File No. 33-60738 CIK #900231
Securities and Exchange Commission
Washington, D. C. 20549
Post-Effective
Amendment No. 3
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 Defined Funds Insured National Series 1
Name and executive office address of Depositor:
EVEREN Unit Investment Trusts
(a division of EVEREN Securities, Inc.)
77 West Wacker - 29th Floor
Chicago, Illinois 60601
Name and complete address of agent for service:
Robert K. Burke
77 West Wacker - 29th Floor
Chicago, Illinois 60601
( X ) Check box if it is proposed that this filing will become
effective at 2:00 p.m. on September 30, 1996 pursuant to
paragraph (b) of Rule 485.
KEMPER TAX-EXEMPT INSURED INCOME TRUSTNATIONAL SERIESKEMPER
DEFINED FUNDSINSURED NATIONAL SERIESEVEREN Unit Investment
TrustsInsured National SeriesPART ONE
The date of this Part One is that datewhich is set forth in Part
Two of the Prospectus
Kemper Tax-Exempt Insured Income Trust, Kemper Defined Funds
Insured National Series and EVEREN Unit Investment Trusts Insured
National Series (the "Trusts" and each a "Trust") were formed for
the purpose of gaining interest income free from Federal income
taxes while conserving capital and diversifying risks by
investing in an insured, fixed portfolio consisting of
obligations issued by or on behalf of states of the United States
or counties, municipalities, authorities or political
subdivisions thereof.
Units of the Trust are not deposits or obligations of, or
guaranteed by, any bank, and Units are not federally insured or
otherwise protected by the Federal Deposit Insurance Corporation
and involve investment risk including loss of principal.
Insurance guaranteeing the scheduled payment of principal and
interest on all of the Municipal Bonds in the portfolio listed in
Part Two has been obtained from an independent company by either
the Trust, the Sponsor or the issuer of the Municipal Bonds
involved. Insurance obtained by the Sponsor or a Municipal Bond
issuer is effective so long as such Bonds are outstanding. The
insurance, in any case, does not relate to the Units offered
hereby or to their market value. As a result of such insurance,
the Units of the Trust received on the Date of Deposit a rating
of "AAA" by Standard & Poor's, a Division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's") or "Aaa" by Moody's
Investors Service, Inc. See "Insurance on the Portfolio" and
"Description of Securities Ratings." No representation is made
as to any insurer's ability to meet its commitments.
This Prospectus is in two parts. Read and retain both parts for
future reference.
Sponsor: EVEREN Unit Investment Trusts,a service of EVEREN
Securities, Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE
SUMMARY 3
The Trust 3
Insurance 3
Public Offering Price 4
Interest and Principal Distributions 4
Reinvestment 4
Estimated Current Return and Estimated Long-Term Return 4
Market for Units 5
Risk Factors 5
THE TRUST 5
PORTFOLIOS 6
Risk Factors 7
INSURANCE ON THE PORTFOLIOS 14
Financial Guaranty Insurance Company 16
AMBAC Indemnity Corporation 17
Municipal Bond Investors Assurance Corporation 17
Financial Security Assurance 18
Capital Guaranty Insurance Company 19
DISTRIBUTION REINVESTMENT 20
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS 21
TAX STATUS OF THE TRUST 21
TAX REPORTING AND REALLOCATION 26
PUBLIC OFFERING OF UNITS 26
Public Offering Price 26
Accrued Interest 29
Purchased and Daily Accrued Interest 30
Accrued Interest 30
Public Distribution of Units 31
Profits of Sponsor 32
MARKET FOR UNITS 32
REDEMPTION 32
Computation of Redemption Price 34
UNITHOLDERS 34
Ownership of Units 34
Distributions to Unitholders 35
Statement to Unitholders 36
Rights of Unitholders 38
INVESTMENT SUPERVISION 38
ADMINISTRATION OF THE TRUST 39
The Trustee 39
The Evaluator 40
Amendment and Termination 40
Limitations on Liability 42
The Sponsor 42
The Trustee 42
The Evaluator 42
EXPENSES OF THE TRUST 42
THE SPONSOR 44
LEGAL OPINIONS 44
INDEPENDENT AUDITORS 44
DESCRIPTION OF MUNICIPAL BOND RATINGS 45
Essential Information[1]
Report of Independent Auditors*
Statement of Assets and Liabilities*
Statement of Operations*
Statement of Changes in Net Assets*
Schedule of Investments*
Notes to Schedules of Investments*
Notes to Financial Statements*
KEMPER TAX-EXEMPT INSURED INCOME TRUST
KEMPER DEFINED FUNDS INSURED NATIONAL SERIES
EVEREN UNIT INVESTMENT TRUSTS INSURED NATIONAL SERIES
SUMMARY
The Trust. Kemper Tax-Exempt Insured Income Trust, Kemper
Defined Funds Insured National Series and EVEREN Unit Investment
Trusts Insured National Series (the "Trusts" and each a "Trust")
are each a unit investment trust consisting of a number of
diversified portfolios (the "Series"), each portfolio consisting
of obligations ("Municipal Bonds," "Securities" or "Bonds")
issued by or on behalf of states of the United States or
counties, municipalities, authorities or political subdivisions
thereof.
The objective of each Series of the Trust is tax-exempt income
and conservation of capital with diversification of risk through
investment in an insured, fixed portfolio of Municipal Bonds.
Interest on certain Municipal Bonds in certain of the Trusts will
be a preference item for purposes of the alternative minimum tax.
Accordingly, such Trusts may be appropriate only for investors
who are not subject to the alternative minimum tax. There is, of
course, no guarantee that the Trusts' objective will be achieved.
All of the Municipal Bonds in a Series of the Trust were rated in
the category "BBB" or better by Standard & Poor's ("Standard &
Poor's") or "Baa" by Moody's Investors Service, Inc. ("Moody's")
on the date such Series was established (the "Date of Deposit").
Ratings of the Municipal Bonds may have changed since the Date of
Deposit. See "Description of Securities Ratings" herein and the
"Schedule of Investments" in Part Two.
The Units, each of which represents a pro rata undivided
fractional interest in the Municipal Bonds deposited in the
appropriate Series of the Trust, are issued and outstanding Units
which have been reacquired by the Sponsor either by purchase of
Units tendered to the Trustee for redemption or by purchase in
the open market. No offering is being made on behalf of the
Trust and any profit or loss realized on the sale of Units will
accrue to the Sponsor and/or the firm reselling such Units.
Insurance. Insurance guaranteeing the scheduled payment of
principal and interest on all of the Municipal Bonds in the
portfolio of each Series of the Trust has been obtained by the
Trust, the Sponsor or directly by the issuer from an independent
insurance company. Series A through A-24 of the Kemper
Tax-Exempt Insured Income Trust are insured by AMBAC Indemnity
Corporation ("AMBAC Indemnity") and Series A-25 and subsequent
Series of the Kemper Tax-Exempt Insured Income Trust, Kemper
Defined Funds Insured National Series and EVEREN Unit Investment
Trusts Insured National Series are insured by Financial Guaranty
Insurance Company ("Financial Guaranty"), Municipal Bond Investor
Assurance Corporation ("MBIA") or other insurers. Insurance
obtained directly by the issuer may be from such companies or
other insurers. See "Insurance on the Portfolio" herein and
"Schedule of Investments" in Part Two. Insurance obtained by the
Trust remains in effect only while the insured Municipal Bonds
are retained in the Trust, while insurance obtained by a
Municipal Bond issuer is effective so long as such Bonds are
outstanding. Pursuant to an irrevocable commitment of Financial
Guaranty, in the event of a sale of any Bond from Series A-25 or
subsequent Series of the Kemper Tax-Exempt Insured Income Trust
covered under the Trust's insurance policy, the Trustee has the
right to obtain permanent insurance for such Municipal Bond upon
the payment of a single predetermined insurance premium from the
proceeds of the sale of such Municipal Bond. The insurance, in
either case, does not relate to the Units offered hereby or to
their market value. As a result of such insurance, the Units of
each Series of the Trust received on the original Date of Deposit
a rating of "AAA" from Standard & Poor's. See "Insurance on the
Portfolio." No representation is made as to AMBAC Indemnity's,
Financial Guaranty's, MBIA's or any other insurer's ability to
meet its commitments.
Public Offering Price. The Public Offering Price per Unit of a
Series of the Trust is equal to a pro rata share of the aggregate
bid prices of the Municipal Bonds in such Series (plus or minus a
pro rata share of cash, if any, in the Principal Account, held or
owned by the Series) plus Purchased Interest, if any, plus a
sales charge shown under "Public Offering of Units." In
addition, there will be added to each transaction an amount equal
to the accrued interest from the last Record Date of such Series
to the date of settlement (three business days after order)(such
amount is referred to as Daily Accrued Interest in the case of
certain Series). The sales charge is reduced on a graduated
scale as indicated under "Public Offering of Units _ Public
Offering Price."
Interest and Principal Distributions. Distributions of the
estimated annual interest income to be received by a Series of
the Trust, after deduction of estimated expenses, will be made
monthly unless the Unitholder elects to receive such
distributions quarterly or semi-annually. Distributions will be
paid on the Distribution Dates to holders of record of such
Series on the Record Dates set forth for the applicable option.
See "Essential Information" in Part Two. The distribution of
funds, if any, in the Principal Account of each Series, will be
made semi-annually to Unitholders of Record on the appropriate
dates. See "Essential Information" in Part Two. Unitholders of
Kemper Defined Funds and EVEREN Unit Investment Trusts receive
monthly distributions of interest and principal.
Reinvestment. Distributions of interest and principal, including
capital gains, if any, made by a Series of the Trust will be paid
in cash unless a Unitholder elects to reinvest such distributions.
See "Distribution Reinvestment."
Estimated Current Return and Estimated Long-Term Return. The
Estimated Current Return is calculated by dividing the estimated
net annual interest income per Unit by the Public Offering Price
of such Trust. The estimated net annual interest income per Unit
will vary with changes in fees and expenses of such Trust and
with the principal prepayment, redemption, maturity, exchange or
sale of Securities while the Public Offering Price will vary with
changes in the bid price of the underlying Securities and with
changes in the Purchased Interest, if any; therefore, there is no
assurance that the present Estimated Current Return will be
realized in the future. Estimated Long-Term Return is calculated
using a formula which (1) takes into consideration, and
determines and factors in the relative weightings of, the market
values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated
retirements of all of the Securities in the Trust and (2) takes
into account the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirements of
the Securities and the expenses of the Trust will change, there
is no assurance that the present Estimated Long-Term Return will
be realized in the future. Estimated Current Return and
Estimated Long-Term Return are expected to differ because the
calculation of Estimated Long-Term Return reflects the estimated
date and amount of principal returned while Estimated Current
Return calculations include only net annual interest income and
Public Offering Price.
Market for Units. While under no obligation to do so, the
Sponsor intends, subject to change at any time, to maintain a
market for the Units of each Series of the Trust and to
continuously offer to repurchase such Units at prices which are
based on the aggregate bid side evaluation of the Municipal Bonds
in such Series of the Trust. If such a market is not maintained
and no other over-the-counter market is available, Unitholders
will still be able to dispose of their Units through redemption
by the Trustee at prices based upon the aggregate bid price of
the Municipal Bonds in such Series of the Trust. See
"Redemption."
Risk Factors. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among
other factors, the inability of the issuer or an insurer to pay
the principal of or interest on a bond when due, volatile
interest rates, early call provisions, and changes to the tax
status of the Municipal Bonds. See "Portfolios _ Risk Factors."
THE TRUST
Each Series of the Trust is one of a series of unit investment
trusts created by the Sponsor under the name Kemper Tax-Exempt
Insured Income Trust, Kemper Defined Funds Insured National
Series or EVEREN Unit Investment Trusts Insured National Series,
all of which are similar, and each of which was created under the
laws of the State of Missouri pursuant to a Trust Agreement[2]
(the "Agreement"). EVEREN Unit Investment Trusts, a service of
EVEREN Securities, Inc., acts as Sponsor and Evaluator and The
Bank of New York acts as Trustee.
The objectives of the Trust are tax-exempt income and
conservation of capital with diversification of risk through
investment in an insured, fixed portfolio of Municipal Bonds.
Interest on certain Municipal Bonds in the Trusts will be a
preference item for purposes of the alternative minimum tax.
Accordingly, such Trusts may be appropriate only for the
investors who are not subject to the alternative minimum tax.
There is, of course, no guarantee that the Trusts' objectives
will be achieved.
A Series of the Trust may be an appropriate investment vehicle
for investors who desire to participate in a portfolio of
insured, tax-exempt, fixed income securities with greater
diversification than they might be able to acquire individually.
In addition, Municipal Bonds of the type deposited in the Trust
are often not available in small amounts.
Each Series of the Trust consists of an insured portfolio of
interest bearing obligations issued by or on behalf of states of
the United States or counties, municipalities, authorities or
political subdivisions thereof the interest on which is, in the
opinion of bond counsel to the issuing authorities, exempt from
all Federal income taxes under existing law, but may be subject
to state and local taxes. Proceeds from the maturity, redemption
or sale of the Municipal Bonds in a Series of the Trust, unless
used to pay for Units tendered for redemption, will be
distributed to Unitholders of such Series and will not be
utilized to purchase replacement or additional Municipal Bonds
for the Series.
The Units, each of which represents a pro rata undivided
fractional interest in the principal amount of Municipal Bonds
deposited in a Series of the Trust, are issued and outstanding
Units which have been reacquired by the Sponsor either by
purchase of Units tendered to the Trustee for redemption or by
purchase in the open market. No offering is being made on behalf
of the Trust or any Series thereof and any profit or loss
realized on the sale of Units will accrue to the Sponsor and/or
the firm reselling such Units. To the extent that Units of a
Series of the Trust are redeemed, the principal amount of
Municipal Bonds in such Series will be reduced and the undivided
fractional interest represented by each outstanding Unit of the
Series will increase. See "Redemption."
