File No. 333-36731
CIK #896372
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, 226th
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 Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 W. Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of fractional undivided
beneficial interest.
F. Approximate date of proposed sale to the public:
As Soon As Practicable After The Effective Date Of The Registration
Statement
/ X / Check box if it is proposed that this filing will become effective
on December 4, 1997 pursuant to Rule 487.
Insured Municipals Income Trust,
226th 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-Underwriting
underwriter )
5. Organization of trust ) Part II-Introduction
6. Execution and termination of ) Part II-Introduction
Trust Indenture and Agreement ) Part II-Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
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 Explanations
of security holders ) Part II-Trust Administration
11. Type of securities comprising ) Part II-Introduction
units ) Part I-Trust Information
) Part I-Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Part II-Introduction
expenses
) Part I-Summary of Essential Financial
) Information
) Part II-Unitholder Explanations
) Part I-Trust Information
) Part II-Trust Administration
(b) Certain information regard- ) *
ing periodic payment plan )
certificates )
(c) Certain percentages
) Part I-Summary of Essential Financial
) Information
) Part II-Unitholder Explanations
(d) Certain other fees, ) Part II-Unitholder Explanations
expenses or charges ) Part II-Trust Administration
payable by holders )
(e) Certain profits to be ) Part II-Unitholder Explanations
received by depositor, ) Part I-Other Matters-Underwriting
principal underwriter, ) Part I-Notes to Portfolios
trustee or affiliated )
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Part II-Unitholder Explanations
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Part II-Introduction
underlying securities ) Part II-Unitholder Explanations
) Part II-Trust Administration
17. Withdrawal or redemption ) Part II-Unitholder Explanations
) Part II-Trust Administration
18. (a) Receipt and disposition ) Part II-Introduction
of income ) Part II-Unitholder Explanations
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Part II-Unitholder Explanations
) Part II-Trust Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Part II-Unitholder Explanations
) Part II-Trust Administration
20. Certain miscellaneous provisions ) Part II-Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Part I-Portfolios
) Part II-Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
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
December 4, 1997
Van Kampen American Capital
Prospectus Part I
Insured Municipals Income Trust, 226th Insured Multi-Series
IM-IT 395
Missouri IM-IT 104
New Jersey IM-IT 121
Pennsylvania IM-IT 233
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 four underlying separate unit investment trusts designated as Insured
Municipals Income Trust, Series 395 (the "IM-IT Trust" ), Missouri
Insured Municipals Income Trust, Series 104 (the "Missouri IM-IT Trust"
), New Jersey Insured Municipals Income Trust, Series 121 (the "New Jersey
IM-IT Trust" ) and Pennsylvania Insured Municipals Income Trust, Series 233
(the "Pennsylvania IM-IT Trust" ). The various trusts are collectively
referred to herein as the "Trusts" or the "Insured Trusts."
The Missouri IM-IT, New Jersey IM-IT and Pennsylvania 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INSURED MUNICIPALS INCOME TRUST, 226th Insured Multi-Series
As of 8:00 A.M. Central Time on the Date of Deposit: December 4, 1997
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
Missouri New Jersey Pennsylvania
GENERAL INFORMATION IM-IT Trust IM-IT Trust IM-IT Trust IM-IT Trust
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust <F1>................... $ 9,000,000 $ 3,000,000 $ 3,025,000 $ 3,010,000
Number of Units............................................................ 8,944 3,065 3,055 3,045
Fractional Undivided Interest in the Trust per Unit ....................... 1/8,944 1/3,065 1/3,055 1/3,045
Principal Amount (Par Value) of Securities per Unit........................ $ 1,006.26 $ 978.79 $ 990.18 $ 988.51
Public Offering Price: ....................................................
Aggregate Offering Price of Securities in Portfolio....................... $ 8,505,781 $ 2,914,829 $ 2,905,331 $ 2,895,809
Aggregate Offering Price of Securities per Unit........................... $ 951.00 $ 951.00 $ 951.01 $ 951.00
Sales Charge <F2>......................................................... $ 49.00 $ 49.00 $ 48.99 $ 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>............................................. $ 943.65 $ 943.84 $ 943.77 $ 943.78
Secondary Market Repurchase Price per Unit <F3>............................ $ 951.00 $ 951.00 $ 951.01 $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit.... $ 56.35 $ 56.16 $ 56.23 $ 56.22
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit............................................................. $ 7.35 $ 7.16 $ 7.24 $ 7.22
Minimum Value of the Trust under which Trust Agreement may be terminated... $ 1,800,000 $ 600,000 $ 605,000 $ 602,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date................December 9, 1997
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......................Close of the New York Stock Exchange
- ----------
<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 "Unitholder Explanations--Public
Offering--General" in Part II of this Prospectus.
<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 "Unitholder
Explanations--Public Offering--Market for Units" in Part II of this
Prospectus.
</TABLE>
IM-IT
- --------------------------------------------------------------------------
General. The IM-IT consists of 14 issues of Securities. Six of the Bonds in
the IM-IT 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 located in 12 states or
territories, divided by purpose of issues (and percentage of principal amount
to total IM-IT) as follows: General Obligation, 6 (44%); Health Care, 3 (22%);
General Purpose, 2 (20%); Wholesale Electric, 1 (6%); Public Building, 1 (5%)
and Water and Sewer, 1 (3%). No Bond issue has received a provisional
rating. The dollar weighted average maturity of the Bonds in the Trust is 29
years. Approximately 31% of the principal amount of the Bonds in the IM-IT are
issued by issuers located in the State of Illinois.
Tax Status. For a discussion of the Federal tax status of income earned on
IM-IT Trust Units, see "Federal Tax Status" in Part II of this
Prospectus.
<TABLE>
<CAPTION>
Per Unit Information: Semi-
Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 49.62 $ 49.62
Less: Estimated Annual Expense per Unit <F2>...................... $ 1.72 $ 1.31
Less: Annual Premium on Portfolio Insurance per Unit.............. .11 .11
Estimated Net Annual Interest Income per Unit..................... $ 47.79 $ 48.20
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 47.79 $ 48.20
Divided by 12 and 2, respectively................................. $ 3.98 $ 24.10
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .13276 $ .13390
Estimated Current Return Based on Public Offering Price <F1><F3>... 4.78% 4.82%
Estimated Long-Term Return <F3>.................................... 4.83% 4.87%
Estimated Initial Monthly Distribution (January 1998).............. $ 4.11
Estimated Initial Semi-annual Distribution (June 1998)............. $ 24.23
Estimated Normal Distribution per Unit <F3>........................ $ 3.98 $ 24.10
</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
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 $.37
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 $49.99. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.09 and $1.68 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 $4,590. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $8,190.
</TABLE>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
SERIES 395 (226TH INSURED MULTI-SERIES)
PORTFOLIO As of December 4, 1997
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- ------------- -------------------------------------------------------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
$ 500,000 Montgomery, Alabama, Baptist Medical Center, Special Care
Facilities Financing Authority, Revenue Bonds, Series 1997C 2007 @ 102
(FSA Insured) #5.375% Due 9/1/2022........................... AAA 2020 @ 100 S.F. $ 500,000
750,000 Piedmont Municipal Power Agency (South Carolina) Electric
Revenue Bonds, Refunding Series 1991 (MBIA Insured) #4.00%
Due 1/1/2023.................................................. AAA 2001 @ 100 620,257
1,000,000 Chicago Park District, Illinois, General Obligation Unlimited
Tax Park Bonds, Series 1997 (Personal Property Replacement
Tax Alternate Revenue Source) AMBAC Assurance Insured 2008 @ 100
#5.375% Due 1/1/2025.......................................... AAA 2023 @ 100 S.F. 1,001,440
800,000 Kansas City, Missouri, Individual Development Authority,
Mortgage Revenue Refunding Bonds, Series 1997A 5.55% Due 2008 @ 102
8/1/2025##.................................................... AAA 2009 @ 100 S.F. 809,560
500,000 Interboro School District, Deleware County, Pennsylvania,
General Obligation Bonds, Series 1997 (MBIA Insured) #5.375%
Due 8/15/2025................................................. AAA 2023 @ 100 S.F. 505,270
450,000 Public Utility District No. 1 of Chelan County, Washington,
Columbia River-Rock Island Hydro-Electric System, Revenue
Refunding Bonds, Series 1997A (MBIA Insured) #0.00% Due
6/1/2026...................................................... AAA 99,671<F6>
500,000 Anchorage, Alaska, Electric Utility Revenue Bonds, Municipal
Light and Power Company (AMBAC Assurance Insured) #5.125% 2006 @ 102
Due 12/1/2026................................................. AAA 2016 @ 100 S.F. 488,355
500,000 Southern Mississippi, Educational Building Corporation,
Revenue Bonds, Series 1997B (Dormitory Project) AMBAC 2008 @ 100
Assurance Insured #5.30% Due 3/1/2027##...................... AAA 2023 @ 100 S.F. 498,780
500,000 Michigan State, Hospital Financing Authority, Revenue
Refunding Bonds (Mid-Michigan Obligated Group) Series A (FSA 2007 @ 102
Insured) #5.375% Due 6/1/2027................................ AAA 2025 @ 100 S.F. 499,925
1,000,000 Illinois Health Facilities Authority, Revenue Bonds (Memorial
Health System) Series 1997 (MBIA Insured) #5.25% Due 2008 @ 101
10/1/2027..................................................... AAA 2019 @ 100 S.F. 982,810
750,000 Chicago, Illinois, Board of Education, Chicago School Reform, 2007 @ 102
Series A (AMBAC Assurance Insured) #5.25% Due 12/1/2027...... AAA 2023 @ 100 S.F. 741,495
1,000,000 Brazos County, Texas, Health Facilities Development
Corporation, Franciscan Services Corporation Obligated Group,
Revenue Bonds, Series 1997B (MBIA Insured) #5.375% Due 2007 @ 102
1/1/2028...................................................... AAA 2023 @ 100 S.F. 998,320
250,000 Loudon County, Virginia, Sanitary Authority, Water Sewer 2007 @ 102
Revenue Bonds (FGIC Insured) #5.25% Due 1/1/2030............. AAA 2027 @ 100 S.F. 253,158
500,000 New York State, Dormitory Authority Revenues, FHA-Sarah
Neuman Nursing Home, (AMBAC Assurance Insured) 5.50% Due 2007 @ 102
8/1/2037##.................................................... AAA 2022 @ 100 S.F. 506,740
$ 9,000,000 $ 8,505,781
============= =============
</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 Assurance). 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 8 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: Public Building, 3 (37%); General
Purpose, 1 (17%); Health Care, 1 (17%); Airport, 1 (16%); Higher Education, 1
(8%) and Retail Electric/Gas/Telephone, 1 (5%). 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.
Missouri's population was 5,117,000 according to the 1990 census of the
United States Bureau of the Census, which represented an increase of 200,000
or 4.1% from the 1980 census of 4,917,000 inhabitants. Based on the 1990
population, Missouri was the 15th largest state in the nation and the third
most populous state west of the Mississippi River, ranking behind California
and Texas. In 1994, the State's population was estimated to be 5,278,000 by
the United States Bureau of the Census.
Agriculture is a significant component of Missouri's economy. According to
data of the United States Department of Agriculture, Missouri's value of cash
receipts from farm marketing in 1996 was $4.5 billion. Missouri is one of the
nation's leading purebred livestock producers. In 1996, sales of livestock
and livestock products constituted nearly 56% of the State's total
agricultural receipts.
Missouri is one of the leading mineral producers in the Midwest, and ranked
15th nationally in 1993 in the production of nonfuel minerals. Total
preliminary value of mineral production in 1993 was approximately $832
million. The State continues to rank first in the nation 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.
The Missouri economy has produced exceptional job growth over the past four
years. Missouri total non-farm employment in January 1997 reached 2,584,100.
This is an increase of 35,900 jobs since January of 1996. Missouri personal
income grew by 7.1% in Fiscal Year 1995 and by 5.4% in Fiscal Year 1996. The
Missouri economy is expected to show solid growth in Fiscal Year 1997.
Missouri personal income is predicted to grow approximately 4.25% with
unemployment remaining low.
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. By
October 1996, Missouri had added the most new jobs in non-farm employment of
all the mountain-plains states, with employment growth of 16,400. In the last
ten years, Missouri has experienced a significant increase in employment in
the service sector and in wholesale and retail trade. Missouri led the ten
mountain-plains states in adding the most service jobs between October 1995
and October 1996, at 23,400. From the third quarter of 1995 to the third
quarter of 1996, Missouri experienced total employment increase of 1.4%, or
36,400 new jobs.
According to the United States Bureau of Labor Statistics, the 1995
unemployment rate in Missouri was 4.8% and the 1996 rate was 4.1%. This
compares favorably with a nationwide unemployment rate of 5.6% for 1995 and
5.4% for 1996.
In 1995, per capita personal income in Missouri was $21,819, a 5.7% increase
over the 1994 figure of $20,644. For the United States as a whole, per capita
income in 1995 was $23,208, a 5.3% increase over the 1994 per capita income of
$22,047. In 1995, Missouri had the largest pay gain for the mountain-plains
region, at 4.2%, outpacing the percentage gain for the nation.
Fiscal Year 1996 began with a beginning balance in the General Revenue Fund of
$383.38 million. Total resources available at the end of Fiscal Year 1996 were
$6,286.2 million. Total obligations were $5,946.9 million. The Budget
Stabilization Fund transfer to the General Revenue in Fiscal Year 1996 was
$3.865 million, leaving an ending balance in the General Revenue of $335.413
million.
Final calculations made pursuant to Article X of the Missouri Constitution
show that total state revenues for Fiscal Year 1996 exceeded the total state
revenue limit by $229.1 million. Therefore, in accordance with Article X, the
entire amount of excess revenues will be refunded to Missouri income taxpayers
in calendar year 1998. Litigation has delayed the refund of $147.2 million
triggered in Fiscal Year 1995.
Total General Revenue receipts with collections and transfers for fiscal years
1995 and 1996 were $5,443.4 million and $5,813.2 million, respectively. The
total General Revenue expenditures in Fiscal Year 1996 for the operating
budget were $5,287.5 million.
Estimated total resources available in the General Revenue Fund at the end of
Fiscal Year 1997 are $6,645.4 million. Total obligations in the General
Revenue for Fiscal Year 1997 are estimated at $6,426.1 million. The Budget
Stabilization Fund Transfer to the General Revenue for Fiscal Year 1997 is
estimated at $86.55 million, leaving an ending balance in the General Revenue
of $132.78 million. Total General Revenue resources for Fiscal Year 1998 are
projected at $6,500.8 million. Total obligations for Fiscal year 1998 are
forecast at $6,500.8 million, leaving a $0 ending balance.
The Office of Administration projects that total state revenues will exceed
the total state revenue limit by approximately $155 million in Fiscal Year
1997, with a net revenue increase of 5.6%. The Office of Administration
projects that revenues will not exceed the revenue limit in Fiscal Year 1998
if the Governor's recommended tax reductions are enacted, although net
revenue growth is predicted at 5.0%. It is projected that total state revenues
will be approximately $140 million below the Article X revenue limit refund
threshold in Fiscal Year 2002.
Total General Revenue receipts with collections and transfers for fiscal year
1997 is estimated at $6,181.6 million. Fiscal year 1997 appropriations are
estimated at $5,941.3 million. For fiscal year 1998, before tax cuts, General
Revenue receipts are estimated at $6,498.9 million, and after proposed tax
cuts, the estimate is $6,281.1 million. The Governor has recommended
appropriations for the operating budget for Fiscal Year 1998 of $6,202.2
million.
For fiscal year 1998, the majority of revenues for the State of Missouri will
be obtained from individual income taxes (56.2%), sales and use taxes (25.1%),
corporate income taxes (8.1%), and corporate franchise taxes (1.2%). Major
expenditures for fiscal year 1998 include elementary and secondary education
(33.5%), human services (25.7%), higher education (13.7%), corrections and
public safety (7.9%) and desegregation (4.7%).
The fiscal year 1998 budget balances resources and obligations based on the
consensus revenue and refund estimate and an opening balance resulting from
revenue variance and anticipated spending in Fiscal Year 1996 as well as
various capital improvements in Fiscal Year 1997. The total general revenue
operating budget for fiscal year 1998 exclusive of desegregation is $5,026.8
million.
