AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 1995
REGISTRATION NO. 33-60115
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO THE
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGiSTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. EXACT NAME OF TRUST: VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
B. NAME OF DEPOSITOR: VOYAGEUR FUND MANAGERS, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
VOYAGEUR FUND MANAGERS, INC.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copy to:
KENNETH R. LARSEN MARK J. KNEEDY
Voyageur Fund Managers, Inc. c/o Chapman and Cutler
90 South Seventh Street, Suite 4400 111 West Monroe Street
Minneapolis, Minnesota 55402 Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title and amount of Proposed maximum Amount of
securities being registered aggregate offering registration fee
price
<S> <C> <C> <C>
Voyageur Tax-Exempt Trust, An indefinite number of Indefinite $500*
Series 4 Units of Beneficial Interest
pursuant to Rule 24f-2 under
the Investment Company Act of 1940
</TABLE>
* previously filed
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration
Statement.
/ :/ Check box if it is proposed that this filing will become effective on
July 20, 1995 at 2:00 P.M. pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
______________________
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of Trust } Prospectus front cover
2. (b) Title of securities issued................................................. } Summary of Essential
} Information
3. Name and address of each depositor.............................................. } Trust Administration
4. Name and address of Trustee..................................................... } Trust Administration
5. State of organization of Trust.................................................. } The Fund
6. Execution and termination of Trust agreement.................................... } Trust Administration
7. Changes of name................................................................. } The Fund; Trust Administration
8. Fiscal year..................................................................... } *
9. Litigation...................................................................... } *
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a) Registered of bearer securities............................................ } Rights of Unitholders
(b) Cumulative or distributive securities...................................... } Rights of Unitsholders; The Fund
(c) Redemption................................................................. } Rights of Unitholders
(d) Conversion, transfer, etc.................................................. } Rights of Unitholders
(e) Periodic payment plan...................................................... } *
(f) Voting rights.............................................................. } Rights of Unitholders
(g) Notice of Unitholders...................................................... } Trust Administration
(h) Consents required.......................................................... } Rights of Unitholders; Trust
Administration
(i) Other provisions........................................................... } Tax Status; Insurance on the
Bonds
}
11. Type of securities comprising units............................................. } The Fund; The State Trusts
12. Certain information regarding periodic payment certificates } *
}
13. (a) Load, fees, expenses, etc.................................................. } Estimated Current Return and
} Estimated Long-Term Return;
} Trust Operating Expenses
(b) Certain information regarding periodic payment certificates................ } *
(c) Certain percentages........................................................ } Summary of Essential
} Information; Public Offering;
} Insurance on the Bonds
(d) Certain other fees, etc. payable by holders................................ } Rights of Unitholders
(e) Certain profits receivable by depositor,
principal, underwriters, writers, Trustee or
affiliated person..................................................... } Trust Operating Expenses;
} Public Offering
(f) Ratio of annual charges to income.......................................... } *
} The Fund
14. Issuance of Trust's securities.................................................. } Rights of Unitholders
15. Receipt and handling of payments from purchasers................................ } *
16. Acquisition and disposition of underlying } The Fund; Investment Objectives
securities................................................................ } and Portfolio Selection; Trust
} Administration; Public
} Offering
17. Withdrawal or redemption........................................................ } Rights of Unitholders; Public
} Offering
18. (a) Receipt, custody and disposition of income................................. } Rights of Unitholders
(b) Reinvestment of distributions.............................................. } Rights of Unitholders
(c) Reserves or special Trusts................................................. } Trust Operating Expenses
(d) Schedule of distributions.................................................. } *
19. Records, accounts and reports................................................... } Rights of Unitholders;
} Trust Administration
20. Certain miscellaneous provisions of Trust agreement
(a) Amendment.................................................................. } Trust Administration
(b) Termination................................................................ } *
(c) and (d) Trustee, removal and successor..................................... } Trust Administration
(e) and (f) Depositor, removal and successor................................... } Trust Administration
21. Loans to security holders } *
22. Limitations on liability........................................................ } Trust Administration
23. Bonding arrangements............................................................ } *
24. Other material provisions of Trust agreement.................................... } *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor....................................................... } Trust Administration
26. Fees received by depositor...................................................... } See Items 13(a) and 13(e)
27. Business of depositor........................................................... } Trust Administration
28. Certain information as to officials and
affiliated persons of depositor........................................... } Trust Administration
29. Voting securities of depositor.................................................. } *
30. Persons controlling depositor................................................... } *
31. Payment by depositor for certain services
rendered to Trust......................................................... } *
32. Payment by depositor for certain other services rendered to Trust............... } *
33. Remuneration of employees of depositor
for certain services rendered to Trust.................................... } *
34. Remuneration of other persons for certain
services rendered to Trust................................................ } *
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of Trust's securities by states.................................... } Public Offering
36. Suspension of sales of Trust's securities....................................... } *
37. Revocation of authority to distribute........................................... } *
38. (a) Method of Distribution..................................................... } Public Offering
(b) Underwriting Agreements.................................................... } Underwriting
(c) Selling Agreements......................................................... } Public Offering
39. (a) Organization of principal underwriters..................................... } Trust Administration
(b) N.A.S.D. membership of principal underwriters.............................. } *
40. Certain fees received by principal underwriters................................. } See Items 13(a) and 13(e)
41. (a) Business of principal underwriters......................................... } Trust Administration
(b) Branch offices of principal underwriters................................... } *
(c) Salesmen of principal underwriters......................................... } *
42. Ownership of Trust's securities by certain persons.............................. } *
43. Certain brokerage commissions received by
principal underwriters.................................................... } Public Offering
44. (a) Method of valuation........................................................ } Public Offering
(b) Schedule as to offering price.............................................. } *
(c) Variation in offering price to certain persons............................. } Public Offering
45. Suspension of redemption rights................................................. } Rights of Unitholders
46. (a) Redemption valuation....................................................... } Public Offering
(b) Schedule as to redemption price............................................ } *
47. Maintenance of position in underlying securities................................ } Public Offering
} Rights of Unitholders
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation of Trustee.......................................... } Trust Administration
49. Fees and expenses of Trustee.................................................... } Trust Operating Expenses
50. Trustee's lien.................................................................. } *
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
51. Insurance of holders of Trust's securities...................................... } Cover Page; Trust Operating
} Expenses; Insurance on
} the Bonds
VII. POLICY OF REGISTRANT
52. (a) Provisions of Trust agreement with respect
to selection or elimination............................................... } The Fund; Trust Administration
(b) Transactions involving elimination of
underlying securities..................................................... } *
(c) Policy regarding substitution or elimination
of underlying securities.................................................. } The Fund; Trust Administration
(d) Fundamental policy not otherwise covered................................... } *
53. Tax status of Trust............................................................. } Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years........................................ } *
55.-58. Certain information regarding periodic payment
certificates.............................................................. } *
59. Financial statements (Instruction 1(c) to Form S-6)............................. } *
</TABLE>
_____________
*Inapplicable, answer negative or not required.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
COLORADO INSURED SERIES 4
OREGON INSURED SERIES 3
THE FUND. Voyageur Tax-Exempt Trust, Series 4 (the "Fund") consists of the
underlying separate unit investment trusts set forth above. The various trusts
are collectively referred to herein as the "Trusts." Each Trust initially
consists of interest-bearing obligations (including delivery statements relating
to contracts for the purchase of certain such obligations and an irrevocable
letter of credit) 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 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. 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, 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.
INVESTMENT OBJECTIVES OF THE FUND. The objectives of the Fund are income
exempt from 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.
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 this Prospectus for future reference.
THE DATE OF THIS PROSPECTUS IS JULY 20, 1995
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of each Trust
during the initial offering period is equal to the aggregate offering price of
the 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. For sales charges in the
secondary market, see "Public Offering--General." 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. During the initial offering period, the sales charge is reduced on a
graduated scale for sales involving 10,000 or more Units. If Units were
available for purchase at the opening of business on the Initial Date of
Deposit, the Public Offering Price per Unit would have been that amount set
forth in the "Summary of Essential Financial Information." See "Public
Offering."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return and Estimated Long-Term Return to Unitholders are as set forth
under "Summary of Essential Financial Information." The methods of calculating
Estimated Current Return and Estimated Long-Term Return are set forth in the
footnotes to the "Summary of Essential Financial Information" and under
"Estimated Current Return and Estimated Long-Term Return."
DISTRIBUTIONS. Unitholders will receive distributions on a monthly basis.
See "Rights of Unitholders-Distributions of Interest and Principal." Record
dates will be the first day of each month. Distributions will be made on the
fifteenth day of the month subsequent to the respective record dates.
MARKET FOR UNITS. Although not obligated to do so, an affiliate of the
Sponsor, Voyageur Fund Distributors, Inc., intends to, and 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; however,
during the initial offering period such prices will be based upon the aggregate
offering prices of the Bonds. If such a market is not maintained and no other
over-the-counter market is available, a Unitholder will be able to dispose of
his Units through redemption at prices based upon the bid prices of the
underlying Bonds (see "Rights of Unitholders--Redemption of Units").
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end management investment company as
described herein. See "Rights of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in the 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."
