File No. 33-
CIK #896681
Securities And Exchange Commission
Washington, D.C. 20549-1004
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust,
Multi-Series 218
B. Name of Depositor: Van Kampen Merritt 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:
Van Kampen Merritt Inc. Chapman and Cutler
Attention: John C. Merritt, Chairman Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
E. Title and amount of securities being registered: 1,000* Units
F. Proposed maximum offering price to the public of the securities being
registered: ($1,020 per Unit**): $1,020,000
G. Amount of filing fee, computed at one twenty-ninth of 1 percent of the
proposed maximum aggregate offering price to the public: $351.72
H. Approximate date of proposed sale to the public:
as soon as practicable after the Effective Date
of the Registration Statement
_______________________________________________________________________
* 500 Units registered for primary distribution.
500 Units registered for resale by Depositor of Units previously
sold in primary distribution
** Estimated solely for the purpose of calculating the
registration fee.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 218
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) Underwriting
underwriter )
5. Organization of trust ) Introduction
6. Execution and termination of ) Introduction
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and Securities of the Trust
10. General information regarding ) Introduction
trust's securities and rights) Unitholder Explanations
of security holders ) Trust Information
) Trust Administration
11. Type of securities comprising ) Introduction
units ) Trust Information
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates)
13. (a) Load, fees, charges and ) Introduction
expenses ) Summary of Essential Financial
) Information
) Unitholder Explanations
) Trust Information
) Trust Administration
(b) Certain information regard-) *
ing periodic payment plan)
certificates )
(c) Certain percentages ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
(d) Certain other fees, ) Unitholder Explanations
expenses or charges ) Trust Administration
payable by holders )
(e) Certain profits to be ) Unitholder Explanations
received by depositor, ) Underwriting
principal underwriter, ) Notes to Portfolios
trustee or affiliated )
persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Unitholder Explanations
15. Receipt and handling of payments) *
from purchasers )
16. Acquisition and disposition of ) Introduction
underlying securities ) Unitholder Explanations
) Trust Administration
17. Withdrawal or redemption ) Unitholder Explanations
) Trust Administration
18. (a) Receipt and disposition ) Introduction
of income ) Unitholder Explanations
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Unitholder Explanations
) Trust Administration
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Unitholder Explanations
) Trust Administration
20. Certain miscellaneous provisions) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolios
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) Trust Administration
27. Business of Depositor ) Trust Administration
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor) *
31. Compensation of Directors ) *
32. Compensation of Directors ) *
33. Compensation of Employees ) *
34. Compensation to other persons ) Unitholder Explanations
IV. Distribution and Redemption of Securities
35. Distribution of trust's ) Introduction
securities by states ) Settlement of Bonds in the Trusts
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Unitholder Explanations
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Trust Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices of principal) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of the ) *
trust )
43. Certain brokerage commissions )
received by principal ) *
underwriter )
44. (a) Method of valuation ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
) Trust Administration
(b) Schedule as to offering ) *
price )
(c) Variation in offering price) Unitholder Explanations
to certain persons )
45. Suspension of redemption rights) *
46. (a) Redemption valuation ) Unitholder Explanations
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Unitholder Explanations
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
trustee )
49. Fees and expenses of trustee ) Summary of Essential Financial
) Information
) Trust Administration
50. Trustee's lien ) Trust Administration
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's)
securities ) *
VII. Policy of Registrant
52. (a) Provisions of trust agree-)
ment with respect to )
replacement or elimi- ) Trust Administration
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying) *
securities )
(c) Policy regarding substitu-) Trust Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Trust Information
) Other Matters
VIII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Other Matters
tions 1(c) to Form S-6) )
__________________________________
* Inapplicable, omitted, answer negative or not required
Preliminary Prospectus Dated March 15, 1994
Insured municipals Income Trust and
Investors' Quality Tax-Exempt Trust
1,000 Units Multi-Series 218
(A Unit Investment Trust)
The attached final Prospectus for a prior Series of the Fund is
hereby used as a preliminary Prospectus for the above stated Series. The
narrative information and structure of the attached final Prospectus will
be substantially the same as that of the final Prospectus for this
Series. Information with respect to pricing, the number of Units, dates
and summary information regarding the characteristics of securities to be
deposited in this Series is not now available and will be different since
each Series has a unique Portfolio. Accordingly the information
contained herein with regard to the previous Series should be considered
as being included for informational purposes only. Ratings of the
securities in this Series are expected to be comparable to those of the
securities deposited in the previous Series. However, the Estimated
Current Return for this Series will depend on the interest rates and
offering prices of the securities in this Series and may vary materially
from that of the previous Series.
A registration statement relating to the units of this Series will
be filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to completion
or amendment. Such Units may not be sold nor may offer to buy be
accepted prior to the time the registration statement becomes effective.
This Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the Units in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy to accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any State.
PRELIMINARY PROSPECTUS DATED MARCH 10, 1994
SUBJECT TO COMPLETION
March 10, 1994 Van Kampen Merritt
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 216
IM-IT 319
New York IM-IT 119
Ohio IM-IT Intermediate Laddered Maturity Series 4
Tennessee IM-IT 26
North Carolina Quality 74
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is excludable under existing law from gross income for
Federal income taxes. In addition, the interest income of each State Trust is,
in the opinion of counsel, exempt to the extent indicated from state and local
taxes, when held by residents of the state where the issuers of Bonds in such
Trust are located. Capital gains, if any, are subject to Federal tax.
THE FUND. The objectives of the Fund are Federal and, in the case of a
State Trust, state tax-exempt income and conservation of capital through an
investment in a diversified portfolio of tax-exempt bonds. The Fund consists
of five underlying separate unit investment trusts designated as Insured
Municipals Income Trust, Series 319 (the "IM-IT"), New York Insured Municipals
Income Trust, Series 119 (the "New York IM-IT Trust"), Ohio IM-IT Intermediate
Laddered Maturity Series 4 (the "Ohio IM-IT Intermediate Laddered Maturity
Trust"), Tennessee Insured Municipals Income Trust, Series 26 (the "Tennessee
IM-IT Trust") and North Carolina Investors' Quality Tax-Exempt Trust, Series
74 (the "North Carolina Quality Trust"). The various trusts are collectively
referred to herein as the "Trusts", the New York IM-IT, Ohio IM-IT
Intermediate Laddered Maturity, Tennessee IM-IT and North Carolina Quality
Trusts are sometimes collectively referred to herein as the "State Trusts",
while the IM-IT, New York IM-IT, Ohio IM-IT Intermediate Laddered Maturity and
Tennessee IM-IT Trusts are sometimes collectively referred to herein as the
"Insured Trusts", the Ohio IM-IT Intermediate Laddered Maturity Trust is
sometimes referred to herein as the "State Intermediate Laddered Maturity
Trust" and the North Carolina Quality Trust is sometimes referred to herein as
the "Quality Trust". Each Trust initially consists of delivery statements
relating to contracts to purchase securities and, thereafter, will consist of
such securities as may continue to be held (the "Bonds" or "Securities"). Such
Securities are interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is,
in the opinion of recognized bond counsel to the issuing governmental
authority, exempt from all Federal income taxes under the existing law. In
addition, the interest income of each State Trust is, in the opinion of
counsel, exempt to the extent indicated from state and local taxes, when held
by residents of the state where the issuers of Bonds in such Trust are
located.
"AAA" RATING FOR THE INSURED TRUSTS ONLY. Insurance guaranteeing the
payments of principal and interest, when due, on the Securities in the
portfolio of each Insured Trust has been obtained from a municipal bond
insurance company either by such Trust or by the issuer of the Bonds involved,
by a prior owner of the Bonds or by the Sponsor prior to the deposit of such
Bonds in an Insured Trust. See "Unitholder Explanations--Insurance on the
Bonds in the Insured Trusts" on page 22. Insurance obtained by an Insured
Trust applies only while Bonds are retained in such Trust while insurance
obtained on Preinsured Bonds is effective so long as such Bonds are
outstanding. The Trustee, upon the sale of a Bond insured under an insurance
policy obtained by an Insured Trust, has a right to obtain from the insurer
involved permanent insurance for such Bond upon the payment of a single
predetermined insurance premium and any expenses related thereto from the
proceeds of the sale of such Bond. INSURANCE RELATES ONLY TO THE BONDS IN A
TRUST AND NOT TO THE UNITS OFFERED HEREBY OR TO THE MARKET VALUE THEREOF. As a
result of such insurance, the Units of each Insured Trust have received a
rating of "AAA" by Standard & Poor's Corporation. Standard & Poor's
Corporation has indicated that this rating is not a recommendation to buy,
hold or sell Units nor does it take into account the extent to which expenses
of each Insured Trust or sales by each Insured Trust of Bonds for less than
the purchase price paid by such Trust will reduce payments to Unitholders of
the interest and principal required to be paid on such Bonds. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts". No representation
is made as to any insurer's ability to meet its commitments.
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of each
Trust during the initial offering period is equal to the aggregate offering
price of the Securities in such Trust's portfolio and cash, if any, in the
Principal Account held or owned by such Trust Fund plus the applicable sales
charge plus Purchased Interest and accrued interest, if any. After the initial
public offering period, the secondary market Public Offering Price of each
Trust will be equal to the aggregate bid price of the Securities in such Trust
and cash, if any, in the Principal Account held or owned by such Trust Fund
plus the applicable sales charge plus Purchased Interest and accrued interest,
if any. Sales charges for the Trusts in the initial market, expressed both as
a percentage of the Public Offering Price (excluding Purchased Interest) and
as a percentage of the aggregate offering price of the Securities, are set
forth in footnote (2) under "Summary of Essential Financial Information". For
sales charges in the secondary market, see "Unitholder Explanations--Public
Offering". If the Securities in each Trust were available for direct purchase
by investors, the purchase price of the Securities would not include the sales
charge included in the Public Offering Price of the Units. During the initial
offering period, the sales charge is reduced on a graduated scale for sales
involving at least 100 Units. If Units were available for purchase at the
opening of business on the Date of Deposit (except for the IM-IT as of 8:00
A.M. Central Time on the Date of Deposit), the Public Offering Price per Unit
would have been that amount set forth in the "Summary of Essential Financial
Information" for each Trust. See "Unitholder Explanations--Public Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
2 Introduction
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The annual
Estimated Current Return and Estimated Long-Term Return to Unitholders at the
opening of business (except for the IM-IT as of 8:00 A.M. Central Time on the
Date of Deposit) on March 10, 1994, were as set forth under "Per Unit
Information" for each Trust. The methods of calculating Estimated Current
Return and Estimated Long-Term Return are set forth in the footnotes to the
"Per Unit Information" for each Trust.
OBJECTIVES OF THE FUND. The objectives of the Fund are income exempt from
Federal income tax and, in the case of a State Trust, Federal and state income
tax (if any) and conservation of capital through an investment in diversified
portfolios of Federal and state tax-exempt obligations. There is, of course,
no guarantee that the Fund will achieve its objectives. The Fund may be an
appropriate investment vehicle for investors who desire to participate in a
portfolio of tax-exempt fixed income securities with greater diversification
than they might be able to acquire individually. In addition, securities of
the type deposited in the Fund are often not available in small amounts.
DISTRIBUTIONS. Purchasers of Units will receive distributions on a
monthly basis. See "Unitholder Explanations--Settlement of Bonds in the
Trusts". Record dates will be the first day of each month. Distributions will
be made on the fifteenth day of the month subsequent to the respective record
dates.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor, Van
Kampen Merritt Inc., intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units at prices based upon the aggregate
bid prices of the Securities in the respective Trusts plus Purchased Interest;
however, during the initial offering period such prices will be based upon the
aggregate offering prices of the Securities plus Purchased Interest. If such a
market is not maintained and no other over-the-counter market is available, a
Unitholder will be able to dispose of his Units only through redemption at
prices based upon the bid prices of the underlying Securities plus Purchased
Interest (see "Unitholder Explanations--Public Offering--Redemption of Units"
and "Unitholder Explanations-- Public Offering--Market for Units").
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. See "Unitholder Explanations--Public Offering-- Reinvestment
Option".
<PAGE>
Summary of Essential Financial Information 3
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES 216
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE DATE OF DEPOSIT: MARCH 10, 1994
(EXCEPT FOR THE IM-IT AS OF 8:00 A.M. CENTRAL TIME ON THE DATE OF DEPOSIT)
SPONSOR: VAN KAMPEN MERRITT INC.
EVALUATOR: AMERICAN PORTFOLIO EVALUATION SERVICES
(A DIVISION OF A SUBSIDIARY OF THE SPONSOR)
TRUSTEE: THE BANK OF NEW YORK
<CAPTION>
OHIO
IM-IT
INTERMEDIATE
NEW YORK LADDERED
GENERAL INFORMATION IM-IT IM-IT TRUST MATURITY TRUST
<S> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust.................. $ 7,850,000 $ 3,050,000 $ 3,000,000
Number of Units...................................................... 8,025 3,105 3,000
Fractional Undivided Interest in the Trust per Unit.................. 1/8,025 1/3,105 1/3,000
Principal Amount (Par Value) of Securities per Unit <F1>............. $ 978.19 $ 982.29 $ 1,000.00
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio.............. $ 7,560,717 $ 2,928,633 $ 2,954,669
Aggregate Offering Price of Securities per Unit.................. $ 942.15 $ 943.20 $ 984.89
Sales Charge <F2>................................................ $ 48.54 $ 48.59 $ 30.46
Purchased Interest <F3>.......................................... $ 74,750 $ 25,483 $ 22,864
Purchased Interest per Unit <F3>................................. $ 9.31 $ 8.21 $ 7.62
Public Offering Price per Unit <F3>.............................. $ 1,000.00 $ 1,000.00 $ 1,022.97
Redemption Price per Unit, including Purchased Interest <F3>......... $ 944.12 $ 944.13 $ 984.93
Secondary Market Repurchase Price per Unit, including Purchased
Interest <F3>...................................................... $ 951.46 $ 951.41 $ 992.51
Excess of Public Offering Price per Unit Over Redemption Price per
Unit............................................................... $ 55.88 $ 55.87 $ 38.04
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit..................................................... $ 7.34 $ 7.28 $ 7.58
Minimum Value of the Trust under which Trust Agreement may be
terminated......................................................... $ 1,570,000 $ 610,000 $ 600,000
Minimum Principal Distribution.......... $1.00 per Unit
First Settlement Date................... March 17, 1994
Evaluator's Annual Supervisory Fee...... Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee....... $0.30 per $1,000 principal amount of
Bonds <F4>
Evaluations for purpose of sale, purchase or redemption of Units are made
as of 4:00 P.M. Eastern time on days of trading on the New York Stock
Exchange next following receipt of an order for a sale or purchase of
Units or receipt by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a
number of units such that each unit represents approximately $1,000
principal amount of underlying securities. The Sponsor, on the other hand,
in determining the number of Units for each Trust, other than IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity
and IM-IT Short Intermediate Trusts, has elected not to follow this format
but rather to provide that number of Units which will establish as close
as possible as of the Date of Deposit a Public Offering Price per Unit of
$1,000. For IM-IT Limited Maturity, IM-IT Intermediate, State Intermediate
Laddered Maturity and IM-IT Short Intermediate Trusts, on the other hand,
each unit represents $1,000 principal amount of underlying securities in
such Trust on the Date of Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public
Offering Price per Unit (excluding Purchased Interest) and in parenthesis
as a percentage of the aggregate offering price of the Securities, are as
follows: an IM-IT or a State Trust (other than a State Intermediate
Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT Limited Maturity
<PAGE>
4 Summary of Essential Financial Information
Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9% (4.058%); an
IM-IT Short Intermediate Trust or a State Intermediate Laddered Maturity
Trust - 3.0% (3.093%).
<F3>Purchased Interest is a portion of the unpaid interest that has accrued on
the Bonds from the later of the last payment date on the Bonds or the date
of issuance thereof through the First Settlement Date and is included in
the calculation of the Public Offering Price. Purchased Interest will be
distributed to Unitholders as Units are redeemed or Securities mature or
are called. Anyone ordering Units for settlement after the First
Settlement Date will pay accrued interest from such date to the date of
settlement (normally five business days after order) less distributions
from the Interest Account subsequent to the First Settlement Date. For
purchases settling on the First Settlement Date, no accrued interest will
be added to the Public Offering Price other than the Purchased Interest
already included therein. After the initial offering period, the Sponsor's
Repurchase Price per Unit will be determined as described under the
caption "Public Offering-- Market for Units."
<F4>Such fee is based on the outstanding principal amount of Securities in
each Trust on the Date of Deposit for the first year and as of the close
of business on January 1 for each year thereafter.
</TABLE>
<PAGE>
Summary of Essential Financial Information 5
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES 216
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION (CONTINUED)
AT THE OPENING OF BUSINESS ON THE DATE OF DEPOSIT: MARCH 10, 1994
(EXCEPT FOR THE IM-IT AS OF 8:00 A.M. CENTRAL TIME ON THE DATE OF DEPOSIT)
SPONSOR: VAN KAMPEN MERRITT INC.
EVALUATOR: AMERICAN PORTFOLIO EVALUATION SERVICES
(A DIVISION OF A SUBSIDIARY OF THE SPONSOR)
TRUSTEE: THE BANK OF NEW YORK
<CAPTION>
TENNESSEE NORTH CAROLINA
GENERAL INFORMATION IM-IT TRUST QUALITY TRUST
<S> <C> <C>
Principal Amount (Par Value) of Securities in Trust................................... $ 3,020,000 $ 3,010,000
Number of Units....................................................................... 3,040 3,052
Fractional Undivided Interest in the Trust per Unit................................... 1/3,040 1/3,052
Principal Amount (Par Value) of Securities per Unit <F1>.............................. $ 993.42 $ 986.24
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio............................... $ 2,870,267 $ 2,876,468
Aggregate Offering Price of Securities per Unit................................... $ 944.17 $ 942.49
Sales Charge <F2>................................................................. $ 48.64 $ 48.55
Purchased Interest <F3>........................................................... $ 21,857 $ 27,341
Purchased Interest per Unit <F3>.................................................. $ 7.19 $ 8.96
Public Offering Price per Unit <F3>............................................... $ 1,000.00 $ 1,000.00
Redemption Price per Unit, including Purchased Interest <F3>.......................... $ 943.81 $ 943.85
Secondary Market Repurchase Price per Unit, including Purchased Interest <F3>......... $ 951.36 $ 951.45
Excess of Public Offering Price per Unit Over Redemption Price per Unit............... $ 56.19 $ 56.15
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit.. $ 7.55 $ 7.60
Minimum Value of the Trust under which Trust Agreement may be terminated.............. $ 604,000 $ 602,000
Minimum Principal Distribution.......... $1.00 per Unit
First Settlement Date................... March 17, 1994
Evaluator's Annual Supervisory Fee...... Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee....... $0.30 per $1,000 principal amount of
Bonds <F4>
Evaluations for purpose of sale, purchase or redemption of Units are made
as of 4:00 P.M. Eastern time on days of trading on the New York Stock
Exchange next following receipt of an order for a sale or purchase of
Units or receipt by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a
number of units such that each unit represents approximately $1,000
principal amount of underlying securities. The Sponsor, on the other hand,
in determining the number of Units for each Trust, other than IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity
and IM-IT Short Intermediate Trusts, has elected not to follow this format
but rather to provide that number of Units which will establish as close
as possible as of the Date of Deposit a Public Offering Price per Unit of
$1,000. For IM-IT Limited Maturity, IM-IT Intermediate, State Intermediate
Laddered Maturity and IM-IT Short Intermediate Trusts, on the other hand,
each unit represents $1,000 principal amount of underlying securities in
such Trust on the Date of Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public
Offering Price per Unit (excluding Purchased Interest) and in parenthesis
as a percentage of the aggregate offering price of the Securities, are as
follows: an IM-IT or a State Trust (other than a State Intermediate
Laddered Maturity Trust) - 4.9% (5.152%); an IM-IT Limited Maturity
Trust - 4.3% (4.493%); an IM-IT Intermediate Trust - 3.9% (4.058%); an
IM-IT Short Intermediate Trust or a State Intermediate Laddered Maturity
Trust - 3.0% (3.093%).
<F3>Purchased Interest is a portion of the unpaid interest that has accrued on
the Bonds from the later of the last payment date on the Bonds or the date
of issuance thereof through the First Settlement Date and is included in
the calculation of the Public Offering Price. Purchased Interest will be
distributed to Unitholders as Units are redeemed or Securities mature or
are called. Anyone ordering Units for settlement after the First
Settlement Date will pay accrued interest from such date to the date of
settlement (normally five business days after order) less distributions
from the Interest Account
<PAGE>
6 Summary of Essential Financial Information
subsequent to the First Settlement Date. For purchases settling on the
First Settlement Date, no accrued interest will be added to the Public
Offering Price other than the Purchased Interest already included therein.
After the initial offering period, the Sponsor's Repurchase Price per Unit
will be determined as described under the caption "Public Offering--
Market for Units."
<F4>Such fee is based on the outstanding principal amount of Securities in
each Trust on the Date of Deposit for the first year and as of the close
of business on January 1 for each year thereafter.
</TABLE>
<PAGE>
Unitholder Explanations 7
SETTLEMENT OF BONDS IN THE TRUSTS
THE FUND. Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 216 (the "Fund"), was created under the laws of
the State of New York pursuant to a Trust Indenture and Agreement (the "Trust
Agreement"), dated the Date of Deposit, among Van Kampen Merritt Inc., as
Sponsor, American Portfolio Evaluation Services, a division of Van Kampen
Merritt Investment Advisory Corp., as Evaluator, and The Bank of New York, as
Trustee.
The Fund consists of five separate portfolios of delivery statements
relating to contracts to purchase interest-bearing obligations issued by or on
behalf of states and territories of the United States, and political
subdivisions and authorities thereof, the interest on which is, in the opinion
of recognized bond counsel to the issuing authorities, excludable from gross
income for Federal income tax under existing law. All issuers of Securities in
a State Trust are located in the State for which such Trust is named or in
United States territories or possessions and their public authorities;
consequently, in the opinion of recognized bond counsel to such State issuers,
the related interest earned on such Securities is exempt to the extent
indicated from state and local taxes of such State. With the exception of the
New York and Pennsylvania Trusts, Units of such Trusts may be purchased only
by residents of the State for which such Trust is named. Units of a New York
Trust may be purchased by residents of New York, Connecticut, Florida and
Massachusetts. Units of a Pennsylvania Trust may be purchased by residents of
Pennsylvania, Connecticut, Florida, Maryland, New York, Ohio and West
Virginia. Offerees in the States of Indiana, Virginia and Washington may
purchase Units of the IM-IT Trust only. On the Date of Deposit, the Sponsor
deposited with the Trustee the aggregate principal amount of Securities in
each Trust as indicated under "General Information--Principal Amount (Par
Value) of Securities in Trust" in the "Summary of Essential Financial
Information". Such Securities consist of delivery statements relating to
contracts for the purchase of certain interest-bearing obligations and cash,
cash equivalents and/or irrevocable letters of credit issued by a financial
institution in the amount required for such purchases. Thereafter, the
Trustee, in exchange for the Securities so deposited, delivered to the Sponsor
the certificates evidencing the ownership of the number of Units in each Trust
as indicated under "Summary of Essential Financial Information." Unless
otherwise terminated as provided herein, the Trust Agreement for any IM-IT or
State Trust (other than a State Intermediate Laddered Maturity Trust) will
terminate at the end of the calendar year prior to the fiftieth anniversary of
its execution, and the Trust Agreement for any IM-IT Limited Maturity Trust,
IM-IT Intermediate Trust, State Intermediate Laddered Maturity Trust or IM-IT
Short Intermediate Trust will terminate at the end of the calendar year prior
to the twentieth anniversary of its execution.
The portfolio of any IM-IT or State Trust (other than a State
Intermediate Laddered Maturity Trust) consists of Bonds maturing approximately
15 to 40 years from the Date of Deposit. The approximate range of maturities
from the Date of Deposit for Bonds in any IM-IT Limited Maturity Trust, IM-IT
Intermediate Trust, State Intermediate Laddered Maturity Trust and IM-IT Short
Intermediate Trust is 12 to 15 years, 5 to 15 years, 5 to 10 years and 3 to 7
years, respectively. The dollar-weighted average maturity of the Bonds in any
IM-IT Intermediate Trust, State Intermediate Laddered Maturity Trust and IM-IT
Short Intermediate Trust is less than or equal to 10 years, 10 years and 5
years, respectively.
The portfolio of any State Intermediate Laddered Maturity Trust is
structured so that approximately 20% of the Bonds contained in such portfolio
will mature each year, commencing in approximately the fifth year of the
Trust, entitling each Unitholder to a return of principal. This return of
principal may offer Unitholders the opportunity to respond to changing
economic conditions and to specific financial needs that may arise between the
fifth and tenth years of a State Intermediate Laddered Maturity Trust.
However, the flexibility provided by the return of principal may at the same
time eliminate a Unitholder's ability to reinvest the amount returned at a
rate as high as the implicit yield on the obligations which matured.
Certain of the Bonds in certain of the Trusts may be "zero coupon" bonds.
See footnote (6) in "Notes to Portfolios". Zero coupon bonds are purchased at
a deep discount because the buyer receives only the right to receive a final
payment at the maturity of the bond and does not receive any periodic interest
payments. The effect of
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8 Unitholder Explanations
owning deep discount bonds which do not make current interest payments (such
as the zero coupon bonds) is that a fixed yield is earned not only on the
original investment but also, in effect, on all discount earned during the
life of such obligation. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income on such
obligation at a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest at higher
rates in the future. For this reason, zero coupon bonds are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality which pay interest.
Certain of the Bonds in certain of the Trusts may have been purchased on
a "when, as and if issued" or "delayed delivery" basis. See footnote (5) in
"Notes to Portfolios". The delivery of any such Securities may be delayed or
may not occur. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. To the extent any
Securities are actually delivered to the Fund after their respective expected
dates of delivery, Unitholders who purchase their Units prior to the date such
Securities are actually delivered to the Trustee would be required to adjust
their tax basis in their Units for a portion of the interest accruing on such
Securities during the interval between their purchase of Units and the actual
delivery of such Securities. As a result of any such adjustment, the Estimated
Current Returns during the first year would be slightly lower than those
stated herein which would be the returns after the first year, assuming the
portfolio of a Trust and estimated annual expenses other than that of the
Trustee (which may be reduced in the first year only) do not vary from that
set forth under "Per Unit Information" for the applicable Trust. Holders of
the Units will be "at risk" with respect to all Securities in the portfolios
including "when, as and if issued" and "delayed delivery" Securities (i.e.,
may derive either gain or loss from fluctuations in the evaluation of such
Securities) from the date they commit for Units. For a discussion of the
Sponsor's obligations in the event of the failure of any contract for the
purchase of any of the Securities and limited right to substitute other
tax-exempt bonds to replace any failed contract, see "Replacement Bonds"
below.
Each Unit initially offered represents the fractional undivided interest
in the principal and net income of a Trust indicated under "Summary of
Essential Financial Information". To the extent that any Units are redeemed by
the Trustee, the fractional undivided interest in a Trust represented by each
unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which
may include the Sponsor or the Underwriters, or until the termination of the
Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION. The objectives of the Fund are
income exempt from Federal income taxation and, in the case of a State Trust,
Federal and state income taxation and conservation of capital through an
investment in diversified portfolios of Federal and state tax-exempt
obligations. A State Intermediate Laddered Maturity Trust has additional
objectives of providing protection against changes in interest rates and
investment flexibility through an investment in a laddered portfolio of
intermediate-term interest-bearing obligations with maturities ranging from
approximately 5 to 10 years in which roughly 20% of the obligations contained
in such portfolio will mature each year commencing in approximately the fifth
year of the Trust. There is, of course, no guarantee that the Trusts will
achieve their respective objectives. The Fund may be an appropriate investment
vehicle for investors who desire to participate in a portfolio of tax-exempt
fixed income securities with greater diversification than they might be able
to acquire individually. In addition, securities of the type deposited in the
Fund are often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Insured Trust has been obtained by such Trust
from either AMBAC Indemnity Corporation ("AMBAC Indemnity"), Financial
Guaranty Insurance Company ("Financial Guaranty" or "FGIC") or a combination
thereof (collectively, the "Portfolio Insurers"), or by the issuer of such
Bonds, by a prior owner of such Bonds, or by the Sponsor prior to the deposit
of such Bonds in such Trust from (1) AMBAC Indemnity or one of its
subsidiaries, American Municipal Bond Assurance Corporation ("AMBAC") or MGIC
Indemnity Corporation ("MGIC Indemnity"), (2) Financial Guaranty, (3)
Municipal Bond Investors Assurance Corporation ("MBIA"), (4) Bond Investors
Guaranty Insurance Company ("BIG"), (5) National Union Fire Insurance Company
of Pittsburgh, PA. ("National Union"), (6) Capital Guaranty Insurance Company
("Capital Guaranty"), (7) Capital Markets Assurance Corporation ("CapMAC")
and/or (8) Financial
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Unitholder Explanations 9
Security Assurance Inc. ("Financial Security" or "FSA") (collectively, the
"Preinsured Bond Insurers") (see "Unitholder Explanations--Insurance on the
Bonds in the Insured Trusts"). Insurance obtained by an Insured Trust is
effective only while the Bonds thus insured are held in such Trust. The
Trustee has the right to acquire permanent insurance from a Portfolio Insurer
with respect to each Bond insured by the respective Portfolio Insurer under a
Trust portfolio insurance policy. Insurance relating to Bonds insured by the
issuer, by a prior owner of such Bonds or by the Sponsor is effective so long
as such Bonds are outstanding. Bonds insured under a policy of insurance
obtained by the issuer, by a prior owner of such Bonds or by the Sponsor from
one of the Preinsured Bond Insurers (the "Preinsured Bonds") are not
additionally insured by an Insured Trust. No representation is made as to any
insurer's ability to meet its commitments.
Neither the Public Offering Price nor any evaluation of Units for
purposes of repurchases or redemptions reflects any element of value for the
insurance obtained by an Insured Trust, if any, unless Bonds are in default in
payment of principal or interest or in significant risk of such default. See
"Unitholder Explanations--Public Offering--Offering Price". On the other hand,
the value, if any, of Preinsured Bond insurance is reflected and included in
the market value of such Bonds.
In order for bonds to be eligible for insurance, they must have credit
characteristics which would qualify them for at least the Standard & Poor's
Corporation rating of "BBB-" or at least the Moody's Investors Service, Inc.
rating of "Baa", which in brief represent the lowest ratings for securities of
investment grade (see "Other Matters--Description of Securities Ratings").
