<PAGE> 1
File No. 33-06938
CIK #796363
Securities and Exchange Commission
Washington, D. C. 20549
Post-Effective
Amendment No. 8
to
Form S-6
For Registration under the Securities Act of 1933
of Securities of Unit Investment Trusts Registered
on Form N-8B-2
KEMPER TAX-EXEMPT INSURED INCOME TRUST, SERIES A-45
NAME AND EXECUTIVE OFFICE ADDRESS OF DEPOSITOR:
KEMPER UNIT INVESTMENT TRUSTS
(a service of Kemper Securities, Inc.)
77 West Wacker - 5th Floor
Chicago, Illinois 60601
Name and complete address of agent for service:
C. PERRY MOORE
77 West Wacker - 5th Floor
Chicago, Illinois 60601
X(X) Check box if it is proposed that this filing will become effective
immediately upon pursuant to paragraph (b) of Rule 485.
<PAGE> 1
KEMPER TAX-EXEMPT INSURED INCOME TRUST
NATIONAL SERIES
PART ONE
The date of this Part One is that date
which is set forth in Part Two of the Prospectus
Kemper Tax-Exempt Insured Income Trust (the "Trust") was formed for
the purpose of gaining interest income free from Federal income taxes while
conserving capital and diversifying risks by investing in an insured, fixed
portfolio consisting of obligations issued by or on behalf of states of the
United States or counties, municipalities, authorities or political
subdivisions thereof.
Insurance guaranteeing the scheduled payment of principal and
interest on all of the Municipal Bonds in the portfolio listed in Part Two has
been obtained from an independent company by either the Trust, the Sponsor or
the issuer of the Municipal Bonds involved. Insurance obtained by a Municipal
Bond issuer is effective so long as such Bonds are outstanding. The insurance,
in any case, does not relate to the Units offered hereby or to their market
value. As a result of such insurance, the Units of the Trust received on the
original date of deposit a rating of "AAA" by Standard & Poor's Corporation.
See "Insurance on the Portfolios" and "Description of Securities Ratings." No
representation is made as to any insurer's ability to meet its commitments.
This Prospectus is in two parts. Read and retain both parts for
future reference.
SPONSOR: 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.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . 3
The Trust . . . . . . . . . . . . . . 3
Insurance . . . . . . . . . . . . . . 3
Public Offering Price . . . . . . . . 4
Interest and Principal
Distributions . . . . . . . . . . . . 4
Reinvestment . . . . . . . . . . . . . 4
Estimated Long-Term Return and
Estimated Current Return . . . . . . 4
Market for Units . . . . . . . . . . . 5
THE TRUST . . . . . . . . . . . . . . . . 5
PORTFOLIOS . . . . . . . . . . . . . . . 6
Portfolio Risk Information . . . . . . 7
INSURANCE ON THE PORTFOLIOS . . . . . . . 12
Financial Guaranty Insurance
Company . . . . . . . . . . . . . . . 14
AMBAC Indemnity Corporation . . . . . 14
Municipal Bond Investors
Assurance Corporation . . . . . . . 14
Financial Security Assurance . . . . . 15
Capital Guaranty Insurance
Company . . . . . . . . . . . . . . . 16
DISTRIBUTION REINVESTMENT . . . . . . . . 17
The Program Agent is Investors
Fiduciary Trust Company . . . . . . . 18
INTEREST AND ESTIMATED LONG-TERM
AND CURRENT RETURNS . . . . . . . . . . . 18
TAX STATUS OF THE TRUST . . . . . . . . . 18
PUBLIC OFFERING OF UNITS . . . . . . . . 22
Public Offering Price . . . . . . . . 22
Public Distribution of Units . . . . . 24
Profits of Sponsor . . . . . . . . . . 25
MARKET FOR UNITS . . . . . . . . . . . . 26
REDEMPTION . . . . . . . . . . . . . . . 25
Computation of Redemption Price . . . 26
UNITHOLDERS . . . . . . . . . . . . . . . 27
Ownership of Units . . . . . . . . . . 27
Distributions to Unitholders . . . . . 27
Statement to Unitholders . . . . . . . 28
Rights of Unitholders . . . . . . . . 30
INVESTMENT SUPERVISION . . . . . . . . . 30
ADMINISTRATION OF THE TRUST . . . . . . . 31
The Trustee . . . . . . . . . . . . . 31
The Evaluator . . . . . . . . . . . . 32
Amendment and Termination . . . . . . 33
Limitations on Liability . . . . . . . 33
The Trustee . . . . . . . . . . . . . 34
The Evaluator: . . . . . . . . . . . . 34
EXPENSES OF THE TRUST . . . . . . . . . . 34
THE SPONSOR . . . . . . . . . . . . . . . 35
LEGAL OPINIONS . . . . . . . . . . . . . 36
INDEPENDENT AUDITORS . . . . . . . . . . 36
DESCRIPTION OF MUNICIPAL BOND
RATINGS . . . . . . . . . . . . . . . . 36
Essential Information*
Report of Independent Auditors*
Statement of Assets and Liabilities*
Statement of Operations*
Statement of Changes in Net Assets*
Schedule of Investments*
Notes to Schedules of Investments*
Notes to Financial Statements*
*INFORMATION ON THESE ITEMS APPEARS IN PART TWO
</TABLE>
-2-
<PAGE> 3
KEMPER TAX-EXEMPT INSURED INCOME TRUST
SUMMARY
THE TRUST. Kemper Tax-Exempt Insured Income Trust (the "Trust") is a
unit investment trust consisting of a number of diversified portfolios (the
"Series"), each portfolio consisting of obligations ("Municipal Bonds",
"Securities" or "Bonds") issued by or on behalf of states of the United States
or counties, municipalities, authorities or political subdivisions thereof.
The objective of each Series of the Trust is tax-exempt income and
conservation of capital with diversification of risk through investment in an
insured, fixed portfolio of long-term Municipal Bonds. Interest on certain
Municipal Bonds in certain of the National Series will be a preference item for
purposes of the alternative minimum tax. Accordingly, such National Series may
be appropriate only for investors who are not subject to the alternative
minimum tax. There is, of course, no guarantee that the Trust's objective will
be achieved.
All of the Municipal Bonds in a Series of the Trust were rated in the
category "BBB" or better by Standard & Poor's Corporation ("Standard & Poor's")
or "Baa" by Moody's Investors Service, Inc. ("Moody's") on the date such Series
was established (the "Date of Deposit"). Ratings of the Municipal Bonds may
have changed since the Date of Deposit. See "Description of Securities
Ratings" herein and the "Schedule of Investments" in Part Two.
The Units, each of which represents a pro rata undivided fractional
interest in the Municipal Bonds deposited in the appropriate Series of the
Trust, are issued and outstanding Units which have been reacquired by the
Sponsor either by purchase of Units tendered to the Trustee for redemption or
by purchase in the open market. No offering is being made on behalf of
the Trust and any profit or loss realized on the sale of Units will accrue to
the Sponsor and/or the firm reselling such Units.
INSURANCE. Insurance guaranteeing the scheduled payment of principal
and interest on all of the Municipal Bonds in the portfolio of each Series of
the Trust has been obtained by the Trust, the Sponsor or directly by the issuer
from an independent insurance company. Series A through A-24 are insured by
AMBAC Indemnity Corporation ("AMBAC Indemnity") and Series A-25 and subsequent
Series are insured by Financial Guaranty Insurance Company ("Financial
Guaranty") or other insurers. Insurance obtained directly by the issuer may be
from such companies or other insurers. See "Insurance on the Portfolio"
herein and "Schedule of Investments" in Part Two. Insurance obtained by the
Trust remains in effect only while the insured Municipal Bonds are retained in
the Trust, while insurance obtained by a Municipal Bond issuer is effective so
long as such Bonds are outstanding. Pursuant to an irrevocable commitment of
Financial Guaranty, in the event of a sale of any Bond from Series A-25 or
subsequent series covered under the Trust's insurance policy, the Trustee has
the right to obtain permanent insurance for such Municipal Bond upon the
payment of a single predetermined insurance premium from the proceeds of the
sale of such Municipal Bond. The insurance, in either case, does not relate to
the Units offered hereby or to their market value. As a result of such
insurance,
-3-
<PAGE> 4
the Units of each Series of the Trust received on the original Date of Deposit
a rating of "AAA" from Standard & Poor's. See "Insurance on the Portfolio."
No representation is made as to AMBAC Indemnity's, Financial Guaranty's or any
other insurer's ability to meet its commitments.
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Series
of the Trust is equal to a pro rata share of the aggregate bid prices of the
Municipal Bonds in such Series (plus or minus a pro rata share of cash, if any,
in the Principal Account, held or owed by the Series) plus a sales charge shown
under "Public Offering of Units." In addition, there will be added to each
transaction an amount equal to the accrued interest from the last Record Date
of such Series to the date of settlement (five business days after order). The
sales charge is reduced on a graduated scale as indicated under "Public
Offering of Units - Public Offering Price."
INTEREST AND PRINCIPAL DISTRIBUTIONS. Distributions of the estimated
annual interest income to be received by a Series of the Trust, after deduction
of estimated expenses, will be made monthly unless the Unitholder elects to
receive such distributions quarterly or semi-annually. Distributions will be
paid on the Distribution Dates to holders of record of such Series on the
Record Dates set forth for the applicable option. See "Essential Information"
in Part Two.
The distribution of funds, if any, in the Principal Account of each
Series, will be made semi-annually to Unitholders of Record on the appropriate
dates. See "Essential Information" in Part Two.
REINVESTMENT. Distributions of interest and principal, including
capital gains, if any, made by a Series of the Trust will be paid in cash
unless a Unitholder elects to reinvest such distributions. See "Distribution
Reinvestment."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return is calculated by dividing the estimated net annual interest
income per Unit by the Public Offering Price of such Trust. The estimated net
annual interest income per Unit will vary with changes in fees and expenses of
such Trust and with the principal prepayment, redemption, maturity, exchange or
sale of Securities while the Public Offering Price will vary with changes in
the bid price of the underlying Securities; therefore, there is no assurance
that the present Estimated Current Returns will be realized in the future.
Estimated Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Return will be realized in
the future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while Estimated
Current Return calculations include only net annual interest income and Public
Offering Price.
-4-
<PAGE> 5
MARKET FOR UNITS. While under no obligation to do so, the Sponsor
intends, subject to change at any time, to maintain a market for the Units of
each Series of the Trust and to continuously offer to repurchase such Units at
prices which are based on the aggregate bid side evaluation of the Municipal
Bonds in such Series of the Trust. If such a market is not maintained and no
other over-the-counter market is available, Unitholders will still be able to
dispose of their Units through redemption by the Trustee at prices based upon
the aggregate bid price of the Municipal Bonds in such Series of the Trust.
See "Redemption."
THE TRUST
Each Series of the Trust is one of a series of unit investment trusts
created by the Sponsor under the name Kemper Tax-Exempt Insured Income Trust,
all of which are similar, and each of which was created under the laws of the
State of Missouri pursuant to a Trust Agreement* (the "Agreement"). Kemper
Unit Investment Trusts, a service of Kemper Securities, Inc., acts as Sponsor
and Evaluator and Investors Fiduciary Trust Company acts as Trustee. For
information regarding the relationship of Kemper Unit Investment Trusts and
Investors Fiduciary Trust Company, see "The Sponsor."
The objectives of the Trust are tax-exempt income and conservation of
capital with diversification of risk through investment in an insured, fixed
portfolio of long-term Municipal Bonds. Interest on certain Municipal Bonds
in the National Series will be a preference item for purposes of the
alternative minimum tax. Accordingly, such National Series may be appropriate
only for the investors who are not subject to the alternative minimum tax.
There is, of course, no guarantee that the Trust's objectives will be achieved.
A Series of the Trust may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of insured, tax-exempt,
fixed income securities with greater diversification than they might be able to
acquire individually. In addition, Municipal Bonds of the type deposited in
the Trust are often not available in small amounts.1
Each Series of the Trust consists of an insured portfolio of interest
bearing obligations issued by or on behalf of states of the United States or
counties, municipalities, authorities or political subdivisions thereof the
interest on which is, in the opinion of bond counsel to the issuing
authorities, exempt from all Federal income taxes under existing law, but may
be subject to state and local taxes. Proceeds from the maturity, redemption or
sale of the Municipal Bonds in a Series of the Trust, unless used to pay for
Units tendered for redemption, will be distributed to Unitholders of such
Series and will not be utilized to purchase replacement or additional Municipal
Bonds for the Series.
- -------------------------
* Reference is hereby made to said Trust Agreement, and any statements
contained herein are qualified in their entirety by the provisions of said
Trust Agreements.
-5-
<PAGE> 6
The Units, each of which represents a pro rata undivided fractional
interest in the principal amount of Municipal Bonds deposited in a Series of
the Trust, are issued and outstanding Units which have been reacquired by the
Sponsor either by purchase of Units tendered to the Trustee for redemption or
by purchase in the open market. No offering is being made on behalf of the
Trust or any Series thereof and any profit or loss realized on the sale of
Units will accrue to the Sponsor and/or the firm reselling such Units. To the
extent that Units of a Series of the Trust are redeemed, the principal amount
of Municipal Bonds in such Series will be reduced and the undivided fractional
interest represented by each outstanding Unit of the Series will increase. See
"Redemption."
PORTFOLIOS
In selecting the Municipal Bonds which comprise the portfolio of a
Series of the Trust the following requirements, were deemed to be of primary
importance: (a) a minimum rating of "BBB" by Standard & Poor's Corporation or
"Baa" by Moody's Investors Service, Inc. (see "Description of Securities
Ratings"); (b) the price of the Municipal Bonds relative to other issues of
similar quality and maturity; (c) the diversification of the Municipal Bonds as
to purpose of issue; (d) the income to the Unitholders of the Series; and (e)
whether such Municipal Bonds were insured, or the availability and cost of
insurance for the prompt payment of principal and interest, when due, on the
Municipal Bonds; and (f) the dates of maturity of the Municipal Bonds.
Subsequent to the Date of Deposit, a Municipal Bond may cease to be
rated or its rating may be reduced below the minimum required as of the Date of
Deposit. Neither event requires the elimination of such investment from the
portfolio, but may be considered in the Sponsor's determination to direct the
Trustee to dispose of the investment. See "Investment Supervision" herein and
"Schedule of Investments" in Part Two.
The Sponsor may not alter the portfolio of a Series of the Trust,
except that certain of the Municipal Bonds may be sold upon the happening of
certain extraordinary circumstances. See "Investment Supervision."
