File No. 33-13308 CIK No. 812346
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 4
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Voyageur Unit Investment Trust, Series 2
(Exact Name of Trust)
Voyageur Fund Managers, Inc.
(Exact Name of Depositor)
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
(Complete address of Depositor's principal executive offices)
Voyageur Fund Managers, Inc. Chapman and Cutler
Attention: Thomas J. Abood Attention: Mark J. Kneedy
90 South Seventh Street, Suite 4400 111 West Monroe Street
Minneapolis, Minnesota 55402 Chicago, Illinois 60603
(Name and complete address of agents for service)
(X) Check if it is proposed that this filing will become effective on November
22, 1995 pursuant to paragraph (b) of Rule 485.
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
1,864 UNITS
PROSPECTUS
Part One
Dated November 22, 1995
NOTE: PART ONE OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY PART TWO.
In the opinion of Counsel, interest income to the Trust and to Unit
holders, with certain exceptions, is exempt under existing law from all Federal
income taxes. In addition, the interest income is, in the opinion of Special
Counsel, exempt to the extent indicated from Minnesota State and local income
taxes. Capital gains, if any, are subject to tax.
THE TRUST
Voyageur Unit Investment Trust, Series 2 (the "Trust") consists of a fixed
portfolio of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities within the State of Minnesota,
counties, municipalities, authorities and political subdivisions thereof, the
interest on which is, in the opinion of recognized bond counsel to the issuing
governmental authorities, exempt from all Federal income taxes and from
Minnesota State and local income taxes under existing law. At November 17, 1995,
each Unit represented a 1/1,864 undivided interest in the principal and net
income of the Trust (see "The Trusts" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor 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 Sponsor. 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 aggregate value of
the Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 5.50% of the Public Offering Price (5.820%
of the amount invested). At November 17, 1995, the Public Offering Price per
Unit was $605.37 plus net interest accrued to date of settlement (three business
days after such date) of $.29852, $.29952 and $.30069 for the monthly, quarterly
and semi-annual distribution plans, respectively (see "Public Offering" in Part
Two).
Please retain all parts of this Prospectus for future reference.
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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.
- --------------------------------------------------------------------------------
VOYAGEUR FUND MANAGERS, INC.
SPONSOR
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.96% per annum on November 17, 1995, 5.94% under the quarterly
distribution plan and 5.92% under the monthly distribution plan. Estimated
Long-Term Return to Unit holders under the semi-annual distribution plan was
4.18% per annum on November 17, 1995, 4.15% under the quarterly distribution
plan and 4.13% under the monthly distribution plan. 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 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; (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust; and (3) takes into effect the tax-adjusted yield from potential
capital gains at the Date of Deposit. Since the market values and estimated
retirements of the Bonds and the expenses of the Trust will change, there is no
assurance that the present Estimated 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.
<TABLE>
<CAPTION>
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 17, 1995
SPONSOR: VOYAGEUR FUND MANAGERS, INC.
EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
TRUSTEE: THE BANK OF NEW YORK
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $980,000
Number of Units 1,864
Fractional Undivided Interest in the Trust per Unit 1/1,864
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,066,343
Aggregate Value of Bonds per Unit $572.07
Sales Charge 5.820% (5.50% of Public Offering Price) $33.30
Public Offering Price per Unit $605.37*
Redemption Price and Sponsor's Repurchase Price per Unit
($33.30 less than the Public Offering Price per Unit) $572.07*
Date Trust Established April 9, 1987
Mandatory Termination Date December 31, 2036
Evaluator's Fee: $.27 per $1,000 principal amount of bonds, with a minimum annual fee of $1,500.
Evaluations for purposes of sale, purchase or redemption of Units are made as of the close of trading
(4:00 p.m. Eastern time) on the New York Stock Exchange on each day which it is open.
Discretionary Liquidation Amount of the Trust is 20% of the original principal amount of Bonds in
the Trust.
Supervisory fee payable to the Sponsor Maximum of $.25 per Unit annually
</TABLE>
* Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption" in Part
Two).
<TABLE>
<CAPTION>
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 17, 1995
SPONSOR: VOYAGEUR FUND MANAGERS, INC.
EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
TRUSTEE: THE BANK OF NEW YORK
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Quarterly Annual
Calculation of Estimated Net Annual Income:
<S> <C> <C> <C>
Estimated Annual Interest Income $37.90 $37.90 $37.90
Less: Estimated Annual Expense $ 2.08 $ 1.96 $ 1.82
------ ------- -------
Estimated Net Annual Interest Income $35.82 $35.94 $36.08
====== ====== ======
Calculation of Interest Distribution:
Estimated Interest Distribution Per Unit $ 2.99 $ 8.99 $18.04
Divided by 12, 4 and 2, Respectively
Public Offering Price per Unit $605.37 $605.37 $605.37
Estimated Daily Rate of Net Interest Accrual $.09951 $.09984 $.10023
Estimated Current Return Based on
Public Offering Price 5.92% 5.94% 5.96%
Estimated Long-Term Return Based on
Public Offering Price 4.13% 4.15% 4.18%
</TABLE>
TRUSTEE'S ANNUAL FEE: $1.08, $.85 and $.60 per $1,000 principal amount of Bonds
for those portions of the Trust under the monthly, quarterly and semi-annual
distribution plans, respectively.
COMPUTATION DATES: Fifteenth day of the month as follows: monthly-each month;
quarterly- March, June, September and December; semi-annual-June and December.
DISTRIBUTION DATES: last day of the month as follows: monthly-each month;
quarterly - March, June, September and December; semi-annual-June and December.
ESTIMATED ANNUAL EXPENSES: Calculations based on financial data as of April 30,
1995. Actual expenses per unit may differ for each distribution plan.
INDEPENDENT AUDITORS' REPORT
To the Sponsor, Trustee and the Unitholders of
Voyageur Unit Investment Trust, Series 2:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Voyageur Unit Investment Trust, Series 2 (the
Trust) as of April 30, 1995, and the related statements of operations and
changes in net assets for the years in the three-year period ended April 30,
1995.These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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. Investments held in
custody are confirmed to us by the trustee. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide 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 Voyageur Unit Investment Trust,
Series 2 at April 30, 1995, and the results of its operations and changes in its
net assets for the years in the three-year period ended April 30, 1995, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
August 11, 1995
<TABLE>
<CAPTION>
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
Statement of Assets and Liabilities
April 30, 1995
Assets
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<S> <C>
Investments in securities, at market (cost $1,102,493)
(note 3 to schedule of investments) $ 1,144,427
Interest receivable 30,980
Receivable for investment securities sold 5,000
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Total assets $ 1,180,407
___________________________________________________________________________________________________________________
Liabilities and Net Assets
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Cash disbursements in excess of cash on demand deposit 9,038
Accrued liabilities 2,556
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Total liabilities 11,594
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Net assets (2,033 units of fractional undivided interest currently outstanding):
Original cost to investors of 3,074 units (note B) 3,074,000
Less:
Gross underwriting commissions (note C) (146,015)
Cost of securities sold or called since date of deposit (1,825,494)
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1,102,491
Net unrealized appreciation of investments (note D) 41,934
Undistributed investment income, net 19,383
Undistributed proceeds from bonds 5,005
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Net assets 1,168,813
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Total liabilities and net assets $ 1,180,407
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
Statements of Operations
Year Year Year
ended ended ended
April 30, April 30, April 30,
1995 1994 1993
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<S> <C> <C> <C>
Investment income, interest $ 86,729 $ 119,169 $ 161,522
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Expenses:
Trustee fees and expenses 1,950 2,293 2,916
Evaluator fees 1,572 1,531 2,338
Sponsor fees 518 0 1,405
Accounting fees 1,000 2,500 2,780
Other 1,636 275 142
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Total expenses 6,676 6,599 9,581
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Investment income, net 80,053 112,570 151,941
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Realized and unrealized gain (loss) on investments, net (notes A and D):
Net realized gain (loss) on investments 9,926 14,176 (68,418)
Net change in unrealized appreciation
(depreciation) (17,841) (49,070) 120,477
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Net (loss) gain on investments (7,915) (34,894) 52,059
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Net increase in net assets
resulting from operations $ 72,138 $ 77,676 $ 204,000
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
Statements of Changes in Net Assets
Year Year Year
ended ended ended
April 30, April 30, April 30,
1995 1994 1993
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Operations:
<S> <C> <C> <C>
Investment income, net $ 80,053 $ 112,570 $ 151,941
Net realized gain (loss) on investments 9,926 14,176 (68,418)
Net change in unrealized (depreciation)
appreciation (17,841) (49,070) 120,477
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Net increase in net assets
resulting from operations 72,138 77,676 204,000
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Distributions to unitholders from (notes E and F):
Investment income, net (84,215) (119,753) (165,595)
Distributions, principal (99,015) (376,828) (376,162)
Unit redemptions (50,714) (230,464) (556,244)
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Total distributions (233,944) (727,045) (1,098,001)
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Total decrease
in net assets (161,806) (649,369) (894,001)
Net assets:
Beginning of year 1,330,619 1,979,988 2,873,989
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End of year $ 1,168,813 $ 1,330,619 $ 1,979,988
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements.
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
Notes to Financial Statements
April 30, 1995
(A) The financial statements of Voyageur Unit Investment Trust, Series 2 are
prepared on the accrual basis of accounting. Security transactions are
accounted for on the date the securities are purchased or sold. The Trust
will terminate on the mandatory termination date of December 31, 2036.
(B) Cost to investors represents the initial public offering price as of the
date of deposit, adjusted for the cost of bonds called or sold since the
date of deposit.
(C) The gross underwriting commission represents the aggregate sales charge
paid in connection with the initial public offering.
(D) At April 30, 1995, the gross unrealized market appreciation was $41,934 and
the gross unrealized market depreciation was $0. The net unrealized market
appreciation was $41,934.
(E) Distributions of net interest income to unitholders are paid monthly,
quarterly or semiannually based on the unitholder's election.
(F) During the current year 82 units were redeemed with principal of $49,653
and interest of $1,061. Since October 1991, there has been no active
secondary market for the Trust's units.
(G) No provision for income taxes has been made because the Trust is not an
association taxable as a corporation for federal or Minnesota state 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.
