FILE NO: 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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 7
B. Name of Depositor: VOYAGEUR FUND MANAGERS, INC.
C. Complete address of Depositor's principal executive offices:
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
D. Name and complete address of agents for service:
VOYAGEUR FUND MANAGERS, INC. CHAPMAN AND CUTLER
Attention: Thomas J. Abood Attention: Mark J. Kneedy
90 South Seventh Street, Suite 4400 111 West Monroe Street
Minneapolis, Minnesota 55402 Chicago, Illinois 60603
E. Title and amount of securities being registered: An indefinite number of
Units of proportionate interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee: $500.00
H. Approximate date of proposed sale to the 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 _____
pursuant to Rule 487
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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 7
CROSS REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on 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>
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Introduction
) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) Underwriting
underwriter )
5. Organization of trust ) Introduction
6. Execution and termination of ) Introduction
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. General information regarding ) Introduction
trust's securities and rights ) Rights of Unitholders
of security holders ) The Fund
) Trust Administration
11. Type of securities comprising ) Introduction
units ) The Fund
) The Trusts
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and ) Introduction
expenses ) Summary of Essential Financial
) Information
) Public Offering
) Trust Information
) Trust Administration
(b) Certain information regard- ) *
ing periodic payment plan )
certificates )
(c) Certain percentages ) Introduction
) Summary of Essential Financial
) Information
) Public Offering
(d) Certain other fees, ) Public Offering
expenses or charges ) Trust Administration
payable by holders ) Trust Operating Expenses
(e) Certain profits to be ) Public Offering
received by depositor, ) Underwriting
principal underwriter, ) The Trusts
trustee or affiliated persons ) Trust Operating Expenses
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) The Fund
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Introduction
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Introduction
of income ) Rights of Unitholders
(b) Reinvestment of distribu- ) Rights of Unitholders
tions )
(c) Reserves or special funds )
) Trust Administration
(d) Schedule of distributions ) Summary of Essential Financial Information
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of trust agreement )
21. Loans to security holders ) *
22. Limitations on liability )
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) Trust Administration
27. Business of Depositor ) Trust Administration
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Directors ) *
32. Compensation of Directors ) *
33. Compensation of Employees ) *
34. Compensation to other persons ) Public Offering
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's ) Rights of Unitholders
securities )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Underwriting
(c) Selling agreements )
39. (a) Organization of principal )
underwriter )
) Trust Administration
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of the ) *
trust )
43. Certain brokerage commissions )
received by principal ) *
underwriter )
44. (a) Method of valuation ) Introduction
) Summary of Essential Financial
) Information
) Public Offering
) Trust Administration
) Rights of Unitholders
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) Public Offering
to certain persons )
45. Suspension of redemption rights ) Rights of Unitholders
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests )
in underlying securities ) Trust Administration
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of ) Trust Administration
trustee )
49. Fees and expenses of trustee ) Summary of Essential Financial
) Information
) Trust Administration
50. Trustee's lien ) Trust Administration
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's )
securities ) *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agree- )
ment with respect to )
replacement or elimi- ) The Fund
nation of portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitu- ) Trust Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax status of trust ) Tax Status
) The Trusts
VIII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
)
56. Certain information regarding ) *
)
57. Periodic payment certificates )
58. )
59. Financial statements (Instruc- ) Other Matters
tions 1(c) to Form S-6) )
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* Inapplicable, omitted, answer negative or not required
</TABLE>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 7
ARIZONA INSURED SERIES 2
NATIONAL INSURED SERIES 2
OREGON INSURED SERIES 4
TERRITORIAL INSURED SERIES 4
THE FUND. Voyageur Tax-Exempt Trust, Series 7 (the "Fund") consists of the
underlying separate unit investment trusts set forth above. The various trusts
are collectively referred to herein as the "Trusts." Territorial Insured Series
4 and National Insured Series 2 are referred to herein as the "Insured National
Trusts" while Arizona Insured Series 2 and Oregon Insured Series 4 are
collectively referred to herein as the "Insured State Trusts." Each Trust
initially consists of interest-bearing obligations (including delivery
statements relating to contracts for the purchase of certain such obligations
and an irrevocable letter of credit) issued by or on behalf of states and
territories of the United States and political subdivisions and authorities
thereof, the interest on which is, with certain exceptions, in the opinion of
recognized bond counsel to the issuing governmental authorities, exempt from all
Federal income taxes under existing law (the "Bonds"). In addition, the interest
income of each 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future reference.
THE DATE OF THIS PROSPECTUS IS_________, 1996
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 $100,000 or more. If Units were available
for purchase at the opening of business on the Initial Date of Deposit, the
Public Offering Price per Unit would have been that amount set forth in the
"Summary of Essential Financial Information." See "Public Offering."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return and Estimated Long-Term Return to Unitholders are as set forth
under "Summary of Essential Financial Information." The methods of calculating
Estimated Current Return and Estimated Long-Term Return are set forth in the
footnotes to the "Summary of Essential Financial Information" and under
"Estimated Current Return and Estimated Long-Term Return."
DISTRIBUTIONS. Unitholders will receive distributions on a monthly basis.
See "Rights of Unitholders--Distributions of Interest and Principal." Record
dates will be the first day of each month. Distributions will be made on the
fifteenth day of the month subsequent to the respective record dates.
MARKET FOR UNITS. Although not obligated to do so, an affiliate of the
Sponsor, Voyageur Fund Distributors, Inc., intends to, and certain of the other
Underwriters may, maintain a secondary market for the Units at prices based upon
the aggregate bid price of the Bonds in the portfolio of a Trust; however,
during the initial offering period such prices will be based upon the aggregate
offering prices of the Bonds. If such a market is not maintained and no other
over-the-counter market is available, a Unitholder will be able to dispose of
his Units through redemption at prices based upon the bid prices of the
underlying Bonds (see "Rights of Unitholders--Redemption of Units").
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end management investment company as
described herein. See "Rights of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other factors,
the inability of the issuer or an insurer to pay the principal of or interest on
a Bond when due, volatile interest rates, early call provisions, and changes to
the tax status of the Bonds. See "The Trusts--Risk Factors" for the applicable
Trust and "Risk Factors."
VOYAGEUR TAX-EXEMPT TRUST, SERIES 7
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: _______, 1996
SPONSOR AND EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<TABLE>
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ARIZONA NATIONAL OREGON TERRITORIAL
INSURED INSURED INSURED INSURED
SERIES 2 SERIES 2 SERIES 4 SERIES 4
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Principal Amount (Par Value) of Bonds...................
Number of Units.........................................
Fractional Undivided Interest in the Trust per Unit.....
Principal Amount (Par Value) of Bonds per Unit (1)......
Public Offering Price: Aggregate Offering Price of
Bonds in Portfolio.................................
Aggregate Offering Price of Bonds per Unit..............
Sales Charge 4.9% (5.152% of the Aggregate Offering
Price of the Bonds) per Unit(2).....................
Public Offering Price per Unit(2)(3)....................
Redemption Price per Unit(3)(4).........................
Sponsor's Initial Repurchase Price per Unit.............
Excess of Public Offering Price per Unit Over
Redemption Price per Unit...........................
Excess of Sponsor's Initial Repurchase Price per Unit
Over Redemption Price per Unit......................
Minimum Value of the Trust under which Trust
Agreement may be terminated.........................
Minimum Principal Distribution............$0.10 per Unit
First Settlement Date................... _________, 1996
Mandatory Termination Date.............December 31, 2045
Calculation of Estimated Net Annual Unit Income(5):
Estimated Annual Interest Income per Unit...........
