securities) for a State
Intermediate Laddered Maturity Trust and 2.0% of the Public Offering Price
(2.041% of the aggregate offering price of the Securities) for an IM-IT Short
Intermediate Trust, cash, if any, in the Principal Account held or owned by
such Trust, and accrued interest, if any. After the initial public offering
period, the secondary market public offering price is based on the bid prices
of the 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, and accrued interest, if any. For purposes of
computation, Bonds will be deemed to mature on their expressed maturity dates
unless: (a) the Bonds have been called for redemption or are subject to
redemption at 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 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 a Trust. Expressed as a percent of
the Public Offering Price, the sales charge on a Trust consisting entirely of
a portfolio of Bonds with 15 years to maturity would be 4.80%. The sales
charges in the table above do not apply to IM-IT Discount Trusts. The
applicable secondary market sales charges for an IM-IT Discount Trust are set
forth in Part I of any Prospectus by which such Trust is offered. The sales
charge applicable to quantity purchases during the initial offering period is,
however, reduced on a graduated basis to any person acquiring 100 or more
Units as follows:
<TABLE>
<CAPTION>
Dollar Amount of Sales
Charge Reduction Per Unit
IM-IT, State (other than
a State Intermediate
Laddered Maturity Trust) IM-IT Short
Aggregate Number of and National Quality Intermediate IM-IT Discount
Units Purchased Trusts Trust Trust Other Trusts
<S> <C> <C> <C> <C>
100-249 Units......... $ 4.00 $ 2.00 $ 2.00 $ 4.00
250-499 Units......... $ 6.00 $ 3.00 $ 4.00 $ 6.00
500-999 Units......... $ 14.00 $ 4.00 $ 6.00 $ 9.00
1,000 or more Units... $ 19.00 $ 6.00 $ 8.00 $ 11.00
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for such quantity purchases. See "Public
Offering--Unit Distribution" . This reduced sales charge structure will
apply on all purchases by the same person from any one Underwriter or dealer
of units of Van Kampen American Capital-sponsored unit investment trusts which
are being offered in the initial offering period (a) on any one day (the "
Initial Purchase Date" ) or (b) on any day subsequent to the Initial
Purchase Date, if (1) the units purchased are of a unit investment trust
purchased on the Initial Purchase Date, and (2) the person purchasing the
units purchased a sufficient amount of units on the Initial Purchase Date to
qualify for a reduced sales charge on such date. In the event units of more
than one trust are purchased on the Initial Purchase Date, the aggregate
dollar amount of such purchases will be used to determine whether purchasers
are eligible for a reduced sales charge. Such aggregate dollar amount will be
divided by the public offering price per unit (on the day preceding the date
of purchase) of each respective trust purchased to determine the total number
of units which such amount could have purchased of each individual trust.
Purchasers must then consult the applicable trust's prospectus to determine
whether the total number of units which could have been purchased of a
specific trust would have qualified for a reduced sales charge and, if so
qualified, the amount of such reduction. Assuming a purchaser qualifies for a
sales charge reduction or reductions, to determine the applicable sales charge
reduction or reductions it is necessary to accumulate all purchases made on
the Initial Purchase Date and all purchases made in accordance with (b) above.
Units purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser under 21 years of age will be deemed for the purposes
of calculating the applicable sales charge to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a trustee or
other fiduciary purchasing securities for one or more trust estate or
fiduciary accounts. Employees of Van Kampen American Capital Distributors Inc.
and its affiliates may purchase Units of the Trust at the current Public
Offering Price less the underwriting commission or less the dealer's
concession in the absence of an underwriting commission. Registered
representatives of selling Underwriters may purchase Units of the Fund at the
current Public Offering Price less the underwriting commission during the
initial offering period and less the dealer's concession for secondary market
transactions. Registered representatives of selling brokers, dealers, or
agents may purchase Units of the Fund at the current Public Offering Price
less the dealer's concession during the initial offering period and for
secondary market transactions.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Trust
Administration--General--Unit Distribution" ) by (1) investors who purchase
Units through registered investment advisers, certified financial planners and
registered broker-dealers who in each case either charge periodic fees for
financial planning, investment advisory or asset management services, or
provide such services in connection with the establishment of an investment
account for which a comprehensive "wrap fee" charge is imposed, (2)
bank trust departments investing funds over which they exercise exclusive
discretionary investment authority and that are held in a fiduciary, agency,
custodial or similar capacity, (3) any person who for at least 90 days, has
been an officer, director or bona fide employee of any firm offering Units for
sale to investors or their immediate family members (as described above) and
(4) officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything
to the contrary in this Prospectus, such investors, bank trust departments,
firm employees and bank holding company officers and directors who purchase
Units through this program will not receive sales charge reductions for
quantity purchases.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
Part I of this Prospectus in accordance with fluctuations in the prices of the
underlying Securities in each Trust.
As indicated above, the price of the Units as of the date the Securities were
deposited in each Trust was determined by adding to the aggregate offering
price of the Securities of a Trust an amount equal to the applicable sales
charge expressed as a percentage of the aggregate offering price of the
Securities and dividing the sum so obtained by the number of Units
outstanding. This computation produced a gross underwriting commission equal
to such sales charge expressed as a percentage of the Public Offering Price.
Such price determination as of the close of business on the day before the
Date of Deposit (except for an IM-IT, IM-IT Discount or a Pennsylvania IM-IT
Trust as of 8:00 A.M. Central Time on the Date of Deposit) was made on the
basis of an evaluation of the Securities in each Trust prepared by Interactive
Data Corporation, a firm regularly engaged in the business of evaluating,
quoting or appraising comparable securities. After the close of business on
the day before the Date of Deposit (except for an IM-IT, IM-IT Discount or a
Pennsylvania IM-IT Trust after 8:00 A.M. Central Time on the Date of Deposit)
and during the period of initial offering, the Evaluator will appraise or
cause to be appraised daily the value of the underlying Securities of each
Trust as of the Evaluation Time on days the New York Stock Exchange is open
for business and will adjust the Public Offering Price of the Units
commensurate with such appraisal. Such Public Offering Price will be effective
for all orders received at or prior to the Evaluation Time on each such day.
Orders received by the Trustee, Sponsor or any Underwriter for purchases,
sales or redemptions after that time, or on a day when the New York Stock
Exchange is closed, will be held until the next determination of price. For
secondary market sales the Public Offering Price per Unit will be equal to the
aggregate bid price of the Securities in the Trust plus an amount equal to the
applicable secondary market sales charge expressed as a percentage of the
aggregate bid price of the Securities and dividing the sum so attained by the
number of Units then outstanding. This computation produces a gross commission
equal to such sales charge expressed as a percentage of the Public Offering
Price. For secondary market purposes such appraisal and adjustment with
respect to a Trust will be made by the Evaluator as of the Evaluation Time on
days in which the New York Stock Exchange is open for each day on which any
Unit of such Trust is tendered for redemption and it shall determine the
aggregate value of any Trust as of the Evaluation Time on such other days as
may be necessary.
The aggregate price of the Securities in each Trust has been and will be
determined on the basis of bid prices or offering prices, as is appropriate,
(a) on the basis of current market prices for the Securities obtained from
dealers or brokers who customarily deal in bonds comparable to those held by
the Fund; (b) if such prices are not available for any particular Securities,
on the basis of current market prices for comparable bonds; (c) by causing the
value of the Securities to be determined by others engaged in the practice of
evaluation, quoting or appraising comparable bonds; or (d) by any combination
of the above. Market prices of the Securities will generally fluctuate with
changes in market interest rates. Unless Bonds are in default in payment of
principal or interest or in significant risk of such default, the Evaluator
will not attribute any value to the insurance obtained by an Insured Trust, if
any.
The Evaluator will consider in its evaluation of Bonds which are in default in
payment of principal or interest or, in the Sponsor's opinion, in significant
risk of such default (the "Defaulted Bonds" ) the value of the
insurance guaranteeing interest and principal payments. The value of the
insurance will be equal to the difference between (i) the market value of
Defaulted Bonds assuming the exercise of the right to obtain Permanent
Insurance (less the insurance premiums and related expenses attributable to
the purchase of Permanent Insurance) and (ii) the market value of such
Defaulted Bonds not covered by Permanent Insurance. In addition, the Evaluator
will consider the ability of the affected Portfolio Insurer to meet its
commitments under any Trust insurance policy, including the commitments to
issue Permanent Insurance. It is the position of the Sponsor that this is a
fair method of valuing the Bonds and the insurance obtained by an Insured
Trust and reflects a proper valuation method in accordance with the provisions
of the Investment Company Act of 1940. No value has been ascribed to insurance
obtained by an Insured Trust, if any, as of the date of this Prospectus.
The initial or primary Public Offering Price of the Units is equal to the
offering price per Unit of the underlying Securities in each Trust plus the
applicable sales charge plus interest accrued but unpaid from the First
Settlement Date to the date of settlement. The secondary market Public
Offering Price is equal to the bid price per Unit of the Securities in each
Trust plus the applicable sales charge plus accrued interest. The offering
price of Securities in each Trust may be expected to average approximately
0.5%-1% more than the bid price of such Securities. On the Date of Deposit,
the offering side evaluations of the Securities in the Trusts were higher than
the bid side evaluations of such Securities by the respective amounts
indicated in "Notes to Portfolios" in Part I of this Prospectus.
Although payment is normally made three business days following the order for
purchase, payment may be made prior thereto. A person will become the owner of
Units on the date of settlement provided payment has been received. Cash, if
any, made available to the Sponsor prior to the date of settlement for the
purchase of Units may be used in the Sponsor's business and may be deemed to
be a benefit to the Sponsor, subject to the limitations of the Securities
Exchange Act of 1934. Delivery of certificates representing Units so ordered
will be made three business days following such order or shortly thereafter.
See "Redemption of Units" below for information regarding the ability
to redeem Units ordered for purchase.
Market for Units. During the initial public offering period, the Sponsor
and/or certain of the Underwriters intend to offer to purchase Units at a
price equivalent to the Public Offering Price which is based upon the
aggregate offering price per Unit of the underlying Securities in each Trust
plus accrued interest to the date of settlement less the related sales
commission. Afterward, although not obligated to do so, the Sponsor intends
to, and certain of the other Underwriters may, maintain a market for the Units
offered hereby and to offer continuously to purchase such Units at prices,
subject to change at any time, based upon the aggregate bid prices of the
Securities in the portfolio of each Trust plus interest accrued to the date of
settlement and plus any principal cash on hand, less any amounts representing
taxes or other governmental charges payable out of the Trust and less any
accrued Trust expenses. If the supply of Units exceeds demand or if some other
business reason warrants it, the Sponsor and/or the Underwriters may either
discontinue all purchases of Units or discontinue purchases of Units at such
prices. In the event that a market is not maintained for the Units and the
Unitholder cannot find another purchaser, a Unitholder of any Trust desiring
to dispose of his Units may be able to dispose of such Units only by tendering
them to the Trustee for redemption at the Redemption Price, which is based
upon the aggregate bid price of the Securities in the portfolio of such Trust
plus any accrued interest. The aggregate bid prices of the underlying
Securities in a Trust are expected to be less than the related aggregate
offering prices. See "Redemption of Units" below. A Unitholder who
wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in existence any price in
excess of the Redemption Price and, if so, the amount thereof.
Distributions of Interest and Principal. Interest received by the Fund,
including that part of the proceeds of any disposition of Securities which
represents accrued interest, is credited by the Trustee to the Interest
Account for the appropriate Trust. Other receipts are credited to the
Principal Account for the appropriate Trust. Interest received by the Fund
after deduction of amounts sufficient to reimburse the Trustee, without
interest, for any amounts advanced and paid to the Sponsor as the Unitholder
of record as of the First Settlement Date (see "Public Offering--Offering
Price" above) will be distributed on or shortly after the twenty-fifth day
of each month on a pro rata basis to Unitholders of record of a Trust as of
the preceding record date who are entitled to distributions at that time under
the plan of distributions chosen. All distributions will be net of applicable
expenses. The pro rata share of cash in the Principal Account of a Trust will
be computed as of the date set forth under "Per Unit Information" for
the applicable Trust in Part I of this Prospectus, and thereafter as of the
semi-annual record date, and distributions to the Unitholders as of such
record date will be made on or shortly after the 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 any Principal or
Interest Account (but may itself earn interest thereon and therefore benefits
from the use of such funds) nor to make a distribution from the Principal
Account unless the amount available for distribution therein shall equal at
least $1.00 per Unit. However, should the amount available for distribution in
the Principal Account equal or exceed $10.00 per Unit, the Trustee will make a
special distribution from the Principal Account on the next succeeding monthly
distribution date to holders of record on the related monthly record date.
The distribution to the Unitholders of a Trust as of each record date after
the First Settlement Date will be made on the following distribution date or
shortly thereafter and shall consist of an amount substantially equal to such
portion of the Unitholder's pro rata share of the estimated net annual
interest income in the Interest Account of such Trust after deducting
estimated expenses attributable as is consistent with the distribution plan
chosen. Because interest payments are not received by the Fund at a constant
rate throughout the year, such interest distribution may be more or less than
the amount credited to such Interest Account as of the record date. For the
purpose of minimizing fluctuations in the distributions from an Interest
Account, the Trustee is authorized to advance such amounts as may be necessary
to provide interest distributions of approximately equal amounts. The Trustee
shall be reimbursed for any such advances from funds in the applicable
Interest Account on the ensuing record date. Persons who purchase Units
between a record date and a distribution date will receive their first
distribution on the second distribution date after the purchase, under the
applicable plan of distribution.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the Interest Account and, to the extent funds are not sufficient therein, from
the Principal Account, amounts necessary to pay the expenses of the Fund (as
determined on the basis set forth under "Trust Administration--Fund
Administration and Expenses" ). The Trustee also may withdraw from said
Accounts such amounts, if any, as it deems necessary to establish a reserve
for any governmental charges payable out of the Fund. Amounts so withdrawn
shall not be considered a part of the Fund's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
Accounts. In addition, the Trustee may withdraw from the Interest and
Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Bonds and redemptions of Units by the Trustee.
Reinvestment Option. Unitholders of 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.
Unitholders of New York Trusts, other than residents of Massachusetts, may
elect to have distributions reinvested in shares of First Investors New York
Insured Tax Free Fund, Inc. subject to a sales charge of $1.50 per $100
reinvested (paid to First Investors Management Company, Inc.).
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee, at its Unit Investment Trust Division, 101 Barclay
Street, 20th Floor, New York, New York 10286, of the certificates representing
the Units to be redeemed, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
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 by
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 the Evaluation Time on days of trading on the New York
Stock Exchange, the date of tender is the next day on which such Exchange is
open for trading and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the Redemption Price computed on that
day.
Under regulations issued by the Internal Revenue Service, the Trustee will be
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, such Unitholder should provide a tax identification
number to the Trustee in order to avoid this possible "back-up
withholding" in the event the Trustee has not been previously provided
such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of such Trust or, if the balance therein is insufficient, from the
Principal Account of such Trust. All other amounts will be withdrawn from the
Principal Account of such Trust. The Trustee is empowered to sell underlying
Securities of a Trust in order to make funds available for redemption. Units
so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the bid price of the Securities in
each Trust, while the initial and primary Public Offering Price of Units will
be determined on the basis of the offering price of the Securities in each
Trust, as of the Evaluation Time on days of trading on the New York Stock
Exchange on the date any such determination is made. On the Date of Deposit
the Public Offering Price per Unit (which is based on the offering prices of
the Bonds in each Trust and includes the sales charge) exceeded the value at
which Units could have been redeemed (based upon the current bid prices of the
Securities in such Trust) by the amount shown under "Summary of Essential
Financial Information" in Part I of this Prospectus. While the Trustee has
the power to determine the Redemption Price per Unit when Units are tendered
for redemption, such authority has been delegated to the Evaluator which
determines the price per Unit on a daily basis. The Redemption Price per Unit
is the pro rata share of each Unit in each Trust on the basis of (i) the cash
on hand in such Trust or moneys in the process of being collected, (ii) the
value of the Securities in such Trust based on the bid prices of the
Securities therein, except for cases in which the value of insurance has been
included, (iii) interest accrued thereon, less (a) amounts representing taxes
or other governmental charges payable out of such Trust and (b) the accrued
expenses of such Trust. The Evaluator may determine the value of the
Securities in each Trust by employing any of the methods set forth in "
Public Offering--Offering Price" . In determining the Redemption Price per
Unit no value will be assigned to the portfolio insurance maintained on the
Bonds in an Insured Trust unless such Bonds are in default in payment of
principal or interest or in significant risk of such default. For a
description of the situations in which the Evaluator may value the insurance
obtained by the Insured Trusts, see "Public Offering--Offering Price"
above.
The price at which Units may be redeemed could be less than the price paid by
the Unitholder and may be less than the par value of the Securities
represented by the Units so redeemed. As stated above, the Trustee may sell
Securities to cover redemptions. When Securities are sold, the size and
diversity of the affected Trust will be reduced. Such sales may be required at
a time when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or during which the Securities and Exchange
Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the
Securities in the Trusts is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
Reports Provided. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and
the amount of other receipts (received since the preceding distribution), if
any, being distributed expressed in each case as a dollar amount representing
the pro rata share of each Unit of a Trust outstanding. For as long as the
Trustee deems it to be in the best interests of the Unitholders, the accounts
of each Trust shall be audited, not less frequently than annually, by
independent certified public accountants and the report of such accountants
shall be furnished by the Trustee to Unitholders of such Trusts upon request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a registered Unitholder of a Trust a statement (i) as to the Interest
Account: interest received (including amounts representing interest received
upon any disposition of Securities) and the percentage of such interest by
states in which the issuers of the Securities are located, deductions for
applicable taxes and for fees and expenses of such Trust, for purchases of
Replacement Bonds and for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar year;
(ii) as to the Principal Account: the dates of disposition of any Securities
and the net proceeds received therefrom (excluding any portion representing
accrued interest), the amount paid for purchases of Replacement Bonds and for
redemptions of Units, if any, deductions for payment of applicable taxes and
fees and expenses of the Trustee, the amount of "when issued" interest
treated as a return of capital, if any, and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit based upon the last computation
thereof made during such calendar year; and (v) amounts actually distributed
during such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding. In order to comply
with Federal and state tax reporting requirements, Unitholders will be
furnished, upon request to the Trustee, evaluations of the Securities in a
Trust furnished to it by the Evaluator. Each distribution statement of a Trust
will reflect pertinent information in respect of the other plan of
distribution so that Unitholders may be informed regarding the results of such
other plan of distribution.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust or by the issuer of such
Bonds, or by a prior owner of such Bonds, or by the Sponsor prior to the
deposit of such Bonds in a Trust guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in such Trust. See "
Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection" . The "Portfolio Insurers" and the "
Preinsured Bond Insurers" are described under "Notes to Portfolios"
in Part I of this Prospectus. The Portfolio Insurers are either AMBAC
Indemnity Corporation or Financial Guaranty Insurance Company. An insurance
policy obtained by an Insured Trust, if any, is non-cancellable and will
continue in force so long as such Trust is in existence, the respective
Portfolio Insurer is still in business and the Bonds described in such policy
continue to be held by such Trust (see "Portfolio" for the respective
Insured Trust in Part I of this Prospectus). Any portfolio insurance premium
for an Insured Trust, which is an obligation of such Trust, is paid by each
Trust on a monthly basis. Non-payment of premiums on a policy obtained by an
Insured Trust will not result in the cancellation of insurance but will force
the insurer to take action against the Trustee to recover premium payments due
it. The Trustee in turn will be entitled to recover such payments from such
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
an Insured Trust, if any, are fixed for the life of the Trust. The premium for
any Preinsured Bond insurance has been paid by such issuer, by a prior owner
of such Bonds or the Sponsor and any such policy or policies are
non-cancellable and will continue in force so long as the Bonds so insured are
outstanding and the respective Preinsured Bond Insurer remains in business. If
the provider of an original issuance insurance policy is unable to meet its
obligations under such policy or if the rating assigned to the claims-paying
ability of any such insurer deteriorates, the Portfolio Insurers have no
obligation to insure any issue adversely affected by either of the above
described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds as they
fall due. For the purposes of insurance obtained by an Insured Trust, "
when due" generally means the stated maturity date for the payment of
principal and interest. However, in the event (a) an issuer of a Bond defaults
in the payment of principal or interest on such Bond, (b) such issuer enters
into a bankruptcy proceeding or (c) the maturity of such Bond is accelerated,
the affected Portfolio Insurer has the option, in its sole discretion, after
receiving notice of the earliest to occur of such a default, bankruptcy
proceeding or acceleration to pay the outstanding principal amount of such
Bond plus accrued interest to the date of such payment and thereby retire the
Bond from the affected Trust prior to such Bond's stated maturity date. The
insurance does not guarantee the market value of the Bonds or the value of the
Units. Insurance obtained by an Insured Trust, if any, is only effective as to
Bonds owned by and held in such Trust. In the event of a sale of any such Bond
by the Trustee, such insurance terminates as to such Bond on the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the Trustee,
upon the sale of a Bond covered under a portfolio insurance policy obtained by
an Insured Trust, has the right to obtain permanent insurance with respect to
such Bond (i.e., insurance to maturity of the Bonds regardless of the identity
of the holder thereof) (the "Permanent Insurance" ) upon the payment of
a single predetermined insurance premium and any expenses related thereto from
the proceeds of the sale of such Bond. Accordingly, any Bond in an Insured
Trust is eligible to be sold on an insured basis. It is expected that the
Trustee would exercise the right to obtain Permanent Insurance only if upon
such exercise the affected Trust would receive net proceeds (sale of Bond
proceeds less the insurance premium and related expenses attributable to the
Permanent Insurance) from such sale in excess of the sale proceeds if such
Bonds were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance would be determined based upon the
insurability of each Bond as of the Date of Deposit and would not be increased
or decreased for any change in the creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an advantage
to an Insured Trust in that each Bond insured by a Trust insurance policy may
be sold out of the affected Trust with the benefits of the insurance attaching
thereto. Thus, the value of the insurance, if any, at the time of sale, can be
realized in the market value of the Bond so sold (which is not the case in
connection with any value attributable to an Insured Trust's portfolio
insurance). See "Public Offering--Offering Price" . Because any such
insurance value may be realized in the market value of the Bond upon the sale
thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it
is much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Public Offering--Redemption of Units" ) and (b) at the
time of termination of an Insured Trust, if such Trust were holding defaulted
Bonds or Bonds in significant risk of default such Trust would not need to
hold such Bonds until their respective maturities in order to realize the
benefits of such Trust's portfolio insurance (see "Trust
Administration--Amendment or Termination" ).
