AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1995
REGISTRATION NO. 33-62681
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 5
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:
THOMAS J. ABOOD 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
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CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C>
Title and amount of Proposed maximum Amount of
securities being registered aggregate offering registration fee
price
Voyageur Tax-Exempt Trust, An indefinite number of Indefinite $500*
Series 5 Units of Beneficial Interest
pursuant to Rule 24f-2 under
the Investment Company Act of 1940
* previously filed
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration
Statement.
/ / Check box if it is proposed that this filing will become effective on
October 19, 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 5
______________________
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C> <C>
1. (a) Name of Trust................................. } Prospectus front cover
2. (b) Title of securities issued.................... } Summary of Essential
} Information
3. Name and address of each depositor................. } Trust Administration
4. Name and address of Trustee........................ } Trust Administration
5. State of organization of Trust..................... } The Fund
6. Execution and termination of Trust agreement....... } Trust Administration
7. Changes of name.................................... } The Fund; Trust Administration
8. Fiscal year........................................ } *
9. Litigation......................................... } *
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a) Registered of bearer securities............... } Rights of Unitholders
(b) Cumulative or distributive securities. ....... } Rights of Unitsholders; The Fund
(c) Redemption.................................... } Rights of Unitholders
(d) Conversion, transfer, etc..................... } Rights of Unitholders
(e) Periodic payment plan......................... } *
(f) Voting rights................................. } Rights of Unitholders
(g) Notice of Unitholders......................... } Trust Administration
(h) Consents required............................. } Rights of Unitholders; Trust Administration
(i) Other provisions.............................. } Tax Status; Insurance on the Bonds
11. Type of securities comprising units................ } The Fund; The State Trusts
12. Certain information regarding periodic payment..... } *
certificates
13. (a) Load, fees, expenses, etc..................... } Estimated Current Return and Estimated
} Long-Term Return; Trust Operating
} Expenses
(b) Certain information regarding periodic........ } *
payment certificates }
(c) Certain percentages........................... } Summary of Essential Information;
} Public Offering; Insurance
} on 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 } 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
} 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 service
rendered to Trust................................ } *
32. Payment by depositor for certain other services
rendered to Trust................................ } *
33. Remuneration of employees of depositor
for certain services rendered to Trust........... } *
34. Remuneration of other persons for certain
services rendered to Trust....................... } *
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of Trust's securities by states....... } Public Offering
36. Suspension of sales of Trust's securities.......... } *
37. Revocation of authority to distribute.............. } *
38. (a) Method of Distribution........................ } Public Offering
(b) Underwriting Agreements....................... } Underwriting
(c) Selling Agreements............................ } Public Offering
39. (a) Organization of principal underwriters........ } Trust Administration
(b) N.A.S.D. membership of principal underwriters. } *
40. Certain fees received by principal underwriters.... } See Items 13(a) and 13(e)
41. (a) Business of principal underwriters............ } Trust Administration
(b) Branch offices of principal underwriters...... } *
(c) Salesmen of principal underwriters............ } *
42. Ownership of Trust's securities by certain persons. } *
43. Certain brokerage commissions received by
principal underwriters........................... } Public Offering
44. (a) Method of valuation........................... } Public Offering
(b) Schedule as to offering price................. } *
(c) Variation in offering price to certain persons } Public Offering
45. Suspension of redemption rights.................... } Rights of Unitholders
46. (a) Redemption valuation.......................... } Public Offering
(b) Schedule as to redemption price............... } *
47. Maintenance of position in underlying securities... } Public Offering
} Rights of Unitholders
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation of Trustee............. } Trust Administration
49. Fees and expenses of Trustee....................... } Trust Operating Expenses
50. Trustee's lien..................................... } *
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
51. Insurance of holders of Trust's securities......... } Cover Page; Trust Operating
} Expenses; Insurance on the
} Bonds
VII. POLICY OF REGISTRANT
52. (a) Provisions of Trust agreement with respect
to selection or elimination................... } The Fund; Trust Administration
(b) Transactions involving elimination of
underlying securities......................... } *
(c) Policy regarding substitution or elimination
of underlying securities...................... } The Fund; Trust Administration
(d) Fundamental policy not otherwise covered...... } *
53. Tax status of Trust................................ } Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years........... } *
55. Certain information regarding periodic payment
58. certificates..................................... } *
59. Financial statements (Instruction 1(c) to Form S-6) } *
_____________
*Inapplicable, answer negative or not required.
</TABLE>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 5
NATIONAL INSURED SERIES 1
COLORADO INSURED SERIES 5
TERRITORIAL INSURED SERIES 2
THE FUND. Voyageur Tax-Exempt Trust, Series 5 (the "Fund") consists of the
underlying separate unit investment trusts set forth above. The various trusts
are collectively referred to herein as the "Trusts." National Insured Series 1
and Territorial Insured Series 2 are collectively referred to herein as the
"Insured National Trusts" while Colorado Insured Series 5 is referred to herein
as the "Insured State Trust." 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 Insured State Trust
is, in the opinion of counsel, exempt to the extent indicated from state and
local taxes when held by residents of the state where the issuers of Bonds in
such Trust are located. Investors should consult their tax advisers to determine
the extent to which such interest income is exempt from taxation in their state
of residence. Capital gains, if any, are subject to Federal and state tax. All
Bonds in the Fund have insurance guaranteeing the payments of principal and
interest, when due, or are escrowed to maturity. All such insurance remains
effective so long as the Bonds are outstanding. IT SHOULD BE NOTED THAT THE
INSURANCE RELATES ONLY TO THE BONDS IN A TRUST AND NOT TO THE UNITS OFFERED
HEREBY OR TO THE MARKET VALUE THEREOF. As a result of such insurance or escrow,
the Bonds of each Trust are rated "AAA" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") and/or "Aaa"
by Moody's Investors Service, Inc. ("Moody's"). Both Standard & Poor's and
Moody's have indicated that their respective rating is not a recommendation to
buy, hold or sell Units nor does it take into account the extent to which
expenses of a Trust or sales by a Trust of Bonds for less than the purchase
price paid by such Trust will reduce payment to Unitholders of the interest and
principal required to be paid on such Bonds. See "Insurance on the Bonds." No
representation is made as to any insurer's ability to meet its commitments.
Certain of the Bonds in certain of the Trusts may have been acquired at prices
which resulted in such Bonds being purchased at a discount from the aggregate
par value of such Bonds. Gains based upon the difference, if any, between the
value of such Bonds at maturity, redemption or sale and their purchase price at
a discount (plus earned original issue discount) may constitute taxable ordinary
income with respect to a Unitholder who is not a dealer with respect to his
Units
INVESTMENT OBJECTIVES OF THE FUND. The objectives of the Fund are income
exempt from Federal income tax and, in the case of an Insured State Trust,
Federal and state income tax (if any) and conservation of capital through an
investment in diversified portfolios of Federal and state tax-exempt
obligations. The Fund may be an appropriate investment vehicle for investors who
desire to participate in a portfolio of tax-exempt fixed income securities with
greater diversification than they might be able to acquire individually. In
addition, securities of the type deposited in the Fund are often not available
in small amounts. There is, of course, no guarantee that the Fund will achieve
its objectives. The payment of interest and the preservation of principal are
dependent upon the continuing ability of the issuers and/or obligors of the
Bonds and of the insurers thereof to meet their respective obligations.
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 OCTOBER 19, 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."
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 5
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: OCTOBER 19, 1995
SPONSOR AND EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
National Colorado Territorial
Insured Insured Insured
Series 1 Series 5 Series 2
-------- ----------- ----------
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Principal Amount (Par Value) of Bonds (1)................... $4,000,000 $3,150,000 $3,600,000
Number of Units............................................. 413,302 324,849 373,199
Fractional Undivided Interest in the Trust per Unit......... 1/413,302 1/324,849 1/373,199
Principal Amount (Par Value) of Bonds per Unit.............. $9.678 $9.697 $9.646
Public Offering Price: Aggregate Offering Price of Bonds in
Portfolio............................................... $3,930,502 $3,089,314 $3,549,123
Aggregate Offering Price of Bonds per Unit.................. $9.51 $9.51 $9.51
Sales Charge 4.9% (5.152% of the Aggregate Offering Price
of the Bonds) per Unit(2)............................... $.49 $.49 $.49
Public Offering Price per Unit(2)(3)........................ $10.00 $10.00 $10.00
Redemption Price per Unit(3)(4)............................. $9.44 $9.44 $9.44
Sponsor's Initial Repurchase Price per Unit................. $9.51 $9.51 $9.51
Excess of Public Offering Price per Unit Over Redemption
Price per Unit.......................................... $0.56 $0.56 $0.56
Excess of Sponsor's Initial Repurchase Price per Unit Over
Redemption Price per Unit............................... $0.07 $0.07 $0.07
Minimum Value of the Trust under which Trust Agreement
may be terminated....................................... $800,000 $630,000 $720,000
Minimum Principal Distribution................$1.00 per Unit
First Settlement Date...................... October 24, 1995
Mandatory Termination Date.................December 31, 2045
Calculation of Estimated Net Annual Unit Income(5):
Estimated Annual Interest Income per Unit............... $0.54421 $0.53236 $0.52921
Less: Estimated Annual Expense per Unit................. $0.02115 $0.02388 $0.02261
-------- -------- --------
Estimated Net Annual Interest Income per Unit........... $0.52306 $0.50848 $0.50660
Estimated Normal Monthly Distribution per Unit(6)........... $0.04359 $0.04237 $0.04222
Estimated Daily Rate of Net Interest Accrual per Unit....... $0.00145 $0.00141 $0.00141
Estimated Current Return Based on Public Offering
Price(2)(6)(7).......................................... 5.23% 5.08% 5.07%
Estimated Long-Term Return(2)(6)(7)......................... 5.22% 5.06% 5.02%
Initial Distribution (November 15, 1995).................... $0.01017 $0.00989 $0.00985
Trustee's Initial Annual Fee per $1,000 Principal Amount of
Bonds(5)................................................ $2.00 $1.96 $1.88
Evaluator's Annual Fee per Unit............................. $0.00000 $0.00000 $0.00000
Sponsor's Annual Fee per Unit............................... $0.00000 $0.00000 $0.00000
Record Dates.........................First day of each month
Distribution Dates...............Fifteenth day of each month
</TABLE>
Evaluations for purpose of sale, purchase or redemption of Units are made as of
4:00 P.M. Eastern time on days of trading on the New York Stock Exchange next
following receipt of an order for a sale or purchase of Units or receipt by the
Trustee of Units tendered for redemption.
(1) Because certain of the Securities in certain Trusts may from time to time
under certain circumstances be sold or redeemed or will be called or mature
in accordance with their terms, there is no guarantee that the value of
each Unit at the respective Trusts' termination will be equal to the
Principal Amount (Par Value) of Securities per Unit stated above.
(2) The sales charge is decreased and the Estimated Current Return and
Estimated Long-Term Return are increased for transactions entitled to a
reduced sales charge. See "Public Offering--General."
(3) Anyone ordering Units for settlement after the First Settlement Date will
pay accrued interest from such date to the date of settlement (normally
three business days after order) less distributions from the Interest
Account subsequent to the First Settlement Date. For purchases settling on
the First Settlement Date, no accrued interest will be added to the Public
Offering Price. After the initial offering period, the Sponsor's Repurchase
Price per Unit will be determined as described under the caption "Public
Offering--Public Market."
(4) See "Rights of Unitholders--Redemption of Units."
(5) During the first year the Trustee will reduce its fee in National Insured
Series 1 by approximately $.00242 per Unit (which amount is the estimated
interest to be earned per Unit prior to the expected delivery dates for the
"when, as and if issued" Bonds included in such Trust). Should such
estimated interest exceed such amount, the Trustee will reduce its fee up
to its annual fee. After the first year, the Trustee's fee will be that
amount indicated above; Estimated Annual Interest Income per Unit will be
increased to $.54663; Estimated Annual Expense per Unit will be increased
to $.0235; and Estimated Net Annual Interest Income per Unit will remain
the same as shown. See "Estimated Current Return and Estimated Long-Term
Return."
(6) 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.
(7) The Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The estimated
net annual interest income per Unit will vary with changes in fees and
expenses of the Trustee, the Sponsor and the Evaluator and with the
principal prepayment, redemption, maturity, exchange or sale of Bonds while
the Public Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the present
Estimated Current Return indicated above will be realized in the future.
The Estimated Long-Term Return is calculated using a formula which (1)
takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in a Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirements of the Bonds
and the expenses of a Trust will change, there is no assurance that the
present Estimated Long-Term Return as indicated above will be realized in
the future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated Long-Term
Return reflects the estimated date and amount of principal returned while
the Estimated Current Return calculation includes only net annual interest
income and Public Offering Price.
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 three 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 an Insured
State Trust are located in the State for which such Trust is named or in United
States territories or possessions and their public authorities; consequently, in
the opinion of counsel, the related interest earned on such Bonds is exempt to
the extent indicated from state and local taxes of such State or territory. In
addition, in the case of the Insured National Trusts, interest income may also
be exempt from certain state and local taxes for residents of various states.
Illinois, Indiana, Virginia and Washington residents may only purchase Units of
National Insured Series 1 and Territorial Insured Series 2 by this Prospectus.
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
income tax and, in the case of an Insured State Trust, Federal and state income
taxation and to conserve capital through an investment in diversified portfolios
of Federal and state tax-exempt obligations. There is, of course, no guarantee
that the Trusts will achieve their objectives. The Fund may be an appropriate
investment vehicle for investors who desire to participate in a portfolio of
tax-exempt fixed income securities with greater diversification than they might
be able to acquire individually. In addition, securities of the type deposited
in the Fund are often not available in small amounts.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Trust has been obtained by the issuer of such
Bonds, by a prior owner of such Bonds or by the Sponsor prior to the deposit of
such Bonds in such Trust from one of several insurance companies (the
"Insurers"). Certain bonds may be escrowed to maturity. No representation is
made as to any Insurer's ability to meet its commitments. All Bonds insured by
an Insurer receive a "AAA" rating by Standard & Poor's and a "Aaa" rating by
Moody's. Standard & Poor's describes securities it rates "AAA" as having "the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and repay principal is extremely strong." Moody's describes
securities it rates "Aaa" as "judged to be of the best quality." They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Their safety is so absolute that
with the occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
In selecting Bonds for the Trusts the following factors, among others, were
considered by the Sponsor: (i) whether the Bonds are insured by an Insurer, (ii)
the prices of the Bonds relative to other bonds of comparable quality and
maturity and (iii) the diversification of Bonds as to purpose of issue and
location of issuer. Subsequent to 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
NATIONAL INSURED SERIES 1
GENERAL. National Insured Series 1 (the "National Trust") consists of
issues of nine Bonds issued by entities located in six states. The 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 National Trust) as follows:
37.5% Utility Revenue Bonds; 25.0% Education Revenue Bonds; 12.5% Health Care
Revenue Bonds; 12.5% Industrial Revenue Bonds and 12.5% Other Revenue Bonds. No
Bond has received a provisional rating. Three of the Bonds in the National Trust
(37.5%) are Bonds of Issuers located in the state of California. For a general
description of certain of the risks associated with the Bonds, see "Risk
Factors" below.
FEDERAL TAXATION. For a discussion of the Federal tax status of income
earned on National Trust Units, see "Tax Status."
<TABLE>
<CAPTION>
NATIONAL INSURED SERIES 1
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 19, 1995
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited Redemption to National
Principal (1) or Bonds Contracted for (1)(5) Rating (2) Feature (3) Trust (4)
- ------------- --------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
$500,000 Washington State Power Supply System, AAA 2003 @ 102 $493,125
Nuclear Project No. 1 Refunding Revenue 2014 @ 100 S.F.
Bonds, Series 1993A, (MBIA Insured),
5.70% Due 7/1/2017#
500,000 Poway Redevelopment Agency, Paguay AAA 2003 @ 102 495,625
Redevelopment Project, Subordinated Tax 2024 @ 100 S.F.
Allocation Refunding Bonds, Series 1993,
(FGIC Insured), 5.75% Due 12/15/2026#
500,000 Board of Governors of State Colleges and AAA 2005 @ 102 500,000
Universities, Western Illinois University, 2013 @ 100 S.F.
Auxiliary Facilities System Revenue
Bonds, Series 1995A, (AMBAC Insured),
5.80% Due 4/1/2020#
500,000 Woodbury County, Iowa, Health System AAA 2005 @ 102 485,625
Revenue Refunding Bonds, (St. Luke's 2013 @ 100 S.F.