Less: Estimated Annual Expense per Unit.............
Estimated Net Annual Interest Income per Unit.......
Estimated Normal Monthly Distribution per Unit(6).......
Estimated Daily Rate of Net Interest Accrual per Unit...
Estimated Current Return Based on Public Offering
Price(2)(6)(7)......................................
Estimated Long-Term Return(2)(6)(7).....................
Initial Distribution (_________, 1996)..................
Trustee's Initial Annual Fee per $1,000 Principal
Amount of Bonds(5)..................................
Evaluator's Annual Fee per Unit.........................
Sponsor's Annual Fee per Unit...........................
Estimated Organizational and Offering Expenses per Unit (8)
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 the ________ Trust
by approximately $______ 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 $_______; Estimated Annual Expense per Unit will be increased
to $_______; 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.
(8) Each Trust (and therefore the Unitholders of the respective Trust) will
bear all or a portion of its organizational and offering costs (including
costs of preparing the registration statement, the trust indenture and
other closing documents, registering Units with the Securities and Exchange
Commission and states, the initial audit of the Trust portfolios and the
initial fees and expenses of the Trustee but not including the expenses
incurred in the preparation and printing of brochures and other advertising
materials and any other selling expenses) as is common for mutual funds.
Total organizational and offering expenses will be charged off against
principal at the end of the initial offering period which is currently
expected to be approximately 2-3 months from the Initial Date of Deposit.
In so doing, the Sponsor may have to sell Securities from the Trusts. The
sale of Securities will serve to reduce the Principal Amount (Par Value) of
Securities per Unit stated above. See 'Trust Operating Expenses" and
"Statements of Net Assets." Historically, the sponsors of unit investment
trusts have paid all of the costs of establishing such trusts.
THE FUND
GENERAL. The Fund was created under the laws of the State of Missouri
pursuant to a Trust Agreement (the "Trust Agreement"), dated the Initial Date of
Deposit, as defined in "Summary of Essential Financial Information," with
Voyageur Fund Managers, Inc., as Sponsor and Evaluator, and Investors Fiduciary
Trust Company, as Trustee.
The Fund consists of four 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 2 and Territorial Insured Series 4 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
ARIZONA INSURED SERIES 2
GENERAL. Arizona Insured Series 2 (the "Arizona Trust") consists of issues
of _____Bonds. ____ of the Bonds in the Arizona Trust are general obligations
(____%) 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 Arizona Trust) as follows: ____% Health Care Revenue Bonds,
____% Transportation Revenue Bonds and ___% Housing 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 ARIZONA. The following brief summary regarding the
economy of Arizona is based upon information drawn from publicly available
sources and is included for the purpose of providing the information about
general economic conditions that may or may not affect issuers of the Arizona
Bonds. The Sponsor has not independently verified any of the information
contained in such publicly available documents.
Arizona is the nation's sixth largest state in terms of area. Arizona's
main economic/ employment sectors include services, tourism and manufacturing.
Mining and agriculture are also significant, although they tend to be more
capital than labor intensive. Services is the single largest economic sector.
Many of these jobs are directly related to tourism.
The unemployment rate in Arizona for 1994 was 6.3% and for 1993 was 6.2%.
This compares favorably with a national rate of 6.3% in 1994 and 6.8% in 1993.
BUDGETARY PROCESS. Arizona operates on a fiscal year beginning July 1 and
ending June 30. Fiscal year 1995 refers to the year ended June 30, 1995.
Total General and Special Revenue Funds of over $6.35 billion were expected
during fiscal year 1994. Approximately 44.5% of this budgeted revenue comes from
sales and use taxes, 44.4% from income taxes (both individual and corporate) and
4.4% from property taxes. All taxes total approximately $4.0 billion, or 93% of
the General Fund revenues. Non-tax revenue includes items such as income from
the state lottery, licenses, fees and permits, and interest.
For fiscal year 1994, the budget called for expenditures of approximately
$6.3 billion. These expenditures fell into the following major categories:
education (47.4%), health and welfare (26.3%), protection and safety (4.0%),
general government (15.5%), and inspection and regulation, natural resources,
transportation and other (6.8%). The State's general fund revenues for fiscal
year 1995 are budgeted at approximately $4.7 billion.
Most or all of the Bonds of an Arizona Trust are not obligations of the
State of Arizona, and are not supported by the State's taxing powers. The
particular source of payment and security for each of the Bonds is detailed in
the instruments themselves and in related offering materials. There can be no
assurances, however, with respect to whether the market value or marketability
of any of the Bonds issued by an entity other than the State of Arizona will be
affected by the financial or other condition of the State or of any entity
located within the State. In addition, it should be noted that the State of
Arizona, as well as counties, municipalities, political subdivisions and other
public authorities of the state, are subject to limitations imposed by Arizona's
constitution with respect to ad valorem taxation, bonded indebtedness and other
matters. For example, the state legislature cannot appropriate revenues in
excess of 7% of the total personal income of the state in any fiscal year. These
limitations may affect the ability of the issuers to generate revenues to
satisfy their debt obligations.
Although most of the Bonds in an Arizona Trust are revenue obligations of
local governments or authorities in the State, there can be no assurance that
the fiscal and economic conditions referred to above will not affect the market
value or marketability of the Bonds or the ability of the respective obligors to
pay principal of and interest on the Bonds when due.
On July 21, 1994, the Arizona Supreme Court rendered its opinion in
ROOSEVELT ELEMENTARY SCHOOL DISTRICT NUMBER 66, ET AL V.C. DIANNE BISHOP, ET AL
(the "ROOSEVELT OPINION"). In this opinion, the Arizona Supreme Court held that
the present statutory financing scheme for public education in the State of
Arizona does not comply with the Arizona constitution. Subsequently, the Arizona
School Boards Association, with the approval of the appellants and the appellees
to the ROOSEVELT OPINION, and certain Arizona school districts, filed with the
Arizona Supreme Court motions for clarification of the ROOSEVELT OPINION,
specifically with respect to seeking prospective application of the ROOSEVELT
OPINION. On July 29, 1994, the Arizona Supreme Court clarified the ROOSEVELT
OPINION to hold that such opinion will have prospective effect only.
Certain other circumstances are relevant to the market value, marketability
and payment of any hospital and health care revenue bonds in an Arizona Trust.
The Arizona Legislature has in the past sought to enact health care cost control
legislation. Certain other health care regulatory laws have expired. It is
expected that the Arizona Legislature will at future sessions continue to
attempt to adopt legislation concerning health care cost control and related
regulatory matters. The effect of any such legislation or of the continued
absence of any legislation restricting hospital bed increases and limiting new
hospital construction on the ability of Arizona hospitals and other health care
providers to pay debt service on their revenue bonds cannot be determined at
this time.
Arizona does not participate in the federally administered Medicaid
program. Instead, the state administers an alternative program, Arizona Health
Care Cost Containment System ("AHCCCS"), which provides health care to indigent
persons meeting certain financial requirements, through managed care programs.
In fiscal year 1994, AHCCCS was financed approximately 60% by federal funds, 29%
by state funds, and 11% by county funds.
Under state law, hospitals retain the authority to raise rates with
notification and review by, but not approval from, the Department of Health
Services. Hospitals in Arizona have experienced profitability problems along
with those in other states. At least two Phoenix-based hospitals have defaulted
on or reported difficulties in meeting their bond obligations during the past
three years.
