AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1996
REGISTRATION NO. 333-10705
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO THE
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. EXACT NAME OF TRUST: VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
B. NAME OF DEPOSITOR: VOYAGEUR FUND MANAGERS, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
VOYAGEUR FUND MANAGERS, INC.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copy to:
THOMAS J. ABOOD MARK J. KNEEDY
Voyageur Fund Managers, Inc. c/o Chapman and Cutler
90 South Seventh Street, Suite 4400 111 West Monroe Street
Minneapolis, Minnesota 55402 Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title and amount of Proposed maximum Amount of
securities being registered aggregate offering registration fee
price
Voyageur Tax-Exempt Trust, An indefinite number of Indefinite $0.00
Series 8 Units of Beneficial Interest
pursuant to Rule 24f-2 under
the Investment Company Act of 1940
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration
Statement.
/X/ Check box if it is proposed that this filing will become effective on
October 17, 1996 at 2:00 P.M. pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
----------------------
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C>
1. (a) Name of Trust............................................. } Prospectus front cover
2. (b) Title of securities issued................................ } Summary of Essential
} Information
3. Name and address of each depositor............................. } Trust Administration
4. Name and address of Trustee.................................... } Trust Administration
5. State of organization of Trust................................. } The Fund
6. Execution and termination of Trust agreement................... } Trust Administration
7. Changes of name................................................ } The Fund; Trust Administration
8. Fiscal year.................................................... } *
9. Litigation } *
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a) Registered of bearer securities........................... } Rights of Unitholders
(b) Cumulative or distributive securities..................... } Rights of Unitsholders; The Fund
}
(c) Redemption................................................ } Rights of Unitholders
(d) Conversion, transfer, etc................................. } Rights of Unitholders
(e) Periodic payment plan..................................... } *
(f) Voting rights............................................. } Rights of Unitholders
(g) Notice of Unitholders..................................... } Trust Administration
(h) Consents required......................................... } Rights of Unitholders; Trust
} Administration
(i) Other provisions.......................................... } Tax Status; Insurance on the Bonds
}
11. Type of securities comprising units............................ } The Fund; The State Trusts
12. Certain information regarding periodic payment certificates } *
}
13. (a) Load, fees, expenses, etc................................. } Estimated Current Return and
} Estimated Long-Term Return;
} Trust Operating Expenses
(b) Certain information regarding periodic payment certificates } *
}
(c) Certain percentages....................................... } Summary of Essential Information;
} Public Offering; Insurance on the
} Bonds
(d) Certain other fees, etc. payable by holders............... } Rights of Unitholders
(e) Certain profits receivable by depositor,
principal, underwriters, writers, Trustee or
affiliated person..................................... } Trust Operating Expenses; Public
} Offering
(f) Ratio of annual charges to income......................... } *
} The Fund
14. Issuance of Trust's securities................................. } Rights of Unitholders
15. Receipt and handling of payments from purchasers............... } *
16. Acquisition and disposition of underlying } The Fund; Investment Objectives
securities................................................ } and Portfolio Selection; Trust
} Administration; Public Offering
}
17. Withdrawal or redemption....................................... } Rights of Unitholders; Public Offering
}
18. (a) Receipt, custody and disposition of income................ } Rights of Unitholders
(b) Reinvestment of distributions............................. } Rights of Unitholders
(c) Reserves or special Trusts................................ } Trust Operating Expenses
(d) Schedule of distributions................................. } *
19. Records, accounts and reports.................................. } Rights of Unitholders; Trust
} Administration
20. Certain miscellaneous provisions of Trust agreement
(a) Amendment................................................. } Trust Administration
(b) Termination............................................... } *
(c) and (d) Trustee, removal and successor.................... } Trust Administration
(e) and (f) Depositor, removal and successor................... } Trust Administration
21. Loans to security holders } *
22. Limitations on liability....................................... } Trust Administration
23. Bonding arrangements........................................... } *
24. Other material provisions of Trust agreement................... } *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor...................................... } Trust Administration
26. Fees received by depositor..................................... } See Items 13(a) and 13(e)
27. Business of depositor.......................................... } Trust Administration
28. Certain information as to officials and
affiliated persons of depositor........................... } Trust Administration
29. Voting securities of depositor................................. } *
30. Persons controlling depositor.................................. } *
31. Payment by depositor for certain services
rendered to Trust......................................... } *
32. Payment by depositor for certain other services rendered to
Trust..................................................... } *
33. Remuneration of employees of depositor
for certain services rendered to Trust.................... } *
34. Remuneration of other persons for certain
services rendered to Trust................................ } *
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of Trust's securities by states................... } Public Offering
36. Suspension of sales of Trust's securities...................... } *
37. Revocation of authority to distribute.......................... } *
38. (a) Method of Distribution.................................... } Public Offering
(b) Underwriting Agreements................................... } Underwriting
(c) Selling Agreements........................................ } Public Offering
39. (a) Organization of principal underwriters.................... } Trust Administration
(b) N.A.S.D. membership of principal underwriters............. } *
40. Certain fees received by principal underwriters................ } See Items 13(a) and 13(e)
41. (a) Business of principal underwriters........................ } Trust Administration
(b) Branch offices of principal underwriters.................. } *
(c) Salesmen of principal underwriters........................ } *
42. Ownership of Trust's securities by certain persons............. } *
43. Certain brokerage commissions received by
principal underwriters.................................... } Public Offering
44. (a) Method of valuation....................................... } Public Offering
(b) Schedule as to offering price............................. } *
(c) Variation in offering price to certain persons............ } Public Offering
45. Suspension of redemption rights................................ } Rights of Unitholders
46. (a) Redemption valuation...................................... } Public Offering
(b) Schedule as to redemption price........................... } *
47. Maintenance of position in underlying securities............... } Public Offering
} Rights of Unitholders
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation of Trustee......................... } Trust Administration
49. Fees and expenses of Trustee................................... } Trust Operating Expenses
50. Trustee's lien................................................. } *
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
51. Insurance of holders of Trust's securities..................... } Cover Page; Trust Operating
} Expenses; Insurance on the Bonds
}
VII. POLICY OF REGISTRANT
52. (a) Provisions of Trust agreement with respect
to selection or elimination............................... } The Fund; Trust Administration
(b) Transactions involving elimination of
underlying securities..................................... } *
(c) Policy regarding substitution or elimination
of underlying securities.................................. } The Fund; Trust Administration
(d) Fundamental policy not otherwise covered.................. } *
53. Tax status of Trust............................................ } Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years....................... } *
55 Certain information regarding periodic payment
thru certificates.............................................. } *
58.
59. Financial statements (Instruction 1(c) to Form S-6)............ } *
- -------------
*Inapplicable, answer negative or not required.
</TABLE>
VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
COLORADO INSURED SERIES 7
MINNESOTA INSURED SERIES4
NEW MEXICO SERIES 1
THE FUND. Voyageur Tax-Exempt Trust, Series 8 (the "Fund") consists of the
underlying separate unit investment trusts set forth above. The various trusts
are collectively referred to herein as the "Trusts" or the "State Trusts."
Colorado Insured Series 7 and Minnesota Insured Series 4 are referred to herein
as the "Insured Trusts." Because not all of the Bonds in New Mexico Series 1 are
insured, New Mexico Series 1 is not an insured Trust. Each Trust initially
consists of interest-bearing obligations (including delivery statements relating
to contracts for the purchase of certain such obligations and an irrevocable
letter of credit) issued by or on behalf of states and territories of the United
States and political subdivisions and authorities thereof, the interest on which
is, with certain exceptions, in the opinion of recognized bond counsel to the
issuing governmental authorities, exempt from all Federal income taxes under
existing law (the "Bonds"). In addition, the interest income of each 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 Insured Trusts 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 AN INSURED 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 Insured 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 in the Insured Trusts". No representation is made as to
any insurer's ability to meet its commitments. NO INSURANCE POLICY HAS BEEN
OBTAINED FOR ANY OF THE BONDS IN THE TRUST WITH THE NAME DESIGNATION OF NEW
MEXICO SERIES 1; HOWEVER, CERTAIN OF THE BONDS CONTAINED THEREIN MAY BE INSURED.
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 a State Trust, Federal and
state income tax (if any) and conservation of capital through an investment in
diversified portfolios of Federal and state tax-exempt obligations. The Fund may
be an appropriate investment vehicle for investors who desire to participate in
a portfolio of tax-exempt fixed income securities with greater diversification
than they might be able to acquire individually. In addition, securities of the
type deposited in the Fund are often not available in small amounts. There is,
of course, no guarantee that the Fund will achieve its objectives. The payment
of interest and the preservation of principal are dependent upon the continuing
ability of the issuers and/or obligors of the Bonds and of the insurers thereof
to meet their respective obligations.
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY AND INVOLVE INVESTMENT RISK, INCLUDING LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The investor is advised to read and retain this
Prospectus for future reference.
THE DATE OF THIS PROSPECTUS IS OCTOBER 17, 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 8
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: OCTOBER 17, 1996
SPONSOR AND EVALUATOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<TABLE>
<CAPTION>
COLORADO MINNESOTA NEW
INSURED INSURED MEXICO
SERIES 7 SERIES 4 SERIES 1
---------- ------------ ---------
<S> <C> <C> <C>
Principal Amount (Par Value) of Bonds................................ $2,015,000 $1,620,000 $1,690,000
Number of Units...................................................... 205,863 165,992 173,063
Fractional Undivided Interest in the Trust per Unit.................. 1/205,863 1/165,992 1/173,063
Principal Amount (Par Value) of Bonds per Unit (1)................... $9.788 $9.760 $9.765
Public Offering Price: Aggregate Offering Price of
Bonds in Portfolio............................................... $1,957,756 $1,578,585 $1,645,829
Aggregate Offering Price of Bonds per Unit........................... $9.51 $9.51 $9.51
Sales Charge 4.9% (5.152% of the Aggregate Offering
Price of the Bonds) per Unit(2)................................... $0.49 $0.49 $0.49
Public Offering Price per Unit(2)(3)................................. $10.00 $10.00 $10.00
Redemption Price per Unit(3)(4)...................................... $9.43 $9.44 $9.44
Sponsor's Initial Repurchase Price per Unit.......................... $9.51 $9.51 $9.51
Excess of Public Offering Price per Unit Over
Redemption Price per Unit......................................... $0.57 $0.56 $0.56
Excess of Sponsor's Initial Repurchase Price per Unit
Over Redemption Price per Unit.................................... $0.08 $0.07 $0.07
Minimum Value of the Trust under which Trust
Agreement may be terminated....................................... $403,000 $324,000 $338,000
Minimum Principal Distribution.........................$0.10 per Unit
First Settlement Date............................... October 22, 1996
Mandatory Termination Date..........................December 31, 2045
Calculation of Estimated Net Annual Unit Income(5):
Estimated Annual Interest Income per Unit......................... $0.53555 $0.53260 $0.54070
Less: Estimated Annual Expense per Unit........................... $0.02814 $0.02779 $0.02984
-------- -------- --------
Estimated Net Annual Interest Income per Unit..................... $0.50741 $0.50481 $0.51086
Estimated Normal Monthly Distribution per Unit(6).................... $0.04228 $0.04207 $0.04257
Estimated Daily Rate of Net Interest Accrual per Unit................ $0.00141 $0.00140 $0.00142
Estimated Current Return Based on Public Offering
Price(2)(6)(7).................................................... 5.07% 5.05% 5.11%
Estimated Long-Term Return(2)(6)(7).................................. 5.08% 5.03% 5.10%
Initial Distribution (November 15, 1996)............................. $0.01269 $0.01262 $0.01277
Trustee's Initial Annual Fee per $1,000 Principal
Amount of Bonds(5)................................................ $1.56 $1.58 $1.63
Evaluator's Annual Fee per Unit...................................... $0.00250 $0.00250 $0.00250
Sponsor's Annual Fee per Unit........................................ $0.00300 $0.00300 $0.00300
Estimated Organizational and Offering Expenses per Unit (8).......... $0.03598 $0.04465 $0.03617
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 Minnesota
Trust by approximately $0.00184 per Unit (which amount is the estimated
interest to be earned per Unit prior to the expected delivery date 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 $0.53444; Estimated Annual Expense per Unit will be increased
to $0.02963; and Estimated Net Annual Interest Income per Unit will remain
the same as shown. However, in no event will the Trustee's Annual Fee for
each trust be less than $2,000. 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 three separate unit investment trusts, each having a
portfolio of interest-bearing obligations (including delivery statements
relating to contracts for the purchase of certain such obligations) issued by or
on behalf of states and territories of the United States, and political
subdivisions and authorities thereof, the interest on which is, in the opinion
of recognized bond counsel to the issuing governmental authorities, exempt from
all Federal income taxes under existing law. All issuers of Bonds in a 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. 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 an irrevocable letter 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 at least "AAA" by Standard & Poor's and/or "Aaa"
by Moody's in the case of an Insured Trust and at least BBB by Standard & Poor's
and/or Baa by Moody's in the case of any uninsured Trust; and (vi) be insured by
one of the Insurers if such Bonds are purchased for an Insured Trust. 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 a 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 Insured 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. All Bonds selected for an uninsured Trust were rated in no case less
than BBB by Standard & Poor's or Baa by Moody's. See "Description of Bond
Ratings." NO PORTFOLIO INSURANCE POLICY HAS BEEN OBTAINED BY THE SPONSOR FOR
BONDS CONTAINED IN NEW MEXICO SERIES 1.
In selecting Bonds for the Trusts the following factors, among others, were
considered by the Sponsor: (i) either the Standard & Poor's rating of the
securities was in no case less than AAA in the case of the Insured Trusts and
BBB in the case of the uninsured Trusts, or the Moody's rating of the Securities
was in no case less than Aaa in the case of the Insured Trusts and Baa in the
case of the uninsured Trusts, including provisional or conditional ratings,
respectively, or, if not rated, the Securities had, in the opinion of the
Sponsor, credit characteristics sufficiently similar to the credit
characteristics of interest-bearing tax-exempt obligations that were so rated as
to be acceptable for acquisition by the Fund, (ii) whether the Bonds are insured
by an Insurer in the case of an Insured Trust, (iii) the prices of the Bonds
relative to other bonds of comparable quality and maturity and (iv) the
diversification of Bonds as to purpose of issue and location of issuer, (v) with
respect to the Insured Trusts, the availability and cost of insurance for the
prompt payment of principal and interest, when due, on the Bonds. Subsequent to
the Initial Date of Deposit, a Bond may cease to be rated or its rating may be
reduced below either the applicable Standard & Poor's or Moody's ratings set
forth above or both. Neither event requires elimination of such Bonds from the
portfolio of a Trust but may be considered in the Sponsor's determination as to
whether or not to direct the Trustee to dispose of the Bonds, see "Trust
Administration-- Portfolio Administration."