Obligated Group), Series 1995A, (MBIA
Insured), 5.50% Due 9/1/2016# **
500,000 California State University, Sacramento AAA 2005 @ 102 471,876
Foundation Auxiliary Organization Bonds,
Series 1995A, (MBIA Insured), 5.375%
Due 10/1/2027# **
500,000 City of St. George, Washington County, AAA 2005 @ 101 503,750
Utah, Water Revenue Bonds, 1995 Series
A, (AMBAC Insured), 5.85% Due
6/1/2020 **
500,000 City of Burbank, California, Wastewater AAA 2005 @ 102 486,250
Treatment Revenue Bonds, 1995 Series A,
(FGIC Insured), 5.50% Due 6/1/2025# **
200,000 City of Cedar Rapids, Iowa, Pollution AAA 2003@ 102 192,000
Control Revenue Refunding Bonds, (Iowa
Electric Light and Power Company
Project), Series 1993 (MBIA Insured),
5.50% Due 11/1/2023#
300,000 Sabine River Authority of Texas, AAA 2003 @ 102 302,251
Collateralized Pollution Control Revenue
Refunding Bonds, (Texas Utilities Electric
Company Project), Series 1993 B, (MBIA
__________ Insured), 5.85% Due 5/1/2022# __________
$4,000,000 $3,930,502
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 20.
COLORADO INSURED SERIES 5
GENERAL. Colorado Insured Series 5 (the "Colorado Trust") consists of
issues of eight Bonds. One of the Bonds in the Colorado Trust is a general
obligation (7.9%) 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: 15.9% Healthcare Revenue
Bonds, 39.7% Transportation Revenue Bonds, 4.8% Housing Revenue Bonds and 31.7%
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.
<TABLE>
<CAPTION>
COLORADO INSURED SERIES 5
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 19, 1995
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited Redemption to Colorado
Principal (1) or Bonds Contracted for (1)(5) Rating (2) Feature (3) Trust (4)
- ------------- --------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
$500,000 City and County of Denver Airport AAA 2005 @ 102 $ 491,250
System Revenue Bonds, Series 1995A 2017 @ 100 S.F.
(MBIA Insured), 5.60% Due 11/15/2020#
500,000 Arapahoe County Capital Improvement AAA 2005 @ 103 526,250
Trust Fund Highway Revenue Bonds (E- 2016 @ 100 S.F.
470 Project) (MBIA Insured), 6.15% Due
8/31/2026
500,000 Summit County School District RE-1 AAA 2005 @ 100 508,750
General Obligation Improvement Bonds, 2011 @ 100 S.F.
Series 1995A (FGIC Insured), 5.70% Due
12/1/2014#
500,000 Adams County School District No. 12 AAA 2005 @ 100 507,500
Series 1995C, (MBIA Insured), 5.60%
Due 12/15/2012#
500,000 Colorado Springs Hospital Revenue and AAA 2005 @ 102 515,625
Refunding Bonds, Series 1995 (MBIA 2016 @ 100 S.F.
Insured), 6.00% Due 12/15/2024#
250,000 Commonwealth of Puerto Rico Public AAA 2005 @ 101.5 244,063
Improvement Bonds, General Obligation 2016 @ 100 S.F.
Bonds (MBIA Insured), 5.37% Due
7/1/2022#
250,000 City and County of Denver Airport AAA 2005 @ 102 248,438
System Revenue Bonds, Series 1995A 2021 @ 100 S.F.
(MBIA Insured), 5.70% Due 11/15/2025#
150,000 El Paso County Single Family Mortgage AAA 47,439
Revenue Bonds, 1984 Series A (Escrowed
__________ to Maturity) zero coupon bond Due 9/1/2015# (6) __________
$3,150,000 $3,089,314
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 20.
TERRITORIAL INSURED SERIES 2
GENERAL. Territorial Insured Series 2 (the "Territorial Trust") consists
entirely of obligations of issuers located in Territories of the United States,
such as Puerto Rico, Guam and the Northern Marianna Islands. Specifically,
Territorial Insured Series 2 consists of issues of seven Bonds all issued by
entities located in the Commonwealth of Puerto Rico. One of the Bonds in the
Territorial Trust is a general obligation (27.8%) 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 Territorial
Trust) as follows: 2.8% Health Revenue Bonds; 27.8% Transportation Revenue
Bonds; 13.8% Education Revenue Bonds and 27.8% Other 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 PUERTO RICO. The economy of Puerto Rico is closely
integrated with that of the mainland United States. During fiscal 1993
approximately 86% of Puerto Rico's exports were to the U.S. mainland, which was
also the source of approximately 69% of Puerto Rico's imports. The economy of
Puerto Rico is dominated by the manufacturing and service sectors. The
manufacturing sector has experienced a basic change over the years as a result
of increased emphasis on higher wage, high technology industries such as
pharmaceuticals, electronics, computers, microprocessors, professional and
scientific instruments, and certain high technology machinery and equipment. The
service sector, including finance, insurance and real estate, also plays a major
role in the economy. It ranks second only to manufacturing in contribution to
the gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in response
to the expansion of the manufacturing sector.
Gross Product in fiscal 1989 was $20.0 billion, and gross product in fiscal
1993 was $25.0 billion. This represents an increase in gross product of 25.2%
from fiscal 1989 to 1993. Since fiscal 1987, personal income, both aggregate and
per capita, has increased consistently each fiscal year. In fiscal 1993,
aggregate personal income was $24.1 billion and personal income per capita was
$6,760. According to the U.S. Census Bureau, the population of Puerto Rico was
approximately 3,522,000 in 1990 compared to 3,196,520 in 1980.
Puerto Rico's decade-long economic expansion continued throughout the
five-year period from fiscal 1989 through fiscal 1993. Almost every sector of
the economy was affected and record levels of employment were achieved. While
trends in the Puerto Rico economy normally follow those in the U.S., Puerto Rico
did not experience a recession as did the U.S., primarily because of low oil
prices, low interest rates, and its strong manufacturing base which has a large
component of non-cyclical industries. Other factors behind the expansion
included Commonwealth-sponsored economic development programs, the relatively
stable prices of oil imports, periodic declines in the exchange value of the
U.S. dollar and the relatively low cost of borrowing during the period.
Average unemployment increased from 14.4% in fiscal 1989 to 16.8% in fiscal
1993. According to the Labor Department's Household Employment Survey, in the
first eight months of fiscal 1994 total employment (seasonally adjusted)
increased 1.6% when compared to the same period in fiscal 1993. For the first
eight months of fiscal 1994, the unemployment rate (seasonally adjusted)
decreased from 17.3% to 15.1%.
The Gross Product forecast for fiscal 1994, made in February 1994,
shows an increase of 2.9% over fiscal 1993. Whether actual growth in the Puerto
Rico economy in fiscal 1994 and fiscal 1995 will continue depends on several
factors, including the state of the U.S. economy and the relative stability in
the price of oil imports, the exchange value of the U.S. dollar and the cost of
borrowing.
The Puerto Rican economy is affected by a number of Commonwealth and
federal investment incentive programs. For example, Section 936 of the Internal
Revenue Code (the "Code") provides for a credit against federal income taxes for
U.S. companies operating on the island if certain requirements are met. The
Omnibus Budget Reconciliation Act of 1993 imposes limits on such credit,
effective for tax years beginning after 1993. In addition, from time to time
proposals are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment can be made
at this time of the precise effect of such limitation, it is expected that the
limitation of Section 936 credits would have a negative impact on Puerto Rico's
economy.
Aid for Puerto Rico's economy has traditionally depended heavily on federal
programs, and current federal budgetary policies suggest than an expansion of
aid to Puerto Rico is unlikely. An adverse effect on the Puerto Rican economy
could result from other U.S. policies, including a reduction of tax benefits for
distilled products, further reduction in transfer payment programs such as food
stamps, curtailment of military spending and policies which could lead to a
stronger dollar.
In a plebiscite held in November, 1993, the Puerto Rican electorate chose
to continue Puerto Rico's Commonwealth status. Previously proposed legislation,
which was not enacted, would have preserved the federal tax exempt status of the
outstanding debts of Puerto Rico and its public corporations regardless of the
outcome of the referendum, to the extent that similar obligations issued by
states are so treated and subject to the provisions of the Code currently in
effect. There can be no assurance that any pending or future legislation finally
enacted will include the same or similar protection against loss of tax
exemption. The November 1993 plebiscite can be expected to have both direct and
indirect consequences on such matters as the basic characteristics of future
Puerto Rico debt obligations, the markets for these obligations, and the types,
levels and quality of revenue sources pledged for the payment of existing and
future debt obligations. Such possible consequences include legislative
proposals seeking restoration of the status of Section 936 benefits otherwise
subject to the limitations discussed above. However, no assessment can be made
at this time of the economic and other effects of a change in federal laws
affecting Puerto Rico as a result of the November 1993 plebiscite.
FEDERAL TAXATION. For a discussion of the Federal tax status of income
earned on Territorial Trust Units, see "Tax Status."
<TABLE>
<CAPTION>
TERRITORIAL INSURED SERIES 2
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 19, 1995
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited Redemption to Territorial
Principal(1) or Bonds Contracted for(1)(5) Rating(2) Feature(3) Trust(4)
------------ ------------------------------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
$100,000 Puerto Rico Industrial, Tourist, AAA 2005 @ 102 $105,375
Educational, Medical and Environmental 2017 @ 100 S.F.
Control Facilities Financing Authority,
Hospital Revenue Bonds, 1995 Series A
(MBIA Insured), 6.25% Due 7/1/2024#
500,000 Puerto Rico Highway and Transportation AAA 2003 @ 101.5 494,375
Authority, Highway Revenue Refunding 2016 @ 100 S.F.
Bonds, Series W, (FSA Insured), 5.50%
Due 7/1/2017#
500,000 Puerto Rico Public Buildings Authority AAA 2005 @ 101.5 493,125
Government Facilities Revenue Bonds, 2023 @ 100 S.F.
Series A (AMBAC Insured), 5.50% Due
7/1/2025#
500,000 University of Puerto Rico, University AAA 2005 @ 101.5 478,750
System Revenue Bonds, Series M, 2016 @ 100 S.F.
(MBIA Insured) 5.25% Due 6/1/2025#
500,000 Puerto Rico Municipal Finance Agency, AAA 2004 @ 101.5 520,625
1994 Series A Bonds, (FSA Insured) 2010 @ 100 S.F.
6.00% Due 7/1/2014)#
1,000,000 Commonwealth of Puerto Rico Public AAA 2005 @ 101.5 976,250
Improvement Bonds, General Obligation 2016 @ 100 S.F.
Bonds (MBIA Insured) 5.375% Due
7/1/2022#
500,000 Puerto Rico Highway and Transportation AAA 2003 @ 101.5 480,623
Authority, Highway Revenue Refunding 2018 @ 100 S.F.
Bonds, Series W, (FSA Insured) 5.25%
__________ Due 7/1/2020# __________
$3,600,000 $3,549,123
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 20.
Notes to Schedules of Investments
As of the Opening of Business on the
Initial Date of Deposit: October 19, 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 August 21, 1995 to October 18, 1995. These Bonds have expected settlement
dates from October 19, 1995 to October 31, 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:
Annual
Interest Bid Side
Cost to Profit (Loss) Income Evaluation
Trust Sponsor to Sponsor to Trust of Bonds
----- ------- ---------- -------- --------
National Insured Series 1 $3,896,550 $33,952 $225,925 $3,900,413
Colorado Insured Series 5 3,033,178 56,136 172,938 3,066,132
Territorial Insured Series 2 3,457,396 91,727 197,500 3,521,945
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 0.771%, 0.756%
and 0.772% for the National, Colorado and Territorial Trusts, respectively. 50%
of the Securities in National Insured Series 1 (marked by a double asterisk
(**)) have been purchased on a "when of the principal amount, as and if issued"
basis. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. Delivery is expected to take
place at various dates up to 7 days after the First Settlement Date.
"#" 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."
6. This Bond has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Bonds which pay no
interest are normally described as "zero coupon" bonds. Over the life of bonds
purchased at a deep discount the value of such bonds will increase such that
upon maturity the holders of such bonds will receive 100% of the principal
amount thereof. To the extent that zero coupon bonds are sold or called prior to
maturity, there is no guarantee that the value of the proceeds received
therefrom by the Trust will equal or exceed the par value that would have been
obtained at maturity of such zero coupon bonds.
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>
National Tax Equivalent Table
-----------------------------
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
------------------------------ ------------------------------------------------------------
Single Joint Tax 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
Return Return Bracket Equivalent Taxable Estimated Current Return
--------- -------------- ------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23.35 $ 0- 39.00 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
23.35- 56.55 39.00- 94.25 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
56.55-117.95 94.25-143.60 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
117.95-256.50 143.60-256.50 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 256.50 Over 256.50 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
Colorado Tax Equivalent Table
-----------------------------
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
------------------------------ ------------------------------------------------------------
Single Joint Tax 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
Return Return Bracket Equivalent Taxable Estimated Current Return
--------- -------------- ------- ------------------------------------------------------------
$ 0- 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
Territorial Tax Equivalent Table
--------------------------------
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
------------------------------ ------------------------------------------------------------
Single Joint Tax 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
Return Return Bracket* Equivalent Taxable Estimated Current Return
--------- -------------- ------- ------------------------------------------------------------
$ 0- 23.35 $ 0- 39.00 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
23.35- 56.55 39.00- 94.25 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
56.55-117.95 94.25-143.60 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
117.95-256.50 143.60-256.50 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 256.50 Over 256.50 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
*The table reflects the Federal tax rate and does not reflect any effect that
Puerto Rico taxes may have in determining the taxable equivalent yield for
residents of Puerto Rico.
</TABLE>
INDEPENDENT AUDITORS' REPORT
TO THE SPONSOR, TRUSTEE AND THE UNITHOLDERS OF VOYAGEUR TAX-EXEMPT TRUST,
SERIES 5:
We have audited the accompanying statements of net assets, including the
schedules of investments, of Voyageur Tax-Exempt Trust, Series 5 (National
Insured Series 1, Colorado Insured Series 5 and Territorial Insured Series 2) as
of October 19, 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 5 (National Insured Series 1, Colorado Insured Series 5 and Territorial
Insured Series 2) as of October 19, 1995, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 19, 1995
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 5
STATEMENTS OF NET ASSETS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 19, 1995
National Colorado Territorial
Insured Insured Insured
Series 1 Series 5 Series 2
-------- ---------- --------
<S> <C> <C> <C>
Contracts to purchase securities(1)(2) $3,930,502 $3,089,314 $3,549,123
Accrued interest on underlying securities(1)(3) 44,337 53,601 77,715
----------- ----------- -----------
Total Assets $3,974,839 $3,142,915 $3,626,838
Less: distributions payable(3) 44,337 53,601 77,715
----------- ----------- -----------
Net Assets $3,930,502 $3,089,314 $3,549,123
========== ========== ==========
Net Assets Represented By:
Interest of Unitholders--
Units of fractional undivided interest
outstanding: (413,302, 324,849,
and 373,199 Units, respectively)
Cost to investors(4) $4,133,020 $3,248,490 $3,731,991
Less: Gross underwriting commission(4) 202,518 159,176 182,868
----------- ---------- -----------
Net Assets(4) $3,930,502 $3,089,314 $3,549,123
============ ========== ==========
- ----------------------
(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>
<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>
National Insured Series 1 $3,974,839 $4,000,000 $3,930,502 $44,337
Colorado Insured Series 5 3,142,915 3,150,000 3,089,314 53,601
Territorial Insured Series 2 3,626,838 3,600,000 3,549,123 77,715
</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 October 24,
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) 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. See
footnote (6) in "The Trusts Notes to Schedules of Investments."
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, National Insured Series 1, Colorado Insured Series 5 and Territorial
Insured Series 2 have been given a duration of 12.20, 11.94 and 11.47,
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 5 would be expected to decline
approximately 11.94% 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 a compounding factor and the expenses and sales charge associated
with each Trust Unit. Since the market values and estimated retirements of the
Bonds and the expenses of a Trust will change, there is no assurance that the
present Estimated Long-Term Returns will be realized in the future. Estimated
Current Returns and Estimated Long-Term Returns are expected to differ because
the calculation of Estimated Long-Term Returns reflects the estimated date and
amount of principal returned while Estimated Current Returns calculations
include only net annual interest income and Public Offering Price.
