File No. 33-
CIK #897388
Securities and Exchange Commission
Washington, D.C. 20549-1004
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Insured Municipals Income Trust,
161st Insured Multi-Series
B. Name of Depositor: Van Kampen Merritt Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Van Kampen Merritt Inc. Chapman and Cutler
Attention: John C. Merritt, Chairman Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
E. Title and amount of securities being registered: 1,000* Units
F. Proposed maximum offering price to the public of the securities
being registered: ($1020 per Unit**): $1,020,000
G. Amount of filing fee, computed at one twenty-nineth of 1 percent of
the proposed maximum aggregate offering price to the
public: $351.72
H. Approximate date of proposed sale to the public:
As soon as practicable after the effective date of the Registration
Statement
______________________________________________________________________
* 500 Units registered for primary distribution.
500 Units registered for resale by Depositor of Units previously
sold in primary distribution.
** Estimated solely for the purpose of calculating the
registration fee.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Insured Municipals Income Trust,
161st Insured Multi-Series
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust) )
(b) Title of securities issued ) Prospectus 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 expenses) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
Trust Information
Trust Administration
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Introduction
) Summary of Essential Financial
) Information
) Unitholder Explanations
(d) Certain other fees, expenses or ) Unitholder Explanations
charges payable by holders ) Trust Administration
(e) Certain profits to be received ) Unitholder Explanations
by depositor, principal ) Underwriting
underwriter, trustee or ) Notes to Portfolios
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 distributions ) *
(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 securities Introduction
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 underwriter) Trust Administration
)
(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 trustee) Trust Administration
)
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 agreement ) Trust Administration
with respect to replacement or )
elimination of portfolio securities)
(b) Transactions involving elimination)
of underlying securities ) *
(c) Policy regarding substitution or) Trust Administration
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 (Instructions ) Other Matters
1(c) to Form S-6) )
_________________________________
* Inapplicable, omitted, answer negative or not required
Preliminary Prospectus Dated April 8, 1994
Insured Municipals Income Trust
1,000 Units 161st Insured Multi-Series
(A Unit Investment Trust)
The attached final Prospectus for a prior Series of the Fund is
hereby used as a preliminary Prospectus for the above stated Series. The
narrative information and structure of the attached final Prospectus will
be substantially the same as that of the final Prospectus for this
Series. Information with respect to pricing, the number of Units, dates
and summary information regarding the characteristics of securities to be
deposited in this Series is not now available and will be different since
each Series has a unique Portfolio. Accordingly the information
contained herein with regard to the previous Series should be considered
as being included for informational purposes only. Ratings of the
securities in this Series are expected to be comparable to those of the
securities deposited in the previous Series. However, the Estimated
Current Return for this Series will depend on the interest rates and
offering prices of the securities in this Series and may vary materially
from that of the previous Series.
A registration statement relating to the units of this Series will
be filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to completion
or amendment. Such Units may not be sold nor may offer to buy be
accepted prior to the time the registration statement becomes effective.
This Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the Units in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This Prospectus shall
not constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any State.
PRELIMINARY PROSPECTUS DATED MARCH 22, 1994
SUBJECT TO COMPLETION
March 22, 1994 Van Kampen Merritt
INSURED MUNICIPALS INCOME TRUST, 157TH INSURED MULTI-SERIES
IM-IT 320
Minnesota IM-IT 51
Oklahoma IM-IT 8
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, insured portfolio of tax-exempt bonds. The Fund
consists of three underlying separate unit investment trusts designated as
Insured Municipals Income Trust, Series 320 (the "IM-IT"), Minnesota Insured
Municipals Income Trust, Series 51 (the "Minnesota IM-IT Trust") and Oklahoma
Insured Municipals Income Trust, Series 8 (the "Oklahoma IM-IT Trust"). The
various trusts are collectively referred to herein as the "Trusts", the
Minnesota IM-IT and Oklahoma IM-IT Trusts are sometimes collectively referred
to herein as the "State Trusts", while the IM-IT, Minnesota IM-IT and Oklahoma
IM-IT Trusts are sometimes collectively referred to herein as the "Insured
Trusts". Each Trust initially consists of delivery statements relating to
contracts to purchase securities and, thereafter, will consist of such
securities as may continue to be held (the "Bonds" or "Securities"). Such
Securities are interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is,
in the opinion of recognized bond counsel to the issuing governmental
authority, exempt from all Federal income taxes under 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. 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 20. Insurance obtained by an Insured Trust applies
only while Bonds are retained in such Trust while insurance obtained on
Preinsured Bonds is effective so long as such Bonds are outstanding. The
Trustee, upon the sale of a Bond insured under an insurance policy obtained by
an Insured Trust, has a right to obtain from the insurer involved permanent
insurance for such Bond upon the payment of a single predetermined insurance
premium and any expenses related thereto from the proceeds of the sale of such
Bond. INSURANCE RELATES ONLY TO THE BONDS IN A TRUST AND NOT TO THE UNITS
OFFERED HEREBY OR TO THE MARKET VALUE THEREOF. As a result of such insurance,
the Units of each Insured Trust have received a rating of "AAA" by Standard &
Poor's Corporation. Standard & Poor's Corporation has indicated that this
rating is not a recommendation to buy, hold or sell Units nor does it take
into account the extent to which expenses of each Insured Trust or sales by
each Insured Trust of Bonds for less than the purchase price paid by such
Trust will reduce payments to Unitholders of the interest and principal
required to be paid on such Bonds. See "Unitholder Explanations--Insurance on
the Bonds in the Insured Trusts". No representation is made as to any
insurer's ability to meet its commitments.
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of each
Trust during the initial offering period is equal to the aggregate offering
price of the Securities in such Trust's portfolio and cash, if any, in the
Principal Account held or owned by such Trust Fund plus the applicable sales
charge plus Purchased Interest and accrued interest, if any. After the initial
public offering period, the secondary market Public Offering Price of each
Trust will be equal to the aggregate bid price of the Securities in such Trust
and cash, if any, in the Principal Account held or owned by such Trust Fund
plus the applicable sales charge plus Purchased Interest and accrued interest,
if any. Sales charges for the Trusts in the initial market, expressed both as
a percentage of the Public Offering Price (excluding Purchased Interest) and
as a percentage of the aggregate offering price of the Securities, are set
forth in footnote (2) under "Summary of Essential Financial Information". For
sales charges in the secondary market, see "Unitholder Explanations--Public
Offering". If the Securities in each Trust were available for direct purchase
by investors, the purchase price of the Securities would not include the sales
charge included in the Public Offering Price of the Units. During the initial
offering period, the sales charge is reduced on a graduated scale for sales
involving at least 100 Units. If Units were available for purchase at the
opening of business on the Date of Deposit (except for the IM-IT as of 8:00
A.M. Central Time on the Date of Deposit), the Public Offering Price per Unit
would have been that amount set forth in the "Summary of Essential Financial
Information" for each Trust. See "Unitholder Explanations--Public Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
2 Introduction
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The annual
Estimated Current Return and Estimated Long-Term Return to Unitholders at the
opening of business (except for the IM-IT as of 8:00 A.M. Central Time on the
Date of Deposit) on March 22, 1994, were as set forth under "Per Unit
Information" for each Trust. The methods of calculating Estimated Current
Return and Estimated Long-Term Return are set forth in the footnotes to the
"Per Unit Information" for each Trust.
OBJECTIVES OF THE FUND. The objectives of the Fund are income exempt from
Federal income tax and, in the case of a State Trust, Federal and state income
tax (if any) and conservation of capital through an investment in diversified
portfolios of Federal and state tax-exempt obligations. There is, of course,
no guarantee that the Fund will achieve its objectives. The Fund may be an
appropriate investment vehicle for investors who desire to participate in a
portfolio of tax-exempt fixed income securities with greater diversification
than they might be able to acquire individually. In addition, securities of
the type deposited in the Fund are often not available in small amounts.
DISTRIBUTIONS. Purchasers of Units will receive distributions on a
monthly basis. See "Unitholder Explanations--Settlement of Bonds in the
Trusts". Record dates will be the first day of each month. Distributions will
be made on the fifteenth day of the month subsequent to the respective record
dates.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor, Van
Kampen Merritt Inc., intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units at prices based upon the aggregate
bid prices of the Securities in the respective Trusts plus Purchased Interest;
however, during the initial offering period such prices will be based upon the
aggregate offering prices of the Securities plus Purchased Interest. If such a
market is not maintained and no other over-the-counter market is available, a
Unitholder will be able to dispose of his Units only through redemption at
prices based upon the bid prices of the underlying Securities plus Purchased
Interest (see "Unitholder Explanations--Public Offering--Redemption of Units"
and "Unitholder Explanations-- Public Offering--Market for Units").
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. See "Unitholder Explanations--Public Offering-- Reinvestment
Option".
<PAGE>
Summary of Essential Financial Information 3
<TABLE>
INSURED MUNICIPALS INCOME TRUST,
157TH INSURED MULTI-SERIES
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE DATE OF DEPOSIT: MARCH 22, 1994
(EXCEPT FOR THE IM-IT AS OF 8:00 A.M. CENTRAL TIME ON THE DATE OF DEPOSIT)
SPONSOR: VAN KAMPEN MERRITT INC.
EVALUATOR: AMERICAN PORTFOLIO EVALUATION SERVICES
(A DIVISION OF A SUBSIDIARY OF THE SPONSOR)
TRUSTEE: THE BANK OF NEW YORK
<CAPTION>
MINNESOTA OKLAHOMA
GENERAL INFORMATION IM-IT IM-IT TRUST IM-IT TRUST
<S> <C> <C> <C>
Principal Amount (Par Value) of Securities in Trust.................. $ 9,850,000 $ 3,015,000 $ 3,000,000
Number of Units...................................................... 10,097 3,023 3,021
Fractional Undivided Interest in the Trust per Unit.................. 1/10,097 1/3,023 1/3,021
Principal Amount (Par Value) of Securities per Unit <F1>............. $ 975.54 $ 997.35 $ 993.05
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio.............. $ 9,512,029 $ 2,849,051 $ 2,847,630
Aggregate Offering Price of Securities per Unit.................. $ 942.06 $ 942.46 $ 942.61
Sales Charge <F2>................................................ $ 48.54 $ 48.56 $ 48.57
Purchased Interest <F3>.......................................... $ 94,906 $ 27,158 $ 26,656
Purchased Interest per Unit <F3>................................. $ 9.40 $ 8.98 $ 8.82
Public Offering Price per Unit <F3>.............................. $ 1,000.00 $ 1,000.00 $ 1,000.00
Redemption Price per Unit, including Purchased Interest <F3>......... $ 944.15 $ 943.96 $ 943.99
Secondary Market Repurchase Price per Unit, including Purchased
Interest <F3>...................................................... $ 951.46 $ 951.44 $ 951.43
Excess of Public Offering Price per Unit Over Redemption Price per
Unit............................................................... $ 55.85 $ 56.04 $ 56.01
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit..................................................... $ 7.31 $ 7.48 $ 7.44
Minimum Value of the Trust under which Trust Agreement may be
terminated......................................................... $ 1,970,000 $ 603,000 $ 600,000
Minimum Principal Distribution.......... $1.00 per Unit
First Settlement Date................... March 29, 1994
Evaluator's Annual Supervisory Fee...... Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee....... $0.30 per $1,000 principal amount of
Bonds <F4>
Evaluations for purpose of sale, purchase or redemption of Units are made
as of 4:00 P.M. Eastern time on days of trading on the New York Stock
Exchange next following receipt of an order for a sale or purchase of
Units or receipt by The Bank of New York of Units tendered for redemption.
<FN>
<F1>Many unit investment trusts comprised of municipal securities issue a
number of units such that each unit represents approximately $1,000
principal amount of underlying securities. The Sponsor, on the other hand,
in determining the number of Units for each Trust, other than IM-IT
Limited Maturity, IM-IT Intermediate, 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, and IM-IT Short Intermediate Trusts, on the other
hand, each unit represents $1,000 principal amount of underlying
securities in such Trust on the Date of Deposit.
<F2>Sales charges for the Trusts, expressed as a percentage of the Public
Offering Price per Unit (excluding Purchased Interest) and in parenthesis
as a percentage of the aggregate offering price of the Securities, are as
follows: an IM-IT or a State Trust - 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 - 3.0% (3.093%).
<F3>Purchased Interest is a portion of the unpaid interest that has accrued on
the Bonds from the later of the last payment date on the Bonds or the date
of issuance thereof through the First Settlement Date and is included in
the calculation of the Public Offering Price. Purchased Interest will be
distributed to Unitholders as Units are redeemed or Securities mature or
are called. Anyone ordering Units for settlement after the First
Settlement Date will pay accrued interest from such date to the date of
settlement (normally five business days after order) less distributions
from the Interest Account
<PAGE>
4 Summary of Essential Financial Information
subsequent to the First Settlement Date. For purchases settling on the
First Settlement Date, no accrued interest will be added to the Public
Offering Price other than the Purchased Interest already included therein.
After the initial offering period, the Sponsor's Repurchase Price per Unit
will be determined as described under the caption "Public Offering--
Market for Units."
<F4>Such fee is based on the outstanding principal amount of Securities in
each Trust on the Date of Deposit for the first year and as of the close
of business on January 1 for each year thereafter.
</TABLE>
<PAGE>
Unitholder Explanations 5
SETTLEMENT OF BONDS IN THE TRUSTS
THE FUND. Insured Municipals Income Trust, 157th Insured Multi-Series
(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 three separate portfolios of delivery statements
relating to contracts to purchase interest-bearing obligations issued by or on
behalf of states and territories of the United States, and political
subdivisions and authorities thereof, the interest on which is, in the opinion
of recognized bond counsel to the issuing authorities, excludable from gross
income for Federal income tax under existing law. All issuers of Securities in
a State Trust are located in the State for which such Trust is named or in
United States territories or possessions and their public authorities;
consequently, in the opinion of recognized bond counsel to such State issuers,
the related interest earned on such Securities is exempt to the extent
indicated from state and local taxes of such State. With the exception of the
New York and Pennsylvania Trusts, Units of such Trusts may be purchased only
by residents of the State for which such Trust is named. Units of a New York
Trust may be purchased by residents of New York, Connecticut, Florida and
Massachusetts. Units of a Pennsylvania Trust may be purchased by residents of
Pennsylvania, Connecticut, Florida, Maryland, New York, Ohio and West
Virginia. Offerees in the States of Indiana, Virginia and Washington may
purchase Units of the IM-IT Trust only. On the Date of Deposit, the Sponsor
deposited with the Trustee the aggregate principal amount of Securities in
each Trust as indicated under "General Information--Principal Amount (Par
Value) of Securities in Trust" in the "Summary of Essential Financial
Information". Such Securities consist of delivery statements relating to
contracts for the purchase of certain interest-bearing obligations and cash,
cash equivalents and/or irrevocable letters of credit issued by a financial
institution in the amount required for such purchases. Thereafter, the
Trustee, in exchange for the Securities so deposited, delivered to the Sponsor
the certificates evidencing the ownership of the number of Units in each Trust
as indicated under "Summary of Essential Financial Information." Unless
otherwise terminated as provided herein, the Trust Agreement for any IM-IT or
State Trust 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, or IM-IT Short Intermediate
Trust will terminate at the end of the calendar year prior to the twentieth
anniversary of its execution.
The portfolio of any IM-IT or State Trust 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, and IM-IT Short Intermediate Trust is 12 to
15 years, 5 to 15 years, and 3 to 7 years, respectively. The dollar-weighted
average maturity of the Bonds in any IM-IT Intermediate Trust, and IM-IT Short
Intermediate Trust is less than or equal to 10 years and 5 years,
respectively.
