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File No. 33-26149
CIK # 844165
Securities and Exchange Commission
Washington, D. C. 20549
Post-Effective
Amendment No. 6
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 BOND ENHANCED SECURITIES TRUST, SERIES 13 AND SERIES 14
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.
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KEMPER BOND ENHANCED SECURITIES TRUST
(FORMERLY KEMPER DOUBLE PLAY TRUST)
SMALL CAPITALIZATION EQUITY SERIES
(FORMERLY NAMED SUMMIT SERIES)
GROWTH SERIES AND TOTAL RETURN SERIES
PART ONE
The date of this Part One is that date
which is set forth in Part Two of the Prospectus
This Prospectus contains information about prior issued Series of the Kemper
Bond Enhanced Securities Trust. Each Series of Trust attempts to protect
Unitholders' capital by investing a portion of its portfolio in certificates
representing "zero coupon" U.S. Treasury obligations (such obligations evidence
the right to receive a fixed payment at a future date from the U.S. Government
and are backed by the full faith and credit of the U.S. Government). The
remainder of each Series' portfolio is invested in a Kemper mutual fund.
Certain Series of the Trust have a portion of their portfolios invested in
Kemper Small Capitalization Equity Fund (formerly named Summit Fund) whose
objective is maximum appreciation of investors' capital. Certain Series of the
Trust have a portion of their portfolios invested in Kemper Growth Fund, whose
objective is growth of capital through professional management and
diversification of investment securities having potential for capital
appreciation. Other Series of the Trust have a portion of their portfolios
invested in Kemper Total Return Fund whose objective is to obtain the highest
total return, a combination of income and capital appreciation, consistent with
reasonable risk. Information about specific Series is included in Part Two of
the Prospectus, which must also be provided to purchasers of units of such
Series. Minimum purchase of any Series is 5,000 Units or $5,000, whichever is
less, except the minimum for Uniform Gifts to Minors Act or Uniform Transfers
to Minors Act accounts is $1,000 and for IRA accounts is $250.
Units of the Trust are not deposits of, or guaranteed by, any bank, and Units
are not federally insured or otherwise protected by the Federal Deposit
Insurance Corporation and involve investment risk including loss of principal.
SPONSOR: KEMPER UNIT INVESTMENT TRUSTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The investor is advised to read and retain both parts of this Prospectus for
future reference.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Zero Coupon Treasuries . . . . . . . . . . . . . . . . . . . . . . 6
Kemper Small Capitalization Equity Fund . . . . . . . . . . . . . 7
Kemper Total Return Fund . . . . . . . . . . . . . . . . . . . . . 12
Kemper Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . 22
PUBLIC OFFERING OF UNITS . . . . . . . . . . . . . . . . . . . . . 24
DISTRIBUTIONS TO UNITHOLDERS . . . . . . . . . . . . . . . . . . . 27
DISTRIBUTION REINVESTMENT . . . . . . . . . . . . . . . . . . . . 28
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
RIGHTS OF UNITHOLDERS . . . . . . . . . . . . . . . . . . . . . . 31
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PORTFOLIO SUPERVISION . . . . . . . . . . . . . . . . . . . . . . 35
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . 36
ADMINISTRATION OF THE TRUST . . . . . . . . . . . . . . . . . . . 37
EXPENSES OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . 40
THE SPONSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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KEMPER BOND ENHANCED SECURITIES TRUST
SMALL CAPITALIZATION EQUITY SERIES
(Formerly Summit Series)
AND TOTAL RETURN SERIES
(Formerly Kemper Double Play Trust).
SUMMARY
The Trust. Each Series of the Kemper Bond Enhanced Securities Trust (the
"Trust") is a unit investment trust consisting of a portfolio of certificates
representing "zero coupon" U.S. Treasury bonds and shares of one Kemper Fund.
Each Kemper Fund is an open-end, diversified management investment company,
commonly known as a mutual fund.
The objective of each Series of the Trust is to protect Unitholders' capital
by investing a portion of its portfolio in "zero coupon" U.S. Treasury bonds
either directly ("STRIPS") or by investing in securities evidencing "zero
coupon" U.S. Treasury bonds, for example, Certificates of Accrual on Treasury
Securities ("CATS") or Treasury Investment Growth Receipts ("TIGR's"), such
securities being referred to herein as the "Treasury Obligations." The
remainder of each Series' portfolio is invested in a Kemper mutual fund.
Certain Series of the Trust have a portion of their portfolios invested in
Kemper Summit Fund, whose objective is maximum appreciation of investors'
capital. Certain Series of the Trust have a portion of their portfolios
invested in Kemper Growth Fund, whose objective is growth of capital through
professional management and diversification of investment securities having
potential for capital appreciation. Other Series of the Trust have a portion
of their portfolios invested in Kemper Total Return Fund whose objective is to
obtain the highest total return, a combination of income and capital
appreciation, consistent with reasonable risk. In addition, some Series of the
Trust had original termination dates of approximately 10 years while other
Series of the Trust had original termination dates of approximately 5 years and
were initially designated as Short-Intermediate Term Trusts. Information
about specific Series is included in Part Two of the Prospectus, which must
also be provided to purchasers of Units of such Series. Collectively, the
Treasury Obligations and Fund shares in each Series are referred to herein as
the "Securities." See the "Schedules of Investments" in Part Two. U.S.
Treasury bonds evidence the right to receive a fixed payment at a future date
from the U.S. Government and are backed by the full faith and credit of the
U.S. Government. The guarantee of the U.S. Government does not apply to the
market value of the Treasury Obligations or the Units of any Series of the
Trust, whose net asset values will fluctuate and, prior to maturity, may be
more or less than a purchaser's acquisition cost. There is, of course, no
guarantee that the objective of any Series of the Trust will be achieved.
Each Unit of a Series represents an undivided fractional interest in all the
Securities deposited in that Series of the Trust. Each Series of the Trust has
been organized so that purchasers of Units should receive,
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at the termination of the Series an amount per Unit at least equal to $1.00,
even if the Fund therein never paid a dividend and the value of the Fund shares
in such Series were to drop to zero, which the Sponsor considers highly
unlikely. This feature of the Trust provides Unitholders who purchase Units at
a price of $1.00 or less per Unit with total principal protection, including
any sales charges paid, although they might forego any earnings on the amount
invested.
The Treasury Obligations deposited in each Series of the Trust on the
Initial Date of Deposit will mature on the dates shown for the specific Series
shown in Part Two of the Prospectus. The Treasury Obligations in each Series
have a maturity value equal to $1.00 per Unit. The Fund shares deposited in
the Trust's portfolios have no fixed maturity date and the net asset value of
the shares will fluctuate. See "Portfolios."
The Kemper Small Capitalization Equity Fund (formerly named Kemper Summit
Fund) shares deposited in each Small Capitalization Equity Series of the Trust
represent an interest in a portfolio of equity securities, mainly common stocks
and securities convertible into or exchangeable for common stocks. Since many
of the securities in the Kemper Small Capitalization Equity Fund portfolio may
be considered speculative in nature, substantially greater than the average
market volatility and investment risk may be involved.
The Kemper Growth Fund (the "Growth Fund") shares deposited in the Growth
Series of the Trust represent an interest in a portfolio of common stocks and
securities convertible into or exchangeable for common stocks. The Growth
Fund's investment policy may involve a somewhat greater risk than is inherent
in the ordinary investment security.
The Kemper Total Return Fund shares deposited in each Total Return Series of
the Trust represent an interest in a portfolio of fixed income and equity
securities, mainly common stocks and securities convertible into or
exchangeable for common stocks. The percentage of Fund assets invested in
fixed income and equity securities will vary from time to time depending upon
the judgment of the Fund's management as to general market and economic
conditions, trends in yields and interest rates and changes in fiscal or
monetary policies.
An investment in Units of a Series of the Trust should be made with an
understanding of the risks which such an investment may entail. The value
of the portfolio of each Series and hence of the Units thereof, during the
period prior to maturity of such Series, may be more or less than the price
paid for the Units. The value of the underlying Treasury Obligations in each
Series will fluctuate inversely with changes in interest rates and the value of
the Fund shares in each Series will fluctuate as the value of the securities in
its portfolio increases or decreases. The Treasury Obligations are subject to
substantially greater price fluctuations during periods of changing interest
rates than are securities of comparable quality which make regular interest
payments. See "Investment Considerations." Certain economic environments
during certain periods, 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
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obligations in particular and have produced sharp rises and declines in the
stock market, reflecting the unsettled nature of the economy due to such
factors. The Sponsor cannot predict the degree to which such fluctuations will
continue in the future.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price per Unit
of each Series is based upon a pro rata share of the bid prices of the Treasury
Obligations and the net asset value of the Fund shares in such Series of the
Trust plus or minus a pro rata share of cash, if any, held in the Principal
Account or owed by such Series of the Trust, plus a maximum sales charge of 5%
(equivalent to 5.263% of the net amount invested) for "regular" Series and 4%
(equivalent to 4.167% of the net amount invested) for Short-Intermediate Term
Series. The minimum purchase is 5,000 Units or $5,000, whichever is less,
except that the minimum for Uniform Gifts to Minors Act (UGMA) and Uniform
Transfers to Minors Act (UTMA) accounts is $1,000 and the minimum for
Individual Retirement Accounts is $250. The sales charge is reduced on a
graduated scale for sales involving at least $100,000 or 100,000 Units and will
be applied on whichever basis is more favorable to the investor.
DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS. Distributions of any net income,
other than amortized discount, will be made annually in the case of the Small
Capitalization Equity Series, semi-annually for the Growth Series and quarterly
for the Total Return Series. Distributions of realized capital gain, if any,
received by any Series of the Trust will be made whenever the Fund in such
Series makes such a distribution. Income with respect to the amortization of
original issue discount on the Treasury Obligations will not be distributed
currently, although Unitholders will be subject to income tax at ordinary
income rates as if a distribution had occurred. See "Tax Status."
Additionally, upon termination of a Series of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unitholder his pro
rata share of such Series' assets, less expenses, in the manner set forth under
"Distributions to Unitholders."
REINVESTMENT. Each Unitholder will, unless they elect to receive cash
payments, have distributions of principal (including the proceeds received upon
the maturity of the Treasury Obligations in a Series of the Trust at
termination), capital gains, if any, and income made by a Series of the Trust,
automatically invested in shares of the Fund originally deposited in such
Series. Such distributions will be reinvested without charge to the
participant on each applicable Distribution Date. See "Distribution
Reinvestment."
MARKET FOR UNITS. While under no obligation to do so, the Sponsor intends
to maintain a market for Units of each Series of the Trust and to offer to
repurchase such Units at prices which are based on the aggregate bid side
evaluation of the Treasury Obligations and the aggregate net asset value of the
Fund shares in such Series of the Trust. If a secondary market is not
maintained, a Unitholder may dispose of Units through redemption by the Trustee
at prices based upon the aggregate bid price of the Treasury Obligations and
the aggregate net asset value of the Fund shares in such Series of the Trust.
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THE TRUST
Kemper Bond Enhanced Securities Trust, Small Capitalization Equity Series,
Growth Series and Total Return Series (collectively the "Trust") consist of a
Series of unit investment trusts which were created under the laws of the State
of Missouri pursuant to Trust Indenture (the "Agreements") between Kemper Unit
Investment Trusts, a service of Kemper Securities, Inc., as Sponsor, and
Investors Fiduciary Trust Company, as Trustee. For information regarding the
relationship of Kemper Unit Investment Trusts and Investors Fiduciary Trust
Company, see "The Sponsor."
With the deposit of the Securities, the Sponsor established a percentage
relationship between the principal amounts of Treasury Obligations and Fund
shares in each Series' Portfolio. Since the prices of the underlying Fund
shares and Treasury Obligations will fluctuate daily, the ratio, on a cost
basis, may also change daily. The maturity value of the Treasury Obligations
and the portion of a Fund share represented by each Unit will not change.
Each Series of the Trust has been organized so that purchasers of Units
should receive, at the termination of the Series, an amount per Unit at least
equal to $1.00, even if the Fund in such Series never paid a dividend and the
value of the Fund shares in such Series were to drop to zero, which the Sponsor
considers highly unlikely. To the extent that Units of a Series of the Trust
are redeemed, the aggregate value of the Securities in such Series will be
reduced and the undivided fractional interest represented by each outstanding
Unit of such Series will increase. See "Redemption."
PORTFOLIOS
ZERO COUPON TREASURIES. The Treasury Obligations deposited in each
Series of the Trust consist of U.S. Treasury bonds which have been stripped of
their unmatured interest coupons or such coupons, or receipts or certificates
evidencing such bonds or coupons (such as CATS or TIGR's). CATS and TIGR's
(and other similar securities) are certificates that represent receipts of
ownership of the payments that comprise a Government bond. The underwriters of
such certificates purchase a U.S. Treasury bond and place such bond in an
irrevocable trust with a custodian bank, and the custodian bank then issues
receipts that evidence ownership of the semi-annual coupon payments and the
final principal payment of the bond. The actual Treasury securities that are
used to create CATS or TIGR's (and other similar securities) are held in book
entry form at the custodian. U.S. Treasury bonds evidence the right to receive
a fixed payment at a future date from the U.S. Government and are backed by the
full faith and credit of the U.S. Government. Treasury Obligations are
purchased at a deep discount because the buyer obtains only the right to a
fixed payment at a fixed date in the future 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 Treasury Obligations) is that a fixed
yield is earned not only on the original investment but also, in effect, on all
earnings during the life of the discount obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable
to reinvest the income on such obligations at a rate as high as the implicit
yield on the discount obligations, but at the same time eliminates the holder's
ability to reinvest at higher rates in the
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future. For this reason, the Treasury Obligations are subject to substantially
greater price fluctuations during periods of changing interest rates than are
securities of comparable quality which make regular interest payments.
Certain Series of the Trust initially had termination dates of approximately
10 years while other Series of the Trust initially had termination dates of
approximately 5 years and were designated as Short-Intermediate Term Trusts.
Because the Treasury Obligations in the longer term Series have more time to
accrete in value before maturity, they could be purchased at a much lower
price. The effect of being able to acquire the Treasury Obligations at a lower
price is to permit more of such Series' portfolios to be invested in shares of
the Mutual Fund included in the portfolio of such Series.