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: JULY 20, 1995
SPONSOR AND EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<TABLE>
<CAPTION>
Colorado Oregon
Insured Insured
Series 4 Series 3
<S> <C> <C>
Principal Amount (Par Value) of Bonds........................... $3,000,000 $2,385,000
Number of Units................................................. 302,510 244,502
Fractional Undivided Interest in the Trust per Unit............. 1/302,510 1/244,502
Principal Amount (Par Value) of Bonds per Unit.................. $9.917 $9.755
Public Offering Price: Aggregate Offering Price of Bonds in
Portfolio................................................... $2,876,870 $2,325,214
Aggregate Offering Price of Bonds per Unit...................... $9.51 $9.51
Sales Charge 4.9% (5.152% of the Aggregate Offering Price
of the Bonds) per Unit(1)................................... $.49 $.49
Public Offering Price per Unit(1)(2)............................ $10.00 $10.00
Redemption Price per Unit(2)(3)................................. $9.45 $9.45
Sponsor's Initial Repurchase Price per Unit..................... $9.51 $9.51
Excess of Public Offering Price per Unit Over Redemption
Price per Unit.............................................. $0.55 $0.55
Excess of Sponsor's Initial Repurchase Price per Unit Over
Redemption Price per Unit................................... $0.06 $0.06
Minimum Value of the Trust under which Trust Agreement
may be terminated........................................... $600,000 $477,000
Minimum Principal Distribution.....................$1.00 per Unit
First Settlement Date...............................July 25, 1995
Mandatory Termination Date......................December 31, 2045
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit................... $0.54812 $0.53545
Less: Estimated Annual Expense per Unit..................... $0.03863 $0.03581
Estimated Net Annual Interest Income per Unit............... $0.50949 $0.49964
Estimated Normal Monthly Distribution per Unit(4)............... $0.04246 $0.04164
Estimated Daily Rate of Net Interest Accrual per Unit........... $0.00142 $0.00139
Estimated Current Return Based on Public Offering
Price(1)(4)(5).............................................. 5.09% 5.00%
Estimated Long-Term Return(1)(4)(5)............................. 5.15% 5.09%
Initial Distribution (August 15, 1995).......................... $0.00849 $0.00833
Trustee's Initial Annual Fee per $1,000 Principal Amount of
Bonds....................................................... $2.20 $2.17
Evaluator's Annual Fee per Unit................................. $0.00000 $0.00000
Sponsor's Annual Fee per Unit................................... $0.00300 $0.00000
Estimated Annual Organizational Expenses per Unit (6)........... $0.00871 $0.00875
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
three business days after order) less distributions from the Interest
Account subsequent to the First Settlement Date. For purchases settling on
the First Settlement Date, no accrued interest will be added to the Public
Offering Price. After the initial offering period, the Sponsor's Repurchase
Price per Unit will be determined as described under the caption "Public
Offering--Public Market."
(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 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.
(6) Each Trust (and therefore the Unitholders of the respective Trust) will
bear all or a portion of its organizational costs (including costs of
preparing the registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange Commission
and states, the initial audit of the Trust portfolios and the initial fees
and expenses of the Trustee but not including the expenses incurred in the
preparation and printing of brochures and other advertising materials and
any other selling expenses) as is common for mutual funds. Total
organizational expenses will be amortized over a five year period. See
"Trust Operating Expenses" and "Statements of Net Assets." Historically,
the sponsors of unit investment trusts have paid all of the costs of
establishing such trusts.
THE FUND
GENERAL. The Fund was created under the laws of the State of Missouri
pursuant to a Trust Agreement (the "Trust Agreement"), dated the Initial Date of
Deposit, as defined in "Summary of Essential Financial Information," with
Voyageur Fund Managers, Inc., as Sponsor and Evaluator, and Investors Fiduciary
Trust Company, as Trustee.
The Fund consists of two separate unit investment trusts, each having a
portfolio of interest-bearing obligations (including delivery statements
relating to contracts for the purchase of certain such 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 a 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. On the
Initial Date of Deposit, the Sponsor deposited with the Trustee the Bonds
indicated under the "Schedule of Investments" for each Trust herein, including
delivery statements relating to contracts for the purchase of certain such
obligations and irrevocable letters of credit issued by a financial institution
in the aggregate amount required for such purchases (the "Bonds"). Thereafter,
the Trustee, in exchange for the Bonds so deposited, delivered to the Sponsor
evidences of ownership of the number of Units of each Trust as indicated under
"Summary of Essential Financial Information."
With the deposit of the Bonds on the Initial Date of Deposit, the Sponsor
established a percentage relationship between the amounts of Bonds in each
Trust's portfolio. From time to time following the Initial Date of Deposit, the
Sponsor, pursuant to the Trust Agreement, may deposit additional Bonds in a
Trust and Units may be continuously offered for sale to the public by means of
this Prospectus, resulting in a potential increase in the outstanding number of
Units of a Trust. Any additional Bonds deposited in a Trust will maintain, as
nearly as is practicable, the original proportionate relationship of the Bonds
in a Trust's portfolio. Since the prices of the underlying Bonds will fluctuate
daily, the ratio, on a market value basis, will also change daily. The portion
of Bonds represented by each Unit will not change as a result of the deposit of
additional Bonds in a Trust.
Certain of the Bonds in certain of the Trusts may have been purchased on a
"when, as and if issued" or "delayed delivery" basis. See footnote (1) in "The
Trusts--Notes to Schedules of Investments." The delivery of any such Bonds may
be delayed or may not occur. Interest on these Bonds begins accruing to the
benefit of Unitholders on their respective dates of delivery. To the extent any
Bonds are actually delivered to the Fund after their respective expected dates
of delivery, Unitholders who purchase their Units prior to the date such Bonds
are actually delivered to the Trustee would be required to adjust their tax
basis in their Units for a portion of the interest accruing on such Bonds during
the interval between their purchase of Units and the actual delivery of such
Bonds. As a result of any such adjustment, the Estimated Current Returns during
the first year would be slightly lower than those stated herein which would be
the returns after the first year, assuming the portfolio of a Trust and
estimated annual expenses other than those of the Trustee (which may be reduced
in the first year only) do not vary from that set forth under "Summary of
Essential Financial Information". Unitholders will be "at risk" with respect to
all Bonds in the portfolios including "when, as and if issued" and "delayed
delivery" Bonds (i.e., may derive either gain or loss from fluctuations in the
evaluation of such Bonds) from the date they commit for Units. For a discussion
of the Sponsor's obligations in the event of the failure of any contract for the
purchase of any of the Bonds and limited right to substitute other tax-exempt
bonds to replace any failed contract, see "Replacement Bonds" below.
Each Unit initially offered represents the fractional undivided interest in
each Trust as indicated under "Summary of Essential Financial Information." To
the extent that any Units are redeemed by the Trustee, the fractional undivided
interest in 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
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"). 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 the 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 Initial Date of Deposit 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 Initial Date of Deposit, 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
COLORADO INSURED SERIES 4
GENERAL. The Colorado Trust consists of issues of seven Bonds. One of the
Bonds in the Colorado Trust is a general obligation (16.7%) of the governmental
entity issuing it and is backed by the taxing power thereof. The remaining
issues are payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. These issues are divided by
purpose of issues (and percentage of principal amount to total Colorado Trust)
as follows: 33.3% Healthcare Revenue Bonds, 16.7% Transportation Revenue Bonds,
16.7% Utility Revenue Bonds and 16.6% Education Revenue Bonds. No Bond has
received a provisional rating. For a general description of certain of the risks
associated with the Bonds, see "Risk Factors" below.
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.
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.
COLORADO INSURED SERIES 4
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: JULY 20, 1995
<TABLE>
<CAPTION>
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited Redemption to Colorado
Principal or Bonds Contracted for (1)(5) Rating (2) Feature (3) Trust (4)
<S> <C> <C> <C> <C>
$500,000 City of Colorado Springs, Colorado, Hospital AAA 2005 @ 102 $501,875
Revenue and Refunding Bonds, Series 1995, 2016 @ 100 S.F.
(MBIA Insured), 6.00% Due 12/15/2024#
500,000 City and County of Denver, Colorado, for and AAA 2005 @ 102 481,250
on behalf of its Department of Aviation, 2021 @ 100 S.F.
Airport System Revenue Bonds, Series 1995A,
(MBIA Insured), 5.70% Due 11/15/2025#
500,000 Summit School District RE-1, Summit County, AAA 2005 @ 100 496,875
Colorado, General Obligation Improvement
Bonds, Series 1995A, (FGIC Insured), 5.70%
Due 12/1/2014#
500,000 City of Colorado Springs, Colorado, Utilities AAA 2004 @ 100 456,250
System Improvement and Refunding Revenue 2020 @ 100 S.F.
Bonds, Series 1994A, (MBIA Insured), 5.125%
Due 11/15/2023#
500,000 Sisters of Charity of Leavenworth Health AAA 2003 @ 102 447,498
Services Corporation, City and County of 2015 @ 100 S.F.
Denver, Colorado, Revenue Bonds, Series
1994, (MBIA Insured), 5.00% Due 12/1/2023#
250,000 Board of Trustees of the State Colleges in AAA 2004 @ 101 245,623
Colorado, Western State College of Colorado 2010 @ 100 S.F.
Project, Series 1994C, (MBIA Insured),
5.625% Due 5/15/2015#
250,000 El Paso County School District No. 12 AAA 2005 @ 100 247,499
Cheyenne Mountain, El Paso County, 247,499
Colorado, General Obligation Improvement 247,499
Bonds, Series 1995, (AMBAC Insured), 5.65% 247,499
_____ Due 9/15/2015# ________
$3,000,000 $2,876,870
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Schedules of Investments" on page .
OREGON INSURED SERIES 3
GENERAL. The Oregon Trust consists of issues of seven Bonds. Four of the
Bonds in the Oregon Trust are general obligations (62.3%) of the governmental
entities issuing them and are backed by the taxing power thereof. The remaining
issues are payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. These issues are divided by
purpose of issues (and percentage of principal amount to total Oregon Trust) as
follows: 12.6% Healthcare Revenue Bonds; 12.6% Water and Sewer Revenue Bonds;
and 12.5% Lease Revenue Bonds. No Bond has received a provisional rating. For a
general description of certain of the risks associated with the Bonds, see "Risk
Factors" below.
