<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1994
REGISTRATION NO. 33-52165
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. EXACT NAME OF TRUST:
KEMPER DEFINED FUNDS SERIES 13
B. NAME OF DEPOSITOR:
KEMPER UNIT INVESTMENT TRUSTS
(a service of Kemper Securities, Inc.)
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
KEMPER UNIT INVESTMENT TRUSTS
77 West Wacker Drive, 5th Floor
Chicago, Illinois 60601
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
C. PERRY MOORE Copy to:
MARK J. KNEEDY
77 West Wacker Drive, 5th Floor c/o Chapman and Cutler
Chicago, Illinois 60601
111 West Monroe Street
Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF
TITLE AND AMOUNT OF PROPOSED MAXIMUM REGISTRATION
SECURITIES BEING REGISTERED AGGREGATE OFFERING PRICE FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper De- An indefinite number of Indefinite $500
fined Funds Units of Beneficial Inter-
Series 13 est pursuant to Rule 24f-2
under the Investment Com-
pany Act of 1940
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
[X] Check box if it is proposed that this filing will become effective at
2:00 P.M. on February 17, 1994 pursuant to paragraph (b) of Rule 487.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE>
KEMPER DEFINED FUNDS SERIES 13
----------------
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
I. ORGANIZATION AND GENERAL INFORMATION
<C> <S> <C>
1. (a)Name of trust................... Prospectus front cover
(b)Title of securities issued...... Essential Information
2. Name and address of each depositor. Administration of the Trusts
3. Name and address of trustee........
Name and address of principal
4. underwriters...................... Underwriting
5. State of organization of trust..... The Trust Funds
6. Execution and termination of trust The Trust Funds; Administration of the
agreement......................... Trusts
7. Changes of name.................... The Trust Funds
8. Fiscal year........................ *
9. Litigation.........................
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a)Registered or bearer securities. Unitholders
(b)Cumulative or distributive
securities........................ The Trust Funds
(c)Redemption...................... Redemption
(d)Conversion, transfer, etc....... Unitholders; Market for Units
(e)Periodic payment plan........... *
(f)Voting rights................... Unitholders
Investment Supervision;
(g)Notice of certificateholders.... Administration of the Trusts;
Unitholders
Unitholders; Administration of the
(h)Consents required............... Trusts
(i)Other provisions................ Federal Tax Status; Insurance on the
Portfolios of the Insured Trust Funds
Type of securities comprising
11. units............................. The Trust Funds; Portfolios
12. Certain information regarding peri-
odic payment
certificates...................... *
Essential Information; Public Offering
13. (a) Load, fees, expenses, etc...... of Units; Interest, Estimated Long-
Term Return and Estimated Current
Return; Expenses of the Trust
</TABLE>
- --------
* Inapplicable, answer negative or not required.
i
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<C> <S> <C>
(b)Certain information regarding
periodic payment certifi-
cates....................... *
(c)Certain percentages........... Essential Information; Public Offering
of Units; Insurance on the Portfolios
of the Insured Trust Funds
(d)Certain other fees, etc. pay-
able by holders................. Unitholders
(e)Certain profits receivable by
depositor, principal under-
writers, trustee or affili- Expenses of the Trust; Public Offering
ated persons................ of Units
(f)Ratio of annual charges to in-
come............................ *
The Trust Funds;
14. Issuance of trust's securities... Unitholders
Receipt and handling of payments
15. from purchasers................. *
Acquisition and disposition of The Trust Funds; Portfolios;
16. underlying securities........... Investment Supervision
Market for Units; Redemption; Public
17. Withdrawal or redemption......... Offering of Units
(a)Receipt, custody and disposi-
18. tion of income.................. Unitholders
(b)Reinvestment of distributions. Distribution Reinvestment
(c)Reserves or special funds..... Expenses of the Trust
(d)Schedule of distributions..... *
Unitholders;
Redemption; Administration
19. Records, accounts and reports.... of the Trusts
Certain miscellaneous provisions
20. of trust agreement
(a)Amendment.....................
(b)Termination................... Administration of the Trusts
(c)and (d) Trustee, removal and
successor....................... Administration of the Trusts
(e)and (f) Depositor, removal and
successor....................... Administration of the Trusts
21. Loans to security holders........ *
22. Limitations on liability......... Administration of the Trusts
23. Bonding arrangements............. *
Other material provisions of
24. trust agreement................. *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor........ Administration of the Trusts
26. Fees received by depositor....... See Items 13(a) and 13(e)
27. Business of depositor............ Administration of the Trusts
28. Certain information as to offi-
cials and affiliated persons of
depositor....................... Administration of the Trusts
29. Voting securities of depositor...
30. Persons controlling depositor.... Administration of the Trusts
</TABLE>
- --------
* Inapplicable, answer negative or not required.
ii
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<C> <S> <C>
31. Payment by depositor for certain services
rendered to trust.......................
32. Payment by depositor for certain other *
services rendered to trust..............
33. Remuneration of employees of depositor
for certain services rendered to trust..
34. Remuneration of other persons for certain
services rendered to trust..............
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's securities by Public Offering of Units.
states..................................
36. Suspension of sales of trust's securi- *
ties....................................
37. Revocation of authority to distribute....
38. (a)Method of distribution................ Public Offering of Units;
(b)Underwriting agreements............... Market for Units;
(c)Selling agreements.................... Public Offering of Units
39. (a)Organization of principal underwrit-
ers.....................................
(b)N.A.S.D. membership of principal un- Administration of the Trusts
derwriters..............................
40. Certain fees received by principal under- See Items 13(a) and 13(e)
writers.................................
41. (a)Business of principal underwriters.... Administration of the Trusts
(b)Branch offices of principal underwrit-
ers.....................................
(c)Salesmen of principal underwriters.... *
42. Ownership of trust's securities by cer-
tain persons............................
43. Certain brokerage commissions received by
principal underwriters.................. Public Offering of Units
44. (a)Method of valuation................... Public Offering of Units
(b)Schedule as to offering price......... *
(c)Variation in offering price to certain Public Offering of Units
persons.................................
45. Suspension of redemption rights.......... Redemption
46. (a)Redemption valuation.................. Redemption; Market for Units;
Public Offering of Units
(b)Schedule as to redemption price....... *
Market for Units;
47. Maintenance of position in underlying se- Public Offering of Units;
curities................................
Redemption
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation of trustee... Administration of the Trusts
49. Fees and expenses of trustee.............
50. Trustee's lien........................... Expenses of the Trust
</TABLE>
- --------
* Inapplicable, answer negative or not required.
iii
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
<C> <S> <C>
51. Insurance of holders of trust's Cover Page; Expenses of the Trust;
securities....................... Insurance on the Portfolios of the
Insured Trust Funds
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying se- The Trust Funds; Portfolios;
curities..................... Investment Supervision
(b) Transactions involving elimi-
nation of underlying securi-
ties......................... *
(c) Policy regarding substitution
or elimination of underlying
securities................... Investment Supervision
(d) Fundamental policy not other-
wise covered................. *
Essential Information;
53. Tax status of Trust.............. Portfolios;
Federal Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
Trust's securities during last
54. ten years........................
55.
56. Certain information regarding pe-
riodic payment certificates..... *
57.
58.
Financial statements (Instruction
59. 1(c) to Form S-6)................ *
</TABLE>
- --------
* Inapplicable, answer negative or not required.
iv
<PAGE>
KEMPER DEFINED FUNDS SERIES 13
(TAX-EXEMPT PORTFOLIO)
Insured National Series 8 (the "Insured National Series") was formed for the
purpose of gaining interest income exempt 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.
Insured New York Series 4 was formed for the purpose of gaining interest
income free from Federal and State income taxes and, where applicable, local
income taxes and/or property taxes while conserving capital and diversifying
risks by investing in an insured, fixed portfolio consisting of obligations
issued by or on behalf of the State for which such Trust Fund is named or
counties, municipalities, authorities or political subdivisions thereof.
Virginia Series 1 was formed for the purpose of gaining interest income free
from Federal and State income taxes and, where applicable, local income taxes
and/or property taxes while conserving capital and diversifying risks by
investing in a fixed portfolio consisting of obligations issued by or on
behalf of the State for which such Trust Fund is named 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 of each Insured Trust has been
obtained directly by the issuer or the Sponsor from Municipal Bond Investors
Assurance Corporation or other insurers. See "Insurance on the Portfolios of
the Insured Trust Funds" on page A-9 and "Portfolios." Insurance obtained by a
Municipal Bond issuer is effective so long as such Bonds are outstanding. THE
INSURANCE DOES NOT RELATE TO THE UNITS OF THE INSURED TRUSTS OFFERED HEREBY OR
TO THEIR MARKET VALUE. As a result of such insurance, the Units of the Insured
Trusts have received a rating of "Aaa" by Moody's Investors Service, Inc. See
"Insurance on the Portfolios of the Insured Trust Funds." No representation is
made as to any insurer's ability to meet its commitments.
- ------------------------------------------------------------------------------
SPONSOR: KEMPER UNIT INVESTMENT TRUSTS
a service of Kemper Securities, Inc.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future
reference.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 17, 1994.
<PAGE>
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust Fund
during the initial offering period is equal to a pro rata share of the
offering prices of the Municipal Bonds in such Trust Fund plus or minus a pro
rata share of (a) cash, if any, in the Principal Account held or owed by such
Trust Fund, (b) Purchased Interest and (c) Daily Accrued Interest plus that
sales charge indicated under "Essential Information." The secondary market
Public Offering Price per Unit will be based upon a pro rata share of the bid
prices of the Municipal Bonds in each Trust Fund plus or minus a pro rata
share of (a) cash, if any, in the Principal Account held or owned by such
Trust Fund, (b) Purchased Interest and (c) Daily Accrued Interest plus the
applicable sales charge. For sales charges in the secondary market, see
"Public Offering of Units--Public Offering Price." The sales charge is reduced
on a graduated scale for sales involving at least $100,000 or 10,000 Units and
will be applied on whichever basis is more favorable to the investor. The
minimum purchase for each Trust is $1,000.
INTEREST AND PRINCIPAL DISTRIBUTIONS. Distributions of the estimated annual
interest income to be received by each Trust Fund, after deduction of
estimated expenses, will be made monthly. See "Essential Information."
Distributions of funds, if any, in the Principal Account will be made as
provided in "Unitholders--Distributions to Unitholders."
REINVESTMENT. Each Unitholder of a Trust Fund offered herein may elect to have
distributions of principal or interest or both automatically invested without
charge in shares of certain mutual funds sponsored by Kemper Financial
Services, Inc. See "Distribution Reinvestment."
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening of
business on the Date of Deposit, the Estimated Long-Term Return and the
Estimated Current Return, if applicable, for each Trust were as set forth in
"Essential Information." The Estimated Current Return is 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 Trustee, the Sponsor and Evaluator
and with the principal prepayment, redemption, maturity, exchange or sale of
Bonds while the Public Offering Price will vary with changes in the offering
price of the underlying Bonds and with changes in the Purchased Interest and
Daily Accrued Interest; therefore, there is no assurance that the present
Estimated Current Return will be realized in the future. 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 retirement dates of all of the Bonds in
the applicable Trust and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and estimated
retirement dates of the Bonds and the expenses of a 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. After the initial offering period, while under no obligation
to do so, the Sponsor intends to, and certain of the other Underwriters may,
maintain a market for the Units and to offer to repurchase such Units at
prices subject to change at any time which are based on the aggregate bid side
evaluation of the Municipal Bonds in the Trust Fund plus Purchased Interest
and Daily Accrued Interest.
2
<PAGE>
KEMPER DEFINED FUNDS SERIES 13
ESSENTIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE DATE OF DEPOSIT
<TABLE>
<C> <S>
SPONSOR AND EVALUATOR: KEMPER UNIT INVESTMENT TRUSTS, A SERVICE OF
KEMPER SECURITIES, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
</TABLE>
The income, expense and distribution data set forth below has been calculated
for Unitholders purchasing less than 10,000 Units. Unitholders purchasing more
than 10,000 Units will receive a slightly higher return because of the reduced
sales charge for larger purchases.
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NEW YORK VIRGINIA
SERIES 8 SERIES 4 SERIES 1
------- ------- -------
<S> <C> <C> <C>
Public Offering Price per Unit (1)(2)................................. $ 10.000 $ 10.000 $ 10.000
Principal Amount of Municipal Bonds per Unit.......................... $ 9.702 $ 9.700 $ 9.704
Estimated Current Return based on Public Offering Price
(3)(4)(5)(7)........................................................ 5.08% 3.74% 4.26%
Estimated Long-Term Return (3)(4)(5)(7)............................... 5.12% 3.85% 4.37%
Estimated Normal Annual Distribution per Unit (7)..................... $ 0.50832 $ 0.37440 $ 0.42624
Principal Amount of Municipal Bonds................................... $ 10,280,000 $ 5,000,000 $ 3,750,000
Number of Units....................................................... 1,059,625 515,467 386,434
Fractional Undivided Interest per Unit................................ 1/1,059,625 1/515,467 1/386,434
Calculation of Public Offering Price--Less than 10,000 Units:
Aggregate Offering Price of Bonds................................. $ 10,063,362 $ 4,965,662 $ 3,702,164
Aggregate Offering Price of Bonds per Unit........................ $ 9.497 $ 9.633 $ 9.580
Purchased Interest (1)............................................ 87,846 34,366 11,467
Purchased Interest per Unit....................................... $ 0.083 $ 0.067 $ 0.030
Total Offering Price and Purchased Interest Per Unit (1)........ $ 9.580 $ 9.700 $ 9.610
Plus Sales Charge per Unit (9).................................... $ 0.420 $ 0.300 $ 0.390
Public Offering Price per Unit (1)(2)............................... $ 10.000 $ 10.000 $ 10.000
Redemption Price per Unit............................................. $ 9.498 $ 9.620 $ 9.506
Sponsor's Initial Repurchase Price per Unit........................... $ 9.580 $ 9.700 $ 9.610
Excess of Public Offering Price per Unit over Redemption Price per
Unit................................................................ $ 0.502 $ 0.380 $ 0.494
Excess of Public Offering Price per Unit over Sponsor's Initial
Repurchase Price per Unit........................................... $ 0.420 $ 0.300 $ 0.390
Calculation of Estimated Net Annual Interest Income per Unit (7):
Estimated Annual Interest Income.................................. $ 0.52385 $ 0.38936 $ 0.44510
Less: Estimated Annual Expense.................................... $ 0.01560 $ 0.01505 $ 0.01881
---------- ---------- ----------
Estimated Net Annual Interest Income.............................. $ 0.50825 $ 0.37431 $ 0.42629
Estimated Daily Rate of Net Interest Accrual per Unit................. $ 0.001412 $ 0.001040 $ 0.001184
Minimum Principal Value of the Trust under which Trust Agreement may
be terminated....................................................... $ 2,056,000 $ 1,000,000 $ 750,000
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made as
of the close of business of the Sponsor (3:15 p.m. Central Time) next
following receipt of an order for a sale or purchase of Units or receipt by
Investors Fiduciary Trust Company of Units tendered for redemption.
information.