KEMPER SMALL CAPITALIZATION EQUITY FUND. The portfolios of certain Series
of the Trust, in addition to Treasury Obligations, also contain shares of
Kemper Small Capitalization Equity Fund (formerly the Summit Fund) ("Small Cap
Fund"). Small Cap Fund is an open-end, diversified management investment
company, commonly known as a mutual fund. Small Cap Fund's objective is
maximum appreciation of investors' capital. Small Cap Fund's investments
normally consist mainly of common stocks and securities convertible into or
exchangeable for common stocks. Small Cap Fund may also invest a small portion
of its assets in put and call options and foreign securities, purchase and sell
financial futures contracts, engage in foreign currency transactions and lend
its portfolio securities. The shares of Small Cap Fund deposited in such
Series of the Trust are maintained on the books of Small Cap Fund's transfer
agent.
SMALL CAP FUND INFORMATION. Small Cap Fund was initially organized as a
business trust under the laws of Massachusetts on October 24, 1985. Effective
January 31, 1986, Small Cap Fund, pursuant to a reorganization, succeeded to
the assets and liabilities of Kemper Summit Fund, Inc., a Maryland corporation
organized in 1968 and in 1991 changed its name to Small Capitalization Equity
Fund. Small Cap Fund may issue an unlimited number of shares of beneficial
interest. While only shares of a single Series ("Portfolio") are presently
being offered, the Board of Trustees may authorize the issuance of additional
Portfolios if deemed desirable, each with its own investment objectives,
policies and restrictions. Since Small Cap Fund may offer multiple Portfolios,
it is known as a "series company." Shares of a Portfolio have equal
noncumulative voting rights and equal rights with respect to dividends, assets
and liquidation of such Portfolios. Shares are fully paid and nonassessable
when issued, are transferable without restriction and have no preemptive
or conversion rights.
Small Cap Fund has followed the practice of distributing annually
substantially all of its net investment income and any net realized capital
gains after the close of its fiscal year. Small Cap Fund intends to continue
to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and, if so qualified, will not be liable for Federal
income taxes to the extent its earnings are distributed.
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Important financial information, such as net investment income, expenses and
dividends, along with the independent public accountants' report appear in
Small Cap Fund's Part B, Statement of Additional Information, which may be
obtained by calling (312) 781-1121 or by writing to: Kemper Small Cap Fund at
120 S. LaSalle Street, Chicago, Illinois, 60603.
SMALL CAP FUND'S OBJECTIVE AND POLICIES. Small Cap Fund's objective is
maximum appreciation of investors' capital. Current income will not be a
significant factor. Small Cap Fund is designed primarily for investors with
substantial resources and the investment experience to consider their shares as
a long-term investment involving financial risk commensurate with potential
substantial gains.
Small Cap Fund seeks attractive areas for investment opportunity arising
from such factors as technological advances, new marketing methods, and changes
in our economy and population. Management believes that such investment
opportunities may be found among the following:
(1) Companies engaged in high technology fields such as electronics,
computers, computer peripheral equipment, nuclear energy,
metallurgy, medicine, radiation, graphic arts and oceanography.
(2) Companies having a significantly improved earnings outlook as the
result of changed economic environment, acquisitions, mergers,
new management, changed corporate strategy or product innovation.
(3) Companies supplying new or rapidly growing services to consumers
and businesses in such fields as automation, data processing,
communications, marketing and finance.
(4) Companies which are unseasoned or embryonic, to a limited extent.
Small Cap Fund's investment portfolio will normally consist primarily of
common stocks and securities convertible into or exchangeable for common
stocks, including warrants and rights. Small Cap Fund may also invest to a
limited degree in preferred stocks and debt securities when they are believed
to offer opportunities for capital growth. Small Cap Fund may also purchase
options on securities and index options, may purchase and sell financial
futures contracts and options on financial futures contracts, may purchase
foreign securities and engage in foreign currency transactions and
may at times lend its portfolio securities. When a temporary defensive
position is deemed advisable, it may, without limit, invest in high-grade
senior securities and securities of the U.S. Government and its
instrumentalities or retain cash or cash equivalents.
In the selection of investments, long-term capital appreciation will take
precedence over short range market fluctuations. Small Cap Fund does not
intend to engage actively in trading for short-term profits, though it may
occasionally make investments for short-term capital appreciation when such
action is believed to be desirable and consistent with sound investment
procedure. Generally, Small Cap Fund will make long-term
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(as defined in the Internal Revenue Code in order to qualify for long-term
capital gains tax treatment) rather than short-term investments. Nevertheless,
it may dispose of such investments at any time it may be deemed advisable
because of a subsequent change in the circumstances of a particular company or
industry or in general market or economic conditions. For example, a security
initially purchased for long-term growth potential may be sold at any time when
it is determined that future growth may not be at an acceptable rate or that
there is a risk of substantial decline in market price. The rate of portfolio
turnover is not a limiting factor when changes in investments are deemed
appropriate. In addition, market conditions, cash requirements for redemption
and repurchase of shares or other factors could affect the portfolio turnover
rate.
Since many of the securities in Small Cap Fund's portfolio may be considered
speculative in nature by traditional investment standards, substantially
greater than average market volatility and investment risk may be involved.
There can be no assurance that Small Cap Fund's objective of maximum capital
appreciation will be achieved. Small Cap Fund has adopted certain investment
restrictions which are presented in its Part B, Statement of Additional
Information, and which, together with its investment objective and policies,
cannot be changed without approval by holders of a majority of Small Cap Fund's
outstanding voting shares.
Options Transactions. Small Cap Fund may invest up to five percent of its
assets in put and call options. A put option gives the holder (buyer) the
right to sell a security at a specified price (the exercise price) at any time
until a certain date (the expiration date). A call option gives the holder
(buyer) the right to purchase a security at a specified price (the exercise
price) at any time until a certain date (the expiration date). Small Cap Fund
will only invest in options which are traded on securities exchanges and for
which it pays a premium (cost of option). As part of its options transactions,
Small Cap Fund may also purchase options on securities indices. Options on
securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
In connection with its foreign securities investments, Small Cap Fund may also
purchase foreign currency options. Small Cap Fund may enter into closing
transactions, exercise its options or permit them to expire.
Financial Futures Transactions. Small Cap Fund may engage in financial
futures transactions. Financial futures contracts are commodity contracts
which obligate the long or short holder to take or make delivery of a specified
quantity of a financial instrument, such as a security, or the cash value of a
securities index, during a specified future period at a specified price. In
connection with its foreign securities investments, Small Cap Fund may also
engage in foreign currency financial futures transactions. Although some
financial futures contracts call for making or taking delivery of the
underlying securities, in most cases these obligations are closed out before
delivery. The closing of such a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract. Such a
transaction cancels the obligation under the original contract to make or take
delivery. Other financial futures contracts, such as futures contracts on a
securities index, by their terms call for cash settlements.
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There are risks associated with the use of financial futures contracts
because there may be an imperfect correlation between the price movements of
the futures contracts and price movements of the securities which the Fund owns
or intends to purchase. Small Cap Fund could lose money on the financial
futures contracts and also on the price of such securities. If a liquid
secondary market did not exist when Small Cap Fund wished to close out a
financial futures contract, it would not be able to do so and would continue to
be required to make daily cash payments of variation margin in the event of
adverse price movements. If the investment manager's judgment about the
general direction of interest rates or markets is wrong, the overall
performance may be poorer than if no such contracts had been entered into. The
costs incurred in connection with futures transactions could also adversely
affect Small Cap Fund's performance.
Small Cap Fund may also purchase and write call and put options on financial
futures contracts in an attempt to hedge against market risks. An option
purchased by Small Cap Fund may expire worth less in which case Small Cap Fund
would lose the premium paid for it. Small Cap Fund may engage in futures
transactions only on commodities exchanges or boards of trade. Small Cap Fund
will not engage in transactions in financial futures contracts or options for
speculation, but only in an attempt to hedge against market conditions
affecting the values of securities which Small Cap Fund owns or intends to
purchase.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, Small Cap Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by collateral (cash or U.S. government securities) equal
to no less than the market value, determined daily, of the securities loaned.
Small Cap Fund will receive amounts equal to dividends or interest on the
securities loaned. It will also earn income for having made the loan. Any
cash collateral pursuant to these loans will be invested in short-term money
market instruments. Management will limit such lending to not more than
one-third of the value of Small Cap Fund's total assets. Apart from lending
its securities and acquiring debt securities of a type customarily purchased by
financial institutions, Small Cap Fund will not make loans to other persons.
Foreign Securities. Although Small Cap Fund will invest primarily in
securities that are publicly traded in the United States, it has the discretion
to invest a portion of its assets in foreign securities that are traded
principally in securities markets outside the United States. Small Cap
Fund currently limits investment in foreign securities not publicly traded in
the United States to less than 10% of its total assets. Small Cap Fund may
also invest in U.S. dollar denominated American Depositary Receipts which are
traded in the United States. Foreign securities present certain risks in
addition to those presented by domestic securities, including risks associated
with currency fluctuations, possible imposition of foreign governmental
regulations or taxes adversely affecting portfolio securities, and generally
different degrees of liquidity, market volatility and availability of
information. However, Small Cap Fund intends to invest in foreign securities
only when the potential benefits to it are deemed to outweigh those risks. In
connection with its foreign securities investments, Small Cap Fund may, to a
limited extent, engage in foreign currency exchange transactions, purchase
foreign currency options and purchase and sell foreign currency futures
contracts. More complete information concerning foreign securities and
related techniques is contained under "Investment Policies and
Techniques-Foreign Securities and Foreign Currency Transactions" in the Small
Cap Fund Part B, Statement
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of Additional Information.
NET ASSET VALUE OF SMALL CAP FUND. The net asset value per share is
determined by calculating the total value of Small Cap Fund's assets, which
will normally be composed chiefly of investment securities, deducting total
liabilities and dividing the result by the number of shares outstanding.
Portfolio securities which are traded on a national securities exchange or
securities listed on the NASDAQ National Market are valued at the last sale
price on the exchange or market where primarily traded or listed or, if there
is no recent sale price available, at the last current bid quotation.
Portfolio securities that are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on such
exchanges. Securities not so traded or listed are valued at the last current
bid quotation if market quotations are available. Fixed income securities are
valued by using market quotations, or independent pricing services which use
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Options are valued at the last sale price unless the bid price is higher or the
asked price is lower, in which event such bid or asked price is used.
Financial futures are valued at the settlement price established each day by
the board of trade or exchange on which they are traded. Other securities,
including restricted securities, and other assets are valued at fair value as
determined in good faith by the Board of Trustees. For purposes of determining
Small Cap Fund's net asset value, all assets and liabilities initially
expressed in foreign currency values will be converted into United States
dollar values at the mean between the bid and offered quotations of such
currencies against United States dollars as last quoted by any recognized
dealer. If an event were to occur, after the value of a Small Cap Fund
instrument was so established but before the net asset value per share was
determined which was likely to materially change the net asset value, then that
Small Cap Fund instrument would be valued using fair value considerations by
the Board of Trustees or its delegates. On each day the New York Stock
Exchange (the "Exchange") is open for trading, the net asset value is
determined as of the close of the Exchange (normally 3:00 p.m. Chicago time).
INVESTMENT MANAGER AND UNDERWRITER OF THE FUND. Kemper Financial Services,
Inc. ("KFS"), a wholly-owned subsidiary of Kemper Financial Companies, ("KFC")
is an affiliate of the Sponsor of the Trust and is also the investment adviser
of Small Cap Fund and provides Small Cap Fund with continuous professional
investment supervision. KFS is also the principal underwriter of Small Cap
Fund and acts as agent of Small Cap Fund in the sale of its shares. KFS has
been engaged in the management of investment funds for more than 40 years. KFS
provides investment advice and manages investment portfolios for the Kemper
Insurance Companies and other corporate, pension, profit-sharing and individual
accounts and acts as investment adviser or principal underwriter for 26
open-end and six closed-end investment companies, with 59 separate investment
portfolios. Kemper Financial Companies is a financial services holding company
which is a subsidiary of Kemper Corporation, a diversified insurance and
financial services holding company.
Responsibility for overall management of Small Cap Fund rests with its
trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreement provides that KFS shall act as Small Cap
Fund's investment adviser, manage its investments and provide it with various
services and facilities.
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<PAGE> 12
As compensation for the services and facilities furnished, Small Cap Fund
pays a base annual management fee, payable monthly, at the rate of .65 of 1% of
the average daily net assets of Small Cap Fund. The base fee will be subject
to upward or downward adjustment between .35 and .95 of 1% on the basis of the
investment performance of Small Cap Fund compared with the performance of
Standard & Poor's Index of 500 Stocks (the "Index").
More detailed information, which is included in Small Cap Fund's Part B,
Statement of Additional Information, is available from the Sponsor and will be
supplied without charge upon request. However, Unitholders should be aware
that, since they own their shares of Small Cap Fund through the Trust, such
shares will not be eligible to participate in Small Cap Fund's other features,
such as exchange privilege, letter of intent, etc. These special features are,
however, available with respect to shares in reinvestment accounts and are
described in the prospectus of the Kemper mutual funds designated as available
for reinvestment.
KEMPER TOTAL RETURN FUND. The portfolios of certain Series of the Trust
also contain, in addition to Treasury Obligations, shares of Kemper Total
Return Fund ("Total Return Fund"). Total Return Fund is an open-end,
diversified management investment company, commonly known as a mutual fund.
Total Return Fund's objective is to obtain the highest total return, a
combination of income and capital appreciation, consistent with reasonable
risk. Total Return Fund's investment will normally consist of fixed income
securities (bonds and other debt securities) and equity securities (stocks).
The shares of Total Return Fund deposited in such Series of the Trust are
maintained on the books of Total Return Fund's transfer agent.