Missouri will continue to see a decline in the ongoing costs of desegregation
in Fiscal Year 1997. Beginning with a negotiated joint stipulation reached on
February 22, 1995, Governor Carnahan has attempted to reduce these annual
costs and end court supervision in the Kansas City case. This negotiation
yielded $22.5 million in total savings that were used for state aid to all
Missouri schools beginning in Fiscal Year 1996. Following the U.S. Supreme
Court decision on June 12, 1995, further negotiations reduced costs an
additional $57.9 million, bringing the total savings allocated to the school
foundation formula to $80.4 million. In addition, one-time savings of $66.6
million have been redirected to Missouri schools through the formula. State
law requires that desegregation savings go toward the foundation formula for
all Missouri schools.
As of December 31, 1996, the state has spent $2.8 billion on the desegregation
cases in St. Louis and Kansas City. At the end of fiscal year 1997, that total
will rise to an estimated $2.9 billion. The appropriation for Fiscal Year 1997
was $262 million. The revised estimate for fiscal year 1997 is $257.9 million,
excluding carryover amounts for capital improvements, and the projection for
fiscal year 1998 is $264 million. The state's obligation for desegregation
capital improvement was paid for with one-time revenue sources set aside in
previous fiscal years. Ongoing costs are primarily from the St. Louis magnet
schools, general salary increases ordered by the federal district court in
Kansas City and the costs of voluntary interdistrict transfers in both cases.
These estimates are subject to variables including actions of the school
districts and participating students, future court orders and the expenditure
rates of the school districts. If the court approves a settlement agreement in
the Kansas City case, State desegregation payments would phase out and end by
Fiscal Year 2000.
Currently, each of the general obligation bonds issued by the State of
Missouri is rated "Triple A" by Moody's Investors Service, Inc.,
Standard and Poor's Corporation, and Fitch's Investors Services. Missouri is
one of only six states that have this rating from all three rating
organizations. 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.
Through voter-approved amendments to the state constitution, the people of
Missouri have authorized the issuance of state general obligation bonds for
three purposes: fourth state building bonds (approved in August 1994), water
pollution control bonds, and third state building bonds. As of January 1,
1997, $198,620,000 principal remains outstanding of the $200,000,000 issued
fourth state building bonds; and $137,315,000 principal remains outstanding of
the $439,494,240 issued water pollution control bonds (both amounts excluding
refunding issuances). With the final $75 million issuance on December 1, 1987,
all $600 million in third state building bonds authorized by Missouri voters
in 1982 were issued.
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 an authority of the Commonwealth of Puerto Rico
(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" ). It is assumed that, at the respective times of issuance of the
Bonds, opinions relating to the validity thereof and to the exemption of
interest thereon from Federal income tax were rendered by bond counsel to the
respective issuing authorities. In addition, it is assumed that, with respect
to the Missouri Bonds, bond counsel to the issuing authorities rendered
opinions as to the exemption of interest from the Missouri State Income Tax
and, with respect to the Possession Bonds, bond counsel to the issuing
authorities rendered opinions as to the exemption from all state and local
income taxation of the Possession Bonds and the interest thereon. Neither the
Sponsor nor its counsel has made any review for the Missouri IM-IT Trust of
the proceedings relating to the issuance of the Bonds or the bases for the
opinions rendered in connection therewith. 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>
Per Unit Information: Semi-
Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 48.83 $ 48.83
Less: Estimated Annual Expense per Unit <F2>...................... $ 1.99 $ 1.53
Less: Annual Premium on Portfolio Insurance per Unit.............. $ .20 $ .20
Estimated Net Annual Interest Income per Unit..................... $ 46.64 $ 47.10
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 46.64 $ 47.10
Divided by 12 and 2, respectively................................. $ 3.88 $ 23.55
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .12958 $ .13086
Estimated Current Return Based on Public Offering Price <F1><F3>... 4.66% 4.71%
Estimated Long-Term Return <F3>.................................... 4.65% 4.70%
Estimated Initial Monthly Distribution (January 1998).............. $ 4.01
Estimated Initial Semi-annual Distribution (January 1998).......... $ 4.05
Estimated Normal Distribution per Unit <F3>........................ $ 3.88 $ 23.55
</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
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>During the first year the Trustee will reduce its fee by approximately $.33
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 $49.16. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.32 and $1.86 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>
MISSOURI INSURED MUNICIPALS INCOME TRUST
SERIES 104 (226TH INSURED MULTI-SERIES)
PORTFOLIO As of December 4, 1997
<CAPTION>
Offering
Price To
Missouri
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- ------------- ------------------------------------------------------------ -------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
$ 150,000 Puerto Rico Electric Power Authority, Power Revenue Capital
Appreciation Bonds, Series N (MBIA Insured) #0.00% Due
7/1/2017.................................................... AAA 2015 @ 87.06 S.F. $ 55,839<F6>
350,000 Kansas City Municipal Assistance Corporation, Missouri,
Leasehold Refunding Revenue Bonds, Series 1996A (H. Roe
Bartle Convention Center Project) MBIA Insured #5.00% Due 2006 @ 101
4/15/2020................................................... AAA 2016 @ 100 S.F. 342,990
500,000 St. Louis, Missouri, Regional Convention and Sports Complex
Authority, Revenue Refunding Bonds (Convention and Sports
Facilities) Series C, AMBAC Assurance Insured #5.30% Due 2007 @ 100
8/15/2020................................................... AAA 2018 @ 100 S.F. 504,930
500,000 Health and Educational Facilities Authority of the State of
Missouri, Health Facilities Revenue Bonds (Saint
Luke's/Shawnee Mission Health System) Series 1996A (MBIA 2006 @ 102
Insured) #5.375% Due 11/15/2021............................ AAA 2017 @ 100 S.F. 507,625
250,000 City of St. Louis, Missouri, Parking Revenue Refunding 2006 @ 102
Bonds, Series 1996 (MBIA Insured) #5.375% Due 12/15/2021... AAA 2017 @ 100 S.F. 253,835
500,000 Kansas City, Missouri, Individual Development Authority,
Mortgage Revenue Refunding Bonds, Series 1997A 5.55% Due 2008 @ 102
8/1/2025##.................................................. AAA 2009 @ 100 S.F. 505,975
250,000 Health and Educational Facilities Authority of Missouri,
Educational Facilities Revenue Bonds (St. Louis University) 2006 @ 102
Series 1996 (AMBAC Assurance Insured) #5.20% Due 10/1/2026. AAA 2017 @ 100 S.F. 249,750
500,000 St. Louis, Missouri, Airport Revenue Bonds (Capital
Improvement Program) Lambert-St. Louis International 2007 @ 101
Airport, Series 1997A (FGIC Insured) #5.125% Due 7/1/2027.. AAA 2023 @ 100 S.F. 493,885
$ 3,000,000 $ 2,914,829
============= =============
</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 Assurance). 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 9 issues of Securities. One of
the Bonds in the New Jersey IM-IT Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New Jersey IM-IT Trust) as follows: General Purpose, 4 (37%); Health
Care, 1 (17%); Transportation, 1 (17%); Water and Sewer, 1 (13%); General
Obligation, 1 (8%) and Public Building, 1 (8%). 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 1,071 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 1995 the State ranked second among states in per
capita personal income ($29,248).
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 5.3%
in May 1997, which is higher than the national average of 4.8% in May 1997.
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, 1996, there was a total authorized bond indebtedness of
approximately $10.31 billion, of which $3.69 billion was issued and
outstanding, $4.76 billion was retired (including bonds for which provision
for payment has been made through the sale and issuance of refunding bonds)
and $1.86 billion was unissued. The appropriation for the debt service
obligation on such outstanding indebtedness was $446.9 million for fiscal year
1997.
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 1993,
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 $937.4 million. At the end of fiscal year 1994,
there was a surplus in the general fund of $926.0 million. At the end of
fiscal year 1995, there was a surplus in the general fund of $569.2 million.
It is estimated that New Jersey closed its fiscal year 1996 with a surplus of
$442.0 million and fiscal year 1997 with a surplus of $276.2 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.
In June 1997, Governor Whitman signed the New Jersey Legislature's $16.8
billion budget for Fiscal Year 1998. The balanced budget, which includes $442
million in surplus, is $800 million more than the 1997 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 hospital assessment authorized by the
Health Care Reform Act of 1992; the State's role in a consent order concerning
the construction of a resource facility in Passaic County; the State's actions
regarding alleged chromium contamination of State-owned property in Hudson
County; the constitutionality of annual A-901 hazardous and solid waste
licensure renewal fees collected by the Department of Environmental Protection
and Energy; the State's funding formula that attempts to close the spending
gap between poor urban school districts and wealthy suburban districts; the
use by the State of assessments on certain insurers to retire debt of the
Market Transition Fund, the manner in which mental health services are
provided to inmates with serious mental disorders who are confined within the
facilities of the Department of Corrections; the spousal impoverishment
provisions of the Medicare Catastrophic Coverage Act; Medicaid hospital
reimbursements since February, 1995; and the efforts to revitalize Atlantic
City through the design and construction of a highway and tunnel. 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>
Per Unit Information: Semi-
Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit..................... $ 49.15 $ 49.15
Less: Estimated Annual Expense per Unit <F1>.................. $ 2.35 $ 1.85
Less: Annual Premium on Portfolio Insurance per Unit..........
Estimated Net Annual Interest Income per Unit................. $ 46.80 $ 47.30
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit................. $ 46.80 $ 47.30
Divided by 12 and 2, respectively............................. $ 3.90 $ 23.65
Estimated Daily Rate of Net Interest Accrual per Unit.......... $ .12999 $ .13139
Estimated Current Return Based on Public Offering Price <F2>... 4.68% 4.73%
Estimated Long-Term Return <F2>................................ 4.65% 4.70%
Estimated Initial Monthly Distribution (January 1997).......... $ 4.02
Estimated Initial Semi-annual Distribution (January 1998)...... $ 4.07
Estimated Normal Distribution per Unit <F2>.................... $ 3.90 $ 23.65
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F1><F3>... $.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>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 $1,543. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,753.
</TABLE>
<TABLE>
NEW JERSEY INSURED MUNICIPALS INCOME TRUST
SERIES 121 (226TH INSURED MULTI-SERIES)
PORTFOLIO As of December 4, 1997
<CAPTION>
Offering
Price To New
Jersey
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- ------------- -------------------------------------------------------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
$ 500,000 New Jersey, Health Care Facilities Financing Authority,
Revenue Refunding Bonds (Atlantic Health System Hospital
Corporation) Series A (AMBAC Assurance Insured) #5.375% Due 2007 @ 102
7/1/2019...................................................... AAA 2017 @ 100 S.F. $ 507,500
250,000 The Board of Education of the Township of South Brunswick in
the County of Middlesex, New Jersey, Refunding School Bonds, 2007 @ 100
Series AA (FGIC Insured) #5.25% Due 8/1/2020................. AAA 2018 @ 100 S.F. 251,795
400,000 Lacey Municipal Utility District Authority, New Jersey Water 2007 @ 102
Revenue Refunding Bonds (MBIA Insured) #5.10% Due 12/1/2021.. AAA 2017 @ 100 S.F. 395,468
500,000 Delaware River and Bay Authority, New Jersey, Revenue Bonds, 2004 @ 102
Series 1993 (MBIA Insured) #4.75% Due 1/1/2024............... AAA 2018 @ 100 S.F. 469,820
150,000 New Jersey, Economic Development Authority, Revenue Bonds
(St. Barnabas Medical Center Project) Series A (MBIA Insured)
#0.00% Due 7/1/2024.......................................... AAA 37,051<F6>
125,000 Hudson County, New Jersey, Improvement Authority Utility
System Revenue Bonds (Harrison Franchise Acquisition Project)
FSA Insured #5.35% Due 1/1/2027.............................. AAA 2008 @ 101.50 126,726
350,000 New Jersey Economic Development Authority Revenue Bonds,
Saint Barnabas Project Series A (MBIA Insured) #5.375% Due
7/1/2027...................................................... 2007 @ 102 353,983
500,000 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 109th Series (FSA Insured) #5.375% Due 2007 @ 101
7/15/2027..................................................... AAA 2023 @ 100 S.F. 507,675
250,000 Essex County, New Jersey, Improvement Authority, Guaranteed
Lease Revenue Bonds (Sportsplex Project) Series A (AMBAC 2007 @ 101
Assurance Insured) #5.45% Due 10/1/2027...................... AAA 2023 @ 100 S.F. 255,313
$ 3,025,000 $ 2,905,331
============= =============
</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" .
PENNSYLVANIA IM-IT TRUST
- --------------------------------------------------------------------------
General. The Pennsylvania IM-IT Trust consists of 8 issues of Securities. Four
of the Bonds in the Pennsylvania 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 Pennsylvania IM-IT Trust) as follows: General Obligation, 4 (41%);
Health Care, 2 (29%); Higher Education, 1 (17%) and Water and Sewer, 1 (13%).
No Bond issue has received a provisional rating.
Risk Factors. Investors should consider the financial difficulties and
pressures which the Commonwealth of Pennsylvania and certain of its municipal
subdivisions have undergone. There can be no assurance that the Commonwealth
will not experience declines in economic conditions or that portions of the
Bonds in the Trust will not be affected by such declines. The following
briefly summarizes some of these difficulties, the current financial situation
and factors affecting the financial situation in the Commonwealth. It is
derived from sources that are generally available to investors and is based in
part on information obtained from various agencies in the Commonwealth. No
independent verification has been made of the following information.
State Economy. Pennsylvania has been historically identified as a
heavy-industry state although that reputation has changed as the industrial
composition of the Commonwealth diversified when the coal, steel and railroad
industries began to decline. The major new sources of growth in the
Commonwealth are in the service sector, including trade, medical and the
health services, education and financial institutions. The Commonwealth's
agricultural industries are also an important component of its economic
structure, accounting for more than $3.6 billion in crop and livestock
products annually while agribusiness and food related industries support $39
billion in economic activity annually.
Non-manufacturing employment in the Commonwealth has increased steadily
to its September 1997 level of 82.9% of total Commonwealth employment. The
growth in employment experienced in the Commonwealth is comparable to the
growth in employment in the Middle Atlantic region of the United States.
Manufacturing, which contributed 17.1% of non-agricultural employment as of
September 1997, has fallen behind both the services sector and the trade
sector as the largest single source of employment within the Commonwealth. In
September 1997, the services sector accounted for 31.5% of all
non-agricultural employment in the Commonwealth while the trade sector
accounted for 22.8%. As of September 1997, the average unemployment rate
(seasonally adjusted) in the Commonwealth was 5.3% compared to 4.9% for the
United States.
State Budget. The Commonwealth operates under an annual budget that is
formulated and submitted for legislative approval by the Governor each
February. The General Assembly may add, change or delete any items in the
budget prepared by the Governor, but the Governor retains veto power over the
individual appropriations passed by the legislature. The Commonwealth's
fiscal year begins on July 1 and ends on June 30. Financial information for
the principal operating funds of the Commonwealth is maintained on a budgetary
basis of accounting, which is used for the purpose of ensuring compliance with
the enacted operating budget. Since 1984, the Commonwealth has also prepared
annual financial statements in accordance with generally accepted accounting
principles ("GAAP" ). Budgetary basis financial reports are based on a
modified cash basis of accounting, as opposed to a modified accrual basis of
accounting prescribed by GAAP. The budgetary basis financial information is
adjusted at fiscal year-end to reflect appropriate accruals for financial
reporting in conformity with GAAP.
Recent Financial Conditions. The fiscal years 1992 through 1996 were
years of recovery for Pennsylvania from the recession in 1990 and 1991. The
recovery fiscal years were characterized by modest economic growth and low
inflation rates in the Commonwealth. These economic conditions, combined with
several years of tax reductions following the various tax rate increases and
tax base expansions enacted in fiscal 1991 for the General Fund, produced
modest increases in Pennsylvania's tax revenues during the period. Tax
revenues from fiscal 1992 through fiscal 1996 rose at an annual average rate
of 2.8%. Total revenues and other income sources increased during this period
by an average annual rate of 3.3%. Expenditures and other uses during the
fiscal 1992 through fiscal 1996 period rose at a 4.4% annual rate, led by
annual average increases of 14.2% for protection of persons and property
program costs and 11.4% for capital outlay costs. Expenditure reductions for
fiscal 1996 from the previous fiscal year for operating transfers out and for
conservation of natural resources program costs were the result of accounting
changes affecting the General Fund and the Motor License Fund and a
recategorization of expenditures due to a departmental restructuring in the
General Fund. At the close of fiscal 1996, the fund balance for the
governmental fund types totaled $1,986.3 million, an increase of $58.7 million
over fiscal 1995 and $758.5 million over fiscal 1992.
