File No. 33-53933
CIK #896705
Securities And Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 226
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:
Chapman and Cutler Van Kampen Merritt Inc.
Attention: Mark J. Kneedy Attention: John C. Merritt, Chairman
111 W. Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: 66,972* Units
F. Proposed maximum offering price to the public of the securities being
registered:
($1020 per Unit**): $68,311,440
G. Amount of filing fee, computed at one twenty-ninth of 1 percent of proposed
maximum aggregate offering
price to the public: $23,555.63 ($351.72 previously paid)
H. Approximate date of proposed sale to the public:
as soon as practicable after the Effective Date of the Registration Statement
/ X /:Check box if it is proposed that this filing will become effective on
July 12, 1994 pursuant to Rule 487.
44,648 Units registered for primary distribution.
22,324 Units registered for resale by Depositor of
Units previously sold in primary distribution.
** Estimated solely for the purpose of calculating the registration fee.
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 226
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
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 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 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 JULY 12, 1994
SUBJECT TO COMPLETION
July 12, 1994 Van Kampen Merritt
INSURED MUNICIPALS INCOME TRUST AND
INVESTORS' QUALITY TAX-EXEMPT TRUST, MULTI-SERIES 226
IM-IT 329
IM-IT 93rd Short Intermediate
IM-IT 79th Intermediate
IM-IT 75th Limited Maturity
California IM-IT Intermediate Laddered Maturity Series 12
Colorado IM-IT 69
Michigan IM-IT 118
New Jersey IM-IT 94
Oklahoma IM-IT 11
North Carolina Quality 76
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 ten underlying separate unit investment trusts designated as Insured
Municipals Income Trust, Series 329 (the "IM-IT"), Insured Municipals Income
Trust, 93rd Short Intermediate Series (the "IM-IT Short Intermediate Trust"),
Insured Municipals Income Trust, 79th Intermediate Series (the "IM-IT
Intermediate Trust"), Insured Municipals Income Trust, 75th Limited Maturity
Series (the "IM-IT Limited Maturity Trust"), California IM-IT Intermediate
Laddered Maturity Series 12 (the "California IM-IT Intermediate Laddered
Maturity Trust"), Colorado Insured Municipals Income Trust, Series 69 (the
"Colorado IM-IT Trust"), Michigan Insured Municipals Income Trust, Series 118
(the "Michigan IM-IT Trust"), New Jersey Insured Municipals Income Trust,
Series 94 (the "New Jersey IM-IT Trust"), Oklahoma Insured Municipals Income
Trust, Series 11 (the "Oklahoma IM-IT Trust") and North Carolina Investors'
Quality Tax-Exempt Trust, Series 76 (the "North Carolina Quality Trust"). The
various trusts are collectively referred to herein as the "Trusts", the
California IM-IT Intermediate Laddered Maturity, Colorado IM-IT, Michigan
IM-IT, New Jersey IM-IT, Oklahoma IM-IT and North Carolina Quality Trusts are
sometimes collectively referred to herein as the "State Trusts", while the
IM-IT, IM-IT Short Intermediate, IM-IT Intermediate, IM-IT Limited Maturity,
California IM-IT Intermediate Laddered Maturity, Colorado IM-IT, Michigan
IM-IT, New Jersey IM-IT and Oklahoma IM-IT Trusts are sometimes collectively
referred to herein as the "Insured Trusts", the California 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 23. 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
close of business on the day before 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 as of
the close of business on the day before the Date of Deposit (except for the
IM-IT as of 8:00 A.M. Central Time on the Date of Deposit) 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 226
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT THE CLOSE OF BUSINESS ON THE DAY BEFORE THE DATE OF DEPOSIT: JULY 11, 1994
(EXCEPT FOR THE IM-IT AS OF 8:00 A.M. CENTRAL TIME ON THE DATE OF DEPOSIT:
JULY 12, 1994)
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>
CALIFORNIA
IM-IT
IM-IT SHORT IM-IT INTERMEDIATE
INTERMEDIATE INTERMEDIATE IM-IT LIMITED LADDERED
GENERAL INFORMATION IM-IT TRUST TRUST MATURITY TRUST MATURITY TRUST
<S> <C> <C> <C> <C> <C>
Principal Amount (Par Value) of
Securities in Trust............. $ 9,555,000 $ 7,000,000 $ 5,000,000 $ 5,040,000 $ 3,000,000
Number of Units................... 9,522 7,000 5,000 5,040 3,000
Fractional Undivided Interest in
the Trust per Unit.............. 1/9,522 1/7,000 1/5,000 1/5,040 1/3,000
Principal Amount (Par Value) of
Securities per Unit <F1>........ $ 1,003.47 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Public Offering Price:
Aggregate Offering Price of
Securities in Portfolio....... $ 8,991,359 $ 6,923,636 $ 4,869,368 $ 4,871,236 $ 2,945,305
Aggregate Offering Price of
Securities per Unit........... $ 944.27 $ 989.09 $ 973.87 $ 966.52 $ 981.77
Sales Charge <F2>............. $ 48.65 $ 30.58 $ 39.52 $ 43.42 $ 30.35
Purchased Interest <F3>....... $ 67,396 $ 38,616 $ 25,769 $ 25,645 $ 23,959
Purchased Interest per Unit
<F3>.......................... $ 7.08 $ 5.52 $ 5.15 $ 5.09 $ 7.99
Public Offering Price per Unit
<F3>.......................... $ 1,000.00 $ 1,025.19 $ 1,018.54 $ 1,015.03 $ 1,020.11
Redemption Price per Unit,
including Purchased Interest
<F3>............................ $ 943.76 $ 987.13 $ 971.58 $ 963.75 $ 982.06
Secondary Market Repurchase Price
per Unit, including Purchased
Interest <F3>................... $ 951.35 $ 994.61 $ 979.02 $ 971.61 $ 989.76
Excess of Public Offering Price
per Unit Over Redemption Price
per Unit........................ $ 56.24 $ 38.06 $ 46.96 $ 51.28 $ 38.05
Excess of Sponsor's Initial
Repurchase Price per Unit Over
Redemption Price per Unit....... $ 7.59 $ 7.48 $ 7.44 $ 7.86 $ 7.70
Minimum Value of the Trust under
which Trust Agreement may be
terminated...................... $ 1,911,000 $ 1,400,000 $ 1,000,000 $ 1,008,000 $ 600,000
Minimum Principal Distribution.......... $1.00 per Unit
First Settlement Date................... July 19, 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.
<PAGE>
4 Summary of Essential Financial Information
<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 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 226
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION (CONTINUED)
AT THE CLOSE OF BUSINESS ON THE DAY BEFORE THE DATE OF DEPOSIT: JULY 11, 1994
(EXCEPT FOR THE IM-IT AS OF 8:00 A.M. CENTRAL TIME ON THE DATE OF DEPOSIT:
JULY 12, 1994)
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>
COLORADO MICHIGAN NEW JERSEY OKLAHOMA NORTH CAROLINA
GENERAL INFORMATION IM-IT TRUST IM-IT TRUST IM-IT TRUST IM-IT TRUST QUALITY TRUST
<S> <C> <C> <C> <C> <C>
Principal Amount (Par Value) of
Securities in Trust............. $ 3,000,000 $ 3,050,000 $ 3,100,000 $ 3,050,000 $ 3,050,000
Number of Units................... 3,031 3,022 3,058 2,978 2,997
Fractional Undivided Interest in
the Trust per Unit.............. 1/3,031 1/3,022 1/3,058 1/2,978 1/2,997
Principal Amount (Par Value) of
Securities per Unit <F1>........ $ 989.77 $ 1,009.27 $ 1,013.73 $ 1,024.18 $ 1,017.68
Public Offering Price:
Aggregate Offering Price of
Securities in Portfolio....... $ 2,855,438 $ 2,846,204 $ 2,883,707 $ 2,822,539 $ 2,825,121
Aggregate Offering Price of
Securities per Unit........... $ 942.08 $ 941.83 $ 943.00 $ 947.80 $ 942.65
Sales Charge <F2>............. $ 48.53 $ 48.52 $ 48.59 $ 48.83 $ 48.56
Purchased Interest <F3>....... $ 28,451 $ 29,150 $ 25,730 $ 10,040 $ 26,330
Purchased Interest per Unit
<F3>.......................... $ 9.39 $ 9.65 $ 8.41 $ 3.37 $ 8.79
Public Offering Price per Unit
<F3>.......................... $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Redemption Price per Unit,
including Purchased Interest
<F3>............................ $ 943.96 $ 943.40 $ 943.50 $ 943.14 $ 944.12
Secondary Market Repurchase Price
per Unit, including Purchased
Interest <F3>................... $ 951.47 $ 951.48 $ 951.41 $ 951.17 $ 951.44
Excess of Public Offering Price
per Unit Over Redemption Price
per Unit........................ $ 56.04 $ 56.60 $ 56.50 $ 56.86 $ 55.88
Excess of Sponsor's Initial
Repurchase Price per Unit Over
Redemption Price per Unit....... $ 7.51 $ 8.08 $ 7.91 $ 8.03 $ 7.32
Minimum Value of the Trust under
which Trust Agreement may be
terminated...................... $ 600,000 $ 610,000 $ 620,000 $ 610,000 $ 610,000
Minimum Principal Distribution.......... $1.00 per Unit
First Settlement Date................... July 19, 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
<PAGE>
6 Summary of Essential Financial Information
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 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 226 (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 ten 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, IM-IT Short Intermediate, IM-IT Intermediate and
IM-IT Limited Maturity Trusts 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 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
<PAGE>
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
<PAGE>
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
<PAGE>
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 close of business on the day before 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 July 19, 1994. The first
record date for each Trust (August 1, 1994) is 12 days from such date. The
daily rates of estimated net annual interest income per Unit are $.16183,
$.12835, $.14064, $.15451, $.13048, $.15315, $.15587, $.15699, $.14748 and
$.15757 for the IM-IT, IM-IT Short Intermediate, IM-IT Intermediate, IM-IT
Limited Maturity, California IM-IT Intermediate Laddered Maturity, Colorado
IM-IT, Michigan IM-IT, New Jersey IM-IT, Oklahoma IM-IT and North Carolina
Quality Trusts, respectively. This amounts to $1.94, $1.54, $1.69, $1.85,
$1.57, $1.84, $1.87, $1.88, $1.77 and $1.89 for the IM-IT, IM-IT Short
Intermediate, IM-IT Intermediate, IM-IT Limited Maturity, California IM-IT
Intermediate Laddered Maturity, Colorado IM-IT, Michigan IM-IT, New Jersey
IM-IT, Oklahoma 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 Colorado IM-IT Trust:
The Colorado IM-IT Trust accrues
$1.84 to the first record date plus
$50.60 which is 11 normal distributions at $4.60, and finally adding
$2.70 which has accrued from July 1, 1995 until July 19, 1995 which
completes the 360 day cycle (18 days times the daily factor)
Total $55.14 interest earned / $1,000.00 (Date of Deposit Public Offering
Price) = 5.51% Estimated Current Return as of the Date of
Deposit.
PURCHASED AND ACCRUED INTEREST
PURCHASED INTEREST. Purchased Interest is a portion of the unpaid
interest that has accrued on the Securities from the later of the last payment
date on the Securities or the date of issuance thereof through the First
Settlement Date and is included in the calculation of the Public Offering
Price. Purchased Interest will be distributed to Unitholders as Units are
redeemed or Securities mature or are called. See "Summary of Essential
Financial Information" for the amount of Purchased Interest per Unit for each
Trust. Purchased Interest is an element of the price Unitholders will receive
in connection with the sale or redemption of Units prior to the termination of
the Trust.
ACCRUED INTEREST. Accrued interest is an accumulation of unpaid interest
on securities which generally is paid semi-annually, although the Trust
accrues such interest daily. Because of this, the Trust always has an amount
of interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling subsequent to the First Settlement Date, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of the Trust the amount, if any, of accrued interest
paid on their Units.
As indicated in "Purchased Interest", accrued interest as of the First
Settlement Date includes Purchased Interest. In an effort to reduce the amount
of Purchased Interest which would otherwise have to be paid by Unitholders,
the Trustee may advance a portion of such accrued interest to the Sponsor as
the Unitholder of record as of the First Settlement Date. Consequently, the
amount of accrued interest to be added to the Public Offering Price of Units
will include only accrued interest from the First Settlement Date to the date
of settlement (other than the Purchased Interest already included therein),
less any distributions from the Interest Account subsequent to the First
Settlement Date. See "Public Offering--Distributions of Interest and
Principal".
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholder
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the Purchased Interest and accrued interest from
the purchaser of his Units. Since the Trustee has the use of the funds
(including Purchased Interest) held in the Interest Account for distributions
to Unitholders and since such Account is non-interest-bearing to Unitholders,
the Trustee benefits thereby.
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
<PAGE>
Unitholder Explanations 17
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 and
accrued interest, if any. For purposes of computation, Bonds will be deemed to
mature on their expressed maturity dates unless: (a) the Bonds have been
called for redemption or 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 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. In the event units of more than one trust
are purchased on the Initial Purchase Date, the aggregate dollar amount of
such purchases will be used to determine whether purchasers are eligible for a
reduced sales charge. Such aggregate dollar amount will be divided by the
public offering price per unit (on the day preceding the date of purchase) of
each respective trust purchased to determine the total number of units which
such amount could have purchased of each individual trust. Purchasers must
then consult the applicable trust's prospectus to determine whether the total
number of units which could have been purchased of a specific trust would have
qualified for a reduced sales charge and, if so qualified, the amount of such
reduction. Assuming a purchaser
<PAGE>
18 Unitholder Explanations
qualifies for a sales charge reduction or reductions, to determine the
applicable sales charge reduction or reductions it is necessary to accumulate
all purchases made on the Initial Purchase Date and all purchases made in
accordance with (b) above. Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser under 21 years of age
will be deemed for the purposes of calculating the applicable sales charge to
be additional purchases by the purchaser. The reduced sales charges will also
be applicable to a trustee or other fiduciary purchasing securities for one or
more trust estate or fiduciary accounts. Employees of Van Kampen 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 close of business on the day before 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 close of business on
the day before 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 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.
<PAGE>
Unitholder Explanations 19
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 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
<PAGE>
20 Unitholder Explanations
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.
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
<PAGE>
Unitholder Explanations 21
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
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)
<PAGE>
22 Unitholder Explanations
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 and may be less than the par value of the Securities
represented by the Units so redeemed. As stated above, the Trustee may sell
Securities to cover redemptions. When Securities are sold, the size and
diversity of the affected Trust will be reduced. Such sales may be required at
a time when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trusts is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
REPORTS PROVIDED. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and
the amount of other receipts (received since the preceding distribution), if
any, being distributed expressed in each case as a dollar amount representing
the pro rata share of each Unit of a Trust outstanding. For as long as the
Trustee deems it to be in the best interests of the Unitholders, the accounts
of each Trust shall be audited, not less frequently than annually, by
independent certified public accountants and the report of such accountants
shall be furnished by the Trustee to Unitholders of such Trusts upon request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a registered Unitholder of a Trust a statement (i) as to the Interest
Account: interest received (including amounts representing interest received
upon any disposition of Securities) and the percentage of such interest by
states in which the issuers of the Securities are located, 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.
<PAGE>
Unitholder Explanations 23
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.
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
<PAGE>
24 Unitholder Explanations
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 $1,988,000,000 (unaudited) and statutory capital of
approximately $1,148,000,000 (unaudited) as of March 31, 1994. Statutory
capital consists of AMBAC Indemnity's policyholders' surplus and statutory
contingency reserve. AMBAC Indemnity is a wholly owned subsidiary of AMBAC
Inc., a 100% publicly-held company. Moody's Investors Service, Inc. and
Standard & Poor's 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 March 31, 1994 MBIA had admitted assets of $3.2 billion (unaudited), total
liabilities of $2.2 billion (unaudited), and total capital and surplus of $998
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.
<PAGE>
Unitholder Explanations 25
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.
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
<PAGE>
26 Unitholder Explanations
(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 March 31, 1994, Capital Guaranty had more than $12.5 billion in net
exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$196,042,817 (unaudited), and the total admitted assets were $288,052,110
(unaudited) as reported to the Insurance Department of the State of Maryland
as of March 31, 1994. 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.
<PAGE>
Unitholder Explanations 27
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 $168 million and $163 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
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,
<PAGE>
28 Unitholder Explanations
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.
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 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.
<PAGE>
Unitholder Explanations 29
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%
IM-IT Short Intermediate............................ 0% 0% 100% 100%
IM-IT Intermediate.................................. 0% 0% 100% 100%
IM-IT Limited Maturity.............................. 0% 0% 100% 100%
California IM-IT Intermediate
Laddered Maturity.................................. 0% 0% 100% 100%
Colorado IM-IT...................................... 0% 0% 100% 100%
Michigan IM-IT...................................... 0% 0% 100% 100%
New Jersey IM-IT.................................... 0% 0% 100% 100%
Oklahoma IM-IT...................................... 0% 0% 100% 100%
</TABLE>
The breakdown of the Preinsured Bonds is as follows: IM-IT--AMBAC
Indemnity 11%, Capital Guaranty 10%, Financial Guaranty 27% and MBIA 52%;
IM-IT Short Intermediate Trust--AMBAC Indemnity 28%, Capital Guaranty 9%,
Financial Guaranty 17%, MBIA 30% and FSA 16%; IM-IT Intermediate Trust--AMBAC
Indemnity 14%, Capital Guaranty 15%, Financial Guaranty 26% and MBIA 45%;
IM-IT Limited Maturity Trust--AMBAC Indemnity 44%, Capital Guaranty 6%,
Financial Guaranty 9%, MBIA 27% and FSA 14%; California IM-IT Intermediate
Laddered Maturity Trust--AMBAC Indemnity 50%, Financial Guaranty 20% and MBIA
30%; Colorado IM-IT Trust--AMBAC Indemnity 30%, Financial Guaranty 8%, MBIA
45% and FSA 17%; Michigan IM-IT Trust--AMBAC Indemnity 13%, Financial Guaranty
28%, MBIA 52% and FSA 7%; New Jersey IM-IT Trust--AMBAC Indemnity 11%, Capital
Guaranty 15%, Financial Guaranty 16%, MBIA 48% and FSA 10%; Oklahoma IM-IT
Trust--AMBAC Indemnity 51% and Financial Guaranty 49%.
<PAGE>
30 IM-IT-- Series 329
IM-IT
GENERAL. The IM-IT consists of 13 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 9
states or territories, divided by purpose of issues (and percentage of
principal amount to total IM-IT) as follows: General Purpose, 3 (20%); Health
Care, 2 (16%); Public Building, 2 (11%); Public Education, 1 (11%); Higher
Education, 1 (10%); Water and Sewer, 1 (10%); Wholesale Electric, 1 (10%);
Retail Electric/Gas, 1 (8%) and Multi-Family Mortgage Revenue, 1 (4%). No Bond
issue has received a provisional rating. The dollar weighted average maturity
of the Bonds in the Trust is 29 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>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 59.64
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.38
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 58.26
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 58.26
Divided by 12............................................................................................ $ 4.86
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .16183
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.83%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.88%
Initial Distribution (August 1994)............................................................................. $ 1.94
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.86
PURCHASED INTEREST <F6>........................................................................................ $ 7.08
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
AUGUST 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.46 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 $60.10.
Estimated Annual Expense per Unit (excluding insurance) will be increased
to $1.84; 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 $9,364.
<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>
IM-IT-- Series 329 31
<TABLE>
INSURED MUNICIPALS INCOME TRUST
SERIES 329 (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 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 Hammond Multi-School Building Corporation (Lake County,
Indiana) First Mortgage Revenue Refunding Bonds, Series 1994
(Capital Guaranty Insured)** 2004 @ 102
6.60% Due 1/10/2018.......................................... AAA 2015 @ 100 S.F. $ 1,017,980
525,000 The Philadelphia Municipal Authority (Philadelphia,
Pennsylvania) Lease Revenue Refunding Bonds, Series 1993C
(FGIC Insured) 2003 @ 102
#5.25% Due 4/1/2018.......................................... AAA 2008 @ 100 S.F. 451,574
50,000 Metropolitan Pier and Exposition Authority (Illinois) Dedicated
State Tax Revenue Bonds, (McCormick Place Expansion Project)
Series 1992A (FGIC Insured)
#0.00% Due 6/15/2020......................................... AAA 8,892<F6>
1,000,000 Metropolitan Pier and Exposition Authority (Illinois) McCormick
Place Expansion Project, Revenue Bonds, Series 1992A (MBIA
Insured)
#6.50% Due 6/15/2022......................................... AAA 2003 @ 102 1,005,000
850,000 Charleston County, South Carolina, Hospital Facilities Revenue
Refunding and Improvement Bonds, Series 1992 (Medical Society
Health Systems, Inc. Project) MBIA Insured 2002 @ 100
#5.00% Due 10/1/2022......................................... AAA 2020 @ 100 S.F. 681,122
1,000,000 North Carolina Eastern Municipal Power Agency, Power System
Revenue Bonds, Refunding Series 1993B (FGIC Insured)
#6.25% Due 1/1/2023.......................................... AAA 2003 @ 102 979,040
365,000 Pennsylvania Intergovernmental Cooperation Authority, Special
Tax Revenue Bonds (City of Philadelphia Funding Program)
Series 1993 (MBIA Insured) 2003 @ 100
#5.625% Due 6/15/2023........................................ AAA 2016 @ 100 S.F. 327,561
905,000 Board of Governors of State Colleges and Universities, Chicago
State University, Auxiliary Facilities System Revenue Bonds,
Series 1994 (MBIA Insured) 2004 @ 102
#6.15% Due 12/1/2023......................................... AAA 2018 @ 100 S.F. 870,429
1,000,000 City of Santa Fe, New Mexico, Gross Receipts Tax Revenue Bonds,
Series July 1, 1994 (AMBAC Indemnity Insured)** 2004 @ 100
#6.30% Due 6/1/2024.......................................... YAAA 2015 @ 100 S.F. 991,640
400,000 Howard County, Maryland, Mortgage Revenue Refunding Bonds,
Series 1994A (Beech's Farm Apartments Project-FHA Insured
Mortgage Loan) MBIA Insured** 2004 @ 102
6.50% Due 7/1/2024........................................... YAAA 2013 @ 100 S.F. 402,000
710,000 New Hampshire Higher Educational and Health Facilities
Authority, Revenue Bonds, The Hitchcock Clinic Issue, Series
1994 (MBIA Insured)
#6.00% Due 7/1/2024.......................................... AAA 2004 @ 102 666,939
1,000,000 Loudoun County Sanitation Authority (Virginia) Water and Sewer
System Revenue Bonds, Refunding Series 1992 (FGIC Insured) 2003 @ 100
#6.25% Due 1/1/2030.......................................... AAA 2017 @ 100 S.F. 984,030
750,000 South Carolina Public Service Authority, Revenue Bonds,
Refunding Series 1993C (Santee Cooper) MBIA Insured 2003 @ 102
#5.125% Due 1/1/2032......................................... AAA 2026 @ 100 S.F. 605,152
$ 9,555,000 $ 8,991,359
</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>
32 IM-IT-- 93rd Short Intermediate Series
IM-IT SHORT INTERMEDIATE TRUST
GENERAL. The IM-IT Short Intermediate Trust consists of 12 issues of
Securities. Three of the Bonds in the IM-IT Short Intermediate 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 located in 8 states or territories, divided by
purpose of issues (and percentage of principal amount of total IM-IT Short
Intermediate Trust) as follows: General Obligations, 3 (27%); General Purpose,
2 (25%); Health Care, 2 (20%); Transportation, 1 (16%); Public Education, 3
(9%) and Public Building, 1 (3%). No Bond issue has received a provisional
rating. All of the obligations in the IM-IT Short Intermediate Trust mature
within 3-7 years of the Date of Deposit. The dollar weighted average maturity
of the Bonds in the Trust is 5.0 years.
TAX STATUS. For a discussion of the Federal tax status of income earned
on IM-IT Short Intermediate Trust Units, see "Other Matters--Federal Tax
Status".
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 47.65
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.44
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 46.21
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 46.21
Divided by 12............................................................................................ $ 3.85
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .12835
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 4.51%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 4.70%
Initial Distribution (August 1994)............................................................................. $ 1.54
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 3.85
PURCHASED INTEREST <F6>........................................................................................ $ 5.52
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
AUGUST 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
$48.08. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $1.87; 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 $6,860.
<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>
IM-IT-- 93rd Short Intermediate Series 33
<TABLE>
INSURED MUNICIPALS INCOME TRUST
93RD SHORT INTERMEDIATE SERIES (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND IM-IT SHORT
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION INTERMEDIATE
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C>
$ 215,000 St. Louis Municipal Finance Corporation II, Leasehold Revenue
Improvement Bonds, Series 1994 (City of St. Louis, Missouri,
Lessee) Civic Courts Building Project (FGIC Insured)
4.70% Due 8/1/1998........................................... AAA $ 213,852
610,000 Hammond Multi-School Building Corporation (Lake County,
Indiana) First Mortgage Revenue Refunding Bonds, Series 1994
(Capital Guaranty Insured)**
215M--5.10% Due 1/10/1999.................................... AAA 215,806
220M--5.10% Due 7/10/1999.................................... AAA 220,825
175M--5.20% Due 1/10/2000.................................... AAA 175,656
1,000,000 Mississippi Hospital Equipment and Facilities Authority,
Revenue Refunding and Improvement Bonds, North Mississippi
Health Services, Series 1993-1 (AMBAC Indemnity Insured)
4.80% Due 5/15/1999.......................................... AAA 990,990
1,000,000 Chicago, Illinois, School Finance Authority, Unlimited
Tax-General Obligation Bonds, Series 1994A (MBIA Insured)
4.50% Due 6/1/1999........................................... AAA 971,920
1,000,000 City of Santa Fe, New Mexico, Gross Receipts Tax Revenue Bonds,
Series July 1, 1994 (AMBAC Indemnity Insured)**
#5.00% Due 6/1/1999.......................................... AAA 999,420
1,095,000 New Jersey Transportation Trust Fund Authority, Transportation
System Revenue Bonds, Series 1993A (FSA Insured)
#4.40% Due 6/15/1999......................................... AAA 1,060,168
675,000 Philadelphia, Pennsylvania, School District, Unlimited
Tax-General Obligation Bonds, Series 1994A (MBIA Insured)
4.95% Due 7/1/1999........................................... AAA 673,124
400,000 Berks County Municipal Authority (Pennsylvania) Hospital
Revenue Bonds (The Reading Hospital and Medical Center
Project) Series 1994B (MBIA Insured)
4.90% Due 10/1/1999.......................................... AAA 397,852
255,000 City of Philadelphia, Pennsylvania, General Obligation Bonds,
Series 1994B (FGIC Insured)
#5.00% Due 11/15/1999........................................ AAA 254,758
750,000 Lower Colorado River Authority (Texas) Junior Lien Revenue
Refunding Bonds, Fourth Supplemental Series (FGIC Insured)
#5.10% Due 1/1/2000.......................................... AAA 749,265
$ 7,000,000 $ 6,923,636
</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>
34 IM-IT-- 79th Intermediate Series
IM-IT INTERMEDIATE TRUST
GENERAL. The IM-IT Intermediate Trust consists of 13 issues of
Securities. Six of the Bonds in the IM-IT Intermediate 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 located in 9 states or territories, divided by
purpose of issues (and percentage of principal amount to total IM-IT
Intermediate Trust) as follows: General Obligations, 6 (35%); Health Care, 2
(26%); Public Education, 3 (15%); Waste Disposal, 1 (14%) and General Purpose,
1 (10%). No Bond issue has received a provisional rating. All of the
obligations in the IM-IT Intermediate Trust mature within 5-15 years of the
Date of Deposit. The dollar weighted average maturity of the Bonds in the
Trust is 9.6 years.
TAX STATUS. For a discussion of the Federal tax status of income earned
on IM-IT Intermediate Trust Units, see "Other Matters--Federal Tax Status".
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 51.92
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.28
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 50.64
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 50.64
Divided by 12............................................................................................ $ 4.22
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .14064
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 4.97%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.17%
Initial Distribution (August 1994)............................................................................. $ 1.69
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.22
PURCHASED INTEREST <F6>........................................................................................ $ 5.15
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
AUGUST 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.65 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
$52.57. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $1.93; 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 $4,900.
<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>
IM-IT-- 79th Intermediate Series 35
<TABLE>
INSURED MUNICIPALS INCOME TRUST
79TH INTERMEDIATE SERIES (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND IM-IT
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION INTERMEDIATE
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C>
$ 175,000 District of Columbia, Washington, D.C., Unlimited Tax-General
Obligation Refunding Bonds, Series 1993A (MBIA Insured)
#5.75% Due 6/1/2003.......................................... AAA $ 176,244
490,000 General Obligation Bonds, Series 1994A of Harrison County,
Mississippi (MBIA Insured)**
285M--5.60% Due 7/1/2003..................................... YAAA 287,052
205M--5.60% Due 7/1/2004..................................... YAAA 204,988
145,000 General Obligation Bonds, Series 1994B of Harrison County,
Mississippi (MBIA Insured)**
5.60% Due 7/1/2003........................................... YAAA 146,044
705,000 Hillsborough County, Florida, Solid Waste and Resource
Recovery, Refunding Revenue Bonds, Series 1994 (MBIA Insured)
5.30% Due 10/1/2003.......................................... AAA 695,010
750,000 Washington Health Care Facilties Authority, Revenue Bonds
(Empire Health Services, Spokane) Series 1993 (MBIA Insured)
#5.50% Due 11/1/2003......................................... AAA 747,368
750,000 City of Philadelphia, Pennsylvania, General Obligation
Refunding Bonds, Series 1994A (FGIC Insured)
#5.40% Due 11/15/2003........................................ AAA 741,960
750,000 Hammond Multi-School Building Corporation (Lake County,
Indiana) First Mortgage Revenue Refunding Bonds, Series 1994
(Capital Guaranty Insured)**
280M--5.60% Due 1/10/2004.................................... AAA 280,028
290M--5.60% Due 7/10/2004.................................... AAA 289,985
180M--5.75% Due 1/10/2005.................................... AAA 2004 @ 102 180,675
500,000 City of Santa Fe, New Mexico, Gross Receipts Tax Revenue Bonds,
Series July 1, 1994 (AMBAC Indemnity Insured)**
#5.60% Due 6/1/2004.......................................... YAAA 2002 @ 101 499,965
200,000 Peoria Unified School District No. 11 of Maricopa County,
Arizona, School Improvement and Refunding Bonds, Series 1994
(AMBAC Indemnity Insured)
#0.00% Due 7/1/2004.......................................... YAAA 113,960<F6>
535,000 Illinois Health Facilities Authority (Elmhurst Memorial
Hospital) FGIC Insured
#5.20% Due 1/1/2005.......................................... AAA 2003 @ 102 506,089
$ 5,000,000 $ 4,869,368
</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>
36 IM-IT-- 75th Limited Maturity Series
IM-IT LIMITED MATURITY TRUST
GENERAL. The IM-IT Limited Maturity Trust consists of 11 issues of
Securities. Five of the Bonds in the IM-IT Limited 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 located in 8 states or territories, divided by
purpose of issues (and percentage of principal amount to total IM-IT Limited
Maturity Trust) as follows: General Obligations, 5 (51%); Retail Electric/Gas,
2 (20%); Water and Sewer, 1 (12%); General Purpose, 1 (9%); Public Education,
1 (6%) and Higher Education, 1 (2%). Two bond issues aggregating approximately
29% and three bond issues aggregating approximately 25% of the aggregate
principal amount of the Securities in the Trust are obligations of issuers
located in the States of Illinois and Mississippi, respectively. No Bond issue
has received a provisional rating. All of the obligations in the IM-IT Limited
Maturity Trust mature approximately within 12-15 years of the Date of Deposit.