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. 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:
<TABLE>
<CAPTION>
Aggregate Number of Units Purchased Percent of Offering Price
----------------------------------- -------------------------
<S> <C>
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%
</TABLE>
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. Employees, officers and directors
(including their immediate family members, defined as spouses, children,
grandchildren, parents, grandparents, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons) of the Sponsor and its subsidiaries may purchase
Units of the Trusts without a sales charge in both the initial and secondary
offering periods.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a bond from the last day on which interest thereon was paid. Interest on
Bonds generally is paid semi-annually, although a Trust accrues such interest
daily. Because of this, each Trust always has an amount of interest earned but
not yet collected by the Trustee. For this reason, 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:
<TABLE>
<CAPTION>
Aggregate Dollar Value Total Concession per Unit
of Units Purchased (as a Percentage of the Public Offering Price)
------------------ --------------------------------------
<S> <C>
$100,000 - $249,999 .............................................. 3.2%
$250,000 - $499,999 .............................................. 3.2%
$500,000 - $999,000 .............................................. 2.9%
$1,000,000 or more................................................ 2.5%
</TABLE>
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>
Aggregate Dollar Value Total Underwriter Concession per Unit
of Units Underwritten (as a Percentage of the Public Offering Price)
--------------------- --------------------------------------------
<S> <C>
$100,000 - $249,999 .............................................. 3.5%
$250,000 - $499,999 .............................................. 3.6%
$500,000 - $999,000 .............................................. 3.7%
$1,000,000 or more................................................ 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 4.7% 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 Financial Group, Inc. which is
owned approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and
less than 1% by certain benefit plans for the employees of Dougherty Financial
Group, Inc. and its subsidiaries. The address of each of the Sponsor and
Distributor is 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota
55402.
Mr. Dougherty co-founded the predecessor of Dougherty Financial Group, Inc.
in 1977 and has served as Dougherty Financial Group's Chairman of the Board and
Chief Executive Officer since inception. Pohlad Companies is a holding company
owned in equal parts by each of James O. Pohlad, Robert C. Pohlad and William M.
Pohlad. As of December 31, 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. (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, (800) 253-5622. The Trustee is subject to supervision and
examination by the Division of Finance of the State of Missouri and the Federal
Deposit Insurance Corporation.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the portfolio of any Trust.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Fund. Such
records shall include the name and address of, and the certificates issued by
each Trust to, every Unitholder of each Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or Federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Bonds held in the Trusts.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the Trusts created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon receiving
notice of such resignation is obligated to appoint a successor trustee promptly.
If, upon such resignation, no successor trustee has been appointed and has
accepted the appointment within 30 days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a corporation organized under the laws of the United States or any
State, be authorized to exercise trust powers and have at all times an aggregate
capital, surplus and undivided profits of not less than $5,000,000.
UNDERWRITING
The Underwriters named below have severally purchased Units in the
following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
National Colorado Territorial
Insured Insured Insured
Name Address Series 1 Series 5 Series 2
- ----------------------- ------------------------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Voyageur Fund 90 South Seventh Street 403,302 304,849 303,199
Distributors, Inc. Minneapolis, MN 55402
Edward D. Jones 12555 Manchester Road 10,000 10,000
St. Louis, MO 63131
Fidelity Capital Markets 164 Northern Avenue 10,000
Boston, MA 02210
BC Ziegler 215 N. Main Street 10,000
West Bend, WI 53095
Primevest Financial 400 First Street South 10,000
St. Cloud, MN 56301
Miller, Johnson & Kuehn 1660 S. Highway 100, 10,000
Minneapolis, MN 55416
Piper Jaffray 222 South Ninth Street 10,000
Minneapolis, MN 55440
Advest, Inc. 280 Trumbull Street 10,000
Hartford, CT 06103
Stifel, Nicolaus & Co., Inc. 500 N. Broadway 10,000 10,000
St. Louis, MO 63102
------- ------- -------
Totals 413,302 324,849 373,199
======= ======= =======
</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................. 23
STATEMENTS OF NET ASSETS..................... 24
RISK FACTORS................................. 25
ESTIMATED CURRENT RETURN AND
ESTIMATED LONG-TERM RETURN............ 32
TRUST OPERATING EXPENSES..................... 32
INSURANCE ON THE BONDS....................... 34
TAX STATUS................................... 35
PUBLIC OFFERING.............................. 38
RIGHTS OF UNITHOLDERS........................ 43
TRUST ADMINISTRATION......................... 48
UNDERWRITING................................. 52
OTHER MATTERS................................ 53
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
- --------------------------------------------------------------------------------
October 19, 1995
VOYAGEUR TAX-EXEMPT TRUST,
SERIES 5
NATIONAL INSURED SERIES 1
COLORADO INSURED SERIES 5
TERRITORIAL INSURED SERIES 2
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6
The Cross-Reference Sheet
The Prospectus
The signatures
The following exhibits:
1.1 Standard Terms and Conditions of Trust - Voyageur Tax-Exempt Turst Series 1
and Subsequent Series, dated January 19, 1995, filed as an exhibit hereto.
1.2 Form of Trust Indenture and Agreement for Voyageur Tax-Exempt Trust, Series
5.
2. Opinion of counsel to the Sponsor as to legality of the securities being
registered including a consent to the use of its name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus and opinion of counsel
as to Federal income tax status of the securities being registered and
certain state tax matters.
3. None.
4. Not Applicable. .
5. Financial Data Schedules filed hereto electronically as Exhibit(s) 27
pursuant to Rule 401 of Regulation S-T.
6. Written Consents
(a) Consent of George K. Baum & Company
(b) Consent of KPMG Peat Marwick LLP.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Voyageur Tax-Exempt Trust, Series 5, 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 19th
day of October, 1995.
VOYAGEUR TAX-EXEMPT TRUST,
SERIES 5
(Registrant)
By: Voyageur Fund Managers, Inc.
(Depositor)
By: /s/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 October 19, 1995.
SIGNATURE TITLE
MICHAEL E. DOUGHERTY Chairman of the Board of Directors
- ------------------------ and Director
Michael E. Dougherty
JOHN G. TAFT
John G. Taft Chief Executive Officer and Director
EDWARD J. KOHLER
- ------------------------
Edward J. Kohler Director
FRANK C. TONNEMAKER
- ------------------------
Frank C. Tonnemaker Director
JANE M. WYATT
- ------------------------
Jane M. Wyatt Director
/s/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 the Registration Statement on
Form S-6 for Voyageur Tax-Exempt Trust, Series 5 (Registration No. 33-62681).
EXHIBIT 1.1
VOYAGEUR TAX-EXEMPT TRUST
SERIES 1 AND SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
DATED: JANUARY 19, 1995
BETWEEN
VOYAGEUR FUND MANAGERS, INC.
Depositor
AND
INVESTORS FIDUCIARY TRUST COMPANY
Trustee
VOYAGEUR TAX-EXEMPT TRUST
SERIES 1 AND SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
FOR SERIES FOR WHICH INVESTORS FIDUCIARY TRUST COMPANY
MAY ACT AS TRUSTEE
EFFECTIVE
JANUARY 19, 1995
INDEX
ARTICLE I DEFINITIONS.....................................................2
Agreement.................................................................2
Bonds.....................................................................2
Business Day..............................................................2
Certificate...............................................................2
Contract Obligations......................................................5
Depositor.................................................................5
Evaluation Time...........................................................5
Evaluator.................................................................5
Fund......................................................................5
Initial Date of Deposit...................................................5
Insurance.................................................................5
Insurer...................................................................6
Interest Account..........................................................6
Interest Distribution.....................................................6
Interest Distribution Date................................................6
Principal Account.........................................................6
Principal Distribution Date...............................................6
Program Agent.............................................................6
Record Date...............................................................6
Redemption Date...........................................................6
Redemption Price..........................................................6
Reserve Account...........................................................7
Supplement Trust Agreement................................................7
Trust Agreement...........................................................7
Trust Fund or Trust.......................................................7
Trust Fund Evaluation.....................................................7
Trustee...................................................................7
Unit......................................................................7
Unitholder................................................................8
Unit Value................................................................8
ARTICLE II DEPOSIT OF BONDS; ACCEPTANCE OF TRUST; ISSUANCE OF
UNITS; FORM OF CERTIFICATES; PORTFOLIO INSURANCE ..............8
Section 2.01. Deposit of Bonds...........................................8
Section 2.02. Acceptance of Trust........................................9
Section 2.03. Issuance of Units..........................................9
Section 2.04. Form of Certificates......................................10
Section 2.05. Portfolio Insurance.......................................10
ARTICLE III ADMINISTRAT1ON OF FUND.........................................12
Section 3.01. Certain Moneys to be Credited to Interest Account.........12
Section 3.02. Certain Moneys to be Credited to Principal Account.......12
Section 3.03. Establishment of Reserve Account..........................13
Section 3.04. Certain Deductions and Distributions......................13
Section 3.05. Statements and Reports....................................15
Section 3.06. Extraordinary Sale of Bonds...............................17
Section 3.07. Refunding Obligations.....................................18
Section 3.08. Counse1...................................................18
Section 3.09. Action by Trustee Regarding Bonds.........................18
Section 3.10. Trustee Not Required to Adjust Accounts...................19
Section 3.11. Notice of Change in Principal Account.....................19
Section 3.12. Limited Replacement of Special Bonds......................19
Section 3.13. Compensation of Depositor for Supervisory Services........21
ARTICLE IV EVALUATION OF BONDS............................................22
Section 4.01. Evaluation of Bonds.......................................22
Section 4.02. Certain Information to be made Available..................22
Section 4.03. Compensation of the Evaluator.............................23
Section 4.04. Liability of the Evaluator................................23
Section 4.05. Resignation, Removal and Other Matters Relating to the
Evaluator.................................................23
ARTICLE V TRUST FUND EVALUATION..........................................25
Section 5.01. Trust Fund Evaluation.....................................25
Section 5.02. Redemption of Units.......................................25
-ii-
ARTICLE VI ISSUANCE, TRANSFER, INTERCHANGE................................27
Section 6.01. Issuance of Certificates..................................27
Section 6.02. Transfer of Units.........................................27
Section 6.03. Replacement of Certificates...............................28
Section 6.04. Form of Certificate.......................................29
ARTICLE VII DEPOSITOR......................................................29
Section 7.01. Certain Matters Regarding Succession......................29
Section 7.02. Liability of Depositor and Indemnification................29
ARTICLE VIII TRUSTEE........................................................30
Section 8.01. Generaal Matters Relating to the Trustee..................30
Section 8.02. Books, Records and Reports................................32
Section 8.03. Reports to Securities and Exchange Commission and
Others....................................................33
Section 8.04. Agreement and List of Bonds on File.......................33
Section 8.05. Compensation of Trustee...................................33
Section 8.06. Resignation, Discharge or Removal of the Trustee;
Successors................................................34
Section 8.07. Qualification of Trustee..................................35
Section 8.08. Collateral................................................35
ARTICLE IX TERMINATION....................................................35
Section 9.01. Procedure Upon Termination................................35
Section 9.02. Notice to Unitholders.....................................37
Section 9.03. Moneys to be Held in Trust Without Interest...............37
Section 9.04. Dissolution of Depositor Not to Terminate.................37
ARTICLE X MISCELLANEOUS PROVISIONS.......................................37
Section 10.01. Amendment and Waiver......................................37
Section 10.02. Initial Costs.............................................38
Section 10.03. Registration (Initial and Current) of Units and Fund......38
Section 10.04. Certain Matters Relating to Unitholders...................38
Section 10.05. Missouri Law to Govern....................................39
Section 10.06. Notices...................................................39
Section 10.07. Severability..............................................39
Section 10.08. Separate and Distinct Series..............................40
EXECUTION ....................................................................42
ACKNOWLEDGMENTS ..............................................................43
-iii-
VOYAGEUR TAX-EXEMPT TRUST
SERIES 1 AND SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
for Series for which Investors Fiduciary Trust Company
may act as Trustee
EFFECTIVE January 19, 1995
These Standard Terms and Conditions of Trust, Effective January 19, 1995,
are executed between Voyageur Fund Managers, Inc., as Depositor, and Investors
Fiduciary Trust Company, as Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust shall be applicable to Series
1 and each Series subsequent to the date hereof of Voyageur Tax-Exempt Trust for
which Investors Fiduciary Trust Company acts as Trustee as provided in this
paragraph. For each such series of Voyageur Tax-Exempt Trust to which these
Standard Terms and Conditions of Trust are to be applicable, the Depositor and
the Trustee shall execute a Trust Agreement incorporating by reference these
Standard Terms and Conditions of Trust and designating any exclusion from or
exception to such incorporation by reference for the purposes of that series or
variation of the terms hereof for the purposes of that series and specifying for
that series (i) the name of each Trust Fund, (ii) the Bonds deposited in trust
for each Trust Fund and the number of Units delivered for each Trust Fund by the
Trustee in exchange for the Bonds pursuant to Section 2.01, (iii) the fractional
undivided interest represented by each Unit of each Trust Fund, (iv) the
Interest Distribution Dates, (v) the Principal Distribution Dates, (vi) the
Record Dates, (vii) the Initial Date of Deposit for each Trust Fund, (viii) the
First Settlement Date, (ix) the Evaluator's fee, (x) the liquidation amount for
purposes of Section 8.01(g), (xi) the Trustee's fee, (xii) the supervisory fee
and (xiii) the balance of the Principal Account referenced in Section 3.04(b).
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
AGREEMENT
These Standard Terms and Conditions of Trust and all amendments and
supplements hereto and thereto.
BONDS
The interest-bearing tax-exempt obligations, including Contract Obligations
listed in all Schedules to the Trust Agreement or deposited in the Trust Fund
pursuant to Section 2.01(b) and any obligations received in exchange or
substitution for such obligations pursuant to Sections 3.07 or 3.12 hereof, as
may from time to time continue to be held as a part of any Trust Fund.
BUSINESS DAY
Any day other than a Saturday, Sunday or a day on which the New York Stock
Exchange is closed.
CERTIFICATE
Any one of the Certificates manually executed by the Trustee in
substantially the following form with the blanks appropriately filled in:
-2-
Face of Certificate
NUMBER VOYAGEUR TAX-EXEMPT TRUST UNITS
CERTIFICATE OF BENEFICIAL OWNERSHIP
THIS CERTIFIES THAT _____________________________ is the registered owner
of _______ Unit(s) of fractional undivided interest in Voyageur Tax-Exempt Trust
of the above Series (herein referred to as the "TRUST") created under the laws
of the State of Missouri pursuant to the Agreement and the related Trust
Agreement, a copy of which is available at the office of the Trustee. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the aforesaid Agreement and the related Trust Agreement to which
the holder of this Certificate by virtue of the acceptance hereof assents and is
bound. This Certificate is transferable and interchangeable by the registered
owner in person or by his duly authorized attorney at the office of the Trustee
upon surrender of this Certificate properly endorsed or accompanied by a written
instrument of transfer and any other documents that the Trustee may require for
transfer, in form satisfactory to the Trustee, and payment of the fees and
expenses provided in the Trust Agreement.
WITNESS the facsimile signature of the Depositor and the manual signature
of an authorized signatory of the Trustee.
Dated:
VOYAGEUR FUND MANAGERS, INC., INVESTORS FIDUCIARY TRUST COMPANY,
Depositor Trustee, 127 West 10th Street,
Kansas City, Missouri 64105
By__________________________ By________________________________
Authorized Signature Authorized Signature
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REVERSE OF CERTIFICATE
FORM OF ASSIGNMENT
FOR VALUE RECEIVED _______________________________________ hereby sells,
assigns and transfers unto
____________________
____________________
Please Insert Social Security or Other
Identifying Number of Assignee
______________________________
______________________________
the within Certificate and does hereby irrevocably constitute and appoint
___________________________________________________, attorney, to transfer the
within Certificate on the books of the Trustee, with full power of substitution
in the premises.
Dated: ______________________________
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the Certificate in every particular,
without alteration or enlargement or any change whatever, and must be
guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guarantee program
in addition to, or in substitution for, STAMP, as may be accepted by
the Trustee.
Signature Guaranteed
By__________________________________
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CONTRACT OBLIGATIONS
The Bonds listed in the Schedules of the Trust Agreement which are to
be acquired by any Trust Fund pursuant to contract, contracts for the purchase
of such bonds which have been assigned to the Trustee along with the amount
required for their purchase which have been delivered to the Trustee or Bonds
which the Depositor has contracted to purchase for any Trust Fund pursuant to
Section 3.12 hereof.
DEPOSITOR
Voyageur Fund Managers, Inc. or its successors or any successor Depositor
appointed as herein provided.
EVALUATION TIME
Close of business of the Depositor, unless another meaning is assigned to
it in Part II of the Trust Agreement.
EVALUATOR
Voyageur Fund Managers, Inc. or its successors or any successor Evaluator
appointed as herein provided.
FUND
All Trust Funds outstanding under this Agreement.
INITIAL DATE OF DEPOSIT
The meaning assigned to it in Part II of the Trust Agreement.
INSURANCE
The contract or policy of insurance obtained by the Fund guaranteeing the
payment when due of the principal of and interest on the Bonds held pursuant and
subject to this Agreement, including those Bonds held pursuant and subject to
this Agreement which are also insured by individual policies of insurance which
have been obtained by the issuers of such Bonds, together with the proceeds, if
any, thereof payable to or received by the Trustee for the benefit of the Fund
and the Unitholders thereof except that Insurance shall not include those Bonds
held pursuant and subject to this Agreement which are insured by individual
policies of insurance which have been obtained by the issuers of such Bonds and
which are not also insured by the Insurance (the "PRE-INSURED BONDS").
