File No. 333-26193 CIK No. 1011915
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Delaware Investments Unit Investment Trust, Series 10
(Exact Name of Trust)
Delaware Capital Management, Inc.
(Exact Name of Depositor)
One Commerce Square
Philadelphia, Pennsylvania 19103
(Complete address of Depositor's principal executive offices)
Delaware Capital Management, Inc. Chapman and Cutler
Attention: George M. Chamberlain, Jr. Attention: Mark J. Kneedy
One Commerce Square 111 West Monroe Street
Philadelphia, Pennsylvania 19103 Chicago, Illinois 60603
(Name and complete address of agents for service)
(X) Check if it is proposed that this filing will become effective on October
8, 1998 pursuant to paragraph (b) of Rule 485.
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
CORPORATE HIGH YIELD SERIES 1 - 408,744 UNITS
PROSPECTUS - Part One
Dated October 7, 1998 as of June 30, 1998
NOTE: PART ONE OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY
PART TWO OF THIS PROSPECTUS.
THE TRUST
Delaware Investments Unit Investment Trust, Series 10 (the "FUND") consists of
the underlying unit investment trust set forth above (the "Trust"). The Trust
consists of a fixed portfolio of interest-bearing corporate debt obligations of
domestic companies (the "Corporate Bonds" or "Bonds"). At February 28, 1998,
each Unit represented a 1/408,744 undivided interest in the principal and net
income of the Trust (see "The Trust" in Part Two of this Prospectus).
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. ALL OF THE
AGGREGATE PRINCIPAL AMOUNT OF 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 "THE FUND - INVESTMENT OBJECTIVES AND
PORTFOLIO SELECTION" AND "RISK FACTORS" IN PART TWO OF THIS PROSPECTUS.
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Distributor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss resulting
from the sale of Units will accrue to the Distributor. No proceeds from the sale
of Units will be received by the Trust.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is equal to the net assets of the Trust
divided by the number of Units outstanding, plus a sales charge of 4.50% of the
Public Offering Price (4.712% of the amount invested). At February 28, 1998 the
Public Offering Price per Unit was $10.47 (see "Public Offering" in Part Two of
this Prospectus).
Please retain all parts of this Prospectus for future reference.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DELAWARE CAPITAL MANAGEMENT, INC.
SPONSOR
DELAWARE DISTRIBUTORS, L.P.
DISTRIBUTOR
<PAGE>
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
Estimated Current Return to Unit holders as of Feburary 28, 1998 was 8.39% and
Estimated Long-Term Return to Unit holders as of February 28, 1998 was 7.48%.
Estimated Current Return is calculated by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price. Estimated Long-Term
Return is calculated by using a formula which (1) takes into consideration and
determines and factors in the relative weightings of the market values, yields
(which take 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 expense and sales charge
associated with each Unit of the Trust. Since the market values and the
estimated retirements of the Bonds and the expenses of the Trust will change,
there is no assurance that the present Estimated Current Return and Estimated
Long-Term Return indicated above will be realized in the future. 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 calculations
include only Net Annual Interest Income and Public Offering Price. The above
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. See "Estimated Current Return and Estimated Long-Term
Return" in Part Two of this Prospectus.
2
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
SUMMARY OF ESSENTIAL INFORMATION AS OF FEBRUARY 28, 1998
SPONSOR: DELAWARE CAPITAL MANAGEMENT, INC.
DISTRIBUTOR: DELAWARE DISTRIBUTOR, L.P.
EVALUATOR: MULLER DATA CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
CORPORATE
HIGH YIELD
SERIES 1
----------
<S> <C>
Principal Amount (Par Value) of Bonds (1) $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 $ 9.419
Public Offering Price: Net Assets $4,087,476
Net Asset Value per Unit $ 10.00
Sales Charge 4.50% (4.712% of the Net Asset Value) per Unit (2) $ 0.47
Public Offering Price per Unit (2)(3) $ 10.47
Redemption Price per Unit (3)(4) $ 10.00
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $ 0.47
Minimum Value of the Trust under which Trust Agreement
may be terminated $ 770,000
Minimum Principal Distribution $0.01 per Unit
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 $ 0.02347
----------
Estimated Net Annual Interest Income per Unit $ 0.87861
Estimated Normal Monthly Distribution per Unit (5) $ 0.07322
Estimated Daily Rate of Net Interest Accrual per Unit $ 0.00244
Estimated Current Return Based on Public Offering Price (2)(5)(6) 8.39%
Estimated Long-Term Return (2)(5)(6) 7.48%
Trustee's Initial Annual Fee per $1,000 principal amount of Bonds $ 1.26
Evaluator's Fee per Evaluation $ 8.00
Sponsor's Annual Fee per Unit $ 0.00300
Record Dates First day of each month
Distribution Dates Fifteenth day of each month
</TABLE>
3
<PAGE>
Evaluations for purpose of sale, purchase or redemption of Units are made as of
the close of trading of the New York Stock Exchange (generally 4:00PM Eastern
Standard Time) on days of trading 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 certain Trusts may from time to
time under certain circumstances be sold or redeemed or will be
called or matured 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. 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 expense of the Trustee, the Sponsor and the
Evaluator and with the principal prepayment, redemption, maturity,
exchange or sale of 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 weighting 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 a 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 a 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.
