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File No. 2-87885 CIK #732732
Securities and Exchange CommissionWashington, D. C. 20549
Post-Effective
Amendment No. 11
to
Form S-6
For Registration under the Securities Act of 1933
of Securities of Unit Investment Trusts Registered
on Form N-8B-2
Kemper Tax-Exempt Insured Income Trust, Series A-7
Name and executive office address of Depositor:
EVEREN Unit Investment Trusts
(a division of EVEREN Securities, Inc.)
77 West Wacker - 29th Floor
Chicago, Illinois 60601
Name and complete address of agent for service:
Robert K. Burke
77 West Wacker - 29th Floor
Chicago, Illinois 60601
( X ) Check box if it is proposed that this filing will
become effective at 2:00 p.m. on December 29, 1995 pursuant to
paragraph (b) of Rule 485.
KEMPER TAX-EXEMPT INSURED INCOME TRUST NATIONAL SERIES KEMPER
DEFINED FUNDS INSURED NATIONAL SERIES PART ONE
The date of this Part One is that date which is set forth in Part
Two of the Prospectus
Kemper Tax-Exempt Insured Income Trust and Kemper Defined
Funds Insured National Series (the "Trusts" and each a "Trust")
were formed for the purpose of gaining interest income free from
Federal income taxes while conserving capital and diversifying
risks by investing in an insured, fixed portfolio consisting of
obligations issued by or on behalf of states of the United States
or counties, municipalities, authorities or political
subdivisions thereof.
Units of the Trust are not deposits or obligations of, or
guaranteed by, any bank, and Units are not federally insured or
otherwise protected by the Federal Deposit Insurance Corporation
and involve investment risk including loss of principal.
Insurance guaranteeing the scheduled payment of principal
and interest on all of the Municipal Bonds in the portfolio
listed in Part Two has been obtained from an independent company
by either the Trust, the Sponsor or the issuer of the Municipal
Bonds involved. Insurance obtained by the Sponsor or a Municipal
Bond issuer is effective so long as such Bonds are outstanding.
The insurance, in any case, does not relate to the Units offered
hereby or to their market value. As a result of such insurance,
the Units of the Trust received on the Date of Deposit a rating
of "AAA" by Standard & Poor's Ratings Group ("Standard & Poor's")
or "Aaa" by Moody's Investors Service, Inc. See "Insurance on
the Portfolios" and "Description of Securities Ratings." No
representation is made as to any insurer's ability to meet its
commitments.
This Prospectus is in two parts. Read and retain both parts
for future reference.
SPONSOR: EVEREN UNIT INVESTMENT TRUSTS,a service of EVEREN
Securities, Inc.
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.
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TABLE OF CONTENTS
PAGE
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SUMMARY 3
The Trust 3
Insurance 3
Public Offering Price 4
Interest and Principal Distributions 4
Reinvestment 4
Estimated Current Return and Estimated Long-Term Return
4
Market for Units 5
Risk Factors 5
THE TRUST 5
PORTFOLIOS 6
Risk Factors 7
INSURANCE ON THE PORTFOLIOS 14
Financial Guaranty Insurance Company 16
AMBAC Indemnity Corporation 16
Municipal Bond Investors Assurance Corporation 17
Financial Security Assurance 17
Capital Guaranty Insurance Company 19
DISTRIBUTION REINVESTMENT 20
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS 21
TAX STATUS OF THE TRUST 21
PUBLIC OFFERING OF UNITS 26
Public Offering Price 26
Accrued Interest 28
Purchased and Daily Accrued Interest 29
Public Distribution of Units 30
Profits of Sponsor 30
MARKET FOR UNITS 31
REDEMPTION 31
Computation of Redemption Price 33
UNITHOLDERS 33
Ownership of Units 33
Distributions to Unitholders 34
Interest Distributions 34
Principal Distributions 35
Statement to Unitholders 35
Rights of Unitholders 37
INVESTMENT SUPERVISION 37
ADMINISTRATION OF THE TRUST 38
The Trustee 38
The Evaluator 39
Amendment and Termination 40
Limitations on Liability 41
The Sponsor 41
The Trustee 41
The Evaluator 41
EXPENSES OF THE TRUST 41
THE SPONSOR 43
LEGAL OPINIONS 43
INDEPENDENT AUDITORS 43
DESCRIPTION OF MUNICIPAL BOND RATINGS 44
Essential Information*
Report of Independent Auditors*
Statement of Assets and Liabilities*
Statement of Operations*
Statement of Changes in Net Assets*
Schedule of Investments*
Notes to Schedules of Investments*
Notes to Financial Statements*
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KEMPER TAX-EXEMPT INSURED INCOME TRUST
KEMPER DEFINED FUNDS INSURED NATIONAL SERIES
SUMMARY
The Trust. Kemper Tax-Exempt Insured Income Trust and
Kemper Defined Funds Insured National Series (the "Trusts" and
each a "Trust") are each a unit investment trust consisting of a
number of diversified portfolios (the "Series"), each portfolio
consisting of obligations ("Municipal Bonds," "Securities" or
"Bonds") issued by or on behalf of states of the United States or
counties, municipalities, authorities or political subdivisions
thereof.
The objective of each Series of the Trust is tax-exempt
income and conservation of capital with diversification of risk
through investment in an insured, fixed portfolio of Municipal
Bonds. Interest on certain Municipal Bonds in certain of the
Trusts will be a preference item for purposes of the alternative
minimum tax. Accordingly, such Trusts may be appropriate only
for investors who are not subject to the alternative minimum tax.
There is, of course, no guarantee that the Trusts' objective will
be achieved.
All of the Municipal Bonds in a Series of the Trust were
rated in the category "BBB" or better by Standard & Poor's
Ratings Group ("Standard & Poor's") or "Baa" by Moody's Investors
Service, Inc. ("Moody's") on the date such Series was established
(the "Date of Deposit"). Ratings of the Municipal Bonds may have
changed since the Date of Deposit. See "Description of
Securities Ratings" herein and the "Schedule of Investments" in
Part Two.
The Units, each of which represents a pro rata undivided
fractional interest in the Municipal Bonds deposited in the
appropriate Series of the Trust, are issued and outstanding Units
which have been reacquired by the Sponsor either by purchase of
Units tendered to the Trustee for redemption or by purchase in
the open market. No offering is being made on behalf of the
Trust and any profit or loss realized on the sale of Units will
accrue to the Sponsor and/or the firm reselling such Units.
Insurance. Insurance guaranteeing the scheduled
payment of principal and interest on all of the Municipal Bonds
in the portfolio of each Series of the Trust has been obtained by
the Trust, the Sponsor or directly by the issuer from an
independent insurance company. Series A through A-24 of the
Kemper Tax-Exempt Insured Income Trust are insured by AMBAC
Indemnity Corporation ("AMBAC Indemnity") and Series A-25 and
subsequent Series of the Kemper Tax-Exempt Insured Income Trust
and Kemper Defined Funds Insured National Series are insured by
Financial Guaranty Insurance Company ("Financial Guaranty"),
Municipal Bond Investor Assurance Corporation ("MBIA") or other
insurers. Insurance obtained directly by the issuer may be from
such companies or other insurers. See "Insurance on the
Portfolio" herein and "Schedule of Investments" in Part Two.
Insurance obtained by the Trust remains in effect only while the
insured Municipal Bonds are retained in the Trust, while
insurance obtained by a Municipal Bond issuer is effective so
long as such Bonds are outstanding. Pursuant to an irrevocable
commitment of Financial Guaranty, in the event of a sale of any
Bond from Series A-25 or subsequent Series of the Kemper
Tax-Exempt Insured Income Trust covered under the Trust's
insurance policy, the Trustee has the right to obtain permanent
insurance for such Municipal Bond upon the payment of a single
predetermined insurance premium from the proceeds of the sale of
such Municipal Bond. The insurance, in either case, does not
relate to the Units offered hereby or to their market value. As
a result of such insurance, the Units of each Series of the Trust
received on the original Date of Deposit a rating of "AAA" from
Standard & Poor's. See "Insurance on the Portfolio." No
representation is made as to AMBAC Indemnity's, Financial
Guaranty's, MBIA's or any other insurer's ability to meet its
commitments.
Public Offering Price. The Public Offering Price per
Unit of a Series of the Trust is equal to a pro rata share of the
aggregate bid prices of the Municipal Bonds in such Series (plus
or minus a pro rata share of cash, if any, in the Principal
Account, held or owned by the Series) plus Purchased Interest, if
any, in the case of Kemper Defined Funds Insured National Series
plus a sales charge shown under "Public Offering of Units." In
addition, there will be added to each transaction an amount equal
to the accrued interest from the last Record Date of such Series
to the date of settlement (five business days after order)(such
amount is referred to as Daily Accrued Interest in the case of
Kemper Defined Funds Insured National Series). The sales charge
is reduced on a graduated scale as indicated under "Public
Offering of Units _ Public Offering Price."
Interest and Principal Distributions. Distributions of
the estimated annual interest income to be received by a Series
of the Trust, after deduction of estimated expenses, will be made
monthly unless the Unitholder elects to receive such
distributions quarterly or semi-annually. Distributions will be
paid on the Distribution Dates to holders of record of such
Series on the Record Dates set forth for the applicable option.
See "Essential Information" in Part Two. The distribution of
funds, if any, in the Principal Account of each Series, will be
made semi-annually to Unitholders of Record on the appropriate
dates. See "Essential Information" in Part Two. Unitholders of
Kemper Defined Funds receive monthly distributions of interest
and principal.
Reinvestment. Distributions of interest and principal,
including capital gains, if any, made by a Series of the Trust
will be paid in cash unless a Unitholder elects to reinvest such
distributions. See "Distribution Reinvestment."
Estimated Current Return and Estimated Long-Term
Return. The Estimated Current Return is calculated by dividing
the estimated net annual interest income per Unit by the Public
Offering Price of such Trust. The estimated net annual interest
income per Unit will vary with changes in fees and expenses of
such Trust and with the principal prepayment, redemption,
maturity, exchange or sale of Securities while the Public
Offering Price will vary with changes in the bid price of the
underlying Securities and with changes in the Purchased Interest
for Kemper Defined Funds Insured National Series; therefore,
there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration,
and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization
of premiums and the accretion of discounts) and estimated
retirements of all of the Securities in the Trust and (2) takes
into account the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirements of
the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Return will
be realized in the future. Estimated Current Return and
Estimated Long-Term Return are expected to differ because the
calculation of Estimated Long-Term Return reflects the estimated
date and amount of principal returned while Estimated Current
Return calculations include only net annual interest income and
Public Offering Price.
Market for Units. While under no obligation to do so,
the Sponsor intends, subject to change at any time, to maintain a
market for the Units of each Series of the Trust and to
continuously offer to repurchase such Units at prices which are
based on the aggregate bid side evaluation of the Municipal Bonds
in such Series of the Trust. If such a market is not maintained
and no other over-the-counter market is available, Unitholders
will still be able to dispose of their Units through redemption
by the Trustee at prices based upon the aggregate bid price of
the Municipal Bonds in such Series of the Trust. See
"Redemption."
Risk Factors. An investment in the Trusts should be
made with an understanding of the risks associated therewith,
including, among other factors, the inability of the issuer or an
insurer to pay the principal of or interest on a bond when due,
volatile interest rates, early call provisions, and changes to
the tax status of the Municipal Bonds. See "Portfolios _ Risk
Factors."
THE TRUST
Each Series of the Trust is one of a series of unit
investment trusts created by the Sponsor under the name Kemper
Tax-Exempt Insured Income Trust or Kemper Defined Funds Insured
National Series, all of which are similar, and each of which was
created under the laws of the State of Missouri pursuant to a
Trust Agreement* (the "Agreement"). EVEREN Unit Investment
Trusts, a service of EVEREN Securities, Inc., acts as Sponsor and
Evaluator and Investors Fiduciary Trust Company acts as Trustee.
The objectives of the Trust are tax-exempt income and
conservation of capital with diversification of risk through
investment in an insured, fixed portfolio of Municipal Bonds.
Interest on certain Municipal Bonds in the Trusts will be a
preference item for purposes of the alternative minimum tax.
Accordingly, such Trusts may be appropriate only for the
investors who are not subject to the alternative minimum tax.
There is, of course, no guarantee that the Trusts' objectives
will be achieved.
A Series of the Trust may be an appropriate investment
vehicle for investors who desire to participate in a portfolio of
insured, tax-exempt, fixed income securities with greater
diversification than they might be able to acquire individually.
In addition, Municipal Bonds of the type deposited in the Trust
are often not available in small amounts.
Each Series of the Trust consists of an insured portfolio of
interest bearing obligations issued by or on behalf of states of
the United States or counties, municipalities, authorities or
political subdivisions thereof the interest on which is, in the
opinion of bond counsel to the issuing authorities, exempt from
all Federal income taxes under existing law, but may be subject
to state and local taxes. Proceeds from the maturity, redemption
or sale of the Municipal Bonds in a Series of the Trust, unless
used to pay for Units tendered for redemption, will be
distributed to Unitholders of such Series and will not be
utilized to purchase replacement or additional Municipal Bonds
for the Series.
The Units, each of which represents a pro rata undivided
fractional interest in the principal amount of Municipal Bonds
deposited in a Series of the Trust, are issued and outstanding
Units which have been reacquired by the Sponsor either by
purchase of Units tendered to the Trustee for redemption or by
purchase in the open market. No offering is being made on behalf
of the Trust or any Series thereof and any profit or loss
realized on the sale of Units will accrue to the Sponsor and/or
the firm reselling such Units. To the extent that Units of a
Series of the Trust are redeemed, the principal amount of
Municipal Bonds in such Series will be reduced and the undivided
fractional interest represented by each outstanding Unit of the
Series will increase. See "Redemption."
PORTFOLIOS
In selecting the Municipal Bonds which comprise the
portfolio of a Series of the Trust the following requirements,
were deemed to be of primary importance: (a) a minimum rating of
"BBB" by Standard & Poor's or "Baa" by Moody's Investors Service,
Inc. (see "Description of Securities Ratings"); (b) the price of
the Municipal Bonds relative to other issues of similar quality
and maturity; (c) the diversification of the Municipal Bonds as
to purpose of issue; (d) the income to the Unitholders of the
Series; (e) whether such Municipal Bonds were insured, or the
availability and cost of insurance for the prompt payment of
principal and interest, when due, on the Municipal Bonds; and
(f) the dates of maturity of the Municipal Bonds.
Subsequent to the Date of Deposit, a Municipal Bond may
cease to be rated or its rating may be reduced below the minimum
required as of the Date of Deposit. Neither event requires the
elimination of such investment from the portfolio, but may be
considered in the Sponsor's determination to direct the Trustee
to dispose of the investment. See "Investment Supervision"
herein and "Schedule of Investments" in Part Two.
The Sponsor may not alter the portfolio of a Series of the
Trust, except that certain of the Municipal Bonds may be sold
upon the happening of certain extraordinary circumstances. See
"Investment Supervision."
Certain Series of the Trust contain Municipal Bonds which
may be subject to redemption prior to their stated maturity date
pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or
otherwise. A sinking fund is a reserve fund accumulated over a
period of time for retirement of debt. A callable debt
obligation is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a
method by which a debt obligation is redeemed at or before
maturity, by the proceeds of a new debt obligation. In general,
call provisions are more likely to be exercised when the offering
side valuation is at a premium over par than when it is at a
discount from par. Accordingly, any such call, redemption, sale
or maturity will reduce the size and diversity of such Series,
and the net annual interest income of the Series and may reduce
the Estimated Long-Term Returns and/or Estimated Current Return.
See "Interest and Estimated Long-Term and Current Returns." Each
Trust portfolio contains a listing of the sinking fund and call
provisions, if any, with respect to each of the debt obligations.