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INSURER
Any insurance company, its successors and assigns, which is the issuer of
the contract or policy of insurance obtained by the Fund protecting any Trust
Fund and the Unitholders thereof against nonpayment when due of the principal of
and interest on any Bond (except for Pre-Insured Bonds) held by the Trustee as
part of the Fund.
INTEREST ACCOUNT
The account created pursuant to Section 3.01.
INTEREST DISTRIBUTION
The meaning assigned to it in Section 3.04.
INTEREST DISTRIBUTION DATE
The meaning assigned to it in Part II of the Trust Agreement.
PERMANENT INSURANCE
The meaning assigned to it in Section 5.02.
PRINCIPAL ACCOUNT
The account created pursuant to Section 3.02.
PRINCIPAL DISTRIBUTION DATE
The meaning assigned to it in Part II of the Trust Agreement.
PROGRAM AGENT
Program Agent shall mean Investors Fiduciary Trust Company or its
successors, unless a different Program Agent shall be designated by the Trust
Agreement for a particular Trust Fund.
RECORD DATE
The meaning assigned to it in Part II of the Trust Agreement.
REDEMPTION DATE
The meaning assigned to it in Section 5.02.
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REDEMPTION PRICE
The meaning assigned to it in Section 5.02.
RESERVE ACCOUNT
The account created pursuant to Section 3.03.
SUPPLEMENT TRUST AGREEMENT
Shall mean an amendment or supplement to the Trust Agreement executed
pursuant to Section 2.01(b) for the purpose of depositing additional Bonds in
the Trust Fund and issuing additional Units.
TRUST AGREEMENT
The Trust Agreement for the particular series of Voyageur Tax-Exempt Trust
into which these Standard Terms and Conditions of Trust are incorporated.
TRUST FUND OR TRUST
Any one of the separate trusts created by this Agreement and a Trust
Agreement which shall consist of the Bonds and all undistributed interest or
other amounts received or accrued thereon and any undistributed cash held in the
Principal and Interest Accounts or otherwise realized from the sale,
liquidation, redemption or maturity thereof, exclusive of any amounts which may
be on deposit in the Reserve Account.
TRUST FUND EVALUATION
The meaning assigned to it in Section 5.01.
TRUSTEE
Investors Fiduciary Trust Company or its successors or any successor
Trustee appointed as herein provided.
UNIT
The fractional undivided interest in and ownership of an individual
Trust Fund equal initially to the fraction specified in Part II of the Trust
Agreement, the denominator of which fraction shall be (1) increased by the
number of any additional Units issued pursuant to Section 2.03 hereof and (2)
decreased by the number of any such Units redeemed as provided in Section 5.02.
Whenever reference is made herein to the "INTEREST" of a Unitholder in the Trust
Fund or in the Interest or Principal Accounts, it shall mean such
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fractional undivided interest represented by the number of Units, whether or not
evidenced by a Certificate or Certificates, held of record by such Unitholder in
such Trust Fund.
UNITHOLDER
The holder of any Unit as recorded on the books of the Trustee, his legal
representatives and heirs and the successors of any corporation, partnership or
other legal entity which is a holder of any Unit.
UNIT VALUE
The value of the fractional undivided interest in and ownership of any
individual Trust Fund represented by each Unit as determined by a Trust Fund
Evaluation.
Words importing a singular number shall include the plural number in each
case and vice versa, except as the context herein may clearly indicate otherwise
and words importing persons shall include corporations, partnerships and
associations, as well as natural persons. The words "HEREIN", "HEREBY",
"HEREWITH", "HERETOFORE", and other singular words or phrases or references and
associations shall refer to the Agreement in its entirety.
ARTICLE II
DEPOSIT OF BONDS; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES; PORTFOLIO INSURANCE
SECTION 2.01. DEPOSIT OF BONDS. (a) The Depositor, concurrently with the
execution and delivery hereof, hereby grants and conveys all of its right, title
and interest in and to and hereby conveys to and deposits with the Trustee in an
irrevocable Trust the Bonds (together with accrued and unpaid interest thereon)
and confirmations of contracts to purchase Bonds, including Contract
Obligations, listed in the Schedules to the Trust Agreement duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form, to be held, managed and applied by the Trustee as herein provided
for the benefit of each Unitholder to the extent of such Unitholder's interest
in the Trust Fund. The Depositor hereby also delivers to the Trustee a certified
check or checks, cash or cash equivalents or an irrevocable letter or letters of
credit issued by a commercial bank or banks in an amount necessary to consummate
the purchase of any Bonds or Contract Obligations. In the event any Bonds have
not been delivered to the Trustee on or before the close of business of the
Trustee on the day before the date of expiration of any letter or letters of
credit, the Trustee is hereby directed to draw on such letter or letters of
credit unless the Depositor has either extended or replaced such letter or
letters on or before such close of business.
(b) From time to time following the Initial Date of Deposit for a Trust,
the Depositor is hereby authorized, in its discretion, to assign, convey to and
deposit with the Trustee additional Bonds for such Trust, duly endorsed in blank
or accompanied by all
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necessary instruments of assignment and transfer in proper form, to be held,
managed and applied by the Trustee as herein provided. Such deposit of
additional Bonds shall be made, in each case, pursuant to an executed
Supplemental Trust Agreement. Any additional Bonds to be deposited must (1) be
issued by the same issuer; (2) have the same original issue date; (3) have the
same coupon or interest rate; (4) have the same maturity date; (5) have the same
redemption features; and (6) have other legal characteristics as the Bonds
originally deposited in the Trust on the Initial Date of Deposit. The Depositor
in each case shall ensure that each deposit of additional Bonds pursuant to this
Section shall have the same ratio of Bonds (based on principal amount) as
existed on the Initial Date of Deposit for each Trust Fund. Any brokerage fees
related to the purchase of Bonds deposited in the Trust Fund after the Initial
Date of Deposit shall be an expense of such Trust Fund.
(c) The Trustee may deposit a certified check or checks, cash or cash
equivalents, or cash drawn on the irrevocable letter or letters of credit
deposited by the Depositor, to purchase Bonds or Contract Obligations in a
non-interest bearing account for the Trust Fund.
(d) In the event that the purchase of Bonds or Contract Obligations
pursuant to any contract shall not be consummated in accordance with said
contract, and the Depositor does not, on or before the third Business Day prior
to the next following Distribution Date, direct the Trustee to utilize monies
deposited for the purchase of Replacement Bonds or Replacement Contract
Obligations, the Trustee shall credit to the Principal Account referred to in
Section 3.02 the monies, or, if applicable, the monies drawn on an irrevocable
letter of credit, deposited by the Depositor for the purpose of such purchase.
Such funds shall be distributed pursuant to Section 3.04 to Unitholders of
record as of the Record Date next following the failure of consummation of such
purchase. The Depositor shall cause to be refunded to each Unitholder his pro
rata portion of the sales charge levied on the sale of Units to such Unitholder
attributable to such Bond or Contract Obligation. The Depositor shall also pay
to the Trustee, for distribution to the Unitholders, interest on such Bond or
Contract Obligation, computed at the coupon rate, to the date such Bond or
Contract Obligations is removed from the Trust Fund.
(e) The Trustee is hereby irrevocably authorized to effect registration or
transfer of the Bonds in fully registered form to the name of the Trustee or to
the name of its nominee.
SECTION 2.02. ACCEPTANCE OF TRUST. The Trustee hereby accepts the trusts
herein created, and the Trustee declares that it holds and will hold the Trust
Fund as Trustee, in trust upon the trusts herein set forth, for the use and
benefit of the present and future Unitholders and subject to the terms and
conditions of the Trust Agreement and this Agreement.
SECTION 2.03. ISSUANCE OF UNITS. (a) The Trustee hereby acknowledges
receipt of the deposit of the Bonds listed in the Schedules to the Trust
Agreement and referred to in Section 2.01 hereof and, simultaneously with the
receipt of said deposit, has recorded on its books the ownership, by the
Depositor or such other person or persons as may be indicated
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by the Depositor, of the aggregate number of Units specified in the Trust
Agreement and has to or on the order of the Depositor in exchange therefor
delivered documentation evidencing the ownership of the number of Units
specified substantially in the form above recited representing the ownership of
those Units. The Trustee hereby agrees that on the date of any Supplemental
Trust Agreement, it shall acknowledge that the additional Bonds identified
therein have been deposited with it by recording on its books the ownership, by
the Depositor or such other person or persons as may be indicated by the
Depositor, of the aggregate number of Units to be issued in respect of such
additional Bonds so deposited, and shall, if so requested, execute documentation
substantially in the form above recited representing the ownership of an
aggregate number of those Units.
(b) Under the terms and conditions of the Trust Agreement and this
Agreement and at such times as are permitted by the Trustee, Units may also be
held in certificated form. Unitholders may elect to have their Units held in
certificated form by making a written request to the Trustee requesting such
Certificates; provided, that the Trustee is entitled to specify the minimum
denomination of any Certificate issued. The Trustee shall, at the request of the
holder of any Units held in uncertificated form, issue a new Certificate to
evidence such Units and at such time make an appropriate notation in the
registration books of the Trustee. The rights set forth in this Agreement of any
holder of Units held in certificated form shall be the same as those of any
other Unitholder. Certificates may be transferred as provided in Article VI.
SECTION 2.04. FORM OF CERTIFICATES. Each Certificate referred to in Section
2.03 is, and each Certificate hereafter issued shall be, in substantially the
form herein above recited, numbered serially for identification, in fully
registered form, transferable on the books of the Trustee as herein provided,
executed manually by an authorized signature of the Trustee and by a facsimile
signature of an Authorized Officer of the Depositor and dated the date of
execution and delivery by the Trustee.
SECTION 2.05. PORTFOLIO INSURANCE. Concurrently with the delivery to the
Trustee of the Bonds listed in the Schedules to the Trust, the Insurer has
delivered to and deposited with the Trustee the Insurance to protect the Fund
and the Unitholders thereof against nonpayment of principal and interest, when
due, on any Bond or Bonds (except for Pre-Insured Bonds) held by the Trustee in
the portfolio of the Fund.
The Trustee shall take all action deemed necessary or advisable in
connection with the Insurance to continue the Insurance in full force and effect
and shall pay all premiums due thereon, including the initial premium, all in
such manner as in its sole discretion shall appear to result in the most
protection and least expense to such trust.
The Insurance may not be cancelled by the Insurer. However, as of each
Record Date the Trustee shall make the deduction and payment of premiums
prescribed in Section 3.04(a)(6) of this Agreement in order to continue in force
the coverage thus provided. The Insurer's right to the payment of premiums from
funds held by the Trustee in accordance with the terms of the policy is absolute
(except when payment is withheld in good faith by the Trustee in the event of
dispute over the amount thereof), but no failure on
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the part of the Trustee to make such payment of premium or installment thereof
to the Insurer shall result in a cancellation of the Insurance or otherwise
affect the right of any Unitholder under the policy to have any amounts of
principal and interest paid by the Insurer to the Trustee to be held as part of
the Fund when the same are not paid when due by the issuer of a Bond or Bonds
held by the Trustee as part of the Fund.
With each payment of premium or installment thereof, the Trustee shall
notify the Insurer of all Bonds (except for Pre-Insured Bonds) which during the
expiring premium period were redeemed from or sold by the Fund.
At all times during the existence of the Fund the Insurance policy shall
provide for payment by the Insurer or its agent to the Trustee of any amounts of
principal and interest due, but not paid, by the issuer of a Bond (except for
Pre-Insured Bonds). The Trustee shall promptly notify the Insurer or its agent
of any nonpayment or threatened nonpayment of principal or interest and the
Insurer or its agent shall within 30 days after receipt of such notice make
payment to the Trustee of all amounts of principal and interest at this time
due, but not paid.
Payments of principal and interest assumed by the Insurer shall be made as
required by the related Bond or Bonds, except in the event of a sale of any such
Bond or Bonds by the Trustee under Section 3.06, 3.07 or 5.02, or a termination
of this Indenture and the trusts created hereby under Section 8.01, prior to the
final maturity of such Bond or Bonds, in each of which events, upon notice from
the Trustee, the Insurer or its agent shall promptly make payment of the accrued
interest on such Bond or Bonds to the Trustee and shall be relieved of further
obligation to the Trustee thereon.
Upon the making of any payment referred to in the preceding paragraphs, the
Insurer shall succeed to the rights of the Trustee under the Bond or Bonds
involved to the extent of the payments made at that time, or any time subsequent
thereto, and shall continue to make all payments required by the terms of such
Bond or Bonds to the extent that funds are not provided therefor by the issuer
thereof. Upon the payment of any amounts by the Insurer or its agent, occasioned
by the nonpayment thereof by the issuer, the Trustee shall execute and deliver
to the Insurer or its agent any receipt, instrument or document required to
evidence the right of the Insurer in the Bond or Bonds involved to payment of
principal and/or interest thereon to the extent of the payments made by the
Insurer or its agent to the Trustee.
With respect to Pre-Insured Bonds in the Fund, the Trustee shall promptly
notify the insurer of the Pre-Insured Bonds of any nonpayment of principal or
interest on such Pre-Insured Bonds and if such insurer should fail to make
payment to the Trustee within 30 days after receipt of such notice, the Trustee
shall take all action against such insurer and/or the issuer deemed necessary to
collect all amounts of principal and interest at this time due, but not
collected.
The Trustee shall also take such action required under Section 5.02 of
this Agreement with respect to Permanent Insurance, as defined in Section 5.02.
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ARTICLE III
ADMINISTRATION OF FUND
SECTION 3.01. CERTAIN MONEYS TO BE CREDITED TO INTEREST ACCOUNT. The
Trustee shall collect the interest on the Bonds for each Trust Fund as it
becomes payable (including all interest accrued but unpaid prior to the date of
deposit or acquisition of the Bonds hereunder and including that part of the
proceeds of the sale, liquidation, redemption or maturity of any Bonds which
represents accrued interest thereon ), and credit such interest to a separate
account for each Trust Fund to be known as the "Interest Account". The Trustee
is authorized to advance out of its own funds and then cause to be deposited in
and credited to the Interest Account of the Trust Fund any amount necessary to
permit the payment of any Interest Distribution out of the Interest Account
required to be made with respect to such Trust Fund by the Trustee on each
Distribution Date; provided, however, that the Trustee shall be entitled to be
reimbursed without interest out of such Trust Fund for any and all amounts
advanced by it pursuant to this Section 3.0l as interest on the Bonds is
collected.
SECTION 3.02. CERTAIN MONEYS TO BE CREDITED TO PRINCIPAL ACCOUNT. (a) With
respect to each Trust Fund all moneys (except moneys held by the Trustee
pursuant to subsection (b) hereof) other than amounts credited to the Interest
Account received by the Trustee in respect of the Bonds under this Agreement
shall be credited to a separate account for each Trust Fund to be known as the
"Principal Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Obligations or deposited to secure such purchases are hereby declared
to be held specially by the Trustee for such purchases and shall not be deemed
to be part of the Principal Account until (i) the Depositor fails to timely
purchase a Contract Obligation and has not given the Failed Contract Notice (as
defined in Section 3.12) at which time the moneys and/or letters of credit
attributable to the Contract Obligation not purchased by the Depositor shall be
credited to the Principal Account; or (ii) the Depositor has given the Trustee
the Failed Contract Notice at which time the moneys and/or letters of credit
attributable to failed contracts referred to in such Notice shall be credited to
the Principal Account; provided, however, that if the Depositor also notifies
the Trustee in the Failed Contract Notice (or by separate notice delivered
concurrently with or prior to the Failed Contract Notice) that it has purchased
or entered into a contract to purchase a New Bond (as defined in Section 3.12),
the Trustee shall not credit such moneys and/or letters of credit to the
Principal Account unless the New Bond shall also have failed or is not delivered
by the Depositor within two business days after the settlement date of such New
Bond, in which event the Trustee shall forthwith credit such moneys and/or
letters of credit to the Principal Account. The Trustee shall in any case
forthwith credit to the Principal Account, and/or cause the Depositor to deposit
in the Principal Account, the difference, if any, between the purchase price of
the failed Contract Obligation and the purchase price of the New Bond, together
with any sales charge and accrued interest applicable to such difference and
distribute such moneys to Unitholders pursuant to Section 3.04.
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SECTION 3.03. ESTABLISHMENT OF RESERVE ACCOUNT. From time to time the
Trustee may withdraw from the Interest or Principal Accounts of each Trust Fund
such amounts as it, in its sole discretion, shall deem requisite to establish a
reserve for any applicable taxes or other governmental charges that may be
payable out of such Trust Fund or for indemnification or extraordinary expenses
of the Depositor or Trustee pursuant to Section 7.02, 8.01 or 8.05. Such amounts
so withdrawn shall be credited to a separate account for such Trust Fund which
shall be known as the " Reserve Account." The Trustee shall not be required to
distribute to the Unitholders any of the amounts in the Reserve Account;
provided, however, that if it, in its sole discretion, determines that such
amounts are no longer necessary, then it shall promptly deposit such amounts in
the account from which withdrawn, or if such Trust Fund has been terminated or
shall be in the process of termination, the Trustee, upon such determination,
shall distribute to each Unitholder of such Trust Fund such Unitholder's
interest in the Reserve Account in accordance with Section 9.01.