4
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Unitholders of
Delaware Investments Unit Investment Trust, Series 10:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Delaware Investments Unit Investment Trust,
Series 10 (the "Fund") (comprised of Corporate High Yield Series 1) as of
February 28, 1998, and the related statements of operations and changes in net
assets for the period May 22, 1997 (Initial Date of Deposit) to February 28,
1998. These financial statements are the responsibility of the Fund's Sponsor.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of February 28, 1998, 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 that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Corporate High Yield Series
1 of Delaware Investments Unit Investment Trust, Series 10 at February 28, 1998,
and the results of its operations and changes in its net assets for the period
May 22, 1997 (Initial Date of Deposit) to February 28, 1998, in conformity with
generally accepted accounting principles.
Philadelphia, Pennsylvania
September 18, 1998
5
<PAGE>
CORPORATE HIGH YIELD SERIES 1
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL SECURITY COUPON RATE REDEMPTION MARKET
RATINGS(1) AMOUNT DESCRIPTION AND MATURITY FEATURES(2) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO INVESTMENTS)
CORPORATE BONDS (100.0%)
BANKING, FINANCE & INSURANCE (8.3%)
-----------------------------------------------------------------------------------------------------------
Ba3/B+ $ 325,000 Muzak Limited Partnership, Muzak Capital 10.00% @ 2003 2000 @ 105 $ 339,625
Corporation, Unsecured Senior Notes -----------
CABLE, MEDIA & PUBLISHING (33.1%)
-----------------------------------------------------------------------------------------------------------
B2/B 325,000 Cablevision Systems Corporation, Unsecured 9.875% @ 2006 2001 @ 104.94 358,312
Senior Subordinated Notes
B1/BB- 275,000 Hollinger International Publishing Inc., Unsecured 9.25% @ 2006 2001 @ 104.625 293,563
Senior Subordinated Notes
Ba2/BB 325,000 Jones Intercable Inc., Senior Notes 8.875% @ 2007 2004 @ 101.11 342,469
B1/B 325,000 Universal Outdoor Inc., Senior Subordinated 9.75% @ 2006 2001 @ 104.875 365,625
Notes
-----------
1,359,969
-----------
FOOD, BEVERAGE & TOBACCO (8.3%)
-----------------------------------------------------------------------------------------------------------
B2/B+ 325,000 Delta Beverage Group Inc., Senior Notes 9.75% @ 2003 2000 @ 104.875 340,438
-----------
INDUSTRIAL MACHINERY (16.9%)
-----------------------------------------------------------------------------------------------------------
B1/BB- 325,000 American Safety Razor Co., Senior Notes, 9.875% @ 2005 2000 @ 104.39 350,187
Series B
Ba3/B+ 325,000 Westinghouse Air Brake Company, Senior Notes 9.375% @ 2005 2000 @ 104.69 344,500
-----------
694,687
-----------
LEISURE, LODGING & ENTERTAINMENT (16.7%)
-----------------------------------------------------------------------------------------------------------
B2/B 325,000 AMC Entertainment Inc., 144A, Senior 9.50% @ 2009 2002 @ 104.75 340,437
Subordinated Notes
B2/B 325,000 Cinemark USA Inc., Senior Subordinated 9.625% @ 2008 2001 @ 104.81 344,500
Notes, Series B
-----------
684,937
-----------
TELECOMMUNICATIONS (16.7%)
-----------------------------------------------------------------------------------------------------------
B2/BB+ 650,000 Comcast Cellular Holdings Inc., 144A, Senior 9.50% @ 2007 2002 @ 104.75 684,125
Notes -----------
- ---------------------------------------------------------------------------------------------------------------------------------
$3,850,000 Total Bonds (Cost: $3,934,161) $4,103,781
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Schedule of Investments and Financial Statements
6
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
NOTES TO SCHEDULES OF INVESTMENTS
FEBRUARY 28, 1998
(1) All ratings (unaudited) are Standard & Poor's Corporation and/or
Moody's Investors Service.