Certain Series of the Trust contain Municipal Bonds which may be
subject to redemption prior to their stated maturity date pursuant to sinking
fund provisions, call provisions or extraordinary optional or mandatory
redemption provisions or otherwise. A sinking fund is a reserve fund
accumulated over a period of time for retirement of debt. A callable debt
obligation is one which is subject to redemption or refunding prior to maturity
at the option of the issuer. A refunding is a method by which a debt
obligation is redeemed at or before maturity, by the proceeds of a new debt
obligation. In general, call provisions are more likely to be exercised when
the offering side valuation is at a premium over par than when it is at a
discount from par. Accordingly, any such call, redemption, sale or maturity
will reduce the size and diversity of such Series, and the net annual interest
income of the Series and may reduce the Estimated Long-Term Returns and/or
Estimated Current Return. See "Interest and Estimated Long-Term and Current
Returns." Each Trust portfolio contains a listing of the sinking fund and call
provisions, if any, with respect to each of the debt obligations. Extraordinary
optional redemptions and mandatory redemptions result from the happening of
certain events. Generally, events that may permit the extraordinary optional
redemption of Municipal Bonds or may require the mandatory redemption of
Municipal Bonds include among others: a final determination that the interest
on the Municipal Bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the Municipal
Bonds were used; an exercise by a local, state or Federal governmental unit of
its power of eminent domain to take all or substantially all of the project for
which the proceeds of the Municipal Bonds were used; changes in the economic
availability of raw materials, operating supplies or facilities or
technological or other changes which render the operation of the project for
which the proceeds of the Municipal Bonds were used uneconomic; changes in law
or an administrative or judicial decree which
-6-
<PAGE> 7
renders the performance of the agreement under which the proceeds of the
Municipal Bonds were made available to finance the project impossible or which
creates unreasonable burdens or which imposes excessive liabilities, such as
taxes not imposed on the date the Municipal Bonds are issued on the issuer of
the Municipal Bonds or the user of the proceeds of the Municipal Bonds; an
administrative or judicial decree which requires the cessation of a substantial
part of the operations of the project financed with the proceeds of the
Municipal Bonds; an overestimate of the costs of the project to be financed
with proceeds of the Municipal Bonds resulting in excess proceeds of the
Municipal Bonds which may be applied to redeem Municipal Bonds; or an
underestimate of a source of funds securing the Municipal Bonds resulting in
excess funds which may be applied to redeem Municipal Bonds. The Sponsor is
unable to predict all of the circumstances which may result in such redemption
of an issue of Municipal Bonds.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Municipal Bond.
PORTFOLIO RISK INFORMATION. An investment in Units of a Series of the
Trust should be made with an understanding of the risks which an investment in
fixed rate debt obligations may entail, including the risk that the value of
the portfolio and hence of the Units will decline with increases in interest
rates. The value of the underlying Municipal Bonds will fluctuate inversely
with changes in interest rates. The uncertain economic conditions of recent
years, together with the fiscal measures adopted to attempt to deal with them,
have resulted in wide fluctuations in interest rates and, thus, in the value of
fixed rate debt obligations generally and long term obligations in particular.
The Sponsor cannot predict whether such fluctuations will continue in the
future.
Certain Series of the Trust contain Municipal Bonds which are general
obligations of a governmental entity that are backed by the taxing power of
such entity. All other Municipal Bonds in the Series of the Trust are revenue
bonds payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds, on the other hand, are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. There are, of course, variations in the security of
the different Municipal Bonds in the Series of the Trust, both within a
particular classification and between classifications, depending on numerous
factors.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are derived from services provided by
hospitals and other health care facilities, including nursing homes. In view
of this an investment in such Series should be made with an understanding of
the characteristics of such issuers and the risks that such an investment may
entail. Ratings of bonds issued for health care facilities are often based on
feasibility studies that contain projections of occupancy levels, revenues and
expenses. A facility's gross receipts and net income available for debt
service will be affected by future events and conditions including, among other
things, demand for services and the ability of the facility to provide the
services required, physicians' confidence in the facility, management
capabilities, economic developments in the service area, competition, efforts
by insurers and governmental agencies to limit rates, legislation establishing
state rate-setting agencies, expenses, the cost and possible unavailability of
malpractice insurance, the funding of Medicare, Medicaid and other similar
third party payor programs, and government regulation. Federal legislation has
been enacted which implemented a system of prospective Medicare reimbursement
which may restrict the flow of revenues to hospitals and other facilities which
are reimbursed for services provided under the Medicare program. Future
legislation or changes in the areas noted above, among other things, would
affect all hospitals to varying degrees and, accordingly, any adverse changes
in these areas may adversely affect the ability of such issuers to make payment
of principal and interest on Municipal Bonds held
-7-
<PAGE> 8
in such Series. Such adverse changes also may adversely affect the ratings of
the Municipal Bonds held in such Series of the Trust. Hospitals and other
health care facilities are subject to claims and legal actions by patients and
others in the ordinary course of business. Although these claims are generally
covered by insurance, there can be no assurance that a claim will not exceed
the insurance coverage of a health care facility or that insurance coverage
will be available to a facility. In addition, a substantial increase in the
cost of insurance could adversely affect the results of operations of a
hospital or other health care facility. Certain hospital bonds may provide for
redemption at par at any time upon the sale by the issuer of the hospital
facilities to a non-affiliated entity or in other circumstances. For example,
certain hospitals may have the right to call bonds at par if the hospital may
legally be required because of the bonds to perform procedures against
specified religious principles. Certain FHA- insured bonds may provide that
all or a portion of those bonds, otherwise callable at a premium, can be called
at par in certain circumstances. If a hospital defaults upon a bond
obligation, the realization of Medicare and Medicaid receivables may be
uncertain and, if the bond obligation is secured by the hospital facilities,
legal restrictions on the ability to foreclose upon the facilities and the
limited alternative uses to which a hospital can be put may reduce severely its
collateral value.
Certain Series of the Trust contain Municipal Bonds which are single
family mortgage revenue bonds, which are issued for the purpose of acquiring
from originating financial institutions notes secured by mortgages on
residences located within the issuer's boundaries and owned by persons of low
or moderate income. Mortgage loans are generally partially or completely
prepaid prior to their final maturities as a result of events such as sale of
the mortgaged premises, default, condemnation or casualty loss. Because these
Municipal Bonds are subject to extraordinary mandatory redemption in whole or
in part from such prepayments of mortgage loans, a substantial portion of such
Municipal Bonds will probably be redeemed prior to their scheduled maturities
or even prior to their ordinary call dates. The redemption price of such
issues may be more or less than the offering price of such Municipal Bonds.
Extraordinary mandatory redemption without premium could also result from the
failure of the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some cases, from the
sale by the Municipal Bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other sources
becoming competitive with the interest rates on the mortgage loans funded with
the proceeds of the single family mortgage revenue bonds. Additionally,
unusually high rates of default on the underlying mortgage loans may reduce
revenues available for the payment of principal of or interest on such mortgage
revenue bonds. Single family mortgage revenue bonds issued after December 31,
1980 were issued under Section 103A of the Internal Revenue Code, which Section
contains certain ongoing requirements relating to the use of the proceeds of
such Bonds in order for the interest on such Municipal Bonds to retain its
tax-exempt status. In each case, the issuer of the Municipal Bonds has
covenanted to comply with applicable ongoing requirements and bond counsel to
such issuer has issued an opinion that the interest on the Municipal Bonds is
exempt from Federal income tax under existing laws and regulations. There can
be no assurances that the ongoing requirements will be met. The failure to
meet these requirements could cause the interest on the Municipal Bonds to
become taxable, possibly retroactively from the date of issuance.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are primarily derived from mortgage loans
to housing projects for low to moderate income families. The ability of such
issuers to make debt service payments will be affected by events and conditions
affecting financed projects, including, among other things, the achievement and
maintenance of sufficient occupancy levels and adequate rental income,
increases in taxes, employment and income conditions prevailing in local labor
markets, utility costs and other operating expenses, the managerial ability of
project managers, changes in laws and governmental regulations, the
appropriation of subsidies and social and economic trends affecting the
localities in which the projects are located. The occupancy of housing
projects may be adversely affected by high rent levels and income limitations
imposed under Federal and state programs. Like single family mortgage revenue
bonds, multi-family mortgage revenue bonds are subject to redemption and call
features,
-8-
<PAGE> 9
including extraordinary mandatory redemption features, upon prepayment, sale
or non-origination of mortgage loans as well as upon the occurrence of other
events. Certain issuers of single or multi-family housing bonds have
considered various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In connection with the housing
Municipal Bonds held by the Trust, the Sponsor has not had any direct
communications with any of the issuers thereof, but at the initial Date of
Deposit it was not aware that any of the respective issuers of such Municipal
Bonds were actively considering the redemption of such Municipal Bonds prior to
their respective stated initial call dates. However, there can be no assurance
that an issuer of a Municipal Bond in the Trust will not attempt to so redeem a
Municipal Bond in the Trust.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are derived from the sale of water and/or
sewerage services. Water and sewerage bonds are generally payable from user
fees. Problems faced by such issuers include the ability to obtain timely and
adequate rate increases, a decline in population resulting in decreased user
fees, the difficulty of financing large construction programs, the limitations
on operations and increased costs and delays attributable to environmental
considerations, the increasing difficulty of obtaining or discovering new
supplies of fresh water, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. Issuers may have experienced these problems in
varying degrees. Because of the relatively short history of solid waste
disposal bond financing, there may be technological risks involved in the
satisfactory construction or operation of the projects exceeding those
associated with most municipal enterprise projects. Increasing environmental
regulation on the federal, state and local level has a significant impact on
waste disposal facilities. While regulation requires more waste producers to
use waste disposal facilities, it also imposes significant costs on the
facilities. These costs include compliance with frequently changing and
complex regulatory requirements, the cost of obtaining construction and
operating permits, the cost of conforming to prescribed and changing equipment
standards and required methods of operation and the cost of disposing of the
waste residue that remains after the disposal process in an environmentally
safe manner. In addition, waste disposal facilities frequently face
substantial opposition by environmental groups and officials to their location
and operation, to the possible adverse effects upon the public health and the
environment that may be caused by wastes disposed of at the facilities and to
alleged improper operating procedures. Waste disposal facilities benefit from
laws which require waste to be disposed of in a certain manner but any
relaxation of these laws could cause a decline in demand for the facilities'
services. Finally, waste disposal facilities are concerned with many of the
same issues facing utilities insofar as they derive revenues from the sale of
energy to local power utilities.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are primarily derived from the sale of
electric energy or natural gas. Utilities are generally subject to extensive
regulation by state utility commissions which, among other things, establish
the rates which may be charged and the appropriate rate of return on an
approved asset base. The problems faced by such issuers include the difficulty
in obtaining approval for timely and adequate rate increases from the governing
public utility commission, the difficulty in financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, increased competition, recent
reductions in estimates of future demand for electricity in certain areas of
the country, the difficulty of the capital market in absorbing utility debt,
the difficulty in obtaining fuel at reasonable prices and the effect of energy
conservation. Issuers may have experienced these problems in varying degrees.
In addition, Federal, state and municipal governmental authorities may from
time to time review existing and impose additional regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of such Municipal Bonds to make
payments of principal and/or interest on such Municipal Bonds. The ability of
state and local joint action power agencies to make payments on bonds they have
issued is dependent in large part on payments made to them pursuant to power
supply or similar agreements. Courts in Washington and Idaho have held that
certain agreements between the Washington Public Power Supply System ("WPPSS")
and the WPPSS participants are unenforceable because the participants did not
have the authority to enter into the agreements. While these decisions are not
specifically applicable to agreements
-9-
<PAGE> 10
entered into by public entities in other states, they may cause a reexamination
of the legal structure and economic viability of certain projects financed by
joint action power agencies, which might exacerbate some of the problems
referred to above and possibly lead to legal proceedings questioning the
enforceability of agreements upon which payment of these bonds may depend.
Certain Series of the Trust contain Municipal Bonds which are
industrial revenue bonds ("IRBs"), including pollution control revenue bonds,
which are tax-exempt securities issued by states, municipalities, public
authorities or similar entities to finance the cost of acquiring, constructing
or improving various industrial projects. These projects are usually operated
by corporate entities. Issuers are obligated only to pay amounts due on the
IRBs to the extent that funds are available from the unexpended proceeds of the
IRBs or receipts or revenues of the issuer under an arrangement between the
issuer and the corporate operator of a project. The arrangement may be in the
form of a lease, installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to be
sufficient to meet the payments of amounts due on the IRBs. Regardless of the
structure, payment of IRBs is solely dependent upon the creditworthiness of the
corporate operator of the project or corporate guarantor. Corporate operators
or guarantors may be affected by many factors which may have an adverse impact
on the credit quality of the particular company or industry. These include
cyclicality of revenues and earnings, regulatory and environmental
restrictions, litigation resulting from accidents or environmentally-caused
illnesses, extensive competition and financial deterioration resulting from
leveraged buy-outs or takeovers. The IRBs in the Series of the Trust may be
subject to special or extraordinary redemption provisions which may provide for
redemption at par or, with respect to original issue discount bonds, at issue
price plus the amount of original issue discount accreted to the redemption
date plus, if applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other Municipal Bonds in the Series of
the Trust prior to the stated maturity of such Municipal Bonds.
Certain Series of the Trust contain Municipal Bonds which are
obligations which are payable from and secured by revenues derived from the
ownership and operation of facilities such as airports, bridges, turnpikes,
port authorities, convention centers and arenas. The major portion of an
airport's gross operating income is generally derived from fees received from
signatory airlines pursuant to use agreements which consist of annual payments
for leases, occupancy of certain terminal space and service fees. Airport
operating income may therefore be affected by the ability of the airlines to
meet their obligations under the use agreements. The air transport industry is
experiencing significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing severe
financial difficulties. The Sponsor cannot predict what effect these industry
conditions may have on airport revenues which are dependent for payment on the
financial condition of the airlines and their usage of the particular airport
facility. Similarly, payment on Municipal Bonds related to other facilities is
dependent on revenues from the projects, such as user fees from ports, tolls on
turnpikes and bridges and rents from buildings. Therefore, payment may be
adversely affected by reduction in revenues due to such factors as increased
cost of maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Certain Series of the Trusts contain Municipal Bonds which are
obligations of issuers which are, or which govern the operation of, schools,
colleges and universities and whose revenues are derived mainly from ad valorem
taxes, or for higher education systems, from tuition, dormitory revenues,
grants and endorsements. General problems relating to school bonds include
litigation contesting the state constitutionality of financing public education
in part from ad valorem taxes, thereby creating a disparity in educational
funds available to schools in wealthy areas and schools in poor areas.
Litigation or legislation on this issue may affect the sources of funds
available for the payment of school bonds in the Trusts. General problems
relating to college and university obligations would include the prospect of a
declining percentage of the population consisting
-10-
<PAGE> 11
of "college" age individuals, possible inability to raise tuition and fees
sufficiently to cover increased operating costs, the uncertainty of continued
receipt of Federal grants and state funding and new government legislation or
regulations which may adversely affect the revenues or costs of such issuers.
All of such issuers have been experiencing certain of these problems in varying
degrees. In addition, the ability of universities and colleges to meet their
obligations is dependent upon various factors, including the size and diversity
of their sources of revenues, enrollment, reputation, management expertise, the
availability and restrictions on the use of endowments and other funds, the
quality and maintenance costs of campus facilities, and, in the case of public
institutions, the financial condition of the relevant state or other
governmental entity and its policies with respect to education. The
institution's ability to maintain enrollment levels will depend on such factors
as tuition costs, geographic location, geographic diversity and quality of
student body, quality of the faculty and the diversity of program offerings.
Certain Series of the Trust contain Municipal Bonds which are Urban
Redevelopment Bonds ("URBs"). URBs have generally been issued under bond
resolutions pursuant to which the revenues and receipts payable under the
arrangements with the operator of a particular project have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may
have been granted as security for the URBs. Regardless of the structure,
payment of the URBs is solely dependent upon the creditworthiness of the
operator of the project.
Certain of the Municipal Bonds in the Trust may be lease revenue bonds
whose revenues are derived from lease payments made by a municipality or other
political subdivision which is leasing equipment or property for use in its
operation. The risks associated with owning Municipal Bonds of this nature
include the possibility that appropriation of funds for a particular project or
equipment may be discontinued. The Sponsor cannot predict the likelihood of
nonappropriation of funds for these types of lease revenue Municipal Bonds.