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.
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.
OREGON INSURED SERIES 3
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: JULY 20, 1995
<TABLE>
<CAPTION>
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited to Oregon
Principal (1) or Bonds Contracted for(1)(5) Rating(2) Redemption Feature(3) Trust(4)
<S> <C> <C> <C> <C>
$300,000 Washington County Education Service Disrict, AAA 2005 @ 100 $294,750
Washington County, Oregon, Advance
Refunding Certificates of Participation, Series
1995, (MBIA Insured), 5.75% Due 6/1/2025#
300,000 Lincoln County School District, Lincoln AAA 2009 @ 100 288,000
County, Oregon, General Obligation Bonds,
Series 1995, (FGIC Insured), 5.25% Due
6/15/2012#
400,000 Polk County School District No. 2, Dallas, AAA 2003 @ 101 388,500
Oregon, General Obligation Bonds, Series 2007 @ 100 S.F.
1993, (FSA Insured), 5.40% Due 6/1/2012#
500,000 Salem-Keizer School District No. 24J, Marion AAA 2004 @ 100 503,750
& Polk Counties, Oregon, General Obligation
Building Bonds, Series 1994, (FGIC Insured),
5.75% Due 6/1/2012#
300,000 Hospital Facility Authority of the Western AAA 2004 @ 102 297,373
Lane Hospital District, Revenue Refunding 2013 @ 100 S.F.
Bonds, Series 1994, (Sisters of St. Joseph of
Peace, Health and Hospital Services), (MBIA
Insured), 5.75% Due 8/1/2019#
300,000 City of McMinnville, Yamhill County, Oregon, AAA 2004 @ 102 276,749
Sewerage System Revenue Bonds, Series 1994 2010 @ 100 S.F.
A, (FGIC Insured), 5.00% Due 2/1/2014#
285,000 Jackson County School District No. 549C AAA 2005 @ 100 276,092
Medford, Oregon, General Obligation Bonds, 2011 @ 100 S.F.
Series 1995, (FSA Insured), 5.375% Due
_______ 06/01/2012# _______
$2,385,000 $2,325,214
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Schedules of Investments" on page .
Notes to Schedules of Investments
As of the Opening of Business on the
Initial Date of Deposit: July 20, 1995
1. All Bonds are represented by "regular way" or "when issued" contracts
for the performance of which an irrevocable letter of credit, obtained from an
unaffiliated financial institution, has been deposited with the Trustee. The
Sponsor has assigned to the Trustee all of its right, title and interest in and
to such Bonds. Contracts to acquire Bonds were entered into during the period
from May 31, 1995 to July 19, 1995. These Bonds have expected settlement dates
from July 20, 1995 to July 25, 1995 (see "The Fund").
2. All ratings are by Standard & Poor's and/or Moody's. 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.
3. There is shown under this heading the year in which each issue of the
Bonds is initially or currently callable and the call price for that year. Each
issue of the Bonds continues to be callable at declining prices thereafter (but
not below par value) except for original issue discount bonds which are
redeemable at prices based on the issue price plus the amount of original issue
discount accreted to redemption date plus, if applicable, some premium, the
amount of which will decline in subsequent years. "S.F." indicates a sinking
fund is established with respect to an issue of the Bonds. Redemption pursuant
to call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed obligations have an offering
side valuation which represents a premium over par. Certain Bonds may be subject
to redemption without premium prior to the date shown pursuant to extraordinary
optional or mandatory redemptions if certain events occur. Notwithstanding any
provisions to the contrary, certain bond issuers have in the past, and others
may in the future, attempt to redeem bonds prior to their initially scheduled
call dates and at prices which do not include any premiums. For a general
discussion of certain of these events, see "Risk Factors--Redemptions of Bonds."
To the extent that the Bonds were deposited in a Trust at a price higher than
the price at which they are redeemed, this will represent a loss of capital when
compared with the original Public Offering Price of the Units. Conversely, to
the extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Distributions will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Bonds and there will be distributed to Unitholders the
principal amount and any premium received on such redemption. The Estimated
Current Return and Estimated Long-Term Return in this event may be affected by
such redemptions. For the Federal tax effect on Unitholders of such redemptions
and resultant distributions, see "Tax Status" and "Estimated Current Return and
Estimated Long-Term Return."
4. Evaluation of Bonds is made on the basis of current offering prices for
the Bonds. The offering prices are greater than the current bid prices of the
Bonds which is the basis on which Unit value is determined for purposes of
redemption of Units (see "Public Offering--Offering Price").
5. Other information regarding the Bonds in each Trust, as of the opening
of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Annual Bid Side
Cost to Profit (Loss) Interest Income Evaluation
Trust Sponsor to Sponsor to Trust of Bonds
<S> <C> <C> <C> <C>
Colorado Insured Series 4 $2,909,633 ($32,763) $165,813 $2,859,103
Oregon Insured Series 3 2,315,107 10,107 130,919 2,311,367
</TABLE>
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in the portfolios. On the opening of business on
the Initial Date of Deposit, the offering side evaluation of the Bonds in each
Trust was higher than the bid side evaluation of such Bonds by 0.621% and 0.599%
for the Colorado and Oregon Trusts, respectively. All contracts are expected to
be settled by the First Settlement Date for the purchase of Units.
"#" indicates that such Bond was issued at either an original issue discount or
purchased at a market discount. The tax effect of Bonds issued at an original
issue discount or purchased at a market discount is described in "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 1995. 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 $114,700. 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>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23.35 $ 0- 39.00 19.3% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67% 9.29%
23.35- 56.55 39.00- 94.25 31.6 6.58 7.31 8.04 8.77 9.50 10.23 10.96
56.55-117.95 94.25- 143.60 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
117.95-256.50 143.60-256.50 39.2 7.40 8.22 9.05 9.87 10.69 11.51 12.34
Over 256.50 Over 256.50 42.6 7.84 8.71 9.58 10.45 11.32 12.20 13.07
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- 23.35 $ 0- 39.00 22.7% 5.82% 6.47% 7.12% 7.76% 8.41% 9.06% 9.70%
23.35- 56.55 39.00- 94.25 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
56.55-117.95 94.25-143.60 37.2 7.17 7.96 8.76 9.55 10.35 11.15 11.94
117.95-256.50 143.60-256.50 41.8 7.73 8.59 9.45 10.35 11.17 12.03 12.89
Over 256.50 Over 256.50 45.0 8.18 9.09 10.00 10.91 11.82 12.73 13.64
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Sponsor, Trustee and the Unitholders of Voyageur Tax-Exempt Trust,
Series 4:
We have audited the accompanying statements of net assets, including the
schedules of investments, of Voyageur Tax-Exempt Trust, Series 4 (Colorado
Insured Series 4 and Oregon Insured Series 3) as of July 20, 1995. The
statements of net assets are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase securities
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
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 Tax-Exempt Trust,
Series 4 (Colorado Insured Series 4 and Oregon Insured Series 3) as of July 20,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 20, 1995
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
STATEMENTS OF NET ASSETS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: JULY 20, 1995
<TABLE>
<CAPTION>
Colorado Oregon
Insured Insured
Series 4 Series 3
<S> <C> <C>
Contracts to purchase securities(1)(2) $2,876,870 $2,325,214
Accrued interest on underlying securities(1)(3) 25,584 29,075
Organizational costs (4) 13,171 10,699
Total Assets $2,915,625 $2,364,988
Less: distributions payable(3) 25,584 29,075
Less: accrued organizational costs(4) 13,171 10,699
Net Assets $2,876,870 $2,325,214
Net Assets Represented By:
Interest of Unitholders--
Units of fractional undivided interest outstanding:
(302,510 and 244,502 Units, respectively)
Cost to investors(5) $3,025,100 $2,445,020
Less: Gross underwriting commission(5) 148,230 119,806
Net Assets(5) $2,876,870 $2,325,214
</TABLE>
(1) The aggregate value of the Bonds listed under "Schedule of Investments" for
each Trust herein and their cost to such Trust are the same. The value of
the Bonds is determined by Securities Pricing Service, a division of George
K. Baum & Company on the bases set forth under "Public Offering--Offering
Price." The contracts to purchase Bonds are collateralized by an
irrevocable letter of credit which has been deposited with the Trustee in
and for the following amounts:
<TABLE>
<CAPTION>
Principal Offering
Amount of Price of Accrued Interest
Amount of Bonds Under Bonds Under to Expected
Letter of Credit Contracts Contracts Delivery Dates
<S> <C> <C> <C> <C>
Colorado Insured Series 4 $2,902,454 $3,000,000 $2,876,870 $25,584
Oregon Insured Series 3 2,354,289 2,385,000 2,325,214 29,075
</TABLE>
(2) Insurance coverage providing for the timely payment of principal and
interest on the Bonds in the portfolio of each Trust has been obtained by
the issuer of the Bond, the underwriter of such Bond, the Sponsor or
others. See "Schedule of Investments."
(3) The Trustee will advance the amount of accrued interest as of July 25, 1995
(the "First Settlement Date"), and all accrued interest to the First
Settlement Date will be distributed to the Sponsor as the Unitholder of
record as of the First Settlement Date.
(4) Deferred organizational costs will be amortized on a straight-line basis
over five years commencing on the Initial Date of Deposit.
(5) The aggregate public offering price (exclusive of interest) and the
aggregate sales charge are computed on the bases set forth under "Public
Offering--Offering Price" and "Public Offering--Sponsor and Underwriter
Compensation" and assume all single transactions involve less than 10,000
Units. For single transactions involving 10,000 or more Units, the sales
charge is reduced (see "Public Offering--General") resulting in an equal
reduction in both the Cost to investors and the Gross underwriting
commission while the Net Assets remains unchanged.