Financial Results for Recent Fiscal Years. The five-year period from
fiscal 1992 through fiscal 1996 recorded a 4.6% average annual increase in
revenues and other sources, led by an average annual increase of 13.2% for
intergovernmental revenues. The increase for intergovernmental revenues in
fiscal 1996 is partly due to an accounting change. Tax revenues during the
five-year period increased an average of 2.5% as modest economic growth, low
inflation rates and several tax rate reductions and other tax reduction
measures constrained the growth of tax revenues. The tax reduction measures
followed a $2.7 billion tax increase measure adopted for the 1992 fiscal year.
Expenditures and other uses during the fiscal 1992 through fiscal 1996
period rose at an average annual rate of 6.0% led by increases of 14.2% for
protection of persons and property program costs. The costs of a prison
expansion program and other correctional program expenses are responsible for
the large percentage increase. A reduction in debt service costs at an average
annual rate of 29.1% over the five-year period is a result of reduced
short-term borrowing for cash flow purposes. Improved financial results and
structural cash flow modifications contributed to the lower borrowing. Efforts
to control costs for various social welfare programs and the presence of
favorable economic conditions have led to a modest 5.6% increase for public
health and welfare costs for the five year period. The fund balance at June
30, 1996, totaled $635.2 million, a $547.7 million increase from a balance of
$87.5 million at June 30, 1992.
Fiscal 1996 Financial Results. Commonwealth revenues (prior to tax
refunds) for the 1996 fiscal year increased by $113.9 million over the prior
fiscal year to $16,338.5 million representing a growth rate of 0.7%. Tax rate
reductions and other tax law changes substantially reduced the amount and rate
of revenue growth for the fiscal year. The Commonwealth has estimated that tax
changes enacted for the 1996 fiscal year reduced Commonwealth revenues by
$283.4 million representing 1.7 percentage points of fiscal 1996 growth in
Commonwealth revenues. The most significant tax changes enacted for the 1996
fiscal year were (i) the reduction of the corporate net income tax rate to
9.99%; (ii) double weighing of the sales factor of the corporate net income
apportionment calculation; (iii) an increase in the maximum annual allowance
for a net operating loss deduction from $0.5 million to $1.0 million; (iv) an
increase in the basic exemption amount for the capital stock and franchise
tax; (v) the repeal of the tax on annuities; and (vi) the elimination of
inheritance tax on transfers of certain property to surviving spouses.
Among the major sources of Commonwealth revenues for the 1996 fiscal
year, corporate tax receipts declined $338.4 million from receipts in the
prior fiscal year, largely due to the various tax changes enacted for these
taxes. Corporate tax changes were enacted to reduce the cost of doing business
in Pennsylvania for the purpose of encouraging business to remain in
Pennsylvania and to expand employment opportunities within the state. Sales
and use tax receipts for the fiscal year increased $155.5 million, or 2.8%,
over receipts during fiscal 1995. All of the increase was produced by the
non-motor vehicle portion of the tax as receipts from the sale of motor
vehicles declined slightly for fiscal 1996. Personal income tax receipts for
the fiscal year increased $291.1 million, or 5.7%, over receipts during fiscal
1995. Personal income tax receipts were aided by a 10.2% increase in
nonwithholding tax payments which generally are comprised of quarterly
estimated and annual final return tax payments. Non-tax receipts for the
fiscal year increased $23.7 million for the fiscal year. Included in that
increase was $67 million in net receipts from a tax amnesty program that was
available for a portion of the 1996 fiscal year. Some portion of the tax
amnesty receipts represent normal collections of delinquent taxes. The tax
amnesty program is not expected to be repeated.
The unappropriated surplus (prior to transfers to Tax Stabilization
Reserve Fund) at the close of the fiscal year for the General Fund was $183.8
million, $65.5 million above estimate. Transfers to the Tax Stabilization
Reserve Fund from fiscal 1996 operations will be $27.6 million. This amount
represents the 15% of the fiscal year ending unappropriated surplus transfer
provided under current law. With the addition of this transfer and anticipated
interest earnings, the Tax Stabilization Reserve Fund balance will be $211
million.
Fiscal 1997 Budget. The enacted fiscal 1997 budget provides for
expenditures from Commonwealth revenues of $16,375.8 million, an increase of
0.6% over appropriated amounts from Commonwealth revenues for fiscal 1996. The
fiscal 1997 budget is based on anticipated Commonwealth revenues before
refunds of $16,744.5 million, an increase over actual fiscal 1996 revenues of
2.5%.
Increased authorized spending for fiscal 1997 is driven largely by
increased costs of the corrections and the probation and parole programs.
Continuation of the trend of rapidly rising inmate populations increases
operating costs for correctional facilities and requires the opening of new
facilities. The fiscal 1997 budget contains an appropriation increase in
excess of $110 million for these programs. The approved budget also contains
some departmental restructurings. The Department of Community Affairs was
eliminated with certain of its programs transferred to the Department of
Commerce that has been renamed the Department of Community and Economic
Development. In addition to assuming some of the community programs, a
significant restructuring of the economic development programs was completed
with the establishment of the new Department of Community and Economic
Development. Although the departmental restructurings are estimated to save
approximately $8 million, a $25 million increase in funds was committed to
economic and community development programs for fiscal 1997.
Providing funding for these program increases in a fiscal year budget
where appropriations increased by only $96.7 million, or 0.6%, required
reductions and savings in other programs funded from the General Fund. A major
reform of the current welfare system was enacted in May 1996 to encourage
recipients toward self-sufficiency through work requirements, to provide
temporary support for families showing personal responsibility and to maintain
safeguards for those who cannot help themselves. Net savings to the fiscal
1997 budget of $176.5 million is anticipated. Many of these savings are
redirected in the fiscal 1997 budget toward providing additional support
services to those working and seeking work. Of the net savings, $21 million is
committed to job training opportunities and an additional $69 million towards
making day care services available to welfare recipients for work
opportunities. The fiscal 1997 budget also provides additional funding without
requiring additional appropriations. An actuarial reduction of 112 basis
points in the employer contribution rate is estimated to save school districts
approximately $21 million for the fiscal year. Additional savings can be
expected to be realized by school districts from legislated changes to teacher
sabbatical leaves and worker's compensation insurance.
Proposed Fiscal 1998 Budget. On February 4, 1997, the Governor presented
his proposed General Fund budget for fiscal 1998 to the General Assembly.
Revenue estimates in the proposed budget were developed using a national
economic forecast with projected annual growth rates below two percent. Total
Commonwealth revenues before reductions for refunds and proposed tax changes
are estimated to be $17,339.2 billion, 2.4% above revised estimates for fiscal
1997. Proposed appropriations against those revenues total $16,915.7 million,
a 2.7% increase over currently estimated fiscal 1997 appropriations. As
proposed, the fiscal 1998 budget assumes the draw down of the currently
estimated $177.6 million unappropriated surplus at June 30, 1997; however, no
appropriation lapses are included in this projection. Four tax law proposals
and a proposed increase transfer of taxes to a special purpose are included in
the proposed budget. Together these items are estimated to reduce fiscal 1998
Commonwealth revenues by $66.9 million. All require legislative enactment.
The General Assembly is reviewing the proposed budget in hearings before its
committees. The General Assembly may change, eliminate or add amounts and
items to the Governor's proposed budget and there can be no assurance that the
budget, as prepared by the Governor, will be enacted into law.
Debt Limits and Outstanding Debt. The Pennsylvania Constitution permits
the issuance of the following types of debt: (i) debt to suppress insurrection
or rehabilitate areas affected by disaster; (ii) electorate approved debt;
(iii) debt for capital projects subject to an aggregate outstanding debt limit
of 1.75 times the annual average tax revenues of the preceding five fiscal
years; and (iv) tax anticipation notes payable in the fiscal year of issuance.
Under the Pennsylvania Fiscal Code, the Auditor General is required to certify
to the Governor and the General Assembly certain information regarding the
Commonwealth's indebtedness. According to the February 29, 1996, Auditor
General certificate, the average annual tax revenues deposited in all funds in
the five fiscal years ended June 30, 1995, was approximately $17.7 billion,
and, therefore, the net debt limitation for the 1996 fiscal year is $30.9
billion. Outstanding net debt totaled $3.9 billion at June 30, 1995,
approximately equal to the net debt at June 30, 1994. At February 29, 1996,
the amount of debt authorized by law to be issued, but not yet incurred, was
$16.5 billion. Outstanding general obligation debt totaled $5,045.4 million at
June 30, 1995, a decrease of $30.4 million from June 30, 1994. Over the
ten-year period ending June 30, 1995, total outstanding general obligation
debt increased at an annual rate of 1.1%. Within the most recent five-year
period, outstanding general obligation debt has grown at an annual rate of
1.7%.
Debt Ratings. All outstanding general obligation bonds of the
Commonwealth are rated AA- by S&P and A1 by Moody's. There is no assurance
that any ratings will continue for any period of time or that they will not be
revised or withdrawn.
City of Philadelphia. The City of Philadelphia (the "City" ) is
the largest city in the Commonwealth, with an estimated population of
1,585,577 according to the 1990 Census. Philadelphia experienced a series of
general fund deficits for fiscal years 1988 through 1992 which have culminated
in serious financial difficulties for the City. In its 1992 Comprehensive
Annual Financial Report, Philadelphia reported a cumulative general fund
deficit of $71.4 million for fiscal year 1992.
In June 1991, the Pennsylvania legislature established the Pennsylvania
Intergovernmental Cooperation Authority ("PICA" ), a five-member board
to assist Philadelphia in remedying fiscal emergencies. PICA is designed to
provide assistance through the issuance of funding debt and to make factual
findings and recommendations to Philadelphia concerning its budgetary and
fiscal affairs. The legislation empowered PICA to issue notes and bonds on
behalf of Philadelphia, and also authorized Philadelphia to levy a one-percent
sales tax, the proceeds of which would be used to pay off the bonds. In return
for Pica's fiscal assistance, Philadelphia is required, among other things,
to establish five-year financial plans that include balanced annual budgets.
Under the legislation, if Philadelphia does not comply with such requirements,
PICA may withhold bond revenues and certain state funding. At this time, the
City is operating under a five-year fiscal plan approved by PICA. As of
February 28, 1997, PICA issued approximately $1,761.7 million of its Special
Tax Revenue Bonds. No further PICA bonds are to be issued by PICA for the
purpose of financing a capital project or deficit, as the authority for such
bond sales expired on December 31, 1994. PICA's authority to issue debt for
the purpose of financing a cash flow deficit expired on December 31, 1996. Its
ability to refund existing outstanding debt is unrestricted.
The audited General fund balance of Philadelphia as of June 30, 1994,
1995 and 1996 showed a surplus of approximately $15.4 million, $80.5 million
and $118.5 million, respectively. S&P's rating on Philadelphia's general
obligation bonds is "BBB-." Moody's rating is "Baa."
Litigation. The Commonwealth is a party to numerous lawsuits in which an
adverse final decision could materially affect the Commonwealth's
governmental operations and consequently its ability to pay debt service on
its obligations. The Commonwealth also faces tort claims made possible by the
limited waiver of sovereign immunity effected by Act 152, approved September
28, 1978, as amended. Under the Act, damages for any loss are limited to
$250,000 per person and $1 million for each accident.
Tax Status. For a discussion of the Federal tax status of income earned on
Pennsylvania IM-IT Trust Units, see "Federal Tax Status" in Part II of
this Prospectus.
In the opinion of Chapman and Cutler, special counsel for the Pennsylvania
IM-IT Trust for Pennsylvania tax matters, under existing law:
We have examined certain laws of the State of Pennsylvania (the "State"
) to determine their applicability to the Pennsylvania IM-IT Trust and to the
holders of Units in the Pennsylvania IM-IT Trust who are residents of the
State of Pennsylvania (the "Unitholders" ). The assets of the
Pennsylvania IM-IT Trust will consist of interest-bearing obligations issued
by or on behalf of the State, any public authority, commission, board or other
agency created by the State or a political subdivision of the State, or
political subdivisions thereof (the "Bonds" ). Distributions of income
with respect to the Bonds received by the Pennsylvania IM-IT Trust will be
made monthly.
Although we express no opinion with respect thereto, in rendering the opinion
expressed herein, we have assumed that: (i) the Bonds were validly issued by
the State or its municipalities, as the case may be, (ii) the interest thereon
is excludable from gross income for federal income tax purposes, (iii) the
interest thereon is exempt from Pennsylvania State and local taxes and (iv)
the Bonds are exempt from county personal property taxes. This opinion does
not address the taxation of persons other than full-time residents of
Pennsylvania.
Based on the foregoing, and review and consideration of existing State laws as
of this date, it is our opinion, and we herewith advise you, as follows:
(1)The Pennsylvania IM-IT Trust will have no tax liability for purposes of the
personal income tax (the "Personal Income Tax" ), the corporate income
tax (the "Corporate Income Tax" ) and the capital stock-franchise tax
(the "Franchise Tax" ), all of which are imposed under the Pennsylvania
Tax Reform Code of 1971, or the Philadelphia School District Investment Net
Income Tax (the "Philadelphia School Tax" ) imposed under Section
19-1804 of the Philadelphia Code of Ordinances.
(2)Interest on the Bonds, net of Pennsylvania IM-IT Trust expenses, which is
exempt from the Personal Income Tax when received by the Pennsylvania IM-IT
Trust and which would be exempt from such tax if received directly by a
Unitholder, will retain its status as exempt from such tax when received by
the Pennsylvania IM-IT Trust and distributed to such Unitholder. Interest on
the Bonds which is exempt from the Corporate Income Tax and the Philadelphia
School Tax when received by the Pennsylvania IM-IT Trust and which would be
exempt from such taxes if received directly by a Unitholder, will retain its
status as exempt from such taxes when received by the Pennsylvania IM-IT Trust
and distributed to such Unitholder.
(3)Distributions from the Pennsylvania IM-IT Trust attributable to capital
gains recognized by the Pennsylvania IM-IT Trust upon its disposition of a
Bond issued on or after February 1, 1994, will be taxable for purposes of the
Personal Income Tax and the Corporate Income Tax. No opinion is expressed with
respect to the taxation of distributions from the Pennsylvania IM-IT Trust
attributable to capital gains recognized by the Pennsylvania IM-IT Trust upon
its disposition of a Bond issued before February 1, 1994.
(4)Distributions from the Pennsylvania IM-IT Trust attributable to capital
gains recognized by the Pennsylvania IM-IT Trust upon its disposition of a
Bond will be exempt from the Philadelphia School Tax if the Bond was held by
the Pennsylvania IM-IT Trust for a period of more than six months and the
Unitholder held his Unit for more than six months before the disposition of
the Bond. If, however, the Bond was held by the Pennsylvania IM-IT Trust or
the Unit was held by the Unitholder for a period of less than six months, then
distributions from the Pennsylvania IM-IT Trust attributable to capital gains
recognized by the Pennsylvania IM-IT Trust upon its disposition of a Bond
issued on or after February 1, 1994 will be taxable for purposes of the
Philadelphia School Tax; no opinion is expressed with respect to the taxation
of any such gains attributable to Bonds issued before February 1, 1994.
(5)Insurance proceeds paid under policies which represent maturing interest on
defaulted obligations will be exempt from the Corporate Income Tax to the same
extent as such amounts are excluded from gross income for federal income tax
purposes. No opinion is expressed with respect to whether such insurance
proceeds are exempt from the Personal Income Tax or the Philadelphia School
Tax.
(6)Each Unitholder will recognize gain for purposes of the Corporate Income
Tax if the Unitholder redeems or sells Units of the Pennsylvania IM-IT Trust
to the extent that such a transaction results in a recognized gain to such
Unitholder for federal income tax purposes and such gain is attributable to
Bonds issued on or after February 1, 1994. No opinion is expressed with
respect to the taxation of gains realized by a Unitholder on the sale or
redemption of a Unit to the extent such gain is attributable to Bonds issued
prior to February 1, 1994.