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value for such insurance (including the right
to obtain Permanent Insurance) for the purpose of computing the price or
redemption value of Units if the Bonds covered by such insurance are in
default in payment of principal or interest or in significant risk of such
default. The value of the insurance will be the difference between (i) the
market value of a Bond which is in default in payment of principal or interest
or in significant risk of such default assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium and related expenses
attributable to the purchase of Permanent Insurance) and (ii) the market value
of such Bonds not covered by Permanent Insurance. See "Public
Offering--Offering Price" . It is also the present intention of the Trustee
not to sell such Bonds to effect redemptions or for any other reason but
rather to retain them in the portfolio because value attributable to the
insurance cannot be realized upon sale. See "Public Offering--Offering
Price" herein for a more complete description of an Insured Trust's method
of valuing defaulted Bonds and Bonds which have a significant risk of default.
Insurance obtained by the issuer of a Bond is effective so long as such Bond
is outstanding. Therefore, any such insurance may be considered to represent
an element of market value in regard to the Bonds thus insured, but the exact
effect, if any, of this insurance on such market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust, if
any, with respect to the Bonds in such Trust were issued by one or more of the
Portfolio Insurers. Any other Preinsured Bond insurance policy (or commitment
therefor) was issued by one of the Preinsured Bond Insurers. See "
Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection" .
The following summary information relating to the listed insurance companies
has been obtained from publicly available information:
<TABLE>
<CAPTION>
Financial Information as of December 31, 1994
(in millions of dollars)
Date Admitted Policyholders'
Name Established Assets Surplus
<S> <C> <C> <C>
AMBAC Indemnity Corporation.............. 1970 $ 2,145 $ 782
Capital Guaranty Insurance Corporation... 1986 304 168
Capital Markets Assurance Corporation.... 1987 199 140
Financial Guaranty Insurance Company..... 1984 2,131 894
Financial Security Assurance, Inc........ 1984 804 344
MBIA Insurance Corporation............... 1986 3,401 1,110
</TABLE>
In order to be in an Insured Trust, Bonds must be insured by one of the
Preinsured Bond Insurers or be eligible for the insurance being obtained by
such Trust. In determining eligibility for insurance, the Preinsured Bond
Insurers and the Portfolio Insurers have applied their own standards which
correspond generally to the standards they normally use in establishing the
insurability of new issues of municipal bonds and which are not necessarily
the criteria used in the selection of Bonds by the Sponsor. To the extent the
standards of the Preinsured Bond Insurers and the Portfolio Insurers are more
restrictive than those of the Sponsor, the previously stated Trust investment
criteria have been limited with respect to the Bonds. This decision is made
prior to the Date of Deposit, as debt obligations not eligible for insurance
are not deposited in an Insured Trust. Thus, all of the Bonds in the
portfolios of the Insured Trusts in the Fund are insured either by the
respective Trust or by the issuer of the Bonds, by a prior owner of such Bonds
or by the Sponsor prior to the deposit of such Bonds in a Trust.
Because the Bonds are insured by one of the Portfolio Insurers or one of the
Preinsured Bond Insurers as to the timely payment of principal and interest,
when due, and on the basis of the various reinsurance agreements in effect,
Standard & Poor's has assigned to the Units of each Insured Trust its "
AAA" investment rating. Such rating will be in effect for a period of
thirteen months from the Date of Deposit and will, unless renewed, terminate
at the end of such period. See "Description of Ratings" . The obtaining
of this rating by an Insured Trust should not be construed as an approval of
the offering of the Units by Standard & Poor's or as a guarantee of the market
value of such Trust or of the Units.
An objective of portfolio insurance obtained by an Insured Trust is to obtain
a higher yield on the portfolio of such Trust than would be available if all
the Securities in such portfolio had Standard & Poor's "AAA" rating
and yet at the same time to have the protection of insurance of prompt payment
of interest and principal, when due, on the Bonds. There is, of course, no
certainty that this result will be achieved. Preinsured Bonds in an Insured
Trust (all of which are rated "AAA" by Standard & Poor's) may or may
not have a higher yield than uninsured bonds rated "AAA" by Standard &
Poor's. In selecting such Bonds for an Insured Trust, the Sponsor has applied
the criteria hereinbefore described.
In the event of nonpayment of interest or principal, when due, in respect of a
Bond, AMBAC Indemnity shall make such payment not later than 30 days and
Financial Guaranty shall make such payment within one business day after the
respective insurer has been notified that such nonpayment has occurred or is
threatened (but not earlier than the date such payment is due). The insurer,
as regards any payment it may make, will succeed to the rights of the Trustee
in respect thereof. All policies issued by the Portfolio Insurers and the
Preinsured Bond Insurers are substantially identical insofar as obligations to
an Insured Trust are concerned.
The Internal Revenue Service has issued a letter ruling which holds in effect
that insurance proceeds representing maturing interest on defaulted municipal
obligations paid to holders of insured bonds, under policy provisions
substantially identical to the policies described herein, will be excludable
from Federal gross income under Section 103(a)(1) of the Internal Revenue Code
to the same extent as if such payments were made by the issuer of the
municipal obligations. Holders of Units in an Insured Trust should discuss
with their tax advisers the degree of reliance which they may place on this
letter ruling. However, Chapman and Cutler, counsel for the Sponsor, has given
an opinion to the effect such payment of proceeds would be excludable from
Federal gross income to the extent described under "Federal Tax Status"
.
Each Portfolio Insurer is subject to regulation by the department of insurance
in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform
on its contract of insurance in the event a claim should be made thereunder at
some time in the future. At the date hereof, it is reported that no claims
have been submitted or are expected to be submitted to any of the Portfolio
Insurers which would materially impair the ability of any such company to meet
its commitment pursuant to any contract of bond or portfolio insurance.
The information relating to each Portfolio Insurer has been furnished by such
companies. The financial information with respect to each Portfolio Insurer
appears in reports filed with state insurance regulatory authorities and is
subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates
thereof.
For information relating to the insurance on the Bonds in the Insured Trusts
and the breakdown of the insurers of Preinsured Bonds, see footnote (5) in
"Notes to Portfolios" in Part I of this Prospectus.
UNDERWRITING
For a breakdown of the Underwriters who have severally purchased Units of each
Trust from the Sponsor, see "Other Matters--Underwriting" in Part I of
this Prospectus.
Units may also be sold to broker-dealers and others at prices representing the
per Unit concession or agency commission stated under "Trust
Administration--General--Unit Distribution" . However, resales of Units by
such broker-dealers and others to the public will be made at the Public
Offering Price described in the Prospectus. The Sponsor reserves the right to
reject, in whole or in part, any order for the purchase of Units and the right
to change the amount of the concession or agency commission from time to time.
In addition to any other benefits the Underwriters may realize from the sale
of the Units of the Fund, the Agreement Among Underwriters provides that the
Sponsor will share on a pro rata basis among certain Underwriters (those who
underwrite at least 250 Units) 50% of the aggregate gain, if any, represented
by the difference between the Sponsor's cost of the Securities in connection
with their acquisition and the evaluation thereof on the Date of Deposit less
deductions for certain accrued interest and certain other costs. See "
Trust Administration--General--Sponsor and Underwriter Compensation"
herein and "Portfolio" for the applicable Trust in Part I of this
Prospectus.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by
the Sponsor, or participate in sales programs sponsored by the Sponsor, an
amount not exceeding the total applicable sales charges on the sales generated
by such persons at the public offering price during such programs. Also, the
Sponsor in its discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying underwriters, brokers,
dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trusts. These programs will not change the price Unitholders pay for their
Units or the amount that the Trusts will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to Underwriters that sell units of trusts it sponsors. The Sponsor
pays substantially all costs associated with the seminar, excluding
Underwriter travel costs. Each Underwriter is invited to send a certain number
of representatives based on the gross number of units such firm underwrites
during a designated time period.
FUND ADMINISTRATION AND EXPENSES
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. On June 21, 1996
VK/AC Holding, Inc., the indirect corporate parent of the Sponsor, entered
into an Agreement and Plan of Merger among Morgan Stanley Group Inc., MSAM
Holdings II, Inc. and MSAM Acquisition Inc., pursuant to which MSAM
Acquisition Inc. will be merged with and into VK/AC Holding, Inc. and VK/AC
Holding, Inc. will be the surviving corporation. MSAM Acquisition Inc. is a
wholly owned subsidiary of MSAM Holdings II, Inc. which, in turn, is a wholly
owned subsidiary of Morgan Stanley Group Inc. Subject to a number of
conditions being met, it is currently anticipated that a closing will occur in
November of 1996. Thereafter, VK/AC Holding, Inc. and its affiliated entities,
including the Sponsor, shall be part of the Morgan Stanley Group Inc. 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, (708) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas, 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of March 31, 1996 the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$123,020,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Fund or to any Series thereof or to any other Underwriter. The
information is included herein only for the purpose of informing investors as
to the financial responsibility of the Sponsor and its ability to carry out
its contractual obligations. More detailed financial information will be made
available by the Sponsor upon request.)
As of March 31, 1996, the Sponsor and its affiliates managed or supervised
approximately $57.2 billion of investment products, of which over $24.8
billion is invested in municipal securities. The Sponsor and its affiliates
managed $45.4 billion of assets, consisting of $22.5 billion for 63 open-end
mutual funds (of which 47 are distributed by Van Kampen American Capital
Distributors, Inc.), $11.9 billion for 38 closed-end funds and $5.6 billion
for 93 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 rates of compensation deemed by the Trustee to be reasonable and
not exceeding amounts prescribed by the Securities and Exchange Commission,
(ii) terminate the Trust Agreement and liquidate the Fund as provided therein
or (iii) continue to act as Trustee without terminating the Trust Agreement.
All costs and expenses incurred in creating and establishing the Fund,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses,
advertising and selling expenses, expenses of the Trustee, initial evaluation
fees and other out-of-pocket expenses have been borne by the Sponsor at no
cost to the Fund.
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Fund. However, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., which is an affiliate of the Sponsor, will receive
an annual supervisory fee as indicated under "Summary of Essential
Financial Information" in Part I of this Prospectus for providing
portfolio supervisory services for the Fund. Such fee may exceed the actual
costs of providing such supervisory services for this Fund, but at no time
will the total amount received for portfolio supervisory services rendered to
Series 1 of the Fund and subsequent series and to any other unit investment
trusts sponsored by the Sponsor for which the Evaluator provides portfolio
supervisory services in any calendar year exceed the aggregate cost to the
Evaluator of supplying such services in such year. In addition, the Evaluator
shall receive an annual evaluation fee as indicated under "Summary of
Essential Financial Information" in Part I of this Prospectus for
regularly evaluating each Trust's portfolio. Such fees are based on the
outstanding principal amount of Securities in each Trust on the Date of
Deposit for the first year and as of the close of business on January 1 for
each year thereafter. Both of the foregoing fees may be increased without
approval of the Unitholders by amounts not exceeding proportionate increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index published by the United States Department of Labor or, if such
category is no longer published, in a comparable category. The Sponsor and the
Underwriters will receive sales commissions and may realize other profits (or
losses) in connection with the sale of Units and the deposit of the Securities
as described under "General--Sponsor and Underwriter Compensation"
below.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, telephone
(800) 221-7668. The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Fund. Such
records shall include the name and address of, and the certificates issued by
the Fund to, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or Federal statute,
rule or regulation (see "Unitholder Explanations--Public Offering--Reports
Provided" ). The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Securities held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of the trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all Fund
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee. Any corporation into which a
Trustee may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which a Trustee shall be a
party, shall be the successor trustee. The Trustee must be a banking
corporation organized under the laws of the United States or any state and
having at all times an aggregate capital, surplus and undivided profits of not
less than $5,000,000.
Trustee's Fee. For its services the Trustee will receive a fee based on the
aggregate outstanding principal amount of Securities in each Trust as of the
opening of business on January 2 and July 2 of each year as set forth under
"Per Unit Information" for the applicable Trust in Part I of this
Prospectus. During the first year the Trustee may agree to reduce its fee (and
to the extent necessary pay miscellaneous expenses of a Trust) as stated under
"Per Unit Information" for the applicable Trust in Part I of this
Prospectus. After the first year such fee will be computed at $.51 per $1,000
principal amount of Securities for that portion of each Trust under the
semi-annual distribution plan and $.91 per $1,000 principal amount of
Securities for that portion of each Trust under the monthly distribution plan.
Based on the size of the Trust on the Date of Deposit, the Trustee's estimated
annual fees for ordinary recurring services would initially amount to that
amount set forth under "Per Unit Information" for the applicable Trust
in Part I of the Prospectus. The Trustee's fees are payable monthly on or
before the twenty-fifth day of each month from the Interest Account of each
Trust to the extent funds are available and then from the Principal Account of
each Trust, with such payments being based on each Trust's portion of such
expenses. Since the Trustee has the use of the funds being held in the
Principal and Interest Accounts for future distributions, payment of expenses
and redemptions and since such Accounts are non-interest bearing to
Unitholders, the Trustee benefits thereby. Part of the Trustee's compensation
for its services to each Trust is expected to result from the use of these
funds. Such fees may be increased without approval of the Unitholders by
amounts not exceeding proportionate increases under the category "All
Services Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor or, if such category is no longer
published, in a comparable category. The Trustee's fees will not be increased
in future years in order to make up any reduction in the Trustee's fees
described under "Per Unit Information" for the applicable Trust in
Part I of this Prospectus. For a discussion of the services rendered by the
Trustee pursuant to its obligations under the Trust Agreement, see "
Unitholder Explanations--Public Offering--Reports Provided" and "
Trustee" above.
Portfolio Administration. The Trustee is empowered to sell, for the purpose
of redeeming Units tendered by any Unitholder, and for the payment of expenses
for which funds may not be available, such of the Bonds designated by the
Evaluator as the Trustee in its sole discretion may deem necessary. The
Evaluator, in designating such Securities, will consider a variety of factors,
including (a) interest rates, (b) market value and (c) marketability. The
Sponsor, in connection with the Quality Trusts, may direct the Trustee to
dispose of Securities upon default in payment of principal or interest,
institution of certain legal proceedings, default under other documents
adversely affecting debt service, default in payment of principal or interest
on other obligations of the same issuer, decline in projected income pledged
for debt service on revenue bonds or decline in price or the occurrence of
other market or credit factors, including advance refunding (i.e., the
issuance of refunding securities and the deposit of the proceeds thereof in
trust or escrow to retire the refunded securities on their respective
redemption dates), so that in the opinion of the Sponsor the retention of such
Securities would be detrimental to the interest of the Unitholders. In
connection with the Insured Trusts to the extent that Bonds are sold which are
current in payment of principal and interest in order to meet redemption
requests and defaulted Bonds are retained in the portfolio in order to
preserve the related insurance protection applicable to said Bonds, the
overall quality of the Bonds remaining in such Trust's portfolio will tend to
diminish. Except as described in this section and in certain other unusual
circumstances for which it is determined by the Trustee to be in the best
interests of the Unitholders or if there is no alternative, the Trustee is not
empowered to sell Bonds from an Insured Trust which are in default in payment
of principal or interest or in significant risk of such default and for which
value has been attributed for the insurance obtained by such Insured Trust.
Because of such restrictions on the Trustee under certain circumstances, the
Sponsor may seek a full or partial suspension of the right of Unitholders to
redeem their Units in an Insured Trust. See "Unitholder
Explanations--Public Offering-- Redemption of Units" . The Sponsor is
empowered, but not obligated, to direct the Trustee to dispose of Bonds in the
event of an advanced refunding.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new obligations in exchange or
substitution for any Security pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the Sponsor may deem
proper if (1) the issuer is in default with respect to such Security or (2) in
the written opinion of the Sponsor the issuer will probably default with
respect to such Security in the reasonably foreseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after the deposit
of obligations in exchange or substitution for underlying Securities, the
Trustee is required to give notice thereof to each Unitholder of the Trust
thereby affected, identifying the Securities eliminated and the Securities
substituted therefor. Except as stated herein and under "Unitholder
Explanations--Settlement of Bonds in the Trusts" regarding the
substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Fund of any securities other than the Securities initially deposited is not
permitted.
If any default in the payment of principal or interest on any Security occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Security within 30 days after notification by
the Trustee to the Sponsor of such default, the Trustee may in its discretion
sell the defaulted Security and not be liable for any depreciation or loss
thereby incurred.
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units. The offering price of any Units acquired by the
Sponsor will be in accord with the Public Offering Price described in the then
currently effective prospectus describing such Units. Any profit resulting
from the resale of such Units will belong to the Sponsor which likewise will
bear any loss resulting from a lower offering or Redemption Price subsequent
to its acquisition of such Units.
Insurance Premiums. The cost of the portfolio insurance obtained by the
respective Trusts, if any, is that amount shown in footnote (5) in "Notes
to Portfolios" in Part I of this Prospectus, so long as such Trust retains
the Bonds. Premiums, which are obligations of each Insured Trust, are payable
monthly by the Trustee on behalf of the respective Trust. As Bonds in the
portfolio of an Insured Trust are redeemed by their respective issuers or are
sold by the Trustee, the amount of the premium will be reduced in respect of
those Bonds no longer owned by and held in such Trust. If the Trustee
exercises the right to obtain permanent insurance, the premiums payable for
such permanent insurance will be paid solely from the proceeds of the sale of
the related Bonds. The premiums for such permanent insurance with respect to
each Bond will decline over the life of the Bond. A Trust does not incur any
expense for Preinsured Bond insurance, since the premium or premiums for such
insurance have been paid by the issuer or the Sponsor prior to the deposit of
such Preinsured Bonds in a Trust. Preinsured Bonds are not additionally
insured by an Insured Trust.