<TABLE>
<CAPTION>
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
Schedule of Investments
April 30, 1995
Aggregate
Ratings principal Title of bonds described Coupon rate Redemption Market
(1) amount in trust or contracted for and maturity features (2) value (3)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aa $ 325,000 Minneapolis Redevelopment 7.10% @ 01/01/20 01/01/97 @ 103 $ 328,156
Mortgage Revenue Bonds
(Riverfront Project) Series
1987A (4)
AA 65,000 Minneapolis Housing & 6.75% @ 05/01/09 05/01/95 @ 101.5 65,324
Redevelopment Authority
Single Family Mortgage
Revenue Bonds
AA+ 120,000 Minnesota Housing Finance 7.00% @ 07/01/16 07/01/95 @ 102 120,241
Agency Single Family S.F. 01/01/06 @ 100
Mortgage Bonds, Series 1986C
AAA 250,000 Minnetonka Multifamily 7.25% @ 12/01/02 12/01/97 @ 102 262,383
Rental Housing Revenue
Bonds (Minnetonka Hills
Apartment Project) Series 1985
AAA 290,000 St. Louis Park Multifamily 7.375% @ 12/01/28 06/01/97 @ 102 296,531
Rental Housing Revenue S.F. 06/01/08 @ 100
Bonds (FHA Insured Mortgage
Loan--Community Housing
and Service Corporation
Project)
AAA 70,000 Southern Minnesota Municipal 7.125% @ 01/01/15 01/01/96 @ 102 71,792
Power Agency Power Supply S.F. 06/01/08 @ 100
System Revenue Refunding
Bonds, Series 1986C
- -------------------------------------------------------------------------------------------------------------------------
$1,120,000 Total Bonds (cost: $1,102,493) $1,144,427
_________________________________________________________________________________________________________________________
</TABLE>
See notes to schedule of investments.
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
Notes to Schedule of Investments
April 30, 1995
(1) All ratings (unaudited) except those identified by an asterisk are by
Standard & Poor's Corporation. All ratings identified by an asterisk are by
Moody's Investors Service.
(2) Unless otherwise indicated, there is shown under this heading the year in
which each issue of bonds initially is redeemable and the redemption price
for that year; each such issue continues to be redeemable at declining
prices thereafter, but not below par. "S.F." indicates a sinking fund has
been or will be established with respect to an issue of bonds. In addition,
certain bonds in the portfolio may be redeemed in whole or in part other
than by operation of the stated redemption or sinking fund provisions under
certain unusual or extraordinary circumstances specified in the instruments
setting forth the terms and provisions of such bonds. A sinking fund is a
reserve fund accumulated over a period of time for retirement of debt. A
callable bond is one which is subject to redemption prior to maturity at
the option of the issuer.
(3) The market value 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. Determinations of the aggregate bid price of the bonds, for purposes
of redemptions by the Trustee, will be made on each business day on which
the New York Stock Exchange is open for business as of the Evaluation Time,
effective for all sales or redemptions made subsequent to the last
preceding determination.
(4) This issue of bonds is secured by an irrevocable letter of credit from the
Bank of Tokyo, Ltd.
VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
PART ONE
MUST BE ACCOMPANIED BY PART TWO
--------------
PROSPECTUS
--------------
SPONSOR: Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
TRUSTEE: The Bank of New York
101 Barclay Street
New York, New York 10286
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.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust 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.
VOYAGEUR UNIT INVESTMENT TRUST
SERIES 1
SERIES 2
SERIES 3
PART TWO
---------------------------
The investment objectives of the Trusts are to obtain for Unitholders
tax-exempt income and conservation of capital through investment in a
diversified portfolio of municipal bonds.
The interest on all bonds in the Trusts is, in the opinion of recognized
bond counsel to the issuers of the obligations, not includable in gross income
for federal income tax purposes or in taxable net income of individuals, estates
or trusts for Minnesota income tax purposes under existing laws (except in
certain instances depending upon the Unitholders). Such interest income is
subject to tax in the case of corporations subject to the Minnesota Corporate
Franchise Tax or the Corporate Alternative Minimum Tax and is a factor in the
computation of the Minimum Fee applicable to financial institutions. Interest on
certain bonds may be includable in income for purposes of the federal and
Minnesota alternative minimum taxes. Capital gains, if any, are subject to tax.
The minimum purchase is three Units. Only whole Units may be purchased. The
value of the Units of the Trusts will fluctuate with the value of the underlying
bonds.
THE INITIAL PUBLIC OFFERING OF UNITS IN THE TRUSTS HAS BEEN COMPLETED. THE
UNITS OFFERED HEREBY ARE ISSUED AND OUTSTANDING UNITS THAT HAVE BEEN ACQUIRED BY
THE SPONSOR EITHER BY PURCHASE FROM THE TRUSTEE OF UNITS TENDERED FOR REDEMPTION
OR IN THE SECONDARY MARKET.
THIS PROSPECTUS IS IN TWO PARTS. INVESTORS SHOULD READ AND RETAIN BOTH
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.
---------------------------
THE DATE OF THIS PROSPECTUS IS THAT DATE WHICH IS SET FORTH IN PART ONE OF THE
PROSPECTUS.
SUMMARY
THE TRUST
Voyageur Unit Investment Trust, Series 1-3 (herein referred to collectively
as the "TRUSTS" and individually as a "TRUST") are each one of a series of
similar but separate unit investment trusts consisting of a diversified
portfolio of interest-bearing municipal bonds (the "BONDS") issued by or on
behalf of the State of Minnesota and counties, municipalities, authorities and
political subdivisions thereof. The interest on the Bonds in each Trust is, in
the opinion of recognized bond counsel to the issuing governmental authorities,
not includable in gross income for federal income tax purposes or in taxable net
income of individuals, estates and trusts for Minnesota income tax purposes
under existing laws (except in certain instances depending upon the
Unitholders). Such interest income is includable in taxable income of
corporations and financial institutions for purposes of the Minnesota franchise
tax. Interest on certain Bonds may be includable in income for purposes of the
federal and Minnesota alternative minimum taxes. See "The Trusts--Portfolios."
OBJECTIVES
The objectives of each Trust are tax-exempt income for federal and State of
Minnesota income tax purposes and conservation of capital. There is, of course,
no guarantee that these objectives will be achieved since the payment of
interest and conservation of capital is dependent upon the continued ability of
the issuers of the Bonds to meet such obligations. See "The Trusts--Portfolios."
In addition, the continuing tax-exempt status of such interest may be dependent
upon compliance following the issuance of the Bonds with certain restrictions
and upon future tax legislation. See "The Trusts--Tax Status."
THE UNITS
As of the date of this Prospectus the fractional and undivided interest
represented by a Unit was that amount stated under "Summary of Essential
Information" in Part One. If Units in the Trusts are redeemed, the fractional
undivided interest represented by each unredeemed Unit will increase although
the actual interest in the Trust represented by such Unit will remain
essentially unchanged.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the date indicated therein, Estimated Current Return and Estimated
Long-Term Return to Unitholders is set forth in the "Summary of Essential
Information" in Part One. 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 OF INTEREST AND PRINCIPAL
Distributions of interest received by a Trust, pro rated on an annual
basis, will be made semiannually unless the Unitholder elects to receive them
quarterly or monthly. Distributions of funds in the Principal Account, if any,
will be made semi-annually. See "Rights of Unitholders--Distribution of Interest
and Principal."
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is equal to the aggregate bid price
of the Bonds in a Trust's portfolio divided by the number of Units outstanding
in such Trust, plus accrued interest on the date of settlement and a sales
charge equal to 5.50% of the Public Offering Price per Unit (5.820% of the
aggregate offering price of the Bonds per Unit), subject to reduction for
certain quantity purchases (see "Public Offering--Offering Price"). If the
underlying Bonds in each Trust were available for direct purchase, the purchase
price of such Bonds would not include the sales charge included in the Public
Offering Price of the Units.
MARKET FOR UNITS
The Sponsor, although not obligated to do so, presently intends to maintain
a market for the Units, as more fully described under "Public Offering--Market
for Units." If such market is not maintained, a Unitholder may be able to
dispose of his Units only through redemption.
RISK FACTORS
An investment in the Trusts should be made with an understanding of the
risks associated therewith, including, among other factors, the inability of the
issuer to pay the principal of or interested on a bond when due, volatile
interest rates, early call provisions, and changes to the tax status of the
Bonds. See "The Trusts--Risk Factors."
THE TRUSTS
GENERAL
Voyageur Unit Investment Trust, Series 1-3 (herein referred to collectively
as the "TRUSTS" and individually as a "TRUST") are each one of a series of
similar but separate unit investment trusts created under the laws of the State
of New York by a Trust Indenture and Agreement and related Reference Trust
Agreement (the "TRUST AGREEMENTS") among Voyageur Fund Managers, Inc. who has
assumed responsibility of an affiliate, Dougherty Dawkins, Inc. (formerly
Dougherty, Dawkins, Strand & Bigelow Incorporated and Dougherty, Dawkins, Strand
& Yost Incorporated), as Sponsor, The Bank of New York, as Trustee, and American
Portfolio Advisory Service Inc., as Evaluator.
PORTFOLIOS
The objectives of each Trust are to obtain for Unitholders tax-exempt
income, for federal and State of Minnesota income tax purposes, and conservation
of capital through investment in a diversified portfolio of municipal bonds.
There is, of course, no guarantee that a Trust's objectives will be achieved.
The portfolio of Bonds for each Trust was chosen by the Sponsor with a view to
achieving a balance of income and diversification as to the purpose of issue and
safety of principal. The following factors, among others, were considered in
selecting the Bonds: (a) 100% of the aggregate principal amount of the bonds
deposited in a Trust are obligations of the State of Minnesota or of the
counties, municipalities, authorities or political subdivisions thereof, so that
the interest on all of such obligations, in the opinion of bond counsel to the
issuing governmental authorities, is not includable in gross income for federal
income tax purposes or in taxable net income of individuals, trusts and estates
for Minnesota income tax purposes under existing laws (except in certain
instances depending upon the Unitholders); (b) the Bonds are diversified as to
purpose of issue; and (c) in the opinion of the Sponsor, the Bonds are fairly
valued relative to other bonds of comparable quality and maturity.
Notwithstanding clause (a) in the preceding sentence, interest on certain Bonds
may be includable in income for purposes of the federal and Minnesota
alternative minimum taxes. Interest on such Bonds also is subject to tax in the
case of corporations subject to the Minnesota Corporate Franchise Tax or the
Corporate Alternative Minimum Tax and is a factor in the computation of the
Minimum Fee applicable to financial institutions.
The portfolios of the Trusts do not contain any issues of bonds the
interest on which is includable in the income of individuals, estates and trust
for purposes of the federal and Minnesota alternative minimum taxes. See
"Schedule of Investments" in Part One.
As of the date indicated therein, the Bonds in each Trust (computed as a
percentage of the aggregate principal amount of Bonds in such Trust on such
date) were rated by Standard & Poor's Corporation or by Moody's Investors
Service as described in "Schedule of Investments" in Part One. Unrated Bonds
were, in the opinion of the Sponsor, of comparable investment quality as of such
date. For a description of the meaning of the applicable rating symbols as
published by Standard & Poor's Corporation and Moody's Investors Service, see
"Description of Bond Ratings." There can be no assurance that the economic and
political conditions on which the ratings of the Bonds are based will continue
or that particular Bond issues may not be adversely affected by changes in
economic, political or other conditions that do not affect the above ratings.
State grants and aids represent a large percentage of the total revenues of
cities, towns, counties and school districts in Minnesota. Even with respect to
Bonds that are revenue obligations and not general obligations of the issuer,
there can be no assurance that fiscal problems of the State of Minnesota will
not adversely affect the market value or marketability of the Bonds or the
ability of the respective obligors to pay interest on and principal of the
Bonds.