3
<PAGE>
ESSENTIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NEW YORK VIRGINIA
SERIES 8 SERIES 4 SERIES 1
<S> <C> <C> <C>
-------------- -------------- --------------
Trustee's Annual Fee per $1,000 principal amount of Municipal Bonds
(6)................................................................. $0.860 $0.690 $1.020
Reduction of Trustee's fee per Unit during the first year (7)............ $0.00000 $0.00000 $0.00349
Estimated annual interest income per Unit during the first year (7)...... $0.52385 $0.38936 $0.44161
Interest Payments (8):
First Payment per Unit, representing 6 days (28 days in the case of
Insured New York Series 4).......................................... $0.00847 $0.02912 $0.00710
Estimated Normal Monthly Distribution per Unit........................... $0.04236 $0.03120 $0.03552
Estimated Normal Annual Distribution per Unit............................ $0.50832 $0.37440 $0.42624
Sales Charge (9):
As a percentage of Public Offering Price per Unit........................ 4.200% 3.000% 3.900%
As a percentage of net amount invested................................... 4.384% 3.093% 4.058%
As a percentage of net amount invested in earning assets................. 4.422% 3.114% 4.071%
Date of Trust Agreements............................................... February 17, 1994
First Settlement Date.................................................. February 25, 1994 (March 3, 1994 in the
case of Insured New York Series 4)
Mandatory Termination Date............................................. December 31, 2022
Evaluator's Annual Evaluation Fee...................................... Maximum of $0.30 per $1,000 Principal
Amount of Municipal Bonds
Sponsor's Annual Surveillance Fee...................................... Maximum of $0.002 per Unit
</TABLE>
- ------------------------------
(1) Purchased Interest is a portion of the unpaid interest that has
accumulated on the Bonds in a Trust from the later of the last payment
date on the Bonds or the date of issuance thereof through the First
Settlement Date of such Trust. In addition, anyone ordering Units after
the Date of Deposit will pay Daily Accrued Interest from the later of the
First Settlement Date or the last Record Date for such Trust to the date
of settlement (five business days after order). Daily Accrued Interest is
the estimated daily rate of net interest accrued on the Bonds in a Trust.
(2) Many unit investment trusts comprised of municipal securities issue a
number of units such that each unit represents approximately $1,000
principal amount of underlying securities. The Sponsor, on the other
hand, in determining the number of Units for each Trust has elected not
to follow this format but rather to provide that number of Units which
will establish as close as possible as of the Date of Deposit a Public
Offering Price per Unit of $10.
(3) The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Public Offering
of Units--Public Offering Price."
(4) The 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 Trustee, the Sponsor and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of Bonds
while the Public Offering Price will vary with changes in the offering
price of the underlying Bonds and with changes in the Purchased Interest
and Daily Accrued Interest; therefore, there is no assurance that the
present Estimated Current Returns indicated above will be realized in the
future. The 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 retirement dates of all of the Bonds in the applicable Trust
and (2) takes into account the expenses and sales charge associated with
each Trust Unit. Since the market values and estimated retirement dates
of the Bonds and expenses of each Trust will change, there is no
assurance that the present Estimated Long-Term Returns as indicated above
will be realized in the future. The Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the
calculation of the Estimated Long-Term Returns reflects the estimated
date and amount of principal returned while the Estimated Current Return
calculations include only net annual interest income and Public Offering
Price.
(5) This figure is based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Bonds. The estimated
cash flows to Unitholders for the Trusts are either set forth under
"Estimated Cash Flows to Unitholders" or are available upon request at no
charge from the Sponsor.
(6) See "Expenses of the Trusts."
(7) During the first year, the Trustee has agreed to reduce its fee (and to
the extent necessary pay expenses of the Trust Funds) in the amounts
stated above. The Trustee has agreed to the foregoing to cover all or a
portion of the interest on any Municipal Bonds accruing prior to their
expected dates of delivery, since interest will not accrue to the benefit
of Unitholders of a Trust Fund until such Bonds are actually delivered to
the Trust Fund. The estimated net annual interest income per Unit will
remain as indicated. See "The Trust Funds" and "Interest, Estimated
Long-Term Return and Estimated Current Return."
(8) Unitholders will receive interest distributions monthly. The Record Date
is the first day of the month, commencing March 1, 1994, and the
distribution date is the fifteenth day of the month, commencing March 15,
1994 for Insured National Series 8 and Virginia Series 1. The Record Date
is the first day of the month, commencing April 1, 1994, and the
distribution date is the fifteenth day of the month, commencing April 15,
1994 for Insured New York Series 4.
(9) The sales charge as a percentage of the net amount invested in earning
assets will increase as Daily Accrued Interest increases. Transactions
subject to quantity discounts (see "Public Offering of Units-Public
Offering Price") will have reduced sales charges, thereby reducing all
percentages in the table.
4
<PAGE>
THE TRUST FUNDS
GENERAL
Kemper Defined Funds Series 13 includes the following separate unit investment
trusts created by the Sponsor under the name Kemper Defined Funds: "Insured
National Series 8" (the "Insured National Trust"), "Insured New York Series 4"
(the "Insured State Trust") and "Virginia Series 1" (the "State Trust")
(hereinafter collectively called the "Trusts" or "Trust Funds"). Each of the
Trust Funds is generally similar but each is separate and is designated by a
different series number. Each of the Trust Funds was created under the laws of
the State of Missouri pursuant to a trust indenture dated the Date of Deposit
(the "Trust Agreements") between Kemper Unit Investment Trusts, a service of
Kemper Securities, Inc. (the "Sponsor") and Investors Fiduciary Trust Company
(the "Trustee").*
The Insured National Trust was formed for the purpose of gaining interest
income free from Federal income taxes while conserving capital and
diversifying risks by investing in 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.
The Insured State Trust was formed for the purpose of gaining interest income
free from Federal and State income taxes and, where applicable, local income
and/or property taxes while conserving capital and diversifying risks by
investing in an insured, fixed portfolio consisting of obligations issued by
or on behalf of the State for which such Trust Fund is named or counties,
municipalities, authorities or political subdivisions thereof.
The State Trust was formed for the purpose of gaining interest income free
from Federal and State income taxes and, where applicable, local income and/or
property taxes while conserving capital and diversifying risks by investing in
a fixed portfolio consisting of obligations issued by or on behalf of the
State for which such Trust Fund is named or counties, municipalities,
authorities or political subdivisions thereof.
There is, of course, no guarantee that the Trust Funds' objectives will be
achieved.
On the Date of Deposit, the Sponsor delivered to the Trustee that aggregate
principal amount of Municipal Bonds or contracts for the purchase thereof for
deposit in the Trust Funds as set forth under "Essential Information." Of such
principal amount, the amount specified in "Essential Information" was
deposited in each Trust. In exchange for the Municipal Bonds so deposited, the
Trustee delivered to the Sponsor documentation evidencing the ownership of
that number of Units for each Trust Fund as indicated under "Essential
Information." Offerees in the States of Indiana and Washington may only
purchase units of the Insured National Trust. Offerees in the State of
Virginia may only purchase units of the Insured National Trust and the
Virginia Trust.
Each Trust Fund initially consists of delivery statements (i.e., contracts) to
purchase obligations (the "Municipal Bonds" or the "Bonds"). The Sponsor has a
limited right of substitution for such Bonds in the event of a failed
contract. See "Portfolios."
Certain of the Bonds in certain of the Trust Funds may have been purchased on
a "when, as and if issued" or "delayed delivery" basis with delivery expected
to take place after the First Settlement Date. See "The Trust Fund--Series
Information" and "Notes to Portfolios." Accordingly, the delivery of such
Bonds may be delayed or may not occur. Interest on these Municipal Bonds
begins accruing to the benefit of Unitholders on their respective dates of
delivery. To the extent any Municipal Bonds are actually delivered to a Trust
Fund after their respective expected dates of delivery, Unitholders who
purchase Units in such Trust Fund prior to the date such "when, as and if
issued" or "delayed delivery" Municipal Bonds are actually delivered to the
Trustee would, to the extent such income is not offset by a reduction in the
Trustee's fee (or, to the extent necessary, other expenses), be required to
reduce their tax basis in their Units of such Trust Fund since
- ---------------------------
* Reference is made to the Trust Agreements, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreements.
5
<PAGE>
the interest accruing on such Bonds during the interval between their purchase
of Units and the actual delivery of such Bonds would, for tax purposes, be
considered a non-taxable return of principal rather than as tax-exempt
interest. The result of such adjustment, if necessary, would be, during the
first year only, that the Estimated Long-Term Returns may be, and the
Estimated Current Returns would be, slightly lower than those shown herein,
assuming the Trust Fund portfolios and estimated annual expenses do not vary.
Holders of Units will be "at risk" with respect to these Bonds (i.e., may
derive either gain or loss from fluctuations in the evaluation of such Bonds)
from the date they commit for Units.
All of the Municipal Bonds in each Trust Fund are rated in the category "BBB"
or better by Standard & Poor's or "Baa" or better by Moody's. See "Description
of Municipal Bond Ratings" and "The Trust Fund-- Portfolios."
Each Unit represents an undivided fractional interest in the Municipal Bonds
deposited in the appropriate Trust Fund, as shown under "Essential
Information." All Municipal Bonds deposited were accompanied by copies of
opinions of bond counsel given at the time of original delivery of such
obligations to the effect that interest thereon is exempt from all Federal
income taxes, except in certain instances depending on the holder, and from
State income taxes and, where applicable, local income and/or property taxes
for residents of the State for which such Trust Fund is named. Capital gains,
if any, are subject to Federal income taxation, payable by Unitholders. See
"Federal Tax Status."
An investment in Units of a Trust Fund should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio and hence of the Units will
decline with increases in interest rates. The value of the underlying
Municipal Bonds will fluctuate inversely with changes in interest rates. The
uncertain economic conditions of recent years, together with the fiscal
measures adopted to attempt to deal with them, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate debt
obligations generally and long-term obligations in particular. The Sponsor
cannot predict the degree to which such fluctuations will continue in the
future.
SERIES INFORMATION
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NEW YORK VIRGINIA
SERIES 8 SERIES 4 SERIES 1
<S> <C> <C> <C>
------------ ------------ ------------
Number of Obligations........................................................ 11 7 6
Territorial Obligations (1)..................................................
General Obligation Bonds (2)(4).............................................. 1 (10%) 4 (60%) 0
Revenue Bonds (3)(4)......................................................... 10 (90%) 3 (40%) 6 (100%)
Revenue Bond Concentrations (4):
Airport......................................................................
Correctional Facilities......................................................
Education.................................................................... 1 (3%) 2 (28%)
Electric Systems............................................................. 3 (29%)
Excise Tax Revenue...........................................................
Hospital..................................................................... 2 (19%) 2 (37%)
Housing......................................................................
Lease Revenue................................................................ 1 (20%)
Port Authority............................................................... 1 (12%)
Wastewater................................................................... 1(10%)
Tax Allocation...............................................................
Transportation...............................................................
Tollroad..................................................................... 2 (19%)
Utilities....................................................................
Water and Sewer.............................................................. 1 (10%) 3 (43%)
Miscellaneous................................................................
Average life of the Municipal Bonds in the
Trust (5).................................................................. 25 7 12
Percentage of "when, as and if issued " or "delayed delivery" Bonds purchased
by the Trust............................................................... None None 37%
Syndication (6).............................................................. 23 0 0
</TABLE>
29% of the Aggregate Principal Amount of the Bonds in Insured National Series
8 are Obligations of Issuers located in the State of Illinois.
- ------------------------------
(1) Municipal Bonds issued by Territories of the United States (which term
includes the Commonwealth of Puerto Rico and the District of Columbia)
generally receive the same tax exempt treatment for both state and
Federal tax purposes as Municipal Bonds issued by political entities in
the named State Trust. See "Special Considerations and State Tax Status"
for each Trust.
(2) General obligation bonds are general obligations of governmental entities
and are backed by the taxing powers of such entities.
6
<PAGE>
(3) Revenue bonds are payable from the income of a specific project or
authority and are not supported by an issuer's power to levy taxes.
(4) The portfolio percentage in parenthesis represents the principal amount
of such Bonds to the total principal amount of Bonds in the Trust. For a
discussion of the risks associated with investments in the bonds of such
issuers, see "Portfolios--General Trust Information."
(5) The average life of the Bonds in a Trust is calculated based upon the
stated maturities of the Bonds in such Trust (or, with respect to Bonds
for which funds or securities have been placed in escrow to redeem such
Bonds on a stated call date, based upon such call date). The average life
of the Bonds in a Trust may increase or decrease from time to time as
Bonds mature or are called or sold.
(6) The Sponsor and/or affiliated Underwriters have participated as either
the sole underwriter or manager or a member of underwriting syndicates
from which approximately that percentage listed above of the aggregate
principal amount of the Bonds in such Trust were acquired.
TAXABLE EQUIVALENT ESTIMATED CURRENT RETURN TABLES
As of the date of this Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under combined Federal and State taxes
(where applicable) using the published Federal and State tax rates (where
applicable) scheduled to be in effect in 1994. They incorporate increased tax
rates for higher income taxpayers that were included in the Revenue
Reconciliation Act of 1993. These tables illustrate approximately what you
would have to earn on taxable investments to equal the tax-exempt estimated
current return in your income tax bracket. For cases in which more than one
State bracket falls within a Federal bracket the highest State bracket is
combined with the Federal bracket. The combined State and Federal tax rates
shown reflect the fact that State tax payments are currently deductible for
Federal tax purposes, and have been rounded to the nearest 1/2 of 1%. The
tables do not show the approximate taxable estimated current returns for
individuals that are subject to the alternative minimum tax. The taxable
equivalent estimated current returns may be somewhat higher than the
equivalent returns indicated in the following tables for those individuals who
have adjusted gross incomes in excess of $108,450. The tables do not reflect
the effect of limitations on itemized deductions and the deduction for
personal exemptions. They were designed to phase out certain benefits of these
deductions for higher income taxpayers. These limitations, in effect, raise
the marginal Federal tax rate to approximately 44 percent for taxpayers filing
a joint return and entitled to four personal exemptions and to approximately
41 percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on
the number of exemptions claimed and the total amount of the taxpayer's
itemized deductions. For example, the limitation on itemized deductions will
not cause a taxpayer to lose more than 80% of his allowable itemized
deductions, with certain exceptions. See "Federal Tax Status" for a more
detailed discussion of recent Federal tax legislation, including a discussion
of provisions affecting corporations.
