File No. 33-30001 CIK #853156
Securities and Exchange Commission
Washington, D. C. 20549
Post-Effective
Amendment No. 8
to
Form S-6
For Registration under the Securities Act of 1933
of Securities of Unit Investment Trusts Registered
on Form N-8B-2
Kemper Tax-Exempt Income Trust, Series 87
Name and executive office address of Depositor:
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
Name and complete address of agent for service:
Robin Pinkerton
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
( X ) Check box if it is proposed that this filing will
become effective at 2:00 p.m. on November 21, 1997
pursuant to paragraph (b) of Rule 485.
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KEMPER TAX-EXEMPT INCOME TRUST
NATIONAL SERIES
INTERMEDIATE TERM SERIES
SHORT-INTERMEDIATE TERM SERIES
PART ONE
THE DATE OF THIS PART ONE IS THAT DATE
WHICH IS SET FORTH IN PART TWO
OF THE PROSPECTUS
Each Series of Kemper Tax-Exempt Income Trust (the "Trust" or the
"National Trust") was formed for the purpose of gaining interest income
free from Federal income taxes while conserving capital and diversifying
risks by investing in a fixed portfolio of Municipal Bonds consisting of
obligations of states of the United States and political subdivisions and
authorities thereof. The portfolios of the Intermediate Term Series and
the Short-Intermediate Term Series of the Trust are similar to the
National Series, except that the Intermediate Term Series consist of
obligations having a dollar-weighted average maturity of 10 years or less
and the Short-Intermediate Term Series have a dollar-weighted average
maturity of 5 years or less.
Units of the Trust are not deposits or obligations of, or guaranteed
by, any bank, and Units are not federally insured or otherwise protected
by the Federal Deposit Insurance Corporation and involve investment risk
including loss of principal.
This Prospectus is in two parts. Read and retain both parts for
future reference.
SPONSOR: RANSON & ASSOCIATES INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
SUMMARY 2
THE TRUST 4
PORTFOLIO 5
RISK FACTORS 6
DISTRIBUTION REINVESTMENT 12
INTEREST AND ESTIMATED LONG-
TERM AND CURRENT RETURNS 12
TAX STATUS OF THE TRUST 13
TAX REPORTING AND REALLOCATION 17
PUBLIC OFFERING OF UNITS 18
PUBLIC OFFERING PRICE 18
ACCRUED INTEREST 20
PUBLIC DISTRIBUTION OF UNITS 21
PROFITS OF SPONSOR 22
MARKET FOR UNITS 22
REDEMPTION 23
COMPUTATION OF REDEMPTION PRICE 24
UNITHOLDERS 25
OWNERSHIP OF UNITS 25
DISTRIBUTIONS TO UNITHOLDERS 25
STATEMENTS TO UNITHOLDERS 26
RIGHTS OF UNITHOLDERS 28
INVESTMENT SUPERVISION 28
ADMINISTRATION OF THE TRUST 29
THE TRUSTEE 29
THE EVALUATOR 30
AMENDMENT AND TERMINATION 30
LIMITATIONS ON LIABILITY 31
EXPENSES OF THE TRUST 32
THE SPONSOR 33
LEGAL OPINIONS 34
INDEPENDENT AUDITORS 34
DESCRIPTION OF SECURITIES RATINGS 34
Essential Information*
Report of Independent Auditors*
Statement of Net Assets and Liabilities*
Statement of Operations*
Statement of Changes in Net Assets*
Schedule of Investments*
Notes to Schedule Investments*
Notes to Financial Statements*
*Information on these items appears in Part Two
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KEMPER TAX-EXEMPT INCOME TRUST
NATIONAL SERIES
INTERMEDIATE TERM SERIES
SHORT-INTERMEDIATE TERM SERIES
SUMMARY
The Trust. Each Series of the Kemper Tax-Exempt Income Trust (the
"Trust" or the "National Trust") is one of a series of investment
companies each of which is a unit investment trust consisting of a
diversified portfolio of obligations of states of the United States and
political subdivisions and authorities thereof ("Municipal Bonds" or
"Securities"). The portfolios of the Intermediate Term Series and Short-
Intermediate Term Series of the Trust are similar to the National Series,
except that the Intermediate Term Series consist of obligations having a
dollar-weighted average maturity of 10 years or less and the Short-
Intermediate Term Series have a dollar-weighted average maturity of 5
years or less. Municipal Bonds in the portfolio were rated as of the
Date of Deposit in the category "A" or better by Standard & Poor's, a
Division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") or
Moody's Investors Service, Inc. Ratings of the Municipal Bonds may have
changed since the Date of Deposit. See "Description of Securities
Ratings" herein and the "Schedule of Investments" in Part Two. Ranson &
Associates, Inc. is the Sponsor and Evaluator of the Trusts and is
successor sponsor and evaluator of all unit investment trusts formerly
sponsored by EVEREN Unit Investment Trusts, a service of EVEREN
Securities, Inc. The Bank of New York is the Trustee of the Trusts as
successor to Investors Fiduciary Trust Company.
The objective of each Series of the Trust is tax-exempt income and
conservation of capital with diversification of risk through investment
in a fixed portfolio of Municipal Bonds. Interest on certain Municipal
Bonds in certain of the National Series will be a preference item for
purposes of the alternative minimum tax. Accordingly, such National
Series may be appropriate only for investors who are not subject to the
alternative minimum tax. There is, of course, no guarantee that the
Trust's objectives will be achieved.
The Units, each of which represents a pro rata undivided fractional
interest in the Municipal Bonds deposited in the appropriate Series of
the Trust, are issued and outstanding Units which have been reacquired by
the Sponsor either by purchase or Units tendered to the Trustee for
redemption or by purchase in the open market. No offering is being made
on behalf of the Trust and any profit or loss realized on the sale of
Units will accrue to the Sponsor and/or the firm reselling such Units.
Public Offering Price. The Public Offering Price per Unit of a
Series of the Trust is equal to a pro rata share of the aggregate bid
prices of the Municipal Bonds in such Series (plus or minus a pro rata
share of cash, if any, in the Principal Account, held or owned by the
Series) plus a sales charge in the amount shown under "Public Offering of
Units." In addition, there will be added to each transaction an amount
equal to the accrued interest from the last Record Date of such Series
to the date of settlement (three business days after order). The sales
charge is reduced on a graduated scale as indicated under "Public
Offering of Units-Public Offering Price."
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Interest and Principal Distributions. Distributions of the
estimated annual interest income received by a National Series or an
Intermediate Term Series, after deduction of estimated expenses, will be
made monthly unless the Unitholder elects to receive such distributions
quarterly or semi-annually. Distributions will be paid on the
Distribution Dates to Unitholders of Record of each such Series on the
Record Dates set forth for the applicable option. Distributions of the
estimated annual interest income to be received by a Short-Intermediate
Term Series of the Trust, after deduction of estimated expenses, will be
made semi-annually on January 15 and July 15 to Unitholders of record on
January 1 and July 1, respectively, of each year. (See "Essential
Information" in Part Two.)
The distribution of funds, if any, in the Principal Account of each
Series, will be made semi-annually to Unitholders of Record on the
appropriate dates. See "Essential Information" in Part Two.
Reinvestment. Distributions of interest and principal, including
capital gains, if any, made by a Series of the Trust will be paid in cash
unless a Unitholder elects to reinvest such distributions. Each
Unitholder of a Trust Fund offered herein may elect to have distributions
of principal or interest or both automatically invested without charge in
shares of certain mutual funds sponsored by Zurich Kemper Investments,
Inc. See "Distribution Reinvestment."
Estimated Current Return and Estimated Long-Term Return. The
Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price of such
Trust. The estimated net annual interest income per Unit will vary with
changes in fees and expenses of the Trustee, the Sponsor and Evaluator
and with the principal prepayment, redemption, maturity, exchange or sale
of Securities while the Public Offering Price will vary with changes in
the bid price of the underlying Securities; therefore, there is no
assurance that the present Estimated Current Returns will be realized in
the future. Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of all of the Securities in the Trust and (2) takes
into account the expenses and sales charge associated with each Trust
Unit. Since the market values and estimated retirements of the
Securities and the expenses of the Trust will change, there is no
assurance that the present Estimated Long-Term Return will be realized in
the future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only net annual interest
income and Public Offering Price.
Market for Units. While under no obligation to do so, the Sponsor
intends, subject to change at any time, to maintain a market for the
Units of each Series of the Trust and to continuously offer to repurchase
such Units at prices which are based on the aggregate bid side evaluation
of the Municipal Bonds in such Series of the Trust. If such a market is
not maintained and no other over-the-counter market is available,
Unitholders will still be able to dispose of their Units through
redemption by the Trustee at prices based upon the aggregate bid price of
the Municipal Bonds in such Series of the Trust. See "Redemption."
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Risk Factors. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other
factors, the inability of the issuer to pay the principal of or interest
on a bond when due, volatile interest rates, early call provisions, and
changes to the tax status of the Municipal Bonds. See "Portfolio-Risk
Factors."
THE TRUST
Each Series of the Trust is one of a Series of unit investment
trusts created by the Sponsor under the name Kemper Tax-Exempt Income
Trust, all of which are similar, and each of which was created under the
laws of the State of Missouri pursuant to a Trust Agreement*
( the "Agreement" ). Ranson & Associates, Inc. is the Sponsor
and Evaluator of the Trusts and is successor sponsor and evaluator of all
unit investment trusts formerly sponsored by EVEREN Unit Investment
Trusts, a service of EVEREN Securities, Inc. The Bank of New York is the
Trustee of the Trusts as successor to Investors Fiduciary Trust Company.
A Series of the Trust may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt, fixed
income securities with greater diversification than they might be able to
acquire individually. In addition, Municipal Bonds of the type deposited
in the Trust are often not available in small amounts.
Each Series of the Trust contains a portfolio of interest bearing
obligations issued by or on behalf of states of the United States and
political subdivisions and authorities thereof the interest on which is,
in the opinion of bond counsel to the issuing authorities, exempt from
all Federal income taxes under existing law, but may be subject to state
and local taxes. The portfolios of the Intermediate Term Series and the
Short-Intermediate Term Series of the Trust are similar to the National
Series, except that the Intermediate Term Series consist of obligations
having a dollar-weighted average maturity of 10 years or less and the
Short-Intermediate Series consist of obligations having a dollar-weighted
average maturity of 5 years or less.
Proceeds of the maturity, redemption or sale of the Municipal Bonds
in a Series of the Trust, unless used to pay for Units tendered for
redemption, will be distributed to Unitholders of such Series and will
not be utilized to purchase replacement or additional Municipal Bonds for
such Series.
The Units, each of which represents a pro rata undivided fractional
interest in the principal amount of Municipal Bonds deposited in a Series
of the Trust, are issued and outstanding Units which have been reacquired
by the Sponsor either by purchase of Units tendered to the Trustee for
redemption or by purchase in the open market. No offering is being made
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* Reference is made to the Trust Agreement, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreement.
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on behalf of the Trust or any Series thereof and any profit or loss
realized on the sale of Units will accrue to the Sponsor and/or the firm
reselling such Units.
To the extent that Units of a Series of the Trust are redeemed, the
principal amount of Municipal Bonds in such Series will be reduced and
the undivided fractional interest represented by each outstanding Unit of
that Series will increase. See "Redemption."
The objective of the Trust is tax-exempt income and conservation of
capital with diversification of risk through investment in a fixed
portfolio of Municipal Bonds. There is, of course, no guarantee that the
Trust's objectives will be achieved.
