File No. 33-54973
CIK #896712
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 233
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: 36,393* Units
F. Proposed maximum offering price to the public of the securities being
registered: ($1020 per Unit**): $37,120,860
G. Amount of filing fee, computed at one twenty-ninth of 1 percent of proposed
maximum aggregate offering
price to the public: $12,800.27 ($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
September 29, 1994 pursuant to Rule 487.
24,262 Units registered for primary distribution.
12,131 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 233
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
September 29, 1994
Van Kampen Merritt
Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 233
California IM-IT 132
Florida IM-IT Intermediate
Laddered Maturity Series 10
Florida IM-IT 84
New Jersey IM-IT Intermediate
Laddered Maturity Series 4
Pennsylvania IM-IT 193
Texas IM-IT Intermediate
Laddered Maturity Series 1
Texas IM-IT 38
North Carolina Quality 77
In the opinion of counsel, interest to the Fund and to Unitholders, with
certain exceptions, is excludable under existing law from gross income for
Federal income taxes. In addition, the interest income of each State Trust is,
in the opinion of counsel, exempt to the extent indicated from state and local
taxes, when held by residents of the state where the issuers of Bonds in such
Trust are located. Capital gains, if any, are subject to Federal tax.
The Fund. The objectives of the Fund are Federal and, in the case of a State
Trust, state tax-exempt income and conservation of capital through an
investment in a diversified portfolio of tax-exempt bonds. The Fund consists
of eight underlying separate unit investment trusts designated as California
Insured Municipals Income Trust, Series 132 (the "California IM-IT
Trust"), Florida IM-IT Intermediate Laddered Maturity Series 10 (the "
Florida IM-IT Intermediate Laddered Maturity Trust"), Florida Insured
Municipals Income Trust, Series 84 (the "Florida IM-IT Trust"), New
Jersey IM-IT Intermediate Laddered Maturity Series 4 (the "New Jersey
IM-IT Intermediate Laddered Maturity Trust"), Pennsylvania Insured
Municipals Income Trust, Series 193 (the "Pennsylvania IM-IT Trust"),
Texas IM-IT Intermediate Laddered Maturity Series 1 (the "Texas IM-IT
Intermediate Laddered Maturity Trust"), Texas Insured Municipals Income
Trust, Series 38 (the "Texas IM-IT Trust") and North Carolina
Investors' Quality Tax-Exempt Trust, Series 77 (the "North Carolina
Quality Trust"). The various trusts are collectively referred to herein as
the "Trusts", the California IM-IT, Florida IM-IT Intermediate
Laddered Maturity, Florida IM-IT, New Jersey IM-IT Intermediate Laddered
Maturity, Pennsylvania IM-IT, Texas IM-IT Intermediate Laddered Maturity,
Texas IM-IT and North Carolina Quality Trusts are sometimes collectively
referred to herein as the "State Trusts", while the California IM-IT,
Florida IM-IT Intermediate Laddered Maturity, Florida IM-IT, New Jersey IM-IT
Intermediate Laddered Maturity, Pennsylvania IM-IT, Texas IM-IT Intermediate
Laddered Maturity and Texas IM-IT Trusts are sometimes collectively referred
to herein as the "Insured Trusts", the Florida IM-IT Intermediate
Laddered Maturity, New Jersey IM-IT Intermediate Laddered Maturity and Texas
IM-IT Intermediate Laddered Maturity Trusts are sometimes collectively
referred to herein as the "State Intermediate Laddered Maturity Trusts"
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 21. 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 Pennsylvania IM-IT Trust as of 8:00 A.M.
Central Time on the Date of Deposit), the Public Offering Price per Unit would
have been that amount set forth in the "Summary of Essential Financial
Information"for each Trust. See "Unitholder Explanations--Public
Offering".
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Estimated Current Return and Estimated Long-Term Return. The annual Estimated
Current 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 Pennsylvania
IM-IT Trust 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. Units
of the Trust are not deposits or obligations of, or guaranteed or endorsed by,
any bank and are not federally insured or otherwise protected by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency
and involve investment risk, including the possible loss of principal.
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".
Risk Factors. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the
inability of the issuer or an insurer to pay the principal of or interest on a
bond when due, volatile interest rates, early call provisions, and changes to
the tax status of the Bonds. See "Unitholder Explanations--Settlement of
Bonds in the Trusts--Risk Factors".
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
Multi-Series 233
Summary of Essential Financial Information
At the Close of Business on the day before the Date of Deposit:
September 28, 1994
(except for the Pennsylvania IM-IT Trust as of 8:00 A.M. Central Time
on the Date of Deposit: September 29, 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>
Florida New Jersey
IM-IT IM-IT
Intermediate Intermediate
California Laddered Florida Laddered
GENERAL INFORMATION IM-IT Trust Maturity Trust IM-IT Trust Maturity Trust
<S> <C> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust....... $ 3,135,000 $ 3,000,000 $ 3,080,000 $ 3,000,000
Number of Units........................................... 3,072 3,000 3,147 3,000
1/ 1/ 1/ 1/
Fractional Undivided Interest in the Trust per Unit ...... 3,072 3,000 3,147 3,000
Principal Amount (Par Value) of Securities per Unit<F1>... $ 1,020.51 $ 1,000.00 $ 978.71 $ 1,000.00
Public Offering Price: ...................................
Aggregate Offering Price of Securities in Portfolio...... $ 2,892,475 $ 2,958,438 $ 2,963,329 $ 2,972,661
Aggregate Offering Price of Securities per Unit.......... $ 941.56 $ 986.15 $ 941.64 $ 990.89
Sales Charge <F2>........................................ $ 48.51 $ 30.49 $ 48.51 $ 30.64
Purchased Interest <F3>.................................. $ 30,506 $ 21,812 $ 30,995 $ 24,163
Purchased Interest per Unit <F3>......................... $ 9.93 $ 7.27 $ 9.85 $ 8.05
Public Offering Price per Unit <F3>...................... $ 1,000.00 $ 1,023.91 $ 1,000.00 $ 1,029.58
Redemption Price per Unit, including Purchased
Interest <F3>............................................ $ 943.50 $ 986.05 $ 943.99 $ 991.45
Secondary Market Repurchase Price per Unit,
including Purchased Interest <F3>........................ $ 951.49 $ 993.42 $ 951.49 $ 998.94
Excess of Public Offering Price per Unit Over
Redemption Price per Unit................................ $ 56.50 $ 37.86 $ 56.01 $ 38.13
Excess of Sponsor's Initial Repurchase Price per Unit
Over Redemption Price per Unit........................... $ 7.99 $ 7.37 $ 7.50 $ 7.49
Minimum Value of the Trust under which Trust
Agreement may be terminated.............................. $ 627,000 $ 600,000 $ 616,000 $ 600,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution..........$1.00 per Unit
First Settlement Date...................October 6, 1994
Evaluator's Annual Supervisory Fee......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee<F4>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a number
of units such that each unit represents approximately $1,000 principal amount
of underlying securities. The Sponsor, on the other hand, in determining the
number of Units for each Trust, other than IM-IT Limited Maturity, IM-IT
Intermediate, State Intermediate Laddered Maturity and IM-IT Short
Intermediate Trusts, has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price per Unit of $1,000. For IM-IT
Limited Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, on the other hand, each unit represents
$1,000 principal amount of underlying securities in such Trust on the Date of
Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public Offering
Price per Unit (excluding Purchased Interest) and in parenthesis as a
percentage of the aggregate offering price of the Securities, are as follows:
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>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
AND INVESTORS' QUALITY TAX-EXEMPT TRUST,
Multi-Series 233
Summary of Essential Financial Information (Continued)
At the Close of Business on the day before the Date of Deposit:
September 28, 1994
(except for the Pennsylvania IM-IT Trust as of 8:00 A.M. Central Time
on the Date of Deposit: September 29, 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>
Texas
IM-IT
Intermediate
Pennsylvania Laddered Texas North Carolina
GENERAL INFORMATION IM-IT Trust Maturity Trust IM-IT Trust Quality Trust
<S> <C> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust....... $ 3,100,000 $ 3,000,000 $ 3,055,000 $ 3,000,000
Number of Units........................................... 3,055 3,000 3,039 2,949
1/ 1/ 1/ 1/
Fractional Undivided Interest in the Trust per Unit ...... 3,055 3,000 3,039 2,949
Principal Amount (Par Value) of Securities per Unit<F1>... $ 1,014.73 $ 1,000.00 $ 1,005.26 $ 1,017.29
Public Offering Price: ...................................
Aggregate Offering Price of Securities in Portfolio...... $ 2,876,269 $ 2,964,250 $ 2,861,320 $ 2,777,151
941
Aggregate Offering Price of Securities per Unit.......... $ .50 $ 988.08 $ 941.53 $ 941.73
Sales Charge <F2>........................................ $ 48.50 $ 30.56 $ 48.51 $ 48.52
Purchased Interest <F3>.................................. $ 30,550 $ 24,599 $ 30,259 $ 28,763
Purchased Interest per Unit <F3>......................... $ 10.00 $ 8.20 $ 9.96 $ 9.75
Public Offering Price per Unit <F3>...................... $ 1,000.00 $ 1,026.84 $ 1,000.00 $ 1,000.00
Redemption Price per Unit, including Purchased
Interest <F3>............................................ $ 944.10 $ 988.77 $ 943.69 $ 943.90
Secondary Market Repurchase Price per Unit,
including Purchased Interest <F3>........................ $ 951.50 $ 996.28 $ 951.49 $ 951.48
Excess of Public Offering Price per Unit Over
Redemption Price per Unit................................ $ 55.90 $ 38.07 $ 56.31 $ 56.10
Excess of Sponsor's Initial Repurchase Price per Unit
Over Redemption Price per Unit........................... $ 7.40 $ 7.51 $ 7.80 $ 7.58
Minimum Value of the Trust under which Trust
Agreement may be terminated.............................. $ 620,000 $ 600,000 $ 611,000 $ 600,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution..........$1.00 per Unit
First Settlement Date...................October 6, 1994
Evaluator's Annual Supervisory Fee......Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee<F4>...$0.30 per $1,000 principal amount of Bonds
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a
number of units such that each unit represents approximately $1,000 principal
amount of underlying securities. The Sponsor, on the other hand, in
determining the number of Units for each Trust, other than IM-IT Limited
Maturity, IM-IT Intermediate, State Intermediate Laddered Maturity and
IM-IT Short Intermediate Trusts, has elected not to follow this format but
rather to provide that number of Units which will establish as close as
possible as of the Date of Deposit a Public Offering Price per Unit of $1,000.
For IM-IT Limited Maturity, IM-IT Intermediate, State Intermediate Laddered
Maturity and IM-IT Short Intermediate Trusts, on the other hand, each unit
represents $1,000 principal amount of underlying securities in such Trust on
the Date of Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public
Offering Price per Unit (excluding Purchased Interest) and in parenthesis as a
percentage of the aggregate offering price of the Securities, are as follows:
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>
SETTLEMENT OF BONDS IN THE TRUSTS
The Fund. Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust, Multi-Series 233 (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 eight 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. 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 State Trust (other than a State
Intermediate Laddered Maturity Trust) will terminate at the end of the
calendar year prior to the fiftieth anniversary of its execution, and the
Trust Agreement for any IM-IT Limited Maturity Trust, IM-IT Intermediate
Trust, State Intermediate Laddered Maturity Trust or IM-IT Short Intermediate
Trust will terminate at the end of the calendar year prior to the twentieth
anniversary of its execution.
The portfolio of any 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 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 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 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.
Risk Factors. 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 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 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 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 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 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.
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 Pennsylvania IM-IT Trust 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 October 6, 1994. The first
record date for each Trust (November 1, 1994) is 25 days from such date. The
daily rates of estimated net annual interest income per Unit are $.15984,
$.12883, $.15867, $.13388, $.16085, $.13414, $.16015 and $.15670 for the
California IM-IT, Florida IM-IT Intermediate Laddered Maturity, Florida IM-IT,
New Jersey IM-IT Intermediate Laddered Maturity, Pennsylvania IM-IT, Texas
IM-IT Intermediate Laddered Maturity, Texas IM-IT and North Carolina Quality
Trusts, respectively. This amounts to $4.00, $3.22, $3.97, $3.35, $4.02,
$3.35, $4.00 and $3.92 for the California IM-IT, Florida IM-IT Intermediate
Laddered Maturity, Florida IM-IT, New Jersey IM-IT Intermediate Laddered
Maturity, Pennsylvania IM-IT, Texas IM-IT Intermediate Laddered Maturity,
Texas IM-IT and North Carolina Quality Trusts, respectively.
Utilizing the preceding information, the following procedure illustrates the
calculation of first year estimated net annual interest income per Unit for
the California IM-IT Trust:
The California IM-IT Trust accrues
$4.00 to the first record date plus
$48.00 which is 10 normal distributions at $4.80, and finally adding
$5.54 which has accrued from September 1, 1995 until October 6, 1995 which
completes the 360 day cycle (35 days times the daily factor)
Total $57.54 interest earned /$1,000.00 (Date of Deposit Public Offering
Price) = 5.75% 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 a State Trust (other than a State Intermediate Laddered Maturity Trust),
4.3% of the Public Offering Price (excluding Purchased Interest) (4.493% of
the aggregate offering price of the Securities) for an IM-IT Limited Maturity
Trust, 3.9% of the Public Offering Price (excluding Purchased Interest)
(4.058% of the aggregate offering price of the Securities) for an IM-IT
Intermediate Trust and 3.0% of the Public Offering Price (excluding Purchased
Interest) (3.093% of the aggregate offering price of the Securities) for an
IM-IT Short Intermediate Trust or a State Intermediate Laddered Maturity
Trust. After the initial public offering period, the secondary market Public
Offering Price is based on the bid prices of the Securities in each Trust and
includes a sales charge determined in accordance with the table set forth
below, which is based upon the dollar weighted average maturity of each Trust
plus in each case Purchased Interest 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:
<TABLE>
<CAPTION>
Sales Charge Years To Maturity Sales Charge
Years To Maturity
<S> <C> <C> <C>
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
</TABLE>
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Securities in a Trust. Expressed as a percent of
the Public Offering Price (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
State
(other than a
State Intermediate
Laddered Maturity
Aggregate Number of Trust)
Units Purchased and National
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 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
Pennsylvania IM-IT Trust as of 8:00 A.M. Central Time on the Date of Deposit)
was made on the basis of an evaluation of the Securities in each Trust
prepared by Interactive Data 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
Pennsylvania IM-IT Trust 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.
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 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 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) 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.
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 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 June 30, 1994 MBIA had admitted assets of $3.3 billion
(unaudited), total liabilities of $2.2 billion (unaudited), and total capital
and surplus of $1.1 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's year end financial statements prepared in
accordance with statutory accounting practices are available from MBIA. The
address of MBIA is 113 King Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group, Inc. On
January 5, 1990, MBIA acquired all of the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company (BIG),
now known as MBIA Insurance Corp. of Illinois. Through a reinsurance
agreement, BIG has ceded all of its net insured risks, as well as its unearned
premium and contingency reserves, to MBIA and MBIA has reinsured BIG's net
outstanding exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA "
Aaa"and short term loans "MIG 1,"both designated to be of the
highest quality.
Standard & Poor's Corporation rates all new issues insured by MBIA "
AAA"Prime Grade.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's Corporation rating of MBIA. No
application has been made to any other rating agency in order to obtain
additional ratings on the Bonds. The ratings reflect the respective rating
agency's current assessment of the creditworthiness of MBIA and its ability to
pay claims on its policies of insurance. Any further explanation as to the
significance of the above ratings may be obtained only from the applicable
rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds, and
such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds.
Financial Guaranty Insurance Company ("Financial Guaranty"or "
FGIC") is a wholly-owned subsidiary of FGIC Corporation (the "
Corporation"), a Delaware holding company. The Corporation is a
wholly-owned subsidiary of General Electric Capital Corporation ("GECC"
). Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of June 30, 1994, the total capital and surplus of
Financial Guaranty was approximately $850,000,000. 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
(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 June 30, 1994, Capital Guaranty had more than $13.7 billion in net
exposure outstanding (excluding deferred issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$89,917,075 (unaudited), and the total admitted assets were $286,825,253
(unaudited) as reported to the Insurance Department of the State of Maryland
as of June 30, 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.
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,
Standard & Poor's Corporation has assigned to the Units of each Insured Trust
its "AAA"investment rating. See "Description of Securities
Ratings". The obtaining of this rating by an Insured Trust should not be
construed as an approval of the offering of the Units by Standard & Poor's
Corporation or as a guarantee of the market value of such Trust or of the
Units.
On the date of this Prospectus, the Estimated Current Return on the Securities
in the New Jersey IM-IT Intermediate Laddered Maturity Trust was 4.68% after
payment of the insurance premium or premiums payable by such Trust, while the
Estimated Long-Term Return on such Trust was 4.79%. The Estimated Current
Return on an identical portfolio without the insurance obtained by the above
mentioned Trust would have been 4.69% on such date, while the Estimated
Long-Term Return on an identical portfolio without the insurance obtained by
the above mentioned Trust would have been 4.80%.
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.
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
Bonds insured Bonds insured
under AMBAC under Financial
Trust Indemnity Guaranty Preinsured Total
portfolio insurance portfolio insurance Bonds
<S> <C> <C> <C> <C>
California IM-IT.................................. -- -- 100% 100%
Florida IM-IT Intermediate Laddered Maturity...... -- -- 100% 100%
Florida IM-IT..................................... -- -- 100% 100%
New Jersey IM-IT Intermediate Laddered Maturity... 7% -- 93% 100%
Pennsylvania IM-IT................................ -- -- 100% 100%
Texas IM-IT Intermediate Laddered Maturity........ -- -- 100% 100%
Texas IM-IT....................................... -- -- 100% 100%
</TABLE>
The breakdown of the Preinsured Bonds is as follows: California IM-IT
Trust--Financial Guaranty 17%, MBIA 69% and FSA 14%; Florida IM-IT
Intermediate Laddered Maturity Trust--Financial Guaranty 22%, MBIA 68% and FSA
10%; Florida IM-IT Trust--AMBAC Indemnity 36%, Financial Guaranty 58% and
MBIA 6%; New Jersey IM-IT Intermediate Laddered Maturity Trust-- AMBAC
Indemnity 16%, MBIA 60% and FSA 17%; Pennsylvania IM-IT Trust--AMBAC Indemnity
11%, Financial Guaranty 8%, MBIA 65% and FSA 16%; Texas IM-IT Intermediate
Laddered Maturity Trust--AMBAC Indemnity 90% and Capital Guaranty 10%; Texas
IM-IT Trust--AMBAC Indemnity 38%, Financial Guaranty 32% and MBIA 30%.
CALIFORNIA IM-IT TRUST
General. The California IM-IT Trust consists of 8 issues of Securities. One
of the Bonds in the California 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 California IM-IT Trust) as follows: Certificates of Participation, 2
(27%); Retail Electric/Gas, 2 (19%); General Obligations, 1 (16%); Water and
Sewer, 1 (16%); Tax District, 1 (14%) and Public Building, 1 (8%). No Bond
issue has received a provisional rating.
Risk Factors. 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 relating 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 over 30 million represents 12% 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 1991, 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 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 of 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, payable from the State's General Fund, of approximately $4.0
billion. Of the State's outstanding general obligation debt, approximately 28%
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
1993-1994 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 last 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 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. Total local assistance from the
State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing reductions
in certain aid programs. 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 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 has upheld the validity of the District's lease, and the case has been
settled. Any judgment in any future case against the position asserted by the
Trustee in the Richmond case 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.
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 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:
the California IM-IT Trust is not an association taxable as a corporation and
the income of the California IM-IT Trust will be treated as the income of the
Unitholders under the income tax laws of California;
amounts treated as interest on the underlying Securities in the California
IM-IT Trust which are exempt from tax under California personal income tax and
property tax laws when received by the California IM-IT 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;
under California income tax law, each Unitholder in the California IM-IT Trust
will have a taxable event when the California IM-IT 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 Trust to a Unitholder is allocated
among each of the Bond issues held in the California IM-IT Trust (in
accordance with the proportion of the California IM-IT 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;
under the California personal property tax laws, bonds (including the
Securities in the California IM-IT Trust) or any interest therein is exempt
from such tax;
any proceeds paid under the insurance policy issued to the California IM-IT
Trust 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; and
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 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 Trust of the proceedings
relating to the issuance of the Securities or of the basis for such opinions.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit.................................... $ 59.58
Less: Estimated Annual Expense per Unit <F1>................................. $ 2.04
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 57.54
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 57.54
Divided by 12................................................................ $ 4.80
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .15984
Estimated Current Return Based on Public Offering Price <F2><F3><F4>.......... 5.75%
Estimated Long-Term Return <F2><F3><F4>....................................... 5.86%
Initial Distribution (November 1994).......................................... $ 4.00
Estimated Normal Distribution per Unit <F4>................................... $ 4.80
Purchased Interest <F5>....................................................... $ 9.93
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
November 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 (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 the 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
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>
<TABLE>
CALIFORNIA INSURED MUNICIPALS INCOME TRUST
SERIES 132 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of either Redemption California
Principal<F1> Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F4>
<S> <C> <C> <C> <C>
$ 250,000 State Public Works Board of the State of California, Lease
Revenue Bonds (Department of Corrections) Series 1993D
(California State Prison-Lassen County, Susanville) MBIA 2002 @ 102
Insured #5.375% Due 6/1/2018.................................... AAA 2015 @ 100 S.F. $ 215,605
500,000 City of Los Angeles, California, Wastewater System Revenue
Bonds, Refunding Series 1993A (MBIA Insured) #5.80% Due
6/1/2021 ........................................................ AAA 2003 @ 102 461,545
500,000 State of California, Various Purpose General Obligation Bonds 2002 @ 102
(MBIA Insured) #6.00% Due 10/1/2021 ............................ AAA 2020 @ 100 S.F. 475,725
500,000 Sacramento Municipal Utility District, Electric Revenue Bonds, 2004 @ 102
Series 1994I (MBIA Insured) #6.00% Due 1/1/2024 ................ AAA 2016 @ 100 S.F. 474,885
435,000 Santa Clara Valley Water District (Santa Clara County,
California) Refunding and Improvement Certificates of 2004 @ 102
Participation, Series 1994A (FGIC Insured) #6.00% Due 2/1/2024 AAA 2016 @ 100 S.F. 413,676
400,000 California Statewide Communities Development Authority,
Certificates of Participation (Sharp Healthcare Obligated 2004 @ 102
Group) MBIA Insured #6.00% Due 8/15/2024 ....................... AAA 2021 @ 100 S.F. 378,748
100,000 Department of Water and Power of the City of Los Angeles
(California) Electric Plant Revenue Bonds, Issue of 1994 (FGIC 2004 @ 102
Insured) #5.30% Due 2/15/2025 .................................. AAA 2022 @ 100 S.F. 83,536
450,000 The Community Redevelopment Agency of the City of Los Angeles,
California (Bunker Hill Project) Tax Allocation Revenue 2003 @ 102
Refunding Bonds, Series H (FSA Insured) #5.60% Due 12/1/2028 .. AAA 2024 @ 100 S.F. 388,755
$ 3,135,000 $ 2,892,475
</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".
FLORIDA IM-IT INTERMEDIATE LADDERED MATURITY TRUST
General. The Florida IM-IT Intermediate Laddered Maturity Trust consists of 10
issues of Securities. One of the Bonds in the Florida IM-IT Intermediate
Laddered Maturity 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 Florida IM-IT
Intermediate Laddered Maturity Trust) as follows: Certificates of
Participation, 2 (27%); General Purpose, 2 (27%); Health Care, 1 (20%); Water
and Sewer, 3 (18%); Public Building, 1 (5%) and General Obligations, 1 (3%).
No Bond issue has received a provisional rating. All of the obligations in the
Florida 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 6.76 years.
Risk Factors. Florida's economy has in the past been highly dependent on the
construction industry and construction related manufacturing. This dependency
has declined in recent years and continues to do so as a result of continued
diversification of the State's economy. For example, in 1980 total contract
construction employment as a share of total non-farm employment was just over
seven percent and in 1993 the share had edged downward to five percent. This
trend is expected to continue as Florida's economy continues to diversify.
Florida, nevertheless, has a dynamic construction industry with single and
multi-family housing starts accounting for 8.5% of total U.S. housing starts
in 1993 while the State's population is 5.3% of the U.S. total population.
Florida's housing starts since 1980 have represented an average of 11.0% of
the U.S.'s total annual starts, and since 1980 total housing starts have
averaged 156,450 a year.
A driving force behind the State's construction industry has been the State's
rapid rate of population growth. Although Florida currently is the fourth most
populous state (with an estimated population of 13.4 million), its annual
population growth is now projected to decline as the number of people moving
into the State is expected to hover near the mid 250,000 range annually
throughout the 1990s. This population trend should provide fuel for business
and home builders to keep construction activity lively in Florida for some
time to come. However, other factors do influence the level of construction in
the State. For example, Federal tax reform in 1986 and other changes to the
Federal income tax code have eliminated tax deductions for owners of two or
more residential real estate properties and have lengthened depreciation
schedules on investment and commercial properties. Economic growth and
existing supplies of commercial buildings and homes also contribute to the
level of construction activity in the State.
Since 1980, the State's job creation rate is almost twice the rate for the
nation as a whole, and its growth rate in new non-agricultural jobs is the
fastest of the 11 most populous states and second only to California in the
absolute number of new jobs created. Contributing to the State's rapid rate of
growth in employment and income is international trade. Since 1980, the
State's unemployment rate has generally been below that of the U.S. In recent
years, however, as the State's economic growth has slowed from its previous
highs, the State's unemployment rate has tracked above the national average.
The average in Florida since 1980 has been 6.5% while the national average is
7.1%. According to the U.S. Department of Commerce, the Florida Department of
Labor and Employment Security, and the Florida Consensus Economic Estimating
Conference (together the "Organization") the State's unemployment rate
was 8.2% during 1992. As of January, 1994, the Organization estimates that the
unemployment rate will be 6.7% for 1993-94 and 6.1% in 1994-95.
The rate of job creation in Florida's manufacturing sector has exceeded that
of the U.S. From the beginning of 1980 through 1993, the State added over
50,100 new manufacturing jobs, an 11.7% increase. During the same period,
national manufacturing employment declined ten out of the fourteen years, for
a loss of 2,977,000 jobs.
Total non-farm employment in Florida is expected to increase 2.7% in 1993-94
and rise 3.8% in 1994-95. Trade and services, the two largest figures, account
for more than half of the total non-farm employment. Employment in the service
sectors should experience an increase of 3.9% in 1993-94, while growing 4.9%
in 1994-95. Trade is expected to expand 2.2% in 1994 and 3.4% in 1995. The
service sector is now the State's largest employment category.
Tourism is one of Florida's most important industries. Approximately 40.9
million tourists visited the State in 1992, as reported by the Florida
Department of Commence. In terms of business activities and state tax
revenues, tourists in Florida in 1992 represented an estimated 4.5 million
additional residents. Visitors to the State tend to arrive equally by air and
car. The State's tourism industry over the years has become more
sophisticated, attracting visitors year-round and, to a degree, reducing its
seasonality. Tourist arrivals are expected to decline by almost two percent
this year, but recover next year with 5.0% growth. By the end of the State's
current fiscal year, 41.0 million domestic and international tourists are
expected to have visited the State. In 1994-95, tourist arrivals should
approximate 43.0 million.
