File No. 2-95183 CIK #760499
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 Government Securities Trust GNMA Portfolio, Series 4
Name and executive office address of Depositor:
Kemper Unit Investment Trusts
(a service of Kemper 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 April 28, 1995
pursuant to paragraph (b) of Rule 485.
KEMPER GOVERNMENT SECURITIES TRUST
KEMPER DEFINED FUNDS, GNMA PORTFOLIO
KEMPER DEFINED FUNDS, U.S. TREASURY PORTFOLIO
PART ONE
Each Series of the Kemper Government Securities Trust, GNMA
Portfolio and Kemper Defined Funds, GNMA Portfolio (collectively,
the "GNMA Trust") was formed for the purpose of obtaining safety
of capital and current monthly distributions of interest and
principal through investment in a portfolio consisting of
mortgage-backed Securities of the modified pass-through type.
All payments of principal and interest on the mortgage-backed
Securities are fully guaranteed by the Government National
Mortgage Association ("GNMA"). The full faith and credit of the
United States is pledged to the payment of the Securities in the
GNMA Trust but the Units of such Series are not backed by such
full faith and credit.
Each Series of the Kemper Government Securities Trust, FNMA
Debenture (the "FNMA Trust") is a unit investment trust whose
objective is to obtain safety of capital and current monthly
distributions of interest through investment in a portfolio
representing undivided interests in specified fixed rate
debentures (unsecured general obligations) issued and guaranteed
by the Federal National Mortgage Association ("Fannie Mae").
While Fannie Mae is a corporate instrumentality of the United
States, the Securities in the FNMA Trust are not guaranteed by
the United States or any agency thereof and do not constitute
debts or obligations of the United States. The obligations of
Fannie Mae under its guarantee are obligations solely of Fannie
Mae and are not backed by, or entitled to, the full faith and
credit of the United States.
Each Series of the Kemper Government Securities Trust, U.S.
Treasury Portfolio and Kemper Defined Funds, U.S. Treasury
Portfolio (collectively, the "U.S. Treasury Portfolio Series")
was formed for the purpose of providing safety of capital and
investment flexibility through an investment in a portfolio of
interest-bearing (or in certain Series zero coupon) U.S. Treasury
obligations that are backed by the full faith and credit of the
United States Government. Interest income distributed by the
U.S. Treasury Portfolio Series is exempt from state personal
income taxes in all states, except perhaps in Tennessee. Certain
Series of the U.S. Treasury Portfolio are available to
non-resident aliens and the income from such Series, provided
certain conditions are met, will be exempt from withholding for
U.S. Federal income tax for such foreign investors. A foreign
investor must provide a completed W-8 form to his financial
representative or the trustee to avoid withholding on his
account.
Units of the Trusts are not deposits or obligations of, or
guaranteed by, any bank, and are not federally insured or
otherwise protected by the Federal Deposit Insurance Corporation
and involve investment risk including loss of principal.
SPONSOR: KEMPER UNIT INVESTMENT TRUSTS,a service of Kemper
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.
The investor is advised to read and retain both parts of this
Prospectus for future reference.The date of this Part One is that
date set forth in Part Two of the Prospectus
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
SUMMARY _ GNMA PORTFOLIO
4
General
4
Monthly Distributions
4
Securities
5
Special Considerations
5
Estimated Current and Long-Term Returns
5
Market for Units
5
GNMA PORTFOLIO
6
The GNMA Trust
6
Risk Factors
6
Portfolios
7
Origination
8
Nature of Ginnie Maes and GNMA Guaranty
9
Life of the Securities and of the Series of the GNMA
Trust
10
SUMMARY _ FNMA DEBENTURE
12
General
12
Monthly Distributions
12
Debentures
12
Special Considerations
12
Estimated Current and Long-Term Returns
13
Market for Units
13
FNMA DEBENTURE
13
The FNMA Trust
13
Risk Factors
14
PORTFOLIOS
15
Fannie Mae
15
FNMA Debentures
16
SUMMARY _ U.S. TREASURY PORTFOLIO
17
Monthly Distributions
18
Stripped Treasury Securities
18
Risk Factors
19
Estimated Current and Long-Term Returns
19
Market for Units
20
THE U.S. TREASURY PORTFOLIO SERIES
20
Risk Factors
21
General
21
RATING OF UNITS
21
PORTFOLIO SELECTION
22
THE UNITS
22
ESTIMATED LONG-TERM AND CURRENT RETURNS
23
Public Offering Price
24
Volume Discount
24
Public Distribution
27
Profits of Sponsor
28
TAX STATUS OF THE TRUSTS
29
Regulated Investment Companies
29
Foreign Investors Trust
31
U.S. Treasury Portfolio Series
32
Kemper Defined Funds, GNMA Portfolio, Series 1
36
RETIREMENT PLANS
40
Individual Retirement Account _ IRA
40
Qualified Retirement Plans
41
Excess Distributions Tax
41
DISTRIBUTION REINVESTMENT
41
REDEMPTION
42
Right of Redemption
42
Computation of Redemption Value
44
Postponement of Redemption
45
RIGHTS OF UNITHOLDERS
45
Unitholders
45
Ownership of Units
45
Certain Limitations
46
EXPENSES AND CHARGES
46
Initial Expenses
46
Fees
46
Other Charges
47
ADMINISTRATION OF THE TRUST
48
Records and Accounts
48
Distributions from the Interest, Principal and
Capital Gains Accounts
48
GNMA Trust
48
FNMA Trust
48
U.S. Treasury Portfolio Series
49
General
50
Portfolio Supervision
51
Reports to Unitholders
52
Amendments
54
Termination
54
RESIGNATION, REMOVAL AND LIABILITY
55
Regarding the Sponsor
55
Regarding the Evaluator
56
MISCELLANEOUS
56
Sponsor
56
Trustee
56
Legal Opinions
57
INDEPENDENT AUDITORS
57
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP
57
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 Schedule of Investments*
Notes to Financial Statements*
*Information on these items appears in Part Two
</TABLE>
KEMPER GOVERNMENT SECURITIES TRUST
KEMPER DEFINED FUNDS, GNMA PORTFOLIO
KEMPER DEFINED FUNDS, U.S. TREASURY PORTFOLIO
SUMMARY _ GNMA PORTFOLIO
General;. Each Series of the Kemper Government Securities
Trust, GNMA Portfolio and Kemper Defined Funds, GNMA Portfolio
(collectively, the "GNMA Trust"), is one of a series of unit
investment trusts whose objective is to obtain safety of capital
and to provide current monthly distributions of interest and
principal through investment in a fixed portfolio initially
consisting of contracts to purchase taxable mortgage-backed
securities of the modified pass-through type ("Ginnie Maes" or
"Securities"), including so-called "Ginnie Mae II's" (see "GNMA
Portfolios-Origination"), which involve larger pools of mortgages
and which have a central paying agent, fully guaranteed as to
principal and interest by the Government National Mortgage
Association ("GNMA"). Certain Series of the GNMA Trust contain
Ginnie Maes which consist of pools of long term (i.e., 30 year)
mortgages on 1- to 4-family dwellings. Other Series contain
Ginnie Maes consisting of pools of mortgages on 1- to 4-family
dwellings which have stated maturity of 15 years (so called
"Ginnie Mae Midgets"). See "GNMA Portfolios" and the "Schedule
of Investments" in Part Two. Under certain circumstances, the
Sponsor may direct the Trustee to reinvest certain surplus monies
in the principal account of a Series in additional Ginnie Maes.
See "Administration of the Trust _ Portfolio Supervision."
The guaranteed payment of principal and interest afforded by
Ginnie Maes may make an investment in a Series of the GNMA Trust
particularly well suited for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. In addition, the ability to buy whole or
fractional Units (minimum purchase $1,000, $250 for IRA accounts)
enables such investors to tailor the dollar amount of their
purchases of Units to take maximum possible advantage of the
annual deductions available for contributions to such plans.
Investors should consult with their tax advisers before
investing. See "Retirement Plans."
Monthly Distributions;. Monthly distributions of principal,
prepayments of principal, if any, and interest received by a
Series of the GNMA Trust will be paid in cash unless the
Unitholder elects to have them automatically reinvested in any
open-end mutual fund underwritten or advised by Kemper Financial
Services, Inc., an affiliate of the Sponsor, 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 GNMA Trusts,
Unitholders should carefully consider the consequences before
selecting such Kemper Funds for reinvestment. Any such
reinvestment is made at net asset value, that is, without a sales
charge. Investors have the ability to designate that only
principal payments (including prepayments) or only interest
payments or both are to be reinvested. Investors who intend to
participate in the Reinvestment Program should so indicate at the
time of their purchase. See "Distribution Reinvestment." It
should be noted by purchasers of Midget Foreign Investors Trusts
that distributions from the reinvestment fund chosen generally
will be subject to U.S. Federal income tax withholding.
Distributions will be made on or about the last day of each month
to Unitholders of record on the 1st day of such month.
Securities. One or more different issues of Ginnie Maes
were deposited in the GNMA Trust on the Initial Date of Deposit.
The current percentage relationship among the Ginnie Maes in a
GNMA Series is shown under "Essential Information" and "Schedule
of Investments" in Part Two.
Special Considerations;. An investment in Units of a Series
of the GNMA Trust should be made with an understanding of the
risks which an investment in fixed rate long term 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. Because of the shorter average life of the
Securities in certain Series of the GNMA Trust and the lower
coupon interest rates on such Securities, the value of such
Series should tend to fluctuate less than longer term
obligations. Some or all of the Securities in a Series of the
GNMA Trust may have been purchased at a market discount.
Estimated Current and Long-Term Returns;. The Estimated
Current Return shown under "Essential Information" in Part Two,
shows the return based on the Public Offering Price which
includes a sales charge and is computed by dividing the estimated
net annual interest income by the Public Offering Price. The net
annual interest rate will vary with changes in the fees and
expenses of the Trustee, Sponsor and Evaluator and with the
exchange, redemption, sale, scheduled payments, prepayments or
maturity of underlying Securities. The Public Offering Price
will also vary with fluctuations in the evaluation of the
underlying Securities and, in the case of Kemper Defined Funds,
with changes in Purchased Interest and Daily Accrued Interest.
Therefore, it can be expected that the Estimated Current Return
will fluctuate in the future. The Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration,
and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization
of premiums and the accretion of discounts) and estimated average
life of all of the Securities in the Trusts and (2) takes into
account the expenses and sales charge associated with each Unit
of each Trust. Since the market values and estimated average
life of the Securities and the expenses of the Trusts will
change, it can be expected that the Estimated Long-Term Returns
will fluctuate in the future. The Estimated Current Return and
Estimated Long-Term Return are expected to differ because the
calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the
Estimated Current Return calculation includes only the net annual
interest rate and Public Offering Price. See "Estimated
Long-Term and Current Returns." The net annual income is, of
course, taxable to a Unitholder. The net annual income is not
taxable for Federal income tax purposes to qualified foreign
investors who have purchased Midget Foreign Investors Trusts.
See "Tax Status of the Trusts" and "Retirement Plans."
Market for Units;. The Sponsor, though not obligated to do
so, intends to maintain a market for the Units of the Series of
the GNMA Trust based on the aggregate bid side evaluation of the
underlying Securities plus, in the case of Kemper Defined Funds,
Purchased Interest and Daily Accrued Interest. If such market is
not maintained, a Unitholder will, nevertheless, be able to
dispose of his Units through redemption at prices based on the
aggregate bid side evaluation of the underlying Securities in
each Series. See "Redemption." Market conditions may cause such
prices to be greater or less than the amount paid for Units.
GNMA PORTFOLIO
The GNMA Trust. Each Series of the GNMA Trust is a "unit
investment trust" created under Missouri law pursuant to a Trust
Indenture and Agreement (hereinafter collectively referred to as
the "Indenture")* between Kemper Unit Investment Trusts, a
service of Kemper Securities, Inc., as Sponsor and Investors
Fiduciary Trust Company, as Trustee. For information regarding
the relationship between the Sponsor and the Trustee, see
"Miscellaneous _ Trustee."
The purpose and objective of the GNMA Trust is to provide
investors with an appropriate vehicle to obtain safety of capital
and monthly distributions of interest and principal through
investment in a fixed portfolio of securities (the "GNMA
Portfolio") consisting of taxable mortgage-backed securities of
the modified pass-through type ("Ginnie Maes") guaranteed by the
Government National Mortgage Association ("GNMA") and backed by
the full faith and credit of the United States. In addition, the
Midget Foreign Investors Trusts and GNMA Foreign Investors
Portfolio Series, which are available only to non-resident alien
investors, have an additional purpose of providing income which
is exempt from withholding for U.S. Federal income taxes for such
foreign investors. A foreign investor must provide a completed
W-8 Form to his financial representative or the Trustee to avoid
withholding on his account. See "Tax Status of the Trusts."
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* To the extent reference is made to the Indenture, any
statements herein are qualified in their entirety by the
provisions of said Indenture.
As used herein, the term "Securities" means the Ginnie Maes
described in Part Two under "Schedule of Investments."
On the date shown, each Unit represented the fractional
undivided interest in the Securities and estimated net income of
the Series of the GNMA Trust set forth in Part Two under
"Essential Information." Because regular payments of principal
are to be received and certain of the Securities from time to
time may be redeemed or will mature in accordance with their
terms or may be sold under certain circumstances described
herein, the Series of the GNMA Trust is not expected to retain
its present size and composition. Units will remain outstanding
until redeemed upon tender to the Trustee by any Unitholder
(which may include the Sponsor) or until the termination of a
Series of the GNMA Trust pursuant to the Indenture.
Risk Factors. An investment in Units of a Series of the
GNMA Trust should be made with an understanding of the risks
which an investment in fixed rate long term debt obligations may
entail, including the risk that the value of the GNMA Portfolio
and hence of the Units will decline with increases in interest
rates. Because of the shorter average life of the Ginnie Mae
Midgets in certain Series of the GNMA Trust, and the lower coupon
interest rate on such Securities, the value of the Units of such
Series should tend to fluctuate less than that of Series composed
of longer term obligations. The value of the underlying
Securities will fluctuate inversely with changes in interest
rates. In addition, the potential for appreciation of the
underlying Securities, which might otherwise be expected to occur
as a result of a decline in interest rates may be limited or
negated by increased principal prepayments on the underlying
mortgages. The high inflation of prior years, together with the
fiscal measures adopted to attempt to deal with it, have resulted
in wide fluctuations in interest rates and, thus, in the value of
fixed rate long term debt obligations generally. The Sponsor
cannot predict whether such fluctuations will continue in the
future.
The Securities in the Series of the GNMA Trust were chosen
in part on the basis of their respective stated maturity dates.
The ranges of maturity dates of the Securities contained in a
Series of the Trust are shown in Part Two on the "Schedule of
Investments." See "Life of the Securities and of the Series of
the GNMA Trust."
A Series of the GNMA Trust may be an appropriate medium for
investors who desire to participate in a portfolio of taxable
fixed income securities offering the safety of capital provided
by securities backed by the full faith and credit of the United
States but who do not wish to invest the minimum $25,000 which is
required for a direct investment in GNMA guaranteed securities.
Portfolios. The GNMA Portfolios of the Series of the GNMA
Trust consist of Ginnie Maes, including so-called Ginnie Mae II's
and, in the case of certain designated Series, Ginnie Mae
Midgets, fully guaranteed as to payment of principal and interest
by the Government National Mortgage Association. In order for
Ginnie Maes to be eligible for inclusion in Midget Foreign
Investors Trusts or GNMA Foreign Investors Portfolio Series,
evidence must be received by the Sponsor that the underlying
mortgages were originated after July 18, 1984. Although the
Sponsor believes that all the underlying mortgages were
originated after July 18, 1984, to the extent that this is not
the case, a Foreign Investor will be subject to withholding for
U.S. Federal income taxes on income derived from mortgages that
were originated on or prior to July 18, 1984. See "Tax Status of
the Trusts." Each group of Ginnie Maes described herein as
having a specified range of maturities includes individual
mortgage-backed securities which have varying ranges of
maturities. Each such group of Ginnie Maes is described as one
category of securities because current market conditions accord
no difference in price among the individual Ginnie Mae securities
within such group on the basis of the difference in the maturity
dates of each Ginnie Mae. As long as this market condition
prevails, a purchase of Ginnie Maes with the same coupon rate and
a maturity date within the range mentioned above will be
considered an acquisition of the same Security. In the future,
however, the difference in maturity ranges could affect the
market value of the individual Ginnie Maes. At such time, any
additional purchases by a GNMA Portfolio Series of the Trust will
take into account the maturities of the individual Securities.
A Series of the GNMA Trust may contain Securities which were
acquired at a market discount. Such Securities trade at less
than par value because the interest rates thereon are lower than
interest rates on comparable debt securities being issued at
currently prevailing interest rates. If interest rates for newly
issued and otherwise comparable securities increase, the market
discount of previously issued securities will increase and if
interest rates for newly issued comparable securities decline,
the market discount of previously issued securities will
decrease, other things being equal. Market discount attributable
to interest rate changes does not indicate a lack of market
confidence in the issue.
Holders of Units will be "at risk" with respect to such
Securities (i.e., may derive either gain or loss from
fluctuations in the evaluation of the Securities) from the date
they commit for Units. See "Estimated Long _ Term and Current
Returns."
The mortgages underlying a Ginnie Mae may be prepaid at any
time without penalty. A lower or higher return on Units may
occur depending on whether the price at which the respective
Ginnie Maes were acquired by a Series of the Trust is lower or
higher than par (which represents the price at which such Ginnie
Maes will be redeemed upon prepayment). Redemption of premium
Ginnie Maes at par pursuant to prepayments of mortgages will
operate to lower the current return on Units outstanding at that
time since premium Ginnie Maes normally carry higher interest
coupons than par or discount Ginnie Maes. If mortgages rates
decline in the future, such prepayments may occur with increasing
frequency because, among other reasons, mortgagors may be able to
refinance their outstanding mortgages at lower interest rates.
See "Life of the Securities and of the Series of the GNMA Trust."
Set forth below is a brief description of the current method
of origination of Ginnie Maes; the nature of such securities,
including the guaranty of GNMA; the basis of selection and
acquisition of the Ginnie Maes included in the GNMA Portfolios;
and the expected life of the Ginnie Maes in the Series of the
GNMA Trust. The "Schedule of Investments" in Part Two contains
information concerning the coupon rate and range of stated
maturities of the Ginnie Maes in such Series of the GNMA Trust.