Lease revenue Municipal Bonds may also be subject to the risk of abatement in
many states -- rental obligations cease in the event that damage, destruction
or condemnation of the project prevents its use by the lessee. (In these
cases, insurance provisions designed to alleviate this risk become important
credit factors.) In the event of default by the lessee government, there may
be significant legal and/or practical difficulties involved in the re-letting
or sale of the project. Some of these issues, particularly those for equipment
purchase, contain the so-called "substitution safeguard", which bars the lessee
government, in the event its defaults on its rental payments, from the purchase
or use of similar equipment for a certain period of time. This safeguard is
designed to insure that the lessee government will appropriate even though it
is not legally obligated to do so, but its legality remains untested in most,
if not all, states.
Certain Series of the Trust contain "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the payment of current
interest. Zero coupon bonds are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the maturity of the bond
and does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the zero
coupon bonds) is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount earned during the life of such
obligation. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest the income on such obligation at a rate as
high as the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future. For
this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
securities of comparable quality which pay interest currently. For the Federal
tax consequences of original issue discount bonds such as the zero coupon
bonds, see "Tax Status of the Trust."
-11-
<PAGE> 12
Investors should be aware that many of the Municipal Bonds in the
Series of the Trust are subject to continuing requirements such as the actual
use of Municipal Bond proceeds or manner of operation of the project financed
from Municipal Bond proceeds that may affect the exemption of interest on such
Municipal Bonds from Federal income taxation. Although at the time of issuance
of each of the Municipal Bonds in the Series of the Trust an opinion of bond
counsel was rendered as to the exemption of interest on such obligations from
Federal income taxation, there can be no assurance that the respective issuer
or other obligors on such obligations will fulfill the various continuing
requirements established upon issuance of the Municipal Bonds. A failure to
comply with such requirements may cause a determination that interest on such
obligations is subject to Federal income taxation, perhaps even retroactively
from the date of issuance of such Municipal Bonds, thereby reducing the value
of the Municipal Bonds and subjecting Unitholders to unanticipated tax
liabilities.
Federal bankruptcy statutes relating to the adjustment of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or
consent of creditors, which proceedings could result in material and adverse
modification or alteration of the rights of holders of obligations issued by
such subdivisions or authorities.
Certain issues of the Municipal Bonds in some Series of the Trust
represent "moral obligations" of a governmental entity other than the issuer.
In the event that the issuer of the Municipal Bond defaults in the repayment
thereof, such other governmental entity lawfully may, but is not obligated to,
discharge the obligation of the issuer to repay such Municipal Bond. If an
issuer of moral obligation bonds is unable to meet its obligations, the
repayment of such Municipal Bonds becomes a moral commitment but not a legal
obligation of the state or municipality in question. Even though the state may
be called on to restore any deficits in capital reserve funds of the agencies
or authorities which issued the bonds, any restoration generally requires
appropriation by the State legislature and accordingly does not constitute a
legally enforceable obligation or debt of the state. The agencies or
authorities generally have no taxing power.
To the best of the Sponsor's knowledge, as of the date of this
Prospectus, there is no litigation pending with respect to any Municipal Bond
which might reasonably be expected to have a material adverse effect on the
Trust or any Series thereof. Although the Sponsor is unable to predict whether
any litigation may be instituted, or if instituted, whether such litigation
might have a material adverse effect on the Trust or any Series, the Trust
received copies of the opinions of bond counsel given to the issuing
authorities at the time of original delivery of each of the Municipal Bonds to
the effect that the Municipal Bonds had been validly issued and that the
interest thereon is exempt from Federal income taxes.
INSURANCE ON THE PORTFOLIOS
All Municipal Bonds in the portfolios of each Series of the Trust are
insured as to payment of interest and principal, when due, either by a policy
obtained by the Trust, the Sponsor or by the Bond issuer. Series A through A-24
are insured by AMBAC Indemnity and Series A-25 and subsequent Series are
insured by Financial Guaranty. The insurance policy obtained by the Trust for
a Series is non-cancelable and will continue in force so long as such Series of
the Trust is in existence, the insurer and/or the reinsures referred to below
remain in business and the Municipal Bonds described in the policy continue to
be held in such Series of the Trust. The premium for any insurance policy or
policies obtained by an issuer of Municipal Bonds has been paid in advance by
such issuer and any such policy or policies are non-cancelable and will remain
in force so long as the Municipal Bonds so insured are outstanding and the
insurer and/or insurers referred to below remain in business. In those
instances where Municipal Bond insurance is obtained by the Sponsor or
-12-
<PAGE> 13
the issuer directly from an insurer, no premiums for insurance are paid by the
Trust and such bonds are not covered by the Trust's policy. Non-payment of
premiums on the policy obtained by the Trust will not result in the
cancellation of such insurance but will force the insurer to take action
against the Trustee to recover premium payments due it. Premium rates for each
issue of Municipal Bonds protected by the policy obtained by the Trust are
fixed for the life of the appropriate Series of the Trust.
The aforementioned insurance guarantees the scheduled payment of
principal and interest on all of the Municipal Bonds as they fall due. It does
not guarantee the market value of the Municipal Bonds or the value of the Units
of a Series of the Trust. The insurance obtained by the Trust is only
effective as to Municipal Bonds owned by and held in a Series of the Trust and
the price which an individual pays on acquisition of Units, or receives on
redemption or resale of Units, does not, except as indicated below, include any
element of value for the insurance obtained by the Trust. Unitholders should
recognize that in order to receive any benefit from the portfolio insurance
obtained by the Trust they must be owners of the Units of a Series of the Trust
at the time the Trustee becomes entitled to receive any payment from the
insurer for such Series. Insurance obtained by the issuer of a Municipal Bond
is effective so long as the Municipal Bond is outstanding, whether or not held
by a Series of the Trust.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Municipal Bond from Series A-25 (or any subsequent
Series) covered under the Trust's insurance policy, has the right to obtain
permanent insurance (the "Permanent Insurance") with respect to such Municipal
Bond (i.e., insurance to the maturity of the Municipal Bond regardless of the
identity of the holder thereof) upon the payment of a single predetermined
insurance premium from the proceeds of the sale of such Municipal Bond.
Accordingly, every Municipal Bond in Series A-25 (or subsequent Series) of the
Trust is eligible to be sold on an insured basis. It is expected that the
Trustee will exercise the right to obtain Permanent Insurance with respect to
Municipal Bonds in such Series only if upon such exercise the Trust would
receive net proceeds (i.e., the value of such Municipal Bond if sold as an
insured Municipal Bond less the insurance premium attributable to the Permanent
Insurance) from such sale in excess of the sale proceeds if such Municipal Bond
was sold on an uninsured basis. The insurance premium with respect to each
Municipal Bond is determined based upon the insurability of each Municipal Bond
as of the Date of Deposit and will not be increased or decreased for any change
in the creditworthiness of such Municipal Bond's issuer.
Insurance obtained by the Trust, under normal circumstances, has no
effect on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value to such insurance for the purpose of
computing the price or redemption value of Units only in circumstances where
the credit quality of an underlying Municipal Bond has significantly
deteriorated. Insurance obtained by the issuer of a Municipal Bond is
effective so long as such Municipal Bond is outstanding. Therefore, any such
insurance may be considered to represent an element of market value in regard
to the Municipal Bonds thus insured, but the exact effect, if any, of this
insurance on such market value cannot be predicted.
The value to be added to such Municipal Bonds shall be an amount equal
to the excess, if any, by which the net proceeds realized from the sale of the
Municipal Bonds on an insured basis exceeds the sum of (i) the net proceeds
realizable from the sale of the Municipal Bonds on an uninsured basis plus (ii)
in the case of Series A-25 and later the premium attributable to the Permanent
Insurance. The portfolio insurance obtained by the Trust from AMBAC Indemnity
for Series A through A-24 is applicable only while the Municipal Bonds remain
in the Trust's portfolio. Consequently, the price received by the Trust upon
the disposition of any such Municipal Bond will reflect a value placed upon it
by the market as an uninsured obligation rather than a value resulting from the
insurance. Due to this fact, the Sponsor will not direct the Trustee to
dispose of Municipal Bonds in Series A through A-24 which are in default or
imminent danger of default but to retain such
-13-
<PAGE> 14
Municipal Bonds in the portfolio so that if a default in the payment of
interest or principal occurs the Trust may realize the benefits of the
insurance.
The Sponsor will instruct the Trustee not to sell Municipal Bonds from
Series A-25 or later to effect redemptions or for any reason but rather to
retain them in the portfolio unless value attributable to the Permanent
Insurance can be realized upon sale. See "Investment Supervision."
FINANCIAL GUARANTY INSURANCE COMPANY. Financial Guaranty is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a wholly-owned subsidiary is General
Electric Capital Corporation ("GECC"). Neither the Corporation nor GECC is
obligated to pay the debt of or the claims against Financial Guaranty.
Financial Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of December 31,
1992, the total capital and surplus of Financial Guaranty was approximately
$621,000,000. Copies of Financial Guaranty's financial statements, prepared on
the basis of statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted accounting principles,
may be obtained by writing to Financial Guaranty at 115 Broadway, New York, New
York 10006, Attention: Communications Department. Financial Guaranty's
telephone number is (212) 312- 3000.
In addition, Financial Guaranty Insurance Company is currently
authorized to write insurance in 49 states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained herein with
respect to such corporation is unaudited but appears in reports or other
materials filed with state insurance regulatory authorities and is subject to
audit and review by such authorities. No representation is made herein as to
the accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof but the
Sponsor is not aware that the information herein is inaccurate or incomplete.
AMBAC INDEMNITY CORPORATION. AMBAC Indemnity Corporation ("AMBAC") is
a Wisconsin-domiciled stock insurance company, regulated by the office of
Commissioner of Insurance of Wisconsin, and licensed to do business in 50
states, the District of Columbia and the Commonwealth of Puerto Rico, with
admitted assets (unaudited) of approximately $1,503,000,000 and statutory
capital (unaudited) of approximately $862,000,000 as of September 30, 1992.
Statutory capital consists of statutory contingency reserve and policyholders'
surplus. AMBAC Indemnity is a wholly-owned subsidiary of AMBAC Inc., a 100%
publicly held company. Moody's Investors Service, Inc. and Standard & Poor's
Corporation have both assigned a AAA claims-paying ability rating to AMBAC.
Copies of AMBAC's financial statements prepared in accordance with statutory
accounting standards are available from AMBAC. The address of AMBAC's
administrative offices and its telephone number are One State Street Plaza, 17
Floor, New York, New York 10004 and (212) 668-0340. AMBAC has entered into
quota share reinsurance agreements under which a percentage of the insurance
underwritten pursuant to certain municipal bank insurance programs of AMBAC
Indemnity has been and will be assumed by a number of foreign and domestic
unaffiliated reinsures.
MUNICIPAL BOND INVESTORS ASSURANCE CORPORATION. Municipal Bond
Investors Assurance Corporation ("MBIA Corporation") is the principal operating
subsidiary of MBIA, Inc., a New York Stock Exchange listed Company. MBIA, Inc.
is obligated to pay the debts of or claims against MBIA Corporation. MBIA
Corporation, which commenced municipal bond insurance operations on January 5,
1987, is a limited liability
-14-
<PAGE> 15
corporation rather than a several liability association. MBIA Corporation is
domiciled in the State of New York and licensed to do business in all 50
states, the District of Columbia and the Commonwealth of Puerto Rico.
As of December 31, 1991 MBIA Corporation had admitted assets of $2.0
billion (audited), total liabilities of $1.4 billion (audited), and total
capital and surplus of $647 million (audited) prepared in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of September 30, 1992, MBIA Corporation had admitted assets of
$2.3 billion (unaudited), total liabilities of $1.6 billion (unaudited), and
total policyholder's surplus of $758 million (unaudited), prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. Standard & Poor's Corporation has rated the
claims-paying ability of MBIA "AAA". Copies of MBIA Corporation's financial
statements prepared in accordance with statutory accounting practices are
available from MBIA Corporation. The address of MBIA Corporation is 113 King
Street, Armonk, New York 10504.
Effective December 31, 1993, MBIA Inc. acquired Bond Investors Group,
Inc. On January 5, 1990, the Insurer acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of BIG, now known as MBIA Insurance
Corp. of Illinois. Through a reinsurance agreement, BIG has ceded all of its
net insured risks, as well as its unearned premium and contingency reserves, to
the Insurer and the Insurer has reinsured BIG's net outstanding exposure.
Moody's Investors Service rates all bonds issues insured by MBIA "Aaa"
and short-term loans "MIG1," both designated to be of the highest quality.
Standard & Poor's Corporation rates all new issues insured by MBIA "AAA."
FINANCIAL SECURITY ASSURANCE. Financial Security Assurance ("Financial
Security" or "FSA") is a monoline insurance company incorporated on March 16,
1984 under the laws of the State of New York. The operations of Financial
Security commenced on July 25, 1985, and Financial Security received its New
York State insurance license on September 23, 1985. Financial Security and its
two wholly owned subsidiaries are licensed to engage in financial guaranty
insurance business in 47 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. In general, financial guaranty insurance consists of the issuance
of a guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of these securities, in consideration for payment
of a premium to the insurer.
Financial Security is 91.6% owned by U S West, Inc., and 8.4% owned by
Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine"). U S West, Inc.
operates businesses involved in communications, data solutions, marketing
services and capital assets, including the provision of telephone services in
14 states in the western and midwestern United States. Tokio Marine is the
largest property and casualty insurance company in Japan. No shareholder of
Financial Security is obligated to pay any debt of Financial Security or any
claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.
-15-
<PAGE> 16
As of September 30, 1992 the total policyholders' surplus and
contingency reserves and the total unearned premium reserve, respectively, of
Financial Security and its consolidated subsidiaries were, in accordance with
statutory accounting principles, approximately $456,840,000 (unaudited) and
$231,686,000 (unaudited), and the total shareholders' equity and the unearned
premium reserve, respectively of Financial Security and its consolidated
subsidiaries were, in accordance with generally accepted accounting principles,
approximately $615,376,000 (unaudited) and $213,838,000 (unaudited).
Copies of Financial Security's financial statements may be obtained by
writing of Financial Security at 350 Park Avenue, New York, New York 10022,
attention Communications Department. Financial Security's and its telephone
number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or either of its subsidiaries
are reinsured among such companies at an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsures under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc., and "AAA" by Standard & Poor's Corporation, Nippon
Investors Service Inc., Duff & Phelps Inc. and Australian Ratings Pty. Ltd.
Such ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
CAPITAL GUARANTY INSURANCE COMPANY. Capital Guaranty Insurance Company
("Capital Guaranty") was incorporated in Maryland on June 25, 1986, and is a
wholly owned subsidiary of Capital Guaranty Corporation, a Maryland insurance
holding company.
Capital Guaranty Corporation is owned by the following investors:
Constellation Investments, Inc., an affiliate of Baltimore Gas and Electric;
Fleet/Norstar Financial Group, Inc.; Safeco Corporation; Sibag Finance
Corporation, an affiliate of Siemens A.G. and United States Fidelity and
Guaranty Company and management.
Capital Guaranty, headquartered in San Francisco, is an monoline
financial guaranty insurer engaged in the underwriting and development of
financial guaranty insurance. Capital Guaranty insures general obligation, tax
supported and revenue bonds structured as tax-exempt and taxable securities as
well as selectively insures taxable corporate/asset backed securities. Standard
& Poor's rates the claims-paying ability of Capital Guaranty "AAA".