The dollar weighted average maturity of the Bonds in the Trust is 14.7 years.
TAX STATUS. For a discussion of the Federal tax status of income earned
on IM-IT Limited Maturity Trust Units, see "Other Matters--Federal Tax
Status".
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME DURING THE FIRST YEAR <F1>
Estimated Annual Interest Income per Unit................................................................ $ 56.01
Less: Estimated Annual Expense per Unit <F2>............................................................. $ .95
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 55.06
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT DURING THE FIRST YEAR:
Estimated Net Annual Interest Income per Unit............................................................ $ 55.06
Divided by 12............................................................................................ $ 4.59
Estimated Daily Rate of Net Interest Accrual per Unit During the First Year.................................... $ .15294
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE DURING THE FIRST YEAR <F1><F3><F4><F5>................. 5.42%
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME AFTER THE FIRST YEAR <F1>
Estimated Annual Interest Income per Unit................................................................ $ 57.56
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.93
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 55.63
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT AFTER THE FIRST YEAR:
Estimated Net Annual Interest Income per Unit............................................................ $ 55.63
Divided by 12............................................................................................ $ 4.64
Estimated Daily Rate of Net Interest Accrual per Unit After the First Year..................................... $ .15451
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE AFTER THE FIRST YEAR <F1><F3><F4><F5>.................. 5.48%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.61%
Initial Distribution (August 1994)............................................................................. $ 1.85
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.64
PURCHASED INTEREST <F6>........................................................................................ $ 5.09
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
AUGUST 15, 1994
<FN>
<F1> The differences between the Estimated Current Returns during the first
year and after the first year are shown in the table above. Due to
inclusion in the portfolio of "when, as and if issued" Bonds a portion of
the monies received by the Trust (the net interest accruing on such bonds
prior to their respective deliveries to the Trust--the last of which is
expected to be on August 31, 1994) will be treated, in the first year
only, as a distribution which is not deemed to be income to Unitholders.
During the first year $1.55 per Unit (for those purchasing units on the
Date of Deposit) will be "when issued" interest. However, because the
Trustee will reduce its expenses during the first year to the extent of
its annual fee which is expected to be approximately $.98 per Unit, only
$.57 or .056% per Unit will be considered such a distribution and is the
difference between the first and second year monthly Estimated Current
Return indicated above. It should be noted that the actual cash generated
in connection with each Unit during the first year will equal the amount
indicated under Estimated Net Annual Interest Income per Unit. This cash
amount during the first year includes $.57 per Unit, which is a
distribution not deemed to be income. See "The Fund" and "Estimated
Current Returns and Estimated Long-Term Returns". The fact that there is
a distribution not deemed to be income during the first year would not
effect the Estimated Long-Term Return by more than .01% per Unit.
<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
<PAGE>
IM-IT-- 75th Limited Maturity Series 37
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>
38 IM-IT-- 75th Limited Maturity Series
<TABLE>
INSURED MUNICIPALS INCOME TRUST
75TH LIMITED MATURITY SERIES (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND IM-IT LIMITED
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> <C>
$ 250,000 City of Austin, Texas, Combined Utility Systems Revenue
Refunding Bonds, Series 1992 (AMBAC Indemnity Insured)
#6.25% Due 11/15/2007........................................ AAA 2002 @ 102 $ 255,983
700,000 Signal Hill School District No. 181 (St. Clair County,
Illinois) Unlimited Tax-General Obligation School Bonds,
Series 1994 (FSA Insured) 2004 @ 102
6.45% Due 12/1/2008.......................................... YAAA 2004 @ 100 S.F. 724,493
300,000 Hammond Multi-School Building Corporation (Lake County,
Indiana) First Mortgage Revenue Refunding Bonds, Series 1994
(Capital Guaranty Insured)**
6.15% Due 1/10/2009.......................................... AAA 2004 @ 102 302,754
475,000 City of Santa Rosa High School District (County of Sonoma,
State of California) General Obligation Bonds, Election of
1991, Series 1994 (FGIC Insured)
5.70% Due 5/1/2009........................................... YAAA 2004 @ 102 458,987
750,000 Chicago, Illinois, School Finance Authority, Unlimited
Tax-General Obligation Bonds, Series 1994A (MBIA Insured)
#5.00% Due 6/1/2009.......................................... AAA 2004 @ 102 660,458
475,000 City of Santa Fe, New Mexico, Revenue Bonds, Series 1994A
(AMBAC Indemnity Insured)**
#5.95% Due 6/1/2009.......................................... YAAA 2004 @ 100 472,715
415,000 Harrison County, Mississippi, General Obligation Bonds, Series
1994A (MBIA Insured)**
#5.90% Due 7/1/2009.......................................... YAAA 2004 @ 100 408,991
205,000 Harrison County, Mississippi, General Obligation Bonds, Series
1994B (MBIA Insured)**
#5.90% Due 7/1/2009.......................................... YAAA 2004 @ 100 202,031
620,000 City of Meridian, Mississippi, Combined Water and Sewer System
Revenue Bonds, Series 1994A (AMBAC Indemnity Insured)**
#6.10% Due 7/1/2009.......................................... YAAA 2004 @ 102 623,100
100,000 New York State Dormitory Authority, City University Revenue
Bonds (AMBAC Indemnity Insured)**
6.125% Due 7/1/2009.......................................... YAAA 2004 @ 102 101,551
750,000 Utah Associated Municipal Power Systems (Hunter Project)
Refunding Revenue Bonds, Series 1994 (AMBAC Indemnity
Insured)
#5.00% Due 7/1/2009.......................................... AAA 2004 @ 102 660,173
$ 5,040,000 $ 4,871,236
</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>
California IM-IT Intermediate Laddered Maturity Series 12 39
CALIFORNIA IM-IT INTERMEDIATE LADDERED MATURITY TRUST
GENERAL. The California IM-IT Intermediate Laddered Maturity Trust
consists of 9 issues of Securities. None of the Bonds in the California IM-IT
Intermediate Laddered Maturity 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 California IM-IT Intermediate Laddered Maturity Trust) as follows: Water
and Sewer, 2 (40%); Certificates of Participation, 3 (30%); General Purpose, 3
(18%) and Tax District, 1 (12%). No Bond issue has received a provisional
rating. All of the obligations in the California IM-IT Intermediate Laddered
Maturity Trust mature within 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 6.89 years.
SPECIAL CONSIDERATIONS. The Trust will invest substantially all of its
assets in California Municipal Obligations. The Trust is therefore susceptible
to political, economic or regulatory factors affecting issuers of California
Municipal Obligations. These include the possible adverse effects of certain
California constitutional amendments, legislative measures, voter initiatives
and other matters that are described below. The following information provides
only a brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are generally
available to investors and are believed to be accurate. No independent
verification has been made of the accuracy or completeness of any of the
following information. It is based in part on information obtained from
various State and local agencies in California or contained in official
statements for various California Municipal Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of California Municipal
Obligations held in the portfolio of the Fund or the ability of particular
obligors to make timely payments of debt service on (or related to) those
obligations.
California's economy is the largest among the 50 states and one of the
largest in the world. The State's population of almost 32 million represents
12.8% of the total United States population and grew by 27% in the 1980s.
Total personal income in the State, at an estimated $662 billion in 1992,
accounts for 13% of all personal income in the nation. Total employment is
almost 14 million, the majority of which is in the service, trade and
manufacturing sectors.
Reports issued by the State Department of Finance and other sources
indicate that the State's economy is suffering its worst recession since the
1930s, with prospects for recovery slower than for the nation as a whole. The
State has lost over 800,000 jobs since the start of the recession in mid 1990
and additional job losses are expected before an upturn begins. The largest
job losses have been in Southern California, led by declines in the aerospace
and construction industries. Weaknesses statewide occurred in manufacturing,
construction, services and trade, and will be hurt in the next few years by
continued cuts in federal defense spending and base closures. Unemployment is
expected to remain well above the national average in 1994. The State's
economy is only expected to pull out of the recession slowly following the
national recovery which has begun. Delay in recovery will exacerbate
shortfalls in State revenues.
Certain California Municipal Obligations may be obligations of issuers
which rely in whole or in part, directly or indirectly, on ad valorem property
taxes as a source of revenue. The taxing powers of California local
governments and districts are limited by Article XIIIA of the California
Constitution, enacted by the voters in 1978 and commonly known as "Proposition
13." Briefly, Article XIIIA limits to 1% of full cash value the rate of ad
valorem property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or
change of ownership (subject to a number of exemptions). Taxing entities may,
however, raise ad valorem taxes above the 1% limit to pay debt service on
voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system
<PAGE>
40 California IM-IT Intermediate Laddered Maturity Series 12
has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13, and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through
ad valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed non-voter approved levy of "general taxes" which
were not dedicated to a specific use. In response to these decisions, the
voters of the State in 1986 adopted an initiative statute which imposed
significant new limits on the ability of local entities to raise or levy
general taxes, except by receiving majority local voter approval. Significant
elements of this initiative, "Proposition 62", have been overturned in recent
court cases. An initiative proposed to re-enact the provisions of Proposition
62 as a constitutional amendment was defeated by the voters in November 1990,
but such a proposal may be renewed in the future.
California and its local governments are subject to an annual
"appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations limit
imposed. "Appropriations subject to limitation" are authorizations to spend
"proceeds of taxes," which consists of tax revenues and certain other funds,
including proceeds from regulatory licenses, user charges or other fees, to
the extent that such proceeds exceed the cost of providing the product or
service, but "proceeds of taxes" excludes most State subventions to local
governments. No limit is imposed on appropriations or funds which are not
"proceeds of taxes," such as reasonable user charges or fees and certain other
non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters, (2) appropriations
arising from certain emergencies declared by the Governor, (3) appropriations
for certain capital outlay projects, (4) appropriations by the State of
post-1989 increases in gasoline taxes and vehicle weight fees, and (5)
appropriations made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 by Proposition 111 to follow more closely
growth in California's economy.
"Excess" revenues are measured over a two-year cycle. Local governments
must return any excess to taxpayers by rate reduction. The State must refund
50% of any excess, with the other 50% paid to schools and community colleges.
With more liberal annual adjustment factors since 1988, and depressed revenues
since 1990 because of the recession, few governments are currently operating
near their spending limits, but this condition may change over time. Local
governments may by voter approval exceed their spending limits for up to four
years.
During fiscal year 1986-87, State receipts from proceeds of taxes
exceeded its appropriations limit by $1.1 billion, which was returned to
taxpayers. Since that year, appropriations subject to limitation have been
under the State limit. State appropriations are expected to be $3.7 billion
under the limit for Fiscal Year 1993-94.
Because of the complex nature of Articles XIIIA and XIIIB of the
California Constitution, the ambiguities and possible inconsistencies in their
terms, and the impossibility of predicting future appropriations or changes in
population and cost of living, and the probability of continuing legal
challenges, it is not currently possible to determine fully the impact of
Article XIIIA or Article XIIIB on California Municipal Obligations or on the
ability of California or local governments to pay debt service on such
California Municipal Obligations. It is not presently possible to predict the
outcome of any pending litigation with respect to the ultimate scope, impact
or constitutionality of either Article XIIIA or Article XIIIB, or the impact
of any such determinations upon State agencies or local governments, or upon
their ability to pay debt service on their obligations. Future initiative or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
As of April 1, 1994, California had approximately $18.1 billion of
general obligation bonds outstanding, and $5.6 billion remained authorized but
unissued. In addition, at June 30, 1993, the State had lease-purchase
obligations,
<PAGE>
California IM-IT Intermediate Laddered Maturity Series 12 41
payable from the State's General Fund, of approximately $4.0 billion. Of the
State's outstanding general obligation debt, 26% is presently self-liquidating
(for which program revenues are anticipated to be sufficient to reimburse the
General Fund for debt service payments). Four general obligation bond
propositions, totalling $5.9 billion, will be on the June, 1994 ballot. In
Fiscal Year 1992-93, debt service on general obligation bonds and
lease-purchase debt was approximately 4.1% of General Fund revenues. The State
has paid the principal of and interest on its general obligation bonds,
lease-purchase debt and short-term obligations when due.
The principal sources of General Fund revenues in 1992-93 were the
California personal income tax (44% of total revenues), the sales tax (38%),
bank and corporation taxes (12%), and the gross premium tax on insurance (3%).
California maintains a Special Fund for Economic Uncertainties (the "Economic
Uncertainties Fund"), derived from General Fund revenues, as a reserve to meet
cash needs of the General Fund, but which is required to be replenished as
soon as sufficient revenues are available. Year-end balances in the Economic
Uncertainties Fund are included for financial reporting purposes in the
General Fund balance. In most recent years, California has budgeted to
maintain the Economic Uncertainties Fund at around 3% of General Fund
expenditures but essentially no reserve has been budgeted in 1992-93 or
1993-94 because reserves have been reduced by the recession.
Throughout the 1980s, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to
local public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about
34%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse
economic, fiscal, and budget conditions. The economic recession seriously
affected State tax revenues. It also caused increased expenditures for health
and welfare programs. The State is also facing a structural imbalance in its
budget with the largest programs supported by the General Fund (education,
health, welfare and corrections) growing at rates significantly higher than
the growth rates for the principal revenue sources of the General Fund. As a
result, the State entered a period of budget imbalance, with expenditures
exceeding revenues for four of the five fiscal years through 1991-92.
As the State fell into a deep recession in the summer of 1990, the State
budget fell sharply out of balance in the 1990-91 and 1991-92 fiscal years,
despite significant expenditure cuts and tax increases. The State had
accumulated a $2.8 billion budget deficit by June 30, 1992. This deficit also
severely reduced the State's cash resources, so that it had to rely on
external borrowing in the short-term markets to meet its cash needs.
With the failure to enact a budget by July 1, 1992, the State had no
legal authority to pay many of its vendors until the budget was passed;
nevertheless, certain obligations (such as debt service, school
apportionments, welfare payments and employee salaries) were payable because
of continuing or special appropriations or court orders. However, the State
Controller did not have enough cash to pay all of these ongoing obligations as
they came due, as well as valid obligations incurred in the prior fiscal year.
Starting on July 1, 1992, the Controller was required to issue
"registered warrants" in lieu of normal warrants backed by cash to pay many
State obligations. Available cash was used to pay constitutionally mandated
and priority obligations. Between July 1 and September 3, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants, all
of which were called for redemption by September 4, 1992 following enactment
of the 1992-93 Budget Act and issuance by the State of $3.3 billion of Interim
Notes.
The 1992-93 Budget Act, when finally adopted, was projected to eliminate
the State's accumulated deficit, with additional expenditure cuts and a $1.3
billion transfer of State education funding costs to local governments by
shifting local property taxes to school districts. However, as the recession
continued longer and deeper than expected, revenues once again were far below
projections, and only reached a level just equal to the amount of
expenditures. Thus, the State continued to carry its $2.8 billion budget
deficit at June 30, 1993.
The 1993-94 Budget Act was similar to the prior year, in reliance on
expenditure cuts and an additional $2.6 billion transfer of costs to local
government, particularly counties. A major feature of the budget was a
two-year plan to
<PAGE>
42 California IM-IT Intermediate Laddered Maturity Series 12
eliminate the accumulated deficit by borrowing into the 1994-95 fiscal year.
With the recession still continuing longer than expected, the 1994-95
Governor's Budget now projects that in the 1993-94 Fiscal Year, the General
Fund will have $900 million less revenue and $800 million higher expenditures
than budgeted. As a result revenues will only exceed expenditures by about
$400 million. If this projection is met, it will be the first operating
surplus in four years; however, some budget analysts outside the Department of
Finance project revenues in the balance of 1993-94 will not even meet the
revised, lower projection. In addition, the General Fund may have some
unplanned costs for relief related to the January 17, 1994 Northridge
earthquake.
The State has implemented its short-term borrowing as part of the deficit
elimination plan, and has also borrowed additional sums to cover cash flow
shortfalls in the spring of 1994, for a total of $3.2 billion, coming due in
July and December, 1994. Repayment of these short-term notes will require
additional borrowing, as the State's cash position continues to be adversely
affected.
The Governor's 1994-95 Budget proposal recognizes the need to bridge a
gap of around $5 billion by June 30, 1995. Over $3.1 billion of this amount is
being requested from the federal government as increased aid, particularly for
costs associated with incarcerating, educating and providing health and
welfare services to undocumented immigrants. However, President Clinton has
not included these costs in his proposed Fiscal 1995 Budget. The rest of the
budget gap is proposed to be closed with expenditure cuts and projected $600
million of new revenue assuming the State wins a tax case presently pending in
the U.S. Supreme Court. Thus the State will once again face significant
uncertainties and very difficult choices in the 1994-95 budget, as tax
increases are unlikely and many cuts and budget adjustments have been made in
the past three years.
The State's severe financial difficulties for the current and upcoming
budget years will result in continued pressure upon various local governments,
particularly school districts and counties which depend on State aid. Despite
efforts in recent years to increase taxes and reduce governmental
expenditures, there can be no assurance that the State will not face budget
gaps in the future.
State general obligation bonds are currently rated "Aa" by Moody's and
"A+" by S&P. Both of these ratings were recently reduced from "AAA" levels
which the State held until late 1991. There can be no assurance that such
ratings will be maintained in the future. It should be noted that the
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
The State is involved in certain legal proceedings (described in the
State's recent financial statements) that, if decided against the State, may
require the State to make significant future expenditures or may substantially
impair revenues.
Property tax revenues received by local governments declined more than
50% following passage of Proposition 13. Subsequently, the California
Legislature enacted measures to provide for the redistribution of the State's
General Fund surplus to local agencies, the reallocation of certain State
revenues to local agencies and the assumption of certain governmental
functions by the State to assist municipal issuers to raise revenues. Through
1990-91, local assistance (including public schools) accounted for around 75%
of General Fund spending. To reduce State General Fund support for school
districts, the 1992-93 and 1993-94 Budget Acts caused local governments to
transfer $3.9 billion of property tax revenues to school districts,
representing loss of the post-Proposition 13 "bailout" aid. Local governments
have in return received greater revenues and greater flexibility to operate
health and welfare programs. To the extent the State should be constrained by
its Article XIIIB appropriations limit, or its obligation to conform to
Proposition 98, or other fiscal considerations, the absolute level, or the
rate of growth, of State assistance to local governments may be reduced. Any
such reductions in State aid could compound the serious fiscal constraints
already experienced by many local governments, particularly counties. The
Richmond Unified School District (Contra Costa County) entered bankruptcy
proceedings in May 1991, but the proceedings have been dismissed.
California Municipal Obligations which are assessment bonds may be
adversely affected by a general decline in real estate values or a slowdown in
real estate sales activity. In many cases, such bonds are secured by land
which is undeveloped at the time of issuance but anticipated to be developed
within a few years after issuance. In the event of
<PAGE>
California IM-IT Intermediate Laddered Maturity Series 12 43
such reduction or slowdown, such development may not occur or may be delayed,
thereby increasing the risk of a default on the bonds. Because the special
assessments or taxes securing these bonds are not the personal liability of
the owners of the property assessed, the lien on the property is the only
security for the bonds. Moreover, in most cases the issuer of these bonds is
not required to make payments on the bonds in the event of delinquency in the
payment of assessments or taxes, except from amounts, if any, in a reserve
fund established for the bonds.
Certain California long-term lease obligations, though typically payable
from the general fund of the municipality, are subject to "abatement" in the
event the facility being leased is unavailable for beneficial use and
occupancy by the municipality during the term of the lease. Abatement is not a
default, and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement occurs.
The most common cases of abatement are failure to complete construction of the
facility before the end of the period during which lease payments have been
capitalized and uninsured casualty losses to the facility (e.g., due to
earthquake). In the event abatement occurs with respect to a lease obligation,
lease payments may be interrupted (if all available insurance proceeds and
reserves are exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were
taken over by a State receiver (including a brief period under bankruptcy
court protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was a named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the original lease transaction. The trial
court upheld the validity of the lease, and the case is expected to be
settled, but if it is not, further appeals may occur. Any ultimate judgment
against the Trustee may have adverse implications for lease transactions of a
similar nature by other California entities.
The repayment of industrial development securities secured by real
property may be affected by California laws limiting foreclosure rights of
creditors. Securities backed by health care and hospital revenues may be
affected by changes in State regulations governing cost reimbursements to
health care providers under Medi-Cal (the State's Medicaid program), including
risks related to the policy of awarding exclusive contracts to certain
hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g., because of a major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after the
enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are the
Issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to determine the impact of any
such legislation on California Municipal Obligations in which the Fund may
invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California Municipal Obligations.
<PAGE>
44 California IM-IT Intermediate Laddered Maturity Series 12
Substantially all of California is within an active geologic region
subject to major seismic activity. Any California Municipal Obligation in the
Portfolio could be affected by an interruption of revenues because of damaged
facilities, or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could be
constrained by the inability of (i) an Issuer to have obtained earthquake
insurance coverage at reasonable rates; (ii) an insurer to perform on its
contracts of insurance in the event of widespread losses; or (iii) the Federal
or State government to appropriate sufficient funds within their respective
budget limitations.
TAX STATUS. For a discussion of the Federal tax status of income earned
on California IM-IT Intermediate Laddered Maturity Trust Units, see "Other
Matters--Federal Tax Status".
In the opinion of Orrick, Herrington & Sutcliffe, special counsel to the
Fund for California tax matters, under existing California income and property
tax law applicable to individuals who are California residents:
(1) the California IM-IT Intermediate Laddered Maturity Trust is not an
association taxable as a corporation and the income of the California
IM-IT Intermediate Laddered Maturity Trust will be treated as the
income of the Unitholders under the income tax laws of California;
(2) amounts treated as interest on the underlying Securities in the
California IM-IT Intermediate Laddered Maturity Trust which are exempt
from tax under California personal income tax and property tax laws
when received by the California IM-IT Intermediate Laddered Maturity
Trust will, under such laws, retain their status as tax-exempt
interest when distributed to Unitholders. However, interest on the
underlying Securities attributed to a Unitholder which is a
corporation subject to the California franchise tax laws may be
includable in its gross income for purposes of determining its
California franchise tax. Further, certain interest which is
attributable to a Unitholder subject to the California personal income
tax and which is treated as an item of tax preference for purposes of
the federal alternative minimum tax pursuant to Section 57(a)(5) of
the Internal Revenue Code of 1986 may also be treated as an item of
tax preference that must be taken into account in computing such
Unitholder's alternative minimum taxable income for purposes of the
California alternative minimum tax enacted by 1987 California
Statutes, chapter 1138. However, because of the provisions of the
California Constitution exempting the interest on bonds issued by the
State of California, or by local governments within the state, from
taxes levied on income, the application of the new California
alternative minimum tax to interest otherwise exempt from the
California personal income tax in some cases may be unclear;
(3) under California income tax law, each Unitholder in the California
IM-IT Intermediate Laddered Maturity Trust will have a taxable event
when the California IM-IT Intermediate Laddered Maturity Trust
disposes of a Security (whether by sale, exchange, redemption, or
payment at maturity) or when the Unitholder redeems or sells Units.
Because of the requirement that tax cost basis be reduced to reflect
amortization of bond premium, under some circumstances a Unitholder
may realize taxable gains when Units are sold or redeemed for an
amount equal to, or less than, their original cost. The total cost of
each Unit in the California IM-IT Intermediate Laddered Maturity Trust
to a Unitholder is allocated among each of the Bond issues held in the
California IM-IT Intermediate Laddered Maturity Trust (in accordance
with the proportion of the California IM-IT Intermediate Laddered
Maturity Trust comprised by each Bond issue) in order to determine his
per Unit tax cost for each Bond issue; and the tax cost reduction
requirements relating to amortization of bond premium will apply
separately to the per Unit tax cost of each Bond issue. Unitholders'
bases in their units, and the bases for their fractional interest in
each Trust asset, may have to be adjusted for their pro rata share of
accrued interest received, if any, on Securities delivered after the
Unitholders' respective settlement dates;
(4) under the California personal property tax laws, bonds (including
the Securities in the California IM-IT Intermediate Laddered Maturity
Trust) or any interest therein is exempt from such tax;
(5) any proceeds paid under the insurance policy issued to the
California IM-IT Intermediate Laddered Maturity Trust with respect to
the Securities which represent maturing interest on defaulted
obligations
<PAGE>
California IM-IT Intermediate Laddered Maturity Series 12 45
held by the Trustee will be exempt from California personal income tax
if, and to the same extent as, such interest would have been so exempt
if paid by the issuer of the defaulted obligations; and
(6) under Section 17280(b)(2) of the California Revenue and Taxation
Code, interest on indebtedness incurred or continued to purchase or
carry Units of the California IM-IT Intermediate Laddered Maturity
Trust is not deductible for the purposes of the California personal
income tax. While there presently is no California authority
interpreting this provision, Section 17280(b)(2) directs the
California Franchise Tax Board to prescribe regulations determining
the proper allocation and apportionment of interest costs for this
purpose. The Franchise Tax Board has not yet proposed or prescribed
such regulations. In interpreting the generally similar Federal
provision, the Internal Revenue Service has taken the position that
such indebtedness need not be directly traceable to the purchase or
carrying of Units (although the Service has not contended that a
deduction for interest on indebtedness incurred to purchase or improve
a personal residence or to purchase goods or services for personal
consumption will be disallowed). In the absence of conflicting
regulations or other California authority, the California Franchise
Tax Board generally has interpreted California statutory tax
provisions in accord with Internal Revenue Service interpretations of
similar Federal provisions.
At the respective times of issuance of the Securities, opinions relating
to the validity thereof and to the exemption of interest thereon from Federal
income tax and California personal income tax are rendered by bond counsel to
the respective issuing authorities. Except in certain instances in which
Orrick, Herrington & Sutcliffe acted as bond counsel to issuers of Securities,
and as such made a review of proceedings relating to the issuance of certain
Securities at the time of their issuance, Orrick, Herrington & Sutcliffe has
not made any special review for the California IM-IT Intermediate Laddered
Maturity Trust of the proceedings relating to the issuance of the Securities
or of the basis for such opinions.
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 49.03
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 2.05
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 46.98
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 46.98
Divided by 12............................................................................................ $ 3.92
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .13048
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 4.61%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 4.82%
Initial Distribution (August 1994)............................................................................. $ 1.57
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 3.92
PURCHASED INTEREST <F6>........................................................................................ $ 7.99
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
AUGUST 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.03 per Unit (which amount is the estimated interest to be earned per
Unit prior to the expected delivery dates for the "when, as and if
issued" Bonds included in this Trust). Should such estimated interest
exceed such amount, the Trustee will reduce its fee up to its annual fee.
After the first year, the Trustee's fee will be that amount indicated
above. Estimated annual interest income per Unit will be increased to
$49.06. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $2.08; 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 $2,940.
<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
<PAGE>
46 California IM-IT Intermediate Laddered Maturity Series 12
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>
California IM-IT Intermediate Laddered Maturity Series 12 47
<TABLE>
CALIFORNIA IM-IT INTERMEDIATE LADDERED MATURITY SERIES 12
(IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
CALIFORNIA
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> <C>
$ 600,000 Santa Clara Valley Water District (California) Refunding and
Improvement Certificates of Participation, Series 1994A (FGIC
Insured)**
480M--4.90% Due 2/1/1999..................................... YAAA $ 479,861
120M--5.00% Due 2/1/2000..................................... YAAA 119,589
545,000 West Sacramento Financing Authority (Yolo County, California)
1994 Revenue (Tax Allocation) Bonds, West Sacramento
Redevelopment Project (MBIA Insured)
#120M--4.80% Due 9/1/1999.................................... YAAA 119,372
#180M--4.90% Due 9/1/2000.................................... YAAA 178,327
#245M--5.00% Due 9/1/2001.................................... YAAA 242,303
300,000 California Statewide Communities Development Authority, Insured
Health Facilities Revenue Certificates of Participation
(UniHealth America) Series 1993A (AMBAC Indemnity Insured)
#4.80% Due 10/1/2000......................................... AAA 295,587
355,000 Industry Urban-Development Agency, City of Industry,
California, Civic-Recreational-Industrial Redevelopment
Project No. 1, 1992 Tax Allocation Refunding Bonds (MBIA
Insured)
5.30% Due 5/1/2001........................................... AAA 357,300
600,000 Chino Basin Regional Financing Authority (California) Revenue
Bonds, Series 1994 (Chino Basin Municipal Water District
Sewer System Project) AMBAC Indemnity Insured
#5.20% Due 8/1/2002.......................................... YAAA 596,418
600,000 Public Facilities Financing Authority of the City of San Diego,
California, Sewer Revenue Bonds, Series 1993 (AMBAC Indemnity
Insured)
#4.40% Due 5/15/2003......................................... AAA 556,548
$ 3,000,000 $ 2,945,305
</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>
48 Colorado IM-IT-- Series 69
COLORADO IM-IT TRUST
GENERAL. The Colorado IM-IT Trust consists of 8 issues of Securities.
One of the Bonds in the Colorado IM-IT Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Colorado IM-IT Trust) as follows: General Purpose, 4 (40%); Health Care,
2 (30%); Higher Education, 1 (17%) and General Obligations, 1 (13%). No Bond
issue has received a provisional rating.