Origination. The Ginnie Maes included in the GNMA
Portfolios are backed by the indebtedness secured by underlying
mortgage pools of long term mortgages on 1- to 4-family
dwellings. In the case of The Midget Foreign Investors Trusts or
GNMA Foreign Investors Portfolio Series, which may be acquired
only by qualified foreign investors, the Sponsor has acquired
only pools containing mortgages which it believes were originated
after July 18, 1984. The pool of mortgages which is to underlie
a particular new issue of Ginnie Maes is assembled by the
proposed issuer of such Ginnie Maes. The issuer is typically a
mortgage banking firm, and in every instance must be a mortgagee
approved by and in good standing with the Federal Housing
Administration ("FHA"). In addition, GNMA imposes its own
criteria on the eligibility of issuers, including a net worth
requirement.
The mortgages which are to comprise a new Ginnie Mae pool
may have been originated by the issuer itself in its capacity as
a mortgage lender or may be acquired by the issuer from a third
party. Such third party may be another mortgage banker, a
banking institution, the Veterans Administration ("VA") (which in
certain instances acts as a direct lender and thus originates its
own mortgages) or one of several other governmental agencies.
All mortgages in any given pool will be insured under the
National Housing Act, as amended ("FHA-insured") or Title V of
the Housing Act of 1949 ("FMHA-insured") or guaranteed under the
Servicemen's Readjustment Act of 1944, as amended, or Chapter 37
of Title 38, U.S.C. ("VA-guaranteed"). Such mortgages will have
a date for the first scheduled monthly payment of principal that
is not more than one year prior to the date on which GNMA issues
its guaranty commitment as described below, will have comparable
interest rates and maturity dates, and will meet additional
criteria of GNMA. All mortgages in the pools backing the Ginnie
Maes contained in the Portfolios are mortgages on 1- to 4-family
dwellings (having a stated maturity of up to 30 years, except in
the case of certain Series containing Ginnie Mae Midgets, whose
stated maturity is 15 years). In general, the mortgages in these
pools provide for monthly payments over the life of the mortgage
(aside from prepayments) designed to repay the principal of the
mortgage over such period, together with interest at the fixed
rate of the unpaid balance.
To obtain GNMA approval of a new pool of mortgages, the
issuer will file with GNMA an application containing information
concerning itself, describing generally the pooled mortgages, and
requesting that GNMA approve the issue and issue its commitment
(subject to GNMA's satisfaction with the mortgage documents and
other relevant documentation) to guarantee the timely payment of
principal of and interest on the Ginnie Maes to be issued by the
issuer. If the application is in order, GNMA will issue its
commitment and will assign a GNMA pool number to the pool. Upon
completion of the required documentation (including detailed
information as to the underlying mortgages, a custodial agreement
with a Federal or state regulated financial institution
satisfactory to GNMA pursuant to which the underlying mortgages
will be held in safekeeping, and a detailed guaranty agreement
between GNMA and the issuer) the issuance of the Ginnie Maes is
permitted. When the Ginnie Maes are issued, GNMA will endorse
its guaranty thereon. The aggregate principal amount of Ginnie
Maes issued will be equal to the then unpaid aggregate principal
balances of the pooled mortgages. The interest rate borne by the
Ginnie Maes is currently fixed at 1/2 of 1% below the interest
rate of the pooled 1- to 4-family mortgages, the differential
being applied to the payment of servicing and custodial charges
as well as GNMA's guaranty fee.
Ginnie Mae II's consist of jumbo pools of mortgages
consisting of pools of mortgages from more than one issuer. The
major advantage of Ginnie Mae II's lies in the fact that a
central paying agent sends one check to the holder on the
required payment date. This greatly simplifies the current
procedure of collecting distributions from each issuer of a
Ginnie Mae, since such distributions are often received late.
Nature of Ginnie Maes and GNMA Guaranty;. All of the Ginnie
Maes in the GNMA Portfolio, including the Ginnie Mae II's, are of
the "modified pass-through" type, i.e., they provide for timely
monthly payments to the registered holders thereof (including the
Series of the GNMA Trust) of a pro rata share of the scheduled
principal payments on the underlying mortgages, whether or not
collected by the issuers. Such monthly payments will also
include, on a pro rata basis, any prepayments of principal of
such mortgages received and interest (net of the servicing and
other charges described above) on the aggregate unpaid principal
balance of such Ginnie Maes, whether or not the interest on the
underlying mortgage has been collected by the issuers.
The Ginnie Maes in the GNMA Portfolios are guaranteed as to
timely payment of principal and interest by GNMA. Funds received
by the issuers on account of the mortgages backing the Ginnie
Maes in the GNMA Portfolios are intended to be sufficient to make
the required payments of principal of and interest on such Ginnie
Maes but, if such funds are insufficient for that purpose, the
guaranty agreements between the issuers and GNMA require the
issuers to make advances sufficient for such payments. If the
issuers fail to make such payments, GNMA will do so.
GNMA is authorized by Section 306(g) of Title III of the
National Housing Act to guarantee the timely payment of principal
of and interest on securities which are based on or backed by a
trust or pool composed of mortgages insured by FHA, the Farmers'
Home Administration ("FMHA") or guaranteed by the VA.
Section 306(g) provides further that the full faith and credit of
the United States is pledged to the payment of all amounts which
may be required to be paid under any guaranty under such
subsection. An opinion of an Assistant Attorney General of the
United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States
backed by its full faith and credit."* GNMA is empowered to
borrow from the United States Treasury to the extent necessary to
make any payments of principal and interest required under such
guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured
by the underlying FHA-insured, FMHA-insured or VA-guaranteed
mortgages and, except to the extent of funds received by the
issuers on account of such mortgages, Ginnie Maes do not
constitute a liability of nor evidence any recourse against such
issuers, but recourse thereon is solely against GNMA. Holders of
Ginnie Maes (such as the GNMA Trust) have no security interest in
or lien on the underlying mortgages.
The GNMA guaranties referred to herein relate only to
payment of principal of and interest on the Ginnie Maes in the
GNMA Portfolios and not to the Units offered hereby.
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* Any statement in this Prospectus that a particular Security
is backed by the full faith and credit of the United States is
based upon the opinion of an Assistant Attorney General of the
United States and should be so construed.
Life of the Securities and of the Series of the GNMA Trust.
Monthly payments of principal will be made, and additional
prepayments of principal may be made, to the Series of the GNMA
Trust in respect of the mortgages underlying the Ginnie Maes in
the GNMA Portfolios. All of the mortgages in the pools relating
to the Ginnie Maes in the GNMA Portfolios are subject to
prepayment without any significant premium or penalty at the
option of the mortgagors. While the mortgages on 1- to 4-family
dwellings underlying the Ginnie Maes have a stated maturity of up
to 30 years (15 years for Ginnie Mae Midgets), it has been the
experience of the mortgage industry that the average life of
comparable mortgages, owing to prepayments, refinancings and
payments from foreclosures is considerably less.
In the mid 1970's, published tables for Ginnie Maes utilized
a 12 year average life assumption for Ginnie Mae pools of 26-30
year mortgages on 1- to 4-family dwellings. This assumption was
derived from the FHA experience relating to prepayments on such
mortgages during the period from the mid 1950's to the mid
1970's. This 12 year average life assumption was calculated in
respect of a period during which mortgage lending rates were
fairly stable. That assumption is probably no longer an accurate
measure of the life of Ginnie Maes or their underlying single
family mortgage pools. However, current yield tables, published
in 1981, still utilize the 12 year average life assumption and
Ginnie Maes continue to be traded based on this assumption.
Recently, mortgages issued at high interest rates have
experienced accelerated prepayment rates which would indicate a
shorter average life than 12 years.
A number of factors, including homeowner's mobility, change
in family size and mortgage market interest rates will affect the
average life of the Ginnie Maes in the GNMA Portfolios. For
example, Ginnie Maes issued during a period of high interest
rates will be backed by a pool of mortgage loans bearing
similarly high rates. In general, during a period of declining
interest rates, new mortgage loans with interest rates lower than
those charged during periods of high rates will become available.
To the extent a homeowner has an outstanding mortgage with a high
rate, he may refinance his mortgage at a lower interest rate or
he may rapidly repay his old mortgage. Should this happen, a
Ginnie Mae issued with a high interest rate may experience a
rapid prepayment of principal as the underlying mortgage loans
prepay in whole or in part. Accordingly, there can be no
assurance that the prepayment levels which will be actually
realized will conform to the experience of the FHA, other
mortgage lenders or other Ginnie Mae investors.
It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Maes in the GNMA Portfolios. Therefore, the
termination of a Series of the GNMA Trust might be accelerated as
a result of prepayments made as described herein.
In addition to prepayments as described above, sales of
Securities in the GNMA Portfolios under certain permitted
circumstances may result in an accelerated termination of a
Series of the GNMA Trust. Also, it is possible that, in the
absence of a secondary market for the Units or otherwise,
redemptions of Units may occur in sufficient numbers to reduce
the GNMA Portfolios to a size resulting in such termination.
Early termination of a Series of the GNMA Trust may have
important consequences to the Unitholder, e.g., to the extent
that Units were purchased with a view to an investment of longer
duration, the overall investment program of the investor may
require readjustment; or the overall return on investment may be
less or greater than anticipated, depending, in part, on whether
the purchase price paid for Units represented the payment of an
overall premium or a discount, respectively, above or below the
stated principal amounts of the underlying mortgages. In
addition, a capital gain or loss may result for tax purposes from
termination of the GNMA Portfolios.
SUMMARY _ FNMA DEBENTURE
General. Each Series of the Kemper Government Securities
Trust FNMA Debenture (the "FNMA Trust") is a unit investment
trust whose objective is to obtain safety of capital and current
monthly distributions of interest through investment in a
portfolio (the "FNMA Portfolio") representing undivided interests
in specified fixed rate debentures (the "Debentures"), which are
unsecured general obligations issued and guaranteed by the
Federal National Mortgage Association ("Fannie Mae"). While
Fannie Mae is a corporate instrumentality of the United States,
the Debentures are not guaranteed by the United States or any
agency thereof and do not constitute debts or obligations of the
United States. The obligations of Fannie Mae under its guarantee
are obligations solely of Fannie Mae and are not backed by, or
entitled to, the full faith and credit of the United States. The
value of the Units and the current return to new purchasers will
fluctuate with the value of the portfolio which will generally
decrease or increase inversely with changes in interest rates.
The guaranteed payment of principal and interest by Fannie
Mae of the Debentures may make investment in the FNMA Trust
particularly well suited for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. In addition, the ability to buy whole or
fractional Units (minimum purchase $1,000 per Series, $250 for
IRA accounts) enables such investors to tailor the dollar amount
of their purchases of Units to take maximum possible advantage of
the annual deductions available for contributions to such plans.
Investors should consult with their tax advisers before
investing. See "Retirement Plans."
Monthly Distributions. Monthly distributions of interest
received by the FNMA Trust will be paid in cash unless the
Unitholder elects to have them automatically reinvested in any
mutual fund underwritten or advised by KFS (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 FNMA Trust, Unitholders should carefully consider the
consequences before selecting such Kemper Funds for reinvestment.
Any such reinvestment is made at net asset value, that is,
without a sales charge. Investors, at the time of purchase, will
have the ability to designate that only principal payments
(including prepayments) or only interest payments or both are to
be reinvested. Investors who intend to participate in the
Reinvestment Program may so designate, at the time of their
purchase. See "Distribution Reinvestment." Distributions will
be made on or about the last business day of each month, to
Unitholders of record on the 1st day of such month.
Debentures. One or more different issues of Debentures
were deposited in the FNMA Trust on the Initial Date of Deposit.
The current percentage relationship among the Debentures in a
FNMA Series is shown under "Essential Information" and "Schedule
of Investments" in Part Two.
Special Considerations. An investment in Units of a Series
of the FNMA 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 FNMA Portfolio
and hence of the Units will decline with increases in interest
rates. Because of the shorter average life of the Debentures in
a FNMA Trust, the value of the Units of such Series should tend
to fluctuate less than longer term obligations of a similar
nature. Some or all of the Debentures in the FNMA Trust have
been purchased at a market discount. The current returns (coupon
interest rate) of such Debentures are lower than the current
returns of similar, comparably rated, debt securities issued at
currently prevailing interest rates.
Estimated Current and Long-Term Returns. The Estimated
Current Return per 1,000 Units shown under "Essential
Information" in Part Two, shows the return based on the Public
Offering Price which includes a sales charge of 3.0% (equivalent
to 3.093% of the net amount invested) and is computed by
multiplying the estimated net annual interest rate per 1,000
Units of such Series (which shows the return per 1,000 Units
based on a $1,000 principal amount) by $1,000 and dividing the
result by the Public Offering price per 1,000 Units. The sales
charge will be reduced for sales involving at least $250,000 or
250,000 Units. See "Public Offering of Units _ Volume Discount."
The net annual interest rate per 1,000 Units will vary with
changes in the fees and expenses of the Trustee, Sponsor and
Evaluator and with the exchange, redemption, sale or maturity of
underlying Debentures. The Public Offering Price of each Series
of the FNMA Trust will also vary with fluctuations in the
evaluation of the underlying Debentures. Therefore, it can be
expected that the Estimated Current Return will fluctuate in the
future. The Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration, and determines and
factors in the relative weightings of, the market values, yields
(which takes into account the amortization of premiums and the
accretion of discounts) and estimated average life of all of the
Securities in the Trusts and (2) takes into account the expenses
and sales charge associated with each Unit of each Trust. Since
the market values and estimated average life of the Securities
and the expenses of the Trusts will change, it can be expected
that the Estimated Long-Term Returns will fluctuate in the
future. The Estimated Current Return and Estimated Long-Term
Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount
of principal returned while the Estimated Current Return
calculation includes only the net annual interest rate and Public
Offering Price. See "Estimated Long-Term and Current Returns."
The net annual income is, of course, taxable to a Unitholder.
See "Tax Status of the Trusts" and "Retirement Plans."
Market for Units. The Sponsor, though not obligated to do
so, intends to maintain a market for the Units based on the
aggregate bid side evaluation of the underlying Debentures. If
such market is not maintained, a Unitholder will, nevertheless,
be able to dispose of his Units through redemption at prices
based on the aggregate bid side evaluation of the underlying
Debentures. See "Redemptions." Market conditions may cause such
prices to be greater or less than the amount paid for Units.
FNMA DEBENTURE
The FNMA Trust. Each Series of the FNMA Trust is a "unit
investment trust" created under Missouri law pursuant to a Trust
Indenture and Agreement (hereinafter collectively referred to as
the "Indenture")* among the Sponsor and the Trustee. For
information regarding the relationship between the Sponsor and
the Trustee, see "Miscellaneous _ Trustee."
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* To the extent reference is made to the Indenture, any
statements herein are qualified in their entirety by the
provisions of said Indenture.
The objective of the FNMA Trust is to obtain safety of
capital and current monthly distributions of interest through
investment in a portfolio representing undivided interests in
specified fixed rate debentures (unsecured general obligations)
issued and guaranteed by the Federal National Mortgage
Association ("Fannie Mae"). While Fannie Mae is a corporate
instrumentality of the United States, the Debentures are not
guaranteed by the United States or any agency thereof and do not
constitute debts or obligations of the United States. The
obligations of Fannie Mae under its guarantee are obligations
solely of Fannie Mae and are not backed by, or entitled to, the
full faith and credit of the United States. The value of the
Units and the current return to new purchasers will fluctuate
with the value of the Debentures included in the FNMA Portfolio
which will generally decrease or increase inversely with changes
in interest rates. See "Tax Status of the Trusts."
As used herein, the term "Debentures" means the debentures
(unsecured general obligations) issued by Fannie Mae and
initially deposited in a Series of the FNMA Trust described
herein and includes all contracts to purchase such Debentures
accompanied by an irrevocable letter of credit sufficient to
perform such contracts initially deposited in the FNMA Trust and
described in Part Two under "Schedule of Investments."
On the date shown, each Unit represented the fractional
undivided interest in the Debentures and estimated net income of
the Series of the FNMA Trust set forth in Part Two under
"Essential Information" in the ratio of 1,000 Units for each
$1,000 face amount of Debentures deposited in that Series of the
FNMA Trust. Because certain of the Debentures from time to time
may be redeemed or will mature in accordance with their terms or
may be sold under certain circumstances described herein, the
Series of the FNMA Trust will not retain its present size and
composition. Units will remain outstanding until redeemed upon
tender to the Trustee by any Unitholder (which may include the
Sponsor) or until the termination of that Series of the FNMA
Trust pursuant to the Indenture.
Risk Factors. An investment in Units of a Series of the
FNMA 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 FNMA Portfolio and hence
of the Units will decline with increases in interest rates. The
value of the underlying Debentures will fluctuate inversely with
changes in interest rates. The high inflation of recent years,
together with the fiscal measures adopted to attempt to deal with
it, have resulted in wide fluctuations in interest rates and,
thus, in the value of fixed rate long term debt obligations
generally. The Sponsor cannot predict whether such fluctuations
will continue in the future.
The Debentures in the FNMA Portfolio were chosen in part on
the basis of their respective stated maturity dates. The
maturity dates of each of the Debentures contained in the FNMA
Trust are shown in Part Two on the "Schedule of Investments."
The FNMA Trust may be an appropriate medium for investors
who desire to participate in a portfolio of taxable fixed income
securities offering the safety of capital provided by debt
obligations backed by the guarantee of Fannie Mae but who do not
wish to invest the minimum $10,000 which is required for a direct
investment in FNMA guaranteed debt obligations.
PORTFOLIOS
Fannie Mae. The Federal National Mortgage Association
("Fannie Mae") is a federally chartered and stockholder-owned
corporation organized and existing under the Federal National
Mortgage Association Charter Act. It is the largest investor in
home mortgage loans in the United States, with a net portfolio of
more than $99 billion of mortgage loans as of June 30, 1988.
Fannie Mae was originally established in 1938 as a United States
Government agency to provide supplemental liquidity to the
mortgage market and was transformed into a stockholder-owned and
privately managed corporation by legislation enacted in 1968.
Fannie Mae provides funds to the mortgage market by
purchasing mortgage loans from lenders, thereby replenishing
their funds for additional lending. Fannie Mae acquires funds to
purchase loans from many capital market investors that may not
ordinarily invest in mortgage loans, thereby expanding the total
amount of funds available for housing. Operating nationwide,
Fannie Mae helps to redistribute mortgage funds from
capital-surplus to capital-short areas.
Fannie Mae also issues mortgage-backed securities ("MBS"),
which are guaranteed mortgage pass-through certificates
evidencing beneficial interests in pools of mortgage loans.
Fannie Mae receives guaranty fees for its guaranty of timely
payment of principal and interest on the certificates. Fannie
Mae issues MBS primarily in exchange for pools of mortgage loans
from Lenders. The issuance of MBS enables Fannie Mae to further
its statutory purpose of increasing the liquidity of residential
mortgage loans. MBS outstanding as of June 30, 1988 totaled
$157.4 billion.