Capital Guaranty's insured portfolio currently includes over $9 billion
in total principal and interest insured. As of December 31, 1990, the total
policyholders' surplus of Capital Guaranty was $103,802,396 (audited), and the
total admitted assets were $180,118,227 (audited) as reported to the Insurance
Department of the State of Maryland. Financial statements for Capital Guaranty
Insurance Company, that have been prepared in accordance with statutory
insurance accounting standards, are available upon request. The address of
Capital Guaranty's headquarters is Steuart Tower, 22nd Floor, One Market Plaza,
San Francisco, CA 94105-
-16-
<PAGE> 17
1413 and the telephone number is (415) 995-8000.
In order to be in a Series of the Trust, Municipal Bonds must be
insured by the issuer thereof or be eligible for the insurance obtained by the
Series of the Trust. In determining eligibility, the company insuring the
portfolio has applied its own standards which correspond generally to the
standards it normally uses in establishing the insurability of new issues of
municipal bonds and which are not necessarily the criteria used in regard to
the selection of Municipal Bonds by the Sponsor. To the extent the standards
of the insurer are more restrictive than those of the Sponsor, the previously
stated Trust investment criteria have been limited.
On the date shown under "Essential Information" in Part Two, the
Estimated Long-Term and Current Returns per Unit for the Trust, after payment
of the insurance premium were as indicated. The Estimated Long-Term and
Current Returns per Unit for a trust with an identical portfolio without the
insurance obtained by the Trust would have been higher on such date.
An objective of the portfolio insurance obtained by the Trust is to
obtain a higher yield on the portfolio of the Series of the Trust than would be
available if all the Municipal Bonds in such portfolio had Standard & Poor's
"AAA" rating and/or Moody's "Aaa" rating(s), while having the protection of
insurance of prompt payment of interest and principal, when due, on the
Municipal Bonds. There is, of course, no certainty that this result will be
achieved. Municipal Bonds in a Series of the Trust which have been insured by
the issuer (all of which are rated "AAA" by Standard & Poor's and/or "Aaa" by
Moody's) may or may not have a higher yield than uninsured bonds rated "AAA" by
Standard & Poor's or "Aaa" by Moody's. In selecting such Municipal Bonds for
the portfolio, the Sponsor has applied the criteria described above.
In the event of nonpayment of interest or principal, when due, in
respect of a Municipal Bond, the appropriate insurer shall make such payment
not later than 30 days after it has been notified that such nonpayment has
occurred or is threatened (but not earlier than the date such payment is due).
The insurer, as regards any payment it may make, will succeed to the rights of
the Trustee in respect thereof.
The Internal Revenue Service has issued a letter ruling which holds, in
effect, that inurance proceeds representing maturity interest on defaulted
municipal obligations paid to municipal bond funds substantially similar to the
Trust, under policy provisions substantially identical to the policies
described herein, will be excludable from Federal gross income under Section
103(a)(1) of the Internal Revenue Code. Holders of Units in the Trust should
discuss with their tax advisers the degree of reliance which they may place on
this letter ruling. Furthermore, Chapman and Cutler, Counsel for the Sponsor,
have given an opinion to the effect that such payment of proceeds would be
excludable from Federal gross income to the same extent that such interest
would have been so excludable if paid by the issuer of the defaulted
obligations. See "Tax Status of the Trust."
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust Fund may elect to have distributions of
principal (including capital gains, if any) or interest or both automatically
invested without charge in shares of any mutual fund underwritten or advised by
Kemper Financial Services, Inc., an affiliate of the sponsor, (the "Kemper
Funds") which is registered in the Unitholder's state of residence, other than
those Kemper Funds sold with a contingent deferred sales charge. Since the
portfolio securities and investment objectives of such Kemper Funds may differ
significantly from that of the Trust Funds, Unitholders should carefully
consider the consequences, including the fact that distributions from such
Kemper Funds may be taxable, before selecting such Kemper Funds for
-17-
<PAGE> 18
reinvestment. Detailed information with respect to the investment objectives
and the management of the Funds is contained in their respective prospectuses,
which can be obtained from and appropriate Trust Fund Underwriter upon request.
An investor should read the prospectus of the reinvestment fund selected prior
to making the election to reinvest. Unitholders who desire to have such
distributions automatically reinvested should inform their broker at the time
of purchase or should file with the Program Agent referred to below a written
notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Program Agent an
election to have such distributions reinvested without charge. Such election
must be received by the Program Agent at least ten days prior to the Record
Date applicable to any distribution in order to be in effect for such Record
Date. Any such election shall remaining effect until a subsequent notice is
received by the Program Agent (See "Distributions to Unitholders").
THE PROGRAM AGENT IS INVESTORS FIDUCIARY TRUST COMPANY. All inquiries
concerning participation in distribution reinvestment should be directed to the
Program Agent at P.O. Box 419430, Kansas City, Missouri 64173-0216, telephone
(816) 474-8786.
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS
As of the opening of business on the date indicated therein, the
Estimated Current Returns and the Estimated Long-Term Returns for the Trust
were as set forth under "Essential Information" in Part Two of this Prospectus.
Estimated Current Returns are calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net
annual interest income per Unit will vary with changes in fees and expenses of
the Trust and with the principal prepayment, redemption, maturity, exchange or
sale of Securities while the Public Offering Price will vary with changes in
the offering price of the underlying Securities; therefore, there is no
assurance that the present Estimated Current Returns will be realized in the
future. Estimated Long-Term Returns are calculated using a formula which (1)
takes into consideration, and determines and factors in the relative weightings
of, the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all of
the Securities in the Trust and (2) takes into account the expenses and sales
charge associated with the Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Returns will be realized
in the future. Estimated Current Returns and Estimated Long-Term Returns are
expected to differ because the calculation of Estimated Long-Term Returns
reflects the estimated date and amount of principal returned while Estimated
Current Returns calculations include only net annual interest income and Public
Offering Price.
TAX STATUS OF THE TRUST
All Municipal Bonds in the Trust were accompanied by copies of opinions
of bond counsel given to the issuers thereof at the time of original delivery
of the Municipal Bonds to the effect that the interest thereon is exempt from
all Federal income taxes. In connection with the offering of Units of the
Trust Funds, neither the Sponsor, the Trustee, the auditors nor their
respective counsel have made any review of the proceedings relating to the
issuance of the Municipal Bonds or the basis for such opinions. Gain realized
on the sale or redemption of the Municipal Bonds by the Trustee or of a Unit by
a Unitholder is, however, includable in gross income for Federal income tax
purposes. Such gain does not include any amounts received in respect of
accrued interest or earned original issue discount. It should be noted that
under recently enacted legislation described below that subjects accretion of
market discount on tax-exempt bonds to taxation as ordinary income, gain
realized on the sale or redemption of Municipal Bonds by the Trustee or of
Units by a Unitholder that
-18-
<PAGE> 19
would have been treated as capital gain under prior law is treated as ordinary
income to the extent it is attributable to accretion of market discount.
Market discount can arise based on the price a Trust Fund pays for Municipal
Bonds or the price a Unitholder pays for his or her Units. In addition, bond
counsel to the issuing authorities rendered opinions as to the exemption of
interest on such Bonds, when held by residents of the state in which the
issuers of such bonds are located, from state income taxes and, where
applicable, local income taxes.
Neither the Sponsor, the Trustee, the Independent Auditors nor their
respective counsel, have made any review of the proceedings relating to the
issuance of the Municipal Bonds or the bases for such opinions. However, bond
counsel to the issuing authorities rendered opinions as to the exemption of
interest on such Bonds, when held by residents of the state in which the
issuers of such bonds are located, from state income taxes and, where
applicable, local income taxes.
At the time of closing for the Trusts, Chapman and Cutler, counsel for
the Sponsor, rendered an opinion under then existing law substantially to the
effect that:
Each series of the Trust is not an association taxable as a corporation for
federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the Internal
Revenue Code of 1986 (the "Code") will retain its status when distributed to
Unitholders, except to the extent such interest is subject to the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below.
Each Unitholder is considered to be the owner of a pro rata portion of each
asset of the respective Series of the Trust in the proportion that the
number of Units of such Trust held by him bears to the total number of
Units outstanding of such Trust under subpart E, subchapter J of chapter 1 of
the Code and will have a taxable event when such Trust
disposes of a Bond, or when the Unitholder redeems or sells his Units.
Unitholders must reduce the tax basis of their Units for their share of
accrued interest received by a Trust, if any, on Bonds delivered after the
Unitholders pay for their Units to the extent that such interest accrued on
such Bonds during the period from the Unitholder's settlement date to the
date such Bonds are delivered to a Trust and, consequently, such Unitholders
may have an increase in taxable gain or reduction in capital loss upon
the disposition of such Units. Gain or loss upon the sale or redemption of
Units is measured by comparing the proceeds of such sale or redemption with
the adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder. The amount of any such gain or loss is
measured by comparing the Unitholder's pro rata share of the total proceeds
from such disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who
purchases Units, such basis (before adjustment for earned original issue
discount and amortized bond premium, if any) is determined by apportioning
the cost of the Units among each of the Trust's assets ratably according to
value as of the date of acquisition of the Units. The tax cost reduction
requirements of the Code relating to amortization of bond premium may, under
some circumstances, result in the Unitholder realizing a taxable gain when
his Units are sold or redeemed for an amount equal to his original cost.
Any proceeds paid under individual insurance policies obtained by issuers of
Bonds or under any insurance policies obtained by the Trust or the Sponsor
which represent maturing interest on defaulted obligations held by the
Trustee will be excludable from Federal gross income if, and to the same
extent as, such interest would have been so excludable if paid in the normal
course by the issuer of the defaulted obligations.
-19-
<PAGE> 20
Sections 1288 and 1272 of the Internal Revenue Code of 1986 (the
"Code") provide a complex set of rules governing the accrual of original issue
discount. These rules provide that original issue discount accrues either on
the basis of a constant compound interest rate or ratably over the term of the
Municipal Bond, depending on the date the Municipal Bond was issued. In
addition, special rules apply if the purchase price of a Municipal Bond exceeds
the original issue price plus the amount of original issue discount which would
have previously accrued based upon its issue price (its "adjusted issue
price"). The application of these rules will also vary depending on the value
of the Municipal Bond on the date a Unitholder acquires his Units, and the
price the Unitholder pays for his Units. Investors with questions regarding
these Code sections should consult with their tax advisers.
"The Revenue Reconcilliation Act of 1993" (the "Tax Act") was recently
enacted. The Tax Act subjects tax- exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993. In general,
market discount is the amount (if any) by which the stated redemption price at
maturity exceeds an investor's purchase price (except to the extent that such
difference, if any, is attributable to original issue discount not yet
accrued). Under the Tax Act, accretion of market discount is taxable as
ordinary income; under prior law the accretion had been treated as capital
gain. Market discount that accretes while a Trust Fund holds a Municipal Bond
would be recognized as ordinary income by the Unitholders when principal
payments are received on the Municipal Bond, upon sale or at redemption
(including early redemption), or upon sale or redemption of his or her Units,
unless a Unitholder elects to include market discount in taxable income as it
accrues. The market discount rules are complex and Unitholders should consult
their tax advisers regarding these rules and their application.
In the case of all Unitholders (both individuals and corporations),
interest on all or certain Bonds held by certain Series of the Trusts may be
treated as an item of tax preference for purposes of computing the alternative
minimum tax. Accordingly, investments in Units may subject Unitholders to (or
result in increased liability under) the alternative minimum tax. Due to the
complexity of the alternative minimum tax, Unitholders are urged to consult
their tax advisers regarding the impact, if any, of the alternative minimum
tax.
In addition, in the case of certain corporations, the alternative
minimum tax and the Superfund Tax depend upon the corporation's alternative
minimum taxable income, which is the corporation's taxable income with certain
adjustments. One of the adjustment items used in computing the alternative
minimum taxable income and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's "adjusted
current earnings" over an amount equal to its alternative minimum taxable
income (before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all of the Bonds in a Trust. Unitholders are urged to
consult their tax advisers with respect to the particular tax consequences to
them including the corporate alternative minimum tax, the Superfund Tax and the
branch profit tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry Units
of a Trust is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase or
improve a personal residence). Also, under Section 265 of the Code, certain
financial institutions that acquire units would generally not be able to
deduct any of the interest expense attributable to ownership of such Units.
Investors with questions
-20-
<PAGE> 21
regarding these issues should consult with their tax advisers.
In the case of certain Municipal Bonds in certain Series of the Trust,
the opinions of bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with the proceeds of
these securities or persons related thereto, for periods while such securities
are held by such a user or related person, will not be excludable from Federal
gross income, although interest on such securities received by others would be
excludable from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes that he
or she may be a "substantial user" or a "related person" as so defined should
contact his or her tax adviser.
Under existing law, the Trusts are not associations taxable as a
corporation and the income of the Trusts will be treated as the income of the
Unitholders under the income tax laws of the State of Missouri.
All statements of law in the Prospectus concerning exclusion from gross
income for Federal, state or other tax purposes are the opinions of counsel and
are to be so construed.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from Federal
gross income are rendered by bond counsel to the respective issuing
authorities. Neither the Sponsor nor Chapman and Cutler has made any special
review for the Trust Funds of the proceedings relating to the issuance of the
Bonds or of the basis for such opinions.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum marginal stated tax rate of 28 percent. However, it should
be noted that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which ordinary income
and capital gains are taxed. Under the Code, taxpayers must disclose to the
Internal Revenue Service the amount of tax-exempt interest earned during the
year.
Section 86 of the Code, in general, provides that fifty percent of
Social Security benefits are includible in gross income to the extent that the
sum of "modified adjusted gross income" plus fifty percent of the Social
Security benefits received exceeds a "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint return
and zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from the Trust, will be subject to tax. A taxpayer
whose adjusted gross income already exceeds the base amount must include fifty
percent of his Social Security benefits in gross income whether or not he
receives any tax-exempt interest. A taxpayer whose modified adjusted gross
income (after inclusion of tax-exempt interest) does not exceed the base amount
need not include
-21-
<PAGE> 22
any Social Security benefits in gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31,1993, up to 85 percent of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross income"
plus fifty percent of Social Security benefits received exceeds an "adjusted
base amount." The adjusted base amount is $34,000 for married taxpayers,
$44,000 for married taxpayers filing a joint return and zero for married
taxpayers who do not live apart at all times during the taxable year and who
file separate returns.
For a discussion of the state tax status of income earned on Units of a
state trust, see the discussion of tax status for the applicable trust. Except
as noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The laws of
the several states vary with respect to the taxation of such obligations.
