MEMORANDUM OF CHANGES
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
The Prospectus filed with Amendment No. 1 of the Registration Statement
on Form S-6 has been revised to reflect information regarding the deposit of
bonds on May 22, 1997, and to set forth certain statistical data based thereon.
COVER PAGE. The series number and the Trust has been added. Information
relating to the sales charge and the price of the offering if the units
were available for purchase at the opening of business on the Initial
Date of Deposit is set forth in the "Public Offering Price" section.
PAGE 3. The "Summary of Essential Financial Information" table
has been completed.
PAGES 8-9. The following information for the Trust appears on the
pages indicated:
Summary data regarding the composition of the portfolio
of the Trusts.
The Portfolio for the Trust.
PAGE 10. The Notes to Schedule of Investments has been completed.
PAGE 12. The Independent Auditors' Report has been completed.
PAGE 13. The Statement of Net Assets has been completed.
PAGE 27. In the section "Offering Price," the differences between
the offering side evaluations and the bid side
evaluations of the Bonds in the Trusts have been set
forth.
PAGE 28. The dealer concession has been set forth in the "Public
Offering" section.
PAGE 28. The percentage of the aggregate principal amount of the
Securities in the Trusts in which the Sponsor or
affiliates of the Sponsor have participated as
underwriters or members of the underwriting syndicate
has been set forth in the "Sponsor and Underwriter
Compensation" section.
BACK COVER The Series number, the Trust in the Fund and the date of
the Prospectus have been included.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-26193
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO THE
REGISTRATION STATEMENT
ON
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: DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
B. NAME OF DEPOSITOR: VOYAGEUR FUND MANAGERS, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
VOYAGEUR FUND MANAGERS, INC.
One Commerce Square
Philadelphia, Pennsylvania 19103
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copy to:
George M. Chamberlain, Jr. MARK J. KNEEDY
Voyageur Fund Managers, Inc. c/o Chapman and Cutler
One Commerce Square 111 West Monroe Street
Philadelphia, Pennsylvania 19103 Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title and amount of Proposed maximum Amount of
securities being registered aggregate offering price registration fee
<S> <C> <C> <C>
Delaware-Voyageur Unit Investment An indefinite number of Indefinite $0.00
Trust, Series 10 Units of Beneficial Interest
pursuant to Rule 24f-2 under
the Investment Company Act of 1940
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration
Statement.
/ / Check box if it is proposed that this filing will become effective on
May 22, 1997 at 2:00 P.M. pursuant to Rule 487.
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.
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
----------------------
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
Form N-8B-2 FORM S-6
Item Number HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C> <C>
1. (a) Name of Trust.............................................................. } Prospectus front cover
2. (b) Title of securities issued................................................. } Summary of Essential
} Information
3. Name and address of each depositor.............................................. } Trust Administration
4. Name and address of Trustee..................................................... } Trust Administration
5. State of organization of Trust.................................................. } The Fund
6. Execution and termination of Trust agreement } Trust Administration
7. Changes of name................................................................. } The Fund; Trust Administration
8. Fiscal year..................................................................... } *
9. Litigation...................................................................... } *
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a) Registered of bearer securities............................................ } Rights of Unitholders
(b) Cumulative or distributive securities...................................... } Rights of Unitsholders; The Fund
}
(c) Redemption................................................................. } Rights of Unitholders
(d) Conversion, transfer, etc.................................................. } Rights of Unitholders
(e) Periodic payment plan...................................................... } *
(f) Voting rights.............................................................. } Rights of Unitholders
(g) Notice of Unitholders...................................................... } Trust Administration
(h) Consents required.......................................................... } Rights of Unitholders; Trust
} Administration
(i) Other provisions........................................................... } Tax Status; Insurance on the
} Bonds
11. Type of securities comprising units............................................. } The Fund; The State Trusts
12. Certain information regarding periodic payment } *
certificates }
13. (a) Load, fees, expenses, etc.................................................. } Estimated Current Return and
} Estimated Long-Term Return;
} Trust Operating Expenses
(b) Certain information regarding periodic payment } *
certificates........................................................... }
(c) Certain percentages........................................................ } Summary of Essential
} Information; Public Offering;
} Insurance on the Bonds
(d) Certain other fees, etc. payable by holders } Rights of Unitholders
(e) Certain profits receivable by depositor,
principal, underwriters, writers, Trustee or
affiliated person............................................................... } Trust Operating Expenses; Public
} Offering
(f) Ratio of annual charges to income.......................................... } *
} The Fund
14. Issuance of Trust's securities.................................................. } Rights of Unitholders
15. Receipt and handling of payments from purchasers } *
16. Acquisition and disposition of underlying } The Fund; Investment Objectives
securities...................................................................... } and Portfolio Selection; Trust
} Administration; Public
} Offering
17. Withdrawal or redemption........................................................ } Rights of Unitholders; Public
} Offering
18. (a) Receipt, custody and disposition of income } Rights of Unitholders
(b) Reinvestment of distributions.............................................. } Rights of Unitholders
(c) Reserves or special Trusts................................................. } Trust Operating Expenses
(d) Schedule of distributions.................................................. } *
19. Records, accounts and reports................................................... } Rights of Unitholders; Trust
} Administration
20. Certain miscellaneous provisions of Trust agreement
(a) Amendment.................................................................. } Trust Administration
(b) Termination................................................................ } *
(c) and (d) Trustee, removal and successor..................................... } Trust Administration
(e) and (f) Depositor, removal and successor.................................... } Trust Administration
21. Loans to security holders } *
22. Limitations on liability........................................................ } Trust Administration
23. Bonding arrangements............................................................ } *
24. Other material provisions of Trust agreement.................................... } *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor....................................................... } Trust Administration
26. Fees received by depositor...................................................... } See Items 13(a) and 13(e)
27. Business of depositor........................................................... } Trust Administration
28. Certain information as to officials and
affiliated persons of depositor................................................. } Trust Administration
29. Voting securities of depositor.................................................. } *
30. Persons controlling depositor................................................... } *
31. Payment by depositor for certain services
rendered to Trust............................................................... } *
32. Payment by depositor for certain other services rendered
to Trust........................................................................ } *
33. Remuneration of employees of depositor
for certain services rendered to Trust.......................................... } *
34. Remuneration of other persons for certain
services rendered to Trust...................................................... } *
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of Trust's securities by states.................................... } Public Offering
36. Suspension of sales of Trust's securities....................................... } *
37. Revocation of authority to distribute........................................... } *
38. (a) Method of Distribution..................................................... } Public Offering
(b) Underwriting Agreements.................................................... } Underwriting
(c) Selling Agreements......................................................... } Public Offering
39. (a) Organization of principal underwriters..................................... } Trust Administration
(b) N.A.S.D. membership of principal underwriters } *
40. Certain fees received by principal underwriters } See Items 13(a) and 13(e)
41. (a) Business of principal underwriters......................................... } Trust Administration
(b) Branch offices of principal underwriters } *
(c) Salesmen of principal underwriters......................................... } *
42. Ownership of Trust's securities by certain persons } *
43. Certain brokerage commissions received by
principal underwriters.......................................................... } Public Offering
44. (a) Method of valuation........................................................ } Public Offering
(b) Schedule as to offering price.............................................. } *
(c) Variation in offering price to certain persons } Public Offering
45. Suspension of redemption rights................................................. } Rights of Unitholders
46. (a) Redemption valuation....................................................... } Public Offering
(b) Schedule as to redemption price............................................ } *
47. Maintenance of position in underlying securities } Public Offering
} Rights of Unitholders
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation of Trustee.......................................... } Trust Administration
49. Fees and expenses of Trustee.................................................... } Trust Operating Expenses
50. Trustee's lien.................................................................. } *
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
51. Insurance of holders of Trust's securities...................................... } Cover Page; Trust Operating
} Expenses; Insurance on the
} Bonds
VII. POLICY OF REGISTRANT
52. (a) Provisions of Trust agreement with respect
to selection or elimination..................................................... } The Fund; Trust Administration
(b) Transactions involving elimination of
underlying securities........................................................... } *
(c) Policy regarding substitution or elimination
of underlying securities........................................................ } The Fund; Trust Administration
(d) Fundamental policy not otherwise covered } *
53. Tax status of Trust............................................................. } Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years........................................ } *
55 Certain information regarding periodic payment thru
certificates.................................................................... } *
58.
59. Financial statements (Instruction 1(c) to Form S-6) } *
- -------------
</TABLE>
* Inapplicable, answer negative or not required.
CORPORATE HIGH YIELD SERIES 1
THE FUND. Delaware - Voyageur Unit Investment Trust, Series 10 (the
"Fund") consists of the underlying separate unit investment trust set forth
above (the "Trust). The Trust consists of a portfolio of interest-bearing
corporate debt obligations of domestic companies (the "Corporate Bonds," or
"Bonds"), including delivery statements relating to contracts for the purchase
of certain such obligations and an irrevocable letter of credit.
INVESTMENT OBJECTIVE OF THE TRUST. The investment objective of the
Trust is to provide a high level of current income through investment in a fixed
portfolio consisting of domestic high-yield, high-risk corporate debt
obligations issued after July 18, 1984. The objective of the Trust is dependent
upon the continuing ability of the issuers and/or obligors of the Bonds to meet
their respective obligations. There is, of course, no guarantee that the
objective of the Trust will be achieved. See "The Trust--Corporate High Yield
Series 1." ALL OF THE AGGREGATE PRINCIPAL AMOUNT OF THE BONDS IN THE TRUST ARE
LOWER RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS," THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES. INVESTORS
SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "INVESTMENT
OBJECTIVES AND PORTFOLIO SELECTION" AND "RISK FACTORS."
For foreign investors who are not United States citizens or residents,
interest income from the Trust may not be subject to federal withholding taxes
if certain conditions are met. See "Tax Status."
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY AND INVOLVE INVESTMENT RISK, INCLUDING LOSS OF PRINCIPAL.
- -------------------------------------------------------------------------------
VOYAGEUR FUND MANAGERS, INC.
- -------------------------------------------------------------------------------
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.
The investor is advised to read and retain this Prospectus for future
reference.
THE DATE OF THIS PROSPECTUS IS MAY 22, 1997
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of the
Trust during the initial offering period is equal to the aggregate offering
price of the Bonds in the Trust's portfolio and cash, if any, in the Principal
Account held or owned by such Trust divided by the number of Units outstanding,
plus the applicable sales charge and accrued interest, if any. For sales charges
in the secondary market, see "Public Offering--General." If the Bonds in the
Trust were available for direct purchase by investors, the purchase price of the
Bonds 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 $100,000 or more. If Units were available
for purchase at the opening of business on the Initial Date of Deposit, the
Public Offering Price per Unit would have been that amount set forth in the
"Summary of Essential Financial Information." See "Public Offering."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return and Estimated Long-Term Return to Unitholders are as set forth
under "Summary of Essential Financial Information." The methods of calculating
Estimated Current Return and Estimated Long-Term Return are set forth in the
footnotes to the "Summary of Essential Financial Information" and under
"Estimated Current Return and Estimated Long-Term Return."
DISTRIBUTIONS. Unitholders will receive distributions on a monthly
basis. See "Rights of Unitholders-- Distributions of Interest and Principal."
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, an affiliate of the
Sponsor, Voyageur Fund Distributors, Inc., intends to, and the Managing
Underwriter may, maintain a secondary market for the Units at prices based upon
the aggregate bid price of the Bonds in the portfolio of a Trust; however,
during the initial offering period such prices will be based upon the aggregate
offering prices of the Bonds. 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 through redemption at prices based upon the bid prices of the
underlying Bonds (see "Rights of Unitholders--Redemption of Units").
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end management investment company as
described herein. See "Rights of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other factors,
the loss of principal and/or interest due to changes in economic conditions,
volatile interest rates, early call provisions, lack of liquidity and changing
perceptions regarding junk bonds. See "Risk Factors."
DELAWARE - VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: MAY 22, 1997
MANAGING UNDERWRITER: COHIG & ASSOCIATES, INC.
SPONSOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
EVALUATOR: MULLER DATA CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
Corporate
High-Yield
Series 1
--------------
<S> <C>
Principal Amount (Par Value) of Bonds........................................... $ 3,850,000
Number of Units................................................................. 408,744
Fractional Undivided Interest in the Trust per Unit............................. 1/408,744
Principal Amount (Par Value) of Bonds per Unit (1).............................. $ 9.419
Public Offering Price:
Aggregate Offering Price of Bonds in Portfolio.............................. $ 3,934,161
Aggregate Offering Price of Bonds per Unit................................... $ 9.62
Sales Charge 3.75% (3.896% of the Aggregate Offering
Price of the Bonds) per Unit(2).............................................. $ 0.38
Public Offering Price per Unit(2)(3)............................................ $ 10.00
Redemption Price per Unit(3)(4)................................................. $ 9.58
Sponsor's Initial Repurchase Price per Unit..................................... $ 9.62
Excess of Public Offering Price per Unit Over
Redemption Price per Unit.................................................... $ 0.42
Excess of Sponsor's Initial Repurchase Price per Unit
Over Redemption Price per Unit............................................... $ 0.04
Minimum Value of the Trust under which Trust
Agreement may be terminated.................................................. $ 770,000
Minimum Principal Distribution per Unit......................................... $ 0.01
First Settlement Date..............................................May 28 , 1997
Mandatory Termination Date.....................................December 31, 2009
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit.................................... $ 0.90208
Less: Estimated Annual Expense per Unit...................................... $ 0.02310
--------------
Estimated Net Annual Interest Income per Unit................................ $ 0.87898
Estimated Normal Monthly Distribution per Unit(5)............................... $ 0.07325
Estimated Daily Rate of Net Interest Accrual per Unit........................... $ 0.00244
Estimated Current Return Based on Public Offering
Price(2)(5)(6)............................................................... 8.79%
Estimated Long-Term Return(2)(5)(6)............................................. 8.50%
Initial Distribution (June 15, 1997)............................................ $ 0.00732
Trustee's Initial Annual Fee per $1,000 Principal
Amount of Bonds.............................................................. $ 1.26
Evaluator's Fee per Evaluation(8)............................................... $ 8.00
Sponsor's Annual Fee per Unit .................................................. $ 0.0030
Estimated Organizational and Offering Expenses per Unit (7)..................... $ 0.06763
Record Dates.............................................First day of each month
Distribution Dates...................................Fifteenth day of each month
</TABLE>
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
Trustee of Units tendered for redemption.
(1) Because certain of the Securities in the Trust may from time to time
under certain circumstances be sold or redeemed or will be called or
mature in accordance with their terms, there is no guarantee that the
value of each Unit at the Trust's termination will be equal to the
Principal Amount (Par Value) of Securities per Unit stated above.
(2) The sales charge is decreased and the Estimated Current Return and
Estimated Long-Term Return are increased for transactions entitled to a
reduced sales charge. See "Public Offering--General."
(3) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. For purchases
settling on the First Settlement Date, no accrued interest will be
added to the Public Offering Price. After the initial offering period,
the Sponsor's Repurchase Price per Unit will be determined as described
under the caption "Public Offering--Public Market."
(4) See "Rights of Unitholders--Redemption of Units."
(5) 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 Bonds. The estimated
cash flows for each Trust are available upon request at no charge from
the Sponsor.
(6) 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, the Sponsor and the Evaluator and
with the principal prepayment, redemption, maturity, exchange or sale
of Bonds while the Public Offering Price will vary with changes in the
offering price of the underlying Bonds; therefore, there is no
assurance that the present Estimated Current Return indicated above
will be realized in the future. The Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and
determines and factors in the relative weightings of, the market
values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Bonds in the Trust and (2) takes into account a compounding factor and
the expenses and sales charge associated with each Trust Unit. Since
the market values and estimated retirements of the Bonds 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.
(7) The Trust (and therefore the Unitholders) will bear all or a portion of
its organizational and offering costs (including costs of preparing the
registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange
Commission and states, the initial audit of the Trust portfolios and
the initial fees and expenses of the Trustee but not including the
expenses incurred in the preparation and printing of brochures and
other advertising materials and any other selling expenses) as is
common for mutual funds. Total organizational and offering expenses
will be charged off against principal at the end of the initial
offering period which is currently expected to be approximately 4-6
months from the Initial Date of Deposit. In order to reimburse the
Trustee for organizational and offering costs, the Sponsor may have to
sell Securities from the Trust. The sale of Securities will serve to
reduce the Principal Amount (Par Value) of Securities per Unit stated
above. See "Trust Operating Expenses" and "Statements of Net Assets."
Historically, the sponsors of unit investment trusts have paid all of
the costs of establishing such trusts.
(8) For the first two months of the offering period the Evaluator's Fee
will be used to offset organizational and offering costs.
THE FUND
GENERAL. The Fund consists of one unit investment trust (the "Trust")
which was created under the laws of the State of New York pursuant to a Trust
Agreement (the "Trust Agreement"), dated the Initial Date of Deposit, as defined
in "Summary of Essential Financial Information," with Voyageur Fund Managers,
Inc., as Sponsor, Muller Data Corporation, as Evaluator, and The Chase Manhattan
Bank, as Trustee.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
interest-bearing corporate debt obligations of domestic companies (the
"Corporate Bonds" or "Bonds") as indicated under "Schedule of Investments"
herein, including delivery statements relating to contracts for the purchase of
certain such obligations and an irrevocable letter of credit issued by a
financial institution in the amount required for such purchases. Thereafter, the
Trustee, in exchange for the Bonds so deposited, delivered to the Sponsor
evidences of ownership of the number of Units of the Trust as indicated under
"Summary of Essential Financial Information."
With the deposit of the Bonds on the Initial Date of Deposit, the
Sponsor established a percentage relationship between the amounts of Bonds in
the Trust's portfolio. From time to time following the Initial Date of Deposit,
the Sponsor, pursuant to the Trust Agreement, may deposit additional Bonds in
the Trust and Units may be continuously offered for sale to the public by means
of this Prospectus, resulting in a potential increase in the outstanding number
of Units of the Trust. Any additional Bonds deposited in the Trust will
maintain, as nearly as is practicable, the original proportionate relationship
of the Bonds in the Trust's portfolio. Since the prices of the underlying Bonds
will fluctuate daily, the ratio, on a market value basis, will also change
daily. The portion of Bonds represented by each Unit will not change as a result
of the deposit of additional Bonds in the Trust.
Certain of the Bonds in the Trust may have been purchased on a "when,
as and if issued" or "delayed delivery" basis. See footnote (1) in "The
Trust--Notes to Schedules of Investments." The delivery of any such Bonds may be
delayed or may not occur. Interest on these Bonds begins accruing to the benefit
of Unitholders on their respective dates of delivery. To the extent any Bonds
are actually delivered to the Fund after their respective expected dates of
delivery, Unitholders who purchase their Units prior to the date such Bonds are
actually delivered to the Trustee would be required to adjust their tax basis in
their Units for a portion of the interest accruing on such Bonds during the
interval between their purchase of Units and the actual delivery of such Bonds.
As a result of any such adjustment, the Estimated Current Returns during the
first year would be slightly lower than those stated herein which would be the
returns after the first year, assuming the portfolio of the Trust and estimated
annual expenses do not vary from that set forth under "Summary of Essential
Financial Information". Unitholders will be "at risk" with respect to all Bonds
in the portfolios including "when, as and if issued" and "delayed delivery"
Bonds (i.e., may derive either gain or loss from fluctuations in the evaluation
of such Bonds) from the date they commit for Units. For a discussion of the
Sponsor's obligations in the event of the failure of any contract for the
purchase of any of the Bonds and limited right to substitute other bonds to
replace any failed contract, see "Replacement Bonds" below.
Each Unit initially offered represents the fractional undivided
interest in the Trust as indicated under "Summary of Essential Financial
Information." To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in the 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
Managing Underwriter, or until the termination of the Trust Agreement.
REPLACEMENT BONDS. Because certain of the Bonds in the Trust 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 the 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 Bond. In the event of a failure to deliver
any Bond that has been purchased for the Trust 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 securities ("Replacement Bonds") to make up the original corpus of the
Trust.
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 satisfy the criteria
described below for Bonds originally included in the Trust, (ii) must have a
fixed maturity date of at least seven years, but not exceeding the maturity date
of the Failed Bonds, (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 Initial Date of
Deposit, at least equal to that of the Failed Bonds, and (iv) shall not be
"when, as and if issued" bonds. Whenever a Replacement Bond has been acquired
for the Trust, the Trustee shall, within five days thereafter, notify all
Unitholders of the 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
Trust of the Failed Bond exceeded the cost of the Replacement Bond plus accrued
interest. Once the original corpus of the Trust is acquired, the Trustee will
have no power to vary the investment of the Trust; i.e., the Trustee will have
no managerial power to take advantage of market variations 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 Trust and distribute the principal and
accrued interest (at the coupon rate of such Failed Bonds to the date the Failed
Bonds are removed from the Trust) attributable to such Failed Bonds not later
than the next Distribution Date following such removal or such earlier time as
the Trustee in its sole discretion deems to be in the interest of the
Unitholders. In the event a Replacement Bond could not be acquired by the Trust,
the estimated net annual interest income per Unit for the Trust would be reduced
and the Estimated Current Return and the 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 Trust.
INVESTMENT OBJECTIVES AND PORTFOLIO SELECTION
The objective of the Trust is to provide a high level of current income
through an investment in a fixed portfolio consisting of high-yield, high-risk
corporate debt obligations issued after July 18, 1984. The securities included
in the Trust are commonly known as "junk bonds" and are subject to greater
market fluctuations and potential risk of loss of income and principal than are
investments in lower-yielding, higher-rated fixed-income securities.
Historically, high-yield bonds have provided greater returns than conventional
debt securities, but have also been subject to greater volatility. The
securities included in this Trust should be viewed as speculative and an
investor should review his or her ability to assume the risks associated with
speculative corporate bonds. The payment of income is dependent upon the
continuing ability of the issuers and/or obligors of the Bonds to meet their
respective obligations. There is, of course, no guarantee that the Trust's
objective will be achieved.
The Sponsor of the Trust selected the Bonds for the portfolio after
considering the Trust's investment objective as well as the credit quality of
the individual Bonds selected for the Trust. The following facts, among others,
were also considered: (a) the price of the Bonds relative to other issues of
similar quality and maturity; (b) the present rating and credit quality of the
issuers of the Bonds and the potential improvement in the credit quality of such
issuers; (c) the diversification of the Bonds as to location of issuer; (d) the
income to the Unitholders of the Trust; (e) whether the Bonds were issued after
July 18, 1984; and (f) the stated maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust were
rated "B-" or better by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's") or Fitch Investors Service, L.P. ("Fitch"). See
"Description of Bond Ratings" and "Corporate High Yield Series 1--Schedule of
Investments." Subsequent to the Initial Date of Deposit, a Bond may cease to be
so rated. If this should occur, the Trust would not be required to eliminate the
Bond from the Trust, but such an event may be considered in the Sponsor's
determination to direct the Trustee to dispose of such Bond. See "Trust
Administration--Portfolio Administration."
To the best knowledge of the Sponsor, there is no litigation pending as
of the Initial Date of Deposit in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trust. At any time after the
Initial Date of Deposit, litigation may be initiated on a variety of grounds
with respect to Bonds in the Trust. While the outcome of litigation of such
nature can never be entirely predicted, the Trust has received or will receive
opinions of bond counsel to the issuing authorities of each Bond on the date of
issuance to the effect that such Bonds have been validly issued. In addition,
other factors may arise from time to time which potentially may impair the
ability of issuers to meet obligations undertaken with respect to the Bonds.
THE TRUST
CORPORATE HIGH YIELD SERIES 1
GENERAL. Corporate High Yield Series 1 consists of 11 domestic
Corporate Bonds. 100 percent of the principal amount of the Bonds in the Trust
were purchased at a premium over par value. 83.12 percent of the Bonds are
subject to optional call or redemption provisions within 7 years from the
Initial Date of Deposit. See "Notes to Schedule of Investments" for additional
information on redemption provisions. The Bonds are divided by type (and
percentage of principal amount of the Trust) as set forth in the following
table:
Type Portfolio Percentage
---- --------------------
General Industrial 33.8%
Cable 33.8%
Entertainment 25.3%
Publishing 7.1%
CORPORATE HIGH YIELD SERIES 1
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: MAY 22, 1997
<TABLE>
<CAPTION>
Name of Issuer, Title, Interest Rate and Moody's/ Offering Price
Aggregate Maturity Date of either Bonds Deposited S&P Redemption to Corporate
Principal or Bonds Contracted for (1)(5) Rating (2) Feature (3) High Yield (4)
- ---------- ----------------------------------------------- ------- ----------- --------------
<S> <C> <C> <C> <C>
$ 325,000 AMC Entertainment Inc., 144A, Senior B2/B 2002 @ 104.75 $ 330,688
Subordinated Notes, 9.50%, Due 03/15/2009
325,000 American Safety Razor Co., Senior Notes, B1/BB- 2000 @ 104.39 340,317
Series B, 9.875%, Due 08/01/2005
325,000 Cablevision Systems Corporation, Unsecured B2/B 2001 @ 104.94 335,562
Senior Subordinated Notes, 9.875%, Due
05/15/2006
325,000 Cinemark USA Inc., Senior Subordinated B2/B 2001 @ 104.81 333,125
Notes, Series B, 9.625%, Due 08/01/2008
650,000(1) Comcast Cellular Holdings Inc., 144A, Senior B2/BB+ 2002 @ 104.75 654,875
Notes, 9.50%, Due 05/01/2007
325,000 Delta Beverage Group Inc., Senior Notes, B2/B+ 2000 @ 104.875 336,375
9.75%, Due 12/15/2003
275,000 Hollinger International Publishing Inc., B1/BB- 2001 @ 104.625 278,438
Unsecured Senior Subordinated Notes,
9.25%, Due 02/01/2006
325,000 Jones Intercable Inc., Senior Notes, 8.875%, Ba2/BB 2004 @ 101.11 325,812
Due 04/01/2007
325,000 Muzak Limited Partnership, Muzak Capital Ba3/B+ 2000 @ 105 338,813
Corporation, Unsecured Senior Notes,
10.00%, Due 10/01/2003
325,000 Universal Outdoor Inc., Senior Subordinated B1/B 2001 @ 104.875 331,906
Notes, 9.75%, Due 10/15/2006
325,000 Westinghouse Air Brake Company, Senior Ba3/B+ 2000 @ 104.69 328,250
Notes, 9.375%, Due 06/15/2005
- ---------- ----------
$3,850,000 $3,934,161
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 10.
Notes to Schedule of Investments
As of the Opening of Business on the
Initial Date of Deposit: May 22, 1997
1. Certain Bonds are represented by "regular way" or "when issued"
contracts for the performance of which an irrevocable letter of credit, obtained
from a financial institution unaffiliated with the Sponsor, has been deposited
with the Trustee. The Sponsor has assigned to the Trustee all of its right,
title and interest in and to such Bonds. Contracts to acquire Bonds were entered
into on May 20, 1997. These Bonds have an expected settlement date on May 23,
1997 (see "The Fund").