SPECIAL CONSIDERATIONS. The State Constitution requires that expenditures
for any fiscal year not exceed revenues for such fiscal year. By statute, the
amount of General Fund revenues available for appropriation is based upon
revenue estimates which, together with other available resources, must exceed
annual appropriations by the amount of the unappropriated reserve (the
"Unappropriated Reserve"). The Unappropriated Reserve requirement for fiscal
year 1991, 1992 and 1993 was set at 3%. For fiscal year 1992 and thereafter,
General Fund appropriations are also limited by statute to an amount equal to
the cost of performing certain required reappraisals of taxable property plus
an amount equal to the lesser of (i) five percent of Colorado personal income
or (ii) 106% of the total General Fund appropriations for the previous fiscal
year. This restriction does not apply to any General Fund appropriations which
are required as a result of a new federal law, a final state or federal court
order or moneys derived from the increase in the rate or amount of any tax or
fee approved by a majority of the registered electors of the State voting at
any general election. In addition, the statutory limit on the level of General
Fund appropriations may be exceeded for a given fiscal year upon the
declaration of a State fiscal emergency by the State General Assembly.
The 1991 fiscal year end fund balance was $16.3 million, which was $62.8
million below the 3% Unappropriated Reserve requirement. As of the end of the
1992 fiscal year, the fund balance was $133.3 million, which was $49.1 million
over the 3% Unappropriated Reserve requirement. Based on June 20, 1993
estimates, the 1993 fiscal year ending fund balance is expected to be $281.8
million, or $189.7 million over the 3% required Unappropriated Reserve.
On November 3, 1992, voters in Colorado approved a constitutional
amendment (the "Amendment") which, in general, became effective December 31,
1992, and which could restrict the ability of the State and local governments
to increase revenues and impose taxes. The Amendment applies to the State and
all local governments, including home rule entities ("Districts").
Enterprises, defined as government-owned businesses authorized to issue
revenue bonds and receiving under 10% of annual revenue in grants from all
Colorado state and local governments combined, are excluded from the
provisions of the Amendment.
The provisions of the Amendment are unclear and will probably require
judicial interpretation. Among other provisions, beginning November 4, 1992,
the Amendment requires voter approval prior to tax increases, creation of
debt, or mill levy or valuation for assessment ratio increases. The Amendment
also limits increases in government spending and property tax revenues to
specified percentages. The Amendment requires that District property tax
revenues yield no more than the prior year's revenues adjusted for inflation,
voter approved changes and (except with regard to school districts) local
growth in property values according to a formula set forth in the Amendment.
School districts are allowed to adjust tax levies for changes in student
enrollment. Pursuant to the Amendment, local government spending is to be
limited by the same formula as the limitation for property tax revenues. The
Amendment limits increases in expenditures from the State general fund and
program revenues (cash funds) to the growth in inflation plus the percentage
change in State population in the prior calendar year. The basis for initial
spending and revenue limits are fiscal year 1992 spending and 1991 property
taxes collected in 1992. The basis for spending and revenue limits for fiscal
year 1994 and later years will be the prior fiscal year's spending and
property taxes collected in the prior calendar year. Debt service changes,
reductions and voter-approved revenue changes are excluded from the
calculation basis. The Amendment also prohibits new or increased real property
transfer tax rates, new State real property taxes and local District income
taxes.
According to the Colorado Economic Prespective, Fourth Quarter, FY
1992-93, June 20, 1993 (the "Economic Report"), inflation for 1992 was 3.7%
and population grew at the rate of 2.7% in Colorado. Accordingly, under the
Amendment, increases in State expenditures during the 1994 fiscal year will be
limited to 6.4% over expenditures during the 1993 fiscal year. The 1993 fiscal
year is the base year for calculating the limitation for the 1994 fiscal year.
For the 1993 fiscal year, the Office of State Planning and Budgeting estimates
that general fund revenues will total $3,341.7 million and that program
revenues (cash funds) will total $1,753.4 million, or total estimated base
revenues of $5,095.1 million. Expenditures for the 1994 fiscal year,
therefore, cannot exceed $5,421.2 million. However, the
<PAGE>
Colorado IM-IT-- Series 69 49
1994 fiscal year general fund and program revenues (cash funds) are projected
to be only $5,220.4 million, or $200.8 million less than expenditures allowed
under the spending limitation.
There is also a statutory restriction on the amount of annual increases
in taxes that the various taxing jurisdictions in Colorado can levy without
electoral approval. This restriction does not apply to taxes levied to pay
general obligation debt.
As the State experienced revenue shortfalls in the mid-1980s, it adopted
various measures, including impoundment of funds by the Governor, reduction of
appropriations by the General Assembly, a temporary increase in the sales tax,
deferral of certain tax reductions and inter-fund borrowings. On a GAAP basis,
the State had unrestricted General Fund balances at June 30 of approximately
$100.3 million in fiscal year 1988, $134.4 million in fiscal year 1989, $116.6
million in fiscal year 1990, $16.3 million in fiscal year 1991 and $133.3
million in fiscal year 1992. The fiscal year 1993 unrestricted general fund is
currently estimated to be $281.8 million.
For fiscal year 1992, the following tax categories generated the
following respective revenue percentages of the State's $2,995.8 million total
gross receipts: individual income taxes represented 53.7% of gross fiscal year
1992 receipts; excise taxes represented 33.4% of gross fiscal year 1992
receipts; and corporate income taxes represented 3.7% of gross fiscal year
1992 receipts. The final budget for fiscal year 1993 projects general fund
revenues of approximately $3,341.7 million and appropriations of approximately
$3,046.7 million. The percentages of general fund revenue generated by type of
tax for fiscal year 1993 are not expected to be significantly different from
fiscal year 1992 percentages.
Under its constitution, the State of Colorado is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions which are subject to annual
renewal at the option of the State. In addition, the State is authorized to
issue short-term revenue anticipation notes. Local governmental units in the
State are also authorized to incur indebtedness. The major source of financing
for such local government indebtedness is an ad valorem property tax. In
addition, in order to finance public projects, local governments in the State
can issue revenue bonds payable from the revenues of a utility or enterprise
or from the proceeds of an excise tax, or assessment bonds payable from
special assessments. Colorado local governments can also finance public
projects through leases which are subject to annual appropriation at the
option of the local government. Local governments in Colorado also issue tax
anticipation notes. The Amendment requires prior voter approval for the
creation of any multiple fiscal year debt or other financial obligation
whatsoever, except for refundings at a lower rate or obligations of an
enterprise.
Based on data published by the State of Colorado, Office of State
Planning and Budgeting as presented in the Economic Report, over 50% of
non-agricultural employment in Colorado in 1992 was concentrated in the retail
and wholesale trade and service sectors, reflecting the importance of tourism
to the State's economy and of Denver as a regional economic and transportation
hub. The government and manufacturing sectors followed as the fourth and fifth
largest employment sectors in the State, representing approximately 18.3% and
11.5%, respectively, of non-agricultural employment in the State in 1992.
According to the Economic Report, during the first quarter of 1993,
45,900 net new jobs were generated in the Colorado economy, an increase of
24.4% over the first quarter of 1992. However, the unemployment rate rose from
an average of 5.5% during the first quarter of 1992 to 5.8% during the first
quarter of 1993. Total retail sales increased by 9.8% during the first quarter
of 1993 as compared to the same period in 1992.
Personal income rose 6.6% in Colorado during 1992 and 5.5% in 1991. In
1992, Colorado was the twelfth fastest growing state in terms of personal
income growth. However, because of heavy migration into the state and a large
increase in low-paying retail sector jobs, per capita personal income in
Colorado increased by only 3.8% in 1992, 0.1% below the increase in per capita
personal income for the nation as a whole.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in the
Colorado IM-IT Trust), which, to varying degrees, have also experienced
reduced revenues as a result of recessionary conditions and other factors.
TAX STATUS. For a discussion of the Federal tax status of income earned
on Colorado IM-IT Trust Units, see "Other Matters--Federal Tax Status".
Neither the Sponsor nor its counsel have independently examined the Bonds
to be deposited in and held in the Trust. However, although Chapman and Cutler
expresses no opinion with respect to the issuance of the Bonds, in rendering
its opinion expressed herein, it has assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon
<PAGE>
50 Colorado IM-IT-- Series 69
is excludable from gross income for federal income tax purposes, and (iii)
interest on the Bonds, if received directly by a Unitholder, would be exempt
from the income tax imposed by the State that is applicable to individuals and
corporations (the "State Income Tax"). This opinion does not address the
taxation of persons other than full time residents of Colorado.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Colorado law:
Because Colorado income tax law is based upon the Federal law, the
Colorado IM-IT Trust is not an association taxable as a corporation for
purposes of Colorado income taxation.
With respect to Colorado Unitholders, in view of the relationship between
Federal and Colorado tax computations described above:
(1) Each Colorado Unitholder will be treated as owning a pro rata share
of each asset of the Colorado IM-IT Trust for Colorado income tax
purposes in the proportion that the number of Units of such Trust held
by the Unitholder bears to the total number of outstanding Units of
the Colorado IM-IT Trust, and the income of the Colorado IM-IT Trust
will therefore be treated as the income of each Colorado Unitholder
under Colorado law in the proportion described;
(2) Interest on Bonds that would not be includable in income for
Colorado income tax purposes when paid directly to a Colorado
Unitholder will be exempt from Colorado income taxation when received
by the Colorado IM-IT Trust and attributed to such Colorado Unitholder
and when distributed to such Colorado Unitholder;
(3) Any proceeds paid under an insurance policy or policies issued to
the Colorado IM-IT Trust with respect to the Bonds in the Colorado
IM-IT Trust which represent maturing interest on defaulted obligations
held by the Trustee will be excludable from Colorado adjusted gross
income if, and to the same extent as, such interest is so excludable
for federal income tax purposes;
(4) Any proceeds paid under individual policies obtained by issuers of
Bonds in the Colorado IM-IT Trust which represent maturing interest on
defaulted obligations held by the Trustee will not be includable in
income for Colorado income tax purposes if, and to the same extent as,
such interest is not so includable for federal income tax purposes;
(5) Each Colorado Unitholder will realize taxable gain or loss when the
Colorado IM-IT Trust disposes of a Bond (whether by sale, exchange,
redemption, or payment at maturity) or when the Colorado Unitholder
redeems or sells Units at a price that differs from original cost as
adjusted for amortization of bond discount or premium and other basis
adjustments (including any basis reduction that may be required to
reflect a Colorado Unitholder's share of interest, if any, accruing on
Bonds during the interval between the Colorado Unitholder's settlement
date and the date such Bonds are delivered to the Colorado IM-IT
Trust, if later);
(6) Tax cost reduction requirements relating to amortization of bond
premium may, under some circumstances, result in Colorado Unitholders
realizing taxable gain when their Units are sold or redeemed for an
amount equal to or less than their original cost; and
(7) If interest on indebtedness incurred or continued by a Colorado
Unitholder to purchase Units in the Colorado IM-IT Trust is not
deductible for federal income tax purposes, it also will be
non-deductible for Colorado income tax purposes.
Unitholders should be aware that all tax-exempt interest, including their
share of interest on the Bonds paid to the Colorado IM-IT Trust, is taken into
account for purposes of determining eligibility for the Colorado Property Tax/
Rent/Heat Rebate.
<PAGE>
Colorado IM-IT-- Series 69 51
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME:
Estimated Annual Interest Income per Unit................................................................ $ 57.14
Less: Estimated Annual Expense per Unit <F1>............................................................. $ 2.00
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 55.14
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 55.14
Divided by 12............................................................................................ $ 4.60
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .15315
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F2><F3><F4>........................................... 5.51%
ESTIMATED LONG-TERM RETURN <F2><F3><F4>........................................................................ 5.59%
Initial Distribution (August 1994)............................................................................. $ 1.84
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F4>.................................................................... $ 4.60
PURCHASED INTEREST <F5>........................................................................................ $ 9.39
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
AUGUST 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>
52 Colorado IM-IT-- Series 69
<TABLE>
COLORADO INSURED MUNICIPALS INCOME TRUST
SERIES 69 (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND COLORADO
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>
$ 200,000 Town of Parker, Colorado, Sales and Use Tax Refunding Revenue
Bonds, Series 1993 (MBIA Insured) 2003 @ 100
#5.375% Due 11/1/2011........................................ AAA 2007 @ 100 S.F. $ 185,020
250,000 Arvada, Colorado, Sales and Use Tax, Revenue Refunding and
Improvement Bonds (FGIC Insured) 2002 @ 100
#6.25% Due 12/1/2012......................................... AAA 2008 @ 100 S.F. 252,843
250,000 Town of Vail, Colorado, Sales Tax Revenue Refunding and
Improvement Bonds, Series 1992B (MBIA Insured) 2002 @ 101
#6.125% Due 12/1/2012........................................ AAA 2005 @ 100 S.F. 250,545
500,000 City of Louisville, Colorado, Sales Tax Refunding Revenue
Bonds, Series 1993 (FSA Insured) 2003 @ 101
#5.20% Due 12/1/2013......................................... AAA 2009 @ 100 S.F. 449,115
400,000 Commonwealth of Puerto Rico, Public Improvement Bonds
(Unlimited Tax-General Obligation) Series 1993 (AMBAC
Indemnity Insured) 2002 @ 101.5
#5.875% Due 7/1/2018......................................... AAA 2016 @ 100 S.F. 388,288
500,000 University of Colorado Hospital Authority, Hospital Revenue
Bonds, Series 1992A (AMBAC Indemnity Insured) 2002 @ 102
#6.40% Due 11/15/2022........................................ AAA 2013 @ 100 S.F. 505,605
400,000 Mesa County Colorado Revenue Bonds (Sisters of Charity of
Leavenworth Health Services Corporation) Series 1994 (MBIA
Insured) 2003 @ 102
#5.00% Due 12/1/2023......................................... AAA 2015 @ 100 S.F. 335,092
500,000 University of Northern Colorado, Revenue Refunding &
Improvement Bonds, Auxiliary Facilities System (MBIA Insured) 2004 @ 101
#6.00% Due 6/1/2024.......................................... AAA 2015 @ 100 S.F. 488,930
$ 3,000,000 $ 2,855,438
</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>
Michigan IM-IT-- Series 118 53
MICHIGAN IM-IT TRUST
GENERAL. The Michigan IM-IT Trust consists of 8 issues of Securities.
Four of the Bonds in the Michigan IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Michigan IM-IT Trust) as follows: General Obligations, 4 (38%); Higher
Education, 2 (30%); Health Care, 1 (16%) and Transportation, 1 (16%). No Bond
issue has received a provisional rating.
SPECIAL CONSIDERATIONS. Investors should be aware that the economy of the
State of Michigan has, in the past, proven to be cyclical, due primarily to
the fact that the leading sector of the State's economy is the manufacturing
of durable goods. While the State's efforts to diversify its economy have
proven successful, as reflected by the fact that the share of employment in
the State in the durable goods sector has fallen from 33.1 percent in 1960 to
17.9 percent in 1990, durable goods manufacturing still represents a sizable
portion of the State's economy. As a result, any substantial national economic
downturn is likely to have an adverse effect on the economy of the State and
on the revenues of the State and some of its local governmental units.
In May 1986, Moody's Investors Service raised the State's general
obligation bond rating to "A1". In October 1989, Standard & Poor's Corporation
raised its rating on the State's general obligation bonds to "AA".
The State's economy could continue to be affected by changes in the auto
industry, notably consolidation and plant closings resulting from competitive
pressures and over-capacity. Such actions could adversely affect State
revenues and the financial impact on the local units of government in the
areas in which plants are closed could be more severe.
General Motors Corporation has announced the scheduled closing of several
of its plants in Michigan in 1993 and 1994. The impact these closures will
have on the State's revenues and expenditures is not currently known. The
impact on the financial condition of the municipalities in which the plants
are located may be more severe than the impact on the State itself.
In recent years, the State has reported its financial results in
accordance with generally accepted accounting principles. For each of the five
fiscal years ending with the fiscal year ended September 30, 1989, the State
reported positive year-end General Fund balances and positive cash balances in
the combined General Fund/School Aid Fund. For the fiscal years ending
September 30, 1990 and 1991, the State reported negative year-end General Fund
Balances of $310.4 million and $169.4 million, respectively, but ended the
1992 fiscal year with its general fund in balance and ended the 1993 fiscal
year with a small general fund surplus. A positive cash balance in the
combined General Fund/School Aid Fund was recorded at September 30, 1990. In
the 1991 thru 1993 fiscal years the State experienced deteriorating cash
balances which necessitated short term borrowing and the deferral of certain
scheduled cash payments. The State borrowed $900 million for cash flow
purposes in the 1993 fiscal year, which was repaid on September 30, 1993. The
State's Budget Stabilization Fund received a $283 million transfer from the
General Fund in the 1993 State fiscal year, bringing the fund balance to $303
million at September 30, 1993.
The Michigan Constitution of 1963 limits the amount of total revenues of
the State raised from taxes and certain other sources to a level for each
fiscal year equal to a percentage of the State's personal income for the prior
calendar year. In the event that the State's total revenues exceeds the limit
by 1 percent or more, the Michigan Constitution of 1963 requires that the
excess be refunded to taxpayers.
On March 15, 1994, Michigan voters approved a school finance reform
amendment to the State's Constitution which, among other things, increases the
State sales tax rate from 4% to 6% and places a cap on property assessment
increases for all property taxes. Such approval triggers the effectiveness of
legislation under which the State's income tax rate will be cut from 4.6% to
4.4%, some property taxes will be reduced and school funding will be provided
from a combination of property taxes and state revenues, some of which will be
provided from other new or increased State taxes. The legislation also
contains other proposals that may reduce or alter the revenues of local units
of government, and tax increment bonds could be particularly affected. While
the ultimate impact of the constitutional amendment and related legislation
cannot yet be accurately predicted, investors should be alert to the potential
effect of such measures upon the operations and revenues of Michigan local
units of government.
Although all or most of the Bonds in the Michigan IM-IT Trust are revenue
obligations or general obligations of local governments or authorities rather
than general obligations of the State of Michigan itself, there can be no
assurance that any financial difficulties the State may experience will not
adversely affect the market value or marketability of the Bonds or the ability
of the respective obligors to pay interest on or principal of the Bonds,
<PAGE>
54 Michigan IM-IT-- Series 118
particularly in view of the dependency of local governments and other
authorities upon State aid and reimbursement programs and, in the case of
bonds issued by the State Building Authority, the dependency of the State
Building Authority on the receipt of rental payments from the State to meet
debt service requirements upon such bonds. In the 1991 fiscal year, the State
deferred certain scheduled cash payments to municipalities, school districts,
universities and community colleges. While such deferrals were made up at
specified later dates, similar future deferrals could have an adverse impact
on the cash position of some local governmental units. Additionally, the State
reduced revenue sharing payments to municipalities below that level provided
under formulas by $10.9 million in the 1991 fiscal year, up $34.4 million in
the 1992 fiscal year, $45.5 million in the 1993 fiscal year and $64.6 million
(budgeted) in the 1994 fiscal year.
The Michigan IM-IT Trust may contain general obligation bonds of local
units of government pledging the full faith and credit of the local unit which
are payable from the levy of ad valorem taxes on taxable property within the
jurisdiction of the local unit. Such bonds issued prior to December 22, 1978,
or issued after December 22, 1978 with the approval of the electors of the
local unit, are payable from property taxes levied without limitation as to
rate or amount. With respect to bonds issued after December 22, 1978, and
which were not approved by the electors of the local unit, the tax levy of the
local unit for debt service purposes is subject to constitutional, statutory
and charter tax rate limitations. In addition, several major industrial
corporations have instituted challenges of their ad valorem property tax
assessments in a number of local municipal units in the State. If successful,
such challenges could have an adverse impact on the ad valorem tax bases of
such units which could adversely affect their abiltiy to raise funds for
operation and debt service requirements.
TAX STATUS. For a discussion of the Federal tax status of income earned
on Michigan IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Miller, Canfield, Paddock and Stone, special counsel to
the Fund for Michigan tax matters, under existing Michigan law:
The Michigan IM-IT Trust and the owners of Units will be treated for
purposes of the Michigan income tax laws and the Single Business Tax in
substantially the same manner as they are for purposes of the Federal income
tax laws, as currently enacted. Accordingly, we have relied upon the opinion
of Messrs. Chapman and Cutler as to the applicability of Federal income tax
under the Internal Revenue Code of 1986 to the Michigan IM-IT Trust and the
Holders of Units.
Under the income tax laws of the State of Michigan, the Michigan IM-IT
Trust is not an association taxable as a corporation; the income of the
Michigan IM-IT Trust will be treated as the income of the Unitholders and be
deemed to have been received by them when received by the Michigan IM-IT
Trust. Interest on the underlying Bonds which is exempt from tax under these
laws when received by Michigan IM-IT Trust will retain its status as tax
exempt interest to the Unitholders.
For purposes of the foregoing Michigan tax laws, each Unitholder will be
considered to have received his pro rata share of Bond interest when it is
received by the Michigan IM-IT Trust, and each Unitholder will have a taxable
event when the Michigan IM-IT Trust disposes of a Bond (whether by sale,
exchange, redemption or payment at maturity) or when the Unitholder redeems or
sells his Certificate to the extent the transaction constitutes a taxable
event for Federal income tax purposes. The tax cost of each unit to a
Unitholder will be established and allocated for purposes of these Michigan
tax laws in the same manner as such cost is established and allocated for
Federal income tax purposes.
Under the Michigan Intangibles Tax, the Michigan IM-IT Trust is not
taxable and the pro rata ownership of the underlying Bonds, as well as the
interest thereon, will be exempt to the Unitholders to the extent the Michigan
IM-IT Trust consists of obligations of the State of Michigan or its political
subdivisions or municipalities, or of obligations of possessions of the United
States.
The Michigan Single Business Tax replaced the tax on corporate and
financial institution income under the Michigan Income Tax, and the Intangible
Tax with respect to those intangibles of persons subject to the Single
Business Tax the income from which would be considered in computing the Single
Business Tax. Persons are subject to the Single Business Tax only if they are
engaged in "business activity", as defined in the Act. Under the Single
Business Tax, both interest received by the Michigan IM-IT Trust on the
underlying Bonds and any amount distributed from the Michigan IM-IT Trust to a
Unitholder, if not included in determining taxable income for Federal income
tax purposes, is also not included in the adjusted tax base upon which the
Single Business Tax is computed, of either the Michigan IM-IT Trust or the
Unitholders. If the Michigan IM-IT Trust or the Unitholders have a taxable
event for Federal income tax purposes when the Michigan IM-IT Trust disposes
of a Bond (whether by sale, exchange, redemption or
<PAGE>
Michigan IM-IT-- Series 118 55
payment at maturity) or the Unitholder redeems or sells his Certificate, an
amount equal to any gain realized from such taxable event which was included
in the computation of taxable income for Federal income tax purposes (plus an
amount equal to any capital gain of an individual realized in connection with
such event but excluded in computing that individual's Federal taxable income)
will be included in the tax base against which, after allocation,
apportionment and other adjustments, the Single Business Tax is computed. The
tax base will be reduced by an amount equal to any capital loss realized from
such a taxable event, whether or not the capital loss was deducted in
computing Federal taxable income in the year the loss occurred. Unitholders
should consult their tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee of the
Trust, or paid under individual policies obtained by issuers of Bonds, which,
when received by the Unitholders, represent maturing interest on defaulted
obligations held by the Trustee, will be excludable from the Michigan income
tax laws and the Single Business Tax if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of the defaulted
obligations. While treatment under the Michigan Intangibles Tax is not
premised upon the characterization of such proceeds under the Internal Revenue
Code, the Michigan Department of Treasury should adopt the same approach as
under the Michigan income tax laws and the Single Business Tax.
As the Tax Reform Act of 1986 eliminates the capital gain deduction for
tax years beginning after December 31, 1986, the federal adjusted gross
income, the computation base for the Michigan Income Tax, of a Unitholder will
be increased accordingly to the extent such capital gains are realized when
the Michigan IM-IT Trust disposes of a Bond or when the Unitholder redeems or
sells a Unit, to the extent such transaction constitutes a taxable event for
Federal income tax purposes.
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 58.14
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 2.02
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 56.12
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 56.12
Divided by 12............................................................................................ $ 4.68
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .15587
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.61%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.73%
Initial Distribution (August 1994)............................................................................. $ 1.87
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.68
PURCHASED INTEREST <F6>........................................................................................ $ 9.65
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
AUGUST 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.07 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
$58.21. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $2.09; 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".
<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.
<PAGE>
56 Michigan IM-IT-- Series 118
<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>
Michigan IM-IT-- Series 118 57
<TABLE>
MICHIGAN INSURED MUNICIPALS INCOME TRUST
SERIES 118 (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND MICHIGAN
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>
$ 200,000 Brighton Area School District, Michigan, Unlimited Tax-General
Obligation School Bonds, Series 1993-I (FSA Insured) 2003 @ 101.5
#5.25% Due 5/1/2014.......................................... AAA 2011 @ 100 S.F. $ 175,780
100,000 Grand Haven Area Public Schools, Counties of Ottawa and
Muskegon, State of Michigan, 1994 School Building and Site
and Refunding Bonds (General Obligation-Unlimited Tax) MBIA
Insured 2003 @ 102
#6.05% Due 5/1/2014.......................................... AAA 2011 @ 100 S.F. 97,682
500,000 Board of Control, Saginaw Valley State University (Michigan)
General Revenue Bonds, Series 1993 (MBIA Insured) 2003 @ 102
#5.375% Due 7/1/2016......................................... AAA 2010 @ 100 S.F. 446,620
500,000 Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Oakwood Hospital Obligated Group) Series
1993A (FGIC Insured) 2003 @ 102
#5.625% Due 11/1/2018........................................ AAA 2014 @ 100 S.F. 452,165
400,000 Board of Control of Ferris State University (Michigan) General
Revenue Bonds, Series 1993 (AMBAC Indemnity Insured)** 2003 @ 102
#6.25% Due 10/1/2019......................................... AAA 2015 @ 100 S.F. 399,440
500,000 State of Michigan, State Trunk Line Fund Refunding Revenue
Bonds, Series 1992B-2 (MBIA Insured) 2002 @ 100
#5.50% Due 10/1/2021......................................... AAA 2013 @ 100 S.F. 448,640
350,000 Hudsonville Public Schools, Counties of Ottawa and Allegan,
State of Michigan, 1994 School Building and Site and
Refunding Bonds (General Obligation-Unlimited Tax) Series B
(FGIC Insured) 2004 @ 102
6.10% Due 5/1/2024........................................... AAA 2020 @ 100 S.F. 340,067
500,000 Zeeland Public Schools, Counties of Ottawa and Allegan, State
of Michigan, 1994 School Building and Site and Refunding
Bonds (General Obligation-Unlimited Tax) Series B (MBIA
Insured) 2004 @ 102
#6.10% Due 5/1/2024.......................................... AAA 2020 @ 100 S.F. 485,810
$ 3,050,000 $ 2,846,204
</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>
58 New Jersey IM-IT-- Series 94
NEW JERSEY IM-IT TRUST
GENERAL. The New Jersey IM-IT Trust consists of 8 issues of Securities.
Two of the Bonds in the New Jersey IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New Jersey IM-IT Trust) as follows: Health Care, 3 (32%); General
Obligations, 2 (20%); General Purpose, 1 (16%); Higher Education, 1 (16%) and
Industrial Revenue, 1 (16%). No Bond issue has received a provisional rating.
SPECIAL CONSIDERATIONS. As described above, the New Jersey IM-IT Trust
consists of a portfolio of Bonds. The Trust is therefore susceptible to
political, economic or regulatory factors affecting issuers of the Bonds. The
following information provides only a brief summary of some of the complex
factors affecting the financial situation in New Jersey (the "State") and is
derived from sources that are generally available to investors and is believed
to be accurate. It is based in part on information obtained from various State
and local agencies in New Jersey. No independent verification has been made of
any of the following information.
New Jersey is the ninth largest state in population and the fifth
smallest in land area. With an average of 1,050 people per square mile, it is
the most densely populated of all the states. The state's economic base is
diversified, consisting of a variety of manufacturing, construction and
service industries, supplemented by rural areas with selective commercial
agriculture. Historically, New Jersey's average per capita income has been
well above the national average, and in 1992 the State ranked second among
states in per capita personal income ($26,457).
The New Jersey Economic Policy Council, a statutory arm of the New Jersey
Department of Commerce and Economic Development, has reported in New Jersey
Economic Indicators, a monthly publication of the New Jersey Department of
Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from
the export boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost momentum. In
the meantime, the prolonged fast growth in the State in the mid 1980s resulted
in a tight labor market situation, which has led to relatively high wages and
housing prices. This means that, while the incomes of New Jersey residents are
relatively high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration
of New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities and trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an estimated 6.9%
in May 1994, which is higher than the national average of 6.0% in May 1994.
Economic recovery is likely to be slow and uneven in New Jersey, with
unemployment receding at a correspondingly slow pace, due to the fact that
some sectors may lag due to continued excess capacity. In addition, employers
even in rebounding sectors can be expected to remain cautious about hiring
until they become convinced that improved business will be sustained. Also,
certain firms will continue to merge or downsize to increase profitability.
Debt Service. The primary method for State financing of capital projects
is through the sale of the general obligation bonds of the State. These bonds
are backed by the full faith and credit of the State tax revenues and certain
other fees are pledged to meet the principal and interest payments and if
provided, redemption premium payments, if any, required to repay the bonds. As
of June 30, 1993, there was a total authorized bond indebtedness of
approximately $8.98 billion, of which $3.6 billion was issued and outstanding,
$4.0 billion was retired (including bonds for which provision for payment has
been made through the sale and issuance of refunding bonds) and $1.38 billion
was unissued. The debt service obligation for such outstanding indebtedness is
$119.9 million for fiscal year 1994.
New Jersey's Budget and Appropriation System. The State operates on a
fiscal year beginning July 1 and ending June 30. At the end of fiscal year
1989, there was a surplus in the State's general fund (the fund into which all
State revenues not otherwise restricted by statute are deposited and from
which appropriations are made) of $411.2
<PAGE>
New Jersey IM-IT-- Series 94 59
million. At the end of fiscal year 1990, there was a surplus in the general
fund of $1 million. At the end of fiscal year 1991, there was a surplus in the
general fund of $1.4 million. New Jersey closed its fiscal year 1992 with a
surplus of $760.8 million. It is estimated that New Jersey closed its fiscal
year 1993 with a surplus of $361.3 million.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes (consisting
of $1.5 billion in sales and use taxes and $1.3 billion in income taxes), the
biggest tax hike in New Jersey history. There can be no assurance that
receipts and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the
increase in the State's sales and use tax rate from 6% to 7% and the
elimination of exemptions for certain products and services not previously
subject to the tax, such as telephone calls, paper products (which has since
been reinstated), soaps and detergents, janitorial services, alcoholic
beverages and cigarettes. At the time of enactment, it was projected that
these taxes would raise approximately $1.5 billion in additional revenue.
