File No. 33-84086
CIK No. 930360
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2
Voyageur Tax-Exempt Trust, Series 1
(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 May 17,
1996 pursuant to paragraph (b) of Rule 485.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
COLORADO INSURED SERIES 1 -- 300,885 UNITS
MINNESOTA INSURED SERIES 1 -- 317,913 UNITS
OREGON INSURED SERIES 1 -- 263,229 UNITS
PROSPECTUS
PART ONE
Dated May 17, 1996
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 state and local income taxes.
Capital gains, if any, are subject to Federal tax.
THE TRUST
Voyageur Tax-Exempt Trust, Series 1 (the "TRUST") consists of a fixed
portfolio of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities within each state, 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 state and local
income taxes under existing law. At February 29, 1996, each Unit represented a
1/300,885, 1/317,913 and 1/263,229 undivided interest, for Colorado Insured,
Minnesota Insured and Oregon Insured, respectively, in the principal and net
income of each 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 February 29, 1996 the Public Offering Price per Unit
was $10.77, $10.88 and $10.87 for Colorado Insured, Minnesota Insured and Oregon
Insured, respectively (see "Public Offering" in Part Two).
Please retain all parts of this Prospectus for future reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
VOYAGEUR FUND MANAGERS, INC.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
Estimated Current Return to Unitholders as of February 29, 1996 was 5.38%,
5.30% and 5.25% for Colorado Insured, Minnesota Insured and Oregon Insured,
respectively. Estimated Long-Term Return to Unitholders as of February 29, 1996
was 4.74%, 4.68% and 4.57% for Colorado Insured, Minnesota Insured and Oregon
Insured, respectively. 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 and (2) takes into account a compounding factor and the expenses and sales
charge associated with each Unit of the Trust. 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 TAX-EXEMPT TRUST SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF FEBRUARY 29, 1996
SPONSOR AND EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
COLORADO MINNESOTA OREGON
INSURED INSURED INSURED
SERIES 1 SERIES 1 SERIES 1
---------- ---------- ---------
<S> <C> <C> <C>
Principal Amount (Par Value) of Bonds.............................. $2,885,000 $3,105,000 $2,525,000
Number of Units.................................................... 300,885 317,913 263,229
Fractional Undivided Interest in the Trust per Unit................ 1/300,885 1/317,913 1/263,229
Principal Amount (Par Value) of Bonds per Unit..................... $9.588 $9.767 $9.592
Public Offering Price: Aggregate Offering Price of Bonds in Portfolio $3,062,764 $3,268,608 $2,704,332
Aggregate Offering Price of Bonds per 100 Units.................... $10.18 $10.28 $10.27
Sales Charge 5.5% (5.796%, 5.837% and 5.842% of the Aggregate
Offering Price of the Bonds) per Unit(1)...................... $.59 $.60 $.60
Public Offering Price per Unit(1)(2)............................... $10.77 $10.88 $10.87
Redemption Price per Unit(2)(3).................................... $10.18 $10.28 $10.27
Excess of Public Offering Price per Unit Over Redemption Price
per Unit...................................................... $.59 $.60 $.60
Minimum Value of the Trust under which Trust Agreement ............ $577,000 $621,000 $505,000
may be terminated
Minimum Principal Distribution.......................$1.00 per Unit
First Settlement Date..............................January 26, 1995
Mandatory Termination Date........................December 31, 2044
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit..................... $0.60695 $0.60184 $0.59805
Less: Estimated Annual Expense per Unit....................... $0.02744 $0.02575 $0.02766
-------- -------- --------
Estimated Net Annual Interest Income per Unit................. $0.57951 $0.57609 $0.57039
Estimated Normal Monthly Distribution per Unit(4).................. $0.04829 $0.04801 $0.04753
Estimated Daily Rate of Net Interest Accrual per Unit.............. $0.00160 $0.00160 $0.00158
Estimated Current Return Based on Public Offering Price(1)(4)(5)... 5.38% 5.30% 5.25%
Estimated Long-Term Return(1)(4)(5)................................ 4.74% 4.68% 4.57%
Trustee's Initial Annual Fee per $1,000 principal amount of Bonds.. $ 2.38 $ 2.13 $ 2.30
Record Dates................................First day of each month
Distribution Dates......................Fifteenth day of each month
</TABLE>
Evaluations for purpose of sale, purchase or redemption of Units are made as of
4:00 P.M. Eastern time on days of trading on the New York Stock Exchange next
following receipt of an order for a sale or purchase of Units or receipt
by the Trustee of Units tendered for redemption.
(1) The sales charge is decreased and the Estimated Current Return and
Estimated Long-Term Return are increased for transactions entitled to a
reduced sales charge. See "Public Offering--General."
(2) Anyone ordering Units for settlement after the First Settlement Date will
pay accrued interest from such date to the date of settlement (normally
five business days after order) less distributions from the Interest
Account subsequent to the First Settlement Date. After the initial offering
period, the Sponsor's Repurchase Price per Unit will be determined as
described under the caption "Public Offering--Public Market."
(3) See "Rights of Unitholders--Redemption of Units."
(4) These figures are based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Bonds. The estimated cash flows
for each Trust are available upon request at no charge from the Sponsor.
(5) The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The estimated
net annual interest income per Unit will vary with changes in fees and
expenses of the Trustee, the Sponsor and the Evaluator and with the
principal prepayment, redemption, maturity, exchange or sale of Bonds while
the Public Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the present
Estimated Current Return indicated above will be realized in the future.
The Estimated Long-Term Return is calculated using a formula which (1)
takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in a Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirements of the Bonds
and the expenses of a Trust will change, there is no assurance that the
present Estimated Long-Term Return as indicated above will be realized in
the future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated Long-Term
Return reflects the estimated date and amount of principal returned while
the Estimated Current Return calculation includes only net annual interest
income and Public Offering Price.
INDEPENDENT AUDITORS' REPORT
The Unitholders and Trustee
Voyageur Tax-Exempt Trust, Series 1:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Voyageur Colorado Insured Series 1, Voyageur
Minnesota Insured Series 1, and Voyageur Oregon Insured Series 1 (Trusts within
Voyageur Tax-Exempt Trust, Series 1) as of February 29, 1996, the related
statements of operations and changes in net assets and the supplementary
information for the year ended February 29, 1996 and the period from January 19,
1995 (commencement of operations) to February 28, 1995. These financial
statements and the supplementary information are the responsibility of the
Trusts' management. Our responsibility is to express an opinion on these
financial statements and the supplementary information 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 Colorado Insured
Series 1, Voyageur Minnesota Insured Series 1 and Voyageur Oregon Insured Series
1 at February 29, 1996, and the results of their operations, changes in their
net assets and the supplementary information for the periods stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 12, 1996
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------
Colorado Minnesota Oregon
Insured Insured Insured
Series 1 Series 1 Series 1
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Investments in securities, at market value
(cost: $2,861,416, $3,023,353,
and $2,503,308, respectively)
(note 3 to schedule of investments) $ 3,062,764 $ 3,268,608 $ 2,704,332
Interest receivable 58,509 45,438 36,608
----------- ----------- -----------
Total assets $ 3,121,273 $ 3,314,046 $ 2,740,940
=========== =========== ===========
LIABILITIES AND NET ASSETS
Bank overdraft 42,811 28,954 22,765
Accrued dividends payable 14,530 15,263 12,511
Accrued expenses payable 1,168 1,221 1,332
----------- ----------- -----------
Total liabilities 58,509 45,438 36,608
----------- ----------- -----------
Net assets (units of fractional undivided
interest outstanding: 300,885,
317,913 and 263,229, respectively):
Original cost to investors of 300,885;
317,913; and 263,229
units, respectively (note B) 3,008,850 3,179,130 2,632,290
Less:
Gross underwriting commissions (note C) (147,434) (155,777) (128,982)
----------- ----------- -----------
2,861,416 3,023,353 2,503,308
Net unrealized appreciation of investments (note D) 201,348 245,255 201,024
----------- ----------- -----------
Net assets 3,062,764 3,268,608 2,704,332
----------- ----------- -----------
Total liabilities and net assets $ 3,121,273 $ 3,314,046 $ 2,740,940
=========== =========== ===========
Net asset value per unit
(300,885; 317,913; and 263,229 units, respectively) $ 10.18 $ 10.28 $ 10.27
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
COLORADO INSURED
SERIES 1
-------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Investment income, interest $182,622 $ 17,754
-------- --------
Expenses:
Trustee fees and expenses 7,310 635
Accounting fees 1,000 167
-------- --------
Total expenses 8,310 802
-------- --------
Investment income, net 174,312 16,952
-------- --------
Unrealized gain on investments, net (notes A and D):
Net change in unrealized appreciation 90,026 111,322
-------- --------
Net gain on investments 90,026 111,322
-------- --------
Net increase in net assets resulting
from operations $264,338 $128,274
======== ========
- ----------
* Period from January 19, 1995 (commencement of operations) to February 28, 1995.
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF OPERATIONS (CONTINUED)
- ----------------------------------------------------------------------------------
MINNESOTA INSURED
SERIES 1
---------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Investment income, interest $191,333 $ 18,601
-------- --------
Expenses:
Trustee fees and expenses 7,241 628
Accounting fees 1,000 167
-------- --------
Total expenses 8,241 795
-------- --------
Investment income, net 183,092 17,806
-------- --------
Unrealized gain on investments, net (notes A and D):
Net change in unrealized appreciation 133,908 111,347
-------- --------
Net gain on investments 133,908 111,347
-------- --------
Net increase in net assets resulting
from operations $317,000 $129,153
======== ========
- ----------
* Period from January 19, 1995 (commencement of operations) to February 28, 1995.
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF OPERATIONS (CONTINUED)
- ---------------------------------------------------------------------------------
OREGON INSURED
SERIES 1
--------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Investment income, interest $157,424 $15,306
-------- -------
Expenses:
Trustee fees and expenses 6,327 543
Accounting fees 1,000 167
-------- -------
Total expenses 7,327 710
-------- -------
Investment income, net 150,097 14,596
-------- -------
Unrealized gain on investments, net (notes A and D):
Net change in unrealized appreciation 122,051 78,973
-------- -------
Net gain on investments 122,051 78,973
-------- -------
Net increase in net assets resulting
from operations $272,148 $93,569
======== =======
- ----------
* Period from January 19, 1995 (commencement of operations) to February 28, 1995.
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
COLORADO INSURED
SERIES 1
------------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
----------- -----------
<S> <C> <C>
Operations
Investment income, net $ 174,312 $ 16,952
Net change in unrealized appreciation 90,026 111,322
----------- -----------
Net increase in net assets
resulting from operations 264,338 128,274
----------- -----------
Distributions to unitholders from (note E):
Investment income, net (174,312) (16,952)
----------- -----------
Total distributions (174,312) (16,952)
----------- -----------
Total increase in net assets 90,026 111,322
Net assets:
Beginning of period 2,972,738 2,861,416
----------- -----------
End of period $ 3,062,764 $ 2,972,738
=========== ===========
</TABLE>
- ----------
* Commencement of operations.
See accompanying notes to financial statements.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA INSURED
SERIES 1
---------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
----------- -----------
<S> <C> <C>
Operations
Investment income, net $ 183,092 $ 17,806
Net change in unrealized appreciation 133,908 111,347
----------- -----------
Net increase in net assets
resulting from operations 317,000 129,153
----------- -----------
Distributions to unitholders from (note E):
Investment income, net (183,092) (17,806)
----------- -----------
Total distributions (183,092) (17,806)
----------- -----------
Total increase in net assets 133,908 111,347
Net assets:
Beginning of period 3,134,700 3,023,353
----------- -----------
End of period $ 3,268,608 $ 3,134,700
=========== ===========
</TABLE>
- ----------
* Commencement of operations.
See accompanying notes to financial statements.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON INSURED
SERIES 1
--------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
----------- -----------
<S> <C> <C>
Operations
Investment income, net $ 150,097 $ 14,596
Net change in unrealized appreciation 122,051 78,973
----------- -----------
Net increase in net assets
resulting from operations 272,148 93,569
----------- -----------
Distributions to unitholders from (note E):
Investment income, net (150,097) (14,596)
----------- -----------
Total distributions (150,097) (14,596)
----------- -----------
Total increase in net assets 122,051 78,973
Net assets:
Beginning of period 2,582,281 2,503,308
----------- -----------
End of period $ 2,704,332 $ 2,582,281
=========== ===========
</TABLE>
- ----------
* Commencement of operations.
See accompanying notes to financial statements.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996
(A) The financial statements of Voyageur Tax-Exempt Trust, Series 1 are
prepared on the accrual basis of accounting. Security transactions are
accounted for on the date the securities are purchased or sold. The Trust
was organized on January 19, 1995 and is registered under the Investment
Company Act of 1940. The Trust will terminate on the mandatory termination
date of December 31, 2044.
(B) For reporting purposes, cost of the bonds reflects no amortization or
accretion.
(C) The gross underwriting commission represents the aggregate sales charge
paid in connection with the initial public offering.
(D) At February 29,1996, the gross unrealized market appreciation was $201,348,
$245,255 and $201,024 and the gross unrealized market depreciation was $0,
$0 and $0 for Colorado Insured Series 1, Minnesota Insured Series 1 and
Oregon Insured Series 1, respectively. The net unrealized market
appreciation was $201,348, $245,255 and $201,024 for Colorado Insured
Series 1, Minnesota Insured Series 1 and Oregon Insured Series 1,
respectively.
(E) Distributions of net interest income to unitholders are paid monthly.
(F) During the current period no units were redeemed for Colorado Insured
Series 1, Minnesota Insured Series 1 and Oregon Insured Series 1. Since
inception date, 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 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.
(H) Supplementary Information
Select data for a unit of the Trust outstanding throughout each period
follows:
<TABLE>
<CAPTION>
COLORADO INSURED
SERIES 1
---------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Interest income $ 0.61 $ 0.06
Expenses 0.03 0.00
------- -------
Net investment income 0.58 0.06
Income distributions (0.58) (0.06)
------- -------
0.00 0.00
Net change in unrealized appreciation 0.30 0.37
------- -------
Increase in net asset value 0.30 0.37
Net asset value, beginning of period 9.88 9.51
------- -------
Net asset value, end of period $ 10.18 $ 9.88
======= =======
</TABLE>
- ----------
* Commencement of operations.
(H) Supplementary Information (continued)
Select data for a unit of the Trust outstanding throughout each period
follows:
<TABLE>
<CAPTION>
MINNESOTA INSURED
SERIES 1
--------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Interest income $ 0.60 $ 0.06
Expenses 0.03 0.00
------- -------
Net investment income 0.57 0.06
Income distributions (0.57) (0.06)
------- -------
0.00 0.00
Net change in unrealized appreciation 0.42 0.35
------- -------
Increase in net asset value 0.42 0.35
Net asset value, beginning of period 9.86 9.51
------- -------
Net asset value, end of period $ 10.28 $ 9.86
======= =======
</TABLE>
- ----------
* Commencement of operations.
<TABLE>
<CAPTION>
OREGON INSURED
SERIES 1
---------------------------
PERIOD FROM
YEAR JANUARY 19,
ENDED 1995* TO
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Interest income $ 0.60 $ 0.06
Expenses 0.03 0.00
------- -------
Net investment income 0.57 0.06
Income distributions (0.57) (0.06)
------- -------
0.00 0.00
Net change in unrealized appreciation 0.46 0.30
------- -------
Increase in net asset value 0.46 0.30
Net asset value, beginning of period 9.81 9.51
------- -------
Net asset value, end of period $ 10.27 $ 9.81
======= =======
</TABLE>
- ----------
* Commencement of operations.
COLORADO INSURED SERIES 1
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Aggregate
principal Title of bonds deposited Coupon rate Redemption Market
Ratings (1) amount in trust or contracted for and maturity features (2) value (3)
- -----------------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
COLORADO MUNICIPAL BONDS (100.0%):
GENERAL OBLIGATION (34.4%):
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAA/Aaa $250,000 Douglas County School District, Number 6.50% @ 2016 2004 @ 101 $272,210
RE. 1, Douglas and Elbert Counties, 2012 @ 100 S.F.
Colorado, (General Obligation Improvement
Bonds), Series 1994A, (MBIA Insured)
AAA/Aaa 500,000 Pueblo County School District No. 70, 6.40% @ 2014 2004 @ 100 538,385
(Pueblo County, Colorado) General
Obligation Bonds, Series 1995, (AMBAC
Insured)
AAA/Aaa 220,000 Summit School District RE-1, Summit County, 6.70% @ 2014 2004 @ 100 241,459
Colorado, General Obligation Improvement 2010 @ 100 S.F.
