<PAGE> 1
PROSPECTUS
KEMPER CORPORATION
OFFER TO EXCHANGE ITS 6.875% NOTES DUE 2003, SERIES A,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING 6.875% NOTES DUE 2003.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME,
ON DECEMBER 12, 1994, UNLESS EXTENDED.
KEMPER CORPORATION, a Delaware corporation ("Kemper"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus and in the
accompanying letter of transmittal (the "Letter of Transmittal") (which together
constitute the "Exchange Offer"), to exchange up to $200 million aggregate
principal amount of 6.875% Notes Due 2003, Series A (the "New Notes")of Kemper
for a like principal amount of Kemper's issued and outstanding 6.875% Notes Due
2003 (the "Existing Notes") with the holders thereof. The New Notes will be
issued under the Indenture dated as of September 15, 1993 (the "Indenture"),
between Kemper and The First National Bank of Chicago, as trustee, pursuant to
which the Existing Notes were issued, and will be general unsecured obligations
ranking pari passu with other unsecured and unsubordinated indebtedness of
Kemper. The terms of the New Notes are identical in all material respects to the
terms of the Existing Notes that are to be exchanged therefor, except that the
New Notes will not contain terms with respect to transfer restrictions or
adjustments in the interest rate. See "Description of the New Notes."
There is no existing debt of Kemper which will be senior to the New Notes,
but because Kemper is a holding company, the New Notes are effectively
subordinated to indebtedness and other liabilities of Kemper's subsidiaries.
Kemper cannot predict the amount of debt (senior or on par) which could be
incurred in the future.
On June 26, 1994, Kemper, Conseco, Inc., an Indiana corporation ("Conseco"),
and KC Acquisition, Inc., a wholly owned subsidiary of Conseco ("Acquisition"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Acquisition would merge into Kemper (the "Merger") and Kemper as the
surviving corporation would thereby become a wholly owned subsidiary of Conseco.
The Merger would not change any rights of holders of notes, and Kemper as the
surviving corporation will not have the right to do anything which the Indenture
presently prohibits Kemper from doing. Kemper has no current plans to issue debt
senior to the New Notes or the Existing Notes. If Conseco, as it has previously
announced, obtains secured financing which would become secured indebtedness of
Kemper upon the Merger, then pursuant to the terms of the Indenture, Kemper
would be obligated to take such steps as would be necessary effectively to
secure the New Notes and Existing Notes equally and ratably with (or prior to)
all such secured indebtedness. There are no provisions in the Indenture which
would preclude the Merger, and the Indenture does not contain a provision which
would entitle the holders of the New Notes or the Existing Notes to require
Kemper to repurchase the notes upon the occurrence of a change of control of
Kemper.
The Existing Notes were issued and sold on September 22, 1993 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided by Section 4(2) of
the Securities Act. Accordingly, the Existing Notes may not be reoffered, resold
or otherwise pledged, hypothecated or transferred unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. The New Notes are being offered hereunder pursuant to an option
available to Kemper under an exchange and registration agreement (the "Exchange
and Registration Agreement"), dated September 22, 1993, between Kemper and
Goldman, Sachs & Co. and Kemper Securities, Inc. (the "Initial Purchasers")
relating to the Existing Notes. See "The Exchange Offer -- Purpose of the
Exchange Offer." Based on no-action letters issued by the staff of the
Securities and Exchange Commission (the "Commission") to third parties, Kemper
believes that the New Notes issued pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by holders thereof (other than any
such holder that is an "affiliate" of Kemper within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of any such holder's business and such
holder has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of such New Notes; provided, however,
that in addition to meeting certain conditions in the Exchange and Registration
Agreement, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Kemper has agreed that, for a period of
90 days after the date of this Prospectus, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
(continued on page 2)
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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 DATE OF THIS PROSPECTUS IS NOVEMBER 8, 1994.
<PAGE> 2
(continued from page 1)
Holders of Existing Notes whose Existing Notes are not tendered and accepted
in the Exchange Offer will continue to hold such Existing Notes and will be
entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Existing Notes will continue to be subject to
the existing restrictions upon transfer thereof and Kemper will have no
obligation to file a registration statement covering resales of Existing Notes
not exchanged for New Notes in the Exchange Offer for any reason, except in
limited circumstances with respect to Existing Notes held by certain
broker-dealers, and, in any event after the consummation of the Exchange Offer,
the holders of Existing Notes not exchanged for New Notes will no longer be
entitled to the Step-Up in Interest Rate (as defined in the Exchange and
Registration Agreement) applicable to such Existing Notes in the absence of
registration. As of March 15, 1994, the Existing Notes have been bearing
interest at 7.375% per annum. See "Exchange and Registration Agreement."
The Exchange Offer will expire at 5:00 P.M., New York time, on December 12,
1994, unless extended in the sole discretion of Kemper (the "Expiration Date").
The date of acceptance for exchange of the Existing Notes (the "Exchange Date")
will be the first business day following the Expiration Date. Existing Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date; otherwise such tenders will be irrevocable.
Interest on each New Note will accrue from the last interest payment date on
which interest was paid on the Existing Note surrendered in exchange therefor.
No assurance can be given that an active market for the New Notes will
develop. Kemper does not intend to list the New Notes on any securities
exchange.
The New Notes will be available initially only in book-entry form. Kemper
expects that the New Notes issued pursuant to this Exchange Offer will be issued
in the form of global notes, which will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") and registered in its name or in the name of
Cede & Co., its nominee. Beneficial interests in the global notes representing
the New Notes will be shown on, and transfers thereof will be effected through,
records maintained by DTC and its participants. See "Description of New
Notes -- Book-Entry System."
2
<PAGE> 3
FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
AVAILABLE INFORMATION
Kemper has filed with the Commission a registration statement on Form S-4
relating to the New Notes offered hereby (together with all amendments and
exhibits, the "Registration Statement") under the Securities Act. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to such exhibit, and each such statement shall be
deemed qualified in its entirety by such reference.
Kemper is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Copies of such reports, proxy statements, other information and the
Registration Statement (and the exhibits and schedules thereto) can be obtained,
upon payment of prescribed fees, from the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. In addition, such reports, proxy statements, other information and
the Registration Statement (and the exhibits and schedules thereto) can be
copied and inspected at the Commission's public reference facilities referred to
above and at the Commission's Regional Offices at 7 World Trade Center (13th
floor), New York, New York 10048 and 500 West Madison, Suite 1400, Chicago,
Illinois 60661. Kemper's common stock is listed on the New York Stock Exchange,
Inc. (the "NYSE"), and such reports, proxy statements and other information
concerning the Company should be available for inspection at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
As used herein, unless the context otherwise requires, the term "Company"
refers to Kemper Corporation and its subsidiaries, and the term "Kemper" refers
to Kemper Corporation.
3
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Kemper hereby incorporates by reference into this Prospectus the following
documents or information filed with the Commission:
(a) Kemper's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed on March 30, 1994 (the "Form 10-K"), including
those portions of Kemper's 1993 Annual Report to Stockholders which are
incorporated by reference in the Form 10-K;
(b) Kemper's 1994 Notice of Annual Meeting and Proxy Statement filed
on April 11, 1994, excluding the Report on Executive Compensation of the
Committee on Compensation and Organization and the performance graph
therein;
(c) Kemper's Current Reports on Form 8-K filed on January 18, 1994,
July 1, 1994 and October 31, 1994;
(d) Kemper's Quarterly Reports on Form 10-Q filed on August 12, 1994
for the quarterly period ended June 30, 1994 (the "Form 10-Q") and May 16,
1994 for the quarterly period ended March 31, 1994;
(e) Kemper's Form 8-A/A filed on July 20, 1994; and
(f) all documents filed by Kemper pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act on or after the date of this Prospectus and
prior to the termination of the offering made hereby.
Any statement contained herein or in any document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus to the extent that a subsequent statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Kemper will provide without charge to each person to whom this Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
or all of the information incorporated herein by reference other than exhibits
to such information (unless such exhibits are specifically incorporated by
reference into such information). Kemper's principal executive office is located
at One Kemper Drive in Long Grove, Illinois, 60049. Its telephone number is
(708) 320-4700. Requests for such copies should be directed to the Corporate
Secretary of Kemper at its principal executive office. To ensure timely delivery
of the documents, any request should be made by December 7, 1994 (five days
prior to the Expiration Date).
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<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by the detailed
information and the consolidated financial statements, including the notes
thereto, included or incorporated by reference in this Prospectus. See "Risk
Factors" for a discussion of certain factors to be considered in connection with
the Exchange Offer.
COMPANY OVERVIEW
A financial services organization, the Company categorizes its continuing
operations into four business segments: asset management, life insurance,
securities brokerage and real estate. Kemper Financial Services, Inc. had assets
under management of $65.4 billion at September 30, 1994. INVEST Financial
Corporation, an approximate 95% owned subsidiary of Kemper Financial Services,
Inc., distributes mutual fund and annuity products through financial
institutions. The Company's life insurance subsidiaries, Federal Kemper Life
Assurance Company and Kemper Investors Life Insurance Company, offer a variety
of term and interest-sensitive insurance products as well as fixed-rate and
variable annuity contracts. The Company's securities brokerage business,
represented primarily by Kemper Securities, Inc., principally consists of retail
brokerage services. The Company's real estate subsidiaries include companies
which act as general or limited partners in and lenders to various joint
ventures. The Company's discontinued operations primarily consist of primary
property-casualty insurance, reinsurance and risk management subsidiaries
divested in 1993.
[GRAPHIC]
On June 26, 1994, Kemper, Conseco and Acquisition entered into the Merger
Agreement pursuant to which Acquisition would merge into Kemper and Kemper would
thereby become a wholly owned subsidiary of Conseco. See "RISK FACTORS -- Merger
Agreement and Strategic Transactions" and "RISK FACTORS -- Changes in Ratings."
5
<PAGE> 6
THE EXCHANGE OFFER
Securities Offered......... $200 million aggregate principal amount of 6.875%
Notes Due 2003, Series A (the "New Notes"). The
New Notes will be issued under the Indenture
dated as of September 15, 1993 (the "Indenture"),
between Kemper and The First National Bank of
Chicago, as trustee, pursuant to which Kemper's
outstanding 6.875% Notes Due 2003 were issued
(the "Existing Notes").
The terms of the New Notes are identical in all
material respects to the terms of the Existing
Notes that are to be exchanged therefor, except
that the New Notes will not contain terms with
respect to transfer restrictions or adjustments
in the interest rate. See "Description of the New
Notes."
As of March 15, 1994, the Existing Notes began
bearing interest at 7.375% per annum pursuant to
certain Step-Up in Interest Rate provisions
applicable in the absence of registration. After
consummation of the Exchange Offer, the Step-Up
in Interest Rate will be rescinded and the
Existing Notes will bear interest at the original
rate of 6.875% per annum. See "Exchange and
Registration Agreement."
The Exchange Offer......... The New Notes are being offered in exchange for a
like principal amount of the Existing Notes.
Existing Notes are required to be exchanged in
minimum denominations of $100,000 and integral
multiples of $1,000 in excess thereof. Kemper has
elected to make the Exchange Offer pursuant to an
option under an exchange and registration
agreement (the "Exchange and Registration
Agreement"), dated September 22, 1993, between
Kemper and Goldman, Sachs & Co. and Kemper
Securities, Inc. (the "Initial Purchasers")
relating to the Existing Notes. For a description
of the procedures for tendering, see "The
Exchange Offer -- Tender Procedure."
Each broker-dealer that receives New Notes for its
own account in exchange for Existing Notes, where
such Existing Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See
"Plan of Distribution."
Expiration Date;
Withdrawal................. The Exchange Offer will expire at 5:00 P.M., New
York time, on December 12, 1994, or such later
date and time to which it may be extended in the
sole discretion of Kemper (the "Expiration
Date"). Although Kemper may extend the Expiration
Date indefinitely, Kemper presently intends to
consummate the Exchange Offer as soon as
practicable. The date of acceptance for exchange
of the Existing Notes (the "Exchange Date") will
be the first business day following the
Expiration Date.
Existing Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. Any Existing Notes withdrawn or
not accepted for exchange for any reason (for
example, due to a failure to submit properly
completed documents) will be returned without
expense to the tendering holders thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer. See "The
Exchange Offer -- Withdrawal Rights."
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<PAGE> 7
Conditions to the Exchange
Offer.................... A minimum aggregate principal amount of $100,000
and integral multiples of $1,000 in excess
thereof of Existing Notes are required to be
tendered for exchange. For certain other
conditions, see "The Exchange Offer -- Conditions
to the Exchange Offer."
Material Federal Income Tax
Considerations........... The exchange of the Existing Notes for the New
Notes should not be a taxable event to the
holder, and the holder should not recognize any
taxable gain or loss or any interest income as a
result of such exchange. See "Material Federal
Income Tax Considerations."