PORTFOLIOS
In selecting the Municipal Bonds which comprise the portfolio of
a Series of the Trust the following requirements, were deemed to
be of primary importance: (a) a minimum rating of "BBB" by
Standard & Poor's or "Baa" by Moody's Investors Service, Inc.
(see "Description of Securities Ratings"); (b) the price of the
Municipal Bonds relative to other issues of similar quality and
maturity; (c) the diversification of the Municipal Bonds as to
purpose of issue; (d) the income to the Unitholders of the
Series; (e) whether such Municipal Bonds were insured, or the
availability and cost of insurance for the prompt payment of
principal and interest, when due, on the Municipal Bonds; and (f)
the dates of maturity of the Municipal Bonds.
Subsequent to the Date of Deposit, a Municipal Bond may cease to
be rated or its rating may be reduced below the minimum required
as of the Date of Deposit. Neither event requires the
elimination of such investment from the portfolio, but may be
considered in the Sponsor's determination to direct the Trustee
to dispose of the investment. See "Investment Supervision"
herein and "Schedule of Investments" in Part Two.
The Sponsor may not alter the portfolio of a Series of the Trust,
except that certain of the Municipal Bonds may be sold upon the
happening of certain extraordinary circumstances. See
"Investment Supervision."
Certain Series of the Trust contain Municipal Bonds which may be
subject to redemption prior to their stated maturity date
pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or
otherwise. A sinking fund is a reserve fund accumulated over a
period of time for retirement of debt. A callable debt
obligation is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a
method by which a debt obligation is redeemed at or before
maturity, by the proceeds of a new debt obligation. In general,
call provisions are more likely to be exercised when the offering
side valuation is at a premium over par than when it is at a
discount from par. Accordingly, any such call, redemption, sale
or maturity will reduce the size and diversity of such Series,
and the net annual interest income of the Series and may reduce
the Estimated Long-Term Returns and/or Estimated Current Return.
See "Interest and Estimated Long-Term and Current Returns." Each
Trust portfolio contains a listing of the sinking fund and call
provisions, if any, with respect to each of the debt obligations.
Extraordinary optional redemptions and mandatory redemptions
result from the happening of certain events. Generally, events
that may permit the extraordinary optional redemption of
Municipal Bonds or may require the mandatory redemption of
Municipal Bonds include among others: a final determination that
the interest on the Municipal Bonds is taxable; the substantial
damage or destruction by fire or other casualty of the project
for which the proceeds of the Municipal Bonds were used; an
exercise by a local, state or Federal governmental unit of its
power of eminent domain to take all or substantially all of the
project for which the proceeds of the Municipal Bonds were used;
changes in the economic availability of raw materials, operating
supplies or facilities or technological or other changes which
render the operation of the project for which the proceeds of the
Municipal Bonds were used uneconomic; changes in law or an
administrative or judicial decree which renders the performance
of the agreement under which the proceeds of the Municipal Bonds
were made available to finance the project impossible or which
creates unreasonable burdens or which imposes excessive
liabilities, such as taxes not imposed on the date the Municipal
Bonds are issued on the issuer of the Municipal Bonds or the user
of the proceeds of the Municipal Bonds; an administrative or
judicial decree which requires the cessation of a substantial
part of the operations of the project financed with the proceeds of
the Municipal Bonds; an overestimate of the costs of the
project to be financed with proceeds of the Municipal Bonds
resulting in excess proceeds of the Municipal Bonds which may be
applied to redeem Municipal Bonds; or an underestimate of a
source of funds securing the Municipal Bonds resulting in excess
funds which may be applied to redeem Municipal Bonds. The
Sponsor is unable to predict all of the circumstances which may
result in such redemption of an issue of Municipal Bonds.
The Sponsor and the Trustee shall not be liable in any way for
any default, failure or defect in any Municipal Bond.
Risk Factors. An investment in Units of a Series of the Trust
should be made with an understanding of the risks which an
investment in fixed rate debt obligations may entail, including
the risk that the value of the portfolio and hence of the Units
will decline with increases in interest rates. The value of the
underlying Municipal Bonds will fluctuate inversely with changes
in interest rates. The uncertain economic conditions experienced
in the past, together with the fiscal measures adopted to attempt
to deal with them, have resulted in wide fluctuations in interest
rates and, thus, in the value of fixed rate debt obligations
generally and long term obligations in particular. The Sponsor
cannot predict whether such fluctuations will continue in the
future.
Certain Series of the Trust contain Municipal Bonds which are
general obligations of a governmental entity that are backed by
the taxing power of such entity. All other Municipal Bonds in
the Series of the Trust are revenue bonds payable from the income
of a specific project or authority and are not supported by the
issuer's power to levy taxes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds,
on the other hand, are payable only from the revenues derived
from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific
revenue source. There are, of course, variations in the security
of the different Municipal Bonds in the Series of the Trust, both
within a particular classification and between classifications,
depending on numerous factors.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are derived from services
provided by hospitals and other health care facilities, including
nursing homes. In view of this an investment in such Series
should be made with an understanding of the characteristics of
such issuers and the risks that such an investment may entail.
Ratings of bonds issued for health care facilities are often
based on feasibility studies that contain projections of
occupancy levels, revenues and expenses. A facility's gross
receipts and net income available for debt service will be
affected by future events and conditions including, among other
things, demand for services and the ability of the facility to
provide the services required, physicians' confidence in the
facility, management capabilities, economic developments in the
service area, competition, efforts by insurers and governmental
agencies to limit rates, legislation establishing state rate-setting
agencies, expenses, the cost and possible
unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, and
government regulation. Federal legislation has been enacted
which implemented a system of prospective Medicare reimbursement
which may restrict the flow of revenues to hospitals and other
facilities which are reimbursed for services provided under the
Medicare program. Future legislation or changes in the areas
noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse changes in these
areas may adversely affect the ability of such issuers to make
payment of principal and interest on Municipal Bonds held in such
Series. Such adverse changes also may adversely affect the
ratings of the Municipal Bonds held in such Series of the Trust.
Hospitals and other health care facilities are subject to claims
and legal actions by patients and others in the ordinary course
of business. Although these claims are generally covered by
insurance, there can be no assurance that a claim will not exceed
the insurance coverage of a health care facility or that
insurance coverage will be available to a facility. In addition,
a substantial increase in the cost of insurance could adversely
affect the results of operations of a hospital or other health
care facility. Certain hospital bonds may provide for redemption
at par at any time upon the sale by the issuer of the hospital
facilities to a non-affiliated entity or in other circumstances.
For example, certain hospitals may have the right to call bonds
at par if the hospital may legally be required because of the
bonds to perform procedures against specified religious
principles. Certain FHA-insured bonds may provide that all or a
portion of those bonds, otherwise callable at a premium, can be
called at par in certain circumstances. If a hospital defaults
upon a bond obligation, the realization of Medicare and Medicaid
receivables may be uncertain and, if the bond obligation is
secured by the hospital facilities, legal restrictions on the
ability to foreclose upon the facilities and the limited
alternative uses to which a hospital can be put may reduce
severely its collateral value.
Certain Series of the Trust contain Municipal Bonds which are
single family mortgage revenue bonds, which are issued for the
purpose of acquiring from originating financial institutions
notes secured by mortgages on residences located within the
issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely
prepaid prior to their final maturities as a result of events
such as sale of the mortgaged premises, default, condemnation or
casualty loss. Because these Municipal Bonds are subject to
extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such
Municipal Bonds will probably be redeemed prior to their
scheduled maturities or even prior to their ordinary call dates.
The redemption price of such issues may be more or less than the
offering price of such Municipal Bonds. Extraordinary mandatory
redemption without premium could also result from the failure of
the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some
cases, from the sale by the Municipal Bond issuer of the mortgage
loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates on
mortgage loans funded from other sources becoming competitive
with the interest rates on the mortgage loans funded with the
proceeds of the single family mortgage revenue bonds.
Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single
family mortgage revenue bonds issued after December 31, 1980 were
issued under Section 103A of the Internal Revenue Code, which
Section contains certain ongoing requirements relating to the use
of the proceeds of such Bonds in order for the interest on such
Municipal Bonds to retain its tax-exempt status. In each case,
the issuer of the Municipal Bonds has covenanted to comply with
applicable ongoing requirements and bond counsel to such issuer
has issued an opinion that the interest on the Municipal Bonds is
exempt from Federal income tax under existing laws and
regulations. There can be no assurances that the ongoing
requirements will be met. The failure to meet these requirements
could cause the interest on the Municipal Bonds to become
taxable, possibly retroactively from the date of issuance.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are primarily derived from
mortgage loans to housing projects for low to moderate income
families. The ability of such issuers to make debt service
payments will be affected by events and conditions affecting
financed projects, including, among other things, the achievement
and maintenance of sufficient occupancy levels and adequate
rental income, increases in taxes, employment and income
conditions prevailing in local labor markets, utility costs and
other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the
appropriation of subsidies and social and economic trends
affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high
rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds,
multi-family mortgage revenue bonds are subject to redemption and
call features, including extraordinary mandatory redemption
features, upon prepayment, sale or non-origination of mortgage
loans as well as upon the occurrence of other events. Certain
issuers of single or multi-family housing bonds have considered
various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In connection with the
housing Municipal Bonds held by the Trust, the Sponsor has not
had any direct communications with any of the issuers thereof,
but at the initial Date of Deposit it was not aware that any of
the respective issuers of such Municipal Bonds were actively
considering the redemption of such Municipal Bonds prior to their
respective stated initial call dates. However, there can be no
assurance that an issuer of a Municipal Bond in the Trust will
not attempt to so redeem a Municipal Bond in the Trust.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are derived from the sale
of water and/or sewerage services. Water and sewerage bonds are
generally payable from user fees. Problems faced by such issuers
include the ability to obtain timely and adequate rate increases,
a decline in population resulting in decreased user fees, the
difficulty of financing large construction programs, the
limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh
water, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. Issuers may have experienced
these problems in varying degrees. Because of the relatively
short history of solid waste disposal bond financing, there may
be technological risks involved in the satisfactory construction
or operation of the projects exceeding those associated with most
municipal enterprise projects. Increasing environmental
regulation on the federal, state and local level has a
significant impact on waste disposal facilities. While
regulation requires more waste producers to use waste disposal
facilities, it also imposes significant costs on the facilities.
These costs include compliance with frequently changing and
complex regulatory requirements, the cost of obtaining
construction and operating permits, the cost of conforming to
prescribed and changing equipment standards and required methods
of operation and the cost of disposing of the waste residue that
remains after the disposal process in an environmentally safe
manner. In addition, waste disposal facilities frequently face
substantial opposition by environmental groups and officials to
their location and operation, to the possible adverse effects
upon the public health and the environment that may be caused by
wastes disposed of at the facilities and to alleged improper
operating procedures. Waste disposal facilities benefit from
laws which require waste to be disposed of in a certain manner
but any relaxation of these laws could cause a decline in demand
for the facilities' services. Finally, waste disposal facilities
are concerned with many of the same issues facing utilities
insofar as they derive revenues from the sale of energy to local
power utilities.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are primarily derived from
the sale of electric energy or natural gas. Utilities are
generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which
may be charged and the appropriate rate of return on an approved
asset base. The problems faced by such issuers include the
difficulty in obtaining approval for timely and adequate rate
increases from the governing public utility commission, the
difficulty in financing large construction programs, the
limitations on operations and increased costs and delays
attributable to environmental considerations, increased
competition, recent reductions in estimates of future demand for
electricity in certain areas of the country, the difficulty of
the capital market in absorbing utility debt, the difficulty in
obtaining fuel at reasonable prices and the effect of energy
conservation. Issuers may have experienced these problems in
varying degrees. In addition, Federal, state and municipal
governmental authorities may from time to time review existing
and impose additional regulations governing the licensing,
construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of such Municipal
Bonds to make payments of principal and/or interest on such
Municipal Bonds. The ability of state and local joint action
power agencies to make payments on bonds they have issued is
dependent in large part on payments made to them pursuant to
power supply or similar agreements. Courts in Washington and
Idaho have held that certain agreements between the Washington
Public Power Supply System ("WPPSS") and the WPPSS participants
are unenforceable because the participants did not have the
authority to enter into the agreements. While these decisions
are not specifically applicable to agreements entered into by
public entities in other states, they may cause a reexamination
of the legal structure and economic viability of certain projects
financed by joint action power agencies, which might exacerbate
some of the problems referred to above and possibly lead to legal
proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Certain Series of the Trust contain Municipal Bonds which are
industrial revenue bonds ("IRBs"), including pollution control
revenue bonds, which are tax-exempt securities issued by states,
municipalities, public authorities or similar entities to finance
the cost of acquiring, constructing or improving various
industrial projects. These projects are usually operated by
corporate entities. Issuers are obligated only to pay amounts
due on the IRBs to the extent that funds are available from the
unexpended proceeds of the IRBs or receipts or revenues of the
issuer under an arrangement between the issuer and the corporate
operator of a project. The arrangement may be in the form of a
lease, installment sale agreement, conditional sale agreement or
loan agreement, but in each case the payments to the issuer are
designed to be sufficient to meet the payments of amounts due on
the IRBs. Regardless of the structure, payment of IRBs is solely
dependent upon the creditworthiness of the corporate operator of
the project or corporate guarantor. Corporate operators or
guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or
industry. These include cyclicality of revenues and earnings,
regulatory and environmental restrictions, litigation resulting
from accidents or environmentally-caused illnesses, extensive
competition and financial deterioration resulting from leveraged
buy-outs or takeovers. The IRBs in the Series of the Trust may
be subject to special or extraordinary redemption provisions
which may provide for redemption at par or, with respect to
original issue discount bonds, at issue price plus the amount of
original issue discount accreted to the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other Municipal Bonds in
the Series of the Trust prior to the stated maturity of such
Municipal Bonds.