RISK FACTORS. An investment in Units of a Trust should be made with an
understanding of the risks which an investment in fixed-rate long-term debt
obligations may entail, including the risk that the value of a Trust and hence
of the Units will decline with increases in interest rates. High inflation and
recession, together with the fiscal and monetary measures adopted to attempt to
deal with those and other economic problems, have contributed to recent wide
fluctuations in interest rates and thus in the value of fixed-rate obligations
generally. The Sponsor cannot predict future economic policies or their
consequences or, therefore, the course or extent of any similar fluctuations in
the future.
In addition, investors should be aware that the Internal Revenue Code
includes provisions that significantly affect the federal income tax treatment
of interest on certain tax-exempt bonds, the projects and activities that may be
financed from proceeds of tax-exempt bonds and the principal amount of certain
tax-exempt bonds that may be issued by governmental entities in certain states,
including the State of Minnesota. Proposals may be introduced before Congress in
the future, the purpose of which will be to further restrict or eliminate the
federal income tax exemption for interest on debt obligations similar to the
Bonds in the Trusts. See "The Trusts--Tax Status."
Although Minnesota state law provides that interest on Minnesota bonds is
exempt from Minnesota state income taxation, the Minnesota state legislature has
recently enacted a statement of intent that Minnesota bonds should be subject to
Minnesota state income taxation if a court decides that this exemption violates
the Commerce Clause of, or otherwise contravenes, the U.S. Constitution,
effective for the calendar year in which such a decision becomes final. It
cannot be predicted whether a court would render such a decision or whether, as
a result thereof, interest on Minnesota bonds and therefore distributions by a
Trust would become subject to Minnesota state income taxation.
An investment in Units of the Trusts should be made with an understanding
of the risks which investments in certain categories of bonds may entail, as
described below.
(a) GENERAL OBLIGATION BONDS -- Certain of the Bonds in the Trusts may
be general obligations of a governmental entity that are backed by the ad
valorem property taxing power of the entity. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for
the payment of principal and interest. However, the taxing power of any
governmental entity may be limited by provisions of state constitutions or
laws and an entity's credit will depend upon many factors, including an
erosion of the tax base due to population declines, natural disasters,
declines in the state's industrial base or inability to attract new
industries, economic limits on the ability to tax without eroding the tax
base and the extent to which the entity relies upon federal or state aid,
access to capital markets or other factors beyond the entity's control.
In the early 1980s the State of Minnesota experienced financial
difficulties due to a downturn in the State's economy resulting from the
national recession. As a consequence, the State's revenues were
significantly lower than anticipated in the July 1, 1979 to June 30, 1981
biennium and the July 1, 1981 to June 30, 1983 biennium.
In response to revenue shortfalls, the legislature broadened and
increased the State sales tax, increased income taxes (by increasing rates
and eliminating deductions) and reduced appropriations and deferred payment
of State aid, including appropriations for and aids to local governmental
units. The State's fiscal problems affected other governmental units within
the State, such as local government, school districts and state agencies,
which, in varying degrees, also faced cash flow difficulties. In certain
cases, revenues of local governmental units and agencies were reduced by
the recession.
Because of the State's fiscal problems, Standard & Poor's Corporation
reduced its rating on the State's outstanding obligation bonds from AAA to
AA+ in August 1981 and to AA in March 1982. Moody's Investors Service, Inc.
lowered its rating on the State's outstanding general obligation bonds from
Aaa to Aa in April 1982. The State's economy recovered in the July 1, 1983
to June 30, 1985 biennium, and substantial reductions in the individual
income tax were enacted in 1984 and 1985. Standard & Poor's raised its
rating on the State's outstanding general obligation bonds to AA+ in
January 1985. In 1986, 1987, 1991, 1992 and 1993, legislation was required
to eliminate projected budget deficits by raising additional revenue,
reducing expenditures, including aids to political subdivisions and higher
education, reducing the State's budget reserve (cash flow account),
imposing a sales tax on purchases by local governmental units, and making
other budgetary adjustments. A budget forecast released by the Minnesota
Department of Finance on March 1, 1994 projected a balanced General Fund at
the end of the then current biennium, June 30, 1995, plus an increase in
the State's cash flow account from $360 million to $500 million. Total
projected expenditures and transfers for the biennium are $17.0 billion.
The forecast also projects, however, a shortage of $29.5 million in the
Local Government Trust Fund at June 30, 1995, against total projected
expenditures from the Fund of $1.8 billion for the biennium.
State grants and aids represent a large percentage of the total
revenues of cities, towns, counties and school districts in Minnesota. Even
with respect to Bonds that are revenue obligations of the issuer and not
general obligations of the State, there can be no assurance that the fiscal
problems referred to above will not adversely affect the market or
marketability of the Bonds or the ability of the respective obligors to pay
interest on and principal of the Bonds.
(b) INDUSTRIAL REVENUE BONDS ("IRBS") -- Certain of the Bonds in the
Trusts may be IRBs. IRBs, including pollution control revenue bonds, are
tax-exempt securities issued by states, municipalities, public authorities
or similar entities ("ISSUERS") to finance the cost of acquiring,
constructing or improving various projects, including pollution control
facilities and certain industrial development facilities. These projects
are usually operated by private entities. IRBs are not general obligations
of governmental entities backed by their taxing power. Issuers are
obligated to pay amounts due on the IRBs only to the extent that funds are
available from the unexpended proceeds of the IRBs, if any, or receipts or
revenues of the issuer under arrangements between the issuer and the
private operator of a project. These arrangements may be in the form of a
lease, installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer from the private
entity are designed to be sufficient to meet the payments of amounts due on
the IRBs.
IRBs are generally issued under bond resolutions, agreements or trust
indentures pursuant to which the revenues and receipts payable under the
issuer's arrangements with the private operator of a particular project
have been assigned and pledged to the holders of the IRBs or a trustee for
the benefit of the holders of the IRBs. In certain cases, a mortgage on the
underlying project may be granted to the holders of the IRBs or a trustee
as additional security for the IRBs. In addition, IRBs are frequently
directly guaranteed by the private operator of the project or by another
affiliated company. Regardless of the structure, payment of IRBs is solely
dependent upon the creditworthiness of the private operator of the project
or the guarantor. Private operators or guarantors that are industrial or
commercial companies may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or industry.
These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition (including that of
low-cost foreign companies), unfunded pension fund liabilities or
off-balance sheet items, and financial deterioration resulting from
leveraged buy-outs or takeovers.
In the opinion of bond counsel rendered on the date of issuance of
each IRB in each Trust's portfolio, the interest on the IRBs is not
includable in gross income for federal income tax purposes or in taxable
net income of individuals, estates and trusts for Minnesota income tax
purposes under existing laws (except in certain instance depending upon the
Unitholders). Such interest income is includable in taxable income of
corporations and financial institutions for purposes of the Minnesota
franchise tax. Interest on certain IRBs may be includable in income for
purposes of the federal and Minnesota alternative minimum taxes. See "The
Trusts--Tax Status." In the case of an IRB, this tax status is dependent
upon the issues and private obligor meeting certain conditions, and the
opinion of bond counsel assumes that these conditions will be met. However,
there can be no assurance that the issuer and the private obligor will meet
these conditions, in which event the interest on the IRB could be
determined to be taxable, perhaps retroactively from the date of issuance
of the IRB. Further, there can be no assurance that legislation will not be
enacted which could case interest on some or all of the IRBs as well as
other Bonds in the Trusts to be subject to tax.
In certain cases, an IRB may provide that if the interest on such IRB
should ultimately be determined to be taxable, the IRB would become due and
payable and, in addition, may provide that any related letter of credit or
other security could be called upon to satisfy all or part of the
obligation. In other cases, however, an IRB may not provide for the
acceleration or redemption of the IRB or a call upon the related letter of
credit or other security upon a determination of taxability. In those cases
in which an IRB does not provide protection from a determination of
taxability or in which both the private party and the bank or other entity
issuing the letter of credit or other security are unable to meet their
obligations to pay the amounts due on the IRB as a result of a
determination of taxability, the Sponsor may direct the Trustee to sell the
IRB and, since it would be sold as a taxable security, it is expected that
it would have to be sold at a substantial discount from current market
price. In addition, as mentioned above, Unitholders might be required to
pay income tax on interest received prior to the date of the determination
of taxability.
(c) REVENUE OBLIGATIONS OF UTILITIES -- Certain of the Bonds in the
Trusts may be revenue obligations of issuers engaged in the generation,
distribution and/or sale of electrical power (including the sale of
electricity generated through nuclear energy) and/or natural gas. The
ability of such issuers to make payments of principal of, or interest on,
such obligations is dependent, among other things, upon the continuing
ability of such issuers to derive sufficient revenues from their operations
to meet debt service requirements. General problems confronting such
issuers include the difficulty in financing construction projects during
inflationary periods, ongoing design modifications, schedule extensions,
strikes, restrictions on operations and increased costs and delays
attributable to applicable environmental laws, the difficulty in obtaining
fuel for energy generation at reasonable prices, the difficulty in
obtaining natural gas for resale, and the effects of present or proposed
energy or natural resource conservation programs. The Sponsor believes that
all of the issuers of such obligations have been experiencing these
problems to a greater or less extent. In addition, federal, state and
municipal governmental authorities may from time to time review existing,
and impose additional, regulations governing the licensing, construction
and operation of nuclear power plants. Any delays in the licensing,
construction or operation of power plants, or the suspension of operations
of such power plants, which have been or are being financed by proceeds of
certain of the Bonds held in the Trusts, may affect the payment of interest
on, or the repayment of the principal amount of, such Bonds. The Sponsor is
unable to predict the ultimate form any such regulations may take or the
impact such regulations might have on the Bonds in the Trusts.
The ability of state and local joint action power agencies to make
payments on bonds they have issued is dependent in large part upon payments
made to them pursuant to power supply or similar agreements. Courts in
Washington and Idaho have held that certain agreements between the
Washington Public Power Supply System and certain of its participants are
unenforceable because the participants did not have the authority to enter
into the agreements. While these decisions are not specifically applicable
to agreements entered into by public entities in other states, they may
cause an examination of the legal structure and economic viability of
certain projects financed by joint action power agencies, which might
exacerbate some of the problems referred to above and possibly lead to
legal proceedings questioning the enforceability of agreements upon which
payment of these bonds may depend.
(d) HOUSING AUTHORITY OBLIGATION -- Certain of the Bonds in the Trusts
may be obligations of municipal housing authorities and single-family
mortgage revenue bonds. Weaknesses in federal housing subsidy programs and
their administration may result in a decrease of subsidiaries available for
payment of principal of and interest on housing authority bonds. Economic
developments, including fluctuations in interest rates and increasing
construction and operating costs, may also adversely impact on revenues of
housing authorities. In the case of some housing authorities, inability to
obtain additional financing could also reduce revenues available to pay
existing obligations. Single-family mortgage revenue bonds are subject to
extraordinary mandatory redemption at par in whole or in part from the
proceeds derived from prepayments of underlying mortgage loans and also
from the unused proceeds of the issue within a stated period which may be
within a year from the date of issue. For a discussion of the consequences
to Unitholders of such redemption, see "The Trusts--Portfolios--General
Considerations," below.