PORTFOLIO
In selecting the Municipal Bonds which comprise the portfolio of a
Series of the Trust the following requirements, among others, were deemed
to be of primary importance: (a) a minimum rating of "A" by either
Standard & Poor's or Moody's Investors Service, Inc. (See "Description
of Securities Ratings"); (b) the price of the Municipal Bonds relative to
other issues of similar quality and maturity; (c) the diversification of
the Municipal Bonds as to purpose of issue; (d) the dates of maturity of
the Municipal Bonds and (e) the income to the Unitholders of the Series
of the Trust. A Municipal Bond may cease to be rated or its rating may
be reduced below the minimum required as of the Date of Deposit. Neither
event requires the elimination of such investment from the portfolio of a
Series of the Trust, but may be considered in the Sponsor's determination
to direct the Trustee to dispose of the investment. See "Investment
Supervision" herein and "Schedule of Investments" in Part Two.
Interest on certain Municipal Bonds in certain of the National
Series will be a preference item for purposes of the alternative minimum
tax. Accordingly, such National Series may be appropriate only for
investors who are not subject to the alternative minimum tax.
The Sponsor may not alter the portfolio of a Series of the Trust,
except that certain of the Municipal Bonds may be sold upon the happening
of certain extraordinary circumstances. See "Investment Supervision."
Certain of the Municipal Bonds in the Series of the Trust may be
subject to redemption prior to their stated maturity date pursuant to
sinking fund provisions, call provisions or extraordinary optional or
mandatory redemption provisions or otherwise. A sinking fund is a
reserve fund accumulated over a period of time for retirement of debt. A
callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is
a method by which a debt obligation is redeemed at or before maturity, by
the proceeds of a new debt obligation. In general, call provisions are
more likely to be exercised when the offering side valuation is at a
premium over par than when it is at a discount from par. Accordingly,
any such call, redemption, sale or maturity will reduce the size and
diversity of such Series, and the net annual interest income of the
Series and may reduce the Estimated Long-Term Return and/or Estimated
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Current Return. See "Interest and Estimated Long-Term and Current
Returns." Each Trust portfolio contains a listing of the sinking fund
and call provisions, if any, with respect to each of the debt
obligations. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. Generally,
events that may permit the extraordinary optional redemption of Municipal
Bonds or may require the mandatory redemption of Municipal Bonds include,
among others: a final determination that the interest on the Municipal
Bonds is taxable; the substantial damage or destruction by fire or other
casualty of the project for which the proceeds of the Municipal Bonds
were used; an exercise by a local, state or Federal governmental unit of
its power of eminent domain to take all or substantially all of the
project for which the proceeds of the Municipal Bonds were used; changes
in the economic availability of raw materials, operating supplies or
facilities or technological or other changes which render the operation
of the project for which the proceeds of the Municipal Bonds were used
uneconomic; changes in law or an administrative or judicial decree which
renders the performance of the agreement under which the proceeds of the
Municipal Bonds were made available to finance the project impossible or
which creates unreasonable burdens or which imposes excessive
liabilities, such as taxes not imposed on the date the Municipal Bonds
are issued on the issuer of the Municipal Bonds or the user of the
proceeds of the Municipal Bonds; an administrative or judicial decree
which requires the cessation of a substantial part of the operations of
the project financed with the proceeds of the Municipal Bonds; an
overestimate of the costs of the project to be financed with the proceeds
of the Municipal Bonds resulting in excess proceeds of the Municipal
Bonds which may be applied to redeem Municipal Bonds; or an underestimate
of a source of funds securing the Municipal Bonds resulting in excess
funds which may be applied to redeem Municipal Bonds. The Sponsor is
unable to predict all of the circumstances which may result in such
redemption of an issue of Municipal Bonds.
The Sponsor, and the Trustee shall not be liable in any way for any
default, failure or defect in any Municipal Bond.
Risk Factors. An investment in Units of a Series of the Trust
should be made with an understanding of the risks which an investment in
fixed rate debt obligations may entail, including the risk that the value
of the portfolio and hence of the Units will decline with increases in
interest rates. The value of the underlying Municipal Bonds will
fluctuate inversely with changes in interest rates. The uncertain
economic conditions of recent years, together with the fiscal measures
adopted to attempt to deal with them, have resulted in wide fluctuations
in interest rates and, thus, in the value of fixed rate debt obligations
generally and long term obligations in particular. The Sponsor cannot
predict whether such fluctuations will continue in the future.
Certain of the Municipal Bonds in some Series of the Trust may be
general obligations of a governmental entity that are backed by the
taxing power of such entity. All other Municipal Bonds in such Trusts
are revenue bonds payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
Revenue bonds, on the other hand, are payable only from the revenues
derived from a particular facility or class of facilities or, in some
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cases, from the proceeds of a special excise or other specific revenue
source. There are, of course, variations in the security of the
different Municipal Bonds in the Trusts, both within a particular
classification and between classifications, depending on numerous
factors.
Certain of the Municipal Bonds in some Series of the Trust may be
obligations of issuers whose revenues are derived from services provided
by hospitals and other health care facilities, including nursing homes.
In view of this an investment in such Series should be made with an
understanding of the characteristics of such issuers and the risks that
such an investment may entail. Ratings of bonds issued for health care
facilities are often based on feasibility studies that contain
projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service will be affected
by future events and conditions including, among other things, demand for
services and the ability of the facility to provide the services
required, physicians' confidence in the facility, management
capabilities, economic developments in the service area, competition,
efforts by insurers and governmental agencies to limit rates, legislation
establishing state rate-setting agencies, expenses, the cost and possible
unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, and government
regulation. Federal legislation has been enacted which implemented a
system of prospective Medicare reimbursement which may restrict the flow
of revenues to hospitals and other facilities which are reimbursed for
services provided under the Medicare program. Future legislation or
changes in the areas noted above, among other things, would affect all
hospitals to varying degrees and, accordingly, any adverse changes in
these areas may adversely affect the ability of such issuers to make
payment of principal and interest on Municipal Bonds held in such Series.
Such adverse changes also may adversely affect the ratings of the
Municipal Bonds held in such Series of the Trust.
Certain of the Municipal Bonds in some Series of the Trust may be
single family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned
by persons of low or moderate income. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default,
condemnation or casualty loss. Because these Municipal Bonds are subject
to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such Municipal
Bonds will probably be redeemed prior to their scheduled maturities or
even prior to their ordinary call dates. The redemption price of such
issues may be more or less than the offering price of such Municipal
Bonds. Extraordinary mandatory redemption without premium could also
result from the failure of the originating financial institutions to make
mortgage loans in sufficient amounts within a specified time period or,
in some cases, from the sale by the Municipal Bond issuer of the mortgage
loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates on mortgage
loans funded from other sources becoming competitive with the interest
rates on the mortgage loans funded with the proceeds of the single family
mortgage revenue bonds. Additionally, unusually high rates of default on
the underlying mortgage loans may reduce revenues available for the
payment of principal of or interest on such mortgage revenue bonds.
Single family mortgage revenue bonds issued after December 31, 1980 were
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issued under Section 103A of the Internal Revenue Code of 1954, which
Section contains certain ongoing requirements relating to the use of the
proceeds of such Bonds in order for the interest on such Municipal Bonds
to retain its tax-exempt status. In each case, the issuer of the
Municipal Bonds has covenanted to comply with applicable ongoing
requirements and bond counsel to such issuer has issued an opinion that
the interest on the Municipal Bonds is exempt from Federal income tax
under existing laws and regulations. There can be no assurances that the
ongoing requirements will be met. The failure to meet these requirements
could cause the interest on the Municipal Bonds to become taxable,
possibly retroactively from the date of issuance.
Certain of the Municipal Bonds in some Series of the Trust may be
obligations of issuers whose revenues are primarily derived from mortgage
loans to housing projects for low to moderate income families. The
ability of such issuers to make debt service payments will be affected by
events and conditions affecting financed projects, including, among other
things, the achievement and maintenance of sufficient occupancy levels
and adequate rental income, increases in taxes, employment and income
conditions prevailing in local labor markets, utility costs and other
operating expenses, the managerial ability of project managers, changes
in laws and governmental regulations, the appropriation of subsidies and
social and economic trends affecting the localities in which the projects
are located. The occupancy of housing projects may be adversely affected
by high rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features,
including extraordinary mandatory redemption features, upon prepayment,
sale or non-origination of mortgage loans as well as upon the occurrence
of other events. Certain issuers of single or multi-family housing bonds
have considered various ways to redeem bonds they have issued prior to
the stated first redemption dates for such bonds. In connection with the
housing Municipal Bonds held by the Trust, the Sponsor has not had any
direct communications with any of the issuers thereof, but at the initial
Date of Deposit it was not aware that any of the respective issuers of
such Municipal Bonds were actively considering the redemption of such
Municipal Bonds prior to their respective stated initial call dates.
However, there can be no assurance that an issuer of a Municipal Bond in
a Trust will not attempt to so redeem a Municipal Bond in such Trust.
Certain of the Municipal Bonds in some Series of the Trust may be
obligations of issuers whose revenues are derived from the sale of water
and/or sewerage services. Water and sewerage bonds are generally payable
from user fees. Problems faced by such issuers include the ability to
obtain timely and adequate rate increases, a decline in population
resulting in decreased user fees, the difficulty of financing large
construction programs, the limitations on operations and increased costs
and delays attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh water, the
effect of conservation programs and the impact of "no-growth" zoning
ordinances. Issuers may have experienced these problems in varying
degrees.
Certain of the Municipal Bonds in some Series of the Trust may be
obligations of issuers whose revenues are primarily derived from the sale
of electric energy or natural gas. Utilities are generally subject to
extensive regulation by state utility commissions which, among other
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things, establish the rates which may be charged and the appropriate rate
of return on an approved asset base. The problems faced by such issuers
include the difficulty in obtaining approval for timely and adequate rate
increases from the governing public utility commission, the difficulty in
financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations,
increased competition, recent reductions in estimates of future demand
for electricity in certain areas of the county, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining
fuel at reasonable prices and the effect of energy conservation. Issuers
may have experienced these problems in varying degrees. In addition,
Federal, state and municipal governmental authorities may from time to
time review existing and impose additional regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of such Municipal Bonds to
make payments of principal and/or interest on such Municipal Bonds. The
ability of state and local joint action power agencies to make payments
on bonds they have issued is dependent in large part on payments made to
them pursuant to power supply or similar agreements. Courts in
Washington and Idaho have held that certain agreements between the
Washington Public Power Supply System ("WPPSS") and the WPPSS
participants are unenforceable because the participants did not have the
authority to enter into the agreements. While these decisions are not
specifically applicable to agreements entered into by public entities in
other states, they may cause a reexamination of the legal structure and
economic viability of certain projects financed by joint action power
agencies, which might exacerbate some of the problems referred to above
and possibly lead to legal proceedings questioning the enforceability of
agreements upon which payment of these bonds may depend.
Certain of the Municipal Bonds in some Series of the Trust may be
industrial revenue bonds ("IRBs"), including pollution control revenue
bonds, which are tax-exempt securities issued by states, municipalities,
public authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. These projects
are usually operated by corporate entities. Issuers are obligated only
to pay amounts due on the IRBs to the extent that funds are available
from the unexpended proceeds of the IRBs or receipts or revenues of the
issuer under an arrangement between the issuer and the corporate operator
of a project. The arrangement may be in the form of a lease, installment
sale agreement, conditional sale agreement or loan agreement, but in each
case the payments to the issuer are designed to be sufficient to meet the
payments of amounts due on the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the
corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or
industry. These include cyclicality of revenues and earnings, regulatory
and environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from leveraged buy-outs or takeovers. The IRBs
in the Series of the Trust may be subject to special or extraordinary
redemption provisions which may provide for redemption at par or, with
respect to original issue discount bonds, at issue price plus the amount
of original issue discount accreted to the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other Municipal Bonds in the
Series of the Trust prior to the stated maturity of such Municipal Bonds.