Untendered or Not Accepted
Existing Notes........... After the consummation of the Exchange Offer,
Kemper will have no obligation to file a
registration statement covering resales of
Existing Notes not exchanged for New Notes in the
Exchange Offer for any reason, except in limited
circumstances with respect to Existing Notes held
by certain broker-dealers, and, in any event
after the consummation of the Exchange Offer, the
holders of untendered Existing Notes will no
longer be entitled to the Step-Up in Interest
Rate (as such terms are defined in the Exchange
and Registration Agreement) applicable to such
Existing Notes in the absence of registration.
Holders of Existing Notes who do not tender their
Existing Notes in the Exchange Offer or whose
Existing Notes are not accepted for exchange will
continue to hold such Existing Notes and will be
entitled to all the rights and preferences and
will be subject to the limitations applicable
thereto under the Indenture, except for any such
rights or limitations which, by their terms,
terminate or cease to be effective as a result of
this Exchange Offer. All untendered and tendered
but unaccepted Existing Notes will continue to be
subject to the restrictions on transfer provided
therein.
Exchange Agent............. First Chicago Trust Company of New York.
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<PAGE> 8
TERMS OF THE NEW NOTES
The terms of the New Notes are identical in all material respects to the
terms of the Existing Notes except that the New Notes will not contain terms
with respect to transfer restrictions or adjustments in the interest rate.
Maturity Date.............. September 15, 2003.
Interest Payment Dates..... Interest on the New Notes, is payable semiannually
on March 15 and September 15 of each year.
Interest on each New Note will accrue from the
last interest payment date on which interest was
paid on the Existing Note surrendered in exchange
therefor. For a discussion of federal income tax
treatment, see "Material Federal Income Tax
Considerations."
Redemption................. The New Notes are not subject to redemption prior
to maturity.
Sinking Fund............... None.
Ranking.................... The New Notes are general, unsecured obligations of
Kemper and will rank pari passu with other
unsecured and unsubordinated indebtedness of
Kemper. Kemper has no current plans to issue debt
senior to the New Notes. If Conseco, as it has
previously announced, obtains secured financing
which would become secured indebtedness of Kemper
upon the Merger, then pursuant to the terms of
the Indenture, Kemper would be obligated to take
such steps as would be necessary effectively to
secure the New Notes and any Existing Notes
equally and ratably with (or prior to) all such
secured indebtedness. The New Notes are
effectively subordinated to indebtedness and
other liabilities of Kemper's subsidiaries.
Certain Covenants.......... The New Notes shall have the benefit of the
covenants contained in the Indenture, including
covenants relating to (i) the Company's ability
to incur, issue, assume or guarantee debt secured
by the assets of any Restricted Subsidiaries (as
defined in the Indenture) which are regulated
insurance companies, (ii) sales by the Company of
capital stock of Restricted Subsidiaries and
(iii) the consolidation, merger, conveyance,
transfer or lease of properties and assets of
Kemper. There are no provisions in the Indenture,
however, which would preclude the Merger. See
"RISK FACTORS -- Merger Agreement and Strategic
Transactions" and "RISK FACTORS -- Changes in
Ratings."
Events of Default.......... Any one of the following events will constitute an
Event of Default under the Indenture with respect
to the New Notes: (i) default for 30 days in any
payment of interest of any New Note; (ii) default
in any payment of principal on any New Note when
due; (iii) default for 60 days after written
notice as provided in the Indenture in the
performance of any other covenant of Kemper in
the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit
of any series of securities other than the New
Notes); or (iv) certain events of bankruptcy,
insolvency or reorganization.
8
<PAGE> 9
The following event shall also constitute an Event
of Default with respect to the New Notes: an
event of default, as defined in any indentures or
instruments under which Kemper shall have
outstanding at least $25,000,000 aggregate
principal amount of indebtedness for money
borrowed, shall happen and be continuing and
either (i) such default results from the failure
to pay principal upon final maturity of such
indebtedness after expiration of any applicable
grace period or (ii) such indebtedness shall, as
a result thereof, have been accelerated so that
the same shall be or become due and payable prior
to the date on which the same would otherwise
have become due and payable, and such
acceleration shall not be rescinded or annulled
within 10 days after notice thereof shall have
been given, by registered or certified mail, to
Kemper by the Trustee, or to Kemper and the
Trustee by the holders of at least 25% in
aggregate principal amount of the New Notes at
the time outstanding; provided, however, that if
such event of default under such indentures or
instruments shall be remedied or cured by Kemper
in accordance with the terms thereof or waived by
the holders of such indebtedness, then even if
the New Notes shall have been accelerated (but
not paid) as provided under the Indenture, such
Event of Default shall be deemed likewise to have
been thereupon remedied, cured or waived and such
acceleration rescinded without further action
upon the part of either the Trustee or any
holders of the New Notes.
Use of Proceeds............ There will be no cash proceeds to Kemper from the
exchange pursuant to the Exchange Offer. On
September 22, 1993, Kemper received net proceeds
of approximately $195.5 million from the issuance
and sale of the Existing Notes which it used to
repay short-term indebtedness and to purchase
certain real estate-related investments from its
life insurance subsidiaries.
Risk Factors............... Holders of the Existing Notes should consider
carefully the information set forth under "Risk
Factors" as well as the other information set
forth in this Prospectus before tendering
Existing Notes in exchange for the New Notes.
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<PAGE> 10
RISK FACTORS
Each holder of the Existing Notes should consider carefully the specific
risk factors set forth below as well as the other information contained or
incorporated by reference in this Prospectus before tendering Existing Notes in
exchange for New Notes offered hereby. The risk factors set forth below are
generally applicable to the Existing Notes as well as the New Notes.
MERGER AGREEMENT AND STRATEGIC TRANSACTIONS
On June 26, 1994, Kemper, Conseco and Acquisition entered into the Merger
Agreement pursuant to which Acquisition would merge with and into the Company,
and Kemper as the surviving corporation would become a wholly owned subsidiary
of Conseco. This pending transaction was previously reported by the Company in
its Form 8-Ks filed July 1, 1994 and October 31, 1994, and the Form 10-Q filed
August 12, 1994, each of which is incorporated herein by reference. The
description of the Merger in this prospectus is subject to and qualified in its
entirety by the descriptions in the incorporated documents, including the Merger
Agreement which was filed as an exhibit to the Form 10-Q.
On November 2, 1994, Conseco announced that it proposed that the Merger
Agreement be revised to provide that each of the issued and outstanding shares
of Kemper common stock be converted into the right to receive $56.00 in cash and
0.1087 shares of Conseco common stock instead of the $56.00 in cash and the
fraction (not more than 0.2418 nor less than 0.1982) of a share of Conseco
common stock provided for in the Merger Agreement. Based on the November 1, 1994
closing price of Conseco common stock, the Conseco proposal would reduce the
merger consideration per share of Kemper common stock to approximately $60 from
almost $65. Conseco stated that under the revised proposal, Conseco stockholder
approval would not be required in connection with the Merger. Also on November
2, 1994, Kemper stated that Conseco's proposed change would be reviewed with the
Kemper board of directors in due course.
The closing of the Merger is subject to certain conditions set forth in the
Merger Agreement, including but not limited to the approval of the Merger by the
affirmative vote of the common stockholders of Kemper entitled to cast at least
a majority of the votes which all common stockholders of Kemper are entitled to
cast thereon, the approval of the issuance of shares of Conseco common stock in
the Merger by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present or represented by proxy and entitled
to vote thereon at a special meeting of stockholders of Conseco, the receipt of
all required governmental and regulatory consents, the receipt of certain
approvals with respect to the registered investment companies for which any of
the Company's subsidiaries act as investment advisor or sub-advisor, the receipt
of certain consents from the noninvestment company advisory clients of the asset
management subsidiaries of the Company, the obtaining by Conseco of all
financing necessary to pay the aggregate cash consideration payable in
connection with the Merger, and the closing of the Merger by March 31, 1995.
Immediately following the Merger it is anticipated that Kemper will sell its
life insurance and real estate subsidiaries to a partnership in which Conseco is
the sole managing general partner.
In connection with the Merger Agreement, certain of the Company's credit
ratings were placed under review. See "-- Changes in Ratings" below.
As a holding company, Kemper also regularly reviews the strategic fit of
all its businesses and may consider the acquisition or disposition of assets,
and the Company may consider entering into joint ventures and other
transactions.
The Indenture does not contain a provision entitling the holders of notes,
at their option, to require Kemper to repurchase the notes upon the occurrence
of events which would result in a change of control of the Company. See
"DESCRIPTION OF THE NOTES -- Restrictive Covenants -- Consolidation and Merger."
Further, there are no provisions in the Indenture which would preclude the
Merger.
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REAL ESTATE EXPOSURE
The following table shows the Company's after-tax operating and realized
investment results during each of the three years ended December 31, 1993 and
the nine months ended September 30, 1994 (in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------
1994 1993 1992 1991
------------- ------- ------- ------
<S> <C> <C> <C> <C>
Operating loss..................................... $ (25.1) $ (59.3) $ (34.2) $(19.4)
Realized investment gain (loss).................... $ 22.6 $(198.4) $(174.9) $(21.4)
</TABLE>
For an expanded discussion of real estate-related results, see the sections
captioned "MANAGEMENT'S DISCUSSION AND ANALYSIS -- RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- Real Estate" and "-- INVESTMENTS" in both the 1993 Annual
Report to Stockholders (portions of which are incorporated by reference in the
Form 10-K, which is incorporated herein by reference) and the Form 10-Q (which
is incorporated herein by reference).
The $1.4 billion real estate portfolio held by the Company's continuing
operations constituted 16.8 percent of its cash and invested assets at September
30, 1994. The portfolio consists of joint venture and third-party mortgage loans
and other real estate-related investments. The majority of the Company's real
estate loans are on properties or projects where the Company, its former parent,
Lumbermens Mutual Casualty Company ("Lumbermens"), or their respective
affiliates have taken ownership positions in joint ventures with a small number
of partners.
The Company has continued to fund both existing properties and legal
commitments. Total future legal commitments were $572.6 million at September 30,
1994. This amount represented a net decrease of $64.2 million since year-end
1993, largely due to fundings in 1994. As of September 30, 1994, the Company
expects to fund approximately $229.3 million of these legal commitments along
with providing capital to existing projects. The disparity between total legal
commitments and the amount expected to be funded relates principally to standby
financing arrangements that provide credit enhancements to certain tax-exempt
bonds, which the Company does not presently expect to fund. The total legal
commitments, along with estimated working capital requirements, are considered
in the Company's evaluation of reserves and write-downs.
The Company monitors its real estate portfolio and identifies changes in
the relevant real estate marketplaces, the economy and each borrower's
circumstances. The Company's portfolio is distributed by property type and
geographic location. Real estate markets have been depressed in recent periods
in those areas where most of the Company's real estate portfolio is located.
Approximately half of the Company's real estate holdings are in California and
Illinois. About 5.5 percent are in Spain. In California, real estate market
conditions have continued to be worse than in many other areas of the country.
Undeveloped land, including the Spanish projects, represented approximately
19.3 percent of the Company's real estate portfolio at September 30, 1994. To
maximize the value of certain land and other projects, additional development is
proceeding or is planned. Such development of existing projects may continue to
require substantial funding, either from the Company or third parties. In the
present real estate markets, third-party financing can require credit enhancing
arrangements (e.g., standby financing arrangements and loan commitments) from
the Company. The values of development projects are dependent on a number of
factors, including obtaining necessary permits and market demand for the
permitted use of the property. There can be no assurance that such permits will
be obtained as planned or at all, nor that such expenditures will occur as
scheduled, nor that the Company's plans with respect to such projects may not
change substantially.
The Company's real estate experience could continue to be adversely
affected by overbuilding and weak economic conditions in certain real estate
markets and by tight lending practices by banks
11
<PAGE> 12
and other lenders. Stagnant or worsening economic conditions in the areas in
which the Company has made loans, or additional adverse information becoming
known to the Company through its regular reviews or otherwise, could result in
higher levels of problem loans or potential problem loans, reductions in the
value of real estate collateral and adjustments to the real estate reserve. The
Company's net income and stockholders' equity could be materially reduced in
future periods if real estate market conditions remain stagnant or worsen in
areas where the Company's portfolio is located.
Current conditions in the real estate markets are adversely affecting the
financial resources of certain of the Company's joint venture partners. Every
partner, however, remains active in the control of its respective joint
ventures. In evaluating a partner's ability to meet its financial commitments,
the Company considers the amount of all applicable debt and the value of all
properties within that portion of the Company's portfolio consisting of loans to
and investments in joint ventures with such partner. In 1993, the Company
decided to recognize 100 percent of the operating results of certain joint
ventures. The additional operating results are being recorded primarily by the
Company's real estate subsidiaries, which are the equity holders in such
ventures.
Based on the level of troubled real estate-related investments the Company
experienced in the first half of 1994 and in 1993 and 1992, the Company
anticipates additional foreclosures and deeds in lieu of foreclosures in 1994.