TOTAL RETURN FUND INFORMATION. Total Return Fund was organized as a
business trust under the laws of Massachusetts on October 24, 1985. Effective
January 31, 1986, Total Return Fund, pursuant to a reorganization, succeeded to
the assets and liabilities of Kemper Total Return Fund, Inc., a Maryland
corporation organized in 1963. The Total Return Fund was known as the Balanced
Income Fund, Inc. until 1972 and as Supervised Investors Income Fund, Inc.
until 1977. Total Return Fund may issue an unlimited number of shares of
beneficial interest. While only shares of a single Series ("Portfolio") are
presently being offered, the Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable, each with its own investment
objectives, policies and restrictions. Since Total Return Fund may offer
multiples Portfolios, it is known as a "Series company." Shares of a Portfolio
have equal non-cumulative voting rights and equal rights with respect to
dividends, assets and liquidation of such Portfolio. Shares are fully paid
and nonassessable when issued, are transferable without restriction and
have no preemptive or conversion rights.
Total Return Fund has followed the practice of distributing quarterly
substantially all of its net investment income and distributes any net realized
capital gains after the close of its fiscal year. Total Return Fund intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and, if so qualified, will not be liable for Federal
income taxes to the extent its earnings are distributed.
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<PAGE> 13
Important financial information, such as net investment income, expenses and
dividends, along with the independent public accountants' report appear in
Total Return Fund's annual report to shareholders. Copies of Total Return
Fund's annual report to shareholders and its Part B, Statement of Additional
Information, may be obtained without charge by calling (312) 781-1121 or by
writing to: Kemper Total Return Fund at 120 S. LaSalle Street, Chicago,
Illinois, 60603.
TOTAL RETURN FUND'S INVESTMENT OBJECTIVE AND POLICIES. The objective of
Total Return Fund is to obtain the highest total return, a combination of
income and capital appreciation, consistent with reasonable risk. Total Return
Fund will emphasize liberal current income in seeking its objective. Total
Return Fund's investments will normally consist of fixed income and equity
securities. Fixed income securities will include bonds and other debt
securities and preferred stocks, some of which may have a call on common stock
through attached warrants or a conversion privilege. The percentage of assets
invested in fixed income and equity securities will vary from time to time
depending upon the judgment of management as to general market and economic
conditions, trends in yields and interest rates and changes in fiscal or
monetary policies. Total Return Fund may also purchase options on securities
and index options, may purchase and sell financial futures contracts and
options on financial futures contracts, may purchase foreign securities and
engage in foreign currency transactions and may at times lend its portfolio
securities. Total Return Fund may invest in fixed income securities which are
in the lower rating categories and those which are unrated.
Total Return Fund does not make investments for short-term profits, but it
is not restricted in policy with regard to portfolio turnover and will make
changes in its investment portfolio from time to time as business and economic
conditions and market prices may dictate and as its investment policy may
require.
There can be no assurance that Total Return Fund's objective can be achieved
or that its shareholders will be protected from the risk of loss inherent in
security ownership.
Total Return Fund will not normally engage in the trading of securities for
the purpose of realizing short-term profits, but it will adjust its portfolio
as considered advisable in view of prevailing or anticipated market
conditions and its investment objective. Accordingly, Total Return Fund
may sell portfolio securities in anticipation of a rise in interest rates and
purchase securities in anticipation of a decline in interest rates. Frequency
of portfolio turnover will not be a limiting factor should Total Return Fund's
investment adviser deem it desirable to purchase or sell securities.
Total Return Fund has adopted certain investment restrictions which are
presented in the Part B, Statement of Additional Information, and which,
together with the investment objective and policies of Total Return Fund,
cannot be changed without approval by holders of a majority of its outstanding
voting shares.
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<PAGE> 14
Options and Financial Futures Transactions. Total Return Fund may invest up
to five percent of its assets in put and call options. A put option gives the
holder (buyer) the right to sell a security at a specified price (the exercise
price) at any time until a certain date (the expiration date). A call option
gives the holder (buyer) the right to purchase a security at a specified price
(the exercise price) at any time until a certain date (the expiration date).
Total Return Fund will only invest in options that are traded on securities
exchanges and for which it pays a premium (cost of option). As part of its
options transactions, Total Return Fund may also purchase options on securities
indices. Options on securities indices are similar to options on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. In connection with its foreign securities investments, Total Return
Fund may also purchase foreign currency options. Total Return Fund will only
invest in options which are traded on securities exchanges and for which it
pays a premium (cost of option). Total Return Fund may enter into closing
transactions, exercise its options or permit them to expire.
Financial Futures Transactions. Total Return Fund may engage in financial
future transactions. Financial futures contracts are commodity contracts which
obligate the long or short holder to take or make delivery of a specified
quantity of a financial instrument, such as a security or the cash value of a
securities index, during a specified future period at a specified price. In
connection with its foreign securities investments, Total Return Fund may also
engage in foreign currency financial future transactions. Although some
financial futures contracts call for making or taking delivery of the
underlying securities, in most cases these obligations are closed out before
delivery. The closing of a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract. Such a
transaction cancels the obligation under the original contract to make or take
delivery. Other financial futures contracts, such as futures contracts on a
securities index, by their terms call for cash settlements. Total Return Fund
may engage in financial futures transactions as an attempt to hedge against
market risks.
At the time the Total Return Fund enters into a futures contract, it is
required to deposit with its custodian, on behalf of the broker, a specified
amount of cash or eligible securities, called "initial margin." The initial
margin required for a futures contract is set by the exchange on which the
contract is traded. Subsequent payments, called "variation margin," to and
from the broker are made on a daily basis as the market price of the futures
contract fluctuates.
The Total Return Fund may engage in financial futures transactions as an
attempt to hedge against market risks. For example, when the near-term market
view is bearish but the portfolio composition is judged satisfactory for the
longer term, exposure to temporary declines in the market may be reduced by
entering into futures contracts to sell securities or the cash value of a
securities index. Conversely, where the near-term view is bullish, but the
Total Return Fund is believed to be well positioned for the longer term with a
high cash position, the Total Return Fund can hedge against market increases by
entering into futures contracts to buy securities or the cash value of a
securities index. In either case, the use of futures contracts would tend to
reduce portfolio turnover and facilitate the Total Return Fund's pursuit of its
investment
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<PAGE> 15
objective.
There are risks associated with the use of financial futures contracts
because there may be an imperfect correlation between the price movements of
the futures contracts and price movements of the securities which Total Return
Fund owns or intends to purchase. Total Return Fund could lose money on the
financial futures contracts and also on the price of such securities. If a
liquid secondary market did not exist when Total Return Fund wished to close
out a financial futures contract, it would not be able to do so and would
continue to be required to make daily cash payments of variation margin in the
event of adverse price movements. If KFS' judgment about the general direction
of interest rates or markets is wrong, the overall performance may be poorer
than if no such contracts had been entered into. The costs incurred in
connection with futures transactions could adversely affect Total Return Fund's
performance.
Total Return Fund may also purchase and write call and put options on
financial futures contracts in an attempt to hedge against market risks. An
option purchased by Total Return Fund may expire worth less in which case Total
Return Fund would lose the premium paid for it. Total Return Fund may engage
in futures transactions only on commodities exchanges or boards of trade.
Total Return Fund will not engage in transactions in financial futures
contracts or options for speculation, but only as an attempt to hedge against
market conditions affecting the values of securities which Total Return Fund
owns or intends to purchase.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, Total Return Fund may lend its portfolio securities (principally
to broker-dealers) without limit where such loans are callable at any time and
are continuously secured by collateral (cash or U.S. government securities)
equal to no less than the market value, determined daily, of the securities
loaned. Total Return Fund will receive amounts equal to dividends or interest
on the securities loaned. It will also earn income for having made the loan.
Any cash collateral pursuant to these loans will be invested in short-term
money market instruments. Management will limit such lending to not more than
one-third of the value of Total Return Fund's total assets. Apart from lending
its securities and acquiring debt securities of a type customarily purchased by
financial institutions, Total Return Fund will not make loans to other persons.
Foreign Securities. Although the Total Return Fund will invest primarily in
securities that are publicly traded in the United States, it has the
discretion to invest a portion of its assets in foreign securities that are
traded principally in securities markets outside the United States. The Total
Return Fund currently limits investment in foreign securities not publicly
traded in the United States to less than 10% of its total assets. The Total
Return Fund may also invest in U.S. dollar denominated American Depositary
Receipts which are traded in the United States and are not subject to the
preceding limitations. Foreign securities present certain risks in addition to
those presented by domestic securities, including risks associated with
currency fluctuations, possible imposition of foreign governmental regulations
or taxes adversely affecting portfolio securities, and generally different
degrees of liquidity, market volatility and availability of information.
However, the Total Return Fund intends to invest in foreign securities only
when the potential benefits to it are deemed to outweigh those risks. In
connection with its foreign securities investments, the Total Return
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<PAGE> 16
Fund may, to a limited extent, engage in foreign currency exchange
transactions, purchase foreign currency options and purchase and sell foreign
currency futures contracts. More complete information concerning foreign
securities and related techniques is contained under "Investment Policies and
Techniques - Foreign Securities and Foreign Currency Transactions" in the Total
Return Fund's Part B, Statement of Additional Information.
NET ASSET VALUE OF TOTAL RETURN FUND. The net asset value per share is
determined by calculating the total value of Total Return Fund's assets, which
will normally be composed chiefly of investment securities, deducting total
liabilities and dividing the result by the number of shares outstanding.
Portfolio securities that are traded on a national securities exchange or
securities listed on the NASDAQ National Market are valued at the last sale
price on the exchange or market where primarily traded or listed or, if there
is no recent sale, at the last current bid quotation. Portfolio securities
that are primarily traded on foreign securities exchanges are generally valued
at the preceding closing values of such securities on their respective
exchanges where primarily traded. Securities not so traded or listed are
valued at the last current bid quotation if market quotations are available.
Fixed income securities are valued by using market quotations, or independent
pricing services which use prices provided by market makers or estimates of
market values obtained from yield data relating to instruments or securities
with similar characteristics. Equity options are valued at the last sale price
unless the bid price is higher or the asked price is lower, in which event such
bid or asked price is used. Financial futures are valued at the settlement
price established each day by the board of trade or exchange on which they are
traded. Other securities, including restricted securities, and other assets
are valued at fair value as determined in good faith by the Board of Trustees.
For purposes of determining the Fund's net asset value, all assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and offered
quotations of such currencies against United States dollars as last quoted by
any recognized dealer. If an event were to occur, after the value of a Total
Return Fund instrument was so established but before the net asset value per
share is determined which was likely to materially change the net asset value,
then that Total Return Fund instrument would be valued using fair value
considerations by the Board of Trustees or its delegates. On each day the New
York Stock Exchange (the "Exchange") is open for trading, the net asset value
is determined as of the close of the Exchange (normally 3:00 p.m. Chicago
time).
INVESTMENT MANAGER AND UNDERWRITER OF TOTAL RETURN FUND. Kemper Financial
Services, Inc. ("KFS"), a wholly-owned subsidiary of Kemper Financial
Companies, is an affiliate of the Sponsor of the Trust and is the investment
adviser of Total Return Fund and provides Total Return Fund with continuous
professional investment supervision. KFS is also the principal underwriter of
Total Return Fund and acts as agent of Total Return Fund in the sale of its
shares. KFS has been engaged in the management of investment funds for more
than 40 years. KFS provides investment advice and manages investment
portfolios for the Kemper Insurance Company and other corporate, pension,
profit-sharing and individual accounts and acts as investment adviser or
principal underwriter for 26 open-end and six closed-end investment companies
with 59 separate portfolios. Kemper Financial Companies is a financial
services holding company which is a subsidiary of Kemper Corporation, a
diversified insurance and financial services holding company.
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<PAGE> 17
Responsibility for overall management of Total Return Fund rests with its
trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreement provides that KFS shall act as Total Return
Fund's investment adviser, manage its investments and provide it with various
services and facilities. Total Return Fund pays an investment management fee,
payable monthly, at the annual rate of .65 of 1% of the first $200,000,000 of
the average daily net assets, .55 of 1% on the next $300,000,000 of the average
daily net assets and .45 of 1% of average daily net assets over $500,000,000.
More detailed information, which is included in Total Return Fund's Part B,
Statement of Additional Information, is available from the Sponsor and will be
supplied without charge upon request. However, Unitholders should be aware
that, since they own their shares of Total Return Fund through the Trust, such
shares will not be eligible to participate in Total Return Fund's other
features, such as exchange privilege, letter of intent, etc. These special
features are, however, available with respect to shares in reinvestment
accounts and are described in the prospectus of the Kemper mutual funds
designated as available for reinvestment.
KEMPER GROWTH FUND. Certain Series of the Trust also contains shares of the
Growth Fund. The Growth Fund is an open-end diversified management investment
company, commonly known as a mutual fund. The Growth Fund's objective is
growth of capital through professional management and diversification of
investment securities having potential for capital appreciation. The Growth
Fund invests primarily in common stocks but can invest in any securities with
potential for capital growth. The Growth Fund may also invest a small portion
of its assets in put and call options, purchase and sell financial futures
contracts, purchase foreign securities and engage in related foreign currency
transactions and lend its portfolio securities. The shares of the Growth Fund
deposited in Series 13 of the Trust are maintained on the books of the Growth
Fund's transfer agent.
GROWTH FUND INFORMATION. The Growth Fund was organized as a business trust
under the laws of Massachusetts on October 24, 1985. Effective January 31,
1986, the Growth Fund, pursuant to a reorganization, succeeded to the assets
and liabilities of Kemper Growth Fund, Inc., a Maryland corporation organized
in 1965. The Growth Fund may issue an unlimited number of shares of beneficial
interest in one or more Series or "Portfolios." While only shares of a single
Portfolio are presently being offered, the Board of Trustees may authorize the
issuance of additional Portfolios if deemed desirable, each with
its own investment objectives,policies and restrictions. Since the
Growth Fund may offer multiple Portfolios, it is known as a "Series company."
Shares of a Portfolio have equal noncumulative voting rights and equal
rights with respect to dividends, assets and liquidation of such Portfolios.
Shares are fully paid and nonassessable when issued, are transferable
without restriction and have no preemptive or conversion rights.
The Growth Fund has followed the practice of distributing semi-annually
substantially all of its net investment income and any net realized capital
gains after the close of its fiscal year. The Growth Fund intends to continue
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and, if so qualified, will not be liable for federal income taxes
to the extent its earnings are distributed.