Projections and estimates of receipts from sales and use taxes, however, have
been subject to variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the
form of an increased state income tax on individuals. At the time of
enactment, it was projected that this increase would raise approximately $1.3
billion in additional income taxes to fund a new school aid formula, a new
homestead rebate program and state assumption of welfare and social services
costs. Projections and estimates of receipts from income taxes, however, have
also been subject to variance in recent fiscal years. Under the legislation,
income tax rates increased from their previous range of 2% to 3.5% to a new
range of 2% to 7%, with the higher rates applying to married couples with
incomes exceeding $70,000 who file joint returns, and to individuals filing
single returns with incomes of more than $35,000.
The Florio administration has contended that the income tax package will
help reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation the State will assume
approximately $289 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition,
under the new formula for funding school aid, an extra $1.1 billion is
proposed to be sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased from
7% to 6%, and effective January 1, 1994, a 5% reduction in the income tax
rates was enacted.
On June 30, 1994, Governor Whitman signed the New Jersey Legislature's
$15.7 billion budget for Fiscal Year 1995. The balanced budget, which includes
$455 million in surplus, is $141 million less than the 1994 budget. Whether
the State can achieve a balanced budget depends on its ability to enact and
implement expenditure reductions and to collect the estimated tax revenues.
The Fiscal Year 1994 Appropriations Act forecasts sales and use tax
collections of $3.920 billion, a 7.5% increase from receipts estimated in the
Revised Revenue Estimates for Fiscal Year 1993. It also forecasts gross income
tax collections of $4.748 billion, a 10.6% increase from receipts estimated
for Fiscal Year 1993, and corporation business tax collections of $1.1
billion, a 15.4% increase from receipts estimated for Fiscal Year 1993.
However, projections and estimates of receipts from taxes have been subject to
variance in recent years as a result of several factors, most recently a
significant slowdown in the national, regional and State economies, sluggish
employment and uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax laws.
Litigation. The State is a party in numerous legal proceedings pertaining
to matters incidental to the performance of routine governmental operations.
Such litigation includes, but is not limited to, claims asserted against the
State arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are cases challenging the following: the
formula relating to State aid to public schools, the method by which the State
shares with its counties maintenance recoveries and costs for residents in
State institutions, unreasonably low Medicaid payment rates for long-term
facilities in New Jersey, the obligation of counties to maintain Medicaid or
Medicare eligible residents of institutions
<PAGE>
60 New Jersey IM-IT-- Series 94
and facilities for the developmentally disabled, taxes paid into the Spill
Compensation Fund (a fund established to provide money for use by the State to
remediate hazardous waste sites and to compensate other persons for damages
incurred as a result of hazardous waste discharge) based on Federal
preemption, various provisions, and the constitutionality of the Fair
Automobile Insurance Reform Act of 1990, the State's method of funding the
judicial system, certain provisions of New Jersey's hospital rate-setting
system, the adequacy of Medicaid reimbursement for services rendered by
doctors and dentists to Medicaid eligible children, the Commissioner of
Health's calculation of the hospital assessment required by the Health Care
Cost Reduction Act of 1991, refusal of the State to share with Camden County
federal funding the State recently received for disproportionate share
hospital payments made to county psychiatric facilities, and recently enacted
legislation calling for a revaluation of several New Jersey public employee
pension funds in order to provide additional revenues for the State's general
fund. Adverse judgments in these and other matters could have the potential
for either a significant loss of revenue or a significant unanticipated
expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The State is unable to estimate its exposure for
these claims.
Debt Ratings. For many years, both Moody's Investors Service, Inc. and
Standard and Poor's Corporation rated New Jersey general obligation bonds Aaa
and "AAA", respectively. On July 3, 1991, however, Standard and Poor's
Corporation downgraded New Jersey general obligation bonds to "AA+." On June
4, 1992, Standard and Poor's Corporation placed New Jersey general obligation
bonds on CreditWatch with negative implications, citing as its principal
reason for its caution the unexpected denial by the federal government of New
Jersey's request for $450 million in retroactive Medicaid payments for
psychiatric hospitals. These funds were critical to closing a $1 billion gap
in the State's $15 billion budget for fiscal year 1992 which ended on June 30,
1992. Under New Jersey state law, the gap in the budget must be closed before
the new budget year begins on July 1, 1992. Standard and Poor's suggested the
State could close fiscal 1992's budget gap and help fill fiscal 1993's hole by
a reversion of $700 million of pension contributions to its general fund under
a proposal to change the way the State calculates its pension liability.
On July 6, 1992, Standard and Poor's Corporation reaffirmed its "AA+"
rating for New Jersey general obligation bonds and removed the debt from its
CreditWatch list, although it stated that New Jersey's long-term financial
outlook was negative. Standard and Poor's Corporation was concerned that the
State was entering fiscal 1993 with only a $26 million surplus and remained
concerned about whether the State economy would recover quickly enough to meet
lawmakers' revenue projections. It also remained concerned about the recent
federal ruling leaving in doubt how much the State was due in retroactive
Medicaid reimbursements and a ruling by a federal judge, now on appeal, of the
State's method for paying for uninsured hospital patients. There can be no
assurance that these ratings will continue or that particular bond issues may
not be adversely affected by changes in the State or local economic or
political conditions.
On August 24, 1992, Moody's Investors Service Inc. downgraded New Jersey
general obligation bonds to "Aa1," stating that the reduction reflected a
developing pattern of reliance on nonrecurring measures to achieve budgetary
balance, four years of financial operations marked by revenue shortfalls and
operating deficits, and the likelihood that serious financial pressures will
persist.
Although New Jersey recently received $412 million in settlement of its
$450 million dispute with the federal government for retroactive Medicaid
reimbursements, neither Moody's nor Standard and Poor's has revised its rating
for New Jersey general obligation bonds.
TAX STATUS. For a discussion of the Federal tax status of income earned
on New Jersey IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Pitney, Hardin, Kipp & Szuch, special counsel to the
Fund for New Jersey tax matters, under existing law:
<PAGE>
New Jersey IM-IT-- Series 94 61
(1) The New Jersey IM-IT Trust will be recognized as a trust and not an
association taxable as a corporation. The New Jersey IM-IT Trust will
not be subject to the New Jersey Corporation Business Tax or the New
Jersey Corporation Income Tax.
(2) With respect to the non-corporate Unitholders who are residents of
New Jersey, the income of the New Jersey IM-IT Trust which is
allocable to each such Unitholder will be treated as the income of
such Unitholder under the New Jersey Gross Income Tax. Interest on the
underlying Bonds which would be exempt from New Jersey Gross Income
Tax if directly received by such Unitholder will retain its status as
tax-exempt interest when received by the New Jersey IM-IT Trust and
distributed to such Unitholder. Any proceeds paid under the insurance
policy issued to the Trustee of the New Jersey IM-IT Trust with
respect to the Bonds or under individual policies obtained by issuers
of Bonds which represent maturing interest on defaulted obligations
held by the Trustee will be exempt from New Jersey Gross Income Tax
if, and to the same extent as, such interest would have been so exempt
if paid by the issuer of the defaulted obligations.
(3) A non-corporate Unitholder will not be subject to the New Jersey
Gross Income Tax on any gain realized either when the New Jersey IM-IT
Trust disposes of a Bond (whether by sale, exchange, redemption, or
payment at maturity), when the Unitholder redeems or sells his Units
or upon payment of any proceeds under the insurance policy issued to
the Trustee of the New Jersey IM-IT Trust with respect to the Bonds or
under individual policies obtained by issuers of Bonds which represent
maturing principal on defaulted obligations held by the Trustee. Any
loss realized on such disposition may not be utilized to offset gains
realized by such Unitholder on the disposition of assets the gain on
which is subject to the New Jersey Gross Income Tax.
(4) Units of the New Jersey IM-IT Trust may be taxable on the death of
a Unitholder under the New Jersey Transfer Inheritance Tax Law or the
New Jersey Estate Tax Law.
(5) If a Unitholder is a corporation subject to the New Jersey
Corporation Business Tax or New Jersey Corporation Income Tax,
interest from the Bonds in the New Jersey IM-IT Trust which is
allocable to such corporation will be includable in its entire net
income for purposes of the New Jersey Corporation Business Tax or New
Jersey Corporation Income Tax, less any interest expense incurred to
carry such investment to the extent such interest expense has not been
deducted in computing Federal taxable income. Net gains derived by
such corporation on the disposition of the Bonds by the New Jersey
IM-IT Trust or on the disposition of its Units will be included in its
entire net income for purposes of the New Jersey Corporation Business
Tax or New Jersey Corporation Income Tax. Any proceeds paid under the
insurance policy issued to the Trustee of the New Jersey IM-IT Trust
with respect to the Bonds or under individual policies obtained by
issuers of Bonds which represent maturing interest or maturing
pincipal on defaulted obligations held by the Trustee will be included
in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax if, and to the same
extent as, such interest or proceeds would have been so included if
paid by the issuer of the defaulted obligations.
<PAGE>
62 New Jersey IM-IT-- Series 94
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 58.59
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 2.07
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 56.52
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 56.52
Divided by 12............................................................................................ $ 4.71
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .15699
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.65%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.75%
Initial Distribution (August 1994)............................................................................. $ 1.88
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.71
PURCHASED INTEREST <F6>........................................................................................ $ 8.41
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
AUGUST 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.02 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
$58.61. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $2.09; 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 $3,038.
<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>
New Jersey IM-IT-- Series 94 63
<TABLE>
NEW JERSEY INSURED MUNICIPALS INCOME TRUST
SERIES 94 (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND NEW JERSEY
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>
$ 100,000 City of Woodbury, County of Gloucester, New Jersey, General
Obligation Bonds, Series 1994 (Bank Qualified) FSA Insured
#5.60% Due 6/1/2013.......................................... YAAA $ 93,622
500,000 The Port Authority of New York and New Jersey Consolidated
Bonds, Ninety-Second Series (FGIC Insured)
#5.00% Due 7/15/2022......................................... AAA 2004 @ 101 412,430
330,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Underwood Memorial Hospital, Series 1993B (AMBAC
Indemnity Insured) 2003 @ 102
#5.70% Due 7/1/2023.......................................... AAA 2014 @ 100 S.F. 302,171
500,000 New Jersey Economic Development Authority, Economic Development
Revenue Bonds (Greater New York Councils, Boy Scouts of
America-1993 Project) MBIA Insured 2003 @ 102
#5.45% Due 9/1/2023.......................................... AAA 2008 @ 100 S.F. 446,560
500,000 New Jersey Educational Facilities Authority, Revenue Bonds (New
Jersey Institute of Technology) Series 1994 (MBIA Insured) 2004 @ 102
#6.00% Due 7/1/2024.......................................... AAA 2016 @ 100 S.F. 482,385
450,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds (Monmouth Medical Center Issue) Series 1994C (Capital
Guaranty Insured) 2004 @ 102
#6.25% Due 7/1/2024.......................................... AAA 2017 @ 100 S.F. 444,461
220,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Newark Beth Israel Medical Center Issue, Series 1994
(FSA Insured)** 2004 @ 102
#6.00% Due 7/1/2024.......................................... YAAA 2017 @ 100 S.F. 210,828
500,000 Industrial Pollution Control Financing Authority of Salem
County (New Jersey) Pollution Control Revenue Refunding Bonds
(Public Service Electric and Gas Company Project) Series
1993B (MBIA Insured)
6.25% Due 6/1/2031........................................... AAA 2004 @ 102 491,250
$ 3,100,000 $ 2,883,707
</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>
64 Oklahoma IM-IT-- Series 11
OKLAHOMA IM-IT TRUST
GENERAL. The Oklahoma IM-IT Trust consists of 4 issues of Securities.
One of the Bonds in the Oklahoma IM-IT Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Oklahoma IM-IT Trust) as follows: General Obligations, 1 (26%); General
Purpose, 1 (25%); Transportation, 1 (25%) and Wholesale Electric, 1 (24%). No
Bond issue has received a provisional rating.
SPECIAL CONSIDERATIONS. Investors in the Oklahoma IM-IT Trust should
consider that the economy of the State has been experiencing difficulties as a
result of an economic recession largely attributable to a decline in the
agricultural industry and a rapid decline that was experienced in the early
and mid 1980s in the energy industry which have, in turn, caused declines in
the real estate industry, the banking industry and most other sectors of the
State's economy. Continued low levels of economic activity, another decline in
oil and gas production prices, low growth in the State's major industries or
private or public financial difficulties could adversely affect Bonds in the
Portfolio and consequently the value of Units in the Oklahoma IM-IT Trust.
Governmental expense budgeting provisions in Oklahoma are conservative,
basically requiring a balanced budget each fiscal year unless a debt is
approved by a vote of the people providing for the collection of a direct
annual tax to pay the debt. Certain limited exceptions include: deficiency
certificates issued in the discretion of the Governor (however, the deficiency
certificates may not exceed $500,000 in any fiscal year); and debts to repel
invasion, suppress insurrection or to defend the State in the event of war.
To ensure a balanced annual budget, the State Constitution provides
procedures for certification by the State Board of Equalization of revenues
received in the previous fiscal year and amounts available for appropriation
based on a determination of revenues to be received by the State in the
General Revenue Fund in the next ensuing fiscal year.
Beginning July 1, 1985, surplus funds were to be placed in a
Constitutional Reserve Fund until the Reserve Fund equals 10% of the General
Revenue Fund certification for the preceding fiscal year.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions
to which the issuers in the Oklahoma IM-IT Trust are subject. Additionally,
many factors including national economic, social and environmental policies
and conditions, which are not within the control of the issuers of Bonds,
could affect or could have an adverse impact on the financial condition of the
State and various agencies and political subdivisions located in the State.
The Sponsor is unable to predict whether or to what extent such factors 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 Oklahoma 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 Oklahoma IM-IT Trust Units, see "Other Matters--Federal Tax Status".
The assets of the Oklahoma IM-IT Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Oklahoma (the "State") or
counties, municipalities, authorities or political subdivisions thereof (the
"Oklahoma Bonds") or by the Commonwealth of Puerto Rico, Guam and the United
States Virgin Islands (the "Possession Bonds") (collectively, the "Bonds"). At
the respective times of issuance of the Oklahoma Bonds, certain, but not
necessarily all, of the issues of the Oklahoma Bonds may have been accompanied
by an opinion of bond counsel to the respective issuing authorities that
interest on such Oklahoma Bonds (the "Oklahoma Tax-Exempt Bonds") are exempt
from the income tax imposed by the State of Oklahoma that is applicable to
individuals and corporations (the "Oklahoma State Income Tax"). The Trust may
include Oklahoma Bonds the interest on which is subject to the Oklahoma State
Income Tax (the "Oklahoma Taxable Bonds"). SEE "PORTFOLIO" WHICH INDICATES BY
FOOTNOTE WHICH OKLAHOMA BONDS ARE OKLAHOMA TAX-EXEMPT BONDS (ALL OTHER
OKLAHOMA BONDS INCLUDED IN THE PORTFOLIO ARE OKLAHOMA TAXABLE BONDS).
<PAGE>
Oklahoma IM-IT-- Series 11 65
Neither the Sponsor nor its counsel has independently examined the Bonds
to be deposited in and held in the Trust. However, although no opinion is
expressed herein regarding such matters, it is assumed that: (i) the Bonds
were validly issued, (ii) the interest thereon is excludable from gross income
for Federal income tax purposes and (iii) interest on the Oklahoma Tax-Exempt
Bonds, if received directly by a Unitholder, would be exempt from the Oklahoma
State Income Tax. At the respective times of issuance of the Bonds, opinions
relating to the validity thereof and to the exemption of interest thereon from
Federal income tax were rendered by bond counsel to the respective issuing
authorities. In addition, with respect to the Oklahoma Tax-Exempt Bonds, bond
counsel to the issuing authorities rendered opinions as to the exemption of
interest from the Oklahoma State Income Tax. Neither the Sponsor nor its
counsel has made any review for the Trust of the proceedings relating to the
issuance of the Bonds or of the bases for the opinions rendered in connection
therewith. The opinion set forth below does not address the taxation of
persons other than full time residents of Oklahoma.
In the opinion of Chapman and Cutler, Special Counsel to the Fund for
Oklahoma tax matters, under existing laws as of the date of this Prospectus
and based upon the assumptions set forth above:
(1) For Oklahoma State Income Tax purposes, the Trust is not an
association taxable as a corporation, each Unitholder of the Trust will be
treated as the owner of a pro rata portion of the Trust and the income of such
portion of the Trust will be treated as the income of the Unitholder.
(2) Interest paid and original issue discount, if any, on the Bonds which
would be exempt from the Oklahoma State Income Tax if received directly by a
Unitholder will be exempt from the Oklahoma State Income Tax when received by
the Trust and distributed to such Unitholder. A Unitholder's pro rata portion
of any interest paid and original issue discount, if any, on the Bonds which
would be subject to the Oklahoma State Income Tax if received directly by a
Unitholder, including, for example interest paid and original issue discount,
if any, on the Oklahoma Taxable Bonds, will be taxable to such Unitholder for
Oklahoma State Income Tax purposes when received by the Trust.
(3) To the extent that interest paid and original issue discount, if any,
derived from the Trust by a Unitholder with respect to Possession Bonds is
excludable from gross income for Federal income tax purposes pursuant to 48
U.S.C. (S)745, 48 U.S.C. (S)1423a, and 48 U.S.C. (S)1403, such interest paid
and original issue discount, if any, will not be subject to the Oklahoma State
Income Tax.
(4) Each Unitholder of the Trust will recognize gain or loss for Oklahoma
State Income Tax purposes if the Trustee disposes of a Bond (whether by
redemption, sale, or otherwise) or if the Unitholder redeems or sells Units of
the Trust to the extent that such a transaction results in a recognized gain
or loss to such Unitholder for Federal income tax purposes. Due to the
amortization of bond premium and other basis adjustments required by the
Internal Revenue Code, a Unitholder, under some circumstances, may realize
taxable gain when his or her Units are sold or redeemed for an amount equal to
their original cost.
(5) Although no opinion is expressed herein, we have been informally
advised by the Oklahoma Tax Commission that any insurance proceeds paid under
policies which represent maturing interest on defaulted obligations which are
excludable from gross income for Federal income tax purposes should be
excludable from the Oklahoma State Income Tax to the same extent as such
interest would have been if paid by the issuer of such Bonds held by the
Trust.
(6) The Oklahoma State Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase or carry
Units in the Trust, the interest on which is exempt from such tax.
(7) Although no opinion is expressed herein, we have been informally
advised by the Oklahoma Tax Commission that the Trust, in part because of its
status as a "grantor trust" for Federal income tax purposes, should not be
subject to the Oklahoma state franchise tax.
The scope of this opinion is expressly limited to the matters set forth
herein, and we express no other opinions of law with respect to the state or
local taxation of the Trust, the purchase, ownership or disposition of Units
or the Unitholders under Oklahoma law.
<PAGE>
66 Oklahoma IM-IT-- Series 11
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 54.59
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.49
Less: Annual Premium on Portfolio Insurance per Unit..................................................... --
Estimated Net Annual Interest Income per Unit............................................................ $ 53.10
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 53.10
Divided by 12............................................................................................ $ 4.43
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .14748
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.31%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.46%
Initial Distribution (August 1994)............................................................................. $ 1.77
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.43
PURCHASED INTEREST <F6>........................................................................................ $ 3.37
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
AUGUST 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.62 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
$55.21. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $2.11; 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".
<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>
Oklahoma IM-IT-- Series 11 67
<TABLE>
OKLAHOMA INSURED MUNICIPALS INCOME TRUST
SERIES 11 (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND OKLAHOMA
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>
+$ 750,000 Grand River Dam Authority, Oklahoma, Revenue Refunding Bonds,
Series 1993 (AMBAC Indemnity Insured)
#5.50% Due 6/1/2010.......................................... AAA $ 721,193
+ 800,000 Oklahoma General Obligation Building Bonds, Series 1992A (AMBAC
Indemnity Insured)** 2003 @ 102
5.20% Due 7/15/2016.......................................... AAA 2014 @ 100 S.F. 744,784
+ 750,000 Oklahoma Turnpike Authority, Revenue Bonds, First Senior Series
1992A (FGIC Insured) 2002 @ 102
#6.125% Due 1/1/2020......................................... AAA 2016 @ 100 S.F. 753,750
+ 750,000 Oklahoma Municipal Power Authority, Power Supply System Revenue
Bonds, Refunding Series 1994A (FGIC Insured) 2008 @ 102
#4.75% Due 1/1/2022.......................................... AAA 2016 @ 100 S.F. 602,812
$ 3,050,000 $ 2,822,539
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
+ In the opinion of the Bond Issuer's legal counsel, as of the date of
issuance of such Bonds, the interest income generated by such Bonds is exempt
from Federal and Oklahoma state income taxes.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
68 North Carolina QUALITY-- Series 76
NORTH CAROLINA QUALITY TRUST
GENERAL. The North Carolina Quality Trust consists of 8 issues of
Securities. None of the Bonds in the North Carolina Quality 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 North Carolina Quality Trust) as follows:
Certificates of Participation, 3 (34%); Wholesale Electric, 2 (33%); Health
Care, 1 (25%) and Water and Sewer, 1 (8%). 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. The General Assembly responded by enacting a number of new taxes
and fees, which generated an estimated $665.5 million in fiscal year 1991-92.
Revenues for 1992-93 were estimated to include an additional $95.6 million and
helped produce a budget surplus (approximately $342 million) for the 1992-1993
fiscal year.
In addition, the 1993 Session of the General Assembly reduced allowable
departmental operating expenditures by $120.3 and $122.8 million for fiscal
years 1993-94 and 1994-95 respectively, and authorized continuation funding of
approximately $8.33 billion for fiscal year 1993-94 and $8.60 billion for
fiscal year 1994-95. The savings reductions were based on recommendations from
the Governor, the Government Performance Audit Committee and selected savings
identified by the General Assembly.
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 solid upward
economic 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 March 1989 decision of the United States Supreme Court that it is
unconstitutional for a
<PAGE>
North Carolina QUALITY-- Series 76 69
state to exempt from state income taxation retirement benefits paid by the
state or its local governments, but not to exempt retirement benefits paid by
the federal government.
Based on that decision, certain federal retirees and federal military
personnel plaintiffs brought an action in federal court against the North
Carolina Department of Revenue and certain officials of the State alleging the
unconstitutionality of taxes collected under prior North Carolina tax statutes
and seeking damages for the illegally collected taxes paid on federal
retirement or military pay for the years 1985-88 (covering the asserted 3 year
limitations period), plus interest. Swanson, et al. v. Powers, et al. (United
States District Court for the Eastern District of North Carolina, No.
89-282-CIV-5-H) ("Swanson Federal"). The individual plaintiffs in Swanson
Federal also brought an action in North Carolina state court seeking refunds
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 amounts claimed by federal retirees in the Swanson actions have not
been precisely 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 Swanson State, the North Carolina Supreme Court found for the State,
ruling that the State would not be required to refund taxes illegally
collected prior to the U.S. Supreme Court's decision. 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 law, the U.S.
Supreme Court held that the Commonwealth of Virginia must provide "meaningful
backward-looking relief" to the plaintiffs, 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. On March 4, 1994 (in an unpublished
opinion), the North Carolina Supreme Court decided in favor of the State,
dismissing the Swanson State case. The plaintiffs reportedly will appeal to
the United States Supreme Court.
The decision in Harper also reactivated the damage claims in Swanson
Federal, and the federal court will begin hearing arguments on these claims in
February 1994.
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 1992, the State labor force grew about 22% (from 2,855,200 to
3,487,500). Per capita income during the period 1980 to 1990 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 1993, the State was reported to
rank tenth among the states in non-agricultural employment and eighth in
manufacturing employment. Employment indicators have varied somewhat in the
annual periods since June of 1989, but have demonstrated an upward trend since
1991. The following table reflects the fluctuations in certain key employment
categories.
<PAGE>
70 North Carolina QUALITY-- Series 76
<TABLE>
<CAPTION>
Category (all seasonally adjusted) June 1989 June 1990 June 1991 June 1992 June 1993
<S> <C> <C> <C> <C> <C>
Civilian Labor Force 3,286,000 3,312,000 3,228,000 3,495,000 3,504,000
Nonagricultural Employment 3,088,000 3,129,000 3,059,000 3,135,000 3,203,400
Goods Producing Occupations 1,042,200 1,023,100 973,600 980,800 993,600
(mining, construction and
manufacturing)
Service Occupations 2,045,800 2,106,300 2,085,400 2,154,200 2,209,800
Wholesale/Retail Occupations 713,900 732,500 704,100 715,100 723,200
Government Employees 482,200 496,400 496,700 513,400 515,400
Miscellaneous Services 563,900 587,300 596,300 638,300 676,900
Agricultural Employment 54,900 58,900 88,700 102,800 88,400
</TABLE>
The adjusted unemployment rate in June 1993 was 5.4% of the labor force,
as compared with an unemployment rate of 7.0% nationwide.
Gross agricultural income in 1992 was $5.26 billion, including
approximately $5,181,695,000 income from commodities. As of 1992, the State
was tenth in the nation in gross agricultural income. According to the State
Commissioner of Agriculture, in 1992, the State ranked first in the nation in
the production of flue-cured tobacco, total tobacco, turkeys and sweet
potatoes; second in the value of poultry and poultry products, in the
production of cucumbers for pickles and in trout production; fourth in
commercial broilers, strawberries and peanuts; sixth in burley tobacco and
hogs; and seventh in the number of chickens (excluding broilers), pecans and
apples.
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. North
Carolina is the third most diversified agricultural state in the nation.
Nevertheless, tobacco production is the second leading source of
agricultural income in the State, accounting for 20.3% 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. The largest single source for agricultural
income in the State is poultry and eggs, which accounted for revenues of
approximately $1.6 billion in 1992 and 31% of gross agricultural income.
The number of farms has been decreasing; in 1993 there were approximately
59,000 farms in the State (down from approximately 72,000 in 1987, a decrease
of about 18% in six 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 statistics
office reports that in 1992 approximately $7.8 billion was spent on tourism in
the State, with 1993 revenues from tourism expected to exceed $8 billion. The
statistics office estimates a 6% annual average revenue growth rate in the
tourism industry. In 1991, traveler expenditures directly generated more than
155,000 jobs within the State, 5.1 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
also reaffirmed its stable outlook for the State in October 1993.
Standard & Poor's reports that North Carolina's rating reflects the
State's strong economic characteristics, sound financial performance, and low
debt levels.
<PAGE>
North Carolina QUALITY-- Series 76 71
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>
72 North Carolina QUALITY-- Series 76
<TABLE>
<CAPTION>
<S> <C>
PER UNIT INFORMATION:
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 58.67
Less: Estimated Annual Expense per Unit.................................................................. $ 1.94
Estimated Net Annual Interest Income per Unit............................................................ $ 56.73
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 56.73
Divided by 12............................................................................................ $ 4.73
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .15757
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F2><F3><F4>....................................... 5.67%
ESTIMATED LONG-TERM RETURN <F2><F3><F4>........................................................................ 5.81%
Initial Distribution (August 1994)............................................................................. $ 1.89
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F4>.................................................................... $ 4.73
PURCHASED INTEREST <F5>........................................................................................ $ 8.79
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
AUGUST 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
$58.83. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $2.10; 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> 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>
North Carolina QUALITY-- Series 76 73
<TABLE>
NORTH CAROLINA INVESTORS' QUALITY TAX-EXEMPT TRUST
SERIES 76 (IM-IT AND QUALITY MULTI-SERIES 226)
PORTFOLIO AS OF JULY 12, 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>
$ 250,000 City of Charlotte, North Carolina, Certificates of
Participation, Series 1994A (CityFair Parking
Facility Project)**
#6.125% Due 6/1/2010............................... AA N/R 2004 @ 102 $ 248,110
500,000 North Carolina Municipal Power Agency, Number 1
Catawba Electric Revenue Refunding Bonds (AMBAC
Indemnity Insured)
#5.75% Due 1/1/2015................................ AAA Aaa 2003 @ 100 466,235
250,000 Orange Water and Sewer Authority (North Carolina)
Water and Sewer System Revenue and Revenue and
Refunding Bonds, Series 1993 2003 @ 102
#5.20% Due 7/1/2016................................ AA Aa 2009 @ 100 S.F. 218,775
250,000 North Carolina Medical Care Commission, Hospital
Revenue Bonds (Moore Regional Hospital Project) 2003 @ 102
#5.00% Due 10/1/2018............................... A+ A 2014 @ 100 S.F. 204,748
300,000 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. 259,503
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 @ 102 489,520
500,000 Chapel Hill, North Carolina, Parking Facilities
Refunding Certificates of Participation, Series
1994** 2003 @ 102
#6.45% Due 12/1/2023............................... A+ A1 2019 @ 100 S.F. 499,190
500,000 North Carolina Medical Care Commission, Hospital
Revenue Bonds (Alamance Health Services, Inc.
Project) Series 1993 (FSA Insured) 2003 @ 102
#5.50% Due 8/15/2024............................... AAA Aaa 2014 @ 100 S.F. 439,040
$ 3,050,000 $ 2,825,121
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
74 Notes to Portfolios
NOTES TO PORTFOLIOS:
AS OF THE DATE OF DEPOSIT: JULY 12, 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 June 20, 1994 to July 12, 1994. These Securities have
expected settlement dates ranging from July 12, 1994 to August 31, 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").