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Certain of the Municipal Bonds in some Series of the Trust may be
obligations which are payable from and secured by revenues derived from
the ownership and operation of facilities such as airports, bridges,
turnpikes, port authorities, convention centers and arenas. The major
portion of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements which
consist of annual payments for leases, occupancy of certain terminal
space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under
the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect
these industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
Municipal Bonds related to other facilities is dependent on revenues from
the projects, such as user fees from ports, tolls on turnpikes and
bridges and rents from buildings. Therefore, payment may be adversely
affected by reduction in revenues due to such factors as increased cost
of maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Certain of the Municipal Bonds in some Series of the Trust may be
obligations of issuers which are, or which govern the operation of,
schools, colleges and universities and whose revenues are derived mainly
from ad valorem taxes, or for higher education systems, from tuition,
dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools in wealthy
areas and schools in poor areas. Litigation or legislation on this issue
may affect the sources of funds available for the payment of school bonds
in the Trusts. General problems relating to college and university
obligations would include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to
raise tuition and fees sufficiently to cover increased operating costs,
the uncertainty of continued receipt of Federal grants and state funding
and new government legislation or regulations which may adversely affect
the revenues or costs of such issuers. All of such issuers have been
experiencing certain of these problems in varying degrees.
Certain of the Municipal Bonds in some Series of the Trust may be
Urban Redevelopment Bonds ("URBs"). URBs have generally been issued
under bond resolutions pursuant to which the revenues and receipts
payable under the arrangements with the operator of a particular project
have been assigned and pledged to purchasers. In some cases, a mortgage
on the underlying project may have been granted as security for the URBs.
Regardless of the structure, payment of the URBs is solely dependent upon
the creditworthiness of the operator of the project.
Certain of the Municipal Bonds in the Trust may be lease revenue
bonds whose revenues are derived from lease payments made by a
municipality or other political subdivision which is leasing equipment or
property for use in its operation. The risks associated with owning
Municipal Bonds of this nature include the possibility that appropriation
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of funds for a particular project or equipment may be discontinued. The
Sponsor cannot predict the likelihood of non-appropriation of funds for
these types of lease revenue Municipal Bonds.
Certain of the Municipal Bonds in some Series of the Trust may be
"zero coupon" bonds, i.e., an original issue discount bond that does not
provide for the payment of current interest. Zero coupon bonds are
purchased at a deep discount because the buyer obtains only the right to
receive a final payment at the maturity of the bond and does not receive
any periodic interest payments. The effect of owning deep discount bonds
which do not make current interest payments (such as the zero coupon
bonds) is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount earned during the life of
such obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such
obligation at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon
bonds are subject to substantially greater price fluctuations during
periods of changing market interest rates than are securities of
comparable quality which pay interest currently. For the Federal tax
consequences of original issue discount bonds such as the zero coupon
bonds, see "Tax Status of the Trust."
Investors should be aware that many of the Municipal Bonds in some
Series of the Trust are subject to continuing requirements such as the
actual use of Municipal Bond proceeds or manner of operation of the
project financed from Municipal Bond proceeds that may affect the
exemption of interest on such Municipal Bonds from Federal income
taxation. Although at the time of issuance of each of the Municipal
Bonds in the Trusts an opinion of bond counsel was rendered as to the
exemption of interest on such obligations from Federal income taxation,
there can be no assurance that the respective issuers or other obligors
on such obligations will fulfill the various continuing requirements
established upon issuance of the Municipal Bonds. A failure to comply
with such requirements may cause a determination that interest on such
obligations is subject to Federal income taxation, perhaps even
retroactively from the date of issuance of such Municipal Bonds, thereby
reducing the value of the Municipal Bonds and subjecting Unitholders to
unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of debts of
political subdivisions and authorities of states of the United States
provide that, in certain circumstances, such subdivisions or authorities
may be authorized to initiate bankruptcy proceedings without prior notice
to or consent of creditors, which proceedings could result in material
and adverse modification or alteration of the rights of holders of
obligations issued by such subdivisions or authorities.
Certain of the Municipal Bonds in some Series of the Trust represent
"moral obligations" of another governmental entity other than the issuer.
In the event that the issuer of the Municipal Bond defaults in the
repayment thereof, such other governmental entity lawfully may, but is
not obligated to, discharge the obligation of the issuer to repay such
Municipal Bond.
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<PAGE>
To the best of the Sponsor's knowledge, as of the date of the
Prospectus, there is no litigation pending with respect to any Municipal
Bonds which might reasonably be expected to have a material adverse
effect on the Trust or any Series thereof. Although the Sponsor is
unable to predict whether any litigation may be instituted, or if
instituted, whether such litigation might have a material adverse effect
on the Trust or any Series, the Trust received copies of the opinions of
bond counsel given to the issuing authorities at the time of original
delivery of each of the Municipal Bonds to the effect that the Municipal
Bonds had been validly issued and that the interest thereon is exempt
from Federal income taxes.
DISTRIBUTION REINVESTMENT
Each Unitholder of the Trust may elect to have distributions of
principal (including capital gains, if any) or interest or both
automatically invested without charge in shares of any mutual fund
registered in such Unitholder's state of residence which is underwritten
or advised by Zurich Kemper Investments, Inc. (the "Kemper Funds"), other
than those Kemper Funds sold with a contingent deferred sales charge.
Since the portfolio securities and investment objectives of such Kemper
Funds may differ significantly from that of the Trust, Unitholders should
carefully consider the consequences, before selecting such Kemper Funds
for reinvestment. Detailed information with respect to the investment
objectives and the management of the Kemper Funds is contained in their
respective prospectuses, which can be obtained from the Sponsor, and many
investment firms, upon request. An investor should read the appropriate
prospectus prior to making the election to reinvest. Unitholders who
desire to have such distributions automatically reinvested should inform
their broker at the time of purchase or should file with the Program
Agent referred to below a written notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Program Agent
an election to have such distributions reinvested without charge. Such
election must be received by the Program Agent at least ten days prior to
the Record Date applicable to any distribution in order to be in effect
for such Record Date. Any such election shall remain in effect until a
subsequent notice is received by the Program Agent. See "Distributions
to Unitholders."
The Program Agent is the Trustee. All inquiries concerning
participation in distribution reinvestment should be directed to the
Trustee at its unit investment trust office.
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS
As of the opening of business on the date indicated therein, the
Estimated Current Returns and the Estimated Long-Term Returns for the
Trust were as set forth under "Essential Information" in Part Two of this
Prospectus. Unitholders choosing distributions quarterly or semi-
annually will receive a slightly higher rate because of the lower
Trustee's fees and expenses under such plans. Estimated Current Returns
are calculated by dividing the estimated net annual interest income per
Unit by the Public Offering Price. The estimated net annual interest
income per Unit will vary with changes in fees and expenses of the
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Trustee, the sponsor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while the Public
Offering Price will vary with changes in the offering price of the
underlying Securities; therefore, there is no assurance that the present
Estimated Current Returns will be realized in the future. Estimated Long-
Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and (2) takes into account the expenses
and sales charge associated with the Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Returns will be realized in the future. Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the
calculation of Estimated Long-Term Returns reflects the estimated date
and amount of principal returned while Estimated Current Returns
calculations include only net annual interest income and Public Offering
Price.
TAX STATUS OF THE TRUST
All Municipal Bonds in the Trust were accompanied by copies of
opinions of bond counsel given to the issuers thereof at the time of
original delivery of the Municipal Bonds to the effect that the interest
thereon is exempt from all Federal income taxes. In connection with the
offering of Units of the Trust Funds, neither the Sponsor, the Trustee,
the auditors nor their respective counsel have made any review of the
proceedings relating to the issuance of the Municipal Bonds or the basis
for such opinions. Gain realized on the sale or redemption of the
Municipal Bonds by the Trustee or of a Unit by a Unitholder is, however,
includable in gross income for Federal income tax purposes (subject to
various non-recognition provisions of the Internal Revenue Code of 1986,
as amended (the "Code")). Such gain does not include any amounts
received in respect of accrued interest or earned original issue
discount, if any. It should be noted that, as further described below,
accretion of market discount on tax-exempt bonds to taxation as ordinary
income. Market discount can arise based on the price a Trust Fund pays
for Municipal Bonds or the price a Unitholder pays for his or her Units.
In addition, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds, when held by residents of the
state in which the issuers of such bonds are located, from state income
taxes and, where applicable, local income taxes.
In the opinion of Chapman and Cutler, counsel for the Sponsor:
Each series of the Trust is not an association taxable as a
corporation for federal income tax purposes and interest and accrued
original issue discount on Bonds which is excludable from gross
income under the Code will retain its status when distributed to
Unitholders; however, such interest may be taken into account in
computing the alternative minimum tax, an additional tax on branches
of foreign corporations and the environmental tax (the "Superfund
Tax"), as noted below.
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Exemption of interest and accrued original issue discount on
any Municipal Bonds for Federal income tax purposes does not
necessarily result in tax-exemption under the laws of the several
states as such laws vary with respect to the taxation of such
securities and in many states all or part of such interest and
accrued original issue discount may be subject to tax.
Each Unitholder is considered to be the owner of a pro rata
portion of each asset of the respective Series of the Trust in the
proportion that the number of Units of such Trust held by him bears
to the total number of Units outstanding of such Trust under subpart
E, subchapter J of chapter 1 of the Code and will have a taxable
event when such Trust disposes of a Bond, or when the Unitholder
redeems or sells his Units. Unitholders must reduce the tax basis
of their Units for their share of accrued interest received by a
Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such Bonds
during the period from the Unitholder's settlement date to the date
such Bonds are delivered to a Trust and, consequently, such
Unitholders may have an increase in taxable gain or reduction in
capital loss upon the disposition of such Units. Gain or loss upon
the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the
Units. If the Trustee disposes of Bonds (whether by sale, payment
on maturity, redemption or otherwise), gain or loss is recognized to
the Unitholder (subject to various non-recognition provisions of the
Code). The amount of any such gain or loss is measured by comparing
the Unitholder's pro rata share of the total proceeds from such
disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who
purchases Units, such basis (before adjustment for earned original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust's assets
ratably according to value as of the date of acquisition of the
Units. The basis of each Unit and of each Municipal Bond which was
issued with original issue discount must be increased by the amount
of the accrued original issue discount (and market discount, if the
Unitholder elects to include market discount in income as it
accrues) and the basis of each Unit and of the Unitholder's interest
in each Municipal Bond which was acquired by such Unitholder at a
premium must be reduced by the annual amortization of Municipal Bond
premium. The tax basis reduction requirements of the Code relating
to amortization of bond premium may, under some circumstances,
result in the Unitholder realizing a taxable gain when his Units are
sold or redeemed for an amount equal to his original cost.
Any proceeds paid under individual insurance policies obtained
by issuers of Bonds or under any insurance policies obtained by the
Trust or the Sponsor which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal
gross income if, and to the same extent as, such interest would have
been so excludable if paid in the normal course by the issuer of the
defaulted obligations; provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the
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<PAGE>
issuer of the obligations, rather than the insurer, will pay debt
service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Municipal Bond,
depending on the date the Municipal Bond was issued. In addition,
special rules apply if the purchase price of a Municipal Bond exceeds the
original issue price plus the amount of original issue discount which
would have previously accrued based upon its issue price (its "adjusted
issue price") to prior owners. The application of these rules will also
vary depending on the value of the Municipal Bond on the date a
Unitholder acquires his Units, and the price the Unitholder pays for his
Units. Unitholders should consult with their tax advisers regarding
these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued)
subject to a statutory "de minimis" rule. Market discount can arise
based on the price a Trust pays for Municipal Bonds or the price a
Unitholder pays for his or her Units. Under the Tax Act, accretion of
market discount is taxable as ordinary income; under prior law the
accretion had been treated as capital gain. Market discount that
accretes while a Trust Fund holds a Municipal Bond would be recognized as
ordinary income by the Unitholders when principal payments are received
on the Municipal Bond, upon sale or at redemption (including early
redemption), or upon sale or redemption of his or her Units, unless a
Unitholder elects to include market discount in taxable income as it
accrues. The market discount rules are complex and Unitholders should
consult their tax advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and
the Superfund Tax depend upon the corporation's alternative minimum
taxable income, which is the corporation's taxable income with certain
adjustments. One of the adjustment items used in computing the
alternative minimum taxable income and the Superfund Tax of a corporation
(other than an S Corporation, Regulated Investment Company, Real Estate
Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to
its alternative minimum taxable income (before such adjustment item and
the alternative tax net operating loss deduction). "Adjusted current
earnings" includes all tax-exempt interest, including interest on all of
the Bonds in a Trust and tax-exempt original issue discount. Unitholders
should consult their tax advisers with respect to the particular tax
consequences to them including the corporate alternative minimum tax, the
Superfund Tax and the branch profits tax imposed by Section 884 of the
Code.