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<PAGE> 18
Important financial information for the Growth Fund, such as net investment
income, expenses and dividends, along with the independent public accountants'
report appear in the Growth Fund's 1988 Annual Report to shareholders, which
may be obtained without charge by calling (312) 781-1121 or by writing to:
Kemper Growth Fund at 120 South LaSalle Street, Chicago, Illinois 60603.
GROWTH FUND'S INVESTMENT OBJECTIVE AND POLICIES. The Growth Fund's
objective is growth of capital through professional management and
diversification of investments in securities it believes to have possibilities
for capital appreciation. There is no assurance that this objective will be
realized. In seeking to obtain capital appreciation, the Growth Fund may trade
to some degree in securities for the short term. To this extent, the Growth
Fund will be engaged in trading operations based on short-term market
considerations as distinct from long-term investment based upon fundamental
valuation of securities. However, the Growth Fund will emphasize fundamental
research in attempting to identify under-valued situations which it is hoped
will appreciate over the longer term. The Growth Fund's investment policy may
involve a somewhat greater risk than is inherent in the ordinary investment
security.
The annual turnover rate of the Growth Fund's portfolio may vary from year
to year, and may also be affected by cash requirements for redemptions and
repurchases of Growth Fund shares, and by the necessity of maintaining the
Growth Fund as a regulated investment company under the Internal Revenue Code
in order to receive certain favorable tax treatment.
In seeking to achieve its objective, it will be the Growth Fund's policy to
invest primarily in securities which it believes offer the potential for
increasing the Growth Fund's total asset value. While it is anticipated that
most investments will be in common stocks of companies with above-average
growth prospects, investments may also be made to a limited degree in other
common stocks and in convertible securities, such as bonds and preferred
stocks.
The Growth Fund may also purchase options on securities and index options,
may purchase and sell financial futures contracts and options on financial
futures contracts, may purchase foreign securities and engage in related
foreign currency transactions and may at times lend its portfolio securities.
There may also be times when a significant portion of the
Growth Fund's assets may be held temporarily in cash or defensive type
securities, depending upon management's analysis of business and economic
conditions and the outlook for security prices.
Some of the factors the Growth Fund's management will consider in making its
investments are patterns of increasing growth in sales and earnings, the
development of new or improved products or services, favorable outlooks for
growth in the industry, the probability of increased operating efficiencies,
emphasis on research and development, cyclical conditions, or other signs that
a company is expected to show greater than average capital appreciation and
earnings growth.
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<PAGE> 19
Options Transactions. The Growth Fund may invest up to five percent of its
net assets in put and call options. A put option gives the holder (buyer) the
right to sell a security at a specified price (the exercise price) at any time
until a certain date (the expiration date). A call option gives the holder
(buyer) the right to purchase a security at a specified price (the exercise
price) at any time until a certain date (the expiration date). The Growth Fund
will only invest in options that are traded on securities exchanges and for
which it pays a premium (cost of option). As part of its options transactions,
the Growth Fund may also purchase options on securities indices in an attempt
to hedge against market conditions affecting the values of securities that the
Growth Fund owns or intends to purchase, and not for speculation. Options on
securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
In connection with its foreign securities investments, the Growth Fund may also
purchase foreign currency options. The Growth Fund may enter into closing
transactions, exercise its options or permit them to expire.
Financial Futures Transactions. The Growth Fund may engage in financial
futures transactions. Financial futures contracts are commodity contracts
which obligate the long or short holder to take or make delivery of a specified
quantity of a financial instrument, such as a security, or the cash value of a
securities index during a specified future period at a specified price. In
connection with its foreign securities investments, the Growth Fund may also
engage in a foreign currency financial futures transactions. Although some
financial futures contracts call for making or taking delivery of the
underlying securities, in most cases these obligations are closed out before
delivery. The closing of such a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract. Such a
transaction cancels the obligation under the original contract to make or take
delivery. Other financial futures contracts, such as futures contracts on a
securities index, by their terms call for cash settlements.
At the time the Growth Fund enters into a futures contract, it is required
to deposit with its custodian, on behalf of the broker, a specified amount of
cash or eligible securities, called "initial margin." The initial margin
required for a futures contract is set by the exchange on which the contract
is traded. Subsequent payments, called "variation margin," to and from the
broker are made on a daily basis as the market price of the futures contract
fluctuates.
The Growth Fund may engage in financial futures transactions as an attempt
to hedge against market risks. For example, when the near-term market view is
bearish but the portfolio composition is judged satisfactory for the longer
term, exposure to temporary declines in the market may be reduced by entering
into futures contracts to sell securities or the cash value of a securities
index. Conversely, where the near-term view is bullish, but the Growth Fund is
believed to be well positioned for the longer term with a high cash position,
the Growth Fund can hedge against market increases by entering into futures
contracts to buy securities or the cash value of a securities index. In either
case, the use of futures contracts would tend to reduce portfolio turnover and
facilitate the Growth Fund's pursuit of its investment objective.
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<PAGE> 20
There are risks associated with the use of financial futures contracts
because there may be an imperfect correlation between the price movements of
the futures contracts and price movements of the securities which the Growth
Fund owns or intends to purchase. The Growth Fund could lose money on the
financial futures contracts and also on the price of such securities. The
degree of difference in price movements between futures contracts and the
securities being hedged depends upon such things as differences between the
securities being hedged and the securities underlying the futures contracts and
variations in speculative market demand for futures contracts and the
underlying securities. If a liquid secondary market did not exist when the
Growth Fund wished to close out a financial futures contract, it would not be
able to do so and would have to continue making daily cash payments of
variation margin in the event of adverse price movements. If the investment
manager's judgment about the general direction of markets is wrong, the overall
performance may be poorer than if no such contracts had been entered into. The
costs incurred in connection with futures transactions could also adversely
affect the Growth Fund's performance.
The Growth Fund may also purchase and write call and put options on
financial futures contracts in an attempt to hedge against market risks. An
option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise, the writer
(seller) of the option delivers the futures contract to the holder (buyer) at
the exercise price. An option purchased by the Growth Fund may expire worth
less in which case the Growth Fund would lose the premium paid for it.
The Growth Fund may engage in futures transactions only on commodities
exchanges or boards of trade. The Growth Fund will not engage in transactions
in financial futures contracts or related options for speculation, but only as
an attempt to hedge against market conditions affecting the values of
securities which the Growth Fund owns or intends to purchase.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Growth Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by collateral (cash or United States government
securities) equal to no less than the market value, determined daily, of the
securities loaned. The Growth Fund will receive amounts equal to dividends or
interest on the securities loaned. It will also earn income for having
made the loan. Any cash collateral pursuant to these loans will be invested in
short-term money market instruments. Management will limit such lending to not
more than one-third of the value of the Growth Fund's total assets. Apart from
lending its securities and acquiring debt securities of a type customarily
purchased by financial institutions, the Growth Fund will not make loans to
other persons.
Foreign Securities. Although the Growth Fund will invest primarily in
securities that are publicly traded in the United States, it has the discretion
to invest a portion of its assets in foreign securities that are traded
principally in securities markets outside the United States. The Growth Fund
currently limits investments in foreign securities not publicly traded in the
United States to less than 10% of its total assets. The Growth Fund may also
invest in U.S. dollar denominated American Depositary Receipts which are traded
in the
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<PAGE> 21
United States and are not subject to the preceding limitations. Foreign
securities present certain risks in addition to those presented by domestic
securities, including risks associated with currency fluctuations, possible
imposition of foreign governmental regulations or taxes adversely affecting
portfolio securities and generally different degrees of liquidity, market
volatility and availability of information. However, the Growth Fund intends
to invest in foreign securities only when the potential benefits to it are
deemed to outweigh those risks. In connection with its foreign securities
investments, the Growth Fund may, to a limited extent, engage in foreign
currency exchange transactions, purchase foreign currency options and purchase
and sell foreign currency futures contracts. More complete information
concerning foreign securities and related techniques is contained under
"Investment Policies and Techniques-Foreign Securities and Foreign Currency
Transactions" in the Growth Fund's Part B, Statement of Additional Information.
NET ASSET VALUE OF GROWTH FUND. The net asset value per share is determined
by calculating the total value of the Growth Fund's assets, which will normally
be composed chiefly of investment securities, deducting total liabilities and
dividing the result by the number of shares outstanding. Portfolio securities
which are traded on a national securities exchange or securities listed on the
NASDAQ National Market are valued at the last sale price on the exchange or
market where primarily traded or listed or, if there is no recent sale price
available, at the last current bid quotation. Portfolio securities that are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges where
primarily traded. Securities not so traded or listed are valued at the last
current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Options are valued at the last sale price unless the
bid price is higher or the asked price is lower, in which event such bid or
asked price is used. Financial futures are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded. Other securities, including restricted securities, and other assets
are valued at fair value as determined in good faith by the board of Trustees.
For purposes of determining the Growth Fund's net asset value, all assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and offered
quotations of such currencies against United States dollars as last quoted by
any recognized dealer. If an event were to occur, after the value of an
instrument was so established but before the net asset value per share was
determined, which was likely to materially change the net asset value, then
that instrument would be valued using fair value considerations by the Board of
Trustees or its delegates. On each day the New York Stock Exchange (the
"Exchange") is open for trading, the net asset value is determined as of the
close of the Exchange (normally, 3:00 p.m. Chicago time).
INVESTMENT MANAGER AND UNDERWRITER OF GROWTH FUND. Kemper Financial
Services, Inc. ("KFS"), a wholly-owned subsidiary of Kemper Financial
Companies, Inc. ("KFC"), is an affiliate of the Sponsor of the Trust and is the
investment manager of the Growth Fund and provides the Growth Fund with
continuous professional investment supervision. KFS is also the principal
underwriter of the Growth Fund and acts as agent of the Growth Fund in the sale
of its shares. KFS has more assets under management than any other Chicago
based investment manager and is one of the largest investment managers in the
country. KFS has been engaged in the management of investment funds for more
than 40 years. KFS provides investment
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<PAGE> 22
advice and manages investment portfolios for the Kemper Insurance Companies and
other corporate, pension, profit sharing and individual accounts and acts as
investment adviser or principal underwriter for 26 open-end and six closed-end
investment companies, with 59 investment portfolios. KFC is a financial
services holding company which is a subsidiary of Kemper Corporation, a
diversified insurance and financial services holding company.
Responsibility for overall management of the Growth Fund rests with its
trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreement provides that KFS shall act as the Growth
Fund's investment adviser, manage its investments and provide it with various
services and facilities.
The Growth Fund pays an investment management fee, payable monthly, at the
annual rate of .65 of 1% of the first $200,000,000 of average daily net assets,
.55 of 1% of the next $300,000,000 of average daily net assets and .45 of 1% of
average daily net assets over $500,000,000.
More detailed information, which is included in the Growth Fund's Part B,
Statement of Additional Information, is available from the Sponsor and will be
supplied without charge upon request. However, Unitholders should be aware
that, since they own their shares of the Growth Fund through the Trust, such
shares will not be eligible to participate in the Growth Fund's other features,
such as exchange privilege, letter of intent, etc. These special features are,
however, available with respect to shares in reinvestment accounts and are
described in the prospectus of the Kemper mutual funds designated as available
for reinvestment.
INVESTMENT CONSIDERATIONS
Investors should be aware of certain other considerations before making a
decision to invest in any Series of the Trust described herein.
KFS, which is an affiliate of the Sponsor, is also the investment adviser
and principal underwriter of the Funds deposited in these Series of the Trust.
Shares of the Funds were purchased for deposit in the appropriate Series of the
Trust pursuant to an exemptive order of the Securities and Exchange Commission.
Under the terms of the exemptive order, the Sponsor has agreed to take certain
steps to ensure that each Series' investment in Fund shares is equitable to all
parties and particularly that the interests of the Unitholders of such Series
are protected. Because KFS is an affiliate of the Trust's Sponsor,
the Funds have agreed to waive any sales charge on shares sold to the Trust,
since the Sponsor is receiving a portion of the sales charge on all Units
sold. Furthermore, the Sponsor has agreed to waive its usual fee for acting as
Evaluator of the Trust's portfolios with respect to that portion of the
portfolios comprised of Fund shares, since information with respect to the
price of the Funds' shares is readily available to it. In addition, the Trust
Agreement requires the Trustee to vote all share of a Fund held in a Series
of the Trust in the same manner and ratio on all proposals as the vote of
owners of fund shares not held by such Series of the Trust.
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<PAGE> 23
The value of a Fund's shares, like the value of the Treasury Obligations,
will fluctuate over the life of a Series of the Trust and may be more or less
than the price at which they were deposited in the Trust. The Funds' shares
may appreciate or depreciate in value (or pay dividends) depending on the full
range of economic and market influences affecting the securities in which it is
invested and the success of the Funds' managements in anticipating or taking
advantages of such opportunities as may occur. However, the Sponsor believes
that, upon termination of each Series of the Trust, even if the Fund shares
deposited in such Series are worth less, an event which the Sponsor considers
highly unlikely, the Treasury Obligations will provide sufficient principal to
at least equal $1.00 per Unit. This feature of the Trust provides Unitholders
with principal protection, although they might forego any earnings on the
amount invested.
Unless a Unitholder purchases Units of a Series of the Trust on a date when
the value of the Units is $1.00 or less and unless the Treasury Obligations
remain in such Series of the Trust, total distributions, including
distributions made upon termination of such Series of the Trust, may be less
than the amount paid for a Unit.
A Series of the Trust may be terminated prior to the maturity of the
Treasury Obligations if, due to declines in the value of the Securities or
sales of Securities to meet redemptions or for other reasons, the aggregate net
asset value of the Series is less than 20% of the aggregate amount deposited in
such Series.
Each Series of the Trust consists of the Securities listed under "Schedules
of Investments" in Part Two as may continue to be held from time to time in
such Series.
The Trustee has no power to vary the investments of any Series, i.e., the
Trustee will have no managerial power to take advantage of market variations to
improve a Unitholder's investment but may dispose of Securities only under
limited circumstances. Of course, the portfolios of the Mutual Funds included
in each Series will be changing as the portfolio managers of such funds attempt
to achieve the Mutual Fund's objective. See "Portfolio Supervision."