(2) 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. Redemption
pursuant to call provisions generally will 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", in Part Two of this Prospectus. 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 to 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 premiums 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" in Part Two of this Prospectus.
7
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998
<TABLE>
<CAPTION>
CORPORATE
HIGH YIELD
SERIES 1
- --------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at market (cost $3,934,161) $ 4,103,781
Interest receivable 104,444
-----------
Total assets 4,208,225
LIABILITIES
Accrued expenses 4,433
Distributions payable 29,940
Cash overdraft 86,376
-----------
Total liabilities 120,749
-----------
Net assets $ 4,087,476
===========
Net assets (408,744 units of fractional undivided interest outstanding):
Original cost to investors of 408,744 units $ 4,087,440
Less:
Gross underwriting commissions (NOTE 4) (153,279)
Offering expenses (16,305)
-----------
3,917,856
Net unrealized appreciation of investments (NOTE 2) 169,620
-----------
Net assets $ 4,087,476
===========
Net asset value per unit (408,744 units) $ 10.00
===========
</TABLE>
- -----------------------------------------------
See accompanying Notes to Financial Statements.
8
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
CORPORATE
HIGH YIELD
SERIES 1
-------------
PERIOD FROM
MAY 22, 1997*
TO FEBRUARY
28, 1998
-------------
<S> <C>
Investment income, interest $ 279,612
Expenses:
Trustee fees and expenses 3,957
Evaluator fees 1,263
Sponsor fees 941
Audit fees 1,000
---------
Total expenses 7,161
---------
Investment income, net 272,451
---------
Unrealized gain on investments:
Net change in unrealized appreciation 169,620
---------
Net gain on investments 169,620
---------
Net increase in net assets resulting from operations $ 442,071
=========
</TABLE>
- -----------------------------------
*Commencement of operations
See accompanying Notes to Financial Statements.
9
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CORPORATE
HIGH YIELD
SERIES 1
-------------
PERIOD FROM
MAY 22, 1997*
TO FEBRUARY
28, 1998
-------------
<S> <C>
Operations:
Net investment income $ 272,451
Net change in unrealized appreciation 169,620
-----------
Net increase in net assets resulting from operations 442,071
-----------
Distributions to unitholders from (NOTE 4):
Investment income, net (272,451)
-----------
Total distributions (272,451)
-----------
Less: Offering expenses (NOTE 1): (16,305)
-----------
Total increase in net assets 153,315
Net assets:
Beginning of period 3,934,161
-----------
End of period $ 4,087,476
===========
</TABLE>
- -----------------------------------------
* Commencement of operations
See accompanying Notes to Financial Statements
10
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998
Delaware Investments Unit Investment Trust, Series 10 (the "Fund") consists of
Corporate High Yield Series 1 ("Corporate High Yield"). The Fund was organized
on May 22, 1997 and is registered under the Investment Company Act of 1940.
1. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
The market value of securities is determined by the Evaluator (a) on the
basis of current bid prices for the bonds; (b) if bid prices are not
available, on the basis of current bid prices for comparable bonds; (c) by
causing the value of the bonds to be determined by others engaged in the
practice of evaluating, quoting, or appraising comparable bonds; or (d) by
any combination of the above.
FEDERAL INCOME TAXES
No provisions for income taxes has been made because the Trust is not an
association taxable as a corporation for federal income tax purposes. Each
unitholder will be treated as the owner of a pro rata portion of the Trust
and will be taxed on his or her pro rata share of net investment income and
securities gains or losses, if any.
ORGANIZATION AND OFFERING COSTS
Organization and offering costs, including the costs of preparing the
initial registration statement, registering units with the Securities and
Exchange Commission and states, the initial audit of the Trust portfolio
and the initial fees and expenses of the Trustee were charged against
principal at the end of the Trust's initial offering period. The original
offering period as defined by the Sponsor is the point when either the
distributors inventory is substantially depleted, the Sponsor offers an
additional series, or one year has passed, which ever is sooner.
OTHER
The financial statements of the Fund are prepared on the accrual basis of
accounting. Security transactions are accounted for on the date the
securities are purchased or sold. For financial reporting purposes, cost of
the bonds reflects no amortization or accretion of bond premium or
discount.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
11
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENTS
At February 28, 1998, the unrealized market appreciation (depreciation) was as
follows:
Corporate High
Yield
-------------
Gross unrealized appreciation $169,620
Gross unrealized depreciation --
-------------
Net unrealized appreciation $169,620
=============
3. TRUST EXPENSES
The Trust pays trustee fees, evaluator fees, sponsor fees and various
out-of-pocket expenses.