Counsel for the Sponsor has also advised that under Section 265 of
the Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax purposes.
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The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid on
indebtedness incurred to purchase or improve a personal residence or to
purchase goods or services for personal consumption). Also, under
Section 265 of the Code, certain financial institutions that acquire
units would generally not be able to deduct any of the interest expense
attributable to ownership of such Units. On December 7, 1995 the U.S.
Treasury Department released proposed legislation that, if adopted, would
generally extend the financial institution rules to all corporations,
effective for obligations acquired after the date of announcement.
Investors with questions regarding these issues should consult with their
tax advisers.
In the case of certain Municipal Bonds in certain Series of the
Trust, the opinions of bond counsel indicate that interest on such
securities received by a "substantial user" of the facilities being
financed with the proceeds of these securities or persons related
thereto, for periods while such securities are held by such a user or
related person, will not be excludable from Federal gross income,
although interest on such securities received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes that he or she may be a "substantial user" or a
"related person" as so defined should contact his or her tax adviser.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35% effective for long-term capital gains
realized in taxable years beginning on or after January 1, 1993. For
taxpayers other than corporations, net capital gains are subject to a
maximum marginal stated tax rate of 28%. However, it should be noted
that legislative proposals are introduced from time to time that affect
tax rates and could affect relative differences at which ordinary income
and capital gains are taxed. Under the Code, taxpayers must disclose to
the Internal Revenue Service the amount of tax-exempt interest earned
during the year.
All statements of law in the Prospectus concerning exclusion from
gross income for Federal, state or other tax purposes are the opinions of
counsel and are to be so construed.
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Trust Funds of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
Section 86 of the Code, in general, provides that fifty percent of
Social Security benefits are includible in gross income to the extent
that the sum of "modified adjusted gross income" plus fifty percent of
the Social Security benefits received exceeds a "base amount." The base
amount is $25,000 for unmarried taxpayers, $32,000 for married taxpayers
filing a joint return and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Modified adjusted gross income is adjusted gross income determined
without regard to certain otherwise allowable deductions and exclusions
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from gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income, they will
be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31,1993, up to eighty-five percent of Social Security benefits
are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus fifty percent of Social Security benefits
received exceeds an "adjusted base amount." The adjusted base amount is
$34,000 for married taxpayers, $44,000 for married taxpayers filing a
joint return and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from the Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount or
the adjusted base amount must include fifty percent or eighty-five
percent, respectively of his Social Security benefits in gross income
whether or not he receives any tax-exempt interest. A taxpayer whose
modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security
benefits in gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations subject to either the environmental tax or the branch
profits tax, financial institutions, certain insurance companies, certain
S corporations, individual recipients of Social Security or Railroad
Retirement benefits and taxpayers who may be deemed to have incurred (or
continued) indebtedness to purchase or carry tax-exempt obligations.
Prospective investors should consult their tax advisors as to the
applicability of any collateral consequences. On December 7, 1995, the
U.S. Treasury Department released proposed legislation that, if adopted,
could affect the United States federal income taxation of non-United
States Unitholders and the portion of the Trusts' income allocable to non-
United States Unitholders.
The exemption of interest on state and local obligations for Federal
income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The
laws of the several states vary with respect to the taxation of such
obligations.
TAX REPORTING AND REALLOCATION
Because the Trust receives interest and makes monthly distributions
based upon such Trust's expected total collections of interest and any
anticipated expenses, certain tax reporting consequences may arise. The
Trust is required to report Unitholder information to the Internal
Revenue Service ("IRS"), based upon the actual collection of interest by
such Trust on the securities in such Trust, without regard to such Trust,
without regard to such Trust's expenses or to such Trust's payments to
Unitholders during the year. If distributions to Unitholders exceed
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interest collected, the difference will be reported as a return of
principal which will reduce a Unitholder's cost basis in its Units (and
its pro rata interest in the securities in the Trust). A Unitholder must
include in taxable income the amount of income reported by a Trust to the
IRS regardless of the amount distributed to such Unitholder. If a
Unitholder's share of taxable income exceeds income distributions made by
a Trust to such Unitholder, such excess is in all likelihood attributable
to the payment of miscellaneous expenses of such Trust which will not be
deductible by an individual Unitholder as an itemized deduction except to
the extent that the total amount of certain itemized deductions, such as
investments expenses (which would include the Unitholder's share of Trust
expenses), tax return preparation fees and employee business expenses,
exceeds 2% of such Unitholder's adjusted gross income. Alternatively, in
certain cases, such excess may represent an increase in the Unitholder's
tax basis in the Units owned. Investors with questions regarding these
issues should consult with their tax advisors.
PUBLIC OFFERING OF UNITS
Public Offering Price. Units of each Series of the Trust are
offered at the Public Offering Price, plus accrued interest to the
expected settlement date. The Public Offering Price per Unit is equal to
the aggregate bid side evaluation of the Municipal Bonds in the Series'
portfolio (as determined pursuant to the terms of a contract with the
Evaluator by Cantor Fitzgerald & Co., a non-affiliated firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities), plus or minus cash, if any, in the Principal Account, held
or owned by such Series of the Trust, divided by the number of
outstanding Units of the Series, plus the sales charge applicable. The
sales charge is based upon the dollar weighted average maturity of the
Trust and is determined in accordance with the table set forth below.
For purposes of this computation, Municipal Bonds will be deemed to
mature on their expressed maturity dates unless: (a) the Municipal Bonds
have been called for redemption or funds or securities have been placed
in escrow to redeem them on an earlier call date, in which case such call
date will be deemed to be the date upon which they mature; or (b) such
Municipal Bonds are subject to a "mandatory tender," in which case such
mandatory tender will be deemed to be the date upon which they mature.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to the Trust based upon the
dollar weighted average maturity of such Trust's portfolio, in accordance
with the following schedule:
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<TABLE>
<CAPTION>
PERCENT OF
DOLLAR PUBLIC PERCENT OF NET
WEIGHTED AVERAGE OFFERING AMOUNT
YEARS TO MATURITY PRICE INVESTED
----------------- ------------- --------------
<S> <C> <C>
1 to 3.99 years 2.00% 2.041%
4 to 7.99 years 3.50 3.627
8 to 14.99 years 4.50 4.712
15 or more years 5.50 5.820
</TABLE>
The sales charge per Unit will be reduced as set forth below:
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
--------- ---------- ----------
AMOUNT OF INVESTMENT SALES CHARGE (% OF PUBLIC OFFERING PRICE)
- -------------------- -----------------------------------------
<S> <C> <C> <C>
$1,000 to $99,999 3.50% 4.50% 5.50%
$100,000 to $499,999 3.25 4.25 5.00
$500,000 to $999,999 3.00 4.00 4.50
$1,000,000 or more 2.75 3.75 4.00
</TABLE>
- -----------------
* If the dollar weighted average maturity of the Trust is from 1 to
3.99 years, the sales charge is 2% and 1.5% of the Public Offering
for purchases of $1 to $249,999 and $250,000 or more, respectively.
The reduced sales charges as shown on the chart above will apply to
all purchases of Units on any one day by the same purchaser from the same
firm and for this purpose purchases of Units of a Series of the Trust
will be aggregated with concurrent purchases of Units of any other unit
investment trust that may be offered by the Sponsor. Additionally, Units
purchased in the name of a spouse or child (under 21) of such purchaser
will be deemed to be additional purchases by such purchaser. The reduced
sales charges will also be applicable to a trust or other fiduciary
purchasing for a single trust estate or single fiduciary account.
The Sponsor intends to permit officers, directors and employees of
the Sponsor and, at the discretion of the Sponsor and Evaluator,
registered representatives of selling firms to purchase Units of the
Trust without a sales charge, although a transaction processing fee may
be imposed on such trades.
Units may be purchased at the Public Offering Price less the
concession the Sponsor typically allows to dealers and other selling
agents for purchases (see "Public Distribution of Units") by investors
who purchase Units through registered investment advisers, certified
financial planners or registered broker-dealers who in each case either
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charge periodic fees for financial planning, investment advisory or asset
management services, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap
fee" charge is imposed.
The Public Offering Price per Unit of a Series of the Trust on the
date shown on the cover page of Part Two of the Prospectus or on any
subsequent date will vary from the amounts stated under "Essential
Information" in Part Two due to fluctuations in the prices of the
underlying Municipal Bonds. The aggregate bid side evaluation of the
Municipal Bonds shall be determined (a) on the basis of current bid
prices of the Municipal Bonds, (b) if bid prices are not available for
any particular Municipal Bond, on the basis of current bid prices for
comparable bonds, (c) by determining the value of the Municipal Bonds on
the bid side of the market by appraisal, or (d) by any combination of the
above.
The foregoing evaluations and computations shall be made as of the
Evaluation Time stated under "Essential Information" in Part Two, on each
business day effective for all sales made during the preceding 24-hour
period, and for purposes of resales and repurchase of Units.
The interest on the Municipal Bonds in a Series of the Trust, less
the estimated fees and expenses, is estimated to accrue in the annual
amounts per Unit set forth under "Essential Information" in Part Two.
The amount of net interest income which accrues per Unit may change as
Municipal Bonds mature or are redeemed, exchanged or sold, or as the
expenses of such Series of the Trust change or as the number of
outstanding Units of the Series changes.
Payment for Units must be made on or before the third business day
following purchase (the "settlement date"). A purchaser becomes the
owner of Units on the settlement date. If a Unitholder desires to have
certificates representing Units purchased, such certificates will be
delivered as soon as possible following a 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.
Accrued Interest. Accrued interest consists of two elements. The
first element arises as a result of accrued interest which is the
accumulation of unpaid interest on a bond from the last day on which
interest thereon was paid. Interest on Bonds in the Trust Fund is
actually paid either monthly or semi-annually to the Trust Fund.
However, interest on the Bonds in the Trust Funds is accounted for daily
on an accrual basis. Because of this, a Trust Fund always has an amount
of interest earned but not yet collected by the Trustee by the Trustee
because of coupons that are not yet due. For this reason, the Public
Offering Price of Units will have added to it the proportionate share of
accrued and undistributed interest to the date of settlement.
The Trustee advanced the amount of accrued interest as the First
Settlement Date and the same was distributed to the Sponsor. Such
advance was repaid to the Trustee through the first receipts of interest
received on the Municipal Bonds. Consequently, the amount of accrued
interest added to the Public Offering Price of Units included only
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accrued interest arising after the First Settlement Date of a Trust Fund,
less any distributions from the Interest Account subsequent to the First
Settlement Date. Since the First Settlement Date was the date of
settlement for anyone who ordered Units on the Date of Deposit, no
accrued interest was added to the Public Offering Price of Units ordered
on the Date of Deposit.
The second element of accrued interest arises because of the
structure of the Interest Account. The Trustee has no cash for
distribution to Unitholders until it receives interest payments on the
Bonds in a Trust Fund. The Trustee is obligated to provide its own
funds, at times, in order to advance interest distributions. The Trustee
will recover these advancements when such interest is received. Interest
Account balances are established so that it will not be necessary on a
regular basis for the Trustee to advance its own funds in connection with
such interest distributions and since the funds held by the Trustee will
be used by it to earn interest thereon, it benefits thereby (see
"Expenses of the Trust").