The State's per capita personal income in 1992 of $19,947 was slightly below
the national average of $19,841 and significantly ahead of that for the
southeast United States, which was $17,661. Real personal income in the State
is estimated to increase 5.5% in 1993-94 and 4.7% in 1994-95. By the end of
1994-95, real personal income per capita in the State is projected to average
6.7% higher than its 1992-93 level.
Compared to other states, Florida has a proportionately greater retirement age
population which comprises 18.3% (as of April 1, 1991) of the State's
population and is forecast to grow at an average annual rate of over 1.96%
through the 1990s. Thus, property income (dividends, interest, and rent) and
transfer payments (Social Security and pension benefits, among other sources
of income) are a relatively more important source of income. For example,
Florida's total wages and salaries and other labor income in 1992 was 61% of
total income, while a similar figure for the nation for 1992 was 72.0%.
Transfer payments are typically less sensitive to the business cycle than
employment income and, therefore, act as stabilizing forces in weak economic
periods. While many of the U.S.'s senior citizens choose the State as their
place of retirement, the State is also recognized as attracting a significant
number of working age people. Since 1982, the prime working age population
(18-44) has grown at an average annual rate of 3.3%.
In fiscal year 1991-92, approximately 64% of the State's total direct revenue
to its three operating funds was derived from State taxes, with federal grants
and other special revenue accounting for the balance. State sales and use tax,
corporate income tax, and beverage tax amounted to 68%, 7% and 5%,
respectively, of total receipts by the General Revenue Fund during fiscal year
1991-92. In that same year, expenditures for education, health and welfare,
and public safety amounted to 53%, 30% and 13.3%, respectively, of total
expenditures from the General Revenue Fund.
Hurricane Andrew left some parts of south Florida devastated. Post-Hurricane
Andrew clean up and rebuilding have changed the outlook for the State's
economy. Single and multi-family housing starts in 1993-94 are projected to
reach a combined level of 118,000, and to increase to 134,300 next year.
Lingering recessionary effects on consumers and tight credit are two of the
reasons for relatively slow core construction activity, as well as lingering
effects from the 1986 tax reform legislation discussed above. However,
construction is one of the sectors most severely affected by Hurricane Andrew.
Low interest rates and pent up demand combined with improved consumer
confidence should lead to improved housing starts. The construction figures
above include additional housing starts as a result of destruction by
Hurricane Andrew. Total construction expenditures are forecasted to increase
15.6% this year and increase 13.3% next year.
The State Constitution and statutes mandate that the State budget, as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. If the Governor or Comptroller
believes a deficit will occur in any State fund, by statute, he must certify
his opinion to the Administrative Commission, which then is authorized to
reduce all State agency budgets and releases by a sufficient amount to prevent
a deficit in any fund. Additionally, the State Constitution prohibits issuance
of State obligations to fund State operations.
Estimated fiscal year 1993-94 General Revenue plus Working Capital funds
available total $13,582.7 million, an 8.4% increase over 1992-93. This
reflects a transfer of $190 million, out of an estimated $220.0 million in
non-recurring revenue due to Andrew, to a hurricane relief trust fund. Of the
total General Revenue plus Working Capital funds available to the State,
$12,943.5 million of that is Estimated Revenues (excluding the Andrew impact)
which represents an increase of 7.3% over the previous year's Estimated
Revenues. With effective General Revenues plus Working Capital Fund
appropriations at $13,276.9 million, unencumbered reserves at the end of
1993-94 are estimated at $305.8 million. Estimated, fiscal year 1994-95
General Revenue plus Working Capital funds available total $14,293.5 million,
a 5.2% increase over 1993-94. This amount reflects a transfer of $159.00
million in non-recurring revenue due to Hurricane Andrew, to a hurricane
relief trust fund. The $13,877.2 million in Estimated Revenues (excluding the
Hurricane Andrew impact) represent an increase of 7.2% over the previous
year's Estimated Revenues. The massive effort to rebuild and replace destroyed
or damaged property in the wake of Andrew is responsible for the substantial
positive revenue impacts shown here. Most of the impact is in the increase in
the State's sales tax.
In fiscal year 1992-93, approximately 62% of the State's total direct revenue
to its three operating funds were derived from State taxes, with Federal
grants and other special revenue accounting for the balance. State sales and
use tax, corporate income tax, intangible personal property tax, and beverage
tax amounted to 68%, 7%, 4%, and 4%, respectively, of total General Revenue
Funds available during fiscal 1992-93. In that same year, expenditures for
education, health and welfare, and public safety amounted to approximately
49%, 30%, and 11%, respectively, of total expenditures from the General
Revenue Fund.
The State's sales and use tax (6%) currently accounts for the State's single
largest source of tax receipts. Slightly less than 10% of the State's sales
and use tax is designated for local governments and is distributed to the
respective counties in which collected for such use by such counties and the
municipalities therein. In addition to this distribution, local governments
may (by referendum) assess a 0.5% or a 1.0% discretionary sales tax within
their county. Proceeds from this local option sales tax are earmarked for
funding local infrastructure programs and acquiring land for public recreation
or conservation or protection of natural resources as provided under Florida
law. Certain charter counties have other taxing powers in addition, and
non-consolidated counties with a population in excess of 800,000 may levy a
local option sales tax to fund indigent health care. It alone cannot exceed
0.5% and when combined with the infrastructure surtax cannot exceed 1.0%. For
the fiscal year ended June 30, 1993, sales and use tax receipts (exclusive of
the tax on gasoline and special fuels) totalled $9,426.0 million, an increase
of 12.5% over fiscal year 1991-92.
The second largest source of State tax receipts is the tax on motor fuels.
However, these revenues are almost entirely dedicated trust funds for specific
purposes and are not included in the State's General Revenue Fund.
The State imposes an alcoholic beverage wholesale tax (excise tax) on beer,
wine, and liquor. This tax is one of the State's major tax sources, with
revenues totalling $442.2 million in fiscal year ending June 30, 1993.
Alcoholic beverage tax receipts declined 1.6% over the previous year. The
revenues collected from this tax are deposited into the State's General
Revenue Fund.
The State imposes a corporate income tax. All receipts of the corporate income
tax are credited to the General Revenue Fund. For the fiscal year ended June
30, 1993, receipts from this source were $846.6 million, an increase of 5.6%
from fiscal year 1991-92.
The State imposes a documentary stamp tax on deeds and other documents
relating to realty, corporate shares, bonds, certificates of indebtedness,
promissory notes, wage assignments, and retail charge accounts. The
documentary stamp tax collections totaled $639.0 million during fiscal year
1992-93, a 27.0% increase from the previous fiscal year. Beginning in fiscal
year 1992-93, 71.29% of these taxes are to be deposited to the General Revenue
Fund.
The State imposes a gross receipts tax on electric, natural gas, and
telecommunications services. All gross receipts utilities tax collections are
credited to the State's Public Education Capital Outlay and Debt Service Trust
Fund. In fiscal year 1992-93, this amounted to $447.9 million.
The State imposes an intangible personal property tax on stocks, bonds,
including bonds secured by liens in Florida real property, notes, governmental
leaseholds, and certain other intangibles not secured by a lien on Florida
real property. The annual rate of tax is 2 mils. Second, the State imposes a
non-recurring 2 mil tax on mortgages and other obligations secured by liens on
Florida real property. In fiscal year 1992-93, total intangible personal
property tax collections were $783.4 million, a 33% increase over the prior
year. Of the tax proceeds, 66.5% are distributed to the General Revenue Fund.
The State began its own lottery in 1988. State law requires that lottery
revenues be distributed 50% to the public in prizes, 38% for use in enhancing
education, and the balance, 12.0% for costs of administering the lottery.
Fiscal year 1992-93 lottery ticket sales totalled $2.13 billion, providing
education with $810.4 million.
The State's severance tax applies to oil, gas, and sulphur production, as well
as the severance of phosphate rock and other solid minerals. Total collections
from severance taxes total $64.5 million during fiscal year 1992-93, down 4.0%
from the previous year. Currently, 60.0% of this amount is transferred to the
General Revenue Fund.
The State has continuously been dependent on the highly cyclical construction
and construction related manufacturing industries. While that dependency has
decreased, the State is still somewhat at the mercy of the construction and
construction related manufacturing industries. The construction industry is
driven to a great extent by the State's rapid growth in population. There can
be no assurance that population growth will in fact continue throughout the
1990's in which case there could be an adverse impact on the State's economy
through the loss of construction and construction related manufacturing jobs.
Also, while interest rates remain low currently, an increase in interest rates
could significantly adversely impact the financing of new construction within
the State, thereby adversely impacting unemployment and other economic factors
within the State. In addition, available commercial office space has tended to
remain high over the past few years. So long as this glut of commercial rental
space continues, construction of this type of space will likely continue to
remain slow.
At the end of fiscal 1993, approximately $5.61 billion in principal amount of
debt secured by the full faith and credit of the State was outstanding. In
addition, since July 1, 1993, the State issued about $873.0 million in
principal amount of full faith and credit bonds.
The State Constitution and statutes mandate that the State budget, as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. If the Governor or Comptroller
believe a deficit will occur in any State fund, by statute, he must certify
his opinion to the Administrative Commission, which then is authorized to
reduce all State agency budgets and releases by a sufficient amount to prevent
a deficit in any fund. Additionally, the State Constitution prohibits issuance
of State obligations to fund State operations.
Currently under litigation are several issues relating to State actions or
State taxes that put at risk substantial amounts of General Revenue Fund
monies. Accordingly, there is no assurance that any of such matters,
individually or in the aggregate, will not have a material adverse affect on
Florida's financial position.
Florida law provides preferential tax treatment to insurers who maintain a
home office in the State. Certain insurers challenged the constitutionality of
this tax preference and sought a refund of taxes paid. Recently, the State
Supreme Court ruled in favor of the State. This case and others, along with
pending refund claims, total about $150 million.
Florida maintains a bond rating of Aa and AA from Moody's Investors Service
and Standard & Poor's Corporation, respectively, on the majority of its
general obligation bonds, although the rating of a particular series of
revenue bonds relates primarily to the project, facility, or other revenue
sources from which such series derives funds for repayment. While these
ratings and some of the information presented above indicate that Florida is
in satisfactory economic health, there can be no assurance that there will not
be a decline in economic conditions or that particular Municipal Obligations
purchased by the Fund will not be adversely affected by any such changes.
The sources for the information presented above include official statements
and financial statements of the State of Florida. While the Sponsor has not
independently verified this information, the Sponsor has no reason to believe
that the information is not correct in all material respects.
Tax Status. For a discussion of the Federal tax status of income earned on
Florida IM-IT Intermediate Laddered Maturity Trust units, see "Other
Matters--Federal Tax Status".
The Bonds were accompanied by opinions of Bond Counsel to the respective
issuers thereof to the effect that the Bonds were exempt from the Florida
intangibles tax. Neither the Sponsor nor its counsel have independently
reviewed such opinions or examined the Bonds to be deposited in and held by
the Florida IM-IT Intermediate Laddered Maturity Trust and have assumed the
correctness as of the date of deposit of the opinions of Bond Counsel.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
law:
For Florida state income tax purposes, the Florida IM-IT Intermediate Laddered
Maturity Trust will not be subject to the Florida income tax imposed by
Chapter 220, Florida Statutes. In addition, Florida does not impose any income
taxes at the local level.
Because Florida does not impose an income tax on individuals, non-corporate
Unitholders residing in Florida will not be subject to any Florida income
taxation on income realized by the Florida IM-IT Intermediate Laddered
Maturity Trust. Any amounts paid to the Florida IM-IT Intermediate Laddered
Maturity Trust or to non-corporate Unitholders residing in Florida under an
insurance policy issued to the Florida IM-IT Intermediate Laddered Maturity
Trust or the Sponsor which represent maturing interest on defaulted
obligations held by the Trustee will not be subject to the Florida income tax
imposed by Chapter 220, Florida Statutes.
Corporate Unitholders with commercial domiciles in Florida will be subject to
Florida income or franchise taxation on income realized by the Florida IM-IT
Intermediate Laddered Maturity Trust and on payments of interest pursuant to
any insurance policy. Other corporate Unitholders will be subject to Florida
income or franchise taxation on income realized by the Florida IM-IT
Intermediate Laddered Maturity Trust (or on payments of interest pursuant to
any insurance policy) only to the extent that the income realized does not
constitute "non-business income"as defined by Chapter 220.
Units will be subject to Florida estate tax only if held by Florida residents.
However, the Florida estate tax is limited to the amount of the credit for
state death taxes provided for in Section 2011 of the Internal Revenue Code.
Neither the Bonds nor the Units will be subject to the Florida ad valorem
property tax, the Florida intangibles personal property tax or Florida sales
or use tax.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit.................................... $ 48.11
Less: Estimated Annual Expense per Unit <F2>................................. $ 1.73
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 46.38
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 46.38
Divided by 12................................................................ $ 3.87
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .12883
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>...... 4.53%
Estimated Long-Term Return <F3><F4><F5> ...................................... 4.75%
Initial Distribution (November 1994).......................................... $ 3.22
Estimated Normal Distribution per Unit <F5>................................... $ 3.87
Purchased Interest <F6>....................................................... $ 7.27
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
November 15, 1994
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.35
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 $48.46. 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 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 (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 the 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
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>
<TABLE>
FLORIDA IM-IT INTERMEDIATE LADDERED MATURITY
SERIES 10 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
Florida
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 Tampa, Florida, Revenue Bonds (Allegany Health System-St.
Joseph) Series 1993 (MBIA Insured)
#4.15% Due 12/1/1999............................................... AAA $ 574,038
200,000 Hillsborough County, Florida, School Board Certificates of
Participation, Series 1994 (MBIA Insured)
#5.00% Due 7/1/2000................................................ AAA 200,750
40,000 Hillsborough County, Florida, Utility Refunding Revenue Bonds,
Series 1993 (MBIA Insured)
4.70% Due 8/1/2000................................................. AAA 39,433
500,000 Martin County, Florida, Consolidated Utilities System Refunding
and Improvement Revenue Bonds, Series 1994 (FGIC
Insured)**
#200M-4.875% Due 10/1/2000 AAA 199,978
#300M-5.00% Due 10/1/2001.......................................... AAA 300,246
160,000 Orlando, Florida, Parking Facilities Refunding Revenue Bonds,
Series 1994A (FGIC Insured)
#4.00% Due 10/1/2000............................................... AAA 149,342
100,000 Indian River County, Florida, School District, General Obligation
Refunding Bonds, Series 1993 (FSA Insured)
#4.80% Due 4/1/2001................................................ AAA 98,675
200,000 Puerto Rico Municipal Finance Agency, Series 1994A (FSA
Insured)**
#5.20% Due 7/1/2001................................................ AAA 200,170
600,000 Homestead, Florida, Special Insurance Assessment Revenue
Bonds, Hurricane Andrew Covered Claim Assessment
Program, Series 1993 (MBIA Insured)
#5.125% Due 3/1/2002............................................... AAA 597,666
600,000 Dade County, Florida, School Board Certificates of Participation,
Series 1994A (MBIA Insured)
#5.25% Due 5/1/2003................................................ AAA 598,140
$ 3,000,000 $ 2,958,438
</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".
FLORIDA IM-IT TRUST
General. The Florida IM-IT Trust consists of 8 issues of Securities. None of
the Bonds in the Florida IM-IT Trust are general obligations of the
governmental entities issuing them or are backed by the taxing power thereof.
All of the issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Florida IM-IT Trust) as follows: Public Building, 2 (32%); Retail
Electric/Gas, 2 (26%); Health Care, 1 (16%); Water and Sewer, 1 (16%);
Certificates of Participation, 1 (7%) and Wholesale Electric, 1 (3%). No Bond
issue has received a provisional rating.
Risk Factors. Florida's economy has in the past been highly dependent on the
construction industry and construction related manufacturing. This dependency
has declined in recent years and continues to do so as a result of continued
diversification of the State's economy. For example, in 1980 total contract
construction employment as a share of total non-farm employment was just over
seven percent and in 1993 the share had edged downward to five percent. This
trend is expected to continue as Florida's economy continues to diversify.
Florida, nevertheless, has a dynamic construction industry with single and
multi-family housing starts accounting for 8.5% of total U.S. housing starts
in 1993 while the State's population is 5.3% of the U.S. total population.
Florida's housing starts since 1980 have represented an average of 11.0% of
the U.S.'s total annual starts, and since 1980 total housing starts have
averaged 156,450 a year.
A driving force behind the State's construction industry has been the State's
rapid rate of population growth. Although Florida currently is the fourth most
populous state (with an estimated population of 13.4 million), its annual
population growth is now projected to decline as the number of people moving
into the State is expected to hover near the mid 250,000 range annually
throughout the 1990s. This population trend should provide fuel for business
and home builders to keep construction activity lively in Florida for some
time to come. However, other factors do influence the level of construction in
the State. For example, Federal tax reform in 1986 and other changes to the
Federal income tax code have eliminated tax deductions for owners of two or
more residential real estate properties and have lengthened depreciation
schedules on investment and commercial properties. Economic growth and
existing supplies of commercial buildings and homes also contribute to the
level of construction activity in the State.
Since 1980, the State's job creation rate is almost twice the rate for the
nation as a whole, and its growth rate in new non-agricultural jobs is the
fastest of the 11 most populous states and second only to California in the
absolute number of new jobs created. Contributing to the State's rapid rate of
growth in employment and income is international trade. Since 1980, the
State's unemployment rate has generally been below that of the U.S. In recent
years, however, as the State's economic growth has slowed from its previous
highs, the State's unemployment rate has tracked above the national average.
The average in Florida since 1980 has been 6.5% while the national average is
7.1%. According to the U.S. Department of Commerce, the Florida Department of
Labor and Employment Security, and the Florida Consensus Economic Estimating
Conference (together the "Organization") the State's unemployment rate
was 8.2% during 1992. As of January, 1994, the Organization estimates that the
unemployment rate will be 6.7% for 1993-94 and 6.1% in 1994-95.
The rate of job creation in Florida's manufacturing sector has exceeded that
of the U.S. From the beginning of 1980 through 1993, the State added over
50,100 new manufacturing jobs, an 11.7% increase. During the same period,
national manufacturing employment declined ten out of the fourteen years, for
a loss of 2,977,000 jobs.
Total non-farm employment in Florida is expected to increase 2.7% in 1993-94
and rise 3.8% in 1994-95. Trade and services, the two largest figures, account
for more than half of the total non-farm employment. Employment in the service
sectors should experience an increase of 3.9% in 1993-94, while growing 4.9%
in 1994-95. Trade is expected to expand 2.2% in 1994 and 3.4% in 1995. The
service sector is now the State's largest employment category.
Tourism is one of Florida's most important industries. Approximately 40.9
million tourists visited the State in 1992, as reported by the Florida
Department of Commence. In terms of business activities and state tax
revenues, tourists in Florida in 1992 represented an estimated 4.5 million
additional residents. Visitors to the State tend to arrive equally by air and
car. The State's tourism industry over the years has become more
sophisticated, attracting visitors year-round and, to a degree, reducing its
seasonality. Tourist arrivals are expected to decline by almost two percent
this year, but recover next year with 5.0% growth. By the end of the State's
current fiscal year, 41.0 million domestic and international tourists are
expected to have visited the State. In 1994-95, tourist arrivals should
approximate 43.0 million.
The State's per capita personal income in 1992 of $19,947 was slightly below
the national average of $19,841 and significantly ahead of that for the
southeast United States, which was $17,661. Real personal income in the State
is estimated to increase 5.5% in 1993-94 and 4.7% in 1994-95. By the end of
1994-95, real personal income per capita in the State is projected to average
6.7% higher than its 1992-93 level.
Compared to other states, Florida has a proportionately greater retirement age
population which comprises 18.3% (as of April 1, 1991) of the State's
population and is forecast to grow at an average annual rate of over 1.96%
through the 1990s. Thus, property income (dividends, interest, and rent) and
transfer payments (Social Security and pension benefits, among other sources
of income) are a relatively more important source of income. For example,
Florida's total wages and salaries and other labor income in 1992 was 61% of
total income, while a similar figure for the nation for 1992 was 72.0%.
Transfer payments are typically less sensitive to the business cycle than
employment income and, therefore, act as stabilizing forces in weak economic
periods. While many of the U.S.'s senior citizens choose the State as their
place of retirement, the State is also recognized as attracting a significant
number of working age people. Since 1982, the prime working age population
(18-44) has grown at an average annual rate of 3.3%.
In fiscal year 1991-92, approximately 64% of the State's total direct revenue
to its three operating funds was derived from State taxes, with federal grants
and other special revenue accounting for the balance. State sales and use tax,
corporate income tax, and beverage tax amounted to 68%, 7% and 5%,
respectively, of total receipts by the General Revenue Fund during fiscal year
1991-92. In that same year, expenditures for education, health and welfare,
and public safety amounted to 53%, 30% and 13.3%, respectively, of total
expenditures from the General Revenue Fund.
Hurricane Andrew left some parts of south Florida devastated. Post-Hurricane
Andrew clean up and rebuilding have changed the outlook for the State's
economy. Single and multi-family housing starts in 1993-94 are projected to
reach a combined level of 118,000, and to increase to 134,300 next year.
Lingering recessionary effects on consumers and tight credit are two of the
reasons for relatively slow core construction activity, as well as lingering
effects from the 1986 tax reform legislation discussed above. However,
construction is one of the sectors most severely affected by Hurricane Andrew.
Low interest rates and pent up demand combined with improved consumer
confidence should lead to improved housing starts. The construction figures
above include additional housing starts as a result of destruction by
Hurricane Andrew. Total construction expenditures are forecasted to increase
15.6% this year and increase 13.3% next year.
The State Constitution and statutes mandate that the State budget, as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. If the Governor or Comptroller
believes a deficit will occur in any State fund, by statute, he must certify
his opinion to the Administrative Commission, which then is authorized to
reduce all State agency budgets and releases by a sufficient amount to prevent
a deficit in any fund. Additionally, the State Constitution prohibits issuance
of State obligations to fund State operations.
Estimated fiscal year 1993-94 General Revenue plus Working Capital funds
available total $13,582.7 million, an 8.4% increase over 1992-93. This
reflects a transfer of $190 million, out of an estimated $220.0 million in
non-recurring revenue due to Andrew, to a hurricane relief trust fund. Of the
total General Revenue plus Working Capital funds available to the State,
$12,943.5 million of that is Estimated Revenues (excluding the Andrew impact)
which represents an increase of 7.3% over the previous year's Estimated
Revenues. With effective General Revenues plus Working Capital Fund
appropriations at $13,276.9 million, unencumbered reserves at the end of
1993-94 are estimated at $305.8 million. Estimated, fiscal year 1994-95
General Revenue plus Working Capital funds available total $14,293.5 million,
a 5.2% increase over 1993-94. This amount reflects a transfer of $159.00
million in non-recurring revenue due to Hurricane Andrew, to a hurricane
relief trust fund. The $13,877.2 million in Estimated Revenues (excluding the
Hurricane Andrew impact) represent an increase of 7.2% over the previous
year's Estimated Revenues. The massive effort to rebuild and replace destroyed
or damaged property in the wake of Andrew is responsible for the substantial
positive revenue impacts shown here. Most of the impact is in the increase in
the State's sales tax.
In fiscal year 1992-93, approximately 62% of the State's total direct revenue
to its three operating funds were derived from State taxes, with Federal
grants and other special revenue accounting for the balance. State sales and
use tax, corporate income tax, intangible personal property tax, and beverage
tax amounted to 68%, 7%, 4%, and 4%, respectively, of total General Revenue
Funds available during fiscal 1992-93. In that same year, expenditures for
education, health and welfare, and public safety amounted to approximately
49%, 30%, and 11%, respectively, of total expenditures from the General
Revenue Fund.
The State's sales and use tax (6%) currently accounts for the State's single
largest source of tax receipts. Slightly less than 10% of the State's sales
and use tax is designated for local governments and is distributed to the
respective counties in which collected for such use by such counties and the
municipalities therein. In addition to this distribution, local governments
may (by referendum) assess a 0.5% or a 1.0% discretionary sales tax within
their county. Proceeds from this local option sales tax are earmarked for
funding local infrastructure programs and acquiring land for public recreation
or conservation or protection of natural resources as provided under Florida
law. Certain charter counties have other taxing powers in addition, and
non-consolidated counties with a population in excess of 800,000 may levy a
local option sales tax to fund indigent health care. It alone cannot exceed
0.5% and when combined with the infrastructure surtax cannot exceed 1.0%. For
the fiscal year ended June 30, 1993, sales and use tax receipts (exclusive of
the tax on gasoline and special fuels) totalled $9,426.0 million, an increase
of 12.5% over fiscal year 1991-92.
The second largest source of State tax receipts is the tax on motor fuels.
However, these revenues are almost entirely dedicated trust funds for specific
purposes and are not included in the State's General Revenue Fund.
The State imposes an alcoholic beverage wholesale tax (excise tax) on beer,
wine, and liquor. This tax is one of the State's major tax sources, with
revenues totalling $442.2 million in fiscal year ending June 30, 1993.
Alcoholic beverage tax receipts declined 1.6% over the previous year. The
revenues collected from this tax are deposited into the State's General
Revenue Fund.
The State imposes a corporate income tax. All receipts of the corporate income
tax are credited to the General Revenue Fund. For the fiscal year ended June
30, 1993, receipts from this source were $846.6 million, an increase of 5.6%
from fiscal year 1991-92.
The State imposes a documentary stamp tax on deeds and other documents
relating to realty, corporate shares, bonds, certificates of indebtedness,
promissory notes, wage assignments, and retail charge accounts. The
documentary stamp tax collections totaled $639.0 million during fiscal year
1992-93, a 27.0% increase from the previous fiscal year. Beginning in fiscal
year 1992-93, 71.29% of these taxes are to be deposited to the General Revenue
Fund.
The State imposes a gross receipts tax on electric, natural gas, and
telecommunications services. All gross receipts utilities tax collections are
credited to the State's Public Education Capital Outlay and Debt Service Trust
Fund. In fiscal year 1992-93, this amounted to $447.9 million.
The State imposes an intangible personal property tax on stocks, bonds,
including bonds secured by liens in Florida real property, notes, governmental
leaseholds, and certain other intangibles not secured by a lien on Florida
real property. The annual rate of tax is 2 mils. Second, the State imposes a
non-recurring 2 mil tax on mortgages and other obligations secured by liens on
Florida real property. In fiscal year 1992-93, total intangible personal
property tax collections were $783.4 million, a 33% increase over the prior
year. Of the tax proceeds, 66.5% are distributed to the General Revenue Fund.
The State began its own lottery in 1988. State law requires that lottery
revenues be distributed 50% to the public in prizes, 38% for use in enhancing
education, and the balance, 12.0% for costs of administering the lottery.
Fiscal year 1992-93 lottery ticket sales totalled $2.13 billion, providing
education with $810.4 million.
The State's severance tax applies to oil, gas, and sulphur production, as well
as the severance of phosphate rock and other solid minerals. Total collections
from severance taxes total $64.5 million during fiscal year 1992-93, down 4.0%
from the previous year. Currently, 60.0% of this amount is transferred to the
General Revenue Fund.