To the best knowledge of the Sponsor, there is no litigation pending as of
the Initial Date of Deposit in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Fund or any of the Trusts.
At any time after the Initial Date of Deposit, litigation may be initiated on a
variety of grounds with respect to Bonds in the Fund. Such litigation, as, for
example, suits challenging the issuance of pollution control revenue bonds under
environmental protection statutes, may affect the validity of such Bonds or the
tax-free nature of the interest thereon. While the outcome of litigation of such
nature can never be entirely predicted, the Fund has received or will receive
opinions of bond counsel to the issuing authorities of each Bond on the date of
issuance to the effect that such Bonds have been validly issued and that the
interest thereon is exempt from Federal and applicable state income taxation. In
addition, other factors may arise from time to time which potentially may impair
the ability of issuers to meet obligations undertaken with respect to the Bonds.
THE TRUSTS
COLORADO INSURED SERIES 7
GENERAL. Colorado Insured Series 7 (the "Colorado Trust") consists of
issues of 6 Bonds. One of the Bonds in the Colorado Trust is a general
obligation (13.2%) of the governmental entity issuing it and is backed by the
taxing power thereof. The remaining issues are payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. These issues are divided by purpose of issues (and percentage of
principal amount to total Colorado Trust) follows: 12.4% Education Revenue
Bonds, 37.2% Health Care Revenue Bonds, 24.8% Transportation Revenue Bonds and
12.4% Water and Sewer Revenue Bonds. No Bond has received a provisional rating.
For a general description of certain of the risks associated with the Bonds, see
"Risk Factors" below.
RISK FACTORS SPECIFIC TO COLORADO. The State Constitution requires that
expenditures for any fiscal year not exceed revenues for such fiscal year. By
statute, the amount of General Fund revenues available for appropriation is
based upon revenue estimates which, together with other available resources,
must exceed annual appropriations by the amount of the unappropriated reserve
(the "Unappropriated Reserve"). The Unappropriated Reserve requirement for
fiscal year 1991, 1992 and 1993 was set at 3% of total appropriations from the
General Fund. For fiscal years 1994 and thereafter, the Unappropriated Reserve
retirement is set at 4%. In addition to the Unappropriated Reserve, a
constitutional amendment approved by Colorado voters in 1992 requires the State
and each local government to reserve a certain percentage of its fiscal year
spending (excluding bonded debt service) for emergency use (the "Emergency
Reserve"). The minimum Emergency Reserve was set at 2% for 1994 and 3% for 1995
and later years. For fiscal year 1992 and thereafter General Fund appropriations
are also limited by statute to an amount equal to the cost of performing certain
required reappraisals of taxable property plus an amount equal to the lesser of
(i) five percent of Colorado personal income or (ii) 106% of the total General
Fund appropriations for the previous fiscal year. This restriction does not
apply to any General Fund appropriations which are required as a result of a new
federal law, a final state or federal court order or moneys derived from the
increase in the rate or amount of any tax or fee approved by a majority of the
registered electors of the State voting at any general election. In addition,
the statutory limit on the level of Federal Fund appropriations may be exceeded
for a given fiscal year upon the declaration of a State fiscal emergency by the
State General Assembly.
The 1995 fiscal year ending General Fund balance was $486.7 million, or
$260.7 million over the required Unappropriated Reserve and Emergency Reserve.
The 1996 fiscal year ending General fund balance was $343.9 million, or $187.2
million over the required Unappropriated Reserve and Emergency Reserve. Based on
September 20, 1996, estimates, the 1997 fiscal year ending General Fund balance
is expected to be $357.6 million, or $191.7 million over the required
Unappropriated Reserve and Emergency Reserve.
On November 3, 1992, voters in Colorado approved a constitutional amendment
(the "Amendment") which, in general, became effective December 31, 1992, and
which could restrict the ability of the State and local governments to increase
revenues and impose taxes. The Amendment applies to the State and all local
governments, including home rule entities ("Districts"). Enterprises, defined as
government-owned businesses authorized to issue revenue bonds and receiving
under 10% of annual revenue in grants from all Colorado state and local
governments combined, are excluded from the provisions of the Amendment.
The provisions of the Amendment are unclear and have required judicial
interpretation. Among other provisions, beginning November 4, 1992, the
Amendment requires voter approval prior to tax increases, creation of debt, or
mill levy or valuation for assessment ratio increases. The Amendment also limits
increases in government spending and property tax revenues to specified
percentages. The Amendment requires that District property tax revenues yield no
more than the prior year's revenues adjusted for inflation, voter approved
changes and (except with regard to school districts) local growth in property
values according to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment. Pursuant to the
Amendment, local government spending is to be limited by the same formula as the
limitation for property tax revenues. The Amendment limits increases in
expenditures from the State general fund and program revenues (cash funds) to
the growth in inflation plus the percentage change in State population in the
prior calendar year. The basis for initial spending and revenue limits are
fiscal year 1992 spending and 1991 property taxes collected in 1992. The bases
for spending and revenue limits for fiscal year 1994 and later years will be the
prior fiscal year's spending and property taxes collected in the prior calendar
year. Debt service changes, reductions and voter-approved revenue changes are
excluded from the calculation bases. The Amendment also prohibits new or
increased real property transfer tax rates, new State real property taxes and
local District income taxes.
Litigation concerning several issues relating to the Amendment has been
brought in the Colorado courts. The litigation deals with three principal
issues: (i) whether Districts can increase mill levies to pay debt service on
general obligation bonds without obtaining voter approval; (ii) whether a
multi-year lease-purchase agreement subject to annual appropriations is an
obligation which requires voter approval prior to execution of the agreement;
and (iii) what constitutes an "enterprise" which is excluded from the provisions
of the Amendment. In September, 1994, the Colorado Supreme Court held that
Districts can increase mill levies to pay debt service on general obligation
bonds issued after the effective date of the Amendment; in June, 1995, the
Colorado Supreme Court validated mill levy increases to pay general obligation
bonds issued prior to the Amendment. In late 1994, the Colorado Court of Appeals
held that multi-year lease-purchase agreements subject to annual appropriation
do not require voter approval. The time to file an appeal in that case has
expired. Finally, in May, 1995, the Colorado Supreme Court ruled that entities
with the power to levy taxes may not themselves be "enterprises" for purposes of
the Amendment; however, the Court did not address the issue of how valid
enterprises may be created. Future litigation in the "enterprise" arena may be
filed in the future to clarify these issues.
According to the COLORADO ECONOMIC PERSPECTIVE, FIRST QUARTER, FY 1996-97,
SEPTEMBER 20, 1996 (the "Economic Report"), inflation for 1995 was 4.3% and
population grew at the rate of 2.3% in Colorado. Accordingly, under the
Amendment, increases in State expenditures during the 1997 fiscal year will be
limited to 6.6% over expenditures during the 1996 fiscal year. The limitation
for the 1998 fiscal year is projected to be 5.8%, based on projected inflation
of 3.9% for 1996 and projected population growth of 1.9% during 1996. The 1996
fiscal year is the base year for calculating the limitation for the 1997 fiscal
year. For the 1996 fiscal year, General Fund revenues totaled $4,230.8 million
and program revenues (cash funds) totaled $1,839.5 million, resulting in total
estimated base revenues of $6,124.3 million. Expenditures for the 1997 fiscal
year, therefore, cannot exceed $6,528.5 million. However, the 1997 fiscal year
General Fund and program revenues (cash funds) are projected to be only $6,478.2
million, or $50.3 million less than expenditures allowed under the spending
limitation.
There is also a statutory restriction on the amount of annual increases in
taxes that the various taxing jurisdictions in Colorado can levy without
electoral approval. This restriction does not apply to taxes levied to pay
general obligation debt.
As the State experienced revenue shortfalls in the mid-1980s, it adopted
various measures, including impoundment of funds by the Governor, reduction of
appropriations by the General Assembly, a temporary increase in the sales tax,
deferral of certain tax reductions and inter-fund borrowings. On a GAAP basis,
the State had unrestricted General Fund balances at June 30 of approximately
$16.3 million in fiscal year 1991, $133.3 million in fiscal year 1992, $326.6
million in fiscal year 1993, $405.1 million in fiscal year 1994 and $ 486.7
million in fiscal year 1995. The fiscal year 1996 unrestricted General Fund
ending balance was $343.9 million, with projections for fiscal year 1997 at
$357.6 million.
Revenues for the fiscal year ending June 30, 1996, showed Colorado's
general fund continuing to slow. Revenues grew by $272.3 million, to $4,268.7
million, a 6.8% increase from 1995. However, this figure was down from the
fiscal year 1995 pace of 7.3%. General Fund expenditures rose substantially and
exceeded revenues by $144.6 million. Reasons for this consist of a change in how
the state manages its emergency reserve, and a significant increase in the
transfer of reserves to the Capital Construction Fund, and the Police and Fire
Pension Association (increases of $29 million and $32 million, respectively).
For fiscal year 1996, the following tax categories generated the following
respective revenue percentages of the State's $4,268.7 million total gross
receipts: individual income taxes represented 54.4% of gross fiscal year 1996
receipts; sales, use and other excise taxes represented 33.2% of gross fiscal
year 1996 receipts; and corporate income taxes represented 4.8% of gross fiscal
year 1996 receipts. The final budget for fiscal year 1997 projects general fund
revenues of approximately $4,546.6 million and appropriations of approximately
$4,151.9 million. The percentages of general fund revenue generated by type of
tax for fiscal year 1997 are not expected to be significantly different from
fiscal year 1996 percentages.
For fiscal year 1997, General Fund revenues are projected at $4,546.6
million. Revenue growth is expected to slow slightly to 6.5% over fiscal year
1996 actual revenues. Total general fund expenditures are estimated at $4,417.9
million. The ending general fund balance, after reserve set-asides, is $191.7
million.
Under its constitution, the State of Colorado is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The State
enters into certain lease transactions which are subject to annual renewal at
the option of the State. In addition, the State is authorized to issue
short-term revenue anticipation notes. Local governmental units in the State are
also authorized to incur indebtedness. The major source of financing for such
local government indebtedness is an ad valorem property tax. In addition, in
order to finance public projects, local governments in the State can issue
revenue bonds payable from the revenues of a utility or enterprise or from the
proceeds of an excise tax, or assessment bonds payable from special assessments.
Colorado local governments can also finance public projects through leases which
are subject to annual appropriation at the option of the local government. Local
governments in Colorado also issue tax anticipation notes. The Amendment
requires prior voter approval for the creation of any multiple fiscal year debt
or other financial obligation whatsoever, except for refundings at a lower rate
or obligations of an enterprise.
Based on data published by the State of Colorado, Office of State Planning
and Budgeting, Colorado gained 74,966 employees in 1995. The 1995 increase was
down about 10,000 from the 1994 gain, but mirrored the 1993 employment increase.
Services and retail trade were the number one and two largest growing industries
in Colorado in 1995, adding 28,766 (6.0% increase) and 20,905 (6.2% increase)
employees, respectively. Transportation, communications, and public utilities
reported the largest percentage gain from 1994 to 1995, at 8.8%. Construction
reported the fourth largest employment gain over the year, at 5.2%, with
increases about half of what they had been in 1994 and 1993 due to the
completion of the Denver International airport. Mining continued to be the
weakest industry sector, with only a 0.5% increase.
The unemployment rate in Colorado remained stable at 4.2% during both 1994
and 1995. As of June 1996, the Colorado unemployment rate was 4.6% compared to
the 5.5% rate for the nation. Colorado's job growth rate increased 4.3% from
1994 to 1995 as compared to a 2.7% growth rate for the United States in 1994.
The services sector comprised 28% of Colorado's 1995 employment and generated
38% of the State's growth.
Personal income rose 6.2% in Colorado during 1994 and 7.5% in 1993. During
1995, personal income rose 8.0% in Colorado to $88.131 billion, as compared with
5.9% for the nation as a whole. In 1996, Colorado's personal income is expected
to drop back to 6.2%, with the national stimates between the 1994 rate of 4.9%
and the 6.1% of 1995.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in the
Colorado Trust), which, to varying degrees, have also experienced reduced
revenues as a result of recessionary conditions and other factors.
STATE TAXATION. For a discussion of the Federal tax status of income earned
on Colorado Trust Units, see "Tax Status."
Neither the Sponsor nor its counsel has independently examined the Bonds to
be deposited in and held in the Colorado Trust. However, although Chapman and
Cutler expresses no opinion with respect to the issuance of the Bonds, in
rendering its opinion expressed herein, it has assumed that: (i) the Bonds were
validly issued; (ii) the interest thereon is excludable from gross income for
Federal income tax purposes; and (iii) interest on the Bonds, if received
directly by a Unitholder, would be exempt from the income tax imposed by the
State of Colorado that is applicable to individuals and corporations (the "State
Income Tax"). This opinion does not address the taxation of persons other than
full time residents of Colorado.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Colorado law:
1. Because Colorado income tax law is based upon the Federal law, the
Colorado Trust is not an association taxable as a corporation for purposes
of Colorado income taxation.
2. With respect to Colorado Unitholders, in view of the relationship
between Federal and Colorado tax computations described above:
(i) Each Colorado Unitholder will be treated as owning a pro rata
share of each asset of the Colorado Trust for Colorado income tax
purposes in the proportion that the number of Units of such Trust held
by the Unitholder bears to the total number of outstanding Units of
the Colorado Trust, and the income of the Colorado Trust will
therefore be treated as the income of each Colorado Unitholder under
Colorado law in the proportion described and an item of income of the
Colorado Trust will have the same character in the hands of a Colorado
Unitholder as it would have in the hands of the Trustee;
(ii) Interest on Bonds that would not be includable in income for
Colorado income tax purposes when paid directly to a Colorado
Unitholder will be exempt from Colorado income taxation when received
by the Colorado Trust and attributed to such Colorado Unitholder and
when distributed to such Colorado Unitholder;
(iii) Certain of the Colorado Bonds in the Colorado Trust have
been insured by the issuers thereof against default in the prompt
payment of principal and interest. Based upon the exemptions and
assumptions referred to above, it is our opinion that any amount
received by the Colorado Trust representing maturing interest on such
bonds will be excludible from Colorado adjusted gross income, if and
to the same extent as, such interest is so excludible for federal
income tax purposes if paid in the normal course by the issuer
notwithstanding that the source of the payment is from insurance
proceeds provided, that, at the time such insurance policies are
purchased, the amounts paid for such policies are reasonable,
customary and consistent with reasonable expectation that the issuer
of the Colorado Bonds, rather than the insurer will pay debt service
on the Colorado Bonds.