The tax exemption for certain housing authority bonds depends upon
qualification under Section 103A of the Internal Revenue Code of 1954, as
amended (the "1954 CODE") or Section 143 of the Internal Revenue Code of
1986 (the "1986 CODE") in the case of single-family mortgage bonds or under
Section 103(b)(4)(A) of the 1954 Code, Section 142(d) of the 1986 Code or
other provisions of federal law in the case of certain multi-family housing
bonds (including Section 8 assisted bonds). These sections of the Code or
other provision of federal law contain certain ongoing requirements
relating to the cost and location of the residences financed with the
proceeds of the single-family mortgage bonds and the income levels of
tenants of the rental projects financed with the proceeds of the
multi-family housing bonds. While the issuers of the bonds, and other
parties, including the originators and servicers of the single-family
mortgages and the owners of the rental projects financed with the
multi-family housing bonds, covenant to meet these ongoing requirements and
generally agree to institute procedures designed to insure that these
requirements are met, there can be no assurance that these ongoing
requirements will be consistently met. The failure to meet these
requirements could cause the interest on the bonds to become taxable,
possibly retroactively from the date of issuance, thereby reducing the
value of the bonds, subjecting Unitholders to unanticipated tax liabilities
and possibly requiring the Trustee to sell the bonds at the reduced value.
Furthermore, any failure to meet these ongoing requirements might not
constitute an event of default under the applicable mortgage or permit the
holder to accelerate payment of the bond or require the issuer to redeem
the bond. In any event, where the mortgage is insured by the Federal
Housing Administration ("FHA"), the consent of the FHA may be required
before insurance proceeds would become payable to redeem the mortgage
subsidy bonds.
(e) REVENUE BONDS OF HOSPITAL AND HEALTH CARE FACILITIES -- Certain of
the Bonds in the Trusts may be hospital revenue bonds (including health
care facilities, nursing homes and congregate care facilities). The ability
of the issuers of such Bonds to meet their obligations is dependent, among
other things, upon the revenues, costs and occupancy levels of the subject
facilities. Additionally, a major portion of hospital revenues typically is
derived from federal or state programs such as Medicare and Medicaid and
from Blue Cross and other insurers. Changes in the compensation and
reimbursement formulas of these governmental program or in the rates of
insurers may reduce revenues available for the payment of principal of, or
interest on, hospital revenue bonds. New government legislation or
regulations and other factors, such as the inability to obtain sufficient
malpractice insurance, may also adversely impact the revenues or costs of
hospitals and may also adversely affect the ratings of hospital revenue
bonds held in the Trusts.
(f) FACILITY REVENUE BONDS DEPENDENT UPON USER FEES -- Certain of the
Bonds in the Trusts may be facility revenue bonds payable from and secured
by the revenues from the ownership and operation of particular facilities,
such as airports, bridges, turnpikes, port authorities, convention centers
and arenas. Therefore, payment may be adversely affected by reduction in
revenues due to such factors as increased cost of maintenance or decreased
use of a facility, lower cost of alternative modes of transportation or
scarcity of fuel and reduction or loss of rents.
(g) REVENUE OBLIGATIONS OF UNIVERSITIES AND SCHOOLS -- Certain of the
Bonds in the Trusts may be revenue obligations of universities and schools.
The ability of universities and schools to meet their obligations is
dependent upon various factors, including the revenues, costs and
enrollment levels of the institutions. In addition, their ability may be
affected by declines in enrollment and tuition revenue, the availability of
federal, state and alumni financial support, the method and validity, under
state constitutions, of present systems of financing public education,
fluctuations in interest rates and construction costs, increased
maintenance and energy costs, failure or inability to raise tuition or room
charges, and adverse results of endowment fund investments.
GENERAL CONSIDERATIONS. Most of the Bonds are subject to redemption, in
whole or in part, prior to their stated maturity date pursuant to sinking fund
or optional redemption provisions. A listing of the initial sinking fund and
optional redemption provisions, if any, with respect to each of the Bonds is set
forth under "Schedule of Investments" in Part One. In general, an optional
redemption provision is more likely to be exercised when the offering price
valuation of a bond is higher than its optional redemption price, as might occur
in periods of declining interest rates, then when such price valuation is less
than the bond's optional redemption price. In addition, certain Bonds may be
redeemed in whole or in part other than by operation of the stated redemption or
sinking fund provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds. CERTAIN OF THE BONDS WERE ACQUIRED BY THE TRUSTS AT PRICES IN EXCESS OF
PRICES AT WHICH SUCH BONDS MAY BE REDEEMED IN THE FUTURE. To the extent that a
Bond in a Trust is redeemed at a price which is less than the valuation of such
Bond on the date a Unitholder of such Trust acquired his Units, the proceeds
distributable to such Unitholder in respect of such redemption will be less than
that portion of the purchase price for such Units which was attributable to such
Bond. Such proceeds, however, may be more or less than the valuation of such
Bond at the time of such redemption. Because certain of the Bonds may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and 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. A reduction in the size of a Trust will reduce the Estimated Net
Annual Interest Income of such Trust and result in a taxable event to
Unitholders and may affect the Estimated Current Return. See "The
Trusts--Estimated Current Return to Unitholders" and "The Trusts--Tax Status."
To the best knowledge of the Sponsor, there is no 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 Trusts. Litigation may be
initiated at any time in the future on a variety of grounds with respect to
Bonds in the Trusts. Such litigation may affect the validity of such Bonds or
the tax-free nature of the interest thereon. While the outcome of litigation of
such nature can never be entirely predicted, each Trust has received opinions of
bond counsel to the issuing authorities of each Bond on the date of issuance to
the effect that the Bonds in such Trust have been validly issued and that the
interest thereon is not includable in gross income for federal income tax
purposes or in taxable net income of individuals, estates and trusts for
Minnesota income tax purposes under existing laws (except in certain instances
depending upon the Unitholders). Such interest income is includable in taxable
income of corporations and financial institutions for purposes of the Minnesota
franchise tax. Interest on certain Bonds may be includable in income for
purposes of the federal and Minnesota alternative minimum taxes.
In addition, other factors may arise from time to time which may
potentially impair the ability of issuers to meet obligations undertaken with
respect to Bonds. THE SPONSOR, THE TRUSTEE AND THE EVALUATOR SHALL NOT BE LIABLE
IN ANY WAY FOR ANY DEFAULT, FAILURE OR DEFECT IN ANY BOND.
An amendment to the Federal Bankruptcy Act was enacted in 1978 relating to
the adjustment of indebtedness owed by any political subdivision or public
agency or instrumentality of any state, including municipalities. Among other
things, this amendment facilitates the use of proceedings under the Federal
Bankruptcy Act by any such entity to restructure or otherwise alter the terms of
its obligations, including those of the type comprising a Trust's portfolio. The
Sponsor is unable to predict the effect of this legislation on the Trusts.
THE UNITS
On the date indicated therein, each Unit represented the fractional
undivided interest in the principal and net interest of the Trust set forth
under "Summary of Essential Information" in Part One. If any Units of a Trust
are redeemed by the Trustee after such date, the fractional undivided interest
therein represented by each unredeemed Unit will increase, although the actual
interest in such Trust represented by each such Unit will remain essentially the
same. Units will remain outstanding until redeemed upon tender to the Trustee by
any Unitholder, which may include the Sponsor, or until the termination of the
applicable Trust Agreement.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the date indicated in Part One, the Estimated Current Returns and the
Estimated Long-Term Returns were those indicated in the "Summary of Essential
Information." The Estimated Current Returns are calculated by dividing the
estimated net annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in fees and
expenses of the Trustee, Sponsor and Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Bonds while the Public
Offering Price will vary with changes in the offering price of the underlying
Bonds; therefore, there is no assurance that the present Estimated Current
Returns will be realized in the future. Estimated Long-Term Returns are
calculated using a formula which (i) takes into consideration, and determines
and factors in the relative weightings of, the market values, yields (which
takes into account the amortization of premiums and the accretion of discounts)
and estimated retirements of all the Bonds in a Trust and (ii) takes into
account a compounding factor, 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 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.
TAX STATUS
FEDERAL TAX STATUS
All Bonds deposited in the Trusts were accompanied by copies of opinions of
bond counsel to the issuers thereof, given at the time of original delivery of
the Bonds, to the effect that the interest thereon in excludable from gross
income for Federal income tax purposes. In connection with the offering of Units
of the Trusts, neither the Sponsor, the Trustee, the auditors nor their
respective counsel have made any review of the proceedings relating to the
issuance of the Bonds or the basis for such opinions. Gain realized on the sale
or redemption of the Bonds by the Trustee or of a Unit by a Unitholder is,
however, includable in gross income for Federal income tax purposes. Such gain
does not include any amounts received in respect of accrued interest or accrued
original issue discount, if any. It should be noted that under recently enacted
legislation described below that subjects accretion of market discount on
tax-exempt bonds to taxation as ordinary income, gain realized on the sale or
redemption of Bonds by the Trustee or of Units by a Unitholder that would have
been treated as capital gain under prior law is treated as ordinary income to
the extent it is attributable to accretion of market discount. Market discount
can arise based on the price a Trust pays for Municipal Bonds or the price a
Unitholder pays for his or her Units. In addition, bond counsel to the issuing
authorities rendered opinions as to the exemption of interest on such Bonds,
when held by residents of the state in which the issuers of such bonds are
located, from state income taxes and, where applicable, local income taxes.
In the opinion of Special Counsel to the Trusts:
Each Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Internal Revenue Code
of 1986 (the "CODE") will retain its status when distributed to
Unitholders, except to the extent such interest is subject to the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "SUPERFUND TAX"), as noted
below.
Exemption of interest and accrued original issue discount on any Bond
for Federal income tax purposes does not necessarily result in
tax-exemption under the laws of the several states as such laws vary with
respect to the taxation of such securities and in many states all or part
of such interest and accrued issue discount may be subject to tax.
Each Unitholder is considered to be the owner of a pro rata portion of
each asset of the respective Trust in the proportion that the number of
Units of such Trust held by him bears to the total number of Units
outstanding of such Trust under subpart E, subchapter J of chapter 1 of the
Code and will have a taxable event when such Trust disposes of a Bond, or
when the Unitholder redeems or sells his Units. Unitholders must reduce the
tax basis of their Units for their share of accrued interest received by a
Trust, if any, on Bonds delivered after the date the Unitholders pay for
their Units to the extent that such interest accrued on such Bonds during
the period from the Unitholder's settlement date to the date such Bonds are
delivered to a Trust and, consequently, such Unitholders may have an
increase in taxable gain or reduction in capital loss upon the disposition
of such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether by
sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder. The amount of any such gain or loss is
measured by comparing the Unitholder's pro rata share of the total proceeds
from such disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who
purchases Units, such basis (before adjustment for earned original issue
discount and amortized bond premium, if any) is determined by apportioning
the cost of the Units among each of the Trust's assets ratably according to
value as of the date of acquisition of the Units. The basis of each Unit
and of each Bond which was issued with original issue discount must be
increased by the amount of the accrued original issue discount and the
basis of each Unit and of the Unitholder's interest in each Bond which was
acquired by such Unitholder at a premium must be reduced by the annual
amortization of Bond premium. The tax cost reduction requirements of the
Code relating to amortization of bond premium may, under some
circumstances, result in the Unitholder realizing a taxable gain when his
Units are sold or redeemed for an amount equal to his original cost.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the Bond on
the date a Unitholder acquires his Units, and the price the Unitholder pays for
his Units. Investors with questions regarding these Code sections should consult
with their tax advisers.