The State has continuously been dependent on the highly cyclical construction
and construction related manufacturing industries. While that dependency has
decreased, the State is still somewhat at the mercy of the construction and
construction related manufacturing industries. The construction industry is
driven to a great extent by the State's rapid growth in population. There can
be no assurance that population growth will in fact continue throughout the
1990's in which case there could be an adverse impact on the State's economy
through the loss of construction and construction related manufacturing jobs.
Also, while interest rates remain low currently, an increase in interest rates
could significantly adversely impact the financing of new construction within
the State, thereby adversely impacting unemployment and other economic factors
within the State. In addition, available commercial office space has tended to
remain high over the past few years. So long as this glut of commercial rental
space continues, construction of this type of space will likely continue to
remain slow.
At the end of fiscal 1993, approximately $5.61 billion in principal amount of
debt secured by the full faith and credit of the State was outstanding. In
addition, since July 1, 1993, the State issued about $873.0 million in
principal amount of full faith and credit bonds.
The State Constitution and statutes mandate that the State budget, as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. If the Governor or Comptroller
believe a deficit will occur in any State fund, by statute, he must certify
his opinion to the Administrative Commission, which then is authorized to
reduce all State agency budgets and releases by a sufficient amount to prevent
a deficit in any fund. Additionally, the State Constitution prohibits issuance
of State obligations to fund State operations.
Currently under litigation are several issues relating to State actions or
State taxes that put at risk substantial amounts of General Revenue Fund
monies. Accordingly, there is no assurance that any of such matters,
individually or in the aggregate, will not have a material adverse affect on
Florida's financial position.
Florida law provides preferential tax treatment to insurers who maintain a
home office in the State. Certain insurers challenged the constitutionality of
this tax preference and sought a refund of taxes paid. Recently, the State
Supreme Court ruled in favor of the State. This case and others, along with
pending refund claims, total about $150 million.
Florida maintains a bond rating of Aa and AA from Moody's Investors Service
and Standard & Poor's Corporation, respectively, on the majority of its
general obligation bonds, although the rating of a particular series of
revenue bonds relates primarily to the project, facility, or other revenue
sources from which such series derives funds for repayment. While these
ratings and some of the information presented above indicate that Florida is
in satisfactory economic health, there can be no assurance that there will not
be a decline in economic conditions or that particular Municipal Obligations
purchased by the Fund will not be adversely affected by any such changes.
The sources for the information presented above include official statements
and financial statements of the State of Florida. While the Sponsor has not
independently verified this information, the Sponsor has no reason to believe
that the information is not correct in all material respects.
Tax Status. For a discussion of the Federal tax status of income earned on
Florida IM-IT Trust units, see "Other Matters--Federal Tax Status".
The Bonds were accompanied by opinions of Bond Counsel to the respective
issuers thereof to the effect that the Bonds were exempt from the Florida
intangibles tax. Neither the Sponsor nor its counsel have independently
reviewed such opinions or examined the Bonds to be deposited in and held by
the Florida IM-IT Trust and have assumed the correctness as of the date of
deposit of the opinions of Bond Counsel.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
law:
For Florida state income tax purposes, the Florida IM-IT Trust will not be
subject to the Florida income tax imposed by Chapter 220, Florida Statutes. In
addition, Florida does not impose any income taxes at the local level.
Because Florida does not impose an income tax on individuals, non-corporate
Unitholders residing in Florida will not be subject to any Florida income
taxation on income realized by the Florida IM-IT Trust. Any amounts paid to
the Florida IM-IT Trust or to non-corporate Unitholders residing in Florida
under an insurance policy issued to the Florida IM-IT Trust or the Sponsor
which represent maturing interest on defaulted obligations held by the Trustee
will not be subject to the Florida income tax imposed by Chapter 220, Florida
Statutes.
Corporate Unitholders with commercial domiciles in Florida will be subject to
Florida income or franchise taxation on income realized by the Florida IM-IT
Trust and on payments of interest pursuant to any insurance policy. Other
corporate Unitholders will be subject to Florida income or franchise taxation
on income realized by the Florida IM-IT Trust (or on payments of interest
pursuant to any insurance policy) only to the extent that the income realized
does not constitute "non-business income"as defined by Chapter 220.
Units will be subject to Florida estate tax only if held by Florida residents.
However, the Florida estate tax is limited to the amount of the credit for
state death taxes provided for in Section 2011 of the Internal Revenue Code.
Neither the Bonds nor the Units will be subject to the Florida ad valorem
property tax, the Florida intangibles personal property tax or Florida sales
or use tax.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit.................................... $ 58.75
Less: Estimated Annual Expense per Unit <F2>................................. $ 1.63
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 57.12
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 57.12
Divided by 12................................................................ $ 4.76
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .15867
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>...... 5.71%
Estimated Long-Term Return <F3><F4><F5>....................................... 5.73%
Initial Distribution (November 1994).......................................... $ 3.97
Estimated Normal Distribution per Unit <F5>................................... $ 4.76
Purchased Interest <F6>....................................................... $ 9.85
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
November 15, 1994
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.34
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 $59.09. Estimated Annual Expense
per Unit (excluding insurance) will be increased to $1.97; and estimated net
annual interest income per Unit will remain the same as shown. See "
Estimated Current Returns and Estimated Long-Term Returns."Based on the
outstanding principal amount of Securities as of the Date of Deposit, the
Trustee's annual fee would be $3,018.
<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 (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 the 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
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>
<TABLE>
FLORIDA INSURED MUNICIPALS INCOME TRUST
SERIES 84 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of Redemption Florida
Principal<F1> either Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F4>
<S> <C> <C> <C> <C>
$ 480,000 Hernando County, Florida, Criminal Justice Complex Financing
Project, Revenue Bonds (FGIC Insured) 7.65% Due 7/1/2016 .... AAA $ 558,475
200,000 School Board of Seminole County, Florida, Certificates of
Participation, Master Lease Program, Series 1994A (MBIA 2004 @ 102
Insured) #6.125% Due 7/1/2019 ............................... AAA 2015 @ 100 S.F. 196,618
500,000 Orange County, Florida, Tourist Development Tax Refunding
Revenue Bonds, Series 1992B (AMBAC Indemnity Insured) #6.00% 2002 @ 100
Due 10/1/2021 ................................................. AAA 2020 @ 100 S.F. 483,775
300,000 Clay County, Florida, Utilities System Revenue Bonds, Series 2003 @ 102
1993A (FGIC Insured) #5.00% Due 11/1/2023 ................... AAA 2018 @ 100 S.F. 243,033
500,000 Port St. Lucie, Florida, Utility System Revenue Bonds, Series 2004 @ 100
1994 (FGIC Insured) #6.00% Due 9/1/2024 .................... AAA 2015 @ 100 S.F. 483,675
500,000 Martin County, Florida, Consolidated Utilities System
Refunding and Improvement Revenue Bonds, Series 1994 (FGIC
Insured)** #6.00% Due 10/1/2024 ............................. AAA 2004 @ 102 483,000
100,000 Florida State Municipal Power Agency, Revenue Refunding Bonds
(Stanton II Project) Series 1993 (AMBAC Indemnity Insured) 2003 @ 100
#4.50% Due 10/1/2027 ......................................... AAA 2017 @ 100 S.F. 73,248
500,000 South Broward Hospital District (Florida) Hospital Revenue and
Revenue Refunding Bonds, Series 1993 (AMBAC Indemnity 2003 @ 102
Insured) #5.50% Due 5/1/2028 ................................ AAA 2023 @ 100 S.F. 441,505
$ 3,080,000 $ 2,963,329
</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".
NEW JERSEY IM-IT INTERMEDIATE LADDERED MATURITY TRUST
General. The New Jersey IM-IT Intermediate Laddered Maturity Trust consists of
8 issues of Securities. Three of the Bonds in the New Jersey IM-IT
Intermediate Laddered Maturity Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total New Jersey IM-IT Intermediate Laddered Maturity Trust) as follows:
Health Care, 2 (33%); Certificates of Participation, 1 (20%); General Purpose,
1 (20%); Higher Education, 1 (17%) and General Obligations, 3 (10%). No Bond
issue has received a provisional rating. All of the obligations in the New
Jersey 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 6.65 years.
Risk Factors. As described above, the New Jersey IM-IT Intermediate Laddered
Maturity Trust consists of a portfolio of Bonds. The Trust is therefore
susceptible to political, economic or regulatory factors affecting issuers of
the Bonds. The following information provides only a brief summary of some of
the complex factors affecting the financial situation in New Jersey (the "
State") and is derived from sources that are generally available to
investors and is believed to be accurate. It is based in part on information
obtained from various State and local agencies in New Jersey. No independent
verification has been made of any of the following information.
New Jersey is the ninth largest state in population and the fifth smallest in
land area. With an average of 1,062 people per square mile, it is the most
densely populated of all the states. The state's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries,
supplemented by rural areas with selective commercial agriculture.
Historically, New Jersey's average per capita income has been well above the
national average, and in 1993 the State ranked second among states in per
capita personal income ($26,967).
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 6.0%
in August 1994, which is lower than the national average of 6.1% in August
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 appropriation for the debt service obligation on such
outstanding indebtedness is $103.5 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 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 $937.4 million.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes (consisting
of $1.5 billion in sales and use taxes and $1.3 billion in income taxes), the
biggest tax hike in New Jersey history. There can be no assurance that
receipts and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the increase
in the State's sales and use tax rate from 6% to 7% and the elimination of
exemptions for certain products and services not previously subject to the
tax, such as telephone calls, paper products (which has since been
reinstated), soaps and detergents, janitorial services, alcoholic beverages
and cigarettes. At the time of enactment, it was projected that these taxes
would raise approximately $1.5 billion in additional revenue. Projections and
estimates of receipts from sales and use taxes, however, have been subject to
variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the form of
an increased state income tax on individuals. At the time of enactment, it was
projected that this increase would raise approximately $1.3 billion in
additional income taxes to fund a new school aid formula, a new homestead
rebate program and state assumption of welfare and social services costs.
Projections and estimates of receipts from income taxes, however, have also
been subject to variance in recent fiscal years. Under the legislation, income
tax rates increased from their previous range of 2% to 3.5% to a new range of
2% to 7%, with the higher rates applying to married couples with incomes
exceeding $70,000 who file joint returns, and to individuals filing single
returns with incomes of more than $35,000.
The Florio administration had contended that the income tax package will help
reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation the State will assume
approximately $289 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition,
under the new formula for funding school aid, an extra $1.1 billion 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%. Effective January 1, 1994, an across the board 5% reduction in the
income tax rates was enacted and effective January 1, 1995 further reductions
ranging from 1% up to 10% in income tax rates will take effect.
On June 30, 1993, 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.
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 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 role in a consent order concerning the construction of a resource
facility in Passaic County, actions taken by the New Jersey Bureau of
Securities against an individual, the State's actions regarding alleged
chromium contamination of State-owned property in Hudson County, the issuance
of emergency redirection orders and a draft permit by the Department of
Environmental Protection and Energy, 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 the constitutionality of annual A-901 hazardous and solid
waste licensure renewal fees collected by the Department of Environmental
Protection and Energy. Adverse judgments in these and other matters could have
the potential for either a significant loss of revenue or a significant
unanticipated expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The State is unable to estimate its exposure for
these claims.
Debt Ratings. For many years, both Moody's Investors Service, Inc. and
Standard and Poor's Corporation rated New Jersey general obligation bonds Aaa
and "AAA", respectively. On July 3, 1991, however, Standard and Poor's
Corporation downgraded New Jersey general obligation bonds to "AA+."
On June 4, 1992, Standard and Poor's Corporation placed New Jersey general
obligation bonds on CreditWatch with negative implications, citing as its
principal reason for its caution the unexpected denial by the federal
government of New Jersey's request for $450 million in retroactive Medicaid
payments for psychiatric hospitals. These funds were critical to closing a $1
billion gap in the State's $15 billion budget for fiscal year 1992 which ended
on June 30, 1992. Under New Jersey state law, the gap in the budget 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. However, on July
27, 1994, Standard and Poor's announced that it was changing the State's
outlook from negative to stable due to a brightening of the State's prospects
as a result of Governor Whitman's effort to trim spending and cut taxes,
coupled with an improving economy. Standard and Poor's reaffirmed its "
AA+"rating at the same time.
On August 24, 1992, Moody's Investors Service Inc. downgraded New Jersey
general obligation bonds to "Aa1,"stating that the reduction
reflected a developing pattern of reliance on nonrecurring measures to achieve
budgetary balance, four years of financial operations marked by revenue
shortfalls and operating deficits, and the likelihood that serious financial
pressures will persist. On August 5, 1994, Moody's reaffirmed its "Aa1"
rating, citing on the positive side New Jersey's broad-based economy, high
income levels, history of maintaining a positive financial position and
moderate (albeit rising) debt ratios, and on the negative side, a continued
reliance on one-time revenue and a dependence on pension-related savings to
achieve budgetary balance.
Tax Status. For a discussion of the Federal tax status of income earned on New
Jersey IM-IT Intermediate Laddered Maturity 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:
The New Jersey IM-IT Intermediate Laddered Maturity Trust will be recognized
as a trust and not an association taxable as a corporation. The New Jersey
IM-IT Intermediate Laddered Maturity Trust will not be subject to the New
Jersey Corporation Business Tax or the New Jersey Corporation Income Tax.
With respect to the non-corporate Unitholders who are residents of New Jersey,
the income of the New Jersey IM-IT Intermediate Laddered Maturity 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 Intermediate Laddered Maturity Trust and
distributed to such Unitholder. Any proceeds paid under the insurance policy
issued to the Trustee of the New Jersey IM-IT Intermediate Laddered Maturity
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.
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 Intermediate
Laddered Maturity 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 Intermediate Laddered Maturity 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.
Units of the New Jersey IM-IT Intermediate Laddered Maturity 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.
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 Intermediate Laddered Maturity 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 Intermediate Laddered Maturity 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 Intermediate Laddered Maturity Trust with respect to
the Bonds or under individual policies obtained by issuers of Bonds which
represent maturing interest or maturing principal on defaulted obligations
held by the Trustee will be included in its entire net income for purposes of
the New Jersey Corporation Business Tax or New Jersey Corporation Income Tax
if, and to the same extent as, such interest or proceeds would have been so
included if paid by the issuer of the defaulted obligations.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit.................................... $ 50.35
Less: Estimated Annual Expense per Unit <F1>................................. $ 2.08
Less: Annual Premium on Portfolio Insurance per Unit......................... $ .07
Estimated Net Annual Interest Income per Unit................................ $ 48.20
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 48.20
Divided by 12................................................................ $ 4.02
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .13388
Estimated Current Return Based on Public Offering Price <F2><F3><F4>.......... 4.68%
Estimated Long-Term Return <F2><F3><F4>....................................... 4.79%
Initial Distribution (November 1994).......................................... $ 3.35
Estimated Normal Distribution per Unit <F4>................................... $ 4.02
Purchased Interest <F5>....................................................... $ 8.05
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
November 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 (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 the 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
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>
<TABLE>
NEW JERSEY IM-IT INTERMEDIATE LADDERED MATURITY
SERIES 4 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
New Jersey
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 The Board of Education of the City of Pleasantville, County of
Atlantic, New Jersey, Certificates of Participation (Bank
Qualified) MBIA Insured
#4.90% Due 3/1/1999 ......................................... AAA $ 601,044
205,000 State of New Jersey, General Obligation Refunding Bonds,
Series D
#100M - 5.10% Due 2/15/2000 AA+ 100,375
#105M - 5.40% Due 2/15/2003 ................................. AA+ 105,394
500,000 New Jersey Economic Development Authority, Revenue Bonds
(RWJ Health Care Corp. at Hamilton Obligated Group Project)
Series 1994 (FSA Insured)
5.20% Due 7/1/2000 .......................................... AAA 503,060
600,000 New Jersey Economic Development Authority, Market Transition
Facility Senior Lien Revenue Bonds, Series 1994A (MBIA
Insured)
#5.25% Due 7/1/2001 ......................................... AAA 603,888
495,000 New Jersey Educational Facilities Authority, Revenue Bonds,
Trenton State College Issue, Series 1994B (AMBAC Indemnity
Insured)
#5.10% Due 7/1/2002 ......................................... AAA 490,594
100,000 The Borough of Stanhope, County of Sussex, New Jersey, General
Obligation Water Bonds, Series 1994 (Bank Qualified) MBIA
Insured
5.625% Due 9/1/2002 ......................................... AAA 102,446
500,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds (St. Peters Medical Center) Series F (MBIA Insured)
#4.50% Due 7/1/2003 ......................................... AAA 465,860
$ 3,000,000 $ 2,972,661
</TABLE>
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond Insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
PENNSYLVANIA IM-IT TRUST
General. The Pennsylvania IM-IT Trust consists of 8 issues of Securities. Two
of the Bonds in the Pennsylvania IM-IT Trust are general obligations of the
governmental entities issuing them and are backed by the taxing power thereof.
The remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Pennsylvania IM-IT Trust) as follows: Health Care, 2 (28%); General
Purpose, 1 (16%); Industrial Revenue, 1 (16%); Retail Electric/Gas, 1 (16%);
Water and Sewer, 1 (16%) and General Obligations, 2 (8%). No Bond issue has
received a provisional rating.
Risk Factors. Investors should be aware of certain factors that might affect
the financial conditions of the Commonwealth of Pennsylvania. Pennsylvania
historically has been identified as a heavy industry state although that
reputation has changed recently as the industrial composition of the
Commonwealth diversified when the coal, steel and railroad industries began to
decline. A more diversified economy was necessary as the traditionally strong
industries in the Commonwealth declined due to a long-term shift in jobs,
investment and workers away from the northeast part of the nation. The major
sources of growth in Pennsylvania are in the service sector, including trade,
medical and the health services, education and financial institutions.
Pennsylvania's agricultural industries are also an important component of the
Commonwealth's economic structure, accounting for more than $3.6 billion in
crop and livestock products annually, while agribusiness and food related
industries support $39 billion in economic activity annually.
Non-agricultural employment in the Commonwealth declined by 5.1 percent during
the recessionary period from 1980 to 1983. In 1984, the declining trend was
reversed as employment grew by 2.9 percent over 1983 levels. From 1983 to
1990, Commonwealth employment continued to grow each year, increasing an
additional 14.3 percent. For the last three years, unemployment in the
Commonwealth has declined 1.2 percent. The growth in employment experienced in
Pennsylvania is comparable to the growth in employment in the Middle Atlantic
Region which has occurred during this period.
Back to back recessions in the early 1980s reduced the manufacturing sector's
employment levels moderately during 1980 and 1981, sharply during 1982, and
even further in 1983. Non-manufacturing employment has increased steadily
since 1980 to its 1993 level of 81.6 percent of total Commonwealth employment.
Consequently, manufacturing employment constitutes a diminished share of total
employment within the Commonwealth. Manufacturing, contributing 18.4 percent
of 1993 non-agricultural employment, has fallen behind both the services
sector and the trade sector as the largest single source of employment within
the Commonwealth. In 1993 the services sector accounted for 29.9 percent of
all non-agricultural employment while the trade sector accounted for 22.4
percent.
From 1983 to 1989, Pennsylvania's annual average unemployment rate dropped
from 11.8 percent to 4.5 percent, falling below the national rate in 1986 for
the first time in over a decade. Pennsylvania's annual average unemployment
rate remained below the national average from 1986 until 1990. Slower economic
growth caused the unemployment rate in the Commonwealth to rise to 6.9 percent
in 1991 and 7.5 percent in 1992. The resumption of faster economic growth
resulted in a decrease in the Commonwealth's unemployment rate to 7.1 percent
in 1993. As of July 1994, the seasonally adjusted unemployment rate for the
Commonwealth was 6.5 percent compared to 6.1 percent for the United States.
The five year period from fiscal 1989 through fiscal 1993 was marked by public
health and welfare costs growing at a rate double the growth rate for all the
state expenditures. Rising caseloads, increased utilization of services and
rising prices joined to produce the rapid rise of public health and welfare
costs at a time when a national recession caused tax revenues to stagnate and
even decline. During the period from fiscal 1989 through fiscal 1993, public
health and welfare costs rose by an average annual rate of 10.9 percent while
tax revenues were growing at an average annual rate of 5.5 percent.
Consequently, spending on other budget programs was restrained to a growth
rate below 5.0 percent and sources of revenues other than taxes became larger
components of fund revenues. Among those sources are transfers from other
funds and hospital and nursing home pooling of contributions to use as federal
matching funds.
Tax revenues declined in fiscal 1991 as a result of the recession in the
economy. A $2.7 billion tax increase enacted for fiscal 1992 brought financial
stability to the General Fund. That tax increase included several taxes with
retroactive effective dates which generated some one-time revenues during
fiscal 1992. The absence of those revenues in fiscal 1993 contributed to the
decline in tax revenues shown for fiscal 1993.
It should be noted that the creditworthiness of obligations issued by local
Pennsylvania issuers may be unrelated to the creditworthiness of obligations
issued by the Commonwealth of Pennsylvania, and there is no obligation on the
part of the Commonwealth to make payment on such local obligations in the
event of default.
Financial information for the principal operating funds of the Commonwealth is
maintained on a budgetary basis of accounting. A budgetary basis of accounting
is used for the purpose of ensuring compliance with the enacted operating
budget and is governed by applicable statutes of the Commonwealth and by
administrative procedures. The Commonwealth also prepares annual financial
statements in accordance with generally accepted accounting principles ("
GAAP"). The budgetary basis financial information maintained by the
Commonwealth to monitor and enforce budgetary control is adjusted at fiscal
year-end to reflect appropriate accruals for financial reporting in conformity
with GAAP.
Fiscal 1991 Financial Results. GAAP Basis: During fiscal 1991 the General Fund
experienced an $861.2 million operating deficit resulting in a fund balance
deficit of $980.9 million at June 30, 1991. The operating deficit was a
consequence of the effect of a national recession that restrained budget
revenues and pushed expenditures above budgeted levels. At June 30, 1991, a
negative unreserved-undesignated balance of $1,146.2 million was reported.
During fiscal 1991 the balance then available in the Tax Stabilization Reserve
Fund was used to maintain vital state spending.
Budgetary Basis: A deficit of $453.6 million was recorded by the General Fund
at June 30, 1991. The deficit was a consequence of higher-than-budgeted
expenditures and lower-than-estimated revenues during the fiscal year brought
about by the national economic recession that began during the fiscal year.
The budgetary basis deficit at June 30, 1991 was carried into the 1992 fiscal
year and funded in the fiscal 1992 budget. A number of actions were taken
throughout the fiscal year by the Commonwealth to mitigate the effects of the
recession on budget revenues and expenditures. Actions taken, together with
normal appropriation lapses, produced $871 million in expenditure reductions
and increases in revenues and other transfers for the fiscal year. The most
significant of these actions were a $214 million transfer from the
Pennsylvania Industrial Development Authority, a $134 million transfer from
the Tax Stabilization Reserve Fund, and a pooled financing program to match
federal Medicaid funds replacing $145 million of state funds.
Fiscal 1992 Financial Results. GAAP Basis: During fiscal 1992 the General Fund
reported a $1.1 billion operating surplus. This operating surplus was achieved
through legislated tax rate increases and tax base broadening measures enacted
in August 1991 and by controlling expenditures through numerous cost reduction
measures implemented throughout the fiscal year. As a result of the fiscal
1992 operating surplus, the fund balance increased to $87.5 million and the
unreserved-undesignated deficit dropped to $138.6 million from its fiscal 1991
level of $1,146.2 million.
Budgetary Basis: Eliminating the budget deficit carried into fiscal 1992 from
fiscal 1991 and providing revenues for fiscal 1992 budgeted expenditures
required tax revisions that were estimated to have increased receipts for the
1992 fiscal year by over $2.7 billion. Total revenues for the fiscal year were
$14,516.8 million, a $2,654.5 million increase over cash revenues during
fiscal 1991. Originally based on forecasts for an economic recovery, the
budget revenue estimates were revised downward during the fiscal year to
reflect continued recessionary economic activity. Largely due to the tax
revisions enacted for the budget, corporate tax receipts totalled $3,761.2
million, up from $2,656.3 million in fiscal 1991, sales tax receipts increased
by $302 million to $4,499.7 million, and personal income tax receipts totalled
$4,807.4 million, an increase of $1,443.8 million over receipts in fiscal
1991.
As a result of the lowered revenue estimate during the fiscal year, increased
emphasis was placed on restraining expenditure growth and reducing expenditure
levels. A number of cost reductions were implemented during the fiscal year
that contributed to $296.8 million of appropriation lapses. These
appropriation lapses were responsible for the $8.8 million surplus at fiscal
year-end, after accounting for the required ten percent transfer of the
surplus to the Tax Stabilization Reserve Fund.
Spending increases in the fiscal 1992 budget were largely accounted for by
increases for education, social services and corrections programs.
Commonwealth funds for the support of public schools were increased by 9.8
percent to provide a $438 million increase to $4.9 billion for fiscal 1992.
The fiscal 1992 budget provided additional funds for basic and special
education and included provisions designed to help restrain the annual
increase of special education costs, an area of recent rapid cost increases.
Child welfare appropriations supporting county operated child welfare programs
were increased $67 million, more than 31.5 percent over fiscal 1991. Other
social service areas such as medical and cash assistance also received
significant funding increases as costs rose quickly as a result of the
economic recession and high inflation rates of medical care costs. The costs
of corrections programs, reflecting the marked increase in the prisoner
population, increased by 12 percent. Economic development efforts, largely
funded from bond proceeds in fiscal 1991, were continued with General Fund
appropriations for fiscal 1992.
The budget included the use of several Medicaid pooled financing transactions.
These pooling transactions replaced $135 million of Commonwealth funds,
allowing total spending under the budget to increase by an equal amount.
Fiscal 1993 Financial Results. GAAP Basis: The fund balance of the General
Fund increased by $611.4 million during the fiscal year, led by an increase in
the unreserved balance of $576.8 million over the prior fiscal year balance.
At June 30, 1993, the fund balance totalled $698.9 and the
unreserved/undesignated balance totalled $64.4 million. A continuing recovery
of the Commonwealth's financial condition from the effects of the national
economic recession of 1990 and 1991 is demonstrated by this increase in the
balance and a return to a positive unreserved/undesignated balance. The
previous positive unreserved/undesignated balance was recorded in fiscal 1987.
For the second consecutive fiscal year the increase in the
unreserved/undesignated balance exceeded the increase recorded in the
budgetary basis unappropriated surplus during the fiscal year.
Budgetary Basis: The 1993 fiscal year closed with revenues higher than
anticipated and expenditures about as projected, resulting in an ending
unappropriated balance surplus (prior to the ten percent transfer to the Tax
Stabilization Reserve Fund) of $242.3 million, slightly higher than estimated
in May 1993. Cash revenues were $41.5 million above the budget estimate and
totalled $14.633 billion representing less than a one percent increase over
revenues for the 1992 fiscal year. A reduction in the personal income tax rate
in July 1992 and the one-time receipt of revenues from retroactive corporate
tax increases in fiscal 1992 were responsible, in part, for the low revenue
growth in fiscal 1993.