Bonds, Series 1994, (FGIC Insured)
--------------
1,052,054
--------------
HEALTH CARE REVENUE (17.2%):
------------------------------------------------------------------------------------------------
AAA/Aaa 500,000 University of Colorado Hospital Authority 6.40% @ 2022 2002 @ 102 527,575
(Hospital Revenue Bonds), Series 2013 @ 100 S.F. --------------
1992A, (AMBAC Insured)#
INDUSTRIAL REVENUE (13.8%):
------------------------------------------------------------------------------------------------
AAA/Aaa 415,000 Adams County, Colorado Pollution Control 5.875% @ 2014 2003 @ 101 423,715
Refunding Revenue Bonds, (Public --------------
Service Company of Colorado Project),
1993 Series A, (MBIA Insured)#
EDUCATION REVENUE (17.3%):
------------------------------------------------------------------------------------------------
AAA/Aaa 500,000 Colorado State Board of Agriculture, 6.40% @ 2017 2002 @ 101 531,035
Colorado State University Auxiliary 2012 @ 100 S.F. --------------
Facilities Refunding and Improvement
Revenue Bonds, Series 1992,
(MBIA Insured)#
SALES AND USE TAX REVENUE (8.6%):
------------------------------------------------------------------------------------------------
AAA/Aaa 250,000 City of Arvada, Colorado, Sales and Use 6.25% @ 2017 2002 @ 100 262,507
Tax Refunding and Improvement 2013 @ 100 S.F. --------------
Revenue Bonds, Series 1992,
(FGIC Insured)#
UTILITY REVENUE (8.7%):
------------------------------------------------------------------------------------------------
AAA/Aaa 250,000 City of Westminster, Colorado, Water and 6.25% @ 2014 2004 @ 100 265,878
Wastewater Utility Enterprise, (Water and 2010 @ 100 S.F. --------------
Wastewater Revenue Bonds), Series
1994, (AMBAC Insured)
- -----------------------------------------------------------------------------------------------------------------------------
$2,885,000 Total Bonds (cost: $2,861,416) $3,062,764
=============================================================================================================================
</TABLE>
MINNESOTA INSURED SERIES 1
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Aggregate
principal Title of bonds deposited Coupon rate Redemption Market
Ratings (1) amount in trust or contracted for and maturity features (2) value (3)
- ---------------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MINNESOTA MUNICIPAL BONDS (100.0%):
PRE-REFUNDED/ESCROWED (2.4%):
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAA/Aaa $70,000 Health Care Facilities Revenue Bonds, 6.30% @ 2004 2002 @ 102 $78,519
(The Duluth Clinic, Ltd), Duluth Economic --------------
Development Authority, Minnesota,
Series 1992, (AMBAC Insured), ETM #
GENERAL OBLIGATION (27.1%):
---------------------------------------------------------------------------------------------
AAA/Aaa 500,000 Independent School District 279, Osseo 5.60% @ 2011 2004 @ 100 509,235
Area Schools, Minnesota, General
Obligation School Building Bonds,
Series 1994A, (FGIC Insured)#
AAA/Aaa 355,000 Independent School District No. 750 6.15% @ 2011 2002 @ 100 373,506
(Rocori Area Schools), Cold Spring, 2008 @ 100 S.F.
Minnesota, General Obligation School
Building Bonds, Series 1992A,
(FGIC Insured)#
--------------
882,741
--------------
HEALTH CARE REVENUE (55.0%):
---------------------------------------------------------------------------------------------
AAA/Aaa 500,000 City of Brainerd, Minnesota, Refunding 6.65% @ 2017 2002 @ 102 539,685
Revenue Bonds, (The Evangelical 2005 @ 100 S.F.
Lutheran Good Samaritan Society
Project), Series 1992A, (FSA Insured)
AAA/Aaa 500,000 City of Minneapolis, Minnesota, Hospital 6.50% @ 2011 2002 @ 102 538,355
Revenue Refunding Bonds, (Fairview 2002 @ 100 S.F.
Hospital and Healthcare Services),
1991 Series A, (MBIA Insured)#
AAA/Aaa 500,000 City of Rochester, Minnesota, Health 6.25% @ 2021 2002 @ 102 528,990
Care Facilities Revenue Bonds, (Mayo 2015 @ 100 S.F.
Foundation / Mayo Medical Center),
Series 1992F, (AMBAC Insured)#
AAA/Aaa 180,000 Health Care Facilities Revenue Bonds, 6.30% @ 2022 2002 @ 102 191,018
(The Duluth Clinic, Ltd), Duluth Economic 2013 @ 100 S.F.
Development Authority, Minnesota,
Series 1992, (AMBAC Insured)#
--------------
1,798,048
--------------
UTILITY REVENUE (15.5%):
---------------------------------------------------------------------------------------------
AAA/Aaa 500,000 Southern Minnesota Municipal Power 5.75% @ 2018 2003 @ 102 509,300
Agency, Power Supply System Revenue 2013 @ 100 S.F. --------------
Bonds, Series 1992A, (MBIA Insured)#
- ---------------------------------------------------------------------------------------------------------------------------
$3,105,000 Total Bonds (cost: $3,023,353) $3,268,608
=============================================================================================================================
</TABLE>
See notes to schedule of investments.
OREGON INSURED SERIES 1
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Aggregate
principal Title of bonds deposited Coupon rate Redemption Market
Ratings (1) amount in trust or contracted for and maturity features (2) value (3)
- -----------------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
OREGON MUNICIPAL BONDS (100.0%):
GENERAL OBLIGATION (39.2%):
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAA/Aaa $300,000 City of Hermiston, Umatilla County, Oregon, 6.20% @ 2024 2004 @ 100 $317,688
(General Obligation Water Bonds),
Series 1994, (AMBAC Insured)#
AAA/Aaa 350,000 Umatilla County School District No. 8R, 6.00% @ 2013 2004 @ 100 367,927
Hermiston, Oregon, General Obligation
Bonds, Series 1994, (AMBAC Insured)#
AAA/Aaa 350,000 Washington County School District No. 88J 6.10% @ 2012 2005 @ 100 373,394
Sherwood, Oregon, General Obligation 2008 @ 100 S.F.
Bonds, Series 1994, (FSA Insured)#
--------------
1,059,009
--------------
HEALTH CARE REVENUE (13.3%):
----------------------------------------------------------------------------------------------
AAA/Aaa 325,000 The Hospital Facilities Authority of the 6.70% @ 2021 2001 @ 102 358,719
City of Portland, Oregon Hospital 2012 @ 100 S.F. --------------
Revenue Bonds, (Legacy Health System)
Series 1991B (AMBAC Insured)#
EDUCATION REVENUE (13.0%):
----------------------------------------------------------------------------------------------
AAA/Aaa 300,000 Washington County Education Service 7.10% @ 2025 2005 @ 100 353,181
District, Washington County, Oregon, 2017 @ 100 S.F. --------------
Certificates of Participation,
Series 1994, (MBIA Insured)
UTILITY REVENUE (34.5%):
----------------------------------------------------------------------------------------------
AAA/Aaa 300,000 City of Eugene, Oregon, Electric Utility 5.80% @ 2022 2004 @ 101 306,804
System Revenue Bonds, Series 2020 @ 100 S.F.
1994C, (MBIA Insured)#
AAA/Aaa 300,000 City of Portland, Oregon, Sewer System 6.25% @ 2015 2004 @ 101 321,534
Revenue Refunding Bonds, 2013 @ 100 S.F.
1993 Series A, (FGIC Insured)#
AAA/Aaa 300,000 Emerald People's Utility District, Lane 5.75% @ 2016 2002 @ 102 305,085
County, Oregon, Electric System 2013 @ 100 S.F.
Revenue Refunding Bonds, Series
1992, (AMBAC Insured)#
--------------
933,423
--------------
- -----------------------------------------------------------------------------------------------------------------------------
$2,525,000 Total Bonds (cost: $2,503,308) $2,704,332
=============================================================================================================================
</TABLE>
See notes to schedule of investments.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
NOTES TO SCHEDULES OF INVESTMENTS
FEBRUARY 29, 1996
(1) All ratings (unaudited) are by Standard & Poor's Corporation and/or
Moody's Investors Service. As a result of the insurance related to each
Bond, each Bond is rated "AAA" by Standard & Poor's and/or "Aaa" by
Moody's.
(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 on the basis of current
bid prices for the bonds. 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.
(4) For financial reporting purposes the Trust does not amortize bond premium
and discount.
# Indicates Bond was issued at either an original issue discount or
purchased at a market discount.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 1
PART ONE
MUST BE ACCOMPANIED BY PART TWO
--------------
PROSPECTUS
--------------
Sponsor: Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Trustee: Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
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 TAX-EXEMPT TRUST SERIES
PROSPECTUS PART TWO OF THIS PROSPECTUS
PART TWO MAY NOT BE DISTRIBUTED
MAY 17, 1996 WITHOUT PART ONE
- --------------------------------------------------------------------------------
THE FUND. Voyageur Tax-Exempt Trust Series (the "Fund") consists of the
underlying separate unit investment trusts set forth in Part One of this
Prospectus. The various trusts are collectively referred to herein as the
"Trusts." Territorial Insured Series and National Insured Series are referred to
herein as the "Insured National Trust", while Arizona Insured Series, Colorado
Insured Series, Minnesota Insured Series and Oregon Insured Series are
collectively referred to herein as the "Insured State Trusts." Each Trust
consists of interest-bearing obligations issued by or on behalf of states and
territories of the United States and political subdivisions and authorities
thereof, the interest on which is, with certain exceptions, in the opinion of
recognized bond counsel to the issuing governmental authorities, exempt from all
Federal income taxes under existing law (the "Bonds"). In addition, the interest
income of each Insured State Trust is, in the opinion of counsel, exempt to the
extent indicated from state and local taxes when held by residents of the state
where the issuers of Bonds in such Trust are located. Investors should consult
their tax advisers to determine the extent to which such interest income is
exempt from taxation in their state of residence. Capital gains, if any, are
subject to Federal and state tax. All Bonds in the Fund have insurance
guaranteeing the payments of principal and interest, when due, or are escrowed
to maturity. All such insurance remains effective so long as the Bonds are
outstanding. IT SHOULD BE NOTED THAT THE INSURANCE RELATES ONLY TO THE BONDS IN
A TRUST AND NOT TO THE UNITS OFFERED HEREBY OR TO THE MARKET VALUE THEREOF. As a
result of such insurance or escrow, the Bonds of each Trust are rated "AAA" by
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's") and/or "Aaa" by Moody's Investors Service, Inc.
("Moody's"). Both Standard & Poor's and Moody's have indicated that their
respective rating is not a recommendation to buy, hold or sell Units nor does it
take into account the extent to which expenses of a Trust or sales by a Trust of
Bonds for less than the purchase price paid by such Trust will reduce payment to
Unitholders of the interest and principal required to be paid on such Bonds. See
"Insurance on the Bonds." No representation is made as to any insurer's ability
to meet its commitments. Certain of the Bonds in certain of the Trusts may have
been acquired at prices which resulted in such Bonds being purchased at a
discount from the aggregate par value of such Bonds. Gains based upon the
difference, if any, between the value of such Bonds at maturity, redemption or
sale and their purchase price at a discount (plus earned original issue
discount) may constitute taxable ordinary income with respect to a Unitholder
who is not a dealer with respect to his Units.
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY AND INVOLVE INVESTMENT RISK, INCLUDING LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The investor is advised to read and retain both Part One and Part Two of this
Prospectus for future reference.
INVESTMENT OBJECTIVES OF THE FUND. The objectives of the Fund are income
exempt from Federal income tax and, in the case of an Insured State Trust,
Federal and state income tax (if any) and conservation of capital through an
investment in diversified portfolios of Federal and state tax-exempt
obligations. The Fund may be an appropriate investment vehicle for investors who
desire to participate in a portfolio of tax-exempt fixed income securities with
greater diversification than they might be able to acquire individually. In
addition, securities of the type deposited in the Fund are often not available
in small amounts. There is, of course, no guarantee that the Fund will achieve
its objectives. The payment of interest and the preservation of principal are
dependent upon the continuing ability of the issuers and/or obligors of the
Bonds and of the insurers thereof to meet their respective obligations.
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of each Trust
is equal to the aggregate bid price of the Bonds in such Trust's portfolio and
cash, if any, in the Principal Account held or owned by such Trust divided by
the number of Units outstanding, plus the applicable sales charge and accrued
interest, if any. If the Bonds in each Trust were available for direct purchase
by investors, the purchase price of the Bonds would not include the sales charge
included in the Public Offering Price of the Units. See "Public Offering."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return and Estimated Long-Term Return to Unitholders are as set forth
under "Summary of Essential Financial Information" in Part One of this
Prospectus. The methods of calculating Estimated Current Return and Estimated
Long-Term Return are set forth in the footnotes to the "Summary of Essential
Financial Information" in Part One of this Prospectus and under "Estimated
Current Return and Estimated Long-Term Return."
DISTRIBUTIONS. Unitholders will receive distributions on a monthly basis.
See "Rights of Unitholders-- Distributions of Interest and Principal." Record
dates will be the first day of each month. Distributions will be made on the
fifteenth day of the month subsequent to the respective record dates.
MARKET FOR UNITS. Although not obligated to do so, an affiliate of the
Sponsor, Voyageur Fund Distributors, Inc., intends to, and certain of the other
Underwriters may, maintain a secondary market for the Units at prices based upon
the aggregate bid price of the Bonds in the portfolio of a Trust. If such a
market is not maintained and no other over-the-counter market is available, a
Unitholder will be able to dispose of his Units through redemption at prices
based upon the bid prices of the underlying Bonds (see "Rights of
Unitholders--Redemption of Units").
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end management investment company as
described herein. See "Rights of Unitholders-- Reinvestment Option."
RISK FACTORS. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other factors,
the inability of the issuer or an insurer to pay the principal of or interest on
a Bond when due, volatile interest rates, early call provisions, and changes to
the tax status of the Bonds. See "The Trusts--Risk Factors" for the applicable
Trust and "Risk Factors."
THE FUND
GENERAL. The Fund was created under the laws of the State of Missouri
pursuant to a Trust Agreement (the "Trust Agreement"), dated each Trust's
Initial Date of Deposit, as defined in "Summary of Essential Financial
Information"in Part One of this Prospectus, with Voyageur Fund Managers, Inc.,
as Sponsor and Evaluator, and Investors Fiduciary Trust Company, as Trustee.
The Fund consists of separate unit investment trusts, each having a
portfolio of interest-bearing obligations issued by or on behalf of states and
territories of the United States, and political subdivisions and authorities
thereof, the interest on which is, in the opinion of recognized bond counsel to
the issuing governmental authorities, exempt from all Federal income taxes under
existing law. All issuers of Bonds in an Insured State Trust are located in the
State for which such Trust is named or in United States territories or
possessions and their public authorities; consequently, in the opinion of
counsel, the related interest earned on such Bonds is exempt to the extent
indicated from state and local taxes of such State or territory. In addition, in
the case of an Insured National Trust, interest income may also be exempt from
certain state and local taxes for residents of various states. Illinois,
Indiana, Virginia and Washington residents may only purchase Units of an Insured
National Series by this Prospectus.
Each Unit represents the fractional undivided interest in each Trust as
indicated under "Summary of Essential Financial Information" in Part One of this
Prospectus. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in a Trust represented by each unredeemed Unit
will increase, although the actual interest in such Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the Sponsor or the
Underwriters, or until the termination of the Trust Agreement.
REPLACEMENT BONDS. Because certain of the Bonds in a Trust may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can be given
that a Trust will retain for any length of time its present size and
composition. Neither the Sponsor nor the Trustee shall be liable in any way for
any default, failure or defect in any Bond. In the event of a failure to deliver
any Bond that has been purchased for a Trust under a contract, including those
securities purchased on a "when, as and if issued" basis ("Failed Bonds"), the
Sponsor is authorized under the Trust Agreement to direct the Trustee to acquire
other securities ("Replacement Bonds") to make up the original corpus of the
affected Trust.
The Replacement Bonds must be purchased within 20 days after delivery of
the notice of the failed contract and the purchase price (exclusive of accrued
interest) may not exceed the amount of funds reserved for the purchase of the
Failed Bonds. The Replacement Bonds shall (i) be tax-exempt bonds, issued by
states or territories of the United States or political subdivisions thereof and
shall have the benefit of an exemption from state taxation of interest to an
extent equal to or greater than that of the bonds they replace, with fixed
maturity dates substantially the same as those of the Failed Bonds; (ii) be
purchased at a price that results in a yield to maturity and in a current
return, in each case as of the Initial Date of Deposit, at least equal to that
of the Failed Bonds; (iii) be payable in U.S. currency; (iv) not be when, as and
if issued bonds; (v) be rated "AAA" by Standard & Poor's or "Aaa" by Moody's;
and (vi) be insured by one of the Insurers. Whenever a Replacement Bond has been
acquired for a Trust, the Trustee shall, within five days thereafter, notify all
Unitholders of such Trust of the acquisition of the Replacement Bond and shall,
on the next monthly distribution date which is more than 30 days thereafter,
make a pro rata distribution of the amount, if any, by which the cost to the
affected Trust of the Failed Bond exceeded the cost of the Replacement Bond plus
accrued interest. Once the original corpus of a Trust is acquired, the Trustee
will have no power to vary the investment of the Trust; i.e., the Trust will
have no managerial power to take advantage of market variations to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Bonds to all Unitholders of the affected Trust and distribute the principal and
accrued interest (at the coupon rate of such Failed Bonds to the date the Failed
Bonds are removed from the Trust) attributable to such Failed Bonds not later
than the next Distribution Date following such removal or such earlier time as
the Trustee in its sole discretion deems to be in the interest of the
Unitholders. In the event a Replacement Bond should not be acquired by a Trust,
the estimated net annual interest income per Unit for the Trust would be reduced
and the Estimated Current Return and the Estimated Long-Term Return thereon
might be lowered. In addition, Unitholders should be aware that they may not be
able at the time of receipt of such principal to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such proceeds
were earning to Unitholders in the affected Trust.