Insofar as tax-exempt Arizona public utility pollution control revenue
bonds are concerned, the issuance of such bonds and the periodic rate increases
needed to cover operating costs and debt service are subject to regulation by
the Arizona Corporation Commission, the only significant exception being the
Salt River Project Agricultural Improvement and Power District which, as a
Federal instrumentality, is exempt from rate regulation. On July 15, 1991,
several creditors of Tucson Electric Power Company ("Tucson Electric") filed
involuntary petitions under Chapter 11 of the U.S. Bankruptcy Code to force
Tucson Power to reorganize under the supervision of the bankruptcy court. On
December 31, 1991, the Bankruptcy Court approved the utility's motion to dismiss
the July petition after five months of negotiations between Tucson Electric and
its creditors to restructure the utility's debts and other obligations. In
December 1992, Tucson Electric announced that it had completed its financial
restructuring. In January 1993, Tucson Electric asked the Arizona Corporation
Commission for a 9.3% average rate increase. Tucson Electric serves
approximately 270,000 customers, primarily in the Tucson area. Inability of any
regulated public utility to secure necessary rate increases could adversely
affect, to an indeterminable extent, its ability to pay debt service on its
pollution control revenue bonds.
Based on a recent U.S. Supreme Court ruling, the State has determined to
refund $197 million, including statutory interest, in State income taxes
previously collected from Federal retirees on their pensions. This payment will
be made over a four-year period beginning with approximately $14.6 million in
tax refunds in fiscal year 1993-94. A combination of tax refunds and tax credits
will be used to satisfy this liability.
The foregoing information constitutes only a brief summary of some of the
general factors which may impact certain issuers of Bonds and does not purport
to be a complete or exhaustive description of all adverse conditions to which
the issuers of Bonds held by the Arizona Trusts are subject. Additionally, many
factors including national economic, social and environmental policies and
conditions, which are not within the control of the issuers of the Bonds, could
affect or could have an adverse impact on the financial condition of the
issuers. The Sponsor is unable to predict whether or to what extent such factors
or other factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of the Bonds
acquired by the Arizona Trusts to pay interest on or principal of the Bonds.
STATE TAXATION. For a discussion of the Federal tax status of income earned
on Arizona Trust Units, see "Tax Status."
The assets of the Arizona Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Arizona (the "State"), its
political subdivisions and authorities (the "Bonds"), provided the interest on
such Bonds received by the Trust is exempt from State income taxes.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing law:
1. For Arizona income tax purposes, each Unitholder will be treated as
the owner of a pro rata portion of the Arizona Trust, and the income of the
Arizona Trust therefore will be treated as the income of the Unitholder
under State law.
2. For Arizona income tax purposes, interest on the Bonds which is
excludable from Federal gross income and which is exempt from Arizona
income taxes when received by the Arizona Trust, and which would be
excludable from Federal gross income and exempt from Arizona income taxes
if received directly by a Unitholder, will retain its status as tax-exempt
interest when received by the Arizona Trust and distributed to the
Unitholders.
3. To the extent that interest derived from the Arizona Trust by a
Unitholder with respect to the Bonds is excludable from Federal gross
income, such interest will not be subject to Arizona income taxes.
4. Each Unitholder will receive taxable gain or loss for Arizona
income tax purposes when Bonds held in the Arizona Trust are sold,
exchanged, redeemed or paid at maturity, or when the Unitholder redeems or
sells Units, at a price that differs from original cost as adjusted for
amortization of Bond discount or premium and other basis adjustments,
including any basis reduction that may be required to reflect a
Unitholder's share of interest, if any, accruing on Bonds during the
interval between the Unitholder's settlement date and the date such Bonds
are delivered to the Arizona trust, if later.
5. Amounts paid by the insurer under an insurance policy or policies
issued to the Arizona Trust, if any, with respect to the Bonds in the
Arizona Trust which represent maturing interest on defaulted obligations
held by the Trustee will be exempt from State income taxes if, and to the
same extent as, such interest would have been so exempt if paid by the
issuer of the defaulted obligations provided that, at the time such
policies are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the issuer of
the obligations, rather than the insurer, will pay debt service on the
obligations.
6. Arizona law does not permit a deduction for interest paid or
incurred on indebtedness incurred or continued to purchase or carry Units
in the Arizona Trust, the interest on which is exempt from Arizona income
taxes.
7. Neither the Bonds nor the Units will be subject to Arizona property
taxes, sales tax or use tax.
ARIZONA INSURED SERIES 2
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: __________, 1996
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING PRICE
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED REDEMPTION TO ARIZONA
PRINCIPAL (1) OR BONDS CONTRACTED FOR (1)(5) RATING (2) FEATURE (3) TRUST (4)
- ------------- ------------------------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page ___.
NATIONAL INSURED SERIES 2
GENERAL. National Insured Series 2 (the "National Trust") consists of
issues of _____ Bonds issued by entities located in ____ 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:
____% Utility Revenue Bonds; ____% Education Revenue Bonds; ____% Health Care
Revenue Bonds; ____% Industrial Revenue Bonds and ____% Other Revenue Bonds. No
Bond has received a provisional rating. _____ of the Bonds in the National Trust
(____%) are Bonds of issuers located in the state of _______. 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."
NATIONAL INSURED SERIES 2
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: ________, 1996
<TABLE>
<CAPTION>
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>
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page __.
OREGON INSURED SERIES 4
GENERAL. The Oregon Trust consists of ______ issues of Bonds. ____ of the
Bonds in the Oregon Trust are general obligations (____%) of the governmental
entities issuing them and are backed by the taxing power thereof. The remaining
issues are payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. These issues are divided by
purpose of issues (and percentage of principal amount to total Oregon Trust) as
follows: ____% Health Care Revenue Bonds, and ___% Utility Revenue Bonds. No
Bond has received a provisional rating. For a general description of certain of
the risks associated with the Bonds, see "Risk Factors" below.
RISK FACTORS SPECIFIC TO OREGON. Oregon's economy continued to expand
through the first half of 1994, though signs of slowing were clearly evident.
The latest data on employment (second quarter 1994) and personal income (first
quarter 1994) show growth rate decreases compared to the previous quarter.
Construction and high technology manufacturing continued to expand rapidly in
the second quarter of 1994; but the rest of the State economy was essentially
flat. On a seasonally adjusted basis, activity in the timber industry dropped
off during the Spring of 1994 after a two-quarter spurt.
According to the Oregon Employment Department, Oregon's overall employment
continued its steady increase. The seasonally adjusted unemployment rate for
April 1994 was 2.5 percent above the same month in 1993, although there was a
slight and probably temporary decline from March 1994 to April 1994. Oregon's
seasonally adjusted unemployment rate measured 5.8 percent in May 1994, a
decline of one tenth of a percentage point form the April rate. Comparatively,
the national seasonally adjusted unemployment rate fell four tenths of a point
to 6.0 percent in May 1994. While the gap between the Oregon and national
unemployment rated narrowed in May, Oregon has remained below the national level
for two consecutive months.
High lumber prices temporarily increased employment in early 1994 in the
lumber and wood products sector, and it is expected that the long-term
employment decline in this industry will return during the latter part of 1994.
The State's numerous smaller manufacturing operations continued to grow; and in
general the non-manufacturing sector did not show its usual strength. Although
the construction sector has remained flat at around 58,000 jobs in 1994,
employment is ten percent above 1993 levels. The finance insurance and real
estate sector experienced a 6.6 percent increase in 1994 as compared to 1993;
and along with the construction sector, its growth was fueled by the combination
of low interest rates and strong in-migration. Restrictions on the growth of
property taxes has prevented the state and local government sector from growing.