(iv) Each Colorado Unitholder will realize taxable gain or loss
when the Colorado Trust disposes of the Bonds (whether by sale,
exchange, redemption, or payment at maturity) or when the Colorado
Unitholder redeems or sells Units at a price that differs from
original cost as adjusted for amortization of bond discount or premium
and other basis adjustments (including any basis reduction that may be
required to reflect a Colorado Unitholder's share of interest, if any,
accruing on Bonds during the interval between the Colorado
Unitholder's settlement date and the date such Bonds are delivered to
the Colorado Trust, if later);
(v) Tax basis reduction requirements relating to amortization of
bond premium may, under some circumstances, result in Colorado
Unitholders realizing taxable gain when their Units are sold or
redeemed for an amount equal to or less than their original cost; and
(vi) If interest on indebtedness incurred or continued by a
Colorado Unitholder to purchase Units in the Colorado Trust is not
deductible for Federal income tax purposes, it also will be
non-deductible for Colorado income tax purposes.
Unitholders should be aware that all tax-exempt interest, including their
share of interest on the Bonds paid to the Colorado Trust, is taken into account
for purposes of determining eligibility for the Colorado Property Tax/Rent/Heat
Rebate. Chapman and Cutler has expressed no opinion with respect to taxation
under any other provisions of the Colorado law. Ownership of the Units may
result in collateral Colorado tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any such
collateral consequences.
<TABLE>
<CAPTION>
COLORADO INSURED SERIES 7
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 17, 1996
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING PRICE
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED REDEMPTION TO COLORADO
PRINCIPAL (1) OR BONDS CONTRACTED FOR (1)(5) RATING (2) FEATURE (3) TRUST (4)
- ------------- ----------------------------------------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
$500,000 Colorado Health Facilities Authority, Hospital AAA 2004 @ 102 $505,625
Revenue Improvement and Refunding Bonds, 2010 @ 100 S.F.
(Boulder Community Hospital Project), Series
1994B, (MBIA Insured) 5.875% Due
10/01/2023#
250,000 Auraria Higher Education Center (State of AAA 2006 @ 101 238,438
Colorado) Student Fee Revenue Refunding 2016 @ 100 S.F.
Bonds, Series 1996, (AMBAC Insured),
5.30% Due 05/01/2021#
250,000 Colorado Health Facilities Authority Hospital AAA 2006 @ 101 235,000
Revenue Bonds (The Children's Hospital 2016 @ 100 S.F.
Association Project), Series 1996, (MBIA
Insured) 5.25% Due 10/01/2026#
500,000 City and County of Denver, Colorado Airport AAA 2005 @ 102 493,125
System Revenue Bonds, Series 1995A, 2021 @ 100 S.F.
(MBIA Insured) 5.70% Due 11/15/2025#
250,000 City of Colorado Springs, Colorado, Utilities AAA 2004 @ 100 238,125
System Improvement and Refunding Revenue
Bonds, Series 1994A, (MBIA Insured) 5.10%
Due 11/15/2017#
265,000 Highlands Ranch Metropolitan District No. 2, AAA 2006 @ 101 247,443
Douglas County, Colorado, General 2013 @ 100 S.F.
Obligation Refunding Bonds, Series 1996,
- ---------- (FSA Insured) 5.00% Due 06/15/2016# -----------
$2,015,000 $1,957,756
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 26.
MINNESOTA INSURED SERIES 4
GENERAL. The Minnesota Insured Series 4 (the "Minnesota Trust" ) consists
of 7 issues of Bonds. Three of the Bonds in the Minnesota Trust are general
obligations (37.0%) 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 Minnesota Trust) as follows: 40.1% Healthcare Revenue
Bonds and 22.9% 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 MINNESOTA. Minnesota's 1994-95 fiscal year ended
with a general fund and local government trust fund budgetary balance of $444.63
million. Total resources available were $17.760 billion. Total expenditures and
transfers were $16.740 billion.
According to a July 1996 report from the Minnesota Department of Finance,
net general fund receipts, including revenues dedicated to the local government
trust fund are estimated to have totaled more than $8.983 billion during the
1996 fiscal year, $255.3 (2.9%) more than forecast. Minnesota's economy has been
stronger than forecast in 1996. Each of the four major taxes--individual, sales,
corporate, and motor vehicle--brought in an estimated $4,146.6 million, $2,905.1
million, $704.8 million, and 372.1 million, respectively, a total of $226
million more than forecast. More than $100 million of the additional revenue is
attributable to settlement of tax year 1995 individual income tax liabilities,
some of which may be one time in nature.
The uncommitted general fund balance at the close of the 1996-97 biennium
is expected to be $64 million. This forecast reflects the statutory allocations
made in November 1995 to increase the budget reserve to $220 million and reduce
the school property tax recognition percentage to zero by fiscal year 1997.
Total general fund revenues for the 1996-97 biennium are expected to be $18.453
billion. Total general fund expenditures are expected to reach $18.839 billion.
In recent years, Minnesota has ranked as one of the top five states in
production for dairy products, soy beans, hogs, corn, turkeys, sugar beets,
barley, hay, sweet corn, oats, green peas, and sunflowers. In 1994, Minnesota
ranked first in the nation in cash receipts for sugar beets. Total cash receipts
in 1994 were $6.522 billion, with dairy products and soy beans contributing
18.3% and 15.6%, respectively.
Minnesota's 1980-94 growth rate of 12.1% was the highest of the 12 Midwest
states and nearly triple the overall growth rate for the Midwest. Minnesota's
population grew 4.4% from 1990-94, to 4,570,355.
Between 1985 and 1994, more than 435,000 jobs were added in Minnesota,
resulting in employment growth of 24.1% compared to the national average of
16.9%. The four fastest growing industries in Minnesota were: services;
manufacturing; finance, insurance and real estate (FIRE); and transportation,
communications and public utilities (TCPU). Manufacturing employment increased
10.5% while overall national manufacturing employment declined nearly 5%.
Minnesota continues to rely on its competitive advantages to generate jobs in
traditional and emerging manufacturing and service industries. Mining continues
to be the weakest industry, although in 1993, Minnesota accounted for more than
three-quarters of the total U.S. iron ore production. In 1994, 2.244 million
were employed in non-farm industries.
The annual unemployment rate in Minnesota was below the U.S. and Midwest
rates every year during the ten-year period 1985 to 1994. In 1994, the Minnesota
unemployment rate was at a ten-year low of 3.9%, compared to the 6.1% for the
nation. The highest unemployment rate Minnesota has experienced in the last ten
years was 6.0% in 1985.
Minnesota's unadjusted unemployment rate increased slightly from 3.4% in
July 1995 to 3.5% in July 1996. This compares with the U.S. rate of 5.9% in July
1995 and 5.6% in July 1996. Between July 1995 and July 1996, Minnesota added
42,700 jobs, growing at a rate of 1.8% for total nonfarm wage and salary
employment. This brings the total number of nonfarm jobs in the state to
2,431,800. In the last year, the services division accounted for over 40% of the
growth and trade made up another 30%. From July 1995 to July 1996, the services
sector grew 2.7%, or 17,400 jobs. Manufacturing added 2,400 jobs, a .8%
increase. FIRE gained 3,900 jobs for a growth rate of 2.8%. This was the largest
percentage increase of any industry division in the state. TCPU increased by
2.7%, or 3,200 jobs. Employment has grown at a 3.5% annual rate in 1996, well
above the national average.
The labor force participation rate in Minnesota was 75.6% in 1994, almost
14% higher than the U.S. average of 66.6%. In 1994, there were 2.565 million in
the labor force. As of July 1996, this number increased to 2.637 million.
In 1994, per capita personal income in Minnesota was $22,257, exceeding the
national average by 2.5%. Minnesota ranked 16th in the nation in per capita
personal income. Between 1993 and 1994, Minnesota per capita personal income
increased 7.4%, double the national growth rate. The service sector contributed
the most to total earned income, over $19.3 billion, followed by the
manufacturing sector, nearly $17.2 billion. Minnesota's personal income is
estimated to increase 5.0% in 1996. The U.S. increase for 1996 is predicted at
4.7%.
Minnesota's wage and salary income increased 4.2% in 1993, 6.6% in 1994 and
6.2% in 1995. In comparison, the United States annual increase was 3.5%, 4.8%,
and 5.5% for 1993, 1994, and 1995, respectively. For 1996, Minnesota's wage and
salary income is expected to increase 4.5% compared to the United States' 4.4%
increase.
In May 1996, Moody's Investor Services upgraded Minnesota's general
obligation bond rating to Aaa. S&P's current rating is AA+, and Fitch's rates
Minnesota bonds at AAA.
STATE TAXATION. For a discussion of the Federal tax status of income earned
on Minnesota Trust Units, see "Tax Status."
Counsel to the Minnesota Trust understands that the Minnesota Trust will
only have income consisting of (i) interest from bonds issued by the State of
Minnesota and its political and governmental subdivisions, municipalities and
governmental agencies and instrumentalities (the "Minnesota Bonds") and bonds
issued by possessions of the United States (the "Possession Bonds" and, with the
Minnesota Bonds, the "Bonds") which would be exempt from Federal and Minnesota
income taxation when paid directly to an individual, trust or estate, (ii) gain
on the disposition of such Bonds and (iii) proceeds paid under certain insurance
policies issued to the issuers of the Bonds which represent maturing interest or
principal payments on defaulted Bonds held by the Trustee.
Neither the Sponsor nor its counsel has independently examined the Bonds to
be deposited in and held in the Trust. However, although no opinion is expressed
herein regarding such matters, it is assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon is excludible from gross income for Federal
income tax purposes and (iii) the interest thereon is exempt from income tax
imposed by Minnesota that is applicable to individuals, trusts and estates (the
"Minnesota Income Tax"). It should be noted that interest on the Minnesota Bonds
is subject to tax in the case of corporations subject to the Minnesota Corporate
Franchise Tax or the Corporate Alternative Minimum Tax and is a factor in the
computation of the Minimum Fee applicable to financial institutions; no opinion
is expressed with respect to the treatment of interest on the Possession Bonds
for purposes of such taxes. The opinion set forth below does not address the
taxation of persons other than full time residents of Minnesota. Although
Minnesota state law provides that interest on Minnesota bonds is exempt from
Minnesota state income taxation, the Minnesota state legislature has enacted a
statement of intent that interest on Minnesota bonds should be subject to
Minnesota state income taxation if it is judicially determined that the
exemption discriminates against interstate commerce, effective for the calendar
year in which such a decision becomes final. It cannot be predicted whether a
court would render such a decision or whether, as a result thereof, interest on
Minnesota bonds and therefore distributions by the Minnesota Trust would become
subject to Minnesota state income taxation.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Minnesota income tax law as of the date of this prospectus and based
upon the assumptions above:
1. The Minnesota Trust is not an association taxable as a corporation
and each Unitholder of the Minnesota Trust will be treated as the owner of
a pro rata portion of the Minnesota Trust, and the income of such portion
of the Minnesota Trust will therefore be treated as the income of the
Unitholder for Minnesota Income Tax purposes;
2. Income on the Bonds which is excludible from Minnesota taxable
income for purposes of the Minnesota Income Tax when received by the
Minnesota Trust and which would be excludible from Minnesota taxable income
for purposes of the Minnesota Income Tax if received directly by a
Unitholder will be excludible from Minnesota taxable income for purposes of
the Minnesota Income Tax when received by the Minnesota Trust and
distributed to such Unitholder;
3. To the extent that interest on certain Bonds, if any, which is
includible in the computation of "alternative minimum taxable income" for
Federal income tax purposes, such interest will also be includible in the
computation of "alternative minimum taxable income" for purposes of the
Minnesota Alternative Minimum Tax imposed on individuals, estates and
trusts;
4. Each Unitholder of the Minnesota Trust will recognize gain or loss
for Minnesota Income Tax purposes if the Trustee disposes of a Bond
(whether by redemption, sale or otherwise) or if the Unitholder redeems or
sells Units of the Minnesota Trust to the extent that such a transaction
results in a recognized gain or loss to such Unitholder for Federal income
tax purposes;
5. Tax basis reduction requirements relating to amortization of bond
premium may, under some circumstances, result in Unitholders realizing
taxable gain for Minnesota Income Tax purposes when their Units are sold or
redeemed for an amount equal to or less than their original cost;
6. Proceeds, if any, paid under individual insurance policies obtained
by issuers of Bonds which represent maturing interest on defaulted
obligations held by the Trustee will be excludible from Minnesota net
income if, and to the same extent as, such interest would have been so
excludible from Minnesota income tax if paid in the normal course by the
issuer of the defaulted obligation provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
bonds, rather than the insurer, will pay debt service on the bonds; and
7. To the extent that interest derived from the Minnesota Trust by a
Unitholder with respect to any Possession Bonds is excludible from gross
income for Federal income tax purposes, such interest will not be subject
to the Minnesota Income Tax. As noted above, we have expressed no opinion
as to the treatment of interest on the Possession Bonds for purposes of the
Minnesota Corporate Franchise Tax or the Alternative Minimum Tax or whether
it is a factor in the computation of the Minimum Fee applicable to
financial institutions. Although a federal statute currently provides that
bonds issued by the Government of Puerto Rico, or by its authority, are
exempt from all state and local taxation, the Supreme Court of Minnesota
has held that interest earned on bonds issued by the Government of Puerto
Rico may be included in taxable net income for purposes of computing the
Minnesota bank excise tax. The State of Minnesota could apply the same
reasoning in determining whether interest on the Possession Bonds is
subject to the taxes listed above on which we express no opinion.
Chapman and Cutler has not examined any of the Bonds to be deposited and
held in the Minnesota Trust or the proceedings for the issuance thereof or the
opinions of bond counsel with respect thereto, and therefore express no opinions
to the exemption from State income taxes of interest on the Bonds if received
directly by a Unitholder. Chapman and Cutler has expressed no opinion with
respect to taxation under any other provision of Minnesota law. Ownership of the
Units may result in collateral Minnesota tax consequence to certain taxpayers.
Prospective investors should consult their tax advisors as to the applicability
of any such collateral consequences.
<TABLE>
<CAPTION>
MINNESOTA INSURED SERIES 4
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 17, 1996
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING PRICE
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED REDEMPTION TO MINNESOTA
PRINCIPAL (1) OR BONDS CONTRACTED FOR (1)(5) RATING (2) FEATURE (3) TRUST (4)
------------- -------------------------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
$250,000 Independent School District 138, North Branch, AAA 2005 @ 100 $250,936
Minnesota, General Obligation School Building 2016 @ 100 S.F.