The principal office of Fannie Mae is located at 3900
Wisconsin Avenue, NW, Washington, DC 20016 (telephone:
202-752-7000). Fannie Mae has five regional offices located in
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Los Angeles,
California; and Philadelphia, Pennsylvania.
Copies of Fannie Mae's most recent annual and quarterly
reports and proxy statement are available without charge from the
Vice President for Investor Relations, Federal National Mortgage
Association, 3900 Wisconsin Avenue, NW, Washington, DC 20016
(telephone: 202-752-7115). The Sponsor has not participated in
the preparation of Fannie Mae's Offering Statements, Information
Statements or Supplements.
FNMA Debentures. The Debentures are unsecured general
obligations issued under the Federal National Mortgage
Association Charter Act and do not contain provisions permitting
the holders to accelerate the maturity thereof. The Debentures
are issued in minimum denominations of $10,000 and integral
multiples of $5,000 in excess thereof.
Debt obligations of Fannie Mae, together with any interest
thereon, are not guaranteed by the United States and do not
constitute a debt or obligation of the United States or any
agency thereof. However, Fannie Mae's obligations have
traditionally been treated as "U.S. agency" debt in the
marketplace and are eligible for investment by many supervised
financial institutions without regard to legal limits generally
imposed on investment securities.
Fannie Mae usually makes debenture offerings through a
nationwide group of securities dealers and dealer banks. Fannie
Mae does not sell its debentures directly to the public. Payment
for such securities must be made in federal funds. The
Debentures are actively traded in the U.S. Treasury _ federal
agency securities market.
Fannie Mae usually offers its Debentures at the beginning of
each month for delivery and payment on or about the 10th day of
the month. The Debentures are available only in book-entry form,
i.e., in the form of an entry made on the records of a Federal
Reserve Bank. Principal and interest on the Debentures are
payable through any member of the Federal Reserve System. In
most cases interest payments on interest-bearing obligations are
made semi-annually.
Under the Secondary Mortgage Market Enhancement Act of 1984,
any person, trust, corporation, partnership, association business
trust, or business entity created pursuant to or existing under
the laws of the United States or any state is authorized to
purchase, hold and invest in securities issued or guaranteed by
Fannie Mae, to the same extent that such person or entity is
authorized under any applicable law to purchase, hold or invest
in obligations issued by or guaranteed as to principal and
interest by the United States or any agency or instrumentality
thereof. However, the preemptive effect of the law may be
limited or eliminated as to future purchases by an applicable
state statute enacted after such Act and prior to October 3,
1991.
In addition, the Internal Revenue Service has ruled that the
Fannie Mae is an instrumentality of the United States for
purposes of Section 7701(a)(19) of the Internal Revenue Code of
1986; therefore, domestic building and loan associations and
mutual savings banks are permitted to invest in Fannie Mae's
securities to meet the percentage of total assets required to be
invested in, among other things, "stock or obligations of a
corporation which is an instrumentality of the United States."
Further, the IRS permits real estate investment trusts to treat
holdings of securities of Fannie Mae as "government securities"
to meet the requirement that 75 percent of the value of their
total assets consists of real estate assets, cash and cash items
(including receivables), and government securities.
The FNMA Trust may contain Debentures which were acquired at
a market discount. Such Debentures trade at less than par value
because the interest rates thereon are lower than interest rates
on comparable debt obligations being issued at currently
prevailing interest rates. If such interest rates for newly
issued and otherwise comparable debt obligations increase, the
market discount of previously issued debt obligations will
increase and if such interest rates for newly issued comparable
debt obligations decline, the market discount of previously
issued debt obligations will decrease, other things being equal.
Market discount attributable to interest rate changes does not
indicate a lack of market confidence on the issue.
Holders of Units will be "at risk" with respect to the
market value of such Debentures (i.e., may derive either gain or
loss from fluctuations in the offering side evaluation of the
Debentures) from the date they commit for Units.
Debt obligations, such as the Debentures, issued by Fannie
Mae are subject to federal estate and gift taxes, and the income
derived from them does not have any exemption as such under the
Internal Revenue Code of 1986. The Act establishing Fannie Mae
does not contain any specific exemption with respect to any taxes
on the principal of or interest on obligations issued by Fannie
Mae by any state or possession of the United States or by any
local taxing authority. Purchasers residing in states that
impose intangible property or income taxes should consult their
own tax advisers as to the status of the obligations issued by
Fannie Mae and their interests under applicable tax laws. See
"Tax Status of the Trust."
SUMMARY _ U.S. TREASURY PORTFOLIO
Each Kemper Government Securities Trust, U.S. Treasury
Portfolio and Kemper Defined Funds, U.S. Treasury Portfolio
(collectively, the "U.S. Treasury Portfolio Series") is a unit
investment trust whose objective is to obtain safety of capital
and investment flexibility as well as current monthly
distributions of interest through investment in a fixed, laddered
portfolio consisting of interest-bearing U.S. Treasury
obligations or, in certain U.S. Treasury Portfolio Series,
consisting of some or almost all zero coupon U.S. Treasury
obligations (the "U.S. Treasury Obligations"). The U.S. Treasury
Portfolio Series is formed for the purpose of providing
protection against changes in interest rates and also passing
through to Unitholders in all states the exemption from state
personal income taxes afforded to direct owners of U.S.
obligations. Each U.S. Treasury Portfolio Series has an
additional purpose of providing income which is exempt from
withholding for U.S. Federal income taxes for non-resident alien
investors. A foreign investor must provide a completed W-8 Form
to his financial representative or the Trustee to avoid
withholding on his account. The Securities are direct
obligations of the United States and are backed by its full faith
and credit. The value of the Units, the estimated current return
and estimated long-term return to new purchasers will fluctuate
with the value of the portfolio which will generally decrease or
increase inversely with changes in interest rates.
The guaranteed payment of principal and interest afforded by
U.S. Treasury Obligations, and, with respect to those Series
which own zero coupon U.S. Treasury Obligations ("Stripped
Treasury Securities"), the additional fact that no interest
distributions will be made prior to maturity of the Stripped
Treasury Securities may make investment in U.S. Treasury
Portfolio Series particularly well suited for purchase by
Individual Retirement Accounts, Keogh Plans, pension funds and
other tax-deferred retirement plans. In addition, the ability to
buy Units (minimum purchase $1,000 per Series, $250 for IRA
accounts) at a Public Offering Price of approximately $1.00 per
Unit ($10.00 per Unit for Kemper Defined Funds) enables such
investors to tailor the dollar amount of their purchases of Units
to take maximum possible advantage of the annual deductions
available for contributions to such plans. Investors should
consult with their tax advisers before investing. See
"Retirement Plans."
Monthly Distributions. Monthly distributions of interest
received by each U.S. Treasury Portfolio Series will be paid in
cash unless the Unitholder elects to have them automatically
reinvested in any mutual fund underwritten or advised by an
affiliate of the Sponsor, 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 U.S. Treasury Portfolio,
Unitholders should carefully consider the consequences before
selecting such Kemper Funds for reinvestment. Any such
reinvestment is made at net asset value (that is, without a sales
charge). Investors have the ability to designate that only
principal payments or only interest payments or both are to be
reinvested (see "Reinvestment Program"). Distributions of
principal will be made in accordance with the instructions of the
investor in any month the amount in the Principal Account equals
or exceeds $1.00 per 1,000 Units ($1.00 per 100 Units for Kemper
Defined Funds). Distributions will be made as specified in Part
Two for each Trust.
Stripped Treasury Securities. Stripped Treasury Securities
are sold at a deep discount because the buyer of those securities
obtains only the right to receive a future fixed payment on the
security and not any rights to periodic interest payments
thereon. Purchasers of these Securities acquire, in effect,
discount obligations that are economically identical to the
"zero-coupon bonds" that have been issued by corporations. Zero
coupon bonds are debt obligations which do not make any periodic
payments of interest prior to maturity and accordingly are issued
at a deep discount.
Stripped Treasury Securities held by any Series of the U.S.
Treasury Portfolio Series Trust shall consist solely of either of
the following types of the registered securities: (a) U.S.
Treasury debt obligations originally issued as bearer coupon
bonds which have been stripped of their unmatured interest
coupons and (b) coupons which have been stripped from U.S.
Treasury bearer bonds, either of which may be held through the
Federal Reserve Bank's book entry system called "Separate Trading
of Registered Interest and Principal of Securities" ("STRIPS").
The Stripped Treasury Securities are payable in full at maturity
at their stated maturity amount and are not subject to redemption
prior to maturity. In addition, the Stripped Treasury Securities
do not make any periodic payments of interest.
The Stripped Treasury Securities are sold at a substantial
discount from their face amounts payable at maturity. The holder
of Stripped Treasury Securities will be required to include
annually in gross income an allocable portion of the deemed
original issue discount, prior to receipt of cash attributable to
that income. Accordingly, any Series owning Stripped Treasury
Securities may not be a suitable investment unless these taxes
can be paid from other funds or unless such Series is purchased
by Individual Retirement Accounts, Keogh plans or other
tax-deferred retirement plans. Stripped Treasury Securities are
marketable in substantially the same manner as other discount
Treasury Securities.
Risk Factors. An investment in Units of the U.S. Treasury
Portfolio should be made with an understanding of the risks which
an investment in fixed-rate U.S. Treasury obligations may entail,
including the risk that the value of the portfolio and hence of
the Units will decline with increases in interest rates. Some or
all of the Securities in the Trust Fund have been purchased at a
market discount. The current returns (coupon interest rate) of
such Securities are lower than the current returns of similar,
comparably rated, Securities issued at currently prevailing
interest rates.
Additionally, an investment in a Series holding Stripped
Treasury Securities should be made with an understanding of the
risks which an investment in debt obligations, most of which were
purchased at a deep discount, may entail, including the risk that
the value of the underlying debt obligations and hence of the
Units will decline with increases in interest rates. The market
value of Stripped Treasury Securities, and therefore the value of
the Units, may be subject to greater fluctuations in response to
changing interest rates than debt obligations of comparable
maturities which pay interest currently. This risk is greater
when the period to maturity is longer. No distributions of
income are anticipated until maturity of the Stripped Treasury
Securities. The price per Unit will vary in accordance with
fluctuations in the values of the Stripped Treasury Securities,
and the distributions could change if Stripped Treasury
Securities are paid or sold, or if the expenses of the Trust
change.
The Stripped Treasury Securities will mature at one year
intervals in consecutive years and do not make any periodic
payment of income prior to maturity. Accordingly, it is not
anticipated that there will be any periodic distributions of
income.
Because interest on "zero coupon" debt obligations is not
distributed on a current basis but in effect compounded, the
value of securities of this type, including the value of accreted
and reinvested interest (and of a trust comprised of these
obligations), is subject to greater fluctuations than of
obligations which distribute income regularly. Accordingly,
while the full faith and the credit of the U.S. government
provides a high level of protection against credit risks on the
Securities, sale of Units before maturity of the Securities at a
time when interest rates have increased would involve greater
risk than in a trust which is invested in debt obligations or
comparable maturity which pay interest currently. This risk is
greater when the period to maturity is longer.
Estimated Current and Long-Term Returns. The Estimated
Current Return is calculated by dividing the estimated net annual
interest rate per Unit by the Public Offering Price. The net
estimated annual interest rate per Unit will vary with changes in
the fees and expenses of the Trustee, Sponsor and Evaluator and
with the exchange, redemption, sales, scheduled payments,
prepayments or maturity of underlying Securities in the
portfolio. The Public Offering Price of a Trust will also vary
with fluctuations in the evaluation of the underlying Securities
and in the case of Kemper Defined Funds with changes in the
Purchased Interest and Daily Accrued Interest; therefore, there
is no assurance that the present Estimated Current Return will be
realized in the future. The Estimated Long-Term Return is
calculated using a formula which (1) takes into account the
amortization of premiums and the accretion of discounts) and, in
the case of the GNMA and FNMA Trusts, estimated average life of
all of the Securities in such Series, or in the case of the U.S.
Treasury Portfolio Series, the estimated retirements of all the
Securities in such Series and (2) takes into account the expenses
and sales charge associated with each Unit of the Trust. Since
the market values and the estimated average lives or estimated
retirements, as the case may be, of the Securities and the
expenses of a Trust will change, it can be expected that the
Estimated Long-Term Returns will fluctuate in the future.
Estimate Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated
Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation
includes only the net annual interest rate and Public Offering
Price.
Market for Units. The Sponsor, though not obligated to do
so, after the initial offering period, intends to maintain a
market for the Units based on the aggregate bid side evaluation
of the underlying Securities plus, in the case of Kemper Defined
Funds, Purchased Interest and Daily Accrued Interest. If such
market is not maintained, a Unitholder will, nevertheless, be
able to dispose of his Units through redemption at prices based
on the aggregate bid side evaluation of the underlying
Securities. See "Redemption." Market conditions may cause such
prices to be greater or less than the amount paid for Units.
THE U.S. TREASURY PORTFOLIO SERIES
Each Kemper Government Securities Trust, U.S. Treasury
Portfolio and Kemper Defined Funds, U.S. Treasury Portfolio
(collectively, the "U.S. Treasury Portfolio Series") is a "unit
investment trust" created under Missouri law pursuant to a Trust
Indenture and Agreement (hereinafter collectively referred to as
the "Indenture")* between Kemper Unit Investment Trusts, a
service of Kemper Securities, Inc. (the "Sponsor") and Investors
Fiduciary Trust Company (the "Trustee"). For information
regarding the relationship between the Sponsor and the Trustee,
see "Miscellaneous _ Trustee."
The objective of the U.S. Treasury Portfolio is to obtain
safety of capital and investment flexibility through investment
in a fixed, laddered portfolio consisting of interest-bearing (or
in some cases zero coupon) U.S. Treasury obligations. The U.S.
Treasury Portfolio Series is formed for the purpose of providing
protection against changes in interest rates and also passing
through to Unitholders in all states the exemption from state
personal income taxes afforded to direct owners of U.S.
obligations. The Securities are direct obligations of the United
States and are backed by its full faith and credit. The value of
the Units, the estimated current return and estimated long-term
return to new purchasers will fluctuate with the value of the
Securities included in the portfolio which will generally
decrease or increase inversely with changes in interest rates.
See "Tax Status of the Trusts."
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* To the extent reference is made to the Indenture, any
statements herein are qualified in their entirety by the
provisions of said indenture.
Risk Factors. An investment in Units of the U.S. Treasury
Portfolio Series should be made with an understanding of the
risks which an investment in fixed rate debt obligations may
entail, including the risks that the value of the Portfolio and
hence of the Units will decline with increases in interest rates.
The value of the underlying Securities will fluctuate inversely
with changes in interest rates. The high inflation of prior
years, together with the fiscal measures adopted to attempt to
deal with it, have resulted in wide fluctuations in interest
rates and, thus, in the value of fixed rate long term debt
obligations generally. The Sponsor cannot predict whether such
fluctuations will continue in the future.
In selecting Securities for deposit in the U.S. Treasury
Portfolio Series, the following factors, among others, were
considered by the Sponsor: (i) the prices of the Securities
relative to other comparable Securities; (ii) the maturities of
these Securities; and (iii) whether the Securities were issued
after July 18, 1984.
The U.S. Treasury Portfolio Series may be an appropriate
medium for investors who desire to participate in a portfolio of
taxable fixed income securities offering the safety of capital
provided by an investment backed by the full faith and credit of
the United States. In addition, many investors may benefit from
the exemption from state and local personal income taxes that
will pass through the U.S. Treasury Portfolio Series to
Unitholders in virtually all states.
Since Unitholders of a Series holding Stripped Treasury
Securities will be required for federal income tax purposes to
include amounts in ordinary gross income in advance of the
receipt of the cash attributable to such income, such Series may
be appropriate only for an account which can pay taxes with other
funds in advance of the receipt of the cash attributable to such
income or for Individual Retirement Accounts, Keogh plans or
other tax-deferred retirement plans.
General. Each Unit in a Series represents the fractional
undivided interest in the U.S. Treasury Portfolio Series as set
forth under "Essential Information" in Part Two. Because certain
of the Securities from time to time may be redeemed or will
mature in accordance with their terms or may be sold under
certain circumstances described herein, the U.S. Treasury
Portfolio Series of the Trust is not expected to retain its
present size and composition. Units will remain outstanding
until redeemed upon tender to the Trustee by any Unitholder
(which may include the Sponsor) or until the termination of the
Trust pursuant to the Indenture.
RATING OF UNITS
Standard & Poor's Ratings Group ("Standard & Poor's") has
rated the Units of each Series of the Trusts "AAA." This is the
highest rating assigned by Standard & Poor's. See "Description
of Standard & Poor's Rating" herein. Standard & Poor's has been
compensated by the Sponsor for its services in rating Units of
the Series of the Trusts.
PORTFOLIO SELECTION
In selecting Ginnie Maes, Debentures and U.S. Treasury
Obligations (collectively referred to herein as the "Portfolio
Obligations") for deposit in a Series of the appropriate Trusts,
the following factors, among others, were considered by the
Sponsor: (i) the types of such obligations available; (ii) the
prices and yields of such obligations relative to other
comparable obligations including the extent to which such
obligations are trading at a premium or at a discount from par;
and (iii) the maturities of such obligations.
Each Series of the Trusts consists of the unamortized
principal amount of the Portfolio Obligations listed in Part Two
under "Schedule of Investments" as may continue to be held from
time to time in such Series together with accrued and
undistributed interest thereon and undistributed cash
representing payments and prepayments of principal and proceeds
realized from the disposition of Portfolio Obligations. Neither
the sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Securities.
Each series of the Trust may contain "zero coupon" U.S.
Treasury Obligations. See footnote (6) in "Notes to Schedule of
Investments" in Part Two of this Prospectus. Zero coupon
obligations are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the
maturity of the obligations and does not receive any periodic
interest payments. The effect of owning deep discount
obligations which do not make current interest payments (such as
the zero coupon obligations) 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 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 obligations are subject to substantially greater price
fluctuations during periods of changing market interest rates
than are securities of comparable quality which pay interest.
Because regular payments of principal are to be received and
certain of the Portfolio Obligations from time to time may be
redeemed or will mature in accordance with their terms or may be
sold under certain circumstances described herein, the Series of
the Trusts are not expected to retain their present size and
composition.
THE UNITS
Each Unit represents the fractional undivided interest in a
Series of the Trusts set forth in Part Two under "Essential
Information." If any Units are redeemed by the Trustee, the
principal amount of Portfolio Obligations in such Series of the
Trusts will be reduced by amounts allocable to redeemed Units,
and the fractional undivided interest represented by each Unit in
the balance will be increased. Units will remain outstanding
until redeemed upon tender to the Trustee by any Unitholder
(which may include the Sponsor) or until the termination of the
Series of the Trusts. See "Redemption" and "Administration of
the Trust _ Termination."