NATIONAL
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------------------ ---------------------------------------------------------------
SINGLE JOINT TAX 3 1/2% 4% 4 1/2% 5% 5 1/2% 6% 6 1/2%
RETURN RETURN BRACKET EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ -------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.75 $ 0 - 38.00 15 % 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
22.75 - 55.10 38.00 - 91.85 28 4.86 5.56 6.25 6.94 7.64 8.33 9.03
55.10 - 115.00 91.85 - 140.00 31 5.07 5.80 6.52 7.25 7.97 8.70 9.42
115.00 - 250.00 140.00 - 250.00 36 5.47 6.25 7.03 7.81 8.59 9.38 10.16
Over 250.00 Over 250.00 39.6 5.79 6.62 7.45 8.28 9.11 9.93 10.76
</TABLE>
7
<PAGE>
NEW YORK
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------------------ ---------------------------------------------------------------
SINGLE JOINT TAX 3 1/2% 4% 4 1/2% 5% 5 1/2% 6% 6 1/2%
RETURN RETURN BRACKET* EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ -------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.75 $ 0 - 38.00 21.5 % 4.46% 5.10% 5.73% 6.37% 7.01% 7.64% 8.28%
22.75 - 55.10 38.00 - 91.85 33.5 5.26 6.02 6.77 7.52 8.27 9.02 9.77
55.10 - 115.00 91.85 - 140.00 36.2 5.49 6.27 7.05 7.84 8.62 9.40 10.19
115.00 - 250.00 140.00 - 250.00 40.9 5.92 6.77 7.61 8.46 9.31 10.15 11.0
Over 250.00 Over 250.00 44.2 6.27 7.17 8.06 8.96 9.86 10.75 11.65
</TABLE>
- ------------
*Combined Federal and State tax bracket was computed assuming that the
investor is not subject to local income taxes, such as New York City taxes.
Should a Unitholder reside in a locality which imposes an income tax, the
Unitholder's equivalent taxable estimated current return would be greater than
the equivalent taxable estimated current returns indicated in the table. The
table does not reflect the recent enactment of a New York State supplemental
income tax based upon a taxpayer's New York State taxable income and New York
State adjusted gross income. This supplemental tax results in an increased
marginal state income tax rate to the extent a taxpayer's New York State
adjusted gross income ranges between $100,000 and $150,000. In addition, the
table does not reflect the amendments to the New York State income tax law
that imposes limitations on the deductibility of itemized deductions. The
application of the New York State limitation on itemized deductions may result
in a higher combined Federal, State and local tax rate than indicated in the
table. The table assumes for this purpose that a taxpayer's New York State
adjusted income equals his Federal adjusted gross income.
NEW YORK CITY RESIDENTS ONLY
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------------------ ---------------------------------------------------------------
SINGLE JOINT TAX 3 1/2% 4% 4 1/2% 5% 5 1/2% 6% 6 1/2%
RETURN RETURN BRACKET* EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ -------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.75 $ 0 - 38.00 25.2 % 4.68% 5.35% 6.02% 6.68% 7.35% 8.02% 8.69%
22.75 - 55.10 38.00 - 91.85 36.6 5.52 6.31 7.10 7.89 8.68 9.46 10.25
55.10 - 115.00 91.85 - 140.00 39.3 5.77 6.59 7.41 8.24 9.06 9.88 10.71
115.00 - 250.00 140.00 - 250.00 43.7 6.22 7.10 7.99 8.88 9.77 10.66 11.55
Over 250.00 Over 250.00 46.9 6.59 7.35 8.47 9.42 10.36 11.30 12.24
</TABLE>
- ------------
*Combined Federal, State and City tax bracket was computed assuming that the
investor is subject to New York City taxes. The table does not reflect the New
York State supplemental income tax based upon a taxpayer's New York State
taxable income and New York State adjusted gross income. This supplemental tax
results in an increased marginal state income tax rate to the extent a
taxpayer's New York State adjusted gross income ranges between $100,000 and
$150,000. In addition, the table does not reflect the amendments to the New
York State income tax law that imposes limitations on the deductibility of
itemized deductions. The application of the New York State supplemental income
tax and limitation on itemized deductions may result in a higher combined
Federal, State and local tax rate than indicated in the table. The table
assumes for this purpose that a taxpayer's New York State adjusted income
equals his Federal adjusted gross income.
VIRGINIA
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
------------------------------------ ---------------------------------------------------------------
SINGLE JOINT TAX 4 1/2% 5% 5 1/2% 6% 6 1/2% 7% 7 1/2%
RETURN RETURN BRACKET* EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
------ ------ -------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 22.75 $ 0 - 38.00 19.9 % 5.62% 6.24% 6.87% 7.49% 8.11% 8.74% 9.36%
22.75 - 55.10 38.00 - 91.85 32.1 6.63 7.36 8.10 8.84 9.57 10.31 11.05
55.10 - 115.00 91.85 - 140.00 35.0 6.92 7.69 8.46 9.23 10.00 10.77 11.54
115.00 - 250.00 140.00 - 250.00 39.7 7.46 8.29 9.12 9.95 10.78 11.61 12.44
Over 250.00 Over 250.00 43.1 7.91 8.79 9.67 10.54 11.42 12.30 13.18
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
KEMPER DEFINED FUNDS SERIES 13 INSURED NATIONAL SERIES 8
</TABLE>
PORTFOLIO
AS OF THE DATE OF DEPOSIT: FEBRUARY 17, 1994
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE, COUPON RATE AND MATURITY DATE
OF BOND COST OF
AGGREGATE REPRESENTED BY SPONSOR'S CONTRACTS TO PURCHASE REDEMPTION BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
$ 1,000,000 Elsinore Valley Municipal Water District (Riverside AAA 2002 @ 102 $ 1,019,490
County, California), Elsinore Valley Water and 2013 @ 100 S.F.
Sewer Facilities Corporation, Refunding
Certificates of Participation, Series 1992A (FGIC
Insured), 5.75% Due 07/01/2019
1,000,000 City of Chicago (Illinois), General Obligation Bonds AAA 2003 @ 102 1,010,040
(Emergency Telephone System), Series 1993 (FGIC 2014 @ 100 S.F.
Insured), 5.625% Due 01/01/2023
1,000,000 City of Chicago (Illinois), Wastewater Transmission AAA 2003 @ 100 948,510
Revenue Bonds, Refunding Series 1993 (FGIC 2014 @ 100 S.F.
Insured), 5.125% Due 01/01/2020
1,000,000 The Illinois State Toll Highway Authority, Toll AAA 2003 @ 102 1,016,060
Highway Priority Revenue Bonds, 1992 Series A (FGIC
Insured), 5.75% Due 01/01/2017
945,000 Indiana Health Facility Financing Authority Hospital AAA 2002 @ 102 963,418
Revenue Refunding and Improvement Bonds (Ancilla 2009 @ 100 S.F.
Systems Incorporated), 5.75% Due 07/01/2015
335,000(P) Romulus Community Schools (General Obligation - AAA Non-Callable 79,874
Unlimited Tax), County of Wayne, State of Michigan,
1993 Refunding Bonds (FGIC Insured), 0.00% Due
05/01/2020
1,000,000 North Carolina Eastern Municipal Power Agency, Power AAA 2003 @ 100 1,000,000
System Revenue Bonds, Refunding Series 1993B (FGIC 2015 @ 100 S.F.
Insured), 5.50% Due 01/01/2017
1,000,000 Harris County, Texas, Toll Road Senior Lien, Revenue AAA 2004 @ 102 1,000,000
Refunding Bonds, Series 1994 (FGIC Insured), 5.50%
Due 8/15/2021
1,000,000 Lower Colorado River Authority, Junior Lien Refunding AAA 2002 @ 102 1,009,330
Revenue Bonds, Fourth Supplemental Series (FSA 2015 @ 100 S.F.
Insured), 5.625% Due 01/01/2017
1,000,000 Washington Public Power Supply System, Nuclear AAA 2003 @ 102 1,016,640
Project No. 1 Refunding Revenue Bonds, Series 1993A 2014 @ 100 S.F.
(MBIA Insured), 5.70% Due 07/01/2017
1,000,000 Wisconsin Health and Educational Facilities Authority AAA 2003 @ 102 1,000,000
Revenue Bonds (Sisters of the Sorrowful Mother - 2014 @ 100 S.F.
Ministry Corporation), Series 1993D (MBIA Insured),
5.50% Due 08/15/2019
----------- -----------
$ 10,280,000 $ 10,063,362
----------- -----------
----------- -----------
</TABLE>
- ------------
See "Notes to Portfolios."
9
<PAGE>
<TABLE>
<S> <C>
KEMPER DEFINED FUNDS SERIES 13 INSURED NEW YORK
SERIES 4
</TABLE>
PORTFOLIO
AS OF THE DATE OF DEPOSIT: FEBRUARY 17, 1994
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE, COUPON RATE AND MATURITY DATE OF
BOND COST OF
AGGREGATE REPRESENTED BY SPONSOR'S CONTRACTS TO PURCHASE REDEMPTION BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
$ 300,000 City of Buffalo, New York, General Obligation Bonds AAA Non-Callable $ 309,378
(General Improvement Bonds, Series 1994A (MBIA
Insured), 4.75% Due 02/01/2000
1,000,000 County of Nassau, New York, General Obligation AAA Non-Callable 1,000,000
Refunding Bonds (General Improvement Refunding Bonds,
Series 1994A) (FGIC Insured), 3.75% Due 05/01/1998
700,000(C) County of Nassau, New York, General Obligation AAA Non-Callable 700,000
Refunding Bonds (General Improvement Refunding Bonds,
Series 1994A) (FGIC Insured), 4.10% Due 05/01/2000
1,000,000 Dormitory Authority of the State of New York, New York AAA Non-Callable 1,017,500
University Insured Revenue Bonds, Series 1993B (MBIA
Insured), 4.20% Due 07/01/1999
400,000(P) Dormitory Authority of the State of New York, State AAA Non-Callable 276,284
University Educational Facilities Revenue Bonds,
Series 1994A (MBIA Insured) 0.00% Due 05/15/2002
1,000,000 The City of New York, General Obligation Bonds, Fiscal AAA Non-Callable 1,051,250
1994 Series F (MBIA Insured), 5.125% Due 08/01/2001
600,000 The Port Authority of New York and New Jersey AAA Non-Callable 611,250
Consolidated Bonds, Ninety-First Series (FSA
Insured), 4.50% Due 11/15/2002
---------- ----------
$ 5,000,000 $ 4,965,662
---------- ----------
---------- ----------
</TABLE>
- ------------
See "Notes to Portfolios."
10
<PAGE>
<TABLE>
<S> <C>
KEMPER DEFINED FUNDS SERIES 13 VIRGINIA
SERIES 1
</TABLE>
PORTFOLIO
AS OF THE DATE OF DEPOSIT: FEBRUARY 17, 1994
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE, COUPON RATE AND MATURITY DATE OF
BOND COST OF
AGGREGATE REPRESENTED BY SPONSOR'S CONTRACTS TO PURCHASE REDEMPTION BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
$ 750,000(S) Augusta County Service Authority (Virginia), Water and AAA Non-Callable $ 750,000
Sewer System Revenue Bonds, Series 1994 (MBIA
Insured), 4.85% Due 11/01/2006
100,000(P) County of Chesterfield, Virginia, Water and Sewer AA Non-Callable 52,164
Revenue Refunding Bonds, Series 1992A, 0.00% Due
11/01/2007
750,000 County of Stafford, Virginia, Refunding Certificates of AAA 2004 @ 102 750,000
Participation, Series 1994 (AMBAC Insured), 4.70% Due
11/01/2005
750,000 Fairfax County Water Authority (Virginia), Water AA- Non-Callable 750,000
Revenue Bonds, Series 1994, 4.60% Due 04/01/2004
650,000(S) Industrial Development Authority of the City of A 2004 @ 102 650,000
Hampton, Virginia, Hospital Revenue and Refunding
Bonds (Sentara Hampton General Hospital), Series
1994A, 5.00% Due 11/01/2007
750,000 Virginia Commonwealth University, Medical College of AA- Non-Callable 750,000
Virginia Hospital Revenue Refunding Bonds, Series D,
4.45% Due 07/01/2003
---------- ----------
$ 3,750,000 $ 3,702,164
---------- ----------
---------- ----------
</TABLE>
- ------------
See "Notes to Portfolios."
11
<PAGE>
NOTES TO PORTFOLIOS:
All insured Bonds in the Trust Funds are insured only by the insurer indicated
in the description. The insurance was obtained directly by the issuer of the
Bonds or by the Sponsor.
(P) These Bonds have been purchased at an original issue discount from the
par value because there is little or no stated interest income thereon.
Over the life of these Bonds the value increases, so that upon maturity
the holders of the Bonds will receive 100% of the principal amount
thereof.
(S) These Municipal Bonds are "when, as and if issued" or "delayed
delivery" and have expected settlement dates after the "First Settlement
Date." Interest on these Bonds begins accruing to the benefit of
Unitholders on the date of delivery.
(C) This Bond is of the same issue as another Bond in the Trust.
(D) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(1) Contracts to acquire Municipal Bonds were entered into by the Sponsor
between February 2, 1994 and February 15, 1994. All Bonds are represented
by regular way contracts, unless otherwise indicated, for the performance
of which an irrevocable letter of credit has been deposited with the
Trustee.
(2) The ratings have been provided by Muller Data Corporation as reported to
Muller Data Corporation by the respective rating agencies. All ratings
represent Standard & Poor's Corporation ratings unless marked with the
symbol "(STAR)" in which case the rating represents a Moody's Investors
Service, Inc. rating. A brief description of the applicable Standard &
Poor's and Moody's rating symbols and their meanings is set forth under
"Description of Municipal Bond Ratings." A rating marked by "g" is
contingent upon Standard & Poor's Corporation receiving final
documentation from the insurer.