Certain Series of the Trust contain Municipal Bonds which are
obligations which are payable from and secured by revenues
derived from the ownership and operation of facilities such as
airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross
operating income is generally derived from fees received from
signatory airlines pursuant to use agreements which consist of
annual payments for leases, occupancy of certain terminal space
and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations
under the use agreements. The air transport industry is
experiencing significant variations in earnings and traffic, due
to increased competition, excess capacity, increased costs,
deregulation, traffic constraints and other factors, and several
airlines are experiencing severe financial difficulties. The
Sponsor cannot predict what effect these industry conditions may
have on airport revenues which are dependent for payment on the
financial condition of the airlines and their usage of the
particular airport facility. Similarly, payment on Municipal
Bonds related to other facilities is dependent on revenues from
the projects, such as user fees from ports, tolls on turnpikes
and bridges and rents from buildings. Therefore, payment may be
adversely affected by reduction in revenues due to such factors
as increased cost of maintenance, decreased use of a facility,
lower cost of alternative modes of transportation, scarcity of
fuel and reduction or loss of rents.
Certain Series of the Trusts contain Municipal Bonds which are
obligations of issuers which are, or which govern the operation
of, schools, colleges and universities and whose revenues are
derived mainly from ad valorem taxes, or for higher education
systems, from tuition, dormitory revenues, grants and
endorsements. General problems relating to school bonds include
litigation contesting the state constitutionality of financing
public education in part from ad valorem taxes, thereby creating
a disparity in educational funds available to schools in wealthy
areas and schools in poor areas. Litigation or legislation on
this issue may affect the sources of funds available for the
payment of school bonds in the Trusts. General problems relating
to college and university obligations would include the prospect
of a declining percentage of the population consisting of
"college" age individuals, possible inability to raise tuition
and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state
funding and new government legislation or regulations which may
adversely affect the revenues or costs of such issuers. All of
such issuers have been experiencing certain of these problems in
varying degrees. In addition, the ability of universities and
colleges to meet their obligations is dependent upon various
factors, including the size and diversity of their sources of
revenues, enrollment, reputation, management expertise, the
availability and restrictions on the use of endowments and other
funds, the quality and maintenance costs of campus facilities,
and, in the case of public institutions, the financial condition
of the relevant state or other governmental entity and its
policies with respect to education. The institution's ability to
maintain enrollment levels will depend on such factors as tuition
costs, geographic location, geographic diversity and quality of
student body, quality of the faculty and the diversity of program
offerings.
Certain Series of the Trust contain Municipal Bonds which are
Urban Redevelopment Bonds ("URBs"). URBs have generally been
issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a
particular project have been assigned and pledged to purchasers.
In some cases, a mortgage on the underlying project may have been
granted as security for the URBs. Regardless of the structure,
payment of the URBs is solely dependent upon the creditworthiness
of the operator of the project.
Certain of the Municipal Bonds in the Trust may be lease revenue
bonds whose revenues are derived from lease payments made by a
municipality or other political subdivision which is leasing
equipment or property for use in its operation. The risks
associated with owning Municipal Bonds of this nature include the
possibility that appropriation of funds for a particular project
or equipment may be discontinued. The Sponsor cannot predict the
likelihood of nonappropriation of funds for these types of lease
revenue Municipal Bonds.
Certain Series of the Trust contain "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the
payment of current interest. Zero coupon bonds are purchased at
a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not
receive any periodic interest payments. The effect of owning
deep discount bonds which do not make current interest payments
(such as the zero coupon bonds) is that a fixed yield is earned
not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This
implicit reinvestment of earnings at the same rate eliminates the
risk of being unable to reinvest the income on such obligation at
a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest
at higher rates in the future. For this reason, zero coupon
bonds are subject to substantially greater price fluctuations
during periods of changing market interest rates than are
securities of comparable quality which pay interest currently.
For the Federal tax consequences of original issue discount bonds
such as the zero coupon bonds, see "Tax Status of the Trust."
Investors should be aware that many of the Municipal Bonds in the
Series of the Trust are subject to continuing requirements such
as the actual use of Municipal Bond proceeds or manner of
operation of the project financed from Municipal Bond proceeds
that may affect the exemption of interest on such Municipal Bonds
from Federal income taxation. Although at the time of issuance
of each of the Municipal Bonds in the Series of the Trust an
opinion of bond counsel was rendered as to the exemption of
interest on such obligations from Federal income taxation, there
can be no assurance that the respective issuer or other obligors on
such obligations will fulfill the various continuing
requirements established upon issuance of the Municipal Bonds. A
failure to comply with such requirements may cause a
determination that interest on such obligations is subject to
Federal income taxation, perhaps even retroactively from the date
of issuance of such Municipal Bonds, thereby reducing the value
of the Municipal Bonds and subjecting Unitholders to
unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of debts
of political subdivisions and authorities of states of the United
States provide that, in certain circumstances, such subdivisions
or authorities may be authorized to initiate bankruptcy
proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse
modification or alteration of the rights of holders of
obligations issued by such subdivisions or authorities.
Certain issues of the Municipal Bonds in some Series of the Trust
represent "moral obligations" of a governmental entity other than
the issuer. In the event that the issuer of the Municipal Bond
defaults in the repayment thereof, such other governmental entity
lawfully may, but is not obligated to, discharge the obligation
of the issuer to repay such Municipal Bond. If an issuer of
moral obligation bonds is unable to meet its obligations, the
repayment of such Municipal Bonds becomes a moral commitment but
not a legal obligation of the state or municipality in question.
Even though the state may be called on to restore any deficits in
capital reserve funds of the agencies or authorities which issued
the bonds, any restoration generally requires appropriation by
the State legislature and accordingly does not constitute a
legally enforceable obligation or debt of the state. The
agencies or authorities generally have no taxing power.
To the best of the Sponsor's knowledge, as of the Date of Deposit
for each Trust, there is no litigation pending with respect to
any Municipal Bond which might reasonably be expected to have a
material adverse effect on the Trust or any Series thereof.
Although the Sponsor is unable to predict whether any litigation
may be instituted, or if instituted, whether such litigation
might have a material adverse effect on the Trust or any Series,
the Trust received copies of the opinions of bond counsel given
to the issuing authorities at the time of original delivery of
each of the Municipal Bonds to the effect that the Municipal
Bonds had been validly issued and that the interest thereon is
exempt from Federal income taxes.
INSURANCE ON THE PORTFOLIOS
All Municipal Bonds in the portfolios of each Series of the Trust
are insured as to payment of interest and principal, when due,
either by a policy obtained by the Trust, the Sponsor or by the
Bond issuer. Series A through A-24 of the Kemper Tax-Exempt
Insured Income Trust are insured by AMBAC Indemnity and Series
A-25 and subsequent Series of the Kemper Tax-Exempt Insured
Income Trust, Kemper Defined Funds Insured National Series and
EVEREN Unit Investment Trusts Insured National Series are insured
by Financial Guaranty, MBIA and other insurers. The insurance
policy obtained by the Trust for a Series is non-cancelable and will
continue in force so long as such Series of the Trust is in
existence, the insurer and/or the reinsures referred to below
remain in business and the Municipal Bonds described in the
policy continue to be held in such Series of the Trust. The
premium for any insurance policy or policies obtained by an
issuer of Municipal Bonds has been paid in advance by such issuer
and any such policy or policies are non-cancelable and will
remain in force so long as the Municipal Bonds so insured are
outstanding and the insurer and/or insurers referred to below
remain in business. In those instances where Municipal Bond
insurance is obtained by the Sponsor or the issuer directly from
an insurer, no premiums for insurance are paid by the Trust and
such bonds are not covered by the Trust's policy. Non-payment of
premiums on the policy obtained by the Trust will not result in
the cancellation of such insurance but will force the insurer to
take action against the Trustee to recover premium payments due
it. Premium rates for each issue of Municipal Bonds protected by
the policy obtained by the Trust are fixed for the life of the
appropriate Series of the Trust.
The aforementioned insurance guarantees the scheduled payment of
principal and interest on all of the Municipal Bonds as they fall
due. It does not guarantee the market value of the Municipal
Bonds or the value of the Units of a Series of the Trust. The
insurance obtained by the Trust is only effective as to Municipal
Bonds owned by and held in a Series of the Trust and the price
which an individual pays on acquisition of Units, or receives on
redemption or resale of Units, does not, except as indicated
below, include any element of value for the insurance obtained by
the Trust. Unitholders should recognize that in order to receive
any benefit from the portfolio insurance obtained by the Trust
they must be owners of the Units of a Series of the Trust at the
time the Trustee becomes entitled to receive any payment from the
insurer for such Series. Insurance obtained by the issuer of a
Municipal Bond is effective so long as the Municipal Bond is
outstanding, whether or not held by a Series of the Trust.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Municipal Bond from Series A-25 (or
any subsequent Series) of the Kemper Tax-Exempt Insured Income
Trust, Kemper Defined Funds Insured National Series or EVEREN
Unit Investment Trusts covered under the Trust's insurance
policy, has the right to obtain permanent insurance (the
"Permanent Insurance") with respect to such Municipal Bond (i.e.,
insurance to the maturity of the Municipal Bond regardless of the
identity of the holder thereof) upon the payment of a single
predetermined insurance premium from the proceeds of the sale of
such Municipal Bond. Accordingly, every Municipal Bond in Series
A-25 (or subsequent Series) of the Kemper Tax-Exempt Insured
Income Trust, Kemper Defined Funds Insured National Series or
EVEREN Unit Investment Trusts is eligible to be sold on an
insured basis. It is expected that the Trustee will exercise
the right to obtain Permanent Insurance with respect to Municipal
Bonds in such Series only if upon such exercise the Trust would
receive net proceeds (i.e., the value of such Municipal Bond if
sold as an insured Municipal Bond less the insurance premium
attributable to the Permanent Insurance) from such sale in excess
of the sale proceeds if such Municipal Bond was sold on an
uninsured basis. The insurance premium with respect to each
Municipal Bond is determined based upon the insurability of each
Municipal Bond as of the Date of Deposit and will not be
increased or decreased for any change in the creditworthiness of
such Municipal Bond's issuer.
Insurance obtained by the Trust, under normal circumstances, has
no effect on the price or redemption value of Units. It is the
present intention of the Evaluator to attribute a value to such
insurance for the purpose of computing the price or redemption
value of Units only in circumstances where the credit quality of
an underlying Municipal Bond has significantly deteriorated.
Insurance obtained by the issuer of a Municipal Bond is effective
so long as such Municipal Bond is outstanding. Therefore, any
such insurance may be considered to represent an element of
market value in regard to the Municipal Bonds thus insured, but
the exact effect, if any, of this insurance on such market value
cannot be predicted.
The value to be added to such Municipal Bonds shall be an amount
equal to the excess, if any, by which the net proceeds realized
from the sale of the Municipal Bonds on an insured basis exceeds
the sum of (i) the net proceeds realizable from the sale of the
Municipal Bonds on an uninsured basis plus (ii) in the case of
Series A-25 and subsequent Series of the Kemper Tax-Exempt
Insured Income Trust, Kemper Defined Funds Insured National
Series or EVEREN Unit Investment Trusts the premium attributable
to the Permanent Insurance. The portfolio insurance obtained by
the Trust from AMBAC Indemnity for Series A through A-24 of the
Kemper Tax-Exempt Insured Income Trust is applicable only while
the Municipal Bonds remain in the Trust's portfolio.
Consequently, the price received by the Trust upon the
disposition of any such Municipal Bond will reflect a value
placed upon it by the market as an uninsured obligation rather
than a value resulting from the insurance. Due to this fact, the
Sponsor will not direct the Trustee to dispose of Municipal Bonds
in Series A through A-24 of the Kemper Tax-Exempt Insured Income
Trust which are in default or imminent danger of default but to
retain such Municipal Bonds in the portfolio so that if a default
in the payment of interest or principal occurs the Trust may
realize the benefits of the insurance.
The Sponsor will instruct the Trustee not to sell Municipal Bonds
from Series A-25 or subsequent Series of the Kemper Tax-Exempt
Insured Income Trust, Kemper Defined Funds Insured National
Series or EVEREN Unit Investment Trusts Insured National Series
to effect redemptions or for any reason but rather to retain them
in the portfolio unless value attributable to the Permanent
Insurance can be realized upon sale. See "Investment
Supervision."
Financial Guaranty Insurance Company. Financial Guaranty is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"),
a Delaware holding company. The Corporation is a wholly-owned
subsidiary is General Electric Capital Corporation ("GECC").
Neither the Corporation nor GECC is obligated to pay the debt of or
the claims against Financial Guaranty. Financial Guaranty is
domiciled in the State of New York and is subject to regulation
by the State of New York Insurance Department. As of December
31, 1995, the total capital and surplus of Financial Guaranty was
approximately $1,000,520,000. Copies of Financial Guaranty's
financial statements, prepared on the basis of statutory
accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted
accounting principles, may be obtained by writing to Financial
Guaranty at 115 Broadway, New York, New York 10006, Attention:
Communications Department or to the New State Insurance
Department at 160 West Broadway, 18th Floor, New York, New York
10013, Attention: Property Companies Bureau (telephone number
(212) 621-0389). Financial Guaranty's telephone number is (212)
312-3000.
In addition, Financial Guaranty Insurance Company is currently
authorized to write insurance in all 50 states and the District
of Columbia.
The information relating to Financial Guaranty contained above
has been furnished by such corporation. The financial
information contained herein with respect to such corporation is
unaudited but appears in reports or other materials filed with
state insurance regulatory authorities and is subject to audit
and review by such authorities. No representation is made herein
as to the accuracy or adequacy of such information or as to the
absence of material adverse changes in such information
subsequent to the date thereof but the Sponsor is not aware that
the information herein is inaccurate or incomplete.