Any consolidation accounting resulting from foreclosures would add the related
ventures' assets and senior third-party liabilities to the Company's balance
sheet and eliminate the Company's loans to such ventures. See the "Troubled real
estate-related investments" table on page 32 of the Form 10-Q, incorporated
herein by reference, and on page 35 of the 1993 Annual Report to Stockholders,
portions of which are incorporated by reference in the Form 10-K, which is
incorporated herein by reference.
Due to the adverse real estate environment affecting the Company's
portfolio in recent years, the Company has devoted significant attention to its
real estate portfolio, enhancing monitoring of the portfolio as well as
formulating specific action plans addressing nonperforming and potential problem
credits. Since 1991, the Company has intensified its attention to evaluating the
asset quality, cash flow and prospects associated with each of its projects.
However, there can be no assurance that such efforts will result in an
improvement in the performance of the Company's real estate portfolio.
The Company is analyzing various potential transactions designed to reduce
the level of real estate-related investments on the Company's balance sheet.
Specific types of transactions under consideration and previously utilized
include loan sales, property sales, mortgage refinancings and real estate
investment trusts ("REITs").
In the third quarter of 1994, Company subsidiaries recorded $17.1 million
of pre-tax income from a transaction in which they sold their equity investments
in certain multifamily residential properties to a newly formed REIT. With
regard to various other potential transactions being considered, the Company
believes that none are so significant or so likely as to be considered material
to its consolidated financial statements or other disclosures at this time.
CHANGES IN RATINGS
On March 18, 1993, Moody's Investors Service ("Moody's") placed its "Baa1"
senior debt rating of Kemper and financial strength ratings of the Company's two
life insurance subsidiaries under review for possible downgrade. On August 20,
1993, Moody's completed its review by downgrading Kemper's senior debt rating to
"Baa2" and Kemper's preferred stock rating to "Baa3" from "Baa2" while
confirming the "Baa1" financial strength ratings of the two life insurance
subsidiaries. On March 19, 1993, Standard & Poor's Corporation ("Standard &
Poor's") lowered the senior debt rating of Kemper to "BBB+" from "A-" and
removed Kemper from "Credit Watch" where it was placed in February of 1993. On
May 13, 1993, Standard & Poor's announced it had assigned a "BBB" rating to the
Company's Series E Preferred Stock issued in April 1993. On August 26, 1993,
Standard & Poor's lowered Kemper's senior debt rating to "BBB" and Kemper's
preferred stock rating to "BB+." On March 22, 1993, Duff & Phelps Inc. ("Duff &
Phelps") lowered its senior debt rating of Kemper from
12
<PAGE> 13
"A" to "A-", while the claims-paying ability ratings of the Company's two life
insurance subsidiaries, Federal Kemper Life Assurance Company (rated "AA-") and
Kemper Investors Life Insurance Company (rated "A+"), remained unaffected by the
Duff & Phelps action. The Duff & Phelps ratings were all reaffirmed on July 20,
1993. On June 8, 1993, A. M. Best Co. lowered the claims-paying ability ratings
of both of the Company's life insurance subsidiaries to "A-" from "A".
On March 15, 1994, Moody's, Standard & Poor's and Duff & Phelps placed
their ratings of Kemper under "review with direction uncertain", on "CreditWatch
with developing implications" and on "Rating Watch -- Uncertain", respectively.
In connection with and following the execution of the Merger Agreement, Moody's
placed under review with "possible downgrade" its Baa2 senior debt rating and
Baa3 preferred stock rating of Kemper and its Baa1 financial strength ratings of
both of the Company's life insurance subsidiaries; Standard & Poor's placed on
"CreditWatch with 'negative' implications" its BBB senior debt rating and BB+
preferred stock rating of Kemper; Duff & Phelps placed "on Rating Watch -- Down"
Kemper's A- senior debt rating, Federal Kemper Life Assurance Company's AA-
claims-paying ability rating and Kemper Investors Life Insurance Company's A+
claims-paying ability rating; and A.M. Best Co. placed under review its "A-"
(Excellent) Best's Ratings of both of the life insurance subsidiaries.
Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. The ratings organizations continue
to review the financial performance and condition of insurers and their
investment portfolios, including those of the Company's life insurance
subsidiaries. Any reductions in Kemper's senior debt ratings could adversely
impact the Company's financial flexibility by limiting the Company's access to
capital or increasing its cost of borrowings. Any reductions in the life
insurance subsidiaries' claims-paying ability or financial strength ratings
could result in their products being less attractive to consumers.
Ratings reductions for Kemper or its subsidiaries and other financial
events can also trigger obligations to fund certain real estate-related
commitments to take out other lenders. In such events, those lenders can be
expected to renegotiate their loan terms, although they are not contractually
obligated to do so. Such circumstances could accelerate or increase the
Company's purchases of real estate-related assets from its regulated life
insurance subsidiaries to support further their respective statutory capital
positions.
No credit rating is a recommendation to buy, sell or hold securities. Each
rating is subject to revision or withdrawal at any time by the assigning rating
organization and should be evaluated independently of any other rating.
REGULATORY CONSIDERATIONS AND RISK-BASED CAPITAL
Regulatory authorities establish minimum liquidity and capital standards
for the Company's asset management, life insurance and securities brokerage
subsidiaries.
The Company's life insurance subsidiaries are generally subject to
regulation and supervision by the insurance departments of the jurisdictions in
which the subsidiaries are licensed to do business. These departments enforce
laws and regulations designed to assure that insurance companies maintain
adequate capital and surplus, manage investments according to prescribed
character, standards and limitations and comply with a variety of operational
standards. The departments also make periodic examinations of individual
companies and review annual and other reports on the financial condition of each
company operating within their respective jurisdictions. Regulations, which
often vary from state to state, cover most aspects of the insurance business,
including forms of policies and accounting and financial reporting procedures.
Under asset adequacy and risk-based capital rules adopted in 1993 in
Illinois (the domiciliary state of the Company's life insurance subsidiaries),
state regulators may mandate remedial action for inadequately reserved or
inadequately capitalized companies. The new asset adequacy rules are designed to
assure that reserves and assets are adequate to cover liabilities under a
variety of
13
<PAGE> 14
economic scenarios. The focus of the new capital rules is a risk-based formula
that applies prescribed factors to various risk elements in an insurer's
business and investments to develop a minimum capital requirement designed to be
proportional to the amount of risk assumed by the insurer. The Company's life
insurance subsidiaries have reserves and capital levels exceeding any which
would mandate action under the new rules.
HOLDING COMPANY LIQUIDITY
The major ongoing sources of the Company's liquidity are asset management
fees, securities brokerage commissions, collateralized bank borrowings by the
securities brokerage operations, collections of life insurance premium revenue,
deposits for annuities and interest-sensitive life contracts, investment income,
other operating revenue and cash provided from maturing or sold investments.
Kemper receives interest on loans, dividends and payments for federal income
taxes from its subsidiaries. Kemper, from time to time, borrows funds and issues
securities for cash. During 1993, Kemper received $380.3 million in cash from
the sales of discontinued property-casualty insurance operations.
The Company continues to use its resources for dividends to stockholders,
corporate interest and other holding company expenses, consolidated federal
income tax payments, common stock repurchases (treasury stock), acquisitions of
subsidiaries and additional investments in, or asset purchases from,
subsidiaries. In 1993, the Company provided $517.1 million in cash to the life
insurance subsidiaries by purchasing $447.1 million of certain real
estate-related investments (subordinated loans and equity investments) from such
subsidiaries and contributing $70.0 million in capital to the life insurance
segment. Through the third quarter of 1994, the Company purchased an additional
$199.1 million of real estate-related investments from its two life insurance
subsidiaries and contributed $65.0 million to the capital of one of the life
subsidiaries by utilizing a dividend received from the other. The Company's
purchases of such investments from its life insurance subsidiaries were
consummated at the carrying values of such investments at the dates of purchase.
The Company expects it may continue to make substantial purchases of real
estate-related investments from its life insurance subsidiaries. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS -- RESULTS OF OPERATIONS AND FINANCIAL
CONDITION -- Real Estate" on pages 22 and 23 of the Form 10-Q, incorporated
herein by reference, and on page 28 of the 1993 Annual Report to Stockholders,
portions of which are incorporated by reference in the Form 10-K, which is
incorporated herein by reference.
Since Kemper is a holding company, its rights and the rights of its
creditors, including the holders of the New Notes, to participate in the assets
of any subsidiary upon the latter's liquidation or recapitalization will be
subject to the prior claims of the subsidiary's creditors (including, in the
case of an insurance subsidiary, its policyholders, and in the case of an
investment advisor or broker-dealer subsidiary, its customers), except to the
extent that Kemper itself may be a creditor with recognized claims against the
subsidiary. In addition, there are certain regulatory limitations on the payment
of dividends and on loans and other transfers of funds to Kemper by certain of
its subsidiaries.
Dividend distributions to stockholders from an insurance company are
restricted by state insurance laws. In Illinois, where Kemper's life insurance
subsidiaries are domiciled, if such dividend, together with other distributions
during the 12 preceding months, would exceed the greater of (a) ten percent of
the company's surplus as regards policyholders as of the preceding December 31,
or (b) the net income of the company for the preceding calendar year, then such
proposed dividend must be reported to the director of insurance at least 30 days
prior to the proposed payment date and may be paid only if not disapproved. In
Illinois, insurance laws also permit payment of dividends only out of earned
surplus, exclusive of all or most unrealized capital gains.
Dividend distributions from securities brokerage firms are restricted by
federal and state securities laws, the rules or regulations thereunder and/or
the rules and regulations of an exchange of which a firm is a member. The
Company's registered broker-dealer and investment adviser subsidiaries cannot
14
<PAGE> 15
lawfully pay dividends that would either reduce their respective net capital
amounts below the minimum amounts required or cause certain net capital
decreases without prior regulatory approval.
The aggregate maximum dividend distribution that can be made to Kemper by
its asset management, life insurance and securities brokerage subsidiaries in
1994 without prior approval is $150.0 million. The amount of dividends paid by
subsidiaries to Kemper during the nine months ended September 30, 1994 was
$105.8 million, including $70.8 million which required regulatory approval.
LEGAL MATTERS
(a) As previously disclosed, in 1992 the Commission's Staff commenced an
investigation into certain of the Company's real estate-related accounting
practices and related disclosures. The Company has fully cooperated throughout
the Staff's investigation. The Company and the Staff have had settlement
discussions respecting this matter.
(b) In August 1993, a class action styled Tabankin, et al. v. Kemper
Short-Term Global Income Fund, et al. was filed in federal court in the Northern
District of Illinois on behalf of various investors in the Kemper Short-Term
Global Income Fund during the period from October 29, 1990 to December 31, 1992,
and in the Short-Term Global Income Portfolio of Kemper Investment Portfolios
(collectively with the Global Income Fund, the "Funds") during the period from
February 1, 1991 to December 31, 1992. The complaint alleges violations of
various federal securities laws and common law fraud based on alleged material
misstatements or omissions concerning the investment strategies of the Funds
arising out of declines in the share price (net asset value) of the Funds when
the value of the U.S. dollar rose against a number of European currencies in the
aftermath of the rejection of the Maastricht Treaty, the collapse of the
Exchange Rate Mechanism, and the resulting devaluation of European currencies in
the fall of 1992. Plaintiffs' claim for damages is unspecified.
In January 1994, the defendants' motion to dismiss was granted and judgment
entered with a memorandum opinion finding, among other things, that the Funds'
prospectuses adequately disclosed both the risks associated with the Funds'
investment strategies and the risks to net asset value which could arise from
currency devaluations. Plaintiffs moved for leave to file an amended complaint.
In March 1994, the district court granted plaintiffs' motion. In April 1994, the
defendants refiled their motion to dismiss. On June 23, 1994, the district court
entered an order granting the defendants' motion to dismiss and entering final
judgment in favor of the Company. The plaintiffs have appealed this judgment.
The Company believes it has meritorious defenses and intends to continue to
vigorously defend this class action.
(c) In December 1993, a federal district court in Portland, Oregon entered
judgment on a May 1993 jury verdict against Boettcher & Company, a predecessor
firm of Kemper Securities, Inc. ("KSI"), in a class action lawsuit filed in 1988
by persons who purchased securities of Melridge, Inc. between November 1983 and
1987. If upheld on appeal, the judgment could result in liability of up to
approximately $57 million, depending on various factors including the amount of
written claims actually filed by class members, exclusive of any interest and
attorneys' fees that may be awarded on certain claims. In its verdict, the jury
found Boettcher 30 percent at fault for violations of federal and state
securities laws in connection with certain public offerings of Melridge common
stock and convertible debentures in the mid-1980s, as well as secondary market
transactions in both securities. Certain former Melridge executives were found
30 percent at fault for the violations, and other defendants who had settled
with the plaintiffs were found 40 percent at fault. KSI has appealed the
judgment and intends to vigorously pursue all available legal remedies.