INVESTMENT OBJECTIVES AND PORTFOLIO SELECTION
The objectives of the Fund are to gain interest income exempt from Federal
income tax and, in the case of an Insured State Trust, Federal and state income
taxation and to conserve capital through an investment in diversified portfolios
of Federal and state tax-exempt obligations. There is, of course, no guarantee
that the Trusts will achieve their objectives. The Fund may be an appropriate
investment vehicle for investors who desire to participate in a portfolio of
tax-exempt fixed income securities with greater diversification than they might
be able to acquire individually. In addition, securities of the type deposited
in the Fund are often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Trust has been obtained by the issuer of such
Bonds, by a prior owner of such Bonds or by the Sponsor prior to the deposit of
such Bonds in such Trust from one of several insurance companies (the
"Insurers"). Certain Bonds may be escrowed to maturity. No representation is
made as to any Insurer's ability to meet its commitments. All Bonds insured by
an Insurer receive a "AAA" rating by Standard & Poor's and a "Aaa" rating by
Moody's. Standard & Poor's describes securities it rates "AAA" as having "the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and repay principal is extremely strong." Moody's describes
securities it rates "Aaa" as "judged to be of the best quality." They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Their safety is so absolute that
with the occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
In selecting Bonds for the Trusts the following factors, among others, were
considered by the Sponsor: (i) whether the Bonds are insured by an Insurer, (ii)
the prices of the Bonds relative to other bonds of comparable quality and
maturity and (iii) the diversification of Bonds as to purpose of issue and
location of issuer. Subsequent to a Trust's Initial Date of Deposit, a Bond may
cease to be rated or its rating may be reduced below "AAA", "Aaa" or both.
Neither event requires elimination of such Bonds from the portfolio of a Trust
but may be considered in the Sponsor's determination as to whether or not to
direct the Trustee to dispose of the Bonds, see "Trust Administration--
Portfolio Administration".
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 Fund or any of the Trusts.
At any time after the date of this Prospectus, litigation may be initiated on a
variety of grounds with respect to Bonds in the Fund. Such litigation, as, for
example, suits challenging the issuance of pollution control revenue bonds under
environmental protection statutes, may affect the validity of such Bonds or the
tax-free nature of the interest thereon. While the outcome of litigation of such
nature can never be entirely predicted, the Fund has received or will receive
opinions of bond counsel to the issuing authorities of each Bond on the date of
issuance to the effect that such Bonds have been validly issued and that the
interest thereon is exempt from Federal and applicable state income taxation. In
addition, other factors may arise from time to time which potentially may impair
the ability of issuers to meet obligations undertaken with respect to the Bonds.
THE TRUSTS
RISK FACTORS SPECIFIC TO ARIZONA. The following brief summary regarding the
economy of Arizona is based upon information drawn from publicly available
sources and is included for the purpose of providing the information about
general economic conditions that may or may not affect issuers of the Arizona
Bonds. The Sponsor has not independently verified any of the information
contained in such publicly available documents.
Arizona is the nation's sixth largest state in terms of area. Arizona's
main economic sectors include services, tourism and manufacturing. Mining and
agriculture are also significant, although they tend to be more capital than
labor intensive. Services is the single largest economic sector. Many of these
jobs are directly related to tourism.
The unemployment rate in Arizona for 1994 was 6.3% and for 1993 was 6.2%
compared to a national rate of 6.1% in 1994 and 6.8% in 1993. Job growth may be
adversely affected by the closing of a major air force base near Phoenix.
The State operates on a fiscal year beginning July 1 and ending June 30.
Fiscal year 1995 refers to the year ended June 30, 1995.
Total General Fund revenues of $4.3 billion are expected during fiscal year
1995. Approximately 44.5% of this budgeted revenue comes from sales and use
taxes, 44.4% from income taxes (both individual and corporate) and 4.4% from
property taxes. All taxes total approximately $4.0 billion, or 93% of General
Fund revenues. Non-tax revenue includes items such as income from the state
lottery, licenses, fees and permits, and interest.
For fiscal year 1994, the budget called for expenditures of approximately
$4.1 billion. These expenditures fell into the following major categories:
education (47.4%), health and welfare (26.3%), protection and safety (4.0%),
general government (15.5%), and inspection and regulation, natural resources,
transportation and other (6.8%). The State's general fund expenditures for
fiscal year 1995 are budgeted at approximately $4.7 billion. Fiscal year 1995's
proposed expenditures fall into the following major categories: education
(51.5%), health and welfare (24.1%), protection and safety (3.6%), general
government (14.5%), and inspection and regulation, natural resources,
transportation and other (6.3%). On March 16, 1995, Governor Symington signed
into law a fiscal year 1996 budget of $4.5 billion.
Most or all of the Bonds of the Arizona Trust are not obligations of the
State of Arizona, and are not supported by the State's taxing powers. The
particular source of payment and security for each of the Bonds is detailed in
the instruments themselves and in related offering materials. There can be no
assurances, however, with respect to whether the market value or marketability
of any of the Bonds issued by an entity other than the State of Arizona will be
affected by the financial or other condition of the State or of any entity
located within the State. In addition, it should be noted that the State of
Arizona, as well as counties, municipalities, political subdivisions and other
public authorities of the state, are subject to limitations imposed by Arizona's
constitution with respect to ad valorem taxation, bonded indebtedness and other
matters. For example, the state legislature cannot appropriate revenues in
excess of 7% of the total personal income by the state in any fiscal year. These
limitations may affect the ability of the issuers to generate revenues to
satisfy their debt obligations.
On July 21, 1994, the Arizona Supreme Court rendered its opinion in
ROOSEVELT ELEMENTARY SCHOOL DISTRICT NUMBER 66, ET AL V. DIANNE BISHOP, ET AL
(the "Roosevelt Opinion"). In this opinion, the Arizona Supreme Court held that
the present statutory financing scheme for public education in the State of
Arizona does not comply with the Arizona constitution. Subsequently, the Arizona
School Boards Association, with the approval of the appellants and the appellees
to the Roosevelt Opinion, and certain Arizona school districts, filed with the
Arizona Supreme Court motions for clarification of the Roosevelt Opinion,
specifically with respect to seeking prospective application of the Roosevelt
Opinion. On July 29, 1994, the Arizona Supreme Court clarified the Roosevelt
Opinion to hold that such opinion will have prospective effect only.
Certain other circumstances are relevant to the market value, marketability
and payment of any hospital and health care revenue bonds in the Arizona Trust.
The Arizona Legislature has in the past sought to enact health care cost control
legislation.
Certain other health care regulatory laws have expired. It is expected that the
Arizona legislature will at future sessions continue to attempt to adopt
legislation concerning health care cost control and related regulatory matters.
The effect of any such legislation or of the continued absence of any
legislation restricting hospital bed increases and limiting new hospital
construction on the ability of Arizona hospitals and other health care providers
to pay debt service on their revenue bonds cannot be determined at this time.
Arizona does not participate in the federally administered Medicaid
program. Instead, the state administers an alternative program, Arizona Health
Care Cost Containment System ("AHCCCS"), which provides health care to indigent
persons meeting certain financial eligibility requirements, through managed care
programs. In fiscal year 1995, AHCCCS will be financed approximately 60% by
federal funds, 29% by state funds, and 11% by county funds.
Under state law, hospitals retain the authority to raise funds with
notification and review by, but not approval from, the Department of Health
Services. Hospitals in Arizona have experienced profitability problems along
with those in other states. At least two Phoenix based hospitals have defaulted
on or reported difficulties in meeting their bond obligations in recent years.
Insofar as tax-exempt Arizona public utility pollution control revenue
bonds are concerned, the issuance of such bonds and the periodic rate increases
needed to cover operation costs and debt service are subject to regulation by
the Arizona Corporation Commission, the only significant exception being the
Salt River Project Agricultural Improvement and Power District which, as a
Federal instrumentality, is exempt from rate regulation. On July 15, 1991,
several creditors of Tucson Electric Power Company ("Tucson Electric") filed
involuntary petitions under Chapter 11 of the U.S. Bankruptcy Code to force
Tucson Power to reorganize under the supervision of the bankruptcy court. On
December 31, 1991, the Bankruptcy Court approved the utility's motion to dismiss
the July petition, after five months of negotiations between Tucson Electric and
its creditors to restructure the utility's debts and other obligations. In
December 1992, Tucson Electric announced that it had completed its financial
restructuring. In January 1993, Tucson Electric asked the Arizona Corporation
Commission for a 9.3% average rate increase. Tucson Electric services
approximately 270,000 customers, primarily in the Tucson area. Inability of any
regulated public utility to secure necessary rate increases could adversely
affect, to an indeterminable extent, its ability to pay debt service on its
pollution control revenue bonds.
Based on a recent U.S. Supreme Court ruling, the State has determined to
refund $197 million, including statutory interest, in State income taxes
previously collected from Federal retirees on their pensions. This payment will
be made over a four-year period beginning with approximately $14.6 million in
tax refunds in fiscal year 1994. A combination of tax refunds and tax credits
will be used to satisfy this liability.
ARIZONA STATE TAXATION. For a discussion of the Federal tax status of
income earned on Arizona Trust Units, see "Tax Status."
The assets of the Arizona Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Arizona (the "State"), its
political subdivisions and authorities (the "Bonds"), provided the interest on
such Bonds received by the Trust is exempt from State income taxes.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing law:
1.For Arizona income tax purposes, each Unitholder will be treated as the
owner of a pro rata portion of the Arizona Trust, and the income of the Arizona
Trust therefore will be treated as the income of the Unitholder under State law.
2.For Arizona income tax purposes, interest on the Bonds which is
excludable from Federal gross income and which is exempt from Arizona income
taxes when received by the Arizona Trust, and which would be excludable from
Federal gross income and exempt from Arizona income taxes if received directly
by a Unitholder, will retain its status as tax-exempt interest when received by
the Arizona Trust and distributed to the Unitholders.
3.To the extent that interest derived from the Arizona Trust by a
Unitholder with respect to the Bonds is excludable from Federal gross income,
such interest will not be subject to Arizona income taxes.
4.Each Unitholder will receive taxable gain or loss for Arizona income tax
purposes when Bonds held in the Arizona Trust are sold, exchanged, redeemed or
paid at maturity, or when the Unitholder redeems or sells Units, at a price that
differs from original cost as adjusted for amortization of Bond discount or
premium and other basis adjustments, including any basis reduction that may be
required to reflect a Unitholder's share of interest, if any, accruing on Bonds
during the interval between the Unitholder's settlement date and the date such
Bonds are delivered to the Arizona trust, if later.
5.Amounts paid by the insurer under an insurance policy or policies issued
to the Arizona Trust, if any, with respect to the Bonds in the Arizona Trust
which represent maturing interest on defaulted obligations held by the Trustee
will be exempt from State income taxes if, and to the same extent as, such
interest would have been so exempt if paid by the issuer of the defaulted
obligations provided that, at the time such policies are purchased, the amounts
paid for such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the obligations, rather than the
insurer, will pay debt service on the obligations.
6.Arizona law does not permit a deduction for interest paid or incurred on
indebtedness incurred or continued to purchase or carry Units in the Arizona
Trust, the interest on which is exempt from Arizona income taxes.
7.Neither the Bonds nor the Units will be subject to Arizona property
taxes, sales tax or use tax.
RISK FACTORS SPECIFIC TO COLORADO. The State Constitution requires that
expenditures for any fiscal year not exceed revenues for such fiscal year. By
statute, the amount of General Fund revenues available for appropriation is
based upon revenue estimates which, together with other available resources,
must exceed annual appropriations by the amount of the unappropriated reserve
(the "Unappropriated Reserve"). The Unappropriated Reserve requirement for
fiscal year 1991, 1992 and 1993 was set at 3% of total appropriations from the
General Fund. For fiscal years 1994 and thereafter, the Unappropriated Reserve
retirement is set at 4%. In addition to the Unappropriated Reserve, a
constitutional amendment approved by Colorado voters in 1992 requires the State
and each local government to reserve a certain percentage of its fiscal year
spending (excluding bonded debt service) for emergency use (the "Emergency
Reserve"). The minimum Emergency Reserve is set at 2% for 1994 and 3% for 1995
and later years. For fiscal year 1992 and thereafter General Fund appropriations
are also limited by statute to an amount equal to the cost of performing certain
required reappraisals of taxable property plus an amount equal to the lesser of
(i) five percent of Colorado personal income or (ii) 106% of the total General
Fund appropriations for the previous fiscal year. This restriction does not
apply to any General Fund appropriations which are required as a result of a new
federal law, a final state or federal court order or moneys derived from the
increase in the rate or amount of any tax or fee approved by a majority of the
registered electors of the State voting at any general election. In addition,
the statutory limit on the level of Federal Fund appropriations may be exceeded
for a given fiscal year upon the declaration of a State fiscal emergency by the
State General Assembly.
The 1993 fiscal year ending General Fund balance was $326.8 million, which
was $196.9 million over the combined Unappropriated Reserve and Emergency
Reserve requirement. The 1994 fiscal year ending General Fund balance (exclusive
of $39.0 million allocated to Emergency Reserve) was $320.4 million, or $188.6
million over the required Unappropriated Reserve. Based on December 20, 1994,
estimates, the 1995 fiscal year ending General Fund balance (exclusive of $74.1
million allocated to Emergency Reserve) is expected to be $276.8 million, or
$135.1 million over the required Unappropriated Reserve.
On November 3, 1992, voters in Colorado approved a constitutional amendment
(the "Amendment") which, in general, became effective December 31, 1992, and
which could restrict the ability of the State and local governments to increase
revenues and impose taxes. The Amendment applies to the State and all local
governments, including home rule entities ("Districts"). Enterprises, defined as
government-owned businesses authorized to issue revenue bonds and receiving
under 10% of annual revenue in grants from all Colorado state and local
governments combined, are excluded from the provisions of the Amendment.
The provisions of the Amendment are unclear and have required judicial
interpretation. Among other provisions, beginning November 4, 1992, the
Amendment requires voter approval prior to tax increases, creation of debt, or
mill levy or valuation for assessment ratio increases. The Amendment also limits
increases in government spending and property tax revenues to specified
percentages. The Amendment requires that District property tax revenues yield no
more than the prior year's revenues adjusted for inflation, voter approved
changes and (except with regard to school districts) local growth in property
values according to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment. Pursuant to the
Amendment, local government spending is to be limited by the same formula as the
limitation for property tax revenues. The Amendment limits increases in
expenditures from the State general fund and program revenues (cash funds) to
the growth in inflation plus the percentage change in State population in the
prior calendar year. The basis for initial spending and revenue limits are
fiscal year 1992 spending and 1991 property taxes collected in 1992. The basis
for spending and revenue limits for fiscal year 1994 and later years will be the
prior fiscal year's spending and property taxes collected in the prior calendar
year. Debt service changes, reductions and voter-approved revenue changes are
excluded from the calculation basis. The Amendment also prohibits new or
increased real property transfer tax rates, new State real property taxes and
local District income taxes.
Litigation concerning several issues relating to the Amendment has been
brought in the Colorado courts. The litigation deals with three principal
issues: (i) whether Districts can increase mill levies to pay debt service on
general obligation bonds without obtaining voter approval; (ii) whether a
multi-year lease-purchase agreement subject to annual appropriations is an
obligation which requires voter approval prior to execution of the agreement;
and (iii) what constitutes an "enterprise" which is excluded from the provisions
of the Amendment. In September, 1994, the Colorado Supreme Court held that
Districts can increase mill levies to pay debt service on general obligation
bonds issued after the effective date of the Amendment; litigation regarding
mill levy increases to pay general obligation bonds issued prior to the
Amendment is still pending. In late 1994, the Colorado Court of Appeals held
that multi-year lease-purchase agreements subject to annual appropriation do not
require voter approval. The time to file an appeal in that case has expired. An
appeal of the primary case addressing the remaining issue has been heard by the
Colorado Supreme Court; an opinion is expected by mid-1995. The outcome of that
appeal cannot be predicted at this time.