RISK FACTORS
GENERAL. 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.
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" 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. See "The Trusts--General" for each Trust.
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. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be health care revenue
bonds. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such an
investment may entail. Ratings of bonds issued for health care facilities are
often based on feasibility studies that contain projections of occupancy levels,
revenues and expenses. A facility's gross receipts and net income available for
debt service may be affected by future events and conditions including, among
other things, demand for services and the ability of the facility to provide the
services required, physicians' confidence in the facility, management
capabilities, competition with other health care facilities, efforts by insurers
and governmental agencies to limit rates, legislation establishing state
rate-setting agencies, expenses, the cost and possible unavailability of
malpractice insurance, the funding of Medicare, Medicaid and other similar third
party payor programs, government regulation and the termination or restriction
of governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third party payor programs. 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. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of public
utility issuers, including those selling wholesale and retail electric power and
gas. In view of this an investment in such a Trust should be made with an
understanding of the characteristics of such issuers and the risks which such an
investment may entail. General problems of such issuers would include the
difficulty in financing large construction programs in an inflationary period,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital market in absorbing
utility debt, the difficulty in obtaining fuel at reasonable prices and the
effect of energy conservation. All of such issuers have been experiencing
certain of these problems in varying degrees. In addition, Federal, state and
municipal governmental authorities may from time to time review existing, and
impose additional, regulations governing the licensing, construction and
operation of nuclear power plants, which may adversely affect the ability of the
issuers of certain of the Bonds in the portfolio to make payments of principal
and/or interest on such Bonds. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
whose revenues are derived from the sale of water and/or sewerage services. In
view of this an investment in such a Trust should be made with an understanding
of the characteristics of such issuers and the risks which such an investment
may entail. Such Bonds are generally payable from user fees. The problems of
such issuers include the ability to obtain timely and adequate rate increases,
population decline resulting in decreased user fees, the difficulty of financing
large construction programs, the limitations on operations and increased costs
and delays attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh water, the effect
of conservation programs and the impact of "no growth" zoning ordinances. All of
such issuers have been experiencing certain of these problems in varying
degrees. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be industrial revenue
bonds ("IRBs"). In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks which
such an investment may entail. IRBs have generally been issued under bond
resolutions pursuant to which the revenues and receipts payable under the
arrangements with the operator of a particular project have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the IRBs. Regardless of the structure, payment
of IRBs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor. Corporate operators or guarantors may be
affected by many factors which may have an adverse impact on the credit quality
of the particular company or industry. These include cyclicality of revenues and
earnings, regulatory and environmental restrictions, litigation resulting from
accidents or environmentally-caused illnesses, extensive competition and
financial deterioration resulting from a corporate restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may result in the
operator of a project becoming highly leveraged which may impact on such
operator's creditworthiness which in turn would have an adverse impact on the
rating and/or market value of such Bonds. Further, the possibility of such a
restructuring may have an adverse impact on the market for and consequently the
value of such Bonds, even though no actual takeover or other action is ever
contemplated or effected. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations that are
secured by lease payments of a governmental entity (hereinafter called "lease
obligations"). Lease obligations are often in the form of certificates of
participation. In view of this an investment in such a Trust should be made with
an understanding of the characteristics of such issuers and the risks which such
an investment may entail. Although the lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to appropriate for and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease
payments in future years unless money is appropriated for such purpose on a
yearly basis. A governmental entity that enters into such a lease agreement
cannot obligate future governments to appropriate for and make lease payments
but covenants to take such action as is necessary to include any lease payments
due in its budgets and to make the appropriations therefor. A governmental
entity's failure to appropriate for and to make payments under its lease
obligation could result in insufficient funds available for payment of the
obligations secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations of issuers
which are, or which govern the operation of, schools, colleges and universities
and whose revenues are derived mainly from ad valorem taxes or, for higher
education systems, from tuition, dormitory revenues, grants and endowments. In
view of this an investment in such a Trust should be made with an understanding
of the characteristics of such issuers and the risks which such an investment
may entail. General problems relating to school bonds include litigation
contesting the state constitutionality of financing public education in part
from ad valorem taxes, thereby creating a disparity in educational funds
available to schools in wealthy areas and schools in poor areas. Litigation or
legislation on this issue may affect the sources of funds available for the
payment of school bonds in the Trusts. General problems relating to college and
university obligations include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to raise
tuitions and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state funding, and
government legislation or regulations which may adversely affect the revenues or
costs of such issuers. All of such issuers have been experiencing certain of
these problems in varying degrees. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. In view of this an investment in such a Trust should be made
with an understanding of the characteristics of such issuers and the risks which
such an investment may entail. The major portion of an airport's gross operating
income is generally derived from fees received from signatory airlines pursuant
to use agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees. Airport operating income may therefore
be affected by the ability of the airlines to meet their obligations under the
use agreements. The air transport industry is experiencing significant
variations in earnings and traffic, due to increased competition, excess
capacity, increased costs, deregulation, traffic constraints and other factors,
and several airlines are experiencing severe financial difficulties. The Sponsor
cannot predict what effect these industry conditions may have on airport
revenues which are dependent for payment on the financial condition of the
airlines and their usage of the particular airport facility. Similarly, payment
on Bonds related to other facilities is dependent on revenues from the projects,
such as user fees from ports, tolls on turnpikes and bridges and rents from
buildings. Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased use of facility,
lower cost of alternative modes of transportation, scarcity of fuel and
reduction or loss of rents. See "The Trusts--General" for each Trust.
Certain of the Bonds in certain of the Trusts may be obligations which are
payable from and secured by revenues derived from the operation of resource
recovery facilities. In view of this an investment in such a Trust should be
made with an understanding of the characteristics of such issuers and the risks
which such an investment may entail. Resource recovery facilities are designed
to process solid waste, generate steam and convert steam to electricity.
Resource recovery bonds may be subject to extraordinary optional redemption at
par upon the occurrence of certain circumstances, including but not limited to:
destruction or condemnation of a project; contracts relating to a project
becoming void, unenforceable or impossible to perform; changes in the economic
availability of raw materials, operating supplies or facilities necessary for
the operation of a project or technological or other unavoidable changes
adversely affecting the operation of a project; administrative or judicial
actions which render contracts relating to the projects void, unenforceable or
impossible to perform; or impose unreasonable burdens or excessive liabilities.
The Sponsor cannot predict the causes or likelihood of the redemption of
resource recovery bonds in a Trust prior to the stated maturity of the Bonds.
See "The Trusts--General" for each Trust.
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. Based upon each Trust's investment in a portfolio of long-term
bonds, Insured Colorado Series 4 and Insured Oregon Series 3 have been given a
duration of 12.29 and 10.65, respectively. These figures represent the
percentage by which each Trust's Unit value is estimated to change with a 1%
change in interest rates. For example, the Unit value of Insured Colorado Series
4 would be expected to decline approximately 12.29% for every 1% increase in
interests rates, and would be expected to increase by approximately the same
percentage assuming a decrease in interest rates.
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 "The Trusts--Schedule of Investments" for each Trust
and footnote (3) in "The Trusts--Notes to Schedules of Investments."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Current Returns and the Estimated Long-Term Returns were those indicated in the
"Summary of Essential Financial Information." The Estimated Current Returns are
calculated by dividing the estimated net annual interest income per Unit by the
Public Offering Price. The estimated net annual interest income per Unit will
vary with changes in fees and expenses of the Trustee, Sponsor and Evaluator and
with the principal prepayment, redemption, maturity, exchange or sale of Bonds
while the Public Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the present
Estimated Current Returns will be realized in the future. Estimated Long-Term
Returns are calculated using a formula which (i) takes into consideration, and
determines and factors in the relative weightings of, the market values, yields
(which takes into account the amortization of premiums and the accretion of
discounts) and estimated retirements of all the Bonds in a Trust and (ii) takes
into account 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.
In order to acquire certain of the Bonds contracted for by the Sponsor for
deposit in each Trust, it may be necessary for the Sponsor or Trustee to pay on
the settlement dates for delivery of such Bonds amounts covering accrued
interest on such Bonds which exceed (i) the amounts paid by Unitholders and (ii)
the amounts which will be made available through cash furnished by the Sponsor
on the Initial Date of Deposit, which amount of cash may exceed the interest
which would accrue to the First Settlement Date. The Trustee has agreed to pay
for any amounts necessary to cover any such excess and will be reimbursed
therefor, without interest, when funds become available from interest payments
on the particular Bonds with respect to which such payments may have been made.
Also, since interest on any "when, as and if issued" Bonds does not begin
accruing as tax-exempt interest income to the benefit of Unitholders until their
respective dates of delivery, the Trustee may, in order to maintain (or in some
cases approach) for the Unitholders the same estimated net annual interest
incomes during the first year of the Trusts' operations as is indicated under
"Summary of Essential Financial Information," reduce its fee (and to the extent
necessary pay Trust expenses) in an amount equal to that indicated under
"Summary of Essential Financial Information."