All statements in the Prospectus concerning exemption from Federal,
state or other taxes are the opinions of counsel and are to be construed.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of each Series of the Trust are offered
at the Public Offering Price, plus accrued interest to the expected settlement
date. The Public Offering Price per Unit of a Series is equal to the aggregate
bid side evaluation of the Municipal Bonds in the Series' portfolio (as
determined pursuant to the terms of a contract with the Evaluator, by Kenny
Information Services, Inc., a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities), plus or
minus cash, if any, in the Principal Account, held or owed by the Series,
divided by the number of outstanding Units of that Series of the Trust, plus
the sales charge applicable. The sales charge is based upon the dollar
weighted average maturity of the Trust and is determined in accordance with the
table set forth below. For purposes of this computation, Municipal Bonds will
be deemed to mature on their expressed maturity dates unless: (a) the
Municipal Bonds have been called for redemption or funds or securities have
been placed in escrow to redeem them on an earlier call date, in which case
such call date will be deemed to be the date upon which they mature; or (b)
such Municipal Bonds are subject to a "mandatory tender", in which case such
mandatory tender will be deemed to be the date upon which they mature. The
effect of this method of sales charge computation will be that different sales
charge rates will be applied to the Trust based upon the dollar weighted
average maturity of such Trust's portfolio, in accordance with the following
schedule:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF NET
DOLLAR WEIGHTED AVERAGE PUBLIC OFFERING AMOUNT
YEARS TO MATURITY PRICE INVESTED
- ----------------- ----- --------
<S> <C> <C>
0 to 3.99 years . . . . . . . . . . . . . . . . . . . . . . . 2.00% 2.041%
4 to 7.99 years . . . . . . . . . . . . . . . . . . . . . . . 3.50 3.627
8 to 14.99 years . . . . . . . . . . . . . . . . . . . . . . 4.50 4.712
15 or more years . . . . . . . . . . . . . . . . . . . . . . 5.50 5.820
</TABLE>
-22-
<PAGE> 23
The sales charge per Unit will be reduced as set forth below:
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY*2
<TABLE>
<CAPTION>
4 TO 7.99 8 TO 14.99 15 OR MORE
------------------------------------------------------
AMOUNT OF INVESTMENT SALES CHARGE (% OF PUBLIC OFFERING PRICE)
- -------------------- -----------------------------------------
<S> <C> <C> <C>
$1 to $99,999 . . . . . . . . . . . . . . . . . . . . . . . . . 3.50% 4.50% 5.50%
$100,000 to $499,999 . . . . . . . . . . . . . . . . . . . . . 3.25 4.25 5.00
$500,000 to $999,999 . . . . . . . . . . . . . . . . . . . . . 3.00 4.00 4.50
$1,000,000 or more . . . . . . . . . . . . . . . . . . . . . . 2.75 3.75 4.00
</TABLE>
The reduced sales charge as shown on the preceding charts will apply to
all purchases of Units on any one day by the same purchases from the same
dealer, and for this purpose, purchases of Units of a Series of the Trust will
be aggregated with concurrent purchases of Units of any other unit investment
trust that may be offered by the Sponsor. Additionally, Units purchased in the
name of a spouse or child (under 21) of such purchaser will be deemed to be
additional purchases by such purchaser. The reduced sales charge will also be
applicable to a trust or other fiduciary purchasing for a single trust estate or
single fiduciary account.
The Sponsor intends to permit officers, directors and employees of the
Sponsor and Evaluator and, at the discretion of the Sponsor, registered
representatives of selling firms to purchase Units of the Trusts without a sales
charge, although a transaction processing fee may be imposed on such trades.
The Public Offering Price on the date shown on the cover page of Part
Two of the Prospectus or on any subsequent date will vary from the amounts
stated under "Essential Information" in Part Two in accordance with fluctuations
in the prices of the underlying Municipal Bonds. The aggregate bid side
evaluation of the Municipal Bonds shall be determined (a) on the basis of
current bid prices of the Municipal Bonds, (b) if bid prices are not available
for any particular Municipal Bond, on the basis of current bid prices for
comparable bonds, (c) by determining the value of the Municipal Bonds on the
bid side of the market by appraisal, or (d) by any combination of the above.
Except as described in "Insurance on the Portfolios" above, the Evaluator will
not attribute any value to the insurance obtained by the Trust. On the other
hand, the value of insurance obtained by an issuer of Municipal Bonds or by the
Sponsor is reflected and included in the market value of such Municipal Bonds.
In any case, the Evaluator will consider the ability of an insurer to
meet its commitments under the Trust's insurance policy (if any). For example,
if the Trust were to hold the Municipal Bonds of a municipality which had
significantly deteriorated in credit quality, the Evaluator would first consider
in its evaluation the market price of the Municipal Bonds at their lower credit
rating. The Evaluator would also attribute a value to the insurance feature of
the Municipal Bonds which would be equal to the difference between the market
value of such Municipal Bonds and the market value of bonds of a similar
- -----------------------------------------
* If the dollar weighted average maturity of a Trust is under 3.99 years,
the sales charge is 2% and 1.5% of the Public Offering Price for purchases
of $1 to $249,999 and $250,000 or more, respectively.
-23-
<PAGE> 24
nature which were of investment grade rating. It is the position of the Sponsor
that this is a fair method of valuing insured Municipal Bonds and reflects a
proper valuation method in accordance with the provisions of the Investment
Company Act of 1940. For a description of the circumstances under which
a full or partial suspension of the right of Unitholders to redeem their Units
may occur, see "Redemption."
The foregoing evaluations and computations shall be made as of the
Evaluation Time stated under "Essential Information" in Part Two, on each
business day effective for all sales made during the preceding 24-hour period,
and for purposes of resales and repurchases of Units.
The interest on the Municipal Bonds in each Series of the Trust, less
the estimated fees and expenses, is estimated to accrue in the annual amounts
per Unit set forth under "Essential Information" in Part Two. The amount of net
interest income which accrues per Unit may change as Municipal Bonds mature or
are redeemed, exchanged or sold, or as the expenses of a Series of the Trust
change or as the number of outstanding Units of such Series changes.
Payment for Units must be made on or before the fifth business day
following purchase (the "settlement date"). A purchaser becomes the owner of
Units on the settlement date. If a Unitholder desires to have certificates
representing Units purchased, such certificates will be delivered as soon as
possible following his written request therefor. For information with respect
to redemption of Units purchased, but as to which certificates requested have
not been received, see "Redemption" below.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor has qualified Units for sale
in all states. Units will be sold through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers at prices which represent discounts from the
Public Offering Price as set forth in the table below. Certain commercial banks
are making Units of the Trust available to their customers on an agency basis.
A portion of the sales charge paid by their customers is retained by or remitted
to the banks, in the amount shown in the table below. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
-24-
<PAGE> 25
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY*3
<TABLE>
<CAPTION>
4 TO 7.99 8 TO 14.99 15 OR MORE
-------------------------------------------------------------
DISCOUNT PER UNIT
AMOUNT OF INVESTMENT (% OF PUBLIC OFFERING PRICE)
- -------------------- ----------------------------
<S> <C> <C> <C>
$1 to $99,999 . . . . . . . . . . . . . . . . . . . . . 2.00% 3.00% 4.00%
$100,000 to $499,999 . . . . . . . . . . . . . . . . . 1.75 2.75 3.50
$500,000 to $999,999 . . . . . . . . . . . . . . . . . 1.50 2.50 3.00
$1,000,000 or more . . . . . . . . . . . . . . . . . . 1.25 2.25 2.50
</TABLE>
In addition to such discounts, the Sponsor may, from time to time, pay
or allow an additional discount, in the form of cash or other compensation, to
dealers employing registered representatives who sell, during a specified time
period, a minimum dollar amount of Units of the Trusts and other unit investment
trusts underwritten by the Sponsor.
The Sponsor reserves the right to change the levels of discounts at any
time. The difference between the discount and the sales charge will be retained
by the Sponsor.
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units.
PROFITS OF SPONSOR. The Sponsor will retain a portion of the sales
charge on each Unit sold, representing the difference between the Public
Offering Price of the Units and the discounts allowed to firms selling such
Units. The Sponsor may realize additional profit or loss as a result of the
possible change in the daily evaluation of the Municipal Bonds in the Trust,
since the value of its inventory of Units may increase or decrease.
MARKET FOR UNITS
While not obligated to do so, the Sponsor intends to, subject to change
at any time, maintain a market for Units of each Series of the Trust offered
hereby and to offer to purchase said Units at prices, as determined by the
Evaluator, based on the aggregate bid prices of the underlying Municipal Bonds
of such Series, together with accrued interest to the expected date of
settlement. Accordingly, Unitholders who wish to dispose of their Units should
inquire of their broker or bank as to the current market price of the Units in
order to determine whether there is in existence any price in excess of the
Redemption Price and, if so, the amount thereof.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market
described above may cause
- --------------------------------
* If the dollar weighted average maturity of a Trust is under 3.99 years, the
concession or agency commission is 1.00% of the Public Offering Price.
-25-
<PAGE> 26
their Units to be redeemed by the Trustee by making a written request to
the Trustee, Investors Fiduciary Trust Company, P.O. Box 419430, Kansas City,
Missouri 64173-0216 and, in the case of Units evidenced by a certificate, by
tendering such certificate to the Trustee, properly endorsed or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Trustee. Unitholders must sign the request, and such certificate or transfer
instrument, exactly as their names appear on the records of the Trustee and on
any certificate representing the Units to be redeemed. If the amount of the
redemption is $25,000 or less and the proceeds are payable to the Unitholder(s)
of record at the address of record, no signature guarantee is necessary for
redemptions by individual account owners (including joint owners). Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a commercial bank or trust
company, savings and loan association or by a member firm of a national
securities exchange. A certificate should only be sent by registered or
certified mail for the protection of the Unitholder. Since tender of the
certificate is required for redemption when one has been issued, Units
represented by a certificate cannot be redeemed until the certificate
representing such Units has been received by the purchaser.
Redemption shall be made by the Trustee on the seventh calendar day
following the day on which a tender for redemption is received, or if the
seventh calendar day is not a business day, on the first business day prior
thereto (the "Redemption Date"), by payment of cash equivalent to the Redemption
Price for that Series of the Trust, determined as set forth below under
"Computation of Redemption Price," as of the Evaluation Time stated under
"Essential Information" in Part Two, next following such tender, multiplied by
the number of Units being redeemed. Any Units redeemed shall be cancelled and
any undivided fractional in the Trust Fund extinguished. The price received
upon redemption might be more or less than the amount paid by the Unitholder
depending on the value of the Municipal Bonds in the portfolio at the time of
redemption. Any Units redeemed shall be cancelled and any undivided fractional
in the Trust Fund extinguished. Any Units redeemed shall be cancelled and any
undivided fractional interest in that Series of the Trust will be extinguished.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a tax return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from the selling
broker. However, any time a Unitholder elects to tender Units for redemption,
such Unitholder should make sure that the Trustee has been provided a certified
tax identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously provided such
number, one must be provided at the time redemption is requested.
Any amounts paid on redemption representing interest shall be withdrawn
from the Interest Account of such Series to the extent that funds are available
for such purpose. All other amounts paid on redemption shall be withdrawn from
the Principal Account of such Series. The Trustee is empowered to sell
Municipal Bonds from the portfolio of a Series in order to make funds available
for the redemption of Units of such Series. Such sale may be required when
Municipal Bonds would not otherwise be sold and might result in lower prices
than might otherwise be realized. To the extent Municipal Bonds are sold, the
size and diversity of that Series of the Trust will be reduced.
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase any Units tendered for redemption, in lieu of
redeeming such Units, to sell such Units in the over-the-
-26-
<PAGE> 27
counter market for the account of tendering Unitholders at prices which will
return to such Unitholders amounts in cash, net after brokerage commissions,
transfer taxes and other charges, equal to or in excess of the Redemption Price
for such Units. In the event of any such sale, the Trustee shall pay the net
proceeds thereof to the Unitholders on the day they would otherwise be entitled
to receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for
any period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or during which (as determined by the
Securities and Exchange Commission) trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which disposal by the Trustee of Municipal Bonds is not reasonably practicable
or it is not reasonably practicable to fairly determine the value of the
underlying Municipal Bonds in accordance with the Agreement; or (3) for such
other period as the Securities and Exchange Commission may by order permit.
Because insurance obtained by Series A through A-24 of the Trust terminates as
to Bonds which are sold by the Trustee and because the insurance obtained by
such Series of the Trust does not have a realizable cash value which can be used
by the Trustee to meet redemptions of Units, under certain circumstances the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unitholders to redeem
their Units if a significant portion of the Bonds in the portfolio is in default
in payment of principal or interest or in significant risk of such default. The
Trustee is not liable to any person or in any way for any loss or damage which
may result from any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price for Units of each
Series of the Trust is computed by the Evaluator as of the Evaluation Time
stated under "Essential Information" in Part Two next occurring after the
tendering of a Unit for redemption and on any other business day desired by it,
by
A. adding (1) the cash on hand in such Series of the Trust other than
cash depositier in the Trust Funds to purchase Municipal Bonds not applied to
the purchase of such Bonds; (2) the aggregate value of the Municipal Bonds held
in such Series of the Trust, as determined by the Evaluator on the basis of bid
prices therefor; (3) interest accrued and unpaid on the Municipal Bonds in that
Series of the Trust as of the date of computation; and
B. deducting therefrom (1) amounts representing any applicable taxes
or governmental charges payable out of that Series of the Trust and for which no
deductions have been previously made for the purpose of additions to the Reserve
Account described under "Expenses of the Trust"; (2) amounts representing
estimated accrued expenses of that Series of the Trust including, but not
limited to, fees and expenses of the Trustee (including legal and auditing fees
and insurance costs), the Evaluator, the Sponsor and bond counsel, if any; (3)
cash held for distribution to Unitholders of record as of the business day prior
to the evaluation being made; and (4) other liabilities incurred by such Series
of the Trust; and
C. finally, dividing the results of such computation by the number of
Units of such Series of the Trust outstanding as of the date thereof.
UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of a Trust will not be evidenced
by certificates unless a Unitholder, the Unitholder's registered broker/dealer
or the clearing agent makes a written request to
-27-
<PAGE> 28
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 commercial bank or trust company, savings and loan association or by a member
firm of a national securities exchange.
Units may be purchased and certificates, if requested, will be issued in
denominations of one Unit or any multiple thereof subject to any minimum
investment requirement established by the Sponsor from time to time. Any
Certificate issued will be numbered serially for identification, issued in fully
registered form and will be transferable only on the books of the Trustee. The
Trustee may require a Unitholder to pay a reasonable fee, to be determined in
the sole discretion of the Trustee, for each certificate re-issued or
transferred, and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. The Trustee at the present
time does not intend to charge for the normal transfer or interchange of
certificates. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity (generally
amounting to 3% of the market value of the Units), affidavit of loss, evidence
of ownership and payment of expenses incurred.
DISTRIBUTIONS TO UNITHOLDERS. Interest received by a Series of the
Trust, including any portion of the proceeds from a disposition of Municipal
Bonds which represents accrued interest, is credited by the Trustee to the
Interest Account for such Series. All other receipts are credited by the
Trustee to a separate Principal Account for such Series. During each year the
distributions to the Unitholders of each Series of the Trust as of each Record
Date (see "Essential Information" in Part Two) will be made on the following
Distribution Date or shortly thereafter and shall consist of an amount
substantially equal to one-twelfth, one-fourth or one-half (depending on the
distribution option selected) of such holders' pro rata share of the estimated
net annual interest income to the Interest Account for such Series of the
Trust. In addition, the Trustee will distribute on each semiannual
Distribution Date or shortly thereafter, to each Unitholder of record on the
preceding Record Date, an amount substantially equal to such holders' pro rata
share of the cash balance, if any, in the Principal Account 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 of
such Series is less than $1.00 per Unit; if such balance is between $5.00 and
$10.00 per Unit, distributions will be made on each quarterly Distribution
Date; and if such balance exceeds $10.00 per Unit, such amounts will be
distributed on the next monthly Distribution Date. Persons who purchase Units
of the Trust between a Record Date and a Distribution Date will receive their
first distribution on the second Distribution Date following their purchase of
Units. All distributions of principal and interest will be paid in cash
unless a Unitholder has elected to reinvest principal and/or interest payments
in shares of one of the reinvestment funds. See "Distribution Reinvestment."
Interest distributions per Unit for each Series will be in the amounts shown
under "Essential Information" in the applicable Part Two and may change as
underlying Municipal Bonds are redeemed, paid or sold, or as expenses of such
Series of the Trust change or the number of outstanding Units of such Series
of the Trust changes.
