MEMORANDUM OF CHANGES
INSURED MUNICIPALS INCOME TRUST
231ST INSURED MULTI-SERIES
This Prospectus filed with Amendment No. 1 of the Registration
Statement on Form S-6 has been revised to reflect information regarding
the deposit of the Trusts. All page numbers below refer to Prospectus
Part I.
Cover Page. The Trust name, Estimated Current Return, Estimated
Long-Term Return, CUSIP number and date of the prospectus have been
completed. Explanatory disclosure regarding Estimated Current Return
and Estimated Long-Term Return has been added.
Page 2. The "Summary of Essential Financial Information" has been
completed.
Pages 3-4. The "Portfolio" and the notes thereto have been completed.
Page 6. The Underwriters have been named.
Page 7. The "Report of Independent Certified Public Accountants and
"Statement of Condition" has been completed.
Back Cover Page. The name of the Fund, Trust and date of the
prospectus has been completed.
Back Cover. The names and series numbers of the Trusts and the date of
the prospectus have been changed.
<PAGE>
FILE NO. 333-45169
CIK #896377
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
231st INSURED MULTI-SERIES
B. Name of Depositor: VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
CHAPMAN AND CUTLER VAN KAMPEN AMERICAN CAPITAL
Attention: Mark J. Kneedy DISTRIBUTORS, INC.
111 W. Monroe Street Attention: Don G. Powell, Chairman
Chicago, Illinois 60603 One Parkview Plaza
Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of fractional undivided
beneficial interest.
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT
/ X / Check box if it is proposed that this filing will become effective on
- ---- May 29, 1998 pursuant to Rule 487.
<PAGE>
<TABLE>
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INSURED MUNICIPALS INCOME TRUST,
231ST 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
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1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Part I Front Cover Page
2. Name and address of Depositor ) Part II-The Trusts
) Part I-Summary of Essential Financial
) Information
) Part II-Fund Administration
3. Name and address of Trustee ) Part II-The Trusts
) Part I-Summary of Essential Financial
) Information
) Part II-Trust Administration
4. Name and address of principal ) Part I-Underwriting
underwriter )
5. Organization of trust ) Part II-The Trusts
6. Execution and termination of ) Part II-The Trusts
Trust Indenture and Agreement ) Part II-Fund Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
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II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
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10. General information regarding ) Part II-The Trusts
trust's securities and rights ) Part II-Rights of Unitholders
of security holders ) Part II-Fund Administration
11. Type of securities comprising ) Part II-The Trusts
units ) Part I-Cover Page
) Part I-Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Part II-The Trust
expenses ) Part I-Summary of Essential Financial
) Information
) Part II-Expenses
) Part II-Public Offering
)
(b) Certain information regard- ) *
ing periodic payment plan )
certificates )
(c) Certain percentages ) Part I-Summary of Essential Financial
) Information
) Part II-Public Offering
(d) Certain other fees, ) Par II-Rights of Unitholders
expenses or charges ) Part II-Expenses
payable by holders )
(e) Certain profits to be ) Part II-Public Offering
received by depositor, )
principal underwriter, ) Part I-Notes to Portfolio
trustee or affiliated )
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Part II-Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Part II-The Trusts
underlying securities ) Part II-Unitholder Explanations
) Part II-Fund Administration
17. Withdrawal or redemption ) Part II-Rights of Unitholders
) Part II-Fund Administration
18. (a) Receipt and disposition )
of income ) Part II-Rights of Unitholders
(b) Reinvestment of distribu- ) Part II-Rights of Unitholders
tions )
(c) Reserves or special funds ) Part II-Rights of Unitholders
) Part II-Fund Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Part II-Rights of Unitholders
) Part II-Fund Administration
20. Certain miscellaneous provisions ) Part II-Fund Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Part I-Portfolio
) Part II-Fund Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
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III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
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25. Organization of Depositor ) Part II-Fund Administration
26. Fees received by Depositor ) Part II-Fund Administration
27. Business of Depositor ) Part II-Fund 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-Public Offering
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IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
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35. Distribution of trust's ) Part I-Cover Page
securities by states ) Part II-Public Offering
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Part II-Public Offering
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Part II-Fund Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Part II-Fund 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 I-Summary of Essential Financial
) Information
) Part II-Rights of Unitholders
) Part II-Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) Part II-Public Offering
to certain persons )
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Part II-Rights of Unitholders
) Part II-Public Offering
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Part II-Public Offering
in underlying securities ) Part II-Fund Administration
<CAPTION>
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C>
48. Organization and regulation of ) Part II-Fund Administration
trustee )
49. Fees and expenses of trustee ) Part I-Summary of Essential Financial
) Information
) Part II-Expenses
50. Trustee's lien ) Part II-Expenses
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VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
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51. Insurance of holders of trust's )
securities ) *
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VII. POLICY OF REGISTRANT
<S> <C>
52. (a) Provisions of trust agree- )
ment with respect to )
replacement or elimi- ) Part II-Fund Administration
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitu- ) Part II-Fund Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust )
) Part II-Federal Tax Status
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VIII. Financial and Statistical Information
<S> <C>
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Part I-Statement of Condition
tions 1(c) to Form S-6) )
- ----------------------------------
* Inapplicable, omitted, answer negative or not required
</TABLE>
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART I
CONNECTICUT INSURED MUNICIPALS INCOME TRUST, SERIES 37
- --------------------------------------------------------------------------------
Connecticut Insured Municipals Income Trust, Series 37 (the "Trust")
(included in Insured Municipals Income Trust, 231st Insured Multi-Series (the
"Fund")) consists of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is, in
the opinion of bond counsel to the issuer, exempt from all Federal income taxes
under existing law and exempt to the extent described herein from Connecticut
state and local taxes when held by residents of Connecticut (the "Bonds"). The
objective of the Trust is Federal and Connecticut tax-exempt income and
conservation of capital through an investment in a diversified portfolio of
tax-exempt bonds. The Units of the Trust are rated "AAA" by Standard & Poor's.
The Trust is referred to herein as the "State Trust" or "Insured Trust".
The Trust consists of 9 issues of Bonds. Two of the Bonds are general
obligations of the governmental entities issuing them and are backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: Higher Education, 2 (33%); Health Care, 1 (17%);
Retail Electric/Gas/Telephone, 2 (17%); Public Education, 1 (13%); General
Obligation, 2 (12%) and General Purpose, 1 (8%). Approximately 25% of the
principal amount of the Bonds are issued by issuers located in Puerto Rico. The
dollar weighted average maturity of the Bonds is 27 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.56% 4.61%
Estimated Long Term Return: 4.53% 4.57%
CUSIP: 207588-82-3 207588-83-1
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
MAY 29, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<S> <C> <C> <C>
Initial Date of Deposit: May 29, 1998 Principal Amount of Bonds per Unit (1): $ 960.31
Principal Amount of Bonds: $ 3,000,000 Number of Units: 3,124
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 2,970,939
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.80
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 48.02 $ 48.02
Less Estimated Expenses (4) $ 2.39 $ 1.92
Less Estimated Insurance Expenses $ -- $ --
Estimated Net Interest Income $ 45.63 $ 46.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 4.68 on $ 4.73 on
July 25, 1998 July 25, 1998
Normal Distribution (3) $ 3.80 $ 23.05
Record Dates 10th day of July 10 and
each month January 10
Distribution Dates 25th day of July 25 and
each month January 25
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public
Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.93 $ 0.86
----------- -----------
Total Annual Expenses per Unit $ 2.39 $ 1.92
=========== ===========
- --------------------------------------------------------------------------------
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (June 3, 1997), Unitholders will pay accrued
interest from such date to the settlement date less distributions from the
Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
<TABLE>
<CAPTION>
PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
CONNECTICUT
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 100,000 Ansonia, Connecticut, General Obligation Bonds (FGIC Insured)
#5.00% Due 10/15/2016................................ AAA 2008 @ 102 $ 100,500
250,000 Bridgeport, Connecticut, General Obligation Bonds, Series A
(AMBAC Assurance Insured) 2007 @ 101
#5.25% Due 03/01/2017................................ AAA 2013 @ 100 S.F. 255,115
250,000 Puerto Rico, Electric Power Authority, Power Revenue
Refunding Bonds, Series EE (MBIA Insured) 2008 @ 101.50
#4.50% Due 07/01/2018................................ AAA 2017 @ 100 S.F. 235,515
400,000 Connecticut, State Health and Educational Facilities Authority,
Revenue Bonds, Taft School Issue, Series D (MBIA Insured)
#5.00% Due 07/01/2022................................ AAA 2008 @ 100 398,664
500,000 Connecticut, State Health and Educational Facilities
Authority, Revenue Bonds (Choate Rosemary Hall Issue) Series
B (MBIA Insured) 2007 @ 101
#5.00% Due 07/01/2027................................ AAA 2018 @ 100 S.F. 494,940
500,000 Connecticut, State Health and Educational Facilities
Authority, Revenue Bonds, Middlesex Health Services, Series
I (MBIA Insured) 2007 @ 101
#5.125% Due 07/01/2027............................... AAA 2018 @ 100 S.F. 500,310
500,000 Connecticut, State Health and Higher Educational Facilities
Authority, Revenue Bonds, Trinity College Issue, Series F
(MBIA Insured) 2008 @ 102
#5.00% Due 07/01/2028................................ AAA 2022 @ 100 S.F. 494,075
250,000 Puerto Rico Commonwealth Infrastructure Financing Authority,
Revenue Bonds, Special Series A (AMBAC Assurance Insured) 2008 @ 101
#5.00% Due 07/01/2028................................ AAA 2022 @ 100 S.F. 245,910
250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series DD (MBIA Insured) 2008 @ 101.50
#5.00% Due 07/01/2028................................ AAA 2020 @ 100 S.F. 245,910
- --------------- ------------
$ 3,000,000 $ 2,970,939
=============== ============
- ---------------------------------------------------------------------------------------------------------------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from April 13, 1998 to
May 28, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 2,939,594 $ 31,345
- -----------
The breakdown of the Preinsured Bond Insurers is as follows:
AMBAC Assurance 17%, Financial Guaranty 3% and MBIA 80%.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
CONNECTICUT RISK FACTORS. The financial condition of the State of Connecticut
is affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The State's economic base is diversified,
consisting of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. The State has a relatively
high wage labor market which has resulted in the State's business sector
becoming more vulnerable to competitive pressures.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
The State of Connecticut currently maintains a "AA-", "Aa3" and "AA" bond
rating from Standard & Poor's, Moody's and Fitch IBCA, Inc. (formerly Fitch
Investors Service, L.P.), respectively, on its general obligation indebtedness.
Further information concerning Connecticut risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. For a discussion of the Federal tax status of income earned on
Connecticut IM-IT Trust Units, see "Federal Tax Status" in Prospectus Part II.
The assets of the Connecticut IM-IT Trust will consist of obligations (the
"Bonds"); certain of the Bonds have been issued by or on behalf of the State of
Connecticut or its political subdivisions or other public instrumentalities,
state or local authorities, districts, or similar public entities created under
the laws of the State of Connecticut ("Connecticut Bonds") and the balance of
the Bonds have been issued by or on behalf of entities classified for the
relevant purposes as territories or possessions of the United States, including
one or more of Puerto Rico, Guam, or the Virgin Islands, the interest on the
obligations of which Federal law would prohibit Connecticut from taxing if
received directly by the Unitholders. Certain Connecticut Bonds in the
Connecticut IM-IT Trust were issued prior to the enactment of the Connecticut
income tax on the Connecticut taxable income of individuals, trusts, and estates
(the "Connecticut Income Tax"); therefore, bond counsel to the issuers of such
Bonds did not opine as to the exemption of the interest on such Bonds from such
tax. However, the Sponsor and special counsel to the Trusts for Connecticut tax
matters believe that such interest will be so exempt. Interest on Bonds in the
Connecticut IM-IT Trust issued by other issuers, if any, is, in the opinion of
bond counsel to such issuers, exempt from state taxation.
Generally, a Unitholder recognizes gain or loss for purposes of the
Connecticut Income Tax to the same extent as the Unitholder recognizes gain or
loss for Federal income tax purposes. Ordinarily this would mean that gain or
loss would be recognized by a Unitholder upon the maturity, redemption, sale, or
other disposition by the Connecticut IM-IT Trust of a Bond held by it, or upon
the redemption, sale or other disposition of a Unit of the Connecticut IM-IT
Trust held by the Unitholder. However, gains and losses from the sale or
exchange of Connecticut Bonds held as capital assets are not taken into account
for purposes of this tax. Regulations indicate that this rule would apply to
gain or loss recognized by a Unitholder holding a Unit of the Connecticut IM-IT
Trust as a capital asset upon the maturity, redemption, sale, or other
disposition of a Connecticut Bond held by the Connecticut IM-IT Trust. However,
it is not clear whether this rule would also apply, to the extent attributable
to Connecticut Bonds held by the Connecticut IM-IT Trust, to gain or loss
recognized by a Unitholder upon the redemption, sale, or other disposition of a
Unit of the Connecticut IM-IT Trust held by the Unitholder. Unitholders are
urged to consult their own tax advisors concerning these matters.
In the opinion of Day, Berry & Howard LLP, special counsel to the Fund for
Connecticut tax matters, which relies explicitly on the opinion of Chapman and
Cutler regarding Federal income tax matters, under existing Connecticut law:
The Connecticut IM-IT Trust is not liable for any tax on or measured by net
income imposed by the State of Connecticut.
Interest income of the Connecticut IM-IT Trust from a Bond issued by or on
behalf of the State of Connecticut, any political subdivision thereof, or public
instrumentality, state or local authority, district, or similar public entity
created under the laws of the State of Connecticut (a "Connecticut Bond"), or
from a Bond issued by United States territories or possessions the interest on
which Federal law would prohibit Connecticut from taxing if received directly by
a Unitholder from the issuer thereof, is not taxable under the Connecticut tax
on the Connecticut taxable income of individuals, trusts, and estates (the
"Connecticut Income Tax"), when any such interest is received by the Connecticut
IM-IT Trust or distributed by it to such a Unitholder.
Insurance proceeds received by the Connecticut IM-IT Trust representing
maturing interest on defaulted Bonds held by the Connecticut IM-IT Trust are not
taxable under the Connecticut Income Tax if, and to the same extent as, such
interest would not be taxable thereunder if paid directly to the Connecticut
IM-IT Trust by the issuer of such Bonds.
Gains and losses recognized by a Unitholder for Federal income tax purposes
upon the maturity, redemption, sale, or other disposition by the Connecticut
IM-IT Trust of a Bond held by the Connecticut IM-IT Trust or upon the
redemption, sale, or other disposition of a Unit of the Connecticut IM-IT Trust
held by a Unitholder are taken into account as gains or losses, respectively,
for purposes of the Connecticut Income Tax, except that, in the case of a
Unitholder holding a Unit of the Connecticut IM-IT Trust as a capital asset,
such gains and losses recognized upon the maturity, redemption, sale, or
exchange of a Connecticut Bond held by the Connecticut IM-IT Trust are excluded
from gains and losses taken into account for purposes of such tax, and no
opinion is expressed as to the treatment for purposes of such tax of gains and
losses recognized, to the extent attributable to Connecticut Bonds, upon the
redemption, sale, or other disposition by a Unitholder of a Unit of the
Connecticut IM-IT Trust held by him.
The portion of any interest income or capital gain of the Connecticut IM-IT
Trust that is allocable to a Unitholder that is subject to the Connecticut
corporation business tax is includable in the gross income of such Unitholder
for purposes of such tax.
An interest in a Unit of the Connecticut IM-IT Trust that is owned by or
attributable to a Connecticut resident at the time of his death is includable in
his gross estate for purposes of the Connecticut succession tax and the
Connecticut estate tax.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,724
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
Smith Barney Inc. 388 Greenwich Street, 23rd Floor, New York, New York 10013 100
-----------------
3,124
=================
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen American Capital
unit investment trusts may qualify for a reduced sales charge by signing a
nonbinding Letter of Intent with any single broker-dealer. After signing a
Letter of Intent, at the date total purchases, less redemptions, of units of any
combination of series of Van Kampen American Capital unit investment trusts by a
purchaser (including units purchased in the name of the spouse of a purchaser or
in the name of a child of such purchaser under 21 years of age) exceed $500,000,
the selling broker-dealer, bank or other will credit the unitholder with cash as
a retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen American
Capital unit investment trusts must equal or exceed $100,000.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Connecticut Insured Municipals Income Trust, Series 37
(included in Insured Municipals Income Trust, 231st Insured Multi-Series:
We have audited the accompanying statement of condition and the portfolio of
Connecticut Insured Municipals Income Trust, Series 37 (included in Insured
Municipals Income Trust, 231st Insured Multi-Series) as of May 29, 1998. The
statement of condition and portfolio are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Connecticut Insured Municipals
Income Trust, Series 37 (included in Insured Municipals Income Trust, 231st
Insured Multi-Series) as of May 29, 1998, in conformity with generally accepted
accounting principles.
Chicago, Illinois GRANT THORNTON LLP
May 29, 1998
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF MAY 29, 1998
INVESTMENT IN BONDS
<S> <C>
Contracts to purchase Bonds (1)(2) $ 2,970,939
Accrued interest to the First Settlement Date (1)(2) 53,986
--------------------
Total $ 3,024,925
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 53,986
Interest of Unitholders--
Cost to investors 3,124,000
Less: Gross underwriting commission 153,061
--------------------
Net interest to Unitholders (1)(2) 2,970,939
--------------------
Total $ 3,024,925
====================
- ----------------------------------------------------------------------------------------------------------------------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
</TABLE>
PROSPECTUS
PART I
MAY 29, 1998
INSURED MUNICIPALS INCOME TRUST, 231ST INSURED MULTI-SERIES
CONNECTICUT INSURED MUNICIPALS INCOME TRUST, SERIES 37
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART I
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST, SERIES 236
- --------------------------------------------------------------------------------
Pennsylvania Insured Municipals Income Trust, Series 236 (the "Trust")
(included in Insured Municipals Income Trust, 231st Insured Multi-Series (the
"Fund")) consists of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is, in
the opinion of bond counsel to the issuer, exempt from all Federal income taxes
under existing law and exempt to the extent described herein from Pennsylvania
state and local taxes when held by residents of Pennsylvania (the "Bonds"). The
objective of the Trust is Federal and Pennsylvania tax-exempt income and
conservation of capital through an investment in a diversified portfolio of
tax-exempt bonds. The Units of the Trust are rated "AAA" by Standard & Poor's.
The Trust is referred to herein as the "State Trust" or "Insured Trust".
The Trust consists of 8 issues of Bonds. Two of the Bonds are general
obligations of the governmental entities issuing them and are backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: Health Care, 3 (34%); Higher Education, 2 (32%);
Water and Sewer, 1 (17%) and General Obligation, 2 (17%). The dollar weighted
average maturity of the Bonds is 27 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.61% 4.66%
Estimated Long Term Return: 4.65% 4.70%
CUSIP: 70884E-86-3 70884E-87-1
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
MAY 29, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<S> <C> <C> <C> <C>
Initial Date of Deposit: May 29, 1998 Principal Amount of Bonds per Unit (1): $ 999.67
Principal Amount of Bonds: $ 3,000,000 Number of Units: 3,001
</TABLE>
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 2,853,963
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.69
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 48.28 $ 48.28
Less Estimated Expenses (4) $ 2.18 $ 1.68
Less Estimated Insurance Expenses $ -- $ --
Estimated Net Interest Income $ 46.10 $ 46.60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 4.73 on $ 4.78 on
July 25, 1998 July 25, 1998
Normal Distribution (3) $ 3.84 $ 23.30
Record Dates 10th day of July 10 and
each month January 10
Distribution Dates 25th day of July 25 and
each month January 25
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public
Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) (6) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 0.91 $ 0.81
----------- -----------
Total Annual Expenses per Unit $ 2.37 $ 1.87
=========== ===========
- --------------------------------------------------------------------------------
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (June 3, 1998), Unitholders will pay accrued
interest from such date to the settlement date less distributions from the
Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
(6) During the first year the Trustee will reduce its fee by approximately
$.19 per Unit (which is the estimated interest to be earned prior to the
expected delivery dates for the "when, as and if issued" Bonds). Should the
interest exceed this amount, the Trustee will reduce its fee up to its
annual fee. After the first year, the Trustee's fee will be the amount
indicated above. Estimated interest income will increase to $48.47.
Estimated General Expenses will increase to $2.37 and $1.87 under the
monthly and semi-annual distribution plans, respectively. Estimated Net
Interest Income will remain as shown.
<TABLE>
<CAPTION>
PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
PENNSYLVANIA
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 350,000 Seneca Valley, Pennsylvania, School District, General
Obligation Refunding Bonds, Series AA (FGIC Insured) 2008 @ 100
#5.15% Due 02/15/2020................................ AAA 2014 @ 100 S.F. $ 349,125
500,000 Municipal Authority of the Borough of Lewiston (Mifflin
County, Pennsylvania) Water Revenue Bonds, Series 1998
(MBIA Insured) 2008 @ 100
5.20% Due 01/01/2022##............................... NR 2012 @ 100 S.F. 502,500
150,000 McKeesport, Pennsylvania, Area School District, General
Obligation Capital Appreciation Bonds (MBIA Insured)
#0.00% Due 10/01/2023................................ AAA 39,725 (6)
475,000 Pennsylvania, State Higher Educational Facilities Authority,
Revenue State Systems Bonds (Higher Education) Series O
(Ambac Assurance Insured) 2007 @ 100
#5.125% Due 06/15/2024............................... AAA 2021 @ 100 S.F. 472,397
540,000 Allegheny County, Pennsylvania, Hospital Development
Authority, Revenue Health System Bonds, Catholic Health Care
East, Series A (AMBAC Assurance Insured) 2008 @ 102
#4.875% Due 11/15/2026............................... AAA 2019 @ 100 S.F. 511,423
500,000 University of Pittsburgh of the Commonwealth of Pennsylvania,
System of Higher Education Revenue Bonds, University Capital
Projects (FGIC Insured) 2007 @ 102
#5.125% Due 06/01/2027............................... AAA 2023 @ 100 S.F. 496,175
230,000 Montgomery County, Pennsylvania, Higher Education and Health
Authority, Health Care Revenue Bonds, Series 1997A (Holy
Redeemer Health System) AMBAC Assurance Insured 2007 @ 101
#5.25% Due 10/01/2027................................ AAA 2024 @ 100 S.F. 231,150
255,000 Washington County, Pennsylvania, Hospital Authority Revenue
Bonds (The Washington Hospital Project) Ambac Assurance
Insured 2008 @ 101
#5.125% Due 07/01/2028............................... AAA 2019 @ 100 S.F. 251,468
- --------------- ------------
$ 3,000,000 $ 2,853,963
=============== ============
- --------------------------------------------------------------------------------------------------------------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from May 26, 1998 to
May 28, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 2,831,536 $ 22,427
- -----------
The breakdown of the Preinsured Bond Insurers is as follows: AMBAC Assurance
50%, Financial Guaranty 28% and MBIA 22%.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
PENNSYLVANIA RISK FACTORS. The financial condition of the Commonwealth of
Pennsylvania is affected by various national, economic, social and environmental
policies and conditions. Additionally, Constitutional and statutory limitations
imposed on the State and its local governments concerning taxes, bond
indebtedness and other matters may constrain the revenue-generating capacity of
the Commonwealth and its local governments and, therefore, the ability of the
issuers of the Bonds to satisfy their obligations. Historically, the
Commonwealth has experienced significant revenue shortfalls.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. Historically, the economy of the Commonwealth has
been dependent on heavy industry and manufacturing. Growth in the Commonwealth
economy has more recently been in the service sector, including trade, health
services and educational institutions. Growth in these sectors may be affected
by federal funding and state legislation.
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.
All outstanding general obligation bonds of the Commonwealth are rated AA- by
Standard and Poor's and Aa3 by Moody's.
Further information concerning Pennsylvania risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. For a discussion of the Federal tax status of income earned on
Pennsylvania IM-IT Trust Units, see "Federal Tax Status" in Prospectus Part
II. 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.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,201
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
Fahnestock & Co., Inc. 110 Wall Street, 8th Floor, New York, New York 10005 100
Gruntal & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
Legg Masin Wood Walker, Inc. 111 South Calvert Street, Baltimore, Maryland 21202 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 Securities Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 100
-----------------
3,001
=================
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen American Capital
unit investment trusts may qualify for a reduced sales charge by signing a
nonbinding Letter of Intent with any single broker-dealer. After signing a
Letter of Intent, at the date total purchases, less redemptions, of units of any
combination of series of Van Kampen American Capital unit investment trusts by a
purchaser (including units purchased in the name of the spouse of a purchaser or
in the name of a child of such purchaser under 21 years of age) exceed $500,000,
the selling broker-dealer, bank or other will credit the unitholder with cash as
a retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen American
Capital unit investment trusts must equal or exceed $100,000.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Pennsylvania Insured Municipals Income Trust, Series 236
(included in Insured Municipals Income Trust, 231st Insured Multi-Series:
We have audited the accompanying statement of condition and the portfolio of
Pennsylvania Insured Municipals Income Trust, Series 236 (included in Insured
Municipals Income Trust, 231st Insured Multi-Series) as of May 29, 1998. The
statement of condition and portfolio are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pennsylvania Insured Municipals
Income Trust, Series 236 (included in Insured Municipals Income Trust, 231st
Insured Multi-Series) as of May 29, 1998, in conformity with generally accepted
accounting principles.
Chicago, Illinois GRANT THORNTON LLP
May 29, 1998
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF MAY 29, 1998
INVESTMENT IN BONDS
<S> <C>
Contracts to purchase Bonds (1)(2) $ 2,853,963
Accrued interest to the First Settlement Date (1)(2) 24,067
--------------------
Total $ 2,878,030
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 24,067
Interest of Unitholders--
Cost to investors 3,001,000
Less: Gross underwriting commission 147,037
--------------------
Net interest to Unitholders (1)(2) 2,853,963
--------------------
Total $ 2,878,030
====================
- ----------------------------------------------------------------------------------------------------------------------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
</TABLE>
PROSPECTUS
PART I
MAY 29, 1998
INSURED MUNICIPALS INCOME TRUST, 231ST INSURED MULTI-SERIES
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST, SERIES 236
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART I
TENNESSEE INSURED MUNICIPALS INCOME TRUST, SERIES 41
- --------------------------------------------------------------------------------
Tennessee Insured Municipals Income Trust, Series 41 (the "Trust") (included
in Insured Municipals Income Trust, 231st Insured Multi-Series (the "Fund"))
consists of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is, in
the opinion of bond counsel to the issuer, exempt from all Federal income taxes
under existing law and exempt to the extent described herein from Tennessee
state and local taxes when held by residents of Tennessee (the "Bonds"). The
objective of the Trust is Federal and Tennessee tax-exempt income and
conservation of capital through an investment in a diversified portfolio of
tax-exempt bonds. The Units of the Trust are rated "AAA" by Standard & Poor's.