LACK OF PUBLIC MARKET
The New Notes are being offered to the holders of the Existing Notes. The
Existing Notes were offered and sold in September 1993 to the Initial Purchasers
in transactions not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The
15
<PAGE> 16
Initial Purchasers subsequently resold the Existing Notes to Qualified
Institutional Buyers (as defined in Rule 144A under the Securities Act), to a
limited number of institutional accredited investors within the meaning of Rule
501 under the Securities Act and in offshore transactions in reliance on
Regulation S under the Securities Act. The Existing Notes are eligible and have
been designated for trading in the Private Offerings Resales and Trading through
Automated Linkages ("PORTAL") System of the National Association of Securities
Dealers, Inc.
The New Notes are a new issue of notes and there is currently no
established market for the New Notes, and there can be no assurance as to the
liquidity of any markets that may develop for the New Notes, the ability of
holders of the New Notes to sell their New Notes or the price at which such
holders would be able to sell their New Notes. If such markets were to exist,
the New Notes could trade at prices that may be higher or lower than the initial
market values thereof depending on many factors, including among other things,
the Company's results of operations, prevailing interest rates and the markets
for similar securities. See "Plan of Distribution" for certain information
pertaining to the market for the New Notes. Kemper does not intend to list the
New Notes on any securities exchange or to seek the admission of the New Notes
for quotation or trading in the National Association of Securities Dealers'
Automated Quotation System.
The liquidity of, and trading for, the New Notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.
EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF THE EXCHANGE OFFER
TO NON-TENDERING HOLDERS OF THE EXISTING NOTES
Issuance of the New Notes in exchange for Existing Notes pursuant to the
Exchange Offer will be made only after a timely receipt by Kemper of such
Existing Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of Existing Notes desiring to
tender such Existing Notes in exchange for New Notes should allow sufficient
time to ensure timely delivery. Kemper is under no duty to give notification of
defects or irregularities with respect to the tenders of Existing Notes for
exchange. Existing Notes that are not tendered or are tendered but not accepted
(for example, due to a failure to submit properly completed documents) will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof and Kemper will have no further
obligation to provide for the registration under the Securities Act of such
Existing Notes. In addition, any holder of Existing Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes may be deemed to have received restricted securities and, if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction unless such resale
is exempt from such requirements. After consummation of the Exchange Offer, the
Step-Up in Interest Rate of 7.375% per annum on any remaining Existing Notes
will be rescinded and the original interest rate of 6.875% per annum will be
reinstated. See "The Exchange Offer."
Kemper may in the future seek to acquire untendered Existing Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. Kemper has no present plan to acquire any Existing Notes which are
not tendered in the Exchange Offer.
16
<PAGE> 17
BUSINESS DESCRIPTION
Kemper is a financial services holding company that gathers, manages and
protects the assets of individual, corporate and institutional clients. The
Company's continuing operations include asset management, life insurance,
securities brokerage and real estate subsidiaries. The principal executive
offices of the Company are located at One Kemper Drive, Long Grove, Illinois
60049-0001. Its telephone number is (708) 320-4700.
ASSET MANAGEMENT
Kemper Financial Services, Inc. ("KFS") had $65.4 billion in assets under
management at September 30, 1994. KFS' product offerings include 21 stock and
bond funds, each of which offers fund shareholders the choice of three pricing
configurations: (i) the traditional front-end load option, (ii) a spread load
(contingent deferred sales charge) and annual distribution fees charged pursuant
to a plan complying with Rule 12b-1 under the General Rules and Regulations
under the Investment Company Act of 1940 ("12b-1 Fees") or (iii) a level load
charging annual service and 12b-1 Fees with no advance commission on the sale.
KFS also offers investment management and advisory services for individual and
institutional investors. KFS distributes its products and services primarily
through securities brokerage firms, banks and other financial institutions,
independent brokers and agents, financial planners and corporate pension and
profit-sharing plans. INVEST Financial Corporation, a KFS subsidiary, is also an
important distributor of Kemper products.
LIFE INSURANCE
Federal Kemper Life Assurance Company ("FKLA") markets a selected range of
life insurance, including term, and annuity products. FKLA's products are
designed for individuals and small business owners and include features such as
premium guarantee levels and premium reduction options. FKLA distributes its
products through independent general agents and various other channels.
Kemper Investors Life Insurance Company ("KILICO") specializes in variable
and fixed annuities. KILICO has been offering products in the variable annuity
marketplace for more than ten years. KILICO markets its products primarily
through financial institutions, securities brokerage firms, financial planners
and other specialty distributors of financial products. In 1992 and 1993, the
management, operations and employees of KILICO were integrated with those of
FKLA to increase efficiencies and coordinate the strategic directions of both
companies. Immediately following the closing of the Merger (see "RISK FACTORS --
Merger Agreement and Strategic Transactions"), it is anticipated that the
Company will divest its life insurance subsidiaries.
SECURITIES BROKERAGE
Kemper Securities, Inc. ("KSI") is a full-service securities brokerage
firm, providing a wide array of investment vehicles and advisory services to
individual, business and institutional investors. Although KSI's market focus is
primarily retail, the firm also provides investment banking services to
corporate and municipal clients.
REAL ESTATE
This segment includes the Company's real estate subsidiaries. These
subsidiaries include companies which act as general or limited partners in and
lenders to various joint ventures. Immediately following the closing of the
Merger (see "RISK FACTORS -- Merger Agreement and Strategic Transactions"), it
is anticipated that the Company will divest its real estate subsidiaries.
OTHER OPERATIONS AND CORPORATE
This category includes the holding company income and expenses of Kemper
and Kemper Financial Companies, Inc.
DISCONTINUED OPERATIONS
The Company divested its primary property-casualty insurance, reinsurance
and risk management subsidiaries in the second half of 1993.
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<PAGE> 18
USE OF PROCEEDS
There will be no cash proceeds to Kemper from the exchange pursuant to the
Exchange Offer. On September 22, 1993, Kemper received net proceeds of
approximately $195.5 million from the issuance and sale of the Existing Notes
which it used to repay short-term indebtedness and to purchase certain real
estate-related investments from its life insurance subsidiaries. Such short-term
indebtedness was earlier incurred by Kemper primarily to also purchase certain
real estate-related investments from its life insurance subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
(CONTINUING OPERATIONS)
The following table sets forth the ratio of earnings to fixed charges for
the continuing operations of the Company for the periods indicated. Earnings
represent consolidated earnings (losses) before income taxes and the cumulative
effect of accounting changes and fixed charges (excluding interest capitalized).
Fixed charges consist of interest and the portion of rental expense deemed
representative of the interest factor.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER
30, YEAR ENDED DECEMBER 31,
------------ ------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............. 2.9 (a) (b) (c) 1.9 (d) 2.3
Ratio, excluding interest expense on
collateralized borrowings of securities
brokerage operations......................... 3.8 (a) (b) (c) 2.6 (d) 3.8
- ---------------
</TABLE>
(a) Nine months ended September 30, 1993 ratios are not shown since fixed
charges exceeded available earnings by approximately $206 million.
(b) 1993 ratios are not shown since fixed charges exceeded available earnings by
approximately $111 million.
(c) 1992 ratios are not shown since fixed charges exceeded available earnings by
approximately $274 million.
(d) 1990 ratios are not shown since fixed charges exceeded available earnings by
approximately $69 million.
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<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT SHARE DATA AND ASSETS UNDER MANAGEMENT)
The following table sets forth selected consolidated financial and other
data of the Company. The selected statement of operations and balance sheet
data, insofar as it relates to each of the five years in the five-year period
ended December 31, 1993, have been derived from the Company's consolidated
financial statements, which for each such year have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The selected financial
data for, and as of the end of, interim periods are derived from the Company's
unaudited interim financial statements. Such unaudited interim financial
statements include all adjustments (consisting only of normal recurring
accruals) that the Company considers necessary for a fair presentation of the
financial position and the results of operations as of the dates and for the
periods indicated. This information should be read in conjunction with
Management's Discussion and Analysis and the Consolidated Financial Statements
of the Company, including the notes thereto, which are incorporated herein by
reference to the Form 10-K. This information has been restated to reflect the
classification of certain subsidiaries as discontinued operations.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
REVENUE
Insurance premium income..................... $ 113 $ 116 $ 158 $ 136 $ 124 $ 112 $ 107
Net investment income........................ 356 316 427 522 654 664 604
Asset management income...................... 341 374 498 481 438 427 458
Securities brokerage income.................. 380 484 640 639 632 597 637
Realized investment loss..................... (22) (302) (256) (360) (108) (24) (4)
Other income (loss).......................... 73 59 82 86 76 53 (11)
------ ------ ------ ------ ------ ------ ------
Total revenue....................... 1,241 1,047 1,549 1,504 1,816 1,829 1,791
------ ------ ------ ------ ------ ------ ------
BENEFITS AND EXPENSES
Insurance claim costs and policyholder
benefits................................... 357 391 514 598 640 604 527
Amortized policy acquisition costs........... 50 42 60 67 48 59 58
Other operating costs and expenses........... 695 819 1,084 1,114 1,016 1,224 1,015
------ ------ ------ ------ ------ ------ ------
Total expenses...................... 1,102 1,252 1,658 1,779 1,704 1,887 1,600
------ ------ ------ ------ ------ ------ ------
Earnings (loss) from continuing operations
before income tax (benefit)................ 139 (205) (109) (275) 112 (58) 191
Income tax (benefit)......................... 50 (57) (20) (75) 36 13 67
------ ------ ------ ------ ------ ------ ------
Income (loss) from continuing operations... 89 (148) (89) (200) 76 (71) 124
Income from discontinued operations.......... -- 25 25 24 129 83 183
Gain on sale of discontinued operations to
related party, net of tax.................. -- 186 205 -- -- -- --
Gain on other sales of discontinued
operations, net of tax..................... 6 83 92 -- -- -- --
------ ------ ------ ------ ------ ------ ------
Income (loss) before cumulative effect of
changes in accounting principles......... 95 146 233 (176) 205 12 307
Cumulative effect of changes in accounting
principles, net of tax..................... -- 2 2 (27) -- -- --
------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ 95 $ 148 $ 235 $ (203) $ 205 $ 12 $ 307
====== ====== ====== ====== ====== ====== ======
Average number of common and equivalent
shares outstanding (in thousands).......... 34,256 45,837 42,830 48,840 48,094 48,431 51,281
====== ====== ====== ====== ====== ====== ======
NET INCOME (LOSS) PER SHARE
Primary
Continuing operations........................ $ 2.09 $(3.78) $(2.80) $(4.39) $ 1.58 $(1.44) $ 2.39
Discontinued operations...................... .17 6.73 7.86 .23 2.67 1.69 3.57
------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ 2.26 $ 2.95 $ 5.06 $(4.16) $ 4.25 $ .25 $ 5.96
====== ====== ====== ====== ====== ====== ======
Fully diluted
Continuing operations........................ $ 2.08 $(3.41) $(2.36) $(4.39) $ 1.58 $(1.44) $ 2.39
Discontinued operations...................... .14 6.30 7.23 .23 2.67 1.69 3.57
------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ 2.22 $ 2.89 $ 4.87 $(4.16) $ 4.25 $ .25 $ 5.96
====== ====== ====== ====== ====== ====== ======
</TABLE>
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<PAGE> 20
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
Total assets......................... $13,877 $14,028 $14,038 $13,176 $13,105 $12,164 $11,296
Notes payable........................ 338 456 349 396 242 288 488
Long-term debt....................... 390 383 394 183 218 116 96
Convertible debentures of
subsidiary......................... 38 65 46 79 98 119 112
Preferred stock...................... 360 361 361 101 1 1 2
Stockholders' equity................. $ 1,358 $ 1,635 $ 1,619 $ 1,766 $ 1,839 $ 1,626 $ 1,724
======= ======= ======= ======= ======= ======= =======
Investment portfolio -- continuing
operations
Cash and short-term investments...... $ 686 $ 926 $ 967 $ 541 $ 1,333 $ 315 $ 408
Fixed maturities..................... 4,607
Investment-grade................... 5,376 4,981 5,106 4,116 3,019 3,013 (a)
Below investment-grade............. 208 305 227 407 630 1,656 (a)
Equity securities.................... 36 127 99 106 77 47 22
Mortgage loans
Joint venture...................... 938 1,146 1,053 1,264 1,459 1,223 773
Third-party........................ 145 168 154 345 450 468 335
Other real estate-related
investments........................ 276 424 272 343 403 428 (b)
Other invested assets................ 453 440 447 400 390 368 408
------- ------- ------- ------- ------- ------- -------
Total cash and invested
assets.................... $ 8,118 $ 8,517 $ 8,325 $ 7,522 $ 7,761 $ 7,518 $ 6,553
======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(a) For 1989, the Company did not classify fixed maturities as
"investment-grade" or "below investment-grade."
