MEMORANDUM OF CHANGES
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
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 May 22, 1997, 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 8-23. 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. New Mexico Series 2.
PAGES 14-23. Pennsylvania Insured Series 1.
PAGES 24-26. Territorial Insured Series 6.
PAGE 27. The Notes to Schedules of Investments has been
completed.
PAGE 28. The Independent Auditors' Report has been completed.
PAGE 29. The Statements of Net Assets have been completed.
PAGE 45. 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 47. 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 60. 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.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-27095
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: DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
B. NAME OF DEPOSITOR: VOYAGEUR FUND MANAGERS, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
VOYAGEUR FUND MANAGERS, INC.
One Commerce Square
Philadelphia, Pennsylvania 19103
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copy to:
George M. Chamberlain, Jr. MARK J. KNEEDY
Voyageur Fund Managers, Inc. c/o Chapman and Cutler
One Commerce Square 111 West Monroe Street
Philadelphia, Pennsylvania 19103 Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title and amount of Proposed maximum Amount of
securities being registered aggregate offering price registration fee
<S> <C> <C> <C>
Delaware-Voyageur Tax-Exempt An indefinite number of Indefinite $0.00
Trust, Series 10 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
May 22, 1997 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.
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
----------------------
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
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<CAPTION>
Form N-8B-2 FORM S-6
Item Number HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C> <C>
1. (a) Name of Trust.............................................................. } Prospectus front cover
2. (b) Title of securities issued................................................. } Summary of Essential
} Information
3. Name and address of each depositor.............................................. } Trust Administration
4. Name and address of Trustee..................................................... } Trust Administration
5. State of organization of Trust.................................................. } The Fund
6. Execution and termination of Trust agreement ................................... } Trust Administration
7. Changes of name................................................................. } The Fund; Trust Administration
8. Fiscal year..................................................................... } *
9. Litigation...................................................................... } *
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a) Registered of bearer securities............................................ } Rights of Unitholders
(b) Cumulative or distributive securities...................................... } Rights of Unitsholders; The Fund
(c) Redemption................................................................. } Rights of Unitholders
(d) Conversion, transfer, etc.................................................. } Rights of Unitholders
(e) Periodic payment plan...................................................... } *
(f) Voting rights.............................................................. } Rights of Unitholders
(g) Notice of Unitholders...................................................... } Trust Administration
(h) Consents required.......................................................... } Rights of Unitholders; Trust
} Administration
(i) Other provisions........................................................... } Tax Status; Insurance on the
} Bonds
11. Type of securities comprising units............................................. } The Fund; The State Trusts
12. Certain information regarding periodic payment certificates .................... } *
13. (a) Load, fees, expenses, etc.................................................. } Estimated Current Return and
} Estimated Long-Term Return;
} Trust Operating Expenses
(b) Certain information regarding periodic payment certificates ............... } *
(c) Certain percentages........................................................ } Summary of Essential
} Information; Public Offering;
} Insurance on 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) ............................ } *
- -------------
</TABLE>
* Inapplicable, answer negative or not required.
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
NEW MEXICO SERIES 2 PENNSYLVANIA INSURED SERIES 1
TERRITORIAL INSURED SERIES 6
THE FUND. Delaware-Voyageur Tax-Exempt Trust, Series 10 (the "Fund")
consists of the underlying separate unit investment trusts set forth above. The
various trusts are collectively referred to herein as the "Trusts." Pennsylvania
Insured Series 1 is referred to herein as the "Insured State Trust." Territorial
Insured Series 6 is referred to herein as the "Insured National Trust."
Collectively, the Insured State Trust and the Insured National Trusts may be
referred to herein as the "Insured Trusts." Because not all of the Bonds in New
Mexico Series 2 are insured, New Mexico Series 2 is not an Insured State Trust.
New Mexico Series 2 and the Insured State Trust may, collectively, be referred
to herein as the "State Trusts." Each Trust initially consists of
interest-bearing obligations (including delivery statements relating to
contracts for the purchase of certain such obligations and an irrevocable letter
of credit) issued by or on behalf of states and territories of the United States
and political subdivisions and authorities thereof, the interest on which is,
with certain exceptions, in the opinion of recognized bond counsel to the
issuing governmental authorities, exempt from all Federal income taxes under
existing law (the "Bonds"). In addition, the interest income of each 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 State 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 an Insured Trust or sales by
an Insured 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 2; 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 the State Trusts,
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 Trusts 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 Trusts are often not available
in small amounts. There is, of course, no guarantee that the Trusts will achieve
their 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 MAY 22, 1997
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."
<TABLE>
<CAPTION>
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: MAY 22, 1997
SPONSOR: VOYAGEUR FUND MANAGERS, INC.
DISTRIBUTOR: VOYAGEUR FUND DISTRIBUTORS, INC.
EVALUATOR: MULLER DATA CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
New Pennsylvania Territorial
Mexico Insured Insured
Series 2 Series 1 Series 6
------------------------------------------------
<S> <C> <C> <C>
Principal Amount (Par Value) of Bonds................ $ 2,395,000 $ 2,250,000 $ 3,750,000
Number of Units...................................... 246,137 233,340 381,277
Fractional Undivided Interest in the Trust per Unit.. 1/246,137 1/233,340 1/381,277
Principal Amount (Par Value) of Bonds per Unit (1)... $ 9.730 $ 9.643 $ 9.835
Public Offering Price:
Aggregate Offering Price of Bonds in Portfolio.. $ 2,340,771 $ 2,219,073 $ 3,625,960
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)...................... $ 9.47 $ 9.47 $ 9.47
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......................... $ 0.53 $ 0.53 $ 0.53
Excess of Sponsor's Initial Repurchase Price per Unit
Over Redemption Price per Unit.................... $ 0.04 $ 0.04 $ 0.04
Minimum Value of the Trust under which Trust
Agreement may be terminated....................... $ 479,000 $ 450,000 $ 750,000
Minimum Principal Distribution.........$0.01 per Unit
First Settlement Date................... May 28, 1997
Mandatory Termination Date..........December 31, 2045
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit......... $ 0.53373 $ 0.54577 $ 0.52783
Less: Estimated Annual Expense per Unit........... $ 0.02800 $ 0.02850 $ 0.02380
------------- ------------- ------------
Estimated Net Annual Interest Income per Unit..... $ 0.50573 $ 0.51727 $ 0.50403
Estimated Normal Monthly Distribution per Unit(5).... $ 0.04214 $ 0.04311 $ 0.04200
Estimated Daily Rate of Net Interest Accrual per Unit $ 0.00140 $ 0.00144 $ 0.00140
Estimated Current Return Based on Public Offering
Price(2)(5)(6).................................... 5.06% 5.17% 5.04%
Estimated Long-Term Return(2)(5)(6).................. 4.97% 5.16% 5.07%
Initial Distribution (June 15, 1997)................. $ 0.00421 $ 0.00431 $ 0.00420
Trustee's Initial Annual Fee per $1,000 Principal
Amount of Bonds................................... $ 1.26 $ 1.26 $ 1.26
Evaluator's Fee per Evaluation(8).................... $ 8.00 $ 8.00 $ 8.00
Sponsor's Annual Fee per Unit........................ $ 0.00300 $ 0.00300 $ 0.00300
Estimated Organizational and Offering Expenses
per Unit (7)...................................... $ 0.02766 $ 0.03195 $ 0.03170
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 Bonds 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) 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.
(6) 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.
(7) 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 at the end of the initial offering period which is currently expected
to be approximately 4-6 months from the Initial Date of Deposit. In order
to reimburse the Trustee for organizational and offering costs, 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.
(8) For the first two months of the offering period the Evaluator has agreed to
waive their fee. Such fee reduction will be used to offset organizational
and offering costs.
THE FUND
GENERAL. The Fund was created under the laws of the State of New York
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, Muller Data Corporation, as Evaluator,
and The Chase Manhattan Bank, 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. In
addition, in the case of the Insured National Trust, interest income may also be
exempt from certain state and local taxes for residents of various states.
Illinois, Indiana, Virginia and Washington residents may only purchase units of
an Insured National Trust by this Prospectus. On the Initial Date of Deposit,
the Sponsor deposited with the Trustee the Bonds indicated under the "Schedule
of Investments" for each Trust herein, including delivery statements relating to
contracts for the purchase of certain such obligations and 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 Insured 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 HAS BEEN OBTAINED BY THE SPONSOR FOR
BONDS CONTAINED IN NEW MEXICO SERIES 2.
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
NEW MEXICO SERIES 2
GENERAL. New Mexico Series 2 (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: 50.5% Other Revenue Bonds, 20.9% Education
Revenue Bonds, 20.9% Water & Sewer Revenue Bonds, 5.2% Pollution Control Revenue
Bonds, 2.5% 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. Some but not all 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 ratio, 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 from state
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 2
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: MAY 22, 1997
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited Redemption to New Mexico
Principal or Bonds Contracted for(1)(5) Rating(2) Feature (3) Trust (4)
- ---------- ----------------------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
$ 500,000 Santa Fe County, New Mexico, Correctional System AAA $461,755
Revenue Bonds, Series 1997 (FSA Insured) 5.000%
Due 02/01/2018 #
250,000 Bernalillo County, New Mexico, Gross Receipts AA 2006 @ 100 251,525
Tax Revenue Bonds, Series 1996A, 5.750% Due
04/01/2021 #
125,000 City of Farmington, New Mexico, Pollution AAA 2006 @ 102 S.F. 125,628
Control Revenue Refunding Bonds, 1996 Series C, 2008 @ 100 S.F.
(AMBAC Insured) 5.700% Due 12/01/2016
60,000(1)Puerto Rico Electric Power Authority, Power AAA 19,700
Revenue Refunding Bonds, Zero Coupon Bonds,
Series N (MBIA Insured) 0.000% Due 07/01/2017 #
(6)
500,000 City of Rio Rancho, New Mexico, Water and AAA 2006 @ 100 513,615
Wastewater System Bonds, Series 1995A (FSA
Insured) 6.000% Due 05/15/2022 #
$ 460,000 San Miguel County, New Mexico, Gross Receipts AA 2007 @ 100 470,888
Tax Refunding and Improvement Revenue Bonds,
Series 1997A (Asset Guaranty Ins. Co. Insured)
5.950% Due 03/01/2018
500,000 The Regents of The University of New Mexico, AAA 2006 @ 101 497,660
Subordinate Lien System Revenue Bonds, Series 2007 @ 100 S.F.
1996 (MBIA Insured) 5.500% Due 06/01/2016 #
---------- ----------
$2,395,000 $2,340,771
========== ==========
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 28.
PENNSYLVANIA INSURED SERIES 1
GENERAL. Pennsylvania Insured Series 1 (the "Pennsylvania Trust")
consists of seven 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. Two of the Bonds in the Pennsylvania Trust are general obligations
(33.3%) of the governmental entity issuing them and are backed by the taxing
power thereof. The remaining issues are divided by purpose of issues (and
percentage of principal amount to total Pennsylvania Trust) as follows: 44.5%
Health Care Revenue Bonds, 11.1% Education Revenue Bonds, 6.6% Water & Sewer
Revenue Bonds, 4.5% Other Revenue Bonds. No Bond has received a provisional
rating. For a general description of certain of the risks associated with the
Bonds, see "Risk Factors" below.
RISK FACTORS SPECIFIC TO PENNSYLVANIA. Prospective investors should
consider the financial difficulties and pressures which the Commonwealth of
Pennsylvania and certain of its municipal subdivisions have undergone. Both the
Commonwealth and the City of Philadelphia have historically experienced
significant revenue shortfalls. There can be no assurance that the Commonwealth
will not experience further declines in economic conditions or that portions of
the municipal obligations purchased by the Fund will not be affected by such
declines. Without intending to be complete, the following briefly summarizes
some of these difficulties and the current financial situation, as well as some
of the complex factors affecting the financial situation in the Commonwealth. It
is derived from sources that are generally available to investors and is based
in part on information obtained from various agencies in the Commonwealth. No
independent verification has been made of the following information.
STATE ECONOMY. Pennsylvania has been historically identified as a
heavy-industry state although that reputation has changed recently as the
industrial composition of the Commonwealth diversified when the coal, steel and
railroad industries began to decline. The major new sources of growth in the
Commonwealth are in the service sector, including trade, medical and the health
services, education and financial institutions. The Commonwealth's agricultural
industries are also an important component of its economic structure, accounting
for more than $3.6 billion in crop and livestock products annually while
agribusiness and food related industries support $39 billion in economic
activity annually.
Non-manufacturing employment in the Commonwealth has increased steadily
since 1980 to its 1995 level of 82.1 percent of total Commonwealth employment.
The growth in employment experienced in the Commonwealth during such periods is
comparable to the growth in employment in Middle Atlantic region of the United
States. Manufacturing, which contributed 17.9 percent of 1995 non-agricultural
employment, has fallen behind both the services sector and the trade sector as
the largest single source of employment within the Commonwealth. In 1995, the
services sector accounted for 30.4 percent of all non-agricultural employment in
the Commonwealth while the trade sector accounted for 22.8 percent.
The Commonwealth recently experienced a slowdown in its economy.
Moreover, economic strengths and weaknesses vary in different parts of the
Commonwealth. In general, heavy industry and manufacturing have been facing
increasing competition from foreign producers. During 1995, the annual average
unemployment rate in the Commonwealth was 5.9 percent compared to 5.6 percent
for the United States. For March 1996 the unadjusted unemployment rate was 5.9
percent in the Commonwealth and 5.8 percent in the United States, while the
seasonally adjusted unemployment rate for the Commonwealth was 5.6 percent and
for the United States was 5.6 percent.
STATE BUDGET. The Commonwealth operates under an annual budget that is
formulated and submitted for legislative approval by the Governor each February.
The Pennsylvania Constitution requires that the Governor's budget proposal
consist of three parts: (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated revenues
and available surplus are less than proposed expenditures, a recommendation for
specific additional sources of revenue sufficient to pay the deficiency, (ii) a
capital budget setting forth proposed expenditures to be financed from the
proceeds of obligations of the Commonwealth or its agencies or from operating
funds; and (iii) a financial plan for not less than the succeeding five fiscal
years, that includes for each year projected operating expenditures and
estimated revenues and projected expenditures for capital projects. The General
Assembly may add, change or delete any items in the budget prepared by the
Governor, but the Governor retains veto power over the individual appropriations
passed by the legislature. The Commonwealth's fiscal year begins on July 1 and
ends on June 30.
All funds received by the Commonwealth are subject to appropriation in
specific amounts by the General Assembly or by executive authorization by the
Governor. Total appropriations enacted by the General Assembly may not exceed
the ensuing year's estimated revenues, plus (less) the unappropriated fund
balance (deficit) of the preceding year, except for constitutionally authorized
debt service payments. Appropriations from the principal operating funds of the
Commonwealth (the General Fund, the Motor License Fund and the State Lottery
Fund) are generally made for one fiscal year and are returned to the
unappropriated surplus of the fund if not spent or encumbered by the end of the
fiscal year. The Constitution specifies that a surplus of operating funds at the
end of a fiscal year must be appropriated for the ensuing year.
Pennsylvania uses the "fund" method of accounting. For purposes of
government accounting, a "fund" is an independent fiscal and accounting entity
with a self-balancing set of accounts, recording cash and/or other
resourcestogether with all related liabilities and equities that are segregated
for the purpose of carrying on specific activities or attaining certain
objectives in accordance with the fund's special regulations, restrictions or
limitations. In the Commonwealth, funds are established by legislative enactment
or in certain cases by administrative action. Over 150 funds have been
established for the purpose of recording the receipt and disbursement of moneys
received by the Commonwealth. Annual budgets are adopted each fiscal year for
the principal operating funds of the Commonwealth and several other special
revenue funds. Expenditures and encumbrances against these funds may only be
made pursuant to appropriation measures enacted by the General Assembly and
approved by the Governor. The General Fund, the Commonwealth's largest fund,
receives all tax revenues, non-tax revenues and federal grants and entitlements
that are not specified by law to be deposited elsewhere. The majority of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. Debt service on all bond indebtedness of the Commonwealth, except
that issued for highway purposes or for the benefit of other special revenue
funds, is payable from the General Fund.
Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting, which is used for
the purpose of ensuring compliance with the enacted operating budget. Since
1984, the Commonwealth has also prepared annual financial statements in
accordance with generally accepted accounting principles ("GAAP"). Budgetary
basis financial reports are based on a modified cash basis of accounting, as
opposed to a modified accrual basis of accounting prescribed by GAAP. The
budgetary basis financial information is adjusted at fiscal year-end to reflect
appropriate accruals for financial reporting in conformity with GAAP.
RECENT FINANCIAL CONDITIONS. From fiscal 1984, when the Commonwealth
first prepared its financial statements on a GAAP basis, through fiscal 1989,
the Commonwealth reported a positive unreserved-undesignated fund balance for
its governmental fund types at each fiscal year end. Slowing economic growth
during 1990, leading to a national economic recession beginning in fiscal 1991,
reduced revenue growth and increased costs of certain governmental programs and
contributed to negative unreserved-undesignated fund balances at the end of the
1990 and 1991 fiscal years. The negative unreserved-undesignated fund balance
was due largely to operating deficits in the General Fund and the State Lottery
Fund during those fiscal years. Actions taken during fiscal 1992 to bring the
General Fund budget back into balance, including tax increases and expenditure
restraints, resulted in a $1.1 billion reduction to the unreserved-undesignated
fund deficit for combined governmental fund types and a return to a positive
fund balance. Financial performance continued to improve during the 1993 and
1994 fiscal years. The fund balance for the governmental fund types increased
from $1,692.8 million on June 30, 1993, as restated, to $1,982.0 million on June
30, 1994, an increase of $289.2 million. An unreserved-undesignated fund balance
of $334.7 million was recorded for fiscal 1994 year end. At June 30, 1995, the
fund balance totaled $1,927.6 million, including an unreserved-undesignated fund
balance of $104.8 million.
FINANCIAL RESULTS FOR RECENT FISCAL YEARS. For the five-year period
from fiscal 1991 through fiscal 1995, total revenues and other sources rose at a
9.1 percent average annual rate while total expenditures and other uses grew by
7.4 percent annually. Over two-thirds of the increase in total revenues and
other sources during this period occurred during fiscal 1992 when a $2.7 billion
tax increase was enacted to address a fiscal 1991 budget deficit and to fund
increased expenditures for fiscal 1992. For the four-year period from fiscal
1992 through fiscal 1995, total revenues and other sources increased at an
annual average of 3.3 percent, less than one-half the rate of increase for the
five-year period beginning with fiscal 1991. This slower rate of growth was due,
in part, to tax rate reductions and other tax law revisions that restrained the
growth of tax receipts for fiscal years 1993, 1994 and 1995.
Expenditures and other uses followed a pattern similar to that for
revenues, although with smaller growth rates, during the fiscal 1991 through
fiscal 1995 period. Program areas having the largest increase in costs for the
fiscal 1991 to fiscal 1995 period related to protection of persons and property,
an expansion of state prisons, and public health and welfare. Recently, efforts
to restrain the rapid expansion of public health and welfare program costs have
resulted in expenditure increases at or below the total rate of increase for
total expenditures in each fiscal year.
FISCAL 1994 FINANCIAL RESULTS. Commonwealth revenues during the 1994
fiscal year totaled $15,210.7 million, $38.6 million above the fiscal year
estimate, and 3.9 percent over Commonwealth revenues during the 1993 fiscal
year. The sales tax was an important contributor to the higher than estimated
revenues. The strength of collections from the sales tax offset the lower than
budgeted performance of the personal income tax that ended the 1994 fiscal year
$74.4 million below estimate. The shortfall in the personal income tax was
largely due to shortfalls in income not subject to withholding such as interest,
dividends and other income. Expenditures, excluding pooled financing
expenditures and net of all fiscal 1994 appropriation lapses, totaled $14,934.4
million representing a 7.2 percent increase over fiscal 1993 expenditures.
Medical assistance and prisons spending contributed to the rate of spending
growth for the 1994 fiscal year. The Commonwealth maintained an operating
balance on a budgetary basis for fiscal 1994 producing a fiscal year ending
unappropriated surplus of $335.8 million.
FISCAL 1995 FINANCIAL RESULTS. Commonwealth revenues for the 1995
fiscal year were above estimate and exceeded fiscal year expenditures and
encumbrances. Fiscal 1995 was the fourth consecutive fiscal year the
Commonwealth reported an increase in the fiscal year-end unappropriated balance.
Prior to reserves for transfer to the Tax Stabilization Reserve Fund, the fiscal
1995 closing unappropriated surplus was $540.0 million, an increase of $204.2
million over the fiscal 1994 closing unappropriated surplus prior to transfers.
Commonwealth revenues during the 1995 fiscal year were $4159.4 million,
2.9 percent, above the estimate of revenues used at the time the 1995 fiscal
year budget was enacted. Corporation taxes contributed $329.4 million of the
additional receipts, largely due to higher receipts from the corporate net
income tax. Fiscal 1995 revenues from the corporate net income tax were 22.6
percent over collections in fiscal 1994 and include the effects of the reduction
of the tax rate from 12.25 percent to 11.99 percent that became effective with
tax years beginning on and after January 1, 1994. The sales and use tax and
miscellaneous revenues also showed strong year-over-year growth that produced
above-estimate revenue collections. Sales and use tax revenues were $5,526.9
million, $128.8 million above the enacted budget estimate and 7.9 percent over
fiscal 1994 collections. Tax receipts from both motor vehicle and non-motor
vehicle sales contributed to the higher collections. Miscellaneous revenue
collections for fiscal 1995 were $183.5 million, $44.9 million above estimate
and were largely due to additional investment earnings, escheat revenues and
other miscellaneous revenues.
FISCAL 1996 BUDGET. On June 30, 1995, the Governor signed a $16.2
billion general fund budget, an increase of approximately 2.7 percent over the
total appropriations from Commonwealth revenues in the fiscal 1995 budget. The
appropriations increase for fiscal 1996 is one of the lowest rates in recent
years. Areas receiving the largest budgetary increases are medical assistance
and basic education. In addition, the budget accelerated corporate net income
tax rate reductions, eliminated the inheritance tax paid by a surviving spouse
on jointly-owned property, and made other business tax reductions.
FISCAL 1997 BUDGET. In February 1996, the Governor presented his
proposed fiscal 1997 budget to the General Assembly. Proposed appropriations
from General Fund Commonwealth revenues totals $16,189.9 million, a reduction
from the estimated $16,219.9 million (including proposed supplemental
appropriations) for fiscal 1996. The proposed reduction represents a decline of
approximately 0.2 percent in appropriations from the prior fiscal year. Revenue
receipts are estimated to increase by $403.9 million, or 2.5 percent, over
anticipated receipts for fiscal 1996. The anticipated increased revenues,
together with the projected $140 million of appropriation lapses during fiscal
1996 and the proposed draw-down of approximately $95 million of surplus provide
the funding sources for the proposed budget. The proposed draw-down of the
fiscal 1996 unappropriated surplus produces a projected 1997 fiscal year end
surplus of under $5 million, without any consideration of possible appropriation
lapses for fiscal 1997. The decline in appropriation authority over the prior
fiscal year in the proposed budget relies on several program changes, including
$329 million of cost containment efforts in public health and welfare programs.
Other significant cost restraints include reductions to appropriations for the
state-aided colleges and universities and no increases for the state-related
colleges and universities.
DEBT LIMITS AND OUTSTANDING DEBT. The Pennsylvania Constitution permits
the issuance of the following types of debt: (i) debt to suppress insurrection
or rehabilitate areas affected by disaster; (ii) electorate approved debt; (iii)
debt for capital projects subject to an aggregate outstanding debt limit of 1.75
times the annual average tax revenues of the preceding five fiscal years; and
(iv) tax anticipation notes payable in the fiscal year of issuance.
Under the Pennsylvania Fiscal Code, the Auditor General is required to
certify to the Governor and the General Assembly certain information regarding
the Commonwealth's indebtedness. According to the February 29, 1996 Auditor
General certificate, the average annual tax revenues deposited in all funds in
the five fiscal years ended June 30, 1995 was approximately $17.7 billion, and,
therefore, the net debt limitation for the 1996 fiscal year is $30.9 billion.