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
<PAGE>
6 Unitholder Explanations
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. 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.
<PAGE>
Unitholder Explanations 7
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, 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,
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.
PORTFOLIO CONCENTRATIONS. Certain of the Bonds in certain of the Trusts
may be general obligations of a governmental entity that are backed by the
taxing power of such entity. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. All other Bonds in the
Trusts are revenue bonds payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds, on the
other hand, are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source. There are, of course,
variations in the security of the different Bonds in the Fund, both within a
particular classification and between classifications, depending on numerous
factors. See "General" for each Trust.
<PAGE>
8 Unitholder Explanations
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
<PAGE>
Unitholder Explanations 9
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
<PAGE>
10 Unitholder Explanations
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 an IM-IT or a State Trust
or, in the case of an IM-IT Limited Maturity, IM-IT Intermediate, or IM-IT
Short Intermediate Trust, must have a fixed maturity date within the range
<PAGE>
Unitholder Explanations 11
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 by Standard & Poor's Corporation or "Baa" or better in the case of the
Insured 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
<PAGE>
12 Unitholder Explanations
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 opening of business on the Date of Deposit (except for the
IM-IT as of 8:00 A.M. Central Time on the Date of Deposit) the Estimated
Current Return and the Estimated Long-Term Return were as set forth in the
"Per Unit Information" for each Trust. Estimated Current Return is calculated
by dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is calculated using
a formula which (1) takes into consideration, and determines and factors in
the relative weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of all of the Securities in a Trust and (2) takes into
account the expenses and sales charge associated with each Trust Unit. Since
the market values and estimated retirements of the Securities and the expenses
of a Trust will change, there is no assurance that the present Estimated
Long-Term Return will be realized in the future. The Estimated Current Return
and Estimated Long-Term Return are expected to differ because the calculation
of Estimated Long-
<PAGE>
Unitholder Explanations 13
Term Return reflects the estimated date and amount of principal returned while
the Estimated Current Return calculation includes only net annual interest
income and Public Offering Price.
In order to acquire certain of the Securities contracted for by the
Sponsor for deposit in the Fund, it may be necessary for the Sponsor or
Trustee to pay on the settlement dates for delivery of such Securities amounts
covering accrued interest on such Securities which exceed (1) the amounts paid
by Unitholders and (2) the amounts which will be made available through cash
furnished by the Sponsor on the Date of Deposit, which amount of cash may
exceed the interest which would accrue to the First Settlement Date. The
Trustee has agreed to pay for any amounts necessary to cover any such excess
and will be reimbursed therefor, without interest, when funds become available
from interest payments on the particular Securities with respect to which such
payments may have been made. Also, since interest on any "when, as and if
issued" Securities does not begin accruing as tax-exempt interest income to
the benefit of Unitholders until their respective dates of delivery, the
Trustee may, in order to maintain (or in some cases approach) for the
Unitholders the same estimated net annual interest incomes during the first
year of the Trusts' operations as is indicated under "Per Unit Information"
for the applicable Trust, reduce its fee (and to the extent necessary pay
Trust expenses) in an amount equal to that indicated under "Per Unit
Information" for the applicable Trust.
INTEREST EARNING SCHEDULE
CALCULATION OF ESTIMATED NET ANNUAL INTEREST INCOME. The estimated net
annual interest income is based on 360 days. To account for the estimated net
annual interest income per Unit in a Trust, it is necessary to use the
following information.
The beginning interest date for each Trust is March 29, 1994. The first
record date for each Trust (May 1, 1994) is 32 days from such date. The daily
rates of estimated net annual interest income per Unit are $.15166, $.14358
and $.13889 for the IM-IT, Minnesota IM-IT and Oklahoma IM-IT Trusts,
respectively. This amounts to $4.85, $4.59 and $4.44 for the IM-IT, Minnesota
IM-IT and Oklahoma IM-IT Trusts, respectively.
Utilizing the preceding information, the following procedure illustrates
the calculation of first year estimated net annual interest income per Unit
for the Minnesota IM-IT Trust:
The Minnesota IM-IT Trust accrues
$4.59 to the first record date plus
$43.10 which is 10 normal distributions at $4.31, and finally adding
$4.00 which has accrued from March 1, 1995 until March 29, 1995 which
completes the 360 day cycle (28 days times the daily factor)
Total $51.69 interest earned / $1,000.00 (Date of Deposit Public Offering
Price) = 5.17% 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.
<PAGE>
14 Unitholder Explanations
As indicated in "Purchased Interest", accrued interest as of the First
Settlement Date includes Purchased Interest. In an effort to reduce the amount
of Purchased Interest which would otherwise have to be paid by Unitholders,
the Trustee may advance a portion of such accrued interest to the Sponsor as
the Unitholder of record as of the First Settlement Date. Consequently, the
amount of accrued interest to be added to the Public Offering Price of Units
will include only accrued interest from the First Settlement Date to the date
of settlement (other than the Purchased Interest already included therein),
less any distributions from the Interest Account subsequent to the First
Settlement Date. See "Public Offering--Distributions of Interest and
Principal."
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholder
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the Purchased Interest and accrued interest from
the purchaser of his Units. Since the Trustee has the use of the funds
(including Purchased Interest) held in the Interest Account for distributions
to Unitholders and since such Account is non-interest-bearing to Unitholders,
the Trustee benefits thereby.
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price which includes
Purchased Interest. During the initial offering period the Public Offering
Price is based on the offering prices of the Securities in each Trust and
includes a sales charge of 4.9% of the Public Offering Price (excluding
Purchased Interest) (5.152% of the aggregate offering price of the Securities)
for an IM-IT or a State Trust, 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. After the initial
public offering period, the secondary market Public Offering Price is based on
the bid prices of the Securities in each Trust and includes a sales charge
determined in accordance with the table set forth below, which is based upon
the dollar weighted average maturity of each Trust plus in each case Purchased
Interest. For purposes of computation, Bonds will be deemed to mature on their
expressed maturity dates unless: (a) the Bonds have been called for redemption
or funds or securities have been placed in escrow to redeem them on an earlier
call date, in which case such call date will be deemed to be the date upon
which they mature; or (b) such Bonds are subject to a "mandatory tender", in
which case such mandatory tender will be deemed to be the date upon which they
mature.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to each Trust based upon the
dollar weighted average maturity of such Trust's Portfolio, in accordance with
the following schedule:
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
1................... 1.523% 9.................... 4.712%
2................... 2.041 10................... 4.932
3................... 2.564 11................... 4.932
4................... 3.199 12................... 4.932
5................... 3.842 13................... 5.374
6................... 4.058 14................... 5.374
7................... 4.275 15................... 5.374
8................... 4.493 16 to 30............. 6.045
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Securities in a Trust. Expressed as a percent of
the Public Offering Price (excluding Purchased Interest), the sales charge on
a Trust consisting entirely of a portfolio of Bonds with 15 years to maturity
would be 5.10%. The sales
<PAGE>
Unitholder Explanations 15
charge applicable to quantity purchases during the initial offering period is,
however, reduced on a graduated basis to any person acquiring 100 or more
Units as follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF SALES
CHARGE REDUCTION PER UNIT
IM-IT,
AGGREGATE NUMBER OF STATE AND NATIONAL
UNITS PURCHASED QUALITY TRUSTS OTHER TRUSTS
<S> <C> <C>
100-249 Units................................... $ 4.00 $ 4.00
250-499 Units................................... $ 6.00 $ 6.00
500-999 Units................................... $ 14.00 $ 9.00
1,000 or more Units............................. $ 19.00 $ 11.00
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for such quantity purchases. See "Public
Offering--Unit Distribution". This reduced sales charge structure will apply
on all purchases by the same person from any one Underwriter or dealer of
units of Van Kampen Merritt-sponsored unit investment trusts which are being
offered in the initial offering period (a) on any one day (the "Initial
Purchase Date") or (b) on any day subsequent to the Initial Purchase Date, if
(1) the units purchased are of a unit investment trust purchased on the
Initial Purchase Date, and (2) the person purchasing the units purchased a
sufficient amount of units on the Initial Purchase Date to qualify for a
reduced sales charge on such date. To determine the applicable sales charge
for units purchased in accordance with (b) above, it is necessary to
accumulate all purchases made on the Initial Purchase Date and all purchases
made in accordance with (b) above. Units purchased in the name of the spouse
of a purchaser or in the name of a child of such purchaser under 21 years of
age will be deemed for the purposes of calculating the applicable sales charge
to be additional purchases by the purchaser. The reduced sales charges will
also be applicable to a trustee or other fiduciary purchasing securities for
one or more trust estate or fiduciary accounts. Employees of Van Kampen
Merritt Inc. and its subsidiaries may purchase Units of the Trust at the
current Public Offering Price less the underwriting commission during the
initial offering period, and less the dealer's concession for secondary market
transactions. Registered representatives of selling Underwriters may purchase
Units of the Fund at the current Public Offering Price less the underwriting
commission during the initial offering period, and less the dealer's
concession for secondary market transactions. Registered representatives of
selling brokers, dealers, or agents may purchase Units of the Fund at the
current Public Offering Price less the dealer's concession during the initial
offering period and for secondary market transactions.
OFFERING PRICE. Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in
each Trust.
As indicated above, the price of the Units as of the date the Securities
were deposited in each Trust was determined by adding to the aggregate
offering price of the Securities of a Trust an amount equal to the applicable
sales charge expressed as a percentage of the aggregate offering price of the
Securities plus Purchased Interest and dividing the sum so obtained by the
number of Units outstanding. This computation produced a gross underwriting
commission equal to such sales charge expressed as a percentage of the Public
Offering Price (excluding Purchased Interest). Such price determination as of
the opening of business on the Date of Deposit (except for the IM-IT as of
8:00 A.M. Central Time on the Date of Deposit) was made on the basis of an
evaluation of the Securities in each Trust prepared by Interactive Data
Services, Inc., a firm regularly engaged in the business of evaluating,
quoting or appraising comparable securities. After the opening of business on
the Date of Deposit (except for the IM-IT as of 8:00 A.M. Central Time on the
Date of Deposit) and during the period of initial offering, the Evaluator will
appraise or cause to be appraised daily the value of the underlying Securities
of each Trust as of 4:00 P.M. Eastern time on days the New York Stock Exchange
is open for business and will adjust the Public Offering Price of the Units
commensurate with such appraisal. Such Public Offering Price will be effective
for all orders received at or prior to 4:00 P.M. Eastern time on each such
day. Orders received by the Trustee, Sponsor or any Underwriter for purchases,
sales or 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
<PAGE>
16 Unitholder Explanations
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
<PAGE>
Unitholder Explanations 17
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
<PAGE>
18 Unitholder Explanations
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
<PAGE>
Unitholder Explanations 19
number to the Trustee in order to avoid this possible "back-up withholding" in
the event the Trustee has not been previously provided such number.
Purchased Interest and accrued interest paid on redemption shall be
withdrawn from the Interest Account of such Trust or, if the balance therein
is insufficient, from the Principal Account of such Trust. All other amounts
will be withdrawn from the Principal Account of such Trust. The Trustee is
empowered to sell underlying Securities of a Trust in order to make funds
available for redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Securities in each Trust, while the initial and primary Public Offering Price
of Units will be determined on the basis of the offering price of the
Securities in each Trust, as of 4:00 P.M. Eastern time on days of trading on
the New York Stock Exchange on the date any such determination is made. On the
Date of Deposit the Public Offering Price per Unit (which is based on the
offering prices of the Bonds and Purchased Interest in each Trust and includes
the sales charge) exceeded the value at which Units could have been redeemed
(based upon the current bid prices of the Securities and Purchased Interest in
such Trust) by the amount shown under "Summary of Essential Financial
Information". While the Trustee has the power to determine the Redemption
Price per Unit when Units are tendered for redemption, such authority has been
delegated to the Evaluator which determines the price per Unit on a daily
basis. The Redemption Price per Unit is the pro rata share of each Unit in
each Trust on the basis of (i) the cash on hand in such Trust or moneys in the
process of being collected, (ii) the value of the Securities in such Trust
based on the bid prices of the Securities therein, except for cases in which
the value of insurance has been included, (iii) Purchased Interest for each
Trust and (iv) interest accrued thereon, less (a) amounts representing taxes
or other governmental charges payable out of such Trust and (b) the accrued
expenses of such Trust. The Evaluator may determine the value of the
Securities in each Trust by employing any of the methods set forth in "Public
Offering--Offering Price". In determining the Redemption Price per Unit no
value will be assigned to the portfolio insurance maintained on the Bonds in
an Insured Trust unless such Bonds are in default in payment of principal or
interest or in significant risk of such default. For a description of the
situations in which the Evaluator may value the insurance obtained by the
Insured Trusts, see "Public Offering--Offering Price" above.
The price at which Units may be redeemed could be less than the price
paid by the Unitholder. As stated above, the Trustee may sell Securities to
cover redemptions. When Securities are sold, the size and diversity of the
affected Trust will be reduced. Such sales may be required at a time when
Securities would not otherwise be sold and might result in lower prices than
might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trusts is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
REPORTS PROVIDED. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and
the amount of other receipts (received since the preceding distribution), if
any, being distributed expressed in each case as a dollar amount representing
the pro rata share of each Unit of a Trust outstanding. For as long as the
Trustee deems it to be in the best interests of the Unitholders, the accounts
of each Trust shall be audited, not less frequently than annually, by
independent certified public accountants and the report of such accountants
shall be furnished by the Trustee to Unitholders of such Trusts upon request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a registered Unitholder of a Trust a statement (i) as to the Interest
Account: interest received (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
<PAGE>
20 Unitholder Explanations
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
<PAGE>
Unitholder Explanations 21
an insured basis. It is expected that the Trustee would exercise the right to
obtain Permanent Insurance only if upon such exercise the affected Trust would
receive net proceeds (sale of Bond proceeds less the insurance premium and
related expenses attributable to the Permanent Insurance) from such sale in
excess of the sale proceeds if such Bonds were sold on an uninsured basis. The
insurance premium with respect to each Bond eligible for Permanent Insurance
would be determined based upon the insurability of each Bond as of the Date of
Deposit and would not be increased or decreased for any change in the
creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an
advantage to an Insured Trust in that each Bond insured by a Trust insurance
policy may be sold out of the affected Trust with the benefits of the
insurance attaching thereto. Thus, the value of the insurance, if any, at the
time of sale, can be realized in the market value of the Bond so sold (which
is not the case in connection with any value attributable to an Insured
Trust's portfolio insurance). See "Public Offering--Offering Price". Because
any such insurance value may be realized in the market value of the Bond upon
the sale thereof upon exercise of the Permanent Insurance option, the Sponsor
anticipates that (a) in the event an Insured Trust were to be comprised of a
substantial percentage of Bonds in default or significant risk of default, it
is much less likely that such Trust would need at some point in time to seek a
suspension of redemptions of Units than if such Trust were to have no such
option (see "Public Offering--Redemption of Units") and (b) at the time of
termination of an Insured Trust, if such Trust were holding defaulted Bonds or
Bonds in significant risk of default such Trust would not need to hold such
Bonds until their respective maturities in order to realize the benefits of
such Trust's portfolio insurance (see "Trust Administration--Amendment or
Termination").