The Revenue Reconciliation Act of 1993 (the "TAX ACT") subjects tax-exempt
bonds to the market discount rules of the Code effect for bonds purchased after
April 30, 1993. In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase price (except
to the extent that such difference, if any, is attributable to original issue
discount not yet accrued). Market discount can arise based on the price a Trust
pays for Bonds or the price a Unitholder pays for his or her Units. Under the
Tax Act, accretion of market discount is taxable as ordinary income; under prior
law the accretion had been treated as capital gain. Market discount the accretes
while a Trust holds a Bond would be recognized as ordinary income by the
Unitholders when principal payments are received on the Bond, upon sale or at
redemption (including early redemption), or upon the sale or redemption of his
or her Units, unless a Unitholder elects to incur market discount in taxable
income as it accrues. The market discount rules are complex and Unitholders
should consult their tax advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax depend upon the corporation's alternative minimum taxable income,
which is the corporation's taxable income with certain adjustments. One of the
adjustment items used in computing the alternative minimum taxable income and
the Superfund Tax of a corporation (other than a S Corporation, Regulated
Investment Company, Real Estate Investment Trust, or REMIC) is an amount equal
to 75% of the excess of such corporation's "adjusted current earnings" over an
amount equal to its alternative minimum taxable income (before each adjustment
time and the alternative tax net operating loss deduction). "Adjusted current
earnings" includes all tax-exempt interest, including interest on all of the
Bonds in a Trust and tax-exempt original issued discount. Unitholders are urged
to consult their tax advisers with respect to the particular tax consequences to
them including the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry Units
of a Trust is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase or
improve a personal residence or to purchase goods or services for personal
consumption). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not to be able to deduct any of
the interest expense attributable to ownership of such Units. Investors with
questions regarding these issues should consult with their tax advisers.
In the case certain Bonds in the Trusts, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user" of the
facilities being financed with the proceeds of these Bonds or persons related
thereto, for periods while such Bonds are held by such a user or related person,
will not be excludable from Federal gross income, although interest on such
Bonds received by others would be excludable from Federal gross income.
"Substantial user" and "related person" are defined under U.S. Treasury
Regulations. Any person who believes that he or she may be a "substantial user"
or a "related person" as so defined should contact his or her tax adviser.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35% effective for long-term capital gains realized in
taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
In the opinion of Special Counsel to the Trusts for New York tax matters,
the Trusts are not associations taxable as a corporation and the income of the
Trusts will be treated as the income of the Unitholders under the income tax
laws of the State of New York.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF COUNSEL AND
ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor its counsel has made any special review for the Trusts
of the proceedings relating to the issuance of the Bonds or of the basis for
such opinions.
Section 86 of Code, in general, provides that fifty percent of Social
Security benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus fifty percent of the Social Security
benefits received exceeds a "base amount." The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the taxable
year and who file separate returns. Modified adjusted gross income is adjusted
gross income determined without regard to certain otherwise allowable deductions
and exclusions from gross income and by including tax-exempt interest. To the
extent that Social Security benefits are includible in gross income, they will
be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December
31, 1993, up to 85 percent of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus fifty
percent of Social Security benefits received exceeds an "adjusted base amount."
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for married
taxpayers filing a joint return and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from the Trust Fund, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his or her Social Security
benefits in gross income whether or not he or she receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after inclusion of
tax-exempt interest) does not exceed the base amount need not include any Social
Security benefits in gross income.
For a discussion of the Minnesota tax status of income earned on Units of a
Trust, see the discussion of Minnesota tax status below. Except as noted
therein, the exemption of interest on state and local obligations for Federal
income tax purposes discussed above does not necessarily result in exemption
under the income or other tax laws of any state or city. The laws of the several
states vary with respect to the taxation of such obligations.
MINNESOTA STATE TAX STATUS
We understand that the Trusts only have income consisting of (i) interest
from bonds issued by the State of Minnesota and its political and governmental
subdivisions, municipalities and governmental agencies and instrumentalities and
bonds issued by possessions of the United States which would be exempt from
federal and Minnesota income taxation when paid directly to an individual, trust
or estate (the "BONDS"), (ii) gain on the disposition of such Bonds, and (iii)
proceeds paid under certain insurance policies issued to the Trustee or to the
issuers of the Bonds which represent maturing interest or principal payments on
defaulted Bonds held by the Trustee.
Neither the Sponsor nor its counsel have independently examined the Bonds
deposited in and held in a Trust. However, although no opinion is expressed
herein regarding such matters, it is assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon is excludable from gross income for federal
income tax purposes and (iii) the interest thereon is exempt from income tax
imposed by Minnesota that is applicable to individuals, trusts and estates (the
"MINNESOTA INCOME TAX"). It should be noted that interest on the Bonds is
subject to tax in the case of corporations subject to the Minnesota Corporate
Franchise Tax or the Corporate Alternative Minimum Tax and is a factor in the
computation of the Minimum Fee applicable to financial institutions. The opinion
set forth below does not address the taxation of persons other than full time
residents of Minnesota.
In the opinion of Special Counsel to the Trusts:
(1) Each Trust is not an association taxable as a corporation and each
Unitholder of a Trust will be treated as the owner of a pro rata portion of
such Trust, and the income of such portion of such Trust will therefore be
treated as the income of the Unitholder for Minnesota Income Tax purposes;
(2) Income on the Bonds which is exempt from the Minnesota Income Tax
when received by a Unitholder of a Trust and which would be exempt from the
Minnesota Income Tax if received directly by a Unitholder, will retain its
status as exempt from such tax when received by such Trust and distributed
to such Unitholder;
(3) To the extent that interest on the Bonds, if any, is includible in
the computation of "alternative minimum taxable income" for federal income
tax purposes, such interest will also be includible in the computation of
"alternative minimum taxable income" for purposes of the Minnesota
Alternative Minimum Tax imposed on individuals, estates and trusts and on
corporations;
(4) Each Unitholder of a Trust will recognize gain or loss for
Minnesota Income Tax purposes if the Trustee disposes of a Bond (whether by
redemption, sale or otherwise) or if the Unitholder redeems or sells Units
of such Trust to the extent that such a transaction results in a recognized
gain or loss to such Unitholder for federal income tax purposes;
(5) Tax cost reduction requirements relating to amortization of bond
premium may, under some circumstances, result in Unitholders realizing
taxable gain for Minnesota Income Tax purposes when their Units are sold or
redeemed for an amount equal to or less than their original cost; and
(6) To the extent that interest derived from a Trust by a Unitholder
with respect to any Possession Bonds is excludable from gross income for
federal income tax purposes pursuant to 48 U.S.C. Section 745, 48 U.S.C.
Section 1423a and 48 U.S.C. Section 1403, such interest will not be subject
to either the Minnesota Income Tax or the Minnesota alternative minimum tax
imposed on individuals, estates and trusts. It should be noted that
interest relating to Possession Bonds is subject to tax in the case of
corporations subject to the Minnesota Corporate Franchise Tax or the
Corporate Alternative Minimum Tax.
We have not examined any of the Bonds deposited and held in the Trusts or
the proceedings for the issuance thereof or the opinions of bond counsel with
respect thereto, and therefore express no opinion to the exemption from State
income taxes of interest on the Bonds if received directly by a Unitholder.
EXPENSES AND CHARGES
SECONDARY MARKET EXPENSES. The cost of maintaining a secondary market,
including the preparation and printing of this Prospectus, advertising expenses
and legal fees, are currently paid by the Sponsor and not by the Trusts.
SPONSOR'S, TRUSTEE'S AND EVALUATOR'S FEES. The Sponsor's, Trustee's and
Evaluator's fees are set forth under "Summary of Essential Information" in Part
One. The Sponsor's fee may exceed the actual cost of providing portfolio
supervisory services for a Trust, but at no time will the total amount received
for portfolio supervisory services rendered to all series of Voyageur Unit
Investment Trust in any calendar year exceed the aggregate cost to the Sponsor
of supplying such services in such year. The Trustee's and Evaluator's fees for
each Trust are payable monthly on or before each monthly Distribution Date and
the Sponsor's annual fee for each Trust is payable annually on December 1, all
from the Interest Account of the appropriate Trust to the extent funds are
available and then from the Principal Account of such Trust. These fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases in consumer prices for services as measured by the
United States Department of Labor's Consumer Price Index entitled "All Services
Less Rent of Shelter" or, if such Index is no longer published, in a similar
index as determined by the Trustee and the Sponsor. If the balances in the
Principal and Interest Accounts are insufficient to provide for amounts payable
by a Trust, or amounts payable to the Trustee which are secured by its prior
lien on a Trust, the Trustee is permitted to sell Bonds to pay such amounts.
OTHER CHARGES. The following additional charges are or may be incurred by a
Trust: all expenses of the Trustee (including fees and expenses of counsel and
auditors) incurred in connection with its activities under the Trust Agreement,
including the expenses and costs of any action undertaken by the Trustee to
protect the Trust and the rights and interests of the Unitholders; fees of the
Trustee for any extraordinary services performed under the Trust Agreement;
indemnification of the Trustee for any loss or liability accruing to it without
gross negligence, bad faith or willful misconduct on its part, arising out of or
in connection with its acceptance or administration of the Trust;
indemnification of the Sponsor for any losses, liabilities and expenses incurred
in acting as Depositor of the Trust other than by reason of gross negligence,
bad faith or willful misconduct or by reason of reckless disregard of its
obligations and duties; all taxes and other governmental charges imposed upon
the Bonds or any part of the Trust (no such taxes or charges are being levied,
made or, to the knowledge of the Sponsor, contemplated); and, to the extent then
lawful as set forth in a written opinion of independent counsel to the Sponsor,
expenses (including legal, accounting and printing expenses) of maintaining
registration or qualification of the Units and/or the Trust under federal or
state securities laws subsequent to initial registration so long as the Sponsor
is maintaining a market for the Units.
The Trustee shall cause the accounts of each Trust to be audited not less
than annually by independent public accountants selected by the Sponsor. The
expense of an audit shall be an expense of each Trust; PROVIDED, HOWEVER, that
the Trustee shall not be required to have such an audit conducted if the cost to
a Trust would exceed $.50 per Unit on an annual basis. Unitholders covered by
the audit during the year may receive a copy of the audited financials upon
request.
The above expenses, including the Trustee's fee, when paid by or owing to
the Trustee are secured by a lien on the Trust from which such expenses are
payable. In addition, the Trustee is empowered to sell Bonds in order to make
funds available to pay all expenses.