Outstanding net debt totaled $3.9 billion at June 30, 1995, approximately equal
to the net debt at June 30, 1994. At February 29, 1996, the amount of debt
authorized by law to be issued, but not yet incurred, was $16.5 billion.
Outstanding general obligation debt totaled $5,045.4 million at June
30, 1995, a decrease of $30.4 million from June 30, 1994. Over the ten-year
period ending June 30, 1995, total outstanding general obligation debt increased
at an annual rate of 1.1 percent. Within the most recent five-year period,
outstanding general obligation debt has grown at an annual rate of 1.7 percent.
DEBT RATINGS. All outstanding general obligation bonds of the
Commonwealth are rated AA - by S&P and Al by Moody's.
CITY OF PHILADELPHIA. The City of Philadelphia (the "CITY" or
"PHILADELPHIA") is the largest city in the Commonwealth, with an estimated
population of 1,585,577 according to the 1990 Census. Philadelphia experienced a
series of general fund deficits for fiscal years 1988 through 1992 which have
culminated in serious financial difficulties for the City. In its 1992
Comprehensive Annual Financial Report, Philadelphia reported a cumulative
general fund deficit of $71.4 million for fiscal year 1992.
In June 1991, the Pennsylvania legislature established the Pennsylvania
Intergovernmental Cooperation Authority ("PICA"), a five-member board to assist
Philadelphia in remedying fiscal emergencies. PICA is designed to provide
assistance through the issuance of funding debt and to make factual findings and
recommendations to Philadelphia concerning its budgetary and fiscal affairs. The
legislation empowered PICA to issue notes and bonds on behalf of Philadelphia,
and also authorized Philadelphia to levy a one-percent sales tax, the proceeds
of which would be used to pay off the bonds. In return for Pica's fiscal
assistance, Philadelphia is required, among other things, to establish five-year
financial plans that include balanced annual budgets. Under the legislation, if
Philadelphia does not comply with such requirements, PICA may withhold bond
revenues and certain state funding. At this time, the City is operating under a
five-year fiscal plan approved by PICA on April 17, 1995. Technical
modifications were made to that plan as of July 12, 1995 and the revised plan,
incorporating such technical modifications, was approved by PICA on July 18,
1995. As of November 15, 1995, PICA has issued approximately $1,418.7 million of
its Special Tax Revenue Bonds.
No further PICA bonds are to be issued by PICA for the purpose of
financing a capital project or deficit, as the authority for such bond sales
expired on December 31, 1994. PICA's authority to issue debt for the purpose of
financing a cash flow deficit expires on December 31, 1996. Its ability to
refund existing outstanding debt is unrestricted.
In January 1993, Philadelphia anticipated a cumulative general fund
budget deficit of $57 million for the 1993 fiscal year. In response to the
anticipated deficit, the Mayor unveiled a financial plan eliminating the budget
deficit for the 1993 budget year through significant service cuts that included
a plan to privatize certain city-provided services. Due to an upsurge in tax
receipts, cost-cutting and additional PICA borrowings, Philadelphia completed
the 1993 fiscal year with a balanced general fund budget. The audit findings for
fiscal year 1993 show a cumulative general fund surplus of approximately $3
million for the fiscal year ended June 30, 1993.
In January 1994, the Mayor proposed a $2.3 billion city general fund
budget that included no tax increases, no significant service cuts and a series
of modest health and welfare program increases. At that time, the Mayor also
unveiled a $2.2 billion program (the "PHILADELPHIA ECONOMIC STIMULUS PROGRAM")
designed to stimulate Philadelphia's economy and stop the loss of 1,000 jobs a
month. In its 1994 Comprehensive Annual Financial Report, Philadelphia reported
a cumulative general fund surplus of approximately $15.4 million for the fiscal
year ended June 30, 1994, up from approximately $3 million as of June 30, 1993.
Philadelphia's preliminary unaudited General Fund financial statements at June
30, 1995 project a surplus approximating $59.6 million.
S&P's rating on Philadelphia's general obligation bonds is "BBB-."
Moody's rating is currently "Baa."
LITIGATION. The Commonwealth is a party to numerous lawsuits in which
an adverse final decision could materially affect the Commonwealth's
governmental operations and consequently its ability to pay debt service on its
obligations. The Commonwealth also faces tort claims made possible by the
limited waiver of sovereign immunity effected by Act 152, approved September 28,
1978, as amended. Under the Act, damages for any loss are limited to $250,000
per person and $1 million for each accident.
STATE TAXATION. For a discussion of the Federal tax status of income
earned on Pennsylvania Trust Units, see "Tax Status."
In the opinion of Chapman and Cutler, special counsel for the
Pennsylvania Trust for Pennsylvania tax matters, under existing law:
We have examined certain laws of the State of Pennsylvania (the
"STATE") to determine their applicability to the Pennsylvania Trust (the
"PENNSYLVANIA TRUST") and to the holders of Units in the Pennsylvania Trust who
are residents of the State of Pennsylvania (the "UNITHOLDERS"). The assets of
the Pennsylvania Trust will consist of interest-bearing obligations issued by or
on behalf of the State, any public authority, commission, board or other agency
created by the State or a political subdivision of the State, or political
subdivisions thereof (the "BONDS"). Distributions of income with respect to the
Bonds received by the Pennsylvania Trust will be made monthly.
Although we express no opinion with respect thereto, in rendering the
opinion expressed herein, we have assumed that: (i) the Bonds were validly
issued by the State or its municipalities, as the case may be, (ii) the interest
therein is excludable from gross income for federal income tax purposes, (iii)
the interest thereon is exempt from Pennsylvania State and local taxes and (iv)
the Bonds are exempt from county personal property taxes. This opinion does not
address the taxation of persons other than full-time residents of Pennsylvania.
Based on the foregoing, and review and consideration of existing State
laws as of this date, it is our opinion, and we herewith advise you, as follows:
1. The Pennsylvania Trust will have no tax liability for
purposes of the personal income tax (the "PERSONAL INCOME TAX"), the
corporate income tax (the "CORPORATE INCOME TAX") and the capital
stock-franchise tax (the "FRANCHISE TAX"), all of which are imposed
under the Pennsylvania Tax Reform Code of 1971, or the Philadelphia
School District Investment Net Income Tax (the "PHILADELPHIA SCHOOL
TAX") imposed under Section 19-1804 of the Philadelphia Code of
Ordinances.
2. Interest on the Bonds, net of Pennsylvania Trust expenses,
which is exempt from the Personal Income Tax when received by the
Pennsylvania Trust and which would be exempt from such tax if received
directly by a Unitholder, will retain its status as exempt from such
tax when received by the Pennsylvania Trust and distributed to such
Unitholder. Interest on the Bonds which is exempt from the Corporate
Income Tax and the Philadelphia School Tax when received by the
Pennsylvania Trust and which would be exempt from such taxes if
received directly by a Unitholder, will retain its status as exempt
from such taxes when received by the Pennsylvania Trust and distributed
to such Unitholder.
3. Distributions from the Pennsylvania Trust attributable to
capital gains recognized by the Pennsylvania Trust upon its disposition
of a Bond issued on or after February 1, 1994, will be taxable for
purposes of the Personal Income Tax and the Corporate Income Tax. No
opinion is expressed with respect to the taxation of distributions from
the Pennsylvania Trust attributable to capital gains recognized by the
Pennsylvania Trust upon its disposition of a Bond issued before
February 1, 1994.
4. Distributions from the Pennsylvania Trust attributable to
capital gains recognized by the Pennsylvania Trust upon its disposition
of a Bond will be exempt from the Philadelphia School Tax if the Bond
was held by the Pennsylvania Trust for a period of more than six months
and the Unitholder held his Unit for more than six months before the
disposition of the Bond. If, however, the Bond was held by the
Pennsylvania Trust or the Unit was held by the Unitholder for a period
of less than six months, then distributions from the Pennsylvania Trust
attributable to capital gains recognized by the Pennsylvania Trustupon
its disposition of a Bond issued on or after February 1, 1994 will be
taxable for purposes of the Philadelphia School Tax; no opinion is
expressed with respect to the taxation of any such gains attributable
to Bonds issued before February 1, 1994.
5. Insurance proceeds paid under policies which represent
maturing interest on defaulted obligations will be exempt from the
Corporate Income Tax to the same extent as such amounts are excluded
from gross income for federal income tax purposes. No opinion is
expressed with respect to whether such insurance proceeds are exempt
from the Personal Income Tax or the Philadelphia School Tax.
6. Each Unitholder will recognize gain for purposes of the
Corporate Income Tax if the Unitholder redeems or sells Units of the
Pennsylvania Trust to the extent that such a transaction results in a
recognized gain to such Unitholder for federal income tax purposes and
such gain is attributable to Bonds issued on or after February 1, 1994.
No opinion is expressed with respect to the taxation of gains realized
by a Unitholder on the sale or redemption of a Unit to the extent such
gain is attributable to Bonds issued prior to February 1, 1994.
7. A Unitholder's gain on the sale or redemption of a Unit
will be subject to the Personal Income Tax, except that no opinion is
expressed with respect to the taxation of any such gain to the extent
it is attributable to Bonds issued prior to February 1, 1994.
8. A Unitholder's gain upon a redemption or sale of Units will
be exempt from the Philadelphia School Tax if the Unitholder held his
Unit for more than six months and the gain is attributable to Bondsheld
by the Pennsylvania Trust for a period of more than six months. If,
however, the Unit was held by the Unitholder for less than six months
or the gain is attributable to Bonds held by the Pennsylvania Trust for
a period of less than six months, then the gains will be subject to the
Philadelphia School Tax; except that no opinion is expressed with
respect to the taxation of any such gains attributable to Bonds issued
before February 1, 1994.
9. The Bonds will not be subject to taxation under the County
Personal Property Tax Act of June 17, 1913 (the "PERSONAL PROPERTY
TAX"). Personal property taxes in Pennsylvania are imposed and
administered locally, and thus no assurance can be given as to whether
Units will be subject to the Personal Property Tax in a particular
jurisdiction However, in our opinion, Units should not be subject to
the Personal Property Tax.
Unitholders should be aware that, generally, interest on indebtedness
incurred or continued to purchase or carry Units is not deductible for purposes
of the Personal Income Tax, the Corporate Income Tax or the Philadelphia School
Tax.
We have not examined any of the Bonds to be deposited and held in the
Pennsylvania 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 or state income taxation of interest on the Bonds if
interest thereon had been received directly by a Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Pennsylvania law. Ownership of the Units may result
in collateral Pennsylvania tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any such
collateral consequences.
PENNSYLVANIA INSURED SERIES 1
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: MAY 22, 1997
Name of Issuer, Title, Interest Rate and Offering Price to
Aggregate Maturity Date of either Bonds Deposited Redemption Pennsylvania
Principal or Bonds Contracted for(1)(5) Rating(2) Feature(3) Trust(4)
- ---------- ----------------------------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
$ 500,000 The School District of Philadelphia, AAA 2005 @ 101 $481,910
Pennsylvania, General Obligation Bonds, 2007 @ 100 S.F.
Series B of 1995 (AMBAC Insured) 5.500% Due
09/01/2025 #
250,000 The School District of The City of Erie, AAA 2006 @ 100 249,750
General Obligation Bonds, Series A of 1996,
(MBIA Insured) 5.750% Due 05/01/2026 #
100,000 The Harrisburg Authority, Tax-Exempt Revenue AAA 2007 @ 100 99,095
Bonds (The City of Harrisburg Project),
Series II of 1997, (MBIA Insured) 5.625% Due
09/15/2017 #
500,000 The Hospitals and Higher Education AAA 2005 @ 102 498,130
Facilities Authority of Philadelphia, 2007 @ 100 S.F.
Hospital Revenue Bonds, Series of 1995A,
(Connie Lee Insured) 5.750% Due 01/01/2019 #
250,000 Pennsylvania Higher Educational Facilities AAA 2006 @ 100 251,740
Authority (Commonwealth of Pennsylvania)
Revenue Bonds, State System of Higher
Education, Series N, (MBIA Insured) 5.800%
Due 06/15/2024 #
150,000 Luzerne County Flood Protection Authority, AAA 2006 @ 100 148,508
Luzerne County, Pennsylvania, Guaranteed
Flood Protection Bonds, Series of 1996 (MBIA
Insured) 5.650% Due 07/15/2026 #
500,000 Lehigh County General Purpose Authority, AAA 2005 @ 102 489,940
Hospital Revenue Bonds (Lehigh Valley 2007 @ 100 S.F.
Hospital) Series B of 1995, (MBIA Inusred)
5.625% Due 07/01/2025 #
---------- ----------
$2,250,000 $2,219,073
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 28.
TERRITORIAL INSURED SERIES 6
GENERAL. Territorial Insured Series 6 (the "Territorial Trust")
consists entirely of obligations of issuers located in Territories of the United
States, such as Puerto Rico, Guam and the Northern Marianna Islands.
Specifically, the Territorial Trust consists of 7 issues of Bonds all issued by
entities located in the Commonwealth of Puerto Rico. One of the Bonds in the
Territorial Trust is a general obligation (13.3%) of the governmental entity
issuing it and is backed by the taxing power thereof. The remaining issues are
payable from the income of a specific project or authority and are not supported
by the issuer's power to levy taxes. These issues are divided by purpose of
issues (and percentage of principal amount to total Territorial Trust) as
follows: 26.7% Health Care Revenue Bonds, 26.7% Utility Revenue Bonds, 13.3%
Water & Sewer Bonds, 13.3% Education Revenue Bonds, 6.7% Housing Revenue Bonds.
No Bond has received a provisional rating. For a general description of certain
of the risks associated with the Bonds, see "Risk Factors" below.
RISK FACTORS SPECIFIC TO PUERTO RICO. The economy of Puerto Rico is
closely integrated with that of the mainland United States. During fiscal 1996
approximately 88% of Puerto Rico's exports were to the U.S. mainland, which was
also the source of approximately 62% of Puerto Rico's imports. The economy of
Puerto Rico is dominated by the manufacturing and service sectors. The
manufacturing sector has experienced a basic change over the years as a result
of increased emphasis on higher wage, high technology industries such as
pharmaceuticals, electronics, computers, microprocessors, professional and
scientific instruments, and certain high technology machinery and equipment. The
service sector, including finance, insurance and real estate, also plays a major
role in the economy. It ranks second only to manufacturing in contribution to
the gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in response
to the expansion of the manufacturing sector.
Puerto Rico's more than decade-long economic expansion continued
throughout the five-year period from fiscal 1992 through fiscal 1996. Almost
every sector of the economy participated and record levels of employment were
achieved. Factors behind this expansion included government-sponsored economic
development programs, periodic declines in the exchange value of the U.S.
dollar, increases in the level of federal transfers and the relatively low cost
of borrowing. Unemployment, although at relatively low historical levels,
remains above the average for the United States. Average employment increased
from 977,000 in fiscal 1992 to 1,092,300 in fiscal 1996. Average unemployment
decreased from 16.5% in fiscal 1992, to 13.8% in fiscal 1996.
Gross product in fiscal 1992 was $23.7 billion and gross product in
fiscal 1996 was $30.2 billion ($26.7 billion in 1992 prices). This represents an
increase in gross product of 27.7% from fiscal 1992 to 1996 (12.9% in 1992
prices). Since fiscal 1985, personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1996, aggregate personal
income was $29.4 billion ($27.8 billion in 1992 prices) and personal income per
capita was $7,882 ($7,459 in 1992 prices).
The gross product forecast for fiscal 1997, made in February 1997,
projects an increase of 2.8% over fiscal 1996. Further growth in the Puerto Rico
economy in fiscal 1997 depends on several factors, including the strength of the
U.S. economy, the relative stability in the price of oil imports, increases in
the number of visitors to the island, the level of exports, the exchange value
of the U.S. dollar, the level of federal transfers and the cost of borrowing.
During the first seven months of fiscal 1997, total employment (seasonally
adjusted) averaged 1,129,100, compared to 1,089,000 in the same period in fiscal
1996, an increase of 3.7%.
The Puerto Rican economy is affected by a number of Commonwealth and
federal investment incentive programs. Aid for Puerto Rico's economy has
traditionally depended heavily on federal programs, and current federal
budgetary policies suggest that an expansion of aid to Puerto Rico is unlikely.
An adverse effect on the Puerto Rican economy could result from other U.S.
policies, including further reduction in transfer payment programs such as food
stamps, curtailment of military spending and policies which could lead to a
stronger dollar. One of the factors assisting the development of the Puerto
Rican economy has been the tax incentives offered by the federal and Puerto Rico
governments. Recently enacted federal legislation amending Internal Revenue Code
Section 936, however, phases out the federal tax incentives during a ten-year
period.
On February 26, 1997, legislation was introduced in the U.S. House of
Representatives proposing a mechanism to settle permanently the political
relationship between Puerto Rico and the United States, either through full self
government (e.g., statehood or independence, including, as an alternative, free
association via a bilateral treaty) or continued commonwealth. Under the
legislation, failure to settle on full self government after completion of the
referendum process provided therein would result in retention of commonwealth
status. Any change in the current status of Puerto Rico could have a material
adverse impact on such matters as the basic characteristics of future Puerto
Rico debt obligations, the markets for these obligations, and the types, levels
and quality of revenue sources pledged for the payment of existing and future
debt obligations. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting Puerto Rico.
FEDERAL TAXATION. For a discussion of the Federal tax status of income
earned on Territorial Trust Units, see "Tax Status."
<TABLE>
<CAPTION>
TERRITORIAL INSURED SERIES 6
SCHEDULE OF INVESTMENTS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: MAY 22, 1997
Name of Issuer, Title, Interest Rate and Offering Price
Aggregate Maturity Date of either Bonds Deposited Redemption to Territorial
Principal or Bonds Contracted for(1)(5) Rating(2) Feature(3) Trust(4)
----------- ----------------------------- --------- ---------- ---------
<S> <C> <C> <C> <C>
$ 500,000 Puerto Rico Electric Power Authority, Power AAA 2007 @ 101.5 $483,685
Revenue Bonds, Series X, (MBIA Insured) 2009 @ 100 S.F.
5.375% Due 07/01/2027 #
500,000 University of Puerto Rico, University System AAA 2005 @ 101.5 474,715
Revenue Bonds, Series M (MBIA Insured) 5.250% 2007 @ 100 S.F.
Due 06/01/2025 #
250,000 Puerto Rico Municipal Finance Agency, 1997 AAA 2007 @ 101.5 247,350
Series A Bonds, (FSA Insured) 5.500% Due 2009 @ 100 S.F.
07/01/2021 #
500,000 Puerto Rico Aqueduct and Sewer Authority, AAA 2006 @ 101.5 465,795
Refunding Bonds, Series 1995, (AMBAC Insured) 2008 @ 100 S.F.
5.000% Due 07/01/2019 #
1,000,000(1) Puerto Rico Industrial, Tourist, Educational, AAA 2007 @ 101.5 978,630
Medical and Environmental Control Facilities 2009 @ 100 S.F.
Financing Authority, Hospital Revenue Bonds,
1997 Series A (MBIA Insured) 5.500% Due
07/01/2026 #
500,000 Commonwealth of Puerto Rico, Public AAA 2005 @ 101.5 484,245
Improvement Bonds of 1995 (MBIA Insured) 2007 @ 100 S.F.
5.375% Due 07/01/2022 #
500,000 Puerto Rico Electric Power Authority, Power AAA 2005 @ 100 491,540
Revenue Bonds, Series AA, (MBIA Insured)
5.500% Due 07/01/2025 #
---------- ----------
$3,750,000 $3,625,960
========== ==========
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to Schedules
of Investments" on page 28.
Notes to Schedules of Investments
As of the Opening of Business on the
Initial Date of Deposit: May 22, 1997
1. Certain Bonds are represented by "regular way" or "when issued"
contracts for the performance of which an irrevocable letter of credit, obtained
from a financial institution unaffiliated with the Sponsor, has been deposited
with the Trustee. The Sponsor has assigned to the Trustee all of its right,
title and interest in and to such Bonds. Contracts to acquire Bonds were entered
into during the period from May 20, 1997 to May 21, 1997. These Bonds have
expected settlement dates from May 22, 1997 to May 27, 1997 (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>
New Mexico Series 2 $ 2,318,679 $ 22,092 $ 131,370 $ 2,332,072
Pennsylvania Insured Series 1 $ 2,212,334 $ 6,739 $ 127,350 $ 2,210,522
Territorial Insured Series 6 $ 3,609,338 $ 16,622 $ 201,250 $ 3,610,885
</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 by0.373%, 0.387% and
0.417% for the New Mexico, Pennsylvania and Territorial Trusts, respectively.
"#" 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 1997. 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 $121,200. 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>
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
------------------------------- ------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 24.65 20.1% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39%
$ 0 - 41.20 21.0 5.70 6.33 6.96 7.59 8.23 8.86 9.49
24.65 - 59.75 41.20 - 99.60 33.7 6.79 7.54 8.30 9.05 9.80 10.56 11.31
59.75 - 124.65 99.60 - 151.75 36.9 7.13 7.92 8.72 9.51 10.30 11.09 11.89
124.65 - 271.05 151.75 - 271.05 41.4 7.68 8.53 9.39 10.24 11.09 11.95 12.80
Over 271.05 Over 271.05 44.7 8.14 9.04 9.95 10.85 11.75 12.66 13.56
Pennsylvania 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 - 24.65 $ 0 - 41.20 17.4% 5.45% 6.05% 6.66% 7.26% 7.87% 8.47% 9.08%
24.65 - 59.75 41.20 - 99.60 30.0 6.43 7.14 7.86 8.57 9.29 10.00 10.71
59.75 - 124.65 99.60 - 151.75 32.9 6.71 7.45 8.20 8.94 9.69 10.43 11.18
124.65 - 271.05 151.75 - 271.05 37.8 7.23 8.04 8.84 9.65 10.45 11.25 12.06
Over 271.05 Over 271.05 41.3 7.67 8.52 9.37 10.22 11.07 11.93 12.78
Territorial Tax Equivalent Table
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
Single Joint Tax 4-1/2% 5% 5-1/2% 6% 6-1/2% 7% 7-1/2%
Return Return Bracket* Equivalent Taxable Estimated Current Return
------------------------------- ------- -----------------------------------------------------------
$ 0 - 24.65 $ 0 - 41.20 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.65 - 59.75 41.20 - 99.60 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
59.75 - 124.65 96.60 - 151.75 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
124.65- 271.05 151.75- 271.05 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over 271.05 Over 271.05 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
INDEPENDENT AUDITORS' REPORT
TO THE SPONSOR, TRUSTEE AND THE UNITHOLDERS OF DELAWARE-VOYAGEUR
TAX-EXEMPT TRUST, SERIES 10:
We have audited the accompanying statements of net assets, including
the schedules of investments, of Delaware-Voyageur Tax-Exempt Trust, Series 10
(New Mexico Series 2, Pennsylvania Insured Series 1 and Territorial Insured
Series 6), as of May 22, 1997. 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 securities held and 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 Delaware-Voyageur
Tax-Exempt Trust, Series 10 (New Mexico Series 2, Pennsylvania Insured Series 1
and Territorial Insured Series 6), as of May 22, 1997, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 22, 1997
<TABLE>
<CAPTION>
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
STATEMENTS OF NET ASSETS
AS OF THE OPENING OF BUSINESS ON THE INITIAL
DATE OF DEPOSIT: MAY 22, 1997
New Pennsylvania Territorial
Mexico Insured Insured
Series 2 Series 1 Series 6
---------------------------------------------------
<S> <C> <C> <C>
Investments in securities $ 2,321,071 $ 2,219,073 $ 3,136,645
Contracts to purchase securities(1)(2) 19,700 -- 489,315
Accrued interest on underlying securities(1)(3) 35,044 44,141 58,219
Organizational and offering Costs(4) 6,807 7,456 12,087
------------- ------------- -------------
Total Assets $ 2,382,622 $ 2,270,670 $ 3,696,266
Less: distributions payable(3) 35,044 44,141 58,219
Less: accrued organizational and
offering costs(4) 6,807 7,456 12,087
------------- ------------- -------------
Net Assets $ 2,340,771 $ 2,219,073 $ 3,625,960
============= ============= =============
Net Assets Represented By:
Interest of Unitholders--
Units of fractional undivided interest
outstanding: (246,137, 233,340, 381,277)
Cost to investors(5) $ 2,461,370 $ 2,333,400 $ 3,812,770
Less: Gross underwriting commission(5) 120,599 114,327 186,810
------------- ------------ -------------
Net Assets(5) $ 2,340,771 $ 2,219,073 $ 3,625,960
============= ============ =============
</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 Muller Data Corporation on the bases set
forth under "Public Offering--Offering Price." The contracts to purchase
securities are collateralized by an irrevocable letter of credit which has
been deposited with the Trustee in and for the following amounts:
<TABLE>
<CAPTION>
Principal Offering
Amount of Price of Accrued Interest
Amount of Bonds Under Bonds Under to Expected
Letter of Credit Contracts Contracts Delivery Dates
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Mexico Series 2 $ 102,000 $ 60,000 $ 19,700 $ --
Territorial Insured Series 6 $ 850,000 $ 500,000 $ 489,315 $ 4,354
</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 May 28, 1997
(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.