SECTION 3.04. CERTAIN DEDUCTIONS AND DISTRIBUTIONS. (a) On or before each
Interest Distribution Date as of the close of business on the preceding Record
Date the Trustee shall separately with respect to each Trust Fund to which such
Interest Distribution Date relates:
(1) deduct from the Interest Account or, to the extent funds are
not available in such Account, from the Principal Account and pay to
itself individually (i) the amounts that it is at the time entitled to
receive pursuant to Section 8.05 on account of its services
theretofore performed and expenses theretofore incurred and (ii) the
amounts that it is at the time entitled to receive under the terms of
Section 3.01 in reimbursement of amounts advanced by it pursuant to
that Section;
(2) deduct from the Interest Account or, to the extent funds are
not available in such Account, from the Principal Account the amounts
that the Evaluator is at the time entitled to receive pursuant to
Section 4.03 on account of its services theretofore performed and
expenses theretofore incurred;
(3) deduct from the Interest Account or, to the extent funds are
not available in such Account, from the Principal Account an amount
equal to unpaid fees and expenses, if any, of bond counsel pursuant to
Section 3.08 as certified by the Depositor;
(4) deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account and pay to
the Depositor the amounts that the Depositor is at the time entitled
to receive pursuant to Section 3.13 on account of its services
theretofore performed and expenses theretofore incurred;
(5) deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account, and
reimburse itself for any other fees and expenses arising from time to
time out of the Trust operations that the Trustee has paid; and
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(6) deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account and pay to
the Insurer the amount of any premium to which it is at the time
entitled to receive, pursuant to Section 2.05.
(b) The Trustee shall for each Trust Fund as of the close of business on
the applicable Record Date compute the amount of the Interest Distribution per
Unit for the next Interest Distribution Date (each such amount being herein
called the "Interest Distribution") (i) by adding to the amount actually
received with respect to interest on the Bonds in the Trust Fund during the
period from the Record Date preceding such Record Date to and including such
Record Date the estimated interest income on the Bonds in the Trust Fund to be
received for the eleven-month period following such Record Date, (ii) by
deducting from the amount determined in accordance with the preceding clause (i)
the total of (X) the sum of the amounts to be deducted from the Interest Account
of such Trust Fund as of such Record Date pursuant to the foregoing provisions
of Section 3.04(a) and (Y) the estimated sum of the amounts to be deducted from
the Interest Account of such Trust Fund pursuant to the foregoing provisions of
Section 3.04(a) during the eleven-month period following such Record Date, (iii)
dividing the amount so obtained by 12 (the number of Interest Distribution Dates
per year for such Unit), and (iv) dividing the result of the calculation
performed pursuant to the immediately preceding clause (iii) by the number of
Units outstanding on the applicable Record Date. On or shortly after each
Interest Distribution Date, the Trustee shall distribute with respect to each
Unitholder of the Trust Fund of record at the close of business on the preceding
Record Date an amount substantially equal to the Interest Distribution computed
as of such Record Date.
To the extent that moneys in the Principal Account have not been
previously used to pay for the redemption of Units tendered to a Trust Fund, on
the Principal Distribution Dates each Unitholder shall receive such holder's pro
rata share of the cash balance of the Principal Account of the Trust Fund
computed as of the close of business on the preceding Record Dates for such
Principal Distribution Dates by (i) deducting from such cash balance the total
of (X) cash required to cover contracts to purchase Bonds, (Y) cash required for
the redemption of unredeemed tendered Units and (Z) the sum of the amounts to be
deducted from the Principal Account as of each such Record Date pursuant to the
foregoing provisions of Section 3.04(a) and (ii) dividing the amount so obtained
by the number of Units outstanding on the Record Date immediately preceding such
Principal Distribution Date; provided, however, that if the balance of the
Principal Account on any such Record Date is less than that amount stated in
Part II of the Trust Agreement, no distribution from the Principal Account need
be made.
In making the computation of any Unitholder's interest in the balance of
the Interest and Principal Accounts, fractions of less than one cent per Unit
shall be omitted. In addition, the Trustee in its discretion may on any
Distribution Date determine that the amount to be distributed to Unitholders
should be more or less than the amount of the applicable Interest or Principal
Distribution per Unit because of any unusual or extraordinary increase or
decrease in the expenses incurred or expected to be incurred by such Trust Fund.
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(c) If the Depositor (i) fails to replace any failed Special Bond (as
defined in Section 3.12) or (ii) is unable or fails to enter into any contract
for the purchase of any New Bond in accordance with Section 3.12, the Trustee
shall distribute to all Unitholders the principal, accrued interest and sales
charge attributable to such Special Bonds not more than 30 days after the
expiration of the Purchase Period (as defined in Section 3.12). If any contract
for a New Bond in replacement of a Special Bond shall fail, the Trustee shall
distribute the principal, accrued interest and sales charge attributable to the
Special Bond to the Unitholders not more than 30 days after the date on which
the contract in respect of such New Bond failed. If at the end of the Purchase
Period less than all moneys attributable to a failed Special Bond have been
applied or allocated by the Trustee pursuant to a contract to purchase New
Bonds, the Trustee shall distribute the remaining moneys (i) to Unitholders not
more than 30 days after the end of the Purchase Period to the extent the failed
Special Bond has not been fully replaced by New Bonds or (ii) to the Depositor
to the extent moneys remain after the purchase of the New Bonds, if any, and the
distribution referred to in clause (i).
(d) Except as provided below, all distributions shall be made by first
class mail to each Unitholder of record at the close of business on the
preceding applicable Record Date at the address of such holder appearing on the
registration books of the Trustee provided, however, that the Trustee shall if
so directed with respect to distributions from the Interest and/or Principal
Account either orally or in writing at the time of purchase of Units or
thereafter in writing signed by the Unitholder and timely received, make such
distributions to a reinvestment program. A Unitholder' s written notice must be
received by the Trustee, as Program Agent for the reinvestment program, at least
ten days prior to the Record Date for the next Interest Distribution in order to
be in effect for such Interest Distribution and by the last Record Date for
distribution of principal in any year in order to be effective for the following
calendar year. All such notices shall remain in effect until a subsequent notice
is received by the Program Agent. Upon receipt of any such distribution the
Program Agent shall purchase shares (or fractions thereof) in the applicable
reinvestment fund as directed by the Unitholder. The Program Agent shall not be
liable to any Unitholder for any action taken with respect to its duties and
responsibilities as Program Agent; PROVIDED, HOWEVER, that this provision shall
not protect the Program Agent against liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
(e) Except as provided by the preceding paragraph, Unitholders of record on
the registration books of the Trustee at the close of business on the Record
Date prior to each Distribution Date, shall be entitled to the distribution in
respect of such Distribution Date, and, except as provided in Article VIII, no
liability shall attach to the Trustee by reason of payment to or on the order of
any such Unitholder of record. Nothing herein shall be construed to prevent the
payment of distributions from the Interest and Principal Accounts to any such
Unitholder by means of one check, draft or other proper instrument.
SECTION 3.05. STATEMENTS AND REPORTS. With each distribution from the
Interest or Principal Accounts of each Trust Fund the Trustee shall set forth,
either in the instrument by
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means of which payment of such distribution is made or in an accompanying
statement, the amount being distributed from each such account expressed as a
dollar amount per Unit of such Trust Fund.; Within a reasonable period of time
after the last business day of each calendar year, the Trustee shall furnish to
each person who at any time during such calendar year was a Unitholder of any
individual Trust Fund a statement for such Trust Fund setting forth with respect
to such calendar year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds and, if issuers
of Bonds are located in more than one jurisdiction, the percentage of
such amount by states and territories in which the issuers of the
Bonds are located;
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.12 and for redemption's pursuant to Section 5.02;
(3) the deductions for applicable taxes and fees and expenses of
the Trustee, the Evaluator, the Depositor and bond counsel, if any,
all as provided under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to Section
3.03, if any;
(5) the balance remaining after such distributions, deductions
and reservations expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last business day of such
calendar year;
(B) as to the Principal Account:
(1) the dates of sale, maturity, liquidation or redemption of any
of the Bonds and the net proceeds received therefrom (excluding any
portion thereof credited to the Interest Account);
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.13 and for redemption's pursuant to Section 5.02;
(3) the deductions for payment of applicable taxes and fees and
expenses (including insurance premiums) of the Trustee, the Evaluator,
the Depositor and bond counsel, if any, all as provided under Section
3.04(a);
(4) the reservations made by the Trustee pursuant to Section
3.03, if any;
(5) the balance remaining after such distributions, deductions
and reservations, expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last business day of such
calendar year; and
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(C) the following information:
(1) a list of the Bonds as of the last business day of such
calendar year;
(2) the number of Units outstanding on the last business day of
such calendar year;
(3) the Unit Value based on the Trust Fund Evaluations made on
the last day of December (or the last business day prior thereto) of
such calendar year; and
(4) the amounts actually distributed to Unitholders during such
calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
per Unit outstanding on the Record Dates for such distributions.
SECTION 3.06. EXTRAORDINARY SALE OF BONDS. The Depositor by written notice
may direct the Trustee to sell Bonds at such price and time and in such manner
as shall be deemed appropriate by the Depositor if the Depositor shall have
determined that any one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the payment of
principal or interest when due and payable;
(b) that any action or proceeding has been instituted at law or in
equity seeking to restrain or enjoin the payment of principal or interest
on any such Bonds, the illegality, irregularity or omission of any
necessary acts or proceedings preliminary to the issuance of such Bonds, or
seeking to restrain or enjoin the performance by the officers or employees
of any such issuing body of an improper or illegal act in connection with
the administration of funds necessary for debt service on such Bonds or
otherwise; or that there exists any other legal question or impediment
affecting such Bonds or the payment of principal or interest on the same;
(c) that there has occurred any breach of covenant or warranty in any
resolution, trust indenture or other document which might adversely affect
either immediately or contingently the payment of principal or interest on
such Bonds, or their general credit standing, or otherwise impair the sound
investment character of such Bonds;
(d) that there has been a default in the payment of principal of,
premium, if any, or interest on any other outstanding obligations of the
issuer or the guarantor of such Bonds; or
(e) that in the case of revenue Bonds, the revenues and income of the
facility or project or other special funds expressly charged and pledged
for payment of principal or interest or both on any such Bonds shall fall
substantially below the
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estimated revenues or income calculated by the engineers or other proper
officials charged with the acquisition, construction or operation of such
facility or project, so that, in the opinion of the Depositor, the
retention of such Bonds would be detrimental to the interest of the
Unitholders; or
(f) that the price of any such Bond has declined to such an extent, or
such other market or credit factors exist (including the advance refunding
of any such Bonds), that in the opinion of the Depositor the retention of
such Bonds would be detrimental to the interest of the Unitholders.
Upon receipt of such direction from the Depositor, the Trustee shall
proceed to sell the specified Bonds. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
made pursuant to any such direction or by reason of the failure of the Depositor
to give any such direction, and in the absence of such direction the Trustee
shall have no duty to sell any Bonds under this Section 3.06 except to the
extent otherwise required by Section 3.09. The Depositor shall not be liable for
errors of judgment in directing or failing to direct the Trustee pursuant to
this Section 3.06. This provision, however, shall not protect the Trustee or
Depositor against any liability for which they would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of their reckless disregard of their obligations
and duties hereunder.
SECTION 3.07. REFUNDING OBLIGATIONS. In the event that an offer by the
issuer of any of the Bonds shall be made to issue new obligations in exchange or
substitution for any issue of Bonds pursuant to a plan for the refunding or
refinancing of such Bonds, the Depositor shall instruct the Trustee in writing
to reject such offer and either hold or sell such Bonds, except that if (1) the
issuer is in default with respect to payment of principal or interest or both on
such Bonds or (2) in the opinion of the Depositor given in writing to the
Trustee, the issuer will probably default with respect to payment of principal
or interest or both on such Bonds in the reasonably foreseeable future, the
Depositor shall instruct the Trustee in writing to accept or reject such offer
or take any other action with respect thereto as the Depositor may deem proper.
Any obligations received in exchange shall be deposited hereunder and shall be
subject to the terms and conditions of this Agreement to the same extent as the
Bonds originally deposited hereunder. Within five days after such exchange and
deposit, written notice thereof shall be given by the Trustee, as agent for the
Depositor, to each Unitholder of the affected Trust Fund, including an
identification of the Bonds eliminated and the obligations substituted therefor.
SECTION 3.08. COUNSEL. The Depositor may employ from time to time counsel
to act on behalf of any Trust Fund for any legal services in connection with the
Bonds, and any legal matters relating to the possible disposition of any Bonds
pursuant to any provisions hereof. The fees and expenses of such counsel shall
be paid by the Trustee as provided in Section 3.04(a)(3) hereof.
SECTION 3.09. ACTION BY TRUSTEE REGARDING BONDS. (a) In the event that the
Trustee shall have been notified at any time of any action to be taken or
proposed to be taken by
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holders of the Bonds (including but not limited to the making of any demand,
direction, request, giving of any notice, consent or waiver or the voting with
respect to any amendment or supplement to any indenture, agreement or other
instrument under or pursuant to which the Bonds have been issued) the Trustee
shall promptly notify the Depositor and shall thereupon take such action or
refrain from taking any action as the Depositor shall in writing direct;
provided, however, that if the Depositor shall not within five business days of
the giving of such notice to the Depositor direct the Trustee to take or refrain
from taking any action, the Trustee shall take such action as it, in its sole
discretion, shall deem advisable. The Bonds may, in the discretion of the
Trustee, be interchanged from time to time into either bearer or registered form
without any notification thereof to the Depositor or the Unitholders and may be
registered in the name of the Trustee or the name of any nominee designated by
it.
(b) If at any time the principal of or interest on any of the Bonds shall
not have been duly paid, either pursuant to the Insurance or otherwise, the
Trustee shall notify the Depositor thereof. If within thirty days after such
notification the Depositor has not given any instruction in writing to sell or
to hold or has not taken any action in connection with such Bonds, the Trustee
may, in its discretion, sell such Bonds forthwith, and the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
such sale.
(c) Except as provided in Article VII and Article VIII, neither the
Depositor nor the Trustee shall be liable to any person for any action or
failure to take action with respect to this Section 3.09.
SECTION 3.10. TRUSTEE NOT REQUIRED TO ADJUST ACCOUNTS. Nothing in this
Agreement, or otherwise, shall be construed to require the Trustee to make any
adjustments between the Interest Account and the Principal Account by reason of
any premium or discount in respect of any of the Bonds.
SECTION 3.11. NOTICE OF CHANGE IN PRINCIPAL ACCOUNT. The Trustee shall give
prompt written notice to the Depositor and the Evaluator (if separate from the
Depositor) of all amounts credited to or withdrawn from the Principal Account of
any Trust Fund pursuant to any of the provisions of this Article III, and the
balance in such Account after giving effect to the credit or withdrawal.
SECTION 3.12. LIMITED REPLACEMENT OF SPECIAL BONDS. If any contract in
respect of Contract Obligations other than a contract to purchase a New Bond (as
defined below), including those purchased on a "when, as and if issued" basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositor or the Trustee (such failed Contract Obligations being herein called
the "Special Bonds"), the Depositor, after it is notified in writing that the
Special Bond will not be delivered by the seller thereof to the Depositor, shall
notify the Trustee (such notice being herein called the "Failed Contract
Notice") of its inability to deliver the failed Special Bond to the Trustee.
Within a maximum of 20 days after giving such Failed Contract Notice (such 20
day period being herein called the "Purchase Period"), the Depositor may, if it
deems such action to be in the best interest
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of the Trust, purchase, or enter into a contract to purchase, an obligation to
be held as a Bond hereunder (herein called the "New Bond") as part of the Trust
Fund in replacement of the failed Special Bond, subject to the satisfaction of
all of the following conditions in the case of each purchase or contract to
purchase:
(a) The New Bonds (i) shall be tax-exempt bonds issued by states or
territories of the United States or political subdivisions and authorities
thereof, (ii) shall have a fixed maturity date (whether or not entitled to
the benefits of any sinking, redemption, purchase or similar fund) not less
than the earlier of the maturity of the Special Bond or ten years after the
date of purchase, (iii) must be purchased at a price that results in a
yield to maturity and a current return at least equal to that of the
Special Bonds as of the Initial Date of Deposit, (iv) shall be payable as
to principal and interest in United States currency, (v) shall not be
"when, as if issued" bonds and (vi) must be eligible to be insured (and
when acquired be insured) under the Insurance, if applicable.