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 $.30 and $.25 per 100 Units on an
annual basis for sponsor and evaluation fees, respectively. Such fees, if any,
are as set forth under "Summary of Essential Financial Information." 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 Series
1 and subsequent series of Voyageur Tax-Exempt Trust 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." 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. Expenses incurred in establishing the Trusts,
including the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and state
registration fees, the initial fees and expenses of the Trustee, legal and
accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by each Trust and amortized over a five year period. The
following additional charges are or may be incurred by the Trusts: (i) fees of
the Trustee for extraordinary services, (ii) expenses of the Trustee (including
legal and auditing expenses) and of counsel designated by the Sponsor, (iii)
various governmental charges, (iv) expenses and costs of any action taken by the
Trustee to protect 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. During the initial
offering period the Public Offering Price is based on the offering prices of the
Bonds in each Trust and includes a sales charge of 4.9% of the Public Offering
Price (5.152% of the aggregate offering price of the Bonds) plus any accrued
interest. In the secondary market the Public Offering Price is based on the bid
prices of the Bonds in 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. However, the sales charge applicable to quantity purchases is,
during the initial offering period, reduced by a discount on a graduated basis
to any person acquiring 10,000 or more Units as follows:
Aggregate Number of Units Purchased Percent of Offering Price
10,000 - 24,999 Units.................. 0.30%
25,000 - 49,999 Units.................. 0.50%
50,000 - 99,000 Units.................. 0.90%
100,000 or more Units.................. 1.40%
Any such reduced sales charge, including pursuant to a Letter of Intent
described below, shall be the responsibility of the selling Underwriter, broker,
dealer or agent. The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any one Underwriter
or dealer. Units purchased in the name of the spouse of a purchaser or in the
name of a child of such purchaser under 21 years of age will be deemed for the
purposes of calculating the applicable sales charge to be additional purchases
by the purchaser. The reduced sales charges will also be applicable to a trustee
or other fiduciary purchasing securities for one or more trust estate or
fiduciary accounts. In addition, a purchaser desiring to purchase during a 12
month period $1,000,000 or more of Units in any series of Voyageur Tax-Exempt
Trust may qualify for a reduced sales charge by signing a nonbinding Letter of
Intent. After signing a Letter of Intent, at the date total purchases, less
redemptions, of units of series of Voyageur Tax-Exempt Trust by a purchaser
(including units purchased in the name of the spouse of a purchaser or in the
name of a child of such purchaser under 21 years of age) aggregate $1,000,000,
the selling Underwriter or dealer will make a retroactive reduction of the sales
charge on such Units in the amount of $.10 per Unit (reduced by any previous
discount received on the Units). If a purchaser does not complete the required
purchases under the Letter of Intent within the 12 month period, no such
retroactive sales charge reduction shall be made. To qualify as a purchase under
a Letter of Intent each purchase of units of a series of Voyageur Tax-Exempt
Trust must be equal to or exceed $100,000.
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, with respect to sales
settling subsequent to the First Settlement Date, the Public Offering Price of
Units will have added to it the proportionate share of accrued interest to the
date of settlement. Unitholders will receive on the next distribution date of
the respective Trust the amount, if any, of accrued interest paid on their
Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of Units to
the public, the Trustee will advance the amount of accrued interest as of the
First Settlement Date and the same will be distributed to the Sponsor as the
Unitholder of record as of the First Settlement Date. Consequently, the amount
of accrued interest to be added to the Public Offering Price of Units will
include only accrued interest from the First Settlement Date to the date of
settlement, less any distributions from the Interest Account subsequent to the
First Settlement Date. See "Rights of Unitholders--Distributions of Interest and
Principal."
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of interest
actually received by 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 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 Initial Date of Deposit was determined by adding to the determination of the
aggregate offering price of the Bonds an amount equal to 5.152% of such value
and dividing the sum so obtained by the number of Units outstanding. This
computation produced a gross underwriting profit equal to 4.9% of the Public
Offering Price. Such price determination as of the opening of business on the
Initial Date of Deposit was made on the basis of an evaluation of the Bonds in
each Trust prepared by Securities Pricing Service, a division of George K. Baum
& Company, a firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities. Except on the Initial Date of Deposit, during
the initial offering period, the Evaluator will appraise or cause to be
appraised daily the value of the underlying Bonds as of 4:00 P.M. Eastern time
on days the New York Stock Exchange is open and will adjust the Public Offering
Price of the Units commensurate with such appraisal. Such Public Offering Price
will be effective for all orders received at or prior to 4:00 P.M. Eastern time
on each such day. Orders received by the Trustee, Sponsor, Distributor or any
Underwriter or dealer for purchases, sales or redemptions after that time, or on
a day when the New York Stock Exchange is closed, will be held until the next
determination of price. For secondary market sales the Public Offering Price per
Unit will be equal to the aggregate bid price of the Bonds in a Trust plus the
secondary market sales charge. For secondary market purposes such appraisal and
adjustment will be made by the Evaluator as of 4:00 P.M. Eastern time on days on
which the New York Stock Exchange is open for each day on which any Unit of a
Trust is tendered for redemption, and it shall determine the aggregate value of
such Trust as of 4:00 P.M. Eastern time on such other days as may be necessary.
The aggregate price of the Bonds in each Trust has been and will be
determined on the basis of bid prices or offering prices, as appropriate, (i) on
the basis of current market prices for the Bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held by the Trust;
(ii) if such prices are not available for any particular Bonds, on the basis of
current market prices for comparable bonds; (iii) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (iv) by any combination of the above.
The initial or primary Public Offering Price of the Units and the Sponsor's
initial repurchase price per Unit are based on the offering price per Unit of
the underlying Bonds plus the applicable sales charge plus interest accrued but
unpaid from the First Settlement Date to the date of settlement. The secondary
market Public Offering Price and the Redemption Price per Unit are based on the
bid price per Unit of the Bonds in 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 bid price of such Bonds. On the Initial Date
of Deposit, the offering side evaluation of the Bonds in each Trust were higher
than the bid side evaluation of such Bonds by the amount indicated under
footnote (5) in "The Trusts--Notes to Schedules of Investments."
Although payment is normally made three business days following the order
for purchase, payment may be made prior thereto. However, delivery of
certificates, if any are requested in writing, representing Units so ordered
will be made as soon as possible following such order or shortly thereafter. A
person will become the owner of Units on the date of settlement provided payment
has been received. Cash, if any, made available to the Sponsor prior to the date
of settlement for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the limitations of
the Securities Exchange Act of 1934.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering Price, plus accrued interest computed as
described above. Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this prospectus at the
secondary Public Offering Price in the manner described.
The Sponsor intends to qualify the Units for sale in the state for which
such Trust is named. Broker-dealers or others will be allowed a concession or
agency commission in connection with the distribution of Units during the
initial offering period equal to $.33 per Unit and in the secondary market equal
to 4.0% of the Public Offering Price per Unit. Broker-dealers or others will be
allowed an additional concession or agency commission in connection with the
sale of Units on the Initial Date of Deposit of 2.00% per Unit. In addition, any
dealer who sells at least the lesser of 100,000 Units or $1,000,000 worth of
Units between the Initial Date of Deposit and the First Settlement Date will be
entitled to a concession or agency commission equal to $.40 per Unit on all
Units sold during such period. It is anticipated that one or more Underwriters
will qualify for this additional concession. Certain commercial banks are making
Units of the Fund available to their customers on an agency basis. A portion of
the sales charge (equal to the agency commission referred to above) is retained
by or remitted to the banks. Under the Glass-Steagall Act, banks are prohibited
from underwriting Units of the Fund; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have not indicated that
these particular agency transactions are not permitted under such Act. In
addition, state securities laws on this issue may differ from the
interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
Notwithstanding the concessions referred to above, in connection with any
quantity purchases, a broker/dealer or bank will receive the following
concessions for purchases made from the Sponsor, pursuant to the sales charge
reduction schedule for quantity purchases set forth above, resulting in total
concessions as contained in the following table:
Total Concession per Unit
(as a Percentage of the
Aggregate Number of Units Purchased Public Offering Price)
10,000 - 24,999 Units................... 3.2%
25,000 - 49,999 Units................... 3.2%
50,000 - 99,000 Units................... 2.9%
100,000 or more Units................... 2.5%
The Sponsor and the Distributor each reserves the right to reject, in whole
or in part, any order for the purchase of Units and to change the amount of the
concession or agency commission to dealers and others from time to time. See
"Underwriting." To facilitate the handling of transactions, sales of Units shall
normally be limited to transactions involving a minimum of $1,000.
SPONSOR AND UNDERWRITER COMPENSATION. The gross sales commission through
the initial or primary distribution of Units will equal 4.9% of the Public
Offering Price of the Units (5.152% of the net amount invested), less any
reduced sales charge for quantity purchases as described under "General" above.
Underwriters will acquire Units from the Sponsor based on the amount of Units
underwritten. The concessions from the Public Offering Price will be as set
forth in the following table:
<TABLE>
<CAPTION>
10,000 - 24,999 25,000 - 49,999 50,000 - 99,999 100,000 or more
Units Underwritten Units Underwritten Units Underwritten Units Underwritten
<S> <C> <C> <C>
3.5% 3.6% 3.7% 4.0%
</TABLE>
In addition, the Sponsor will realize a profit or will sustain a loss, as
the case may be, as a result of the difference between the price paid for the
Bonds by the Sponsor and the cost of such Bonds to a Trust (which is based on
the determination of the aggregate offering price of the Bonds in such Trust on
the Initial Date of Deposit as prepared by Securities Pricing Service, a
division of George K. Baum & Company). See "Underwriting" and "The
Trusts--Schedules of Investments." Affiliates of the Sponsor and the
Underwriters may also realize profits or sustain losses with respect to Bonds
deposited in a Trust which were acquired by the Sponsor from underwriting
syndicates of which such parties were members. An affiliate of the Sponsor
participated as sole underwriter or as manager or as a member of any
underwriting syndicate from which 9.3% of the Bonds in the portfolios of the
Trusts were acquired. The Underwriters may further realize additional profit or
loss during the initial offering period as a result of the possible fluctuations
in the market value of the Bonds in a Trust after the Initial Date of Deposit,
since all proceeds received from purchasers of Units (excluding dealer
concessions or agency commissions allowed, if any) will be retained by the
Underwriters.
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.