Extraordinary optional redemptions and mandatory redemptions
result from the happening of certain events. Generally, events
that may permit the extraordinary optional redemption of
Municipal Bonds or may require the mandatory redemption of
Municipal Bonds include among others: a final determination that
the interest on the Municipal Bonds is taxable; the substantial
damage or destruction by fire or other casualty of the project
for which the proceeds of the Municipal Bonds were used; an
exercise by a local, state or Federal governmental unit of its
power of eminent domain to take all or substantially all of the
project for which the proceeds of the Municipal Bonds were used;
changes in the economic availability of raw materials, operating
supplies or facilities or technological or other changes which
render the operation of the project for which the proceeds of the
Municipal Bonds were used uneconomic; changes in law or an
administrative or judicial decree which renders the performance
of the agreement under which the proceeds of the Municipal Bonds
were made available to finance the project impossible or which
creates unreasonable burdens or which imposes excessive
liabilities, such as taxes not imposed on the date the Municipal
Bonds are issued on the issuer of the Municipal Bonds or the user
of the proceeds of the Municipal Bonds; an administrative or
judicial decree which requires the cessation of a substantial
part of the operations of the project financed with the proceeds
of the Municipal Bonds; an overestimate of the costs of the
project to be financed with proceeds of the Municipal Bonds
resulting in excess proceeds of the Municipal Bonds which may be
applied to redeem Municipal Bonds; or an underestimate of a
source of funds securing the Municipal Bonds resulting in excess
funds which may be applied to redeem Municipal Bonds. The
Sponsor is unable to predict all of the circumstances which may
result in such redemption of an issue of Municipal Bonds.
The Sponsor and the Trustee shall not be liable in any way
for any default, failure or defect in any Municipal Bond.
Risk Factors. An investment in Units of a Series of
the Trust should be made with an understanding of the risks which
an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio and hence of
the Units will decline with increases in interest rates. The
value of the underlying Municipal Bonds will fluctuate inversely
with changes in interest rates. The uncertain economic
conditions experienced in the past, together with the fiscal
measures adopted to attempt to deal with them, have resulted in
wide fluctuations in interest rates and, thus, in the value of
fixed rate debt obligations generally and long term obligations
in particular. The Sponsor cannot predict whether such
fluctuations will continue in the future.
Certain Series of the Trust contain Municipal Bonds which
are general obligations of a governmental entity that are backed
by the taxing power of such entity. All other Municipal Bonds in
the Series of the Trust are revenue bonds payable from the income
of a specific project or authority and are not supported by the
issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds,
on the other hand, are payable only from the revenues derived
from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific
revenue source. There are, of course, variations in the security
of the different Municipal Bonds in the Series of the Trust, both
within a particular classification and between classifications,
depending on numerous factors.
Certain Series of the Trust contain Municipal Bonds which
are obligations of issuers whose revenues are derived from
services provided by hospitals and other health care facilities,
including nursing homes. In view of this an investment in such
Series should be made with an understanding of the
characteristics of such issuers and the risks that such an
investment may entail. Ratings of bonds issued for health care
facilities are often based on feasibility studies that contain
projections of occupancy levels, revenues and expenses. A
facility's gross receipts and net income available for debt
service will be affected by future events and conditions
including, among other things, demand for services and the
ability of the facility to provide the services required,
physicians' confidence in the facility, management capabilities,
economic developments in the service area, competition, efforts
by insurers and governmental agencies to limit rates, legislation
establishing state rate-setting agencies, expenses, the cost and
possible unavailability of malpractice insurance, the funding of
Medicare, Medicaid and other similar third party payor programs,
and government regulation. Federal legislation has been enacted
which implemented a system of prospective Medicare reimbursement
which may restrict the flow of revenues to hospitals and other
facilities which are reimbursed for services provided under the
Medicare program. Future legislation or changes in the areas
noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse changes in these
areas may adversely affect the ability of such issuers to make
payment of principal and interest on Municipal Bonds held in such
Series. Such adverse changes also may adversely affect the
ratings of the Municipal Bonds held in such Series of the Trust.
Hospitals and other health care facilities are subject to claims
and legal actions by patients and others in the ordinary course
of business. Although these claims are generally covered by
insurance, there can be no assurance that a claim will not exceed
the insurance coverage of a health care facility or that
insurance coverage will be available to a facility. In addition,
a substantial increase in the cost of insurance could adversely
affect the results of operations of a hospital or other health
care facility. Certain hospital bonds may provide for redemption
at par at any time upon the sale by the issuer of the hospital
facilities to a non-affiliated entity or in other circumstances.
For example, certain hospitals may have the right to call bonds
at par if the hospital may legally be required because of the
bonds to perform procedures against specified religious
principles. Certain FHA-insured bonds may provide that all or a
portion of those bonds, otherwise callable at a premium, can be
called at par in certain circumstances. If a hospital defaults
upon a bond obligation, the realization of Medicare and Medicaid
receivables may be uncertain and, if the bond obligation is
secured by the hospital facilities, legal restrictions on the
ability to foreclose upon the facilities and the limited
alternative uses to which a hospital can be put may reduce
severely its collateral value.
Certain Series of the Trust contain Municipal Bonds which
are single family mortgage revenue bonds, which are issued for
the purpose of acquiring from originating financial institutions
notes secured by mortgages on residences located within the
issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely
prepaid prior to their final maturities as a result of events
such as sale of the mortgaged premises, default, condemnation or
casualty loss. Because these Municipal Bonds are subject to
extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such
Municipal Bonds will probably be redeemed prior to their
scheduled maturities or even prior to their ordinary call dates.
The redemption price of such issues may be more or less than the
offering price of such Municipal Bonds. Extraordinary mandatory
redemption without premium could also result from the failure of
the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some
cases, from the sale by the Municipal Bond issuer of the mortgage
loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates on
mortgage loans funded from other sources becoming competitive
with the interest rates on the mortgage loans funded with the
proceeds of the single family mortgage revenue bonds.
Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single
family mortgage revenue bonds issued after December 31, 1980 were
issued under Section 103A of the Internal Revenue Code, which
Section contains certain ongoing requirements relating to the use
of the proceeds of such Bonds in order for the interest on such
Municipal Bonds to retain its tax-exempt status. In each case,
the issuer of the Municipal Bonds has covenanted to comply with
applicable ongoing requirements and bond counsel to such issuer
has issued an opinion that the interest on the Municipal Bonds is
exempt from Federal income tax under existing laws and
regulations. There can be no assurances that the ongoing
requirements will be met. The failure to meet these requirements
could cause the interest on the Municipal Bonds to become
taxable, possibly retroactively from the date of issuance.
Certain Series of the Trust contain Municipal Bonds which
are obligations of issuers whose revenues are primarily derived
from mortgage loans to housing projects for low to moderate
income families. The ability of such issuers to make debt
service payments will be affected by events and conditions
affecting financed projects, including, among other things, the
achievement and maintenance of sufficient occupancy levels and
adequate rental income, increases in taxes, employment and income
conditions prevailing in local labor markets, utility costs and
other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the
appropriation of subsidies and social and economic trends
affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high
rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds,
multi-family mortgage revenue bonds are subject to redemption and
call features, including extraordinary mandatory redemption
features, upon prepayment, sale or non-origination of mortgage
loans as well as upon the occurrence of other events. Certain
issuers of single or multi-family housing bonds have considered
various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In connection with the
housing Municipal Bonds held by the Trust, the Sponsor has not
had any direct communications with any of the issuers thereof,
but at the initial Date of Deposit it was not aware that any of
the respective issuers of such Municipal Bonds were actively
considering the redemption of such Municipal Bonds prior to their
respective stated initial call dates. However, there can be no
assurance that an issuer of a Municipal Bond in the Trust will
not attempt to so redeem a Municipal Bond in the Trust.
Certain Series of the Trust contain Municipal Bonds which
are obligations of issuers whose revenues are derived from the
sale of water and/or sewerage services. Water and sewerage bonds
are generally payable from user fees. Problems faced by such
issuers include the ability to obtain timely and adequate rate
increases, a decline in population resulting in decreased user
fees, the difficulty of financing large construction programs,
the limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh
water, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. Issuers may have experienced
these problems in varying degrees. Because of the relatively
short history of solid waste disposal bond financing, there may
be technological risks involved in the satisfactory construction
or operation of the projects exceeding those associated with most
municipal enterprise projects. Increasing environmental
regulation on the federal, state and local level has a
significant impact on waste disposal facilities. While
regulation requires more waste producers to use waste disposal
facilities, it also imposes significant costs on the facilities.
These costs include compliance with frequently changing and
complex regulatory requirements, the cost of obtaining
construction and operating permits, the cost of conforming to
prescribed and changing equipment standards and required methods
of operation and the cost of disposing of the waste residue that
remains after the disposal process in an environmentally safe
manner. In addition, waste disposal facilities frequently face
substantial opposition by environmental groups and officials to
their location and operation, to the possible adverse effects
upon the public health and the environment that may be caused by
wastes disposed of at the facilities and to alleged improper
operating procedures. Waste disposal facilities benefit from
laws which require waste to be disposed of in a certain manner
but any relaxation of these laws could cause a decline in demand
for the facilities' services. Finally, waste disposal facilities
are concerned with many of the same issues facing utilities
insofar as they derive revenues from the sale of energy to local
power utilities.
Certain Series of the Trust contain Municipal Bonds which
are obligations of issuers whose revenues are primarily derived
from the sale of electric energy or natural gas. Utilities are
generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which
may be charged and the appropriate rate of return on an approved
asset base. The problems faced by such issuers include the
difficulty in obtaining approval for timely and adequate rate
increases from the governing public utility commission, the
difficulty in financing large construction programs, the
limitations on operations and increased costs and delays
attributable to environmental considerations, increased
competition, recent reductions in estimates of future demand for
electricity in certain areas of the country, the difficulty of
the capital market in absorbing utility debt, the difficulty in
obtaining fuel at reasonable prices and the effect of energy
conservation. Issuers may have experienced these problems in
varying degrees. In addition, Federal, state and municipal
governmental authorities may from time to time review existing
and impose additional regulations governing the licensing,
construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of such Municipal
Bonds to make payments of principal and/or interest on such
Municipal Bonds. The ability of state and local joint action
power agencies to make payments on bonds they have issued is
dependent in large part on payments made to them pursuant to
power supply or similar agreements. Courts in Washington and
Idaho have held that certain agreements between the Washington
Public Power Supply System ("WPPSS") and the WPPSS participants
are unenforceable because the participants did not have the
authority to enter into the agreements. While these decisions
are not specifically applicable to agreements entered into by
public entities in other states, they may cause a reexamination
of the legal structure and economic viability of certain projects
financed by joint action power agencies, which might exacerbate
some of the problems referred to above and possibly lead to legal
proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Certain Series of the Trust contain Municipal Bonds which
are industrial revenue bonds ("IRBs"), including pollution
control revenue bonds, which are tax-exempt securities issued by
states, municipalities, public authorities or similar entities to
finance the cost of acquiring, constructing or improving various
industrial projects. These projects are usually operated by
corporate entities. Issuers are obligated only to pay amounts
due on the IRBs to the extent that funds are available from the
unexpended proceeds of the IRBs or receipts or revenues of the
issuer under an arrangement between the issuer and the corporate
operator of a project. The arrangement may be in the form of a
lease, installment sale agreement, conditional sale agreement or
loan agreement, but in each case the payments to the issuer are
designed to be sufficient to meet the payments of amounts due on
the IRBs. Regardless of the structure, payment of IRBs is solely
dependent upon the creditworthiness of the corporate operator of
the project or corporate guarantor. Corporate operators or
guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or
industry. These include cyclicality of revenues and earnings,
regulatory and environmental restrictions, litigation resulting
from accidents or environmentally-caused illnesses, extensive
competition and financial deterioration resulting from leveraged
buy-outs or takeovers. The IRBs in the Series of the Trust may
be subject to special or extraordinary redemption provisions
which may provide for redemption at par or, with respect to
original issue discount bonds, at issue price plus the amount of
original issue discount accreted to the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other Municipal Bonds in
the Series of the Trust prior to the stated maturity of such
Municipal Bonds.
Certain Series of the Trust contain Municipal Bonds which
are obligations which are payable from and secured by revenues
derived from the ownership and operation of facilities such as
airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross
operating income is generally derived from fees received from
signatory airlines pursuant to use agreements which consist of
annual payments for leases, occupancy of certain terminal space
and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations
under the use agreements. The air transport industry is
experiencing significant variations in earnings and traffic, due
to increased competition, excess capacity, increased costs,
deregulation, traffic constraints and other factors, and several
airlines are experiencing severe financial difficulties. The
Sponsor cannot predict what effect these industry conditions may
have on airport revenues which are dependent for payment on the
financial condition of the airlines and their usage of the
particular airport facility. Similarly, payment on Municipal
Bonds related to other facilities is dependent on revenues from
the projects, such as user fees from ports, tolls on turnpikes
and bridges and rents from buildings. Therefore, payment may be
adversely affected by reduction in revenues due to such factors
as increased cost of maintenance, decreased use of a facility,
lower cost of alternative modes of transportation, scarcity of
fuel and reduction or loss of rents.
Certain Series of the Trusts contain Municipal Bonds which
are obligations of issuers which are, or which govern the
operation of, schools, colleges and universities and whose
revenues are derived mainly from ad valorem taxes, or for higher
education systems, from tuition, dormitory revenues, grants and
endorsements. General problems relating to school bonds include
litigation contesting the state constitutionality of financing
public education in part from ad valorem taxes, thereby creating
a disparity in educational funds available to schools in wealthy
areas and schools in poor areas. Litigation or legislation on
this issue may affect the sources of funds available for the
payment of school bonds in the Trusts. General problems relating
to college and university obligations would include the prospect
of a declining percentage of the population consisting of
"college" age individuals, possible inability to raise tuition
and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state
funding and new government legislation or regulations which may
adversely affect the revenues or costs of such issuers. All of
such issuers have been experiencing certain of these problems in
varying degrees. In addition, the ability of universities and
colleges to meet their obligations is dependent upon various
factors, including the size and diversity of their sources of
revenues, enrollment, reputation, management expertise, the
availability and restrictions on the use of endowments and other
funds, the quality and maintenance costs of campus facilities,
and, in the case of public institutions, the financial condition
of the relevant state or other governmental entity and its
policies with respect to education. The institution's ability to
maintain enrollment levels will depend on such factors as tuition
costs, geographic location, geographic diversity and quality of
student body, quality of the faculty and the diversity of program
offerings.
Certain Series of the Trust contain Municipal Bonds which
are Urban Redevelopment Bonds ("URBs"). URBs have generally been
issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a
particular project have been assigned and pledged to purchasers.
In some cases, a mortgage on the underlying project may have been
granted as security for the URBs. Regardless of the structure,
payment of the URBs is solely dependent upon the creditworthiness
of the operator of the project.
Certain of the Municipal Bonds in the Trust may be lease
revenue bonds whose revenues are derived from lease payments made
by a municipality or other political subdivision which is leasing
equipment or property for use in its operation. The risks
associated with owning Municipal Bonds of this nature include the
possibility that appropriation of funds for a particular project
or equipment may be discontinued. The Sponsor cannot predict the
likelihood of nonappropriation of funds for these types of lease
revenue Municipal Bonds.
Certain Series of the Trust contain "zero coupon" bonds,
i.e., an original issue discount bond that does not provide for
the payment of current interest. Zero coupon bonds are purchased
at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not
receive any periodic interest payments. The effect of owning
deep discount bonds which do not make current interest payments
(such as the zero coupon bonds) is that a fixed yield is earned
not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This
implicit reinvestment of earnings at the same rate eliminates the
risk of being unable to reinvest the income on such obligation at
a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest
at higher rates in the future. For this reason, zero coupon
bonds are subject to substantially greater price fluctuations
during periods of changing market interest rates than are
securities of comparable quality which pay interest currently.
For the Federal tax consequences of original issue discount bonds
such as the zero coupon bonds, see "Tax Status of the Trust."