ESTIMATED LONG-TERM AND CURRENT RETURNS
The Estimated Current Return and Estimated Long-Term Return
for each trust are the amounts set forth in Part Two under
"Essential Information" as of the date shown on that page.
Estimated Current Return is calculated by dividing the estimated
net annual interest rate per Unit by the Public Offering Price.
The estimated net annual interest rate per Unit will vary with
changes in fees and expenses of the Trustee, the Sponsor and the
Evaluator and with the principal prepayment, redemption,
maturity, exchange or sale of Portfolio Obligations while the
Public Offering Price will vary with changes in the offering
price of the underlying Portfolio Obligations and in the case of
Kemper Defined Funds, with changes in Purchased Interest and
Daily Accrued Interest; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future.
The Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration, and determines and factors in
the relative weightings of, the market values, yields (which
takes into account the amortization of premiums and the accretion
of discounts) and, in the case of GNMA Portfolio Series, the
estimated average life of all the Portfolio Obligations in such
Series or, in the case of U.S. Treasury Portfolio Series, the
estimated retirements of all of the Portfolio Obligations in such
Series and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and the
estimated average lives or estimated retirements, as the case may
be, of the Portfolio Obligations 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. The Estimated
Current Return and Estimated Long-Term Return are expected to
differ because the calculation of the Estimated Long-Term Return
reflects the estimated dates and amounts of principal returned
while the Estimated Current Return calculations include only net
annual interest rates and Public Offering Price. See "Summary _
GNMA Portfolio _ Estimated Current and Long-Term Returns,"
"Summary _ FNMA Debenture _ Estimated Current and Long-Term
Returns" and "Summary _ U.S. Treasury Portfolio _ Estimated
Current and Long-Term Returns."
Payments received in respect of the mortgages underlying the
Ginnie Maes in the GNMA Trust Portfolios will consist of a
portion representing interest and a portion representing
principal. Although the aggregate monthly payment made by the
obligor on each mortgage remains constant (aside from optional
prepayments of principal), in the early years most of each such
payment will represent interest, while in later years, the
proportion representing interest will decline and the proportion
representing principal will increase. However, by reason of
optional prepayments, principal payments in the earlier years on
the mortgages underlying the Ginnie Maes may be substantially in
excess of those required by the amortization schedules of such
mortgages. Therefore, principal payments in later years may be
substantially less since the aggregate unpaid principal balances
of such underlying mortgages may have been greatly reduced. To
the extent that the underlying mortgages bearing higher interest
rates in the GNMA Trust Portfolios are pre-paid faster than the
other underlying mortgages, the net annual interest rate per Unit
and the Estimated Current Return on the Units can be expected to
decline. Monthly payments to the Unitholders will reflect all of
the foregoing factors.
In addition to the Public Offering Price, the price of a
Unit will include accrued interest on the Portfolio Obligations
from the last Record Date of that Series of the Trusts to the
date of settlement for any purchase. Therefore, accrued interest
will generally be added to the value of the Units. If a
Unitholder sells all or a portion of his Units, he will receive
his proportionate share of the accrued interest on such Series
from the purchaser of his Units. Similarly, if a Unitholder
redeems all or a portion of his Units, the Redemption Price per
Unit will include accrued interest on the Portfolio Obligations.
PUBLIC OFFERING OF UNITS
Public Offering Price. The Public Offering Price of Units
is computed by adding to the aggregate bid price of the Portfolio
Obligations in that Series of the Trusts as determined by the
Evaluator (see below) plus any money in the Principal Account of
such Series other than money required to redeem tendered Units,
plus, in the case of Kemper Defined Funds, Purchased Interest and
Daily Accrued Interest, then dividing such sum by the number of
Units of such Series outstanding and then adding that sales
charge referred to 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" below.
Volume Discount. Although under no obligation to do so,
the Sponsor intends to permit volume purchasers of Units to
purchase Units at a reduced sales charge. The Sponsor may at any
time change the amount by which the sales charge is reduced or
may discontinue the discount altogether.
The sales charge per Unit for the GNMA Portfolio Series will
be reduced pursuant to the following graduated scale:
<TABLE>
<CAPTION>
GNMA MIDGET SERIES GNMA SERIES
PERCENT OF PERCENT OF PERCENT OF
PERCENT OF
OFFERING NET AMOUNT OFFERING
NET AMOUNT
TICKET SIZE PRICE INVESTED PRICE
INVESTED
<S> <C> <C> <C> <C>
Less than $100,000 3.50% 3.627% 3.95%
4.112%
$100,000 to $249,999 3.25 3.359 3.70
3.842
$250,000 to $499,999 2.85 2.934 3.35
3.466
$500,000 to $999,999* 2.60 2.669 3.10
3.199
</TABLE>
* For any transaction in excess of this amount, contact
the Sponsor for the applicable sales charge.
The sales charge per Unit for the FNMA Trusts will be
reduced pursuant to the following graduated scale:
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
0-2.99 YEARS
PERCENT OF
PERCENT OF NET AMOUNT
OFFERING PRICE INVESTED
<S> <C> <C>
Less than $250,000 2.00% 2.041%
$250,000 to $499,999 1.50 1.523
$500,000 or more 1.25 1.266
3-6.99 YEARS
PERCENT OF
PERCENT OF NET AMOUNT
OFFERING PRICE INVESTED
<C> <C>
Less than $250,000 2.50% 2.564%
$250,000 to $499,999 1.75 1.781
$500,000 or more 1.50 1.523
7-10 YEARS
PERCENT OF
PERCENT OF NET AMOUNT
OFFERING PRICE INVESTED
<C> <C>
Less than $250,000 3.00% 3.093%
$250,000 to $499,999 2.25 2.302
$500,000 or more 2.00 2.041
</TABLE>
The sales charge per Unit for U.S. Treasury Portfolio Series
will be reduced pursuant to the following graduated scale:
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
0-1.99 YEARS 2-2.99 YEARS 3-4.99 YEARS
TICKET SIZE SALES CHARGE (PERCENT OF PUBLIC OFFERING PRICE)
<S> <C> <C> <C>
Less than $500,000 1.25% 1.50% 1.75%
$500,000 to $999,999 1.00 1.25 1.50
$1,000,000 to $1,499,999* 1.00 1.00 1.25
5-6.99 YEARS 7-9.99 YEARS
TICKET SIZE SALES CHARGE (PERCENT OF PUBLIC OFFERING PRICE)
<C> <C>
Less than $500,000 2.25% 3.00%
$500,000 to $999,999 1.75 2.50
$1,000,000 to $1,499,999* 1.50 2.00
</TABLE>
* For any transaction in excess of $1,499,999, please
contact the Sponsor for the applicable sales charge.
The reduced sales charges as shown on the tables above will
apply to all purchases of Units on any one day by the same person
from the same firm, and for this purpose, purchases of Units of
one or more Series of the Trusts 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
is also applicable to a trustee or other fiduciary purchasing
Units for a single trust estate or single fiduciary account.
The Sponsor will also allow purchasers who commit to
purchase $1 million or more of The Series units during a 12 month
period to do so at the applicable sales charge for such series
pursuant to a letter of intent, subject to certain restrictions.
The Sponsor intends to permit officers, directors and
employees of the Sponsor and Evaluator to purchase Units of any
Series of the Trusts without a sales charge, although a
transaction processing fee may be imposed on such trades. The
Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units and the right to charge the
amount of the sales charge from time to time.
In addition to the Public Offering Price, the price of a
Unit of a Series of the Kemper Government Securities Trust will
include accrued interest on the Portfolio Obligations from the
last Record Date of that Series of such Trust to the date of
settlement for any purchase. Therefore, accrued interest will
generally be added to the value of the Units of such Trust. If a
Unitholder of the Kemper Government Securities Trust sells all or
a portion of his Units, he will receive his proportionate share
of the accrued interest for that Series of the Trusts from the
purchaser of his Units. Similarly, if a Unitholder of the Kemper
Government Securities Trust redeems all or a portion of his
Units, the Redemption Price per Unit will include accrued
interest on the Portfolio Obligations in such Series.
In the case of any Series of Kemper Defined Funds, the
Public Offering Price includes accrued interest which consists of
two elements. The first element arises as a result of accrued
interest which is the accumulation of unpaid interest on a
security from the later of the last day on which interest thereon
was paid or the date of original issuance of the security.
Interest on the Portfolio Obligations in a Trust is paid monthly
or semi-annually to the Trust. The aggregate amount of such
accrued interest on the Portfolio Obligations in a Trust in any
Series of Kemper Defined Funds to the First Settlement Date of
such Trust is referred to herein as "Purchased Interest."
Included in the Public Offering Price of the Trust Units is
Purchased Interest. The second element of accrued interest
arises because the estimated net interest on the Units in a Trust
is accounted for daily on an accrual basis (herein referred to as
"Daily Accrued Interest" for purposes of Kemper Defined Funds
Trusts). 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 in any Series of
Kemper Defined Funds will include the proportionate share of
Daily Accrued Interest to the date of settlement. If a
Unitholder in any Series of Kemper Defined Funds sells or redeems
all or a portion of his Units or if the Portfolio Obligations are
sold or otherwise removed or if the Trust is liquidated, he will
receive at that time his proportionate share of the Purchased
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.
The Public Offering Price on any date will vary from the
amount stated under "Essential Information" in Part Two due to
fluctuations in the valuation of the underlying Portfolio
Obligations in such Series of the Trusts and, in the case of
Kemper Defined Funds, the additions or deletions of Purchased
Interest and Daily Accrued Interest.
The aggregate bid prices of the Portfolio Obligations in a
Series of the Trusts, are determined for each Series of the
Trusts by the Evaluator, in the following manner: (a) on the
basis of current bid prices for the Portfolio Obligations, (b) if
bid prices are not available for the Portfolio Obligations, on
the basis of current bid prices for comparable securities, (c) by
determining the value of the Portfolio Obligations on the bid
side of the market by appraisal, or (d) by any combination of the
above. The Evaluator may obtain current price information as to
the Portfolio Obligations from investment dealers or brokers,
including the Sponsor. Such evaluations and computations will be
made as of the close of business on each business day and will be
effective for all sales of Units made during the preceding
24-hour period. Evaluations, for purposes of redemptions by the
Trustee, will be made each business day as of the Evaluation Time
stated under "Essential Information" in Part Two, effective for
all redemptions made subsequent to the last preceding
determination.
In connection with the Ginnie Maes deposited in the GNMA
Trusts, there is a period of time beginning on the first day of
each month, during which the total amount of payments (including
prepayments, if any) of principal for the preceding month on the
various mortgages underlying each of the Ginnie Maes in the
Portfolio of a Series will not yet have been reported by the
issuer to GNMA and made generally available to the public.
During this period, the precise principal amount of the
underlying mortgages remaining outstanding for each Ginnie Mae in
the Portfolios, and therefore the precise principal amount of
such Security, will not be known, although the principal amount
outstanding for the preceding month will be known. Therefore,
the exact amount of principal to be acquired by the Trustee as a
holder of such Securities which may be distributed to Unitholders
of such Series with the next monthly distribution will not be
known. The Sponsor does not expect that the amounts of such
prepayments and the differences in such principal amounts from
month to month will be material in relation to a Series of the
GNMA Trusts due to the number of mortgages underlying each Ginnie
Mae and the number of such Ginnie Maes in each Series of the GNMA
Trusts. However, there can be no assurance that they will not be
material. For purposes of the determination by the Evaluator of
the bid prices of the Ginnie Maes in the GNMA Portfolios and for
purposes of calculations of accrued interest on the Units, during
the period in each month prior to the time when the precise
amounts of principal of the Ginnie Maes for the month become
publicly available, the Evaluator will base its evaluations and
calculations, which are the basis for calculations of the Public
Offering Price, the Sponsor's Repurchase Price and the Redemption
Price per Unit, upon the principal amount of such Series
outstanding for the preceding month. The Sponsor expects that
the differences in such principal amounts from month to month
will not be material to each GNMA Portfolio Series of the Trusts.
Nevertheless, the Sponsor will adopt procedures as to pricing and
evaluation for the Units of each Series of the GNMA Trusts, with
such modifications, if any, deemed necessary by the Sponsor for
the protection of Unitholders, designed to minimize the impact of
such differences upon the calculation of the Public Offering
Price per Unit, the Sponsor's Repurchase Price per Unit and the
Redemption Price per Unit of such Series.
Public Distribution. The Sponsor has qualified Units for
sale in various states. Units will be sold through dealers who
are members of the National Association of Securities Dealers,
Inc. and through others. Such firms receive a discount from the
Public Offering Price as indicated in the tables under "Profit of
Sponsor" 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 an amount as indicated in the tables
under "Profit of Sponsor" 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 permitted 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. The Sponsor reserves the right to reject,
in whole or in part, any order for the purchase of Units. The
Sponsor reserves the right to change the discounts from time to
time. The difference between the discounts and the sales charge
will be retained by the Sponsor.
The Sponsor also reserves the right to change the discounts
set forth above from time to time. 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
Series of the Trusts and other unit investment trusts
underwritten by the Sponsor.
While not obligated to do so, the Sponsor intends, subject
to change at any time, to maintain a market for Units of the
Series of the Trusts offered hereby and to continuously offer to
purchase said Units at prices based on the aggregate bid prices
of the underlying Portfolio Obligations in such Series, together
with accrued interest to the expected date of settlement.
The Sponsor may suspend or discontinue purchases of Units at
prices based on the bid prices of Securities in any Series of the
Trusts if the supply of Units exceeds demand, or for other
business reasons.
Profits of Sponsor. Sales of Units may be made to or
through dealers or through others at prices which represent
discounts from the Public Offering Price as set forth below.
Discounted rates for the GNMA Portfolio Series are as follows:
<TABLE>
<CAPTION>
GNMA GNMA
TICKET SIZE* MIDGET SERIES SERIES
<S> <C> <C>
Less than $100,000 2.10% 2.60%
$100,000 to $249,999 2.10 2.60
$250,000 to $499,999 1.80 2.30
$500,000 to $999,999** 1.55 2.05
</TABLE>
* The breakpoint is applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1.00 per Unit
for $1 Units and $1000 per 100 Units for $10 Units.
** For transactions in excess of this amount, contact the
Sponsor for the applicable rates.
Discounts for the FNMA Debenture Series are as follows:
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
<TABLE>
<CAPTION>
TICKET SIZE* 0-2.99 YEARS 3-6.99 YEARS 7-10
YEARS
<S> <C> <C> <C>
Less than $250,000 1.00% 1.75% 2.00%
$250,000 to $499,999 0.75% 1.00 1.25
$500,000 or more 0.75% 0.75 1.00
</TABLE>
* The breakpoint is applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1.00 per Unit
for $1 Units and $1000 per 100 Units for $10 Units.
On the sale of Units, the Sponsor will retain the difference
between the discount and the sales charge. The Sponsor may also
realize profits or sustain losses while maintaining a market in
the Units, in the amount of any difference between the prices at
which it buys Units and the prices at which Units are resold
after allowing for the discount.
Cash, if any, received by a dealer from Unitholders prior to
the settlement date for a purchase of Units of any Series may be
used in such dealer's business subject to the limitations of
Rule 15c3-3 under the Securities Exchange Act of 1934 and may be
of benefit to the dealer.
TAX STATUS OF THE TRUSTS
Regulated Investment Companies. Each Series of the GNMA
and FNMA Trusts (except Kemper Defined Funds, GNMA Portfolio,
Series 1) is an association taxable as a corporation under the
Internal Revenue Code and has qualified for and elected for tax
treatment as a "regulated investment company" under the Internal
Revenue Code of 1986 (the "Code"). By qualifying for and
electing such treatment, such Series of the GNMA and FNMA Trusts
will not be subject to federal income tax on net investment
income or net capital gains distributed to Unitholders of such
Series. The Code imposes a 4% excise tax on certain
undistributed income of a regulated investment company that does
not timely distribute certain percentages of its ordinary taxable
income and capital gains by the end of each calendar year. Each
Series of the GNMA and FNMA Portfolio intends to timely
distribute taxable income and capital gains to avoid the
imposition of such tax. Distributions of the entire net
investment income of each Series of such Trusts is required by
the Indenture.
Distributions from the Trusts, to the extent of the earnings
and profits of such Series, will constitute dividends for federal
income tax purposes which are taxable as ordinary income to
Unitholders. Distributions of the Series' net investment income
and any net short-term capital gain will be taxable as ordinary
income to the Unitholders of such Series. Distributions from
each Series of the GNMA and FNMA Trusts will not be eligible for
the 70% dividends received deduction for corporations.
Although distributions generally will be treated as
distributed when paid, distributions declared in October,
November or December, payable to Unitholders of record on a
specified date in one of those months and paid during January of
the following year will be treated as having been distributed by
each Series of such Trusts (and received by the Unitholders) on
December 31 of the year such distributions are declared.
Distributions which the Trusts designate as capital gain
dividends will be taxable to Unitholders thereof as long-term
capital gains, regardless of the length of time the Units have
been held by a Unitholder. Distributions in partial liquidation,
reflecting the proceeds of prepayments, redemptions, maturities
(including monthly mortgage payments of principal in GNMA Series)
or sales of Portfolio Obligations from a Series of such Trusts
(exclusive of net capital gain) will not be taxable to
Unitholders of such Series to the extent that they represent a
return of capital for tax purposes. The portion of distributions
which represents a return of capital will, however, reduce a
Unitholder's basis in his Units, and to the extent they exceed
the basis of his Units will be taxable as a capital gain. A
Unitholder will realize a taxable gain or loss when his Units are
sold or redeemed for an amount different from his original cost
after reduction for previous distributions to the extent that
they represented a return of capital. Such gain or loss will
generally constitute either a long-term or short-term capital
gain or loss depending upon the length of time the Unitholder has
held his Units. Any loss on Units held six months or less will
be treated as long-term capital loss to the extent of any capital
gains dividends received (or deemed to have been received) by the
Unitholder with respect to such Units.
Under the Code, certain miscellaneous itemized deductions,
such as investment expenses, tax return preparation fees and
employee business expenses, will be deductible by individuals
only to the extent they exceed 2% of adjusted gross income.
Miscellaneous itemized deductions subject to this limitation
under present law do not include expenses incurred by the GNMA
and FNMA Trusts, as long as the Units of such Trusts are held by
or for 500 or more persons at all times during the taxable year.
In the event the Units of any Series of a GNMA and FNMA Trust are
held by fewer than 500 persons, additional taxable income will be
realized by the individual (and other noncorporate) Unitholders
in excess of the distributions received from such Series.