Except as indicated below, insurance obtained by an Insured Trust has no
effect on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value for such insurance (including the right
to obtain Permanent Insurance) for the purpose of computing the price or
redemption value of Units if the Bonds covered by such insurance are in
default in payment of principal or interest or in significant risk of such
default. The value of the insurance will be the difference between (i) the
market value of a Bond which is in default in payment of principal or interest
or in significant risk of such default assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium and related expenses
attributable to the purchase of Permanent Insurance) and (ii) the market value
of such Bonds not covered by Permanent Insurance. See "Public
Offering--Offering Price". It is also the present intention of the Trustee not
to sell such Bonds to effect redemptions or for any other reason but rather to
retain them in the portfolio because value attributable to the insurance
cannot be realized upon sale. See "Public Offering-- Offering Price" herein
for a more complete description of an Insured Trust's method of valuing
defaulted Bonds and Bonds which have a significant risk of default. Insurance
obtained by the issuer of a Bond is effective so long as such Bond is
outstanding. Therefore, any such insurance may be considered to represent an
element of market value in regard to the Bonds thus insured, but the exact
effect, if any, of this insurance on such market value cannot be predicted.
The portfolio insurance policy or policies obtained by an Insured Trust,
if any, with respect to the Bonds in such Trust were issued by one or more of
the Portfolio Insurers. Any other Preinsured Bond insurance policy (or
commitment therefor) was issued by one of the Preinsured Bond Insurers. See
"Unitholder Explanations--Settlement of Bonds in the Trusts--Objectives and
Securities Selection".
AMBAC Indemnity Corporation ("AMBAC Indemnity") is a Wisconsin-domiciled
stock insurance corporation regulated by the Office of the Commissioner of
Insurance of the State of Wisconsin and licensed to do business in 50 states,
the District of Columbia and the Commonwealth of Puerto Rico, with admitted
assets of approximately $1,936,000,000 (unaudited) and statutory capital of
approximately $1,096,000,000 (unaudited) as of September 30, 1993. Statutory
capital consists of AMBAC Indemnity's policyholders' surplus and statutory
contingency reserve. AMBAC Indemnity is a wholly owned subsidiary of AMBAC
Inc., a 100% publicly-held company. Moody's Investors 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.
<PAGE>
22 Unitholder Explanations
AMBAC Indemnity has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Indemnity has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
Municipal Bond Investors Assurance Corporation ("MBIA") is the principal
operating subsidiary of MBIA Inc., a New York Stock Exchange listed company.
MBIA Inc. is not obligated to pay the debts of or claims against MBIA. MBIA is
a limited liability corporation rather than a several liability association.
MBIA is domiciled in the State of New York and licensed to do business in all
fifty states, the District of Columbia and the Commonwealth of Puerto Rico. As
of December 31, 1992 MBIA had admitted assets of $2.6 billion (audited), total
liabilities of $1.7 billion (audited), and total capital and surplus of $896
million (audited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. As of December
31, 1993, MBIA had admitted assets of $3.1 billion (unaudited), total
liabilities of $2.1 billion (unaudited), and total capital and surplus of $978
million (unaudited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. Copies
of MBIA's year end financial statements prepared in accordance with statutory
accounting practices are available from MBIA. The address of MBIA is 113 King
Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group,
Inc. On January 5, 1990, MBIA acquired all of the outstanding stock of Bond
Investors Group, Inc., the parent of Bond Investors Guaranty Insurance Company
(BIG), now known as MBIA Insurance Corp. of Illinois. Through a reinsurance
agreement, BIG has ceded all of its net insured risks, as well as its unearned
premium and contingency reserves, to MBIA and MBIA has reinsured BIG's net
outstanding exposure.
Moody's Investors Service, Inc. rates all bond issues insured by MBIA
"Aaa" and short term loans "MIG 1," both designated to be of the highest
quality.
Standard & Poor's Corporation rates all new issues insured by MBIA "AAA"
Prime Grade.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's Corporation rating of MBIA. No
application has been made to any other rating agency in order to obtain
additional ratings on the Bonds. The ratings reflect the respective rating
agency's current assessment of the creditworthiness of MBIA and its ability to
pay claims on its policies of insurance. Any further explanation as to the
significance of the above ratings may be obtained only from the applicable
rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds.
Financial Guaranty Insurance Company ("Financial Guaranty" or "FGIC") is
a wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a wholly-owned subsidiary of General
Electric Capital Corporation ("GECC"). Neither the Corporation nor GECC is
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of December 31,
1993, the total capital and surplus of Financial Guaranty was approximately
$777,000,000. Copies of Financial Guaranty's financial statements, prepared on
the basis of statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted accounting principles,
may be obtained by writing to Financial Guaranty at 115 Broadway, New York,
New York 10006, Attention: Communications Department, telephone number: (212)
312-3000 or to the New York State Insurance Department at 160 West Broadway,
18th Floor, New York, New York 10013, Attention: Property Companies Bureau,
telephone number: (212) 621-0389.
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
<PAGE>
Unitholder Explanations 23
23, 1985. Financial Security and its two wholly owned subsidiaries are
licensed to engage in the financial guaranty insurance business in 49 states,
the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. In general, financial guaranty insurance consists of the issuance
of a guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of those securities, in consideration for payment
of a premium to the insurer.
Financial Security is approximately 91.6% owned by U S WEST, Inc. and
8.4% owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine").
Neither U S WEST, Inc. nor Tokio Marine is obligated to pay the debts of or
the claims against Financial Security. Financial Security is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department. As of March 31, 1993, the total policyholders' surplus
and contingency reserves and the total unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were, in accordance
with generally accepted accounting principles, approximately $479,110,000
(unaudited) and $220,078,000 (unaudited), and the total shareholders' equity
and the total unearned premium reserve, respectively, of Financial Security
and its consolidated subsidiaries were, in accordance with generally accepted
accounting principles, approximately $628,119,000 (unaudited) and $202,493,000
(unaudited). Copies of Financial Security's financial statements may be
obtained by writing to Financial Security at 350 Park Avenue, New York, New
York, 10022, Attention: Communications Department. Its telephone number is
(212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written by Financial Security or either of its subsidiaries are
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance
policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc., and "AAA" by Standard & Poor's Corporation, Nippon
Investors Service Inc., Duff & Phelps Inc. and Australian Ratings Pty. Ltd.
Such ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company ("Capital Guaranty") is a "Aaa/AAA"
rated monoline stock insurance company incorporated in the State of Maryland,
and is a wholly owned subsidiary of Capital Guaranty Corporation, a Maryland
insurance holding company. Capital Guaranty Corporation is a publicly owned
company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in 49 states, the
District of Columbia and three U.S. territories. Capital Guaranty focuses on
insuring municipal securities and our policies guaranty the timely payment of
principal and interest when due for payment on new issue and secondary market
issue municipal bond transactions. Capital Guaranty's claims-paying ability is
rated "Triple-A" by both Moody's and Standard & Poor's.
As of September 30, 1993, Capital Guaranty had $13.6 billion in net
exposure outstanding. The total statutory policyholders' surplus and
contingency reserve of Capital Guaranty was approximately $181,383,432
(unaudited), and the total admitted assets were approximately $270,021,126
(unaudited) as reported to the Insurance Department of the State of Maryland.
Financial statements for Capital Guaranty Insurance Company, that have been
prepared in accordance with statutory insurance accounting standards, are
available upon request. The address of Capital Guaranty's headquarters and its
telephone number are Steuart Tower, 22nd Floor, One Market Plaza, San
Francisco, CA 94105-1413 and (415) 995-8000.
<PAGE>
24 Unitholder Explanations
CapMAC is a New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety insurance.
CapMAC is licensed in 50 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the territory of Guam. CapMAC insures
structured asset-backed, corporate, municipal and other financial obligations
in the domestic and foreign capital markets. CapMAC may also provide financial
guarantee reinsurance for structured asset-backed, corporate and municipal
obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's Corporation ("Standard &
Poor's"), "AAA" by Duff & Phelps, Inc. ("Duff & Phelps") and "AAA" by Nippon
Investors Inc. Such ratings reflect only the views of the respective rating
agencies, are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a company
that is owned by a group of institutional and other investors, including
CapMAC's management and employees.
Neither Holdings nor any of its stockholders is obligated to pay any
claims under any surety bond issued by CapMAC or any debts of CapMAC or to
make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the State of
New York. In addition, CapMAC is subject to regulation by the insurance
departments of the other jurisdictions in which it is licensed. CapMAC is
subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends, investment of assets, changes in
control, transactions with affiliates and consolidations and acquisitions. The
amount of exposure per risk that CapMAC may retain, after giving effect to
reinsurance, collateral or other security, is also regulated. Statutory and
regulatory accounting practices may prescribe appropriate rates at which
premiums are earned and the levels of reserves required. In addition, various
insurance laws restrict the incurrence of debt, regulate permissible
investments of reserves, capital and surplus, and govern the form of surety
bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured. Such
reinsurance does not relieve CapMAC of any of its obligations under the Surety
Bond(s).
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
As of December 31, 1993 and 1992, CapMAC had qualified statutory capital
(which consists of policyholders' surplus and contingency reserve) of
approximately $167 million and $161 million, respectively, and had not
incurred any debt obligations. Article 69 of the New York State Insurance Law
requires CapMAC to establish and maintain the contingency reserve, which is
available to cover claims under surety bonds issued by CapMAC.
In addition to its qualified statutory capital and other reinsurance
available to pay claims under its surety bonds, CapMAC has entered into a Stop
Loss Reinsurance Agreement (the "Stop Loss Agreement") with Winterthur Swiss
Insurance Company (the "Reinsurer"), which is rated AAA by Standard & Poor's
and Aaa by Moody's, pursuant to which the Reinsurer will be required to pay
any losses incurred by CapMAC during the term of the Stop Loss Agreement on
the surety bonds covered under the Stop Loss Agreement in excess of a
specified amount of losses incurred by CapMAC under such surety bonds (such
specified amount initially being $100 million and increasing annually by an
amount equal to 66 2/3% of the increase in CapMAC's statutory capital and
surplus) up to an aggregate limit payable under the Stop Loss Agreement of $50
million. The Stop Loss Agreement has a term of seven years, is extendable for
one-year periods and is subject to early termination upon the occurrence of
certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity
facility (the "Liquidity Facility") provided by a syndicate of banks rated
A1+/P1 by Standard & Poor's and Moody's, respectively, having a term of 360
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
<PAGE>
Unitholder Explanations 25
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 Returns on the
Securities in the Minnesota IM-IT Trust and Oklahoma IM-IT Trust were 5.17%
and 5.00%, respectively, after payment of the insurance premium or premiums
payable by each Trust, while the Estimated Long-Term Returns on such Trusts
were 5.28% and 5.03%, respectively. The Estimated Current Returns on identical
portfolios without the insurance obtained by the above-mentioned Trusts would
have been 5.18% and 5.09%, respectively, on such date, while the Estimated
Long-Term Returns on identical portfolios without the insurance obtained by
the above mentioned Trusts would have been 5.29% and 5.11%, respectively.
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".
<PAGE>
26 Unitholder Explanations
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such
regulation, however, is no guarantee that each Portfolio Insurer will be able
to perform on its contract of insurance in the event a claim should be made
thereunder at some time in the future. At the date hereof, it is reported that
no claims have been submitted or are expected to be submitted to any of the
Portfolio Insurers which would materially impair the ability of any such
company to meet its commitment pursuant to any contract of bond or portfolio
insurance.
The information relating to each Portfolio Insurer has been furnished by
such companies. The financial information with respect to each Portfolio
Insurer appears in reports filed with state insurance regulatory authorities
and is subject to audit and review by such authorities. No representation is
made herein as to the accuracy or adequacy of such information or as to the
absence of material adverse changes in such information subsequent to the
dates thereof.
The Bonds in the Insured Trusts are insured as follows:
<TABLE>
<CAPTION>
BONDS INSURED BONDS INSURED
UNDER AMBAC UNDER FINANCIAL
INDEMNITY GUARANTY PREINSURED
TRUST PORTFOLIO INSURANCE PORTFOLIO INSURANCE BONDS TOTAL
<S> <C> <C> <C> <C>
IM-IT............................................... 0% 0% 100% 100%
Minnesota IM-IT..................................... 11% 0% 89% 100%
Oklahoma IM-IT...................................... 75% 0% 25% 100%
</TABLE>
The breakdown of the Preinsured Bonds is as follows: IM-IT--AMBAC
Indemnity 19%, Financial Guaranty 30% and MBIA 51%; Minnesota IM-IT
Trust--AMBAC Indemnity 35%, Capital Guaranty 34%, Financial Guaranty 17% and
FSA 3%; Oklahoma IM-IT Trust--Financial Guaranty 25%.
<PAGE>
IM-IT-- Series 320 27
IM-IT
GENERAL. The IM-IT consists of 11 issues of Securities. One of the Bonds
in the IM-IT 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 located in 7 states or
territories, divided by purpose of issues (and percentage of principal amount
to total IM-IT) as follows: Health Care, 4 (29%); Retail Electric/Gas, 2
(21%); Certificates of Participation, 1 (10%); General Obligations, 1 (10%);
Public Building, 1 (10%); Transportation, 1 (10%) and Wholesale Electric, 1
(10%). No Bond issue has received a provisional rating. The dollar weighted
average maturity of the Bonds in the Trust is 27 years.
TAX STATUS. For a discussion of the Federal tax status of income earned
on IM-IT Units, see "Other Matters-- Federal Tax Status".
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
<S> <C>
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 56.17
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 1.57
Less: Annual Premium on Portfolio Insurance per Unit..................................................... ---
Estimated Net Annual Interest Income per Unit............................................................ $ 54.60
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 54.60
Divided by 12............................................................................................ $ 4.55
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .15166
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.46%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.49%
Initial Distribution (May 1994)................................................................................ $ 4.85
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.55
PURCHASED INTEREST <F6>........................................................................................ $ 9.40
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
MAY 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.23 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 $56.40.
Estimated Annual Expense per Unit (excluding insurance) will be increased
to $1.80; and estimated net annual interest income per Unit will remain
the same as shown. See "Estimated Current Returns and Estimated Long-Term
Returns." Based on the outstanding principal amount of Securities as of
the Date of Deposit, the Trustee's annual fee would be $9,653.
<F2> Excluding insurance costs.