Since interest on Municipal Bonds in each Series of the Trust is payable
at varying intervals, usually in semiannual installments, and distributions of
income are made to Unitholders of a Series of the Trust at what may be different
intervals from receipt of interest, the interest accruing to such Series of the
Trust may not be equal to the amount of money received and available for
distribution from the
-28-
<PAGE> 29
Interest Account of such Series. Therefore, on each Distribution Date
the amount of interest actually on deposit in the Interest Account and available
for distribution may be slightly more or less than the interest distribution
made. In order to eliminate fluctuations in interest distributions resulting
from such variances, the Trustee is authorized by the Agreement to advance such
amounts as may be necessary to provide interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest, for any such
advances from funds available in the Interest Account of such Series.
Because the interest to which Unitholders of a Series of the Trust are
entitled will at most times exceed the amount available for distribution, there
will almost always remain an item of accrued interest that is added to the daily
value of the Units of such Series. If Unitholders of a Series sell or redeem
all or a portion of their Units they will be paid their proportionate share of
the accrued interest of such Series to, but not including, the fifth business
day after the date of sale or to the date of tender in the case of a redemption.
Unitholders purchasing Units will initially receive distributions in
accordance with the election of the prior owner. Unitholders desiring to change
their distribution option may do so by sending written notice to the Trustee,
together with their certificate (if one was issued). Certificates should only be
sent by registered or certified mail to minimize the possibility of loss. If
written notice and any certificate are received by the Trustee not later than
January 1 of a year, the change will become effective on January 2 for
distributions commencing with February 15 of that year. If notice is not
received by the Trustee, the Unitholder will be deemed to have elected to
continue with the same option for the subsequent twelve months.
STATEMENT TO UNITHOLDERS. With each distribution, the Trustee will
furnish or cause to be furnished each Unitholder a statement of the amount of
interest and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit.
The accounts of each Series of the Trust are required to be audited
annually, at the Series' expense, by independent auditors designated by the
Sponsor, unless the Trustee determines that such an audit would not be in the
best interest of the Unitholders of such Series of the Trust. The accountants'
report will be furnished by the Trustee to any Unitholder of such Series of the
Trust upon written request.
Within a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to each person who at any time during the calendar
year was a Unitholder of a Series of the Trust a statement covering the calendar
year, setting forth:
A. As to the Interest Account:
1. The amount of interest received on the Municipal Bonds in such
Series and the percentage of such amount by states and territories in which the
issuers of such Municipal Bonds are located;
2. The amount paid from the Interest Account of such Series
representing accrued interest of any Units redeemed;
3. The deductions from the Interest Account of such Series for
applicable taxes, if any, fees and expenses (including insurance costs and
auditing fees) of the Trustee, the Evaluator, the Sponsor
-29-
<PAGE> 30
and bond counsel, if any;
4. Any amounts credited by the Trustee to a Reserve Account for such
Series described under "Expenses of the Trust"; and
5. The net amount remaining after such payments and deductions,
expressed both as a total dollar amount and a dollar amount per Unit outstanding
on the last business day of such calendar year.
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of any of the
Municipal Bonds in such Series and the net proceeds received therefrom excluding
any portion credited to the Interest Account;
2. The amount paid from the Principal Account of such Series
representing the principal of any Units redeemed;
3. The deductions from the Principal Account of such Series for
payment of applicable taxes, if any, fees and expenses (including insurance
costs and auditing expenses) of the Trustee, the Evaluator, the Sponsor and of
bond counsel, if any;
4. Any amounts credited by the Trustee to a Reserve Account for such
Series described under "Expenses of the Trust"; and
5. The net amount remaining after distributions of principal and
deductions, expressed both as a dollar amount and as a dollar amount per Unit
outstanding on the last business day of such calendar year.
C. The following information:
1. A list of the Municipal Bonds in such Series as of the last
business day of such calendar year;
2. The number of Units of such Series outstanding on the last business
day of such calendar year;
3. The Redemption Price of such Series based on the last Trust
Evaluation made during such calendar year;
4. The amount actually distributed during such calendar year from the
Interest and Principal Accounts of such Series separately stated, expressed both
as total dollar amounts and as dollar amounts per Unit of such Series
outstanding on the Record Date for each such distribution.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the
Trustee for redemption. No Unitholder of a Series shall have the right to
control the operation and management of such Series or of the Trust in any
manner, except to vote with respect to amendment of the Agreement or termination
of such Series of the Trust. The death or incapacity of any Unitholder will not
operate to terminate the Series or the Trust nor entitle legal representatives
or heirs to claim an accounting or to bring any action or proceeding in any
court for partition or winding up of such Series or the Trust.
-30-
<PAGE> 31
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolio of the Trust by the purchase,
sale or substitution of Municipal Bonds, except in the special circumstances
noted below. Thus, with the exception of the redemption or maturity of
Municipal Bonds in accordance with their terms, and/or the sale of Municipal
Bonds to meet redemption requests, the assets of the Trust will remain unchanged
under normal circumstances.
The Sponsor may direct the Trustee to dispose of Municipal Bonds the
value of which has been affected by certain adverse events, including
institution of certain legal proceedings, a decline in their price or the
occurrence of other market factors, including advance refunding, so that in the
opinion of the Sponsor the retention of such Municipal Bonds in a Series of the
Trust would be detrimental to the interest of the Unitholders of such Series.
The proceeds from any such sales, exclusive of any portion which represents
accrued interest, will be credited to the Principal Account for distribution to
the Unitholders.
The portfolio insurance obtained by the Trust from AMBAC Indemnity for
Series A through A-24 is applicable only while the Municipal Bonds remain in the
portfolio of a Series of the Trust. Consequently, the price received by such
Series of the Trust upon the disposition of any such Municipal Bond will reflect
a value placed upon it by the market as an uninsured obligation rather than a
value resulting from the insurance. Due to this fact, the Sponsor will not
direct the Trustee to dispose of Municipal Bonds in Series A through A-24 which
are in default or imminent danger of default but to retain such Municipal Bonds
in the portfolio so that if a default in the payment of interest or principal
occurs, the Trust may realize the benefits of the insurance.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, at the time of the sale of a Municipal Bond covered under the Trust's
insurance policy with respect to Series A-25 and subsequent Series, has the
right to obtain permanent insurance with respect to such Municipal Bond (i.e.,
insurance to maturity of the Municipal Bond regardless of the identity of the
holder thereof) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium from the proceeds of the sale of such Municipal
Bond. Accordingly, every Municipal Bond in such Series of the Trust is eligible
to be sold on an insured basis. It is expected that the Trustee will exercise
the right to obtain Permanent Insurance for Municipal Bonds in Series A-25 and
subsequent Series only if upon such exercise a Series of the Trust would receive
net proceeds (i.e., the value of such Municipal Bond if sold as an insured bond
less the insurance premium attributable to the Permanent Insurance) from such
sale in excess of the sale proceeds if such Municipal Bond were sold on an
uninsured basis. The insurance premium with respect to each Municipal Bond in
such Series is determined based upon the insurability of each Municipal Bond as
of the initial Date of Deposit and will not be increased or decreased for any
change in the creditworthiness of such Municipal Bond's issuer.
The Trustee is permitted to utilize the option to obtain Permanent
Insurance available on Series A-25 and subsequent Series only in circumstances
where the value added to the Municipal Bonds exceeds the costs of acquiring
such Permanent Insurance. Unless such Permanent Insurance may be obtained at an
acceptable price, the Sponsor will not direct the Trustee to dispose of
Municipal Bonds which are in default or imminent danger of default but to retain
such Municipal Bonds in the portfolio so that the Trust may realize the benefits
of the insurance on the portfolio.
-31-
<PAGE> 32
The Sponsor is required to instruct the Trustee to reject any offer made
by an issuer of Municipal Bonds to issue new obligations in exchange or
substitution for any of such Municipal Bonds pursuant to a refunding financing
plan except that the Sponsor may instruct the Trustee to accept or reject such
an offer or to take any other action with respect thereto as the Sponsor may
deem proper if (1) the issuer is in default with respect to such Bonds or (2) in
the written opinion of the Sponsor the issuer will probably default with respect
to such Bonds in the reasonably foreseeable future. Any obligation so received
in exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations in
exchange or substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder, identifying the Bonds eliminated and the
Bonds substituted therefor.
The Trustee may sell Municipal Bonds designated by the Sponsor from a
Series of the Trust for the purpose of redeeming Units of such Series tendered
for redemption and the payment of expenses. See "Redemption".
ADMINISTRATION OF THE TRUST
THE TRUSTEE. The Trustee, Investors Fiduciary 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 jointly
owned by DST Systems, Inc. and Kemper Financial Services, Inc., an affiliate of
the Sponsor. See "The Sponsor."
The Trustee, whose duties are ministerial in nature, has not
participated in selecting the portfolio of any Series of the Trust. For
information relating to the responsibilities of the Trustee under the Agreement,
reference is made to the material set forth under "Unitholders."
In accordance with the Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office. Such records shall
include the name and address of, and the number of Units held by, every
Unitholder of each Series. The books and records with respect to a Series of
the Trust shall be open to inspection by any Unitholder of such Series at all
reasonable times during the usual business hours. The Trustee shall make such
annual or other reports as may from time to time be required under any
applicable state or Federal statute, rule or regulation. The Trustee shall keep
a certified copy or duplicate original of the Agreement on file in its office
available for inspection at all reasonable times during usual business hours by
any Unitholder, together with a current list of the Municipal Bonds held in each
Series of the Trust. Pursuant to the Agreement, the Trustee may employ one or
more agents for the purpose of custody and safeguarding of Municipal Bonds
comprising the portfolios.
Under the Agreement, the Trustee or any successor trustee may resign and
be discharged of its duties created by the Agreement by executing an instrument
in writing and filing the same with the Sponsor.
-32-
<PAGE> 33
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
Sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. In case the Trustee becomes
incapable of acting or is adjudged a bankrupt or is taken over by public
authorities, the Sponsor may remove the Trustee and appoint a successor trustee
as provided in the Agreement. Notice of such removal and appointment shall be
mailed to each Unitholder by the Sponsor. Upon execution of a written
acceptance of such appointment by a successor trustee, all the rights, powers,
duties and obligations of the original Trustee shall vest in the successor. The
Trustee shall be a corporation organized under the laws of the United States or
any state thereof, which is authorized under such laws to exercise trust
powers. The Trustee shall have at all times an aggregate capital, surplus and
undivided profits of not less than $2,000,000.
THE EVALUATOR. Kemper Unit Investment Trusts, a service of Kemper
Securities, Inc., the Sponsor, also serves as Evaluator. The Evaluator may
resign or be removed by the Trustee, in which event the Trustee is to use its
best efforts to appoint a satisfactory successor. Such resignation or removal
shall become effective upon acceptance of appointment by the successor
evaluator. If, upon resignation of the Evaluator, no successor has accepted
appointment within thirty days after notice of resignation, the Evaluator may
apply to a court of competent jurisdiction for the appointment of a successor.
Notice of such resignation or removal and appointment shall be mailed by the
Trustee to each Unitholder. At the present time, pursuant to a contract with
the Evaluator, Kenny Information Services, Inc., a non-affiliated firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities, provides portfolio evaluations of the Municipal Bonds in the Trust
which are then reviewed by the Evaluator. In the event the Sponsor is unable to
obtain current evaluations from Kenny Information Systems, Inc., it may make its
own evaluations or it may utilize the services of any other non-affiliated
evaluator or evaluators it deems appropriate.
AMENDMENT AND TERMINATION. The Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or (3)
to make such provisions as shall not adversely affect the interests of the
Unitholders. The Agreement may also be amended in any respect by the Sponsor
and the Trustee, or any of the provisions thereof may be waived, with the
consent of the holders of Units representing 66 - 2/3% of the Units then
outstanding, provided that no such amendment or waiver will reduce the interest
in a Series of the Trust of any Unitholder without the consent of such
Unitholder or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Unitholders. In no event shall
the Agreement be amended to increase the number of Units issuable thereunder or
to permit, except in accordance with the provisions of the Agreement, the
acquisition of any Municipal Bonds in addition to or in substitution for those
in the Trust. The Trustee shall promptly notify Unitholders of the substance of
any such amendment.
The Agreements provide that a Series of the Trust shall terminate upon
the maturity, redemption or other disposition, of the last of the Municipal
Bonds held in such Series. If the value of a Series of the Trust shall be less
than the applicable minimum Trust value stated under "Essential Information" in
Part Two the Trustee may, in its discretion, and shall, when so directed by the
Sponsor, terminate such Series of the Trust. A Series of the Trust may be
terminated at any time by the holders of Units
-33-
<PAGE> 34
representing 66-2/3% of the Units of such Series then outstanding. In
the event of termination, written notice thereof will be sent by the Trustee to
all Unitholders of such Series. Within a reasonable period after termination,
the Trustee will sell any Municipal Bonds remaining in such Series of the Trust
and, after paying all expenses and charges incurred by such Series of the Trust,
will distribute to Unitholders of such Series (upon surrender for cancellation
of certificates for Units, if issued) their pro rata share of the balances
remaining in the Interest and Principal Accounts of such Series.
Notwithstanding the foregoing, in connection with final distributions to
Unitholders, it should be noted that because the portfolio insurance obtained by
Series A through A-24 of the Trust is applicable only while Bonds so insured are
held by such Series of the Trust, the price to be received by such Series of the
Trust upon the disposition of any such Bond which is in default by reason of
nonpayment of principal or interest, will not reflect any value based on such
insurance. Therefore, in connection with any liquidation of such Series it
shall not be necessary for the Trustee to, and the Trustee does not currently
intend to, dispose of any Bond or Bonds if retention of such Bond or Bonds,
until due, shall be deemed to be in the best interest of Unitholders, including,
but not limited to situations in which a Bond or Bonds so insured are in default
and situations in which a Bond or Bonds so insured have a deteriorated market
price resulting from a significant risk of default. All proceeds received, less
applicable expenses, from insurance on defaulted Bonds not disposed of at the
date of termination will ultimately be distributed to Unitholders of record as
of such date of termination as soon as practicable after the date such defaulted
Bond or Bonds become due and applicable insurance proceeds have been received by
the Trustee.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the
Agreements, but will be under no liability to the Unitholders for taking any
action or refraining from any action in good faith pursuant to the Agreements or
for errors in judgment, except in cases of its own gross negligence, bad faith
or willful misconduct. The Sponsor shall not be liable or responsible in any
way for depreciation or loss incurred by reason of the sale of any Municipal
Bonds.
The Trustee: The Agreements provide that the Trustee shall be under no
liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies, Municipal Bonds,
or certificates except by reason of its own gross negligence, bad faith or
willful misconduct, nor shall the Trustee be liable or responsible in any way
for depreciation or loss incurred by reason of the sale by the Trustee of any
Municipal Bonds. In the event that the Sponsor shall fail to act, the Trustee
may act and shall not be liable for any such action taken by it in good faith.
The Trustee shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the Municipal Bonds or upon the interest
thereon. In addition, the Agreements contain other customary provisions
limiting the liability of the Trustee.
The Evaluator: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The Agreement provides that the determinations made by the Evaluator
shall be made in good faith upon the basis of the best information available to
it, provided, however, that the Evaluator shall be under no liability to the
Trustee or Unitholders for errors in judgment, but shall be liable only for its
gross negligence, lack of good faith or willful misconduct.