The services sector in 1994 was somewhat weak, with April's figure the same as
the 1993 December's figures.
Oregon's high technology manufacturing and construction sectors provided
sufficient momentum to fuel healthy job and income growth through the end of
1994. At that point, higher interest rates and slowing national conditions are
expected to weaken these key sectors and moderate the State's overall growth
rate. Nonetheless, a recovering Japanese economy (one of Oregon's leading
foreign trading partners) and continued population growth should provide enough
impetus to keep jobs and inflation-adjusted income in the state growing through
1995.
Semiconductor operations are likely to continue expanding in Oregon through
the next two years. This is expected to boost employment in the electronics
industry by 11.6 percent in 1994 and 7.6 percent in 1995. Between the end of
1995 and the end of 1991, jobs in the industry are projected to have increased
by 6,600 or 37 percent. Jobs in the non-electrical machinery industry, which
includes office equipment, are expected to grow 7.7 percent in 1994 and 3.2
percent in 1995. High technology manufacturing jobs are projected to account for
25 percent of Oregon's manufacturing employment in 1995 compared to 21.9 percent
in 1985.
The State's construction sector is expected to record one more quarter of
rapid employment growth (fourth quarter 1994) before higher interest rates begin
to constrain activity. Construction employment was forecasted to rise 11 percent
for 1994 as a whole before slowing to 5.1 percent in 1995. Housing starts are
projected to total 20,900 in 1994, a gain of 10 percent over 1993 but turn flat
in 1995. Commercial and industrial projects are expected to make up an
increasingly larger share of construction activity through 1996. The completion
of large infrastructure projects, expansion of high technology manufacturing
capacity, and falling vacancy rates for commercial real estate all suggest that
non-residential construction activity will be robust in the short-term.
Property values have continued to increase. The Oregon Department of
Revenue reports that overall property values grew by ten percent in 1993.
Residential property values increased 14 percent which includes improvements
made to property during 1993. Many homeowners continue to see little or no
decrease in property taxes as value increases offset declining tax rates.
The General Fund revenue forecast is $6,333.2 million for the 1993-95
biennium. The forecast has been increased $88.2 from the December 1993 estimate
and $127.7 million from the previous estimate as of the close of the 1993
Legislative Session. The major changes in the current forecast are as follows: a
$51.7 million increase in personal income taxes, a $36.5 million increase in
corporate income taxes, a $6.1 million decrease in liquor apportionment revenue
and a $5.0 million increase in gift and inheritance tax revenue.
General Fund revenue is expected to reach $6,907.7 million for the 1995-97
biennium. Combining the revenue estimate with the projected $330.9 million
ending balance for the 1993-95 biennium results in an estimated $7,238.6 million
in available General Fund resources for the 1995-97 budget period. The June 1994
resource estimate is $141.4 million or 2.0 percent more than the March 1994
forecast.
According to the June 1994 forecast of the Oregon Office of Economic
Analysis, Oregon's economy is expected to continue expanding through 1995 though
the rate of growth is likely to moderate as credit sensitive sectors feel the
impact of higher interest rates. As the State's durable goods manufacturing and
construction sectors soften, migration from other states can be expected to
continue generating jobs in services and trade. Oregon's income and job growth
are expected to remain above the national average in 1995.
Migration from other states, particularly California, is expected to
greatly influence the State's economy. Oregon's population was expected to have
grown by 63,000 in 1994, with two-thirds of the gain coming from net
in-migration. Growth is expected to slow to 58,000 in 1995 as the California
economy slowly rebounds. According to the Western Blue Chip consensus forecast,
jobs in California were expected to the decline a further 0.6 percent in 1994
before turning around and increasing 1.0 percent in 1995. The rebound in
California should slow Oregon population growth but will increase demand for
Oregon products.
The recent increase in the lumber and wood products industry is not
expected to continue. Lumber prices peaked in December of 1993 and have
generally fallen through April of 1994. More importantly, supply is limited even
if there is release of federal timber following implementation of the new
federal forest plan. The timber harvest is expected to fall from 5.5 billion
board feet (BBF) in 1993 to 5.3 BBF in 1994 and 5.0 BBF in 1995. Employment was
expected to rise marginally in both the second and third quarters before
starting a steady decline at the end of 1994. For 1994 as a whole, employment in
lumber and wood products is expected to increase 4.6 percent then decline 5.8
percent in 1995.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions to
which the issuers in the Oregon Trust are subject. Additionally, many factors
including national economic, social and environmental policies and conditions,
which are not within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of the State and various
agencies and political subdivisions located in the State. The Sponsor is unable
to predict whether or to what extent such factors or other factors may affect
the issuers of Bonds, the market value or marketability of the Bonds or the
ability of the respective issuers of the Bonds acquired by the Oregon Trust to
pay interest on or principal of the Bonds.
STATE TAXATION. For a discussion of the Federal tax status of income earned
on Oregon Trust Units, see "Tax Status."
The assets of the Oregon Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Oregon (the "State") or counties,
municipalities, authorities or political subdivisions thereof (the "Oregon
Bonds") or by the Commonwealth of Puerto Rico, Guam and the United States Virgin
islands (the "Possession Bonds") (collectively, the "Bonds"). Neither the
Sponsor nor its counsel have independently examined the Bonds to be deposited in
and held in the Oregon Trust. However, although no opinion is expressed herein
regarding such matters, it is assumed that: (i) the Bonds were validly issued;
(ii) the interest thereon is excludable from gross income for Federal income tax
purposes; and (iii) interest on the Bonds, if received directly by an Oregon
Unitholder, would be exempt from the Oregon income tax applicable to individuals
(the "Oregon Personal Income Tax").
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Oregon law and based on the assumptions set forth above:
1. The Oregon Trust is not an association taxable as a corporation and
based upon an administrative rule of the Oregon State Department of
Revenue, each Oregon Unitholder of the Oregon Trust will be essentially
treated as the owner of a pro rata portion of the Oregon Trust and the
income of such portion of the Oregon Trust will be treated as the income of
the Oregon Unitholder for Oregon Personal Income Tax purposes;
2. Interest on the Bonds which is exempt from the Oregon Personal
Income Tax when received by the Oregon Trust, and which would be exempt
from the Oregon Personal Income Tax if received directly by an Oregon
Unitholder, will retain its status as exempt from such tax when received by
the Oregon Trust and distributed to an Oregon Unitholder;
3. To the extent that interest derived from the Oregon Trust by an
Oregon Unitholder with respect to the Possession Bonds is excludable from
gross income for Federal income tax purposes pursuant to 48 U.S.C. Section
745, 48 U.S.C. Section 1423a and 48 U.S.C. Section 1403, such interest will
not be subject to the Oregon Personal Income Tax. Each Oregon Unitholder of
the Oregon Trust will recognize gain or loss for Oregon Personal Income Tax
purposes if the Trustee disposes of a bond (whether by redemption, sale or
otherwise) or if the Oregon Unitholder redeems or sells Units of the Oregon
Trust to the extent that such a transaction results in a recognized gain or
loss to such Oregon Unitholder for Federal income tax purposes; and
4. The Oregon Personal Income Tax does not permit a deduction of
interest paid or incurred on indebtedness incurred or continued to purchase
or carry Units in the Oregon Trust, the interest on which is exempt from
such Tax.
Investors should consult their tax advisers regarding collateral tax
consequences under Oregon law relating to the ownership of the Units, including,
but not limited to, the calculation of "net pension income" tax credits for
retirees and the applicability of other Oregon taxes.