Bonds, Series 1995A, (FGIC Insured) 5.625% Due
02/01/2017#
300,000 City of Minneapolis, Minnesota and Housing and AAA 2005 @ 102 291,375
Redevelopment Authority of the City of St. Paul, 2017 @ 100 S.F.
Minnesota Health Care Revenue Bonds
(Children's Health Care) Series 1995, (FSA
Insured) 5.50% Due 08/15/2025#
250,000 Economic Development Authority of the City of AAA 2006 @ 100 244,062
Litchfield, Minnesota, General Obligation Housing 2017 @ 100 S.F.
Development Bonds, Series 1996A, (FSA Insured)
5.50% Due 02/01/2022#**
250,000 City of St. Cloud, Minnesota Hopsital Facilities AAA 2006 @ 101 226,562
Refunding Revenue Bonds (The Saint Cloud 2016 @ 100 S.F.
Hospital), Series 1996-B, (AMBAC Insured)
5.00% Due 07/01/2020#
370,000 Southern Minnesota Municipal Power Agency, AAA 2003 @ 102 372,775
Power Supply System Revenue Bonds, Series 2013 @ 100 S.F.
1994A, (MBIA Insured), 5.75% Due 1/1/2018#
100,000 Independent School District No. 192, Farmington, AAA 2003 @ 100 94,000
Minnesota, General Obligation School Building 2012 @ 100 S.F.
Bonds, Series 1994, (AMBAC Insured) 5.125%
Due 02/01/2015#
100,000 Housing and Redevelopment Authority of The AAA 2003 @ 102 98,875
City of St. Paul, Minnesota, Hospital Facility 2008 @ 100 S.F.
Revenue Bonds, (St. Paul-Ramsey Medical Center
Project), Series 1993, (AMBAC Insured) 5.50%
- ---------- ----------
$1,620,000 $1,578,585
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 26.
NEW MEXICO SERIES 1
GENERAL. New Mexico Series 1 (the "New Mexico Trust") consists of 7 issues
of Bonds. 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 New Mexico Trust) as follows: 14.8% Education Revenue Bonds, 29.6%
Industrial Revenue Bonds, 8.0% Water and Sewer Revenue Bonds and 47.6% Other
Revenue Bonds. No Bond has received a provisional rating. For a general
description of certain of the risks associated with the Bonds, see "Risk
Factors" below. None of the Bonds in the New Mexico Trust are insured.
RISK FACTORS SPECIFIC TO NEW MEXICO. The following brief summary regarding
the economy of New Mexico 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 New
Mexico Bonds. The Sponsor has not independently verified any of the information
contained in such publicly available documents.
Major industries in the State are energy resources, services, construction,
trade, tourism, agriculture-agribusiness, manufacturing, mining, and government.
From 1994-95, the value of construction contracts increased 6.9% to $2.1
billion. In 1995, the total of gas and oil sales was $3.12 billion, however,
this was a 9.7% decrease from 1994. In 1994, the value of mineral production
(i.e., crude petroleum, natural gas, uranium, and coal) was approximately $5.05
billion. Major federally funded scientific research facilities at Los Alamos,
Albuquerque and White Sands are also a notable part of the State's economy.
The State has a thriving tourist industry. In 1994, there were
approximately 2.29 million visits to national parks and about 4.9 million visits
to State parks. According to a 1991 estimate by the U.S. Travel Data Center, the
State's tourist industry generated about $2.3 billion in revenue and more than
38,370 jobs. However, 1995 was a slower year for tourism and travel in New
Mexico. Total gross receipts for hotels and other lodging places dropped 1.4%,
compared with a 5.6% gain in 1994. Air travel was also down 0.4%. In addition,
visits to New Mexico's national parks and monuments, affected partly by federal
government shutdowns in the fall and winter, dropped 1.7%.
Agriculture is a major part of the State's economy, producing $1.521
billion in 1995. This was a 0.4% decrease from 1994. As a high, relatively dry
region with extensive grasslands, the State is ideal for raising cattle, sheep,
and other livestock. Livestock receipts dropped 3.0% from 1994-95, to $1.066
billion due to significant declines in prices for beef cattle and calves.
Because of irrigation and a variety of climatic conditions, the State's farmers
are able to produce a diverse assortment of quality products. The State's
farmers are major producers of alfalfa hay, wheat, chile peppers, cotton,
fruits, and pecans. Crop revenues in 1995 rose 6.4% to $455 million.
Agricultural businesses include chile canneries, wineries, alfalfa pellets,
chemical and fertilizer plants, farm machinery, feed lots, and commercial
slaughter plants.
Job growth in New Mexico in 1993 was the highest since 1984. However, in
1995, the total employment growth rate was 1.7%, less than half the 1994 growth
rate of 4.2%, while the unemployment rate stabilized, remaining level at 6.3% in
1994 and 1995 after reaching a seven year high of 7.7% in 1993. The fact that
the State's 1995 unemployment rate is higher than the national rate of 5.6% can
be partially explained by population growth in New Mexico that is well in excess
of the national average. New Mexico's population growth is 1.8%, about twice the
national rate. Job growth in New Mexico has increased migration which has kept
the unemployment rate higher than it otherwise would have been. New Mexico ranks
5th in the nation in unemployment as of April 1996, up from 10th highest in
April 1995.
The New Mexico economy recorded solid gains in 1995, but the rate of
expansion had slowed by the end of the year. Nonagricultural wage and salary
employment rose 4.9%, or 32,500 jobs, for all of 1995, reaching 689,700 jobs.
This was about the same as the 1994 increase (5.0%) and marked the third year in
a row that job growth surpassed 4%. Total personal income was up 8.1% to $30.4
billion, exceeding the 6.9% gain in 1994, and the U.S. gain of 6.0%. State job
growth and personal income gain have exceeded the national rate since 1988.
However, the rapid growth of New Mexico's population has had a negative
impact on per capita income. The 1995 per capita income of $18,055 was
approximately 79% of the national figure of $22,788 and ranked 48th out of the
50 states and the District of Columbia, although New Mexico's per capita income
growth rate of 6.0% was 1.0% above the national rate and ranked ninth
nationally.
Construction, services and trade were the job growth leaders in 1995.
Construction employment rose by 4,200 jobs, or 10.1%. Although this was a
sizable jump, it was down from the previous annual increase, 16.5%. The advance
in services increased by 15,200 jobs, or 8.6%, while growth in trade employment
rose 5.5%, or 8,600 jobs. Transportation and public utilities placed fourth,
with an increase of 3.7%. Finance, insurance and real estate recorded gains of
only 1.7%. Government and manufacturing were the weakest industries at 1.3%
each. Mining employment remained unchanged at 15,700 for both 1994 and 1995.
The state's economy will still expand at a healthy pace in 1996, but not as
fast as last year. The slowing trend is expected to continue into 1997.
From fiscal year 1989 through fiscal year 1992, the annual base revenue
growth in New Mexico (recurring revenues adjusted to exclude legislative changes
or extraordinary receipts) was in the range of 3.0% to 4.5%. In fiscal year
1993, base revenue growth was about 5.5%, exclusive of gains in the volatile
energy-related areas. For fiscal year 1994, base revenues were forecast to
increase by 6.5%, reflecting the State's economic strength. The outlook was for
stronger economic and revenue growth to continue for several years.
Because of this strong revenue growth, cash balances and recurring revenues
were substantially higher in 1994 than expected from 1993. Prior to 1994
appropriations, New Mexico's Department of Finance and Administration projected
the fiscal year 1994 ending General Fund balances to be about $300 million,
which was almost 13% of total appropriations. Since the State typically tries to
maintain a 5% reserve ration, this anticipated total was two and one-half times
the usual reserve objective. Thus, substantial funds were available for
nonrecurring appropriations or tax cuts. Total recurring expenditures for fiscal
year 1994 were $2,368.8 million. Total general fund revenue for 1994 was $2.559
billion.
Reflecting strength in the economy and sufficient revenues, the 1994
Legislature cut General Fund revenues for fiscal year 1995 by almost $60 million
by restoring low income/personal income tax rebates, lowering personal income
tax rates, especially for married filers, suspending 2 cents of the gasoline tax
for a 3-year period and diverting the governmental gross receipts tax to an
infrastructure fund. Scheduled personal income tax rate cuts in 1995 and 1996
were to reduce personal income tax revenues an additional $25 million by fiscal
year 1997.
The fiscal plan adopted by the 1994 legislature overstated fiscal year 1995
and 1996 general fund revenue by more than $100 million. While state revenue was
growing, it was not growing as fast as estimated. In September of 1995, the
Governor ordered a reduction of general fund allotments to all state agencies.
Total general fund revenue for fiscal year 1995 was $2.630 billion, a 2.7%
increase from fiscal year 1994. Recurring revenue for fiscal year 1995 totaled
$2.643 billion, an increase of 3.3% from fiscal year 1994. Recurring
appropriations for fiscal year 1995 totaled $2.623 billion, up 9.3% from fiscal
year 1994. Total expenditures for fiscal year 1995 were $2.715 billion, 5.0%
higher than 1994, with a total ending balance of $58.822 million.
For the fiscal year ending June 30, 1996, recurring revenue totaled $2.747
billion, an increase of 3.9% over the previous fiscal year. Total General Fund
Revenue was $2.752 billion, up 4.6% from fiscal year 1995. The fiscal year 1996
revenue was below a December 1995 estimate by $2 million, or 0.1%. In general,
weakness in broad-based taxes was offset by strength in revenue related to the
production of natural gas and crude oil. Strength relative to the estimate was
also evident for interest earnings, miscellaneous receipts and reversions.
Preliminary results for fiscal year 1996 show general fund total receipts
and recurring appropriations at $2.75 billion. Fiscal year 1996 receipts are up
4.6% from fiscal year 1995 while recurring appropriations are up 4.9%.
Nonrecurring appropriations for fiscal year 1996 were $22 million, down 76% from
fiscal year 1995. The net transfer necessary from the operating reserve is $24.3
million and is within the $30 million transfer authority authorized by the 1996
legislature.
The 1996 legislature also established the risk reserve fund within the
general fund. General fund balances including the risk reserve fund are
projected to total over $137 million. Without the risk reserve, balances would
be $21.5 million. The fiscal year 1996 balance in the operating reserve is $16.8
million, or only 0.6% of fiscal year 1996 total revenue.
The state support reserve received a $3.37 million transfer from public
school support and the ending balance is $4.7 million for fiscal year 1996.
Disaster allotments from the appropriation contingency fund totaled over
$5.4 million, primarily due to the drought and the severe wildfires experienced
during 1996 and the ending balance in the appropriation contingency fund is a
nominal $35,000 due to a reversion.
For fiscal year 1997, the Governor proposed a budget which took into
consideration spending requirements in Medicaid (an 18.2% increase, or $30.9
million) and in the criminal justice system (a 5.7% increase, or $6.9 million),
and placed a high priority on public school funding (a 2.0% increase, or $26.2
million).
Estimated results for fiscal year 1997 show general fund total receipts of
$2.955 billion and recurring appropriations of $2.862 billion with expenditures
totaling $2.883 billion. The estimated fiscal year 1997 total ending balance is
$210 million, an increase of 53% over the preliminary fiscal year 1996 results
of $137 million.
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 New Mexico 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
New Mexico Trust to pay interest on or principal of the Bonds.
STATE TAXATION. For a discussion of the Federal tax status of income earned
on New Mexico Trust Units, see "Tax Status."
The assets of the New Mexico Trust will consist of interest-bearing
obligations issued by or on behalf of the State of New Mexico ("New Mexico") or
counties, municipalities, authorities or political subdivisions thereof (the
"New Mexico Bonds"), and by or on behalf of the government of Puerto Rico, the
government of the Guam, or the government of the Virgin Islands (collectively
the "Possession Bonds")(collectively the New Mexico Bonds and the Possession
Bonds shall be referred to herein as the "Bonds") the interest on which is
expected to qualify as exempt from New Mexico income taxes.
Neither the Sponsor nor its counsel have independently examined the Bonds
to be deposited in and held in the New Mexico Trust. However, although no
opinion is expressed herein regarding such matter, 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 a Unit holder, would be exempt from the New Mexico income
taxes applicable to individuals and corporation (collectively, the "New Mexico
State Income Tax"). At the respective times of issuance of the Bonds, opinions
relating to the validity thereof and to the exemption of interest thereon from
federal income tax were rendered by bond counsel to the respective issuing
authorities. In addition, with respect to the Bonds, bond counsel to the issuing
authorities rendered opinions as to the exemption of interest from the New
Mexico State Income Tax. Neither the Sponsor nor its counsel has made any review
for the New Mexico Trust of the proceedings relating to the issuance of the
Bonds or of the bases for the opinions rendered in connection therewith. The
opinion set forth below does not address the taxation of persons other than full
time residents of New Mexico.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing law and based upon the assumptions set forth above:
(1) The New Mexico Trust will not be subject to tax under the New
Mexico State Income Tax.
(2) Interest on the Bonds which is exempt from the New Mexico State
Income Tax when received by the New Mexico Trust, and which would be exempt
from the New Mexico State Income Tax if received directly by a Unitholder,
will retain its status as exempt from such tax when received by the New
Mexico Trust and distributed to such Unitholder provided that the New
Mexico Trust complies with the reporting requirements contained in the New
Mexico State Income Tax Regulations.
(3) To the extent that interest income derived from the New Mexico
Trust by a Unitholder with respect to Possession Bonds is exempt fromstate
taxes pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section 1423a or 48
U.S.C. Section 1403, such interest income will not be subject to New Mexico
State Income Tax.
(4) Each Unitholder will recognize gain or loss for New Mexico State
Income Tax purposes if the Trustee disposes of a bond (whether by
redemption, sale or otherwise) or if the Unitholder redeems or sells Units
of the New Mexico Trust to the extent that such a transaction results in a
recognized gain or loss to such Unitholder for federal income tax purposes.
(5) The New Mexico State Income Tax does not permit a deduction of
interest paid on indebtedness or other expenses incurred (or continued) in
connection with the purchase or carrying of Units in the New Mexico Trust
to the extent that interest income related to the ownership of Units is
exempt from the New Mexico State Income Tax.
Chapman and Cutler has expressed no opinion with respect to taxation under
any other provisions of New Mexico law. Prospective investors should consult
their tax advisors regarding collateral tax consequences under New Mexico law
relating to the ownership of the Units, including, but not limited to, the
inclusion of income attributable to ownership of the Units in "modified gross
income" for the purposes of determining eligibility for and the amount of the
low income comprehensive tax rebate, the child day care credit, and the elderly
taxpayers' property tax rebate and the applicability of other New Mexico taxes,
such as the New Mexico estate tax.