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. Voyageur Fund Managers, Inc., which acts as
Sponsor, reserves the right to charge fees for providing portfolio supervision
services in amounts set forth under "Summary of Essential Financial Information"
per 100 Units on an annual basis. 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 services for this Fund, but at no time will the total
amount paid to the Sponsor for portfolio supervisory services rendered to all
unit investment trusts sponsored by Voyageur Fund Managers, Inc. in any calendar
year exceed the aggregate cost to the Sponsor of supplying such services in such
year. The foregoing fee 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 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."
EVALUATOR'S FEE. For its services, the Evaluator will receive an annual
fee as set forth under "Summary of Essential Financial Information." The
Evaluator's fees are payable in monthly installments. The Evaluator's 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.
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 over 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. Although no insurance
has been obtained on the Bonds in the uninsured Trusts, 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 an Insured 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 Insured Trusts. The
insurance does not, however, guarantee the market value of the Bonds or of the
Units.
TAX STATUS
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 were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Trusts, where applicable, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds when held by residents of the State in which issuers of such Bonds are
located, from State income taxes and certain State or local intangibles and
local income taxes. Neither the Sponsor nor Chapman and Cutler have made any
special review for the Fund of the proceedings relating to the issuance of the
Bonds or of the bases for such opinions. If the interest on a Bond should be
determined to be taxable, the Bond would generally have to be sold at a
substantial discount. In addition, investors could be required to pay income tax
on interest received prior to the date on which interest is determined to be
taxable. Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unitholder is includible in gross income for Federal income tax
purposes and may be includible in gross income for state tax purposes. (Such
gain does not include any amounts received in respect of accrued interest or
accrued original issue discount, if any). If a Bond is acquired with accrued
interest, that portion of the price paid for the accrued interest is added to
the tax basis of the Bond. When this accrued interest is received, it is treated
as a return of capital and reduces the tax basis of the Bond. If a Bond is
purchased for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond, and the
tax basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year. For purposes of the following opinions, it is
assumed that each asset of the Trust is debt, the interest on which is excluded
for Federal income tax purposes.
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 for
Federal income tax purposes, when received by a Trust and 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 each asset 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. If the Unitholder disposes of a Unit, he is deemed
thereby to have disposed of his entire pro rata interest in all assets
of the Trust involved including his pro rata portion of all the Bonds
represented by the Unit. Legislative proposals have been made that
would treat certain transactions designed to reduce or eliminate risk
of loss and opportunities for gain as constructive sales for purposes
of recognition of gain (but not loss). Unitholders should consult their
own tax advisors with regard to any such constructive sale
rules.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 before the date the Trust
acquired ownership of the Bonds (and the amount of this reduction may
exceed the amount of accrued interest paid to the seller), 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 (subject to various non-recognition provisions of the Code).
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 accrued 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.
It should be noted that certain legislative proposals have been made
which could affect the calculation of basis for Unitholders holding
securities that are substantially identical to the Bonds. Unitholders
should consult their own tax advisors with regard to the calculation of
basis. 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. If a Bond is acquired with accrued interest, that
portion of the price paid for the accrued interest is added to the tax basis of
the Bond. When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased for a
premium, the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax basis of
the Bond is reduced each tax year by the amount of the premium amortized in that
tax year. 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
Trust. Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. Legislative proposals have been
introduced that would extend the Superfund Tax. 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. Legislative
proposals have been made that would extend the financial institution rules to
all corporations. Investors with questions regarding these issues should consult
with their tax advisers.
In the case of certain of the Bonds in the Trust, 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.
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. For purposes of computing the
alternative minimum tax for individuals and corporations and the Superfund Tax
for corporations, interest on certain private activity bonds (which includes
most industrial and housing revenue bonds) issued on or after August 8, 1996 is
included as an item of tax preference.
In general, Section 86 of the Code, 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 and affiliates
of the Sponsor 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 Muller Data Corporation, a firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities. Except on the Initial Date of Deposit, during the initial offering
period, the Evaluator will appraise or cause to be appraised daily the value of
the underlying Bonds as of 4:00 P.M. Eastern time on days the New York Stock
Exchange is open and will adjust the Public Offering Price of the Units
commensurate with such appraisal. Such Public Offering Price will be effective
for all orders received at or prior to 4:00 P.M. Eastern time on each such day.
Orders received by the Trustee, Sponsor, Distributor or any Underwriter or
dealer for purchases, sales or redemptions after that time, or on a day when the
New York Stock Exchange is closed, will be held until the next determination of
price. For secondary market sales the Public Offering Price per Unit will be
equal to the aggregate bid price of the Bonds in a Trust plus the secondary
market sales charge. For secondary market purposes such appraisal and adjustment
will be made by the Evaluator as of 4:00 P.M. Eastern time on days on which the
New York Stock Exchange is open for each day on which any Unit of a Trust is
tendered for redemption, and it shall determine the aggregate value of such
Trust as of 4:00 P.M. Eastern time on such other days as may be necessary.
The aggregate price of the Bonds in each Trust has been and will be
determined on the basis of bid prices or offering prices, as appropriate, (i) on
the basis of current market prices for the Bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held by the Trust;
(ii) if such prices are not available for any particular Bonds, on the basis of
current market prices for comparable bonds; (iii) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (iv) by any combination of the above.
The initial or primary Public Offering Price of the Units and the
Sponsor's initial repurchase price per Unit are based on the offering price per
Unit of the underlying Bonds plus the applicable sales charge plus interest
accrued but unpaid from the First Settlement Date to the date of settlement. The
secondary market Public Offering Price and the Redemption Price per Unit are
based on the bid price per Unit of the Bonds in each Trust plus the applicable
sales charge plus accrued interest. The offering price of Bonds in each Trust
may be expected to range from .35%-1% more than the bid price of such Bonds. On
the Initial Date of Deposit, the offering side evaluation of the Bonds in each
Trust were higher than the bid side evaluation of such Bonds by the amount
indicated under footnote (5) in "The Trusts--Notes to Schedules of Investments."
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. However, delivery of
certificates, if any are requested in writing, representing Units so ordered
will be made as soon as possible following such order or shortly thereafter. A
person will become the owner of Units on the date of settlement provided payment
has been received. Cash, if any, made available to the Sponsor prior to the date
of settlement for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the limitations of
the Securities Exchange Act of 1934.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering Price, plus accrued interest computed as
described above. Upon the completion of the initial offering, Units repurchased
in the secondary market, if any, may be offered by this prospectus at the
secondary Public Offering Price in the manner described.
The Sponsor intends to qualify the Units for sale in the state for
which such Trust is named, except that in the case of the National Trusts, the
Sponsor intends to qualify Units for sale in a number of states and Puerto Rico.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
equal to $.33 per Unit 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 Muller
Data Corporation. 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 2.9% 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 one twelfth 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 or
its affiliates, Delaware Management Company, Inc. or Delaware International
Advisors, Ltd., 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 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 Delaware Distributors, L.P. at 1818 Market Street,
Philadelphia, Pennsylvania 19103.
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 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, expressed 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, at its unit investment trust office,
The Chase Manhattan Bank, Bowling Green Station, P.O. Box 5185, New York, NY
10274-5185 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. The Trustee's
toll-free number for customer assistance is 1-800-428-8890, available 9:00 a.m.
to 5:00 p.m. EST any business day.
Redemption shall be made by the Trustee on the third business day
following the day on which a tender for redemption is received (the "Redemption
Date"). Such redemption shall be made by payment of cash, equivalent to the
Redemption Price for such Trust, determined as set forth below as of the
evaluation time stated under "Summary of Essential Financial Information," next
following such tender, multiplied by the number of Units being redeemed. Any
Units redeemed shall be cancelled and any undivided fractional interest in the
Fund extinguished. The price received upon redemption might be more or less than
the amount paid by the Unitholder depending on the value of the Bonds in the
Trust involved at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee
will be required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any amount
so withheld is transmitted to the Internal Revenue Service and may be recovered
by the Unitholder only when filing a return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from the selling
broker. However, at any time a Unitholder elects to tender Units for redemption,
such Unitholder should provide a tax identification number to the Trustee in
order to avoid this possible "back-up withholding" in the event the Trustee has
not been previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the
Interest Account or, if the balance therein is insufficient, from the Principal
Account. All other amounts will be withdrawn from the Principal Account. The
Trustee is empowered to sell underlying Bonds in order to make funds available
for redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the Bonds in
each Trust, while the initial and primary Public Offering Price of Units will be
determined on the basis of the offering price of the Bonds, as of 4:00 P.M.
Eastern time on days of trading on the New York Stock Exchange on the date any
such determination is made. On the Initial Date of Deposit, the Public Offering
Price per Unit (which is based on the offering prices of the Bonds and includes
the sales charge) exceeded the value at which Units could have been redeemed
(based upon the current bid prices of the Bonds in such Trust) by the amount
shown under "Summary of Essential Financial Information." While the Trustee has
the power to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which determines
the price per Unit on a daily basis. The Redemption Price per Unit is the pro
rata share of each Unit in a Trust determined on the basis of (i) the cash on
hand in such Trust or monies in the process of being collected, (ii) the value
of the Bonds in such Trust based on the bid prices of the Bonds (including "when
issued" contracts, if any) and (iii) interest accrued thereon, less (a) amounts
representing taxes or other governmental charges payable out of such Trust and
(b) the accrued expenses of such Trust. The Evaluator may determine the value of
the Bonds in a Trust by employing any of the methods set forth in "Public
Offering-- Offering Price."
The price at which Units may be redeemed could be less than the price
paid by the Unitholder and may be less than the par value of the Bonds
represented by the Units so redeemed. As stated above, the Trustee may sell
Bonds to cover redemptions. When Bonds are sold, the size of the affected Trust
will be, and the diversity may be, reduced. Such sales may be required at a time
when Bonds would not otherwise be sold and might result in lower prices than
might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Bonds in a
Trust is not reasonably practicable, or for such other periods as the Securities
and Exchange Commission may by order permit. The Trustee is not liable to any
person in any way for any loss or damage which may result from any such
suspension or postponement.
TRUST ADMINISTRATION
DISTRIBUTOR PURCHASES OF UNITS. The Trustee shall notify the
Distributor of any tender of Units for redemption. If the Distributor's bid in
the secondary market at that time equals or exceeds the Redemption Price per
Unit, it may purchase such Units by notifying the Trustee before the close of
business on the date of such notification and by making payment therefor to the
Unitholder not later than the day on which the Units would otherwise have been
redeemed by the Trustee. Units held by the Sponsor or Distributor may be
tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Distributor will be in
accord with the Public Offering Price described in the then currently effective
prospectus describing such Units. Any profit resulting from the resale of such
Units will belong to the Distributor which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to its acquisition of such
Units.
PORTFOLIO ADMINISTRATION. The Trustee is empowered to sell, for the
purpose of redeeming Units tendered by any Unitholder, and for the payment of
expenses for which funds may not be available, such of the Bonds designated by
the Sponsor as the Trustee in its sole discretion may deem necessary. The
Sponsor, in designating such Bonds, will consider a variety of factors,
including (i) interest rates, (ii) market value and (iii) marketability. The
Sponsor may direct the Trustee to dispose of Bonds in the event there is a
decline in price or the occurrence of other market or credit factors, including
advance refunding (i.e., the issuance of refunding securities and the deposit of
the proceeds thereof in trust or escrow to retire the refunded securities on
their respective redemption dates), so that in the opinion of the Sponsor the
retention of such Securities would be detrimental to the interest of the
Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer
made by an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan, except
that the Sponsor may instruct the Trustee to accept or reject such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
(i) the issuer is in default with respect to such Bond or (ii) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Bond in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder, identifying the Bonds eliminated and the
Bonds substituted therefor. Except as stated herein and under "The
Fund--Replacement Bonds" regarding the substitution of Replacement Bonds for
Failed Bonds, the acquisition by the Trust of any obligations other than the
Bonds initially deposited is not permitted.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor within 30 days, the Trustee
is required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bond within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
AMENDMENT OR TERMINATION. The Sponsor and the Trustee have the power to
amend the Trust Agreement without the consent of any of the Unitholders when
such an amendment is (i) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with any
other provision contained therein or (ii) to make such other provisions as shall
not adversely affect the interest of the Unitholders (as determined in good
faith by the Sponsor and the Trustee), provided that the Trust Agreement may not
be amended to increase the number of Units issuable thereunder or to permit the
deposit or acquisition of obligations either in addition to or in substitution
for any of the Bonds initially deposited in a Trust, except for the substitution
of certain refunding obligations for such Bonds, for Replacement Bonds and for
subsequent deposits (see "The Fund"). In the event of any amendment requiring
the consent of Unitholders, 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. After
the close of business on April 30, 1997, Voyageur Fund Managers, Inc. and
Voyageur Fund Distributors, Inc. became indirect, wholly owned subsidiaries of
Lincoln National Corporation ("LNC") as a result of LNC's acquisition of
Dougherty Financial Group, Inc., the parent company of the Sponsor and the
Distributor. LNC, headquartered in Fort Wayne, Indiana, owns and operates
insurance and investment management businesses, including Delaware Management
Holdings, Inc. ("DMH"). Affiliates of DMH serve as adviser, distributor and
transfer agent for the Delaware Group of Mutual Funds, including the
Delaware-Voyageur Funds.
As of May 1, 1997, affiliates of DMH, including Voyageur Fund Managers,
Inc., had assets under management of over $34 billion in mutual fund and
institutional accounts, and served as investment adviser to more than 60 mutual
fund portfolios. The principal business address for Voyageur Fund Managers, Inc.
is One Commerce Square, Philadelphia, Pennsylvania 19103; the principal business
address for Voyageur Fund Distributors, Inc. is 1818 Market Street,
Philadelphia, Pennsylvania 19103. (This paragraph relates only to the Sponsor
and not to the Fund or to any Series thereof. 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 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. Muller Data Corporation 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.
TRUSTEE. The Trustee is The Chase Manhattan Bank, with its principal
executive office located at 270 Park Avenue, New York, New York 10017 and its
unit investment trust office at 4 New York Plaza, 6th Floor, New York, New York
10004-2413. The Trustee is subject to supervision by the Superintendent of Banks
of the State of New York, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System.
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. 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>
New Pennsylvania Territorial
Mexico Insured Insured
Name Address Series 2 Series 1 Series 6
- -------------------- --------------------------- -------- -------- --------
<S> <C> <C> <C> <C>
Voyageur Fund 1818 Market Street 226,137 223,340 346,277
Distributors, Inc. Philadelphia, PA 19103
Edward D. Jones & Co. 12555 Manchester Road 10,000 10,000
St. Louis MO 63131
Rauscher Pierce Refsnes, Inc. 2711 North Haskell Avenue 10,000
Suite 2700
Dallas, TX 75204
Southwest Securities 1201 Elm Street, Suite 4300 10,000 25,000
Dallas, TX 75270 ------- ------- -------
Total Units 246,137 233,340 381,277
======= ======= =======
</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. Carter, Ledyard & Milburn will act as counsel for the Trustee and as
special New York tax counsel for the Trusts.
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.
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.
- -------------------
* As published by the ratings companies.
** 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.
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.
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.................................... 4
INVESTMENT OBJECTIVES AND
PORTFOLIO SELECTION.................... 7
THE TRUSTS.................................. 8
EQUIVALENT TAXABLE ESTIMATED
CURRENT RETURNS........................ 29
INDEPENDENT AUDITORS' REPORT................ 31
STATEMENTS OF NET ASSETS.................... 32
RISK FACTORS................................ 33
ESTIMATED CURRENT RETURN AND
ESTIMATED LONG-TERM RETURN............. 39
TRUST OPERATING EXPENSES.................... 40
INSURANCE ON THE BONDS IN THE
INSURED TRUSTS......................... 42
TAX STATUS.................................. 43
PUBLIC OFFERING............................. 47
RIGHTS OF UNITHOLDERS....................... 52
TRUST ADMINISTRATION........................ 57
UNDERWRITING................................ 61
OTHER MATTERS............................... 62
DESCRIPTION OF BOND RATINGS................. 62
- ------------------------------------------------
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.
UIT-FI10
P R O S P E C T U S
May 22, 1997
DELAWARE-VOYAGEUR
TAX-EXEMPT TRUST,
SERIES 10
NEW MEXICO SERIES 2
PENNSYLVANIA INSURED SERIES 1
TERRITORIAL INSURED SERIES 6
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 - Delaware-Voyageur Tax-Exempt
Trust Series 10 and certain Subsequent Series.
1.2 Form of Trust Indenture and Agreement for Delaware-Voyageur Tax-Exempt
Trust, Series 10.
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.
3.1 Opinion of counsel as to New York income tax status of securities being
registered.
3.2 Opinion of counsel as to advancement of funds by Trustee.
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 Muller Data Corporation.
(b) Consent of KPMG Peat Marwick LLP.
SIGNATURES
The Registrant, Delaware-Voyageur Tax-Exempt Trust, Series 10, 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, Delaware-Voyageur Tax-Exempt Trust, Series 10, 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 Philadelphia and State of
Pennsylvania on the 22nd day of May, 1997.
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST,
SERIES 10
(Registrant)
By: Voyageur Fund Managers, Inc.
(Depositor)
By: George M. Chamberlain, Jr.
------------------------------------
Senior Vice President and Secretary
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 May 22, 1997.
SIGNATURE TITLE
WAYNE A. STORK
- --------------------------
Wayne A. Stork President, Chief Executive Officer
and Chief Investment Officer
DAVID K. DOWNES
- --------------------------
David K. Downes Executive Vice President, Chief Operating
Officer, Chief Financial Officer,
Treasurer and Director
GEORGE M. CHAMBERLAIN, JR.
- --------------------------
George M. Chamberlain, Jr. Senior Vice President, Secretary and
Director
RICHARD J. FLANERY
- --------------------------
Richard J. Flanery Director
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST
SERIES 10 AND CERTAIN SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
DATED: MAY 22, 1997
BETWEEN
VOYAGEUR FUND MANAGERS, INC.
Depositor,
MULLER DATA CORPORATION,
Evaluator
AND
THE CHASE MANHATTAN BANK,
Trustee
INDEX
ARTICLE I DEFINITIONS ............................................. 1
Agreement .............................................................. 1
Bonds .................................................................. 2
Business Day ........................................................... 2
Certificate ............................................................ 2
Contract Obligations ................................................... 5
Depositor .............................................................. 5
Evaluation Time ........................................................ 5
Evaluator .............................................................. 5
Fund ................................................................... 5
Initial Date of Deposit ................................................ 5
Insurance .............................................................. 5
Insurer ................................................................ 6
Interest Account ....................................................... 6
Interest Distribution .................................................. 6
Interest Distribution Date ............................................. 6
Principal Account ...................................................... 6
Principal Distribution Date ............................................ 6
Program Agent .......................................................... 6
Record Date ............................................................ 6
Redemption Date ........................................................ 7
Redemption Price ....................................................... 7
Reserve Account ........................................................ 7
Supplement Trust Agreement ............................................. 7
Trust Agreement ........................................................ 7
Trust Fund or Trust .................................................... 7
Trust Fund Evaluation .................................................. 7
Trustee ................................................................ 7
Unit ................................................................... 7
Unitholder ............................................................. 8
Unit Value ............................................................. 8
ARTICLE II DEPOSIT OF BONDS; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES;
PORTFOLIO INSURANCE ..................................... 8
Section 2.01. Deposit of Bonds ........................................ 8
Section 2.02. Acceptance of Trust ..................................... 10
Section 2.03. Issuance of Units ....................................... 10
Section 2.04. Form of Certificates .................................... 11
Section 2.05. Portfolio Insurance for the Insured Trusts .............. 11
ARTICLE III ADMINISTRATION OF FUND .................................. 13
Section 3.01. Certain Moneys to be Credited to Interest Account ....... 13
Section 3.02. Certain Moneys to be Credited to Principal Account ...... 13
Section 3.03. Establishment of Reserve Account ........................ 14
Section 3.04. Certain Deductions and Distributions .................... 14
Section 3.05. Statements and Reports .................................. 17
Section 3.06. Extraordinary Sale of Bonds ............................. 18
Section 3.07. Refunding Obligations ................................... 20
Section 3.08. Counsel ................................................. 20
Section 3.09. Action by Trustee Regarding Bonds ....................... 20
Section 3.10. Trustee Not Required to Adjust Accounts ................. 21
Section 3.11. Notice of Change in Principal Account ................... 21
Section 3.12. Limited Replacement of Special Bonds .................... 21
Section 3.13. Compensation of Depositor for Supervisory Services ...... 22
Section 3.14. Bookkeeping and Administrative Expenses ................. 22
ARTICLE IV EVALUATION OF BONDS ..................................... 24
Section 4.01. Evaluation of Bonds ..................................... 24
Section 4.02. Certain Information to be made Available ................ 25
Section 4.03. Compensation of the Evaluator ........................... 25
Section 4.04. Liability of the Evaluator .............................. 26
Section 4.05. Resignation, Removal and Other Matters Relating to
the Evaluator ........................................... 26
ARTICLE V TRUST FUND EVALUATION ................................... 27
Section 5.01. Trust Fund Evaluation ................................... 27
Section 5.02. Redemption of Units ..................................... 28
ARTICLE VI ISSUANCE, TRANSFER, INTERCHANGE ......................... 31
Section 6.01. Issuance of Certificates ................................ 31
Section 6.02. Transfer of Units ....................................... 31
Section 6.03. Replacement of Certificates ............................. 32
Section 6.04. Form of Certificate ..................................... 32
ARTICLE VII DEPOSITOR ............................................... 32
Section 7.01. Certain Matters Regarding Succession .................... 32
Section 7.02. Liability of Depositor and Indemnification .............. 33
ARTICLE VIII TRUSTEE ................................................. 34
Section 8.01. General Matters Relating to the Trustee ................. 34
Section 8.02. Books, Records and Reports .............................. 36
Section 8.03. Reports to Securities and Exchange Commission and Others 36
Section 8.04. Agreement and List of Bonds on File ..................... 36
Section 8.05. Compensation of Trustee ................................. 36
Section 8.06. Resignation, Discharge or Removal of the Trustee;
Successors .............................................. 38
Section 8.07. Qualification of Trustee ................................ 39
Section 8.08. Collateral .............................................. 39
ARTICLE IX TERMINATION ............................................. 39
Section 9.01. Procedure Upon Termination .............................. 39
Section 9.02. Notice to Unitholders ................................... 41
Section 9.03. Moneys to be Held in Trust Without Interest ............. 41
Section 9.04. Dissolution of Depositor Not to Terminate ............... 41
ARTICLE X MISCELLANEOUS PROVISIONS ................................ 41
Section 10.01. Amendment and Waiver .................................... 41
Section 10.02. Initial Costs ........................................... 42
Section 10.03. Registration (Initial and Current) of Units and Fund .... 43
Section 10.04. Certain Matters Relating to Unitholders ................. 43
Section 10.05. New York Law to Govern .................................. 44
Section 10.06. Notices ................................................. 44
Section 10.07. Severability ............................................ 44
Section 10.08. Separate and Distinct Series ............................ 44
EXECUTION .............................................................. 42
ACKNOWLEDGMENTS ........................................................ 43
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST
SERIES 10 AND CERTAIN SUBSEQUENT SERIES
STANDARD TERMS AND CONDITIONS OF TRUST
EFFECTIVE May 22, 1997
These Standard Terms and Conditions of Trust, Effective May 22, 1997,
are executed between Voyageur Fund Managers, Inc., as Depositor, Muller Data
Corporation, as Evaluator and The Chase Manhattan Bank, as Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust shall be applicable to
Series 10 and each Series subsequent to the date hereof of Delaware-Voyageur
Tax-Exempt Trust for which The Chase Manhattan Bank acts as Trustee as provided
in this paragraph. For each such series of Delaware Voyageur Tax-Exempt Trust to
which these Standard Terms and Conditions of Trust are to be applicable, the
Depositor, the Evaluator named in the Trust Agreement and the Trustee shall
execute a Trust Agreement incorporating by reference these Standard Terms and
Conditions of Trust and designating any exclusion from or exception to such
incorporation by reference for the purposes of that series or variation of the
terms hereof for the purposes of that series and specifying for that series (i)
the name of each Trust Fund, and (ii) the Bonds deposited in trust for each
Trust Fund.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
AGREEMENT
These Standard Terms and Conditions of Trust and all amendments and
supplements hereto and thereto.