-34-
<PAGE> 35
EXPENSES OF THE TRUST
Except with respect to those series indicated in the next sentence, the
Sponsor will not charge any Series of the Trust an advisory fee and will receive
no fee from the Trust for services performed as Sponsor. The Sponsor will charge
Kemper Tax-Exempt Income Trust, Multi-State Series 45 and subsequent series a
surveillance fee for services performed for such Trust Funds in an amount not to
exceed the amount shown under "Essential Information" in Part Two, but in no
event will such compensation when combined with all compensation received from
Kemper Tax-Exempt Insured Income Trust, Multi-State Series 23, 24, 32 and
subsequent series, Kemper Tax-Exempt Insured Income Trust, Series A-74 and
subsequent series and Kemper Tax-Exempt Income Trust, Multi-State Series 45 and
subsequent series exceed the aggregate cost to the Sponsor for providing such
services. Such fee shall be based on the total number of Units of such Trust
outstanding as of the January Record Date for any annual period. The Sponsor
paid all the expenses of creating and establishing the Trust, including the cost
of the initial preparation, printing and execution of the Prospectus, Agreement
and the certificates, legal and accounting expenses, advertising and selling
expenses, payment of closing fees, expenses of the Trustee, initial evaluation
fees and other out-of-pocket expenses.
The Trustee receives for its services a fee calculated on the basis of
the annual rate set forth under "Essential Information" in Part Two per $1,000
principal amount of Municipal Bonds in each Series of the Trust, based on the
largest aggregate principal amount of Municipal Bonds in such Series at any time
during the monthly, quarterly or semi-annual period, as appropriate. Funds that
are available for future distributions, redemptions and payment of expenses are
held in accounts which are non-interest bearing to Unitholders and are available
for use by the Trustee pursuant to normal banking procedures; however, the
Trustee is also authorized by the Trust Agreements to make from time to time
certain non-interest bearing advances to the Trust Funds. The Trustee also
receives indirect benefits to the extent that it holds funds on deposit in the
various non-interest bearing accounts created pursuant to the Agreement;
however, the Trustee is also authorized by the Agreement to make from time to
time certain non-interest bearing advances to the Trust. See
"Unitholders-Distributions to Unitholders."
For evaluation of Municipal Bonds in a Series of the Trust, the
Evaluator receives a fee, payable monthly, calculated on the basis of an annual
rate as set forth under "Essential Information" in Part Two, based upon the
largest aggregate principal amount of Municipal Bonds in such Series of the
Trust at any time during such monthly period.
The Trustee's, Sponsor's (if any) and Evaluator's fees are payable
monthly on or before each Distribution Date by deductions from the Interest
Account of each Series to the extent funds are available and then from the
Principal Account of such Series. Such fees may be increased without approval
of Unitholders by amounts not exceeding a proportionate increase in the Consumer
Price Index entitled "All Services Less Rent of Shelter", published by the
United States Department of Labor, or any equivalent index substituted therefor.
The following additional charges are or may be incurred by a Series of
the Trust: (a) fees for the Trustee's extraordinary services; (b) expenses of
the Trustee (including legal and auditing expenses and insurance costs, but not
including any fees and expenses charged by any agent for custody and
safeguarding of Municipal Bonds) and of bond counsel, if any; (c) various
governmental charges; (d) expenses and costs of any action taken by the Trustee
to protect the Trust or such Series, or the rights and interests of the
Unitholders; (e) indemnification of the Trustee for any loss, liability or
expense incurred by it in the administration of such Series of the Trust without
gross negligence, bad faith or
-35-
<PAGE> 36
willful misconduct on its part; (f) indemnification of the Sponsor for
any loss, liability or expense incurred in acting in that capacity without
gross negligence, bad faith or willful misconduct; and (g) expenditures
incurred in contacting Unitholders upon termination of the Series. The fees
and expenses set forth herein are payable out of such Series of the Trust and,
when owed to the Trustee, are secured by a lien on the assets of the Series of
the Trust. Fees or charges relating to the Trust shall be allocated to each
Trust Fund in the same ratio as the principal amount of such Trust Fund bears
to the total principal amount of all Trust Funds in the Trust. Fees or charges
relating solely to a particular Trust Fund shall be charged only to such Trust
Fund.
Fees and expenses of a Series of the Trust shall be deducted from the
Interest Account of such Series, or, to the extent funds are not available in
such Account, from the Principal Account of such Series. The Trustee may
withdraw from the Principal Account or the Interest Account of such Series such
amounts, if any, as it deems necessary to establish a reserve for any taxes or
other governmental charges or other extraordinary expenses payable out of that
Series of the Trust. Amounts so withdrawn shall be credited to a separate
account maintained for such Series known as the Reserve Account and shall not be
considered a part of such Series when determining the value of the Units of such
Series until such time as the Trustee shall return all or any part of such
amounts to the appropriate account.
THE SPONSOR
The Sponsor, Kemper Unit Investment Trusts, with an office at 77 West
Wacker Drive, 5th 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 acts as underwriter of a number of other Kemper
unit investment trusts and will act as underwriter of any other unit investment
trust created by the Sponsor in the future. As of April 30, 1993, the total
stockholder's equity of Kemper Securities, Inc. was approximately $426,125,017
(unaudited).
If at any time the Sponsor shall of fail to perform any of its duties
under the Agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or its affairs are taken over by public authorities, then
the Trustee may (a) appoint a successor sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding such reasonable amounts as may
be prescribed by the Securities and Exchange Commission, or (b) terminate the
Agreement and liquidate the Trust or any Series thereof as provided therein or
(c) continue to act as Trustee without terminating the Agreement.
The foregoing financial information with regard to the Sponsor relates
to the Sponsor only and not to this Trust or any Series. Such information is
included in this Prospectus only for the purposes of informing investors as to
the financial responsibility of the Sponsor and its ability to carry out its
contractual obligations with respect to the Series of the Trust. More
comprehensive financial information can be obtained upon request from the
Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
Federal tax law were originally passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
-36-
<PAGE> 37
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of investments,
appearing in Part Two of this Prospectus and Registration Statement, with
information pertaining to the specific Series of the Trust to which such
statement relates, has been audited by Ernst & Young, independent auditors, as
set forth in their report appearing in Part Two and is included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
DESCRIPTION OF MUNICIPAL BOND RATINGS*4
STANDARD & POOR'S CORPORATION. - A brief description of the applicable
Standard & Poor's Corporation rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer and
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or unavailability
of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement,
under the laws of bankruptcy and other laws affecting creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
- ----------------------------------
* As published by the rating company itself.
-37-
<PAGE> 38
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
MOODY'S INVESTORS SERVICE, INC. -- A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Their
safety is so absolute that with the occasional exception of oversupply in a few
specific instances, characteristically, their market value is affected solely by
money market fluctuations.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities. Their market value is virtually immune to all but money market
influences, with the occasional exception of oversupply in a few specific
instances.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
The market value of A-rated bonds may be influenced to some degree by economic
performance during a substained period of depressed business conditions, but,
during periods of normalcy, A-rated bonds frequently move in parallel with Aaa
and Aa obligations, with the occasional
-38-
<PAGE> 39
exception of oversupply in a few specific instances.
A1 - Bonds which are rated A1 offer the maximum in security within their
quality group, can be bought for possible upgrading in quality, and
additionally, afford the investor an opportunity to gauge more precisely the
relative attractiveness of offerings in the market place.
Baa - Bonds which are rated Baa are considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics as
well. The market value of Baa-rated bonds is more sensitive to changes in
economic circumstances and, aside from occasional speculative factors applying
to some bonds of this class, Baa market valuations move in parallel with Aaa, Aa
and A obligations during periods of economic normalcy, except in instances of
oversupply.
Conditional Ratings: Bonds rated "Con(-)" are ones for which the
security depends upon the completion of some act or the fulfillment of some
condition. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in certain areas of its bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
-39-
<PAGE> 2
Kemper Tax-Exempt Insured Income Trust
Series A-45
Part Two
Dated March 30, 1994
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> 3
Kemper Tax-Exempt Insured Income Trust
Series A-45
Essential Information
As of March 1, 1994
Sponsor: Kemper Financial Services, Inc.
Evaluator: Kemper Unit Investment Trusts
Trustee: Investors Fiduciary Trust Company
<TABLE>
<S> <C>
GENERAL INFORMATION
Principal Amount of Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,115,000
Number of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,715
Fractional Undivided Interest in the Trust per Unit . . . . . . . . . . . . . . . . . . . 1/4,715
Principal Amount of Municipal Bonds per Unit . . . . . . . . . . . . . . . . . . . . . . $ 872.75
Public Offering Price:
Aggregate Bid Price of Municipal Bonds in the Portfolio . . . . . . . . . . . . . . . . $ 4,308,687
Aggregate Bid Price of Municipal Bonds per Unit . . . . . . . . . . . . . . . . . . . . $ 913.83
Cash per Unit (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .13
Sales Charge 4.712% (4.5% of Public Offering Price) . . . . . . . . . . . . . . . . . . $ 43.07
Public Offering Price per Unit (exclusive of accrued interest) (2) . . . . . . . . . . $ 957.03
Redemption Price per Unit (exclusive of accrued interest) . . . . . . . . . . . . . . . . $ 913.96
Excess of Public Offering Price per Unit Over Redemption Price per Unit . . . . . . . . . $ 43.07
Minimum Value of the Trust under which Trust Agreement may be terminated . . . . . . . . $ 1,000,000
Date of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 18, 1986
Mandatory Termination Date . . . . . . . . . . . . . . . . . . . . . . December 31, 2036
</TABLE>
Annual Evaluation Fee: $.30 per $1,000 principal amount of Municipal Bonds.
Evaluations for purpose of sale, purchase or redemption of Units are made as of
the close of business of the Sponsor next following receipt of an order for a
sale or purchase of Units or receipt by Investors Fiduciary Trust Company of
Units tendered for redemption.
SPECIAL INFORMATION BASED ON VARIOUS DISTRIBUTION OPTIONS
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMIANNUAL
----------------------------------------------------
<S> <C> <C> <C>
Calculation of Estimated Net Annual
Interest Income per Unit (3):
Estimated Annual Interest Income . . . . . . . . . $63.1957 $63.1957 $63.1957
Less: Estimated Annual Expense,
Excluding Insurance . . . . . . . . . . . . 1.8489 1.6006 1.3242
Annual Premium on Portfolio
Insurance . . . . . . . . . . . . . . . . . . . 1.7627 1.7627 1.7627
-------------------------------------------
Estimated Net Annual Interest Income . . . . . . . . . $59.5841 $59.8324 $60.1088
-------------------------------------------
-------------------------------------------
Calculation of Interest Distribution per Unit:
Estimated Net Annual Interest Income . . . . . . . . $59.5841 $59.8324 $60.1088
Divided by 12, 4 and 2, respectively . . . . . . . . $ 4.9653 $14.9581 $30.0544
Estimated Daily Rate of Net Interest
Accrual per Unit . . . . . . . . . . . . . . . . . . $ .1655 $ .1662 $ .1670
Estimated Current Return Based on Public
Offering Price (3) . . . . . . . . . . . . . . . . . 6.23% 6.25% 6.28%
Estimated Long-Term Return (3) . . . . . . . . . . . . 4.22% 4.24% 4.27%
</TABLE>
Trustee's Annual Fees and Expenses (including Evaluator's Fee):
$1.8489, $1.6006 and $1.3242 ($.7580, $.6971 and $.6918 of which represent
expenses) per Unit under the monthly, quarterly and semiannual distribution
options, respectively.
Record and Computation Dates: First day of the month, as follows: monthly --
each month; quarterly -- January, April, July and October; semiannual --
January and July.
Distribution Dates: Fifteenth day of the month, as follows: monthly -- each
month; quarterly -- January, April, July and October; semiannual -- January
and July.
i
<PAGE> 4
1. This amount, if any, represents principal cash or overdraft which is an
asset or liability of the Trust and is included in the Public Offering
Price.
2. Units are offered at the Public Offering Price plus accrued interest to the
date of settlement (five business days after purchase). On March 1, 1994,
there was added to the Public Offering Price of $957.03, accrued interest
to the settlement date of March 8, 1994 of $9.38, $19.44 and $19.56 for a
total price of $966.41, $976.47 and $976.59 for the monthly, quarterly and
semiannual distribution options, respectively.
3. The Estimated Long-Term Return and Estimated Current Return will vary. For
detailed explanation, see Part One of this prospectus.
ii
<PAGE> 5
Report of Independent Auditors
Unitholders
Kemper Tax-Exempt Insured Income Trust
Series A-45
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Kemper Tax-Exempt Insured Income Trust Series
A-45 as of November 30, 1993, 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 November 30, 1993,
by correspondence with the custodial bank. An audit also includes assessing
the accounting principles used and significant estimates made by the sponsor,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kemper Tax-Exempt Insured
Income Trust Series A-45 at November 30, 1993, 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.
/s/ ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
March 16, 1994
1
<PAGE> 6
Kemper Tax-Exempt Insured Income Trust
Series A-45
Statement of Assets and Liabilities
November 30, 1993
<TABLE>
<S> <C> <C>
ASSETS
Municipal Bonds, at value (cost $4,132,905) (Note 1) $4,499,948
Accrued interest 102,411
Cash 23,552
------------
4,625,911
LIABILITIES AND NET ASSETS
Accrued liabilities 4,151
Net assets, applicable to 4,880 Units outstanding (Note 5):
Cost of Trust assets, exclusive of interest (Note 1) $4,132,905
Unrealized appreciation (Note 2) 367,043
Distributable funds 121,812
----------------------------
Net assets $4,621,760
------------
------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 7
Kemper Tax-Exempt Insured Income Trust
Series A-45
Statement of Operations
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1993 1992 1991
--------------------------------------------
<S> <C> <C> <C>
Investment income -- interest $310,386 $324,305 $349,194
Expenses:
Trustee's fees and related expenses 6,617 6,929 7,219
Evaluator's fees 1,285 1,353 1,443
Insurance expense 8,700 9,059 9,650
--------------------------------------------
Total expenses 16,602 17,341 18,312
--------------------------------------------
Net investment income 293,784 306,964 330,882
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) 1,060 10,995 (90)
Unrealized appreciation during the year
111,904 150,537 123,028
--------------------------------------------
Net gain on investments 112,964 161,532 122,938
--------------------------------------------
Net increase in net assets resulting from operations
$406,748 $468,496 $453,820
---------------------------------------------
---------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 8
Kemper Tax-Exempt Insured Income Trust
Series A-45
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1993 1992 1991
--------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income $ 293,784 $ 306,964 $ 330,882
Realized gain (loss) on investments 1,060 10,995 (90)
Unrealized appreciation on investments
during the year 111,904 150,537 123,028
--------------------------------------------------
Net increase in net assets resulting
from operations 406,748 468,496 453,820
Distributions to Unitholders:
Net investment income (299,358) (313,820) (331,841)
Principal from investment transactions (23,522) (469,200) (6,329)
Capital transactions:
Redemption of Units (27,284) (15,670) (18,038)
--------------------------------------------------
Total increase (decrease) in net assets 56,584 (330,194) 97,612
Net assets:
At the beginning of the year 4,565,176 4,895,370 4,797,758
--------------------------------------------------
At the end of the year (including distributable funds
applicable to Trust Units of $121,812, $117,356 and
$115,863 at November 30, 1993, 1992 and 1991,
respectively) $4,621,760 $4,565,176 $4,895,370
--------------------------------------------------
--------------------------------------------------
Trust Units outstanding at the end of the year
4,880 4,910 4,926
--------------------------------------------------
--------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 9
Kemper Tax-Exempt Insured Income Trust
Series A-45
Schedule of Investments
November 30, 1993
<TABLE>
<CAPTION>
REDEMPTION PRINCIPAL
NAME OF ISSUER AND TITLE OF BOND(7) COUPON RATE MATURITY DATE PROVISIONS(2) RATING(1) AMOUNT(4) VALUE(3)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
+Dade County Health Facilities Authority 7.375% 5/01/2013 1997 @ 102 AAA $ 475,000 $ 532,974
(Florida) Hospital Revenue Bonds, Series
1986A (Baptist Hospital of Miami Project).