Chapman and Cutler has not examined any of the Bonds to be deposited and
held in the Oregon Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto and therefore it expresses no
opinion as to the exemption from the Oregon Personal Income Tax of interest on
the Bonds if received directly by an Oregon Unitholder. In addition, prospective
purchasers subject to the Oregon corporate income tax should be advised that for
purposes of the Oregon Corporate Income (Excise) Tax, interest on the Bonds
received by the Oregon Trust and distributed to an Oregon Unitholder subject to
such tax will be added to the corporate Oregon Unitholder's Federal taxable
income and therefore will be taxable. No opinion is expressed regarding the
Oregon taxation of foreign or domestic insurance companies.
<TABLE>
<CAPTION>
OREGON INSURED SERIES 4
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: _________, 1996
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING PRICE
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED REDEMPTION TO OREGON
PRINCIPAL (1) OR BONDS CONTRACTED FOR (1)(5) RATING (2) FEATURE (3) TRUST (4)
------------- ------------------------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page __.
TERRITORIAL INSURED SERIES 4
GENERAL. Territorial Insured Series 4 (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 4 consists of issues of _____ Bonds all issued by
entities located in the Commonwealth of Puerto Rico. ____ of the Bonds in the
Territorial Trust is a general obligation (____%) 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 Territorial Trust) as
follows: ___% Health Care Revenue Bonds; ____% Transportation Revenue Bonds;
____% Education Revenue Bonds and ____% Other Revenue Bonds. ____ bond issues
represent ____% and ____%, respectively, of the aggregate principal amount of
the Territorial Trust. 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 4
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: _________, 1996
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>
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page __.
Notes to Schedules of Investments
As of the Opening of Business on the
Initial Date of Deposit: ______, 1996
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 _______, 1996 to _______, 1996. These Bonds have expected settlement dates
from _________, 1996 to ________, 1996 (see "The Fund").
2. All ratings are by Standard & Poor's and/or Moody's. As a result of the
insurance related to each Bond, each Bond is rated "AAA" by Standard & Poor's
and/or "Aaa" by Moody's.
3. There is shown under this heading the year in which each issue of the
Bonds is initially or currently callable and the call price for that year. Each
issue of the Bonds continues to be callable at declining prices thereafter (but
not below par value) except for original issue discount bonds which are
redeemable at prices based on the issue price plus the amount of original issue
discount accreted to redemption date plus, if applicable, some premium, the
amount of which will decline in subsequent years. "S.F." indicates a sinking
fund is established with respect to an issue of the Bonds. Redemption pursuant
to call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed obligations have an offering
side valuation which represents a premium over par. Certain Bonds may be subject
to redemption without premium prior to the date shown pursuant to extraordinary
optional or mandatory redemptions if certain events occur. Notwithstanding any
provisions to the contrary, certain bond issuers have in the past, and others
may in the future, attempt to redeem bonds prior to their initially scheduled
call dates and at prices which do not include any premiums. For a general
discussion of certain of these events, see "Risk Factors--Redemptions of Bonds."
To the extent that the Bonds were deposited in a Trust at a price higher than
the price at which they are redeemed, this will represent a loss of capital when
compared with the original Public Offering Price of the Units. Conversely, to
the extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Distributions will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Bonds and there will be distributed to Unitholders the
principal amount and any premium received on such redemption. The Estimated
Current Return and Estimated Long-Term Return in this event may be affected by
such redemptions. For the Federal tax effect on Unitholders of such redemptions
and resultant distributions, see "Tax Status" and "Estimated Current Return and
Estimated Long-Term Return."
4. Evaluation of Bonds is made on the basis of current offering prices for
the Bonds. The offering prices are greater than the current bid prices of the
Bonds which is the basis on which Unit value is determined for purposes of
redemption of Units (see "Public Offering--Offering Price").
5. Other information regarding the Bonds in each Trust, as of the opening
of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL BID SIDE
COST TO PROFIT (LOSS) INTEREST INCOME EVALUATION
TRUST SPONSOR TO SPONSOR TO TRUST OF BONDS
----- ------- ---------- -------- --------
<S> <C> <C> <C> <C>
Arizona Insured Series 2
National Insured Series 2
Oregon Insured Series 4
Territorial Insured Series 4
</TABLE>
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in the portfolios. On the opening of business on
the Initial Date of Deposit, the offering side evaluation of the Bonds in each
Trust was higher than the bid side evaluation of such Bonds by ____%, ____% and
____% for the Arizona, National, Oregon and Territorial Trusts, respectively.
____% of the principal amount of the Securities in the ---- Trust (marked by a
double asterisk (**)) have been purchased on a "when, 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 1996. This table illustrates
approximately what you would have to earn on taxable investments to equal the
tax-exempt estimated current return in your income tax bracket. For cases in
which more than one State bracket falls within a Federal bracket, the highest
State bracket is combined with the Federal bracket. The combined State and
Federal tax rates shown reflect the fact that State tax payments are currently
deductible for Federal tax purposes. The table does not show the approximate
taxable estimated current returns for individuals who are subject to the
alternative minimum tax. The taxable equivalent estimated current returns may be
somewhat higher than the equivalent returns indicated in the following table for
those individuals who have adjusted gross incomes in excess of $117,950. The
table does not reflect the effect of limitations on itemized deductions and the
deduction for personal exemptions which were designed to phase out certain
benefits of these deductions for higher income taxpayers. These limitations, in
effect, raise the marginal maximum Federal tax rate to approximately 44 percent
for taxpayers filing a joint return and entitled to four personal exemptions and
to approximately 41 percent for taxpayers filing a single return entitled to
only one personal exemption. These limitations are subject to certain maximums,
which depend on the number of exemptions claimed and the total amount of the
taxpayer's itemized deductions. For example, the limitation on itemized
deductions will not cause a taxpayer to lose more than 80 percent of his
allowable itemized deductions, with certain exceptions. See "Tax Status" for a
more detailed discussion of recent Federal tax legislation, including a
discussion of provisions affecting corporations.
<TABLE>
<CAPTION>
ARIZONA TAX EQUIVALENT TABLE
----------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------- -----------------------------------
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ ------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 24.00 $ 0- 40.10 18.0% 5.49% 6.10% 6.71% 7.32% 7.93% 8.54% 9.15%
40.10-96.90 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
24.00-58.15 31.7 6.59 7.32 8.05 8.78 9.52 10.25 10.98
58.15-121.30 96.90-147.70 34.6 6.88 7.65 8.41 9.17 9.94 10.70 11.47
147.70-263.75 39.3 7.41 8.24 9.06 9.88 10.71 11.53 12.36
121.30-263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
Over 263.75 Over 263.75 43.0 7.89 8.77 9.65 10.53 11.40 12.28 13.16
NATIONAL TAX EQUIVALENT TABLE
-----------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------- -----------------------------------
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ ------- -------------------------------------------
$ 0- 24.00 $ 0- 40.10 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.00 - 58.15 40.10 - 96.90 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
58.15 - 121.30 96.90 - 147.70 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
121.30 - 263.75 147.70 - 263.75 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 263.75 Over 263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
OREGON TAX EQUIVALENT TABLE
---------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------- -----------------------------------
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ ------- -------------------------------------------
$ 0- 24.00 $ 0- 40.10 22.7% 5.82% 6.47% 7.12% 7.76% 8.41% 9.06% 9.70%
24.00 - 58.15 40.10 - 96.90 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
58.15 - 121.30 96.90 - 147.70 37.2 7.17 7.96 8.76 9.55 10.35 11.15 11.94
121.30 - 263.75 147.70 - 263.75 41.8 7.73 8.59 9.45 10.35 11.17 12.03 12.89
Over 263.75 Over 263.75 45.0 8.18 9.09 10.00 10.91 11.82 12.73 13.64
TERRITORIAL TAX EQUIVALENT TABLE
--------------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------- -----------------------------------
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ ------- -------------------------------------------
$ 0 - 24.00 $ 0 - 40.10 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.00 - 58.15 40.10 - 96.90 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
58.15 - 121.30 96.90 - 147.70 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
121.30- 263.75 147.70 - 263.75 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 263.75 Over 263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
*The table reflects the Federal tax rate and does not reflect any effect that
Puerto Rico taxes may have in determining the taxable equivalent yield for
residents of Puerto Rico.