(3) There is shown under this heading the year in which each issue of
Municipal Bonds is initially redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable
at declining prices thereafter, but not below par value. The prices at
which the Bonds may be redeemed or called prior to maturity may or may
not include a premium and, in certain cases, may be less than the cost of
the Bonds to the Trust. 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 that a sinking
fund is established with respect to an issue of Municipal Bonds.
(4) During the initial offering period, evaluations of Municipal Bonds are
made on the basis of current offering side evaluations of the Municipal
Bonds. The aggregate offering price is greater than the aggregate bid
price of the Municipal Bonds, which is the basis on which Redemption
Prices will be determined for purposes of redemption of Units after the
initial offering period.
(5) Other information regarding the Municipal Bonds in the Trust Funds, at
the opening of business on the Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
BONDS (LOSS) TO INCOME TO VALUE
TRUST FUND TO SPONSOR SPONSOR TRUST OF BONDS
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
Insured National Series 8................................. $ 9,996,738 $ 66,624 $ 555,088 $ 9,976,506
Insured New York Series 4................................. $ 4,953,954 $ 11,708 $ 200,700 $ 4,924,426
Virginia Series 1......................................... $ 3,673,781 $ 28,383 $ 172,000 $ 3,661,822
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor reflects
underwriting profits or losses received or incurred by the Sponsor
through its participation in underwriting syndicates but such amounts
reflect portfolio hedging transaction costs, hedging gains or losses,
certain other carrying costs and the cost of insurance obtained by the
Sponsor, if any, prior to the Date of Deposit for individual Bonds.
12
<PAGE>
UNDERWRITING
The Underwriters named below have severally purchased Units of the Trusts in
the following respective aggregate percentages:
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NEW YORK VIRGINIA
SERIES 8 SERIES 4 SERIES 1
<S> <C> <C> <C>
-------------- -------------- --------------
*Kemper Unit Investment Trusts 809,625 495,467 166,434
Wheat, First Securities 150,000
*Kemper Securities, Inc. 100,000
Gruntal & Company, Inc. 10,000 10,000 10,000
J. J. B. Hilliard, W. L. Lyons, Inc. 25,000
Raffensperger, Hughes & Co., Inc. 25,000
Advest, Inc. 10,000 10,000
Branch, Cabell & Company 10,000
Craigie, Inc. 10,000
Davenport & Company 10,000
Fidelity Capital Markets a Division of National Financial Services Corp. 10,000
First of Michigan Corporation 10,000
J. C. Bradford & Company 10,000
Linsco/Private Ledger 10,000
McDonald & Company Securities, Inc. 10,000
Nathan & Lewis Securities, Inc. 10,000
Piper Jaffray Inc. 10,000
Raymond James & Associates, Inc. 10,000
Robert W. Baird & Co., Inc. 10,000
Stifel Nicolaus & Company, Inc. 10,000
William R. Hough & Co. 10,000
-------------- -------------- --------------
TOTAL UNITS: 1,059,625 515,467 386,434
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Underwriter Addresses
Advest, Inc., One Commercial Plaza, 280 Trumbull Street, Hartford, CT 01630
Branch, Cabell & Company, 919 East Main Street, 17th Floor, Richmond, VA 23219
Craigie, Inc., 823 East Main Street, Richmond, VA 23219
Davenport & Company, 901 E. Cary Street, Richmond, VA 23219
Fidelity Capital Markets a Division of National Financial Services Corp., 161
Devonshire Street, D4, Boston, MA 02110
First of Michigan Corporation, 100 Renaissance Center, 26th Floor, Detroit, MI
48243
Gruntal & Company, Inc., 14 Wall Street, 14th Floor, New York, NY 10005
J. C. Bradford & Company, 330 Commerce Street, Nashville, TN 37201-1809
J. J. B. Hilliard, W. L. Lyons, Inc., Hilliard Lyons Center, Louisville, KY
40202
*Kemper Securities, Inc., 77 West Wacker Drive, 28th Floor, Chicago, IL
60601-1994
*Kemper Unit Investment Trusts a service of Kemper Securities, Inc., 77 West
Wacker Drive, 5th Floor, Chicago, IL 60601-1994
Linsco/Private Ledger, 5871 Oberlin Drive, San Diego, CA 92121
McDonald & Company Securities, Inc., 2100 Society National Bank Building,
Cleveland, OH 44114
13
<PAGE>
Nathan & Lewis Securities, Inc., 119 West 40th Street, 21st Floor, New York,
NY 10018
Piper Jaffray Inc., 222 South Ninth Street, Minneapolis, MN 55440
Raymond James & Associates, Inc., 880 Carillon Parkway, St Petersburg, FL
33716
Robert W. Baird & Co., Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202
Southwest Securities Inc., 1201 Elm Street, Suite 4300, Dallas, TX 75270
Stifel Nicolaus & Company, Inc., 500 North Broadway, St Louis, MO 63102
Wheat, First Securities, Riverfront Plaza, 901 East Byrd Street, Richmond, VA
23219
William R. Hough & Co., 100 Second Avenue South, Suite 800, St Petersburg, FL
33701
Kemper Corporation owns or has a controlling interest in Kemper Unit
Investment Trusts (the Trusts's Sponsor and Evaluator) and Kemper Securities,
Inc. Kemper Unit Investment Trusts is a service of Kemper Securities, Inc. For
additional information about the Underwriters, see "Underwriting."
The Underwriters acquired the Units of the Trust Funds at a price per Unit
equal to the Public Offering Prices set forth under "Essential Information"
less the Underwriters' takedown. The amount of the Underwriters' takedown for
Trusts with a weighted average maturity less than 7.5 years for each Unit is
$.22 for those firms committing for 10,000-24,999 Units, $.22 plus 50% of any
net portfolio profit for those firms committing for 25,000-99,999 Units and
$.23 plus 50% of any net portfolio profit for those firms committing for
100,000 or more Units. The amount of the Underwriters' takedown for Trusts
with a weighted average maturity between 7.5 and 14.99 years for each Unit is
$.28 for those firms committing for 10,000-24,999 Units, $.28 plus 50% of any
net portfolio profit for those firms committing for 25,000-49,999 Units, $.29
plus 50% of any net portfolio profit for those firms committing for
50,000-99,999 Units and $.30 plus 50% of any net portfolio profit for those
firms committing for 100,000 or more Units. The amount of the Underwriters'
takedown for Trusts with a weighted average maturity greater than 14.99 years
for each Unit is $.31 for those firms committing for 10,000-24,999 Units, $.31
plus 50% of any net portfolio profit for those firms committing for
25,000-49,000 Units, $.32 plus 50% of any net portfolio profit for those firms
committing for 50,000-99,000 Units and $.33 plus 50% of any net portfolio
profit for those firms committing for 100,000 or more Units. In connection
with any quantity discounts (see "Public Offering of Units--Public Offering
Price"), the Sponsor and the applicable Underwriter will each receive reduced
concessions as a result of the reduced sales charges to the investor. 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
who underwrite additional Units of a Trust or who sell, during a specified
time period, a minimum dollar amount of Units of a Trust and other unit
investment trusts underwritten by the Sponsor. The Underwriting Agreement
provides that the Sponsor will select and purchase the Municipal Bonds for
deposit in the Trust Funds on its own behalf and on behalf of the other
Underwriters.
The Underwriting Agreement provides that a public offering of the Units of the
Trust Funds will be made by the Underwriters at the Public Offering Price
described in the Prospectus. Units may also be sold to or through dealers, who
are members of the National Association of Securities Dealers, Inc., and
others at prices representing discounts from the Public Offering Price.
However, resales of Units of the Trust Funds to the public will be made at the
Public Offering Price thereof.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of Units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks
14
<PAGE>
and/or others that sponsor sales contests or recognition programs conforming
to criteria established by the Sponsor, or participate in sales programs
sponsored by the Sponsor, an amount not exceeding the total applicable sales
charges on the sales generated by such persons at the public offering price
during such programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor pay fees to
qualifying underwriters, brokers, dealers, banks or others for certain
services or activities which are primarily intended to result in sales of
Units of the Trusts. Such payments are made by the Sponsor out of its own
assets, and not out of the assets of the Trusts. These programs will not
change the price Unitholders pay for their Units or the amount that the Trusts
will receive from the Units sold. Approximately every eighteen months the
Sponsor holds a business seminar which is open to Underwriters that sell units
of trusts it sponsors. The Sponsor pays substantially all costs associated
with the seminar, excluding Underwriter travel costs. Each Underwriter is
invited to send a certain number of representatives based on the gross number
of units such firm underwrites during a designated time period.
15
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
KEMPER DEFINED FUNDS SERIES 13:
We have audited the accompanying statements of condition and the related
portfolios of Kemper Defined Funds Series 13 (Insured National Series 8,
Insured New York Series 4 and Virginia Series 1) as of February 17, 1994. The
statements of condition and portfolios are the responsibility of the Sponsor.
Our responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit 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 Municipal Bonds owned at February 17, 1994
and a letter of credit deposited to purchase Municipal Bonds by correspondence
with the Trustee. 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 our audit provides 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 Series
13 (Insured National Series 8, Insured New York Series 4 and Virginia Series
1) as of February 17, 1994, in conformity with generally accepted accounting
principles.
GRANT THORNTON
Chicago, Illinois
February 17, 1994
16
<PAGE>
KEMPER DEFINED FUNDS SERIES 13
STATEMENTS OF CONDITION
AT THE OPENING OF BUSINESS ON FEBRUARY 17, 1994, THE DATE OF DEPOSIT
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NEW YORK VIRGINIA
SERIES 8 SERIES 4 SERIES 1
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT IN MUNICIPAL BONDS
Municipal Bonds deposited in the Trusts (1)(4)...................... $ 1,000,000 $ 2,068,750 $ 1,500,000
Contracts to purchase Municipal Bonds (1)(4)........................ 9,063,362 2,896,912 2,202,164
Accrued Interest to First Settlement Date on Municipal Bonds
(1)(2)............................................................ 87,846 34,366 11,467
----------- ---------- ----------
Total............................................................... $ 10,151,208 $ 5,000,028 $ 3,713,631
----------- ---------- ----------
----------- ---------- ----------
Number of Units..................................................... 1,059,625 515,467 386,434
LIABILITIES AND INTEREST OF UNITHOLDERS
Accrued Interest payable to Sponsor (1)(2).......................... $ -- $ -- $ --
Interest of Unitholders--
Cost to investors (3)............................................... $ 10,596,250 $ 5,154,670 $ 3,864,340
Less: Gross underwriting commission (3)......................... 445,042 154,642 150,709
------------ ----------- -----------
Net interest to Unitholders (1)(2)(3)............................... $ 10,151,208 $ 5,000,028 $ 3,713,631
------------ ----------- -----------
Total............................................................... $ 10,151,208 $ 5,000,028 $ 3,713,631
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
- ------------
NOTES:
(1) The aggregate value of the Municipal Bonds listed in each Portfolio and
their cost to the Trust are the same. The value of the Municipal Bonds is
determined by Muller Data Corporation on the bases set forth under
"Public Offering of Units--Public Offering Price". The contracts to
purchase Municipal Bonds are collateralized by an irrevocable letter of
credit of $14,296,117 which has been deposited with the Trustee. Of this
amount, $14,162,438 relates to the offering price of amount of Municipal
Bonds to be purchased and $133,679 relates to accrued interest on such
Municipal Bonds to the expected dates of delivery.
(2) Accrued interest on the underlying Municipal Bonds represents the
interest accrued as of the First Settlement Date from the later of the
last payment date on the Bonds of the date of issuance thereof. The
Trustee may advance to the Trust a portion of the accrued interest on the
underlying Municipal Bonds for distribution to the Sponsor as the
Unitholder of record as of the First Settlement Date. A portion of the
accrued interest on the underlying Municipal Bonds is payable by
investors and is included in the Public Offering Price. This portion is
called Purchased Interest and represents the difference between Accrued
Interest to First Settlement Date on Municipal Bonds and Accrued Interest
payable to Sponsor (see "Essential Information").
(3) The aggregate public offering price includes a sales charge for the
Trust as set forth under Essential Information, assuming all single
transactions involve less than 10,000 Units. For single transactions
involving 10,000 or more Units, the sales charge is reduced (see "Public
Offering of Units--Public Offering Price") resulting in an equal
reduction in both the Cost to investors and the Gross underwriting
commission while the Net interest to Unitholders remains unchanged.
(4) Insurance coverage providing for the timely payment of principal and
interest on the Municipal Bonds in the Insured Trusts has been obtained
directly by the issuer of such Municipal Bonds or by the Sponsor from
Municipal Bond Investors Assurance Corporation or other insurers.
17
<PAGE>
SPECIAL CONSIDERATIONS AND STATE TAX STATUS
INSURED NEW YORK SERIES 4
SPECIAL CONSIDERATIONS
The portfolio of Insured New York Series 4 includes certain bonds issued by
New York State (the "State"), by its various public bodies (the "Agencies"),
and/or by other entities located within the State, including the City of New
York (the "City").
Some of the more significant events and conditions relating to the financial
situation in New York are summarized below. This section provides only a brief
summary of the complex factors affecting the financial situation in New York
and is derived from sources that are generally available to investors and is
believed to be accurate. It is based in part on Official Statements and
prospectuses issued by, and on other information reported by the State, the
City and their agencies in connection with the issuance of their respective
securities.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of New York
Municipal Obligations held in the portfolio of the Fund or the ability of
particular obligors to make timely payments of debt service on (or relating
to) those obligations.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State economy has grown more slowly than that of the
nation as a whole, gradually eroding the State's relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high state and local tax burden
relative to other states. The burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
A national recession commenced in mid-1990. The downturn continued throughout
the State's 1990-91 fiscal year and was followed by a period of weak economic
growth during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to grow faster
than 1992, but still at a very moderate rate as compared to other recoveries.
The national recession has been more severe in the State because of factors
such as a significant retrenchment in the financial services industry,
cutbacks in defense spending, and an overbuilt real estate market.
1993-94 Fiscal Year. On April 5, 1993, the State Legislature approved a $32.08
billion budget. Following enactment of the budget the 1993-94 State Financial
Plan was formulated on April 16, 1993. This Plan projects General Fund
receipts and transfers from other funds at $32.367 billion and disbursements
and transfers to other funds at $32.300 billion. In comparison to the
Governor's recommended Executive Budget for the 1993-94 fiscal year, as
revised on February 18, 1993, the 1993-94 State Financial Plan reflects
increases in both receipts and disbursements in the General Fund of $811
million.