The Trust is referred to herein as the "State Trust" or "Insured Trust".
The Trust consists of 9 issues of Bonds. Four of the Bonds are general
obligations of the governmental entities issuing them and are backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount) as follows: General Obligation, 4 (37%); Health Care, 2 (30%);
Retail Electric/Gas/Telephone, 1 (16%); Water and Sewer, 1 (12%) and General
Purpose, 1 (5%). The dollar weighted average maturity of the Bonds is 23 years.
Monthly Semi-Annual
------------- ------------
Estimated Current Return: 4.46% 4.51%
Estimated Long Term Return: 4.48% 4.53%
CUSIP: 880465-10-9 880465-11-7
Estimated Current Return shows the estimated cash to be received each year
from the Bonds (net of estimated annual expenses) divided by the Public Offering
Price (including the sales charge).
Estimated Long-Term Return shows the estimated return over the estimated life
of the Trust. This is based on an average of the yields to maturity (or an
earlier call date) of the Bonds adjusted to reflect the sales charge and
estimated expenses. The average yield for the portfolio is derived by weighting
each Bond's yield by its value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long-Term Return accounts for maturities, discounts and premiums of
the Bonds.
No return calculation can predict your actual return because returns vary
with purchase price, sales charges, the length of the time Units are held and
changes in portfolio composition, interest income and expenses. The estimated
returns are designed to show a comparison rather than a prediction of returns. A
yield calculation, which is more comparable to a calculation of an individual
bond, may be higher or lower than these estimated returns which are more
comparable to return calculations of other investment products.
MAY 29, 1998
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
<S> <C> <C> <C>
Initial Date of Deposit: May 29, 1998 Principal Amount of Bonds per Unit (1): $ 988.62
Principal Amount of Bonds: $ 2,085,000 Number of Units: 2,109
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
Aggregate Offering Price of Bonds $ 2,005,669
Aggregate Offering Price of Bonds per Unit $ 951.00
Plus Sales Charge per Unit $ 49.00
Public Offering Price per Unit (2) $ 1,000.00
Redemption Price per Unit $ 943.76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED ANNUAL INCOME PER UNIT
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Estimated Interest Income $ 47.14 $ 47.14
Less Estimated Expenses (4) $ 2.50 $ 2.04
Less Estimated Insurance Expenses $ -- $ --
Estimated Net Interest Income $ 44.64 $ 45.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ESTIMATED DISTRIBUTIONS
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------------- -----------------
Initial Distribution $ 4.58 on $ 4.63 on
July 25, 1998 July 25, 1998
Normal Distribution (3) $ 3.72 $ 22.55
Record Dates 10th day of July 10 and
each month January 10
Distribution Dates 25th day of July 25 and
each month January 25
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Semi-
Monthly Annual
----------- -----------
Sales Charge (% of Public
Offering Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's Fee (5) $ 0.91 $ 0.51
Evaluator's Supervisory Fee $ 0.25 $ 0.25
Evaluator's Evaluation Fee (5) $ 0.30 $ 0.30
Other Operating Expenses $ 1.04 $ 0.98
----------- -----------
Total Annual Expenses per Unit $ 2.50 $ 2.04
=========== ===========
- --------------------------------------------------------------------------------
(1) Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at
Trust termination will be equal to the Principal Amount of Bonds per Unit.
(2) After the First Settlement Date (June 3, 1998), Unitholders will pay accrued
interest from such date to the settlement date less distributions from the
Interest Account after the First Settlement Date.
(3) This is based on estimated cash flows per Unit which will vary with changes
in expenses, interest rates and maturity, call, exchange or sale of the
Bonds. Estimated cash flows are set forth in the Information Supplement or
are available upon request.
(4) Excludes insurance expenses.
(5) This fee is assessed per $1,000 principal amount of Bonds. Other fees are
assessed per Unit.
<TABLE>
<CAPTION>
PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
OFFERING
PRICE TO
TENNESSEE
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AND REDEMPTION IM-IT
PRINCIPAL MATURITY DATE OF BONDS(1)(2) RATING(3) FEATURE(4) TRUST (2)
- --------------- --------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$ 350,000 Cocke County, Tennessee, School General Obligation Bonds
(FGIC Insured)
#5.00% Due 06/01/2015................................ Aaa* 2006 @ 100 $ 349,769
250,000 Shelby County, Tennessee, Health Educational and Housing
Facility, Board Hospital Revenue Bonds (Methodist
Healthcare) MBIAInsured 2008 @ 101
#5.00% Due 04/01/2018................................ AAA 2014 @ 100 S.F. 248,383
200,000 Chattanooga, Tennessee, General Obligation Unlimited Tax
Bonds (FGIC Insured) 2006 @ 101
#5.00% Due 09/01/2018................................ AAA 2016 @ 100 S.F. 199,976
250,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, Water and Sewer Revenue Refunding Bonds,
Series A (FGIC Insured)
#5.00% Due 01/01/2019................................ AAA 2008 @ 101 248,075
100,000 Metropolitan Government of Nashville and Davidson County,
Tennessee, Electric Revenue Capital Appreciation Bonds,
Series A (MBIA Insured)
#0.00% Due 05/15/2019................................ AAA 34,564
130,000 Gatlinburg, Tennessee, Public Improvement Bonds
(FGIC Insured) 2007 @ 101
#5.00% Due 05/01/2020................................ Aaa* 2019 @ 100 S.F. 128,773
335,000 Johnson City, Tennessee, Electric Revenue Bonds
(MBIA Insured) 2007 @ 101
#5.15% Due 05/01/2023................................ AAA 2018 @ 100 S.F. 339,328
100,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, General Obligation Bonds-Series A (FGIC Insured) 2006 @ 101
#5.125% Due 11/15/2027............................... AAA 2023 @ 100 S.F. 99,970
370,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, Health and Educational Facilities, Revenue
Hospital Bonds (Baptist Hospital, Inc.) Series A
(MBIA Insured) 2008 @ 101
#4.875% Due 11/01/2028............................... AAA 2019 @ 100 S.F. 356,831
- --------------- ------------
$ 2,085,000 $ 2,005,669
=============== ============
- --------------------------------------------------------------------------------------------------------------------------
All of the Bonds are insured either by one of the Preinsured Bond Insurers as
indicated in the Bond name or by a Portfolio Insurer under a portfolio insurance
policy. See "Insurance on the Bonds in the Insured Trusts" in Prospectus Part
II.
For an explanation of the footnotes used on this page, see "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(1) The Bonds are represented by "regular way" or "when issued" contracts for
the performance of which an irrevocable letter of credit, obtained from an
affiliate of the Trustee, has been deposited with the Trustee. Contracts to
acquire the Bonds were entered into during the period from May 19, 1998 to
May 28, 1998.
(2) Other information regarding the Bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
--------------- ---------------
$ 1,989,967 $ 15,702
- -----------
The breakdown of the Preinsured Bond Insurers is as follows:
Financial Guaranty 49% and MBIA 51%.
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these Bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
First Settlement Date. "#" prior to the coupon rate indicates that the Bond
was issued at an original issue discount. See "The Trusts--Risk Factors" in
Prospectus Part II. The tax effect of Bonds issued at an original issue
discount is described in "Federal Tax Status" in Prospectus Part II.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the Bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "N/R" indicates that the
rating service did not provide a rating for that Bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each Bond is initially or currently callable and
the call price for that year. Each Bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to redemption date plus,
if applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. Certain Bonds may be subject to redemption without premium
prior to the date shown pursuant to extraordinary optional or mandatory
redemptions if certain events occur. See "The Trusts--Risk Factors" in
Prospectus Part II.
TENNESSEE RISK FACTORS. The financial condition of the State of Tennessee is
affected by various national, economic, social and environmental policies and
conditions. Additionally, Constitutional and statutory limitations imposed on
the State and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds to
satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The State's economic base is diversified,
consisting of manufacturing, construction and service industries, supplemented
by a diverse agricultural sector. These sectors tend to be more cyclical than
other sectors.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
The State of Tennessee currently maintains a "AAA", "Aaa" and "AAA" bond
rating from Standard & Poor's, Moody's and Fitch IBCA, Inc. (formerly Fitch
Investors Service, L.P.), respectively, on its general obligation indebtedness.
Further information concerning Tennessee risk factors may be obtained upon
request to the Sponsor as described in "Additional Information" appearing in
Prospectus Part II.
TAX STATUS. For a discussion of the Federal tax status of income earned on
Tennessee IM-IT Trust Units, see "Federal Tax Status" in Prospectus Part II. The
assets of the Tennessee IM-IT Trust will consist of bonds issued by the State of
Tennessee (the "State") or any county or any municipality or political
subdivision thereof, including any agency, board, authority or commission, the
interest on which is exempt from the Hall Income Tax imposed by the State of
Tennessee ("Tennessee Bonds") or by the Commonwealth of Puerto Rico (the "Puerto
Rico Bonds") (collectively, the "Bonds").
Under Tennessee law, a unit investment trust taxable as a grantor trust for
federal income tax purposes is entitled to special Tennessee State tax treatment
(as more fully described below) with respect to its proportionate share of
interest income received or accrued with respect to the Tennessee Bonds.
Tennessee law also provides an exemption for distributions made by a unit
investment trust or mutual fund that are attributable to "bonds or securities of
the United States government or any agency or instrumentality thereof" ("U.S.
Government, Agency or Instrumentality Bonds"). If it were determined that the
Trust held assets other than Tennessee Bonds or U.S. Government, Agency or
Instrumentality Bonds, a proportionate share of distributions from the Trust
would be taxable to Unitholders for Tennessee Income Tax purposes.
Further, this provision appears only to provide an exemption for
distributions that relate to interest income, distributions by the Trust that
relate to capital gains realized from the sale or redemption of Tennessee Bonds
or U.S. Government, Agency or Instrumentality Bonds are likely to be treated as
taxable dividends for purposes of the Hall Income Tax. However, capital gains
realized directly by a Unitholder when the Unitholder sells or redeems his Unit
will not be subject to the Hall Income Tax. The opinion set forth below assumes
that the interest on the Tennessee Bonds, if received directly by a Unitholder,
would be exempt from the Hall Income Tax under Tennessee State law. This opinion
does not address the taxation of persons other than full-time residents of the
State of Tennessee.
Because this provision only provides an exemption for distributions
attributable to interest on Tennessee Bonds or U.S. Government, Agency or
Instrumentality Bonds, it must be determined whether bonds issued by the
Government of Puerto Rico qualify as U.S. Government, Agency or Instrumentality
Bonds. For Hall Income Tax purposes, there is currently no published
administrative interpretation or opinion of the Attorney General of Tennessee
dealing with the status of distributions made by unit investment trusts such as
the Tennessee Trust that are attributable to interest paid on bonds issued by
the Government of Puerto Rico. However, in a letter dated August 14, 1992 (the
"Commissioner's Letter"), the Commissioner of the State of Tennessee Department
of Revenue advised that Puerto Rico would be an "instrumentality" of the U.S.
Government and treated bonds issued by the Government of Puerto Rico as U.S.
Government, Agency or Instrumentality Bonds. Based on this conclusion, the
Commissioner advised that distributions from a mutual fund attributable to
investments in Puerto Rico Bonds are exempt from the Hall Income Tax. Both the
Sponsor and Chapman and Cutler, for purposes of its opinion (as set forth
below), have assumed, based on the Commissioner's Letter, that bonds issued by
the Government of Puerto Rico are U.S. Government, Agency or Instrumentality
Bonds. However, it should be noted that the position of the Commissioner is not
binding, and is subject to change, even on a retroactive basis.
The Sponsor cannot predict whether new legislation will be enacted into law
affecting the tax status of Tennessee IM-IT Trusts. The occurrence of such an
event could cause distributions of interest income from the Trust to be subject
to the Hall Income Tax. Investors should consult their own tax advisors in this
regard. It is assumed for purposes of the discussion and opinion below that the
Bonds constitute debt for federal income tax purposes.
In the opinion of Chapman and Cutler, Counsel to the Sponsor, under existing
Tennessee State law as of the date of this prospectus:
For purposes of the Hall Income Tax, the Tennessee Excise Tax imposed by
Section 67-4-806 (the "State Corporate Income Tax"), and the Tennessee Franchise
Tax imposed by Section 67-4-903, the Tennessee IM-IT Trust will not be subject
to such taxes.
For Hall Income Tax purposes, a proportionate share of such distributions
from the Tennessee IM-IT Trust to Unitholders, to the extent attributable to
interest on the Tennessee Bonds (based on the relative proportion of interest
received or accrued attributable to Tennessee Bonds) will be exempt from the
Hall Income Tax when distributed to such Unitholders. Based on the
Commissioner's Letter, distributions from the Trust to Unitholders, to the
extent attributable to interest on the Puerto Rico Bonds (based on the relative
proportion of interest received or accrued attributable to the Puerto Rico
Bonds) will be exempt from the Hall Income Tax when distributed to such
Unitholders. A proportionate share of distributions from the Tennessee IM-IT
Trust attributable to assets other than the Bonds would not, under current law,
be exempt from the Hall Income Tax when distributed to Unitholders.
For State Corporate Income Tax Purposes, Tennessee law does not provide an
exemption for interest on Tennessee Bonds and requires that all interest
excludable from Federal gross income must be included in calculating "net
earnings" subject to the State Corporate Income Tax. No opinion is expressed
regarding whether such tax would be imposed on the earnings or distributions of
the Tennessee IM-IT Trust (including interest on the Bonds or gain realized upon
the disposition of the Bonds by the Tennessee IM-IT Trust) attributable to
Unitholders subject to the State Corporate Income Tax. However, based upon prior
written advice from the Tennessee Department of Revenue, earnings and
distributions from the Tennessee IM-IT Trust (including interest on the
Tennessee Bonds or gain realized upon the disposition of the Tennessee Bonds by
the Tennessee IM-IT Trust) attributable to the Unitholders should be exempt from
the State Corporate Income Tax. The position of the Tennessee Department of
Revenue is not binding, and is subject to change, even on a retroactive basis.
Each Unitholder will realize taxable gain or loss for State Corporate Income
Tax purposes when the Unitholder redeems or sells his Units, at a price that
differs from original cost as adjusted for accretion or any discount or
amortization of any premium and other basis adjustments, including any basis
reduction that my be required to reflect a Unitholder's share of interest, if
any, accruing on Bonds during the interval between the Unitholder's settlement
date and the date such Bonds are delivered to the Tennessee IM-IT Trust, if
later. Tax basis reduction requirements relating to amortization of bond premium
may, under some circumstances, result in Unitholders realizing taxable gain when
the Units are sold or redeemed for an amount equal to or less than their
original cost.
For purposes of the Tennessee Property Tax, the Tennessee IM-IT Trust will be
exempt from taxation with respect to the Bonds it holds. As for the taxation of
the Units held by the Unitholders, although intangible personal property is not
presently subject to Tennessee taxation, no opinion is expressed with regard to
potential property taxation of the Unitholders with respect to the Units because
the determination of whether property is exempt from such tax is made on a
county by county basis.
No opinion is expressed herein regarding whether insurance proceeds paid in
lieu of interest on the Bonds held by the Tennessee IM-IT Trust (including the
Tennessee Bonds) are exempt from the Hall Income Tax. Distributions of such
proceeds to Unitholders may be subject to the Hall Income Tax.
The Bonds and the Units held by the Unitholder will not be subject to
Tennessee sales and use taxes.
We have not examined any of the Bonds to be deposited and held in the
Tennessee Trust or the proceedings for the issuance thereof or the opinions of
bond counsel with respect thereto, and therefore express no opinion as to the
exemption from State income taxes of interest on the Bonds if received directly
by a Unitholder. 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 Tennessee Bonds, bond counsel to the issuing authorities rendered
opinions as the exemption of interest from the Income taxes imposed and, with
respect to the Possession Bonds, bond counsel to the issuing authorities
rendered opinions as 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 Tennessee Trust of the proceedings relating
to the issuance of the Bonds or the bases for the opinions rendered in
connection therewith.
Chapman and Cutler has expressed no opinion with respect to taxation under
any other provision of Tennessee law. Ownership of the Units may result in
collateral Tennessee tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any such
collateral consequences.
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. For additional information regarding the
Underwriters, including information relating to compensation and benefits
received by the Underwriters, see "Public Offering--Sponsor and Underwriter
Compensation" in Prospectus Part II.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
-----------------
<S> <C> <C>
Van Kampen American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,809
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 1 New York Plaza, 14th Floor, New York, New York 10292-2014 100
-----------------
2,109
=================
</TABLE>
LETTER OF INTENT. A purchaser desiring to purchase during a 13 month period
$500,000 or more of any combination of series of Van Kampen American Capital
unit investment trusts may qualify for a reduced sales charge by signing a
nonbinding Letter of Intent with any single broker-dealer. After signing a
Letter of Intent, at the date total purchases, less redemptions, of units of any
combination of series of Van Kampen American Capital unit investment trusts by a
purchaser (including units purchased in the name of the spouse of a purchaser or
in the name of a child of such purchaser under 21 years of age) exceed $500,000,
the selling broker-dealer, bank or other will credit the unitholder with cash as
a retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen American
Capital unit investment trusts must equal or exceed $100,000.
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Tennessee Insured Municipals Income Trust, Series 41
(included in Insured Municipals Income Trust, 231st Insured Multi-Series:
We have audited the accompanying statement of condition and the portfolio of
Tennessee Insured Municipals Income Trust, Series 41 (included in Insured
Municipals Income Trust, 231st Insured Multi-Series) as of May 29, 1998. The
statement of condition and portfolio are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase tax-exempt
bonds by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tennessee Insured Municipals
Income Trust, Series 41 (included in Insured Municipals Income Trust, 231st
Insured Multi-Series) as of May 29, 1998, in conformity with generally accepted
accounting principles.
Chicago, Illinois GRANT THORNTON LLP
May 29, 1998
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF MAY 29, 1998
INVESTMENT IN BONDS
<S> <C>
Contracts to purchase Bonds (1)(2) $ 2,005,669
Accrued interest to the First Settlement Date (1)(2) 17,013
--------------------
Total $ 2,022,682
====================
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) $ 17,013
Interest of Unitholders--
Cost to investors 2,109,000
Less: Gross underwriting commission 103,331
--------------------
Net interest to Unitholders (1)(2) 2,005,669
--------------------
Total $ 2,022,682
====================
- --------------------------------------------------------------------------------------------------------------------------
(1) The value of the Bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price" in Prospectus Part
II. The contracts to purchase Bonds are collateralized by an irrevocable
letter of credit in an amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
First Settlement Date to the Trust for distribution to the Sponsor as the
Unitholder of record as of such date.
</TABLE>
PROSPECTUS
PART I
MAY 29, 1998
INSURED MUNICIPALS INCOME TRUST, 231ST INSURED MULTI-SERIES
TENNESSEE INSURED MUNICIPALS INCOME TRUST, SERIES 41
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
THIS PROSPECTUS PART I MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART II.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
<PAGE>
February 1998
VAN KAMPEN AMERICAN CAPITAL
PROSPECTUS PART II
INSURED MUNICIPALS INCOME TRUST, INSURED MULTI-SERIES AND
INSURED MUNICIPALS INCOME TRUST AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES
- --------------------------------------------------------------------------------
THE FUND. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an investment
in a diversified portfolio of tax-exempt bonds. The Fund consists of the
underlying separate unit investment trusts set forth in Prospectus Part I. The
Bonds are interest-bearing obligations issued by or on behalf of municipalities
and other governmental authorities, the interest on which is exempt from all
Federal income taxes under existing law in the opinion of bond counsel to the
issuer. In addition, the interest income of each State Trust is, in the opinion
of bond counsel to the issuer, exempt to the extent indicated from state and
local taxes, when held by residents of the state where the issuers of the Bonds
are located. Except in specific instances as noted in Prospectus Part I, the
information contained in this Prospectus Part II shall apply to each Trust in
its entirety.
"AAA" RATING FOR THE INSURED TRUSTS. Insurance guaranteeing the payments of
principal and interest, when due, on the Bonds in each Insured Trust has been
obtained from a municipal bond insurance company. See "Insurance on the Bonds in
the Insured Trusts". Insurance relates only to the Bonds and not to the Units or
to the market value thereof. As a result of such insurance, the Units of each
Insured Trust have received a rating of "AAA" by Standard & Poor's, A Division
of the McGraw-Hill Companies ("Standard & Poor's"). Units of the Trusts are not
insured by the FDIC, are not deposits or other obligations of, or guaranteed by,
any government agency and are subject to investment risk, including possible
loss of the principal amount invested.
PUBLIC OFFERING PRICE. The Public Offering Price of Units during the initial
offering period includes the aggregate offering price of the Bonds, the
applicable sales charge, cash, if any, in the Principal Account of the Trust,
and accrued interest, if any. Sales charges for the Trusts are set forth under
"Public Offering--General." During the initial offering period, the sales charge
is reduced for sales involving at least 100 Units.
ESTIMATED CURRENT AND LONG-TERM RETURNS. The Estimated Current Returns and
Estimated Long-Term Returns to Unitholders are described on the cover of
Prospectus Part I. See "Estimated Current and Long-Term Returns."
DISTRIBUTION OPTIONS. Unitholders may elect to receive distributions on a
monthly or semi-annual basis. See "Rights of Unitholders--Distributions of
Interest and Principal". Those indicating no choice will be deemed to have
chosen the monthly distribution plan.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends to,
and certain of the other Underwriters may, maintain a secondary market for the
Units. If a secondary market is not available, a Unitholder will always be able
to redeem his Units through the Trustee on any business day. See "Rights of
Unitholders--Redemption of Units" and "Public Offering--Market for Units".
REINVESTMENT OPTION. Unitholders may reinvest their distributions into Van
Kampen American Capital or Morgan Stanley mutual funds. See "Rights of
Unitholders--Reinvestment Option". Unitholders may also have the option of
exchanging their investment for units of other Van Kampen American Capital unit
investment trusts at a reduced sales charge. Unitholders may obtain a prospectus
for such trusts from the Sponsor.
RISK FACTORS. An investment in Units should be made with an understanding of
certain risks, including, among other factors, the inability of the issuer or an
insurer, if any, to pay the principal of or interest on a bond when due,
volatile interest rates, early call provisions, and changes to the tax status of
the Bonds. See "The Trusts--Risk Factors".
THIS PROSPECTUS PART II MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART I.
BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
An Information Supplement has been filed with the Securities and Exchange
Commission ("SEC") and can be obtained without charge by calling (800) 856-8487
or is available along with other related materials at the SEC's Internet site
(http://www.sec.gov). This Prospectus incorporates by reference the entire
Information Supplement.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE TRUSTS
- --------------------------------------------------------------------------------
THE FUND. This series of the Insured Municipals Income Trust or the
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust (the
"Fund"), consists of the underlying separate unit investment trusts described in
Prospectus Part I. The Fund was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement (the "Trust Agreement"), dated the
date of Prospectus Part I (the "Date of Deposit") among Van Kampen American
Capital Distributors, Inc., as Sponsor, American Portfolio Evaluation Services,
a division of Van Kampen American Capital Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee.
The Fund consists of separate portfolios of interest-bearing
obligations issued by or on behalf of states and territories of the United
States, and political subdivisions and authorities thereof, the interest on
which is, in the opinion of recognized bond counsel to the issuing authorities,
excludable from gross income for Federal income tax purposes under existing law.
All issuers of Bonds in a State Trust are located in the state for which the
Trust is named or in United States territories or possessions and their public
authorities; consequently, in the opinion of recognized bond counsel to the Bond
issuers, the interest earned on the Bonds is exempt to the extent indicated in
Prospectus Part I from state and local taxes. Further, in the opinion of bond
counsel to the respective issuers, the interest income of each Bond in a U.S.
Territorial IM-IT Trust is exempt from state, Commonwealth of Puerto Rico and
local income taxation. With the exception of New York and Pennsylvania Trusts,
Units of a State Trust may be purchased only by residents of the state for which
the Trust is named. Units of a New York Trust may be purchased by residents of
New York, Connecticut and Florida. Units of a Pennsylvania Trust may be
purchased by residents of Pennsylvania, Connecticut, Florida, Maryland, New
York, Ohio and West Virginia. State Trusts, other than State Intermediate
Laddered Maturity Trusts or State Intermediate Trusts, are referred to herein as
"Long-Term State Trusts".
On the Date of Deposit, the Sponsor deposited with the Trustee the
aggregate principal amount of Bonds indicated in the "Summary of Essential
Financial Information" in Prospectus Part I. The Bonds initially consist of
delivery statements relating to contracts for their purchase and cash, cash
equivalents and/or irrevocable letters of credit issued by a financial
institution. Thereafter, the Trustee, in exchange for the Bonds, delivered to
the Sponsor evidence of ownership of the number of Units indicated under
"Summary of Essential Financial Information" in Prospectus Part I.
The portfolio of any IM-IT, IM-IT Discount, U.S. Territorial IM-IT,
Long-Term State or National Quality Trust consists of Bonds maturing
approximately 15 to 40 years from the Date of Deposit. The approximate range of
maturities from the Date of Deposit for Bonds in any IM-IT Limited Maturity
Trust, IM-IT Intermediate Trust, State Intermediate Laddered Maturity Trust and
IM-IT Short Intermediate Trust is 12 to 15 years, 5 to 15 years, 5 to 10 years
and 3 to 7 years, respectively. The portfolio of any State Intermediate Laddered
Maturity Trust is structured so that approximately 20% of the Bonds will mature
each year, beginning in approximately the fifth year of the Trust, entitling
each Unitholder to a return of principal. This return of principal may offer
Unitholders the opportunity to respond to changing economic conditions and to
specific financial needs that may arise between the fifth and tenth years of the
Trust. However, the flexibility provided by the return of principal may also
eliminate a Unitholder's ability to reinvest at a rate as high as the yield on
the Bonds which matured.
Each Unit initially offered represents a fractional undivided interest
in the principal and net income of a Trust. To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in a Trust
represented by each Unit will increase, although the actual interest in the
Trust will remain unchanged. Units will remain outstanding until redeemed by
Unitholders or until the termination of the Trust Agreement.