Accrued interest is computed as of the initial Record Date of the
Trust Funds. On the date of the first distribution of interest to
Unitholders after the First Settlement Date, the interest collected by
the Trustee will be sufficient to repay its advances, to allow for
accrued interest under the monthly, quarterly and semi-annual plans of
distribution and to generate enough cash to commence distributions to
Unitholders. If a Unitholder sells or redeems all or a portion of his
Units or if the Bonds in a Trust Fund are sold or otherwise removed or if
a Trust Fund is liquidated, he will receive at that time his
proportionate share of the accrued interest computed to the settlement
date in the case of sale or liquidation and to the date of tender in the
case of redemption in such Trust Fund.
Public Distribution of Units. The Sponsor has qualified Units for
sale in all states. Units will be sold through dealers who are members
of the National Association of Securities Dealers, Inc. and through
others. Sales may be made to or through dealers at prices which
represent discounts from the Public Offering Price as set forth below.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge paid by
their customers is retained by or remitted to the banks, in an amount as
shown in the tables 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.
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<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
--------- ---------- ----------
AMOUNT OF INVESTMENT Discount per Unit (% of Public Offering Price)
- -------------------- ----------------------------------------------
<S> <C> <C> <C>
$1,000 to $99,999 2.00% 3.00% 4.00%
$100,000 to $499,999 1.75 2.75 3.50
$500,000 to $999,999 1.50 2.50 3.00
$1,000,000 or more 1.25 2.25 2.50
</TABLE>
- ---------------------
* If the dollar weighted average maturity of a Trust is from 1 to 3.99
years, the concession or agency commission is 1.00% of the Public
Offering Price.
The Sponsor reserves the right to change the discounts set forth
above from time to time. In addition to such discounts, the Sponsor may,
from time to time, pay or allow an additional discount, in the form of
cash or other compensation, to dealers employing registered
representatives who sell, during a specified time period, a minimum
dollar amount of Units of the 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.
The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units.
Profits of Sponsor. The Sponsor will retain a portion of the sales
charge of each Unit sold, representing the difference between the Public
Offering Price of the Units and the discounts allowed to firms selling
such Units. The Sponsor may realize additional profit or loss as a
result of the possible change in the daily evaluation of the Municipal
Bonds in a Series of the Trust, since the value of its inventory of Units
may increase or decrease.
MARKET FOR UNITS
While not obligated to do so, the Sponsor intends to, and certain of
the Underwriters may, subject to change at any time, maintain a market
for Units of each Series of the Trust offered hereby and to continuously
offer to purchase said Units at prices, as determined by the Evaluator,
based on the aggregate bid prices of the underlying Municipal Bonds of
such Series, together with accrued interest to the expected date of
settlement. Accordingly, Unitholders who wish to dispose of their Unit
should inquire of their bank or broker as to the current market price in
order to determine whether there is in existence any price in excess of
the Redemption Price and, if so, the amount thereof.
The offering price of any Units resold by the Sponsor 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 will belong to the Sponsor. The Sponsor may suspend or
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discontinue purchases of Units of any Trust Fund if the supply of Units
exceeds demand, or for other business reasons.
REDEMPTION
If more favorable terms do not exist in the over-the-counter market
described above, Unitholders of a Series of the Trust may cause their
Units to be redeemed by the Trustee by making a written request to the
Trustee, The Bank of New York, 101 Barclay Street, New York, New York
10286 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 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 redeemed. If the amount of the redemption is $25,000 or less and the
proceeds are payable to the Unitholder(s) of record at the address of
record, no signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional documentation may be
requested, and a signature guarantee is always required, from
corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
guarantee program in addition to, or in substitution for, STAMP, as may
be accepted by the Trustee. A certificate should only be sent by
registered or certified mail for the protection of the Unitholder. Since
tender of the certificate is required for redemption when one has been
issued, Units represented by a certificate cannot be redeemed until the
certificate representing the Units has been received by the purchaser.
Redemption shall be made by the Trustee on the third business day
following the day on which a tender for redemption is received (the
"Redemption Date"), by payment of cash equivalent to the Redemption Price
for such series, 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. The price received upon redemption might
be more or less than the amount paid by the Unitholder depending on the
value of the Municipal Bonds in the portfolio at the time of redemption.
Any Units redeemed shall be cancelled and any undivided fractional
interest in that Series of the Trust will be extinguished.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the principal
amount of a Unit redemption if the Trustee has not been furnished the
redeeming Unitholder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to the
Internal Revenue Service and may be recovered by the Unitholder only when
filing a tax return. Under normal circumstances the Trustee obtains the
Unitholder's tax identification number from the selling broker. However,
any time a Unitholder elects to tender Units for redemption, such
Unitholder should make sure that the Trustee has been provided a
certified tax identification number in order to avoid this possible "back-
up withholding." In the event the Trustee has not been previously
provided such number, one must be provided at the time redemption is
requested.
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Any amounts paid on redemption representing interest shall be
withdrawn from the Interest Account for such Series to the extent that
funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Principal Account of such Series.
The Trustee is empowered to sell Municipal Bonds from the portfolio of a
Series of the Trust in order to make funds available for the redemption
of Units of such Series. Such sale may be required when Municipal Bonds
would not otherwise be sold and might result in lower prices than might
otherwise be realized. To the extent Municipal Bonds are sold, the size
and diversity of that Series will be reduced.
The Trustee is irrevocably authorized in its discretion, if an
Underwriter 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 such Unitholders amounts in cash, net after brokerage
commissions, transfer taxes and other charges, equal to or in excess of
Redemption Price for such Units. In the event of any such sale, the
Trustee shall pay the net proceeds thereof to the Unitholders on the day
they would otherwise be entitled to receive payment of the Redemption
Price.
The right of redemption may be suspended and payment postponed (1)
for any period during which the New York Stock Exchange is closed, other
than customary weekend and holiday closings, or during which (as
determined by the Securities and Exchange Commission) trading on the New
York Stock Exchange is restricted; (2) for any period during which an
emergency exists as a result of which disposal by the Trustee of
Municipal Bonds is not reasonably practicable or it is not reasonably
practicable to fairly determine the value of the underlying Municipal
Bonds in accordance with the Trust Agreements; or (3) for such other
period as the Securities and Exchange Commission may by order permit.
The Trustee is not liable to any person or in any way for any loss or
damage which may result from any such suspension or postponement.
Computation of Redemption Price. The Redemption Price for Units of
each Series of the Trust is computed by the Evaluator as of the
evaluation time stated under "Essential Information" in Part Two next
occurring after the tendering of a Unit for redemption and on any other
business day desired by it, by
A. adding (1) the cash on hand in such Series of the Trust;
(2) the aggregate value of each issue of the Municipal Bonds held in
such Series of the Trust, as determined by the Evaluator on the
basis of bid prices therefor; and (3) interest accrued and unpaid on
the Municipal Bonds in such Series of the Trust as of the date of
computation; and
B. deducting therefrom (1) amounts representing any
applicable taxes or governmental charges payable out of the Series
of the Trust and for which no deductions have been previously made
for the purpose of additions to the Reserve Account described under
"Expenses of the Trust"; (2) amounts representing estimated accrued
expenses of such Series including, but not limited to, fees and
expenses of the Trustee (including legal and auditing fees), the
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Evaluator, the Sponsor, and bond counsel, if any; (3) cash held for
distribution to Unitholders of record as of the business day prior
to the evaluation being made; and (4) other liabilities incurred by
such Series; and
C. finally, dividing the results of such computation by the
number of Units of such Series of the Trust outstanding as of the
date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of a Series of the Trust
will not be evidenced by a certificate unless a Unitholder or the
Unitholder's registered broker/dealer or the clearing agent for such
broker/dealers 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, presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unitholder. Unitholders must
sign such written request, and such certificate or transfer instrument,
exactly as their names appear on the records of the Trustee and on any
certificate representing the Units to be transferred. Such signatures
must be guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by the
Trustee.
Units may be purchased and certificates, if requested, will be
issued in denominations of one Unit or any whole Unit multiple thereof
subject to any minimum requirement established by the sponsor from time
to time. Any certificate issued will be numbered serially for
identification, issued in fully registered form and will be transferable
only on the books of the trustee. The Trustee may require a Unitholder
to pay a reasonable fee, to be determined in the sole discretion of the
Trustee, for each certificate re-issued or transferred, and to pay any
governmental charge that may be imposed in connection with each such
transfer or interchange. The Trustee at the present time does not
intend to charge for the normal transfer or interchange of certificates.
Destroyed, stolen, mutilated or lost certificates will be replaced upon
delivery to the Trustee of satisfactory indemnity (generally amounting to
3% of the market value of the Units), affidavit of loss, evidence of
ownership and payment of expenses incurred.
Distributions to Unitholders. Interest Distributions: Interest
received by a Series of the Trust, including any portion of the proceeds
from a disposition of Municipal Bonds which represents accrued interest,
is credited by the Trustee to the Interest Account for such Series. All
other receipts are credited by the Trustee to a separate Principal
Account for such Series. During each year the distributions to the
Unitholders of each Series of the Trust as of each Record Date (see
"Essential Information" in Part Two) will be made on the following
Distribution Date or shortly thereafter and shall consist of an amount
substantially equal to one-twelfth, one-quarter or one-half (depending on
the distribution option selected) of such Unitholders' pro rata share of
the estimated annual income to the Interest Account for such Series,
after deducting estimated expenses. However, interest to which
Unitholders of a Series of the Trust are entitled will at most times
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<PAGE>
exceed the amount available for distribution, there will almost always
remain an item of accrued interest that is accounted for daily and is
added to the value of each Unit. If Unitholders sell or redeem all or a
portion of their Units, they will be paid their proportionate share of
the accrued interest of such Series of the Trust to, but not including,
the fifth business day after the date of sale or to the date of tender in
the case of a redemption.
Persons who purchase Units between a Record Date and a Distribution
Date will receive their first distributions on the second Distribution
Date following their purchase of Units. Since interest on Municipal
Bonds in each Series of the Trust is payable at varying intervals,
usually in semi-annual installments, and distributions of income are made
to Unitholders of the Series of the Trust at what may be different
intervals from receipt of interest, the interest accruing to such Series
of the Trust may not be equal to the amount of money received and
available for distribution from the Interest Account for such Series.
Therefore, on each Distribution Date the amount of interest actually on
deposit in the Interest Account and available for distribution may be
slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such
variances, the Trustee is authorized by the Trust Agreements to advance
such amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee will be reimbursed, without
interest, for any such advances from funds available in the Interest
Account of such Series.
Unitholders purchasing Units will initially receive distributions in
accordance with the election of the prior owner. Unitholders desiring to
change their distribution option, if applicable, may do so by sending
written notice to the Trustee, together with their certificate (if one
was issued). Certificates should only be sent by registered or certified
mail to minimize the possibility of loss. If written notice and any
certificate are received by the Trustee not later than January 1 or
July 1 of a year, the change will become effective on January 2 for
distributions commencing with February 15 or August 15, respectively, of
that year. If notice is not received by the Trustee, the Unitholder will
be deemed to have elected to continue with the same option.
Principal Distributions: The Trustee will distribute on each
Distribution Date or shortly thereafter, to each Unitholder of Record of
a Series of the Trust on the preceding Record Date, an amount
substantially equal to such Unitholders' pro rata share of the cash
balance, if any, in the Principal Account of such Series (but not less
than $1.00 per Unit or $.001 per Unit for certain Series) computed as of
the close of business on the preceding Record Date.
Statements to Unitholders. With each distribution, the Trustee will
furnish or cause to be furnished to each Unitholder a statement of the
amount of interest and the amount of other receipts, if any, which are
being distributed, expressed in each case as a dollar amount per Unit.
The accounts of each Series of the Trust are required to be audited
annually, at the Series' expense, by independent auditors designated by
the Sponsor, unless the Trustee determines that such an audit would not
be in the best interest of the Unitholders of such Series of the Trust.