Investors should be aware that many of the Municipal Bonds
in the Series of the Trust are subject to continuing requirements
such as the actual use of Municipal Bond proceeds or manner of
operation of the project financed from Municipal Bond proceeds
that may affect the exemption of interest on such Municipal Bonds
from Federal income taxation. Although at the time of issuance
of each of the Municipal Bonds in the Series of the Trust an
opinion of bond counsel was rendered as to the exemption of
interest on such obligations from Federal income taxation, there
can be no assurance that the respective issuer or other obligors
on such obligations will fulfill the various continuing
requirements established upon issuance of the Municipal Bonds. A
failure to comply with such requirements may cause a
determination that interest on such obligations is subject to
Federal income taxation, perhaps even retroactively from the date
of issuance of such Municipal Bonds, thereby reducing the value
of the Municipal Bonds and subjecting Unitholders to
unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of
debts of political subdivisions and authorities of states of the
United States provide that, in certain circumstances, such
subdivisions or authorities may be authorized to initiate
bankruptcy proceedings without prior notice to or consent of
creditors, which proceedings could result in material and adverse
modification or alteration of the rights of holders of
obligations issued by such subdivisions or authorities.
Certain issues of the Municipal Bonds in some Series of the
Trust represent "moral obligations" of a governmental entity
other than the issuer. In the event that the issuer of the
Municipal Bond defaults in the repayment thereof, such other
governmental entity lawfully may, but is not obligated to,
discharge the obligation of the issuer to repay such Municipal
Bond. If an issuer of moral obligation bonds is unable to meet
its obligations, the repayment of such Municipal Bonds becomes a
moral commitment but not a legal obligation of the state or
municipality in question. Even though the state may be called on
to restore any deficits in capital reserve funds of the agencies
or authorities which issued the bonds, any restoration generally
requires appropriation by the State legislature and accordingly
does not constitute a legally enforceable obligation or debt of
the state. The agencies or authorities generally have no taxing
power.
To the best of the Sponsor's knowledge, as of the Date of
Deposit for each Trust, there is no litigation pending with
respect to any Municipal Bond which might reasonably be expected
to have a material adverse effect on the Trust or any Series
thereof. Although the Sponsor is unable to predict whether any
litigation may be instituted, or if instituted, whether such
litigation might have a material adverse effect on the Trust or
any Series, the Trust received copies of the opinions of bond
counsel given to the issuing authorities at the time of original
delivery of each of the Municipal Bonds to the effect that the
Municipal Bonds had been validly issued and that the interest
thereon is exempt from Federal income taxes.
INSURANCE ON THE PORTFOLIOS
All Municipal Bonds in the portfolios of each Series of the
Trust are insured as to payment of interest and principal, when
due, either by a policy obtained by the Trust, the Sponsor or by
the Bond issuer. Series A through A-24 of the Kemper Tax-Exempt
Insured Income Trust are insured by AMBAC Indemnity and
Series A-25 and subsequent Series of the Kemper Tax-Exempt
Insured
Income Trust and Kemper Defined Funds Insured National Series are
insured by Financial Guaranty, MBIA and other insurers. The
insurance policy obtained by the Trust for a Series is
non-cancelable and will continue in force so long as such Series
of the Trust is in existence, the insurer and/or the reinsures
referred to below remain in business and the Municipal Bonds
described in the policy continue to be held in such Series of the
Trust. The premium for any insurance policy or policies obtained
by an issuer of Municipal Bonds has been paid in advance by such
issuer and any such policy or policies are non-cancelable and
will remain in force so long as the Municipal Bonds so insured
are outstanding and the insurer and/or insurers referred to below
remain in business. In those instances where Municipal Bond
insurance is obtained by the Sponsor or the issuer directly from
an insurer, no premiums for insurance are paid by the Trust and
such bonds are not covered by the Trust's policy. Non-payment of
premiums on the policy obtained by the Trust will not result in
the cancellation of such insurance but will force the insurer to
take action against the Trustee to recover premium payments due
it. Premium rates for each issue of Municipal Bonds protected by
the policy obtained by the Trust are fixed for the life of the
appropriate Series of the Trust.
The aforementioned insurance guarantees the scheduled
payment of principal and interest on all of the Municipal Bonds
as they fall due. It does not guarantee the market value of the
Municipal Bonds or the value of the Units of a Series of the
Trust. The insurance obtained by the Trust is only effective as
to Municipal Bonds owned by and held in a Series of the Trust and
the price which an individual pays on acquisition of Units, or
receives on redemption or resale of Units, does not, except as
indicated below, include any element of value for the insurance
obtained by the Trust. Unitholders should recognize that in
order to receive any benefit from the portfolio insurance
obtained by the Trust they must be owners of the Units of a
Series of the Trust at the time the Trustee becomes entitled to
receive any payment from the insurer for such Series. Insurance
obtained by the issuer of a Municipal Bond is effective so long
as the Municipal Bond is outstanding, whether or not held by a
Series of the Trust.
Pursuant to an irrevocable commitment of Financial Guaranty,
the Trustee, upon the sale of a Municipal Bond from Series A-25
(or any subsequent Series) of the Kemper Tax-Exempt Insured
Income Trust or Kemper Defined Funds Insured National Series
covered under the Trust's insurance policy, has the right to
obtain permanent insurance (the "Permanent Insurance") with
respect to such Municipal Bond (i.e., insurance to the maturity
of the Municipal Bond regardless of the identity of the holder
thereof) upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Municipal Bond.
Accordingly, every Municipal Bond in Series A-25 (or subsequent
Series) of the Kemper Tax-Exempt Insured Income Trust or Kemper
Defined Funds Insured National Series is eligible to be sold on
an insured basis. It is expected that the Trustee will exercise
the right to obtain Permanent Insurance with respect to Municipal
Bonds in such Series only if upon such exercise the Trust would
receive net proceeds (i.e., the value of such Municipal Bond if
sold as an insured Municipal Bond less the insurance premium
attributable to the Permanent Insurance) from such sale in excess
of the sale proceeds if such Municipal Bond was sold on an
uninsured basis. The insurance premium with respect to each
Municipal Bond is determined based upon the insurability of each
Municipal Bond as of the Date of Deposit and will not be
increased or decreased for any change in the creditworthiness of
such Municipal Bond's issuer.
Insurance obtained by the Trust, under normal circumstances,
has no effect on the price or redemption value of Units. It is
the present intention of the Evaluator to attribute a value to
such insurance for the purpose of computing the price or
redemption value of Units only in circumstances where the credit
quality of an underlying Municipal Bond has significantly
deteriorated. Insurance obtained by the issuer of a Municipal
Bond is effective so long as such Municipal Bond is outstanding.
Therefore, any such insurance may be considered to represent an
element of market value in regard to the Municipal Bonds thus
insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted.
The value to be added to such Municipal Bonds shall be an
amount equal to the excess, if any, by which the net proceeds
realized from the sale of the Municipal Bonds on an insured basis
exceeds the sum of (i) the net proceeds realizable from the sale
of the Municipal Bonds on an uninsured basis plus (ii) in the
case of Series A-25 and subsequent Series of the Kemper
Tax-Exempt Insured Income Trust or Kemper Defined Funds Insured
National Series the premium attributable to the Permanent
Insurance. The portfolio insurance obtained by the Trust from
AMBAC Indemnity for Series A through A-24 of the Kemper
Tax-Exempt Insured Income Trust is applicable only while the
Municipal Bonds remain in the Trust's portfolio. Consequently,
the price received by the Trust upon the disposition of any such
Municipal Bond will reflect a value placed upon it by the market
as an uninsured obligation rather than a value resulting from the
insurance. Due to this fact, the Sponsor will not direct the
Trustee to dispose of Municipal Bonds in Series A through A-24 of
the Kemper Tax-Exempt Insured Income Trust which are in default
or imminent danger of default but to retain such Municipal Bonds
in the portfolio so that if a default in the payment of interest
or principal occurs the Trust may realize the benefits of the
insurance.
The Sponsor will instruct the Trustee not to sell Municipal
Bonds from Series A-25 or subsequent Series of the Kemper
Tax-Exempt Insured Income Trust or Kemper Defined Funds Insured
National Series to effect redemptions or for any reason but
rather to retain them in the portfolio unless value attributable
to the Permanent Insurance can be realized upon sale. See
"Investment Supervision."
Financial Guaranty Insurance Company. Financial
Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a
wholly-owned subsidiary is General Electric Capital Corporation
("GECC"). Neither the Corporation nor GECC is obligated to pay
the debt of or the claims against Financial Guaranty. Financial
Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of
September 30, 1994, the total capital and surplus of Financial
Guaranty was approximately $871,000,000. Copies of Financial
Guaranty's financial statements, prepared on the basis of
statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted
accounting principles, may be obtained by writing to Financial
Guaranty at 115 Broadway, New York, New York 10006, Attention:
Communications Department or to the New State Insurance
Department at 160 West Broadway, 18th Floor, New York, New York
10013, Attention: Property Companies Bureau (telephone number
(212) 621-0389). Financial Guaranty's telephone number is (212)
312-3000.
In addition, Financial Guaranty Insurance Company is
currently authorized to write insurance in all 50 states and the
District of Columbia.
The information relating to Financial Guaranty contained
above has been furnished by such corporation. The financial
information contained herein with respect to such corporation is
unaudited but appears in reports or other materials filed with
state insurance regulatory authorities and is subject to audit
and review by such authorities. No representation is made herein
as to the accuracy or adequacy of such information or as to the
absence of material adverse changes in such information
subsequent to the date thereof but the Sponsor is not aware that
the information herein is inaccurate or incomplete.
AMBAC Indemnity Corporation. AMBAC Indemnity
Corporation ("AMBAC") is a Wisconsin-domiciled stock insurance
company, regulated by the office of Commissioner of Insurance of
Wisconsin, and licensed to do business in 50 states, the District
of Columbia and the Commonwealth of Puerto Rico, with admitted
assets (unaudited) of approximately $1,936,000,000 and statutory
capital (unaudited) of approximately $1,096,000,000 as of
September 30, 1993. Statutory capital consists of statutory
contingency reserve and policyholders' surplus. AMBAC Indemnity
is a wholly-owned subsidiary of AMBAC Inc., a 100% publicly held
company. Moody's Investors Service, Inc. and Standard & Poor's
Corporation have both assigned a AAA claims-paying ability rating
to AMBAC. Copies of AMBAC's financial statements prepared in
accordance with statutory accounting standards are available from
AMBAC. The address of AMBAC's administrative offices and its
telephone number are One State Street Plaza, 17 Floor, New York,
New York 10004 and (212) 668-0340. AMBAC has entered into quota
share reinsurance agreements under which a percentage of the
insurance underwritten pursuant to certain municipal bank
insurance programs of AMBAC Indemnity has been and will be
assumed by a number of foreign and domestic unaffiliated
reinsures.
Municipal Bond Investors Assurance Corporation.
Municipal Bond Investors Assurance Corporation ("MBIA
Corporation") is the principal operating subsidiary of MBIA,
Inc., a New York Stock Exchange listed Company. MBIA, Inc. is
obligated to pay the debts of or claims against MBIA Corporation.
MBIA Corporation, which commenced municipal bond insurance
operations on January 5, 1987, is a limited liability corporation
rather than a several liability association. MBIA Corporation is
domiciled in the State of New York and licensed to do business in
all 50 states, the District of Columbia and the Commonwealth of
Puerto Rico.
As of September 30, 1994 MBIA Corporation had admitted
assets of $3.3 billion (unaudited), total liabilities of $2.2
billion (unaudited), and total capital and surplus of $1.1
billion (unaudited) prepared in accordance with statutory
accounting practices prescribed or permitted by insurance
regulatory authorities. Standard & Poor's has rated the
claims-paying ability of MBIA "AAA." Copies of MBIA
Corporation's financial statements prepared in accordance with
statutory accounting practices are available from MBIA
Corporation. The address of MBIA Corporation is 113 King Street,
Armonk, New York 10504.
Effective December 31, 1993, MBIA Inc. acquired Bond
Investors Group, Inc. On January 5, 1990, the Insurer acquired
all of the outstanding stock of Bond Investors Group, Inc., the
parent of BIG, now known as MBIA Insurance Corp. of Illinois.
Through a reinsurance agreement, BIG has ceded all of its net
insured risks, as well as its unearned premium and contingency
reserves, to the Insurer and the Insurer has reinsured BIG's net
outstanding exposure.
Moody's Investors Service rates all bonds issues insured by
MBIA "Aaa" and short-term loans "MIG1," both designated to be of
the highest quality. Standard & Poor's rates all new issues
insured by MBIA "AAA."
Financial Security Assurance. Financial Security
Assurance ("Financial Security" or "FSA") is a monoline insurance
company incorporated on March 16, 1984 under the laws of the
State of New York. The operations of Financial Security
commenced on July 25, 1985, and Financial Security received its
New York State insurance license on September 23, 1985.
Financial Security and its two wholly owned subsidiaries are
licensed to engage in financial guaranty insurance business in 49
states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged
exclusively in the business of writing financial guaranty
insurance, principally in respect of asset-backed and other
collateralized securities offered in domestic and foreign
markets. Financial Security and its subsidiaries also write
financial guaranty insurance in respect of municipal and other
obligations and reinsure financial guaranty insurance policies
written by other leading insurance companies. In general,
financial guaranty insurance consists of the issuance of a
guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of these securities, in consideration
for payment of a premium to the insurer.
Financial Security is 91.6% owned by U S West, Inc., and
8.4% owned by Tokio Marine and Fire Insurance Co., Ltd. ("Tokio
Marine"). Neither U S West, Inc. nor Tokio Marine is obligated
to pay the debts of or the claims against Financial Security.
Financial Security is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance
Department.
As of March 31, 1993 the total policyholders' surplus and
contingency reserves and the total unearned premium reserve,
respectively, of Financial Security and its consolidated
subsidiaries were, in accordance with statutory accounting
principles, approximately $479,110,000 (unaudited) and
$220,078,000 (unaudited), and the total shareholders' equity and
the unearned premium reserve, respectively of Financial Security
and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately
$628,119,000 (unaudited) and $202,493,000 (unaudited).
Copies of Financial Security's financial statements may be
obtained by writing of Financial Security at 350 Park Avenue, New
York, New York 10022, attention Communications Department.
Financial Security's and its telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on
financial guaranty insurance written by Financial Security or
either of its subsidiaries are reinsured among such companies at
an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable
statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its
financial guaranty insurance policies with unaffiliated reinsures
under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized
by Financial Security as a risk management device and to comply
with certain statutory and rating agency requirements; it does
not alter or limit Financial Security's obligations under any
financial guaranty insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by
Moody's Investors Service, Inc., and "AAA" by Standard & Poor's,
Nippon Investors Service Inc., Duff & Phelps Inc. and Australian
Ratings Pty. Ltd. Such ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell
or hold securities and are subject to revision or withdrawal at
any time by such rating agencies.
Capital Guaranty Insurance Company. Capital Guaranty
Insurance Company ("Capital Guaranty" or "CGIC") is a "Aaa/AAA"
rated monoline stock insurance company incorporated in the State
of Maryland, and is a wholly owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company. Capital
Guaranty Corporation is a publicly owned company whose shares are
traded on the New York Stock Exchange.
Capital Guaranty Corporation is authorized to provide
insurance in all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, Guam and the U.S. Virgin Islands.
Capital Guaranty focuses on insuring municipal securities and
provides policies which guaranty the timely payment of principal
and interest when due for payment on new issue and secondary
market issue municipal bond transactions. Capital Guaranty's
claims-paying ability is rated "Triple-A" by both Moody's and
Standard & Poor's.
As of December 31, 1994, Capital Guaranty had $15.7 billion
in net exposure outstanding (excluding defeased issues). The
total statutory policyholders' surplus and contingency reserve of
Capital Guaranty was $196,529,000 and the total admitted assets
were $303,723,316 as reported to the Insurance Department of the
State of Maryland as of December 31, 1994.
Financial statements for Capital Guaranty Insurance Company,
that have been prepared in accordance with statutory insurance
accounting standards, are available upon request. The address of
Capital Guaranty's headquarters is Steuart Tower, 22nd Floor, One
Market Plaza, San Francisco, CA 94105-1413 and the telephone
number is (415) 955-8000.