<F3> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F5> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F6> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
28 IM-IT-- Series 320
<TABLE>
INSURED MUNICIPALS INCOME TRUST
SERIES 320 (157TH INSURED MULTI-SERIES)
PORTFOLIO AS OF MARCH 22, 1994
<CAPTION>
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION PRICE TO
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> IM-IT<F4>
<S> <C> <C> <C> <C>
$ 1,000,000 Matanuska-Susitna Borough, Alaska, General Obligation School
Construction Bonds, Series 1994A (MBIA Insured)** 2004 @ 102
#6.00% Due 5/1/2014.......................................... YAAA 2011 @ 100 S.F. $ 1,002,090
1,000,000 Illinois State Toll Highway Authority, Toll Highway Priority
Revenue Bonds, Series 1992A (FGIC Insured)
#6.20% Due 1/1/2016.......................................... AAA 2003 @ 102 1,008,770
1,000,000 Washington State Public Power Supply System, Nuclear Project
No.1, Refunding Revenue Bonds, Series 1993A (MBIA Insured) 2003 @ 102
#5.70% Due 7/1/2017.......................................... AAA 2014 @ 100 S.F. 961,500
1,000,000 Elsinore Valley Municipal Water District (Riverside County,
California) Refunding Certificates of Participation, Series
1992A (FGIC Insured) 2002 @ 102
#5.75% Due 7/1/2019.......................................... AAA 2013 @ 100 S.F. 972,580
500,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Bonds (Sisters of the Sorrowful Mother Corporation)
Series 1993C (MBIA Insured) 2003 @ 102
#5.50% Due 8/15/2019......................................... AAA 2014 @ 100 S.F. 463,985
850,000 Wisconsin State Health and Educational Facilities Authority,
Hospital Revenue Refunding Bonds (Bellin Memorial Hospital)
Series 1993 (AMBAC Indemnity Insured) 2003 @ 102
#5.875% Due 2/15/2022........................................ AAA 2020 @ 100 S.F. 828,699
500,000 Illinois State Health Facilities Authority, Revenue Bonds,
Children's Memorial Hospital, Series 1993 (MBIA Insured) 2003 @ 102
#5.00% Due 8/15/2022......................................... AAA 2014 @ 100 S.F. 428,685
1,000,000 Washington State Health Care Facilities Authority, Revenue
Bonds, Series 1992 (Swedish Hospital Medical Center, Seattle)
AMBAC Indemnity Insured 2002 @ 102
#6.30% Due 11/15/2022........................................ AAA 2013 @ 100 S.F. 1,016,480
1,000,000 Rhode Island Convention Center Authority, Revenue Bonds, Series
1993 (MBIA Insured) 2004 @ 102
#5.00% Due 5/15/2023......................................... AAA 2009 @ 100 S.F. 861,950
1,000,000 Indianapolis, Indiana, Gas Utility Revenue Bonds, Series A
(FGIC Insured)** 2004 @ 102
#5.875% Due 6/1/2024......................................... YAAA 2020 @ 100 S.F. 980,770
1,000,000 Los Angeles, California, Department of Water and Power,
Electric Plant Refunding and Revenue Bonds, Series 1993 (MBIA
Insured) 2003 @ 102
#5.875% Due 9/1/2030......................................... AAA 2024 @ 100 S.F. 986,520
$ 9,850,000 $ 9,512,029
</TABLE>
All of the Bonds in the portfolio are insured by one of the Preinsured Bond
Insurers as indicated in the Bond name. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
Minnesota IM-IT-- Series 51 29
MINNESOTA IM-IT TRUST
GENERAL. The Minnesota IM-IT Trust consists of 9 issues of Securities.
Four of the Bonds in the Minnesota 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 Minnesota IM-IT Trust) as follows: General Obligations, 4 (54%); Health
Care, 2 (33%); Single Family Mortgage Revenue, 1 (7%); Retail Electric/Gas, 1
(4%) and Wholesale Electric, 1 (2%). No Bond issue has received a provisional
rating.
SPECIAL CONSIDERATIONS. In the early 1980's the State of Minnesota
experienced financial difficulties due to a downturn in the State's economy
resulting from the national recession. As a consequence, the State's revenues
were significantly lower than anticipated in the July 1, 1979 to June 30, 1981
biennium and the July 1, 1981 to June 30, 1983 biennium.
In response to revenue shortfalls, the legislature broadened and
increased the State sales tax, increased income taxes (by increasing rates and
eliminating deductions) and reduced appropriations and deferred payment of
State aid, including appropriations for and aids to local governmental units.
The State's fiscal problems affected other governmental units within the
State, such as local government, school districts and state agencies, which,
in varying degrees, also faced cash flow difficulties. In certain cases,
revenues of local governmental units and agencies were reduced by the
recession.
Because of the State's fiscal problems, Standard & Poor's Corporation
reduced its rating on the State's outstanding general obligation bonds from
AAA to AA+ in August 1981 and to AA in March 1982. Moody's Investors Service,
Inc. lowered its rating on the State's outstanding general obligation bonds
from Aaa to Aa in April 1982. The State's economy recovered in the July 1,
1983 to June 30, 1985 biennium, and substantial reductions in the individual
income tax were enacted in 1984 and 1985. Standard & Poor's raised its rating
on the State's outstanding general obligation bonds to AA+ in January 1985. In
1986, 1987, 1991, 1992 and 1993, legislation was required to eliminate
projected budget deficits by raising additional revenue, reducing
expenditures, including aids to political subdivisions and higher education,
reducing the State's budget reserve (cash flow account), imposing a sales tax
on purchases by local governmental units, and making other budgetary
adjustments. A budget forecast released by the Minnesota Department of Finance
on March 1, 1994 projects a balanced General Fund at the end of the current
biennium, June 30, 1995, plus an increase in the State's cash flow account
from $360 million to $500 million. Total projected expenditures and transfers
for the biennium are $17.0 billion. The forecast also projects, however, a
shortage of $29.5 million in the Local Government Trust Fund at June 30, 1995,
against total projected expenditures from the Fund of $1.8 billion for the
biennium.
State grants and aids represent a large percentage of the total revenues
of cities, towns, counties and school districts in Minnesota. Even with
respect to Bonds that are revenue obligations of the issuer and not general
obligations of the State, there can be no assurance that the fiscal problems
referred to above will not adversely affect the market value or marketability
of the Bonds or the ability of the respective obligors to pay interest on and
principal of the Bonds.
TAX STATUS. For a discussion of the Federal tax status of income earned
on Minnesota IM-IT Trust Units, see "Other Matters--Federal Tax Status".
In the opinion of Dorsey & Whitney, special counsel to the Fund for
Minnesota tax matters, under existing Minnesota law:
We understand that the Minnesota IM-IT Trust will have no income
other than (i) interest income on bonds issued by the State of Minnesota
and its political and governmental subdivisions, municipalities and
governmental agencies and instrumentalities and on bonds issued by
possessions of the United States which would be exempt from Federal and
Minnesota income taxation when paid directly to an individual, trust or
estate (and the term "Bonds" as used herein refers only to such Bonds),
(ii) gain on the disposition of such
<PAGE>
30 Minnesota IM-IT-- Series 51
Bonds, and (iii) proceeds paid under certain insurance policies issued
to the Trustee or to the issuers of the Bonds which represent maturing
interest or principal payments on defaulted Bonds held by the Trustee.
"Taxable income" for Minnesota income tax purposes is the same as
"taxable income" for Federal income tax purposes with certain modifications
that (with one exception) do not apply to the present circumstances. The
exception is that corporations must add to Federal taxable income the amount
of any interest received on the obligations of states and their agencies and
instrumentalities, political and governmental subdivisions, and
municipalities. The terms "trust" and "corporation" have the same meanings for
Minnesota income tax purposes, as relevant to the Minnesota tax status of the
Minnesota IM-IT Trust, as for Federal income tax purposes.
In view of the relationship between Federal and Minnesota law described
in the preceding paragraph and the opinion of Chapman and Cutler with respect
to Federal tax treatment of the Minnesota IM-IT Trust and its Unitholders: (1)
the Minnesota IM-IT Trust will be treated as a trust rather than a corporation
for Minnesota income tax purposes and will not be deemed the recipient of any
Minnesota taxable income; (2) each Unitholder of the Minnesota IM-IT Trust
will be treated as the owner of a pro rata portion of the Minnesota IM-IT
Trust for Minnesota income tax purposes and the income of the Minnesota IM-IT
Trust will therefore be treated as the income of the Unitholders under
Minnesota law; (3) interest on the Bonds will be exempt from Minnesota income
taxation of Unitholders who are individuals, trusts and estates when received
by the Minnesota IM-IT Trust and attributed to such Unitholders and when
distributed to such Unitholders (except as hereinafter provided with respect
to "industrial development bonds" and "private activity bonds" held by
"substantial users"); (4) interest on the Bonds will be includible in the
Minnesota taxable income (subject to allocation and apportionment) of
Unitholders that are corporations; (5) each Unitholder will realize taxable
gain or loss when the Minnesota IM-IT Trust disposes of a Bond (whether by
sale, exchange, redemption or payment at maturity) or when the Unitholder
redeems or sells Units at a price which differs from original cost as adjusted
for amortization of bond discount or premium and other basis adjustments
(including any basis reduction that may be required to reflect a Unitholder's
share of interest, if any, accruing on Bonds during the interval between the
Unitholder's settlement date and the date such Bonds are delivered to the
Minnesota IM-IT Trust, if later); (6) tax cost reduction requirements relating
to amortization of bond premium may, under some circumstances, result in
Unitholders realizing taxable gain when their Units are sold or redeemed for
an amount equal to or less than their original cost; (7) any proceeds paid
under the insurance policy issued to the Trustee with respect to the Bonds
which represent maturing interest on defaulted obligations held by the Trustee
will be excludible from Minnesota gross income if, and to the same extent as,
such interest would have been so excludible if paid by the issuer of the
defaulted obligations; (8) any proceeds paid under individual insurance
policies obtained by issuers of Bonds which represent maturing interest on
defaulted obligations held by the Trustee will be excludible from Minnesota
gross income if, and to the same extent as, such interest would have been so
excludible if paid in the normal course by the issuer of the defaulted
obligations; (9) net capital gains of Unitholders attributable to the Bonds
will be fully includible in the Minnesota taxable income of Unitholders
(subject to allocation and apportionment in the case of corporate
Unitholders); and (10) interest on Bonds includible in the computation of
"alternative minimum taxable income" for federal income tax purposes will also
be includible in the computation of "alternative minimum taxable income" for
Minnesota income tax purposes.
Interest income attributable to Bonds that are "industrial development
bonds" or "private activity bonds", as those terms are defined in the Internal
Revenue Code, will be taxable under Minnesota law to a Unitholder who is a
"substantial user" of the facilities financed by the proceeds of such Bonds
(or a "related person" to such a "substantial user") to the same extent as if
such Bonds were held by such Unitholder.
<PAGE>
Minnesota IM-IT-- Series 51 31
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
<S> <C>
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME <F1>
Estimated Annual Interest Income per Unit................................................................ $ 53.87
Less: Estimated Annual Expense per Unit <F2>............................................................. $ 2.04
Less: Annual Premium on Portfolio Insurance per Unit..................................................... $ .14
Estimated Net Annual Interest Income per Unit............................................................ $ 51.69
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 51.69
Divided by 12............................................................................................ $ 4.31
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .14358
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F1><F3><F4><F5>....................................... 5.17%
ESTIMATED LONG-TERM RETURN <F3><F4><F5>........................................................................ 5.28%
Initial Distribution (May 1994)................................................................................ $ 4.59
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F5>.................................................................... $ 4.31
PURCHASED INTEREST <F6>........................................................................................ $ 8.98
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
MAY 15, 1994
<FN>
<F1> During the first year the Trustee will reduce its fee by approximately
$.03 per Unit (which amount is the estimated interest to be earned per
Unit prior to the expected delivery dates for the "when, as and if
issued" Bonds included in this Trust). Should such estimated interest
exceed such amount, the Trustee will reduce its fee up to its annual fee.
After the first year, the Trustee's fee will be that amount indicated
above. Estimated annual interest income per Unit will be increased to
$53.90. Estimated Annual Expense per Unit (excluding insurance) will be
increased to $2.07; 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 $2,955.
<F2> Excluding insurance costs.
<F3> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F4> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F5> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F6> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
32 Minnesota IM-IT-- Series 51
<TABLE>
MINNESOTA INSURED MUNICIPALS INCOME TRUST
SERIES 51 (157TH INSURED MULTI-SERIES)
PORTFOLIO AS OF MARCH 22, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND MINNESOTA
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION IM-IT
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C>
$ 50,000 Northern Municipal Power Agency (Minnesota) Electric System
Revenue Bonds, Refunding Series 1989A (AMBAC Indemnity
Insured)
#0.00% Due 1/1/2011.......................................... AAA $ 18,920<F6>
135,000 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Bonds, Series 1992B 2003 @ 102
#5.75% Due 1/1/2011.......................................... A+ 2008 @ 100 S.F. 134,231
500,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds (The Duluth Clinic, Ltd.) Series
1992 (AMBAC Indemnity Insured) 2002 @ 102
#6.20% Due 11/1/2012......................................... AAA 2006 @ 100 S.F. 514,160
100,000 Independent School District No. 564 (Thief River Falls)
Pennington, Marshall, and Red Lake Counties, Minnesota,
General Obligation School Building Bonds of 1993 (FSA
Insured) 2002 @ 100
5.35% Due 4/1/2013........................................... AAA 2011 @ 100 S.F. 95,357
500,000 City of Becker, Minnesota, Independent School District, General
Obligation Bonds, Series B (Capital Guaranty Insured) 2003 @ 100
#5.375% Due 2/1/2014......................................... AAA 2012 @ 100 S.F. 477,600
200,000 Minnesota Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1992D-2 2003 @ 102
5.95% Due 1/1/2017........................................... AA+ 2012 @ 100 S.F. 197,312
530,000 Independence School District No.728, Elk River, Minnesota,
General Obligation Refunding Bonds, Series 1993 (Capital
Guaranty Insured) 2003 @ 100
5.20% Due 2/1/2017........................................... AAA 2013 @ 100 S.F. 489,486
500,000 City of Minneapolis, Minnesota, and Housing and Redevelopment
Authority of the City of Saint Paul, Minnesota, Health Care
System Revenue Bonds (HealthSpan) Series 1993 (AMBAC
Indemnity Insured) 2003 @ 102
#4.75% Due 11/15/2018........................................ AAA 2014 @ 100 S.F. 425,405
500,000 City of Moorhead, Minnesota, General Obligation Tax Increment
Bonds, Series 1994A (FGIC Insured)** 2003 @ 100
#5.75% Due 2/1/2021.......................................... AAA 2014 @ 100 S.F. 496,580
$ 3,015,000 $ 2,849,051
</TABLE>
All of the Bonds in the portfolio are insured either by one of the Preinsured
Bond insurers (as indicated in the Bond name) or under the portfolio insurance
policy obtained by the Trust from AMBAC Indemnity. See "Unitholder
Explanations--Insurance on the Bonds in the Insured Trusts".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
Oklahoma IM-IT-- Series 8 33
OKLAHOMA IM-IT TRUST
GENERAL. The Oklahoma IM-IT Trust consists of 4 issues of Securities.
One of the Bonds in the Oklahoma IM-IT Trust is a general obligation of the
governmental entity issuing it and is backed by the taxing power thereof. The
remaining issues are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. These
issues are divided by purpose of issues (and percentage of principal amount to
total Oklahoma IM-IT Trust) as follows: Retail Electric/Gas, 2 (50%); General
Obligations, 1 (25%) and Transportation, 1 (25%). No Bond issue has received a
provisional rating.
SPECIAL CONSIDERATIONS. Investors in the Oklahoma IM-IT Trust should
consider that the economy of the State has been experiencing difficulties as a
result of an economic recession largely attributable to a decline in the
agricultural industry and a rapid decline that was experienced in the early
and mid 1980s in the energy industry which have, in turn, caused declines in
the real estate industry, the banking industry and most other sectors of the
State's economy. Continued low levels of economic activity, another decline in
oil and gas production prices, low growth in the State's major industries or
private or public financial difficulties could adversely affect Bonds in the
Portfolio and consequently the value of Units in the Oklahoma IM-IT Trust.
Governmental expense budgeting provisions in Oklahoma are conservative,
basically requiring a balanced budget each fiscal year unless a debt is
approved by a vote of the people providing for the collection of a direct
annual tax to pay the debt. Certain limited exceptions include: deficiency
certificates issued in the discretion of the Governor (however, the deficiency
certificates may not exceed $500,000 in any fiscal year); and debts to repel
invasion, suppress insurrection or to defend the State in the event of war.
To ensure a balanced annual budget, the State Constitution provides
procedures for certification by the State Board of Equalization of revenues
received in the previous fiscal year and amounts available for appropriation
based on a determination of revenues to be received by the State in the
General Revenue Fund in the next ensuing fiscal year.