Appropriations less lapses totalled $13.870 billion representing a 1.1 percent
increase over expenditures during fiscal 1992. The low growth in spending is a
consequence of a low rate of revenue growth, significant one-time expenses
during fiscal 1992, increased tax refund reserves to cushion against adverse
decisions on pending litigations, and the receipt of federal funds for
expenditures previously paid out of Commonwealth funds.
By state statute, ten percent of the budgetary basis unappropriated surplus at
the end of a fiscal year is to be transferred to the Tax Stabilization Reserve
Fund. The transfer for the fiscal 1993 balance was $24.2 million. The
remaining unappropriated surplus of $218.0 million was carried forward into
the 1994 fiscal year.
Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth revenues during
the fiscal year totalled $15,210.7 million, $38.6 million above the fiscal
year estimate, and 3.9 percent over Commonwealth revenues during the previous
fiscal year. The sales tax was an important contributor to the higher than
estimated revenues. Collections from the sales tax were $5.124 billion, a 6.1
percent increase from the prior fiscal year and $81.3 million above estimate.
The strength of collections from the sales tax offset the lower than budgeted
performance of the personal income tax which ended the fiscal year $74.4
million below estimate. The shortfall in the personal income tax was largely
due to shortfalls in income not subject to withholding such as interest,
dividends and other income. Tax refunds in fiscal 1994 were reduced
substantially below the $530 million amount provided in fiscal 1993. The
higher fiscal 1993 amount and the reduced fiscal 1994 amount occurred because
reserves of approximately $160 million were added to fiscal 1993 tax refunds
to cover potential payments if the Commonwealth lost litigation known as
Philadelphia Suburban Corp v. Commonwealth. Those reserves were carried into
fiscal 1994 until the litigation was decided in the Commonwealth's favor in
December 1993 and $147.3 million of reserves for tax refunds were released.
Expenditures, excluding pooled financing expenditures and net of all fiscal
1994 appropriation lapses, totalled $14,934.4 million representing a 7.2
percent increase over fiscal 1993 expenditures. Medical assistance and
corrections spending contributed to the rate of spending growth for the fiscal
year.
The Commonwealth maintained an operating balance on a budgetary basis for
fiscal 1994 producing a fiscal year ending unappropriated surplus of $335.8
million. By state statute, ten percent ($33.6 million) of that surplus will
be transferred to the Tax Stabilization Reserve Fund and the remaining balance
will be carried over into the fiscal 1995 fiscal year.
Fiscal 1995 Budget. The fiscal 1995 budget was approved by the Governor on
June 16, 1994 and provided for $15,652.9 million of appropriations from
Commonwealth funds, an increase of 3.9 percent over appropriations, including
supplemental appropriations, for fiscal 1994. Medical assistance expenditures
represent the largest single increase in the budget ($221 million)
representing a nine percent increase over the prior fiscal year. The budget
includes a reform of the state-funded public assistance program that added
certain categories of eligibility to the program but also limited the
availability of such assistance to other eligible persons. Education
subsidies to local school districts were increased by $132.2 million to
continue the increased funding for the poorest school districts in the state.
The budget also includes tax reductions totalling an estimated $166.4 million.
Low income working families will benefit from an increase of the dependent
exemption to $3,000 from $1,500 for the first dependent and from $1,000 for
all additional dependents. A reduction to the corporate net income tax rate
from 12.25 percent to 9.99 percent to be phased in over a period of four years
was enacted. A net operating loss provision has been added to the corporate
net income tax and will be phased in over three years with a $500,000 per firm
annual cap on losses used to offset profits. Several other tax changes to the
sales tax, the inheritance tax and the capital stock and franchise tax were
also enacted.
The fiscal 1995 budget projects a $4 million fiscal year-end unappropriated
surplus. No assumption as to appropriation lapses in fiscal 1995 has been made.
All outstanding general obligation bonds of the Commonwealth are rated AA- by
S&P and A1 by Moody's.
Any explanation concerning the significance of such ratings must be obtained
from the rating agencies. There is no assurance that any ratings will continue
for any period of time or that they will not be revised or withdrawn.
The City of Philadelphia ("Philadelphia") is the largest city in the
Commonwealth, with an estimated population of 1,585,577 according to the 1990
Census. Philadelphia functions both as a city of the first class and a county
for the purpose of administering various governmental programs.
For the fiscal year ending June 30, 1991, Philadelphia experienced a
cumulative General Fund balance deficit of $153.5 million. The audit findings
for the fiscal year ending June 30, 1992, place the Cumulative General Fund
balance deficit at $224.9.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class
cities in remedying fiscal emergencies was enacted by the General Assembly and
approved by the Governor in June, 1991. PICA is designed to provide assistance
through the issuance of funding debt to liquidate budget deficits and to make
factual findings and recommendations to the assisted city concerning its
budgetary and fiscal affairs. An intergovernmental cooperation agreement
between Philadelphia and PICA was approved by City Council on January 3, 1992,
and approved by the PICA Board and signed by the Mayor on January 8, 1992. At
this time, Philadelphia is operating under a five year fiscal plan approved by
PICA on April 6, 1992. Full implementation of the five year plan was delayed
due to labor negotiations that were not completed until October 1992, three
months after the expiration of the old labor contracts. The terms of the new
labor contracts are estimated to cost approximately $144.0 million more than
what was budgeted in the original five year plan. An amended five year plan
was approved by PICA in May 1993. The audit findings show a surplus of
approximately $3 million for the fiscal year ending June 30, 1993. The fiscal
1994 budget projects no deficit and a balanced budget for the year ending June
30, 1994. The Mayor's latest update of the five year financial plan was
approved by PICA on May 2, 1994.
In June 1992, PICA issued $474,555,000 of its Special Tax Revenue Bonds to
provide financial assistance to Philadelphia and to liquidate the cumulative
General Fund balance deficit. PICA issued $643,430,000 in July 1993 and
$178,675,000 in August 1993 of Special Tax Revenue Bonds to refund certain
general obligation bonds of the City and to fund additional capital projects.
As of the date hereof, the ratings on the City's long-term obligations
supported by payments from the City's General Fund are rated Ba by Moody's and
BB by S&P. Any explanation concerning the significance of such ratings must be
obtained from the rating agencies. There is no assurance that any ratings will
continue for any period of time or that they will not be revised or withdrawn.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of bonds and does not
purport to be a complete or exhaustive description of all adverse conditions
to which the issuers of the Bonds in the Pennsylvania 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 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 Pennsylvania 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
Pennsylvania IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Saul, Ewing, Remick & Saul, counsel to the Fund for
Pennsylvania tax matters, under existing law:
Units evidencing fractional undivided interest in the Pennsylvania IM-IT
Trust, which are represented by obligations issued by the Commonwealth of
Pennsylvania, any public authority, commission, board or other agency created
by the Commonwealth of Pennsylvania, any political subdivision of the
Commonwealth of Pennsylvania or any public authority created by any such
political subdivision are not taxable under any of the personal property taxes
presently in effect in Pennsylvania;
distributions of interest income to Unitholders that would not be taxable it
received directly by a Pennsylvania resident are not subject to personal
income tax under the Pennsylvania Tax Reform Code of 1971; nor will such
interest be taxable under the Philadelphia School District Investment Income
Tax imposed on Philadelphia resident individuals;
a Unitholder will have a taxable event under the Pennsylvania state and local
income taxes referred to in the preceding paragraph upon the redemption or
sale of his Units. Units will be taxable under the Pennsylvania inheritance
and estate taxes;
a Unitholder which is a corporation will have a taxable event under the
Pennsylvania Corporate Net Income Tax when it redeems or sells its Units.
Interest income distributed to Unitholders which are corporations is not
subject to Pennsylvania Corporate Net Income Tax or Mutual Thrift Institutions
Tax. However, banks, title insurance companies and trust companies may be
required to take the value of the Units into account in determining the
taxable value of their shares subject to the Shares Tax;
under Act No. 68 of December 3, 1993, gains derived by the Fund from the sale,
exchange or other disposition of Bonds may be subject to Pennsylvania personal
or corporate income taxes. Those gains which are distributed by the Fund to
Unitholders who are individuals may be subject to Pennsylvania Personal Income
Tax. For Unitholders which are corporations, the distributed gains may be
subject to Corporate Net Income Tax or Mutual Thrift Institutions Tax. Gains
which are not distributed by the Fund may nevertheless be taxable to
Unitholders if derived by the Fund from the sale, exchange or other
disposition of Bonds issued on or after February 1, 1994. Gains which are not
distributed by the Fund will remain nontaxable to Unitholders if derived by
the Fund from the sale, exchange or other disposition of Bonds issued prior to
February 1, 1994;
any proceeds paid under insurance policies issued to the Trustee or obtained
by the issuers of the Bonds with respect to the Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be excludable from
Pennsylvania 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 Fund is not taxable as a corporation under Pennsylvania tax laws
applicable to corporations.
On December 3, 1993, changes to Pennsylvania laws affecting taxation of income
and gains from the sale of Commonwealth of Pennsylvania and local obligations
were enacted. Among these changes was the repeal of the exemption from tax of
gains realized upon the sale or other disposition of such obligations. The
Pennsylvania Department of Revenue has issued proposed regulations concerning
these changes. The opinions expressed above are based on our analysis of the
law and proposed regulations but are subject to modification upon review of
final regulations or other guidance that may be issued by the Department of
Revenue or future court decisions.
In rendering its opinion, Saul, Ewing, Remick & Saul has not, for timing
reasons, made an independent review of proceedings related to the issuance of
the Bonds. It has relied on Van Kampen Merritt Inc. for assurance that the
Bonds have been issued by the Commonwealth of Pennsylvania or by or on behalf
of municipalities or other governmental agencies within the Commonwealth.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit.................................... $ 60.00
Less: Estimated Annual Expense per Unit <F1>................................. $ 2.09
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 57.91
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 57.91
Divided by 12................................................................ $ 4.83
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .16085
Estimated Current Return Based on Public Offering Price <F2><F3><F4>.......... 5.79%
Estimated Long-Term Return <F2><F3><F4>....................................... 5.89%
Initial Distribution (November 1994).......................................... $ 4.02
Estimated Normal Distribution per Unit <F4>................................... $ 4.83
Purchased Interest <F5>....................................................... $ 10.00
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
November 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 (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 the 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
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>
<TABLE>
PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST
SERIES 193 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of either Redemption Pennsylvania
Principal<F1> Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F4
<S> <C> <C> <C> <C>
$ 150,000 South Butler County School District (Butler County,
Pennsylvania) General Obligation Bonds, Series 1993 (FGIC 2003 @ 100
Insured) #5.50% Due 10/1/2017.................................. AAA 2013 @ 100 S.F. $ 132,974
100,000 County of Centre, Pennsylvania, General Obligation Bonds, 2003 @ 100
Series 1993A (FGIC Insured) #5.30% Due 7/1/2018............... AAA 2012 @ 100 S.F. 86,070
500,000 Lehigh County (Pennsylvania) Industrial Development Authority,
Pollution Control Revenue Refunding Bonds, Series 1992A
(Pennsylvania Power and Light Company Project) MBIA Insured
6.40% Due 11/1/2021............................................ AAA 2002 @ 102 499,610
500,000 Pennsylvania Intergovernmental Cooperation Authority, Special
Tax Revenue Refunding Bonds (City of Philadelphia Funding 2003 @ 100
Program) Series 1993A (MBIA Insured) #5.00% Due 6/15/2022...... AAA 2014 @ 100 S.F. 401,300
350,000 Blair County Hospital Authority, Hospital Revenue Bonds, Series
1992 (The Altoona Hospital Project) AMBAC Indemnity Insured) 2002 @ 102
#6.50% Due 7/1/2022............................................ AAA 2015 @ 100 S.F. 351,750
500,000 Erie County Hospital Authority (Commonwealth of Pennsylvania)
Hospital Revenue Refunding Bonds, Series 1992B (Saint Vincent 2002 @ 102
Health Center Project) MBIA Insured #6.375% Due 7/1/2022....... AAA 2014 @ 100 S.F. 494,450
500,000 City of Philadelphia, Pennsylvania, Water and Wastewater 2003 @ 102
Revenue Bonds, Series 1993 (MBIA Insured) #5.25% Due 6/15/2023 AAA 2020 @ 100 S.F. 416,035
500,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 2003 @ 102
Fourteenth Series (FSA Insured) #6.375% Due 7/1/2026........... AAA 2015 @ 100 S.F. 494,080
$ 3,100,000 $ 2,876,269
</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".
TEXAS IM-IT INTERMEDIATE LADDERED MATURITY TRUST
General. The Texas IM-IT Intermediate Laddered Maturity Trust consists of 10
issues of Securities. One of the Bonds in the Texas IM-IT Intermediate
Laddered Maturity 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 Texas IM-IT
Intermediate Laddered Maturity Trust) as follows: General Obligations, 1
(20%); Public Building, 2 (20%); Health Care, 1 (19%); Higher Education, 2
(18%); General Purpose, 2 (12%); Other Care, 1 (10%) and Water and Sewer, 1
(1%). No Bond issue has received a provisional rating. All of the obligations
in the Texas 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 6.58
years.
Risk Factors. Historically, the primary sources of the State's revenues have
been sales taxes, mineral severance taxes and federal grants. Due to the
collapse of oil and gas prices in 1986 and a resulting enactment by recent
legislatures of new tax measures, including those increasing the rates of
existing taxes and expanding the tax base for certain taxes, there has been a
reordering in the relative importance of the State's taxes in terms of their
contribution to the State's revenue in any year. Due to the State's expansion
in Medicaid spending and other Health and Human Services programs requiring
federal matching revenues, federal receipts became the State's number one
source of income in fiscal 1993. Sales tax, which had been the main source of
revenue for the previous 12 years, dropped to second, accounting for 27% of
total revenues in fiscal 1993. Interest and investment income is now the third
largest revenue source, contributing 6.4% of total revenues in fiscal 1993.
The motor fuels tax is now the State's fourth largest revenue source and the
second largest tax, accounting for approximately 6.2% of total revenue in
fiscal year 1993. Licenses, fees and permits, the State's fifth largest
revenue source, accounted for 6.3% of the total revenue in fiscal year 1993.
The remainder of the State's revenues are derived primarily from other excise
taxes. The State currently has no personal or corporate income tax. The State
does, however, impose a corporate franchise tax based in certain circumstances
in part on a corporation's profit.
Heavy reliance on the energy and agricultural sectors for jobs and income
resulted in a general downturn in the Texas economy beginning in 1982 as those
industries suffered significantly. The effects of this downturn continued to
adversely affect the State's real estate industry and its financial
institutions for several years. As a result of these problems, the general
revenue fund had a $231 million cash deficit at the beginning of the 1987
fiscal year and ended the 1987 fiscal year with a $745 million cash deficit.
In 1987, the Texas economy began to move toward a period of recovery. The
expansion continued in 1988 and 1989. In fiscal year 1993, the State ended the
year with a general revenue fund cash surplus of $1,163 million. This was the
sixth consecutive year that Texas ended a fiscal year with a posiitve balance.
The 73rd Legislature meeting in 1993 passed the 1994-1995 biennial all funds
budget of $71.2 billion without increasing state taxes. This was accomplished
by cutting spending in certain areas and increasing federal funding. The state
Comptroller has estimated that total state revenues from all sources would
total $65.3 billion for the 1994-1995 biennium.
The Texas Constitution prohibits the State from levying ad valorem taxes on
property for general revenue purposes and limits the rate of such taxes for
other purposes to $.35 per $100 of valuation. The Constitution also permits
counties to levy, in addition to all other ad valorem taxes permitted by the
Constitution, ad valorem taxes on property within the county for flood control
and road purposes in an amount not to exceed $.30 per $100 of valuation. The
Constitution prohibits counties, cities and towns from levying a tax rate
exceeding $.80 per $100 of valuation for general fund and other specified
purposes.
With certain specific exceptions, the Texas Constitution generally prohibits
the creation of debt by or on behalf of the State unless the voters of the
State, by constitutional amendment, authorize the issuance of debt (including
general obligation indebtedness backed by the State's taxing power and full
faith and credit). In excess of $8.49 billion of general obligation bonds have
been authorized in Texas and almost $4.18 billion of such bonds are currently
outstanding. Of these, approximately 76% were issued by the Veterans' Land
Board and the Texas Public Finance Authority.
Though the full faith and credit of the State are pledged for the payment of
all general obligations issued by the State, much of that indebtedness is
designed to be eventually self-supporting from fees, payments, and other
sources of revenues; in some instances, the receipt of such revenues by
certain issuing agencies has been in sufficient amounts to pay the principal
of and interest on the issuer's outstanding bonds without requiring the use of
appropriated funds.
Pursuant to Article 717k-2, Texas Revised Civil Statutes, as presently
amended, the net effective interest rate for any issue or series of Bonds in
the Texas IM-IT Trust is limited to 15%.
From the time Standard & Poor's Corporation began rating Texas general
obligation bonds in 1956 until early 1986, that firm gave such bonds its
highest rating, "AAA."In April 1986, in response to the State
economic problems, Standard & Poor's downgraded its rating of Texas general
obligation bonds to "AA+."Such rating was further downgraded in July
1987 to "AA."Moody's Investors Service, Inc. has rated Texas bonds
since prior to the Great Depression. Moody's upgraded its rating of Texas
general obligation bonds in 1962 from "Aa"to "Aaa", its
highest rating, following the imposition of a statewide sales tax by the
Legislature. Moody's downgraded such rating to "Aa"in March 1987. No
prediction can be made concerning future changes in ratings by national rating
agencies of Texas general obligation bonds or concerning the effect of such
ratings changes on the market for such issues.
The same economic and other factors affecting the State of Texas and its
agencies also have affected cities, counties, school districts and other
issuers of bonds located throughout the State. Declining revenues caused by
the downturn in the Texas economy in the mid-1980s forced these various other
issuers to raise taxes and cut services to achieve the balanced budget
mandated by their respective charters or applicable State law requirements.
Standard & Poor's Corporation and Moody's Investors Service, Inc. assign
separate ratings to each issue of bonds sold by these other issuers. Such
ratings may be significantly lower than the ratings assigned by such rating
agencies to Texas general obligation bonds.
On April 15, 1991, the Governor signed into law Senate Bill 351, the School
Finance Reform Bill. This bill sets a minimum local property tax rate which
guarantees the local school districts a basic state allotment of a specified
amount per pupil. The funding mechanism is based on tax base consolidation and
creates 188 new taxing units, drawn largely along county lines. Within each
taxing unit, school districts will share the revenue raised by the minimum
local property tax. Local school districts are allowed to "enrich"
programs and provide for facilities construction by levying an additional tax.
In January 1992 the Texas Supreme Court declared the School Finance Reform
Bill unconstitutional because the community education districts are in essence
a state property tax. The legislature was given until September 1, 1993 to
pass a new school finance reform bill. The Supreme Court said that, in the
meantime, the county education districts could continue to levy and collect
property taxes. Several taxpayers have filed suit challenging the right of
such districts to collect a tax that has been declared unconstitutional by the
Supreme Court. In March 1993, the Legislature passed a proposed constitutional
amendment which would allow a limited amount of money to be "
recaptured"from wealthy school districts and redistributed to
property-poor school districts. However, the amendment was rejected by the
voters on May 1, 1993, requiring the Legislature to develop a new school
finance plan. At the end of May 1993, the legislature passed a new school
finance bill that provides school districts with certain choices to achieve
funding equalization. Although a number of both poor and wealthy school
districts have challenged the new funding law, the trial judge has stated that
the new law shall be implemented for at least the 1993-1994 school year before
considering any constitutional challenges.
The Comptroller has estimated that total revenues for fiscal 1994 will be
$33.59 billion, compared to actual revenues of $33.79 billion for fiscal 1993.
The revenue estimate for fiscal 1994 is based on an assumption that the Texas
economy will show a steady growth.
A wide variety of Texas laws, rules and regulations affect, directly, or
indirectly, the payment of interest on, or the repayment of the principal of,
Bonds in the Texas IM-IT Trust. The impact of such laws and regulations on
particular Bonds may vary depending upon numerous factors including, among
others, the particular type of Bonds involved, the public purpose funded by
the Bonds and the nature and extent of insurance or other security for payment
of principal and interest on the Bonds. For example, Bonds in the Texas IM-IT
Trust which are payable only from the revenues derived from a particular
facility may be adversely affected by Texas laws or regulations which make it
more difficult for the particular facility to generate revenues sufficient to
pay such interest and principal, including, among others, laws and regulations
which limit the amount of fees, rates or other charges which may be imposed
for use of the facility or which increase competition among facilities of that
type or which limit or otherwise have the effect of reducing the use of such
facilities generally, thereby reducing the revenues generated by the
particular facility. Bonds in the Texas IM-IT Trust, the payment of interest
and principal on which is payable from annual appropriations, may be adversely
affected by local laws or regulations that restrict the availability of monies
with which to make such appropriations. Similarly, Bonds in the Texas IM-IT
Trust, the payment of interest and principal on which is secured, in whole or
in part, by an interest in real property may be adversely affected by declines
in real estate values and by Texas laws that limit the availability of
remedies or the scope of remedies available in the event of a default on such
Bonds. Because of the diverse nature of such laws and regulations and the
impossibility of predicting the nature or extent of future changes in existing
laws or regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws
and regulations on the Bonds in the Texas IM-IT Trust and, therefore, on the
Units.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds in the Texas
IM-IT Trust and does not purport to be a complete or exhaustive description of
all adverse conditions to which the issuers in the Texas 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 the
Bond, the market value or marketability of the Bonds or the ability of the
respective issuers of the Bonds acquired by the Texas 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
Texas IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Leonard Hurt Terry & Blinn, a professional corporation,
special counsel to the Fund, under existing Texas law:
Neither the State nor any political subdivision of the State currently imposes
an income tax on individuals. Therefore, no portion of any distribution
received by an individual Unitholder of the Trust in respect of his Units,
including a distribution of the proceeds of insurance in respect of such
Units, is subject to income taxation by the State or any political subdivision
of the State;
Except in the case of certain transportation businesses, savings and loan
associations and insurance companies, no Unit of the Trust is taxable under
any property tax levied in the State;
The "inheritance tax"of the State, imposed upon certain transfers of
property of a deceased resident individual Unitholder, may be measured in part
upon the value of Units of the Trust included in the estate of such
Unitholder; and
With respect to any Unitholder which is subject to the State corporate
franchise tax, Units in the Trust held by such Unitholder, and distributions
received thereon, will be taken into account in computing the "taxable
capital"of the Unitholder allocated to the State, one of the bases by
which such franchise tax is currently measured (the other being a
corporation's "net capital earned surplus", which is, generally, its
net corporate income plus officers and directors income).
The opinion set forth in clause (2), above, is limited to the extent that
Units of the Trust may be subject to property taxes levied in the State if
held on the relevant date: (i) by a transportation business described in
V.T.C.A., Tax Code, Subchapter A, Chapter 24; (ii) by a savings and loan
association formed under the laws of the State (but only to the extent
described in section 11.09 of the Texas Savings and Loan Act, Vernon's Ann.
Civ. St. art. 852a); or (iii), by an insurance company incorporated under the
laws of the State (but only to the extent described in V.A.T.S., Insurance
Code, Art. 4.01). Each Unitholder described in the preceding sentence should
consult its own tax advisor with respect to such matters.
Corporations subject to the State franchise tax should be aware that in its
first called 1991 session, the Texas Legislature adopted, and the Governor has
signed into law, certain substantial amendments to the State corporate
franchise tax, the effect of which may be to subject to taxation all or a
portion of any gains realized by such a corporate Unitholder upon the sale,
exchange or other disposition of a Unit. The amendments are applicable to
taxable periods commencing January 1991, and to each taxable period
thereafter. Because no authoritative judicial, legislative or administrative
interpretation of these amendments has issued, and there remain many
unresolved questions regarding its potential effect on corporate franchise
taxpayers, each corporation which is subject to the State franchise tax and
which is considering the purchase of Units should consult its tax advisor
regarding the effect of these amendments.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income <F1>:
Estimated Annual Interest Income per Unit.................................... $ 49.82
Less: Estimated Annual Expense per Unit <F2>................................. $ 1.53
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 48.29
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 48.29
Divided by 12................................................................ $ 4.02
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .13414
Estimated Current Return Based on Public Offering Price <F1><F3><F4><F5>...... 4.70%
Estimated Long-Term Return <F3><F4><F5>....................................... 4.85%
Initial Distribution (November 1994).......................................... $ 3.35
Estimated Normal Distribution per Unit <F5>................................... $ 4.02
Purchased Interest <F6>....................................................... $ 8.20
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
November 15, 1994
<FN>
<F1>During the first year the Trustee will reduce its fee by approximately $.55
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 $50.37. 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 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 (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 the 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
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>
<TABLE>
TEXAS IM-IT INTERMEDIATE LADDERED MATURITY
SERIES 1 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
Texas
IM-IT
Intermediate
Laddered
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of Redemption Maturity
Principal<F1> either Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> Trust<F4>
<S> <C> <C> <C> <C> <C>
$ 260,000 City of Alice, Texas (Jim Wells County) Tax Notes, Series 1994
(AMBAC Indemnity Insured) 5.00% Due 8/1/1999................. AAA $ 260,975
540,000 North Harris Montgomery Community College District (Texas)
Revenue Bonds (AMBAC Indemnity Insured)** 340M-5.00% Due AAA 341,275
9/15/1999 #200M-5.25% Due 9/15/2003........................... AAA 197,246
565,000 Victoria County, Texas, Hospital Revenue Refunding Bonds
(Citizen's Medical Center Issue) Series 1994 (AMBAC Indemnity
Insured) #5.30% Due 1/1/2000.................................. AAA 568,859
35,000 City of Plano, Texas (Collin and Denton Counties) Municipal
Drainage Utility System Revenue Bonds, Series 1994 (AMBAC
Indemnity Insured)** 6.50% Due 5/15/2000...................... AAA 37,318
600,000 Brushy Creek Municipal Utility District, Williamson County,
Texas, Combination Unlimited Tax and Revenue Refunding Bonds,
Series 1994 (AMBAC Indemnity Insured)** #5.15% Due 6/1/2001.. AAA 597,210
100,000 Lower Colorado River Authority, Texas, Priority Refunding
Revenue Bonds, Series B (AMBAC Indemnity Insured) #0.00% Due
1/1/2002....................................................... AAA 67,618 <F6>
600,000 Texas Public Finance Authority, Building Revenue Bonds, Series
1994A (AMBAC Indemnity Insured)** #200M - 5.35% Due 2/1/2002 AAA 200,136
#400M - 5.45% Due 2/1/2003.................................... AAA 400,144
300,000 Texas State Public Property Finance Corporation, Acquisition
and Refunding Revenue Bonds, Mental Health and Retardation
Center, Series 1993 (Capital Guaranty Insured) 5.00% Due
9/1/2002....................................................... AAA 293,469
$ 3,000,000 $ 2,964,250
</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".
TEXAS IM-IT TRUST
General. The Texas IM-IT Trust consists of 9 issues of Securities. One of the
Bonds in the Texas 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 Texas IM-IT
Trust) as follows: Industrial Revenue, 2 (33%); Health Care, 2 (23%); Retail
Electric/Gas, 1 (16%); Water and Sewer, 2 (13%); Transportation, 1 (10%) and
General Obligations, 1 (5%). No Bond issue has received a provisional
rating.