<PAGE>
Notes to Portfolios 75
(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................................. -- $ 8,925,440 $ 65,919 $ 572,289 $ 8,919,069
IM-IT Short Intermediate.............. -- $ 6,900,054 $ 23,582 $ 336,583 $ 6,871,288
IM-IT Intermediate.................... -- $ 4,844,361 $ 25,007 $ 262,828 $ 4,832,150
IM-IT Limited Maturity................ -- $ 4,834,472 $ 36,764 $ 290,088 $ 4,831,656
California IM-IT Intermediate
Laddered Maturity.................... -- $ 2,940,393 $ 4,912 $ 147,165 $ 2,922,213
Colorado IM-IT........................ -- $ 2,839,396 $ 16,042 $ 173,188 $ 2,832,688
Michigan IM-IT........................ -- $ 2,825,083 $ 21,121 $ 175,900 $ 2,821,813
New Jersey IM-IT...................... -- $ 2,862,692 $ 21,015 $ 179,235 $ 2,859,500
Oklahoma IM-IT........................ -- $ 2,793,536 $ 29,003 $ 164,413 $ 2,798,625
North Carolina Quality................ -- $ 2,804,779 $ 20,342 $ 176,313 $ 2,803,188
</TABLE>
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............................... 25% 1 to 21 days
IM-IT Short Intermediate............ 23% 1 to 21 days
IM-IT Intermediate.................. 38% 1 to 21 days
IM-IT Limited Maturity.............. 42% 1 to 42 days
California IM-IT Intermediate
Laddered Maturity.................. 20% 1 day
Colorado IM-IT...................... 0% --
Michigan IM-IT...................... 13% 3 days
New Jersey IM-IT.................... 7% 2 days
Oklahoma IM-IT...................... 26% 16 days
North Carolina Quality.............. 25% 1 to 9 days
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities
in the IM-IT, IM-IT Short Intermediate, IM-IT Intermediate, IM-IT Limited
Maturity, California IM-IT Intermediate Laddered Maturity, Colorado
IM-IT, Michigan IM-IT, New Jersey IM-IT, Oklahoma IM-IT and North
Carolina Quality Trusts were higher than the bid side evaluations of such
Securities by 0.76%, 0.75%, 0.74%, 0.79%, 0.77%, 0.76%, 0.80%, 0.78%,
0.78% and 0.72%, 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 1% and 4% of the
aggregate principal amount of the Securities in the IM-IT and IM-IT
Intermediate Trust, respectively, are "zero coupon" bonds.
<PAGE>
76 Underwriting
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>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,872
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 1,500
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 500
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 500
Nathan & Lewis Securities, Inc. 119 West 40th Street, New York, New York 10018 250
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
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
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
J. J. B. Hilliard, W. L. Lyons, Inc. 501 South Fourth Street, Louisville, Kentucky 40202 100
William R. Hough & Company 100 Second Avenue South, 8th Floor, St. Petersburg, Florida 100
33701
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 100
Linsco/Private Ledger Financial Services, 5871 Oberlin Drive, San Diego, California 92121 100
Inc.
Mabon Securities Corp. One Liberty Plaza, 165 Broadway, New York, New York 10006 100
Principal Financial Securities, Inc. Fountain Place, 1445 Ross Avenue, Suite 2300, Dallas, Texas 100
75201
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Roosevelt & Cross Inc. 20 Exchange Place, New York, New York 10005 100
Smith Barney Inc. 2 World Trade Center, 101st Floor, New York, New York 10048 100
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 100
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 100
23219
B. C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 100
9,522
</TABLE>
<TABLE>
<CAPTION>
IM-IT SHORT
INTERMEDIATE
NAME ADDRESS TRUST UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 5,550
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 500
Unit Investment Trust Department 10292
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 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
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
J. J. B. Hilliard, W. L. Lyons, Inc. 501 South Fourth Street, Louisville, Kentucky 40202 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 100
7,000
</TABLE>
<PAGE>
Underwriting 77
<TABLE>
<CAPTION>
IM-IT
INTERMEDIATE
NAME ADDRESS TRUST UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,050
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 250
Unit Investment Trust Department 10292
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
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
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, Florida 33733 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
5,000
</TABLE>
<TABLE>
<CAPTION>
IM-IT LIMITED
MATURITY TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 3,990
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 250
Unit Investment Trust Department 10292
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
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
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, Florida 33733 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
5,040
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA
IM-IT
INTERMEDIATE
LADDERED
MATURITY TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,500
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
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
3,000
</TABLE>
<PAGE>
78 Underwriting
<TABLE>
<CAPTION>
COLORADO
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,431
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
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Smith Barney Inc. 2 World Trade Center, 101st Floor, New York, New York 10048 100
3,031
</TABLE>
<TABLE>
<CAPTION>
MICHIGAN
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,272
First of Michigan Corporation 100 Renaissance Center, 26th Floor, Detroit, Michigan 48243 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
Roney & Co. One Griswold, Detroit, Michigan 48226 100
3,022
</TABLE>
<TABLE>
<CAPTION>
NEW JERSEY
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,558
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Smith Barney Inc. 2 World Trade Center, 101st Floor, New York, New York 10048 100
3,058
</TABLE>
<TABLE>
<CAPTION>
OKLAHOMA
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,028
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Linsco/Private Ledger Financial Services, 5871 Oberlin Drive, San Diego, California 92121 100
Inc.
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Smith Barney Inc. 2 World Trade Center, 101st Floor, New York, New York 10048 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 100
2,978
</TABLE>
<PAGE>
Underwriting 79
<TABLE>
<CAPTION>
NORTH CAROLINA
QUALITY TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,347
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 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
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
2,997
</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 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>
80 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
December 31, 1993 the total stockholders' equity of Van Kampen Merritt Inc.
was $122,167,000 (audited). (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 March 31, 1994, the Sponsor and its affiliates managed or
supervised approximately $36.5 billion of investment products, of which over
$24 billion is invested in municipal securities. The Sponsor and its
affiliates managed $22.5 billion of assets, consisting of $8.2 billion for 21
open end mutual funds, $8.0 billion for 34 closed-end funds and $6.3 billion
for 51 institutional accounts. The Sponsor has also deposited approximately
$24 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 $14 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, Arkansas, (except for the Oklahoma IM-IT Trust where a portion of the income of
California, California Intermediate, the Trust is subject to the Oklahoma state income tax)
California 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 Intermediate 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 81
<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
Strategic Ten Trust............................ Provide an above average total return through a combination of
(United States, United Kingdom, and Hong Kong potential capital appreciation and dividend income, consistent with
Portfolios) preservation of invested capital, by investing in a portfolio of
common stocks of the ten companies in a recognized stock exchange
index having the highest dividend yields
NAME OF MUTUAL FUND FUND INVESTMENT OBJECTIVE
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
</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>
82 Trust Administration
<TABLE>
<CAPTION>
NAME OF MUTUAL FUND FUND INVESTMENT OBJECTIVE (Continued)
<S> <C>
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
Van Kampen Merritt Utility Fund................ Provide capital appreciation and current income by investing in a
diversified portfolio of common stocks and income securities issued by
companies engaged in the utilities industry
Van Kampen Merritt Strategic Income Fund....... Provide shareholders with high current income. The Fund will seek
capital appreciation as a secondary objective
</TABLE>
<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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Trust Administration 83
NAME OF CLOSED-END FUND FUND INVESTMENT OBJECTIVE (Continued)
<S> <C>
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>
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
<PAGE>
84 Trust Administration
Explanations--Public Offering--Reports Provided"). The Trustee is required to
keep a certified copy or duplicate original of the Trust Agreement on file in
its office available for inspection at all reasonable times during the usual
business hours by any Unitholder, together with a current list of the
Securities held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may
resign and be discharged of the trusts created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Fund Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which a Trustee shall be a party, shall be the successor trustee. The
Trustee must be a banking corporation organized under the laws of the United
States or any state and having at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
TRUSTEE'S FEE. For its services the Trustee will receive a fee based on
the aggregate outstanding principal amount of Securities in each Trust as of
the opening of business on January 2 and July 2 of each year as set forth
under "Per Unit Information" for the applicable Trust. 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
<PAGE>
Trust Administration 85
determined by the Trustee to be in the best interests of the Unitholders or if
there is no alternative, the Trustee is not empowered to sell Bonds from an
Insured Trust which are in default in payment of principal or interest or in
significant risk of such default and for which value has been attributed for
the insurance obtained by such Insured Trust. Because of such restrictions on
the Trustee under certain circumstances, the Sponsor may seek a full or
partial suspension of the right of Unitholders to redeem their Units in an
Insured Trust. See "Unitholder Explanations--Public Offering-- Redemption of
Units". The Sponsor is empowered, but not obligated, to direct the Trustee to
dispose of Bonds in the event of an advanced refunding.
The Sponsor is required to instruct the Trustee to reject any offer made
by an issuer of any of the Securities to issue new obligations in exchange or
substitution for any Security pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the Sponsor may deem
proper if (1) the issuer is in default with respect to such Security or (2) in
the written opinion of the Sponsor the issuer will probably default with
respect to such Security in the reasonably foreseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after the deposit
of obligations in exchange or substitution for underlying Securities, the
Trustee is required to give notice thereof to each Unitholder of the Trust
thereby affected, identifying the Securities eliminated and the Securities
substituted therefor. Except as stated herein and under "Unitholder
Explanations--Settlement of Bonds in the Trusts" regarding the substitution of
Replacement Bonds for Failed Bonds, the acquisition by the Fund of any
securities other than the Securities initially deposited is not permitted.
If any default in the payment of principal or interest on any Security
occurs and no provision for payment is made therefor within 30 days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails to
instruct the Trustee to sell or to hold such Security within 30 days after
notification by the Trustee to the Sponsor of such default, the Trustee may in
its discretion sell the defaulted Security and not be liable for any
depreciation or loss thereby incurred.
SPONSOR PURCHASES OF UNITS. The Trustee shall notify the Sponsor of any
tender of Units for redemption. If the Sponsor's bid in the secondary market
at that time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord
with the Public Offering Price described in the then currently effective
prospectus describing such Units. Any profit resulting from the resale of such
Units will belong to the Sponsor which likewise will bear any loss resulting
from a lower offering or Redemption Price subsequent to its acquisition of
such Units.
INSURANCE PREMIUMS. The cost of the portfolio insurance obtained by the
respective Trusts, if any, is that amount shown in footnote (5) in "Notes to
Portfolios", 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.
<PAGE>
86 Trust Administration
The fees and expenses set forth herein are payable out of the Trusts.
When such fees and expenses are paid by or owing to the Trustee, they are
secured by a lien on the portfolio or portfolios of the applicable Trust or
Trusts. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by the Fund, the Trustee has the
power to sell Securities to pay such amounts.
GENERAL
AMENDMENT OR TERMINATION. The Sponsor and the Trustee have the power to
amend the Trust Agreement without the consent of any of the Unitholders when
such an amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein or (b) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee), provided that the Trust Agreement
may not be amended to increase the number of Units issuable thereunder or to
permit the deposit or acquisition of securities either in addition to or in
substitution for any of the Securities initially deposited in the Fund, except
for the substitution of certain refunding securities for such Securities. In
the event of any amendment, the Trustee is obligated to notify promptly all
Unitholders of the substance of such amendment.
A Trust may be terminated at any time by consent of Unitholders of 51% of
the Units of such Trust then outstanding or by the Trustee when the value of
such Trust, as shown by any semi-annual evaluation, is less than that
indicated under "Summary of Essential Financial Information". 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 or par
amount of Securities represented by the Units held by such Unitholder. The
Trustee shall then distribute to each Unitholder his share of the balance of
the Interest and Principal Accounts. With such distribution the Unitholder
shall be furnished a final distribution statement of the amount distributable.
At such time as the Trustee in its sole discretion shall determine that any
amounts held in reserve are no longer necessary, it shall make distribution
thereof to Unitholders in the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so
insured are held by such Trust, the price to be received by such Trust upon
the disposition of any such Bond which is in default, by reason of nonpayment
of principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for
the Trustee to, and the Trustee does not currently intend to, dispose of any
Bond or Bonds if retention of such Bond or Bonds, until due, shall be deemed
to be in the best interest of Unitholders, including, but not limited to,
situations in which a Bond or Bonds so insured are in default and situations
in which a Bond or Bonds so insured have deteriorated market prices resulting
from a significant risk of default. Since the Preinsured Bonds will reflect
the value of the related insurance, it is the present intention of the Sponsor
not to direct the Trustee to hold any of such Preinsured Bonds after the date
of termination. All proceeds received, less applicable expenses, from
insurance on defaulted Bonds not disposed of at the date of
<PAGE>
Trust Administration 87
termination will ultimately be distributed to Unitholders of record as of such
date of termination as soon as practicable after the date such defaulted Bond
or Bonds become due and applicable insurance proceeds have been received by
the Trustee.
LIMITATION ON LIABILITIES. The Sponsor, the Evaluator and the Trustee
shall be under no liability to Unitholders for taking any action or for
refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and
duties hereunder. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Securities. In the
event of the failure of the Sponsor to act under the Trust Agreement, the
Trustee may act thereunder and shall not be liable for any action taken by it
in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon or upon it as Trustee under the Trust Agreement or upon or in respect
of the Fund which the Trustee may be required to pay under any present or
future law of the United States of America or of any other taxing authority
having jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering Price, plus 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
an IM-IT Short Intermediate Trust or a State Intermediate Laddered Maturity
Trust, and in the case of an IM-IT Limited Maturity Trust, $27.00 per Unit for
less than 100 Units, $31.00 per Unit for any single transaction of 100 to 249
Units, $30.50 per Unit for any single transaction of 250 to 499 Units, $33.50
per Unit for any single transaction of 500 to 999 Units and $31.00 per Unit
for any single transaction of 1,000 or more Units. And in the case of an IM-IT
Intermediate Trust, $25.00 per Unit for less than 100 Units, $29.00 per Unit
for any single transaction of 100 to 249 Units, $28.50 per Unit for any single
transaction of 250 to 499 Units, $31.50 per Unit for any single transaction of
500 to 999 Units and $31.00 per Unit for any single transaction of 1,000 or
more Units. And in the case of an IM-IT or 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--
<PAGE>
88 Trust Administration
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 IM-IT, IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short
Intermediate, State Intermediate Laddered Maturity Trust and State Trusts,
respectively, as of the Date of Deposit. In connection with quantity sales to
purchasers of any IM-IT or State Trust (other than a State Intermediate
Laddered Maturity Trust) the Underwriters will receive from the Sponsor
commissions totalling $37.00 per Unit for any single transaction of 100 to 249
Units, $39.00 per Unit for any single transaction of 250 to 499 Units, $40.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units. In connection with quantity
sales to purchasers of any IM-IT Intermediate Trust the Underwriters will
receive from the Sponsor commissions totalling $30.00 per Unit for any single
transaction of 100 to 249 Units, $29.50 per Unit for any single transaction of
250 to 499 Units, $32.50 per Unit for any single transaction of 500 to 999
Units and $31.00 per Unit for any single transaction of 1,000 or more Units.
In connection with quantity sales to purchasers of any IM-IT Short
Intermediate Trust the Underwriters will receive from the Sponsor commissions
totalling $23.00 per Unit for any single transaction of 100 to 249 Units,
$23.00 per Unit for any single transaction of 250 to 499 Units, $24.75 per
Unit for any single transaction of 500 to 999 Units and $24.00 per Unit for
any single transaction of 1,000 or more Units. In connection with quantity
sales to purchasers of any IM-IT Limited Maturity Trust the Underwriters will
receive from the Sponsor commissions totalling $32.00 per Unit for any single
transaction of 100 to 249 Units, $32.00 per Unit for any single transaction of
250 to 499 Units, $34.50 per Unit for any single transaction of 500 to 999
Units and $31.00 per Unit for any single transaction of 1,000 or more Units.
A. G. Edwards & Sons, Inc. ("Edwards"), which acts as a Managing Underwriter
of Units of the various series of the IM-IT and the IM-IT Limited Maturity
Trust, will receive reimbursement from the Sponsor for certain costs and
further compensation in the amount of $5.00 for each Unit of both the IM-IT
and the IM-IT Limited Maturity Trust it underwrites. Also, if Principal
Financial Securities, Inc. commits (on the Date of Deposit) to underwrite a
total of 4,000 or more Units of 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 Principal Financial Securities, Inc. will receive an
additional $1.00 per Unit for each of the Units of such Trust it commits to
underwrite in said month. In addition, A.G. Edwards & Sons, Inc. ("Edwards"),
which acts as a Managing Underwriter of Units of the various series of the
IM-IT Short Intermediate Trust and the IM-IT Intermediate Trust, will receive
from the Sponsor reimbursement for certain costs and further compensation in
the amount of $2.00 for each Unit it underwrites of the IM-IT Short
Intermediate Trust, provided it underwrites a minimum of 1,000 Units of the
IM-IT Short Intermediate Trust, and $3.00 for each Unit it underwrites of the
IM-IT Intermediate Trust, provided it underwrites a minimum of 1,500 Units of
the IM-IT Intermediate Trust. In addition, the Sponsor will receive from the
Managing Underwriters of the Oklahoma IM-IT Trust (who underwrites 15% of the
Trust involved or 1,000 Units of such Trust, whichever is greater) the excess
of such gross sales commission over $38.00 per Unit of any such Trust, as of
the Date of Deposit. Also, any such Managing Underwriter that sells a total of
25% or 1,500 Units, whichever is greater, of any individual Oklahoma IM-IT
Trust will receive an additional $2.00 per each such Unit. See "Unitholder
Explanations--Public Offering--General." Further, each Underwriter who
underwrites 1,000 or more Units in any Trust will receive additional
compensation from the Sponsor of $1.00 for each Unit it underwrites. In
addition, the Sponsor and certain of the Underwriters will realize a profit or
the Sponsor will sustain a loss, as the case may be, as a result of the
difference between the price paid for the Securities by the Sponsor and the
cost of such Securities to a Trust (which is based on the determination by
Interactive Data Services, Inc. of the aggregate offering price of the
underlying
<PAGE>
Trust Administration 89
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>
90 Other Matters
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to Federal, Colorado and Oklahoma tax law have been passed
upon by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603,
as counsel for the Sponsor. Orrick, Herrington & Sutcliffe has acted as
special counsel to the Fund for California tax matters. Miller, Canfield,
Paddock and Stone has acted as special counsel to the Fund for Michigan tax
matters. Pitney, Hardin, Kipp & Szuch has acted as special counsel to the Fund
for New Jersey tax matters. Hunton & Williams has acted as special counsel to
the Fund for North Carolina tax matters. Tanner Propp & Farber has acted as
counsel for the Trustee and as special counsel to the Fund for New York tax
matters. None of the special counsel for the Fund has expressed any opinion
regarding the completeness or materiality of any matters contained in this
Prospectus other than the tax opinion set forth under "Tax Status" relating to
the Trust for which it has provided an opinion.
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
provided that, at the time such policies are purchased, the amounts
paid for
<PAGE>
Other Matters 91
such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the obligations, rather than
the insurer, will pay debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue
discount which would have previously accrued based upon its issue price (its
"adjusted issue price") to prior owners. The application of these rules will
also vary depending on the value of the Bond on the date a Unitholder acquires
his Units and the price the Unitholder pays for his Units. 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.
<PAGE>
92 Other Matters
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal
gross income are rendered by bond counsel to the respective issuing
authorities. Neither the Sponsor nor Chapman and Cutler has made any special
review for the Fund of the proceedings relating to the issuance of the Bonds
or of the basis for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains realized
in taxable years beginning on or after January 1, 1993. For taxpayers other
than corporations, net capital gains are subject to a maximum marginal stated
tax rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security benefits
received exceeds a "base amount". The base amount is $25,000 for unmarried
taxpayers, $32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the taxable year
and who file separate returns. Modified adjusted gross income is adjusted
gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible in
gross income to the extent that the sum of "modified adjusted gross income"
plus 50% of Social Security benefits received exceeds an "adjusted base
amount." The adjusted base amount is $34,000 for unmarried taxpayers, $44,000
for married taxpayers filing a joint return, and zero for married taxpayers
who do not live apart at all times during the taxable year and who file
separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from a Trust, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his Social Security benefits
in gross income whether or not he receives any tax-exempt interest. A taxpayer
whose modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security benefits
in gross income.
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>
Other Matters 93
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 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.
*As published by the rating companies.
<PAGE>
94 Other Matters
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.
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 226 (IM-IT, IM-IT Short Intermediate, IM-IT
Intermediate, IM-IT Limited Maturity, California IM-IT Intermediate
Laddered Maturity, Colorado IM-IT, Michigan IM-IT, New Jersey IM-IT,
Oklahoma 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 226 (IM-IT, IM-IT Short
Intermediate, IM-IT Intermediate, IM-IT Limited Maturity, California
IM-IT Intermediate Laddered Maturity, Colorado IM-IT, Michigan IM-IT,
New Jersey IM-IT, Oklahoma IM-IT and North Carolina Quality Trusts) as
of July 12, 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 226 (IM-IT, IM-IT Short Intermediate, IM-IT Intermediate,
IM-IT Limited Maturity, California IM-IT Intermediate Laddered Maturity,
Colorado IM-IT, Michigan IM-IT, New Jersey IM-IT, Oklahoma IM-IT and
North Carolina Quality Trusts) as of July 12, 1994, in conformity with
generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON
July 12, 1994
<PAGE>
Other Matters 95
<PAGE>
96 Other Matters
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 226
STATEMENTS OF CONDITION
AS OF JULY 12, 1994
<CAPTION>
CALIFORNIA
IM-IT
IM-IT SHORT IM-IT INTERMEDIATE
INTERMEDIATE INTERMEDIATE IM-IT LIMITED LADDERED
INVESTMENT IN SECURITIES IM-IT TRUST TRUST MATURITY TRUST MATURITY TRUST
<S> <C> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities
<F1><F2><F4>.............................. $ 8,991,359 $ 6,923,636 $ 4,869,368 $ 4,871,236 $ 2,945,305
Accrued interest to the First Settlement
Date <F1><F4>............................. 67,396 38,616 25,769 25,645 23,959
Total.............................. $ 9,058,755 $ 6,962,252 $ 4,895,137 $ 4,896,881 $ 2,969,264
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor
<F1><F4>................................ $ -- $ -- $ -- $ -- $ --
Interest of Unitholders--
Cost to investors <F3>................ 9,522,000 7,176,330 5,092,700 5,115,751 3,060,330
Less: Gross underwriting commission <F3>.. 463,245 214,078 197,563 218,870 91,066
Net interest to Unitholders
<F1><F3><F4>..................... 9,058,755 6,962,252 4,895,137 4,896,881 2,969,264
Total.............................. $ 9,058,755 $ 6,962,252 $ 4,895,137 $ 4,896,881 $ 2,969,264
<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........................................... $ 9,060,059 $ 9,555,000 $ 8,991,359 $ 68,700
IM-IT Short Intermediate Trust.................. $ 6,961,386 $ 7,000,000 $ 6,923,636 $ 37,750
IM-IT Intermediate Trust........................ $ 4,896,794 $ 5,000,000 $ 4,869,368 $ 27,426
IM-IT Limited Maturity Trust.................... $ 4,901,754 $ 5,040,000 $ 4,871,236 $ 30,518
California IM-IT Intermediate
Laddered Maturity Trust........................ $ 2,967,111 $ 3,000,000 $ 2,945,305 $ 21,806
<F2> Insurance coverage providing for timely payment, when due, of all
principal and interest on the Bonds in the Insured Trusts has been
obtained either by such Trusts, by a prior owner of the Bonds, by the
Sponsor prior to the deposit of such Bonds or by the issuers of the Bonds
involved. Such insurance does not guarantee the market value of the Bonds
or the value of the Units. The insurance obtained by the Insured Trusts
is effective only while Bonds thus insured are held in such Trusts.
Neither the bid nor offering prices of the underlying Bonds or of the
Units, absent situations in which bonds are in default in payment of
principal or interest or in significant risk of such default, include
value, if any, attributable to the insurance obtained by such Trusts.
<F3> The 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>
Other Matters 97
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 226
STATEMENTS OF CONDITION (CONTINUED)
AS OF JULY 12, 1994
<CAPTION>
COLORADO MICHIGAN NEW JERSEY OKLAHOMA NORTH CAROLINA
INVESTMENT IN SECURITIES IM-IT TRUST IM-IT TRUST IM-IT TRUST IM-IT TRUST QUALITY TRUST
<S> <C> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities
<F1><F2><F4>.............................. $ 2,855,438 $ 2,846,204 $ 2,883,707 $ 2,822,539 $ 2,825,121
Accrued interest to the First Settlement
Date <F1><F4>............................. 28,451 29,150 25,730 10,040 26,330
Total.............................. $ 2,883,889 $ 2,875,354 $ 2,909,437 $ 2,832,579 $ 2,851,451
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor
<F1><F4>................................ $ -- $ -- $ -- $ -- $ --
Interest of Unitholders--
Cost to investors <F3>................ 3,031,000 3,022,000 3,058,000 2,978,000 2,997,000
Less: Gross underwriting commission <F3>.. 147,111 146,646 148,563 145,421 145,549
Net interest to Unitholders
<F1><F3><F4>..................... 2,883,889 2,875,354 2,909,437 2,832,579 2,851,451
Total.............................. $ 2,883,889 $ 2,875,354 $ 2,909,437 $ 2,832,579 $ 2,851,451
<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
Colorado IM-IT Trust............................ $ 2,881,656 $ 3,000,000 $ 2,855,438 $ 26,218
Michigan IM-IT Trust............................ $ 2,873,646 $ 3,050,000 $ 2,846,204 $ 27,442
New Jersey IM-IT Trust.......................... $ 2,907,383 $ 3,100,000 $ 2,883,707 $ 23,676
Oklahoma IM-IT Trust............................ $ 2,832,624 $ 3,050,000 $ 2,822,539 $ 10,085
North Carolina Quality Trust.................... $ 2,850,962 $ 3,050,000 $ 2,825,121 $ 25,841
<F2> Insurance coverage providing for timely payment, when due, of all
principal and interest on the Bonds in the Insured Trusts has been
obtained either by such Trusts, by a prior owner of the Bonds, by the
Sponsor prior to the deposit of such Bonds or by the issuers of the Bonds
involved. Such insurance does not guarantee the market value of the Bonds
or the value of the Units. The insurance obtained by the Insured Trusts
is effective only while Bonds thus insured are held in such Trusts.
Neither the bid nor offering prices of the underlying Bonds or of the
Units, absent situations in which bonds are in default in payment of
principal or interest or in significant risk of such default, include
value, if any, attributable to the insurance obtained by such Trusts.
<F3> The 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>
98 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 1/2% 6% 6 1/2% 7% 7 1/2% 8% 8 1/2%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 15% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41% 10.00%
22.80 - 55.10 38.00 - 91.90 28 7.64 8.33 9.03 9.72 10.42 11.11 11.81
55.10 - 115.00 91.90 - 140.00 31 7.97 8.70 9.42 10.14 10.87 11.59 12.32
115.00 - 250.00 140.00 - 250.00 36 8.59 9.38 10.16 10.94 11.72 12.50 13.28
Over 250.00 Over 250.00 39.6 9.11 9.93 10.76 11.59 12.42 13.25 14.07
</TABLE>
<TABLE>
SHORT INTERMEDIATE
<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 15% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
22.80 - 55.10 38.00 - 91.90 28 5.56 6.25 6.94 7.64 8.33 9.03 9.72
55.10 - 115.00 91.90 - 140.00 31 5.80 6.52 7.25 7.97 8.70 9.42 10.14
115.00 - 250.00 140.00 - 250.00 36 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over 250.00 Over 250.00 39.6 6.62 7.45 8.28 9.11 9.93 10.76 11.59
</TABLE>
<TABLE>
INTERMEDIATE
<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 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
22.80 - 55.10 38.00 - 91.90 28 6.25 6.94 7.64 8.33 9.03 9.72 10.42
55.10 - 115.00 91.90 - 140.00 31 6.52 7.25 7.97 8.70 9.42 10.14 10.87
115.00 - 250.00 140.00 - 250.00 36 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 250.00 Over 250.00 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
<PAGE>
Other Matters 99
<TABLE>
LIMITED MATURITY
<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 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
22.80 - 55.10 38.00 - 91.90 28 6.25 6.94 7.64 8.33 9.03 9.72 10.42
55.10 - 115.00 91.90 - 140.00 31 6.52 7.25 7.97 8.70 9.42 10.14 10.87
115.00 - 250.00 140.00 - 250.00 36 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 250.00 Over 250.00 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
<TABLE>
CALIFORNIA 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 20.1% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
22.80 - 55.10 38.00 - 91.90 34.7 6.13 6.89 7.66 8.42 9.19 9.95 10.72
91.90 - 140.00 37.4 6.39 7.19 7.99 8.79 9.58 10.38 11.18
55.10 - 115.00 37.9 6.44 7.25 8.05 8.86 9.66 10.47 11.27
115.00 - 212.38 140.00 - 250.00 42.4 6.94 7.81 8.68 9.55 10.42 11.28 12.15
212.38 - 250.00 43.0 7.02 7.89 8.77 9.65 10.53 11.40 12.28
250.00 - 424.76 45.6 7.35 8.27 9.19 10.11 11.03 11.95 12.87
Over 250.00 Over 424.76 46.2 7.43 8.36 9.29 10.22 11.15 12.08 13.01
</TABLE>
*The State tax rates assumed do not take into account possible adjustment of
tax brackets based on changes in the Consumer Price Index. The table reflects
California income tax laws that increase State income tax rates for high
income taxpayers. However, the table does not reflect the limitation on
itemized deductions and the phase out of the benefit for the personal
exemption credit and the dependent exemption credit that are imposed by the
California income tax laws in a manner similar to Federal tax law.
<TABLE>
COLORADO
<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 19.3% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67% 9.29%
22.80 - 55.10 38.00 - 91.90 31.6 6.58 7.31 8.04 8.77 9.50 10.23 10.96
55.10 - 115.00 91.90 - 140.00 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
115.00 - 250.00 140.00 - 250.00 39.2 7.40 8.22 9.05 9.87 10.69 11.51 12.34
Over 250.00 Over 250.00 42.6 7.84 8.71 9.58 10.45 11.32 12.20 13.07
</TABLE>
<TABLE>
MICHIGAN
<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 21.8% 6.39% 7.03% 7.67% 8.31% 8.95% 9.59% 10.23%
22.80 - 55.10 38.00 - 91.90 33.7 7.54 8.30 9.05 9.80 10.56 11.31 12.07
55.10 - 115.00 91.90 - 140.00 36.5 7.87 8.66 9.45 10.24 11.02 11.81 12.60
115.00 - 250.00 140.00 - 250.00 41.1 8.49 9.34 10.19 11.04 11.88 12.73 13.58
Over 250.00 Over 250.00 44.4 8.99 9.89 10.79 11.69 12.59 13.49 14.39
</TABLE>
*The combined State and Federal tax bracket is computed utilizing a 4.47%
state personal income tax rate which is a weighted average rate that takes
into account a change in tax rates which was recently approved by Michigan
voters and a 3.5% tax on intangible income. The bracket does not reflect the
effect of the exemption from local income taxes; accordingly, Michigan
residents subject to such local income taxes would need a somewhat higher
taxable estimated current return than those shown to equal the tax-exempt
estimated current return of the Trust.