Beginning July 1, 1985, surplus funds were to be placed in a
Constitutional Reserve Fund until the Reserve Fund equals 10% of the General
Revenue Fund certification for the preceding fiscal year.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions
to which the issuers in the Oklahoma IM-IT Trust are subject. Additionally,
many factors including national economic, social and environmental policies
and conditions, which are not within the control of the issuers of Bonds,
could affect or could have an adverse impact on the financial condition of the
State and various agencies and political subdivisions located in the State.
The Sponsor is unable to predict whether or to what extent such factors or
other factors may affect the issuers of Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of the
Bonds acquired by the Oklahoma IM-IT Trust to pay interest on or principal of
the Bonds.
TAX STATUS. For a discussion of the Federal tax status of income earned
on Oklahoma IM-IT Trust Units, see "Other Matters--Federal Tax Status".
The assets of the Oklahoma IM-IT Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Oklahoma (the "State") or
counties, municipalities, authorities or political subdivisions thereof (the
"Oklahoma Bonds") or by the Commonwealth of Puerto Rico, Guam and the United
States Virgin Islands (the "Possession Bonds") (collectively, the "Bonds"). At
the respective times of issuance of the Oklahoma Bonds, certain, but not
necessarily all, of the issues of the Oklahoma Bonds may have been accompanied
by an opinion of bond counsel to the respective issuing authorities that
interest on such Oklahoma Bonds (the "Oklahoma Tax-Exempt Bonds") are exempt
from the income tax imposed by the State of Oklahoma that is applicable to
individuals and corporations (the "Oklahoma State Income Tax"). The Trust may
include Oklahoma Bonds the interest on which is subject to the Oklahoma State
Income Tax (the "Oklahoma Taxable Bonds"). SEE "PORTFOLIO" WHICH INDICATES BY
FOOTNOTE WHICH OKLAHOMA BONDS ARE OKLAHOMA TAX-EXEMPT BONDS (ALL OTHER
OKLAHOMA BONDS INCLUDED IN THE PORTFOLIO ARE OKLAHOMA TAXABLE BONDS).
<PAGE>
34 Oklahoma IM-IT-- Series 8
Neither the Sponsor nor its counsel has independently examined the Bonds
to be deposited in and held in the Trust. However, although no opinion is
expressed herein regarding such matters, it is assumed that: (i) the Bonds
were validly issued, (ii) the interest thereon is excludable from gross income
for Federal income tax purposes and (iii) interest on the Oklahoma Tax-Exempt
Bonds, if received directly by a Unitholder, would be exempt from the Oklahoma
State Income Tax. At the respective times of issuance of the Bonds, opinions
relating to the validity thereof and to the exemption of interest thereon from
Federal income tax were rendered by bond counsel to the respective issuing
authorities. In addition, with respect to the Oklahoma Tax-Exempt Bonds, bond
counsel to the issuing authorities rendered opinions as to the exemption of
interest from the Oklahoma State Income Tax. Neither the Sponsor nor its
counsel has made any review for the Trust of the proceedings relating to the
issuance of the Bonds or of the bases for the opinions rendered in connection
therewith. The opinion set forth below does not address the taxation of
persons other than full time residents of Oklahoma.
In the opinion of Chapman and Cutler, Special Counsel to the Fund for
Oklahoma tax matters, under existing laws as of the date of this Prospectus
and based upon the assumptions set forth above:
(1) For Oklahoma State Income Tax purposes, the Trust is not an
association taxable as a corporation, each Unitholder of the Trust will be
treated as the owner of a pro rata portion of the Trust and the income of such
portion of the Trust will be treated as the income of the Unitholder.
(2) Interest paid and original issue discount, if any, on the Bonds which
would be exempt from the Oklahoma State Income Tax if received directly by a
Unitholder will be exempt from the Oklahoma State Income Tax when received by
the Trust and distributed to such Unitholder. A Unitholder's pro rata portion
of any interest paid and original issue discount, if any, on the Bonds which
would be subject to the Oklahoma State Income Tax if received directly by a
Unitholder, including, for example interest paid and original issue discount,
if any, on the Oklahoma Taxable Bonds, will be taxable to such Unitholder for
Oklahoma State Income Tax purposes when received by the Trust.
(3) To the extent that interest paid and original issue discount, if any,
derived from the Trust by a Unitholder with respect to Possession Bonds is
excludable from gross income for Federal income tax purposes pursuant to 48
U.S.C. (S)745, 48 U.S.C. (S)1423a, and 48 U.S.C. (S)1403, such interest paid
and original issue discount, if any, will not be subject to the Oklahoma State
Income Tax.
(4) Each Unitholder of the Trust will recognize gain or loss for Oklahoma
State Income Tax purposes if the Trustee disposes of a Bond (whether by
redemption, sale, or otherwise) or if the Unitholder redeems or sells Units of
the Trust to the extent that such a transaction results in a recognized gain
or loss to such Unitholder for Federal income tax purposes. Due to the
amortization of bond premium and other basis adjustments required by the
Internal Revenue Code, a Unitholder, under some circumstances, may realize
taxable gain when his or her Units are sold or redeemed for an amount equal to
their original cost.
(5) Although no opinion is expressed herein, we have been informally
advised by the Oklahoma Tax Commission that any insurance proceeds paid under
policies which represent maturing interest on defaulted obligations which are
excludable from gross income for Federal income tax purposes should be
excludable from the Oklahoma State Income Tax to the same extent as such
interest would have been if paid by the issuer of such Bonds held by the
Trust.
(6) The Oklahoma State Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase or carry
Units in the Trust, the interest on which is exempt from such tax.
(7) Although no opinion is expressed herein, we have been informally
advised by the Oklahoma Tax Commission that the Trust, in part because of its
status as a "grantor trust" for Federal income tax purposes, should not be
subject to the Oklahoma state franchise tax.
The scope of this opinion is expressly limited to the matters set forth
herein, and we express no other opinions of law with respect to the state or
local taxation of the Trust, the purchase, ownership or disposition of Units
or the Unitholders under Oklahoma law.
<PAGE>
Oklahoma IM-IT-- Series 8 35
<TABLE>
<CAPTION>
PER UNIT INFORMATION:
<S> <C>
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME:
Estimated Annual Interest Income per Unit................................................................ $ 52.94
Less: Estimated Annual Expense per Unit <F1>............................................................. $ 2.07
Less: Annual Premium on Portfolio Insurance per Unit..................................................... $ .87
Estimated Net Annual Interest Income per Unit............................................................ $ 50.00
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit............................................................ $ 50.00
Divided by 12............................................................................................ $ 4.17
Estimated Daily Rate of Net Interest Accrual per Unit.......................................................... $ .13889
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F2><F3><F4>........................................... 5.00%
ESTIMATED LONG-TERM RETURN <F2><F3><F4>........................................................................ 5.03%
Initial Distribution (May 1994)................................................................................ $ 4.44
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F4>.................................................................... $ 4.17
PURCHASED INTEREST <F5>........................................................................................ $ 8.82
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
MAY 15, 1994
<FN>
<F1> Excluding insurance costs.
<F2> The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Unitholder
Explanations--Public Offering--General".
<F3> The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities and with changes in the Purchased Interest;
therefore, there is no assurance that the present Estimated Current
Return indicated above will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which <F1>takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and <F2>takes into account the expenses
and sales charge associated with each Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return as indicated above will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated
Current Return calculation includes only net annual interest income and
Public Offering Price.
<F4> These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Series are set forth under "Estimated Cash
Flows to Unitholders".
<F5> See "Unitholder Explanations--Purchased and Accrued Interest".
</TABLE>
<PAGE>
36 Oklahoma IM-IT-- Series 8
<TABLE>
OKLAHOMA INSURED MUNICIPALS INCOME TRUST
SERIES 8 (157TH INSURED MULTI-SERIES)
PORTFOLIO AS OF MARCH 22, 1994
<CAPTION>
OFFERING
PRICE TO
NAME OF ISSUER, TITLE, INTEREST RATE AND OKLAHOMA
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED OR REDEMPTION IM-IT
PRINCIPAL<F1> BONDS CONTRACTED FOR<F1><F5> RATING<F2> FEATURE<F3> TRUST<F4>
<S> <C> <C> <C> <C>
+$ 750,000 Grand River Dam Authority, Oklahoma, Revenue and Refunding
Bonds, Series 1993
#5.50% Due 6/1/2009.......................................... A- $ 744,203
+ 750,000 State of Oklahoma, General Obligation Bonds, Oklahoma Building
Bonds, Series 1992A 2003 @ 102
5.20% Due 7/15/2016.......................................... AA 2014 @ 100 S.F. 720,337
+ 750,000 Oklahoma State Turnpike Authority, Turnpike Revenue Bonds,
First Senior Revenue Series 1992A 2002 @ 102
#6.125% Due 1/1/2020......................................... A+ 2016 @ 100 S.F. 772,313
+ 750,000 Oklahoma Municipal Power Authority, Power Supply System Revenue
Bonds, Series 1994B (FGIC Insured) 2008 @ 102
#4.50% Due 1/1/2028.......................................... AAA 2022 @ 100 S.F. 610,777
$ 3,000,000 $ 2,847,630
</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".
+ In the opinion of the Bond Issuer's legal counsel, as of the date of
issuance of such Bonds, the interest income generated by such Bonds is exempt
from Federal and Oklahoma state income taxes.
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
<PAGE>
Notes to Portfolios 37
NOTES TO PORTFOLIOS:
AS OF THE DATE OF DEPOSIT: MARCH 22, 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 October 22, 1993 to March 21, 1994. These Securities have
expected settlement dates ranging from March 22, 1994 to April 7, 1994
(see "Unitholder Explanations").
(2) All ratings are by Standard & Poor's Corporation unless otherwise
indicated. "*" indicates that the rating of the Bond is by Moody's
Investors Service, Inc. The ratings represent the latest published
ratings by the respective ratings agency or, if not published, represent
private letter ratings or those ratings expected to be published by the
respective ratings agency. "Y" indicates that such rating is contingent
upon physical receipt by the respective ratings agency of a policy of
insurance obtained by the issuer of the bonds involved and issued by the
Preinsured Bond Insurer named in the bond's title. A commitment for
insurance in connection with these bonds has been issued by the
Preinsured Bond Insurer named in the bond's title. "N/R" indicates that
the applicable rating service did not provide a rating for that
particular Security. For a brief description of the rating symbols and
their related meanings, see "Other Matters-- Description of Securities
Ratings".
(3) There is shown under this heading the year in which each issue of Bonds
is initially or currently callable and the call price for that year. Each
issue of Bonds continues to be callable at declining prices thereafter
(but not below par value) except for original issue discount bonds which
are redeemable at prices based on the issue price plus the amount of
original issue discount accreted to redemption date plus, if applicable,
some premium, the amount of which will decline in subsequent years.
"S.F." indicates a sinking fund is established with respect to an issue
of Bonds. Redemption pursuant to call provisions generally will, and
redemption pursuant to sinking fund provisions may, occur at times when
the redeemed bonds have an offering side valuation which represents a
premium over par. Certain Bonds may be subject to redemption without
premium prior to the date shown pursuant to extraordinary optional or
mandatory redemptions if certain events occur. Single family mortgage
revenue bonds and housing authority bonds are most likely to be called
subject to such provisions, but other bonds may have similar call
features. Notwithstanding any provisions to the contrary, certain bond
issuers have in the past and others may in the future attempt to redeem
Bonds prior to their initially scheduled call dates and at prices which
do not include any premiums. For a general discussion of certain of these
events, see "Unitholder Explanations--Bond Redemptions". To the extent
that the Securities were deposited in a Trust at a price higher than the
price at which they are redeemed, this will represent a loss of capital
when compared with the original Public Offering Price of the Units.
Conversely, to the extent that the Bonds were acquired at a price lower
than the redemption price, this will represent an increase in capital
when compared with the original Public Offering Price of the Units.
Distributions will generally be reduced by the amount of the income which
would otherwise have been paid with respect to redeemed Securities and
there will be distributed to Unitholders the principal amount and any
premium received on such redemption. The Estimated Current Return and
Estimated Long-Term Return in this event may be affected by such
redemptions. For the Federal tax effect on Unitholders of such
redemptions and resultant distributions, see paragraph (2) under "Other
Matters--Federal Tax Status".
(4) Evaluation of Securities is made on the basis of current offering prices
for the Securities. The offering prices are greater than the current bid
prices of the Securities which is the basis on which Unit value is
determined for purposes of redemption of Units (see "Unitholder
Explanations--Public Offering--Offering Price").
(5) Other information regarding the Bonds in each Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL PROFIT
INSURANCE COST TO (LOSS) TO ANNUAL INTEREST BID SIDE EVALUATION
TRUST COST SPONSOR SPONSOR INCOME TO TRUST OF BONDS
<S> <C> <C> <C> <C> <C>
IM-IT................................. -- $ 9,442,980 $ 69,049 $ 569,438 $ 9,438,154
Minnesota IM-IT....................... $ 421 $ 2,829,610 $ 19,441 $ 162,948 $ 2,826,439
Oklahoma IM-IT........................ $ 2,625 $ 2,840,574 $ 7,056 $ 159,938 $ 2,825,130
</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.
<PAGE>
38 Notes to Portfolios
Certain Securities in the Fund, if any, marked by a double asterisk (**),
have been purchased on a "when, as and if issued" or "delayed delivery"
basis. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. Delivery is expected
to take place at various dates after the First Settlement Date as
follows:
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PRINCIPAL RANGE OF DAYS SUBSEQUENT
TRUST AMOUNT TO FIRST SETTLEMENT DATE
<S> <C> <C>
IM-IT............................... 20% 6 to 8 days
Minnesota IM-IT..................... 17% 1 day
Oklahoma IM-IT...................... 0% --
</TABLE>
On the Date of Deposit, the offering side evaluations of the Securities
in the IM-IT, Minnesota IM-IT and Oklahoma IM-IT Trusts were higher than
the bid side evaluations of such Securities by 0.75%, 0.75% and 0.75%,
respectively, of the aggregate principal amounts of such Securities.
"#" indicates that such Bond was issued at an original issue discount.
The tax effect of Bonds issued at an original issue discount is described
in "Other Matters--Federal Tax Status".
(6) This Bond has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Bonds which
pay no interest are normally described as "zero coupon" bonds. Over the
life of bonds purchased at a deep discount the value of such bonds will
increase such that upon maturity the holders of such bonds will receive
100% of the principal amount thereof. Approximately 2% of the aggregate
principal amount of the Securities in the Minnesota IM-IT Trust are "zero
coupon" bonds.
(7) The issuer of this Bond has sold or reserved the right to sell to third
parties all or a portion of its right to call the Bond in accordance with
the redemption provisions of the Bond. See "Unitholder
Explanations--Settlement of Bonds in the Trusts--Bond Redemptions."