(b) For 1989, the Company included other real estate-related investments in
other invested assets and fixed maturities.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT
(IN BILLIONS)
Mutual funds
Money market....................... $ 12.3 $ 14.3 $ 12.3 $ 15.1 $ 17.6 $ 24.9 $ 21.5
Fixed-income....................... 21.9 25.7 25.7 24.6 21.5 17.5 18.2
Equity............................. 9.0 9.4 9.4 8.4 6.5 3.6 3.1
Investment advisory.................. 5.3 4.6 4.7 4.3 4.5 3.1 2.6
Kemper Corporation affiliates........ 9.7 9.9 9.8 10.1 9.7 8.3 7.8
Lumbermens Mutual Casualty Company,
its affiliates and other........... 7.2 7.4 7.4 6.8 6.1 6.0 5.8
------- ------- ------- ------- ------- ------- -------
Total assets under
management................ $ 65.4 $ 71.3 $ 69.3 $ 69.3 $ 65.9 $ 63.4 $ 59.0
======= ======= ======= ======= ======= ======= =======
</TABLE>
20
<PAGE> 21
CAPITALIZATION
(IN MILLIONS)
The following table sets forth the consolidated short-term debt and
capitalization of Kemper and its subsidiaries at September 30, 1994.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------
<S> <C>
Short-term debt:
Collateralized bank loans of securities brokerage operations............. $ 314.1
Other short-term debt.................................................... 24.1
------------------
Total short-term debt............................................ 338.2
------------------
Long-term debt:
6.875% Notes Due 2003.................................................... 200.0
8.80% Notes Due 1998..................................................... 110.8
Medium-term notes........................................................ 65.5
Other long-term debt..................................................... 13.6
Convertible debentures of subsidiary..................................... 38.4
------------------
Total long-term debt............................................. 428.3
------------------
Total short-term and long-term debt.............................. $ 766.5
===============
Redeemable securities of subsidiary........................................ $ .3
===============
Stockholders' equity:
Preferred stock.......................................................... $ 360.4
Common stock............................................................. 329.8
Additional paid-in capital............................................... 358.2
Unrealized loss on foreign currency transactions......................... (39.6)
Unrealized appreciation on investments................................... (225.8)
Retained earnings........................................................ 1,603.9
Treasury shares, at cost................................................. (1,028.9)
------------------
Total stockholders' equity....................................... 1,358.0
------------------
Total capitalization (excludes total short-term debt)...................... $ 1,786.6
===============
</TABLE>
21
<PAGE> 22
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were originally issued and sold to the Initial
Purchasers on September 22, 1993. The offer and sale of the Existing Notes to
the Initial Purchasers was not required to be registered under the Securities
Act in reliance upon the exemption provided by Section 4(2) of the Securities
Act. The Initial Purchasers subsequently resold the Existing Notes to Qualified
Institutional Buyers (as defined in Rule 144A under the Securities Act), to a
limited number of institutional accredited investors within the meaning of Rule
501 under the Securities Act and in offshore transactions in reliance on
Regulation S under the Securities Act. Prior to and as a condition to the
initial sale of the Existing Notes, Kemper entered into an exchange and
registration agreement (the "Exchange and Registration Agreement") dated
September 22, 1993, between Kemper and the Initial Purchasers pursuant to which
Kemper agreed with the Initial Purchasers, for the benefit of the holders of the
Existing Notes, to increase the initial interest rate on the Existing Notes by
0.50% per annum from 6.875% per annum (the "Initial Interest Rate") to 7.375%
per annum (the "Step-Up in Interest Rate") unless Kemper caused on or prior to
March 15, 1994 either (i) an exchange offer to be consummated, pursuant to which
new notes of Kemper covered by a registration statement and containing terms
identical in all material respects to the terms of the Existing Notes (except
that the new notes would not contain terms with respect to transfer restrictions
and adjustments in the interest rate) would be offered in exchange for Existing
Notes tendered at the option of the holders thereof, or (ii) a registration
statement covering resales of the Existing Notes to be filed and declared
effective under the Securities Act. The Exchange Offer contemplated by this
Prospectus is designed to satisfy the condition set forth in (i) of the
preceding sentence. The Step-Up in Interest Rate began accruing on March 15,
1994 and will be payable on September 15, 1994 and on each March 15 and
September 15 thereafter, except if rescinded as provided in the following
sentence. The Exchange and Registration Agreement provides that if after Kemper
becomes obligated to pay the Step-Up in Interest Rate, either the Exchange Offer
is consummated or a registration statement covering resales of the Existing
Notes is declared effective in accordance with the Exchange and Registration
Agreement, then, upon the happening of either of such events, the Step-Up in
Interest Rate on the Existing Notes will be permanently rescinded and the
Initial Interest Rate shall be reinstated as of the date of either of such
events.
The purpose of the Exchange Offer is to rescind the Step-Up in Interest
Rate on the Existing Notes and reinstate the Initial Interest Rate pursuant to
Kemper's option under the Exchange and Registration Agreement. Except as
provided under "Plan of Distribution" with respect to certain broker-dealers,
this Prospectus may not be used by any holder of the Existing Notes or any
holder of the New Notes to satisfy the registration and prospectus delivery
requirements under the Securities Act, if any, that may apply in connection with
any resale of such Existing Notes or New Notes. See "Terms of the Exchange"
below.
TERMS OF THE EXCHANGE
Kemper hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of New Notes for each $1,000 in principal amount of the
Existing Notes. Existing Notes are required to be exchanged in minimum
denominations of $100,000 and integral multiples of $1,000 in excess thereof.
The terms of the New Notes are identical in all material respects to the terms
of the Existing Notes for which they may be exchanged pursuant to this Exchange
Offer, except that the New Notes will generally be freely transferable by
holders thereof, and will not be subject to adjustments in the interest rate.
The New Notes will evidence the same debt as the Existing Notes and will be
entitled to all of the benefits and restrictions/limitations applicable thereto
under the Indenture. See "Description of the New Notes."
Kemper has not requested, and does not intend to request, an interpretation
by the staff of the Commission with respect to whether the New Notes issued
pursuant to the Exchange Offer in
22
<PAGE> 23
exchange for the Existing Notes may be offered for sale, resold or otherwise
transferred by any holder without compliance with the registration and
prospectus delivery provisions of the Securities Act. Based on an interpretation
by the staff of the Commission set forth in a series of no-action letters issued
to third parties, Kemper believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Existing Notes may be offered for sale, resold
and otherwise transferred by any holder of such New Notes (other than any such
holder which is an "affiliate" of Kemper within the meaning of Rule 405 under
the Securities Act or certain broker-dealers as described below) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and such holder has no arrangement or understanding
with any person to participate in the distribution (within the meaning of the
Securities Act) of such New Notes. Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the New Notes cannot rely
on such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction unless an exemption exists. In order to
participate in the Exchange Offer, each broker-dealer that receives New Notes
for its own account in exchange for Existing Notes, where such Existing Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the date
of this Prospectus, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
Interest on the New Notes shall accrue from the last interest payment date
on which interest was paid on the Existing Notes surrendered in exchange
therefor. The Step-Up in Interest Rate on the Existing Notes will be permanently
rescinded and the Initial Interest Rate shall be reinstated as of the
consummation of the Exchange Offer.
Tendering holders of the Existing Notes shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Existing Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATIONS; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York time, on December 12, 1994, unless
Kemper in its sole discretion extends the period during which the Exchange Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date on which the Exchange Offer, as so extended by Kemper, shall expire.
Kemper reserves the right to extend the Exchange Offer at any time and from time
to time by giving oral or written notice to First Chicago Trust Company of New
York (the "Exchange Agent") and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. Kemper presently intends to consummate the
Exchange Offer as soon as practicable. During any extension of the Exchange
Offer, all Existing Notes previously tendered pursuant to the Exchange Offer
will remain subject to the Exchange Offer.
The Exchange Date will be the first business day following the Expiration
Date. Kemper expressly reserves the right to (i) terminate the Exchange Offer
and not accept for exchange any Existing Notes if either of the events set forth
below under "Conditions to the Exchange Offer" shall have occurred and shall not
have been waived by Kemper and (ii) amend the terms of the Exchange Offer in any
manner which, in its good faith judgment is advantageous to the holders of the
Existing Notes, whether before or after any tender of the Existing Notes. Unless
Kemper terminates the Exchange Offer prior to 5:00 p.m., New York time, on the
Expiration Date, Kemper will exchange the New Notes for the Existing Notes on
the Exchange Date.
23
<PAGE> 24
TENDER PROCEDURE
The tender to Kemper of Existing Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and Kemper in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Existing Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date (or complying with
the procedure for book-entry transfer described below) or (ii) complying with
the guaranteed delivery procedures described below.
If tendered Existing Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Existing Notes are to be reissued) in the name of
the registered holder (which term, for the purposes of these tender procedures,
shall include any participant in The Depository Trust Company (also referred to
as a "book-entry transfer facility") whose name appears on a security listing as
the owner of Existing Notes), the signature of such signer need not be
guaranteed. In any other case, the tendered Existing Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to Kemper
and duly executed by the registered holder and the signature on the endorsement
or instrument of transfer must be guaranteed by a commercial bank or trust
company located or having an office, branch, agency or correspondent in the
United States, or by a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. (any of the foregoing
hereinafter referred to as an "Eligible Institution"). If the New Notes and/or
Existing Notes not exchanged are to be delivered to an address other than that
of the registered holder appearing on the note register for the Existing Notes,
the signature in the Letter of Transmittal, including that of any participant in
The Depository Trust Company, must be guaranteed by an Eligible Institution.
The method of delivery of Existing Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance obtained,
and the mailing to be made sufficiently in advance of the Expiration Date to
permit delivery to the Exchange Agent on or before the Expiration Date.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Existing Notes at the
book-entry transfer facility for the purpose of facilitating the Exchange Offer,
and subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of Existing Notes by causing such book-entry transfer facility to
transfer such Existing Notes into the Exchange Agent's account with respect to
the Existing Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Existing Notes may be
effected through book-entry transfer into the Exchange Agent's accounts at the
book-entry transfer facility, an appropriate Letter of Transmittal with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its address
set forth on the back cover page of this Prospectus on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Existing Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission (receipt confirmed by telephone and
an original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Existing Notes are registered and, if possible, the
certificate
24
<PAGE> 25
numbers of the Existing Notes to be tendered, and stating that the tender is
being made thereby and guaranteeing that within five New York Stock Exchange
trading days after the date of execution of such letter, telegram or facsimile
transmission by the Eligible Institution, the Existing Notes, in proper form for
transfer (or a confirmation of book-entry transfer of such Existing Notes into
the Exchange Agent's account at the book-entry transfer facility), will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Existing Notes being tendered by the above-described method are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), Kemper may, at its option, reject the tender. Copies of a "Notice of
Guaranteed Delivery" which may be used by Eligible Institutions for the purposes
described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of New Notes in exchange for Existing Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Existing Notes will be
determined by Kemper in its sole discretion, whose determination will be final
and binding. Kemper reserves the absolute right to reject any or all tenders not
in proper form or the acceptance for exchange of which may, in the opinion of
Kemper's counsel, be unlawful. Kemper also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularity in the
tender of any Existing Notes. None of Kemper, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Existing Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Existing Notes to Kemper and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Existing Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Existing Notes and to
acquire New Notes issuable upon the exchange of such tendered Existing Notes,
and that, when the same are accepted for exchange, Kemper will acquire good and
unencumbered title to the tendered Existing Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or Kemper to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Existing
Notes or transfer ownership of such Existing Notes on the account books
maintained by a book-entry transfer facility. The Transferor further agrees that
acceptance of any tendered Existing Notes by Kemper and the issuance of New
Notes in exchange therefor shall constitute performance in full by Kemper of its
obligations under the Exchange and Registration Agreement and that Kemper shall
have no further obligations or liabilities thereunder except as provided in said
agreement. All authority conferred by the Transferor will survive the death or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
25
<PAGE> 26
The Transferor certifies that it is not an "affiliate" of Kemper within the
meaning of Rule 405 under the Securities Act and that it is acquiring the New
Notes offered hereby in the ordinary course of such Transferor's business and
that such Transferor has no arrangement with any person to participate in the
distribution of such New Notes. Each transferor which is a broker-dealer
receiving New Notes for its own account must represent that it acquired the
Existing Notes for its own account as a result of market-making activities or
other trading activities and it has not entered into any arrangement or
understanding with Kemper or an affiliate of Kemper to distribute the New Notes
received by it in the Exchange Offer. In addition, such broker-dealer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Kemper will, for a period of 90 days
after the date of this Prospectus, make this Prospectus available to any
broker-dealer for use in connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Existing Notes pursuant to the Exchange Offer are irrevocable,
except that Existing Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus, and with respect to a
facsimile transmission, must be confirmed by telephone and an original delivered
by guaranteed overnight delivery. Any such notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered Existing Notes to
be withdrawn, the certificate numbers of Existing Notes to be withdrawn, the
principal amount of Existing Notes to be withdrawn, a statement that such holder
is withdrawing his election to have such Existing Notes exchanged, and the name
of the registered holder of such Existing Notes, and must be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to Kemper that the person withdrawing the tender has succeeded to
the beneficial ownership of the Existing Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Existing Notes promptly following
receipt of notice of withdrawal. If Existing Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Existing Notes or otherwise comply with the book-
entry transfer facility procedure. All questions as to the validity of notices
of withdrawals, including time of receipt, will be determined by Kemper in its
sole discretion, and such determination will be final and binding on all
parties.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Existing Notes validly tendered and not withdrawn and
issuance of the New Notes will be made on the Exchange Date. For the purposes of
the Exchange Offer, Kemper shall be deemed to have accepted for exchange validly
tendered Existing Notes when, as and if Kemper has given written notice thereof
to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Existing
Notes for the purposes of receiving New Notes from Kemper and causing the
Existing Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of New Notes to be
issued in exchange for accepted Existing Notes will be made by the Exchange
Agent promptly after acceptance by Kemper of the tendered Existing Notes.