Risk Factors. Historically, the primary sources of the State's revenues have
been sales taxes, mineral severance taxes and federal grants. Due to the
collapse of oil and gas prices in 1986 and a resulting enactment by recent
legislatures of new tax measures, including those increasing the rates of
existing taxes and expanding the tax base for certain taxes, there has been a
reordering in the relative importance of the State's taxes in terms of their
contribution to the State's revenue in any year. Due to the State's expansion
in Medicaid spending and other Health and Human Services programs requiring
federal matching revenues, federal receipts became the State's number one
source of income in fiscal 1993. Sales tax, which had been the main source of
revenue for the previous 12 years, dropped to second, accounting for 27% of
total revenues in fiscal 1993. Interest and investment income is now the third
largest revenue source, contributing 6.4% of total revenues in fiscal 1993.
The motor fuels tax is now the State's fourth largest revenue source and the
second largest tax, accounting for approximately 6.2% of total revenue in
fiscal year 1993. Licenses, fees and permits, the State's fifth largest
revenue source, accounted for 6.3% of the total revenue in fiscal year 1993.
The remainder of the State's revenues are derived primarily from other excise
taxes. The State currently has no personal or corporate income tax. The State
does, however, impose a corporate franchise tax based in certain circumstances
in part on a corporation's profit.
Heavy reliance on the energy and agricultural sectors for jobs and income
resulted in a general downturn in the Texas economy beginning in 1982 as those
industries suffered significantly. The effects of this downturn continued to
adversely affect the State's real estate industry and its financial
institutions for several years. As a result of these problems, the general
revenue fund had a $231 million cash deficit at the beginning of the 1987
fiscal year and ended the 1987 fiscal year with a $745 million cash deficit.
In 1987, the Texas economy began to move toward a period of recovery. The
expansion continued in 1988 and 1989. In fiscal year 1993, the State ended the
year with a general revenue fund cash surplus of $1,163 million. This was the
sixth consecutive year that Texas ended a fiscal year with a posiitve balance.
The 73rd Legislature meeting in 1993 passed the 1994-1995 biennial all funds
budget of $71.2 billion without increasing state taxes. This was accomplished
by cutting spending in certain areas and increasing federal funding. The state
Comptroller has estimated that total state revenues from all sources would
total $65.3 billion for the 1994-1995 biennium.
The Texas Constitution prohibits the State from levying ad valorem taxes on
property for general revenue purposes and limits the rate of such taxes for
other purposes to $.35 per $100 of valuation. The Constitution also permits
counties to levy, in addition to all other ad valorem taxes permitted by the
Constitution, ad valorem taxes on property within the county for flood control
and road purposes in an amount not to exceed $.30 per $100 of valuation. The
Constitution prohibits counties, cities and towns from levying a tax rate
exceeding $.80 per $100 of valuation for general fund and other specified
purposes.
With certain specific exceptions, the Texas Constitution generally prohibits
the creation of debt by or on behalf of the State unless the voters of the
State, by constitutional amendment, authorize the issuance of debt (including
general obligation indebtedness backed by the State's taxing power and full
faith and credit). In excess of $8.49 billion of general obligation bonds have
been authorized in Texas and almost $4.18 billion of such bonds are currently
outstanding. Of these, approximately 76% were issued by the Veterans' Land
Board and the Texas Public Finance Authority.
Though the full faith and credit of the State are pledged for the payment of
all general obligations issued by the State, much of that indebtedness is
designed to be eventually self-supporting from fees, payments, and other
sources of revenues; in some instances, the receipt of such revenues by
certain issuing agencies has been in sufficient amounts to pay the principal
of and interest on the issuer's outstanding bonds without requiring the use of
appropriated funds.
Pursuant to Article 717k-2, Texas Revised Civil Statutes, as presently
amended, the net effective interest rate for any issue or series of Bonds in
the Texas IM-IT Trust is limited to 15%.
From the time Standard & Poor's Corporation began rating Texas general
obligation bonds in 1956 until early 1986, that firm gave such bonds its
highest rating, "AAA."In April 1986, in response to the State
economic problems, Standard & Poor's downgraded its rating of Texas general
obligation bonds to "AA+."Such rating was further downgraded in July
1987 to "AA."Moody's Investors Service, Inc. has rated Texas bonds
since prior to the Great Depression. Moody's upgraded its rating of Texas
general obligation bonds in 1962 from "Aa"to "Aaa", its
highest rating, following the imposition of a statewide sales tax by the
Legislature. Moody's downgraded such rating to "Aa"in March 1987. No
prediction can be made concerning future changes in ratings by national rating
agencies of Texas general obligation bonds or concerning the effect of such
ratings changes on the market for such issues.
The same economic and other factors affecting the State of Texas and its
agencies also have affected cities, counties, school districts and other
issuers of bonds located throughout the State. Declining revenues caused by
the downturn in the Texas economy in the mid-1980s forced these various other
issuers to raise taxes and cut services to achieve the balanced budget
mandated by their respective charters or applicable State law requirements.
Standard & Poor's Corporation and Moody's Investors Service, Inc. assign
separate ratings to each issue of bonds sold by these other issuers. Such
ratings may be significantly lower than the ratings assigned by such rating
agencies to Texas general obligation bonds.
On April 15, 1991, the Governor signed into law Senate Bill 351, the School
Finance Reform Bill. This bill sets a minimum local property tax rate which
guarantees the local school districts a basic state allotment of a specified
amount per pupil. The funding mechanism is based on tax base consolidation and
creates 188 new taxing units, drawn largely along county lines. Within each
taxing unit, school districts will share the revenue raised by the minimum
local property tax. Local school districts are allowed to "enrich"
programs and provide for facilities construction by levying an additional tax.
In January 1992 the Texas Supreme Court declared the School Finance Reform
Bill unconstitutional because the community education districts are in essence
a state property tax. The legislature was given until September 1, 1993 to
pass a new school finance reform bill. The Supreme Court said that, in the
meantime, the county education districts could continue to levy and collect
property taxes. Several taxpayers have filed suit challenging the right of
such districts to collect a tax that has been declared unconstitutional by the
Supreme Court. In March 1993, the Legislature passed a proposed constitutional
amendment which would allow a limited amount of money to be "
recaptured"from wealthy school districts and redistributed to
property-poor school districts. However, the amendment was rejected by the
voters on May 1, 1993, requiring the Legislature to develop a new school
finance plan. At the end of May 1993, the legislature passed a new school
finance bill that provides school districts with certain choices to achieve
funding equalization. Although a number of both poor and wealthy school
districts have challenged the new funding law, the trial judge has stated that
the new law shall be implemented for at least the 1993-1994 school year before
considering any constitutional challenges.
The Comptroller has estimated that total revenues for fiscal 1994 will be
$33.59 billion, compared to actual revenues of $33.79 billion for fiscal 1993.
The revenue estimate for fiscal 1994 is based on an assumption that the Texas
economy will show a steady growth.
A wide variety of Texas laws, rules and regulations affect, directly, or
indirectly, the payment of interest on, or the repayment of the principal of,
Bonds in the Texas IM-IT Trust. The impact of such laws and regulations on
particular Bonds may vary depending upon numerous factors including, among
others, the particular type of Bonds involved, the public purpose funded by
the Bonds and the nature and extent of insurance or other security for payment
of principal and interest on the Bonds. For example, Bonds in the Texas IM-IT
Trust which are payable only from the revenues derived from a particular
facility may be adversely affected by Texas laws or regulations which make it
more difficult for the particular facility to generate revenues sufficient to
pay such interest and principal, including, among others, laws and regulations
which limit the amount of fees, rates or other charges which may be imposed
for use of the facility or which increase competition among facilities of that
type or which limit or otherwise have the effect of reducing the use of such
facilities generally, thereby reducing the revenues generated by the
particular facility. Bonds in the Texas IM-IT Trust, the payment of interest
and principal on which is payable from annual appropriations, may be adversely
affected by local laws or regulations that restrict the availability of monies
with which to make such appropriations. Similarly, Bonds in the Texas IM-IT
Trust, the payment of interest and principal on which is secured, in whole or
in part, by an interest in real property may be adversely affected by declines
in real estate values and by Texas laws that limit the availability of
remedies or the scope of remedies available in the event of a default on such
Bonds. Because of the diverse nature of such laws and regulations and the
impossibility of predicting the nature or extent of future changes in existing
laws or regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws
and regulations on the Bonds in the Texas IM-IT Trust and, therefore, on the
Units.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds in the Texas
IM-IT Trust and does not purport to be a complete or exhaustive description of
all adverse conditions to which the issuers in the Texas 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 the
Bond, the market value or marketability of the Bonds or the ability of the
respective issuers of the Bonds acquired by the Texas 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
Texas IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Leonard Hurt Terry & Blinn, a professional corporation,
special counsel to the Fund, under existing Texas law:
Neither the State nor any political subdivision of the State currently imposes
an income tax on individuals. Therefore, no portion of any distribution
received by an individual Unitholder of the Trust in respect of his Units,
including a distribution of the proceeds of insurance in respect of such
Units, is subject to income taxation by the State or any political subdivision
of the State;
Except in the case of certain transportation businesses, savings and loan
associations and insurance companies, no Unit of the Trust is taxable under
any property tax levied in the State;
The "inheritance tax"of the State, imposed upon certain transfers of
property of a deceased resident individual Unitholder, may be measured in part
upon the value of Units of the Trust included in the estate of such
Unitholder; and
With respect to any Unitholder which is subject to the State corporate
franchise tax, Units in the Trust held by such Unitholder, and distributions
received thereon, will be taken into account in computing the "taxable
capital"of the Unitholder allocated to the State, one of the bases by
which such franchise tax is currently measured (the other being a
corporation's "net capital earned surplus", which is, generally, its
net corporate income plus officers and directors income).
The opinion set forth in clause (2), above, is limited to the extent that
Units of the Trust may be subject to property taxes levied in the State if
held on the relevant date: (i) by a transportation business described in
V.T.C.A., Tax Code, Subchapter A, Chapter 24; (ii) by a savings and loan
association formed under the laws of the State (but only to the extent
described in section 11.09 of the Texas Savings and Loan Act, Vernon's Ann.
Civ. St. art. 852a); or (iii), by an insurance company incorporated under the
laws of the State (but only to the extent described in V.A.T.S., Insurance
Code, Art. 4.01). Each Unitholder described in the preceding sentence should
consult its own tax advisor with respect to such matters.
Corporations subject to the State franchise tax should be aware that in its
first called 1991 session, the Texas Legislature adopted, and the Governor has
signed into law, certain substantial amendments to the State corporate
franchise tax, the effect of which may be to subject to taxation all or a
portion of any gains realized by such a corporate Unitholder upon the sale,
exchange or other disposition of a Unit. The amendments are applicable to
taxable periods commencing January 1991, and to each taxable period
thereafter. Because no authoritative judicial, legislative or administrative
interpretation of these amendments has issued, and there remain many
unresolved questions regarding its potential effect on corporate franchise
taxpayers, each corporation which is subject to the State franchise tax and
which is considering the purchase of Units should consult its tax advisor
regarding the effect of these amendments.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income During the First Year <F1>:
Estimated Annual Interest Income per Unit.................................... $ 58.51
Less: Estimated Annual Expense per Unit <F2>................................. $ 1.10
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 57.41
Calculation of Estimated Interest Earnings per Unit During the First Year:
Estimated Net Annual Interest Income per Unit................................ $ 57.41
Divided by 12................................................................ $ 4.78
Estimated Daily Rate of Net Interest Accrual per Unit During the First Year... $ .15946
Estimated Current Return Based on Public Offering Price During the First
Year <F1><F3><F4><F5>....................................................... 5.74%
Calculation of Estimated Net Annual Unit Income After the First Year <F1>:....
Estimated Annual Interest Income per Unit.................................... $ 59.74
Less: Estimated Annual Expense per Unit <F2>................................. $ 2.08
Less: Annual Premium on Portfolio Insurance per Unit......................... --
Estimated Net Annual Interest Income per Unit................................ $ 57.66
Calculation of Estimated Interest Earnings per Unit After the First Year:.....
Estimated Net Annual Interest Income per Unit................................ $ 57.66
Divided by 12 ............................................................... $ 4.81
Estimated Daily Rate of Net Interest Accrual per Unit After the First Year.... $ .16015
Estimated Current Return Based on Public Offering Price After the First
Year <F1><F3><F4><F5>....................................................... 5.77%
Estimated Long-Term Return <F1><F3><F4><F5>................................... 5.85%
Initial Distribution (November 1994).......................................... $ 4.00
Estimated Normal Distribution per Unit <F5>................................... $ 4.81
Purchased Interest <F6>....................................................... $ 9.96
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
November 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
November 1, 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 $1.23
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 $.25 or .025% 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
After the First Year. This cash amount during the first year includes $.25 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 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 (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 the 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
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>
<TABLE>
TEXAS INSURED MUNICIPALS INCOME TRUST
SERIES 38 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Offering
Price To
Aggregate Name of Issuer, Title, Interest Rate andMaturity Date of either Redemption Texas
Principal<F1> Bonds Deposited orBonds Contracted for<F1><F5> Rating<F2> Feature<F3> IM-IT Trust<F4
<S> <C> <C> <C> <C>
$ 410,000 North Texas Municipal Water District, City of Heath Sanitary
Sewer System, Installment Sale Contract Revenue Bonds, Series
1994 (MBIA Insured)** #200M-6.25% Due 7/10/2015 #210M-6.25% AAA 2004 @ 100 197,556
Due 7/10/2016..................................................... AAA 2004 @ 100 $ 207,352
150,000 Town of Trophy Club, Texas (Denton County) General Obligation
Bonds, Series 1994 (Bank Qualified) AMBAC Indemnity Insured**
#6.25% Due 9/1/2015.............................................. AAA 2005 @ 100 149,014
500,000 Coastal Bend Health Facilities Development Corporation (Texas)
Revenue Bonds (Incarnate Word Health Services Project) Series 2003 @ 102
1987A (AMBAC Indemnity Insured) 6.30% Due 1/1/2017.............. AAA 2007 @ 100 S.F. 490,760
300,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding 2004 @ 102
Bonds, Series 1994 (FGIC Insured)** #5.375% Due 8/15/2020....... AAA 2017 @ 100 S.F. 262,548
500,000 Brazos River Authority (Texas) Collateralized Pollution Control
Revenue Refunding Bonds (Texas Utilities Electric Company
Project) Series 1993A (AMBAC Indemnity Insured) #5.50% Due
5/1/2022.......................................................... AAA 2003 @ 102 439,445
195,000 Tyler Health Facilities Development Corporation (Texas) Hospital
Revenue Bonds (Mother Frances Hospital of Tyler Project) Series 2002 @ 102
1992 (FGIC Insured) #6.50% Due 7/1/2022......................... AAA 2010 @ 100 S.F. 195,975
500,000 Austin, Texas, Utility System Revenue Refunding Bonds, Series 2004 @ 100
1994 (FGIC Insured)** #5.75% Due 5/15/2024...................... AAA 2017 @ 100 S.F. 453,445
500,000 Matagorda County, Texas, Navigation District No. 1, Pollution
Control Revenue Refunding Bonds, Series 1993 (Central Power &
Light Company Project) MBIA Insured 6.00% Due 7/1/2028.......... AAA 2003 @ 102 465,225
$ 3,055,000 $ 2,861,320
</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".
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: Health Care, 3 (35%);
Wholesale Electric, 2 (33%); Certificates of Participation, 2 (23%) and
General Purpose, 1 (9%). No Bond issue has received a provisional or
conditional rating.
Risk Factors. 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 to
generate additional revenue and reduced allowable departmental operating
expenditures and continuation funding. The spending reductions were based on
recommendations from the Governor, the Government Performance Audit Committee
and selected reductions identified by the General Assembly.
The State, like the nation, has experienced economic recovery since 1991.
Apparently due to both increased tax and fee revenue and the previously
enacted spending reductions, the State had a budget surplus of approximately
$887 million at the end of fiscal 1993-94. After review of the 1994-95
continuation budget adopted in 1993, the General Assembly approved spending
expansion funds, in part to restore certain employee salaries to budgeted
levels, which amounts had been deferred to balance the budgets in 1989-1993,
and to authorize funding for new initiatives for economic development,
education, human services and environmental programs. (The cutback in funding
for infrastructure and social development projects had been cited by agencies
rating State obligations, following the 1991 reductions, as cause for concern
about the long-term consequences of those reductions on the economy of the
State and the State's fiscal prospects).
Based on projected growth in State tax and fee revenues, the General Fund
balance forecast for the end of the 1994-95 fiscal year is approximately $310
million.
It is unclear what effect these developments at the State level may have on
the value of the Debt Obligations in the North Carolina Trust.
The State is subject to claims by classes of plaintiffs asserting a right to a
refund of taxes paid under State statutes that allegedly discriminated against
federal retirees and armed services personnel in a manner that was
unconstitutional based on the decision by the United States Supreme Court in a
1989 Michigan case involving a similar law, Davis v. Michigan Department of
Treasury ("Davis"). At the time of that decision, State income tax law
exempted retirement income paid by North Carolina State and local governments
but did not exempt retirement income paid by the federal government to its
former employees. Also, State tax law at the time provided a deduction for
certain income earned by members of the North Carolina National Guard, but did
not provide a similar deduction for members of the federal armed services.
Following the Davis decision the North Carolina legislature amended the tax
laws to provide identical retirement income exclusions for former state and
federal employees (effective for 1989), and repealed the deduction given to
members of the State National Guard. In addition, the amendments authorized a
special tax credit for federal retirees equal to the taxes paid on their
nonexcluded federal pensions in 1988 (to be taken over a three year period
beginning with returns for 1990).
Subsequent to Davis, the North Carolina plaintiffs brought an action in
federal court against the North Carolina Department of Revenue and certain
officials of the State alleging that the collection of the taxes under the
prior North Carolina tax statutes was prohibited by the state and federal
constitutions, and also violated civil rights protections under 42 U.S.C. SS
1983, a federal statute prohibiting discriminatory taxation of the
compensation of certain federal employees (4 U.S.C. SS 111), and the
principle of intergovernmental tax immunity. The plaintiffs sought injunctive
relief requiring the State to provide refunds of 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 estimated that as of June 30,
1994, the claims (including interest) would then aggregate approximately $280
million.
In 1991, the North Carolina Supreme Court in Swanson State affirmed a decision
in favor of the State, holding that the U.S. Supreme Court decision in Davis
was not to have retroactive effect. Review was granted by the United States
supreme Court and the case subsequently was remanded to the North Carolina
Supreme Court for reconsideration in light of the U.S. Supreme Court's 1993
holding in Harper v. Virginia Dept. of Taxation ("Harper"). In Harper,
which also involved the disparate income tax treatment of retired state and
federal employees and the question of retroactive application of Davis, 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. Harper was remanded to the Supreme Court of Virginia to
determine whether a remedy was required and, if so, what form it would take.
Similarly, Swanson State was remanded for reconsideration of whether the North
Carolina tax laws satisfied the due process requirements of the federal
constitution and, if not, what remedy was to be provided by the State.
On remand, the North Carolina Supreme Court held in early 1994 that the
plaintiffs in Swanson State were procedurally barred from recovering refunds
because they did not comply with the State's statutory postpayment refund
demand procedure. The plaintiffs contended unsuccessfully that the postpayment
demand requirement did not meet the requirements of the federal constitution,
in light of the Harper decision, for "meaningful backward-looking
relief". Plaintiffs in Swanson State have petitioned the U.S. Supreme
Court for review of the most recent North Carolina Supreme Court decision.
Following Harper, the plaintiffs in Swanson Federal again requested an
injunction requiring refunds. (Although the federal and state cases are
independent, the refund claims apparently would lead to only a single recovery
of taxes deemed unlawfully collected.) In May 1994, the U.S. District Court
granted the State's motion to dismiss all but one claim made by the
plaintiffs, declaring that those claims were precluded by the 1994 North
Carolina Supreme Court decision in Swanson State. Plaintiffs in Swanson
Federal asserted that relief should have been granted because of the effect of
the federal District Court's 1990 opinion in Swanson Federal denying the
defendants' motion that the federal Tax Injunction Act precluded the
plaintiffs' claims, in which the court found that the statutory post-payment
remedy for refund of unlawful taxes was no "plain, speedy and
efficient", as required by that law, Swanson Federal, 1990 WL 545,761
(E.D.N.C.), rev'd, 937 F.2d 965 (1991), cert. denied, U.S. ,
112 S. Ct. 871 (1992). In its May 1994 decision, the federal court
rejected that assertion and held that its finding regarding the federal
Tax Injunction Act was jurisdictional only and was not a determination
that the statutory remedy violated the due process clause.
The plaintiffs' claim that was not dismissed with prejudice in the recent
District Court order asserts that the State continued an unlawful
discrimination, contrary to the requirements of 4 U.S.C. SS 111 and the
doctrine of intergovernmental tax immunity, by increasing benefits to State
retirees (in order to offset the effect of the deletion of the preferential
State retirement income exemption) as part of the bill that equalized the
income exclusion of State and federal retirement payments. The claim is based
on a holding of similar effect in Sheehy v. Public Employees Retirement Div.,
864 P. 2d 762 (Mont. 1993). In its May 1994 order, the District Court allowed
the plaintiffs to dismiss the Sheehy claim without prejudice. Therefore,
plaintiffs could assert those claims in another action; apparently, the relief
would require providing federal retirees with tax refunds or other payments
equal to the allegedly discriminatory payments made to State retirees since
1989.The court noted that those claims will be subject to the statutory
post-deprivation procedural requirements, and that a challenge to the legality
of the remedial statute would be precluded under the scope of the court's
order dismissing the other claims. However, the court granted plaintiffs'
motion to dismiss the Sheehy claims without prejudice because the record did
not show whether the plaintiffs had complied with statutory requirements. The
plaintiffs in Swanson State have appealed the District Court decision to the
United States Court of Appeals.
Several states involved in similar suits have reached settlements.
Expressions of interest in settlement of the claims in Swanson by both the
plaintiffs and State officials have been reported in the press, but no
prediction can be made of the likelihood or amount of settlement. Although the
recent improvements in the economy and fiscal condition of the State might
better enable the State to satisfy an adverse decision without significant
consequences to the State's fiscal condition or governmental functions,
because the amount of the potential liability has not been fixed and because
of the potential that adverse fiscal or economic developments could cause a
more negative result on the State if a large amount must be paid, no assurance
can be given that the impact of the Swanson cases, if the plaintiffs
ultimately succeed, will not have an adverse impact on the Debt Obligations.
State and local government retirees also filed a class action suit in
1990 as a result of the repeal of the income tax exemptions for state and
local government retirement benefits. The original suit was dismissed after
the North Carolina Supreme Court ruled in 1991 that the plaintiffs had failed
to comply with state law requirements for challenging unconstitutional taxes
and the United States Supreme Court denied review. In 1992, many of the same
plaintiffs filed a new lawsuit alleging essentially the same claims, including
breach of contract, unconstitutional impairment of contract rights by the
State in taxing benefits that were allegedly promised to be tax-exempt and
violation of several state constitutional provisions. The North Carolina
Attorney General's office estimates that the amount in controversy is
approximately $40-45 million annually for the tax years 1989 through 1992. The
case is now pending in state court.
Other litigation against the State include the following. None of the
cases, in the reported opinion of the Department of the Treasurer, would have
a material adverse affect on the State's ability to meet its obligations.
Leandro et al. v. State of North Carolina and State Board of Education -
In May, 1994 students and boards of education in five counties in the State
filed suit in state court requesting a declaration that the public education
system of North Carolina, including its system of funding, violates the State
constitution by failing to provide adequate or substantially equal educational
opportunities and denying due process of law and violates various statutes
relating to public education. The suit is similar to a number of suits in
other states, some of which resulted in holdings that the respective systems
of public education funding were unconstitutional under the applicable state
law. The defendants in such suit have filed a motion to dismiss, but no answer
to the complaint, and no pretrial discovery has taken place.
Francisco Case - In August, 1994 a class action lawsuit was filed in
state court against the Superintendent of Public Instruction and the State
Board of Education on behalf of a class of parents and their children who are
characterized as limited English proficient. The complaint alleges that the
State has failed to provide funding for the education of these students and
has failed to supervise local school systems in administering programs for
them. The complaint does not allege an amount in controversy, but asks the
Court to order the defendants to fund a comprehensive program to ensure equal
educational opportunities for children with limited English proficiency.
Faulkenburg v. Teachers' and State Employees' Retirement System, Peeve v.
Teachers' and State Employees' Retirement System, and Woodard v. Local
Governmental Employees' Retirement System - Plaintiffs are disability
retirees who brought class actions in state court challenging changes in the
formula for payment of disability retirement benefits and claiming impairment
of contract rights, breach of fiduciary duty, violation of other federal
constitutional rights, and violation of state constitutional and statutory
rights. The State estimates that the cost in damages and higher prospective
benefit payments to plaintiffs and class members would probably amount to $50
million or more in Faulkenburg, $50 million or more in Peele, and $15 million
or more in Woodward, all ultimately payable, at least initially, from the
retirement system funds. Upon review in Faulkenburg, the North Carolina Court
of Appeals and Supreme Court have held that claims made in Faulkenburg
substantially similar to those in Peele and Woodward, for breach of fiduciary
duty and violation of federal constitutional rights brought under the federal
Civil Rights Act either do not state a cause of action or are otherwise barred
by the statute of limitations. In 1994 plaintiffs took voluntary dismissals of
their claims for impairment of contract rights in violation of the United
States Constitution and filed new actions in federal court asserting the same
claims along with claims for violation of constitutional rights in the
taxation of retirement benefits. The remaining state court claims in all cases
are scheduled to be heard in North Carolina in October, 1994.
Fulton Case - The State's intangible personal property tax levied on certain
shares of stock has been challenged by the plaintiff on grounds that it
violates the Commerce Clause of the United States Constitution by
discriminating against stock issued by corporations that do all or part of
their business outside the State. The plaintiff in the action is a North
Carolina corporation that does all or part of its business outside the State.
The plaintiff seeks to invalidate the tax in its entirety and to recover tax
paid on the value of its shares in other corporations. The North Carolina
Court of Appeals invalidated the taxable percentage deduction and excised it
from the statute beginning with the 1994 tax year. The effect of this ruling
is to increase collections by rendering all stock taxable on 100% of its
value. The State and the plaintiff have sought further appellate review, and
the case is pending before the North Carolina Supreme Court. Net collections
from the tax for the fiscal year ended June 30, 1993 amounted to $120.6
million.
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 and the State
rose from twelfth to tenth in population. The State's estimate of population
as of June 30, 1994 is 7,023,663. Notwithstanding its rank in population size,
North Carolina 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 as 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 1993, the State labor force grew about 25% (from 2,855,200 to
3,556,000). Per capita income during the period 1980 to 1993 grew from $7,999
to $18,702, an increase of 133.8%.
The current economic profile of the State consists of a combination of
industry, agriculture and tourism. As of June 1994, 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.
<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 (mining,
construction and manufacturing 1,042,200 1,023,100 973,600 980,800 993,600
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 seasonally adjusted unemployment rate in June 1994 was estimated to be
3.7% of the labor force (down from 5.4% in June 1993), as compared with an
unemployment rate of 6.0% nationwide (down from 7.0% in June 1993).