According to the COLORADO ECONOMIC PERSPECTIVE, FOURTH QUARTER, FY 1994-95,
DECEMBER 20, 1994 (the "Economic Report"), inflation for 1993 was 4.2% and
population grew at the rate of 2.9% in Colorado. Accordingly, under the
Amendment, increases in State expenditures during the 1995 fiscal year will be
limited to 7.1% over expenditures during the 1994 fiscal year. The limitation
for the 1996 fiscal year is projected to be 6.9%, based on projected inflation
of 4.4% for 1994 and projected population growth of 2.5% during 1994. The 1994
fiscal year is the base year for calculating the limitation for the 1995 fiscal
year. For the 1994 fiscal year, General Fund revenues totaled $3,596.1 million
and program revenues (cash funds) totaled $1,659.8 million, resulting in total
estimated base revenues of $5,629.1 million. Expenditures for the 1995 fiscal
year, therefore, cannot exceed $5,629.1 million. However, the 1995 fiscal year
General Fund and program revenues (cash funds) are projected to be only $5,536.3
million, or $92.8 million less than expenditures allowed under the spending
limitation.
There is also a statutory restriction on the amount of annual increases in
taxes that the various taxing jurisdictions in Colorado can levy without
electoral approval. This restriction does not apply to taxes levied to pay
general obligation debt.
As the State experienced revenue shortfalls in the mid-1980s, it adopted
various measures, including impoundment of funds by the Governor, reduction of
appropriations by the General Assembly, a temporary increase in the sales tax,
deferral of certain tax reductions and inter-fund borrowings. On a GAAP basis,
the State had unrestricted General Fund balances at June 30 of approximately
$134.4 million in fiscal year 1989, $116.6 million in fiscal year 1990, $16.3
million in fiscal year 1991, $133.3 million in fiscal year 1992, $326.6 million
in fiscal year 1993, and $320.4 million in fiscal year 1994. The fiscal year
1995 unrestricted General Fund ending balance is currently projected to be
$276.8 million.
For fiscal year 1994, the following tax categories generated the following
respective revenue percentages of the State's $3,596.1 million total gross
receipts: individual income taxes represented 53.4% of gross fiscal year 1994
receipts; sales, use and other excise taxes represented 31.2% of gross fiscal
year 1994 receipts; and corporate income taxes represented 4.1% of gross fiscal
year 1994 receipts. The final budget for fiscal year 1995 projects general fund
revenues of approximately $3,797.2 million and appropriations of approximately
$3,542.1 million. The percentages of general fund revenue generated by type of
tax for fiscal year 1995 are not expected to be significantly different from
fiscal year 1994 percentages.
Under its constitution, the State of Colorado is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The State
enters into certain lease transactions which are subject to annual renewal at
the option of the State. In addition, the State is authorized to issue
short-term revenue anticipation notes. Local governmental units in the State are
also authorized to incur indebtedness. The major source of financing for such
local government indebtedness is an ad valorem property tax. In addition, in
order to finance public projects, local governments in the State can issue
revenue bonds payable from the revenues of a utility or enterprise or from the
proceeds of an excise tax, or assessment bonds payable from special assessments.
Colorado local governments can also finance public projects through leases which
are subject to annual appropriation at the option of the local government. Local
governments in Colorado also issue tax anticipation notes. The Amendment
requires prior voter approval for the creation of any multiple fiscal year debt
or other financial obligation whatsoever, except for refundings at a lower rate
or obligations of an enterprise.
Based on data published by the State of Colorado, Office of State Planning
and Budgeting as presented in the Economic Report, over 50% of non-agricultural
employment in Colorado in 1994 was concentrated in the retail and wholesale
trade and service sectors, reflecting the importance of tourism to the State's
economy and of Denver as a regional economic and transportation hub. The
government and manufacturing sectors followed as the fourth and fifth largest
employment sectors in the State, representing approximately 17.5% and 11%,
respectively, of non-agricultural employment in the State in 1994. The Office of
Planning and Budgeting projects similar concentrations for 1995 and 1996.
According to the Economic Report, the unemployment rate improved slightly
from an average of 5.2% during 1993 to 4.9% during 1994. Total retail sales
increased by 11.3% during 1994. Colorado continued to surpass the job growth
rate of the U.S., with a 3.5% rate of growth projected for Colorado in 1994, as
compared with 2.6% for the nation as a whole. However, the rate of job growth in
Colorado is expected to decline in 1995, primarily due to the completion in 1994
of large public works projects, such as Denver International Airport, Coors
Baseball Field, and the Denver Public Library renovation project, the closure of
Lowry Air Force Base and cutbacks at Rocky Flats.
Personal income rose 7.4% in Colorado during 1993 and 7.1% in 1992. During
1994, personal income rose 6.7% in Colorado, as compared with 5.9% for the
nation as a whole.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in the
Colorado Trust), which, to varying degrees, have also experienced reduced
revenues as a result of recessionary conditions and other factors.
COLORADO STATE TAXATION. For a discussion of the Federal tax status of
income earned on Colorado Trust Units, see "Tax Status."
Neither the Sponsor nor its counsel has independently examined the Bonds to
be deposited in and held in the Colorado Trust. However, although Chapman and
Cutler expresses no opinion with respect to the issuance of the Bonds, in
rendering its opinion expressed herein, it has assumed that: (i) the Bonds were
validly issued; (ii) the interest thereon is excludable from gross income for
Federal income tax purposes; and (iii) interest on the Bonds, if received
directly by a Unitholder, would be exempt from the income tax imposed by the
State of Colorado that is applicable to individuals and corporations (the "State
Income Tax"). This opinion does not address the taxation of persons other than
full time residents of Colorado.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Colorado law:
1.Because Colorado income tax law is based upon the Federal law, the
Colorado Trust is not an association taxable as a corporation for purposes
of Colorado income taxation.
2.With respect to Colorado Unitholders, in view of the relationship
between Federal and Colorado tax computations described above:
(i) Each Colorado Unitholder will be treated as owning a pro rata
share of each asset of the Colorado Trust for Colorado income tax
purposes in the proportion that the number of Units of such Trust held
by the Unitholder bears to the total number of outstanding Units of
the Colorado Trust, and the income of the Colorado Trust will
therefore be treated as the income of each Colorado Unitholder under
Colorado law in the proportion described and an item of income of the
Colorado Trust will have the same character in the hands of a Colorado
Unitholder as it would have in the hands of the Trustee;
(ii) Interest on Bonds that would not be includable in income for
Colorado income tax purposes when paid directly to a Colorado
Unitholder will be exempt from Colorado income taxation when received
by the Colorado Trust and attributed to such Colorado Unitholder and
when distributed to such Colorado Unitholder;
(iii) Any proceeds paid under individual policies obtained by
issuers of Bonds in the Colorado Trust which represent maturing
interest on defaulted obligations held by the Trustee will not be
includable in income for Colorado income tax purposes if, and to the
same extent as, such interest is not so includable for Federal income
tax purposes;
(iv) Each Colorado Unitholder will realize taxable gain or loss
when the Colorado Trust disposes of the Bonds (whether by sale,
exchange, redemption, or payment at maturity) or when the Colorado
Unitholder redeems or sells Units at a price that differs from
original cost as adjusted for amortization of bond discount or premium
and other basis adjustments (including any basis reduction that may be
required to reflect a Colorado Unitholder's share of interest, if any,
accruing on Bonds during the interval between the Colorado
Unitholder's settlement date and the date such Bonds are delivered to
the Colorado Trust, if later);
(v) Tax cost reduction requirements relating to amortization of
bond premium may, under some circumstances, result in Colorado
Unitholders realizing taxable gain when their Units are sold or
redeemed for an amount equal to or less than their original cost; and
(vi) If interest on indebtedness incurred or continued by a
Colorado Unitholder to purchase Units in the Colorado Trust is not
deductible for Federal income tax purposes, it also will be
non-deductible for Colorado income tax purposes.
Unitholders should be aware that all tax-exempt interest, including their
share of interest on the Bonds paid to the Colorado Trust, is taken into account
for purposes of determining eligibility for the Colorado Property Tax/Rent/Heat
Rebate. No opinion is expressed regarding the Colorado taxation of foreign or
domestic insurance companies.
RISK FACTORS SPECIFIC TO MINNESOTA. 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 reduced its
rating on the State's outstanding general obligation bonds from AAA to AA+ in
August 1981 and to AA in March 1982. Moody's 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 government units, and making other budgetary
adjustments. A budget forecast released by the Minnesota Department of Finance
on March 1, 1994 projects a balanced General Fund at the end of the current
biennium, June 30, 1995, plus an increase in the State's cash flow account from
$360 million to $500 million. Total projected expenditures and transfers for the
biennium are $17.0 billion. The forecast also projects, however, a shortage of
$29.5 million in the Local Government Trust Fund at June 30, 1995, against total
projected expenditures from the Fund of $1.8 billion for the biennium.
State grants and aids represent a large percentage of the total revenues of
cities, towns, counties and school districts in Minnesota. Even with respect to
bonds that are revenue obligations of the issuer and not general obligations of
the State, there can be no assurance that the fiscal problems referred to above
will not adversely affect the market value or marketability of the bonds or the
ability of the respective obligors to pay interest on and principal of the
bonds.
MINNESOTA STATE TAXATION. For a discussion of the Federal tax status of
income earned on Minnesota Trust Units, see "Tax Status."
Counsel to the Minnesota Trust understands that the Minnesota Trust will
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 issuers of the Bonds which represent maturing
interest or principal payments on defaulted Bonds held by the Trustee.
Neither the Sponsor nor its counsel has independently examined the Bonds to
be deposited in and held in the Trust. However, although no opinion is expressed
herein regarding such matters, it is assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon is excludible 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 Chapman and Cutler, counsel to the Sponsor, under
existing Minnesota income tax law as of the date of this prospectus and based
upon the assumptions above:
1.The Minnesota Trust is not an association taxable as a corporation
and each Unitholder of the Minnesota Trust will be treated as the owner of
a pro rata portion of the Minnesota Trust, and the income of such portion
of the Minnesota 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 the Minnesota 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 the
Minnesota Trust and distributed to such Unitholder;
3.To the extent that interest on the Bonds, if any, which 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 the Minnesota 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 the Minnesota 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;
6.Proceeds, if any, paid under individual insurance policies obtained
by issuers of Bonds which represent maturing interest on defaulted
obligations held by the Trustee will be excludible from Minnesota net
income if, and to the same extent as, such interest would have been so
excludible if paid in the normal course by the issuer of the defaulted
obligation provided that, at the time such policies are purchased, the
amounts paid for such policies are reasonable, customary and consistent
with the reasonable expectation that the issuer of the bonds, rather than
the insurer, will pay debt service on the bonds; and
7.To the extent that interest derived from the Minnesota Trust by a
Unitholder with respect to any possession obligations is excludible 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.
Chapman and Cutler has not examined any of the Bonds to be deposited and
held in the Minnesota Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no opinions
to the exemption from State income taxes of interest on the Bonds if received
directly by a Unitholder.
RISK FACTORS SPECIFIC TO OREGON. Oregon's economy continued to expand
through the first half of 1994, though signs of slowing were clearly evident.
The latest data on employment (second quarter 1994) and personal income (first
quarter 1994) show growth rate decreases compared to the previous quarter.
Construction and high technology manufacturing continued to expand rapidly in
the second quarter of 1994; but the rest of the State economy was essentially
flat. On a seasonally adjusted basis, activity in the timber industry dropped
off during the Spring of 1994 after a two-quarter spurt.
According to the Oregon Employment Department, Oregon's overall employment
continued its steady increase. The seasonally adjusted unemployment rate for
April 1994 was 2.5 percent above the same month in 1993, although there was a
slight and probably temporary decline from March 1994 to April 1994. Oregon's
seasonally adjusted unemployment rate measured 5.8 percent in May 1994, a
decline of one tenth of a percentage point form the April rate. Comparatively,
the national seasonally adjusted unemployment rate fell four tenths of a point
to 6.0 percent in May 1994. While the gap between the Oregon and national
unemployment rated narrowed in May, Oregon has remained below the national level
for two consecutive months.
High lumber prices temporarily increased employment in early 1994 in the
lumber and wood products sector, and it is expected that the long-term
employment decline in this industry will return during the latter part of 1994.
The State's numerous smaller manufacturing operations continued to grow; and in
general the non-manufacturing sector did not show its usual strength. Although
the construction sector has remained flat at around 58,000 jobs in 1994,
employment is ten percent above 1993 levels. The finance insurance and real
estate sector experienced a 6.6 percent increase in 1994 as compared to 1993;
and along with the construction sector, its growth was fueled by the combination
of low interest rates and strong in-migration. Restrictions on the growth of
property taxes has prevented the state and local government sector from growing.
The services sector in 1994 was somewhat weak, with April's figure the same as
the 1993 December's figures.
Oregon's high technology manufacturing and construction sectors provided
sufficient momentum to fuel healthy job and income growth through the end of
1994. At that point, higher interest rates and slowing national conditions are
expected to weaken these key sectors and moderate the State's overall growth
rate. Nonetheless, a recovering Japanese economy (one of Oregon's leading
foreign trading partners) and continued population growth should provide enough
impetus to keep jobs and inflation-adjusted income in the state growing through
1995.
Semiconductor operations are likely to continue expanding in Oregon through
the next two years. This is expected to boost employment in the electronics
industry by 11.6 percent in 1994 and 7.6 percent in 1995. Between the end of
1995 and the end of 1991, jobs in the industry are projected to have increased
by 6,600 or 37 percent. Jobs in the non-electrical machinery industry, which
includes office equipment, are expected to grow 7.7 percent in 1994 and 3.2
percent in 1995. High technology manufacturing jobs are projected to account for
25 percent of Oregon's manufacturing employment in 1995 compared to 21.9 percent
in 1985.
The State's construction sector is expected to record one more quarter of
rapid employment growth (fourth quarter 1994) before higher interest rates begin
to constrain activity. Construction employment was forecasted to rise 11 percent
for 1994 as a whole before slowing to 5.1 percent in 1995. Housing starts are
projected to total 20,900 in 1994, a gain of 10 percent over 1993 but turn flat
in 1995. Commercial and industrial projects are expected to make up an
increasingly larger share of construction activity through 1996. The completion
of large infrastructure projects, expansion of high technology manufacturing
capacity, and falling vacancy rates for commercial real estate all suggest that
non-residential construction activity will be robust in the short-term.
Property values have continued to increase. The Oregon Department of
Revenue reports that overall property values grew by ten percent in 1993.
Residential property values increased 14 percent which includes improvements
made to property during 1993. Many homeowners continue to see little or no
decrease in property taxes as value increases offset declining tax rates.
The General Fund revenue forecast is $6,333.2 million for the 1993-95
biennium. The forecast has been increased $88.2 from the December 1993 estimate
and $127.7 million from the previous estimate as of the close of the 1993
Legislative Session. The major changes in the current forecast are as follows: a
$51.7 million increase in personal income taxes, a $36.5 million increase in
corporate income taxes, a $6.1 million decrease in liquor apportionment revenue
and a $5.0 million increase in gift and inheritance tax revenue.
General Fund revenue is expected to reach $6,907.7 million for the 1995-97
biennium. Combining the revenue estimate with the projected $330.9 million
ending balance for the 1993-95 biennium results in an estimated $7,238.6 million
in available General Fund resources for the 1995-97 budget period. The June 1994
resource estimate is $141.4 million or 2.0 percent more than the March 1994
forecast.
According to the June 1994 forecast of the Oregon Office of Economic
Analysis, Oregon's economy is expected to continue expanding through 1995 though
the rate of growth is likely to moderate as credit sensitive sectors feel the
impact of higher interest rates. As the State's durable goods manufacturing and
construction sectors soften, migration from other states can be expected to
continue generating jobs in services and trade. Oregon's income and job growth
are expected to remain above the national average in 1995.
Migration from other states, particularly California, is expected to
greatly influence the State's economy. Oregon's population was expected to have
grown by 63,000 in 1994, with two-thirds of the gain coming from net
in-migration. Growth is expected to slow to 58,000 in 1995 as the California
economy slowly rebounds. According to the Western Blue Chip consensus forecast,
jobs in California were expected to the decline a further 0.6 percent in 1994
before turning around and increasing 1.0 percent in 1995. The rebound in
California should slow Oregon population growth but will increase demand for
Oregon products.