2. Such ratings were obtained from a corporate bond reporting service.
3. There is shown under this heading the year in which each issue of
the Bonds is initially or currently callable and the call price for that year.
Each issue of the 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 the Bonds. Redemption pursuant
to call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed obligations 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. 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 "Risk Factors--Redemptions of Bonds."
To the extent that the Bonds were deposited in the 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 Bonds 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 "Tax Status" and "Estimated Current Return and
Estimated Long-Term Return."
4. Evaluation of Bonds is made on the basis of current offering prices
for the Bonds. The offering prices are greater than the current bid prices of
the Bonds which is the basis on which Unit value is determined for purposes of
redemption of Units (see "Public Offering--Offering Price").
5. Other information regarding the Bonds in the Trust, as of the
opening of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Annual Bid Side
Cost to Profit (Loss) Interest Income Evaluation
Trust Sponsor to Sponsor to Trust of Bonds
----- ------- ---------- -------- --------
<S> <C> <C> <C> <C>
Corporate High Yield $ 3,932,894 $ 1,267 $ 368,719 $ 3,918,761
Series 1
</TABLE>
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in the portfolio. On the opening of business on
the Initial Date of Deposit, the offering side evaluation of the Bonds in the
Trust was higher than the bid side evaluation of such Bonds by 0.393% .
INDEPENDENT AUDITORS' REPORT
TO THE SPONSOR, TRUSTEE AND THE UNITHOLDERS OF DELAWARE - VOYAGEUR UNIT
INVESTMENT TRUST, SERIES 10:
We have audited the accompanying statement of net assets, including the
schedule of investments, of Delaware - Voyageur Unit Investment Trust, Series 10
(Corporate High Yield Series1), as of May 22, 1997. The statement of net assets
is the responsibility of the Sponsor. Our responsibility is to express an
opinion on such financial statement based on our audits.
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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of securities held and confirmation of an irrevocable letter of
credit deposited to purchase 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 statement referred to above present
fairly, in all material respects, the financial position of Delaware - Voyageur
Unit Investment Trust, Series 10 (Corporate High Yield Series 1), as of May 22,
1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 22, 1997
DELAWARE - VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
STATEMENT OF NET ASSETS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: MAY 22, 1997
Corporate
High Yield
Series 1
----------
Investments in securities $ 3,606,724
Contracts to purchase securities(1) 327,437
Accrued interest on underlying securities(1)(2) 81,637
Organizational and offering costs (3) 27,642
---------------
Total Assets $ 4,043,440
Less: distributions payable(2) 81,637
Less: accrued organizational and offering costs (3) 27,642
---------------
Net Assets $ 3,934,161
===============
Net Assets Represented By:
Interest of Unitholders--
Units of fractional undivided interest
outstanding: ( 408,744 Units, respectively)
Cost to investors(4) $ 4,087,440
Less: Gross underwriting commission(4) 153,279
---------------
Net Assets(4) $ 3,934,161
===============
- ----------------------
(1) The aggregate value of the Bonds listed under "Schedule of Investments"
for the Trust herein and their cost to such Trust are the same. The
value of the Bonds is determined by Muller Data Corporation on the
bases set forth under "Public Offering--Offering Price." The contracts
to purchase Bonds are collateralized by an irrevocable letter of credit
which has been deposited with the Trustee in and for the following
amounts:
<TABLE>
<CAPTION>
Principal Offering
Amount of Price of Accrued Interest
Amount of Bonds Under Bonds Under to Expected
Letter of Credit Contracts Contracts Delivery Dates
---------------- --------- --------- --------------
<S> <C> <C> <C> <C>
Corporate High Yield Series 1 $ 548,000 $ 325,000 $ 327,437 $ 1,715
</TABLE>
(2) The Trustee will advance the amount of accrued interest as of May 28,
1997 (the "First Settlement Date"), and all accrued interest to the
First Settlement Date will be distributed to the Sponsor as the
Unitholder of record as of the First Settlement Date.
(3) The Trust (and therefore Unitholders) will bear all or a portion of
their organizational and offering costs, which will be deferred and
charged off against principal at the end of the initial offering
period.
(4) The aggregate public offering price (exclusive of interest) and the
aggregate sales charge are computed on the bases set forth under
"Public Offering--Offering Price" and "Public Offering--Sponsor and
Underwriter Compensation" and assume all single transactions involve
less than $100,000. For single transactions involving $100,000 or more,
the sales charge is reduced (see "Public Offering--General") resulting
in an equal reduction in both the Cost to investors and the Gross
underwriting commission while the Net Assets remains unchanged.
RISK FACTORS
GENERAL. An investment in Units of the Trust should be made with an
understanding of the risks that an investment in "high-yield, high-risk," fixed
rate, domestic corporate debt obligations or "junk bonds" may entail, including
increased credit risks and the risk that the value of the Units will decline,
and may decline precipitously, with increases in interest rates. In recent years
there have been wide fluctuations in interest rates and thus in the value of
fixed-rate, debt obligations generally. Bonds such as those included in the
Trust are, under most circumstances, subject to greater market fluctuations and
risk of loss of income and principal than are investments in lower-yielding,
higher-rated securities, and their value may decline precipitously because of
increases in interest rates, not only because the increases in rates generally
decreases values, but also because increased rates may indicate a slowdown in
the economy and a decrease in the value of assets generally that may adversely
affect the credit of issuers of high-yield, high-risk securities resulting in a
higher incidence of defaults among high-yield, high-risk securities. A slowdown
in the economy, or a development adversely affecting an issuer's
creditworthiness, may result in the issuer being unable to maintain earnings or
sell assets at the rate and at the prices, respectively, that are required to
produce sufficient cash flow to meet its interest and principal requirements.
For an issuer that has outstanding both senior commercial bank debt and
subordinated high-yield, high-risk securities, an increase in interest rates
will increase that issuer's interest expense insofar as the interest rate on the
bank debt is fluctuating. However, many leveraged issuers enter into interest
rate protection agreements to fix or cap the interest rate on a large portion of
their bank debt. The Sponsor cannot predict future economic policies or their
consequences or, therefore, the course or extent of any similar market
fluctuations in the future.
"High-yield" or "junk" bonds, the generic names for corporate bonds
rated below "BBB" by Standard & Poor's or Fitch, or below "Baa" by Moody's, are
frequently issued by corporations in the growth stage of their development, by
established companies whose operations or industries are depressed, or by highly
leveraged companies purchased in leveraged buyout transactions. The market for
high-yield bonds is very specialized and investors in it have been predominantly
financial institutions. High-yield, high-risk bonds are generally not listed on
a national securities exchange. Trading of high-yield, high-risk bonds,
therefore, takes place primarily in over-the-counter markets which consist of
groups of dealer firms that are typically major securities firms. Because the
high-yield bond market is a dealer market, rather than an auction market, no
single obtainable price for a given bond prevails at any given time. Prices are
determined by negotiation between traders. The existence of a liquid trading
market for the Bonds may depend on whether dealers will make a market in the
Bonds. There can be no assurance that a market will be made for any of the
Bonds, that any market for the Bonds will be maintained or of the liquidity of
the Bonds in any markets made. Not all dealers maintain markets in all
high-yield, high-risk bonds. Therefore, since there are fewer traders in these
bonds than there are in "investment grade" bonds, the bid-offer spread is
usually greater for high-yield, high-risk bonds than it is for investment grade
bonds. The price at which the Bonds may be sold to meet redemptions and the
value of the Trust will be adversely affected if trading markets for the Bonds
are limited or absent. If the rate of redemptions is great, the value of the
Trust may decline to a level that requires liquidation. See "Trust
Administration --Amendment or Termination."
Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the issuers
of lower-rated securities may not be as strong as that of other issuers.
Moreover, if a Bond is recharacterized as equity by the Internal Revenue Service
for federal income tax purposes, the issuer's interest deduction with respect to
the Bond will be disallowed and this disallowance may adversely affect the
issuer's credit rating. Because investors generally perceive that there are
greater risks associated with the lower-rated securities in the Trust, the
yields and prices of these securities tend to fluctuate more than higher-rated
securities with changes in the perceived quality of the credit of their issuers.
In addition, the market value of high-yield, high-risk, fixed-income securities
may fluctuate more than the market value of higher-rated securities since
high-yield, high-risk, fixed-income securities tend to reflect short-term credit
developments to a greater extent than higher-rated securities. Lower-rated
securities generally involve greater risks of loss of income and principal than
higher-rated securities. Issuers of lower-rated securities may possess fewer
creditworthiness characteristics than issuers of higher-rated securities and,
especially in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders, owners of
property leased to the issuer or others which, if sustained, would make it more
difficult for the issuers to meet their payment obligations. High-yield,
high-risk bonds are also affected by variables such as interest rates, inflation
rates and the real growth in the economy. Therefore, investors should consider
carefully the relative risks associated with investment in securities which
carry lower ratings.
The value of the Units reflects the value of the portfolio securities,
including the value (if any) of securities in default. Should the issuer of any
Bond default in the payment of principal or interest, the Trust may incur
additional expenses seeking payment on the defaulted Bond. Because amounts (if
any) recovered by the Trust in payment under the defaulted Bond may not be
reflected in the value of the Units until actually received by the Trust, and
depending upon when a Unitholder purchases or sells his or her Units, it is
possible that a Unitholder would bear a portion of the cost of recovery without
receiving any portion of the payment recovered.
High-yield, high-risk bonds are generally subordinated obligations. The
payment of principal (and premium, if any), interest and sinking fund
requirements with respect to subordinated obligations of an issuer is
subordinated in right of payment to the payment of senior obligations of the
issuer. Senior obligations generally include most, if not all, significant debt
obligations of an issuer, whether existing at the time of issuance of
subordinated debt or created thereafter. Upon any distribution of the assets of
an issuer with subordinated obligations upon dissolution, total or partial
liquidation or reorganization of or similar proceeding relating to the issuer,
the holders of senior indebtedness will be entitled to receive payment in full
before holders of subordinated indebtedness will be entitled to receive any
payment. Moreover, generally no payment with respect to subordinated
indebtedness may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of senior indebtedness
of an issuer generally will recover more, ratably, than holders of subordinated
indebtedness of that issuer.
Obligations that are rated lower than BBB by Standard & Poor's or
Fitch, or Baa by Moody's, respectively, should be considered speculative as such
ratings indicate a quality of less than investment grade. Investors should
carefully review the objective of the Trust and consider their ability to assume
the risks involved before making an investment in the Trust. See "Description of
Bond Ratings" for a description of speculative ratings issued by Standard &
Poor's, Moody's and Fitch.
Certain of the Bonds in the Trust may have been acquired at a market
discount from par value. The coupon interest rates on the discount bonds at the
time they were purchased and deposited in the Trust were lower than the current
market interest rates for newly issued bonds of comparable rating and type. If
such interest rates for newly issued comparable bonds increase, the market
discount of previously issued bonds will become greater, and if such interest
rates for newly issued comparable bonds decline, the market discount of
previously issued bonds will be reduced, other things being equal. Investors
should also note that the value of bonds purchased at a market discount will
increase in value faster than Bonds purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value of bonds
purchased at a market discount will decrease faster than Bonds purchased at a
market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium bonds and the prepayment benefit for lower yielding,
discount bonds will be reduced. A discount bond held to maturity will have a
larger portion of its total return in the form of taxable income and capital
gain and less in the form of interest income than a comparable bond newly issued
at current market rates. See "Tax Status." Market discount attributable to
interest changes does not indicate a lack of market confidence in the issue.
Neither the Sponsor, the Distributor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds.
Certain of the Bonds in the Trust may be original issue discount bonds.
Under current law, the original issue discount, which is the difference between
the stated redemption price at maturity and the issue price of the Bonds, is
deemed to accrue on a daily basis and the accrued portion is treated as interest
income for Federal income tax purposes. On sale or redemption, any gain realized
that is in excess of the earned portion of original issue discount will be
taxable as capital gain unless the gain is attributable to market discount in
which case the accretion of market discount is taxable as ordinary income. See
"Tax Status." The current value of an original issue discount bond reflects the
present value of its stated redemption price at maturity. The market value tends
to increase in greater increments as the Bonds approach maturity.
Certain of the original issue discount bonds may be zero coupon bonds
(including bonds known as multiplier bonds, money multiplier bonds, capital
appreciation bonds, capital accumulator bonds, compound interest bonds and money
discount maturity payment bonds). Zero coupon bonds do not provide for the
payment of any current interest and generally provide for payment at maturity at
face value unless sooner sold or redeemed. Zero coupon bonds may be subject to
more price volatility than conventional bonds. While some types of zero coupon
bonds, such as multipliers and capital appreciation bonds, define par as the
initial offering price rather than the maturity value, they share the basic zero
coupon bond features of (i) not paying interest on a semi-annual basis and (ii)
providing for the reinvestment of the bond's semi-annual earnings at the bond's
stated yield to maturity. While zero coupon bonds are frequently marketed on the
basis that their fixed rate of return minimizes reinvestment risk, this benefit
can be negated in large part by weak call protection, i.e., a bond's provision
for redemption at only a modest premium over the accreted value of the bond. See
"The Trust--Notes to Schedule of Investments."
Certain of the Bonds in the Trust may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the premium
bonds at the time they were purchased and deposited in the Trust were higher
than the current market interest rates for newly issued bonds of comparable
rating and type. If such interest rates for newly issued and otherwise
comparable bonds decrease, the market premium of previously issued bonds will be
increased, and if such interest rates for newly issued comparable bonds
increase, the market premium of previously issued bonds will be reduced, other
things being equal. The current returns of bonds trading at a market premium are
initially higher than the current returns of comparable bonds of a similar type
issued at currently prevailing interest rates because premium bonds tend to
decrease in market value as they approach maturity when the face amount becomes
payable. Because part of the purchase price is thus returned not at maturity but
through current income payments, early redemption of a premium bond at par or
early prepayments of principal will result in a reduction in yield. 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 or for original issue
discount Bonds a premium over the accreted value. To the extent that the Bonds
were deposited in the Fund at a price higher than the price at which they are
redeemed, this will represent a loss of capital when compared to the original
Public Offering Price of the Units. Because premium bonds generally pay a higher
rate of interest than Bonds priced at or below par, the effect of the redemption
of premium bonds would be to reduce estimated net annual unit income by a
greater percentage than the par amount of such bonds bears to the total par
amount of Bonds in the Trust. Although the actual impact of any such redemptions
that may occur will depend upon the specific Bonds that are redeemed, it can be
anticipated that the estimated net annual unit income will be significantly
reduced after the dates on which such Bonds are eligible for redemption. The
Trust may be required to sell zero coupon bonds prior to maturity (at their
current market price which is likely to be less than their par value) in the
event that all the Bonds in the portfolio other than the zero coupon bonds are
called or redeemed in order to pay expenses of the Trust or in case the Trust is
terminated. See "Trust Administration--Portfolio Administration" and "Trust
Administration--Amendment or Termination." See "The Trust--Schedule of
Investments" for the Trust for the earliest scheduled call date and the initial
redemption price for each Bond.
An investment in Units of the Trusts should be made with an
understanding of the interest rate risk associated with such an investment.
Generally, bond prices (and therefore Unit prices) will move inversely with
interest rates, and bonds (Trusts) with longer maturities are likely to exhibit
greater fluctuations in market value, all other things being equal, than bonds
(Trusts) with shorter maturities.
REDEMPTIONS OF BONDS. Certain of the Bonds in the Trust are 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 and it may also affect the current return on Units of the Trust
involved. The Trust portfolio contains a listing of the sinking fund and call
provisions, if any, with respect to each of the Bonds. Extraordinary optional
redemptions and mandatory redemptions result from the happening of certain
events. The Sponsor is unable to predict all of the circumstances which may
result in such redemption of an issue of Bonds. See "The Trust--Schedule of
Investments."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the opening of business on the Initial Date of Deposit, the
Estimated Current Returns and the Estimated Long-Term Returns were those
indicated in the "Summary of Essential Financial Information." The Estimated
Current Returns are 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,
Sponsor and Evaluator and with the principal prepayment, redemption, maturity,
exchange or sale of Bonds while the Public Offering Price will vary with changes
in the offering price of the underlying Bonds; therefore, there is no assurance
that the present Estimated Current Returns will be realized in the future.
Estimated Long-Term Returns are calculated using a formula which (i) 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 the Bonds in the
Trust and (ii) takes into account a compounding factor and the expenses and
sales charge associated with each Trust Unit. Since the market values and
estimated retirements of the Bonds and the expenses of the Trust will change,
there is no assurance that the present Estimated Long-Term Returns will be
realized in the future. Estimated Current Returns and Estimated Long-Term
Returns are expected to differ because the calculation of Estimated Long-Term
Returns reflects the estimated date and amount of principal returned while
Estimated Current Returns calculations include only net annual interest income
and Public Offering Price.
In order to acquire certain of the Bonds contracted for by the Sponsor
for deposit in the Trust, it may be necessary for the Sponsor or Trustee to pay
on the settlement dates for delivery of such Bonds amounts covering accrued
interest on such Bonds which exceed (i) the amounts paid by Unitholders and (ii)
the amounts which will be made available through cash furnished by the Sponsor
on the Initial 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 Bonds with respect to which such payments may have been made.
TRUST OPERATING EXPENSES
COMPENSATION OF SPONSOR. Voyageur Fund Managers, Inc., which acts as
Sponsor, will receive fees for providing portfolio surveillance in amounts as
set forth under "Summary of Essential Financial Information" per 100 Units on an
annual basis. Any such charges would be payable in monthly installments and
would be based on the number of Units outstanding on the first day of each month
of each year. Any such fees may exceed the actual costs of providing such
supervisory services for this Fund, but at no time will the total amount paid to
the Sponsor for portfolio supervisory services rendered to all unit investment
trusts sponsored by Voyageur Fund Managers, Inc. in any calendar year exceed the
aggregate cost to the Sponsor of supplying such services in such year. 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. An affiliate of the Sponsor will receive sales commissions and may
realize other profits (or losses) in connection with the sale of Units and the
Sponsor may realize profits (or losses) in connection with the deposit of the
Bonds as described under "Public Offering--Sponsor and Underwriter
Compensation."
EVALUATOR'S FEE. For its services, the Evaluator will receive a fee as
set forth under "Summary of Essential Financial Information." The Evaluator's
fees are payable in monthly installments and would be based on the number of
evaluations made. The Evaluator's 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.
TRUSTEE'S FEE. For its services, the Trustee will receive an annual fee
as set forth under "Summary of Essential Financial Information." The Trustee's
fees are payable in monthly installments (based on the outstanding principal
amount of Bonds in the Trust as of the first day of each month of each year) on
or before the fifteenth day of each month from the Interest Account to the
extent funds are available and then from the Principal Account. The Trustee's
fee may be periodically adjusted in response to fluctuations in short-term
interest rates (reflecting the cost to the Trustee of advancing funds to the
Trust to meet scheduled distributions) and may be further 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. 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 the Fund is expected to result from
the use of these funds. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration."
MISCELLANEOUS EXPENSES. Expenses incurred in establishing the Trust,
including the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and state
registration fees, the initial fees and expenses of the Trustee, legal and
accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by each Trust and charged off against principal at the
end of the initial offering period. The following additional charges are or may
be incurred by the Trusts: (i) fees of the Trustee for extraordinary services,
(ii) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (iii) various governmental charges, (iv)
expenses and costs of any action taken by the Trustee to protect the Trust and
the rights and interests of Unitholders, (v) indemnification of the Trustee for
any loss, liability or expenses incurred by it in the administration of the
Trust without gross negligence, bad faith or willful misconduct on its part,
(vi) any special custodial fees payable in connection with the sale of any of
the Bonds in the Trust and (vii) expenditures incurred in contacting Unitholders
upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust.
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 Trust. 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 Bonds to pay such
amounts.
TAX STATUS
For purposes of the following discussion and opinion, it is assumed
that interest on the Bonds is included in gross income for Federal income tax
purposes and that the Bonds are debt for Federal income tax purposes.
In the opinion of Chapman and Cutler, Counsel for the Sponsor, under
existing law:
(1) The Trust is not an association taxable as a corporation
for Federal income tax purposes.
(2) Each Unit holder of the Trust is considered to be the
owner of a pro rata portion of each of the Trust assets under subpart
E, subchapter J of chapter 1 of the Internal Revenue Code of 1986
(hereinafter the "CODE"). Each Unitholder will be considered to have
received his pro rata share of income derived from each Trust asset
when such income is considered to be received by the Trust. Each
Unitholder will also be required to include in taxable income for
Federal income tax purposes, original issue discount with respect to
his interest in any Bonds held by the Trust at the same time and in the
same manner as though the Unitholder were the direct owner of such
interest.
(3) Each Unitholder will have a taxable event when a Bond of
the Trust is disposed of whether by sale, liquidation, redemption, or
payment at maturity or otherwise, or when the Unitholder redeems or
sells his Units. The Unitholder's tax basis in his Units will equal his
tax basis in his pro rata portion of all of the assets of the Trust.
Such basis is determined (before the adjustments described below) by
apportioning the tax basis for the Units among each of the Trust's
assets according to value as of the valuation date nearest the date of
acquisition of the Units. Unitholders must reduce the tax basis of
their Units for their share of accrued interest received, if any, on
Bonds delivered after the date the Unitholders pay for their Units to
the extent that such interest accrued on such Bonds before the date the
Trust acquired ownership of the Bonds (and the amount of this reduction
may exceed the amount of accrued interest paid to the sellers) 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, exchange,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder (subject to various nonrecognition
provisions of the Code). The amount of any such gain or loss is
measured by comparing the Unitholder's pro rata share of the total
proceeds from such disposition with his basis for his fractional
interest in the asset disposed of. The basis of each Unit and of each
Bond which was issued with original issue discount (or which has market
discount) must be increased by the amount of accrued original issue
discount (and market discount, if the Unitholder elects to include
market discount in income as it accrues) and the basis of each Unit and
of each Bond which was purchased by the Trust at a premium must be
reduced by the annual amortization of bond premium which the Unit
holder has properly elected to amortize under Section 171 of the Code.
The tax basis reduction requirements of the Code relating to
amortization of bond premium may, under some circumstances, result in
the Unitholder realizing a taxable gain when his Units are sold or
redeemed for an amount equal to or less than his original cost.
Original issue discount is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount in this
case is generally the difference between the Bond's purchase price and
its stated redemption price at maturity. A Unitholder will be required
to include in gross income for each taxable year the sum of his daily
portions of original issue discount as such original issue discount
accrues and will in general be subject to Federal income tax with
respect to the total amount of such original issue discount that
accrues for such year even though the income is not distributed to the
Unitholders during such year, unless the original issue discount on a
Bond is less than a "de minimis" amount as determined under Treasury
Regulations. To the extent the amount of such discount is less than the
respective "de minimis" amount, such discount shall be treated as zero.
In general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. Unitholders should consult their tax
advisers regarding the Federal income tax consequences and accretion of
original issue discount.
Each Unitholder's pro rata share of each expense paid by the Trust is
deductible by the Unitholder to the same extent as though the expense had been
paid directly by him. It should be noted that as a result of the Tax Reform Act
of 1986, certain miscellaneous itemized deductions, such as investment expenses,
tax return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income (similar limitations also apply to estates and trusts). Unitholders
may be required to treat some or all of the expenses paid by the Trust as
miscellaneous itemized deductions subject to this limitation.
If a Unitholder's tax basis of his pro rata portion in any Bonds held
by the Trust exceeds the amount payable by the issuer of the Bonds with respect
to such pro rata interest upon maturity of the Bond, such excess would be
considered premium which may be amortized by the Unitholder at the Unit holder's
election as provided in Section 171 of the Code. Unitholders should consult
their tax advisers regarding whether such election should be made and the manner
of amortizing premium.
Certain of the Bonds in the Trust may have been acquired with "original
issue discount." In the case of any Bonds in the Trust acquired with "original
issue discount" that exceeds a "de minimis" amount as specified in the Code,
such discount is includable in taxable income of the Unitholders on an accrual
basis computed daily, without regard to when payments of interest on such Bonds
are received. The Code provides a complex set of rules regarding the accrual of
original issue discount. These rules provide that original issue discount
generally accrues on the basis of a constant compound interest rate over the
term of the Bonds. Unitholders should consult their tax advisers as to the
amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of
the Bond by the Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon its issue
price (its "ADJUSTED ISSUE PRICE"). Similarly, these special rules would apply
to a Unit holder if the tax basis of his pro rata portion of a Bond issued with
original issue discount exceeds his pro rata portion of its adjusted issue
price. Unit holders should also consult their tax advisers regarding these
special rules.
It is possible that a Bond that has been issued at an original issue
discount may be characterized as a "high-yield discount obligation" within the
meaning of Section 163(e)(5) of the Code. To the extent that such an obligation
is issued at a yield in excess of six percentage points over the applicable
Federal rate, a portion of the original issue discount on such obligation will
be characterized as a distribution on stock (E.G., dividends) for purposes of
the dividends-received deduction which is available to certain corporations with
respect to certain dividends received by such corporation.
If a Unitholder's tax basis in his pro rata portion of Bonds is less
than the allocable portion of such Bond's stated redemption price at maturity
(or, if issued with original issue discount, the allocable portion of its
"revised issue price"), such difference will constitute market discount unless
the amount of market discount is "de minimis" as specified in the Code. Market
discount accrues daily computed on a straight-line basis, unless the Unitholder
elects to calculate accrued market discount under a constant yield method.
Unitholders should consult their tax advisers as to the amount of market
discount which accrues.
Accrued market discount is generally includable in taxable income to
the Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Bonds, on the sale, maturity or disposition of
such Bonds by the Trust, and on the sale by a Unitholder of Units, unless a
Unitholder elects to include the accrued market discount in taxable income as
such discount accrues. If a Unitholder does not elect to annually include
accrued market discount in taxable income as it accrues, deductions for any
interest expenses incurred by the Unitholder which is incurred to purchase or
carry his Units will be reduced by such accrued market discount. In general, the
portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in income.
Unitholders should consult their tax advisers regarding whether an election
should be made to include market discount in income as it accrues and as to the
amount of interest expense which may not be currently deductible.
The tax basis of a Unitholder with respect to his interest in a Bond is
increased by the amount of original issue discount (and market discount, if the
Unit holder elects to include market discount, if any, on the Bonds held by the
Trust in income as it accrues) thereon properly included in the Unit holder's
gross income as determined for Federal income tax purposes and reduced by the
amount of any amortized premium which the Unit holder has properly elected to
amortize under Section 171 of the Code. A Unitholder's tax basis in his Units
will equal his tax basis in his pro rata portion of all of the assets of the
Trust.