As of 1993, the State was tenth in the nation in gross agricultural income of
which nearly the entire amount (approximately $5.3 billion) was from
commodities. According to the State Commissioner of Agriculture, in 1993, 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
eggs, hog production, trout and the production of cucumbers for pickles;
fourth in commercial broilers, blueberries and peanuts; sixth in burley
tobacco and net farm income.
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.
Tobacco production is the leading source of agricultural income in the State,
accounting for 20% 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 poultry industry provides nearly 34% of gross agricultural income. The
pork industry has been expanding and accounted for 17% of gross agricultural
income in 1993.
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 reports that in
1993 more than $8 billion was spent on tourism in the State. The Department
estimates that two-thirds of total expenditures came from out-of-state
travelers, and that approximately 250,000 people were employed in
tourism-related jobs.
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 January 1994.
Standard & Poor's reports that North Carolina's rating reflects the State's
strong economic characteristics, sound financial performance, and low debt
levels.
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 statements by, or 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.
<TABLE>
<CAPTION>
Per Unit Information:
<S> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit.................................... $ 58.52
Less: Estimated Annual Expense per Unit...................................... $ 2.11
Estimated Net Annual Interest Income per Unit................................ $ 56.41
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit................................ $ 56.41
Divided by 12................................................................ $ 4.70
Estimated Daily Rate of Net Interest Accrual per Unit......................... $ .15670
Estimated Current Return Based on Public Offering Price <F1><F2><F3>.......... 5.64%
Estimated Long-Term Return <F1><F2><F3>....................................... 5.80%
Initial Distribution (November 1994).......................................... $ 3.92
Estimated Normal Distribution per Unit <F3>................................... $ 4.70
Purchased Interest <F4>....................................................... $ 9.75
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
November 15, 1994
<FN>
<F1>The Estimated Current Return and Estimated Long-Term Return are increased for
transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F2>The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The estimated
net annual interest income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public Offering
Price will vary with changes in the offering price of the underlying
Securities and with changes in the Purchased Interest; therefore, there is no
assurance that the present Estimated Current Return indicated above will be
realized in the future. The Estimated Long-Term Return is calculated using a
formula which (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 the 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
the Trust will change, there is no assurance that the present Estimated
Long-Term Return as indicated above will be realized in the future. The
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated Current
Return calculation includes only net annual interest income and Public
Offering Price.
<F3>These figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current interest
rates and with the principal prepayment, redemption, maturity, call, exchange
or sale of the underlying Securities. The estimated cash flows for this Series
are set forth under "Estimated Cash Flows to Unitholders".
<F4>See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<TABLE>
NORTH CAROLINA INVESTORS' QUALITY TAX-EXEMPT TRUST
SERIES 77 (IM-IT AND QUALITY MULTI-SERIES 233)
PORTFOLIO As of September 29, 1994
<CAPTION>
Name of Issuer, Title, Interest Rate and
Maturity Date of either Bonds Deposited or Offering
Bonds Contracted for<F1><F5> Price To
Aggregate Redemption North
Principal<F1> Rating<F2> Feature<F3> Carolina
Standard Quality
& Poor's Moody's Trust<F4>
<S> <C> <C> <C> <C> <C>
$ 200,000 County of Wayne, North Carolina, Refunding
Certificates of Participation, Series 1994 (Bank
Qualified) MBIA Insured 2004 @ 102
#5.10% Due 8/1/2010................................. AAA Aaa 2008 @ 100 S.F. $ 176,344
250,000 City of Fayetteville, North Carolina, Public Works
Commission Revenue Refunding Bonds, Series
1993 (FGIC Insured) 2003 @ 100
#4.75% Due 3/1/2014................................. AAA Aaa 2011 @ 100 S.F. 205,763
500,000 Durham County, North Carolina, Certificates of
Participation, Hospital and Office Facilities
Project, Series 1994 2004 @ 102
#6.00% Due 5/1/2017................................. AA Aa 2015 @ 100 S.F. 478,755
500,000 North Carolina Municipal Power Agency No. 1,
Catawba Electric Revenue Refunding Bonds,
Series 1992 (MBIA Insured) 2003 @ 100
#5.75% Due 1/1/2020................................. AAA Aaa 2019 @ 100 S.F. 456,230
500,000 North Carolina Medical Care Commission, Hospital
Revenue Refunding Bonds (Presbyterian Health
Services Corp. Project) Series 1993 2003 @ 102
#5.50% Due 10/1/2020................................ AA Aa 2015 @ 100 S.F. 446,230
250,000 North Carolina Medical Care Commission, Hospital
Revenue Refunding Bonds (North Carolina
Baptist Hospitals Project) Series 1992A 2002 @ 102
#6.00% Due 6/1/2022................................. AA- Aa 2015 @ 100 S.F. 239,890
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 @ 102 486,365
300,000 Board of Governors of the University of North
Carolina (North Carolina) University of North
Carolina Hospitals at Chapel Hill, Revenue Bonds,
Series 1992 2002 @ 102
#6.00% Due 2/15/2024................................ AA- A1 2018 @ 100 S.F. 287,574
$ 3,000,000 $ 2,777,151
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
NOTES TO PORTFOLIOS:As of the Date of Deposit: September 29, 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
August 24,1994 to September 28,1994. These Securities have expected settlement
dates ranging from September 29,1994 to November 1,1994 (see "Unitholder
Explanations").
(2)All ratings are by Standard & Poor's Corporation unless otherwise
indicated. "*"indicates that the rating of the Bond is by Moody's Investors
Service, Inc. The ratings represent the latest published ratings by the
respective ratings agency or, if not published, represent private letter
ratings or those ratings expected to be published by the respective ratings
agency. "Y"indicates that such rating is contingent upon physical
receipt by the respective ratings agency of a policy of insurance obtained by
the issuer of the bonds involved and issued by the Preinsured Bond Insurer
named in the bond's title. A commitment for insurance in connection with these
bonds has been issued by the Preinsured Bond Insurer named in the bond's
title. "N/R"indicates that the applicable rating service did not
provide a rating for that particular Security. For a brief description of the
rating symbols and their related meanings, see "Other Matters--Description
of Securities Ratings".
(3)There is shown under this heading the year in which each issue of Bonds is
initially or currently callable and the call price for that year. Each issue
of Bonds continues to be callable at declining prices thereafter (but not
below par value) except for original issue discount bonds which are redeemable
at prices based on the issue price plus the amount of original issue discount
accreted to redemption date plus, if applicable, some premium, the amount of
which will decline in subsequent years. "S.F."indicates a sinking
fund is established with respect to an issue of Bonds. Redemption pursuant to
call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed bonds have an offering side
valuation which represents a premium over par. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to extraordinary
optional or mandatory redemptions if certain events occur. Single family
mortgage revenue bonds and housing authority bonds are most likely to be
called subject to such provisions, but other bonds may have similar call
features. Notwithstanding any provisions to the contrary, certain bond issuers
have in the past and others may in the future attempt to redeem Bonds prior to
their initially scheduled call dates and at prices which do not include any
premiums. For a general discussion of certain of these events, see "
Unitholder Explanations--Bond Redemptions". To the extent that the
Securities were deposited in a Trust at a price higher than the price at which
they are redeemed, this will represent a loss of capital when compared with
the original Public Offering Price of the Units. Conversely, to the extent
that the Bonds were acquired at a price lower than the redemption price, this
will represent an increase in capital when compared with the original Public
Offering Price of the Units. Distributions will generally be reduced by the
amount of the income which would otherwise have been paid with respect to
redeemed Securities and there will be distributed to Unitholders the principal
amount and any premium received on such redemption. The Estimated Current
Return and Estimated Long-Term Return in this event may be affected by such
redemptions. For the Federal tax effect on Unitholders of such redemptions and
resultant distributions, see paragraph (2) under "Other Matters--Federal
Tax Status".
(4)Evaluation of Securities is made on the basis of current offering prices
for the Securities. The offering prices are greater than the current bid
prices of the Securities which is the basis on which Unit value is
determined for purposes of redemption of Units (see "Unitholder Explanations
- --Public Offering--Offering Price").
(5)Other information regarding the Bonds in each Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Annual
Annual Profit Interest Bid Side
Trust Insurance Cost to (Loss) to Income to Evaluation of
Cost Sponsor Sponsor Trust Bonds
<S> <C> <C> <C> <C> <C>
California IM-IT.................................. $ -- $ 2,875,395 $ 17,080 $ 183,038 $ 2,867,925
Florida IM-IT Intermediate Laddered Maturity...... $ -- $ 2,941,745 $ 16,693 $ 145,380 $ 2,936,350
Florida IM-IT..................................... $ -- $ 2,942,360 $ 20,969 $ 185,970 $ 2,939,750
New Jersey IM-IT Intermediate Laddered Maturity... $ 205 $ 2,964,298 $ 8,363 $ 151,040 $ 2,950,188
Pennsylvania IM-IT................................ $ -- $ 2,860,150 $ 16,119 $ 183,300 $ 2,853,688
Texas IM-IT Intermediate Laddered Maturity........ $ -- $ 2,952,804 $ 11,446 $ 151,120 $ 2,941,725
Texas IM-IT....................................... $ -- $ 2,852,412 $ 8,908 $ 181,550 $ 2,837,625
North Carolina Quality............................ $ -- $ 2,749,624 $ 27,527 $ 172,575 $ 2,754,813
</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
Trust Aggregate Principal Range of Days Subsequent
Amount to First Settlement Date
<S> <C> <C>
California IM-IT.................................. -- --
Florida IM-IT Intermediate Laddered Maturity...... 23% 5 to 13 days
Florida IM-IT..................................... 16% 13 days
New Jersey IM-IT Intermediate Laddered Maturity... -- --
Pennsylvania IM-IT................................ -- --
Texas IM-IT Intermediate Laddered Maturity........ 59% 5 to 19 days
Texas IM-IT....................................... 45% 6 to 25 days
North Carolina Quality............................ -- --
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities in the
California IM-IT, Florida IM-IT Intermediate Laddered Maturity, Florida IM-IT,
New Jersey IM-IT Intermediate Laddered Maturity, Pennsylvania IM-IT, Texas
IM-IT Intermediate Laddered Maturity, Texas IM-IT and North Carolina Quality
Trusts were higher than the bid side evaluations of such Securities by 0.78%,
0.74%, 0.77%, 0.75%, 0.73%, 0.75%, 0.78% and 0.74%, 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 3% of the aggregate principal amount
of the Securities in the Texas IM-IT Intermediate Laddered Maturity Trust
are "zero coupon"bonds.
Underwriting. The Underwriters named below have severally purchased Units in
the following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
California
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,322
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Crowell, Weedon & Company One Wilshire Boulevard, Los Angeles, California 90017 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
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 100
3,072
</TABLE>
<TABLE>
<CAPTION>
Florida
IM-IT
Intermediate
Laddered
Name Maturity Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,550
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 100
3,000
</TABLE>
<TABLE>
<CAPTION>
Florida
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,347
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 250
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
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
3,147
</TABLE>
<TABLE>
<CAPTION>
New Jersey
IM-IT
Intermediate
Laddered
Name Maturity Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,400
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 250
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
3,000
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,105
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 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
Janney Montgomery Scott Inc. 1801 Market Street, 11th Floor, Philadelphia, Pennsylvania 19103 100
Legg Mason Wood Walker, Inc. 111 South Calvert Street, Baltimore, Maryland 21202 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 100
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 100
3,055
</TABLE>
<TABLE>
<CAPTION>
Texas
IM-IT
Intermediate
Laddered
Name Maturity Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,600
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 100
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
3,000
</TABLE>
<TABLE>
<CAPTION>
Texas
Name IM-IT Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,539
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
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 100
3,039
</TABLE>
<TABLE>
<CAPTION>
North Carolina
Name Quality Trust
Address Units
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,449
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York,
Unit Investment Trust Dept. New York 10292 100
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 23219 100
2,949
</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.
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 Municipals
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>
Name of Trust
Trust Investment Objective
<CAPTION>
<S> <C>
Tax-exempt income by investing in insured municipal
Insured Municipals Income Trust...................................... securities
Double tax-exemption for California residents by investing
California Insured Municipals Income Trust........................... in insured California municipal securities
Double and in certain cases triple tax-exemption for New
York residents by investing in insured New York municipal
New York Insured Municipals Income Trust............................. securities
Double and in certain cases triple tax-exemption for
Pennsylvania residents by investing in insured Pennsylvania
Pennsylvania Insured Municipals Income Trust......................... municipal securities
Insured Municipals Income Trust, Insured Multi-Series
(Premium Bond Series, National, Limited Maturity,
Intermediate, Short Intermediate, Discount, Alabama, Arizona,
Arkansas, California, California Intermediate, 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 Tax-exempt income by investing in insured municipal
York Limited Maturity, Ohio, Ohio Intermediate, Ohio securities; all issuers of bonds in a state trust are
Intermediate Laddered Maturity, Ohio Premium, Oklahoma, located in such state or in territories or possessions of
Pennsylvania, Pennsylvania Intermediate, Pennsylvania the United States-- providing exemptions from all state
Intermediate Laddered Maturity, Pennsylvania Premium, income tax for residents of such state (except for the
Tennessee, Texas, Texas Intermediate Laddered Maturity, Oklahoma IM-IT Trust where a portion of the income of the
Washington, West Virginia).......................................... Trust is subject to the Oklahoma state income tax
Tax-exempt income by investing in insured municipal
Insured Tax Free Bond Trust.......................................... securities
Tax-exempt income by investing in insured municipal
securities; all issuers of bonds in a state trust are
Insured Tax Free Bond Trust, Insured Multi-Series located in such state--providing exemptions from state
(National Limited Maturity, New York)............................... income tax for residents of such state
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Investors' Quality Tax-Exempt Trust.............................. Tax-exempt income by investing in municipal securities
Investors' Quality Tax-Exempt Trust, Multi-Series
(National, National AMT, Intermediate, Alabama, Arizona,
Arkansas, California, Colorado, Connecticut, Delaware,
Florida, Georgia, Hawaii, Kansas, Kentucky, Maine, Maryland, Tax-exempt income by investing in municipal securities; all
Massachusetts, Michigan, Minnesota, Missouri, Nebraska, issuers of bonds in a state trust are located in such state or
New Jersey, New York, North Carolina, Ohio, Oregon, in territories or possessions of the United States--providing
Pennsylvania, South Carolina, Virginia)......................... exemptions from state income tax for residents of such state
Tax-exempt income for investors not subject to the alternative
minimum tax by investing in municipal securities, some or all of
Investors' Quality Municipals Trust, AMT Series...................which are subject to the Federal alternative minimum tax
Investors' Corporate Income Trust.................................Taxable income by investing in corporate bonds
Investors' Governmental Securities--Income Trust................. Taxable income by investing in government-backed GNMA securities
High current income through an investment in a diversified
portfolio of foreign currency denominated corporate debt
Van Kampen Merritt International Bond Income Trust................obligations
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of
Van Kampen Merritt Insured Income Trust...........................insured, long-term or intermediate-term corporate debt securities
High dividend income and capital appreciation by investing in
Van Kampen Merritt Utility Income Trust...........................common stock of electric utilities
Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of the
Van Kampen Merritt Blue Chip Opportunity Trust....................Dow Jones Industrial Average*
Protect Unitholders' capital and provide the potential for
capital 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
Van Kampen Merritt Blue Chip Opportunity and of the creation of the trust were components of the Dow Jones
Treasury Trust...................................................Industrial Average*
High current income consistent with preservation of capital
through a 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
Van Kampen Merritt Emerging Markets Income Trust..................Brady Plan
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities which provide
Van Kampen Merritt Global Telecommunications Trust................equipment for or services to the telecommunications industry
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
Van Kampen Merritt Global Energy Trust............................the energy industry
Provide an above average total return through a combination of
potential capital appreciation and dividend income, consistent
with preservation of invested capital, by investing in a
Strategic Ten Trust portfolio of common stocks of the ten companies in a recognized
(United States, United Kingdom, and Hong Kong Portfolios)........stock exchange index having the highest dividend yields
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
Van Kampen Merritt Brand Name Equity Trust........................the non-durable consumer products industry
</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.
<TABLE>
Name of Mutual Fund
Fund Investment Objective
<CAPTION>
<S> <C>
Van Kampen Merritt U.S. Government Fund....................High current income by investing in U.S. Government securities
High current income exempt from Federal income taxes by investing in
Van Kampen Merritt Insured Tax Free Income Fund............insured municipal securities
High level of current income exempt from Federal income tax, consistent
Van Kampen Merritt Municipal Income Fund...................with preservation of capital
High current income exempt from Federal income taxes by investing in
Van Kampen Merritt Tax Free High Income Fund...............medium and lower grade municipal securities
High current income exempt from Federal and California income taxes by
Van Kampen Merritt California Insured Tax Free Fund........investing in insured California municipal securities
Provide a high level of current income by investing in medium and lower
grade domestic and foreign government and corporate debt securities.
Van Kampen Merritt High Yield Fund.........................The Fund will seek capital appreciation as a secondary objective
Long-term growth of both capital and dividend income by investing in
Van Kampen Merritt Growth and Income Fund..................dividend paying common stocks
High current income exempt from Federal and Pennsylvania state and
local income taxes by investing in medium and lower grade Pennsylvania
Van Kampen Merritt Pennsylvania Tax Free Income Fund.......municipal securities
High current income by investing in a broad range of money market
Van Kampen Merritt Money Market Fund.......................instruments that will mature within twelve months
High current income exempt from Federal income taxes by investing in a
broad range of municipal securities that will mature within twelve
Van Kampen Merritt Tax Free Money Fund.....................months
High current income by investing in a global portfolio of high quality
debt securities denominated in various currencies having remaining
Van Kampen Merritt Short-Term Global Income Fund...........maturities of not more than three years
High level of current income with a relatively stable net asset value
Van Kampen Merritt Adjustable Rate U.S. Government Fund....investing in U.S. Government securities
High level of current income exempt from federal income tax, consistent
Van Kampen Merritt Limited Term Municipal Income Fund......with preservation of capital
Provide capital appreciation and current income by investing in a
diversified portfolio of common stocks and income securities issued by
Van Kampen Merritt Utility Fund............................companies engaged in the utilities industry
Provide shareholders with high current income. The Fund will seek
Van Kampen Merritt Strategic Income Fund...................capital appreciation as a secondary objective
</TABLE>
<TABLE>
Name of Closed-end Fund
Fund Investment Objective
<CAPTION>
<S> <C>
High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment
Van Kampen Merritt Municipal Income Trust......................grade municipal securities
High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt California Municipal Trust..................investment grade California municipal securities
High current income while seeking to preserve shareholders' capital
by investing in a diversified portfolio of high yield fixed income
Van Kampen Merritt Intermediate Term High Income Trust.........securities
High current income while seeking to preserve shareholders' capital
by investing in a diversified portfolio of high yield fixed income
Van Kampen Merritt Limited Term High Income Trust..............securities
High current income, consistent with preservation of capital by
Van Kampen Merritt Prime Rate Income Trust.....................investing in interests in floating or variable rate senior loans
High current income exempt from Federal income tax, consistent with
Van Kampen Merritt Investment Grade Municipal Trust............preservation of capital
High level of current income exempt from Federal income tax,
Van Kampen Merritt Municipal Trust.............................consistent with preservation of capital
High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt California Quality Municipal Trust..........investment grade California municipal securities
High current income exempt from Federal income taxes and Florida
intangible personal property taxes with safety of principal by
investing in a diversified portfolio of investment grade Florida
Van Kampen Merritt Florida Quality Municipal Trust.............municipal securities
High current income exempt from Federal as well as New York State
and New York City income taxes with safety of principal by
investing in a diversified portfolio of investment grade New York
Van Kampen Merritt New York Quality Municipal Trust............municipal securities
High current income exempt from Federal and Ohio income taxes with
safety of principal by investing in a diversified portfolio of
Van Kampen Merritt Ohio Quality Municipal Trust................investment grade Ohio municipal securities
High current income exempt from Federal and Pennsylvania income
taxes with safety of principal by investing in a diversified
Van Kampen Merritt Pennsylvania Quality Municipal Trust........portfolio of investment grade Pennsylvania municipal securities
High level of current income exempt from Federal income tax,
Van Kampen Merritt Trust for Investment Grade Municipals.......consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a
diversified portfolio of municipal securities which are covered by
Van Kampen Merritt Trust for Insured Municipals................insurance with respect to timely payment of principal and interest
High level of current income exempt from Federal and California
income taxes, consistent with preservation of capital by investing
Van Kampen Merritt Trust for Investment Grade CA Municipals....in a diversified portfolio of California municipal securities
High level of current income exempt from Federal income taxes,
consistent with preservation of capital. The Fund also seeks to
offer its Shareholders the opportunity to own securities exempt
Van Kampen Merritt Trust for Investment Grade FL Municipals....from Florida intangible personal property taxes
High level of current income exempt from Federal income taxes and
Van Kampen Merritt Trust for Investment Grade NJ Municipals New Jersey gross income taxes, consistent with preservation of
.............................................................capital
High level of current income exempt from Federal as well as from
New York State and New York City income taxes, consistent with
Van Kampen Merritt Trust for Investment Grade NY Municipals....preservation of capital
High level of current income exempt from Federal and Pennsylvania
income taxes and, where possible under local law, local income and
Van Kampen Merritt Trust for Investment Grade PA Municipals....property taxes, consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a
Van Kampen Merritt Municipal Opportunity Trust.................diversified portfolio of municipal securities
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a
Van Kampen Merritt Advantage Municipal Income Trust............diversified portfolio of municipal securities
High level of current income exempt from Federal and Pennsylvania
Van Kampen Merritt Advantage Pennsylvania Municipal income taxes and, where possible under local law, local income and
Income Trust..................................................property taxes, consistent with preservation of capital
Provide common shareholders with a high level of current income
exempt from Federal income taxes, consistent with preservation of
Van Kampen Merritt Strategic Sector Municipal Trust............capital
High level of current income exempt from Federal income taxes,
Van Kampen Merritt Value Municipal Income Trust................consistent with preservation of capital
Van Kampen Merritt California Value Municipal High level of current income exempt from Federal and California
Income Trust..................................................income taxes, consistent with preservation of capital
High level of current income exempt from Federal income taxes and
Van Kampen Merritt Massachusetts Value Municipal Massachusetts personal income taxes, consistent with preservation
Income Trust.................................................of capital
Van Kampen Merritt New Jersey Value Municipal High level of current income exempt from Federal income taxes and
Income Trust..................................................New Jersey gross income tax, consistent with preservation of capital
High level of current income exempt from Federal as well as New
Van Kampen Merritt New York Value Municipal York State and New York City income taxes, consistent with
Income Trust..................................................preservation of capital
Van Kampen Merritt Ohio Value Municipal Income High level of current income exempt from Federal and Ohio income
Trust.........................................................taxes, 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
High level of current income exempt from federal income tax,
Van Kampen Merritt Municipal Opportunity Trust II..............consistent with preservation of capital
High level of current income exempt from federal income tax,
consistent with preservation of capital. The Fund seeks to offer
its common shareholders the opportunity to own securities exempt
Van Kampen Merritt Florida Municipal Opportunity Trust ........from Florida intangible personal property taxes
Provide common shareholders with a high level of current income
exempt from federal income tax, consistent with preservation of
Van Kampen Merritt Advantage Municipal Income Trust II.........capital
To provide common shareholders with a high level of current income
exempt from federal income tax, consistent with preservation of
Van Kampen Merritt Select Sector Municipal Trust...............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 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 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.
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 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 Trusts. In the event of
termination of the Fund or any Trust, written notice thereof will be sent by
the Trustee to each Unitholder of such Trust at his address appearing on the
registration books of the Fund maintained by the Trustee. Within a reasonable
time thereafter the Trustee shall liquidate any Securities then held in such
Trust and shall deduct from the funds of such Trust any accrued costs,
expenses or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and costs of liquidation and any amounts required
as a reserve to provide for payment of any applicable taxes or other
governmental charges. The sale of Securities in the Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were
not required at such time. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the principal amount or par
amount of Securities represented by the Units held by such Unitholder. The
Trustee shall then distribute to each Unitholder his share of the balance of
the Interest and Principal Accounts. With such distribution the Unitholder
shall be furnished a final distribution statement of the amount distributable.
At such time as the Trustee in its sole discretion shall determine that any
amounts held in reserve are no longer necessary, it shall make distribution
thereof to Unitholders in the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so
insured are held by such Trust, the price to be received by such Trust upon
the disposition of any such Bond which is in default, by reason of nonpayment
of principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for
the Trustee to, and the Trustee does not currently intend to, dispose of any
Bond or Bonds if retention of such Bond or Bonds, until due, shall be deemed
to be in the best interest of Unitholders, including, but not limited to,
situations in which a Bond or Bonds so insured are in default and situations
in which a Bond or Bonds so insured have deteriorated market prices resulting
from a significant risk of default. Since the Preinsured Bonds will reflect
the value of the related insurance, it is the present intention of the Sponsor
not to direct the Trustee to hold any of such Preinsured Bonds after the date
of termination. All proceeds received, less applicable expenses, from
insurance on defaulted Bonds not disposed of at the date of termination will
ultimately be distributed to Unitholders of record as of such date of
termination as soon as practicable after the date such defaulted Bond or Bonds
become due and applicable insurance proceeds have been received by the
Trustee.
Limitation on Liabilities. The Sponsor, the Evaluator and the Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
their reckless disregard of their obligations and duties hereunder. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Securities. In the event of the failure of
the Sponsor to act under the Trust Agreement, the Trustee may act thereunder
and shall not be liable for any action taken by it in good faith under the
Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Fund
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see "
Underwriting") at the Public Offering Price, plus 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
$20.00 per Unit for less than 100 Units, $22.00 per Unit for any single
transaction of 100 to 249 Units, $21.50 per Unit for any single transaction of
250 to 499 Units, $24.50 per Unit for any single transaction of 500 to 999
Units and $24.00 per Unit for any single transaction of 1,000 or more Units of
a State Intermediate Laddered Maturity Trust, in the case of a State Trust
(other than a State Intermediate Laddered Maturity Trust) $30.00 per Unit for
less than 100 Units, $36.00 per Unit for any single transaction of 100 to 249
Units, $38.00 per Unit for any single transaction of 250 to 499 Units, $39.00
per Unit for any single transaction of 500 to 999 Units and $39.00 per Unit
for any single transaction of 1,000 or more Units, provided that such Units
are acquired either from the Sponsor (in the case of dealer transactions) or
through the Sponsor (in the case of transactions involving brokers or others).
The increased concession or agency commission is a result of the discount
given to purchasers for quantity purchases. See "Unitholder
Explanations--Public Offering--General". Certain commercial banks are
making Units of the Fund available to their customers on an agency basis. A
portion of the sales charge paid by these customers (equal to the agency
commission referred to above) is retained by or remitted to the banks. Under
the Glass-Steagall Act, banks are prohibited from underwriting Units of the
Fund; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. Any quantity discount (see "
Unitholder Explanations--Public Offering--General") provided to investors
will be borne by the selling dealer or agent. For secondary market
transactions, such concession or agency commission will amount to 70% of the
applicable sales charge as determined using the table found in "Unitholder
Explanations--Public Offering".