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trusts: (a) fees of the Trustee for extraordinary services,
(b) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trusts
and the rights and interests of Unitholders, (e) indemnification of the
Trustee for any loss, liability or expenses incurred by it in the
administration of the Fund without negligence, bad faith or willful misconduct
on its part, (f) any special custodial fees payable in connection with the
sale of any of the Bonds in a Trust, (g) expenditures incurred in contacting
Unitholders upon termination of the Trusts and (h) costs incurred to reimburse
the Trustee for advancing funds to the Trusts to meet scheduled distributions
(which costs may be adjusted periodically in response to fluctuations in
short-term interest rates). The fees and expenses set forth herein are payable
out of the Trusts. When such fees and expenses are paid by or owing to the
Trustee, they are secured by a lien on the portfolio or portfolios of the
applicable Trust or Trusts. If the balances in the Interest and Principal
Accounts are insufficient to provide for amounts payable by the Fund, the
Trustee has the power to sell Securities to pay such amounts.
GENERAL
Amendment or Termination. The Sponsor and the Trustee have the power to amend
the Trust Agreement without the consent of any of the Unitholders when such an
amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein or (b) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee), provided that the Trust Agreement
may not be amended to increase the number of Units issuable thereunder or to
permit the deposit or acquisition of securities either in addition to or in
substitution for any of the Securities initially deposited in the Fund, except
for the substitution of certain refunding securities for such Securities. In
the event of any amendment, the Trustee is obligated to notify promptly all
Unitholders of the substance of such amendment.
A Trust may be terminated at any time by consent of Unitholders of 51% of the
Units of such Trust then outstanding or by the Trustee when the value of such
Trust, as shown by any semi-annual evaluation, is less than that indicated
under "Summary of Essential Financial Information" in Part I of this
Prospectus. A Trust will be liquidated by the Trustee in the event that a
sufficient number of Units not yet sold are tendered for redemption by the
Underwriters, including the Sponsor, so that the net worth of such Trust would
be reduced to less than 40% of the initial principal amount of such Trust. If
a Trust is liquidated because of the redemption of unsold Units by the
Underwriters, the Sponsor will refund to each purchaser of Units the entire
sales charge paid by such purchaser. The Trust Agreement provides that each
Trust shall terminate upon the redemption, sale or other disposition of the
last Security held in such Trust, but in no event shall it continue beyond the
end of the year preceding the fiftieth anniversary of the Trust Agreement in
the case of an IM-IT, an IM-IT Discount, a State (other than a State
Intermediate Laddered Maturity Trust) or a National Quality Trust, or beyond
the end of the year preceding the twentieth anniversary of the Trust Agreement
in the case of IM-IT Limited Maturity, IM-IT Intermediate, State Intermediate
Laddered Maturity and IM-IT Short Intermediate Trusts. In the event of
termination of the Fund or any Trust, written notice thereof will be sent by
the Trustee to each Unitholder of such Trust at his address appearing on the
registration books of the Fund maintained by the Trustee. Within a reasonable
time thereafter the Trustee shall liquidate any Securities then held in such
Trust and shall deduct from the funds of such Trust any accrued costs,
expenses or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and costs of liquidation and any amounts required
as a reserve to provide for payment of any applicable taxes or other
governmental charges. The sale of Securities in the Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were
not required at such time. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the principal amount or par
amount of Securities represented by the Units held by such Unitholder. The
Trustee shall then distribute to each Unitholder his share of the balance of
the Interest and Principal Accounts. With such distribution the Unitholder
shall be furnished a final distribution statement of the amount distributable.
At such time as the Trustee in its sole discretion shall determine that any
amounts held in reserve are no longer necessary, it shall make distribution
thereof to Unitholders in the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so
insured are held by such Trust, the price to be received by such Trust upon
the disposition of any such Bond which is in default, by reason of nonpayment
of principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for
the Trustee to, and the Trustee does not currently intend to, dispose of any
Bond or Bonds if retention of such Bond or Bonds, until due, shall be deemed
to be in the best interest of Unitholders, including, but not limited to,
situations in which a Bond or Bonds so insured are in default and situations
in which a Bond or Bonds so insured have deteriorated market prices resulting
from a significant risk of default. Since the Preinsured Bonds will reflect
the value of the related insurance, it is the present intention of the Sponsor
not to direct the Trustee to hold any of such Preinsured Bonds after the date
of termination. All proceeds received, less applicable expenses, from
insurance on defaulted Bonds not disposed of at the date of termination will
ultimately be distributed to Unitholders of record as of such date of
termination as soon as practicable after the date such defaulted Bond or Bonds
become due and applicable insurance proceeds have been received by the Trustee.
Limitation on Liabilities. The Sponsor, the Evaluator and the Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
their reckless disregard of their obligations and duties hereunder. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Securities. In the event of the failure of
the Sponsor to act under the Trust Agreement, the Trustee may act thereunder
and shall not be liable for any action taken by it in good faith under the
Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Fund
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see "
Underwriting" ) at the Public Offering Price, plus interest accrued but
unpaid from the First Settlement Date to the date of settlement as described
above under "Unitholder Explanations--Accrued Interest--Accrued
Interest" . Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this Prospectus at the
secondary Public Offering Price plus interest accrued to the date of
settlement in the manner described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of $10.00 per Unit for less than 100 Units, $10.00 per Unit for any single
transaction of 100 to 249 Units, $9.50 per Unit for any single transaction of
250 to 499 Units, $9.00 per Unit for any single transaction of 500 to 999
Units and $8.00 per Unit for any single transaction of 1,000 or more Units of
an IM-IT Short Intermediate Trust, $25.00 per Unit for less than 100 Units,
$29.00 per Unit for any single transaction of 100 to 249 Units, $28.50 per
Unit for any single transaction of 250 to 499 Units, $31.50 per Unit for any
single transaction of 500 to 999 Units and $31.00 per Unit for any single
transaction of 1,000 or more Units of an IM-IT Intermediate Trust, $27.00 per
Unit for less than 100 Units, $31.00 per Unit for any single transaction of
100 to 249 Units, $30.50 per Unit for any single transaction of 250 to 499
Units, $33.50 per Unit for any single transaction of 500 to 999 Units and
$31.00 per Unit for any single transaction of 1,000 or more Units of an IM-IT
Limited Maturity Trust, $18.00 per Unit for less than 100 Units, $18.00 per
Unit for any single transaction of 100 to 249 Units, $16.00 per Unit for any
single transaction of 250 to 499 Units, $14.00 per Unit for any single
transaction of 500 to 999 Units, $12.00 per Unit for any single transaction of
1,000 to 1,499 Units, and $10.00 per Unit for any single transaction of 1,500
or more Units of an IM-IT Discount Trust, $20.00 per Unit for less than 100
Units, $22.00 per Unit for any single transaction of 100 to 249 Units, $21.50
per Unit for any single transaction of 250 to 499 Units, $24.50 per Unit for
any single transaction of 500 to 999 Units and $24.00 per Unit for any single
transaction of 1,000 or more Units of a State Intermediate Laddered Maturity
Trust, and in the case of an IM-IT, a State (other than a State Intermediate
Laddered Maturity Trust) or a National Quality Trust $30.00 per Unit for less
than 100 Units, $36.00 per Unit for any single transaction of 100 to 249
Units, $38.00 per Unit for any single transaction of 250 to 499 Units, $39.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units, provided that such Units
are acquired either from the Sponsor (in the case of dealer transactions) or
through the Sponsor (in the case of transactions involving brokers or others).
The increased concession or agency commission is a result of the discount
given to purchasers for quantity purchases. See "Unitholder
Explanations--Public Offering--General" . Certain commercial banks are
making Units of the Fund available to their customers on an agency basis. A
portion of the sales charge paid by these customers (equal to the agency
commission referred to above) is retained by or remitted to the banks. Under
the Glass-Steagall Act, banks are prohibited from underwriting Units of the
Fund; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. Any quantity discount (see "
Unitholder Explanations--Public Offering--General" ) provided to investors
will be borne by the selling dealer or agent. For secondary market
transactions, such concession or agency commission will amount to 70% of the
applicable sales charge as determined using the table found in "Unitholder
Explanations--Public Offering" . The minimum purchase in the primary and
secondary market will be one Unit. The Sponsor reserves the right to reject,
in whole or in part, any order for the purchase of Units and to change the
amount of the concession or agency commission to dealers and others from time
to time. See "Unitholder Explanations--Underwriting" herein and "
Other Matters--Underwriting" in Part I of this Prospectus.
Sponsor and Underwriter Compensation. The Underwriters will receive a gross
sales commission equal to that percentage of the Public Offering Price of the
Units as indicated under "Unitholder Explanations--Public
Offering--Offering Price" less any reduced sales charges for quantity
purchases as described under "Unitholder Explanations--Public
Offering--General" .
The Sponsor will receive from the Underwriters the excess of such gross sales
commission over $35.00, $20.00, $29.00, $27.00, $12.00, $22.00 and $35.00 per
Unit of any Quality, IM-IT Discount, IM-IT Limited Maturity, IM-IT
Intermediate, IM-IT Short Intermediate, State Intermediate Laddered Maturity
Trust and any Insured Trusts, respectively, as of the Date of Deposit. In
connection with quantity sales to purchasers of any IM-IT Discount Trust the
Underwriters will receive from the Sponsor commissions totaling $19.00 per
Unit for any single transaction of 100 to 249 Units, $18.00 per Unit for any
single transaction of 250 to 499 Units, $16.00 per Unit for any single
transaction of 500 to 999 Units, $14.00 per Unit for any single transaction of
1,000 to 1,499 Units, and $12.00 per Unit for any single transaction of 1,500
or more Units. In connection with quantity sales to purchasers of any IM-IT,
State Trust (other than a State Intermediate Laddered Maturity Trust) or
National Quality Trust the Underwriters will receive from the Sponsor
commissions totalling $37.00 per Unit for any single transaction of 100 to 249
Units, $39.00 per Unit for any single transaction of 250 to 499 Units, $40.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units. In connection with quantity
sales to purchasers of any IM-IT Short Intermediate Trust the Underwriters
will receive from the Sponsor commissions totalling $11.00 per Unit for any
single transaction of 100 to 249 Units, $10.50 per Unit for any single
transaction to 250 to 499 Units, $10.00 per Unit for any single transaction of
500 to 999 Units and $8.00 per Unit for any single transaction of 1,000 or
more Units. In connection with quantity sales to purchasers of any IM-IT
Intermediate Trust the Underwriters will receive from the Sponsor commissions
totalling $30.00 per Unit for any single transaction of 100 to 249 Units,
$29.50 per Unit for any single transaction of 250 to 499 Units, $32.50 per
Unit for any single transaction of 500 to 999 Units and $31.00 per Unit for
any single transaction of 1,000 or more Units. In connection with quantity
sales to purchasers of any IM-IT Limited Maturity Trust the Underwriters will
receive from the Sponsor commissions totalling $32.00 per Unit for any single
transaction of 100 to 249 Units, $32.00 per Unit for any single transaction of
250 to 499 Units, $34.50 per Unit for any single transaction of 500 to 999
Units and $31.00 per Unit for any single transaction of 1,000 or more Units.
In connection with quantity sales to purchasers of any State Intermediate
Laddered Maturity Trust the Underwriters will receive from the Sponsor
commissions totalling $23.00 per Unit for any single transaction of 100 to 249
Units, $23.00 per Unit for any single transaction of 250 to 499 Units, $24.75
per Unit for any single transaction of 500 to 999 Units and $24.00 per Unit
for any single transaction of 1,000 or more Units. A. G. Edwards & Sons, Inc.
which acts as a Managing Underwriter of Units of the various series of the
IM-IT or National Quality Trust, will receive from the Sponsor reimbursement
for certain costs and further compensation in the amount of $5.00 for each
Unit of the IM-IT or National Quality Trust it underwrites. Also, if Principal
Financial Securities, Inc. commits (on the Date of Deposit) to underwrite a
total of 4,000 or more Units of a single series of the IM-IT, any other series
of the IM-IT and/or any series of Texas Insured Municipals Income Trust during
any calendar month, then Principal Financial Securities, Inc. will receive an
additional $1.00 per Unit for each of the Units of such Trust it commits to
underwrite in said month. In addition, the Sponsor will receive from the
Managing Underwriters of any National Quality, California IM-IT, Connecticut
IM-IT, Massachusetts IM-IT, Michigan IM-IT, New York IM-IT, Oklahoma IM-IT,
Ohio IM-IT, Kansas Quality, Maryland Quality or Oregon Quality Trust (who
underwrite 15% of the Trust involved or 1,000 Units of such Trust, whichever
is greater) the excess of such gross sales commission over $38.00 per Unit of
any such Trust, as of the Date of Deposit. Also, any such Managing Underwriter
that sells a total of 25% or 1,500 Units, whichever is greater, of any
individual series of such Trusts will receive an additional $2.00 per each
such Unit. In addition, the Sponsor will receive from the Managing
Underwriters of the Florida IM-IT Intermediate Laddered Maturity Trust (who
underwrite 15% of the Trust involved or 1,000 Units of the Trust, whichever is
greater) the excess of such gross sales commission over $28.00 per Unit of any
such Trust, as of the Date of Deposit. Also, any such Managing Underwriter
that sells a total of 25% or 1,500 Units, whichever is greater, of any
individual series of such Trust will receive an additional $1.00 per each such
Unit. In connection with quantity sales to purchasers of any Pennsylvania
IM-IT Trust the Underwriters will receive from the Sponsor commissions
totalling $35.00 per Unit for any single transaction of 100 to 249 Units,
$36.00 per Unit for any single transaction of 250 to 499 units, $37.00 per
Unit for any single transaction of 500 to 999 Units and $38.00 per Unit for
any single transaction of 1,000 or more Units. In addition, any Underwriter
that sells a total of 25% or 1,500 Units, whichever is greater, of any
Pennsylvania IM-IT Trust will receive an additional $2.00 per each such Unit.
The Sponsor and First Investors Corporation ("First Investors" ) have
entered into an agreement under which First Investors will receive an
additional $5.00 per Unit in connection with a minimum commitment of 17.5% of
the total Units of the New York IM-IT Trust, provided that the New York IM-IT
Trust does not exceed 10,000 Units. If the New York IM-IT Trust exceeds 10,000
Units, First Investors will receive an additional $5.00 per Unit if First
Investors underwrites the lesser of 3,000 Units or 20% of the New York IM-IT
Trust. In addition, the Sponsor has entered into agreements with Advest, Inc.
("Advest" ) and Gruntal & Co., Inc. ("Gruntal" ) whereby Advest
and Gruntal will receive an additional $2.00 per Unit in connection with a
minimum commitment of 1,500 Units of any New York IM-IT Trust. In addition,
the Sponsor and J. J. B. Hilliard, W. L. Lyons, Inc. ("Hilliard, Lyons"
) have entered into an agreement under which Hilliard, Lyons may receive an
additional $2.00 for each Unit of the Kentucky Quality Trust which it
underwrites, provided it underwrites a minimum of 400 Units of such Trust. See
"Unitholder Explanations--Public Offering--General." Further, each
Underwriter who underwrites 1,000 or more Units in any Trust will receive
additional compensation from the Sponsor of $1.00 for each Unit it
underwrites. In addition, the Sponsor and certain of the Underwriters will
realize a profit or the Sponsor will sustain a loss, as the case may be, as a
result of the difference between the price paid for the Securities by the
Sponsor and the cost of such Securities to a Trust (which is based on the
determination by Interactive Data Corporation of the aggregate offering price
of the underlying Securities in such Trust on the Date of Deposit). See "
Unitholder Explanations--Underwriting" herein and "Portfolio" for
the applicable Trust and "Notes to Portfolios" in Part I of this
Prospectus. The Sponsor and the Underwriters may also realize profits or
sustain losses with respect to Securities deposited in each Trust which were
acquired by the Sponsor from underwriting syndicates of which they were
members. The Sponsor has participated as sole underwriter or as manager or as
a member of the underwriting syndicates from which none of the aggregate
principal amount of the Securities in the portfolios of the Fund were
acquired. The Underwriters may further realize additional profit or loss
during the initial offering period as a result of the possible fluctuations in
the market value of the Securities in each Trust after the Date of Deposit,
since all proceeds received from purchasers of Units (excluding dealer
concessions or agency commissions allowed, if any) will be retained by the
Underwriters. Affiliates of an Underwriter are entitled to the same dealer
concessions or agency commissions that are available to the Underwriter.
As stated under "Unitholder Explanations--Public Offering--Market for
Units" , the Sponsor intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units of the Fund. In so maintaining a
market, such person or persons will also realize profits or sustain losses in
the amount of any difference between the price at which Units are purchased
and the price at which Units are resold (which price is based on the bid
prices of the Securities in such Trust and includes a sales charge). In
addition, such person or persons will also realize profits or sustain losses
resulting from a redemption of such repurchased Units at a price above or
below the purchase price for such Units, respectively.
Legal Opinions. The legality of the Units offered hereby and certain matters
relating to Federal tax law have been passed upon by Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Special counsel to the Fund for certain state tax matters are named under "
Tax Status" for each Trust appearing in Part I of this Prospectus. Kroll &
Tract has acted as counsel for the Trustee and as special counsel to the Fund
for New York tax matters. None of the special counsel for the Fund has
expressed any opinion regarding the completeness or materiality of any matters
contained in this Prospectus other than the tax opinion set forth under "
Tax Status" relating to the Trust for which it has provided an opinion in
Part I of this Prospectus.
Independent Certified Public Accountants. The statements of condition and the
related securities portfolios at the Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law as of the date of this Part II of the Prospectus:
(1)Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on Bonds
which is excludable from gross income under the Internal Revenue Code of 1986
(the "Code" ) will retain its status when distributed to Unitholders;
however such interest may be taken into account in computing the alternative
minimum tax, an additional tax on branches of foreign corporations and the
environmental tax (the "Superfund Tax" ), as noted below;
(2)Each Unitholder is considered to be the owner of a pro rata portion of the
respective Trust under subpart E, subchapter J of chapter 1 of the Code and
will have a taxable event when such Trust disposes of a Bond, or when the
Unitholder redeems or sells his Units. Unitholders must reduce the tax basis
of their Units for their share of accrued interest received by the respective
Trust, if any, on Bonds delivered after the Unitholders pay for their Units to
the extent that such interest accrued on such Bonds during the period from the
Unitholder's settlement date to the date such Bonds are delivered to the
respective Trust and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such Units.
Gain or loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the Units. If
the Trustee disposes of Bonds (whether by sale, payment on maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder. The
amount of any such gain or loss is measured by comparing the Unitholder's pro
rata share of the total proceeds from such disposition with the Unitholder's
basis for his or her fractional interest in the asset disposed of. In the case
of a Unitholder who purchases Units, such basis (before adjustment for earned
original issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets ratably
according to value as of the valuation date nearest the date of acquisition of
the Units. The tax basis reduction requirements of the Code relating to
amortization of bond premium may, under some circumstances, result in the
Unitholder realizing a taxable gain when his Units are sold or redeemed for an
amount less than or equal to his original cost;
(3)Any proceeds paid under an insurance policy or policies dated the Date of
Deposit, issued to an Insured Trust by AMBAC Indemnity, Financial Guaranty or
a combination thereof with respect to the Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations; and
(4)Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted obligations held by the Trustee
will be excludable from Federal gross income if, and to the same extent as,
such interest would have been excludable if paid in the normal course by the
issuer of the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
obligations, rather than the insurer, will pay debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Bond, depending on the date the Bond was
issued. In addition, special rules apply if the purchase price of a Bond
exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "
adjusted issue price" ) to prior owners. The application of these rules
will also vary depending on the value of the Bond on the date a Unitholder
acquires his Units and the price the Unitholder pays for his Units.
Unitholders should consult with their tax advisers regarding these rules and
their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act" )
subjects tax-exempt bonds to the market discount rules of the Code effective
for bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds an
investor's purchase price (except to the extent that such difference, if any,
is attributable to original issue discount not yet accrued), subject to a
statutory de minimis rule. Market discount can arise based on the price a
Trust pays for Bonds or the price a Unitholder pays for his or her Units.