OBJECTIVES AND BOND SELECTION. The objectives of the Fund are income
exempt from Federal income taxation and, in the case of a State Trust, Federal
and state income taxation and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. A State
Intermediate Laddered Maturity Trust has additional objectives of providing
protection against changes in interest rates and investment flexibility through
an investment in a laddered portfolio of intermediate-term interest-bearing
obligations with maturities ranging from approximately 5 to 10 years in which
roughly 20% of the Bonds mature each year beginning in approximately the fifth
year of the Trust. There is, of course, no guarantee that the Trusts will
achieve their objectives. The Fund may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed income
bonds with greater diversification than they might be able to acquire
individually. Insurance guaranteeing the timely payment, when due, of all
principal and interest on the Bonds in each Insured Trust has been obtained from
a municipal bond insurance company. For information relating to insurance on the
Bonds, see "Insurance on the Bonds in the Insured Trusts". In addition, these
bonds are often not available in small amounts.
<PAGE>
In selecting Bonds for the Trusts, the Sponsor considered the following
factors, among others: (a) either the Standard & Poor's rating of the Bonds was
not less than "BBB-" for Insured Trusts and "A-" for Quality Trusts, or the
Moody's Investors Service, Inc. ("Moody's") rating of the Bonds was not less
than "Baa" for Insured Trusts and "A" for the Quality Trusts, including
provisional or conditional ratings, respectively, (or, if not rated, the Bonds
had credit characteristics sufficiently similar to the credit characteristics of
interest-bearing tax-exempt bonds that were so rated as to be acceptable for
acquisition by the Fund in the opinion of the Sponsor), (b) the prices of the
Bonds relative to other bonds of comparable quality and maturity, (c) the
diversification of Bonds as to purpose of issue and location of issuer and (d)
with respect to the Insured Trusts, the availability and cost of insurance.
After the Date of Deposit, a Bond may cease to be rated or its rating may be
reduced below the minimum required as of the Date of Deposit. Neither event
requires elimination of a Bond from a Trust but may be considered in the
Sponsor's determination as to whether or not to direct the Trustee to dispose of
the Bond (see "Fund Administration--Portfolio Administration").
RISK FACTORS. The Trusts include certain types of bonds as described on
the cover of Prospectus Part I. An investment in Units should be made with an
understanding of the characteristics of and risks associated with such bonds.
The following is a brief summary of certain of these risks. Additional
information is included in Prospectus Part I and in the Information Supplement.
See "Additional Information". Neither the Sponsor nor the Trustee are liable for
any default, failure or defect in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental
entity that are backed by the taxing power of the entity. All other Bonds are
revenue bonds payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds, both within a particular classification and between
classifications, depending on numerous factors.
Mortgage loan obligations may be FHA insured or may be single family
mortgage revenue bonds issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income. Mortgage
loans are generally partially or completely prepaid prior to their final
maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. A substantial portion of these bonds
will probably be redeemed prior to their scheduled maturities or even prior to
their ordinary call dates. Additionally, unusually high rates of default on the
underlying mortgage loans may reduce revenues available for the payment of
principal of or interest on mortgage revenue bonds.
Health care revenue bonds have ratings issued for health care
facilities that are often based on feasibility studies that contain projections
of occupancy levels, revenues and expenses. A facility's gross receipts and net
income available for debt service may be affected by future events and
conditions including, among other things, demand for services and the ability of
the facility to provide the services required, competition with other health
care facilities, efforts by insurers and governmental agencies to limit rates
and legislation establishing state rate-setting agencies.
Public utility bond issuers sell wholesale and retail electric power
and gas. General problems of these issuers include difficulty in financing large
construction programs in an inflationary period, costs and delays attributable
to environmental considerations, the difficulty of the capital market in
absorbing utility debt, difficulty in obtaining fuel at reasonable prices, the
effect of energy conservation and government regulations.
Water and/or sewerage revenue bonds are generally payable from user
fees. The problems of these issuers include the ability to obtain rate
increases, population decline resulting in decreased user fees, financing,
environmental considerations, discovering fresh water and the impact of
"no-growth" zoning ordinances.
Industrial revenue bonds ("IRBs") have generally been issued under bond
resolutions under which the revenues and receipts payable have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure, payment
of IRBs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor which may be affected by such things as
cyclicality of revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents, extensive competition and financial
deterioration resulting from a corporate restructuring.
Lease bonds are secured by lease payments of a governmental entity and
are often in the form of certificates of participation. Although the lease bonds
do not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease bond is ordinarily backed by the
municipality's covenant to appropriate for and make the payments due under the
lease bond. However, certain lease bonds contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease payments in
future years unless money is appropriated for such purpose on a yearly basis. A
governmental entity that enters into such a lease agreement cannot obligate
future governments to appropriate for and make lease payments but covenants to
take such action as is necessary to include any lease payments due in its
budgets and to make the appropriations therefor. A governmental entity's failure
to appropriate for and to make payments under its lease bond could result in
insufficient funds available for payment of the bonds secured thereby. Although
"non-appropriation" lease bonds are secured by the leased property, disposition
of the property in the event of foreclosure might prove difficult.
<PAGE>
Education bond issuers govern the operation of schools, colleges and
universities and revenues are derived mainly from ad valorem taxes or from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the financing of public education, a
declining percentage of the population consisting of "college" age individuals,
inability to raise tuitions and fees sufficiently and government legislation or
regulations which may adversely affect the revenues or costs of the issuers.
Transportation bonds are payable from revenues derived from the
ownership and operation of facilities such as airports, bridges, turnpikes, port
authorities, convention centers and arenas. Airport operating income may be
affected by the ability of the airlines to meet their obligations under use
agreements. Payment on bonds related to other facilities may be adversely
affected by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative modes of
transportation, scarcity of fuel and reduction or loss of rents.
Certain Bonds are payable from revenues derived from the operation of
resource recovery facilities which are designed to process solid waste, generate
steam and convert steam to electricity. Resource recovery bonds may be subject
to extraordinary optional redemption at par upon the occurrence of circumstances
such as destruction or condemnation of a project, void or unenforceable
contracts, changes in the economic availability of raw materials, and operating
supplies or facilities, or other unavoidable changes adversely affecting the
operation of a project.
Certain Bonds may have been acquired at a market discount from par
value at maturity. The interest rates on these bonds are lower than current
market interest rates for newly issued bonds of comparable rating and type.
Generally, if interest rates for newly issued comparable bonds increase, the
market discount of previously issued bonds will increase, and if interest rates
for newly issued comparable bonds decline, the market discount of previously
issued bonds will decrease. The value of bonds purchased at a market discount
will generally increase in value faster than bonds purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase, the value of
bonds purchased at a market discount will generally decrease faster than bonds
purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium bonds and the prepayment benefit for
lower yielding, discount bonds will be reduced. A bond purchased at a market
discount and held to maturity will have a larger portion of its total return in
the form of taxable income and capital gain and less in the form of tax-exempt
interest income than a comparable bond newly issued at current market rates. See
"Federal Tax Status." Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue.
Certain Bonds may be "original issue discount" bonds which were issued
with interest rates less than rates offered by comparable bonds and were
originally sold at a discount from their par value. These bonds may include
"zero coupon" bonds which are described below. In a stable interest rate
envronment, the market value of an original issue discount bond would tend to
increase more slowly in the early years and in greater increments as the bond
approached maturity. These bonds may be subject to redemption at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus some premium, if applicable. Under these call provisions, these
bonds may be called prior to maturity at a price less than par value. See
"Federal Tax Status" for a discussion of the tax consequenses of owning these
bonds.
Certain Bonds may be "zero coupon" bonds. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning these bonds is that a fixed
yield is earned not only on the original investment but also, in effect, on all
discount earned during the life of the bond. This implicit reinvestment of
earnings at the same rate eliminates the risk of being unable to reinvest income
at a rate as high as the implicit yield on the discount bond, but at the same
time eliminates the ability to reinvest at higher rates in the future. For this
reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are bonds of
comparable quality which pay interest.
Certain Bonds may have been purchased on a "when, as and if issued" or
"delayed delivery" basis. The delivery of these Bonds may be delayed or may not
occur. Interest on these Bonds begins accruing to the benefit of Unitholders on
their respective dates of delivery. To the extent any Bonds are actually
delivered to a Trust after the expected dates of delivery, Unitholders who
purchase their Units prior to the actual delivery date would be required to
adjust their tax basis in their Units for a portion of the interest accruing on
those Bonds during the interval between their purchase of Units and the actual
delivery of the Bonds. As a result of any adjustment, the Estimated Current
Return during the first year would be slightly lower than stated herein.
Unitholders will be "at risk" with respect to all Bonds (i.e., may derive either
gain or loss from fluctuations in the value of the Bonds) from the date they
order Units.
<PAGE>
Certain Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by which
a debt obligation is redeemed, at or before maturity, by the proceeds of a new
debt obligation. In general, call provisions are more likely to be exercised
when the bond price is at a premium over par than when it is at a discount from
par. The exercise of redemption or call provisions generally will result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions; it may also affect the current return on
Units. See "Portfolio" in Prospectus Part I for a list of the sinking fund and
call provisions, if any, with respect to the Bonds. The Sponsor is unable to
predict all of the circumstances which may result in redemption of a Bond.
To the best knowledge of the Sponsor, there is no litigation pending as
of the Date of Deposit in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trusts. At any time after
the Date of Deposit, litigation may be initiated on a variety of grounds with
respect to the Bonds. Such litigation may affect the validity of the Bonds or
the tax-free nature of interest payments. While the outcome of litigation can
never be predicted, the Fund has received or will receive opinions of bond
counsel to the issuers of each Bond on the date of issuance to the effect that
the Bonds have been validly issued and interest payments are exempt from Federal
income tax. In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to meet obligations undertaken
with respect to the Bonds.
Like other investment companies, financial and business organizations
and individuals around the world, the Trusts could be adversely affected if the
computer systems used by the Sponsor, Evaluator or Trustee or other service
providers to the Trusts do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." While the Sponsor, Evaluator and Trustee are taking
steps that they believe are reasonably designed to address the Year 2000
Problem, there can be no assurance that these steps will be sufficient to avoid
any adverse impact to the Trusts. The Year 2000 Problem may impact certain
issuers of the Bonds to varying degrees, however, the Sponsor is unable to
predict what impact, if any, the Year 2000 Problem will have on any issuer.
ESTIMATED CURRENT AND LONG-TERM RETURNS
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The Estimated Current Returns and the Estimated Long-Term Returns as of
the Date of Deposit are set forth on the cover of the Prospectus Part I.
Estimated Current Return is calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net annual
interest income per Unit will vary with changes in fees and expenses of the
Trust and with the principal prepayment, redemption, maturity, exchange or sale
of Bonds. The Public Offering Price will vary with changes in the price of the
Bonds. Accordingly, there is no assurance that the present Estimated Current
Return will be realized in the future. Estimated Long-Term Return is calculated
using a formula which (1) takes into consideration, and determines and factors
in the relative weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of the Bonds and (2) takes into account the expenses and
sales charge associated with Units. Since the value and estimated retirements of
the Bonds and the expenses of a Trust will change, there is no assurance that
the present Estimated Long-Term Return will be realized in the future. The
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of Estimated Long-Term Return reflects the estimated
date and amount of principal returned while the Estimated Current Return
calculation includes only net annual interest income and Public Offering Price.
In order to acquire certain Bonds, it may be necessary for the Sponsor
or Trustee to pay amounts covering accrued interest on the Bonds which exceed
the amounts which will be made available through cash furnished by the Sponsor
on the Date of Deposit. This cash may exceed the interest which would accrue to
the First Settlement Date. The Trustee has agreed to pay for any amounts
necessary to cover any excess and will be reimbursed when funds become available
from interest payments on the related Bonds. Also, since interest on any "when,
as and if issued" Bonds does not begin accruing as tax-exempt interest income to
the benefit of Unitholders until the date of delivery, the Trustee may reduce
its fee and pay Trust expenses in order to maintain or approach the same
estimated net annual interest income during the first year of the Trust's
operations as described under "Summary of Essential Financial Information" in
Prospectus Part I.
<PAGE>
PUBLIC OFFERING
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GENERAL. Units are offered at the Public Offering Price. During the
initial offering period the Public Offering Price is based on the aggregate
offering price of the Bonds, the sales charge described below, cash, if any, in
the Principal Account and accrued interest, if any. After the initial public
offering period, the secondary market public offering price is based on the bid
prices of the Bonds, the sales charge described below, cash, if any, in the
Principal Account and accrued interest, if any. The minimum purchase in the
primary and secondary market is one Unit.
The initial offering period sales charges are as follows:
<TABLE>
<CAPTION>
INITIAL OFFERING PERIOD SALES CHARGE
AS PERCENT OF
--------------------------------------
PUBLIC OFFERING OFFERING PRICE
TRUST PRICE OF BONDS
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<S> <C> <C>
IM-IT, U.S. Territorial IM-IT, Long-Term State and National
Quality Trusts 4.900% 5.152%
IM-IT Limited Maturity Trusts 4.300 4.493
IM-IT Discount Trusts 4.000 4.167
IM-IT Intermediate Trusts 3.900 4.058
State Intermediate Laddered Maturity Trusts 3.000 3.093
IM-IT Short Intermediate Trusts 2.000 2.041
</TABLE>
The sales charge applicable to quantity purchases during the initial
offering period is reduced as follows:
<TABLE>
<CAPTION>
SALES CHARGE REDUCTION PER UNIT
-----------------------------------------------------------------------------------
IM-IT, U.S.
TERRITORIAL IM-IT,
LONG-TERM STATE
AGGREGATE NUMBER OF AND NATIONAL IM-IT SHORT IM-IT
UNITS PURCHASED* QUALITY TRUSTS INTERMEDIATE TRUST DISCOUNT TRUST OTHER TRUSTS
- ----------------------------- -------------------- -------------------- ---------------- -------------
<S> <C> <C> <C> <C>
100-249 Units $ 4.00 $ 2.00 $ 2.00 $ 4.00
250-499 Units $ 6.00 $ 3.00 $ 4.00 $ 6.00
500-999 Units $ 14.00 $ 4.00 $ 6.00 $ 9.00
1,000 or more Units $ 19.00 $ 6.00 $ 8.00 $ 11.00
- -----------------------------
</TABLE>
* The breakpoint sales charges are also applied on a dollar basis
utilizing a breakpoint equivalent in the above table of $1,000 per Unit and will
be applied on whichever basis is more favorable to the investor. The breakpoints
will be adjusted to take into consideration purchase orders stated in dollars
which cannot be completely fulfilled due to the Trusts' requirement that only
whole Units be issued.
The secondary market sales charge is computed as described in the
following table based upon the estimated long-term return life of a Trust's
portfolio:
<TABLE>
<CAPTION>
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
1 1.010% 8 3.627% 15 5.042%
2 1.523 9 4.167 16 5.152
3 2.041 10 4.384 17 5.263
4 2.302 11 4.603 18 5.374
5 2.564 12 4.712 19 5.485
6 2.828 13 4.822 20 5.597
7 3.093 14 4.932 21 to 30 5.708
</TABLE>
<PAGE>
For purposes of computation of the estimated long-term return life,
Bonds will be deemed to mature on their expressed maturity dates unless: (a) the
Bonds have been called for redemption or are subject to redemption at an earlier
call date, in which case this call date will be deemed to be the maturity date;
or (b) the Bonds are subject to a "mandatory tender", in which case the
mandatory tender will be deemed to be the maturity date. The sales charges in
the above table are expressed as a percentage of the aggregate bid prices of the
Bonds. Expressed as a percent of the Public Offering Price, the sales charge on
a Trust consisting entirely of Bonds with 15 years to maturity would be 4.80%.
The sales charges in the table above do not apply to IM-IT Discount Trusts. The
applicable secondary market sales charges for an IM-IT Discount Trust are set
forth in the applicable Prospectus Part I.
Any reduced sales charge is the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for quantity purchases. The reduced sales charge
structure in the initial offering period sales charge table above will apply on
all purchases by the same person from any one Underwriter or dealer of units of
Van Kampen American Capital-sponsored unit investment trusts which are being
offered in the initial offering period (a) on any one day (the "Initial Purchase
Date") or (b) on any day subsequent to the Initial Purchase Date, if (1) the
units purchased are of a unit investment trust purchased on the Initial Purchase
Date, and (2) the person purchasing the units purchased a sufficient amount of
units on the Initial Purchase Date to qualify for a reduced sales charge on such
date. In the event units of more than one trust are purchased on the Initial
Purchase Date, the aggregate dollar amount of such purchases will be used to
determine whether purchasers are eligible for a reduced sales charge. Such
aggregate dollar amount will be divided by the public offering price per unit
(on the day preceding the date of purchase) of each respective trust purchased
to determine the total number of units which such amount could have purchased of
each individual trust. Purchasers must then consult the applicable trust's
prospectus to determine whether the total number of units which could have been
purchased of a specific trust would have qualified for a reduced sales charge
and, if so qualified, the amount of such reduction. Assuming a purchaser
qualifies for a sales charge reduction or reductions, to determine the
applicable sales charge reduction or reductions it is necessary to accumulate
all purchases made on the Initial Purchase Date and all purchases made in
accordance with (b) above. Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser ("immediate family
members") will be deemed for the purposes of calculating the applicable sales
charge to be additional purchases by the purchaser. The reduced sales charges
will also be applicable to a trustee or other fiduciary purchasing Units for one
or more trust, estate or fiduciary accounts.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons (collectively referred to herein as "related
purchasers")) of Van Kampen American Capital Distributors, Inc. and its
affiliates and Underwriters and their affiliates may purchase Units at the
Public Offering Price less the applicable underwriting commission or less the
applicable dealer concession in the absence of an underwriting commission.
Employees, officers and directors (including related purchasers) of dealers and
their affiliates and vendors providing services to the Sponsor may purchase
Units at the Public Offering Price less the applicable dealer concession.
Purchasers of units of any two consecutive series of a Trust may
aggregate purchases of units of such series for purposes of the sales charge
reduction for quantity purchases, provided that at the time of the initial
purchase of units such purchaser submitted a purchase order for at least 100
units that was partially unfulfilled due to a lack of units of such Trust series
available for sale at such time. The sales charge reduction shall be applied to
the subsequent purchase of units such that the aggregate sales charge reduction
applicable to both purchases will equal the amount described in the initial
offering period sales charge table above.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge reduction
for quantity purchases) less the concession the Sponsor typically allows to
brokers and dealers for purchases by (1) investors who purchase Units through
registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management services, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed, (2) bank trust departments
investing funds over which they exercise exclusive discretionary investment
authority and that are held in a fiduciary, agency, custodial or similar
capacity, (3) any person who for at least 90 days, has been an officer, director
or bona fide employee of any firm offering Units for sale to investors or their
immediate family members (as described above) and (4) officers and directors of
bank holding companies that make Units available directly or through
subsidiaries or bank affiliates. Notwithstanding anything to the contrary in
this Prospectus, such investors, bank trust departments, firm employees and bank
holding company officers and directors who purchase Units through this program
will not receive sales charge reductions for quantity purchases.
<PAGE>
OFFERING PRICE. The Public Offering Price of Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Prospectus
Part I in accordance with fluctuations in the prices of the Bonds. The price of
Units on the Date of Deposit was determined by adding the applicable sales
charge to the aggregate offering price of the Bonds and dividing the sum by the
number of Units outstanding. This price determination was made on the basis of
an evaluation of the Bonds prepared by Interactive Data Corporation, a firm
regularly engaged in the business of evaluating, quoting or appraising
comparable securities. During the initial offering period, the Evaluator will
value the Bonds as of the Evaluation Time on days the New York Stock Exchange is
open for business and will adjust the Public Offering Price of Units
accordingly. This Public Offering Price will be effective for all orders
received at or prior to the Evaluation Time on each such day. The "Evaluation
Time" is the close of trading on the New York Stock Exchange on each day that
the Exchange is open for trading. Orders received by the Trustee, Sponsor or any
Underwriter for purchases, sales or redemptions after that time, or on a day
when the New York Stock Exchange is closed, will be held until the next
determination of price. The secondary market Public Offering Price per Unit will
be equal to the aggregate bid price of the Bonds plus the applicable secondary
market sales charge and dividing the sum by the number of Units outstanding. For
secondary market purposes, this computation will be made by the Evaluator as of
the Evaluation Time for each day on which any Unit is tendered for redemption
and as necessary. The offering price of Bonds may be expected to average
approximately 0.5%-1% more than the bid price.
The aggregate price of the Bonds is determined on the basis of bid
prices or offering prices, as is appropriate, (a) on the basis of current market
prices obtained from dealers or brokers who customarily deal in bonds comparable
to those held by the Fund; (b) if these prices are not available, on the basis
of current market prices for comparable bonds; (c) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (d) by any combination of the above. Market
prices of the Bonds will generally fluctuate with changes in market interest
rates. Unless Bonds are in default in payment of principal or interest or in
significant risk of default, the Evaluator will not attribute any value to the
insurance obtained by an Insured Trust, if any.
The Evaluator will consider in its evaluation of Bonds which are in
default in payment of principal or interest or, in the Sponsor's opinion, in
significant risk of default (the "Defaulted Bonds") the value of any insurance
guaranteeing interest and principal payments. The value of the insurance will be
equal to the difference between (i) the market value of Defaulted Bonds assuming
the exercise of the right to obtain Permanent Insurance (less the insurance
premiums and related expenses attributable to the purchase of Permanent
Insurance) and (ii) the market value of Defaulted Bonds not covered by Permanent
Insurance. In addition, the Evaluator will consider the ability of a Portfolio
Insurer to meet its commitments under any insurance policy, including
commitments to issue Permanent Insurance. No value has been ascribed to
insurance obtained by an Insured Trust, if any, as of the date of this
Prospectus.
A person will become the owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the Sponsor
prior to the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor, subject to
the limitations of the Securities Exchange Act of 1934.
ACCRUED INTEREST. Accrued interest is an accumulation of unpaid
interest on securities which generally is paid semi-annually, although each
Trust accrues interest daily. Because of this, a Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling after the First Settlement Date, the proportionate
share of accrued interest to the settlement date is added to the Public Offering
Price of Units. Unitholders will receive the amount of accrued interest paid on
their Units on the next distribution date. In an effort to reduce the accrued
interest which would have to be paid by Unitholders, the Trustee will advance
the amount of accrued interest to the Sponsor as the Unitholder of record as of
the First Settlement Date. Consequently, the accrued interest added to the
Public Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account after the First Settlement Date. Because of the varying
interest payment dates of the Bonds, accrued interest at any point in time will
be greater than the amount of interest actually received by a Trust and
distributed to Unitholders. If a Unitholder sells or redeems all or a portion of
his Units, he will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his Units.
UNIT DISTRIBUTION. Units will be distributed to the public by
Underwriters, broker-dealers and others at the Public Offering Price, plus
accrued interest. The Sponsor intends to qualify Units for sale in a number of
states. Broker-dealers or others will be allowed a concession or agency
commission in connection with the distribution of Units during the initial
offering period for any single transaction as described in the following table,
provided that the Units are acquired from the Sponsor.
<PAGE>
<TABLE>
<CAPTION>
IM-IT, U.S.
TERRITORIAL
IM-IT, LONG- IM-IT STATE
IM-IT TERM STATE AND IM-IT SHORT IM-IT LIMITED INTERMEDIATE
DISCOUNT NATIONAL INTERMEDIATE INTERMEDIATE MATURITY LADDERED
TRUST QUALITY TRUSTS TRUST TRUST TRUST MATURITY TRUST
----------- -------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units $ 18.00 $ 30.00 $ 10.00 $ 25.00 $ 27.00 $ 20.00
100 - 249 Units $ 19.00 $ 32.00 $ 11.00 $ 28.00 $ 30.00 $ 21.00
250 - 499 Units $ 20.00 $ 34.00 $ 11.00 $ 27.00 $ 30.00 $ 21.00
500 - 999 Units $ 20.00 $ 35.00 $ 12.00 $ 30.00 $ 32.00 $ 23.00
1,000 - 1,499 Units $ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
1,500 or more Units $ 20.00 $ 34.00 $ 12.00 $ 29.00 $ 29.00 $ 22.00
</TABLE>
The increased concession or agency commission is a result of the
discount given to purchasers for quantity purchases. See "Public
Offering--General". In addition to the concessions and agency commissions
described in the table, volume concessions or agency commissions of an
additional $5.00 per Unit of an IM-IT, a U.S. Territorial IM-IT, a Long-Term
State or a National Quality Trust and $2.00 per Unit of all other Trusts will be
given to any broker/dealer or agent (other than Underwriters) who purchases from
the Sponsor at least 250 Units of such Trust during the initial offering period.
These additional concessions will be allowed at the time of purchase, provided,
however, the additional concession applicable to initial purchases totaling less
than 250 Units will be paid retroactively at the end of the initial offering
period. The breakpoint concessions or agency commissions are also applied on a
dollar basis utilizing a breakpoint equivalent of $1,000 per Unit and will be
applied on whichever basis is more favorable to the distributor. The breakpoints
will be adjusted to take into consideration purchase orders stated in dollars
which cannot be completely fulfilled due to the requirement that only whole
Units be issued. Certain commercial banks may be making Units available to their
customers on an agency basis. A portion of the sales charge paid by these
customers (equal to the agency commission referred to above) is retained by or
remitted to the banks. Any discount provided to investors will be borne by the
selling dealer or agent. For secondary market transactions, the concession or
agency commission will amount to 70% of the applicable sales charge. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units and to change the amount of the concession or agency commission to dealers
and others from time to time.
SPONSOR AND UNDERWRITER COMPENSATION. The Underwriters will receive a
gross sales commission equal to the sales charge applicable to the transaction
involved. "Public Offering--General". The Sponsor will receive from the
Underwriters the excess of this gross sales commission over the amounts set
forth in the following table, as of the Date of Deposit. For a list of the
Underwriters that have purchased Units from the Sponsor, see "Underwriting" in
Prospectus Part I.
<TABLE>
<CAPTION>
IM-IT, U.S.