A Unitholder will recognize taxable capital gain (or loss) when all or
part of his pro rata interest in a Bond is disposed of in a taxable transaction
for an amount greater (or less) than his tax basis therefor. As previously
discussed, gain realized on the disposition of the interest of a Unitholder in
any Bond deemed to have been acquired with market discount will be treated as
ordinary income to the extent the gain does not exceed the amount of accrued
market discount not previously taken into income. Any capital gain or loss
arising from the disposition of a Bond by the Trust or the disposition of Units
by a Unitholder will be short-term capital gain or loss unless the Unitholder
has held his Units for more than one year in which case such capital gain or
loss will be long-term. For taxpayers other than corporations, net capital gains
(which is defined as net long-term capital gain over net short-term capital loss
for a taxable year) are presently subject to a maximum stated marginal 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. The tax basis reduction
requirements of the Code relating to amortization of bond premium may, under
some circumstances, result in the Unitholder realizing taxable gain when his
Units are redeemed for an amount equal to or less than his original cost.
The Revenue Reconciliation Act of 1993 (the "TAX ACT") raised tax rates
on ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Tax Act, the Tax Act includes
a provision that characterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the potential effect
of this provision on their investment in Units.
If the Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all Trust assets, including his pro
rata portion of all of the Bonds represented by the Unit. This may result in a
portion of the gain, if any, on such sale being taxable as ordinary income under
the market discount rules (assuming no election was made by the Unitholder to
include market discount in income as it accrues) as previously discussed.
A Unitholder who is a foreign investor (i.e., an investor other than a
U.S. citizen or resident or a U.S. corporation, partnership, estate or trust)
will not be subject to United States Federal income taxes, including withholding
taxes, on interest income (including any original issue discount) on, or any
gain from the sale or other disposition of, his pro rata interest in any Bond or
the sale of his Units PROVIDED that all of the following conditions are met: (i)
the interest income or gain is not effectively connected with the conduct by the
foreign investor of a trade or business within the United States, (ii) if the
interest is United States source income (which is the case for most securities
issued by United States issuers), and the Bond is issued after July 18, 1984,
then the foreign investor does not own, directly or indirectly, 10% or more of
the total combined voting power of all classes of voting stock of the issuer of
the Bond and the foreign investor is not a controlled foreign corporation
related (within the meaning of Section 864(d)(4) of the Code) to the issuer of
the Bond, (iii) with respect to any gain, the foreign investor (if an
individual) is not present in the United States for 183 days or more during his
or her taxable year and (iv) the foreign investor provides all certification
which may be required of his status (foreign investors may contact the Sponsor
to obtain a Form W-8 which must be filed with the Trustee and refiled every
three calendar years thereafter). Foreign investors should consult their tax
advisers with respect to United States tax consequences of ownership of Units.
It should be noted that the Tax Act included a provision which
eliminates the exemption from United States taxation, including withholding
taxes, for certain "contingent interest." The provision applies to interest
received after December 31, 1993. No opinion is expressed herein regarding the
potential applicability of this provision and whether United States taxation or
withholding taxes could be imposed with respect to income derived from the Units
as a result thereof. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
Each Unitholder (other than a foreign investor who has properly
provided the certifications described above) will be requested to provide the
Unitholder's taxpayer identification number to the trustee and to certify that
the Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by the
Trust to such Unitholder, including amounts received upon the redemption of the
Units will be subject to back-up withholding.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, the Trust is not an association taxable as a
corporation and the income of the Trust will be treated as the income of the
Unit holders under the existing income tax laws of the State and City of New
York.
The foregoing discussion relates only to United States Federal and New
York State and City income taxes; Unitholders may be subject to foreign, state
and local taxation in other jurisdictions (including a foreign investor's
country of residence). Unitholders should consult their tax advisers regarding
potential state, local, or foreign taxation with respect to the Units.
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price. During the
initial offering period the Public Offering Price is based on the offering
prices of the Bonds in the Trust and includes a sales charge of 3.75% of the
Public Offering Price (3.896% of the aggregate offering price of the Bonds) plus
any accrued interest. In the secondary market the Public Offering Price is based
on the bid prices of the Bonds in the Trust and includes a sales charge of 4.5%
of the Public Offering Price (4.712% of the aggregate bid price of the Bonds)
plus any accrued interest. However, the sales charge applicable to quantity
purchases is, during the initial offering period, reduced by a discount on a
graduated basis to any person acquiring $100,000 or more as follows (except for
sales made pursuant to a "wrap fee account" or similar arrangements as set forth
below):
Aggregate Dollar Value Reduction as a
of Units Purchased Percent of Offering Price
------------------ -------------------------
$100,000 - 249,999 ....................... 0.15%
$250,000 - 499,999 ....................... 0.25%
$500,000 - 999,999 ....................... 0.45%
$1,000,000 or more ....................... 0.75%
Any such reduced sales charge shall be the responsibility of the
selling Underwriter, broker, dealer or agent. The reduced sales charge structure
will apply on all purchases of Units in a Trust by the same person on any one
day from any one Underwriter or dealer. In addition, Unitholders who, during the
offering period, cumulatively purchase a sufficient number of Units of a Trust
to qualify for a reduced sales charge will receive such reduction retroactively
upon reaching the appropriate level. 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. Investors may use the redemption or
termination proceeds they have received from other unit investment trusts
sponsored by the Sponsor to purchase Units of a Trust without a sales charge.
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, officers and directors (including their immediate family
members, defined as spouses, children, grandchildren, parents, grandparents,
mothers-in-law, fathers-in-law, sons-in-law and daughters-in-law, and trustees,
custodians or fiduciaries for the benefit of such persons) of the Sponsor and
its affiliates, Underwriters and broker/dealers may purchase Units of the Trust
without a sales charge in both the initial and secondary offering periods.
Investors who purchase Units through registered broker/dealers who
charge periodic fees for financial planning, investment advisory or asset
management services, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap fee"
charge is imposed may purchase Units in the initial and secondary offering
periods at the Public Offering Price less the concession the Sponsor typically
would allow such broker/dealer. See "Public Offering--Unit Distribution."
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid
interest on a bond from the last day on which interest thereon was paid.
Interest on Bonds 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.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering Price in the sale
of Units to the public, the Trustee will advance the amount of accrued interest
as of the First Settlement Date and the same will be distributed 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, less any distributions from the Interest Account subsequent to the
First Settlement Date. See "Rights of Unitholders--Distributions of Interest and
Principal."
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trust and distributed to Unitholders. Therefore, there
will always remain an item of accrued interest that is added to the value of the
Units. If a Unitholder sells or redeems all or a portion of his Units, he will
be entitled to receive his proportionate share of the accrued interest from the
purchaser of his Units. Since the Trustee has the use of the funds held in the
Interest Account for distributions to Unitholders and since such Account is
noninterest-bearing to Unitholders, the Trustee benefits thereby.
OFFERING PRICE. The 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 Bonds in the Trust.
As indicated above, the price of the Units as of the opening of
business on the Initial Date of Deposit was determined by adding to the
determination of the aggregate offering price of the Bonds an amount equal to
3.896% of such value and dividing the sum so obtained by the number of Units
outstanding. This computation produced a gross underwriting profit equal to
3.75% of the Public Offering Price. Such price determination as of the opening
of business on the Initial Date of Deposit was made on the basis of an
evaluation of the Bonds in each Trust prepared by Muller Data Corporation, a
firm regularly engaged in the business of evaluating, quoting or appraising
comparable securities. Except on the Initial Date of Deposit, during the initial
offering period, the Evaluator will appraise or cause to be appraised daily the
value of the underlying Bonds as of 4:00 P.M. Eastern time on days the New York
Stock Exchange is open 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, Distributor or any Underwriter or
dealer for purchases, sales or redemptions after that time, or on a day when the
New York Stock Exchange is closed, will be held until the next determination of
price. For secondary market sales the Public Offering Price per Unit will be
equal to the aggregate bid price of the Bonds in a Trust plus the secondary
market sales charge. For secondary market purposes such appraisal and adjustment
will be made by the Evaluator as of 4:00 P.M. Eastern time on days on which the
New York Stock Exchange is open for each day on which any Unit of a Trust is
tendered for redemption, and it shall determine the aggregate value of such
Trust as of 4:00 P.M. Eastern time on such other days as may be necessary.
The aggregate price of the Bonds in the Trust has been and will be
determined on the basis of bid prices or offering prices, as appropriate, (i) on
the basis of current market prices for the Bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held by the Trust;
(ii) if such prices are not available for any particular Bonds, on the basis of
current market prices for comparable bonds; (iii) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (iv) by any combination of the above.
The initial or primary Public Offering Price of the Units and the
Sponsor's initial repurchase price per Unit are based on the offering price per
Unit of the underlying Bonds plus the applicable sales charge plus interest
accrued but unpaid from the First Settlement Date to the date of settlement. The
secondary market Public Offering Price and the Redemption Price per Unit are
based on the bid price per Unit of the Bonds in the Trust plus the applicable
sales charge plus accrued interest. The offering price of Bonds in the Trust may
be expected to range from 1-3% more than the bid price of such Bonds. On the
Initial Date of Deposit, the offering side evaluation of the Bonds in each Trust
were higher than the bid side evaluation of such Bonds by the amount indicated
under footnote (5) in "The Trust--Notes to Schedule of Investments."
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. However, delivery of
certificates, if any are requested in writing, representing Units so ordered
will be made as soon as possible following such order or shortly thereafter. 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.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by the Managing Underwriter, Underwriters,
broker-dealers and others (see "Underwriting") at the Public Offering Price,
plus accrued interest computed as described above. 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 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 equal to $0.25 per Unit and in the secondary market equal to
3.0% of the Public Offering Price per Unit. In addition, broker-dealers or
others who sell, within five business days of the Trust's Initial Date of
Deposit, that amount necessary to qualify for the Underwriter Concession set
forth under "Sponsor and Underwriter Compensation" below will be allowed the
concession set forth in such section on all sales during such period. Certain
commercial banks are making Units of the Fund available to their customers on an
agency basis. A portion of the sales charge (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. Notwithstanding the concessions referred to above, in connection
with any quantity purchases, a broker/dealer or bank will receive the following
concessions for purchases made from the Sponsor, pursuant to the sales charge
reduction schedule for quantity purchases set forth above, resulting in total
concessions as contained in the following table:
Aggregate Dollar Value Total Concession
of Units Purchased per Unit
---------------------- ----------------
$100,000 - $249,999 ..................... $.24
$250,000 - $499,999 ..................... .23
$500,000 - $999,999 ..................... .22
$1,000,000 or more....................... .20
The Sponsor and the Distributor each 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." To facilitate the handling of transactions, sales of Units
shall normally be limited to transactions involving a minimum of $1,000.
SPONSOR AND UNDERWRITER COMPENSATION. The gross sales commission
through the initial or primary distribution of Units will equal 3.75% of the
Public Offering Price of the Units (3.896% of the net amount invested), less any
reduced sales charge for quantity purchases as described under "General" above.
The Underwriters will acquire Units from the Sponsor based on the amount of
Units underwritten. The concessions from the Public Offering Price will be as
set forth in the following table:
Aggregate Dollar Value Total Underwriter
of Units Underwritten Concession per Unit*
---------------------- ----------------
$100,000 - $249,999 ..................... $.27
$250,000 - $499,999 ..................... .28
$500,000 - $999,999 ..................... .29
$1,000,000 or more....................... .30
* The Managing Underwriter will receive a Total Underwriter Concession of $.32
per Unit for Aggregate Dollar Value of Units Underwritten of $1,500,000 or more.
Broker-dealers and other financial institutions purchasing Units from
the Distributor during the first week after the Initial Date of Deposit may also
receive the concession described above according to the schedule above
describing Underwriter compensation. In addition, the Sponsor will realize a
profit or will sustain a loss, as the case may be, as a result of the difference
between the price paid for the Bonds by the Sponsor and the cost of such Bonds
to the Trust (which is based on the determination of the aggregate offering
price of the Bonds in such Trust on the Initial Date of Deposit as prepared by
Muller Data Corporation. See "Underwriting" and "The Trust--Schedule of
Investments." The Sponsor has not participated as sole underwriter or as a
manager or as a member of an underwriting syndicate from which the Bonds in the
portfolio of the Trust were acquired. The Underwriter 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 Bonds in the Trust after the
Initial 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 Underwriter.
As stated under "Public Market" below, an affiliate of the Sponsor,
Voyageur Fund Distributors, Inc. (the "Distributor"), intends to, and the
Managing Underwriter may, maintain a secondary market for the Units of the Fund.
In so maintaining a market, the Distributor or the Managing Underwriter 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 Bonds in the Trust and includes a
sales charge). In addition, the Sponsor, the Distributor or the Managing
Underwriter 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.
PUBLIC MARKET. During the initial public offering period, the
Distributor and/or the Managing Underwriter intends to offer to purchase Units
at a price based on the aggregate offering price per Unit of the Bonds in the
Trust plus accrued interest to the date of settlement. Afterward, although they
are not obligated to do so, the Distributor intends to, and the Managing
Underwriter may, maintain a market for the Units offered hereby and to offer
continuously to purchase such Units at the bid price of the Bonds in the
portfolio plus interest accrued to the date of settlement 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
Distributor and/or the Managing Underwriter 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 desiring to dispose of his Units may dispose of such
Units by tendering them to the Trustee for redemption at the Redemption Price,
which is based upon the aggregate bid price of the Bonds in the portfolio and
any accrued interest. The aggregate bid prices of the underlying Bonds in the
Trust are expected to be less than the related aggregate offering prices. See
"Rights of Unitholders--Redemption of Units." A UNITHOLDER WHO WISHES TO DISPOSE
OF HIS UNITS SHOULD INQUIRE OF HIS BROKER AS TO CURRENT MARKET PRICES IN ORDER
TO DETERMINE WHETHER THERE IS IN EXISTENCE ANY PRICE IN EXCESS OF THE REDEMPTION
PRICE AND, IF SO, THE AMOUNT THEREOF.
RIGHTS OF UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of the Trust will not be
evidenced by certificates unless a Unitholder, the Unitholder's registered
broker/dealer or the clearing agent for such broker/dealer makes a written
request to the Trustee. Certificates, if issued, will be so noted on the
confirmation statement sent to the Underwriter and broker. Non-receipt of such
certificate(s) must be reported to the Trustee within one year; otherwise, a 2%
surety bond fee will be required for replacement.
Units are transferable by making a written request to the Trustee and,
in the case of Units evidenced by a certificate, by presenting and surrendering
such certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unitholder. Unitholders must sign such
written request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate representing
the Units to be transferred. Such signatures must be guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee.
Although no such charge is now made or contemplated, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate reissued 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.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by the
Trust, including that part of the proceeds of any disposition of Bonds which
represents accrued interest and including any insurance proceeds representing
interest due on defaulted Bonds, is credited by the Trustee to the Interest
Account of the Trust. Other receipts are credited to the Principal Account of
the Trust. Interest received by the Trust after deduction of amounts sufficient
to reimburse the Trustee 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") will be distributed on or shortly after the fifteenth
day of each month on a pro rata basis to Unitholders of record as of the
preceding record date (which will be the first day of the month). All
distributions will be net of applicable expenses. The pro rata share of cash in
the Principal Account will be computed as of the applicable 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 Bonds 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 the Principal or Interest Accounts (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 shall equal at least $0.10 per Unit.
The distribution to the Unitholders 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 one twelfth of
the Unitholders' pro rata share of the estimated net annual unit income in the
Interest Account after deducting estimated expenses. Because interest payments
are not received by the Trust at a constant rate throughout the year, such
interest distribution may be more or less that the amount credited to the
Interest Account as of the record date. For the purpose of minimizing
fluctuation in the distributions from the 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
for any such advances from funds in the Interest Account on the ensuing record
date. Persons who purchase Units will commence receiving distributions only
after such person becomes a record owner. Notification to the Trustee of the
transfer of Units is the responsibility of the purchaser, but in the normal
course of business such notice is provided by the selling broker-dealer.
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 Trust (as determined
on the basis set forth under "Trust Operating 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 or extraordinary charges
payable out of the Trust. Amounts so withdrawn shall not be considered a part of
the Trust's assets until such time as the Trustee shall return all for 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 redemption of Units by the
Trustee.
REINVESTMENT OPTION. Unitholders of the Trust may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any mutual fund advised by the Sponsor or
its affiliates, Delaware Management Company, Inc. or Delaware International
Advisors, Ltd., which are registered in the Unitholder's state of residence.
Such mutual funds are hereinafter collectively referred to as the "Reinvestment
Funds."
Each Reinvestment Fund has investment objectives which differ from
those of the Trust. 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 Fund from Delaware Distributors, L.P. at 1818 Market Street,
Philadelphia, Pennsylvania 19103.
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 closing of trading on the New York Stock Exchange on such
date.
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 on his
or her Units in cash. There will be no charge or other penalty for such
termination. Each Reinvestment Fund, its sponsor and its investment adviser
shall have the right to terminate at any time the reinvestment plan relating to
such fund.
REPORTS PROVIDED. The Trustee shall furnish Unitholders of the Trust in
connection with each distribution a statement of the amount of interest and, if
any, the amount of other receipts being distributed expressed in each case as a
dollar amount representing the pro rata share of each Unit of the Trust
outstanding. For as long as the Sponsor deems it to be in the best interests of
the Unitholders, the accounts of the 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 the Trust
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 the Trust a statement (i) as to the
Interest Account: interest received (including amounts representing interest
received upon any disposition of the Bonds), deductions for applicable taxes and
for fees and expenses of such Trust, for purchases of Replacement Bonds and for
redemptions of Units, if any, reservations made by the Trustee, if any, and the
balance remaining after such distributions and deductions, expressed in each
case both as a total dollar amount and as a dollar amount representing the pro
rata share of each Unit outstanding on the last business day of such calendar
year; (ii) as to the Principal Account: the dates of disposition of any Bonds
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, reservations made by the Trustee, if any,
deductions for payment of applicable taxes, fees and expenses of such Trust 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 Bonds 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
Bonds in the Trust furnished to it by the Evaluator.
REDEMPTION OF UNITS. A Unitholder who does not dispose of Units in the
secondary market described above may cause Units to be redeemed by the Trustee
by making a written request to the Trustee, at its unit investment trust office,
The Chase Manhattan Bank, Bowling Green Station, P.O. Box 5185, New York, New
York 10274-5185 and, in the case of Units evidenced by a certificate, by
tendering such certificate to the Trustee, properly endorsed or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Trustee. Unitholders must sign the request, and such certificate or transfer
instrument, exactly as their names appear on the records of the Trustee and on
any certificate representing the Units to be redeemed. If the amount of the
redemption is $25,000 or less and the proceeds are payable to the Unitholder(s)
of record at the address of record, no signature guarantee is necessary for
redemptions by individual account owners (including joint owners). Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in the STAMP or
such other guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee. A certificate should only be sent by registered
or certified mail for the protection of the Unitholder. Since tender of the
certificate is required for redemption when one has been issued, Units
represented by a certificate cannot be redeemed until the certificate
representing such Units has been received by the purchasers. The Trustee's
toll-free number for customer assistance is 1-800-428-8890, available 9:00 a.m.
to 5:00 p.m. EST any business day.
Redemption shall be made by the Trustee on the third business day
following the day on which a tender for redemption is received (the "Redemption
Date"). Such redemption shall be made by payment of cash, equivalent to the
Redemption Price for such Trust, determined as set forth below as of the
evaluation time stated under "Summary of Essential Financial Information," next
following such tender, multiplied by the number of Units being redeemed. Any
Units redeemed shall be cancelled and any undivided fractional interest in the
Fund extinguished. The price received upon redemption might be more or less than
the amount paid by the Unitholder depending on the value of the Bonds in the
Trust at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee
will be required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any amount
so withheld is transmitted to the Internal Revenue Service and may be recovered
by the Unitholder only when filing a return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from the selling
broker. However, at any time a Unitholder elects to tender Units for redemption,
such Unitholder should provide a tax identification number to the Trustee in
order to avoid this possible "back-up withholding" in the event the Trustee has
not been previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the
Interest Account or, if the balance therein is insufficient, from the Principal
Account. All other amounts will be withdrawn from the Principal Account. The
Trustee is empowered to sell underlying Bonds 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 Bonds in
the Trust, while the initial and primary Public Offering Price of Units will be
determined on the basis of the offering price of the Bonds, 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 Initial Date of Deposit, the Public Offering
Price per Unit (which is based on the offering prices of the Bonds and includes
the sales charge) exceeded the value at which Units could have been redeemed
(based upon the current bid prices of the Bonds in the 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 the Trust determined on the basis of (i) the cash on
hand in such Trust or monies in the process of being collected, (ii) the value
of the Bonds in such Trust based on the bid prices of the Bonds (including "when
issued" contracts, if any) and (iii) 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 Bonds in the Trust by employing any of the methods set forth in "Public
Offering -- Offering Price."
The price at which Units may be redeemed could be less than the price
paid by the Unitholder and may be less than the par value of the Bonds
represented by the Units so redeemed. As stated above, the Trustee may sell
Bonds to cover redemptions. When Bonds are sold, the size of the Trust will be,
and the diversity may be, reduced. Such sales may be required at a time when
Bonds would not otherwise be sold and might result in lower prices than might
otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the 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 Bonds in
the Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee is not
liable to any person in any way for any loss or damage which may result from any
such suspension or postponement.
TRUST ADMINISTRATION
DISTRIBUTOR PURCHASES OF UNITS. The Trustee shall notify the
Distributor of any tender of Units for redemption. If the Distributor'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 date of such notification 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 or Distributor may be
tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Distributor 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 Distributor which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to its acquisition of such
Units.
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 Sponsor as the Trustee in its sole discretion may deem necessary. The
Sponsor, in designating such Bonds, will consider a variety of factors,
including (i) interest rates, (ii) market value and (iii) marketability. The
Sponsor may direct the Trustee to dispose of Bonds in the event there is a
decline in price or the occurrence of other market or credit factors, including
advance refunding (i.e., the issuance of refunding securities and the deposit of
the proceeds thereof in trust or escrow to retire the refunded securities on
their respective redemption dates), so that in the opinion of the Sponsor the
retention of such Securities would be detrimental to the interest of the
Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer
made by an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
(i) the issuer is in default with respect to such Bond or (ii) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Bond in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder, identifying the Bonds eliminated and the
Bonds substituted therefor. Except as stated herein and under "The
Fund--Replacement Bonds" regarding the substitution of Replacement Bonds for
Failed Bonds, the acquisition by the Trust of any obligations other than the
Bonds initially deposited is not permitted.
If any default in the payment of principal or interest on any Bond
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 Bond within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
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 (i) 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 (ii) 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 obligations either in addition to or in substitution
for any of the Bonds initially deposited in the Trust, except for the
substitution of certain refunding obligations for such Bonds, for Replacement
Bonds and for subsequent deposits (see "The Fund"). In the event of any
amendment requiring the consent of Unitholders, the Trustee is obligated to
notify promptly all Unitholders of the substance of such amendment.
The Trust may be terminated at any time by consent of Unitholders
representing 66-2/3% 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 the minimum value indicated under "Summary of Essential Financial
Information." The Trust will be liquidated by the Trustee in the event that a
sufficient number of Units not yet sold are tendered for redemption by the
underwriters, including the Sponsor, so that the net worth of such Trust would
be reduced to less than 40% of the initial principal amount of such Trust. If
the Trust is liquidated because of the redemption of unsold Units by the
Underwriter, the Sponsor will refund to each purchaser of Units the entire sales
charge paid by such purchaser.
The Trust Agreement provides that the Trust shall terminate upon the
redemption, sale or other disposition of the last Bond held in such Trust, but
in no event shall it continue beyond the end of the year preceding the fiftieth
anniversary of the Trust Agreement. In the event of termination of the 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 Trust maintained
by the Trustee, such notice specifying the time or times at which the Unitholder
may surrender his certificate or certificates, if any were issued, for
cancellation. Within a reasonable time thereafter the Trustee shall liquidate
any Bonds 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 Bonds in the Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were not
required at such time. For this reason, among others, the amount realized by a
Unitholder upon termination may be less than the principal amount or par amount
of Bonds represented by the Units held by such Unitholder. The Trustee shall
then distribute to each Unitholder his or her share of the balance of the
Interest and Principal Accounts. With such distribution the Unitholders 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.
LIMITATION ON LIABILITIES. The Sponsor, the Evaluator, the Distributor
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
thereunder. The Trustee shall not be liable for depreciation or loss incurred by
reason of the sale by the Trustee of any of the Bonds. In the event of the
failure of the Sponsor to act under the Trust Agreement, the Trustee may act
thereunder and shall not be liable for any action taken by it in good faith
under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds 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, Distributor 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, Distributor 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.
MANAGING UNDERWRITER. Cohig & Associates, Inc. is a privately-owned,
full-service brokerage firm, organized in 1985 and specializing in investment
counsel for individuals and small institutions and also in providing capital for
emerging-growth companies.
The Managing Underwriter's Research Department supports the firm's
account executives and investment banking customers with in-depth research and
analysis on emerging-growth companies and special situations.
In addition to periodic underwritings, Cohig & Associates, Inc.
provides its clients with a traditional range of investment products and
services, including listed and OTC stocks, municipal, corporate and government
bonds, mutual funds and retirement accounts. The Managing Underwriter's account
executives strive to create portfolios that balance prudence and capital
preservation with opportunities for the kind of dramatic upside moves that build
wealth.
SPONSOR. Voyageur Fund Managers, Inc. is the Sponsor of the Fund and
Voyageur Fund Distributors, Inc. is the primary Distributor of Fund Units. After
the close of business on April 30, 1997, Voyageur Fund Managers, Inc. and
Voyageur Fund Distributors, Inc. became indirect, wholly owned subsidiaries of
Lincoln National Corporation ("LNC") as a result of LNC's acquisition of
Dougherty Financial Group, Inc., the parent company of the Sponsor and the
Distributor. LNC, headquartered in Fort Wayne, Indiana, owns and operates
insurance and investment management businesses, including Delaware Management
Holdings, Inc. ("DMH"). Affiliates of DMH serve as adviser, distributor and
transfer agent for the Delaware Group of Mutual Funds, including the
Delaware-Voyageur Funds.
As of May 1, 1997, affiliates of DMH, including Voyageur Fund Managers,
Inc., had assets under management of over $34 billion in mutual fund and
institutional accounts, and served as investment adviser to more than 60 mutual
fund portfolios. The principal business address for Voyageur Fund Managers, Inc.
is One Commerce Square, Philadelphia, Pennsylvania 19103; the principal business
address for Voyageur Fund Distributors, Inc. is 1818 Market Street,
Philadelphia, Pennsylvania 19103. (This paragraph relates only to the Sponsor
and not to the Fund or to any Series thereof. The information is included herein
only for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations. More
detailed information will be made available by the Sponsor upon request.)