<TABLE>
<CAPTION>
NEW MEXICO SERIES 1
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 17, 1996
NAME OF ISSUER, TITLE, INTEREST RATE AND OFFERING PRICE
AGGREGATE MATURITY DATE OF EITHER BONDS DEPOSITED REDEMPTION TO NEW MEXICO
PRINCIPAL (1) OR BONDS CONTRACTED FOR (1)(5) RATING (2) FEATURE (3) TRUST (4)
------------- -------------------------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
$250,000 Bernalillo County, New Mexico, Gross Receipts AA 2006 @ 100 $250,625
Tax Revenue Bonds, Series 1996A, 5.75% Due 2022 @ 100 S.F.
04/01/2026#
40,000 City of Albuquerque, New Mexico, Gross AAA 2011 @ 63.2018 10,725
Receipts/Lodgers' Tax Refunding and
Improvement Revenue Bonds, Series 1991B,
(FSA Insured) 0% Due 07/01/2018 #(6)
250,000 Sandoval County, New Mexico, Incentive A+ 2006 @ 101 251,875
Payment Refunding Revenue Bonds, Tax-Exempt
Series 1996B, 5.75% Due 02/01/2010
515,000 City of Santa Fe, New Mexico, Municipal AAA 2007 @ 100 511,780
Recreation Complex Subordinate Net
Revenue/Subordinate Lien Gross Receipts Tax
Revenue Bonds, Series 1996C, (AMBAC
Insured) 5.75% Due 06/01/2021#
250,000 The Regents of the University of New Mexico, AAA 2006 @ 101 239,062
Subordinate Lien System Revenue Bonds, Series
1996, (MBIA Insured) 5.375% Due 06/01/2026#
135,000 City of Santa Fe, New Mexico, Utility Revenue AAA 2006 @ 101 129,262
Refunding Bonds, Series 1995A, (AMBAC 2015 @ 100 S.F.
Insured) 5.25% Due 06/01/2017#
250,000 City of Farmington, New Mexico, Pollution AAA 2003 @ 102 252,500
Control Refunding Revenue Bonds, Southern
California Edison Company Four Corners
Project, Series 1993A (MBIA Insured) 5.875%
- ---------- Due 06/01/2023 ----------
$1,690,000 $1,645,829
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 26.
Notes to Schedules of Investments
As of the Opening of Business on the
Initial Date of Deposit: October 17, 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 September 17, 1996 to October 15, 1996. These Bonds have expected
settlement dates from September 20, 1996 to October 30, 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 in an Insured Trust, each Bond is rated "AAA" by
Standard & Poor's and/or "Aaa" by Moody's. See "Insurance on Bonds in the
Insured Trusts" and "Description of Bond Ratings."
3. There is shown under this heading the year in which each issue of the
Bonds is initially or currently callable and the call price for that year. Each
issue of the Bonds continues to be callable at declining prices thereafter (but
not below par value) except for original issue discount bonds which are
redeemable at prices based on the issue price plus the amount of original issue
discount accreted to redemption date plus, if applicable, some premium, the
amount of which will decline in subsequent years. "S.F." indicates a sinking
fund is established with respect to an issue of the Bonds. Redemption pursuant
to call provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed obligations have an offering
side valuation which represents a premium over par. Certain Bonds may be subject
to redemption without premium prior to the date shown pursuant to extraordinary
optional or mandatory redemptions if certain events occur. Notwithstanding any
provisions to the contrary, certain bond issuers have in the past, and others
may in the future, attempt to redeem bonds prior to their initially scheduled
call dates and at prices which do not include any premiums. For a general
discussion of certain of these events, see "Risk Factors--Redemptions of Bonds."
To the extent that the Bonds were deposited in a Trust at a price higher than
the price at which they are redeemed, this will represent a loss of capital when
compared with the original Public Offering Price of the Units. Conversely, to
the extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Distributions will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Bonds and there will be distributed to Unitholders the
principal amount and any premium received on such redemption. The Estimated
Current Return and Estimated Long-Term Return in this event may be affected by
such redemptions. For the Federal tax effect on Unitholders of such redemptions
and resultant distributions, see "Tax Status" and "Estimated Current Return and
Estimated Long-Term Return."
4. Evaluation of Bonds is made on the basis of current offering prices for
the Bonds. The offering prices are greater than the current bid prices of the
Bonds which is the basis on which Unit value is determined for purposes of
redemption of Units (see "Public Offering--Offering Price").
5. Other information regarding the Bonds in each Trust, as of the opening
of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL BID SIDE
COST TO PROFIT (LOSS) INTEREST INCOME EVALUATION
TRUST SPONSOR TO SPONSOR TO TRUST OF BONDS
----- ------- ---------- -------- --------
<S> <C> <C> <C> <C>
Colorado Insured Series 7 $1,952,012 $5,744 $110,250 $1,941,706
Minnesota Insured Series 4 $1,571,232 $7,353 $88,713 $1,566,688
New Mexico Series 1 $1,626,966 $18,863 $93,575 $1,633,359
</TABLE>
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Bonds in the portfolios. On the opening of business on
the Initial Date of Deposit, the offering side evaluation of the Bonds in each
Trust was higher than the bid side evaluation of such Bonds by 0.827%, 0.759%
and 0.763% for the Colorado, Minnesota and New Mexico Trusts, respectively. A
Bond in the Minnesota Trust, representing 15.4% of the principal amount of the
Bonds, (marked by a double asterisk (**)) was purchased on a "when, as and if
issued" basis. Interest on this Bond begins accruing to the benefit of
Unitholders on its respective date of delivery. Delivery is expected to take
place 8 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>
COLORADO TAX EQUIVALENT TABLE
-----------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------- -----------------------------------
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 24.00 $ 0 - 40.10 19.3% 5.58% 6.20% 6.82% 7.43% 8.05% 8.67% 9.29%
24.00 - 58.15 40.10 - 96.90 31.6 6.58 7.31 8.04 8.77 9.50 10.23 10.96
58.15 - 121.30 96.90 - 147.70 34.5 6.87 7.63 8.40 9.16 9.92 10.69 11.45
121.30 - 263.75 147.70 - 263.75 39.2 7.40 8.22 9.05 9.87 10.69 11.51 12.34
Over 263.75 Over 263.75 42.6 7.84 8.71 9.58 10.45 11.32 12.20 13.07
MINNESOTA TAX EQUIVALENT TABLE
------------------------------
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------- -----------------------------------
SINGLE JOINT TAX 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
----------------------------------------- -------------------------------------------------------------
$ 0- 24.00 $ 0 - 40.10 21.8% 5.75% 6.39% 7.03% 7.67% 8.31% 8.95% 9.59%
24.00 - 58.15 40.10 - 96.90 34.1 6.83 7.59 8.35 9.10 9.86 10.62 11.38
58.15 - 121.30 96.90 - 147.70 36.9 7.13 7.92 8.72 9.51 10.30 11.09 11.89
121.30 - 263.75 147.70 - 263.75 41.4 7.68 8.53 9.39 10.24 11.09 11.95 12.80
Over 263.75 Over 263.75 44.7 8.14 9.04 9.95 10.85 11.75 12.66 13.56
NEW MEXICO 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 20.1% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39%
$ 0 - 40.10 21.0 5.70 6.33 6.96 7.59 8.23 8.86 9.49
24.00 - 58.15 40.10 - 96.90 33.7 6.79 7.54 8.30 9.05 9.80 10.56 11.31
58.15 - 121.30 96.90 - 147.70 36.9 7.13 7.92 8.72 9.51 10.30 11.09 11.89
121.30 - 263.75 147.70 - 263.75 41.4 7.68 8.53 9.39 10.24 11.09 11.95 12.80
Over 263.75 Over 263.75 44.7 8.14 9.04 9.95 10.85 11.75 12.66 13.56
</TABLE>
INDEPENDENT AUDITORS' REPORT
TO THE SPONSOR, TRUSTEE AND THE UNITHOLDERS OF VOYAGEUR TAX-EXEMPT TRUST, SERIES
8:
We have audited the accompanying statements of net assets, including the
schedules of investments, of Voyageur Tax-Exempt Trust, Series 8 (Colorado
Insured Series 7, Minnesota Insured Series 4 and New Mexico Series 1), as of
October 17, 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 8 (Colorado Insured Series 7, Minnesota Insured Series 4 and New Mexico
Series 1), as of October 17, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 17, 1996
VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
STATEMENTS OF NET ASSETS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: OCTOBER 17, 1996
<TABLE>
<CAPTION>
COLORADO MINNESOTA NEW
INSURED INSURED MEXICO
SERIES 7 SERIES 4 SERIES 1
-------- -------- --------
<S> <C> <C> <C>
Contracts to purchase securities(1)(2) $1,957,756 $1,578,585 $1,645,829
Accrued interest on underlying securities(1)(3) 37,546 21,003 18,747
Organizational and offering Costs (4) 7,407 7,412 6,259
---------- ---------- ----------
Total Assets $2,002,709 $1,607,000 $1,670,835
Less: distributions payable(3) 37,546 21,003 18,747
Less: accrued organizational and offering costs (4) 7,407 7,412 6,259
---------- ---------- ----------
Net Assets $1,957,756 $1,578,585 $1,645,829
========== ========== ==========
Net Assets Represented By:
Interest of Unitholders--
Units of fractional undivided interest
outstanding: ( 205,863, 165,992
and 173,063 Units, respectively)
Cost to investors(5) $2,058,629 $1,659,921 $1,730,630
Less: Gross underwriting commission(5) 100,873 81,336 84,801
------------ ------------ ------------
Net Assets(5) $1,957,756 $1,578,585 $1,645,829
========== ========== ==========
</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>
Colorado Insured Series 7 $1,995,302 $2,015,000 $1,957,756 $37,546
Minnesota Insured Series 4 $1,599,588 $1,620,000 $1,578,585 $21,003
New Mexico Series 1 $1,664,576 $1,690,000 $1,645,829 $18,747
</TABLE>
(2) Insurance coverage providing for the timely payment of principal and
interest on the Bonds in the portfolio of each Insured Trust has been
obtained by the issuer of the Bond, the underwriter of such Bond, the
Sponsor or others. See "Schedule of Investments."
(3) The Trustee will advance the amount of accrued interest as of October 22,
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 will 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,
Colorado Insured Series 7, Minnesota Insured Series 4 and New Mexico Series 1
have been given a duration of 11.61, 11.59, and 11.75, 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
Colorado Insured Series 7 would be expected to decline approximately 11.61% for
every 1% increase in interest 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 IN THE INSURED TRUSTS
Insurance guaranteeing prompt payment of interest and principal, when due,
on the Bonds in the Insured Trusts in the Fund has been obtained by the Sponsor
or by the issuers or underwriters of such Bonds. No insurance has been obtained
on the Bonds in the uninsured Trusts, however, certain of the Bonds in the
uninsured Trusts may be insured.
An Insurer has issued a policy or policies of insurance covering each of
the Bonds in the Insured 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 Insured 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; however such interest may be taken into account in
computing 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 valuation date nearest the date of acquisition
of the Units. The tax basis 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 less than or 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 provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price") 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. Unitholders should consult with their tax
advisers regarding these rules and their application.
"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) subject to a statutory
DE MINIMIS rule. 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 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. Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. However, the Superfund Tax could be
extended retroactively. Under the provisions of Section 884 of the Code, a
branch profits tax is levied on the "effectively connected earnings and profits"
of certain foreign corporations which include tax-exempt interest such as
interest on the Bonds in the Trusts. Unitholders should consult their tax
advisers with respect to the particular tax consequences to them including the
corporate alternative minimum tax, the Superfund Tax and the branch profits tax
imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust is not deductible for Federal income tax purposes. The Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase or improve a
personal residence). 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.
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 the Code and 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 is not an association taxable as a corporation
for Missouri income tax purposes and the Unitholders of the Fund will be treated
as owners of a pro rata portion of the Fund and income of the Fund will be
treated as the income of the Unitholders for Missouri State income tax purposes.
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% effective for long-term capital gains realized in
taxable years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
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, for taxable years beginning after December
31, 1993, 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.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers who
may be deemed to have incurred (or continued) indebtedness to purchase or carry
tax-exempt obligations. Prospective investors should consult their tax advisors
as to the applicability of any collateral consequences.
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 (except for sales made
pursuant to a "wrap fee account" or similar arrangements as set forth below):
AGGREGATE DOLLAR VALUE REDUCTION AS A
OF UNITS PURCHASED PERCENT OF OFFERING PRICE
$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%
Any such reduced sales charge 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. In addition, Unitholders who, during the
offering period, cumulatively purchase a sufficient number of Units of a Trust
to qualify for a reduced sales charge will receive such reduction retroactively
upon reaching the appropriate level. 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. Investors may use the redemption proceeds
they have received from other unit investment trusts sponsored by the Sponsor to
purchase Units of a Trust without a sales charge. 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.
Investors who purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset management
services, or provide such services in connection with the establishment of an
investment account for which a comprehensive "wrap fee" charge is imposed may
purchase Units in the initial and secondary offering periods at the Public
Offering Price less the concession the Sponsor typically would allow such
broker/dealer. See "Public Offering--Unit Distribution."
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a bond from the last day on which interest thereon was paid. Interest on
Bonds generally is paid semi-annually, although a Trust accrues such interest
daily. Because of this, each Trust always has an amount of interest earned but
not yet collected by the Trustee. For this reason, with respect to sales
settling subsequent to the First Settlement Date, the Public Offering Price of
Units will have added to it the proportionate share of accrued interest to the
date of settlement. Unitholders will receive on the next distribution date of
the respective Trust the amount, if any, of accrued interest paid on their
Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of Units to
the public, the Trustee will advance the amount of accrued interest as of the
First Settlement Date and the same will be distributed to the Sponsor as the
Unitholder of record as of the First Settlement Date. Consequently, the amount
of accrued interest to be added to the Public Offering Price of Units will
include only accrued interest from the First Settlement Date to the date of
settlement, less any distributions from the Interest Account subsequent to the
First Settlement Date. See "Rights of Unitholders--Distributions of Interest and
Principal."
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. Therefore, there
will always remain an item of accrued interest that is added to the value of the
Units. If a Unitholder sells or redeems all or a portion of his Units, he will
be entitled to receive his proportionate share of the accrued interest from the
purchaser of his Units. Since the Trustee has the use of the funds held in the
Interest Account for distributions to Unitholders and since such Account is
noninterest-bearing to Unitholders, the Trustee benefits thereby.