<PAGE>
100 Other Matters
<TABLE>
NEW JERSEY
<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 17.1% 6.03% 6.63% 7.24% 7.84% 8.44% 9.05% 9.65%
22.80 - 55.10 38.00 - 91.90 32.7 7.43 8.17 8.92 9.66 10.40 11.14 11.89
91.90 - 140.00 35.5 7.75 8.53 9.30 10.08 10.85 11.63 12.40
55.10 - 115.00 35.8 7.79 8.57 9.35 10.12 10.90 11.68 12.46
115.00 - 250.00 140.00 - 250.00 40.5 8.40 9.24 10.08 10.92 11.76 12.61 13.45
Over 250.00 Over 250.00 43.8 8.90 9.79 10.68 11.57 12.46 13.35 14.23
</TABLE>
<TABLE>
OKLAHOMA
<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 22.3% 6.44% 7.08% 7.72% 8.37% 9.01% 9.65% 10.30%
22.80 - 55.10 38.00 - 91.90 33.3 7.50 8.25 9.00 9.75 10.49 11.24 11.99
55.10 - 115.00 91.90 - 140.00 35.9 7.80 8.58 9.36 10.14 10.92 11.70 12.48
115.00 - 250.00 140.00 - 250.00 40.3 8.38 9.21 10.05 10.89 11.73 12.56 13.40
Over 250.00 Over 250.00 43.4 8.83 9.72 10.60 11.48 12.37 13.25 14.13
</TABLE>
*The combined Federal and State tax rate provided for the Oklahoma IM-IT Trust
takes into account the fact that all of the annual income of the Trust
generated by the Bonds in the Oklahoma IM-IT Trust is exempt from the Oklahoma
state income tax. The table does not reflect the fact that Oklahoma taxpayers
have the option of not deducting Federal income tax liability for Oklahoma tax
purposes. If an Oklahoma taxpayer chooses this option, the taxpayer may be
taxed at a rate lower than the rate shown in the above table.
<TABLE>
NORTH CAROLINA
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET* 5 1/2% 6% 6 1/2% 7% 7 1/2% 8% 8 1/2%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 21% 6.96% 7.59% 8.23% 8.86% 9.49% 10.13% 10.76%
22.80 - 55.10 38.00 - 91.90 33 8.21 8.96 9.70 10.45 11.19 11.94 12.69
55.10 - 115.00 91.90 - 140.00 36.4 8.65 9.43 10.22 11.01 11.79 12.58 13.36
115.00 - 250.00 140.00 - 250.00 41 9.32 10.17 11.02 11.86 12.71 13.56 14.41
Over 250.00 Over 250.00 44.3 9.87 10.77 11.67 12.57 13.46 14.36 15.26
</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>
Other Matters 101
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>
August 1994 $1.94 $ 1.94
September 1994 - June 2005 4.86 4.86
July 2005 4.56 $105.01 $.80 110.37
August 2005 - June 2006 4.30 4.30
July 2006 4.30 42.01 .32 46.63
August 2006 3.68 105.02 .82 109.52
September 2006 - March 2018 3.51 3.51
April 2018 3.51 55.14 .34 58.99
May 2018 - September 2022 3.27 3.27
October 2022 3.27 94.52 .53 98.32
November 2022 - December 2022 2.91 2.91
January 2023 2.91 105.02 .77 108.70
February 2023 - June 2023 2.37 2.37
July 2023 2.28 38.33 .25 40.86
August 2023 - November 2023 2.20 2.20
December 2023 2.20 95.04 .69 97.93
January 2024 - May 2024 1.72 1.72
June 2024 1.72 105.02 .78 107.52
July 2024 1.18 74.57 .53 76.28
August 2024 - December 2029 .82 .82
January 2030 .82 105.02 .77 106.61
February 2030 - December 2031 .28 .28
January 2032 .28 78.76 .48 79.52
</TABLE>
<PAGE>
102 Other Matters
<TABLE>
IM-IT SHORT INTERMEDIATE 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>
August 1994 $ 1.54 $ 1.54
September 1994 - July 1998 3.85 3.85
August 1998 3.85 $ 30.71 $.17 34.73
September 1998 - January 1999 3.73 3.73
February 1999 3.64 30.71 .18 34.53
March 1999 - May 1999 3.61 3.61
June 1999 3.31 428.58 2.35 434.24
July 1999 1.65 252.85 1.34 255.84
August 1999 .91 31.43 .18 32.52
September 1999 .88 .88
October 1999 .88 57.14 .32 58.34
November 1999 .65 .65
December 1999 .57 36.43 .21 37.21
January 2000 .50 107.15 .62 108.27
February 2000 25.00 .15 25.15
</TABLE>
<PAGE>
Other Matters 103
<TABLE>
IM-IT INTERMEDIATE 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>
August 1994 $ 1.69 $ 1.69
September 1994 - May 2003 4.22 4.22
June 2003 4.22 $ 35.00 $.20 39.42
July 2003 4.06 86.00 .47 90.53
August 2003 - September 2003 3.66 3.66
October 2003 3.66 141.00 .73 145.39
November 2003 3.06 150.00 .81 153.87
December 2003 2.03 150.00 .79 152.82
January 2004 1.73 1.73
February 2004 1.55 56.00 .31 57.86
March 2004 - May 2004 1.47 1.47
June 2004 1.47 100.00 .55 102.02
July 2004 1.01 81.00 .22 82.23
August 2004 .65 58.00 .32 58.97
September 2004 - December 2004 .57 .57
January 2005 .57 107.00 .55 108.12
February 2005 36.00 .20 36.20
</TABLE>
<PAGE>
104 Other Matters
<TABLE>
IM-IT LIMITED 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>
August 1994 $ 1.85 $ 1.85
September 1994 - November 2004 4.64 4.64
December 2004 4.50 $ 49.60 $.27 54.37
January 2005 - June 2006 4.38 4.38
July 2006 4.38 142.86 .77 148.01
August 2006 3.46 59.52 .32 63.30
September 2006 - November 2006 3.37 3.37
December 2006 3.37 138.89 .79 143.05
January 2007 - April 2009 2.64 2.64
May 2009 2.64 94.24 .48 97.36
June 2009 2.20 243.06 1.16 246.42
July 2009 1.14 271.83 1.30 274.27
</TABLE>
<PAGE>
Other Matters 105
<TABLE>
CALIFORNIA 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>
August 1994 $ 1.57 $ 1.57
September 1994 - January 1999 3.92 3.92
February 1999 3.92 $160.00 $ 1.28 165.20
March 1999 - August 1999 3.28 3.28
September 1999 3.28 40.00 .31 43.59
October 1999 - January 2000 3.12 3.12
February 2000 3.12 40.00 .33 43.45
March 2000 - August 2000 2.96 2.96
September 2000 2.96 60.00 .48 63.44
October 2000 2.72 100.00 .78 103.50
November 2000 - April 2001 2.33 2.33
May 2001 2.33 118.33 1.02 121.68
June 2001 - August 2001 1.82 1.82
September 2001 1.82 81.67 .66 84.15
October 2001 - July 2002 1.49 1.49
August 2002 1.49 200.00 1.70 203.19
September 2002 - May 2003 .65 .65
June 2003 .27 200.00 1.43 201.70
</TABLE>
<PAGE>
106 Other Matters
<TABLE>
COLORADO 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>
August 1994 $ 1.84 $ 1.84
September 1994 - November 2002 4.60 4.60
December 2002 4.60 $ 82.48 $.85 87.93
January 2003 - May 2003 4.17 4.17
June 2003 4.17 82.48 .83 87.48
July 2003 - November 2004 3.76 3.76
December 2004 3.30 164.96 1.73 169.99
January 2005 - October 2011 2.90 2.90
November 2011 2.90 65.98 .58 69.46
December 2011 - November 2013 2.61 2.61
December 2013 2.61 164.97 1.41 168.99
January 2014 - June 2018 1.91 1.91
July 2018 1.91 131.97 1.28 135.16
August 2018 - November 2023 1.28 1.28
December 2023 1.28 131.97 1.08 134.33
January 2024 - May 2024 .75 .75
June 2024 .75 164.96 1.63 167.34
</TABLE>
<PAGE>
Other Matters 107
<TABLE>
MICHIGAN 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>
August 1994 $ 1.87 $ 1.87
September 1994 - April 2014 4.68 4.68
May 2014 4.68 $ 99.27 $.91 104.86
June 2014 - June 2016 4.23 4.23
July 2016 4.23 165.45 1.47 171.15
August 2016 - October 2018 3.51 3.51
November 2018 3.51 165.45 1.54 170.50
December 2018 - September 2019 2.75 2.75
October 2019 2.75 132.37 1.37 136.49
November 2019 - September 2021 2.07 2.07
October 2021 2.07 165.45 1.51 169.03
November 2021 - April 2024 1.33 1.33
May 2024 1.33 281.27 2.85 285.45
</TABLE>
<PAGE>
108 Other Matters
<TABLE>
NEW JERSEY 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>
August 1994 $ 1.88 $ 1.88
September 1994 - May 2013 4.71 4.71
June 2013 4.71 $ 32.70 $.26 37.67
July 2013 - July 2022 4.56 4.56
August 2022 4.21 163.50 1.17 168.88
September 2022 - June 2023 3.90 3.90
July 2023 3.90 107.92 .88 112.70
August 2023 3.40 3.40
September 2023 3.40 163.50 1.28 168.18
October 2023 - June 2024 2.67 2.67
July 2024 2.67 382.60 3.35 388.62
August 2024 - May 2031 .77 .77
June 2031 .77 163.51 1.47 165.75
</TABLE>
<PAGE>
Other Matters 109
<TABLE>
OKLAHOMA 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>
August 1994 $ 1.77 $ 1.77
September 1994 - June 2004 4.43 4.43
July 2004 4.43 $251.84 $.94 257.21
August 2004 - May 2010 3.17 3.17
June 2010 3.17 251.85 .85 255.87
July 2010 - July 2016 2.04 2.04
August 2016 1.43 268.64 .85 270.92
September 2016 - December 2021 .90 .90
January 2022 .90 251.84 .73 253.47
</TABLE>
<PAGE>
110 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>
August 1994 $ 1.89 $ 1.89
September 1994 - May 2010 4.73 4.73
June 2010 4.73 $ 83.41 $.76 88.90
July 2010 - December 2014 4.31 4.31
January 2015 4.31 166.84 1.43 172.58
February 2015 - June 2016 3.53 3.53
July 2016 3.53 83.41 .65 87.59
August 2016 - September 2018 3.18 3.18
October 2018 3.18 83.42 .62 87.22
November 2018 - November 2020 2.84 2.84
December 2020 2.84 100.10 .79 103.73
January 2021 - December 2022 2.41 2.41
January 2023 2.41 166.83 1.56 170.80
February 2023 - November 2023 1.56 1.56
December 2023 1.56 166.84 1.61 170.01
January 2024 - August 2024 .68 .68
September 2024 .28 166.83 1.37 168.48
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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
Purchased and Accrued Interest.................. 16
Purchased Interest............................ 16
Accrued Interest.............................. 16
Public Offering................................. 16
General....................................... 16
Offering Price................................ 18
Market for Units.............................. 19
Distributions of Interest and Principal....... 19
Reinvestment Option........................... 20
Redemption of Units........................... 21
Reports Provided.............................. 22
Insurance on the Bonds in the Insured Trusts.... 23
IM-IT............................................ 30
IM-IT SHORT INTERMEDIATE TRUST................... 32
IM-IT INTERMEDIATE TRUST......................... 34
IM-IT LIMITED MATURITY TRUST..................... 36
CALIFORNIA IM-IT INTERMEDIATE LADDERED
MATURITY TRUST................................. 39
COLORADO IM-IT TRUST............................. 48
MICHIGAN IM-IT TRUST............................. 53
NEW JERSEY IM-IT TRUST........................... 58
OKLAHOMA IM-IT TRUST............................. 64
NORTH CAROLINA QUALITY TRUST..................... 68
NOTES TO PORTFOLIOS.............................. 74
UNDERWRITING..................................... 76
TRUST ADMINISTRATION............................. 80
Fund Administration and Expenses................ 80
Sponsor....................................... 80
Compensation of Sponsor and Evaluator......... 83
Trustee....................................... 83
Trustee's Fee................................. 84
Portfolio Administration...................... 84
Sponsor Purchases of Units.................... 85
Insurance Premiums............................ 85
Miscellaneous Expenses........................ 85
General......................................... 86
Amendment or Termination...................... 86
Limitation on Liabilities..................... 87
Unit Distribution............................. 87
Sponsor and Underwriter Compensation.......... 88
OTHER MATTERS.................................... 90
Legal Opinions.................................. 90
Independent Certified Public Accountants........ 90
FEDERAL TAX STATUS............................... 90
DESCRIPTION OF SECURITIES RATINGS................ 93
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS..................................... 94
STATEMENTS OF CONDITION.......................... 95
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
TABLES.......................................... 97
ESTIMATED CASH FLOWS TO UNITHOLDERS.............. 100
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
July 12, 1994
LOGO
INSURED MUNICIPALS INCOME TRUST
AND
INVESTORS' QUALITY TAX-EXEMPT TRUST,
MULTI-SERIES 226
IM-IT 329
IM-IT 93rd Short Intermediate
IM-IT 79th Intermediate
IM-IT 75th Limited Maturity
California IM-IT Intermediate
Laddered Maturity Series 12
Colorado IM-IT 69
Michigan IM-IT 118
New Jersey IM-IT 94
Oklahoma IM-IT 11
North Carolina Quality 76
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.
Contents of Registration Statement
This Amendment of Registration Statement comprises the following papers
and documents:
The facing sheet and the Cross-Reference sheet
The Prospectus and the signatures
The consents of independent public accountants, ratings services
and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.4 Copy of Municipal Bond Investment Trust Insurance Policy
issued by AMBAC Indemnity Corporation Company and/or Financial
Guaranty Insurance Company for each Insured Trust.
1.5 Form of Master Agreement Among Underwriters.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to the Federal, Colorado and Oklahoma income
tax status of securities being registered.
3.3 Opinion and consent of counsel as to New York income tax status of
the Fund under New York law.
3.4 Opinion and consent of counsel as to income tax status to
California residents of Units of the California IM-IT Trust.
3.5 Opinion and consent of counsel as to income tax status to Michigan
residents of Units of the Michigan IM-IT Trust.
3.6 Opinion and consent of counsel as to income tax status to New
Jersey residents of Units of the New Jersey IM-IT Trust.
3.7 Opinion and consent of counsel as to income tax status to North
Carolina residents of Units of the North Carolina Quality Trust.
4.1 Consent of Interactive Data Services, Inc.
4.2 Consent of Standard & Poor's Corporation with respect to the
Insured Trusts.
4.3 Consent of Grant Thornton.
Signatures
The Registrant, Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 226, hereby identifies Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-
Series 189 and Multi-Series 213 for purposes of the representations
required by Rule 487 and represents the following: (1) that the portfolio
securities deposited in the series as to the securities of which this
Registration Statement is being filed do not differ materially in type or
quality from those deposited in such previous series; (2) that, except to
the extent necessary to identify the specific portfolio securities
deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration
Statement is being filed, this Registration Statement does not contain
disclosures that differ in any material respect from those contained in
the registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and (3)
that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 226 has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois
on the 12th day of July, 1994.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt
Trust, Multi-Series 226
By Van Kampen Merritt Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons, in the capacities indicated on July 12, 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*)
* A 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.
Exhibit 1.1
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 226
Trust Agreement
Dated: July 12, 1994
This Trust Agreement between Van Kampen Merritt Inc., as Depositor,
American Portfolio Evaluation Services, a division of Van Kampen Merritt
Investment Advisory Corp., as Evaluator, and The Bank of New York, as
Trustee, sets forth certain provisions in full and incorporates other
provisions by reference to the document entitled "Insured Municipals
Income Trust and Investors' Quality Tax-Exempt Trust, Standard Terms and
Conditions of Trust, Effective August 26, 1987 for Multi-Series 59 and
Subsequent Series" (herein called the "Standard Terms and Conditions of
Trust"), and such provisions as are set forth in full and such provisions
as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections
of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(4), listed in the
Schedules hereto, have been deposited in the Trusts under this Trust
Agreement.
(b) The fractional undivided interest in and ownership of the
various Trusts represented by each Unit thereof is the amount set
forth under "Summary of Essential Financial Information-Fractional
Undivided Interest in the Trust per Unit" in the Prospectus.
(c) The approximate amounts, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid to
the Depositor pursuant to Section 3.05 shall be the amount per Unit
that the Trustee agreed to reduce its fee or pay Trust expenses set
forth in the footnotes to the "Per Unit Information" for each Trust
in the Prospectus times the number of units in such Trust referred
to in Part II (b) of this Trust Agreement.
(d) The First General Record Date and the amount of the second
distribution of funds from the Interest Account of each Trust shall
be the record date for the Interest Account and the amount set forth
under "Interest Earning Schedule" in the Prospectus.
(e) The First Settlement Date shall be the date set forth
under "Summary of Essential Financial Information-First Settlement
Date" in the Prospectus.
(f) Any monies held to purchase "when issued" bonds will be
held in noninterest bearing accounts.
(g) The Evaluation Time for purpose of sale, purchase or
redemption of Units shall be 4:00 P.M. Eastern time.
(h) The face of the form of the Certificates will be
substantially as follows:
No. ___________ Certificate of Ownership _________ Units
--Evidencing--
An Undivided Interest
-In-
This is to certify that ____________________ is the owner and
registered holder of this Certificate evidencing the ownership of
______units of fractional undivided interest in the above-named Trust
created pursuant to the Indenture, a copy of which is available at the
office of the Trustee. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Indenture to
which the Holder of this Certificate by virtue of the acceptance
hereof assents and is bound, a summary of which Indenture is contained
in the Prospectus relating to the Trust. This Certificate is
transferable and interchangeable by the registered owner in person or
by his duly authorized attorney at the Trustee's office upon surrender
of this Certificate properly endorsed or accompanied by a written
instrument of transfer and any other documents that the Trustee may
require for transfer, in form satisfactory to the Trustee and payment
of the fees and expenses provided in the Indenture.
Witness the facsimile signature of a duly authorized officer of
the Sponsor and the manual signature of an authorized signatory of the
Trustee.
Dated:
Van Kampen Merritt Inc., The Bank of New York,
Depositor Trustee
By __________________________ By__________________________
Chairman Authorized Signatory
(i) Section 8.02(d) and (e) of the Standard Terms and
Conditions of Trust are hereby stricken and replaced by the
following:
(d) distribution to each Certificateholder of such Trust such
holder's pro rata share of the balance of the Interest Account of
such Trust;
(e) distribute to each Certificateholder of such Trust such
holder's pro rata share of the balance of the Principal Account of
such Trust; and
In Witness Whereof, Van Kampen Merritt Inc. has caused this Trust
Agreement to be executed by one of its Vice Presidents or Assistant Vice
Presidents and its corporate seal to be hereto affixed and attested by
its Secretary or one of its Vice Presidents or Assistant Secretaries,
American Portfolio Evaluation Services, a division of Van Kampen Merritt
Investment Advisory Corp., has caused this Trust Indenture and Agreement
to be executed by its President or one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by its Secretary, its
Assistant Secretary or one of its Assistant Vice Presidents and The Bank
of New York, has caused this Trust Agreement to be executed by one of its
Vice Presidents and its corporate seal to be hereto affixed and attested
to by one of its Vice Presidents, Assistant Vice Presidents or Assistant
Treasurers; all as of the day, month and year first above written.
Van Kampen Merritt Inc., Depositor
By Sandra A. Waterworth
Vice President
[Seal]
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services a division of Van Kampen
Merritt Investment Advisory
Corp.
By Dennis J. Mcdonnell
President
[Seal]
Attest:
By Scott E. Martin
Secretary
The Bank Of New York
By Jeffrey Bieselin
Vice President
[Seal]
Attest:
By Norbert Loney
Assistant Treasurer
Schedules to Trust Agreement
Securities Initially Deposited
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust
Multi-Series 226
(Note: Incorporated herein and made a part hereof as indicated below
are the corresponding "Portfolios" of each of the Trusts as set
forth in the Prospectus.)
Exhibit 1.5
Dated: June 1, 1992
Master Agreement Among Underwriters
For Unit Investment Trusts Sponsored by
Van Kampen Merritt Inc.
Van Kampen Merritt Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Gentlemen:
1. The Trust. We understand that you, Van Kampen Merritt Inc.
(the "Sponsor"), are entering into this agreement (the "Agreement") in
counterparts with us and other firms who may be underwriters for issues
of various series of unit investment trusts for which you will act as
Sponsor. This Agreement shall apply to any offering after May 1, 1992 of
units of fractional undivided interest in such various series unit
investment trusts in which we elect to act as an underwriter
(underwriters with respect to each such trust being hereinafter called
"Underwriters") after receipt of a notice from you stating the name and
size of the trust and that our participation as an Underwriter in the
proposed offering shall be subject to the provisions of this Agreement.
The issuer of the units of fractional undivided interests in a series of
a unit investment trust offered in any offering of units made pursuant to
this Agreement is hereinafter referred to as the "Trust" and the
reference to "Trust" in this Agreement applies only to such Trust, and
such units of such Trust offered are hereinafter called the "Units".
Each Trust is or will be registered as a "unit investment trust" under
the Investment Company Act of 1940 (the "1940 Act") by appropriate
filings with the Securities and Exchange Commission (the "Commission").
Additionally, each Trust is or will be registered with the Commission
under the Securities Act of 1933 (the "1933 Act") on Form S-6 or its
successor forms, including a proposed form of prospectus (the
"Preliminary Prospectus").
The registration statement as finally amended and revised at the
time it becomes effective is herein referred to as the "Registration
Statement" and the related prospectus is herein referred to as the
"Prospectus", except that if the prospectus filed by the Trust pursuant
to Rule 424(b) under the 1933 Act shall differ from the prospectus on
file at the time the Registration Statement shall become effective, the
term "Prospectus" shall refer to the prospectus filed pursuant to Rule
424(b) from and after the date on which it shall have been filed.
The following provisions of this Agreement shall apply separately to
each individual offering of Units by a Trust.
We understand that as of the date upon which we have agreed to
underwrite Units of the Trust the Commission shall not have issued any
order preventing or restraining the use of any Preliminary Prospectus
and, further, that each Preliminary Prospectus shall conform in all
material respects to the requirements of the 1933 Act and the Rules and
Regulations thereunder and, as of its date, shall not include any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading; and when the Registration
Statement becomes effective, it and the Prospectus, and any amendments or
supplements thereto, will contain all statements that are required to be
stated therein in accordance with the 1933 Act and the Rules and
Regulations thereunder and will in all material respects conform to the
requirements of the 1933 Act and the Rules and Regulations thereunder,
and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that you make no representation or warranty as to
information contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement, in reliance upon and in conformity with, written information
furnished to you by or on behalf of any Underwriter specifically for use
in the preparation thereof.
2. Designation and Authority of Representative. You are hereby
authorized to act as our representative (the "Representative") in
connection with all matters to which this Agreement relates and to take
the action provided herein to be taken by you as you may otherwise deem
necessary or advisable. We understand that we have no obligations under
this Agreement with respect to any Trust in which we choose not to
participate as an Underwriter.
You will be under no liability to us for any act or omission except
for obligations expressly assumed by you herein and no obligations on
your part will be implied or inferred herefrom. The rights and
liabilities of the respective parties hereto are several and not joint,
and nothing herein or hereunder will constitute then a partnership,
association or separate entity.
3. Profit or Loss in Acquisition of Securities. It is understood
that the acquisition of securities (the "Securities") for deposit in the
portfolio of the Trust shall be at your cost and risk. We acknowledge
that you will share with us any net deposit profits in the amounts and to
the extent, if any, indicated under "Sponsor and Underwriter
Compensation" in the Prospectus. For the purposes of determining the
number of Units underwritten, we understand that we will be credited for
that number of Units set forth opposite our name in the section entitled
"Underwriting" in the prospectus.
We agree that you shall have no liability (as Representative or
otherwise) with respect to the issue form, validity, legality,
enforceability, value of, or title to the Securities, except for the
exercise of due care in determining the genuineness of such Securities
and the conformance thereof with the descriptions and qualifications
appearing in the Prospectus.
4. Purchase of Units. Promptly after you make a determination to
offer Units of a Trust and you inquire as to whether we desire to
participate in such offering, we will advise you promptly as to the
number of Units which we will purchase or of our decision not to
participate in such offering. Such advice may be written or oral. The
delivery to the Sponsor of a completed Schedule A to this Agreement shall
constitute adequate written advice. Oral advice shall be binding but
shall be promptly confirmed in writing by us by means of telegraph,
telegram or other form of wire or facsimile transmission. Such written
confirmation shall contain the information requested by Schedule A to
this Agreement. You may rely on and we hereby commit on the terms and
conditions of this Agreement to purchase and pay for the number of Units
of the Trust set forth in such advice (the "Unit Commitment"). Our Unit
Commitment may be increased only by mutual agreement between us and you
at any time prior to the date as of which the Trust Agreement for the
Trust is executed (the "Date of Deposit"). We agree that you in your
sole discretion reserve the right to decrease our Unit Commitment at any
time prior to the Date of Deposit and if you so elect to make such a
decrease, you will notify us of such an election by telephone and
promptly confirm the same in writing.
The price to be paid for such Units shall be the Public Offering
Price per Unit (as defined in the Prospectus) as first determined on the
Date of Deposit or such later determination on such Date of Deposit as
you shall advise us, less the sum per Unit indicated under "Sponsor and
Underwriter Compensation" in the Prospectus. Further, each Underwriter
who underwrites that number of Units indicated under "Sponsor and
Underwriter Compensation" in the Prospectus will receive from the Sponsor
that additional compensation indicated under such section of the
Prospectus for each Unit it underwrites, providing the Trust size is in
excess of that number of Units, if any, indicated under such section of
the Prospectus. At the Date of Deposit, we will become the owner of the
Units and be entitled to the benefits (except for interest, if any,
accruing from the Date of Deposit to the First Settlement Date) as well
as the risks inherent therein. We acknowledge that those persons, if
any, named in the Prospectus under "Sponsor and Underwriter Compensation"
are Managing or Co-Managing Underwriters of the Trust, as indicated
therein, and we acknowledge that those persons specifically named therein
will receive as additional compensation those respective per Unit amounts
set forth in such section of the Prospectus.
You are authorized to retain custody of our Units until the
Registration Statement relating thereto has become effective under the
1933 Act and you shall have received payment from us for such Units.
You are authorized to file an amendment to said Registration
Statement describing the Securities and furnishing information based
thereon or relating thereto and any further amendments or supplements to
the Registration Statement or Prospectus which you may deem necessary or
advisable. We will furnish to you upon your request such information as
will be required to insure that the Registration Statement and Prospectus
are current insofar as they relate to us and we thereafter continue to
furnish you with such information as may be necessary to keep current and
correct the information previously supplied.
We understand that the Trust will also take action with respect to
the offering and sale of Units in accordance with the Blue Sky or
securities laws of certain states in which it is proposed that the Units
may be offered and sold.
5. Public Offering. You agree that you will advise us promptly
when the Registration Statement has become effective, and we agree that
when we are advised that the Units are released for public offering, we
will make a public offering thereof by means of the Prospectus under the
1933 Act, as amended, which describes the deposit of Securities and
related information. The Public Offering Price and the terms and
conditions of the public offering shall be as set forth in the Prospectus
and shall rely with respect to the offering price of the Securities upon
the determination of the Evaluator named in the Prospectus. Public
advertisement of the offering, if any, shall be made by you on behalf of
the Underwriters on such date as you shall determine. We agree that
before we use any Trust advertising material which we have created, we
will obtain your prior approval to use such advertising materials.
6. Public Offering Price. We agree that each day while this
Agreement is in effect and the evaluation of the Trust is made by the
Evaluator named in the Prospectus, we will contact you for such
evaluation and of the resultant Public Offering Price for the purpose of
the offering and sale of the respective Units to the public. We agree as
required by Section 22(d) of the 1940 Act to offer and sell our Units at
the current Public Offering Price described in the Prospectus.
7. Permitted Transactions. It is agreed that part or all of the
Units purchased by us may be sold to dealers, or other entities with whom
we can legally grant a concession or agency commission, only at the then
effective Public Offering Price, less the concession described in the
Prospectus.
From time to time prior to the termination of this Agreement, at
your Request, we will advise you of the number of our Units which remain
unsold and, at your request, we agree to deliver to you any of such
unsold Units to be sold for our account to retail accounts or, less the
concession or agency commission then effective, to dealers or others.
If prior to the termination of this Agreement, or such earlier date
as you may determine and advise us thereof in writing, you shall purchase
or contract to purchase any of our Units or any Units issued in exchange
therefor, in the open market or otherwise, or if any such Units shall be
tendered to the Trustee for redemption because not effectively placed for
investment by us, we agree to repurchase such Units at a price equal to
the total cost of such purchase, including accrued interest and
commissions, if any, and transfer taxes on redelivery. Regardless of the
amount paid on the repurchase of any such Units, it is agreed that they
may be resold by us only at the then effective Public Offering Price.
Until the termination of this Agreement, we agree that we will make
no purchase of Units other than (i) purchases provided for in this
Agreement, (ii) purchases approved by you and (iii) purchases as broker
in executing unsolicited orders.
8. Compliance With Commission Order. We hereby agree as follows:
(a) we will refund all sales charges to purchasers of Units from us or
any dealer participating in the distribution of Units who purchased such
Units from us if, within ninety days from the time that the Registration
Statement of the respective Units under the 1933 Act shall have become
effective, (i) the net worth of the trust shall be reduced to less than
20% of the principal amount of Securities originally deposited therein or
(ii) the Trust shall have been terminated; (b) you may instruct the
Trustee on the Date of Deposit that, in the event that redemption by any
Underwriters of Units constituting part of any unsold allotment of Units
shall result in the Trust having a net worth of less than 40% of the
principal amount of Securities originally deposited therein, the Trustee
shall terminate the Trust in the manner provided in the Trust Indenture
and Agreement (as defined in the Prospectus) and distribute the
Securities and other assets of the Trust pursuant to the provisions of
the Trust Indenture and Agreement; and (c) in the event that the Trust
shall have been terminated pursuant to (b) above, we will refund any
sales charges to any purchaser of such Units who purchased from us, or
purchased from a dealer participating in the distribution of such Units
who purchased such Units from us. We authorize you to charge our account
for all refunds of sales charges in respect to our Units.