Chase Manhattan Bank serves as Trustee and receives a monthly fee based on $1.26
per $1,000 principal amount of bonds outstanding as of the first day of such
month plus out-of-pocket expenses.
Muller Data Corporation serves as Evaluator and receives an $8.00 fee per
evaluation for the Trust.
Delaware Capital Management, Inc., an affiliate of the Fund's Distributor,
serves as Sponsor and receives a monthly fee (based on the number of units
outstanding as of the first day of such month) not to exceed $.003 per Unit on
an annual basis for the Trust. Prior to May 1, 1997, Voyageur Fund Managers,
Inc. served as Sponsor.
4. OTHER INFORMATION
The gross underwriting commission represents the aggregate sales charge paid in
connection with the initial public offering. Distributions of net investment
income to unitholders are paid on a monthly basis.
12
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. SELECTED DATA
Selected data for a unit of the Trust outstanding throughout the period follows:
<TABLE>
<CAPTION>
CORPORATE
HIGH YIELD
SERIES 1
-------------
PERIOD FROM
MAY 22, 1997*
TO FEBRUARY
28, 1998
-------------
<S> <C>
Interest income $ 0.69
Expenses (0.02)
--------
Net investment income 0.67
Income distributions (0.67)
--------
--
Offering expenses (0.04)
Net change in unrealized appreciation 0.42
--------
Increase in net asset value 0.38
Net asset value, beginning of period 9.62
--------
Net asset value, end of period $ 10.00
========
</TABLE>
- ----------------------------------
* Commencement of operations
13
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUST, SERIES 10
Part One
Must Be Accompanied By Part Two of this Prospectus
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
Sponsor: Delaware Capital Management, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103
Distributor: Delaware Distributors, L.P.
1818 Market Street
Philadelphia, Pennsylvania 19103
Trustee: The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004-2413
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
The Prospectus does not contain all the information set forth in the
registration statement 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.
<PAGE>
DELAWARE INVESTMENTS UNIT INVESTMENT TRUSTS
CORPORATE HIGH YIELD SERIES
PROSPECTUS PART TWO OF THIS PROSPECTUS
PART TWO MAY NOT BE DISTRIBUTED
OCTOBER 7, 1998, AS OF JUNE 30, 1998 WITHOUT PART ONE
- --------------------------------------------------------------------------------
SUMMARY
THE FUND. Delaware Investments Unit Investment Trusts, Corporate High
Yield Series (the "FUND") consists of the underlying separate unit investment
trusts set forth in Part One of this Prospectus. The various trusts are
collectively referred to herein as the "TRUSTS." Each Trust consists of a
portfolio of interest-bearing corporate debt obligations of domestic companies
(the "CORPORATE BONDS," or "BONDS").
INVESTMENT OBJECTIVE OF THE FUND. The investment objective of each
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. ALL OF THE BONDS IN THE TRUSTS 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 "THE FUND-INVESTMENT
OBJECTIVES AND PORTFOLIO SELECTION" AND "RISK FACTORS." The objective of each
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 Trusts will be achieved.
For foreign investors who are not United States citizens or residents,
interest income from the Trusts may not be subject to federal withholding taxes
if certain conditions are met. See "Tax Status."
UNITS OF THE TRUSTS 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.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of each
Trust is equal to the aggregate bid price of the Bonds in each 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. If the Bonds in a 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. 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" in Part One of this
Prospectus. The methods of calculating Estimated Current Return and Estimated
Long-Term Return are set forth 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, Delaware Distributors, L.P. (the "DISTRIBUTOR"), intends to maintain a
secondary market for the Units at prices based upon the aggregate bid price of
the Bonds in the portfolio of a Trust. 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 open-end management investment companies advised
by the Sponsor or its affiliates, 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. In addition, as each Trust contains a limited
number of Bonds, a default by one issuer will negatively impact the amount of
interest received by that Trust. See "RISK FACTORS."
The investor is advised to read and retain both Part One and Part Two
of this Prospectus for future reference.
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THE FUND
GENERAL. The Fund was created under the laws of the State of New York
pursuant to a Trust Agreement (the "TRUST AGREEMENT"), dated each Trust's
Initial Date of Deposit, as defined in "Summary of Essential Financial
Information" in Part One of this Prospectus, with Delaware Capital Management,
Inc. as Sponsor, Muller Data Corporation, as Evaluator, and The Chase Manhattan
Bank, as Trustee.