To facilitate the handling of transactions during the initial offering period,
sales of Units shall normally be limited to transactions involving a minimum
of five Units. Further purchases may be made in multiples of one Unit. The
minimum purchase in the secondary market will be one Unit.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units and to change the amount of the concession or agency
commission to dealers and others from time to time. See "Underwriting"
.
Sponsor and Underwriter Compensation. The Underwriters will receive a gross
sales commission equal to that percentage of the Public Offering Price of the
Units (excluding Purchased Interest) as indicated under "Unitholder
Explanations--Public Offering--Offering Price"less any reduced sales
charges for quantity purchases as described under "Unitholder
Explanations--Public Offering--General".
The Sponsor will receive from the Underwriters the excess of such gross sales
commission over $35.00, $29.00, $27.00, $22.00, $22.00 and $35.00 per Unit of
any Quality, IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short
Intermediate, State Intermediate Laddered Maturity and other Insured Trusts,
respectively, as of the Date of Deposit. In connection with quantity sales to
purchasers of any 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 State Intermediate Laddered Maturity Trust the
Underwriters will receive from the Sponsor commissions totalling $23.00 per
Unit for any single transaction of 100 to 249 Units, $23.00 per Unit for any
single transaction of 250 to 499 Units, $24.75 per Unit for any single
transaction of 500 to 999 Units and $24.00 per Unit for any single
transaction of 1,000 or more Units. In connection with quantity sales to
purchasers of any Pennsylvania IM-IT Trust the Underwriters will receive from
the Sponsor commissions totalling $35.00 per Unit for any single transaction
of 100 to 249 Units, $36.00 per Unit for any single transaction of 250 to 499
units, $37.00 per Unit for any single transaction of 500 to 999 Units and
$38.00 per Unit for any single transaction of 1,000 or more Units. In
addition, any Underwriter that sells a total of 25% or 1,500 Units, whichever
is greater, of any Pennsylvania IM-IT Trust will receive an additional $2.00
per each such Unit. 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 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.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby and certain matters
relating to Federal and Florida 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. 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. Saul,
Ewing, Remick & Saul has acted as special counsel to the Fund for Pennsylvania
tax matters. Leonard Hurt Terry & Blinn has acted as special counsel to the
Fund for Texas 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:
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;
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;
Any proceeds paid under an insurance policy or policies dated the Date of
Deposit, issued to an Insured Trust by AMBAC Indemnity, Financial Guaranty or
a combination thereof with respect to the Bonds which represent maturing
interest on defaulted obligations held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the issuer of the defaulted obligations provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations; and
Any proceeds paid under individual policies obtained by issuers of Bonds which
represent maturing interest on defaulted obligations held by the Trustee will
be excludable from Federal gross income if, and to the same extent as, such
interest would have been excludable if paid in the normal course by the issuer
of the defaulted obligations provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable, customary and
consistent with the reasonable expectation that the issuer of the obligations,
rather than the insurer, will pay debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Bond, depending on the date the Bond was
issued. In addition, special rules apply if the purchase price of a Bond
exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "
adjusted issue price") to prior owners. The application of these rules
will also vary depending on the value of the Bond on the date a Unitholder
acquires his Units and the price the Unitholder pays for his Units. Investors
with questions regarding these Code sections should consult with their tax
advisers.
"The Revenue Reconciliation Act of 1993"(the "Tax Act")
subjects tax-exempt bonds to the market discount rules of the Code effective
for bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds an
investor's purchase price (except to the extent that such difference, if any,
is attributable to original issue discount not yet accrued). Market discount
can arise based on the price a Trust pays for Bonds or the price a Unitholder
pays for his or her Units. Under the Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been treated as
capital gain. Market discount that accretes while a Trust holds a Bond would
be recognized as ordinary income by the Unitholders when principal payments
are received on the Bond, upon sale or at redemption (including early
redemption), or upon the sale or redemption of his or her Units, unless a
Unitholder elects to include market discount in taxable income as it accrues.
The market discount rules are complex and Unitholders should consult their tax
advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 depends upon
the corporation's alternative minimum taxable income, which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income and the
Superfund Tax of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust, or REMIC) is an amount equal
to 75% of the excess of such corporation's "adjusted current earnings"
over an amount equal to its alternative minimum taxable income (before such
adjustment item and the alternative tax net operating loss deduction). "
Adjusted current earnings"includes all tax exempt interest, including
interest on all of the Bonds in the Fund. Unitholders are urged to consult
their tax advisers with respect to the particular tax consequences to them
including the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase or improve
a personal residence). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of
the interest expense attributable to ownership of such Units. Investors with
questions regarding this issue should consult with their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user"
of the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or
related person, will not be excludible from Federal gross income, although
interest on such Bonds received by others would be excludible from Federal
gross income. "Substantial user"and "related person"are
defined under U.S. Treasury Regulations. Any person who believes that he or
she may be a "substantial user"or a "related person"as so
defined should contact his or her tax adviser.
In the opinion of Tanner Propp & Farber, special counsel to the Fund for New
York tax matters, under existing law, the Fund and each Trust are not
associations taxable as corporations and the income of each Trust will be
treated as the income of the Unitholders under the income tax laws of the
State and City of New York.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
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.
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.
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 233 (California IM-IT, Florida IM-IT Intermediate Laddered
Maturity, Florida IM-IT, New Jersey IM-IT Intermediate Laddered Maturity,
Pennsylvania IM-IT, Texas IM-IT Intermediate Laddered Maturity, Texas 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 233 (California IM-IT, Florida IM-IT
Intermediate Laddered Maturity, Florida IM-IT, New Jersey IM-IT Intermediate
Laddered Maturity, Pennsylvania IM-IT, Texas IM-IT Intermediate Laddered
Maturity, Texas IM-IT and North Carolina Quality Trusts) as of September 29,
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 233 (California
IM-IT, Florida IM-IT Intermediate Laddered Maturity, Florida IM-IT, New Jersey
IM-IT Intermediate Laddered Maturity, Pennsylvania IM-IT, Texas IM-IT
Intermediate Laddered Maturity, Texas IM-IT and North Carolina Quality Trusts)
as of September 29, 1994, in conformity with generally accepted accounting
principles.
Chicago, Illinois GRANT THORNTON
September 29, 1994
<TABLE>
INSURED MUNICIPALS INCOME TRUST
and
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 233
Statements of Condition
As of
September 29, 1994
<CAPTION>
Florida New Jersey
IM-IT IM-IT
Intermediate Intermediate
INVESTMENT IN SECURITIES California Laddered Florida Laddered
IM-IT Trust Maturity Trust IM-IT Trust Maturity Trust
<S> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities
<F1><F2><F4>............................................ $ 2,892,475 $ 2,958,438 $ 2,963,329 $ 2,972,661
Accrued interest to the First Settlement Date <F1><F4>... 38,182 21,812 53,096 24,163
Total.................................................... $ 2,930,657 $ 2,980,250 $ 3,016,425 $ 2,996,824
LIABILITY AND INTEREST OF
UNITHOLDERS
Liability-- .............................................
Accrued interest payable to Sponsor <F1><F4> $ 7,676 $ -- $ 22,101 $ --
Interest of Unitholders-- ...............................
Cost to investors <F3>................................... 3,072,000 3,071,730 3,147,000 3,088,740
Less: Gross underwriting commission <F3>................. 149,019 91,480 152,676 91,916
Net interest to Unitholders <F1><F3><F4>................. 2,922,981 2,980,250 2,994,324 2,996,824
Total.................................................... $ 2,930,657 $ 2,980,250 $ 3,016,425 $ 2,996,824
<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:
Accrued
Principal Offering Interest to
Amount of Amount of Price of Expected
Letter of Bonds Under Bonds Under Delivery
Credit Contracts Contracts Dates
California IM-IT Trust......................... $2,929,450....$3,135,000....$2,892,475....$36,975...
Florida IM-IT Intermediate Laddered Maturity
Trust......................................... $2,979,401....$3,000,000....$2,958,438....$20,963...
Florida IM-IT Trust............................ $3,015,502....$3,080,000....$2,963,329....$52,173...
New Jersey IM-IT Intermediate Laddered
Maturity Trust................................ $2,994,393....$3,000,000....$2,972,661....$21,732...
<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>
<TABLE>
INSURED MUNICIPALS INCOME TRUST
and
INVESTORS' QUALITY TAX-EXEMPT TRUST
MULTI-SERIES 233
Statements of Condition (Continued)
As of
September 29, 1994
<CAPTION>
Texas
IM-IT
Intermediate
INVESTMENT IN SECURITIES Pennsylvania Laddered Texas North Carolina
IM-IT Trust Maturity Trust IM-IT Trust Quality Trust
<S> <C> <C> <C> <C>
Contracts to purchase tax-exempt securities
<F1><F2><F4>............................................ $ 2,876,269 $ 2,964,250 $ 2,861,320 $ 2,777,151
Accrued interest to the First Settlement Date <F1><F4>... 53,919 24,599 38,119 47,470
Total.................................................... $ 2,930,188 $ 2,988,849 $ 2,899,439 $ 2,824,621
LIABILITY AND INTEREST OF
UNITHOLDERS
Liability-- .............................................
Accrued interest payable to Sponsor <F1><F4> $ 23,369 $ -- $ 7,860 $ 18,707
Interest of Unitholders-- ...............................
Cost to investors <F3>................................... 3,055,000 3,080,520 3,039,000 2,949,000
Less: Gross underwriting commission <F3>................. 148,181 91,671 147,421 143,086
Net interest to Unitholders <F1><F3><F4>................. 2,906,819 2,988,849 2,891,579 2,805,914
Total.................................................... $ 2,930,188 $ 2,988,849 $ 2,899,439 $ 2,824,621
<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:
Accrued
Principal Offering Interest to
Amount of Amount of Price of Expected
Letter of Bonds Under Bonds Under Delivery
Credit Contracts Contracts Dates
Pennsylvania IM-IT Trust...................... $ 2,928,395 $ 3,100,000 $ 2,876,269 $ 52,126
Texas IM-IT Intermediate Laddered Maturity
Trust........................................ $ 2,989,589 $ 3,000,000 $ 2,964,250 $ 25,339
Texas IM-IT Trust............................. $ 2,901,200 $ 3,055,000 $ 2,861,320 $ 39,880
North Carolina Quality Trust.................. $ 2,821,664 $ 3,000,000 $ 2,777,151 $ 44,513
<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>
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.
CALIFORNIA
<TABLE>
<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 20.1% 6.88% 7.51% 8.14% 8.76% 9.39% 10.01% 10.64%
22.80 - 55.10 38.00 - 91.90 34.7 8.42 9.19 9.95 10.72 11.49 12.25 13.02
91.90 - 140.00 37.4 8.79 9.58 10.38 11.18 11.98 12.78 13.58
55.10 - 115.00 37.9 8.86 9.66 10.47 11.27 12.08 12.88 13.69
115.00 - 212.38 140.00 - 250.00 42.4 9.55 10.42 11.28 12.15 13.02 13.89 14.76
212.38 - 250.00 43 9.65 10.53 11.40 12.28 13.16 14.04 14.91
250.00 - 424.76 45.6 10.11 11.03 11.95 12.87 13.79 14.71 15.63
Over 250.00 Over 250.00 46.2 10.22 11.15 12.08 13.01 13.94 14.87 15.80
</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.
FLORIDA
<TABLE>
<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>
INTERMEDIATE LADDERED MATURITY
* The State of Florida imposes no income tax on individuals; accordingly, the
table reflects only the exemption from Federal income taxes. The table does
not reflect the exemption of Units of the Florida Trust from the State's
intangible tax; accordingly, Florida residents subject to such tax would need
a somewhat higher taxable estimated current return than those shown to equal
the tax-exempt estimated current return of the Florida Trust.
FLORIDA
<TABLE>
<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>
* The State of Florida imposes no income tax on individuals; accordingly, the
table reflects only the exemption from Federal income taxes. The table does
not reflect the exemption of Units of the Florida Trust from the State's
intangible tax; accordingly, Florida residents subject to such tax would need
a somewhat higher taxable estimated current return than those shown to equal
the tax-exempt estimated current return of the Florida Trust.
NEW JERSEY INTERMEDIATE LADDERED MATURITY
<TABLE>
<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 17% 5.42% 6.02% 6.63% 7.23% 7.83% 8.43% 9.04%
22.80 - 55.10 38.00 - 91.90 32.5 6.67 7.41 8.15 8.89 9.63 10.37 11.11
91.90 - 140.00 35.3 6.96 7.73 8.50 9.27 10.05 10.82 11.59
55.10 - 115.00 35.6 6.99 7.76 8.54 9.32 10.09 10.87 11.65
115.00 - 250.00 140.00 - 250.00 40.3 7.54 8.38 9.21 10.05 10.89 11.73 12.56
Over 250.00 Over 250.00 43.6 7.98 8.87 9.75 10.64 11.52 12.41 13.30
</TABLE>
PENNSYLVANIA
<TABLE>
<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 17.4% 6.66% 7.26% 7.87% 8.47% 9.08% 9.69% 10.29%
22.80 - 55.10 38.00 - 91.90 30 7.86 8.57 9.29 10.00 10.71 11.43 12.14
55.10 - 115.00 91.90 - 140.00 32.9 8.20 8.94 9.69 10.43 11.18 11.92 12.67
115.00 - 250.00 140.00 - 250.00 37.8 8.84 9.65 10.45 11.25 12.06 12.86 13.67
Over 250.00 Over 250.00 41.3 9.37 10.22 11.07 11.93 12.78 13.63 14.48
</TABLE>
* The table does not reflect the effect of the exemption of the Trust from
local personal property taxes and from the Philadelphia School District
Investment Net Income Tax, accordingly; residents of Pennsylvania subject to
such taxes would need a higher taxable estimated current return than those
shown to equal the tax-exempt estimated current return of the Trust.
TEXAS INTERMEDIATE LADDERED MATURITY
<TABLE>
<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>
* The State of Texas Currently imposes no income tax on individuals;
accordingly, the table reflects only exemption from Federal income taxes.
TEXAS
<TABLE>
<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>
* The State of Texas Currently imposes no income tax on individuals;
accordingly, the table reflects only exemption from Federal income taxes.
NORTH CAROLINA
<TABLE>
<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.
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.
California IM-IT Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 4.00 $ 4.00
December 1994 - May 2018 4.80 4.80
June 2018 4.80 $ 81.38 $ .72 86.90
July 2018 - May 2021 4.44 4.44
June 2021 4.44 162.76 1.57 168.77
July 2021 - September 2021 3.67 3.67
October 2021 3.67 162.76 1.63 168.06
November 2021 - December 2023 2.87 2.87
January 2024 2.87 162.76 1.63 167.26
February 2024 2.08 141.60 1.41 145.09
March 2024 - August 2024 1.38 1.38
September 2024 1.04 130.21 1.30 132.55
October 2024 - February 2025 .75 .75
March 2025 .67 32.55 .29 33.51
April 2025 - November 2028 .61 .61
December 2028 .61 146.48 1.37 148.46
</TABLE>
Florida IM-IT Intermediate Laddered Maturity Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 3.22 $ 3.22
December 1994 - November 1999 3.87 3.87
December 1999 3.87 $ 200.00 $ 1.24 205.11
January 2000 - June 2000 3.19 3.19
July 2000 3.19 66.66 .50 70.35
August 2000 2.92 13.34 .09 16.35
September 2000 2.87 2.87
October 2000 2.87 120.00 .81 123.68
November 2000 - March 2001 2.44 2.44
April 2001 2.44 33.33 .24 36.01
May 2001 - June 2001 2.31 2.31
July 2001 2.31 66.67 .52 69.50
August 2001 - September 2001 2.03 2.03
October 2001 2.03 100.00 .75 102.78
November 2001 - February 2002 1.62 1.62
March 2002 1.62 200.00 1.54 203.16
April 2002 - April 2003 .79 .79
May 2003 .79 200.00 1.57 202.36
</TABLE>
Florida IM-IT Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 3.97 $ 3.97
December 1994 - June 2016 4.76 4.76
July 2016 4.76 $ 152.52 $ 1.94 159.22
August 2016 - June 2019 3.80 3.80
July 2019 3.80 63.55 .65 68.00
August 2019 - September 2021 3.49 3.49
October 2021 3.49 158.89 1.59 163.97
November 2021 - October 2023 2.71 2.71
November 2023 2.71 95.32 .79 98.82
December 2023 - August 2024 2.32 2.32
September 2024 2.32 158.89 1.59 162.80
October 2024 1.54 158.88 1.59 162.01
November 2024 - September 2027 .77 .77
October 2027 .77 31.77 .24 32.78
November 2027 - April 2028 .65 .65
May 2028 .65 158.88 1.46 160.99
</TABLE>
New Jersey IM-IT Intermediate Laddered Maturity Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 3.35 $ 3.35
December 1994 - February 1999 4.02 4.02
March 1999 4.02 $ 200.00 $ 1.57 205.59
April 1999 - February 2000 3.22 3.22
March 2000 3.15 33.33 .27 36.75
April 2000 - June 2000 3.09 3.09
July 2000 3.09 166.67 1.39 171.15
August 2000 - June 2001 2.38 2.38
July 2001 2.38 200.00 1.68 204.06
August 2001 - June 2002 1.53 1.53
July 2002 1.53 165.00 1.34 167.87
August 2002 .84 .84
September 2002 .84 33.33 .30 34.47
October 2002 - February 2003 .69 .69
March 2003 .61 35.00 .30 35.91
April 2003 - June 2003 .54 .54
July 2003 .54 166.67 1.20 168.41
</TABLE>
Pennsylvania IM-IT Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 4.02 $ 4.02
December 1994 - June 2004 4.83 4.83
July 2004 4.83 $ 114.56 $ 1.24 120.63
August 2004 - September 2017 4.22 4.22
Octobver 2017 4.22 49.10 .45 53.77
November 2017 - June 2018 4.00 4.00
July 2018 4.00 32.73 .29 37.02
August 2018 - October 2021 3.86 3.86
November 2021 3.86 163.67 1.75 169.28
December 2021 - June 2022 3.00 3.00
July 2022 2.65 327.33 3.10 333.08
August 2022 - June 2023 1.48 1.48
July 2023 1.11 163.67 1.43 166.21
August 2023 - June 2026 .79 .79
July 2026 .79 163.66 1.74 166.19
</TABLE>
Texas IM-IT Intermediate Laddered Maturity Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 3.35 $ 3.35
December 1994 - July 1999 4.02 4.02
August 1999 4.02 $ 86.66 $ .71 91.39
September 1999 3.67 3.67
October 1999 3.43 113.34 .92 117.69
November 1999 - December 1999 3.21 3.21
January 2000 3.21 188.33 1.62 193.16
February 2000 - May 2000 2.40 2.40
June 2000 2.37 11.67 .12 14.16
July 2000 - May 2001 2.34 2.34
June 2001 2.34 200.00 1.68 204.02
July 2001 - December 2001 1.50 1.50
January 2002 1.50 33.33 34.83
February 2002 1.50 66.67 .58 68.75
March 2002 - August 2002 1.22 1.22
September 2002 1.22 100.00 .82 102.04
October 2002 - January 2003 .81 .81
February 2003 .81 133.33 1.19 135.33
March 2003 - September 2003 .22 .22
October 2003 .07 66.67 .57 67.31
</TABLE>
Texas IM-IT Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 4.00 $ 4.00
December 1994 - June 2004 4.81 4.81
July 2004 4.81 $ 64.16 $ .70 69.67
August 2004 - July 2015 4.46 4.46
August 2015 4.23 65.81 .69 70.73
September 2015 4.13 49.36 .51 54.00
October 2015 - July 2016 3.88 3.88
August 2016 3.63 69.10 .72 73.45
September 2016 - December 2016 3.52 3.52
January 2017 3.52 164.53 1.73 169.78
February 2017 - August 2020 2.68 2.68
September 2020 2.45 98.72 .88 102.05
October 2020 - April 2022 2.25 2.25
May 2022 2.25 164.52 1.51 168.28
June 2022 - May 2024 1.51 1.51
June 2024 1.10 164.53 1.58 167.21
July 2024 - June 2028 .74 .74
July 2028 .74 164.53 1.64 166.91
</TABLE>
North Carolina Quality Trust
Monthly
<TABLE>
<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> <C>
November 1994 $ 3.92 $ 3.92
December 1994 - July 2010 4.70 4.70
August 2010 4.70 $ 67.81 $ .58 73.09
September 2010 - February 2014 4.42 4.42
March 2014 4.42 84.78 .67 89.87
April 2014 - April 2017 4.09 4.09
May 2017 4.09 169.55 1.69 175.33
June 2017 - December 2019 3.26 3.26
January 2020 3.26 169.55 1.62 174.43
February 2020 - September 2020 2.47 2.47
October 2020 2.47 169.55 1.56 173.58
November 2020 - May 2022 1.71 1.71
June 2022 1.71 84.77 .85 87.33
July 2022 - December 2022 1.30 1.30
January 2023 1.30 169.55 1.76 172.61
February 2023 - February 2024 .43 .43
March 2024 .17 101.73 1.02 102.92
</TABLE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
<TABLE>
<CAPTION>
Title
Page
<S> <C>
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
Risk Factors 9
Replacement Bonds 12
Bond Redemptions 13
Distributions 13
Certificates 13
Estimated Current Returns and Estimated Long-Term Returns 14
Interest Earning Schedule 14
Calculation of Estimated Net Annual Interest Income 14
Purchased and Accrued Interest 15
Purchased Interest 15
Accrued Interest 15
Public Offering 15
General 15
Offering Price 17
Market for Units 18
Distributions of Interest and Principal 18
Reinvestment Option 19
Redemption of Units 20
Reports Provided 21
Insurance on the Bonds in the Insured Trusts 21
CALIFORNIA IM-IT TRUST 28
FLORIDA IM-IT INTERMEDIATE LADDERED MATURITY
TRUST 36
FLORIDA IM-IT TRUST 42
NEW JERSEY IM-IT INTERMEDIATE LADDERED MATURITY
TRUST 48
PENNSYLVANIA IM-IT TRUST 54
TEXAS IM-IT INTERMEDIATE LADDERED MATURITY TRUST 61
TEXAS IM-IT TRUST 66
NORTH CAROLINA QUALITY TRUST 72
NOTES TO PORTFOLIOS 79
UNDERWRITING 81
TRUST ADMINISTRATION 85
Fund Administration and Expenses 85
Sponsor 85
Compensation of Sponsor and Evaluator 89
Trustee 89
Trustee's Fee 89
Portfolio Administration 90
Sponsor Purchases of Units 91
Insurance Premiums 91
Miscellaneous Expenses 91
General 91
Amendment or Termination 91
Limitation on Liabilities 92
Unit Distribution 92
Sponsor and Underwriter Compensation 93
OTHER MATTERS 94
Legal Opinions 94
Independent Certified Public Accountants 94
FEDERAL TAX STATUS 94
DESCRIPTION OF SECURITIES RATINGS 97
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS 98
STATEMENTS OF CONDITION 99
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
TABLES 103
ESTIMATED CASH FLOWS TO UNITHOLDERS 107
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
(R)denotes a registered trademark of Van Kampen Merritt Inc.
September 29, 1994
Insured Municipals
Income Trust
and
Investors' Quality Tax-
Exempt Trust,
Multi-Series 233
California IM-IT 132
Florida IM-IT Intermediate Laddered Maturity Series 10
Florida IM-IT 84
New Jersey IM-IT Intermediate Laddered Maturity Series 4
Pennsylvania IM-IT 193
Texas IM-IT Intermediate Laddered Maturity Series 1
Texas IM-IT 38
North Carolina Quality 77
Van Kampen Merritt (R)
Investing with a sense of direction
One Parkview Plaza
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
and Florida 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 New
Jersey residents of Units of the New Jersey IM-IT Trust.
3.6 Opinion and consent of counsel as to income tax status to
Pennsylvania residents of Units of the Pennsylvania IM-IT Trust.
3.7 Opinion and consent of counsel as to income tax status to Texas
residents of Units of the Texas IM-IT and Texas IM-IT Intermediate
Laddered Maturity Trusts.
3.8 Opinion and consent of counsel as to income tax status to North
Carolina residents of Units of the North Carolina IM-IT 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 233, 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 233 has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois
on the 29th day of September, 1994.
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt
Trust, Multi-Series 233
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 September 29, 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 233
Trust Agreement
Dated: September 29,1994
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 233
(Note: Incorporated herein and made a part hereof as indicated below
are the corresponding "Portfolios" of each of the Trusts as set
forth in the Prospectus.)
Exhibit 1.4
--
AMBAC AMBAC Indemnity Corporation
c/o CT Corporation Systems
Municipal Bond Investment 44 East Mifflin Street
Trust Insurance Policy Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company
Agrees to Guarantee
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 233
(New Jersey Insured Municipals Income Trust,Intermediate
Laddered Maturity, Series 4)
Van Kampen Merritt, Inc.
("Investment Trust") the insured, the payment of that portion of the
principal of and interest on each of the Bonds which shall be due during
the Policy Period but is unpaid by reason of Nonpayment by the Issuer, in
consideration of the insurance premium paid and subject to the terms and
conditions contained herein or added hereto.
Policy No. FE013580 Policy Date: September
29, 1994
Trustee: The Bank of New York
101 Barclay Street, 17flW
New York, New York 10286
In Witness Whereof, the Insurer has caused this Policy to be affixed
with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal
and signatures and binding upon the Insurer by virtue of the
countersignature of its duly authorized representative.
P. Lassiter
President@AMBAC Indemnity Corporation
Stephen D. Cooke
Secretary
/w/Nancy Davila
Authorized Representative@
1. Definitions
(a) "Policy" is this policy of insurance and all applications and
schedules for Municipal Bond Investment Trust Insurance relating hereto,
all of which are hereby incorporated by reference herein.
(b) "Bonds" are the specific securities covered by this Policy and
are identified and described in the Schedule attached hereto and hereby
made a part hereof.
(c) "Issuer" is each respective issuer, identified in the Schedule,
of the Bonds.
(d) "Investment Trust" is the entity represented to have an
insurable interest in the Bonds insured under this Policy, identified on
the face of this Policy.
(e) "Trustee" is the Trustee of the Investment Trust, or any
successor Trustee thereto or Co-Trustee therewith.
(f) "Sponsor" is the firm or entity responsible for creating the
Investment Trust and thereafter performing the services to it required of
its sponsor, or any successor Sponsor thereof or Co-Sponsor therewith.
(g) "Insured Instrument" is any instrument evidencing all or any
part of the principal or of interest on a Bond which is Due for Payment.
(h) "Policy Period" is the period during which this Policy of
insurance is effective. The Policy Period commences at 12:01 A.M.
(i) "Premium Installment Period" is the period for which
installments of the annual insurance premium are payable monthly,
quarterly or semiannually, as determined initially for the Investment
Trust.
(j) "Nonpayment" is the failure of an Issuer to provide sufficient
funds to the payment agent for payment in full of all principal and
interest on a Bond which is Due for Payment.
(k) "Due for Payment," when referring to principal of a Bond (or
Insured Instrument evidencing such principal), is when the stated
maturity date has been reached, and does not refer to any earlier date on
which payment is due by reason of call for redemption, acceleration or
other advancement of maturity; and when referring to interest on a Bond
(or Insured Instrument evidencing such interest), is when the stated date
for payment has been reached.