(b) Each New Bond shall be rated at least "A" or better by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc. or Moody's Investors
Service, Inc.
(c) The purchase price of the New Bonds shall not exceed the amount of
funds reserved for the purchase of the Special Bonds.
(d) The Depositor shall furnish a notice to the Trustee (which may be
part of the Failed Contract Notice) in respect of the New Bond purchased or
to be purchased that shall (i) identify the New Bonds, (ii) state that the
contract to purchase, if any, entered into by the Depositor is satisfactory
in form and substance and (iii) state that the foregoing conditions of
clauses (a) and (b) have been satisfied with respect to the New Bonds.
Upon satisfaction of the foregoing conditions with respect to any New Bond,
the Trustee shall pay the purchase price for the New Bond from the amount of
funds reserved for the purchase of the Special Bonds or, if the Trustee has
credited any moneys and/or letters of credit attributable to the failed Special
Bond to the Principal Account, the Trustee shall pay the purchase price of the
New Bond upon directions from the Depositor from the moneys and/or letters of
credit so credited to the Principal Account. If the Trustee has credited moneys
of the Depositor to the Principal Account, the Trustee shall forthwith return to
the Depositor the portion of such moneys that is not properly distributable to
Unitholders pursuant to Section 3.04.
Whenever a New Bond is acquired by the Depositor pursuant to the provisions
of this Section 3.12, the Trustee shall, within five days thereafter, mail to
all Unitholders notices of such acquisition, including an identification of the
failed Special Bonds and the New Bonds acquired. The purchase price of the New
Bonds shall be paid out of the funds reserved for the purchase of the failed
Special Bonds. Except as provided in Article VIII, the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
any purchase made pursuant to any such directions and in the absence of such
directions the
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Trustee shall have no duty to purchase any New Bonds under this Agreement. The
Depositor shall not be liable for any failure to instruct the Trustee to
purchase any New Bonds or for errors of judgment in respect of this Section
3.12; provided, however, that this provision shall not protect the Depositor
against any liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
SECTION 3.13. COMPENSATION OF DEPOSITOR FOR SUPERVISORY SERVICES. As
compensation for providing supervisory portfolio services under this Agreement,
the Depositor shall receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee in the amount
specified as compensation for the Depositor in Part II of the Trust Agreement,
but in no event shall such compensation when combined with all compensation
received from other series of the Fund or other unit investment trusts sponsored
by the Depositor or its affiliates for providing such supervisory services in
any calendar year exceed the aggregate cost to the Depositor for providing such
services. The rate of such compensation may be increased by the Depositor from
time to time, without the consent or approval of any Unitholder or the Trustee,
by amounts not exceeding the proportionate increase, during the period from the
date of such Trust Agreement to the date of any such increase, in consumer
prices as last published prior to each such date under the classification "All
Services Less Rent of Shelter" in the Consumer Price Index For All Urban
Consumers (CPI-U) U.S. City Average, not seasonally adjusted, base 1982 - 84 =
100, published by the United States Department of Labor. In the event that such
classification ceases to incorporate a significant number of items, or if a
substantial change is made in the method of establishing such classification,
then the classification shall be adjusted in a fair and reasonable manner to the
figure that would have resulted had no substantial change occurred in the manner
of computing such classification. In the event that such classification (or a
successor or substitute index) is not available, such governmental or other
service or publication as shall evaluate the information in substantially the
same manner as the aforesaid classification shall be used in lieu thereof. Such
compensation shall be charged by the Trustee, upon receipt of invoice therefor
from the Depositor, against the Interest and Principal Accounts on or before the
Distribution Date on which such period terminates. If the cash balance in the
Interest and Principal Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.13, the Trustee shall have the power to sell
(i) Bonds from the current list of Bonds designated to be sold pursuant to
Section 5.02 hereof, or (ii) if no such Bonds have been so designated, such
Bonds as the Trustee may see fit to sell in its own discretion, and to apply the
proceeds of any such sale in payment of the amounts payable pursuant to this
Section 3.13. Any moneys payable to the Depositor pursuant to this Section 3.13
shall be secured by a prior lien on the Trust Fund except that such lien shall
be junior and subordinate to any lien in favor of the Trustee under the
provisions of Section 8.08.
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ARTICLE IV
EVALUATION OF BONDS;
THE EVALUATOR
SECTION 4.01. EVALUATION OF BONDS. The Evaluator shall determine separately
and promptly furnish to the Trustee and the Depositor (if separate from the
Evaluator) upon request the value of each issue of Bonds (treating separate
maturities of Bonds as separate issues) as of the Evaluation Time on the bid
side of the market on the days on which the Trust Fund Evaluation is required by
Section 5.01, and, in addition, as of the Evaluation Time on the bid side of the
market if the secondary market in the Units is maintained based on bid side
values or on both the bid and offering sides, if the Trustee shall so inform the
Evaluator from time to time, such additional evaluation being on each business
day commencing with the date of the Trust Agreement. Such evaluations shall be
made (i) on the basis of current bid or offering prices for the Bonds, (ii) if
bid or offering prices are not available for any Bonds, on the basis of current
bid or offering prices for comparable bonds, (iii) by determining the value of
the Bonds on the bid or offering side of the market by appraisal or (iv) by any
Fund, the Evaluator shall also determine and furnish to the Trustee and the
Depositor the aggregate of (a) the value of all Bonds on the basis of such
evaluation and (b) on the basis of the information furnished to the Evaluator by
the Trustee pursuant to Section 3.11, the amount of cash then held in the
Principal Account which was received by the Trustee after the Record Date
preceding such determination less any amounts held in the Principal Account for
distribution to Unitholders on a subsequent Distribution Date when a Record Date
occurs four business days or less after such determination. For the purposes of
the foregoing, the Evaluator may obtain current bid or offering prices for the
Bonds from investment dealers or brokers (including the Depositor) that
customarily deal in similar bonds or from any other reporting service or sources
of information which the Evaluator deems appropriate.
Insurance obtained for a Trust Fund has no effect, under normal
circumstances, on the price or redemption value of Units. It is the present
intention of the Evaluator to attribute a value to such insurance for the
purpose of computing the price or redemption value of Units only in
circumstances where the credit quality of an underlying Bond has significantly
deteriorated. The value to be added to such Bonds shall be an amount equal to
the excess, if any, by which the net proceeds realizable from the sale of the
Bonds on an insured basis exceeds the sum of (i) the net proceeds realizable
from the sale of the Bonds on an uninsured basis plus (ii) the premium
attributable to the Permanent Insurance. The Depositor will instruct the Trustee
not to sell such Bonds to effect redemptions or for any other reason but rather
to retain them in the portfolio unless value attributable to the Permanent
Insurance can be realized upon sale. Insurance obtained by the issuer of a Bond
is effective so long as such Bond is outstanding. Therefore, any such insurance
may be considered to represent an element of market value in regard to the Bonds
thus insured, but the exact effect, if any, of this insurance on such market
value cannot be predicted.
SECTION 4.02. CERTAIN INFORMATION TO BE MADE AVAILABLE. For the purpose of
permitting Unitholders to satisfy any reporting requirements of applicable
federal or state
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tax law, the Evaluator shall make available to the Trustee and the Trustee shall
transmit to any Unitholder upon request any determinations made by the Evaluator
pursuant to Section 4.01 which concern the Trust Fund in which such Unitholder
holds Units.
SECTION 4.03. COMPENSATION OF THE EVALUATOR. As compensation for its
services hereunder, the Evaluator shall receive against a statement therefor
submitted to the Trustee on or before each Distribution Date the amount
specified as compensation for the Evaluator in Part II of the Trust Agreement.
The rate of such compensation may be increased by the Evaluator from time to
time, without the consent or approval of any Unitholder, the Trustee or the
Depositor, by amounts not exceeding the proportionate increase, during the
period from the date of such Trust Agreement to the date of any such increase,
in consumer prices as last published prior to each such date under the
classification "All Services Less Rent of Shelter" in the Consumer Price Index
For All Urban Consumers (CPI-U) U.S. City Average, not seasonally adjusted, base
1982 - 84 = 100, published by the United States Department of Labor. In the
event that such classification ceases to incorporate a significant number of
items, or if a substantial change is made in the method of establishing such
classification, then the classification shall be adjusted in a fair and
reasonable manner to the figure that would have resulted had no substantial
change occurred in the manner of computing such classification. In the event
that such classification (or a successor or substitute index) is not available,
such governmental or other service or publication as shall evaluate the
information in substantially the same manner as the aforesaid classification
shall be used in lieu thereof. Such compensation shall be charged by the
Trustee, upon receipt of invoice therefor from the Evaluator, against the
Interest and Principal Accounts on or before the Distribution Date. If the cash
balances in the Interest and Principal Accounts shall be insufficient to provide
for amounts payable pursuant to this Section 4.03, the Trustee shall have the
power to sell (i) Bonds designated to be sold pursuant to Section 5.02 hereof or
(ii) if no such Bonds have been so designated, such Securities as the Trustee
may see fit to sell in its own discretion, and to apply the proceeds of any such
sale in payment of the amounts payable pursuant to this Section 4.03. Any moneys
payable to the Evaluator pursuant to this Section 4.03 shall be secured by a
prior lien on the Trust Fund except that such lien shall be junior and
subordinate to any lien in favor of the Trustee under the provisions of Section
8.08.
SECTION 4.04. LIABILITY OF THE EVALUATOR. The Trustee, the Depositor (if
separate from the Evaluator) and the Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The determinations made by the Evaluator hereunder shall be made in
good faith upon the basis of the best information available to it. The Evaluator
shall be under no liability to the Trustee, the Depositor or the Unitholders for
errors in judgment; provided, however, that this provision shall not protect the
Evaluator against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
SECTION 4.05. RESIGNATION, REMOVAL AND OTHER MATTERS RELATING TO THE
EVALUATOR. (a) The Evaluator may resign and be discharged hereunder, by
executing an instrument in writing resigning as the Evaluator and filing the
same with the Depositor (if separate from
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the Evaluator) and the Trustee not less than 60 days before the date specified
in such instrument when, subject to Section 4.05(c), such resignation is to take
effect. Upon receiving such notice of resignation, the Depositor (if separate
from the Evaluator) and the Trustee shall use their best efforts to appoint a
successor Evaluator having qualifications and at a rate of compensation
satisfactory to the Depositor (if separate from the Evaluator) and the Trustee.
Such appointment shall be made by written instrument executed by the Depositor
(if separate from the Evaluator) and the Trustee, in duplicate, one copy of
which shall be delivered to the resigning Evaluator and one copy to the
successor Evaluator. The Depositor may remove the Evaluator at any time upon
thirty days' written notice and appoint a successor Evaluator having
qualifications and at a rate of compensation satisfactory to the Depositor and
the Trustee. Such appointment shall be made by written instrument executed by
the Depositor, in duplicate, one copy of which shall be delivered to the
Evaluator so removed and one copy to the successor Evaluator. Notice of such
resignation or removal and appointment of a successor Evaluator shall be mailed
by the Trustee to each Unitholder.
(b) If the Evaluator resigns and no successor Evaluator shall have been
appointed and have accepted appointment within 30 days after receipt of the
notice of resignation by the Depositor (if appropriate) and the Trustee, the
Evaluator may forthwith apply to a court of competent jurisdiction for the
appointment of a successor Evaluator. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor Evaluator.
(c) Any successor Evaluator appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the Trustee an instrument accepting such
appointment hereunder, and such successor Evaluator without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
the Evaluator herein and shall be bound by all the terms and conditions of this
Agreement. Any resignation or removal of the Evaluator and appointment of a
successor Evaluator pursuant to this Section 4.05 shall become effective upon
such acceptance of appointment.
(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Evaluator hereunder shall be a party, shall be the
successor Evaluator under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which the Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
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ARTICLE V
TRUST FUND EVALUATION;
REDEMPTION OF UNITS
SECTION 5.01. TRUST FUND EVALUATION. As of the Evaluation Time next
following any tender by a Unitholder for redemption and on any other business
day desired by it or as may be required hereunder, the Trustee shall as to each
Trust Fund:
Add
(1) cash on hand in the Trust Fund, other than cash held especially
for the purchase of Contract Obligations,
(2) the aggregate value of each issue of the Bonds in the Trust Fund
(including Contract Obligations) on the bid side of the market as
determined by the Evaluator pursuant to Section 4.01, and
(3) accrued but unpaid interest on the Bonds in the Trust Fund at the
close of business on the date of such computation;
Deduct
(1) amounts representing any applicable taxes, governmental charges or
other charges pursuant to Section 3.03 payable out of the Trust Fund and
for which no deductions shall have previously been made for the purpose of
addition to the Reserve Account,
(2) amounts representing estimated accrued fees and expenses of the
Trust Fund including but not limited to unpaid fees and expenses of the
Trustee (including legal and auditing expenses), the Evaluator, the
Depositor, the Insurer and bond counsel, and
(3) cash allocated for distribution to Unitholders of the Trust Fund
of record as of the business day prior to the evaluation then being made.
The resulting figure is herein called a "TRUST FUND EVALUATION."
SECTION 5.02. REDEMPTION OF UNITS; SALE OF BONDS. Any Unitholder may cause
any of his Units to be redeemed by the Trustee, subject to the terms of this
Section 5.02, by making a written request to the Trustee at its principal trust
office, and, in the case of Units evidenced by a Certificate, by tendering such
Certificate to the Trustee at such office, properly endorsed or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Trustee. Unitholders must sign such written request, and such Certificate or
transfer instrument, exactly as their name appears on the records of the Trustee
and on any Certificate representing the Units to be redeemed. Such signature
must
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be guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other signature guarantee program in addition to, or
in substitution for, STAMP, as may be accepted by the Trustee. Such redemption
shall be made by the Trustee on the seventh calendar day following the day on
which request for redemption is received by the Trustee, provided that if such
seventh calendar day is not a business day, then such Units shall be redeemed on
the first business day prior thereto (such seventh calendar day or first
business day prior thereto being herein called the "REDEMPTION DATE"). Subject
to payment by such Unitholder of any tax or other governmental charges which may
be imposed thereon, such redemption is to be made by payment on the Redemption
Date of cash equal to the Unit Value (determined on the basis of the Trust Fund
Evaluation made in accordance with Section 5.0l) multiplied by the number of
Units being redeemed (herein called the "REDEMPTION PRICE"). The portion of the
Redemption Price which represents interest shall be withdrawn from the Interest
Account of the affected Trust Fund to the extent available. The balance paid on
any redemption including accrued interest, if any, shall be withdrawn from the
Principal Account of the affected Trust to the extent that funds are available
for such purpose. If such available balance shall be insufficient, the Trustee
shall sell from such Trust Fund such Bonds from among those designated for such
purpose by the Depositor as the Trustee in its discretion shall deem advisable
or necessary. Sales of Bonds by the Trustee shall be made in such manner as the
Trustee shall in the exercise of its fiduciary judgment determine will bring the
best price obtainable for the Trust Fund. In the event that funds are withdrawn
from the Principal Account or Bonds are sold for payment of any portion of the
Redemption Price representing accrued interest, the Principal Account shall be
reimbursed when sufficient funds are next available in the Interest Account for
such funds so applied.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than seven calendar days following the
day on which tender for redemption is made (1) for any period during which the
New York Stock Exchange, Inc. is closed other than customary weekend and holiday
closings; (2) for any period during which (i) trading on the New York Stock
Exchange, Inc. is restricted or (ii) an emergency exists as a result of which
disposal by the Trust Fund of the Bonds is not reasonably practicable or it is
not reasonably practicable fairly to determine in accordance herewith the value
of the Bonds for the purposes of any Trust Fund Evaluation; or (3) for such
other period as the Securities and Exchange Commission may by order permit.
No later than the close of business on the day of tender of any Unit for
redemption by a Unitholder other than the Depositor, the Trustee shall notify
the Depositor of such tender. The Depositor shall have the right to purchase
such Units by notifying the Trustee of its election to make such purchase as
soon as practicable thereafter but in no event subsequent to the close of
business on the second business day after the day on which such Units were
tendered for redemption. Such purchase shall be made by payment for such Units
by the Depositor to the Unitholder not later than the close of business on the
Redemption Date of any amount not less than the Redemption Price which would
otherwise be payable by the Trustee to such Unitholder.
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Any Unit so purchased by the Depositor may at the option of the Depositor
be tendered to the Trustee for redemption in the manner provided in the first
paragraph of this Section 5.02.
The Depositor shall deliver a current list of Bonds in each Trust Fund to
be sold for the purpose of redemption of Units tendered for redemption and for
payment of expenses hereunder. In connection therewith, the Depositor may
specify the minimum principal amounts of any Bonds to be sold at any one time.