9. Substitution of Underwriters. We authorize you to arrange for
the substitution hereunder of other persons, who may include you and us,
for all or any part of the commitment of any nondefaulting Underwriter
with the consent of such Underwriter, and of any defaulting Underwriter
without the consent thereof, upon such terms and conditions as you may
deem advisable, provided that the number of Units to be purchased by us
shall not be increased without our consent and that such substitution
shall not in any way affect the liability of any defaulting Underwriter
to the other Underwriters for damages from such default, nor relieve any
other Underwriter of any obligation under this Agreement. The expenses
chargeable to the account of any defaulting Underwriter and not paid for
by it or by a person substituted for such Underwriter and any additional
losses or expenses arising from such default shall be considered to be
expenses under this Agreement and shall be charged against the accounts
of the nondefaulting Underwriters in proportion to their respective
commitments.
10. Termination. This Agreement shall terminate with respect to
each Trust which we have agreed to underwrite 30 days after the date on
which the public offering of the Units of such Trust is made in
accordance with Section 5 hereof unless sooner terminated by you,
provided that you may extend this Agreement for not more than eleven
successive periods of 30 days each upon notice to us and each of the
other Underwriters.
Notwithstanding any settlement on the termination of this Agreement,
we agree to pay our share of any amount payable on account of any claim,
demand or liability which may be asserted against the Underwriters, or
any of them, based on the claim that the Underwriters constitute an
association, unincorporated business or other separate entity and our
share of any expenses incurred by you in defending against any such
claim, demand or liability. We also agree to pay any stamp taxes which
may be assessed and paid after such settlement on account of any Units
received or sold hereunder for our account.
Notwithstanding any termination of this Agreement, no sales of the
Units shall be made by us at any time except in conformity with the
provisions of Section 22(d) of the 1940 Act.
11. Default by Other Underwriters. Default by any one or more of
the other Underwriters in respect of their several obligations under this
Agreement shall neither release you nor us from any of our respective
obligations hereunder.
12. Notices. Notices hereunder shall by deemed to have been duly
given if mailed or telegraphed to us at our address set forth below, in
the case of notices to us, or to you at your address set forth at the
head of this Agreement, in the case of notices to you.
13. Net Capital. You represent that you, and we represent that we,
are in compliance with the capital requirements of Rule 15c-3-1
promulgated by the Commission under the Securities and Exchange Act of
1934, and we may, in accordance with and pursuant to such Rule 15c-3-1,
agree to purchase the amount of Units to be purchased by you and us,
respectively, under the Agreement.
14. Miscellaneous. We confirm that we are a member in good
standing of the National Association of Securities Dealers, Inc.
We confirm that we will take reasonable steps to provide the
Preliminary Prospectus or final Prospectus to any person making written
request therefor to us and to make the Preliminary Prospectus or the
final Prospectus available to each person associated with us expected to
solicit customers' orders for the Units prior to the effective
registration date and the final Prospectus if he is expected to offer the
Units after the effective date. We understand that you will supply us
upon our request with sufficient copies of such prospectuses to comply
with the foregoing.
This Agreement is being executed by us and delivered to you in
duplicate. Upon your confirmation hereof and of agreements in identical
form with each of the other Underwriters, this Agreement shall constitute
a valid and binding contract between us.
Very truly yours,
Confirmed as of the date set forth Indicated below our firm
at the head of this Agreement name and address exactly as we
wish to appear in the Prospectus
Van Kampen Merritt, Inc.
By____________________________ ____________________________________
Title__________________________ ____________________________________
____________________________________
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
July 12, 1994
Van Kampen Merritt Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226
Gentlemen:
We have served as counsel for Van Kampen Merritt Inc., Sponsor and
Depositor of Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 226 (hereinafter referred to as the "Fund"),
in connection with the preparation, execution and delivery of a Trust
Agreement dated July 12, 1994 between Van Kampen Merritt Inc., as
Depositor, American Portfolio Evaluation Services, a division of Van
Kampen Merritt Investment Advisory Corp., as Evaluator, and The Bank of
New York, as Trustee, pursuant to which the Depositor has delivered to
and deposited Bonds listed in the Schedules to the Trust Agreement with
the Trustee and pursuant to which the Trustee has issued to or on the
order of the Depositor a certificate or certificates representing Units
of fractional undivided interest in and ownership of the several Trusts
of said Fund (hereinafter referred to as the "Units") created under said
Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the Units in the
several Trusts of the Fund have been duly authorized; and
2. The certificates evidencing the Units in the several
Trusts of the Fund when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust
Agreement, will constitute valid and binding obligations of such
Trusts and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-53933) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
said Registration Statement and in the related Prospectus.
Respectfully submitted,
Chapman and Cutler
MJK/ch
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
July 12, 1994
Van Kampen Merritt Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
Unit Investment Trust Division
101 Barclay Street
New York, New York 10286
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226
______________________________________________
Gentlemen:
We have acted as counsel for Van Kampen Merritt Inc., Depositor of
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 226 (the "Fund"), in connection with the issuance of Units
of fractional undivided interest in the several Trusts of said Fund under
a Trust Agreement dated July 12, 1994 (the "Indenture") between Van
Kampen Merritt Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen Merritt Investment Advisory Corp., as
Evaluator, and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we
have deemed pertinent.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
trusts) of chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that
the number of Units of such Trust held by him bears to the total
number of Units outstanding of such Trust. Under subpart E,
subchapter J of chapter 1 of the Code, income of each Trust will be
treated as income of each Unitholder of the respective Trust in the
proportion described, and an item of Trust income will have the same
character in the hands of a Unitholder as it would have in the hands
of the Trustee. Accordingly, to the extent that the income of a
Trust consists of interest excludable from gross income under
Section 103 of the Code, such income will be excludable from Federal
gross income of the Unitholders, except in the case of a Unitholder
who is a substantial user (or a person related to such user) of a
facility financed through issuance of any industrial development
bonds or certain private activity bonds held by the respective
Trust. In the case of such Unitholder (and no other) interest
received with respect to his Units attributable to such industrial
development bonds or such private activity bonds is includable in
his gross income. In the case of certain corporations, interest on
the Bonds is included in computing the alternative minimum tax
pursuant to Section 56(c) of the Code, the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code, and the branch
profits tax imposed by Section 884 of the Code with respect to U.S.
branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. Before
adjustment, such basis would normally be cost if the Unitholder had
acquired his Units by purchase, plus his aliquot share of advances
by the Trustee to the Trust to pay interest on Bonds delivered after
the Unitholder's settlement date to the extent that such interest
accrued on the Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the
respective Trust, but only to the extent that such advances are to
be repaid to the Trustee out of interest received by such Trust with
respect to such Bonds. In addition, such basis will be increased by
the Unitholder's aliquot share of the accrued original issue
discount with respect to each Bond held by the Trust with respect to
which there was an original issue discount at the time the Bond was
issued and reduced by the annual amortization of bond premium, if
any, on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Unitholder and the amount thereof is measured by
comparing the Unitholder's aliquot share of the total proceeds from
the transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning the
tax basis for his Units among each of the Trust assets (as of the
date on which his Units were acquired) ratably according to their
values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced by the
amount of his aliquot share of interest received by the Trust, if
any, on Bonds delivered after the Unitholder's settlement date to
the extent that such interest accrued on the Bonds during the period
from the Unitholder's settlement date to the date such Bonds are
delivered to the Trust, must be reduced by the annual amortization
of bond premium, if any, on Bonds held by the Trust and must be
increased by the Unitholder's share of the accrued original issue
discount with respect to each Bond which, at the time the Bond was
issued, had original issue discount.
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price",
such excess shall be original issue discount. With respect to each
Unitholder, upon the purchase of his Units subsequent to the
original issuance of Bonds held by the Trust, Section 1272(a)(7) of
the Code provides for a reduction in the accrued "daily portion" of
such original issue discount upon the purchase of a Bond subsequent
to the Bond's original issue, under certain circumstances. In the
case of any Bond held by the Trust the interest on which is
excludable from gross income under Section 103 of the Code, any
original issue discount which accrues with respect thereto will be
treated as interest which is excludable from gross income under
Section 103 of the Code.
(vi) We have examined the Municipal Bond Unit Investment Trust
Insurance policies, if any, issued to certain of the Trusts on the
Date of Deposit by AMBAC Indemnity Corporation, Financial Guaranty
Insurance Corporation or a combination thereof. Each such policy,
or a combination of such policies, insures all bonds held by the
Trustee for that particular Trust (other than bonds described in
paragraph (vii)) against default in the prompt payment of principal
and interest. In our opinion, any amount paid under each said
policy, or a combination of said policies, which represents maturing
interest on defaulted obligations held by the Trustee will be
excludable from federal gross income if, and to the same extent as,
such interest would have been so excludable if paid by the issuer of
the defaulted bonds provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the
issuer of the bonds, rather than the insurer, will pay debt service
on the bonds. Paragraph (ii) of this opinion is accordingly
applicable to insurance proceeds representing maturing interest.
(vii) Certain bonds in the portfolios of certain of the Insured
Trusts have been insured by the issuers thereof against default in
the prompt payment of principal and interest. Insurance has been
obtained for such bonds, or, in the case of a commitment, the bonds
will be ultimately insured under the terms of such an insurance
policy, which are designated as issuer insured bonds on the
portfolio pages of the respective Trusts in the prospectus for the
Fund, by the issuer of such bonds. Insurance obtained by the issuer
is effective so long as such bonds remain outstanding. For each of
these bonds, we have been advised that the aggregate principal
amount of such bonds listed on the portfolio page for the respective
Trust was acquired by the applicable Trust and are part of the
series of such bonds listed on the portfolio page for the respective
Trust in the aggregate principal amount listed on the portfolio page
for the respective Trust. Based upon the assumption that the bonds
acquired by the applicable Trust are part of the series covered by
an insurance policy or, in the case of a commitment, will be
ultimately insured under the terms of such an insurance policy, it
is our opinion that any amounts received by the applicable Trust
representing maturing interest on such bonds will be excludable from
federal gross income if, and to the same extent as, such interest
would have been so excludable if paid in normal course by the Issuer
notwithstanding the source of the payment is from policy proceeds.
Paragraph (ii) of this opinion is accordingly applicable to such
payment.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending on
the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the amount
of original issue discount which would have previously accrued based upon
its issue price (its "adjusted issue price") 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.
Because the Trusts do not include any "private activity" bonds
within the meaning of Section 141 of the Code issued on or after August
15, 1986, none of the Trust Fund's interest income shall be treated as an
item of tax preference when computing the alternative minimum tax. In
the case of corporations, for taxable years beginning after December 31,
1986, the alternative minimum tax and the Superfund Tax depend upon the
corporation's taxable income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items
used in computing alternative minimum taxable income ("AMTI") and the
Superfund Tax of a corporation (other than an S corporation, Regulated
Investment Company, Real Estate Investment Trust or REMIC) for taxable
years beginning after 1989, is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net
operating loss deduction). "Adjusted current earnings" includes, all tax-
exempt interest, including interest on all Bonds in the Trust, and tax-
exempt original issue discount.
Effective for tax returns filed after December 31, 1987, all
taxpayers are required to disclose to the Internal Revenue Service the
amount of tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable
year of 100 percent of the otherwise deductible interest on indebtedness
incurred or continued by financial institutions, to which either Section
585 or Section 593 of the Code applies, to purchase or carry obligations
acquired after August 7, 1986, the interest on which is exempt from
Federal income taxes for such taxable year. Under rules prescribed by
Section 265, the amount of interest otherwise deductible by such
financial institutions in any taxable year which is deemed to be
attributable to tax-exempt obligations acquired after August 7, 1986,
will be the amount that bears the same ratio to the interest deduction
otherwise allowable (determined without regard to Section 265) to the
taxpayer for the taxable year as the taxpayer's average adjusted basis
(within the meaning of Section 1016) of tax-exempt obligations acquired
after August 7, 1986, bears to such average adjusted basis for all assets
of the taxpayer, unless such financial institution can otherwise
establish, under regulations, to be prescribed by the Secretary of the
Treasury, the amount of interest on indebtedness incurred or continued to
purchase or carry such obligations.
We also call attention to the fact that, under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry
Units is not deductible for Federal income tax purposes. Under rules
used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly traceable
to the purchase of Units. However, these rules generally do not apply to
interest paid on indebtedness incurred for expenditures of a personal
nature such as a mortgage incurred to purchase or improve a personal
residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued).
Market discount can arise based on the price a Trust pays for Bonds or
the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior
law, the accretion had been treated as capital gain. Market discount
that accretes while a Trust holds a Bond would be recognized as ordinary
income by the Unitholders when principal payments are received on the
Bond, upon sale or at redemption (including early redemption), or upon
the sale or redemption of his or her Units, unless a Unitholder elects to
include market discount in taxable income as it accrues.
We have also examined the income tax law of the State of Colorado,
which is based upon the Federal Law, to determine its applicability to
the Colorado IM-IT Trust (the "Colorado Trust") being created as part of
the Fund and to the holders of Units in the Colorado Trust who are
residents of the State of Colorado ("Colorado Unitholders"). Although we
express no opinion with respect to the issuance of the bonds, in
rendering our opinion expressed herein, we have assumed that: (i) the
bonds were validly issued, (ii) interest thereon is excludable from gross
income for federal income tax purposes, and (iii) interest on the bonds,
if received directly by a Unitholder, would be exempt from the income tax
imposed by the State that is applicable to individuals and corporations
(the "State Income Tax"). This opinion does not address the taxation of
persons other than full time residents of Colorado. Based upon the
foregoing it is our opinion that under Colorado income tax law, as
presently enacted and construed:
a) The Colorado Trust is not an association taxable as a
corporation for purposes of Colorado income taxation.
(b) Each Colorado Unitholder will be treated as owning a pro-
rata share of each asset of the Colorado Trust for Colorado income
tax purposes in the proportion that the number of Units of such
Trust held by him bears to the total number of outstanding Units of
the Colorado Trust, and the income of the Colorado Trust will
therefore be treated as the income of each Colorado Unitholder under
Colorado law in the proportion described and an item of income of
the Colorado Trust will have the same character in the hands of a
Colorado Unitholder as it would have in the hands of the Trustee.
(c) Gain or loss will be recognized by a Colorado Unitholder
upon redemption or sale of his Units. Such gain or loss is measured
by comparing the proceeds of such redemption or sale with the
adjusted basis of the Units represented by his Certificate. Before
adjustment, such basis would normally be cost if the Colorado
Unitholder has acquired his Units by purchase, plus his aliquot
share of advances by the Trustee to the Colorado Trust to pay
interest on bonds delivered after the Colorado Unitholder's
settlement date to the extent that such interest accrued on such
bonds during the period from the Colorado Unitholder's settlement
date to the date such bonds are delivered to the Colorado Trust, but
only to the extent that such advances are to be repaid to the
Trustee out of interest received by such Trust with respect to such
bonds. In addition, such basis will be increased by the Colorado
Unitholder's aliquot share of the accrued original issue discount
with respect to each bond held by such Trust with respect to which
there was an original issue discount at the time such bond was
issued and reduced by the annual amortization of bond premium, if
any, on the bonds held by the Colorado Trust.
(d) If the Trustee disposes of a bond (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Colorado Unitholder and the amount thereof is
measured by comparing the Colorado Unitholder's aliquot share of the
total proceeds from the transaction with his basis for his
fractional interest in the bond disposed of. Such basis is
ascertained by apportioning the tax basis for his Units among each
of the bonds (as of the date on which his units were acquired)
ratably according to their values as of the valuation date nearest
the date on which he purchased such Units. A Colorado Unitholder's
basis in his Units and of his fractional interest in each bond must
be reduced by the amount of his aliquot share of interest received
by the Colorado Trust, if any, in bonds delivered after the Colorado
Unitholder's settlement date to the extent that such interest
accrued on such bonds during the period from the Colorado
Unitholder's settlement date to the date such bonds are delivered to
the Colorado Trust, must be reduced by the annual amortization of
bond premium, if any, on bonds held by such Trust and must be
increased by the Colorado Unitholder's share of the accrued original
issue discount with respect to each bond which, at the time such
bond was issued, had original issue discount.
(e) If interest on indebtedness incurred or continued by a
Colorado Unitholder to purchase Units in the Colorado Trust is not
deductible for Federal income tax purposes, it will also be
nondeductible for Colorado income tax purposes.
(f) So long as the Colorado Trust holds obligations issued, on
or after May 1, 1980, by the State of Colorado or its political
subdivisions (the "Colorado Bonds"), then to the extent the interest
on the Colorado Bonds is excludable from Federal gross income of a
Colorado Unitholder pursuant to Section 103 of the Code, such
interest will be excludable from Colorado adjusted gross income of
such Unitholder.
(g) Any amounts paid under an insurance policy issued to the
Colorado Trust which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Colorado
adjusted gross income if, and to the same extent as, such interest
is been so excludable for federal income tax purposes. Paragraph
(f) of this opinion is accordingly applicable to insurance proceeds
representing maturing interest.
(h) Certain of the bonds in the Colorado Trust have been
insured by the issuers thereof against default in the prompt payment
of principal and interest. Based upon the exemptions and
assumptions referred to above, it is our opinion that any amounts
received by the Colorado Trust representing maturing interest on
such bonds will be excludable from Colorado adjusted gross income
if, and to the same extent as, such interest is so excludable for
federal income tax purposes. Paragraph (f) of this opinion is
accordingly applicable to such payment.
We have not examined any of the Bonds to be deposited and held in
the Colorado Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no
opinion as to the exemption from State income taxes of interest on the
Bonds if received directly by a Unitholder.
We have also examined the income tax law of the State of Oklahoma to
determine its applicability to the Oklahoma IM-IT Trust (the "Oklahoma IM-
IT Trust") being created as a part of the Fund and to the holders of the
Units in the Oklahoma IM-IT Trust who are residents of the State of
Oklahoma ("Oklahoma Unitholders").
The assets of the Oklahoma IM-IT Trust will consist of interest-
bearing obligations issued by or on behalf of the State of Oklahoma (the
"State") or counties, municipalities, authorities or political
subdivisions thereof (the "Oklahoma Bonds") or by the Commonwealth of
Puerto Rico, Guam and the United States Virgin Islands (the "Possession
Bonds") (collectively, the "Bonds"). At the respective times of issuance
of the Oklahoma Bonds, certain, but not necessarily all, of the issues of
the Oklahoma Bonds may have been accompanied by an opinion of bond
counsel to the respective issuing authorities that interest on such
Oklahoma Bonds (the "Oklahoma Tax-Exempt Bonds") are exempt from the
income tax imposed by the State of Oklahoma that is applicable to
individuals and corporations (the "Oklahoma State Income Tax"). The
Oklahoma IM-IT Trust may include Oklahoma Bonds the interest on which is
subject to the Oklahoma State Income Tax (the "Oklahoma Taxable Bonds").
Although we express no opinion with respect to the issuance of the
Bonds, in rendering our opinion expressed herein, we have assumed that:
(i) the Bonds were validly issued, (ii) the interest thereon is
excludable from gross income for federal income tax purposes and (iii)
interest on the Oklahoma Tax-Exempt Bonds, if received directly by a Unit
holder, would be exempt from the Oklahoma State Income Tax. At the
respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exemption of interest thereon from federal
income tax were rendered by bond counsel to the respective issuing
authorities. In addition, with respect to the Oklahoma Tax-Exempt Bonds,
bond counsel to the issuing authorities rendered opinions as to the
exemption of interest from the Oklahoma State Income Tax. We have not
made any review for the Trust of the proceedings relating to the issuance
of the Bonds or of the bases for the opinions rendered in connection
therewith. This opinion does not address the taxation of persons other
than full time residents of Oklahoma.
Based on the foregoing, and based on review and consideration of
existing laws of the State as of this date, it is our opinion, and we
herewith advise you, as follows:
(1) For Oklahoma State Income Tax purposes, the Oklahoma IM-IT
Trust is not an association taxable as a corporation, each
Unitholder of the Oklahoma IM-IT Trust will be treated as the owner
of a pro rata portion of the Oklahoma IM-IT Trust and the income of
such portion of the Oklahoma IM-IT Trust will be treated as the
income of the Unitholder.
(2) Interest paid and original issue discount, if any, on the
Bonds which would be exempt from the Oklahoma State Income Tax if
received directly by a Unitholder will be exempt from the Oklahoma
State Income Tax when received by the Oklahoma IM-IT Trust and
distributed to such Unitholder.
A Unitholder's pro rata portion of any interest paid and
original issue discount, if any, on the Bonds which would be subject
to the Oklahoma State Income Tax if received directly by a
Unitholder, including, for example, interest paid and original issue
discount, if any, on the Oklahoma Taxable Bonds, will be taxable to
such Unitholder for Oklahoma State Income Tax purposes when received
by the Oklahoma IM-IT Trust.
(3) To the extent that interest paid and original issue
discount, if any, derived from the Oklahoma IM-IT Trust by a
Unitholder with respect to Possession Bonds is excludable from gross
income for Federal income tax purposes pursuant to 48 U.S.C. 475,
48 U.S.C. 1423A, and 48 U.S.C. 1403, such interest paid and
original discount, if any, will not be subject to the Oklahoma State
Income Tax.
(4) Each Unitholder of the Oklahoma IM-IT Trust will recognize
gain or loss for Oklahoma State Income Tax purposes if the Trustee
disposes of a Bond (whether by redemption, sale, or otherwise) or if
the Unitholder redeems or sells Units of the Oklahoma IM-IT Trust to
the extent that such a transaction results in a recognized gain or
loss to such Unitholder for federal income tax purposes. Due to the
amortization of bond premium and other basis adjustments required by
the Internal Revenue Code, a Unitholder, under some circumstances,
may realize taxable gain when his or her Units are sold or redeemed
for an amount equal to their original cost.
(5) Although no opinion is expressed herein, we have been
informally advised by the Oklahoma Tax Commission that any insurance
proceeds paid under policies which represent maturing interest on
defaulted obligations which are excludable from gross income for
federal income tax purposes should be excludable from Oklahoma State
Income Tax to the same extent as such interest would have been if
paid by the issuer of such Bonds held by the Oklahoma IM-IT Trust.
(6) The Oklahoma State Income Tax does not permit a deduction
of interest paid or incurred on indebtedness incurred or continued
to purchase or carry Units in the Oklahoma IM-IT Trust the interest
on which is exempt from such tax.
(7) Although no opinion is expressed herein, we have been
informally advised by the Oklahoma Tax Commission that the Oklahoma
IM-IT Trust, in part because of its status as a "grantor trust" for
federal income tax purposes, should not be subject to the Oklahoma
state franchise tax.
The scope of this opinion is expressly limited to the matters set
forth herein, and we express no other opinions of law with respect to the
state of local taxation of the Oklahoma IM-IT Trust, the purchase,
ownership or disposition of Units or the Unitholders under Oklahoma law.
We have not examined any of the Bonds to be deposited and held in
the Oklahoma IM-IT Trust or the proceedings for the issuance thereof or
the opinions of bond counsel with respect thereto, and therefore express
no opinion as to the exemption from either the Oklahoma State Income Tax
or the Oklahoma Minimum Tax of interest on the Oklahoma Bonds if received
directly by a Unitholder.
Very truly yours,
Chapman and Cutler
MJK/ch
Exhibit 3.1
Tanner Propp & Farber
99 Park Avenue
New York, New York 10016
July 12, 1994
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust,
Multi-Series 226
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 226 (the
"Fund") consisting of Insured Municipals Income Trust, Series 329,
Insured Municipals Income Trust, Short Intermediate Series 93, Insured
Municipals Income Trust, Intermediate Series 79, Insured Municipals
Income Trust, Limited Maturity Series 75, California Insured Municipals
Income Trust, Intermediate Laddered Maturity Series 12, Colorado Insured
Municipals Income Trust, Series 69, Michigan Insured Municipals Income
Trust, Series 118, New Jersey Insured Municipals Income Trust, Series 94,
Oklahoma Insured Municipals Income Trust, Series 11 and North Carolina
Investors' Quality Tax-Exempt Trust, Series 76 (in the aggregate the
"Trusts" and individually "Trusts") for the purpose of determining the
applicability of certain New York taxes under the circumstances
hereinafter described.
The Fund is created pursuant to a Trust Agreement (the
"Indenture"), dated as of today (the "Date of Deposit") among Van Kampen
Merritt Inc. (the "Depositor"), American Portfolio Evaluation Services, a
division of Van Kampen Merritt Investment Advisory Corp., as Evaluator,
and The Bank of New York as Trustee (the "Trustee"). As described in the
prospectus relating to the Fund dated today to be filed as an amendment
to a registration statement previously filed with the Securities and
Exchange Commission (file number 33-53933) under the Securities Act of
1933, as amended (the "Prospectus"), the objectives of the Fund are the
generation of income exempt from Federal taxation and as regards each
Trust denominated with the name of a state exempt from income tax, if
any, of the denominated in the name of that Trust to the extent indicated
in the Prospectus. No opinion is expressed herein with regard to the
Federal or State tax aspects of the bonds, the Fund, and units of the
Trust (the "Units"), or any interest, gains or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trusts, the total principal amount of interest
bearing obligations and/or contracts for the purchase thereof together
with an irrevocable letter of credit in the amount required for the
purchase price and accrued interest, if any, and, in the case of Trusts
denominated as "Insured," an insurance policy purchased by the Depositor
evidencing the insurance guaranteeing the timely payment of principal and
interest of the obligations comprising the corpus of that Trust other
than those obligations the timely payment of principal and interest of
which are guaranteed by an insurance policy purchased by the issuer
thereof or a prior owner, which may include the Depositor prior to the
Date of Deposit, as more fully set forth in the Prospectus with respect
to each Trust.
We understand with respect to the obligations described in the
preceding paragraph that all insurance, whether purchased by the
Depositor, the issuer or a prior owner, provides, or will provide, that
the amount paid by the insurer in respect of any bond may not exceed the
amount of principal and interest due on the bond and such payment will in
no event relieve the issuer from its continuing obligation to pay such
defaulted principal and interest in accordance with the terms of the
obligation.
The Trustee will not participate in the selection of the obligations
to be deposited in the Fund, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of each of the Trusts as more fully set
forth in the Prospectus and the Registration Statement. The Units, which
are represented by certificates ("Certificates"), will be offered to the
public by the Prospectus upon the effectiveness of the Registration
Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with interest
received by each of the Trusts and with the proceeds from the disposition
of obligations held in each of the Trusts and the distribution of such
interest and proceeds to the Unit holders of that Trust. The Trustee
will also maintain records of the registered holders of Certificates
representing an interest in each Trust and administer the redemption of
Units by such Certificate holders and may perform certain administrative
functions with respect to an automatic investment option.
Generally, obligations held in the Fund may be removed therefrom by
the Trustee only upon redemption prior to their stated maturity, at the
direction of the Depositor in the event of an advance refunding, or upon
the occurrence of certain other specified events which adversely affect
the sound investment character of the Fund, such as default by the issuer
in payment of interest or principal on the obligation and no provision
for payment is made therefor either pursuant to the portfolio insurance
or otherwise and the Depositor fails to instruct the Trustee, within
thirty (30) days after notification, to hold such obligation.
Prior to the termination of the Fund, the Trustee is empowered to
sell Bonds, from a list furnished by the Evaluator, only for the purpose
of redeeming Units tendered to it and of paying expenses for which funds
are not available. The Trustee does not have the power to vary the
investment of any Unit holder in the Fund, and under no circumstances may
the proceeds of sale of any obligations held by the Fund be used to
purchase new obligations to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(l)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
The term "trust" includes any business conducted by a
trustee or trustees in which interest or ownership is
evidenced by certificate or other written instrument.
Such a trust includes, but is not limited to, an
association commonly referred to as a "business
trust" or "Massachusetts trust." In determining
whether a trustee or trustees are conducting a
business, the form of the agreement is of
significance but is not controlling. The actual
activities of the trustee or trustees, not their
purposes and powers, will be regarded as decisive
factors in determining whether a trust is subject to
tax under Article 9-A. The mere investment of funds
and the collection of income therefrom, with
incidental replacement of securities and reinvestment
of funds, does not constitute the conduct of a
business in the case of a business conducted by the
trustee or trustees. 20 NYCRR 1-2.3(b)(2) (July 11,
1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1073, 85 N.Y.S.2d 705 (1949).
An opinion of the Attorney General of the State of New York, 47 N.Y.
Atty. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee
of an unincorporated investment trust was without authority to reinvest
amounts received upon the sales of securities and could dispose of
securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell
obligations contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the
obligation is in question or in which cash is needed to pay redeeming
Unit holders or to pay expenses, or where the Fund is liquidated pursuant
to the termination of the Indenture. Only in circumstances in which the
issuer of an obligation attempts to refinance it can the Trustee exchange
an obligation for a new security. In substance, the Trustee will merely
collect and distribute income and will not reinvest any income or
proceeds, and the Trustee has no power to vary the investment of any Unit
holder in a Trust.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance June 23,
1978.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of a Trust will
be considered as owning a share of each asset of that Trust in the
proportion that the number of Units held by such holder bears to the
total number of Units outstanding and the income of a Trust will be
treated as the income of each Unit holder of that Trust in said
proportion pursuant to Subpart E of Part E, subchapter J of Chapter 1 of
the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York.
1. Each Trust will not constitute an association taxable as a
corporation under New York law and, accordingly, will not be subject to
tax on its income under the New York franchise tax or the New York City
general corporation tax.
2. The income of each of the Trusts will be treated as the income
of the Unit holders under the income tax laws of the State and City of
New York.
3. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business, trade, profession or occupation
carried on in the State of New York.
In addition, we are of the that opinion no New York State stock
transfer tax will be payable in respect of any transfer of the
Certificates by reason of the exemption contained in paragraph (a) of
Subdivision 8 of Section 270 of the New York Tax Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
Tanner Propp & Farber
MNS:ac
Exhibit 3.4
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
July 12, 1994
The Bank of New York
through its Wall Street Trust Division
101 Barclay Street
New York, New York 10286
Re: California Insured Municipals Income Trust
Intermediate Laddered Maturity Series 12
Dear Sirs:
We have acted as special California counsel for Van Kampen Merritt
Inc., as Sponsor and Depositor of California Insured Municipals Income
Trust, Twelfth Intermediate (Laddered Maturity Series) (the "Fund"), in
connection with the issuance under the Trust Indenture and Agreement
dated July 12, 1994, among Van Kampen Merritt Inc., as Sponsor and
Depositor, American Portfolio Evaluation Services, a division of Van
Kampen Merritt Investment Advisory Corp., as Evaluator, and The Bank of
New York through its Wall Street Trust division, as Trustee, of 3,000
Units of fractional undivided interest in the Fund (the "Units") in
exchange for certain bonds, as well as "regular-way" and "when-issued"
contracts for the purchase of bonds (such bonds and contracts are
hereinafter referred to collectively as the "Securities").