TERRITORIAL
IM-IT, LONG- IM-IT STATE
IM-IT TERM STATE AND IM-IT SHORT IM-IT LIMITED INTERMEDIATE
DISCOUNT NATIONAL INTERMEDIATE INTERMEDIATE MATURITY LADDERED
TRUST QUALITY TRUSTS TRUST TRUST TRUST MATURITY TRUST
----------- -------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 99 Units $ 20.00 $ 35.00 $ 12.00 $ 27.00 $ 29.00 $ 22.00
100 - 249 Units $ 21.00 $ 37.00 $ 13.00 $ 30.00 $ 32.00 $ 23.00
250 - 499 Units $ 22.00 $ 39.00 $ 13.50 $ 29.50 $ 32.00 $ 23.00
500 - 999 Units $ 22.00 $ 40.00 $ 14.00 $ 32.50 $ 34.50 $ 25.00
1,000 - 1,499 Units $ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
1,500 or more Units $ 22.00 $ 39.00 $ 14.00 $ 31.00 $ 31.00 $ 24.00
</TABLE>
A. G. Edwards & Sons, Inc. which acts as a Managing Underwriter of
Units of the various series of the IM-IT or National Quality Trust, will receive
from the Sponsor reimbursement for certain costs and further compensation in the
amount of $5.00 for each Unit of the IM-IT or National Quality Trust it
underwrites. In addition, the Sponsor will receive from the Managing
Underwriters of any National Quality, (who underwrite 15% of the Trust involved
or 1,000 Units of such Trust, whichever is greater) the excess of such gross
sales commission over $38.00 per Unit of any such Trust, as of the Date of
Deposit. Also, any such Managing Underwriter that sells a total of 25% or 1,500
Units, whichever is greater, of any individual series of such Trusts will
receive an additional $2.00 per each such Unit. In connection with quantity
sales to purchasers of any Pennsylvania IM-IT Trust the Underwriters will
receive from the Sponsor commissions totalling $35.00 per Unit for any single
transaction of 100 to 249 Units, $36.00 per Unit for any single transaction of
250 to 499 units, $37.00 per Unit for any single transaction of 500 to 999 Units
and $38.00 per Unit for any single transaction of 1,000 or more Units. In
addition, any Underwriter that sells a total of 25% or 1,500 Units, whichever is
greater, of any Pennsylvania IM-IT Trust will receive an additional $2.00 per
each such Unit. In addition, the Sponsor has entered into agreements with
Advest, Inc. ("Advest") and Gruntal & Co., Inc. ("Gruntal") whereby Advest and
Gruntal will receive an additional $2.00 per Unit in connection with a minimum
commitment of 1,500 Units of any New York IM-IT Trust. In addition, the Sponsor
and J. J. B. Hilliard, W. L. Lyons, Inc. ("Hilliard, Lyons") have entered into
an agreement under which Hilliard, Lyons may receive an additional $2.00 for
each Unit of the Kentucky Quality Trust which it underwrites, provided it
underwrites a minimum of 400 Units of such Trust. Further, each Underwriter who
underwrites 1,000 or more Units in any Trust will receive additional
compensation from the Sponsor of $1.00 for each Unit it underwrites. The
breakpoints listed herein will also be applied on a dollar basis utilizing a
breakpoint equivalent of $1,000 per Unit and will be applied on whichever basis
is more favorable to the Underwriter.
<PAGE>
In addition, the Sponsor and certain Underwriters will realize a profit
or loss, as a result of the difference between the price paid for the Bonds by
the Sponsor and the cost of the Bonds to a Trust. See "Portfolio" and "Notes to
Portfolio" in Prospectus Part I. Underwriters may also realize profits or losses
with respect to Bonds which were acquired by the Sponsor from underwriting
syndicates of which they were members. The Sponsor has not participated as sole
underwriter or as manager or as a member of the underwriting syndicates from
which the Bonds in the Trusts were acquired. Underwriters may further realize
profit or loss during the initial offering period as a result of possible
fluctuations in the market value of the Bonds since all proceeds received from
purchasers of Units (excluding dealer concessions or agency commissions allowed,
if any) will be retained by the Underwriters. Affiliates of an Underwriter are
entitled to the same dealer concessions or agency commissions that are available
to the Underwriter. In addition to any other benefits Underwriters may realize
from the sale of Units, the Sponsor will share on a pro rata basis among senior
Underwriters (those who underwrite at least 250 Units) 50% of any gain (less
deductions for accrued interest and certain costs) represented by the difference
between the cost of the Bonds to the Sponsor and the evaluation of the Bonds on
the Date of Deposit. The Sponsor and certain of the other Underwriters will also
realize profits or losses in the amount of any difference between the price at
which Units are purchased and the price at which Units are resold in connection
with maintaining a secondary market for Units and will also realize profits or
losses resulting from a redemption of repurchased Units at a price above or
below the purchase price.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor during
a specified time period. In addition, at various times the Sponsor may implement
other programs under which the sales forces of such firms may be eligible to win
other nominal awards for certain sales efforts, or under which the Sponsor will
reallow to any such firms that sponsor sales contests or recognition programs
conforming to criteria established by the Sponsor, or participate in sales
programs sponsored by the Sponsor, an amount not exceeding the total applicable
sales charges on the sales generated by such persons at the public offering
price during such programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor pay fees to
qualifying firms for certain services or activities which are primarily intended
to result in sales of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts. These programs
will not change the price Unitholders pay for their Units or the amount that the
Trusts will receive from the Units sold. Approximately every eighteen months the
Sponsor holds a business seminar which is open to Underwriters that sell units
of trusts it sponsors. The Sponsor pays substantially all costs associated with
the seminar, excluding Underwriter travel costs. Each Underwriter is invited to
send a certain number of representatives based on the gross number of units such
firm underwrites during a designated time period.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends
to, and certain of the other Underwriters may, maintain a market for Units and
offer to purchase Units at prices, subject to change at any time, based upon the
aggregate bid prices of the Bonds plus accrued interest and any principal cash
on hand, less any amounts representing taxes or other governmental charges
payable out of the Trust and less any accrued Trust expenses. If the supply of
Units exceeds demand or if some other business reason warrants it, the Sponsor
and/or the Underwriters may either discontinue all purchases of Units or
discontinue purchases of Units at these prices. If a market is not maintained
and the Unitholder cannot find another purchaser, a Unitholder will be able to
dispose of Units by tendering them to the Trustee for redemption at the
Redemption Price. See "Rights of Unitholders--Redemption of Units". A Unitholder
who wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in any price in excess of
the Redemption Price and, if so, the amount thereof. The Trustee will notify the
Sponsor of any tender of Units for redemption. If the Sponsor's bid in the
secondary market at that time equals or exceeds the Redemption Price per Unit,
it may purchase the Units not later than the day on which the Units would
otherwise have been redeemed by the Trustee.
<PAGE>
RIGHTS OF UNITHOLDERS
- --------------------------------------------------------------------------------
DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by a Trust,
pro rated on an annual basis, will be distributed monthly unless a Unitholder
elects to receive semi-annual distributions. The amount and time of the first
distribution is described in Prospectus Part I under "Summary of Essential
Financial Information". The plan of distribution selected by a Unitholder will
remain in effect until changed. Unitholders who purchase Units in the secondary
market will receive distributions in accordance with the election of the prior
owner. Unitholders may change their distribution plan by indicating the change
on a card which may be obtained from the Trustee and return the card to the
Trustee with their certificates and other documentation required by the Trustee.
Certificates should be sent by registered or certified mail to avoid their being
lost or stolen. If the card and certificate are properly presented to the
Trustee, the change will become effective on the first day after the next
semi-annual record date and will remain effective until changed.
Interest received by a Trust, including that part of the proceeds of
any disposition of Bonds which represents accrued interest, is credited by the
Trustee to the Interest Account. Other receipts are credited to the Principal
Account. After deduction of amounts sufficient to reimburse the Trustee, without
interest, for any amounts advanced and paid to the Sponsor as the Unitholder of
record as of the First Settlement Date, interest received will be distributed on
each distribution date to Unitholders of record as of the preceding record date.
All distributions will be net of estimated expenses. Funds in the Principal
Account will be distributed on each semi-annual distribution date to Unitholders
of record as of the preceding semi-annual record date. The Trustee is not
required to pay interest on funds held in the Principal or Interest Account (but
may itself earn interest thereon and therefore benefits from the use of these
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution therein shall equal at least $1.00 per Unit. However,
should the amount available for distribution in the Principal Account equal or
exceed $10.00 per Unit, the Trustee will make a special distribution from the
Principal Account on the next monthly distribution date to Unitholders of record
on the related monthly record date.
Because interest payments are not received by a Trust at a constant
rate throughout the year, interest distributions may be more or less than the
amount credited to the Interest Account as of the record date. For the purpose
of minimizing fluctuations in interest distributions, the Trustee is authorized
to advance amounts necessary to provide interest distributions of approximately
equal amounts. The Trustee is reimbursed for these advances from funds in the
Interest Account on the next record date. Persons who purchase Units between a
record date and a distribution date will receive their first distribution on the
second distribution date after the purchase, under the applicable plan of
distribution.
REINVESTMENT OPTION. Unitholders may elect to have distributions on
their Units automatically reinvested in shares of certain Van Kampen American
Capital or Morgan Stanley mutual funds which are registered in the Unitholder's
state of residence (the "Reinvestment Funds"). Each Reinvestment Fund has
investment objectives that differ from those of the Trusts. The prospectus
relating to each Reinvestment Fund describes its investment policies and the
procedures to follow to begin reinvestment. A Unitholder may obtain a prospectus
for the Reinvestment Funds from Van Kampen American Capital Distributors, Inc.
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
After becoming a participant in a reinvestment plan, each Trust
distribution will automatically be applied on the applicable distribution date
to purchase shares of the applicable Reinvestment Fund at a net asset value
computed on such date. Unitholders with an existing Guaranteed Reinvestment
Option (GRO) Program account (whereby a sales charge is imposed on distribution
reinvestments) may transfer their existing account into a new GRO account which
allows purchases of Reinvestment Fund shares at net asset value. Confirmations
of all reinvestments will be mailed to the Unitholder by the Reinvestment Fund.
A participant may elect to terminate his or her reinvestment plan and receive
future distributions in cash by notifying the Trustee in writing at least five
days before the next distribution date. Each Reinvestment Fund, its sponsor and
investment adviser have the right to terminate its reinvestment plan at any
time. Unitholders of New York Trusts who are New York residents may elect to
have distributions reinvested in shares of First Investors New York Insured Tax
Free Fund, Inc. subject to a sales charge of $1.50 per $100 reinvested (paid to
First Investors Management Company, Inc.).
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his
Units by tender to the Trustee, at its Unit Investment Trust Division, 101
Barclay Street, 20th Floor, New York, New York 10286, of the certificates
representing the Units to be redeemed, duly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing satisfactory
indemnity, such as in connection with lost, stolen or destroyed certificates)
and by payment of applicable governmental charges, if any. Redemption of Units
cannot occur until certificates representing the Units or satisfactory indemnity
have been received by the Trustee. No later than seven calendar days following
satisfactory tender, the Unitholder will receive an amount for each Unit equal
to the Redemption Price per Unit next computed after receipt by the Trustee of
the tender of Units. The "date of tender" is deemed to be the date on which
Units are received by the Trustee, except that as regards Units received after
the Evaluation Time on days of trading on the New York Stock Exchange, the date
of tender is the next day on which that Exchange is open and the Units will be
deemed to have been tendered to the Trustee on that day for redemption at the
Redemption Price.
<PAGE>
Under Internal Revenue Service regulations, the Trustee is required to
withhold a specified percentage of a Unit redemption if the Trustee has not
received the Unitholder's tax identification number as required by such
regulations. Any amount withheld is transmitted to the Internal Revenue Service
and may be recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, the Unitholder should provide a tax identification number
to the Trustee in order to avoid this possible "back-up withholding".
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the Bonds as
of the Evaluation Time on days of trading on the New York Stock Exchange on the
date any such determination is made. The Evaluator determines the Redemption
Price per Unit on days Units are tendered for redemption. The Redemption Price
per Unit is the pro rata share of each Unit on the basis of (i) the cash on hand
in the Trust or moneys in the process of being collected, (ii) the value of the
Bonds based on the bid prices of the Bonds, except for cases in which the value
of insurance has been included, (iii) accrued interest, less (a) amounts
representing taxes or other governmental charges and (b) the accrued Trust
expenses. The Evaluator may determine the value of the Bonds by employing any of
the methods set forth in "Public Offering--Offering Price". In determining the
Redemption Price per Unit no value will be assigned to the portfolio insurance
maintained on the Bonds in an Insured Trust unless the Bonds are in default in
payment of principal or interest or in significant risk of default. For a
description of the situations in which the Evaluator may value the insurance
obtained by the Insured Trusts, see "Public Offering--Offering Price". Accrued
interest paid on redemption shall be withdrawn from the Interest Account or, if
the balance therein is insufficient, from the Principal Account. All other
amounts will be withdrawn from the Principal Account. Units so redeemed shall be
cancelled.
The price at which Units may be redeemed could be less than the price
paid by the Unitholder and may be less than the par value of the Bonds
represented by the Units redeemed. The Trustee may sell Bonds to cover
redemptions. When Bonds are sold, the size and diversity of the Trust will be
reduced. Sales may be required at a time when Bonds would not otherwise be sold
and might result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the SEC determines that
trading on that Exchange is restricted or an emergency exists, as a result of
which disposal or evaluation of the Bonds is not reasonably practicable, or for
other periods as the SEC may by order permit. Under certain extreme
circumstances the Sponsor may apply to the SEC for an order permitting a full or
partial suspension of the right of Unitholders to redeem their Units.
CERTIFICATES. Ownership of Units is evidenced by certificates unless a
Unitholder makes a written request to the Trustee that ownership be in book
entry form. Units are transferable by making a written request to the Trustee
and, in the case of Units in certificate form, by presentation and surrender of
the certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign the written
request, or certificate transfer instrument, exactly as his name appears on the
records of the Trustee and on the face of any certificate with the signature
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or a signature guaranty program accepted by the Trustee. The Trustee
may require additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority. Certificates will be issued in denominations of one Unit
or any multiple thereof. Although no such charge is now made, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate re-issued or
transferred and to pay any governmental charge that may be imposed in connection
with each transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
REPORTS PROVIDED. Unitholders will receive a statement of interest and
other receipts received for each distribution. For as long as the Sponsor deems
it to be in the best interest of Unitholders, the accounts of each Trust will be
audited annually by independent certified public accountants and the report of
the accountants will be furnished to Unitholders upon request. Within a
reasonable period of time after the end of each year, the Trustee will furnish
to each person who was a registered Unitholder during that year a statement
describing the interest and principal received on the Bonds, actual Trust
distributions, Trust expenses, a list of the Bonds and other Trust information.
Unitholders will be furnished the Evaluator's evaluations of the Bonds upon
request.
<PAGE>
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
- --------------------------------------------------------------------------------
Insurance has been obtained guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in each Insured Trust. An insurance
policy obtained by an Insured Trust, if any, is non-cancellable and will
continue in force so long as the Trust is in existence, the respective Portfolio
Insurer is still in business and the Bonds described in the policy continue to
be held by the Trust. Any portfolio insurance premium for an Insured Trust is
paid by the Trust on a monthly basis. The premium for any Preinsured Bond
insurance has been paid by the issuer, by a prior owner of the Bonds or the
Sponsor and any policy is non-cancellable and will continue in force so long as
the Bonds so insured are outstanding and the Preinsured Bond Insurer remains in
business. The Portfolio Insurers and the Preinsured Bond Insurers are described
in "Portfolio" and the notes thereto in Prospectus Part I. The Portfolio
Insurers are either AMBAC Assurance Corporation or Financial Guaranty Insurance
Company. More detailed information regarding insurance on the Bonds and the
Preinsured Bond and Portfolio Insurers is included in the Information
Supplement. See "Additional Information".
The portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds when they
fall due. For this purpose, "when due" generally means the stated payment or
maturity date for the payment of principal and interest. However, in the event
(a) an issuer defaults in the payment of principal or interest, (b) an issuer
enters into a bankruptcy proceeding or (c) the maturity of the Bond is
accelerated, the affected Portfolio Insurer has the option to pay the
outstanding principal amount of the Bond plus accrued interest to the date of
payment and thereby retire the Bond from the Trust prior to the Bond's stated
maturity date. The insurance does not guarantee the market value of the Bonds or
the value of the Units. The Trustee, upon the sale of a Bond covered under a
portfolio insurance policy has the right to obtain permanent insurance with
respect to the Bond (i.e., insurance to maturity of the Bond regardless of the
identity of the holder) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium and expenses from the proceeds of the sale of
the Bond. It is expected that the Trustee would exercise the right to obtain
Permanent Insurance only if upon exercise the Trust would receive net proceeds
in excess of the sale proceeds if the Bonds were sold on an uninsured basis.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE>
<CAPTION>
FINANCIAL INFORMATION (IN MILLIONS OF DOLLARS)
-------------------------------------------------
ADMITTED POLICYHOLDERS'
NAME ASSETS SURPLUS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMBAC Assurance Corporation (at 6/30/97) $ 2,736 $ 1,548
Capital Markets Assurance Corporation (at 9/30/97) 351 192
Financial Guaranty Insurance Company (at 9/30/97) 2,531 1,247
Financial Security Assurance, Inc. (at 9/30/97) 1,404 517
MBIA Insurance Corporation (at 9/30/97) 5,100 1,700
</TABLE>
Because the Bonds are insured by Portfolio Insurers or Preinsured Bond
Insurers as to the timely payment of principal and interest, when due, and on
the basis of the various reinsurance agreements in effect, Standard & Poor's has
assigned to the Units of each Insured Trust its "AAA" investment rating. This
rating will be in effect for a period of thirteen months from the Date of
Deposit and will, unless renewed, terminate at the end of such period. See
"Description of Ratings" in the Information Supplement. This rating should not
be construed as an approval of the offering of the Units by Standard & Poor's or
as a guarantee of the market value of the Trust or of the Units.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made. At the date
hereof, it is reported that no claims have been submitted or are expected to be
submitted to any of the Portfolio Insurers which would materially impair the
ability of any such company to meet its commitment pursuant to any contract of
insurance. The information relating to each Portfolio Insurer has been furnished
by such companies. The financial information with respect to each Portfolio
Insurer appears in reports filed with state insurance regulatory authorities and
is subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates thereof.
<PAGE>
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
SPONSOR. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect subsidiary
of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM
Holdings II, Inc., which in turn is a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization
of more than $21 billion, which was created by the merger of Morgan Stanley
Group Inc. with Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in a
wide range of financial services through three primary businesses: securities,
asset management and credit services. These principal businesses include
securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; global custody, securities clearance services and securities lending;
and credit card services. As of June 2, 1997, MSDWD, together with its
affiliated investment advisory companies, had approximately $270 billion of
assets under management, supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the
underwriting and distribution of unit investment trusts and mutual funds with
roots in money management dating back to 1926. The Sponsor is a member of the
National Association of Securities Dealers, Inc. and has offices at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak
Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not to
the Fund or to any other Series thereof. The information is included herein only
for the purpose of informing investors as to the financial responsibility of the
Sponsor and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
As of March 31, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $58.45 billion of investment
products, of which over $10.85 billion is invested in municipal bonds. The
Sponsor and its Van Kampen American Capital affiliates managed $47 billion of
assets, consisting of $29.23 billion for 59 open-end mutual funds (of which 46
are distributed by Van Kampen American Capital Distributors, Inc.) $13.4 billion
for 37 closed-end funds and $4.97 billion for 106 institutional accounts. The
Sponsor has also deposited approximately $26 billion of unit investment trusts.
All of Van Kampen American Capital's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and not
exceeding amounts prescribed by the SEC, (ii) terminate the Trust Agreement and
liquidate the Fund as provided therein or (iii) continue to act as Trustee
without terminating the Trust Agreement.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, telephone
(800) 221-7668. The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law. Additional
information regarding the Trustee is set forth in the Information Supplement,
including the Trustee's qualifications and duties, its ability to resign, the
effect of a merger involving the Trustee and the Sponsor's ability to remove and
replace the Trustee. See "Additional Information".
PORTFOLIO ADMINISTRATION. The Trusts are not managed funds and, except
as provided in the Trust Agreement, Bonds generally will not be sold or
replaced. The Sponsor may, however, direct that Bonds be sold in certain limited
situations to protect to the Trust based on advice from the Evaluator. These
situations may include default in interest or principal payments on the Bonds or
other obligations of an issuer, an advanced refunding or institution of certain
legal proceedings. In addition, the Trustee may sell Bonds designated by the
Evaluator for purposes of redeeming Units or payment of expenses. The Evaluator
will consider a variety of factors in designating Bonds to be sold including
interest rates, market value and marketability. Except in limited circumstances,
the Trustee must reject any offer by an issuer to issue bonds in exchange or
substitution for the Bonds (such as a refunding or refinancing plan). The
Trustee will promptly notify Unitholders of any exchange or substitution. The
Information Supplement contains a more detailed description of circumstances in
which Bonds may be sold or replaced. See "Additional Information".
<PAGE>
REPLACEMENT BONDS. No assurance can be given that a Trust will retain
its present size or composition because Bonds may be sold, redeemed or mature
from time to time and the proceeds will be distributed to Unitholders and will
not be reinvested. In the event of a failure to deliver any Bond that has been
purchased under a contract ("Failed Bonds"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds") to make up the original portfolio of a Trust. Replacement Bonds must be
purchased within 20 days after delivery of the notice of the failed contract and
the purchase price (exclusive of accrued interest) may not exceed the amount of
funds reserved for the purchase of the Failed Bonds. The Replacement Bonds must
be substantially identical to the Failed Bonds in terms of (i) the exemption
from federal and state taxation, (ii) maturity, (iii) yield to maturity and
current return, (iv) Standard & Poor's or Moody's ratings, and (v) insurance in
an Insured Trust. The Trustee shall notify all Unitholders of a Trust within
five days after the acquisition of a Replacement Bond and shall make a pro rata
distribution of the amount, if any, by which the cost of the Failed Bond
exceeded the cost of the Replacement Bond plus accrued interest. If Failed Bonds
are not replaced, the Sponsor will refund the sales charge attributable to the
Failed Bonds to all Unitholders of the Trust and distribute the principal and
accrued interest (at the coupon rate of the Failed Bonds to the date of removal
from the Trust) attributable to the Failed Bonds within 30 days after removal.
All interest paid to a Unitholder which accrued after the expected date of
settlement for Units will be paid by the Sponsor and accordingly will not be
treated as tax-exempt income. If Failed Bonds are not replaced, the Estimated
Net Annual Interest Income per Unit would be reduced and the Estimated Current
Return and Estimated Long-Term Return might be lowered. Unitholders may not be
able to reinvest their proceeds in other securities at a yield equal to or in
excess of the yield of the Failed Bonds.
AMENDMENT OF TRUST AGREEMENT. The Sponsor and the Trustee may amend the
Trust Agreement without the consent of Unitholders to correct any provision
which may be defective or to make other provisions that will not adversely
affect the interest of the Unitholders (as determined in good faith by the
Sponsor and the Trustee). The Trust Agreement may not be amended to increase the
number of Units or to permit the acquisition of Bonds in addition to or in
substitution for any of the Bonds initially deposited in the Trust, except for
the substitution of certain refunding Bonds. The Trustee will notify Unitholders
of any amendment.
TERMINATION OF TRUST AGREEMENT. A Trust will terminate upon the
redemption, sale or other disposition of the last Bond held in the Trust. A
Trust may also be terminated at any time by consent of Unitholders of 51% of the
Units then outstanding or by the Trustee when the value of the Trust is less
than 20% of the original principal amount of Bonds. The Trustee will notify each
Unitholder of any termination within a reasonable time and will then liquidate
any remaining Bonds. The sale of Bonds upon termination may result in a lower
amount than might otherwise be realized if sale were not required at that time.
For this reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount of Bonds per Unit or value at
the time of purchase. The Trustee will distribute to each Unitholder his share
of the balance of the Interest and Principal Accounts after deduction of costs,
expenses or indemnities. The Unitholder will receive a final distribution
statement with this distribution. When the Trustee in its sole discretion
determines that any amounts held in reserve are no longer necessary, it will
distribute these amounts to Unitholders. The Information Supplement contains
further information regarding termination of a Trust.
See "Additional Information".
LIMITATION ON LIABILITIES. The Sponsor, Evaluator and Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence (negligence in the case of the Trustee) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of the
Bonds. In the event of the failure of the Sponsor to act under the Trust
Agreement, the Trustee may act thereunder and shall not be liable for any action
taken by it in good faith under the Trust Agreement. The Trustee is not liable
for any taxes or governmental charges imposed on the Bonds, on it as Trustee
under the Trust Agreement or on the Fund which the Trustee may be required to
pay under any present or future law of the United States of America or of any
other taxing authority having jurisdiction. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the Trustee. The
Trustee and Sponsor may rely on any evaluation furnished by the Evaluator and
have no responsibility for the accuracy thereof. Determinations by the Evaluator
shall be made in good faith upon the basis of the best information available to
it; provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor or Unitholders for errors in judgment.
<PAGE>
FEDERAL TAX STATUS
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At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal gross
income were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Trusts, where applicable, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds when held by residents of the State in which the issuers of such Bonds are
located from state income taxes and certain state or local intangibles and local
income taxes. Neither the Sponsor nor Chapman and Cutler have made any review of
the Trust proceedings relating to the issuance of the Bonds or of the basis of
such opinions. If the interest on a Bond should be determined to be taxable, the
Bond would generally have to be sold at a substantial discount. In addition,
investors could be required to pay income tax on interest received prior to the
date on which interest is determined to be taxable. Gain realized on the sale or
redemption of the Bonds by the Trustee or of a Unit by a Unitholder is
includible in gross income for Federal income tax purposes and may be includible
in gross income for state tax purposes. Such gain does not include any amounts
received in respect of accrued interest or accrued original issue discount, if
any. If a Bond is acquired with accrued interest, that portion of the price paid
for the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and reduces
the tax basis of the Bond. If a Bond is purchased for a premium, the amount of
the premium is added to the tax basis of the Bond. Bond premium is amortized
over the remaining term of the Bond, and the tax basis of the Bond is reduced
each tax year by the amount of the premium amortized in that tax year. For
purposes of the following opinions, it is assumed that each asset of the Trust
is debt, the interest on which is excluded for Federal income tax purposes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law as of the date of this Prospectus:
(1) Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Internal Revenue
Code of 1986 (the "Code") will retain its status for Federal income tax
purposes, when received by a Trust and when distributed to Unitholders;
however such interest may be taken into account in computing the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below;
(2) Each Unitholder is considered to be the owner of a pro rata portion of
each asset of the respective Trust under subpart E, subchapter J of
chapter 1 of the Code and will have a taxable event when such Trust
disposes of a Bond, or when the Unitholder redeems or sells his Units.