PUBLIC MARKET. During the initial public offering period, the Distributor
and/or certain of the other Underwriters intend to offer to purchase Units at a
price based on the aggregate offering price per Unit of the Bonds in each Trust
plus accrued interest to the date of settlement. Afterward, 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 after deduction of amounts
sufficient to reimburse the Trustee for any amounts advanced and paid to the
Sponsor as the Unitholder of record as of the First Settlement Date (see "Public
Offering--Offering Price") will be distributed on or shortly after the fifteenth
day of each month on a pro rata basis to Unitholders of record as of the
preceding record date (which will be the first day of the month). All
distributions will be net of applicable expenses. The pro rata share of cash in
the Principal Account will be computed as of the applicable record date, and
distributions to the Unitholders as of such record date will be made on or
shortly after the fifteenth day of such month. Proceeds received from the
disposition of any of the Bonds after such record date and prior to the
following distribution date will be held in the Principal Account and not
distributed until the next distribution date. The Trustee is not required to pay
interest on funds held in the Principal or Interest Accounts (but may itself
earn interest thereon and therefore benefits from the use of such funds) nor to
make a distribution from the Principal Account unless the amount available for
distribution shall equal at least $1.00 per Unit.
The distribution to the Unitholders as of each record date after the First
Settlement Date will be made on the following distribution date or shortly
thereafter and shall consist of an amount substantially equal to 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 419430, 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, while the initial and primary Public Offering Price of Units will be
determined on the basis of the offering price of the Bonds, as of 4:00 P.M.
Eastern time on days of trading on the New York Stock Exchange on the date any
such determination is made. On the Initial Date of Deposit, the Public Offering
Price per Unit (which is based on the offering prices of the Bonds and includes
the sales charge) exceeded the value at which Units could have been redeemed
(based upon the current bid prices of the Bonds in such Trust) by the amount
shown under "Summary of Essential Financial Information." While the Trustee has
the power to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which determines
the price per Unit on a daily basis. The Redemption Price per Unit is the pro
rata share of each Unit in 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 Dawkins, 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 Dawkins and its
subsidiaries.
Mr. Dougherty co-founded the predecessor of Dougherty Dawkins in 1977 and
has served as Dougherty Dawkins' Chairman of the Board and Chief Executive
Officer since inception. Pohlad Companies is a holding company owned in equal
parts by each of James O. Pohlad, Robert C. Pohlad and William M. Pohlad. As of
December 31, 1994, Voyageur Fund Managers, Inc. served as the manager to six
closed-end and ten open-end investment companies (comprising 24 separate
investment portfolios), administered numerous private accounts and managed
approximately $7.4 billion in assets. The principal business address 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,
1994, the total stockholders' equity of Voyageur Fund Managers, Inc. was
$5,675,766 (unaudited). (This paragraph relates only to the Sponsor and not to
the 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, for both the initial offering period
and secondary market transactions, 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. 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.
UNDERWRITING
The Underwriters named below have severally purchased Units in the
following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
Colorado Oregon
Insured Insured
Name Address Series 4 Series 3
<S> <C> <C> <C>
Voyageur Fund 90 South Seventh Street 292,510 234,502
Distributors, Inc. Minneapolis, MN 55402
Edward D. Jones & Co. 12555 Manchester Road 10,000 10,000
St. Louis, MO 63131
Totals 302,510 244,502
</TABLE>
Units may also be sold to broker-dealers and others at prices representing
the per Unit concession or agency commission stated under "Public Offering--Unit
Distribution." However, resales of Units by such broker-dealers and others to
the public will be made at the Public Offering Price described in the
Prospectus. The Sponsor and the Distributor each reserves the right to reject,
in whole or in part, any order for the purchase of Units and the right to change
the amount of the concession or agency commission from time to time.
At various times the Sponsor may implement programs under which the sales
forces of 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.
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 statements of net assets and the related
schedules of investments as of the opening of business on the Initial Date of
Deposit included in this Prospectus have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent auditors, appearing elsewhere
herein and upon the authority of said firm as experts in accounting and
auditing.
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
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION ........ 3
THE FUND .......................................... 5
INVESTMENT OBJECTIVES AND PORTFOLIO SELECTION ..... 7
THE TRUSTS......................................... 8
EQUIVALENT TAXABLE ESTIMATED CURRENT RETURNS ...... 21
INDEPENDENT AUDITORS' REPORT....................... 22
STATEMENTS OF NET ASSETS........................... 23
RISK FACTORS....................................... 24
ESTIMATED CURRENT RETURN AND ESTIMATED
LONG-TERM RETURN ................................. 30
TRUST OPERATING EXPENSES........................... 31
INSURANCE ON THE BONDS............................. 33
TAX STATUS......................................... 34
PUBLIC OFFERING.................................... 37
RIGHTS OF UNITHOLDERS.............................. 42
TRUST ADMINISTRATION............................... 47
UNDERWRITING....................................... 51
OTHER MATTERS...................................... 52
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
July 20, 1995
VOYAGEUR TAX-EXEMPT TRUST,
SERIES 4
COLORADO INSURED SERIES 4
OREGON SERIES 3
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers
and documents:
The facing sheet of Form S-6
The Cross-Reference Sheet
The Prospectus
The signatures
The following exhibits:
<TABLE>
<C> <C>
1.1 Form of Trust Indenture and Agreement for Voyageur Tax-Exempt
Trust, Series 4.
3.1 Opinion of counsel to the Sponsor as to legality of the securities
being registered including a consent to the use of its name under
the headings "Tax Status" and "Legal Opinions" in the Prospectus
and opinion of counsel as to Federal income tax status of the
securities being registered and certain state tax matters.
4.1 Consent of George K. Baum & Company.
4.2 Consent of KPMG Peat Marwick LLP.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Voyageur Tax-Exempt Trust, Series 4, has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis and State of
Minnesota on the 20th day of July, 1995.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
(Registrant)
By: Voyageur Fund Managers, Inc.
(Depositor)
By: Kenneth R. Larsen
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on by the following person in the
capacity indicated and on July 20, 1995.
SIGNATURE TITLE
JOHN G. TAFT
John G. Taft Chief Executive Officer and Director
KENNETH R. LARSEN
Kenneth R. Larsen Chief Financial Officer and Director
ANDREW M. MCCULLAGH, JR.
Andrew M. McCullagh, Jr. Director
JANE M. WYATT
Jane M. Wyatt Director
THEODORE E. JESSEN
Theodore E. Jessen Director
FRANK C. TONNEMAKER
Frank C. Tonnemaker Director
DALE L. KURTZ
Dale L. Kurtz Director
JAMES C. KING
James C. King Director
Kenneth R. Larsen
______________________
Kenneth R. Larsen
Kenneth R. Larsen signs this document pursuant to a Power of Attorney
filed with the Securities and Exchange Commission with Amendment No. 1 to the
Registration Statement on Form S-6 for Voyageur Tax-Exempt Trust, Series 1
(Registration No. 33-84086).
MEMORANDUM OF CHANGES
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
The Prospectus filed with Amendment No. 1 of the Registration Statement
on Form S-6 has been revised to reflect information regarding the deposit of
bonds on July 20, 1995, and to set forth certain statistical data based thereon.
COVER PAGE. The series number and the Trusts in the Fund have been
added. Information relating to the sales charge and the price of the
offering if the units were available for purchase at the opening of
business on the Initial Date of Deposit is set forth in the "Public
Offering Price" section.
PAGE 3. The "Summary of Essential Financial Information"
table has been completed.
PAGES 8-20. The following information for the Trusts appears
on the pages indicated:
Summary data regarding the composition of the
portfolio of the Trusts.
Information regarding special State risk factors.
The opinion of Special Counsel to the Fund for
State tax matters.
The Portfolio for the Trusts.
PAGES 8-14. Colorado Insured Series 4.
PAGES 15-20. Oregon Insured Series 3.
PAGE 20. The Notes to Schedules of Investments has been
completed.
PAGE 22. The Independent Auditors'Report has been
completed.
PAGE 23. The Statements of Net Assets have been completed.
PAGE 39. In the section "Offering Price," the differences
between the offering side evaluations and the bid
side evaluations of the Bonds in the Trusts have
been set forth.
PAGE 40. The dealer concession has been set forth in the
"Public Offering" section.
PAGE 41. The percentage of the aggregate principal
amount of the Securities in the Trusts in which
the Sponsor or affiliates of the Sponsor have
participated as underwriters or members of the
underwriting syndicate has been set forth in the
"Sponsor and Underwriter Compensation" section.
PAGE 51. The "Underwriting" section has been completed.
BACK COVER The Series numbers, the Trusts in the Fund and
the date of the Prospectus have been included.
Exhibit 1.1
VOYAGEUR TAX-EXEMPT TRUST
SERIES 4
TRUST AGREEMENT
Dated: July 20, 1995
This Trust Agreement between Voyageur Fund Managers, Inc., as
Depositor, and Investors Fiduciary Trust Company, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust for Voyageur
Tax-Exempt Trust, Series 1 and Subsequent Series, Effective January 19, 1995"
(herein called the "Standard Terms and Conditions of Trust"), and such
provisions as are set forth in full and such provisions as are incorporated by
reference constitute a single instrument. All references herein to Articles and
Sections are to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the Provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Article I listed in Schedule A hereto
have been deposited in Trust under this Trust Agreement.
(b) The fractional undivided interest in and ownership of a Trust
represented by each unit for such Trust on the Initial Date of Deposit
is the amount set forth under "Summary of Essential Financial
Information - Fractional Undivided Interest in the Trust per Unit" in
the Prospectus.
(c) For each Trust the Record Dates, Distribution Dates and the
amount of the first distribution of funds from the Interest Account
shall be the record dates, distribution dates and the amount set forth
under "Summary of Essential Financial Information" on page 3 of the
Prospectus.