<PAGE>
Underwriting 39
UNDERWRITING. The Underwriters named below have severally purchased Units
in the following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
NAME ADDRESS IM-IT UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,297
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 2,000
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 500
B. C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 500
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 250
The Principal/Eppler, Guerin & Turner, Fountain Place, 1445 Ross Avenue, Suite 2300, Dallas, Texas 250
Inc. 75201
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 250
Unit Investment Trust Department 10292
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 250
William R. Hough & Company 100 Second Avenue South, 8th Floor, St. Petersburg, Florida 150
33701
Advest, Inc. 280 Trumbull Street, Hartford, Connecticut 06103 100
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 100
Butler, Wick & Co., Inc. City Center One, Suite 700, P.O. Box 149, Youngstown, Ohio 100
44501
Fidelity Capital Markets 161 Devonshire Street D4, Boston, Massachusetts 02110 100
A Division of National Financial
Services
Corporation
First of Michigan Corporation 100 Renaissance Center, 26th Floor, Detroit, Michigan 48243 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
J. J. B. Hilliard, W. L. Lyons, Inc. 501 South Fourth Street, Louisville, Kentucky 40202 100
Mabon Securities Corp. One Liberty Plaza, 165 Broadway, New York, New York 10006 100
Nathan & Lewis Securities, Inc. 119 West 40th Street, New York, New York 10018 100
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, Florida 33733 100
Roosevelt & Cross Inc. 20 Exchange Place, New York, New York 10005 100
Smith Barney Shearson 2 World Trade Center, 101st Floor, New York, New York 10048 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
Wheat, First Securities, Inc. River Front Plaza, 901 East Byrd Street, Richmond, Virginia 100
23219
10,097
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 2,523
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, New York 100
Unit Investment Trust Department 10292
3,023
</TABLE>
<TABLE>
<CAPTION>
OKLAHOMA
IM-IT TRUST
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 1,921
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 250
Stifel, Nicolaus & Company, Incorporated 500 North Broadway, St. Louis, Missouri 63102 250
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Linsco/Private Ledger Financial Services, 5871 Oberlin Drive, San Diego, California 92121 100
Inc.
Prudential Securities Inc. 32 Old Slip, 16th Floor, Financial Square, New York, New York 100
Unit Investment Trust Department 10292
Smith Barney Shearson 2 World Trade Center, 101st Floor, New York, New York 10048 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 100
3,021
</TABLE>
<PAGE>
40 Underwriting
Units may also be sold to broker-dealers and others at prices
representing the per Unit concession or agency commission stated under "Trust
Administration--General--Unit Distribution". However, resales of Units by such
broker-dealers and others to the public will be made at the Public Offering
Price described in the Prospectus. The Sponsor reserves the right to reject,
in whole or in part, any order for the purchase of Units and the right to
change the amount of the concession or agency commission from time to time.
In addition to any other benefits the Underwriters may realize from the
sale of the Units of the Fund, the Agreement Among Underwriters provides that
the Sponsor will share on a pro rata basis among those Underwriters who
underwrite at least 250 Units 50% of the aggregate gain, if any, represented
by the difference between the Sponsor's cost of the Securities in connection
with their acquisition and the evaluation thereof on the Date of Deposit less
deductions for certain accrued interest and certain other costs. See "Trust
Administration--General--Sponsor and Underwriter Compensation" and "Portfolio"
for the applicable Trust.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by
the Sponsor, or participate in sales programs sponsored by the Sponsor, an
amount not exceeding the total applicable sales charges on the sales generated
by such persons at the public offering price during such programs. Also, the
Sponsor in its discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying underwriters, brokers,
dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trusts. These programs will not change the price Unitholders pay for their
Units or the amount that the Trusts will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to Underwriters that sell units of trusts it sponsors. The Sponsor
pays substantially all costs associated with the seminar, excluding
Underwriter travel costs. Each Underwriter is invited to send a certain number
of representatives based on the gross number of units such firm underwrites
during a designated time period.
<PAGE>
Trust Administration 41
FUND ADMINISTRATION AND EXPENSES
SPONSOR. Van Kampen Merritt Inc., a Delaware corporation, is the Sponsor
of the Trust. Van Kampen Merritt Inc. is primarily owned by Clayton, Dubilier
& Rice, Inc., a New York-based private investment firm. Van Kampen Merritt
Inc. management owns a significant minority equity position. Van Kampen
Merritt Inc. specializes in the underwriting and distribution of unit
investment trusts and mutual funds. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has its principal office at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000. It maintains
a branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
September 30, 1993 the total stockholders' equity of Van Kampen Merritt Inc.
was $200,885,000 (unaudited). (This paragraph relates only to the Sponsor and
not to the Insured Municipals Income Trust or to any Insured Multi-Series
thereof or to any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility of
the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
As of November 30, 1993, the Sponsor and its affiliates managed or
supervised approximately $38.5 billion of investment products, of which over
$25 billion is invested in municipal securities. The Sponsor and its
affiliates managed $23 billion of assets, consisting of $8.2 billion for 19
open end mutual funds, $8.3 billion for 33 closed-end funds and $6.5 billion
for 51 institutional accounts. The Sponsor has also deposited approximately
$23.5 billion of unit investment trusts. Based on cumulative assets deposited,
the Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipal
Income Trust(R) or the IM-IT(R) trust. The Sponsor also provides surveillance
and evaluation services at cost for approximately $15.5 billion of unit
investment trust assets outstanding. Since 1976, the Sponsor has serviced over
one million retail investor accounts, opened through retail distribution
firms. Van Kampen Merritt Inc. is the sponsor of the various series of the
trusts listed below and the distributor of the mutual funds and closed-end
funds listed below. Unitholders may only invest in the trusts, mutual funds
and closed-end funds which are registered for sale in the state of residence
of such Unitholder. In order for a Unitholder to invest in the trusts, mutual
funds and closed-end funds listed below, such Unitholder must obtain a
prospectus relating to the trust or fund involved. A prospectus is the only
means by which an offer can be delivered to investors.
<TABLE>
<CAPTION>
NAME OF TRUST TRUST INVESTMENT OBJECTIVE
<S> <C>
Insured Municipals Income Trust................ Tax-exempt income by investing in insured municipal securities
California Insured Municipals Income Trust..... Double tax-exemption for California residents by investing in insured
California municipal securities
New York Insured Municipals Income Trust....... Double and in certain cases triple tax-exemption for New York residents
by investing in insured New York municipal securities
Pennsylvania Insured Municipals Income Trust... Double and in certain cases triple tax-exemption for Pennsylvania
residents by investing in insured Pennsylvania municipal securities
Insured Municipals Income Trust, Insured Tax-exempt income by investing in insured municipal securities; all
Multi-Series................................. issuers of bonds in a state trust are located in such state or in
(Premium Bond Series, National, Limited territories or possessions of the United States-- providing
Maturity, Intermediate, Short Intermediate, exemptions from all state income tax for residents of such state
Discount, Alabama, Arizona, California, (except for the Oklahoma IM-IT Trust where a portion of the income of
California Intermediate, California the Trust is subject to the Oklahoma state income tax)
Intermediate Laddered Maturity, California
Premium, Colorado, Connecticut, Florida,
Florida Intermediate, Florida Intermediate
Laddered Maturity, Georgia, Louisiana,
Massachusetts, Massachusetts Premium,
Michigan, Michigan Intermediate, Michigan
Intermediate Laddered Maturity, Michigan
Premium, Minnesota, Missouri, Missouri Inter-
mediate Laddered Maturity, Missouri Premium,
New Jersey, New Jersey Intermediate Laddered
Maturity, New Mexico, New York, New York
Intermediate, New York Intermediate Laddered
Maturity, New York Limited Maturity, Ohio,
Ohio Intermediate, Ohio IM-IT Intermediate
Laddered Maturity, Ohio Premium, Oklahoma,
Pennsylvania, Pennsylvania Intermediate,
Pennsylvania Intermediate Laddered Maturity,
Pennsylvania Premium, Tennessee, Texas,
Washington, West Virginia)
Insured Tax Free Bond Trust.................... Tax-exempt income by investing in insured municipal securities
Insured Tax Free Bond Trust, Insured Tax-exempt income by investing in insured municipal securities; all
Multi-Series................................. issuers of bonds in a state trust are located in such state--providing
(National, Limited Maturity, New York) exemptions from state income tax for residents of such state
</TABLE>
<PAGE>
42 Trust Administration
<TABLE>
<CAPTION>
NAME OF TRUST TRUST INVESTMENT OBJECTIVE (Continued)
<S> <C>
Investors' Quality Tax-Exempt Trust............ Tax-exempt income by investing in municipal securities
Investors' Quality Tax-Exempt Trust, Tax-exempt income by investing in municipal securities; all issuers of
Multi-Series................................. bonds in a state trust are located in such state or in territories or
(National, National AMT, Intermediate, possessions of the United States--providing exemptions from state
Alabama, Arizona, Arkansas, California, income tax for residents of such state
Colorado, Connecticut, Delaware, Florida,
Georgia, Kansas, Kentucky, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Missouri,
Nebraska, New Jersey, New York, North
Carolina, Ohio, Oregon, Pennsylvania, South
Carolina, Virginia)
Investors' Quality Municipals Trust, AMT Tax-exempt income for investors not subject to the alternative minimum
Series....................................... tax by investing in municipal securities, some or all of which are
subject to the Federal alternative minimum tax
Investors' Corporate Income Trust.............. Taxable income by investing in corporate bonds
Investors' Governmental Securities--Income Taxable income by investing in government-backed GNMA securities
Trust........................................
Van Kampen Merritt International Bond Income High current income through an investment in a diversified portfolio of
Trust........................................ foreign currency denominated corporate debt obligations
Van Kampen Merritt Insured Income Trust........ High current income consistent with preservation of capital through a
diversified investment in a fixed portfolio of insured, long-term or
intermediate-term corporate debt securities
Van Kampen Merritt Utility Income Trust........ High dividend income and capital appreciation by investing in common
stock of electric utilities
Van Kampen Merritt Blue Chip Opportunity Provide the potential for capital appreciation and income by investing
Trust........................................ in a portfolio of actively traded, New York Stock Exchange listed
equity securities which are components of the Dow Jones Industrial
Average*
Van Kampen Merritt Blue Chip Opportunity and Protect Unitholders' capital and provide the potential for capital
Treasury Trust............................... appreciation and income by investing a portion of its portfolio in
"zero coupon" U.S. Treasury obligations and the remainder of the
trust's portfolio in actively traded, New York Stock Exchange listed
equity securities which at the time of the creation of the trust were
components of the Dow Jones Industrial Average*
Van Kampen Merritt Emerging Markets Income High current income consistent with preservation of capital through a
Trust........................................ diversified investment in a fixed portfolio primarily consisting of
Brady Bonds of emerging market countries that have restructured
sovereign debt pursuant to the framework of the Brady Plan
Van Kampen Merritt Global Telecommunications Provide the potential for capital appreciation and income consistent
Trust........................................ with the preservation of invested capital, by investing in a portfolio
of equity securities which provide equipment for or services to the
telecommunications industry
Van Kampen Merritt Global Energy Trust......... Provide the potential for capital appreciation and income consistent
with the preservation of invested capital, by investing in a portfolio
of equity securities diversified within the energy industry
</TABLE>
<TABLE>
<CAPTION>
NAME OF MUTUAL FUND FUND INVESTMENT OBJECTIVE
<S> <C>
Van Kampen Merritt U.S. Government Fund........ High current income by investing in U.S. Government securities
Van Kampen Merritt Insured Tax Free Income High current income exempt from Federal income taxes by investing in
Fund.......................................... insured municipal securities
Van Kampen Merritt Municipal Income Fund....... High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt Tax Free High Income Fund... High current income exempt from Federal income taxes by investing in
medium and lower grade municipal securities
Van Kampen Merritt California Insured Tax Free High current income exempt from Federal and California income taxes by
Fund.......................................... investing in insured California municipal securities
Van Kampen Merritt High Yield Fund............. Provide a high level of current income by investing in medium and lower
grade domestic and foreign government and corporate debt securities.
The Fund will seek capital appreciation as a secondary objective
Van Kampen Merritt Growth and Income Fund...... Long-term growth of both capital and dividend income by investing in
dividend paying common stocks
Van Kampen Merritt Pennsylvania Tax Free Income High current income exempt from Federal and Pennsylvania state and
Fund.......................................... local income taxes by investing in medium and lower grade Pennsylvania
municipal securities
Van Kampen Merritt Money Market Fund........... High current income by investing in a broad range of money market
instruments that will mature within twelve months
Van Kampen Merritt Tax Free Money Fund......... High current income exempt from Federal income taxes by investing in a
broad range of municipal securities that will mature within twelve
months
Van Kampen Merritt Short-Term Global Income High current income by investing in a global portfolio of high quality
Fund.......................................... debt securities denominated in various currencies having remaining
maturities of not more than three years
Van Kampen Merritt Adjustable Rate U.S. High level of current income with a relatively stable net asset value
Government Fund............................... investing in U.S. Government securities
Van Kampen Merritt Limited Term Municipal High level of current income exempt from federal income tax, consistent
Income Fund................................... with preservation of capital
</TABLE>
* The Dow Jones Industrial Average is the property of Dow Jones & Company,
Inc. Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
<PAGE>
Trust Administration 43
<TABLE>
<CAPTION>
NAME OF CLOSED-END FUND FUND INVESTMENT OBJECTIVE
<S> <C>
Van Kampen Merritt Municipal Income Trust...... High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment grade
municipal securities
Van Kampen Merritt California Municipal High current income exempt from Federal and California income taxes
Trust......................................... with safety of principal by investing in a diversified portfolio of
investment grade California municipal securities
Van Kampen Merritt Intermediate Term High High current income while seeking to preserve shareholders' capital by
Income Trust.................................. investing in a diversified portfolio of high yield fixed income
securities
Van Kampen Merritt Limited Term High Income High current income while seeking to preserve shareholders' capital by
Trust......................................... investing in a diversified portfolio of high yield fixed income
securities
Van Kampen Merritt Prime Rate Income Trust..... High current income, consistent with preservation of capital by
investing in interests in floating or variable rate senior loans
Van Kampen Merritt Investment Grade Municipal High current income exempt from Federal income tax, consistent with
Trust......................................... preservation of capital
Van Kampen Merritt Municipal Trust............. High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt California Quality Municipal High current income exempt from Federal and California income taxes
Trust......................................... with safety of principal by investing in a diversified portfolio of
investment grade California municipal securities
Van Kampen Merritt Florida Quality Municipal High current income exempt from Federal income taxes and Florida
Trust......................................... intangible personal property taxes with safety of principal by
investing in a diversified portfolio of investment grade Florida
municipal securities
Van Kampen Merritt New York Quality Municipal High current income exempt from Federal as well as New York State and
Trust......................................... New York City income taxes with safety of principal by investing in a
diversified portfolio of investment grade New York municipal
securities
Van Kampen Merritt Ohio Quality Municipal High current income exempt from Federal and Ohio income taxes with
Trust......................................... safety of principal by investing in a diversified portfolio of
investment grade Ohio municipal securities
Van Kampen Merritt Pennsylvania Quality High current income exempt from Federal and Pennsylvania income taxes
Municipal Trust............................... with safety of principal by investing in a diversified portfolio of
investment grade Pennsylvania municipal securities
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal income tax, consistent
Municipals.................................... with preservation of capital
Van Kampen Merritt Trust for Insured High level of current income exempt from Federal income tax, consistent
Municipals.................................... with preservation of capital by investing in a diversified portfolio of
municipal securities which are covered by insurance with respect to
timely payment of principal and interest
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal and California income
CA Municipals................................. taxes, consistent with preservation of capital by investing in a
diversified portfolio of California municipal securities
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal income taxes,
FL Municipals................................. consistent with preservation of capital. The Fund also seeks to offer
its Shareholders the opportunity to own securities exempt from Florida
intangible personal property taxes
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal income taxes and New
NJ Municipals................................. Jersey gross income taxes, consistent with preservation of capital
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal as well as from New
NY Municipals................................. York State and New York City income taxes, consistent with
preservation of capital
Van Kampen Merritt Trust for Investment Grade High level of current income exempt from Federal and Pennsylvania
PA Municipals................................. income taxes and, where possible under local law, local income and
property taxes, consistent with preservation of capital
Van Kampen Merritt Municipal Opportunity High level of current income exempt from Federal income tax, consistent
Trust......................................... with preservation of capital by investing in a diversified portfolio of
municipal securities
Van Kampen Merritt Advantage Municipal Income High level of current income exempt from Federal income tax, consistent
Trust......................................... with preservation of capital by investing in a diversified portfolio of
municipal securities
Van Kampen Merritt Advantage Pennsylvania High level of current income exempt from Federal and Pennsylvania
Municipal Income Trust........................ income taxes and, where possible under local law, local income and
property taxes, consistent with preservation of capital
Van Kampen Merritt Strategic Sector Municipal Provide common shareholders with a high level of current income exempt
Trust......................................... from Federal income taxes, consistent with preservation of capital
Van Kampen Merritt Value Municipal Income High level of current income exempt from Federal income taxes,
Trust......................................... consistent with preservation of capital
Van Kampen Merritt California Value Municipal High level of current income exempt from Federal and California income
Income Trust.................................. taxes, consistent with preservation of capital
Van Kampen Merritt Massachusetts Value High level of current income exempt from Federal income taxes and
Municipal Income Trust........................ Massachusetts personal income taxes, consistent with preservation of
capital
Van Kampen Merritt New Jersey Value Municipal High level of current income exempt from Federal income taxes and New
Income Trust.................................. Jersey gross income tax, consistent with preservation of capital
Van Kampen Merritt New York Value Municipal High level of current income exempt from Federal as well as New York
Income Trust.................................. State and New York City income taxes, consistent with preservation of
capital
Van Kampen Merritt Ohio Value Municipal Income High level of current income exempt from Federal and Ohio income taxes,
Trust......................................... consistent with preservation of capital
Van Kampen Merritt Pennsylvania Value Municipal High level of current income exempt from Federal and Pennsylvania
Income Trust.................................. income taxes, consistent with preservation of capital
Van Kampen Merritt Municipal Opportunity Trust High level of current income exempt from federal income tax, consistent
II............................................ with preservation of capital
Van Kampen Merritt Florida Municipal High level of current income exempt from federal income tax, consistent
Opportunity Trust............................. with preservation of capital. The Fund seeks to offer its common
shareholders the opportunity to own securities exempt from Florida
intangible personal property taxes
Van Kampen Merritt Advantage Municipal Income Provide common shareholders with a high level of current income exempt
Trust II...................................... from federal income tax, consistent with preservation of capital
Van Kampen Merritt Select Sector Municipal To provide common shareholders with a high level of current income
Trust......................................... exempt from federal income tax, consistent with preservation of capital
</TABLE>
<PAGE>
44 Trust Administration
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, 1st Insured Multi-Series 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
<PAGE>
Trust Administration 45
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. 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.