If the Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all assets of the Trust
involved including his pro rata portion of all the Bonds represented by
a Unit. Legislative proposals have been made that would treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain as constructive sales for purposes of recognition
of gain (but not loss). Unitholders should consult their own tax
advisors with regard to any such constructive sale rules. Unitholders
must reduce the tax basis of their Units for their share of accrued
interest received by the respective Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on such Bonds before the date the Trust acquired
ownership of the Bonds (and the amount of this reduction may exceed the
amount of accrued interest paid to the seller) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale
or redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with the Unitholder's basis for
his or her fractional interest in the asset disposed of. In the case of
a Unitholder who purchases Units, such basis (before adjustment for
accrued original issue discount and amortized bond premium, if any) is
determined by apportioning the cost of the Units among each of the Trust
assets ratably according to value as of the valuation date nearest the
date of acquisition of the Units. It should be noted that certain
legislative proposals have been made which could affect the calculation
of basis for Unitholders holding securities that are substantially
identical to the Bonds. Unitholders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unitholder
realizing a taxable gain when his Units are sold or redeemed for an
amount less than or equal to his original cost;
(3) Any proceeds paid under an insurance policy or policies dated the Date
of Deposit, issued to an Insured Trust with respect to the Bonds which
represent maturing interest on defaulted obligations held by the Trustee
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been so excludable if paid in the normal
course by the issuer of the defaulted obligations provided that, at the
time such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations; and
<PAGE>
(4) Any proceeds paid under individual policies obtained by issuers of Bonds
which represent maturing interest on defaulted Bonds held by the Trustee
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been excludable if paid in the normal
course by the issuer of the defaulted Bonds provided that, at the time
such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Bonds, rather than the insurer, will pay debt
service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "adjusted
issue price") to prior owners. If a Bond is acquired with accrued interest, that
portion of the price paid for the accrued interest is added to the tax basis of
the Bond. When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased for a
premium, the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax basis of
the Bond is reduced each tax year by the amount of the premium amortized in that
tax year. The application of these rules will also vary depending on the value
of the Bond on the date a Unitholder acquires his Units and the price the
Unitholder pays for his Units. Unitholders should consult with their tax
advisers regarding these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued), subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust pays for
Bonds or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law the
accretion had been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Unitholder elects to include market discount in taxable income
as it accrues. The market discount rules are complex and Unitholders should
consult their tax advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and
the Superfund Tax for taxable years beginning after December 31, 1986 depends
upon the corporation's alternative minimum taxable income, which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income and the Superfund
Tax of a corporation (other than an S Corporation, Regulated Investment Company,
Real Estate Investment Trust, or REMIC) is an amount equal to 75% of the excess
of such corporation's "adjusted current earnings" over an amount equal to its
alternative minimum taxable income (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax exempt interest, including interest on all of the Bonds in the
Fund. Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. Legislative proposals have been
introduced which would extend the Superfund Tax. Under the provisions of Section
884 of the Code, a branch profits tax is levied on the "effectively connected
earnings and profits" of certain foreign corporations which include tax-exempt
interest such as interest on the Bonds in the Trust. Unitholders should consult
their tax advisers with respect to the particular tax consequences to them
including the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry Units
of a Trust is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase or
improve a personal residence). Also, under Section 265 of the Code, certain
financial institutions that acquire Units would generally not be able to deduct
any of the interest expense attributable to ownership of such Units. Legislative
proposals have been made that would extend the financial institution rules to
all corporations. Investors with questions regarding these issues should consult
their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or related
person, will not be excludible from Federal gross income, although interest on
such Bonds received by others would be excludible from Federal gross income.
"Substantial user" and "related person" are defined under the Code and U.S.
Treasury Regulations. Any person who believes that he or she may be a
"substantial user" or a "related person" as so defined should contact his or her
tax adviser.
<PAGE>
In the opinion of special counsel to the Fund for New York tax matters,
under existing law, the Fund and each Trust are not associations taxable as
corporations and the income of each Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross
income for Federal, state or other tax purposes are the opinions of counsel and
are to be so construed.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains realized
in taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains (which are defined as net long-term capital gain
over net short-term capital loss for a taxable year) are subject to a maximum
marginal stated tax rate of 28%. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates and could
affect relative differences at which ordinary income and capital gains are
taxed. Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year. For purposes of
computing the alternative minimum tax for individuals and corporations and the
Superfund Tax for corporations, interest on certain private activity bonds
(which includes most industrial and housing revenue bonds) issued on or after
August 8, 1996 is included as an item of tax preference. Except as otherwise
noted in Prospectus Part I, the Trusts do not include any such private activity
bonds issued on or after that date.
Section 86 of the Code provides that 50% of Social Security benefits
are includible in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of the Social Security benefits received exceeds a "base
amount". The base amount is $25,000 for unmarried taxpayers, $32,000 for married
taxpayers filing a joint return and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Modified adjusted gross income is adjusted gross income determined without
regard to certain otherwise allowable deductions and exclusions from gross
income and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any other item
of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus 50%
of Social Security benefits received exceeds an "adjusted base amount." The
adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for married
taxpayers filing a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from a Trust, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his Social Security benefits in
gross income whether or not he receives any tax-exempt interest. A taxpayer
whose modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security benefits in
gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers who
may be deemed to have incurred (or continued) indebtedness to purchase or carry
tax-exempt obligations. Prospective investors should consult their tax advisors
as to the applicability of any collateral consequences.
For a discussion of the state tax status of income earned on Units of a
Trust and recent changes in Federal tax law, see Prospectus Part I. Except as
noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The laws of
the several states vary with respect to the taxation of such obligations.
<PAGE>
EXPENSES
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The Sponsor will not receive any fees in connection with its activities
relating to the Fund. However, American Portfolio Evaluation Services, a
division of Van Kampen American Capital Investment Advisory Corp., which is an
affiliate of the Sponsor, will receive the annual supervisory fee indicated
under "Summary of Essential Financial Information" in Prospectus Part I for
providing portfolio supervisory services for the Fund. In addition, the
Evaluator will receive the annual evaluation fee indicated under "Summary of
Essential Financial Information" in Prospectus Part I for evaluating each
Trust's portfolio. These fees may exceed the actual costs of providing these
services for a Trust but the total amount received by the Evaluator for
providing these services to all Van Kampen American Capital unit investment
trusts will not exceed the total cost of providing the services in any calendar
year. For its services the Trustee will receive the fee indicated under "Summary
of Essential Financial Information" in Prospectus Part I (which may be reduced
as described therein). Part of the Trustee's compensation for its services is
expected to result from the use of the funds being held in the Principal and
Interest Accounts for future distributions, payment of expenses and redemptions
since these Accounts are non-interest bearing to Unitholders. These fees are
based on the outstanding principal amount of Bonds and Units on the Date of
Deposit for the first year and as of the close of business on January 1 for each
year thereafter.
Premiums for any portfolio insurance are obligations of each Insured
Trust and are payable monthly by the Trustee on behalf of the Trust. As Bonds in
an Insured Trust are redeemed by their respective issuers or are sold by the
Trustee, the amount of the premium will be reduced in respect of those Bonds. If
the Trustee exercises the right to obtain permanent insurance, the premiums
payable for such permanent insurance will be paid solely from the proceeds of
the sale of the related Bonds.
The following additional charges are or may be incurred by the Trusts:
(a) fees of the Trustee for extraordinary services, (b) expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (c) various governmental charges, (d) expenses and costs of any action
taken by the Trustee to protect the Trusts and the rights and interests of
Unitholders, (e) indemnification of the Trustee for any loss, liability or
expenses incurred by it in the administration of the Fund without negligence,
bad faith or willful misconduct on its part, (f) any special custodial fees
payable in connection with the sale of any of the Bonds in a Trust, (g)
expenditures incurred in contacting Unitholders upon termination of the Trusts
and (h) costs incurred to reimburse the Trustee for advancing funds to the
Trusts to meet scheduled distributions (which costs may be adjusted periodically
in response to fluctuations in short-term interest rates). The fees and expenses
set forth herein are payable out of the Trusts. When such fees and expenses are
paid by or owing to the Trustee, they are secured by a lien on the portfolio of
the applicable Trust. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by a Trust, the Trustee has the
power to sell Bonds to pay such amounts.
On or before the twenty-fifth day of each month, the Trustee will
deduct from the Interest Account and, to the extent funds are not sufficient
therein, from the Principal Account, amounts necessary to pay the expenses of
the Fund. The Trustee also may withdraw from these Accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of the Fund. Amounts so withdrawn shall not be considered a part of
the Fund's assets until such time as the Trustee shall return all or any part of
such amounts to the appropriate Accounts. All costs and expenses incurred in
creating and establishing the Fund, including the cost of the initial
preparation, printing and execution of the Trust Agreement and the certificates,
legal and accounting expenses, advertising and selling expenses, expenses of the
Trustee, initial evaluation fees and other out-of-pocket expenses have been
borne by the Sponsor at no cost to the Fund.
ADDITIONAL INFORMATION
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This Prospectus does not contain all the information set forth in the
Registration Statement filed by the Fund with the SEC. The Information
Supplement, which has been filed with the SEC, includes more detailed
information concerning the Bonds, investment risks and general information about
the Fund. This Prospectus incorporates by reference the entire Information
Supplement. The Information Supplement may be obtained by contacting the Trustee
or is available along with other related materials at the SEC's Internet site
(http://www.sec.gov).
OTHER MATTERS
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LEGAL MATTERS. The legality of the Units offered hereby and certain
matters relating to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Winston & Strawn has acted as counsel to the Trustee and Special counsel to the
Fund for New York tax matters. Special counsel to the Fund for certain state tax
matters are named under "Tax Status" appearing in Prospectus Part I.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition
and the related portfolio at the Date of Deposit included in Prospectus Part I
have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report in Prospectus Part I, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
<PAGE>
TABLE OF CONTENTS
TITLE PAGE
The Trusts 2
The Fund 2
Objectives and Bond Selection 2
Risk Factors 3
Estimated Current and Long-Term Returns 5
Public Offering 6
General 6
Offering Price 7
Accrued Interest 8
Unit Distribution 8
Sponsor and Underwriter Compensation 9
Market for Units 10
Rights of Unitholders 11
Distributions of Interest and Principal 11
Reinvestment Option 11
Redemption of Units 11
Certificates 12
Reports Provided 12
Insurance on the Bonds in the Insured Trusts 13
Fund Administration 14
Sponsor 14
Trustee 14
Portfolio Administration 14
Replacement Bonds 15
Amendment of Trust Agreement 15
Termination of Trust Agreement 15
Limitation on Liabilities 15
Federal Tax Status 16
Expenses 18
Additional Information 19
Other Matters 19
Legal Matters 19
Independent Certified Public Accountants 19
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No person is authorized to give any information or to make any
representations not contained in this Prospectus; and any information or
representation not contained herein must not be relied upon as having been
authorized by the Fund, the Sponsor or the Underwriters. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy,
securities in any state to any person to whom it is not lawful to make such
offer in such state.
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
<PAGE>
PROSPECTUS
PART II
- -------------------------------------------------------------------------------
FEBRUARY 1998
INSURED MUNICIPALS
INCOME TRUST,
INSURED MULTI-SERIES
AND
INSURED MUNICIPALS
INCOME TRUST AND
INVESTORS' QUALITY TAX-
EXEMPT TRUST,
MULTI-SERIES
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
INFORMATION SUPPLEMENT
INSURED MUNICIPALS INCOME TRUST, 231ST INSURED MULTI-SERIES
- --------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Fund which is not described in the Prospectus for
the Fund. This Information Supplement should be read in conjunction with the
Fund's prospectus. This Information Supplement is not a prospectus (but is
incorporated into the Prospectus by reference), does not include all of the
information that an investor should consider before investing in a Trust and may
not be used to offer or sell Units without the Prospectus. Copies of the
Prospectus can be obtained by contacting the Sponsor at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 or by contacting your broker. This Information
Supplement is dated as of the date of Prospectus Part I and all capitalized
terms have been defined in the Prospectus.
TABLE OF CONTENTS
PAGE
Municipal Bond Risk Factors.......................................... 2
Insurance on the Bonds in the Insured Trusts......................... 6
Portfolio Administration............................................. 12
Trustee Information.................................................. 13
Termination of the Trust Agreement................................... 14
Description of Ratings............................................... 14
Equivalent Taxable Estimated Current Return Tables................... 16
Connecticut Risk Factors............................................. 18
Pennsylvania Risk Factors............................................ 19
Tennessee Risk Factors............................................... 22
Estimated Cash Flows to Unitholders.................................. 26
MUNICIPAL BOND RISK FACTORS
The Trusts include certain types of bonds described below. Accordingly, an
investment in a Trust should be made with an understanding of the
characteristics of and risks associated with such bonds. The types of bonds
included in each Trust are described on the cover of the related Prospectus Part
I. Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds.
Certain of the Bonds may be general obligations of a governmental entity that
are backed by the taxing power of such entity. All other Bonds in the Trusts are
revenue bonds payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different Bonds in the Fund, both within a particular classification and between
classifications, depending on numerous factors.
Certain of the Bonds may be obligations which derive their payments from
mortgage loans. Certain of such housing bonds may be FHA insured or may be
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities as a result of events such as sale of the mortgaged
premises, default, condemnation or casualty loss. Because these bonds are
subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period. Additionally,
unusually high rates of default on the underlying mortgage loans may reduce
revenues available for the payment of principal of or interest on such mortgage
revenue bonds. These bonds were issued under Section 103A of the Internal
Revenue Code, which Section contains certain requirements relating to the use of
the proceeds of such bonds in order for the interest on such bonds to retain its
tax-exempt status. In each case the issuer of the bonds has covenanted to comply
with applicable requirements and bond counsel to such issuer has issued an
opinion that the interest on the bonds is exempt from Federal income tax under
existing laws and regulations. Certain issuers of housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In connection with the housing bonds held by
the Fund, the Sponsor at the Date of Deposit is not aware that any of the
respective issuers of such bonds are actively considering the redemption of such
bonds prior to their respective stated initial call dates.
Certain of the Bonds may be health care revenue bonds. Ratings of bonds
issued for health care facilities are often based on feasibility studies that
contain projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service may be affected by
future events and conditions including, among other things, demand for services
and the ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with other
health care facilities, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the cost
and possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, government regulation and
the termination or restriction of governmental financial assistance, including
that associated with Medicare, Medicaid and other similar third party payor
programs.
Certain of the Bonds may be obligations of public utility issuers, including
those selling wholesale and retail electric power and gas. General problems of
such issuers would include the difficulty in financing large construction
programs in an inflationary period, the limitations on operations and increased
costs and delays attributable to environmental considerations, the difficulty of
the capital market in absorbing utility debt, the difficulty in obtaining fuel
at reasonable prices and the effect of energy conservation. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds to make payments of principal
and/or interest on such Bonds.
Certain of the Bonds may be obligations of issuers whose revenues are derived
from the sale of water and/or sewerage services. Such bonds are generally
payable from user fees. The problems of such issuers include the ability to
obtain timely and adequate rate increases, population decline resulting in
decreased user fees, the difficulty of financing large construction programs,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the increasing difficulty of obtaining or
discovering new supplies of fresh water, the effect of conservation programs and
the impact of "no-growth" zoning ordinances.
Certain of the Bonds may be industrial revenue bonds ("IRBs"). IRBs have
generally been issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a particular
project have been assigned and pledged to purchasers. In some cases, a mortgage
on the underlying project may have been granted as security for the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon the
creditworthiness of the corporate operator of the project or corporate
guarantor. Corporate operators or guarantors may be affected by many factors
which may have an adverse impact on the credit quality of the particular company
or industry. These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a corporate restructuring pursuant to a leveraged
buy-out, takeover or otherwise. Such a restructuring may result in the operator
of a project becoming highly leveraged which may impact on such operator's
creditworthiness which in turn would have an adverse impact on the rating and/or
market value of such bonds. Further, the possibility of such a restructuring may
have an adverse impact on the market for and consequently the value of such
bonds, even though no actual takeover or other action is ever contemplated or
effected.
Certain of the Bonds may be obligations that are secured by lease payments of
a governmental entity (hereinafter called "lease obligations"). Lease
obligations are often in the form of certificates of participation. Although the
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to appropriate for and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. A governmental entity that enters into such
a lease agreement cannot obligate future governments to appropriate for and make
lease payments but covenants to take such action as is necessary to include any
lease payments due in its budgets and to make the appropriations therefor. A
governmental entity's failure to appropriate for and to make payments under its
lease obligation could result in insufficient funds available for payment of the
obligations secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult.
Certain of the Bonds may be obligations of issuers which are, or which govern
the operation of, schools, colleges and universities and whose revenues are
derived mainly from ad valorem taxes or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby creating a
disparity in educational funds available to schools in wealthy areas and schools
in poor areas. Litigation or legislation on this issue may affect the sources of
funds available for the payment of school bonds in the Trusts. General problems
relating to college and university obligations include the prospect of a
declining percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal grants and
state funding, and government legislation or regulations which may adversely
affect the revenues or costs of such issuers.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income is
generally derived from fees received from signatory airlines pursuant to use
agreements which consist of annual payments for leases, occupancy of certain
terminal space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under the use
agreements. From time to time the air transport industry has experienced
significant variations in earnings and traffic, due to increased competition,
excess capacity, increased costs, deregulation, traffic constraints and other
factors, and several airlines have experienced severe financial difficulties.
Similarly, payment on bonds related to other facilities is dependent on revenues
from the projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of transportation,
scarcity of fuel and reduction or loss of rents.
Certain of the Bonds may be obligations which are payable from and secured by
revenues derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation of a
project; contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of a project or
technological or other unavoidable changes adversely affecting the operation of
a project; and administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform or impose
unreasonable burdens or excessive liabilities. The Sponsor cannot predict the
causes or likelihood of the redemption of resource recovery bonds in a Trust
prior to the stated maturity of the Bonds.
Certain of the Bonds may have been acquired at a market discount from par
value at maturity. The coupon interest rates on discount bonds at the time they
were purchased and deposited in a Trust were lower than the current market
interest rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable bonds increase, the market discount
of previously issued bonds will become greater, and if such interest rates for
newly issued comparable bonds decline, the market discount of previously issued
bonds will be reduced, other things being equal. Investors should also note that
the value of bonds purchased at a market discount will increase in value faster
than bonds purchased at a market premium if interest rates decrease. Conversely,
if interest rates increase, the value of bonds purchased at a market discount
will decrease faster than bonds purchased at a market premium. In addition, if
interest rates rise, the prepayment risk of higher yielding, premium Securities
and the prepayment benefit for lower yielding, discount bonds will be reduced. A
bond purchased at a market discount and held to maturity will have a larger
portion of its total return in the form of taxable income and capital gain and
less in the form of tax-exempt interest income than a comparable bond newly
issued at current market rates. See "Federal Tax Status" in Prospectus Part II.
Market discount attributable to interest changes does not indicate a lack of
market confidence in the issue.
Certain of the Bonds may be "zero coupon" bonds. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligation at a rate as high as the implicit yield
on the discount obligation, but at the same time eliminates the holder's ability
to reinvest at higher rates in the future. For this reason, zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality which
pay interest.
Certain of the Bonds may have been purchased on a "when, as and if issued" or
"delayed delivery" basis. See "Notes to Portfolio" in Prospectus Part I. The
delivery of any such Bonds may be delayed or may not occur. Interest on these
Bonds begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Bonds are actually delivered to the Fund after their
respective expected dates of delivery, Unitholders who purchase their Units
prior to the date such Bonds are actually delivered to the Trustee would be
required to adjust their tax basis in their Units for a portion of the interest
accruing on such Bonds during the interval between their purchase of Units and
the actual delivery of such Bonds. As a result of any such adjustment, the
Estimated Current Returns during the first year would be slightly lower than
those stated in the Prospectus which would be the returns after the first year,
assuming the portfolio of a Trust and estimated annual expenses other than that
of the Trustee (which may be reduced in the first year only) do not vary from
that set forth in Prospectus Part I. Unitholders will be "at risk" with respect
to all Bonds in the portfolios including "when, as and if issued" and "delayed
delivery" Bonds (i.e., may derive either gain or loss from fluctuations in the
evaluation of such Bonds) from the date they commit for Units.
Certain of the Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is a method
by which a debt obligation is redeemed, at or before maturity, by the proceeds
of a new debt obligation. In general, call provisions are more likely to be
exercised when the offering side valuation is at a premium over par than when it
is at a discount from par. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called bonds are used to pay for Unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions; it may also affect
the current return on Units of the Trust involved. Each Trust portfolio contains
a listing of the sinking fund and call provisions, if any, with respect to each
of the debt obligations. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. Generally, events that
may permit the extraordinary optional redemption of bonds or may require the
mandatory redemption of bonds include, among others: a final determination that
the interest on the bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the bonds were
used; an exercise by a local, state or Federal governmental unit of its power of
eminent domain to take all or substantially all of the project for which the
proceeds of the bonds were used; changes in the economic availability of raw
materials, operating supplies or facilities or technological or other changes
which render the operation of the project for which the proceeds of the bonds
were used uneconomic; changes in law or an administrative or judicial decree
which renders the performance of the agreement under which the proceeds of the
bonds were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes, not
imposed on the date the bonds are issued on the issuer of the bonds or the user
of the proceeds of the bonds; an administrative or judicial decree which
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the bonds; an overestimate of the costs of the
project to be financed with the proceeds of the bonds resulting in excess
proceeds of the bonds which may be applied to redeem bonds; or an underestimate
of a source of funds securing the bonds resulting in excess funds which may be
applied to redeem bonds. The issuer of certain bonds in a Trust may have sold or
reserved the right to sell, upon the satisfaction of certain conditions, to
third parties all or any portion of its rights to call bonds in accordance with
the stated redemption provisions of such bonds. In such a case the issuer no
longer has the right to call the bonds for redemption unless it reacquires the
rights from such third party. A third party pursuant to these rights may
exercise the redemption provisions with respect to a bond at a time when the
issuer of the bond might not have called a bond for redemption had it not sold
such rights. The Sponsor is unable to predict all of the circumstances which may
result in such redemption of an issue of Bonds. See also the discussion of
single family mortgage and multi-family revenue bonds above for more information
on the call provisions of such bonds.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect upon the Fund or any of the Trusts. At any
time after the Date of Deposit, litigation may be initiated on a variety of
grounds with respect to Bonds in the Fund. Such litigation, as, for example,
suits challenging the issuance of pollution control revenue bonds under
environmental protection statutes, may affect the validity of such Bonds or the
tax-free nature of the interest thereon. While the outcome of litigation of such
nature can never be entirely predicted, the Fund has received or will receive
opinions of bond counsel to the issuing authorities of each Bond on the date of
issuance to the effect that such Bonds have been validly issued and that the
interest thereon is exempt from Federal income tax. In addition, other factors
may arise from time to time which potentially may impair the ability of issuers
to meet obligations undertaken with respect to the Bonds.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust, by the issuer of Bonds in
an Insured Trust, by a prior owner of such Bonds, or by the Sponsor prior to the
deposit of such Bonds in a Trust guaranteeing prompt payment of interest and
principal, when due, in respect of the bonds in such Trust. See Settlement of
Bonds in "The Trusts--Objectives and Bond Selection" in Prospectus Part II. The
Portfolio Insurers and the Preinsured Bond Insurers are described under
"Portfolio" and "Notes to Portfolio" in Prospectus Part I. The Portfolio
Insurers are either AMBAC Assurance Corporation or Financial Guaranty Insurance
Company. An insurance policy obtained by an Insured Trust, if any, is
non-cancellable and will continue in force so long as such Trust is in
existence, the respective Portfolio Insurer is still in business and the Bonds
described in such policy continue to be held by such Trust (see "Portfolio" for
the respective Insured Trust in Prospectus Part I). Any portfolio insurance
premium for an Insured Trust, which is an obligation of such Trust, is paid by
such Trust on a monthly basis. Non-payment of premiums on a policy obtained by
an Insured Trust will not result in the cancellation of insurance but will force
the insurer to take action against the Trustee to recover premium payments due
it. The Trustee in turn will be entitled to recover such payments from such
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
an Insured Trust, if any, are fixed for the life of the Trust. The premium for
any Preinsured Bond insurance has been paid by such issuer, by a prior owner of
such Bonds or the Sponsor and any such policy or policies are non-cancellable
and will continue in force so long as the Bonds so insured are outstanding and
the respective Preinsured Bond Insurer remains in business. If the provider of
an original issuance insurance policy is unable to meet its obligations under
such policy or if the rating assigned to the claims-paying ability of any such
insurer deteriorates, the Portfolio Insurers have no obligation to insure any
issue adversely affected by either of the above described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if any,
guarantees the timely payment of principal and interest on the Bonds when they
fall due. For the purposes of insurance obtained by an Insured Trust, "when due"
generally means the stated payment or maturity date for the payment of principal
and interest. However, in the event (a) an issuer of a Bond defaults in the
payment of principal or interest on such Bond, (b) such issuer enters into a
bankruptcy proceeding or (c) the maturity of such Bond is accelerated, the
affected Portfolio Insurer has the option, in its sole discretion, after
receiving notice of the earliest to occur of such a default, bankruptcy
proceeding or acceleration to pay the outstanding principal amount of such Bond
plus accrued interest to the date of such payment and thereby retire the Bond
from the affected Trust prior to such Bond's stated maturity date. The insurance
does not guarantee the market value of the Bonds or the value of the Units.