BONDS
The interest-bearing tax-exempt obligations, including Contract
Obligations listed in all Schedules to the Trust Agreement or deposited in the
Trust Fund pursuant to Section 2.01(b) and any obligations received in exchange
or substitution for such obligations pursuant to Sections 3.07 or 3.12 hereof,
as may from time to time continue to be held as a part of any Trust Fund.
BUSINESS DAY
Any day other than a Saturday, Sunday or a day on which the New York
Stock Exchange is closed.
CERTIFICATE
Any one of the Certificates manually executed by the Trustee in
substantially the following form with the blanks appropriately filled in:
Face of Certificate
NUMBER DELAWARE-VOYAGEUR TAX-EXEMPT TRUST UNITS
CERTIFICATE OF BENEFICIAL OWNERSHIP
THIS CERTIFIES THAT _____________________________ is the registered
owner of _______ Unit(s) of fractional undivided interest in Delaware-Voyageur
Tax-Exempt Trust of the above Series (herein referred to as the "TRUST") created
under the laws of the State of New York pursuant to the Agreement and the
related Trust Agreement, a copy of which is available at the office of the
Trustee. This Certificate is issued under and is subject to the terms,
provisions and conditions of the aforesaid Agreement and the related Trust
Agreement to which the holder of this Certificate by virtue of the acceptance
hereof assents and is bound. This Certificate is transferable and
interchangeable by the registered owner in person or by his duly authorized
attorney at the office of the Trustee upon surrender of this Certificate
properly endorsed or accompanied by a written instrument of transfer and any
other documents that the Trustee may require for transfer, in form satisfactory
to the Trustee, and payment of the fees and expenses provided in the Agreement.
WITNESS the facsimile signature of the Depositor and the manual
signature of an authorized signatory of the Trustee.
Dated:
VOYAGEUR FUND MANAGERS, INC., THE CHASE MANHATTAN BANK,
Depositor, Trustee,
One Commerce Square 4 New York Plaza
Philadelphia, Pennsylvania 19103 New York, New York 10004-2413
By __________________________ By __________________________
Authorized Signature Authorized Signature
REVERSE OF CERTIFICATE
FORM OF ASSIGNMENT
FOR VALUE RECEIVED _______________________________________ hereby
sells, assigns and transfers unto
__________________________
__________________________
Please Insert Social Security or Other
Identifying Number of Assignee
______________________________________
______________________________________
the within Certificate and does hereby irrevocably constitute and appoint
___________________________________________________, attorney, to transfer the
within Certificate on the books of the Trustee, with full power of substitution
in the premises.
Dated: __________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate in every particular, without alteration
or enlargement or any change whatever, and must be guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee.
Signature Guaranteed
By ___________________________________
CONTRACT OBLIGATIONS
The Bonds listed in the Schedules of the Trust Agreement which are to
be acquired by any Trust Fund pursuant to contract, contracts for the purchase
of such bonds which have been assigned to the Trustee along with the amount
required for their purchase which have been delivered to the Trustee or Bonds
which the Depositor has contracted to purchase for any Trust Fund pursuant to
Section 3.12 hereof.
DEPOSITOR
Voyageur Fund Managers, Inc. or its successors or any successor
Depositor appointed as herein provided.
EVALUATION TIME
That time stated in the Prospectus for each respective Trust Fund
appearing in the "Summary of Essential Financial Information."
EVALUATOR
Muller Data Corporation or its successors or any successor Evaluator
appointed as herein provided.
FUND
All Trust Funds outstanding under this Agreement.
INITIAL DATE OF DEPOSIT
The meaning assigned to it in the Prospectus for each respective Trust
Fund appearing in the "Summary of Essential Information."
INSURANCE
The contract or policy of insurance obtained by certain Trust Funds
guaranteeing the payment when due of the principal of and interest on the Bonds
held pursuant and subject to this Agreement, including those Bonds held pursuant
and subject to this Agreement which are also insured by individual policies of
insurance which have been obtained by the issuers of such Bonds, together with
the proceeds, if any, thereof payable to or received by the Trustee for the
benefit of such Trust Funds and the Unitholders thereof except that Insurance
shall not include those Bonds held pursuant and subject to this Agreement which
at the time of their deposit are insured by individual policies of insurance
which have been obtained by the issuers of such Bonds or others (the
"PRE-INSURED BONDS").
INSURER
Any insurance company, its successors and assigns, which is the issuer
of the contract or policy of insurance obtained by a Trust Fund protecting such
Trust Fund and the Unitholders thereof against nonpayment when due of the
principal of and interest on any Bond (except for Pre-Insured Bonds) held by the
Trustee as part of the Fund.
INTEREST ACCOUNT
The account created pursuant to Section 3.01.
INTEREST DISTRIBUTION
The meaning assigned to it in Section 3.04.
INTEREST DISTRIBUTION DATE
The meaning assigned to it in the Prospectus for each respective Trust
Fund under the caption "Distribution Dates" appearing in the "Summary of
Essential Financial Information."
PERMANENT INSURANCE
The meaning assigned to it in Section 5.02.
PRINCIPAL ACCOUNT
The account created pursuant to Section 3.02.
PRINCIPAL DISTRIBUTION DATE
The meaning assigned to it in the Prospectus for each respective Trust
Fund under the caption "Distribution Dates" appearing in the "Summary of
Essential Financial Information."
PROGRAM AGENT
Program Agent shall mean The Chase Manhattan Bank or its successors,
unless a different Program Agent shall be designated by the Trust Agreement for
a particular Trust Fund.
RECORD DATE
The meaning assigned to it in the Prospectus for each respective Trust
Fund under the caption "Record Dates" appearing in the "Summary of Essential
Financial Information."
REDEMPTION DATE
The meaning assigned to it in Section 5.02.
REDEMPTION PRICE
The meaning assigned to it in Section 5.02.
RESERVE ACCOUNT
The account created pursuant to Section 3.03.
SUPPLEMENT TRUST AGREEMENT
Shall mean an amendment or supplement to the Trust Agreement executed
pursuant to Section 2.01(b) for the purpose of depositing additional Bonds in
the Trust Fund and issuing additional Units.
TRUST AGREEMENT
The Trust Agreement for the particular series of Delaware-Voyageur
Tax-Exempt Trust into which these Standard Terms and Conditions of Trust are
incorporated.
TRUST FUND OR TRUST
Any one of the separate trusts created by this Agreement and a Trust
Agreement which shall consist of the Bonds and all undistributed interest or
other amounts received or accrued thereon and any undistributed cash held in the
Principal and Interest Accounts or otherwise realized from the sale,
liquidation, redemption or maturity thereof, exclusive of any amounts which may
be on deposit in the Reserve Account.
TRUST FUND EVALUATION
The meaning assigned to it in Section 5.01.
TRUSTEE
The Chase Manhattan Bank or its successors or any successor Trustee
appointed as herein provided.
UNIT
The fractional undivided interest in and ownership of an individual
Trust Fund equal initially to the fraction specified in the Prospectus for each
respective Trust Fund under the caption "Fractional Undivided Interest in the
Trust per Unit" appearing in the "Summary of Essential Financial Information,"
the denominator of which fraction shall be (1) increased by the number of any
additional Units issued pursuant to Section 2.03 hereof and (2) decreased by the
number of any such Units redeemed as provided in Section 5.02. Whenever
reference is made herein to the "INTEREST" of a Unitholder in the Trust Fund or
in the Interest or Principal Accounts, it shall mean such fractional undivided
interest represented by the number of Units, whether or not evidenced by a
Certificate or Certificates, held of record by such Unitholder in such Trust
Fund.
UNITHOLDER
The holder of any Unit as recorded on the books of the Trustee, his
legal representatives and heirs and the successors of any corporation,
partnership or other legal entity which is a holder of any Unit.
UNIT VALUE
The value of the fractional undivided interest in and ownership of any
individual Trust Fund represented by each Unit as determined by a Trust Fund
Evaluation.
Words importing a singular number shall include the plural number in
each case and vice versa, except as the context herein may clearly indicate
otherwise and words importing persons shall include corporations, partnerships
and associations, as well as natural persons. The words "HEREIN", "HEREBY",
"HEREWITH", "HERETOFORE", and other singular words or phrases or references and
associations shall refer to the Agreement in its entirety.
ARTICLE II
DEPOSIT OF BONDS; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES; PORTFOLIO INSURANCE
SECTION 2.01. DEPOSIT OF BONDS. (a) The Depositor, concurrently with
the execution and delivery hereof, hereby grants and conveys all of its right,
title and interest in and to and hereby conveys to and deposits with the Trustee
in an irrevocable Trust the Bonds (together with accrued and unpaid interest
thereon) and confirmations of contracts to purchase Bonds, including Contract
Obligations, listed in the Schedules to the Trust Agreement duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form, to be held, managed and applied by the Trustee as herein provided
for the benefit of each Unitholder to the extent of such Unitholder's interest
in the Trust Fund. The Depositor hereby also delivers to the Trustee a certified
check or checks, cash or cash equivalents or an irrevocable letter or letters of
credit issued by a commercial bank or banks in an amount necessary to consummate
the purchase of any Bonds or Contract Obligations. In the event any Bonds have
not been delivered to the Trustee on or before the close of business of the
Trustee on the day before the date of expiration of any letter or letters of
credit, the Trustee is hereby directed to draw on such letter or letters of
credit unless the Depositor has either extended or replaced such letter or
letters on or before such close of business.
(b) From time to time following the Initial Date of Deposit for a
Trust, the Depositor is hereby authorized, in its discretion, to assign, convey
to and deposit with the Trustee additional Bonds for such Trust, in bearer form,
duly endorsed in blank or accompanied by all necessary instruments of assignment
and transfer in proper form (or Contract Obligations relating to such Bonds), to
be held, managed and applied by the Trustee as herein provided. Such deposit of
additional Bonds shall be made, in each case, pursuant to an executed
Supplemental Trust Agreement. The Depositor, in each case, shall ensure that
each deposit of additional Bonds pursuant to this Section shall be, as nearly as
is practicable, in the identical ratio as the Percentage Ratio for such Bonds as
is specified in the Prospectus for the Trust and the Depositor shall ensure that
such Bonds are identical to those deposited on the Initial Date of Deposit. The
Depositor shall obtain an opinion of counsel satisfactory to the Depositor as to
the validity of each deposit of additional Bonds. Any brokerage fees related to
the purchase of Bonds deposited in the Trust Fund after the Initial Date of
Deposit shall be an expense of such Trust Fund. The Depositor shall deliver the
additional Bonds which were not delivered concurrently with the deposit of
additional Bonds and which were represented by Contract Obligations within 10
calendar days after such deposit of additional Bonds (the "ADDITIONAL BONDS
DELIVERY PERIOD"). If a contract to buy such Bonds between the Depositor and
seller is terminated by the seller thereof for any reason beyond the control of
the Depositor or if for any other reason such Bonds are not delivered to the
Trust Fund by the end of the Additional Bonds Delivery Period for such deposit,
the Trustee shall immediately draw on the Letter of Credit, if any, in its
entirety, apply the monies in accordance with Section 2.01(d), and the Depositor
shall forthwith take the remedial action specified in Section 3.12. If the
Depositor does not take the action specified in Section 3.12 within 10 calendar
days of the end of the Additional Bonds Delivery Period, the Trustee shall
forthwith take the action specified in Section 3.12. Instructions to purchase
additional Bonds shall be in writing and shall specify the name, CUSIP number,
if any, aggregate amount of the Bond to be purchased and price. The Trustee
shall have no responsibility or liability for any loss or depreciation resulting
from any purchase made pursuant to the Depositor's instructions and in the
absence thereof shall have no duty to purchase any Bonds. The Trustee shall have
no responsibility for maintaining the composition of the Trust portfolio.
(c) In connection with the deposits described in Section 2.01 (a) and
(b), the Depositor has, in the case of Section 2.01(a) deposits, and, prior to
the Trustee accepting a Section 2.01(b) deposit will, deposit a certified check,
cash, cash equivalents and/or Letter(s) of Credit in an amount sufficient to
purchase the Contract Obligations (the "PURCHASE AMOUNT") relating to Bonds
which are not actually delivered to the Trustee at the time of such deposit, the
terms of which unconditionally allow the Trustee to draw on the full amount of
the available Letter of Credit. The Trustee may deposit a certified check or
checks, cash or cash equivalents, or cash drawn on the irrevocable letter or
letters of credit deposited by the Depositor, to purchase Bonds or Contract
Obligations in a non-interest bearing account for the Trust Fund.
(d) In the event that the purchase of Bonds or Contract Obligations
pursuant to any contract shall not be consummated in accordance with said
contract, and the Depositor does not, on or before the third Business Day prior
to the next following Distribution Date, direct the Trustee to utilize monies
deposited for the purchase of Replacement Bonds or Replacement Contract
Obligations, the Trustee shall credit to the Principal Account referred to in
Section 3.02 the monies, or, if applicable, the monies drawn on an irrevocable
letter of credit, deposited by the Depositor for the purpose of such purchase.
Such funds shall be distributed pursuant to Section 3.04 to Unitholders of
record as of the Record Date next following the failure of consummation of such
purchase. The Depositor shall cause to be refunded to each Unitholder his pro
rata portion of the sales charge levied on the sale of Units to such Unitholder
attributable to such Bond or Contract Obligation. The Depositor shall also pay
to the Trustee, for distribution to the Unitholders, interest on such Bond or
Contract Obligation, computed at the coupon rate, to the date such Bond or
Contract Obligation is removed from the Trust Fund.
(e) The Trustee is hereby irrevocably authorized to effect registration
or transfer of the Bonds in fully registered form to the name of the Trustee or
to the name of its nominee.
(f) Any contrary authorization in subparagraph (b) notwithstanding,
deposits of additional Bonds made after the 90-day period immediately following
the Initial Date of Deposit (except for deposits made to replace failed Contract
Obligations is such deposits occur within 20 days from the date of a failure
occurring within such initial 90-day period) shall maintain exactly the
Percentage Ratio existing immediately prior to such deposit.
(g) In connection with and at the time of any deposit of additional
Bonds pursuant to Section 2.01(b), the Depositor shall exactly replicate Cash
(as defined below) received or receivable by the Trust Fund as of the date of
such deposit. For purposes of this paragraph, "Cash" means, as to the Principal
Account, cash or other property (other than Bonds) on hand in the Principal
Account or receivable and to be credited to the Principal Account as of the date
of the deposit (other than amounts to be distributed solely to persons other
than holders of Units created by the deposit) and, as to the Income Account,
cash or other property (other than Bonds) received by the Trust Fund as of the
date of the deposit or receivable by the Trust Fund in respect of matured
interest payments not received as of the date of the deposit, reduced by the
amount of any cash or other property received or receivable on any Bond
allocable (in accordance with the Trustee's calculation of the monthly
distributions from the Income Account pursuant to Section 3.04) to a
distribution made or to be made in respect of a Record Date occurring prior to
the deposit. Such replication will be made on the basis of a fraction, the
numerator of which is the number of Units created by the deposit and the
denominator of which is the number of Units which are outstanding immediately
prior to the deposit.
SECTION 2.02. ACCEPTANCE OF TRUST. The Trustee hereby accepts the
Trusts herein created, and the Trustee declares that it holds and will hold the
Trust Fund as Trustee, in trust upon the trusts herein set forth, for the use
and benefit of the present and future Unitholders and subject to the terms and
conditions of the Trust Agreement and this Agreement.
SECTION 2.03. ISSUANCE OF UNITS. (a) The Trustee hereby acknowledges
receipt of the deposit of the Bonds listed in the Schedules to the Trust
Agreement and referred to in Section 2.01 hereof and, simultaneously with the
receipt of said deposit, has recorded on its books the ownership, by the
Depositor or such other person or persons as may be indicated by the Depositor,
of the aggregate number of Units specified in the Trust Agreement. The Trustee
hereby agrees that on the date of any Supplemental Trust Agreement, it shall
acknowledge that the additional Bonds identified therein have been deposited
with it by recording on its books the ownership, by the Depositor or such other
person or persons as may be indicated by the Depositor, of the aggregate number
of Units to be issued in respect of such additional Bonds so deposited.
(b) Under the terms and conditions of the Trust Agreement and this
Agreement and at such times as are permitted by the Trustee, Units may also be
held in certificated form. Unitholders may elect to have their Units held in
certificated form by making a written request to the Trustee requesting such
Certificates; provided, that the Trustee is entitled to specify the minimum
denomination of any Certificate issued. The Trustee shall, at the request of the
holder of any Units held in uncertificated form, issue a new Certificate to
evidence such Units and at such time make an appropriate notation in the
registration books of the Trustee. The rights set forth in this Agreement of any
holder of Units held in certificated form shall be the same as those of any
other Unitholder. Certificates may be transferred as provided in Article VI.
SECTION 2.04. FORM OF CERTIFICATES. Each Certificate referred to in
Section 2.03 is, and each Certificate hereafter issued shall be, in
substantially the form herein above recited, numbered serially for
identification, in fully registered form, transferable on the books of the
Trustee as herein provided, executed manually by an authorized signature of the
Trustee and by a facsimile signature of an Authorized Officer of the Depositor
and dated the date of execution and delivery by the Trustee.
SECTION 2.05. PORTFOLIO INSURANCE FOR THE INSURED TRUSTS. The
provisions of this Section 2.05 shall apply only (i) to a Trust into which the
Depositor deposits Bonds which are not Pre-Insured Bonds and (ii) the Trust
Agreement for which specifies that the Bonds are to be covered by Insurance.
Concurrently with the delivery to the Trustee of the Bonds in each
Insured Trust listed in the Schedules to the Trust, the Insurer has delivered to
and deposited with the Trustee a unit investment trust insurance policy to
protect each Insured Trust and the Unitholders thereof against nonpayment of
principal and interest, when due, on any Bond or Bonds (except for Pre-Insured
Bonds) held by the Trustee in the portfolio of such Trust.
The Trustee shall take all action deemed necessary or advisable in
connection with the Insurance to continue the Insurance in full force and effect
and shall pay all premiums due thereon, including the initial premium, all in
such manner as in its sole discretion shall appear to result in the most
protection and least expense to such Trust.
The Insurance may not be canceled by the Insurer. However, as of each
Record Date the Trustee shall make the deduction and payment of premiums
prescribed in Section 3.04(a)(6) of this Agreement in order to continue in force
the coverage thus provided. The Insurer's right to the payment of premiums from
funds held by the Trustee in accordance with the terms of the policy is absolute
(except when payment is withheld in good faith by the Trustee in the event of
dispute over the amount thereof), but no failure on the part of the Trustee to
make such payment of premium or installment thereof to the Insurer shall result
in a cancellation of the Insurance or otherwise affect the right of any
Unitholder under the policy to have any amounts of principal and interest paid
by the Insurer to the Trustee to be held as part of the Fund when the same are
not paid when due by the issuer of a Bond or Bonds held by the Trustee as part
of the Fund.
With each payment of premium or installment thereof, the Trustee shall
notify the Insurer of all Bonds (except for Pre-Insured Bonds) which during the
expiring premium period were redeemed from or sold by the Insured Trust.
At all times during the existence of the Insured Trusts the Insurance
policy shall provide for payment by the Insurer or its agent to the Trustee of
any amounts of principal and interest due, but not paid, by the issuer of a Bond
(except for Pre-Insured Bonds). The Trustee shall promptly notify the Insurer or
its agent of any nonpayment or threatened nonpayment of principal or interest
and the Insurer or its agent shall within 30 days after receipt of such notice
make payment to the Trustee of all amounts of principal and interest at this
time due, but not paid.
Payments of principal and interest assumed by the Insurer shall be made
as required by the related Bond or Bonds, except in the event of a sale of any
such Bond or Bonds by the Trustee under Section 3.06, 3.07 or 5.02, or a
termination of this Indenture and the Trusts created hereby under Section 8.01,
prior to the final maturity of such Bond or Bonds, in each of which events, upon
notice from the Trustee, the Insurer or its agent shall promptly make payment of
the accrued interest on such Bond or Bonds to the Trustee and shall be relieved
of further obligation to the Trustee thereon.
Upon the making of any payment referred to in the preceding paragraphs,
the Insurer shall succeed to the rights of the Trustee under the Bond or Bonds
involved to the extent of the payments made at that time, or any time subsequent
thereto, and shall continue to make all payments required by the terms of such
Bond or Bonds to the extent that funds are not provided therefor by the issuer
thereof. Upon the payment of any amounts by the Insurer or its agent, occasioned
by the nonpayment thereof by the issuer, the Trustee shall execute and deliver
to the Insurer or its agent any receipt, instrument or document required to
evidence the right of the Insurer in the Bond or Bonds involved to payment of
principal and/or interest thereon to the extent of the payments made by the
Insurer or its agent to the Trustee.
With respect to Pre-Insured Bonds in the Fund, the Trustee shall
promptly notify the insurer of the Pre-Insured Bonds of any nonpayment of
principal or interest on such Pre-Insured Bonds and if such insurer should fail
to make payment to the Trustee within 30 days after receipt of such notice, the
Trustee shall take all action against such insurer and/or the issuer deemed
necessary to collect all amounts of principal and interest at this time due, but
not collected.
The Trustee shall also take such action required under Section 5.02 of
this Agreement with respect to Permanent Insurance, as defined in Section 5.02.
ARTICLE III
ADMINISTRATION OF FUND
SECTION 3.01. CERTAIN MONEYS TO BE CREDITED TO INTEREST ACCOUNT. The
Trustee shall collect the interest on the Bonds for each Trust Fund as it
becomes payable (including all interest accrued but unpaid prior to the date of
deposit or acquisition of the Bonds hereunder and including that part of the
proceeds of the sale, liquidation, redemption or maturity of any Bonds which
represents accrued interest thereon ), and credit such interest to a separate
account for each Trust Fund to be known as the "Interest Account". The Trustee
is authorized to advance out of its own funds and then cause to be deposited in
and credited to the Interest Account of the Trust Fund any amount necessary to
permit the payment of any Interest Distribution out of the Interest Account
required to be made with respect to such Trust Fund by the Trustee on each
Distribution Date; provided, however, that the Trustee shall be entitled to be
reimbursed without interest out of such Trust Fund for any and all amounts
advanced by it pursuant to this Section 3.0l as interest on the Bonds is
collected.