To the best of the Sponsor's knowledge, there is no litigation pending as of
the Date of this Part One of the Prospectus in respect of any Security
which might reasonably be expected to have a material adverse effect on the
Trust or any Series of the Trust. At any time, litigation may be instituted on
a variety of grounds with respect to the Securities at any time, although the
Sponsor has no reason to believe that any litigation is imminent. The Sponsor
is unable to predict whether any such litigation will be instituted, or if
instituted, whether such litigation might have a material adverse effect on the
Trust or a Series of the Trust.
PUBLIC OFFERING OF UNITS
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<PAGE> 24
PUBLIC OFFERING PRICE. The Public Offering Price if based on the aggregate
bid side evaluation of the Treasury Obligations and the net asset value of the
Fund shares in the Series' portfolio, plus or minus cash, if any, in the
Principal Account held or owed by such Series, plus the applicable sales
charge, divided by the number of outstanding Units of the Series. Pursuant to
the terms of agreements with the Evaluator, certain investment banking firms
have agreed to supply prices which, in their opinion, reflect their assessment
of the market value of the Treasury Obligations included in each Series'
Portfolio. The Evaluator utilizes such prices to assist it in determining the
Public Offering Price per Unit.
The minimum purchase of any Series of the Trust is 1,000 Units or $1,000,
whichever is less, except the minimum for Uniform Gifts to Minors Act (UGMA)
and Uniform Transfers to Minors Act (UTMA) accounts is $1,000 and the minimum
for IRA accounts is $250. The sales charge applicable to quantity purchases is
reduced on a graduated scale for sales to any investor of at least $100,000 or
100,000 Units and will be applied on whichever basis is more favorable to the
investor.
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
<TABLE>
<CAPTION>
0-2.99 Years 3-4.99 Years 5-10 Years
Percent of Percent of Percent of Percent of Percent of Percent of
Offering Net Amount Offering Net Amount Offering Net Amount
TICKET SIZE Price Invested Price Invested Price Invested
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less than $100,00 . . . 2.00% 2.041% 3.00% 3.093% 5.00% 5.263%
$100,000 to $499,999 . 1.75 1.781 2.50 2.564 4.00 4.167
$500,000 to $999,999 . 1.50 1.523 2.00 2.041 3.00 3.093
$1,000,000 or more . . Negotiated Negotiated Negotiated
</TABLE>
The reduced sales charges as shown on the chart above will apply to all
purchase of Units on any one day by the same purchaser from the same dealer,
and for this purpose, purchases of Units of any Series of this 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 its officers, directors and employees and any
NASD registered representative to purchase Units of any Series of the Trust
without a sales charge and without meeting the Trust's normal minimum
investment requirement, although a transaction processing fee may be imposed.
Such Units are sold for investment only and on condition that they will not be
resold except through redemption by the Trustee or repurchase by the Sponsor.
The foregoing evaluations and computations shall be made as of the evaluation
time stated under
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<PAGE> 25
"Essential Information" in Part Two on each business day, effective for all
sales made during the preceding 24-hour period.
Payment for Units must be made on or before the fifth business day following
purchase. 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.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. The Public
Offering Price of Units and the Redemption Price are determined on the basis of
the bid prices of the Treasury Obligations in such Series. The Fund shares in
each Series are valued on net asset value for both the secondary markets and
for purposes of redemptions. The Public Offering Price per 1,000 Units, on the
date shown on the cover of Part Two, which includes the sales charge, exceeded
the Redemption Price by the amount shown under "Essential Information" in Part
Two. The bid and offering prices of the Treasury Obligations and the net asset
value of the Fund shares in each Series is expected to vary. For this reason
and others, including the fact that the Public Offering Price of each Series
includes the sales charge, the amount realized by a Unitholder upon redemption
at any time prior to the scheduled termination of a Series of the Trust may be
less than $1.00 per Unit.
DISTRIBUTION OF UNITS. Units of a Series acquired by the Sponsor in the
secondary market will be offered to the public by this Prospectus at the then
current Public Offering Price, which is based on the bid prices of the
Securities in such Series. Minimum purchase is 1,000 Units or $1,000,
whichever is less, except that the minimum for UGMA and UTMA accounts is $1,000
and the minimum for IRA accounts is $250.
Units will be sold through dealers who are members of the National
Association of Securities Dealers, Inc. and through other financial
institutions. Sales may be made to or through dealers at prices which
represent discounts from the Public Offering Price as set forth 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 amounts 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. The Sponsor
reserves the right to change the discounts set forth below from time to
time. In addition to such discounts, the Sponsor may, from time to time, pay
or allow an additional discount, in the form of cash or other compensation, to
dealers employing registered representatives who sell, during a specified time
period, a minimum dollar amount of Units of one or more Series of the Trust and
other unit investment trusts underwritten by the Sponsor. The difference
between the discount and the sales charge will be retained by the Sponsor.
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<PAGE> 26
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
TICKET SIZE* 0-2.99 YEARS 3-4.99 YEARS 5-10 YEARS
- ------------ ------------ ------------ ----------
<S> <C> <C> <C>
Less than $100,000 . . . . . . . . 1.25% 2.00% 4.00%
$100,000 to $499,999 . . . . . . . 1.00 1.50 3.00
$500,000 to $999,999 . . . . . . . 1.00 1.25 2.00
$1,000,000 or more . . . . . . . . Negotiated Negotiated Negotiated
</TABLE>
*The breakpoint discounts are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1.00 per Unit.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units.
PROFITS OF SPONSOR. The Sponsor may realize profits or sustain losses while
maintaining a secondary market in the Units of each Series of Trust, in the
amount of any difference between the prices at which it buys Units of such
Series and the prices at which the Units of such Series are resold (after
allowing for the discount), or the prices at which it buys such Units and the
prices at which the Sponsor redeems such Units (based on the bid side of the
Securities in that Series of the Trust), as the case may be.
Cash, if any, received by a dealer from Unitholders prior to the settlement
date for a purchase of Units of any Series may be used in such dealer's
business subject to the limitations of Rule 15c3-3 under the Securities
Exchange Act of 1934 and may be of benefit to the dealer.
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 such Series of
Trust offered hereby and to continuously offer to purchase said Units at
prices, determined by the Evaluator, based on the aggregate bid prices of the
underlying Treasury Obligations and the net asset value of the Fund shares in
each Series of the Trust.
The offering price of any Units resold by the Sponsor or any dealer will be
in accord with that described in the currently effective Prospectus
describing such Units. Any profit or loss resulting from the resale of such
Units, after allowance of a discount to the dealer or other entity which
initiates the transaction, will belong to the Sponsor. The Sponsor may suspend
or discontinue purchases of Units of any Series at any time, and from time to
time, without notice.
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<PAGE> 27
DISTRIBUTIONS TO UNITHOLDERS
The Trustee will distribute any net income (other than amortized discount)
received with respect to any of the Securities in a Series of the Trust, on
each applicable Distribution Date to Unitholders of record of such Series on
the preceding Record Date. See "Essential Information" in Part Two. Proceeds
received on the sale of any Securities in a Series of Trust, to the extent not
used to meet redemptions of Units of such Series or pay expenses, will be
distributed annually on the Distribution Date to Unitholders of record of such
Series on the preceding Record Date. Income with respect to the original issue
discount on the Treasury Obligations in a Series of the Trust will not be
distributed currently, although Unitholders of such Series will be subject to
income tax as if a distribution had occurred. See "Tax Status."
Each Series' Record Dates and Distribution Dates were established so as to
occur on or shortly after the dividend payment dates of the Fund deposited in
such Series. Kemper Small Capitalization Equity Fund normally distributes
annually all of its net investment income and any net realized capital gains in
November after the close of its fiscal year at the end of September. The
Growth Fund normally distributes semi-annually all of its net investment
income and any net realized gains in November after the close of its fiscal
year at the end of September. Kemper Total Return Fund normally makes
quarterly income distributions in February, May, August and November and one
distribution of any net realized capital gains in November, after the close of
its fiscal year at the end of October.
Under regulations issued by the Internal Revenue Service, the Trustee
is required to withhold a specified percentage of any distribution made by the
Trust if the Trustee has not been furnished the 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 under certain circumstances by contacting the Trustee, otherwise the
amount may be recoverable only when filing a tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, a Unitholder should examine his or her
statements from the Trustee to 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 should be provided as soon as possible.
Within a reasonable time after a Series of the Trust is terminated, each
Unitholder of such Series will, upon surrender of his Units for redemption,
receive: (i) the number of shares of the appropriate Fund attributable to his
Units, which will be distributed "in kind" directly to him, rather than
redeemed, (ii) a pro rata share of the amounts realized upon the disposition of
the Treasury Obligations and (iii) a pro rata share of any other assets of such
Series of the Trust, less expenses of the Series. Not less than 60 days prior
to the termination of a Series of the Trust, Unitholders will be offered the
option of having the proceeds from the disposition of the Treasury Obligations
in such Series invested, at the net asset value on the date such proceeds
become available to that Series of the Trust, in additional shares of the Fund
originally deposited in such Series. Unless a Unitholder indicates that he
wishes to reinvest such amounts, they will be paid in cash, as indicated above.
A Unitholder may, of course, at any time after the shares are distributed to
his
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<PAGE> 28
account, instruct the Fund in which he is invested to redeem all or a portion
of the shares in his account or take advantage of the exchange privilege to
move his or her account to another Kemper mutual fund. Shares of Small Cap
Fund, Growth Fund or Total Return Fund, as more fully described in their
prospectuses, will be redeemed at the then current net asset value without any
redemption charge.
DISTRIBUTION REINVESTMENT
Kemper Financial Services, Inc. is also the Investment Manager and
Principal Underwriter of Kemper Growth Fund, Kemper Small Cap Fund, Kemper
Total Return Fund and other Kemper mutual funds. Each Unitholder of a Series
of the Trust will have distributions of principal, capital gains, if any, or
income or any of these made by a Series of the Trust automatically invested in
shares of the Fund deposited in that Series of the Trust at such Fund's net
asset value next computed, unless he indicates at the time of purchase, or
subsequently notifies the Program Agent (see below) in writing, that he wishes
to receive cash payments. Reinvestment by the Trust in Fund shares can only be
made after the Trust receives a distribution from the Fund and will occur at a
time later than if the Fund shares were owned directly.
Additional information with respect to the investment objective and the
management of each of the Funds is contained in its prospectus, which can be
obtained from the Sponsor or any firm making Units of the Trust available upon
request.
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 remain in 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
Kemper Service Company, service agent for the Program Agent at P.O. Box 419430,
Kansas City, Missouri 64173-0216, telephone (816) 474-8786.
EXCHANGE PRIVILEGE. Subject to the following limitations, shares held in a
Unitholder's reinvestment account may be exchanged for shares of certain other
Kemper mutual funds at relative net asset values. The exchange privilege does
not apply to the shares of the underlying fund in the Trust's portfolio, only
to a Unitholder's reinvestment account. The exchange privilege is not a right
and may be denied or modified.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged
(generally $1,000). Exchanges are made based on relative dollar values of the
shares involved in the exchange. There is no service fee for an exchange;
however, dealers or
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<PAGE> 29
other firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the Fund held and
purchase of shares of the other fund. For Federal income tax purposes, any
such exchange constitutes a sale upon which a gain or loss will be realized,
depending upon whether the value of the shares being exchanged is more or less
than the shareholder's adjusted cost basis. Shareholders interested in
exercising the exchange privilege may obtain prospectuses of the other funds
from dealers, other firms or KFS. Exchanges may be accomplished by a written
request to Kemper Mutual Funds, Attention: Exchange Department, P.O. Box
419557, Kansas City, Missouri 64141-6557, or by telephone if a preauthorized
exchange authorization, as provided on the account application, is on file with
Kemper Service Company. Once the telephone authorization is on file, Kemper
Service Company will honor requests by any person by telephone at
1-800-231-5142. Any certificates for shares must be deposited prior to any
exchange of such shares.
In addition, shares held in reinvestment accounts may be entitled to
participate in other features offered by the Kemper Funds if authorized or
requested by the shareholder. Unitholders should inquire of their financial
services representative about such features or consult the prospectus for the
Kemper Fund in their reinvestment account.
TAX STATUS
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the units of a
Trust. The summary is limited to investors who hold Units as "Capital Assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986 (the "Code"). Unitholders should consult
their tax advisors in determining the federal, state, local and other tax
consequences of the purchase, ownership and deposition of Units in a Trust.
At the time of closing of the various Series of the Trust, Chapman and
Cutler, counsel for the Sponsor, rendered an opinion under then existing law
substantially to the effect that:
1. The Series of the Trust are not associations taxable as corporations
for Federal income tax purposes; each Unitholder will be treated
as the owner of a pro rata portion of the assets of the appropriate
Series of the Trust under the Code; and each Unitholder will be
considered to have received his pro rata share of income derived from
each Trust asset when such income is received by a Trust.
2. Each Unitholder will have a taxable event when a Trust disposes of a
Security (whether by sale, exchange, redemption, or payment
at maturity) or upon the sale or redemption of Units by such
Unitholder. The price a Unitholder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Security held by a Trust (in proportion to the fair market values
thereof on the date the Unitholder purchases his Units)
in order to determine his initial cost for his pro rata
portion of each Security held by a Trust. The Treasury Obligations
held by the Trusts are treated as stripped bonds and will in all
likelihood be treated as bonds issued at an original issue discount
as of the date a Unitholder purchased his Units. Because the
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<PAGE> 30
Treasury Obligations represent interests in "stripped" U.S. Treasury
bonds, a Unitholder's initial cost for his pro rata portion of each
Treasury Obligation held by the Trusts shall be treated as its
"purchase price" by the Unitholder. Original issue discount is
effectively treated as interest for federal income tax purposes and
the amount of original issue discount in this case is generally the
difference between the bond's purchase price and its stated redemption
price at maturity. A Unitholder will be required to include in gross
income for each taxable year the sum of his daily portions of original
issue discount attributable to the Treasury Obligations held by the
Trusts as such original issue discount accrues and will in general be
subject to federal income tax with respect to the total amount of such
original issue discount that accrues for such year even though the
income is not distributed to the Unitholders during such year to the
extent it is not less than a "de minimis" amount as determined under
a Treasury Regulation issued on December 28, 1992 relating to
stripped bonds. To the extent the amount of such discount is less
than the respective "de minis" amount, such discount shall be treated
as zero. In general, original issue discount accrues daily under a
constant interest rate method which takes into account the semi-annual
compounding of accrued interest. In the case of the Treasury
Obligations, this method will generally result in an increasing amount
of income to the Unitholder each year. Unitholders should consult
their tax advisors regarding the federal income tax consequences and
accretion of original issue discount under the stripped bond rules.