AMBAC Indemnity Corporation. AMBAC Indemnity Corporation
("AMBAC") is a Wisconsin-domiciled stock insurance company,
regulated by the office of Commissioner of Insurance of
Wisconsin, and licensed to do business in 50 states, the District
of Columbia and the Commonwealth of Puerto Rico, with admitted
assets (unaudited) of approximately $2,145,000,000 and statutory
capital (unaudited) of approximately $782,000,000 as of December
31, 1994. Statutory capital consists of statutory contingency
reserve and policyholders' surplus. AMBAC Indemnity is a
wholly-owned subsidiary of AMBAC Inc., a 100% publicly held
company. Moody's Investors Service, Inc. and Standard & Poor's
Corporation have both assigned a AAA claims-paying ability rating
to AMBAC. Copies of AMBAC's financial statements prepared in
accordance with statutory accounting standards are available from
AMBAC. The address of AMBAC's administrative offices and its
telephone number are One State Street Plaza, 17 Floor, New York,
New York 10004 and (212) 668-0340. AMBAC has entered into quota
share reinsurance agreements under which a percentage of the
insurance underwritten pursuant to certain municipal bank
insurance programs of AMBAC Indemnity has been and will be
assumed by a number of foreign and domestic unaffiliated
reinsures.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA
Corporation") is the principal operating subsidiary of MBIA,
Inc., a New York Stock Exchange listed Company. MBIA, Inc. is
obligated to pay the debts of or claims against MBIA Corporation.
MBIA Corporation, which commenced municipal bond insurance
operations on January 5, 1987, is a limited liability corporation
rather than a several liability association. MBIA Corporation is
domiciled in the State of New York and licensed to do business in
all 50 states, the District of Columbia and the Commonwealth of
Puerto Rico.
As of September 30, 1995 MBIA Corporation had admitted assets of
$3.7 billion (unaudited), total liabilities of $2.5 billion
(unaudited), and total capital and surplus of $1.2 billion
(unaudited) prepared in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, the Insurer has admitted
assets of $3.4 billion (audited), total liabilities of $2.3
billion (audited), and total capital and surplus of $1.1 billion
(audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory
authorities. Standard & Poor's has rated the claims-paying
ability of MBIA "AAA." Copies of MBIA Corporation's financial
statements prepared in accordance with statutory accounting
practices are available from MBIA Corporation. The address of
MBIA Corporation is 113 King Street, Armonk, New York 10504.
Effective December 31, 1993, MBIA Inc. acquired Bond Investors
Group, Inc. On January 5, 1990, the Insurer acquired all of the
outstanding stock of Bond Investors Group, Inc., the parent of
BIG, now known as MBIA Insurance Corp. of Illinois. Through a
reinsurance agreement, BIG has ceded all of its net insured
risks, as well as its unearned premium and contingency reserves,
to the Insurer and the Insurer has reinsured BIG's net
outstanding exposure.
Moody's Investors Service rates all bonds issues insured by MBIA
"Aaa" and short-term loans "MIG1," both designated to be of the
highest quality. Standard & Poor's rates all new issues insured
by MBIA "AAA."
Financial Security Assurance. Financial Security Assurance
("Financial Security" or "FSA") is a monoline insurance company
incorporated on March 16, 1984 under the laws of the State of New
York. The operations of Financial Security commenced on July 25,
1985, and Financial Security received its New York State
insurance license on September 23, 1985. Financial Security and
its two wholly owned subsidiaries are licensed to engage in
financial guaranty insurance business in 49 states, the District
of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively
in the business of writing financial guaranty insurance,
principally in respect of asset-backed and other collateralized
securities offered in domestic and foreign markets. Financial
Security and its subsidiaries also write financial guaranty
insurance in respect of municipal and other obligations and
reinsure financial guaranty insurance policies written by other
leading insurance companies. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled
payments of an issuer's securities, thereby enhancing the credit
rating of these securities, in consideration for payment of a
premium to the insurer.
Financial Security is 91.6% owned by U S West, Inc., and 8.4%
owned by Tokio Marine and Fire Insurance Co., Ltd. ("Tokio
Marine"). Neither U S West, Inc. nor Tokio Marine is obligated
to pay the debts of or the claims against Financial Security.
Financial Security is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance
Department.
As of March 31, 1993 the total policyholders' surplus and
contingency reserves and the total unearned premium reserve,
respectively, of Financial Security and its consolidated
subsidiaries were, in accordance with statutory accounting
principles, approximately $479,110,000 (unaudited) and
$220,078,000 (unaudited), and the total shareholders' equity and
the unearned premium reserve, respectively of Financial Security
and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately
$628,119,000 (unaudited) and $202,493,000 (unaudited).
Copies of Financial Security's financial statements may be
obtained by writing of Financial Security at 350 Park Avenue, New
York, New York 10022, attention Communications Department.
Financial Security's and its telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or either of its
subsidiaries are reinsured among such companies at an agreed-upon
percentage substantially proportional to their respective
capital, surplus and reserves, subject to applicable statutory
risk limitations. In addition, Financial Security reinsures a
portion of its liabilities under certain of its financial
guaranty insurance policies with unaffiliated reinsures under
various quota share treaties and on a transaction-by-transaction
basis. Such reinsurance is utilized by Financial Security as a
risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial
Security's obligations under any financial guaranty insurance
policy.
Financial Security's claims-paying ability is rated "Aaa" by
Moody's Investors Service, Inc., and "AAA" by Standard & Poor's,
Nippon Investors Service Inc., Duff & Phelps Inc. and Australian
Ratings Pty. Ltd. Such ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell
or hold securities and are subject to revision or withdrawal at
any time by such rating agencies.
Capital Guaranty Insurance Company. Capital Guaranty Insurance
Company ("Capital Guaranty" or "CGIC") is a "Aaa/AAA" rated
monoline stock insurance company incorporated in the State of
Maryland, and is a wholly owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company. Capital
Guaranty Corporation is a publicly owned company whose shares are
traded on the New York Stock Exchange.
Capital Guaranty Corporation is authorized to provide insurance
in all 50 states, the District of Columbia, the Commonwealth of
Puerto Rico, Guam and the U.S. Virgin Islands. Capital Guaranty
focuses on insuring municipal securities and provides policies
which guaranty the timely payment of principal and interest when due
for payment on new issue and secondary market issue municipal
bond transactions. Capital Guaranty's claims-paying ability is
rated "Triple-A" by both Moody's and Standard & Poor's.
As of September 30, 1995, Capital Guaranty had $19.0 billion in
net exposure outstanding (excluding defeased issues). The total
statutory policyholders' surplus and contingency reserve of
Capital Guaranty was $204,642,000 and the total admitted assets
were $326,802,226 as reported to the Insurance Department of the
State of Maryland as of September 30, 1995.
Financial statements for Capital Guaranty Insurance Company, that
have been prepared in accordance with statutory insurance
accounting standards, are available upon request. The address of
Capital Guaranty's headquarters is Steuart Tower, 22nd Floor, One
Market Plaza, San Francisco, CA 94105-1413 and the telephone
number is (415) 955-8000.
In order to be in a Series of the Trust, Municipal Bonds must be
insured by the issuer thereof or be eligible for the insurance
obtained by the Series of the Trust. In determining eligibility,
the company insuring the portfolio has applied its own standards
which correspond generally to the standards it normally uses in
establishing the insurability of new issues of municipal bonds
and which are not necessarily the criteria used in regard to the
selection of Municipal Bonds by the Sponsor. To the extent the
standards of the insurer are more restrictive than those of the
Sponsor, the previously stated Trust investment criteria have
been limited.
On the date shown under "Essential Information" in Part Two, the
Estimated Long-Term and Current Returns per Unit for the Trust,
after payment of the insurance premium, if any, were as
indicated. The Estimated Long-Term and Current Returns per Unit
for a trust with an identical portfolio without the insurance
obtained by the Trust would have been higher on such date.
An objective of the portfolio insurance obtained by the Trust is
to obtain a higher yield on the portfolio of the Series of the
Trust than would be available if all the Municipal Bonds in such
portfolio had Standard & Poor's "AAA" rating and/or Moody's "Aaa"
rating(s), while having the protection of insurance of prompt
payment of interest and principal, when due, on the Municipal
Bonds. There is, of course, no certainty that this result will
be achieved. Municipal Bonds in a Series of the Trust which have
been insured by the issuer (all of which are rated "AAA" by
Standard & Poor's and/or "Aaa" by Moody's) may or may not have a
higher yield than uninsured bonds rated "AAA" by Standard &
Poor's or "Aaa" by Moody's. In selecting such Municipal Bonds
for the portfolio, the Sponsor has applied the criteria described
above.
In the event of nonpayment of interest or principal, when due, in
respect of a Municipal Bond, the appropriate insurer shall make
such payment not later than 30 days after it has been notified
that such nonpayment has occurred or is threatened (but not
earlier than the date such payment is due). The insurer, as
regards any payment it may make, will succeed to the rights of
the Trustee in respect thereof.
The Internal Revenue Service has issued a letter ruling which holds,
in effect, that insurance proceeds representing maturity
interest on defaulted municipal obligations paid to municipal
bond funds substantially similar to the Trust, under policy
provisions substantially identical to the policies described
herein, will be excludable from Federal gross income under
Section 103(a)(1) of the Internal Revenue Code. Holders of Units
in the Trust should discuss with their tax advisers the degree of
reliance which they may place on this letter ruling.
Furthermore, Chapman and Cutler, Counsel for the Sponsor, have
given an opinion to the effect that such payment of proceeds
would be excludable from Federal gross income to the same extent
that such interest would have been so excludable if paid by the
issuer of the defaulted obligations. See "Tax Status of the
Trust."
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust Fund may elect to have distributions
of principal (including capital gains, if any) or interest or
both automatically invested without charge in shares of any
mutual fund registered in such Unitholder's state of residence
which is underwritten or advised by Kemper Financial Services,
Inc., an affiliate of the sponsor, (the "Kemper Funds"), other
than those Kemper Funds sold with a contingent deferred sales
charge. Since the portfolio securities and investment objectives
of such Kemper Funds may differ significantly from that of the
Trust Funds, Unitholders should carefully consider the
consequences, including the fact that distributions from such
Kemper Funds may be taxable, before selecting such Kemper Funds
for reinvestment. Detailed information with respect to the
investment objectives and the management of the Funds is
contained in their respective prospectuses, which can be obtained
from and appropriate Trust Fund Underwriter upon request. An
investor should read the prospectus of the reinvestment fund
selected prior to making the election to reinvest. Unitholders
who desire to have such distributions automatically reinvested
should inform their broker at the time of purchase or should file
with the Program Agent referred to below a written notice of
election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the
Program Agent an election to have such distributions reinvested
without charge. Such election must be received by the Program
Agent at least ten days prior to the Record Date applicable to
any distribution in order to be in effect for such Record Date.
Any such election shall remaining effect until a subsequent
notice is received by the Program Agent (See "Distributions to
Unitholders").
The Program Agent is the Trustee. All inquiries concerning
participation in distribution reinvestment should be directed to
the Program Agent at its unit investment trust division office.
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS
As of the opening of business on the date indicated therein, the
Estimated Current Returns, if applicable, and the Estimated
Long-Term Returns for the Trust were as set forth under
"Essential Information" in Part Two of this Prospectus. Estimated
Current Returns are calculated by dividing the
estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per
Unit will vary with changes in fees and expenses of the Trust and
with the principal prepayment, redemption, maturity, exchange or
sale of Securities while the Public Offering Price will vary with
changes in the offering price of the underlying Securities and
with changes in Purchased Interest, if any; 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.
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 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. 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
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 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 (Daily Accrued Interest for certain
Series). The Public Offering Price per Unit of a Series is equal
to the aggregate bid side evaluation of the Municipal Bonds in
the Series' portfolio (as determined pursuant to the terms of a
contract with the Evaluator, by 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
the Series, divided by the number of outstanding Units of that
Series of the Trust, plus Purchased Interest, if any, plus the
sales charge applicable. The sales charge is based upon the
dollar weighted average maturity of the Trust and is determined
in accordance with the table set forth below. Investors who
purchase Units through brokers or dealers pursuant to a current
management agreement which by contract or operation of law does
not allow such broker or dealer to earn an additional commission
(other than any fee or commission paid for maintenance of such
investor's account under the management agreement) on such
transactions may purchase such Units at the current Public
Offering Price net of the applicable broker or dealer concession.
See "Public Distribution of Units" below. For purposes of this
computation, Municipal Bonds will be deemed to mature on their
expressed maturity dates unless: (a) the Municipal Bonds have
been called for redemption or funds or securities have been
placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they
mature; or (b) such Municipal Bonds are subject to a "mandatory
tender," in which case such mandatory tender will be deemed to be
the date upon which they mature. The effect of this method of
sales charge computation will be that different sales charge
rates will be applied to the Trust based upon the dollar weighted
average maturity of such Trust's portfolio, in accordance with
the following schedule:
PERCENT OF PERCENT
DOLLAR WEIGHTED PUBLIC OF NET
AVERAGE YEARS OFFERING AMOUNT
TO MATURITY PRICE INVESTED
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
The sales charge per Unit will be reduce d as set forth below:
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)
$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
- -------------------
* If the dollar weighted average maturity of a Trust is from 1
to 3.99 years, the sales charge is 2% and 1.5% of the Public
Offering Price for purchases of $1 to $249,999 and $250,000 or
more, respectively.