If a Ginnie Mae or Fannie Mae has been purchased by a GNMA
or FNMA Trust at a market discount (i.e. for purchase price less
than its outstanding principal amount) unless the amount of
market discount "de minimis" as specified in the Code, each
payment of principal on such security will constitute ordinary
income to such Series of the Trust to the extent of any accrued
market discount. In the case of a Ginnie Mae, the amount of
market discount that is deemed to accrue each month shall
generally be the amount of discount that bears the same ratio to
the total amount of remaining market discount that the amount of
interest paid during the accrual period (each month) bears to the
total amount of interest remaining to be paid on the Ginnie Mae
as of the beginning of the accrual period.
The market discount rules do no apply to stripped U.S.
Treasury Obligations because they are stripped debt instruments
subject to special original issue discount rules. Unitholders
should consult their tax advisers as to the amount of original
issue discount which accrues.
"The Revenue Reconciliation Act of 1993" (the "Tax Act")
raised tax rates on ordinary income while capital gains remain
subject to a 28% maximum stated rate for taxpayers other than
corporations. Because some or all capital gains are taxed at a
comparatively lower rate under the Tax Act, the Tax Act includes
a provision that recharacterizes capital gains as ordinary income
in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors
should consult with their tax advisers regarding the potential
effect of this provision on their investment in Units.
Each Unitholder of each Series of the GNMA and FNMA Trusts
shall receive an annual statement describing the tax status of
the distributions paid by such Series of such Trust.
It should be remembered that even if distributions are
reinvested, they are still treated as distributions for income
tax purposes.
Foreign Investors Trust. Each Kemper Government Securities
Trust, GNMA Portfolio Series of Midget Foreign Investors Trust,
which is available only to non-resident alien investors, is not
an association taxable as a corporation for Federal income tax
purposes and income received by such Series will be treated as
the income of the Unitholders.
A Unitholder of a Series of a Midget Foreign Investors Trust
who is not a citizen or resident of the United States or a United
States domestic corporation (a "Foreign Investor") will not be
subject to U.S. Federal income taxes, including withholding taxes
on amounts distributed from a Trust (including any original issue
discount) on, or any gain from the sale or other disposition of,
his Units or the sale or disposition of any Ginnie Mae by the
trustee, provided that (i) the interest income or gain is not
effectively connected with the conduct by the Foreign Investor of
a trade or business within the United States, (ii) with respect
to any gain, the Foreign Investor (if an individual) is not
present in the United States for 183 days or more during the
taxable year, and (iii) the Foreign Investor provides the
required certification of his status and of the matters contained
in clauses (i) and (ii) above, and further provided that the
exemption from withholding for U.S. Federal income taxes for
interest on any Ginnie Mae shall only apply to the extent the
mortgages underlying the Ginnie Mae were originated after
July 18, 1984.
Interest income received by the Trust is subject to
withholding taxes under Section 1441 of the Code prior to
distribution of such interest income to each Unitholder unless
the Unitholder provides his financial representative or the
Trustee with a statement that (i) is signed by the Unitholder
under penalties of perjury, (ii) certifies that such Unitholder
is not a United States person, or in the case of an individual,
that he is neither a citizen nor a resident of the United States,
and (iii) provides the name and address of the Unitholder. The
statement may be made, at the option of the person otherwise
required to withhold, on Form W-8 or on a substitute form that is
substantially similar to Form W-8. If the information provided
on the statement changes, the beneficial owner must so inform the
person otherwise required to withhold within 30 days of such
change.
The foregoing discussions relate only to Federal income
taxes on distributions by each Series of a Trust; such
distributions may also be subject to state and local taxation.
Unitholders should consult their own tax advisers regarding
questions of state and local taxation applicable to the Units.
Foreign Unitholders should consult their own tax advisers with
respect to United States Federal income tax consequences or
ownership of Units.
It should be remembered that even if distributions are
reinvested, they are still treated as distributions for income
tax purposes.
U.S. Treasury Portfolio Series. In the opinion of Chapman
and Cutler, counsel for the Sponsor:
(1) Each Series of the U.S. Treasury Portfolio is
not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the
owner of a pro rata portion of the U.S. Treasury Portfolio
Series of the Trust under the Code and income of such Series
will be treated as the income of the Unitholders under the
Code.
(2) Each Unitholder will have a taxable event
when the U.S. Treasury Portfolio Series disposes of a U.S.
Treasury Obligation, 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 the
U.S. Treasury Portfolio Series, if any, on U.S. Treasury
Obligations delivered after the Unitholder pay for their
Units to the extent that such interest accrued on such U.S.
Treasury Obligations during the period from the Unitholder's
settlement date to the date such U.S. Treasury Obligations
are delivered to the U.S. Treasury Portfolio Series 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 U.S. Treasury Obligations
(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, amortized
bond premium and accrued market discount (if the Unitholder
has elected to include such market discount in income as it
accrues), if any) is determined by apportioning the cost of
the Units among each of the U.S. Treasury Portfolio Series
assets ratably according to value as of the date of
acquisition of the Units. The tax cost reduction
requirements of said 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.
(3) Certain Series of the U.S. Treasury Portfolio
Series contain Stripped Treasury Securities. The basis of
each Unit and of each U.S. Treasury Obligation which was
issued with original issue discount must be increased by the
amount of accrued original issue discount and the basis of
each Unit and of each U.S. Treasury Obligation which was
purchased by such Trust at a premium must be reduced by the
annual amortization of bond premium which the Unitholder has
properly elected to amortize under Section 171 of the Code.
The Stripped Treasury Securities held by such Trusts are
treated as bonds that were originally issued at an original
issue discount provided, pursuant to a Treasury Regulation
(the "Regulation") issued on December 28, 1992, that the
amount of original issue discount determined under
Section 1286 of the Code is not less than a "de minimis"
amount as determined thereunder. Because the Stripped
Treasury Securities represent interests in "stripped" U.S.
Treasury bonds, a Unitholder's initial cost for his pro rata
portion of each Stripped Treasury Securities held by the
Trust (determined at the time he acquires his Units, in the
manner described above) shall be treated as its "purchase
price" by the Unitholder. Original issue discount is
effectively treated as interest for federal income tax
purposes, and the amount of original issue discount in this
case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A
Unitholder will be required to include in gross income for
each taxable year the sum of his daily portions of original
issue discount attributable to the Stripped Treasury
Securities held by the U.S. Treasury Portfolio Series as
such original issue discount accrues and will, in general,
be subject to federal income tax with respect to the total
amount of such original issue discount that accrues for such
year even though the income is not distributed to the
Unitholders during such year to the extent it is not less
than a "de minimis" amount as determined under the
Regulation. In general, original issue discount accrues
daily under a constant interest rate method which takes into
account the semi-annual compounding of accrued interest. In
the case of the Stripped Treasury Securities, this method
will generally result in an increasing amount of income to
the Unitholders each year. Unitholders should consult their
tax advisers regarding the federal income tax consequences
and accretion of original issue discount.
(4) The Unitholder's aliquot share of the total
proceeds received on the disposition of, or principal paid
with respect to, a U.S. Treasury Obligation held by the U.S.
Treasury Portfolio Series will constitute ordinary income
(which will be treated as interest income for most purposes)
to the extent it does not exceed the accrued market discount
on such U.S. Treasury Obligation issued after July 18, 1984
that has not previously been included in taxable income by
such Unitholder. A Unitholder may generally elect to
include market discount in income as such discount accrues.
In general, market discount is the excess, if any, of the
Unitholder's pro rata portion of the outstanding principal
balance of a U.S. Treasury Obligation over the Unitholder's
initial tax cost for such pro rata portion, determined at
the time such Unitholder acquires his Units. However,
market discount with respect to any U.S. Treasury Obligation
will generally be considered zero if it does not exceed the
statutorily defined de minimis amount. The market discount
rules do not apply to Stripped Treasury Securities because
they are stripped debt instruments subject to special
original issue discount rules as discussed above. If a
Unitholder sells his Units, gain, if any, will constitute
ordinary income to the extent of the aggregate of the
accrued market discount on the Unitholder's pro rata portion
of each U.S. Treasury Obligation that is held by the U.S.
Treasury Portfolio Series that has not previously been
included in taxable income by such Unitholder. In general,
market discount accrues on a ratable basis unless the
Unitholder elects to accrue such discount on a constant
interest rate basis. However, a Unitholder should consult
his own tax adviser regarding the accrual of market
discount. The deduction by a Unitholder for any interest
expense incurred to purchase or carry Units will be reduced
by the amount of any accrued market discount that has not
yet been included in taxable income by such Unitholder. In
general, the portion of any interest expense which is not
currently deductible would be ultimately deductible when the
accrued market discount is included in income.
(5) The Code provides that
"miscellaneous
itemized deductions" are allowable only to the extent that
they exceed two percent of an individual taxpayer's adjusted
gross income. Miscellaneous itemized deductions subject to
this limitation under present law include a Unitholder's pro
rata share of expenses paid by the applicable Series of the
U.S. Treasury Portfolio Series, including fees of the
Trustee, and the Evaluator, but does not include amortizable
bond premium on U.S. Treasury Obligations held by the U.S.
Treasury Portfolio Series.
"The Revenue Reconciliation Act of 1993" ( the "Tax Act")
raised tax rates on ordinary income while capital gains remain
subject to a 28% maximum stated rate for taxpayers other than
corporations. Because some or all capital gains are taxed at a
comparatively lower rate under the Tax Act, the Tax Act includes
a provision that recharacterizes capital gains as ordinary income
in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors
should consult with their tax advisers regarding the potential
effect of this provision on their investment in Units.
The market discount rules do not apply to stripped U.S.
Treasury Obligations because they are stripped debt instruments
subject to special original issue discount rules. Unitholders
should consult their tax advisers as to the amount of original
issue discount which accrues.
If a Unitholder does not elect to annually include accrued
market discount in taxable income as it accrues, deduction for
any interest expense incurred by the Unitholder which is incurred
to purchase or carry his Units will be reduced by such accrued
market discount. In general, the portion of any interest expense
which was not currently deductible would ultimately be deductible
when the accrued market discount is included in income.
Unitholders should consult their tax advisers regarding whether
an election should be made to include market discount in income
as it accrues and as to the amount of interest expense which may
not be currently deductible.
The tax basis of a Unitholder with respect to his interest
in a U.S. Treasury Obligation is increased by the amount of
original issue discount (and market discount, if the Unitholder
elects to include market discount, if any, on the U.S. Treasury
Obligations held by the Trust in income as it accrues) thereon
properly included in the Unitholder's gross income as determined
for Federal income tax purposes and reduced by the amount of any
amortized acquisition premium which the Unitholder has properly
elected to amortize under Section 171 of the Code. A
Unitholder's tax basis in his Units will equal his tax basis in
is pro rata portion of all of the asset of the Trust.
A Unitholder will recognize taxable capital gain (or loss)
when all or part of his pro rata interest in a U.S. Treasury
Obligation is disposed of in a taxable transaction for an amount
greater (or less) than his tax basis therefor. Any gain
recognized on a sale or exchange and not constituting a
realization of accrued "market discount," and any loss will,
under current law, generally be capital gain or loss except in
the case of a dealer or financial institution. As previously
discussed, gain realized on the disposition of the interest of a
Unitholder in any U.S. Treasury Obligation deemed to have been
acquired with market discount will be treated as ordinary income
to the extent the gain does not exceed the amount of accrued
market discount not previously taken into income. Any capital
gain or loss arising from the disposition of a U.S. Treasury
Obligation by the Trust or the disposition of Units by a
Unitholder will be short-term capital gain or loss unless the
Unitholder has held his Units for more than one year in which
case such capital gain or loss will be long-term. The tax cost
reduction requirements of the Code relating to amortization of
bond premium may under some circumstances, result in the
Unitholder realizing taxable gain when his Units are sold or
redeemed for an amount equal to or less than his original cost.
If the Unitholder disposes of a Unit, he is deemed thereby
to have disposed of his entire pro rata interest in all Trust
assets including his pro rata portion of the U.S. Treasury
Obligations represented by the Unit. This may result in a
portion of the gain, if any, on such sale being taxable as
ordinary income under the market discount rules (assuming no
election was made by the Unitholder to include market discount in
income as it accrues) as previously discussed.
The Sponsor believes that Unitholders who are individuals
will not be subject to any state personal income taxes on the
interest received by a U.S. Treasury Portfolio Series and
distributed to them. However, Unitholders (including
individuals) may be subject to state and local taxes on any
capital gains (or market discount treated as ordinary income)
derived from a U.S. Treasury Portfolio Series and to other state
and local taxes (including corporate income or franchise taxes,
personal property or intangibles taxes, and estate or inheritance
taxes) on their Units or the income derived therefrom. In
addition, individual Unitholders (and any other Unitholders which
are not subject to state and local taxes on the interest income
derived from U.S. Treasury Portfolio Series) will probably not be
entitled to a deduction for state and local tax purposes for
their share of the fees and expenses paid by a U.S. Treasury
Portfolio Series, for any amortized bond premium or for any
interest on indebtedness incurred to purchase or carry their
Units. Therefore, even though the Sponsor believes that interest
income from a U.S. Treasury Portfolio Series is exempt from state
personal income taxes in all states, Unitholders should consult
their own tax advisers with respect to state and local taxation.
A Unitholder of a U.S. Treasury Portfolio Series who is not
a citizen or resident of the United States or a United States
domestic corporation (a "Foreign Investor") will not be subject
to U.S. federal income taxes, including withholding taxes on
amounts distributed from the U.S. Treasury Portfolio Series
(including any original issue discount) on, or any gain from the
sale or other disposition of, his Units or the sale or
disposition of any U.S. Treasury Obligations by the Trustee,
provided that (i) the interest income or gain is not effectively
connected with the conduct by the Foreign Investor of a trade or
business within the United States, (ii) with respect to any gain,
the Foreign Investor (if an individual) is not present in the
United States for 183 days or more during the taxable year, and
(iii) the Foreign Investor provides the required certification of
his status and of the matters contained in clauses (i) and (ii)
above, and further provided that the exemption from withholding
for U.S. federal income taxes for interest on any U.S. Treasury
Obligation shall only apply to the extent the U.S. Treasury
Obligation was issued after July 18, 1984.
Unless an applicable treaty exemption applies and proper
certification is made, amounts otherwise distributable by the
U.S. Treasury Portfolio Series to a Foreign Investor will
generally be subject to withholding taxes under Section 1441 of
the Code unless the Unitholder timely provides his financial
representative or the Trustee with a statement that (i) is signed
by the Unitholder under penalties of perjury, (ii) certifies that
such Unitholder is not a United States person, or in the case of
an individual, that he is neither a citizen nor a resident of the
United States, and (iii) provides the name and address of the
Unitholder. The statement may be made, at the option of the
person otherwise required to withhold, on Form W-8 or on a
substitute form that is substantially similar to Form W-8. If
the information provided on the statement changes, the beneficial
owner must so inform the person otherwise required to withhold
within 30 days of such change.
Foreign Unitholders should consult their own tax advisers
with respect to the foreign and United States tax consequences on
ownership of Units.
It should be remembered that even if distributions are
reinvested they are still treated as distributions for income tax
purposes.
It should also be remembered that Unitholders of Series
holding Stripped Treasury Securities will be required for federal
income tax purposes to include amounts in ordinary gross income
in advance of the receipt of the cash attributable to such
income.
Each Unitholder (other than a foreign investor who has
properly provided the certifications described above will be
requested to provide the Unitholder's taxpayer identification
number to the Trustee and to certify that the Unitholder has not
been notified that payments to the Unitholder are subject to
back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder will be
subject to back-up withholding.
Kemper Defined Funds, GNMA Portfolio, Series 1. In the
opinion of Chapman and Cutler, counsel for the Sponsor:
(1) Each GNMA Portfolio Series is not
an
associate taxable as a corporation for Federal income tax
purposes; each Unitholder will be treated as the owner of a
pro rata portion of the GNMA Portfolio Series of the
respective Trust under the Code and income of such Series
will be treated as the income of the Unitholders under the
Code.
(2) Each Unitholder will have a taxable event
when a GNMA Portfolio Series disposes of a Security, 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 GNMA Portfolio Series, if
any, on Securities delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such
Securities during the period from the Unitholder's
settlement date to the date such Securities are delivered to
such GNMA Portfolio Series 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 Securities (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 for 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, amortized bond premium and accrued
market discount (if the Unitholder has elected to include
such market discount in income as it accrues), if any) is
determined by apportioning the cost of the Units among each
of a GNMA Portfolio Series assets ratably according to value
as of the date of acquisition of the Units. The tax cost
reduction requirements of said 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.
(3) Each GNMA Portfolio Series contains Stripped
Treasury Securities. The basis of each Unit and of each
Security which was issued with original issue discount
(including the U.S. Treasury obligations) must be increased
by the amount of accrued original issue discount and the
basis of each Unit and of each Security which was purchased
by the Trusts at a premium which the Unitholder has property
elected to amortize under Section 171 of the Code. The
Stripped Treasury Securities held by the Trusts are treated
as bonds that were originally issued at an original issue
discount provided, pursuant to a Treasury Regulation (the
"Regulation") issued on December 28, 1992, that the amount
of original issue discount determined under Section 1286 of
the Code is not less than a "de minimis" amount as
determined thereunder. Because the Stripped Treasury
Securities represent interests in "stripped" U.S. Treasury
bonds, a Unitholder's initial cost for his pro rata portion
of each Stripped Treasury Security held by a Trust
(determined at the time he acquires his Units, in the manner
described above) shall be treated as its "purchase price" by
the Unitholder. Original issue discount is effectively
treated as interest for Federal income tax purposes, and the
amount of original issue discount in this case is generally
the difference between the bond's purchase price and its
stated redemption price at maturity. A Unitholder will be
required to include in gross income for each taxable year
the sum of his daily portions of original issue discount
attributable to the Stripped Treasury Securities held by a
Trust as such original discount accrues and will, in
general, be subject to Federal income tax with respect to
the total amount of such original issue discount that
accrues for such year even though the income is not
distributed to the Unitholders during such year to the
extent it is not less than a "de minimis" amount as
determined under the Regulation. In general, original issue
discount accrues daily under a constant interest rate method
which takes into account the semi-annual compounding of
accrued interest. In the case of the Stripped Treasury
Securities this method will generally result in an
increasing amount of income to the Unitholders each year.
Unitholders should consult their tax advisers regarding the
Federal income tax consequences and accretion of original
issue discount.