In order to be in a Series of the Trust, Municipal Bonds
must be insured by the issuer thereof or be eligible for the
insurance obtained by the Series of the Trust. In determining
eligibility, the company insuring the portfolio has applied its
own standards which correspond generally to the standards it
normally uses in establishing the insurability of new issues of
municipal bonds and which are not necessarily the criteria used
in regard to the selection of Municipal Bonds by the Sponsor. To
the extent the standards of the insurer are more restrictive than
those of the Sponsor, the previously stated Trust investment
criteria have been limited.
On the date shown under "Essential Information" in Part Two,
the Estimated Long-Term and Current Returns per Unit for the
Trust, after payment of the insurance premium, if any, were as
indicated. The Estimated Long-Term and Current Returns per Unit
for a trust with an identical portfolio without the insurance
obtained by the Trust would have been higher on such date.
An objective of the portfolio insurance obtained by the
Trust is to obtain a higher yield on the portfolio of the Series
of the Trust than would be available if all the Municipal Bonds
in such portfolio had Standard & Poor's "AAA" rating and/or
Moody's "Aaa" rating(s), while having the protection of insurance
of prompt payment of interest and principal, when due, on the
Municipal Bonds. There is, of course, no certainty that this
result will be achieved. Municipal Bonds in a Series of the
Trust which have been insured by the issuer (all of which are
rated "AAA" by Standard & Poor's and/or "Aaa" by Moody's) may or
may not have a higher yield than uninsured bonds rated "AAA" by
Standard & Poor's or "Aaa" by Moody's. In selecting such
Municipal Bonds for the portfolio, the Sponsor has applied the
criteria described above.
In the event of nonpayment of interest or principal, when
due, in respect of a Municipal Bond, the appropriate insurer
shall make such payment not later than 30 days after it has been
notified that such nonpayment has occurred or is threatened (but
not earlier than the date such payment is due). The insurer, as
regards any payment it may make, will succeed to the rights of
the Trustee in respect thereof.
The Internal Revenue Service has issued a letter ruling
which holds, in effect, that insurance proceeds representing
maturity interest on defaulted municipal obligations paid to
municipal bond funds substantially similar to the Trust, under
policy provisions substantially identical to the policies
described herein, will be excludable from Federal gross income
under Section 103(a)(1) of the Internal Revenue Code. Holders of
Units in the Trust should discuss with their tax advisers the
degree of reliance which they may place on this letter ruling.
Furthermore, Chapman and Cutler, Counsel for the Sponsor, have
given an opinion to the effect that such payment of proceeds
would be excludable from Federal gross income to the same extent
that such interest would have been so excludable if paid by the
issuer of the defaulted obligations. See "Tax Status of the
Trust."
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust Fund may elect to have
distributions of principal (including capital gains, if any) or
interest or both automatically invested without charge in shares
of any mutual fund registered in such Unitholder's state of
residence which is underwritten or advised by Kemper Financial
Services, Inc., (the "Kemper
Funds"), other than those Kemper Funds sold with a contingent
deferred sales charge. Since the portfolio securities and
investment objectives of such Kemper Funds may differ
significantly from that of the Trust Funds, Unitholders should
carefully consider the consequences, including the fact that
distributions from such Kemper Funds may be taxable, before
selecting such Kemper Funds for reinvestment. Detailed
information with respect to the investment objectives and the
management of the Funds is contained in their respective
prospectuses, which can be obtained from and appropriate Trust
Fund Underwriter upon request. An investor should read the
prospectus of the reinvestment fund selected prior to making the
election to reinvest. Unitholders who desire to have such
distributions automatically reinvested should inform their broker
at the time of purchase or should file with the Program Agent
referred to below a written notice of election.
Unitholders who are receiving distributions in cash may
elect to participate in distribution reinvestment by filing with
the Program Agent an election to have such distributions
reinvested without charge. Such election must be received by the
Program Agent at least ten days prior to the Record Date
applicable to any distribution in order to be in effect for such
Record Date. Any such election shall remaining effect until a
subsequent notice is received by the Program Agent (See
"Distributions to Unitholders").
The Program Agent is Investors Fiduciary Trust Company. All
inquiries concerning participation in distribution reinvestment
should be directed to the Program Agent at P.O. Box 419430,
Kansas City, Missouri 64173-0216, telephone (816) 474-8786.
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS
As of the opening of business on the date indicated therein,
the Estimated Current Returns, if applicable, and the Estimated
Long-Term Returns for the Trust were as set forth under
"Essential Information" in Part Two of this Prospectus.
Estimated Current Returns are calculated by dividing the
estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per
Unit will vary with changes in fees and expenses of the Trust and
with the principal prepayment, redemption, maturity, exchange or
sale of Securities while the Public Offering Price will vary with
changes in the offering price of the underlying Securities and
with changes in Purchased Interest for Kemper Defined Funds;
therefore, there is no assurance that the present Estimated
Current Returns will be realized in the future. Estimated
Long-Term Returns are calculated using a formula which (1) takes
into consideration, and determines and factors in the relative
weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of
discounts) and estimated retirements of all of the Securities in
the Trust and (2) takes into account the expenses and sales
charge associated with the Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of
the Trust will change, there is no assurance that the present
Estimated Long-Term Returns will be realized in the future.
Estimated Current Returns and Estimated Long-Term Returns are
expected to differ because the calculation of Estimated Long-Term
Returns reflects the estimated date and amount of principal
returned while Estimated Current Returns calculations include
only net annual interest income and Public Offering Price.
TAX STATUS OF THE TRUST
All Municipal Bonds in the Trust were accompanied by copies
of opinions of bond counsel given to the issuers thereof at the
time of original delivery of the Municipal Bonds to the effect
that the interest thereon is exempt from all Federal income
taxes. In connection with the offering of Units of the Trust
Funds, neither the Sponsor, the Trustee, the auditors nor their
respective counsel have made any review of the proceedings
relating to the issuance of the Municipal Bonds or the basis for
such opinions. Gain realized on the sale or redemption of the
Municipal Bonds by the Trustee or of a Unit by a Unitholder is,
however, includable in gross income for Federal income tax
purposes. Such gain does not include any amounts received in
respect of accrued interest or earned original issue discount.
It should be noted that under recently enacted legislation
described below that subjects accretion of market discount on
tax-exempt bonds to taxation as ordinary income, gain realized on
the sale or redemption of Municipal Bonds by the Trustee or of
Units by a Unitholder that would have been treated as capital
gain under prior law is treated as ordinary income to the extent
it is attributable to accretion of market discount. Market
discount can arise based on the price a Trust Fund pays for
Municipal Bonds or the price a Unitholder pays for his or her
Units. In addition, bond counsel to the issuing authorities
rendered opinions as to the exemption of interest on such Bonds,
when held by residents of the state in which the issuers of such
bonds are located, from state income taxes and, where applicable,
local income taxes.
Neither the Sponsor, the Trustee, the Independent Auditors
nor their respective counsel, have made any review of the
proceedings relating to the issuance of the Municipal Bonds or
the bases for such opinions. However, bond counsel to the
issuing authorities rendered opinions as to the exemption of
interest on such Bonds, when held by residents of the state in
which the issuers of such bonds are located, from state income
taxes and, where applicable, local income taxes.
In the opinion of Chapman and Cutler, counsel for the
Sponsor:
Each series of the Trust is not an association taxable
as a corporation for federal income tax purposes and
interest and accrued original issue discount on Bonds which
is excludable from gross income under the Internal Revenue
Code of 1986 (the "Code") will retain its status when
distributed to Unitholders, except to the extent such
interest is subject to the alternative minimum tax, an
additional tax on branches of foreign corporations and the
environmental tax (the "Superfund Tax"), as noted below.
Exemption of interest and accrued original issue
discount on any Municipal Bonds for Federal income tax
purposes does not necessarily result in tax-exemption under
the laws of the several states as such laws vary with
respect to the taxation of such securities and in many
states all or part of such interest and accrued original
issue discount may be subject to tax.
Each Unitholder is considered to be the owner of a pro
rata portion of each asset of the respective Series of the
Trust in the proportion that the number of Units of such
Trust held by him bears to the total number of Units
outstanding of such Trust under subpart E, subchapter J of
chapter 1 of the Code and will have a taxable event when
such Trust disposes of a Bond, or when the Unitholder
redeems or sells his Units. Unitholders must reduce the tax
basis of their Units for their share of accrued interest
received by a Trust, if any, on Bonds delivered after the
Unitholders pay for their Units to the extent that such
interest accrued on such Bonds during the period from the
Unitholder's settlement date to the date such Bonds are
delivered to a Trust and, consequently, such Unitholders may
have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon
the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis
of the Units. If the Trustee disposes of Bonds (whether by
sale, payment on maturity, redemption or otherwise), gain or
loss is recognized to the Unitholder. The amount of any
such gain or loss is measured by comparing the Unitholder's
pro rata share of the total proceeds from such disposition
with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a
Unitholder who purchases Units, such basis (before
adjustment for earned original issue discount and amortized
bond premium, if any) is determined by apportioning the cost
of the Units among each of the Trust's assets ratably
according to value as of the date of acquisition of the
Units. The basis of each Unit and of each Municipal Bond
which was issued with original issue discount must be
increased by the amount of the accrued original issue
discount and the basis of each Unit and of the Unitholder's
interest in each Municipal Bond which was acquired by such
Unitholder at a premium must be reduced by the annual
amortization of Municipal Bond premium. The tax cost
reduction requirements of the Code relating to amortization
of bond premium may, under some circumstances, result in the
Unitholder realizing a taxable gain when his Units are sold
or redeemed for an amount equal to his original cost.
Any proceeds paid under individual insurance policies
obtained by issuers of Bonds or under any insurance policies
obtained by the Trust or the Sponsor which represent
maturing interest on defaulted obligations held by the
Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so
excludable if paid in the normal course by the issuer of the
defaulted obligations; provided that, at the time such
policies are purchased, the amounts paid for such policies
are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than
the insurer, will pay debt service on the obligations.
Sections 1288 and 1272 of the Internal Revenue Code of 1986
(the "Code") provide a complex set of rules governing the accrual
of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Municipal Bond,
depending on the date the Municipal Bond was issued. In
addition, special rules apply if the purchase price of a
Municipal Bond exceeds the original issue price plus the amount
of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value
of the Municipal Bond on the date a Unitholder acquires his
Units, and the price the Unitholder pays for his Units.
Investors with questions regarding these Code sections should
consult with their tax advisers.
"The Revenue Reconciliation Act of 1993" (the "Tax Act")
subjects tax-exempt bonds to the market discount rules of the
Code effective for bonds purchased after April 30, 1993. In
general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if
any, is attributable to original issue discount not yet accrued)
subject to a statutory "de minimis" rule. Market discount can
arise based on the price a Trust pays for Municipal Bonds or the
price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under
prior law the accretion had been treated as capital gain. Market
discount that accretes while a Trust Fund holds a Municipal Bond
would be recognized as ordinary income by the Unitholders when
principal payments are received on the Municipal Bond, upon sale
or at redemption (including early redemption), or upon sale or
redemption of his or her Units, unless a Unitholder elects to
include market discount in taxable income as it accrues. The
market discount rules are complex and Unitholders should consult
their tax advisers regarding these rules and their application.
In the case of all Unitholders (both individuals and
corporations), interest on all or certain Bonds held by certain
Series of the Trusts may be treated as an item of tax preference
for purposes of computing the alternative minimum tax.
Accordingly, investments in Units may subject Unitholders to (or
result in increased liability under) the alternative minimum tax.
Due to the complexity of the alternative minimum tax, Unitholders
are urged to consult their tax advisers regarding the impact, if
any, of the alternative minimum tax.
In the case of certain corporations, the alternative minimum
tax and the Superfund Tax depend upon the corporation's
alternative minimum taxable income, which is the corporation's
taxable income with certain adjustments. One of the adjustment
items used in computing the alternative minimum taxable income
and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment
Trust, or REMIC) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to
its alternative minimum taxable income (before such adjustment
item and the alternative tax net operating loss deduction).
"Adjusted current earnings" includes all tax-exempt interest,
including interest on all of the Bonds in a Trust. Unitholders
are urged to consult their tax advisers with respect to the
particular tax consequences to them including the corporate
alternative minimum tax, the Superfund Tax and the branch profits
tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section
265 of the Code, interest on indebtedness incurred or continued
to purchase or carry Units of a Trust is not deductible for
Federal income tax purposes. The Internal Revenue Service has
taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (however, these
rules generally do not apply to interest paid on indebtedness
incurred to purchase or improve a personal residence). Also,
under Section 265 of the Code, certain financial institutions
that acquire units would generally not be able to deduct any of
the interest expense attributable to ownership of such Units.
Investors with questions regarding these issues should consult
with their tax advisers.
In the case of certain Municipal Bonds in certain Series of
the Trust, the opinions of bond counsel indicate that interest on
such securities received by a "substantial user" of the
facilities being financed with the proceeds of these securities
or persons related thereto, for periods while such securities are
held by such a user or related person, will not be excludable
from Federal gross income, although interest on such securities
received by others would be excludable from Federal gross income.
"Substantial user" and "related person" are defined under U.S.
Treasury Regulations. Any person who believes that he or she may
be a "substantial user" or a "related person" as so defined
should contact his or her tax adviser.
In the case of corporations, the alternative tax rate
applicable to long-term capital gains is 35% effective for
long-term capital gains realized in taxable years beginning on or
after January 1, 1993. For taxpayers other than corporations,
net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates
and could affect relative differences at which ordinary income
and capital gains are taxed. Under the Code, taxpayers must
disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Under existing law, the Trusts are not associations taxable
as a corporation and the income of the Trusts will be treated as
the income of the Unitholders under the income tax laws of the
State of Missouri.
All statements of law in the Prospectus concerning exclusion
from gross income for Federal, state or other tax purposes are
the opinions of counsel and are to be so construed.
At the respective times of issuance of the Bonds, opinions
relating to the validity thereof and to the exclusion of interest
thereon from Federal gross income are rendered by bond counsel to
the respective issuing authorities. Neither the Sponsor nor
Chapman and Cutler has made any special review for the Trust
Funds of the proceedings relating to the issuance of the Bonds or
of the basis for such opinions.
Section 86 of the Code, in general, provides that fifty
percent of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross
income" plus fifty percent of the Social Security benefits
received exceeds a "base amount." The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at
all times during the taxable year and who file separate returns.
Modified adjusted gross income is adjusted gross income
determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including
tax-exempt interest. To the extent that Social Security benefits
are includible in gross income, they will be treated as any other
item of gross income.
In addition, under the Tax Act, for taxable years beginning
after December 31,1993, up to eighty-five percent of Social
Security benefits are includible in gross income to the extent
that the sum of "modified adjusted gross income" plus fifty
percent of Social Security benefits received exceeds an "adjusted
base amount." The adjusted base amount is $34,000 for married
taxpayers, $44,000 for married taxpayers filing a joint return
and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified
adjusted gross income solely for the purpose of determining what
portion, if any, of Social Security benefits will be included in
gross income, no tax-exempt interest, including that received
from the Trust, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the
adjusted base amount must include fifty percent or eighty-five
percent, respectively of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest. A
taxpayer whose modified adjusted gross income (after inclusion of
tax-exempt interest) does not exceed the base amount need not
include any Social Security benefits in gross income.
The exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily
result in exemption under the income or other tax laws of any
state or city. The laws of the several states vary with respect
to the taxation of such obligations.
PUBLIC OFFERING OF UNITS
Public Offering Price. Units of each Series of the
Trust are offered at the Public Offering Price, plus accrued
interest to the expected settlement date (Daily Accrued Interest
for Kemper Defined Funds). The Public Offering Price per Unit of
a Series is equal to the aggregate bid side evaluation of the
Municipal Bonds in the Series' portfolio (as determined pursuant
to the terms of a contract with the Evaluator, by Muller Data
Corporation, a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable
securities), plus or minus cash, if any, in the Principal
Account, held or owned by the Series, divided by the number of
outstanding Units of that Series of the Trust, plus Purchased
Interest in the case of Kemper Defined Funds, plus the sales
charge applicable. The sales charge is based upon the dollar
weighted average maturity of the Trust and is determined in
accordance with the table set forth below. Investors who
purchase Units through brokers or dealers pursuant to a current
management agreement which by contract or operation of law does
not allow such broker or dealer to earn an additional commission
(other than any fee or commission paid for maintenance of such
investor's account under the management agreement) on such
transactions may purchase such Units at the current Public
Offering Price net of the applicable broker or dealer concession.