The recent increase in the lumber and wood products industry is not
expected to continue. Lumber prices peaked in December of 1993 and have
generally fallen through April of 1994. More importantly, supply is limited even
if there is release of federal timber following implementation of the new
federal forest plan. The timber harvest is expected to fall from 5.5 billion
board feet (BBF) in 1993 to 5.3 BBF in 1994 and 5.0 BBF in 1995. Employment was
expected to rise marginally in both the second and third quarters before
starting a steady decline at the end of 1994. For 1994 as a whole, employment in
lumber and wood products is expected to increase 4.6 percent then decline 5.8
percent in 1995.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions to
which the issuers in the Oregon Trust are subject. Additionally, many factors
including national economic, social and environmental policies and conditions,
which are not within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of the State and various
agencies and political subdivisions located in the State. The Sponsor is unable
to predict whether or to what extent such factors or other factors may affect
the issuers of Bonds, the market value or marketability of the Bonds or the
ability of the respective issuers of the Bonds acquired by the Oregon Trust to
pay interest on or principal of the Bonds.
OREGON STATE TAXATION. For a discussion of the Federal tax status of income
earned on Oregon Trust Units, see "Tax Status."
The assets of the Oregon Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Oregon (the "State") or counties,
municipalities, authorities or political subdivisions thereof (the "Oregon
Bonds") or by the Commonwealth of Puerto Rico, Guam and the United States Virgin
islands (the "Possession Bonds") (collectively, the "Bonds"). Neither the
Sponsor nor its counsel have independently examined the Bonds to be deposited in
and held in the Oregon Trust. However, although no opinion is expressed herein
regarding such matters, it is assumed that: (i) the Bonds were validly issued;
(ii) the interest thereon is excludable from gross income for Federal income tax
purposes; and (iii) interest on the Bonds, if received directly by an Oregon
Unitholder, would be exempt from the Oregon income tax applicable to individuals
(the "Oregon Personal Income Tax").
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Oregon law and based on the assumptions set forth above:
1.The Oregon Trust is not an association taxable as a corporation and
based upon an administrative rule of the Oregon State Department of
Revenue, each Oregon Unitholder of the Oregon Trust will be essentially
treated as the owner of a pro rata portion of the Oregon Trust and the
income of such portion of the Oregon Trust will be treated as the income of
the Oregon Unitholder for Oregon Personal Income Tax purposes;
2.Interest on the Bonds which is exempt from the Oregon Personal
Income Tax when received by the Oregon Trust, and which would be exempt
from the Oregon Personal Income Tax if received directly by an Oregon
Unitholder, will retain its status as exempt from such tax when received by
the Oregon Trust and distributed to an Oregon Unitholder;
3.To the extent that interest derived from the Oregon Trust by an
Oregon Unitholder with respect to the 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 the Oregon Personal Income Tax. Each Oregon Unitholder of
the Oregon Trust will recognize gain or loss for Oregon Personal Income Tax
purposes if the Trustee disposes of a bond (whether by redemption, sale or
otherwise) or if the Oregon Unitholder redeems or sells Units of the Oregon
Trust to the extent that such a transaction results in a recognized gain or
loss to such Oregon Unitholder for Federal income tax purposes; and
4.The Oregon Personal Income Tax does not permit a deduction of
interest paid or incurred on indebtedness incurred or continued to purchase
or carry Units in the Oregon Trust, the interest on which is exempt from
such Tax.
Investors should consult their tax advisers regarding collateral tax
consequences under Oregon law relating to the ownership of the Units, including,
but not limited to, the calculation of "net pension income" tax credits for
retirees and the applicability of other Oregon taxes.
Chapman and Cutler has not examined any of the Bonds to be deposited and
held in the Oregon Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto and therefore it expresses no
opinion as to the exemption from the Oregon Personal Income Tax of interest on
the Bonds if received directly by an Oregon Unitholder. In addition, prospective
purchasers subject to the Oregon corporate income tax should be advised that for
purposes of the Oregon Corporate Income (Excise) Tax, interest on the Bonds
received by the Oregon Trust and distributed to an Oregon Unitholder subject to
such tax will be added to the corporate Oregon Unitholder's Federal taxable
income and therefore will be taxable. No opinion is expressed regarding the
Oregon taxation of foreign or domestic insurance companies.
RISK FACTORS SPECIFIC TO PUERTO RICO. The economy of Puerto Rico is closely
integrated with that of the mainland United States. During fiscal 1993
approximately 86% of Puerto Rico's exports were to the U.S. mainland, which was
also the source of approximately 69% of Puerto Rico's imports. The economy of
Puerto Rico is dominated by the manufacturing and service sectors. The
manufacturing sector has experienced a basic change over the years as a result
of increased emphasis on higher wage, high technology industries such as
pharmaceuticals, electronics, computers, microprocessors, professional and
scientific instruments, and certain high technology machinery and equipment. The
service sector, including finance, insurance and real estate, also plays a major
role in the economy. It ranks second only to manufacturing in contribution to
the gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in response
to the expansion of the manufacturing sector.
Gross Product in fiscal 1989 was $20.0 billion, and gross product in fiscal
1993 was $25.0 billion. This represents an increase in gross product of 25.2%
from fiscal 1989 to 1993. Since fiscal 1987, personal income, both aggregate and
per capita, has increased consistently each fiscal year. In fiscal 1993,
aggregate personal income was $24.1 billion and personal income per capita was
$6,760. According to the U.S. Census Bureau, the population of Puerto Rico was
approximately 3,522,000 in 1990 compared to 3,196,520 in 1980.
Puerto Rico's decade-long economic expansion continued throughout the
five-year period from fiscal 1989 through fiscal 1993. Almost every sector of
the economy was affected and record levels of employment were achieved. While
trends in the Puerto Rico economy normally follow those in the U.S., Puerto Rico
did not experience a recession as did the U.S., primarily because of low oil
prices, low interest rates, and its strong manufacturing base which has a large
component of non-cyclical industries. Other factors behind the expansion
included Commonwealth-sponsored economic development programs, the relatively
stable prices of oil imports, periodic declines in the exchange value of the
U.S. dollar and the relatively low cost of borrowing during the period.
Average unemployment increased from 14.4% in fiscal 1989 to 16.8% in fiscal
1993. According to the Labor Department's Household Employment Survey, in the
first eight months of fiscal 1994 total employment (seasonally adjusted)
increased 1.6% when compared to the same period in fiscal 1993. For the first
eight months of fiscal 1994, the unemployment rate (seasonally adjusted)
decreased from 17.3% to 15.1%.
The Gross Product forecast for fiscal 1994, made in February 1994, shows an
increase of 2.9% over fiscal 1993. Whether actual growth in the Puerto Rico
economy in fiscal 1994 and fiscal 1995 will continue depends on several factors,
including the state of the U.S. economy and the relative stability in the price
of oil imports, the exchange value of the U.S. dollar and the cost of borrowing.
The Puerto Rican economy is affected by a number of Commonwealth and
federal investment incentive programs. For example, Section 936 of the Internal
Revenue Code (the "Code") provides for a credit against federal income taxes for
U.S. companies operating on the island if certain requirements are met. The
Omnibus Budget Reconciliation Act of 1993 imposes limits on such credit,
effective for tax years beginning after 1993. In addition, from time to time
proposals are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment can be made
at this time of the precise effect of such limitation, it is expected that the
limitation of Section 936 credits would have a negative impact on Puerto Rico's
economy.
Aid for Puerto Rico's economy has traditionally depended heavily on federal
programs, and current federal budgetary policies suggest than an expansion of
aid to Puerto Rico is unlikely. An adverse effect on the Puerto Rican economy
could result from other U.S. policies, including a reduction of tax benefits for
distilled products, further reduction in transfer payment programs such as food
stamps, curtailment of military spending and policies which could lead to a
stronger dollar.
In a plebiscite held in November, 1993, the Puerto Rican electorate chose
to continue Puerto Rico's Commonwealth status. Previously proposed legislation,
which was not enacted, would have preserved the federal tax exempt status of the
outstanding debts of Puerto Rico and its public corporations regardless of the
outcome of the referendum, to the extent that similar obligations issued by
states are so treated and subject to the provisions of the Code currently in
effect. There can be no assurance that any pending or future legislation finally
enacted will include the same or similar protection against loss of tax
exemption. The November 1993 plebiscite can be expected to have both direct and
indirect consequences on such matters as the basic characteristics of future
Puerto Rico debt obligations, the markets for these obligations, and the types,
levels and quality of revenue sources pledged for the payment of existing and
future debt obligations. Such possible consequences include legislative
proposals seeking restoration of the status of Section 936 benefits otherwise
subject to the limitations discussed above. However, no assessment can be made
at this time of the economic and other effects of a change in federal laws
affecting Puerto Rico as a result of the November 1993 plebiscite.
FEDERAL TAXATION. For a discussion of the Federal tax status of income
earned on Territorial Trust Units, see "Tax Status."
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURNS
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
State (if applicable) taxes using the published Federal and State (if
applicable) tax rates scheduled to be in effect in 1996. This 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 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 who are subject to the
alternative minimum tax. The taxable equivalent estimated current returns may be
somewhat higher than the equivalent returns indicated in the following table for
those individuals who have adjusted gross incomes in excess of $117,950. The
table does not reflect the effect of limitations on itemized deductions and the
deduction for personal exemptions which 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 percent 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>
ARIZONA TAX EQUIVALENT TABLE
----------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT
------------------------- ----------------------------
RETURN
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 24.00 $ 0 - 40.10 18.0% 5.49% 6.10% 6.71% 7.32% 7.93% 8.54% 9.15%
40.10 - 96.90 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
24.00 - 58.15 31.7 6.59 7.32 8.05 8.78 9.52 10.25 10.98
58.15 - 121.30 96.90 - 147.70 34.6 6.88 7.65 8.41 9.17 9.94 10.70 11.47
147.70 - 263.75 39.3 7.41 8.24 9.06 9.88 10.71 11.53 12.36
121.30 - 263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
Over 263.75 Over 263.75 43.0 7.89 8.77 9.65 10.53 11.40 12.28 13.16
COLORADO TAX EQUIVALENT TABLE
-----------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT
------------------------- ----------------------------
RETURN
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 19.3% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67% 9.29%
24.00 - 58.15 40.10 - 96.90 31.6 6.58 7.31 8.04 8.77 9.50 10.23 10.96
58.15 - 121.30 96.90 - 147.70 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
121.30 - 263.75 147.70 - 263.75 39.2 7.40 8.22 9.05 9.87 10.69 11.51 12.34
Over 263.75 Over 263.75 42.6 7.84 8.71 9.58 10.45 11.32 12.20 13.07
MINNESOTA TAX EQUIVALENT TABLE
------------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT
------------------------- ----------------------------
RETURN
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
$ 0- 24.00 $ 0 - 40.10 21.8% 5.75% 6.39% 7.03% 7.67% 8.31% 8.95% 9.59%
24.00 - 58.15 40.10 - 96.90 34.1 6.83 7.59 8.35 9.10 9.86 10.62 11.38
58.15 - 121.30 96.90 - 147.70 36.9 7.13 7.92 8.72 9.51 10.30 11.09 11.89
121.30 - 263.75 147.70 - 263.75 41.4 7.68 8.53 9.39 10.24 11.09 11.95 12.80
Over 263.75 Over 263.75 44.7 8.14 9.04 9.95 10.85 11.75 12.66 13.56
NATIONAL TAX EQUIVALENT TABLE
-----------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT
------------------------- ----------------------------
RETURN
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
$ 0- 24.00 $ 0 - 40.10 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.00 - 58.15 40.10 - 96.90 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
58.15 - 121.30 96.90 - 147.70 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
121.30 - 263.75 147.70 - 263.75 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 263.75 Over 263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
OREGON TAX EQUIVALENT TABLE
---------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT
------------------------- ----------------------------
RETURN
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
$ 0- 24.00 $ 0 - 40.10 22.7% 5.82% 6.47% 7.12% 7.76% 8.41% 9.06% 9.70%
24.00 - 58.15 40.10 - 96.90 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
58.15 - 121.30 96.90 - 147.70 37.2 7.17 7.96 8.76 9.55 10.35 11.15 11.94
121.30 - 263.75 147.70 - 263.75 41.8 7.73 8.59 9.45 10.35 11.17 12.03 12.89
Over 263.75 Over 263.75 45.0 8.18 9.09 10.00 10.91 11.82 12.73 13.64
TERRITORIAL TAX EQUIVALENT TABLE
--------------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT
------------------------- ----------------------------
RETURN
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
$ 0- 24.00 $ 0 - 40.10 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.00 - 58.15 40.10 - 96.90 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
58.15 - 121.30 96.90 - 147.70 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
121.30 - 263.75 147.70 - 263.75 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 263.75 Over 263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
*The table reflects the Federal tax rate and does not reflect any effect that
Puerto Rico taxes may have in determining the taxable equivalent yield for
residents of Puerto Rico.
RISK FACTORS
GENERAL. Certain of the Bonds in the Trusts may have been acquired at a
market discount from par value. The coupon interest rates on the discount bonds
at the time they were purchased and deposited in the Trusts were lower than the
current market interest rates for newly issued bonds of comparable rating and
type. If such interest rates for newly issued comparable bonds increase, the
market discount of previously issued bonds will become greater, and if such
interest rates for newly issued comparable bonds decline, the market discount of
previously issued bonds will be reduced, other things being equal. Investors
should also note that the value of bonds purchased at a market discount will
increase in value faster than Bonds purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value of bonds
purchased at a market discount will decrease faster than Bonds purchased at a
market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium bonds and the prepayment benefit for lower yielding,
discount bonds will be reduced. A discount bond held to maturity will have a
larger portion of its total return in the form of taxable income and capital
gain and less in the form of tax-exempt interest income than a comparable bond
newly issued at current market rates. See "Tax Status." Market discount
attributable to interest changes does not indicate a lack of market confidence
in the issue. Neither the Sponsor, the Distributor nor the Trustee shall be
liable in any way for any default, failure or defect in any of the Bonds.
Certain of the Bonds in the Trusts may be original issue discount bonds.
Under current law, the original issue discount, which is the difference between
the stated redemption price at maturity and the issue price of the Bonds, is
deemed to accrue on a daily basis and the accrued portion is treated as
tax-exempt interest income for Federal income tax purposes. On sale or
redemption, any gain realized that is in excess of the earned portion of
original issue discount will be taxable as capital gain unless the gain is
attributable to market discount in which case the accretion of market discount
is taxable as ordinary income. See "Tax Status." The current value of an
original issue discount bond reflects the present value of its stated redemption
price at maturity. The market value tends to increase in greater increments as
the Bonds approach maturity.
Certain of the original issue discount bonds may be zero coupon bonds
(including bonds known as multiplier bonds, money multiplier bonds, capital
appreciation bonds, capital accumulator bonds, compound interest bonds and money
discount maturity payment bonds). Zero coupon bonds do not provide for the
payment of any current interest and generally provide for payment at maturity at
face value unless sooner sold or redeemed. Zero coupon bonds may be subject to
more price volatility than conventional bonds. While some types of zero coupon
bonds, such as multipliers and capital appreciation bonds, define par as the
initial offering price rather than the maturity value, they share the basic zero
coupon bond features of (i) not paying interest on a semi-annual basis and (ii)
providing for the reinvestment of the bond's semi-annual earnings at the bond's
stated yield to maturity. While zero coupon bonds are frequently marketed on the
basis that their fixed rate of return minimizes reinvestment risk, this benefit
can be negated in large part by weak call protection, i.e., a bond's provision
for redemption at only a modest premium over the accreted value of the bond. See
footnote (6) in "The Trusts -- Notes to Schedules of Investments" in Part One of
this Prospectus.
Certain of the Bonds in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the premium
bonds at the time they were purchased and deposited in the Trusts were higher
than the current market interest rates for newly issued bonds of comparable
rating and type. If such interest rates for newly issued and otherwise
comparable bonds decrease, the market premium of previously issued bonds will be
increased, and if such interest rates for newly issued comparable bonds
increase, the market premium of previously issued bonds will be reduced, other
things being equal. The current returns of bonds trading at a market premium are
initially higher than the current returns of comparable bonds of a similar type
issued at currently prevailing interest rates because premium bonds tend to
decrease in market value as they approach maturity when the face amount becomes
payable. Because part of the purchase price is thus returned not at maturity but
through current income payments, early redemption of a premium bond at par or
early prepayments of principal will result in a reduction in yield. Redemption
pursuant to call provisions generally will, and redemption pursuant to sinking
fund provisions may, occur at times when the redeemed Bonds have an offering
side valuation which represents a premium over par or for original issue
discount Bonds a premium over the accreted value. To the extent that the Bonds
were deposited in the Fund at a price higher than the price at which they are
redeemed, this will represent a loss of capital when compared to the original
Public Offering Price of the Units. Because premium bonds generally pay a higher
rate of interest than Bonds priced at or below par, the effect of the redemption
of premium bonds would be to reduce estimated net annual unit income by a
greater percentage than the par amount of such bonds bears to the total par
amount of Bonds in the affected Trust. Although the actual impact of any such
redemptions that may occur ill depend upon the specific Bonds that are redeemed,
it can be anticipated that the estimated net annual unit income will be
significantly reduced after the dates on which such Bonds are eligible for
redemption. A Trust may be required to sell zero coupon bonds prior to maturity
(at their current market price which is likely to be less than their par value)
in the event that all the Bonds in the portfolio other than the zero coupon
bonds are called or redeemed in order to pay expenses of a Trust or in case a
Trust is terminated. See "Trust Administration--Portfolio Administration" and
"Trust Administration--Amendment or Termination." See "The Trusts--Schedule of
Investments" in Part One of this Prospectus for each Trust for the earliest
scheduled call date and the initial redemption price for each Bond.