If at any such time the Depositor shall for any reason fail to deliver such a
list, the Trustee, in its sole discretion, may designate a current list of Bonds
in each Trust Fund for such purposes. The net proceeds of any sale of Bonds
which represents interest shall be credited to the Interest Account of the
affected Trust Fund, and the balance of such net proceeds shall be credited to
the Principal Account of such Trust Fund. The Depositor shall also designate on
such list of Bonds designated to be sold the Bonds upon the sale of which the
Trustee shall obtain permanent insurance (the "PERMANENT INSURANCE") from an
Insurer, provided that if the Depositor shall for any reason fail to make such
designation, the Trustee in its sole discretion shall make such designation if
it deems such designation to be in the best interests of Unitholders. The
Trustee is hereby authorized to pay and shall pay out of the proceeds of the
sale of the Bonds which are covered by Permanent Insurance any premium for such
Permanent Insurance and the net proceeds after such deduction shall be credited
to the Principal Account and the net proceeds representing accrued interest
shall be credited to the Interest Account.
Except as provided in Article VII and Article VIII, neither the Depositor
nor the Trustee shall be liable or responsible in any way for depreciation or
loss incurred by reason of any sale or designation of Bonds made pursuant to
this Section 5.02.
Any Certificates evidencing Units redeemed pursuant to this Section 5.02
shall be cancelled by the Trustee and the Unit or Units evidenced by such
Certificates shall be extinguished by such redemptions.
ARTICLE VI
ISSUANCE, TRANSFER, INTERCHANGE
AND REPLACEMENT OF CERTIFICATES
SECTION 6.01. ISSUANCE OF CERTIFICATES. Certificates representing Units
held by a Unitholder will not be issued except upon written request by a
Unitholder, or his or her registered broker/dealer, to the Trustee at its
principal trust office. Certificates that have been issued may be returned to
the Trustee at any time and cancelled, without affecting the Unitholder's
interest in the Trust Fund, when accompanied by proper written instructions from
the Unitholder.
SECTION 6.02. TRANSFER OF UNITS Interchange of Certificates;. A Unitholder
may transfer any of his Units by making a written request to the Trustee at its
principal trust office and, in the case of Units evidenced by a Certificate, by
presenting and surrendering
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such Certificate at such office properly endorsed or accompanied by a written
instrument or instruments of transfer in form satisfactory to the Trustee.
Unitholders must sign such written request, and such Certificate of transfer
instrument, exactly as their name appears on the records of the Trustee and on
any Certificate representing the Units to be transferred. Such signature must be
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guarantee program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. Such transfer shall
thereupon be made on the records of the Trustee and, if appropriate, a new
registered Certificate or Certificates for the same number of Units of the same
Trust Fund shall be issued in exchange and substitution therefor. Certificates
issued pursuant to this Agreement are interchangeable for one or more other
Certificates of the same Trust Fund in an equal aggregate number of Units and
all Certificates issued shall be issued in denominations of one Unit or any
whole multiple thereof as may be requested by the Unitholder. The Trustee may
deem and treat the person in whose name any Unit or Certificate shall be
registered upon the books of the Trustee as the owner of such Unit or
Certificate for all purposes hereunder and the Trustee shall not be affected by
any notice to the contrary. The transfer books maintained by the Trustee for
each Trust Fund for the purpose of this Section 6.02 shall be closed for an
individual Trust Fund as such Trust Fund is terminated pursuant to Article IX
hereof.
A sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such transfer or interchange shall be paid to the
Trustee. A Unitholder may be required to pay such amount as may be specified by
the Trustee (and approved by the Depositor) for each new Certificate issued on
any such transfer or interchange.
All Certificates cancelled pursuant to this Agreement, other than those
endorsed for transfer, may be cremated or otherwise destroyed by the Trustee.
SECTION 6.03. REPLACEMENT OF CERTIFICATES. In case any Certificate shall
become mutilated or be destroyed, stolen or lost, the Trustee shall execute and
deliver a new Certificate in exchange and substitution therefor upon the
Unitholder's furnishing the Trustee with proper identification and satisfactory
indemnity, complying with such other reasonable regulations and conditions as
the Trustee may prescribe and paying such expenses as the Trustee may incur,
provided, however, that if the particular Trust Fund has terminated or is in the
process of termination, the Trustee, in lieu of issuing such new Certificate,
may, upon the terms and conditions set forth herein, make the distributions set
forth in Section 9.01 hereof. Any mutilated Certificate shall be duly
surrendered and cancelled before any duplicate Certificate shall be issued in
exchange and substitution therefor. Any duplicate Certificate issued pursuant to
this Section 6.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time. Upon issuance of any
duplicate Certificate pursuant to this Section 6.03, the Certificate claimed to
have been lost, stolen or destroyed shall become null and void and of no effect,
and any bona fide purchaser thereof shall have only such rights as are afforded
under Article 8 of the
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Uniform Commercial Code to a holder presenting a Certificate for transfer in the
case of an overissue.
SECTION 6.04. FORM OF CERTIFICATE. Each Certificate shall be in fully
registered form, shall be numbered serially for identification, shall be
executed in facsimile by the original Depositor of the Trust Fund in question
and manually by an authorized signatory of the Trustee, shall be dated the date
of execution and delivery by the Trustee and shall represent a fractional
undivided interest in the specified Trust Fund, the numerator of which fraction
shall be the number of Units set forth on the face of such Certificate and the
denominator of which shall be the total number of Units of undivided interest of
such Trust Fund outstanding at any such time.
ARTICLE VII
DEPOSITOR
Section 7.01. CERTAIN MATTERS REGARDING SUCCESSION. The covenants,
provisions and agreements herein contained shall in every case be binding upon
any successor to the business of any Depositor. In the event of an assignment by
any Depositor to a successor corporation or partnership as permitted by the next
following sentence, such Depositor and, if such Depositor is a partnership, its
partners shall be relieved of all further liability under this Agreement. Any
Depositor may transfer all or substantially all of its assets to a corporation
or partnership which carries on the business of such Depositor, if at the time
of such transfer such successor duly assumes all the obligations of such
Depositor under this Agreement.
SECTION 7.02. LIABILITY OF DEPOSITOR AND INDEMNIFICATION. (a) The Depositor
shall not be under any liability to any Trust Fund or the Unitholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment or for depreciation or
loss incurred by reason of the purchase or sale of any Bonds, provided, however,
that this provision shall not protect the Depositor against any liability to
which it would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder. The Depositor may
rely in good faith on any paper, order, notice, list, affidavit, receipt,
evaluation, opinion, endorsement, assignment, draft or any other document of any
kind prima facie properly executed and submitted to it by the Trustee, the
Trustee's counsel, the Evaluator or any other person for any matters arising
hereunder. The Depositor shall in no event be deemed to have assumed or incurred
any liability, duty or obligation to any Unitholder, the Evaluator or the
Trustee other than as expressly provided for herein.
(b) Each Trust Fund shall pay and hold the Depositor harmless from and
against any loss, liability or expense incurred in acting as Depositor of such
Trust Fund other than by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. The
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Depositor shall not be under any obligation to appear in, prosecute or defend
any legal action which in its opinion may involve it in any expense or
liability, provided, however, that the Depositor may in its discretion undertake
any such action which it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties hereto and the interests of
the Unitholders hereunder and, in such event, the legal expenses and costs of
any such action and any liability resulting therefrom shall be expenses, costs
and liabilities of the Trust Fund concerned and shall be paid directly by the
Trustee out of the Interest and Principal Accounts of such Trust Fund.
(c) None of the provisions of this Agreement shall be deemed to protect or
purport to protect the Depositor against any liability to the Trust Fund or to
the Unitholders to which the Depositor would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Depositor's reckless disregard of its obligations
and duties under this Agreement.
ARTICLE VIII
TRUSTEE
SECTION 8.01. GENERAL MATTERS RELATING TO THE TRUSTEE. (a) All moneys
deposited with or received by the Trustee hereunder shall be held by it without
interest in trust as part of the appropriate Trust Fund or Reserve Account until
required to be disbursed in accordance with the provisions of this Agreement and
such moneys will be segregated in such manner as shall constitute the
segregation and holding thereof in trust within the meaning of the Investment
Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in good
faith on any evaluation, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document whether or not of the same kind, prima facie properly
executed, or the disposition of moneys or Bonds pursuant to this Agreement;
provided, however, that this provision shall not protect the Trustee against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder, and
the Trustee may construe any of the provisions of this Agreement insofar as the
same may appear to be ambiguous or inconsistent with any other provisions
hereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto and the Unitholders.
(c) The Trustee shall not be responsible for or in respect of the recitals
herein, the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor, or for the form, character, genuineness, sufficiency,
value or validity of any Bonds (except that the Trustee shall be responsible for
the exercise of due care in determining the genuineness of Bonds delivered to it
pursuant to contracts for the purchase of such Bonds) or for or in respect of
the validity or sufficiency of any Certificates (except for the due execution
thereof by the Trustee) or for the due execution thereof by the Depositor and
the
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Trustee shall in no event assume or incur any liability, duty or obligation to
any Unitholder or to the Depositor or Evaluator, other than as expressly
provided for herein. The Trustee shall not be responsible for or in respect of
the validity of any signature by or on behalf of the Depositor.
(d) The Trustee shall not be under any obligation to appear in, prosecute
or defend any action which in its opinion may involve it in expense or liability
unless it shall be furnished with such reasonable security and indemnity against
such expense or liability as it may be required, and any pecuniary cost of the
Trustee from such actions shall be deductible ratably from and a ratable charge
against the Trust Funds concerned. The Trustee shall in its discretion undertake
such action as it may deem necessary at any and all times to protect the Trust
Funds and the rights and interests of the Unitholders pursuant to the terms of
this Agreement, provided, however, that the expenses and costs of such actions,
undertakings or proceedings shall be reimbursable to the Trustee ratably from
the Trust Funds concerned.
(e) The Trustee may employ agents, attorneys, accountants and auditors,
including an agent or agents for the purpose of custody and safeguarding Bonds,
and shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable care. The Trustee shall not be
liable in respect of any action taken or suffered under this Agreement in good
faith, in accordance with an opinion of counsel. The fees and expenses charged
by such agents, attorneys, accountants or auditors, except for the fees and
expenses charged by any agent or agents for custody and safeguarding of Bonds,
shall constitute an expense of the Trustee reimbursable from the Interest and
Principal Accounts as set forth in Section 3.04 hereof.
(f) If at any time the Depositor shall fail to undertake or perform any of
the duties which by the terms of this Agreement are affirmatively required by it
to be undertaken or performed, or the Depositor shall be incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Depositor or of
its property shall be appointed, or any public officer shall take charge or
control of the Depositor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case, the Trustee
may do any one or more of the following: (1) appoint a successor Depositor who
shall act hereunder in all respects in place of such Depositor and which may be
compensated, at rates deemed by the Trustee to be reasonable under the
circumstances, by deduction ratably from the Interest Account or, to the extent
funds are not available in such Account, from the Principal Account of the Trust
Funds but no such deduction shall be made exceeding such reasonable amount as
the Securities and Exchange Commission may prescribe in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940; (2) continue to act as
Trustee hereunder without terminating this Agreement; or (3) terminate this
Agreement and the trust created hereby and liquidate the Trust Funds in the
manner provided in Section 9.0l.
(g) If the value of any Trust Fund as shown by any Trust Fund Evaluation
shall be less than the liquidation amount specified in Part II of the Trust
Agreement the Trustee may in its discretion, and shall if so directed by the
Depositor, terminate this Agreement and the
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trust created hereby, only insofar as it relates to such Trust Fund, and
liquidate such Trust Fund all in the manner provided in Section 9.0l or if by
reason of the aggregate redemption of Units not theretofore sold by the
Depositor and/or one or more of the underwriters such that the net worth of such
Trust Fund is reduced to less than 40% of the aggregate principal amount of
Bonds initially deposited therein, the Trustee shall terminate this Agreement
and the trust created hereby, only insofar as it relates to such Trust Fund, and
liquidate such Trust Fund, all in the manner provided in Section 9.0l.
(h) In no event shall the Trustee be personally liable for any taxes or
other governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon. The Trustee shall be reimbursed and indemnified out of the
Interest and Principal Accounts of the appropriate Trust Fund for all such taxes
and charges, for any tax or charge imposed against the Trustee as Trustee of
such Trust Fund and for any expenses, including counsel fees, which the Trustee
may sustain or incur with respect to such taxes or charges.
(i) Notwithstanding any provisions of this Agreement to the contrary, no
payment to a Depositor or to any principal underwriter (as defined in the
Investment Company Act of 1940) for the Trust Fund or to any affiliated person
(as so defined) or agent of a Depositor or such underwriter shall be allowed the
Trustee as an expense except for payment of such reasonable amounts as the
Securities and Exchange Commission may prescribe as compensation for performing
bookkeeping and other administrative services of a character normally performed
by the Trustee.
SECTION 8.02. BOOKS, RECORDS AND REPORTS. The Trustee shall keep proper
books of record and account of all the transactions of each Trust under this
Indenture at its corporate trust office including a record of the name and
address of, and the Certificates issued by each Trust and held by, every
Unitholder, and such books and records of each Trust shall be open to inspection
by any Unitholder of such Trust at all reasonable times during the usual
business hours.
Unless the Depositor determines that such an audit is not required, the
account of each Trust shall be audited not less than annually by independent
public accountants designated from time to time by the Depositor and reports of
such accountants shall be furnished by the Trustee, upon request, to
Unitholders. The Trustee, however, in connection with any such audits shall not
be obligated to use Trust assets to pay for such audits in excess of the amounts
indicated in the Prospectus relating to such Trust.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of independent counsel to the Depositor, the Trustee
shall pay, or reimburse to the Depositor or others, the costs of the preparation
of documents and information with respect to a Trust required by law or
regulation in connection with the maintenance of a secondary market in units of
such Trust. Such costs may include but are not limited to accounting and legal
fees, blue sky registration and filing fees, printing expenses and other
reasonable expenses related to documents required under federal and state
securities laws. Such costs shall be a Trust expense and the Trustee shall not
be obligated to advance any of its own funds to make such payments.
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SECTION 8.03. REPORTS TO SECURITIES AND EXCHANGE COMMISSION AND OTHERS. The
Trustee shall make such annual or other reports as may from time to time be
required under any applicable state or federal statute or rule or regulation
thereunder.
SECTION 8.04. AGREEMENT AND LIST OF BONDS ON FILE. The Trustee shall keep a
certified copy or duplicate original of this Agreement on file at its principal
trust office available for inspection by any Unitholder at all reasonable times
during its usual business hours, and the Trustee shall keep and so make
available for inspection a current list of the Bonds in each Trust Fund.
SECTION 8.05. COMPENSATION OF TRUSTEE. The Trustee shall receive at the
times and in the manner set forth in Section 3.04 as compensation for performing
the usual, ordinary, normal and recurring services under this Agreement during
the preceding month an amount equal to the amount specified as compensation for
the Trustee in Part II of the Trust Agreement. The rate of such compensation 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 increased by the Trustee from time to time,
without the consent or approval of any Unitholder or the Depositor, by amounts
not exceeding the proportionate increase, during the period from the date of
such Trust Agreement to the date of any such increase, in consumer prices as
last published prior to each such date under the classification "All Services
Less Rent of Shelter" in the Consumer Price Index For All Urban Consumers
(CPI-U) U.S. City Average, not seasonally adjusted, based 1982 - 84 = 100,
published by the United States Department of Labor. In the event that such
classification ceases to incorporate a significant number of items, or if a
substantial change is made in the method of establishing such classification,
then the classification shall be adjusted in a fair and reasonable manner to the
figure that would have resulted had no substantial change occurred in the manner
of computing such classification. In the event that such classification (or a
successor or substitute index) is not available, such governmental or other
service or publication as shall evaluate the information in substantially the
same manner as the aforesaid classification shall be used in lieu thereof.
The Trustee shall also receive, at the times and in the manner set forth in
Section 3.04, reimbursement for any and all expenses and disbursements incurred
hereunder (except as set forth in Section 8.01(e)), including legal and auditing
expenses and additional compensation for any extraordinary services performed
hereunder, which extraordinary services shall include but not be limited to, all
costs and expenses incurred by the Trustee in making any annual or other reports
pursuant to Section 8.03, or in making any distribution of cash attributable to
failed contracts covering Contract Obligations in accordance with Section 3.04;
provided, however, that the amount of any such charge which has not been finally
determined as of any Distribution Date may be estimated and any necessary
adjustments shall be made in the succeeding period.
The Trustee shall be indemnified ratably from the Trust Funds and held
harmless against any loss, liability or expense incurred without gross
negligence, bad faith, willful misconduct or reckless disregard of its duties on
the part of the Trustee arising out of or in
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connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim or liability in the
premises.