The reduced sales charge as shown on the preceding charts will
apply to all purchases of Units on any one day by the same
purchases from the same dealer, and for this purpose, purchases
of Units of a Series of the Trust will be aggregated with
concurrent purchases of Units of any other unit investment trust
that may be offered by the Sponsor. Additionally, Units
purchased in the name of a spouse or child (under 21) of such
purchaser will be deemed to be additional purchases by such
purchaser. The reduced sales charge will also be applicable to a
trust or other fiduciary purchasing for a single trust estate or
single fiduciary account.
The Sponsor intends to permit officers, directors and employees
of the Sponsor and Evaluator and, at the discretion of the
Sponsor, registered representatives of selling firms to purchase
Units of the Trusts without a sales charge, although a
transaction processing fee may be imposed on such trades.
The Public Offering Price on the date shown on the cover page of
Part Two of the Prospectus or on any subsequent date will vary
from the amounts stated under "Essential Information" in Part Two
in accordance with fluctuations in the prices of the underlying
Municipal Bonds. The aggregate bid side evaluation of the
Municipal Bonds shall be determined (a) on the basis of current
bid prices of the Municipal Bonds, (b) if bid prices are not
available for any particular Municipal Bond, on the basis of
current bid prices for comparable bonds, (c) by determining the
value of the Municipal Bonds on the bid side of the market by
appraisal, or (d) by any combination of the above. Except as
described in "Insurance on the Portfolios" above, the Evaluator
will not attribute any value to the insurance obtained by the
Trust. On the other hand, the value of insurance obtained by an
issuer of Municipal Bonds or by the Sponsor is reflected and
included in the market value of such Municipal Bonds.
In any case, the Evaluator will consider the ability of an
insurer to meet its commitments under the Trust's insurance
policy (if any). For example, if the Trust were to hold the
Municipal Bonds of a municipality which had significantly
deteriorated in credit quality, the Evaluator would first
consider in its evaluation the market price of the Municipal
Bonds at their lower credit rating. The Evaluator would also
attribute a value to the insurance feature of the Municipal Bonds
which would be equal to the difference between the market value
of such Municipal Bonds and the market value of bonds of a
similar nature which were of investment grade rating. It is the
position of the Sponsor that this is a fair method of valuing
insured Municipal Bonds and reflects a proper valuation method in
accordance with the provisions of the Investment Company Act of
1940. For a description of the circumstances under which a full
or partial suspension of the right of Unitholders to redeem their
Units may occur, see "Redemption."
The foregoing evaluations and computations shall be made as of
the Evaluation Time stated under "Essential Information" in Part
Two, on each business day effective for all sales made during the
preceding 24-hour period, and for purposes of resales and
repurchases of Units.
The interest on the Municipal Bonds in each Series of the Trust,
less the estimated fees and expenses, is estimated to accrue in
the annual amounts per Unit set forth under "Essential
Information" in Part Two. The amount of net interest income
which accrues per Unit may change as Municipal Bonds mature or
are redeemed, exchanged or sold, or as the expenses of a Series
of the Trust change or as the number of outstanding Units of such
Series changes.
Payment for Units must be made on or before the 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 his written request therefor. For information
with respect to redemption of Units purchased, but as to which
certificates requested have not been received, see "Redemption"
below.
Accrued Interest. Included in the Public Offering Price of Units
of Kemper Tax-Exempt Insured Income Trust is accrued interest as
described herein. Accrued Interest consists of two elements.
The first arises as a result of accrued interest which is the
accumulation of unpaid interest on a bond from the last day on
which interest thereon was paid. Interest on Bonds in the Trust
Funds is actually paid either monthly or semi-annually to the
Trust Fund. However, interest on the Bonds in the Trust Funds is
accounted for daily on an accrual basis. Because of this, a
Trust Fund always has an amount of interest earned but not yet
collected by the Trustee because of coupons that are not yet due.
For this reason, the Public Offering Price of Units will have
added to it the proportionate share of accrued and undistributed
interest to the date of settlement.
The Trustee will advance the amount of accrued interest as of the
First Settlement Date and the same will be distributed to
Sponsor. Such advance will be repaid to the Trustee through the
first receipts of interest received on the Municipal Bonds.
Consequently, the amount of accrued interest to be added to the
Public Offering Price of Units will include only accrued interest
arising after the First Settlement Date of a Trust Fund, less any
distributions from the Interest Account subsequent to this First
Settlement Date. Since the First Settlement Date is the date of
settlement for anyone ordering Units on the Date of Deposit, no
accrued interest will be added to the Public Offering Price of
Units ordered on the Date of Deposit.
The second element of accrued interest arises because of the
structure of the Interest Account. The Trustee has no cash for
distribution to Unitholders until it receives interest payments
on the Bonds in a Trust Fund. The Trustee is obligated to
provide its own funds, at times, in order to advance interest
distributions. The Trustee will recover these advancements when
such interest is received. Interest Account balances are
established so that it will not be necessary on a regular basis
for the Trustee to advance its own funds in connection with such
interest distributions. The Interest Account balances are also
structured so that there will generally be positive cash balances
and since the funds held by the Trustee will be used by it to
earn interest thereon, it benefits thereby (see "Expenses of the
Trust").
Accrued interest is computed as of the initial Record Date of the
Trust Funds. On the date of the first distribution of interest
to Unitholders after the First Settlement Date, the interest
collected by the Trustee will be sufficient to repay its
advances, to allow for accrued interest under the monthly,
quarterly and semi-annual plans of distribution and to generate
enough cash to commence distributions to Unitholders. If a
Unitholder sells or redeems all or a portion of his Units or if
the Bonds in a Trust Fund are sold or otherwise removed or if a
Trust Fund is liquidated, he will receive at that time his
proportionate share of the accrued interest computed to the
settlement date in the case of sale or liquidation and to the of
tender in the case of redemption in such Trust Fund.
Purchased and Daily Accrued Interest. Included in the Public
Offering Price of Units for Kemper Defined Funds Insured National
Series 1-13 is Purchased and Daily Accrued Interest as described
herein. Accrued interest consist of two elements. The first
element arises as a result of accrued interest which is the
accumulation of unpaid interest on a bond from the later of the
last day on which interest thereon was paid or the date of
original issuance of the bond. Interest on the coupon Bonds in
the Trust fund is paid semi-annually to the Trust. A portion of
the aggregate amount of such accrued interest on the Bonds in the
Trust to the First Settlement Date of the Trust Units is the
Purchased Interest. In an effort to reduce the amount of
Purchased Interest which would otherwise have to be paid by
Unitholders, the Trustee may advance a portion of the accrued
interest to the Sponsor as the Unitholder of record as of the
First Units in the Trust Fund is accounted for daily on an
accrual basis (herein referred to as "Daily Accrued Interest").
Because of this, the Units always have an amount of interest
earned but not yet paid or reserved for payment. For this
reason, the Public Offering Price of Units will include the
proportionate share of Daily Accrued Interest to the date of
settlement.
If a Unitholder sells or redeems all or a portion of his Units or
if the bonds are sold or otherwise removed or if the Trust Fund
is liquidated, he will receive at that time his proportionate
share of the Purchase Interest and Daily Accrued Interest
computed to the settlement date in the case of sale or
liquidation and to the date of tender in the case of redemption
in the Trust Fund.
Accrued Interest. Included in the Public Offering Price of Units
for Kemper Defined Funds Insured National Series 14 and
subsequent series and all EVEREN Unit Investment Trusts Insured
National Series is accrued interest as described herein. Accrued
interest is the accumulation of unpaid interest on a security
from the last day on which interest thereon was paid. Interest
on Securities generally is paid semi-annually although a Trust
accrues such interest daily. Because of this, a Trust always has
an amount of interest earned but not yet collected by the
Trustee. For this reason, with respect to sales settling
subsequent to the First Settlement Date, the Public Offering
Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will
receive on the next distribution date of a Trust the amount, if
any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering
Price in the sale of Units to the public, the Trustee will
advance the amount of accrued interest as of the First Settlement
Date and the same will be distributed to the Sponsor as the
Unitholder of record as of the First Settlement Date.
Consequently, the amount of accrued interest to be added to the
Public Offering Price of Units will include only accrued interest
from the First Settlement Date to the date of settlement, less
any distributions from the Interest Account subsequent to the
First Settlement Date.
Because of the varying interest payment dates of the Securities,
accrued interest at any point in time will be greater than the
amount of interest actually received by the Trusts and
distributed to Unitholders. Therefore, there will always remain
an item of accrued interest that is added to the value of the
Units. If a Unitholder sells or redeems all or a portion of his
Units, he will be entitled to receive his proportionate share of
the accrued interest from the purchaser of his Units. Since the
Trustee has the use of the funds held in the Interest Account for
distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits
thereby.
Public Distribution of Units. The Sponsor has qualified Units
for sale in all states. Units will be sold through dealers who
are members of the National Association of Securities Dealers,
Inc. and through others. Sales may be made to or through dealers
at prices which represent discounts from the Public Offering
Price as set forth in the table below. Certain commercial banks
are making Units of the Trust available to their customers on an
agency basis. A portion of the sales charge paid by their
customers is retained by or remitted to the banks, in the amount
shown in the table below. Under the Glass-Steagall Act, banks
are prohibited from underwriting Trust Units; however, the
Glass-Steagall Act does permit certain agency transactions and
the banking regulators have indicated that these particular
agency transactions are permitted under such Act. In addition,
state securities laws on this issue may differ from the
interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers
pursuant to state law.
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)
$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
- -----------------
* If the dollar weighted average maturity of a Trust is from 1
to 3.99 years, the concession or agency commission is 1.00% of
the Public Offering Price.
In addition to such discounts, the Sponsor may, from time to
time, pay or allow an additional discount, in the form of cash or
other compensation, to dealers employing registered
representatives who sell, during a specified time period, a
minimum dollar amount of Units of the Trusts and other unit
investment trusts underwritten by the Sponsor.
The Sponsor reserves the right to change the levels of discounts
at any time. The difference between the discount and the sales
charge will be retained by the Sponsor.
The Sponsor reserves the right to reject, in whole or in part,
any order for the purchase of Units.
Profits of Sponsor. The Sponsor will retain a portion of the
sales charge on each Unit sold, representing the difference between
the Public Offering Price of the Units and the discounts
allowed to firms selling such Units. The Sponsor may realize
additional profit or loss as a result of the possible change in
the daily evaluation of the Municipal Bonds in the Trust, since
the value of its inventory of Units may increase or decrease.
MARKET FOR UNITS
While not obligated to do so, the Sponsor intends to, and certain
of the Underwriters may, subject to change at any time, maintain
a market for Units of each Series of the Trust offered hereby and
to continuously offer to purchase said Units at prices, as
determined by the Evaluator, based on the aggregate bid prices of
the underlying Municipal Bonds of such Series, together with
accrued interest to the expected date of settlement. Unitholders
who wish to dispose of their Units should inquire of their broker
or bank as to the current market price of the Units in order to
determine whether there is in existence any price in excess of
the Redemption Price and, if so, the amount thereof.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary
market described above may cause their Units to be redeemed by
the Trustee by making a written request to the Trustee, 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 the request,
and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate
representing the Units to be redeemed. If the amount of the
redemption is $25,000 or less and the proceeds are payable to the
Unitholder(s) of record at the address of record, no signature
guarantee is necessary for redemptions by individual account
owners (including joint owners). Additional documentation may be
requested, and a signature guarantee is always required, from
corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or
such other guarantee program in addition to, or in substitution
for, STAMP, as may be accepted by the Trustee. A certificate
should only be sent by registered or certified mail for the
protection of the Unitholder. Since tender of the certificate is
required for redemption when one has been issued, Units
represented by a certificate cannot be redeemed until the
certificate representing such Units has been received by the
purchaser.
Redemption shall be made by the Trustee on the 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 that Series of the Trust, determined as set
forth below under "Computation of Redemption Price," as of the
evaluation time stated under "Essential Information" in Part Two,
next following such tender, multiplied by the number of Units
being redeemed. Any Units redeemed shall be cancelled and any
undivided fractional in the Trust Fund extinguished. The price
received upon redemption might be more or less than the amount
paid by the Unitholder depending on the value of the Municipal
Bonds in the portfolio at the time of redemption. Any Units
redeemed shall be cancelled and any undivided fractional interest
in that Series of the Trust will be extinguished.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unitholder's tax identification number in
the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unitholder's tax
identification number from the selling broker. However, any time
a Unitholder elects to tender Units for redemption, such
Unitholder should make sure that the Trustee has been provided a
certified tax identification number in order to avoid this
possible "back-up withholding." In the event the Trustee has not
been previously provided such number, one must be provided at the
time redemption is requested.
Any amounts paid on redemption representing interest shall be
withdrawn from the Interest Account of such Series to the extent
that funds are available for such purpose. All other amounts
paid on redemption shall be withdrawn from the Principal Account
of such Series. The Trustee is empowered to sell Municipal Bonds
from the portfolio of a Series in order to make funds available
for the redemption of Units of such Series. Such sale may be
required when Municipal Bonds would not otherwise be sold and
might result in lower prices than might otherwise be realized.
To the extent Municipal Bonds are sold, the size and diversity of
that Series of the Trust will be reduced.
The Trustee is irrevocably authorized in its discretion, if an
Underwriter does not elect to purchase any Units tendered for
redemption, in lieu of redeeming such Units, to sell such Units
in the over-the-counter market for the account of tendering
Unitholders at prices which will return to such Unitholders
amounts in cash, net after brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Price
for such Units. In the event of any such sale, the Trustee shall
pay the net proceeds thereof to the Unitholders on the day they
would otherwise be entitled to receive payment of the Redemption
Price.