Insurance obtained by an Insured Trust, if any, is only effective as to Bonds
owned by and held in such Trust. In the event of a sale of any such Bond by the
Trustee, such insurance terminates as to such Bond on the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the Trustee,
upon the sale of a Bond covered under a portfolio insurance policy obtained by
an Insured Trust, has the right to obtain permanent insurance with respect to
such Bond (i.e., insurance to maturity of the Bond regardless of the identity of
the holder thereof) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium and any expenses related thereto from the
proceeds of the sale of such Bond. Accordingly, any Bond in an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee would
exercise the right to obtain Permanent Insurance only if upon such exercise the
affected Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium and related expenses attributable to the Permanent Insurance)
from such sale in excess of the sale proceeds if such Bonds were sold on an
uninsured basis. The insurance premium with respect to each Bond eligible for
Permanent Insurance would be determined based upon the insurability of each Bond
as of the Date of Deposit and would not be increased or decreased for any change
in the creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an
advantage to an Insured Trust in that each Bond insured by a Trust insurance
policy may be sold out of the affected Trust with the benefits of the insurance
attaching thereto. Thus, the value of the insurance, if any, at the time of
sale, can be realized in the market value of the Bond so sold (which is not the
case in connection with any value attributable to an Insured Trust's portfolio
insurance). See Public Offering--Offering Price" in Prospectus Part II. Because
any such insurance value may be realized in the market value of the Bond upon
the sale thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it is
much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Rights of Unitholders--Redemption of Units" in Prospectus Part II)
and (b) at the time of termination of an Insured Trust, if such Trust were
holding defaulted Bonds or Bonds in significant risk of default such Trust would
not need to hold such Securities until their respective maturities in order to
realize the benefits of such Trust's portfolio insurance (see "Fund
Administration--Termination of Trust Agreement" in Prospectus Part II).
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention of
the Evaluator to attribute a value for such insurance (including the right to
obtain Permanent Insurance) for the purpose of computing the price or redemption
value of Units if the Bonds covered by such insurance are in default in payment
of principal or interest or in significant risk of such default. The value of
the insurance will be the difference between (i) the market value of a bond
which is in default in payment of principal or interest or in significant risk
of such default assuming the exercise of the right to obtain Permanent Insurance
(less the insurance premium and related expenses attributable to the purchase of
Permanent Insurance) and (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering--Offering Price" in Prospectus Part
II. It is also the present intention of the Trustee not to sell such Bonds to
effect redemptions or for any other reason but rather to retain them in the
portfolio because value attributable to the insurance cannot be realized upon
sale. See "Public Offering--Offering Price" in Prospectus Part II for a more
complete description of an Insured Trust's method of valuing defaulted Bonds and
Bonds which have a significant risk of default. Insurance obtained by the issuer
of a Bond is effective so long as such Bond is outstanding. Therefore, any such
insurance may be considered to represent an element of market value in regard to
the Bonds thus insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust, if
any, with respect to the Bonds in such Trust were issued by one or more of the
Portfolio Insurers. Any other Preinsured Bond insurance policy (or commitment
therefor) was issued by one of the Preinsured Bond Insurers. See "The
Trusts--Objectives and Bond Selection" in Prospectus Part II.
Capital Markets Assurance Corporation ("CapMAC") is a New York-domiciled
monoline stock insurance company which engages only in the business of financial
guaranty and surety insurance. CapMAC is licensed in all 50 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and the territory
of Guam. CapMAC insures structured asset-backed, corporate, municipal and other
financial obligations in the U.S. and international capital markets. CapMAC also
provides financial guarantee reinsurance for structured asset-backed, corporate,
municipal and other financial obligations written by other major insurance
companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors Service,
Inc. ("Moody's"), "AAA" by Standard & Poor's, "AAA" by Duff & Phelps Credit
Rating Co. ("Duff & Phelps") and "AAA" by Nippon Investors Service, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Pursuant to a merger of a subsidiary of MBIA Inc. with and into CapMAC
Holdings Inc., CapMAC became an indirect wholly-owned subsidiary of MBIA Inc. on
February 17, 1998. MBIA Inc., through its wholly-owned subsidiary, MBIA
Insurance Corporation, is a financial guaranty insurer of municipal bonds and
structured finance transactions. MBIA Insurance Corporation has a claims paying
rating of triple-A from Moody's Investor Service, Inc., Standard & Poor's
Ratings Services and Fitch Investors Service. Pursuant to a reinsurance
agreement, it is anticipated that CapMAC will cede all of its net insured risks,
as well as its unearned premiums and contingency reserves, to MBIA Insurance
Corporation and that MBIA Insurance Corporation will reinsure CapMAC's net
outstanding exposure. NEITHER MBIA INC. NOR ANY OF ITS STOCKHOLDERS IS OBLIGATED
TO PAY ANY CLAIMS UNDER ANY POLICY ISSUED BY CAPMAC OR ANY DEBTS OF CAPMAC OR TO
MAKE ADDITIONAL CAPITAL CONTRIBUTIONS TO CAPMAC.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance laws and
regulations of the other jurisdictions in which it is licensed. Such insurance
laws regulate, among other things, the amount of net exposure per risk that
CapMAC may retain, capital transfers, dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and acquisitions.
CapMAC is subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC's obligations under the Policy(s) may be reinsured. Such reinsurance
does not relieve CapMAC of any of its obligations under the Policy(s). THE
POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED
IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. As of December 31, 1995 and 1996,
CapMAC had qualified statutory capital (which consists of policyholders'
surplus, statutory capital, and contingency reserves) of approximately $260
million and $240 million, respectively, and had not incurred any debt
obligations. As of September 30, 1997, CapMAC had qualified statutory capital of
$278.6 million and had not incurred any debt obligations. Article 69 of the New
York State Insurance Law requires CapMAC to establish and maintain the
contingency reserve, which is available to cover claims under policies issued by
CapMAC.
Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which differ from generally accepted accounting
principles, are filed with the Insurance Department of the State of New York and
are available upon request. CapMAC is located at 885 Third Avenue, New York, New
York 10022, and its telephone is (212) 755-1155.
Effective July 14, 1997, AMBAC Indemnity Corporation changed its name to
AMBAC Assurance Corporation ("AMBAC Assurance"). AMBAC Assurance is a
Wisconsin-domiciled stock insurance corporation regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin and licensed to do business
in 50 states, the District of Columbia and the Commonwealth of Puerto Rico, with
admitted assets of $2,735,772,668 (unaudited) and statutory capital of
$1,547,693,950 (unaudited) as of June 30, 1997. Statutory capital consists of
AMBAC Assurance's policyholders' surplus and statutory contingency reserve.
AMBAC Assurance is a wholly owned subsidiary of AMBAC Financial Group, Inc., a
100% publicly-held company. Moody's Investors Service, Inc. and Standard &
Poor's have both assigned a triple-A claims-paying ability rating to AMBAC
Assurance.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Assurance. The address of AMBAC
Assurance's administrative offices and its telephone number are One State Street
Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Assurance has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Assurance has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of
MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is not obligated
to pay the debts of or claims against MBIA. MBIA is domiciled in the State of
New York and licensed to do business in and subject to regulation under the laws
of all fifty states, the District of Columbia, the Commonwealth of the Northern
Mariana Islands, the Commonwealth of Puerto Rico, the Virgin Islands of the
United States and the Territory of Guam. MBIA has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
Effective February 17, 1998, MBIA, Inc. acquired all of the outstanding
stock of CapMAC, through a merger with its parent, CapMAC Holdings, Inc.
Pursuant to a reinsurance agreement, CapMAC has ceded all of its net insured
risks (including any amounts due but unpaid from third party reinsurers), as
well as its unearned premiums and contingency reserves to MBIA. MBIA, Inc. is
not obligated to pay debts of or claims against CapMAC.
As of December 31, 1996, the insurer had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total capital and
surplus of $1.4 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1997, MBIA had admitted assets of $5.3 billion
(audited), total liabilities of $3.5 billion (audited), and total capital and
surplus of $1.8 billion (audited), determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's financial statements prepared in accordance with
statutory accounting practices are available from MBIA. The address of MBIA is
113 King Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc.
On January 5, 1990, MBIA acquired all of the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company (BIG), now
known as MBIA Insurance Corp. of Illinois. Through a reinsurance agreement, BIG
has ceded all of its net insured risks, as well as its unearned premium and
contingency reserves, to MBIA and MBIA has reinsured BIG's net outstanding
exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG-1," both designated to be of the highest quality.
Standard & Poor's rates all new issues insured by MBIA "AAA" Prime Grade.
Moody's, Standard & Poor's and Fitch IBCA, Inc. (formerly Fitch Investors
Service, L.P.), all rate the claims paying ability of MBIA as "Triple A." The
Moody's Investors Service, Inc. rating of MBIA should be evaluated independently
of the Standard & Poor's rating of MBIA. No application has been made to any
other rating agency in order to obtain additional ratings on the Obligations.
The ratings reflect the respective rating agency's current assessment of the
creditworthiness of MBIA and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Obligations and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of either or
both ratings may have an adverse effect on the market price of the Obligations.
Financial Guaranty Insurance Company ("Financial Guaranty" or "FGIC") is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a subsidiary of General Electric Capital
Corporation ("GE Capital"). Neither the Corporation nor GE Capital is obligated
to pay the debts of or the claims against Financial Guaranty. Financial Guaranty
is a monoline financial guaranty insurer domiciled in the State of New York and
subject to regulation by the State of New York Insurance Department. As of
December 31, 1997, the total capital and surplus of Financial Guaranty was
$1,255,590,411. Financial Guaranty prepares financial statements on the basis of
both statutory accounting principles, and generally accepted accounting
principles. Copies of such financial statements may be obtained by writing to
Financial Guaranty at 115 Broadway, New York, New York 10006, Attention:
Communications Department, telephone number: (212) 312-3000 or to the New York
State Insurance Department at 25 Beaver Street, New York, New York 10004-2319,
Attention: Financial Condition Property/Casualty Bureau, telephone number: (212)
480-5187.
In addition, Financial Guaranty is currently licensed to write insurance in
all 50 states and the District of Columbia.
Financial Security Assurance Inc. ("Financial Security" or "FSA") is a
monoline insurance company incorporated in 1984 under the laws of the State of
New York. Financial Security is licensed to engage in the financial guaranty
insurance business in all 50 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities, thereby enhancing the credit rating of those securities, in
consideration for payment of a premium to the insurer. Financial Security and
its subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
Financial Security insures both newly issued securities sold in the primary
market and outstanding securities sold in the secondary market that satisfy
Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Financial Security is obligated to pay any debt of Financial
Security or its subsidiaries or any claim under any insurance policy issued by
Financial Security or its subsidiaries or to make any additional contribution to
the capital of Financial Security or its subsidiaries. As of September 30, 1997,
the total policyholders' surplus and contingency reserves and the total unearned
premium reserve, respectively, of Financial Security and its consolidated
subsidiaries were, in accordance with statutory accounting principles,
approximately $788,108,000 (unaudited) and $461,203,000 (unaudited), and the
total shareholders' equity and the total unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately $894,461,000 (unaudited)
and $401,251,000 (unaudited). Copies of Financial Security's financial
statements may be obtained by writing to Financial Security at 350 Park Avenue,
New York, New York, 10022, Attention: Communications Department.
Its telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries (including FSA
Maryland) are reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective capital, surplus and reserves,
subject to applicable statutory risk limitations. In addition, Financial
Security and FSA Maryland reinsure a portion of their liabilities under certain
of their financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. Such
reinsurance is utilized as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit the
obligations of Financial Security or FSA Maryland under any financial guaranty
insurance policy.
The claims-paying ability of Financial Security and FSA Maryland is rated
"Aaa" by Moody's Investors Service, Inc., and "AAA" by Standard & Poor's Ratings
Services, Nippon Investors Service Inc. and Standard & Poor's (Australia) Pty.
Ltd. Such ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to revision
or withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company was involved in a merger in 1995. On
December 20, 1995, Capital Guaranty Corporation ("CGC") merged with a subsidiary
of Financial Security Assurance Holdings Ltd. and Capital Guaranty Insurance
Company, CGC's principal operating subsidiary, changed its name to Financial
Security Assurance of Maryland Inc. ("FSA Maryland") and became a wholly owned
subsidiary of Financial Security Assurance Inc. For further description, see
"Financial Security Assurance Inc." herein.
The address of FSA Maryland and its telephone number are Steuart Tower, One
Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000. In order to be in
an Insured Trust, Bonds must be insured by one of the Preinsured Bond Insurers
or be eligible for the insurance being obtained by such Trust. In determining
eligibility for insurance, the Preinsured Bond Insurers and the Portfolio
Insurers have applied their own standards which correspond generally to the
standards they normally use in establishing the insurability of new issues of
municipal bonds and which are not necessarily the criteria used in the selection
of Bonds by the Sponsor. To the extent the standards of the Preinsured Bond
Insurers and the Portfolio Insurers are more restrictive than those of the
Sponsor, the previously stated Trust investment criteria have been limited with
respect to the Bonds. This decision is made prior to the Date of Deposit, as
debt obligations not eligible for insurance are not deposited in an Insured
Trust. Thus, all of the Bonds in the portfolios of the Insured Trusts in the
Fund are insured either by the respective Trust or by the issuer of the Bonds,
by a prior owner of such Bonds or by the Sponsor prior to the deposit of such
Bonds in a Trust.
Because the Bonds are insured by one of the Portfolio Insurers or one of the
Preinsured Bond Insurers as to the timely payment of principal and interest,
when due, and on the basis of the various reinsurance agreements in effect,
Standard & Poor's has assigned to the Units of each Insured Trust its "AAA"
investment rating. Such rating will be in effect for a period of thirteen months
from the Date of Deposit and will, unless renewed, terminate at the end of such
period. See "Description of Ratings". The obtaining of this rating by an Insured
Trust should not be construed as an approval of the offering of the Units by
Standard & Poor's or as a guarantee of the market value of such Trust or of the
Units.
An objective of portfolio insurance obtained by an Insured Trust is to obtain
a higher yield on the portfolio of such Trust than would be available if all the
Bonds in such portfolio had Standard & Poor's "AAA" rating and yet at the same
time to have the protection of insurance of prompt payment of interest and
principal, when due, on the Bonds. There is, of course, no certainty that this
result will be achieved. Preinsured Bonds in an Insured Trust (all of which are
rated "AAA" by Standard & Poor's) may or may not have a higher yield than
uninsured bonds rated "AAA" by Standard & Poor's. In selecting such Bonds for an
Insured Trust, the Sponsor has applied the criteria hereinbefore described.
In the event of nonpayment of interest or principal, when due, in respect of
a Bond, AMBAC Indemnity shall make such payment not later than 30 days and
Financial Guaranty shall make such payment within one business day after the
respective insurer has been notified that such nonpayment has occurred or is
threatened (but not earlier than the date such payment is due). The insurer, as
regards any payment it may make, will succeed to the rights of the Trustee in
respect thereof. All policies issued by the Portfolio Insurers and the
Preinsured Bond Insurers are substantially identical insofar as obligations to
an Insured Trust are concerned.
The Internal Revenue Service has issued a letter ruling which holds in effect
that insurance proceeds representing maturing interest on defaulted municipal
obligations paid to holders of insured bonds, under policy provisions
substantially identical to the policies described herein, will be excludable
from Federal gross income under Section 103(a)(1) of the Internal Revenue Code
to the same extent as if such payments were made by the issuer of the municipal
obligations. Holders of Units in an Insured Trust should discuss with their tax
advisers the degree of reliance which they may place on this letter ruling.
However, Chapman and Cutler, counsel for the Sponsor, has given an opinion to
the effect such payment of proceeds would be excludable from Federal gross
income to the extent described under "Federal Tax Status" in Prospectus Part II.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made thereunder at some
time in the future. At the date hereof, it is reported that no claims have been
submitted or are expected to be submitted to any of the Portfolio Insurers which
would materially impair the ability of any such company to meet its commitment
pursuant to any contract of bond or portfolio insurance.
The information relating to each Portfolio Insurer has been furnished by such
companies. The financial information with respect to each Portfolio Insurer
appears in reports filed with state insurance regulatory authorities and is
subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such information subsequent to the dates thereof.
PORTFOLIO ADMINISTRATION
The Trustee is empowered to sell, for the purpose of redeeming Units tendered
by any Unitholder, and for the payment of expenses for which funds may not be
available, such of the Bonds designated by the Evaluator as the Trustee in its
sole discretion may deem necessary. The Evaluator, in designating such Bonds,
will consider a variety of factors including (a) interest rates, (b) market
value and (c) marketability. The Sponsor, in connection with the Quality Trusts,
may direct the Trustee to dispose of Bonds upon default in payment of principal
or interest, institution of certain legal proceedings, default under other
documents adversely affecting debt service, default in payment of principal or
interest or other obligations of the same issuer, decline in projected income
pledged for debt service on revenue bonds or decline in price or the occurrence
of other market or credit factors, including advance refunding (i.e., the
issuance of refunding securities and the deposit of the proceeds thereof in
trust or escrow to retire the refunded securities on their respective redemption
dates), so that in the opinion of the Sponsor the retention of such Bonds would
be detrimental to the interest of the Unitholders. In connection with the
Insured Trusts to the extent that Bonds are sold which are current in payment of
principal and interest in order to meet redemption requests and defaulted Bonds
are retained in the portfolio in order to preserve the related insurance
protection applicable to said Bonds, the overall quality of the Bonds remaining
in such Trust's portfolio will tend to diminish. Except as described in this
section and in certain other unusual circumstances for which it is determined by
the Trustee to be in the best interests of the Unitholders or if there is no
alternative, the Trustee is not empowered to sell Bonds from an Insured Trust
which are in default in payment of principal or interest or in significant risk
of such default and for which value has been attributed for the insurance
obtained by such Insured Trust. Because of restrictions on the Trustee under
certain circumstances, the Sponsor may seek a full or partial suspension of the
right of Unitholders to redeem their Units in an Insured Trust. See "Rights of
Unitholders--Redemption of Units" in Prospectus Part II. The Sponsor is
empowered, but not obligated, to direct the Trustee to dispose of Bonds in the
event of an advanced refunding.
The Sponsor is required to instruct the Trustee to reject any offer made by
an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
(1) the issuer is in default with respect to such Bond or (2) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Bond in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder of the Trust thereby affected, identifying the
Bonds eliminated and the Bonds substituted therefor. Except as stated herein and
under "Fund Administration--Replacement Bonds" in Prospectus Part II regarding
the substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Fund of any securities other than the Bonds initially deposited is not
permitted.
If any default in the payment of principal or interest on any Bonds occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bonds within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
TRUSTEE INFORMATION
The Trustee is The Bank of New York, a trust company organized under the laws
of New York. The Bank of New York has its unit investment trust division offices
at 101 Barclay Street, New York, New York 10286, telephone (800) 221-7668. The
Bank of New York is subject to supervision and examination by the Superintendent
of Banks of the State of New York and the Board of Governors of the Federal
Reserve System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Fund. Such records
shall include the name and address of, and the certificates issued by the Fund
to, every Unitholder of the Fund. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or Federal statute, rule or
regulation. The Trustee is required to keep a certified copy or duplicate
original of the Trust Agreement on file in its office available for inspection
at all reasonable times during the usual business hours by any Unitholder,
together with a current list of the Bonds held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all Fund
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon receiving
notice of such resignation is obligated to appoint a successor trustee promptly.
If, upon such resignation, no successor trustee has been appointed and has
accepted the appointment within 30 days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee. Any
corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
TERMINATION OF THE TRUST AGREEMENT
A Trust may be terminated at any time by consent of Unitholders of 51% of the
Units of such Trust then outstanding or by the Trustee when the value of such
Trust, as shown by any semi-annual evaluation, is less than 20% of the original
principal amount of Bonds. A Trust will be liquidated by the Trustee in the
event that a sufficient number of Units not yet sold are tendered for redemption
by the Underwriters, including the Sponsor, so that the net worth of such Trust
would be reduced to less than 40% of the initial principal amount of such Trust.
If a Trust is liquidated because of the redemption of unsold Units by the
Underwriters, the Sponsor will refund to each purchaser of Units the entire
sales charge paid by such purchaser. The Trust Agreement provides that each
Trust shall terminate upon the redemption, sale or other disposition of the last
Bond held in such Trust, but in no event shall it continue beyond the end of the
year preceding the fiftieth anniversary of the Trust Agreement in the case of an
IM-IT Discount, a U.S. Territorial IM-IT, a Long-Term State or a National
Quality Trust, or beyond the end of the year preceding the twentieth anniversary
of the Trust Agreement in the case of IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short Intermediate
Trusts. In the event of termination of any Trust, written notice thereof will be
sent by the Trustee to each Unitholder of such Trust at his address appearing on
the registration books of the Fund maintained by the Trustee. Within a
reasonable time thereafter the Trustee shall liquidate any Bond then held in
such Trust and shall deduct from the funds of such Trust any accrued costs,
expenses or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and costs of liquidation and any amounts required as
a reserve to provide for payment of any applicable taxes or other government
charges. The sale of Bonds in the Trust upon termination may result in a lower
amount than might otherwise be realized if such sale were not required at such
time. For this reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount or par amount of Bonds
represented by the Units held by such Unitholder. The Trustee shall then
distribute to each Unitholder his share of the balance of the Interest and
Principal Accounts. With such distribution the Unitholder shall be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion shall determine that any amounts held in reserve
are no longer necessary, it shall make distribution thereof to Unitholders in
the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so insured
are held by such Trust, the price to be received by such Trust upon the
disposition of any such Bond which is in default, by reason of nonpayment of
principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for the
Trustee to, and the Trustee does not currently intend to, dispose of any Bond or
Bonds if retention of such Bond or Bonds, until due, shall be deemed to be in
the best interest of Unitholders, including, but not limited to, situations in
which a Bond or Bonds so insured have deteriorated market prices resulting from
a significant risk of default. Since the Preinsured Bonds will reflect the value
of the related insurance, it is the present intention of the Sponsor not to
direct the Trustee to hold any of such Preinsured Bonds after the date of
termination. All proceeds received, less applicable expenses, from insurance on
defaulted Bonds not disposed of at the date of termination will ultimately be
distributed to Unitholders of record as of such date of termination as soon as
practicable after the date such defaulted Bond or Bonds become due and
applicable insurance proceeds have been received by the Trustee.
DESCRIPTION OF RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES. A Standard &
Poor's municipal bond rating is a current assessment of the creditworthiness of
an obligor with respect to a specific debt obligation. This assessment of
creditworthiness may take into consideration obligors such as guarantors,
insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
II.Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Provisional Ratings: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion,
makes no comment on the likelihood of, or the risk of default upon failure of,
such completion. Accordingly, the investor should exercise his own judgment with
respect to such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable Moody's
rating symbols and their meanings follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large, or by an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. With the occasional
exception of oversupply in a few specific instances, the safety of obligations
of this class is so absolute that their market value is affected solely by money
market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. These Aa bonds are high grade, their market value virtually immune
to all but money market influences, with the occasional exception of oversupply
in a few specific instances.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as higher medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. The market
value of A-rated bonds may be influenced to some degree by credit circumstances
during a sustained period of depressed business conditions. During periods of
normalcy, bonds of this quality frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few specific
instances.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the high
end of its category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Con--Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of the Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under combined Federal and State taxes
(where applicable) using the published Federal and State tax rates (where
applicable) scheduled to be in effect in 1998. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you would
have to earn on taxable investments to equal the tax-exempt estimated current
return in your income tax bracket. The tables assume that Federal taxable income
is equal to State income subject to tax, and for cases in which more than one
State rate falls within a Federal bracket, the State rate corresponding to the
highest income within that Federal bracket is used. The combined State and
Federal tax rates shown reflect the fact that State tax payments are currently
deductible for Federal tax purposes. The tables do not reflect any local taxes
or any taxes other than personal income taxes. The tables do not show the
approximate taxable estimated current returns for individuals that are subject
to the alternative minimum tax. The taxable equivalent estimated current returns
may be somewhat higher than the equivalent returns indicated in the following
tables for those individuals who have adjusted gross incomes in excess of
$124,500. The tables do not reflect the effect of Federal or State limitations
(if any) on the amount of allowable itemized deductions and the deduction for
personal or dependent exemptions or any other credits. These limitations were
designed to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the marginal maximum Federal tax
rate to approximately 44 percent for taxpayers filing a joint return and
entitled to four personal exemptions and to approximately 41 percent for
taxpayers filing a single return entitled to only one personal exemption. These
limitations are subject to certain maximums, which depend on the number of
exemptions claimed and the total amount of taxpayer's itemized deductions. For
example, the limitation on itemized deductions will not cause a taxpayer to lose
more than 80% of his allowable itemized deductions, with certain exceptions. See
"Federal Tax Status" in Prospectus Part II for a more detailed discussion of
recent Federal tax legislation.
<TABLE>
<CAPTION>
CONNECTICUT
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-25.35 $ 0-42.35 18.3% 4.90% 5.51% 6.12% 6.73% 7.34% 7.96% 8.57%
25.35-61.40 42.35-102.30 31.2 5.81 6.54 7.27 7.99 8.72 9.45 10.17
61.40-128.10 102.30-155.95 34.1 6.07 6.83 7.59 8.35 9.10 9.86 10.62
128.10-278.45 155.95-278.45 38.9 6.55 7.36 8.18 9.00 9.82 10.64 11.46
Over 278.45 Over 278.45 42.3 6.93 7.80 8.67 9.53 10.40 11.27 12.13
<CAPTION>
PENNSYLVANIA
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-25.35 $ 0-42.35 17.4% 4.84% 5.45% 6.05% 6.66% 7.26% 7.87% 8.47%
25.35-61.40 42.35-102.30 30.0 5.71 6.43 7.14 7.86 8.57 9.29 10.00
61.40-128.10 102.30-155.95 32.9 5.96 6.71 7.45 8.20 8.94 9.69 10.43
128.10-278.45 155.95-278.45 37.8 6.43 7.23 8.04 8.84 9.65 10.45 11.25
Over 278.45 Over 278.45 41.3 6.81 7.67 8.52 9.37 10.22 11.07 11.93
<CAPTION>
TENNESSEE
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------- ---------------------------------------------------------------------------
SINGLE JOINT TAX 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
RETURN RETURN BRACKET* EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-25.35 $ 0-42.35 20.1% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
25.35-61.40 42.35-102.30 32.3 5.91 6.65 7.39 8.12 8.86 9.60 10.34
61.40-128.10 102.30-155.95 35.1 6.16 6.93 7.70 8.47 9.24 10.02 10.79
128.10-278.45 155.95-278.45 39.8 6.64 7.48 8.31 9.14 9.97 10.80 11.63
Over 278.45 Over 278.45 43.2 7.04 7.92 8.80 9.68 10.56 11.44 12.32
- -----------------
*The Tennessee state tax rate is the rate at which dividends and interest are
taxed.
</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
federal government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the condition
of the short-term debt market. The investment characteristics of the Trusts are
described more fully in the Prospectus.
CONNECTICUT RISK FACTORS
The following information is only a summary of risk factors associated with
Connecticut. It has been compiled from official government statements and other
publicly available documents. Although the Sponsor has not independently
verified the information, it has no reason to believe that it is not correct in
all material respects.