18
<PAGE>
While a portion of the increased receipts was the result of a $487 million
increase in the State's 1992-93 positive year-end margin at March 31, 1993 to
$671 million, the balance of such increased receipts is based upon (i) a
projected $269 million increase in receipts resulting from improved 1992-93
results and the expectation of an improving economy, (ii) projected additional
payments of $200 million from the Federal government as reimbursements for
indigent medical care, (iii) the early payment of $50 million of personal tax
returns in 1992-93 which otherwise would have been paid in 1993-94; offset by
(iv) the State Legislature's failure to enact $195 million of additional
revenue-raising recommendations proposed by the Governor. There can be no
assurances that all of the projected receipts referred to above will be
received.
Despite the $811 million increase in disbursements included in the 1993-94
State Financial Plan, a reduction in aid to some local government units can be
expected. To offset a portion of such reductions, the 1993-94 State Financial
Plan contains a package of mandate relief, cost containment and other
proposals to reduce the costs of many programs for which local governments
provide funding. There can be no assurance, however, that localities that
suffer cuts will not be adversely affected, leading to further requests for
State financial assistance.
There can be no assurance that the State will not face substantial potential
budget gaps in the future resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions
to align recurring receipts and disbursements.
1992-93 Fiscal Year. Before giving effect to a 1992-93 year-end deposit to the
refund reserve account of $671 million, General Fund receipts in 1992-93 would
have been $716 million higher than originally projected. This year-end deposit
effectively reduced 1992-93 receipts by $671 million and made those receipts
available for 1993-94.
The State's favorable performance primarily resulted from income tax
collections that were $700 million higher than projected which reflected both
stronger economic activity and tax-induced one-time acceleration of income
into 1992. In other areas larger than projected business tax collections and
unbudgeted receipts offset the loss of $200 million of anticipated Federal
reimbursement and losses of, or shortfalls in, other projected revenue
sources.
For 1992-93 disbursements and transfers to other funds (including the deposit
to the refund reserve account discussed above) totalled $30.829 billion, an
increase of $45 million above projections in April 1992.
Fiscal year 1992-93 was the first time in four years that the State did not
incur a cash-basis operating deficit in the General Fund requiring the
issuance of deficit notes or other bonds, spending cuts or other revenue
raising measures.
Indebtedness. As of March 31, 1993, the total amount of long-term State
general obligation debt authorized but unissued stood at $2.4 billion. As of
the same date, the State had approximately $5.4 billion in general obligation
bonds. The State issued $850 million in tax and revenue anticipation notes
("TRANS") on April 28, 1993. The State does not project the need to issue
additional TRANS during the State's 1993-94 fiscal year.
The State anticipates that its borrowings for capital purposes during the
State's 1993-94 fiscal year will consist of $460 million in general obligation
bonds and $140 million in new commercial paper issuances. In addition, the
State expects to issue $140 million in bonds for the purpose of redeeming
outstanding bond anticipation notes. The Legislature has authorized the
issuance of up to $85 million in certificates of participation during the
State's 1993-94 fiscal year for personal and real property acquisitions. The
19
<PAGE>
projection of the State regarding its borrowings for the 1993-94 fiscal year
may change if actual receipts fall short of State projections or if other
circumstances require.
In June 1990, legislation was enacted creating the "New York Local Government
Assistance Corporation" ("LGAC"), a public benefit corporation empowered to
issue long-term obligations to fund certain payments to local governments
traditionally funded through the State's annual seasonal borrowing. To date,
LGAC has issued its bonds to provide net proceeds of $3.28 billion. LGAC has
been authorized to issue additional bonds to provide net proceeds of $703
million during the State's 1993-94 fiscal year.
The $850 million in TRANS issued by the State in April 1993 were rated
SP-1-Plus by S&P on April 26, 1993, and MIG-1 by Moody's on April 23, 1993,
which represents the highest ratings given by such agencies and the first time
the State's TRANS have received these ratings since its May 1989 TRANS
issuance. Both agencies cited the State's improved fiscal position as a
significant factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at A on April 23,
1993, and S&P's rating stood at A-with a stable outlook on April 26, 1993, an
improvement from S&P's negative outlook prior to April 1993. Previously,
Moody's lowered its rating to A on June 6, 1990, its rating having been A1
since May 27, 1986. S&P lowered its rating from A to A-on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992, AA-from August
1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's, in confirming its rating of the State's general obligation bonds, and
S&P, in improving its outlook on such bonds from negative to stable, noted the
State's improved fiscal condition and reasonable revenue assumptions contained
in the 1993-94 State budget.
New York City accounts for approximately 41% of the State's population and
personal income, and the City's financial health affects the State in numerous
ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other
actions, the State Legislature (i) created the Municipal Assistance
Corporation ("MAC") to assist with long-term financing for the City's
short-term debt and other cash requirements and (ii) created the State
Financial Control Board (the "Control Board") to review and approve the City's
budgets and City four-year financial plans (the financial plans also apply to
certain City-related public agencies (the "Covered Organizations")).
Over the past three years, the rate of economic growth in the City has slowed
substantially, and the City's economy is currently in recession. The City
projects and its current four-year financial plan assumes a recovery early in
the 1993 calendar year. The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial plan. The
City Comptroller has issued reports concluding that the recession of the
City's economy will be more severe and last longer than is assumed in the
Financial Plan.
Fiscal Year 1993 and 1993-1996 Financial Plan. The City's 1993 fiscal year
results are projected to be balanced in accordance with generally accepted
accounting principles ("GAAP"). The City was required to close substantial
budget gaps in its 1990, 1991 and 1992 fiscal years in order to maintain
balanced operating results.
The City's modified 1993-1996 Financial Plan dated February 9, 1993 covering
fiscal years 1993-1996 projects budget gaps for 1994 through 1996. The Office
of the State Deputy Controller for the City of New York has estimated that
under the modified Financial Plan budget gaps will be $102 million for fiscal
year
20
<PAGE>
1994, $196 million for fiscal year 1995 and $354 million for fiscal year 1996,
primarily due to anticipated higher spending on labor costs.
However, the City's modified Plan is dependent upon a gap-closing program,
certain elements of which the staff of Control Board identified on March 25,
1993 to be at risk due to projected levels of State and Federal aid and
revenue and expenditures estimates which may not be achievable. The Control
Board indicated that the City's modified Financial Plan does not make progress
towards establishing a balanced budget process. The Control Board's report
identified budget gap risks of $1.0 billion, $1.9 billion, $2.3 billion and
$2.6 billion in fiscal years 1994 through 1997, respectively.
On June 3, 1993, the Mayor announced that State and federal aid for Fiscal
Year 1993-1994 would be $280 million less than projected and that in order to
balance the City's budget $176 million of previously announced contingent
budget cuts would be imposed. The Mayor indicated that further savings would
entail serious reductions in services. The State Comptroller on June 14, 1993
criticized efforts by the Mayor and City Council to balance the City's budget
which rely primarily on one-shot revenues. The State Comptroller added that
the City's budget should be based on "recurring revenues that fund recurring
expenditures."
Given the foregoing factors, there can be no assurance that the City will
continue to maintain a balanced budget, or that it can maintain a balanced
budget without additional tax or other revenue increases or reductions in City
services, which could adversely affect the City's economic base.
Pursuant to the laws of the State, the City prepares a four-year annual
financial plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections. The City is
required to submit its financial plans to review bodies, including the Control
Board. If the City were to experience certain adverse financial circumstances,
including the occurrence or the substantial likelihood and imminence of the
occurrence of an annual operating deficit of more than $100 million or the
loss of access to the public credit markets to satisfy the City's capital and
seasonal financing requirements, the Control Board would be required by State
law to exercise certain powers, including prior approval of City financial
plans, proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. As a result of the national and
regional economic recession, the State's projections of tax revenues for its
1991 and 1992 fiscal years were substantially reduced. For its 1993 fiscal
year, the State, before taking any remedial action reflected in the State
budget enacted by the State Legislature on April 2, 1992 reported a potential
budget deficit of $4.8 billion. If the State experiences revenue shortfalls or
spending increases beyond its projections during its 1993 fiscal year or
subsequent years, such developments could result in reductions in projected
State aid to the City. In addition, there can be no assurance that State
budgets in future fiscal years will be adopted by the April 1 statutory
deadline and that there will not be adverse effects on the City's cash flow
and additional City expenditures as a result of such delays.
The City's projections set forth in the financial plan are based on various
assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and
contingencies include the timing of any regional and local economic recovery,
the absence of wage increases in excess of the increases assumed in the
financial plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets, levels of
education expenditures as may be required by State law, adoption of future
City budgets by the New York City Council, and approval by the Governor, the
State Legislature and the cooperation of MAC with respect to various other
actions proposed in the financial plan.
21
<PAGE>
The City's ability to maintain a balanced operating budget is dependent on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional
expenditure reductions and revenue sources to achieve operating budgets for
fiscal years 1994 and thereafter. Any such proposed expenditure reductions
will be difficult to implement because of their size and the substantial
expenditure reductions already imposed on City operations in the past two
years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
financing program for fiscal years 1993 through 1996 contemplates capital
spending of $15.7 billion of general obligation bonds primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make
capital investments. A significant portion of such bond financing is used to
reimburse the City's general fund for capital expenditures already incurred.
In addition, the City issues revenue and tax anticipation notes to finance its
seasonal working capital requirements. The terms and success of projected
public sales of City general obligation bonds and notes will be subject to
prevailing market conditions at the time of the sale, and no assurance can be
given that the credit markets will absorb the projected amounts of public bond
and note sales. In addition, future developments concerning the City and
public discussion of such developments, the City's future financial needs and
other issues may affect the market for outstanding City general obligation
bonds and notes. If the City were unable to sell its general obligation bonds
and notes, it would be prevented from meeting its planned operating and
capital expenditures.
The City Comptroller, the staff of the Control Board, the Office of the State
Deputy Comptroller for the City of New York (the "OSDC") and other agencies
and public officials have issued reports and made public statements which,
among other things, state that projected revenues may be less and future
expenditures may be greater than those forecast in the financial plan. In
addition, the Control Board and other agencies have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet
the costs of its expenditure increases and to provide necessary services. It
is reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
Fiscal Years 1990, 1991 and 1992. The City achieved balanced operating results
as reported in accordance with GAAP for the 1992 fiscal year. During the 1990
and 1991 fiscal years, the City implemented various actions to offset a
projected budget deficit of $3.2 billion for the 1991 fiscal year, which
resulted from declines in City revenue sources and increased public assistance
needs due to the recession. Such actions included $822 million of tax
increases and substantial expenditure reductions.
The quarterly modification to the City's financial plan submitted to the
Control Board on May 7, 1992 (the "1992 Modification") projected a balanced
budget in accordance with GAAP for the 1992 fiscal year after taking into
account a discretionary transfer of $455 million to the 1993 fiscal year as
the result of a 1992 fiscal year surplus. In order to achieve a balanced
budget for the 1992 fiscal year, during the 1991 fiscal year, the City
proposed various actions for the 1992 fiscal year to close a projected gap of
$3.3 billion in the 1992 fiscal year.
On November 19, 1992, the City submitted to the Control Board the Financial
Plan for the 1993 through 1996 fiscal years, which is a modification to a
financial plan submitted to the Control Board on June 11, 1992 (the "June
Financial Plan"), and which relates to the City, the Board of Education
("BOE") and the City University of New York ("CUNY"). The 1993-1996 Financial
Plan projects revenues and expenditures of $29.9 billion each for the 1993
fiscal year balanced in accordance with GAAP.
During the 1992 fiscal year, the City proposed various actions to close a
previously projected gap of approximately $1.2 billion for the 1993 fiscal
year. The gap-closing actions for the 1993 fiscal year proposed during the
1992 fiscal year and outlined in the City's June Financial Plan included $489
million of
22
<PAGE>
discretionary transfers from the 1992 fiscal year. The 1993-1996 City
Financial Plan includes additional gap-closing actions to offset an additional
potential $81 million budget gap.
The 1993-1996 Financial Plan also sets forth projections and outlines a
proposed gap-closing program for the 1994 through 1996 fiscal years to close
projected budget gaps of $1.7 billion, $2.0 billion and $2.6 billion,
respectively, in the 1994 through 1996 fiscal years. On February 9, 1993, the
City issued a modification to the 1993-1996 Financial Plan (the "February
Modification"). The February Modification projects budget gaps for fiscal
years 1994, 1995 and 1996 of $2.1 billion, $3.1 billion and $3.8 billion,
respectively.
Various actions proposed in the 1993-1996 Financial Plan are subject to
approval by the Governor and approval by the State Legislature, and the
proposed increase in Federal aid is subject to approval by Congress and the
President. The State Legislature has in the past failed to approve certain
proposals similar to those that the 1993-1996 Financial Plan assumes will be
approved by the State Legislature during the 1993 fiscal year. If these
actions cannot be implemented, the City will be required to take other actions
to decrease expenditures or increase revenues to maintain a balanced financial
plan.
On March 9, 1993, OSDC issued a report on the February Modification. The
report expressed concern that the budget gaps projected for fiscal years 1994
through 1996 are the largest the City has faced at this point in the financial
planning cycle in at least a decade, and concluded that the February
Modification represented a step backward in the City's efforts to bring
recurring revenues into line with recurring expenditures.
The City is a defendant in a significant number of lawsuits. Such litigation
includes, but is not limited to, actions commenced and claims asserted against
the City arising out of alleged constitutional violations, torts, breaches of
contracts and other violations of law and condemnation proceedings. While the
ultimate outcome and fiscal impact, if any, on the proceedings and claims are
not currently predictable, adverse determination in certain of them might have
a material adverse effect upon the City's ability to carry out its Financial
Plan. As of June 30, 1992, legal claims in excess of $341 billion were
outstanding against the City for which the City estimated its potential future
liability to be $2.3 billion.
As of the date of this prospectus, Moody's rating of the City's general
obligation bonds stood at Baa1 and S&P's rating stood at A-. On February 11,
1991, Moody's had lowered its rating from A.