The right of redemption may be suspended and payment postponed
(1) for any period during which the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or
during which (as determined by the Securities and Exchange
Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result
of which disposal by the Trustee of Municipal Bonds is not
reasonably practicable or it is not reasonably practicable to
fairly determine the value of the underlying Municipal Bonds in
accordance with the Trust Agreements; or (3) for such other
period as the Securities and Exchange Commission may by order
permit. Because insurance obtained by certain Series of the Trust
terminates as to Bonds which are sold by the Trustee and
because the insurance obtained by such Series of the Trust does
not have a realizable cash value which can be used by the Trustee
to meet redemptions of Units, under certain circumstances the
Sponsor may apply to the Securities and Exchange Commission for
an order permitting a full or partial suspension of the right of
Unitholders to redeem their Units if a significant portion of the
Bonds in the portfolio is in default in payment of principal or
interest or in significant risk of such default. The Trustee is
not liable to any person or in any way for any loss or damage
which may result from any such suspension or postponement.
Computation of Redemption Price. The Redemption Price for Units
of each Series of the Trust is computed by the Evaluator as of
the evaluation time stated under "Essential Information" in Part
Two next occurring after the tendering of a Unit for redemption
and on any other business day desired by it, by:
A. adding (1) the cash on hand in such Series of the Trust
other than cash depositor in the Trust Funds to purchase
Municipal Bonds not applied to the purchase of such Bonds; (2)
the aggregate value of the Municipal Bonds held in such Series of
the Trust, as determined by the Evaluator on the basis of bid
prices therefor; and (3) interest accrued and unpaid on the
Municipal Bonds in that Series of the Trust as of the date of
computation; and
B. deducting therefrom (1) amounts representing any
applicable taxes or governmental charges payable out of that
Series of the Trust and for which no deductions have been
previously made for the purpose of additions to the Reserve
Account described under "Expenses of the Trust"; (2) amounts
representing estimated accrued expenses of that Series of the
Trust including, but not limited to, fees and expenses of the
Trustee (including legal and auditing fees and insurance costs),
the Evaluator, the Sponsor and bond counsel, if any; (3) cash
held for distribution to Unitholders of record as of the business
day prior to the evaluation being made; and (4) other liabilities
incurred by such Series of the Trust; and
C. finally, dividing the results of such computation by
the number of Units of such Series of the Trust outstanding as of
the date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of a Trust will not be
evidenced by certificates unless a Unitholder, the Unitholder's
registered broker/dealer or the clearing agent makes a written
request to the Trustee. Units are transferable by making a
written request to the Trustee and, in the case of Units
evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a
written instrument or instruments of transfer which should be
sent registered or certified mail for the protection of the
Unitholder. Unitholders must sign such written request, and such
certificate or transfer instrument, exactly as their names appear
on the records of the Trustee and on any certificate representing
the Units to be transferred. Such signatures must be guaranteed
by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by
the Trustee.
Units may be purchased and certificates, if requested, will be
issued in denominations of one Unit or any multiple thereof
subject to any minimum investment requirement established by the
Sponsor from time to time. Any Certificate issued will be
numbered serially for identification, issued in fully registered
form and will be transferable only on the books of the Trustee.
The Trustee may require a Unitholder to pay a reasonable fee, to
be determined in the sole discretion of the Trustee, for each
certificate re-issued or transferred, and to pay any governmental
charge that may be imposed in connection with each such transfer
or interchange. The Trustee at the present time does not intend
to charge for the normal transfer or interchange of certificates.
Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the Units),
affidavit of loss, evidence of ownership and payment of expenses
incurred.
Distributions to Unitholders. Interest received by a Series of
the Trust, including any portion of the proceeds from a
disposition of Municipal Bonds which represents accrued interest,
is credited by the Trustee to the Interest Account for such
Series. All other receipts are credited by the Trustee to a
separate Principal Account for such Series. During each year the
distributions to the Unitholders of each Series of the Trust as
of each Record Date (see "Essential Information" in Part Two)
will be made on the following Distribution Date or shortly
thereafter and shall consist of an amount substantially equal to
one-twelfth, one-fourth or one-half (depending on the
distribution option selected except in Series of Kemper Defined
Funds and EVEREN Unit Investment Trusts in which case only
monthly distributions are available) of such Unitholders' pro
rata share of the estimated net annual interest income to the
Interest Account for such Series of the Trust. However, the
interest to which Unitholders of a Series of the Trust are
entitled will at most times exceed the amount available for
distribution, there will almost always remain an item of accrued
interest that is added to the daily value of the Units of such
Series. If Unitholders of a Series sell or redeem all or a
portion of their Units they will be paid their proportionate
share of the accrued interest of such Series to, but not
including, the fifth business day after the date of sale or to
the date of tender in the case of a redemption.
Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the
Second Distribution Date following the purchase of their Units.
Since interest on Municipal Bonds in each Series of the Trust is
payable at varying intervals, usually in semiannual installments,
and distributions of income are made to Unitholders of a Series
of the Trust at what may be different intervals from receipt of
interest, the interest accruing to such Series of the Trust may not
be equal to the amount of money received and available for
distribution from the Interest Account of such Series.
Therefore, on each Distribution Date the amount of interest
actually on deposit in the Interest Account and available for
distribution may be slightly more or less than the interest
distribution made. In order to eliminate fluctuations in
interest distributions resulting from such variances, the Trustee
is authorized by the Agreement to advance such amounts as may be
necessary to provide interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest,
for any such advances from funds available in the Interest
Account of such Series.
Unitholders purchasing Units will initially receive distributions
in accordance with the election of the prior owner. Unitholders
desiring to change their distribution option, if applicable, may
do so by sending written notice to the Trustee, together with
their certificate (if one was issued). Certificates should only
be sent by registered or certified mail to minimize the
possibility of loss. If written notice and any certificate are
received by the Trustee not later than January 1 of a year, the
change will become effective on January 2 for distributions
commencing with February 15 of that year. If notice is not
received by the Trustee, the Unitholder will be deemed to have
elected to continue with the same option for the subsequent
twelve months.
The Trustee will distribute on each semi-annual Distribution Date
(or in the case of Kemper Defined Funds and EVEREN Unit
Investment Trusts, on each Distribution Date) or shortly
thereafter, to each Unitholder of Record of the Trust on the
preceding Record Date, an amount substantially equal to such
Unitholder's pro rata share of the cash balance, if any, in the
Principal Account of such Trust computed as of the close of
business on the preceding Record Date. However, no distribution
will be required if the balance in the Principal Account is less
than $1.00 per Unit (or $.001 per Unit for certain Series).
Except for Series of Kemper Tax-Exempt Insured Income Trust, if
such balance is between $5.00 and $10.00 per Unit, distributions
will be made on each quarterly Distribution Date; and if such
balance exceeds $10.00 per Unit, such amounts will be distributed
on the next monthly Distribution Date.
Statement to Unitholders. With each distribution, the Trustee
will furnish or cause to be furnished each Unitholder a statement
of the amount of interest and the amount of other receipts, if
any, which are being distributed, expressed in each case as a
dollar amount per Unit.
The accounts of each Series of the Trust are required to be
audited annually, at the Series' expense, by independent auditors
designated by the Sponsor, unless the Trustee determines that
such an audit would not be in the best interest of the
Unitholders of such Series of the Trust. The accountants' report
will be furnished by the Trustee to any Unitholder of such Series
of the Trust upon written request.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each person who at any time during
the calendar year was a Unitholder of a Series of the
Trust a statement covering the calendar year, setting forth:
A. As to the Interest Account:
1. The amount of interest received on the Municipal Bonds
in such Series and the percentage of such amount by states and
territories in which the issuers of such Municipal Bonds are
located;
2. The amount paid from the Interest Account of such
Series representing accrued interest of any Units redeemed;
3. The deductions from the Interest Account of such Series
for applicable taxes, if any, fees and expenses (including
insurance costs and auditing fees) of the Trustee, the Evaluator,
the Sponsor and bond counsel, if any;
4. Any amounts credited by the Trustee to a Reserve
Account for such Series described under "Expenses of the Trust";
and
5. The net amount remaining after such payments and
deductions, expressed both as a total dollar amount and a dollar
amount per Unit outstanding on the last business day of such
calendar year.
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of
any of the Municipal Bonds in such Series and the net proceeds
received therefrom excluding any portion credited to the Interest
Account;
2. The amount paid from the Principal Account of such
Series representing the principal of any Units redeemed;
3. The deductions from the Principal Account of such
Series for payment of applicable taxes, if any, fees and expenses
(including insurance costs and auditing expenses) of the Trustee,
the Evaluator, the Sponsor and of bond counsel, if any;
4. Any amounts credited by the Trustee to a Reserve
Account for such Series described under "Expenses of the Trust";
and
5. The net amount remaining after distributions of
principal and deductions, expressed both as a dollar amount and
as a dollar amount per Unit outstanding on the last business day
of such calendar year.
C. The following information:
1. A list of the Municipal Bonds in such Series as of the
last business day of such calendar year;
2. The number of Units of such Series outstanding on the
last business day of such calendar year;
3. The Redemption Price of such Series based on the last
Trust Evaluation made during such calendar year; and
4. The amount actually distributed during such calendar
year from the Interest and Principal Accounts of such Series
separately stated, expressed both as total dollar amounts and as
dollar amounts per Unit of such Series outstanding on the Record
Date for each such distribution.
Rights of Unitholders. A Unitholder may at any time tender Units
to the Trustee for redemption. No Unitholder of a Series shall
have the right to control the operation and management of such
Series or of the Trust in any manner, except to vote with respect
to amendment of the Trust Agreements or termination of such
Series of the Trust. The death or incapacity of any Unitholder
will not operate to terminate the Series or the Trust nor entitle
legal representatives or heirs to claim an accounting or to bring
any action or proceeding in any court for partition or winding up
of such Series or the Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolio of the Trust by the
purchase, sale or substitution of Municipal Bonds, except in the
special circumstances noted below. Thus, with the exception of
the redemption or maturity of Municipal Bonds in accordance with
their terms, and/or the sale of Municipal Bonds to meet
redemption requests, the assets of the Trust will remain
unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Municipal Bonds
the value of which has been affected by certain adverse events,
including institution of certain legal proceedings, a decline in
their price or the occurrence of other market factors, including
advance refunding, so that in the opinion of the Sponsor the
retention of such Municipal Bonds in a Series of the Trust would
be detrimental to the interest of the Unitholders of such Series.
The proceeds from any such sales, exclusive of any portion which
represents accrued interest, will be credited to the Principal
Account for distribution to the Unitholders.
The portfolio insurance obtained by the Trust from AMBAC
Indemnity for Series A through A-24 of the Kemper Tax-Exempt
Insured Income Trust is applicable only while the Municipal Bonds
remain in the portfolio of a Series of the Trust. Consequently,
the price received by such Series of the Trust upon the
disposition of any such Municipal Bond will reflect a value
placed upon it by the market as an uninsured obligation rather
than a value resulting from the insurance. Due to this fact, the
Sponsor will not direct the Trustee to dispose of Municipal Bonds
in Series A through A-24 of the Kemper Tax-Exempt Insured Income
Trust which are in default or imminent danger of default but to
retain such Municipal Bonds in the portfolio so that if a default
in the payment of interest or principal occurs, the Trust may
realize the benefits of the insurance.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, at the time of the sale of a Municipal Bond covered
under the Trust's insurance policy with respect to Series A-25
and subsequent Series of the Kemper Tax-Exempt Insured Income
Trust, has the right to obtain permanent insurance with respect
to such Municipal Bond (i.e., insurance to maturity of the
Municipal Bond regardless of the identity of the holder thereof)
(the "Permanent Insurance") upon the payment of a single
predetermined insurance premium from the proceeds of the sale of
such Municipal Bond. Accordingly, every Municipal Bond in such
Series of the Trust is eligible to be sold on an insured basis.
It is expected that the Trustee will exercise the right to obtain
Permanent Insurance for Municipal Bonds in Series A-25 and
subsequent Series of the Kemper Tax-Exempt Insured Income Trust
only if upon such exercise a Series of the Trust would receive net
proceeds (i.e., the value of such Municipal Bond if sold as
an insured bond less the insurance premium attributable to the
Permanent Insurance) from such sale in excess of the sale
proceeds if such Municipal Bond were sold on an uninsured basis.
The insurance premium with respect to each Municipal Bond in such
Series is determined based upon the insurability of each
Municipal Bond as of the initial Date of Deposit and will not be
increased or decreased for any change in the creditworthiness of
such Municipal Bond's issuer.
The Trustee is permitted to utilize the option to obtain
Permanent Insurance available on Series A-25 and subsequent
Series of the Kemper Tax-Exempt Insured Income Trust only in
circumstances where the value added to the Municipal Bonds
exceeds the costs of acquiring such Permanent Insurance. Unless
such Permanent Insurance may be obtained at an acceptable price,
the Sponsor will not direct the Trustee to dispose of Municipal
Bonds which are in default or imminent danger of default but to
retain such Municipal Bonds in the portfolio so that the Trust
may realize the benefits of the insurance on the portfolio.
The Sponsor is required to instruct the Trustee to reject any
offer made by an issuer of Municipal Bonds to issue new
obligations in exchange or substitution for any of such Municipal
Bonds pursuant to a refunding financing plan except that the
Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the
Sponsor may deem proper if (1) the issuer is in default with
respect to such Bonds or (2) in the written opinion of the
Sponsor the issuer will probably default with respect to such
Bonds in the reasonably foreseeable future. Any obligation so
received in exchange or substitution will be held by the Trustee
subject to the terms and conditions of the Trust Agreement to the
same extent as Bonds originally deposited thereunder. Within
five days after the deposit of obligations in exchange or
substitution for underlying Bonds, the Trustee is required to
give notice thereof to each Unitholder, identifying the Bonds
eliminated and the Bonds substituted therefor.
The Trustee may sell Municipal Bonds designated by the Sponsor
from a Series of the Trust for the purpose of redeeming Units of
such Series tendered for redemption and the payment of expenses.
See "Redemption."