The Fund consists of separate unit investment trusts, each having a
portfolio of interest bearing corporate debt obligations of domestic companies.
Each Unit offered represents the fractional undivided interest in a
Trust as indicated under "SUMMARY OF ESSENTIAL FINANCIAL INFORMATION" in Part
One of this Prospectus. To the extent that any Units are redeemed by the
Trustee, the fractional undivided interest in a Trust represented by each
unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Distributor, or until the termination of the Trust Agreement.
Because certain of the Bonds in a 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 a 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 a Bond is sold or redeemed from a Trust or matures in
accordance with its terms, the estimated net annual interest income per Unit for
such 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 such Trust.
INVESTMENT OBJECTIVES AND PORTFOLIO SELECTION. The objective of the
Fund 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 bonds included in the Trusts 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 Bonds included in each Trust should be viewed
as speculative and an investor should review his or her ability to assume the
risks associated with an investment in 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 a Trust's objective will be achieved.
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The Sponsor of the Fund selected the Bonds for each Trust's portfolio
after considering the Fund's investment objective as well as the credit quality
of the individual Bonds selected for each 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 Trusts 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." Subsequent to each Trust's Initial Date of
Deposit, a Bond may cease to be so rated or its rating may be reduced below the
applicable Moody's, Standard & Poor's or Fitch ratings set forth above or both.
Neither event requires elimination of such Bonds from the portfolio of a Trust
but may be considered in the Sponsor's determination as to whether or not to
direct the Trustee to dispose of such Bond. See "TRUST ADMINISTRATION--PORTFOLIO
ADMINISTRATION."
RISK FACTORS
GENERAL. An investment in Units of the Trusts 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
Trusts 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.
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"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. Obligations that
are rated lower than BBB by Standard & Poor's or Fitch or Baa by Moody's should
be considered speculative, as such ratings indicate a quality of less than
investment grade. Investors should carefully review the objective of a Trust and
consider their ability to assume the risks involved before making an investment
in a Trust. See "Description of Bond Ratings" for a description of speculative
ratings issued by Standard & Poor's, Moody's and Fitch. 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 a 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 a 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 Trusts, 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
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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, a Trust may incur
additional expenses seeking payment on the defaulted Bond. Because amounts (if
any) recovered by a Trust in payment under the defaulted Bond may not be
reflected in the value of the Units until actually received by such 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.
Certain of the Bonds in the Trusts 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 Trusts 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.
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Certain of the Bonds in the Trusts 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.
Certain of the Bonds in the Trusts 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 Trusts 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 bond 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
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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
Trusts. 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. A 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 such Trust is terminated. See "TRUST
ADMINISTRATION -- PORTFOLIO ADMINISTRATION" and "TRUST ADMINISTRATION --
AMENDMENT OR TERMINATION." See "THE TRUST -- SCHEDULE OF INVESTMENTS" in Part
One of this Prospectus 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.
Like other investment companies, financial and business organizations
and individuals around the world, a Trust could be adversely affected if the
computer systems used by the Sponsor, Evaluator or Trustee or other service
providers to the Trusts do not properly process and calculate date-related
information and data involving dates of January 1, 2000 and thereafter. This is
commonly known as the "Year 2000 Problem." The Sponsor, Evaluator and Trustee
are taking steps that they believe are reasonably designed to address the Year
2000 Problem with respect to computer systems that they use and to obtain
reasonable assurances that comparable steps are being taken by each Trust's
other service providers. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact to the Trusts. The
Sponsor is unable to predict what impact, if any, the Year 2000 Problem will
have on issuers of the Bonds contained in the Trusts.
To the best knowledge of the Sponsor, there is no material litigation
pending as of the date of this Prospectus in respect of any Bonds which might
reasonably be expected to have a material adverse effect upon the Fund or any of
the Trusts. At any time after the date of this Prospectus, litigation may be
initiated on a variety of grounds with respect to Bonds in the Trust. The
outcome of litigation of such nature can never be entirely predicted. 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.
REDEMPTION 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
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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. Each 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 "SCHEDULE OF INVESTMENTS" in Part One of
this Prospectus.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the date indicated in "Summary of Essential Financial
Information" in Part One of this Prospectus, the Estimated Current Returns and
the Estimated Long-Term Returns were those indicated therein. 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 a 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 a 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.