PUBLIC OFFERING
OFFERING PRICE
The Public Offering Price of the Units in the secondary market is
determined by adding to the Evaluator's determination of the aggregate bid price
of the Bonds per Unit a sales charge of 5.82% thereof (except as provided below
for certain quantity purchases), equal to 5.50% of the Public Offering Price. A
proportionate share of accrued and undistributed interest payable with respect
to the Units on the date of settlement (five business days after order) is also
added to the Public Offering Price. Such accrued interest is not distributable
to Unitholders until Units are tendered for redemption or presented to the
Sponsor for repurchase by the Sponsor or until the termination of a Trust. See
"Rights of Unitholders--Distribution of Interest and Principal--Accrued
Interest."
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least $100,000 or 100 Units and will be
applied on whichever basis is more favorable to the purchaser. Sales charges are
as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
DOLLAR AMOUNT PRICE INVESTED
<S> <C> <C>
Less than $100,000.......................................... 5.5% 5.820%
$100,000 but less than $500,000............................. 5.0 5.273
$500,000 but less than $1,000,000........................... 4.5 4.712
$1,000,000 or more.......................................... 4.0 4.167
</TABLE>
The Public Offering Price of Units on the date of this Prospectus or on any
subsequent date may vary from the Public Offering Price set forth under "Summary
of Essential Information" in Part One in accordance with fluctuations in the
prices of the Bonds.
The aggregate bid price of the Bonds 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. Determinations of the aggregate bid price of the
Bonds, for purposes of secondary market transactions by the Sponsor and
redemptions by the Trustee, will be made on each business day on which the New
York Stock Exchange is open for business as of the Evaluation Time, effective
for all sales or redemptions made subsequent to the last preceding
determination. See "Public Offering--Market for Units" and "Rights of
Unitholders-Redemption." For information relating to the calculation of the
Redemption Price, which, like the Public Offering Price in the secondary market,
is based upon the aggregate bid price of the underlying Bonds, see "Rights of
Unitholders--Redemption--Computation of Redemption Price per Unit."
DISTRIBUTION OF UNITS
Units acquired by the Sponsor in the secondary market referred to below are
offered to the public by this Prospectus at the current Public Offering Price.
The Sponsor has qualified the Units for sale in certain states. Units may
be sold to dealers who are members of the National Association of Securities
Dealers, Inc. at prices which include a concession from the Public Offering
Price (determined without any reductions for quantity purchases) of 3%, subject
to change from time to time.
Sales will be made only with respect to whole Units, and the Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units.
MARKET FOR UNITS
The Sponsor, although not obligated to do so, presently intends to maintain
a market for the Units at prices based upon each Unit's pro rata share of the
aggregate value of the Bonds determined (by the Evaluator) on the basis of the
bid side of the market. The Sponsor's repurchase price shall not be less than
the Redemption Price. See "Redemption--Computation of Redemption Price per
Unit." There is no sales charge incurred when a Unitholder sells Units back to
the Sponsor. Any Units repurchased by the Sponsor may be reoffered to the public
by the Sponsor at the Public Offering Price at the time, plus accrued interest.
If the supply of Units exceeds demand, or for any other reason, the Sponsor
may cease to maintain such a market in the Units at any time and from time to
time without notice. A secondary market in Units of a Trust will not be
maintained at any time during which the right of redemption for such Trust shall
have been suspended. See "Rights of Unitholders--Redemption--Tender of Units."
In the event that a market is not maintained for the Units, a Unitholder
desiring to dispose of his Units may be able to do so only by tendering such
Units to the Trustee for redemption at the Redemption Price, which is based upon
the aggregate bid price of the Bonds. IF A UNITHOLDER WISHES TO DISPOSE OF HIS
UNITS, HE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO
MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. See "Rights of
Unitholders--Redemption."
Prospectuses relating to certain other unit investment trusts indicate an
intention, subject to change, on the part of the respective sponsors of such
trusts to repurchase units of those trusts on the basis of a price higher than
the bid prices of the securities in the trusts (i.e., on the basis of the
offering prices of such securities). Consequently, depending upon the prices
actually paid, the repurchase price of other sponsors for units of their trusts
may be computed on a somewhat more favorable basis than the repurchase price
offered by the Sponsor for Units of the Trusts in secondary market transactions.
As in the Trusts, the repurchase price per unit of such other trusts will depend
primarily upon the value of the securities in the portfolio of each such trust.
SPONSOR'S PROFITS
In maintaining a market for the Units (see "Public Offering--Market for
Units"), the Sponsor will realize profits or sustain losses in the amount of any
difference between the price at which it buys Units and the price at which it
resells or redeems such Units and to the extent it earns sales charges on
resales. Cash, if any, made available to the Sponsor prior to the settlement
date for the purchase of Units may be used in the Sponsor's business subject to
the limitations of the Securities Exchange Act of 1934 and may be of benefit to
the Sponsor.
RIGHTS OF UNITHOLDERS
CERTIFICATES
Ownership of Units is evidenced by registered certificates executed by the
Trustee and the Sponsor. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unitholder may be required to pay $2.00 per certificate reissued or
transferred, and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. For new certificates issued
to replace destroyed, stolen or lost certificates, the Unitholder must furnish
indemnity satisfactory to the Trustee and must pay such expenses as the Trustee
may incur. Mutilated certificates must be surrendered to the Trustee for
replacement.
DISTRIBUTION OF INTEREST AND PRINCIPAL
Interest received by the Trustee on the Bonds, including that part of the
proceeds of any disposition of Bonds which represents accrued interest, shall be
credited to the Interest Account of the appropriate Trust. All other moneys
received by the Trustee shall be credited to the Principal Account of the
appropriate Trust.
While interest will be distributed semi-annually, quarterly or monthly,
depending upon the method of distribution chosen, principal, including capital
gains, will be distributed only semi-annually. The Trustee is not required,
however, to make a distribution from the Principal Account unless the amount
available for distribution in such account equals at least $1.00 per Unit. In
addition, if at any time the pro rata share of cash in the Principal Account of
Unitholders exceeds $10.00 as of a monthly Record Date, the Trustee shall, to
the extent permitted under applicable law, on the next succeeding monthly
Distribution Date, distribute the Unitholders' pro rata share of the balance of
the Principal Account.
The pro rata share of cash in the Principal Account will be computed as of
each semi-annual Record Date and distributions to the Unitholders as of such
Record Date will be made on or shortly after the following Distribution Date.
Proceeds received from the disposition, including sale, call or maturity, of any
of the Bonds after a Record Date will be held in the Principal Account and
either used to pay for Units redeemed or distributed on the Distribution Date
following the next semi-annual Record Date.
The pro rata share of the Interest Account will be computed by the Trustee
each month as of each Record Date and distributions will be made on or shortly
after the fifteenth day of the month to Unitholders as of the Record Date who
are entitled to distributions at that time under the plan of distribution
chosen. Persons who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the Distribution Date following the
next Record Date under the applicable plan of distribution. Record Dates for
monthly distributions will be the first day of each month; Record Dates for
quarterly distributions will be the first day of March, June, September and
December; and Record Dates for semi-annual distributions will be the first day
of June and December.
Details of distributions per Unit under the various plans based upon
Estimated Net Annual Interest Income are set forth in the "Summary of Essential
Information" in Part One as of the date indicated therein. The amount of the
regular distributions will remain the same as long as the Trust portfolio and
Trust expenses remain the same.
The plan of distribution selected by a Unitholder will remain in effect
until changed. Unitholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. For the convenience of Unitholders, in May of each year the Trustee will
furnish each Unitholder a card to be returned to the Trustee, together with the
certificate to which it relates, by June 15 of such year if the Unitholder
wishes to change his plan of distribution. The change will become effective as
of June 2 of such year for the ensuing 12 months. Certificates should only be
sent by registered or certified mail to minimize the possibility of their being
lost or stolen. If the card and certificate are not returned to the Trustee, the
Unitholders will be deemed to have elected to continue the same plan.
Because Bond interest is not received by a Trust at a constant rate
throughout the year, any interest distribution may be more or less than the
amount actually deposited in the Interest Account and available for distribution
that month. In order to reduce fluctuations in distributions resulting from such
variances, the Trustee is required by the Trust Agreements to advance such
amounts as may be necessary to provide interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest, for any such
advances from funds available from the Interest Account on the next ensuing
Record Date. Funds which are available for future distributions (including any
amount represented by accrued interest added to the Public Offering Price, see
"Public Offering--Offering Price"), payments of expenses and redemptions are in
accounts which are non-interest bearing to Unitholders and are therefore
available for use by, and will be of benefit to, the Trustee pursuant to normal
banking procedures.
As of the first day of each month, the Trustee will deduct from the
appropriate Interest Account and, to the extent funds are not sufficient
therein, from the appropriate Principal Account amounts necessary to pay the
expenses of each Trust. See "The Trusts--Expenses and Charges." The Trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of a Trust. 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
account. In addition, the Trustee may withdraw from the Interest Account and the
Principal Account of a Trust such amounts as may be necessary to cover
redemption of Units of such Trust by the Trustee. See "Rights of
Unitholders--Redemption."
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 in a Trust is accounted for daily on an accrual basis. 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. Interest accrues to the benefit
of Unitholders commencing with the settlement date of their purchase
transaction.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time prior to the termination of a Trust will be
greater than the amount of interest actually received by the Trust and
distributed to Unitholders. For example, a portion of the accrued interest paid
by a Unitholder when purchasing a Unit represents accrued interest which has
been accrued by a Trust but which will not be received by the Trust in time to
be distributed on the next Distribution Date. See "Public Offering--Offering
Price." As such accrued interest amounts are later received (generally over the
ensuing six months), additional amounts of unpaid interest will be continually
accrued by the Trust during its life and added to the value of the Units.
Therefore, during the life of a Trust there will always exist on each
Distribution Date an item of accrued interest that is added to the value of the
Units but which is not distributable to the Unitholders until a later
Distribution Date. Under customary procedures, if a Unitholder sells all or a
portion of his Units he will be entitled to receive his proportionate share of
all accrued interest payable with respect to the Units (including that portion
representing interest accrued but not yet received by a Trust) from the
purchaser of his Units. See "Public Offering--Market for Units." Similarly, if a
Unitholder redeems all or a portion of his Units, the Redemption Price per Unit
which he is entitled to receive from the Trustee will also include a
proportionate share of all accrued interest payable with respect to the Units.
See "Rights of Unitholders--Redemption--Computation of Redemption Price per
Unit." Thus, the accrued interest attributable to a Unit will not be entirely
recovered until the Unitholder either redeems or sells such Unit or until the
relevant Trust is terminated.
REINVESTMENT PLAN
Each Trust has terminated its Reinvestment Plan except with respect to
Unitholders participating in the Plan prior to September 1, 1989. The Plan will
remain open only with respect to Units held of record by participating
Unitholders on August 31, 1989. Any Units purchased after such date, whether by
participating Unitholders or by new Unitholders, will be ineligible.