INDEPENDENT AUDITORS' REPORT
TO THE SPONSOR, TRUSTEE AND THE UNITHOLDERS OF VOYAGEUR TAX-EXEMPT TRUST,
SERIES 7:
We have audited the accompanying statements of net assets, including the
schedules of investments, of Voyageur Tax-Exempt Trust, Series 7 (Arizona
Insured Series 2, National Insured Series 2, Oregon Insured Series 4 and
Territorial Insured Series 4) as of ________, 1996. 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 7 (Arizona Insured Series 2, National Insured Series 2, Oregon Insured
Series 4 and Territorial Insured Series 4) as of ______, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
__________, 1996
<TABLE>
<CAPTION>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 7
STATEMENTS OF NET ASSETS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: __________, 1996
ARIZONA NATIONAL OREGON TERRITORIAL
INSURED INSURED INSURED INSURED
SERIES 2 SERIES 2 SERIES 4 SERIES 4
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Contracts to purchase securities(1)(2)
Accrued interest on underlying securities(1)(3)
Organizational and offering Costs (4)
Total Assets
Less: distributions payable(3)
Less: accrued organizational and offering costs (4)
Net Assets
Net Assets Represented By:
Interest of Unitholders--
Units of fractional undivided interest
outstanding: (________, ______
and _______ Units, respectively)
Cost to investors(5)
Less: Gross underwriting commission(5)
Net Assets(5)
</TABLE>
- ----------------------
(1) The aggregate value of the Bonds listed under "Schedule of Investments" for
each Trust herein and their cost to such Trust are the same. The value of
the Bonds is determined by Securities Pricing Service, a division of George
K. Baum & Company on the bases set forth under "Public Offering--Offering
Price." The contracts to purchase Bonds are collateralized by an
irrevocable letter of credit which has been deposited with the Trustee in
and for the following amounts: Principal Offering
<TABLE>
<CAPTION>
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>
Arizona Insured Series 2
National Insured Series 2
Oregon Insured Series 4
Territorial Insured Series 4
</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 ______, 1996
(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 Trusts (and therefore Unitholders) will bear all or a portion of their
organizational and offering costs, which will be deferred and charged off
against principal at the end of the initial offering period.
(5) The aggregate public offering price (exclusive of interest) and the
aggregate sales charge are computed on the bases set forth under "Public
Offering--Offering Price" and "Public Offering--Sponsor and Underwriter
Compensation" and assume all single transactions involve less than
$100,000. For single transactions involving $100,000 or more, 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 environ-mentally-caused illnesses, extensive competition and
financial deterioration resulting from a corporate restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may result in the
operator of a project becoming highly leveraged which may impact on such
operator's creditworthiness which in turn would have an adverse impact on the
rating and/or market value of such Bonds. Further, the possibility of such a
restructuring may have an adverse impact on the market for and consequently the
value of such Bonds, even though no actual takeover or other action is ever
contemplated or effected. 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, Arizona Insured Series 2, National Insured Series 2, Oregon Insured
Series 4 and Territorial Insured Series 4 have been given a duration of ____,
_____, _____ and _____ 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 ______ Series __ would be
expected to decline approximately ____% 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. Expenses incurred in establishing the Trusts,
including the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and state
registration fees, the initial fees and expenses of the Trustee, legal and
accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by each Trust and charged off against principal at the
end of the initial offering period. The following additional charges are or may
be incurred by the Trusts: (i) fees of the Trustee for extraordinary services,
(ii) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (iii) various governmental charges, (iv)
expenses and costs of any action taken by the Trustee to protect a Trust and the
rights and interests of Unitholders, (v) indemnification of the Trustee for any
loss, liability or expenses incurred by it in the administration of a Trust
without gross negligence, bad faith or willful misconduct on its part, (vi) any
special custodial fees payable in connection with the sale of any of the Bonds
in a Trust and (vii) expenditures incurred in contacting Unitholders upon
termination of a Trust.
The fees and expenses set forth herein are payable out of the Trusts. When
such fees and expenses are paid by or owing to the Trustee, they are secured by
a lien on the portfolio or portfolios of the applicable Trust or Trusts. If the
balances in the Interest and Principal Accounts are insufficient to provide for
amounts payable by the Fund, the Trustee has the power to sell Bonds to pay such
amounts.
INSURANCE ON THE BONDS
Insurance guaranteeing prompt payment of interest and principal, when due,
on all the Bonds in the Fund has been obtained by the Sponsor or by the issuers
or underwriters of such Bonds.
An Insurer has issued a policy or policies of insurance covering each of
the Bonds in the Trusts, each policy to remain in force until the payment in
full of such Bonds and whether or not the Bonds continue to be held by a Trust.
By the terms of each policy the Insurer will unconditionally guarantee to the
holders or owners of the Bonds the payment, when due, required of the issuer of
the Bonds of an amount equal to the principal of and interest on the Bonds as
such payments shall become due but not be paid (except that in the event of any
acceleration of the due date of principal by reason of mandatory or optional
redemption, default or otherwise, the payments guaranteed will be made in such
amounts and at such times as would have been due had there not been an
acceleration). The Insurer will be responsible for such payments, less any
amounts received by the holders or owners of the Bonds from any trustee for the
bond issuers or from any other sources other than the Insurer. The Insurers'
policies relating to small industrial development bonds and pollution control
revenue bonds also guarantee the full and complete payments required to be made
by or on behalf of an issuer of Bonds pursuant to the terms of the Bonds if
there occurs an event which results in the loss of the tax-exempt status of the
interest on such Bonds, including principal, interest or premium payments, if
any, as and when thereby required. Each Insurer has indicated that its insurance
policies do not insure the payment of principal or interest on bonds which are
not required to be paid by the issuer thereof because the bonds were not validly
issued. However, as indicated under "Tax Status," the respective issuing
authorities have received opinions of bond counsel relating to the valid
issuance of each of the Bonds in the Trusts. Each Insurer's policy also does not
insure against non-payment of principal of or interest on the Bonds resulting
from the insolvency, negligence or any other act or omission of the trustee or
other paying agent for the Bonds. Such policies are not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. The policies are non-cancelable and the insurance premiums
have been fully paid on or prior to the date of deposit, either by the Sponsor
or, if a policy has been obtained by a Bond issuer, by such issuer.
Standard & Poor's rates all new issues insured by an Insurer "AAA Prime
Grade." Moody's rates all bond issues insured by an Insurer "Aaa". These ratings
independently reflect each company's current assessment of the creditworthiness
of each Insurer and its ability to pay claims on its policies of insurance. See
"Investment Objectives and Portfolio Selection." Any further explanation as to
the significance of either rating may be obtained only from the company which
issued the respective rating. Neither rating is a recommendation to buy, sell or
hold the Bonds, and such rating may be subject to revision or withdrawal at any
time by the respective issuer. Any downward revision or withdrawal of the rating
may have an adverse effect on the market price of the Bonds.