OFFERING PRICE. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in accordance
with fluctuations in the prices of the underlying Bonds in each Trust.
As indicated above, the price of the Units as of the opening of business on
the Initial Date of Deposit was determined by adding to the determination of the
aggregate offering price of the Bonds an amount equal to 5.152% of such value
and dividing the sum so obtained by the number of Units outstanding. This
computation produced a gross underwriting profit equal to 4.9% of the Public
Offering Price. Such price determination as of the opening of business on the
Initial Date of Deposit was made on the basis of an evaluation of the Bonds in
each Trust prepared by Securities Pricing Service, a division of George K. Baum
& Company, a firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities. Except on the Initial Date of Deposit, during
the initial offering period, the Evaluator will appraise or cause to be
appraised daily the value of the underlying Bonds as of 4:00 P.M. Eastern time
on days the New York Stock Exchange is open and will adjust the Public Offering
Price of the Units commensurate with such appraisal. Such Public Offering Price
will be effective for all orders received at or prior to 4:00 P.M. Eastern time
on each such day. Orders received by the Trustee, Sponsor, Distributor or any
Underwriter or dealer for purchases, sales or redemptions after that time, or on
a day when the New York Stock Exchange is closed, will be held until the next
determination of price. For secondary market sales the Public Offering Price per
Unit will be equal to the aggregate bid price of the Bonds in a Trust plus the
secondary market sales charge. For secondary market purposes such appraisal and
adjustment will be made by the Evaluator as of 4:00 P.M. Eastern time on days on
which the New York Stock Exchange is open for each day on which any Unit of a
Trust is tendered for redemption, and it shall determine the aggregate value of
such Trust as of 4:00 P.M. Eastern time on such other days as may be necessary.
The aggregate price of the Bonds in each Trust has been and will be
determined on the basis of bid prices or offering prices, as appropriate, (i) on
the basis of current market prices for the Bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held by the Trust;
(ii) if such prices are not available for any particular Bonds, on the basis of
current market prices for comparable bonds; (iii) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (iv) by any combination of the above.
The initial or primary Public Offering Price of the Units and the Sponsor's
initial repurchase price per Unit are based on the offering price per Unit of
the underlying Bonds plus the applicable sales charge plus interest accrued but
unpaid from the First Settlement Date to the date of settlement. The secondary
market Public Offering Price and the Redemption Price per Unit are based on the
bid price per Unit of the Bonds in each Trust plus the applicable sales charge
plus accrued interest. The offering price of Bonds in each Trust may be expected
to range from .35%-1% more than the bid price of such Bonds. On the Initial Date
of Deposit, the offering side evaluation of the Bonds in each Trust were higher
than the bid side evaluation of such Bonds by the amount indicated under
footnote (5) in "The Trusts--Notes to Schedules of Investments."
Although payment is normally made three business days following the order
for purchase, payment may be made prior thereto. However, delivery of
certificates, if any are requested in writing, representing Units so ordered
will be made as soon as possible following such order or shortly thereafter. A
person will become the owner of Units on the date of settlement provided payment
has been received. Cash, if any, made available to the Sponsor prior to the date
of settlement for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the limitations of
the Securities Exchange Act of 1934.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering Price, plus accrued interest computed as
described above. Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this prospectus at the
secondary Public Offering Price in the manner described.
The Sponsor intends to qualify the Units for sale in the state for which
such Trust is named. Broker-dealers or others will be allowed a concession or
agency commission in connection with the distribution of Units during the
initial offering period equal to $.33 per Unit ($.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:
AGGREGATE DOLLAR VALUE TOTAL CONCESSION
OF UNITS PURCHASED PER UNIT
$100,000 - $249,999 .................................... $.32
$250,000 - $499,999 .................................... .31
$500,000 - $999,999 .................................... .29
$1,000,000 or more...................................... .25
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:
AGGREGATE DOLLAR VALUE TOTAL UNDERWRITER
OF UNITS UNDERWRITTEN CONCESSION PER UNIT
$100,000 - $249,999 ......................................... $.35
$250,000 - $499,999 ......................................... .36
$500,000 - $999,999 ......................................... .37
$1,000,000 or more........................................... .40
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 an
underwriting syndicate from which 6.9% 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. In addition, although not obligated to, the
Sponsor currently intends to refund the sales charge paid by a Unitholder to
such Unitholder's estate in conjunction with the redemption of such Units as a
result of the Unitholder's death.
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 August 31, 1996, Voyageur Fund Managers, Inc. served as the
manager to six closed-end and ten open-end investment companies (comprising 33
separate investment portfolios), administered numerous private accounts and,
together with its affiliates, managed approximately $11.5 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>
COLORADO MINNESOTA NEW
INSURED INSURED MEXICO
NAME ADDRESS SERIES 7 SERIES 4 SERIES 1
---- ------- -------- -------- --------
<S> <C> <C> <C> <C>
Voyageur Fund 90 South Seventh Street 160,863 155,992 93,063
Distributors, Inc. Minneapolis, MN 55402
Dain Bosworth Incorporated 60 South Sixth Street 10,000 10,000
Minneapolis, MN 55402
Edward D. Jones & Co. 12555 Manchester Road 10,000
St. Louis, MO 63131
Everen Securities, Inc. 77 W. Wacker Drive 25,000 35,000
Chicago, IL 60601
Principal Financial Securities 1445 Russ Avenue 25,000
2300 First Interstate Tower
Dallas, TX 75202
Rauscher, Pierce, Refsnes, Inc. 2711 N. Haskell Avenue 10,000
Dallas, TX 75204
Southwest Securities 1201 Elm Street 10,000
Dallas, TX 75270
Totals 205,863 165,992 173,063
======= ======= =======
</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.
DESCRIPTION OF BOND RATINGS*
STANDARD & POOR'S. A brief description of the applicable Standard & Poor's
ratings symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
____________________
* As published by the ratings companies.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.**
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his/her own judgment with respect to such likelihood
and risk.
_____________________
** Bonds insured by Financial Guaranty Insurance Company, AMBAC Indemnity
Corporation, Municipal Bond Investors Assurance Corporation, Connie Lee
Insurance Company, Financial Security Assurance and Capital Guaranty Insurance
Company are automatically rated "AAA" by Standard & Poor's.
Credit Watch: Credit Watch highlights potential changes in ratings of bonds
and other fixed income securities. It focuses on events and trends which place
companies and government units under special surveillance by S&P's 180-member
analytical staff. These may include merges, voter referendums, actions by
regulatory authorities, or developments gleaned from analytical reviews. Unless
otherwise noted, a rating decision will be made within 90 days. Issues appear on
Credit Watch where an event, situation, or deviation from trends occurred and
needs to be evaluated as to its impact on credit ratings. A listing, however,
does not mean a rating change is inevitable. Since S&P continuously monitors all
of its ratings, Credit Watch is not intended to include all issues under review.
Thus, rating changes will occur without issues appearing on Credit Watch.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can 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.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Their market value is virtually immune to all but money market influences, with
the occasional exception of oversupply in a few specific instances.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future. The
market value of A-rated bonds may be influenced to some degree by economic
performance during a sustained period of depressed business conditions, but,
during periods of normalcy, A-rated bonds frequently move in parallel with Aaa
and Aa obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible upgrading in
quality, and additionally, afford the investor an opportunity to gauge more
precisely the relative attractiveness of offerings in the market place.
Baa - Bonds which are rated Baa are considered as medium grade obligation;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. The market value of Baa-rated
bonds is more sensitive to changes in economic circumstances, and aside form
occasional speculative factors applying to some bonds of this class, Baa market
valuations will move in parallel with Aaa, Aa, and A obligations during periods
of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the high
end of its category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Con.(--) - Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Fund,
the Sponsor or the Underwriters. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to whom it is not lawful to make such offer in such state.
================================================================================
TABLE OF CONTENTS
TITLE PAGE
SUMMARY OF ESSENTIAL
FINANCIAL INFORMATION.................. 3
THE FUND.................................... 5
INVESTMENT OBJECTIVES AND
PORTFOLIO SELECTION.................... 7
THE TRUSTS.................................. 8
EQUIVALENT TAXABLE ESTIMATED
CURRENT RETURNS........................ 27
INDEPENDENT AUDITORS' REPORT................ 29
STATEMENTS OF NET ASSETS.................... 30
RISK FACTORS................................ 31
ESTIMATED CURRENT RETURN AND
ESTIMATED LONG-TERM RETURN............. 38
TRUST OPERATING EXPENSES.................... 38
INSURANCE ON THE BONDS IN THE
INSURED TRUSTS......................... 40
TAX STATUS.................................. 41
PUBLIC OFFERING............................. 45
RIGHTS OF UNITHOLDERS....................... 50
TRUST ADMINISTRATION........................ 54
UNDERWRITING................................ 59
OTHER MATTERS............................... 60
DESCRIPTION OF BOND RATINGS................. 60
================================================================================
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
P R O S P E C T U S
================================================================================
October 17, 1996
VOYAGEUR TAX-EXEMPT TRUST,
SERIES 8
COLORADO INSURED SERIES 7
MINNESOTA INSURED SERIES 4
NEW MEXICO SERIES 1
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6
The Cross-Reference Sheet
The Prospectus
The signatures
The following exhibits:
1.1 Standard Terms and Conditions of Trust - Voyageur Tax-Exempt Trust Series 1
and Subsequent Series, dated January 19, 1995 among Voyageur Fund Managers,
Inc., as Sponsor and Investors Fiduciary Trust Company, as Trustee
(incorporated by reference to Amendment No. 1 to Form S-6 (File No.
33-62681) filed on behalf of Voyageur Tax-Exempt Trust, Series 5.)
1.2 Form of Trust Indenture and Agreement for Voyageur Tax-Exempt Trust, Series
8.
2. Opinion of counsel to the Sponsor as to legality of the securities being
registered including a consent to the use of its name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus and opinion of counsel
as to Federal income tax status of the securities being registered and
certain state tax matters.
3. None.
4. Not applicable.
5. Financial Data Schedules filed hereto electronically as Exhibit(s) 27
pursuant to Rule 401 of Regulation S-T.
6. Written Consents.
(a) Consent of George K. Baum & Company.
(b) Consent of KPMG Peat Marwick LLP.
SIGNATURES
The Registrant, Voyageur Tax-Exempt Trust, Series 8, hereby identifies
Voyageur Tax-Exempt Trust, Series 1, Voyageur Tax-Exempt Trust, Series 3 and
Voyageur Tax-Exempt Trust, Series 4 for purposes of the representations required
by Rule 487 and represents the following: (1) that the portfolio securities
deposited in the series with respect to which this Registration Statement is
being filed do not differ materially in type or quality from those deposited in
such previous series; (2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide essential financial
information for, the series with respect to which this Registration Statement is
being filed, this Registration Statement does not contain disclosures that
differ in any material respect from those contained in the registration
statements for such previous series as to which the effective date was
determined by the Securities and Exchange Commission or the staff; and (3) that
it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Voyageur Tax-Exempt Trust, Series 8, has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and State of Minnesota on the 16th
day of October, 1996.
VOYAGEUR TAX-EXEMPT TRUST,
SERIES 8
(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 on by the following person in the
capacity indicated and on October 16, 1996.
SIGNATURE TITLE
MICHAEL E. DOUGHERTY
- -------------------- Chairman of the Board of Directors
Michael E. Dougherty 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 Exchange Commission with the Registration Statement on
Form S-6 for Voyageur Tax-Exempt Trust, Series 5 (Registration No. 33-62682).
MEMORANDUM OF CHANGES
VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
The Prospectus filed with Amendment No. 1 of the Registration Statement on
Form S-6 has been revised to reflect information regarding the deposit of bonds
on October 17, 1996, and to set forth certain statistical data based thereon.
COVER PAGE. The series number and the Trusts in the Fund have been added.
Information relating to the sales charge and the price of the offering if
the units were available for purchase at the opening of business on the
Initial Date of Deposit is set forth in the "Public Offering Price"
section.
PAGE 3. The "Summary of Essential Financial Information" table has
been completed.
PAGES 8-25. The following information for the Trusts appears on the
pages indicated:
Summary data regarding the composition of the portfolio of
the Trusts.
Information regarding special State risk factors.
The opinion of Special Counsel to the Fund for State tax
matters.
The Portfolio for the Trusts.
PAGES 8-14. Colorado Insured Series 7.
PAGES 14-19.Minnesota Insured Series 4.
PAGES 20-25.New Mexico Series 1.
PAGE 26. The Notes to Schedules of Investments has been completed.
PAGE 29. The Independent Auditors' Report has been completed.
PAGE 30. The Statements of Net Assets have been completed.
PAGE 46. In the section "Offering Price," the differences between the
offering side evaluations and the bid side evaluations of
the Bonds in the Trusts have been set forth.
PAGE 47. The dealer concession has been set forth in the "Public
Offering" section.
PAGE 49. The percentage of the aggregate principal amount of the
Securities in the Trusts in which the Sponsor or affiliates of
the Sponsor have participated as underwriters or members of the
underwriting syndicate has been set forth in the "Sponsor and
Underwriter Compensation" section.
PAGE 59. The "Underwriting" section has been completed.
BACK COVER The Series numbers, the Trusts in the Fund and the date of the
Prospectus have been included.
Exhibit 1.2
VOYAGEUR TAX-EXEMPT TRUST
SERIES 8
TRUST AGREEMENT
Dated: October 17, 1996
This Trust Agreement between Voyageur Fund Managers, Inc., as Depositor,
and Investors Fiduciary Trust Company, as Trustee, sets forth certain provisions
in full and incorporates other provisions by reference to the document entitled
"Standard Terms and Conditions of Trust for Voyageur Tax-Exempt Trust, Series 1
and Subsequent Series, Effective January 19, 1995" (herein called the "STANDARD
TERMS AND CONDITIONS OF TRUST"), and such provisions as are set forth in full
and such provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are to Articles and
Sections of the Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the Provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Article I listed in Schedule A hereto have
been deposited in Trust under this Trust Agreement.
(b) The fractional undivided interest in and ownership of a Trust
represented by each unit for such Trust on the Initial Date of Deposit is
the amount set forth under "Summary of Essential Financial Information -
Fractional Undivided Interest in the Trust per Unit" in the Prospectus.
(c) For each Trust the Record Dates, Distribution Dates and the amount
of the first distribution of funds from the Interest Account shall be the
record dates, distribution dates and the amount set forth under "Summary of
Essential Financial Information" on page 3 of the Prospectus.
(d) The term "Initial Date of Deposit" for each Trust shall mean
October 17, 1996.