Under the Tax Act, accretion of market discount is taxable as ordinary income;
under prior law the accretion had been treated as capital gain. Market
discount that accretes while a Trust holds a Bond would be recognized as
ordinary income by the Unitholders when principal payments are received on the
Bond, upon sale or at redemption (including early redemption), or upon the
sale or redemption of his or her Units, unless a Unitholder elects to include
market discount in taxable income as it accrues. The market discount rules are
complex and Unitholders should consult their tax advisers regarding these
rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 depends upon
the corporation's alternative minimum taxable income, which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income and the
Superfund Tax of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust, or REMIC) is an amount equal
to 75% of the excess of such corporation's "adjusted current earnings"
over an amount equal to its alternative minimum taxable income (before such
adjustment item and the alternative tax net operating loss deduction). "
Adjusted current earnings" includes all tax exempt interest, including
interest on all of the Bonds in the Fund. Under 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. On December 7,
1995, the U.S. Treasury Department released proposed legislation that, if
enacted, would generally extend the financial institution rules to all
corporations, effective for obligations acquired after the date of
announcement. 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 Kroll & Tract, special counsel to the Fund for New York tax
matters, under existing law, the Fund and each Trust are not associations
taxable as corporations and the income of each Trust will be treated as the
income of the Unitholders under the income tax laws of the State and City of
New York.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35%, effective for long-term capital gains realized in
taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of "
modified adjusted gross income" plus 50% of the Social Security benefits
received exceeds a "base amount" . The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85% of Social Security benefits are includible in gross income to
the extent that the sum of "modified adjusted gross income" plus 50%
of Social Security benefits received exceeds an "adjusted base amount."
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for
married taxpayers filing a joint return, and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does
not exceed the base amount need not include any Social Security benefits in
gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers
who may be deemed to have incurred (or continued) indebtedness to purchase or
carry tax-exempt obligations. Prospective investors should consult their tax
advisors as to the applicability of any collateral consequences. On December
7, 1995, the U.S. Treasury Department released proposed legislation that, if
adopted, could affect the United States federal income taxation of non-United
States Unitholders and the portion of the Trust's income allocable to
non-United States Unitholders. Similar language, which would be effective on
the date of enactment, was included in the Health Insurance Reform Bill as
passed by the U.S. Senate on April 23, 1996.
For a discussion of the state tax status of income earned on Units of a Trust,
see "Tax Status" for the applicable Trust in Part I of this
Prospectus. Except as noted therein, the exemption of interest on state and
local obligations for Federal income tax purposes discussed above does not
necessarily result in exemption under the income or other tax laws of any
state or city. The laws of the several states vary with respect to the
taxation of such obligations.
DESCRIPTION OF RATINGS
Standard & Poor's, A Division of the McGraw-Hill Companies. A Standard &
Poor's corporate or municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific debt obligation.
This assessment of creditworthiness may take into consideration obligors such
as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard & Poor's by
the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangements under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit quality,
the ratings from "AA" to "BBB" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings: A provisional rating ("p" ) assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to
completion, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
Moody's Investors Service, Inc. A brief description of the applicable Moody's
rating symbols and their meanings follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "
gilt edge" . Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
With the occasional exception of oversupply in a few specific instances, the
safety of obligations of this class is so absolute that their market value is
affected solely by money market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. These Aa bonds are high grade, their market value virtually immune
to all but money market influences, with the occasional exception of
oversupply in a few specific instances.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as higher medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to some degree by
credit circumstances during a sustained period of depressed business
conditions. During periods of normalcy, bonds of this quality frequently move
in parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Con--Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
As published by the rating companies.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
<TABLE>
<CAPTION>
Title Page
<S> <C>
INTRODUCTION 2
UNITHOLDER EXPLANATIONS 3
Settlement of Bonds in the Trusts 3
The Fund 3
Objectives and Securities Selection 4
Risk Factors 4
Replacement Bonds 8
Distributions 9
Change of Distribution Option 9
Certificates 10
Estimated Current Returns and Estimated Long-Term Returns 10
Accrued Interest 11
Public Offering 11
General 11
Offering Price 13
Market for Units 14
Distributions of Interest and Principal 15
Reinvestment Option 16
Redemption of Units 16
Reports Provided 17
Insurance on the Bonds in the Insured Trusts 18
Underwriting 21
TRUST ADMINISTRATION 22
Fund Administration and Expenses 22
Sponsor 22
Compensation of Sponsor and Evaluator 22
Trustee 23
Trustee's Fee 23
Portfolio Administration 24
Sponsor Purchases of Units 25
Insurance Premiums 25
Miscellaneous Expenses 25
General 25
Amendment or Termination 25
Limitation on Liabilities 26
Unit Distribution 27
Sponsor and Underwriter Compensation 28
Legal Opinions 29
Independent Certified Public Accountants 29
FEDERAL TAX STATUS 30
DESCRIPTION OF RATINGS 33
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS PART II
July 1996
Insured Municipals Income Trust, Insured Multi-Series
and Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series
A Wealth of Knowledge A Knowledge of Wealthsm
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
This Part II of the Prospectus may not be distributed unless
accompanied by Part I. Both Parts of this Prospectus should be
retained for future reference.
Contents of Registration Statement
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference sheet
The Prospectus
The signatures
The consents of independent public accountants, ratings
services and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.4 Copy of Municipal Bond Fund Portfolio Insurance Policies issued by
AMBAC Indemnity Corporation and/or Financial Guaranty Insurance
Company for any Trust.
1.5 Copy of Agreement Among Underwriters.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal, Colorado, Missouri and Tennessee
income tax status of securities being registered.
3.3 Opinion and consent of counsel as to New York income tax status of
the Fund under New York law.
3.4 Opinion and consent of counsel as to income tax status to Louisiana
residents of Units of the Louisiana IM-IT Trust.
3.5 Opinion and consent of counsel as to income tax status to
Massachusetts residents of Units of the Massachusetts IM-IT Trust.
3.6 Opinion and consent of counsel as to income tax status to New Jersey
residents of Units of the New Jersey IM-IT Trust.
4.1 Consent of Interactive Data Corp.
4.2 Consent of Standard & Poor's.
4.3 Consent of Grant Thornton LLP.
EX-27 Financial Data Schedules
Signatures
The Registrant, Insured Municipals Income Trust, 205th Insured Multi-
Series hereby identifies Insured Municipals Income Trust, 77th Insured
Multi-Series and Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 189 for purposes of the representations
required by Rule 487 and represents the following: (1) that the
portfolio securities deposited in the series as to the securities of
which this Registration Statement is being filed do not differ materially
in type or quality from those deposited in such previous series; (2)
that, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information
for, the series with respect to the securities of which this Registration
Statement is being filed, this Registration Statement does not contain
disclosures that differ in any material respect from those contained in
the registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and (3)
that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust, 205th Insured Multi-Series
has duly caused this Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of Chicago and State of Illinois on the 29th day of August, 1996.
Insured Municipals Income Trust
205th Insured Multi-Series
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities indicated and on August 29, 1996.
Signature Title
Don G. Powell Chairman and Chief Executive)
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-
65744) and with the Registration Statement on Form S-6 of Insured
Municipals Income Trust, 170th Insured Multi-Series (File No. 33-55891)
and the same are hereby incorporated herein by this reference.
Exhibit 1.1
Insured Municipals Income Trust
205th Insured Multi-Series
Trust Agreement
Dated: August 29, 1996
This Trust Agreement between Van Kampen American Capital
Distributors, Inc., as Depositor, American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust, For Van Kampen
American Capital Distributors, Inc. Tax-Exempt Trust, Dated March 16,
1995" (herein called the "Standard Terms and Conditions of Trust"), and
such provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references
herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(4), listed in the
Schedules hereto, have been deposited in the Trusts under this Trust
Agreement.
(b) The fractional undivided interest in and ownership of the
various Trusts represented by each Unit thereof is the amount set
forth under "Summary of Essential Financial Information-Fractional
Undivided Interest in the Trust per Unit" in Prospectus Part I.
(c) The approximate amounts, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid to
the Depositor pursuant to Section 3.05 shall be the amount per Unit
that the Trustee agreed to reduce its fee or pay Trust expenses set
forth in the footnotes to the "Per Unit Information" for each Trust
in Prospectus Part I times the number of units in such Trust
referred to in Part II (b) of this Trust Agreement.
(d) The First General Record Date and the amount of the second
distribution of funds from the Interest Account of each Trust shall
be the record date for the Interest Account and the amount set forth
under "Per Unit Information" for each Trust in Prospectus Part I.
(e) The First Settlement Date shall be the date set forth
under "Summary of Essential Financial Information-First Settlement
Date" in Prospectus Part I.
(f) Any monies held to purchase "when issued" bonds will be
held in noninterest bearing accounts.
(g) The Evaluation Time for purpose of sale, purchase or
redemption of Units shall be 4:00 P.M. Eastern time.
(h) As set forth in Section 3.05, the Record Dates and
Distribution Dates for each Trust are those dates set forth in the
section entitled "Per Unit Information" for each Trust as appears in
Prospectus Part I.
(i) As set forth in Section 3.15, the Evaluator's Annual
Supervisory Fee shall be that amount set forth in "Summary of
Essential Financial Information-Evaluator's Annual Supervisory Fee"
in Prospectus Part I.
(j) As set forth in Section 4.03, the Evaluator's Annual
Evaluation Fee shall be that amount, and computed on that basis, set
forth in "Summary of Essential Financial Information-Evaluator's
Annual Evaluation Fee" in Prospectus Part I
(k) The Trustee's annual compensation as set forth under
Section 6.04, under each distribution plan shall be that amount as
specified in Prospectus Part Iunder the section entitled "Per Unit
Information" for each Trust and will include a fee to induce the
Trustee to advance funds to meet scheduled distributions.
(l) The sixth paragraph of Section 3.05 is hereby revoked and
replaced by the following paragraph:
Unitholders desiring to receive semi-annual
distributions and who purchase their Units prior to the Record
Date for the second distribution under the monthly plan of
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Unitholders desiring to receive semi-annual distributions and
who purchse their Units prior to the Record Date for the first
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Changes in the plan of distribution will become effective as of
opening of business on the day after the next succeeding semi-
annual Record Date and such distributions will continue until
further notice.
(m) Sections 8.02(d) and 8.02(e) are hereby revoked and
replaced with the following:
(d) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Interest Account
of such Trust;
(e) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Principal Account
of such Trust; and
In Witness Whereof, Van Kampen American Capital Distributors,
Inc. has caused this Trust Agreement to be executed by one of its
Vice Presidents or Assistant Vice Presidents and its corporate seal
to be hereto affixed and attested by its Secretary or one of its
Vice Presidents or Assistant Secretaries, American Portfolio
Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., has caused this Trust Indenture and
Agreement to be executed by its President or one of its Vice
Presidents and its corporate seal to be hereto affixed and attested
to by its Secretary, its Assistant Secretary or one of its Assistant
Vice Presidents and The Bank of New York, has caused this Trust
Agreement to be executed by one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by one of its
Vice Presidents, Assistant Vice Presidents or Assistant Treasurers;
all as of the day, month and year first above written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
(Seal)
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. Mcdonnell
President
(Seal)
Attest:
By Scott E. Martin
Secretary
The Bank Of New York
By Jeffrey Bieselin
Vice President
(Seal)
Attest:
By Norbert Loney
Assistant Treasurer
Schedules To Trust Agreement
Securities Initially Deposited
In
Insured Municipals Income Trust, 205th Insured Multi-Series
(Note: Incorporated herein and made a part hereof as indicated below are
the corresponding "Portfolios" of each of the Trusts as set forth in
the Prospectus.)
Exhibit 1.4
AMBAC Indemnity Corporation
c/o CT Corporation Systems
Municipal Bond Investment
44 East Mifflin Street
Trust Insurance Policy
Madison, Wisconsin 53703
Administrative Office: One State Street Plaza
New York, New York 10004
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust, 205th Insured Multi-Series
(Tennessee Insured Municipals Income Trust, Series 37)
to
Van Kampen American
Capital Distributors, Inc.
("Investment Trust") the insured, the payment of that portion of the
principal of and interest on each of the Bonds which shall be due during
the Policy Period but is unpaid by reason of Nonpayment by the Issuer, in
consideration of the insurance premium paid and subject to the terms and
conditions contained herein or added hereto.
Policy No. FE014339
Policy Date: August 29, 1996
Trustee: The Bank of New York
101 Barclay Street, 17flW
New York, New York 10286
In Witness Whereof, the Insurer has caused this Policy to be affixed
with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal
and signatures and binding upon the Insurer by virtue of the
countersignature of its duly authorized representative.
P. Lassiter
President@AMBAC Indemnity Corporation
Stephen D. Cooke
Secretary
/w/Nancy Davila
Authorized Representative @ AMBAC
AMBAC Indemnity Corporation
c/o CT Corporation Systems
Municipal Bond Investment
44 East Mifflin Street
Trust Insurance Policy
Madison, Wisconsin 53703
Administrative Office: One State Street Plaza
New York, New York 10004
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust, 205th Insured Multi-Series
(Missouri Insured Municipals Income Trust, Series 98)
to
Van Kampen American
Capital Distributors, Inc.
("Investment Trust") the insured, the payment of that portion of the
principal of and interest on each of the Bonds which shall be due during
the Policy Period but is unpaid by reason of Nonpayment by the Issuer, in
consideration of the insurance premium paid and subject to the terms and
conditions contained herein or added hereto.
Policy No. FE014320
Policy Date: August 29, 1996
Trustee: The Bank of New York
101 Barclay Street, 17flW
New York, New York 10286
In Witness Whereof, the Insurer has caused this Policy to be affixed
with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal
and signatures and binding upon the Insurer by virtue of the
countersignature of its duly authorized representative.
P. Lassiter
President@AMBAC Indemnity Corporation
Stephen D. Cooke
Secretary
/w/Nancy Davila
Authorized Representative@
1. Definitions
(a) "Policy" is this policy of insurance and all applications and
schedules for Municipal Bond Investment Trust Insurance relating hereto,
all of which are hereby incorporated by reference herein.
(b) "Bonds" are the specific securities covered by this Policy and
are identified and described in the Schedule attached hereto and hereby
made a part hereof.
(c) "Issuer" is each respective issuer, identified in the Schedule,
of the Bonds.
(d) "Investment Trust" is the entity represented to have an
insurable interest in the Bonds insured under this Policy, identified on
the face of this Policy.
(e) "Trustee" is the Trustee of the Investment Trust, or any
successor Trustee thereto or Co-Trustee therewith.
(f) "Sponsor" is the firm or entity responsible for creating the
Investment Trust and thereafter performing the services to it required of
its sponsor, or any successor Sponsor thereof or Co-Sponsor therewith.
(g) "Insured Instrument" is any instrument evidencing all or any
part of the principal or of interest on a Bond which is Due for Payment.
(h) "Policy Period" is the period during which this Policy of
insurance is effective. The Policy Period commences at 12:01 A.M.
(i) "Premium Installment Period" is the period for which
installments of the annual insurance premium are payable monthly,
quarterly or semiannually, as determined initially for the Investment
Trust.
(j) "Nonpayment" is the failure of an Issuer to provide sufficient
funds to the payment agent for payment in full of all principal and
interest on a Bond which is Due for Payment.
(k) "Due for Payment," when referring to principal of a Bond (or
Insured Instrument evidencing such principal), is when the stated
maturity date has been reached, and does not refer to any earlier date on
which payment is due by reason of call for redemption, acceleration or
other advancement of maturity; and when referring to interest on a Bond
(or Insured Instrument evidencing such interest), is when the stated date
for payment has been reached.
(l) "Bond Proceedings" are the legal proceedings by which each of
the Bonds has been authorized, issued or secured, including the governing
statutes, the pertinent resolutions and ordinances of the Issuer, and any
trust indenture, mortgage, lease agreement or other contract relating to
the Bond or its security.
2. Noncancellability and Termination-Refunds of Premium
This Policy cannot be cancelled by AMBAC. The insurance provided by
this Policy shall remain in force throughout the Policy period. This
Policy provides for payment to the Trustee as a result of Nonpayment of
the Bonds. In the event the Trustee sells any of the Bonds, then this
Policy shall be terminated as to any such Bond on the date of said sale,
and AMBAC shall not have any liability under t his Policy on account of
Nonpayment of any such Bond occurring thereafter. This Policy shall be
terminated as to any Bond which AMBAC has been notified by the Sponsor or
by the Trustee has been redeemed from or sold by the Investment Trust, or
was not deposited by the Sponsor, or the contract to purchase which has
failed, on the date such notice is received by AMBAC, and AMBAC shall not
have any liability under this Policy on account of Nonpayment of any such
Bond occurring thereafter. When AMBAC is notified by the Trustee or the
Sponsor that any of the Bonds have been redeemed or sold from the
Investment Trust, or were not deposited into it, or a contract to
purchase any such Bonds has failed, a refund of any prepaid premium
thereof shall be made to the Investment Trust or the Sponsor, as the case
may be. Such notification to AMBAC must specify the amount of Bonds
affected, identify each by its Item Number in an Application identified
by its date and designate the date of such disposal or failure.
3. Payment by Insurer-Amount, When and How Payable
(a) Amount-Payment by AMBAC of the aggregate of the face amount of
all Insured Instruments of the Investment Trust as to which there has
been a Nonpayment, reduced by the aggregate of: (i) the amount which the
Issuer shall have provided for payment of Insured Instruments by the time
of Nonpayment; and (ii) the amount which has been received from any other
source to pay Insured Instruments; such payment shall fully discharge
AMBAC from any further liability on account of the Nonpayment.
(b) When Payable-The payment due the Investment Trust shall be made
not later than thirty days after notice from the Trustee is received by
AMBAC that Nonpayment has occurred, but not earlier than the date on
which the Insured Instruments are Due for Payment.
(c) How Payable-The payment due the Investment Trust shall be paid
by AMBAC in exchange for delivery of Insured Instruments, not less in
face amount than the amount of the payment, in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where an
Insured Instrument is issuable only in a form whereby principal is
payable to registered holders or their assigns, AMBAC shall pay principal
only upon presentation and surrender of the unpaid Insured Instrument,
uncancelled and free of any adverse claim, together with an instrument of
assignment, in satisfactory form, so as to permit ownership of such
Insured Instrument to be registered in the name of AMBAC or its nominee.
In cases where an Insured Instrument is issuable only in a form whereby
interest is payable to registered holders or their assigns, AMBAC shall
pay interest only upon presentation of proof that the claimant is the
person entitled to the pa shall pay interest only upon presentation of
proof that the claimant is the person entitled to the payment of interest
on the Insured Instrument and delivery of an instrument of assignment, in
satisfactory form, transferring to AMBAC all rights under such Insured
Instrument to receive the interest in respect of which the insurance
payment was made.
4. Rights of AMBAC
(a) Subrogation-When AMBAC has made payment with respect to an
Insured Instrument, it shall be subrogated to all of the rights to
payment of the Investment Trust thereon or in relation thereto to the
extent of such payment.
(b) Vesting of Rights and Powers-When AMBAC has made the payment
due to the Investment Trust as described in Condition 3, and until the
full amount of such payment has been recovered, AMBAC shall be vested
with all of the Investment Trust's options, votes, rights, powers and the
like under the Bond Proceedings. AMBAC shall not be liable to the
Investment Trust for any loss or damage resulting from the exercise of or
failure to exercise any of such options, votes, rights, powers and the
like.
(c) Exercise of Rights and Powers-AMBAC may, in its absolute
discretion, exercise or fail to exercise any option, vote, right, power
or the like it may have as holder or registered owner of an Insured
Instrument with respect to which it has made payment. AMBAC shall not be
liable to the Investment Trust for any loss or damage resulting therefrom
(d) Securing of Rights-The Trustee shall execute and deliver
instruments and do whatever else is necessary to secure the foregoing
rights for AMBAC, and will do nothing to prejudice them.
5. Payment of Insurance Premium Installments
The Trustee shall pay, when due, successively, the full amount of
each installment of the insurance premium. Each installment of the
insurance premium is due on or before the last day of the expiring
Premium Installment Period.
If AMBAC has not received such payment on or before such last day,
it shall give notice to the Sponsor to that effect. Such installment
shall be deemed to have been paid when due if AMBAC receives such payment
within ten days after it has given such notice.