Participants in the Reinvestment Plan have Trust distribution reinvested
automatically in one of several open-end, diversified management investment
companies (the "REINVESTMENT FUNDS") advised by Voyageur Fund Managers. Each
distribution of interest income, capital gains or principal on the participant's
Units is, on the applicable Distribution Date, automatically applied on that
date to purchase shares (or fractions thereof) of the Reinvestment Fund chosen
at net asset value as computed as of the close of trading on the New York Stock
Exchange on such date, plus the sales charge set forth in the prospectus of the
Reinvestment Fund. The sales charge is paid to Voyageur Fund Distributors, Inc.,
an affiliate of the Sponsor, as underwriter of the Reinvestment Funds.
REPORTS AND RECORDS
In connection with each distribution, the Trustee shall furnish Unitholders
a statement of the amount of interest, if any, and the amount of other receipts,
if any, which are being distributed, expressed in each case as a dollar amount
per Unit. Within a reasonable time after the end of each calendar year, the
Trustee will furnish to each person who at any time during the calendar year was
a Unitholder of record of a Trust a statement setting forth for each such Trust
(a) as to the Interest Account: interest received (including amounts
representing interest received upon any disposition of Bonds), deductions for
payment of applicable taxes and for fees and expenses of the Trust; and
distributions to Unitholders on redemption of their Units, and the balance
remaining after such deductions and distributions, 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; (b) as to the
Principal Account: the dates of disposition of any Bonds and the net proceeds
received therefrom (excluding any portion representing interest), deductions for
payment of applicable taxes and for fees and expenses of the Trust, the
distributions to Unitholders on redemptions of their Units, 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; (c) a list of
the Bonds disposed of during the calendar year and a list of the Bonds held, and
the number of Units outstanding on the last business day of such calendar year;
(d) the Redemption Price per Unit based upon the last computation thereof made
during such calendar year; and (e) amounts actually distributed during such
calendar year from the Interest Account and from the Principal Account,
separately stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding. The accounts of each
Trust shall be audited not less frequently than annually by independent
certified public accountants designated by the Sponsor, and the reports of such
accountants shall be furnished by the Trustee to Unitholders upon request.
The Trustee shall keep available for inspection by Unitholders, at all
reasonable times during usual business hours, books of record and accounts of
its transactions as Trustee, including records of the names and addresses of
Unitholders, certificates issued or held, a current list of Bonds in each
portfolio and a copy of the appropriate Trust Agreement.
REDEMPTION
TENDER OF UNITS. While it is anticipated that Units can be sold in the
secondary markets, Units may also be tendered to the Trustee for redemption at
its offices at 101 Barclay Street, New York, New York 10286, 20th floor, upon
payment of any relevant tax. At the present time there are no specific taxes
related to the redemption of the Units. No redemption fee will be charged by the
Sponsor or the Trustee. Units redeemed by the Trustee will be canceled.
Certificates for Units to be redeemed must be properly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee. Unitholders must sign exactly as their names appear on the face of the
certificate with the signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature guaranty
program in addition to, or in substitution for, STAMP as may be accepted by the
Trustee. In certain instances the Trustee may require additional documents, such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
Certificates should be sent only by registered or certified mail to minimize the
possibility of their being lost or stolen.
Within three business days following such tender Unitholders will be
entitled to receive in cash an amount for each Unit tendered equal to the
Redemption Price per Unit computed as of the Evaluation Time set forth in the
"Summary of Essential Information" in Part One on the date of tender. See
"Rights of Unitholders--Redemption--Computation of Redemption Price per Unit."
The "date of tender" is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after the Evaluation Time, the
date of tender is the next day on which the New York Stock Exchange is open for
trading, and such Units will be deemed to have been tendered to the Trustee on
such day for redemption at the Redemption Price computed on that day. For
information relating to the purchase by the Sponsor of Units tendered to the
Trustee for redemption at prices equal to or in excess of the Redemption Price,
see "Rights of Unitholders--Redemption--Purchase by the Sponsor of Units
Tendered for Redemption."
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of the applicable Trust or, if the balance therein is insufficient, from
the Principal Account of such Trust. All other amounts paid on redemption shall
be withdrawn from the Principal Account of the applicable Trust. The Trustee is
empowered to sell Bonds from a Trust in order to make funds available for
redemption of Units. Under each Trust Agreement, the Sponsor is obligated to
instruct the Trustee with respect to which Bonds are to be sold in such
circumstances. See "Sponsor--Responsibility." In deciding which Bonds should be
sold, the Sponsor intends to consider, among other things, such factors as: (a)
prevailing market conditions; (b) trading prices of the Bonds; (c) the effect on
interest distributions to Unitholders of the sale of various Bonds; (d) the
financial condition of the issuers thereof; and (e) the effect of the sale of
various Bonds on the investment character of the affected Trust. Such sales, if
required, could result in a sale of Bonds by the Trustee at a loss. To the
extent Bonds in a Trust portfolio are sold, the size and diversity of such Trust
will be reduced, and the Estimated Current Return and Estimated Long-Term Return
of the Units may be affected.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or trading on that Exchange is restricted or during which an
emergency exists as a result of which disposal or evaluation of the Bonds is not
reasonable practicable or for such other periods as the Securities and Exchange
Commission has by order permitted.
COMPUTATION OF REDEMPTION PRICE PER UNIT. The Redemption Price per Unit of
a Trust is the pro rata share of each Unit determined by the Trustee, as of the
Evaluation Time, on the basis of (a) cash on hand in such Trust (other than
funds covering contracts to purchase Bonds) or moneys in the process of being
collected; (b) the aggregate value of the Bonds in such Trust on the bid side of
the market (determined by the Evaluator); and (c) interest accrued thereon not
subject to collection, less (i) amounts representing taxes or governmental
charges payable out of such Trust; (ii) the accrued expenses of such Trust; and
(iii) cash held for distribution to Unitholders of record as of a date prior to
the determination. Accrued interest payable with respect to the Units from the
date of tender through the expected date of settlement also comprises a part of
the Redemption Price per Unit. For information relating to the Evaluator's
determination of the value of the Bonds in a Trust on the basis of their bid
prices, see "Public Offering--Offering Price."
PURCHASE BY THE SPONSOR OF UNITS TENDERED FOR REDEMPTION. Each Trust
Agreement requires that the Trustee notify the Sponsor of any tender of Units
for redemption. So long as the Sponsor is maintaining a bid in the secondary
market, the Sponsor, prior to the close of business on the second business day
following tender, may purchase any Units tendered to the Trustee for redemption
at the price so bid by making payment therefor to the Unitholder in an amount
not less than the Redemption Price on the date of tender. Payment for such Units
shall be made not later than the day on which the Units would otherwise have
been redeemed by the Trustee. See "Public Offering--Market for Units." Units
held by the Sponsor may be tendered to the Trustee for redemption as any other
Units. The decision of the Sponsor to redeem or not to redeem Units held by it
will not be affected by whether the Units were purchased from a Unitholder in
the secondary market or acquired from the Trustee in the manner described in
this paragraph. As noted above, the sale of Bonds to make funds available for
redemption will reduce the size and diversity of a Trust and may affect the
Estimated Current Return of the Units.
The offering price of any Units resold by the Sponsor will be in accord
with the Public Offering Price (see "Public Offering--Offering Price" described
in this Prospectus. Any profit resulting from the resale of such Units will
belong to the Sponsor, which likewise will bear any loss resulting from a lower
Public Offering or Redemption Price subsequent to its acquisition of such Units.
See "Public Offering--Sponsor's Profits."
SPONSOR
Voyageur Fund Managers, Inc. has assumed responsibility of an affiliate,
Dougherty Financial Group, Inc. (formerly Dougherty Dawkins, Inc., Dougherty,
Dawkins, Strand & Bigelow, Inc. and Dougherty, Dawkins, Strand & Yost, Inc.) as
Sponsor of the Trusts. Voyageur Fund Managers, Inc. is an indirect wholly-owned
subsidiary of Dougherty Financial Group, Inc., ("DFG") which is owned
approximately 49% by Michael E. Dougherty, approximately 49% by Pohlad Companies
and less than 1% by certain benefit plans for the employees of DFG and its
subsidiaries.
Mr. Dougherty co-founded the predecessor of DFG in 1977 and has served as
DFG's Chairman of the Board and Chief Executive Officer since inception. Pohlad
Companies is a holding company owned in equal parts by each of James O. Pohlad,
Robert C. Pohlad and William M. Pohlad. As of December 31, 1994, Voyageur Fund
Managers, Inc. served as the manager to six closed-end and ten open-end
investment companies (comprising 24 separate investment portfolios),
administered numerous private accounts and managed approximately $7.4 billion in
assets. The principal business address of Voyageur Fund Managers, Inc. is 90
South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402. As of December
31, 1994, the total stockholders' equity of Voyageur Fund Managers, Inc. was
$5,675,766 (unaudited). (This paragraph relates only to the Sponsor and not to
the Trusts or to any of the Underwriters. 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.)
LIMITATIONS ON LIABILITY
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Trust Agreements, but will not be liable or
responsible in any way for depreciation or loss incurred by reason of the sale
of any Bonds and will be under no liability to Unitholders for taking any action
or refraining from any action in good faith pursuant to the Trust Agreements or
for errors in judgment, except in cases of its own willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties. See
"The Trusts--Portfolios" and "Sponsor--Responsibility."
RESPONSIBILITY
Under the Trust Agreements, the Sponsor is obligated to instruct the
Trustee with respect to which Bonds are to be sold in the circumstances
described under "Rights of Unitholders--Redemption" and is also empowered to
direct the Trustee to dispose of Bonds when certain events occur that adversely
affect the value of Bonds, including default in payment of interest or
principal, default in payment of interest or principal on other obligations of
the same issuer, institution of legal proceedings, default under other documents
adversely affecting debt service, decline in price or the occurrence of other
market or credit factors, or decline in projected income pledged for debt
service on revenue Bonds and advanced refunding that, in the opinion of the
Sponsor, may be detrimental to the interest of the Unitholders.
It is the responsibility of the Sponsor to instruct the Trustee to reject
any offer made by an issuer of any of the Bonds to issue new obligations in
exchange and substitution for any Bonds pursuant to a refunding or refinancing
plan, except that the Sponsor may instruct the Trustee to accept such an offer
or to take any action with respect thereto as the Sponsor may deem proper if the
issuer is in default with respect to such Bonds or in the written opinion of the
Sponsor the issuer will probably default in respect to such Bonds in the
foreseeable future.
Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Trust Agreements to the same
extent as Bonds originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for underlying Bonds in the
portfolio of a Trust, the Trustee is required to give notice thereof to each
Unitholder of such Trust, identifying the Bonds eliminated and the Bonds
substituted therefor.
REGISTRATION
If at any time the Sponsor shall resign or fail to perform any of its
duties under the Trust Agreements or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may appoint a successor sponsor or terminate the applicable Trust Agreement and
liquidate the affected Trust.
TRUSTEE
The Trustee is The Bank of New York, a trust company organized under the
laws of New York, with offices at 101 Barclay Street, New York, New York 10286,
(800) 225-5145. The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the Board or
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law. The
Trustee commenced operations on February 3, 1986 when it acquired the unit
investment trust division of Fidata Trust Company New York.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for any Trust portfolio.