Certain of the Bonds in certain of the Trusts may be general obligations of
a governmental entity that are backed by the taxing power of such entity. In
view of this an investment in such a Trust should be made with an understanding
of the characteristics of such issuers and the risks which such an investment
may entail. All other Bonds in the Trusts are revenue bonds payable from the
income of a specific project or authority and are not supported by the issuer's
power to levy taxes. General obligation bonds are secured by the issuer's pledge
of its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds, on the other hand, are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source. There are, of
course, variations in the security of the different Bonds in the Fund, both
within a particular classification and between classifications, depending on
numerous factors.
Certain of the Bonds in certain of the Trusts may be obligations which
derive their payments from mortgage loans. Certain of such housing bonds may be
FHA insured or may be single family mortgage revenue bonds issued for the
purpose of acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned by
persons of low or moderate income. In view of this an investment in such a Trust
should be made with an understanding of the characteristics of such issuers and
the risks which such an investment may entail. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a result of
events such as sale of the mortgaged premises, default, condemnation or casualty
loss. Because these bonds are subject to extraordinary mandatory redemption in
whole or in part from such prepayments of mortgage loans, a substantial portion
of such bonds will probably be redeemed prior to their scheduled maturities or
even prior to their ordinary call dates. Extraordinary mandatory redemption
without premium could also result from the failure of the originating financial
institutions to make mortgage loans in sufficient amounts within a specified
time period. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of principal of or
interest on such mortgage revenue bonds. These bonds were issued under Section
103A of the Internal Revenue Code, which Section contains certain requirements
relating to the use of the proceeds of such bonds in order for the interest on
such bonds to retain its tax-exempt status. In each case the issuer of the bonds
has covenanted to comply with applicable requirements and bond counsel to such
issuer has issued an opinion that the interest on the bonds is exempt from
Federal income tax under existing laws and regulations. Certain issuers of
housing bonds have considered various ways to redeem bonds they have issued
prior to the stated first redemption dates for such bonds. In connection with
any housing bonds held by the Fund, the Sponsor at the Initial Date of Deposit
is not aware that any of the respective issuers of such Bonds are actively
considering the redemption of such Bonds prior to their respective stated
initial call dates.
Certain of the Bonds in certain of the Trusts may be health care revenue
bonds. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such an
investment may entail. Ratings of bonds issued for health care facilities are
often based on feasibility studies that contain projections of occupancy levels,
revenues and expenses. A facility's gross receipts and net income available for
debt service may be affected by future events and conditions including, among
other things, demand for services and the ability of the facility to provide the
services required, physicians' confidence in the facility, management
capabilities, competition with other health care facilities, efforts by insurers
and governmental agencies to limit rates, legislation establishing state
rate-setting agencies, expenses, the cost and possible unavailability of
malpractice insurance, the funding of Medicare, Medicaid and other similar third
party payor programs, government regulation and the termination or restriction
of governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third party payor programs. Medicare reimbursements
are currently calculated on a prospective basis utilizing a single nationwide
schedule of rates. Prior to such legislation Medicare reimbursements were based
on the actual costs incurred by the health facility. The current legislation may
adversely affect reimbursements to hospitals and other facilities for services
provided under the Medicare program.
Certain of the Bonds in certain of the Trusts may be obligations of public
utility issuers, including those selling wholesale and retail electric power and
gas. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such an
investment may entail. General problems of such issuers would include the
difficulty in financing large construction programs in an inflationary period,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital market in absorbing
utility debt, the difficulty in obtaining fuel at reasonable prices and the
effect of energy conservation. All of such issuers have been experiencing
certain of these problems in varying degrees. In addition, Federal, state and
municipal governmental authorities may from time to time review existing, and
impose additional, regulations governing the licensing, construction and
operation of nuclear power plants, which may adversely affect the ability of the
issuers of certain of the Bonds in the portfolio to make payments of principal
and/or interest on such Bonds.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
whose revenues are derived from the sale of water and/or sewerage services. In
view of this an investment in such a Trust should be made with an understanding
of the characteristics of such issuers and the risks which such an investment
may entail. Such Bonds are generally payable from user fees. The problems of
such issuers include the ability to obtain timely and adequate rate increases,
population decline resulting in decreased user fees, the difficulty of financing
large construction programs, the limitations on operations and increased costs
and delays attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh water, the effect
of conservation programs and the impact of "no growth" zoning ordinances. All of
such issuers have been experiencing certain of these problems in varying
degrees.
Certain of the Bonds in certain of the Trusts may be industrial revenue
bonds ("IRBs"). In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks which
such an investment may entail. IRBs have generally been issued under bond
resolutions pursuant to which the revenues and receipts payable under the
arrangements with the operator of a particular project have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure, payment
of IRBs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor. Corporate operators or guarantors may be
affected by many factors which may have an adverse impact on the credit quality
of the particular company or industry. These include cyclicality of revenues and
earnings, regulatory and environmental restrictions, litigation resulting from
accidents or environ-mentally-caused illnesses, extensive competition and
financial deterioration resulting from a corporate restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may result in the
operator of a project becoming highly leveraged which may impact on such
operator's creditworthiness which in turn would have an adverse impact on the
rating and/or market value of such Bonds. Further, the possibility of such a
restructuring may have an adverse impact on the market for and consequently the
value of such Bonds, even though no actual takeover or other action is ever
contemplated or effected.
Certain of the Bonds in certain of the Trusts may be obligations that are
secured by lease payments of a governmental entity (hereinafter called "lease
obligations"). Lease obligations are often in the form of certificates of
participation. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which such
an investment may entail. Although the lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to appropriate for and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease
payments in future years unless money is appropriated for such purpose on a
yearly basis. A governmental entity that enters into such a lease agreement
cannot obligate future governments to appropriate for and make lease payments
but covenants to take such action as is necessary to include any lease payments
due in its budgets and to make the appropriations therefor. A governmental
entity's failure to appropriate for and to make payments under its lease
obligation could result in insufficient funds available for payment of the
obligations secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
which are, or which govern the operation of, schools, colleges and universities
and whose revenues are derived mainly from ad valorem taxes or, for higher
education systems, from tuition, dormitory revenues, grants and endowments. In
view of this an investment in such a Trust should be made with an understanding
of the characteristics of such issuers and the risks which such an investment
may entail. General problems relating to school bonds include litigation
contesting the state constitutionality of financing public education in part
from ad valorem taxes, thereby creating a disparity in educational funds
available to schools in wealthy areas and schools in poor areas. Litigation or
legislation on this issue may affect the sources of funds available for the
payment of school bonds in the Trusts. General problems relating to college and
university obligations include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to raise
tuitions and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state funding, and
government legislation or regulations which may adversely affect the revenues or
costs of such issuers. All of such issuers have been experiencing certain of
these problems in varying degrees.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks which
such an investment may entail. The major portion of an airport's gross operating
income is generally derived from fees received from signatory airlines pursuant
to use agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees. Airport operating income may therefore
be affected by the ability of the airlines to meet their obligations under the
use agreements. The air transport industry is experiencing significant
variations in earnings and traffic, due to increased competition, excess
capacity, increased costs, deregulation, traffic constraints and other factors,
and several airlines are experiencing severe financial difficulties. The Sponsor
cannot predict what effect these industry conditions may have on airport
revenues which are dependent for payment on the financial condition of the
airlines and their usage of the particular airport facility. Similarly, payment
on Bonds related to other facilities is dependent on revenues from the projects,
such as user fees from ports, tolls on turnpikes and bridges and rents from
buildings. Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased use of facility,
lower cost of alternative modes of transportation, scarcity of fuel and
reduction or loss of rents.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the operation of resource
recovery facilities. In view of this an investment in such a Trust should be
made with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. Resource recovery facilities are designed
to process solid waste, generate steam and convert steam to electricity.
Resource recovery bonds may be subject to extraordinary optional redemption at
par upon the occurrence of certain circumstances, including but not limited to:
destruction or condemnation of a project; contracts relating to a project
becoming void, unenforceable or impossible to perform; changes in the economic
availability of raw materials, operating supplies or facilities necessary for
the operation of a project or technological or other unavoidable changes
adversely affecting the operation of a project; administrative or judicial
actions which render contracts relating to the projects void, unenforceable or
impossible to perform; or impose unreasonable burdens or excessive liabilities.
The Sponsor cannot predict the causes or likelihood of the redemption of
resource recovery bonds in a Trust prior to the stated maturity of the Bonds.
An investment in Units of the Trusts should be made with an understanding
of the interest rate risk associated with such an investment. Generally, bond
prices (and therefore Unit prices) will move inversely with interest rates, and
bonds (Trusts) with longer maturities are likely to exhibit greater fluctuations
in market value, all other things being equal, than bonds (Trusts) with shorter
maturities.
REDEMPTIONS OF BONDS. Certain of the Bonds in certain of the Trusts are
subject to redemption prior to their stated maturity date pursuant to sinking
fund provisions, call provisions or extraordinary optional or mandatory
redemption provisions or otherwise. A sinking fund is a reserve fund accumulated
over a period of time for retirement of debt. A callable debt obligation is one
which is subject to redemption or refunding prior to maturity at the option of
the issuer. A refunding is a method by which a debt obligation is redeemed, at
or before maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation is
at a premium over par than when it is at a discount from par. The exercise of
redemption or call provisions will (except to the extent the proceeds of the
called Bonds are used to pay for Unit redemptions) result in the distribution of
principal and may result in a reduction in the amount of subsequent interest
distributions and it may also affect the current return on Units of the Trust
involved. Each Trust portfolio contains a listing of the sinking fund and call
provisions, if any, with respect to each of the Bonds. Extraordinary optional
redemptions and mandatory redemptions result from the happening of certain
events. Generally, events that may permit the extraordinary optional redemption
of Bonds or may require the mandatory redemption of Bonds include, among others:
the substantial damage or destruction by fire or other casualty of the project
for which the proceeds of the Bonds were used; an exercise by a local, state or
Federal governmental unit of its power of eminent domain to take all or
substantially all of the project for which the proceeds of the Bonds were used;
changes in the economic availability of raw materials, operating supplies or
facilities or technological or other changes which render the operation of the
project for which the proceeds of the Bonds were used uneconomic; changes in law
or an administrative or judicial decree which renders the performance of the
agreement under which the proceeds of the Bonds were made available to finance
the project impossible or which creates unreasonable burdens or which imposes
excessive liabilities, such as taxes, not imposed on the date the Bonds are
issued on the issuer of the Bonds or the user of the proceeds of the Bonds; an
administrative or judicial decree which requires the cessation of a substantial
part of the operations of the project financed with the proceeds of the Bonds,
an overestimate of the costs of the project to be financed with the proceeds of
the Bonds resulting in excess proceeds of the Bonds which may be applied to
redeem Bonds; or an underestimate of a source of funds securing the Bonds
resulting in excess funds which may be applied to redeem Bonds. The Sponsor is
unable to predict all of the circumstances which may result in such redemption
of an issue of Bonds. See "Schedule of Investments" in Part One of this
Prospectus for each Trust and footnote (3) in "Notes to Schedules of
Investments" in Part One of this Prospectus.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the opening of business on the date of this Prospectus, the Estimated
Current Returns and the Estimated Long-Term Returns were those indicated in the
"Summary of Essential Financial Information" in Part One of this Prospectus. The
Estimated Current Returns are calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net annual
interest income per Unit will vary with changes in fees and expenses of the
Trustee, Sponsor and Evaluator and with the principal prepayment, redemption,
maturity, exchange or sale of Bonds while the Public Offering Price will vary
with changes in the offering price of the underlying Bonds; therefore, there is
no assurance that the present Estimated Current Returns will be realized in the
future. Estimated Long-Term Returns are calculated using a formula which (i)
takes into consideration, and determines and factors in the relative weightings
of, the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all the
Bonds in a Trust and (ii) takes into account a compounding factor and the
expenses and sales charge associated with each Trust Unit. Since the market
values and estimated retirements of the Bonds and the expenses of a Trust will
change, there is no assurance that the present Estimated Long-Term Returns will
be realized in the future. Estimated Current Returns and Estimated Long-Term
Returns are expected to differ because the calculation of Estimated Long-Term
Returns reflects the estimated date and amount of principal returned while
Estimated Current Returns calculations include only net annual interest income
and Public Offering Price.
TRUST OPERATING EXPENSES
COMPENSATION OF SPONSOR AND EVALUATOR. Voyageur Fund Managers, Inc., which
acts as Sponsor and Evaluator, reserves the right to charge fees for such
services in amounts which will not exceed the amounts as set forth under
"Summary of Essential Financial Information" in Part One of this Prospectus. Any
such charges would be payable in monthly installments and would be based on the
number of Units outstanding on the first day of each month of each year. Any
such fees may exceed the actual costs of providing such supervisory or
evaluation services for this Fund, but at no time will the total amount paid to
the Sponsor for portfolio supervisory and evaluation services rendered to all
unit investment trusts sponsored by the Sponsor in any calendar year exceed the
aggregate cost to the Sponsor of supplying such services in such year. Both of
the foregoing fees may be increased without approval of the Unitholders by
amounts not exceeding proportionate increases under the category "All Services
Less Rent of Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a comparable
category. An affiliate of the Sponsor and the Underwriters will receive sales
commissions and may realize other profits (or losses) in connection with the
sale of Units and the Sponsor and the Underwriters may realize profits (or the
Sponsor may realize losses) in connection with the deposit of the Bonds as
described under "Public Offering--Sponsor and Underwriter Compensation."
TRUSTEE'S FEE. For its services, the Trustee will receive an annual fee as
set forth under "Summary of Essential Financial Information" in Part One of this
Prospectus. The Trustee's fees are payable in monthly installments (based on the
outstanding principal amount of Bonds in a Trust as of the first day of each
month of each year) on or before the fifteenth day of each month from the
Interest Account to the extent funds are available and then from the Principal
Account. The Trustee's fee may be periodically adjusted in response to
fluctuations in short-term interest rates (reflecting the cost to the Trustee of
advancing funds to a Trust to meet scheduled distributions) and may be further
increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index published by the United States Department of Labor
or, if such category is no longer published, in a comparable category. Since the
Trustee has the use of the funds being held in the Principal and Interest
Accounts for future distributions, payment of expenses and redemptions and since
such Accounts are non-interest bearing to Unitholders, the Trustee benefits
thereby. Part of the Trustee's compensation for its services to the Fund is
expected to result from the use of these funds. For a discussion of the services
rendered by the Trustee pursuant to its obligations under the Trust Agreement,
see "Rights of Unitholders--Reports Provided" and "Trust Administration."
MISCELLANEOUS EXPENSES. The following additional charges are or may be
incurred by the Trusts: (i) fees of the Trustee for extraordinary services, (ii)
expenses of the Trustee (including legal and auditing expenses) and of counsel
designated by the Sponsor, (iii) various governmental charges, (iv) expenses and
costs of any action taken by the Trustee to protect a Trust and the rights and
interests of Unitholders, (v) indemnification of the Trustee for any loss,
liability or expenses incurred by it in the administration of a Trust without
gross negligence, bad faith or willful misconduct on its part, (vi) any special
custodial fees payable in connection with the sale of any of the Bonds in a
Trust and (vii) expenditures incurred in contacting Unitholders upon termination
of a Trust.
The fees and expenses set forth herein are payable out of the Trusts. When
such fees and expenses are paid by or owing to the Trustee, they are secured by
a lien on the portfolio or portfolios of the applicable Trust or Trusts. If the
balances in the Interest and Principal Accounts are insufficient to provide for
amounts payable by the Fund, the Trustee has the power to sell Bonds to pay such
amounts.
INSURANCE ON THE BONDS
Insurance guaranteeing prompt payment of interest and principal, when due,
on all the Bonds in the Fund has been obtained by the Sponsor or by the issuers
or underwriters of such Bonds.
An Insurer has issued a policy or policies of insurance covering each of
the Bonds in the Trusts, each policy to remain in force until the payment in
full of such Bonds and whether or not the Bonds continue to be held by a Trust.