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The accountants' report will be furnished by the Trustee to any
Unitholder of such Series of the Trust upon written request.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each person who at any time during
calendar year was a Unitholder of such Series of the Trust a statement
covering the calendar year, setting forth for the applicable series:
A. As to the Interest Account for such Series:
1. The amount of interest received on the Municipal
Bonds and the percentage of such amount by states and
territories in which the issuers of such Bonds are located;
2. The amount paid from the Interest account
representing accrued interest of any Units redeemed;
3. The deductions from the Interest Account for
applicable taxes, if any, fees and expenses of the Trustee, the
Evaluator, and, if any, of bond counsel;
4. Any amounts credited by the Trustee to a Reserve
Account described under "Expense of the Trust"; and
5. The net amount remaining after such payment and
deductions, expressed both as a total dollar amount and a
dollar amount per Unit outstanding on the last business day of
such calendar year.
B. As to the Principal Account for such Series:
1. The dates of the maturity, liquidation or redemption
of any of the Municipal Bonds and the net proceeds received
therefrom excluding any portion credited to the Interest
Account;
2. The amount paid from the Principal Account
representing the principal of any Units redeemed;
3. The deductions from the Principal Account for payment
of applicable taxes, if any, fees and expenses (including
auditing fees) of the Trustee, the Evaluator, and, if any, of
bond counsel;
4. The amounts credited by the Trustee to a Reserve
Account described under "Expenses of the Trust"; and
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5. The net amount remaining after distributions of
principal and deductions, expressed both as a dollar amount and
as a dollar amount per Unit outstanding on the last business
day of such calendar year.
C. The following information:
1. A list of the Municipal Bonds in such Series as of
the last business day of such calendar year;
2. The number of Units of such Series outstanding on the
last business day of such calendar year;
3. The Redemption Price of such Series based on the last
Trust Evaluation made during such calendar year;
4. The amount actually distributed during such calendar
year from the Interest and Principal Accounts of such Series
separately stated, expressed both as total dollar amounts and
as dollar amounts per Unit outstanding on the Record Date for
each such distribution.
Rights of Unitholders. A Unitholder may at any time tender Units to
the Trustee for redemption. No Unitholder 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 Trust
Agreements or termination of a Series of the Trust. The death or
incapacity of any Unitholder will not operate to terminate any Series of
the Trust nor entitle legal representatives or heirs to claim an
accounting or to bring any action or proceeding in any court for
partition for winding up of the Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolio of a Series of the Trust by
the purchase, sale or substitution of Municipal Bonds, except in the
special circumstances noted below. Thus, with the exception of the
redemption or maturity of Municipal Bonds in accordance with their terms,
and/or the sale of Municipal Bonds to meet redemption requests, the
assets of each Series of the Trust will remain unchanged under normal
circumstances.
The Sponsor may direct the Trustee to dispose of Municipal Bonds the
value of which has been affected by certain adverse events including
institution of certain legal proceedings or decline in price or the
occurrence of other market factors, including advance refunding, so that
in the opinion of the Sponsor the retention of such Bonds in a Series of
the Trust would be detrimental to the interest of the Unitholders. The
proceeds from any such sales, exclusive of any portion which represents
accrued interest, will be credited to the Principal Account of such
Series for distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer
made by an issuer of the Municipal Bonds to issue new obligation in
exchange or substitution for any of such Municipal Bonds pursuant to a
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refunding financing plan, except that the Sponsor may instruct the
Trustee to accept or reject such an offer or to take any other action
with respect thereto as the Sponsor may deem proper if (a) the issuer is
in default with respect to such Municipal Bonds; or (b) in the written
opinion of the Sponsor, there is a reasonable basis to believe that the
issuer will default with respect to such Municipal Bonds in the
foreseeable future. Any obligations received in exchange or substitution
will be held by the Trustee subject to the terms and conditions of the
Trust Agreement to the same extent as the Municipal Bonds originally
deposited thereunder. Within five days after the deposit of obligations
in exchange or substitution for underlying Bonds, the Trustee is required
to give notice thereof to each Unitholder of such Series of such Series
of the Trust registered on the books of the Trustee, identifying the
Municipal Bonds eliminated and the Municipal Bonds substituted therefor.
ADMINISTRATION OF THE TRUST
The Trustee. The Trustee is The Bank of New York, a trust company
organized under the laws of New York. The Bank of New York has its unit
investment trust division offices at 101 Barclay Street, New York, New
York 10286, telephone 1-800-701-8178. The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State
of New York and the Board of Governors of the Federal Reserve System, and
its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The Trustee, whose duties are ministerial in nature, has not
participated in selecting the portfolio of any Series of the Trust. For
information relating to the responsibilities of the Trustee under the
Trust Agreements, reference is made to the material set forth under
"Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep
records of all transactions at its office. Such records shall include
the name and address of, and the number of Units held by, every
Unitholder of a Series of the Trust. Such books and records shall be
open to inspection by any Unitholder of such Series at all reasonable
times during the usual business hours. The Trustee shall make such
annual or other reports as may from time to time be required under any
applicable state or Federal statute, rule or regulation. The Trustee
shall keep a certified copy or duplicate original of the Trust Agreements
on file in its office available for inspection at all reasonable times
during usual business hours by any Unitholder of such Series, together
with a current list of the Municipal Bonds held in such Series of the
Trust. Pursuant to the Trust Agreements, the Trustee may employ one or
more agents for the purpose of custody and safeguarding of Municipal
Bonds comprising the portfolio.
Under the Trust Agreements, the Trustee or any successor trustee may
resign and be discharged of its duties created by the Trust Agreements by
executing an instrument in writing and filing the same with the Sponsor.
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The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than sixty days
before the date specified in such notice when such resignation is to take
effect. The Sponsor upon receiving notice of such resignation is
obligated to appoint a successor trustee promptly. If, upon such
resignation, no successor trustee has been appointed and has accepted the
appointment within thirty days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor at any time may remove the Trustee with or
without cause and appoint a successor trustee as provided in the Trust
Agreements. Notice of such removal and appointment shall be mailed to
each Unitholder by the Sponsor. Upon execution of a written acceptance
of such appointment by a successor trustee, all the rights, powers,
duties and obligations of the original Trustee shall vest in successor.
The Trustee shall be a corporation organized under the laws of the
United States or any state thereof, which is authorized under such laws
to exercise trust powers. The Trustee shall have at all times an
aggregate capital, surplus and undivided profits of not less than
$5,000,000.
The Evaluator. Ranson & Associates, Inc., the Sponsor, also serves
as Evaluator. The Evaluator may resign or be removed by the Trustee in
which event the Trustee is to use its best efforts to appoint a
satisfactory successor. Such resignation or removal shall become
effective upon acceptance of appointment by the successor evaluator. If
upon resignation of the Evaluator no successor has accepted appointment
within thirty days after notice of resignation, the Evaluator may apply
to a court of competent jurisdiction for the appointment of a successor.
Notice of such resignation or removal and appointment shall be mailed by
the Trustee to each Unitholder. At the present time, pursuant to a
contract with the Evaluator, Cantor Fitzgerald & Co., a non-affiliated
firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities, provides portfolio evaluations of the
Municipal Bonds in the Trust which are then reviewed by the Evaluator.
In the event the Sponsor is unable to obtain current evaluations from
Cantor Fitzgerald & Co., it may make its own evaluations or it may
utilize the services of any other non-affiliated evaluator or evaluators
it deems appropriate.
Amendment and Termination. The Trust Agreements may be amended by
the Trustee and the Sponsor without the consent of any of the
Unitholders: (1) to cure any ambiguity or to correct or supplement any
provision which may be defective or inconsistent; (2) to change any
provision thereof as may be required by the Securities and Exchange
Commission or any successor governmental agency; or (3) to make such
provisions as shall not adversely affect the interests of the
Unitholders. The Trust Agreements may also be amended in any respect by
the Sponsor and the Trustee, or any of the provisions thereof may be
waived, with the consent of the holders of Units representing 66-2/3% of
the Units then outstanding of such Series, provided that no such
amendment or waiver will reduce the interest of any Unitholder without
the consent of such Unitholder or reduce the percentage of Units required
to consent to any such amendment or waiver without consent of all
Unitholders of such Series. In no event shall the Trust Agreements be
amended to increase the number of Units of a Series issuable thereunder
or to permit, except in accordance with the provisions of the Trust
Agreements, the acquisition of any Municipal Bonds in addition to or in
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substitution for those in any Series of the Trust. The Trustee shall
promptly notify Unitholders of the substance of any such amendment.
The Trust Agreement provide that each Series of the Trust shall
terminate upon the maturity, redemption or other disposition, of the last
of the Municipal Bonds held in such Series. If the value of a Series of
the Trust shall be less than the applicable minimum value stated under
"Essential Information" in Part Two the Trustee may, in its discretion,
and shall, when so directed by the Sponsor, terminate such Series of the
Trust. A Series of the Trust may be terminated at any time by the
holders of Units representing 66-2/3% of the Units of such Series then
outstanding. In the event of termination of a Series, written notice
thereof will be sent by the Trustee to all Unitholders of such Series.
Within a reasonable period after termination, the Trustee will sell any
Municipal Bonds remaining in that Series of the Trust and, after paying
all expenses and charges incurred by the Series, will distribute to
Unitholders of such Series (upon surrender for cancellation of
certificates for Units, if issued) their pro rata share of the balances
remaining in the Interest and Principal Accounts of such Series.
Limitations on Liability. The Sponsor: The Sponsor is liable for
the performance of its obligations arising from the responsibilities
under the Trust Agreements, but will be under no liability to the
Unitholders for taking any action or refraining from any action in good
faith pursuant to the Trust Agreements or for errors in judgment, except
in cases of its own gross negligence, bad faith or willful misconduct.
The Sponsor shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Municipal
Bonds.
The Trustee: The Trust Agreements provide that the Trustee shall be
under no liability for any action taken in good faith in reliance upon
prima facie properly executed documents or for the disposition of monies,
Municipal Bonds, or certificates except by reason of its own negligence,
bad faith or willful misconduct, nor shall the Trustee be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Municipal Bonds. In the event that the
Sponsor shall fail to act, the Trustee may act and shall not be liable
for any such action taken in good faith. The Trustee shall not be
personally liable for any taxes or other governmental charges imposed
upon or in respect of the Municipal Bonds or upon the interest thereon.
In addition, the Trust Agreements contain other customary provisions
limiting the liability of the Trustee.
The Evaluator: The Trustee and Unitholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility
for the accuracy thereof. The Trust Agreements provide that the
determinations made by the Evaluator shall be made in good faith upon the
basis of the best information available to it, provided, however, that
the Evaluator shall be under no liability to the Trustee or Unitholders
for errors in judgment, but shall be liable only for its gross
negligence, lack of faith or willful misconduct.
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EXPENSES OF THE TRUST
The Sponsor will charge each Series a surveillance fee for services
performed for such Series in an amount not to exceed that amount set
forth in "Essential Information" in Part Two but in no event will such
compensation, when combined with all compensation received from other
unit investment trusts for which the Sponsor both acts as sponsor and
provides portfolio surveillance, exceed the aggregate cost to the Sponsor
for providing such services. Such fee shall be based on the total number
of Units of each series outstanding as the January Record Date for any
annual period. The Sponsor and other Underwriters paid all the expenses
of creating and establishing the Trust, including the cost of the initial
preparation, printing and execution of the Prospectus, Trust Agreements
and the certificates, legal and accounting expenses, advertising and
selling expenses, payment of closing fees, expenses of the Trustee,
initial evaluation fees and other out-of-pocket expenses.
The Trustee receives for its services a fee calculated on the basis
of the annual rate set forth under "Essential Information" in Part Two
based on the largest aggregate principal amount of Municipal Bonds in
such Series of the Trust at any time during the monthly, quarterly or
semi-annual period, as appropriate. The Trustee also receives indirect
benefits to the extent that it holds funds on deposit in the various non-
interest bearing accounts created pursuant to the Agreement; however, the
Trustee is also authorized by the Agreement to make from time to time
certain non-interest bearing advances to the Series of the Trust. See
"Unitholders-Distributions to Unitholders."