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.
EVALUATOR. Muller Data Corporation serves as Evaluator. The Evaluator
may resign or be removed by the Sponsor in which event the Sponsor is to use its
best efforts to appoint a satisfactory successor. Such resignation or removal
shall become effective upon acceptance of appointment by the successor
evaluation. If upon resignation of the Evaluator no successor has accepted
appointment within 30 days after notice of resignation, the Evaluator may apply
to a court of competent jurisdiction for the appointment of a successor. Notice
of such resignation or removal and appointment shall be mailed by the Trustee to
each Unitholder.
TRUSTEE. The Trustee, The Chase Manhattan Bank, is a trust company
specializing in investment related services, organized and existing under the
laws of New York, having its unit investment trust office at 4 New York Plaza,
New York, New York 10004-2413. The Trustee is subject to supervision by the
Superintendent of Banks of the State of New York, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve System.
The duties of the Trustee are primarily ministerial in nature. It did
not participate in the selection of Bonds for the portfolio of the Trust.
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 Trust to, every Unitholder. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during 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 "Rights of Unitholders--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
Bonds held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may
resign and be discharged of the Trust 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 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. Notice of such removal and appointment shall be
mailed to each Unitholder by the Sponsor. Upon execution of a written acceptance
of such appointment by such successor trustee, all the rights, powers, duties
and obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a corporation organized under the laws of the United States or any
State, be authorized to exercise trust powers and have at all times an aggregate
capital, surplus and undivided profits of not less than $5,000,000.
UNDERWRITING
The Underwriters named below has severally purchased Units in the
following respective amounts from the Sponsor.
Corporate
High Yield
Name Address Series 1
- ------------------------ ---------------------------------- ----------
Managing Underwriters
- ---------------------
Cohig & Associates, Inc. 6300 South Syracuse Way, Suite 430 150,000
Englewood, CO 80111
Underwriters
- ------------
Voyageur Fund 1818 Market Street 238,744
Distributors, Inc. Philadelphia, PA 19103
Dain Bosworth Incorporated 60 South Sixth Street 10,000
Minneapolis, MN 55402
Raymond James & Associates P.O. Box 12749 10,000
St. Petersburg, FL 33733-2749 --------
Total 408,744
========
Units may also be sold to broker-dealers and others at prices
representing the per Unit concession or agency commission stated under "Public
Offering--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 and the Distributor each 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.
At various times the Sponsor may implement programs under which the
sales forces of the Underwriter, brokers, dealers, banks and/or others may be
eligible to win nominal awards for certain sales efforts, or under which the
Sponsor will reallow to any such Underwriter, 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 person 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 the Underwriter,
brokers, dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trust. Such payments are
made by the Sponsor out of its own assets, and not out of the assets of the
Trust. These programs will not change the price Unitholders pay for their Units
or the amount that the Trust will receive from the Units sold.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to Federal and state tax law have been passed upon by Chapman
and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as counsel for the
Sponsor. Carter, Ledyard & Milburn will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
INDEPENDENT AUDITORS. The statement of net assets and the related
schedule of investments as of the opening of business on the Initial Date of
Deposit included in this Prospectus have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent auditors, appearing elsewhere
herein and upon the authority of said firm as experts in accounting and
auditing.
DESCRIPTION OF BOND RATINGS*
STANDARD & POOR'S. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follows:
A 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 may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
- --------
* As published by the ratings companies.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
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 - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
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 bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
Plus (+) or Minus (-): 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: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by 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 of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his/her own judgment with respect to such likelihood
and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends which
place companies and government units under special surveillance by S&P's
180-member analytical staff. These may include mergers, voter referendums,
actions by regulatory authorities, or developments gleaned from analytical
reviews. Unless otherwise noted, a rating decision will be made within 90 days.
Issues appear on Credit Watch where an event, situation, or deviation from
trends occurred and needs to be evaluated as to its impact on credit ratings. A
listing, however, does not mean a rating change is inevitable. Since S&P
continuously monitors all of its ratings, Credit Watch is not intended to
include all issues under review. Thus, rating changes will occur without issues
appearing on Credit Watch.
MOODY'S. A brief description of the applicable Moody's rating symbols
and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of 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. Their
safety is so absolute that with the occasional exception of oversupply in a few
specific instances, characteristically, 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 fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Their market value is 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 upper 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
economic performance during a sustained period of depressed business conditions,
but, during periods of normalcy, A-rated bonds frequently move in parallel with
Aaa and Aa obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the maximum
in security within their quality group, can be bought for possible upgrading in
quality, and additionally, afford the investor an opportunity to gauge more
precisely the relative attractiveness of offerings in the market place.
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. The market
value of Baa-rated bonds is more sensitive to changes in economic circumstances,
and aside from occasional speculative factors applying to some bonds of this
class, Baa market valuations will move in parallel with Aaa, Aa, and A
obligations during periods of economic normalcy, except in instances of
oversupply.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
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 operation 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.
FITCH INVESTORS SERVICE, L.P. A brief description of the applicable
Fitch rating symbols and their meanings follows:
AAA - These bonds are considered to be investment grade and of the
highest quality. The obligor has an extraordinary ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - These bonds are considered to be' investment grade and of high
quality. The obligor's ability to pay interest and repay principal, which is
very strong, is somewhat less than for AAA-rated securities or more subject to
possible change over the term of the issue.
A - These bonds are considered to be investment grade and of good
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB - These bonds are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds with
higher ratings.
BB - These bonds are considered speculative and of low investment
grade. The obligor's ability to pay interest and repay principal is not strong
and is considered likely to be affected over time by adverse economic changes.
B - These bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligors ability to pay interest over the life
of the issue and repay principal when due.
A "+" or a "-" sign after a rating symbol indicates relative standing in its
rating.
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 Underwriter. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to whom it is not lawful to make such offer in such state.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
TITLE PAGE
- ----- ----
SUMMARY OF ESSENTIAL
FINANCIAL INFORMATION.................. 3
THE FUND.................................... 5
INVESTMENT OBJECTIVES AND
PORTFOLIO SELECTION.................... 7
THE TRUST................................... 8
INDEPENDENT AUDITORS' REPORT................ 12
STATEMENT OF NET ASSETS..................... 13
RISK FACTORS................................ 14
ESTIMATED CURRENT RETURN AND
ESTIMATED LONG-TERM RETURN............. 18
TRUST OPERATING EXPENSES.................... 19
TAX STATUS.................................. 20
PUBLIC OFFERING............................. 25
RIGHTS OF UNITHOLDERS....................... 30
TRUST ADMINISTRATION........................ 35
UNDERWRITING................................ 40
OTHER MATTERS............................... 41
DESCRIPTION OF BOND RATINGS................. 41
- -------------------------------------------------------------------------------
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.
P R O S P E C T U S
- -------------------------------------------------------------------------------
May 22, 1997
DELAWARE -VOYAGEUR
UNIT INVESTMENT TRUST,
SERIES 10
CORPORATE HIGH YIELD
SERIES 1
UIT-EQPR10 5/97
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers
and documents:
The facing sheet of Form S-6
The Cross-Reference Sheet
The Prospectus
The signatures
The following exhibits:
1.1 Standard Terms and Conditions of Trust - Delaware-Voyageur Unit
Investment Trust Series 10 and certain Subsequent Series.
1.2 Form of Trust Indenture and Agreement for Delaware-Voyageur Unit
Investment Trust, Series 10.
2. Opinion of counsel to the Sponsor as to legality of the securities
being registered including a consent to the use of its name under the
headings "Tax Status" and "Legal Opinions" in the Prospectus and
opinion of counsel as to Federal income tax status of the securities
being registered.
3.1 Opinion of counsel as to New York income tax status of securities being
registered.
3.2 Opinion of counsel as to advancement of funds by Trustee.
4. Not applicable.
5. Financial Data Schedules filed hereto electronically as Exhibit(s) 27
pursuant to Rule 401 of Regulation S-T.
6. Written Consents.
(a) Consent of Muller Data Corporation.
(b) Consent of KPMG Peat Marwick LLP.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Delaware-Voyageur Unit Investment Trust, Series 10, has duly caused
this Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Philadelphia and
State of Pennsylvania on the 22nd day of May, 1997.
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST,
SERIES 10 (Registrant)
By: Voyageur Fund Managers, Inc.
(Depositor)
By: George M. Chamberlain, Jr.
Senior Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on by the following person in the
capacity indicated and on May 22, 1997.
SIGNATURE TITLE
WAYNE A. STORK
- --------------------------
Wayne A. Stork President, Chief Executive Officer
and Chief Investment Officer
DAVID K. DOWNES
- --------------------------
David K. Downes Executive Vice President, Chief Operating
Officer, Chief Financial Officer,
Treasurer and Director
GEORGE M. CHAMBERLAIN, JR.
- --------------------------
George M. Chamberlain, Jr. Senior Vice President, Secretary and
Director
RICHARD J. FLANERY
- --------------------------
Richard J. Flanery Director
EXHIBIT 1.1.1
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST
SERIES 10 AND CERTAIN SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
DATED: MAY 22, 1997
BETWEEN
VOYAGEUR FUND MANAGERS, INC.
Depositor,
MULLER DATA CORPORATION,
Evaluator
AND
THE CHASE MANHATTAN BANK,
Trustee
INDEX
ARTICLE I DEFINITIONS ............................................ 1
Agreement ............................................................. 1
Bonds ................................................................. 2
Business Day .......................................................... 2
Certificate ........................................................... 2
Contract Obligations .................................................. 5
Depositor ............................................................. 5
Evaluation Time ....................................................... 5
Evaluator ............................................................. 5
Fund .................................................................. 5
Initial Date of Deposit ............................................... 5
Insurance ............................................................. 5
Insurer ............................................................... 6
Interest Account ...................................................... 6
Interest Distribution ................................................. 6
Interest Distribution Date ............................................ 6
Principal Account ..................................................... 6
Principal Distribution Date ........................................... 6
Program Agent ......................................................... 6
Record Date ........................................................... 6
Redemption Date ....................................................... 7
Redemption Price ...................................................... 7
Reserve Account ....................................................... 7
Supplement Trust Agreement ............................................ 7
Trust Agreement ....................................................... 7
Trust Fund or Trust ................................................... 7
Trust Fund Evaluation ................................................. 7
Trustee ............................................................... 7
Unit .................................................................. 7
Unitholder ............................................................ 8
Unit Value ............................................................ 8
ARTICLE II DEPOSIT OF BONDS; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES;
PORTFOLIO INSURANCE .................................... 8
Section 2.01. Deposit of Bonds ....................................... 8
Section 2.02. Acceptance of Trust .................................... 10
Section 2.03. Issuance of Units ...................................... 11
Section 2.04. Form of Certificates ................................... 11
Section 2.05. Portfolio Insurance for the Insured Trusts ............. 11
ARTICLE III ADMINISTRATION OF FUND ................................. 13
Section 3.01. Certain Moneys to be Credited to Interest Account ...... 13
Section 3.02. Certain Moneys to be Credited to Principal Account ..... 13
Section 3.03. Establishment of Reserve Account ....................... 14
Section 3.04. Certain Deductions and Distributions ................... 14
Section 3.05. Statements and Reports ................................. 17
Section 3.06. Extraordinary Sale of Bonds ............................ 18
Section 3.07. Refunding Obligations .................................. 20
Section 3.08. Counsel ................................................ 20
Section 3.09. Action by Trustee Regarding Bonds ...................... 20
Section 3.10. Trustee Not Required to Adjust Accounts ................ 21
Section 3.11. Notice of Change in Principal Account .................. 21
Section 3.12. Limited Replacement of Special Bonds ................... 21
Section 3.13. Compensation of Depositor for Supervisory Services ..... 22
ARTICLE IV EVALUATION OF BONDS .................................... 24
Section 4.01. Evaluation of Bonds .................................... 24
Section 4.02. Certain Information to be made Available ............... 25
Section 4.03. Compensation of the Evaluator .......................... 25
Section 4.04. Liability of the Evaluator ............................. 26
Section 4.05. Resignation, Removal and Other Matters Relating to
the Evaluator .......................................... 26
ARTICLE V TRUST FUND EVALUATION .................................. 27
Section 5.01. Trust Fund Evaluation .................................. 27
Section 5.02. Redemption of Units .................................... 28
ARTICLE VI ISSUANCE, TRANSFER, INTERCHANGE ........................ 31
Section 6.01. Issuance of Certificates ............................... 31
Section 6.02. Transfer of Units ...................................... 31
Section 6.03. Replacement of Certificates ............................ 31
Section 6.04. Form of Certificate .................................... 32
ARTICLE VII DEPOSITOR .............................................. 32
Section 7.01. Certain Matters Regarding Succession ................... 32
Section 7.02. Liability of Depositor and Indemnification ............. 32
ARTICLE VIII TRUSTEE ................................................ 33
Section 8.01. General Matters Relating to the Trustee ................ 33
Section 8.02. Books, Records and Reports ............................. 36
Section 8.03. Reports to Securities and Exchange Commission and Others 36
Section 8.04. Agreement and List of Bonds on File .................... 36
Section 8.05. Compensation of Trustee ................................ 36
Section 8.06. Resignation, Discharge or Removal of the Trustee;
Successors ............................................. 37
Section 8.07. Qualification of Trustee ............................... 39
Section 8.08. Collateral ............................................. 39
ARTICLE IX TERMINATION ............................................ 39
Section 9.01. Procedure Upon Termination ............................. 39
Section 9.02. Notice to Unitholders .................................. 41
Section 9.03. Moneys to be Held in Trust Without Interest ............ 41
Section 9.04. Dissolution of Depositor Not to Terminate .............. 41
ARTICLE X MISCELLANEOUS PROVISIONS ............................... 41
Section 10.01. Amendment and Waiver ................................... 41
Section 10.02. Initial Costs .......................................... 42
Section 10.03. Registration (Initial and Current) of Units and Fund ... 43
Section 10.04. Certain Matters Relating to Unitholders ................ 43
Section 10.05. New York Law to Govern ................................. 44
Section 10.06. Notices ................................................ 44
Section 10.07. Severability ........................................... 44
Section 10.08. Separate and Distinct Series ........................... 44
EXECUTION ............................................................. 42
ACKNOWLEDGMENTS ....................................................... 43
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST
SERIES 10 AND CERTAIN SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
EFFECTIVE May 22, 1997
These Standard Terms and Conditions of Trust, Effective May 22, 1997,
are executed between Voyageur Fund Managers, Inc., as Depositor, Muller Data
Corporation, as Evaluator and The Chase Manhattan Bank, as Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust shall be applicable to
Series 10 and certain Series subsequent to the date hereof of Delaware-Voyageur
Unit Investment Trust for which The Chase Manhattan Bank acts as Trustee as
provided in this paragraph. For each such series of Delaware Voyageur Unit
Investment Trust to which these Standard Terms and Conditions of Trust are to be
applicable, the Depositor, the Evaluator named in the Trust Agreement and the
Trustee shall execute a Trust Agreement incorporating by reference these
Standard Terms and Conditions of Trust and designating any exclusion from or
exception to such incorporation by reference for the purposes of that series or
variation of the terms hereof for the purposes of that series and specifying for
that series (i) the name of each Trust Fund, and (ii) the Bonds deposited in
trust for each Trust Fund.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
AGREEMENT
These Standard Terms and Conditions of Trust and all amendments and
supplements hereto and thereto.
BONDS
The interest-bearing corporate debt obligations, including Contract
Obligations listed in all Schedules to the Trust Agreement or deposited in the
Trust Fund pursuant to Section 2.01(b) and any obligations received in exchange
or substitution for such obligations pursuant to Sections 3.07 or 3.12 hereof,
as may from time to time continue to be held as a part of any Trust Fund.
BUSINESS DAY
Any day other than a Saturday, Sunday or a day on which the New York
Stock Exchange is closed.
CERTIFICATE
Any one of the Certificates manually executed by the Trustee in
substantially the following form with the blanks appropriately filled in:
Face of Certificate
NUMBER DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST UNITS
CERTIFICATE OF BENEFICIAL OWNERSHIP
THIS CERTIFIES THAT _____________________________ is the registered
owner of _______ Unit(s) of fractional undivided interest in Delaware-Voyageur
Unit Investment Trust of the above Series (herein referred to as the "TRUST")
created under the laws of the State of New York pursuant to the Agreement and
the related Trust Agreement, a copy of which is available at the office of the
Trustee. This Certificate is issued under and is subject to the terms,
provisions and conditions of the aforesaid Agreement and the related Trust
Agreement to which the holder of this Certificate by virtue of the acceptance
hereof assents and is bound. This Certificate is transferable and
interchangeable by the registered owner in person or by his duly authorized
attorney at the office of the Trustee upon surrender of this Certificate
properly endorsed or accompanied by a written instrument of transfer and any
other documents that the Trustee may require for transfer, in form satisfactory
to the Trustee, and payment of the fees and expenses provided in the Agreement.
WITNESS the facsimile signature of the Depositor and the manual
signature of an authorized signatory of the Trustee.
Dated:
VOYAGEUR FUND MANAGERS, INC., THE CHASE MANHATTAN BANK,
Depositor, Trustee,
One Commerce Square 4 New York Plaza
Philadelphia, Pennsylvania 19103 New York, New York 10004-2413
By ___________________________ By ___________________________
Authorized Signature Authorized Signature
REVERSE OF CERTIFICATE
FORM OF ASSIGNMENT
FOR VALUE RECEIVED _______________________________________ hereby
sells, assigns and transfers unto
___________________________
___________________________
Please Insert Social Security or Other
Identifying Number of Assignee
______________________________________
______________________________________
the within Certificate and does hereby irrevocably constitute and appoint
___________________________________________________, attorney, to transfer the
within Certificate on the books of the Trustee, with full power of substitution
in the premises.
Dated: ______________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate in every particular, without alteration
or enlargement or any change whatever, and must be guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee.
Signature Guaranteed
By ___________________________________
CONTRACT OBLIGATIONS
The Bonds listed in the Schedules of the Trust Agreement which are to
be acquired by any Trust Fund pursuant to contract, contracts for the purchase
of such bonds which have been assigned to the Trustee along with the amount
required for their purchase which have been delivered to the Trustee or Bonds
which the Depositor has contracted to purchase for any Trust Fund pursuant to
Section 3.12 hereof.
DEPOSITOR
Voyageur Fund Managers, Inc. or its successors or any successor
Depositor appointed as herein provided.
EVALUATION TIME
That time stated in the Prospectus for each respective Trust Fund
appearing in the "Summary of Essential Financial Information."
EVALUATOR
Muller Data Corporation or its successors or any successor Evaluator
appointed as herein provided.
FUND
All Trust Funds outstanding under this Agreement.
INITIAL DATE OF DEPOSIT
The meaning assigned to it in the Prospectus for each respective Trust
Fund appearing in the "Summary of Essential Information."
INSURANCE
The contract or policy of insurance obtained by certain Trust Funds
guaranteeing the payment when due of the principal of and interest on the Bonds
held pursuant and subject to this Agreement, including those Bonds held pursuant
and subject to this Agreement which are also insured by individual policies of
insurance which have been obtained by the issuers of such Bonds, together with
the proceeds, if any, thereof payable to or received by the Trustee for the
benefit of such Trust Funds and the Unitholders thereof except that Insurance
shall not include those Bonds held pursuant and subject to this Agreement which
are insured at the time of their deposit by individual policies of insurance
which have been obtained by the issuers of such Bonds or others (the
"PRE-INSURED BONDS").
INSURER
Any insurance company, its successors and assigns, which is the issuer
of the contract or policy of insurance obtained by a Trust Fund protecting such
Trust Fund and the Unitholders thereof against nonpayment when due of the
principal of and interest on any Bond (except for Pre-Insured Bonds) held by the
Trustee as part of the Fund.
INTEREST ACCOUNT
The account created pursuant to Section 3.01.
INTEREST DISTRIBUTION
The meaning assigned to it in Section 3.04.
INTEREST DISTRIBUTION DATE
The meaning assigned to it in the Prospectus for each respective Trust
Fund under the caption "Distribution Dates" appearing in the "Summary of
Essential Financial Information."
PERMANENT INSURANCE
The meaning assigned to it in Section 5.02.
PRINCIPAL ACCOUNT
The account created pursuant to Section 3.02.
PRINCIPAL DISTRIBUTION DATE
The meaning assigned to it in the Prospectus for each respective Trust
Fund under the caption "Distribution Dates" appearing in the "Summary of
Essential Financial Information."
PROGRAM AGENT
Program Agent shall mean The Chase Manhattan Bank or its successors,
unless a different Program Agent shall be designated by the Trust Agreement for
a particular Trust Fund.
RECORD DATE
The meaning assigned to it in the Prospectus for each respective Trust
Fund under the caption "Record Dates" appearing in the "Summary of Essential
Financial Information."
REDEMPTION DATE
The meaning assigned to it in Section 5.02.
REDEMPTION PRICE
The meaning assigned to it in Section 5.02.
RESERVE ACCOUNT
The account created pursuant to Section 3.03.
SUPPLEMENT TRUST AGREEMENT
Shall mean an amendment or supplement to the Trust Agreement executed
pursuant to Section 2.01(b) for the purpose of depositing additional Bonds in
the Trust Fund and issuing additional Units.
TRUST AGREEMENT
The Trust Agreement for the particular series of Delaware-Voyageur Unit
Investment Trust into which these Standard Terms and Conditions of Trust are
incorporated.
TRUST FUND OR TRUST
Any one of the separate trusts created by this Agreement and a Trust
Agreement which shall consist of the Bonds and all undistributed interest or
other amounts received or accrued thereon and any undistributed cash held in the
Principal and Interest Accounts or otherwise realized from the sale,
liquidation, redemption or maturity thereof, exclusive of any amounts which may
be on deposit in the Reserve Account.
TRUST FUND EVALUATION
The meaning assigned to it in Section 5.01.
TRUSTEE
The Chase Manhattan Bank or its successors or any successor Trustee
appointed as herein provided.
UNIT
The fractional undivided interest in and ownership of an individual
Trust Fund equal initially to the fraction specified in the Prospectus for each
respective Trust Fund under the caption "Fractional Undivided Interest in the
Trust per Unit" appearing in the "Summary of Essential Financial Information,"
the denominator of which fraction shall be (1) increased by the number of any
additional Units issued pursuant to Section 2.03 hereof and (2) decreased by the
number of any such Units redeemed as provided in Section 5.02. Whenever
reference is made herein to the "INTEREST" of a Unitholder in the Trust Fund or
in the Interest or Principal Accounts, it shall mean such fractional undivided
interest represented by the number of Units, whether or not evidenced by a
Certificate or Certificates, held of record by such Unitholder in such Trust
Fund.
UNITHOLDER
The holder of any Unit as recorded on the books of the Trustee, his
legal representatives and heirs and the successors of any corporation,
partnership or other legal entity which is a holder of any Unit.
UNIT VALUE
The value of the fractional undivided interest in and ownership of any
individual Trust Fund represented by each Unit as determined by a Trust Fund
Evaluation.
Words importing a singular number shall include the plural number in
each case and vice versa, except as the context herein may clearly indicate
otherwise and words importing persons shall include corporations, partnerships
and associations, as well as natural persons. The words "HEREIN", "HEREBY",
"HEREWITH", "HERETOFORE", and other singular words or phrases or references and
associations shall refer to the Agreement in its entirety.
ARTICLE II
DEPOSIT OF BONDS; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES; PORTFOLIO INSURANCE
SECTION 2.01. DEPOSIT OF BONDS. (a) The Depositor, concurrently with
the execution and delivery hereof, hereby grants and conveys all of its right,
title and interest in and to and hereby conveys to and deposits with the Trustee
in an irrevocable Trust the Bonds (together with accrued and unpaid interest
thereon) and confirmations of contracts to purchase Bonds, including Contract
Obligations, listed in the Schedules to the Trust Agreement duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form, to be held, managed and applied by the Trustee as herein provided
for the benefit of each Unitholder to the extent of such Unitholder's interest
in the Trust Fund. The Depositor hereby also delivers to the Trustee a certified
check or checks, cash or cash equivalents or an irrevocable letter or letters of
credit issued by a commercial bank or banks in an amount necessary to consummate
the purchase of any Bonds or Contract Obligations. In the event any Bonds have
not been delivered to the Trustee on or before the close of business of the
Trustee on the day before the date of expiration of any letter or letters of
credit, the Trustee is hereby directed to draw on such letter or letters of
credit unless the Depositor has either extended or replaced such letter or
letters on or before such close of business.
(b) From time to time following the Initial Date of Deposit for a
Trust, the Depositor is hereby authorized, in its discretion, to assign, convey
to and deposit with the Trustee additional Bonds for such Trust, in bearer form,
duly endorsed in blank or accompanied by all necessary instruments of assignment
and transfer in proper form (or Contract Obligations relating to such Bonds), to
be held, managed and applied by the Trustee as herein provided. Such deposit of
additional Bonds shall be made, in each case, pursuant to an executed
Supplemental Trust Agreement. The Depositor, in each case, shall ensure that
each deposit of additional Bonds pursuant to this Section shall be, as nearly as
is practicable, in the identical ratio as the Percentage Ratio for such Bonds as
is specified in the Prospectus for the Trust and the Depositor shall ensure that
such Bonds are identical to those deposited on the Initial Date of Deposit. The
Depositor shall obtain an opinion of counsel satisfactory to the Depositor as to
the validity of each deposit of additional Bonds. Any brokerage fees related to
the purchase of Bonds deposited in the Trust Fund after the Initial Date of
Deposit shall be an expense of such Trust Fund. The Depositor shall deliver the
additional Bonds which were not delivered concurrently with the deposit of
additional Bonds and which were represented by Contract Obligations within 10
calendar days after such deposit of additional Bonds (the "ADDITIONAL BONDS
DELIVERY PERIOD"). If a contract to buy such Bonds between the Depositor and
seller is terminated by the seller thereof for any reason beyond the control of
the Depositor or if for any other reason such Bonds are not delivered to the
Trust Fund by the end of the Additional Bonds Delivery Period for such deposit,
the Trustee shall immediately draw on the Letter of Credit, if any, in its
entirety, apply the monies in accordance with Section 2.01(d), and the Depositor
shall forthwith take the remedial action specified in Section 3.12. If the
Depositor does not take the action specified in Section 3.12 within 10 calendar
days of the end of the Additional Bonds Delivery Period, the Trustee shall
forthwith take the action specified in Section 3.12. Instructions to purchase
additional Bonds shall be in writing and shall specify the name, CUSIP number,
if any, aggregate amount of the Bond to be purchased and price. The Trustee
shall have no responsibility or liability for any loss or depreciation resulting
from any purchase made pursuant to the Depositor's instructions and in the
absence thereof shall have no duty to purchase any Bonds. The Trustee shall have
no responsibility for maintaining the composition of the Trust portfolio.