See "Public Distribution of Units" below. For purposes of this
computation, Municipal Bonds will be deemed to mature on their
expressed maturity dates unless: (a) the Municipal Bonds have
been called for redemption or funds or securities have been
placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they
mature; or (b) such Municipal Bonds are subject to a "mandatory
tender," in which case such mandatory tender will be deemed to be
the date upon which they mature. The effect of this method of
sales charge computation will be that different sales charge
rates will be applied to the Trust based upon the dollar weighted
average maturity of such Trust's portfolio, in accordance with
the following schedule:
<TABLE>
<CAPTION>
PERCENT OF PERCENT
DOLLAR WEIGHTED PUBLIC OF NET
AVERAGE YEARS OFFERING AMOUNT
TO MATURITY PRICE INVESTED
<S> <C> <C>
1 to 3.99 years 2.00% 2.041%
4 to 7.99 years 3.50 3.627
8 to 14.99 years 4.50 4.712
15 or more years 5.50 5.820
</TABLE>
The sales charge per Unit will be reduced as set forth
below:
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE YEARS TO
MATURITY*
4 to 7.99 8 to 14.99 15 or more
Amount of Investment Sales Charge (% of Public Offering
Price)
<S> <C> <C> <C>
$1,000 to $99,999 3.50% 4.50% 5.50%
$100,000 to $499,999 3.25 4.25 5.00
$500,000 to $999,999 3.00 4.00 4.50
$1,000,000 or more 2.75 3.75 4.00
- -------------------
</TABLE>
* If the dollar weighted average maturity of a Trust is from 1
to 3.99 years, the sales charge is 2% and 1.5% of the Public
Offering Price for purchases of $1 to $249,999 and $250,000 or
more, respectively.
The reduced sales charge as shown on the preceding charts
will apply to all purchases of Units on any one day by the same
purchases from the same dealer, and for this purpose, purchases
of Units of a Series of the Trust will be aggregated with
concurrent purchases of Units of any other unit investment trust
that may be offered by the Sponsor. Additionally, Units
purchased in the name of a spouse or child (under 21) of such
purchaser will be deemed to be additional purchases by such
purchaser. The reduced sales charge will also be applicable to a
trust or other fiduciary purchasing for a single trust estate or
single fiduciary account.
The Sponsor intends to permit officers, directors and
employees of the Sponsor and Evaluator and, at the discretion of
the Sponsor, registered representatives of selling firms to
purchase Units of the Trusts without a sales charge, although a
transaction processing fee may be imposed on such trades.
The Public Offering Price on the date shown on the cover
page of Part Two of the Prospectus or on any subsequent date will
vary from the amounts stated under "Essential Information" in
Part Two in accordance with fluctuations in the prices of the
underlying Municipal Bonds. The aggregate bid side evaluation of
the Municipal Bonds shall be determined (a) on the basis of
current bid prices of the Municipal Bonds, (b) if bid prices are
not available for any particular Municipal Bond, on the basis of
current bid prices for comparable bonds, (c) by determining the
value of the Municipal Bonds on the bid side of the market by
appraisal, or (d) by any combination of the above. Except as
described in "Insurance on the Portfolios" above, the Evaluator
will not attribute any value to the insurance obtained by the
Trust. On the other hand, the value of insurance obtained by an
issuer of Municipal Bonds or by the Sponsor is reflected and
included in the market value of such Municipal Bonds.
In any case, the Evaluator will consider the ability of an
insurer to meet its commitments under the Trust's insurance
policy (if any). For example, if the Trust were to hold the
Municipal Bonds of a municipality which had significantly
deteriorated in credit quality, the Evaluator would first
consider in its evaluation the market price of the Municipal
Bonds at their lower credit rating. The Evaluator would also
attribute a value to the insurance feature of the Municipal Bonds
which would be equal to the difference between the market value
of such Municipal Bonds and the market value of bonds of a
similar nature which were of investment grade rating. It is the
position of the Sponsor that this is a fair method of valuing
insured Municipal Bonds and reflects a proper valuation method in
accordance with the provisions of the Investment Company Act of
1940. For a description of the circumstances under which a full
or partial suspension of the right of Unitholders to redeem their
Units may occur, see "Redemption."
The foregoing evaluations and computations shall be made as
of the Evaluation Time stated under "Essential Information" in
Part Two, on each business day effective for all sales made
during the preceding 24-hour period, and for purposes of resales
and repurchases of Units.
The interest on the Municipal Bonds in each Series of the
Trust, less the estimated fees and expenses, is estimated to
accrue in the annual amounts per Unit set forth under "Essential
Information" in Part Two. The amount of net interest income
which accrues per Unit may change as Municipal Bonds mature or
are redeemed, exchanged or sold, or as the expenses of a Series
of the Trust change or as the number of outstanding Units of such
Series changes.
Payment for Units must be made on or before the fifth
business day following purchase (the "settlement date"). A
purchaser becomes the owner of Units on the settlement date. If
a Unitholder desires to have certificates representing Units
purchased, such certificates will be delivered as soon as
possible following his written request therefor. For information
with respect to redemption of Units purchased, but as to which
certificates requested have not been received, see "Redemption"
below.
The following section "Accrued Interest" applies to
Unitholders of Kemper Tax-Exempt Insured Income Trust:
Accrued Interest. Accrued Interest consists of two
elements. The first arises as a result of accrued interest which
is the accumulation of unpaid interest on a bond from the last
day on which interest thereon was paid. Interest on Bonds in the
Trust Funds is actually paid either monthly or semi-annually to
the Trust Fund. However, interest on the Bonds in the Trust
Funds is accounted for daily on an accrual basis. Because of
this, a Trust Fund always has an amount of interest earned but
not yet collected by the Trustee because of coupons that are not
yet due. For this reason, the Public Offering Price of Units
will have added to it the proportionate share of accrued and
undistributed interest to the date of settlement.
The Trustee will advance the amount of accrued interest as
of the First Settlement Date and the same will be distributed to
Sponsor. Such advance will be repaid to the Trustee through the
first receipts of interest received on the Municipal Bonds.
Consequently, the amount of accrued interest to be added to the
Public Offering Price of Units will include only accrued interest
arising after the First Settlement Date of a Trust Fund, less any
distributions from the Interest Account subsequent to this First
Settlement Date. Since the First Settlement Date is the date of
settlement for anyone ordering Units on the Date of Deposit, no
accrued interest will be added to the Public Offering Price of
Units ordered on the Date of Deposit.
The second element of accrued interest arises because of the
structure of the Interest Account. The Trustee has no cash for
distribution to Unitholders until it receives interest payments
on the Bonds in a Trust Fund. The Trustee is obligated to
provide its own funds, at times, in order to advance interest
distributions. The Trustee will recover these advancements when
such interest is received. Interest Account balances are
established so that it will not be necessary on a regular basis
for the Trustee to advance its own funds in connection with such
interest distributions. The Interest Account balances are also
structured so that there will generally be positive cash balances
and since the funds held by the Trustee will be used by it to
earn interest thereon, it benefits thereby (see "Expenses of the
Trust").
Accrued interest is computed as of the initial Record Date
of the Trust Funds. On the date of the first distribution of
interest to Unitholders after the First Settlement Date, the
interest collected by the Trustee will be sufficient to repay its
advances, to allow for accrued interest under the monthly,
quarterly and semi-annual plans of distribution and to generate
enough cash to commence distributions to Unitholders. If a
Unitholder sells or redeems all or a portion of his Units or if
the Bonds in a Trust Fund are sold or otherwise removed or if a
Trust Fund is liquidated, he will receive at that time his
proportionate share of the accrued interest computed to the
settlement date in the case of sale or liquidation and to the of
tender in the case of redemption in such Trust Fund.
The following section "Purchased and Daily Accrued Interest"
applies to Unitholders of Kemper Defined Funds Insured National
Series:
Purchased and Daily Accrued Interest. Accrued interest
consist of two elements. The first element arises as a result of
accrued interest which is the accumulation of unpaid interest on
a bond from the later of the last day on which interest thereon
was paid or the date of original issuance of the bond. Interest
on the coupon Bonds in the Trust fund is paid semi-annually to
the Trust. A portion of the aggregate amount of such accrued
interest on the Bonds in the Trust to the First Settlement Date
of the Trust Units is the Purchased Interest. In an effort to
reduce the amount of Purchased Interest which would otherwise
have to be paid by Unitholders, the Trustee may advance a portion
of the accrued interest to the Sponsor as the Unitholder of
record as of the First Units in the Trust Fund is accounted for
daily on an accrual basis (herein referred to as "Daily Accrued
Interest"). Because of this, the Units always have an amount of
interest earned but not yet paid or reserved for payment. For
this reason, the Public Offering Price of Units will include the
proportionate share of Daily Accrued Interest to the date of
settlement.
If a Unitholder sells or redeems all or a portion of his
Units or if the bonds are sold or otherwise removed or if the
Trust Fund is liquidated, he will receive at that time his
proportionate share of the Purchase Interest and Daily Accrued
Interest computed to the settlement date in the case of sale or
liquidation and to the date of tender in the case of redemption
in the Trust Fund.
Public Distribution of Units. The Sponsor has
qualified Units for sale in all states. Units will be sold
through dealers who are members of the National Association of
Securities Dealers, Inc. and through others. Sales may be made
to or through dealers at prices which represent discounts from
the Public Offering Price as set forth in the table below.
Certain commercial banks are making Units of the Trust available
to their customers on an agency basis. A portion of the sales
charge paid by their customers is retained by or remitted to the
banks, in the amount shown in the table below. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have indicated that these
particular agency transactions are permitted under such Act. In
addition, state securities laws on this issue may differ from the
interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers
pursuant to state law.
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY*
4 to 7.99 8 to 14.99 15 or more
Amount of Investment Discount per Unit (% of Public
Offering Price)
<S> <C> <C> <C>
$1,000 to $99,999 2.00% 3.00% 4.00%
$100,000 to $499,999 1.75 2.75 3.50
$500,000 to $999,999 1.50 2.50 3.00
$1,000,000 or more 1.25 2.25 2.50
- -----------------
</TABLE>
* If the dollar weighted average maturity of a Trust is from 1
to 3.99 years, the concession or agency commission is 1.00% of
the Public Offering Price.
In addition to such discounts, the Sponsor may, from time to
time, pay or allow an additional discount, in the form of cash or
other compensation, to dealers employing registered
representatives who sell, during a specified time period, a
minimum dollar amount of Units of the Trusts and other unit
investment trusts underwritten by the Sponsor.
The Sponsor reserves the right to change the levels of
discounts at any time. The difference between the discount and
the sales charge will be retained by the Sponsor.
The Sponsor reserves the right to reject, in whole or in
part, any order for the purchase of Units.
Profits of Sponsor. The Sponsor will retain a portion
of the sales charge on each Unit sold, representing the
difference between the Public Offering Price of the Units and the
discounts allowed to firms selling such Units. The Sponsor may
realize additional profit or loss as a result of the possible
change in the daily evaluation of the Municipal Bonds in the
Trust, since the value of its inventory of Units may increase or
decrease.
MARKET FOR UNITS
While not obligated to do so, the Sponsor intends to, and
certain of the Underwriters may, subject to change at any time,
maintain a market for Units of each Series of the Trust offered
hereby and to continuously offer to purchase said Units at
prices, as determined by the Evaluator, based on the aggregate
bid prices of the underlying Municipal Bonds of such Series,
together with accrued interest to the expected date of
settlement. Unitholders who wish to dispose of their Units
should inquire of their broker or bank as to the current market
price of the Units in order to determine whether there is in
existence any price in excess of the Redemption Price and, if so,
the amount thereof.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary
market described above may cause their Units to be redeemed by
the Trustee by making a written request to the Trustee, Investors
Fiduciary Trust Company, P.O. Box 419430, Kansas City, Missouri
64173-0216 and, in the case of Units evidenced by a certificate,
by tendering such certificate to the Trustee, properly endorsed
or accompanied by a written instrument or instruments of transfer
in form satisfactory to the Trustee. Unitholders must sign the
request, and such certificate or transfer instrument, exactly as
their names appear on the records of the Trustee and on any
certificate representing the Units to be redeemed. If the amount
of the redemption is $25,000 or less and the proceeds are payable
to the Unitholder(s) of record at the address of record, no
signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional
documentation may be requested, and a signature guarantee is
always required, from corporations, executors, administrators,
trustees, guardians or associations. The signatures must be
guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by
the Trustee. A certificate should only be sent by registered or
certified mail for the protection of the Unitholder. Since
tender of the certificate is required for redemption when one has
been issued, Units represented by a certificate cannot be
redeemed until the certificate representing such Units has been
received by the purchaser.
Redemption shall be made by the Trustee on the seventh
calendar day following the day on which a tender for redemption
is received, or if the seventh calendar day is not a business
day, on the first business day prior thereto (the "Redemption
Date"), by payment of cash equivalent to the Redemption Price for
that Series of the Trust, determined as set forth below under
"Computation of Redemption Price," as of the evaluation time
stated under "Essential Information" in Part Two, next following
such tender, multiplied by the number of Units being redeemed.
Any Units redeemed shall be cancelled and any undivided
fractional in the Trust Fund extinguished. The price received
upon redemption might be more or less than the amount paid by
the Unitholder depending on the value of the Municipal Bonds in
the portfolio at the time of redemption. Any Units redeemed
shall be cancelled and any undivided fractional interest in that
Series of the Trust will be extinguished.
Under regulations issued by the Internal Revenue Service,
the Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unitholder's tax identification number in
the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unitholder's tax
identification number from the selling broker. However, any time
a Unitholder elects to tender Units for redemption, such
Unitholder should make sure that the Trustee has been provided a
certified tax identification number in order to avoid this
possible "back-up withholding." In the event the Trustee has not
been previously provided such number, one must be provided at the
time redemption is requested.
Any amounts paid on redemption representing interest shall
be withdrawn from the Interest Account of such Series to the
extent that funds are available for such purpose. All other
amounts paid on redemption shall be withdrawn from the Principal
Account of such Series. The Trustee is empowered to sell
Municipal Bonds from the portfolio of a Series in order to make
funds available for the redemption of Units of such Series. Such
sale may be required when Municipal Bonds would not otherwise be
sold and might result in lower prices than might otherwise be
realized. To the extent Municipal Bonds are sold, the size and
diversity of that Series of the Trust will be reduced.
The Trustee is irrevocably authorized in its discretion, if
an Underwriter does not elect to purchase any Units tendered for
redemption, in lieu of redeeming such Units, to sell such Units
in the over-the-counter market for the account of tendering
Unitholders at prices which will return to such Unitholders
amounts in cash, net after brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Price
for such Units. In the event of any such sale, the Trustee shall
pay the net proceeds thereof to the Unitholders on the day they
would otherwise be entitled to receive payment of the Redemption
Price.
The right of redemption may be suspended and payment
postponed (1) for any period during which the New York Stock
Exchange is closed, other than customary weekend and holiday
closings, or during which (as determined by the Securities and
Exchange Commission) trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists
as a result of which disposal by the Trustee of Municipal Bonds
is not reasonably practicable or it is not reasonably practicable
to fairly determine the value of the underlying Municipal Bonds
in accordance with the Trust Agreements; or (3) for such other
period as the Securities and Exchange Commission may by order
permit. Because insurance obtained by certain Series of the
Trust terminates as to Bonds which are sold by the Trustee and
because the insurance obtained by such Series of the Trust does
not have a realizable cash value which can be used by the Trustee
to meet redemptions of Units, under certain circumstances the
Sponsor may apply to the Securities and Exchange Commission for
an order permitting a full or partial suspension of the right of
Unitholders to redeem their Units if a significant portion of the
Bonds in the portfolio is in default in payment of principal or
interest or in significant risk of such default. The Trustee is
not liable to any person or in any way for any loss or damage
which may result from any such suspension or postponement.