For evaluation of Municipal Bonds in a Series of the Trust, the
Evaluator receives a fee, calculated on an annual rate as set forth
under "Essential Information" in Part Two, based upon the largest
aggregate principal amount of Municipal Bonds in such Series of the Trust
at any time during such monthly period.
The Trustee's and Evaluator's fees are payable monthly on or before
each Distribution Date by deductions from the Interest Account of such
Series to the extent funds are available and then from the Principal
Account of such Series. Both fees may be increased without approval of
Unitholders by amounts not exceeding a proportionate increase in the
Consumer Price Index entitled "All Services Less Rent of Shelter,"
published by the United States Department of Labor, or any equivalent
index substituted therefor.
The following additional charges are or may be incurred by a Series
of the Trust: (a) fees for the Trustee's extraordinary services; (b)
expenses of the Trustee (including legal and auditing expenses, but not
including any fees and expenses charged by any agent for custody and
safeguarding of Municipal Bonds) and of bond counsel, if any; (c) various
governmental charges; (d) expenses and costs of any action taken by the
Trustee to protect the Trust or any series thereof, or the rights and
interests of the Unitholders; (e) indemnification of the Trustee for any
loss, liability or expense incurred by it in the administration of the
Trust or any Series without gross negligence, bad faith or willful
misconduct on its part; (f) indemnification of the Sponsor for any loss,
liability or expense incurred in acting as Depositor of a Series of the
Trust without gross negligence, bad faith or willful misconduct; and (g)
expenditures incurred in contacting Unitholders upon termination of a
-32-
<PAGE>
Series of the Trust. The fees and expenses set forth herein are payable
out of the appropriate Series of the Trust and, when owed to the Trustee,
are secured by a lien on the assets of such Series.
Fees and expenses of a Series of the Trust shall be deducted from
the Interest Account of such Series, or, to the extent funds are not
available in such Account, from the Principal Interest Account of such
Series. The Trustee may withdraw from the Principal Account of a Series
or the Interest Account of a Series such amounts, if any, as it deems
necessary to establish a reserve for any taxes or other governmental
charges or other extraordinary expenses payable out of the Trust.
Amounts so withdrawn shall be credited to a separate account maintained
for such Series of 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 until such time as the Trustee shall return all or any
part of such amounts to the appropriate account.
THE SPONSOR
Ranson & Associates, Inc., the Sponsor of the Trusts, is an
investment banking firm created in 1995 by a number of former owners and
employees of Ranson Capital Corporation. On November 26, 1996, Ranson &
Associates, Inc. purchased all existing unit investment trusts sponsored
by EVEREN Securities, Inc. Accordingly, Ranson & Associates is the
successor sponsor to unit investment trusts formerly sponsored by EVEREN
Unit Investment Trusts, a service of EVEREN Securities, Inc. Ranson &
Associates, is also the sponsor and successor sponsor of Series of The
Kansas Tax-Exempt Trust and Multi-State Series of The Ranson Municipal
Trust. Ranson & Associates, Inc. is the successor to a series of
companies, the first of which was originally organized in Kansas in 1935.
During its history, Ranson & Associates, Inc. and its predecessors have
been active in public and corporate finance and have sold bonds and unit
investment trusts and maintained secondary market activities relating
thereto. At present, Ranson & Associates, Inc., which is a member of the
National Association of Securities Dealers, Inc., is the sponsor to each
of the above-named unit investment trusts and serves as the financial
advisor and as an underwriter for issuers in the Midwest and Southwest,
especially in Kansas, Missouri and Texas. The Company's offices are
located at 250 North Rock Road, Suite 150, Wichita, Kansas 67206-2241.
If at any time the Sponsor shall fail to perform any of its duties
under the Agreement or shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or its affairs are taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at
rates of compensation deemed by the Trustee to be reasonable and not
exceeding such reasonable amounts as may be prescribed by the Securities
and Exchange Commission, or (b) terminate the Agreement and liquidate the
Trust or any Series as provided therein or (c) continue to act as Trustee
without terminating the Agreement.
The foregoing financial information with regard to the Sponsor
relates to the Sponsor only and not to any Series of this Trust. Such
information is included in this Prospectus only for the purpose of
informing investors as to the financial responsibility of the Sponsor and
-33-
<PAGE>
its ability to carry out its contractual obligations with respect to the
Series of the Trust. More comprehensive financial information can be
obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters
relating to Federal tax law were originally passed upon by Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of investments,
appearing in Part Two of this Prospectus and Registration Statement, with
information pertaining to the specific Series of the Trust to which such
statements relate, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing in Part Two and is
included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
DESCRIPTION OF SECURITIES RATINGS*
Standard & Poor's. A brief description of the applicable Standard
& Poor's rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer
and obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
- ------------------
* As published by the rating companies.
-34-
<PAGE>
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement, under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only in
small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for bonds in this category than for
bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.
Moody's Investors Service, Inc. - A brief description of the
applicable Moody's Investors Service, Inc. rating symbols and their
meanings follow:
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Their safety is so absolute that with the
occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
-35-
<PAGE>
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make the long term
risks appear somewhat larger than in Aaa securities. Their market value
is virtually immune to all but money market influences, with the
occasional exception of oversupply in a few specific instances.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. The market value of A-rated bonds may
be influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of normalcy,
A-rated bonds frequently move in parallel with Aaa and Aa obligations,
with the occasional exception of oversupply in a few specific instances.
A1 - Bonds which are rated A1 offer the maximum in security within
their quality group, can be bought for possible upgrading in quality, and
additionally, afford the investor an opportunity to gauge more precisely
the relative attractiveness of offering in the market place.
Baa - Bonds which are rated Baa are considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and, in fact, have
speculative characteristics as well. The market value of Baa-rated bonds
is more sensitive to changes in economic circumstances and, aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations move in parallel with Aaa, Aa and A obligations during
periods of economic normalcy, except in instances of oversupply.
Conditional Ratings: Bonds rated "Con (-)" are ones for which the
security depends upon the completion of some act or the fulfillment of
some condition. These are bonds secured by (a) earnings of projects
under construction. (b) earnings of project unseasoned in operation
experience, (c) rentals which begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Parenthetical
rating denotes probable credit stature upon completion of construction or
elimination of basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in certain areas of its
bond rating system. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issuer ranks in
the lower end of its generic rating category.
-36-
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Part Two
Dated November 24, 1997
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NOTE: Part Two of this Prospectus May Not Be Distributed Unless Accompanied by
Part One.
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Essential Information
As of July 31, 1997
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Municipal Bonds $3,489,000
Number of Units 5,197.082
Fractional Undivided Interest in the Trust per Unit 1/5,197.082
Principal Amount of Municipal Bonds per Unit $671.338
Public Offering Price:
Aggregate Bid Price of Municipal Bonds in the Portfolio $3,443,742
Aggregate Bid Price of Municipal Bonds per Unit $662.630
Cash per Unit (1) $(.229)
Sales Charge of 5.820% (5.50% of Public Offering Price) $38.552
Public Offering Price per Unit (exclusive of accrued
interest) (2) $700.953
Redemption Price per Unit (exclusive of accrued interest) $662.401
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $38.552
Minimum Value of the Trust under which Trust Agreement
may be terminated $1,040,000
</TABLE>
Date of Trust August 23, 1989
Mandatory Termination Date December 31, 2039
Annual Evaluation Fee: $.30 per $1,000 principal amount of Municipal Bonds.
Evaluations for purpose of sale, purchase or redemption of Units are made as
of the close of business of the Sponsor next following receipt of an order for
a sale or purchase of Units or receipt by The Bank of New York Co. of Units
tendered for redemption.
[FN]
1. This amount, if any, represents principal cash or overdraft which is an
asset or liability of the Trust and is included in the Public Offering Price.
2. Units are offered at the Public Offering Price plus accrued interest to the
date of settlement (three business days after purchase). On July 31, 1997,
there was added to the Public Offering Price of $700.95, accrued interest to
the settlement date of August 5, 1997 of $8.13, $12.14 and $12.22 for a total
price of $709.08, $713.09 and $713.17 for the monthly, quarterly and semiannual
distribution options, respectively.
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Essential Information (continued)
As of July 31, 1997
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
<TABLE>
<CAPTION>
Special Information Based on Various Distribution Options
Monthly Quarterly Semiannual
<S> <C> <C> <C>
--------- --------- ---------
Calculation of Estimated Net Annual
Interest Income per Unit (3):
Estimated Annual Interest Income $48.285220 $48.285220 $48.285220
Less: Estimated Annual Expense 1.559020 1.284318 1.052638
--------- --------- ---------
Estimated Net Annual Interest Income $46.726200 $47.000902 $47.232582
========= ========= =========
Calculation of Interest Distribution
per Unit:
Estimated Net Annual Interest Income $46.726200 $47.000902 $47.232582
Divided by 12, 4 and 2, respectively $3.893850 $11.750226 $23.616291
Estimated Daily Rate of Net Interest
Accrual per Unit $.129795 $.130558 $.131202
Estimated Current Return Based on Public
Offering Price (3) 6.67% 6.71% 6.74%
Estimated Long-Term Return (3) 6.99% 7.03% 7.06%
</TABLE>
Trustee's Annual Fees and Expenses (including Evaluator's Fee): $1.559020,
$1.284318 and $1.052638 ($.606219, $.525619 and $.523319 of which represents
expenses) per Unit under the monthly, quarterly and semiannual distribution
options, respectively.
Record and Computation Dates: First day of the month, as follows: monthly - each
month; quarterly - January, April, July and October; semiannual - January and
July.
Distribution Dates: Fifteenth day of the month, as follows: monthly - each
month; quarterly - January, April, July and October; semiannual - January and
July.
[FN]
3. The Estimated Long-Term Return and Estimated Current Return will vary. For
detailed explanation, see Part One of this prospectus.