(7)A Unitholder's gain on the sale or redemption of a Unit will be subject to
the Personal Income Tax, except that no opinion is expressed with respect to
the taxation of any such gain to the extent it is attributable to Bonds issued
prior to February 1, 1994.
(8)A Unitholder's gain upon a redemption or sale of Units will be exempt from
the Philadelphia School Tax if the Unitholder held his Unit for more than six
months and the gain is attributable to Bonds held by the Pennsylvania IM-IT
Trust for a period of more than six months. If, however, the Unit was held by
the Unitholder for less than six months or the gain is attributable to Bonds
held by the Pennsylvania IM-IT Trust for a period of less than six months,
then the gains will be subject to the Philadelphia School Tax; except that no
opinion is expressed with respect to the taxation of any such gains
attributable to Bonds issued before February 1, 1994.
(9)The Bonds will not be subject to taxation under the County Personal
Property Tax Act of June 17, 1913 (the "Personal Property Tax" ).
Personal property taxes in Pennsylvania are imposed and administered locally,
and thus no assurance can be given as to whether Units will be subject to the
Personal Property Tax in a particular jurisdiction. However, in our opinion,
Units should not be subject to the Personal Property Tax.
Unitholders should be aware that, generally, interest on indebtedness incurred
or continued to purchase or carry Units is not deductible for purposes of the
Personal Income Tax, the Corporate Income Tax or the Philadelphia School Tax.
We have not examined any of the Bonds to be deposited and held in the
Pennsylvania IM-IT 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 federal or state income taxation of interest
on the Bonds if interest thereon had been received directly by a Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provision of Pennsylvania law. Ownership of the Units may result in
collateral Pennsylvania tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any
such collateral consequences.
<TABLE>
<CAPTION>
Per Unit Information: Semi-
Monthly Annual
------------ -----------
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit......................... $ 49.49 $ 49.49
Less: Estimated Annual Expense per Unit <F2>...................... $ 2.29 $ 1.88
Less: Annual Premium on Portfolio Insurance per Unit.............. -- --
Estimated Net Annual Interest Income per Unit..................... $ 47.20 $ 47.61
Calculation of Estimated Interest Earnings per Unit:
Estimated Net Annual Interest Income per Unit..................... $ 47.20 $ 47.61
Divided by 12 and 2, respectively................................. $ 3.93 $ 23.80
Estimated Daily Rate of Net Interest Accrual per Unit.............. $ .13109 $ .13225
Estimated Current Return Based on Public Offering Price <F1><F3>... 4.72% 4.76%
Estimated Long-Term Return <F3>.................................... 4.74% 4.79%
Estimated Initial Monthly Distribution (January 1998).............. $ 4.06
Estimated Initial Semi-annual Distribution (January 1998).......... $ 4.09
Estimated Normal Distribution per Unit <F3>........................ $ 3.93 $ 23.80
</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
Pennsylvania 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 $.03
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 $49.52. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $2.32 and $1.91 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 $1,535. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fees would initially amount to $2,739.
</TABLE>
<TABLE>
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST
SERIES 233 (226TH INSURED MULTI-SERIES)
PORTFOLIO As of December 4, 1997
<CAPTION>
Offering
Price To
Pennsylvania
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of Redemption IM-IT
either Bonds Deposited or Bonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
- ------------- -------------------------------------------------------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
$ 150,000 Pine-Richland School District (Allegheny County,
Pennsylvania) General Obligation Bonds, Series 1996A (FSA
Insured) #0.00% Due 9/1/2022................................. AAA $ 40,315<F6>
100,000 Deer Lakes School District, Pennsylvania, General Obligation 2008 @ 100
Unlimited Tax Bonds (FSA Insured) #5.00% Due 1/15/2023....... AAA 2018 @ 100 S.F. 97,709
360,000 Wayne County, Pennsylvania, Hospital and Health Facilities
Authority, Hospital Revenue Bonds, Series B (MBIA Insured) 2008 @ 100
#5.25% Due 7/1/2023##......................................... AAA 2020 @ 100 S.F. 356,800
500,000 Interboro School District, Deleware County, Pennsylvania,
General Obligation Bonds, Series 1997 (MBIA Insured) #5.375%
Due 8/15/2025................................................. AAA 2023 @ 100 S.F. 505,270
500,000 County of Beaver, Pennsylvania, General Obligation Bonds,
Series of 1997 (MBIA Insured) #5.30% Due 10/1/2026........... Aaa* 2007 @ 100 502,500
400,000 City of Philadelphia, Pennsylvania, Water and Wastewater
Revenue Bonds, Series 1997A (AMBAC Assurance Insured) 2007 @ 102
#5.125% Due 8/1/2027.......................................... AAA 2023 @ 100 S.F. 393,320
500,000 Montgomery County, Pennsylvania, Industrial Development
Authority (Hill School Project) Revenue Bonds, Series 1997
(MBIA Insured) #5.35% Due 8/15/2027.......................... AAA 2007 @ 100 504,845
500,000 Montgomery County Higher Education and Health Authority,
Health Care Revenue Bonds, 1997 Series A (Holy Redeemer 2007 @ 101
Health System) AMBAC Assurance Insured #5.25% Due 10/1/2027.. AAA 2024 @ 100 S.F. 495,050
$ 3,010,000 $ 2,895,809
============= =============
</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" .
As of the Date of Deposit: December 4, 1997
- --------------------------------------------------------------------------
(1)All Securities are represented by "regular way" or "when
issued" contracts for the performance of which an irrevocable letter of
credit, obtained from an affiliate of the Trustee, has been deposited with the
Trustee. At the Date of Deposit, Securities may have been delivered to the
Sponsor pursuant to certain of these contracts; the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into during the period from
November 25, 1997 to December 3, 1997. These Securities have expected
settlement dates ranging from December 4, 1997 to December 23, 1997 (see "
Unitholder Explanations--Settlement of Bonds in the Trusts" 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 rating 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--Settlement of Bonds in the Trusts--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................ $ 960 $ 8,424,262 $ 81,519 $ 447,150 $ 8,439,968
Missouri IM-IT....... $ 600 $ 2,891,723 $ 23,106 $ 150,688 $ 2,892,881
New Jersey IM-IT..... $ -- $ 2,879,615 $ 25,716 $ 150,150 $ 2,883,206
Pennsylvania IM-IT... $ -- $ 2,864,905 $ 30,904 $ 150,775 $ 2,873,797
</TABLE>
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
Bonds insured Bonds insured
under AMBAC under Financial
Trust Assurance Guaranty Preinsured Total
portfolio insurance portfolio insurance Bonds
----------------------- ----------------------- ------------- --------
<S> <C> <C> <C> <C>
IM-IT................ 9% -- 91% 100%
Missouri IM-IT....... 17% -- 83% 100%
New Jersey IM-IT..... -- -- 100% 100%
Pennsylvania IM-IT... -- -- 100% 100%
</TABLE>
The breakdown of the Preinsured Bond Insurers is as follows: IM-IT Trust--
AMBAC Assurance 36%, Financial Guaranty 3%, MBIA 41% and FSA 11% ; Missouri
IM-IT Trust-- AMBAC Assurance 25%, Financial Guaranty 16%, MBIA 42%, ;
New Jersey IM-IT Trust-- AMBAC Assurance 25%, Financial Guaranty 8%, MBIA
46%, FSA 21%, ; Pennsylvania IM-IT Trust-- AMBAC Assurance 30%, MBIA 62%
and FSA 8%, .
On the date of this Prospectus, the Estimated Current Return on the Securities
in the Missouri IM-IT was 4.66%, based on the monthly plan of
distribution after payment of the insurance premium or premiums payable by
such Trust, while the Estimated Long-Term Return on such Trust was 4.65%, .
The Estimated Current Return on an identical portfolio without the insurance
obtained by the above mentioned Trust would have been , 4.68% based on the
monthly plan of distribution on such date, while the Estimated Long-Term
Return on an identical portfolio without the insurance obtained by the above
mentioned Trust would have been , 4.67% .
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in certain Trusts. The cost of any such
contracts and the corresponding gain or loss is included in the Cost to
Sponsor. Securities marked by a double pound symbol (##) following the
maturity date 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................ 20% --
Missouri IM-IT....... 17% --
New Jersey IM-IT..... -- --
Pennsylvania IM-IT... 12% --
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities in the
IM-IT, Missouri IM-IT, New Jersey IM-IT and Pennsylvania IM-IT Trusts were
higher than the bid side evaluations of such Securities by 0.73%, 0.73%, 0.73%
and 0.73%, respectively, of the aggregate principal amounts of such Securities.
"#" prior to the coupon rate 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 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%, of the
aggregate principal amount of the Securities in each Trust 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, 226th Insured
Multi-Series (IM-IT, Missouri IM-IT, New Jersey IM-IT and Pennsylvania IM-IT
Trusts):
We have audited the accompanying statements of condition and the related
portfolios of Insured Municipals Income Trust, 226th Insured Multi-Series
(IM-IT, Missouri IM-IT, New Jersey IM-IT and Pennsylvania IM-IT Trusts) as of
December 4, 1997. 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, 226th Insured Multi-Series (IM-IT, Missouri IM-IT, New Jersey IM-IT and
Pennsylvania IM-IT Trusts) as of December 4, 1997, in conformity with
generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
December 4, 1997
<TABLE>
INSURED MUNICIPALS INCOME TRUST 226th INSURED MULTI-SERIES
Statements of Condition
As of December 4, 1997
<CAPTION>
INVESTMENT IN SECURITIES Missouri New Jersey Pennsylvania
IM-IT Trust IM-IT Trust IM-IT Trust IM-IT Trust
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F3>... $ 8,505,781 $ 2,914,829 $ 2,905,331 $ 2,895,809
Accrued interest to the First Settlement Date <F1><F3>..... 70,499 30,490 53,453 28,742
------------- ------------- ------------- -------------
Total...................................................... $ 8,576,280 $ 2,945,319 $ 2,958,784 $ 2,924,551
============= ============= ============= =============
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor <F1><F3>............... $ 70,499 $ 30,490 $ 53,453 $ 28,742
Interest of Unitholders--
Cost to investors <F4>..................................... 8,944,000 3,065,000 3,055,000 3,045,000
Less: Gross underwriting commission <F4>................... 438,219 150,171 149,669 149,191
------------- ------------- ------------- -------------
Net interest to Unitholders <F1><F3><F4>................... 8,505,781 2,914,829 2,905,331 2,895,809
------------- ------------- ------------- -------------
Total...................................................... $ 8,576,280 $ 2,945,319 $ 2,958,784 $ 2,924,551
============= ============= ============= =============
==========
<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 Trust................ $ 8,576,745 $ 9,000,000 $ 8,505,781 $ 70,964
Missouri IM-IT Trust....... $ 2,944,879 $ 3,000,000 $ 2,914,829 $ 30,050
New Jersey IM-IT Trust..... $ 2,957,071 $ 3,025,000 $ 2,905,331 $ 51,740
Pennsylvania IM-IT Trust... $ 2,923,475 $ 3,010,000 $ 2,895,809 $ 27,666
<FN>
<F2>Insurance coverage providing for timely payment, when due, of all principal
and interest on the Bonds in the Insured Trusts has been obtained by such
Trusts, by a prior owner of such Bonds, by the Sponsor prior to the deposit of
such Bonds or by the issuers of such Bonds. 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
December 9, 1997, 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 1997. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you
would have to earn on taxable investments to equal the tax-exempt estimated
current return in your income tax bracket. The tables assume that Federal
taxable income is equal to State income subject to tax, and for cases in which
more than one State rate falls within a Federal bracket, the State rate
corresponding to the highest income within that Federal bracket is used. The
combined State and Federal tax rates shown reflect the fact that State tax
payments are currently deductible for Federal tax purposes. The tables do not
reflect any local taxes or any taxes other than personal income taxes. The
tables do not show the approximate taxable estimated current returns for
individuals that are subject to the alternative minimum tax. The taxable
equivalent estimated current returns may be somewhat higher than the
equivalent returns indicated in the following tables for those individuals who
have adjusted gross incomes in excess of $121,200. 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" below and in Part II of this Prospectus for a more
detailed discussion of recent Federal tax legislation, including a discussion
of provisions affecting corporations.
IM-IT
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- -----------------------------------------------------------------------------
Single Joint Tax 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Return Return Bracket Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 24.65 $ 0 - 41.20 15% 5.29 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.65 - 59.75 41.20 - 99.60 28 6.25 6.94 7.64 8.33 9.03 9.72 10.42
59.75 - 124.65 99.60 - 151.75 31 6.52 7.25 7.97 8.70 9.42 10.14 10.87
124.65 - 271.05 151.75 - 271.05 36 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 271.05 Over 271.05 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
MISSOURI
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- -----------------------------------------------------------------------------
Single Joint Tax 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Return Return Bracket Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 24.65 $ 0 - 41.20 19.4% 5.58% 6.20% 6.82% 7.44% 8.06% 8.68% 9.31%
24.65 - 59.75 41.20 - 99.60 32.3 6.65 7.39 8.12 8.86 9.60 10.34 11.08
59.75 - 124.65 99.60 - 151.75 35.1 6.93 7.70 8.47 9.24 10.02 10.79 11.56
124.65 - 271.05 151.75 - 271.05 39.8 7.48 8.31 9.14 9.97 10.80 11.63 12.46
Over 271.05 Over 271.05 43.2 7.92 8.80 9.68 10.56 11.44 12.32 13.20
</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
- --------------------------------------- -----------------------------------------------------------------------------
Single Joint Tax 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Return Return Bracket Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - 24.65 $ 0 - 41.20 16.5% 5.39% 5.99% 6.59% 7.19% 7.78% 8.38% 8.98%
24.65 - 59.75 41.20 - 99.60 32 6.62 7.35 8.09 8.82 9.56 10.29 11.03
59.75 - 124.65 99.60 - 151.75 35.4 6.97 7.74 8.51 9.29 10.06 10.84 11.61
124.65 - 271.05 151.75 - 271.05 40.1 7.51 8.35 9.18 10.02 10.85 11.69 12.52
Over 271.05 Over 271.05 43.4 7.95 8.83 9.72 10.60 11.48 12.37 13.25
</TABLE>
PENNSYLVANIA
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
- --------------------------------------- -----------------------------------------------------------------------------
Single Joint Tax 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
Return Return Bracket Equivalent Taxable Estimated Current Return
- --------------------------------------- ------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 24.65 $ 0 - 41.20 17.4% 5.45% 6.05% 6.66% 7.26% 7.87% 8.47% 9.08%
24.65 - 59.75 41.20 - 99.60 30 6.43 7.14 7.86 8.57 9.29 10.00 10.71
59.75 - 124.65 99.60 - 151.75 32.9 6.71 7.45 8.20 8.94 9.69 10.43 11.18
124.65 - 271.05 151.75 - 271.05 37.8 7.23 8.04 8.84 9.65 10.45 11.25 12.06
Over 271.05 Over 271.05 41.3 7.67 8.52 9.37 10.22 11.07 11.93 12.78
</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.
FEDERAL TAX STATUS
- --------------------------------------------------------------------------
On August 5, 1997, the President signed the Taxpayer Relief Act of 1997 (the
"Act" ). Notwithstanding anything to the contrary in "Federal Tax
Status" in Part II of this Prospectus, under the Act, for taxpayers other
than corporations, net capital gain (which is defined as net long-term capital
gain over net short-term capital loss for the taxable year) is subject to a
maximum marginal stated tax rate of either 28% or 20%, depending upon the
holding period of the capital assets. Capital loss is long-term if the holding
period for the asset is more than one year, and is short-term if the holding
period for the asset is one year or less. Generally, capital gains realized
from assets held for more than one year but not more than 18 months are taxed
at a maximum marginal stated tax rate of 28% and capital gains realized from
assets (with certain exclusions) held for more than 18 months are taxed at a
maximum marginal stated tax rate of 20% (10% in the case of certain taxpayers
in the lowest tax bracket). Further, capital gains realized from assets held
for one year or less are taxed at the same rates as ordinary income.