<PAGE>
46 Trust Administration
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,
<PAGE>
Trust Administration 47
so that the net worth of such Trust would be reduced to less than 40% of the
initial principal amount of such Trust. If a Trust is liquidated because of
the redemption of unsold Units by the Underwriters, the Sponsor will refund to
each purchaser of Units the entire sales charge paid by such purchaser. The
Trust Agreement provides that each Trust shall terminate upon the redemption,
sale or other disposition of the last Security held in such Trust, but in no
event shall it continue beyond the end of the year preceding the fiftieth
anniversary of the Trust Agreement in the case of an IM-IT or a State Trust,
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 and
IM-IT Short Intermediate Trust. In the event of termination of the Fund or any
Trust, written notice thereof will be sent by the Trustee to each Unitholder
of such Trust at his address appearing on the registration books of the Fund
maintained by the Trustee. Within a reasonable time thereafter the Trustee
shall liquidate any Securities then held in such Trust and shall deduct from
the funds of such Trust any accrued costs, expenses or indemnities provided by
the Trust Agreement, including estimated compensation of the Trustee and costs
of liquidation and any amounts required as a reserve to provide for payment of
any applicable taxes or other governmental charges. The sale of Securities in
the Trust upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. For this reason,
among others, the amount realized by a Unitholder upon termination may be less
than the principal amount of Securities represented by the Units held by such
Unitholder. The Trustee shall then distribute to each Unitholder his share of
the balance of the Interest and Principal Accounts. With such distribution the
Unitholder shall be furnished a final distribution statement of the amount
distributable. At such time as the Trustee in its sole discretion shall
determine that any amounts held in reserve are no longer necessary, it shall
make distribution thereof to Unitholders in the same manner.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders of an Insured Trust, it should be noted that because the portfolio
insurance obtained by an Insured Trust is applicable only while Bonds so
insured are held by such Trust, the price to be received by such Trust upon
the disposition of any such Bond which is in default, by reason of nonpayment
of principal or interest, will not reflect any value based on such insurance.
Therefore, in connection with any liquidation, it shall not be necessary for
the Trustee to, and the Trustee does not currently intend to, dispose of any
Bond or Bonds if retention of such Bond or Bonds, until due, shall be deemed
to be in the best interest of Unitholders, including, but not limited to,
situations in which a Bond or Bonds so insured are in default and situations
in which a Bond or Bonds so insured have deteriorated market prices resulting
from a significant risk of default. Since the Preinsured Bonds will reflect
the value of the related insurance, it is the present intention of the Sponsor
not to direct the Trustee to hold any of such Preinsured Bonds after the date
of termination. All proceeds received, less applicable expenses, from
insurance on defaulted Bonds not disposed of at the date of termination will
ultimately be distributed to Unitholders of record as of such date of
termination as soon as practicable after the date such defaulted Bond or Bonds
become due and applicable insurance proceeds have been received by the
Trustee.
LIMITATION ON LIABILITIES. The Sponsor, the Evaluator and the Trustee
shall be under no liability to Unitholders for taking any action or for
refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and
duties hereunder. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Securities. In the
event of the failure of the Sponsor to act under the Trust Agreement, the
Trustee may act thereunder and shall not be liable for any action taken by it
in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon or upon it as Trustee under the Trust Agreement or upon or in respect
of the Fund which the Trustee may be required to pay under any present or
future law of the United States of America or of 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.
<PAGE>
48 Trust Administration
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering Price, plus Purchased Interest, plus
interest accrued but unpaid from the First Settlement Date to the date of
settlement as described above under "Unitholder Explanations--Purchased and
Accrued Interest--Accrued Interest". Upon the completion of the initial
offering, Units repurchased in the secondary market, if any, may be offered by
this Prospectus at the secondary Public Offering Price, plus Purchased
Interest plus interest accrued to the date of settlement in the manner
described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of $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 and $35.00 per Unit of
any Quality, IM-IT Limited Maturity, IM-IT Intermediate, IM-IT Short
Intermediate, and other Insured Trusts, respectively, as of the Date of
Deposit. In connection with quantity sales to purchasers of any IM-IT, State
Trust or National Quality Trust the Underwriters will receive from the Sponsor
commissions totalling $37.00 per Unit for any single transaction of 100 to 249
Units, $39.00 per Unit for any single transaction of 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. A. G. Edwards & Sons, Inc.
("Edwards"), which acts as a Managing Underwriter of Units of the various
series of the IM-IT, will receive from the Sponsor reimbursement for certain
costs and further compensation in the amount of $5.00 for each Unit of the
IM-IT it underwrites. Also, if The Principal/Eppler, Guerin & Turner, Inc.
commits (on the Date of Deposit) to underwrite a total of 4,000 or more Units
of this series of the IM-IT, any other series of the IM-IT and/or any series
of Texas Insured Municipals Income Trust during any calendar month, then The
Principal/Eppler, Guerin & Turner, Inc. will receive an additional $1.00 per
Unit for each of the Units of such Trust it commits to underwrite in said
month. See "Unitholder Explanations--Public Offering--General". In addition,
the Sponsor will receive from the Managing Underwriters of the Oklahoma IM-IT
Trust (who underwrite 15% of the Trust or 1,000 Units of the Trust, whichever
is greater) the excess of such gross sales commission over $38.00 per Unit of
the Trust, as of the Date of Deposit. Also, any such Managing Underwriter that
sells a total of 25% or 1,500 Units, whichever is greater, of the Oklahoma
IM-IT Trust will receive an additional $2.00 per each such Unit. Further, each
Underwriter who underwrites 1,000 or more Units in any Trust will receive
additional compensation from the
<PAGE>
Trust Administration 49
Sponsor of $1.00 for each Unit it underwrites. In addition, the Sponsor and
certain of the Underwriters will realize a profit or the Sponsor will sustain
a loss, as the case may be, as a result of the difference between the price
paid for the Securities by the Sponsor and the cost of such Securities to a
Trust (which is based on the determination by Interactive Data Services, Inc.
of the aggregate offering price of the underlying Securities in such Trust on
the Date of Deposit). See "Underwriting" and "Portfolio" for the applicable
Trust and "Notes to Portfolios". The Sponsor and the Underwriters may also
realize profits or sustain losses with respect to Securities deposited in each
Trust which were acquired by the Sponsor from underwriting syndicates of which
they were members. The Sponsor has participated as sole underwriter or as
manager or as a member of the underwriting syndicates from which none of the
aggregate principal amount of the Securities in the portfolios of the Fund
were acquired. The Underwriters may further realize additional profit or loss
during the initial offering period as a result of the possible fluctuations in
the market value of the Securities in each Trust after the Date of Deposit,
since all proceeds received from purchasers of Units (excluding dealer
concessions or agency commissions allowed, if any) will be retained by the
Underwriters. Affiliates of an Underwriter are entitled to the same dealer
concessions or agency commissions that are available to the Underwriter.
As stated under "Unitholder Explanations--Public Offering--Market for
Units", the Sponsor intends to, and certain of the other Underwriters may,
maintain a secondary market for the Units of the Fund. In so maintaining a
market, such person or persons will also realize profits or sustain losses in
the amount of any difference between the price at which Units are purchased
and the price at which Units are resold (which price is based on the bid
prices of the Securities in such Trust and includes a sales charge). In
addition, such person or persons will also realize profits or sustain losses
resulting from a redemption of such repurchased Units at a price above or
below the purchase price for such Units, respectively.
<PAGE>
50 Other Matters
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to Federal and Oklahoma tax law have been passed upon by
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Dorsey & Whitney has acted as special counsel to the
Fund for Minnesota tax matters. Tanner Propp & Farber has acted as counsel for
the Trustee and as special counsel to the Fund for New York tax matters. None
of the special counsel for the Fund has expressed any opinion regarding the
completeness or materiality of any matters contained in this Prospectus other
than the tax opinion set forth under "Tax Status" relating to the Trust for
which it has provided an opinion.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statements of condition and
the related securities portfolios at the Date of Deposit included in this
Prospectus have been audited by Grant Thornton, independent certified public
accountants, as set forth in their report in this prospectus, and are included
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
(1)Each Trust is not an association taxable as a corporation for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status when
distributed to Unitholders, except to the extent such interest is
subject to the alternative minimum tax, an additional tax on branches
of foreign corporations and the environmental tax (the "Superfund
Tax"), as noted below;
(2)Each Unitholder is considered to be the owner of a pro rata portion
of the respective Trust under subpart E, subchapter J of chapter 1 of
the Code and will have a taxable event when such Trust disposes of a
Bond, or when the Unitholder redeems or sells his Units. Unitholders
must reduce the tax basis of their Units for their share of accrued
interest received by the respective Trust, if any, on Bonds delivered
after the Unitholders pay for their Units to the extent that such
interest accrued on such Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the respective
Trust and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such
Units. Gain or loss upon the sale or redemption of Units is measured
by comparing the proceeds of such sale or redemption with the adjusted
basis of the Units. If the Trustee disposes of Bonds (whether by sale,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder. The amount of any such gain or loss is
measured by comparing the Unitholder's pro rata share of the total
proceeds from such disposition with the Unitholder's basis for his or
her fractional interest in the asset disposed of. In the case of a
Unitholder who purchases Units, such basis (before adjustment for
earned original issue discount and amortized bond premium, if any) is
determined by apportioning the cost of the Units among each of the
Trust assets ratably according to value as of the date of acquisition
of the Units. The tax cost reduction requirements of the Code relating
to amortization of bond premium may, under some circumstances, result
in the Unitholder realizing a taxable gain when his Units are sold or
redeemed for an amount equal to his original cost;
(3)Any proceeds paid under an insurance policy or policies dated the
Date of Deposit, issued to an Insured Trust by AMBAC Indemnity,
Financial Guaranty or a combination thereof with respect to the Bonds
which represent maturing interest on defaulted obligations held by the
Trustee will be excludable from Federal gross income if, and to the
same extent as, such interest would have been so excludable if paid by
the issuer of the defaulted obligations; and
(4)Any proceeds paid under individual policies obtained by issuers of
Bonds which represent maturing interest on defaulted obligations held
by the Trustee will be excludable from Federal gross income if, and to
the same extent as, such interest would have been excludable if paid
in the normal course by the issuer of the defaulted obligations.
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
<PAGE>
Other Matters 51
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.
<PAGE>
52 Other Matters
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains realized
in taxable years beginning on or after January 1, 1993. For taxpayers other
than corporations, net capital gains are subject to a maximum marginal stated
tax rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security benefits
received exceeds a "base amount". The base amount is $25,000 for unmarried
taxpayers, $32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the taxable year
and who file separate returns. Modified adjusted gross income is adjusted
gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible in
gross income to the extent that the sum of "modified adjusted gross income"
plus 50% of Social Security benefits received exceeds an "adjusted base
amount." The adjusted base amount is $34,000 for unmarried taxpayers, $44,000
for married taxpayers filing a joint return, and zero for married taxpayers
who do not live apart at all times during the taxable year and who file
separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from a Trust, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his Social Security benefits
in gross income whether or not he receives any tax-exempt interest. A taxpayer
whose modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security benefits
in gross income.
For a discussion of the state tax status of income earned on Units of a
Trust, see "Tax Status" for the applicable Trust. Except as noted therein, the
exemption of interest on state and local obligations for Federal income tax
purposes discussed above does not necessarily result in exemption under the
income or other tax laws of any State or City. The laws of the several States
vary with respect to the taxation of such obligations.
<PAGE>
Other Matters 53
DESCRIPTION OF SECURITIES RATINGS*
STANDARD & POOR'S CORPORATION. A Standard & Poor's Corporation
("Standard & Poor's") corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to
completion, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
With the occasional exception of oversupply in a few specific instances, the
safety of obligations of this class is so absolute that their market value is
affected solely by money market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
*As published by the rating companies.
<PAGE>
54 Other Matters
Aaa securities. These Aa bonds are high grade, their market value virtually
immune to all but money market influences, with the occasional exception of
oversupply in a few specific instances.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as higher medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to some degree by
credit circumstances during a sustained period of depressed business
conditions. During periods of normalcy, bonds of this quality frequently move
in parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
Baa--Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Con--Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Merritt Inc. and the Unitholders
of Insured Municipals Income Trust, 157th Insured Multi-Series (IM-IT,
Minnesota IM-IT and Oklahoma IM-IT Trusts):
We have audited the accompanying statements of condition and the
related portfolios of Insured Municipals Income Trust, 157th Insured
Multi-Series (IM-IT, Minnesota IM-IT and Oklahoma IM-IT Trusts) as of
March 22, 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, 157th Insured Multi-Series (IM-IT, Minnesota
IM-IT and Oklahoma IM-IT Trusts) as of March 22, 1994, in conformity
with generally accepted accounting principles.