(e) The First Settlement Date shall be the date set forth under
"Summary of Essential Financial Information - First Settlement Date" in the
Prospectus.
(f) For the purposes of Section 4.03, the Evaluator shall receive for
providing evaluation services to the Fund that fee set forth in the section
captioned "Summary of Essential Financial Information" in the Prospectus.
(g) For the purposes of Section 8.01(g), the liquidation amount for
each Trust is hereby specified as the amount set forth under "Summary of
Essential Financial Information" appearing on page 3 of the Prospectus.
(h) For the purposes of Section 8.05, the compensation for the Trustee
shall be that fee set forth in the section captioned "Summary of Essential
Financial Information" appearing on page 3 of the Prospectus.
(i) For the purposes of Section 3.13, the Depositor shall receive for
providing supervisory services the each Trust that fee set forth in the
section captioned "Summary of Essential Financial Information" in the
Prospectus.
(j) For the purposes of Section 3.04(b), the balance of the Principal
Account must equal at least that amount specified in "Rights of Unitholders
Distributions of Interest and Principal" in the Prospectus.
(k) Section 10.02 of the Standard Terms and Conditions of Trust shall
be replaced in its entirety with the following:
"Section 10.02. Initial Cost. The expenses incurred in establishing a
Trust, including the cost of the initial preparation and typesetting of the
registration statement, prospectuses (including preliminary prospectuses),
the indenture, and other documents relating to a Trust, printing of
Certificates, Securities and Exchange Commission and state blue sky
registration fees, the costs of the initial valuation of the portfolio and
audit of a Trust, the initial fees and expenses of the Trustee, and legal
and other out-of-pocket expenses related thereto, but not including the
expenses incurred in the printing of preliminary prospectuses and
prospectuses, expenses incurred in the preparation and printing of
brochures and other advertising materials and any other selling expenses
shall be borne by the Trust, PROVIDED, however, the Trust shall not bear
such expenses in excess of the amount shown in the Statements of Net Assets
included in the Prospectus, and any such excess shall be borne by the
Depositor. To the extent the funds in the Interest and Principal Accounts
of the Trust shall be insufficient to pay the expenses borne by the Trust
specified in this Section 10.02, the Trustee shall advance out of its own
funds and cause to be deposited and credited to the Interest Account such
amount as may be required to permit payment of such expenses. The Trustee
shall be reimbursed for such advance in the manner provided in Section
3.04, and the provisions of Section 8.05 with respect to the reimbursement
of disbursements for Trust expenses, including, without limitation, the
lien in favor of the Trustee therefore, shall apply to the payment of
expenses made pursuant to this Section. For purposes of calculation of
distributions under Section 3.04 and the addition provided in clause (4) of
Section 5.01, the expenses borne by the Trust pursuant to this Section
shall be charged off against principal at the end of the initial offering
period as specified in the Prospectus; PROVIDED, however, that nothing
herein shall be deemed to prevent, and the Trustee shall be entitled to
full reimbursement for any advances made pursuant to this Section no later
than the termination of the Trust.
(l) Section 5.01 of the Standard Terms and Conditions of Trust shall
be amended by deleting the word "and" appearing immediately prior to
subsection (2) of such paragraph and inserting the following at the end of
subsection (3) of such paragraph:
", and (4) amounts representing organizational expenses paid less
amounts representing accrued organizational expenses of a Trust."
IN WITNESS WHEREOF, Voyageur Fund Managers, Inc. has caused this Trust
Agreement to be executed by its Chairman, President, Chief Financial Officer or
one of its Vice Presidents and Investors Fiduciary Trust Company has caused this
Trust Agreement to be executed by one of its Trust Officers all as of the day,
month and year first above written.
Voyageur Fund Managers, Inc., Depositor
By: /s/THOMAS J. ABOOD
------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST COMPANY,
Trustee
By: /S/ RON PUETT
------------------------
Operations Officer
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
(Note: Incorporated herein and made a part hereof are the "SCHEDULES OF
INVESTMENTS" as set forth in the Prospectus.)
Exhibit 2
October 17, 1996
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Re: VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
Ladies/Gentlemen:
We have served as special counsel for Voyageur Fund Managers, Inc., as
Sponsor and Depositor (the "DEPOSITOR") of Voyageur Tax-Exempt Trust, Series 8
(the "Fund"), in connection with the preparation, execution and delivery of a
Trust Agreement dated October 17, 1996 between Voyageur Fund Managers, Inc., as
Depositor, and Investors Fiduciary Trust Company, as Trustee, pursuant to which
the Depositor has delivered to and deposited the bonds listed in Schedule A to
the Trust Agreement with the Trustee and pursuant to which the Trustee has
issued in the name of the Depositor documents representing units of fractional
undivided interest in and ownership of the Fund created under said Trust
Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the execution
and issuance of certificates evidencing the units of the Fund have been
duly authorized; and
2. The certificates evidencing the units of the Fund when duly
executed and delivered by the Depositor and the Trustee in accordance with
the aforementioned Trust Agreement, will constitute valid and binding
obligations of the Fund and the Depositor in accordance with the terms
thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-10705) relating to the units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
October 17, 1996
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
Re: VOYAGEUR TAX-EXEMPT TRUST, SERIES 8
Ladies/Gentlemen:
We have acted as special counsel for Voyageur Fund Managers, Inc.,
Depositor of Voyageur Tax-Exempt Trust, Series 8 (the "FUND"), in connection
with the issuance of units of fractional undivided interest in the Fund, under a
Trust Agreement dated October 17, 1996 (the "INDENTURE") between Voyageur Fund
Managers, Inc., as Depositor, and Investors Fiduciary Trust Company, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation but will
be governed by the provisions of subchapter J (relating to Trusts) of
chapter 1, Internal Revenue Code of 1986 (the "CODE").
(ii) Each Unitholder will be considered as owning a pro rata share of
each asset of the respective Trust in the proportion that the number of
units of such Trust held by him bears to the total number of units
outstanding of such Trust. Under subpart E, subchapter J of chapter 1 of
the Code, income of the Trust will be treated as income of each Unitholder
of the respective trust in the proportion described, and an item of Trust
income will have the same character in the hands of a Unitholder as it
would have in the hands of the Trustee. Accordingly, to the extent that the
income of a Trust consists of interest and original issue discount
excludable from gross income under Section 103 of the Code, such income
will be excludable from federal gross income of the Unitholders, except in
the case of a Unitholder who is a substantial user (or a person related to
such user) of a facility financed through issuance of any industrial
development bonds or certain private activity bonds held by the respective
Trust. In the case of such Unitholder who is a substantial user (and no
other) interest received with respect to his units attributable to such
industrial development bonds or such private activity bonds is includible
in his gross income. To the extent a Trust holds bonds that are "specified
private activity bonds" within the meaning of Section 57(a)(5) of the Code,
a Unitholder's pro rata portion of the income on such Bonds will be
included as an item of tax preference in the computation of the alternative
minimum tax applicable to all taxpayers (including non-corporate taxpayers)
subject to the alternative minimum tax. In the case of certain
corporations, interest on all of the Bonds is included in computing the
alternative minimum tax pursuant to Section 56(c) of the Code, the
environmental tax (the "SUPERFUND TAX") imposed by Section 59A of the Code,
and the branch profits tax imposed by section 884 of the Code with respect
to U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon redemption
or sale of his units. Such gain or loss is measured by comparing the
proceeds of such redemption or sale with the adjusted basis of his units.
Before adjustment, such basis would normally be cost if the Unitholder had
acquired his units by purchase, plus his aliquot share of advances by the
Trustee to a Trust to pay interest on bonds delivered after the
Unitholder's settlement date to the extent that such interest accrued on
the bonds during the period from the Unitholder's settlement date to the
date such bonds are delivered to the respective Trust, but only to the
extent that such advances are to be repaid to the Trustee out of interest
received by such Trust with respect to such bonds. In addition, such basis
will be increased by the Unitholder's aliquot share of the accrued original
issue discount (and market discount, if the Unitholder elects to include
market discount in income as it accrues) with respect to each bond held by
a Trust with respect to which there was an original issue discount at the
time the bond was issued (or which was purchased with market discount) and
reduced by the annual amortization of bond premium, if any, on bonds held
by such Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is recognized to
the Unitholder and the amount thereof is measured by comparing the
Unitholder's aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of. Such basis
is ascertained by apportioning the tax basis for his units among each of
the Trust assets (as of the date on which his units were acquired) ratably
according to their values as of the valuation date nearest the date on
which he purchased such units. A Unitholder's basis in his units and of his
fractional interest in each Trust asset must be reduced by the amount of
his aliquot share of interest received by the Trust, if any, on bonds
delivered after the Unitholder's settlement date to the extent that such
interest accrued on the bonds during the period from the Unitholder's
settlement date to the date such bonds are delivered to the Trust, must be
reduced by the annual amortization of bond premium, if any, on bonds held
by the Trust and will be increased by the Unitholder's share of the accrued
original issue discount (and market discount, if the Unitholder elects to
include market discount in income as it accrues) with respect to each bond
which, at the time the bond was issued, had original issue discount (or
which was purchased with market discount).
(v) In the case of any bond held by a Trust where the "stated
redemption price at maturity" exceeds the "issue price", such excess shall
be original issue discount. With respect to each Unitholder, upon the
purchase of his Units subsequent to the original issuance of bonds held by
the Trust, Section 1272(a)(7) of the Code provides for a reduction in the
accrued "daily portion" of such original issue discount upon the purchase
of a bond subsequent to the bond's original issue, under certain
circumstances. In the case of any bond held by a Trust the interest on
which is excludable from gross income under Section 103 of the Code, any
original issue discount which accrues with respect to the bonds will be
treated as interest which is excludable from gross income under Section 103
of the Code.
(vi) Certain bonds in the portfolios of the Trusts have been insured
by the issuers, underwriters, the Sponsor or others against default in the
prompt payment of principal and interest (the "Insured Bonds"). Such bonds
are so designated on the portfolio pages in the Prospectus for each Trust.
Insurance on Insured Bonds is effective so long as such bonds remain
outstanding. For each of these bonds, we have been advised that the
aggregate principal amount of such bonds listed on the portfolio page was
acquired by the applicable Trust and are part of the series of such bonds
in the listed aggregate principal amount. Based upon the assumption that
the Insured Bonds of the Trust are part of a series covered by an insurance
policy, it is our opinion that any amounts received by the applicable Trust
representing maturing interest on such bonds will be excludable from
Federal gross income if, and to the same extent as, such interest would
have been so excludable if paid in normal course by the issuer
notwithstanding that the source of the payment is from policy proceeds
provided that, at the time such policies are purchased, the amounts paid
for such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the bonds, rather than the
insurer will pay debt service on the bonds. Paragraph (ii) of this opinion
is accordingly applicable to such payment representing maturing interest.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the bond, depending on the date the bond was issued. In
addition, special rules apply if the purchase price of a bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the bond on
the date a Unitholder acquires his units, and the price the Unitholder pays for
his units.
Except with respect to those Trusts that hold "specified private activity
bonds" within the meaning of Section 57 (a)(5) of the Code issued on or after
August 8, 1986 as identified in the Prospectus related hereto (the "AMT
Trusts"), the Trusts do not include any specified private activity bonds and
accordingly none of the interest income of the Trusts (other than the AMT
Trusts, if any) shall be treated as an item of tax preference when computing the
alternative minimum tax. Because the AMT Trusts include "specified private
activity bonds," all or a portion of the income of the AMT Trusts shall be
treated as an item of tax preference for alternative minimum tax purposes. In
the case of corporations, for taxable years beginning after December 31, 1986,
the alternative minimum tax and the Superfund Tax depend upon the corporation's
alternative minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used in
computing AMTI and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust or
REMIC) for taxable years beginning after 1989, is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all bonds in the Trusts, and tax-exempt original issue
discount. Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. However, the Superfund Tax could be
extended retroactively.
Effective for tax returns filed after December 31, 1987, all taxpayers are
required to disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year of
100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986, will be
the amount that bears the same ratio to the interest deduction otherwise
allowable (determined without regard to Section 265) to the taxpayer for the
taxable year as the taxpayer's average adjusted basis (within the meaning of
Section 1016) of tax-exempt obligations acquired after August 7, 1986, bears to
such average adjusted basis for all assets of the taxpayer, unless such
financial institution can otherwise establish, under regulations to be
prescribed by the Secretary of the Treasury, the amount of interest on
indebtedness incurred or continued to purchase or carry such obligations.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued) subject to a statutory
de minimis rule. Market discount can arise based on the price the Trust pays for
Bonds or the price a Unitholder pays for his or her units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law, the
accretion had been treated as capital gain. Market discount that accretes while
the Trust holds a Bond would be recognized as ordinary income by the Unitholders
when principal payments are received on the Bonds, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
units, unless a Unitholder elects to include market discount in taxable income
as it accrues.
We have also examined the income tax law of the State of Colorado, which is
based upon the Federal law, to determine its applicability to Colorado Insured
Series 7 (the "COLORADO TRUST") being created as part of the Fund and to the
holders of Units in the Colorado Trust who are residents of the State of
Colorado ("COLORADO UNITHOLDERS"). Although we express no opinion with respect
to the issuance of the bonds, in rendering our opinion expressed herein, we have
assumed that: (i) the bonds were validly issued, (ii) interest thereon is
excludable from gross income for federal income tax purposes, and (iii) interest
on the bonds, if received directly by a Unitholder, would be exempt from the
income tax imposed by the State that is applicable to individuals and
corporations (the "STATE INCOME TAX"). This opinion does not address the
taxation of persons other than full time residents of Colorado. Based upon the
foregoing it is our opinion that under Colorado income tax law, as presently
enacted and construed:
a) The Colorado Trust is not an association taxable as a corporation
for purposes of Colorado income taxation.
(b) Each Colorado Unitholder will be treated as owning a pro-rata
share of each asset of the Colorado Trust for Colorado income tax purposes
in the proportion that the number of Units of such Trust held by him bears
to the total number of outstanding Units of the Colorado Trust, and the
income of the Colorado Trust will therefore be treated as the income of
each Colorado Unitholder under Colorado law in the proportion described and
an item of income of the Colorado Trust will have the same character in the
hands of a Colorado Unitholder as it would have in the hands of the
Trustee.