Computation of Redemption Price. The Redemption Price
for Units of each Series of the Trust is computed by the
Evaluator as of the evaluation time stated under "Essential
Information" in Part Two next occurring after the tendering of a
Unit for redemption and on any other business day desired by it,
by:
A. adding (1) the cash on hand in such Series of the
Trust other than cash depositor in the Trust Funds to
purchase Municipal Bonds not applied to the purchase of such
Bonds; (2) the aggregate value of the Municipal Bonds held
in such Series of the Trust, as determined by the Evaluator
on the basis of bid prices therefor; and (3) interest
accrued and unpaid on the Municipal Bonds in that Series of
the Trust as of the date of computation; and
B. deducting therefrom (1) amounts representing any
applicable taxes or governmental charges payable out of that
Series of the Trust and for which no deductions have been
previously made for the purpose of additions to the Reserve
Account described under "Expenses of the Trust"; (2) amounts
representing estimated accrued expenses of that Series of
the Trust including, but not limited to, fees and expenses
of the Trustee (including legal and auditing fees and
insurance costs), the Evaluator, the Sponsor and bond
counsel, if any; (3) cash held for distribution to
Unitholders of record as of the business day prior to the
evaluation being made; and (4) other liabilities incurred by
such Series of the Trust; and
C. finally, dividing the results of such computation
by the number of Units of such Series of the Trust
outstanding as of the date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of a Trust will
not be evidenced by certificates unless a Unitholder, the
Unitholder's registered broker/dealer or the clearing agent makes
a written request to the Trustee. Units are transferable by
making a written request to the Trustee and, in the case of Units
evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a
written instrument or instruments of transfer which should be
sent registered or certified mail for the protection of the
Unitholder. Unitholders must sign such written request, and such
certificate or transfer instrument, exactly as their names appear
on the records of the Trustee and on any certificate representing
the Units to be transferred. Such signatures must be guaranteed
by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other signature guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by
the Trustee.
Units may be purchased and certificates, if requested, will
be issued in denominations of one Unit or any multiple thereof
subject to any minimum investment requirement established by the
Sponsor from time to time. Any Certificate issued will be
numbered serially for identification, issued in fully registered
form and will be transferable only on the books of the Trustee.
The Trustee may require a Unitholder to pay a reasonable fee, to
be determined in the sole discretion of the Trustee, for each
certificate re-issued or transferred, and to pay any governmental
charge that may be imposed in connection with each such transfer
or interchange. The Trustee at the present time does not intend
to charge for the normal transfer or interchange of certificates.
Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the Units),
affidavit of loss, evidence of ownership and payment of expenses
incurred.
DISTRIBUTIONS TO UNITHOLDERS.
Interest Distributions. Interest received by a Series
of the Trust, including any portion of the proceeds from a
disposition of Municipal Bonds which represents accrued interest,
is credited by the Trustee to the Interest Account for such
Series. All other receipts are credited by the Trustee to a
separate Principal Account for such Series. During each year the
distributions to the Unitholders of each Series of the Trust as
of each Record Date (see "Essential Information" in Part Two)
will be made on the following Distribution Date or shortly
thereafter and shall consist of an amount substantially equal to
one-twelfth, one-fourth or one-half (depending on the
distribution option selected except in Series of Kemper Defined
Funds in which case only monthly distributions are available) of
such Unitholders' pro rata share of the estimated net annual
interest income to the Interest Account for such Series of the
Trust. However, the interest to which Unitholders of a Series of
the Trust are entitled will at most times exceed the amount
available for distribution, there will almost always remain an
item of accrued interest that is added to the daily value of the
Units of such Series. If Unitholders of a Series sell or redeem
all or a portion of their Units they will be paid their
proportionate share of the accrued interest of such Series to,
but not including, the fifth business day after the date of sale
or to the date of tender in the case of a redemption.
Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the
Second Distribution Date following the purchase of their Units.
Since interest on Municipal Bonds in each Series of the Trust is
payable at varying intervals, usually in semiannual installments,
and distributions of income are made to Unitholders of a Series
of the Trust at what may be different intervals from receipt of
interest, the interest accruing to such Series of the Trust may
not be equal to the amount of money received and available for
distribution from the Interest Account of such Series.
Therefore, on each Distribution Date the amount of interest
actually on deposit in the Interest Account and available for
distribution may be slightly more or less than the interest
distribution made. In order to eliminate fluctuations in
interest distributions resulting from such variances, the Trustee
is authorized by the Agreement to advance such amounts as may be
necessary to provide interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest,
for any such advances from funds available in the Interest
Account of such Series.
Unitholders purchasing Units will initially receive
distributions in accordance with the election of the prior owner.
Unitholders desiring to change their distribution option, if
applicable, may do so by sending written notice to the Trustee,
together with their certificate (if one was issued).
Certificates should only be sent by registered or certified mail
to minimize the possibility of loss. If written notice and any
certificate are received by the Trustee not later than January 1
of a year, the change will become effective on January 2 for
distributions commencing with February 15 of that year. If
notice is not received by the Trustee, the Unitholder will be
deemed to have elected to continue with the same option for the
subsequent twelve months.
Principal Distributions. The Trustee will distribute
on each semi-annual Distribution Date (or in the case of Kemper
Defined Funds, on each Distribution Date) or shortly thereafter,
to each Unitholder of Record of the Trust on the preceding Record
Date, an amount substantially equal to such Unitholder's pro rata
share of the cash balance, if any, in the Principal Account of
such Trust computed as of the close of business on the preceding
Record Date. However, no distribution will be required if the
balance in the Principal Account is less than $1.00 per Unit (or
$.001 per Unit for certain Series). Except for Series of Kemper
Tax-Exempt Insured Income Trust, if such balance is between $5.00
and $10.00 per Unit, distributions will be made on each quarterly
Distribution Date and if such balance exceeds $10.00 per Unit,
such amounts will be distributed on the next monthly Distribution
Date.
Statement to Unitholders. With each distribution, the
Trustee will furnish or cause to be furnished each Unitholder a
statement of the amount of interest and the amount of other
receipts, if any, which are being distributed, expressed in each
case as a dollar amount per Unit.
The accounts of each Series of the Trust are required to be
audited annually, at the Series' expense, by independent auditors
designated by the Sponsor, unless the Trustee determines that
such an audit would not be in the best interest of the
Unitholders of such Series of the Trust. The accountants' report
will be furnished by the Trustee to any Unitholder of such Series
of the Trust upon written request.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a Unitholder of a Series of
the Trust a statement covering the calendar year, setting forth:
A. As to the Interest Account:
1. The amount of interest received on the
Municipal Bonds in such Series and the percentage of
such amount by states and territories in which the
issuers of such Municipal Bonds are located;
2. The amount paid from the Interest Account of
such Series representing accrued interest of any Units
redeemed;
3. The deductions from the Interest Account of
such Series for applicable taxes, if any, fees and
expenses (including insurance costs and auditing fees)
of the Trustee, the Evaluator, the Sponsor and bond
counsel, if any;
4. Any amounts credited by the Trustee to a
Reserve Account for such Series described under
"Expenses of the Trust"; and
5. The net amount remaining after such payments
and deductions, expressed both as a total dollar amount
and a dollar amount per Unit outstanding on the last
business day of such calendar year.
B. As to the Principal Account:
1. The dates of the maturity, liquidation or
redemption of any of the Municipal Bonds in such Series
and the net proceeds received therefrom excluding any
portion credited to the Interest Account;
2. The amount paid from the Principal Account of
such Series representing the principal of any Units
redeemed;
3. The deductions from the Principal Account of
such Series for payment of applicable taxes, if any,
fees and expenses (including insurance costs and
auditing expenses) of the Trustee, the Evaluator, the
Sponsor and of bond counsel, if any;
4. Any amounts credited by the Trustee to a
Reserve Account for such Series described under
"Expenses of the Trust"; and
5. The net amount remaining after distributions
of principal and deductions, expressed both as a dollar
amount and as a dollar amount per Unit outstanding on
the last business day of such calendar year.
C. The following information:
1. A list of the Municipal Bonds in such Series
as of the last business day of such calendar year;
2. The number of Units of such
Series
outstanding on the last business day of such calendar
year;
3. The Redemption Price of such Series based on
the last Trust Evaluation made during such calendar
year; and
4. The amount actually distributed during such
calendar year from the Interest and Principal Accounts
of such Series separately stated, expressed both as
total dollar amounts and as dollar amounts per Unit of
such Series outstanding on the Record Date for each
such distribution.
Rights of Unitholders. A Unitholder may at any time
tender Units to the Trustee for redemption. No Unitholder of a
Series shall have the right to control the operation and
management of such Series or of the Trust in any manner, except
to vote with respect to amendment of the Trust Agreements or
termination of such Series of the Trust. The death or incapacity
of any Unitholder will not operate to terminate the Series or the
Trust nor entitle legal representatives or heirs to claim an
accounting or to bring any action or proceeding in any court for
partition or winding up of such Series or the Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolio of the Trust by the
purchase, sale or substitution of Municipal Bonds, except in the
special circumstances noted below. Thus, with the exception of
the redemption or maturity of Municipal Bonds in accordance with
their terms, and/or the sale of Municipal Bonds to meet
redemption requests, the assets of the Trust will remain
unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Municipal
Bonds the value of which has been affected by certain adverse
events, including institution of certain legal proceedings, a
decline in their price or the occurrence of other market factors,
including advance refunding, so that in the opinion of the
Sponsor the retention of such Municipal Bonds in a Series of the
Trust would be detrimental to the interest of the Unitholders of
such Series. The proceeds from any such sales, exclusive of any
portion which represents accrued interest, will be credited to
the Principal Account for distribution to the Unitholders.
The portfolio insurance obtained by the Trust from AMBAC
Indemnity for Series A through A-24 of the Kemper Tax-Exempt
Insured Income Trust is applicable only while the Municipal Bonds
remain in the portfolio of a Series of the Trust. Consequently,
the price received by such Series of the Trust upon the
disposition of any such Municipal Bond will reflect a value
placed upon it by the market as an uninsured obligation rather
than a value resulting from the insurance. Due to this fact, the
Sponsor will not direct the Trustee to dispose of Municipal Bonds
in Series A through A-24 of the Kemper Tax-Exempt Insured Income
Trust which are in default or imminent danger of default but to
retain such Municipal Bonds in the portfolio so that if a default
in the payment of interest or principal occurs, the Trust may
realize the benefits of the insurance.
Pursuant to an irrevocable commitment of Financial Guaranty,
the Trustee, at the time of the sale of a Municipal Bond covered
under the Trust's insurance policy with respect to Series A-25
and subsequent Series of the Kemper Tax-Exempt Insured Income
Trust, has the right to obtain permanent insurance with respect
to such Municipal Bond (i.e., insurance to maturity of the
Municipal Bond regardless of the identity of the holder thereof)
(the "Permanent Insurance") upon the payment of a single
predetermined insurance premium from the proceeds of the sale of
such Municipal Bond. Accordingly, every Municipal Bond in such
Series of the Trust is eligible to be sold on an insured basis.
It is expected that the Trustee will exercise the right to obtain
Permanent Insurance for Municipal Bonds in Series A-25 and
subsequent Series of the Kemper Tax-Exempt Insured Income Trust
only if upon such exercise a Series of the Trust would receive
net proceeds (i.e., the value of such Municipal Bond if sold as
an insured bond less the insurance premium attributable to the
Permanent Insurance) from such sale in excess of the sale
proceeds if such Municipal Bond were sold on an uninsured basis.
The insurance premium with respect to each Municipal Bond in such
Series is determined based upon the insurability of each
Municipal Bond as of the initial Date of Deposit and will not be
increased or decreased for any change in the creditworthiness of
such Municipal Bond's issuer.
The Trustee is permitted to utilize the option to obtain
Permanent Insurance available on Series A-25 and subsequent
Series of the Kemper Tax-Exempt Insured Income Trust only in
circumstances where the value added to the Municipal Bonds
exceeds the costs of acquiring such Permanent Insurance. Unless
such Permanent Insurance may be obtained at an acceptable price,
the Sponsor will not direct the Trustee to dispose of Municipal
Bonds which are in default or imminent danger of default but to
retain such Municipal Bonds in the portfolio so that the Trust
may realize the benefits of the insurance on the portfolio.
The Sponsor is required to instruct the Trustee to reject
any offer made by an issuer of Municipal Bonds to issue new
obligations in exchange or substitution for any of such Municipal
Bonds pursuant to a refunding financing plan except that the
Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the
Sponsor may deem proper if (1) the issuer is in default with
respect to such Bonds or (2) in the written opinion of the
Sponsor the issuer will probably default with respect to such
Bonds in the reasonably foreseeable future. Any obligation so
received in exchange or substitution will be held by the Trustee
subject to the terms and conditions of the Trust Agreement to the
same extent as Bonds originally deposited thereunder. Within
five days after the deposit of obligations in exchange or
substitution for underlying Bonds, the Trustee is required to
give notice thereof to each Unitholder, identifying the Bonds
eliminated and the Bonds substituted therefor.
The Trustee may sell Municipal Bonds designated by the
Sponsor from a Series of the Trust for the purpose of redeeming
Units of such Series tendered for redemption and the payment of
expenses. See "Redemption."
ADMINISTRATION OF THE TRUST
The Trustee. The Trustee, Investors Fiduciary
Company, is a trust company specializing in investment related
services, organized and existing under the laws of Missouri,
having its trust office at 127 West 10th Street, Kansas City,
Missouri 64105. The Trustee is subject to supervision and
examination by the Division of Finance of the State of Missouri
and the Federal Deposit Insurance Corporation. Investors
Fiduciary Trust Company is owned by State Street Boston
Corporation.
The Trustee, whose duties are ministerial in nature, has not
participated in selecting the portfolio of any Series of the
Trust. For information relating to the responsibilities of the
Trustee under the Agreement, reference is made to the material
set forth under "Unitholders."
In accordance with the Trust Agreements, the Trustee shall
keep records of all transactions at its office. Such records
shall include the name and address of, and the number of Units
held by, every Unitholder of each Series. The books and records
with respect to a Series of the Trust shall be open to inspection
by any Unitholder of such Series at all reasonable times during
the usual business hours. The Trustee shall make such annual or
other reports as may from time to time be required under any
applicable state or Federal statute, rule or regulation. The
Trustee shall keep a certified copy or duplicate original of the
Trust Agreements on file in its office available for inspection
at all reasonable times during usual business hours by any
Unitholder, together with a current list of the Municipal Bonds
held in each Series of the Trust. Pursuant to the Trust
Agreements, the Trustee may employ one or more agents for the
purpose of custody and safeguarding of Municipal Bonds comprising
the portfolios.
Under the Trust Agreements, the Trustee or any successor
trustee may resign and be discharged of its duties created by the
Trust Agreements by executing an instrument in writing and filing
the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the
notice of resignation to all Unitholders then of record, not less
than sixty days before the date specified in such notice when
such resignation is to take effect. The Sponsor upon receiving
notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor
trustee has been appointed and has accepted the appointment
within thirty days after notification, the retiring Trustee may
apply to a court of competent jurisdiction for the appointment of
a successor. The Sponsor may at any time remove the Trustee with
or without cause and appoint a successor trustee as provided in
the Trust Agreements. Notice of such removal and appointment
shall be mailed to each Unitholder by the Sponsor. Upon
execution of a written acceptance of such appointment by a
successor trustee, all the rights, powers, duties and obligations
of the original Trustee shall vest in the successor. The Trustee
shall be a corporation organized under the laws of the United
States or any state thereof, which is authorized under such laws
to exercise trust powers. The Trustee shall have at all times an
aggregate capital, surplus and undivided profits of not less than
$5,000,000.
The Evaluator. EVEREN Unit Investment Trusts, a
service of EVEREN Securities, Inc., the Sponsor, also serves as
Evaluator. The Evaluator may resign or be removed by the
Trustee, in which event the Trustee is to use its best efforts
to appoint a satisfactory successor. Such resignation or removal
shall become effective upon acceptance of appointment by the
successor evaluator. If, upon resignation of the Evaluator, no
successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
Notice of such resignation or removal and appointment shall be
mailed by the Trustee to each Unitholder. At the present time,
pursuant to a contract with the Evaluator, Muller Data
Corporation, a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable
securities, provides portfolio evaluations of the Municipal Bonds
in the Trust which are then reviewed by the Evaluator. In the
event the Sponsor is unable to obtain current evaluations from
Muller Data Corporation, it may make its own evaluations or it
may utilize the services of any other non-affiliated evaluator or
evaluators it deems appropriate.