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. If
an issue is accepted for insurance, a non-cancellable policy for the prompt
payment of interest and principal on the bonds, when due, is issued by the
insurer. Any premium or premiums relating to Preinsured Bond insurance is paid
by the issuer, by a prior owner of such Bonds or by the Sponsor and a monthly
premium is paid by an Insured Trust for the portfolio insurance, if any,
obtained by such Trust. The Trustee has the right to obtain permanent
insurance from a Portfolio Insurer in connection with the sale of a Bond
insured under the insurance policy obtained from the respective Portfolio
Insurer by an Insured Trust upon the payment of a single predetermined
insurance premium from the proceeds of the sale of such Bond. Accordingly, any
Bond in an Insured Trust is eligible to be sold on an insured basis. All Bonds
insured by the Portfolio Insurers and the Preinsured Bond Insurers receive a
"AAA" rating by Standard & Poor's Corporation. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
In selecting Securities for the Trusts the following facts, among others,
were considered by the Sponsor: (a) either the Standard & Poor's Corporation
rating of the Securities was in no case less than "BBB-" in the case of the
Insured Trusts and "A-" in the case of the Quality Trusts, or the Moody's
Investors Service, Inc. rating of the Securities was in no case less than
"Baa" in the case of the Insured Trusts and "A" in the case of the Quality
Trusts, including provisional or conditional ratings, respectively, or, if not
rated, the Securities had, in the opinion of the Sponsor, credit
characteristics sufficiently similar to the credit characteristics of
interest-bearing tax-exempt obligations that were so rated as to be acceptable
for acquisition by the Fund (see "Other Matters--Description of Securities
Ratings"), (b) the prices of the Securities relative to other bonds of
comparable quality and maturity, (c) the diversification of Securities as to
purpose of issue and location of issuer and (d) with respect to the Insured
Trusts, the availability and cost of insurance for the prompt payment of
principal and interest, when due, on the Securities. Subsequent to the Date of
Deposit, a Security may cease to be rated or its rating may be reduced below
the minimum required as of the Date of Deposit. Neither event requires
elimination of such Security from the portfolio of a Trust but may be
considered in the Sponsor's determination as to whether or not to direct the
Trustee to dispose of the Security (see "Trust Administration--Fund
Administration and Expenses--Portfolio Administration").
To the best knowledge of the Sponsor, there is no litigation pending as
of the Date of Deposit in respect of any Securities which might reasonably be
expected to have a material adverse effect upon the Fund or any of the Trusts.
At any time after the Date of Deposit, litigation may be initiated on a
variety of grounds with respect to Securities in the Fund. Such litigation,
as, for example, suits challenging the issuance of pollution control revenue
bonds under environmental protection statutes, may affect the validity of such
Securities or the tax-free nature of the interest thereon. While the outcome
of litigation of such nature can never be entirely predicted, the Fund has
received or will
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10 Unitholder Explanations
receive opinions of bond counsel to the issuing authorities of each Security
on the date of issuance to the effect that such Securities have been validly
issued and that the interest thereon is exempt from Federal income tax. In
addition, other factors may arise from time to time which potentially may
impair the ability of issuers to meet obligations undertaken with respect to
the Securities.
PORTFOLIO CONCENTRATIONS. Certain of the Bonds in certain of the Trusts
may be general obligations of a governmental entity that are backed by the
taxing power of such entity. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. All other Bonds in the
Trusts are revenue bonds payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds, on the
other hand, are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source. There are, of course,
variations in the security of the different Bonds in the Fund, both within a
particular classification and between classifications, depending on numerous
factors. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which
derive their payments from mortgage loans. Certain of such housing bonds may
be FHA insured or may be single family mortgage revenue bonds issued for the
purpose of acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned by
persons of low or moderate income. In view of this an investment in such a
Trust should be made with an understanding of the characteristics of such
issuers and the risks which such an investment may entail. Mortgage loans are
generally partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default, condemnation
or casualty loss. Because these bonds are subject to extraordinary mandatory
redemption in whole or in part from such prepayments of mortgage loans, a
substantial portion of such bonds will probably be redeemed prior to their
scheduled maturities or even prior to their ordinary call dates. Extraordinary
mandatory redemption without premium could also result from the failure of the
originating financial institutions to make mortgage loans in sufficient
amounts within a specified time period. Additionally, unusually high rates of
default on the underlying mortgage loans may reduce revenues available for the
payment of principal of or interest on such mortgage revenue bonds. These
bonds were issued under Section 103A of the Internal Revenue Code, which
Section contains certain requirements relating to the use of the proceeds of
such bonds in order for the interest on such bonds to retain its tax-exempt
status. In each case the issuer of the bonds has covenanted to comply with
applicable requirements and bond counsel to such issuer has issued an opinion
that the interest on the bonds is exempt from Federal income tax under
existing laws and regulations. Certain issuers of housing bonds have
considered various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In connection with the housing bonds
held by the Fund, the Sponsor at the Date of Deposit is not aware that any of
the respective issuers of such Bonds are actively considering the redemption
of such Bonds prior to their respective stated initial call dates. See
"General" for each Trust.
Certain of the Bonds in certain of the Trusts may be health care revenue
bonds. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. Ratings of bonds issued for health care facilities
are often based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net income
available for debt service may be affected by future events and conditions
including, among other things, demand for services and the ability of the
facility to provide the services required, physicians' confidence in the
facility, management capabilities, competition with other health care
facilities, efforts by insurers and governmental agencies to limit rates,
legislation establishing state rate-setting agencies, expenses, the cost and
possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, government regulation
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar third
party payor programs. Pursuant to recent Federal legislation, Medicare
reimbursements are currently calculated on a prospective basis utilizing a
single nationwide schedule of rates. Prior to such legislation Medicare
reimbursements were based on the actual costs incurred by the health facility.
The current
<PAGE>
Unitholder Explanations 11
legislation may adversely affect reimbursements to hospitals and other
facilities for services provided under the Medicare program. Such adverse
changes also may adversely affect the ratings of Securities held in the
portfolios of the Fund; however, because of the insurance obtained by each of
the Insured Trusts, the "AAA" rating of the Units of each of the Insured
Trusts would not be affected. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of
public utility issuers, including those selling wholesale and retail electric
power and gas. In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. General problems of such issuers would
include the difficulty in financing large construction programs in an
inflationary period, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining fuel at
reasonable prices and the effect of energy conservation. All of such issuers
have been experiencing certain of these problems in varying degrees. In
addition, Federal, state and municipal governmental authorities may from time
to time review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Bonds in the
portfolio to make payments of principal and/or interest on such Bonds. See
"General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of
issuers whose revenues are derived from the sale of water and/or sewerage
services. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such
an investment may entail. Such Bonds are generally payable from user fees. The
problems of such issuers include the ability to obtain timely and adequate
rate increases, population decline resulting in decreased user fees, the
difficulty of financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, the increasing difficulty of obtaining or discovering new
supplies of fresh water, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. All of such issuers have been experiencing
certain of these problems in varying degrees. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be industrial revenue
bonds ("IRBs"). In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. IRBs have generally been issued under
bond resolutions pursuant to which the revenues and receipts payable under the
arrangements with the operator of a particular project have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the corporate
operator of the project or corporate guarantor. Corporate operators or
guarantors may be affected by many factors which may have an adverse impact on
the credit quality of the particular company or industry. These include
cyclicality of revenues and earnings, regulatory and environmental
restrictions, litigation resulting from accidents or environmentally-caused
illnesses, extensive competition and financial deterioration resulting from a
corporate restructuring pursuant to a leveraged buy-out, takeover or
otherwise. Such a restructuring may result in the operator of a project
becoming highly leveraged which may impact on such operator's creditworthiness
which in turn would have an adverse impact on the rating and/or market value
of such Bonds. Further, the possibility of such a restructuring may have an
adverse impact on the market for and consequently the value of such Bonds,
even though no actual takeover or other action is ever contemplated or
effected. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations that are
secured by lease payments of a governmental entity (hereinafter called "lease
obligations"). Lease obligations are often in the form of certificates of
participation. In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. Although the lease obligations do not
constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to appropriate for and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. A governmental entity that enters into
such a lease agreement cannot obligate future governments to
<PAGE>
12 Unitholder Explanations
appropriate for and make lease payments but covenants to take such action as
is necessary to include any lease payments due in its budgets and to make the
appropriations therefor. A governmental entity's failure to appropriate for
and to make payments under its lease obligation could result in insufficient
funds available for payment of the obligations secured thereby. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.
See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of
issuers which are, or which govern the operation of, schools, colleges and
universities and whose revenues are derived mainly from ad valorem taxes or
for higher education systems, from tuition, dormitory revenues, grants and
endowments. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which
such an investment may entail. General problems relating to school bonds
include litigation contesting the State constitutionality of financing public
education in part from ad valorem taxes, thereby creating a disparity in
educational funds available to schools in wealthy areas and schools in poor
areas. Litigation or legislation on this issue may affect the sources of funds
available for the payment of school bonds in the Trusts. General problems
relating to college and university obligations include the prospect of a
declining percentage of the population consisting of "college" age
individuals, possible inability to raise tuitions and fees sufficiently to
cover increased operating costs, the uncertainty of continued receipt of
Federal grants and state funding, and government legislation or regulations
which may adversely affect the revenues or costs of such issuers. All of such
issuers have been experiencing certain of these problems in varying degrees.
See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which
are payable from and secured by revenues derived from the ownership and
operation of facilities such as airports, bridges, turnpikes, port
authorities, convention centers and arenas. In view of this an investment in
such a Trust should be made with an understanding of the characteristics of
such issuers and the risks which such an investment may entail. The major
portion of an airport's gross operating income is generally derived from fees
received from signatory airlines pursuant to use agreements which consist of
annual payments for leases, occupancy of certain terminal space and service
fees. Airport operating income may therefore be affected by the ability of the
airlines to meet their obligations under the use agreements. The air transport
industry is experiencing significant variations in earnings and traffic, due
to increased competition, excess capacity, increased costs, deregulation,
traffic constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect these
industry conditions may have on airport revenues which are dependent for
payment on the financial condition of the airlines and their usage of the
particular airport facility. Similarly, payment on Bonds related to other
facilities is dependent on revenues from the projects, such as user fees from
ports, tolls on turnpikes and bridges and rents from buildings. Therefore,
payment may be adversely affected by reduction in revenues due to such factors
as increased cost of maintenance, decreased use of a facility, lower cost of
alternative modes of transportation, scarcity of fuel and reduction or loss of
rents. See "General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which
are payable from and secured by revenues derived from the operation of
resource recovery facilities. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. Resource recovery
facilities are designed to process solid waste, generate steam and convert
steam to electricity. Resource recovery bonds may be subject to extraordinary
optional redemption at par upon the occurrence of certain circumstances,
including but not limited to: destruction or condemnation of a project;
contracts relating to a project becoming void, unenforceable or impossible to
perform; changes in the economic availability of raw materials, operating
supplies or facilities necessary for the operation of a project or
technological or other unavoidable changes adversely affecting the operation
of a project; administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform; or
impose unreasonable burdens or excessive liabilities. The Sponsor cannot
predict the causes or likelihood of the redemption of resource recovery bonds
in such a Trust prior to the stated maturity of the Bonds. See "General" for
each Trust.
REPLACEMENT BONDS. Because certain of the Securities in the Fund may from
time to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from
<PAGE>
Unitholder Explanations 13
such events will be distributed to Unitholders and will not be reinvested, no
assurance can be given that any Trust will retain for any length of time its
present size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Security. In the
event of a failure to deliver any Security that has been purchased for the
Fund under a contract, including those Securities purchased on a "when, as and
if issued" basis ("Failed Bonds"), the Sponsor is authorized under the Trust
Agreement to direct the Trustee to acquire other bonds ("Replacement Bonds")
to make up the original corpus of the Fund.
The Replacement Bonds must be purchased within 20 days after delivery of
the notice of the failed contract and the purchase price (exclusive of accrued
interest) may not exceed the amount of funds reserved for the purchase of the
Failed Bonds. The Replacement Bonds (i) must be tax-exempt bonds issued by
states or territories of the United States or political subdivisions thereof
and, in the case of replacement of bonds in a State Trust, shall have the
benefit of an exemption from state taxation of interest to an extent equal to
or greater than that of the bonds they replace, (ii) must have a fixed
maturity date of at least 10 years in the case of an IM-IT or a State Trust
(other than a State Intermediate Laddered Maturity Trust) or, in the case of
an IM-IT Limited Maturity, IM-IT Intermediate, State Intermediate Laddered
Maturity or IM-IT Short Intermediate Trust, must have a fixed maturity date
within the range set forth under "Unitholder Explanations--Settlement of Bonds
in the Trusts--The Fund", (iii) must be purchased at a price that results in a
yield to maturity and in a current return, in each case as of the Date of
Deposit, at least equal to that of the Failed Bonds, (iv) shall not be "when,
as and if issued" bonds, (v) must be rated "BBB-" or better in the case of the
Insured Trusts and "A-" or better in the case of the Quality Trusts by
Standard & Poor's Corporation or "Baa" or better in the case of the Insured
Trusts and "A" or better in the case of the Quality Trusts by Moody's
Investors Service, Inc. and (vi) with respect to each Insured Trust, must be
insured by one of the Preinsured Bond Insurers or be eligible for (and when
acquired be insured under) the insurance obtained by such Insured Trust.
Whenever a Replacement Bond has been acquired for the Fund, the Trustee shall,
within five days thereafter, notify all Unitholders of the affected Trust of
the acquisition of the Replacement Bond and shall, on the next monthly
distribution date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the affected Trust of
the Failed Bond exceeded the cost of the Replacement Bond plus accrued
interest. Once the original corpus of a Trust is acquired, the Trustee will
have no power to vary the investment of the Trust; i.e., the Trust will have
no managerial power to take advantage of market variation to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Bonds to all Unitholders of the affected Trust and distribute the principal,
Purchased Interest and accrued interest (at the coupon rate of such Failed
Bonds to the date the Failed Bonds are removed from the Fund) attributable to
such Failed Bonds not more than 30 days after such removal or such earlier
time as the Trustee in its sole discretion deems to be in the interest of the
Unitholders. All such interest paid to a Unitholder which accrued after the
expected date of settlement for purchase of his Units will be paid by the
Sponsor and accordingly will not be treated as tax-exempt income. In the event
a Replacement Bond should not be acquired by the Fund, the Estimated Net
Annual Interest Income per Unit for the affected Trust would be reduced and
the Estimated Current Return and Estimated Long-Term Return thereon might be
lowered. In addition, Unitholders should be aware that they may not be able at
the time of receipt of such principal to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such proceeds
were earning to Unitholders in the affected Trust.
BOND REDEMPTIONS. Certain of the Bonds in certain of the Trusts may be
subject to redemption prior to their stated maturity date pursuant to sinking
fund provisions, call provisions or extraordinary optional or mandatory
redemption provisions or otherwise. A sinking fund is a reserve fund
accumulated over a period of time for retirement of debt. A callable debt
obligation is one which is subject to redemption or refunding prior to
maturity at the option of the issuer. A refunding is a method by which a debt
obligation is redeemed, at or before maturity, by the proceeds of a new debt
obligation. In general, call provisions are more likely to be exercised when
the offering side valuation is at a premium over par than when it is at a
discount from par. The exercise of redemption or call provisions will (except
to the extent the proceeds of the called Bonds are used to pay for Unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions; it may also
affect the current return on
<PAGE>
14 Unitholder Explanations
Units of the Trust involved. Each Trust portfolio contains a listing of the
sinking fund and call provisions, if any, with respect to each of the debt
obligations. Extraordinary optional redemptions and mandatory redemptions
result from the happening of certain events. Generally, events that may permit
the extraordinary optional redemption of Bonds or may require the mandatory
redemption of Bonds include, among others: a final determination that the
interest on the Bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the Bonds were
used; an exercise by a local, state or Federal governmental unit of its power
of eminent domain to take all or substantially all of the project for which
the proceeds of the Bonds were used; changes in the economic availability of
raw materials, operating supplies or facilities or technological or other
changes which render the operation of the project for which the proceeds of
the Bonds were used uneconomic; changes in law or an administrative or
judicial decree which renders the performance of the agreement under which the
proceeds of the Bonds were made available to finance the project impossible or
which creates unreasonable burdens or which imposes excessive liabilities,
such as taxes, not imposed on the date the Bonds are issued on the issuer of
the Bonds or the user of the proceeds of the Bonds; an administrative or
judicial decree which requires the cessation of a substantial part of the
operations of the project financed with the proceeds of the Bonds; an
overestimate of the costs of the project to be financed with the proceeds of
the Bonds resulting in excess proceeds of the Bonds which may be applied to
redeem Bonds; or an underestimate of a source of funds securing the Bonds
resulting in excess funds which may be applied to redeem Bonds. The issuer of
certain Bonds in a Trust may have sold or reserved the right to sell, upon the
satisfaction of certain conditions, to third parties all or any portion of its
rights to call Bonds in accordance with the stated redemption provisions of
such Bonds. In such a case the issuer no longer has the right to call the
Bonds for redemption unless it reacquires the rights from such third party. A
third party pursuant to these rights may exercise the redemption provisions
with respect to a Bond at a time when the issuer of the Bond might not have
called a Bond for redemption had it not sold such rights. The Sponsor is
unable to predict all of the circumstances which may result in such redemption
of an issue of Bonds. See "Portfolio" for each Trust and footnote (3) in the
"Notes to Portfolios". See also the discussion of single family mortgage and
multi-family revenue bonds above for more information on the call provisions
of such bonds.
DISTRIBUTIONS. Distributions of interest received by the Fund, pro rated
on an annual basis, will be made monthly. The first such distribution will be
in the amount indicated under 'Per Unit Information' for the applicable Trust
and will be made on the fifteenth day of the month indicated under "Initial
Distribution" therein to Unitholders of record on the first day of such month.
Distribution of funds from the Principal Account, if any, will also be made
monthly, except under certain special circumstances (see "Unitholder
Explanations--Public Offering--Distributions of Interest and Principal").
CERTIFICATES. The Trustee is authorized to treat as the record owner of
Units that person who is registered as such owner on the books of the Trustee.
Ownership of Units of each Trust is evidenced by separate registered
certificates executed by the Trustee and the Sponsor. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unitholder
must sign exactly as his name appears on the face of the certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guaranty program in
addition to, or in substitution for, STAMP, as may be accepted by the Trustee.
In certain instances the Trustee may require additional documents such as, but
not limited to, trust instruments, certificates of death, appointments as
executor or administrator or certificates of corporate authority. Certificates
will be issued in denominations of one Unit or any multiple thereof.
Although no such charge is now made or contemplated, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate re-issued
(other than as a result of a change in plan of distribution) or transferred
and to pay any governmental charge that may be imposed in connection with each
such transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
<PAGE>
Unitholder Explanations 15
ESTIMATED CURRENT RETURNS AND ESTIMATED LONG-TERM RETURNS
As of the opening of business on the Date of Deposit (except for the
IM-IT as of 8:00 A.M. Central Time on the Date of Deposit) the Estimated
Current Return and the Estimated Long-Term Return were as set forth in the
"Per Unit Information" for each Trust. Estimated Current Return is calculated
by dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is calculated using
a formula which (1) takes into consideration, and determines and factors in
the relative weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of all of the Securities in a Trust and (2) takes into
account the expenses and sales charge associated with each Trust Unit. Since
the market values and estimated retirements of the Securities and the expenses
of a Trust will change, there is no assurance that the present Estimated
Long-Term Return will be realized in the future. The Estimated Current Return
and Estimated Long-Term Return are expected to differ because the calculation
of Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price.
In order to acquire certain of the Securities contracted for by the
Sponsor for deposit in the Fund, it may be necessary for the Sponsor or
Trustee to pay on the settlement dates for delivery of such Securities amounts
covering accrued interest on such Securities which exceed (1) the amounts paid
by Unitholders and (2) the amounts which will be made available through cash
furnished by the Sponsor on the Date of Deposit, which amount of cash may
exceed the interest which would accrue to the First Settlement Date. The
Trustee has agreed to pay for any amounts necessary to cover any such excess
and will be reimbursed therefor, without interest, when funds become available
from interest payments on the particular Securities with respect to which such
payments may have been made. Also, since interest on any "when, as and if
issued" Securities does not begin accruing as tax-exempt interest income to
the benefit of Unitholders until their respective dates of delivery, the
Trustee may, in order to maintain (or in some cases approach) for the
Unitholders the same estimated net annual interest incomes during the first
year of the Trusts' operations as is indicated under "Per Unit Information"
for the applicable Trust, reduce its fee (and to the extent necessary pay
Trust expenses) in an amount equal to that indicated under "Per Unit
Information" for the applicable Trust.
INTEREST EARNING SCHEDULE
CALCULATION OF ESTIMATED NET ANNUAL INTEREST INCOME. The estimated net
annual interest income is based on 360 days. To account for the estimated net
annual interest income per Unit in a Trust, it is necessary to use the
following information.
The beginning interest date for each Trust is March 17, 1994. The first
record date for each Trust (April 1, 1994) is 14 days from such date. The
daily rates of estimated net annual interest income per Unit are $.15016,
$.14482, $.12124, $.14052 and $.14358 for the IM-IT, New York IM-IT, Ohio
IM-IT Intermediate Laddered Maturity, Tennessee IM-IT and North Carolina
Quality Trusts, respectively. This amounts to $2.10, $2.03, $1.70, $1.97 and
$2.01 for the IM-IT, New York IM-IT, Ohio IM-IT Intermediate Laddered
Maturity, Tennessee IM-IT and North Carolina Quality Trusts, respectively.
<PAGE>
16 Unitholder Explanations
Utilizing the preceding information, the following procedure illustrates
the calculation of first year estimated net annual interest income per Unit
for the New York IM-IT Trust:
The New York IM-IT Trust accrues
$2.03 to the first record date plus
$47.85 which is 11 normal distributions at $4.35, and finally adding
$2.26 which has accrued from March 1, 1995 until March 17, 1995 which
completes the 360 day cycle (16 days times the daily factor)
Total $52.14 interest earned / $1,000.00 (Date of Deposit Public Offering
Price) = 5.21% Estimated Current Return as of the Date of
Deposit.
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price which includes
Purchased Interest. During the initial offering period the Public Offering
Price is based on the offering prices of the Securities in each Trust and
includes a sales charge of 4.9% of the Public Offering Price (excluding
Purchased Interest) (5.152% of the aggregate offering price of the Securities)
for an IM-IT or a State Trust (other than a State Intermediate Laddered
Maturity Trust), 4.3% of the Public Offering Price (excluding Purchased
Interest) (4.493% of the aggregate offering price of the Securities) for an
IM-IT Limited Maturity Trust, 3.9% of the Public Offering Price (excluding
Purchased Interest) (4.058% of the aggregate offering price of the Securities)
for an IM-IT Intermediate Trust and 3.0% of the Public Offering Price
(excluding Purchased Interest) (3.093% of the aggregate offering price of the
Securities) for an IM-IT Short Intermediate Trust or a State Intermediate
Laddered Maturity Trust. After the initial public offering period, the
secondary market Public Offering Price is based on the bid prices of the
Securities in each Trust and includes a sales charge determined in accordance
with the table set forth below, which is based upon the dollar weighted
average maturity of each Trust plus in each case Purchased Interest. For
purposes of computation, Bonds will be deemed to mature on their expressed
maturity dates unless: (a) the Bonds have been called for redemption or funds
or securities have been placed in escrow to redeem them on an earlier call
date, in which case such call date will be deemed to be the date upon which
they mature; or (b) such Bonds are subject to a "mandatory tender", in which
case such mandatory tender will be deemed to be the date upon which they
mature.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to each Trust based upon the
dollar weighted average maturity of such Trust's Portfolio, in accordance with
the following schedule:
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
1................... 1.523% 9.................... 4.712%
2................... 2.041 10................... 4.932
3................... 2.564 11................... 4.932
4................... 3.199 12................... 4.932
5................... 3.842 13................... 5.374
6................... 4.058 14................... 5.374
7................... 4.275 15................... 5.374
8................... 4.493 16 to 30............. 6.045
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Securities in a Trust. Expressed as a percent of
the Public Offering Price (excluding Purchased Interest), the sales charge on
a Trust consisting entirely of a portfolio of Bonds with 15 years to maturity
would be 5.10%. The sales
<PAGE>
Unitholder Explanations 17
charge applicable to quantity purchases during the initial offering period is,
however, reduced on a graduated basis to any person acquiring 100 or more
Units as follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF SALES
CHARGE REDUCTION PER UNIT
IM-IT,
STATE (OTHER THAN A
STATE INTERMEDIATE
LADDERED MATURITY
AGGREGATE NUMBER OF TRUST) AND NATIONAL
UNITS PURCHASED QUALITY TRUSTS OTHER TRUSTS
<S> <C> <C>
100-249 Units................................... $ 4.00 $ 4.00
250-499 Units................................... $ 6.00 $ 6.00
500-999 Units................................... $ 14.00 $ 9.00
1,000 or more Units............................. $ 19.00 $ 11.00
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for such quantity purchases. See "Public
Offering--Unit Distribution". This reduced sales charge structure will apply
on all purchases by the same person from any one Underwriter or dealer of
units of Van Kampen Merritt-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. To determine the applicable sales charge
for units purchased in accordance with (b) above, it is necessary to
accumulate all purchases made on the Initial Purchase Date and all purchases
made in accordance with (b) above. Units purchased in the name of the spouse
of a purchaser or in the name of a child of such purchaser under 21 years of
age will be deemed for the purposes of calculating the applicable sales charge
to be additional purchases by the purchaser. The reduced sales charges will
also be applicable to a trustee or other fiduciary purchasing securities for
one or more trust estate or fiduciary accounts. Employees of Van Kampen
Merritt Inc. and its subsidiaries may purchase Units of the Trust at the
current Public Offering Price less the underwriting commission during the
initial offering period, and less the dealer's concession for secondary market
transactions. Registered representatives of selling Underwriters may purchase
Units of the Fund at the current Public Offering Price less the underwriting
commission during the initial offering period, and less the dealer's
concession for secondary market transactions. Registered representatives of
selling brokers, dealers, or agents may purchase Units of the Fund at the
current Public Offering Price less the dealer's concession during the initial
offering period and for secondary market transactions.
OFFERING PRICE. Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in
each Trust.
As indicated above, the price of the Units as of the date the Securities
were deposited in each Trust was determined by adding to the aggregate
offering price of the Securities of a Trust an amount equal to the applicable
sales charge expressed as a percentage of the aggregate offering price of the
Securities plus Purchased Interest and dividing the sum so obtained by the
number of Units outstanding. This computation produced a gross underwriting
commission equal to such sales charge expressed as a percentage of the Public
Offering Price (excluding Purchased Interest). Such price determination as of
the opening of business on the Date of Deposit (except for the IM-IT as of
8:00 A.M. Central Time on the Date of Deposit) was made on the basis of an
evaluation of the Securities in each Trust prepared by Interactive Data
Services, Inc., a firm regularly engaged in the business of evaluating,
quoting or appraising comparable securities. After the opening of business on
the Date of Deposit (except for the IM-IT as of 8:00 A.M. Central Time on the
Date of Deposit) and during the period of initial offering, the Evaluator will
appraise or cause to be appraised daily the value of the underlying Securities
of each Trust as of 4:00 P.M. Eastern time on days the New York Stock Exchange
is open for business and will adjust the Public Offering Price of the Units
commensurate with such appraisal. Such Public Offering Price will be effective
for all orders received at or prior to 4:00 P.M. Eastern time on each such
day. Orders received by the Trustee, Sponsor or any Underwriter for purchases,
sales or
<PAGE>
18 Unitholder Explanations
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price. For secondary
market sales the Public Offering Price per Unit will be equal to the aggregate
bid price of the Securities in the Trust plus an amount equal to the
applicable secondary market sales charge expressed as a percentage of the
aggregate bid price of the Securities plus Purchased Interest and dividing the
sum so attained by the number of Units then outstanding. This computation
produces a gross commission equal to such sales charge expressed as a
percentage of the Public Offering Price (excluding Purchased Interest). For
secondary market purposes such appraisal and adjustment with respect to a
Trust will be made by the Evaluator as of 4:00 P.M. Eastern time on days in
which the New York Stock Exchange is open for each day on which any Unit of
such Trust is tendered for redemption, and it shall determine the aggregate
value of any Trust as of 4:00 P.M. Eastern time on such other days as may be
necessary.
The aggregate price of the Securities in each Trust has been and will be
determined on the basis of bid prices or offering prices, as is appropriate,
(a) on the basis of current market prices for the Securities obtained from
dealers or brokers who customarily deal in bonds comparable to those held by
the Fund; (b) if such prices are not available for any particular Securities,
on the basis of current market prices for comparable bonds; (c) by causing the
value of the Securities to be determined by others engaged in the practice of
evaluation, quoting or appraising comparable bonds; or (d) by any combination
of the above. Market prices of the Securities will generally fluctuate with
changes in market interest rates. Unless Bonds are in default in payment of
principal or interest or in significant risk of such default, the Evaluator
will not attribute any value to the insurance obtained by an Insured Trust, if
any.
The Evaluator will consider in its evaluation of Bonds which are in
default in payment of principal or interest or, in the Sponsor's opinion, in
significant risk of such default (the "Defaulted Bonds") the value of the
insurance guaranteeing interest and principal payments. The value of the
insurance will be equal to the difference between (i) the market value of
Defaulted Bonds assuming the exercise of the right to obtain Permanent
Insurance (less the insurance premiums and related expenses attributable to
the purchase of Permanent Insurance) and (ii) the market value of such
Defaulted Bonds not covered by Permanent Insurance. In addition, the Evaluator
will consider the ability of the affected Portfolio Insurer to meet its
commitments under any Trust insurance policy, including the commitments to
issue Permanent Insurance. It is the position of the Sponsor that this is a
fair method of valuing the Bonds and the insurance obtained by an Insured
Trust and reflects a proper valuation method in accordance with the provisions
of the Investment Company Act of 1940.
No value has been ascribed to insurance obtained by an Insured Trust, if
any, as of the date of this Prospectus.
The initial or primary Public Offering Price of the Units is equal to the
offering price per Unit of the underlying Securities in each Trust plus the
applicable sales charge plus Purchased Interest and interest accrued but
unpaid from the First Settlement Date to the date of settlement. The secondary
market Public Offering Price is equal to the bid price per Unit of the
Securities in each Trust plus the applicable sales charge plus Purchased
Interest and accrued interest. The offering price of Securities in each Trust
may be expected to average approximately 0.5%-1% more than the bid price of
such Securities. On the Date of Deposit, the offering side evaluations of the
Securities in the Trusts were higher than the bid side evaluations of such
Securities by the respective amounts indicated under footnote (5) in "Notes to
Portfolios".
Although payment is normally made five business days following the order
for purchase, payment may be made prior thereto. A person will become the
owner of Units on the date of settlement provided payment has been received.
Cash, if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934. Delivery of certificates representing Units
so ordered will be made five business days following such order or shortly
thereafter. See "Redemption of Units" below for information regarding the
ability to redeem Units ordered for purchase.