Manufacturing has historically been of prime economic importance to
Connecticut (sometimes referred to as the "State"). The manufacturing industry
is diversified, with transportation equipment (primarily aircraft engines,
helicopters and submarines) the dominant industry, followed by non-electrical
machinery, fabricated metal products and electrical machinery. As a result of a
rise in employment in service-related industries and a decline in manufacturing
employment, however, manufacturing accounted for only 17.39% of total
non-agricultural employment in Connecticut in 1996. Defense-related business
represents a relatively high proportion of the manufacturing sector. On a per
capita basis, defense awards to Connecticut have traditionally been among the
highest in the nation, and reductions in defense spending have had a substantial
adverse impact on Connecticut's economy.
The average annual unemployment rate in Connecticut increased from a low of
3.0% in 1988 to 7.6% in 1992 and, after a number of important changes in the
method of calculation, was reported to be 5.8% in 1996. Average per capita
personal income of Connecticut residents increased in every year from 1987 to
1996, rising from $21,592 to $33,875. However, pockets of significant
unemployment and poverty exist in several Connecticut cities and towns.
At the end of the 1990-1991 fiscal year, the General Fund had an accumulated
unappropriated deficit of $965,712,000. For the six fiscal years ended June 30,
1997, the General Fund ran operating surpluses, based on the State's budgetary
method of accounting, of approximately $110,200,000, $113,500,000, $19,700,000,
$80,500,000, $250,000,000 and $262,600,000, respectively. General Fund budgets
for the biennium ending June 30, 1999, were adopted in 1997. General Fund
expenditures and revenues are budgeted to be approximately $9,550,000,000 and
$9,700,000,000 for the 1997-1998 and 1998-1999 fiscal years, respectively, an
increase of more than 35% from the budgeted expenditures of approximately
$7,008,000,000 for the 1991-1992 fiscal year.
During 1991, the State issued a total of $965,710,000 Economic Recovery
Notes. The notes were to be payable no later than June 30, 1996, but as part of
the budget adopted for the biennium ending June 30, 1997, payment of the notes
scheduled to be paid during the 1995-1996 fiscal year was rescheduled to be made
over the four fiscal years ending June 30, 1999. The outstanding notes were
$157,055,000 as of December 1, 1997.
The State's primary method for financing capital projects is through the sale
of general obligation bonds. These bonds are backed by the full faith and credit
of the State. As of December 1, 1997, the State had authorized direct general
obligation bond indebtedness totaling $11,460,239,000, of which $10,159,950,000
had been approved for issuance by the State Bond Commission and $9,181,272,000
had been issued. As of December 1, 1997, State direct general obligation
indebtedness outstanding was $6,475,986,251.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The University is authorized to issue bonds totaling $962,000,000
to finance the improvements. The University's bonds will be secured by a State
debt service commitment, the aggregate amount of which is limited to $382
million for the four fiscal years ending June 30, 1999, and $580 million for
bonds issued in the six fiscal years ending June 30, 2005.
In addition, the State has limited or contingent liability on a significant
amount of other bonds. Such bonds have been issued by the following quasi-public
agencies: the Connecticut Housing Finance Authority, the Connecticut Development
Authority, the Connecticut Higher Education Supplemental Loan Authority, the
Connecticut Resources Recovery Authority and the Connecticut Health and
Educational Facilities Authority. Such bonds have also been issued by the cities
of Bridgeport and West Haven and the Southeastern Connecticut Water Authority.
As of March 3, 1998, the amount of bonds outstanding on which the State has
limited or contingent liability totaled $4,000,900,000.
PENNSYLVANIA 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 May 1997 level of 82.7% 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 17.2% of non-agricultural employment as of May 1997, has
fallen behind both the services sector and the trade sector as the largest
single source of employment within the Commonwealth. In May 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 May 1997, the
average unemployment rate in the Commonwealth was 5.9% compared to 5.6% for the
United States. As of January 1997, seasonally adjusted unemployment rate for the
Commonwealth was 5.2% and for the United States was 5.4%.
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.
TENNESSEE RISK FACTORS
The following brief summary regarding the economy of Tennessee is based upon
information drawn from publicly available sources and is included for the
purpose of providing information about general economic conditions that may or
may not affect issuers of the Tennessee obligations. The Sponsor has not
independently verified any of the information contained in such publicly
available documents.
The State Constitution of Tennessee requires a balanced budget. No legal
authority exists for deficit spending for operating purposes beyond the end of a
fiscal year. Tennessee law permits tax anticipation borrowing but any amount
borrowed must be repaid during the fiscal year for which the borrowing was done.
Tennessee has not issued any debt for operating purposes during recent years
with the exception of some advances which were made from the Federal
Unemployment Trust Fund in 1984. No such advances are now outstanding nor is
borrowing of any type for operating purposes contemplated.
The State Constitution of Tennessee forbids the expenditure of the proceeds
of any debt obligation for a purpose other than the purpose for which it was
authorized by statute. Under State law, the term of bonds authorized and issued
cannot exceed the expected life of the projects being financed.
Furthermore, the amount of a debt obligation cannot exceed the amount authorized
by the General Assembly.
Tennessee has a diverse agricultural sector. Both corn and nursery operations
have ranked fourth and fifth (often switching places) in terms of cash receipts
for Tennessee farmers since 1990. Other important crops include wheat,
floriculture, hay, and vegetables. Moreover, cattle operations generate more
income in the aggregate than any other single commodity in Tennessee. In all,
production agriculture generates more than $2 billion in annual cash receipts
for Tennessee farmers. Farm profit in recent years, however, has fluctuated
sharply from a $799 million peak in net cash income for 1992's record production
year to $614.7 million in 1995. Net cash income for 1996 was expected to be
substantially higher than 1995 due to the second consecutive year of high prices
for many crops.
The 1997 year is the first full year under the 1996 farm bill, which
radically changed the character of federal income support for agriculture.
Overall, Tennessee will benefit from the bill, especially in the next few years
when federal payments are substantially higher than what farmers would have
received under the old policy regime. Yet, production shifting (i.e., cotton to
corn and wheat) is expected to cost the state $29.1 million in total income and
output, as well as a loss of an estimated 231 jobs. These changes may result in
significant economic impacts for the regions and industries in which they are
centralized.
Tennessee has experienced a slowdown in the economy during the last several
years. The most prominent is the loss of over 14,000 jobs in the state's
nondurable goods manufacturing sector between the third quarter of 1995 and the
third quarter of 1996. According to the University of Tennessee's Center for
Business and Economic Research, job growth between the third period of 1995 and
1996, at 2.3%, fell a full percentage point below the growth registered in the
prior three years. Also, state sales tax collections grew only 5.9% in 1995-96
and are growing at a similar rate in 1997, versus 9.7% in 1994-95. Despite these
trouble spots, the state's unemployment rate in 1995 and 1996 was 5.2% and 4.9%,
respectively, compared to the national unemployment rates of 5.6% and 5.4%,
respectively. Also, there is strong job growth outside of the manufacturing
sector and significant population growth of 7.8% between 1990 and 1995 versus
5.6% for the U.S.
Overall, employment growth has slipped by a full percentage point, with few
sectors avoiding theslowdown. Only the government and construction sectors show
stronger growth than in earlier years. At the end of 1996, non-agricultural
employment is expected to grow 2.5% and nominal personal income is expected to
have increased 4.6%. Thus, Tennessee will have outperformed the U.S. job growth
rate of 2.0%, but trail in personal growth of 5.4%.
The short-term economic outlook calls for stable and moderate economic growth
for Tennessee through 1998, similar to projections for the national economy.
Nonagricultural employment is expected to grow 2.0% in 1997 and 2.1% in 1998,
considerably lower than the 3.4% average gain registered between 1993 and 1996.
Job growth is expected to be somewhat slower for the national economy, climbing
1.7% in 1997 and 1.4% in 1998.
Tennessee's construction sector is expected to lead all sectors in job
growth, predicted at over 4% in the next two years. The trade sector will grow
3.2% in 1997 and 3.0% in 1998. The services sector, the largest employment
sector of the state economy (accounting for one of four nonagricultural jobs in
1996) will expand at a 3.4% pace in 1997 and will grow 3.2% in 1998. Job growth
in finance, insurance and real estate will be in the 2.0-2.3% range, while
employment in transportation, communication and public utilities will be 1.0% in
1997 and 1998.
The state's manufacturing sector, contributing one out of every five state
jobs, will fall 0.1% in 1997 and rebound 0.5% in 1998. Unfortunately, nondurable
goods employment is expected to decrease over the next few years, with job
losses totaling 3,300 in 1997 and 1,500 in 1998. The textile, apparel and
leather sectors have borne most of the recent job losses. The job losses in
1995-96 came as a surprise and further unanticipated losses may arise in the
future. The state's durable goods manufacturing sector, however, is forecast to
increase 1.0% in 1997 and 1.4% in 1998.
Tennessee's unemployment rate is predicted at 5.1% in both 1997 and 1998. The
U.S. unemployment rate is projected to be 5.5% in 1997, rising to 5.8% in
1998.
The state economy has enjoyed strong growth in personal income in the last
several years. In particular, total personal income growth and per capita
personal income growth between 1993 and 1995 have surpassed growth for the U.S.
economy. However, the margin narrowed in 1995 as U.S. economic growth
accelerated and Tennessee's strong growth slowed.
Tennessee led all of the southeastern states in per capita personal income
growth between 1985 and 1993 and surpassed U.S. growth by a full percentage
point. From 1994-95, Tennessee's per capita personal income increased 5.3% to
$21,038, which was slightly higher than the southeast's average of $20,970. In
1995-96, Tennessee's per capita personal income increased 3.16% to $21,705. In
both 1995 and 1996, Tennessee's per capita personal income was 91% of the
national average.
Growth in nominal Tennessee personal income is projected at 5.5% and 5.4% in
1997 and 1998, respectively. This is much slower than the 7% rate in both 1994
and 1995, but an improvement over the 4.5% rate in 1996. Nominal per capita
personal income is forecast to be up 4.2% and 4.1% in 1997 and 1998,
respectively, comparing well to the 3.5% and 3.8% growth rates projected for the
national economy.
Wage and salary income will advance 5.6% in 1997 and 5.3% in 1998. Roughly
comparable growth will be recorded by other labor income. Proprietor's income is
expected to increase 5.7% and 7.1% in the following two years, while rent,
interest and dividend income will grow 5.5% and 4.8% in 1997 and 1998,
respectively.
Sales tax revenue grew nearly 14% in 1992-93. This figure sharply declined
for fiscal year 1995-96 when the growth rate was only 5.9%. Taxable sales are
forecast to increase 4.5% in 1997 and 4.6% in 1998.
The actual state budget for fiscal year 1995-96 was $13.331 billion and the
estimated state budget for 1996-97 is $14.529 billion. Actual General Fund
revenue for fiscal year 1995-96 was $11,343.9 million. Actual General Fund
appropriations were $5,311.5 million. Estimated revenue for the General Fund for
fiscal year 1996-97 is $12,061.0 million, an increase of $717.1 million or 6.3%.
Estimated appropriations in the General Fund for 1996-97 are $5,735 million, an
increase of $423.5million or 8%.
Total state revenue for fiscal year 1996-97 is estimated at $6,887.5 million,
an increase of 4.7% from 1995-96. Of this amount, approximately 91.8% or
$6,323.1 million is scheduled to be obtained from taxes, each of which will
generate a certain percentage of the total revenues as follows: sales and use
(56.2%); franchise and excise (12.7%); gasoline and gasoline inspection (8.8%);
gross receipts and privilege (4.2%); motor vehicle (3%); income and inheritance
(2.5%); motor fuel (1.9%); tobacco, beer, and alcoholic beverages (1.9%) and all
other taxes (.6%). Of the total state revenue, approximately 41.5% or $2,854.7
million is estimated from the General Fund.
The recommended state budget for fiscal year 1997-98 is $14.420 billion which
is $109.6 million less than 1996-97. Recommended General Fund revenues for
fiscal year 1997-98 are $12,329.2 million and appropriations are $5,993.3
million. The revenue increase from the prior fiscal year is $268.2 million or
2.2% and the increase in appropriations is $258.4 million, or 4.5%.
Total state revenue for fiscal year 1997-98 is estimated at $7,156 million.
Approximately 92% or $6,588.8 million of this amount is projected to be from
taxes. The top three state tax revenue producers are expected to be sales and
use tax at 56.7% or $4,057.1 million of total state revenue, franchise and
excise tax at 12.8% or $913.2 million, and gasoline/gasoline inspection tax at
8.6% or $615.7 million. Approximately 41.5% or $2,966.4 million of the total
state revenue is expected to be in the General Fund.
For Fiscal Year 1997-98, State revenues are scheduled to be allocated in the
following percentages: education (45%); health and social services (23.5%);
transportation, business and economic development (10.4%); law, safety and
correction (9.2%); general governmental (2.6%) and resources and regulation
(2.5%).
Tennessee's general obligation bonds are rated Aaa by Moody's, AAA by
Standard & Poor's and AAA by Fitch IBCA, Inc. (formerly Fitch Investors Service,
L.P.). There can be no assurance that the economic conditions on which these
ratings are based will continue or that particular obligations contained in the
Portfolio of a Tennessee IM-IT Trust may not be adversely affected by changes in
economic or political conditions.
The state sold general obligation bonds in the amount of $113.2 million in
fiscal year 1995-96. This issue increased Tennessee's total general obligation
bond debt at June 30, 1996 to $767,971,000. Approximately 99.9% of this debt was
issued to provide funding for institutional and building construction with the
remaining .1% for highways. Total authorized but unissued bonds for fiscal year
1996-97 is $l,413,755,000. The 1997-98 proposed fiscal year budget recommends
the authorization of an additional $75 million in highway bonds, and $60.8
million in institutional and building bonds to finance capital projects.
Tennessee is involved in certain legal proceedings that, if decided against
the State, may require the State to make significant future expenditures or may
substantially impair revenues. The Tennessee Supreme Court affirmed a case in
which the lower court found that the Tennessee Department of Revenue improperly
defined non-business earnings for tax purposes. Although this case involved only
$925,000, its outcome could affect future cases and could have a detrimental
impact to Tennessee's revenue base. The Tennessee Supreme Court also reversed a
similar case in which the lower court found that the taxpayer's partial sale of
business holdings resulted in taxable business income. Although the Tennessee
Supreme Court differentiated this case from the previous one, these cases may
create future litigation challenging Tennessee's corporate tax and impacting
revenue.
The foregoing information does not purport to be a complete or exhaustive
description of all the conditions to which the issuers of Bonds in the Tennessee
IM-IT Trust are subject. Many factors including national economic, social and
environmental policies and conditions, which are not within the control of the
issuers of Bonds, could affect or could have an adverse impact on the financial
condition of the State and various agencies and political subdivisions located
in the State. Since certain Bonds in the Tennessee IM-IT Trust (other than
general obligation bonds issued by the State) are payable from revenue derived
from a specific source or authority, the impact of a pronounced decline in the
national economy or difficulties in significant industries within the State
could result in a decrease in the amount of revenues realized from such source
or by such authority and thus adversely affect the ability of the respective
issuers of the Bonds in the Tennessee IM-IT Trust to pay the debt service
requirements on the Bonds. Similarly, such adverse economic developments could
result in a decrease in tax revenues realized by the State and thus could
adversely affect the ability of the State to pay the debt service requirements
of any Tennessee general obligation bonds in the Tennessee IM-IT Trust. The
Sponsor is unable to predict whether or to what extent such factors or other
factors may affect the issuers of Bonds, the market value or marketability of
the Bonds or the ability of the respective issuers of the Bonds acquired by the
Tennessee IM-IT Trust to pay interest on or principal of the Bonds.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated monthly and semi-annual
distributions of interest and principal to Unitholders. The tables assume no
changes in expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Bonds prior to maturity or
expected retirement date and the receipt of principal upon maturity or expected
retirement date. To the extent the foregoing assumptions change actual
distributions will vary.
<TABLE>
<CAPTION>
CONNECTICUT
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 4.68 $ 4.68
August 1998 - February 2009 3.80 3.80
March 2009 3.70 $ 80.02 83.72
April 2009 - June 2009 3.46 3.46
July 2009 3.26 160.05 163.31
August 2009 - October 2010 2.80 2.80
November 2010 2.69 32.01 34.70
December 2010 - June 2018 2.67 2.67
July 2018 2.58 80.03 82.61
August 2018 - June 2022 2.38 2.38
July 2022 2.22 128.04 130.26
August 2022 - June 2027 1.86 1.86
July 2027 1.67 160.05 161.72
August 2027 - June 2028 1.22 1.22
July 2028 .83 320.10 320.93
<CAPTION>
CONNECTICUT (CONTINUED)
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 4.73 $ 4.73
January 1999 - January 2009 23.05 23.05
March 2009 $ 80.02 80.02
July 2009 21.38 160.05 181.43
January 2010 - July 2010 16.99 16.99
November 2010 32.01 32.01
January 2011 16.63 16.63
July 2011 - January 2018 16.21 16.21
July 2018 16.13 80.03 96.16
January 2019 - January 2022 14.46 14.46
July 2022 14.31 128.04 142.35
January 2023 - January 2027 11.34 11.34
July 2027 11.15 160.05 171.20
January 2028 7.44 7.44
July 2028 7.05 320.10 327.15
<CAPTION>
PENNSYLVANIA
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 4.73 $ 4.73
August 1998 - December 2007 3.84 3.84
January 2008 3.63 $166.61 170.24
February 2008 - September 2009 3.14 3.14
October 2009 3.04 76.64 79.68
November 2009 - February 2020 2.81 2.81
March 2020 2.41 116.63 119.04
April 2020 - September 2023 2.33 2.33
October 2023 2.33 49.98 52.31
November 2023 - June 2024 2.33 2.33
July 2024 1.79 158.28 160.07
August 2024 - November 2026 1.68 1.68
December 2026 1.09 179.94 181.03
January 2027 - May 2027 .97 .97
June 2027 .76 166.61 167.37
July 2027 - June 2028 .28 .28
July 2028 .17 84.97 85.14
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 4.78 $ 4.78
January 1999 - July 2007 23.30 23.30
January 2008 23.08 $166.61 189.69
July 2008 - July 2009 19.06 19.06
October 2009 76.64 76.64
January 2010 17.98 17.98
July 2010 - January 2020 17.10 17.10
March 2020 116.63 116.63
July 2020 14.73 14.73
January 2021 - July 2023 14.16 14.16
October 2023 49.98 49.98
January 2024 14.16 14.16
July 2024 13.63 158.28 171.91
January 2025 - July 2026 10.22 10.22
December 2026 179.94 179.94
January 2027 8.91 8.91
June 2027 166.61 166.61
July 2027 5.04 5.04
January 2028 1.77 1.77
July 2028 1.66 84.97 86.63
<CAPTION>
TENNESSEE
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 4.58 $ 4.58
August 1998 - April 2008 3.72 3.72
May 2008 3.52 $158.84 162.36
June 2008 - May 2015 3.05 3.05
June 2015 2.85 165.95 168.80
July 2015 - March 2018 2.39 2.39
April 2018 2.24 118.54 120.78
May 2018 - August 2018 1.91 1.91
September 2018 1.79 94.83 96.62
October 2018 - December 2018 1.53 1.53
January 2019 1.38 118.54 119.92
February 2019 - May 2019 1.05 1.05
June 2019 1.05 47.42 48.47
July 2019 - April 2020 1.05 1.05
May 2020 .98 61.64 62.62
June 2020 - November 2027 .80 .80
December 2027 .64 47.42 48.06
January 2028 - October 2028 .61 .61
November 2028 .40 175.44 175.84
<CAPTION>
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JULY AND ESTIMATED ESTIMATED ESTIMATED
JANUARY UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1998 $ 4.63 $ 4.63
January 1999 - January 2008 22.55 22.55
May 2008 $158.84 158.84
July 2008 21.01 21.01
January 2009 - January 2015 18.55 18.55
June 2015 165.95 165.95
July 2015 17.67 17.67
January 2016 - January 2018 14.50 14.50
April 2018 118.54 118.54
July 2018 12.91 12.91
September 2018 94.83 94.83
January 2019 9.81 118.54 128.35
June 2019 47.42 47.42
July 2019 - January 2020 6.41 6.41
May 2020 61.64 61.64
July 2020 5.85 5.85
January 2021 - July 2027 4.92 4.92
December 2027 47.42 47.42
January 2028 4.56 4.56
July 2028 3.73 3.73
November 2028 2.28 175.44 177.72
</TABLE>
<PAGE>
S-1
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 insurance policy (if applicable).
1.5 Form of Master Agreement Among Underwriters. Reference is made to
Exhibit 1.5 to the Registration Statement on Forms S-6 for Insured
Municipals Income Trust, 228th Insured Multi-Series (File No.
333-36891) as filed on January 29, 1998.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal, Pennsylvania and Tennessee 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 Connecticut
residents of Units of the Connecticut IM-IT Trust.
4.1 Consent of Interactive Data Corp.
4.2 Consent of Standard & Poor's.
4.3 Consent of Independent Certified Public Accountants.
EX-27 Financial Data Schedules
<PAGE>
SIGNATURES
The Registrant, Insured Municipals Income Trust, 231st 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 and Multi-Series 300 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, 231st Insured Multi-Series has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Chicago and State
of Illinois on the 29th day of May, 1998.
INSURED MUNICIPALS INCOME TRUST
231st
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 May 29, 1998 by
the following persons who constitute a majority of the Board of Directors of Van
Kampen American Capital Distributors, Inc.
SIGNATURE TITLE
Don G. Powell Chairman and Chief Executive )
Officer )
John H. Zimmerman President and Chief )
Operating Officer
Ronald A. Nyberg Executive Vice President and )
General Counsel
William R. Rybak Executive Vice President and )
Chief Financial Officer )
GINA M. COSTELLO
(Attorney-in-fact*)
- --------------------------------------------------------------------------------
* An executed copy of each of the related powers of attorney was filed with the
Securities and Exchange Commission in connection with the Registration Statement
on Form S-6 of Van Kampen American Capital Equity Opportunity Trust, Series 64
(file No. 33-33087) and Van Kampen American Capital Equity Opportunity Trust,
Series 87 (file No. 333-44581) and are incorporated herein by reference.
EXHIBIT 1.1
INSURED MUNICIPALS INCOME TRUST
231ST INSURED MULTI-SERIES
TRUST AGREEMENT
Dated: May 29, 1998
This Trust Agreement between Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of Van
Kampen American Capital Investment Advisory Corp., as Evaluator, and The Bank of
New York, as Trustee, sets forth certain provisions in full and incorporates
other provisions by reference to the document entitled "Standard Terms and
Conditions of Trust, For Van Kampen American Capital Distributors, Inc.
Tax-Exempt Trust, Dated March 16, 1995" (herein called the "Standard Terms and
Conditions of Trust"), and such provisions as are set forth in full and such
provisions as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(4), listed in the
Schedules hereto, have been deposited in the Trusts under this Trust
Agreement.
(b) The fractional undivided interest in and ownership of the
various Trusts represented by each Unit thereof is a fractional amount,
the numerator of which is one and the denominator of which is the
amount set forth under "Summary of Essential Financial Information
Number of Units" in the related 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 in the related 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 "Summary of Essential Financial Information-Estimated
Distributions - Initial Distribution in the related Prospectus Part I.
(e) The First Settlement Date shall be the date set forth in
the footnotes to the "Summary of Essential Financial Information" in
the related 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 the close of the New York Stock Exchange.
(h) As set forth in Section 3.05, the Record Dates and
Distribution Dates for each Trust are those dates set forth under
"Summary of Essential Financial Information - Estimated Distributions"
in the related 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-Expenses-Evaluator's 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-Expenses-Evaluator's Evaluation Fee" in the related
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 the related Prospectus Part I under the section entitled
"Summary of Essential Financial Information-Expenses-Trustee's Fee" and
will include a fee to induce the Trustee to advance funds to meet
scheduled distributions.
(l) The sixth paragraph of Section 3.05 is hereby revoked and
replaced by the following paragraph:
Unitholders desiring to receive semi-annual
distributions and who purchase their Units prior to the Record
Date for the second distribution under the monthly plan of
distribution may elect at the time of purchase to receive
distributions on a semi-annual basis by notice to the Trustee.
Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee.
Unitholders desiring to receive semi-annual distributions and
who purchase their Units prior to the Record Date for the
first distribution may elect at the time of purchase to
receive distributions on a semi-annual basis by notice to the
Trustee. Such notice shall be effective with respect to
subsequent distributions until changed by further notice to
the Trustee. Changes in the plan of distribution will become
effective as of opening of business on the day after the next
succeeding semi-annual Record Date and such distributions will
continue until further notice.
(m) Sections 8.02(d) and 8.02(e) are hereby revoked and
replaced with the following:
(d) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Interest Account
of such Trust;
(e) distribute to each Unitholder of such Trust such
holder's pro rata share of the balance of the Principal
Account of such Trust; and
<PAGE>
IN WITNESS WHEREOF, Van Kampen American Capital Distributors, Inc. has
caused this Trust Agreement to be executed by one of its Vice Presidents or
Assistant Vice Presidents and its corporate seal to be hereto affixed and
attested by its Secretary or one of its Vice Presidents or Assistant
Secretaries, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., has caused this Trust Indenture and
Agreement to be executed by its President or one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by its Secretary, its
Assistant Secretary or one of its Assistant Vice Presidents and The Bank of New
York, has caused this Trust Agreement to be executed by one of its Vice
Presidents and its corporate seal to be hereto affixed and attested to by one of
its Vice Presidents, Assistant Vice Presidents or Assistant Treasurers; all as
of the day, month and year first above written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By JAMES J. BOYNE
Vice President, Associate General Counsel
and Assistant Secretary
(SEAL)
Attest:
By CATHY NAPOLI
Assistant Secretary
AMERICAN PORTFOLIO EVALUATION SERVICE, a division of Van Kampen American
Capital Investment Advisory Corp.
By DENNIS J. MCDONNELL
President
(SEAL)
Attest:
By JAMES J. BOYNE
Assistant Secretary
THE BANK OF NEW YORK
By JEFFREY BIESELIN
Vice President
(SEAL)
Attest:
By JEFFREY COHEN
Assistant Treasurer
<PAGE>
SCHEDULES TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
INSURED MUNICIPALS INCOME TRUST, 231ST INSURED MULTI-SERIES
(Note: Incorporated herein and made a part hereof as indicated below is the
corresponding "Portfolio" of each of the Trusts as set forth in the related
Prospectus Part I.)