+Cobb County, Georgia, Kennestone Hospital 0.00 8/01/2015 2007 @ 50.402 S.F. AAA 250,000 69,955
Authority Revenue Bonds, Series 1986A.
Insured by Municipal Bond Investors
Assurance Corporation (MBIA).(5)(6)
+Chicago School Finance Authority 7.75 6/01/2009 1996 @ 102 AAA 500,000 556,130
(Illinois) General Obligation School
Assistance Bonds, Refunding Series
(1986B). Insured by MBIA.(5)
+Hospital Authority of Lake County, 7.20 7/01/2013 1996 @ 102 AAA 115,000 126,712
Indiana, Hospital Revenue Refunding Bonds,
Series C (Sisters of Mercy Health Care
System). Insured by Financial Guaranty
Insurance Company.(5)
+City of Ames, Iowa, Hospital Revenue Bonds, 8.25 7/01/2003 1995 @ 101.5 NR 100,000 108,711
Series 1986, Mary Greeley Medical 8.25 7/01/2004 1995 @ 101.5 NR 200,000 217,422
Center Project. 8.25 7/01/2005 1995 @ 101.5 NR 200,000 217,422
Maine State Housing Authority, Mortgage 7.50 11/15/2016 2007 @ 100 S.F. AA- 150,000 156,227
Purchase Bonds, 1986 Series B. 1996 @ 102
+North Carolina Municipal Power Agency 8.50 1/01/2017 1996 @ 102 Aaa* 500,000 556,585
#1, Catawba Electric Revenue Bonds,
Series 1985-B.
Piedmont Municipal Power Agency, South 7.25 1/01/2022 1996 @ 102 A* 305,000 326,298
Carolina, Electric Revenue Bonds, 1986
Refunding Series A.
+City of Austin, Texas, Combined Utility 7.30 5/15/2017 2001 @ 100 AAA 435,000 513,783
System Revenue Bonds, Series 1986 C. 7.30 5/15/2017 2001 @ 100 AAA 65,000 76,772
+Intermountain Power Agency (Utah) Power 7.75 7/01/2017 1996 @ 102 Aaa* 500,000 557,590
Supply Revenue Refunding Bonds,
1986 Series A.
(Section) Utah Housing Finance Agency, 7.375 7/01/2016 1996 @ 103 AA 465,000 483,367
Single-Family Mortgage Purchase Refunding
Bonds, 1986 Series B (Federally Insured
or Guaranteed Mortgage Loans).
--------------------------
$4,260,000 $4,499,948
--------------------------
--------------------------
</TABLE>
See accompanying notes to Schedule of Investments.
5
<PAGE> 10
Kemper Tax-Exempt Insured Income Trust
Series A-45
Notes to Schedule of Investments
1. All ratings are by Standard & Poor's Corporation, unless marked with the
symbol "*", in which case the rating is by Moody's Investors Service, Inc.
The symbol "NR" indicates Bonds for which no rating is available.
2. There is shown under this heading the year in which each issue of Bonds is
initially redeemable and the redemption price for that year or, if
currently redeemable, the redemption price currently in effect; unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter, but not below par value. In addition, certain Bonds in
the Portfolio may be redeemed in whole or in part other than by operation
of the stated redemption or sinking fund provisions under certain unusual
or extraordinary circumstances specified in the instruments setting forth
the terms and provisions of such Bonds. "S.F." indicates a sinking fund is
established with respect to an issue of Bonds. Redemption pursuant to call
provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed Bonds have a valuation
which represents a premium over the call price or par.
To the extent that the Bonds were deposited in the Trust at a price
higher than the price at which they are redeemed, this will represent a
loss of capital when compared with the original Public Offering Price of
the Units. To the extent that the Bonds were acquired at a price lower
than the redemption price, this may represent an increase in capital when
compared with the original Public Offering Price of the Units.
Distributions of net income will generally be reduced by the amount of the
income which would otherwise have been paid with respect to redeemed Bonds
and, unless utilized to pay for Units tendered for redemption, there will
be distributed to Unitholders the principal amount and any premium received
on such redemption. In this event the estimated current return and
estimated long-term return may be affected by such redemptions.
3. See Note 1 to the accompanying financial statements for a description of
the method of determining cost and value.
6
<PAGE> 11
Kemper Tax-Exempt Insured Income Trust
Series A-45
Notes to Schedule of Investments (continued)
4. At November 30, 1993, the Portfolio of the Trust consists of 11 obligations
issued by entities located in 10 states. Ten issues, representing
$3,760,000 of the aggregate principal amount, are payable from the income
of a specific project or authority and are not supported by an issuer's
power to levy taxes. One issue, representing $500,000 of the aggregate
principal amount, is a general obligation of a governmental entity and is
backed by the taxing power of such entity. The sources of payment for the
revenue bonds are divided as follows: Electric Systems, 3; Hospitals and
Health Care, 4; Housing, 2; Water, 1. Approximately 32% and 31% of the
aggregate principal amount of Bonds in the Trust are hospital revenue bonds
and obligations of electrical systems issuers, respectively. Approximately
82% of the aggregate principal amount of Bonds in the Trust are subject to
call by the issuers within five years after November 30, 1993. The
security preceded by (Section) is a Single-Family Mortgage Revenue Bond
issued under Section 103A of the Internal Revenue Code.
5. Insurance on these Bonds was obtained by the issuers of such Bonds.
6. This Bond has been purchased at a discount from the par value because there
is no stated interest income thereon. Such Bond is normally described as a
"zero coupon" Bond. Over the life of the Bond the value increases, so that
upon maturity, the holders of the Bond will receive 100% of the principal
amount thereof.
7. Those securities preceded by (+) are secured by, and payable from, escrowed
U.S. Government securities.
See accompanying notes to financial statements.
7
<PAGE> 12
Kemper Tax-Exempt Insured Income Trust
Series A-45
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF MUNICIPAL BONDS
Municipal Bonds (Bonds) are stated at bid prices as determined by Kemper Unit
Investment Trusts (A Service of Kemper Securities, Inc.), the "Evaluator" of
the Trust. The aggregate bid prices of the Bonds are determined by the
Evaluator based on (a) current bid prices of the Bonds, (b) current bid prices
for comparable bonds, (c) appraisal, or (d) any combination of the above. (See
Note 5 -- Insurance.)
COST OF MUNICIPAL BONDS
Cost of the Trust's Bonds was based on the offering prices of the Bonds on
December 18, 1986 (Date of Deposit). The premium or discount (including any
original issue discount) existing at December 18, 1986, is not being amortized.
Realized gain (loss) from Bond transactions is reported on an identified cost
basis.
2. UNREALIZED APPRECIATION AND DEPRECIATION
Following is an analysis of net unrealized appreciation at November 30, 1993:
Gross unrealized depreciation $ -
Gross unrealized appreciation 367,043
----------
Net unrealized appreciation $ 367,043
----------
----------
3. TRANSACTIONS WITH AFFILIATES
The Trustee, Investors Fiduciary Trust Company, is 50% owned by Kemper
Financial Services, Inc., the Trust's sponsor and an affiliate of Kemper Unit
Investment Trusts. Prior to July 1, 1991, the Trustee's fee (not including the
reimbursement of out-of-pocket expenses), calculated monthly, was at the annual
rate of $1.08, $.86 and $.60 under the monthly, quarterly and semiannual
distribution options, respectively, per $1,000 principal amount of Bonds in the
Trust, based on the largest aggregate principal amount of Bonds in the Trust at
any time during such monthly, quarterly or semiannual periods. Effective July
1, 1991, such fees were revised to $1.25, $1.00 and $.70 under the monthly,
quarterly and semiannual distribution options, respectively. The Evaluator
received a fee, payable monthly, at an annual rate of $.30 per $1,000 principal
amount of Bonds, based on the largest aggregate principal amount of Bonds in
the Trust at any time during such monthly period.
8
<PAGE> 13
Kemper Tax-Exempt Insured Income Trust
Series A-45
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES
The Trust is not an association taxable as a corporation for federal income tax
purposes. Each Unitholder is considered to be the owner of a pro rata portion
of the Trust under Subpart E, Subchapter J of Chapter 1 of the Internal Revenue
Code of 1986, as amended. Accordingly, no provision has been made for federal
income taxes.
5. OTHER INFORMATION
COST TO INVESTORS
The cost to initial investors of Units of the Trust was based on the aggregate
offering price of the Bonds on the date of an investor's purchase, plus a sales
charge of 4.7% of the Public Offering Price (equivalent to 4.932% of the net
amount invested). The Public Offering Price for secondary market transactions
is based on the aggregate bid price of the Bonds plus or minus a pro rata share
of cash or overdraft in the Principal Account, if any, on the date of an
investor's purchase, plus a sales charge of 4.5% of the Public Offering Price
(equivalent to 4.712% of the net amount invested).
INSURANCE
Insurance guaranteeing the payment of all principal and interest on the Bonds
in the portfolio has been obtained from an independent company by the Trust or
the issuer of the Bonds involved. All Bonds in the Trust's portfolio are
insured under the insurance policy obtained by the Trust from Financial
Guaranty Insurance Company (FGIC), except for three issues which are insured
under insurance policies obtained by the respective issuers of such Bonds.
Insurance obtained by the Trust remains in effect only while the insured Bonds
are retained in the Trust, while insurance obtained by a Bond issuer is
effective as long as such Bonds are outstanding. At November 30, 1993, the
value of Bonds does not include any amount attributable to the insurance
acquired by the Trust. Pursuant to an irrevocable commitment of FGIC, in the
event of a sale of a Bond covered under the Trust's insurance policy, the
Trustee has the right to obtain permanent insurance for such Bond upon the
payment of a single predetermined insurance premium from the proceeds of the
sale of such Bond. The insurance, in either case, does not relate to the Units
offered hereby or to their market value. As a result of such insurance, the
Units of the Trust have received a rating of "AAA" by Standard & Poor's
Corporation. No representation is made as to any insurer's ability to meet its
commitments.
9
<PAGE> 14
Kemper Tax-Exempt Insured Income Trust
Series A-45
Notes to Financial Statements (continued)
5. OTHER INFORMATION (CONTINUED)
DISTRIBUTIONS
Distributions of net investment income to Unitholders are declared and paid in
accordance with the option (monthly, quarterly or semiannual) selected by the
investor. Such income distributions, on a record date basis, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------------------
NOVEMBER 30, 1993 NOVEMBER 30, 1992 NOVEMBER 30, 1991
DISTRIBUTION -------------------------------------------------------------------------------------
PLAN PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Monthly $60.93 $149,540 $62.80 $157,735 $67.26 $168,672
Quarterly 61.26 51,435 63.64 51,928 67.60 57,510
Semiannual 61.71 97,989 65.51 103,973 67.94 105,387
--------- --------- ---------
$298,964 $313,636 $331,569
--------- --------- ---------
--------- --------- ---------
</TABLE>
In addition, the Trust redeemed Units with proceeds from the sale of Bonds as
follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
1993 1992 1991
--------------------------------------------
<S> <C> <C> <C>
Principal portion $27,284 $15,670 $18,038
Net interest accrued 394 184 272
--------------------------------------------
$27,678 $15,854 $18,310
--------------------------------------------
--------------------------------------------
Units 30 16 19
--------------------------------------------
--------------------------------------------
</TABLE>
10
<PAGE> 15
Kemper Tax-Exempt Insured Income Trust
Series A-45
Notes to Financial Statements (continued)
5. OTHER INFORMATION (CONTINUED)
Selected data for a Unit of the Trust outstanding throughout each year --
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMIANNUAL
YEAR ENDED NOVEMBER 30 YEAR ENDED NOVEMBER 30 YEAR ENDED NOVEMBER 30
1993 1992 1991 1993 1992 1991 1993 1992 1991
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income $ 63.58 $ 66.00 $ 70.77 $ 63.58 $ 66.00 $ 70.77 $ 63.58 $ 66.00 $ 70.77
-- interest
Expenses 3.63 3.76 3.98 3.35 3.47 3.65 3.08 3.18 3.33
----------------------------------------------------------------------------------------------------
Net investment income 59.95 62.24 66.79 60.23 62.53 67.12 60.50 62.82 67.44
Distributions to
Unitholders:
Net investment
income (60.93) (62.80) (67.26) (61.26) (63.64) (67.60) (61.71) (65.51) (67.94)
Principal from
investment
transactions (4.82) (95.56) (1.28) (4.82) (95.56) (1.28) (4.82) (95.56) (1.28)
Net gain on
investments 23.14 32.87 24.97 23.14 32.87 24.97 23.14 32.87 24.97
-----------------------------------------------------------------------------------------------------
Change in net
asset value 17.34 (63.25) 23.22 17.29 (63.80) 23.21 17.11 (65.38) 23.19
Net asset value:
Beginning of the year 922.24 985.49 962.27 927.41 991.21 968.00 942.81 1,008.19 985.00
----------------------------------------------------------------------------------------------------
End of the year, including
distributable funds $ 939.58 $922.24 $985.49 $944.70 $927.41 $991.21 $959.92 $ 942.81 $1,008.19
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 16
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 March 16, 1994, in this
Post-Effective Amendment to the Registration Statement (Form S-6) and related
Prospectus of Kemper Tax-Exempt Insured Income Trust Series A-45 dated March
30, 1994.
/S/ ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
March 30, 1994
<PAGE> 17
CONTENTS OF POST-EFFECTIVE AMENDMENT
TO 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> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The
Registrant, Kemper Tax-Exempt Insured Income Trust, Series A-45, 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 30th day of March, 1994.
KEMPER TAX-EXEMPT INSURED
INCOME TRUST, SERIES A-45
Registrant
By: Kemper Unit Investment
Trusts
(a service of Kemper
Securities, Inc.)
Depositor
By /s/ C. Perry Moore
C. Perry Moore
Attorney-In-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on March 30,
1994 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
Donald F. Eller Senior Executive Vice President and Director
Donald F. Eller
Stanley R. Fallis Senior Executive Vice President, Chief Financial
Stanley R. Fallis Officer and Director
Frank V. Geremia Senior Executive Vice President and Director
Frank V. Geremia
David B. Mathis Director
David B. Mathis
Robert T. Jackson Director
Robert T. Jackson
Jay B. Walters Senior Executive Vice President and Director
Jay B. Walters
Frederick C. Hosken Senior Executive Vice President and Director
Frederick C. Hosken
Charles M. Kierscht Director
Charles M. Kierscht
Arthur J. McGivern Director
Arthur J. McGivern
C. Perry Moore
C. Perry Moore
C. Perry Moore signs this document pursuant to power of attorney filed
with the Securities and Exchange Commission with (a) Amendment No. 1 to the
Registration Statement on Form S-6 for Kemper Tax-Exempt Insured Income Trust,
Series A-70 and Multi-State Series 28 and Kemper Tax-Exempt Income Trust,
Multi-State Series 42 (Registration No. 33-35425, (b) Amendment No. 1 to the
Registration Statement of Form S-6 for Kemper Tax-Exempt Insured Income Trust,
Series A-72 and Multi-State Series 30 (Registration No. 33-37178) and (c)
Amendment No. 1 to the Registration Statement of Form S-6 for Kemper Tax-Exempt
Insured Income Trust, Multi-State Series 51 (Registration No. 33-48398).