Amendment and Termination. The Trust Agreements may be
amended by the Trustee and the Sponsor without the consent of any
of the Unitholders: (1) to cure any ambiguity or to correct or
supplement any provision which may be defective or inconsistent;
(2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental
agency; or (3) to make such provisions as shall not adversely
affect the interests of the Unitholders. The Trust Agreements
may also be amended in any respect by the Sponsor and the
Trustee, or any of the provisions thereof may be waived, with the
consent of the holders of Units representing 66-2/3% of the Units
then outstanding, provided that no such amendment or waiver will
reduce the interest in a Series of the Trust of any Unitholder
without the consent of such Unitholder or reduce the percentage
of Units required to consent to any such amendment or waiver
without the consent of all Unitholders. In no event shall the
Trust Agreements be amended to increase the number of Units
issuable thereunder or to permit, except in accordance with the
provisions of the Trust Agreements, the acquisition of any
Municipal Bonds in addition to or in substitution for those in
the Trust. The Trustee shall promptly notify Unitholders of the
substance of any such amendment.
The Trust Agreements provide that a Series of the Trust
shall terminate upon the maturity, redemption or other
disposition, of the last of the Municipal Bonds held in such
Series. If the value of a Series of the Trust shall be less than
the applicable minimum Trust value stated under "Essential
Information" in Part Two the Trustee may, in its discretion, and
shall, when so directed by the Sponsor, terminate such Series of
the Trust. A Series of the Trust may be terminated at any time
by the holders of Units representing 66-2/3% of the Units of such
Series then outstanding. In the event of termination, written
notice thereof will be sent by the Trustee to all Unitholders of
such Series. Within a reasonable period after termination, the
Trustee will sell any Municipal Bonds remaining in such Series of
the Trust and, after paying all expenses and charges incurred by
such Series of the Trust, will distribute to Unitholders of such
Series (upon surrender for cancellation of certificates for
Units, if issued) their pro rata share of the balances remaining
in the Interest and Principal Accounts of such Series.
Notwithstanding the foregoing, in connection with final
distributions to Unitholders, it should be noted that because the
portfolio insurance obtained by Series A through A-24 of the
Kemper Tax-Exempt Insured Income Trust is applicable only while
Bonds so insured are held by such Series of the Trust, the price
to be received by such Series of the Trust upon the disposition
of any such Bond which is in default by reason of nonpayment of
principal or interest, will not reflect any value based on such
insurance. Therefore, in connection with any liquidation of such
Series it shall not be necessary for the Trustee to, and the
Trustee does not currently intend to, dispose of any Bond or
Bonds if retention of such Bond or Bonds, until due, shall be
deemed to be in the best interest of Unitholders, including, but
not limited to situations in which a Bond or Bonds so insured are
in default and situations in which a Bond or Bonds so insured
have a deteriorated market price resulting from a significant
risk of default. All proceeds received, less applicable
expenses, from insurance on defaulted Bonds not disposed of at
the date of termination will ultimately be distributed to
Unitholders of record as of such date of termination as soon as
practicable after the date such defaulted Bond or Bonds become
due and applicable insurance proceeds have been received by the
Trustee.
Limitations on Liability.
The Sponsor;. The Sponsor is liable for the performance
of its obligations arising from its responsibilities under the
Trust Agreements, but will be under no liability to the
Unitholders for taking any action or refraining from any action
in good faith pursuant to the Trust Agreements or for errors in
judgment, except in cases of its own gross negligence, bad faith
or willful misconduct. The Sponsor shall not be liable or
responsible in any way for depreciation or loss incurred by
reason of the sale of any Municipal Bonds.
The Trustee. The Trust Agreements provide that the
Trustee shall be under no liability for any action taken in good
faith in reliance upon prima facie properly executed documents or
for the disposition of monies, Municipal Bonds, or certificates
except by reason of its own gross negligence, bad faith or
willful misconduct, nor shall the Trustee be liable or
responsible in any way for depreciation or loss incurred by
reason of the sale by the Trustee of any Municipal Bonds. In the
event that the Sponsor shall fail to act, the Trustee may act and
shall not be liable for any such action taken by it in good
faith. The Trustee shall not be personally liable for any taxes
or other governmental charges imposed upon or in respect of the
Municipal Bonds or upon the interest thereon. In addition, the
Trust Agreements contain other customary provisions limiting the
liability of the Trustee.
The Evaluator. The Trustee and Unitholders may rely on
any evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof. The Trust Agreements
provide that the determinations made by the Evaluator shall be
made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be
under no liability to the Trustee or Unitholders for errors in
judgment, but shall be liable only for its gross negligence, lack
of good faith or willful misconduct.
EXPENSES OF THE TRUST
The Sponsor will charge each Series a surveillance fee for
services performed for such Series in an amount not to exceed
that amount set forth in "Essential Information" in Part Two but
in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which
the Sponsor both acts as sponsor and provides portfolio
surveillance, exceed the aggregate cost to the Sponsor for
providing such services. Such fee shall be based on the total
number of Units of each Series outstanding as of the January
Record Date for any annual period. The Sponsor paid all the
expenses of creating and establishing the Trust, including the
cost of the initial preparation, printing and execution of the
Prospectus, Agreement and the certificates, legal and accounting
expenses, advertising and selling expenses, payment of closing
fees, expenses of the Trustee, initial evaluation fees and other
out-of-pocket expenses.
The Trustee receives for its services a fee calculated on
the basis of the annual rate set forth under "Essential
Information" in Part Two, based on the largest aggregate
principal amount of Municipal Bonds in such Series at any time
during the monthly, quarterly or semi-annual period, as
appropriate. Funds that are available for future distributions,
redemptions and payment of expenses are held in accounts which
are non-interest bearing to Unitholders and are available for use
by the Trustee pursuant to normal banking procedures; however,
the Trustee is also authorized by the Trust Agreements to make
from time to time certain non-interest bearing advances to the
Trust Funds. The Trustee also receives indirect benefits to the
extent that it holds funds on deposit in the various non-interest
bearing accounts created pursuant to the Agreement; however, the
Trustee is also authorized by the Agreement to make from time to
time certain non-interest bearing advances to the Trust. See
"Unitholders_Distributions to Unitholders."
For evaluation of Municipal Bonds in a Series of the Trust,
the Evaluator receives a fee, payable monthly, calculated on the
basis of an annual rate as set forth under "Essential
Information" in Part Two, based upon the largest aggregate
principal amount of Municipal Bonds in such Series of the Trust
at any time during such monthly period.
The Trustee's and Evaluator's fees are payable monthly on or
before each Distribution Date by deductions from the Interest
Account of each Series to the extent funds are available and then
from the Principal Account of such Series. Such fees may be
increased without approval of Unitholders by amounts not
exceeding a proportionate increase in the Consumer Price Index
entitled "All Services Less Rent of Shelter," published by the
United States Department of Labor, or any equivalent index
substituted therefor.
The following additional charges are or may be incurred by a
Series of the Trust: (a) fees for the Trustee's extraordinary
services; (b) expenses of the Trustee (including legal and
auditing expenses and insurance costs, but not including any fees
and expenses charged by any agent for custody and safeguarding of
Municipal Bonds) and of bond counsel, if any; (c) various
governmental charges; (d) expenses and costs of any action taken
by the Trustee to protect the Trust or such Series, or the rights
and interests of the Unitholders; (e) indemnification of the
Trustee for any loss, liability or expense incurred by it in the
administration of such Series of the Trust without gross
negligence, bad faith or willful misconduct on its part;
(f) indemnification of the Sponsor for any loss, liability or
expense incurred in acting in that capacity without gross
negligence, bad faith or willful misconduct; and (g) expenditures
incurred in contacting Unitholders upon termination of the
Series. The fees and expenses set forth herein are payable out
of such Series of the Trust and, when owed to the Trustee, are
secured by a lien on the assets of the Series of the Trust. Fees
or charges relating to the Trust shall be allocated to each Trust
Fund in the same ratio as the principal amount of such Trust Fund
bears to the total principal amount of all Trust Funds in the
Trust. Fees or charges relating solely to a particular Trust
Fund shall be charged only to such Trust Fund.
Fees and expenses of a Series of the Trust shall be deducted
from the Interest Account of such Series, or, to the extent funds
are not available in such Account, from the Principal Account of
such Series. The Trustee may withdraw from the Principal Account
or the Interest Account of such Series such amounts, if any, as
it deems necessary to establish a reserve for any taxes or other
governmental charges or other extraordinary expenses payable out
of that Series of the Trust. Amounts so withdrawn shall be
credited to a separate account maintained for such Series known
as the Reserve Account and shall not be considered a part of such
Series when determining the value of the Units of such Series
until such time as the Trustee shall return all or any part of
such amounts to the appropriate account.
If at any time the Sponsor shall fail to perform any of
its duties under the Agreement or shall become incapable of
acting or shall be adjudged a bankrupt or insolvent or its
affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor sponsor at rates of compensation
deemed by the Trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and
Exchange Commission, or (b) terminate the Agreement and liquidate
the Trust or any Series thereof as provided therein or
(c) continue to act as Trustee without terminating the Agreement.
The foregoing financial information with regard to the
Sponsor relates to the Sponsor only and not to this Trust or any
Series. Such information is included in this Prospectus only for
the purposes of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its
contractual obligations with respect to the Series of the Trust.
More comprehensive financial information can be obtained upon
request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters
relating to Federal tax law were originally passed upon by
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois
60603, as counsel for the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of
investments, appearing in Part Two of this Prospectus and
Registration Statement, with information pertaining to the
specific Series of the Trust to which such statement relates, has
been audited by Ernst & Young LLP, independent auditors, as set
forth in their report appearing in Part Two and is included in
reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
DESCRIPTION OF MUNICIPAL BOND RATINGS*
Standard & Poor's Ratings Group _ A brief description of the
applicable Standard & Poor's Ratings Group ("Standard & Poor's")
rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific debt obligation. This assessment may take
into consideration obligors such as guarantors, insurers, or
lessees.
The bond rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by
the issuer and obtained by Standard & Poor's from other sources
it considers reliable. Standard & Poor's does not perform an
audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default _ capacity and willingness
of the obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation;
and
III. Protection afforded by, and relative position
of, the obligation in the event of bankruptcy,
reorganization or other arrangement, under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA _ Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong.
AA _ Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in small degree.
A _ Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB _ Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated
and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and
risk.
Moody's Investors Service, Inc. _ A brief description of the
applicable Moody's Investors Service, Inc. rating symbols and
their meanings follow:
Aaa _ Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by
money market fluctuations.
Aa _ Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Their market value is
virtually immune to all but money market influences, with the
occasional exception of oversupply in a few specific instances.
A _ Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to
some degree by economic performance during a sustained period of
depressed business conditions, but, during periods of normalcy,
A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A1 _ Bonds which are rated A1 offer the maximum in security
within their quality group, can be bought for possible upgrading
in quality, and additionally, afford the investor an opportunity
to gauge more precisely the relative attractiveness of offerings
in the market place.
Baa _ Bonds which are rated Baa are considered as lower
medium grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as
well. The market value of Baa-rated bonds is more sensitive to
changes in economic circumstances and, aside from occasional
speculative factors applying to some bonds of this class, Baa
market valuations move in parallel with Aaa, Aa and A obligations
during periods of economic normalcy, except in instances of
oversupply.
Conditional Ratings: Bonds rated "Con(-)" are ones for
which the security depends upon the completion of some act or the
fulfillment of some condition. These are bonds secured by
(a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which
begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of construction
or elimination of basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in certain
areas of its bond rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Part Two
Dated December 29, 1995
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.
NOTE: Part Two of this Prospectus May Not Be Distributed unless Accompanied by
Part One.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Essential Information
As of November 15, 1995
Sponsor and Evaluator: EVEREN Unit Investment Trusts
Trustee: Investors Fiduciary Trust Company
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Municipal Bonds $2,835,000
Number of Units 11,112
Fractional Undivided Interest in the Trust per Unit 1/11,112
Principal Amount of Municipal Bonds per Unit $255.13
Public Offering Price:
Aggregate Bid Price of Municipal Bonds in the Portfolio $3,438,355
Aggregate Bid Price of Municipal Bonds per Unit $309.43
Cash per Unit (1) $.65
Sales Charge 3.627% (3.5% of Public Offering Price) $11.25
Public Offering Price per Unit (exclusive of accrued
interest) (2) $321.33
Redemption Price per Unit (exclusive of accrued interest) $310.08
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $11.25
Minimum Value of the Trust under which Trust Agreement
may be terminated $2,600,000
</TABLE>
Date of Trust December 15, 1983
Mandatory Termination Date December 31, 2033
Annual Evaluation Fee: $.35 per $1,000 principal amount of Municipal Bonds.
Evaluations for purpose of sale, purchase or redemption of Units are made as
of the close of business of the Sponsor next following receipt of an order for
a sale or purchase of Units or receipt by Investors Fiduciary Trust Company of
Units tendered for redemption.
[FN]
1. This amount, if any, represents principal cash or overdraft which is an
asset or liability of the Trust and is included in the Public Offering Price.
2. Units are offered at the Public Offering Price plus accrued interest to the
date of settlement (three business days after purchase). On November 15,
1995, there was added to the Public Offering Price of $321.33, accrued
interest to the settlement date of November 20, 1995 of $4.96, $7.07 and
$13.37 for a total price of $326.29, $328.40 and $334.70 for the monthly,
quarterly and semiannual distribution options, respectively.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Essential Information (continued)
As of November 15, 1995
Sponsor and Evaluator: EVEREN Unit Investment Trusts(4)
Trustee: Investors Fiduciary Trust Company
<TABLE>
<CAPTION>
Special Information Based on Various Distribution Options
Monthly Quarterly Semiannual
<S> <C> <C> <C>
-------- -------- --------
Calculation of Estimated Net Annual
Interest Income per Unit (3):
Estimated Annual Interest Income $25.9787 $25.9787 $25.9787
Less: Estimated Annual Expense,
Excluding Insurance .8632 .6635 .6096
Annual Premium on Portfolio
Insurance .3132 .3132 .3132
-------- -------- --------
Estimated Net Annual Interest Income $24.8023 $25.0020 $25.0559
======== ======== ========
Calculation of Interest Distribution
per Unit:
Estimated Net Annual Interest Income $24.8023 $25.0020 $25.0559
Divided by 12, 4 and 2, respectively $2.0669 $6.2505 $12.5280
Estimated Daily Rate of Net Interest
Accrual per Unit $.0689 $.0695 $.0696
Estimated Current Return Based on Public
Offering Price (3) 7.72% 7.78% 7.80%
Estimated Long-Term Return (3) 5.10% 5.16% 5.17%
</TABLE>
Trustee's Annual Fees and Expenses (including Evaluator's Fee): $.8632,
$.6635 and $.6096 ($.4351, $.3091 and $.3511 of which represent expenses) per
Unit under the monthly, quarterly and semiannual distribution options,
respectively.
Record and Computation Dates: First day of the month, as follows: monthly -
each month; quarterly - January, April, July and October; semiannual - January
and July.
Distribution Dates: Fifteenth day of the month, as follows: monthly - each
month; quarterly - January, April, July and October; semiannual - January and
July.
[FN]
3. The Estimated Long-Term Return and Estimated Current Return will vary. For
detailed explanation, see Part One of this prospectus.
4. See Note 6 to the accompanying financial statements of the Trust regarding
a change in ownership of Kemper Unit Investment Trusts and Kemper Securities,
Inc.