The Trustee shall, with each payment, notify AMBAC of all Bonds
which, during the expiring Premium Installment period, were redeemed from
or sold by the Investment Trust, or the contract to purchase which
failed, or which have not been deposited by the Sponsor. Such
notification to AMBAC must specify the amounts of Bonds affected and
identify each by its Item Number in an Application identified by date.
No such notice need be given as to Bonds with respect to which AMBAC has
previously been notified to the same effect.
6. Where Notice is Given
All submissions, designations, payments, notices, reports and other
data or documents required to be submitted shall be mailed to AMBAC at
its administrative office, or to the Investment Trust at its address
shown on the face of this Policy or such other address as it shall
designate.
7. Waiver of Conditions
No permission affecting this insurance shall exist, or waiver of any
condition be valid, unless expressed in writing added hereto. Each of
the conditions of this Policy is hereby made severable, and waiver of one
condition is not a waiver of any other condition.
8. Suite
No suit or action on this Policy for the recovery of any amount
shall be sustained in any court of law or equity unless all of the
conditions of this Policy shall have been complied with (unless
specifically waived by AMBAC in writing) and unless commended within two
years after a Nonpayment.
9. Conflict of Laws
Any provision of this Policy which is on conflict with the laws of
the jurisdiction in which it is effective is hereby amended to conform
with the minimum requirements of such laws.
Exhibit 1.4
AMBAC Indemnity Corporation Administrative Office:
c/o CT Corporation Systems One State Street Plaza
Municipal Bond Investment New York, New York 10004
44 East Mifflin Street
Madison, Wisconsin 53703
AMBAC
Schedule of Bonds (a part of the Application and Policy)
Insured Municipals Income Trust, 205th Insured Multi-Series
(Missouri Insured Municipals Income Trust, Series 98)
Date of Application: August 29, 1996
<TABLE>
<CAPTION>
Date Annual Initial
Item Par Full Name Purpose of Interest of Maturity Premium Annual
No. Value of Issuer Bonds Rate Bonds Date Rate Premium
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $600M Industrial Multi-Family Housing Revenue 6.150% 08/28/96 09/20/31 .1350% $810.00
Development Refunding Bonds (GNMA
Authority of Collateralized-The Lakes
the City of Apartment (Project) Series
Hazelwood, 1996A (SMIP Option Premium
Missouri Rate: .70%)
</TABLE>
Insured Municipals Income Trust, 205th Insured Multi-Series
(Tennessee Insured Municipals Income Trust, Series 37)
Date of Application: August 29, 1996
<TABLE>
<CAPTION>
Date Annual Initial
Item Par Full Name Purpose of Interest of Maturity Premium Annual
No. Value of Issuer Bonds Rate Bonds Date Rate Premium
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $250M Shelby Public Improvement Unlimited 5.875% 07/01/96 06/01/19 .1000% $250.00
County, Tax-General Obligation
Tennessee Bonds, Series 1996A (SMIP
Option Premium Rate: .60%)
</TABLE>
Exhibit 1.5
Dated: June 1, 1992
Master Agreement Among Underwriters
For Unit Investment Trusts Sponsored by
Van Kampen American Capital Distributors, Inc.
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Gentlemen:
1. The Trust. We understand that you, Van Kampen American Capital
Distributors, Inc. (the "Sponsor"), are entering into this agreement (the
"Agreement") in counterparts with us and other firms who may be
underwriters for issues of various series of unit investment trusts for
which you will act as Sponsor. This Agreement shall apply to any
offering after May 1, 1992 of units of fractional undivided interest in
such various series unit investment trusts in which we elect to act as an
underwriter (underwriters with respect to each such trust being
hereinafter called "Underwriters") after receipt of a notice from you
stating the name and size of the trust and that our participation as an
Underwriter in the proposed offering shall be subject to the provisions
of this Agreement. The issuer of the units of fractional undivided
interests in a series of a unit investment trust offered in any offering
of units made pursuant to this Agreement is hereinafter referred to as
the "Trust" and the reference to "Trust" in this Agreement applies only
to such Trust, and such units of such Trust offered are hereinafter
called the "Units". Each Trust is or will be registered as a "unit
investment trust" under the Investment Company Act of 1940 (the "1940
Act") by appropriate filings with the Securities and Exchange Commission
(the "Commission"). Additionally, each Trust is or will be registered
with the Commission under the Securities Act of 1933 (the "1933 Act") on
Form S-6 or its successor forms, including a proposed form of prospectus
(the "Preliminary Prospectus").
The registration statement as finally amended and revised at the
time it becomes effective is herein referred to as the "Registration
Statement" and the related prospectus is herein referred to as the
"Prospectus", except that if the prospectus filed by the Trust pursuant
to Rule 424(b) under the 1933 Act shall differ from the prospectus on
file at the time the Registration Statement shall become effective, the
term "Prospectus" shall refer to the prospectus filed pursuant to Rule
424(b) from and after the date on which it shall have been filed.
The following provisions of this Agreement shall apply separately to
each individual offering of Units by a Trust.
We understand that as of the date upon which we have agreed to
underwrite Units of the Trust the Commission shall not have issued any
order preventing or restraining the use of any Preliminary Prospectus
and, further, that each Preliminary Prospectus shall conform in all
material respects to the requirements of the 1933 Act and the Rules and
Regulations thereunder and, as of its date, shall not include any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading; and when the Registration
Statement becomes effective, it and the Prospectus, and any amendments or
supplements thereto, will contain all statements that are required to be
stated therein in accordance with the 1933 Act and the Rules and
Regulations thereunder and will in all material respects conform to the
requirements of the 1933 Act and the Rules and Regulations thereunder,
and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that you make no representation or warranty as to
information contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement, in reliance upon and in conformity with, written information
furnished to you by or on behalf of any Underwriter specifically for use
in the preparation thereof.
2. Designation and Authority of Representative. You are hereby
authorized to act as our representative (the "Representative") in
connection with all matters to which this Agreement relates and to take
the action provided herein to be taken by you as you may otherwise deem
necessary or advisable. We understand that we have no obligations under
this Agreement with respect to any Trust in which we choose not to
participate as an Underwriter.
You will be under no liability to us for any act or omission except
for obligations expressly assumed by you herein and no obligations on
your part will be implied or inferred herefrom. The rights and
liabilities of the respective parties hereto are several and not joint,
and nothing herein or hereunder will constitute then a partnership,
association or separate entity.
3. Profit or Loss in Acquisition of Securities. It is understood
that the acquisition of securities (the "Securities") for deposit in the
portfolio of the Trust shall be at your cost and risk. We acknowledge
that you will share with us any net deposit profits in the amounts and to
the extent, if any, indicated under "Sponsor and Underwriter
Compensation" in the Prospectus. For the purposes of determining the
number of Units underwritten, we understand that we will be credited for
that number of Units set forth opposite our name in the section entitled
"Underwriting" in the prospectus.
We agree that you shall have no liability (as Representative or
otherwise) with respect to the issue form, validity, legality,
enforceability, value of, or title to the Securities, except for the
exercise of due care in determining the genuineness of such Securities
and the conformance thereof with the descriptions and qualifications
appearing in the Prospectus.
4. Purchase of Units. Promptly after you make a determination to
offer Units of a Trust and you inquire as to whether we desire to
participate in such offering, we will advise you promptly as to the
number of Units which we will purchase or of our decision not to
participate in such offering. Such advice may be written or oral. The
delivery to the Sponsor of a completed Schedule A to this Agreement shall
constitute adequate written advice. Oral advice shall be binding but
shall be promptly confirmed in writing by us by means of telegraph,
telegram or other form of wire or facsimile transmission. Such written
confirmation shall contain the information requested by Schedule A to
this Agreement. You may rely on and we hereby commit on the terms and
conditions of this Agreement to purchase and pay for the number of Units
of the Trust set forth in such advice (the "Unit Commitment"). Our Unit
Commitment may be increased only by mutual agreement between us and you
at any time prior to the date as of which the Trust Agreement for the
Trust is executed (the "Date of Deposit"). We agree that you in your
sole discretion reserve the right to decrease our Unit Commitment at any
time prior to the Date of Deposit and if you so elect to make such a
decrease, you will notify us of such an election by telephone and
promptly confirm the same in writing.
The price to be paid for such Units shall be the Public Offering
Price per Unit (as defined in the Prospectus) as first determined on the
Date of Deposit or such later determination on such Date of Deposit as
you shall advise us, less the sum per Unit indicated under "Sponsor and
Underwriter Compensation" in the Prospectus. Further, each Underwriter
who underwrites that number of Units indicated under "Sponsor and
Underwriter Compensation" in the Prospectus will receive from the Sponsor
that additional compensation indicated under such section of the
Prospectus for each Unit it underwrites, providing the Trust size is in
excess of that number of Units, if any, indicated under such section of
the Prospectus. At the Date of Deposit, we will become the owner of the
Units and be entitled to the benefits (except for interest, if any,
accruing from the Date of Deposit to the First Settlement Date) as well
as the risks inherent therein. We acknowledge that those persons, if
any, named in the Prospectus under "Sponsor and Underwriter Compensation"
are Managing or Co-Managing Underwriters of the Trust, as indicated
therein, and we acknowledge that those persons specifically named therein
will receive as additional compensation those respective per Unit amounts
set forth in such section of the Prospectus.
You are authorized to retain custody of our Units until the
Registration Statement relating thereto has become effective under the
1933 Act and you shall have received payment from us for such Units.
You are authorized to file an amendment to said Registration
Statement describing the Securities and furnishing information based
thereon or relating thereto and any further amendments or supplements to
the Registration Statement or Prospectus which you may deem necessary or
advisable. We will furnish to you upon your request such information as
will be required to insure that the Registration Statement and Prospectus
are current insofar as they relate to us and we thereafter continue to
furnish you with such information as may be necessary to keep current and
correct the information previously supplied.
We understand that the Trust will also take action with respect to
the offering and sale of Units in accordance with the Blue Sky or
securities laws of certain states in which it is proposed that the Units
may be offered and sold.
5. Public Offering. You agree that you will advise us promptly
when the Registration Statement has become effective, and we agree that
when we are advised that the Units are released for public offering, we
will make a public offering thereof by means of the Prospectus under the
1933 Act, as amended, which describes the deposit of Securities and
related information. The Public Offering Price and the terms and
conditions of the public offering shall be as set forth in the Prospectus
and shall rely with respect to the offering price of the Securities upon
the determination of the Evaluator named in the Prospectus. Public
advertisement of the offering, if any, shall be made by you on behalf of
the Underwriters on such date as you shall determine. We agree that
before we use any Trust advertising material which we have created, we
will obtain your prior approval to use such advertising materials.
6. Public Offering Price. We agree that each day while this
Agreement is in effect and the evaluation of the Trust is made by the
Evaluator named in the Prospectus, we will contact you for such
evaluation and of the resultant Public Offering Price for the purpose of
the offering and sale of the respective Units to the public. We agree as
required by Section 22(d) of the 1940 Act to offer and sell our Units at
the current Public Offering Price described in the Prospectus.
7. Permitted Transactions. It is agreed that part or all of the
Units purchased by us may be sold to dealers, or other entities with whom
we can legally grant a concession or agency commission, only at the then
effective Public Offering Price, less the concession described in the
Prospectus.
From time to time prior to the termination of this Agreement, at
your Request, we will advise you of the number of our Units which remain
unsold and, at your request, we agree to deliver to you any of such
unsold Units to be sold for our account to retail accounts or, less the
concession or agency commission then effective, to dealers or others.
If prior to the termination of this Agreement, or such earlier date
as you may determine and advise us thereof in writing, you shall purchase
or contract to purchase any of our Units or any Units issued in exchange
therefor, in the open market or otherwise, or if any such Units shall be
tendered to the Trustee for redemption because not effectively placed for
investment by us, we agree to repurchase such Units at a price equal to
the total cost of such purchase, including accrued interest and
commissions, if any, and transfer taxes on redelivery. Regardless of the
amount paid on the repurchase of any such Units, it is agreed that they
may be resold by us only at the then effective Public Offering Price.
Until the termination of this Agreement, we agree that we will make
no purchase of Units other than (i) purchases provided for in this
Agreement, (ii) purchases approved by you and (iii) purchases as broker
in executing unsolicited orders.
8. Compliance With Commission Order. We hereby agree as follows:
(a) we will refund all sales charges to purchasers of Units from us or
any dealer participating in the distribution of Units who purchased such
Units from us if, within ninety days from the time that the Registration
Statement of the respective Units under the 1933 Act shall have become
effective, (i) the net worth of the trust shall be reduced to less than
20% of the principal amount of Securities originally deposited therein or
(ii) the Trust shall have been terminated; (b) you may instruct the
Trustee on the Date of Deposit that, in the event that redemption by any
Underwriters of Units constituting part of any unsold allotment of Units
shall result in the Trust having a net worth of less than 40% of the
principal amount of Securities originally deposited therein, the Trustee
shall terminate the Trust in the manner provided in the Trust Indenture
and Agreement (as defined in the Prospectus) and distribute the
Securities and other assets of the Trust pursuant to the provisions of
the Trust Indenture and Agreement; and (c) in the event that the Trust
shall have been terminated pursuant to (b) above, we will refund any
sales charges to any purchaser of such Units who purchased from us, or
purchased from a dealer participating in the distribution of such Units
who purchased such Units from us. We authorize you to charge our account
for all refunds of sales charges in respect to our Units.
9. Substitution of Underwriters. We authorize you to arrange for
the substitution hereunder of other persons, who may include you and us,
for all or any part of the commitment of any nondefaulting Underwriter
with the consent of such Underwriter, and of any defaulting Underwriter
without the consent thereof, upon such terms and conditions as you may
deem advisable, provided that the number of Units to be purchased by us
shall not be increased without our consent and that such substitution
shall not in any way affect the liability of any defaulting Underwriter
to the other Underwriters for damages from such default, nor relieve any
other Underwriter of any obligation under this Agreement. The expenses
chargeable to the account of any defaulting Underwriter and not paid for
by it or by a person substituted for such Underwriter and any additional
losses or expenses arising from such default shall be considered to be
expenses under this Agreement and shall be charged against the accounts
of the nondefaulting Underwriters in proportion to their respective
commitments.
10. Termination. This Agreement shall terminate with respect to
each Trust which we have agreed to underwrite 30 days after the date on
which the public offering of the Units of such Trust is made in
accordance with Section 5 hereof unless sooner terminated by you,
provided that you may extend this Agreement for not more than eleven
successive periods of 30 days each upon notice to us and each of the
other Underwriters.
Notwithstanding any settlement on the termination of this Agreement,
we agree to pay our share of any amount payable on account of any claim,
demand or liability which may be asserted against the Underwriters, or
any of them, based on the claim that the Underwriters constitute an
association, unincorporated business or other separate entity and our
share of any expenses incurred by you in defending against any such
claim, demand or liability. We also agree to pay any stamp taxes which
may be assessed and paid after such settlement on account of any Units
received or sold hereunder for our account.
Notwithstanding any termination of this Agreement, no sales of the
Units shall be made by us at any time except in conformity with the
provisions of Section 22(d) of the 1940 Act.
11. Default by Other Underwriters. Default by any one or more of
the other Underwriters in respect of their several obligations under this
Agreement shall neither release you nor us from any of our respective
obligations hereunder.
12. Notices. Notices hereunder shall by deemed to have been duly
given if mailed or telegraphed to us at our address set forth below, in
the case of notices to us, or to you at your address set forth at the
head of this Agreement, in the case of notices to you.
13. Net Capital. You represent that you, and we represent that we,
are in compliance with the capital requirements of Rule 15c-3-1
promulgated by the Commission under the Securities and Exchange Act of
1934, and we may, in accordance with and pursuant to such Rule 15c-3-1,
agree to purchase the amount of Units to be purchased by you and us,
respectively, under the Agreement.
14. Miscellaneous. We confirm that we are a member in good
standing of the National Association of Securities Dealers, Inc.
We confirm that we will take reasonable steps to provide the
Preliminary Prospectus or final Prospectus to any person making written
request therefor to us and to make the Preliminary Prospectus or the
final Prospectus available to each person associated with us expected to
solicit customers' orders for the Units prior to the effective
registration date and the final Prospectus if he is expected to offer the
Units after the effective date. We understand that you will supply us
upon our request with sufficient copies of such prospectuses to comply
with the foregoing.
This Agreement is being executed by us and delivered to you in
duplicate. Upon your confirmation hereof and of agreements in identical
form with each of the other Underwriters, this Agreement shall constitute
a valid and binding contract between us.
Very truly yours,
Confirmed as of the date set forth at the head of this Agreement
Indicated below our firm name and address exactly as we wish to appear
in the Prospectus
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By____________________________________________
Title_________________________________________
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
August 29, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Insured Municipals Income Trust, 205th Insured Multi-Series
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc., as Sponsor and Depositor of Insured Municipals Income
Trust, 205th Insured Multi-Series (hereinafter referred to as the
"Fund"), in connection with the preparation, execution and delivery of a
Trust Agreement dated August 29, 1996 between Van Kampen American Capital
Distributors, Inc., as Depositor, American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee, pursuant to which the
Depositor has delivered to and deposited Bonds listed in the Schedules to
the Trust Agreement with the Trustee and pursuant to which the Trustee
has issued to or on the order of the Depositor a certificate or
certificates representing Units of fractional undivided interest in and
ownership of the several Trusts of said Fund (hereinafter referred to as
the "Units") created under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the Units in the
several Trusts of the Fund have been duly authorized; and
2. The certificates evidencing the Units in the several
Trusts of the Fund when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust
Agreement, will constitute valid and binding obligations of such
Trusts and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-08681) relating to the Units
referred to above and to the use of our name and to the reference to our
firm in said Registration Statement and in the related Prospectus.
Respectfully submitted,
Chapman and Cutler
MJK/cjw
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
August 29, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re:Insured Municipals Income Trust, 205th Insured Multi-Series
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Insured Municipals Income Trust, 205th
Insured Multi-Series (the "Trust"), in connection with the issuance of
Units of fractional undivided interest in the several Trusts of said Fund
under a Trust Agreement dated August 29, 1996 (the "Indenture") between
Van Kampen American Capital Distributors, Inc., as Depositor, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, and The Bank of New York, as
Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we
have deemed pertinent. Based upon the foregoing and upon an
investigation of such matters of law as we consider to be applicable, we
are of the opinion that, under existing Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
trusts) of chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that
the number of Units of such Trust held by him bears to the total
number of Units outstanding of such Trust. Under subpart E,
subchapter J of chapter 1 of the Code, income of each Trust will be
treated as income of each Unitholder of the respective Trust in the
proportion described, and an item of Trust income will have the same
character in the hands of a Unitholder as it would have in the hands
of the Trustee. Accordingly, to the extent that the income of a
Trust consists of interest and original issue discount excludable
from gross income under Section 103 of the Code, such income will be
excludable from Federal gross income of the Unitholders, except in
the case of a Unitholder who is a substantial user (or a person
related to such user) of a facility financed through issuance of any
industrial development bonds or certain private activity bonds held
by the respective Trust. In the case of such Unitholder (and no
other) interest received with respect to his Units attributable to
such industrial development bonds or such private activity bonds is
includable in his gross income. In the case of certain
corporations, interest on the Bonds is included in computing the
alternative minimum tax pursuant to Section 56(c) of the Code, the
environmental tax (the "Superfund Tax") imposed by Section 59A of
the Code, and the branch profits tax imposed by Section 884 of the
Code with respect to U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. Before
adjustment, such basis would normally be cost if the Unitholder had
acquired his Units by purchase, plus his aliquot share of advances
by the Trustee to the Trust to pay interest on Bonds delivered after
the Unitholder's settlement date to the extent that such interest
accrued on the Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the
respective Trust, but only to the extent that such advances are to
be repaid to the Trustee out of interest received by such Trust with
respect to such Bonds. In addition, such basis will be increased by
the Unitholder's aliquot share of the accrued original issue
discount (and market discount, if the Unitholder elects to include
market discount in income as it accrues) with respect to each Bond
held by the Trust with respect to which there was an original issue
discount at the time the Bond was issued (or which was purchased
with market discount) and reduced by the annual amortization of bond
premium, if any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Unitholder and the amount thereof is measured by
comparing the Unitholder's aliquot share of the total proceeds from
the transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning the
tax basis for his Units among each of the Trust assets (as of the
date on which his Units were acquired) ratably according to their
values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced by the
amount of his aliquot share of interest received by the Trust, if
any, on Bonds delivered after the Unitholder's settlement date to
the extent that such interest accrued on the Bonds during the period
from the Unitholder's settlement date to the date such Bonds are
delivered to the Trust, must be reduced by the annual amortization
of bond premium, if any, on Bonds held by the Trust and must be
increased by the Unitholder's share of the accrued original issue
discount (and market discount, if the Unitholder elects to include
market discount in income as it accrues) with respect to each Bond
which, at the time the Bond was issued, had original issue discount
(or which was purchased with market discount).