Because the insurance on the Bonds will be effective so long as the Bonds
are outstanding, such insurance will be taken into account in determining the
market value of the Bonds and therefore some value attributable to such
insurance will be included in the value of the Units of the Trusts. The
insurance does not, however, guarantee the market value of the Bonds or of the
Units.
TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
1. Each Trust is not an association taxable as a corporation for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the Internal
Revenue Code of 1986 (the "Code") will retain its status when distributed
to Unitholders, except to the extent such interest is subject to the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below;
2. Each Unitholder is considered to be the owner of a pro rata portion
of the respective Trust under subpart E, subchapter J of chapter 1 of the
Code and will have a taxable event when such Trust disposes of a Bond, or
when the Unitholder redeems or sells his Unit. Unitholders must reduce the
tax basis of their Units for their share of accrued interest received by
the respective Trust, if any, on Bonds delivered after the Unitholders pay
for their Units to the extent that such interest accrued on such Bonds
during the period from the Unitholder's settlement date to the date such
Bonds are delivered to the respective Trust and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of
Bonds (whether by sale, payment on maturity, redemption or otherwise), gain
or loss is recognized to the Unitholder. The amount of any such gain or
loss is measured by comparing the Unitholder's pro rata share of the total
proceeds from such disposition with the Unitholder's basis for his or her
fractional interest in the asset disposed of. In the case of a Unitholder
who purchases Units, such basis (before adjustment for earned original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets ratably
according to value as of the date of acquisition of the Units. The tax cost
reduction requirements of the Code relating to amortization of bond premium
may, under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to his
original cost; and
3. Any proceeds paid under individual policies obtained by issuers of
Bonds which represent maturing interest on defaulted Bonds held by the
Trustee will be excludable from Federal gross income if, and to the same
extent as, such interest would have been excludable if paid in the normal
course by the issuer of the defaulted Bonds provided that, at the time such
policies are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the issuer of
the Bonds, rather than the Insurer, will pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provided that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price") to
prior owners. The application of these rules will also vary depending on the
value of the Bonds on the date a Unitholder acquires his Units and the price the
Unitholder pays for his Units. Investors with questions regarding these Code
sections should consult with their tax advisers.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued). Market discount can
arise based on the price a Trust pays for Bonds or the price a Unitholder pays
for his or her Units. Under the Tax Act, accretion of market discount is taxable
as ordinary income; under prior law the accretion had been treated as capital
gain. Market discount that accretes while a Trust holds a Bond would be
recognized as ordinary income by the Unitholders when principal payments are
received on the Bond, upon sale or at redemption (including early redemption),
or upon the sale or redemption of his or her Units, unless a Unitholder elects
to include a market discount in taxable income as it accrues. The market
discount rules are complex and Unitholders should consult their tax advisers
regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax for taxable years beginning after December 31, 1986 depend upon
the corporation's alternative minimum taxable income, which is the corporation's
taxable income with certain adjustments. One of the adjustment items used in
computing the alternative minimum taxable income and the Superfund Tax of a
corporation (other than an S Corporation, Regulated Investment Company, Real
Estate Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to its
alternative minimum taxable income (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax exempt interest, including interest on all of the Bonds in the
Fund. Unitholders are urged to consult their tax advisers with respect to the
particular tax consequences to them including the corporate alternative minimum
tax, the Superfund Tax and the branch profits tax imposed by Section 884 of the
Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid in indebtedness incurred to purchase or improve a
personal residence). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of the
interest expense attributable to ownership of such Units. Investors with
questions regarding this issue should consult with their tax advisers.
In the case of certain of the Bonds in the Fund, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or related
person, will not be excludible from Federal gross income, although interest on
such Bonds received by others would be excludible from Federal gross income.
"Substantial user" and "related person" are defined under U.S. Treasury
Regulations. Any person who believes that he or she may be a "substantial user"
or a "related person" as so defined should contact his or her tax adviser.
Under existing law, the Fund and each Trust are not associations taxable as
corporations and the income of each Trust will be treated as the income of the
Unitholders under the income tax laws of the State of Missouri.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF COUNSEL AND
ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%. For taxpayers other than corporations, net
capital gains are subject to a maximum marginal stated tax rate of 28%. However,
it should be noted that legislative proposals are introduced from time to time
that affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed. Under the Code, taxpayers must disclose to
the Internal Revenue Service the amount of tax-exempt interest earned during the
year.
Section 86 of the Code, in general, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus 50% of the Social Security benefits received exceeds
a "base amount." The base amount is $25,000 for unmarried taxpayers, $32,000 for
married taxpayers filing a joint return and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns. Modified adjusted gross income is adjusted gross income determined
without regard to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent that Social
Security benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the Tax Act up to 85% of Social Security benefits are
includible in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds an "adjusted
base amount." The adjusted base amount is $34,000 for unmarried taxpayers,
$44,000 for married taxpayers filing a joint return, and zero for married
taxpayers who do not live apart at all times during the taxable year and who
file separate returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from a Trust, will be subject to tax. A taxpayer whose adjusted
gross income already exceeds the base amount or the adjusted base amount must
include 50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest) does not
exceed the base amount need not include any Social Security benefits in gross
income.
FOR A DISCUSSION OF THE STATE TAX STATUS OF INCOME EARNED ON UNITS OF A
TRUST, SEE "THE TRUSTS--STATE TAXATION" FOR THE APPLICABLE TRUST. EXCEPT AS
NOTED THEREIN, THE EXEMPTION OF INTEREST ON STATE AND LOCAL OBLIGATIONS FOR
FEDERAL INCOME TAX PURPOSES DISCUSSED ABOVE DOES NOT NECESSARILY RESULT IN
EXEMPTION UNDER THE INCOME OR OTHER TAX LAWS OF ANY STATE OR CITY. THE LAWS OF
THE SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF SUCH OBLIGATIONS.
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the offering prices of the
Bonds in each Trust and includes a sales charge of 4.9% of the Public Offering
Price (5.152% of the aggregate offering price of the Bonds) plus any accrued
interest. In the secondary market the Public Offering Price is based on the bid
prices of the Bonds in each Trust and includes a sales charge of 5.5% of the
Public Offering Price (5.820% of the aggregate bid price of the Bonds) plus any
accrued interest. However, the sales charge applicable to quantity purchases is,
during the initial offering period, reduced by a discount on a graduated basis
to any person acquiring $100,000 or more as follows:
<TABLE>
<CAPTION>
AGGREGATE DOLLAR VALUE REDUCTION AS A
OF UNITS PURCHASED PERCENT OF OFFERING PRICE
------------------ -------------------------
<S> <C>
$100,000 - 249,999 .......................................... 0.30%
$250,000 - 499,999 .......................................... 0.50%
$500,000 - 999,999 .......................................... 0.90%
$1,000,000 or more .......................................... 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. 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, except that in the case of the Territorial Trust, the
Sponsor intends to qualify Units for sale in a number of states and Puerto Rico.
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 $.33 per Unit ($.34 per Unit for the portion of aggregate sales of each
Series which exceed $250,000 by broker-dealers or others in the primary offering
who did not act as Underwriters and who purchase such Units from the Sponsor)
and in the secondary market equal to 4.0% of the Public Offering Price per Unit.