MARKET FOR UNITS. During the initial public offering period, the Sponsor
and/or certain of the Underwriters intend to offer to purchase Units at a
price equivalent to the Public Offering Price which is based upon the
aggregate offering price per Unit of the underlying Securities in each Trust
and the amount of Purchased Interest for each Trust plus accrued interest to
the date of settlement less the related sales commission. Afterward, although
they are not
<PAGE>
Unitholder Explanations 19
obligated to do so, the Sponsor intends to, and certain of the other
Underwriters may, maintain a market for the Units offered hereby and to offer
continuously to purchase such Units at prices, subject to change at any time,
based upon the aggregate bid prices of the Securities in the portfolio of each
Trust plus Purchased Interest plus interest accrued to the date of settlement
and plus any principal cash on hand, less any amounts representing taxes or
other governmental charges payable out of the Trust and less any accrued Trust
expenses. If the supply of Units exceeds demand or if some other business
reason warrants it, the Sponsor and/or the Underwriters may either discontinue
all purchases of Units or discontinue purchases of Units at such prices. In
the event that a market is not maintained for the Units and the Unitholder
cannot find another purchaser, a Unitholder of any Trust desiring to dispose
of his Units may be able to dispose of such Units only by tendering them to
the Trustee for redemption at the Redemption Price, which is based upon the
aggregate bid price of the Securities in the portfolio of such Trust plus
Purchased Interest and any accrued interest. The aggregate bid prices of the
underlying Securities in a Trust are expected to be less than the related
aggregate offering prices. See "Redemption of Units" below. A Unitholder who
wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in existence any price in
excess of the Redemption Price and, if so, the amount thereof.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by the Fund,
including that part of the proceeds of any disposition of Securities which
represents Purchased Interest and/or accrued interest, is credited by the
Trustee to the Interest Account for the appropriate Trust. Other receipts are
credited to the Principal Account for the appropriate Trust. Interest received
by the Fund after deduction of amounts sufficient to reimburse the Trustee,
without interest, for any amounts advanced and paid to the Sponsor as the
Unitholder of record as of the First Settlement Date (see "Public
Offering--Offering Price" above) will be distributed on or shortly after the
fifteenth day of each month on a pro rata basis to Unitholders of record of a
Trust as of the preceding record date who are entitled to distributions at
that time. All distributions will be net of applicable expenses. The pro rata
share of cash in the Principal Account of a Trust will be computed as of the
date set forth under "Per Unit Information" for the applicable Trust, and
thereafter as of the record date, and distributions to the Unitholders as of
such record date will be made on or shortly after the fifteenth day of such
month. Proceeds received from the disposition of any of the Securities after
such record date and prior to the following distribution date will be held in
the Principal Account and not distributed until the next distribution date.
The Trustee is not required to pay interest on funds held in any Principal or
Interest Account (but may itself earn interest thereon and therefore benefits
from the use of such funds) nor to make a distribution from the Principal
Account unless the amount available for distribution therein shall equal at
least $1.00 per Unit.
The distribution to the Unitholders of a Trust as of each record date
after the First Settlement Date will be made on the following distribution
date or shortly thereafter and shall consist of an amount substantially equal
to such portion of the Unitholder's pro rata share of the estimated net Annual
interest Income in the Interest Account of such Trust after deducting
estimated expenses. Because interest payments are not received by the Fund at
a constant rate throughout the year, such interest distribution may be more or
less than the amount credited to such Interest Account as of the record date.
For the purpose of minimizing fluctuations in the distributions from an
Interest Account, the Trustee is authorized to advance such amounts as may be
necessary to provide interest distributions of approximately equal amounts.
The Trustee shall be reimbursed, without interest, for any such advances from
funds in the applicable Interest Account on the ensuing record date. Persons
who purchase Units between a record date and a distribution date will receive
their first distribution on the second distribution date after the purchase.
As of the first day of each month, the Trustee will deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Fund (as
determined on the basis set forth under "Trust Administration--Fund
Administration and Expenses"). The Trustee also may withdraw from said
Accounts such amounts, if any, as it deems necessary to establish a reserve
for any governmental charges payable out of the Fund. Amounts so withdrawn
shall not be considered a part of the Fund's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
Accounts. In addition, the Trustee may withdraw from the Interest and
Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Bonds and redemptions of Units by the Trustee.
<PAGE>
20 Unitholder Explanations
REINVESTMENT OPTION. Unitholders of all unit investment trusts sponsored
by Van Kampen Merritt Inc. (except Unitholders of a New York IM-IT Trust or a
New York IM-IT Intermediate Laddered Maturity Trust), may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any of the open ended mutual funds
(except for B shares) listed under "Trust Administration--Sponsor" which are
registered in the Unitholder's state of residence. New York IM-IT Trust and
New York IM-IT Intermediate Laddered Maturity Trust Unitholders, other than
those residing in the Commonwealth of Massachusetts, may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of First Investors New York Insured Tax
Free Fund, Inc., a fund which invests primarily in securities exempt from
federal and New York state and city income tax. Such mutual funds are
hereinafter collectively referred to as the "Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each
Reinvestment Fund describes the investment policies of such fund and sets
forth the procedures to follow to commence reinvestment. A Unitholder may
obtain a prospectus for the respective Reinvestment Funds from Van Kampen
Merritt Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. Texas
residents who desire to reinvest may request that a broker-dealer registered
in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units
will, on the applicable distribution date, automatically be applied, as
directed by such person, as of such distribution date by the Trustee to
purchase shares (or fractions thereof) of the applicable Reinvestment Fund at
a net asset value as computed as of the close of trading on the New York Stock
Exchange on such date, plus a sales charge of $1.00 per $100 of reinvestment
except if the participant selects the First Investors New York Insured Tax
Free Fund, Inc., in which case the sales charge will be $1.50 per $100 of
reinvestment, or except if the participant selects the Van Kampen Merritt
Money Market Fund or the Van Kampen Merritt Tax Free Money Fund in which case
no sales charge applies. A minimum of one-half of such sales charge would be
paid to Van Kampen Merritt Inc. for all Reinvestment Funds except First
Investors New York Insured Tax Free Fund, Inc., in which case such sales
charge would be paid to First Investors Management Company, Inc.
Confirmations of all reinvestments by a Unitholder into a Reinvestment
Fund will be mailed to the Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next
succeeding distribution date, by so notifying the Trustee in writing, elect to
terminate his or her reinvestment plan and receive future distributions of his
or her Units in cash. There will be no charge or other penalty for such
termination. Each Reinvestment Fund, its sponsor and investment adviser shall
have the right to terminate at any time the reinvestment plan relating to such
fund.
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his
Units by tender to the Trustee, at its Unit Investment Trust Division, 101
Barclay Street, 20th Floor, New York, New York 10286, of the certificates
representing the Units to be redeemed, duly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing
satisfactory indemnity, as in connection with lost, stolen or destroyed
certificates) and by payment of applicable governmental charges, if any. Thus,
redemption of Units cannot be effected until certificates representing such
Units have been delivered to the person seeking redemption or satisfactory
indemnity provided. No redemption fee will be charged. On the seventh calendar
day following such tender, or if the seventh calendar day is not a business
day, on the first business day prior thereto, the Unitholder will be entitled
to receive in cash an amount for each Unit equal to the Redemption Price per
Unit next computed after receipt by the Trustee of such tender of Units. The
"date of tender" is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after 4:00 P.M. Eastern time on
days of trading on the New York Stock Exchange, the date of tender is the next
day on which such Exchange is open for trading and such Units will be deemed
to have been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day.
Under regulations issued by the Internal Revenue Service, the Trustee
will be required to withhold a specified percentage of the principal amount of
a Unit redemption if the Trustee has not been furnished the redeeming
<PAGE>
Unitholder Explanations 21
Unitholder's tax identification number in the manner required by such
regulations. Any amount so withheld is transmitted to the Internal Revenue
Service and may be recovered by the Unitholder only when filing a return.
Under normal circumstances the Trustee obtains the Unitholder's tax
identification number from the selling broker. However, at any time a
Unitholder elects to tender Units for redemption, such Unitholder should
provide a tax identification number to the Trustee in order to avoid this
possible "back-up withholding" in the event the Trustee has not been
previously provided such number.
Purchased Interest and accrued interest paid on redemption shall be
withdrawn from the Interest Account of such Trust or, if the balance therein
is insufficient, from the Principal Account of such Trust. All other amounts
will be withdrawn from the Principal Account of such Trust. The Trustee is
empowered to sell underlying Securities of a Trust in order to make funds
available for redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Securities in each Trust, while the initial and primary Public Offering Price
of Units will be determined on the basis of the offering price of the
Securities in each Trust, as of 4:00 P.M. Eastern time on days of trading on
the New York Stock Exchange on the date any such determination is made. On the
Date of Deposit the Public Offering Price per Unit (which is based on the
offering prices of the Bonds and Purchased Interest in each Trust and includes
the sales charge) exceeded the value at which Units could have been redeemed
(based upon the current bid prices of the Securities and Purchased Interest in
such Trust) by the amount shown under "Summary of Essential Financial
Information". While the Trustee has the power to determine the Redemption
Price per Unit when Units are tendered for redemption, such authority has been
delegated to the Evaluator which determines the price per Unit on a daily
basis. The Redemption Price per Unit is the pro rata share of each Unit in
each Trust on the basis of (i) the cash on hand in such Trust or moneys in the
process of being collected, (ii) the value of the Securities in such Trust
based on the bid prices of the Securities therein, except for cases in which
the value of insurance has been included, (iii) Purchased Interest for each
Trust and (iv) interest accrued thereon, less (a) amounts representing taxes
or other governmental charges payable out of such Trust and (b) the accrued
expenses of such Trust. The Evaluator may determine the value of the
Securities in each Trust by employing any of the methods set forth in "Public
Offering--Offering Price". In determining the Redemption Price per Unit no
value will be assigned to the portfolio insurance maintained on the Bonds in
an Insured Trust unless such Bonds are in default in payment of principal or
interest or in significant risk of such default. For a description of the
situations in which the Evaluator may value the insurance obtained by the
Insured Trusts, see "Public Offering--Offering Price" above.
The price at which Units may be redeemed could be less than the price
paid by the Unitholder. As stated above, the Trustee may sell Securities to
cover redemptions. When Securities are sold, the size and diversity of the
affected Trust will be reduced. Such sales may be required at a time when
Securities would not otherwise be sold and might result in lower prices than
might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trusts is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
REPORTS PROVIDED. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and
the amount of other receipts (received since the preceding distribution), if
any, being distributed expressed in each case as a dollar amount representing
the pro rata share of each Unit of a Trust outstanding. For as long as the
Trustee deems it to be in the best interests of the Unitholders, the accounts
of each Trust shall be audited, not less frequently than annually, by
independent certified public accountants and the report of such accountants
shall be furnished by the Trustee to Unitholders of such Trusts upon request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a registered Unitholder of a Trust a statement (i) as to the Interest
Account: interest received
<PAGE>
22 Unitholder Explanations
(including amounts representing interest received upon any disposition of
Securities) and the percentage of such interest by states in which the issuers
of the Securities are located, the amount of Purchased Interest, deductions
for applicable taxes and for fees and expenses of such Trust, for purchases of
Replacement Bonds and for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar year;
(ii) as to the Principal Account: the dates of disposition of any Securities
and the net proceeds received therefrom (excluding any portion representing
accrued interest), the amount paid for purchases of Replacement Bonds and for
redemptions of Units, if any, deductions for payment of applicable taxes and
fees and expenses of the Trustee, the amount of "when issued" interest treated
as a return of capital, if any, and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit based upon the last computation
thereof made during such calendar year; and (v) amounts actually distributed
during such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in a Trust furnished to it by the Evaluator.
INSURANCE ON THE BONDS IN THE INSURED TRUSTS
Insurance has been obtained by each Insured Trust or by the issuer of
such Bonds, or by a prior owner of such Bonds, or by the Sponsor prior to the
deposit of such Bonds in a Trust guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in such Trust. See "Unitholder
Explanations--Settlement of Bonds in the Trusts--Objectives and Securities
Selection". An insurance policy obtained by an Insured Trust, if any, is non-
cancellable and will continue in force so long as such Trust is in existence,
the respective Portfolio Insurer referred to below is still in business and
the Bonds described in such policy continue to be held by such Trust (see
"Portfolio" for the respective Insured Trust). Any portfolio insurance premium
for an Insured Trust, which is an obligation of such Trust, is paid by each
Trust on a monthly basis. Non-payment of premiums on a policy obtained by an
Insured Trust will not result in the cancellation of insurance but will force
the insurer to take action against the Trustee to recover premium payments due
it. The Trustee in turn will be entitled to recover such payments from such
Trust. Premium rates for each issue of Bonds protected by a policy obtained by
an Insured Trust, if any, are fixed for the life of the Trust. The premium for
any Preinsured Bond insurance has been paid by such issuer, by a prior owner
of such Bonds or the Sponsor and any such policy or policies are
non-cancellable and will continue in force so long as the Bonds so insured are
outstanding and the respective Preinsured Bond Insurer remains in business. If
the provider of an original issuance insurance policy is unable to meet its
obligations under such policy or if the rating assigned to the claims-paying
ability of any such insurer deteriorates, the Portfolio Insurers have no
obligation to insure any issue adversely affected by either of the above
described events.
The aforementioned portfolio insurance obtained by an Insured Trust, if
any, guarantees the timely payment of principal and interest on the Bonds as
they fall due. For the purposes of insurance obtained by an Insured Trust,
"when due" generally means the stated maturity date for the payment of
principal and interest. However, in the event (a) an issuer of a Bond defaults
in the payment of principal or interest on such Bond, (b) such issuer enters
into a bankruptcy proceeding or (c) the maturity of such Bond is accelerated,
the affected Portfolio Insurer has the option, in its sole discretion, after
receiving notice of the earliest to occur of such a default, bankruptcy
proceeding or acceleration to pay the outstanding principal amount of such
Bond plus accrued interest to the date of such payment and thereby retire the
Bond from the affected Trust prior to such Bond's stated maturity date. The
insurance does not guarantee the market value of the Bonds or the value of the
Units. Insurance obtained by an Insured Trust, if any, is only effective as to
Bonds owned by and held in such Trust. In the event of a sale of any such Bond
by the Trustee, such insurance terminates as to such Bond on the date of sale.
<PAGE>
Unitholder Explanations 23
Pursuant to an irrevocable commitment of the Portfolio Insurers, the
Trustee, upon the sale of a Bond covered under a portfolio insurance policy
obtained by an Insured Trust, has the right to obtain permanent insurance with
respect to such Bond (i.e., insurance to maturity of the Bonds regardless of
the identity of the holder thereof) (the "Permanent Insurance") upon the
payment of a single predetermined insurance premium and any expenses related
thereto from the proceeds of the sale of such Bond. Accordingly, any Bond in
an Insured Trust is eligible to be sold on an insured basis. It is expected
that the Trustee would exercise the right to obtain Permanent Insurance only
if upon such exercise the affected Trust would receive net proceeds (sale of
Bond proceeds less the insurance premium and related expenses attributable to
the Permanent Insurance) from such sale in excess of the sale proceeds if such
Bonds were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance would be determined based upon the
insurability of each Bond as of the Date of Deposit and would not be increased
or decreased for any change in the creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an
advantage to an Insured Trust in that each Bond insured by a Trust insurance
policy may be sold out of the affected Trust with the benefits of the
insurance attaching thereto. Thus, the value of the insurance, if any, at the
time of sale, can be realized in the market value of the Bond so sold (which
is not the case in connection with any value attributable to an Insured
Trust's portfolio insurance). See "Public Offering--Offering Price". Because
any such insurance value may be realized in the market value of the Bond upon
the sale thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it
is much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Public Offering--Redemption of Units") and (b) at the time of
termination of an Insured Trust, if such Trust were holding defaulted Bonds or
Bonds in significant risk of default such Trust would not need to hold such
Bonds until their respective maturities in order to realize the benefits of
such Trust's portfolio insurance (see "Trust Administration--Amendment or
Termination").
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value for such insurance (including the right
to obtain Permanent Insurance) for the purpose of computing the price or
redemption value of Units if the Bonds covered by such insurance are in
default in payment of principal or interest or in significant risk of such
default. The value of the insurance will be the difference between (i) the
market value of a Bond which is in default in payment of principal or interest
or in significant risk of such default assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium and related expenses
attributable to the purchase of Permanent Insurance) and (ii) the market value
of such Bonds not covered by Permanent Insurance. See "Public
Offering--Offering Price". It is also the present intention of the Trustee not
to sell such Bonds to effect redemptions or for any other reason but rather to
retain them in the portfolio because value attributable to the insurance
cannot be realized upon sale. See "Public Offering-- Offering Price" herein
for a more complete description of an Insured Trust's method of valuing
defaulted Bonds and Bonds which have a significant risk of default. Insurance
obtained by the issuer of a Bond is effective so long as such Bond is
outstanding. Therefore, any such insurance may be considered to represent an
element of market value in regard to the Bonds thus insured, but the exact
effect, if any, of this insurance on such market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust,
if any, with respect to the Bonds in such Trust were issued by one or more of
the Portfolio Insurers. Any other Preinsured Bond insurance policy (or
commitment therefor) was issued by one of the Preinsured Bond Insurers. See
"Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection".
AMBAC Indemnity Corporation ("AMBAC Indemnity") is a Wisconsin-domiciled
stock insurance corporation regulated by the Office of the Commissioner of
Insurance of the State of Wisconsin and licensed to do business in 50 states,
the District of Columbia and the Commonwealth of Puerto Rico, with admitted
assets of approximately $1,936,000,000 (unaudited) and statutory capital of
approximately $1,096,000,000 (unaudited) as of September 30, 1993. Statutory
capital consists of AMBAC Indemnity's policyholders' surplus and statutory
contingency reserve. AMBAC Indemnity is a wholly owned subsidiary of AMBAC
Inc., a 100% publicly-held company. Moody's Investors
<PAGE>
24 Unitholder Explanations
Service, Inc. and Standard & Poor's Corporation have both assigned a triple-A
claims-paying ability rating to AMBAC Indemnity.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Indemnity. The address of AMBAC
Indemnity's administrative offices and its telephone number are One State
Street Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Indemnity has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Indemnity has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
Municipal Bond Investors Assurance Corporation ("MBIA") is the principal
operating subsidiary of MBIA Inc., a New York Stock Exchange listed company.
MBIA Inc. is not obligated to pay the debts of or claims against MBIA. MBIA is
a limited liability corporation rather than a several liability association.
MBIA is domiciled in the State of New York and licensed to do business in all
fifty states, the District of Columbia and the Commonwealth of Puerto Rico. As
of December 31, 1992 MBIA had admitted assets of $2.6 billion (audited), total
liabilities of $1.7 billion (audited), and total capital and surplus of $896
million (audited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. As of December
31, 1993, MBIA had admitted assets of $3.1 billion (unaudited), total
liabilities of $2.1 billion (unaudited), and total capital and surplus of $978
million (unaudited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. Copies
of MBIA's year end financial statements prepared in accordance with statutory
accounting practices are available from MBIA. The address of MBIA is 113 King
Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group,
Inc. On January 5, 1990, MBIA acquired all of the outstanding stock of Bond
Investors Group, Inc., the parent of Bond Investors Guaranty Insurance Company
(BIG), now known as MBIA Insurance Corp. of Illinois. Through a reinsurance
agreement, BIG has ceded all of its net insured risks, as well as its unearned
premium and contingency reserves, to MBIA and MBIA has reinsured BIG's net
outstanding exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA
"Aaa" and short term loans "MIG 1," both designated to be of the highest
quality.
Standard & Poor's Corporation rates all new issues insured by MBIA "AAA"
Prime Grade.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's Corporation rating of MBIA. No
application has been made to any other rating agency in order to obtain
additional ratings on the Bonds. The ratings reflect the respective rating
agency's current assessment of the creditworthiness of MBIA and its ability to
pay claims on its policies of insurance. Any further explanation as to the
significance of the above ratings may be obtained only from the applicable
rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds.
Financial Guaranty Insurance Company ("Financial Guaranty" or "FGIC") is
a wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a wholly-owned subsidiary of General
Electric Capital Corporation ("GECC"). Neither the Corporation nor GECC is
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of December 31,
1993, the total capital and surplus of Financial Guaranty was approximately
$777,000,000. Copies of Financial Guaranty's financial statements, prepared on
the basis of statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted accounting principles,
may be obtained by writing to Financial Guaranty at 115 Broadway, New York,
New York 10006, Attention: Communications Department, telephone number: (212)
312-3000 or to the New York State Insurance Department at 160 West Broadway,
18th Floor, New York, New York 10013, Attention: Property Companies Bureau,
telephone number: (212) 621-0389.
<PAGE>
Unitholder Explanations 25
In addition, Financial Guaranty Insurance Company is currently licensed
to write insurance in all 50 states and the District of Columbia.
Financial Security Assurance, Inc. ("Financial Security" or "FSA") is a
monoline insurance company incorporated on March 16, 1984 under the laws of
the State of New York. The operations of Financial Security commenced on July
25, 1985, and Financial Security received its New York State insurance license
on September 23, 1985. Financial Security and its two wholly owned
subsidiaries are licensed to engage in the financial guaranty insurance
business in 49 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. In general, financial guaranty insurance consists of the issuance
of a guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of those securities, in consideration for payment
of a premium to the insurer.
Financial Security is approximately 91.6% owned by U S WEST, Inc. and
8.4% owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine").
Neither U S WEST, Inc. nor Tokio Marine is obligated to pay the debts of or
the claims against Financial Security. Financial Security is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of March 31, 1993, the total policyholders' surplus
and contingency reserves and the total unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were, in accordance
with generally accepted accounting principles, approximately $479,110,000
(unaudited) and $220,078,000 (unaudited), and the total shareholders' equity
and the total unearned premium reserve, respectively, of Financial Security
and its consolidated subsidiaries were, in accordance with generally accepted
accounting principles, approximately $628,119,000 (unaudited) and $202,493,000
(unaudited). Copies of Financial Security's financial statements may be
obtained by writing to Financial Security at 350 Park Avenue, New York, New
York, 10022, Attention: Communications Department. Its telephone number is
(212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written by Financial Security or either of its subsidiaries are
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance
policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc., and "AAA" by Standard & Poor's Corporation, Nippon
Investors Service Inc., Duff & Phelps Inc. and Australian Ratings Pty. Ltd.
Such ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company ("Capital Guaranty") is a "Aaa/AAA"
rated monoline stock insurance company incorporated in the State of Maryland,
and is a wholly owned subsidiary of Capital Guaranty Corporation, a Maryland
insurance holding company. Capital Guaranty Corporation is a publicly owned
company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in 49 states, the
District of Columbia and three U.S. territories. Capital Guaranty focuses on
insuring municipal securities and our policies guaranty the timely payment of
principal and interest when due for payment on new issue and secondary market
issue municipal bond transactions. Capital Guaranty's claims-paying ability is
rated "Triple-A" by both Moody's and Standard & Poor's.
As of September 30, 1993, Capital Guaranty had $13.6 billion in net
exposure outstanding. The total statutory policyholders' surplus and
contingency reserve of Capital Guaranty was approximately $181,383,432
(unaudited),
<PAGE>
26 Unitholder Explanations
and the total admitted assets were approximately $270,021,126 (unaudited) as
reported to the Insurance Department of the State of Maryland. Financial
statements for Capital Guaranty Insurance Company, that have been prepared in
accordance with statutory insurance accounting standards, are available upon
request. The address of Capital Guaranty's headquarters and its telephone
number are Steuart Tower, 22nd Floor, One Market Plaza, San Francisco, CA
94105-1413 and (415) 995-8000.
CapMAC is a New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety insurance.
CapMAC is licensed in 50 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the territory of Guam. CapMAC insures
structured asset-backed, corporate, municipal and other financial obligations
in the domestic and foreign capital markets. CapMAC may also provide financial
guarantee reinsurance for structured asset-backed, corporate and municipal
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 Corporation ("Standard &
Poor's"), "AAA" by Duff & Phelps, Inc. ("Duff & Phelps") and "AAA" by Nippon
Investors Inc. Such ratings reflect only the views of the respective rating
agencies, are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a company
that is owned by a group of institutional and other investors, including
CapMAC's management and employees.
Neither Holdings nor any of its stockholders is obligated to pay any
claims under any surety bond issued by CapMAC or any debts of CapMAC or to
make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the State of
New York. In addition, CapMAC is subject to regulation by the insurance
departments of the other jurisdictions in which it is licensed. CapMAC is
subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends, investment of assets, changes in
control, transactions with affiliates and consolidations and acquisitions. The
amount of exposure per risk that CapMAC may retain, after giving effect to
reinsurance, collateral or other security, is also regulated. Statutory and
regulatory accounting practices may prescribe appropriate rates at which
premiums are earned and the levels of reserves required. In addition, various
insurance laws restrict the incurrence of debt, regulate permissible
investments of reserves, capital and surplus, and govern the form of surety
bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured. Such
reinsurance does not relieve CapMAC of any of its obligations under the Surety
Bond(s).
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
As of December 31, 1993 and 1992, CapMAC had qualified statutory capital
(which consists of policyholders' surplus and contingency reserve) of
approximately $167 million and $161 million, respectively, and had not
incurred any debt obligations. Article 69 of the New York State Insurance Law
requires CapMAC to establish and maintain the contingency reserve, which is
available to cover claims under surety bonds issued by CapMAC.
In addition to its qualified statutory capital and other reinsurance
available to pay claims under its surety bonds, CapMAC has entered into a Stop
Loss Reinsurance Agreement (the "Stop Loss Agreement") with Winterthur Swiss
Insurance Company (the "Reinsurer"), which is rated AAA by Standard & Poor's
and Aaa by Moody's, pursuant to which the Reinsurer will be required to pay
any losses incurred by CapMAC during the term of the Stop Loss Agreement on
the surety bonds covered under the Stop Loss Agreement in excess of a
specified amount of losses incurred by CapMAC under such surety bonds (such
specified amount initially being $100 million and increasing annually by an
amount equal to 66 2/3% of the increase in CapMAC's statutory capital and
surplus) up to an aggregate limit payable under the Stop Loss Agreement of $50
million. The Stop Loss Agreement has a term of seven years, is extendable for
one-year periods and is subject to early termination upon the occurrence of
certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity
facility (the "Liquidity Facility") provided by a syndicate of banks rated
A1+/P1 by Standard & Poor's and Moody's, respectively, having a term of 360
<PAGE>
Unitholder Explanations 27
days. Under the Liquidity Facility CapMAC will be able, subject to satisfying
certain conditions, to borrow funds from time to time in order to enable it to
fund any claim payments or payments made in settlement or mitigation of claims
payments under its surety bonds, including the Surety Bond.
Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which differ from generally accepted
accounting principles, and filed with the Insurance Department of the State of
New York are available upon request. CapMAC is located at 885 Third Avenue,
New York, New York 10022, and its telephone number is (212) 755-1155.
In order to be in an Insured Trust, Bonds must be insured by one of the
Preinsured Bond Insurers or be eligible for the insurance being obtained by
such Trust. In determining eligibility for insurance, the Preinsured Bond
Insurers, AMBAC Indemnity and Financial Guaranty have applied their own
standards which correspond generally to the standards they normally use in
establishing the insurability of new issues of municipal bonds and which are
not necessarily the criteria used in the selection of Bonds by the Sponsor. To
the extent the standards of the Preinsured Bond Insurers, AMBAC Indemnity and
Financial Guaranty are more restrictive than those of the Sponsor, the
previously stated Trust investment criteria have been limited with respect to
the Bonds. This decision is made prior to the Date of Deposit, as debt
obligations not eligible for insurance are not deposited in an Insured Trust.
Thus, all of the Bonds in the portfolios of the Insured Trusts in the Fund are
insured either by the respective Trust or by the issuer of the Bonds, by a
prior owner of such Bonds or by the Sponsor prior to the deposit of such Bonds
in a Trust.
Because the Bonds are insured by one of the Portfolio Insurers or one of
the Preinsured Bond Insurers as to the timely payment of principal and
interest, when due, and on the basis of the various reinsurance agreements in
effect, Standard & Poor's Corporation has assigned to the Units of each
Insured Trust its "AAA" investment rating. See "Description of Securities
Ratings". The obtaining of this rating by an Insured Trust should not be
construed as an approval of the offering of the Units by Standard & Poor's
Corporation or as a guarantee of the market value of such Trust or of the
Units.
On the date of this Prospectus, the Estimated Current Return on the
Securities in the Tennessee IM-IT Trust was 5.06% after payment of the
insurance premium or premiums payable by such Trust, while the Estimated
Long-Term Return on such Trust was 5.20%. The Estimated Current Return on an
identical portfolio without the insurance obtained by the above-mentioned
Trust would have been 5.09% on such date, while the Estimated Long-Term Return
on an identical portfolio without the insurance obtained by the above
mentioned Trust would have been 5.22%.
An objective of portfolio insurance obtained by an Insured Trust is to
obtain a higher yield on the portfolio of such Trust than would be available
if all the Securities in such portfolio had Standard & Poor's Corporation
"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 Corporation)
may or may not have a higher yield than uninsured bonds rated "AAA" by
Standard & Poor's Corporation. 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
<PAGE>
28 Unitholder Explanations
opinion to the effect such payment of proceeds would be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations. See
"Other Matters--Federal Tax Status".
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such
regulation, however, is no guarantee that each Portfolio Insurer will be able
to perform on its contract of insurance in the event a claim should be made
thereunder at some time in the future. At the date hereof, it is reported that
no claims have been submitted or are expected to be submitted to any of the
Portfolio Insurers which would materially impair the ability of any such
company to meet its commitment pursuant to any contract of bond or portfolio
insurance.
The information relating to each Portfolio Insurer has been furnished by
such companies. The financial information with respect to each Portfolio
Insurer appears in reports filed with state insurance regulatory authorities
and is subject to audit and review by such authorities. No representation is
made herein as to the accuracy or adequacy of such information or as to the
absence of material adverse changes in such information subsequent to the
dates thereof.
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
BONDS INSURED BONDS INSURED
UNDER AMBAC UNDER FINANCIAL
INDEMNITY GUARANTY PREINSURED
TRUST PORTFOLIO INSURANCE PORTFOLIO INSURANCE BONDS TOTAL
<S> <C> <C> <C> <C>
IM-IT............................................... 0% 0% 100% 100%
New York IM-IT...................................... 0% 0% 100% 100%
Ohio IM-IT Intermediate
Laddered Maturity.................................. 0% 0% 100% 100%
Tennessee IM-IT..................................... 20% 0% 80% 100%
</TABLE>
The breakdown of the Preinsured Bonds is as follows: IM-IT--AMBAC
Indemnity 6%, Financial Guaranty 13%, MBIA 65% and FSA 16%; New York IM-IT
Trust--AMBAC Indemnity 36%, Financial Guaranty 2%, MBIA 16% and FSA 46%; Ohio
IM-IT Intermediate Laddered Maturity Trust--AMBAC Indemnity 62%, Financial
Guaranty 20% and MBIA 18%; Tennessee IM-IT Trust--AMBAC Indemnity 8%,
Financial Guaranty 17% and MBIA 55%.
<PAGE>
IM-IT-- Series 319 29
IM-IT
GENERAL. The IM-IT consists of 10 issues of Securities. None of the
Bonds in the IM-IT are general obligations of the governmental entities
issuing them or are backed by the taxing power thereof. All of the issues are
payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. These issues are located in 8
states or territories, divided by purpose of issues (and percentage of
principal amount to total IM-IT) as follows: Public Building, 2 (25%); Health
Care, 2 (23%); Public Education, 1 (13%); Transportation, 1 (13%); Higher
Education, 1 (10%); Airport, 1 (6%); Certificates of Participation, 1 (6%) and
Wholesale Electric, 1 (4%). Two bond issues aggregating approximately 25% of
the aggregate principal amount of the Securities in the Trust are obligations
of issuers located in the State of Illinois, and two bond issues aggregating
approximately 25% of the aggregate principal amount of the Securities in the
Trust are obligations of issuers located in the State of Indiana. No Bond
issue has received a provisional rating. The dollar weighted average maturity
of the Bonds in the Trust is 27 years.
TAX STATUS. For a discussion of the Federal tax status of income earned
on IM-IT Units, see "Other Matters-- Federal Tax Status".