(c) In connection with the deposits described in Section 2.01 (a) and
(b), the Depositor has, in the case of Section 2.01(a) deposits, and, prior to
the Trustee accepting a Section 2.01(b) deposit will, deposit a certified check,
cash, cash equivalents and/or Letter(s) of Credit in an amount sufficient to
purchase the Contract Obligations (the "PURCHASE AMOUNT") relating to Bonds
which are not actually delivered to the Trustee at the time of such deposit, the
terms of which unconditionally allow the Trustee to draw on the full amount of
the available Letter of Credit. The Trustee may deposit a certified check or
checks, cash or cash equivalents, or cash drawn on the irrevocable letter or
letters of credit deposited by the Depositor, to purchase Bonds or Contract
Obligations in a non-interest bearing account for the Trust Fund.
(d) In the event that the purchase of Bonds or Contract Obligations
pursuant to any contract shall not be consummated in accordance with said
contract, and the Depositor does not, on or before the third Business Day prior
to the next following Distribution Date, direct the Trustee to utilize monies
deposited for the purchase of Replacement Bonds or Replacement Contract
Obligations, the Trustee shall credit to the Principal Account referred to in
Section 3.02 the monies, or, if applicable, the monies drawn on an irrevocable
letter of credit, deposited by the Depositor for the purpose of such purchase.
Such funds shall be distributed pursuant to Section 3.04 to Unitholders of
record as of the Record Date next following the failure of consummation of such
purchase. The Depositor shall cause to be refunded to each Unitholder his pro
rata portion of the sales charge levied on the sale of Units to such Unitholder
attributable to such Bond or Contract Obligation. The Depositor shall also pay
to the Trustee, for distribution to the Unitholders, interest on such Bond or
Contract Obligation, computed at the coupon rate, to the date such Bond or
Contract Obligation is removed from the Trust Fund.
(e) The Trustee is hereby irrevocably authorized to effect registration
or transfer of the Bonds in fully registered form to the name of the Trustee or
to the name of its nominee.
(f) Any contrary authorization in subparagraph (b) notwithstanding,
deposits of additional Bonds made after the 90-day period immediately following
the Initial Date of Deposit (except for deposits made to replace failed Contract
Obligations is such deposits occur within 20 days from the date of a failure
occurring within such initial 90-day period) shall maintain exactly the
Percentage Ratio existing immediately prior to such deposit.
(g) In connection with and at the time of any deposit of additional
Bonds pursuant to Section 2.01(b), the Depositor shall exactly replicate Cash
(as defined below) received or receivable by the Trust Fund as of the date of
such deposit. For purposes of this paragraph, "Cash" means, as to the Principal
Account, cash or other property (other than Bonds) on hand in the Principal
Account or receivable and to be credited to the Principal Account as of the date
of the deposit (other than amounts to be distributed solely to persons other
than holders of Units created by the deposit) and, as to the Income Account,
cash or other property (other than Bonds) received by the Trust Fund as of the
date of the deposit or receivable by the Trust Fund in respect of matured
interest payments not received as of the date of the deposit, reduced by the
amount of any cash or other property received or receivable on any Bond
allocable (in accordance with the Trustee's calculation of the monthly
distributions from the Income Account pursuant to Section 3.04) to a
distribution made or to be made in respect of a Record Date occurring prior to
the deposit. Such replication will be made on the basis of a fraction, the
numerator of which is the number of Units created by the deposit and the
denominator of which is the number of Units which are outstanding immediately
prior to the deposit.
SECTION 2.02. ACCEPTANCE OF TRUST. The Trustee hereby accepts the
Trusts herein created, and the Trustee declares that it holds and will hold the
Trust Fund as Trustee, in trust upon the trusts herein set forth, for the use
and benefit of the present and future Unitholders and subject to the terms and
conditions of the Trust Agreement and this Agreement.
SECTION 2.03. ISSUANCE OF UNITS. (a) The Trustee hereby acknowledges
receipt of the deposit of the Bonds listed in the Schedules to the Trust
Agreement and referred to in Section 2.01 hereof and, simultaneously with the
receipt of said deposit, has recorded on its books the ownership, by the
Depositor or such other person or persons as may be indicated by the Depositor,
of the aggregate number of Units specified in the Trust Agreement. The Trustee
hereby agrees that on the date of any Supplemental Trust Agreement, it shall
acknowledge that the additional Bonds identified therein have been deposited
with it by recording on its books the ownership, by the Depositor or such other
person or persons as may be indicated by the Depositor, of the aggregate number
of Units to be issued in respect of such additional Bonds so deposited.
(b) Under the terms and conditions of the Trust Agreement and this
Agreement and at such times as are permitted by the Trustee, Units may also be
held in certificated form. Unitholders may elect to have their Units held in
certificated form by making a written request to the Trustee requesting such
Certificates; provided, that the Trustee is entitled to specify the minimum
denomination of any Certificate issued. The Trustee shall, at the request of the
holder of any Units held in uncertificated form, issue a new Certificate to
evidence such Units and at such time make an appropriate notation in the
registration books of the Trustee. The rights set forth in this Agreement of any
holder of Units held in certificated form shall be the same as those of any
other Unitholder. Certificates may be transferred as provided in Article VI.
SECTION 2.04. FORM OF CERTIFICATES. Each Certificate referred to in
Section 2.03 is, and each Certificate hereafter issued shall be, in
substantially the form herein above recited, numbered serially for
identification, in fully registered form, transferable on the books of the
Trustee as herein provided, executed manually by an authorized signature of the
Trustee and by a facsimile signature of an Authorized Officer of the Depositor
and dated the date of execution and delivery by the Trustee.
SECTION 2.05. PORTFOLIO INSURANCE FOR THE INSURED TRUSTS. The
provisions of this Section 2.05 shall apply only to a Trust (i) into which the
Depositor deposits Bonds which are not Pre-Insured Bonds and (ii) the Trust
Agreement for which specifies that the Bonds are to be covered by Insurance.
Concurrently with the delivery to the Trustee of the Bonds in each
Insured Trust listed in the Schedules to the Trust, the Insurer has delivered to
and deposited with the Trustee a unit investment trust insurance policy to
protect each Insured Trust and the Unitholders thereof against nonpayment of
principal and interest, when due, on any Bond or Bonds (except for Pre-Insured
Bonds) held by the Trustee in the portfolio of such Trust.
The Trustee shall take all action deemed necessary or advisable in
connection with the Insurance to continue the Insurance in full force and effect
and shall pay all premiums due thereon, including the initial premium, all in
such manner as in its sole discretion shall appear to result in the most
protection and least expense to such Trust.
The Insurance may not be cancelled by the Insurer. However, as of each
Record Date the Trustee shall make the deduction and payment of premiums
prescribed in Section 3.04(a)(6) of this Agreement in order to continue in force
the coverage thus provided. The Insurer's right to the payment of premiums from
funds held by the Trustee in accordance with the terms of the policy is absolute
(except when payment is withheld in good faith by the Trustee in the event of
dispute over the amount thereof), but no failure on the part of the Trustee to
make such payment of premium or installment thereof to the Insurer shall result
in a cancellation of the Insurance or otherwise affect the right of any
Unitholder under the policy to have any amounts of principal and interest paid
by the Insurer to the Trustee to be held as part of the Fund when the same are
not paid when due by the issuer of a Bond or Bonds held by the Trustee as part
of the Fund.
With each payment of premium or installment thereof, the Trustee shall
notify the Insurer of all Bonds (except for Pre-Insured Bonds) which during the
expiring premium period were redeemed from or sold by the Insured Trust.
At all times during the existence of the Insured Trusts the Insurance
policy shall provide for payment by the Insurer or its agent to the Trustee of
any amounts of principal and interest due, but not paid, by the issuer of a Bond
(except for Pre-Insured Bonds). The Trustee shall promptly notify the Insurer or
its agent of any nonpayment or threatened nonpayment of principal or interest
and the Insurer or its agent shall within 30 days after receipt of such notice
make payment to the Trustee of all amounts of principal and interest at this
time due, but not paid.
Payments of principal and interest assumed by the Insurer shall be made
as required by the related Bond or Bonds, except in the event of a sale of any
such Bond or Bonds by the Trustee under Section 3.06, 3.07 or 5.02, or a
termination of this Indenture and the Trusts created hereby under Section 8.01,
prior to the final maturity of such Bond or Bonds, in each of which events, upon
notice from the Trustee, the Insurer or its agent shall promptly make payment of
the accrued interest on such Bond or Bonds to the Trustee and shall be relieved
of further obligation to the Trustee thereon.
Upon the making of any payment referred to in the preceding paragraphs,
the Insurer shall succeed to the rights of the Trustee under the Bond or Bonds
involved to the extent of the payments made at that time, or any time subsequent
thereto, and shall continue to make all payments required by the terms of such
Bond or Bonds to the extent that funds are not provided therefor by the issuer
thereof. Upon the payment of any amounts by the Insurer or its agent, occasioned
by the nonpayment thereof by the issuer, the Trustee shall execute and deliver
to the Insurer or its agent any receipt, instrument or document required to
evidence the right of the Insurer in the Bond or Bonds involved to payment of
principal and/or interest thereon to the extent of the payments made by the
Insurer or its agent to the Trustee.
With respect to Pre-Insured Bonds in the Fund, the Trustee shall
promptly notify the insurer of the Pre-Insured Bonds of any nonpayment of
principal or interest on such Pre-Insured Bonds and if such insurer should fail
to make payment to the Trustee within 30 days after receipt of such notice, the
Trustee shall take all action against such insurer and/or the issuer deemed
necessary to collect all amounts of principal and interest at this time due, but
not collected.
The Trustee shall also take such action required under Section 5.02 of
this Agreement with respect to Permanent Insurance, as defined in Section 5.02.
ARTICLE III
ADMINISTRATION OF FUND
SECTION 3.01. CERTAIN MONEYS TO BE CREDITED TO INTEREST ACCOUNT. The
Trustee shall collect the interest on the Bonds for each Trust Fund as it
becomes payable (including all interest accrued but unpaid prior to the date of
deposit or acquisition of the Bonds hereunder and including that part of the
proceeds of the sale, liquidation, redemption or maturity of any Bonds which
represents accrued interest thereon ), and credit such interest to a separate
account for each Trust Fund to be known as the "Interest Account". The Trustee
is authorized to advance out of its own funds and then cause to be deposited in
and credited to the Interest Account of the Trust Fund any amount necessary to
permit the payment of any Interest Distribution out of the Interest Account
required to be made with respect to such Trust Fund by the Trustee on each
Distribution Date; provided, however, that the Trustee shall be entitled to be
reimbursed without interest out of such Trust Fund for any and all amounts
advanced by it pursuant to this Section 3.0l as interest on the Bonds is
collected.
SECTION 3.02. CERTAIN MONEYS TO BE CREDITED TO PRINCIPAL ACCOUNT. (a)
With respect to each Trust Fund all moneys (except moneys held by the Trustee
pursuant to subsection (b) hereof) other than amounts credited to the Interest
Account received by the Trustee in respect of the Bonds under this Agreement
shall be credited to a separate account for each Trust Fund to be known as the
"Principal Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Obligations or deposited to secure such purchases are hereby declared
to be held specially by the Trustee for such purchases and shall not be deemed
to be part of the Principal Account until (i) the Depositor fails to timely
purchase a Contract Obligation and has not given the Failed Contract Notice (as
defined in Section 3.12) at which time the moneys and/or letters of credit
attributable to the Contract Obligation not purchased by the Depositor shall be
credited to the Principal Account; or (ii) the Depositor has given the Trustee
the Failed Contract Notice at which time the moneys and/or letters of credit
attributable to failed contracts referred to in such Notice shall be credited to
the Principal Account; provided, however, that if the Depositor also notifies
the Trustee in the Failed Contract Notice (or by separate notice delivered
concurrently with or prior to the Failed Contract Notice) that it has purchased
or entered into a contract to purchase a New Bond (as defined in Section 3.12),
the Trustee shall not credit such moneys and/or letters of credit to the
Principal Account unless the New Bond shall also have failed or is not delivered
by the Depositor within two business days after the settlement date of such New
Bond, in which event the Trustee shall forthwith credit such moneys and/or
letters of credit to the Principal Account. The Trustee shall in any case
forthwith credit to the Principal Account, and/or cause the Depositor to deposit
in the Principal Account, the difference, if any, between the purchase price of
the failed Contract Obligation and the purchase price of the New Bond, together
with any sales charge and accrued interest applicable to such difference and
distribute such moneys to Unitholders pursuant to Section 3.04.
SECTION 3.03. ESTABLISHMENT OF RESERVE ACCOUNT. From time to time the
Trustee may withdraw from the Interest or Principal Accounts of each Trust Fund
such amounts as it, in its sole discretion, shall deem requisite to establish a
reserve for any applicable taxes or other governmental charges that may be
payable out of such Trust Fund or for indemnification or extraordinary expenses
of the Depositor or Trustee pursuant to Section 7.02, 8.01 or 8.05. Such amounts
so withdrawn shall be credited to a separate account for such Trust Fund which
shall be known as the "Reserve Account." The Trustee shall not be required to
distribute to the Unitholders any of the amounts in the Reserve Account;
provided, however, that if it, in its sole discretion, determines that such
amounts are no longer necessary, then it shall promptly deposit such amounts in
the account from which withdrawn, or if such Trust Fund has been terminated or
shall be in the process of termination, the Trustee, upon such determination,
shall distribute to each Unitholder of such Trust Fund such Unitholder's
interest in the Reserve Account in accordance with Section 9.01.
SECTION 3.04. CERTAIN DEDUCTIONS AND DISTRIBUTIONS. (a) On or before
each Interest Distribution Date as of the close of business on the preceding
Record Date the Trustee shall separately with respect to each Trust Fund to
which such Interest Distribution Date relates:
(1) deduct from the Interest Account or, to the extent funds
are not available in such Account, from the Principal Account and pay
to itself individually (i) the amounts that it is at the time entitled
to receive pursuant to Section 8.05 on account of its services
theretofore performed and expenses theretofore incurred and (ii) the
amounts that it is at the time entitled to receive hereunder in
reimbursement of amounts advanced by it;
(2) deduct from the Interest Account or, to the extent funds
are not available in such Account, from the Principal Account the
amounts that the Evaluator is at the time entitled to receive pursuant
to Section 4.03 on account of its services theretofore performed and
expenses theretofore incurred;
(3) deduct from the Interest Account or, to the extent funds
are not available in such Account, from the Principal Account an amount
equal to unpaid fees and expenses, if any, of bond counsel pursuant to
Section 3.08 as certified by the Depositor;
(4) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account and pay
to the Depositor the amounts that the Depositor is at the time entitled
to receive pursuant to Section 3.13 on account of its services
theretofore performed and expenses theretofore incurred;
(5) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account, and
reimburse itself for any other fees and expenses arising from time to
time out of the Trust operations that the Trustee has paid;
(6) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account and pay
to the Insurer the amount of any premium to which it is at the time
entitled to receive, pursuant to Section 2.05; and
(7) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account, and pay
to the Depositor the amount that it is entitled to receive pursuant to
Section 3.14.
(b) The Trustee, as of the "First Settlement Date", as defined in the
Prospectus, shall advance from its own funds and shall pay to the Unitholders of
the respective Trusts then of record the amount of interest received or accrued
to such date on the Bonds deposited in the respective Trusts, net of a
proportionate amount of Trust expenses attributable to the period between the
date of the Trust Agreement and the First Settlement Date. The Trustee shall for
each Trust Fund as of the close of business on the applicable Record Date
compute the amount of the Interest Distribution per Unit for the next Interest
Distribution Date (each such amount being herein called the "INTEREST
DISTRIBUTION") as follows: Such amount shall be equal to the estimated amount of
interest accrued on the Bonds from and including the immediately preceding
Record Date (or First Settlement Date, as appropriate) through but not including
the Record Date on which the computation is made, less (i) the estimated annual
costs and expenses allocable (on a per diem basis) to such period, (ii) interest
attributable to such period paid or payable in connection with redemption of
Units and (iii) amounts previously advanced by the Trustee pursuant to this
Section which are now deemed to be uncollectible, divided by the number of Units
outstanding on the Record Date on which the computation is being made. On or
shortly after each Interest Distribution Date, the Trustee shall distribute with
respect to each Unitholder of the Trust Fund of record at the close of business
on the preceding Record Date an amount substantially equal to the Interest
Distribution computed as of such Record Date.
To the extent that moneys in the Principal Account have not been
previously used to pay for the redemption of Units tendered to a Trust Fund, on
the Principal Distribution Dates each Unitholder shall receive such holder's pro
rata share of the cash balance of the Principal Account of the Trust Fund
computed as of the close of business on the preceding Record Dates for such
Principal Distribution Dates by (i) deducting from such cash balance the total
of (X) cash required to cover contracts to purchase Bonds, (Y) cash required for
the redemption of unredeemed tendered Units and (Z) the sum of the amounts to be
deducted from the Principal Account as of each such Record Date pursuant to the
foregoing provisions of Section 3.04(a) and (ii) dividing the amount so obtained
by the number of Units outstanding on the Record Date immediately preceding such
Principal Distribution Date; provided, however, that if the balance of the
Principal Account on any such Record Date is less than that amount stated in the
Prospectus for each respective Trust Fund under the caption "Distribution Dates"
appearing in the "Summary of Essential Financial Information," no distribution
from the Principal Account need be made.
In making the computation of any Unitholder's interest in the balance
of the Interest and Principal Accounts, fractions of less than one cent per Unit
shall be omitted. In addition, the Trustee in its discretion may on any
Distribution Date determine that the amount to be distributed to Unitholders
should be more or less than the amount of the applicable Interest or Principal
Distribution per Unit because of any unusual or extraordinary increase or
decrease in the expenses incurred or expected to be incurred by such Trust Fund.
When directed by the Depositor, the Trustee shall invest funds held in the
Income or Principal Accounts, pending distribution, in money market mutual funds
or U.S. Treasury obligations which mature on or before the next applicable
Distribution Date. Any obligations so acquired must be held until they mature
and proceeds therefrom may not be reinvested.
(c) If the Depositor (i) fails to replace any failed Special Bond (as
defined in Section 3.12) or (ii) is unable or fails to enter into any contract
for the purchase of any New Bond in accordance with Section 3.12, the Trustee
shall distribute to all Unitholders the principal, accrued interest and, to the
extent supplied by the Depositor, the sales charge attributable to such Special
Bonds not more than 30 days after the expiration of the Purchase Period (as
defined in Section 3.12). If any contract for a New Bond in replacement of a
Special Bond shall fail, the Trustee shall distribute the principal, accrued
interest and sales charge attributable to the Special Bond to the Unitholders
not more than 30 days after the date on which the contract in respect of such
New Bond failed. If at the end of the Purchase Period less than all moneys
attributable to a failed Special Bond have been applied or allocated by the
Trustee pursuant to a contract to purchase New Bonds, the Trustee shall
distribute the remaining moneys (i) to Unitholders not more than 30 days after
the end of the Purchase Period to the extent the failed Special Bond has not
been fully replaced by New Bonds or (ii) to the Depositor to the extent moneys
remain after the purchase of the New Bonds, if any, and the distribution
referred to in clause (i).
(d) Except as provided below, all distributions shall be made by first
class mail to each Unitholder of record at the close of business on the
preceding applicable Record Date at the address of such holder appearing on the
registration books of the Trustee provided, however, that the Trustee shall if
so directed with respect to distributions from the Interest and/or Principal
Account either orally or in writing at the time of purchase of Units or
thereafter in writing signed by the Unitholder and timely received, make such
distributions to a reinvestment program. A Unitholder's written notice must be
received by the Trustee, as Program Agent for the reinvestment program, at least
ten days prior to the Record Date for the next Interest Distribution in order to
be in effect for such Interest Distribution and by the last Record Date for
distribution of principal in any year in order to be effective for the following
calendar year. All such notices shall remain in effect until a subsequent notice
is received by the Program Agent. Upon receipt of any such distribution the
Program Agent shall purchase shares (or fractions thereof) in the applicable
reinvestment fund as directed by the Unitholder. The Program Agent shall not be
liable to any Unitholder for any action taken with respect to its duties and
responsibilities as Program Agent; PROVIDED, HOWEVER, that this provision shall
not protect the Program Agent against liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
(e) Except as provided by the preceding paragraph, Unitholders of
record on the registration books of the Trustee at the close of business on the
Record Date prior to each Distribution Date, shall be entitled to the
distribution in respect of such Distribution Date, and, except as provided in
Article VIII, no liability shall attach to the Trustee by reason of payment to
or on the order of any such Unitholder of record. Nothing herein shall be
construed to prevent the payment of distributions from the Interest and
Principal Accounts to any such Unitholder by means of one check, draft or other
proper instrument.
SECTION 3.05. STATEMENTS AND REPORTS. With each distribution from the
Interest or Principal Accounts of each Trust Fund the Trustee shall set forth,
either in the instrument by means of which payment of such distribution is made
or in an accompanying statement, the amount being distributed from each such
account expressed as a dollar amount per Unit of such Trust Fund.; Within a
reasonable period of time after the last business day of each calendar year, the
Trustee shall furnish to each person who at any time during such calendar year
was a Unitholder of any individual Trust Fund a statement for such Trust Fund
setting forth with respect to such calendar year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds and,
if issuers of Bonds are located in more than one jurisdiction,
the percentage of such amount by states and territories in
which the issuers of the Bonds are located;
(2) the amounts paid for purchases of New Bonds
pursuant to Section 3.12 and for redemption's pursuant to
Section 5.02;
(3) the deductions for applicable taxes and fees and
expenses of the Trustee, the Evaluator, the Depositor and bond
counsel, if any, all as provided under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to
Section 3.03, if any;
(5) the balance remaining after such distributions,
deductions and reservations expressed both as a total dollar
amount and as a dollar amount per Unit outstanding on the last
business day of such calendar year;
(B) as to the Principal Account:
(1) the dates of sale, maturity, liquidation or
redemption of any of the Bonds and the net proceeds received
therefrom (excluding any portion thereof credited to the
Interest Account);
(2) the amounts paid for purchases of New Bonds
pursuant to Section 3.13 and for redemption's pursuant to
Section 5.02;
(3) the deductions for payment of applicable taxes
and fees and expenses (including insurance premiums) of the
Trustee, the Evaluator, the Depositor and bond counsel, if
any, all as provided under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to
Section 3.03, if any;
(5) the balance remaining after such distributions,
deductions and reservations, expressed both as a total dollar
amount and as a dollar amount per Unit outstanding on the last
business day of such calendar year; and
(C) the following information:
(1) a list of the Bonds as of the last business day
of such calendar year;
(2) the number of Units outstanding on the last
business day of such calendar year;
(3) the Unit Value based on the Trust Fund
Evaluations made on the last day of December (or the last
business day prior thereto) of such calendar year; and
(4) the amounts actually distributed to Unitholders
during such calendar year from the Interest and Principal
Accounts, separately stated, expressed both as total dollar
amounts and as dollar amounts per Unit outstanding on the
Record Dates for such distributions.
SECTION 3.06. EXTRAORDINARY SALE OF BONDS. The Depositor by written
notice may direct the Trustee to sell Bonds at such price and time and in such
manner as shall be deemed appropriate by the Depositor if the Depositor shall
have determined that any one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the payment
of principal or interest when due and payable;
(b) that any action or proceeding has been instituted at law
or in equity seeking to restrain or enjoin the payment of principal or
interest on any such Bonds, the illegality, irregularity or omission of
any necessary acts or proceedings preliminary to the issuance of such
Bonds, or seeking to restrain or enjoin the performance by the officers
or employees of any such issuing body of an improper or illegal act in
connection with the administration of funds necessary for debt service
on such Bonds or otherwise; or that there exists any other legal
question or impediment affecting such Bonds or the payment of principal
or interest on the same;
(c) that there has occurred any breach of covenant or warranty
in any resolution, trust indenture or other document which might
adversely affect either immediately or contingently the payment of
principal or interest on such Bonds, or their general credit standing,
or otherwise impair the sound investment character of such Bonds;
(d) that there has been a default in the payment of principal
of, premium, if any, or interest on any other outstanding obligations
of the issuer or the guarantor of such Bonds; or
(e) that the price of any such Bond has declined to such an
extent, or such other market or credit factors exist (including the
advance refunding of any such Bonds), that in the opinion of the
Depositor the retention of such Bonds would be detrimental to the
interest of the Unitholders;
(f) that such Bonds are the subject to an advanced refunding
(for the purposes of this Section 3.06(g), an "advanced refunding"
shall mean when refunding securities are issued and the proceeds
thereof are deposited in an irrevocable trust to retire the Bonds on or
before their redemption date);or
(g) that as of any Record Date any of the Bonds are scheduled
to be redeemed and paid prior to the next succeeding Distribution Date.
If the Trust is an Insured Trust, the Depositor shall also consider
whether any insurance that may be applicable to the Bonds cannot be relied upon
to provide the principal and interest protections intended to be afforded by
such insurance.
Upon receipt of such direction from the Depositor, upon which the
Trustee shall rely, the Trustee shall proceed to sell or liquidate the specified
Bonds in accordance with such direction; PROVIDED, HOWEVER, that the Trustee
shall not sell or liquidate any Bonds upon receipt of a direction from the
Depositor that it has determined that the conditions in subdivision (h) above
exist, unless the Trustee shall receive on account of such sale or liquidation
the full principal amount of such Bonds, plus the premium, if any, and the
interest accrued and to accrue thereon to the date of the redemption of such
Bonds. The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any sale made pursuant to any such
direction or by reason of the failure of the Depositor to give any such
direction, and in the absence of such direction the Trustee shall have no duty
to sell any Bonds under this Section 3.06 except to the extent otherwise
required by Section 3.09. The Depositor shall not be liable for errors of
judgment in directing or failing to direct the Trustee pursuant to this Section
3.06. This provision, however, shall not protect the Trustee or Depositor
against any liability for which they would otherwise be subject by reason of
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.
SECTION 3.07. REFUNDING OBLIGATIONS. In the event that an offer by the
issuer of any of the Bonds shall be made to issue new obligations in exchange or
substitution for any issue of Bonds pursuant to a plan for the refunding or
refinancing of such Bonds, the Depositor shall instruct the Trustee in writing
to reject such offer and either hold or sell such Bonds, except that if (1) the
issuer is in default with respect to payment of principal or interest or both on
such Bonds or (2) in the opinion of the Depositor given in writing to the
Trustee, the issuer will probably default with respect to payment of principal
or interest or both on such Bonds in the reasonably foreseeable future, the
Depositor shall instruct the Trustee in writing to accept or reject such offer
or take any other action with respect thereto as the Depositor may deem proper.