ADMINISTRATION OF THE TRUST
The Trustee. The Trustee is The Bank of New York, a trust
company organized under the laws of New York. The Bank of New
York has its officers 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 Agreement, reference is made to the material
set forth under "Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep
records of all transactions at its office. Such records shall
include the name and address of, and the number of Units held by,
every Unitholder of each Series. The books and records with
respect to a Series of the Trust shall be open to inspection by
any Unitholder of such Series at all reasonable times during the
usual business hours. The Trustee shall make such annual or
other reports as may from time to time be required under any
applicable state or Federal statute, rule or regulation. The
Trustee shall keep a certified copy or duplicate original of the
Trust Agreements on file in its office available for inspection
at all reasonable times during usual business hours by any
Unitholder, together with a current list of the Municipal Bonds
held in each Series of the Trust. Pursuant to the Trust
Agreements, the Trustee may employ one or more agents for the
purpose of custody and safeguarding of Municipal Bonds comprising
the portfolios.
Under the Trust Agreements, the Trustee or any successor trustee
may resign and be discharged of its duties created by the Trust
Agreements by executing an instrument in writing and filing the
same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice
of resignation to all Unitholders then of record, not less than
sixty days before the date specified in such notice when such
resignation is to take effect. The Sponsor upon receiving notice
of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty
days after notification, the retiring Trustee may apply to a
court of competent jurisdiction for the appointment of a
successor. The Sponsor may at any time remove the Trustee with
or without cause and appoint a successor trustee as provided in
the Trust Agreements. Notice of such removal and appointment
shall be mailed to each Unitholder by the Sponsor. Upon
execution of a written acceptance of such appointment by a
successor trustee, all the rights, powers, duties and obligations
of the original Trustee shall vest in the successor. The Trustee
shall be a corporation organized under the laws of the United
States or any state thereof, which is authorized under such laws
to exercise trust powers. The Trustee shall have at all times an
aggregate capital, surplus and undivided profits of not less than
$5,000,000.
The Evaluator. EVEREN Unit Investment Trusts, a service of
EVEREN Securities, Inc., the Sponsor, also serves as Evaluator.
The Evaluator may resign or be removed by the Trustee, in which
event the Trustee is to use its best efforts to appoint a
satisfactory successor. Such resignation or removal shall become
effective upon acceptance of appointment by the successor
evaluator. If, upon resignation of the Evaluator, no successor
has accepted appointment within thirty days after notice of
resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the
Trustee to each Unitholder. At the present time, pursuant to a
contract with the Evaluator, 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, provided that no such amendment or waiver will
reduce the interest in a Series of the Trust of any Unitholder
without the consent of such Unitholder or reduce the percentage
of Units required to consent to any such amendment or waiver
without the consent of all Unitholders. In no event shall the
Trust Agreements be amended to increase the number of Units
issuable thereunder or to permit, except in accordance with the
provisions of the Trust Agreements, the acquisition of any
Municipal Bonds in addition to or in substitution for those in
the Trust. The Trustee shall promptly notify Unitholders of the
substance of any such amendment.
The Trust Agreements provide that a Series of the Trust shall
terminate upon the maturity, redemption or other disposition, of
the last of the Municipal Bonds held in such Series. If the
value of a Series of the Trust shall be less than the applicable
minimum Trust value stated under "Essential Information" in Part
Two the Trustee may, in its discretion, and shall, when so
directed by the Sponsor, terminate such Series of the Trust. A
Series of the Trust may be terminated at any time by the holders
of Units representing 66-2/3% of the Units of such Series then
outstanding. In the event of termination, written notice thereof
will be sent by the Trustee to all Unitholders of such Series.
Within a reasonable period after termination, the Trustee will
sell any Municipal Bonds remaining in such Series of the Trust
and, after paying all expenses and charges incurred by such
Series of the Trust, will distribute to Unitholders of such
Series (upon surrender for cancellation of certificates for
Units, if issued) their pro rata share of the balances remaining
in the Interest and Principal Accounts of such Series.
Notwithstanding the foregoing, in connection with final
distributions to Unitholders, it should be noted that because the
portfolio insurance obtained by Series A through A-24 of the
Kemper Tax-Exempt Insured Income Trust is applicable only while
Bonds so insured are held by such Series of the Trust, the price to
be received by such Series of the Trust upon the disposition
of any such Bond which is in default by reason of nonpayment of
principal or interest, will not reflect any value based on such
insurance. Therefore, in connection with any liquidation of such
Series it shall not be necessary for the Trustee to, and the
Trustee does not currently intend to, dispose of any Bond or
Bonds if retention of such Bond or Bonds, until due, shall be
deemed to be in the best interest of Unitholders, including, but
not limited to situations in which a Bond or Bonds so insured are
in default and situations in which a Bond or Bonds so insured
have a deteriorated market price resulting from a significant
risk of default. All proceeds received, less applicable
expenses, from insurance on defaulted Bonds not disposed of at
the date of termination will ultimately be distributed to
Unitholders of record as of such date of termination as soon as
practicable after the date such defaulted Bond or Bonds become
due and applicable insurance proceeds have been received by the
Trustee.
Limitations on Liability.
The Sponsor. The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the Trust
Agreements, but will be under no liability to the Unitholders for
taking any action or refraining from any action in good faith
pursuant to the Trust Agreements or for errors in judgment,
except in cases of its own gross negligence, bad faith or willful
misconduct. The Sponsor shall not be liable or responsible in
any way for depreciation or loss incurred by reason of the sale
of any Municipal Bonds.
The Trustee. The Trust Agreements provide that the Trustee shall
be under no liability for any action taken in good faith in
reliance upon prima facie properly executed documents or for the
disposition of monies, Municipal Bonds, or certificates except by
reason of its own gross negligence, bad faith or willful
misconduct, nor shall the Trustee be liable or responsible in any
way for depreciation or loss incurred by reason of the sale by
the Trustee of any Municipal Bonds. In the event that the
Sponsor shall fail to act, the Trustee may act and shall not be
liable for any such action taken by it in good faith. The
Trustee shall not be personally liable for any taxes or other
governmental charges imposed upon or in respect of the Municipal
Bonds or upon the interest thereon. In addition, the Trust
Agreements contain other customary provisions limiting the
liability of the Trustee.
The Evaluator. The Trustee and Unitholders may rely on any
evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof. The Trust Agreements
provide that the determinations made by the Evaluator shall be
made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be
under no liability to the Trustee or Unitholders for errors in
judgment, but shall be liable only for its gross negligence, lack
of good faith or willful misconduct.
EXPENSES OF THE TRUST
The Sponsor will charge each Series a surveillance fee for services
performed for such Series in an amount not to exceed
that amount set forth in "Essential Information" in Part Two but
in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which
the Sponsor both acts as sponsor and provides portfolio
surveillance, exceed the aggregate cost to the Sponsor for
providing such services. Such fee shall be based on the total
number of Units of each Series outstanding as of the January
Record Date for any annual period. The Sponsor paid all the
expenses of creating and establishing the Trust, including the
cost of the initial preparation, printing and execution of the
Prospectus, Agreement and the certificates, legal and accounting
expenses, advertising and selling expenses, payment of closing
fees, expenses of the Trustee, initial evaluation fees and other
out-of-pocket expenses.
The Trustee receives for its services a fee calculated on the
basis of the annual rate set forth under "Essential Information"
in Part Two, based on the largest aggregate principal amount of
Municipal Bonds in such Series at any time during the monthly,
quarterly or semi-annual period, as appropriate. Funds that are
available for future distributions, redemptions and payment of
expenses are held in accounts which are non-interest bearing to
Unitholders and are available for use by the Trustee pursuant to
normal banking procedures; however, the Trustee is also
authorized by the Trust Agreements to make from time to time
certain non-interest bearing advances to the Trust Funds. The
Trustee also receives indirect benefits to the extent that it
holds funds on deposit in the various non-interest bearing
accounts created pursuant to the Agreement; however, the Trustee
is also authorized by the Agreement to make from time to time
certain non-interest bearing advances to the Trust. See
"Unitholders_Distributions to Unitholders."
For evaluation of Municipal Bonds in a Series of the Trust, the
Evaluator receives a fee, payable monthly, calculated on the
basis of an annual rate as set forth under "Essential
Information" in Part Two, based upon the largest aggregate
principal amount of Municipal Bonds in such Series of the Trust
at any time during such monthly period.
The Trustee's and Evaluator's fees are payable monthly on or
before each Distribution Date by deductions from the Interest
Account of each Series to the extent funds are available and then
from the Principal Account of such Series. Such fees may be
increased without approval of Unitholders by amounts not
exceeding a proportionate increase in the Consumer Price Index
entitled "All Services Less Rent of Shelter," published by the
United States Department of Labor, or any equivalent index
substituted therefor.
The following additional charges are or may be incurred by a
Series of the Trust: (a) fees for the Trustee's extraordinary
services; (b) expenses of the Trustee (including legal and
auditing expenses and insurance costs, but not including any fees
and expenses charged by any agent for custody and safeguarding of
Municipal Bonds) and of bond counsel, if any; (c) various
governmental charges; (d) expenses and costs of any action taken by
the Trustee to protect the Trust or such Series, or the rights
and interests of the Unitholders; (e) indemnification of the
Trustee for any loss, liability or expense incurred by it in the
administration of such Series of the Trust without gross
negligence, bad faith or willful misconduct on its part; (f)
indemnification of the Sponsor for any loss, liability or expense
incurred in acting in that capacity without gross negligence, bad
faith or willful misconduct; and (g) expenditures incurred in
contacting Unitholders upon termination of the Series. The fees
and expenses set forth herein are payable out of such Series of
the Trust and, when owed to the Trustee, are secured by a lien on
the assets of the Series of the Trust. Fees or charges relating
to the Trust shall be allocated to each Trust Fund in the same
ratio as the principal amount of such Trust Fund bears to the
total principal amount of all Trust Funds in the Trust. Fees or
charges relating solely to a particular Trust Fund shall be
charged only to such Trust Fund.
Fees and expenses of a Series of the Trust shall be deducted from
the Interest Account of such Series, or, to the extent funds are
not available in such Account, from the Principal Account of such
Series. The Trustee may withdraw from the Principal Account or
the Interest Account of such Series such amounts, if any, as it
deems necessary to establish a reserve for any taxes or other
governmental charges or other extraordinary expenses payable out
of that Series of the Trust. Amounts so withdrawn shall be
credited to a separate account maintained for such Series known
as the Reserve Account and shall not be considered a part of such
Series when determining the value of the Units of such Series
until such time as the Trustee shall return all or any part of
such amounts to the appropriate account.
THE SPONSOR
The Sponsor, EVEREN Unit Investment Trusts, with an office at 77
West Wacker Drive, 29th Floor, Chicago, Illinois 60601, (800)
621-5024, is a service of EVEREN Securities, Inc., which is a
wholly-owned subsidiary of Capital Corporation. The Sponsor acts
as underwriter of a number of other EVEREN unit investment trusts
and will act as underwriter of any other unit investment trust
created by the Sponsor in the future. As of December 31, 1995,
the total stockholder's equity of EVEREN Securities, Inc. was
approximately $261,286,862 (unaudited).
If at any time the Sponsor shall of fail to perform any of its
duties under the Agreement or shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or its affairs are
taken over by public authorities, then the Trustee may (a)
appoint a successor sponsor at rates of compensation deemed by
the Trustee to be reasonable and not exceeding such reasonable
amounts as may be prescribed by the Securities and Exchange
Commission, or (b) terminate the Agreement and liquidate the
Trust or any Series thereof as provided therein or (c) continue
to act as Trustee without terminating the Agreement.
The foregoing financial information with regard to the Sponsor
relates to the Sponsor only and not to this Trust or any Series.
Such information is included in this Prospectus only for the
purposes of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its
contractual obligations with respect to the Series of the Trust.
More comprehensive financial information can be obtained upon
request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters
relating to Federal tax law were originally passed upon by
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois
60603, as counsel for the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of
investments, appearing in Part Two of this Prospectus and
Registration Statement, with information pertaining to the
specific Series of the Trust to which such statement relates, has
been audited by Ernst & Young LLP, independent auditors, as set
forth in their report appearing in Part Two and is included in
reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
DESCRIPTION OF MUNICIPAL BOND RATINGS[3]
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;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement, under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA _ Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong.
AA _ Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
A _ Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB _ Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated
and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and
risk.
Moody's Investors Service, Inc. _ A brief description of the
applicable Moody's Investors Service, Inc. rating symbols and
their meanings follow:
Aaa _ Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by
money market fluctuations.
Aa _ Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger
than in Aaa securities. Their market value is virtually immune
to all but money market influences, with the occasional exception
of oversupply in a few specific instances.
A _ Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
The market value of A-rated bonds may be influenced to some
degree by economic performance during a sustained period of
depressed business conditions, but, during periods of normalcy,
A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A1 _ Bonds which are rated A1 offer the maximum in security
within their quality group, can be bought for possible upgrading
in quality, and additionally, afford the investor an opportunity
to gauge more precisely the relative attractiveness of offerings
in the market place.
Baa _ Bonds which are rated Baa are considered as lower medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as
well. The market value of Baa-rated bonds is more sensitive to
changes in economic circumstances and, aside from occasional
speculative factors applying to some bonds of this class, Baa
market valuations move in parallel with Aaa, Aa and A obligations
during periods of economic normalcy, except in instances of
oversupply.
Conditional Ratings: Bonds rated "Con(-)" are ones for which the
security depends upon the completion of some act or the
fulfillment of some condition. These are bonds secured by (a)
earnings of projects under construction, (b) earnings of projects
unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or
elimination of basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in certain areas
of its bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
[1] Information on these items appears in Part Two
[2] Reference is made to the Trust Agreement, and any statements
contained herein are qualified in their entirety by the
provisions of the Trust Agreement.
[3] As published by the rating companies.