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
<S> <C>
Estimated Annual Interest Income per Unit................................................................ $ 55.46
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.40
Less: Annual Premium on Portfolio Insurance per Unit..................................................... ---
Estimated Net Annual Interest Income per Unit............................................................ $ 54.06
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 54.06
Divided by 12............................................................................................ $ 4.51
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .15016
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.41%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.46%
Initial Distribution (April 1994).............................................................................. $ 2.10
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.51
PURCHASED INTEREST <F6>........................................................................................ $ 9.31
Trustee's Annual Fee <F1>.............. $.98 per $1,000 principal amount of
Bonds
Record and Computation Dates........... FIRST day of each month
DISTRIBUTION DATES..................... FIFTEENTH DAY OF EACH MONTH COMMENCING
APRIL 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.43 per Unit (which amount is the estimated interest to be earned per Unit
prior to the expected delivery dates for the "when, as and if issued"
Bonds included in this Trust). Should such estimated interest exceed such
amount, the Trustee will reduce its fee up to its annual fee. After the
first year, the Trustee's fee will be that amount indicated above.
Estimated annual interest income per Unit will be increased to $55.89.
Estimated Annual Expense per Unit (excluding insurance) will be increased
to $1.83; and estimated net annual interest income per Unit will remain
the same as shown. See "Estimated Current Returns and Estimated Long-Term
Returns." Based on the outstanding principal amount of Securities as of
the Date of Deposit, the Trustee's annual fee would be $7,693.
<F2> Excluding insurance costs.
<F3> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F5> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F6> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
30 IM-IT-- Series 319
<TABLE>
INSURED MUNICIPALS INCOME TRUST
SERIES 319 (IM-IT AND QUALITY MULTI-SERIES 216)
PORTFOLIO AS OF MARCH 10, 1994
<CAPTION>
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION PRICE TO
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> IM-IT<F4>
<S> <C> <C> <C> <C>
$ 1,000,000 Indiana Health Facility Financing Authority, First Mortgage
Hospital Building Bonds (Clinton County, Indiana) Series 1994
(MBIA Insured)** 2004 @ 101
#6.00% Due 7/1/2016.......................................... AAA 2007 @ 100 S.F. $ 1,005,000
1,000,000 Illinois State Toll Highway Authority, Toll Highway Priority
Revenue Bonds, Series 1992A (FGIC Insured)
#5.75% Due 1/1/2017.......................................... AAA 2003 @ 102 968,050
300,000 Washington State Public Power Supply System, Nuclear Project
No.1, Refunding Revenue Bonds, Series 1993A (MBIA Insured) 2003 @ 102
#5.70% Due 7/1/2017.......................................... AAA 2014 @ 100 S.F. 290,253
1,000,000 South Harrison Community School Building Corporation (Indiana)
First Mortgage Bonds, Series 1993 (MBIA Insured) 2003 @ 102
#5.85% Due 7/15/2020......................................... AAA 2014 @ 100 S.F. 985,170
500,000 Clark County, Nevada, Las Vegas-McCarran International Airport,
Passenger Facility Charge Revenue Bonds, Series 1992A (AMBAC
Indemnity Insured) 2002 @ 102
#6.00% Due 7/1/2022.......................................... AAA 2011 @ 100 S.F. 502,500
500,000 City of Stockton (California) Certificates of Participation
(Water Enterprise Project) Series A (FSA Insured) 2002 @ 102
#5.80% Due 8/1/2022.......................................... AAA 2010 @ 100 S.F. 488,905
1,000,000 Rhode Island Convention Center Authority, Revenue Bonds, Series
1993 (MBIA Insured) 2004 @ 102
#5.00% Due 5/15/2023......................................... AAA 2009 @ 100 S.F. 867,970
750,000 Maine Health and Higher Educational Facilities Authority,
Revenue Bonds, Series 1994A (FSA Insured)** 2004 @ 102
#6.00% Due 7/1/2024.......................................... AAA 2011 @ 100 S.F. 743,363
800,000 Hillsborough County Industrial Development Authority, Florida,
Industrial Development Revenue Bonds, Series 1994 (University
Community Hospital) MBIA Insured** 2004 @ 102
#5.80% Due 8/15/2024......................................... AAA 2020 @ 100 S.F. 781,736
1,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds
(Rush Presbyterian-St. Luke's Medical Center) MBIA Insured 2003 @ 102
#5.50% Due 11/15/2025........................................ AAA 2014 @ 100 S.F. 927,770
$ 7,560,717
$ 7,850,000
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
New York IM-IT-- Series 119 31
NEW YORK IM-IT TRUST
GENERAL. The New York IM-IT Trust consists of 9 issues of Securities.
None of the Bonds in the New York IM-IT Trust are general obligations of the
governmental entities issuing them or are backed by the taxing power thereof.
All of the issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New York IM-IT Trust) as follows: Health Care, 2 (33%); Transportation,
3 (21%); Water and Sewer, 1 (17%); Public Building, 1 (13%); Retail
Electric/Gas, 1 (13%) and Higher Education, 1 (3%). No Bond issue has received
a provisional rating.
A resident of New York State (or New York City) will be subject to New
York State (or New York City) personal income tax with respect to gains
realized when New York Obligations held in the New York Insured Trust are
sold, redeemed or paid at maturity or when his Units are sold or redeemed,
such gain will equal the proceeds of sale, redemption or payment less the tax
basis of the New York Obligation or Unit (adjusted to reflect (a) the
amortization of premium or discount, if any, on New York Obligations held in
the Trust, (b) accrued original issue discount, with respect to each New York
Obligation which, at the time the New York Obligation was issued had original
issue discount, and (c) the deposit of New York Obligations with accrued
interest in the Trust after the Unitholder's settlement date).
Interest or gain from the New York Insured Trust derived by a Unitholder
who is not a resident of New York State (or New York City) will not be subject
to New York State (or New York City) personal income tax, unless the Units are
property employed in a business, trade, profession or occupation carried on in
New York State (or New York City).
Amounts paid on defaulted New York Obligations held by the Trustee under
policies of insurance issued with respect to such New York Obligations will be
excludable from income for New York State and New York City income tax
purposes, if and to the same extent as, such interest would have been
excludable if paid by the respective issuer.
For purposes of the New York State and New York City franchise tax on
corporations, Unitholders which are subject to such tax will be required to
include in their entire net income any interest or gains distributed to them
even though distributed in respect of New York obligations.
If borrowed funds are used to purchase Units in the Trust, all (or part)
of the interest on such indebtedness will not be deductible for New York State
and New York City tax purposes. The purchase of Units may be considered to
have been made with borrowed funds even though such funds are not directly
traceable to the purchase of Units in any New York Trust.
The Portfolio of the New York IM-IT Trust includes obligations issued by
New York State (the "State"), by its various public bodies (the "Agencies"),
and/or by other entities located within the State, including the City of New
York (the "City").
Some of the more significant events relating to the financial situation
in New York are summarized below. This section provides only a brief summary
of the complex factors affecting the financial situation in New York and is
based in part on Official Statements issued by, and on other information
reported by the State, the City and the Agencies in connection with the
issuance of their respective securities.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of New York Municipal
Obligations held in the portfolio of the Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State economy has grown more slowly than
that of the nation as a whole, gradually eroding the State's relative economic
affluence. Statewide, urban centers have experienced significant changes
involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had
in attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
<PAGE>
32 New York IM-IT-- Series 119
The State has for many years had a very high state and local tax burden
relative to other states. The burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
A national recession commenced in mid-1990. The downturn continued
throughout the State's 1990-91 fiscal year and was followed by a period of
weak economic growth during the 1991 calendar year. For calendar year 1992,
the national economy continued to recover, although at a rate below all
post-war recoveries. For calendar year 1993, the economy is expected to grow
faster than 1992, but still at a very moderate rate, as compared to other
recoveries. The national recession has been more severe in the State because
of factors such as a significant retrenchment in the financial services
industry, cutbacks in defense spending, and an overbuilt real estate market.
1993-94 Fiscal Year. On April 5, 1993, the State Legislature approved a
$32.08 billion budget. Following enactment of the budget the 1993-94 State
Financial Plan was formulated on April 16, 1993. This Plan projects General
Fund receipts and transfers from other funds at $32.367 billion and
disbursements and transfers to other funds at $32.300 billion. In comparison
to the Governor's recommended Executive Budget for the 1993-94 fiscal year, as
revised on February 18, 1993, the 1993-94 State Financial Plan reflects
increases in both receipts and disbursements in the General Fund of $811
million.
While a portion of the increased receipts was the result of a $487
million increase in the State's 1992-93 positive year-end margin at March 31,
1993 to $671 million, the balance of such increased receipts is based upon (i)
a projected $269 million increase in receipts resulting from improved 1992-93
results and the expectation of an improving economy, (ii) projected additional
payments of $200 million from the Federal government as reimbursements for
indigent medical care, (iii) the early payment of $50 million of personal tax
returns in 1992-93 which otherwise would have been paid in 1993-94; offset by
(iv) the State Legislature's failure to enact $195 million of additional
revenue-raising recommendations proposed by the Governor. There can be no
assurances that all of the projected receipts referred to above will be
received.
Despite the $811 million increase in disbursements included in the
1993-94 State Financial Plan, a reduction in aid to some local government
units can be expected. To offset a portion of such reductions, the 1993-94
State Financial Plan contains a package of mandate relief, cost containment
and other proposals to reduce the costs of many programs for which local
governments provide funding. There can be no assurance, however, that
localities that suffer cuts will not be adversely affected, leading to further
requests for State financial assistance.
There can be no assurance that the State will not face substantial
potential budget gaps in the future resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions
to align recurring receipts and disbursements.
1992-93 Fiscal Year. Before giving effect to a 1992-93 year-end deposit
to the refund reserve account of $671 million, General Fund receipts in
1992-93 would have been $716 million higher than originally projected. This
year-end deposit effectively reduced 1992-93 receipts by $671 million and made
those receipts available for 1993-94.
The State's favorable performance primarily resulted from income tax
collections that were $700 million higher than projected which reflected both
stronger economic activity and tax-induced one-time acceleration of income
into 1992. In other areas larger than projected business tax collections and
unbudgeted receipts offset the loss of $200 million of anticipated Federal
reimbursement and losses of, or shortfalls in, other projected revenue
sources.
For 1992-93, disbursements and transfers to other funds (including the
deposit to the refund reserve account discussed above) totalled $30.829
billion, an increase of $45 million above projections in April 1992.
Fiscal year 1992-93 was the first time in four years that the State did
not incur a cash-basis operating deficit in the General Fund requiring the
issuance of deficit notes or other bonds, spending cuts or other revenue
raising measures.
Indebtedness. As of March 31, 1993, the total amount of long-term State
general obligation debt authorized but unissued stood at $2.4 billion. As of
the same date, the State had approximately $5.4 billion in general obligation
bonds. The State issued $850 million in tax and revenue anticipation notes
("TRANS") on April 28, 1993. The State does not project the need to issue
additional TRANS during the State's 1993-94 fiscal year.
The State projects that its borrrowings for capital purposes during the
State's 1993-94 fiscal year will consist of $460 million in general obligation
bonds and $140 million in new commercial paper issuances. In addition, the
State
<PAGE>
New York IM-IT-- Series 119 33
expects to issue $140 million in bonds for the purpose of redeeming
outstanding bond anticipation notes. The Legislature has authorized the
issuance of up to $85 million in certificates of participation during the
State's 1993-94 fiscal year for personal and real property acquisitions during
the State's 1993-94 fiscal year. The projection of the State regarding its
borrowings for the 1993-94 fiscal year may change if actual receipts fall
short of State projections or if other circumstances require.
In June 1990, legislation was enacted creating the "New York Local
Government Assistance Corporation" ("LGAC"), a public benefit corporation
empowered to issue long-term obligations to fund certain payments to local
governments traditionally funded through the State's annual seasonal
borrowing. To date, LGAC has issued its bonds to provide net proceeds of $3.28
billion. LGAC has been authorized to issue additional bonds to provide net
proceeds of $703 million during the State's 1993-94 fiscal year.
Ratings. The $850 million in TRANS issued by the State in April 1993 were
rated SP-1-Plus by S&P on April 26, 1993, and MIG-1 by Moody's on April 23,
1993, which represents the highest ratings given by such agencies and the
first time the State's TRANS have received these ratings since its May 1989
TRANS issuance. Both agencies cited the State's improved fiscal position as a
significant factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at A on
April 23, 1993, and S&P's rating stood at A-with a stable outlook on April 26,
1993, an improvement from S&P's negative outlook prior to April 1993.
Previously, Moody's lowered its rating to A on June 6, 1990, its rating having
been A1 since May 27, 1986. S&P lowered its rating from A to A-on January 13,
1992. S&P's previous ratings were A from March 1990 to January 1992, AA-from
August 1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's, in confirming its rating of the State's general obligation
bonds, and S&P, in improving its outlook on such bonds from negative to
stable, noted the State's improved fiscal condition and reasonable revenue
assumptions contained in the 1993-94 State budget.
The City accounts for approximately 41% of the State's population and
personal income, and the City's financial health affects the State in numerous
ways.
In response to the City's fiscal crisis in 1975, the State took a number
of steps to assist the City in returning to fiscal stability. Among other
actions, the State Legislature (i) created MAC to assist with long-term
financing for the City's short-term debt and other cash requirements and (ii)
created the State Financial Control Board (the "Control Board") to review and
approve the City's budgets and City four-year financial plans (the financial
plans also apply to certain City-related public agencies (the "Covered
Organizations")).
In February 1975, the New York State Urban Development Corporation
("UDC"), which had approximately $1 billion of outstanding debt, defaulted on
certain of its short-term notes. Shortly after the UDC default, the City
entered a period of financial crisis. Both the State Legislature and the
United States Congress enacted legislation in response to this crisis. During
1975, the State Legislature (i) created MAC to assist with long-term financing
for the City's short-term debt and other cash requirements and (ii) created
the State Financial Control Board (the "Control Board") to review and approve
the City's budgets and City four-year financial plans (the financial plans
also apply to certain City-related public agencies (the "Covered
Organizations")).
Over the past three years, the rate of economic growth in the City has
slowed substantially, and the City's economy is currently in recession. The
City projects, and its current four-year financial plan assumes, a recovery
early in the 1993 calendar year. The Mayor is responsible for preparing the
City's four-year financial plan, including the City's current financial plan.
The City Comptroller has issued reports concluding that the recession of the
City's economy will be more severe and last longer than is assumed in the
financial plan.
Fiscal Year 1993 and 1993-1996 Financial Plan. The City's 1993 fiscal
year results are projected to be balanced in accordance with generally
accepted accounting principles ("GAAP"). The City was required to close
substantial budget gaps in its 1990, 1991 and 1992 fiscal years in order to
maintain balanced operating results.
The City's modified Financial Plan dated February 9, 1993 covering fiscal
years 1993-1996 projects budget gaps for 1994 through 1996. The Office of the
State Deputy Controller for the City of New York has estimated that under the
modified Financial Plan budget gaps will be $102 million for fiscal year 1994,
$196 million for fiscal year 1995 and $354 million for fiscal year 1996,
primarily due to anticipated higher spending on labor costs.
However, the City's modified Plan is dependent upon a gap-closing
program, certain elements of which the staff of Control Board identified on
March 25, 1993 to be at risk due to projected levels of State and Federal aid
and
<PAGE>
34 New York IM-IT-- Series 119
revenue and expenditures estimates which may not be achievable. The Control
Board indicated that the City's modified Financial Plan does not make progress
towards establishing a balanced budget process. The Control Board's report
identified budget gap risks of $1.0 billion, $1.9 billion, $2.3 billion and
$2.6 billion in fiscal years 1994 through 1997, respectively.
On June 3, 1993, the Mayor announced that State and federal aid for
Fiscal Year 1993-1994 would be $280 million less than projected and that in
order to balance the City's budget $176 million of previously announced
contingent budget cuts would be imposed. The Mayor indicated that further
savings would entail serious reductions in services. The State Comptroller on
June 14, 1993 criticized efforts by the Mayor and City Council to balance the
City's budget which rely primarily on one-shot revenues. The Comptroller added
that the City's budget should be based on "recurring revenues that fund
recurring expenditures." Given the foregoing factors, there can be no
assurance that the City will continue to maintain a balanced budget, or that
it can maintain a balanced budget without additional tax or other revenue
increases or reductions in City services, which could adversely affect the
City's economic base.
Pursuant to State law, the City prepares a four-year annual financial
plan, which is reviewed and revised on a quarterly basis and which includes
the City's capital, revenue and expense projections. The City is required to
submit its financial plans to review bodies, including the Control Board. If
the City were to experience certain adverse financial circumstances, including
the occurrence or the substantial likelihood and imminence of the occurrence
of an annual operating deficit of more than $100 million or the loss of access
to the public credit markets to satisfy the City's capital and seasonal
financial requirements, the Control Board would be required by State law to
exercise certain powers, including prior approval of City financial plans,
proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. As a result of the
national and regional economic recession, the State's projections of tax
revenues for its 1991 and 1992 fiscal years were substantially reduced. For
its 1993 fiscal year, the State, before taking any remedial action reflected
in the State budget enacted by the State Legislature on April 2, 1992 reported
a potential budget deficit of $4.8 billion. If the State experiences revenue
shortfalls or spending increases beyond its projections during its 1993 fiscal
year or subsequent years, such developments could also result in reductions in
projected State aid to the City. In addition, there can be no assurance that
State budgets in future fiscal years will be adopted by the April 1 statutory
deadline and that there will not be adverse effects on the City's cash flow
and additional City expenditures as a result of such delays.
The City's projections set forth in its financial plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and
contingencies include the timing of any regional and local economic recovery,
the absence of wage increases in excess of the increases assumed in its
financial plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets, levels of
education expenditures as may be required by State law, adoption of future
City budgets by the New York City Council, and approval by the Governor or the
State Legislature and the cooperation of MAC with respect to various other
actions proposed in such financial plan.
The City's ability to maintain a balanced operating budget is dependent
on whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional
expenditure reductions and revenue sources to achieve balanced operating
budgets for fiscal years 1994 and thereafter. Any such proposed expenditure
reductions will be difficult to implement because of their size and the
substantial expenditure reductions already imposed on City operations in the
past two years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
financing program for fiscal years 1993 through 1996 contemplates issuance of
$15.7 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In
addition, the City issues revenue and tax anticipation notes to finance its
seasonal working capital requirements. The terms and success of projected
public sales of City general obligation bonds and notes will be subject to
prevailing market conditions at the time of the sale, and no assurance can be
given that the credit markets will absorb the projected amounts of public bond
and note sales. In addition, future developments concerning the City and
public discussion of such developments, the City's future financial
<PAGE>
New York IM-IT-- Series 119 35
needs and other issues may affect the market for outstanding City general
obligation bonds and notes. If the City were unable to sell its general
obligation bonds and notes, it would be prevented from meeting its planned
operating and capital expenditures.
The City Comptroller, the staff of the Control Board, the Office of the
State Deputy Comptroller for the City of New York (the "OSDC") and other
agencies and public officials have issued reports and made public statements
which, among other things, state that projected revenues may be less and
future expenditures may be greater than those forecast in the financial plan.
In addition, the Control Board and other agencies have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet
the costs of its expenditure increases and to provide necessary services. It
is reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
The City achieved balanced operating results as reported in accordance
with GAAP for the 1992 fiscal year. During the 1990 and 1991 fiscal years, the
City implemented various actions to offset a projected budget deficit of $3.2
billion for the 1991 fiscal year, which resulted from declines in City revenue
sources and increased public assistance needs due to the recession. Such
actions included $822 million of tax increases and substantial expenditure
reductions.
The quarterly modification to the City's financial plan submitted to the
Control Board on May 7, 1992 (the "1992 Modification") projected a balanced
budget in accordance with GAAP for the 1992 fiscal year after taking into
account a discretionary transfer of $455 million to the 1993 fiscal year as
the result of a 1992 fiscal year surplus. In order to achieve a balanced
budget for the 1992 fiscal year, during the 1991 fiscal year, the City
proposed various actions for the 1992 fiscal year to close a projected gap of
$3.3 billion in the 1992 fiscal year.
On November 19, 1992, the City submitted to the Control Board the
Financial Plan for the 1993 through 1996 fiscal years, which is a modification
to a financial plan submitted to the Control Board on June 11, 1992 (the "June
Financial Plan"), and which relates to the City, the Board of Education
("BOE") and the City University of New York ("CUNY"). The 1993-1996 Financial
Plan projects revenues and expenditures of $29.9 billion each for the 1993
fiscal year balanced in accordance with GAAP.
During the 1992 fiscal year, the City proposed various actions to close a
previously projected gap of approximately $1.2 billion for the 1993 fiscal
year. The gap-closing actions for the 1993 fiscal year proposed during the
1992 fiscal year and outlined in the City's June Financial Plan included $489
million of discretionary transfers from the 1992 fiscal year. The 1993-1996
City Financial Plan includes additional gap-closing actions to offset an
additional potential $81 million budget gap.
The 1993-1996 Financial Plan also sets forth projections and outlines a
proposed gap-closing program for the 1994 through 1996 fiscal years to close
projected budget gaps of $1.7 billion, $2.0 billion and $2.6 billion,
respectively, in the 1994 through 1996 fiscal years. On February 9, 1993, the
City issued a modification to the 1993-1996 Financial Plan (the "February
Modification"). The February Modification projects budget gaps for fiscal
years 1994, 1995 and 1996 of $2.1 billion, $3.1 billion and $3.8 billion,
respectively.
Various actions proposed in the 1993-1996 Financial Plan are subject to
approval by the Governor and approval by the State Legislature, and the
proposed increase in Federal aid is subject to approval by Congress and the
President. The State Legislature has in the past failed to approve certain
proposals similar to those that the 1993-1996 Financial Plan assumes will be
approved by the State Legislature during the 1993 fiscal year. If these
actions cannot be implemented, the City will be required to take other actions
to decrease expenditures or increase revenues to maintain a balanced financial
plan.
On March 9, 1993, OSDC issued a report on the February Modification. The
report expressed concern that the budget gaps projected for fiscal years 1994
through 1996 are the largest the City has faced at this point in the financial
planning cycle in at least a decade, and concluded that the February
Modification represented a step backward in the City's efforts to bring
recurring revenues into line with recurring expenditures.
The City is a defendant in a significant number of lawsuits. Such
litigation includes, but is not limited to, actions commenced and claims
asserted against the City arising out of alleged constitutional violations,
torts, breaches of contracts, and other violations of law and condemnation
proceedings. While the ultimate outcome and fiscal impact, if any, on the
proceedings and claims are not currently predictable, adverse determinations
in certain of them might have a material adverse effect upon the City's
ability to carry out its financial plan. As of June 30, 1992, legal claims in
<PAGE>
36 New York IM-IT-- Series 119
excess of $341 billion were outstanding against the City for which the City
estimated its potential future liability to be $2.3 billion.
As of the date of this prospectus, Moody's rating of the City's general
obligation bonds stood at Baa1 and S&P's rating stood at A-. On February 11,
1991, Moody's had lowered its rating from A.
On March 30, 1993, in confirming its Baa1 rating, Moody's noted that:
The financial plan for fiscal year 1994 and beyond shows an ongoing
imbalance between the City's expenditures and revenues. The key indication
of this structural imbalance is not necessarily the presence of sizable
out-year budget gaps, but the recurring use of one-shot actions to close
gaps. One-shots constitute a significant share of the proposed gap-closing
program for fiscal year 1994, and they represent an even larger share of
those measures which the City seems reasonably certain to attain. Several
major elements of the program, including certain state actions, federal
counter cyclical aid and part of the city's tax package, remain uncertain.
However, the gap closing plan may be substantially altered when the
executive budget is offered later this spring.
On March 30, 1993, S&P affirmed its A-rating with a negative outlook,
stating that:
The City's key credit factors are marked by a high and growing debt
burden, and taxation levels that are relatively high, but stable. The
City's economy is broad-based and diverse, but currently is in prolonged
recession, with slow growth prospects for the foreseeable future.
The rating outlook is negative, reflecting the continued fiscal
pressure facing the City, driven by continued weakness in the local
economy, rising spending pressures for education and labor costs of city
employees, and increasing costs associated with rising debt for capital
construction and repair.
The current financial plan for the City assumes substantial increases
in aid from national and state governments. Maintenance of the current
rating, and stabilization of the rating outlook, will depend on the City's
success in realizing budgetary aid from these governments, or replacing
those revenues with ongoing revenue-raising measures or spending
reductions under the City's control. However, increased reliance on
non-recurring budget balancing measures that would support current
spending, but defer budgetary gaps to future years, would be viewed by S&P
as detrimental to New York City's single-'A-' rating.
Previously, Moody's had raised its rating to A in May, 1988, to Baa1 in
December, 1985, to Baa in November, 1983 and to Ba1 in November, 1981. S&P had
raised its rating to A-in November, 1987, to BBB+ in July, 1985 and to BBB in
March, 1981.
On May 9, 1990, Moody's revised downward its rating on outstanding City
revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
Notes then being sold MIG-2. On April 30, 1991 Moody's confirmed its MIG-2
rating for the outstanding revenue anticipation notes and for the $1.25
billion in notes then being sold. On April 29, 1991, S&P revised downward its
rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1992, the City and MAC had, respectively, $20.3
billion and $4.7 billion of outstanding net long-term indebtedness.
Certain Agencies of the State have faced substantial financial
difficulties which could adversely affect the ability of such Agencies to make
payments of interest on, and principal amounts of, their respective bonds. The
difficulties have in certain instances caused the State (under so-called
"moral obligation" provisions which are non-binding statutory provisions for
State appropriations to maintain various debt service reserve funds) to
appropriate funds on behalf of the Agencies. Moreover, it is expected that the
problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse effect on investor confidence
in, and therefore the market price of, obligations of the defaulting Agencies.
In addition, any default in payment on any general obligation of any Agency
whose bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal
guarantees of City and MAC obligations and could thus jeopardize the City's
long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen
Agencies that each had outstanding debt of $100 million or more. These
eighteen Agencies had an aggregate of $62.2 billion of outstanding debt,
including
<PAGE>
New York IM-IT-- Series 119 37
refunding bonds, of which the State was obligated under lease-purchase,
contractual obligation or moral obligation provisions on $25.3 billion.
The State is a defendant in numerous legal proceedings pertaining to
matters incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are a number of cases challenging the
constitutionality or the adequacy and effectiveness of a variety of
significant social welfare programs primarily involving the State's mental
hygiene programs. Adverse judgments in these matters generally could result in
injunctive relief coupled with prospective changes in patient care which could
require substantial increased financing of the litigated programs in the
future.
The State is also engaged in a variety of claims wherein significant
monetary damages are sought. Actions commenced by several Indian nations claim
that significant amounts of land were unconstitutionally taken from the
Indians in violation of various treaties and agreements during the eighteenth
and nineteenth centuries. The claimants seek recovery of approximately six
million acres of land as well as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993 referred to a Special Master for
determination of damages in an action by the State of Delaware to recover
certain unclaimed dividends, interest and other distributions made by issuers
of securities held by New York based-brokers incorporated in Delaware. (State
of Delaware v. State of New York.) The State had taken such unclaimed property
under its Abandoned Property Law. The State expects that it may pay a
significant amount in damages during fiscal year 1993-94 but it has indicated
that it has sufficient funds on hand to pay any such award, including funds
held in contingency reserves. The State's 1993-94 Financial Plan includes the
establishment of a $100 million contingency reserve fund which would be
available to fund such an award which some reports have estimated at $100-$800
million.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz 1993"),
petitioners have challenged the constitutionality of mass transportation
bonding programs of the New York State Thruway Authority and the Metropolitan
Transportation Authority. On May 24, 1993, the Supreme Court, Albany County,
temporarily enjoined the State from implementing those bonding programs. In
previous actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation and the
New York Local Government Assistance Corporation. While there have been no
decisions on the merits in such previous actions, by an opinion dated May 11,
1993, the New York Court of Appeals held in a proceeding commenced on April
29, 1991 in the Supreme Court, Albany County (Schulz v. State of New York),
that petitioners had standing as voters under the State Constitution to bring
such action.
Petitioners in Schulz 1993 have asserted that issuance of bonds by the
two Authorities is subject to approval by statewide referendum. At this time
there can be no forecast of the likelihood of success on the merits by the
petitioners, but a decision upholding this constitutional challenge could
restrict and limit the ability of the State and its instrumentalities to
borrow funds in the future. The State has not indicated that the temporary
injunction issued by the Supreme Court in this action will have any immediate
impact on its financial condition or interfere with projects requiring
immediate action.
Adverse developments in the foregoing proceedings or new proceedings
could adversely affect the financial condition of the State in the future.
Certain localities in addition to New York City could have financial
problems leading to requests for additional State assistance. Both the Revised
1992-1993 State Financial Plan and the recommended 1993-94 State Financial
Plan includes a significant reduction in State aid to localities in such
programs as revenue sharing and aid to education from projected base-line
growth in such programs. It is expected that such reductions will result in
the need for localities to reduce their spending or increase their revenues.
The potential impact on the State of such actions by localities is not
included in projections of State receipts and expenditures in the State's
1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by the State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions taken
by the Governor or the State Legislature to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be determined.
<PAGE>
38 New York IM-IT-- Series 119
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1991, the total indebtedness of all
localities in the State was approximately $31.6 billion, of which $16.8
billion was debt of New York City (excluding $6.7 billion in MAC debt). State
law requires the Comptroller to review and make recommendations concerning the
budgets of those local government units other than New York City authorized by
State law to issue debt to finance deficits during the period that such
deficit financing is outstanding. Fifteen localities had outstanding
indebtedness for state financing at the close of their fiscal year ending in
1991. In 1992, an unusually large number of local government units requested
authorization for deficit financings. According to the Comptroller, ten local
government units have been authorized to issue deficit financing in the
aggregate amount of $131.1 million.
Certain proposed Federal expenditure reductions could reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities.
If the State, New York City or any of the Agencies were to suffer serious
financial difficulties jeopardizing their respective access to the public
credit markets, the marketability of notes and bonds issued by localities
within the State, including notes or bonds in the New York IM-IT Trust, could
be adversely affected. Localities also face anticipated and potential problems
resulting from certain pending litigation, judicial decisions, and long-range
economic trends. The longer-range potential problems of declining urban
population, increasing expenditures, and other economic trends could adversely
affect localities and require increasing State assistance in the future.
TAX STATUS. For a discussion of the Federal tax status of income earned
on New York IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Tanner Propp & Farber, special counsel to the Fund for
New York tax matters, under existing New York law:
The New York IM-IT Trust is not an association taxable as a
corporation and the income of the New York IM-IT Trust will be treated
as the income of the Unitholders under the income tax laws of the State
and City of New York. Individuals who reside in New York State or City
will not be subject to State and City tax on interest income which is
exempt from Federal income tax under section 103 of the Internal Revenue
Code of 1986 and derived from obligations of New York State or a
political subdivision thereof, although they will be subject to New York
State and City tax with respect to any gains realized when such
obligations are sold, redeemed or paid at maturity or when any such
Units are sold or redeemed.
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
<S> <C>
Estimated Annual Interest Income per Unit................................................................ $ 53.95
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.81
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 52.14
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 52.14
Divided by 12............................................................................................ $ 4.35
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .14482
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.21%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.28%
Initial Distribution (April 1994).............................................................................. $ 2.03
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.35
PURCHASED INTEREST <F6>........................................................................................ $ 8.21
Trustee's Annual Fee <F1>.............. $.98 per $1,000 principal amount of
Bonds
Record and Computation Dates........... FIRST day of each month
DISTRIBUTION DATES..................... FIFTEENTH DAY OF EACH MONTH COMMENCING
APRIL 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.16 per Unit (which amount is the estimated interest to be earned per
Unit prior to the expected delivery dates for the "when, as and if
issued" Bonds included in this Trust). Should such estimated interest
exceed such amount, the Trustee will reduce its fee up to its annual fee.