Nevertheless, if such an obligation is received by a Trust, it shall either be
sold by the Trustee or held in such Trust pursuant to the direction of the
Depositor. Any obligation so received in exchange shall be deposited hereunder
and shall be subject to the terms and conditions of this Agreement to the same
extent as the Bonds originally deposited hereunder. Within five days after such
deposit, notice of such exchange and deposit shall be given by the Trustee to
each Unitholder of such Trust, including an identification of the Bonds
eliminated and the obligations substituted therefor.
SECTION 3.08. COUNSEL. The Depositor may employ from time to time
counsel to act on behalf of any Trust Fund for any legal services in connection
with the Bonds, and any legal matters relating to the possible disposition of
any Bonds pursuant to any provisions hereof. The fees and expenses of such
counsel shall be paid by the Trustee as provided in Section 3.04(a)(3) hereof.
SECTION 3.09. ACTION BY TRUSTEE REGARDING BONDS. (a) In the event that
the Trustee shall have been notified at any time of any action to be taken or
proposed to be taken by holders of the Bonds (including but not limited to the
making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to any amendment or supplement to any
indenture, agreement or other instrument under or pursuant to which the Bonds
have been issued) the Trustee shall promptly notify the Depositor and shall
thereupon take such action or refrain from taking any action as the Depositor
shall in writing direct; provided, however, that if the Depositor shall not
within five business days of the giving of such notice to the Depositor direct
the Trustee to take or refrain from taking any action, the Trustee shall take
such action as it, in its sole discretion, shall deem advisable. The Bonds may,
in the discretion of the Trustee, be interchanged from time to time into either
bearer or registered form without any notification thereof to the Depositor or
the Unitholders and may be registered in the name of the Trustee or the name of
any nominee designated by it.
(b) If at any time the principal of or interest on any of the Bonds
shall not have been duly paid, either pursuant to the Insurance or otherwise,
the Trustee shall notify the Depositor thereof. If within thirty days after such
notification the Depositor has not given any instruction in writing to sell or
to hold or has not taken any action in connection with such Bonds, the Trustee
may, in its discretion, sell such Bonds forthwith, and the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
such sale.
(c) Except as provided in Article VII and Article VIII, neither the
Depositor nor the Trustee shall be liable to any person for any action or
failure to take action with respect to this Section 3.09.
SECTION 3.10. TRUSTEE NOT REQUIRED TO ADJUST ACCOUNTS. Nothing in this
Agreement, or otherwise, shall be construed to require the Trustee to make any
adjustments between the Interest Account and the Principal Account by reason of
any premium or discount in respect of any of the Bonds.
SECTION 3.11. NOTICE OF CHANGE IN PRINCIPAL ACCOUNT. The Trustee shall
give prompt written notice to the Depositor and the Evaluator (if separate from
the Depositor) of all amounts credited to or withdrawn from the Principal
Account of any Trust Fund pursuant to any of the provisions of this Article III,
and the balance in such Account after giving effect to the credit or withdrawal.
SECTION 3.12. LIMITED REPLACEMENT OF SPECIAL BONDS. If any contract in
respect of Contract Obligations other than a contract to purchase a New Bond (as
defined below), including those purchased on a "when, as and if issued" basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositor or the Trustee (such failed Contract Obligations being herein called
the "Special Bonds"), the Depositor, after it is notified in writing that the
Special Bond will not be delivered by the seller thereof to the Depositor, shall
notify the Trustee (such notice being herein called the "Failed Contract
Notice") of its inability to deliver the failed Special Bond to the Trustee.
Within a maximum of 20 days after giving such Failed Contract Notice (such 20
day period being herein called the "Purchase Period"), the Depositor may, if it
deems such action to be in the best interest of the Trust, purchase, or enter
into a contract to purchase, an obligation to be held as a Bond hereunder
(herein called the "New Bond") as part of the Trust Fund in replacement of the
failed Special Bond, subject to the satisfaction of all of the following
conditions in the case of each purchase or contract to purchase:
(a) The New Bonds (i) shall have a fixed maturity date
(whether or not entitled to the benefits of any sinking, redemption,
purchase or similar fund) not less than the earlier of the maturity of
the Special Bond or ten years after the date of purchase, (ii) must be
purchased at a price that results in a yield to maturity and a current
return at least equal to that of the Special Bonds as of the Initial
Date of Deposit, (iii) shall be payable as to principal and interest in
United States currency, (iv) shall not be "when, as if issued" bonds
and (v) must be eligible to be insured (and when acquired be insured)
under the Insurance, if applicable.
(b) Each New Bond shall be rated at least "B-" or better by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.,
Moody's Investors Service, Inc. or Fitch Investors Service, L.P.
(c) The purchase price of the New Bonds shall not exceed the
amount of funds reserved for the purchase of the Special Bonds.
(d) The Depositor shall furnish a notice to the Trustee (which
may be part of the Failed Contract Notice) in respect of the New Bond
purchased or to be purchased that shall (i) identify the New Bonds,
(ii) state that the contract to purchase, if any, entered into by the
Depositor is satisfactory in form and substance and (iii) state that
the foregoing conditions of clauses (a) and (b) have been satisfied
with respect to the New Bonds.
Upon satisfaction of the foregoing conditions with respect to any New
Bond, the Trustee shall pay the purchase price for the New Bond from the amount
of funds reserved for the purchase of the Special Bonds or, if the Trustee has
credited any moneys and/or letters of credit attributable to the failed Special
Bond to the Principal Account, the Trustee shall pay the purchase price of the
New Bond upon directions from the Depositor from the moneys and/or letters of
credit so credited to the Principal Account. If the Trustee has credited moneys
of the Depositor to the Principal Account, the Trustee shall forthwith return to
the Depositor the portion of such moneys that is not properly distributable to
Unitholders pursuant to Section 3.04.
Whenever a New Bond is acquired by the Depositor pursuant to the
provisions of this Section 3.12, the Trustee shall, within five days thereafter,
mail to all Unitholders notices of such acquisition, including an identification
of the failed Special Bonds and the New Bonds acquired. The purchase price of
the New Bonds shall be paid out of the funds reserved for the purchase of the
failed Special Bonds. Except as provided in Article VIII, the Trustee shall not
be liable or responsible in any way for depreciation or loss incurred by reason
of any purchase made pursuant to any such directions and in the absence of such
directions the Trustee shall have no duty to purchase any New Bonds under this
Agreement. The Depositor shall not be liable for any failure to instruct the
Trustee to purchase any New Bonds or for errors of judgment in respect of this
Section 3.12; provided, however, that this provision shall not protect the
Depositor against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
SECTION 3.13. COMPENSATION OF DEPOSITOR FOR SUPERVISORY SERVICES. As
compensation for providing supervisory portfolio services under this Agreement,
the Depositor shall receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee in the amount
specified as compensation for the Depositor in the Prospectus for each
respective Trust Fund under the caption "Sponsor's Annual Fee per Unit" in the
"Summary of Essential Financial Information", but in no event shall such
compensation when combined with all compensation received from other series of
the Fund or other unit investment trusts sponsored by the Depositor or its
affiliates for providing such supervisory services in any calendar year exceed
the aggregate cost to the Depositor for providing such services. The rate of
such compensation may be increased by the Depositor from time to time, without
the consent or approval of any Unitholder or the Trustee, by amounts not
exceeding the proportionate increase, during the period from the date of such
Trust Agreement to the date of any such increase, in consumer prices as last
published prior to each such date under the classification "All Services Less
Rent of Shelter" in the Consumer Price Index For All Urban Consumers (CPI-U)
U.S. City Average, not seasonally adjusted, base 1982 - 84 = 100, published by
the United States Department of Labor. In the event that such classification
ceases to incorporate a significant number of items, or if a substantial change
is made in the method of establishing such classification, then the
classification shall be adjusted in a fair and reasonable manner to the figure
that would have resulted had no substantial change occurred in the manner of
computing such classification. In the event that such classification (or a
successor or substitute index) is not available, such governmental or other
service or publication as shall evaluate the information in substantially the
same manner as the aforesaid classification shall be used in lieu thereof. Such
compensation shall be charged by the Trustee, upon receipt of invoice therefor
from the Depositor, against the Interest and Principal Accounts on or before the
Distribution Date on which such period terminates. If the cash balance in the
Interest and Principal Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.13, the Trustee shall have the power to sell
(i) Bonds from the current list of Bonds designated to be sold pursuant to
Section 5.02 hereof, or (ii) if no such Bonds have been so designated, such
Bonds as the Trustee may see fit to sell in its own discretion, and to apply the
proceeds of any such sale in payment of the amounts payable pursuant to this
Section 3.13. Any moneys payable to the Depositor pursuant to this Section 3.13
shall be secured by a prior lien on the Trust Fund except that such lien shall
be junior and subordinate to any lien in favor of the Trustee under the
provisions of Section 8.08 and of the Evaluator under the provisions of Section
4.03.
SECTION 3.14. BOOKKEEPING AND ADMINISTRATIVE EXPENSES. If so provided
in the Prospectus, as compensation for providing bookkeeping and other
administrative services of a character described in Section 26(a)(2)(C) of the
Investment Company Act of 1940 to the extent such services are in addition to,
and do not duplicate, the services to be provided hereunder by the Trustee or
the Depositor for providing supervisory services, the Depositor shall receive
against a statement or statements therefor submitted to the Trustee monthly or
annually an aggregate annual fee in an amount which shall not exceed that amount
set forth in the Prospectus times the number of Units outstanding as of January
1 of such year except for a year or years in which an initial offering period
occurs, in which case the fee for a month is based on the number of Units
outstanding at the end of such month (such annual fee to be pro rated for any
calendar year in which the Depositor provides service during less than the whole
of such year), but in no event shall such compensation received from other unit
investment trusts for which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in any calendar year
exceed the aggregate cost to the depositor for providing such services to such
unit investment trusts. Such compensation may, from time to time, be adjusted
provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the date hereof,
in consumer prices for services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent of Shelter" or
similar index as described under Section 3.13. The consent or concurrence of any
Unitholder hereunder shall not be required for any such adjustment or increase.
Such compensation shall be paid by the Trustee, upon receipt of invoice therefor
from the Depositor, upon which, as to the cost incurred by the Depositor of
providing services hereunder the Trustee may rely, and shall be charged against
the Interest and Principal Accounts on or before the Distribution Date following
the Record Date on which such period terminates. The Trustee shall have no
liability to any Unitholder or other person for any payment made in good faith
pursuant to this Section.
If the cash balance in the Interest and Principal Accounts shall be
insufficient to provide for amounts payable pursuant to this Section 3.14, the
Trustee shall have the power to sell (i) Bonds from the current list of Bonds
designated to be sold pursuant to Section 5.02 hereof, or (ii) if no such Bonds
have been designated, such Bonds as the Trustee may see fit to sell in its own
discretion, and to apply the proceeds of any such sale in payment of the amounts
payable pursuant to this Section 3.14.
All moneys payable to the Depositor pursuant to this Section 3.14 shall
be secured by a prior lien on the Trust except that no such lien shall be prior
to any lien in favor of the Trustee under the provisions of Section 8.08 and of
the Evaluator under the provisions of Section 4.03.
ARTICLE IV
EVALUATION OF BONDS;
THE EVALUATOR
SECTION 4.01. EVALUATION OF BONDS. The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor (if separate
from the Evaluator) upon request the value of each issue of Bonds (treating
separate maturities of Bonds as separate issues) as of the Evaluation Time on
the bid side of the market on the days on which the Trust Fund Evaluation is
required by Section 5.01, and, in addition, as of the Evaluation Time on the bid
side of the market if the secondary market in the Units is maintained based on
bid side values or on both the bid and offering sides, if the Depositor shall so
inform the Evaluator from time to time, such additional evaluation being on each
business day commencing with the date of the Trust Agreement. Such evaluations
shall be made (i) on the basis of current bid or offering prices for the Bonds,
(ii) if bid or offering prices are not available for any Bonds, on the basis of
current bid or offering prices for comparable bonds, (iii) by determining the
value of the Bonds on the bid or offering side of the market by appraisal or
(iv) by any combination thereof. The Evaluator shall also determine and furnish
to the Trustee and the Depositor the aggregate of (a) the value of all Bonds on
the basis of such evaluation and (b) on the basis of the information furnished
to the Evaluator by the Trustee pursuant to Section 3.11, the amount of cash
then held in the Principal Account which was received by the Trustee after the
Record Date preceding such determination less any amounts held in the Principal
Account for distribution to Unitholders on a subsequent Distribution Date when a
Record Date occurs two business days or less after such determination. For the
purposes of the foregoing, the Evaluator may obtain current bid or offering
prices for the Bonds from investment dealers or brokers (including the
Depositor) that customarily deal in similar bonds or from any other reporting
service or sources of information which the Evaluator deems appropriate.
The Evaluator shall attribute value to Insurance only in circumstances
where the credit quality of an underlying Bond has significantly deteriorated.
The value to be added to such Bonds shall be an amount equal to the excess, if
any, by which the net proceeds realizable from the sale of the Bonds on an
insured basis exceeds the sum of (i) the net proceeds realizable from the sale
of the Bonds on an uninsured basis plus (ii) the premium attributable to the
Permanent Insurance.
SECTION 4.02. CERTAIN INFORMATION TO BE MADE AVAILABLE. For the purpose
of permitting Unitholders to satisfy any reporting requirements of applicable
federal or state tax law, the Evaluator shall make available to the Trustee and
the Trustee shall transmit to any Unitholder upon request any determinations
made by the Evaluator pursuant to Section 4.01 which concern the Trust Fund in
which such Unitholder holds Units.
SECTION 4.03. COMPENSATION OF THE EVALUATOR. As compensation for its
services hereunder, the Evaluator shall receive against a statement therefor
submitted to the Trustee on or before each Distribution Date the amount
specified as compensation for the Evaluator in the Prospectus for each
respective Trust Fund under the caption "Evaluator's Annual Fee per Unit" in the
"Summary of Essential Financial Information." The rate of such compensation may
be increased by the Evaluator from time to time, without the consent or approval
of any Unitholder, the Trustee or the Depositor, by amounts not exceeding the
proportionate increase, during the period from the date of such Trust Agreement
to the date of any such increase, in consumer prices as last published prior to
each such date under the classification "All Services Less Rent of Shelter" in
the Consumer Price Index For All Urban Consumers (CPI-U) U.S. City Average, not
seasonally adjusted, base 1982 - 84 = 100, published by the United States
Department of Labor. In the event that such classification ceases to incorporate
a significant number of items, or if a substantial change is made in the method
of establishing such classification, then the classification shall be adjusted
in a fair and reasonable manner to the figure that would have resulted had no
substantial change occurred in the manner of computing such classification. In
the event that such classification (or a successor or substitute index) is not
available, such governmental or other service or publication as shall evaluate
the information in substantially the same manner as the aforesaid classification
shall be used in lieu thereof. Such compensation shall be charged by the
Trustee, upon receipt of invoice therefor from the Evaluator, against the
Interest and Principal Accounts on or before the Distribution Date. If the cash
balances in the Interest and Principal Accounts shall be insufficient to provide
for amounts payable pursuant to this Section 4.03, the Trustee shall have the
power to sell (i) Bonds designated to be sold pursuant to Section 5.02 hereof or
(ii) if no such Bonds have been so designated, such Securities as the Trustee
may see fit to sell in its own discretion, and to apply the proceeds of any such
sale in payment of the amounts payable pursuant to this Section 4.03. Any moneys
payable to the Evaluator pursuant to this Section 4.03 shall be secured by a
prior lien on the Trust Fund except that such lien shall be junior and
subordinate to any lien in favor of the Trustee under the provisions of Section
8.08.
SECTION 4.04. LIABILITY OF THE EVALUATOR. The Trustee, the Depositor
(if separate from the Evaluator) and the Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The determinations made by the Evaluator hereunder shall be made in
good faith upon the basis of the best information available to it. The Evaluator
shall be under no liability to the Trustee, the Depositor or the Unitholders for
errors in judgment; provided, however, that this provision shall not protect the
Evaluator against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
SECTION 4.05. RESIGNATION, REMOVAL AND OTHER MATTERS RELATING TO THE
EVALUATOR. (a) The Evaluator may resign and be discharged hereunder, by
executing an instrument in writing resigning as the Evaluator and filing the
same with the Depositor (if separate from the Evaluator) and the Trustee not
less than 60 days before the date specified in such instrument when, subject to
Section 4.05(c), such resignation is to take effect. Upon receiving such notice
of resignation, the Depositor (if separate from the Evaluator) and the Trustee
shall use their best efforts to appoint a successor Evaluator having
qualifications and at a rate of compensation satisfactory to the Depositor (if
separate from the Evaluator) and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor (if separate from the Evaluator)
and the Trustee, in duplicate, one copy of which shall be delivered to the
resigning Evaluator and one copy to the successor Evaluator. The Depositor may
remove the Evaluator at any time upon thirty days' written notice and appoint a
successor Evaluator having qualifications and at a rate of compensation
satisfactory to the Depositor and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor, in duplicate, one copy of which
shall be delivered to the Evaluator so removed and one copy to the successor
Evaluator. Notice of such resignation or removal and appointment of a successor
Evaluator shall be mailed by the Trustee to each Unitholder.
(b) If the Evaluator resigns and no successor Evaluator shall have been
appointed and have accepted appointment within 30 days after receipt of the
notice of resignation by the Depositor (if appropriate) and the Trustee, the
Evaluator may forthwith apply to a court of competent jurisdiction for the
appointment of a successor Evaluator. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor Evaluator.
(c) Any successor Evaluator appointed hereunder shall execute,
acknowledge and deliver to the Depositor and the Trustee an instrument accepting
such appointment hereunder, and such successor Evaluator without any further
act, deed or conveyance shall become vested with all the rights, powers, duties
and obligations of its predecessor hereunder with like effect as if originally
named the Evaluator herein and shall be bound by all the terms and conditions of
this Agreement. Any resignation or removal of the Evaluator and appointment of a
successor Evaluator pursuant to this Section 4.05 shall become effective upon
such acceptance of appointment.
(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Evaluator hereunder shall be a party, shall be the
successor Evaluator under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which the Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
ARTICLE V
TRUST FUND EVALUATION;
REDEMPTION OF UNITS
SECTION 5.01. TRUST FUND EVALUATION. As of the Evaluation Time next
following any tender by a Unitholder for redemption and on any other business
day desired by it or as may be required hereunder, the Trustee shall as to each
Trust Fund:
Add
(1) cash on hand in the Trust Fund, other than cash held
especially for the purchase of Contract Obligations,
(2) the aggregate value of each issue of the Bonds in the
Trust Fund (including Contract Obligations) on the bid side of the
market as determined by the Evaluator pursuant to Section 4.01,
(3) accrued but unpaid interest on the Bonds in the Trust Fund
at the close of business on the date of such computation, and
(4) amounts representing organizational expenses paid less
amounts representing accrued organizational expenses of a Trust Fund;
Deduct
(1) amounts representing any applicable taxes, governmental
charges or other charges pursuant to Section 3.03 payable out of the
Trust Fund and for which no deductions shall have previously been made
for the purpose of addition to the Reserve Account,
(2) amounts representing estimated accrued fees and expenses
of the Trust Fund including but not limited to unpaid fees and expenses
of the Trustee (including legal and auditing expenses), the Evaluator,
the Depositor, the Insurer, if any, and bond counsel, and
(3) cash allocated for distribution to Unitholders of the
Trust Fund of record as of the business day prior to the evaluation
then being made.
The resulting figure is herein called a "TRUST FUND EVALUATION."
Until the Depositor has informed the Trustee that there will be no
further deposits of additional Bonds pursuant to Section 2.01(b), the Depositor
shall provide the Trustee with written estimates of (i) total organizational
expenses to be borne by the Trust pursuant to Section 10.02 and (ii) the total
number of Units to be issued in connection with the initial deposit and all
anticipated deposits of additional Bonds. For purposes of calculating the Trust
Fund Evaluation and Unit Value, the Trustee shall treat all such anticipated
expenses as having been paid and all liabilities therefor as having been
incurred, and all Units as having been issued, in each case on the date of the
Trust Agreement, and, in connection with each such calculation, shall take into
account a pro rata portion of such expense and liability based on the actual
number of Units issued as of the date of such calculation. In the event the
Trustee is informed by the Depositor of a revision in its estimate of total
expenses or total Units and upon the conclusion of the deposit of additional
Bonds, the Trustee shall base calculations made thereafter on such revised
estimates or actual expenses, respectively, but such adjustment shall not affect
calculations made prior thereto and no adjustment shall be made in respect
thereof.
SECTION 5.02. REDEMPTION OF UNITS; SALE OF BONDS. Any Unitholder may
cause any of his Units to be redeemed by the Trustee, subject to the terms of
this Section 5.02, by making a written request to the Trustee at its unit
investment trust office, and, in the case of Units evidenced by a Certificate,
by tendering such Certificate to the Trustee at such office, properly endorsed
or accompanied by a written instrument or instruments of transfer in form
satisfactory to the Trustee. Unitholders must sign such written request, and
such Certificate or transfer instrument, exactly as their name appears on the
records of the Trustee and on any Certificate representing the Units to be
redeemed. Such signature must be guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature guarantee
program in addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. Such redemption shall be made by the Trustee on the third business day
following the day on which request for redemption is received by the Trustee
(such day being herein called the "REDEMPTION DATE"). Subject to payment by such
Unitholder of any tax or other governmental charges which may be imposed
thereon, such redemption is to be made by payment on the Redemption Date of cash
equal to the Unit Value (determined on the basis of the Trust Fund Evaluation
made in accordance with Section 5.0l) multiplied by the number of Units being
redeemed (herein called the "REDEMPTION PRICE"). Units received for redemption
by the Trustee on any day after the evaluation time set forth in the related
Prospectus will be held by the Trustee until the next day on which the New York
Stock Exchange is open for trading and will be deemed to have been tendered on
such day for redemption at the Redemption Price computed on that day. The
portion of the Redemption Price which represents interest shall be withdrawn
from the Interest Account of the affected Trust Fund to the extent available.
The balance paid on any redemption including accrued interest, if any, shall be
withdrawn from the Principal Account of the affected Trust to the extent that
funds are available for such purpose. If such available balance shall be
insufficient, the Trustee shall sell from such Trust Fund such Bonds from among
those designated for such purpose by the Depositor as the Trustee in its
discretion shall deem advisable or necessary. Sales of Bonds by the Trustee
shall be made in such manner as the Trustee shall in the exercise of its
fiduciary judgment determine will bring the best price obtainable for the Trust
Fund. In the event that funds are withdrawn from the Principal Account or Bonds
are sold for payment of any portion of the Redemption Price representing accrued
interest, the Principal Account shall be reimbursed when sufficient funds are
next available in the Interest Account for such funds so applied.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than three business days following the
day on which tender for redemption is made (1) for any period during which the
New York Stock Exchange, Inc. is closed other than customary weekend and holiday
closings; (2) for any period during which (i) trading on the New York Stock
Exchange, Inc. is restricted or (ii) an emergency exists as a result of which
disposal by the Trust Fund of the Bonds is not reasonably practicable or it is
not reasonably practicable fairly to determine in accordance herewith the value
of the Bonds for the purposes of any Trust Fund Evaluation; or (3) for such
other period as the Securities and Exchange Commission may by order permit, and
shall not be liable to any person or in any way for any loss or damage which may
result from any such suspension or postponement.
No later than the close of business on the day of tender of any Unit
for redemption by a Unitholder other than the Depositor, the Trustee shall
notify the Depositor of such tender. The Depositor shall have the right to
purchase such Units by notifying the Trustee of its election to make such
purchase as soon as practicable thereafter but in no event subsequent to the
close of business on the second business day after the day on which such Units
were tendered for redemption. Such purchase shall be made by payment for such
Units by the Depositor to the Unitholder not later than the close of business on
the Redemption Date of any amount not less than the Redemption Price which would
otherwise be payable by the Trustee to such Unitholder.
Any Unit so purchased by the Depositor may at the option of the
Depositor be tendered to the Trustee for redemption in the manner provided in
the first paragraph of this Section 5.02.
The Depositor shall maintain with the Trustee a current list of Bonds
held in each Trust Fund designated to be sold and the minimum par amount thereof
for the purpose of redemption of Units of each Trust Fund tendered for
redemption and not purchased by the Depositor, and for payment of expenses
hereunder. If at any such time the Depositor shall for any reason fail to
deliver such a list, the Trustee, in its sole discretion, may designate a
current list of Bonds in each Trust Fund for such purposes. The net proceeds of
any sale of Bonds which represents interest shall be credited to the Interest
Account of the affected Trust Fund, and the balance of such net proceeds shall
be credited to the Principal Account of such Trust Fund. The Depositor shall
also designate on such list of Bonds designated to be sold the Bonds upon the
sale of which the Trustee shall obtain permanent insurance (the "PERMANENT
INSURANCE") from an Insurer, provided that if the Depositor shall for any reason
fail to make such designation, the Trustee in its sole discretion shall make
such designation if it deems such designation to be in the best interests of
Unitholders. The Trustee is hereby authorized to pay and shall pay out of the
proceeds of the sale of the Bonds which are covered by Permanent Insurance any
premium for such Permanent Insurance and the net proceeds after such deduction
shall be credited to the Principal Account and the net proceeds representing
accrued interest shall be credited to the Interest Account.
Sales of Bonds shall be made in such manner as the Trustee shall
determine will bring the best price obtainable for the Trust Fund, provided,
however, that sales shall be made in such manner, as the Trustee shall
determine, as will provide the Trustee with funds in an amount sufficient and at
the time necessary in order for it to pay the Redemption Price of Units tendered
for redemption, regardless of whether or not a better price could be obtained if
the Bonds were sold without regard for the day on which the proceeds of such
sale would be received. The Trustee shall not be liable or responsible in any
way for depreciation or loss incurred by reason of any sale of Bonds made
pursuant to this Section 5.02.
Certificates evidencing Units and the amount recorded in the
registration books of the Trust Fund representing Units held in uncertificated
form redeemed pursuant to this Section 5.02 shall be canceled by the Trustee and
the Unit or Units evidenced by such Certificates or evidenced by such records in
the registration books of the Trust Fund for Units held in uncertificated form
shall be terminated by such redemptions.
When directed by the Depositor, the Trustee shall employ the Depositor
as its agent for the purpose of executing sales of Bonds. The Depositor will
verify the Trustee's ownership of any Bond prior to entering into a contract for
its sale. The Trustee shall have no liability for loss or depreciation resulting
from the Depositor's negligence or misconduct as such agent.