Tendered Existing Notes not
26
<PAGE> 27
accepted for exchange by Kemper (for example, due to either a failure to submit
properly completed documents or the occurrence of one of the events described in
"-- Conditions to the Exchange Offer" below) will be returned without expense to
the tendering holders promptly following the Expiration Date or, if Kemper
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, Kemper will not be required to issue New Notes in respect
of any properly tendered Existing Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by issuing a press release to the Dow Jones News
Service), or its option, modify or otherwise amend the Exchange Offer, if any of
the following events occur:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority
which, in the sole judgment of Kemper, would prohibit, restrict or
otherwise render illegal, consummation of the Exchange Offer;
(b) there shall have occurred a change in the current
interpretation by the staff of the Commission that the New Notes issued
pursuant to the Exchange Offer in exchange for Existing Notes may be
offered for resale, resold and otherwise transferred by the holders
thereof (other than any such holder that is an "affiliate" of the
Corporation within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such New Notes are
acquired in the ordinary course of such holders' business and such
holders have no arrangements with any person to participate in the
distribution of such New Notes;
(c) there shall have occurred a change in the current
interpretation by the staff of the Commission that the New Notes issued
pursuant to the Exchange Offer in exchange for Existing Notes may be
offered for resale, resold and otherwise transferred by holders who are
broker-dealers so long as the representations set forth elsewhere herein
are made by such broker-dealers; and
(d) if, at any time prior to the consummation of the Exchange
Offer, Kemper reasonably determines, in good faith, that the Commission
is unlikely to permit the consummation of the Exchange Offer.
Kemper expressly reserves the right to terminate the Exchange Offer and not
to accept for exchange any Existing Notes upon the occurrence of any of the
foregoing conditions (which represents all of the material conditions to the
acceptance by Kemper of properly tendered Existing Notes). In addition, Kemper
may amend the Exchange Offer at any time prior to the Expiration Date if any of
the conditions set forth above occurs.
The conditions specified above are for the sole benefit of Kemper and may
be waived by Kemper, in whole or in part, in its sole discretion. Any
determination made by Kemper concerning an event, development or circumstance
described or referred to above will be final and binding on all parties.
EXCHANGE AGENT
First Chicago Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the back cover page of this
Prospectus. The First National Bank of Chicago acts as Trustee under the
Indenture.
27
<PAGE> 28
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
Kemper has not retained any dealer-manager or similar agent in connection
with the Exchange Offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of the Exchange Offer. Kemper will, however,
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for reasonable out-of-pocket expenses in connection therewith.
Kemper will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this Prospectus and related documents to the beneficial owners of the
Existing Notes and in handling or forwarding tenders for their customers.
RELIANCE; COMPLIANCE
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by Kemper. Neither the delivery of
this Prospectus nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of Kemper
since the respective dates as of which information is given herein. The Exchange
Offer is not being made to (nor will tenders be accepted from or on behalf of)
holders of Existing Notes in any jurisdiction in which the making of the
Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction. However, Kemper may, at its discretion, take such
action as it may deem necessary to make the Exchange Offer in any such
jurisdiction and extend the Exchange Offer to holders of Existing Notes in such
jurisdiction. In any jurisdiction where the securities laws or the blue sky laws
require the Exchange Offer to be made by a licensed broker or dealer, the
Exchange Offer is being made on behalf of Kemper by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept. Holders of the Existing Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
Kemper will have elected and completed an option contained in the Exchange and
Registration Agreement to rescind the Step-Up in Interest Rate. Holders of the
Existing Notes who either do not tender or tender but Kemper does not accept
their Existing Notes in the Exchange Offer will continue to hold such Existing
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for any such rights under the Exchange and
Registration Agreement which by their terms terminate or cease to have further
effectiveness as a result of the consummation of this Exchange Offer. All
untendered and tendered but unaccepted Existing Notes will continue to be
subject to the restrictions on transfer set forth in the Indenture.
Kemper may in the future seek to acquire untendered Existing Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. Kemper has no present plan to acquire any Existing Notes which are
not tendered in the Exchange Offer.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The New Notes will be issued under an Indenture dated as of September 15,
1993 (the "Indenture"), between Kemper and The First National Bank of Chicago,
as trustee (the "Trustee), a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is available for
inspection at the Corporate Trust Office of the Trustee in Chicago, Illinois and
as described under "Available Information." The First National Bank of Chicago
will initially act as Paying Agent for the New Notes. The Indenture permits the
issuance of securities in addition to the New Notes, and all securities issuable
under the Indenture are referred to herein as the "Securities." The Indenture
will not limit the aggregate amount of Securities which may be issued
thereunder, and Securities may be issued thereunder from time to time in
separate series up to the aggregate amount from time to time authorized by
Kemper for each series. The Securities will be unsecured obligations of Kemper
and will rank on a parity with all other unsecured and unsubordinated
indebtedness of Kemper. There is no existing debt of Kemper which will be senior
to the New Notes, but because Kemper is a holding company, the New Notes are
effectively subordinated to indebtedness and other liabilities of Kemper's
subsidiaries. The Indenture does not contain a provision entitling the holders
of notes, at their option, to require Kemper to repurchase the notes upon the
occurrence of events which would result in a change of control of Kemper.
Further, there are no provisions in the Indenture which would preclude the
Merger.
The New Notes will constitute one series of Securities issued under the
Indenture. The statements under this caption are brief summaries of certain
provisions of the Indenture, do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Indenture and the New Notes, including the definitions therein of certain
terms. Wherever particular sections of the Indenture or terms that are defined
in the Indenture are referred to, it is intended that such sections or defined
terms shall be incorporated herein by reference.
The New Notes will mature on September 15, 2003, and will be limited to an
aggregate principal amount of $200,000,000. The New Notes will accrue interest
from the last interest payment date on which interest was paid on the Existing
Notes surrendered in exchange therefor. The Step-Up in Interest Rate on the
Existing Notes will be permanently rescinded and the Initial Interest Rate shall
be reinstated as of the consummation of the Exchange Offer. The interest on the
New Notes will be payable semi-annually in arrears on March 15 and September 15
of each year, commencing March 15, 1995, and at Maturity, until the principal
thereof is paid or made available for payment. Interest will be computed and
paid on the basis of a 360-day year of twelve 30-day months. Interest will be
payable generally to the Person in whose name such New Note (or any predecessor
New Note) is registered at the close of business on the preceding March 1 or
September 1, as the case may be.
The New Notes are not redeemable prior to maturity and will not be subject
to the operation of any sinking fund.
The New Notes will be issued only in fully registered form without coupons,
in denominations of $100,000 and any amount in excess thereof which is an
integral multiple of $1,000. The New Notes will be denominated in U.S. dollars,
and payments of principal and interest will be made in U.S. dollars.
Principal and interest payable at Maturity on the New Notes will be made in
immediately available funds at the office or agency of the Paying Agent in
Chicago, Illinois and New York, New York, provided that the New Note is
presented to the Paying Agent at such office or agency in time for the Paying
Agent to make such payments in such funds in accordance with its normal
procedures. Interest (other than interest payable at Maturity) will be payable
at the above-mentioned office or agency of the Paying Agent, except that the
payment of interest may be made at the option of Kemper by check mailed to the
address of the Person entitled thereto as it appears in the Security Register.
The New Notes may be presented for registration of transfer or exchange at the
above-mentioned office or agency of the Paying Agent.
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RESTRICTIVE COVENANTS
Restrictions on Secured Indebtedness
The Indenture provides that Kemper will not, directly or indirectly, and
will not permit any Subsidiary (as defined below) to, directly or indirectly,
incur, issue, assume or guarantee any indebtedness for money borrowed, whether
or not evidenced by negotiable instruments or securities, or any notes, bonds,
debentures or similar evidences of indebtedness for money borrowed ("Debt"),
secured by a mortgage, pledge or a lien ("Mortgage") on any assets or property
of Kemper or any Restricted Subsidiary (as defined below) which is a regulated
insurance company ("Restricted Insurance Subsidiary") or any shares of capital
stock or Debt of any Restricted Insurance Subsidiary, without effectively
providing that the New Notes and all other securities outstanding ("Securities
Outstanding") under the Indenture shall be secured equally and ratably with (or
prior to) such secured Debt. This restriction will not apply, and there will be
excluded from secured Debt in any computation under such restriction, Debt
secured by (i) Mortgages existing on the date of the Indenture, (ii) Mortgages
in favor of Kemper or a Restricted Subsidiary, (iii) Mortgages in favor of any
governmental body to secure progress, advance or other payments pursuant to any
contract or provisions of any statute, (iv) Mortgages on real property or any
fixture or improvement thereon, whether or not existing at the time of
acquisition, provided that the principal amount of the Debt so secured does not
exceed the fair value of such property, (v) Mortgages securing obligations
issued by a State, territory or possession of the United States or any political
subdivision or instrumentality thereof to finance the construction or
acquisition of property, the interest on which obligations is not, in the
opinion of tax counsel of recognized standing or in a ruling of the Internal
Revenue Service, includable in the gross revenue of the holder thereof by reason
of Section 103(a)(1) of the Internal Revenue Code or any successor provision
thereto existing at the time of issuance, (vi) Mortgages on property, shares of
capital stock or Debt of any corporation existing at the time such corporation
becomes a Restricted Insurance Subsidiary, (vii) Mortgages on property, shares
of capital stock or Debt existing at the time of acquisition thereof by Kemper
or any Restricted Insurance Subsidiary (including, subject to the provisions
summarized under "Consolidation and Merger" below, acquisition through merger or
consolidation), (viii) Mortgages on property, shares of capital stock or Debt
hereafter acquired (or, in the case of property, constructed) by Kemper or any
Restricted Insurance Subsidiary and created prior to, at the time of, or within
120 days after, acquisition (or, in the case of property, the completion of
construction or commencement of commercial operation, whichever is later) to
secure or provide for the payment of all or any part of the purchase price (or,
in the case of property, the construction price) thereof or any indebtedness
incurred for that purpose, (ix) Mechanics', landlords', tax or other statutory
liens and deposits required or provided for under state insurance laws or
similar regulatory liens and deposits required or provided for under state
insurance laws or similar regulatory statutes, and (x) any extensions, renewals
or replacements of any Mortgage referred to in the foregoing clauses (i) through
(ix) inclusive. (Section 1008)
Restrictions on Sales of Capital Stock of Restricted Subsidiaries.
The Indenture provides that Kemper will not, directly or indirectly, sell,
transfer or otherwise dispose of (except to a Subsidiary), and it will not
permit any Subsidiary, directly or indirectly, to issue, sell, transfer or
otherwise dispose of (except to Kemper or to a Subsidiary), any shares of
capital stock of a Restricted Subsidiary unless such issuance, sale, transfer or
other disposition is either
(i) to employees of any Subsidiary or Subsidiaries pursuant to a plan
or agreement approved in a Board Resolution, or
(ii) for a consideration which in a Board Resolution is declared to be
at least equal to the fair value thereof.