<PAGE>
Report of Independent Auditors
Unitholders
Kemper Tax-Exempt Income Trust
Series 87
We have audited the accompanying statement of assets and liabilities of Kemper
Tax-Exempt Income Trust Series 87, including the schedule of investments, as of
July 31, 1997, 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 July 31, 1997, by
correspondence with the custodial bank. An audit also includes assessing the
accounting principles used and significant estimates made by the sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kemper Tax-Exempt Income Trust
Series 87 at July 31, 1997, and the results of its operations and changes in its
net assets for the periods indicated above in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Kansas City, Missouri
November 14, 1997
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Statement of Assets and Liabilities
July 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Municipal Bonds, at value (cost $3,379,475) $3,443,742
Interest receivable 78,474
Receivable from securities sold 10,000
---------
Total assets 3,532,216
Liabilities and net assets
Cash overdraft 30,224
Accrued liabilities 1,481
---------
31,705
Net assets, applicable to 5,197 Units outstanding:
Cost of Trust assets, exclusive of interest $3,379,475
Unrealized appreciation 64,267
Distributable funds 56,769
--------- ---------
Net assets $3,500,511
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Statements of Operations
<TABLE>
<CAPTION>
Year ended July 31
1997 1996 1995
<S> <C> <C> <C>
--------- --------- ---------
Investment income - interest $276,878 $304,571 $312,019
Expenses:
Trustee's fees and related expenses 7,506 7,547 6,697
Evaluator's fees 1,365 1,047 1,283
--------- --------- ---------
Total expenses 8,871 8,594 7,980
--------- --------- ---------
Net investment income 268,007 295,977 304,039
Realized and unrealized gain (loss) on
investments:
Realized gain 10,965 - -
Unrealized appreciation (depreciation)
during the year (25,018) (38,785) 8,829
--------- --------- ---------
Net gain (loss) on investments (14,053) (38,785) 8,829
--------- --------- ---------
Net increase in net assets resulting
from operations $253,954 $257,192 $312,868
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended July 31
1997 1996 1995
<S> <C> <C> <C>
--------- --------- ---------
Operations:
Net investment income $268,007 $295,977 $304,039
Realized gain on investments 10,965 - -
Unrealized appreciation (depreciation)
on investments during the year (25,018) (38,785) 8,829
--------- --------- ---------
Net increase in net assets resulting
from operations 253,954 257,192 312,868
Distributions to Unitholders:
Net investment income (273,518) (298,135) (304,568)
Principal from investment transactions (689,306) (84,971) (27,003)
--------- --------- ---------
Total distributions to Unitholders (962,824) (383,106) (331,571)
Capital transactions:
Redemption of Units (11,902) - -
--------- --------- ---------
Total decrease in net assets (720,772) (125,914) (18,703)
Net assets:
At the beginning of the year 4,221,283 4,347,197 4,365,900
--------- --------- ---------
At the end of the year (including
distributable funds applicable to
Trust Units of $56,769, $148,488
and $65,617 at July 31, 1997, 1996
and 1995, respectively) $3,500,511 $4,221,283 $4,347,197
========= ========= =========
Trust Units outstanding at the end
of the year 5,197 5,213 5,213
========= ========= =========
Net asset value per Unit at the end
of the year:
Monthly $673.49 $806.30 $833.95
========= ========= =========
Quarterly $673.60 $806.38 $833.83
========= ========= =========
Semiannual $673.67 $806.45 $833.88
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Kemper Tax-Exempt Income Trust
Series 87
Schedule of Investments
July 31, 1997
<CAPTION>
Coupon Maturity Redemption Principal
Name of Issuer and Title of Bond Rate Date Provisions(2) Rating(1) Amount Value(3)
<S> <C> <C> <C> <C> <C> <C>
- --------------------- --- --- ----- --- --------- ---
Clark County, Nevada, Airport Systems Improvement 8.250% 7/01/2015 2009 @ 100 S.F. A+ $400,000 $403,144
Revenue Bonds, Series March 1, 1988. 1998 @ 102
New York State Energy Research and Development 7.750 1/01/2024 1998 @ 101.5 A+ 500,000 492,960
Authority, Electric Facilities Revenue Bonds,
Consolidated Edison Company of New York, Inc.,
Series 1989A.
Fishers, Indiana, Economic Development Water 7.875 3/01/2019 1998 @ 102 A+ 500,000 497,590
Facilities Revenue Bonds, Indianapolis Water Company
Project.
Indiana Employment Development Commission, Exempt 7.450 8/01/2019 1999 @ 102 AA- 480,000 492,345
Facilities Revenue Bonds, Indianapolis Power & Light
Company Project, Series 1989.
County of Jefferson, Kentucky, Pollution Control 7.750 2/01/2019 1998 @ 102 AA 300,000 297,972
Revenue Bonds, Louisville Gas & Electric Company
Project, 1989 Series A.
Ohio Housing Finance Agency, Single-Family Mortgage 7.650 3/01/2029 2014 @ 100 S.F. AAA 234,000 234,503
Revenue Bonds, GNMA Mortgage-Backed Securities 1999 @ 102
Program, 1989 Series A.
Puerto Rico Public Buildings Authority, Revenue 0.000 7/01/2004 Non-Callable AAA 250,000 177,038
Refunding Bonds, Series G. Insured by FGIC. (5) (4)
South Dakota Student Loan Corporation, Student Loan 7.625 8/01/2006 1999 @ 102 A 325,000 333,245
Revenue Bonds, Series 1989-B.
State of Texas, Veteran's Land Bonds, General 7.625 12/01/2018 2014 @ 100 S.F. AA 500,000 514,945
Obligation Bonds, Series 1989. 1999 @ 102
--------- ---------
$3,489,000 $3,443,742
========= =========
</TABLE>
[FN]
See accompanying notes to Schedule of Investments.
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Notes to Schedule of Investments
1. All ratings are by Standard & Poor's Corporation, unless marked with the
symbol "*", in which case the rating is by Moody's Investors Service, Inc. The
symbol "NR" indicates Bonds for which no rating is available.
2. There is shown under this heading the year in which each issue of Bonds is
initially redeemable and the redemption price for that year or, if currently
redeemable, the redemption price currently in effect; unless otherwise
indicated, each issue continues to be redeemable at declining prices thereafter,
but not below par value. In addition, certain Bonds in the Portfolio may be
redeemed in whole or in part other than by operation of the stated redemption or
sinking fund provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds. "S.F." indicates a sinking fund is established with respect to an issue
of Bonds. Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed Bonds
have a valuation which represents a premium over the call price or par.
To the extent that the Bonds were deposited in the Trust at a price higher
than the price at which they are redeemed, this will represent a loss of capital
when compared with the original Public Offering Price of the Units. To the
extent that the Bonds were acquired at a price lower than the redemption price,
this may represent an increase in capital when compared with the original Public
Offering Price of the Units. Distributions of net income will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Bonds and, unless utilized to pay for Units tendered for
redemption, there will be distributed to Unitholders the principal amount and
any premium received on such redemption. In this event the estimated current
return and estimated long-term return may be affected by such redemptions.
3. See Note 1 to the accompanying financial statements for a description of the
method of determining cost and value.
4. Insurance on this Bond was obtained by the issuer of such Bond. No
representation is made as to any insurer's ability to meet its commitments.
5. This Bond has been purchased at a discount from the par value because there
is no stated interest income thereon. Such Bond is normally described as a
"zero coupon" Bond. Over the life of the Bond the value increases, so that upon
maturity, the holders of the Bond will receive 100% of the principal amount
thereof.
See accompanying notes to financial statements.
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Notes to Financial Statements
1. Significant Accounting Policies
Trust Sponsor and Evaluator
From the Trust's date of deposit through November 26, 1996, the Trust's sponsor
and evaluator was EVEREN Unit Investment Trusts (EVEREN), or its predecessor
entity, Kemper Unit Investment Trusts. On that date, Zurich Kemper Investments,
Inc. acquired EVEREN and assigned substantially all of its unit investment trust
business to Ranson & Associates, Inc., which serves as the Trust's sponsor and
evaluator.
Valuation of Municipal Bonds
Municipal Bonds (Bonds) are stated at bid prices as determined by Ranson &
Associates, Inc., the "Evaluator" of the Trust. The aggregate bid prices of the
Bonds are determined by the Evaluator based on (a) current bid prices of the
Bonds, (b) current bid prices for comparable bonds, (c) appraisal, or (d) any
combination of the above.
Cost of Municipal Bonds
Cost of the Trust's Bonds was based on the offering prices of the Bonds on
August 23, 1989 (Date of Deposit). The premium or discount (including any
original issue discount) existing at August 23, 1989, is not being amortized.
Realized gain (loss) from Bond transactions is reported on an identified cost
basis.
2. Unrealized Appreciation and Depreciation
Following is an analysis of net unrealized appreciation at July 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $117,319
Gross unrealized depreciation (53,052)
----------
Net unrealized appreciation $64,267
=========
</TABLE>
3. Federal Income Taxes
The Trust is not an association taxable as a corporation for federal income tax
purposes. Each Unitholder is considered to be the owner of a pro rata portion
of the Trust under Subpart E, Subchapter J of Chapter 1 of the Internal Revenue
Code of 1986, as amended. Accordingly, no provision has been made for federal
income taxes.
4. Other Information
Cost to Investors
The cost to original investors of Units of the Trust was based on the aggregate
offering price of the Bonds on the date of an investor's purchase, plus a sales
charge of 4.90% of the Public Offering Price (equivalent to 5.152% of the net
amount invested). The Public Offering Price for secondary market transactions
is based on the aggregate bid price of the Bonds plus or minus a pro rata share
of cash or overdraft in the Principal Account, if any, and daily accrued
interest on the date of an investor's purchase, plus a sales charge of 5.50% of
the Public Offering Price (equivalent to 5.820% of the net amount invested).
<PAGE>
Kemper Tax-Exempt Income Trust
Series 87
Notes to Financial Statements (continued)
Distributions
Distributions of net investment income to Unitholders are declared and paid in
accordance with the option (monthly, quarterly or semiannual) selected by the
investor. Income distributions, on a record date basis, are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
Distribution July 31, 1997 July 31, 1996 July 31, 1995
Plan Per Unit Total Per Unit Total Per Unit Total
<S> <C> <C> <C> <C> <C> <C>
- ----- --------- ----- ---------------------------- -----
Monthly $52.33 $164,973 $56.99 $177,771 $58.22 $177,211
Quarterly 52.59 44,353 57.30 49,052 58.52 50,792
Semiannual 52.85 63,909 57.55 71,312 58.78 76,565
---------- ---------- ----------
$273,235 $298,135 $304,568
========= ========= =========
</TABLE>
In addition, the Trust redeemed Units with proceeds from the sale of Bonds as
follows:
<TABLE>
<CAPTION>
Year Ended
July 31,
1997
<S> <C> <C> <C>
----------
Principal portion $11,902
Net interest accrued 283
----------
$12,185
=========
Units 16
=========
</TABLE>
In addition, distribution of principal related to the sale or call of securities
is $132.48, $16.30 and $5.18 per Unit for the years ended July 31, 1997, 1996
and 1995, respectively.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated November 14, 1997, in this Post-Effective
Amendment to the Registration Statement (Form S-6) and related Prospectus of
Kemper Tax-Exempt Income Trust Series 87 dated November 24, 1997.
Ernst & Young LLP
Kansas City, Missouri
November 24, 1997
<PAGE>
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>
Signatures
Pursuant to the requirements of the Securities Act of 1933,
The Registrant, Kemper Tax-Exempt Income Trust, Series 87,
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 Wichita,
and State of Kansas, on the 21st day of November, 1997.
Kemper Tax-Exempt Income Trust,
Series 87
Registrant
By: Ranson & Associates, Inc.
Depositor
By: Robin Pinkerton
President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below on November 21, 1997 by the following persons, who
constitute a majority of the Board of Directors of Ranson &
Associates, Inc.
Signature Title
Douglas K. Rogers Executive Vice and President and Director
Douglas K. Rogers
Alex R. Meitzner Chairman of the Board and Director
Alex R. Meitzner
Robin K. Pinkerton President, Secretary, Treasurer and
Robin K. Pinkerton Director
Robin Pinkerton
An executed copy of each of the related powers of attorney
was filed with the Securities and Exchange Commission in
connection with the Registration Statement on Form S-6 of The
Kansas Tax-Exempt Trust, Series 51 (File No. 33-46376) and
Series 52 (File No. 33-47687) and the same are hereby
incorporated herein by this reference.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM KEMPER TAX-EXEMPT INCOME TRUST SERIES 87
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<SERIES>
<NUMBER> 87
<NAME> KEMPER TAX-EXEMPT INCOME TRUST SERIES 87
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Jul-31-1997
<PERIOD-END> Jul-31-1997
<INVESTMENTS-AT-COST> 3,379,475
<INVESTMENTS-AT-VALUE> 3,443,742
<RECEIVABLES> 78,474
<ASSETS-OTHER> 10,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,532,216
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,705
<TOTAL-LIABILITIES> 31,705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,436,244
<SHARES-COMMON-STOCK> 5,197
<SHARES-COMMON-PRIOR> 5,213
<ACCUMULATED-NII-CURRENT> 56,769
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 64,267
<NET-ASSETS> 3,500,511
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 276,878
<OTHER-INCOME> 0
<EXPENSES-NET> 8,871
<NET-INVESTMENT-INCOME> 268,007
<REALIZED-GAINS-CURRENT> 10,965
<APPREC-INCREASE-CURRENT> (25,018)
<NET-CHANGE-FROM-OPS> 253,954
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (273,518)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (689,306)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 16
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (720,772)
<ACCUMULATED-NII-PRIOR> 148,488
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