In addition, broker-dealers or others who sell, within five business days of a
Trust's Initial Date of Deposit, that amount necessary to qualify for the
Underwriter Concession set forth under "Sponsor and Underwriter Compensation"
below will be allowed the concession set forth in such section on all sales
during such period. 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
OF UNITS PURCHASED PER UNIT
------------------ --------
<S> <C>
$100,000 - $249,999 .............................................. $.32
$250,000 - $499,999 .............................................. .31
$500,000 - $999,999 .............................................. .29
$1,000,000 or more................................................ .25
</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
OF UNITS UNDERWRITTEN CONCESSION PER UNIT
--------------------- -------------------
<S> <C>
$100,000 - $249,999 .............................................. $.35
$250,000 - $499,999 .............................................. .36
$500,000 - $999,999 .............................................. .37
$1,000,000 or more................................................ .40
</TABLE>
Broker-dealers and other financial institutions purchasing Units from the
Distributor during the first week after the Initial Date of Deposit may also
receive the concession described above according to the schedule above
describing Underwriters compensation. 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 a manager or as a member of any
underwriting syndicate from which less than 1% 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 $0.10 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 419350, Kansas City, Missouri 64173-0216 and, in the case of Units
evidenced by a certificate, by tendering such certificate to the Trustee,
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee. Unitholders must sign the request,
and such certificate or transfer instrument, exactly as their names appear on
the records of the Trustee and on any certificate representing the Units to be
redeemed. If the amount of the redemption is $25,000 or less and the proceeds
are payable to the Unitholder(s) of record at the address of record, no
signature guarantee is necessary for redemptions by individual account owners
(including joint owners). Additional documentation may be requested, and a
signature guarantee is always required, from corporations, executors,
administrators, trustees, guardians or associations. The signatures must be
guaranteed by a participant in the STAMP or such other guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by the Trustee. A
certificate should only be sent by registered or certified mail for the
protection of the Unitholder. Since tender of the certificate is required for
redemption when one has been issued, Units represented by a certificate cannot
be redeemed until the certificate representing such Units has been received by
the purchasers.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "Redemption Date").
Such redemption shall be made by payment of cash, equivalent to the Redemption
Price for such Trust, determined as set forth below as of the evaluation time
stated under "Summary of Essential Financial Information," next following such
tender, multiplied by the number of Units being redeemed. Any Units redeemed
shall be cancelled and any undivided fractional interest in the Fund
extinguished. The price received upon redemption might be more or less than the
amount paid by the Unitholder depending on the value of the Bonds in the Trust
involved at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee will
be required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a return. Under normal circumstances the Trustee
obtains the Unitholder's tax identification number from the selling broker.
However, at any time a Unitholder elects to tender Units for redemption, such
Unitholder should provide a tax identification number to the Trustee in order to
avoid this possible "back-up withholding" in the event the Trustee has not been
previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account or, if the balance therein is insufficient, from the Principal Account.
All other amounts will be withdrawn from the Principal Account. The Trustee is
empowered to sell underlying Bonds in order to make funds available for
redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the Bonds in
each Trust, 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, 1995, Voyageur Fund Managers, Inc. served as the
manager to six closed-end and ten open-end investment companies (comprising 29
separate investment portfolios), administered numerous private accounts and
managed approximately $8.2 billion in assets. The principal business address for
both Voyageur Fund Managers, Inc. and Voyageur Fund Distributors, Inc. is 90
South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402. As of December
31, 1995, the total stockholders' equity of Voyageur Fund Mangers, Inc. was
$5,264,562 (unaudited). (This paragraph relates only to the Sponsor and not to
the Fund or to any Series thereof or to any of the Underwriters. The information
is included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be made
available by the Sponsor upon request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and not
exceeding amounts prescribed by the Securities and Exchange Commission, (ii)
terminate the Trust Agreement and liquidate the Fund as provided therein or
(iii) continue to act as Trustee without terminating the Trust Agreement.
EVALUATOR. The Sponsor also serves as Evaluator. The Evaluator may resign
or be removed by the Sponsor in which event the Sponsor is to use its best
efforts to appoint a satisfactory successor. Such resignation or removal shall
become effective upon acceptance of appointment by the successor evaluation. If
upon resignation of the Evaluator no successor has accepted appointment within
30 days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to each
Unitholder. At the present time, pursuant to a contract with the Evaluator,
Securities Pricing Service, a division of George K. Baum & Company, a
non-affiliated firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities, provides, 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>
ARIZONA NATIONAL OREGON TERRITORIAL
INSURED INSURED INSURED INSURED
NAME ADDRESS SERIES 2 SERIES 2 SERIES 4 SERIES 4
---- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Voyageur Fund 90 South Seventh Street
Distributors, Inc. Minneapolis, MN 55402
------- ------- ------- ------
Totals
</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...................
THE FUND.....................................
INVESTMENT OBJECTIVES AND
PORTFOLIO SELECTION.....................
THE TRUSTS...................................
EQUIVALENT TAXABLE ESTIMATED
CURRENT RETURNS.........................
INDEPENDENT AUDITORS' REPORT.................
STATEMENTS OF NET ASSETS.....................
RISK FACTORS.................................
ESTIMATED CURRENT RETURN AND
ESTIMATED LONG-TERM RETURN..............
TRUST OPERATING EXPENSES.....................
INSURANCE ON THE BONDS.......................
TAX STATUS...................................
PUBLIC OFFERING..............................
RIGHTS OF UNITHOLDERS........................
TRUST ADMINISTRATION.........................
UNDERWRITING.................................
OTHER MATTERS................................
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
__________, 1996
VOYAGEUR TAX-EXEMPT TRUST,
SERIES 7
ARIZONA INSURED SERIES 2
NATIONAL INSURED SERIES 2
OREGON INSURED SERIES 4
TERRITORIAL INSURED SERIES 4
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services and
legal counsel
The following exhibits:
1.1 Standard Terms and Conditions of Trust - Voyageur Tax-Exempt Trust Series 1
and Subsequent Series dated January 19, 1995 (incorporated by reference to
Amendment No. 1 to Form S-6 filed on behalf Voyageur Tax-Exempt Trust
Series 5).
1.2 Form of Trust Indenture and Agreement for Voyageur Tax-Exempt Trust, Series
7 (to be filed by Amendment).
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 (to be filed by Amendment).
3. None.
4. Not Applicable.
5. Financial Data Schedules filed electronically as Exhibit(s) 27 pursuant to
Rule 401 of Regulation S-T (to be filed by Amendment).
6. Written Consents
(a) Consent of George K. Baum & Company (to be filed by Amendment)
(b) Consent of KPMG Peat Marwick LLP (to be filed by Amendment)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Voyageur Tax-Exempt Trust, Series 7, has duly caused this 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 3rd day of July, 1996.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 7
(Registrant)
By: Voyageur Fund Managers, Inc.
(Depositor)
By /s/ Thomas J. Abood
-----------------------
General Counsel and
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on July 3, 1996.
SIGNATURE TITLE
MICHAEL E. DOUGHERTY
- --------------------
Michael E. Dougherty Chairman of the Board
and Director
JOHN G. TAFT
- --------------------
John G. Taft Chief Executive Officer
and Director
EDWARD J. KOHLER
- --------------------
Edward J. Kohler Director
- --------------------
FRANK C. TONNEMAKER
- --------------------
Frank C. Tonnemaker Director
JANE M. WYATT
- --------------------
Jane M. Wyatt Director
/s/THOMAS J. ABOOD
------------------
Thomas J. Abood
Thomas J. Abood signs this document pursuant to a Power of Attorney filed
with the Securities and Exhange Commission with the Registration Statement on
Form S-6 for Voyageur Tax-Exempt Trust, Series 5 (Registration No.33-62682).