TRUST OPERATING EXPENSES
COMPENSATION OF SPONSOR. Delaware Capital Management, Inc., which acts
as Sponsor, reserves the right to charge fees for providing supervisory services
in amounts which will not exceed the amounts as set forth under "SUMMARY OF
ESSENTIAL FINANCIAL INFORMATION" in Part One of this Prospectus. 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. The
Sponsor may also be reimbursed for bookkeeping and administrative services in
amounts which will not exceed the amounts set forth under "Summary of Essential
Financial Information" in Part One of this Prospectus. With respect to fees
payable to the Sponsor for providing portfolio supervision and bookkeeping and
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administrative services to the Trusts, such individual fees may exceed the
actual costs of providing such services for a Trust, but at no time will the
total amount paid to the Sponsor for providing such services rendered to all
unit investment trusts sponsored by the Sponsor or its affiliates in any
calendar year exceed the aggregate cost to the Sponsor and its affiliates 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. The Distributor, an
affiliate of the Sponsor, will receive sales commissions and may realize other
profits (or losses) in connection with the sale of Units.
EVALUATOR'S FEE. For its services, the Evaluator will receive a fee as
set forth under "SUMMARY OF ESSENTIAL FINANCIAL INFORMATION" in Part One of this
Prospectus. 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" in Part One of
this Prospectus. 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. 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 a 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 a Trust without
gross negligence, bad faith or willful misconduct on its part, (vi) any special
custodial fees
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payable in connection with the sale of any of the Bonds in a Trust and (vii)
expenditures incurred in contacting Unitholders upon termination of a Trust.
The fees and expenses set forth herein are payable out of the Trusts.
When such fees and expenses are paid by or owing to the Trustee, they are
secured by a lien on the portfolio or portfolios of the applicable Trusts. If
the balances in the Interest and Principal Accounts are insufficient to provide
for amounts payable by the Fund, the Trustee has the power to sell Bonds to pay
such amounts.
TAX STATUS
For purposes of the following discussion and opinion, it is assumed
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) Each Trust is not an association taxable as a corporation for
Federal income tax purposes.
(2) Each Unitholder of a 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 a
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 a 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 a 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 a Trust. Such basis is determined (before the adjustments
described below) by apportioning the tax basis for the Units among each of a
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 a 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
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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 a 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. 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. 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 Trusts is
deductible by the Unitholder to the same extent as though the expense had been
paid directly by the Unitholder. 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
may 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 Trusts 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 Trusts may have been acquired with
"original issue discount." In the case of any Bonds in the Trusts 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
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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 a 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 regarding whether an election
should be made and 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 a 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
Unitholder elects to include market discount, if any, on the Bonds held by a
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
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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 a 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 (subject to various
non-recognition provisions of the Code). 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. The holding period for any capital gain or loss
arising from the disposition of a Bond by a Trust or the disposition of Units by
a Unitholder will be determined by the period of time the Unitholder held his or
her Unit and the period of time such Trust held the Bond. The Internal Revenue
Service Restructuring and Reform Act of 1998 (the "1998 TAX ACT") provides that
for taxpayers other than corporations, net capital gain (which is defined as net
long-term capital gain over net short-term capital loss for the taxable year)
realized form property (with certain exclusions) is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in the
lowest tax bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period for the
asset is one year or less. The date on which a Unit is acquired (i.e., the
"trade date") is excluded for purposes for determining the holding period of the
Unit. The legislation is generally effective retroactively for amounts properly
taken into account on or after January 1, 1998. Capital gains realized form
assets held for one year or less are taxed at the same rates as ordinary income.
The Taxpayer Relief Act of 1997 includes other provisions that treat
certain other transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as constructive
sales for purposes of recognition of gain (but not loss) and for purposes of
determining the holding period. Unitholders should consult their own tax
advisers with regard to any such constructive sales rules.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "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. 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.
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.
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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 certain provisions of the Code eliminate 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
Trusts for New York tax matters, as of the Initial Date of Deposit for each
Trust, each Trust was not an association taxable as a corporation and the income
of each Trust will be treated as the income of the Unitholders 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.
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PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price. 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. 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 and
broker/dealers may purchase Units of a Trust without a sales charge in the
secondary offering period.
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 secondary offering period at the
Public Offering Price less the concession the Distributor 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, each Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, 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 respective Trust the amount, if any, of accrued
interest paid on their Units.
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 a 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 Part
One of this Prospectus in accordance with fluctuations in the prices of the
underlying Bonds in each Trust.