After the first year, the Trustee's fee will be that amount indicated
above. Estimated annual interest income per Unit will be increased to
$54.11. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $1.97; and estimated net annual interest income per Unit
will remain the same as shown. See "Estimated Current Returns and
Estimated Long-Term Returns." Based on the outstanding principal amount
of Securities as of the Date of Deposit, the Trustee's annual fee would
be $2,989.
<F2> Excluding insurance costs.
<F3> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<PAGE>
New York IM-IT-- Series 119 39
<F4> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F5> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F6> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
40 New York IM-IT-- Series 119
<TABLE>
NEW YORK INSURED MUNICIPALS INCOME TRUST
SERIES 119 (IM-IT AND QUALITY MULTI-SERIES 216)
PORTFOLIO AS OF MARCH 10, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND NEW YORK
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION IM-IT
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C>
$ 500,000 New York State Medical Care Facilities Finance Agency, F.F.
Thompson Hospital and Thompson Nursing Home Project Revenue
Bonds, Series 1994A (FSA Insured)** 2003 @ 102
#5.80% Due 11/1/2013......................................... AAA 2007 @ 100 S.F. $ 496,700
400,000 New York State Urban Development Corporation, Correctional
Facilities Revenue Bonds, Series 1994A (FSA Insured)
#5.25% Due 1/1/2014.......................................... AAA 376,712
50,000 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series 1993N (FGIC Insured)
#0.00% Due 7/1/2014.......................................... AAA 2014 @ 102.264 15,416<F6>
100,000 Triborough Bridge and Tunnel Authority, New York, General
Purpose Revenue Bonds, Series 1989Q (AMBAC Indemnity Insured) 2000 @ 100
#5.00% Due 1/1/2017.......................................... AAA 2014 @ 100 S.F. 90,096
500,000 New York City Transit Authority (New York) Transit Facilities
Refunding Revenue Bonds (Livingston Plaza Project) Series
1993 (FSA Insured)
#5.40% Due 1/1/2018.......................................... AAA 2014 @ 100 S.F. 475,585
400,000 New York State Energy Research and Development Authority,
Facilities Refunding Revenue Bonds, Series 1993B
(Consolidated Edison Company of New York, Inc.) MBIA Insured
#5.25% Due 8/15/2020......................................... AAA 2003 @ 102 372,424
500,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series 1992C (AMBAC
Indemnity Insured) 2002 @ 101.5
#6.20% Due 6/15/2021......................................... AAA 2019 @ 100 S.F. 515,480
100,000 Dormitory Authority of the State of New York, Mount Sinai
School of Medicine, Insured Revenue Bonds, Series 1994A (MBIA
Insured) 2004 @ 102
#5.00% Due 7/1/2021.......................................... AAA 2017 @ 100 S.F. 89,345
500,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds, Series
1993A (AMBAC Indemnity Insured) 2003 @ 102
#5.80% Due 8/15/2022......................................... AAA 2015 @ 100 S.F. 496,875
$ 2,928,633
$ 3,050,000
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
Ohio IM-IT Intermediate Laddered Maturity Series 4 41
OHIO IM-IT INTERMEDIATE LADDERED MATURITY TRUST
GENERAL. The Ohio IM-IT Intermediate Laddered Maturity Trust consists of
9 issues of Securities. Four of the Bonds in the Ohio IM-IT Intermediate
Laddered Maturity Trust are general obligations of the governmental entities
issuing them and are backed by the taxing power thereof. The remaining issues
are payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. These issues are divided by
purpose of issues (and percentage of principal amount to total Ohio IM-IT
Intermediate Laddered Maturity Trust) as follows: General Obligations, 4
(35%); Health Care, 2 (28%); General Purpose, 1 (20%); Retail Electric/Gas, 1
(11%) and Higher Education, 1 (6%). No Bond issue has received a provisional
rating. All of the obligations in the Ohio IM-IT Intermediate Laddered
Maturity Trust mature within approximately 5-10 years of the Date of Deposit.
Commencing in approximately the fifth year of the Trust, roughly 20% of the
Bonds contained in the Trust will mature each year. The dollar weighted
average maturity of the Bonds in the Trust is 7.26 years.
SPECIAL CONSIDERATIONS. As described above, the Ohio IM-IT Intermediate
Laddered Maturity Trust will invest substantially all of its net assets in
securities issued by or on behalf of (or in certificates of participation in
lease purchase obligations of) the State of Ohio, political subdivisions of
the State, or agencies or instrumentalities of the State or its political
subdivisions (Ohio Obligations). The Ohio IM-IT Intermediate Laddered Maturity
Trust is therefore susceptible to general or particular political, economic or
regulatory factors that may affect issuers of Ohio Obligations. The following
information constitutes only a brief summary of some of the many complex
factors that may have an effect. The information does not apply to "conduit"
obligations on which the public issuer itself has no financial responsibility.
This information is derived from official statements of certain Ohio issuers
published in connection with their issuance of securities and from other
publicly available documents, and is believed to be accurate. No independent
verification has been made of any of the following information.
The creditworthiness of Ohio Obligations of local issuers is generally
unrelated to that of obligations of the State itself, and the State has no
responsibility to make payments on those local obligations. There may be
specific factors that at particular times apply in connection with investment
in particular Ohio Obligations or in those obligations of particular Ohio
issuers. It is possible that the investment may be in particular Ohio
Obligations, or in those of particular issuers, as to which those factors
apply. However, the information below is intended only as a general summary,
and is not intended as a discussion of any specific factors that may affect
any particular obligation or issuer.
The timely payment of principal of and interest on Ohio Obligations has
been guaranteed by bond insurance purchased by the issuers, the Ohio IM-IT
Intermediate Laddered Maturity Trust or other parties. The timely payment of
debt service on Ohio Obligations that are so insured may not be subject to the
factors referred to in this section of the Prospectus.
Ohio is the seventh most populous state. Its 1990 Census count of
10,847,000 indicates a 0.5% population increase from 1980.
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely in part on durable goods
manufacturing largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. As a result, general economic
activity, as in many other industrially-developed states, tends to be more
cyclical than in some other states and in the nation as a whole. Agriculture
is an important segment of the economy, with over half the State's area
devoted to farming and approximately 15% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. For example, the reported 1990
average monthly State rate was 5.7%, compared to the 5.5% national figure.
However, for both 1991 and 1992 the State rates (6.4% and 7.2%) were below the
national rates (6.7% and 7.4%). The unemployment rate and its effects vary
among particular geographic areas of the State.
There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of Ohio
Obligations held in the Ohio IM-IT Intermediate Laddered Maturity Trust
portfolio or the ability of particular obligors to make timely payments of
debt service on (or lease payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July
1 to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most
State operations are financed through the General Revenue Fund (GRF), for
which personal income and sales-use taxes are the major
<PAGE>
42 Ohio IM-IT Intermediate Laddered Maturity Series 4
sources. Growth and depletion of GRF ending fund balances show a consistent
pattern related to national economic conditions, with the ending FY balance
reduced during less favorable and increased during more favorable economic
periods. The State has well-established procedures for, and has timely taken,
necessary actions to ensure resource/ expenditure balances during less
favorable economic periods. These procedures include general and selected
reductions in appropriations spending.
Key biennium ending fund balances at June 30, 1989 were $475.1 million in
the GRF and $353 million in the Budget Stabilization Fund (BSF, a cash and
budgetary management fund). In FYs 1990-91, necessary corrective steps were
taken to respond to lower receipts and higher expenditures in certain
categories than earlier estimated. Those steps included selected reductions in
appropriations spending and the transfer of $64 million from the BSF to the
GRF. The State reported June 30, 1991 ending fund balances of $135.3 million
(GRF) and $300 million (BSF).
To allow time to resolve certain Senate and House budget differences for
the latest complete biennium that began July 1, 1991, an interim
appropriations act was enacted effective July 1, 1991; it included State debt
service and lease rental GRF appropriations for the entire 1992-93 biennium,
while continuing most other appropriations for a month. The general
appropriations act for the entire biennium was passed on July 11, 1991 and
signed by the Governor. Pursuant to it, $200 million was transferred from the
BSF to the GRF in FY 1992.
Based on updated FY financial results and economic forecast in the course
of FY 1992, both in light of the continuing uncertain nationwide economic
situation, there was projected and timely addressed an FY 1992 imbalance in
GRF resources and expenditures. GRF receipts significantly below original
forecasts resulted primarily from lower collections of certain taxes,
particularly sales and use taxes and personal income taxes. Higher expenditure
levels resulted from higher spending in certain areas, particularly human
services including Medicaid. As an initial action, the Governor ordered most
State agencies to reduce GRF spending in the last six months of FY 1992 by a
total of approximately $184 million. As authorized by the General Assembly the
$100.4 million BSF balance, and additional amounts from certain other funds,
were transferred late in the FY to the GRF, and adjustments in the timing of
certain tax payments made. Other administrative revenue and spending actions
resolved the remaining GRF imbalance.
A significant GRF shortfall (approximately $520 million) was then
projected for FY 1993. It was addressed by appropriate legislative and
administrative actions. As a first step the Governor ordered, effective July
1, 1992, $300 million in selected GRF spending reductions. Executive and
legislative action in December 1992--a combination of tax revisions and
additional appropriations spending reductions--resulted in a balance of GRF
resources and expenditures in the 1992-93 biennium. The State reported an
ending GRF fund balance at June 30, 1993 of approximately $111 million, and,
as a first step to BSF replenishment, OBM has deposited $21 million in the
BSF.
No spending reductions were applied to appropriations needed for debt
service or lease rentals on any State obligations.
The GRF appropriations act for the current 1994-95 biennium was passed
and signed by the Governor on July 1, 1993. It includes all necessary GRF
appropriations for biennial State debt service and lease rental payments.
The State's incurrence or assumption of debt without a vote of the people
is, with limited exceptions, prohibited by current State Constitutional
provisions. The State may incur debt, limited in amount to $750,000, to cover
casual deficits or failures in revenues or to meet expenses not otherwise
provided for. The Constitution expressly precludes the State from assuming the
debts of any local government or corporation. (An exception is made in both
cases for any debt incurred to repel invasion, suppress insurrection or defend
the State in war.)
By 13 constitutional amendments, the last adopted in 1993, Ohio voters
have authorized the incurrence of State debt to the payment of which taxes or
excises were pledged. At January 31, 1994, $712.6 million (excluding certain
highway bonds payable primarily from highway use charges) of this debt was
outstanding or awaiting delivery. The only such State debt then still
authorized to be incurred are portions of the highway bonds, and the
following: (a) up to $100 million of obligations for coal research and
development may be outstanding at any one time ($43.1 million outstanding);
(b) $1.2 billion of obligations authorized for local infrastructure
improvements, no more than $120 million may be issued in any calendar year
($645.2 million outstanding or awaiting delivery, 480 million remaining to be
issued); and (c) up to $200 million in general obligation bonds for parks and
recreation purposes may be outstanding at any one time (no more than $50
million to be issued in any one year, and none have yet been issued).
<PAGE>
Ohio IM-IT Intermediate Laddered Maturity Series 4 43
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have excises or
taxes levied to pay debt service. Those special obligations include
obligations issued by the Ohio Public Facilities Commission and the Ohio
Building Authority, $4.28 billion of which were outstanding or awaiting sale
or delivery at January 31, 1994.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing.
The General Assembly may for that purpose authorize the issuance of State
obligations secured by a pledge of all or such portion as it authorizes of
State revenues or receipts (but not by a pledge of the State's full faith and
credit).
State and local agencies issue revenue obligations that are payable from
revenues from or relating to certain facilities (but not from taxes). By
judicial interpretation, these obligations are not "debt" within
constitutional provisions. In general, payment obligations under
lease-purchase agreements of Ohio public agencies (in which certificates of
participation may be issued) are limited in duration to the agency's fiscal
period, and are renewable only upon appropriations being made available for
the subsequent fiscal period.
Local school districts in Ohio receive a major portion (on a state-wide
basis, recently approximately 46%) of their operating moneys from State
subsidies, but are dependent on local property taxes, and in 98 districts from
voter-authorized income taxes, for significant portions of their budgets.
Litigation, similar to that in other states, is pending questioning the
constitutionality of Ohio's system of school funding. A small number of the
State's 612 local school districts have in any year required special
assistance to avoid year-end deficits. A current program provides for school
district cash need borrowing directly from commercial lenders, with diversion
of State subsidy distributions to repayment if needed; in FY 1991 under this
program 26 districts borrowed a total of $41.8 million (including over $27
million by one district), and in FY 1992 borrowings totalled $68.6 million
(including $46.6 million for one district). FY 1993 loans totalled $94.5
million for 43 districts (including $75 million for one). FY 1994 loan
approval totalled at January 31, 1994, $9.90 million for 16 districts.
Ohio's 943 incorporated cities and villages rely primarily on property
and municipal income taxes for their operations, and, with other local
governments, receive local government support and property tax relief moneys
distributed by the State. For those few municipalities that on occasion have
faced significant financial problems, there are statutory procedures for a
joint State/local commission to monitor the municipality's fiscal affairs and
for development of a financial plan to eliminate deficits and cure any
defaults. Since inception in 1979, these procedures have been applied to 23
cities and villages; for 18 of them the fiscal situation was resolved and the
procedures terminated.
At present the State itself does not levy ad valorem taxes on real or
tangible personal property. Those taxes are levied by political subdivisions
and other local taxing districts. The Constitution has since 1934 limited the
amount of the aggregate levy (including a levy for unvoted general
obligations) of property taxes by all overlapping subdivisions, without a vote
of the electors or a municipal charter provision, to 1% of true value in
money, and statutes limit the amount of that aggregate levy to 10 mills per $1
of assessed valuation (commonly referred to as the "ten-mill limitation").
Voted general obligations of subdivisions are payable from property taxes that
are unlimited as to amount or rate.
TAX STATUS. For a discussion of the Federal tax status of income earned
on Ohio IM-IT Intermediate Laddered Maturity Trust Units, see "Other
Matters--Federal Tax Status".
Commencing in 1985, Ohio municipalities may be permitted under Ohio law
to subject interest on certain of the obligations held by the Ohio IM-IT
Intermediate Laddered Maturity Trust to income taxes imposed on their
residents and entities doing business therein.
In the opinion of Squire, Sanders & Dempsey, special counsel to the Fund
for Ohio tax matters, under existing law:
(1) The Ohio IM-IT Intermediate Laddered Maturity Trust is not taxable
as a corporation or otherwise for purposes of the Ohio personal income
tax, the Ohio corporation franchise tax, or the Ohio dealers in
intangibles tax.
(2) Income of the Ohio IM-IT Intermediate Laddered Maturity Trust will
be treated as the income of the Unitholders for purposes of the Ohio
personal income tax, Ohio municipal income taxes and the Ohio
corporation franchise tax in proportion to the respective interest
therein of each Unitholder.
<PAGE>
44 Ohio IM-IT Intermediate Laddered Maturity Series 4
(3) Interest on obligations issued by or on behalf of the State of
Ohio, political subdivisions thereof, or agencies or instrumentalities
thereof ("Ohio Obligations"), or by the governments of Puerto Rico,
the Virgin Islands or Guam ("Territorial Obligations") held by the
Trust is exempt from the Ohio personal income tax, Ohio municipal
income taxes and Ohio school district income taxes, and is excluded
from the net income base of the Ohio corporation franchise tax when
distributed or deemed distributed to Unitholders.
(4) Proceeds paid to the Ohio IM-IT Intermediate Laddered Maturity
Trust under insurance policies representing maturing interest on
defaulted obligations held by the Ohio IM-IT Intermediate Laddered
Maturity Trust will be exempt from Ohio income tax, Ohio municipal
income taxes and the net income base of the Ohio corporation franchise
tax if, and to the same extent as, such interest would be exempt from
such taxes if paid directly by the issuer of such obligations.
(5) Gains and losses realized on the sale, exchange or other
disposition by the Ohio IM-IT Intermediate Laddered Maturity Trust of
Ohio Obligations are excluded in determining adjusted gross and
taxable income for purposes of the Ohio personal income tax, Ohio
municipal income taxes and Ohio school district income taxes, and are
excluded from the net income base of the Ohio corporation franchise
tax when distributed or deemed distributed to Unitholders.
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME:
<S> <C>
Estimated Annual Interest Income per Unit................................................................ $ 45.73
Less: Estimated Annual Expense per Unit <F1>............................................................. $ 2.08
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 43.65
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 43.65
Divided by 12............................................................................................ $ 3.64
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .12124
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F2><F3><F4>........................................... 4.27%
ESTIMATED LONG-TERM RETURN <F2><F3><F4>........................................................................ 4.44%
Initial Distribution (April 1994).............................................................................. $ 1.70
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F4>.................................................................... $ 3.64
PURCHASED INTEREST <F5>........................................................................................ $ 7.62
Trustee's Annual Fee................... $.98 per $1,000 principal amount of
Bonds
Record and Computation Dates........... FIRST day of each month
DISTRIBUTION DATES..................... FIFTEENTH DAY OF EACH MONTH COMMENCING
APRIL 15, 1994
<FN>
<F1> Excluding insurance costs.
<F2> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F4> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F5> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
Ohio IM-IT Intermediate Laddered Maturity Series 4 45
<TABLE>
OHIO IM-IT INTERMEDIATE LADDERED MATURITY SERIES 4 (IM-IT AND QUALITY
MULTI-SERIES 216)
PORTFOLIO AS OF MARCH 10, 1994
<CAPTION>
OFFERING
PRICE TO
OHIO
IM-IT
INTERMEDIATE
NAME OF ISSUER, TITLE, INTEREST RATE AND LADDERED
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION MATURITY
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C>
$ 600,000 Columbus City School District, Ohio, General Obligation
(Unlimited Tax) Bonds, School Building Renovation and
Improvement Refunding Bonds, Series 1993 (FGIC Insured)
#4.65% Due 12/1/1999......................................... AAA $ 602,250
600,000 Akron, Bath and Copley Joint Township Hospital District, Ohio,
Hospital Facility Revenue Bonds (Akron General Medical Center
Project) Series 1993 (AMBAC Indemnity Insured)
#4.75% Due 1/1/2000.......................................... AAA 602,250
335,000 Ohio Municipal Electric Generation Agency, Joint Venture 5,
1993 Beneficial Interest Certificates, Revenue Bonds
(Belleville Hydroelectric Project) AMBAC Indemnity Insured
#4.875% Due 2/15/2001........................................ AAA 336,729
165,000 State of Ohio (OPFC) Higher Education Capital Facilities Bonds,
Series II-1994A (AMBAC Indemnity Insured)
#4.25% Due 12/1/2001......................................... AAA 158,789
280,000 South-Western City School District, Franklin and Pickaway
Counties, Ohio, School Facilities Construction and Renovation
Bonds (General Obligation-Unlimited Tax) MBIA Insured
#100M--0.00% Due 12/1/2001................................... AAA 68,697<F6>
#180M--4.55% Due 12/1/2003................................... AAA 173,822
600,000 Kent State University (A State University of Ohio) General
Receipts Bonds, Series 1994 (AMBAC Indemnity Insured)
4.85% Due 5/1/2002........................................... AAA 598,242
250,000 County of Fairfield, Ohio, Hospital Facilities Refunding
Revenue Bonds (Lancaster-Fairfield Community Hospital) Series
1993 (MBIA Insured)
#5.00% Due 6/15/2003......................................... AAA 250,268
170,000 State of Ohio (Ohio Building Authority) Local Jail Grant
Refunding Bonds, Series 1994A (AMBAC Indemnity Insured)
#4.50% Due 10/1/2003......................................... AAA 163,622
$ 2,954,669
$ 3,000,000
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
46 Tennessee IM-IT-- Series 26
TENNESSEE IM-IT TRUST
GENERAL. The Tennessee IM-IT Trust consists of 9 issues of Securities.
None of the Bonds in the Tennessee IM-IT Trust are general obligations of the
governmental entities issuing them or are backed by the taxing power thereof.
All of the issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purposes of issues (and percentage of principal amount
to total Tennessee IM-IT Trust) as follows: Health Care, 2 (30%); Water and
Sewer, 2 (20%); Retail Electric/Gas, 3 (17%); Single Family Mortgage Revenue,
1 (17%) and Airport, 1 (16%). No Bond issue has received a provisional rating.
SPECIAL CONSIDERATIONS. The following brief summary regarding the economy
of Tennessee is based upon information drawn from publicly available sources
and is included for the purpose of providing information about general
economic conditions that may or may not affect issuers of the Tennessee
obligations. The Sponsor has not independently verified any of the information
contained in such publicly available documents.
The State Constitution of Tennessee requires a balanced budget. No legal
authority exists for deficit spending from operating purposes beyond the end
of a fiscal year. Tennessee law permits tax anticipation borrowing but any
amount borrowed must be repaid during the fiscal year for which the borrowing
was done. Tennessee has not issued any debt for operating purposes during
recent years with the exception of some advances which were made from the
Federal Unemployment Trust Fund in 1984. No such advances are now outstanding
nor is borrowing of any type for operating purposes contemplated.
The State Constitution of Tennessee forbids the expenditure of the
proceeds of any debt obligation for a purpose other than the purpose for which
it was authorized by statute. Under State law, the term of bonds authorized
and issued cannot exceed the expected life of the projects being financed.
Furthermore, the amount of a debt obligation cannot exceed the amount
authorized by the General Assembly.
The State budget for the fiscal year ending June 30, 1991 provides for
revenues and expenditures of approximately $8.6 billion. Approximately 60% of
budgeted State revenues are expected to be generated from State taxes, with
the balance from federal funds, interdepartmental revenue, bond issues and
fees from current services. Less than 2% of fiscal 1991 State revenues are
budgeted to come from bond issues and less than 2% of fiscal 1991 budgeted
expenditures are allocated for debt service. Through the first half of fiscal
1991, revenues were approximately $64.7 million below budget projections and
fiscal 1991 revenues were estimated by the Tennessee Department of Finance and
Administration to be approximately $150 million below projections, principally
due to lower than anticipated sales tax revenues. Sales tax revenues account
for approximately 51% of State tax revenue. Tennessee's Revenue Fluctuation
Reserve is approximately $100 million.
In February 1991, the Governor of Tennessee introduced to the General
Assembly a tax reform proposal intended to generate approximately $627 million
in new State revenue to upgrade the quality of Tennessee public education. The
proposed tax program includes a 4% flat rate personal income tax on adjusted
gross income with a $7,000 exemption (declining as income increases) for each
member of lower income families, repeal of the State sales tax on food,
reduction of the combined State and local sales tax rate to 6% from the
current 8.25%, elimination of the local option sales tax cap, a 20% reduction
in corporate franchise tax, and a repeal of the current 6% income tax on
dividend and interest income. The proposal has been subject to extensive
debate in both the Tennesee House and Senate, and no prediction can be made as
to whether all or any part of the proposed legislation will be enacted.
The Tennessee economy generally tends to rise and fall in a roughly
parallel manner with the U.S. economy, although in recent years Tennessee has
experienced less economic growth than the U.S. average. The Tennessee economy
entered a recession in the last half of 1990 as the Tennessee index of leading
economic indicators fell throughout the period. Tennessee nominal gross State
product rose at a lower rate for 1990, and is projected to rise at a lower
rate for 1991, than the average annual rates for the five year period 1985-89.
Tennessee's population increased 6.7% from 1980 to 1990, less than the
national increase of 10.2% for the same period. Throughout 1990, seasonally
adjusted unemployment rates in Tennessee were at or slightly below the
national average but rose slightly above the national average in December
1990. Beginning in the fourth quarter of 1990, initial unemployment claims
showed substantial monthly increases. The unemployment rate for February 1991
<PAGE>
Tennessee IM-IT-- Series 26 47
stood at 6.8% as compared to 5.4% for December 1990. By 1992, Tennessee
unemployment had decreased to 6.1%, as compared to the national rate of 7.3%,
and has remained below the national rate throughout the first half of 1993.
The rates for January and June of 1993 stood at 6.6% and 6.0%, respectively,
as compared to the national rates of 7.1% and 7.0%. A decline in manufacturing
employment has been partly offset by moderate growth in service sector
employment.
Historically, the Tennessee economy has been characterized by a greater
concentration in manufacturing employment than the U.S. as a whole. While in
recent years Tennessee has followed the national shift away from manufacturing
toward service sector employment, manufacturing continues to be the largest
source of non-agricultural employment in the state, and the state continues to
attract new manufacturing facilities. In addition to the General Motors Saturn
project and a major Nissan facility built in Tennessee in the 1980's, in
January 1991, Nissan announced plans to develop a $600 million engine and
component parts manufacturing facility in Decherd, Tennessee. However, total
planned investment in Tennessee's manufacturing and service sectors was down
sharply to $1.9 billion in 1990 from $3.3 billion in 1989.
Non-agricultural employment in Tennessee is relatively uniformly
diversified, with approximately 24% in the manufacturing sector, approximately
23% in the wholesale and retail trade sector, approximately 22% in the service
sector and approximately 16% in government.
Tennessee's general obligation bonds are rated Aaa by Moody's and AA+ by
Standard & Poor's. Tennessee's smallest counties have Moody's lowest rating
due to these rural counties' limited economies that make them vulnerable to
economic downturns. Tennessee's four largest counties have the second highest
of Moody's nine investment grades.
The foregoing information does not purport to be a complete or exhaustive
description of all the conditions to which the issuers of Bonds in the
Tennessee IM-IT Trust are subject. Many factors including national economic,
social and environmental policies and conditions, which are not within the
control of the issuers of Bonds, could affect or could have an adverse impact
on the financial condition of the State and various agencies and political
subdivisions located in the State. Since certain Bonds in the Tennessee IM-IT
Trust (other than general obligation bonds issued by the State) are payable
from revenue derived from a specific source or authority, the impact of a
pronounced decline in the national economy or difficulties in significant
industries within the State could result in a decrease in the amount of
revenues realized from such source or by such authority and thus adversely
affect the ability of the respective issuers of the Bonds in the Tennessee
IM-IT Trust to pay the debt service requirements on the Bonds. Similarly, such
adverse economic developments could result in a decrease in tax revenues
realized by the State and thus could adversely affect the ability of the State
to pay the debt service requirements of any Tennessee general obligation bonds
in the Tennessee IM-IT Trust. The Sponsor is unable to predict whether or to
what extent such factors or other factors may affect the issuers of Bonds, the
market value or marketability of the Bonds or the ability of the respective
issuers of the Bonds acquired by the Tennessee IM-IT Trust to pay interest on
or principal of the Bonds.
TAX STATUS For a discussion of the federal tax status of income earned on
Tennessee IM-IT Trust Units, see "Other Matters--Federal Tax Status."
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 or its political subdivisions (the "Puerto Rico Bonds") (collectively,
the "Bonds").
Under the recently amended provisions of 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. The recent amendments also provide 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
<PAGE>
48 Tennessee IM-IT-- Series 26
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, because the recent amendments only 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 the recent amendments only provide 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. Additional information regarding such
proposals is currently unavailable. Investors should consult their own tax
advisors in this regard.
In the opinion of Chapman and Cutler, Counsel to the Sponsor, under
existing Tennessee State law as of the date of this prospectus:
For purposes of the Hall Income Tax, the Tennessee Excise Tax imposed by
Section 67-4-806 (the "State Corporate Income Tax"), and the Tennessee
Franchise Tax imposed by Section 67-4-903, the Tennessee IM-IT Trust will not
be subject to such taxes.
For Hall Income Tax purposes, a proportionate share of such distributions
from the Tennessee IM-IT Trust to Unitholders, to the extent attributable to
interest on the Tennessee Bonds (based on the relative proportion of interest
received or accrued attributable to Tennessee Bonds) will be exempt from the
Hall Income Tax when distributed to such Unitholders. Based on the
Commissioner's Letter, distributions from the Trust to Unitholders, to the
extent attributable to interest on the Puerto Rico Bonds (based on the
relative proportion of interest received or accrued attributable to the Puerto
Rico Bonds) will be exempt from the Hall Income Tax when distributed to such
Unitholders. A proportionate share of distributions from the Tennessee IM-IT
Trust attributable to assets other than the Bonds would not, under current
law, be exempt from the Hall Income Tax when distributed to Unitholders.
For Tennessee State Corporate Income Tax Purposes, Tennessee law does not
provide an exemption for interest on Tennessee Bonds and requires that all
interest excludible from Federal gross income must be included in calculating
"net earnings" subject to the State Corporate Income Tax. No opinion is
expressed regarding whether such tax would be imposed on the earnings or
distributions of the Tennessee IM-IT Trust (including interest on the Bonds or
gain realized upon the disposition of the Bonds by the Tennessee IM-IT Trust)
attributable to Unitholders subject to the State Corporate Income Tax.
However, based upon prior written advice from the Tennessee Department of
Revenue, earnings and distributions from the Tennessee IM-IT Trust (including
interest on the Tennessee Bonds or gain realized upon the disposition of the
Tennessee Bonds by the Tennessee IM-IT Trust) attributable to the Unitholders
should be exempt from the State Corporate Income Tax. The position of the
Tennessee Department of Revenue is not binding, and is subject to change, even
on a retroactive basis.
Each Unitholder will realize taxable gain or loss for State Corporate
Income Tax purposes when the Unitholder redeems or sells his Units, at a price
that differs from original cost as adjusted for accretion or any discount or
amortization of any premium and other basis adjustments, including any basis
reduction that may be required to
<PAGE>
Tennessee IM-IT-- Series 26 49
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.
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME:
<S> <C>
Estimated Annual Interest Income per Unit................................................................ $ 52.94
Less: Estimated Annual Expense per Unit <F1>............................................................. $ 2.07
Less: Annual Premium on Portfolio Insurance per Unit..................................................... $ .28
Estimated Net Annual Interest Income per Unit............................................................ $ 50.59
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 50.59
Divided by 12............................................................................................ $ 4.22
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .14052
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F2><F3><F4>........................................... 5.06%
ESTIMATED LONG-TERM RETURN <F2><F3><F4>........................................................................ 5.20%
Initial Distribution (April 1994).............................................................................. $ 1.97
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F4>.................................................................... $ 4.22
PURCHASED INTEREST <F5>........................................................................................ $ 7.19
Trustee's Annual Fee................... $.98 per $1,000 principal amount of
Bonds
Record and Computation Dates........... FIRST day of each month
DISTRIBUTION DATES..................... FIFTEENTH DAY OF EACH MONTH COMMENCING
APRIL 15, 1994
<FN>
<F1> Excluding insurance costs.