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Part Two
Dated September 30, 1996
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>
Report of Independent Auditors
Unitholders
Kemper Defined Funds
Insured National Series 1
We have audited the accompanying statement of assets and liabilities of
Kemper Defined Funds Insured National Series 1, including the schedule
of investments, as of May 31, 1996, and the related statements of
operations and changes in net assets for each of the two years in the
period then ended and for the period from June 23, 1993 (Date of
Deposit) to May 31, 1994. 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 May 31, 1996, 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
Defined Funds Insured National Series 1 at May 31, 1996, 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
September 17, 1996
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Essential Information
As of May 31, 1996
Sponsor and Evaluator: EVEREN Unit Investment Trusts
Trustee: The Bank of New York Co.
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Municipal Bonds $8,115,000
Number of Units 838,605
Fractional Undivided Interest in the Trust per Unit 1/838,605
Principal Amount of Municipal Bonds per Unit $9.676
Public Offering Price:
Aggregate Bid Price of Municipal Bonds in the Portfolio $7,975,672
Aggregate Bid Price of Municipal Bonds per Unit $9.511
Cash per Unit (1) $(.000)
Pricing accrued interest to date of settlement $.034
Sales Charge of 2.041% (2.00% of Public Offering Price) $.195
Public Offering Price per Unit (inclusive of accrued
interest) (2) $9.740
Redemption Price per Unit (inclusive of accrued interest) $9.545
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $.195
Minimum Value of the Trust under which Trust Agreement
may be terminated $2,000,000
</TABLE>
Date of Trust June 23, 1993
Mandatory Termination Date December 31, 2002
Annual Evaluation and Portfolio Surveillance Fees: Evaluation fee of
$.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. Portfolio surveillance fee of $.20 per
100 Units.
[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 which includes
interest to the date of settlement (three business days after purchase).
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Essential Information (continued)
As of May 31, 1996
Sponsor and Evaluator: EVEREN Unit Investment Trusts
Trustee: The Bank of New York Co.
<TABLE>
<CAPTION>
Special Information Based on Distributions
Monthly
<S> <C>
---------
Calculation of Estimated Net Annual
Interest Income per Unit (3):
Estimated Annual Interest Income $.437977
Less: Estimated Annual Expense .018914
---------
Estimated Net Annual Interest Income $.419063
=========
Calculation of Interest Distribution
per Unit:
Estimated Net Annual Interest Income $.419063
Divided by 12 $.034922
Estimated Daily Rate of Net Interest
Accrual per Unit $.001164
Estimated Current Return Based on Public
Offering Price (3) 4.30%
Estimated Long-Term Return (3) 4.97%
</TABLE>
Trustee's Annual Fees and Expenses (including Evaluator's and Portfolio
Surveillance Fees): $.018914 ($.007476 of which represents expenses) per
Unit.
Record and Computation Dates: First day of the month.
Distribution Dates: Fifteenth day of the month.
[FN]
3. The Estimated Long-Term Return and Estimated Current Return will
vary. For detailed explanation, see Part One of this prospectus.
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Statement of Assets and Liabilities
May 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Municipal Bonds, at value (cost $8,078,497) $7,975,672
Interest receivable 120,861
----------
Total assets 8,096,533
Liabilities and net assets
Cash overdraft 65,994
Accrued liabilities 2,263
----------
68,257
Net assets, applicable to 838,605 Units outstanding:
Cost of Trust assets, exclusive of interest $8,078,497
Unrealized depreciation (102,825)
Distributable funds 52,604
---------- ----------
Net assets $8,028,276
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Statements of Operations
<TABLE>
<CAPTION>
Period from
June 23,
1993 to
Year ended May 31 May 31,
1996 1995 1994
<S> <C> <C> <C>
--------- --------- ---------
Investment income - interest $408,946 $448,006 $424,847
Expenses:
Trustee's fees and related expenses 14,082 13,277 12,585
Evaluator's fees and portfolio
surveillance fees 3,911 5,013 4,752
--------- --------- ---------
Total expenses 17,993 18,290 17,337
--------- --------- ---------
Net investment income 390,953 429,716 407,510
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) 4,652 (18,411) -
Unrealized appreciation (depreciation)
during the period (51,602) 147,519 (198,742)
--------- --------- ---------
Net gain (loss) on investments (46,950) 129,108 (198,742)
--------- --------- ---------
Net increase in net assets resulting
from operations $344,003 $558,824 $208,768
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period from
June 23,
1993 to
Year ended May 31 May 31,
1996 1995 1994
<S> <C> <C> <C>
--------- --------- ---------
Operations:
Net investment income $390,953 $429,716 $407,510
Realized gain (loss) on investments 4,652 (18,411) -
Unrealized appreciation (depreciation)
on investments during the period (51,602) 147,519 (198,742)
--------- --------- ---------
Net increase in net assets resulting
from operations 344,003 558,824 208,768
Distributions to Unitholders:
Net investment income (405,484) (431,310) (371,745)
Principal from investment transactions (22,957) - -
Capital transactions:
Issuance of Units - - 9,996,820
Redemption of Units (1,634,525) (214,118) -
--------- --------- ---------
Total increase (decrease) in net assets (1,718,963) (86,604) 9,833,843
Net assets:
At the beginning of the period 9,747,239 9,833,843 -
--------- --------- ---------
At the end of the period (including
distributable funds applicable to
Trust Units of $52,604, $31,974 and
$35,765 at May 31, 1996, 1995
1994, respectively) $8,028,276 $9,747,239 $9,833,843
========= ========= =========
Trust Units outstanding at the end of
the period 838,605 1,007,301 1,030,600
========= ========= =========
Net asset value at the end of the period $9.573 $9.677 $9.540
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Kemper Defined Funds
Insured National
Series 1
Schedule of Investments
May 31, 1996
<CAPTION>
Coupon Maturity Redemption Principal
Name of Issuer and Title of Bond (4) Rate Date Provisions(2) Rating(1) Amount Value(3)
<S> <C> <C> <C> <C> <C> <C>
- --------------------- ------ ---------- ------------ -------- --------- --------
City of Austin, Texas, Combined Utility Systems 0.000% 11/15/2001 Non-Callable AAA $140,000 $104,670
Revenue Refunding Bonds, Series 1993A. Insured by
MBIA. (5)
District of Columbia (Washington, D.C.), General 5.000 12/01/2001 Non-Callable AAA 1,675,000 1,644,833
Obligation Refunding Bonds, Series 1993D. Insured by
FGIC.
Fairbanks North Star Borough, Alaska, General 4.900 3/01/2000 Non-Callable AAA 1,685,000 1,665,808
Obligation Refunding Bonds, 1993 Series S. Insured
by MBIA.
Tempe Elementary School District No.3 of Maricopa 4.350 7/01/1998 Non-Callable AAA 1,600,000 1,571,248
County, Arizona, School Improvement and Refunding
Bonds, Series 1993. Insured by FGIC.
Michigan State Housing Development Authority, Rental 4.250 4/01/1997 Non-Callable AAA 1,720,000 1,721,892
Housing Revenue Bonds, 1993 Series A. Insured by
AMBAC.
City of Round Rock, Texas (Williamson and Travis 4.500 8/15/1999 Non-Callable AAA 1,295,000 1,267,221
Counties), General Obligation Refunding Bonds,
Series 1993. Insured by AMBAC.
--------- ---------
$8,115,000 $7,975,672
========= =========
</TABLE>
[FN]
See accompanying notes to Schedule of Investments.
<PAGE>
Kemper Defined Funds
Insured National
Series 1
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 Investor 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 the Bonds in the Trust was obtained by the issuers of
such Bonds.
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 the financial statements.
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Notes to Financial Statements
1. Significant Accounting Policies
Trust Sponsor and Evaluator
From the Trust's date of deposit through September 14, 1995, the Trust's
sponsor and evaluator was Kemper Unit Investment Trusts, a division of
Kemper Securities, Inc. At that date, the members of certain Kemper
Corporation operating units acquired ownership of certain Kemper units,
which included Kemper Securities, Inc. In connection with the
acquisition, Kemper Securities, Inc. changed its name to EVEREN
Securities, Inc., and Kemper Unit Investment Trusts became EVEREN Unit
Investment Trusts, which now serves as the "Evaluator" and Sponsor of
the Trust. Subsequent to the date of acquisition, neither EVEREN
Securities, Inc. nor EVEREN Unit Investment Trusts is affiliated with
Kemper Financial Services, Inc. or Kemper Corporation.
Valuation of Municipal Bonds
Municipal Bonds (Bonds) are stated at bid prices as determined by EVEREN
Unit Investment Trusts, 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, (d) insurance, or (e) any combination of the above (See
Note 4 - Insurance).
Cost of Municipal Bonds
Cost of the Trust's Bonds was based on the offering prices of the Bonds
on June 23, 1993 (Date of Deposit). The premium or discount (including
any original issue discount) existing at June 23, 1993, 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 depreciation at May 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $12,195
Gross unrealized depreciation (115,020)
---------
Net unrealized depreciation $(102,825)
=========
</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 3.00% of the Public Offering Price
(equivalent to 3.093% of the net amount invested). The Public Offering
Price for secondary market transactions is based on the aggregate bid
price of the Bonds plus or minus a pro rata share of cash or overdraft
in the Principal Account, if any, on the date of an investor's purchase,
plus a sales charge of 2.00% of the Public Offering Price (equivalent to
2.041% of the net amount invested).
<PAGE>
Kemper Defined Funds
Insured National
Series 1
Notes to Financial Statements (continued)
Insurance
Insurance guaranteeing the payment of all principal and interest on the
Bonds in the portfolio has been obtained from independent companies by
the respective issuers of such Bonds. Insurance obtained by a Bond
issuer is effective as long as such Bonds are outstanding. As a result
of such insurance, the Units of Trust have received a rating of "AAA" by
Standard & Poor's Corporation. No representation is made as to any
insurer's ability to meet its commitments.
Distributions
Distributions of net investment income to Unitholders are declared and paid
monthly. Income distributions, on a record date basis, are as follows:
<TABLE>
<CAPTION>
Period from
Year ended Year ended June 23, 1993 to
Distribution May 31, 1996 May 31, 1995 May 31, 1994
Plan Per Unit Total Per Unit Total Per Unit Total
<S> <C> <C> <C> <C> <C> <C>
- ----- --------- ---------- --------- ---------- --------- ----------
Monthly $.420 $396,923 $.421 $429,819 $.361* $371,745*
* Includes $8,799 ($.009 per Unit) distributed to the Underwriters of
the Trust, representing interest income from the Date of Deposit to June
30,1993 (First Settlement Date).
</TABLE>
In addition, the Trust redeemed Units with proceeds from the sale of Bonds as
follows:
<TABLE>
<CAPTION>
Year ended May 31
1996 1995
<S> <C> <C>
---------- ----------
Principal portion $1,634,525 $214,118
Net interest accrued 8,561 1,491
---------- ----------
$1,643,086 $215,609
========== ==========
Units 168,696 23,299
========== ==========
</TABLE>
In addition, distribution of principal related to the sale or call of
securities is $.027 per unit for the period ended May 31, 1996.
5. Change of Trustee
On March 1, 1996, The Bank of New York Co. assumed all trustee
responsibilities from Investors Fiduciary Trust Company.
<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 September 17, 1996, in
this Post-Effective Amendment to the Registration Statement (Form S-6)
and related Prospectus of Kemper Defined Funds Insured National Series 1
dated September 30, 1996.
Ernst & Young LLP
Kansas City, Missouri
September 30, 1996
<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 Defined Funds Insured National Series 1, certifies
that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois, on the 27th
day of September, 1996.
Kemper Defined Funds Insured
National Series 1
Registrant
By: EVEREN Unit Investment Trusts
(a division of EVEREN
Securities, Inc.)
Depositor
By: Michael J. Thoms
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on
September 27, 1996 by the following persons, who constitute a majority
of the Board of Directors of EVEREN Securities, Inc.
Signature Title
James R. Boris Chairman and Chief Executive Officer
James R. Boris
Daniel D. Williams Senior Executive Vice President, Chief
Daniel D. Williams Financial Officer and Treasurer
Frank V. Geremia Senior Executive Vice President
Frank V. Geremia
Stephen G. McConahey President and Chief Operating Officer
Stephen G. McConahey
Stanley R. Fallis Senior Executive Vice President and Chief
Stanley R. Fallis Administrative Officer
David M. Greene Senior Executive Vice President and
David M. Greene Director of Client Services
Thomas R. Reedy Senior Executive Vice President and
Thomas R. Reedy Director of Capital Markets
Janet L. Reali Executive Vice President, Corporate Counsel
Janet L. Reali and Corporate Secretary
Michael J. Thoms
Michael J. Thoms signs this document pursuant to a Power of Attorney
filed with the Securities and Exchange Commission with Amendment No. 1
to the Registration Statement on Form S-6 for Kemper Defined Funds
Series 28 (Registration No. 33-56779).
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM KEMPER DEFINED FUNDS INSURED NATIONAL SERIES 1
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> May-31-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 8,078,497
<INVESTMENTS-AT-VALUE> 7,975,672
<RECEIVABLES> 120,861
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,096,533
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,257
<TOTAL-LIABILITIES> 68,257
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,131,101
<SHARES-COMMON-STOCK> 838,605
<SHARES-COMMON-PRIOR> 1,007,301
<ACCUMULATED-NII-CURRENT> 52,710
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (102,825)
<NET-ASSETS> 8,028,276
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 408,946
<OTHER-INCOME> 0
<EXPENSES-NET> 17,993
<NET-INVESTMENT-INCOME> 390,953
<REALIZED-GAINS-CURRENT> 4,652
<APPREC-INCREASE-CURRENT> (51,602)
<NET-CHANGE-FROM-OPS> 344,003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 405,484
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 22,957
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 117,966
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,718,963)
<ACCUMULATED-NII-PRIOR> 34,172
<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>