In connection therewith, we have examined such corporate records,
certificates and other documents and such questions of law as we have
deemed necessary or appropriate for the purpose of this opinion, and, on
the basis of such examination, and upon existing provisions of the
Revenue and Taxation Code of the State of California, we are of the
opinion that:
1. The Fund is not an association taxable as a corporation
and the income of the Fund will be treated as the income of the
certificateholders under the income tax laws of California.
2. Amounts treated as interest on the underlying securities
which are exempt from tax under California personal income tax and
property tax laws when received by the Fund will, under such laws,
retain their status as tax-exempt interest when distributed to
certificateholders. However, interest on the underlying securities
attributed to a certificateholder which is a corporation subject to
the California franchise tax laws may be includable in its gross
income for purposes of determining its California franchise tax.
3. Under California income tax law, each certificateholder in
the Fund will have a taxable event when the Fund disposes of a
security (whether by sale, exchange, redemption, or payment at
maturity) or when the certificateholder redeems or sells Units.
Because of the requirement that tax cost basis be reduced to reflect
amortization of bond premium, under some circumstances a
certificateholder may realize taxable gain when Units are sold or
redeemed for an amount equal to, or less than, their original cost.
The total tax cost of each Unit to a certificateholder is allocated
among each of the bond issues held in the Fund (in accordance with
the proportion of the Fund comprised by each bond issue) in order to
determine his per unit tax cost for each bond issue; and the tax
cost reduction requirements relating to amortization of bond premium
will apply separately to the per unit cost of each bond issue.
Certificateholders' bases in their Units, and the bases for their
fractional interest in each Fund asset, may have to be adjusted for
their pro rata share of accrued interest received, if any, on
securities delivered after the certificateholders' respective
settlement dates.
4. Under the California personal property tax laws, bonds
(including the Securities) or any interest therein is exempt from
such tax.
5. Any proceeds paid under the insurance policy issued to the
Trustee of the fund with respect to the Securities which represent
maturing interest on defaulted obligations held by the Trustee will
be exempt from California personal income tax if, and to the same
extent as, such interest would have been so exempt if paid by the
issuer of the defaulted obligations.
6. Under Section 17280(b)(2) of the California Revenue and
Taxation Code, interest on indebtedness incurred or continued to
purchase or carry Units of the Trust is not deductible for the
purposes of the California personal income tax. While there
presently is no California authority interpreting this provision,
Section 17280(b)(2) directs the California Franchise Tax Board to
prescribe regulations determining the proper allocation and
apportionment of interest costs for this purpose. The Franchise Tax
Board has not yet proposed or prescribed such regulations. In
interpreting the generally similar Federal provision, the Internal
Revenue Service has taken the position that such indebtedness need
not be directly traceable to the purchase or carrying of Units
(although the Service has not contended that a deduction for
interest on indebtedness incurred to purchase or improve a personal
residence or to purchase goods or services for personal consumption
will be disallowed). In the absence of conflicting regulations or
other California authority, the California Franchise Tax Board
generally has interpreted California statutory tax provisions in
accord with Internal Revenue Service interpretations of similar
Federal provisions.
Opinions relating to the validity of securities and the exemption of
interest thereon from State of California income tax are rendered by bond
counsel to the issuing authority at the time securities are issued and we
have relied solely upon such opinions, or, as to securities not yet
delivered, forms of such opinions contained in official statements
relating to such securities. Except in certain instances in which we
acted as bond counsel to issuers of securities, and as such made a review
of proceedings relating to the issuance of certain securities at the time
of their issuance, we have not made any review of proceedings relating to
the issuance of securities or the bases of bond counsels' opinions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (SEC No. 33-53933) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
said Registration Statement and in the related Prospectus.
Very truly yours,
Orrick, Herrington & Sutcliffe
Exhibit 3.5
Miller, Canfield, Paddock and Stone
1400 North Woodward Avenue, Suite 100
Bloomfield Hills, Michigan 48303-2014
July 12, 1994
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust,
Multi-Series 226
In care of
Van Kampen Merritt Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York through
its Wall Street Trust division
as Trustee of the Insured Municipals
Income Trust and Investors'
Quality Tax-Exempt Trust,
Multi-Series 226
101 Barclay Street
New York, New York 10286
Re: Insured municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226
(Michigan Insured Municipals Income Trust, Series 118)
Gentlemen:
We have acted as special Michigan counsel to you as sponsors and
trustees of Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 226 (Michigan Insured Municipals Income Trust,
Series 118) referred to above (the "Fund"). You have asked that we,
acting in such capacity, render an opinion to you with respect to certain
matters relating to the issuance of the units of fractional undivided
interest in the Fund (the "Units") pursuant to a Registration Statement
on Form S-6 filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Registration Statement").
You have requested our opinion as to the applicability to the
Michigan Insured Municipals Income Trust (the "Michigan Trust") and the
holders of Units (the "Holders"), each of which Units represents the
ownership of a specified fractional undivided interest in the assets of
the Michigan Trust, of the Michigan Income Tax Act (M.C.L.A. 206.1 et
seq.; M.S.A. 7.557 (101) et seq.) (the "Michigan Income Tax"), the City
Income Tax Act (M.C.L.A. 141.501 et seq.; M.S.A. 5.3194 (1) et seq.),
which incorporates the "Uniform City Income Tax Ordinance," the First
Class School District excise tax upon income (M.C.L.A. 380.451; M.S.A.
SS15.4451) (collectively, the "income tax laws"), the Michigan Single
Business Tax Act (M.C.L.A. 208.1 et seq.; M.S.A. 7.558(1) et seq.)
(the "Single Business Tax") and the Michigan Tax on ownership of
Intangible Personal Property (M.C.L.A. 205.131 et seq.; M.S.A.
7.556(1) et seq.) (the "Intangibles Tax"). You have also requested our
opinion regarding the tax status of proceeds payable from an insurance
policy to be obtained by either the Fund or by the issuer of the Bonds
involved, guaranteeing prompt payment of principal and interest on all
Bonds in the portfolio of the Fund.
The Michigan Trust, its formation, its proposed method of operation,
the rights of owners of Certificates representing Units, the nature of
such ownership and the portfolio of investments of the Michigan Trust are
described and set forth in the Prospectus dated July 12, 1994, filed with
the Securities and Exchange commission in Registration No. 33-53933. In
giving our opinion set forth hereunder, we have relied upon the facts
contained in such Registration Statement, including the fact that, at the
respective dates of issuance of the underlying Debt obligations, opinions
of bond counsel to the respective Michigan authorities issuing such Debt
Obligations were given with respect to the validity of the Debt
Obligations and the exemption of the same, and of the interest thereon,
from Michigan taxation.
Based on the above, it is our opinion that:
The Michigan Trust and the owners of Units will, in our opinion, be
treated for purposes of the Michigan income tax laws and the Single
Business Tax in substantially the same manner as they are for purposes of
the Federal income tax laws, as currently enacted. Accordingly, we have
relied upon the opinion of Messrs. Chapman and Cutler as to the
applicability of Federal income tax under the Internal Revenue Code of
1986, as currently amended, to the Michigan Trust and the Holders of
Units.
Under the income tax laws of the State of Michigan, the Michigan
Trust is not an association taxable as a corporation; the income of the
Michigan Trust will be treated as the income of the Holders of Units of
the Michigan Trust and be deemed to have been received by them when
received by the Michigan Trust. Interest on the Debt Obligations in the
Michigan Trust which is exempt from tax under the Michigan income tax
laws when received by the Michigan Trust will retain its status as tax
exempt interest to the Holders of Units of the Michigan Trust.
For purposes of the Michigan income tax laws, each Holder of Units
of the Michigan Trust will be considered to have received his pro rata
share of interest on each Debt Obligation in the Michigan Trust when it
is received by the Michigan Trust, and each Holder will have a taxable
event when the Michigan Trust disposes of a Debt Obligation (whether by
sale, exchange, redemption or payment at maturity) or when the Unit
Holder redeems or sells his Unit, to the extent the transaction
constitutes a taxable event for Federal income tax purposes. The tax
cost of each Unit to a Unit Holder will be established and allocated for
purposes of the Michigan income tax laws in the same manner as such cost
is established and allocated for Federal income tax purposes.
Under the Michigan Intangibles Tax, the Michigan Trust is not
taxable and the pro rata ownership of the underlying Debt obligations, as
well as the interest thereon, will be exempt to the Holders of Units to
the extent the Michigan Trust consists of obligations of the State of
Michigan or its political subdivisions or municipalities, or of
obligations of possessions of the United States.
The Michigan Single Business Tax replaced the tax on corporate and
financial institution income under the Michigan Income Tax, and the
intangible tax with respect to those intangibles of persons subject to
the Single Business Tax the income from which would be considered in
computing the Single Business Tax. Persons are subject to the Single
Business Tax only if they are engaged in "business activity," as defined
in the Act. Under the Single Business Tax, both interest received by the
Michigan Trust on the underlying Debt Obligations and any amount
distributed from the Michigan Trust to a Unit Holder, if not included in
determining taxable income for Federal income tax purposes, is also not
included in the adjusted tax base upon which the Single Business Tax is
computed, of either the Michigan Trust or the Unit Holders. If the
Michigan Trust or the Unit Holders have a taxable event for Federal
income tax purposes when the Michigan Trust disposes of a Debt Obligation
(whether by sale, exchange, redemption or payment at maturity) or the
Holder redeems or sells his Unit, an amount equal to any gain realized
from such taxable event which was included in the computation of taxable
income for Federal income tax purposes (plus an amount equal to any
capital gain of an individual realized in connection with such event but
excluded in computing that individual's Federal taxable income) will be
included in the tax base against which, after allocation, apportionment
and other adjustments, the Single Business Tax is computed. The tax base
will be reduced by an amount equal to any capital loss realized from such
a taxable event, whether or not the capital loss was deducted in
computing Federal taxable income in the year the loss occurred. Holders
should consult their tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee of
the Fund, or paid under individual policies obtained by issuers of Bonds,
which, when received by the Unit Holders, represent maturing interest on
defaulted obligations held by the Trustee, will be excludable from the
Michigan income tax laws and the Single Business Tax if, and to the same
extent as, such interest would have been so excludable if paid by the
issuer of the defaulted obligations. While treatment under the Michigan
Intangibles Tax is not premised upon the characterization of such
proceeds under the Internal Revenue Code, the Michigan Department of
Treasury should adopt the same approach as under the Michigan income tax
laws and the Single Business tax.
Chapman and Cutler of 111 West Monroe Street, Chicago, Illinois
60603, are entitled to rely on this opinion as though it were addressed
to them.
We also advise you that, as the Tax Reform Act of 1986 eliminates
the capital gain deduction for tax years beginning after December 31,
1986, the federal adjusted gross income, the computation base for the
Michigan Income Tax, of a Unit Holder will be increased accordingly to
the extent such capital gains are realized when the Michigan Trust
disposes of a Debt Obligation or when the Unit Holder redeems or sells a
Unit, to the extent such transaction constitutes a taxable event for
Federal income tax purposes.
We hereby consent to the reference to Miller, Canfield, Paddock and
Stone under the heading "Michigan Tax Status" in the Prospectus relating
to the Michigan Trust which is part of the Registration Statement in
Registration No. 33-53933 filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and to the
filing of this opinion as an exhibit to said registration statement.
Yours very truly,
Miller, Canfield, Paddock And Stone
Exhibit 3.6
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
July 12, 1994
Van Kampen Merritt Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226
(New Jersey Insured Municipals Income Trust, Series 94)
Gentlemen:
We have acted as special counsel, with respect to New Jersey state
tax matters, to Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226 (the "Fund") concerning a Registration
Statement (No. 33-53933) on Form S-6 under the Securities Act of 1933, as
amended, covering the issuance by the Fund of units of fractional
undivided interest (the "Units") in several state trusts (the "State
Trusts"), one of which is New Jersey Insured Municipals Income Trust,
Series 94 included as a part of the Fund (the "New Jersey Trust"). Such
Units will be purchased by various investors ("Certificateholders").
The Fund is organized under a Trust Indenture and Agreement (the
"Indenture") of even date herewith (the "Date of Deposit") between Van
Kampen Merritt Inc. (the "Depositor") and The Bank of New York through
its Wall Street Trust division (the "Trustee"). Each Unit of the New
Jersey Trust represents a fractional undivided interest in the principal
and net income of the New Jersey Trust. The New Jersey Trust will be
comprised of that number of units which will establish as close as
possible as of the Date of Deposit a Public Offering Price (as defined in
the Prospectus) per Unit of $1,000. The New Jersey Trust will be
administered as a distinct entity with separate certificates,
investments, expenses, books and records.
In acting as special counsel, we have examined such documents and
records with respect to a prior series, Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 214, as we deem
necessary, including, but not limited to, the Trust Indenture and
Agreement (the "Multi-Series 214 Indenture") and the Prospectus. You
have advised that the Indenture is identical in all material respects to
the Multi-Series 214 Indenture. You have also advised that the opinion
of Messrs. Chapman and Cutler with respect to the Federal income tax
status of the Fund, its constituent State Trusts and its
Certificateholders, is in all material respects identical to the opinion
issued by Messrs. Chapman and Cutler for the Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 214.
We note that the assets of the New Jersey Trust will consist of
interest-bearing obligations issued by or on behalf of the State of New
Jersey, and counties, municipalities, authorities and other political
subdivisions thereof, and certain territories of the United States (the
"Bonds"). Distributions of the interest received by the New Jersey Trust
will be made to each Certificateholder semi-annually unless the
Certificateholder elects to receive such distributions on a monthly
basis. In the opinion of bond counsel to each issuer, the interest on
all Bonds in the New Jersey Trust is exempt from Federal income tax under
existing law.
We understand that on the Date of Deposit the Depositor has
deposited with the Trustee the total principal amount of interest-bearing
obligations and/or contracts for the purchase thereof together with an
irrevocable letter of credit in the amount required for the purchase
price and accrued interest, if any, and an insurance policy purchased by
the Depositor evidencing the insurance guaranteeing the timely payment of
principal and interest of some of the obligations comprising the corpus
of the Fund, as more fully set forth in the Preliminary Prospectus. All
other obligations included in the deposit described above will be covered
by insurance obtained by the issuer of such obligations guaranteeing
timely payment of principal and interest. Such insurance will provide
that the amount paid by the insurer in respect of any Bond may not exceed
the amount of principal and interest due on the Bond and such payment
will in no event relieve the issuer from its continuing obligation to pay
such defaulted principal and interest in accordance with the terms of the
obligation.
Section 2.04 of the Indenture provides that each State Trust is a
separate and distinct trust for all purposes, the assets of one State
Trust may not be commingled with the assets of any other State Trust, and
the expenses of one State Trust shall not be charged against any other
State Trust. Section 2.04 further provides that the certificates
representing the ownership of an undivided fractional interest in one
State Trust shall not be exchangeable for certificates representing the
ownership of an undivided fractional interest in any other State Trust.
The Indenture provides further, among other things, that the Trustee
shall:
(a) collect all interest and monies payable to the New Jersey
Trust, and hold the funds collected in trust on behalf of the
Certificateholders of the New Jersey Trust;
(b) set aside from such funds any amounts necessary for the
reimbursement of advances and for the payment of expenses, taxes and
governmental charges in respect of the New Jersey Trust;
(c) distribute all remaining amounts semi-annually, or monthly
if so elected by a Certificateholder, to the Certificateholders in
proportion to their interest in the New Jersey Trust;
(d) redeem any certificates tendered for redemption by a
Certificateholder provided that the Trustee has notified the
Depositor of the tender and the Depositor has failed to indicate
within a time specified in the Indenture that it will purchase the
tendered certificates from the tendering Certificateholder;
(e) sell or liquidate any or all Bonds at the sole direction
of the Depositor and at such price and time and in such manner as
shall be determined by the Depositor, provided that the Depositor
has determined that any one or more of certain conditions specified
in the Indenture exists;
(f) in connection with an offer made by an obligor of any of
the Bonds to issue new obligations, in exchange and substitution for
any issue of Bonds pursuant to a plan for the refunding or
refinancing of such Bonds, pursuant to the sole instruction of the
Depositor in writing, reject such offer and either hold or sell such
Bonds, or accept or reject such offer or to take any other action
with respect thereto as the Depositor may deem proper; and
(g) at the direction of the Depositor, acquire Replacement
Bonds, as defined in the Prospectus, to make up the original corpus
of the New Jersey Trust in the event of a failure to deliver any
Bond that has been purchased for the New Jersey Trust under a
contract, including those Bonds purchased on a "when, as and if
issued" basis.
The Trustee has no power of sale except (a) on order of the
Depositor as stated herein, (b) to provide funds, not otherwise
available, to pay taxes, charges, expenses, fees or indemnities, (c) in
case of default on any of the Bonds, but only after notification of the
Depositor, and provided that the Depositor has not, within 30 days of
such notification, given any instructions to sell or to hold, or has not
taken any other action in connection with, such Bonds, or (d) for the
purpose of redeeming certificates tendered by any Certificateholder. The
Trustee has no power to reinvest, except as stated in Section 3.08 of the
Indenture. Such limited power of reinvestment is in furtherance of the
Trustee's obligation to protect the trust assets, and does not constitute
power to vary investments.
The Indenture provides further, among other things, that the
Certificateholders:
(a) may tender their certificate or certificates to the
Trustee for redemption except in limited circumstances;
(b) will not have any right to vote or in any manner otherwise
control the operation and management of the Fund, the New Jersey
Trust, or the obligations of the Depositor or Trustee;
(c) may elect to receive distributions from the New Jersey
Trust on a monthly basis;
(d) may terminate the New Jersey Trust at any time by written
consent of Certificateholders representing 51% of the then
outstanding Units of the New Jersey Trust; and
(e) shall be under no liability to any third persons by reason
of any action taken by the Depositor or Trustee or any other
Certificateholder, or any other cause whatsoever.
You have advised that, in the opinion of Messrs. Chapman and Cutler,
for Federal income tax purposes the Fund and New Jersey Trust will not be
taxable as a corporation or association but will be governed by the
provisions of Subchapter J (relating to trusts) of Chapter 1 of the
Internal Revenue Code of 1986, as amended. Each Certificateholder will
be considered the owner of a pro rata portion of the New Jersey Trust and
will be subject to tax on the income therefrom under the provisions of
Subpart E of Subchapter J of Chapter 1 of the Internal Revenue Code of
1986, as amended. The New Jersey Trust itself will not be subject to
Federal income taxes. For Federal income tax purposes, each item of
trust income will have the same character in the hands of the
Certificateholder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of the New Jersey Trust
consists of interest excludable from gross income under Section 103 of
the Internal Revenue Code of 1986, as amended, such income will be
excludable from Federal gross income of the Certificateholder.
Furthermore, any proceeds paid under the insurance policy issued to the
Trustee of the Fund which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal gross
income if, and to the same extent as, such interest would have been so
excludable if paid by the issuer of the defaulted obligations and the
excludability from Federal gross income of interest on Bonds which may be
insured by policies issued directly to the respective Bond issuers will
not be affected if the source of any interest payment is from policy
proceeds.
Based on our examination of the Multi-Series 220 Indenture, your
advice that the Indenture is identical in all material respects to the
Multi-Series 211 Indenture, your advice that the opinion of Messrs.
Chapman and Cutler with respect to the Federal income tax status of the
Fund, its constituent State Trusts and its Certificateholders dated as of
the date hereof is identical in all material respects to its counterpart
in the prior issue of Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 220, and, with respect to Federal
income tax matters, with your approval, relying solely upon the opinion
of Messrs. Chapman and Cutler, and our examination of such other
documents, records and matters of law as we deem necessary, we are of the
opinion that for New Jersey state and local tax purposes:
1. The New Jersey Trust will be recognized as a trust and not
an association taxable as a corporation. The New Jersey Trust will
not be subject to the New Jersey Corporation Business Tax or the New
Jersey Corporation Income Tax.
2. With respect to the non-corporate Certificateholders who
are residents of New Jersey, the income of the New Jersey Trust
which is allocable to each such Certificateholder will be treated as
the income of such Certificateholder under the New Jersey Gross
Income Tax. Interest on the underlying Bonds which would be exempt
from New Jersey Gross Income Tax if directly received by such
Certificateholder will retain its status as tax-exempt interest when
received by the New Jersey Trust and distributed to such
Certificateholder. Any proceeds paid under the insurance policy
issued to the Trustee of the Fund with respect to the Bonds or under
individual policies obtained by issuers of Bonds which represent
maturing interest on defaulted obligations held by the Trustee will
be exempt from New Jersey Gross Income Tax if, and to the same
extent as, such interest would have been so exempt if paid by the
issuer of the defaulted obligations.
3. A non-corporate Certificateholder will not be subject to
the New Jersey Gross Income Tax on any gain realized either when the
New Jersey Trust disposes of a Bond (whether by sale, exchange,
redemption, or payment at maturity) or when the Certificateholder
redeems or sells his Units, or upon payment of any proceeds under
the insurance policy issued to the Trustee of the Fund with respect
to the Bonds or under individual policies obtained by issuers of
Bonds which represent maturing principal on defaulted obligations
held by the Trustee. Any loss realized on such disposition may not
be utilized to offset gains realized by such Certificateholder on
the disposition of assets the gain on which is subject to the New
Jersey Gross Income Tax.
4. Units of the New Jersey Trust may be taxable on the death
of a Certificateholder under the New Jersey Transfer Inheritance Tax
law or the New Jersey Estate Tax Law.
5. If a Certificateholder is a corporation subject to the New
Jersey Corporation Business Tax or New Jersey Corporation Income
Tax, interest from the Bonds in the New Jersey Trust which is
allocable to such corporation will be includable in its entire net
income for purposes of the New Jersey Corporation Business Tax or
New Jersey Corporation Income Tax, less any interest expense
incurred to carry such investment to the extent such interest
expense has not been deducted in computing Federal taxable income.
Net gains derived by such corporation on the disposition of the
Bonds by the New Jersey Trust or on the disposition of its Units
will be included in its entire net income for purposes of the New
Jersey Corporation Business Tax or New Jersey Corporation Income
Tax. Any proceeds paid under the insurance policy issued to the
Trustee of the Fund with respect to the Bonds or under individual
policies obtained by issuers of Bonds which represent maturing
interest or maturing principal on defaulted obligations held by the
Trustee will be included in its entire net income for purposes of
the New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax if, and to the same extent as, such interest or proceeds
would have been so included if paid by the issuer of the defaulted
obligations.
We have not examined any of the obligations to be deposited in the
Fund, and express no opinion as to whether the interest on any such
obligations would in fact be tax-exempt if directly received by a
Certificateholder; nor have we made any review of the proceedings
relating to the issuance of Bonds or the basis for bond counsel opinions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm and a summary of
this opinion included in such Registration Statement and the related
Prospectus. In giving such consent we do not thereby admit that we are
in the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended, and the rules and regulations
thereunder.
Except as indicated in the immediately preceding paragraph hereof
and except with our prior written consent, this opinion may not be quoted
in whole or in part or otherwise referred to in any document or
instrument or be furnished to or relied upon by any person other than the
addressee and The Bank of New York through its Wall Street Trust
division, as Trustee (including any successor trustee).
Very truly yours,
Pitney, Hardin, Kipp & Szuch
Exhibit 3.7
Hunton & Williams
One Hanover Square, Suite 1400
Fayetteville Street Mall
Raleigh, North Carolina 27601
July 12, 1994
The Bank of New York
through its Wall Street Trust Division
101 Barclay Street
New York, New York 10286
Re: Van Kampen Merritt, Inc.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 226,
North Carolina Investors' Quality Tax-Exempt Trust, Series 76
Gentlemen:
We are acting as special North Carolina counsel to the Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-
Series 226 (the "Fund") on North Carolina tax matters relating to North
Carolina Investors' Quality Tax-Exempt Trust, Series 76 (the "North
Carolina Trust") included as part of the Fund. Units of beneficial
interest in the North Carolina Trust (the "Units") are to be sold
pursuant to an effective registration statement on Form S-6 (Registration
No. 33-53933) under the Securities Act of 1933 (the "Registration
Statement"), filed by Van Kampen Merritt, Inc. (the "Sponsor") on behalf
of the Fund, covering the Units and other units of the other trusts
described in the Registration Statement. The number of Units to be sold
is stated in the Registration Statement.
The North Carolina Trust is to be established and the Units are to
be created pursuant to a Trust Agreement (the "Trust Agreement"), dated
the date hereof, among the Sponsor and The Bank of New York through its
Wall Street Trust division, as Trustee (the "Trustee"). The portfolio of
the North Carolina Trust will consist of bonds issued by the State of
North Carolina or municipalities, authorities or political subdivisions
thereof (the "Bonds").
We have examined originals, forms or certified copies, or copies
otherwise identified to our satisfaction, of the Trust Agreement, the
Registration Statement and such other documents as we have deemed
necessary for the purpose of this opinion. We have also relied upon the
form of opinion, to be dated the date hereof and addressed to the
Sponsor, of Chapman and Cutler, counsel to the Sponsor, with respect to
the matters of Federal income tax law set forth therein.
Based upon the foregoing, we are of the opinion that, insofar as the
law of the State of North Carolina is concerned, upon the establishing of
the North Carolina Trust and the issuance of the Units thereunder:
A. The North Carolina Trust is not an "association" taxable
as a corporation under North Carolina law with the result that
income of the North Carolina Trust will be deemed to be income of
the Unit holders.
B. Interest on the Bonds that is exempt from North Carolina
income tax when received by the North Carolina Trust will retain its
tax-exempt status when received by the Unit holders.
C. Unit holders will realize a taxable event when the North
Carolina Trust disposes of a Bond (whether by sale, exchange,
redemption or payment at maturity) or when a Unit holder redeems or
sells his Units (or any of them), and taxable gains for Federal
income tax purposes may result in gains 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
Trust will retain its tax-exempt status in the hands of the Unit
holders.
D. Unit holders must amortize their proportionate shares of
any premium on a Bond. Amortization for each taxable year is
achieved by lowering the Unit holder's basis (as adjusted) in his
Units, with no deduction against gross income for the year.
E. The Units are exempt from the North Carolina tax on
intangible personal property so long as the corpus of the North
Carolina 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
Trust and also the name, description and value of the obligations
held in the corpus of the North Carolina Trust.
In rendering the foregoing opinion we have not passed on or
considered, among other things, the due authorization and delivery of the
Bonds or the North Carolina income tax or intangibles tax status of the
Bonds or income therefrom.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm in the
Registration Statement under the headings "Tax Status Of The Trust Funds"
and "Legal Opinions."
Very truly yours,
Hunton & Williams
Exhibit 4.1
Interactive Data
14 Wall Street
New York, New York 10005
July 8, 1994
Van Kampen Merritt, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226 (A Unit Investment Trust)
Registered Under the Securities Act of 1933, File No. 33-53933
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund, copy of which is attached hereto.
We hereby consent to the reference in the Prospectus and
Registration Statement for the above captioned Fund to Interactive Data
Services, Inc., as the Evaluator, and to the use of the Obligations
prepared by us which are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Standard & Poor's Corporation
25 Broadway
New York, New York 10004-1064
Mr. Mark Kneedy
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
Re: Insured Municipals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 226
Pursuant to your request for a Standard & Poor's rating on the units
of the above-captioned trust, SEC #33-53933 we have reviewed the
information presented to us and have assigned a 'AAA' rating to the units
of the trust and a 'AAA' rating to the securities contained in the trust
for as long as they remain in the trust. The ratings are direct
reflections, of the portfolio of the trust, which will be composed solely
of securities covered by bond insurance policies that insure against
default in the payment of principal and interest on the securities so
long as they remain in the trust. Since such policies have been issued
by one or more insurance companies which have been assigned a 'AAA'
claims paying ability rating by S&P, S&P has assigned a 'AAA' rating to
the units of the trust and to the securities contained in the trust for
as long as they remain in the trust.
You have permission to use the name of Standard & Poor's Corporation
and the above-assigned ratings in connection with your dissemination of
information relating to these units, provided that it is understood that
the ratings are not "market" ratings nor recommendations to buy, hold, or
sell the units of the trust or the securities contained in the trust.
Further, it should be understood the rating on the units does not take
into account the extent to which fund expenses or portfolio asset sales
for less than the fund's purchase price will reduce payment to the unit
holders of the interest and principal required to be paid on the
portfolio assets. S&P reserves the right to advise its own clients,
subscribers, and the public of the ratings. S&P relies on the sponsor
and its counsel, accountants, and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
S&P does not independently verify the truth or accuracy of any such
information.
This letter evidences our consent to the use of the name of Standard
& Poor's Corporation in connection with the rating assigned to the units
in the registration statement or prospectus relating to the units or the
trust. However, this letter should not be construed as a consent by us,
within the meaning of Section 7 of the Securities Act of 1933, to the use
of the name of Standard & Poor's Corporation in connection with the
ratings assigned to the securities contained in the trust. You are
hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Please be certain to send us three copies of your final prospectus
as soon as it becomes available. Should we not receive them within a
reasonable time after the closing or should they not conform to the
representations made to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you.
If we can be of further help, please do not hesitate to call upon us.
Sincerely,
Vincent S. Orgo
*Consisting of:
Insured Municipals Income Trust, Series 329
Insured Municipals Income Trust, Short Intermediate Series 93
Insured Municipals Income Trust, Intermediate Series 79
Insured Municipals Income Trust, 75th Limited Maturity Series
California Insured Municipals Income Trust, Intermediate Laddered
Maturity Series 12
Colorado Insured Municipals Income Trust, Series 69
Michigan Insured Municipals Income Trust, Series 118
New Jersey Insured Municipals Income Trust , Series 94
Oklahoma Insured Municipals Income Trust , Series 11
North Carolina Investors Quality Tax-Exempt Trust, Series 76
Exhibit 4.3
Independent Certified Public Accountants' Consent
We have issued our report dated July 12, 1994 on the statements of
condition and related bond portfolios of Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 226 (IM-IT, IM-IT
Short Intermediate, IM-IT Intermediate, IM-IT Limited Maturity,
California IM-IT Intermediate Laddered Maturity, Colorado IM-IT, Michigan
IM-IT, New Jersey IM-IT, Oklahoma IM-IT and North Carolina Quality
Trusts) as of July 12, 1994 contained in the Registration Statement on
Form S-6 and in the Prospectus. We consent to the use of our report in
the Registration Statement and in the Prospectus and to the use of our
name as it appears under the caption "Other Matters-Independent Certified
Public Accountants."
Grant Thornton
Chicago, Illinois
July 12, 1994