<F2> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F4> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F5> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
50 Tennessee IM-IT-- Series 26
<TABLE>
TENNESSEE INSURED MUNICIPALS INCOME TRUST
SERIES 26 (IM-IT AND QUALITY MULTI-SERIES 216)
PORTFOLIO AS OF MARCH 10, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND TENNESSEE
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION IM-IT
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C>
$ 250,000 The Metropolitan Government of Nashville and Davidson County
(Tennessee) Energy Production Facility, Revenue Refunding
Bonds, Series 1994 (AMBAC Indemnity Insured)
5.20% Due 7/1/2007........................................... AAA 2004 @ 102 $ 244,223
100,000 City of Clarksville (Tennessee) Water, Sewer and Gas Revenue
Refunding and Improvement Bonds, Series 1992 (MBIA Insured)
#0.00% Due 2/1/2014.......................................... AAA 32,198<F6>
500,000 Memphis-Shelby County Airport Authority, Tennessee, Airport
Refunding Revenue Bonds, Series 1993 (MBIA Insured) 2003 @ 102
#5.65% Due 9/1/2015.......................................... AAA 2011 @ 100 S.F. 499,415
500,000 The Metropolitan Government of Nashville and Davidson County
(Tennessee) Water and Sewer Revenue Refunding Bonds, Series
1993 (FGIC Insured) 2003 @ 100
#5.10% Due 1/1/2016.......................................... AAA 2014 @ 100 S.F. 465,270
400,000 The Health and Educational Facilities Board of the City of
Johnson City, Tennessee, Hospital Revenue Refunding Bonds,
Series 1994 (Johnson City Medical Center Hospital) MBIA
Insured 2004 @ 102
#5.25% Due 7/1/2016.......................................... AAA 2014 @ 100 S.F. 374,624
100,000 The Metropolitan Government of Nashville and Davidson Counties
(Tennessee) Electric System Revenue Refunding Bonds, Series
1992A 2002 @ 102
#6.00% Due 5/15/2017......................................... AA 2013 @ 100 S.F. 101,246
500,000 Tennessee Housing Development Agency, Mortgage Finance Program
Revenue Bonds, Series 1993A 2003 @ 102
5.90% Due 7/1/2018........................................... A+ 2014 @ 100 S.F. 497,500
170,000 The Citizens Gas Utility District of Scott and Morgan Counties,
Tennessee, Gas System Revenue Refunding Bonds, Series 1994
(MBIA Insured) 2004 @ 102
#5.25% Due 1/1/2019.......................................... AAA 2015 @ 100 S.F. 160,741
500,000 The Health, Educational and Housing Facilities Board of the
County of Sullivan, Tennessee, Hospital Revenue Bonds, Series
1993 (Holston Valley Health Care, Inc.) MBIA Insured 2003 @ 102
#5.75% Due 2/15/2020......................................... AAA 2014 @ 100 S.F. 495,050
$ 2,870,267
$ 3,020,000
</TABLE>
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
North Carolina QUALITY-- Series 74 51
NORTH CAROLINA QUALITY TRUST
GENERAL. The North Carolina Quality Trust consists of 8 issues of
Securities. One of the Bonds in the North Carolina Quality Trust is a general
obligation of the governmental entity issuing it and is backed by the taxing
power thereof. The remaining issues are payable from the income of a specific
project or authority and are not supported by the issuer's power to levy
taxes. These issues are divided by purpose of issues (and percentage of
principal amount to total North Carolina Quality Trust) as follows:
Certificates of Participation, 1 (17%); Multi-Family Mortgage Revenue, 1
(17%); Wholesale Electric, 1 (17%); Retail Electric/Gas, 1 (16%); Health Care,
2 (13%); Water and Sewer, 1 (13%) and General Obligations, 1 (7%). No Bond
issue has received a provisional rating.
SPECIAL CONSIDERATIONS. See Portfolio for a list of the Debt Obligations
included in the North Carolina Quality Trust. The portions of the following
discussion regarding the financial condition of the State government may not
be relevant to general obligation or revenue bonds issued by political
subdivisions of the State. Those portions and the sections which follow
regarding the economy of the State, are included for the purpose of providing
information about general economic conditions that may or may not affect
issuers of the North Carolina obligations.
General obligations of a city, town or county in North Carolina are
payable from the general revenues of the entity, including ad valorem tax
revenues on property within the jurisdiction. Revenue bonds issued by North
Carolina political subdivisions include (1) revenue bonds payable exclusively
from revenue-producing governmental enterprises and (2) industrial revenue
bonds, college and hospital revenue bonds and other "private activity bonds"
which are essentially non-governmental debt issues and which are payable
exclusively by private entities such as non-profit organizations and business
concerns of all sizes. State and local governments have no obligation to
provide for payment of such private activity bonds and in many cases would be
legally prohibited from doing so. The value of such private activity bonds may
be affected by a wide variety of factors relevant to particular localities or
industries, including economic developments outside of North Carolina.
Section 23-48 of the North Carolina General Statutes appears to permit
any city, town, school district, county or other taxing district to avail
itself of the provisions of Chapter 9 of the United States Bankruptcy Code,
but only with the consent of the Local Government Commission of the State and
of the holders of such percentage or percentages of the indebtedness of the
issuer as may be required by the Bankruptcy Code (if any such consent is
required). Thus, although limitations apply, in certain circumstances
political subdivisions might be able to seek the protection of the Bankruptcy
Code.
State Budget and Revenues. The North Carolina State Constitution requires
that the total expenditures of the State for the fiscal period covered by each
budget not exceed the total of receipts during the fiscal period and the
surplus remaining in the State Treasury at the beginning of the period. The
State's fiscal year runs from July 1st through June 30th.
In 1990 and 1991, the State had difficulty meeting its budget
projections. Lower than anticipated revenues coupled with increases in State
spending requirements imposed by the federal government led to projected
budget deficits for fiscal 1989-1990 and fiscal 1990-1991. Consequently, the
Governor ordered cuts in budgeted State expenditures for both fiscal years.
When similar budget deficits were projected for the next two fiscal
years, the General Assembly addressed the problem through a broad array of
State spending reductions in existing programs or previously budgeted
increases and tax increases. The taxes include a one-cent increase in the
sales tax, a three-cent increase in the excise tax on cigarettes, an increase
in the corporate tax rate (from 7 to 7.75 percent, as well as a four-year
surtax, starting at 4% of the regular income tax for tax year 1991 and
reducing by 1% for each of the following three years), an increase in the
individual income tax rate for married couples with income of more than
$100,000 and individuals with income over $60,000, and other taxes.
The effect of the budget reductions and tax increases resulted in a small
budget surplus (approximately $160 million) for the 1991-1992 fiscal year
(ended June 30, 1992). The State netted a larger budget surplus (approximately
$342 million) for the 1992-1993 fiscal year (ended June 30, 1993). The $9
billion budget for 1993-1994 adopted by
<PAGE>
52 North Carolina QUALITY-- Series 74
the General Assembly did not include any new tax measures. The 1993-1994
budget does include new spending cuts and estimated increased revenues
totalling $30.6 million.
Both the nation and the State have experienced a modest economic recovery
in recent months. However, it is unclear what effect these developments, as
well as the reduction in government spending or increase in taxes may have on
the value of the Debt Obligations in the North Carolina Trust. No clear upward
trend has developed, and both the State and the national economies must be
watched carefully.
The fiscal condition of the State might be affected adversely by
litigation concerning the legality of certain State tax provisions following
the decision of the United States Supreme Court in Davis v. Michigan Dept. of
Treasury (decided March 28, 1989). In Davis, the United States Supreme Court
held unconstitutional a Michigan statute exempting from state income taxation
retirement benefits paid by the state of Michigan or its local governments,
but not exempting retirement benefits paid by the federal government.
Subsequent to Davis, certain federal retirees and federal military
personnel plaintiffs brought an action in North Carolina state court seeking
refund of the illegal taxes. Swanson, et al. v. State of North Carolina, et
al. (Wake County, North Carolina Superior Court, No. 90 CVS 3127) ("Swanson
State").
The amount of refunds claimed by federal retirees in the Swanson action
has not been calculated. Plaintiffs have asserted that the plaintiff class
contains about 100,000 taxpayers; the State has asserted that the claims would
aggregate at least $140 million (which might not include interest).
In a 4-3 decision, the North Carolina Supreme Court found for the
defendants, declaring the State would not be required to refund taxes
illegally collected prior to the decision in Davis. Because of this
determination, the Court did not need to decide what remedies would be
available if Davis were held to apply retroactively. The Court reaffirmed its
decision following reconsideration.
Plaintiffs in Swanson State applied for review by the U.S. Supreme Court.
The U.S. Supreme Court vacated the judgment and remanded the case to the North
Carolina Supreme Court for reconsideration in light of the U.S. Supreme
Court's holding in Harper v. Virginia Dept. of Taxation (No.91-794)
("Harper"). In Harper, which also involved the disparate income tax treatment
of retired state and federal employees and the question of retroactive
application of the decision in Davis, the Supreme Court held that the
Commonwealth of Virginia must provide "meaningful backward-looking relief" to
the palintiffs, if the Commonwealth did not have a predeprivation process
adequate to satisfy due process requirements. The case was remanded to the
Supreme Court of Virginia to determine whether a remedy was required and, if
so, what form it would take.
The impact of Harper on the estimated $140 million of refund claims in
Swanson State has yet to be determined. The North Carolina Supreme Court must
determine whether North Carolina law provides an adequate predeprivation
process, and, if not, what remedy should be fashioned to satisfy due process
requirements.
General. The population of the State has increased 13% from 1980, from
5,880,095 to 6,647,351 as reported by the 1990 federal census. Although North
Carolina is the tenth largest State in population, it is primarily a rural
state, having only five municipalities with populations in excess of 100,000.
The labor force has undergone significant change during recent years. The
State has moved from an agricultural to a service and goods producing economy.
Those persons displaced by farm mechanization and farm consolidations have, in
large measure, sought and found employment in other pursuits. Due to the wide
dispersion of non-agricultural employment, the people have been able to
maintain, to a large extent, their rural habitation practices. During the
period 1980 to 1990, the State labor force grew about 19% (from 2,855,200 to
3,401,000), and per capita income grew from $7,999 to $16,203, an increase of
102.6%.
The current economic profile of the State consists of a combination of
industry, agriculture and tourism. As of May 1991, the State was reported to
rank tenth among the states in non-agricultural employment and eighth in
manufacturing employment. Employment indicators have fluctuated somewhat in
the annual periods since June of 1989. The following table reflects the
fluctuations in certain key employment categories.
<PAGE>
North Carolina QUALITY-- Series 74 53
<TABLE>
<CAPTION>
Category (all seasonally adjusted) June 1989 June 1990 June 1991 June 1992
<S> <C> <C> <C> <C>
Civilian Labor Force 3,286,000 3,312,000 3,228,000 3,275,000
Nonagricultural Employment 3,088,000 3,129,000 3,059,000 3,077,000
Goods Producing Occupations (mining, construction 1,042,200 1,023,100 973,600 974,600
and manufacturing
Service Occupations 2,045,800 2,106,300 2,085,400 2,103,100
Wholesale/Retail Occupations 713,900 732,500 704,100 694,700
Government Employees 482,200 496,400 496,700 502,000
Miscellaneous Services 563,900 587,300 596,300 615,300
Agricultural Employment 54,900 58,900 88,700 102,800
</TABLE>
The unemployment rate in June 1993 was 5.4% of the labor force, as
compared with an unemployment rate of 7.0% nationwide.
The diversity of agriculture in North Carolina and a continuing push in
marketing efforts have protected farm income from some of the wide variations
that have been experienced in other states where most of the agricultural
economy is dependent on a small number of agricultural commodities.
Gross agricultural income in 1991 was $4.98 billion, including
approximately $4,924,071,000 income from commodities. As of 1991, the State
was tenth in the nation in gross agricultural income. Tobacco production is a
leading source of agricultural income in the State, accounting for 21.4% of
gross agricultural income. Tobacco farming in North Carolina has been and is
expected to continue to be affected by major Federal legislation and
regulatory measures regarding tobacco production and marketing and by
international competition. Measures adverse to tobacco farming could have
negative effects on farm income and the North Carolina economy generally. Eggs
and poultry products accounted for revenues of approximately $1.5 billion in
1991.
According to the State Commissioner of Agriculture, based on 1991
figures, the State ranked first in the nation in the production of flue-cured
tobacco, total tobacco, turkeys and sweet potatoes; second in the production
of cucumbers for pickles; third in the value of poultry products and trout;
fourth in commercial broilers and peanuts; sixth in burley tobacco, greenhouse
and nursery receipts, hogs and strawberries; and seventh in the number of
chickens (excluding broilers), peaches and apples. The number of farms has
been decreasing; in 1992 there were approximately 60,000 farms in the State
(down from approximately 72,000 in 1987, a decrease of about 17% in five
years). However, a strong agribusiness sector also supports farmers with farm
inputs (fertilizer, insecticide, pesticide and farm machinery) and processing
of commodities produced by farmers (vegetable canning and cigarette
manufacturing).
The State Department of Commerce, Travel and Tourism Division, has
reported that in 1991 approximately $7 billion was spent on tourism in the
State with 1992 revenues from tourism expected to exceed $7.3 billion. In
1990, traveler expenditures directly generated more than 141,000 jobs within
the State, 4.5 percent of total nonagricultural employment in that year.
Bond Ratings. Currently, Moody's rates North Carolina general obligation
bonds as Aaa and Standard & Poor's rates such bonds as AAA. Standard & Poor's
placed North Carolina general obligation bonds on "credit watch" in June of
1990 and continued to monitor the State's economy closely through 1990 and
1991.
In June of 1992 Standard & Poor's revised its outlook on the State's
AAA-rated general obligation bonds to stable from negative. Among the reasons
for the revision were the revenue spending measures adopted since 1991.
The rating agencies presumably will monitor the results of the
legislative approach to the fiscal difficulties.
Thus, although both rating agencies have reaffirmed the AAA rating of
North Carolina's outstanding general obligation bonds for the present time,
there can be no assurance that these ratings will continue, that local
<PAGE>
54 North Carolina QUALITY-- Series 74
government bond ratings will not decline or that particular bond issues may
not be adversely affected by changes in economic, political or other
conditions that do not affect the ratings.
The Sponsor believes the information summarized above describes some of
the more significant events relating to the North Carolina Trust. The sources
of this information are the official statements of issuers located in North
Carolina, State agencies, publicly available documents, publications of rating
agencies and news reports of statements by State officials and employees and
by rating agencies. The Sponsor and its counsel have not independently
verified any of the information contained in the official statements and other
sources and counsel have not expressed any opinion regarding the completeness
or materiality of any matters contained in this Prospectus other than the tax
opinions set forth below under North Carolina Taxes.
TAX STATUS. For a discussion of the Federal tax status of income earned
on North Carolina Quality Trust Units, see "Other Matters--Federal Tax
Status". The portfolio of the North Carolina Quality Trust consists of bonds
issued by the State of North Carolina or municipalities, authorities or
political subdivisions thereof (the "Bonds").
In the opinion of Hunton & Williams, special counsel to the Fund for
North Carolina tax matters, under existing North Carolina law:
Upon the establishing of the North Carolina Quality Trust and the Units
thereunder:
(1) The North Carolina Quality Trust is not an "association" taxable as
a corporation under North Carolina law with the result that income of
the North Carolina Quality Trust will be deemed to be income of the
Unitholders.
(2) Interest on the Bonds that is exempt from North Carolina income tax
when received by the North Carolina Quality Trust will retain its
tax-exempt status when received by the Unitholders.
(3) Unitholders will realize a taxable event when the North Carolina
Quality Trust disposes of a Bond (whether by sale, exchange,
redemption or payment at maturity) or when a Unitholder redeems or
sells his Units (or any of them), and taxable gains for Federal income
tax purposes may result in gain taxable as ordinary income for North
Carolina income tax purposes. However, when a Bond has been issued
under an act of the North Carolina General Assembly that provides that
all income from such Bond, including any profit made from the sale
thereof, shall be free from all taxation by the State of North
Carolina, any such profit received by the North Carolina Quality Trust
will retain its tax-exempt status in the hands of the Unitholders.
(4) Unitholders must amortize their proportionate shares of any premium
on a Bond. Amortization for each taxable year is accomplished by
lowering the Unitholder's basis (as adjusted) in his Units with no
deduction against gross income for the year.
(5) The Units are exempt from the North Carolina tax on intangible
personal property so long as the corpus of the North Carolina Quality
Trust remains composed entirely of Bonds or, pending distribution,
amounts received on the sale, redemption or maturity of the Bonds and
the Trustee periodically supplies to the North Carolina Department of
Revenue at such times as required by the Department of Revenue a
complete description of the North Carolina Quality Trust and also the
name, description and value of the obligations held in the corpus of
the North Carolina Quality Trust.
The opinion of Hunton & Williams is based, in part, on the opinion of
Chapman and Cutler regarding Federal tax status.
<PAGE>
North Carolina QUALITY-- Series 74 55
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME:
<S> <C>
Estimated Annual Interest Income per Unit................................................................ $ 53.75
Less: Estimated Annual Expense per Unit.................................................................. $ 2.06
Estimated Net Annual Interest Income per Unit............................................................ $ 51.69
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 51.69
Divided by 12............................................................................................ $ 4.31
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .14358
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F2><F3>............................................... 5.17%
ESTIMATED LONG-TERM RETURN <F2><F3>............................................................................ 5.22%
Initial Distribution (April 1994).............................................................................. $ 2.01
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F3>.................................................................... $ 4.31
PURCHASED INTEREST <F4>........................................................................................ $ 8.96
Trustee's Annual Fee................... $.98 per $1,000 principal amount of
Bonds
Record and Computation Dates........... FIRST day of each month
DISTRIBUTION DATES..................... FIFTEENTH DAY OF EACH MONTH COMMENCING
APRIL 15, 1994
<FN>
<F1> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F2> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F3> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F4> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
56 North Carolina QUALITY-- Series 74
<TABLE>
NORTH CAROLINA INVESTORS' QUALITY TAX-EXEMPT TRUST
SERIES 74 (IM-IT AND QUALITY MULTI-SERIES 216)
PORTFOLIO AS OF MARCH 10, 1994
<CAPTION>
OFFERING
PRICE TO
NORTH
NAME OF ISSUER, TITLE, INTEREST RATE AND RATING<F2> CAROLINA
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR STANDARD REDEMPTION QUALITY
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> & POOR'S MOODY'S FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C> <C>
$ 100,000 New Hanover County, North Carolina, Hospital Revenue
Bonds (New Hanover Regional Medical Center Project)
Series 1993 (AMBAC Indemnity Insured) 2003 @ 102
#4.75% Due 10/1/2013............................... AAA Aaa 2009 @ 100 S.F. $ 89,388
200,000 Charlotte, North Carolina, Water and Sewer Bonds
(Unlimited Tax-General Obligation) Series 1993
#5.25% Due 2/1/2014................................ AAA Aaa 2003 @ 102 191,504
300,000 Cumberland County, North Carolina, Hospital
Facilities Revenue Refunding Bonds (Cumberland
County Hospital Systems, Inc.) Series 1993 (MBIA
Insured) 2003 @ 100
#5.50% Due 10/1/2014............................... AAA Aaa 2010 @ 100 S.F. 292,518
500,000 North Carolina, Municipal Power Agency No. 1, Catawba
Electric Revenue Refunding Bonds, Series 1993 (MBIA
Insured) 2003 @ 102
#5.00% Due 1/1/2018................................ AAA Aaa 2016 @ 100 S.F. 448,230
500,000 City of Charlotte, North Carolina, Refunding
Certificates of Participation (Convention Facility
Project) Series 1993C (AMBAC Indemnity Insured) 2003 @ 102
#5.25% Due 12/1/2020............................... AAA Aaa 2014 @ 100 S.F. 467,290
400,000 Buncombe County, North Carolina, Metropolitan
Sewerage District, Sewerage System Revenue
Refunding Bonds, Series 1993A (FGIC Insured) 2003 @ 102
#5.50% Due 7/1/2022................................ AAA Aaa 2014 @ 100 S.F. 388,068
500,000 North Carolina Eastern Municipal Power Agency, Power
System Revenue Bonds, Refunding Series 1993B (FGIC
Insured)
#6.25% Due 1/1/2023................................ AAA Aaa 2003 @ 102 514,970
510,000 North Carolina Housing Finance Agency, Multifamily
Revenue Bonds (1994 FHA-Insured Mortgage Loan
Resolution) Series 1994 2004 @ 102
5.45% Due 9/1/2024................................. AA Aa 2015 @ 100 S.F. 484,500
$ 2,876,468
$ 3,010,000
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
Notes to Portfolios 57
NOTES TO PORTFOLIOS:
AS OF THE DATE OF DEPOSIT: MARCH 10, 1994
(1) All Securities are represented by "regular way" or "when issued"
contracts for the performance of which an irrevocable letter of credit,
obtained from an affiliate of the Trustee, has been deposited with the
Trustee. At the Date of Deposit, Securities may have been delivered to
the Sponsor pursuant to certain of these contracts; the Sponsor has
assigned to the Trustee all of its right, title and interest in and to
such Securities. Contracts to acquire Securities were entered into during
the period from September 29, 1993 to March 10, 1994. These Securities
have expected settlement dates ranging from March 10, 1994 to March 29,
1994 (see "Unitholder Explanations").
(2) All ratings are by Standard & Poor's Corporation unless otherwise
indicated. "*" indicates that the rating of the Bond is by Moody's
Investors Service, Inc. The ratings represent the latest published
ratings by the respective ratings agency or, if not published, represent
private letter ratings or those ratings expected to be published by the
respective ratings agency. "Y" indicates that such rating is contingent
upon physical receipt by the respective ratings agency of a policy of
insurance obtained by the issuer of the bonds involved and issued by the
Preinsured Bond Insurer named in the bond's title. A commitment for
insurance in connection with these bonds has been issued by the
Preinsured Bond Insurer named in the bond's title. "N/R" indicates that
the applicable rating service did not provide a rating for that
particular Security. For a brief description of the rating symbols and
their related meanings, see "Other Matters-- Description of Securities
Ratings".
(3) There is shown under this heading the year in which each issue of Bonds
is initially or currently callable and the call price for that year. Each
issue of Bonds continues to be callable at declining prices thereafter
(but not below par value) except for original issue discount bonds which
are redeemable at prices based on the issue price plus the amount of
original issue discount accreted to redemption date plus, if applicable,
some premium, the amount of which will decline in subsequent years.
"S.F." indicates a sinking fund is established with respect to an issue
of Bonds. Redemption pursuant to call provisions generally will, and
redemption pursuant to sinking fund provisions may, occur at times when
the redeemed bonds have an offering side valuation which represents a
premium over par. Certain Bonds may be subject to redemption without
premium prior to the date shown pursuant to extraordinary optional or
mandatory redemptions if certain events occur. Single family mortgage
revenue bonds and housing authority bonds are most likely to be called
subject to such provisions, but other bonds may have similar call
features. Notwithstanding any provisions to the contrary, certain bond
issuers have in the past and others may in the future attempt to redeem
Bonds prior to their initially scheduled call dates and at prices which
do not include any premiums. For a general discussion of certain of these
events, see "Unitholder Explanations--Bond Redemptions". To the extent
that the Securities were deposited in a Trust at a price higher than the
price at which they are redeemed, this will represent a loss of capital
when compared with the original Public Offering Price of the Units.
Conversely, to the extent that the Bonds were acquired at a price lower
than the redemption price, this will represent an increase in capital
when compared with the original Public Offering Price of the Units.
Distributions will generally be reduced by the amount of the income which
would otherwise have been paid with respect to redeemed Securities and
there will be distributed to Unitholders the principal amount and any
premium received on such redemption. The Estimated Current Return and
Estimated Long-Term Return in this event may be affected by such
redemptions. For the Federal tax effect on Unitholders of such
redemptions and resultant distributions, see paragraph (2) under "Other
Matters--Federal Tax Status".
(4) Evaluation of Securities is made on the basis of current offering prices
for the Securities. The offering prices are greater than the current bid
prices of the Securities which is the basis on which Unit value is
determined for purposes of redemption of Units (see "Unitholder
Explanations--Public Offering--Offering Price").
(5) Other information regarding the Bonds in each Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL PROFIT
INSURANCE COST TO (LOSS) TO ANNUAL INTEREST BID SIDE EVALUATION
TRUST COST SPONSOR SPONSOR INCOME TO TRUST OF BONDS
<S> <C> <C> <C> <C> <C>
IM-IT................................. -- $ 7,499,161 $ 61,556 $ 448,502 $ 7,501,813
New York IM-IT........................ -- $ 2,914,029 $ 14,604 $ 168,000 $ 2,906,045
Ohio IM-IT Intermediate
Laddered Maturity.................... -- $ 2,949,108 $ 5,561 $ 137,184 $ 2,931,938
Tennessee IM-IT....................... $ 850 $ 2,935,221 $ ( 64,954) $ 160,925 $ 2,847,313
North Carolina Quality................ -- $ 2,884,640 $ ( 8,172) $ 164,045 $ 2,853,300
</TABLE>
<PAGE>
58 Notes to Portfolios
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in certain Portfolios. The cost of any such
contracts and the corresponding gain or loss is included in the Cost to
Sponsor.
Certain Securities in the Fund, if any, marked by a double asterisk (**),
have been purchased on a "when, as and if issued" or "delayed delivery"
basis. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. Delivery is expected
to take place at various dates after the First Settlement Date as
follows:
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PRINCIPAL RANGE OF DAYS SUBSEQUENT
TRUST AMOUNT TO FIRST SETTLEMENT DATE
<S> <C> <C>
IM-IT............................... 32% 6 to 12 days
New York IM-IT...................... 16% 6 days
Ohio IM-IT Intermediate
Laddered Maturity.................. 0% --
Tennessee IM-IT..................... 0% --
North Carolina Quality.............. 0% --
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities
in the IM-IT, New York IM-IT, Ohio IM-IT Intermediate Laddered Maturity,
Tennessee IM-IT and North Carolina Quality Trusts were higher than the
bid side evaluations of such Securities by 0.75%, 0.74%, 0.76%, 0.76%
and 0.77%, respectively, of the aggregate principal amounts of such
Securities.
"#" indicates that such Bond was issued at an original issue discount.
The tax effect of Bonds issued at an original issue discount is described
in "Other Matters--Federal Tax Status".
(6) This Bond has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Bonds which
pay no interest are normally described as "zero coupon" bonds. Over the
life of bonds purchased at a deep discount the value of such bonds will
increase such that upon maturity the holders of such bonds will receive
100% of the principal amount thereof. Approximately 2%, 3% and 3% of the
aggregate principal amount of the Securities in the New York IM-IT Trust,
Ohio IM-IT Intermediate Laddered Maturity Trust and Tennessee IM-IT
Trust, respectively, are "zero coupon" bonds, respectively.
(7) The issuer of this Bond has sold or reserved the right to sell to third
parties all or a portion of its right to call the Bond in accordance with
the redemption provisions of the Bond. See "Unitholder
Explanations--Settlement of Bonds in the Trusts--Bond Redemptions."
<PAGE>
Underwriting 59
UNDERWRITING. The Underwriters named below have severally purchased Units
in the following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
NAME ADDRESS IM-IT UNITS
<S> <C> <C>
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 2,000
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,925
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 500
B. C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 400
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
William R. Hough & Company 100 Second Avenue South, 8th Floor, St. Petersburg, Florida 250
33701
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 250
The Principal/Eppler, Guerin & Turner, Fountain Place, 1445 Ross Avenue, Suite 2300, Dallas, Texas 250
Inc. 75201
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 250
Unit Investment Trust Department 10292
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 250
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 100
Butler, Wick & Co., Inc. City Center One, Suite 700, P.O. Box 149, Youngstown, Ohio 100
44501
Dain Bosworth Incorporated 100 Dain Tower, Minneapolis, Minnesota 55402 100
R. G. Dickinson & Co. 200 Des Moines Building, P.O. Box 9111, Des Moines, Iowa 100
50306-9111
Fidelity Capital Markets 161 Devonshire Street D4, Boston, Massachusetts 02110 100
A Division of National Financial
Services
Corporation
First of Michigan Corporation 100 Renaissance Center, 26th Floor, Detroit, Michigan 48243 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Hamilton Investments, Inc. 2 North LaSalle Street, Suite 1300, Chicago, Illinois 60602 100
J. J. B. Hilliard, W. L. Lyons, Inc. 501 South Fourth Street, Louisville, Kentucky 40202 100
Morgan Keegan & Co., Inc. 50 North Front Street, Memphis, Tennessee 38103 100
Nathan & Lewis Securities, Inc. 119 West 40th Street, New York, New York 10018 100
Oppenheimer & Co., Inc. World Financial Center, 8th Floor, New York, New York 10281 100
Roosevelt & Cross Inc. 20 Exchange Place, New York, New York 10005 100
Smith Barney Shearson 2 World Trade Center, 101st Floor, New York, New York 10048 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 100
23219
8,025
</TABLE>
<TABLE>
<CAPTION>
NEW YORK
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,105
First Investors Corporation 95 Wall Street, 22nd Floor, New York, New York 10005 250
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 250
Unit Investment Trust Department 10292
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 100
23219
3,105
</TABLE>
<PAGE>
60 Underwriting
<TABLE>
<CAPTION>
OHIO
IM-IT
INTERMEDIATE
LADDERED
MATURITY TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,900
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 250
Unit Investment Trust Department 10292
McDonald & Company Securities, Inc. 2100 Society Building, Cleveland, Ohio 44114 150
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Fidelity Capital Markets 161 Devonshire Street D4, Boston, Massachusetts 02110 100
A Division of National Financial
Services
Corporation
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 100
The Ohio Company 155 East Broad Street, Columbus, Ohio 43215 100
Smith Barney Shearson 2 World Trade Center, 101st Floor, New York, New York 10048 100
3,000
</TABLE>
<TABLE>
<CAPTION>
TENNESSEE
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,290
Morgan Keegan & Co., Inc. 50 North Front Street, Memphis, Tennessee 38103 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Smith Barney Shearson 2 World Trade Center, 101st Floor, New York, New York 10048 100
3,040
</TABLE>
<TABLE>
<CAPTION>
NORTH CAROLINA
QUALITY TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,552
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 100
23219
3,052
</TABLE>
Units may also be sold to broker-dealers and others at prices
representing the per Unit concession or agency commission stated under "Trust
Administration--General--Unit Distribution". However, resales of Units by such
broker-dealers and others to the public will be made at the Public Offering
Price described in the Prospectus. The Sponsor reserves the right to reject,
in whole or in part, any order for the purchase of Units and the right to
change the amount of the concession or agency commission from time to time.
In addition to any other benefits the Underwriters may realize from the
sale of the Units of the Fund, the Agreement Among Underwriters provides that
the Sponsor will share on a pro rata basis among those Underwriters who
underwrite at least 250 Units 50% of the aggregate gain, if any, represented
by the difference between the Sponsor's cost of the Securities in connection
with their acquisition and the evaluation thereof on the Date of Deposit
<PAGE>
Underwriting 61
less deductions for certain accrued interest and certain other costs. See
"Trust Administration--General--Sponsor and Underwriter Compensation" and
"Portfolio" for the applicable Trust.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by
the Sponsor, or participate in sales programs sponsored by the Sponsor, an
amount not exceeding the total applicable sales charges on the sales generated
by such persons at the public offering price during such programs. Also, the
Sponsor in its discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying underwriters, brokers,
dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trusts. These programs will not change the price Unitholders pay for their
Units or the amount that the Trusts will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to Underwriters that sell units of trusts it sponsors. The Sponsor
pays substantially all costs associated with the seminar, excluding
Underwriter travel costs. Each Underwriter is invited to send a certain number
of representatives based on the gross number of units such firm underwrites
during a designated time period.