(d) The term "Initial Date of Deposit" for each Trust shall mean
July 20, 1995.
(e) The First Settlement Date shall be the date set forth under
"Summary of Essential Financial Information - First Settlement Date"
in the Prospectus.
(f) For the purposes of Section 4.03, the Evaluator shall receive
for providing evaluation services to the Fund that fee set forth in
the section captioned "Summary of Essential Financial Information" in
the Prospectus.
(g) For the purposes of Section 8.01(g), the liquidation amount
for each Trust is hereby specified as the amount set forth under
"Summary of Essential Financial Information" appearing on page 3 of
the Prospectus.
(h) For the purposes of Section 8.05, the compensation for the
Trustee shall be that fee set forth in the section captioned "Summary
of Essential Financial Information" appearing on page 3 of the
Prospectus.
(i) For the purposes of Section 3.13, the Depositor shall receive
for providing supervisory services the each Trust that fee set forth
in the section captioned "Summary of Essential Financial Information"
in the Prospectus.
(j) For the purposes of Section 3.04(b), the balance of the
Principal Account must equal at least that amount specified in "Rights
of Unitholders - Distributions of Interest and Principal" in the
Prospectus.
(k) Section 10.02 of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"Section 10.02. Initial Cost. The expenses incurred in
establishing a Trust, including the cost of the initial preparation
and typesetting of the registration statement, prospectuses (including
preliminary prospectuses), the indenture, and other documents relating
to a Trust, printing of Certificates, Securities and Exchange
Commission and state blue sky registration fees, the costs of the
initial valuation of the portfolio and audit of a Trust, the initial
fees and expenses of the Trustee, and legal and other out-of-pocket
expenses related thereto, but not including the expenses incurred in
the printing of preliminary prospectuses and prospectuses, expenses
incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses shall be borne by
the Trust, provided, however, the Trust shall not bear such expenses
in excess of the amount shown in the Statements of Net Assets included
in the Prospectus, and any such excess shall be borne by the
Depositor. To the extent the funds in the Interest and Principal
Accounts of the Trust shall be insufficient to pay the expenses borne
by the Trust specified in this Section 10.02, the Trustee shall
advance out of its own funds and cause to be deposited and credited to
the Interest Account such amount as may be required to permit payment
of such expenses. The Trustee shall be reimbursed for such advance in
the manner provided in Section 3.04, and the provisions of Section
8.05 with respect to the reimbursement of disbursements for Trust
expenses, including, without limitation, the lien in favor of the
Trustee therefore, shall apply to the payment of expenses made
pursuant to this Section. For purposes of calculation of distributions
under Section 3.04 and the addition provided in clause (4) of Section
5.01, the expenses borne by the Trust pursuant to this Section shall
be deemed to accrue at a daily rate over the time period specified for
their amortization provided in the Prospectus; provided, however, that
nothing herein shall be deemed to prevent, and the Trustee shall be
entitled to full reimbursement for any advances made pursuant to this
Section no later than the termination of the Trust.
(l) Section 5.01 of the Standard Terms and Conditions of Trust
shall be amended by deleting the word "and" appearing immediately
prior to subsection (2) of such paragraph and inserting the following
at the end of subsection (3) of such paragraph:
", and (4) amounts representing organizational expenses paid less
amounts representing accrued organizational expenses of a Trust."
IN WITNESS WHEREOF, Voyageur Fund Managers, Inc. has caused this Trust
Agreement to be executed by its Chairman, President, Chief Financial Officer or
one of its Vice Presidents and Investors Fiduciary Trust Company has caused this
Trust Agreement to be executed by one of its Trust Officers all as of the day,
month and year first above written.
Voyageur Fund Managers, Inc., Depositor
By: /s/ KENNETH R. LARSEN
Chief Financial Officer
INVESTORS FIDUCIARY TRUST COMPANY, Trustee
By: /s/ RON PUETT
Operations Officer
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
VOYAGEUR TAX-EXEMPT TRUST, SERIES 4
(Note: Incorporated herein and made a part hereof are the "Schedules of
Investments" as set forth in the Prospectus.)
July 20, 1995
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Re: Voyageur Tax-Exempt Trust, Series 4
Ladies/Gentlemen:
We have served as special counsel for Voyageur Fund Managers, Inc., as
Sponsor and Depositor (the "Depositor") of Voyageur Tax-Exempt Trust, Series 4
(the "Fund"), in connection with the preparation, execution and delivery of a
Trust Agreement dated July 20, 1995 between Voyageur Fund Managers, Inc., as
Depositor, and Investors Fiduciary Trust Company, as Trustee, pursuant to which
the Depositor has delivered to and deposited the bonds listed in Schedule A to
the Trust Agreement with the Trustee and pursuant to which the Trustee has
issued in the name of the Depositor documents representing units of fractional
undivided interest in and ownership of the Fund created under said Trust
Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the units of the
Fund have been duly authorized; and
2. The certificates evidencing the units of the Fund when duly
executed and delivered by the Depositor and the Trustee in accordance
with the aforementioned Trust Agreement, will constitute valid and
binding obligations of the Fund and the Depositor in accordance with
the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-60115) relating to the units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/cjw
July 20, 1995
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Re: Voyageur Tax-Exempt Trust, Series 4
Ladies/Gentlemen:
We have acted as special counsel for Voyageur Fund Managers, Inc.,
Depositor of Voyageur Tax-Exempt Trust, Series 4 (the "Fund"), in connection
with the issuance of units of fractional undivided interest in the Fund, under a
Trust Agreement dated July 20, 1995 (the "Indenture") between Voyageur Fund
Managers, Inc., as Depositor, and Investors Fiduciary Trust Company, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we have
deemed pertinent.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to
Trusts) of chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata
share of each asset of the respective Trust in the proportion that the
number of units of such Trust held by him bears to the total number of
units outstanding of such Trust. Under subpart E, subchapter J of
chapter 1 of the Code, income of the Trust will be treated as income of
each Unitholder in the proportion described, and an item of Trust
income will have the same character in the hands of a Unitholder as it
would have in the hands of the Trustee. Accordingly, to the extent that
the income of a Trust consists of interest and original issue discount
excludable from gross income under Section 103 of the Code, such income
will be excludable from federal gross income of the Unitholders, except
in the case of a Unitholder who is a substantial user (or a person
related to such user) of a facility financed through issuance of any
industrial development bond or certain private activity bonds held by
the Trust. In the case of such Unitholder who is a substantial user
(and no other) interest received and original issue discount with
respect to his units attributable to such industrial development bonds
or such private activity bonds is includible in his gross income. To
the extent a Trust holds bonds that are "specified private activity
bonds" within the meaning of Section 57(a)(5) of the Code, a
Unitholder's pro rata portion of the income on such Bonds will be
included as an item of tax preference in the computation of the
alternative minimum tax applicable to individuals, Trusts and
corporations. In the case of certain corporations, interest on all of
the Bonds is included in computing the alternative minimum tax pursuant
to Section 56(c) of the Code, and the environmental tax (the "Superfund
Tax").imposed by Section 59A of the Code, and the branch profits tax
imposed by section 884 of the Code with respect to U.S. branches of
foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of his units. Before adjustment, such basis would normally be
cost if the Unitholder had acquired his units by purchase, plus his
aliquot share of advances by the Trustee to a Trust to pay interest on
bonds delivered after the Unitholder's settlement date to the extent
that such interest accrued on the bonds during the period from the
Unitholder's settlement date to the date such bonds are delivered to
the respective Trust, but only to the extent that such advances are to
be repaid to the Trustee out of interest received by such Trust with
respect to such bonds. In addition, such basis will be increased by the
Unitholder's aliquot share of the accrued original issue discount with
respect to each bond held by a Trust with respect to which there was an
original issue discount at the time the bond was issued and reduced by
the annual amortization of bond premium, if any, on bonds held by such
Trust.
(iv) If the Trustee disposes of a Trust asset (whether by
sale, payment on maturity, redemption or otherwise) gain or loss is
recognized to the Unitholder and the amount thereof is measured by
comparing the Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the asset
disposed of. Such basis is ascertained by apportioning the tax basis
for his units among each of the Trust assets (as of the date on which
his units were acquired) ratably according to their values as of the
valuation date nearest the date on which he purchased such units. A
Unitholder's basis in his units and of his fractional interest in each
Trust asset must be reduced by the amount of his aliquot share of
interest received by the Trust, if any, on bonds delivered after the
Unitholder's settlement date to the extent that such interest accrued
on the bonds during the period from the Unitholder's settlement date to
the date such bonds are delivered to the Trust, must be reduced by the
annual amortization of bond premium, if any, on bonds held by the Trust
and will be increased by the Unitholder's share of the accrued original
issue discount with respect to each bond which, at the time the bond
was issued, had original issue discount.
(v) In the case of any bond held by a Trust where the "stated
redemption price at maturity" exceeds the "issue price", such excess
shall be original issue discount. With respect to each Unitholder, upon
the purchase of his Units subsequent to the original issuance of bonds
held by the Trust, Section 1272(a)(7) of the Code provides for a
reduction in the accrued "daily portion" of such original issue
discount upon the purchase of a bond subsequent to the bond's original
issue, under certain circumstances. In the case of any bond held by a
Trust the interest on which is excludable from gross income under
Section 103 of the Code, any original issue discount which accrues with
respect to the bonds will be treated as interest which is excludable
from gross income under Section 103 of the Code.