LIMITATIONS ON LIABILITY
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any moneys, Bonds or
certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents, except in cases of
its own willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties. In addition, the Trustee shall not be personally
liable for any taxes or other governmental charges imposed upon or in respect of
a Trust which the Trustee may be required to pay under current or future law of
the United States or any other taxing authority having jurisdiction. See "The
Trusts--Portfolios."
RESPONSIBILITY
For information relating to the responsibilities of the Trustee under the
Trust Agreements, see "Rights of Unitholders."
RESIGNATION
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Trust Agreements. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor trustee. If upon
resignation of a trustee a successor trustee has not been appointed or, if
appointed, has not 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 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.
EVALUATOR
The Evaluator is Voyageur Fund Managers, Inc., a registered investment
adviser which performs portfolio evaluation services, municipal research, asset
management and investment advisory services. See "Sponsor" above.
LIMITATIONS ON LIABILITY
The Trustee, the Sponsor and the Unitholders may rely upon any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trustee Agreements shall be
made in good faith upon the basis of the best information available to it;
provided however, that the Evaluator shall not be under any liability to the
Trustee, the Sponsor or the Unitholders for errors in judgment. But this
provision shall not protect the Evaluator in cases of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
RESPONSIBILITY
Each Trust Agreement requires the Evaluator to evaluate the Bonds on the
basis of their bid prices on each business day on which the New York Exchange is
open for business as of the Evaluation Time.
RESIGNATION
The Evaluator may resign or may be removed by the Sponsor and the Trustee,
and the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor evaluator. 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.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENTS
AMENDMENT
The Sponsor and the Trustee have the power to amend the Trust Agreements
without the consent of any of the Unitholders when the purpose of such an
amendment is (a) to cure any ambiguity or to correct or supplement any provision
of the Trust Agreements which may be defective or inconsistent with any other
provision contained therein, or (b) to make such other provisions as shall not
adversely affect the interests of the Unitholders. In addition, the Sponsor and
the Trustee may amendment a Trust Agreement with the consent of the Unitholders
evidencing 51% of the Units of the related Trust then outstanding, provided that
no such amendment will reduce the interest in such Trust of any Unitholder
without the consent of such Unitholder or reduce the percentage of Units
required to consent to any such amendment without the consent of all the
Unitholders of such Trust. In no event, however, shall a Trust Agreement be
amended to extend its Mandatory Termination Date, to increase the number of
Units issuable thereunder, to permit the deposit or acquisition of securities
either in addition to or in substitution for any of the Bonds initially
deposited in the related Trust, except for the substitution of certain refunding
securities for such Bonds, or to permit the Trustee to engage in business or
investment activities not specifically authorized in such Trust Agreement as
originally executed. In the event of any amendment, the Trustee is obligated to
notify promptly all Unitholders of the substance of such amendment.
TERMINATION
The Trust shall terminate upon the maturity, redemption, sale or other
disposition, as the case may be, of the last of the Bonds. In addition, a Trust
may be terminated at any time by the consent of 51% of the Unitholders or by the
Trustee when the value of such Trust as determined by the Trustee is less than
the discretionary liquidation amount set forth under "Summary of Essential
Information" in Part One. The value of a Trust may decrease below its optional
termination value by reason, among other things, of the sale or redemption of
the Bonds as well as a decline in the value of the Bonds as the result of
fluctuations in interest rates and/or other market factors. In no event may a
Trust continue beyond the Mandatory Termination Date set forth under "Summary of
Essential Information" in Part One. In the event of termination, written notice
thereof will be sent by the Trustee to all Unitholders of such Trust. Within a
reasonable period after termination of a Trust, the Trustee will sell any bonds
remaining in such Trust and, after paying all expenses and charges incurred by
such Trust will distribute to each Unitholder of such Trust, upon surrender for
cancellation of his certificate for Units, his pro rata share of the balance
remaining in the Interest and Principal Accounts.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have been
passed upon by Chapman and Cutler, Chicago, Illinois, as special counsel to the
Sponsor.
INDEPENDENT AUDITORS
The Financial Statements, including the Schedules of Investments, appearing
in Part One of this Prospectus are included herein in reliance upon the reports
of KPMG Peat Marwick LLP, independent auditors, and upon the authority of that
firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S CORPORATION
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 of creditworthiness may take into consideration
obligors such as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based upon current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, upon the following
considerations:
(a) 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;
(b) Nature of and provisions of the obligation; and
(c) Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA: This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degrees.
A: Bonds rated A have a strong capacity to pay principal and interest
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately 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 bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AAA" to "BB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
#: Indicates that continuance of the rating is contingent upon Standard &
Poor's receipt of closing documentation confirming investments and cash flows.
Provisional Ratings: A provisional rating, indicated by the letter "p"
following a rating, assumes the successful completion of the project being
financed by the issuance of the bonds being rated and indicates that payment of
debt service requirement is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. Accordingly, the
investor should exercise his own judgment with respect to such likelihood and
risk.
MOODY'S INVESTORS SERVICE
A summary of the meaning of the applicable rating symbols as published by
Moody's 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 visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium 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.
Baa: Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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.
Con. (...): Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from "Aa" through "B" in its corporate rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the security ranks in the lower end of its generic category.
TAX FREE VS. TAXABLE INCOME
As of the date of this Prospectus, the following table shows the
approximate taxable estimated current returns for individuals that are
equivalent to tax-exempt estimated current returns under combined Federal and
Minnesota State taxes using the published Federal and Minnesota State tax rates
scheduled to be in effect. The table illustrates approximately what you would
have to earn on taxable investments to equal the tax-exempt estimated current
return in your income tax bracket. For cases in which more than one State
bracket falls within a Federal bracket, the highest State bracket is combined
with the Federal bracket. The combined Minnesota State and Federal tax rates
shown reflect the fact that State tax payments are currently deductible for
Federal tax purposes. The table does not show the approximate taxable estimated
current returns for individuals that are subject to the alternative minimum tax.
The taxable equivalent estimated current returns may be somewhat higher than the
equivalent returns indicated in the table for those individuals who have
adjusted gross incomes in excess of $114,700. The table does not reflect the
effect of limitations on itemized deductions and the deduction for personal
exemptions. They were designed to phase out certain benefits of these deductions
for higher income taxpayers. These limitations, in effect, raise the marginal
maximum Federal tax rate to approximately 44 percent for taxpayers filing a
joint return and entitled to four personal exemptions and to approximately 41
percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on
the number of exemptions claimed and the total amount of the taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not cause a
taxpayer to lose more than 80% of his allowable itemized deductions, with
certain exceptions. See "Tax Status" for a more detailed discussion of recent
Federal tax legislation, including a discussion of provisions affecting
corporations.
<TABLE>
<CAPTION>
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
------------------------- -----------------------------------
Single Joint Tax 5% 5 1/2% 6% 61/2% 7% 71/2% 8%
Return Return Bracket Equivalent Taxable Estimated Current Returns
------ ------ ------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 $ 0 - 39.00 21.8% 6.39% 7.03% 7.67% 8.31% 8.95% 9.59% 10.23%
23.35 - 56.55 39.00 - 94.25 34.1 7.59 8.35 9.10 9.86 10.62 11.38 12.14
56.55 - 117.95 94.25 - 143.60 36.9 7.92 8.72 9.51 10.30 11.09 11.89 12.68
117.95 - 256.50 143.60 - 256.50 41.4 8.53 9.39 10.24 11.09 11.95 12.80 13.65
Over 256.50 Over 256.50 44.7 9.04 9.95 10.85 11.75 12.66 13.56 14.47
</TABLE>
================================================================================
No person is authorized to give any information or to make any representations
not contained in this Prospectus, and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trusts, the Trustee or the Sponsor. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy securities in any state to any
person to whom it is not lawful to make such offer in such state.
TABLE OF CONTENTS
Page
Summary............................................2
The Trusts.........................................3
Public Offering...................................17
Rights of Unitholders.............................20
Sponsor...........................................25
Trustee...........................................26
Evaluator.........................................27
Amendment and Termination
of the Trust Agreements.........................28
Legal Opinions....................................29
Independent Auditors..............................29
Description of Bond Ratings.......................29
Tax Free vs. Taxable Income.......................31
This Prospectus contains information concerning the Trusts and the Sponsor, but
does not contain all of the information set forth in the Trusts' registration
statements, amendments and exhibits relating thereto, which have been 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.
================================================================================
================================================================================
PROSPECTUS
PART TWO
VOYAGEUR UNIT
INVESTMENT TRUST
SERIES 1
SERIES 2
SERIES 3
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Trustee:
The Bank of New York
101 Barclay Street
New York, New York 10286
================================================================================
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
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Voyageur Unit Investment Trust, Series 2, 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 Minneapolis and State of Minnesota on the 22nd day
of November, 1995.
Voyageur Unit Investment Trust, Series 2
(Registrant)
By Voyageur Fund Managers, Inc.
(Depositor)
By /s/ Thomas J. Abood
-----------------------------
General Counsel
(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 November 22, 1995:
Michael E. Dougherty
- --------------------------
Michael E. Dougherty Chairman of the Board of Directors
and Director
John G. Taft
- --------------------------
John G. Taft Chief Executive Officer
and Director
Edward J. Kohler
- --------------------------
Edward J. Kohler Director
Frank C. Tonnemaker
- --------------------------
Frank C. Tonnemaker Director
Jane M. Wyatt
- --------------------------
Jane M. Wyatt Director
Thomas J. Abood signs this document pursuant to a Power of Attorney filed
with the Securities and Exchange Commission with the initial Registration
Statement on Form S-6 for Voyageur Tax-Exempt Trust, Series 5 (Registration No.
33-62681).
INDEPENDENT AUDITORS' CONSENT
The Sponsor, Trustee and the Unitholders of
Voyageur Unit Investment Trust, Series 1, Series 2 and Series 3:
We consent to the use of our reports included herein and to the reference
of our Firm under the heading "Independent Auditors" in Part Two of the
Prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 21, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM AMENDMENT NUMBER 4 TO
FORM S-6 AND IS QUALIFIED IN ITS ENTIRETY TO REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000812346
<NAME> VOYAGEUR UNIT INVESTMENT TRUST, SERIES 2
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1994
<PERIOD-END> APR-30-1995
<INVESTMENTS-AT-COST> 1,102,493
<INVESTMENTS-AT-VALUE> 1,144,427
<RECEIVABLES> 35,980
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,180,407
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 11,594
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,168,813
<SHARES-COMMON-STOCK> 2,033
<SHARES-COMMON-PRIOR> 2,115
<ACCUMULATED-NII-CURRENT> 19,383
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,005
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 41,934
<NET-ASSETS> 1,168,813
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 86,729
<OTHER-INCOME> 0
<EXPENSES-NET> 6,676
<NET-INVESTMENT-INCOME> 80,053
<REALIZED-GAINS-CURRENT> 9,926
<APPREC-INCREASE-CURRENT> (17,841)
<NET-CHANGE-FROM-OPS> 72,138
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 84,215
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 149,729
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 82
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (161,806)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