<PAGE>
62 Trust Administration
FUND ADMINISTRATION AND EXPENSES
SPONSOR. Van Kampen Merritt Inc., a Delaware corporation, is the Sponsor
of the Trust. Van Kampen Merritt Inc. is primarily owned by Clayton, Dubilier
& Rice, Inc., a New York-based private investment firm. Van Kampen Merritt
Inc. management owns a significant minority equity position. Van Kampen
Merritt Inc. specializes in the underwriting and distribution of unit
investment trusts and mutual funds. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has its principal office at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000. It maintains
a branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
September 30, 1993 the total stockholders' equity of Van Kampen Merritt Inc.
was $200,885,000 (unaudited). (This paragraph relates only to the Sponsor and
not to the Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust or to any Multi-Series thereof or to any other Underwriter. The
information is included herein only for the purpose of informing investors as
to the financial responsibility of the Sponsor and its ability to carry out
its contractual obligations. More detailed financial information will be made
available by the Sponsor upon request.)
As of November 30, 1993, the Sponsor and its affiliates managed or
supervised approximately $38.5 billion of investment products, of which over
$25 billion is invested in municipal securities. The Sponsor and its
affiliates managed $23 billion of assets, consisting of $8.2 billion for 19
open end mutual funds, $8.3 billion for 33 closed-end funds and $6.5 billion
for 51 institutional accounts. The Sponsor has also deposited approximately
$23.5 billion of unit investment trusts. Based on cumulative assets deposited,
the Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipal
Income Trust(R) or the IM-IT(R) trust. The Sponsor also provides surveillance
and evaluation services at cost for approximately $15.5 billion of unit
investment trust assets outstanding. Since 1976, the Sponsor has serviced over
one million retail investor accounts, opened through retail distribution
firms. Van Kampen Merritt Inc. is the sponsor of the various series of the
trusts listed below and the distributor of the mutual funds and closed-end
funds listed below. Unitholders may only invest in the trusts, mutual funds
and closed-end funds which are registered for sale in the state of residence
of such Unitholder. In order for a Unitholder to invest in the trusts, mutual
funds and closed-end funds listed below, such Unitholder must obtain a
prospectus relating to the trust or fund involved. A prospectus is the only
means by which an offer can be delivered to investors.
<TABLE>
<CAPTION>
NAME OF TRUST TRUST INVESTMENT OBJECTIVE
<S> <C>
Insured Municipals Income Trust................ Tax-exempt income by investing in insured municipal securities
California Insured Municipals Income Trust..... Double tax-exemption for California residents by investing in insured
California municipal securities
New York Insured Municipals Income Trust....... Double and in certain cases triple tax-exemption for New York residents
by investing in insured New York municipal securities
Pennsylvania Insured Municipals Income Trust... Double and in certain cases triple tax-exemption for Pennsylvania
residents by investing in insured Pennsylvania municipal securities
Insured Municipals Income Trust, Insured Tax-exempt income by investing in insured municipal securities; all
Multi-Series................................. issuers of bonds in a state trust are located in such state or in
(Premium Bond Series, National, Limited territories or possessions of the United States-- providing
Maturity, Intermediate, Short Intermediate, exemptions from all state income tax for residents of such state
Discount, Alabama, Arizona, California, (except for the Oklahoma IM-IT Trust where a portion of the income of
California Intermediate, California the Trust is subject to the Oklahoma state income tax)
Intermediate Laddered Maturity, California
Premium, Colorado, Connecticut, Florida,
Florida Intermediate, Florida Intermediate
Laddered Maturity, Georgia, Louisiana,
Massachusetts, Massachusetts Premium,
Michigan, Michigan Intermediate, Michigan
Intermediate Laddered Maturity, Michigan
Premium, Minnesota, Missouri, Missouri Inter-
mediate Laddered Maturity, Missouri Premium,
New Jersey, New Jersey Intermediate Laddered
Maturity, New Mexico, New York, New York
Intermediate, New York Intermediate Laddered
Maturity, New York Limited Maturity, Ohio,
Ohio Intermediate, Ohio IM-IT Intermediate
Laddered Maturity, Ohio Premium, Oklahoma,
Pennsylvania, Pennsylvania Intermediate,
Pennsylvania Intermediate Laddered Maturity,
Pennsylvania Premium, Tennessee, Texas,
Washington, West Virginia)
Insured Tax Free Bond Trust.................... Tax-exempt income by investing in insured municipal securities
Insured Tax Free Bond Trust, Insured Tax-exempt income by investing in insured municipal securities; all
Multi-Series................................. issuers of bonds in a state trust are located in such state--providing
(National, Limited Maturity, New York) exemptions from state income tax for residents of such state
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Trust Administration 63
<S> <C>
NAME OF TRUST TRUST INVESTMENT OBJECTIVE (Continued)
Investors' Quality Tax-Exempt Trust............ Tax-exempt income by investing in municipal securities
Investors' Quality Tax-Exempt Trust, Tax-exempt income by investing in municipal securities; all issuers of
Multi-Series................................. bonds in a state trust are located in such state or in territories or
(National, National AMT, Intermediate, possessions of the United States--providing exemptions from state
Alabama, Arizona, Arkansas, California, income tax for residents of such state
Colorado, Connecticut, Delaware, Florida,
Georgia, Kansas, Kentucky, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Missouri,
Nebraska, New Jersey, New York, North
Carolina, Ohio, Oregon, Pennsylvania, South
Carolina, Virginia)
Investors' Quality Municipals Trust, AMT Tax-exempt income for investors not subject to the alternative minimum
Series....................................... tax by investing in municipal securities, some or all of which are
subject to the Federal alternative minimum tax
Investors' Corporate Income Trust.............. Taxable income by investing in corporate bonds
Investors' Governmental Securities--Income Taxable income by investing in government-backed GNMA securities
Trust........................................
Van Kampen Merritt International Bond Income High current income through an investment in a diversified portfolio of
Trust........................................ foreign currency denominated corporate debt obligations
Van Kampen Merritt Insured Income Trust........ High current income consistent with preservation of capital through a
diversified investment in a fixed portfolio of insured, long-term or
intermediate-term corporate debt securities
Van Kampen Merritt Utility Income Trust........ High dividend income and capital appreciation by investing in common
stock of electric utilities
Van Kampen Merritt Blue Chip Opportunity Provide the potential for capital appreciation and income by investing
Trust........................................ in a portfolio of actively traded, New York Stock Exchange listed
equity securities which are components of the Dow Jones Industrial
Average*
Van Kampen Merritt Blue Chip Opportunity and Protect Unitholders' capital and provide the potential for capital
Treasury Trust............................... appreciation and income by investing a portion of its portfolio in
"zero coupon" U.S. Treasury obligations and the remainder of the
trust's portfolio in actively traded, New York Stock Exchange listed
equity securities which at the time of the creation of the trust were
components of the Dow Jones Industrial Average*
Van Kampen Merritt Emerging Markets Income High current income consistent with preservation of capital through a
Trust........................................ diversified investment in a fixed portfolio primarily consisting of
Brady Bonds of emerging market countries that have restructured
sovereign debt pursuant to the framework of the Brady Plan
Van Kampen Merritt Global Telecommunications Provide the potential for capital appreciation and income consistent
Trust........................................ with the preservation of invested capital, by investing in a portfolio
of equity securities which provide equipment for or services to the
telecommunications industry
Van Kampen Merritt Global Energy Trust......... Provide the potential for capital appreciation and income consistent
with the preservation of invested capital, by investing in a portfolio
of equity securities diversified within the energy industry
</TABLE>
<TABLE>
<CAPTION>
NAME OF MUTUAL FUND FUND INVESTMENT OBJECTIVE
<S> <C>
Van Kampen Merritt U.S. Government Fund........ High current income by investing in U.S. Government securities
Van Kampen Merritt Insured Tax Free Income High current income exempt from Federal income taxes by investing in
Fund.......................................... insured municipal securities
Van Kampen Merritt Municipal Income Fund....... High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt Tax Free High Income Fund... High current income exempt from Federal income taxes by investing in
medium and lower grade municipal securities
Van Kampen Merritt California Insured Tax Free High current income exempt from Federal and California income taxes by
Fund.......................................... investing in insured California municipal securities
Van Kampen Merritt High Yield Fund............. Provide a high level of current income by investing in medium and lower
grade domestic and foreign government and corporate debt securities.
The Fund will seek capital appreciation as a secondary objective
Van Kampen Merritt Growth and Income Fund...... Long-term growth of both capital and dividend income by investing in
dividend paying common stocks
Van Kampen Merritt Pennsylvania Tax Free Income High current income exempt from Federal and Pennsylvania state and
Fund.......................................... local income taxes by investing in medium and lower grade Pennsylvania
municipal securities
Van Kampen Merritt Money Market Fund........... High current income by investing in a broad range of money market
instruments that will mature within twelve months
Van Kampen Merritt Tax Free Money Fund......... High current income exempt from Federal income taxes by investing in a
broad range of municipal securities that will mature within twelve
months
Van Kampen Merritt Short-Term Global Income High current income by investing in a global portfolio of high quality
Fund.......................................... debt securities denominated in various currencies having remaining
maturities of not more than three years
Van Kampen Merritt Adjustable Rate U.S. High level of current income with a relatively stable net asset value
Government Fund............................... investing in U.S. Government securities
Van Kampen Merritt Limited Term Municipal High level of current income exempt from federal income tax, consistent
Income Fund................................... with preservation of capital
</TABLE>
* The Dow Jones Industrial Average is the property of Dow Jones & Company,
Inc. Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
<PAGE>
64 Trust Administration
<TABLE>
<CAPTION>
NAME OF CLOSED-END FUND FUND INVESTMENT OBJECTIVE
<S> <C>
Van Kampen Merritt Municipal Income Trust...... High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment grade
municipal securities
Van Kampen Merritt California Municipal High current income exempt from Federal and California income taxes
Trust......................................... with safety of principal by investing in a diversified portfolio of
investment grade California municipal securities
Van Kampen Merritt Intermediate Term High High current income while seeking to preserve shareholders' capital by
Income Trust.................................. investing in a diversified portfolio of high yield fixed income
securities
Van Kampen Merritt Limited Term High Income High current income while seeking to preserve shareholders' capital by
Trust......................................... investing in a diversified portfolio of high yield fixed income
securities
Van Kampen Merritt Prime Rate Income Trust..... High current income, consistent with preservation of capital by
investing in interests in floating or variable rate senior loans
Van Kampen Merritt Investment Grade Municipal High current income exempt from Federal income tax, consistent with
Trust......................................... preservation of capital
Van Kampen Merritt Municipal Trust............. High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt California Quality Municipal High current income exempt from Federal and California income taxes
Trust......................................... with safety of principal by investing in a diversified portfolio of
investment grade California municipal securities
Van Kampen Merritt Florida Quality Municipal High current income exempt from Federal income taxes and Florida
Trust......................................... intangible personal property taxes with safety of principal by
investing in a diversified portfolio of investment grade Florida
municipal securities
Van Kampen Merritt New York Quality Municipal High current income exempt from Federal as well as New York State and
Trust......................................... New York City income taxes with safety of principal by investing in a
diversified portfolio of investment grade New York municipal
securities
Van Kampen Merritt Ohio Quality Municipal High current income exempt from Federal and Ohio income taxes with
Trust......................................... safety of principal by investing in a diversified portfolio of
investment grade Ohio municipal securities
Van Kampen Merritt Pennsylvania Quality High current income exempt from Federal and Pennsylvania income taxes
Municipal Trust............................... with safety of principal by investing in a diversified portfolio of
investment grade Pennsylvania municipal securities
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal income tax, consistent
Municipals.................................... with preservation of capital
Van Kampen Merritt Trust for Insured High level of current income exempt from Federal income tax, consistent
Municipals.................................... with preservation of capital by investing in a diversified portfolio of
municipal securities which are covered by insurance with respect to
timely payment of principal and interest
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal and California income
CA Municipals................................. taxes, consistent with preservation of capital by investing in a
diversified portfolio of California municipal securities
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal income taxes,
FL Municipals................................. consistent with preservation of capital. The Fund also seeks to offer
its Shareholders the opportunity to own securities exempt from Florida
intangible personal property taxes
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal income taxes and New
NJ Municipals................................. Jersey gross income taxes, consistent with preservation of capital
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal as well as from New
NY Municipals................................. York State and New York City income taxes, consistent with
preservation of capital
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal and Pennsylvania
PA Municipals................................. income taxes and, where possible under local law, local income and
property taxes, consistent with preservation of capital
Van Kampen Merritt Municipal Opportunity High level of current income exempt from Federal income tax, consistent
Trust......................................... with preservation of capital by investing in a diversified portfolio of
municipal securities
Van Kampen Merritt Advantage Municipal Income High level of current income exempt from Federal income tax, consistent
Trust......................................... with preservation of capital by investing in a diversified portfolio of
municipal securities
Van Kampen Merritt Advantage Pennsylvania High level of current income exempt from Federal and Pennsylvania
Municipal Income Trust........................ income taxes and, where possible under local law, local income and
property taxes, consistent with preservation of capital
Van Kampen Merritt Strategic Sector Municipal Provide common shareholders with a high level of current income exempt
Trust......................................... from Federal income taxes, consistent with preservation of capital
Van Kampen Merritt Value Municipal Income High level of current income exempt from Federal income taxes,
Trust......................................... consistent with preservation of capital
Van Kampen Merritt California Value Municipal High level of current income exempt from Federal and California income
Income Trust.................................. taxes, consistent with preservation of capital
Van Kampen Merritt Massachusetts Value High level of current income exempt from Federal income taxes and
Municipal Income Trust........................ Massachusetts personal income taxes, consistent with preservation of
capital
Van Kampen Merritt New Jersey Value Municipal High level of current income exempt from Federal income taxes and New
Income Trust.................................. Jersey gross income tax, consistent with preservation of capital
Van Kampen Merritt New York Value Municipal High level of current income exempt from Federal as well as New York
Income Trust.................................. State and New York City income taxes, consistent with preservation of
capital
Van Kampen Merritt Ohio Value Municipal Income High level of current income exempt from Federal and Ohio income taxes,
Trust......................................... consistent with preservation of capital
Van Kampen Merritt Pennsylvania Value Municipal High level of current income exempt from Federal and Pennsylvania
Income Trust.................................. income taxes, consistent with preservation of capital
Van Kampen Merritt Municipal Opportunity Trust High level of current income exempt from federal income tax, consistent
II............................................ with preservation of capital
Van Kampen Merritt Florida Municipal High level of current income exempt from federal income tax, consistent
Opportunity Trust............................. with preservation of capital. The Fund seeks to offer its common
shareholders the opportunity to own securities exempt from Florida
intangible personal property taxes
Van Kampen Merritt Advantage Municipal Income Provide common shareholders with a high level of current income exempt
Trust II...................................... from federal income tax, consistent with preservation of capital
Van Kampen Merritt Select Sector Municipal To provide common shareholders with a high level of current income
Trust......................................... exempt from federal income tax, consistent with preservation of capital
</TABLE>
<PAGE>
Trust Administration 65
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and
not exceeding amounts prescribed by the Securities and Exchange Commission,
(ii) terminate the Trust Agreement and liquidate the Fund as provided therein
or (iii) continue to act as Trustee without terminating the Trust Agreement.
All costs and expenses incurred in creating and establishing the Fund,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses,
advertising and selling expenses, expenses of the Trustee, initial evaluation
fees and other out-of-pocket expenses have been borne by the Sponsor at no
cost to the Fund.
COMPENSATION OF SPONSOR AND EVALUATOR. The Sponsor will not receive any
fees in connection with its activities relating to the Fund. However, American
Portfolio Evaluation Services, a division of Van Kampen Merritt Investment
Advisory Corp., which is a wholly-owned subsidiary corporation of the Sponsor,
will receive an annual supervisory fee as indicated under "Summary of
Essential Financial Information" for providing portfolio supervisory services
for the Fund. Such fee (which is based on the number of Units outstanding in
each Trust on January 1 of each year) may exceed the actual costs of providing
such supervisory services for this Fund, but at no time will the total amount
received for portfolio supervisory services rendered to Insured Municipals
Income Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 1 and
subsequent series and to any other unit investment trusts sponsored by the
Sponsor for which the Evaluator provides portfolio supervisory services in any
calendar year exceed the aggregate cost to the Evaluator of supplying such
services in such year. In addition, the Evaluator shall receive an annual
evaluation fee as indicated under "Summary of Essential Financial Information"
for regularly evaluating each Trust's portfolio. Both of the foregoing fees
may be increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index published by the United States Department of Labor
or, if such category is no longer published, in a comparable category. The
Sponsor and the Underwriters will receive sales commissions and may realize
other profits (or losses) in connection with the sale of Units and the deposit
of the Securities as described under "General--Sponsor and Underwriter
Compensation" below.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its offices at 101
Barclay Street, New York, New York 10286 (800) 221-7668. The Bank of New York
is subject to supervision and examination by the Superintendent of Banks of
the State of New York and the Board of Governors of the Federal Reserve
System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper
books of record and account of all transactions at its office for the Fund.
Such records shall include the name and address of, and the certificates
issued by the Fund to, every Unitholder of the Fund. Such books and records
shall be open to inspection by any Unitholder at all reasonable times during
the usual business hours. The Trustee shall make such annual or other reports
as may from time to time be required under any applicable state or Federal
statute, rule or regulation (see "Unitholder Explanations--Public
Offering--Reports Provided"). The Trustee is required to keep a certified copy
or duplicate original of the Trust Agreement on file in its office available
for inspection at all reasonable times during the usual business hours by any
Unitholder, together with a current list of the Securities held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may
resign and be discharged of the trusts created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Fund Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of
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66 Trust Administration
the original trustee shall vest in the successor. The resignation or removal
of a Trustee becomes effective only when the successor trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which a Trustee shall be a party, shall be the successor trustee. The
Trustee must be a banking corporation organized under the laws of the United
States or any state and having at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
TRUSTEE'S FEE. For its services the Trustee will receive a fee based on
the aggregate outstanding principal amount of Securities in each Trust as of
the opening of business on January 2 and July 2 of each year as set forth
under "Per Unit Information" for the applicable Trust. During the first year
the Trustee may agree to reduce its fee (and to the extent necessary pay
miscellaneous expenses of a Trust) as stated under "Per Unit Information" for
the applicable Trust. The Trustee's fees are payable monthly on or before the
fifteenth day of each month from the Interest Account of each Trust to the
extent funds are available and then from the Principal Account of each Trust,
with such payments being based on each Trust's portion of such expenses. Since
the Trustee has the use of the funds being held in the Principal and Interest
Accounts for future distributions, payment of expenses and redemptions and
since such Accounts are non-interest bearing to Unitholders, the Trustee
benefits thereby. Part of the Trustee's compensation for its services to each
Trust is expected to result from the use of these funds. Such fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index published by the United States Department of Labor
or, if such category is no longer published, in a comparable category. The
Trustee's fees will not be increased in future years in order to make up any
reduction in the Trustee's fees described under "Per Unit Information" for the
applicable Trust. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Unitholder
Explanations--Public Offering--Reports Provided" and "Trustee" above.
PORTFOLIO ADMINISTRATION. The Trustee is empowered to sell, for the
purpose of redeeming Units tendered by any Unitholder, and for the payment of
expenses for which funds may not be available, such of the Bonds designated by
the Evaluator as the Trustee in its sole discretion may deem necessary. The
Evaluator, in designating such Securities, will consider a variety of factors,
including (a) interest rates, (b) market value and (c) marketability. The
Sponsor, in connection with the Quality Trusts, may direct the Trustee to
dispose of Securities upon default in payment of principal or interest,
institution of certain legal proceedings, default under other documents
adversely affecting debt service, default in payment of principal or interest
on other obligations of the same issuer, decline in projected income pledged
for debt service on revenue bonds or decline in price or the occurrence of
other market or credit factors, including advance refunding (i.e., the
issuance of refunding securities and the deposit of the proceeds thereof in
trust or escrow to retire the refunded securities on their respective
redemption dates), so that in the opinion of the Sponsor the retention of such
Securities would be detrimental to the interest of the Unitholders. In
connection with the Insured Trusts to the extent that Bonds are sold which are
current in payment of principal and interest in order to meet redemption
requests and defaulted Bonds are retained in the portfolio in order to
preserve the related insurance protection applicable to said Bonds, the
overall quality of the Bonds remaining in such Trust's portfolio will tend to
diminish. Except as described in this section and in certain other unusual
circumstances for which it is determined by the Trustee to be in the best
interests of the Unitholders or if there is no alternative, the Trustee is not
empowered to sell Bonds from an Insured Trust which are in default in payment
of principal or interest or in significant risk of such default and for which
value has been attributed for the insurance obtained by such Insured Trust.
Because of such restrictions on the Trustee under certain circumstances, the
Sponsor may seek a full or partial suspension of the right of Unitholders to
redeem their Units in an Insured Trust. See "Unitholder Explanations--Public
Offering-- Redemption of Units". The Sponsor is empowered, but not obligated,
to direct the Trustee to dispose of Bonds in the event of an advanced
refunding.
The Sponsor is required to instruct the Trustee to reject any offer made
by an issuer of any of the Securities to issue new obligations in exchange or
substitution for any Security pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the Sponsor may deem
proper if (1) the issuer is in default with respect to such Security or (2) in
the written opinion of the Sponsor the issuer will probably default with
respect to such Security in the reasonably foreseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and
<PAGE>
Trust Administration 67
conditions of the Trust Agreement to the same extent as Securities originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Securities, the Trustee is required to
give notice thereof to each Unitholder of the Trust thereby affected,
identifying the Securities eliminated and the Securities substituted therefor.
Except as stated herein and under "Unitholder Explanations--Settlement of
Bonds in the Trusts" regarding the substitution of Replacement Bonds for
Failed Bonds, the acquisition by the Fund of any securities other than the
Securities initially deposited is not permitted.
If any default in the payment of principal or interest on any Security
occurs and no provision for payment is made therefor within 30 days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails to
instruct the Trustee to sell or to hold such Security within 30 days after
notification by the Trustee to the Sponsor of such default, the Trustee may in
its discretion sell the defaulted Security and not be liable for any
depreciation or loss thereby incurred.
SPONSOR PURCHASES OF UNITS. The Trustee shall notify the Sponsor of any
tender of Units for redemption. If the Sponsor's bid in the secondary market
at that time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord
with the Public Offering Price described in the then currently effective
prospectus describing such Units. Any profit resulting from the resale of such
Units will belong to the Sponsor which likewise will bear any loss resulting
from a lower offering or Redemption Price subsequent to its acquisition of
such Units.
INSURANCE PREMIUMS. The cost of the portfolio insurance obtained by the
respective Trusts, if any, is that amount shown in footnote (5) in "Notes to
Portfolios", so long as such Trust retains the Bonds. Premiums, which are
obligations of each Insured Trust, are payable monthly by the Trustee on
behalf of the respective Trust. As Bonds in the portfolio of an Insured Trust
are redeemed by their respective issuers or are sold by the Trustee, the
amount of the premium will be reduced in respect of those Bonds no longer
owned by and held in such Trust. If the Trustee exercises the right to obtain
permanent insurance, the premiums payable for such permanent insurance will be
paid solely from the proceeds of the sale of the related Bonds. The premiums
for such permanent insurance with respect to each Bond will decline over the
life of the Bond. A Trust does not incur any expense for Preinsured Bond
insurance, since the premium or premiums for such insurance have been paid by
the issuer or the Sponsor prior to the deposit of such Preinsured Bonds in a
Trust. Preinsured Bonds are not additionally insured by an Insured Trust.
MISCELLANEOUS EXPENSES. The following additional charges are or may be
incurred by the Trusts: (a) fees of the Trustee for extraordinary services,
(b) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trusts
and the rights and interests of Unitholders, (e) indemnification of the
Trustee for any loss, liability or expenses incurred by it in the
administration of the Fund without negligence, bad faith or willful misconduct
on its part, (f) any special custodial fees payable in connection with the
sale of any of the Bonds in a Trust and (g) expenditures incurred in
contacting Unitholders upon termination of the Trusts.
The fees and expenses set forth herein are payable out of the Trusts.
When such fees and expenses are paid by or owing to the Trustee, they are
secured by a lien on the portfolio or portfolios of the applicable Trust or
Trusts. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by the Fund, the Trustee has the
power to sell Securities to pay such amounts.
GENERAL
AMENDMENT OR TERMINATION. The Sponsor and the Trustee have the power to
amend the Trust Agreement without the consent of any of the Unitholders when
such an amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein or (b) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee), provided that the Trust Agreement
may not be amended to increase the number of Units issuable thereunder or to
permit the deposit or acquisition of securities either in addition to or in
substitution for any of the Securities initially deposited in the Fund, except
for the substitution of certain
<PAGE>
68 Trust Administration
refunding securities for such Securities. In the event of any amendment, the
Trustee is obligated to notify promptly all Unitholders of the substance of
such amendment.
A Trust may be terminated at any time by consent of Unitholders of 51% of
the Units of such Trust then outstanding or by the Trustee when the value of
such Trust, as shown by any semi-annual evaluation, is less than that
indicated under "Summary of Essential Financial Information". A Trust will be
liquidated by the Trustee in the event that a sufficient number of Units not
yet sold are tendered for redemption by the Underwriters, including the
Sponsor, so that the net worth of such Trust would be reduced to less than 40%
of the initial principal amount of such Trust. If a Trust is liquidated
because of the redemption of unsold Units by the Underwriters, the Sponsor
will refund to each purchaser of Units the entire sales charge paid by such
purchaser. The Trust Agreement provides that each Trust shall terminate upon
the redemption, sale or other disposition of the last Security held in such
Trust, but in no event shall it continue beyond the end of the year preceding
the fiftieth anniversary of the Trust Agreement in the case of an IM-IT or a
State Trust (other than a State Intermediate Laddered Maturity Trust), or
beyond the end of the year preceding the twentieth anniversary of the Trust
Agreement in the case of an IM-IT Limited Maturity, IM-IT Intermediate, State
Intermediate Laddered Maturity and IM-IT Short Intermediate Trust. In the
event of termination of the Fund or any Trust, written notice thereof will be
sent by the Trustee to each Unitholder of such Trust at his address appearing
on the registration books of the Fund maintained by the Trustee. Within a
reasonable time thereafter the Trustee shall liquidate any Securities then
held in such Trust and shall deduct from the funds of such Trust any accrued
costs, expenses or indemnities provided by the Trust Agreement, including
estimated compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to provide for payment of any applicable taxes or other
governmental charges. The sale of Securities in the Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were
not required at such time. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the principal amount of
Securities represented by the Units held by such Unitholder. The Trustee shall
then distribute to each Unitholder his share of the balance of the Interest
and Principal Accounts. With such distribution the Unitholder shall be
furnished a final distribution statement of the amount distributable. At such
time as the Trustee in its sole discretion shall determine that any amounts
held in reserve are no longer necessary, it shall make distribution thereof to
Unitholders in the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so
insured are held by such Trust, the price to be received by such Trust upon
the disposition of any such Bond which is in default, by reason of nonpayment
of principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for
the Trustee to, and the Trustee does not currently intend to, dispose of any
Bond or Bonds if retention of such Bond or Bonds, until due, shall be deemed
to be in the best interest of Unitholders, including, but not limited to,
situations in which a Bond or Bonds so insured are in default and situations
in which a Bond or Bonds so insured have deteriorated market prices resulting
from a significant risk of default. Since the Preinsured Bonds will reflect
the value of the related insurance, it is the present intention of the Sponsor
not to direct the Trustee to hold any of such Preinsured Bonds after the date
of termination. All proceeds received, less applicable expenses, from
insurance on defaulted Bonds not disposed of at the date of termination will
ultimately be distributed to Unitholders of record as of such date of
termination as soon as practicable after the date such defaulted Bond or Bonds
become due and applicable insurance proceeds have been received by the
Trustee.
LIMITATION ON LIABILITIES. The Sponsor, the Evaluator and the Trustee
shall be under no liability to Unitholders for taking any action or for
refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and
duties hereunder. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Securities. In the
event of the failure of the Sponsor to act under the Trust Agreement, the
Trustee may act thereunder and shall not be liable for any action taken by it
in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon or upon it as Trustee under the Trust Agreement or upon or in respect
of the Fund which the Trustee may be required to pay under any present or
future law of the United States of America or of
<PAGE>
Trust Administration 69
any other taxing authority having jurisdiction. In addition, the Trust
Agreement contains other customary provisions limiting the liability of the
Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering Price, plus Purchased Interest, plus
interest accrued but unpaid from the First Settlement Date to the date of
settlement as described above under "Unitholder Explanations--Purchased and
Accrued Interest--Accrued Interest." Upon the completion of the initial
offering, Units repurchased in the secondary market, if any, may be offered by
this Prospectus at the secondary Public Offering Price, plus Purchased
Interest plus interest accrued to the date of settlement in the manner
described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of $20.00 per Unit for less than 100 Units, $22.00 per Unit for any single
transaction of 100 to 249 Units, $21.50 per Unit for any single transaction of
250 to 499 Units, $24.50 per Unit for any single transaction of 500 to 999
Units and $24.00 per Unit for any single transaction of 1,000 or more Units of
a State Intermediate Laddered Maturity Trust, and in the case of a State Trust
(other than a State Intermediate Laddered Maturity Trust), $30.00 per Unit for
less than 100 Units, $36.00 per Unit for any single transaction of 100 to 249
Units, $38.00 per Unit for any single transaction of 250 to 499 Units, $39.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units, provided that such Units
are acquired either from the Sponsor (in the case of dealer transactions) or
through the Sponsor (in the case of transactions involving brokers or others).
The increased concession or agency commission is a result of the discount
given to purchasers for quantity purchases. See "Unitholder
Explanations--Public Offering--General". Certain commercial banks are making
Units of the Fund available to their customers on an agency basis. A portion
of the sales charge paid by these customers (equal to the agency commission
referred to above) is retained by or remitted to the banks. Under the
Glass-Steagall Act, banks are prohibited from underwriting Units of the Fund;
however, the Glass-Steagall Act does permit certain agency transactions and
the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. Any quantity discount (see
"Unitholder Explanations--Public Offering--General") provided to investors
will be borne by the selling dealer or agent. For secondary market
transactions, such concession or agency commission will amount to 70% of the
applicable sales charge as determined using the table found in "Unitholder
Explanations-- Public Offering".
To facilitate the handling of transactions during the initial offering
period, sales of Units shall normally be limited to transactions involving a
minimum of five Units. Further purchases may be made in multiples of one Unit.
The minimum purchase in the secondary market will be one Unit.
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units and to change the amount of the concession or agency
commission to dealers and others from time to time. See "Underwriting".
SPONSOR AND UNDERWRITER COMPENSATION. The Underwriters will receive a
gross sales commission equal to that percentage of the Public Offering Price
of the Units (excluding Purchased Interest) as indicated under "Unitholder
Explanations--Public Offering--Offering Price" less any reduced sales charges
for quantity purchases as described under "Unitholder Explanations--Public
Offering--General".
The Sponsor will receive from the Underwriters the excess of such gross
sales commission over $35.00, $29.00, $27.00, $22.00, $22.00 and $35.00 per
Unit of any Quality, IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short
Intermediate, State Intermediate Laddered Maturity and other Insured Trusts,
respectively, as of the Date of Deposit. In connection with quantity sales to
purchasers of any IM-IT, State Trust (other than a State Intermediate Laddered
Maturity Trust) or National Quality Trust the Underwriters will receive from
the Sponsor commissions totalling $37.00 per Unit for any single transaction
of 100 to 249 Units, $39.00 per Unit for any single transaction of
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70 Trust Administration
250 to 499 Units, $40.00 per Unit for any single transaction of 500 to 999
Units and $39.00 per Unit for any single transaction of 1,000 or more Units.