(4) The Unitholder's aliquot share of the total
proceeds received on the disposition of, or principal paid
with respect to, a Security held by a Trust will constitute
ordinary income (which will be treated as interest income
for most purposes) to the extent it does not exceed the
accrued market discount on such Security that has not
previously been included in taxable income by such
Unitholder. A Unitholder may generally elect to include
market discount in income as such discount accrues. In
general, market discount is the excess, if any, of the
Unitholder's pro rata portion of the outstanding principal
balance of a Security over the Unitholder's initial tax cost
for such pro rata portion, determined at the time such
Unitholder acquires his Units. However, market discount
with respect to any Security will generally be considered
zero if it does not exceed the statutorily defined de
minimis amount. The market discount rules do not apply to
Stripped Treasury Securities because they are stripped debt
instruments subject to special original issue discount rules
as discussed above. If a Unitholder sells his Units, gain,
if any, will constitute ordinary income to the extent of the
aggregate of the accrued market discount on the Unitholder's
pro rata portion of each Security issued that is held by a
Trust that has not previously been included in taxable
income by such Unitholder. In general, market discount
accrues on a ratable basis unless the Unitholder elects to
accrue such discount on a constant interest rate basis.
However, a Unitholder should consult his own tax adviser
regarding the accrual of market discount. The deduction by
a Unitholder for any interest expense incurred to purchase
or carry Units will be reduced by the amount of any accrued
market discount that has not yet been included in taxable
income by such Unitholder. In general, the portion of any
interest expense which is not currently deductible would be
ultimately deductible when the accrued market discount is
included in income.
(5) The Code provides that
"miscellaneous
itemized deductions" are allowable only to the extent that
they exceed two percent of an individual taxpayer's adjusted
gross income. Miscellaneous itemized deductions subject to
this limitation under present law include a Unitholder's pro
rata share paid by the Trust, including fees of the Trustee
and the Evaluator but does not include amortizable bond
premium on Securities held by the Trusts.
"The Revenue Reconciliation Act of 1993" (the "Tax Act")
raised tax rates on ordinary income while capital gains remain
subject to a 28% maximum stated rate for taxpayers other than
corporation's. Because some or all capital gains are taxed at a
comparatively lower rate under the Tax Act, the Tax Act included
a provision that recharacterizes capital gains as ordinary income
in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors
should consult with their tax advisers regarding the potential
effect of this provision on their investment in Units.
A Unitholder of a GNMA Portfolio Series who is not a citizen
or resident of the United States or a United States domestic
corporation (a "Foreign Investor") will not be subject to U.S.
Federal income taxes, including withholding taxes on amounts
distributed from the Trusts (including any original issue
discount) on, or any gain from the sale or other disposition of,
his Units or the sale or disposition of any Securities by the
Trustee, provided that (i) the interest income or gain is not
effectively connected with the conduct by the Foreign Investor of
a trade or business within the United States, (ii) with respect
to any gain, the Foreign Investor (if an individual) is not
present in the United States for 183 days or more during the
taxable year, and (iii) the Foreign Investor provides the
required certification of his status and of the matters contained
in clauses (i) and (ii) above, and further provided that the
exemption from withholding for U.S. Federal income taxes for
interest on any Stripped Treasury Security shall only apply to
the extent the Stripped Treasury Security was issued after
July 18, 1984 and for interest on any Ginnie Mae to the extent
the
mortgages underlying such Ginnie Mae were originated after
July 18, 1984.
Unless an applicable treaty exemption applies and proper
certification is made, amounts otherwise distributable by the
Trusts to a Foreign Investor will generally be subject to
withholding taxes under Section 1441 of the Code unless the
Unitholder timely provides his financial representative or the
Trustee with a statement that (i) is signed by the Unitholder
under penalties of perjury, (ii) certifies that such Unitholder
is not a United States person, or in the case of an individual,
that he is neither a citizen nor a resident of the United States,
and (iii) provides the name and address of the Unitholder. The
statement may be made, at the option of the person otherwise
required to withhold, on Form W-8 or on a substitute form that is
substantially similar to Form W-8. If the information provided
on the statement changes, the beneficial owner must so inform the
person otherwise required to withhold within 30 days of such
change.
The foregoing discussions relate only to Federal income
taxes on distributions by the Trusts; such distributions may also
be subject to state and local taxation. Unitholders should
consult their own tax advisers regarding questions of state and
local taxation applicable to the Units.
Foreign Unitholders should consult their own tax advisers
with respect to the foreign and United States tax consequences or
ownership of Units.
It should be remembered that even if distributions are
reinvested, they are still treated as distributions for income
tax purposes.
It should also be remembered that Unitholders may be
required for Federal income tax purposes to include amounts in
ordinary gross income in advance of the receipt of the cash
attributable to such income.
Each Unitholder (other than a foreign investor who has
properly provided the certifications described above) will be
requested to provide the Unitholder's taxpayer identification
number to the Trustee and to certify that the Unitholder has not
been notified that payments to the Unitholder are subject to
back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when
requested, distributions by a Trust to such Unitholder will be
subject to back-up withholding.
RETIREMENT PLANS
As indicated under "Tax Status of the Trusts" above,
Unitholders of a U.S. Treasury Portfolio Series will be required
for Federal income tax purposes to include amounts in ordinary
gross income in advance of the receipt of the cash attributable
to such income. Therefore, purchase of Units may be appropriate
only for an account which can pay taxes with other funds in
advance of the receipt of the cash attributable to such income or
for Individual Retirement Accounts, Keogh plans, pension funds
and other qualified retirement plans, certain of which are
briefly described below.
The various Series of the Trusts which are not Foreign
Investors Trusts, may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other
qualified retirement plans, certain of which are briefly
described below.
Generally, capital gains and income received in each of the
foregoing plans are deferred from federal taxation. All
distributions from such plans are generally treated as ordinary
income but may, in some cases, be eligible for special income
averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific
tax laws related thereto and should consult their attorneys or
tax advisers with respect to the establishment and maintenance of
any such plan. Such plans are offered by brokerage firms and
other financial institutions. Each Series of the Trusts will
waive the $1,000 minimum investment requirement for IRA accounts.
The minimum investment is $250 for tax-deferred plans such as IRA
accounts. Fees and charges with respect to such plans may vary.
Individual Retirement Account _ IRA. Any individual under
age 70-1/2 may contribute the lesser of $2,000 or 100% of
compensation to an IRA annually. Such contributions are fully
deductible if the individual (and spouse if filing jointly) are
not covered by a retirement plan at work. The deductible amount
an individual may contribute to an IRA will be reduced $10 for
each $50 of adjusted gross income over $25,000 ($40,000 if
married, filing jointly or $0 if married, filing separately), if
either an individual or their spouse (if married, filing jointly)
is an active participant in an employer maintained retirement
plan. Thus, if an individual has adjusted gross income over
$35,000 ($50,000 if married, filing jointly or $0 if married,
filing separately) and if an individual or their spouse is an
active participant in an employer maintained retirement plan, no
IRA deduction is permitted. Under the Code, an individual may
make nondeductible contributions to the extent deductible
contributions are not allowed. All distributions from an IRA
(other than the return of certain excess contributions) are
treated as ordinary income for Federal income taxation purposes
provided that under the Code an individual need not pay tax on
the return of nondeductible contributions, the amount includable
in income for the taxable year is the portion of the amount
withdrawn for the taxable year as the individual's aggregate
nondeductible IRA contributions bear to the aggregate balance of
all IRAs of the individual.
A participant's interest in an IRA must be, or commence to
be, distributed to the participant not later than April 1 of the
calendar year following the year during which the participant
attains at 70-1/2. Distributions made before attainment of age
59-1/2, except in the case of the participant's death or
disability, or where the amount distributed is to be rolled over
to another IRA, or where the distributions are taken as a series
of substantially equal periodic payments over the participant's
life or life expectancy (or the joint lives or life expectancies
of the participant and the designated beneficiary) are generally
subject to a surtax in an amount equal to 10% of the
distribution. The amount of such periodic payments may not be
modified before the later of five years or attainment of age
59-1/2. Excess contributions are subject to an annual 6% excise
tax.
IRA applications, disclosure statement and trust agreements
are available from the Sponsor upon request.
Qualified Retirement Plans. Units of a Series of the Trust
which are not Foreign Investors Trusts may be purchased by
qualified pension or profit sharing plans maintained by
corporations, partnerships or sole proprietors. The maximum
annual contribution for a participant in a money purchase pension
plan or to paired profit sharing and pension plans is the lesser
of 25% of compensation or $30,000. Prototype plan documents for
establishing qualified retirement plans are available from the
Sponsor upon request.
Excess Distributions Tax. In addition to the other taxes
due by reason of a plan distribution, a tax of 15% may apply to
certain aggregate distributions from IRAs, Keogh plans, and
corporate retirement plans to the extent such aggregate taxable
distributions exceed specified amounts (generally $150,000, as
adjusted) during a tax year. This 15% tax will not apply to
distributions on account of death, qualified domestic relations
orders or amounts eligible for tax-deferred rollover treatment.
In general, for lump sum distributions the excess distribution
over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee, Investors Fiduciary Trust Company ("IFTC"), has
agreed to act as custodian for certain retirement plan accounts.
An annual fee of $12.00 per account, if not paid separately, will
be assessed by the Trustee and paid through the liquidation of
shares of the retirement account. An individual wishing IFTC to
act as custodian must complete a Kemper UIT/IRA application and
forward it along with a check made payable to Investors Fiduciary
Trust Company. Certificates for Individual Retirement Accounts
can not be issued.
DISTRIBUTION REINVESTMENT
Each Unitholder of the Trust may elect, at the time of
purchase, 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 an affiliate of the Sponsor, 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 Trusts, Unitholders should
carefully consider the consequences before selecting such Kemper
Funds for reinvestment.
Detailed information with respect to the investment
objectives and management of these Kemper Funds is contained in
their respective prospectuses, which can be obtained from the
Sponsor or an investor's financial representative upon request.
An investor should read the appropriate prospectus prior to
making the election to reinvest. Unitholders who desire to have
their distributions automatically reinvested should inform their
financial representative at the time of purchase or should file
with the Program Agent referred to below a written notice of such
election.
Unitholders who initially elect to receive distributions in
cash may elect to participate in the reinvestment program by
filing with the Program Agent an election to have such
distributions reinvested without charge. The 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 distribution. The election to participate in the
reinvestment program shall remain in effect until a subsequent
notice is received in writing by the Program Agent. See
"Administration of the Trust-Distributions from the Interest,
Principal and Capital Gains Accounts."
The Program Agent is Investors Fiduciary Trust Company. All
inquiries concerning participation in the Reinvestment Plan
should be directed to the Program Agent at P.O. Box 419430,
Kansas City, Missouri 64173-0216, telephone (816) 474-8786.
Unitholders participating in IRA's, Keogh Plans and other
tax deferred retirement plans, may find it highly advantageous to
participate in the Reinvestment Program in order to keep the
monies in the account fully invested at all times. Should
reinvestment be selected, an account with an identical
registration to that established at the time the Trust Units are
purchased will be set up in the reinvestment Fund selected by the
investor. Investors should consult with their plan custodian as
to the appropriate disposition of distributions. If participants
in IRA's, Keogh Plans and other tax deferred retirement plans do
not elect a reinvestment option, cash distributions will be sent
to the custodian of the retirement plan and will not be sent to
the investor, since payments to the investor would constitute a
distribution from the plan which would result in tax penalties
for premature withdrawals from such programs. See "Retirement
Plans."
REDEMPTION
Right of Redemption. It may be possible, in some cases,
for Units to be sold in the over-the-counter market for a higher
price than the Redemption Value for such Units. Therefore, a
Unitholder who wishes to dispose of his Units is advised to
inquire through his financial representative as to current market
prices for Units in order to determine if there is an
over-the-counter price in excess of Redemption Value per Unit or
the Sponsor's Repurchase Price for such Series of the Trust.
A Unitholder who does not dispose of Units in the secondary
market described above may cause Units to be redeemed by the
Trustee by making a written request to the Trustee, Investors
Fiduciary Trust Company, P.O. Box 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 redemption by individual
account owners (including joint owners) or fiduciary accounts
where the fiduciary is named in the account registration.
Additional documentation may be requested, and a signature
guarantee is always required, from corporations, executors,
administrators, trustees, guardians or associations. If
required, the 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. 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 Value of
such Series, determined as set forth below under "Computation of
Redemption Value," next following such tender, multiplied by the
number of Units of such Series being redeemed. Any Units
redeemed shall be cancelled and any undivided fractional interest
in such Series of the Trusts extinguished. The price received
upon redemption might be more or less than the amount paid by the
Unitholder depending on the value of the Portfolio Obligations in
the Portfolio of the Series at the time of redemption.
During the period in which the Sponsor maintains a market
for Units, the Sponsor has the right to repurchase any Unit
presented for tender to the Trustee for redemption no later than
the close of business on the second business day following such
presentation.
The Trustee is irrevocably authorized in its discretion, if
the Sponsor does not elect to repurchase any Unit tendered for
redemption or if the Sponsor itself tenders Units for redemption,
in lieu of redeeming Units presented for tender at the Redemption
Value, to sell such Units in the over-the-counter market for the
account of a tendering Unitholder at prices which will return to
the Unitholder monies, net after brokerage commissions, transfer
taxes and other charges, equal to or in excess of the Redemption
Value for such Units. In the event of any such sale, the Trustee
will pay the net proceeds thereof to the Unitholder on the day he
would otherwise be entitled to receive payment of the Redemption
Value.
Any amounts to be paid on redemption representing interest
shall be withdrawn from the Interest Account of such Series to
the extent funds are available. All other amounts paid on
redemption shall be withdrawn from the Principal Account of such
Series. The Trustee is authorized by the Indenture to sell
Portfolio Obligations from a Series in order to provide funds for
redemption. To the extent Portfolio Obligations are sold, the
size of that Series of the Trusts will be reduced. Portfolio
Obligations will be sold by the Trustee so as to maintain, as
closely as practicable, the original percentage relationship
between the principal amounts of the Portfolio Obligations in
such Series. The Portfolio Obligations to be sold for purposes
of redeeming Units will be selected from a list supplied by the
Sponsor. The Portfolio Obligations will be chosen for this list
by the Sponsor on the basis of such market and credit factors as
it may determine are in the best interests of such Series of the
Trust. Provision is made under the Indenture for the Sponsor to
specify minimum face amounts in which blocks of Portfolio
Obligations are to be sold in order to obtain the best price
available. While such minimum amounts may vary from time to time
in accordance with market conditions, it is anticipated that the
minimum face amounts which would be specified would range from
$25,000 to $100,000. Sales may be required at a time when the
Portfolio Obligations would not otherwise be sold and might
result in lower prices than might otherwise be realized.
Moreover, due to the minimum principal amount in which Portfolio
Obligations may be required to be sold, the proceeds of such
sales may exceed the amount necessary for payment of Units
redeemed. To the extent not used to meet other redemption
requests in such Series, such excess proceeds will be distributed
pro rata to all remaining Unitholders of record of such Series,
unless reinvested in substitute Portfolio Obligations. See
"Administration of the Trust _ Portfolio Supervision."
Computation of Redemption Value. The value of a Unit of a
Series of the Trust is determined as of the Evaluation Time
stated under "Essential Information" in Part Two
(a) semiannually, on June 30 and December 31 of each year (or the
last business day prior thereto), (b) on any business day as of
the Evaluation Time next following the tender of any Unit and
(c) on any other business day desired by the Sponsor or the
Trustee,
(1) by adding:
a. The aggregate bid side evaluation of the
Portfolio Obligations in a Series of the Trust, as
determined by the Evaluator;
b. Cash on hand in such Series of the Trusts,
other than money deposited to purchase contract
obligations or money credited to the Reserve Account;
and
c. Accrued but unpaid interest on the Portfolio
Obligations in such Series to the redemption date.
(2) and then deducting from the resulting figure:
amounts representing any applicable taxes or governmental
charges payable by such Series of the Trusts for the purpose
of making an addition to the reserve account (as defined in
the Indenture), amounts representing estimated accrued
expenses (including audit fees) of the Series, amounts
representing unpaid fees and expenses of the Trustee, the
Sponsor (if applicable), counsel and the Evaluator and
monies held for distribution to Unitholders of record of
such Series as of the business day prior to the evaluation
being made on the days or dates set forth above;
(3) and then dividing the result of the above
computation by the total number of Units of such Series
outstanding on the date of evaluation. The resulting figure
equals the Redemption Value for each Unit of such Series.
The Evaluator will determine the aggregate current bid price
evaluation of the Portfolio Obligations in each Series of
the Trusts as set forth under "Public Offering of Units _
Public Offering Price."
Postponement of Redemption. The right of redemption of any
Series may be suspended and payment of the Redemption Value per
Unit postponed for more than seven calendar days following a
tender of Units for redemption for any period (as determined by
the Securities and Exchange Commission) during which the New York
Stock Exchange is closed, other than for customary weekend and
holiday closings, or during which trading on that Exchange is
restricted or an emergency exists as a result of which disposal
or evaluation of the Portfolio Obligations is not reasonably
practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee is not
liable to any person in any way for any loss or damage which may
result from any such suspension or postponement.
RIGHTS OF UNITHOLDERS
Unitholders. A Unitholder is deemed to be a beneficiary of
the Series of the Trusts which he purchased and is vested with
all right, title and interest in the appropriate Series of the
Trusts, each of which was created by the Indenture. A Unitholder
may at any time tender his Units to the Trustee for redemption.
Ownership of Units. Ownership of Units of a Series of the
Trusts will not be evidenced by Certificates unless a Unitholder
or the Unitholder's registered broker/dealer 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.
Certificates will be issued in denominations of 1,000 Units
(100 Units for Kemper Defined Funds) or any whole number of Units
in excess thereof. The Trustee may require a Unitholder to pay a
reasonable fee, to be determined in the sole discretion of the
Trustee, for each certificate reissued or transferred and to pay
any governmental charge that may be imposed in connection with
each such transfer or exchange. The Trustee at the present time
does not intend to charge for the normal transfer or exchange 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, if appropriate, evidence of ownership
and payment of expenses incurred. Any mutilated certificate must
be presented to the Trustee before a substitute certificate will
be issued.
Certain Limitations. The death or incapacity of any
Unitholder (or the dissolution of the Sponsor) will not operate
to terminate the Trusts or any Series thereof nor entitle the
legal representatives or heirs of such Unitholder to claim an
accounting or to take any other action or proceeding in any court
for a partition or winding up of the Trusts or any Series
thereof.
No Unitholder shall have the right to vote except with
respect to removal of the Trustee or amendment and termination of
the Trust or of the Series of which they are a Unitholder. See
"Administration of the Trust _ Amendment" and "Administration of
the Trust _ Termination." Unitholders shall have no right to
control the operation or administration of the Trust or any
Series thereof in any manner, except upon the vote of Unitholders
representing 66-2/3% of the Units of a Series outstanding for
purposes of amendment, termination or discharge of the Trustee,
all as provided in the Indenture; however, no Unitholder shall
ever be under any liability to any third party for any action
taken by the Trustee, Evaluator or Sponsor.