SECTION 3.02. CERTAIN MONEYS TO BE CREDITED TO PRINCIPAL ACCOUNT. (a)
With respect to each Trust Fund all moneys (except moneys held by the Trustee
pursuant to subsection (b) hereof) other than amounts credited to the Interest
Account received by the Trustee in respect of the Bonds under this Agreement
shall be credited to a separate account for each Trust Fund to be known as the
"Principal Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Obligations or deposited to secure such purchases are hereby declared
to be held specially by the Trustee for such purchases and shall not be deemed
to be part of the Principal Account until (i) the Depositor fails to timely
purchase a Contract Obligation and has not given the Failed Contract Notice (as
defined in Section 3.12) at which time the moneys and/or letters of credit
attributable to the Contract Obligation not purchased by the Depositor shall be
credited to the Principal Account; or (ii) the Depositor has given the Trustee
the Failed Contract Notice at which time the moneys and/or letters of credit
attributable to failed contracts referred to in such Notice shall be credited to
the Principal Account; provided, however, that if the Depositor also notifies
the Trustee in the Failed Contract Notice (or by separate notice delivered
concurrently with or prior to the Failed Contract Notice) that it has purchased
or entered into a contract to purchase a New Bond (as defined in Section 3.12),
the Trustee shall not credit such moneys and/or letters of credit to the
Principal Account unless the New Bond shall also have failed or is not delivered
by the Depositor within two business days after the settlement date of such New
Bond, in which event the Trustee shall forthwith credit such moneys and/or
letters of credit to the Principal Account. The Trustee shall in any case
forthwith credit to the Principal Account, and/or cause the Depositor to deposit
in the Principal Account, the difference, if any, between the purchase price of
the failed Contract Obligation and the purchase price of the New Bond, together
with any sales charge and accrued interest applicable to such difference and
distribute such moneys to Unitholders pursuant to Section 3.04.
SECTION 3.03. ESTABLISHMENT OF RESERVE ACCOUNT. From time to time the
Trustee may withdraw from the Interest or Principal Accounts of each Trust Fund
such amounts as it, in its sole discretion, shall deem requisite to establish a
reserve for any applicable taxes or other governmental charges that may be
payable out of such Trust Fund or for indemnification or extraordinary expenses
of the Depositor or Trustee pursuant to Section 7.02, 8.01 or 8.05. Such amounts
so withdrawn shall be credited to a separate account for such Trust Fund which
shall be known as the "Reserve Account." The Trustee shall not be required to
distribute to the Unitholders any of the amounts in the Reserve Account;
provided, however, that if it, in its sole discretion, determines that such
amounts are no longer necessary, then it shall promptly deposit such amounts in
the account from which withdrawn, or if such Trust Fund has been terminated or
shall be in the process of termination, the Trustee, upon such determination,
shall distribute to each Unitholder of such Trust Fund such Unitholder's
interest in the Reserve Account in accordance with Section 9.01.
SECTION 3.04. CERTAIN DEDUCTIONS AND DISTRIBUTIONS. (a) On or before
each Interest Distribution Date as of the close of business on the preceding
Record Date the Trustee shall separately with respect to each Trust Fund to
which such Interest Distribution Date relates:
(1) deduct from the Interest Account or, to the extent funds
are not available in such Account, from the Principal Account and pay
to itself individually (i) the amounts that it is at the time entitled
to receive pursuant to Section 8.05 on account of its services
theretofore performed and expenses theretofore incurred and (ii) the
amounts that it is at the time entitled to receive hereunder in
reimbursement of amounts advanced by it;
(2) deduct from the Interest Account or, to the extent funds
are not available in such Account, from the Principal Account the
amounts that the Evaluator is at the time entitled to receive pursuant
to Section 4.03 on account of its services theretofore performed and
expenses theretofore incurred;
(3) deduct from the Interest Account or, to the extent funds
are not available in such Account, from the Principal Account an amount
equal to unpaid fees and expenses, if any, of bond counsel pursuant to
Section 3.08 as certified by the Depositor;
(4) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account and pay
to the Depositor the amounts that the Depositor is at the time entitled
to receive pursuant to Section 3.13 on account of its services
theretofore performed and expenses theretofore incurred;
(5) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account, and
reimburse itself for any other fees and expenses arising from time to
time out of the Trust operations that the Trustee has paid;
(6) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account and pay
to the Insurer the amount of any premium to which it is at the time
entitled to receive, pursuant to Section 2.05; and
(7) deduct from the Interest Account, or, to the extent funds
are not available in such Account, from the Principal Account, and pay
to the Depositor the amount that it is entitled to receive pursuant to
Section 3.14.
(b) The Trustee, as of the "First Settlement Date", as defined in the
Prospectus, shall advance from its own funds and shall pay to the Unitholders of
the respective Trusts then of record the amount of interest received or accrued
to such date on the Bonds deposited in the respective Trusts, net of a
proportionate amount of Trust expenses attributable to the period between the
date of the Trust Agreement and the First Settlement Date. The Trustee shall
also advance from its own funds and pay the Depositor the amount specified in
the Prospectus, which is all or a portion of the interest which accrues on any
"when-issued" Bonds deposited in the Trusts and Bonds delivered to the Trusts
after the First Settlement Date from the First Settlement Date to the respective
dates of delivery to the respective Trust of any of such Bonds. Subsequent
distributions shall be made as herinafter provided. The Trustee shall for each
Trust Fund as of the close of business on the applicable Record Date compute the
amount of the Interest Distribution per Unit for the next Interest Distribution
Date (each such amount being herein called the "INTEREST DISTRIBUTION") as
follows: Such amount shall be equal to the estimated amount of interest accrued
on the Bonds from and including the immediately preceding Record Date (or First
Settlement Date, as appropriate) through but not including the Record Date on
which the computation is made, less (i) the estimated annual costs and expenses
allocable (on a per diem basis) to such period, (ii) interest attributable to
such period paid or payable in connection with redemption of Units and (iii)
amounts previously advanced by the Trustee pursuant to this Section which are
now deemed to be uncollectible, divided by the number of Units outstanding on
the Record Date on which the computation is being made. On or shortly after each
Interest Distribution Date, the Trustee shall distribute with respect to each
Unitholder of the Trust Fund of record at the close of business on the preceding
Record Date an amount substantially equal to the Interest Distribution computed
as of such Record Date.
To the extent that moneys in the Principal Account have not been
previously used to pay for the redemption of Units tendered to a Trust Fund, on
the Principal Distribution Dates each Unitholder shall receive such holder's pro
rata share of the cash balance of the Principal Account of the Trust Fund
computed as of the close of business on the preceding Record Dates for such
Principal Distribution Dates by (i) deducting from such cash balance the total
of (X) cash required to cover contracts to purchase Bonds, (Y) cash required for
the redemption of unredeemed tendered Units and (Z) the sum of the amounts to be
deducted from the Principal Account as of each such Record Date pursuant to the
foregoing provisions of Section 3.04(a) and (ii) dividing the amount so obtained
by the number of Units outstanding on the Record Date immediately preceding such
Principal Distribution Date; provided, however, that if the balance of the
Principal Account on any such Record Date is less than that amount stated in the
Prospectus for each respective Trust Fund under the caption "Distribution Dates"
appearing in the "Summary of Essential Financial Information," no distribution
from the Principal Account need be made.
In making the computation of any Unitholder's interest in the balance
of the Interest and Principal Accounts, fractions of less than one cent per Unit
shall be omitted. In addition, the Trustee in its discretion may on any
Distribution Date determine that the amount to be distributed to Unitholders
should be more or less than the amount of the applicable Interest or Principal
Distribution per Unit because of any unusual or extraordinary increase or
decrease in the expenses incurred or expected to be incurred by such Trust Fund.
When directed by the Depositor, the Trustee shall invest funds held in the
Income or Principal Accounts, pending distribution, in money market mutual funds
or U.S. Treasury obligations which mature on or before the next applicable
Distribution Date. Any obligations so acquired must be held until they mature
and proceeds therefrom may not be reinvested.
(c) If the Depositor (i) fails to replace any failed Special Bond (as
defined in Section 3.12) or (ii) is unable or fails to enter into any contract
for the purchase of any New Bond in accordance with Section 3.12, the Trustee
shall distribute to all Unitholders the principal, accrued interest and, to the
extent supplied by the Depositor, the sales charge attributable to such Special
Bonds not more than 30 days after the expiration of the Purchase Period (as
defined in Section 3.12). If any contract for a New Bond in replacement of a
Special Bond shall fail, the Trustee shall distribute the principal, accrued
interest and sales charge attributable to the Special Bond to the Unitholders
not more than 30 days after the date on which the contract in respect of such
New Bond failed. If at the end of the Purchase Period less than all moneys
attributable to a failed Special Bond have been applied or allocated by the
Trustee pursuant to a contract to purchase New Bonds, the Trustee shall
distribute the remaining moneys (i) to Unitholders not more than 30 days after
the end of the Purchase Period to the extent the failed Special Bond has not
been fully replaced by New Bonds or (ii) to the Depositor to the extent moneys
remain after the purchase of the New Bonds, if any, and the distribution
referred to in clause (i).
(d) Except as provided below, all distributions shall be made by first
class mail to each Unitholder of record at the close of business on the
preceding applicable Record Date at the address of such holder appearing on the
registration books of the Trustee provided, however, that the Trustee shall if
so directed with respect to distributions from the Interest and/or Principal
Account either orally or in writing at the time of purchase of Units or
thereafter in writing signed by the Unitholder and timely received, make such
distributions to a reinvestment program. A Unitholder's written notice must be
received by the Trustee, as Program Agent for the reinvestment program, at least
ten days prior to the Record Date for the next Interest Distribution in order to
be in effect for such Interest Distribution and by the last Record Date for
distribution of principal in any year in order to be effective for the following
calendar year. All such notices shall remain in effect until a subsequent notice
is received by the Program Agent. Upon receipt of any such distribution the
Program Agent shall purchase shares (or fractions thereof) in the applicable
reinvestment fund as directed by the Unitholder. The Program Agent shall not be
liable to any Unitholder for any action taken with respect to its duties and
responsibilities as Program Agent; PROVIDED, HOWEVER, that this provision shall
not protect the Program Agent against liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
(e) Except as provided by the preceding paragraph, Unitholders of
record on the registration books of the Trustee at the close of business on the
Record Date prior to each Distribution Date, shall be entitled to the
distribution in respect of such Distribution Date, and, except as provided in
Article VIII, no liability shall attach to the Trustee by reason of payment to
or on the order of any such Unitholder of record. Nothing herein shall be
construed to prevent the payment of distributions from the Interest and
Principal Accounts to any such Unitholder by means of one check, draft or other
proper instrument.
SECTION 3.05. STATEMENTS AND REPORTS. With each distribution from the
Interest or Principal Accounts of each Trust Fund the Trustee shall set forth,
either in the instrument by means of which payment of such distribution is made
or in an accompanying statement, the amount being distributed from each such
account expressed as a dollar amount per Unit of such Trust Fund.; Within a
reasonable period of time after the last business day of each calendar year, the
Trustee shall furnish to each person who at any time during such calendar year
was a Unitholder of any individual Trust Fund a statement for such Trust Fund
setting forth with respect to such calendar year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds and, if
issuers of Bonds are located in more than one jurisdiction, the
percentage of such amount by states and territories in which the
issuers of the Bonds are located;
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.12 and for redemption's pursuant to Section 5.02;
(3) the deductions for applicable taxes and fees and expenses
of the Trustee, the Evaluator, the Depositor and bond counsel, if any,
all as provided under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to Section
3.03, if any;
(5) the balance remaining after such distributions, deductions
and reservations expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last business day of such
calendar year;
(B) as to the Principal Account:
(1) the dates of sale, maturity, liquidation or redemption of
any of the Bonds and the net proceeds received therefrom (excluding any
portion thereof credited to the Interest Account);
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.13 and for redemption's pursuant to Section 5.02;
(3) the deductions for payment of applicable taxes and fees
and expenses (including insurance premiums) of the Trustee, the
Evaluator, the Depositor and bond counsel, if any, all as provided
under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to Section
3.03, if any;
(5) the balance remaining after such distributions, deductions
and reservations, expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last business day of such
calendar year; and
(C) the following information:
(1) a list of the Bonds as of the last business day of such
calendar year;
(2) the number of Units outstanding on the last business day
of such calendar year;
(3) the Unit Value based on the Trust Fund Evaluations made on
the last day of December (or the last business day prior thereto) of
such calendar year; and
(4) the amounts actually distributed to Unitholders during
such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
per Unit outstanding on the Record Dates for such distributions.
SECTION 3.06. EXTRAORDINARY SALE OF BONDS. The Depositor by written
notice may direct the Trustee to sell Bonds at such price and time and in such
manner as shall be deemed appropriate by the Depositor if the Depositor shall
have determined that any one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the payment
of principal or interest when due and payable;
(b) that any action or proceeding has been instituted at law
or in equity seeking to restrain or enjoin the payment of principal or
interest on any such Bonds, the illegality, irregularity or omission of
any necessary acts or proceedings preliminary to the issuance of such
Bonds, or seeking to restrain or enjoin the performance by the officers
or employees of any such issuing body of an improper or illegal act in
connection with the administration of funds necessary for debt service
on such Bonds or otherwise; or that there exists any other legal
question or impediment affecting such Bonds or the payment of principal
or interest on the same;
(c) that there has occurred any breach of covenant or warranty
in any resolution, trust indenture or other document which might
adversely affect either immediately or contingently the payment of
principal or interest on such Bonds, or their general credit standing,
or otherwise impair the sound investment character of such Bonds;
(d) that there has been a default in the payment of principal
of, premium, if any, or interest on any other outstanding obligations
of the issuer or the guarantor of such Bonds; or
(e) that in the case of revenue Bonds, the revenues and income
of the facility or project or other special funds expressly charged and
pledged for payment of principal or interest or both on any such Bonds
shall fall substantially below the estimated revenues or income
calculated by the engineers or other proper officials charged with the
acquisition, construction or operation of such facility or project, so
that, in the opinion of the Depositor, the retention of such Bonds
would be detrimental to the interest of the Unitholders;
(f) that the price of any such Bond has declined to such an
extent, or such other market or credit factors exist (including the
advance refunding of any such Bonds), that in the opinion of the
Depositor the retention of such Bonds would be detrimental to the
interest of the Unitholders;
(g) that such Bonds are the subject to an advanced refunding
(for the purposes of this Section 3.06(g), an "advanced refunding"
shall mean when refunding securities are issued and the proceeds
thereof are deposited in an irrevocable trust to retire the Bonds on or
before their redemption date);
(h) that as of any Record Date any of the Bonds are scheduled
to be redeemed and paid prior to the next succeeding Distribution Date;
or
(i) that the Federal tax exemption on such Bonds has been
lost.
If the Trust is an Insured Trust, the Depositor shall also consider
whether any insurance that may be applicable to the Bonds cannot be relied upon
to provide the principal and interest protections intended to be afforded by
such insurance.
Upon receipt of such direction from the Depositor, upon which the
Trustee shall rely, the Trustee shall proceed to sell or liquidate the specified
Bonds in accordance with such direction; PROVIDED, HOWEVER, that the Trustee
shall not sell or liquidate any Bonds upon receipt of a direction from the
Depositor that it has determined that the conditions in subdivision (h) above
exist, unless the Trustee shall receive on account of such sale or liquidation
the full principal amount of such Bonds, plus the premium, if any, and the
interest accrued and to accrue thereon to the date of the redemption of such
Bonds. The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any sale made pursuant to any such
direction or by reason of the failure of the Depositor to give any such
direction, and in the absence of such direction the Trustee shall have no duty
to sell any Bonds under this Section 3.06 except to the extent otherwise
required by Section 3.09. The Depositor shall not be liable for errors of
judgment in directing or failing to direct the Trustee pursuant to this Section
3.06. This provision, however, shall not protect the Trustee or Depositor
against any liability for which they would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and duties
hereunder.
SECTION 3.07. REFUNDING OBLIGATIONS. In the event that an offer by the
issuer of any of the Bonds shall be made to issue new obligations in exchange or
substitution for any issue of Bonds pursuant to a plan for the refunding or
refinancing of such Bonds, the Depositor shall instruct the Trustee in writing
to reject such offer and either hold or sell such Bonds, except that if (1) the
issuer is in default with respect to payment of principal or interest or both on
such Bonds or (2) in the opinion of the Depositor given in writing to the
Trustee, the issuer will probably default with respect to payment of principal
or interest or both on such Bonds in the reasonably foreseeable future, the
Depositor shall instruct the Trustee in writing to accept or reject such offer
or take any other action with respect thereto as the Depositor may deem proper.
Nevertheless, if such an obligation is received by a Trust, it shall either be
sold by the Trustee or held in such Trust pursuant to the direction of the
Depositor. Any obligation so received in exchange shall be deposited hereunder
and shall be subject to the terms and conditions of this Agreement to the same
extent as the Bonds originally deposited hereunder. Within five days after such
deposit, notice of such exchange and deposit shall be given by the Trustee to
each Unitholder of such Trust, including an identification of the Bonds
eliminated and the obligations substituted therefor.
SECTION 3.08. COUNSEL. The Depositor may employ from time to time
counsel to act on behalf of any Trust Fund for any legal services in connection
with the Bonds, and any legal matters relating to the possible disposition of
any Bonds pursuant to any provisions hereof. The fees and expenses of such
counsel shall be paid by the Trustee as provided in Section 3.04(a)(3) hereof.
SECTION 3.09. ACTION BY TRUSTEE REGARDING BONDS. (a) In the event that
the Trustee shall have been notified at any time of any action to be taken or
proposed to be taken by holders of the Bonds (including but not limited to the
making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to any amendment or supplement to any
indenture, agreement or other instrument under or pursuant to which the Bonds
have been issued) the Trustee shall promptly notify the Depositor and shall
thereupon take such action or refrain from taking any action as the Depositor
shall in writing direct; provided, however, that if the Depositor shall not
within five business days of the giving of such notice to the Depositor direct
the Trustee to take or refrain from taking any action, the Trustee shall take
such action as it, in its sole discretion, shall deem advisable. The Bonds may,
in the discretion of the Trustee, be interchanged from time to time into either
bearer or registered form without any notification thereof to the Depositor or
the Unitholders and may be registered in the name of the Trustee or the name of
any nominee designated by it.
(b) If at any time the principal of or interest on any of the Bonds
shall not have been duly paid, either pursuant to the Insurance or otherwise,
the Trustee shall notify the Depositor thereof. If within thirty days after such
notification the Depositor has not given any instruction in writing to sell or
to hold or has not taken any action in connection with such Bonds, the Trustee
may, in its discretion, sell such Bonds forthwith, and the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
such sale.
(c) Except as provided in Article VII and Article VIII, neither the
Depositor nor the Trustee shall be liable to any person for any action or
failure to take action with respect to this Section 3.09.
SECTION 3.10. TRUSTEE NOT REQUIRED TO ADJUST ACCOUNTS. Nothing in this
Agreement, or otherwise, shall be construed to require the Trustee to make any
adjustments between the Interest Account and the Principal Account by reason of
any premium or discount in respect of any of the Bonds.
SECTION 3.11. NOTICE OF CHANGE IN PRINCIPAL ACCOUNT. The Trustee shall
give prompt written notice to the Depositor and the Evaluator (if separate from
the Depositor) of all amounts credited to or withdrawn from the Principal
Account of any Trust Fund pursuant to any of the provisions of this Article III,
and the balance in such Account after giving effect to the credit or withdrawal.
SECTION 3.12. LIMITED REPLACEMENT OF SPECIAL BONDS. If any contract in
respect of Contract Obligations other than a contract to purchase a New Bond (as
defined below), including those purchased on a "when, as and if issued" basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositor or the Trustee (such failed Contract Obligations being herein called
the "Special Bonds"), the Depositor, after it is notified in writing that the
Special Bond will not be delivered by the seller thereof to the Depositor, shall
notify the Trustee (such notice being herein called the "Failed Contract
Notice") of its inability to deliver the failed Special Bond to the Trustee.
Within a maximum of 20 days after giving such Failed Contract Notice (such 20
day period being herein called the "Purchase Period"), the Depositor may, if it
deems such action to be in the best interest of the Trust, purchase, or enter
into a contract to purchase, an obligation to be held as a Bond hereunder
(herein called the "New Bond") as part of the Trust Fund in replacement of the
failed Special Bond, subject to the satisfaction of all of the following
conditions in the case of each purchase or contract to purchase:
(a) The New Bonds (i) shall be tax-exempt bonds issued by
states or territories of the United States or political subdivisions
and authorities thereof, (ii) shall have a fixed maturity date (whether
or not entitled to the benefits of any sinking, redemption, purchase or
similar fund) not less than the earlier of the maturity of the Special
Bond or ten years after the date of purchase, (iii) must be purchased
at a price that results in a yield to maturity and a current return at
least equal to that of the Special Bonds as of the Initial Date of
Deposit, (iv) shall be payable as to principal and interest in United
States currency, (v) shall not be "when, as if issued" bonds and (vi)
must be eligible to be insured (and when acquired be insured) under the
Insurance, if applicable.
(b) Each New Bond shall be rated at least "A" or better by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. or
Moody's Investors Service, Inc.
(c) The purchase price of the New Bonds shall not exceed the
amount of funds reserved for the purchase of the Special Bonds.
(d) The Depositor shall furnish a notice to the Trustee (which
may be part of the Failed Contract Notice) in respect of the New Bond
purchased or to be purchased that shall (i) identify the New Bonds,
(ii) state that the contract to purchase, if any, entered into by the
Depositor is satisfactory in form and substance and (iii) state that
the foregoing conditions of clauses (a) and (b) have been satisfied
with respect to the New Bonds.
Upon satisfaction of the foregoing conditions with respect to any New
Bond, the Trustee shall pay the purchase price for the New Bond from the amount
of funds reserved for the purchase of the Special Bonds or, if the Trustee has
credited any moneys and/or letters of credit attributable to the failed Special
Bond to the Principal Account, the Trustee shall pay the purchase price of the
New Bond upon directions from the Depositor from the moneys and/or letters of
credit so credited to the Principal Account. If the Trustee has credited moneys
of the Depositor to the Principal Account, the Trustee shall forthwith return to
the Depositor the portion of such moneys that is not properly distributable to
Unitholders pursuant to Section 3.04.
Whenever a New Bond is acquired by the Depositor pursuant to the
provisions of this Section 3.12, the Trustee shall, within five days thereafter,
mail to all Unitholders notices of such acquisition, including an identification
of the failed Special Bonds and the New Bonds acquired. The purchase price of
the New Bonds shall be paid out of the funds reserved for the purchase of the
failed Special Bonds. Except as provided in Article VIII, the Trustee shall not
be liable or responsible in any way for depreciation or loss incurred by reason
of any purchase made pursuant to any such directions and in the absence of such
directions the Trustee shall have no duty to purchase any New Bonds under this
Agreement. The Depositor shall not be liable for any failure to instruct the
Trustee to purchase any New Bonds or for errors of judgment in respect of this
Section 3.12; provided, however, that this provision shall not protect the
Depositor against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
SECTION 3.13. COMPENSATION OF DEPOSITOR FOR SUPERVISORY SERVICES. As
compensation for providing supervisory portfolio services under this Agreement,
the Depositor shall receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee in the amount
specified as compensation for the Depositor in the Prospectus for each
respective Trust Fund under the caption "Sponsor's Annual Fee per Unit" in the
"Summary of Essential Financial Information", but in no event shall such
compensation when combined with all compensation received from other series of
the Fund or other unit investment trusts sponsored by the Depositor or its
affiliates for providing such supervisory services in any calendar year exceed
the aggregate cost to the Depositor for providing such services. The rate of
such compensation may be increased by the Depositor from time to time, without
the consent or approval of any Unitholder or the Trustee, by amounts not
exceeding the proportionate increase, during the period from the date of such
Trust Agreement to the date of any such increase, in consumer prices as last
published prior to each such date under the classification "All Services Less
Rent of Shelter" in the Consumer Price Index For All Urban Consumers (CPI-U)
U.S. City Average, not seasonally adjusted, base 1982 - 84 = 100, published by
the United States Department of Labor. In the event that such classification
ceases to incorporate a significant number of items, or if a substantial change
is made in the method of establishing such classification, then the
classification shall be adjusted in a fair and reasonable manner to the figure
that would have resulted had no substantial change occurred in the manner of
computing such classification. In the event that such classification (or a
successor or substitute index) is not available, such governmental or other
service or publication as shall evaluate the information in substantially the
same manner as the aforesaid classification shall be used in lieu thereof. Such
compensation shall be charged by the Trustee, upon receipt of invoice therefor
from the Depositor, against the Interest and Principal Accounts on or before the
Distribution Date on which such period terminates. If the cash balance in the
Interest and Principal Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.13, the Trustee shall have the power to sell
(i) Bonds from the current list of Bonds designated to be sold pursuant to
Section 5.02 hereof, or (ii) if no such Bonds have been so designated, such
Bonds as the Trustee may see fit to sell in its own discretion, and to apply the
proceeds of any such sale in payment of the amounts payable pursuant to this
Section 3.13. Any moneys payable to the Depositor pursuant to this Section 3.13
shall be secured by a prior lien on the Trust Fund except that such lien shall
be junior and subordinate to any lien in favor of the Trustee under the
provisions of Section 8.08 and of the Evaluator under the provisions of Section
4.03.