(c) Gain or loss will be recognized by a Colorado Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by comparing
the proceeds of such redemption or sale with the adjusted basis of the
Units represented by his Unit. Before adjustment, such basis would normally
be cost if the Colorado Unitholder has acquired his Units by purchase, plus
his aliquot share of advances by the Trustee to the Colorado Trust to pay
interest on bonds delivered after the Colorado Unitholder's settlement date
to the extent that such interest accrued on such bonds during the period
from the Colorado Unitholder's settlement date to the date such bonds are
delivered to the Colorado Trust, but only to the extent that such advances
are to be repaid to the Trustee out of interest received by such Trust with
respect to such bonds. In addition, such basis will be increased by the
Colorado Unitholder's aliquot share of the accrued original issue discount
with respect to each bond held by such Trust with respect to which there
was an original issue discount at the time such bond was issued and reduced
by the annual amortization of bond premium, if any, on the bonds held by
the Colorado Trust.
(d) If the Trustee disposes of a bond (whether by sale, payment on
maturity, redemption or otherwise) gain or loss is recognized to the
Colorado Unitholder and the amount thereof is measured by comparing the
Colorado Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the bond disposed
of. Such basis is ascertained by apportioning the tax basis for his Units
among each of the bonds (as of the date on which his units were acquired)
ratably according to their values as of the valuation date nearest the date
on which he purchased such Units. A Colorado Unitholder's basis in his
Units and of his fractional interest in each bond must be reduced by the
amount of his aliquot share of interest received by the Colorado Trust, if
any, in bonds delivered after the Colorado Unitholder's settlement date to
the extent that such interest accrued on such bonds during the period from
the Colorado Unitholder's settlement date to the date such bonds are
delivered to the Colorado Trust, must be reduced by the annual amortization
of bond premium, if any, on bonds held by such Trust and must be increased
by the Colorado Unitholder's share of the accrued original issue discount
with respect to each bond which, at the time such bond was issued, had
original issue discount.
(e) If interest on indebtedness incurred or continued by a Colorado
Unitholder to purchase Units in the Colorado Trust is not deductible for
Federal income tax purposes, it will also be nondeductible for Colorado
income tax purposes.
(f) So long as the Colorado Trust holds obligations issued, on or
after May 1, 1980, by the State of Colorado or its political subdivisions
(the "COLORADO BONDS"), then to the extent the interest on the Colorado
Bonds is excludable from Federal gross income of a Colorado Unitholder
pursuant to Section 103 of the Code, such interest will be excludable from
Colorado adjusted gross income of such Unitholder.
(g) Any amounts paid under an insurance policy issued to the Colorado
Trust which represent maturing interest on defaulted Bonds held by the
Trustee will be excludable from Colorado adjusted gross income if, and to
the same extent as, such interest is excludable for federal income tax
purposes. Paragraph (f) of this opinion is accordingly applicable to
insurance proceeds representing maturing interest.
(h) Certain of the Colorado Bonds in the Colorado Trust have been
insured by the issuers thereof against default in the prompt payment of
principal and interest. Based upon the exemptions and assumptions referred
to above, it is our opinion that any amounts received by the Colorado Trust
representing maturing interest on such bonds will be excludable from
Colorado adjusted gross income if, and to the same extent as, such interest
is so excludable for federal income tax purposes if paid in the normal
course by the issuer notwithstanding that the source of the payment is from
insurance proceeds provided, that, at the time such insurance policies are
purchased, the amounts paid for such insurance policies are reasonable,
customary and consistent with reasonable expectations that the issuer of
the Colorado Bonds, rather than the insurer will pay debt service on the
Colorado Bonds. Paragraph (f) of this opinion is accordingly applicable to
such payment representing maturing interest.
We have not examined any of the Colorado Bonds to be deposited and held in
the Colorado Trust or the proceedings for the issuance thereof or the opinions
of bond counsel with respect thereto, and therefore express no opinion as to the
exemption from State income taxes of interest on the Colorado Bonds if received
directly by a Unitholder.
We have also examined the income tax law of the State of Minnesota, which
is based upon the Federal law, to determine its applicability to Insured
Minnesota Series 2 (the "MINNESOTA TRUST") being created as part of the Fund and
to the holders of Units in the Minnesota Trust who are residents of the State of
Minnesota ("MINNESOTA UNITHOLDERS"). We understand that the Minnesota Trust will
only have income consisting of (i) interest from bonds issued by the State of
Minnesota and its political and governmental subdivisions, municipalities and
governmental agencies and instrumentalities (the "MINNESOTA BONDS") and bonds
issued by possessions of the United States (the "Possession Bonds" and,
collectively with the Minnesota Bonds, the "Bonds") which would be exempt from
Federal and Minnesota income taxation when paid directly to an individual, trust
or estate, (ii) gain on the disposition of such Bonds, and (iii) proceeds paid
under certain insurance policies issued to the Trustee or to the issuers of the
Bonds which represent maturing interest or principal payments on defaulted Bonds
held by the Trustee.
Neither the Sponsor nor its counsel have independently examined the Bonds
to be deposited in and held in the Minnesota Trust. However, although we express
no opinion herein regarding such matters we have assumed that: (i) the Bonds
were validly issued, (ii) the interest thereon is excludable from gross income
for Federal income tax purposes and (iii) the interest thereon is exempt from
income tax imposed by Minnesota that is applicable to individuals, trusts and
estates (the "Minnesota Income Tax"). It should be noted that interest on the
Minnesota Bonds is subject to tax in the case of corporations subject to the
Minnesota Corporate Franchise Tax or the Corporate Alternative Minimum Tax and
is a factor in the computation of the Minimum Fee applicable to financial
institutions; no opinion is expressed with respect to the treatment of interest
on the Possession Bonds for purposes of such taxes. The opinion set forth below
does not address the taxation of persons other than full time residents of
Minnesota.
As noted above, we have expressed no opinion as to the treatment of
interest on the Possession Bonds for purposes of the Minnesota Corporate
Franchise Tax or the Alternative Minimum Tax or whether it is a factor in the
computation of the Minimum Fee applicable to financial institutions. Although a
federal statute currently provides that bonds issued by the Government of Puerto
Rico, or by its authority, are exempt from all state and local taxation, the
Supreme Court of Minnesota has held that interest earned on bonds issued by the
Government of Puerto Rico may be included in taxable net income for purposes of
computing the Minnesota bank excise tax. The State of Minnesota could apply the
same reasoning in determining whether interest on the Possession Bonds is
subject to the taxes listed above on which we express no opinion.
Based on the foregoing it is our opinion that under existing Minnesota
income tax law as of the date of this prospectus and based upon the assumptions
above:
(1) The Minnesota Trust is not an association taxable as a corporation
and each Unitholder of the Minnesota Trust will be treated as the owner of
a pro rata portion of the Minnesota Trust, and the income of such portion
of the Minnesota Trust will therefore be treated as the income of the
Unitholder for Minnesota Income Tax purposes;
(2) Income on the Minnesota Bonds which is excludable from Minnesota
taxable income for purposes of the Minnesota Income Tax when received by
the Minnesota Trust and which would be excludable from Minnesota taxable
income for purposes of the Minnesota Income Tax if received directly by a
Unitholder, will be excludable from Minnesota taxable income for purposes
of the Minnesota Income tax when received by the Minnesota Trust and
distributed to such Unitholder;
(3) To the extent that interest on certain Bonds (except with respect
to Possession Bonds, as to which no opinion is expressed) if any, which is
includible in the computation of "alternative minimum taxable income" for
federal income tax purposes, such interest will also be includible in the
computation of "alternative minimum taxable income" for purposes of the
Minnesota Alternative Minimum Tax imposed on individuals, estates and
trusts;
(4) Each Unitholder of the Minnesota Trust will recognize gain or loss
for Minnesota Income Tax purposes if the Trustee disposes of a Bond
(whether by redemption, sale or otherwise) or if the Unitholder redeems or
sells Units of the Minnesota Trust to the extent that such a transaction
results in a recognized gain or loss to such Unitholder for federal income
tax purposes;
(5) Tax basis reduction requirements relating to amortization of bond
premium may, under some circumstances, result in Unitholders realizing
taxable gain for Minnesota Income Tax purposes when their Units are sold or
redeemed for an amount equal to or less than their original cost;
(6) Proceeds, if any, paid under individual insurance policies
obtained by issuers of Bonds or the Trustee which represent maturing
interest on defaulted obligations held by the Trustee will be excludable
from Minnesota net income if paid in the normal course by the issuer of the
defaulted obligation provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable, customary and
consistent with the reasonable expectation that the issuer of the Bonds,
rather than the insurer, will pay debt service on the Bonds; and
(7) To the extent that interest derived from the Minnesota Trust by a
Unitholder with respect to any Possession Bonds is excludable from gross
income for federal income tax purposes, such interest will not be subject
to the Minnesota Income Tax.
Although Minnesota state law provides that interest on Minnesota bonds is
exempt from Minnesota state income taxation, the Minnesota state legislature has
enacted a statement of intent that interest on Minnesota bonds should be subject
to Minnesota state income taxation if it is judicially determined that the
exemption discriminates against interstate commerce, effective for the calendar
year in which such a decision becomes final. It cannot be predicted whether a
court would render such a decision or whether, as a result thereof, interest on
Minnesota bonds and therefore distributions by the Minnesota Trust would become
subject to Minnesota state income taxation.
We have not examined any of the Bonds to be deposited and held in the
Minnesota Trust or the proceedings for the issuance thereof or the opinions of
bond counsel with respect thereto, and therefore express no opinions to the
exemption from State income taxes of interest on the Bonds if received directly
by a Minnesota Unitholder.
We have also examined certain laws of the State of New Mexico, to determine
their applicability to New Mexico Series 1 (the "NEW MEXICO TRUST") being
created as a part of the Fund and to the holders of Units of the New Mexico
Trust who are residents of the State of New Mexico ("NEW MEXICO UNITHOLDERS").
The assets of the New Mexico Trust will consist of interest-bearing
obligations issued by or on behalf of the State of New Mexico ("NEW MEXICO") or
counties, municipalities, authorities or political subdivisions thereof (the
"NEW MEXICO BONDS") or by the Commonwealth of Puerto Rico, Guam and the United
States Virgin Islands (the "POSSESSION BONDS") (collectively, the "BONDS").
Although we express no opinion with respect to the issuance of the Bonds,
in rendering our opinion expressed herein, we have assumed that: (i) the Bonds
were validly issued, (ii) the interest thereon is excludable from gross income
for federal income tax purposes and (iii) the interest thereon is exempt from
taxation for purposes of the income tax imposed on individuals and the income
tax imposed on corporations by New Mexico (collectively, the "NEW MEXICO STATE
INCOME TAX"). This opinion does not address the taxation of persons other than
full time residents of New Mexico.
Based on the foregoing, and based on review and consideration of existing
laws of New Mexico as of this date, it is our opinion, and we herewith advise
you, as follows:
(1) The New Mexico Trust will not be subject to tax under the New
Mexico State Income Tax.
(2) Interest on the Bonds which is exempt from the New Mexico State
Income Tax when received by the New Mexico Trust, and which would be exempt
from the New Mexico State Income Tax if received directly by a New Mexico
Unitholder, will retain its status as exempt from such tax when received by
the New Mexico Trust and distributed to such New Mexico Unitholder provided
that the New Mexico Trust complies with the reporting requirements
contained in the New Mexico State Income Tax Regulations.
(3) To the extent that interest, derived from the New Mexico Trust by
a Unitholder with respect to Possession Bonds is exempt from state taxes
pursuant to 48 U.S.C. ss.745, 48 U.S.C. ss.1423a, or 48 U.S.C. ss.1403,
such interest will not be subject to the New Mexico State Income Tax.
(4) Each New Mexico Unitholder will recognize gain or loss for New
Mexico State Income Tax purposes if the Trustee disposes of a bond (whether
by redemption, sale or otherwise) or if the New Mexico Unitholder redeems
or sells Units of the New Mexico Trust to the extent that such a
transaction results in a recognized gain or loss to such New Mexico
Unitholder for federal income tax purposes.
(5) The New Mexico State Income Tax does not permit a deduction of
interest paid on indebtedness or other expenses incurred (or continued) in
connection with the purchase or carrying of Units in the New Mexico Trust
to the extent that interest income related to the ownership of Units is
exempt from the New Mexico income tax.
We have not examined any of the Bonds to be deposited and held in the New
Mexico Trust or the proceedings for the issuance thereof or the opinions of bond
counsel with respect thereto, and therefore express no opinion as to the
exemption from federal income taxation of interest on the Bonds or from the New
Mexico State Income Tax of interest or profits on the Bonds if interest thereon
had been received directly by a New Mexico Unitholder.
We have also examined the laws of the State of Missouri to determine their
applicability to the Fund. It is our opinion that under Missouri law, as
presently enacted and construed:
(i) The Fund is not an association taxable as a corporation for
Missouri income tax purposes.
(ii) The Unitholders of the Fund will be treated as the owners of a
pro rata portion of the Fund and the income of the Fund will therefore be
treated as income of the Unitholders for Missouri state income tax
purposes.
(iii) The Fund will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of the Fund
will not generally be subject to the Kansas City, Missouri Earnings and
Profits Tax or the City of St. Louis Earnings Tax (except that no opinion
is expressed in the case of certain Unitholders, including corporations,
otherwise subject to the St. Louis City Earnings Tax).
Very truly yours,
CHAPMAN AND CUTLER
INDEPENDENT AUDITORS' CONSENT
The Unitholders, Sponsor and Trustee
Voyageur Tax Exempt Trust, Series 8:
We consent to the use of our report included herein and to the reference to our
Firm under the heading "Other Matters-Independent Auditors" in the Prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 16, 1996
Exhibit 6(b)
Securities Pricing Service
717 Seventeenth Street, Suite 2500
Denver, Colorado 80202
Attn: Bill Carlstrom
Voyageur Fund Managers, Inc.,
90 S. Seventh Street, Suite 4400
Minneapolis, MN 55402-4115
October 17, 1996
Re: Voyageur Tax-Exempt Trust, Series 8 (A Unit Investment Trust)
REGISTERED UNDER THE SECURITIES ACT OF 1933, FILE NO. 333-10705
Dear Sir/Madam:
We have examined the Registration Statement for the above captioned fund,
copy of which is attached hereto.
We, the Securities Pricing Service, a division of George K. Baum & Company,
hereby consent to the reference in the Prospectus and Registration Statement as
the Evaluator for the above captioned fund.
You are authorized to file copies of this letter with the Securities and
Exchange Commission.
Sincerely,
/s/T.J. Shah
----------------------
Vice President, SPS
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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<NAME> VOYAGEUR TAX EXEMPT TRUST, SERIES 8
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<NAME> VOYAGEUR TAX EXEMPT TRUST, SERIES 8
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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</LEGEND>
<CIK> 0000946196
<NAME> VOYAGEUR TAX EXEMPT TRUST, SERIES 8
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