Legislation is currently pending that provides the appropriate methodology
that should be applied in netting the realized capital gains and losses. Such
legislation is proposed to be effective retroactively for tax years ending
after May 6, 1997. The Act also includes provisions that would treat certain
transactions designed to reduce or eliminate risk of loss and opportunities
for gain (e.g., short sales, offsetting notional principal contracts, futures
or forward contracts, or similar transactions) as constructive sales for
purposes of recognition of gain (and not loss) and for purposes of determining
the holding period. Potential investors should consult their own tax advisors
regarding the potential effect of the Act on their investment in Units. For a
discussion of the Federal tax status of income earned on Trust Units, see "
Federal Tax Status" in Part II of 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 Trust
<TABLE>
Monthly
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ----------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
January 1998 $ 4.11 $ 4.11
February 1998 - August 2007 3.98 3.98
September 2007 3.78 $ 55.90 59.68
October 2007 - December 2007 3.73 3.73
January 2008 3.89 111.81 115.40
February 2008 - December 2008 3.25 3.25
January 2009 3.21 27.95 31.16
February 2009 - July 2009 3.13 3.13
August 2009 3.06 55.90 58.86
September 2009 - January 2010 2.88 2.88
February 2010 2.76 89.45 92.2140
March 2010 - August 2022 2.49 2.49
September 2022 2.42 55.90 58.32
October 2022 - December 2022 2.25 2.25
January 2023 2.17 83.85 86.02
February 2023 - May 2026 1.98 1.98
June 2026 1.98 50.32 52.30
July 2026 - November 2026 1.98 1.98
December 2026 1.91 55.90 57.81
January 2027 - February 2027 1.75 1.75
March 2027 1.68 55.90 57.58
April 2027 - May 2027 1.51 1.51
June 2027 1.44 55.91 57.35
July 2027 - September 2027 1.27 1.27
October 2027 1.13 111.80 112.93
November 2027 .79 .79
December 2027 .69 83.86 84.55
January 2028 .29 111.81 112.10
</TABLE>
IM-IT Trust (Continued)
<TABLE>
Semi-annual
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
- ---------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
June 1998 $ 24.23 $ 24.23
December 1998 - June 2007 24.10 24.10
September 2007 $ 55.90 55.90
December 2007 23.16 23.16
January 2008 111.81 111.81
June 2008 20.03 20.03
December 2008 19.69 19.69
January 2009 27.95 27.95
June 2009 19.06 19.06
August 2009 55.90 55.90
December 2009 17.90 17.90
February 2010 89.45 89.45
June 2010 15.77 15.79
December 2010 - June 2022 15.10 15.10
September 2022 55.90 55.90
December 2022 14.29 14.29
January 2023 83.85 83.85
June 2023 12.19 12.19
December 2023 - December 2025 12.00 12.00
June 2026 12.00 50.32 62.32
December 2026 11.95 55.90 67.85
March 2027 55.90 55.90
June 2027 9.75 55.91 65.66
October 2027 111.80 111.80
December 2027 6.50 83.86 90.36
January 2028 .30 111.81 112.11
</TABLE>
Missouri IM-IT Trust
<TABLE>
Monthly
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ----------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
January 1998 $ 4.01 $ 4.01
February 1998 - August 2007 3.88 3.88
September 2007 3.30 $ 163.13 166.43
October 2007 - November 2008 3.18 3.18
December 2008 2.59 163.13 165.72
January 2009 2.18 81.57 83.75
February 2009 - January 2010 2.12 2.12
February 2010 1.91 163.13 165.04
March 2010 - June 2017 1.40 1.40
July 2017 1.40 48.94 50.34
August 2017 - April 2020 1.40 1.40
May 2020 1.03 114.19 115.22
June 2020 - September 2026 .95 .95
October 2026 .85 81.57 82.42
November 2026 - June 2027 .61 .61
July 2027 .40 163.13 163.53
</TABLE>
<TABLE>
Semi-annual
<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 1998 $ 4.05 $ 4.05
July 1998 - July 2007 23.55 23.55
September 2007 $ 163.13 163.13
January 2008 20.15 20.15
July 2008 19.33 19.33
December 2008 163.13 163.13
January 2009 17.72 81.57 99.29
July 2009 - January 2010 12.90 12.90
February 2010 163.13 163.13
July 2010 9.07 9.07
January 2011 - January 2017 8.57 8.57
July 2017 8.57 48.94 57.51
January 2018 - January 2020 8.57 8.57
May 2020 114.19 114.19
July 2020 7.27 7.27
January 2021 - July 2026 5.80 5.80
October 2026 81.57 81.57
January 2027 4.66 4.66
July 2027 3.52 163.13 166.65
</TABLE>
New Jersey IM-IT Trust
<TABLE>
Monthly
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- ----------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
January 1998 $ 4.02 $ 4.02
February 1998 - July 2007 3.90 3.90
August 2007 3.79 $ 81.83 85.62
September 2007 - September 2008 3.55 3.55
October 2008 3.44 81.83 85.27
November 2008 - January 2009 3.19 3.19
February 2009 2.62 163.67 166.29
March 2009 - June 2009 2.48 2.48
July 2009 2.11 278.23 280.34
August 2009 - December 2009 1.27 1.27
January 2010 1.21 40.92 42.13
February 2010 - November 2021 1.09 1.09
December 2021 .93 130.93 131.86
January 2022 - December 2023 .55 .55
January 2024 .36 163.67 164.03
July 2024 49.10 49.10
</TABLE>
<TABLE>
Semi-annual
<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 1998 $ 4.07 $ 4.07
July 1998 - July 2007 23.65 23.65
August 2007 $ 81.83 81.83
January 2008 21.79 21.79
July 2008 21.55 21.55
October 2008 81.83 81.83
January 2009 20.35 20.35
February 2009 163.67 163.67
July 2009 14.85 278.23 293.08
January 2010 7.71 40.92 48.63
July 2010 - July 2021 6.69 6.69
December 2021 130.93 130.93
January 2022 5.99 5.99
July 2022 - July 2023 3.43 3.43
January 2024 3.24 163.67 166.91
July 2024 49.10 49.10
</TABLE>
Pennsylvania IM-IT Trust
<TABLE>
Monthly
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- --------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
January 1998 $ 4.06 $ 4.06
February 1998 - August 2007 3.93 3.93
September 2007 2.74 $ 328.40 331.14
October 2007 2.29 164.21 166.50
November 2007 - August 2022 1.80 1.80
September 2022 1.80 49.26 51.06
October 2022 - January 2023 1.80 1.80
February 2023 1.70 32.84 34.54
March 2023 - June 2023 1.67 1.67
July 2023 1.52 118.22 119.74
August 2023 - July 2027 1.17 1.17
August 2027 1.01 131.37 132.38
September 2027 .63 .63
October 2027 .42 164.20 164.62
</TABLE>
<TABLE>
Semi-annual
<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 1998 $ 4.09 $ 4.09
July 1998 - July 2007 23.80 23.80
September 2007 $ 328.40 328.40
October 2007 164.21 164.21
January 2008 14.53 14.53
July 2008 - July 2022 10.95 10.95
September 2022 49.26 49.26
January 2023 10.95 10.95
February 2023 32.84 32.84
July 2023 10.04 118.22 128.26
January 2024 - July 2027 7.13 7.13
August 2027 131.37 131.37
October 2027 2.09 164.20 166.29
</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>
Name IM-IT Trust
Address Units
--------------
<S> <C> <C>
Van Kampen American Capital One Parkview Plaza, Oakbrook Terrace, IL 60181 5694
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 1,000
William R. Hough & Company 100 Second Avenue South, 8th Floor, St. Petersburg, Florida 33701 300
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 250
Peacock, Hislop, Staley, & Given, Inc. 122 North Kirkwood Road, St. Louis, Missouri 63122 250
R. Seelaus & Co., Inc. The Atrium @ 47 Maple Street, Summit, New Jersey 07901 250
Advest, Inc. 90 State House Square, Hartford, Connecticut 06103 100
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 100
CIBC Oppenheimer World Financial Center, 8th Floor, New York, New York 10281 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Fahnestock & Co., Inc. 110 Wall Street, 8th Floor, New York, New York 10005 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
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
Principal Financial Securities, Inc. Fountain Place, 1445 Ross Avenue, Suite 2300, Dallas, Texas 75201 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 100
8944
==============
</TABLE>
<TABLE>
<CAPTION>
Name Missouri IM-IT
Address Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital One Parkview Plaza, Oakbrook Terrace, IL 60181 2015
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 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
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
3065
=================
</TABLE>
<TABLE>
<CAPTION>
Name New Jersey
Address IM-IT Trust Units
-----------------
<S> <C> <C>
Van Kampen American Capital One Parkview Plaza, Oakbrook Terrace, IL 60181 2455
CIBC Oppenheimer World Financial Center, 8th Floor, New York, New York 10281 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Janney Montgomery Scott Inc. 1801 Market Street, 11th Floor, Philadelphia, Pennsylvania 19103 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
3055
=================
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania
Name IM-IT Trust
Address Units
----------------
<S> <C> <C>
Van Kampen American Capital One Parkview Plaza, Oakbrook Terrace, IL 60181 2145
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
Fahnestock & Co., Inc. 110 Wall Street, 8th Floor, New York, New York 10005 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Janney Montgomery Scott Inc. 1801 Market Street, 11th Floor, Philadelphia, Pennsylvania 19103 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
Wheat First Butcher Singer River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 100
3045
================
</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 5
MISSOURI IM-IT TRUST 5
NEW JERSEY IM-IT TRUST 5
PENNSYLVANIA IM-IT TRUST 5
NOTES TO PORTFOLIOS 27
OTHER MATTERS 30
Report of Independent Certified Public Accountants 30
Statements of Condition 31
Equivalent Taxable Estimated Current Return Tables 32
Federal Tax Status 34
Estimated Cash Flows to Unitholders 35
Underwriting 40
</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
December 4, 1997
Insured Municipals Income Trust, 226th Insured Multi-Series
IM-IT 395
Missouri IM-IT 104
New Jersey IM-IT 121
Pennsylvania IM-IT 233
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 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 1997
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. Further, in the opinion of bond counsel to the respective
issuers, the interest income of each Bond in the U.S. Territorial IM-IT Trust
is exempt from state, Commonwealth of Puerto Rico and local income taxation.
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 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. Further, in the opinion of bond counsel to the respective issuers,
the interest income of each Bond in the U.S. Territorial IM-IT Trust is exempt
from state, Commonwealth of Puerto Rico and local income taxation. The Bonds
in an IM-IT Discount Trust were acquired at prices which result 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 Trusts are not insured by the FDIC, are not deposits or other
obligations of, or guaranteed by, any government agency and are subject to
investment risk, including possible loss of the principal amount invested.
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.
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--General". 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--General--Unit Distribution".
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 initially 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. Further, in the opinion of
bond counsel to the respective issuers, the interest income of each Bond in
the U.S. Territorial IM-IT Trust is exempt from state, Commonwealth of Puerto
Rico and local income taxation. 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 initially 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, U.S.
Territorial IM-IT, 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, U.S. Territorial IM-IT, 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; and administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform or
impose unreasonable burdens or excessive liabilities. The Sponsor cannot
predict the causes or likelihood of the redemption of resource recovery bonds
in a Trust prior to the stated maturity of the Bonds.
Certain of the Bonds may have been acquired at a market discount from par
value at maturity. The coupon interest rates on 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" below.
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,
U.S. Territorial IM-IT, 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 "Unitholder
Explanations--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 U.S. Territorial 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 to a "mandatory tender" , in
which case such mandatory tender will be deemed to be the date upon which they
mature.
The effect of this method of sales charge computation will be that different
sales charge rates will be applied to each Trust based upon the estimated
long-term return life of such Trust's Portfolio, in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years To Maturity Sales Charge Years To Maturity Sales Charge
<S> <C> <C> <C>
1 1.010% 12 4.712%
2 1.523 13 4.822
3 2.041 14 4.932
4 2.302 15 5.042
5 2.564 16 5.152
6 2.828 17 5.263
7 3.093 18 5.374
8 3.627 19 5.485
9 4.167 20 5.597
10 4.384 21 to 30 5.708
11 4.603
</TABLE>
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Securities in 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, U.S.
Territorial
IM-IT, State
(other than a
State
Intermediate
Laddered
Maturity Trust) IM-IT Short
Aggregate Number of and National Intermediate IM-IT Discount
Units Purchased* Quality 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
____________________
* The breakpoint sales charges are also applied on a dollar basis utilizing a breakpoint
equivalent in the above table of $10 per Unit and will be applied on whichever basis is
more favorable to the investor. The breakpoints will be adjusted to take into
consideration purchase orders stated in dollars which cannot be completely fulfilled due
to the Trusts' requirement that only whole Units be issued.
</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 "Trust
Administration--General--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, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law,
fathers-in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons (collectively referred to herein
as "related purchasers")) of Van Kampen American Capital Distributors,
Inc. and its affiliates and Underwriters and their affiliates may purchase
Units at the Public Offering Price less the applicable underwriting commission
or less the applicable dealer concession in the absence of an underwriting
commission and employees, officers and directors (including related
purchasers) of dealers and their affiliates and vendors providing services to
the Sponsor may purchase Units at the Public Offering Price less the
applicable dealer concession.
Purchasers of units of any two consecutive series of a Trust may aggregate
purchases of units of such series for purposes of the sales charge reduction
for quantity purchases described in the table above, provided that at the time
of the initial purchase of units of 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 above.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (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 distribution 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
elect to terminate his or her reinvestment plan and receive future
distributions of his or her Units in cash by notifying the Trustee in writing
at any time prior to five days before the next distribution date. 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 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" above. 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
Sponsor 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 Sponsor or 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
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Insurance has been obtained by each Insured Trust, by the issuer of Bonds in
an Insured Trust, by a prior owner of such Bonds, or by the Sponsor prior to
the deposit of such Bonds in a Trust guaranteeing prompt payment of interest
and principal, when due, in respect of the Bonds in such Trust. See
"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 such
Trust on a monthly basis. Non-payment of premiums on a policy obtained by an
Insured Trust will not result in the cancellation of insurance but will force
the insurer to take action against the Trustee to recover premium payments due
it. The Trustee in turn will be entitled to recover such payments from such
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
an Insured Trust, if any, are fixed for the life of the Trust. The premium for
any Preinsured Bond insurance has been paid by such issuer, by a prior owner
of such Bonds or the Sponsor and any such policy or policies are
non-cancellable and will continue in force so long as the Bonds so insured are
outstanding and the respective Preinsured Bond Insurer remains in business. If
the provider of an original issuance insurance policy is unable to meet its
obligations under such policy or if the rating assigned to the claims-paying
ability of any such insurer deteriorates, the Portfolio Insurers have no
obligation to insure any issue adversely affected by either of the above
described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds when they
fall due. For the purposes of insurance obtained by an Insured Trust,
"when due" generally means the stated payment or maturity date for the
payment of principal and interest. However, in the event (a) an issuer of a
Bond defaults in the payment of principal or interest on such Bond, (b) such
issuer enters into a bankruptcy proceeding or (c) the maturity of such Bond is
accelerated, the affected Portfolio Insurer has the option, in its sole
discretion, after receiving notice of the earliest to occur of such a default,
bankruptcy proceeding or acceleration to pay the outstanding principal amount
of such Bond plus accrued interest to the date of such payment and thereby
retire the Bond from the affected Trust prior to such Bond's stated maturity
date. The insurance does not guarantee the market value of the Bonds or the
value of the Units. Insurance obtained by an Insured Trust, if any, is only
effective as to Bonds owned by and held in such Trust. In the event of a sale
of any such Bond by the Trustee, such insurance terminates as to such Bond on
the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the Trustee,
upon the sale of a Bond covered under a portfolio insurance policy obtained by
an Insured Trust, has the right to obtain permanent insurance with respect to
such Bond (i.e., insurance to maturity of the 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 "Unitholder Explanations--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 "Unitholder
Explanations--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--General--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 "Unitholder
Explanations--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 "
Unitholder Explanations--Public Offering--Offering Price" 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 (in
millions of dollars)
-----------------------------------------
Date Admitted Policyholders'
Name Established Assets Surplus
- ------------------------------------------------------ -------------- ---------- ---------------
<S> <C> <C> <C>
AMBAC Indemnity Corporation (at 12/31/96)............. 1970 $2,585 $ 899
Capital Markets Assurance Corporation (at 12/31/96)... 1987 321 194
Financial Guaranty Insurance Company (at 3/31/97)..... 1984 2,447 1,124
Financial Security Assurance, Inc. (at 12/31/96)...... 1984 1,155 449
MBIA Insurance Corporation (at 3/31/97 unaudited)..... 1986 4,500 1,500
</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
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Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect
subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned
subsidiary of MSAM Holdings II, Inc., which in turn is a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization of more
than $21 billion, which was created by the merger of Morgan Stanley Group Inc.
with and into Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in
a wide range of financial services through three primary businesses:
securities, asset management and credit services. These principal businesses
include securities underwriting, distribution and trading; merger,
acquisition, restructuring and other corporate finance advisory activities;
merchant banking; stock brokerage and research services; asset management;
trading of futures, options, foreign exchange commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate
advice, financing and investing; global custody, securities clearance services
and securities lending; and credit card services. As of June 2, 1997, MSDWD,
together with its affiliated investment advisory companies, had approximately
$270 billion of assets under management, supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the underwriting
and distribution of unit investment trusts and mutual funds with roots in
money management dating back to 1926. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has offices at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Fund or to any other Series thereof. The information is included herein
only for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
As of March 31, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $58.45 billion of investment
products, of which over $10.85 billion is invested in municipal securities.