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
May 29, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: INSURED MUNICIPALS INCOME TRUST, 231ST 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, 231st Insured
Multi-Series (hereinafter referred to as the "Fund"), in connection with the
preparation, execution and delivery of a Trust Agreement dated May 29, 1998
between Van Kampen American Capital Distributors, Inc., as Depositor, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, and The Bank of New York, as Trustee,
pursuant to which the Depositor has delivered to and deposited Bonds listed in
the Schedules to the Trust Agreement with the Trustee and pursuant to which the
Trustee has issued to or on the order of the Depositor a certificate or
certificates representing Units of fractional undivided interest in and
ownership of the several Trusts of said Fund (hereinafter referred to as the
"Units") created under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the Units in the
several Trusts of the Fund have been duly authorized; and
2. The certificates evidencing the Units in the several
Trusts of the Fund when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust Agreement,
will constitute valid and binding obligations of such Trusts and the
Depositor in accordance with the terms thereof.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-45169) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
May 29, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: INSURED MUNICIPALS INCOME TRUST, 231ST INSURED MULTI-SERIES
Gentlemen:
We have acted as counsel for Van Kampen American Capital Distributors,
Inc., Depositor of Insured Municipals Income Trust, 231st 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 May 29, 1998 (the "Indenture") between Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory Corp.,
as Evaluator, and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we have
deemed pertinent. For purposes of the following opinions, it is assumed that
each asset of the Trusts is debt the interest on which is excluded from gross
income for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
trusts) of Chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that the
number of Units of such Trust held by him bears to the total number of
Units outstanding of such Trust. Under Subpart E, Subchapter J of
Chapter 1 of the Code, income of each Trust will be treated as income
of each Unitholder of the respective Trust in the proportion described,
and an item of Trust income will have the same character in the hands
of a Unitholder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of a Trust consists of
interest and original issue discount excludable from gross income under
Section 103 of the Code, such income will be excludable from Federal
gross income of the Unitholders, except in the case of a Unitholder who
is a substantial user (or a person related to such user) of a facility
financed through issuance of any industrial development bonds or
certain private activity bonds held by the respective Trust. In the
case of such Unitholder who is a substantial user (and no other)
interest received with respect to his Units attributable to such
industrial development bonds or such private activity bonds is
includable in his gross income. In the case of certain corporations,
interest on the Bonds is included in computing the alternative minimum
tax pursuant to Section 56(c) of the Code, and the branch profits tax
imposed by Section 884 of the Code with respect to U.S.
branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. If a Bond is
acquired with accrued interest, that portion of the price paid for the
accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a
premium, the amount of the premium is added to the tax basis of the
Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. Accordingly, Unitholders must
reduce the tax basis of their Units for their share of accrued interest
received by the respective Trust, if any, on Bonds delivered after the
Unitholders pay for their Units to the extent that such interest
accrued on such Bonds before the date the Trust acquired ownership of
the Bonds (and the amount of this reduction may exceed the amount of
accrued interest paid to the seller) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in
capital loss upon the disposition of such Units. In addition, such
basis will be increased by the Unitholder's aliquot share of the
accrued original issue discount (and market discount, if the Unitholder
elects to include market discount in income as it accrues) with respect
to each Bond held by the Trust with respect to which there was original
issue discount at the time the Bond was issued (or which was purchased
with market discount) and reduced by the annual amortization of bond
premium, if any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by
sale, payment on maturity, redemption or otherwise) gain or loss is
recognized to the Unitholder and the amount thereof is measured by
comparing the Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the asset
disposed of. Such basis is ascertained by apportioning the tax basis
for his Units among each of the Trust assets (as of the date on which
his Units were acquired) ratably according to their values as of the
valuation date nearest the date on which he purchased such Units. A
Unitholder's basis in his Units and of his fractional interest in each
Trust asset must be reduced by the amount of his aliquot share of
accrued interest received by the Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on the Bonds before the date the Trust acquired
ownership of the Bonds (and the amount of this reduction may exceed the
amount of accrued interest paid to the seller), must be reduced by the
annual amortization of bond premium, if any, on Bonds held by the Trust
and must be increased by the Unitholder's share of the accrued original
issue discount (and market discount, if the Unitholder elects to
include market discount in income as it accrues) with respect to each
Bond which, at the time the Bond was issued, had original issue
discount (or which was purchased with market discount).
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price," such
excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the original
issuance of Bonds held by the Trust, Section 1272(a)(7) of the Code
provides for a reduction in the accrued "daily portion" of such
original issue discount upon the purchase of a Bond subsequent to the
Bond's original issue, under certain circumstances. In the case of any
Bond held by the Trust the interest on which is excludable from gross
income under Section 103 of the Code, any original issue discount which
accrues with respect thereto will be treated as interest which is
excludable from gross income under Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance Policies, if any, issued to certain of the Trusts on the Date
of Deposit by AMBAC Assurance Corporation, Financial Guaranty Insurance
Corporation or a combination thereof. Each such policy, or a
combination of such policies, insures all bonds held by the Trustee for
that particular Trust (other than bonds described in paragraph (vii))
against default in the prompt payment of principal and interest. In our
opinion, any amount paid under each said policy, or a combination of
said policies, which represents maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal gross
income if, and to the same extent as, such interest would have been so
excludable if paid in normal course by the issuer of the defaulted
Bonds provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent
with the reasonable expectation that the issuer of the Bonds, rather
than the insurer, will pay debt service on the Bonds. Paragraph (ii) of
this opinion is accordingly applicable to insurance proceeds
representing maturing interest.
(vii) Certain Bonds in the portfolios of certain of the Trusts
have been insured by the issuers thereof against default in the prompt
payment of principal and interest (the "Insured Bonds"). Insurance has
been obtained for such Insured Bonds, or, in the case of a commitment,
the Bonds will be ultimately insured under the terms of such an
insurance policy, which are designated as issuer Insured Bonds on the
portfolio pages of the respective Trusts in the Prospectus for the
Fund, by the issuer of such Insured Bonds. Insurance on Insured Bonds
is effective so long as such Insured Bonds remain outstanding. For each
of these Insured Bonds, we have been advised that the aggregate
principal amount of such Insured Bonds listed on the portfolio page for
the respective Trust was acquired by the applicable Trust and are part
of the series of such Insured Bonds listed in the aggregate principal
amount. Based upon the assumption that the Insured Bonds of the Trust
are part of the series covered by an insurance policy or, in the case
of a commitment, will be ultimately insured under the terms of such an
insurance policy, it is our opinion that any amounts received by the
applicable Trust representing maturing interest on such Insured Bonds
will be excludable from Federal gross income if, and to the same extent
as, such interest would have been so excludable if paid in normal
course by the issuer provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
Insured Bonds, rather than the insurer, will pay debt service on the
Insured Bonds. Paragraph (ii) of this opinion is accordingly applicable
to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "adjusted
issue price"). The application of these rules will also vary depending on the
value of the Bonds on the date a Unitholder acquires his Units, and the price
the Unitholder pays for his Units.
Because the Trusts do not include any "private activity" bonds within
the meaning of Section 141 of the Code issued on or after August 8, 1986, none
of the Trust Funds' interest income shall be treated as an item of tax
preference when computing the alternative minimum tax. In the case of
corporations, for taxable years beginning after December 31, 1986, the
alternative minimum tax depends upon the corporation's alternative minimum
taxable income ("AMTI") which is the corporation's taxable income with certain
adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used
in computing AMTI of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust or REMIC) for taxable years
beginning after 1989, is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its AMTI
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trust, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers
are required to disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year
of 100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986, will
generally be the amount that bears the same ratio to the interest deduction
otherwise allowable (determined without regard to Section 265) to the taxpayer
for the taxable year as the taxpayer's average adjusted basis (within the
meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued) subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust pays for
Bonds or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law, the
accretion had been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bond, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Unitholder elects to include market discount in taxable income
as it accrues.
We have 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. It is being assumed
for Federal income tax purposes that the Bonds constitute debt.
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.
We have also examined the income tax law of the State of Tennessee to
determine its applicability to the Tennessee IM-IT Trust (the "Trust") being
created as part of the Fund and to the holders of Units in the Tennessee Trust
who are residents of the State of Tennessee ("Unitholders").
The assets of the Trust will consist of bonds of the State of
Tennessee, or any agency of the State of Tennessee, bonds of any county or
agency of any county of Tennessee, bonds of any incorporated town or city or
agency of any incorporated town or city and bonds of housing authorities of
Tennessee, provided such bonds are issued for any public purpose ("Tennessee
Bonds") or by the Commonwealth of Puerto Rico (the "Puerto Rico Bonds")
(collectively, the "Bonds").
Although we express no opinion with respect to the issuance of the
Bonds, in rendering our opinion expressed herein, we have assumed that: (i) the
Bonds were validly issued, (ii) the interest thereon is excludible from gross
income for federal income tax purposes and (iii) interest on the Bonds, if
received directly by a Unitholder, would be exempt from the Hall Income Tax (the
"Hall Income Tax") imposed by Section 67-2-102 of the Tennessee Code
(hereinafter "Section" refers to sections of the Tennessee Code). This opinion
does not address the taxation of persons other than full time residents of
Tennessee.
On May 8, 1992, legislation (the "Legislation") was enacted in
Tennessee which, in part, clarified that with respect to distributions made by a
unit investment trust after December 31, 1991, that a proportionate share of
such distributions that relate to interest income paid with respect to Tennessee
Bonds from a unit investment trust characterized as a grantor trust for federal
income tax purposes will retain its status as tax-exempt for purposes of the
Hall Income Tax when distributed to Unitholders. The Legislation also provides
an exemption for distributions made by a unit investment trust that are
attributable to "bonds or securities of the United States government or any
agency or instrumentality thereof" ("U.S. Government, Agency or Instrumentality
Bonds"). Unlike prior law, it is important to note that the exemption described
above would not apply with respect to a proportionate share of the distributions
of income by a unit investment trust, to the extent that less than all of the
bonds held by the unit investment trust constitute Tennessee Bonds or U.S.
Government, Agency or Instrumentality Bonds.
Further, because the Legislation only appears to provide an exemption
for distributions that relate to interest income, distributions by the Trust
that relate to capital gains realized from the sale or redemption of Tennessee
Bonds or U.S. Government, Agency or Instrumentality Bonds are likely to be
treated as taxable dividends for purposes of the Hall Income Tax. However,
capital gains realized directly by a Unitholder when the Unitholder sells or
redeems his Unit will not be subject to the Hall Income Tax.
Because the Legislation only provides an exemption for distributions
attributable to interest on Tennessee Bonds or U.S. Government, Agency or
Instrumentality Bonds, it must be determined whether bonds issued by the
Government of Puerto Rico qualify as U.S. Government, Agency or Instrumentality
Bonds. For Hall Income Tax purposes, there is currently no published
administrative interpretation or opinion of the Attorney General of Tennessee
dealing with the status of distributions made by unit investment trusts such as
the Tennessee Trust that are attributable to interest paid on bonds issued by
the Government of Puerto Rico. However, in a letter dated August 14, 1992 (the
"Commissioner's Letter"), the Commissioner of the State of Tennessee Department
of Revenue advised that Puerto Rico would be an "instrumentality" of the U.S.
Government and treated bonds issued by the Government of Puerto Rico as U.S.
Government, Agency or Instrumentality Bonds. Based on this conclusion, the
Commissioner advised that distributions from a mutual fund attributable to
investments in Puerto Rico Bonds are exempt from the Hall Income Tax. Both the
Sponsor and Chapman and Cutler, for purposes of its opinion (as set forth
below), have assumed, based on the Commissioner's Letter, that bonds issued by
the Government of Puerto Rico are U.S. Government, Agency or Instrumentality
Bonds. However, it should be noted that the position of the Commissioner is not
binding, and is subject to change, even on a retroactive basis.
The Sponsor cannot predict whether new legislation will be enacted into
law affecting the tax status of Tennessee Trusts. The occurrence of such an
event could cause distributions of interest income from the trust to be subject
to the Hall Income Tax.
Based on the foregoing, and based on review and consideration of
existing laws of the State of Tennessee as of this date, it is our opinion, and
we herewith advise you, as follows:
1. For purposes of the Hall Income Tax, the Tennessee Excise
Tax imposed by Section 67-4-806 (the "State Corporate Income Tax"), and
the Tennessee Franchise Tax imposed by Section 67-4-903, the Trust will
not be subject to such taxes.
2. For Hall Income Tax purposes, a proportionate share of
such distributions from the Trust to Unitholders, to the extent
attributable to interest on the Tennessee Bonds (based on the relative
proportion of interest received or accrued attributable to Tennessee
Bonds) will be exempt from the Hall Income Tax when distributed to such
Unitholders. Based on the Commissioner's Letter, distributions from the
Trust to Unitholders, to the extent attributable to interest on the
Puerto Rico Bonds (based on the relative proportion of interest
received or accrued attributable to the Puerto Rico Bonds) will be
exempt from the Hall Income Tax when distributed to such Unitholders.
To the extent the assets of the Trust consist of assets other than the
Bonds, a proportionate share of distributions from the Tennessee Trust
attributable to the income secured by such assets would not, under
current law, be exempt from the Hall Income Tax when distributed to
Unitholders.
3. For State Corporate Income Tax purposes, Tennessee law
does not provide an exemption for interest on Tennessee Bonds and
requires that all interest excludible from Federal gross income must be
included in calculating "net earnings" subject to the State Corporate
Income Tax. We express no opinion herein regarding whether such tax
would be imposed on the earnings or distributions of the Tennessee
Trust (including interest on the Bonds or gain realized upon the
disposition of the Bonds by the Trust) attributable to Unitholders
subject to the State Corporate Income Tax. However, based upon prior
written advice from the Tennessee Department of Revenue, earnings and
distributions from the Trust (including interest on the Tennessee Bonds
or gain realized upon the disposition of the Tennessee Bonds by the
Trust) attributable to the Unitholders should be exempt from the State
Corporate Income Tax. The position of the Tennessee Department of
Revenue is not binding, and is subject to change, even on a retroactive
basis.
4. Each Unitholder will realize taxable gain or loss for
State Corporate Income Tax purposes when the Unitholder redeems or
sells his Units at a price that differs from original cost as adjusted
for accretion of any discount or amortization of any premium and other
basis adjustments, including any basis reduction that may be required
to reflect a Untiholder's share of interest, if any, accruing on the
Bonds during the interval between the Untiholder's settlement date and
the date such Bonds are delivered to the Tennessee Trust, if later. Tax
basis reduction requirements relating to amortization of bond premium
may, under some circumstances, result in Unitholders realizing taxable
gain when the Units are sold or redeemed for an amount equal to or less
than their original cost.
5. For purposes of the Tennessee Property Tax imposed by
Section 67-5-102, the Tennessee Trust will be exempt from taxation with
respect to the Tennessee Bonds it holds. As for the taxation of the
Units held by the Unitholders, although intangible personal property is
not presently subject to Tennessee taxation, no opinion is expressed
with regard to potential property taxation of the Unitholders with
respect to the Units because the determination of whether property is
exempt from such tax is made on a county by county basis.
6. The Bonds and the Units held by the Unitholders will not
be subject to Tennessee sales and use taxes.
We have not examined any of the Bonds to be deposited and held in the
Tennessee Trust or the proceedings for the issuance thereof or the opinions of
bond counsel with respect thereto, and therefore express no opinion as to the
exemption from State income taxes of interest on the Bonds if received directly
by a Unitholder. We 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 Bonds, bond counsel to the issuing authorities rendered opinions that the
interest on the Bonds is exempt from the income taxes imposed and, with respect
to the Puerto Rico Bonds, bond counsel to the issuing authorities rendered
opinions that the Puerto Rico Bonds and the interest thereon is exempt from all
state and local income taxation. Neither the Sponsor nor its counsel has made
any review for the Tennessee Trust of the proceedings relating to the issuance
of the Bonds or of the bases for the opinions rendered in connection therewith.
We express no opinion regarding whether insurance proceeds paid in lieu
of interest on the Bonds are exempt from the Hall Income Tax.
Very truly yours,
CHAPMAN AND CUTLER
EXHIBIT 3.3
May 29, 1998
WINSTON & STRAWN
200 PARK AVENUE
NEW YORK, NEW YORK 10166-4193
May 29, 1998
Insured Municipals Income Trust,
231st 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, 231st Insured Multi-Series (the "Fund") consisting of Pennsylvania
Insured Municipals Income Trust, Series 236, Tennessee Insured Municipals Income
Trust, Series 41 and Connecticut Insured Municipals Income Trust, Series 37 (in
the aggregate "Trusts" and individually "Trust") for the purpose of determining
the applicability of certain New York taxes under the circumstances hereinafter
described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"),
dated as of today (the "Date of Deposit") among Van Kampen American Capital
Distributors, Inc. (the "Depositor"), American Portfolio Evaluation Services, a
division of Van Kampen American Capital Investment Advisory Corp., as Evaluator,
and The Bank of New York as Trustee (the "Trustee"). As described in the
prospectus relating to the Fund dated today to be filed as an amendment to a
registration statement previously filed with the Securities and Exchange
Commission (File Number 333-45169) 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
EXHIBIT 3.4
May 29, 1998
DAY, BERRY & HOWARD
City Place
Hartford, Connecticut 06103-3499
May 29, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust, 231st Insured Multi-Series
Gentlemen:
You have requested that we act as special counsel with respect to
certain Connecticut tax aspects of Connecticut Insured Municipals Income Trust,
Series 37 (the "Connecticut IM-IT Trust"), being created as part of Insured
Municipals Income Trust, 231st Insured Multi-Series (the "Fund").
The Fund is created under a Trust Agreement dated the date hereof and
Standard Terms and Conditions of Trust to which it refers, both among Van Kampen
American Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory Corp.,
as Evaluator, and The Bank of New York, as Trustee. The Fund will issue units in
several state trusts, one of which is the Connecticut IM-IT Trust. Each unit of
the Connecticut IM-IT Trust (a "Unit") represents a fractional undivided
interest in the principal and net income of the Connecticut IM-IT Trust. The
Connecticut IM-IT Trust and the trust for any other state included in the Fund
will each be administered as a separate and distinct entity for all purposes,
each having its own separate assets, expenses, accounts, and certificates.
You have informed us that, upon the sale of Units of the Connecticut
IM-IT Trust to investors (the "Unitholders"), the assets of the Connecticut
IM-IT Trust will consist of certain obligations (the "Bonds"); that certain of
the Bonds have been issued by or on behalf the State of Connecticut or its
political subdivisions or other public bodies created under the laws of the
State of Connecticut, and the balance of the Bonds have been issued by or on
behalf of entities classified for the relevant purposes as territories or
possessions of the United States, including one or more of Puerto Rico, Guam, or
the Virgin Islands, the interest on the obligations of which Federal law would
prohibit Connecticut from taxing if received directly by the Unitholders; that,
in the opinion of bond counsel to the issuers of each of the Bonds, the interest
thereon is exempt from Federal income taxation; that distributions to
Unitholders of interest received by the Connecticut IM-IT Trust and of amounts
received thereby upon the maturity, redemption, sale, or other disposition of
the Bonds will be made semi-annually except in the case of Unitholders who have
elected a shorter distribution period; and that the Connecticut IM-IT Trust will
obtain insurance guaranteeing the payment of principal and interest on all Bonds
when due while the Bonds are held by the Connecticut IM-IT Trust, except for
Bonds, if any, as to which the issuer thereof or another person has arranged for
such insurance.
You have informed us that, in the opinion of Messrs. Chapman and
Cutler, for Federal income tax purposes (i) the Connecticut IM-IT Trust will not
be classified as an association, but will be governed by the provisions of
subchapter J of chapter 1 of the Internal Revenue Code of 1986, relating to
trusts; (ii) pursuant to subpart E of said subchapter J, each Unitholder will be
considered to be the owner of a portion of each asset of the Connecticut IM-IT
Trust and to have a portion of each item of income of the Connecticut IM-IT
Trust, in each case such portion being equal to the part of the whole thereof
that the number of Units of the Connecticut IM-IT Trust held by him bears to the
total number of outstanding Units of the Connecticut IM-IT Trust; (iii) each
such item of income will have the same character in the hands of a Unitholder as
in the hands of the Trustee; (iv) such income will be excludable from a
Unitholder's Federal gross income to the extent it consists of interest
excludable therefrom for Federal income tax purposes; (v) gain or loss will be
recognized by a Unitholder upon the redemption or sale of his Units or upon the
maturity, redemption, sale, or other disposition of a Bond held by the
Connecticut IM-IT Trust; and (vi) any amounts received by the Connecticut IM-IT
Trust representing maturing interest on a defaulted Bond will be excludable from
gross income if, and to the same extent as, such interest would have been so
excludable if paid by its issuer.
Based on the foregoing, and relying explicitly on the opinion of
Messrs. Chapman and Cutler regarding Federal income tax matters, we are of the
opinion that, under existing Connecticut law:
1. The Connecticut IM-IT Trust is not subject to any tax on
or measured by net income imposed by the State of Connecticut.
2. Interest income of the Connecticut IM-IT Trust from a
Bond issued by or on behalf of the State of Connecticut, any political
subdivision thereof, or public instrumentality, state or local
authority, district, or similar public entity created under the laws of
the State of Connecticut (a "Connecticut Bond"), or from a Bond issued
by United States territories or possessions the interest on which
Federal law would prohibit Connecticut from taxing if received directly
by a Unitholder from the issuer thereof, is not taxable under the
Connecticut tax on the Connecticut taxable income of individuals,
trusts, and estates (the "Connecticut Income Tax"), when any such
interest is received by the Connecticut IM-IT Trust or distributed by
it to such a Unitholder.
3. Insurance proceeds received by the Connecticut IM-IT
Trust representing maturing interest on defaulted Bonds held by the
Connecticut IM-IT Trust are not taxable under the Connecticut Income
Tax if, and to the same extent as, such interest would not be taxable
thereunder if paid directly to the Connecticut IM-IT Trust by the
issuer of such Bonds.
4. Gains and losses recognized by a Unitholder for Federal
income tax purposes upon the maturity, redemption, sale, or other
disposition by the Connecticut IM-IT Trust of a Bond held by the
Connecticut IM-IT Trust or upon the redemption, sale, or other
disposition of a Unit of the Connecticut IM-IT Trust held by a
Unitholder are taken into account as gains or losses, respectively, for
purposes of the Connecticut Income Tax, except that, in the case of a
Unitholder holding a Unit of the Connecticut IM-IT Trust as a capital
asset, such gains and losses recognized upon the maturity, redemption,
sale or exchange of a Connecticut Bond held by the Connecticut IM-IT
Trust are excluded from gains and losses taken into account for
purposes of such tax, and no opinion is expressed as to the treatment
for purposes of such tax of gains and losses recognized, to the extent
attributable to Connecticut Bonds, upon the redemption, sale, or other
disposition by a Unitholder of a Unit of the Connecticut IM-IT Trust
held by him.
5. The portion of any interest income or capital gain of the
Connecticut IM-IT Trust that is allocable to a Unitholder that is
subject to the Connecticut corporation business tax is includable in
the gross income of such Unitholder for purposes of such tax.
6. An interest in a Unit of the Connecticut IM-IT Trust that
is owned by or attributable to a Connecticut resident at the time of
his death is includable in his gross estate for purposes of the
Connecticut succession tax and the Connecticut estate tax.
We hereby consent, without admitting that we are in the category of
persons whose consent is required, to the filing of this opinion as an exhibit
to the Registration Statement relating to the Units and to the reference to our
firm as special Connecticut tax counsel in such Registration Statement and the
Prospectus contained therein.
We understand that you may deliver a copy of this opinion to the
Trustee and hereby consent to the Trustee's relying on this opinion as though it
were addressed to the Trustee.
Very truly yours,
DAY, BERRY & HOWARD
EXHIBIT 4.1
May 29, 1998
Interactive Data
14 Wall Street
New York, NY 10005
May 28, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Insured Municipals Income Trust, 231st Insured Multi-Series
(A Unit Investment Trust) Registered Under the Securities Act of 1933
FILE NO. 333-45169
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, 231st Insured Multi-Series - consisting of:
Pennsylvania Insured Municipals Income Trust, Series 236
Tennessee Insured Municipals Income Trust, Series 41
Connecticut Insured Municipals Income Trust, Series 37
Pursuant to your request for a Standard & Poor's rating on the units of
the above-captioned trust, SEC #333-45169, 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
June 29, 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 May 29, 1998 on the statements of
condition and related bond portfolios of Insured Municipals Income Trust, 231st
Insured Multi-Series (Pennsylvania IM-IT, Tennessee IM-IT and Connecticut IM-IT
Trusts) as of May 29, 1998 contained in the Registration Statement on Form S-6
and Prospectus. We consent to the use of our report in the Registration
Statement and Prospectus and to the use of our name as it appears under the
caption "Trust Administration-Independent Certified Public Accountants" in Part
II of the Prospectus.
GRANT THORNTON LLP
Chicago, Illinois
May 29, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on May 29, 1998.
It is unaudited
</LEGEND>
<SERIES>
<NUMBER> 37
<NAME> Connecticut
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-29-1998
<PERIOD-END> MAY-29-1998
<INVESTMENTS-AT-COST> 2,970,939
<INVESTMENTS-AT-VALUE> 2,970,939
<RECEIVABLES> 53,986
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,024,925
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,986
<TOTAL-LIABILITIES> 53,986
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,970,939
<SHARES-COMMON-STOCK> 3,124
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,970,939
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on May 29, 1998.
It is unaudited
</LEGEND>
<SERIES>
<NUMBER> 236
<NAME> Pennsylvania
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-29-1998
<PERIOD-END> MAY-29-1998
<INVESTMENTS-AT-COST> 2,853,963
<INVESTMENTS-AT-VALUE> 2,853,963
<RECEIVABLES> 24,067
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,878,030
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,067
<TOTAL-LIABILITIES> 24,067
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,853,963
<SHARES-COMMON-STOCK> 3,001
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,853,963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current time period taken from 487 on May 29, 1998.
It is unaudited
</LEGEND>
<SERIES>
<NUMBER> 41
<NAME> Tennessee
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-29-1998
<PERIOD-END> MAY-29-1998
<INVESTMENTS-AT-COST> 2,005,669
<INVESTMENTS-AT-VALUE> 2,005,669
<RECEIVABLES> 17,013
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,022,682
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,013
<TOTAL-LIABILITIES> 17,013
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,005,669
<SHARES-COMMON-STOCK> 2,109
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,005,669
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