<PAGE>
Report of Independent Auditors
Unitholders
Kemper Tax-Exempt Insured Income Trust
Series A-7
We have audited the accompanying statement of assets and liabilities of Kemper
Tax-Exempt Insured Income Trust Series A-7, including the schedule of
investments, as of August 31, 1995, and the related statements of operations
and changes in net assets for each of the three years in the period then
ended. These financial statements are the responsibility of the Trust's
sponsor. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of August 31, 1995,
by correspondence with the custodial bank. An audit also includes assessing
the accounting principles used and significant estimates made by the sponsor,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kemper Tax-Exempt Insured
Income Trust Series A-7 at August 31, 1995, and the results of its operations
and the changes in its net assets for the periods indicated above in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
December 14, 1995
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Statement of Assets and Liabilities
August 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Municipal Bonds, at value (cost $2,758,931) $3,498,728
Cash 46,987
Interest receivable 36,168
----------
3,581,883
Liabilities and net assets
Accrued liabilities 3,761
Net assets, applicable to 11,208 Units outstanding:
Cost of Trust assets, exclusive of interest $2,758,931
Unrealized appreciation 739,797
Distributable funds 79,394
---------- ----------
Net assets $3,578,122
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Statements of Operations
<TABLE>
<CAPTION>
Year ended August 31
1995 1994 1993
<S> <C> <C> <C>
--------- --------- ---------
Investment income - interest $301,844 $423,691 $925,130
Expenses:
Trustee's fees and related expenses 7,328 9,020 13,974
Evaluator's fees 1,039 1,572 3,236
Insurance expense 3,611 6,219 17,485
--------- --------- ---------
Total expenses 11,978 16,811 34,695
--------- --------- ---------
Net investment income 289,866 406,880 890,435
Realized and unrealized gain (loss)
on investments:
Realized gain 31,094 186,219 245,414
Unrealized depreciation during
the year (186,126) (432,896) (477,646)
--------- --------- ---------
Net loss on investments (155,032) (246,677) (232,232)
--------- --------- ---------
Net increase in net assets resulting
from operations $134,834 $160,203 $658,203
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended August 31
1995 1994 1993
<S> <C> <C> <C>
---------- ----------- -----------
Operations:
Net investment income $289,866 $406,880 $890,435
Realized gain on investments 31,094 186,219 245,414
Unrealized depreciation on investments
during the year (186,126) (432,896) (477,646)
---------- ----------- -----------
Net increase in net assets resulting
from operations 134,834 160,203 658,203
Distributions to Unitholders:
Net investment income (328,218) (535,500) (910,298)
Principal from investment
transactions - (5,257,031) (1,256,236)
Capital transactions:
Redemption of Units (205,405) (219,830) -
---------- ----------- -----------
Total decrease in net assets (398,789) (5,852,158) (1,508,331)
Net assets:
At the beginning of the year 3,976,911 9,829,069 11,337,400
---------- ----------- -----------
At the end of the year (including
distributable funds applicable to
Trust Units of $79,394, $112,056
and $912,809 at August 31, 1995,
1994 and 1993, respectively) $3,578,122 $3,976,911 $9,829,069
========== =========== ===========
Trust Units outstanding at the end
of the year 11,208 11,868 12,393
========== =========== ===========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Schedule of Investments
August 31, 1995
<CAPTION>
Coupon Maturity Redemption Principal
Name of Issuer and Title of Bond(5) Rate Date Provisions(2) Rating(1) Amount(4) Value(3)
<S> <C> <C> <C> <C> <C> <C>
------- ---------- -------------- -------- ---------- ----------
+City of Farmington, New Mexico, Power Revenue 9.875% 1/01/2013 2005 @ 100 AAA $1,440,000 $1,906,661
Refunding Bonds (Generating Division),
Series 1983.
+City of San Antonio, Texas, Electric and Gas 10.50 2/01/2013 1998 @ 102 AAA 1,425,000 1,592,067
Systems Revenue Improvement Bonds, New Series
1983-A. ---------- ----------
$2,865,000 $3,498,728
========== ==========
</TABLE>
[FN]
See accompanying notes to Schedule of Investments.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Schedule of Investments
1. All ratings are by Standard & Poor's Corporation, unless marked with the
symbol "*", in which case the rating is by Moody's Investors Service, Inc.
The symbol "NR" indicates Bonds for which no rating is available.
2. There is shown under this heading the year in which each issue of Bonds is
initially redeemable and the redemption price for that year or, if currently
redeemable, the redemption price currently in effect; unless otherwise
indicated, each issue continues to be redeemable at declining prices
thereafter, but not below par value. In addition, certain Bonds in the
Portfolio may be redeemed in whole or in part other than by operation of the
stated redemption or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the
terms and provisions of such Bonds. "S.F." indicates a sinking fund is
established with respect to an issue of Bonds. Redemption pursuant to call
provisions generally will, and redemption pursuant to sinking fund provisions
may, occur at times when the redeemed Bonds have a valuation which represents
a premium over the call price or par.
To the extent that the Bonds were deposited in the Trust at a price higher
than the price at which they are redeemed, this will represent a loss of
capital when compared with the original Public Offering Price of the Units.
To the extent that the Bonds were acquired at a price lower than the
redemption price, this may represent an increase in capital when compared with
the original Public Offering Price of the Units. Distributions of net income
will generally be reduced by the amount of the income which would otherwise
have been paid with respect to redeemed Bonds and, unless utilized to pay for
Units tendered for redemption, there will be distributed to Unitholders the
principal amount and any premium received on such redemption. In this event
the estimated current return and estimated long-term return may be affected by
such redemptions.
3. See Note 1 to the accompanying financial statements for a description of
the method of determining cost and value.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Schedule of Investments (continued)
4. At August 31, 1995, the Portfolio of the Trust consists of 2 obligations
issued by entities located in 2 states. All of the issues are payable from
the income of a specific project or authority and are not supported by an
issuer's power to levy taxes. All of the Bonds in the Trust are obligations
of electrical systems issuers. Approximately 50% of the aggregate principal
amount of Bonds in the Trust are obligations of issuers located in the state
of Texas. Approximately 50% of the aggregate principal amount of Bonds in the
Trust are obligations of issuers located in the state of New Mexico.
Approximately 50% of the aggregate principal amount of Bonds in the Trust are
subject to call by the issuers within five years after August 31, 1995.
5. Those securities preceded by (+) are secured by, and payable from, escrowed
U.S. Government securities.
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Financial Statements
1. Significant Accounting Policies
Valuation of Municipal Bonds
Municipal Bonds (Bonds) are stated at bid prices as determined by Kemper Unit
Investment Trusts (A Service of Kemper Securities, Inc.), the "Evaluator" and
sponsor of the Trust. The aggregate bid prices of the Bonds are determined by
the Evaluator based on (a) current bid prices of the Bonds, (b) current bid
prices for comparable bonds, (c) appraisal, or (d) any combination of the
above. (See Note 5 - Insurance.)
Cost of Municipal Bonds
Cost of the Trust's Bonds was based on the offering prices of the Bonds on
December 15, 1983 (Date of Deposit). The premium or discount (including any
original issue discount) existing at December 15, 1983, is not being
amortized. Realized gain (loss) from Bond transactions is reported on an
identified cost basis.
2. Unrealized Appreciation and Depreciation
Following is an analysis of net unrealized appreciation at August 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized depreciation $-
Gross unrealized appreciation 739,797
--------
Net unrealized appreciation $739,797
========
</TABLE>
3. Transactions with Affiliates
From the inception of the Trust through January 31, 1995, the Trustee,
Investors Fiduciary Trust Company (IFTC), was 50% owned by Kemper Financial
Services, Inc., an affiliate of Kemper Unit Investment Trusts. On that date,
State Street Boston Corporation acquired IFTC. Prior to January 1, 1995, the
Trustee's fee (not including the reimbursement of out-of-pocket expenses),
calculated monthly, was at the annual rate of $1.35, $1.08 and $.75 under the
monthly, quarterly and semiannual distribution options, respectively, per
$1,000 principal amount of Bonds in the Trust, based on the largest aggregate
principal amount of Bonds in the Trust at any time during such monthly,
quarterly or semiannual periods. Effective January 1, 1995, such fees were
revised to $1.6779, $1.3818 and $.9870 under the monthly, quarterly and
semiannual distribution options, respectively. The Evaluator received a fee,
payable monthly, at an annual rate of $.35 per $1,000 principal amount of
Bonds, based on the largest aggregate principal amount of Bonds in the Trust
at any time during such monthly period.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Financial Statements (continued)
4. Federal Income Taxes
The Trust is not an association taxable as a corporation for federal income
tax purposes. Each Unitholder is considered to be the owner of a pro rata
portion of the Trust under Subpart E, Subchapter J of Chapter 1 of the
Internal Revenue Code of 1986, as amended. Accordingly, no provision has been
made for federal income taxes.
5. Other Information
Cost to Investors
The cost to initial investors of Units of the Trust was based on the aggregate
offering price of the Bonds on the date of an investor's purchase, plus a
sales charge of 4.5% of the Public Offering Price (equivalent to 4.712% of the
net amount invested). The Public Offering Price for secondary market
transactions is based on the aggregate bid price of the Bonds plus or minus a
pro rata share of cash or overdraft in the Principal Account, if any, on the
date of an investor's purchase, plus a sales charge of 3.5% of the Public
Offering Price (equivalent to 3.627% of the net amount invested).
Insurance
Insurance guaranteeing the payment of all principal and interest on the Bonds
in the portfolio has been obtained from AMBAC Indemnity Corporation by the
Trust. Insurance obtained by the Trust remains in effect only while the
insured Bonds are retained in the Trust. At August 31, 1995, the valuation of
Bonds does not include any amount attributable to the insurance acquired by
the Trust. The insurance does not relate to the Units offered hereby or to
their market value. As a result of such insurance, the Units of the Trust
have received a rating of "AAA" by Standard & Poor's Corporation. No
representation is made as to any insurer's ability to meet its commitments.
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Financial Statements (continued)
5. Other Information (continued)
Distributions
Distributions of net investment income to Unitholders are declared and paid in
accordance with the option (monthly, quarterly or semiannual) selected by the
investor. Such income distributions, on a record date basis, are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
Distribution August 31, 1995 August 31, 1994 August 31, 1993
Plan Per Unit Total Per Unit Total Per Unit Total
<S> <C> <C> <C> <C> <C> <C>
-------- -------- -------- -------- -------- --------
Monthly $27.82 $160,244 $41.49 $253,546 $72.79 $439,159
Quarterly 28.05 94,703 45.06 161,299 73.92 272,513
Semiannual 28.11 69,197 45.15 113,589 74.13 198,626
-------- -------- --------
$324,144 $528,434 $910,298
======== ======== ========
</TABLE>
In addition, the Trust redeemed Units with proceeds from the sale of Bonds as
follows:
<TABLE>
<CAPTION>
Year ended August 31
1995 1994
<S> <C> <C>
-------- --------
Principal portion $205,405 $219,830
Net interest accrued 4,074 7,066
-------- --------
$209,479 $226,896
======== ========
Units 660 525
======== ========
</TABLE>
<PAGE>
<TABLE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Financial Statements (continued)
5. Other Information (continued)
Selected data for a Unit of the Trust outstanding throughout each year -
<CAPTION>
Monthly Quarterly Semiannual
Year ended August 31 Year ended August 31 Year ended August 31
1995 1994 1993 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------- -------- -------- ------- -------- -------- ------- -------- --------
Investment income - interest $26.12 $34.89 $74.65 $26.12 $34.89 $74.65 $26.12 $34.89 $74.65
Expenses 1.14 1.48 3.01 .94 1.25 2.68 .89 1.18 2.48
------- -------- -------- ------- -------- -------- ------- -------- --------
Net investment income 24.98 33.41 71.64 25.18 33.64 71.97 25.23 33.71 72.17
Distributions to Unitholders:
Net investment income (27.82) (41.49) (72.79) (28.05) (45.06) (73.92) (28.11) (45.15) (74.13)
Principal from investment
transactions - (427.92) (101.34) - (427.92) (101.34) - (427.92) (101.34)
Net loss on investments (13.03) (20.28) (18.76) (13.03) (20.28) (18.76) (13.03) (20.28) (18.76)
------- -------- -------- ------- -------- -------- ------- -------- --------
Change in net asset value (15.87) (456.28) (121.25) (15.90) (459.62) (122.05) (15.91) (459.64) (122.06)
Net asset value:
Beginning of the year 333.74 790.02 911.27 336.23 795.85 917.90 336.81 796.45 918.51
------- -------- -------- ------- -------- -------- ------- -------- --------
End of the year, including
distributable funds $317.87 $333.74 $790.02 $320.33 $336.23 $795.85 $320.90 $336.81 $796.45
======= ======== ======== ======= ======== ======== ======= ======== ========
</TABLE>
<PAGE>
Kemper Tax-Exempt Insured Income Trust
Series A-7
Notes to Financial Statements (continued)
6. Subsequent Event
Effective September 14, 1995, through an ESOP, the members of certain Kemper
Corporation operating units have acquired ownership of certain Kemper
Corporation operating units, which included Kemper Securities, Inc., the
Trust's sponsor and evaluator. In connection with the acquisition, Kemper
Securities, Inc. changed its name to EVEREN Securities, Inc., and Kemper Unit
Investment Trusts is now a Service of EVEREN Securities, Inc. Subsequent to
the date of acquisition, neither EVEREN Securities, Inc. nor Kemper Unit
Investment Trusts is affiliated with Kemper Financial Services, Inc. or Kemper
Corporation. On September 26, 1995, Kemper Unit Investment Trusts changed its
name to EVEREN Unit Investment Trusts.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated December 14, 1995, in this Post-
Effective Amendment to the Registration Statement (Form S-6) and related
Prospectus of Kemper Tax-Exempt Insured Income Trust Series A-7 dated
December 29, 1995.
Ernst & Young LLP
Kansas City, Missouri
December 29, 1995
<PAGE>
Contents of Post-Effective AmendmentTo Registration Statement
This Post-Effective amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, The
Registrant, Kemper Tax-Exempt Insured Income Trust, Series A-7,
certifies that it meets all of the requirements for effectiveness
of this registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago,
and State of Illinois, on the 28th day of December , 1995.
Kemper Tax-Exempt Insured Income Trust, Series A-7
Registrant
By: EVEREN Unit Investment Trusts
(a division of EVEREN Securities, Inc.)
Depositor
By: Michael J. Thoms
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on
December 28, 1995 by the following persons, who constitute a
majority of the Board of Directors of EVEREN Securities, Inc.
Signature Title
James R. Boris Chairman and Chief Executive Officer
James R. Boris
Stephen G. McConahey President and Chief Operating Officer
Stephen G. McConahey
Frank V. Geremia Senior Executive Vice President
Frank V. Geremia
David M. Greene Senior Executive Vice President
David M. Greene
Thomas R. Reedy Senior Executive Vice President and Director
Thomas R. Reedy
Janet L. Reali Executive Vice President and Director
Janet L. Reali
Daniel D. Williams Executive Vice President and Treasurer
Daniel D. Williams
Michael J. Thoms
Michael J. Thoms signs this document pursuant to a Power of
Attorney filed with the Securities and Exchange Commission with
Amendment No. 1 to the Registration Statement on Form S-6 for
Kemper Defined Funds Series 28 (Registration No. 33-56779).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Post-effective Amendment Number 11 to Form S-6 and is qualified in
its entirety by reference to such Post-effective Amdendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> KEMPER TAX EXEMPT INSURED SERIES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 2,758,931
<INVESTMENTS-AT-VALUE> 3,498,728
<RECEIVABLES> 36,168
<ASSETS-OTHER> 46,987
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,581,883
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,761
<TOTAL-LIABILITIES> 3,761
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,758,931
<SHARES-COMMON-STOCK> 11,208
<SHARES-COMMON-PRIOR> 11,868
<ACCUMULATED-NII-CURRENT> 79,394
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 739,797
<NET-ASSETS> 3,578,122
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 301,844
<OTHER-INCOME> 0
<EXPENSES-NET> 11,978
<NET-INVESTMENT-INCOME> 289,866
<REALIZED-GAINS-CURRENT> 31,094
<APPREC-INCREASE-CURRENT> (186,126)
<NET-CHANGE-FROM-OPS> 134,834
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (328,218)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 660
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (398,789)
<ACCUMULATED-NII-PRIOR> 112,056
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