3. A Unitholder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by a Trust
will generally be considered a capital gain except in the case of a
dealer or a financial institution and will be long-term if the
Unitholder has held his Units for more than one year. A Unitholder's
portion of loss, if any, upon the sale or redemption of Units or the
disposition of Securities held by a Trust will generally be considered
a capital loss except in the case of a dealer or financial institution
and will be long-term if the Unitholder has held his Units for more
than one year. Unitholders should consult their tax advisors
regarding the recognition of such capital gains and losses for federal
income tax purposes.
4. The Code provides that "miscellaneous itemized deductions" are
allowable only to the extent that they exceed two percent of an
individual taxpayer's adjusted gross income. Miscellaneous itemized
deductions subject to this limitation under present law include a
Unitholder's pro rata share of expenses paid by a Trust, including
fees of the Trustee and the Evaluator but does not include
amortizable bond premium on Treasury Obligations held by a Trust.
Because Unitholders are deemed to directly own a pro rata portion of the
Kemper Fund shares in such Series as discussed above, Unitholders are advised
to read the discussion of tax consequences set forth in the prospectus for such
Kemper Fund. Long-term capital gain distributions on the Kemper Fund shares in
a Series are taxable to the Unitholders of such Series as long-term capital
gains regardless of how long a person has been a Unitholder of such Series. If
a Unitholder holds his Units for six months or less or if the appropriate
Series of the Trust holds shares of a Kemper Fund for six months or less, any
loss incurred by a Unitholder related to the disposition of such shares will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received (or deemed to have been received) with respect to such
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<PAGE> 31
shares. Unitholders will be notified annually of the amounts of original issue
discount, income dividends and long-term capital gain distributions includable
in the Unitholder's gross income and amounts of Trust expenses which may be
claimed as itemized deductions. For taxpayers other than corporations, net
capital gains are subject to a maximum stated marginal tax rate of 28 percent.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate. Because some or all capital gains are taxed at a comparatively lower rate
under the Tax Act, the Tax Act includes a provision that recharacterizes
capital gains as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by the
Trusts to such Unitholder (including amounts received upon the redemption of
Units) will be subject to back-up withholding. Distributions by a Trust will
generally be subject to United States income taxation and withholding in the
case of Units held by non-resident alien individuals, foreign corporations or
other non-United States persons (accrual of original issue discount on the
Treasury Obligations may not be subject to taxation or withholding provided
certain requirements are met). Such persons should consult their tax advisers.
Dividend income, long-term capital gains and accrual of original issue
discount may also be subject to state and local taxes. Investors should
consult their tax advisers for specific information on the tax consequences of
particular types of distributions.
Unitholders desiring to purchase Units for tax-deferred plans and IRA's
should consult their broker for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established. See "Retirement Plans."
Under the income tax laws of the State of Missouri the Trust is not an
association taxable as a corporation and the income of each Series of the
Trust will be treated as the income of the Unitholders thereof.
RIGHTS OF UNITHOLDERS
UNITHOLDERS. A Unitholder is deemed to be a beneficiary of the Series of the
Trust which he purchased and is vested with all right, title and interest in
the appropriate Series of the Trust, each of which was created by the
Indenture. A Unitholder may at any time tender his Units to the Trustee for
redemption.
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<PAGE> 32
OWNERSHIP OF UNITS. Ownership of Units of a Series of the Trust will not be
evidenced by certificates unless a Unitholder or the Unitholder's registered
broker/dealer makes a written request to the Trustee. Units are transferable
by making a written request to the Trustee and, in the case of Units evidenced
by a certificate, by presenting and surrendering such certificate to the
Trustee properly endorsed or accompanied by a written instrument or instruments
of transfer which should only be sent by registered or certified mail for the
protection of the Unitholder. Unitholders must sign such written request and
such certificate or transfer instrument, exactly as their names appear on the
records of the Trustee and on any certificate representing the Units to be
transferred. Such signatures must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other signature
guarantee program in addition to, or in substitution for, STAMP as may be
accepted by the Trustee.
Certificates will be issued in denominations of 1,000 Units or any number of
Units in excess thereof. The Trustee may require a Unitholder to pay a
reasonable fee, to be determined in the sole discretion of the Trustee, for
each certificate re-issued or transferred and to pay any governmental charge
that may be imposed in connection with each such transfer or exchange. The
Trustee at the present time does not intend to charge for the normal transfer
or exchange of certificates. Destroyed, stolen, mutilated or lost certificates
will be replaced upon delivery to the Trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the Units), affidavit of
loss, evidence of ownership and payment of expenses incurred. Any mutilated
certificate must be presented to the Trustee before a substitute certificate
will be issued.
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will furnish
each Unitholder of a Series a statement of the amount of income and the amount
of other receipts of such Series, if any, which are being distributed,
expressed in each case as a dollar amount per Unit.
The financial statements of each Series of the Trust are required to be
audited annually, at the Series' expense, by independent certified public
accountants designated by the Sponsor, unless the Trustee determines that such
an audit would not be in the best interest of the Unitholders. The
accountants' report and the financial statements will be furnished by the
Trustee to any Unitholder of such Series upon written request.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar year
was a Unitholder of a Series, a statement, covering the calendar year, setting
forth the following information as to such Series in reasonable detail: (1) a
summary of transactions in that Series of the Trust for such year; (2) any
Securities sold during the year and the Securities held at the end of such year
by such Series; (3) the redemption price per 1,000 Units of such Series based
upon a computation thereof on the 31st day of December of such year (or the
last business day prior thereto); and (4) amounts of income and capital gain of
such Series during such year.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the
Trustee for redemption. The death or incapacity of any Unitholder will not
operate to terminate the Trust or any Series thereof nor entitle
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legal representatives or heirs to claim an accounting or to bring any action or
proceeding in any court for partition or winding up of the Trust or any Series
thereof.
No Unitholder of a Series shall have the right to control the operation and
management of the Trust or any Series thereof in any manner, except to vote
with respect to amendment of the Agreement or termination of the Trust or such
Series.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market described
above may cause Units to be redeemed by the Trustee by making a written request
to the Trustee, Investors Fiduciary Trust Company, P.O. Box 419430, Kansas
City, Missouri 64173-2016 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. Signature guarantees, if required, may only be obtained from a
commercial bank or trust company, savings and loan association or 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 not later than 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, 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 interest in
that Series of the Trust extinguished. The price received upon redemption
during the period prior to the maturity of a Series of the Trust may be more or
less than the price of the Units of such Series on the Initial Date of Deposit,
depending on the value of the Securities in the portfolio at the time of
redemption.
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
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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 income shall be withdrawn from
the Income 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 Securities
from a Series in order to make funds available for the redemption of Units of
such Series. Such sale may be required when Securities would not otherwise be
sold and might result in lower prices than might otherwise be realized. To the
extent Securities are sold, the size and diversity of that Series of the Trust
will be reduced.
As long as the Sponsor is making a market in Units of a Series, prior to the
close of business on the second succeeding business day the Sponsor may
purchase any Units of such Series tendered to the Trustee by making payment, or
arranging for payment to be made therefore, to the Unitholder not later than
the day on which the Redemption Price would have been paid by the Trustee. The
Trustee is irrevocably authorized in its discretion, if the Sponsor does not
elect to purchase any Unit tendered for redemption, in lieu of redeeming such
Units, to sell such Units in the over-the-counter market for the account of
tendering Unitholders at prices which will return to the 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 Securities is not reasonably practicable or it is
not reasonably practicable to fairly determine the value of the underlying
Securities in accordance with the Agreement; or (3) for such other period as
the Securities and Exchange Commission may by order permit. The Trustee is not
liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption price for Units of a Series
of the Trust is computed by the Trustee as of the evaluation time stated under
"Essential Information" in Part Two next occurring after the tendering of a
Unit of such Series for redemption and on any other business day desired by it,
by
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A. adding: (1) the cash on hand in that Series of the Trust other
than cash deposited in the Series to purchase Securities not applied
to the purchase of such Securities; (2) the aggregate value of each
issue of the Securities held in that Series of the Trust, as
determined by the Evaluator on the basis of bid prices of the Treasury
Obligations and the net asset value of the Fund shares next computed;
and (3) dividends receivable on Fund shares in such Series trading
ex-dividend 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) an amount representing estimated accrued expenses
of the Series, including but not limited to fees and expenses of the
Trustee (including legal and auditing fees), the Evaluator and
counsel, if any; (3) cash held for distribution to Unitholders of
record of such Series 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.
PORTFOLIO SUPERVISION
The portfolios of the Series are not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Agreement. The Agreement provides that the Sponsor may (but
need not) direct the Trustee to dispose of a Security:
(1) upon the failure of the issuer to declare or pay anticipated
dividends or interest;
(2) upon the institution of a materially adverse action or proceeding at
law or in equity seeking to restrain or enjoin the declaration
or payment of dividends or interest on any such Securities or the
existence of any other materially adverse legal question or
impediment affecting such Securities or the declaration or payment
of dividends or interest on the same; or
(3) upon the occurrence of any materially adverse credit factors that, in
the opinion of the Sponsor, make the retention of such Securities
detrimental to the interest of the Unitholders.
The Trustee may sell Securities designated by the Sponsor, or if not so
directed, in its own discretion, for the purpose of redeeming Units of a Series
tendered for redemption and the payment of expenses; provided, however, that an
effort will be made to maintain the initial proportionate relationship between
the maturity values of the Treasury Obligations and the number of outstanding
Units of such Series. Where the disposition is made for purposes other than
meeting redemptions, the Trustee will dispose of Fund shares rather than
Treasury Obligations from such Series and if no shares are available, the
Sponsor will pay such fees so that the Trustee is not required to sell Treasury
Obligations.
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RETIREMENT PLANS
The Kemper Bond Enhanced Securities Trust may be well suited for purchase by
Individual Retirement Accounts, Keogh plans, pension funds and other qualified
retirement plans, certain of which are briefly described below.
Generally, capital gains and income received under each of the foregoing
plans are deferred from Federal taxation. All distributions from such plans
are generally treated as ordinary income but may, in some cases, be eligible
for special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisors with respect
to the establishment and maintenance of any such plan. Such plans are offered
by brokerage firms and other financial institutions. Each Trust will waive the
$1,000 minimum investment requirement for accounts. The minimum investment is
$250 for tax-defined plans such as IRA accounts. Fees and charges with respect
to such plans may vary.
Individual Retirement Account-IRA. Any individual over age 70-1/2 may
contribute the lesser of $2,000 or 100% of compensation to an IRA annually.
Such contributions are fully deductible if the individual (and spouse if filing
jointly) are not covered by a retirement plan at work. The deductible amount
an individual may contribute to an IRA will be reduced $10 for each $50 of
adjusted gross income over $25,000 ($40,000 if married, filing jointly or $0 if
married, filing separately), if either an individual or their spouse (if
married, filing jointly) is an active participant in an employer maintained
retirement plan. Thus, if an individual has adjusted gross income over $35,000
($50,000 if married, filing jointly or $0 if married, filing separately) and if
an individual or their spouse is an active participant in an employer
maintained retirement plan, no IRA deduction is permitted. Under the Code, an
individual may make nondeductible contributions to the extent deductible
contributions are not allowed. All distributions from an IRA (other than the
return of certain excess contributions) are treated as ordinary income for
Federal income taxation purposes provided that under the Code an individual
need not pay tax on the return of nondeductible contributions, the amount
includable in income for the taxable year is the portion of the amount
withdrawn for the taxable year as the individual's aggregate nondeductible IRA
contributions bear to the aggregate balance of all IRAs of the individual.
A participant's interest in an IRA must be, or commence to be, distributed
to the participant not later than April 1 of the calendar year following the
year during which the participant attains age 70-1/2. Distributions made
before attainment of age 59-1/2, except in the case of the participant's death
or disability, or where the amount distributed is to be rolled over to another
IRA, or where the distributions are taken as a series of substantially equal
periodic payments over the participant's life or life expectancy (or the joint
lives or life expectancies of the participant and the designated beneficiary)
are generally subject to a surtax in an amount equal to 10% of the
distribution. The amount of such periodic payments may not be modified before
the later of five years or attainment of age 59-1/2. Excess contributions are
subject to an annual 6% excise tax.
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IRA applications, disclosure statements and trust agreements are available
from the Sponsor upon request.
Qualified Retirement Plans. Units of each Series of the Trust may be
purchased by qualified pension or profit sharing plans maintained by
corporations, partnerships or sole proprietors. The maximum annual
contribution for a participant in a money purchase pension plan or to paired
profit sharing and pension plans is the lesser of 25% of compensation or
$30,000. Prototype plan documents for establishing qualified retirement plans
are available from the Sponsor upon request.
Excess Distributions Tax. In addition to the other taxes due by reason of a
plan distribution, a tax of 15% may apply to certain aggregate distributions
from IRAs, Keogh plans, and corporate retirement plans to the extent such
aggregate taxable distributions exceed specified amounts (generally $150,000,
as adjusted) during a tax year. This 15% tax will not apply to distributions
on account of death, qualified domestic relations orders or amounts rolled over
to an eligible plan. In general, for lump sum distributions the excess
distribution over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee, Investors Fiduciary Trust Company, has agreed to act as
custodian for certain retirement plan accounts. An annual fee of $12.00 per
account, if not paid separately, will be assessed by the Trustee and paid
through the liquidation of shares of the retirement account. An individual
wishing IFTC to act as custodian must complete a Kemper UIT/IRA application and
forward it along with a check made payable to Investors Fiduciary Trust
Company. Certificates for Units held in Individual Retirement Accounts can not
be issued.