In connection with quantity sales to purchasers of any State Intermediate
Laddered Maturity Trust the Underwriters will receive from the Sponsor
commissions totalling $23.00 per Unit for any single transaction of 100 to 249
Units, $23.00 per Unit for any single transaction of 250 to 499 Units, $24.75
per Unit for any single transaction or 500 to 999 Units and $24.00 per Unit
for any single transaction of 1,000 or more Units. A. G. Edwards & Sons, Inc.
("Edwards"), which acts as a Managing Underwriter of Units of the various
series of the IM-IT, will receive from the Sponsor reimbursement for certain
costs and further compensation in the amount of $5.00 for each Unit of the
IM-IT it underwrites. Also, if The Principal/Eppler, Guerin & Turner, Inc.
commits (on the Date of Deposit) to underwrite a total of 4,000 or more Units
of this series of the IM-IT, any other series of the IM-IT and/or any series
of Texas Insured Municipals Income Trust during any calendar month, then The
Principal/Eppler, Guerin & Turner, Inc. will receive an additional $1.00 per
Unit for each of the Units of such Trust it commits to underwrite in said
month. See "Unitholder Explanations--Public Offering--General". The Sponsor
and First Investors Corporation ("First Investors") have entered into an
agreement under which First Investors will receive an additional $5.00 per
Unit in connection with a minimum commitment of 17.5% of the total Units of
the New York IM-IT Trust, provided that the New York IM-IT Trust does not
exceed 10,000 Units. If the New York IM-IT Trust exceeds 10,000 Units, First
Investors will receive an additional $5.00 per Unit if First Investors
underwrites the lesser of 3,000 Units or 20% of the New York IM-IT Trust. In
addition, the Sponsor has entered into agreements with Advest, Inc. ("Advest")
and Gruntal & Co., Inc. ("Gruntal") whereby Advest and Gruntal will receive an
additional $2.00 per Unit in connection with a minimum commitment of 1,500
Units of any New York IM-IT Trust. Also, the Sponsor will receive from the
Managing Underwriters of the New York IM-IT Trust (who underwrite 15% of the
Trust or 1,000 Units of the Trust, whichever is greater) the excess of such
gross sales commission over $38.00 per Unit of the Trust, as of the Date of
Deposit. Also, any such Managing Underwriter that sells a total of 25% or
1,500 Units, whichever is greater, of the New York IM-IT Trust will receive an
additional $2.00 per each such Unit. Further, each Underwriter who underwrites
1,000 or more Units in any Trust will receive additional compensation from the
Sponsor of $1.00 for each Unit it underwrites. In addition, the Sponsor and
certain of the Underwriters will realize a profit or the Sponsor will sustain
a loss, as the case may be, as a result of the difference between the price
paid for the Securities by the Sponsor and the cost of such Securities to a
Trust (which is based on the determination by Interactive Data Services, Inc.
of the aggregate offering price of the underlying Securities in such Trust on
the Date of Deposit). See "Underwriting" and "Portfolio" for the applicable
Trust and "Notes to Portfolios". The Sponsor and the Underwriters may also
realize profits or sustain losses with respect to Securities deposited in each
Trust which were acquired by the Sponsor from underwriting syndicates of which
they were members. The Sponsor has participated as sole underwriter or as
manager or as a member of the underwriting syndicates from which none of the
aggregate principal amount of the Securities in the portfolios of the Fund
were acquired. The Underwriters may further realize additional profit or loss
during the initial offering period as a result of the possible fluctuations in
the market value of the Securities in each Trust after the Date of Deposit,
since all proceeds received from purchasers of Units (excluding dealer
concessions or agency commissions allowed, if any) will be retained by the
Underwriters. Affiliates of an Underwriter are entitled to the same dealer
concessions or agency commissions that are available to the Underwriter.
As stated under "Unitholder Explanations--Public Offering--Market for
Units", the Sponsor intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units of the Fund. In so maintaining a
market, such person or persons will also realize profits or sustain losses in
the amount of any difference between the price at which Units are purchased
and the price at which Units are resold (which price is based on the bid
prices of the Securities in such Trust and includes a sales charge). In
addition, such person or persons will also realize profits or sustain losses
resulting from a redemption of such repurchased Units at a price above or
below the purchase price for such Units, respectively.
<PAGE>
Other Matters 71
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to Federal and Tennessee tax law have been passed upon by
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp & Farber has acted as counsel for the
Trustee and as special counsel to the Fund for New York tax matters. Hunton &
Williams has acted as special counsel to the Fund for North Carolina tax
matters. Squire, Sanders & Dempsey has acted as special counsel to the Fund
for Ohio tax matters. None of the special counsel for the Fund has expressed
any opinion regarding the completeness or materiality of any matters contained
in this Prospectus other than the tax opinion set forth under "Tax Status"
relating to the Trust for which it has provided an opinion.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statements of condition and
the related securities portfolios at the Date of Deposit included in this
Prospectus have been audited by Grant Thornton, independent certified public
accountants, as set forth in their report in this prospectus, and are included
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
(1) Each Trust is not an association taxable as a corporation for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status when
distributed to Unitholders, except to the extent such interest is
subject to the alternative minimum tax, an additional tax on branches
of foreign corporations and the environmental tax (the "Superfund
Tax"), as noted below;
(2) Each Unitholder is considered to be the owner of a pro rata portion
of the respective Trust under subpart E, subchapter J of chapter 1 of
the Code and will have a taxable event when such Trust disposes of a
Bond, or when the Unitholder redeems or sells his Units. Unitholders
must reduce the tax basis of their Units for their share of accrued
interest received by the respective Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on such Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the respective
Trust and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such
Units. Gain or loss upon the sale or redemption of Units is measured
by comparing the proceeds of such sale or redemption with the adjusted
basis of the Units. If the Trustee disposes of Bonds (whether by sale,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder. The amount of any such gain or loss is
measured by comparing the Unitholder's pro rata share of the total
proceeds from such disposition with the Unitholder's basis for his or
her fractional interest in the asset disposed of. In the case of a
Unitholder who purchases Units, such basis (before adjustment for
earned original issue discount and amortized bond premium, if any) is
determined by apportioning the cost of the Units among each of the
Trust assets ratably according to value as of the date of acquisition
of the Units. The tax cost 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 equal to his original cost;
(3) Any proceeds paid under an insurance policy or policies dated the
Date of Deposit, issued to an Insured Trust by AMBAC Indemnity,
Financial Guaranty or a combination thereof with respect to the Bonds
which represent maturing interest on defaulted obligations held by the
Trustee will be excludable from Federal gross income if, and to the
same extent as, such interest would have been so excludable if paid by
the issuer of the defaulted obligations; and
(4) Any proceeds paid under individual policies obtained by issuers of
Bonds which represent maturing interest on defaulted obligations held
by the Trustee will be excludable from Federal gross income if, and to
the same extent as, such interest would have been excludable if paid
in the normal course by the issuer of the defaulted obligations.
<PAGE>
72 Other Matters
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue
discount which would have previously accrued based upon its issue price (its
"adjusted issue price") to prior owners. The application of these rules will
also vary depending on the value of the Bond on the date a Unitholder acquires
his Units and the price the Unitholder pays for his Units. Investors with
questions regarding these Code sections should consult with their tax
advisers.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued). Market discount can
arise based on the price a Trust pays for Bonds or the price a Unitholder pays
for his or her Units. Under the Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been treated as
capital gain. Market discount that accretes while a Trust holds a Bond would
be recognized as ordinary income by the Unitholders when principal payments
are received on the Bond, upon sale or at redemption (including early
redemption), or upon the sale or redemption of his or her Units, unless a
Unitholder elects to include market discount in taxable income as it accrues.
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. Unitholders are urged to consult their tax advisers with
respect to the particular tax consequences to them including the corporate
alternative minimum tax, the Superfund Tax and the branch profits tax imposed
by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry
Units of a Trust is not deductible for Federal income tax purposes. The
Internal Revenue Service has taken the position that such indebtedness need
not be directly traceable to the purchase or carrying of Units (however, these
rules generally do not apply to interest paid on indebtedness incurred to
purchase or improve a personal residence). Also, under Section 265 of the
Code, certain financial institutions that acquire Units would generally not be
able to deduct any of the interest expense attributable to ownership of such
Units. Investors with questions regarding this issue should consult with their
tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user"
of the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or
related person, will not be excludible from Federal gross income, although
interest on such Bonds received by others would be excludible from Federal
gross income. "Substantial user" and "related person" are defined under U.S.
Treasury Regulations. Any person who believes that he or she may be a
"substantial user" or a "related person" as so defined should contact his or
her tax adviser.
In the opinion of Tanner Propp & Farber, special counsel to the Fund for
New York tax matters, under existing law, the Fund and each Trust are not
associations taxable as corporations and the income of each Trust will be
treated as the income of the Unitholders under the income tax laws of the
State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross
income for Federal, state or other tax purposes are the opinions of counsel
and are to be so construed.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal
gross income are rendered by bond counsel to the respective issuing
authorities.
<PAGE>
Other Matters 73
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains realized
in taxable years beginning on or after January 1, 1993. For taxpayers other
than corporations, net capital gains are subject to a maximum marginal stated
tax rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security benefits
received exceeds a "base amount". The base amount is $25,000 for unmarried
taxpayers, $32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the taxable year
and who file separate returns. Modified adjusted gross income is adjusted
gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible in
gross income to the extent that the sum of "modified adjusted gross income"
plus 50% of Social Security benefits received exceeds an "adjusted base
amount." The adjusted base amount is $34,000 for unmarried taxpayers, $44,000
for married taxpayers filing a joint return, and zero for married taxpayers
who do not live apart at all times during the taxable year and who file
separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from a Trust, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his Social Security benefits
in gross income whether or not he receives any tax-exempt interest. A taxpayer
whose modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security benefits
in gross income.
For a discussion of the state tax status of income earned on Units of a
Trust, see "Tax Status" for the applicable Trust. Except as noted therein, the
exemption of interest on state and local obligations for Federal income tax
purposes discussed above does not necessarily result in exemption under the
income or other tax laws of any State or City. The laws of the several States
vary with respect to the taxation of such obligations.
<PAGE>
74 Other Matters
DESCRIPTION OF SECURITIES RATINGS*
STANDARD & POOR'S CORPORATION. A Standard & Poor's Corporation
("Standard & Poor's") corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to
completion, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
With the occasional exception of oversupply in a few specific instances, the
safety of obligations of this class is so absolute that their market value is
affected solely by money market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
*As published by the rating companies.
<PAGE>
Other Matters 75
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.
<PAGE>
76 Other Matters
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Merritt Inc. and the Unitholders
of Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 216 (IM-IT, New York IM-IT, Ohio IM-IT Intermediate
Laddered Maturity, Tennessee IM-IT and North Carolina Quality Trusts):
We have audited the accompanying statements of condition and the
related portfolios of Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 216 (IM-IT, New York IM-IT, Ohio
IM-IT Intermediate Laddered Maturity, Tennessee IM-IT and North Carolina
Quality Trusts) as of March 10, 1994. The statements of condition and
portfolios are the responsibility of the Sponsor. Our responsibility is
to express an opinion on such financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of irrevocable letters of credit deposited to purchase
tax-exempt securities by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall
financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 216 (IM-IT, New York IM-IT, Ohio IM-IT Intermediate
Laddered Maturity, Tennessee IM-IT and North Carolina Quality Trusts) as
of March 10, 1994, in conformity with generally accepted accounting
principles.
Chicago, Illinois GRANT THORNTON
March 10, 1994
<PAGE>
Other Matters 77
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 216
STATEMENTS OF CONDITION
AS OF THE DATE OF DEPOSIT: MARCH 10, 1994
<CAPTION>
OHIO
IM-IT
INTERMEDIATE
NEW YORK LADDERED TENNESSEE NORTH CAROLINA
INVESTMENT IN SECURITIES IM-IT IM-IT TRUST MATURITY TRUST IM-IT TRUST QUALITY TRUST
<S> <C> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities
<F1><F2><F4>.............................. $ 7,560,717 $ 2,928,633 $ 2,954,669 $ 2,870,267 $ 2,876,468
Accrued interest to the First Settlement
Date <F1><F4>............................. 80,758 25,483 24,096 21,857 38,940
Total.............................. $ 7,641,475 $ 2,954,116 $ 2,978,765 $ 2,892,124 $ 2,915,408
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor
<F1><F4>................................ $ 6,008 $ -- $ 1,232 $ -- $ 11,599
Interest of Unitholders--
Cost to investors <F3>................ 8,025,000 3,105,000 3,068,910 3,040,000 3,052,000
Less: Gross underwriting commission <F3>.. 389,533 150,884 91,377 147,876 148,191
Net interest to Unitholders
<F1><F3><F4>..................... 7,635,467 2,954,116 2,977,533 2,892,124 2,903,809
Total.............................. $ 7,641,475 $ 2,954,116 $ 2,978,765 $ 2,892,124 $ 2,915,408
<FN>
<F1> The aggregate value of the Securities listed under "Portfolio" for each
Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Services, Inc. on the bases
set forth under "Unitholder Explanations--Public Offering--Offering
Price". The contracts to purchase tax-exempt Securities are
collateralized by irrevocable letters of credit which have been deposited
with the Trustee in and for the following amounts:
OFFERING ACCRUED
PRINCIPAL PRICE INTEREST TO
AMOUNT OF AMOUNT OF OF BONDS EXPECTED
LETTER OF BONDS UNDER UNDER DELIVERY
CREDIT CONTRACTS CONTRACTS DATES
IM-IT........................................... $ 7,643,666 $ 7,850,000 $ 7,560,717 $ 82,949
New York IM-IT Trust............................ $ 2,953,621 $ 3,050,000 $ 2,928,633 $ 24,988
Ohio IM-IT Intermediate
Laddered Maturity Trust........................ $ 2,976,865 $ 3,000,000 $ 2,954,669 $ 22,196
Tennessee IM-IT Trust........................... $ 2,889,651 $ 3,020,000 $ 2,870,267 $ 19,384
North Carolina Quality Trust.................... $ 2,913,306 $ 3,010,000 $ 2,876,468 $ 36,838
<F2> Insurance coverage providing for timely payment, when due, of all
principal and interest on the Bonds in the Insured Trusts has been
obtained either by such Trusts, by a prior owner of the Bonds or by the
issuers of the Bonds involved. Such insurance does not guarantee the
market value of the Bonds or the value of the Units. The insurance
obtained by the Insured Trusts is effective only while Bonds thus insured
are held in such Trusts. Neither the bid nor offering prices of the
underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of
such default, include value, if any, attributable to the insurance
obtained by such Trusts.
<F3> The aggregate public offering price (exclusive of interest) and the
aggregate sales charge are computed on the bases set forth under
"Unitholder Explanations--Public Offering--Offering Price" and "Trust
Administration--General-- Sponsor and Underwriter Profits" and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while
the Net interest to Unitholders remains unchanged.
<F4> Accrued interest on the underlying Securities represents the interest
accrued as of the First Settlement Date from the later of the last
payment date on the Securities or the date of issuance thereof. The
Trustee may advance to the Trust a portion of the accrued interest on the
underlying Securities for distribution to the Sponsor as the Unitholder
of record as of the First Settlement Date. A portion of the accrued
interest ("Purchased Interest") on the underlying Securities, as
indicated under "Summary of Essential Financial Information", is payable
by investors and is included in the Public Offering Price. Purchased
Interest is the difference between Accrued interest to the First
Settlement Date and Accrued interest payable to Sponsor.
</TABLE>
<PAGE>
78 Other Matters
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of this prospectus, the following tables show the
approximate taxable estimated current returns for individuals that are
equivalent to tax-exempt estimated current returns under combined Federal and
State taxes (where applicable) using the published Federal and State tax rates
(where applicable) scheduled to be in effect in 1994. They incorporate
increased tax rates for higher income taxpayers that were included in the
Revenue Reconciliation Act of 1993. These tables illustrate approximately what
you would have to earn on taxable investments to equal the tax-exempt
estimated current return in your income tax bracket. For cases in which more
than one State bracket falls within a Federal bracket, the highest State
bracket is combined with the Federal bracket. The combined State and Federal
tax rates shown reflect the fact that State tax payments are currently
deductible for Federal tax purposes. The tables do not show the approximate
taxable estimated current returns for individuals that are subject to the
alternative minimum tax. The taxable equivalent estimated current returns may
be somewhat higher than the equivalent returns indicated in the following
tables for those individuals who have adjusted gross incomes in excess of
$111,800. The tables do not reflect the effect of limitations on itemized
deductions and the deduction for personal exemptions. They were designed to
phase out certain benefits of these deductions for higher income taxpayers.
These limitations, in effect, raise the marginal maximum Federal tax rate to
approximately 44 percent for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 41 percent for taxpayers filing
a single return entitled to only one personal exemption. These limitations are
subject to certain maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions. See "Other
Matters--Federal Tax Status" for a more detailed discussion of recent Federal
tax legislation, including a discussion of provisions affecting corporations.
<TABLE>
IM-IT
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 15% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
22.80 - 55.10 38.00 - 91.90 28 6.94 7.64 8.33 9.03 9.72 10.42 11.11
55.10 - 115.00 91.90 - 140.00 31 7.25 7.97 8.70 9.42 10.14 10.87 11.59
115.00 - 250.00 140.00 - 250.00 36 7.81 8.59 9.38 10.16 10.94 11.72 12.50
Over 250.00 Over 250.00 39.6 8.28 9.11 9.93 10.76 11.59 12.42 13.25
</TABLE>
<TABLE>
NEW YORK
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET* 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 21.5% 5.73% 6.37% 7.01% 7.64% 8.28% 8.92% 9.55%
22.80 - 55.10 38.00 - 91.90 33.5 6.77 7.52 8.27 9.02 9.77 10.53 11.28
55.10 - 115.00 91.90 - 140.00 36.2 7.05 7.84 8.62 9.40 10.19 10.97 11.76
115.00 - 250.00 140.00 - 250.00 40.9 7.61 8.46 9.31 10.15 11.00 11.84 12.69
Over 250.00 Over 250.00 44.2 8.06 8.96 9.86 10.75 11.65 12.54 13.44
</TABLE>
*Combined Federal and State tax bracket was computed assuming that the
investor is not subject to local income taxes, such as New York City taxes.
Should a Unitholder reside in a locality which imposes an income tax, the
Unitholder's equivalent taxable estimated current return would be greater than
the equivalent taxable estimated current returns indicated in the table. The
table does not reflect the recent enactment of a New York State supplemental
income tax based upon a taxpayer's New York State taxable income and New York
State adjusted gross income. This supplemental tax results in an increased
marginal state income tax rate to the extent a taxpayer's New York State
adjusted gross income ranges between $100,000 and $150,000. In addition, the
table does not reflect the amendments to the New York State income tax law
that imposed limitations on the deductibility of itemized deductions. The
application of the New York State supplemental income tax and limitation on
itemized deductions may result in a higher combined Federal, State and local
tax rate than indicated in the table.
<PAGE>
Other Matters 79
<TABLE>
OHIO INTERMEDIATE LADDERED MATURITY
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET 4% 4 1/2% 5% 5 1/2% 6% 6 1/2% 7%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 18.8% 4.93% 5.54% 6.16% 6.77 7.39% 8.00% 8.62%
22.80 - 55.10 31.7 5.86 6.59 7.32 8.05 8.78 9.52 10.25
38.00 - 91.90 32.3 5.91 6.65 7.39 8.12 8.86 9.60 10.34
55.10 - 115.00 91.90 - 140.00 35.8 6.23 7.01 7.79 8.57 9.35 10.12 10.90
115.00 - 250.00 140.00 - 250.00 40.8 6.76 7.60 8.45 9.29 10.14 10.98 11.82
Over 250.00 Over 250.00 44.1 7.16 8.05 8.94 9.84 10.73 11.63 12.52
</TABLE>
<TABLE>
TENNESSEE
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 20.1% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39%
22.80 - 55.10 38.00 - 91.90 32.3 6.65 7.39 8.12 8.86 9.60 10.34 11.08
55.10 - 115.00 91.90 - 140.00 35.1 6.93 7.70 8.47 9.24 10.02 10.79 11.56
115.00 - 250.00 140.00 - 250.00 39.8 7.48 8.31 9.14 9.97 10.80 11.63 12.46
Over 250.00 Over 250.00 43.2 7.92 8.80 9.68 10.56 11.44 12.32 13.20
</TABLE>
<TABLE>
NORTH CAROLINA
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET* 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 21% 6.33% 6.96% 7.59% 8.23% 8.86% 9.49% 10.13%
22.80 - 55.10 38.00 - 91.90 33 7.46 8.21 8.96 9.70 10.45 11.19 11.94
55.10 - 115.00 91.90 - 140.00 36.4 7.86 8.65 9.43 10.22 11.01 11.79 12.58
115.00 - 250.00 140.00 - 250.00 41 8.47 9.32 10.17 11.02 11.86 12.71 13.56
Over 250.00 Over 250.00 44.3 8.98 9.87 10.77 11.67 12.57 13.46 14.36
</TABLE>
*Combined State and Federal tax bracket was computed giving no effect to the
North Carolina tax on intangible personal property. Units in the Trust are not
subject to such tax; therefore, equivalent taxable estimated current returns
would be greater than the equivalent taxable estimated current returns
indicated in the table when compared to obligations subject to the North
Carolina tax on intangible personal property.
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
Merritt sponsored unit investment trusts with returns on taxable investments
such as corporate or U.S. Government bonds, bank CDs and money market accounts
or money market funds, each of which has investment characteristics that may
differ from those of the Trusts. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank CDs and
money market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of principal,
but pay interest at rates that vary with the condition of the short-term debt
market. The investment characteristics of the Trusts are described more fully
elsewhere in this Prospectus.
<PAGE>
80 Other Matters
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated distributions of
interest, principal and rebates of Purchased Interest to Unitholders. The
tables assume no changes in expenses, no changes in the current interest
rates, no exchanges, redemptions, sales or prepayments of the underlying
Securities prior to maturity or expected retirement date and the receipt of
principal upon maturity or expected retirement date. To the extent the
foregoing assumptions change actual distributions will vary.
<TABLE>
IM-IT
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
April 1994 2.10 2.10
May 1994 - June 2004 4.51 4.51
July 2004 4.51 62.30 .62 67.43
August 2004 - June 2005 4.20 4.20
July 2005 4.20 124.61 1.25 130.06
August 2005 - December 2016 3.59 3.59
January 2017 3.59 124.61 1.19 129.39
February 2017 - June 2017 3.01 3.01
July 2017 3.01 37.38 .36 40.75
August 2017 - July 2020 2.83 2.83
August 2020 2.52 124.62 1.21 128.35
September 2020 - July 2022 2.24 2.24
August 2022 2.24 62.30 .60 65.14
September 2022 - May 2023 1.94 1.94
June 2023 1.67 124.61 1.04 127.32
July 2023 - June 2024 1.44 1.44
July 2024 1.44 93.46 .93 95.83
August 2024 .98 .98
September 2024 .73 99.69 .96 101.38
October 2024 - November 2025 .51 .51
December 2025 .21 124.61 1.15 125.97
</TABLE>
<PAGE>
Other Matters 81
<TABLE>
NEW YORK IM-IT TRUST
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
April 1994 $ 2.03 $ 2.03
May 1994 - June 2005 4.35 4.35
July 2005 3.91 $161.03 $ 1.51 166.45
August 2005 - October 2013 3.53 3.53
November 2013 3.53 161.03 1.42 165.98
December 2013 2.77 2.77
January 2014 2.77 128.82 1.03 132.62
February 2014 - June 2014 2.22 2.22
July 2014 2.22 16.10 18.32
August 2014 - December 2016 2.22 2.22
January 2017 2.22 32.21 .24 34.67
February 2017 - December 2017 2.09 2.09
January 2018 2.09 161.03 1.32 164.44
February 2018 - August 2020 1.38 1.38
September 2020 1.09 128.82 1.03 130.94
October 2020 - June 2021 .83 .83
July 2021 .83 32.21 .24 33.28
August 2021 - August 2022 .70 .70
September 2022 .30 161.03 1.42 162.75
</TABLE>
<PAGE>
82 Other Matters
<TABLE>
OHIO IM-IT INTERMEDIATE LADDERED MATURITY TRUST
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
April 1994 $ 1.70 $ 1.70
May 1994 - November 1999 3.64 3.64
December 1999 3.64 $200.00 $ 1.55 205.19
January 2000 2.88 200.00 1.58 204.46
February 2000 - February 2001 2.11 2.11
March 2001 1.88 111.66 .91 114.45
April 2001 - November 2001 1.67 1.67
December 2001 1.67 88.34 .39 90.40
January 2002 - April 2002 1.49 1.49
May 2002 1.49 200.00 1.62 203.11
June 2002 - June 2003 .70 .70
July 2003 .52 83.33 .69 84.54
August 2003 - September 2003 .36 .36
October 2003 .36 56.67 .42 57.45
November 2003 .15 .15
December 2003 .15 60.00 .46 60.61
</TABLE>
<PAGE>
Other Matters 83
<TABLE>
TENNESSEE IM-IT TRUST
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
April 1994 $ 1.97 $ 1.97
May 1994 - May 2004 4.22 4.22
June 2004 4.13 $ 32.89 $.27 37.29
July 2004 - June 2007 4.06 4.06
July 2007 4.06 82.24 .58 86.88
August 2007 - January 2014 3.71 3.71
February 2014 3.71 32.89 36.60
March 2014 - August 2015 3.71 3.71
September 2015 3.71 164.48 1.26 169.45
October 2015 - December 2015 2.96 2.96
January 2016 2.96 164.47 1.14 168.57
February 2016 - June 2016 2.28 2.28
July 2016 2.28 131.58 .94 134.80
August 2016 - June 2018 1.71 1.71
July 2018 1.71 164.47 1.32 167.50
August 2018 - December 2018 .94 .94
January 2019 .94 55.92 .40 57.26
February 2019 - February 2020 .70 .70
March 2020 .29 164.48 1.28 166.05
</TABLE>
<PAGE>
84 Other Matters
<TABLE>
NORTH CAROLINA QUALITY TRUST
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
April 1994 $ 2.01 $ 2.01
May 1994 - December 2004 4.31 4.31
January 2005 4.31 $163.82 $ 1.71 169.84
February 2005 - September 2013 3.47 3.47
October 2013 3.47 32.77 .26 36.50
November 2013 - January 2014 3.35 3.35
February 2014 3.35 65.53 .57 69.45
March 2014 - September 2014 3.07 3.07
October 2014 3.07 98.29 .90 102.26
November 2014 - December 2017 2.63 2.63
January 2018 2.63 163.83 1.37 167.83
February 2018 - November 2020 1.96 1.96
December 2020 1.96 163.83 1.43 167.22
January 2021 - June 2022 1.26 1.26
July 2022 1.26 131.06 1.20 133.52
August 2022 - August 2024 .67 .67
September 2024 .67 167.10 1.52 169.29
</TABLE>
<PAGE>
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<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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.
Title Page
INTRODUCTION..................................... 2
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION....... 3
UNITHOLDER EXPLANATIONS.......................... 7
Settlement of Bonds in the Trusts............... 7
The Fund...................................... 7
Objectives and Securities Selection........... 8
Portfolio Concentrations...................... 10
Replacement Bonds............................. 12
Bond Redemptions.............................. 13
Distributions................................. 14
Certificates.................................. 14
Estimated Current Returns and Estimated
Long-Term Returns............................. 15
Interest Earning Schedule....................... 15
Calculation of Estimated Net Annual Interest
Income...................................... 15
Public Offering................................. 16
General....................................... 16
Offering Price................................ 17
Market for Units.............................. 18
Distributions of Interest and Principal....... 19
Reinvestment Option........................... 20
Redemption of Units........................... 20
Reports Provided.............................. 21
Insurance on the Bonds in the Insured Trusts.... 22
IM-IT............................................ 29
NEW YORK IM-IT TRUST............................. 31
OHIO IM-IT INTERMEDIATE LADDERED MATURITY
TRUST........................................... 41
TENNESSEE IM-IT TRUST............................ 46
NORTH CAROLINA QUALITY TRUST..................... 51
NOTES TO PORTFOLIOS.............................. 57
UNDERWRITING..................................... 59
TRUST ADMINISTRATION............................. 62
Fund Administration and Expenses................ 62
Sponsor....................................... 62
Compensation of Sponsor and Evaluator......... 65
Trustee....................................... 65
Trustee's Fee................................. 66
Portfolio Administration...................... 66
Sponsor Purchases of Units.................... 67
Insurance Premiums............................ 67
Miscellaneous Expenses........................ 67
General......................................... 67
Amendment or Termination...................... 67
Limitation on Liabilities..................... 68
Unit Distribution............................. 69
Sponsor and Underwriter Compensation.......... 69
OTHER MATTERS.................................... 71
Legal Opinions.................................. 71
Independent Certified Public Accountants........ 71
FEDERAL TAX STATUS............................... 71
DESCRIPTION OF SECURITIES RATINGS................ 74
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS..................................... 75
STATEMENTS OF CONDITION.......................... 76
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
TABLES.......................................... 77
ESTIMATED CASH FLOWS TO UNITHOLDERS.............. 79
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.
(R) denotes a registered trademark of Van Kampen Merritt Inc.
P R O S P E C T U S
March 10, 1994
LOGO
INSURED MUNICIPALS INCOME TRUST
AND
INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES 216
IM-IT 319
New York IM-IT 119
Ohio IM-IT Intermediate Laddered Maturity Series 4
Tennessee IM-IT 26
North Carolina Quality 74
LOGO
<PAGE>
One Parkview Plaza (R)
Oakbrook Terrace, Illinois 60181
Mellon Bank Center
1735 Market Street, Suite 1300
Philadelphia, Pennsylvania 19103
Please retain this Prospectus for future reference.
<PAGE>
Contents of Registration Statement
This 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, rating services and
legal counsel
The following exhibits:
1.1 Proposed form of Trust Agreement among Van Kampen Merritt Inc.,
Depositor, and Bank of New York, as Trustee, and American Portfolio
Evaluation Services, a division of Van Kampen Merritt Investment
Advisory Corp., as Evaluator (to be supplied by amendment).
1.4 Copy of Municipal Bond Fund Portfolio Insurance Policy issued by
AMBAC Indemnity Corporation and/or Bond Investors Guaranty Insurance
Company
(to be supplied by amendment).
1.5 Form of Agreement Among Underwriters (to be supplied by amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be supplied by amendment).
3.2 Opinion and consent of counsel as to Federal income tax status of
securities being registered (to be supplied by amendment).
3.3 Opinion and consent of counsel as to New York tax status of
securities being registered (to be supplied by amendment).
4.1 Consent of Interactive Data Services, Inc. (to be supplied by
amendment).
4.2 Consent of Standard & Poor's Corporation (to be supplied by
amendment).
4.3 Consent of Grant Thornton (to be supplied by amendment.
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 218 has duly caused this 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 15th day
of March, 1994.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt
Trust, Multi-Series 218
(Registrant)
By Van Kampen Merritt Inc.
(Depositor)
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on March 15, 1994.
Signature Title
John C. Merritt Chairman, Chief Executive )
Officer and Director )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A Waterworth
(Attorney-in-fact*)
______________________________________________________________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust Multi-Series 203
(File No. 33-65744) and the same are hereby incorporated herein by
this reference.