Notwithstanding the foregoing, the Trustee is hereby authorized in its
discretion, but without obligations, in the event that the Depositor does not
elect to purchase any Unit tendered to the Trustee for redemption, or in the
event that a Unit is being tendered by the Depositor for redemption, in lieu of
redeeming such Unit, to sell such Unit in the over-the-counter market for the
account of the tendering Unitholder at a price which will return to the
Unitholder an amount in cash, net after deducting brokerage commissions,
transfer taxes and other charges, equal to or in excess of the Redemption Price
which such Unitholder would otherwise be entitled to receive on redemption
pursuant to this Section 5.02. The Trustee shall pay to the Unitholder the net
proceeds of any such sale no later than the day the Unitholder would otherwise
be entitled to receive payment of the Redemption Price hereunder.
Except as provided in Article VII and Article VIII, neither the
Depositor nor the Trustee shall be liable or responsible in any way for
depreciation or loss incurred by reason of any sale or designation of Bonds made
pursuant to this Section 5.02.
ARTICLE VI
ISSUANCE, TRANSFER, INTERCHANGE
AND REPLACEMENT OF CERTIFICATES
SECTION 6.01. ISSUANCE OF CERTIFICATES. Certificates representing Units
held by a Unitholder will not be issued except upon written request by a
Unitholder, or his or her registered broker/dealer, to the Trustee at its unit
investment trust office. Certificates that have been issued may be returned to
the Trustee at any time and cancelled, without affecting the Unitholder's
interest in the Trust Fund, when accompanied by proper written instructions from
the Unitholder.
SECTION 6.02. TRANSFER OF UNITS; INTERCHANGE OF CERTIFICATES. A
Unitholder may transfer any of his Units by making a written request to the
Trustee at its unit investment trust office and, in the case of Units evidenced
by a Certificate, by presenting and surrendering such Certificate at such office
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee. Unitholders must sign such written
request, and such Certificate of transfer instrument, exactly as their name
appears on the records of the Trustee and on any Certificate representing the
Units to be transferred. Such signature must be guaranteed by a participant in
the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee. Such transfer shall thereupon be made on the
records of the Trustee and, if appropriate, a new registered Certificate or
Certificates for the same number of Units of the same Trust Fund shall be issued
in exchange and substitution therefor. Certificates issued pursuant to this
Agreement are interchangeable for one or more other Certificates of the same
Trust Fund in an equal aggregate number of Units and all Certificates issued
shall be issued in denominations of one Unit or any whole multiple thereof as
may be requested by the Unitholder. The Trustee may deem and treat the person in
whose name any Unit or Certificate shall be registered upon the books of the
Trustee as the owner of such Unit or Certificate for all purposes hereunder and
the Trustee shall not be affected by any notice to the contrary. The transfer
books maintained by the Trustee for each Trust Fund for the purpose of this
Section 6.02 shall be closed for an individual Trust Fund as such Trust Fund is
terminated pursuant to Article IX hereof.
A sum sufficient to cover any tax or other governmental charge that may
be imposed in connection with any such transfer or interchange shall be paid to
the Trustee. A Unitholder may be required to pay such amount as may be specified
by the Trustee (and approved by the Depositor) for each new Certificate issued
on any such transfer or interchange.
All Certificates cancelled pursuant to this Agreement, other than those
endorsed for transfer, may be cremated or otherwise destroyed by the Trustee.
SECTION 6.03. REPLACEMENT OF CERTIFICATES. In case any Certificate
shall become mutilated or be destroyed, stolen or lost, the Trustee shall
execute and deliver a new Certificate in exchange and substitution therefor upon
the Unitholder's furnishing the Trustee with proper identification and
satisfactory indemnity, complying with such other reasonable regulations and
conditions as the Trustee may prescribe and paying such expenses as the Trustee
may incur, provided, however, that if the particular Trust Fund has terminated
or is in the process of termination, the Trustee, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 9.01 hereof. Any mutilated Certificate shall
be duly surrendered and cancelled before any duplicate Certificate shall be
issued in exchange and substitution therefor. Any duplicate Certificate issued
pursuant to this Section 6.03 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time. Upon
issuance of any duplicate Certificate pursuant to this Section 6.03, the
Certificate claimed to have been lost, stolen or destroyed shall become null and
void and of no effect, and any bona fide purchaser thereof shall have only such
rights as are afforded under Article 8 of the Uniform Commercial Code to a
holder presenting a Certificate for transfer in the case of an overissue.
SECTION 6.04. FORM OF CERTIFICATE. Each Certificate shall be in fully
registered form, shall be numbered serially for identification, shall be
executed in facsimile by the original Depositor of the Trust Fund in question
and manually by an authorized signatory of the Trustee, shall be dated the date
of execution and delivery by the Trustee and shall represent a fractional
undivided interest in the specified Trust Fund, the numerator of which fraction
shall be the number of Units set forth on the face of such Certificate and the
denominator of which shall be the total number of Units of undivided interest of
such Trust Fund outstanding at any such time.
ARTICLE VII
DEPOSITOR
SECTION 7.01. CERTAIN MATTERS REGARDING SUCCESSION. The covenants,
provisions and agreements herein contained shall in every case be binding upon
any successor to the business of any Depositor. In the event of an assignment by
any Depositor to a successor corporation or partnership as permitted by the next
following sentence, such Depositor and, if such Depositor is a partnership, its
partners shall be relieved of all further liability under this Agreement. Any
Depositor may transfer all or substantially all of its assets to a corporation
or partnership which carries on the business of such Depositor, if at the time
of such transfer such successor duly assumes all the obligations of such
Depositor under this Agreement.
SECTION 7.02. LIABILITY OF DEPOSITOR AND INDEMNIFICATION. (a) The
Depositor shall not be under any liability to any Trust Fund or the Unitholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in judgment or for depreciation
or loss incurred by reason of the purchase or sale of any Bonds, provided,
however, that this provision shall not protect the Depositor against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder. The
Depositor may rely in good faith on any paper, order, notice, list, affidavit,
receipt, evaluation, opinion, endorsement, assignment, draft or any other
document of any kind prima facie properly executed and submitted to it by the
Trustee, the Trustee's counsel, the Evaluator or any other person for any
matters arising hereunder. The Depositor shall in no event be deemed to have
assumed or incurred any liability, duty or obligation to any Unitholder, the
Evaluator or the Trustee other than as expressly provided for herein.
(b) Each Trust Fund shall pay and hold the Depositor harmless from and
against any loss, liability or expense incurred in acting as Depositor of such
Trust Fund other than by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. The Depositor shall not be
under any obligation to appear in, prosecute or defend any legal action which in
its opinion may involve it in any expense or liability, provided, however, that
the Depositor may in its discretion undertake any such action which it may deem
necessary or desirable in respect of this Agreement and the rights and duties of
the parties hereto and the interests of the Unitholders hereunder and, in such
event, the legal expenses and costs of any such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Trust Fund
concerned and shall be paid directly by the Trustee out of the Interest and
Principal Accounts of such Trust Fund.
(c) None of the provisions of this Agreement shall be deemed to protect
or purport to protect the Depositor against any liability to the Trust Fund or
to the Unitholders to which the Depositor would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Depositor's reckless disregard of its obligations
and duties under this Agreement.
ARTICLE VIII
TRUSTEE
SECTION 8.01. GENERAL MATTERS RELATING TO THE TRUSTEE. (a) All moneys
deposited with or received by the Trustee hereunder shall be held by it without
interest in trust as part of the appropriate Trust Fund or Reserve Account until
required to be disbursed in accordance with the provisions of this Agreement and
such moneys will be segregated in such manner as shall constitute the
segregation and holding thereof in trust within the meaning of the Investment
Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in
good faith on any evaluation, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document whether or not of the same kind, prima facie properly
executed, or the disposition of moneys or Bonds pursuant to this Agreement;
PROVIDED, HOWEVER, that this provision shall not protect the Trustee against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder, and
the Trustee may construe any of the provisions of this Agreement insofar as the
same may appear to be ambiguous or inconsistent with any other provisions
hereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto and the Unitholders.
(c) The Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor, or for the form, character, genuineness,
sufficiency, value or validity of any Bonds (except that the Trustee shall be
responsible for the exercise of due care in determining the genuineness of Bonds
delivered to it pursuant to contracts for the purchase of such Bonds) or for or
in respect of the validity or sufficiency of any Certificates (except for the
due execution thereof by the Trustee) or for the due execution thereof by the
Depositor and the Trustee shall in no event assume or incur any liability, duty
or obligation to any Unitholder or to the Depositor or Evaluator, other than as
expressly provided for herein. The Trustee shall not be responsible for or in
respect of the validity of any signature by or on behalf of the Depositor.
(d) The Trustee shall not be under any obligation to appear in,
prosecute or defend any action which in its opinion may involve it in expense or
liability unless it shall be furnished with such reasonable security and
indemnity against such expense or liability as it may be required, and any
pecuniary cost of the Trustee from such actions shall be deductible ratably from
and a ratable charge against the Trust Funds concerned. The Trustee shall in its
discretion undertake such action as it may deem necessary at any and all times
to protect the Trust Funds and the rights and interests of the Unitholders
pursuant to the terms of this Agreement, provided, however, that the expenses
and costs of such actions, undertakings or proceedings shall be reimbursable to
the Trustee ratably from the Trust Funds concerned.
(e) The Trustee may employ agents, attorneys, accountants and auditors,
including an agent or agents for the purpose of custody and safeguarding Bonds,
and shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable care. The Trustee shall not be
liable in respect of any action taken or suffered under this Agreement in good
faith, in accordance with an opinion of counsel. The fees and expenses charged
by such agents, attorneys, accountants or auditors, except for the fees and
expenses charged by any agent or agents for custody and safeguarding of Bonds,
shall constitute an expense of the Trustee reimbursable from the Interest and
Principal Accounts as set forth in Section 3.04 hereof.
(f) If at any time the Depositor shall fail to undertake or perform any
of the duties which by the terms of this Agreement are affirmatively required by
it to be undertaken or performed, or the Depositor shall be incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver of the Depositor or
of its property shall be appointed, or any public officer shall take charge or
control of the Depositor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case, the Trustee
may do any one or more of the following: (1) appoint a successor Depositor who
shall act hereunder in all respects in place of such Depositor and which may be
compensated, at rates deemed by the Trustee to be reasonable under the
circumstances, by deduction ratably from the Interest Account or, to the extent
funds are not available in such Account, from the Principal Account of the Trust
Funds but no such deduction shall be made exceeding such reasonable amount as
the Securities and Exchange Commission may prescribe in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940; (2) continue to act as
Trustee hereunder without terminating this Agreement; or (3) terminate this
Agreement and the trust created hereby and liquidate the Trust Funds in the
manner provided in Section 9.0l.
(g) (i) The Trustee may in its discretion, and shall if so directed by
the Depositor, terminate this Agreement and any Trust Fund created hereby (but
only insofar as the Agreement relates to such Trust Fund) and liquidate such
Trust Fund, all in the manner provided in Section 9.01 if the value of such
Trust Fund as shown by any Trust Fund Evaluation shall be less than the
liquidation amount specified in the Prospectus; and (ii) the Trustee shall
terminate this Agreement and any Trust created hereby (but only insofar as the
Agreement relates to such Trust Fund) and liquidate such Trust Fund all in the
manner provided in Section 9.01 if by reason of the aggregate redemption of
Units not theretofore sold by the Depositor and/or one or more of the
underwriters the net worth of such Trust Fund is reduced to less than 40% of the
aggregate original value of the Securities initially deposited therein.
(h) In no event shall the Trustee be personally liable for any taxes or
other governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon. The Trustee shall be reimbursed and indemnified out of the
Interest and Principal Accounts of the appropriate Trust Fund for all such taxes
and charges, for any tax or charge imposed against the Trustee as Trustee of
such Trust Fund and for any expenses, including counsel fees, which the Trustee
may sustain or incur with respect to such taxes or charges.
(i) Notwithstanding any provisions of this Agreement to the contrary,
no payment to a Depositor or to any principal underwriter (as defined in the
Investment Company Act of 1940) for the Trust Fund or to any affiliated person
(as so defined) or agent of a Depositor or such underwriter shall be allowed the
Trustee as an expense except for payment of such reasonable amounts as the
Securities and Exchange Commission may prescribe as compensation for performing
bookkeeping and other administrative services, as set forth in Section 3.14, of
a character normally performed by the Trustee.
(j) The Trustee in its individual or any other capacity may become an
owner or pledgee of, or be an underwriter or dealer in respect of, obligations
issued by the same issuer (or an affiliate of such issuer) of any Bonds at any
time held as part of the Trust and may deal in any manner with the same or with
the issuer (or an affiliate of the issuer) with the rights and powers as if it
were not the Trustee hereunder.
(k) The Trust may include a letter or letters of credit for the
purchase of Bonds or Contract Obligations issued by the Trustee in its
individual capacity for the account of the Depositor and the Trustee may
otherwise deal with the Depositor and the Trust within the same rights and
powers as if it were not the Trustee hereunder.
SECTION 8.02. BOOKS, RECORDS AND REPORTS. The Trustee shall keep proper
books of record and account of all the transactions of each Trust under this
Indenture at its unit investment trust office including a record of the name and
address of, and the Certificates issued by each Trust and held by, every
Unitholder, and such books and records of each Trust shall be open to inspection
by any Unitholder of such Trust at all reasonable times during the usual
business hours.
Unless the Depositor determines that such an audit is not required, the
account of each Trust shall be audited not less than annually by independent
public accountants designated from time to time by the Depositor and reports of
such accountants shall be furnished by the Trustee, upon request, to
Unitholders. So long as the Depositor is maintaining a secondary market for
Units, the Depositor shall bear the cost of such audits in excess of the amounts
indicated in the Prospectus relating to such Trust (or if no amount is therein
specified, $.50 per 100 Units outstanding).
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of independent counsel to the Depositor, the Trustee
shall pay, or reimburse to the Depositor or others, the costs of the preparation
of documents and information with respect to a Trust required by law or
regulation in connection with the maintenance of a secondary market in units of
such Trust. Such costs may include but are not limited to accounting and legal
fees, blue sky registration and filing fees, printing expenses and other
reasonable expenses related to documents required under federal and state
securities laws. Such costs shall be a Trust expense and the Trustee shall not
be obligated to advance any of its own funds to make such payments.
SECTION 8.03. REPORTS TO SECURITIES AND EXCHANGE COMMISSION AND OTHERS.
The Trustee shall make such annual or other reports as may from time to time be
required under any applicable state or federal statute or rule or regulation
thereunder.
SECTION 8.04. AGREEMENT AND LIST OF BONDS ON FILE. The Trustee shall
keep a certified copy or duplicate original of this Agreement on file at its
unit investment trust office available for inspection by any Unitholder at all
reasonable times during its usual business hours, and the Trustee shall keep and
so make available for inspection a current list of the Bonds in each Trust Fund.
SECTION 8.05. COMPENSATION OF TRUSTEE. The Trustee shall receive at the
times and in the manner set forth in Section 3.04 as compensation for performing
the usual, ordinary, normal and recurring services under this Agreement during
the preceding month an amount equal to the amount specified as compensation for
the Trustee in the Prospectus. Such fee shall accrue daily and be computed on
the basis of the largest par amount of Bonds held by a Trust during the period
with respect to which such compensation is paid. The Trustee may periodically
adjust the compensation provided for pursuant to this paragraph (i) in response
to fluctuations in short-term interest rates and average cash balances of the
Trust accounts (reflecting the cost to the Trustee of advancing funds to a Trust
and changes in anticipated earnings on cash balances) and (ii) in addition, may
from time to time, without the consent or approval of any Unitholder or the
Depositor, adjust such portion of its fee as is not computed by reference to the
cash balance in the Trust accounts by amounts not exceeding the proportionate
increase, during the period from the date of such Agreement to the date of any
such increase, in consumer prices as last published prior to each such date
under the classification "All Services Less Rent of Shelter" in the Consumer
Price Index For All Urban Consumers (CPI-U) U.S. City Average, not seasonally
adjusted, based 1982 - 84 = 100, published by the United States Department of
Labor. In the event that such classification ceases to incorporate a significant
number of items, or if a substantial change is made in the method of
establishing such classification, then the classification shall be adjusted in a
fair and reasonable manner to the figure that would have resulted had no
substantial change occurred in the manner of computing such classification. In
the event that such classification (or a successor or substitute index) is not
available, such governmental or other service or publication as shall evaluate
the information in substantially the same manner as the aforesaid classification
shall be used in lieu thereof.
The Trustee shall also receive, at the times and in the manner set
forth in Section 3.04, reimbursement for any and all expenses and disbursements
incurred hereunder (except as set forth in Section 8.01(e)), including legal and
auditing expenses and additional compensation for any extraordinary services
performed hereunder, which extraordinary services shall include but not be
limited to, all costs and expenses incurred by the Trustee in making any annual
or other reports pursuant to Section 8.03, or in making any distribution of cash
attributable to failed contracts covering Contract Obligations in accordance
with Section 3.04; PROVIDED, HOWEVER, that the amount of any such charge which
has not been finally determined as of any Distribution Date may be estimated and
any necessary adjustments shall be made in the succeeding period.
The Trustee shall be indemnified ratably from the Trust Funds and held
harmless against any loss, liability or expense incurred without gross
negligence, bad faith, willful misconduct or reckless disregard of its duties on
the part of the Trustee arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in the premises.
The Trustee's normal and extraordinary compensation and reimbursement
of the above-mentioned expenses and losses shall be charged by the Trustee
against the Interest and Principal Accounts of the appropriate Trust Funds in
accordance with Section 3.04 on or before each Distribution Date. If the
balances in the Interest and Principal Accounts shall be insufficient to provide
for amounts payable pursuant to this Section 8.05, the Trustee shall have the
power to sell Bonds in the manner provided in Section 5.02 hereof. The Trustee
shall not be liable or responsible in any way for depreciation or loss incurred
by reason of any sale of Bonds made pursuant to this Section 8.05.
SECTION 8.06. RESIGNATION, DISCHARGE OR REMOVAL OF THE TRUSTEE;
SUCCESSORS. (a) The Trustee may resign and be discharged of the trust created by
this Agreement by executing an instrument in writing resigning as Trustee of
such trust, filing the same with the Depositor and mailing a copy of a notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such instrument when, subject to Section 8.06(c), such
resignation is to take effect. Upon receiving such notice of resignation, the
Depositor shall use its best efforts promptly to appoint a successor Trustee in
the manner and meeting the qualifications hereinafter provided, by written
instrument or instruments delivered to the resigning Trustee and the successor
Trustee. In case at any time the Trustee shall not meet the requirements set
forth in Section 8.06 hereof, or shall become incapable of acting, or if a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Trustee in an involuntary case, or the Trustee shall commence a
voluntary case, under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or any receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) for the Trustee or for any
substantial part of its property shall be appointed, or the Trustee shall
generally fail to pay its debts as they become due, or shall fail to meet such
written standards for the Trustee's performance as shall be established from
time to time by the Depositor, or if the Depositor determines in good faith that
there has occurred either (1) a material deterioration in the creditworthiness
of the Trustee or (2) one or more negligent acts on the part of the Trustee
having a materially adverse effect, whether singly or in the aggregate, on the
Trust Fund or on one or more of the Trust Funds of one or more Funds, such that
the replacement of the Trustee is in the best interests of the Unitholders, the
Depositor, upon 60 days' prior written notice, may remove the Trustee and
appoint a successor trustee having qualifications and at a rate of compensation
satisfactory to the Depositor by written instrument, in duplicate, one copy of
which shall be delivered to the Trustee so removed and one copy to the successor
trustee. Notice of such appointment of a successor trustee shall be mailed
promptly after acceptance of such appointment by the successor trustee to each
Unitholder then of record.
(b) In case at any time the Trustee shall resign and no successor
Trustee shall have been appointed within thirty days after notice of resignation
has been received by the Depositor, the retiring Trustee may forthwith apply to
a court of competent jurisdiction for the appointment of a successor Trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(c) Any successor Trustee appointed hereunder shall execute and
acknowledge to the Depositor and the retiring Trustee an instrument accepting
such appointment hereunder, and such successor Trustee without any further act,
deed or conveyance shall become vested with all rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee herein and shall be bound by all the terms and conditions of this
Agreement PROVIDED, HOWEVER, that no successor trustee shall be under any
liability hereunder for occurrences or omissions prior to the execution of such
instrument. Upon the request of such successor Trustee, the retiring Trustee
shall, upon payment of all amounts due the retiring Trustee, execute and deliver
an instrument acknowledged by it transferring to such successor Trustee all the
rights and powers of the retiring Trustee; and the retiring Trustee shall
transfer, deliver and pay over to the successor Trustee all Bonds and moneys at
the time held by it hereunder, if any, together with all necessary instruments
of transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained by the
retiring Trustee in the administration hereof as may be requested by the
successor Trustee and shall thereupon be discharged from all duties and
responsibilities under this Agreement. Any resignation or removal of a Trustee
and appointment of a successor Trustee pursuant to this Section 8.06 shall
become effective upon such acceptance of appointment by the successor Trustee.
(d) Any corporation into which a Trustee hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which such Trustee hereunder shall be a party, shall be the
successor Trustee under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
SECTION 8.07. QUALIFICATION OF TRUSTEE. The Trustee and any successor
Trustee shall be a corporation organized under laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers and
has at all times an aggregate capital, surplus and undivided profits of not less
than $500,000.
SECTION 8.08. COLLATERAL. As collateral security for the prompt payment
to the Trustee of all reimbursement to which the Trustee is entitled hereunder
and of all sums at any time owed to or payable to the Trustee hereunder
(including, without limitation, the prompt reimbursement of the Trustee for any
sums that it may from time to time as required hereunder or in its discretion
advance to the account of the Trust Fund), the Trustee is hereby granted a first
and prior lien and security interest in and to the Trust Fund and all Bonds now
or hereafter included therein, including (without limitation) those Bonds listed
in the Schedules to the Trust Agreement, together with all Bonds, obligations,
Contract Obligations and instruments received in exchange or substitution
therefor and all proceeds thereof and all additions and substitutions.
ARTICLE IX
TERMINATION
SECTION 9.01. PROCEDURE UPON TERMINATION. This Agreement and the trust
created hereby shall terminate as to an individual Trust Fund upon the maturity,
redemption, sale or other disposition, as the case may be, of the last Bond held
hereunder in such Trust Fund, unless sooner terminated as herein before
specified, and may be terminated at any time by written instrument executed by
the Depositor and consented to by holders of Units representing 66-2/3% of the
Units of such Trust Fund then outstanding under this Agreement; provided, that
in no event shall this trust continue with respect to such Trust Fund beyond
January l of the fiftieth year after the creation of such Trust Fund.
This Agreement and the trust created hereby shall be terminated as to
the entire Fund upon the maturity, redemption, sale or other disposition, as the
case may be, of the last Bond held hereunder, in the last maturing Trust Fund,
unless sooner terminated as herein before specified, and may be terminated at
any time by written instrument executed by the Depositor and consented to by
holders of Units representing 66-2/3% of all Units then outstanding under this
Agreement; provided that in no event shall this trust continue beyond December
31 of the year following the termination of the last Trust Fund; and provided
further that in connection with any such liquidation it shall not be necessary
for the Trustee to dispose of any Bond or Bonds if retention of such Bond or
Bonds, until due, shall be deemed to be in the best interests of Unitholders,
including, but not limited to, situations in which a Bond or Bonds insured by
the Insurance are in default, situations in which Bond or Bonds insured by the
Insurance reflect a deteriorated market price resulting from a deterioration in
credit quality and situations in which a Bond or Bonds mature after the
mandatory termination date.
Written notice of any termination, specifying the time or times at
which any Unitholder holding Certificates may surrender such Certificates for
cancellation and the date, determined by the Trustee, upon which the transfer
books of the Trustee, maintained pursuant to Section 8.02, shall be closed with
respect to the terminated Trust Fund or the entire Fund, as the case may be,
shall be given by the Trustee to Unitholders of such terminated Trust Fund or
all Unitholders, as the case may be.
Within a reasonable period of time after the termination of the entire
Fund, the Trustee shall sell all of the Bonds then held, if any, and shall:
(a) deduct from the Interest Account or to the extent that
funds are not available in such Account, from the Principal Account of
every Trust Fund separately and pay to itself individually an amount
equal to the sum of (1) its accrued compensation for its ordinary
services in connection with such Trust Fund, (2) any compensation due
it for its extraordinary services in connection with such Trust Fund
and (3) any other expenses, disbursements and advances in connection
with such Trust Fund as provided herein;
(b) deduct from the Interest Account or to the extent that
funds are not available in such account, from the Principal Account of
every Trust Fund separately and pay accrued and unpaid fees in
connection with such Trust Fund of the Evaluator, the Depositor and
bond counsel, if any;
(c) deduct from the Interest Account, or to the extent that
funds are not available from such Account, from the Principal Account
of every Trust Fund separately any amounts which it in its sole
discretion shall deem requisite to be deposited in the Reserve Account
to provide for any applicable taxes or other governmental charges that
may be payable out of such Trust Fund;
(d) distribute to each Unitholder (upon surrender for
cancellation of his Certificate or Certificates, if issued) such
Unitholder's interest in the balances of the Interest, Principal, and,
on the conditions set forth in Section 3.03 hereof, the Reserve
Accounts of the Trust Fund in which he holds Units;
(e) together with such distribution to each Unitholder as
provided for in paragraph (d), furnish to each such Unitholder a final
statement as of the date of the computation of the amount distributable
to Unitholders of the same Trust Fund, setting forth the data and
information in substantially the form and manner provided for in
Section 3.05 hereof.
SECTION 9.02. NOTICE TO UNITHOLDERS. In the event that all of the
Unitholders holding Certificates shall not surrender their Certificates for
cancellation within six months after the time specified in the applicable,
above-mentioned notice, the Trustee shall give a second written notice to the
remaining Unitholders to surrender their Certificates for cancellation and
receive the liquidating distribution with respect thereto. If within one year
after the second notice all the Certificates issued shall not have been
surrendered for cancellation, the Trustee may take appropriate steps or may
appoint an agent to take appropriate steps to contact the remaining Unitholders
concerning surrender of their Certificates and the cost thereof shall be paid
out of the moneys and other assets which remain in the affected Trust Fund.
SECTION 9.03. MONEYS TO BE HELD IN TRUST WITHOUT INTEREST. The Trustee
shall be under no liability with respect to moneys in the Interest, Principal
and Reserve Accounts upon termination, except to hold the same in trust without
interest.