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price",
such excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the
original issuance of Bonds held by the Trust, Section 1272(a)(7) of
the Code provides for a reduction in the accrued "daily portion" of
such original issue discount upon the purchase of a Bond subsequent
to the Bond's original issue, under certain circumstances. In the
case of any Bond held by the Trust the interest on which is
excludable from gross income under Section 103 of the Code, any
original issue discount which accrues with respect thereto will be
treated as interest which is excludable from gross income under
Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance Policies, if any, issued to certain of the Trusts on the
Date of Deposit by AMBAC Indemnity Corporation, Financial Guaranty
Insurance Corporation or a combination thereof. Each such policy,
or a combination of such policies, insures all bonds held by the
Trustee for that particular Trust (other than bonds described in
paragraph (vii)) against default in the prompt payment of principal
and interest. In our opinion, any amount paid under each said
policy, or a combination of said policies, which represents maturing
interest on defaulted obligations held by the Trustee will be
excludable from Federal gross income if, and to the same extent as,
such interest would have been so excludable if paid in normal course
by the issuer provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the
issuer of the bonds, rather than the insurer, will pay debt service
on the bonds. Paragraph (ii) of this opinion is accordingly
applicable to insurance proceeds representing maturing interest.
(vii) Certain bonds in the portfolios of certain of the Trusts
have been insured by the issuers thereof against default in the
prompt payment of principal and interest. Insurance has been
obtained for such bonds, or, in the case of a commitment, the bonds
will be ultimately insured under the terms of such an insurance
policy, which are designated as issuer insured bonds on the
portfolio pages of the respective Trusts in the Prospectus for the
Fund, by the issuer of such bonds. Insurance obtained by the issuer
is effective so long as such bonds remain outstanding. For each of
these bonds, we have been advised that the aggregate principal
amount of such bonds listed on the portfolio page for the respective
Trust was acquired by the applicable Trust and are part of the
series of such bonds listed on the portfolio page for the respective
Trust in the aggregate principal amount listed on the portfolio page
for the respective Trust. Based upon the assumption that the bonds
acquired by the applicable Trust are part of the series covered by
an insurance policy or, in the case of a commitment, will be
ultimately insured under the terms of such an insurance policy, it
is our opinion that any amounts received by the applicable Trust
representing maturing interest on such bonds will be excludable from
Federal gross income if, and to the same extent as, such interest
would have been so excludable if paid in normal course by the Issuer
provided that, at the time such policies are purchased, the amounts
paid for such policies are reasonable, customary and consistent with
the reasonable expectation that the issuer of the bonds, rather than
the insurer, will pay debt service on the bonds. Paragraph (ii) of
this opinion is accordingly applicable to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending on
the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the amount
of original issue discount which would have previously accured based upon
its issue price (its "adjusted issue price"). The application of these
rules will also vary depending on the value of the bond on the date a
Unitholder acquires his Units, and the price the Unitholder pays for his
Units.
Because the Trusts do not include any "private activity" bonds
within the meaning of Section 141 of the Code issued on or after
August 8, 1986, none of the Trust Funds' interest income shall be treated
as an item of tax preference when computing the alternative minimum tax.
In the case of corporations, for taxable years beginning after
December 31, 1986, the alternative minimum tax and the Superfund Tax
depend upon the corporation's alternative minimum taxable income ("AMTI")
which is the corporations' taxable income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items
used in computing AMTI and the Superfund Tax of a corporation (other than
an S Corporation, Regulated Investment Company, Real Estate Investment
Trust or REMIC) for taxable years beginning after 1989, is an amount
equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its AMTI (before such adjustment item
and the alternative tax net operating loss deduction). "Adjusted current
earnings" includes all tax-exempt interest, including interest on all
Bonds in the Trust, and tax-exempt original issue discount. 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.
Effective for tax returns filed after December 31, 1987, all
taxpayers are required to disclose to the Internal Revenue Service the
amount of tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable
year of 100 percent of the otherwise deductible interest on indebtedness
incurred or continued by financial institutions, to which either
Section 585 or Section 593 of the Code applies, to purchase or carry
obligations acquired after August 7, 1986 (with certain exceptions), the
interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest
otherwise deductible by such financial institutions in any taxable year
which is deemed to be attributable to tax-exempt obligations acquired
after August 7, 1986, will be the amount that bears the same ratio to the
interest deduction otherwise allowable (determined without regard to
Section 265) to the taxpayer for the taxable year as the taxpayer's
average adjusted basis (within the meaning of Section 1016) of tax-exempt
obligations acquired after August 7, 1986, bears to such average adjusted
basis for all assets of the taxpayer, unless such financial institution
can otherwise establish, under regulations, to be prescribed by the
Secretary of the Treasury, the amount of interest on indebtedness
incurred or continued to purchase or carry such obligations. On December
7, 1995 the U.S. Treasury Department released proposed legislation that,
if adopted, would generally extend the financial institution rules to all
corporations, effective for obligations acquired after the date of
announcement.
We also call attention to the fact that, under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry
Units is not deductible for Federal income tax purposes. Under rules
used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly traceable
to the purchase of Units. However, these rules generally do not apply to
interest paid on indebtedness incurred for expenditures of a personal
nature such as a mortgage incurred to purchase or improve a personal
residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued)
subject to a statutory de minimis rule. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unitholder pays for
his or her Units. Under the Tax Act, accretion of market discount is
taxable as ordinary income; under prior law, the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption), or upon the sale of redemption
of his or her Units, unless a Unitholder elects to include market
discount in taxable income as it accrues.
We have also examined the income tax law of the State of Colorado,
which is based upon the Federal Law, to determine its applicability to
the Colorado IM-IT Trust (the "Colorado Trust") being created as part of
the Fund and to the holders of Units in the Colorado Trust who are
residents of the State of Colorado ("Colorado Unitholders"). Although we
express no opinion with respect to the issuance of the bonds, in
rendering our opinion expressed herein, we have assumed that: (i) the
bonds were validly issued, (ii) interest thereon is excludable from gross
income for federal income tax purposes, and (iii) interest on the bonds,
if received directly by a Unitholder, would be exempt from the income tax
imposed by the State that is applicable to individuals and corporations
(the "State Income Tax"). This opinion does not address the taxation of
persons other than full time residents of Colorado. Based upon the
foregoing it is our opinion that under Colorado income tax law, as
presently enacted and construed:
a) The Colorado Trust is not an association taxable as a
corporation for purposes of Colorado income taxation.
(b) Each Colorado Unitholder will be treated as owning a pro-
rata share of each asset of the Colorado Trust for Colorado income
tax purposes in the proportion that the number of Units of such
Trust held by him bears to the total number of outstanding Units of
the Colorado Trust, and the income of the Colorado Trust will
therefore be treated as the income of each Colorado Unitholder under
Colorado law in the proportion described and an item of income of
the Colorado Trust will have the same character in the hands of a
Colorado Unitholder as it would have in the hands of the Trustee.
(c) Gain or loss will be recognized by a Colorado Unitholder
upon redemption or sale of his Units. Such gain or loss is measured
by comparing the proceeds of such redemption or sale with the
adjusted basis of the Units represented by his Certificate. Before
adjustment, such basis would normally be cost if the Colorado
Unitholder has acquired his Units by purchase, plus his aliquot
share of advances by the Trustee to the Colorado Trust to pay
interest on bonds delivered after the Colorado Unitholder's
settlement date to the extent that such interest accrued on such
bonds during the period from the Colorado Unitholder's settlement
date to the date such bonds are delivered to the Colorado Trust, but
only to the extent that such advances are to be repaid to the
Trustee out of interest received by such Trust with respect to such
bonds. In addition, such basis will be increased by the Colorado
Unitholder's aliquot share of the accrued original issue discount
with respect to each bond held by such Trust with respect to which
there was an original issue discount at the time such bond was
issued and reduced by the annual amortization of bond premium, if
any, on the bonds held by the Colorado Trust.
(d) If the Trustee disposes of a bond (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Colorado Unitholder and the amount thereof is
measured by comparing the Colorado Unitholder's aliquot share of the
total proceeds from the transaction with his basis for his
fractional interest in the bond disposed of. Such basis is
ascertained by apportioning the tax basis for his Units among each
of the bonds (as of the date on which his units were acquired)
ratably according to their values as of the valuation date nearest
the date on which he purchased such Units. A Colorado Unitholder's
basis in his Units and of his fractional interest in each bond must
be reduced by the amount of his aliquot share of interest received
by the Colorado Trust, if any, in bonds delivered after the Colorado
Unitholder's settlement date to the extent that such interest
accrued on such bonds during the period from the Colorado
Unitholder's settlement date to the date such bonds are delivered to
the Colorado Trust, must be reduced by the annual amortization of
bond premium, if any, on bonds held by such Trust and must be
increased by the Colorado Unitholder's share of the accrued original
issue discount with respect to each bond which, at the time such
bond was issued, had original issue discount.
(e) If interest on indebtedness incurred or continued by a
Colorado Unitholder to purchase Units in the Colorado Trust is not
deductible for Federal income tax purposes, it will also be
nondeductible for Colorado income tax purposes.
(f) So long as the Colorado Trust holds obligations issued, on
or after May 1, 1980, by the State of Colorado or its political
subdivisions (the "Colorado Bonds"), then to the extent the interest
on the Colorado Bonds is excludable from Federal gross income of a
Colorado Unitholder pursuant to Section 103 of the Code, such
interest will be excludable from Colorado adjusted gross income of
such Unitholder.
(g) Any amounts paid under an insurance policy issued to the
Colorado Trust which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Colorado
adjusted gross income if, and to the same extent as, such interest
is excludable for federal income tax purposes. Paragraph (f) of
this opinion is accordingly applicable to insurance proceeds
representing maturing interest.
(h) Certain of the bonds in the Colorado Trust have been
insured by the issuers thereof against default in the prompt payment
of principal and interest. Based upon the exemptions and
assumptions referred to above, it is our opinion that any amounts
received by the Colorado Trust representing maturing interest on
such bonds will be excludable from Colorado adjusted gross income
if, and to the same extent as, such interest is so excludable for
federal income tax purposes. Paragraph (f) of this opinion is
accordingly applicable to such payment.
We have not examined any of the Bonds to be deposited and held in
the Colorado Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no
opinion as to the exemption from State income taxes of interest on the
Bonds if received directly by a Unitholder.
We have also examined the income tax law of the State of Missouri,
which is based upon the Federal law, to determine its applicability to
the Missouri IM-IT Trust (the "Missouri Trust") being created as part of
the Fund and to the holders of Units in the Missouri Trust who are
residents of the State of Missouri ("Missouri Unitholders").
The assets of the Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Missouri (the "State") or
counties, municipalities, authorities or political subdivisions thereof
(the "Missouri Bonds") or by the Commonwealth of Puerto Rico, Guam and
the United States Virgin Islands (the "Possession Bonds") (collectively,
the "Bonds").
Although we express no opinion with respect to the issuance of the
Bonds, in rendering our opinion expressed herein, we have assumed that:
(i) the Bonds were validly issued, (ii) the interest thereon is
excludible from gross income for Federal income tax purposes, (iii)
interest on the Bonds, if received directly by a Unitholder, would be
exempt from the income tax imposed by the State of Missouri that is
applicable to individuals and corporations (the "Missouri State Income
Tax"). This opinion does not address the taxation of persons other than
full time residents of Missouri.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
exiting law:
(1) The Missouri Trust is not an association taxable as a
corporation for Missouri income tax purposes, and each Unitholder of
the Missouri Trust will be treated as the owner of a pro rata
portion of the Trust and the income of such portion of the Trust
will be treated as the income of the Unitholder for Missouri State
Income Tax purposes;
(2) Interest paid and original issue discount, if any, on the
Bonds which would be exempt from the Missouri State Income Tax if
received directly by a Unitholder will be exempt from the Missouri
State Income Tax when received by the Missouri Trust and distributed
to such Unitholder; however, no opinion is expressed herein
regarding taxation of intererst paid and original issue discount, if
any, on the Bonds received by the Missouri Trust and distributed to
Unitholders under any other tax imposed pursuant to Missouri law,
including but not limited to the franchise tax imposed on financial
institutions pursuant to Chapter 148 of the Missouri Statutes.
(3) Each Unitholder of the Missouri Trust will recognize gain
or loss for Missouri State Income Tax purposes if the Trustee
disposes of a Bond (whether by redemption, sale, or otherwise) or if
the Unitholder redeems or sells Units of the Missouri Trust to the
extent that such a transaction results in a recognized gain or loss
to such Unitholder for Federal income tax purposes. Due to the
amortization of bond premium and other basis adjustments required by
the Internal Revenue Code, a Unitholder, under some circumstances,
may realize taxable gain when his or her Units are sold or redeemed
for an amount less than or equal to their original cost.
(4) Any insurance proceeds paid under policies which represent
maturing interest on defaulted obligations which are excludable from
gross income for Federal income tax purposes will be excludable from
Missouri State Income Tax to the same extent as such interest would
have been paid by the issuer of such Bonds held by the Missouri
Trust; however, no opinion is expressed herein regarding taxation of
interest paid and original issue discount, if any, on the Bonds
received by the Missouri Trust and distributed to Unitholders under
any other tax imposed pursuant to Missouri law, including but not
limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
(5) The Missouri State Income Tax does not permit a deduction
of interest paid or incurred on indebtedness incurred or continued
to purchase or carry Units in the Missouri Trust, the interest on
which is exempt from such Tax.
(6) The Missouri Trust will not be subject to the Kansas City,
Missouri Earnings and Profits Tax and each Unitholder's share of
income of the Bonds held by the Missouri Trust will not generally be
subject to the Kansas City, Missouri Earnings and Profits Tax or the
City of St. Louis Earnings Tax (except that no opinion is expressed
in the case of certain Unitholders, including corporations,
otherwise subject to the St. Louis City Earnings Tax).
(7) Chapman and Cutler has expressed no opinion with respect
to taxation under any other provision of Missouri law. Ownership of
the Units may result in collateral Missouri tax consequences to
certain taxpayers. Prospective investors should consult their tax
advisors as to the applicability of any such collateral
consequences.
Units may be subject to the Missouri Estate Tax. We have not
examined any of the Bonds to be deposited and held in the Missouri Trust
or the proceedings for the issuance thereof or the opinions of bond
counsel with respect thereto, and therefore express no opinion as to the
exemption from the Missouri State Income Tax of interest on the Bonds if
received directly by a Unitholder.
We have also examined the income tax law of the State of Tennessee
to determine its applicability to the Tennessee IM-IT Trust (the "Trust")
being created as part of the Fund and to the holders of Units in the
Tennessee Trust who are residents of the State of Tennessee
("Unitholders").
The assets of the Trust will consist of bonds of the State of
Tennessee, or any agency of the State of Tennessee, bonds of any county
or agency of any county of Tennessee, bonds of any incorporated town or
city or agency of any incorporated town or city and bonds of housing
authorities of Tennessee, provided such bonds are issued for any public
purpose ("Tennessee Bonds") or by the Commonwealth of Puerto Rico or its
political subdivisions (the "Puerto Rico Bonds") (collectively, the
"Bonds").
Although we express no opinion with respect to the issuance of the
Bonds, in rendering our opinion expressed herein, we have assumed that:
(i) the Bonds were validly issued, (ii) the interest thereon is
excludible from gross income for federal income tax purposes and (iii)
interest on the Bonds, if received directly by a Unitholder, would be
exempt from the Hall Income Tax (the "Hall Income Tax") imposed by
Section 67-2-102 of the Tennessee Code (hereinafter "Section" refers to
sections of the Tennessee Code). This opinion does not address the
taxation of persons other than full time residents of Tennessee.
On May 8, 1992, legislation (the "Legislation") was enacted in
Tennessee which, in part, clarified that with respect to distributions
made by a unit investment trust after December 31, 1991, that a
proportionate share of such distributions that relate to interest income
paid with respect to Tennessee Bonds from a unit investment trust
characterized as a grantor trust for federal income tax purposes will
retain its status as tax-exempt for purposes of the Hall Income Tax when
distributed to Unitholders. The Legislation also provides an exemption
for distributions made by a unit investment trust that are attributable
to "bonds or securities of the United States government or any agency or
instrumentality thereof" ("U.S. Government, Agency or Instrumentality
Bonds"). Unlike prior law, it is important to note that the exemption
described above would not apply with respect to a proportionate share of
the distributions of income by a unit investment trust, to the extent
that less than all of the bonds held by the unit investment trust
constitute Tennessee Bonds or U.S. Government, Agency or Instrumentality
Bonds.
Further, because the Legislation only appears to provide an
exemption for distributions that relate to interest income, distributions
by the Trust that relate to capital gains realized from the sale or
redemption of Tennessee Bonds or U.S. Government, Agency or
Instrumentality Bonds are likely to be treated as taxable dividends for
purposes of the Hall Income Tax. However, capital gains realized
directly by a Unitholder when the Unitholder sells or redeems his Unit
will not be subject to the Hall Income Tax.
Because the Legislation only provides an exemption for distributions
attributable to interest on Tennessee Bonds or U.S. Government, Agency or
Instrumentality Bonds, it must be determined whether bonds issued by the
Government of Puerto Rico qualify as U.S. Government, Agency or
Instrumentality Bonds. For Hall Income Tax purposes, there is currently
no published administrative interpretation or opinion of the Attorney
General of Tennessee dealing with the status of distributions made by
unit investment trusts such as the Tennessee Trust that are attributable
to interest paid on bonds issued by the Government of Puerto Rico.
However, in a letter dated August 14, 1992 (the "Commissioner's Letter"),
the Commissioner of the State of Tennessee Department of Revenue advised
that Puerto Rico would be an "instrumentality" of the U.S. Government and
treated bonds issued by the Government of Puerto Rico as U.S. Government,
Agency or Instrumentality Bonds. Based on this conclusion, the
Commissioner advised that distributions from a mutual fund attributable
to investments in Puerto Rico Bonds are exempt from the Hall Income Tax.
Both the Sponsor and Chapman and Cutler, for purposes of its opinion (as
set forth below), have assumed, based on the Commissioner's Letter, that
bonds issued by the Government of Puerto Rico are U.S. Government, Agency
or Instrumentality Bonds. However, it should be noted that the position
of the Commissioner is not binding, and is subject to change, even on a
retroactive basis.
The Sponsor cannot predict whether new legislation will be enacted
into law affecting the tax status of Tennessee Trusts. The occurrence of
such an event could cause distributions of interest income from the trust
to be subject to the Hall Income Tax.
Based on the foregoing, and based on review and consideration of
existing laws of the State of Tennessee as of this date, it is our
opinion, and we herewith advise you, as follows:
1. For purposes of the Hall Income Tax, the Tennessee Excise
Tax imposed by Section 67-4-806 (the "State Corporate Income Tax"),
and the Tennessee Franchise Tax imposed by Section 67-4-903, the
Trust will not be subject to such taxes.
2. For Hall Income Tax purposes, a proportionate share of
such distributions from the Trust to Unitholders, to the extent
attributable to interest on the Tennessee Bonds (based on the
relative proportion of interest received or accrued attributable to
Tennessee Bonds) will be exempt from the Hall Income Tax when
distributed to such Unitholders. Based on the Commissioner's
Letter, distributions from the Trust to Unitholders, to the extent
attributable to interest on the Puerto Rico Bonds (based on the
relative proportion of interest received or accrued attributable to
the Puerto Rico Bonds) will be exempt from the Hall Income Tax when
distributed to such Unitholders. To the extent the assets of the
Trust consist of assets other than the Bonds, a proportionate share
of distributions from the Tennessee Trust attributable to the income
secured by such assets would not, under current law, be exempt from
the Hall Income Tax when distributed to Unitholders.