(l) "Bond Proceedings" are the legal proceedings by which each of
the Bonds has been authorized, issued or secured, including the governing
statutes, the pertinent resolutions and ordinances of the Issuer, and any
trust indenture, mortgage, lease agreement or other contract relating to
the Bond or its security.
2. Noncancellability and Termination-Refunds of Premium
This Policy cannot be cancelled by AMBAC. The insurance provided by
this Policy shall remain in force throughout the Policy period. This
Policy provides for payment to the Trustee as a result of Nonpayment of
the Bonds. In the event the Trustee sells any of the Bonds, then this
Policy shall be terminated as to any such Bond on the date of said sale,
and AMBAC shall not have any liability under t his Policy on account of
Nonpayment of any such Bond occurring thereafter. This Policy shall be
terminated as to any Bond which AMBAC has been notified by the Sponsor or
by the Trustee has been redeemed from or sold by the Investment Trust, or
was not deposited by the Sponsor, or the contract to purchase which has
failed, on the date such notice is received by AMBAC, and AMBAC shall not
have any liability under this Policy on account of Nonpayment of any such
Bond occurring thereafter. When AMBAC is notified by the Trustee or the
Sponsor that any of the Bonds have been redeemed or sold from the
Investment Trust, or were not deposited into it, or a contract to
purchase any such Bonds has failed, a refund of any prepaid premium
thereof shall be made to the Investment Trust or the Sponsor, as the case
may be. Such notification to AMBAC must specify the amount of Bonds
affected, identify each by its Item Number in an Application identified
by its date and designate the date of such disposal or failure.
3. payment by Insurer-Amount, When and How Payable
(a) Amount-Payment by AMBAC of the aggregate of the face amount of
all Insured Instruments of the Investment Trust as to which there has
been a Nonpayment, reduced by the aggregate of: (i) the amount which the
Issuer shall have provided for payment of Insured Instruments by the time
of Nonpayment; and (ii) the amount which has been received from any other
source to pay Insured Instruments; such payment shall fully discharge
AMBAC from any further liability on account of the Nonpayment.
(b) When Payable-The payment due the Investment Trust shall be made
not later than thirty days after notice from the Trustee is received by
AMBAC that Nonpayment has occurred, but not earlier than the date on
which the Insured Instruments are Due for Payment.
(c) How Payable-The payment due the Investment Trust shall be paid
by AMBAC in exchange for delivery of Insured Instruments, not less in
face amount than the amount of the payment, in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where an
Insured Instrument is issuable only in a form whereby principal is
payable to registered holders or their assigns, AMBAC shall pay principal
only upon presentation and surrender of the unpaid Insured Instrument,
uncancelled and free of any adverse claim, together with an instrument of
assignment, in satisfactory form, so as to permit ownership of such
Insured Instrument to be registered in the name of AMBAC or its nominee.
In cases where an Insured Instrument is issuable only in a form whereby
interest is payable to registered holders or their assigns, AMBAC shall
pay interest only upon presentation of proof that the claimant is the
person entitled to the pa shall pay interest only upon presentation of
proof that the claimant is the person entitled to the payment of interest
on the Insured Instrument and delivery of an instrument of assignment, in
satisfactory form, transferring to AMBAC all rights under such Insured
Instrument to receive the interest in respect of which the insurance
payment was made.
4. Rights of AMBAC
(a) Subrogation-When AMBAC has made payment with respect to an
Insured Instrument, it shall be subrogated to all of the rights to
payment of the Investment Trust thereon or in relation thereto to the
extent of such payment.
(b) Vesting of Rights and Powers-When AMBAC has made the payment
due to the Investment Trust as described in Condition 3, and until the
full amount of such payment has been recovered, AMBAC shall be vested
with all of the Investment Trust's options, votes, rights, powers and the
like under the Bond Proceedings. AMBAC shall not be liable to the
Investment Trust for any loss or damage resulting from the exercise of or
failure to exercise any of such options, votes, rights, powers and the
like.
(c) Exercise of Rights and Powers-AMBAC may, in its absolute
discretion, exercise or fail to exercise any option, vote, right, power
or the like it may have as holder or registered owner of an Insured
Instrument with respect to which it has made payment. AMBAC shall not be
liable to the Investment Trust for any loss or damage resulting therefrom
(d) Securing of Rights-The Trustee shall execute and deliver
instruments and do whatever else is necessary to secure the foregoing
rights for AMBAC, and will do nothing to prejudice them.
5. Payment of Insurance Premium Installments
The Trustee shall pay, when due, successively, the full amount of
each installment of the insurance premium. Each installment of the
insurance premium is due on or before the last day of the expiring
Premium Installment Period.
If AMBAC has not received such payment on or before such last day,
it shall give notice to the Sponsor to that effect. Such installment
shall be deemed to have been paid when due if AMBAC receives such payment
within ten days after it has given such notice.
The Trustee shall, with each payment, notify AMBAC of all Bonds
which, during the expiring Premium Installment period, were redeemed from
or sold by the Investment Trust, or the contract to purchase which
failed, or which have not been deposited by the Sponsor. Such
notification to AMBAC must specify the amounts of Bonds affected and
identify each by its Item Number in an Application identified by date.
No such notice need be given as to Bonds with respect to which AMBAC has
previously been notified to the same effect.
6. Where Notice is Given
All submissions, designations, payments, notices, reports and other
data or documents required to be submitted shall be mailed to AMBAC at
its administrative office, or to the Investment Trust at its address
shown on the face of this Policy or such other address as it shall
designate.
7. Waiver of Conditions
No permission affecting this insurance shall exist, or waiver of any
condition be valid, unless expressed in writing added hereto. Each of
the conditions of this Policy is hereby made severable, and waiver of one
condition is not a waiver of any other condition.
8. Suite
No suit or action on this Policy for the recovery of any amount
shall be sustained in any court of law or equity unless all of the
conditions of this Policy shall have been complied with (unless
specifically waived by AMBAC in writing) and unless commended within two
years after a Nonpayment.
9. Conflict of Laws
Any provision of this Policy which is on conflict with the laws of
the jurisdiction in which it is effective is hereby amended to conform
with the minimum requirements of such laws.
<TABLE>
AMBAC AMBAC Indemnity Corporation
c/o CT Corporation Systems
Schedule of Bonds (a part of the Application and Policy) 44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Insured Municipals Income Trust and Investors Quality
Tax Exempt Trust, Combined Multi Series 233
(New Jersey Insured Municipals Income Trust
Intermediate Laddered Maturity, Series 4)
Date of Application: September 29, 1994
<CAPTION>
Item Par Full Name Purpose of Intere Date Maturi Annual Initial
No. Value of Issuer Bonds st of ty Premium Annual
Rate Bonds Date Rate Premium
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. $105M State of New General Obligation Refunding 5.400% 12/15/ 02/15/ .1000% $105.00
Jersey Bonds, Series D (SMIP Option 92 03
Premium Rate: .60%)
2. $100M State of New General Obligation Refunding 5.`00% 12/15/ 02/15/ .1000% $100.00
Jersey Bonds, Series D (SMIP Option 92 00
Premium Rate: .60%)
* Premium attributable to the original insured amount
of each Item of Bonds.
</TABLE>
Exhibit 1.5
Dated: June 1, 1992
--
Master Agreement Among Underwriters
For Unit Investment Trusts Sponsored by
Van Kampen 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 Indicated below our firm
forth at the name and
head of this Agreement 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
September 29, 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 233
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 233 (hereinafter referred to as the "Fund"),
in connection with the preparation, execution and delivery of a Trust
Agreement dated September 29, 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. 33-54973) 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
September 29, 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 233
______________________________________________
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 233 (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 September 29, 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 certain laws of the State of Florida, to
determine their applicability to the Florida IM-IT 82 and Florida IM-IT
Intermediate Laddered Maturity 9 Trust (the "Florida Trust") being
created as part of the Fund and to the holders of Units in the Florida
Trust who are residents of the State of Florida. "Non-Corporate
Unitholder" means a Unitholder of the Florida Trust who is an individual
not subject to the Florida state income tax on corporations under
Chapter 220, Florida Statutes and "Corporate Unitholder" means a
Unitholder of the Florida Trusts that is a corporation, bank or savings
association subject to the Florida state income tax on corporations or
franchise tax imposed on banks or savings associations under Chapter 220,
Florida Statutes.
Although we express no opinion with respect thereto, in rendering
the opinion expressed herein, we have assumed that the Bonds were validly
issued by the State of Florida or its instrumentalities or
municipalities. Based on the foregoing, it is our opinion that:
(a) Neither the Florida Trust nor Non-Corporate Unitholders
will be subject to the Florida income tax imposed by Chapter 220,
Florida Statutes. Therefore, any amounts paid to the Florida Trusts
or Non-Corporate Unitholders under an insurance policy issued to the
Florida Trusts, the Issuers, the Underwriters, or the Sponsors
thereof, or others, which represent maturing interest on defaulted
obligations held by the Trustee will not be subject to the Florida
income tax imposed by Chapter 220, Florida Statutes.
(b) Corporate Unitholders will be subject to Florida income or
franchise taxation under Chapter 220, Florida Statutes (1) on
interest received by the Trust, (2) on payments of interest pursuant
to any insurance policy, (3) on gain realized when Bonds are sold,
redeemed or paid at maturity or when insurance payments with respect
to principal are received by the Trust and (4) on gain on the sale
or redemption of Units, to the extent allocable to Florida as
"adjusted federal income." Corporate Unitholders that have a
commercial domicile in Florida will also be subject to Florida
income or franchise taxation on 100 percent of the items of income
described in clauses (1) through (4) of the immediately preceding
sentence to the extent that such income constitutes "nonbusiness
income."
(c) Even if interest on indebtedness incurred or continued by
a Unitholder to purchase Units in the Trust is not deductible for
Federal income tax purposes, it will reduce interest income on the
Bonds which is reportable by Corporate Unitholders for Florida
income tax purposes.
(d) Trust Units held by a Florida resident will be includible
in the resident's estate for Florida estate tax purposes, but if
such estate is not subject to the Federal estate tax, the estate
will not be subject to the Florida estate tax. The Florida estate
tax is limited to the amount of the credit for state death taxes
provided for in section 2011 of the Code, less estate taxes paid to
states other than Florida.
(e) Neither the Bonds nor the Units will be subject to the
Florida ad valorem tax, the Florida intangible personal property tax
or Florida sales or use tax.
Very truly yours,
Chapman and Cutler
MJK/ch
Exhibit 3.3
Tanner Propp & Farber
99 Park Avenue
New York, New York 10016
September 29, 1994
Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust,
Multi-Series 233
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 233 (the
"Fund") consisting of California Insured Municipals Income Trust, Series
132, Florida Insured Municipals Income Trust, Series 84, Florida Insured
Municipals Income Trust, Intermediate Laddered Maturity, Series 10, New
Jersey Insured Municipals Income Trust, Intermediate Laddered Maturity,
Series 4, Pennsylvania Insured Municipals Income Trust, Series 193, Texas
Insured Municipals Income Trust, Series 38, Texas Insured Municipals
Income Trust, Intermediate Laddered Maturity, Series 1 and Investors'
Quality Tax-Exempt Trust, North Carolina Series 77 (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 33-54973) 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
theteed 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
MJK:clh
Exhibit 3.4
September 29, 1994
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
September 29, 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, Series 132
Dear Sirs:
We have acted as special California counsel for Van Kampen Merritt
Inc., as Sponsor and Depositor of California Insured Municipals Income
Trust, Series 132 (the "Fund"), in connection with the issuance under the
Trust Indenture and Agreement dated September 29, 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 3,072 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. 33-54973) 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
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
September 29, 1994
Van Kampen Merritt Inc.
17W110 22nd Street
Oakbrook Terrace, Illinois 60181
Re: Insured Municipals Income Trust and Investors'
Quality Tax-Exempt Trust, Multi-Series 233
(New Jersey Insured Municipals Income Trust
Intermediate Laddered Maturity Series 4)
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 233 (the "Fund") concerning a Registration
Statement (No. 33-54973) 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
Intermediate Laddered Maturity Series 4 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 222, as we deem
necessary, including, but not limited to, the Trust Indenture and
Agreement (the "Multi-Series 222 Indenture") and the Prospectus. You
have advised that the Indenture is identical in all material respects to
the Multi-Series 222 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 222.
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 226 Indenture, your
advice that the Indenture is identical in all material respects to the
Multi-Series 222 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 222, 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 3.6
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelpia, PA 19102
September 29, 1994
Insured Municipals Income Trust
Investor's Quality Tax-Exempt Trust Multi-Series 233
Pennsylvania Insured Municipals
Income Trust, Series 193
c/o Chapman & Cutler
111 W. Monroe Street
Chicago, Illinois 60603
Attention: Mark J. Kneedy, Esquire
Re:Insured Municipals Income Trust and Investors' Quality Tax-
Exempt Trust, Multi-Series 233 and
Pennsylvania Insured Municipals Income Trust, Series 193
Gentlemen:
We are acting as special counsel with respect to Pennsylvania tax
matters for the Insured Municipals Income Trust and Investors Quality Tax-
Exempt Trust, Multi-Series 233, Pennsylvania Insured Municipals Income
Trust, Series 193 (the "Fund") in connection with the issuance of Units
of fractional undivided interests in the Fund, under a Trust Indenture
and Agreement dated September 29, 1994 between Van Kampen Merritt, Inc.
("Van Kampen") as Depositor, American Portfolio Advisory Service, Inc.,
as Evaluator, and The Bank of New York through its Wall Street Trust
division, as Trustee. It is our understanding that the Fund consists of
a portfolio composed of interest-bearing obligations issued by the
Commonwealth of Pennsylvania or by municipalities and other governmental
authorities within the Commonwealth of Pennsylvania (the "Bonds").
We have not examined any preliminary or final official statements of
issuers of the Bonds, nor have we examined any legal opinions, or
summaries of such opinions, relating to the validity of the Bonds in the
Fund, the exemption of interest thereon from federal income tax, the
exemption of the Bonds from personal property taxes in Pennsylvania, or
the exemption of the interest on and any gain from the sale of the Bonds
from the Pennsylvania personal income tax, given or to be given by bond
counsel to the issuer at the time such Bonds are issued. Further, we
have made no review of the proceedings relating to the issuance of the
Bonds or of the basis for such opinions. Our opinion expressed below is
based in part on the assurance of Van Kampen that the Bonds being
deposited in the Fund have been issued only by the Commonwealth of
Pennsylvania or by or on behalf of municipalities or other governmental
agencies within the Commonwealth of Pennsylvania.
We have examined certified copies, or copies otherwise identified to
our satisfaction, of such other documents as we have deemed necessary or
appropriate for the purpose of rendering this opinion, including those
related to previous transactions in which Van Kampen was the Depositor
which we have been assured by Van Kampen are substantially the same as
those relating to the Fund.
Based upon the foregoing, we are of the opinion that:
(1) Units evidencing fractional undivided interests in the
Fund, to the extent represented by obligations issued by the
Commonwealth of Pennsylvania, any public authority, commission,
board or other agency created by the Commonwealth of Pennsylvania,
any political subdivision of the Commonwealth of Pennsylvania or any
public authority created by any such political subdivision, are not
taxable under any of the personal property taxes presently in effect
in Pennsylvania;
(2) Distributions of interest income to Unitholders that would
not be taxable if received directly by a Pennsylvania resident are
not subject to personal income tax under the Pennsylvania Tax Reform
Code of 1971; nor will such interest be taxable under Philadelphia
School District Investment Income Tax imposed on Philadelphia
resident individuals;
(3) A Unitholder may have a taxable event under the
Pennsylvania state and local income tax referred to in the preceding
paragraph upon the redemption or sale of his Units but not upon the
disposition of any of the Bonds in the Fund to which the holder's
Units relate;
(4) Units are subject to Pennsylvania inheritance and estate
taxes;
(5) A Unitholder which is a corporation may have a taxable
event under the Pennsylvania Corporate Net Income Tax upon the
redemption or sale of its Units. Interest income distributed to
Unitholders which are corporations is not subject to Pennsylvania
Corporate Net Income Tax or Mutual Thrift Institutions Tax.
However, banks, title insurance companies and trust companies may be
required to take the value of Units into account in determining the
taxable value of their shares subject to Shares Tax;
(6) Under Act No. 68 of December 3, 1993, gains derived by the
Fund from the sale, exchange or other disposition of bonds may be
subject to Pennsylvania personal or corporate income taxes. Those
gains which are distributed by the Fund to the Unitholders who are
individuals may be subject to Pennsylvania Personal Income Tax. For
Unitholders which are corporations, the distributed gains may be
subject to Corporate Net Income Tax or Mutual Thrift Institutions
Tax. Gains which are not distributed by the Fund may nevertheless
be taxable to Unitholders if derived by the Fund from the sale,
exchange or other disposition of Bonds issued on or after February
1, 1994. Gains which are not distributed by the Fund will remain
nontaxable to Unitholders if derived by the Fund from the sale,
exchange or other disposition of Bonds issued prior to February 1,
1994;
(7) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the bonds, the
Sponsor or others which represent interest on defaulted obligations
held by the Trustee will be excludable from Pennsylvania gross
income if, and to the same extent as, such interest would have been
so excludable if paid in the normal course by the issuer of the
defaulted obligations; and
(8) The Fund is not taxable as a corporation under
Pennsylvania tax laws applicable to corporations.
On December 3, 1993, changes to Pennsylvania law affecting taxation
of income and gains from the sale of Commonwealth of Pennsylvania and
local obligations were enacted. Among these changes was the repeal of
the exemption from tax of gains realized upon the sale or other
disposition of such obligations. The Pennsylvania Department of Revenue
has issued proposed regulations concerning these changes. The opinions
expressed above are based on our analysis of the law and proposed
regulations but are subject to modification upon review of final
regulations or other guidance that may be issued by the Department of
Revenue or future court decisions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (SEC No. 33-54973) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
the said Registration Statement and in the related Prospectus.
Very truly yours,
Saul, Ewing, Remick & Saul
SERS:RTF/jsr
Exhibit 3.7
Leonard Hurt Terry & Blinn
818 Congress, Suite 1280
Austin, Texas 78701
September 29, 1994
Van Kampen Merritt Inc.
17W110 22nd Street
Oak Brook Terrace, Illinois 60181
Re: Insured Muniicpals Income Trust and Investors' Quality
Tax-Exempt Trust, Multi-Series 233,
Texas Insured Municipals Income Trust, Series 38 and
Texas Insured Municipals Income Trust Intermediate
Laddered Maturity Series 1
Gentlemen:
We have served as Special Texas Tax Counsel to you, as Depositor of
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 233 (the "Fund"), in connection with the issuance under the
Trust Agreement, dated the date hereof (the "Indenture"), between Van
Kampen Merritt Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen Merritt Investment Advisory Corp.
(previously known as American Portfolio Advisory Service Inc.), as
Evaluator, and The Bank of New York, as Trustee, of Units of fractional
undivided interest in two of the Trusts comprising the Fund (referred to
as "the Texas Trusts"). Except as otherwise indicated, each capitalized
term when used herein is intended to have the same meaning as when used
in the Indenture.
In reaching the conclusions set forth below, we have reviewed: a
Trust Agreement dated May 16, 1991 (the "Form Indenture"), and a copy of
the Standard Terms and Conditions of Trust for Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 59 and
Subsequent Series, Effective August 26, 1987 (the "Form Standard Terms"),
each the Form Indenture and the Form Standard Terms being between or
among the Depositor, the Evaluator and the Trustee; a Prospectus in
respect of the Van Kampen Merritt Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 146, dated May 2, 1991
(the "Form Prospectus"), and an opinion of Chapman and Cutler under date
of May 16, 1991 in reference to Insured Municipals Income Trust, and
Investors' Quality Tax-Exempt Trust, Multi-Series 147, pertaining to
certain matters of federal income tax law (the "Form Federal Tax
Opinion"). We have relied upon your representations that each the Form
Indenture, the Form Standard Terms, the Form Prospectus, and the Form
Federal Tax Opinion is identical in all material respects to the
Indenture, the agreement of the Depositor, the Evaluator and the Trustee
pertaining to standard terms and conditions of trust incorporated by
reference into the Indenture, the prospectus to be used in the marketing
of the Fund, and an opinion of Chapman and Cutler to be delivered on the
date hereof in reference to the Fund, respectively. Our opinions set
forth below are reached in reliance upon the aforementioned opinion of
Chapman and Cutler to be delivered on the date hereof.
Based upon the foregoing, and under applicable constitutional and
statutory law of the State of Texas (the "State"), administrative rules
and rulings thereunder, and court decisions in interpretation thereof,
all existing as of the date hereof, we are of the opinion that:
1 . Neither the State nor any political subdivision of the
State currently imposes an income tax with respect to individuals.
Therefore, no portion of any distribution received by an individual
Unitholder of the Texas Trusts in respect of his Unit is subject to
income taxation by the State or any political subdivision of the
State;
2. Except as provided below, no Unit of the Texas Trusts is
taxable under any property tax levied in the State;
3. The "inheritance tax" of the State, imposed upon certain
transfers of property of a deceased resident individual Unitholder,
may be measured in part upon the value of Units of the Texas Trusts
included in the estate of such Unitholder; and
4. With respect to any Unitholder which is subject to the
State corporate franchise tax, Units in the Texas Trusts held by such
Unitholder, and distributions received thereon, will be taken into
account in computing the "taxable capital" of the Unitholder
allocated to the State, which is one of the bases by which such
franchise tax may be measured (the other being a corporation's "net
capital earned surplus," which is, generally, its net corporate
income plus officers' and directors' income.
The opinion set forth in clause (2), above, is limited to the extent
that Units of the Texas Trusts may be subject to property taxes levied in
the State if held on the relevant date: (i) by a transportation business
described in V.T.C.A., Tax Code, Subchapter A, Chapter 24; (ii) by a
savings and loan association formed under the laws of the State (but only
to the extent described in section 11.09 of the Texas Savings and Loan
Act, Vemon's Ann.Civ.St.art. 852a); or (iii), by an insurance company
incorporated under the laws of the State (but only to the extent
described in V.A.T.S., Insurance Code, Art. 4.01). Each Unitholder
described in the preceding sentence should consult its own tax advisor
with respect to such matters.
Corporations subject to the State franchise tax should be aware that
in its first called 1991 session, the Texas legislature adopted, and the
Governor has signed into law, certain substantial amendments to the State
corporate franchise tax, the effect of which may be to subject to
taxation all or a portion of any gains realized by such a corporate
Unitholder upon the sale, exchange or other disposition of a Unit.
Because no authoritative judicial, legislative or administrative
interpretation of these amendments has issued, and there remain many
unresolved questions regarding its potential effect on corporate
franchise taxpayers, each corporation which is subject to the State
franchise tax and which is considering the purchase of Units should
consult its tax advisor regarding the effect of these amendments.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-54973), 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. We
further authorized the reliance upon this opinion of The Bank of New
York, as Trustee under the Indenture.
Respectfully Submitted,
Leonard Hurt Terry & Blinn, a
professional corporation
Exhibit 3.8
Hunton & Williams
One Hanover Square, Suite 1400
Fayetteville Street Mall
Raleigh, North Carolina 27601
September 29, 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 233,
North Carolina Investors' Quality Tax-Exempt Trust, Series 77
Gentlemen:
We are acting as special North Carolina counsel to the Insured
Municipals Income Trust and Investors' Quality Tax-Exempt Trust, Multi-
Series 233 (the "Fund") on North Carolina tax matters relating to North
Carolina Investors' Quality Tax-Exempt Trust, Series 77 (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. 33-54973) 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
September 27, 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 233 (A Unit Investment Trust)
Registered Under the Securities Act of 1933, File No. 33-54973
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 233
Pursuant to your request for a Standard & Poor's rating on the units
of the above-captioned trust, SEC #33-54973, 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:
California Insured Municipals Income Trust, Series 132
Florida Insured Municipals Income Trust, Series 84
Florida Insured Municipals Income Trust, Intermediate Laddered
Maturity Series 10
New Jersey Insured Municipals Income Trust, Intermediate Laddered
Maturity Series 4
Pennsylvania Insured Municipals Income Trust, Series 193
Texas Insured Municipals Income Trust, Series 38
Texas Insured Municipals Income Trust, Intermediate Laddered Maturity
Series 1
North Carolina Investors Quality Tax-Exempt Trust, Series 77
Exhibit 4.3
Independent Certified Public Accountants' Consent
We have issued our report dated September 29, 1994 on the statements
of condition and related bond portfolios of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 233
(California IM-IT, Florida IM-IT, Florida IM-IT Intermediate Laddered
Maturity, New Jersey IM-IT Intermediate Laddered Maturity, Pennsylvania
IM-IT, Texas IM-IT, Texas IM-IT Intermediate Laddered Maturity, North
Carolina Quality Trusts) as of September 29, 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
September 29, 1994
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 132
<NAME> CALIFORNIA IM-IT
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
<INVESTMENTS-AT-COST> 2892475
<INVESTMENTS-AT-VALUE> 2892475
<RECEIVABLES> 38182
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2930657
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7676
<TOTAL-LIABILITIES> 7676
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2922981
<SHARES-COMMON-STOCK> 3072
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2922981
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> FLORIDA INTERMEDIATE LADDERED MATURITY TRUST
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
<INVESTMENTS-AT-COST> 2958438
<INVESTMENTS-AT-VALUE> 2958438
<RECEIVABLES> 21812
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2980250
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2980250
<SHARES-COMMON-STOCK> 3000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2980250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 84
<NAME> FLORIDA IM-IT
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
<INVESTMENTS-AT-COST> 2963329
<INVESTMENTS-AT-VALUE> 2963329
<RECEIVABLES> 53096
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3016425
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22101
<TOTAL-LIABILITIES> 22101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2994324
<SHARES-COMMON-STOCK> 3147
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2994324
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> NEW JERSEY INTERMEDIATE LADDERED MATURITY TRUST
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
<INVESTMENTS-AT-COST> 2972661
<INVESTMENTS-AT-VALUE> 2972661
<RECEIVABLES> 24163
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2996824
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2996824
<SHARES-COMMON-STOCK> 3000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2996824
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 193
<NAME> PENNSYLVANIA IM-IT
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
<INVESTMENTS-AT-COST> 2876269
<INVESTMENTS-AT-VALUE> 2876269
<RECEIVABLES> 53919
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2930188
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23369
<TOTAL-LIABILITIES> 23369
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2906819
<SHARES-COMMON-STOCK> 3055
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2906819
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> TEXAS INTERMEDIATE LADDERED MATURITY TRUST
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
<INVESTMENTS-AT-COST> 2964250
<INVESTMENTS-AT-VALUE> 2964250
<RECEIVABLES> 24599
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2988849
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2988849
<SHARES-COMMON-STOCK> 3000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2988849
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 38
<NAME> TEXAS IM-IT
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
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<PAID-IN-CAPITAL-COMMON> 2891579
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on September 29, 1994 it
is unaudited
</LEGEND>
<SERIES>
<NUMBER> 77
<NAME> QUALITY NORTH CAROLINA
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> SEP-29-1994
<PERIOD-END> SEP-29-1994
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<INVESTMENTS-AT-VALUE> 2777151
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</TABLE>