On June 30, 1993 in confirming the Baa1 rating, Moody's noted that:
The recent trend of declining reliance on [one-shot revenues] is notable,
and it is too early to predict that the increased reliance on one-shots
in the fiscal 1994 budget represents the beginning of a continuing upward
movement in the use of one-shots._._._. Moody's recognized in February of
1991, when the [C]ity's rating was lowered from A to Baa1, that the
[C]ity faced structural budgetary imbalances which were unlikely to be
cured in the near term. Moody's continues to expect the [C]ity's progress
toward achieving structural balance to be slow and uneven, but that the
[C]ity will be diligent and prudent in closing each year's gap, factors
which are consistent with the Baa1 rating level.
On March 30, 1993, S&P affirmed its rating with a negative outlook, stating
that:
The City's key credit factors are marked by a high and growing debt
burden, and taxation levels that are relatively high, but stable. The
City's economy is broad-based and diverse, but currently is in prolonged
recession, with slow growth prospects for the foreseeable future.
The rating outlook is negative, reflecting the continued fiscal pressure
facing the City, driven by continued weakness in the local economy,
rising spending pressures for education and labor costs of city
employees, and increasing costs associated with rising debt for capital
construction and repair.
23
<PAGE>
The current financial plan for the City assumes substantial increases in
aid from national and state governments. Maintenance of the current
rating, and stabilization of the rating outlook, will depend on the
City's success in realizing budgetary aid from these governments, or
replacing those revenues with ongoing revenue-raising measures or
spending reductions under the City's control. However, increased reliance
on non-recurring budget balancing measures that would support current
spending, but defer budgetary gaps to future years, would be viewed by
S&P as detrimental to New York City's single-'A-' rating.
Previously, Moody's had raised its rating to A in May, 1988, to Baa1 in
December, 1985, to Baa in November, 1983 and to Ba1 in November, 1981. S&P had
raised its rating to A-in November, 1987, to BBB+ in July, 1985 and to BBB in
March, 1981.
On May 9, 1990, Moody's revised downward its rating on outstanding City
revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
Notes then being sold MIG-2. On April 30, 1991 Moody's confirmed its MIG-2
rating for the outstanding revenue anticipation notes and for the $1.25
billion in notes then being sold. On April 29, 1991, S&P revised downward its
rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1992, the City and MAC had, respectively, $20.3 billion and
$4.7 billion of outstanding net long-term indebtedness.
Certain Agencies of the State have faced substantial financial difficulties
which could adversely affect the ability of such Agencies to make payments of
interest on, and principal amounts of, their respective bonds. The
difficulties have in certain instances caused the State (under so-called
"moral obligation" provisions which are non-binding statutory provisions for
State appropriations to maintain various debt service reserve funds) to
appropriate funds on behalf of the Agencies. Moreover, it is expected that the
problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse effect on investor confidence
in, and therefore the market price of, obligations of the defaulting Agencies.
In addition, any default in payment on any general obligation of any Agency
whose bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal
guarantees of City and MAC obligations and could thus jeopardize the City's
long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen Agencies
that each had outstanding debt of $100 million or more. These eighteen
Agencies had an aggregate of $62.2 billion of outstanding debt, including
refunding bonds, of which, the State was obligated under lease-purchase,
contractual obligation or moral obligation provisions on $25.3 billion.
The State is a defendant in numerous legal proceedings pertaining to matters
incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are a number of cases challenging the
constitutionality or the adequacy and effectiveness of a variety of
significant social welfare programs primarily involving the State's mental
hygiene programs. Adverse judgments in these matters generally could result in
injunctive relief coupled with prospective changes in patient care which could
require substantial increased financing of the litigated programs in the
future.
24
<PAGE>
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the Indians in
violation of various treaties and agreements during the eighteenth and
nineteenth centuries. The claimants seek recovery of approximately six million
acres of land as well as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993, referred to a Special Master for
determination of damages on an action by the State of Delaware to recover
certain unclaimed dividends, interest and other distributions made by issuers
of securities held by New York based-brokers incorporated in Delaware. (State
of Delaware v. State of New York.) The State had taken such unclaimed property
under its Abandoned Property Law. The State expects that it may pay a
significant amount in damages during fiscal year 1993-94 but it has indicated
that it has sufficient funds on hand to pay any such award, including funds
held in contingency reserves. The State's 1993-94 Financial Plan includes the
establishment of a $100 million contingency reserve fund which would be
available to fund such an award which some reports have estimated at $100-$800
million.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz 1993"),
petitioners have challenged the constitutionality of mass transportation
bonding programs of the New York State Thruway Authority and the Metropolitan
Transportation Authority. On May 24, 1993, the Supreme Court, Albany County,
temporarily enjoined the State from implementing those bonding programs. In
previous actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation and the
New York Local Government Assistance Corporation. While there have been no
decisions on the merits in such previous actions, by an opinion dated May 11,
1993, the New York Court of Appeals held in a proceeding commenced on April
29, 1991 in the Supreme Court, Albany County (Schulz v. State of New York),
that petitioners had standing as voters under the State Constitution to bring
such action.
Petitioners in Schulz 1993 have asserted that issuance of bonds by the two
Authorities is subject to approval by statewide referendum. At this time there
can be no forecast of the likelihood of success on the merits by the
petitioners, but a decision upholding this constitutional challenge could
restrict and limit the ability of the State and its instrumentalities to
borrow funds in the future. The State has not indicated that the temporary
injunction issued by the Supreme Court in this action will have any immediate
impact on its financial condition or interfere with projects requiring
immediate action.
Adverse developments in the foregoing proceedings or new proceedings could
adversely affect the financial condition of the State in the future.
Certain localities in addition to New York City could have financial problems
leading to requests for additional State assistance. Both the Revised
1992-1993 State Financial Plan and the recommended 1993-94 State Financial
Plan includes a significant reduction in State aid to localities in such
programs as revenue sharing and aid to education from projected base-line
growth in such programs. It is expected that such reductions will result in
the need for localities to reduce their spending or increase their revenues.
The potential impact on the State of such actions by localities is not
included in projections of State revenues and expenditures in the State's
1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in
the creation of the Financial Control Board for the City of Yonkers (the
"Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor or the State Legislature to assist Yonkers could result in allocation
of State resources in amounts that cannot yet be determined.
25
<PAGE>
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. In 1991, the total indebtedness of all localities in the
State was approximately $31.6 billion, of which $16.8 billion was debt of New
York City (excluding $6.7 billion in MAC debt). State law requires the
Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City authorized by State law to
issue debt to finance deficits during the period that such deficit financing
is outstanding. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1991. In 1992, an
unusually large number of local government units requested authorization for
deficit financings. According to the Comptroller, ten local government units
have been authorized to issue deficit financing in the aggregate amount of
$131.1 million.
Certain proposed Federal expenditure reductions could reduce, or in some cases
eliminate, Federal funding of some local programs and accordingly might impose
substantial increased expenditure requirements on affected localities. If the
State, New York City or any of the Agencies were to suffer serious financial
difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State, including bonds in Insured New York Long-Intermediate Value Trust,
could be adversely affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial decisions, and
long-range economic trends. The longer-range potential problems of declining
urban population, increasing expenditures, and other economic trends could
adversely affect certain localities and require increasing State assistance in
the future.
NEW YORK TAX STATUS
In the opinion of Tanner, Propp & Farber, special counsel to the Fund for New
York tax matters, under existing New York law:
Insured New York Series 4 is not an association taxable as a corporation and
the income of the Insured New York Series 4 will be treated as the income of
the Unitholders under the income tax laws of the State and City of New York.
Individuals who reside in New York State or City will not be subject to State
and City tax on interest income which is exempt from Federal income tax under
section 103 of the Internal Revenue Code of 1986 and derived from obligations
of New York State or a political subdivision thereof, although they will be
subject to New York State and City tax with respect to any gains realized when
such obligations are sold, redeemed or paid at maturity or when any such Units
are sold or redeemed.
For a discussion of Federal tax matters relating to distributions from the
Trust Fund, see "Federal Tax Status."
VIRGINIA SERIES 1
SPECIAL CONSIDERATIONS
The Commonwealth's financial condition is supported by a broad-based economy,
including manufacturing, tourism, agriculture, ports, mining and fisheries.
Manufacturing continues to be a major source of employment, ranking behind
only services, wholesale and retail trade, and government (Federal, state and
local). The Federal government is a major employer in Virginia due to the
heavy concentration of Federal employees in the metropolitan Washington, D.C.
segment of Northern Virginia and the military employment in the Hampton Roads
area, which houses the nation's largest concentration of military
installations. However, the expected retrenchment of the military sector as a
consequence of the end of the Cold War remains a cloud on the economic
horizon.
26
<PAGE>
In recent years per capita personal income in Virginia has consistently been
above the national average. However, while total personal income has continued
to rise during the current recession, it has not always kept pace with both
inflation and the population, either nationally or in Virginia. Real personal
income in Virginia fell for seven consecutive quarters, ending with the last
quarter of 1991, with a slow recovery being evidenced in 1992. The annualized
rate of growth in real personal income in Virginia for the second quarter of
1992 was 0.5 percent compared to a national rate of 0.3 percent. Virginia's
real per capita income has exceeded that for both the nation and the southeast
region since the early 1980's, although the differentials have decreased since
1989. Virginia's nonagricultural employment figures mirror the national
economy although the recent recession has hit Virginia harder than the nation
as a whole with employment declining at an average annual rate of 1.6 percent
since 1990 in Virginia, compared to 0.7 percent nationally. With respect to
unemployment, Virginia's unemployment rate has consistently been below that of
the nation. For the decade of 1980 to 1990, the differential has been two
percentage points, although it decreased to below one percentage point in 1991
and the first six months of 1992.
Employment trends in Virginia have varied from sector to sector and from
region to region. For example, manufacturing and trade sectors in 1980 each
employed more workers than the service sector. Now the service sector is the
largest employer in Virginia and mining and manufacturing are now at lower
levels than in 1980. Highest rates of unemployment are concentrated in
southwest Virginia where mining jobs have been lost and the lowest
unemployment rates are seen in Northern Virginia where much federally related
employment is concentrated. Not surprisingly, there is great overlap between
areas of lowest unemployment and those of highest per capita income. Economic
recovery from the recent recession is expected to be long and slow in
Virginia, although in the long term, a growing and more diversified export
sector holds promise that should mitigate current concerns.
The Commonwealth of Virginia has historically operated on a fiscally
conservative basis and is required by its Constitution to have a balanced
biennial budget. At the end of the June 30, 1992, fiscal year, the General
Fund had an ending fund balance computed on a budgetary cash basis of $195.2
million, of which $15 million was in required reserve; $142.3 million thereof
was designated for expenditure during the next fiscal year, leaving an
undesignated, unreserved fund balance of $52.8 million, the first such
undesignated fund balance since 1988. Computed on a modified accrual basis in
accordance with generally accepted accounting principles, the General Fund
balance at the end of the fiscal year ended June 30, 1992, was minus $121.8
million, compared with a General Fund balance at the end of the fiscal year
ended June 30, 1991, of minus $265.1 million. Contributing to the reduction
were $256.4 million in deferred credits, representing estimated tax refunds
associated with income taxes withheld for the period January through June,
1992, and an accrual for estimated medicaid claims of $155.8 million.
As of June 30, 1992, total debt of the Commonwealth aggregated $7.3 billion.
Of that amount, $1.5 billion was tax-supported. Outstanding general obligation
debt backed by the full faith and credit of the Commonwealth was $582.7
million at June 30, 1992. Of that amount, $544.4 million was also secured by
revenue producing capital projects. Debt service on the balance equaled 0.2%
of total General Fund expenditures in fiscal year 1992.
The Virginia Constitution contains limits on the amount of general obligation
bonds which the Commonwealth can issue. These limits are substantially in
excess of current levels of outstanding bonds, and at June 30, 1992 would
permit an additional total of approximately $5.00 billion of bonds secured by
revenue-producing projects and approximately $5.50 billion of unsecured
general obligation bonds, with not more than approximately $1.39 billion of
the latter to be issued in any four-year period. Bonds which are not secured
by revenue-producing projects must be approved in a state-wide election.
27
<PAGE>
In November of 1992 the Constitution of Virginia was amended to establish a
permanent Revenue Stabilization Fund. This Fund will go into effect in the
1994-96 biennium. In anticipation of the first required deposit ($40.5
million) to the fund, the Governor included, and the General Assembly
approved, a $30.0 million down payment.
The current biennium started on July 1, 1992 and will end on June 30, 1994.
The amended biennial budget appropriated a total of $29,090.6 million:
$6,416.0 million in general funds and $7,907.1 million in nongeneral funds in
fiscal 1993, and $6,852.1 million in general funds and $7,915.3 million in
nongeneral funds in fiscal 1994.
The amended Appropriations Act assumed that general fund revenues would
increase by 7.1 percent in fiscal 1993 and 6.0 percent in fiscal 1994.
Currently, year-to-date general fund growth for the 11 months of fiscal 1993
is 9.7 percent. When general fund revenues are adjusted for one-time corporate
payments, the year-to-date growth declines to 7.9 percent.
The Commonwealth of Virginia maintains ratings of AAA by Standard & Poor's and
Aaa by Moody's on its general obligation indebtedness, reflecting in part its
sound fiscal management, diversified economic base and low debt ratios. There
can be no assurance that these conditions will continue. Nor are these same
conditions necessarily applicable to securities which are not general
obligations of the Commonwealth. Securities issued by specific municipalities,
governmental authorities or similar issuers may be subject to economic risks
or uncertainties peculiar to the issuers of such securities or the sources
from which they are to be paid.
VIRGINIA TAX STATUS
In the opinion of Chapman and Cutler, special counsel to the Trust for
Virginia tax matters, under existing law as of the date of this prospectus and
based upon the assumptions set forth above:
(1) The Virginia Trust is not an association taxable as a corporation for
purposes of the Virginia Income Tax and each Unitholder of the Trust will
be treated as the owner of a pro rata portion of the assets held by the
Trust and the income of such portion of the Virginia Trust will be
treated as income of the Unitholder for purposes of the Virginia Income
Tax.
(2) Income on the Bonds which is exempt from Virginia Income Tax when
received by the Virginia Trust, and which would be exempt from Virginia
Income Tax if received directly by a Unitholder, will retain its status
as exempt from such tax when received by the Trust and distributed to
such Unitholder.