The Trustee's normal and extraordinary compensation and reimbursement of
the above-mentioned expenses and losses shall be charged by the Trustee against
the Interest and Principal Accounts of the appropriate Trust Funds in accordance
with Section 3.04 on or before each Distribution Date. If the balances in the
Interest and Principal Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 8.05, the Trustee shall have the power to sell
Bonds in the manner provided in Section 5.02 hereof. The Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
any sale of Bonds made pursuant to this Section 8.05.
SECTION 8.06. RESIGNATION, DISCHARGE OR REMOVAL OF THE TRUSTEE; SUCCESSORS.
(a) The Trustee may resign and be discharged of the trust created by this
Agreement by executing an instrument in writing resigning as Trustee of such
trust, filing the same with the Depositor and mailing a copy of a notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such instrument when, subject to Section 8.06(c), such
resignation is to take effect. Upon receiving such notice of resignation, the
Depositor shall use its best efforts promptly to appoint a successor Trustee in
the manner and meeting the qualifications hereinafter provided, by written
instrument or instruments delivered to the resigning Trustee and the successor
Trustee. Notice of such appointment of a successor Trustee shall be mailed
promptly after acceptance of such appointment by the successor Trustee to each
Unitholder then of record. The Depositor may remove the Trustee at any time with
or without cause and appoint a successor Trustee by written instrument or
instruments delivered to the Trustee so removed and the successor Trustee,
provided that a notice of such removal and appointment of a successor Trustee
shall be mailed by the successor Trustee promptly after acceptance of such
appointment to each Unitholder then of record.
(b) In case at any time the Trustee shall resign and no successor Trustee
shall have been appointed within thirty days after notice of resignation has
been received by the Depositor, the retiring Trustee may forthwith apply to a
court of competent jurisdiction for the appointment of a successor Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(c) Any successor Trustee appointed hereunder shall execute and acknowledge
to the Depositor and the retiring Trustee an instrument accepting such
appointment hereunder, and such successor Trustee without any further act, deed
or conveyance shall become vested with all rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee herein and shall be bound by all the terms and conditions of this
Agreement. Upon the request of such successor Trustee, the retiring Trustee
shall, upon payment of all amounts due the retiring Trustee, execute and deliver
an instrument acknowledged by it transferring to such successor Trustee all the
rights and powers of the retiring Trustee; and the retiring Trustee shall
transfer, deliver and pay over to the successor Trustee all Bonds and moneys at
the time held by it hereunder, if any, together with all necessary instruments
of transfer and assignment or other documents properly
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executed necessary to effect such transfer and such of the records or copies
thereof maintained by the retiring Trustee in the administration hereof as may
be requested by the successor Trustee and shall thereupon be discharged from all
duties and responsibilities under this Agreement. Any resignation or removal of
a Trustee and appointment of a successor Trustee pursuant to this Section 8.06
shall become effective upon such acceptance of appointment by the successor
Trustee.
(d) Any corporation into which a Trustee hereunder may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which such Trustee hereunder shall be a party, shall be the
successor Trustee under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
SECTION 8.07. QUALIFICATION OF TRUSTEE. The Trustee and any successor
Trustee shall be a corporation organized under laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers and
has at all times an aggregate capital, surplus and undivided profits of not less
than $500,000.
SECTION 8.08. COLLATERAL. As collateral security for the prompt payment to
the Trustee of all reimbursement to which the Trustee is entitled hereunder and
of all sums at any time owed to or payable to the Trustee hereunder (including,
without limitation, the prompt reimbursement of the Trustee for any sums that it
may from time to time in its discretion advance to the account of the Trust
Fund), the Trustee is hereby granted a first and prior lien and security
interest in and to the Trust Fund and all Bonds now or hereafter included
therein, including (without limitation) those Bonds listed in the Schedules to
the Trust Agreement, together with all Bonds, obligations, Contract Obligations
and instruments received in exchange or substitution therefor and all proceeds
thereof and all additions and substitutions.
ARTICLE IX
TERMINATION
SECTION 9.01. PROCEDURE UPON TERMINATION. This Agreement and the trust
created hereby shall terminate as to an individual Trust Fund upon the maturity,
redemption, sale or other disposition, as the case may be, of the last Bond held
hereunder in such Trust Fund, unless sooner terminated as herein before
specified, and may be terminated at any time by written instrument executed by
the Depositor and consented to by holders of Units representing 66-2/3% of the
Units of such Trust Fund then outstanding under this Agreement; provided, that
in no event shall this trust continue with respect to such Trust Fund beyond
January l of the fiftieth year after the creation of such Trust Fund.
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This Agreement and the trust created hereby shall be terminated as to the
entire Fund upon the maturity, redemption, sale or other disposition, as the
case may be, of the last Bond held hereunder, in the last maturing Trust Fund,
unless sooner terminated as herein before specified, and may be terminated at
any time by written instrument executed by the Depositor and consented to by
holders of Units representing 66-2/3% of all Units then outstanding under this
Agreement; provided that in no event shall this trust continue beyond December
31 of the year following the termination of the last Trust Fund; and provided
further that in connection with any such liquidation it shall not be necessary
for the Trustee to dispose of any Bond or Bonds if retention of such Bond or
Bonds, until due, shall be deemed to be in the best interests of Unitholders,
including, but not limited to, situations in which a Bond or Bonds insured by
the Insurance are in default, situations in which Bond or Bonds insured by the
Insurance reflect a deteriorated market price resulting from a deterioration in
credit quality and situations in which a Bond or Bonds mature after the
mandatory termination date.
Written notice of any termination, specifying the time or times at which
any Unitholder holding Certificates may surrender such Certificates for
cancellation and the date, determined by the Trustee, upon which the transfer
books of the Trustee, maintained pursuant to Section 8.02, shall be closed with
respect to the terminated Trust Fund or the entire Fund, as the case may be,
shall be given by the Trustee to Unitholders of such terminated Trust Fund or
all Unitholders, as the case may be.
Within a reasonable period of time after the termination of the entire
Fund, the Trustee shall sell all of the Bonds then held, if any, and shall:
(a) deduct from the Interest Account or to the extent that funds are
not available in such Account, from the Principal Account of every Trust
Fund separately and pay to itself individually an amount equal to the sum
of (1) its accrued compensation for its ordinary services in connection
with such Trust Fund, (2) any compensation due it for its extraordinary
services in connection with such Trust Fund and (3) any other expenses and
disbursements in connection with such Trust Fund as provided herein;
(b) deduct from the Interest Account or to the extent that funds are
not available in such account, from the Principal Account of every Trust
Fund separately and pay accrued and unpaid fees in connection with such
Trust Fund of the Evaluator, the Depositor and bond counsel, if any;
(c) deduct from the Interest Account, or to the extent that funds are
not available from such Account, from the Principal Account of every Trust
Fund separately any amounts which it in its sole discretion shall deem
requisite to be deposited in the Reserve Account to provide for any
applicable taxes or other governmental charges that may be payable out of
such Trust Fund;
(d) distribute to each Unitholder (upon surrender for cancellation of
his Certificate or Certificates, if issued) such Unitholder's interest in
the balances of the
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Interest, Principal, and, on the conditions set forth in Section 3.03
hereof, the Reserve Accounts of the Trust Fund in which he holds Units,
provided that such distribution shall be made to Unitholders of record as
of the date of such computation and shall be distributed to them within
five days or shortly thereafter;
(e) together with such distribution to each Unitholder as provided for
in paragraph (d), furnish to each such Unitholder a final statement as of
the date of the computation of the amount distributable to Unitholders of
the same Trust Fund, setting forth the data and information in
substantially the form and manner provided for in Section 3.05 hereof.
SECTION 9.02. NOTICE TO UNITHOLDERS. In the event that all of the
Unitholders holding Certificates shall not surrender their Certificates for
cancellation within six months after the time specified in the applicable,
above-mentioned notice, the Trustee shall give a second written notice to the
remaining Unitholders to surrender their Certificates for cancellation and
receive the liquidating distribution with respect thereto. If within one year
after the second notice all the Certificates issued shall not have been
surrendered for cancellation, the Trustee may take appropriate steps or may
appoint an agent to take appropriate steps to contact the remaining Unitholders
concerning surrender of their Certificates and the cost thereof shall be paid
out of the moneys and other assets which remain in the affected Trust Fund.
SECTION 9.03. MONEYS TO BE HELD IN TRUST WITHOUT INTEREST. The Trustee
shall be under no liability with respect to moneys in the Interest, Principal
and Reserve Accounts upon termination, except to hold the same in trust without
interest.
SECTION 9.04. DISSOLUTION OF DEPOSITOR NOT TO TERMINATE. The dissolution of
the Depositor shall not, subject to Section 8.01(f), operate to terminate this
Agreement or the Fund or any individual Trust Fund.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. AMENDMENT AND WAIVER. This Agreement may be amended from
time to time by the Depositor and the Trustee without the consent of any of the
Unitholders (a) to cure any ambiguity or to correct or supplement any provisions
contained herein which may be defective or inconsistent with any other provision
contained herein; (b) to change any provision hereof as may be required by the
Securities and Exchange Commission or any successor governmental agency
exercising similar authority; or (c) to make such other provisions in regard to
matters or questions arising hereunder as shall not adversely affect the
interest of the Unitholders (as determined in good faith by the Depositor and
the Trustee). This Agreement may also be amended from time to time by the
Depositor and the Trustee (or the performance of any of the provisions of this
Agreement may be waived) with the consent of holders of Units representing
66-2/3% of the Units at the time
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outstanding under the Trust Agreement of the individual Trust Fund or Trust
Funds affected for the purpose of adding any provisions of this Agreement or of
modifying in any manner the rights of the holders of Units of such Trust Fund or
Trust Funds; provided, however, that in no event may any amendment be made which
would (a) alter the rights to the Unitholders as against each other, (b) provide
the Trustee with the power to engage in business or investment activities other
than as specifically provided in this Agreement or (c) adversely affect the
characterization of the Trust as a grantor trust for federal income tax
purposes; provided, further, that the consent of 100% of the Unitholders of any
individual Trust Fund is required to amend this Agreement (a) to increase the
number of Units of such Trust Fund issuable hereunder above the number of Units
specified in Part II of the Trust Agreement or such lesser amount as may be
outstanding at any time during the term of this Agreement, (b) to permit, in
addition to acquisitions permitted under Sections 3.07 and 3.12 hereof, the
acquisition hereunder of any Bonds for such Trust Fund different from those
specified in the Schedules to the Trust Agreement, (c) to reduce the aforesaid
percentage of Units the holders of which are required to consent to certain
amendments and (d) to reduce the interest in such Trust Fund represented by any
Units of such Trust Fund.
Promptly after the execution of any amendment the Trustee shall furnish
written notification of the substance of such amendment to each Unitholder then
of record affected thereby.
It shall not be necessary for the consent of Unitholders under this Section
10.01 or under Section 9.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Unitholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
SECTION 10.02. INITIAL COSTS. The cost of the initial preparation, printing
and execution of any Certificates and this Agreement, the initial fees of the
Trustee and the Trustee's counsel and other reasonable expenses in connection
therewith (including stamp taxes on original issuance of the Units and penalties
and interest, if any) together with all of the cost of registering the Units and
the Fund under the Securities Act of 1933 and the Investment Company Act of
1940, respectively, shall be paid by the Depositor.
SECTION 10.03. REGISTRATION (INITIAL AND CURRENT) OF UNITS AND FUND. The
Depositor agrees and undertakes on its own part to register the Units and the
Fund with the Securities and Exchange Commission and under the Blue Sky laws of
such states as the Depositor may select.
SECTION 10.04. CERTAIN MATTERS RELATING TO UNITHOLDERS. (a) The death or
incapacity of any Unitholder shall not operate to terminate this Agreement, the
Fund or the Trust Fund in which he holds Units nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Fund or such Trust
Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them. Each Unitholder expressly waives any right he may
have under any rule of law, or the provisions of any statute, or otherwise, to
require the Trustee at any time
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to account, in any manner other than as expressly provided in this Agreement, in
respect of the Bonds or moneys from time to time received, held and applied by
the Trustee hereunder.
(b) No Unitholder shall have any right to vote except as provided in
Sections 9.01 and 10.01 or in any manner otherwise to control the operation of
the Fund or the obligations of the parties hereto, nor shall anything set forth
in this Agreement or the Trust Agreement or contained in the terms of any
Certificates which may have been issued be construed so as to constitute the
Unitholders from time to time as partners or members of an association; nor
shall any Unitholder ever be under any liability to any third persons by reason
of any action taken by the parties to this Agreement, or for any other cause
whatsoever.
(c) By the purchase and acceptance or other lawful delivery and acceptance
of any Unit, whether certificated or not, the Unitholder shall be deemed to be a
beneficiary of the Trust created by this Agreement and the Trust Agreement and
vested with all right, title and interest in the Trust Fund therein created to
the extent of the Unit or Units set forth whether evidenced by such Certificate
or held in uncertificated form, subject to the terms and conditions of this
Agreement and the Trust Agreement.
(d) A Unitholder may at any time tender his Units or his Certificate(s) if
held in certificated form (including any temporary Certificate or other evidence
of ownership of Units of the Trust Fund, issued by the Trustee or the Depositor)
to the Trustee for redemption, subject to and in accordance with Section 5.02.
SECTION 10.05. MISSOURI LAW TO GOVERN. This Agreement is executed and
delivered in the State of Missouri, and all laws or rules of construction of
such State, except for provisions with respect to choice of law, shall govern
the rights of the parties hereto and the Unitholders and the interpretation of
the provisions hereof.
SECTION 10.06. NOTICES. Any notice, demand, direction or instruction to be
given to the Depositor hereunder shall be in writing and shall be duly given if
mailed, first class with proper postage prepaid, or delivered to the Depositor
at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402, or at such
other address as shall be specified in Part II of the Trust Agreement or by the
Depositor to the other parties hereto in writing. Any notice, demand, direction
or instruction to be given to the Trustee shall be in writing and shall be duly
given if mailed, first class with proper postage prepaid, or delivered to the
principal trust office of the Trustee at 127 West 10th Street, Kansas City,
Missouri 64105, or such other address as shall be specified to the other parties
hereto by the Trustee in writing. Any notice, demand, direction or instruction
to be given to the Evaluator hereunder shall be in writing and shall be duly
given if mailed, first class with proper postage prepaid, or delivered to the
Evaluator at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402,
or at such other address as shall be specified by the Evaluator to the other
parties hereto in writing. Any notice to be given to a Unitholder shall be duly
given if mailed, first class with proper postage prepaid, or delivered to each
Unitholder at the address of such holder appearing on the registration books of
the Trustee.
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SECTION 10.07. SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms shall be for any reason whatsoever held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of any Certificates or the rights of the holders
thereof.
SECTION 10.08. SEPARATE AND DISTINCT SERIES. Each series of Voyageur
Tax-Exempt Trust, to which these Standard Terms and Conditions of Trust shall be
applicable shall, for all financial and administrative purposes, be considered
separate and distinct from every other series, and neither the assets of nor the
expenses of any one series shall be applied or charged against any other series.
-40-
IN WITNESS WHEREOF, the parties hereto have caused these Standard Terms and
Conditions of Trust, Effective January 19, 1995 to be duly executed.
VOYAGEUR FUND MANAGERS, INC.
Depositor
By______________________________________
Chief Financial Officer
INVESTORS FIDUCIARY TRUST COMPANY,
Trustee
Exhibit 1.2
VOYAGEUR TAX-EXEMPT TRUST
SERIES 5
TRUST AGREEMENT
Dated: October 19, 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
October 19, 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.
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 5
(Note: Incorporated herein and made a part hereof are the "SCHEDULES OF
INVESTMENTS" as set forth in the Prospectus.)
Exhibit 2
October 19, 1995
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Re: VOYAGEUR TAX-EXEMPT TRUST, SERIES 5
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 5
(the "FUND"), in connection with the preparation, execution and delivery of a
Trust Agreement dated October 19, 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. 33-62681) 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
October 19, 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 5
Ladies/Gentlemen:
We have acted as special counsel for Voyageur Fund Managers, Inc.,
Depositor of Voyageur Tax-Exempt Trust, Series 5 (the "FUND"), in connection
with the issuance of units of fractional undivided interest in the Fund, under a
Trust Agreement dated October 19, 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 5 (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.
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
EXHIBIT 6(a)
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 October 19, 1995 in Amendment No. 1
to the Registration Statement (Form S-6 File No. 33-62681) and related
Prospectus of Voyageur Tax-Exempt Trust, Series 5.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
October 19, 1995
Exhibit 6(b)
Securities Pricing Service
717 Seventeenth Street, Suite 2500
Denver, Colorado 80202
Attn: Mark Nerud
October 19, 1995
Voyageur Fund Managers, Inc.,
90 S. Seventh Street, Suite 4400
Minneapolis, MN 55402-4115
Re: Voyageur Tax-Exempt Trust, Series 5 (A Unit Investment Trust)
REGISTERED UNDER THE SECURITIES ACT OF 1933, FILE NO. 33-62681
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
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