SECTION 3.14. BOOKKEEPING AND ADMINISTRATIVE EXPENSES. If so provided
in the Prospectus, as compensation for providing bookkeeping and other
administrative services of a character described in Section 26(a)(2)(C) of the
Investment Company Act of 1940 to the extent such services are in addition to,
and do not duplicate, the services to be provided hereunder by the Trustee or by
the Depositor for providing supervisory services, the Depositor shall receive
against a statement or statements therefor submitted to the Trustee monthly or
annually an aggregate annual fee in an amount which shall not exceed that amount
set forth in the Prospectus times the number of Units outstanding as of January
1 of such year except for a year or years in which an initial offering period
occurs, in which case the fee for a month is based on the number of Units
outstanding at the end of such month (such annual fee to be pro rated for any
calendar year in which the Depositor provides service during less than the whole
of such year), but in no event shall such compensation received from other unit
investment trusts for which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in any calendar year
exceed the aggregate cost to the depositor for providing such services to such
unit investment trusts. Such compensation may, from time to time, be adjusted
provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the date hereof,
in consumer prices for services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent of Shelter" or
similar index as described under Section 3.13. The consent or concurrence of any
Unitholder hereunder shall not be required for any such adjustment or increase.
Such compensation shall be paid by the Trustee, upon receipt of invoice therefor
from the Depositor, upon which, as to the cost incurred by the Depositor of
providing services hereunder the Trustee may rely, and shall be charged against
the Interest and Principal Accounts on or before the Distribution Date following
the Record Date on which such period terminates. The Trustee shall have no
liability to any Unitholder or other person for any payment made in good faith
pursuant to this Section.
If the cash balance in the Interest and Principal Accounts shall be
insufficient to provide for amounts payable pursuant to this Section 3.14, the
Trustee shall have the power to sell (i) Bonds from the current list of Bonds
designated to be sold pursuant to Section 5.02 hereof, or (ii) if no such Bonds
have been designated, such Bonds as the Trustee may see fit to sell in its own
discretion, and to apply the proceeds of any such sale in payment of the amounts
payable pursuant to this Section 3.14.
All moneys payable to the Depositor pursuant to this Section 3.14 shall
be secured by a prior lien on the Trust except that no such lien shall be prior
to any lien in favor of the Trustee under the provisions of Section 8.08 and of
the Evaluator under the provisions of Section 4.03.
ARTICLE IV
EVALUATION OF BONDS;
THE EVALUATOR
SECTION 4.01. EVALUATION OF BONDS. The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor (if separate
from the Evaluator) upon request the value of each issue of Bonds (treating
separate maturities of Bonds as separate issues) as of the Evaluation Time on
the bid side of the market on the days on which the Trust Fund Evaluation is
required by Section 5.01, and, in addition, as of the Evaluation Time on the bid
side of the market if the secondary market in the Units is maintained based on
bid side values or on both the bid and offering sides, if the Depositor shall so
inform the Evaluator from time to time, such additional evaluation being on each
business day commencing with the date of the Trust Agreement. Such evaluations
shall be made (i) on the basis of current bid or offering prices for the Bonds,
(ii) if bid or offering prices are not available for any Bonds, on the basis of
current bid or offering prices for comparable bonds, (iii) by determining the
value of the Bonds on the bid or offering side of the market by appraisal or
(iv) by any combination thereof. The Evaluator shall also determine and furnish
to the Trustee and the Depositor the aggregate of (a) the value of all Bonds on
the basis of such evaluation and (b) on the basis of the information furnished
to the Evaluator by the Trustee pursuant to Section 3.11, the amount of cash
then held in the Principal Account which was received by the Trustee after the
Record Date preceding such determination less any amounts held in the Principal
Account for distribution to Unitholders on a subsequent Distribution Date when a
Record Date occurs two business days or less after such determination. For the
purposes of the foregoing, the Evaluator may obtain current bid or offering
prices for the Bonds from investment dealers or brokers (including the
Depositor) that customarily deal in similar bonds or from any other reporting
service or sources of information which the Evaluator deems appropriate.
The Evaluator shall attribute value to Insurance only in circumstances
where the credit quality of an underlying Bond has significantly deteriorated.
The value to be added to such Bonds shall be an amount equal to the excess, if
any, by which the net proceeds realizable from the sale of the Bonds on an
insured basis exceeds the sum of (i) the net proceeds realizable from the sale
of the Bonds on an uninsured basis plus (ii) the premium attributable to the
Permanent Insurance.
SECTION 4.02. CERTAIN INFORMATION TO BE MADE AVAILABLE. For the
purpose of permitting Unitholders to satisfy any reporting requirements of
applicable federal or state tax law, the Evaluator shall make available to the
Trustee and the Trustee shall transmit to any Unitholder upon request any
determinations made by the Evaluator pursuant to Section 4.01 which concern the
Trust Fund in which such Unitholder holds Units.
SECTION 4.03. COMPENSATION OF THE EVALUATOR. As compensation for its
services hereunder, the Evaluator shall receive against a statement therefor
submitted to the Trustee on or before each Distribution Date the amount
specified as compensation for the Evaluator in the Prospectus for each
respective Trust Fund under the caption "Evaluator's Annual Fee per Unit" in the
"Summary of Essential Financial Information." The rate of such compensation may
be increased by the Evaluator from time to time, without the consent or approval
of any Unitholder, the Trustee or the Depositor, by amounts not exceeding the
proportionate increase, during the period from the date of such Trust Agreement
to the date of any such increase, in consumer prices as last published prior to
each such date under the classification "All Services Less Rent of Shelter" in
the Consumer Price Index For All Urban Consumers (CPI-U) U.S. City Average, not
seasonally adjusted, base 1982 - 84 = 100, published by the United States
Department of Labor. In the event that such classification ceases to incorporate
a significant number of items, or if a substantial change is made in the method
of establishing such classification, then the classification shall be adjusted
in a fair and reasonable manner to the figure that would have resulted had no
substantial change occurred in the manner of computing such classification. In
the event that such classification (or a successor or substitute index) is not
available, such governmental or other service or publication as shall evaluate
the information in substantially the same manner as the aforesaid classification
shall be used in lieu thereof. Such compensation shall be charged by the
Trustee, upon receipt of invoice therefor from the Evaluator, against the
Interest and Principal Accounts on or before the Distribution Date. If the cash
balances in the Interest and Principal Accounts shall be insufficient to provide
for amounts payable pursuant to this Section 4.03, the Trustee shall have the
power to sell (i) Bonds designated to be sold pursuant to Section 5.02 hereof or
(ii) if no such Bonds have been so designated, such Securities as the Trustee
may see fit to sell in its own discretion, and to apply the proceeds of any such
sale in payment of the amounts payable pursuant to this Section 4.03. Any moneys
payable to the Evaluator pursuant to this Section 4.03 shall be secured by a
prior lien on the Trust Fund except that such lien shall be junior and
subordinate to any lien in favor of the Trustee under the provisions of Section
8.08.
SECTION 4.04. LIABILITY OF THE EVALUATOR. The Trustee, the Depositor
(if separate from the Evaluator) and the Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The determinations made by the Evaluator hereunder shall be made in
good faith upon the basis of the best information available to it. The Evaluator
shall be under no liability to the Trustee, the Depositor or the Unitholders for
errors in judgment; provided, however, that this provision shall not protect the
Evaluator against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
SECTION 4.05. RESIGNATION, REMOVAL AND OTHER MATTERS RELATING TO THE
EVALUATOR. (a) The Evaluator may resign and be discharged hereunder, by
executing an instrument in writing resigning as the Evaluator and filing the
same with the Depositor (if separate from the Evaluator) and the Trustee not
less than 60 days before the date specified in such instrument when, subject to
Section 4.05(c), such resignation is to take effect. Upon receiving such notice
of resignation, the Depositor (if separate from the Evaluator) and the Trustee
shall use their best efforts to appoint a successor Evaluator having
qualifications and at a rate of compensation satisfactory to the Depositor (if
separate from the Evaluator) and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor (if separate from the Evaluator)
and the Trustee, in duplicate, one copy of which shall be delivered to the
resigning Evaluator and one copy to the successor Evaluator. The Depositor may
remove the Evaluator at any time upon thirty days' written notice and appoint a
successor Evaluator having qualifications and at a rate of compensation
satisfactory to the Depositor and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor, in duplicate, one copy of which
shall be delivered to the Evaluator so removed and one copy to the successor
Evaluator. Notice of such resignation or removal and appointment of a successor
Evaluator shall be mailed by the Trustee to each Unitholder.
(b) If the Evaluator resigns and no successor Evaluator shall have been
appointed and have accepted appointment within 30 days after receipt of the
notice of resignation by the Depositor (if appropriate) and the Trustee, the
Evaluator may forthwith apply to a court of competent jurisdiction for the
appointment of a successor Evaluator. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor Evaluator.
(c) Any successor Evaluator appointed hereunder shall execute,
acknowledge and deliver to the Depositor and the Trustee an instrument accepting
such appointment hereunder, and such successor Evaluator without any further
act, deed or conveyance shall become vested with all the rights, powers, duties
and obligations of its predecessor hereunder with like effect as if originally
named the Evaluator herein and shall be bound by all the terms and conditions of
this Agreement. Any resignation or removal of the Evaluator and appointment of a
successor Evaluator pursuant to this Section 4.05 shall become effective upon
such acceptance of appointment.
(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Evaluator hereunder shall be a party, shall be the
successor Evaluator under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which the Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
ARTICLE V
TRUST FUND EVALUATION;
REDEMPTION OF UNITS
SECTION 5.01. TRUST FUND EVALUATION. As of the Evaluation Time next
following any tender by a Unitholder for redemption and on any other business
day desired by it or as may be required hereunder, the Trustee shall as to each
Trust Fund:
Add
(1) cash on hand in the Trust Fund, other than cash held
especially for the purchase of Contract Obligations,
(2) the aggregate value of each issue of the Bonds in the
Trust Fund (including Contract Obligations) on the bid side of the
market as determined by the Evaluator pursuant to Section 4.01,
(3) accrued but unpaid interest on the Bonds in the Trust Fund
at the close of business on the date of such computation, and
(4) amounts representing organizational expenses paid less
amounts representing accrued organizational expenses of a Trust Fund;
Deduct
(1) amounts representing any applicable taxes, governmental
charges or other charges pursuant to Section 3.03 payable out of the
Trust Fund and for which no deductions shall have previously been made
for the purpose of addition to the Reserve Account,
(2) amounts representing estimated accrued fees and expenses
of the Trust Fund including but not limited to unpaid fees and expenses
of the Trustee (including legal and auditing expenses), the Evaluator,
the Depositor, the Insurer, if any, and bond counsel, and
(3) cash allocated for distribution to Unitholders of the
Trust Fund of record as of the business day prior to the evaluation
then being made.
The resulting figure is herein called a "TRUST FUND EVALUATION."
Until the Depositor has informed the Trustee that there will be no
further deposits of additional Bonds pursuant to Section 2.01(b), the Depositor
shall provide the Trustee with written estimates of (i) total organizational
expenses to be borne by the Trust pursuant to Section 10.02 and (ii) the total
number of Units to be issued in connection with the initial deposit and all
anticipated deposits of additional Bonds. For purposes of calculating the Trust
Fund Evaluation and Unit Value, the Trustee shall treat all such anticipated
expenses as having been paid and all liabilities therefor as having been
incurred, and all Units as having been issued, in each case on the date of the
Trust Agreement, and, in connection with each such calculation, shall take into
account a pro rata portion of such expense and liability based on the actual
number of Units issued as of the date of such calculation. In the event the
Trustee is informed by the Depositor of a revision in its estimate of total
expenses or total Units and upon the conclusion of the deposit of additional
Bonds, the Trustee shall base calculations made thereafter on such revised
estimates or actual expenses, respectively, but such adjustment shall not affect
calculations made prior thereto and no adjustment shall be made in respect
thereof.
SECTION 5.02. REDEMPTION OF UNITS; SALE OF BONDS. Any Unitholder may
cause any of his Units to be redeemed by the Trustee, subject to the terms of
this Section 5.02, by making a written request to the Trustee at its unit
investment trust office, and, in the case of Units evidenced by a Certificate,
by tendering such Certificate to the Trustee at such office, properly endorsed
or accompanied by a written instrument or instruments of transfer in form
satisfactory to the Trustee. Unitholders must sign such written request, and
such Certificate or transfer instrument, exactly as their name appears on the
records of the Trustee and on any Certificate representing the Units to be
redeemed. Such signature must be guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature guarantee
program in addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. Such redemption shall be made by the Trustee on the third business day
following the day on which request for redemption is received by the Trustee
(such day being herein called the "REDEMPTION DATE"). Subject to payment by such
Unitholder of any tax or other governmental charges which may be imposed
thereon, such redemption is to be made by payment on the Redemption Date of cash
equal to the Unit Value (determined on the basis of the Trust Fund Evaluation
made in accordance with Section 5.0l) multiplied by the number of Units being
redeemed (herein called the "REDEMPTION PRICE"). Units received for redemption
by the Trustee on any day after the evaluation time set forth in the related
Prospectus will be held by the Trustee until the next day on which the New York
Stock Exchange is open for trading and will be deemed to have been tendered on
such day for redemption at the Redemption Price computed on that day. The
portion of the Redemption Price which represents interest shall be withdrawn
from the Interest Account of the affected Trust Fund to the extent available.
The balance paid on any redemption including accrued interest, if any, shall be
withdrawn from the Principal Account of the affected Trust to the extent that
funds are available for such purpose. If such available balance shall be
insufficient, the Trustee shall sell from such Trust Fund such Bonds from among
those designated for such purpose by the Depositor as the Trustee in its
discretion shall deem advisable or necessary. Sales of Bonds by the Trustee
shall be made in such manner as the Trustee shall in the exercise of its
fiduciary judgment determine will bring the best price obtainable for the Trust
Fund. In the event that funds are withdrawn from the Principal Account or Bonds
are sold for payment of any portion of the Redemption Price representing accrued
interest, the Principal Account shall be reimbursed when sufficient funds are
next available in the Interest Account for such funds so applied.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than three business days following the
day on which tender for redemption is made (1) for any period during which the
New York Stock Exchange, Inc. is closed other than customary weekend and holiday
closings; (2) for any period during which (i) trading on the New York Stock
Exchange, Inc. is restricted or (ii) an emergency exists as a result of which
disposal by the Trust Fund of the Bonds is not reasonably practicable or it is
not reasonably practicable fairly to determine in accordance herewith the value
of the Bonds for the purposes of any Trust Fund Evaluation; or (3) for such
other period as the Securities and Exchange Commission may by order permit, and
shall not be liable to any person or in any way for any loss or damage which may
result from any such suspension or postponement.
No later than the close of business on the day of tender of any Unit
for redemption by a Unitholder other than the Depositor, the Trustee shall
notify the Depositor of such tender. The Depositor shall have the right to
purchase such Units by notifying the Trustee of its election to make such
purchase as soon as practicable thereafter but in no event subsequent to the
close of business on the second business day after the day on which such Units
were tendered for redemption. Such purchase shall be made by payment for such
Units by the Depositor to the Unitholder not later than the close of business on
the Redemption Date of any amount not less than the Redemption Price which would
otherwise be payable by the Trustee to such Unitholder.
Any Unit so purchased by the Depositor may at the option of the
Depositor be tendered to the Trustee for redemption in the manner provided in
the first paragraph of this Section 5.02.
The Depositor shall maintain with the Trustee a current list of Bonds
held in each Trust Fund designated to be sold and the minimum par amount thereof
for the purpose of redemption of Units of each Trust Fund tendered for
redemption and not purchased by the Depositor, and for payment of expenses
hereunder. If at any such time the Depositor shall for any reason fail to
deliver such a list, the Trustee, in its sole discretion, may designate a
current list of Bonds in each Trust Fund for such purposes. The net proceeds of
any sale of Bonds which represents interest shall be credited to the Interest
Account of the affected Trust Fund, and the balance of such net proceeds shall
be credited to the Principal Account of such Trust Fund. The Depositor shall
also designate on such list of Bonds designated to be sold the Bonds upon the
sale of which the Trustee shall obtain permanent insurance (the "PERMANENT
INSURANCE") from an Insurer, provided that if the Depositor shall for any reason
fail to make such designation, the Trustee in its sole discretion shall make
such designation if it deems such designation to be in the best interests of
Unitholders. The Trustee is hereby authorized to pay and shall pay out of the
proceeds of the sale of the Bonds which are covered by Permanent Insurance any
premium for such Permanent Insurance and the net proceeds after such deduction
shall be credited to the Principal Account and the net proceeds representing
accrued interest shall be credited to the Interest Account.
Sales of Bonds shall be made in such manner as the Trustee shall
determine will bring the best price obtainable for the Trust Fund, provided,
however, that sales shall be made in such manner, as the Trustee shall
determine, as will provide the Trustee with funds in an amount sufficient and at
the time necessary in order for it to pay the Redemption Price of Units tendered
for redemption, regardless of whether or not a better price could be obtained if
the Bonds were sold without regard for the day on which the proceeds of such
sale would be received. The Trustee shall not be liable or responsible in any
way for depreciation or loss incurred by reason of any sale of Bonds made
pursuant to this Section 5.02.
Certificates evidencing Units and the amount recorded in the
registration books of the Trust Fund representing Units held in uncertificated
form redeemed pursuant to this Section 5.02 shall be canceled by the Trustee and
the Unit or Units evidenced by such Certificates or evidenced by such records in
the registration books of the Trust Fund for Units held in uncertificated form
shall be terminated by such redemptions.
When directed by the Depositor, the Trustee shall employ the Depositor
as its agent for the purpose of executing sales of Bonds. The Depositor will
verify the Trustee's ownership of any Bond prior to entering into a contract for
its sale. The Trustee shall have no liability for loss or depreciation resulting
from the Depositor's negligence or misconduct as such agent.
Notwithstanding the foregoing, the Trustee is hereby authorized in its
discretion, but without obligations, in the event that the Depositor does not
elect to purchase any Unit tendered to the Trustee for redemption, or in the
event that a Unit is being tendered by the Depositor for redemption, in lieu of
redeeming such Unit, to sell such Unit in the over-the-counter market for the
account of the tendering Unitholder at a price which will return to the
Unitholder an amount in cash, net after deducting brokerage commissions,
transfer taxes and other charges, equal to or in excess of the Redemption Price
which such Unitholder would otherwise be entitled to receive on redemption
pursuant to this Section 5.02. The Trustee shall pay to the Unitholder the net
proceeds of any such sale no later than the day the Unitholder would otherwise
be entitled to receive payment of the Redemption Price hereunder.
Except as provided in Article VII and Article VIII, neither the
Depositor nor the Trustee shall be liable or responsible in any way for
depreciation or loss incurred by reason of any sale or designation of Bonds made
pursuant to this Section 5.02.
ARTICLE VI
ISSUANCE, TRANSFER, INTERCHANGE
AND REPLACEMENT OF CERTIFICATES
SECTION 6.01. ISSUANCE OF CERTIFICATES. Certificates representing
Units held by a Unitholder will not be issued except upon written request by a
Unitholder, or his or her registered broker/dealer, to the Trustee at its unit
investment trust office. Certificates that have been issued may be returned to
the Trustee at any time and canceled, without affecting the Unitholder's
interest in the Trust Fund, when accompanied by proper written instructions from
the Unitholder.
SECTION 6.02. TRANSFER OF UNITS; INTERCHANGE OF CERTIFICATES. A
Unitholder may transfer any of his Units by making a written request to the
Trustee at its unit investment trust office and, in the case of Units evidenced
by a Certificate, by presenting and surrendering such Certificate at such office
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee. Unitholders must sign such written
request, and such Certificate of transfer instrument, exactly as their name
appears on the records of the Trustee and on any Certificate representing the
Units to be transferred. Such signature must be guaranteed by a participant in
the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee. Such transfer shall thereupon be made on the
records of the Trustee and, if appropriate, a new registered Certificate or
Certificates for the same number of Units of the same Trust Fund shall be issued
in exchange and substitution therefor. Certificates issued pursuant to this
Agreement are interchangeable for one or more other Certificates of the same
Trust Fund in an equal aggregate number of Units and all Certificates issued
shall be issued in denominations of one Unit or any whole multiple thereof as
may be requested by the Unitholder. The Trustee may deem and treat the person in
whose name any Unit or Certificate shall be registered upon the books of the
Trustee as the owner of such Unit or Certificate for all purposes hereunder and
the Trustee shall not be affected by any notice to the contrary. The transfer
books maintained by the Trustee for each Trust Fund for the purpose of this
Section 6.02 shall be closed for an individual Trust Fund as such Trust Fund is
terminated pursuant to Article IX hereof.
A sum sufficient to cover any tax or other governmental charge that may
be imposed in connection with any such transfer or interchange shall be paid to
the Trustee. A Unitholder may be required to pay such amount as may be specified
by the Trustee (and approved by the Depositor) for each new Certificate issued
on any such transfer or interchange.
All Certificates canceled pursuant to this Agreement, other than those
endorsed for transfer, may be cremated or otherwise destroyed by the Trustee.
SECTION 6.03. REPLACEMENT OF CERTIFICATES. In case any Certificate
shall become mutilated or be destroyed, stolen or lost, the Trustee shall
execute and deliver a new Certificate in exchange and substitution therefor upon
the Unitholder's furnishing the Trustee with proper identification and
satisfactory indemnity, complying with such other reasonable regulations and
conditions as the Trustee may prescribe and paying such expenses as the Trustee
may incur, provided, however, that if the particular Trust Fund has terminated
or is in the process of termination, the Trustee, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 9.01 hereof. Any mutilated Certificate shall
be duly surrendered and canceled before any duplicate Certificate shall be
issued in exchange and substitution therefor. Any duplicate Certificate issued
pursuant to this Section 6.03 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time. Upon
issuance of any duplicate Certificate pursuant to this Section 6.03, the
Certificate claimed to have been lost, stolen or destroyed shall become null and
void and of no effect, and any bona fide purchaser thereof shall have only such
rights as are afforded under Article 8 of the Uniform Commercial Code to a
holder presenting a Certificate for transfer in the case of an overissue.
SECTION 6.04. FORM OF CERTIFICATE. Each Certificate shall be in fully
registered form, shall be numbered serially for identification, shall be
executed in facsimile by the original Depositor of the Trust Fund in question
and manually by an authorized signatory of the Trustee, shall be dated the date
of execution and delivery by the Trustee and shall represent a fractional
undivided interest in the specified Trust Fund, the numerator of which fraction
shall be the number of Units set forth on the face of such Certificate and the
denominator of which shall be the total number of Units of undivided interest of
such Trust Fund outstanding at any such time.