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 21 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.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting the portfolios. 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 records of all
transactions at its office. Such records shall include the name and address
of, and the number of Units held by, every Unitholder of such Series. Such
books and records shall be open to inspection by any Unitholder of such Series
at all reasonable times during the usual business hours. The Trustee shall
make such annual or other reports as may from time
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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 of a Series, together with
a current list of the Securities held in such Series of the Trust. Pursuant to
the Agreement, the Trustee may employ one or more agents for the purpose of
custody and safeguarding of Securities comprising the portfolios.
Under the Agreement, the Trustee or any successor trustee may resign and be
discharged of the trust created by the Agreement by executing an instrument in
writing and filing the same with the Sponsor. The Trustee or successor trustee
must mail a copy of the notice of resignation to all Unitholders of any
affected Series 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 of any affected Series by the Sponsor. Upon
execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the 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. Pursuant to the terms
of agreements with the Evaluator, certain investment banking firms have agreed
to supply prices which, in their opinion, reflect their assessment of the
market value of the Treasury Obligations included in each Series' portfolio.
The Evaluator utilizes such prices to assist it in determining the Public
Offering Price per Unit of such Series. 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.
AMENDMENT AND TERMINATION. The Agreement may be amended with respect to any
Series 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)
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to make such provisions as shall not adversely affect the interests of the
Unitholders thereof. The Agreement may also be amended with respect to any
Series, in any manner, 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 of such Series then outstanding, provided that no such
amendment or waiver will reduce the interest of any Unitholder of such Series
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 of such Series. In no event shall the Agreement be amended to
increase the number of Units of a Series issuable thereunder, except in
accordance with the provisions of the Agreement. The Trustee shall promptly
notify Unitholders of the substance of any such amendment.
The Agreement provides that a Series of the Trust shall terminate within 60
days after the maturity, redemption or other disposition of the last of the
Treasury Obligations held in such Series of the Trust. If the value of a
Series of the Trust shall be less than the applicable minimum Series value
stated under "Essential Information" in Part Two (20% of the original aggregate
value of Securities deposited in such Series of the Trust), the Trustee may, in
its discretion, and shall, when so directed by the Sponsor, terminate the
Trust. Any Series of the Trust may be terminated at any time by the holders of
Units representing 66-2/3% of the Units of such Series then outstanding. In
the event of termination, written notice thereof will be sent by the Trustee to
all Unitholders of such Series. Within a reasonable period after termination,
the Trustee will, after paying all expenses and charges incurred by that Series
of the Trust and 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 income and Principal Accounts of such Series.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the
Agreement, but will be under no liability to the Unitholders for taking any
action or refraining from any action in good faith pursuant to the Agreement 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 of the sale of any Securities.
The Trustee: The Agreement provides 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, Securities 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
Securities. 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 Securities or upon the interest or
dividends thereon. In addition, the Agreement contains other customary
provisions limiting the liability of the Trustee. The Trustee, whose duties
are ministerial, has not participated in the selection of Securities for any
Series of the Trust.
The Evaluator: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and
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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.
ACCOUNTS. The Trustee will credit to an Income Account for each Series any
dividends received on the Fund shares therein. All other receipts (e.g.,
return of principal, capital gains, etc.) are credited to a Principal Account
for such Series.
The Trustee may establish reserves (the "Reserve Account") within each
Series of the Trusts for state and local taxes, if any, and any governmental
charges payable out of such Series of the Trust.
EXPENSES OF THE TRUST
The Sponsor will not charge the Trust or any Series thereof an advisory fee
and will receive no fee from the Trust or any Series thereof for services
performed as Sponsor. The Sponsor will receive a portion of the sales
commissions paid in connection with the purchase of Units of each Series. The
Sponsor paid all the expenses of creating and establishing the Series of the
Trust, including the cost of the initial preparation, printing and execution of
the Prospectus, Agreement and certificates, legal and accounting expenses,
advertising and selling expenses, payment of closing fees, the fee of the
Trustee, evaluation fees and other out-of-pocket expenses.
The Trustee receives for its services an annual fee at the rate set forth
under "Essential Information" in Part Two per 1,000 Units in each Series
outstanding based on the largest aggregate number of Units of such Series
outstanding at any time during the year. All dividends received and proceeds
from the sale of Securities from a Series not required to redeem Units of such
Series or other monies received by the Trustee on behalf of such Series of the
Trust shall be held in demand deposit accounts which are non-interest bearing
to Unitholders and are available for use by the Trustee pursuant to normal
banking procedures.
For evaluation of the Treasury Obligations in each Series of the Trust, the
Evaluator shall receive a fee calculated on an annual rate as set forth under
"Essential Information" in Part Two, based upon the largest aggregate
principal amount of Treasury Obligations in such Series of the Trust at any
time during such year. The Trustee's annual fee and expenses shown under
"Essential Information" in Part Two includes the Evaluator's fee. No fee is
paid to the Evaluator with respect to the Fund shares in any Series in the
Trust.
The fees and expenses of the Trustee and the Evaluator are deducted from the
Income Account of each Series of the Trust to the extent funds are available
and then from the Principal Account of such Series. Although the Sponsor
believes there should be sufficient income from the Fund distributions in each
Series to pay the Trust's fees with respect to such Series of the Trust, in the
event that any Series of the Trust does
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not have sufficient income to pay such fees, then shares of the Fund in such
Series, if available, will be sold for that purpose. If no shares are
available, the Sponsor will pay such fees so that is not required to sell
Treasury Obligations, which would be detrimental to the interests of
Unitholders of such Series. Either fee may be increased without approval of
Unitholders by amounts not exceeding a proportionate increase in the Consumer
Price Index entitled "All Services Less Rent," published by the United States
Department of Labor, or any equivalent index substituted therefor.
The following additional charges are or may be incurred by the Trust or any
Series thereof: (a) fees for the Trustee's extraordinary services; (b)
expenses of the Trustee (including legal and auditing expenses, but not
including any fees and expenses charged by any agent for custody and
safeguarding of Securities) and of counsel, if any; (c) various governmental
charges; (d) expenses and costs of any action taken by the Trustee to protect
the Trust or any Series thereof or the rights and interests of the Unitholders
thereof; (e) indemnification of the Trustee for any loss, liability or expense
incurred by it in the administration of the Trust or any Series thereof not
resulting from gross negligence, bad faith or willful misconduct on its part;
(f) indemnification of the Sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct; and (g) expenditures incurred in contacting Unitholders upon
termination of the Trust or any Series thereof. The fees and expenses set
forth herein are payable out of the Trust of each Series of and, when owing to
the Trustee, are secured by a lien on such Series.
Fees and expenses of each Series of the Trust shall be deducted from the
Income 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 Income Account of any Series of the
Trust such amounts, if any, as it deem necessary to establish a reserve for any
taxes or other governmental charges or other extraordinary expenses payable out
of such Series of the Trust. Amounts so withdrawn shall be credited to a
separate account maintained for the Trust known as the Reserve Account and
shall not be considered a part of such Series of the Trust when determining the
value of the Units thereof 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 will act as underwriter of any other unit investment
trust products developed by the Sponsor in the future. As of January 31, 1994
the total stockholder equity of Kemper Securities, Inc. was $261,673,436
(unaudited).
The foregoing information with regard to the Sponsor relates to the Sponsor
only and not to any Series of the Trust. Such information is included in this
Prospectus only for the purpose of informing investors as
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to the financial responsibility of the Sponsor and its ability to carry out its
contractual obligations with respect to the Series of the Trust. More
comprehensive financial information can be obtained upon request from the
Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
federal tax law were originally passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of investments,
appearing in Part Two in this Prospectus and Registration Statement have 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.
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Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Part Two
Dated April 29, 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
[B Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Essential Information
As of April 4, 1994
Sponsor: Kemper Financial Services, Inc.
Evaluator: Kemper Unit Investment Trusts
Trustee: Investors Fiduciary Trust Company
<TABLE>
<S> <C>
GENERAL INFORMATION
Aggregate Maturity Value of the Treasury Obligations in the Trust . . . . . . . . . . . . . $ 4,748,000
Aggregate Number of Shares of Kemper Growth Fund in the Trust . . . . . . . . . . . . . . . 236,849.062
Number of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,748,000
Fractional Undivided Interest in the Trust per Unit . . . . . . . . . . . . . . . . . . . . 1/4,748,000
Calculation of Public Offering Price:
Aggregate Value of Securities in the Trust . . . . . . . . . . . . . . . . . . . . . . . $ 6,609,324
Aggregate Value of Securities per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . $ 1,392
Net Cash per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1)
Sales Charge 5.0% (5.263% of the net amount invested) per 1,000 Units . . . . . . . . . . $ 73
Public Offering Price per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,464
Redemption Price per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,391
</TABLE>
<TABLE>
<S> <C>
Discretionary Liquidation Amount . . . . . . The Trust may be terminated if its aggregate net asset value
is less than 20% of the aggregate amount deposited in the
Series ($1,034,102).
Date of Trust Agreement . . . . . . . . . . . January 10, 1989
Mandatory Termination Date . . . . . . . . . April 15, 1999
Trustee's Annual Fee and Expenses . . . . . . $2.05 ($.80 of which represents expenses) per 1,000 Units
outstanding. Expenses include an Evaluator Fee of $.10 per
$1,000 principal amount of the Treasury Obligations.
Record Date . . . . . . . . . . . . . . . . . Same as the underlying Fund's record date.
Distribution Date . . . . . . . . . . . . . . Promptly after the underlying Fund's distribution date.
CUSIP Number . . . . . . . . . . . . . . . . 488388-21-6
</TABLE>
Evaluations for purpose of sale, purchase or redemption of Units are made as of
3:15 P.M. Central Time 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.
i
<PAGE> 4
Report of Independent Auditors
Unitholders
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Kemper Bond Enhanced Securities Trust Series 13
- -- Growth as of December 31, 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 December 31, 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 Bond Enhanced
Securities Trust Series 13 -- Growth at December 31, 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
April 15, 1994
1
<PAGE> 5
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Statement of Assets and Liabilities
December 31, 1993
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (cost $5,126,554) (Note 1) $7,089,978
Cash 1,015
----------
Total assets 7,090,993
LIABILITIES AND NET ASSETS
Accrued liabilities 1,556
Net assets, applicable to 4,858,000 Units outstanding (Note 5):
Cost of Trust assets (Note 1) $5,126,554
Unrealized appreciation (Note 2) 1,963,424
Distributable funds (541)
-------------------------
Net assets $7,089,437
----------
----------
Net asset value per 1,000 Units $1,459.33
----------
----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 6
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Statement of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends -- ordinary income $ -- $ 7,902 $ 13,925
Interest 278,330 269,397 265,400
------------------------------------------
Total investment income 278,330 277,299 279,325
Expenses:
Trustee's fees and related expenses 10,213 10,942 11,648
Evaluator's fees 523 559 595
------------------------------------------
Total expenses 10,736 11,501 12,243
------------------------------------------
Net investment income 267,594 265,798 267,082
Realized and unrealized gain (loss) on investments:
Capital gain dividend from Fund shares 243,583 7,901 206,092
Net realized gain 171,745 134,054 91,550
Unrealized appreciation (depreciation)
during the year (187,161) (218,777) 1,805,111
------------------------------------------
Net gain (loss) on investments 228,167 (76,822) 2,102,753
------------------------------------------
Net increase in net assets resulting from operations $495,761 $188,976 $2,369,835
------------------------------------------
------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 7
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
-----------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income $ 267,594 $ 265,798 $ 267,082
Capital gain dividend from Fund shares 243,583 7,901 206,092
Net realized gain on investments 171,745 134,054 91,550
Unrealized appreciation (depreciation) on investments
during the year (187,161) (218,777) 1,805,111
-----------------------------------------------
Net increase in net assets resulting from operations 495,761 188,976 2,369,835
Distributions to Unitholders (233,261) (4,541) (207,408)
Capital transactions:
Redemption of 360,000 Units -- -- (423,186)
Redemption of 359,000 Units -- (481,461) --
Redemption of 366,000 Units (542,061) -- --
-----------------------------------------------
Total increase (decrease) in net assets (279,561) (297,026) 1,739,241
Net assets:
Beginning of the year 7,368,998 7,666,024 5,926,783
-----------------------------------------------
End of the year (including distributable funds
applicable to Trust Units of $(541), $(620) and
$(605) at December 31, 1993, 1992 and 1991,
respectively) $7,089,437 $7,368,998 $7,666,024
-----------------------------------------------
-----------------------------------------------
Trust Units outstanding at the end of the year 4,858,000 5,224,000 5,583,000
-----------------------------------------------
-----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 8
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Schedule of Investments
December 31, 1993
<TABLE>
<CAPTION>
MATURITY NAME OF ISSUER AND MARKET
VALUE TITLE OF SECURITY (1) VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
Corpus of U.S. Treasury Notes (stripped of
their interest paying coupons) maturing
$4,858,000 November 15, 1998 $3,777,241
- ----------
- ----------
SHARES
- -----------
242,336.298 Kemper Growth Fund 3,312,737
- ----------- ----------
- ----------- $7,089,978
----------
----------
</TABLE>
NOTE TO SCHEDULE OF INVESTMENTS
1. The Treasury Obligations were purchased at a discount from par value
because there is no stated interest income thereon (such Securities often
are referred to as zero coupon bonds). Over the life of the Treasury
Obligations, the value should increase, so that upon maturity the holders
would receive 100% of the principal amount thereof.
See accompanying notes to financial statements.
5
<PAGE> 9
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
The Treasury Obligations are stated at bid price as determined by Kemper Unit
Investment Trusts (A Service of Kemper Securities, Inc.), the "Evaluator" of
the Trust. The bid price is determined based on (a) current bid price of the
Treasury Obligations, (b) current bid prices for comparable Treasury
Obligations, (c) appraisal, or (d) any combination of the above.
Kemper Growth Fund (the "Fund") shares are stated at net asset value as
determined by Kemper Financial Services, Inc. Net asset value is determined by
calculating the total value of the Fund's assets, which normally will be
composed chiefly of investment securities, deducting total liabilities and
dividing by the number of shares outstanding.