By the terms of each policy the Insurer will unconditionally guarantee to the
holders or owners of the Bonds the payment, when due, required of the issuer of
the Bonds of an amount equal to the principal of and interest on the Bonds as
such payments shall become due but not be paid (except that in the event of any
acceleration of the due date of principal by reason of mandatory or optional
redemption, default or otherwise, the payments guaranteed will be made in such
amounts and at such times as would have been due had there not been an
acceleration). The Insurer will be responsible for such payments, less any
amounts received by the holders or owners of the Bonds from any trustee for the
bond issuers or from any other sources other than the Insurer. The Insurers'
policies relating to small industrial development bonds and pollution control
revenue bonds also guarantee the full and complete payments required to be made
by or on behalf of an issuer of Bonds pursuant to the terms of the Bonds if
there occurs an event which results in the loss of the tax-exempt status of the
interest on such Bonds, including principal, interest or premium payments, if
any, as and when thereby required. Each Insurer has indicated that its insurance
policies do not insure the payment of principal or interest on bonds which are
not required to be paid by the issuer thereof because the bonds were not validly
issued. However, as indicated under "Tax Status," the respective issuing
authorities have received opinions of bond counsel relating to the valid
issuance of each of the Bonds in the Trusts. Each Insurer's policy also does not
insure against non-payment of principal of or interest on the Bonds resulting
from the insolvency, negligence or any other act or omission of the trustee or
other paying agent for the Bonds. Such policies are not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. The policies are non-cancelable and the insurance premiums
have been fully paid on or prior to the date of deposit, either by the Sponsor
or, if a policy has been obtained by a Bond issuer, by such issuer.
Standard & Poor's rates all new issues insured by an Insurer "AAA Prime
Grade." Moody's rates all bond issues insured by an Insurer "Aaa". These ratings
independently reflect each company's current assessment of the creditworthiness
of each Insurer and its ability to pay claims on its policies of insurance. See
"Investment Objectives and Portfolio Selection." Any further explanation as to
the significance of either rating may be obtained only from the company which
issued the respective rating. Neither rating is a recommendation to buy, sell or
hold the Bonds, and such rating may be subject to revision or withdrawal at any
time by the respective issuer. Any downward revision or withdrawal of the rating
may have an adverse effect on the market price of the Bonds.
Because the insurance on the Bonds will be effective so long as the Bonds
are outstanding, such insurance will be taken into account in determining the
market value of the Bonds and therefore some value attributable to such
insurance will be included in the value of the Units of the Trusts. The
insurance does not, however, guarantee the market value of the Bonds or of the
Units.
TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
1.Each Trust is not an association taxable as a corporation for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the Internal
Revenue Code of 1986 (the "Code") will retain its status when distributed
to Unitholders, except to the extent such interest is subject to the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below;
2.Each Unitholder is considered to be the owner of a pro rata portion
of the respective Trust under subpart E, subchapter J of chapter 1 of the
Code and will have a taxable event when such Trust disposes of a Bond, or
when the Unitholder redeems or sells his Unit. Unitholders must reduce the
tax basis of their Units for their share of accrued interest received by
the respective Trust, if any, on Bonds delivered after the Unitholders pay
for their Units to the extent that such interest accrued on such Bonds
during the period from the Unitholder's settlement date to the date such
Bonds are delivered to the respective Trust and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of
Bonds (whether by sale, payment on maturity, redemption or otherwise), gain
or loss is recognized to the Unitholder. The amount of any such gain or
loss is measured by comparing the Unitholder's pro rata share of the total
proceeds from such disposition with the Unitholder's basis for his or her
fractional interest in the asset disposed of. In the case of a Unitholder
who purchases Units, such basis (before adjustment for earned original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets ratably
according to value as of the date of acquisition of the Units. The tax cost
reduction requirements of the Code relating to amortization of bond premium
may, under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to his
original cost; and
3.Any proceeds paid under individual policies obtained by issuers of
Bonds which represent maturing interest on defaulted Bonds held by the
Trustee will be excludable from Federal gross income if, and to the same
extent as, such interest would have been excludable if paid in the normal
course by the issuer of the defaulted Bonds provided that, at the time such
policies are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the issuer of
the Bonds, rather than the Insurer, will pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provided that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price") to
prior owners. The application of these rules will also vary depending on the
value of the Bonds on the date a Unitholder acquires his Units and the price the
Unitholder pays for his Units. Investors with questions regarding these Code
sections should consult with their tax advisers.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued). Market discount can
arise based on the price a Trust pays for Bonds or the price a Unitholder pays
for his or her Units. Under the Tax Act, accretion of market discount is taxable
as ordinary income; under prior law the accretion had been treated as capital
gain. Market discount that accretes while a Trust holds a Bond would be
recognized as ordinary income by the Unitholders when principal payments are
received on the Bond, upon sale or at redemption (including early redemption),
or upon the sale or redemption of his or her Units, unless a Unitholder elects
to include a market discount in taxable income as it accrues. The market
discount rules are complex and Unitholders should consult their tax advisers
regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 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 an S Corporation, Regulated Investment Company, Real
Estate Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to its
alternative minimum taxable income (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax exempt interest, including interest on all of the Bonds in the
Fund. Unitholders are urged to consult their tax advisers with respect to the
particular tax consequences to them including the corporate alternative minimum
tax, the Superfund Tax and the branch profits tax imposed by Section 884 of the
Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid in indebtedness incurred to purchase or improve a
personal residence). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of the
interest expense attributable to ownership of such Units. Investors with
questions regarding this issue should consult with their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or related
person, will not be excludible from Federal gross income, although interest on
such Bonds received by others would be excludible from Federal gross income.
"Substantial user" and "related person" are defined under U.S. Treasury
Regulations. Any person who believes that he or she may be a "substantial user"
or a "related person" as so defined should contact his or her tax adviser.
Under existing law, the Fund and each Trust are not associations taxable as
corporations and the income of each Trust will be treated as the income of the
Unitholders under the income tax laws of the State of Missouri.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF COUNSEL AND
ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%. For taxpayers other than corporations, net
capital gains are subject to a maximum marginal stated tax rate of 28%. However,
it should be noted that legislative proposals are introduced from time to time
that affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed. Under the Code, taxpayers must disclose to
the Internal Revenue Service the amount of tax-exempt interest earned during the
year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus 50% of the Social Security benefits received exceeds
a "base amount." The base amount is $25,000 for unmarried taxpayers, $32,000 for
married taxpayers filing a joint return and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns. Modified adjusted gross income is adjusted gross income determined
without regard to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent that Social
Security benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the Tax Act up to 85% of Social Security benefits are
includible in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds an "adjusted
base amount." The adjusted base amount is $34,000 for unmarried taxpayers,
$44,000 for married taxpayers filing a joint return, and zero for married
taxpayers who do not live apart at all times during the taxable year and who
file separate returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does not
exceed the base amount need not include any Social Security benefits in gross
income.
FOR A DISCUSSION OF THE STATE TAX STATUS OF INCOME EARNED ON UNITS OF A
TRUST, SEE "THE TRUSTS--STATE TAXATION" FOR THE APPLICABLE TRUST. EXCEPT AS
NOTED THEREIN, THE EXEMPTION OF INTEREST ON STATE AND LOCAL OBLIGATIONS FOR
FEDERAL INCOME TAX PURPOSES DISCUSSED ABOVE DOES NOT NECESSARILY RESULT IN
EXEMPTION UNDER THE INCOME OR OTHER TAX LAWS OF ANY STATE OR CITY. THE LAWS OF
THE SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF SUCH OBLIGATIONS.
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price. The Public
Offering Price is based on the bid prices of the Bonds in each Trust and
includes a sales charge of 5.5% of the Public Offering Price (5.820% of the
aggregate bid price of the Bonds) plus any accrued interest. Employees, officers
and directors (including their immediate family members, defined as spouses,
children, grandchildren, parents, grandparents, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons) of the Sponsor and its subsidiaries may purchase
Units of the Trusts without a sales charge in the secondary offering periods.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a bond from the last day on which interest thereon was paid. Interest on
Bonds generally is paid semi-annually, although a Trust accrues such interest
daily. Because of this, each Trust always has an amount of interest earned but
not yet collected by the Trustee. For this reason, the Public Offering Price of
Units will have added to it the proportionate share of accrued interest to the
date of settlement. Unitholders will receive on the next distribution date of
the respective Trust the amount, if any, of accrued interest paid on their
Units.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. Therefore, there
will always remain an item of accrued interest that is added to the value of the
Units. If a Unitholder sells or redeems all or a portion of his Units, he will
be entitled to receive his proportionate share of the accrued interest from the
purchaser of his Units. Since the Trustee has the use of the funds held in the
Interest Account for distributions to Unitholders and since such Account is
noninterest-bearing to Unitholders, the Trustee benefits thereby.
OFFERING PRICE. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Part One of
this Prospectus in accordance with fluctuations in the prices of the underlying
Bonds in each Trust.
As indicated above, the price of the Units as of the opening of business on
the date of this Prospectus was determined by adding to the determination of the
aggregate bid price of the Bonds an amount equal to 5.82% of such value and
dividing the sum so obtained by the number of Units outstanding. This
computation produced a gross underwriting profit equal to 5.5% of the Public
Offering Price. The Evaluator will appraise or cause to be appraised the value
of the underlying Bonds on days on which the New York Stock Exchange is open for
each day on which any Unit of a Trust is tendered for redemption, and it shall
determine the aggregate value of such Trust as of 4:00 P.M. Eastern time on such
other days as may be necessary. Such Public Offering Price will be effective for
all orders received at or prior to 4:00 P.M. Eastern time on each such day.
Orders received by the Trustee, Sponsor, Distributor or any dealer for
purchases, sales or redemptions after that time, or on a day when the New York
Stock Exchange is closed, will be held until the next determination of price.
For secondary market sales the Public Offering Price per Unit will be equal to
the aggregate bid price of the Bonds in a Trust plus the secondary market sales
charge. For secondary market purposes such appraisal and adjustment will be made
by the Evaluator as of 4:00 P.M. Eastern time.
The aggregate price of the Bonds in each Trust has been and will be
determined on the basis of bid prices (i) on the basis of current market prices
for the Bonds obtained from dealers or brokers who customarily deal in bonds
comparable to those held by the Trust; (ii) if such prices are not available for
any particular Bonds, on the basis of current market prices for comparable
bonds; (iii) by causing the value of the Bonds to be determined by others
engaged in the practice of evaluation, quoting or appraising comparable bonds;
or (iv) by any combination of the above.
The Public Offering Price and the Redemption Price per Unit are based on
the bid price per Unit of the Bonds in each Trust plus the applicable sales
charge plus accrued interest. The offering price of Bonds in each Trust may be
expected to range from .35%-1% more than the offer price of such Bonds.
Although payment is normally made three business days following the order
for purchase, payment may be made prior thereto. However, delivery of
certificates, if any are requested in writing, representing Units so ordered
will be made as soon as possible following such order or shortly thereafter. A
person will become the owner of Units on the date of settlement provided payment
has been received. Cash, if any, made available to the Sponsor prior to the date
of settlement for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the limitations of
the Securities Exchange Act of 1934.
UNIT DISTRIBUTION. Units repurchased in the secondary market, if any, may
be offered by this prospectus at the secondary Public Offering Price in the
manner described.
As stated under "Public Market" below, an affiliate of the Sponsor,
Voyageur Fund Distributors, Inc. (the "Distributor"), intends to, and certain of
the other Underwriters may, maintain a secondary market for the Units of the
Fund. In so maintaining a market, the Distributor or any such Underwriters will
also realize profits or sustain losses in the amount of any difference between
the price at which Units are purchased and the price at which Units are resold
(which price is based on the bid prices of the Bonds in a Trust and includes a
sales charge). In addition, the Sponsor, the Distributor or any such
Underwriters will also realize profits or sustain losses resulting from a
redemption of such repurchased Units at a price above or below the purchase
price for such Units, respectively.
At various times the Sponsor may implement programs under which the sales
forces of Underwriters, brokers, dealers, banks and/or others may be eligible to
win nominal awards for certain sales efforts, or under which the Sponsor will
reallow to any such Underwriters, brokers, dealers, banks and/or others that
sponsor sales contests or recognition programs conforming to criteria
established by the Sponsor, or participate in sales programs sponsored by the
Sponsor, an amount not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such programs.
Also, the Sponsor in its discretion may from time to time pursuant to objective
criteria established by the Sponsor pay fees to qualifying Underwriters,
brokers, dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments are
made by the Sponsor out of its own assets, and not out of the assets of the
Trusts. These programs will not change the price Unitholders pay for their Units
or the amount that the Trusts will receive from the Units sold.
PUBLIC MARKET. Although they are not obligated to do so, the Distributor
intends to, and certain of the other Underwriters may, maintain a market for the
Units offered hereby and to offer continuously to purchase such Units at the bid
price of the Bonds in the portfolio plus interest accrued to the date of
settlement plus any principal cash on hand, less any amounts representing taxes
or other governmental charges payable out of the Trust and less any accrued
Trust expenses. If the supply of Units exceeds demand or if some other business
reason warrants it, the Distributor and/or the other Underwriters may either
discontinue all purchases of Units or discontinue purchases of Units at such
prices. In the event that a market is not maintained for the Units and the
Unitholder cannot find another purchaser, a Unitholder desiring to dispose of
his Units may dispose of such Units by tendering them to the Trustee for
redemption at the Redemption Price, which is based upon the aggregate bid price
of the Bonds in the portfolio and any accrued interest. The aggregate bid prices
of the underlying Bonds in a Trust are expected to be less than the related
aggregate offering prices. See "Rights of Unitholders--Redemption of Units." A
UNITHOLDER WHO WISHES TO DISPOSE OF HIS UNITS SHOULD INQUIRE OF HIS BROKER AS TO
CURRENT MARKET PRICES IN ORDER TO DETERMINE WHETHER THERE IS IN EXISTENCE ANY
PRICE IN EXCESS OF THE REDEMPTION PRICE AND, IF SO, THE AMOUNT THEREOF.
RIGHTS OF UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of any Trust will not be evidenced
by certificates unless a Unitholder, the Unitholder's registered broker/dealer
or the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation statement
sent to the Underwriter and broker. Non-receipt of such certificate(s) must be
reported to the Trustee within one year; otherwise, a 2% surety bond fee will be
required for replacement.
Units are transferable by making a written request to the Trustee and, in
the case of Units evidenced by a certificate, by presenting and surrendering
such certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unitholder. Unitholders must sign such
written request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate representing
the Units to be transferred. Such signatures must be guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee.
Although no such charge is now made or contemplated, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by the Trusts,
including that part of the proceeds of any disposition of Bonds which represents
accrued interest and including any insurance proceeds representing interest due
on defaulted Bonds, is credited by the Trustee to the Interest Account of the
appropriate Trust. Other receipts are credited to the Principal Account of the
appropriate Trust. Interest received by a Trust will be distributed on or
shortly after the fifteenth day of each month on a pro rata basis to Unitholders
of record as of the preceding record date (which will be the first day of the
month). All distributions will be net of applicable expenses. The pro rata share
of cash in the Principal Account will be computed as of the applicable record
date, and distributions to the Unitholders as of such record date will be made
on or shortly after the fifteenth day of such month. Proceeds received from the
disposition of any of the Bonds after such record date and prior to the
following distribution date will be held in the Principal Account and not
distributed until the next distribution date. The Trustee is not required to pay
interest on funds held in the Principal or Interest Accounts (but may itself
earn interest thereon and therefore benefits from the use of such funds) nor to
make a distribution from the Principal Account unless the amount available for
distribution shall equal at least $0.10 per Unit.
The distribution to the Unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the Unitholders' pro rata share of
the estimated net annual unit income in the Interest Account after deducting
estimated expenses. Because interest payments are not received by the Trusts at
a constant rate throughout the year, such interest distribution may be more or
less that the amount credited to the Interest Account as of the record date. For
the purpose of minimizing fluctuation in the distributions from the Interest
Account, the Trustee is authorized to advance such amounts as may be necessary
to provide interest distributions of approximately equal amounts. The Trustee
shall be reimbursed for any such advances from funds in the Interest Account on
the ensuing record date. Persons who purchase Units will commence receiving
distributions only after such person becomes a record owner. Notification to the
Trustee of the transfer of Units is the responsibility of the purchaser, but in
the normal course of business such notice is provided by the selling
broker-dealer.
As of the first day of each month, the Trustee will deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of Trusts (as
determined on the basis set forth under "Trust Operating Expenses"). The Trustee
also may withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges or extraordinary charges
payable out of the Trusts. Amounts so withdrawn shall not be considered a part
of a Trust's assets until such time as the Trustee shall return all for any part
of such amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Interest and Principal Accounts such amounts as may be
necessary to cover purchases of Replacement Bonds and redemption of Units by the
Trustee.
REINVESTMENT OPTION. Unitholders of the Trusts may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any mutual fund advised by the Sponsor
which are registered in the Unitholder's state of residence. Such mutual funds
are hereinafter collectively referred to as the "Reinvestment Funds."