3. For State Corporate Income Tax purposes, Tennessee law
does not provide an exemption for interest on Tennessee Bonds and
requires that all interest excludible from Federal gross income must
be included in calculating "net earnings" subject to the State
Corporate Income Tax. We express no opinion herein regarding
whether such tax would be imposed on the earnings or distributions
of the Tennessee Trust (including interest on the Bonds or gain
realized upon the disposition of the Bonds by the Trust)
attributable to Unitholders subject to the State Corporate Income
Tax. However, based upon prior written advice from the Tennessee
Department of Revenue, earnings and distributions from the Trust
(including interest on the Tennessee Bonds or gain realized upon the
disposition of the Tennessee Bonds by the Trust) attributable to the
Unitholders should be exempt from the State Corporate Income Tax.
The position of the Tennessee Department of Revenue is not binding,
and is subject to change, even on a retroactive basis.
4. Each Unitholder will realize taxable gain or loss for
State Corporate Income Tax purposes when the Unitholder redeems or
sells his Units at a price that differs from original cost as
adjusted for accretion of any discount or amortization of any
premium and other basis adjustments, including any basis reduction
that may be required to reflect a Untiholder's share of interest, if
any, accruing on the Bonds during the interval between the
Untiholder's settlement date and the date such Bonds are delivered
to the Tennessee Trust, if later. Tax basis reduction requirements
relating to amortization of bond premium may, under some
circumstances, result in Unitholders realizing taxable gain when the
Units are sold or redeemed for an amount equal to or less than their
original cost.
5. For purposes of the Tennessee Property Tax imposed by
Section 67-5-102, the Tennessee Trust will be exempt from taxation
with respect to the Bonds it holds. As for the taxation of the
Units held by the Unitholders, although intangible personal property
is not presently subject to Tennessee taxation, no opinion is
expressed with regard to potential property taxation of the
Unitholders with respect to the Units because the determination of
whether property is exempt from such tax is made on a county by
county basis.
6. The Bonds and the Units held by the Unitholders will not
be subject to Tennessee sales and use taxes.
We have not examined any of the Bonds to be deposited and held in
the Tennessee Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no
opinion as to the exemption from State income taxes of interest on the
Bonds if received directly by a Unitholder.
We express no opnion regarding whether insurance proceeds paid in
lieu of interest on the Bonds are exempt from the Hall Income Tax.
Very truly yours,
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Kroll & Tract
520 Madison Avenue
New York, NY 10022
August 29, 1996
Insured Municipals Income Trust
205th Insured Multi-Series
The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Insured Municipals Income Trust,
205th Insured Multi-Series (the "Fund") consisting of Insured Municipals
Income Trust, Intermediate Series 88, Colorado Insured Municipals Income
Trust, Series 81, Louisiana Insured Municipals Income Trust, Series 17,
Massachusetts Insured Municipals Income Trust, Series 34, Missouri Insured
Municipals Income Trust, Series 98, New Jersey Insured Municipals Income
Trust, Series 114, New York Insured Municipals Income Trust, Series 136
and Tennessee Insured Municipals Income Trust, Series 37 (individually the
"Trust" and in the aggregate the "Trusts") for the purposes of determining
the applicability of certain New York taxes under the circumstances
hereinafter described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"),
dated as of today (the "Date of Deposit") among Van Kampen American Capital
Distributors, Inc. (the "Depositor"), American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York as Trustee (the "Trustee"). As described
in the prospectus relating to the Fund dated today to be filed as an amendment
to a registration statement previously filed with the Securities and Exchange
Commission (file number 333-08681) under the Securities Act of 1933, as
amended (the "Prospectus" and the "Registration Statement"), the objectives of
the Fund are the generation of income exempt from Federal taxation and as
regards each of the "State" Trusts exempt from income tax and personal
property tax of the State denominated in the name of that "State" Trust, if
any, to the extent indicated in the Prospectus. No opinion is expressed
herein with regard to the Federal or State tax aspects of the bonds, the Fund,
Trusts (other than New York), units of the Trusts (the "Units") other than
New York, or any interest, gains or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee with
respect to each of the Trusts, the total principal amount of interest bearing
obligations and/or contracts for the purchase thereof together with an
irrevocable letter of credit in the amount required for the purchase price and
accrued interest, if any, and an insurance policy purchased by the Depositor
evidencing the insurance guaranteeing the timely payment of principal and
interest of tile obligations comprising the corpus of such trusts oilier than
those obligations the timely payment of principal and interest of which are
guaranteed by an insurance policy purchased by the issuer thereof or a prior
owner, which may be the Depositor prior to the Date of Deposit, as more fully
set forth in the Prospectus with respect to each Trust.
We understand with respect to the obligations described in the preceding
paragraph that all insurance, whether purchased by the Depositor, a prior
owner or the issuer, provides, or will provide, that the amount paid by the
insurer in respect of any bond may not exceed the amount of principal and
interest due on the bond and such payment will in no event relieve the issuer
from its continuing obligation to pay such defaulted principal and interest in
accordance with the terms of the obligation.
The Trustee will not participate in the selection of the obligations to
be deposited in the Fund, and, upon the receipt thereof, will deliver to the
Depositor a registered certificate for the number of Units representing the
entire capital of each of the Trusts as more fully set forth in the Prospectus
and the Registration Statement. The Units, which are represented by
certificates ("Certificates"), will be offered to the public by the Prospectus
upon the effectiveness of the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will consist
primarily of crediting the appropriate accounts with interest received by each
of the Trusts and with the proceeds from the disposition of obligations held
in the Trusts and the distribution of such interest and proceeds to the Unit
holders of that Trust. The Trustee will also maintain records of the
registered holders of Certificates representing an interest in each Trust and
administer the redemption of Units by such Certificate holders and may perform
certain administrative functions with respect to an automatic investment
option.
Generally, obligations held in the Fund may be removed therefrom by the
Trustee only upon redemption prior to their stated maturity, at the direction
of the Depositor in the event of an advance refunding or upon the occurrence
of certain other specified events which adversely affect the sound investment
character of the Fund, such as default by the issuer in payment of interest or
principal on the obligation and no provision for payment is made therefor
either pursuant to insurance or otherwise and the Depositor fails to instruct
the Trustee, within thirty (30) days after notification, to hold such
obligation.
Prior to the termination of the Fund, the Trustee is empowered to sell
Bonds, from a list furnished by the Evaluator, only for the purpose of
redeeming Units tendered to it and of paying expenses for which funds are not
available. The Trustee does not have the power to vary the investment of any
Unit holder in the Fund, and under no circumstances may the proceeds of sale
of any obligations held by the Fund be used to purchase new obligations to be
held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on business
corporations, and, for purposes of that Article, Section 208(l) defines the
term "corporation" to include, among other things, "any business conducted by
a trustee or trustees wherein interest or ownership is evidenced by
certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in which
interest or ownership is evidenced by certificate or other
written instrument includes, but is not limited to, an
association commonly referred to as a "business trust" or
"Massachusetts trust". In determining whether a trustee
or trustees are conducting a business, the form of the
agreement is of significance but is not controlling. The
actual activities of the trustee or trustees, not their
purposes and powers, will be regarded as decisive factors
in determining whether a trust is subject to tax under
Article 9-A. The mere investment of funds and the
collection of income therefrom, with incidental
replacement of securities and reinvestment of funds, does
not constitute the conduct of a business in the case of a
business conducted by a trustee or trustees. 20 NYCRR 1-
2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that where
a trustee merely invests funds and collects and distributes the income
therefrom, the trust is not engaged in business and is not subject to the
franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept.
1948), order resettled, 274 A.D. 1083, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an opinion of the Attorney General of the State of New York, 47 N.Y.
Atty. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making
up the trust only upon the happening of certain specified events or the
existence of certain specified conditions, the trust was not subject to the
franchise tax.
In the instant situation, the Trustee is not empowered to sell
obligations contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the obligation is
in question or in which cash is needed to pay redeeming Unit holders or to pay
expenses, or where the Fund is liquidated pursuant to the termination of the
Indenture. Only in circumstances in which the issuer of an obligation
attempts to refinance it can the Trustee exchange an obligation for a new
security. In substance, the Trustee will merely collect and distribute income
and will not reinvest any income or proceeds, and the Trustee has no power to
vary the investment of any Unit holder in the Fund.
Under Subpart E of Part 1, Subchapter J of Chapter I of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust will be
deemed to be the owner of the trust under certain circumstances and therefore
taxable on his proportionate interest in the income thereof. Where this
Federal tax rule applies, the income attributed to the grantor will also be
income to him for New York income tax purposes. See TSB-M78(9)(c), New York
Department of Taxation and Finance, June 23, 1978.
Article 22 (Personal Income Tax) of the New York Tax Law imposes a tax on
a New York State resident individual's State adjusted gross income. Such
amount is defined by Section 612 as his Federal adjusted gross income, with an
addition for interest income on the obligations of a State or political
subdivision of a state other than New York, if excluded from his federal
adjusted gross income. Such amount is defined by Section T46112 of the
Administrative Code of the City of New York as Ins Federal adjusted gross
income, with an addition for interest income on the obligations of a state or
political subdivision of a state other than New York, if excluded from his
federal adjusted gross income. 48 U.S.C. Section 745 exempts interest on a
bond issued by the Government of Puerto Rico or a political subdivision
thereof from tax of the United States, of any State, and of any state's
county, municipality, or municipal subdivision thereof. 48 U.S.C. Section
1423a exempts interest on a bond issued by the Government of Guam or by its
authority from taxation by the United States, any state or political
subdivision. The New York Trust holds only obligations issued by New York
State or a political subdivision thereof or by the Government of Puerto Rico
or a political subdivision thereof, or by the Government of Guam or by its
authority.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of a Trust will be
considered as owning a share of each asset of that Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income of
each Unit holder of that Trust in said proportion pursuant to Subpart E of
Part 1, Subchapter J of Chapter I of the Code.
Based on the foregoing and of the opinion of Messrs. Chapman and Cutler,
co-counsel for the Depositor, dated today, upon which we specifically rely, we
are of the opinion that under existing laws, rulings, and court decisions
interpreting the laws of the State and City of New York:
1. Each of the Trusts will not constitute an association taxable as a
corporation under New York law, and, accordingly, will not be subject to tax
on its income under the New York State franchise tax or the New York City
general corporation tax.
2. The income of each of the Trusts will be treated as the income of
the Unit holders under the income tax laws of the State and City of New York.
3. Resident individuals of New York State and City will not be subject
to the State or City personal income taxes on interest income on their
proportionate shares of interest income earned by a Trust on any obligation of
New York State or a political subdivision thereof or of the Government of
Puerto Rico or a political subdivision thereof or of the Government of Guam or
by its authority, to the extent such income is excludable from Federal gross
income under Code Section 103.
4. Any amounts paid under the insurance policies purchased by the
Depositor and deposited with the Trustee, as more fully described above,
representing maturing interest on defaulted obligations held by the Trustee
will not be subject to New York State or City income taxes if, and to the same
extent as, such amounts would have been excludable from New York State or City
income taxes if paid by the issuer. Paragraph 3 of this opinion is
accordingly applicable to such policy proceeds representing maturing interest.
5. Any amounts paid under an insurance policy purchased by the issuer
of an obligation or a prior owner, as more fully described above, representing
maturing interest on such defaulting obligation held by the Trustee will not
be subject to New York State or City income taxes if, and to the same extent
as, such amounts would have been excludable from New York State or City income
taxes if paid by the issuer. Paragraph 3 of this opinion is accordingly
applicable to such policy proceeds representing maturing interest.
6. Resident individuals of New York State and City who hold Units will
recognize gain or loss, if any, under the State or City personal income tax
law if the Trustee disposes of a Fund asset. The amount of such gain or loss
is measured by comparing the Unit holder's aliquot share of the total proceeds
from the transaction with his basis for his fractional interest in the asset
disposed of. Such basis is ascertained by apportioning the tax basis for his
Units among each of the Trust's assets (as of the date on which is Units were
acquired) ratably according to their values as of the valuation date nearest
the date on which he purchased such Units. A Unit holder's basis in his Units
and of his fractional interest in the Trust's assets must be reduced by the
amount of his aliquot share of interest received by the Trust, if any, on
bonds delivered after the settlement date to the extent that such interest
accrued on the Bonds during the period from the Unit holder's settlement date
to the date such Bonds are delivered to that Trust and must be adjusted for
amortization of bond premium or accretion of original issue discount, if any,
on tax-exempt obligations held by the Trust.
7. Resident individuals of New York State and City who hold Units will
recognize gain or loss, if any, under the State or City personal income tax
law if the Unit holder sells or redeems any Units. Such gain or loss is
increased by comparing the proceeds of such redemption or sale with the
adjusted basis of the Units redeemed or sold. Before adjustment, such basis
would normally be cost if the Unit holder had acquired his Units by purchase,
plus his aliquot share of advances by the Trustee to the Fund to pay interest
on Bonds delivered after the Unit holder's settlement date to the extent that
such interest accrued on the Bonds during the period from the settlement date
to the date such Bonds are delivered to the Fund, but only to the extent that
such advances are to be repaid to the Trustee out of interest received by the
Fund with respect to such Bonds.
8. Unit holders who are not residents of New York State are not subject
to the personal income tax law thereof with respect to any interest or gain
derived from a Trust or any gain from the sale or other disposition of the
Units, except to the extent that such interest or gain is from property
employed in a business, trade, profession or occupation carried on in New York
state.
In addition, we are of the opinion that no New York State stock transfer
tax will be payable in respect of any transfer of the Certificates by reason
of the exemption contained in paragraph (a) of Subdivision 8 of Section 270 of
the New York Tax Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and
the reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
Kroll & Tract
MNS:hbm
Exhibit 3.4
The Carmouche Law Firm
One Lakeshore Drive, Suite 1900
Lake Charles, Louisiana 70602-2001
August 29, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Gentlemen:
As counsel to Van Kampen American Capitl Distributors, Inc. (the
"Depositor"), we have examined a copy of the Trust Agreement dated as of
August 29, 1996 and Standard Terms and Conditions of Trust for Van Kampen
American Capital Distributors, Inc. Tax-Exempt Trusts, dated March 16,
1995 (the "Trust Agreement"), by and between the Depositor and American
Portfolio Evaluation Service a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator and The Bank of New York, as
Trustee. The Trust Agreement establishes a unit investment trust, the
Insured Municipals Income Trust, 205th Insured Multi-Series, Louisiana
Insured Municipals Income Trust Series 17 (the "Trust"), into which the
Depositor will deposit (i) certain interest-bearing obligations, the
interest on which, in the opinion of counsel to the issuing governmental
authorities with certain exceptions, is either exempt from all present
federal income taxes or is excluded from gross income for federal income
tax purposes, and (ii) moneys to be held by the Trustee upon the terms
and conditions set forth in the Trust Agreement.
The assets of the Trusts will consist of debt obligations issued by
or on behalf of states or territories of the United States and political
subdivisions and authorities thereof, authorized to issue obligations on
their behalf or by the commonwealth of Puerto Rico (collectively the
"Bonds"). Under the Trust Agreements, certificates of beneficial
ownership were issued representing units of the Trusts (the "Units").
The Units represent a fractional undivided interest in the portfolio and
assets of the Trusts.
Based upon the foregoing and upon an examination of such other
pertinent records and documents and matters of law as we deemed
necessary, we are of the opinion that, as of the date hereof and under
existing law:
1. The Trusts will be treated as a trust for Louisiana income tax
purposes and not as an association taxable as a corporation.
2. The Louisiana income tax on resident individuals is based upon
the "tax table income" of resident individuals. The calculation of the
"tax table income" of a resident individual begins with federal adjusted
gross income. Certain modifications are specified, but no such
modification requires the addition of interest on the Bonds.
Accordingly, amounts representing interest excludable from gross income
for federal income tax purposes received by the Trusts with respect to
such obligations will not be taxed to the Trusts, or, except as provided
below, to the resident individual Unitholder, for Louisiana income tax
purposes. In addition to the foregoing, interest on certain of the Bonds
issued by or on behalf of Louisiana authorities may also be exempt from
Louisiana income taxes pursuant to the statutes authorizing their
issuance.
3. To the extent that gain from the sale, exchange or other
disposition of obligations held by the Trusts (whether as a result of a
sale or exchange of such obligations by the Trusts or as a result of a
sale or exchange of a Unit by a Unitholder) is includable in the federal
adjusted gross income of a resident individual, such gain will be
included in the calculation of the Unitholder's Louisiana taxable income.
4. Gain or loss on the Unit or as to underlying Bonds for
Louisiana income tax purposes would be determined by taking into account
the basis adjustments for federal income tax purposes described in the
prospectus for the Units.
As no opinion is expressed regarding the Louisiana tax consequences
of Unitholders other than individuals who are Louisiana residents, tax
counsel should be consulted by other prospective Unitholders. The
Internal Revenue Code of 1986, as amended (the "1986 Code") contains
provisions relating to investing in tax-exempt obligations (including,
for example, corporate minimum tax provisions which treat certain
tax-exempt interest and corporate book income which may include
tax-exempt interest, as tax preference items, provisions affecting the
deductibility of interest expense by financial institutions) which could
have a corresponding effect on the Louisiana tax liability of the
Unitholder.
In rendering the opinions expressed above, we have relied upon the
opinion of Messrs. Chapman and Cutler that the Trusts are not an
association taxable as a corporation for federal income tax purposes,
that each Unitholder of the Trust will be treated as the owner of a pro
rata portion of such Trust under the 1986 Code and that the income of the
Trust will be treated as income of the Unitholder under the 1986 Code.
Tax counsel should be consulted as to the other Louisiana tax
consequences not specifically considered herein, and as to the Louisiana
tax status of taxpayers other than resident individuals who are
Unitholders in the Trust. In addition, no opinion is being rendered as
to the Louisiana tax consequences resulting from any proposed or future
federal or state tax legislation.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our
firm in said Registration Statement for the Trust.
Respectfully submitted,
The Carmouche Law Firm (APC)
By Joseph A. Delafield
Exhibit 3.5
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110-3342
August 29, 1996
Van Kampen American Capital Distributors, Inc.
17W11O 22nd Street
Oakbrook Terrace, Illinois 60181
Re:Insured Municipals Income Trust, 205th Insured Multi-Series
Massachusetts IM-IT Series 34;
S.E.C. Reg. No. 333-08681
Ladies and Gentlemen:
You have requested our opinion as special Massachusetts tax counsel
with respect to the impact of the Massachusetts income tax laws on the
Massachusetts Trust being created as part of the above-entitled Fund and
on the holders of Units of the Massachusetts Trust ("Massachusetts
Unitholders").
We have examined the Trust Indenture and Agreement between Van
Kampen American Capital Distributors, Inc., as Depositor, and American
Portfolio Evalutation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, and The Bank of New York, Wall
Street Trust division, as Trustee, dated today, creating the Fund, the
Preliminary Prospectus dated today relating to the Units of the Fund, and
an opinion of Chapman and Cutler to you dated today as to the federal tax
status of the Fund, its constituent Trusts and their Unitholders. We
have also examined applicable Massachusetts law including rulings by the
Massachusetts Commissioner of Revenue regarding trusts which are similar
in many respects to the Massachusetts Trust being created as part of the
above-entitled Fund.
Based on the foregoing it is our opinion that under existing law and
administration of the affairs of the Massachusetts Trust as set forth in
the Preliminary Prospectus:
1. For Massachusetts income tax purposes, the Massachusetts
Trust will be treated as a corporate trust under Section 8 of
Chapter 62 of the Massachusetts General Laws and not as a grantor
trust under Section 10(e) of Chapter 62 of the Massachusetts General
Laws.
2. The Massachusetts Trust will not be held to be engaging in
business in Massachusetts within the meaning of said Section 8 and
will, therefore, not be subject to Massachusetts income tax.
3. Massachusetts Unitholders who are subject to Massachusetts
income taxation under M.G.L. Chapter 62 will not be required to
include their respective shares of the earnings of or distributions
from the Massachusetts Trust in their Massachusetts gross income to
the extent that such earnings or distributions represent tax-exempt
interest for federal income tax purposes received by the
Massachusetts Trust on obligations issued by Massachusetts, its
counties, municipalities, authorities, political subdivisions or
instrumentalities or by United States territories or possessions
("Obligations").