SECTION 9.04. DISSOLUTION OF DEPOSITOR NOT TO TERMINATE. The
dissolution of the Depositor shall not, subject to Section 8.01(f), operate to
terminate this Agreement or the Fund or any individual Trust Fund.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. AMENDMENT AND WAIVER. This Agreement may be amended from
time to time by the Depositor and the Trustee without the consent of any of the
Unitholders (a) to cure any ambiguity or to correct or supplement any provisions
contained herein which may be defective or inconsistent with any other provision
contained herein; (b) to change any provision hereof as may be required by the
Securities and Exchange Commission or any successor governmental agency
exercising similar authority; or (c) to make such other provisions in regard to
matters or questions arising hereunder as shall not adversely affect the
interest of the Unitholders (as determined in good faith by the Depositor and
the Trustee). This Agreement may also be amended from time to time by the
Depositor and the Trustee (or the performance of any of the provisions of this
Agreement may be waived) with the consent of holders of Units representing
66-2/3% of the Units at the time outstanding under the Trust Agreement of the
individual Trust Fund or Trust Funds affected for the purpose of adding any
provisions of this Agreement or of modifying in any manner the rights of the
holders of Units of such Trust Fund or Trust Funds; provided, however, that in
no event may any amendment be made which would (a) alter the rights to the
Unitholders as against each other, (b) provide the Trustee with the power to
engage in business or investment activities other than as specifically provided
in this Agreement or (c) adversely affect the characterization of the Trust as a
grantor trust for federal income tax purposes; provided, further, that the
consent of 100% of the Unitholders of any individual Trust Fund is required to
amend this Agreement (a) to increase the number of Units of such Trust Fund
issuable hereunder above the number of Units specified in the Prospectus or such
lesser amount as may be outstanding at any time during the term of this
Agreement, (b) to permit, in addition to acquisitions permitted under Sections
3.07 and 3.12 hereof, the acquisition hereunder of any Bonds for such Trust Fund
different from those specified in the Schedules to the Trust Agreement, (c) to
reduce the aforesaid percentage of Units the holders of which are required to
consent to certain amendments and (d) to reduce the interest in such Trust Fund
represented by any Units of such Trust Fund.
Promptly after the execution of any amendment requiring the consent of
the Unitholders or of any other amendment if directed by the Depositor, the
Trustee shall furnish written notification of the substance of such amendment to
each Unitholder then of record affected thereby.
It shall not be necessary for the consent of Unitholders under this
Section 10.01 or under Section 9.01 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Unitholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
SECTION 10.02. INITIAL COSTS. Unless otherwise provided in the Trust's
prospectus, the expenses incurred in establishing a Trust, including the cost of
the initial preparation and typesetting of the registration statement,
prospectuses (including preliminary prospectuses), the indenture, and other
documents relating to a Trust, printing of Certificates, Securities and Exchange
Commission and state blue sky registration fees, the costs of the initial
valuation of the portfolio and audit of a Trust, the initial fees and expenses
of the Trustee, and legal and other out-of-pocket expenses related thereto, but
not including the expenses incurred in the printing of preliminary prospectuses
and prospectuses, expenses incurred in the preparation and printing of brochures
and other advertising materials and any other selling expenses shall be borne by
the Trust, provided, however, the Trust shall not bear such expenses in excess
of the amount shown in the Statements of Net Assets included in the Prospectus,
and any such excess shall be borne by the Depositor. To the extent funds in the
Interest and Principal Accounts of the Trust shall be insufficient to pay the
expenses borne by the Trust specified in this Section 10.02, the Trustee shall
advance out of its own funds and cause to be deposited and credited to the
Interest Account such amount as may be required to permit payment of such
expenses. The Trustee shall be reimbursed for such advance on each Record Date
(or such earlier date on which the expenses have been fully accrued) from funds
on hand in the Interest Account or, to the extent funds are not available in
such Account, from the Principal Account, in the amount deemed to have accrued
as of such Record Date as provided in the following sentence (less prior
payments on account of such advances, if any), and the provisions of Sections
8.05 and 8.08 with respect to the reimbursement of the disbursements for Trust
expenses, including, without limitation, the lien in favor of the Trustee
therefor and the authority to sell Bonds as needed to fund such reimbursement,
shall apply to the payment of expenses and the amounts advanced pursuant to this
Section. For the purposes of the preceding sentence and the addition provided in
clause (4) of the first sentence of Section 5.01, the expenses borne by the
Trust pursuant to this Section shall be deemed to have been paid on the date of
the Agreement and to accrue at a daily rate over the time period specified for
their amortization provided in the Prospectus; provided, however, that nothing
herein shall be deemed to prevent, and the Trustee shall be entitled to, full
reimbursement for any advances made pursuant to this Section no later than the
termination of the Trust. For purposes of calculating the accrual of
organizational expenses under this Section 5.02, the Trustee shall rely on the
written estimates of such expenses provided by the Depositor pursuant to Section
5.01.
SECTION 10.03. REGISTRATION (INITIAL AND CURRENT) OF UNITS AND FUND.
The Depositor agrees and undertakes on its own part to register the Units and
the Fund with the Securities and Exchange Commission and under the Blue Sky laws
of such states as the Depositor may select.
SECTION 10.04. CERTAIN MATTERS RELATING TO UNITHOLDERS. (a) The death
or incapacity of any Unitholder shall not operate to terminate this Agreement,
the Fund or the Trust Fund in which he holds Units nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Fund or such Trust
Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them. Each Unitholder expressly waives any right he may
have under any rule of law, or the provisions of any statute, or otherwise, to
require the Trustee at any time to account, in any manner other than as
expressly provided in this Agreement, in respect of the Bonds or moneys from
time to time received, held and applied by the Trustee hereunder.
(b) No Unitholder shall have any right to vote except as provided in
Sections 9.01 and 10.01 or in any manner otherwise to control the operation of
the Fund or the obligations of the parties hereto, nor shall anything set forth
in this Agreement or the Trust Agreement or contained in the terms of any
Certificates which may have been issued be construed so as to constitute the
Unitholders from time to time as partners or members of an association; nor
shall any Unitholder ever be under any liability to any third persons by reason
of any action taken by the parties to this Agreement, or for any other cause
whatsoever.
(c) By the purchase and acceptance or other lawful delivery and
acceptance of any Unit, whether certificated or not, the Unitholder shall be
deemed to be a beneficiary of the Trust created by this Agreement and the Trust
Agreement and vested with all right, title and interest in the Trust Fund
therein created to the extent of the Unit or Units set forth whether evidenced
by such Certificate or held in uncertificated form, subject to the terms and
conditions of this Agreement and the Trust Agreement.
(d) A Unitholder may at any time tender prior to the Evaluation Time on
the date the Trust is terminated his Units or his Certificate(s) if held in
certificated form (including any temporary Certificate or other evidence of
ownership of Units of the Trust Fund, issued by the Trustee or the Depositor) to
the Trustee for redemption, subject to and in accordance with Section 5.02.
SECTION 10.05. NEW YORK LAW TO GOVERN. This Agreement is executed and
delivered in the State of New York, and all laws or rules of construction of
such State, except for provisions with respect to choice of law, shall govern
the rights of the parties hereto and the Unitholders and the interpretation of
the provisions hereof.
SECTION 10.06. NOTICES. Any notice, demand, direction or instruction to
be given to the Depositor hereunder shall be in writing and shall be duly given
if mailed, first class with proper postage prepaid, or delivered to the
Depositor at One Commerce Square, Philadelphia, Pennsylvania 19103, or at such
other address as shall be specified in the Prospectus or by the Depositor to the
other parties hereto in writing. Any notice, demand, direction or instruction to
be given to the Trustee shall be in writing and shall be duly given if mailed,
first class with proper postage prepaid, or delivered to the unit investment
trust office of the Trustee at 4 New York Plaza, New York, New York 10004-2413,
or such other address as shall be specified to the other parties hereto by the
Trustee in writing. Any notice, demand, direction or instruction to be given to
the Evaluator hereunder shall be in writing and shall be duly given if mailed,
first class with proper postage prepaid, or delivered to the Evaluator at 395
Hudson Street, New York, New York 10014-3622, or at such other address as shall
be specified by the Evaluator to the other parties hereto in writing. Any notice
to be given to a Unitholder shall be duly given if mailed, first class with
proper postage prepaid, or delivered to each Unitholder at the address of such
holder appearing on the registration books of the Trustee.
SECTION 10.07. SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms shall be for any reason whatsoever held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of any Certificates or the rights of the holders
thereof.
SECTION 10.08. SEPARATE AND DISTINCT SERIES. Each series of
Delaware-Voyageur Unit Investment Trust, to which these Standard Terms and
Conditions of Trust shall be applicable shall, for all financial and
administrative purposes, be considered separate and distinct from every other
series, and neither the assets of nor the expenses of any one series shall be
applied or charged against any other series.
IN WITNESS WHEREOF, the parties hereto have caused these Standard Terms
and Conditions of Trust, effective May 22, 1997 to be duly executed.
VOYAGEUR FUND MANAGERS, INC.,
Depositor
By: /s/ George M. Chamberlain, Jr.
-----------------------------------
Senior Vice President and Secretary
MULLER DATA CORPORATION,
Evaluator
By:
-----------------------------------
THE CHASE MANHATTAN BANK,
Trustee
By:
-----------------------------------
Exhibit 1.2
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST
SERIES 10
TRUST AGREEMENT
Dated: May 22, 1997
This Trust Agreement between Voyageur Fund Managers, Inc., as
Depositor, Muller Data Corporation, as Evaluator and The Chase Manhattan Bank,
as Trustee, sets forth certain provisions in full and incorporates other
provisions by reference to the document entitled "Standard Terms and Conditions
of Trust for Delaware-Voyageur Unit Investment Trust, Series 10 and Certain
Subsequent Series, Effective May 22, 1997" (herein called the "STANDARD TERMS
AND CONDITIONS OF TRUST"), and such provisions as are set forth in full and such
provisions as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the Provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Article I listed in Schedule A hereto have
been deposited in Trust under this Trust Agreement.
IN WITNESS WHEREOF, Voyageur Fund Managers, Inc. has caused this Trust
Agreement to be executed by its Senior Vice President and Secretary, Muller Data
Corporation has caused this Trust Agreement to be signed by its Chief Operating
Officer and The Chase Manhattan Bank has caused this Trust Agreement to be
executed by one of its Vice Presidents all as of the day, month and year first
above written.
VOYAGEUR FUND MANAGERS, INC.,
Depositor
By: /s/ George M. Chamberlain, Jr.
----------------------------------
Senior Vice President and Secretary
MULLER DATA CORPORATION, Evaluator
By:
----------------------------------
THE CHASE MANHATTAN BANK, Trustee
By:
----------------------------------
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
DELAWARE-VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
(Note: Incorporated herein and made a part hereof are the "SCHEDULES
OF INVESTMENTS" as set forth in the Prospectus.)
Exhibit 2
May 22, 1997
Voyageur Fund Managers, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103
Re: Delaware-Voyageur Unit Investment Trust, Series 10
Ladies/Gentlemen:
We have served as special counsel for Voyageur Fund Managers, Inc., as
Sponsor and Depositor (the "DEPOSITOR") of Delaware-Voyageur Unit Investment
Trust, Series 10 (the "FUND"), in connection with the preparation, execution and
delivery of a Trust Agreement dated May 22, 1997 between Voyageur Fund Managers,
Inc., as Depositor, Muller Data Corporation, as Evaluator, and The Chase
Manhattan Bank, as Trustee, pursuant to which the Depositor has delivered to and
deposited the bonds listed in Schedule A to the Trust Agreement with the Trustee
and pursuant to which the Trustee has issued in the name of the Depositor
documents representing units of fractional undivided interest in and ownership
of the Fund created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the execution
and issuance of certificates evidencing the units of the Fund have been duly
authorized; and
2. The certificates evidencing the units of the Fund when duly executed
and delivered by the Depositor and the Trustee in accordance with the
aforementioned Trust Agreement, will constitute valid and binding obligations of
the Fund and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-26193) relating to the units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/slm
May 22, 1997
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004-2413
Voyageur Fund Managers, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103
Re: Delaware-Voyageur Unit Investment Trust, Series 10
Gentlemen:
We have acted as counsel for Delaware Fund Managers, Inc., as Sponsor
and Depositor of Delaware-Voyageur Unit Investment Trust, Series 10 (the
"Trust"), in connection with the issuance of Units of fractional undivided
interest in the Trust, under a Trust Agreement dated May 22, 1997 (the
"Indenture") between Delaware Fund Managers, Inc., as Depositor, Muller Data
Corporation, as Evaluator, and The Chase Manhattan Bank, as Trustee.
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we have
deemed pertinent.
The assets of the Trust will consist of a portfolio of high yield, high
risk corporate debt obligations (the "Corporate Bonds" or the "Obligations") as
set forth in the Prospectus. All Obligations have been issued after July 18,
1984. For purpose of the following discussions and opinions, it is assumed that
the Obligations are debt for Federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) The Trust is not an association taxable as a corporation
for Federal income tax purposes but will be governed by the provisions
of subpart E, subchapter J (relating to trusts) of chapter 1, Internal
Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the Trust for Federal income tax purposes. Under
subpart E, subchapter J of chapter 1 of the Code, income of the Trust
will be treated as income of each Unitholder. Each Unitholder will be
considered to have received his pro rata share of income derived from
each Trust asset when such income is considered to be received by the
Trust. Each Unitholder will also be required to include in taxable
income for Federal income tax purposes, original issue discount with
respect to his interest on any Obligation held by the Trust at the same
time and in the same manner as though the Unitholder were the direct
owner of such interest. Original issue discount will be treated as zero
if it is "de minimis" within the meaning of Section 1273 of the Code.
If a Corporate Bond is a "high-yield discount obligation" within the
meaning of Section 163(e)(5) of the Code, certain special rules may
apply. A Unitholder may elect to include in taxable income for Federal
income tax purposes, market discount as it accrues with respect to his
interest in any Corporate Bond held by the Trust which he is considered
as having acquired with market discount at the same time and in the
same manner as though the Unitholder were the direct owner of such
interest
(iii) The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata portion of
each Obligation held by a Trust (in proportion to the fair market
values thereof on the valuation date closest to the date the Unitholder
purchases his Units), in order to determine his tax basis for his pro
rata portion of each Obligation held by the Trust. A Unitholder will be
required to include in gross income for each taxable year the sum of
his daily portions of original issue discount attributable to the
Obligations held by the Trust as such original issue discount accrues
and will in general be subject to Federal income tax with respect to
the total amount of such original issue discount that accrues for such
year even though the income is not distributed to the Unitholders
during such year to the extent it is greater than or equal to the "de
minimis" amount described below. To the extent the amount of such
discount is less than the respective "de minimis" amount, such discount
shall be treated as zero. In general, original issue discount accrues
daily under a constant interest rate method which takes into account
the semi-annual compounding of accrued interest.
(iv) Each Unitholder will have a taxable event when an
Obligation is disposed of (whether by sale, exchange, liquidation,
redemption, payment on maturity or otherwise) or when the Unitholder
redeems or sells his Units. A Unitholder's tax basis in his Units will
equal his tax basis in his pro rata portion of all the assets of the
Trust. Such basis, is determined (before the adjustments described
below) by apportioning the tax basis for the Units among each of the
Trust assets according to value as of the valuation date nearest the
date of acquisition of the Units. Unitholders must reduce their tax
basis of their Units for their share of accrued interest, if any on
Obligations delivered after the date the Unitholders pay for their
Units to the extent such interest accrued on such Obligations before
the date the Trust acquired ownership of the Obligations (and the
amount of this reduction may exceed the amount of accrued interest paid
to the sellers) and, consequently such Unitholder 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 Obligations
(whether by sale, exchange, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder (subject to
various nonrecognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata portion
of the total proceeds from such disposition with his basis for his
fractional interest in the asset disposed of. The basis of each Unit
and of each Obligation which was issued with original issue discount
(or which has market discount) must be increased by the amount of
accrued original issue discount (and market discount if the Unitholder
elects to include market discount in income as it accrues) and the
basis of each Unit and of each Obligation which was purchased by the
Trust at a premium must be reduced by the annual amortization of bond
premium which the Unitholder has properly elected to amortize under
Section 171 of the Code. The tax basis reduction requirements of the
Code relating to amortization of bond premium may, under some
circumstances, result in the Unitholder realizing a taxable gain when
his Units are sold or redeemed for an amount equal to or less than his
original cost.
Each Unitholder's pro rata share of each expense paid by the Trust is
deductible by the Unitholder to the same extent as though the expense had been
paid directly by him. It should be noted that, as a result of The Tax Reform Act
of 1986 (the "Act"), certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses
will be deductible by an individual only to the extent they exceed 2% of such
individual's adjusted gross income (similar limitations also apply to estates
and trusts). Unitholders may be required to treat some or all of the expenses
paid by the Trust as miscellaneous itemized deductions subject to this
limitation.
The Code provides a complex set of rules governing the accrual of
original issue discount. These rules provide that original issue discount
generally accrues on the basis of a constant compound interest rate over the
term of the Obligations. Special rules apply if the purchase price of an
Obligation exceeds its original issue price plus the amount of original issue
discount which would have previously accrued, based upon its issue price (its
"adjusted issue price"). Similarly, these special rules would apply to a
Unitholder if the tax basis of his pro rata portion of an Obligation issued with
original issue discount exceeds his pro rata portion of its adjusted issue
price. It is possible that a Corporate Bond that has been issued at an original
issue discount may be characterized as a "high-yield discount obligation" within
the meaning of Section 163(e)(5) of the Code. To the extent that such an
obligation is issued at a yield in excess of six percentage points over the
applicable Federal rate, a portion of the original issue discount on such
obligation will be characterized as a distribution on stock (e.g., dividends)
for purposes of the dividends received deduction which is available to certain
corporations with respect to certain dividends received by such corporations.
If a Unitholder's tax basis in his pro rata portion of any Corporate
Bond held by the Trust is less than his allocable portion of such Corporate
Bond's stated redemption price at maturity (or, if issued with original issue
discount, the allocable portion of its revised issue price), such difference
will constitute market discount unless the amount of market discount is "de
minimis" as specified in the Code. To the extent the amount of such discount is
less than the respective "de minimis" amount, such discount shall be treated as
zero. Market discount accrues daily computed on a straight line basis, unless
the Unitholder elects to calculate accrued market discount under a constant
yield method.
Accrued market discount is generally includible in taxable income of
the Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on Corporate Bonds held by the Trust, on the sale,
maturity or disposition of such Corporate Bonds by the Trust and on the sale of
a Unitholder's Units unless a Unitholder elects to include the accrued market
discount in taxable income as such discount accrues. If a Unitholder does not
elect to annually include accrued market discount in taxable income as it
accrues, deductions for any interest expense incurred by the Unitholder to
purchase or carry his Units will be reduced by such accrued market discount. In
general, the portion of any interest which was not currently deductible would
ultimately be deductible when the accrued market discount is included in income.
The tax basis of a Unitholder with respect to his interest in an
Obligation is increased by the amount of original issue discount (and market
discount, if the Unitholder elects to include market discount, if any, on the
Obligations held by the Trust in income as it accrues) thereon properly included
in the Unitholder's gross income as determined for Federal income tax purposes
and reduced by the amount of any amortized premium which the Unitholder has
properly elected to amortize under Section 171 of the Code. A Unitholder's tax
basis in his Units will equal his tax basis in his pro rata portion of all the
assets of the Trust.
A Unitholder will recognize taxable gain (or loss) when all or part of
the pro rata interest in an Obligation is disposed of for an amount greater (or
less) than his tax basis therefor in a taxable transaction, subject to various
non-recognition provisions of the Code.
As previously discussed, gain attributable to any Corporate Bond deemed
to have been acquired by the Unitholder with market discount will be treated as
ordinary income to the extent the gain does not exceed the amount of accrued
market discount not previously taken into income. The tax basis reduction
requirements of the Code relating to amortization of bond premium may, under
certain circumstances, result in the Unitholder realizing a taxable gain when
his Units are sold or redeemed for an amount equal to or less than his original
cost.
If a Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all Trust assets including his pro
rata portion of all of the Corporate Bonds represented by the Unit. This may
result in a portion of the gain, if any, on such sale being taxable as ordinary
income under the market discount rules (assuming no election was made by the
Unitholder to include market discount in income as it accrues) as previously
discussed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax
rates on ordinary income while capital gains remain subject to a 28 percent
maximum stated rate for taxpayers other than corporations. Because some or all
capital gains are taxed at a comparatively lower rate under the Tax Act, the Tax
Act includes a provision that recharacterizes capital gains as ordinary income
in the case of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
A Unitholder who is a foreign investor (i.e., an investor other than a
U.S. citizen or resident or a U.S. corporation, partnership, estate or trust)
will not be subject to United States Federal income taxes, including withholding
taxes on interest income (including any original issue discount) on, or any gain
from the sale or other disposition of, his pro rata interest in any Obligation
held by the Trust or the sale of his Units provided that all of the following
conditions are met:
(i) the interest income or gain is not effectively connected
with the conduct by the foreign investor of a trade or business within
the United States;
(ii) if the interest is United States source income (which is
the case for most securities issued by United States issuers), the
Obligation is issued after July 18, 1984, (which is the case for each
Obligation held by the Trust) the foreign investor does not own,
directly or indirectly, 10% or more of the total combined voting power
of all classes of voting stock of the issuer of the Obligation and the
foreign investor is not a controlled foreign corporation related
(within the meaning of Section 864(d)(4) of the Code) to the issuer of
the Obligation;
(iii) with respect to any gain, the foreign investor (if an
individual) is not present in the United States for 183 days or more
during his or her taxable year; and
(iv) the foreign investor provides all certification which may
be required of his status.
It should be noted that the Tax Act includes a provision which
eliminates the exemption from United States taxation, including withholding
taxes, for certain "contingent interest." This provision applies to interest
received after December 31, 1993. No opinion is expressed herein regarding the
potential applicability of this provision and whether United States taxation or
withholding taxes could be imposed with respect to income derived from the Units
as a result thereof.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
Very truly yours
CHAPMAN AND CUTLER
MJK/slm
May 22, 1997
The Chase Manhattan Bank,
as Trustee of
Delaware - Voyageur Tax-Exempt Trust,
Series 10
Four New York Plaza
New York, New York 10004-2413
Attn: Mr. Paul J. Holland
Vice President
Re: Delaware - Voyageur Unit Investment Trust,
Series 10, consisting of
Corporate High Yield Series 1
Dear Sirs:
We are acting as special counsel with respect to New York tax matters
for Delaware - Voyageur Unit Investment Trust, Series 10, which consists of
Corporate High Yield Series 1 (the "Trust"), which will be established under a
certain Standard Terms and Conditions of Trust and a related Trust Agreement
each dated as of today (colletively, the "Indenture") between Voyageur Fund
Managers, Inc., as Depositor (the "Depositor"), Muller Data Corporation, as
Evaluator, and Chase, as Trustee (the "Trustee"). Pursuant to the terms of the
Indenture, units of fractional undivided interest in the Trust (the "Units")
will be issued in the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified copies,
or copies otherwise identified to our satisfaction, of such documents as we have
deemed necessary or appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today and addressed to
the Trustee, of Chapman and Cutler, counsel for the Depositor, with respect to
the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as a
corporation under New York law, and acordingly will not be subject to the New
York State franchise tax or the New York City general corporation tax.
2. Under the income tax laws of the State and City of New York, the
income of the Trust will be considered the income of the holders of the Units.
We consent to the filing of this opinion as an exhibit to the
Registration Statement (No. 333-26193) filed with the Securities and Exchange
Commission with respect to the registration of the sale of the Units and to the
references to our name under the captions "Taxation" and "Legal Opinions" in
such Registraiton Statement and the preliminary prospectus included therein.
Very truly yours,
/s/ Carter, Ledyard & Milburn
SFL:tbm
May 22, 1997
The Chase Manhattan Bank,
as Trustee of
Delaware - Voyageur Unit Investment Trust,
Series 10
Four New York Plaza
New York, New York 10004-2413
Attn: Mr. Paul J. Holland
Vice President
Re: Delaware - Voyageur Unit Investment Trust,
Series 10, consisting of
Corporate High Yield Series 1
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank ("Chase") in
connection with the execution and delivery of a Standard Terms and Conditions of
Trust and a related Trust Agreement each dated as of today (collectively, the
"Indenture"), between Voyageur Fund Managers, Inc., as Depositor (the
"Depositor"), Muller Data Corporation, as Evaluator, and Chase, as Trustee (the
"Trustee"), establishing Delaware - Voyageur Unit Investment Trust, Series 10,
which consists of Corporate High Yield Series 1 (the "Trust"), and the
confirmation by Chase, as Trustee under the Indenture, that it has registered on
the registration books of the Trust the ownership by Depositor of a number of
units constituting the entire interest in the respective Trust (such aggregate
units being herein called "Units"), each of which Units represents an undivided
interest in the Trust, which consists of interest-bearing corporate debt
obligations of domestic companies (including confirmation of contracts for the
purchase of certain obligations not yet delivered and cash, cash equivalents or
an irrecovable letter of credit in the amount required for such purchase upon
the receipt of such obligations), such obligations being defined in the
Indenture as Securities and referenced in the schedules to the Indenture.
We have examined the Indenture, the Closing Memorandum delivered today
by the parties to the Indenture (the "Closing Memorandum"), and such other
documents as we have deemed necessary in order to render this opinion. Based on
the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing corporation having the powers
of a trust company under the laws of the State of New York.
2. The Indenture has been duly executed and delivered by Chase and,
assuming due execution and delivery by the other parties thereto, constitutes
the valid and legally binding obligation of Chase.
3. Chase, as Trustee, has registered on the registration books of the
Trust the ownership of the Units by the Depositor. Upon receipt of confirmation
of the effectiveness of the registration statement for the sale of the Units
filed with the Securities and Exchange Commission under the Securities Act of
1933, the Trustee may cause the Units to be registered in such names as the
Depositor may request, to or upon the order of the Depositor, as provided in the
Closing Memorandum.
4. Chase, as Trustee, may lawfully advance amounts to the Trust and may
be reimbursed, without interest, for any such advances from funds in the
interest and capital accounts, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered, among other
things, whether the Securities have been duly authorized and delivered.
Very truly yours,
/s/ Carter, Ledyard & Milburn
SFL:gcm
EXHIBIT 6(a)
INDEPENDENT AUDITORS CONSENT
We consent to the use of our report included herein and to the
references to our Firm under the heading "OTHER MATTERS -- Independent Auditors"
in the Prospectus.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
May 22, 1997
Exhibit 6(b)
Muller Data Corporation
395 Hudson Street
New York, New York 10014-3622
May 22, 1997
Voyageur Fund Managers, Inc.,
One Commerce Square
Philadelphia, Pennsylvania 19103
Re: Delaware-Voyageur Unit Investment Trust, Series 10
(the "Fund")
Gentlemen:
We have examined the Registration Statement File No. 333-27095 for the
above captioned Fund.
We hereby acknowledge that Muller Data Corporation is currently acting
as the Evaluator for the Fund. We hereby consent to the use in the Registration
Statement of the reference to Muller Data Corporation as the Evaluator for the
above captioned Fund.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Muller Data Corporation
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH DOCUMENT.
</LEGEND>
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<NAME> VOYAGEUR UNIT INVESTMENT TRUST, SERIES 10
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<NAME> CORPORATE HIGH YIELD SERIES 1
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