COST OF INVESTMENTS
Cost of the Trust's Treasury Obligations is based on the offering price
of the Treasury Obligations on the dates of deposit plus amortization of
original issue discount and market discount or premium. Cost of fund shares is
based on the net asset value of such shares on the dates of deposit. The cost
of securities sold is determined using a method which approximates average cost.
INVESTMENT INCOME
Fund dividends are recorded on the ex-dividend date. Interest
income consists of amortization of original issue discount and market discount
or premium on the Treasury Obligations.
2. UNREALIZED APPRECIATION
Following is an analysis of net unrealized appreciation at December 31, 1993:
<TABLE>
<S> <C>
Treasury Obligations $ 607,644
Fund shares 1,355,780
----------
Net unrealized appreciation $1,963,424
----------
----------
</TABLE>
6
<PAGE> 10
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES
The Trustee, Investors Fiduciary Trust Company, is 50% owned by Kemper
Financial Services, Inc., an affiliate of Kemper Unit Investment Trusts. The
Trustee received a fee, payable semiannually, at an annual rate of $1.25 per
1,000 Units outstanding through December 31, 1993 ($1.96 prior to January 1,
1992, which included reimbursement of certain out-of-pocket expenses), based on
the largest aggregate number of Units outstanding at any time during the year.
The Evaluator receives a fee, payable quarterly, at an annual rate of $.10 per
$1,000 principal amount of Treasury Obligations in the Trust, based on the
highest aggregate principal amount of Treasury Obligations in the Trust at any
time during the year.
The Fund has a management and an underwriting agreement
with Kemper Financial Services, Inc. to provide management services and
facilities. The Fund pays an annual management fee, payable monthly, at the
rate of .65 of 1% of the average daily net assets of the Fund up to
$200,000,000, .55 of 1% on the next $300,000,000 of the average daily net
assets and .45 of 1% of the average daily net assets over $500,000,000.
4. FEDERAL INCOME TAXES AND DIVIDENDS TO UNITHOLDERS
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 Treasury Obligations and the net asset value of the Fund
shares on the date of an investor's purchase, plus a sales charge of 5.0% of
the Public Offering Price (equivalent to 5.263% of the net amount invested).
The Public Offering Price for secondary market transactions is based on the
aggregate bid prices of the Treasury Obligations and the net asset value of the
Fund shares 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 5.0% of the Public Offering Price (equivalent to 5.263% of the net
amount invested).
7
<PAGE> 11
Kemper Bond Enhanced Securities Trust
Series 13 -- Growth
Notes to Financial Statements (continued)
5. OTHER INFORMATION (CONTINUED)
Selected data per 1,000 Units of the Trust outstanding during each year --
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
---------------------------------------------
<S> <C> <C> <C>
Investment income -- interest and dividends $ 64.84 $ 61.92 $ 52.88
Expenses 2.49 2.57 2.33
---------------------------------------------
Net investment income 62.35 59.35 50.55
Distributions to Unitholders (47.77) (.85) (37.14)
Net gain (loss) on investments 34.15 (21.00) 362.42
---------------------------------------------
Change in net asset value 48.73 37.50 375.83
Net asset value:
Beginning of the year 1,410.60 1,373.10 997.27
---------------------------------------------
End of the year, including distributable funds $1,459.33 $1,410.60 $1,373.10
---------------------------------------------
---------------------------------------------
</TABLE>
8
<PAGE> 12
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated April 15, 1994, in this
Post-Effective Amendment to the Registration Statement (Form S-6) and related
Prospectus of Kemper Bond Enhanced Securities Trust Series 13 -- Growth dated
April 29, 1994.
/s/ ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
April 29, 1994
<PAGE> 13
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Part Two
Dated April 29, 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> 14
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Essential Information
As of April 4, 1994
Sponsor: Kemper Financial Services, Inc.
Evaluator: Kemper Unit Investment Trusts
Trustee: Investors Fiduciary Trust Company
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of the Treasury Obligations in the Trust . . . . . . . . . . . . . $ 10,102,000
Aggregate Number of Shares of Kemper Total Return Fund in the Trust . . . . . . . . . . . . 526,027.953
Number of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,102,000
Fractional Undivided Interest in the Trust per Unit . . . . . . . . . . . . . . . . . . . . 1/10,102,000
Calculation of Public Offering Price:
Aggregate Value of Securities in the Trust . . . . . . . . . . . . . . . . . . . . . . . $ 12,376,689
Aggregate Value of Securities per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . $ 1,225
Net Cash per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ --
Sales Charge 5.0% (5.263% of the net amount invested) per 1,000 Units . . . . . . . . . . $ 64
Public Offering Price per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,289
Redemption Price per 1,000 Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,225
</TABLE>
<TABLE>
<S> <C>
Discretionary Liquidation Amount . . . . . . . . . . . The Trust may be terminated if its aggregate net asset value is less
than 20% of the aggregate amount deposited in the Series ($2,213,688).
Date of Trust Agreement . . . . . . . . . . . . . . . . January 10, 1989
Mandatory Termination Date . . . . . . . . . . . . . . April 15, 1999
Trustee's Annual Fee and Expenses . . . . . . . . . . . $1.86 ($.71 of which represents expenses) per 1,000 Units
outstanding. Expenses include an Evaluator Fee of $.10 per $1,000
principal amount of the Treasury Obligations.
Record Date . . . . . . . . . . . . . . . . . . . . . . Same as the underlying Fund's record date.
Distribution Date . . . . . . . . . . . . . . . . . . . Promptly after the underlying Fund's distribution date.
CUSIP Number . . . . . . . . . . . . . . . . . . . . . 488388-22-4
</TABLE>
Evaluations for purpose of sale, purchase or redemption of Units are made as of
3:15 P.M. Central Time 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.
i
<PAGE> 15
Report of Independent Auditors
Unitholders
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Kemper Bond Enhanced Securities Trust Series 14
- -- Total Return as of December 31, 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 December 31, 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 Bond Enhanced
Securities Trust Series 14 -- Total Return at December 31, 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
April 15, 1994
1
<PAGE> 16
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Statement of Assets and Liabilities
December 31, 1993
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (cost $10,811,771) (Note 1) $13,373,628
Cash 3,756
-----------
Total assets 13,377,384
LIABILITIES AND NET ASSETS
Accrued liabilities 4,841
Net assets, applicable to 10,322,000 Units outstanding (Note 5):
Cost of Trust assets (Note 1) $10,811,771
Unrealized appreciation (Note 2) 2,561,857
Distributable funds (1,085)
---------------------------
Net assets $13,372,543
-----------
-----------
Net asset value per 1,000 Units $1,295.54
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 17
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Statement of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
---------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends -- ordinary income $ 111,564 $155,069 $ 226,213
Interest 591,508 585,864 577,294
---------------------------------------------
Total investment income 703,072 740,933 803,507
Expenses:
Trustee's fees and related expenses 19,778 21,346 23,541
Evaluator's fees 1,121 1,206 1,316
---------------------------------------------
Total expenses 20,899 22,552 24,857
---------------------------------------------
Net investment income 682,173 718,381 778,650
Realized and unrealized gain (loss) on investments:
Capital gain dividend from Fund shares 595,450 251,618 175,837
Net realized gain 256,442 192,694 140,903
Unrealized appreciation (depreciation) during the year 45,590 (451,257) 2,262,395
---------------------------------------------
Net gain (loss) on investments 897,482 (6,945) 2,579,135
---------------------------------------------
Net increase in net assets resulting from operations $1,579,655 $711,436 $3,357,785
---------------------------------------------
---------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 18
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
---------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income $ 682,173 $ 718,381 $ 778,650
Capital gain dividend from Fund shares 595,450 251,618 175,837
Net realized gain 256,442 192,694 140,903
Unrealized appreciation (depreciation) on investments
during the year 45,590 (451,257) 2,262,395
----------------------------------------------
Net increase in net assets resulting from operations
1,579,655 711,436 3,357,785
Distributions to Unitholders (686,862) (384,392) (375,779)
Capital transactions:
Redemption of 1,086,000 Units -- -- (1,133,759)
Redemption of 854,000 Units -- (1,015,160) --
Redemption of 884,000,000 Units (1,149,487) -- --
----------------------------------------------
Total increase (decrease) in net assets (256,694) (688,116) 1,848,247
Net assets:
Beginning of the year 13,629,237 14,317,353 12,469,106
----------------------------------------------
End of the year (including distributable funds applicable
to Trust Units of $(1,085), $(1,119) and $(1,196) at
December 31, 1993, 1992 and 1991, respectively) $13,372,543 $13,629,237 $14,317,353
----------------------------------------------
----------------------------------------------
Trust Units outstanding at the end of the year 10,322,000 11,206,000 12,060,000
----------------------------------------------
----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 19
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Schedule of Investments
December 31, 1993
<TABLE>
<CAPTION>
MATURITY NAME OF ISSUER AND MARKET
VALUE TITLE OF SECURITY (1) VALUE
-----------------------------------------------------------------------------------
<S> <C> <C>
Corpus of U.S. Treasury Notes (stripped of
their interest paying coupons) maturing
$10,322,000 November 15, 1998 $ 8,025,665
-----------
-----------
SHARES
------
537,483.720 Kemper Total Return Fund 5,347,963
----------- -----------
-----------
$13,373,628
-----------
-----------
</TABLE>
NOTE TO SCHEDULE OF INVESTMENTS
1. The Treasury Obligations were purchased at a discount from par value
because there is no stated interest income thereon (such Securities often
are referred to as zero coupon bonds). Over the life of the Treasury
Obligations, the value should increase, so that upon maturity the holders
would receive 100% of the principal amount thereof.
See accompanying notes to financial statements.
5
<PAGE> 20
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
The Treasury Obligations are stated at bid price as determined by Kemper Unit
Investment Trusts (A Service of Kemper Securities, Inc.), the "Evaluator" of
the Trust. The bid price is determined based on (a) current bid price of the
Treasury Obligations, (b) current bid prices for comparable Treasury
Obligations, (c) appraisal, or (d) any combination of the above.
Kemper Total Return Fund (the "Fund") shares are stated at net asset
value as determined by Kemper Financial Services, Inc. Net asset value is
determined by calculating the total value of the Fund's assets, which normally
will be composed chiefly of investment securities, deducting total liabilities
and dividing by the number of shares outstanding.
COST OF INVESTMENTS
Cost of the Trust's Treasury Obligations is based on the offering price of the
Treasury Obligations on the dates of deposit plus amortization of original
issue discount and market discount or premium. Cost of fund shares is based on
the net asset value of such shares on the dates of deposit. The cost of
securities sold is determined using a method which approximates average cost.
INVESTMENT INCOME
Fund dividends are recorded on the ex-dividend date. Interest income consists
of amortization of original issue discount and market discount or premium on
the Treasury Obligations.
2. UNREALIZED APPRECIATION
Following is an analysis of net unrealized appreciation at December 31, 1993:
Treasury Obligations $1,295,485
Fund shares 1,266,372
----------
Net unrealized appreciation $2,561,857
----------
----------
6
<PAGE> 21
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Notes to Financial Statements (continued)
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. The Trustee received a fee, payable quarterly, at an annual
rate of $1.15 per 1,000 Units outstanding through December 31, 1993 ($1.82
prior to June 1, 1991 and $1.77 from June 1, 1991 to December 31, 1991, which
included reimbursement for certain out-of-pocket expenses), based on the
largest aggregate number of Units outstanding at any time during the year.
The Evaluator receives a fee, payable quarterly, at an annual rate of
$.10 per $1,000 principal amount of Treasury Obligations in the Trust, based on
the highest aggregate principal amount of Treasury Obligations in the Trust at
any time during the year. The Fund has a management and an underwriting
agreement with Kemper Financial Services, Inc. to provide management services
and facilities. The Fund pays an annual management fee, payable monthly, at
the rate of .65 of 1% of the average daily net assets of the Fund up to
$200,000,000, .55 of 1% on the next $300,000,000 of the average daily net
assets and .45 of 1% of the average daily net assets over $500,000,000.
4. FEDERAL INCOME TAXES AND DIVIDENDS TO UNITHOLDERS
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 Treasury Obligations and the net asset value of the Fund
shares on the date of an investor's purchase, plus a sales charge of 5.0% of
the Public Offering Price (equivalent to 5.263% of the net amount invested).
The Public Offering Price for secondary market transactions is based on the
aggregate bid prices of the Treasury Obligations and the net asset value of the
Fund shares 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 5.0% of the Public Offering Price (equivalent to 5.263% of the net
amount invested).
7
<PAGE> 22
Kemper Bond Enhanced Securities Trust
Series 14 -- Total Return
Notes to Financial Statements (continued)
5. OTHER INFORMATION (CONTINUED)
Selected data per 1,000 Units of the Trust outstanding during each year --
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
---------------------------------------------
<S> <C> <C> <C>
Investment income -- interest and dividends $ 76.58 $ 73.34 $ 71.65
Expenses 2.23 2.23 2.15
---------------------------------------------
Net investment income 74.35 71.11 69.50
Distributions to Unitholders (65.82) (34.00) (30.68)
Net gain (loss) on investments 70.77 (8.05) 199.85
---------------------------------------------
Change in net asset value 79.30 29.06 238.67
Net asset value:
Beginning of the year 1,216.24 1,187.18 948.51
---------------------------------------------
End of the year, including distributable funds $1,295.54 $1,216.24 $1,187.18
---------------------------------------------
---------------------------------------------
</TABLE>
8
<PAGE> 23
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated April 15, 1994, in this
Post-Effective Amendment to the Registration Statement (Form S-6) and related
Prospectus of Kemper Bond Enhanced Securities Trust Series 14 -- Total Return
dated April 29, 1994.
/s/ ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
April 29, 1994
<PAGE> 24
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> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The
Registrant, Kemper Bond Enhanced Securities Trust, Series 13 and Series 14,
certifies that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, and State of Illinois, on the 28th day of April, 1994.
KEMPER BOND ENHANCED SECURITIES
TRUST, SERIES 13 AND SERIES 14
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 April 28,
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).