4. Any proceeds of insurance obtained by the Massachusetts
Trust or by the Sponsor of the Fund or by the issuer or underwriter
of an Obligation held by the Massachusetts Trust which are paid to
Massachusetts Unitholders and which represent maturing interest on
defaulted Obligations held by the Massachusetts Trust will be
excludable from the Massachusetts gross income of a Massachusetts
Unitholder if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted
Obligation.
5. The Massachusetts Trust's capital gains and/or capital
losses realized upon disposition of Obligations held by it will be
includable pro rata in the federal gross income of Massachusetts
Unitholders who are subject to Massachusetts income taxation under
M.G.L. Chapter 62, and such gains and/or losses will be includable
as capital gains and/or losses in the Massachusetts Unitholders'
Massachusetts gross income, except where capital gain is
specifically exempted from income taxation under acts authorizing
issuance of said Obligations.
Gains or losses realized on sales or redemptions of Units by
Massachusetts Unitholders who are subject to Massachusetts income
taxation under M.G.L. Chapter 62 will be includable in their
Massachusetts gross income.
In determining such gain or loss Massachusetts Unitholders will, to
the same extent required for Federal tax purposes, have to adjust
their tax bases for their Units for accrued interest received, if
any, on Bonds delivered to the Trustee after the Massachusetts
Unitholders pay for their Units, and for amortization of premiums,
if any, on the Obligations held by the Massachusetts Trust.
6. The Units of the Massachusetts Trust are not subject to
any property tax levied by Massachusetts or any political
subdivision thereof, nor to any income tax levied by any such
political subdivision. They are includable in the gross estate of a
deceased Massachusetts Unitholder who is a resident of Massachusetts
for purposes of the Massachusetts Estate Tax.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-08681) relating to the Units
referred to above and to the use of our name and to the reference to our
firm in said Registration Statement, and in the related Prospectus, under
the headings "Massachusetts Trust - Tax Status" and "Legal Opinions."
Very truly yours,
Peabody & Arnold
Exhibit 3.6
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
August 29, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Insured Municipals Income Trust, 205th Insured Multi-Series
(New Jersey Insured Municipals Income Trust, Series 114
Gentlemen:
We have acted as special counsel, with respect to New Jersey state
tax matters, to Insured Municipals Income Trust, 205th Insured Multi-
Series (the "Fund") concerning a Registration Statement (No. 333-08681 on
Form S-6 under the Securities Act of 1933, as amended, covering the
issuance by the Fund of units of fractional undivided interest (the
"Units") in several state trusts (the "State Trusts"), one of which is
New Jersey Insured Municipals Income Trust, Series 114 included as a part
of the Fund (the "New Jersey Trust"). Such Units will be purchased by
various investors ("Certificateholders").
The Fund is organized under a Trust Indenture and Agreement (the
"Indenture") of even date herewith (the "Date of Deposit") between Van
Kampen American Distributors, Inc. (the "Depositor") and The Bank of New
York through its Wall Street Trust division (the "Trustee"). Each Unit
of the New Jersey Trust represents a fractional undivided interest in the
principal and net income of the New Jersey Trust. The New Jersey Trust
will be comprised of that number of units which will establish as close
as possible as of the Date of Deposit a Public Offering Price (as defined
in the Prospectus) per Unit of $1,000. The New Jersey Trust will be
administered as a distinct entity with separate certificates,
investments, expenses, books and records.
In acting as special counsel, we have examined such documents and
records with respect to a prior series, Insured Municipals Income Trust,
196th Insured Multi-Series, as we deem necessary, including, but not
limited to, the Trust Indenture and Agreement (the "196th Insured Multi-
Series Indenture") and the Prospectus. You have advised that the
Indenture is identical in all material respects to the 196th Insured
Multi-Series Indenture. You have also advised that the opinion of
Messrs. Chapman and Cutler with respect to the Federal income tax status
of the Fund, its constituent State Trusts and its Certificateholders, is
in all material respects identical to the opinion issued by Messrs.
Chapman and Cutler for the Insured Municipals Income Trust, 196th Insured
Multi-Series.
We note that the assets of the New Jersey Trust will consist of
interest-bearing obligations issued by or on behalf of the State of New
Jersey, and counties, municipalities, authorities and other political
subdivisions thereof, and certain territories of the United States (the
"Bonds"). Distributions of the interest received by the New Jersey Trust
will be made to each Certificateholder semi-annually unless the
Certificateholder elects to receive such distributions on a monthly
basis. In the opinion of bond counsel to each issuer, the interest on
all Bonds in the New Jersey Trust is exempt from Federal income tax under
existing law.
We understand that on the Date of Deposit the Depositor has
deposited with the Trustee the total principal amount of interest-bearing
obligations and/or contracts for the purchase thereof together with an
irrevocable letter of credit in the amount required for the purchase
price and accrued interest, if any, and an insurance policy purchased by
the Depositor evidencing the insurance guaranteeing the timely payment of
principal and interest of some of the obligations comprising the corpus
of the Fund, as more fully set forth in the Preliminary Prospectus. All
other obligations included in the deposit described above will be covered
by insurance obtained by the issuer of such obligations guaranteeing
timely payment of principal and interest. Such insurance will provide
that the amount paid by the insurer in respect of any Bond may not exceed
the amount of principal and interest due on the Bond and such payment
will in no event relieve the issuer from its continuing obligation to pay
such defaulted principal and interest in accordance with the terms of the
obligation.
Section 2.04 of the Indenture provides that each State Trust is a
separate and distinct trust for all purposes, the assets of one State
Trust may not be commingled with the assets of any other State Trust, and
the expenses of one State Trust shall not be charged against any other
State Trust. Section 2.04 further provides that the certificates
representing the ownership of an undivided fractional interest in one
State Trust shall not be exchangeable for certificates representing the
ownership of an undivided fractional interest in any other State Trust.
The Indenture provides further, among other things, that the Trustee
shall:
(a) collect all interest and monies payable to the New Jersey
Trust, and hold the funds collected in trust on behalf of the
Certificateholders of the New Jersey Trust;
(b) set aside from such funds any amounts necessary for the
reimbursement of advances and for the payment of expenses, taxes and
governmental charges in respect of the New Jersey Trust;
(c) distribute all remaining amounts semi-annually, or monthly
if so elected by a Certificateholder, to the Certificateholders in
proportion to their interest in the New Jersey Trust;
(d) redeem any certificates tendered for redemption by a
Certificateholder provided that the Trustee has notified the
Depositor of the tender and the Depositor has failed to indicate
within a time specified in the Indenture that it will purchase the
tendered certificates from the tendering Certificateholder;
(e) sell or liquidate any or all Bonds at the sole direction
of the Depositor and at such price and time and in such manner as
shall be determined by the Depositor, provided that the Depositor
has determined that any one or more of certain conditions specified
in the Indenture exists;
(f) in connection with an offer made by an obligor of any of
the Bonds to issue new obligations, in exchange and substitution for
any issue of Bonds pursuant to a plan for the refunding or
refinancing of such Bonds, pursuant to the sole instruction of the
Depositor in writing, reject such offer and either hold or sell such
Bonds, or accept or reject such offer or to take any other action
with respect thereto as the Depositor may deem proper; and
(g) at the direction of the Depositor, acquire Replacement
Bonds, as defined in the Prospectus, to make up the original corpus
of the New Jersey Trust in the event of a failure to deliver any
Bond that has been purchased for the New Jersey Trust under a
contract, including those Bonds purchased on a "when, as and if
issued" basis.
The Trustee has no power of sale except (a) on order of the
Depositor as stated herein, (b) to provide funds, not otherwise
available, to pay taxes, charges, expenses, fees or indemnities, (c) in
case of default on any of the Bonds, but only after notification of the
Depositor, and provided that the Depositor has not, within 30 days of
such notification, given any instructions to sell or to hold, or has not
taken any other action in connection with, such Bonds, or (d) for the
purpose of redeeming certificates tendered by any Certificateholder. The
Trustee has no power to reinvest, except as stated in Section 3.08 of the
Indenture. Such limited power of reinvestment is in furtherance of the
Trustee's obligation to protect the trust assets, and does not constitute
power to vary investments.
The Indenture provides further, among other things, that the
Certificateholders:
(a) may tender their certificate or certificates to the
Trustee for redemption except in limited circumstances;
(b) will not have any right to vote or in any manner otherwise
control the operation and management of the Fund, the New Jersey
Trust, or the obligations of the Depositor or Trustee;
(c) may elect to receive distributions from the New Jersey
Trust on a monthly basis;
(d) may terminate the New Jersey Trust at any time by written
consent of Certificateholders representing 51% of the then
outstanding Units of the New Jersey Trust; and
(e) shall be under no liability to any third persons by reason
of any action taken by the Depositor or Trustee or any other
Certificateholder, or any other cause whatsoever.
You have advised that, in the opinion of Messrs. Chapman and Cutler,
for Federal income tax purposes the Fund and New Jersey Trust will not be
taxable as a corporation or association but will be governed by the
provisions of Subchapter J (relating to trusts) of Chapter 1 of the
Internal Revenue Code of 1986, as amended. Each Certificateholder will
be considered the owner of a pro rata portion of the New Jersey Trust and
will be subject to tax on the income therefrom under the provisions of
Subpart E of Subchapter J of Chapter 1 of the Internal Revenue Code of
1986, as amended. The New Jersey Trust itself will not be subject to
Federal income taxes. For Federal income tax purposes, each item of
trust income will have the same character in the hands of the
Certificateholder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of the New Jersey Trust
consists of interest excludable from gross income under Section 103 of
the Internal Revenue Code of 1986, as amended, such income will be
excludable from Federal gross income of the Certificateholder.
Furthermore, any proceeds paid under the insurance policy issued to the
Trustee of the Fund which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal gross
income if, and to the same extent as, such interest would have been so
excludable if paid by the issuer of the defaulted obligations and the
excludability from Federal gross income of interest on Bonds which may be
insured by policies issued directly to the respective Bond issuers will
not be affected if the source of any interest payment is from policy
proceeds.
Based on our examination of the 196th Insured Multi-Series
Indenture, your advice that the Indenture is identical in all material
respects to the 196th Insured Multi-Series Indenture, your advice that
the opinion of Messrs. Chapman and Cutler with respect to the Federal
income tax status of the Fund, its constituent State Trusts and its
Certificateholders dated as of the date hereof is identical in all
material respects to its counterpart in the prior issue of Insured
Municipals Income Trust, 196th Insured Multi-Series, and, with respect to
Federal income tax matters, with your approval, relying solely upon the
opinion of Messrs. Chapman and Cutler, and our examination of such other
documents, records and matters of law as we deem necessary, we are of the
opinion that for New Jersey state and local tax purposes:
1. The New Jersey Trust will be recognized as a trust and not
an association taxable as a corporation. The New Jersey Trust will
not be subject to the New Jersey Corporation Business Tax or the New
Jersey Corporation Income Tax.
2. With respect to the non-corporate Certificateholders who
are residents of New Jersey, the income of the New Jersey Trust
which is allocable to each such Certificateholder will be treated as
the income of such Certificateholder under the New Jersey Gross
Income Tax. Interest on the underlying Bonds which would be exempt
from New Jersey Gross Income Tax if directly received by such
Certificateholder will retain its status as tax-exempt interest when
received by the New Jersey Trust and distributed to such
Certificateholder. Any proceeds paid under the insurance policy
issued to the Trustee of the Fund with respect to the Bonds or under
individual policies obtained by issuers of Bonds which represent
maturing interest on defaulted obligations held by the Trustee will
be exempt from New Jersey Gross Income Tax if, and to the same
extent as, such interest would have been so exempt if paid by the
issuer of the defaulted obligations.
3. A non-corporate Certificateholder will not be subject to
the New Jersey Gross Income Tax on any gain realized either when the
New Jersey Trust disposes of a Bond (whether by sale, exchange,
redemption, or payment at maturity) or when the Certificateholder
redeems or sells his Units, or upon payment of any proceeds under
the insurance policy issued to the Trustee of the Fund with respect
to the Bonds or under individual policies obtained by issuers of
Bonds which represent maturing principal on defaulted obligations
held by the Trustee. Any loss realized on such disposition may not
be utilized to offset gains realized by such Certificateholder on
the disposition of assets the gain on which is subject to the New
Jersey Gross Income Tax.
4. Units of the New Jersey Trust may be taxable on the death
of a Certificateholder under the New Jersey Transfer Inheritance Tax
law or the New Jersey Estate Tax Law.
5. If a Certificateholder is a corporation subject to the New
Jersey Corporation Business Tax or New Jersey Corporation Income
Tax, interest from the Bonds in the New Jersey Trust which is
allocable to such corporation will be includable in its entire net
income for purposes of the New Jersey Corporation Business Tax or
New Jersey Corporation Income Tax, less any interest expense
incurred to carry such investment to the extent such interest
expense has not been deducted in computing Federal taxable income.
Net gains derived by such corporation on the disposition of the
Bonds by the New Jersey Trust or on the disposition of its Units
will be included in its entire net income for purposes of the New
Jersey Corporation Business Tax or New Jersey Corporation Income
Tax. Any proceeds paid under the insurance policy issued to the
Trustee of the Fund with respect to the Bonds or under individual
policies obtained by issuers of Bonds which represent maturing
interest or maturing principal on defaulted obligations held by the
Trustee will be included in its entire net income for purposes of
the New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax if, and to the same extent as, such interest or proceeds
would have been so included if paid by the issuer of the defaulted
obligations.
We have not examined any of the obligations to be deposited in the
Fund, and express no opinion as to whether the interest on any such
obligations would in fact be tax-exempt if directly received by a
Certificateholder; nor have we made any review of the proceedings
relating to the issuance of Bonds or the basis for bond counsel opinions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm and a summary of
this opinion included in such Registration Statement and the related
Prospectus. In giving such consent we do not thereby admit that we are
in the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended, and the rules and regulations
thereunder.
Except as indicated in the immediately preceding paragraph hereof
and except with our prior written consent, this opinion may not be quoted
in whole or in part or otherwise referred to in any document or
instrument or be furnished to or relied upon by any person other than the
addressee and The Bank of New York through its Wall Street Trust
division, as Trustee (including any successor trustee).
Very truly yours,
Pitney, Hardin, Kipp & Szuch
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
August 27, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Insured Municipals Income Trust, 205th Insured Multi-Series
(A Unit Investment Trust) Registered Under the Securities Act of 1933
File No. 333-08681
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund, copy of which is attached hereto.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Services, Inc.,
as the Evaluator, and to the use of the Obligations prepared by us which
are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Standard & Poor's Ratings Services,
A division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust, 205th Insured Multi-Series - consisting
of:
Insured Municipals Income Trust, Intermediate Series 88;
Colorado Insured Municipals Income Trust, Series 81;
Louisiana Insured Municipals Income Trust, Series 17;
Massachusetts Insured Municipals Income Trust, Series 34;
Missouri Insured Municipals Income Trust, Series 98;
New Jersey Insured Municipals Income Trust, Series 114;
New York Insured Municipals Income Trust, Series 136; and
Tennessee Insured Municipals Income Trust, Series 37;
Pursuant to your request for a Standard & Poor's rating on the units of
the above-captioned trust, SEC #333-08681, we have reviewed the information
presented to us and have assigned a 'AAA' rating to the units of the trust and
a 'AAA' rating to the securities contained in the trust for as long as they
remain in the trust. The ratings are direct reflections, of the portfolio of
the trust, which will be composed solely of securities covered by bond
insurance policies that insure against default in the payment of principal and
interest on the securities so long as they remain in the trust. Since such
policies have been issued by one or more insurance companies which have been
assigned a 'AAA' claims paying ability rating by S&P, S&P has assigned a 'AAA'
rating to the units of the trust and to the securities contained in the trust
for as long as they remain in the trust.
Standard & Poor's will maintain surveillance on the "AAA" Rating Until
September 29, 1997. On this date, the rating will be automatically withdrawn
by Standard & Poor's unless a post effective letter is requested by the trust.
You have permission to use the name of Standard & Poor's Corporation and
the above-assigned ratings in connection with your dissemination of
information relating to these units, provided that it is understood that the
ratings are not "market" ratings nor recommendations to buy, hold, or sell the
units of the trust or the securities contained in the trust. Further, it
should be understood the rating on the units does not take into account the
extent to which fund expenses or portfolio asset sales for less than the
fund's purchase price will reduce payment to the unit holders of the interest
and principal required to be paid on the portfolio assets. S&P reserves the
right to advise its own clients, subscribers, and the public of the ratings.
S&P relies on the sponsor and its counsel, accountants, and other experts for
the accuracy and completeness of the information submitted in connection with
the ratings. S&P does not independently verify the truth or accuracy of any
such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Corporation in connection with the rating assigned to the units in the
registration statement or prospectus relating to the units or the trust.
However, this letter should not be construed as a consent by us, within the
meaning of Section 7 of the Securities Act of 1933, to the use of the name of
Standard & Poor's Corporation in connection with the ratings assigned to the
securities contained in the trust. You are hereby authorized to file a copy
of this letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made
to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
Exhibit 4.3
Independent Certified Public Accountants' Consent
We have issued our report dated August 29, 1996 on the statements of
condition and related bond portfolios of Insured Municipals Income Trust,
205th Insured Multi-Series (IM-IT Intermediate, Colorado IM-IT, Louisiana
IM-IT, Massachusetts IM-IT, Missouri IM-IT, New Jersey IM-IT, New York IM-
IT and Tennessee IM-IT Trusts) as of August 29, 1996 contained in the
Registration Statement on Form S-6 and Prospectus. We consent to the use
of our report in the Registration Statement and Prospectus and to the use
of our name as it appears under the caption "Trust Administration-
Independent Certified Public Accountants" in Part II of the Prospectus.
Grant Thornton LLP
Chicago, Illinois
August 29, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 81
<NAME> ICO
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 2940503
<INVESTMENTS-AT-VALUE> 2940503
<RECEIVABLES> 60935
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3001438
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60935
<TOTAL-LIABILITIES> 60935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2940503
<SHARES-COMMON-STOCK> 3092
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2940503
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 17
<NAME> ILA
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 2920534
<INVESTMENTS-AT-VALUE> 2920534
<RECEIVABLES> 28107
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2948641
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28107
<TOTAL-LIABILITIES> 28107
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2920534
<SHARES-COMMON-STOCK> 3071
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2920534
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 34
<NAME> IMA
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 2866327
<INVESTMENTS-AT-VALUE> 2866327
<RECEIVABLES> 44359
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2910686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44359
<TOTAL-LIABILITIES> 44359
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2866327
<SHARES-COMMON-STOCK> 3014
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2866327
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 88
<NAME> IMIN
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 4890293
<INVESTMENTS-AT-VALUE> 4890293
<RECEIVABLES> 23147
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4913440
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23147
<TOTAL-LIABILITIES> 23147
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4890293
<SHARES-COMMON-STOCK> 5000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4890293
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 98
<NAME> IMO
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 3400791
<INVESTMENTS-AT-VALUE> 3400791
<RECEIVABLES> 46694
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3447485
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46694
<TOTAL-LIABILITIES> 46694
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3400791
<SHARES-COMMON-STOCK> 3576
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3400791
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 114
<NAME> INJ
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 2938621
<INVESTMENTS-AT-VALUE> 2938621
<RECEIVABLES> 23484
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2962105
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23484
<TOTAL-LIABILITIES> 23484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2938621
<SHARES-COMMON-STOCK> 3090
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2938621
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 136
<NAME> INY
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 2943360
<INVESTMENTS-AT-VALUE> 2943360
<RECEIVABLES> 24099
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2967459
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24099
<TOTAL-LIABILITIES> 24099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2943360
<SHARES-COMMON-STOCK> 3095
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2943360
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on August 29, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 37
<NAME> ITN
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-29-1996
<PERIOD-END> AUG-29-1996
<INVESTMENTS-AT-COST> 2915779
<INVESTMENTS-AT-VALUE> 2915779
<RECEIVABLES> 33683
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2949462
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33683
<TOTAL-LIABILITIES> 33683
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2915779
<SHARES-COMMON-STOCK> 3066
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2915779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