(vi) Certain bonds in the portfolios of the Trusts have been
insured by the issuers, underwriters, the Sponsor or others against
default in the prompt payment of principal and interest (the "Insured
Bonds"). Such bonds are so designated on the portfolio pages in the
Prospectus for each Trust. Insurance on Insured Bonds is effective so
long as such bonds remain outstanding. For each of these bonds, we have
been advised that the aggregate principal amount of such bonds listed
on the portfolio page was acquired by the Trust and are part of the
series of such bonds in the listed aggregate principal amount. Based
upon the assumption that the Insured Bonds of the Trust are part of a
series covered by an insurance policy, it is our opinion that any
amounts received by the Trust representing maturing interest on such
bonds will be excludable from Federal gross income if, and to the same
extent as, such interest would have been so excludable if paid in
normal course by the issuer notwithstanding that the source of the
payment is from policy proceeds 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. Paragraph (ii) of this opinion is accordingly
applicable to such payment representing maturing interest.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the bond, depending on the date the
bond was issued. In addition, special rules apply if the purchase price of a
bond exceeds the original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these rules will
also vary depending on the value of the bond on the date a Unitholder acquires
his units, and the price the Unitholder pays for his units.
Except with respect to those Trusts that hold "specified private
activity bonds" within the meaning of Section 57 (a)(5) of the Code issued on or
after August 8, 1986 as identified in the Prospectus related hereto (the "AMT
Trusts"), the Trusts do not include any specified private activity bonds and
accordingly none of the interest income of the Trusts (other than the AMT
Trusts, if any) shall be treated as an item of tax preference when computing the
alternative minimum tax. Because the AMT Trusts include "specified private
activity bonds," all or a portion of the income of the AMT Trusts shall be
treated as an item of tax preference for alternative minimum tax purposes in the
case of individuals, Trusts and corporations. In the case of corporations, for
taxable years beginning after December 31, 1986, the alternative minimum tax and
the Superfund Tax depend upon the corporation's alternative minimum taxable
income ("AMTI"), which is the corporation's taxable income with certain
adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used
in computing AMTI and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust or
REMIC) for taxable years beginning after 1989, is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all bonds in the Trusts, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers
are required to disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year
of 100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986, will be
the amount that bears the same ratio to the interest deduction otherwise
allowable (determined without regard to Section 265) to the taxpayer for the
taxable year as the taxpayer's average adjusted basis (within the meaning of
Section 1016) of tax-exempt obligations acquired after August 7, 1986, bears to
such average adjusted basis for all assets of the taxpayer, unless such
financial institution can otherwise establish, under regulations to be
prescribed by the Secretary of the Treasury, the amount of interest on
indebtedness incurred or continued to purchase or carry such obligations.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units by
taxpayers other than certain financial institutions, as referred to above, is
not deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"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 the 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 the Trust holds a Bond would be
recognized as ordinary income by the Unitholders when principal payments are
received on the Bonds, upon sale or at redemption (including early redemption),
or upon the sale or redemption of his or her units, unless a Unitholder elects
to include market discount in taxable income as it accrues.
We have also examined the income tax law of the State of Colorado,
which is based upon the Federal law, to determine its applicability to Colorado
Insured Series 4 (the "Colorado Trust") being created as part of the Fund and to
the holders of Units in the Colorado Trust who are residents of the State of
Colorado ("Colorado Unitholders"). Although we express no opinion with respect
to the issuance of the bonds, in rendering our opinion expressed herein, we have
assumed that: (i) the bonds were validly issued, (ii) 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 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. Based upon the
foregoing it is our opinion that under Colorado income tax law, as presently
enacted and construed:
a) The Colorado Trust is not an association taxable as a
corporation for purposes of Colorado income taxation.
(b) 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 him 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.
(c) Gain or loss will be recognized by a Colorado Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Unit. Before adjustment, such
basis would normally be cost if the Colorado Unitholder has acquired
his Units by purchase, plus his aliquot share of advances by the
Trustee to the Colorado Trust to pay interest on bonds delivered after
the Colorado Unitholder's settlement date to the extent that such
interest accrued on such bonds during the period from the Colorado
Unitholder's settlement date to the date such bonds are delivered to
the Colorado Trust, but only to the extent that such advances are to
be repaid to the Trustee out of interest received by such Trust with
respect to such bonds. In addition, such basis will be increased by
the Colorado Unitholder's aliquot share of the accrued original issue
discount with respect to each bond held by such Trust with respect to
which there was an original issue discount at the time such bond was
issued and reduced by the annual amortization of bond premium, if any,
on the bonds held by the Colorado Trust.
(d) If the Trustee disposes of a bond (whether by sale, payment
on maturity, redemption or otherwise) gain or loss is recognized to
the Colorado Unitholder and the amount thereof is measured by
comparing the Colorado Unitholder's aliquot share of the total
proceeds from the transaction with his basis for his fractional
interest in the bond disposed of. Such basis is ascertained by
apportioning the tax basis for his Units among each of the bonds (as
of the date on which his units were acquired) ratably according to
their values as of the valuation date nearest the date on which he
purchased such Units. A Colorado Unitholder's basis in his Units and
of his fractional interest in each bond must be reduced by the amount
of his aliquot share of interest received by the Colorado Trust, if
any, in bonds delivered after the Colorado Unitholder's settlement
date to the extent that such interest accrued on such bonds during the
period from the Colorado Unitholder's settlement date to the date such
bonds are delivered to the Colorado Trust, must be reduced by the
annual amortization of bond premium, if any, on bonds held by such
Trust and must be increased by the Colorado Unitholder's share of the
accrued original issue discount with respect to each bond which, at
the time such bond was issued, had original issue discount.
(e) 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 will also be
nondeductible for Colorado income tax purposes.
(f) So long as the Colorado Trust holds obligations issued, on or
after May 1, 1980, by the State of Colorado or its political
subdivisions (the "Colorado Bonds"), then to the extent the interest
on the Colorado Bonds is excludable from Federal gross income of a
Colorado Unitholder pursuant to Section 103 of the Code, such interest
will be excludable from Colorado adjusted gross income of such
Unitholder.
(g) Any amounts paid under an insurance policy issued to the
Colorado Trust which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Colorado
adjusted gross income if, and to the same extent as, such interest is
been so excludable for federal income tax purposes. Paragraph (f) of
this opinion is accordingly applicable to insurance proceeds
representing maturing interest.
(h) Certain of the Colorado Bonds in the Colorado Trust have been
insured by the issuers thereof against default in the prompt payment
of principal and interest. Based upon the exemptions and assumptions
referred to above, it is our opinion that any amounts received by the
Colorado Trust representing maturing interest on such bonds will be
excludable from Colorado adjusted gross income if, and to the same
extent as, such interest is so excludable for federal income tax
purposes. Paragraph (f) of this opinion is accordingly applicable to
such payment.
We have not examined any of the Colorado Bonds to be deposited and held
in the Colorado Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no opinion
as to the exemption from State income taxes of interest on the Colorado Bonds if
received directly by a Unitholder. No opinion is expressed regarding the
Colorado taxation of foreign or domestic insurance companies.
We have also examined certain laws of the State of Oregon, to determine
their applicability to Oregon Insured Series 3 (the "Oregon Trust") being
created as part of the Fund and to the holders of Units in the Oregon Trust who
are residents of the State of Oregon ("Oregon Unitholder"). 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 ("Oregon Bonds") or by the Commonwealth of Puerto
Rico, Guam and the United States Virgin Islands (the "Possession Bonds")
(collectively the "Bonds"). 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) interest on the Bonds, if received directly by a Unitholder, would be
exempt from the Oregon income tax applicable to individual, ("Oregon Personal
Income Tax"). The opinion set forth below does not address the taxation of
persons other than full time residents of Oregon.
Based on the foregoing, and based on review and consideration of
existing laws of the State as of this date, it is our opinion and we herewith
advise you, as follows:
(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 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. *745, 48 U.S.C. *1423a and 48 U.S.C. *1403, such interest
will not be subject to the Oregon Personal Income Tax;
(4) 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
(5) 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.
We have 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 express no opinion as to the
exemption from the Oregon Personal Income Tax of interest on the Bonds if
received directly by a 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 Oregon 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.
We have also examined the laws of the State of Missouri to determine
their applicability to the Fund. It is our opinion that under Missouri law, as
presently enacted and construed:
(i) Each Trust is not an association taxable as a corporation for
Missouri income tax purposes.
(ii) The Unitholders of each Trust will be treated as the owners
of a pro rata portion of each Trust and the income of each Trust will
therefore be treated as income of the Unitholders under Missouri law.
(iii) Each Trust will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of each
Trust will not generally be subject to the Kansas City, Missouri
Earnings and Profits Tax or the City of St. Louis Earnings Tax (except
in the case of certain Unitholders, including corporations, otherwise
subject to the St. Louis City Earnings Tax).
Very truly yours,
CHAPMAN AND CUTLER
MJK/cjw
Exhibit 4.1
Securities Pricing Service
717 Seventeenth Street, Suite 2500
Denver, Colorado 80202
Attn: Mark Nerud
Voyageur Fund Managers, Inc.,
90 S. Seventh Street, Suite 4400
Minneapolis, MN 55402-4115
July 20, 1995
Re: Voyageur Tax-Exempt Trust, Series 4 (A Unit Investment Trust)
Registered Under the Securities Act of 1933, File No. 33-60115
Dear Sir/Madam:
We have examined the Registration Statement for the above captioned
fund, copy of which is attached hereto.
We, the Securities Pricing Service, a division of George K. Baum &
Company, hereby consent to the reference in the Prospectus and Registration
Statement as the Evaluator for the above captioned fund.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Sincerely,
T.J. Shah
Vice President, SPS
EXHIBIT 4.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm as experts under the caption
"Other Matters" and to the use of our report dated July 20, 1995 in Amendment
No. 1 to the Registration Statement (Form S-6 File No. 33-60115) and related
Prospectus of Voyageur Tax-Exempt Trust, Series 4.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
July 20, 1995