(3) Each Unitholder will recognize gain or loss for purposes of the
Virginia Income Tax if the Trustee disposes of a bond (whether by
redemption, sale or otherwise) or if the Unitholder redeems or sells
Units of the Trust to the extent that such a transaction results in a
recognized gain or loss to such Unitholder for federal income tax
purposes, except as described in this paragraph. Virginia has by law
provided that all income from certain tax-exempt obligations issued under
the laws of Virginia, including any profits made from the sale of such
Bonds, shall be exempt from all taxation by Virginia. Although we express
no opinion, the Virginia Department of Taxation has indicated that the
gain on the sale of such tax-exempt obligations, recognized for federal
income tax purposes, would not be subject to Virginia income taxation.
Accordingly, any such gain relating to the disposition of any Bond that
would not be subject to Virginia Income Tax if the Bond was held directly
by a Unitholder will retain its tax-exempt status for purposes of the
Virginia Income Tax when the Bond is disposed of by the Virginia Trust or
when the Unitholder is deemed to have disposed of his pro rata portion of
such Bond upon the
28
<PAGE>
disposition of his Unit, provided that such gain can be determined with
reasonable certainty and substantiated.
(4) The Virginia Income Tax does not permit a deduction of interest paid
on indebtedness incurred or continued to purchase or carry Units in the
Virginia Trust to the extent that interest income related to the
ownership of Units is exempt from the Virginia Income Tax.
In the case of Unitholders subject to the Virginia Bank Franchise Tax, the
income derived by such a Unitholder from his pro rata portion of the Bonds
held by the Virginia Trust may affect the determination of such Unitholder's
Bank Franchise Tax. Prospective investors subject to the Virginia Bank
Franchise Tax should consult their tax advisors.
For a discussion of Federal tax matters relating to distributions from the
Trust Fund, see "Federal Tax Status."
FEDERAL TAX STATUS
All Municipal Bonds deposited in the Trust Funds will be accompanied by copies
of opinions of bond counsel to the issuers thereof, given at the time of
original delivery of the Municipal Bonds, to the effect that the interest
thereon is excludable from gross income for Federal income tax purposes. In
connection with the offering of Units of the Trust Funds, neither the Sponsor,
the Trustee, the auditors nor their respective counsel have made any review of
the proceedings relating to the issuance of the Municipal Bonds or the basis
for such opinions. Gain realized on the sale or redemption of the Municipal
Bonds by the Trustee or of a Unit by a Unitholder is, however, includable in
gross income for Federal income tax purposes. Such gain does not include any
amounts received in respect of accrued interest or earned original issue
discount. It should be noted that under recently enacted legislation described
below that subjects accretion of market discount on tax-exempt bonds to
taxation as ordinary income, gain realized on the sale or redemption of
Municipal Bonds by the Trustee or of Units by a Unitholder that would have
been treated as capital gain under prior law is treated as ordinary income to
the extent it is attributable to accretion of market discount. Market discount
can arise based on the price a Trust Fund pays for Municipal Bonds or the
price a Unitholder pays for his or her Units. In addition, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds, when held by residents of the state in which the issuers of such bonds
are located, from state income taxes and, where applicable, local income
taxes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
Each Trust Fund is not an association taxable as a corporation for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status when
distributed to Unitholders, except to the extent such interest is subject
to the alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below.
Each Unitholder is considered to be the owner of a pro rata portion of
each asset of the respective Trust Fund in the proportion that the number
of Units of such Trust Fund held by him bears to the total number of
Units outstanding of such Trust Fund under subpart E, subchapter J of
chapter 1 of the Code and will have a taxable event when such Trust Fund
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 Fund, 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 Fund and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or
loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the Units.
If the Trustee disposes of Bonds (whether by sale, payment on maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder.
The amount of any such gain or loss is measured by comparing the
Unitholder's pro rata share of the total
29
<PAGE>
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 Fund's assets
ratably according to value as of the date of acquisition of the Units.
The tax cost reduction requirements of the Code relating to amortization
of bond premium may, under some circumstances, result in the Unitholder
realizing a taxable gain when his Units are sold or redeemed for an
amount equal to his original cost.
Any proceeds paid under individual policies obtained by issuers of Bonds
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.
Sections 1288 and 1272 of the Internal Revenue Code of 1986 (the "Code")
provide a complex set of rules governing the accrual of original issue
discount. These rules provide that original issue discount accrues either on
the basis of a constant compound interest rate or ratably over the term of the
Municipal Bond, depending on the date the Municipal Bond was issued. In
addition, special rules apply if the purchase price of a Municipal Bond
exceeds the original issue price plus the amount of original issue discount
which would have previously accrued based upon its issue price (its "adjusted
issue price"). The application of these rules will also vary depending on the
value of the Municipal Bond on the date a Unitholder acquires his Units, and
the price the Unitholder pays for his Units. Investors with questions
regarding these Code sections should consult with their tax advisers.
The Revenue 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). 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 the 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 Fund. Unitholders are urged
to consult their tax advisers with respect to the particular tax consequences
to them including the corporate alternative minimum tax, the Superfund Tax and
the branch 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 Fund is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Also, under Section 265 of the Code, certain
financial institutions that acquire Units would generally not be able to
deduct any of the interest expense attributable to ownership of such Units.
Investors with questions regarding these issues should consult with their tax
advisers.
30
<PAGE>
In the case of certain Municipal Bonds in the Trust Funds, the opinions of
bond counsel indicate that interest on such securities received by a
"substantial user" of the facilities being financed with the proceeds of these
securities or persons related thereto, for periods while such securities are
held by such a user or related person, will not be excludable from Federal
gross income, although interest on such securities received by others would be
excludable from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes that he
or she may be a "substantial user" or a "related person" as so defined should
contact his or her tax adviser.
Under existing law, the Trust Funds are not associations taxable as a
corporation and the income of the Trust Funds will be treated as the income of
the Unitholders under the income tax laws of the State of Missouri.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Trust Funds of the proceedings relating to the issuance of the Bonds or of the
basis for such opinions.
For taxpayers other than corporations, net capital gains are presently subject
to a maximum marginal stated tax rate of 28 percent. However, it should be
noted that legislative proposals are introduced from time to time that affect
tax rates and could affect relative differences at which ordinary income and
capital gains are taxed. Under the Code, taxpayers must disclose to the
Internal Revenue Service the amount of tax-exempt interest earned during the
year.
Section 86 of the Code, in general, provides that fifty percent of Social
Security benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus fifty percent of the Social Security
benefits received exceeds a "base amount". The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85 percent of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus
fifty percent of Social Security benefits received exceeds an "adjusted base
amount." The adjusted base amount is $34,000 for unmarried 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 Fund, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount must include fifty
percent of his Social Security benefits in gross income whether or not he
receives any tax-exempt interest. A taxpayer whose modified adjusted gross
income (after inclusion of tax-exempt interest) does not exceed the base
amount need not include any Social Security benefits in gross income.
For a discussion of the state tax status of income earned on Units of a state
trust, see the discussion of tax status for the applicable trust. Except as
noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The laws of
the several states vary with respect to the taxation of such obligations.
31
<PAGE>
ESTIMATED CASHFLOWS TO UNITHOLDERS
The tables below set forth the estimated monthly distributions of interest,
principal and rebates of accrued interest to carry to Unitholders on a per 100
Units basis. The tables assume no changes in expenses, no changes in the
current interest rates, no exchanges, redemptions, sales or prepayments of the
underlying Securities prior to maturity or expected retirement date and the
receipt of principal upon maturity or expected retirement date. To the extent
the foregoing assumptions change actual distributions will vary.
INSURED NEW YORK TRUST
- ---------------------------
Monthly
- ---------
<TABLE>
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED PURCHASED ESTIMATED
INTEREST PRINCIPAL INTEREST TOTAL
DATES DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C>
- ------------------------------------------ ------------- ------------- ------------- -------------
Apr 15, 1994 $ 2.91 $ 2.91
May 15, 1994 to Apr 15, 1998 $ 3.12 $ 3.12
May 15, 1998 $ 3.12 $ 194.00 $ 0.18 $ 197.30
Jun 15, 1998 to Jun 15, 1999 $ 2.53 $ 2.53
Jul 15, 1999 $ 2.53 $ 194.00 $ 2.76 $ 199.29
Aug 15, 1999 to Jan 15, 2000 $ 1.87 $ 1.87
Feb 15, 2000 $ 1.87 $ 58.20 $ 0.25 $ 60.32
Mar 15, 2000 to Apr 15, 2000 $ 1.64 $ 1.64
May 15, 2000 $ 1.64 $ 135.80 $ 0.14 $ 137.58
Jun 15, 2000 to Jul 15, 2001 $ 1.19 $ 1.19
Aug 15, 2001 $ 1.19 $ 194.00 $ 1.77 $ 196.96
Sep 15, 2001 to May 15, 2002 $ 0.38 $ 0.38
Jun 15, 2002 $ 0.38 $ 77.60 -- $ 77.98
Jul 15, 2002 to Nov 15, 2002 $ 0.38 $ 0.38
Dec 15, 2002 $ 0.16 $ 116.40 $ 1.57 $ 117.13
</TABLE>
32
<PAGE>
DESCRIPTION OF MUNICIPAL BOND RATINGS*
STANDARD & POOR'S CORPORATION.--A brief description of the applicable Standard
& Poor's Corporation rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current assessment
of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer and
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or unavailability
of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement, under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA--Bonds rated AAA have the highest rating assigned by Standard and 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.
- ---------------------------
* As described by the rating company itself.
A-1
<PAGE>
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 marketplace.
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.
A-2
<PAGE>
PORTFOLIOS
The Trust Funds may be an appropriate investment vehicle for investors who
desire to participate in a portfolio of tax-exempt fixed income securities
with greater diversification than they might be able to acquire individually.
In addition, Municipal Bonds of the type deposited in the Trust Fund are often
not available in small amounts.
The selection of Municipal Bonds for each Trust Fund was based largely upon
the experience and judgment of the Sponsor. In making such selections the
Sponsor considered the following factors: (a) Standard & Poor's or Moody's
ratings of the Municipal Bonds; (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 Trust; (e) in the case of insured Trust Funds whether such Bonds were
insured or the availability and cost of insurance for the scheduled payment of
principal and interest on the Municipal Bonds; and (f) the dates of maturity
of the Bonds.
All of the Municipal Bonds in each Trust Fund's portfolio are rated in the
category "BBB" or better (including provisional or conditional ratings) by
Standard & Poor's or "Baa" or better by Moody's. See "Description of Municipal
Bond Ratings" and "Portfolios."
All Municipal Bonds deposited in the Trust Funds on the Date of Deposit were
represented by purchase contracts assigned to the Trustee together with cash,
cash equivalents or irrevocable letters of credit issued by a major commercial
bank in the amounts necessary to complete the purchase thereof.
Bonds in certain of the Trust Funds may have been purchased on a "when, as and
if issued" or delayed delivery basis with delivery expected to take place
after the First Settlement Date. See "Notes to Portfolio." Accordingly, the
delivery of such Bonds may be delayed or may not occur. Interest on these
Municipal Bonds begins accruing to the benefit of Unitholders on their
respective dates of delivery. To the extent any Municipal Bonds are actually
delivered to a Trust Fund after their respective expected dates of delivery,
Unitholders who purchase Units in such Trust Fund prior to the date such
"when, as and if issued" or "delayed delivery" Municipal Bonds are actually
delivered to the Trustee would, to the extent such income is not offset by a
reduction in the Trustee's fee (or, to the extent necessary, other expenses),
be required to reduce their tax basis in their Units of such Trust Fund since
the interest accruing on such Bonds during the interval between their purchase
of Units and the actual delivery of such Bonds would, for tax purposes, be
considered a non-taxable return of principal rather than as tax-exempt
interest. The result of such adjustment, if necesssary, would be, during the
first year only, that the Estimated Long-Term Returns may be, and the
Estimated Current Returns would be, slightly lower than those shown herein,
assuming the Trust Fund portfolios and estimated annual expenses do not vary.
See footnote (3) to "Essential Information." Holders of Units will be "at
risk" with respect to these Bonds (i.e., may derive either gain or loss from
fluctuations in the evaluation of such Bonds) from the date they commit for
Units.
The Sponsor and the Trustee shall not be liable in any way for any default,
failure or defect in any Municipal Bond. In the event of a notice that any
Bonds, including "when, as and if issued" Bonds that have been purchased for
the Trust under contracts, will not be delivered ("Failed Bonds"), the Sponsor
is authorized under the Trust Agreement to direct the Trustee to acquire other
bonds ("Replacement Bonds").
The Replacement Bonds must be purchased within 20 days after delivery of the
notice that a contract to deliver a Municipal Bond will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Bonds. The Replacement Bonds (i) must be tax-exempt bonds issued by
the appropriate state or counties, municipalities, authorities or political
subdivisions thereof, (ii) must have a fixed maturity date of at least three
years if the Bonds are to be deposited in a trust other than a long-term
A-3
<PAGE>
Trust or at least 10 years if the Bonds are to be deposited in a long-term
Trust, (iii) must be purchased at a price that results in a yield to maturity
and a current return at least equal to that of the Failed Bonds as of the Date
of Deposit, (iv) shall not be "when, as and if issued" bonds, (v) must satisfy
the rating criteria for Bonds originally included in such Trust and (vi) in
the case of Insured Trust Funds must be insured. Whenever a Replacement Bond
is acquired for a Trust Fund, the Trustee shall, within five days thereafter,
notify all Unitholders of the Trust Fund of the acquisition of the Replacement
Bond. Once all of the Bonds in a Trust Fund are acquired, the Trustee will
have no power to vary the investments of the Trust Fund, i.e., the Trustee
will have no managerial power to take advantage of market variations to
improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs is
not utilized to acquire Replacement Bonds in the event of a failed contract,
the Sponsor will refund the sales charge attributable to such Failed Bonds to
all Unitholders of the Trust Fund and the Trustee will distribute the
principal, Purchased Interest and Daily Accrued Interest attributable to such
Failed Bonds not more than 30 days after the date on which the Trustee would
have been required to purchase a Replacement Bond. In addition, Unitholders
should be aware that, at the time of receipt of such principal, they may not
be able to reinvest such proceeds in other securities at a yield equal to or
in excess of the yield which such proceeds would have earned for Unitholders
of such Trust Fund.
Whether or not a Replacement Bond is acquired, an amount equal to the accrued
interest (at the coupon rate of the Failed Bonds) will be paid to Unitholders
of the Trust Fund to the date the Sponsor is notified of the failure if the
Sponsor determines not to purchase a Replacement Bond or to the date of
substitution if a Replacement Bond is purchased. All such interest paid to
Unitholders which accrued after the date of settlement for a purchase of Units
will be paid by the Sponsor. In the event a Replacement Bond could not be
acquired by the Trust Fund, the net annual interest income per Unit for such
Trust Fund would be reduced and the Estimated Current Return and Estimated
Long-Term Return might be lowered.