EXPENSES AND CHARGES
Initial Expenses. All expenses and charges incurred prior
to or in establishment of the Series of the Trusts, including the
cost of the initial preparation, printing and execution of the
Indenture and the certificate, the initial fees of the Trustee
and the Evaluator, initial legal and auditing expenses, the cost
of the preparation and printing of the Prospectus and all other
advertising and selling expenses were paid by the Sponsor.
Fees. The Sponsor will receive no fee from the Trusts or
any Series thereof for its services as such. However, the
Sponsor does receive a portfolio surveillance fee, which is
earned for portfolio supervisory services, at the rate set forth
under "Essential Information" in Part Two for the appropriate
Series per $1,000 principal amount of Portfolio Obligations in
such Series of the Trusts, computed monthly on the basis of the
largest principal amount of Portfolio Obligations in such Series
of the Trusts at any time during the preceding month. The
portfolio surveillance fee, which may not exceed the amount set
forth under "Essential Information" in Part Two, may exceed the
actual costs of providing portfolio supervisory services for
these Series of the Trusts, but at no time will the total amount
the Sponsor receives for supervisory services rendered to all
unit investment trusts sponsored by the Sponsor in any calendar
year exceed the aggregate cost of providing such services in that
year.
The Trustee will receive for its services under the
Indenture the fee set forth in Part Two under "Essential
Information" per $1,000 principal amount of Portfolio Obligations
in each Series of the Trusts, computed monthly on the basis of
the largest principal amount of Portfolio Obligations in such
Series at any time during the preceding month. In no event will
the Trustee be paid less than $2,000 per Series in any one year.
For evaluation of Portfolio Obligations in a Series of the
Trusts, the Evaluator shall receive the fee set forth in Part Two
under "Essential Information" per $1,000 principal amount of
Portfolio Obligations in such Series, computed monthly on the
basis of the largest aggregate principal amount of Portfolio
Obligations in such Series at any time during the preceding
month.
The Trustee's fees, Sponsor's portfolio surveillance fees
and the Evaluator's fees are payable monthly on or before each
Distribution Date from the Interest Account of each Series to the
extent funds are available and thereafter from the Principal
Account of such Series. Any of such fees may be increased
without approval of the Unitholders in proportion to increases
under the category "All Services Less Rent of Shelter" in the
Consumer Price Index published by the United States Department of
Labor or if such category is no longer published, in a comparable
category. The Trustee also receives benefits to the extent that
it holds funds on deposits in various non-interest bearing
accounts created under the Indenture.
Other Charges. The following additional charges are or may
be incurred by a Series of the Trusts as more fully described in
the Indenture: (a) fees of the Trustee for extraordinary
services, (b) expenses of the Trustee (including legal and
auditing expenses, but not including any fees and expenses
charged by any agent for custody and safeguarding the Portfolio
Obligations) and of counsel designated by the Sponsor,
(c) various governmental charges, (d) expenses and costs of any
action taken by the Trustee to protect the Series of the Trusts
and the rights and interests of the Unitholders thereof,
(e) indemnification of the Trustee for any loss, liability or
expense incurred by it in the administration of the Series of the
Trusts without gross negligence, bad faith, willful malfeasance
or willful misconduct on its part or reckless disregard of its
obligations and duties, (f) indemnification of the Sponsor for
any losses, liabilities and expenses incurred in acting as
Sponsor under the Indenture without gross negligence, bad faith,
willful malfeasance or willful misconduct or reckless disregard
of its obligations and duties, and (g) expenditures incurred in
contacting Unitholders upon termination of such Series of the
Trusts.
The fees and expenses set forth herein are payable out of a
Series of the Trusts and when so paid by or owing to the Trustee
are secured by a lien on such Series. If the balances in the
Interest and Principal Accounts are insufficient to provide for
amounts payable by any Series of the Trusts, the Trustee has the
power to sell Portfolio Obligations from such Series to pay such
amounts. To the extent Portfolio Obligations are sold, the size
of that Series of the Trusts will be reduced and the proportions
of the types of Portfolio Obligations will change. Such sales
might be required at a time when Portfolio Obligations would not
otherwise be sold and might result in lower prices than might
otherwise be realized. Moreover, due to the minimum principal
amount in which Portfolio Obligations may be required to be sold,
the proceeds of such sales may exceed the amount necessary for
the payment of such fees and expenses.
ADMINISTRATION OF THE TRUST
Records and Accounts. In accordance with the Indenture,
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, each Unitholder of each Series of the
Trusts. Such books and records 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
Indenture on file in its office available for inspection at all
reasonable time during usual business hours by any Unitholder of
such Series, together with a current list of the Portfolio
Obligations held in each Series of the Trusts. Pursuant to the
Indenture, the Trustee may employ one or more agents for the
purpose of custody and safeguarding of the Portfolio Obligations
comprising the Portfolios.
Distributions from the Interest, Principal and Capital Gains
Accounts.
GNMA Trust. The terms of the Ginnie Maes provide for
payment to the holders thereof (including the Series of the GNMA
Trust) on the fifteenth day of each month (the 25th day in the
case of Ginnie Mae II's) of amounts collected by or due to the
issuers thereof with respect to the underlying mortgages during
the preceding month. The Trustee will collect the interest due
each Series on the Securities therein as it becomes payable and
credit such interest to a separate Interest Account created by
the Indenture for such Series.
Distributions will be made to each Unitholder of record of
each Series of the GNMA Trust on the appropriate Distribution
Date and will consist of an amount substantially equal to such
Unitholder's pro rata share of the cash balances in the Interest
Account, the Principal Account and the Capital Gains Account, if
any, of such Series computed as of the close of business on the
preceding Record Date.
FNMA Trust. The terms of the FNMA Debentures provide for
semi-annual payments of interest on or about the 10th day of the
designated months. Interest received by a Series of the FNMA
Trust, including any portion of the proceeds from a disposition
of the Debentures 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. The Trustee normally has no
cash for distribution to Unitholders until it receives interest
payments on the Debentures in such Series. Since interest is
paid semi-annually, during the initial months of such Series, the
Interest Account of such Series, consisting of accrued but
uncollected interest and collected interest (cash), will be
predominantly the uncollected accrued interest that is not
available for distribution. On the dates set forth under
"Essential Information" in Part Two, the trustee will commence
distributions, in part from funds advanced by the Trustee.
Thereafter, assuming the Series retains its original size
and composition, after deduction of the fees and expenses of the
Trustee, Sponsor and Evaluator and reimbursements (without
interest) to the Trustee for any amounts advanced to such Series,
the Trustee will normally make a distribution on each Interest
Distribution Date (the last business day of the month) or shortly
thereafter to Unitholders of record of such Series on the
preceding Record Date. Unitholders of a Series of the FNMA Trust
will receive an amount substantially equal to one-twelfth of such
holders' pro rata share of the estimated net annual interest
income to the Interest Account of such Series. However, interest
earned at any point in time will be greater than the amount
actually received by the Trustee and distributed to the
Unitholders. Therefore, there will always remain an item of
accrued interest that is added to the daily value of the Units.
If Unitholders of a Series of the FNMA Trust 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 a
sale or to the date of tender in the case of a redemption.
Since interest on the Debentures in a Series of the FNMA
Trust is payable in semi-annual installments, and distributions
of income are made to Unitholders at different intervals from
receipt of interest, the interest accruing to such Series may not
be equal to the amount of money received and available for
distribution from the Interest Account. Therefore, on each
Distribution Date the amount of interest actually deposited in
the Interest Account of a Series of the FNMA Trust and available
for distribution may be slightly more or less than the interest
distribution made. In order to eliminate fluctuations in
interest distribution resulting from such variances, the Trustee
is authorized by the Indenture 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 for such Series.
The Trustee will distribute on each semi-annual Distribution
Date or shortly thereafter, to each Unitholder of record a Series
of the FNMA Trust on the preceding semi-annual Record Date, an
amount substantially equal to such holder's pro rata share of the
cash balance, if any, in the Principal Amount of such Series
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 1,000 Units.
U.S. Treasury Portfolio Series. The terms of the U.S.
Treasury Obligations (other than Stripped Treasury Securities)
provide for semi-annual payments of interest on or about the 10th
day (the 15th day for Kemper Defined Funds) of the designated
months. Interest received by a U.S. Treasury Portfolio Series,
including any portion of the proceeds from a disposition of the
U.S. Treasury Obligations which represents accrued interest, is
credited by the Trustee to the Interest Account for such Trust
Fund. All other receipts are credited by the Trustee to a
separate Principal Account for such Trust Fund.
Since interest on the U.S. Treasury Obligations (other than
Stripped Treasury Securities) in U.S. Treasury Portfolio Series
is payable in semi-annual installments, and distributions of
income are made to Unitholders at different intervals from
receipt of interest, the interest accruing to Unitholders in the
U.S. Treasury Portfolio Series may not be equal to the amount of
money received and available for distribution from the Interest
Account. Therefore, on each Distribution Date the amount of
interest actually deposited in the Interest Account of a U.S.
Treasury Portfolio Series 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
Indenture 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 for such
U.S. Treasury Portfolio Series.
Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities obtains only the right to
receive a future fixed payment on the security and not any rights
to periodic interest payments thereon. Purchasers of these
Securities acquire, in effect, discount obligations that are
economically identical to the "zero-coupon bonds" that have been
issued by corporations. Zero coupon bonds are debt obligations
which do not make any periodic payments of interest prior to
maturity and accordingly are issued at a deep discount.
Under generally accepted accounting principles, a holder of
a security purchased at a discount normally must report as an
item of income for financial accounting purposes the portion of
the discount attributable to the applicable reporting period.
The calculation of this attributable income would be made on the
"interest" method which generally will result in a lesser amount
of includable income in earlier periods and a correspondingly
larger amount in later periods. For Federal income tax purposes,
the inclusion will be on a basis that reflects the effective
compounding of accrued but unpaid interest effectively
represented by the discount. Although this treatment is similar
to the "interest" method described above, the "interest" method
may differ to the extent that generally accepted accounting
principles permit or require the inclusion of interest on the
basis of a compounding period other than the semi-annual period.
See "Tax Status of the Trusts."
The Trustee will distribute on each Distribution Date or
shortly thereafter, to each Unitholder of record of U.S. Treasury
Portfolio Series on the preceding Record Date, an amount
substantially equal to such holder's pro rata share of the cash
balance, if any, in the Principal Account of U.S. Treasury
Portfolio Series 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
1,000 Units (or in the case of Kemper Defined Funds, less than
$1.00 per 100 Units). Notwithstanding the foregoing, the Trustee
will make a distribution to Unitholders of all principal relating
to maturing Treasury Obligations within seven business days of
the date of each such maturity.
General. Distributions for an IRA, Keogh or other
tax-deferred retirement plan will not be sent to the individual
Unitholder. These distributions will go directly to the
custodian of the plan to avoid the penalties associated with
premature withdrawals from such accounts. See "Retirement
Plans."
All funds collected or received will be held by the Trustee
in trust, without interest to Unitholders, as part of the
appropriate Series of the Trusts or the Reserve Account for such
Series referred to below until required to be disbursed in
accordance with the provisions of the Indenture. Such funds will
be segregated on the trust ledger of the Trustee so long as such
practice preserves a valid preference of Unitholders of such
Series under the bankruptcy laws of the United States, or if such
preference is not preserved, the Trustee shall handle such funds
in such other manner as shall constitute the segregation and
holding thereof in trust within the meaning of the Investment
Company Act of 1940, as the same may from time to time be
amended. To the extent permitted by the Indenture and applicable
banking regulations, such funds are available for use by the
Trustee pursuant to normal banking procedures.
The first distribution for persons who purchase Units
between a Record Date and a Distribution Date will be made on the
second Distribution Date following their purchase of Units.
The Trustee is authorized by the Indenture to withdraw from
the Principal and/or Interest Accounts of each Series such
amounts as it deems necessary to establish a reserve for any
taxes or other governmental charges that may be payable out of
such Series of the Trust, which amounts will be deposited in a
separate Reserve Account. If the Trustee determines that the
amount in the Reserve Account is greater than the amount
necessary for payment of any taxes or other governmental charges,
it will promptly deposit the excess back in the Account from
which it was withdrawn.
Portfolio Supervision. The Indenture permits the Sponsor
to direct the Trustee to dispose of any Portfolio Obligation in a
Series of the Trusts upon the happening of any of the following
events:
(1) Default in the payment of principal
or
interest on any of the Portfolio Obligations when due and
payable,
(2) Institution of legal proceedings seeking to
restrain or enjoin the payment of any of the Portfolio
Obligations or attacking their validity,
(3) A breach of covenant or warranty which could
adversely affect the payment of debt service on the
Portfolio Obligations,
(4) Default in the payment of principal
or
interest on any other outstanding obligation guaranteed or
backed by the full faith and credit of the United States of
America,
(5) A decline in market price to such an extent
or such other market credit or other factors exist, as in
the opinion of the Sponsor would make retention of any of
the Portfolio Obligations detrimental to the Trusts or any
Series thereof and to the interests of the Unitholders,
(6) An offer is made to refund or refinance any
of the Portfolio Obligations, or
(7) Termination of the Trusts or any Series
thereof.
The Trustee shall also sell any Portfolio Obligation in a
Series of the Trusts if there is a default in the payment of
principal and interest on such Portfolio Obligation and no
provision for payment is made therefor and the Sponsor fails to
instruct the Trustee to sell or hold such Portfolio Obligation
within thirty days after notice to the Sponsor from the Trustee
of such default. The Trustee shall not be liable for any
depreciation or loss by reason of any sale of Portfolio
Obligations or by reason of the failure of the Sponsor to give
directions to the Trustee.
Amounts received by a Series of the Trusts upon the sale of
any Portfolio Obligation under the conditions set forth above
will be deposited in the Principal Account, Interest Account or
Capital Gains Account for such Series, as appropriate, when
received and pursuant to the Sponsor's instructions will be
either distributed by the Trustee on the next Distribution Date
to Unitholders of record of such Series on the Record Date prior
to such Distribution Date.
Reports to Unitholders. With each distribution, the
Trustee will furnish or cause to be furnished to the Unitholders
of each Series a statement of the amount of interest and other
receipts, if any, distributed, expressed in each case as a dollar
amount per Unit of such Series.
The accounts of each Series of the Trusts are required to be
audited annually, at such Series' expense, by independent
certified public accountants designated by the Sponsor, unless
the Trustee determines that such an audit would not be in the
best interest of the Unitholders of that Series of the Trust.
The accountants' report will be furnished by the Trustee to any
Unitholder of such Series upon written request.
Within a reasonable period of time after the end of each
calendar year, the Trustee will furnish to each person who at any
time during such calendar year was a Unitholder of record of a
Series of the Trusts a statement setting forth for the applicable
Series:
(1) As to the Interest Account for such Series:
(a) the amount of interest received on the
Portfolio Obligations, including amounts received as a
portion of the proceeds of any disposition of Portfolio
Obligations;
(b) the amount paid from the
Interest
Account representing accrued interest for any Units
redeemed and amounts paid or reserved for purchases of
substitute Portfolio Obligations;
(c) the deductions from the Interest Account
for applicable taxes or other governmental charges, if
any, and fees and expenses of the Trustee (including
auditing fees), the Sponsor, the Evaluator and counsel;
(d) the deductions from the Interest Account
for payment into the Reserve Account; and
(e) the net amount remaining after
such
payments and deductions expressed both as a total
dollar amount and as a dollar amount per Unit or
appropriate multiple thereof outstanding on the last
business day of such calendar year.
(2) As to the Principal Account for such Series:
(a) the dates of the sale,
maturity,
liquidation or redemption of any of the Portfolio
Obligations and the net proceeds received therefrom,
excluding any portion credited to the Interest Account;
(b) the amount paid from the
Principal
Account representing the principal of any Units
redeemed and amounts paid or reserved for purchases of
substitute Portfolio Obligations;
(c) the deductions from the
Principal
Account, if any, for payment of applicable taxes or
other governmental charges, fees and expenses of the
Trustee (including auditing fees), the Sponsor, the
Evaluator and counsel;
(d) the deductions from the
Principal
Account for payment into the Reserve Account; and
(e) the net amounts remaining after
such
payments and deductions expressed both as a total
dollar amount and as a dollar amount per Unit or
appropriate multiple thereof outstanding on the last
business day of such calendar year.
(3) The following information with respect
to
such Series:
(a) a list of the Portfolio Obligations, as
appropriate, as of the last business day of such
calendar year grouped by coupon and maturity range;
(b) the number of Units outstanding on the
last business day of such calendar year;
(c) the Unit Value (as defined in
the
Indenture) based on the last Trust evaluation made
during such calendar year; and
(d) the amounts actually distributed
during
such calendar year from the Interest and Principal
Accounts, separately stated, expressed both as total
dollar amounts and as dollar amounts per Unit or
appropriate multiple thereof outstanding on the Record
Dates for such distributions.
Amendments. The Indenture and the Agreement with respect
to each Series may be amended by the Trustee and the Sponsor
without the consent of Unitholders (a) to cure any ambiguity or
to correct or supplement any provision thereof which may be
defective or inconsistent, (b) to change any provision thereof as
may be required by the Securities and Exchange Commission or any
successor governmental agency, (c) for those Trusts that have
qualified as "regulated investment companies," to add or change
any provision thereof which may be necessary or advisable for the
continuing qualification as a regulated investment company under
the Internal Revenue Code of 1986 and (d) to make such other
provisions as shall not adversely affect the interest of the
Unitholders (as determined in good faith by the Sponsor and the
Trustee); provided, however, that the Indenture may also be
amended with respect to any Series by the Sponsor and the Trustee
(or the performance of any of the provisions of the Indenture may
be waived) with the consent of holders of Units representing
66-2/3% of the Units then outstanding of such Series for the
purposes of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture of such Series
or of modifying in any manner the rights of Unitholders thereof.
However, the Indenture may not be amended, without the consent of
the holders of all Units of a Series then outstanding, so as
(1) to permit, except in accordance with the terms and conditions
of the Indenture, the acquisition of any Portfolio Obligations
other than those specified in the Indenture, or (2) to reduce the
aforesaid percentage of Units of a Series the holders of which
are required to consent to certain of such amendments and may not
be amended so as to reduce the interest in such Series
represented by Units without the consent of the holder of such
Units. The Trustee shall promptly notify Unitholders of the
substance of any such amendment.
Termination. The Indenture provides that a Series of the
Trusts will terminate after the maturity, redemption, sale or
other disposition of the last of the Portfolio Obligations held
in such Series. If the value of a Series of the Trusts, as shown
by an evaluation, is less than forty percent (40%) of the par
value of the Portfolio Obligations deposited in such Series of
the Trust, the Trustee shall, if directed by the Sponsor in
writing, terminate such Series. A Series of the Trust may also
be terminated at any time by the written consent of holders of
66-2/3% of the Units of such Series outstanding.