The foregoing provisions shall not preclude any sale, transfer or other
disposition by Kemper or any Subsidiary of assets other than assets consisting
of the capital stock of any Restricted Subsidiary. (Section 1009)
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Consolidation and Merger
The Indenture will not prohibit Kemper from merging with any other
corporation provided that Kemper is the surviving corporation in the merger. So
long as any Securities shall be outstanding under the Indenture, Kemper shall
not consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person,
unless such successor corporation or Person shall be a corporation organized and
existing under the laws of the United States, any State thereof or the District
of Columbia, and such successor corporation shall expressly assume, by
supplemental indenture in form satisfactory to the Trustee, the due and punctual
payment of the principal and interest on the New Notes and the performance of
every covenant of the Indenture to be performed by Kemper. In addition, Kemper
or such successor corporation or Person, as the case may be, shall not,
immediately after such merger or consolidation, or such conveyance, transfer or
lease, be in default in the performance of any such covenant. If, upon any such
consolidation with or merger into any other corporation, or upon any such
conveyance, transfer or lease of its properties and assets substantially as an
entirety to any Person, the assets of Kemper would become subject to any
Mortgage which would not be permitted by Section 1008 of the Indenture, Kemper
or such successor corporation or Person, as the case may be, shall take such
steps as shall be necessary effectively to secure the New Notes and all other
Securities Outstanding under the Indenture equally and ratably with (or prior
to) all indebtedness secured thereby. (Article Eight)
RESTRICTED SUBSIDIARY DEFINED
"Restricted Subsidiary" is defined as any Subsidiary ("Subsidiary" being
defined as any corporation more than 50% of the voting stock of which is owned
by Kemper or by another Subsidiary), which is incorporated under the laws of any
state of the United States or of the District of Columbia, and which is either a
regulated insurance company or a regulated broker-dealer; provided, however,
that no such Subsidiary shall be a Restricted Subsidiary if either
(i)(a) the total assets of such Subsidiary are less than 10% of the
total assets of Kemper and its consolidated Subsidiaries (including such
Subsidiary) in each case as set forth on the most recent fiscal year-end
balance sheets of such Subsidiary and Kemper and its consolidated
Subsidiaries, respectively, computed in accordance with generally accepted
accounting principles, and (b) in the case of Kemper Financial Services,
Inc. ("KFS"), such Subsidiary contributed less than 10% of the gross
revenue of Kemper and its consolidated Subsidiaries (including KFS) during
the immediately preceding fiscal year of Kemper as set forth on the most
recent fiscal year-end statements of operations of KFS and Kemper and its
consolidated Subsidiaries, respectively, computed in accordance with
generally accepted accounting principles; or
(ii) the Board of Directors of Kemper determines that such Subsidiary
is not material to (a) the financial condition of Kemper and its
Subsidiaries taken as a whole and (b) Kemper's ability to repay the New
Notes and any other Securities Outstanding under the Indenture. (Section
101)
DEFEASANCE
Kemper may, at its option, discharge its indebtedness evidenced by the New
Notes and its obligations or certain of its obligations under the Indenture with
respect to the New Notes by depositing funds or obligations issued or guaranteed
by the United States of America with the Trustee.
DEFEASANCE AND DISCHARGE
The Indenture provides that Kemper will be discharged from any and all
obligations in respect of the New Notes (except for certain obligations to
register the transfer of, or to exchange, the New Notes, to replace stolen, lost
or mutilated Notes, to maintain paying agencies and to hold monies for payment
in trust) upon the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with
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their terms will provide money in an amount sufficient to pay the principal of,
and each installment of interest on, the New Notes on the Stated Maturity of
such payments in accordance with the terms of the Indenture and the New Notes.
Such a trust may only be established if, among other things, (a) Kemper has
delivered to the Trustee an Opinion of Counsel to effect that (i) Kemper has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of the Indenture, there has been a change in
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of New Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal income tax on the same
amount, and in the same manner and at the same times, as would have been the
case if such defeasance had not occurred; and (b) the New Notes, if then listed
on the New York Stock Exchange, Inc., will not be delisted as a result of such
deposit, defeasance and discharge. In the event of any such defeasance and
discharge of the New Notes, Holders of such New Notes would be able to look only
to such trust fund for payment of principal and interest on their New Notes
until Maturity. (Section 403)
DEFEASANCE OF CERTAIN OBLIGATIONS
The Indenture provides that Kemper may omit to comply with the restrictive
covenants contained in Sections 1008 and 1009 (described in "Restrictions on
Secured Indebtedness" and "Restrictions on Sales of Capital Stock of Restricted
Subsidiaries" above), and any such omission shall not be an Event of Default
with respect to the New Notes, upon the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations which through the payment of interest
and principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, and each installment of
interest on, the New Notes on the Stated Maturity of such payments in accordance
with the terms of the Indenture and the New Notes. The obligations of Kemper
under the Indenture and the New Notes other than with respect to the covenants
contained in Sections 1008 and 1009 of the Indenture shall remain in full force
and effect. Such a trust may only be established if, among other things, Kemper
has delivered to the Trustee an Opinion of Counsel to the effect that (i) the
Holders of the New Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
obligations and will be subject to federal income tax on the same amount, and in
the same manner and at the same times, as would have been the case if such
deposit and defeasance had not occurred, and (ii) the New Notes, if then listed
on the New York Stock Exchange, Inc., will not be delisted as a result of such
deposit and defeasance. (Section 1012)
In the event Kemper exercises its option to omit compliance with the
covenants contained in Sections 1008 and 1009 of the Indenture with respect to
the New Notes as described above and the New Notes are declared due and payable
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the Trustee will be sufficient to pay
amounts due on the New Notes at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the New Notes at the time of the acceleration
resulting from such Event of Default. Kemper shall in any event remain liable
for such payments as provided in the Indenture.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to the New Notes: (i) default for 30 days in any
payment of interest on any New Note; (ii) default in any payment of principal on
any New Note when due; (iii) default for 60 days after written notice as
provided in the Indenture in the performance of any other covenant of Kemper in
the Indenture (other than a covenant or warranty included in the Indenture
solely for the benefit of any series of Securities other than the New Notes); or
(iv) certain events of bankruptcy, insolvency or reorganization. (Section 501)
In addition, the following event shall also constitute an Event of Default
with respect to the New Notes: an event of default, as defined in any indentures
or instruments under which Kemper shall
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have outstanding at least $25,000,000 aggregate principal amount of indebtedness
for money borrowed, shall happen and be continuing and either (i) such default
results from the failure to pay principal upon final maturity of such
indebtedness after expiration of any applicable grace period or (ii) such
indebtedness shall, as a result thereof, have been accelerated so that the same
shall be or become due and payable prior to the date on which the same would
otherwise have become due and payable, and such acceleration shall not be
rescinded or annulled within 10 days after notice thereof shall have been given,
by registered or certified mail, to Kemper by the Trustee, or to Kemper and the
Trustee by the holders of at least 25% in aggregate principal amount of the New
Notes at the time outstanding; provided, however, that if such event of default
under such indentures or instruments shall be remedied or cured by Kemper or
waived by the holders of such indebtedness, then even if the New Notes shall
have been accelerated as provided under the Indenture and provided that the New
Notes shall not have been repaid, such Event of Default shall be deemed likewise
to have been thereupon remedied, cured or waived and such acceleration rescinded
without further action upon the part of either the Trustee or any holders of the
New Notes.
If an Event of Default shall occur and be continuing with respect to the
New Notes, the Trustee or the Holders of not less than 25% in principal amount
of the outstanding New Notes may declare the principal amount of all of the New
Notes to be due and payable. At any time after a declaration of acceleration
with respect to the New Notes has been made, but before a judgment or decree
based on acceleration has been obtained, the Holders of a majority in principal
amount of the outstanding New Notes may, under certain circumstances, rescind
and annul such acceleration. (Section 502)
The Indenture provides that the Trustee shall be under no obligation
(subject to the duty of the Trustee during default to act with the required
standard of care) to exercise any of its rights or powers under the Indenture at
the request or direction of any of the Holders unless such Holders shall have
offered to the Trustee reasonable indemnity. (Sections 601, 603) Subject to such
provisions for indemnification of the Trustee, the Holders of a majority in
principal amount of the outstanding New Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the New Notes. (Section 512)
Kemper will be required to furnish to the Trustee annually a statement as
to the performance by Kemper of certain of its obligations under the Indenture
and as to any default in such performance.
MODIFICATION AND WAIVER
Modification and amendments of the Indenture may be made by Kemper and the
Trustee with the consent of the Holders of a majority in principal amount of the
outstanding Securities of each series affected by such modification or
amendment, provided that no modification or amendment may, without the consent
of the Holder of each outstanding New Note affected thereby, (a) change the
stated maturity date of the principal of, or any installment of principal of or
interest, if any, on, any Security, (b) reduce the principal amount of, or
premium or interest, if any, on any Security, (c) change any obligation of
Kemper to pay additional amounts, (d) reduce the amount of principal of an
original issue discount security payable upon acceleration of the maturity
thereof, (e) change the currency in which any New Note or any premium or
interest thereon is payable, (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Security, (g) reduce the
percentage amount of outstanding Securities of any series, the consent of whose
Holders is required for modification or amendment of the Indenture or for waiver
of compliance with certain provisions of the Indenture or for waiver of certain
defaults, (h) reduce the requirements contained in the Indenture for quorum or
voting (i) change any obligation of Kemper to maintain an office or agency in
the places and for the purposes required by the Indenture, or (j) modify any of
provisions (a)through (j) in this paragraph. (Section 902)
The Holders of a majority in principal amount of the outstanding New Notes
may on behalf of the Holders of all New Notes waive, insofar as the New Notes
are concerned, compliance by Kemper
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with certain restrictive provisions of the Indenture. (Section 1011) The Holders
of a majority in principal amount of the outstanding New Notes may on behalf of
the Holders of all New Notes waive any past default under the Indenture with
respect to the New Notes, except a default in the payment of the principal of or
any premium or interest, if any, on any New Note or in respect of a provision
which under the Indenture cannot be modified or amended without the consent of
the Holder of each outstanding New Note affected. (Section 513)
NOTICES
Notices to Holders of the New Notes will be given by mail to the addresses
of such Holders as they appear in the Security Register. (Section 106)
TITLE
Kemper, the Trustee and any agent of Kemper or the Trustee may treat the
registered owner of any New Note as the absolute owner thereof (whether or not
such New Note shall be overdue and notwithstanding any notice to the contrary)
for the purpose of making payment and for all other purposes. (Section 308)
REPLACEMENT OF NEW NOTES
Any mutilated New Note will be replaced by Kemper at the expense of the
Holder upon surrender of such New Note to the Trustee. New Notes that become
destroyed, stolen or lost will be replaced by Kemper at the expense of the
Holder upon delivery to the Trustee of the New Note or evidence of the
destruction, loss or theft thereof satisfactory to Kemper and the Trustee. In
the case of a destroyed, lost or stolen New Note, an indemnity satisfactory to
the Trustee and Kemper may be required at the expense of the Holder of such New
Note before a replacement New Note will be issued. (Section 306)
GOVERNING LAW
The Indenture and the New Notes will be governed by, and construed in
accordance with, the laws of the State of Illinois.
INFORMATION CONCERNING THE TRUSTEE
Kemper and its subsidiaries maintain deposit accounts and conduct banking
transactions with the Trustee in the ordinary course of business.
BOOK-ENTRY SYSTEM
The New Notes will be represented by one or more global New Notes in
definitive fully registered form without coupons, which will be registered in
the name of a nominee of The Depository Trust Company ("DTC") as depositary. The
global New Notes will, upon request, be exchangeable for other New Notes in
definitive, fully registered form without coupons in denominations of $100,000
and integral multiples of $1,000 in excess thereof, but only upon 10 days' prior
written notice to the Trustee given in accordance with DTC's customary
procedures. The global New Notes will also be exchangeable in certain other
limited circumstances. Kemper, the Trustee and any agent thereof will be
entitled to treat DTC's nominee as the sole owner and holder of the unexchanged
portion of the global New Notes for all purposes.
DTC has advised Kemper that it is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities that its participants deposit with DTC. DTC
also
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facilitates the settlement among its participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the Commission.
Upon the issuance by Kemper of the New Notes represented by a global New
Note, DTC will credit, on its book-entry registration and transfer system, the
respective principal amounts of the New Notes represented by such global New
Note to the accounts of participants. Ownership of beneficial interests in a
global New Note will be limited to participants or persons that hold interests
through participants. Ownership of interests in the New Notes represented by a
global New Note will be shown on records maintained by DTC (with respect to
interests of participants in DTC) or by participants in DTC or persons that may
hold interests through such participants (with respect to persons other than
participants in DTC).
So long as DTC or its nominee is the registered owner of a global New Note,
DTC or its nominee, as the case may be, will be considered the sole registered
owner or registered holder of the New Notes represented by such global New Note
for all purposes under the Indenture. Owners of beneficial interests in New
Notes represented by such global New Notes will be entitled to receive physical
delivery of New Notes in definitive form as provided below in the event the
book-entry system is discontinued.
Payments of principal and interest on the New Notes represented by a global
New Note registered in the name of DTC or its nominee will be made by Kemper
through the Trustee to DTC or its nominee, as the case may be, as the registered
owner of such global New Note. Neither Kemper nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global New
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. Kemper expects that DTC, upon receipt of any
payment of principal or interest in respect of a global New Note, will credit
the accounts of the related participants with payment in amounts proportionate
to their respective holdings in principal amount of interests in such global New
Note as shown on the records of DTC. New Notes will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as depositary of the
global New Notes and a successor depositary is not appointed by Kemper within 90
days, Kemper will issue New Notes in definitive, fully registered form without
coupons in exchange for the New Notes represented by one or more global New
Notes. In addition, Kemper may at any time and in its sole discretion determine
not to have any of the New Notes represented by one or more global New Notes,
and, in such event, will issue New Notes in definitive, fully registered form
without coupons in exchange for all of the global New Notes representing such
New Notes.