ARTICLE VII
DEPOSITOR
SECTION 7.01. CERTAIN MATTERS REGARDING SUCCESSION. The covenants,
provisions and agreements herein contained shall in every case be binding upon
any successor to the business of any Depositor. In the event of an assignment by
any Depositor to a successor corporation or partnership as permitted by the next
following sentence, such Depositor and, if such Depositor is a partnership, its
partners shall be relieved of all further liability under this Agreement. Any
Depositor may transfer all or substantially all of its assets to a corporation
or partnership which carries on the business of such Depositor, if at the time
of such transfer such successor duly assumes all the obligations of such
Depositor under this Agreement.
SECTION 7.02. LIABILITY OF DEPOSITOR AND INDEMNIFICATION. (a) The
Depositor shall not be under any liability to any Trust Fund or the Unitholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in judgment or for depreciation
or loss incurred by reason of the purchase or sale of any Bonds, provided,
however, that this provision shall not protect the Depositor against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder. The
Depositor may rely in good faith on any paper, order, notice, list, affidavit,
receipt, evaluation, opinion, endorsement, assignment, draft or any other
document of any kind prima facie properly executed and submitted to it by the
Trustee, the Trustee's counsel, the Evaluator or any other person for any
matters arising hereunder. The Depositor shall in no event be deemed to have
assumed or incurred any liability, duty or obligation to any Unitholder, the
Evaluator or the Trustee other than as expressly provided for herein.
(b) Each Trust Fund shall pay and hold the Depositor harmless from and
against any loss, liability or expense incurred in acting as Depositor of such
Trust Fund other than by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. The Depositor shall not be
under any obligation to appear in, prosecute or defend any legal action which in
its opinion may involve it in any expense or liability, provided, however, that
the Depositor may in its discretion undertake any such action which it may deem
necessary or desirable in respect of this Agreement and the rights and duties of
the parties hereto and the interests of the Unitholders hereunder and, in such
event, the legal expenses and costs of any such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Trust Fund
concerned and shall be paid directly by the Trustee out of the Interest and
Principal Accounts of such Trust Fund.
(c) None of the provisions of this Agreement shall be deemed to protect
or purport to protect the Depositor against any liability to the Trust Fund or
to the Unitholders to which the Depositor would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Depositor's reckless disregard of its obligations
and duties under this Agreement.
ARTICLE VIII
TRUSTEE
SECTION 8.01. GENERAL MATTERS RELATING TO THE TRUSTEE. (a) All moneys
deposited with or received by the Trustee hereunder shall be held by it without
interest in trust as part of the appropriate Trust Fund or Reserve Account until
required to be disbursed in accordance with the provisions of this Agreement and
such moneys will be segregated in such manner as shall constitute the
segregation and holding thereof in trust within the meaning of the Investment
Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in
good faith on any evaluation, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document whether or not of the same kind, prima facie properly
executed, or the disposition of moneys or Bonds pursuant to this Agreement;
PROVIDED, HOWEVER, that this provision shall not protect the Trustee against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder, and
the Trustee may construe any of the provisions of this Agreement insofar as the
same may appear to be ambiguous or inconsistent with any other provisions
hereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto and the Unitholders.
(c) The Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor, or for the form, character, genuineness,
sufficiency, value or validity of any Bonds (except that the Trustee shall be
responsible for the exercise of due care in determining the genuineness of Bonds
delivered to it pursuant to contracts for the purchase of such Bonds) or for or
in respect of the validity or sufficiency of any Certificates (except for the
due execution thereof by the Trustee) or for the due execution thereof by the
Depositor and the Trustee shall in no event assume or incur any liability, duty
or obligation to any Unitholder or to the Depositor or Evaluator, other than as
expressly provided for herein. The Trustee shall not be responsible for or in
respect of the validity of any signature by or on behalf of the Depositor.
(d) The Trustee shall not be under any obligation to appear in,
prosecute or defend any action which in its opinion may involve it in expense or
liability unless it shall be furnished with such reasonable security and
indemnity against such expense or liability as it may be required, and any
pecuniary cost of the Trustee from such actions shall be deductible ratably from
and a ratable charge against the Trust Funds concerned. The Trustee shall in its
discretion undertake such action as it may deem necessary at any and all times
to protect the Trust Funds and the rights and interests of the Unitholders
pursuant to the terms of this Agreement, provided, however, that the expenses
and costs of such actions, undertakings or proceedings shall be reimbursable to
the Trustee ratably from the Trust Funds concerned.
(e) The Trustee may employ agents, attorneys, accountants and auditors,
including an agent or agents for the purpose of custody and safeguarding Bonds,
and shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable care. The Trustee shall not be
liable in respect of any action taken or suffered under this Agreement in good
faith, in accordance with an opinion of counsel. The fees and expenses charged
by such agents, attorneys, accountants or auditors, except for the fees and
expenses charged by any agent or agents for custody and safeguarding of Bonds,
shall constitute an expense of the Trustee reimbursable from the Interest and
Principal Accounts as set forth in Section 3.04 hereof.
(f) If at any time the Depositor shall fail to undertake or perform any
of the duties which by the terms of this Agreement are affirmatively required by
it to be undertaken or performed, or the Depositor shall be incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver of the Depositor or
of its property shall be appointed, or any public officer shall take charge or
control of the Depositor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case, the Trustee
may do any one or more of the following: (1) appoint a successor Depositor who
shall act hereunder in all respects in place of such Depositor and which may be
compensated, at rates deemed by the Trustee to be reasonable under the
circumstances, by deduction ratably from the Interest Account or, to the extent
funds are not available in such Account, from the Principal Account of the Trust
Funds but no such deduction shall be made exceeding such reasonable amount as
the Securities and Exchange Commission may prescribe in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940; (2) continue to act as
Trustee hereunder without terminating this Agreement; or (3) terminate this
Agreement and the trust created hereby and liquidate the Trust Funds in the
manner provided in Section 9.0l.
(g) (i) The Trustee may in its discretion, and shall if so directed by
the Depositor, terminate this Agreement and any Trust Fund created hereby (but
only insofar as the Agreement relates to such Trust Fund) and liquidate such
Trust Fund, all in the manner provided in Section 9.01 if the value of such
Trust Fund as shown by any Trust Fund Evaluation shall be less than the
liquidation amount specified in the Prospectus; and (ii) the Trustee shall
terminate this Agreement and any Trust created hereby (but only insofar as the
Agreement relates to such Trust Fund) and liquidate such Trust Fund all in the
manner provided in Section 9.01 if by reason of the aggregate redemption of
Units not theretofore sold by the Depositor and/or one or more of the
underwriters the net worth of such Trust Fund is reduced to less than 40% of the
aggregate original value of the Securities initially deposited therein.
(h) In no event shall the Trustee be personally liable for any taxes or
other governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon. The Trustee shall be reimbursed and indemnified out of the
Interest and Principal Accounts of the appropriate Trust Fund for all such taxes
and charges, for any tax or charge imposed against the Trustee as Trustee of
such Trust Fund and for any expenses, including counsel fees, which the Trustee
may sustain or incur with respect to such taxes or charges.
(i) Notwithstanding any provisions of this Agreement to the contrary,
no payment to a Depositor or to any principal underwriter (as defined in the
Investment Company Act of 1940) for the Trust Fund or to any affiliated person
(as so defined) or agent of a Depositor or such underwriter shall be allowed the
Trustee as an expense except for payment of such reasonable amounts as the
Securities and Exchange Commission may prescribe as compensation for performing
bookkeeping and other administrative services, as set forth in Section 3.14, of
a character normally performed by the Trustee.
(j) The Trustee in its individual or any other capacity may become an
owner or pledgee of, or be an underwriter or dealer in respect of, obligations
issued by the same issuer (or an affiliate of such issuer) of any Bonds at any
time held as part of the Trust and may deal in any manner with the same or with
the issuer (or an affiliate of the issuer) with the rights and powers as if it
were not the Trustee hereunder.
(k) The Trust may include a letter or letters of credit for the
purchase of Bonds or Contract Obligations issued by the Trustee in its
individual capacity for the account of the Depositor and the Trustee may
otherwise deal with the Depositor and the Trust within the same rights and
powers as if it were not the Trustee hereunder.
SECTION 8.02. BOOKS, RECORDS AND REPORTS. The Trustee shall keep
proper books of record and account of all the transactions of each Trust under
this Indenture at its unit investment trust office including a record of the
name and address of, and the Certificates issued by each Trust and held by,
every Unitholder, and such books and records of each Trust shall be open to
inspection by any Unitholder of such Trust at all reasonable times during the
usual business hours.
Unless the Depositor determines that such an audit is not required, the
account of each Trust shall be audited not less than annually by independent
public accountants designated from time to time by the Depositor and reports of
such accountants shall be furnished by the Trustee, upon request, to
Unitholders. So long as the Depositor is maintaining a secondary market for
Units, the Depositor shall bear the cost of such audits in excess of the amounts
indicated in the Prospectus relating to such Trust.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of independent counsel to the Depositor, the Trustee
shall pay, or reimburse to the Depositor or others, the costs of the preparation
of documents and information with respect to a Trust required by law or
regulation in connection with the maintenance of a secondary market in units of
such Trust. Such costs may include but are not limited to accounting and legal
fees, blue sky registration and filing fees, printing expenses and other
reasonable expenses related to documents required under federal and state
securities laws. Such costs shall be a Trust expense and the Trustee shall not
be obligated to advance any of its own funds to make such payments.
SECTION 8.03. REPORTS TO SECURITIES AND EXCHANGE COMMISSION AND
OTHERS. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute or rule or
regulation thereunder.
SECTION 8.04. AGREEMENT AND LIST OF BONDS ON FILE. The Trustee shall
keep a certified copy or duplicate original of this Agreement on file at its
unit investment trust office available for inspection by any Unitholder at all
reasonable times during its usual business hours, and the Trustee shall keep and
so make available for inspection a current list of the Bonds in each Trust Fund.
SECTION 8.05. COMPENSATION OF TRUSTEE. The Trustee shall receive at the
times and in the manner set forth in Section 3.04 as compensation for performing
the usual, ordinary, normal and recurring services under this Agreement during
the preceding month an amount equal to the amount specified as compensation for
the Trustee in the Prospectus. During the first year, such compensation shall be
reduced by the amount set forth in the Prospectus which amount represents the
amount of interest which accrues on any "when-issued" Bonds and any Bonds
otherwise delivered after the First Settlement Date between the First Settlement
Date of the respective Trust and the respective dates of delivery of any Bonds.
The Depositor shall reimburse the Trustee for such reduction on or before the
First Settlement Date of the Trust. Such fee shall accrue daily and be computed
on the basis of the largest par amount of Bonds held by a Trust during the
period with respect to which such compensation is paid. The Trustee may
periodically adjust the compensation provided for pursuant to this paragraph (i)
in response to fluctuations in short-term interest rates and average cash
balances of the Trust accounts (reflecting the cost to the Trustee of advancing
funds to a Trust and changes in anticipated earnings on cash balances) and (ii)
in addition, may from time to time, without the consent or approval of any
Unitholder or the Depositor, adjust such portion of its fee as is not computed
by reference to the cash balance in the Trust accounts by amounts not exceeding
the proportionate increase, during the period from the date of such Agreement to
the date of any such increase, in consumer prices as last published prior to
each such date under the classification "All Services Less Rent of Shelter" in
the Consumer Price Index For All Urban Consumers (CPI-U) U.S. City Average, not
seasonally adjusted, based 1982 - 84 = 100, published by the United States
Department of Labor. In the event that such classification ceases to incorporate
a significant number of items, or if a substantial change is made in the method
of establishing such classification, then the classification shall be adjusted
in a fair and reasonable manner to the figure that would have resulted had no
substantial change occurred in the manner of computing such classification. In
the event that such classification (or a successor or substitute index) is not
available, such governmental or other service or publication as shall evaluate
the information in substantially the same manner as the aforesaid classification
shall be used in lieu thereof.
The Trustee shall also receive, at the times and in the manner set
forth in Section 3.04, reimbursement for any and all expenses and disbursements
incurred hereunder (except as set forth in Section 8.01(e)), including legal and
auditing expenses and additional compensation for any extraordinary services
performed hereunder, which extraordinary services shall include but not be
limited to, all costs and expenses incurred by the Trustee in making any annual
or other reports pursuant to Section 8.03, or in making any distribution of cash
attributable to failed contracts covering Contract Obligations in accordance
with Section 3.04; PROVIDED, HOWEVER, that the amount of any such charge which
has not been finally determined as of any Distribution Date may be estimated and
any necessary adjustments shall be made in the succeeding period.
The Trustee shall be indemnified ratably from the Trust Funds and held
harmless against any loss, liability or expense incurred without gross
negligence, bad faith, willful misconduct or reckless disregard of its duties on
the part of the Trustee arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in the premises.
The Trustee's normal and extraordinary compensation and reimbursement
of the above-mentioned expenses and losses shall be charged by the Trustee
against the Interest and Principal Accounts of the appropriate Trust Funds in
accordance with Section 3.04 on or before each Distribution Date. If the
balances in the Interest and Principal Accounts shall be insufficient to provide
for amounts payable pursuant to this Section 8.05, the Trustee shall have the
power to sell Bonds in the manner provided in Section 5.02 hereof. The Trustee
shall not be liable or responsible in any way for depreciation or loss incurred
by reason of any sale of Bonds made pursuant to this Section 8.05.
SECTION 8.06. RESIGNATION, DISCHARGE OR REMOVAL OF THE TRUSTEE;
SUCCESSORS. (a) The Trustee may resign and be discharged of the trust created by
this Agreement by executing an instrument in writing resigning as Trustee of
such trust, filing the same with the Depositor and mailing a copy of a notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such instrument when, subject to Section 8.06(c), such
resignation is to take effect. Upon receiving such notice of resignation, the
Depositor shall use its best efforts promptly to appoint a successor Trustee in
the manner and meeting the qualifications hereinafter provided, by written
instrument or instruments delivered to the resigning Trustee and the successor
Trustee. In case at any time the Trustee shall not meet the requirements set
forth in Section 8.06 hereof, or shall become incapable of acting, or if a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Trustee in an involuntary case, or the Trustee shall commence a
voluntary case, under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or any receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) for the Trustee or for any
substantial part of its property shall be appointed, or the Trustee shall
generally fail to pay its debts as they become due, or shall fail to meet such
written standards for the Trustee's performance as shall be established from
time to time by the Depositor, or if the Depositor determines in good faith that
there has occurred either (1) a material deterioration in the creditworthiness
of the Trustee or (2) one or more negligent acts on the part of the Trustee
having a materially adverse effect, whether singly or in the aggregate, on the
Trust Fund or on one or more of the Trust Funds of one or more Funds, such that
the replacement of the Trustee is in the best interests of the Unitholders, the
Depositor, upon 60 days' prior written notice, may remove the Trustee and
appoint a successor trustee having qualifications and at a rate of compensation
satisfactory to the Depositor by written instrument, in duplicate, one copy of
which shall be delivered to the Trustee so removed and one copy to the successor
trustee. Notice of such appointment of a successor trustee shall be mailed
promptly after acceptance of such appointment by the successor trustee to each
Unitholder then of record.
(b) In case at any time the Trustee shall resign and no successor
Trustee shall have been appointed within thirty days after notice of resignation
has been received by the Depositor, the retiring Trustee may forthwith apply to
a court of competent jurisdiction for the appointment of a successor Trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(c) Any successor Trustee appointed hereunder shall execute and
acknowledge to the Depositor and the retiring Trustee an instrument accepting
such appointment hereunder, and such successor Trustee without any further act,
deed or conveyance shall become vested with all rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee herein and shall be bound by all the terms and conditions of this
Agreement PROVIDED, HOWEVER, that no successor trustee shall be under any
liability hereunder for occurrences or omissions prior to the execution of such
instrument. Upon the request of such successor Trustee, the retiring Trustee
shall, upon payment of all amounts due the retiring Trustee, execute and deliver
an instrument acknowledged by it transferring to such successor Trustee all the
rights and powers of the retiring Trustee; and the retiring Trustee shall
transfer, deliver and pay over to the successor Trustee all Bonds and moneys at
the time held by it hereunder, if any, together with all necessary instruments
of transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained by the
retiring Trustee in the administration hereof as may be requested by the
successor Trustee and shall thereupon be discharged from all duties and
responsibilities under this Agreement. Any resignation or removal of a Trustee
and appointment of a successor Trustee pursuant to this Section 8.06 shall
become effective upon such acceptance of appointment by the successor Trustee.
(d) Any corporation into which a Trustee hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which such Trustee hereunder shall be a party, shall be the
successor Trustee under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
SECTION 8.07. QUALIFICATION OF TRUSTEE. The Trustee and any successor
Trustee shall be a corporation organized under laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers and
has at all times an aggregate capital, surplus and undivided profits of not less
than $500,000.
SECTION 8.08. COLLATERAL. As collateral security for the prompt
payment to the Trustee of all reimbursement to which the Trustee is entitled
hereunder and of all sums at any time owed to or payable to the Trustee
hereunder (including, without limitation, the prompt reimbursement of the
Trustee for any sums that it may from time to time as required hereunder or in
its discretion advance to the account of the Trust Fund), the Trustee is hereby
granted a first and prior lien and security interest in and to the Trust Fund
and all Bonds now or hereafter included therein, including (without limitation)
those Bonds listed in the Schedules to the Trust Agreement, together with all
Bonds, obligations, Contract Obligations and instruments received in exchange or
substitution therefor and all proceeds thereof and all additions and
substitutions.
ARTICLE IX
TERMINATION
SECTION 9.01. PROCEDURE UPON TERMINATION. This Agreement and the trust
created hereby shall terminate as to an individual Trust Fund upon the maturity,
redemption, sale or other disposition, as the case may be, of the last Bond held
hereunder in such Trust Fund, unless sooner terminated as herein before
specified, and may be terminated at any time by written instrument executed by
the Depositor and consented to by holders of Units representing 66-2/3% of the
Units of such Trust Fund then outstanding under this Agreement; provided, that
in no event shall this trust continue with respect to such Trust Fund beyond
January l of the fiftieth year after the creation of such Trust Fund.
This Agreement and the trust created hereby shall be terminated as to
the entire Fund upon the maturity, redemption, sale or other disposition, as the
case may be, of the last Bond held hereunder, in the last maturing Trust Fund,
unless sooner terminated as herein before specified, and may be terminated at
any time by written instrument executed by the Depositor and consented to by
holders of Units representing 66-2/3% of all Units then outstanding under this
Agreement; provided that in no event shall this trust continue beyond December
31 of the year following the termination of the last Trust Fund; and provided
further that in connection with any such liquidation it shall not be necessary
for the Trustee to dispose of any Bond or Bonds if retention of such Bond or
Bonds, until due, shall be deemed to be in the best interests of Unitholders,
including, but not limited to, situations in which a Bond or Bonds insured by
the Insurance are in default, situations in which Bond or Bonds insured by the
Insurance reflect a deteriorated market price resulting from a deterioration in
credit quality and situations in which a Bond or Bonds mature after the
mandatory termination date.
Written notice of any termination, specifying the time or times at
which any Unitholder holding Certificates may surrender such Certificates for
cancellation and the date, determined by the Trustee, upon which the transfer
books of the Trustee, maintained pursuant to Section 8.02, shall be closed with
respect to the terminated Trust Fund or the entire Fund, as the case may be,
shall be given by the Trustee to Unitholders of such terminated Trust Fund or
all Unitholders, as the case may be.
Within a reasonable period of time after the termination of the entire
Fund, the Trustee shall sell all of the Bonds then held, if any, and shall:
(a) deduct from the Interest Account or to the extent that
funds are not available in such Account, from the Principal Account of
every Trust Fund separately and pay to itself individually an amount
equal to the sum of (1) its accrued compensation for its ordinary
services in connection with such Trust Fund, (2) any compensation due
it for its extraordinary services in connection with such Trust Fund
and (3) any other expenses, disbursements and advances in connection
with such Trust Fund as provided herein;
(b) deduct from the Interest Account or to the extent that
funds are not available in such account, from the Principal Account of
every Trust Fund separately and pay accrued and unpaid fees in
connection with such Trust Fund of the Evaluator, the Depositor and
bond counsel, if any;
(c) deduct from the Interest Account, or to the extent that
funds are not available from such Account, from the Principal Account
of every Trust Fund separately any amounts which it in its sole
discretion shall deem requisite to be deposited in the Reserve Account
to provide for any applicable taxes or other governmental charges that
may be payable out of such Trust Fund;
(d) distribute to each Unitholder (upon surrender for
cancellation of his Certificate or Certificates, if issued) such
Unitholder's interest in the balances of the Interest, Principal, and,
on the conditions set forth in Section 3.03 hereof, the Reserve
Accounts of the Trust Fund in which he holds Units;
(e) together with such distribution to each Unitholder as
provided for in paragraph (d), furnish to each such Unitholder a final
statement as of the date of the computation of the amount distributable
to Unitholders of the same Trust Fund, setting forth the data and
information in substantially the form and manner provided for in
Section 3.05 hereof.
SECTION 9.02. NOTICE TO UNITHOLDERS. In the event that all of the
Unitholders holding Certificates shall not surrender their Certificates for
cancellation within six months after the time specified in the applicable,
above-mentioned notice, the Trustee shall give a second written notice to the
remaining Unitholders to surrender their Certificates for cancellation and
receive the liquidating distribution with respect thereto. If within one year
after the second notice all the Certificates issued shall not have been
surrendered for cancellation, the Trustee may take appropriate steps or may
appoint an agent to take appropriate steps to contact the remaining Unitholders
concerning surrender of their Certificates and the cost thereof shall be paid
out of the moneys and other assets which remain in the affected Trust Fund.
SECTION 9.03. MONEYS TO BE HELD IN TRUST WITHOUT INTEREST. The Trustee
shall be under no liability with respect to moneys in the Interest, Principal
and Reserve Accounts upon termination, except to hold the same in trust without
interest.
SECTION 9.04. DISSOLUTION OF DEPOSITOR NOT TO TERMINATE. The
dissolution of the Depositor shall not, subject to Section 8.01(f), operate to
terminate this Agreement or the Fund or any individual Trust Fund.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. AMENDMENT AND WAIVER. This Agreement may be amended
from time to time by the Depositor and the Trustee without the consent of any of
the Unitholders (a) to cure any ambiguity or to correct or supplement any
provisions contained herein which may be defective or inconsistent with any
other provision contained herein; (b) to change any provision hereof as may be
required by the Securities and Exchange Commission or any successor governmental
agency exercising similar authority; or (c) to make such other provisions in
regard to matters or questions arising hereunder as shall not adversely affect
the interest of the Unitholders (as determined in good faith by the Depositor
and the Trustee). This Agreement may also be amended from time to time by the
Depositor and the Trustee (or the performance of any of the provisions of this
Agreement may be waived) with the consent of holders of Units representing
66-2/3% of the Units at the time outstanding under the Trust Agreement of the
individual Trust Fund or Trust Funds affected for the purpose of adding any
provisions of this Agreement or of modifying in any manner the rights of the
holders of Units of such Trust Fund or Trust Funds; provided, however, that in
no event may any amendment be made which would (a) alter the rights to the
Unitholders as against each other, (b) provide the Trustee with the power to
engage in business or investment activities other than as specifically provided
in this Agreement or (c) adversely affect the characterization of the Trust as a
grantor trust for federal income tax purposes; provided, further, that the
consent of 100% of the Unitholders of any individual Trust Fund is required to
amend this Agreement (a) to increase the number of Units of such Trust Fund
issuable hereunder above the number of Units specified in the Prospectus or such
lesser amount as may be outstanding at any time during the term of this
Agreement, (b) to permit, in addition to acquisitions permitted under Sections
3.07 and 3.12 hereof, the acquisition hereunder of any Bonds for such Trust Fund
different from those specified in the Schedules to the Trust Agreement, (c) to
reduce the aforesaid percentage of Units the holders of which are required to
consent to certain amendments and (d) to reduce the interest in such Trust Fund
represented by any Units of such Trust Fund.