As indicated above, the price of the Units as of the opening of
business on the date of this Prospectus was determined by adding to the
determination of the aggregate bid price of the Bonds an amount equal to 4.712%
of such value and dividing the sum so obtained by the number of Units
outstanding. This computation produced a gross underwriting profit equal to
4.50% of the Public Offering Price. The Evaluator will appraise or cause to be
appraised daily the value of the underlying Bonds as of the close of trading on
the New York Stock Exchange (generally 4:00 p.m. Eastern time) on days the New
York Stock Exchange is open
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(or as of any earlier closing time on a day on which the New York Stock Exchange
is scheduled in advance to close at such earlier time) 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 (or as of any earlier closing
time on a day on which the New York Stock Exchange is scheduled in advance to
close at such earlier time) on such other days as may be necessary. Such Public
Offering Price will be effective for all orders received at or prior to 4:00
p.m. Eastern time (or as of any earlier closing time on a day on which the New
York Stock Exchange is scheduled in advance to close at such earlier time) on
each such day. Orders received by the Trustee, Sponsor, Distributor or any
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.
The aggregate price of the Bonds in each Trust has been and will be
determined on the basis of bid prices (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 a 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 Public Offering Price per Unit is based on the bid price per Unit
of the Bonds in each Trust plus the applicable sales charge plus accrued
interest. The offering price of Bonds in each Trust may be expected to range
from 1-3% more than the bid price of such Bonds.
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 Distributor prior to the
date of settlement for the purchase of Units may be used in the Distributor's
business and may be deemed to be a benefit to the Distributor, subject to the
limitations of the Securities Exchange Act of 1934.
UNIT DISTRIBUTION. Units repurchased in the secondary market, if any,
may be offered by this prospectus at the secondary Public Offering Price in the
manner described above. The Distributor intends to qualify the Units for sale in
a number of states. Broker-dealers and other selling agents will be allowed a
concession or agency commission in connection with the distribution of Units
equal to 3.0% of the Public Offering Price per Unit. 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 Trusts; 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
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financial institutions may be required to register as dealers pursuant to state
law. The Distributor 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 other from time to time.
DISTRIBUTOR COMPENSATION. The Distributor will receive a gross sales
commission equal to 4.50% of the Public Offering Price of the Units (equivalent
to 4.712% of the net amount invested), less any reduced sales charge as
described under "PUBLIC OFFERING - GENERAL." See "PUBLIC OFFERING - UNIT
DISTRIBUTION" for information regarding concessions or agency commissions
available to broker-dealers and other selling agents.
As stated under "Public Market" below, the Distributor intends to
maintain a secondary market for the Units of the Fund. In so maintaining a
market, the Distributor 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 Distributor
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.
At various times the Distributor may implement programs under which the
sales forces of the brokers, dealers, banks and/or others may be eligible to win
nominal awards for certain sales efforts, or under which the Distributor will
reallow to any such brokers, dealers, banks and/or others that sponsor sales
contests or recognition programs conforming to criteria established by the
Distributor, or participate in sales programs sponsored by the Distributor, 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
Distributor in its discretion may from time to time pursuant to objective
criteria established by the Distributor pay fees to the brokers, dealers, banks
or others for certain services or activities which are primarily intended to
result in sales of Units of a Trust. Such payments are made by the Distributor
out of its own assets, and not out of the assets of a Trust. These programs will
not change the price Unitholders pay for their Units or the amount that a Trust
will receive from the Units sold.
PUBLIC MARKET. Although not obligated to do so, the Distributor intends
to 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 a Trust
and less any accrued Trust expenses. If the supply of Units exceeds demand or if
some other business reason warrants it, the Distributor 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 of a Trust and any accrued interest. The aggregate bid prices of
the underlying Bonds in a Trust are expected to be less than the related
aggregate offering prices. See "RIGHTS OF UNITHOLDERS -- REDEMPTION OF UNITS." A
UNITHOLDER WHO
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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 any 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 Unitholder's 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
Trusts, 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 appropriate Trust. Other receipts are credited to the Principal
Account of the appropriate Trust. Interest received by a Trust 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
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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 $0.01 per Unit.
The distribution to the Unitholders as of each record 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 Trusts 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 the Trusts (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 Trusts. Amounts so withdrawn shall not be considered a part
of a Trust's assets until such time as the Trustee shall return all or any part
of such amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Interest and Principal Accounts such amounts as may be
necessary to cover 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 in the Delaware
Investments Family of Mutual Funds 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 should obtain a prospectus for the
respective Reinvestment Fund by writing to Delaware Distributors, L.P. at 1818
Market Street, Philadelphia, Pennsylvania 19103 or by phone at 800-362-7500.
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
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Fund at a net asset value as computed as of the next end of a "business day" as
defined in the Reinvestment Fund's prospectus.