DESCRIPTION OF THE EXISTING NOTES
The terms of the Existing Notes are identical in all material respects to
the terms of the New Notes for which they may be exchanged pursuant to this
Exchange Offer, except that the Existing Notes contain terms with respect to
transfer restrictions (and therefore are not freely transferable by holders
thereof) and adjustments in the interest rate.
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EXCHANGE AND REGISTRATION AGREEMENT
Under the Exchange and Registration Agreement, one approach for Kemper to
rescind the Step-Up in Interest Rate and reinstate the Initial Interest Rate is
to file with the Commission and have declared effective, at Kemper's cost, a
registration statement with respect to an offer to exchange new notes of Kemper
to be issued under the Indenture, which have terms identical in all material
respects to the Existing Notes (except that the new notes will not contain terms
with respect to transfer restrictions or adjustments in the interest rate) for
Existing Notes. The Exchange Offer made pursuant to this Prospectus, if
consummated, will satisfy the applicable requirements of the Exchange and
Registration Agreement and will act to rescind the Step-Up in Interest Rate.
Pursuant to the Exchange and Registration Agreement, Kemper must keep the
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed or
otherwise properly delivered to the registered holders of the Existing Notes.
For each Existing Note surrendered to Kemper pursuant to the Exchange Offer, the
holder of such Existing Note will receive a New Note having a principal amount
equal to that of the surrendered Existing Note. Interest on each New Note will
accrue from the last interest payment date on which interest was paid on the
Existing Note surrendered in exchange therefor. Except as noted below, based on
existing Commission interpretations, the Company believes that the New Notes
would in general be freely transferable after the Exchange Offer without further
registration under the Securities Act.
Each holder of Existing Notes who wishes to exchange such Existing Notes
for New Notes in the Exchange Offer will be required to represent that (i) such
holder is not an affiliate of Kemper, (ii) that any New Notes to be received by
such holder will be acquired in the ordinary course of its business, and (iii)
that such holder has no arrangement with any person to participate in a
distribution (within the meaning of the Securities Act) of the New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Existing Notes where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Kemper has agreed that, for a period of 90 days after the date of
this Prospectus, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
AFTER THE CONSUMMATION OF THE EXCHANGE OFFER, KEMPER WILL HAVE NO
OBLIGATION TO FILE A REGISTRATION STATEMENT COVERING RESALES OF EXISTING NOTES
NOT EXCHANGED FOR NEW NOTES IN THE EXCHANGE OFFER FOR ANY REASON, EXCEPT IN
LIMITED CIRCUMSTANCES WITH RESPECT TO EXISTING NOTES HELD BY CERTAIN BROKER-
DEALERS, AND, IN ANY EVENT AFTER THE CONSUMMATION OF THE EXCHANGE OFFER, THE
HOLDERS OF UNTENDERED EXISTING NOTES OR TENDERED BUT UNACCEPTED EXISTING NOTES
WILL NOT BE ENTITLED TO THE STEP-UP IN INTEREST RATE WITH RESPECT TO SUCH
EXISTING NOTES.
In the event that Kemper elects not to consummate an Exchange Offer for any
reason or the staff of the Commission does not permit Kemper to effect such an
Exchange Offer, as an alternative option under the Exchange and Registration
Agreement, Kemper may rescind the Step-Up in Interest Rate and reinstate the
Initial Interest Rate by filing, at its cost, a registration statement covering
resales of the Existing Notes by the holders thereof, and causing such
registration statement to be declared effective under the Securities Act and
keeping such registration statement effective until the earlier of (i) three
years after the date the Existing Notes were originally issued (September 22,
1996) or (ii) the date by which all Existing Notes have been resold pursuant to
the registration statement. Kemper would provide each holder of the Existing
Notes copies of a prospectus, notify each holder when such registration
statement for the Existing Notes has become effective and take certain other
actions as are required to permit resales of the Existing Notes. A holder of
Existing Notes who sells such Existing Notes pursuant to such registration
statement generally would be required to be named
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as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, would be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Exchange and Registration Agreement which are
applicable to such a holder (including certain indemnification obligations).
The summary herein of certain provisions of the Exchange and Registration
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Exchange and
Registration Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion addresses the material United States federal
income and estate tax considerations applicable to the ownership of New Notes.
The discussion set forth below is based upon currently existing provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), existing
regulations thereunder ("Treasury Regulations") and current administrative
rulings and court decisions, all of which may be repealed, revoked or modified
so as to make the ensuing analysis inapplicable.
EXCHANGE OF NEW NOTES
An exchange of Existing Notes for New Notes in the Exchange Offer should
not constitute a taxable event to holders. Consequently, no gain or loss will be
recognized by holders upon receipt of New Notes, the holding period of the New
Notes will include the holding period of the Existing Notes and the basis of the
New Notes will be the same as the basis of the Existing Notes immediately before
the exchange.
UNITED STATES TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of a New
Note that is for United States federal income tax purposes (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof or (c) an estate or trust the income of which is
subject to United States federal income taxation regardless of source.
Interest paid or payable on a New Note generally will be taxable to a
United States Holder as ordinary interest income, in accordance with such
holder's method of accounting for federal income tax purposes. However,
additional interest payable on September 15, 1994 on the Notes with respect to
the period between March 15 and the date the Notes are exchanged for the New
Notes will be subject to certain currently proposed and temporary regulations
relating to original issue discount (the "OID Regulations"). Under the OID
Regulations, a United States Holder will be required to include this additional
interest in income as of September 15, 1994, regardless of such holder's method
of accounting. In addition, OID on the New Notes (the excess of each $1,000 in
principal amount over the issue price per each $1,000 of $982.61) will be
characterized as de minimis under the OID Regulations. Holders should consult
their tax advisors as to the possible effect of the OID Regulations on the New
Notes.
UNITED STATES TAX CONSIDERATIONS FOR FOREIGN HOLDERS
As used herein, the term "United States Alien" means any person that is, as
to the United States, a foreign corporation, a nonresident alien individual, a
nonresident fiduciary of a foreign estate or trust or a foreign partnership one
or more of the members of which is, as to the United States, a foreign
corporation, a nonresident alien individual or a nonresident fiduciary of a
foreign estate or trust.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) withholding of United States federal income tax will not be
required with respect to the payment by Kemper of principal or interest on
a New Note owned by a United States Alien,
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provided that, in the case of interest (i) the beneficial owner of the New
Note does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Kemper entitled to vote
within the meaning of Section 871(h)(3) of the Code and the regulations
thereunder, (ii) the beneficial owner is not a controlled foreign
corporation that is related to Kemper through stock ownership, (iii) the
beneficial owner is not a bank for United States federal income tax
purposes whose receipt of interest on a New Note is described in Section
881(c)(3)(A) of the Code and (iv) the beneficial owner satisfies the
statement requirement described generally below;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a United States
Alien upon the sale, exchange or retirement of a New Note; and
(c) a New Note held by an individual who at the time of his death is a
United States Alien will not be subject to United States federal estate tax
as a result of such individual's death, provided that such individual does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Kemper entitled to vote within the meaning
of Section 871(h)(3) of the Code and provided that the interest payments
with respect to such New Note would not have been, if received at the time
of such individual's death, effectively connected with the conduct of a
United States trade or business by such individual.
To qualify for the exemption from withholding tax referred to in (a)(iv)
above, the beneficial owner of the New Note, or a financial institution holding
the New Note on behalf of such owner, must provide Kemper, in accordance with
specified procedures, with a statement to the effect that the beneficial owner
is not a United States person, citizen or resident. Pursuant to current
temporary Treasury Regulations, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under the
penalties of perjury, that he is not a United States person (which certification
may be made on an Internal Revenue Service ("IRS") Form W-8 or a successor form
so designated by the IRS) or (2) a financial institution holding the New Note on
behalf of such owner certifies under penalties of perjury that such statement
has been received by it and furnishes Kemper with a copy thereof.
Payments to United States Aliens not meeting the requirements of paragraph
(a) above and thus subject to withholding of United States federal income tax
may nevertheless be exempt from such withholding if the beneficial owner of the
New Note properly completes, executes and delivers to Kemper (1) an IRS Form
1001 (or a successor form so designated by the IRS) claiming an exemption from
withholding under the benefit of a tax treaty or (2) an IRS Form 4224 (or a
successor form) stating that interest paid on the New Note is not subject to
withholding tax because it is effectively connected with the owner's conduct of
a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under certain circumstances, Kemper will have to report to the IRS payments
of principal and interest. In addition, a United States Holder may be subject to
"backup withholding" at the rate of 31% with respect to interest paid and OID
accrued on, or proceeds from the disposition of, the New Notes, unless such
United States Holder (i) is a corporation or comes within certain other exempt
categories, and when requested, demonstrates this fact; or (ii) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A United States Holder who does not provide the
correct taxpayer identification number may be subject to penalties imposed by
the IRS. Any amount withheld under these rules will be creditable against the
United States Holder's federal income tax liability.
Generally, no information reporting or backup withholding will be required
with respect to payments of principal or interest made by Kemper to United
States Aliens on New Notes with respect to which a statement described in
(a)(iv) above has been received and the payor does not have actual knowledge
that the holder is a United States person, or another exemption applies.
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<PAGE> 39
THE DISCUSSION SET FORTH IN THIS SECTION "MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS" IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION
TO EXCHANGE THE NOTES. THE DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCALITY, OR NON-UNITED STATES JURISDICTION. IT IS
RECOMMENDED THAT ALL PROSPECTIVE TENDERORS CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE TAX CONSIDERATIONS RELEVANT TO THEIR PARTICULAR CIRCUMSTANCES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. Kemper will, for a period of 90 days after the date
of this Prospectus, make this Prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale.
Kemper will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is in fact an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the date of this Prospectus, Kemper will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. Kemper has agreed in the Exchange and Registration
Agreement to pay all expenses incident to the Exchange Offer other than
commissions or concessions of any brokers or dealers and will indemnify any
broker-dealer referred to herein against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments any such
broker-dealer may be required to make in respect thereof. Pursuant to the
Exchange and Registration Agreement, each participating broker-dealer shall
indemnify the Company against certain liabilities, including liabilities under
the Securities Act, and to contribute, within certain limitations, to payments
the Company may be required to make in respect thereof.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon by
Kathleen A. Gallichio, Esq., General Counsel of Kemper Corporation.
EXPERTS
The consolidated financial statements and schedules of Kemper and its
subsidiaries as of December 31, 1993 and 1992 and for each of the years in the
three-year period ended December 31, 1993 that are incorporated in this
Prospectus by reference have been done so in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, also incorporated by
reference herein.
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NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY KEMPER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF KEMPER SINCE SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 4
Summary............................... 5
Risk Factors.......................... 10
Business Description.................. 17
Use of Proceeds....................... 18
Ratio of Earnings to Fixed Charges.... 18
Selected Consolidated Financial
Information......................... 19
Capitalization........................ 21
The Exchange Offer.................... 22
Description of the New Notes.......... 29
Description of the Existing Notes..... 35
Exchange and Registration Agreement... 36
Material Federal Income Tax
Considerations...................... 37
Plan of Distribution.................. 39
Legal Matters......................... 39
Experts............................... 39
</TABLE>
$200,000,000
KEMPER CORPORATION
6.875% NOTES DUE 2003,
SERIES A
[KEMPER LOGO]
------------------
PROSPECTUS
------------------
EXCHANGE AGENT
FIRST CHICAGO TRUST COMPANY OF NEW YORK
ATTENTION: CORPORATE TRUST OPERATIONS
14 WALL STREET
8TH FLOOR
NEW YORK, NEW YORK 10005
NOVEMBER 8, 1994
<PAGE> 41
APPENDIX
The following graphic material cannot be transmitted pursuant to EDGAR.
Organizational chart of Company on Page 5 of Prospectus.
Organizational chart of the Company is organized by its four business
segments: asset management, life insurance, securities brokerage and real
estate. The asset management segment includes Kemper Financial Services, Inc.
and its 95% owned subsidiary, INVEST Financial Corporation. Kemper Securities,
Inc. represents the securities brokerage segment. These three companies are
owned directly or indirectly by Kemper's 96% owned subsidiary, Kemper Financial
Companies, Inc. The life insurance segment includes Federal Kemper Life
Assurance Company and Kemper Investors Life Insurance Company. Federal Kemper
Life Assurance Company is a wholly-owned subsidiary of Kemper, and Kemper
Investors Life Insurance Company is a wholly-owned subsidiary of Kemper
Financial Companies, Inc. Various subsidiaries and partnerships comprise the
real estate segment.