The Sponsor and its Van Kampen American Capital affiliates managed $47 billion
of assets, consisting of $29.23 billion for 59 open-end mutual funds (of which
46 are distributed by Van Kampen American Capital Distributors, Inc.) $13.4
billion for 37 closed-end funds and $4.97 billion for 106 institutional
accounts. The Sponsor has also deposited approximately $26 billion of unit
investment trusts. All of Van Kampen American Capital's open-end funds,
closed-ended funds and unit investment trusts are professionally distributed
by leading financial firms nationwide. Based on cumulative assets deposited,
the Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R)trust. The Sponsor also provides
surveillance and evaluation services at cost for approximately $13 billion of
unit investment trust assets outstanding. Since 1976, the Sponsor has serviced
over two million investor accounts, opened through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and
not exceeding amounts prescribed by the 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--Replacement Bonds"
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 of the applicable Trust.
If the balances in the Interest and Principal Accounts are insufficient to
provide for amounts payable by a Trust, the Trustee has the power to sell
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 U.S. Territorial IM-IT, 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 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 (negligence in the case of the Trustee) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the Securities. In the event of the failure of the Sponsor to act under the
Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the 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
"Unitholder Explanations--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". Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this Prospectus at the
secondary market Public Offering Price plus interest accrued to the date of
settlement.
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
for any single transaction as described in the following table, provided that
the 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).
<TABLE>
<CAPTION>
IM-IT, U.S.
Territorial
IM-IT,
State
(other than
a State
Intermediate State
Laddered IM-IT Intermediate
IM-IT Maturity IM-IT Limited Laddered
Discount Trust) and IM-IT Short Intermediate Maturity Maturity
Trust National Intermediate Trust Trust Trust
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units...........$ 18.00 $ 30.00 $ 10.00 $ 25.00 $ 27.00 $ 20.00
100 - 249 Units........$ 19.00 $ 32.00 $ 11.00 $ 28.00 $ 30.00 $ 21.00
250 - 499 Units........$ 20.00 $ 34.00 $ 11.00 $ 27.00 $ 30.00 $ 21.00
500 - 999 Units........$ 20.00 $ 35.00 $ 12.00 $ 30.00 $ 32.00 $ 23.00
1,000 - 1,499 Units....$ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
1,500 or more Units....$ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
</TABLE>
The increased concession or agency commission is a result of the discount
given to purchasers for quantity purchases. See "Unitholder
Explanations--Public Offering--General". In addition to the concessions
and agency commissions described herein, volume concessions or agency
commissions of an additional $5.00 per Unit of an IM-IT, a U.S. Territorial
IM-IT, a State (other than a State Intermediate Laddered Maturity Trust) or a
National Quality Trust and $2.00 per Unit of all other Trusts will be given to
any broker/dealer or agent (other than Underwriters) who purchases from the
Sponsor at least 250 Units of such Trust during the initial offering period.
Such additional concessions will be allowed at the time of purchase, provided,
however, the additional concession applicable to initial purchases totaling
less than 250 Units will be paid retroactively at the end of the initial
offering period. The breakpoint concessions or agency commissions described
herein are also applied on a dollar basis utilizing a breakpoint equivalent of
$1,000 per Unit and will be applied on whichever basis is more favorable to
the distributor. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled due to
the requirement that only whole Units be issued. Certain commercial banks 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, the concession or agency commission will amount to 70% of the
applicable sales charge as determined using the table found in "Unitholder
Explanations--Public Offering--General". 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."
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 the amounts set forth in the following tables, as of the Date
of Deposit.
<TABLE>
<CAPTION>
IM-IT, U.S.
Territorial
IM-IT,
State
(other than
a State
Intermediate State
Laddered IM-IT Intermediate
IM-IT Maturity IM-IT Limited Laddered
Discount Trust) and IM-IT Short Intermediate Maturity Maturity
Trust National Intermediate Trust Trust Trust
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units...........$ 20.00 $ 35.00 $ 12.00 $ 27.00 $ 29.00 $ 22.00
100 - 249 Units........$ 21.00 $ 37.00 $ 13.00 $ 30.00 $ 32.00 $ 23.00
250 - 499 Units........$ 22.00 $ 39.00 $ 13.50 $ 29.50 $ 32.00 $ 23.00
500 - 999 Units........$ 22.00 $ 40.00 $ 14.00 $ 32.50 $ 34.50 $ 25.00
1,000 - 1,499 Units....$ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
1,500 or more Units....$ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
</TABLE>
A. G. Edwards & Sons, Inc. which acts as a Managing Underwriter of Units of
the various series of the IM-IT or National Quality Trust, will receive from
the Sponsor reimbursement for certain costs and further compensation in the
amount of $5.00 for each Unit of the IM-IT or National Quality Trust it
underwrites. In addition, the Sponsor will receive from the Managing
Underwriters of any National Quality, (who underwrite 15% of the Trust
involved or 1,000 Units of such Trust, whichever is greater) the excess of
such gross sales commission over $38.00 per Unit of any such Trust, as of the
Date of Deposit. Also, any such Managing Underwriter that sells a total of 25%
or 1,500 Units, whichever is greater, of any individual series of such Trusts
will receive an additional $2.00 per each such Unit. In connection with
quantity sales to purchasers of any Pennsylvania IM-IT Trust the Underwriters
will receive from the Sponsor commissions totalling $35.00 per Unit for any
single transaction of 100 to 249 Units, $36.00 per Unit for any single
transaction of 250 to 499 units, $37.00 per Unit for any single transaction of
500 to 999 Units and $38.00 per Unit for any single transaction of 1,000 or
more Units. In addition, any Underwriter that sells a total of 25% or 1,500
Units, whichever is greater, of any Pennsylvania IM-IT Trust will receive an
additional $2.00 per each such Unit. In addition, the Sponsor has entered into
agreements with Advest, Inc. ("Advest") and Gruntal & Co., Inc. ("
Gruntal") whereby Advest and Gruntal will receive an additional $2.00 per
Unit in connection with a minimum commitment of 1,500 Units of any New York
IM-IT Trust. In addition, the Sponsor and J. J. B. Hilliard, W. L. Lyons, Inc.
("Hilliard, Lyons") have entered into an agreement under which
Hilliard, Lyons may receive an additional $2.00 for each Unit of the Kentucky
Quality Trust which it underwrites, provided it underwrites a minimum of 400
Units of such Trust. 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. The breakpoints listed herein will also
be applied on a dollar basis (in addition to the Unit basis described herein)
utilizing a breakpoint equivalent of $1,000 per Unit and will be applied on
whichever basis is more favorable to the Underwriter.
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 not participated as sole underwriter or as manager or
as a member of the underwriting syndicates from which the Securities in the
Trusts were acquired. The Underwriters may further realize additional profit
or loss during the initial offering period as a result of 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 a 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. Morris
N. Simkin, Esq. 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
- --------------------------------------------------------------------------
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Trusts, where applicable, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds when held by residents of the State in which the issuers of such Bonds
are located from state income taxes and certain state or local intangibles and
local income taxes. Neither the Sponsor nor Chapman and Cutler have made any
review of the Trust proceedings relating to the issuance of the Bonds or of
the basis of such opinions. If the interest on a Bond should be determined to
be taxable, the Bond would generally have to be sold at a substantial
discount. In addition, investors could be required to pay income tax on
interest received prior to the date on which interest is determined to be
taxable. Gain realized on the sale or redemption of the Bonds by the Trustee
or of a Unit by a Unitholder is includible in gross income for Federal income
tax purposes and may be includible in gross income for state tax purposes.
Such gain does not include any amounts received in respect of accrued interest
or accrued original issue discount, if any. If a Bond is acquired with accrued
interest, that portion of the price paid for the accrued interest is added to
the tax basis of the Bond. When this accrued interest is received, it is
treated as a return of capital and reduces the tax basis of the Bond. If a
Bond is purchased for a premium, the amount of the premium is added to the tax
basis of the Bond. Bond premium is amortized over the remaining term of the
Bond, and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. For purposes of the following
opinions, it is assumed that each asset of the Trust is debt, the interest on
which is excluded for Federal income tax purposes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law as of the date of this 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 for Federal income tax purposes,
when received by a Trust and when distributed to Unitholders; however such
interest may be taken into account in computing the alternative minimum tax,
an additional tax on branches of foreign corporations and the environmental
tax (the "Superfund Tax"), as noted below;
(2)Each Unitholder is considered to be the owner of a pro rata portion of each
asset of the respective Trust under subpart E, subchapter J of chapter 1 of
the Code and will have a taxable event when such Trust disposes of a Bond, or
when the Unitholder redeems or sells his Units. If the Unitholder disposes of
a Unit, he is deemed thereby to have disposed of his entire pro rata interest
in all assets of the Trust involved including his pro rata portion of all the
Bonds represented by a Unit. Legislative proposals have been made that would
treat certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain as constructive sales for purposes of recognition of
gain (but not loss). Unitholders should consult their own tax advisors with
regard to any such constructive sale rules. Unitholders must reduce the tax
basis of their Units for their share of accrued interest received by the
respective Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such Bonds before the
date the Trust acquired ownership of the Bonds (and the amount of this
reduction may exceed the amount of accrued interest paid to the seller) and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing the proceeds of
such sale or redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder (subject to various
non-recognition provisions of the Code). The amount of any such gain or loss
is measured by comparing the Unitholder's pro rata share of the total proceeds
from such disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who purchases
Units, such basis (before adjustment for accrued original issue discount and
amortized bond premium, if any) is determined by apportioning the cost of the
Units among each of the Trust assets ratably according to value as of the
valuation date nearest the date of acquisition of the Units. It should be
noted that certain legislative proposals have been made which could affect the
calculation of basis for Unitholders holding securities that are substantially
identical to the Bonds. Unitholders should consult their own tax advisors with
regard to the calculation of basis. The tax basis reduction requirements of
the Code relating to amortization of bond premium may, under some
circumstances, result in the Unitholder realizing a taxable gain when his
Units are sold or redeemed for an amount less than or equal to his original
cost;
(3)Any proceeds paid under an insurance policy or policies dated the Date of
Deposit, issued to an Insured Trust by AMBAC Indemnity, Financial Guaranty or
a combination thereof with respect to the Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid in the normal course by the issuer of the defaulted
obligations provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent with
the reasonable expectation that the issuer of the obligations, rather than the
insurer, will pay debt service on the obligations; and
(4)Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted Bonds held by the Trustee will
be excludable from Federal gross income if, and to the same extent as, such
interest would have been excludable if paid in the normal course by the issuer
of the defaulted Bonds provided that, at the time such policies are purchased,
the amounts paid for such policies are reasonable, customary and consistent
with the reasonable expectation that the issuer of the Bonds, rather than the
insurer, will pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Bond, depending on the date the Bond was
issued. In addition, special rules apply if the purchase price of a Bond
exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its
"adjusted issue price") to prior owners. If a Bond is acquired with accrued
interest, that portion of the price paid for the accrued interest is added to
the tax basis of the Bond. When this accrued interest is received, it is
treated as a return of capital and reduces the tax basis of the Bond. If a
Bond is purchased for a premium, the amount of the premium is added to the tax
basis of the Bond. Bond premium is amortized over the remaining term of the
Bond, and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules will
also vary depending on the value of the Bond on the date a Unitholder acquires
his Units and the price the Unitholder pays for his Units. Unitholders should
consult with their tax advisers regarding these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act")
subjects tax-exempt bonds to the market discount rules of the Code effective
for bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds an
investor's purchase price (except to the extent that such difference, if any,
is attributable to original issue discount not yet accrued), subject to a
statutory de minimis rule. Market discount can arise based on the price a
Trust pays for Bonds or the price a Unitholder pays for his or her Units.
Under the Tax Act, accretion of market discount is taxable as ordinary income;
under prior law the accretion had been treated as capital gain. Market
discount that accretes while a Trust holds a Bond would be recognized as
ordinary income by the Unitholders when principal payments are received on the
Bond, upon sale or at redemption (including early redemption), or upon the
sale or redemption of his or her Units, unless a Unitholder elects to include
market discount in taxable income as it accrues. The market discount rules are
complex and Unitholders should consult their tax advisers regarding these
rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 depends upon
the corporation's alternative minimum taxable income, which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income and the
Superfund Tax of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust, or REMIC) is an amount equal
to 75% of the excess of such corporation's "adjusted current earnings"
over an amount equal to its alternative minimum taxable income (before such
adjustment item and the alternative tax net operating loss deduction).
"Adjusted current earnings" includes all tax exempt interest, including
interest on all of the Bonds in the Fund. Under current Code provisions, the
Superfund Tax does not apply to tax years beginning on or after January 1,
1996. Legislative proposals have been introduced which would extend the
Superfund Tax. Under the provisions of Section 884 of the Code, a branch
profits tax is levied on the "effectively connected earnings and
profits" of certain foreign corporations which include tax-exempt interest
such as interest on the Bonds in the Trust. Unitholders should consult their
tax advisers with respect to the particular tax consequences to them including
the corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase or improve
a personal residence). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of
the interest expense attributable to ownership of such Units. Legislative
proposals have been made that would extend the financial institution rules to
all corporations. Investors with questions regarding these issues should
consult their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user"
of the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or
related person, will not be excludible from Federal gross income, although
interest on such Bonds received by others would be excludible from Federal
gross income. "Substantial user" and "related person" are
defined under the Code and U.S. Treasury Regulations. Any person who believes
that he or she may be a "substantial user" or a "related
person" as so defined should contact his or her tax adviser.
In the opinion of special counsel to the Fund for New York tax matters, under
existing law, the Fund and each Trust are not associations taxable as
corporations and the income of each Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35%, effective for long-term capital gains realized in
taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains (which are defined as net long-term capital
gain over net short-term capital loss for a taxable year) are subject to a
maximum marginal stated tax rate of 28%. However, it should be noted that
legislative proposals are introduced from time to time that affect tax rates
and could affect relative differences at which ordinary income and capital
gains are taxed. Under the Code, taxpayers must disclose to the Internal
Revenue Service the amount of tax-exempt interest earned during the year. For
purposes of computing the alternative minimum tax for individuals and
corporations and the Superfund Tax for corporations, interest on certain
private activity bonds (which includes most industrial and housing revenue
bonds) issued on or after August 8, 1996 is included as an item of tax
preference. Except as otherwise noted in Part One for certain Trusts, the
Trusts do not include any such private activity bonds issued on or after that
date.
Section 86 of the Code provides that 50% of Social Security benefits are
includible in gross income to the extent that the sum of "modified
adjusted gross income" plus 50% of the Social Security benefits received
exceeds a "base amount". The base amount is $25,000 for unmarried
taxpayers, $32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the taxable year
and who file separate returns. Modified adjusted gross income is adjusted
gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85% of Social Security benefits are includible in gross income to
the extent that the sum of "modified adjusted gross income" plus 50%
of Social Security benefits received exceeds an "adjusted base amount."
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for
married taxpayers filing a joint return, and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does
not exceed the base amount need not include any Social Security benefits in
gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers
who may be deemed to have incurred (or continued) indebtedness to purchase or
carry tax-exempt obligations. Prospective investors should consult their tax
advisors as to the applicability of any collateral consequences.