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Fund from Voyageur Fund Distributors,
Inc. at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units will,
on the applicable distribution date, automatically be applied, as directed by
such person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the closing of trading on the New York Stock Exchange on such
date.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next
succeeding distribution date, by so notifying the Trustee in writing, elect to
terminate his or her reinvestment plan and receive future distributions on his
or her Units in cash. There will be no charge or other penalty for such
termination. Each Reinvestment Fund, its sponsor and its investment adviser
shall have the right to terminate at any time the reinvestment plan relating to
such fund.
REPORTS PROVIDED. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest and, if
any, the amount of other receipts (received since the preceding distribution)
being distributed expressed in each case as a dollar amount representing the pro
rata share of each Unit of a Trust outstanding. For as long as the Sponsor deems
it to be in the best interests of the Unitholders, the accounts of each Trust
shall be audited, not less frequently than annually, by independent certified
public accountants and the report of such accountants shall be furnished by the
Trustee to Unitholders of such Trusts upon request. Within a reasonable period
of time after the end of each calendar year, the Trustee shall furnish to each
person who at any time during the calendar year was a registered Unitholder of a
Trust a statement (i) as to the Interest Account: interest received (including
amounts representing interest received upon any disposition of the Bonds) and
the percentage of such amount by states and territories in which the issuers of
such Bonds are located, deductions for applicable taxes and for fees and
expenses of such Trust, for purchases of Replacement Bonds and for redemptions
of Units, if any, reservations made by the Trustee, if any, and the balance
remaining after such distributions and deductions, express in each case both as
a total dollar amount and as a dollar amount representing the pro rata share of
each Unit outstanding on the last business day of such calendar year; (ii) as to
the Principal Account: the dates of disposition of any Bonds and the net
proceeds received therefrom (excluding any portion representing accrued
interest), the amount paid for purchases of Replacement Bonds and for
redemptions of Units, if any, reservations made by the Trustee, if any,
deductions for payment of applicable taxes, fees and expenses of such Trust and
the balance remaining after such distributions and deductions expressed both as
a total dollar amount and as a dollar amount representing the pro rata share of
each Unit outstanding on the last business day of such calendar year; (iii) a
list of the Bonds held and the number of Units outstanding on the last business
day of such calendar year; (iv) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (v) amounts
actually distributed during such calendar year from the Interest and Principal
Accounts, separately stated, expressed both as total dollar amounts and as
dollar amounts representing the pro rata share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Bonds in a Trust furnished to it by the Evaluator.
REDEMPTION OF UNITS. A Unitholder who does not dispose of Units in the
secondary market described above may cause Units to be redeemed by the Trustee
by making a written request to the Trustee, Investors Fiduciary Trust Company,
P.O. Box 419350, Kansas City, Missouri 64173-0216 and, in the case of Units
evidenced by a certificate, by tendering such certificate to the Trustee,
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee. Unitholders must sign the request,
and such certificate or transfer instrument, exactly as their names appear on
the records of the Trustee and on any certificate representing the Units to be
redeemed. If the amount of the redemption is $25,000 or less and the proceeds
are payable to the Unitholder(s) of record at the address of record, no
signature guarantee is necessary for redemptions by individual account owners
(including joint owners). Additional documentation may be requested, and a
signature guarantee is always required, from corporations, executors,
administrators, trustees, guardians or associations. The signatures must be
guaranteed by a participant in the STAMP or such other guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by the Trustee. A
certificate should only be sent by registered or certified mail for the
protection of the Unitholder. Since tender of the certificate is required for
redemption when one has been issued, Units represented by a certificate cannot
be redeemed until the certificate representing such Units has been received by
the purchasers.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "Redemption Date").
Such redemption shall be made by payment of cash, equivalent to the Redemption
Price for such Trust, determined as set forth below as of the evaluation time
stated under "Summary of Essential Financial Information," next following such
tender, multiplied by the number of Units being redeemed. Any Units redeemed
shall be cancelled and any undivided fractional interest in the Fund
extinguished. The price received upon redemption might be more or less than the
amount paid by the Unitholder depending on the value of the Bonds in the Trust
involved at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee will
be required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a return. Under normal circumstances the Trustee
obtains the Unitholder's tax identification number from the selling broker.
However, at any time a Unitholder elects to tender Units for redemption, such
Unitholder should provide a tax identification number to the Trustee in order to
avoid this possible "back-up withholding" in the event the Trustee has not been
previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account or, if the balance therein is insufficient, from the Principal Account.
All other amounts will be withdrawn from the Principal Account. The Trustee is
empowered to sell underlying Bonds in order to make funds available for
redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the Bonds in
each Trust, as of 4:00 P.M. Eastern time on days of trading on the New York
Stock Exchange on the date any such determination is made. While the Trustee has
the power to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which determines
the price per Unit on a daily basis. The Redemption Price per Unit is the pro
rata share of each Unit in a Trust determined on the basis of (i) the cash on
hand in such Trust or monies in the process of being collected, (ii) the value
of the Bonds in such Trust based on the bid prices of the Bonds (including "when
issued" contracts, if any) and (iii) interest accrued thereon, less (a) amounts
representing taxes or other governmental charges payable out of such Trust and
(b) the accrued expenses of such Trust. The Evaluator may determine the value of
the Bonds in a Trust by employing any of the methods set forth in "Public
Offering--Offering Price."
The price at which Units may be redeemed could be less than the price paid
by the Unitholder and may be less than the par value of the Bonds represented by
the Units so redeemed. As stated above, the Trustee may sell Bonds to cover
redemptions. When Bonds are sold, the size of the affected Trust will be, and
the diversity may be, reduced. Such sales may be required at a time when Bonds
would not otherwise be sold and might result in lower prices than might
otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Bonds in a
Trust is not reasonably practicable, or for such other periods as the Securities
and Exchange Commission may by order permit. The Trustee is not liable to any
person in any way for any loss or damage which may result from any such
suspension or postponement.
TRUST ADMINISTRATION
DISTRIBUTOR PURCHASES OF UNITS. The Trustee shall notify the Distributor of
any tender of Units for redemption. If the Distributor's bid in the secondary
market at that time equals or exceeds the Redemption Price per Unit, it may
purchase such Units by notifying the Trustee before the close of business on the
date of such notification and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by the
Trustee. Units held by the Sponsor or Distributor may be tendered to the Trustee
for redemption as any other Units.
The offering price of any Units acquired by the Distributor will be in
accord with the Public Offering Price described in the then currently effective
prospectus describing such Units. Any profit resulting from the resale of such
Units will belong to the Distributor which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to its acquisition of such
Units.
PORTFOLIO ADMINISTRATION. The Trustee is empowered to sell, for the purpose
of redeeming Units tendered by any Unitholder, and for the payment of expenses
for which funds may not be available, such of the Bonds designated by the
Sponsor as the Trustee in its sole discretion may deem necessary. The Sponsor,
in designating such Bonds, will consider a variety of factors, including (i)
interest rates, (ii) market value and (iii) marketability. The Sponsor may
direct the Trustee to dispose of Bonds in the event there is a decline in price
or the occurrence of other market or credit factors, including advance refunding
(i.e., the issuance of refunding securities and the deposit of the proceeds
thereof in trust or escrow to retire the refunded securities on their respective
redemption dates), so that in the opinion of the Sponsor the retention of such
Securities would be detrimental to the interest of the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by
an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
(i) the issuer is in default with respect to such Bond or (ii) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Bond in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder, identifying the Bonds eliminated and the
Bonds substituted therefor. Except as stated herein and under "The
Fund--Replacement Bonds" regarding the substitution of Replacement Bonds for
Failed Bonds, the acquisition by the Trust of any obligations other than the
Bonds initially deposited is not permitted.
If any default in the payment of principal or interest on any Bond occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bond within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
AMENDMENT OR TERMINATION. The Sponsor and the Trustee have the power to
amend the Trust Agreement without the consent of any of the Unitholders when
such an amendment is (i) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with any
other provision contained therein or (ii) to make such other provisions as shall
not adversely affect the interest of the Unitholders (as determined in good
faith by the Sponsor and the Trustee), provided that the Trust Agreement may not
be amended to increase the number of Units issuable thereunder or to permit the
deposit or acquisition of obligations either in addition to or in substitution
for any of the Bonds initially deposited in a Trust, except for the substitution
of certain refunding obligations for such Bonds, for Replacement Bonds and for
subsequent deposits (see "The Fund"). In the event of any amendment, the Trustee
is obligated to notify promptly all Unitholders of the substance of such
amendment.
A Trust may be terminated at any time by consent of Unitholders
representing 66-2/3% of the Units of such Trust then outstanding or by the
Trustee when the value of such Trust, as shown by any semi-annual evaluation, is
less than the minimum value indicated under "Summary of Essential Financial
Information." A Trust will be liquidated by the Trustee in the event that a
sufficient number of Units not yet sold are tendered for redemption by the
Underwriters, including the Sponsor, so that the net worth of such Trust would
be reduced to less than 40% of the initial principal amount of such Trust. If a
Trust is liquidated because of the redemption of unsold Units by the
Underwriters, the Sponsor will refund to each purchaser of Units the entire
sales charge paid by such purchaser.
The Trust Agreement provides that a Trust shall terminate upon the
redemption, sale or other disposition of the last Bond held in such Trust, but
in no event shall it continue beyond the end of the year preceding the fiftieth
anniversary of the Trust Agreement. In the event of termination of a Trust,
written notice thereof will be sent by the Trustee to each Unitholder of such
Trust at his address appearing on the registration books of the Trust maintained
by the Trustee, such notice specifying the time or times at which the Unitholder
may surrender his certificate or certificates, if any were issued, for
cancellation. Within a reasonable time thereafter the Trustee shall liquidate
any Bonds then held in such Trust and shall deduct from the funds of such Trust
any accrued costs, expenses or indemnities provided by the Trust Agreement,
including estimated compensation of the Trustee and costs of liquidation and any
amounts required as a reserve to provide for payment of any applicable taxes or
other governmental charges. The sale of Bonds in a Trust upon termination may
result in a lower amount than might otherwise be realized if such sale were not
required at such time. For this reason, among others, the amount realized by a
Unitholder upon termination may be less than the principal amount or par amount
of Bonds represented by the Units held by such Unitholder. The Trustee shall
then distribute to each Unitholder his or her share of the balance of the
Interest and Principal Accounts. With such distribution the Unitholders shall be
furnished a final distribution statement of the amount distributable. At such
time as the Trustee in its sole discretion shall determine that any amounts held
in reserve are no longer necessary, it shall make distribution thereof to
Unitholders in the same manner.
LIMITATION ON LIABILITIES. The Sponsor, the Evaluator, the Distributor and
the Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and duties
thereunder. The Trustee shall not be liable for depreciation or loss incurred by
reason of the sale by the Trustee of any of the Bonds. In the event of the
failure of the Sponsor to act under the Trust Agreement, the Trustee may act
thereunder and shall not be liable for any action taken by it in good faith
under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Bonds or upon the interest thereon or upon it
as Trustee under the Trust Agreement or upon or in respect of the Fund which the
Trustee may be required to pay under any present or future law of the United
States of America or of any other taxing authority having jurisdiction. In
addition, the Trust Agreement contains other customary provisions limiting the
liability of the Trustee.
The Trustee, Sponsor, Distributor and Unitholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information available to
it, provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor, Distributor or Unitholders for errors in judgment. This
provision shall not protect the Evaluator in any case of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
SPONSOR. Voyageur Fund Managers, Inc. is the Sponsor of the Fund and
Voyageur Fund Distributors, Inc. is the primary distributor of Fund Units.
Voyageur Fund Managers, Inc. and Voyageur Fund Distributors, Inc. are each
indirect wholly-owned subsidiaries of Dougherty Financial Group, Inc. which is
owned approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and
less than 1% by certain benefit plans for the employees of Dougherty Financial
Group, Inc. and its subsidiaries. The address of each of the Sponsor and
Distributor is 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota
55402.
Mr. Dougherty co-founded the predecessor of Dougherty Financial Group, Inc.
in 1977 and has served as Dougherty Financial Group'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, 1995, Voyageur Fund Managers, Inc. served as the
manager to six closed-end and ten open-end investment companies (comprising 29
separate investment portfolios), administered numerous private accounts and
managed approximately $8.2 billion in assets. The principal business address for
both Voyageur Fund Managers, Inc. and Voyageur Fund Distributors, Inc. is 90
South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402. As of December
31, 1995, the total stockholders' equity of Voyageur Fund Mangers, Inc. was
$5,264,562 (unaudited). (This paragraph relates only to the Sponsor and not to
the Fund or to any Series thereof 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 financial information will be made
available by the Sponsor upon request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and not
exceeding amounts prescribed by the Securities and Exchange Commission, (ii)
terminate the Trust Agreement and liquidate the Fund as provided therein or
(iii) continue to act as Trustee without terminating the Trust Agreement.
EVALUATOR. The Sponsor also serves as Evaluator. The Evaluator may resign
or be removed by the Sponsor in which event the Sponsor is to use its best
efforts to appoint a satisfactory successor. Such resignation or removal shall
become effective upon acceptance of appointment by the successor evaluation. If
upon resignation of the Evaluator no successor has accepted appointment within
30 days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to each
Unitholder. At the present time, pursuant to a contract with the Evaluator,
Securities Pricing Service, a division of George K. Baum & Company, a
non-affiliated firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities, provides portfolio evaluations of the Bonds in
the Fund which are then reviewed by the Evaluator. In the event the Sponsor is
unable to obtain current evaluations from Securities Pricing Service, it may
make its own evaluations or it may utilize the services of any other
non-affiliated evaluator or evaluators it deems appropriate.
TRUSTEE. The Trustee, Investors Fiduciary Trust Company, is a trust company
specializing in investment related services, organized and existing under the
laws of Missouri, having its trust office at 127 West 10th Street, Kansas City,
Missouri 64105, (800) 253-5622. The Trustee is subject to supervision and
examination by the Division of Finance of the State of Missouri and the Federal
Deposit Insurance Corporation.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolio of any Trust.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Fund. Such
records shall include the name and address of, and the certificates issued by
each Trust to, every Unitholder of each Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or Federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Bonds held in the Trusts.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the Trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon receiving
notice of such resignation is obligated to appoint a successor trustee promptly.
If, upon such resignation, no successor trustee has been appointed and has
accepted the appointment within 30 days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a corporation organized under the laws of the United States or any
State, be authorized to exercise trust powers and have at all times an aggregate
capital, surplus and undivided profits of not less than $5,000,000.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to Federal and state tax law have been passed upon by Chapman
and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as counsel for the
Sponsor.
INDEPENDENT AUDITORS. The financial statements of each Trust as of the date
presented in Part One of this Prospectus have been included herein in reliance
upon the report of KPMG Peat Marwick LLP, independent auditors, appearing
elsewhere herein and upon the authority of said firm as experts in accounting
and auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Fund,
the Sponsor or the Underwriters. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to whom it is not lawful to make such offer in such state.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
TITLE PAGE
THE FUND..................................... 3
INVESTMENT OBJECTIVES AND
PORTFOLIO SELECTION................... 4
THE TRUSTS................................... 5
EQUIVALENT TAXABLE ESTIMATED
CURRENT RETURNS....................... 21
RISK FACTORS................................. 23
ESTIMATED CURRENT RETURN AND
ESTIMATED LONG-TERM RETURN............ 30
TRUST OPERATING EXPENSES..................... 30
INSURANCE ON THE BONDS....................... 32
TAX STATUS................................... 33
PUBLIC OFFERING.............................. 37
RIGHTS OF UNITHOLDERS........................ 39
TRUST ADMINISTRATION......................... 44
OTHER MATTERS................................ 49
- --------------------------------------------------------------------------------
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
P R O S P E C T U S
- --------------------------------------------------------------------------------
May 17, 1996
PROSPECTUS PART TWO
VOYAGEUR TAX-EXEMPT TRUST
SERIES
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 Tax-Exempt Trust, Series 1, 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 day of
17th day of May, 1996.
Voyageur Tax-Exempt Trust, Series 1
(Registrant)
By Voyageur Fund Managers, Inc.
(Depositor)
By /s/Thomas J. Abood
------------------
General Counsel
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 May 17, 1996:
/s/MICHAEL E. DOUGHERTY
- -----------------------
Michael E. Dougherty Chairman of the Board of Directors
and Director
/s/JOHN G. TAFT
- -----------------------
John G. Taft Chief Executive Officer
and Director
/s/EDWARD J. KOHLER
- -----------------------
Edward J. Kohler Director
/s/JANE M. WYATT
- -----------------------
Jane M. Wyatt Director
/s/FRANK C. TONNEMAKER
- -----------------------
Frank C. Tonnemaker 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
-----------------------------
We consent to the use of our report included herein and to the references
to our Firm under the heading "OTHER MATTERS - INDEPENDENT AUDITORS" in Part Two
of the Prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 16, 1996
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