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 a 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 each Trust shall be audited, not less
frequently than annually, by independent certified public accountants and the
report of such accountants shall be furnished by the Trustee to Unitholders of
such 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 such 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 a Trust furnished to it by the Evaluator.
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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" in
Part One of this Prospectus 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 appropriate 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
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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
a Trust, as of the close of trading on the New York Stock Exchange on days of
trading on the New York Stock Exchange (or as of any earlier closing time on a
day on which the New York Stock Exchange is scheduled in advance to close at
such earlier time) on the date any such determination is made. 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 a 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 a 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 affected 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 a
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 Distributor may be tendered to the
Trustee for redemption as any other Units.
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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 Trustee may, from time to time, retain and pay compensation to
the Sponsor (or an affiliate of the Sponsor) to act as agent for the Trusts with
respect to selling Bonds from the Trusts. In acting in such capacity, the
Sponsor or its affiliate will be held subject to the restrictions under the
Investment Company Act of 1940, as amended.
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, the acquisition by a 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
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<PAGE>
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 a 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.
A 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" in Part One of the Prospectus. A Trust will be liquidated by the
Trustee in the event that a sufficient number of Units not yet sold are tendered
for redemption by the underwriters, including the Distributor, 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 Distributor will refund to each purchaser
of Units the entire sales charge paid by such purchaser.
The Trust Agreement provides that a 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 a 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 such 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 a 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
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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.
SPONSOR. Delaware Capital Management, Inc. is the Sponsor of the Fund
and Delaware Distributors, L.P. is the primary Distributor of Fund Units. Both
the Sponsor and Distributor are indirect, wholly owned subsidiaries of Lincoln
National Corporation ("LNC"). 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 Investments Family of Mutual
Funds.
As of April 30, 1998, affiliates of DMH, including the Sponsor, had
assets under management of over $45 billion in mutual fund and institutional
accounts, and served as investment adviser to over 100 mutual fund portfolios.
The principal business address for the Sponsor is One Commerce Square,
Philadelphia, Pennsylvania 19103; the principal business address for the
Distributor 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.
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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, with its principal
executive offices located at 270 Park Avenue, New York, New York 10017 and 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 a
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 Trusts.
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.
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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.
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 financial statements of each Trust as of the
date presented in Part One of this Prospectus have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given the
authority of such 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.
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:
- ---------------------
* As published by the ratings companies.
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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
29
<PAGE>
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
30
<PAGE>
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.
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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.
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------------------------------
TABLE OF CONTENTS
TITLE PAGE
SUMMARY.....................................................1
THE FUND....................................................3
RISK FACTORS................................................4
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN.....9
TRUST OPERATING EXPENSES....................................9
TAX STATUS.................................................11
PUBLIC OFFERING............................................16
RIGHTS OF UNITHOLDERS......................................19
TRUST ADMINISTRATION.......................................23
OTHER MATTERS..............................................28
DESCRIPTION OF BOND RATINGS................................28
------------------------------
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.
PROSPECTS
PART TWO
------------------------------
October 7, 1998, as of June 30, 1998
DELAWARE INVESTMENTS UNIT
INVESTMENT TRUSTS
CORPORATE HIGH YIELD SERIES
DELAWARE CAPITAL MANAGEMENT, INC.
ONE COMMERCE SQUARE
PHILADELPHIA, PENNSYLVANIA
19103
------------------------------
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE.
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT
TO REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Post-Effective Amendment to the Registration Statement comprises
the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Delaware Investments Unit Investment Trust, Series 10, certifies
that it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment to its Registration Statement to be signed
on its behalf by the undersigned thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Philadelphia and State of
Pennsylvania on the 8th day of October, 1998.
Delaware Investments Unit Investment Trust,
Series 10
(Registrant)
By Delaware Capital Management, Inc.
(Depositor)
By /s/ Wayne A. Stork
--------------------------------------
Chairman of the Board of Directors and
President
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities on October 8, 1998:
/s/ Wayne A. Stork
- -----------------------------
Wayne A. Stork Chairman of the Board of Directors and President
/s/ George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr. Director, Senior Vice President and Secretary
/s/ David K. Downes
- -----------------------------
David K. Downes Senior Vice President, Chief Operating Officer,
and Chief Financial Officer
EXHIBIT 99.c1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated September 18, 1998 in this Post-Effective
Amendment No. 1 to Registration Statement (Form S-6 No. 333-26193) and related
Prospectus of Delaware Investments Unit Investment Trust, Series 10 dated
October 7, 1998.
Ernst & Young LLP
Philadelphia, Pennsylvania
September 30, 1998
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