Upon termination, the Trustee will sell the Portfolio
Obligations then held in the appropriate Series of the Trust and
credit the moneys derived from such sale to the Principal Capital
Gains and Interest Accounts thereof. The Trustee will then,
after deduction of any fees and expenses of such Series and
payment into the Reserve Account of any amount required for taxes
or other governmental charges that may be payable by such Series,
distribute to each Unitholder of such Series, only upon surrender
for cancellation of his certificate, if issued, after due notice
of such termination, such Unitholder's pro rata share in the
Interest, Capital Gains and Principal Accounts for such Series.
The sale of Portfolio Obligations in a Series of the Trusts upon
termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time. For this
reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount of Portfolio
Obligations represented by the Units held by such Unitholder.
RESIGNATION, REMOVAL AND LIABILITY
Regarding the Trustee. The Trustee shall be under no
liability for any action taken in good faith in reliance on prima
facie properly executed documents or for the disposition of
moneys or Portfolio Obligations from any Series of the Trust, nor
shall the Trustee be liable or responsible in any way for
depreciation or loss incurred by reason of the disposition of any
Portfolio Obligations by the Trustee. However, the Trustee shall
be liable for willful malfeasance, willful misconduct, bad faith
or gross negligence in the performance of its duties or by reason
of its reckless disregard of its obligations and duties under the
Indenture. In the event of a failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for
any action taken by it in good faith. The Trustee shall not be
personally liable for any taxes or other governmental charges
imposed upon a Series of the Trust or in respect of the Portfolio
Obligations or the interest thereon. The Indenture also contains
other customary provisions limiting the liability of the Trustee
and providing for the indemnification of the Trustee for any loss
or claim accruing to it without gross negligence, bad faith,
willful misconduct, willful malfeasance or reckless disregard of
its duties and obligations under the Indenture on its part.
The Trustee or any successor may resign by executing an
instrument in writing, filing the same with the Sponsor and
mailing a copy of such notice or resignation to all Unitholders
then of record. Upon receiving such notice the Sponsor will use
its best efforts to appoint a successor Trustee promptly. The
Sponsor may at any time remove the Trustee with or without cause
and appoint a successor as provided in the Indenture. If within
30 days of the resignation of a Trustee no successor has been
appointed or, if appointed, has not accepted the appointment, the
retiring Trustee may apply to a court of competent jurisdiction
for the appointment of a successor. The resignation or removal
of a Trustee becomes effective only when the successor Trustee
accepts its appointment as such or when a court of competent
jurisdiction appoints a successor Trustee.
Regarding the Sponsor. The Sponsor shall be under no
liability to the Series of the Trust or to Unitholders for taking
any action or for refraining from any action in good faith or for
errors in judgment, nor shall the Sponsor be liable or
responsible in any way for depreciation or loss incurred by
reason of the disposition of any Portfolio Obligation. The
Sponsor will, however, be liable for its own willful malfeasance,
willful misconduct, bad faith, gross negligence or reckless
disregard of its duties and obligations under the Indenture.
If at any time the Sponsor shall resign under the Indenture
or shall fail or be incapable of performing its duties thereunder
or shall become bankrupt or its affairs are taken over by public
authorities, the Indenture directs the Trustee to either
(1) appoint a successor sponsor or sponsors at rates of
compensation deemed reasonable by the Trustee and not exceeding
amounts prescribed by the Securities and Exchange Commission or
(2) continue to act as sponsor itself without terminating the
Indenture.
Regarding the Evaluator. The Trustee, Sponsor and
Unitholders may rely on any evaluation furnished by the Evaluator
and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Indenture shall be made
in good faith upon the basis of the best information available to
it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unitholders for errors in
judgment. The Evaluator shall, however, be liable for its own
willful malfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties under the Indenture.
The Evaluator may resign or may be removed by the Sponsor
and the Trustee, and the Sponsor and the Trustee are to use their
best efforts to appoint a satisfactory successor. Such
resignation or removal shall become effective upon the acceptance
of appointment by the successor Evaluator. If upon resignation
of the Evaluator no successor accepts appointment within thirty
days after notice of resignation, the Evaluator may apply to a
court of competent jurisdiction for the appointment of a
successor.
MISCELLANEOUS
Sponsor. The Sponsor, Kemper Unit Investment Trusts, with
an office at 77 West Wacker Drive, 29th Floor, Chicago, Illinois
60601, (800) 621-5024, is a service of Kemper Securities, Inc.,
which is a wholly-owned subsidiary of Kemper Financial Companies,
Inc. which, in turn, is a wholly-owned subsidiary of Kemper
Corporation. The Sponsor will act as underwriter of any other
unit investment trust products developed by the Sponsor in the
future. As of January 31, 1994, the total stockholder's equity
of Kemper Securities, Inc. was $261,673,436 (unaudited).
The foregoing information with regard to the Sponsor relates
to the Sponsor only and not to any Series of the Trust. Such
information is included in this Prospectus only for the purpose
of informing investors as to the financial responsibility of the
Sponsor and its ability to carry out its contractual obligations
shown herein. More comprehensive financial information can be
obtained from the Sponsor upon request.
Trustee. The Trustee, Investors Fiduciary Trust Company,
is a trust company specializing in investment related services,
organized and existing under the laws of Missouri, having its
trust office at 127 West 10th Street, Kansas City, Missouri
64105. 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 Obligations. For
information relating to the responsibilities of the Trustee under
the Indenture, reference is made to the material set forth under
"Administration of the Trust."
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 financial statements appearing in Part Two of this
Prospectus and Registration Statement, with information
pertaining to the specific Series of the Trusts to which such
statements relate, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing in
Part Two and are included in reliance upon such report given upon
the authority of such firm as experts in auditing and accounting.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP*
A Standard & Poor's Ratings Group's rating on the units of
an investment trust (hereinafter referred to collectively as
"units" and "trusts") is a current assessment of creditworthiness
with respect to the investments held by such trust. This
assessment takes into consideration the financial capacity of the
issuers and of any guarantors, insurers, lessees, or mortgagors
with the respect to such investments. The assessment, however,
does not take into account the extent to which trust expenses or
portfolio asset sales for less than the trust's purchase price
will reduce payment to the Unitholder of the interest and
principal required to be paid on the portfolio assets. In
addition, the rating is not a recommendation to purchase, sell,
or hold units, inasmuch as the rating does not comment as to
market price of the units or suitability for a particular
investor.
Trusts rated "AAA" are composed exclusively of assets that
are rated "AAA" by Standard & Poor's or, have, in the opinion of
Standard & Poor's, credit characteristics comparable to assets
rated "AAA," or certain short-term investments. Standard &
Poor's defines its "AAA" rating for such assets as the highest
rating assigned by Standard & Poor's to a debt obligation.
Capacity to pay interest and repay principal is very strong.
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Part Two
Dated April 28, 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 Government Securities Trust
GNMA Portfolio Series 4
Essential Information
As of March 17, 1995
Sponsor: Kemper Financial Services, Inc.
Evaluator: Kemper Unit Investment Trusts
Trustee: Investors Fiduciary Trust Company
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Securities $4,757,918
Number of Units 95,000,097
Fractional Undivided Interest in the Trust per Unit 1/95,000,097
Principal Amount of Securities per 1,000 Units $50
Calculation of Public Offering Price:
Aggregate Value of Securities in the Trust $5,193,714
Aggregate Value of Securities per 1,000 Units $55
Principal Cash per 1,000 Units (1) $1
Sales Charge of 3.95% of Public Offering Price
(4.112% of net amount invested) per 1,000 Units $2
Public Offering Price per 1,000 Units $58
Accrued Interest per 1,000 Units through settlement
date of March 24, 1995 $-
Total Price per 1,000 Units $58
Redemption Price per 1,000 Units $56
Calculation of Estimated Net Annual Interest Income
per 1,000 Units:
Estimated Annual Interest Income $6.59
Less: Estimated Annual Expense $.31
Estimated Net Annual Interest Income $6.28
Daily Rate at which Estimated Net Annual Interest Income
Accrues per 1,000 Units $.0174
Estimated Current Return Based on Public Offering Price (2) 11.01%
Estimated Long-Term Return (2) 9.50%
</TABLE>
[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. The Estimated Current Return and Estimated Long-Term Return will vary with
changes in the Public Offering Price and there is no assurance that such
returns on the date hereof will be applicable on a subsequent date of
purchase. These estimated returns are increased for transactions entitled to
a reduced sales charge (see "Public Offering of Units - Public Offering Price"
- - Part One).
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Essential Information (continued)
As of March 17, 1995
Sponsor: Kemper Financial Services, Inc.
Evaluator: Kemper Unit Investment Trusts
Trustee: Investors Fiduciary Trust Company
Record and Distribution Date Record Date is the first of each
month and distributions to
Unitholders on such record dates
will be made on the last day of the
month.
Distribution Dates No distribution (other than capital
gains distributions) need be made
from the Principal Account if the
balance therein, excluding capital
gains, is less than $1.00 per 1,000
Units.
Trustee's Annual Fee (including
estimated expenses) $.301 per 1,000 Units (includes
$1.358 of Trustee's annual fee per
$1,000 principal amount of
underlying Securities and $.20 of
out-of-pocket expenses per 1,000
Units).
Evaluator's Annual Fee $.175 per $1,000 principal amount of
underlying Securities.
Date of Trust Agreement and
Initial Deposit January 31, 1985
Mandatory Termination Date December 31, 2035
Discretionary Liquidation Amount The Trust may be terminated if the
value thereof is less than
$42,912,845 (40% of the par value of
the Securities deposited in the
Trust).
<PAGE>
Report of Independent Auditors
Unitholders
Kemper Government Securities Trust
GNMA Portfolio Series 4
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Kemper Government Securities Trust
GNMA Portfolio Series 4 as of December 31, 1994, 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 December 31, 1994,
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 Government Securities
Trust GNMA Portfolio Series 4 at December 31, 1994, and the results of its
operations and the changes in its net assets for each of the three years in
the period then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Kansas City, Missouri
April 14, 1995
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Statement of Assets and Liabilities
December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
GNMA Securities, at value (cost $5,205,056) $5,410,358
Cash 93,190
Interest receivable 54,179
----------
Total assets 5,557,727
Liabilities and net assets
Accrued liabilities 12,780
Net assets, applicable to 95,000,097 Units
outstanding:
Cost of Trust assets, exclusive of interest $5,205,056
Unrealized appreciation 205,302
Distributable funds 134,589
---------- ----------
Net assets $5,544,947
==========
Net asset value per 1,000 Units $58.37
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1994 1993 1992
<S> <C> <C> <C>
--------- --------- ----------
Investment income - interest $670,959 $940,992 $1,250,797
Expenses:
Trustee's fees and related expenses 28,286 32,060 37,254
Evaluator's fees 1,079 1,461 1,938
--------- --------- ----------
Total expenses 29,365 33,521 39,192
--------- --------- ----------
Net investment income 641,594 907,471 1,211,605
Realized and unrealized gain (loss)
on investments:
Net realized gain - 8,742 -
Unrealized depreciation
during the year (436,679) (460,560) (272,109)
--------- --------- ----------
Net loss on investments (436,679) (451,818) (272,109)
--------- --------- ----------
Net increase in net assets
resulting from operations $204,915 $455,653 $939,496
========= ========= ==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended December 31
1994 1993 1992
<S> <C> <C> <C>
----------- ----------- -----------
Operations:
Net investment income $641,594 $907,471 $1,211,605
Net realized gain on investments - 8,742 -
Unrealized depreciation on
investments during the year (436,679) (460,560) (272,109)
----------- ----------- -----------
Net increase in net assets resulting
from operations 204,915 455,653 939,496
Distributions to Unitholders:
Net investment income (641,594) (916,214) (1,211,605)
Tax return of capital (2,247,360) (2,360,774) (3,152,145)
----------- ----------- -----------
Total distributions to Unitholders (2,888,954) (3,276,988) (4,363,750)
Capital transactions:
Redemption of 927,540 Units - (102,029) -
----------- ----------- -----------
Total decrease in net assets (2,684,039) (2,923,364) (3,424,254)
Net assets:
Beginning of the year 8,228,986 11,152,350 14,576,604
----------- ----------- -----------
End of the year (including
distributable funds applicable
to Trust Units of $134,589,
$253,218 and $292,288 at
December 31, 1994, 1993 and
1992, respectively) $5,544,947 $8,228,986 $11,152,350
=========== =========== ===========
Trust Units outstanding at the end
of the year 95,000,097 95,000,097 95,927,637
=========== =========== ===========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Schedule of Investments
December 31, 1994
Government National Mortgage Association
Modified Pass-Through Mortgage-Backed Securities
<TABLE>
<CAPTION>
Principal Range of Stated
Amount Coupon Maturities (1) Value
<S> <C> <C> <C> <C>
---------- ------ --------------- ----------
$1,719,752 12.50% 4/15/10-7/15/15 $1,881,512
3,223,632 13.50% 5/15/10-6/15/15 3,528,846
---------- ----------
$4,943,384 $5,410,358
========== ==========
</TABLE>
Note to Schedule of Investments
1. The principal amount of Securities listed as having the range of
maturities shown is an aggregate of individual Securities having varying
stated maturities within that shown. They are listed as one category of
Securities with a single range of maturities because current market conditions
accord no difference in price among the Securities grouped together on the
basis of the difference in their stated maturity. At some time in the future,
however, the differences in stated maturities could affect the market value of
the individual Securities.
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Notes to Financial Statements
1. Significant Accounting Policies
Valuation of Securities
GNMA Securities are stated at bid prices as determined by Kemper Unit
Investment Trusts (A Service of Kemper Securities, Inc.), the "Evaluator" of
the Trust. The aggregate bid prices of the Securities are determined based on
(a) current bid prices of the Securities, (b) current bid prices for
comparable securities, (c) appraisal, or (d) any combination of the above.
Cost of Securities
Cost of the Trust's Securities was based on the offering prices of the
Securities on the dates of deposit of such Securities acquired during the
primary sales period. The premium or discount, if any, is recognized as an
adjustment of investment income on a pro rata basis as principal repayments
are received. Realized gain (loss) from Security transactions is reported on
an identified cost basis.
2. Unrealized Appreciation and Depreciation
Following is an analysis of net unrealized appreciation at December 31, 1994:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $205,302
Gross unrealized depreciation -
--------
Net unrealized appreciation $205,302
========
</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., the Trust's sponsor and an affiliate of Kemper Unit Investment
Trusts. On that date, State Street Boston Corporation acquired IFTC.
Payments to the Trustee included $1.02 of Trustee's annual fee per $1,000
principal amount of underlying Securities in the Trust through December 31,
1994, calculated monthly, based on the largest aggregate principal amount of
Securities in the Trust at any time during the previous month and
reimbursement of out-of-pocket expenses of $.20 per 1,000 Units through
December 31, 1994, calculated monthly, based on the largest number of Trust
Units outstanding at any time during the previous month.
<PAGE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Notes to Financial Statements (continued)
3. Transactions with Affiliates (continued)
The annual Evaluator's fee, calculated monthly, is $.175 per $1,000 principal
amount of Securities in the Trust based on the largest aggregate principal
amount of Securities in the Trust at any time during the previous month.
4. Federal Income Taxes
The Trust is organized as an investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). It is the Trust's
policy to comply with the special provisions of the Code available to
investment companies. Such provisions were complied with and, therefore, no
federal income tax provision is required.
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 Securities on the date of an investor's purchase, plus
or minus a pro rata share of cash or overdraft in the Principal Account and
accrued interest, plus a sales charge of 3.75% of the Public Offering Price
(equivalent to 3.896% of the net amount invested). The Public Offering Price
for secondary market transactions is based on the aggregate bid prices of the
Securities plus or minus a pro rata share of cash or overdraft in the
Principal Account and accrued interest, if any, on the date of an investor's
purchase, plus a sales charge of 3.95% of the Public Offering Price
(equivalent to 4.112% of the net amount invested).
<PAGE>
<TABLE>
Kemper Government Securities Trust
GNMA Portfolio Series 4
Notes to Financial Statements (continued)
5. Other Information (continued)
Selected data per 1,000 Units of the Trust outstanding during each year -
<CAPTION>
Year ended December 31
1994 1993 1992
<S> <C> <C> <C>
------- ------- -------
Investment income - interest $7.06 $9.91 $13.04
Expenses .31 .35 .41
------- ------- -------
Net investment income 6.75 9.56 12.63
Distributions to Unitholders:
Net investment income (7.97) (10.85) (14.34)
Tax return of capital (22.44) (23.57) (31.15)
------- ------- -------
Total distributions to Unitholders (30.41) (34.42) (45.49)
Net loss on investments (4.59) (4.78) (2.83)
------- ------- -------
Decrease in net asset value (28.25) (29.64) (35.69)
Net asset value:
Beginning of the year 86.62 116.26 151.95
------- ------- -------
End of the year, including
distributable funds $58.37 $86.62 $116.26
======= ======= =======
</TABLE>
<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 April 14, 1995, in this Post-
Effective Amendment to the Registration Statement (Form S-6) and related
Prospectus of Kemper Government Securities Trust GNMA Portfolio Series 4 dated
April 28, 1995.
Ernst & Young LLP
Kansas City, Missouri
April 28, 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 Government Securities Trust GNMA
Portfolio, Series 4, 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
27th day of April, 1995.
Kemper Government Securities Trust
GNMA Portfolio, Series 4
Registrant
By: Kemper Unit Investment Trusts
(a service of Kemper
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 April 27, 1995 by the following persons, who constitute
a majority of the Board of Directors of Kemper 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
Arthur J. McGivern Senior Executive Vice President and Director
Arthur J. McGivern
Ramon Pecuch Senior Executive Vice President and Director
Ramon Pecuch
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
David B. Mathis Director
David B. Mathis
Stephen B. Timbers Director
Stephen B. Timbers
Donald F. Eller Director
Donald F. Eller
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).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<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 Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> KEMPER GOVERNMENT SECURITIES TRUST GNMA PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 5,205,056
<INVESTMENTS-AT-VALUE> 5,410,358
<RECEIVABLES> 54,179
<ASSETS-OTHER> 93,190
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,557,727
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,780
<TOTAL-LIABILITIES> 12,780
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,205,056
<SHARES-COMMON-STOCK> 95,000,097
<SHARES-COMMON-PRIOR> 95,000,097
<ACCUMULATED-NII-CURRENT> 134,589
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 205,302
<NET-ASSETS> 5,544,947
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 670,959
<OTHER-INCOME> 0
<EXPENSES-NET> 29,365
<NET-INVESTMENT-INCOME> 641,594
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (436,679)
<NET-CHANGE-FROM-OPS> 204,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (641,594)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (2,247,360)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,684,039)
<ACCUMULATED-NII-PRIOR> 253,218
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 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>