Chicago, Illinois GRANT THORNTON
March 22, 1994
<PAGE>
Other Matters 55
<TABLE>
INSURED MUNICIPALS INCOME TRUST
157TH INSURED MULTI-SERIES
STATEMENTS OF CONDITION
AS OF THE DATE OF DEPOSIT: MARCH 22, 1994
<CAPTION>
MINNESOTA OKLAHOMA
INVESTMENT IN SECURITIES IM-IT IM-IT TRUST IM-IT TRUST
<S> <C> <C> <C>
Contracts to purchase tax-exempt securities <F1><F2><F4>................... $ 9,512,029 $ 2,849,051 $ 2,847,630
Accrued interest to the First Settlement Date <F1><F4>..................... 114,962 61,253 41,017
Total............................................................. $ 9,626,991 $ 2,910,304 $ 2,888,647
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor <F1><F4>............................. $ 20,056 $ 34,095 $ 14,361
Interest of Unitholders--
Cost to investors <F3>............................................... 10,097,000 3,023,000 3,021,000
Less: Gross underwriting commission <F3>................................. 490,065 146,791 146,714
Net interest to Unitholders <F1><F3><F4>.......................... 9,606,935 2,876,209 2,874,286
Total............................................................. $ 9,626,991 $ 2,910,304 $ 2,888,647
<FN>
<F1> The aggregate value of the Securities listed under "Portfolio" for each
Trust herein, and their cost to such Trust are the same. The value of the
Securities is determined by Interactive Data Services, Inc. on the bases
set forth under "Unitholder Explanations--Public Offering--Offering
Price". The contracts to purchase tax-exempt Securities are
collateralized by irrevocable letters of credit which have been deposited
with the Trustee in and for the following amounts:
OFFERING ACCRUED
PRINCIPAL PRICE INTEREST TO
AMOUNT OF AMOUNT OF OF BONDS EXPECTED
LETTER OF BONDS UNDER UNDER DELIVERY
CREDIT CONTRACTS CONTRACTS DATES
IM-IT........................................... $ 9,624,816 $ 9,850,000 $ 9,512,029 $ 112,787
Minnesota IM-IT Trust........................... $ 2,908,626 $ 3,015,000 $ 2,849,051 $ 59,575
Oklahoma IM-IT Trust............................ $ 2,885,760 $ 3,000,000 $ 2,847,630 $ 38,130
<F2> Insurance coverage providing for timely payment, when due, of all
principal and interest on the Bonds in the Insured Trusts has been
obtained either by such Trusts, by a prior owner of the Bonds or by the
issuers of the Bonds involved. Such insurance does not guarantee the
market value of the Bonds or the value of the Units. The insurance
obtained by the Insured Trusts is effective only while Bonds thus insured
are held in such Trusts. Neither the bid nor offering prices of the
underlying Bonds or of the Units, absent situations in which bonds are in
default in payment of principal or interest or in significant risk of
such default, include value, if any, attributable to the insurance
obtained by such Trusts.
<F3> The aggregate public offering price (exclusive of interest) and the
aggregate sales charge are computed on the bases set forth under
"Unitholder Explanations--Public Offering--Offering Price" and "Trust
Administration--General-- Sponsor and Underwriter Profits" and assume all
single transactions involve less than 100 Units. For single transactions
involving 100 or more Units, the sales charge is reduced (see "Unitholder
Explanations--Public Offering--General") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while
the Net interest to Unitholders remains unchanged.
<F4> Accrued interest on the underlying Securities represents the interest
accrued as of the First Settlement Date from the later of the last
payment date on the Securities or the date of issuance thereof. The
Trustee may advance to the Trust a portion of the accrued interest on the
underlying Securities for distribution to the Sponsor as the Unitholder
of record as of the First Settlement Date. A portion of the accrued
interest ("Purchased Interest") on the underlying Securities, as
indicated under "Summary of Essential Financial Information", is payable
by investors and is included in the Public Offering Price. Purchased
Interest is the difference between Accrued interest to the First
Settlement Date and Accrued interest payable to Sponsor.
</TABLE>
<PAGE>
56 Other Matters
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of this prospectus, the following tables show the
approximate taxable estimated current returns for individuals that are
equivalent to tax-exempt estimated current returns under combined Federal and
State taxes (where applicable) using the published Federal and State tax rates
(where applicable) scheduled to be in effect in 1994. They incorporate
increased tax rates for higher income taxpayers that were included in the
Revenue Reconciliation Act of 1993. These tables illustrate approximately what
you would have to earn on taxable investments to equal the tax-exempt
estimated current return in your income tax bracket. For cases in which more
than one State bracket falls within a Federal bracket, the highest State
bracket is combined with the Federal bracket. The combined State and Federal
tax rates shown reflect the fact that State tax payments are currently
deductible for Federal tax purposes. The tables do not show the approximate
taxable estimated current returns for individuals that are subject to the
alternative minimum tax. The taxable equivalent estimated current returns may
be somewhat higher than the equivalent returns indicated in the following
tables for those individuals who have adjusted gross incomes in excess of
$111,800. The tables do not reflect the effect of limitations on itemized
deductions and the deduction for personal exemptions. They were designed to
phase out certain benefits of these deductions for higher income taxpayers.
These limitations, in effect, raise the marginal maximum Federal tax rate to
approximately 44 percent for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 41 percent for taxpayers filing
a single return entitled to only one personal exemption. These limitations are
subject to certain maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions. See "Other
Matters--Federal Tax Status" for a more detailed discussion of recent Federal
tax legislation, including a discussion of provisions affecting corporations.
<TABLE>
IM-IT
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 15% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
22.80 - 55.10 38.00 - 91.90 28 6.94 7.64 8.33 9.03 9.72 10.42 11.11
55.10 - 115.00 91.90 - 140.00 31 7.25 7.97 8.70 9.42 10.14 10.87 11.59
115.00 - 250.00 140.00 - 250.00 36 7.81 8.59 9.38 10.16 10.94 11.72 12.50
Over 250.00 Over 250.00 39.6 8.28 9.11 9.93 10.76 11.59 12.42 13.25
</TABLE>
<TABLE>
MINNESOTA
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 21.8% 6.39% 7.03% 7.67% 8.31% 8.95% 9.59% 10.23%
22.80 - 55.10 38.00 - 91.90 34.1 7.59 8.35 9.10 9.86 10.62 11.38 12.14
55.10 - 115.00 91.90 - 140.00 36.9 7.92 8.72 9.51 10.30 11.09 11.89 12.68
115.00 - 250.00 140.00 - 250.00 41.4 8.53 9.39 10.24 11.09 11.95 12.80 13.65
Over 250.00 Over 250.00 44.7 9.04 9.95 10.85 11.75 12.66 13.56 14.47
</TABLE>
<TABLE>
OKLAHOMA
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX
RETURN RETURN BRACKET* 5% 5 1/2% 6% 6 1/2% 7% 7 1/2% 8%
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.80 $ 0 - 38.00 22.3% 6.44% 7.08% 7.72% 8.37% 9.01% 9.65% 10.30%
22.80 - 55.10 38.00 - 91.90 33.3 7.50 8.25 9.00 9.75 10.49 11.24 11.99
55.10 - 115.00 91.90 - 140.00 35.9 7.80 8.58 9.36 10.14 10.92 11.70 12.48
115.00 - 250.00 140.00 - 250.00 40.3 8.38 9.21 10.05 10.89 11.73 12.56 13.40
Over 250.00 Over 250.00 43.4 8.83 9.72 10.60 11.48 12.37 13.25 14.13
</TABLE>
*The combined Federal and State tax rate provided for the Oklahoma IM-IT Trust
takes into account the fact that all of the annual income of the Trust
generated by the Bonds in the Oklahoma IM-IT Trust is exempt from the Oklahoma
state income tax. The table does not reflect the fact that Oklahoma taxpayers
have the option of not deducting Federal income tax liability for Oklahoma tax
purposes. If an Oklahoma taxpayer chooses this option, the taxpayer may be
taxed at a rate lower than the rate shown in the above table.
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
<PAGE>
Other Matters 57
advertising and sales materials compare the then current estimated returns on
the Trusts and returns over specified periods on other similar Van Kampen
Merritt sponsored unit investment trusts with returns on taxable investments
such as corporate or U.S. Government bonds, bank CDs and money market accounts
or money market funds, each of which has investment characteristics that may
differ from those of the Trusts. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank CDs and
money market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of principal,
but pay interest at rates that vary with the condition of the short-term debt
market. The investment characteristics of the Trusts are described more fully
elsewhere in this Prospectus.
<PAGE>
58 Other Matters
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated distributions of
interest, principal and rebates of Purchased Interest to Unitholders. The
tables assume no changes in expenses, no changes in the current interest
rates, no exchanges, redemptions, sales or prepayments of the underlying
Securities prior to maturity or expected retirement date and the receipt of
principal upon maturity or expected retirement date. To the extent the
foregoing assumptions change actual distributions will vary.
<TABLE>
IM-IT
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C> <C>
May 1994 $ 4.85 $ 4.85
June 1994 - November 2004 4.55 4.55
December 2004 4.28 $ 99.03 $ 1.04 104.35
January 2005 4.04 99.04 1.02 104.10
February 2005 - April 2006 3.54 3.54
May 2006 3.54 99.04 .99 103.57
June 2006 - June 2017 3.05 3.05
July 2017 3.05 99.04 .94 103.03
August 2017 - June 2019 2.59 2.59
July 2019 2.59 99.04 .95 102.58
August 2019 2.13 2.13
September 2019 2.01 49.52 .45 51.98
October 2019 - February 2022 1.91 1.91
March 2022 1.69 84.18 .83 86.70
April 2022 - August 2022 1.51 1.51
September 2022 1.40 49.52 .41 51.33
October 2022 - May 2023 1.30 1.30
June 2023 1.09 99.04 .83 100.96
July 2023 - May 2024 .90 .90
June 2024 .90 99.04 .97 100.91
July 2024 - August 2030 .43 .43
September 2030 .43 99.04 .97 100.44
</TABLE>
<PAGE>
Other Matters 59
<TABLE>
MINNESOTA IM-IT TRUST
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C> <C>
May 1994 $ 4.59 $ 4.59
June 1994 - October 2004 4.31 4.31
November 2004 4.31 $165.39 $ 1.71 171.41
December 2004 - December 2010 3.47 3.47
January 2011 3.47 61.20 .43 65.10
February 2011 - March 2013 3.27 3.27
April 2013 3.27 33.08 .29 36.64
May 2013 - January 2014 3.12 3.12
February 2014 3.12 165.40 1.48 170.00
March 2014 - December 2016 2.40 2.40
January 2017 2.40 66.16 .66 69.22
February 2017 2.09 175.32 1.52 178.93
March 2017 - November 2018 1.35 1.35
December 2018 1.01 165.40 1.31 167.72
January 2019 - January 2021 .71 .71
February 2021 .71 165.40 1.58 167.69
</TABLE>
<PAGE>
60 Other Matters
<TABLE>
OKLAHOMA IM-IT TRUST
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C> <C>
May 1994 $ 4.44 $ 4.44
June 1994 - June 2004 4.17 4.17
July 2004 4.17 $248.26 $ 2.53 254.96
August 2004 - May 2009 2.95 2.95
June 2009 2.95 248.26 2.28 253.49
July 2009 - July 2016 1.87 1.87
August 2016 1.32 248.26 2.15 251.73
September 2016 - December 2027 .84 .84
January 2028 .84 248.26 1.86 250.96
</TABLE>
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
Title Page
INTRODUCTION..................................... 2
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION....... 3
UNITHOLDER EXPLANATIONS.......................... 5
Settlement of Bonds in the Trusts............... 5
The Fund...................................... 5
Objectives and Securities Selection........... 6
Portfolio Concentrations...................... 7
Replacement Bonds............................. 10
Bond Redemptions.............................. 11
Distributions................................. 12
Certificates.................................. 12
Estimated Current Returns and Estimated
Long-Term Returns............................. 12
Interest Earning Schedule....................... 13
Calculation of Estimated Net Annual Interest
Income...................................... 13
Purchased and Accrued Interest.................. 13
Purchased Interest............................ 13
Accrued Interest.............................. 13
Public Offering................................. 14
General....................................... 14
Offering Price................................ 15
Market for Units.............................. 16
Distributions of Interest and Principal....... 17
Reinvestment Option........................... 17
Redemption of Units........................... 18
Reports Provided.............................. 19
Insurance on the Bonds in the Insured Trusts.... 20
IM-IT............................................ 27
MINNESOTA IM-IT TRUST............................ 29
OKLAHOMA IM-IT TRUST............................. 33
NOTES TO PORTFOLIOS.............................. 37
UNDERWRITING..................................... 39
TRUST ADMINISTRATION............................. 41
Fund Administration and Expenses................ 41
Sponsor....................................... 41
Compensation of Sponsor and Evaluator......... 44
Trustee....................................... 44
Trustee's Fee................................. 45
Portfolio Administration...................... 45
Sponsor Purchases of Units.................... 46
Insurance Premiums............................ 46
Miscellaneous Expenses........................ 46
General......................................... 46
Amendment or Termination...................... 46
Limitation on Liabilities..................... 47
Unit Distribution............................. 48
Sponsor and Underwriter Compensation.......... 48
OTHER MATTERS.................................... 50
Legal Opinions.................................. 50
Independent Certified Public Accountants........ 50
FEDERAL TAX STATUS............................... 50
DESCRIPTION OF SECURITIES RATINGS................ 53
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS..................................... 54
STATEMENTS OF CONDITION.......................... 55
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
TABLES.......................................... 56
ESTIMATED CASH FLOWS TO UNITHOLDERS.............. 58
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
(R) denotes a registered trademark of Van Kampen Merritt Inc.
P R O S P E C T U S
March 22, 1994
LOGO
INSURED MUNICIPALS INCOME TRUST, 157TH INSURED MULTI-SERIES
IM-IT 320
Minnesota IM-IT 51
Oklahoma IM-IT 8
LOGO
One Parkview Plaza (R)
Oakbrook Terrace, Illinois 60181
Mellon Bank Center
1735 Market Street, Suite 1300
Philadelphia, Pennsylvania 19103
Please retain this Prospectus for future reference.
<PAGE>
Contents of Registration Statement
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services and
legal counsel
The following exhibits:
1.1 Copy of Trust Agreement (to be supplied by amendment).
1.4 Copy of Municipal Bond Fund Portfolio Insurance Policy issued by
AMBAC Indemnity Corporation and/or Financial Guaranty Insurance
Company for each IM-IT Trust (to be supplied by amendment).
1.5 Copy of Master Agreement Among Underwriters (to be supplied by
amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be supplied by amendment).
3.2 Opinion and consent of counsel as to Federal income tax status of
securities being registered (to be supplied by amendment).
3.3 Opinion and consent of counsel as to income tax status of the Fund
under New York law (to be supplied by amendment).
4.1 Consent of Interactive Data Services, Inc. (to be supplied by
amendment).
4.2 Consent of Standard & Poor's Corporation (to be supplied by
amendment).
4.3 Consent of Grant Thornton (to be supplied by amendment).
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Insured Municipals Income Trust, 161st Insured Multi-Series
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Chicago and
State of Illinois on the 1st day of April, 1994.
Insured Municipals Income Trust,
161st Insured Multi-Series
(Registrant)
By Van Kampen Merritt Inc.
(Depositor)
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on April 1, 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 )
By Sandra A. Waterworth
(Attorney-in-fact*)
______________________________________________________________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust
and Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-
65744) and the same are hereby incorporated herein by this reference.