For a discussion of the state tax status of income earned on Units of a Trust,
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 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 15
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 23
Trustee 23
Trustee's Fee 24
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 34
</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 1997
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 Wealth(sm)
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 Investment Trust Insurance Policy issued
by AMBAC Assurance Corporation 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, Missouri and Pennsylvania income
tax status of securities being registered.
3.3 Opinions and consent of counsel as to New York income tax status of
the Fund under New York law.
3.4 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, 226th 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, 226th 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 4th day of December, 1997.
Insured Municipals Income Trust
226th Insured Multi-Series
By Van Kampen American Capital
Distributors, Inc.
By Gina M. Costello
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on December
4, 1997 by the following persons who constitute a majority of the Board
of Directors of Van Kampen American Capital Distributors, Inc.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Molinari President and Chief )
Operating Officer
Ronald A. Nyberg Executive Vice President and )
General Counsel
William R. Rybak Executive Vice President and )
Chief Financial Officer )
Gina M. Costello (Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Van Kampen American Capital Equity
Opportunity Trust, Series 64 (File No. 333-33087) and the same are hereby
incorporated herein by this reference.
Exhibit 1.1
Insured Municipals Income Trust
226th Insured Multi-Series
Trust Agreement
Dated: December 4, 1997
This Trust Agreement between Van Kampen American Capital
Distributors, Inc., as Depositor, American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust, For Van Kampen
American Capital Distributors, Inc. Tax-Exempt Trust, Dated March 16,
1995" (herein called the "Standard Terms and Conditions of Trust"), and
such provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references
herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(4), listed in the
Schedules hereto, have been deposited in the Trusts under this Trust
Agreement.
(b) The fractional undivided interest in and ownership of the
various Trusts represented by each Unit thereof is the amount set
forth under "Summary of Essential Financial Information-Fractional
Undivided Interest in the Trust per Unit" in Prospectus Part I.
(c) The approximate amounts, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid to
the Depositor pursuant to Section 3.05 shall be the amount per Unit
that the Trustee agreed to reduce its fee or pay Trust expenses set
forth in the footnotes to the "Per Unit Information" for each Trust
in Prospectus Part I times the number of units in such Trust
referred to in Part II (b) of this Trust Agreement.
(d) The First General Record Date and the amount of the second
distribution of funds from the Interest Account of each Trust shall
be the record date for the Interest Account and the amount set forth
under "Per Unit Information" for each Trust in Prospectus Part I.
(e) The First Settlement Date shall be the date set forth
under "Summary of Essential Financial Information-First Settlement
Date" in Prospectus Part I.
(f) Any monies held to purchase "when issued" bonds will be
held in noninterest bearing accounts.
(g) The Evaluation Time for purpose of sale, purchase or
redemption of Units shall be 4:00 P.M. Eastern time.
(h) As set forth in Section 3.05, the Record Dates and
Distribution Dates for each Trust are those dates set forth in the
section entitled "Per Unit Information" for each Trust as appears in
Prospectus Part I.
(i) As set forth in Section 3.15, the Evaluator's Annual
Supervisory Fee shall be that amount set forth in "Summary of
Essential Financial Information-Evaluator's Annual Supervisory Fee"
in Prospectus Part I.
(j) As set forth in Section 4.03, the Evaluator's Annual
Evaluation Fee shall be that amount, and computed on that basis, set
forth in "Summary of Essential Financial Information-Evaluator's
Annual Evaluation Fee" in Prospectus Part I
(k) The Trustee's annual compensation as set forth under
Section 6.04, under each distribution plan shall be that amount as
specified in Prospectus Part I under the section entitled "Per Unit
Information" for each Trust and will include a fee to induce the
Trustee to advance funds to meet scheduled distributions.
(l) The sixth paragraph of Section 3.05 is hereby revoked and
replaced by the following paragraph:
Unitholders desiring to receive semi-annual
distributions and who purchase their Units prior to the Record
Date for the second distribution under the monthly plan of
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Unitholders desiring to receive semi-annual distributions and
who purchase their Units prior to the Record Date for the first
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Changes in the plan of distribution will become effective as of
opening of business on the day after the next succeeding semi-
annual Record Date and such distributions will continue until
further notice.
(m) Sections 8.02(d) and 8.02(e) are hereby revoked and
replaced with the following:
(d) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Interest Account
of such Trust;
(e) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Principal Account
of such Trust; and
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., has caused this Trust Indenture and Agreement to be executed by
its President or one of its Vice Presidents and its corporate seal to be
hereto affixed and attested to by its Secretary, its Assistant Secretary
or one of its Assistant Vice Presidents and The Bank of New York, has
caused this Trust Agreement to be executed by one of its Vice Presidents
and its corporate seal to be hereto affixed and attested to by one of its
Vice Presidents, Assistant Vice Presidents or Assistant Treasurers; all
as of the day, month and year first above written.
Van Kampen American Capital
Distributors, Inc.
By James J. Boyne
Vice President, Associate General
Counsel and Assistant Secretary
(Seal)
Attest:
By Cathy Napoli
Assistant Secretary
American Portfolio Evaluation
Service, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. Mcdonnell
President
(Seal)
Attest:
By James J. Boyne
Assistant Secretary
The Bank Of New York
By Ted Rudich
Vice President
(Seal)
Attest:
By Jeffrey Cohen
Assistant Treasurer
Schedules To Trust Agreement
Securities Initially Deposited
In
Insured Municipals Income Trust, 226th 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.)
AMBAC Exhibit 1.4
AMBAC Assurance Corporation
c/o CT Corporation Systems
Investment Trust Insurance Policy 44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
AMBAC Assurance Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust, 226th Insured Multi-Series
(Insured Municipals Income Trust, Series 395)
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. FE014552 Policy Date: December 4, 1997
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 Assurance Corporation
Stephen D. Cooke
Secretary
/w/Nancy Davila
Authorized Representative@
AMBAC
AMBAC Assurance Corporation
c/o CT Corporation Systems
Investment Trust Insurance Policy 44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
AMBAC Assurance Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust, 226th Insured Multi-Series
(Missouri Insured Municipals Income Trust, Series 104)
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. FE014543
Policy Date: December 4, 1997
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 Assurance 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.
<TABLE>
<CAPTION>
AMBAC AMBAC Assurance Corporation
c/o CT Corporation Systems
Schedule of Bonds (a part of the Policy) 44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Insured Municipals Income Trust, 226th Insured Multi-Series
(Insured Municipals Income Trust, Series 395) Policy Date: December 4, 1997
Item Par Full Name Purpose of Interest Date of Maturity Annual Initial
No. Value of Issuer Bonds Rate Bonds Date Premium Annual
Premium*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $800M Kansas City, Individual Development 5.550% 12/01/97 08/01/25 .1200% $960.00
Missouri Authority, Mortgage Revenue
Refunding Bonds, Series
1997A (SMIP Option Premium
Rate: .70%)
* Premium attributable to the original insured amount of each Item of Bonds.
</TABLE>
<TABLE>
<CAPTION>
AMBAC AMBAC Assurance Corporation
c/o CT Corporation Systems
Schedule of Bonds (a part of the Policy) 44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Insured Municipals Income Trust, 226th Insured Multi-Series
(Missouri Insured Municipals Income Trust, Series 104) Policy Date: December 4, 1997
Item Par Full Name Purpose of Interest Date of Maturity Annual Initial
No. Value of Issuer Bonds Rate Bonds Date Premium Annual
Premium*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $500M Kansas City, Individual Development 5.550% 12/01/97 08/01/25 .1200% $600.00
Missouri Authority, Mortgage Revenue
Refunding Bonds, Series
1997A (SMIP Option Premium
Rate: .70%)
* Premium attributable to the original insured amount of each Item of Bonds.
</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 Indicated below our firm
name and
head of this Agreement address exactly as we wish to appear
in the Prospectus
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By____________________________ _____________________________
Title__________________________ _____________________________
_____________________________
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
December 4, 1997
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Insured Municipals Income Trust, 226th 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, 226th Insured Multi-Series (hereinafter referred to as the
"Fund"), in connection with the preparation, execution and delivery of a
Trust Agreement dated December 4, 1997 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. 333-36731) 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/md
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
December 4, 1997
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, 226th Insured Multi-Series
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Insured Municipals Income Trust, 226th
Insured Multi-Series (the "Fund"), in connection with the issuance of
Units of fractional undivided interest in the several trusts of said Fund
(the "Trusts") under a Trust Agreement dated December 4, 1997 (the
"Indenture") between Van Kampen American Capital Distributors, Inc., as
Depositor, American Portfolio Evaluation Services, a division of Van
Kampen American Capital Investment Advisory Corp., as Evaluator, and The
Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we
have deemed pertinent. For purposes of the following opinions, it is
assumed that each asset of the Trusts is debt the interest on which is
excluded from gross income for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
trusts) of Chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that
the number of Units of such Trust held by him bears to the total
number of Units outstanding of such Trust. Under Subpart E,
Subchapter J of Chapter 1 of the Code, income of each Trust will be
treated as income of each Unitholder of the respective Trust in the
proportion described, and an item of Trust income will have the same
character in the hands of a Unitholder as it would have in the hands
of the Trustee. Accordingly, to the extent that the income of a
Trust consists of interest and original issue discount excludable
from gross income under Section 103 of the Code, such income will be
excludable from Federal gross income of the Unitholders, except in
the case of a Unitholder who is a substantial user (or a person
related to such user) of a facility financed through issuance of any
industrial development bonds or certain private activity bonds held
by the respective Trust. In the case of such Unitholder who is a
substantial user (and no other) interest received with respect to
his Units attributable to such industrial development bonds or such
private activity bonds is includable in his gross income. In the
case of certain corporations, interest on the Bonds is included in
computing the alternative minimum tax pursuant to Section 56(c) of
the Code, and the branch profits tax imposed by Section 884 of the
Code with respect to U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. If a Bond is
acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When
this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is
purchased for a premium, the amount of the premium is added to the
tax basis of the Bond. Bond premium is amortized over the remaining
term of the Bond, and the tax basis of the Bond is reduced each tax
year by the amount of the premium amortized in that tax year.
Accordingly, Unitholders must reduce the tax basis of their Units
for their share of accrued interest received by the respective
Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such Bonds
before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest
paid to the seller) and, consequently, such Unitholders may have an
increase in taxable gain or reduction in capital loss upon the
disposition of such Units. In addition, such basis will be
increased by the Unitholder's aliquot share of the accrued original
issue discount (and market discount, if the Unitholder elects to
include market discount in income as it accrues) with respect to
each Bond held by the Trust with respect to which there was original
issue discount at the time the Bond was issued (or which was
purchased with market discount) and reduced by the annual
amortization of bond premium, if any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Unitholder and the amount thereof is measured by
comparing the Unitholder's aliquot share of the total proceeds from
the transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning the
tax basis for his Units among each of the Trust assets (as of the
date on which his Units were acquired) ratably according to their
values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced by the
amount of his aliquot share of accrued interest received by the
Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on the Bonds
before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest
paid to the seller), must be reduced by the annual amortization of
bond premium, if any, on Bonds held by the Trust and must be
increased by the Unitholder's share of the accrued original issue
discount (and market discount, if the Unitholder elects to include
market discount in income as it accrues) with respect to each Bond
which, at the time the Bond was issued, had original issue discount
(or which was purchased with market discount).
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price",
such excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the
original issuance of Bonds held by the Trust, Section 1272(a)(7) of
the Code provides for a reduction in the accrued "daily portion" of
such original issue discount upon the purchase of a Bond subsequent
to the Bond's original issue, under certain circumstances. In the
case of any Bond held by the Trust the interest on which is
excludable from gross income under Section 103 of the Code, any
original issue discount which accrues with respect thereto will be
treated as interest which is excludable from gross income under
Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance Policies, if any, issued to certain of the Trusts on the
Date of Deposit by AMBAC Assurance Corporation, Financial Guaranty
Insurance Corporation or a combination thereof. Each such policy,
or a combination of such policies, insures all bonds held by the
Trustee for that particular Trust (other than bonds described in
paragraph (vii)) against default in the prompt payment of principal
and interest. In our opinion, any amount paid under each said
policy, or a combination of said policies, which represents maturing
interest on defaulted obligations held by the Trustee will be
excludable from Federal gross income if, and to the same extent as,
such interest would have been so excludable if paid in normal course
by the issuer of the defaulted Bonds provided that, at the time such
policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Bonds, rather than the insurer, will pay debt
service on the Bonds. Paragraph (ii) of this opinion is accordingly
applicable to insurance proceeds representing maturing interest.
(vii) Certain Bonds in the portfolios of certain of the Trusts
have been insured by the issuers thereof against default in the
prompt payment of principal and interest (the "Insured Bonds").
Insurance has been obtained for such Insured Bonds, or, in the case
of a commitment, the Bonds will be ultimately insured under the
terms of such an insurance policy, which are designated as issuer
Insured Bonds on the portfolio pages of the respective Trusts in the
Prospectus for the Fund, by the issuer of such Insured Bonds.
Insurance on Insured Bonds is effective so long as such Insured
Bonds remain outstanding. For each of these Insured Bonds, we have
been advised that the aggregate principal amount of such Insured
Bonds listed on the portfolio page for the respective Trust was
acquired by the applicable Trust and are part of the series of such
Insured Bonds listed in the aggregate principal amount. Based upon
the assumption that the Insured Bonds of the Trust are part of the
series covered by an insurance policy or, in the case of a
commitment, will be ultimately insured under the terms of such an
insurance policy, it is our opinion that any amounts received by the
applicable Trust representing maturing interest on such Insured
Bonds will be excludable from Federal gross income if, and to the
same extent as, such interest would have been so excludable if paid
in normal course by the issuer provided that, at the time such
policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Insured Bonds, rather than the insurer, will
pay debt service on the Insured Bonds. Paragraph (ii) of this
opinion is accordingly applicable to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending on
the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the amount
of original issue discount which would have previously accrued based upon
its issue price (its "adjusted issue price"). The application of these
rules will also vary depending on the value of the Bonds on the date a
Unitholder acquires his Units, and the price the Unitholder pays for his
Units.
Because the Trusts do not include any "private activity" bonds
within the meaning of Section 141 of the Code issued on or after
August 8, 1986, none of the Trust Funds' interest income shall be treated
as an item of tax preference when computing the alternative minimum tax.
In the case of corporations, for taxable years beginning after
December 31, 1986, the alternative minimum tax depends upon the
corporation's alternative minimum taxable income ("AMTI") which is the
corporation's taxable income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items
used in computing AMTI of a corporation (other than an S Corporation,
Regulated Investment Company, Real Estate Investment Trust or REMIC) for
taxable years beginning after 1989, is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount
equal to its AMTI (before such adjustment item and the alternative tax
net operating loss deduction). "Adjusted current earnings" includes all
tax-exempt interest, including interest on all Bonds in the Trust, and
tax-exempt original issue discount.
Effective for tax returns filed after December 31, 1987, all
taxpayers are required to disclose to the Internal Revenue Service the
amount of tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable
year of 100 percent of the otherwise deductible interest on indebtedness
incurred or continued by financial institutions, to which either
Section 585 or Section 593 of the Code applies, to purchase or carry
obligations acquired after August 7, 1986, the interest on which is
exempt from Federal income taxes for such taxable year. Under rules
prescribed by Section 265, the amount of interest otherwise deductible by
such financial institutions in any taxable year which is deemed to be
attributable to tax-exempt obligations acquired after August 7, 1986,
will generally be the amount that bears the same ratio to the interest
deduction otherwise allowable (determined without regard to Section 265)
to the taxpayer for the taxable year as the taxpayer's average adjusted
basis (within the meaning of Section 1016) of tax-exempt obligations
acquired after August 7, 1986, bears to such average adjusted basis for
all assets of the taxpayer. The U.S. Treasury Department has proposed
extending the financial institution rules to all corporations.
We also call attention to the fact that, under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry
Units is not deductible for Federal income tax purposes. Under rules
used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly traceable
to the purchase of Units. However, these rules generally do not apply to
interest paid on indebtedness incurred for expenditures of a personal
nature such as a mortgage incurred to purchase or improve a personal
residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued)
subject to a statutory de minimis rule. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unitholder pays for
his or her Units. Under the Tax Act, accretion of market discount is
taxable as ordinary income; under prior law, the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption), or upon the sale or redemption
of his or her Units, unless a Unitholder elects to include market
discount in taxable income as it accrues.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provisions of Federal law. Ownership of the Units may
result in collateral Federal income tax consequences to certain
taxpayers. Prospective investors should consult their tax advisors as to
the applicability of any such collateral consequences.