Promptly after the execution of any amendment requiring the consent of
the Unitholders or of any other amendment if directed by the Depositor, the
Trustee shall furnish written notification of the substance of such amendment to
each Unitholder then of record affected thereby.
It shall not be necessary for the consent of Unitholders under this
Section 10.01 or under Section 9.01 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Unitholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
SECTION 10.02. INITIAL COSTS. Unless otherwise provided in the Trust's
prospectus, 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 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 on each Record Date
(or such earlier date on which the expenses have been fully accrued) from funds
on hand in the Interest Account or, to the extent funds are not available in
such Account, from the Principal Account, in the amount deemed to have accrued
as of such Record Date as provided in the following sentence (less prior
payments on account of such advances, if any), and the provisions of Sections
8.05 and 8.08 with respect to the reimbursement of the disbursements for Trust
expenses, including, without limitation, the lien in favor of the Trustee
therefor and the authority to sell Bonds as needed to fund such reimbursement,
shall apply to the payment of expenses and the amounts advanced pursuant to this
Section. For the purposes of the preceding sentence and the addition provided in
clause (4) of the first sentence of Section 5.01, the expenses borne by the
Trust pursuant to this Section shall be deemed to have been paid on the date of
the Agreement and to accrue at a daily rate over the time period specified for
their amortization provided in the Prospectus; provided, however, that nothing
herein shall be deemed to prevent, and the Trustee shall be entitled to, full
reimbursement for any advances made pursuant to this Section no later than the
termination of the Trust. For purposes of calculating the accrual of
organizational expenses under this Section 5.02, the Trustee shall rely on the
written estimates of such expenses provided by the Depositor pursuant to Section
5.01.
SECTION 10.03. REGISTRATION (INITIAL AND CURRENT) OF UNITS AND FUND.
The Depositor agrees and undertakes on its own part to register the Units and
the Fund with the Securities and Exchange Commission and under the Blue Sky laws
of such states as the Depositor may select.
SECTION 10.04. CERTAIN MATTERS RELATING TO UNITHOLDERS. (a) The death
or incapacity of any Unitholder shall not operate to terminate this Agreement,
the Fund or the Trust Fund in which he holds Units nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Fund or such Trust
Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them. Each Unitholder expressly waives any right he may
have under any rule of law, or the provisions of any statute, or otherwise, to
require the Trustee at any time to account, in any manner other than as
expressly provided in this Agreement, in respect of the Bonds or moneys from
time to time received, held and applied by the Trustee hereunder.
(b) No Unitholder shall have any right to vote except as provided in
Sections 9.01 and 10.01 or in any manner otherwise to control the operation of
the Fund or the obligations of the parties hereto, nor shall anything set forth
in this Agreement or the Trust Agreement or contained in the terms of any
Certificates which may have been issued be construed so as to constitute the
Unitholders from time to time as partners or members of an association; nor
shall any Unitholder ever be under any liability to any third persons by reason
of any action taken by the parties to this Agreement, or for any other cause
whatsoever.
(c) By the purchase and acceptance or other lawful delivery and
acceptance of any Unit, whether certificated or not, the Unitholder shall be
deemed to be a beneficiary of the Trust created by this Agreement and the Trust
Agreement and vested with all right, title and interest in the Trust Fund
therein created to the extent of the Unit or Units set forth whether evidenced
by such Certificate or held in uncertificated form, subject to the terms and
conditions of this Agreement and the Trust Agreement.
(d) A Unitholder may at any time prior to the Evaluation Time on the
date the Trust is terminated tender his Units or his Certificate(s) if held in
certificated form (including any temporary Certificate or other evidence of
ownership of Units of the Trust Fund, issued by the Trustee or the Depositor) to
the Trustee for redemption, subject to and in accordance with Section 5.02.
SECTION 10.05. NEW YORK LAW TO GOVERN. This Agreement is executed and
delivered in the State of New York, and all laws or rules of construction of
such State, except for provisions with respect to choice of law, shall govern
the rights of the parties hereto and the Unitholders and the interpretation of
the provisions hereof.
SECTION 10.06. NOTICES. Any notice, demand, direction or instruction
to be given to the Depositor hereunder shall be in writing and shall be duly
given if mailed, first class with proper postage prepaid, or delivered to the
Depositor at One Commerce Square, Philadelphia, Pennsylvania 19103, or at such
other address as shall be specified in the Prospectus or by the Depositor to the
other parties hereto in writing. Any notice, demand, direction or instruction to
be given to the Trustee shall be in writing and shall be duly given if mailed,
first class with proper postage prepaid, or delivered to the unit investment
trust office of the Trustee at 4 New York Plaza, New York, New York 10004-2413,
or such other address as shall be specified to the other parties hereto by the
Trustee in writing. Any notice, demand, direction or instruction to be given to
the Evaluator hereunder shall be in writing and shall be duly given if mailed,
first class with proper postage prepaid, or delivered to the Evaluator at 395
Hudson Street, New York, New York 10014-3622, or at such other address as shall
be specified by the Evaluator to the other parties hereto in writing. Any notice
to be given to a Unitholder shall be duly given if mailed, first class with
proper postage prepaid, or delivered to each Unitholder at the address of such
holder appearing on the registration books of the Trustee.
SECTION 10.07. SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms shall be for any reason whatsoever held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of any Certificates or the rights of the holders
thereof.
SECTION 10.08. SEPARATE AND DISTINCT SERIES. Each series of
Delaware-Voyageur Tax-Exempt Trust, to which these Standard Terms and Conditions
of Trust shall be applicable shall, for all financial and administrative
purposes, be considered separate and distinct from every other series, and
neither the assets of nor the expenses of any one series shall be applied or
charged against any other series.
IN WITNESS WHEREOF, the parties hereto have caused these Standard Terms
and Conditions of Trust, effective May 22, 1997 to be duly executed.
VOYAGEUR FUND MANAGERS, INC.,
Depositor
By
-----------------------------------
Senior Vice President and Secretary
MULLER DATA CORPORATION,
Evaluator
By
-----------------------------------
THE CHASE MANHATTAN BANK,
Trustee
By
-----------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL"), which enables a corporation in its original
certificate of incorporation or an amendment thereto to eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of the director's fiduciary duty, except (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
DGCL (providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions), or (iv) for any transaction from which
the director derived an improper personal benefit.
Old Second's Restated Certificate includes a provision eliminating the
liability of directors consistent with Section 102(b)(7) of the DGCL.
Reference also is made to Section 145 of the DGCL which provides that a
corporation may indemnify any person, including officers and directors, who is,
or is threatened to be made, a party to any threatened, pending or completed
legal action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding, if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the corporation's best interests and, with respect to any
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify its officers, directors,
employees and agents in an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer, director, employee or agent is adjudged to be
liable to the corporation. Where an officer, director, employee or agent is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer, director, employee or agent actually and reasonable incurred in
connection therewith.
Old Second's Restated Certificate provides for indemnification of
directors and officers of Old Second to the full extent permitted by the DGCL.
Old Second maintains a directors' liability policy to insure its liability under
the above-described provision of its Restated Certificate and to insure
individual directors against certain obligations not covered by such provisions.
Exhibit 1.2
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST
SERIES 10
TRUST AGREEMENT
Dated: May 22, 1997
This Trust Agreement between Voyageur Fund Managers, Inc., as
Depositor, Muller Data Corporation, as Evaluator and The Chase Manhattan Bank,
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 Delaware-Voyageur Tax-Exempt Trust, Series 10 and Certain
Subsequent Series, Effective May 22, 1997" (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.
IN WITNESS WHEREOF, Voyageur Fund Managers, Inc. has caused this Trust
Agreement to be executed by its Senior Vice President and Secretary, Muller Data
Corporation has caused this Trust Agreement to be signed by its Chief Operating
Officer and The Chase Manhattan Bank has caused this Trust Agreement to be
executed by one of its Vice Presidents all as of the day, month and year first
above written.
VOYAGEUR FUND MANAGERS, INC.,
Depositor
By: GEORGE M. CHAMBERLAIN, JR.
------------------------------------
Senior Vice President and Secretary
MULLER DATA CORPORATION, Evaluator
By:
------------------------------------
THE CHASE MANHATTAN BANK, Trustee
By:
------------------------------------
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
DELAWARE-VOYAGEUR TAX-EXEMPT TRUST, SERIES 10
(Note: Incorporated herein and made a part hereof are the "SCHEDULES OF
INVESTMENTS" as set forth in the Prospectus.)
Exhibit 2
May 22, 1997
Voyageur Fund Managers, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103
Re: Delaware-Voyageur Tax-Exempt Trust, Series 10
Ladies/Gentlemen:
We have served as special counsel for Voyageur Fund Managers, Inc., as
Sponsor and Depositor (the "DEPOSITOR") of Delaware-Voyageur Tax-Exempt Trust,
Series 10 (the "FUND"), in connection with the preparation, execution and
delivery of a Trust Agreement dated May 22, 1997 between Voyageur Fund Managers,
Inc., as Depositor, Muller Data Corporation, as Evaluator, and The Chase
Manhattan Bank, 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. 333-27095) relating to the units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/slm
May 22, 1997
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004-2413
Voyageur Fund Managers, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103
Re: Delaware-Voyageur Tax-Exempt Trust, Series 10
Ladies/Gentlemen:
We have acted as special counsel for Voyageur Fund Managers, Inc.,
Depositor of Delaware-Voyageur Tax-Exempt Trust, Series 10 (the "FUND"), in
connection with the issuance of units of fractional undivided interest in the
Fund, under a Trust Agreement dated May 22, 1997 (the "INDENTURE") between
Voyageur Fund Managers, Inc., as Depositor, Muller Data Corporation, as
Evaluator, and The Chase Manhattan Bank, 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. For purposes of the following opinions, it is assumed that
each asset of the Trust is debt, the interest on which is excluded from gross
income for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation but will
be governed by the provisions of subchapter J (relating to Trusts) of chapter 1,
Internal Revenue Code of 1986 (the "CODE").
(ii) Each Unitholder will be considered as owning a pro rata share of
each asset of the respective Trust in the proportion that the number of units of
such Trust held by him bears to the total number of units outstanding of such
Trust. Under subpart E, subchapter J of chapter 1 of the Code, income of the
Trust will be treated as income of each Unitholder in the proportion described,
and an item of Trust income will have the same character in the hands of a
Unitholder as it would have in the hands of the Trustee. Accordingly, to the
extent that the income of a Trust consists of interest and original issue
discount excludable from gross income under Section 103 of the Code, such income
will be excludable from federal gross income of the Unitholders, except in the
case of a Unitholder who is a substantial user (or a person related to such
user) of a facility financed through issuance of any industrial development
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 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. Under current Code provisions, the Superfund
Tax does not apply to tax years beginning on or after January 1, 1996.
Legislative proposals have been made that would extend the Superfund Tax.
(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 represented by his
Certificate. If a Bond is acquired with accrued interest, that portion of the
price paid for the accrued interest is added to the tax basis of the Bond. When
this accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium, the
amount of the premium is added to the tax basis of the Bond. Bond premium is
amortized over the remaining term of the Bond, and the tax basis of the Bond is
reduced each tax year by the amount of the premium amortized in that tax year.
Accordingly, 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 before the date the Trust acquired ownership of
the Bonds (and the amount of this reduction may exceed the amount of accrued
interest paid to the seller) and, consequently, such Unitholders may have an
increase in taxable gain or reduction in capital loss upon the disposition of
such Units. 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 accrued interest
received by the Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on the Bonds before the
date the Trust acquired ownership of the Bonds (and the amount of this reduction
may exceed the amount of accrued interest paid to the seller) must be reduced by
the annual amortization of bond premium, if any, on Bonds held by the Trust and
must 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) We have examined the Municipal Bond Unit Investment Trust
Insurance policies, if any, issued to certain of the Trusts on the Date of
Deposit by AMBAC Indemnity Corporation, Financial Guaranty Insurance Corporation
or a combination thereof. Each such policy, or a combination of such policies,
insures all Bonds held by the Trustee for that particular Trust (other than
Bonds described in paragraph (vii)) against default in the prompt payment of
principal and interest. In our opinion, any amount paid under each said policy,
or a combination of said policies, which represents maturing interest on
defaulted obligations held by the Trustee will be excludable from Federal gross
income if, and to the same extent as, such interest would have been so
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 that the insurer, will pay debt
service on the Bonds. Paragraph (ii) of this opinion is accordingly applicable
to insurance proceeds representing maturing interest.
(vii) 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
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. Legislative proposals have been
made that would extend the Superfund Tax.
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
generally 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. The
U.S. Treasury Department has proposed extending the financial institution roles
to all corporations.
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 certain laws of the State of New Mexico, to
determine their applicability to New Mexico Series 2 (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 certain laws of the State of Pennsylvania (the
"STATE") to determine their applicability to Pennsylvania Insured Series 1 (the
"PENNSYLVANIA TRUST") and to the holders of Units in the Pennsylvania Trust who
are residents of the State of Pennsylvania (the "UNITHOLDERS"). The assets of
the Pennsylvania Trust will consist of interest-bearing obligations issued by or
on behalf of the State, any public authority, commission, board or other agency
created by the State or a political subdivision of the State, or political
subdivisions thereof (the "BONDS"). Distributions of income with respect to the
Bonds received by the Pennsylvania Trust will be made monthly.
Although we express no opinion with respect thereto, in rendering the
opinion expressed herein, we have assumed that: (i) the Bonds were validly
issued by the State or its municipalities, as the case may be, (ii) the interest
thereon is excludable from gross income for federal income tax purposes, (iii)
the interest thereon is exempt from Pennsylvania State and local taxes and (iv)
the Bonds are exempt from county personal property taxes. This opinion does not
address the taxation of persons other than full-time residents of Pennsylvania.
Based on the foregoing, and review and consideration of existing State
laws as of this date, it is our opinion, and we herewith advise you, as follows:
(1) The Pennsylvania Trust will have no tax liability for purposes of
the personal income tax (the "PERSONAL INCOME TAX"), the corporate income tax
(the "CORPORATE INCOME TAX") and the capital stock-franchise tax (the "FRANCHISE
TAX"), all of which are imposed under the Pennsylvania Tax Reform Code of 1971,
or the Philadelphia School District Investment Net Income Tax (the "PHILADELPHIA
SCHOOL TAX") imposed under Section 19-1804 of the Philadelphia Code of
Ordinances.
(2) Interest on the Bonds, net of Pennsylvania Trust expenses, which is
exempt from the Personal Income Tax when received by the Pennsylvania Trust and
which would be exempt from such tax if received directly by a Unitholder, will
retain its status as exempt from such tax when received by the Pennsylvania
Trust and distributed to such Unitholder. Interest on the Bonds which is exempt
from the Corporate Income Tax and the Philadelphia School Tax when received by
the Pennsylvania Trust and which would be exempt from such taxes if received
directly by a Unitholder, will retain its status as exempt from such taxes when
received by the Pennsylvania Trust and distributed to such Unitholder.
(3) Distributions from the Pennsylvania Trust attributable to capital
gains recognized by the Pennsylvania Trust upon its disposition of a Bond issued
on or after February 1, 1994, will be taxable for purposes of the Personal
Income Tax and the Corporate Income Tax. No opinion is expressed with respect to
the taxation of distributions from the Pennsylvania Trust attributable to
capital gains recognized by the Pennsylvania Trust upon its disposition of a
Bond issued before February 1, 1994.
(4) Distributions from the Pennsylvania Trust attributable to capital
gains recognized by the Pennsylvania Trust upon its disposition of a Bond will
be exempt from the Philadelphia School Tax if the Bond was held by the
Pennsylvania Trust for a period of more than six months and the Unitholder held
his Unit for more than six months before the disposition of the Bond. If,
however, the Bond was held by the Pennsylvania Trust or the Unit was held by the
Unitholder for a period of less than six months, then distributions from the
Pennsylvania Trust attributable to capital gains recognized by the Pennsylvania
Trust upon its disposition of a Bond issued on or after February 1, 1994 will be
taxable for purposes of the Philadelphia School Tax; no opinion is expressed
with respect to the taxation of any such gains attributable to Bonds issued
before February 1, 1994.
(5) Insurance proceeds paid under policies which represent maturing
interest on defaulted obligations will be exempt from the Corporate Income Tax
to the same extent as such amounts are excluded from gross income for federal
income tax purposes. No opinion is expressed with respect to whether such
insurance proceeds are exempt from the Personal Income Tax or the Philadelphia
School Tax.
(6) Each Unitholder will recognize gain for purposes of the Corporate
Income Tax if the Unitholder redeems or sells Units of the Pennsylvania Trust to
the extent that such a transaction results in a recognized gain to such
Unitholder for federal income tax purposes and such gain is attributable to
Bonds issued on or after February 1, 1994. No opinion is expressed with respect
to the taxation of gains realized by a Unitholder on the sale or redemption of a
Unit to the extent such gain is attributable to Bonds issued prior to February
1, 1994.
(7) A Unitholder's gain on the sale or redemption of a Unit will be
subject to the Personal Income Tax, except that no opinion is expressed with
respect to the taxation of any such gain to the extent it is attributable to
Bonds issued prior to February 1, 1994.
(8) A Unitholder's gain upon a redemption or sale of Units will be
exempt from the Philadelphia School Tax if the Unitholder held his Unit for more
than six months and the gain is attributable to Bonds held by the Pennsylvania
Trust for a period of more than six months. If, however, the Unit was held by
the Unitholder for less than six months or the gain is attributable to Bonds
held by the Pennsylvania Trust for a period of less than six months, then the
gains will be subject to the Philadelphia School Tax; except that no opinion is
expressed with respect to the taxation of any such gains attributable to Bonds
issued before February 1, 1994.
(9) The Bonds will not be subject to taxation under the County Personal
Property Tax Act of June 17, 1913 (the "PERSONAL PROPERTY TAX"). Personal
property taxes in Pennsylvania are imposed and administered locally, and thus no
assurance can be given as to whether Units will be subject to the Personal
Property Tax in a particular jurisdiction. However, in our opinion, Units should
not be subject to the Personal Property Tax.
Unitholders should be aware that, generally, interest on indebtedness
incurred or continued to purchase or carry Units is not deductible for purposes
of the Personal Income Tax, the Corporate Income Tax or the Philadelphia School
Tax.
We have not examined any of the Bonds to be deposited and held in the
Pennsylvania 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 or state income taxation of interest on the Bonds if
interest thereon had been received directly by a Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Pennsylvania law. Ownership of the Units may result
in collateral Pennsylvania tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any such
collateral consequences.
Very truly yours,
CHAPMAN AND CUTLER
MJK/slm
May 22, 1997
The Chase Manhattan Bank,
as Trustee of
Delaware - Voyageur Tax-Exempt Trust,
Series 10
Four New York Plaza
New York, New York 10004-2413
Attn: Mr. Paul J. Holland
Vice President
Re: Delaware - Voyageur Tax-Exempt Trust,
Series 10, consisting of
New Mexico Series 2
Pennsylvania Insured Series 1
Territorial Insured Series 6
Dear Sirs:
We are acting as special counsel with respect to New York tax matters
for Delaware - Voyageur Tax-Exempt Trust, Series 10, which consists of New
Mexico Series 2, Pennsylvania Insured Series 1, and Territorial Insured Series 6
(each, a "Trust"), which will be established under a certain Standard Terms and
Conditions of Trust and a related Trust Agreement each dated as of today
(colletively, the "Indenture") between Voyageur Fund Managers, Inc., as
Depositor (the "Depositor"), Muller Data Corporation, as Evaluator, and Chase,
as Trustee (the "Trustee"). Pursuant to the terms of the Indenture, units of
fractional undivided interest in the Trust (the "Units") will be issued in the
aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified copies,
or copies otherise identified to our satisfaction, of such documents as we have
deemed necessary or appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today and addressed to
the Trustee, of Chapman and Cutler, counsel for the Depositor, with respect to
the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as a
corporation under New York law, and acordingly will not be subject to the New
York State franchise tax or the New York City general corporation tax.
2. Under the income tax laws of the State and City of New York, the
income of the Trust will be considered the income of the holders of the Units.
We consent to the filing of this opinion as an exhibit to the
Registration Statement (No. 333-27095) filed with the Securities and Exchange
Commission with respect to the registraiton of the sale of the Units and to the
references to our name under the captions "Taxation" and "Legal Opinions" in
such Registraiton Statement and the preliminary prospectus included therein.
Very truly yours,
/s/ Carter, Ledyard & Milburn
SFL:tbm
May 22, 1997
The Chase Manhattan Bank,
as Trustee of
Delaware - Voyageur Tax-Exempt Trust,
Series 10
Four New York Plaza
New York, New York 10004-2413
Attn: Mr. Paul J. Holland
Vice President
Re: Delaware - Voyageur Tax-Exempt Trust,
Series 10, consisting of
New Mexico Series 2
Pennsylvania Insured Series 1
Territorial Insured Series 6
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank ("Chase") in
connection with the execution and delivery of a Standard Terms and Conditions of
Trust and a related Trust Agreement each dated as of today (collectively, the
"Indenture"), between Voyageur Fund Managers, Inc., as Depositor (the
"Depositor"), Muller Data Corporation, as Evaluator, and Chase, as Trustee (the
"Trustee"), establishing Delaware - Voyageur Tax-Exempt Trust, Series 10, which
consists of New Mexico Series 2, Pennsylvania Insured Series 1, and Territorial
Insured Series 6 (each, a "Trust"), and the confirmation by Chase, as Trustee
under the Indenture, that it has registered on the registration books of the
Trust the ownership by Depositor of a number of units constituting the entire
interest in the respective Trust (such aggregate units being herein called
"Units"), each of which Units represents an undivided interest in the Trust,
which consists of interest-bearing corporate debt obligations of domestic
companies (including confirmation of contracts for the purchase of certain
obligations not yet delivered and cash, cash equivalents or an irrecovable
letter of credit in the amount required for such purchase upon the receipt of
such obligations), such obligations being defined in the Indenture as Securities
and referenced in the schedules to the Indenture.
We have examined the Indenture, the Closing Memorandum delivered today
by the parties to the Indenture (the "Closing Memorandum"), and such other
documents as we have deemed necessary in order to render this opinion. Based on
the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing corporation having the powers
of a trust company under the laws of the State of New York.
2. The Indenture has been duly executed and delivered by Chase and,
assuming due execution and delivery by the other parties thereto, constitutes
the valid and legally binding obligation of Chase.
3. Chase, as Trustee, has registered on the registration books of the
Trust the ownership of the Units by the Depositor. Upon receipt of confirmation
of the effectiveness of the registration statement for the sale of the Units
filed with the Securities and exchange Commission under the Securities Act of
1933, the Trustee may cause the Units to be registered in such names as the
Depositor may request, to or upon the order of the Depositor, as provided in the
Closing Memorandum.
4. Chase, as Trustee, may lawfully advance amounts to the Trust and may
be reimbursed, without interest, for any such advances from funds in the
interest and capital accounts as provided in the Indenture.
In rendering the foregoing opinion, we have not considered, among other
things, whether the Securities have been duly authorized and delivered.
Very truly yours,
/s/ Carter, Ledyard & Milburn
SFL:gcm
EXHIBIT 6(a)
INDEPENDENT AUDITORS CONSENT
We consent to the use of our report included herein and to the
references to our Firm under the heading "OTHER MATTERS -- Independent Auditors"
in the Prospectus.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
May 22, 1997
Exhibit 6(b)
Muller Data Corporation
395 Hudson Street
New York, New York 10014-3622
May 22, 1997
Voyageur Fund Managers, Inc.,
One Commerce Square
Philadelphia, Pennsylvania 19103
Re: Delaware-Voyageur Tax-Exempt Trust, Series 10 (the "Fund")
Gentlemen:
We have examined the Registration Statement File No. 333-27095 for the
above captioned Fund.
We hereby acknowledge that Muller Data Corporation is currently acting
as the Evaluator for the Fund. We hereby consent to the use in the Registration
Statement of the reference to Muller Data Corporation as the Evaluator for the
above captioned Fund.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Muller Data Corporation
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