We have also examined the income tax law of the State of 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 an authority of the Commonwealth of Puerto
Rico (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"). We have assumed that, at the respective times of issuance of the
Bonds, opinions relating to the validity thereof and to the exemption of
interest thereon from Federal income tax were rendered by bond counsel to
the respective issuing authorities. In addition, we have assumed that
with respect to the Missouri Bonds, bond counsel to the issuing
authorities rendered opinions as to the exemption from the Missouri State
income tax and, with respect to the Possession Bonds, bond counsel to the
issuing authorities rendered opinions as to the exemption from all state
and local income taxation of the Possession Bonds and the interest
thereon. Neither the Sponsor nor its counsel has made any review for the
Missouri IM-IT Trust of the proceedings relating to the issuance of the
Bonds or of the bases for the opinions rendered in connection therewith.
This opinion does not address the taxation of persons other than full
time residents of 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 so excluded if 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 examined certain laws of the State of Pennsylvania (the
"State") to determine their applicability to the Pennsylvania IM-IT Trust
(the "Pennsvylania Trust") and to the holders of Units in the
Pennsylvania Trust who are residents of the State of Pennsylvania (the
"Unitholders"). The assets of the Pennsylvania Trust will consist of
interest-bearing obligations issued by or on behalf of the State, any
public authority, commission, board or other agency created by the State
or a political subdivision of the State, or political subdivisions
thereof (the "Bonds"). Distributions of income with respect to the Bonds
received by the Pennsylvania Trust will be made monthly.
Although we express no opinion with respect thereto, in rendering
the opinion expressed herein, we have assumed that: (i) the Bonds were
validly issued by the State or its municipalities, as the case may be,
(ii) the interest thereon is excludable from gross income for federal
income tax purposes, (iii) the interest thereon is exempt from
Pennsylvania State and local taxes and (iv) the Bonds are exempt from
county personal property taxes. This opinion does not address the
taxation of persons other than full-time residents of Pennsylvania.
Based on the foregoing, and review and consideration of existing
State laws as of this date, it is our opinion, and we herewith advise
you, as follows:
(1) The Pennsylvania Trust will have no tax liability for
purposes of the personal income tax (the "Personal Income Tax"), the
corporate income tax (the "Corporate Income Tax") and the capital
stock-franchise tax (the '"Franchise Tax"), all of which are imposed
under the Pennsylvania Tax Reform Code of 1971, or the Philadelphia
School District Investment Net Income Tax (the "Philadelphia School
Tax") imposed under Section 19-1804 of the Philadelphia Code of
Ordinances.
(2) Interest on the Bonds, net of Pennsylvania Trust expenses,
which is exempt from the Personal Income Tax when received by the
Pennsylvania Trust and which would be exempt from such tax if
received directly by a Unitholder, will retain its status as exempt
from such tax when received by the Pennsylvania Trust and
distributed to such Unitholder. Interest on the Bonds which is
exempt from the Corporate Income Tax and the Philadelphia School Tax
when received by the Pennsylvania Trust and which would be exempt
from such taxes if received directly by a Unitholder, will retain
its status as exempt from such taxes when received by the
Pennsylvania Trust and distributed to such Unitholder.
(3) Distributions from the Pennsylvania Trust attributable to
capital gains recognized by the Pennsylvania Trust upon its
disposition of a Bond issued on or after February 1, 1994, will be
taxable for purposes of the Personal Income Tax and the Corporate
Income Tax. No opinion is expressed with respect to the taxation of
distributions from the Pennsylvania Trust attributable to capital
gains recognized by the Pennsylvania Trust upon its disposition of a
Bond issued before February 1, 1994.
(4) Distributions from the Pennsylvania Trust attributable to
capital gains recognized by the Pennsylvania Trust upon its
disposition of a Bond will be exempt from the Philadelphia School
Tax if the Bond was held by the Pennsylvania Trust for a period of
more than six months and the Unitholder held his Unit for more than
six months before the disposition of the Bond. If, however, the
Bond was held by the Pennsylvania Trust or the Unit was held by the
Unitholder for a period of less than six months, then distributions
from the Pennsylvania Trust attributable to capital gains recognized
by the Pennsylvania Trust upon its disposition of a Bond issued on
or after February 1, 1994 will be taxable for purposes of the
Philadelphia School Tax; no opinion is expressed with respect to the
taxation of any such gains attributable to Bonds issued before
February 1, 1994.
(5) Insurance proceeds paid under policies which represent
maturing interest on defaulted obligations will be exempt from the
Corporate Income Tax to the same extent as such amounts are excluded
from gross income for federal income tax purposes. No opinion is
expressed with respect to whether such insurance proceeds are exempt
from the Personal Income Tax or the Philadelphia School Tax.
(6) Each Unitholder will recognize gain for purposes of the
Corporate Income Tax if the Unitholder redeems or sells Units of the
Pennsylvania Trust to the extent that such a transaction results in
a recognized gain to such Unitholder for federal income tax purposes
and such gain is attributable to Bonds issued on or after February
1, 1994. No opinion is expressed with respect to the taxation of
gains realized by a Unitholder on the sale or redemption of a Unit
to the extent such gain is attributable to Bonds issued prior to
February 1, 1994.
(7) A Unitholder's gain on the sale or redemption of a Unit
will be subject to the Personal Income Tax, except that no opinion
is expressed with respect to the taxation of any such gain to the
extent it is attributable to Bonds issued prior to February 1, 1994.
(8) A Unitholder's gain upon a redemption or sale of Units
will be exempt from the Philadelphia School Tax if the Unitholder
held his Unit for more than six months and the gain is attributable
to Bonds held by the Pennsylvania Trust for a period of more than
six months. If, however, the Unit was held by the Unitholder for
less than six months or the gain is attributable to Bonds held by
the Pennsylvania Trust for a period of less than six months, then
the gains will be subject to the Philadelphia School Tax; except
that no opinion is expressed with respect to the taxation of any
such gains attributable to Bonds issued before February 1, 1994.
(9) The Bonds will not be subject to taxation under the County
Personal Property Tax Act of June 17, 1913 (the "Personal Property
Tax"). Personal property taxes in Pennsylvania are imposed and
administered locally, and thus no assurance can be given as to
whether Units will be subject to the Personal Property Tax in a
particular jurisdiction. However, in our opinion, Units should not
be subject to the Personal Property Tax.
Unitholders should be aware that, generally, interest on
indebtedness incurred or continued to purchase or carry Units is not
deductible for purposes of the Personal Income Tax, the Corporate Income
Tax or the Philadelphia School Tax.
We have not examined any of the Bonds to be deposited and held in
the Pennsylvania 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 federal or state income taxation of
interest on the Bonds if interest thereon had been received directly by a
Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Pennsylvania law. Ownership of the Units
may result in collateral Pennsylvania tax consequences to certain
taxpayers. Prospective investors should consult their tax advisors as to
the applicability of any such collateral consequences.
Very truly yours,
Chapman and Cutler
MJK/md
Exhibit 3.3
Winston & Strawn
200 Park Avenue
New York, New York 10166-4193
December 4, 1997
Insured Municipals Income Trust,
226th Insured Multi-Series
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Insured Municipals Income Trust,
226th Insured Multi-Series (the "Fund") consisting of Insured Municipals
Income Trust, Series 395; Missouri Insured Municipals Income Trust, Series
104; New Jersey Insured Municipals Income Trust, Series 121; and Pennsylvania
Insured Municipals Income Trust, Series 233 (individually the "Trust" and in
the aggregate "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 333-36731) 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 the Trusts denominated with a state name exempt from income tax, if
any, of the state denominated in the name of that Trust to the extent
indicated in the Prospectus. No opinion is expressed herein with regard to
the Federal or State (other than New York) tax aspects of the bonds, the Fund,
the Trusts, units of each Trust (the "Units"), or any interest, gains or
losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee with
respect to each Trust, 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, along with 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
Trusts other than those obligations the timely payment of principal and
interest of which are guaranteed by an insurance policy purchased by the
issuer thereof or a prior owner, which may include the Depositor prior to the
Date of Deposit, all as more fully set forth in the Prospectus and the
Registration Statement with respect to each Trust.
We understand that with respect to the obligations described in the
preceding paragraph all insurance policies, whether purchased by the
Depositor, the issuer or a prior owner, provide, 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 corpus of each Trust as more fully set forth in the Prospectus and the
Registration Statement. The Units, which are represented by certificates (the
"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
Trust and with the proceeds from the disposition of obligations held in each
Trust and the distribution of such interest and proceeds to the Unit holders
of that Trust. The Trustee will also maintain records of the registered
holders of Certificates representing an interest in each Trust and administer
the redemption of Units by such Certificate holders and may perform certain
administrative functions with respect to an automatic investment option.
Generally, obligations held in the Fund may be removed therefrom by the
Trustee only upon redemption prior to their stated maturity, at the direction
of the Depositor in the event of an advance refunding or upon the occurrence
of certain other specified events which adversely affect the sound investment
character of the Fund, such as default by the issuer in payment of interest or
principal on the obligation and no provision for payment is made therefor
either pursuant to the portfolio insurance or otherwise and the Depositor
fails to instruct the Trustee, within thirty (30) days after notification, to
hold such obligation.
Prior to the termination of the Fund, the Trustee is empowered to sell
Bonds, from a list furnished by the Depositor, and only for the purposes 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(1) defines the
term "corporation" to include, among other things, "any business conducted by
a trustee or trustees wherein interest or ownership is evidenced by
certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
The term "trust" includes any business conducted by a
trustee or trustees in which interest or ownership is
evidenced by certificate or other written instrument.
Such a trust includes, but is not limited to, an
association commonly referred to as a "business trust" or
"Massachusetts trust". In determining whether a trustee
or trustees are conducting a business, the form of the
agreement is of significance but is not controlling. The
actual activities of the trustee or trustees, not their
purposes and powers, will be regarded as decisive factors
in determining whether a trust is subject to tax under
Article 9-A. The mere investment of funds and the
collection of income therefrom, with incidental
replacement of securities and reinvestment of funds, does
not constitute the conduct of a business in the case of a
trust. 20 NYCRR 1-2.5(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that where
a trustee merely invests funds and collects and distributes the income
therefrom, the trust is not engaged in business and is not subject to the
franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept.
1948), order resettled, 274 A.D. 1073, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an opinion of the Attorney General of the State of New York, 47 N.Y.
Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making
up the trust only upon the happening of certain specified events or the
existence of certain specified conditions, the trust was not subject to the
franchise tax.
In the instant situation, the Trustee is not empowered to, and we assume
will not, sell obligations contained in the corpus of the Fund and reinvest
the proceeds therefrom. Further, the power to sell such obligations is
limited to circumstances in which the creditworthiness or soundness of the
obligation is in question or in which cash is needed to pay redeeming Unit
holders or to pay expenses, or where the Fund is liquidated pursuant to the
termination of the Indenture. Only in circumstances in which the issuer of an
obligation attempts to refinance it can the Trustee exchange an obligation for
a new security. In substance, the Trustee will merely collect and distribute
income and will not reinvest any income or proceeds, and the Trustee has no
power to vary the investment of any Unit holder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust will be
deemed to be the owner of the trust under certain circumstances, and therefore
taxable on his proportionate interest in the income thereof. Where this
Federal tax rule applies, the income attributed to the grantor will also be
income to him for New York income tax purposes. (See TSB-M-78(9)(C), New York
Department of Taxation and Finance, June 23, 1978.)
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of a Trust will be
considered as owning a share of each asset of that Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income of
each Unit holder of that Trust in said proportion pursuant to Subpart E of
Part I, Subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and Cutler,
counsel for the Depositor, dated today, upon which we specifically rely, we
are of the opinion that under existing laws, rulings, and court decisions
interpreting the laws of the State and City of New York:
1. Each Trust will not constitute an association taxable as a
corporation under New York law, and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax.
2. The income of each Trust will be treated as the income of the
Unit holders under the income tax laws of the State and City of New York.
3. Unit holders who are not residents of the State of New York are
not subject to the income tax law thereof with respect to any interest or
gain derived from the Fund or any gain from the sale or other disposition
of the Units, except to the extent that such interest or gain is from
property employed in a business, trade, profession or occupation carried
on in the State of New York.
In addition, we are of the opinion no New York State stock transfer tax
will be payable in respect of any transfer of the Certificates by reason of
the exemption contained in paragraph (a) of Subdivision 8 of Section 270 of
the New York Tax Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and
the reference to us in the Registration Statement and in the Prospectus.
Very truly yours,
Winston & Strawn
MNS:lma
Exhibit 3.4
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
December 4, 1997
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Insured Municipals Income Trust, 226th Insured Multi-Series
(New Jersey Insured Municipals Income Trust, Series 121)
Gentlemen:
We have acted as special counsel, with respect to New Jersey state
tax matters, to Insured Municipals Income Trust, 226th Insured Multi-
Series (the "Fund") concerning a Registration Statement (No. 333-36731)
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 121 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 Capital 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,
222nd Insured Multi-Series, as we deem necessary, including, but not
limited to, the Trust Indenture and Agreement (the "222nd Insured Multi-
Series Indenture") and the Prospectus. You have advised that the
Indenture is identical in all material respects to the 222nd 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, 222nd 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 222nd Insured Multi-Series
Indenture, your advice that the Indenture is identical in all material
respects to the 222nd 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, 222nd 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
December 4, 1997
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Insured Municipals Income Trust, 226th Insured Multi-Series
(A Unit Investment Trust) Registered Under the Securities Act of
1933
File No. 333-36731
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation, as
the Evaluator, and to the use of the obligations prepared by us which are
referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Standard & Poor's
A division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust, 226th Insured Multi-Series - consisting
of:
Insured Municipals Income Trust, Series 395
Missouri Insured Municipals Income Trust, Series 104
New Jersey Insured Municipals Income Trust, Series 121
Pennsylvania Insured Municipals Income Trust, Series 233
Pursuant to your request for a Standard & Poor's rating on the units of
the above-captioned trust, SEC #333-36731, 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
January 4, 1999. On this date, the rating will be automatically withdrawn by
Standard & Poor's unless a post effective letter is requested by the trust.
You have permission to use the name of Standard & Poor's Corporation and
the above-assigned ratings in connection with your dissemination of
information relating to these units, provided that it is understood that the
ratings are not "market" ratings nor recommendations to buy, hold, or sell the
units of the trust or the securities contained in the trust. Further, it
should be understood the rating on the units does not take into account the
extent to which fund expenses or portfolio asset sales for less than the
fund's purchase price will reduce payment to the unit holders of the interest
and principal required to be paid on the portfolio assets. S&P reserves the
right to advise its own clients, subscribers, and the public of the ratings.
S&P relies on the sponsor and its counsel, accountants, and other experts for
the accuracy and completeness of the information submitted in connection with
the ratings. S&P does not independently verify the truth or accuracy of any
such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Corporation in connection with the rating assigned to the units in the
registration statement or prospectus relating to the units or the trust.
However, this letter should not be construed as a consent by us, within the
meaning of Section 7 of the Securities Act of 1933, to the use of the name of
Standard & Poor's Corporation in connection with the ratings assigned to the
securities contained in the trust. You are hereby authorized to file a copy
of this letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made
to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
Exhibit 4.3
Independent Certified Public Accountants' Consent
We have issued our report dated December 4, 1997 on the statements
of condition and related bond portfolios of Insured Municipals Income
Trust, 226th Insured Multi-Series (IM-IT, Missouri IM-IT, New Jersey IM-
IT, and Pennsylvania IM-IT Trusts) as of December 4, 1997 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
December 4, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
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<APPREC-INCREASE-CURRENT> 0
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
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<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on December 4, 1997 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 233
<NAME> ipa
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> DEC-04-1997
<PERIOD-END> DEC-04-1997
<INVESTMENTS-AT-COST> 2895809
<INVESTMENTS-AT-VALUE> 2895809
<RECEIVABLES> 28742
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2924551
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28742
<TOTAL-LIABILITIES> 28742
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2895809
<SHARES-COMMON-STOCK> 3045
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2895809
<DIVIDEND-INCOME> 0
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<APPREC-INCREASE-CURRENT> 0
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
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<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