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 a
Trust Fund, but may be considered in the Sponsor's determination to direct the
Trustee to dispose of such investment. See "Investment Supervision."
The Sponsor may not alter the portfolio of a Trust Fund except upon the
happening of certain extraordinary circumstances. See "Investment
Supervision." Municipal Bonds in such Trust Fund are subject to optional call
or mandatory redemption pursuant to sinking fund provisions, in each case
prior to their stated maturity. A bond subject to optional call is one which
is subject to redemption or refunding prior to maturity at the option of the
issuer, often at a premium over par. A refunding is a method by which a bond
issue is redeemed, at or before maturity, by the proceeds of a new bond issue.
A bond subject to sinking fund redemption is one which is subject to partial
call from time to time at par with proceeds from a fund accumulated for the
scheduled retirement of a portion of an issue prior to maturity. Special or
extraordinary redemption provisions may provide for redemption at par of all
or a portion of an issue upon the occurrence of certain circumstances, which
may be prior to the optional call dates shown in "The Trust Funds--
Portfolios." Redemption pursuant to optional call provisions is more likely to
occur, and redemption pursuant to special or extraordinary redemption
provisions may occur, when the Bonds have an offering side evaluation which
represents a premium over par, that is, when they are able to be refinanced at
a lower cost. The proceeds from any such call or redemption pursuant to
sinking fund provisions, as well as proceeds from the sale of Municipal Bonds
and from Municipal Bonds which mature in accordance with their terms from a
Trust Fund, unless utilized to pay for Units tendered for redemption, will be
distributed to Unitholders of such Trust Fund and will not be used to purchase
additional Municipal Bonds for the Trust Fund. Accordingly, any such call,
redemption, sale or maturity will reduce the size and diversity of the Trust
Fund and the net annual
A-4
<PAGE>
interest income of the Trust Fund and may reduce the Estimated Current Return
and the Estimated Long-Term Return. See "Interest, Estimated Long-Term Return
and Estimated Current Return." The call, redemption, sale or maturity of
Municipal Bonds also may have tax consequences to a Unitholder. See "Federal
Tax Status." Information with respect to the call provisions and maturity
dates of the Municipal Bonds is contained in "The Trust Funds--Portfolios."
Insurance guaranteeing the scheduled payment of principal and interest on all
of the Municipal Bonds in an Insured Trust Fund has been obtained directly by
the issuer. See "Insurance on the Portfolios of the Insured Trust Funds" and
"The Trust Funds--Portfolios." The value of insurance obtained by the issuer
of a Municipal Bond is reflected and included in the market value of such
Bonds. See "Insurance on the Portfolios of the Insured Trust Funds."
Each Unit of a Trust Fund represents an undivided fractional interest in the
Municipal Bonds deposited therein, in the ratio shown under "Essential
Information." Units may be purchased and certificates, if requested, will be
issued in denominations of one Unit or any multiple or fraction thereof,
subject to the Trust's minimum investment requirement of one Unit. Fractions
of Units will be computed to three decimal points. To the extent that Units of
a Trust Fund are redeemed, the principal amount of Municipal Bonds in the
Trust Fund will be reduced and the undivided fractional interest represented
by each outstanding Unit of such Trust Fund will increase. See "Redemption."
GENERAL TRUST INFORMATION
None of the special counsel to the various Trust Funds has expressed any
opinion regarding the completeness or materiality of any matters contained in
this Prospectus other than the tax opinions set forth under "Federal Tax
Status."
Certain of the Bonds in the Trust Funds may be general obligations of a
governmental entity that are backed by the taxing power of such entity. All
other Bonds in the Trusts are revenue bonds payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds, on the other hand, are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. There are, of
course, variations in the security of the different Bonds in the Trust Funds,
both within a particular classification and between classifications, depending
on numerous factors.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are derived from services provided by hospitals and other health care
facilities, including nursing homes. 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's 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 implements 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 affect the
ability of such issuers to make payments of
A-5
<PAGE>
principal and interest on Municipal Bonds held in the portfolios of the Trust
Funds. Such adverse changes also may affect the ratings of the Municipal Bonds
held in the portfolios of the Trust Funds.
Certain of the Bonds in the Trust Funds may be single family mortgage revenue
bonds, which are issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income.
Mortgage loans are generally partially or completely prepaid prior to their
final maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these Bonds are subject to
extraordinary mandatory redemption in whole or in part from such prepayments
of mortgage loans, a substantial portion of such 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 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 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 of 1954, which Section contains certain ongoing
requirements relating to the use of the proceeds of such Bonds in order for
the interest on such Bonds to retain its tax-exempt status. In each case, the
issuer of the Bonds has covenanted to comply with applicable ongoing
requirements and bond counsel to such issuer has issued an opinion that the
interest on the 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
Bonds to become taxable, possibly retroactively from the date of issuance.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are primarily derived from mortgage loans to housing projects for low
to moderate income families. The ability of such issuers to make debt service
payments will be affected by events and conditions affecting financed
projects, including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income, increases in taxes,
employment and income conditions prevailing in local labor markets, utility
costs and other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the appropriation of
subsidies and social and economic trends affecting the localities in which the
projects are located. The occupancy of housing projects may be adversely
affected by high rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or
non-origination of mortgage loans as well as upon the occurrence of other
events. Certain issuers of single or multi-family housing bonds have
considered various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In connection with the housing Bonds
held by the Trust Funds, the Sponsor has not had any direct communications
with any of the issuers thereof, but at the Date of Deposit it is not aware
that any of the respective issuers of such Bonds are actively considering the
redemption of such Bonds prior to their respective stated initial call dates.
However, there can be no assurance that an issuer of a Bond in the Trusts will
not attempt to so redeem a Bond in the Trust Funds.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are derived from the sale of water and/or sewerage services. Water
and sewerage bonds are generally payable from user fees.
A-6
<PAGE>
Problems faced by such issuers include the ability to obtain timely and
adequate rate increases, a decline in population resulting in decreased user
fees, the difficulty of financing large construction programs, the limitations
on operations and increased costs and delays attributable to environmental
considerations, the increasing difficulty of obtaining or discovering new
supplies of fresh water, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. Issuers may have experienced these problems in
varying degrees.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are primarily derived from the sale of electric energy or natural
gas. Utilities are generally subject to extensive regulation by state utility
commissions which, among other 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 Bonds to make payments of principal and/or
interest on such Bonds.
Certain of the Bonds in the Trust Funds may be industrial revenue bonds
("IRBs"), including pollution control revenue bonds, which are tax-exempt
securities issued by states, municipalities, public authorities or similar
entities to finance the cost of acquiring, constructing or improving various
industrial projects. These projects are usually operated by corporate
entities. Issuers are obligated only to pay amounts due on the IRBs to the
extent that funds are available from the unexpended proceeds of the IRBs or
receipts or revenues of the issuer under an arrangement between the issuer and
the corporate operator of a project. The arrangement may be in the form of a
lease, installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to be
sufficient to meet the payments of amounts due on the IRBs. Regardless of the
structure, payment of IRBs is solely dependent upon the creditworthiness of
the corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or industry.
These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from leveraged buy-outs or takeovers. The IRBs in the
Trust Funds 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
Bonds in the Trust Funds prior to the stated maturity of such Bonds.
Certain of the Bonds in the Trust Funds may be obligations which are payable
from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income
is generally derived from fees received from signatory airlines pursuant to
use agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees. Airport operating income may
therefore be affected by the ability of the airlines to meet their obligations
under the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased competition,
excess
A-7
<PAGE>
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 Bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges and
rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of
transportation, scarcity of fuel and reduction or loss of rents.
Certain of the Bonds in the Trust Funds may be obligations of issuers which
are, or which govern the operation of, schools, colleges and universities and
whose revenues are derived mainly from ad valorem taxes, or for higher
education systems, from tuition, dormitory revenues, grants and endowments.
General problems relating to school bonds include litigation contesting the
state constitutionality of financing public education in part from ad valorem
taxes, thereby creating a disparity in educational funds available to schools
in wealthy areas and schools in poor areas. Litigation or legislation on this
issue may affect the sources of funds available for the payment of school
bonds in the Trusts. General problems relating to college and university
obligations would include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to
raise tuition and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state funding and new
government legislation or regulations which may adversely affect the revenues
or costs of such issuers. All of such issuers have been experiencing certain
of these problems in varying degrees.
Certain of the Bonds in the Trust Funds may be Urban Redevelopment Bonds
("URBs"). URBs have generally been issued under bond resolutions pursuant to
which the revenues and receipts payable under the arrangements with the
operator of a particular project have been assigned and pledged to purchasers.
In some cases, a mortgage on the underlying project may have been granted as
security for the URBs. Regardless of the structure, payment of the URBs is
solely dependent upon the creditworthiness of the operator of the project.
Certain of the Bonds in the Trust Funds 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 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 Bonds.
Certain of the Bonds in the Trust Funds may be sales and/or use tax revenue
bonds whose revenues are derived from the proceeds of a special sales or use
tax. Such taxes are generally subject to continuing Legislature approval.
Payments may be adversely affected by reduction of revenues due to decreased
use of a facility or decreased sales.
Certain of the Bonds in the Trust Funds may be "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the payment of current
interest. Zero coupon bonds are purchased at a deep discount because the buyer
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
A-8
<PAGE>
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 "Federal Tax Status."
Investors should be aware that many of the Bonds in the Trust Funds are
subject to continuing requirements such as the actual use of Bond proceeds or
manner of operation of the project financed from Bond proceeds that may affect
the exemption of interest on such Bonds from Federal income taxation. Although
at the time of issuance of each of the Bonds in the Trusts an opinion of bond
counsel was rendered as to the exemption of interest on such obligations from
Federal income taxation, there can be no assurance that the respective issuers
or other obligors on such obligations will fulfill the various continuing
requirements established upon issuance of the 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 Bonds, thereby reducing the value of the Bonds and
subjecting Unitholders to unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of debts of political
subdivisions or authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of
creditors, which proceedings could result in material and adverse modification
or alteration of the rights of holders of obligations issued by such
subdivisions or authorities.
Certain of the Bonds in the Trust Funds may represent "moral obligations" of a
governmental entity other than the issuer. In the event that the issuer of a
Municipal Bond defaults in the repayment thereof, the governmental entity
lawfully may, but is not obligated to, discharge the obligation of the issuer
to repay such Municipal Bond.
To the best of the Sponsor's knowledge, there is no litigation pending as of
the Date of Deposit in respect of any Municipal Bond which might reasonably be
expected to have a material adverse effect on the Trusts or any Trust Fund. At
any time after the Date of Deposit, litigation may be instituted on a variety
of grounds with respect to the Municipal Bonds. Although the Sponsor is unable
to predict whether any such litigation may be instituted, or if instituted,
whether such litigation might have a material adverse effect on any Trust
Fund, the Trust Funds receive copies of the opinions of bond counsel given at
the time of original delivery of each of the Municipal Bonds to the effect
that the Municipal Bonds have been validly issued and that the interest
thereon is exempt from Federal income taxes.
INSURANCE ON THE PORTFOLIOS OF THE INSURED TRUST FUNDS
All Municipal Bonds in the portfolios of the Insured Trust Funds are insured
as to the scheduled payment of interest and principal by the issuer from
Municipal Bond Investors Assurance Corporation or other insurers. See "The
Trust Funds--Portfolios" and the Notes thereto. 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-cancellable and
will remain in force so long as the Municipal Bonds so insured are outstanding
and the insurer and/or insurers thereof remain in business. Where Municipal
Bond insurance is obtained by the issuer directly from Municipal Bond
Investors Assurance Corporation or another insurer, no premiums for insurance
are paid by an Insured Trust Fund. If the provider of an original issuance
insurance policy is unable to meet its obligations under such policy or if the
rating assigned to the claims-paying ability of any such insurer deteriorates,
no other insurer has an obligation to insure any issue adversely affected by
either of the above described events.
A-9
<PAGE>
The aforementioned insurance guarantees the scheduled payment of principal and
interest on all of the Municipal Bonds in an Insured Trust Fund. It does not
guarantee the market value of the Municipal Bonds or the value of the Units of
the Insured Trust Fund. Insurance obtained by the issuer of a Municipal Bond
is effective so long as the Bond is outstanding, whether or not held by an
Insured Trust Fund. Therefore, any such insurance may be considered to
represent an element of market value in regard to the Bonds thus insured, but
the exact effect, if any, of this insurance on such market value cannot be
predicted.
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 of General Electric
Capital Corporation ("GECC"). Neither the Corporation nor GECC is obligated to
pay the debts 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, 1993, the total capital
and surplus of Financial Guaranty was approximately $777,000,000. Copies of
Financial Guaranty's financial statements, prepared on the basis of statutory
accounting principles, and the Corporation's financial statements, prepared on
the basis of generally accepted accounting principles, may be obtained by
writing to Financial Guaranty at 115 Broadway, New York, New York 10006,
Attention: Communications Department (telephone number is (212) 312-3000) or
to the New York State Insurance Department at 160 West Broadway, 18th Floor,
New York, New York 10013, Attention: Property Companies Bureau (telephone
number (212) 621-0389).
In addition, Financial Guaranty Insurance Company is currently authorized to
write insurance in 49 states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained herein with
respect to such corporation is unaudited but appears in reports or other
materials filed with state insurance regulatory authorities and is subject to
audit and review by such authorities. No representation is made herein as to
the accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof but the
Sponsor is not aware that the information herein is inaccurate or incomplete.
AMBAC Indemnity Corporation. AMBAC Indemnity Corporation ("AMBAC") is a
Wisconsin-domiciled stock insurance company, regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin, and licensed to do
business in 50 states, the District of Columbia and the Commonwealth of Puerto
Rico, with admitted assets (unaudited) of approximately $1,725,000,000 and
statutory capital (unaudited) of approximately $963,000,000 as of March 31,
1993. Statutory capital consists of AMBAC policyholders' surplus and statutory
contingency reserve. AMBAC 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,
17th 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 bond insurance programs
of AMBAC has been and will be assumed by a number of foreign and domestic
unaffiliated reinsurers.
Municipal Bond Investors Assurance Corporation. Municipal Bond Investors
Assurance Corporation ("MBIA Corporation") is the principal operating
subsidiary of MBIA, Inc., a New York Stock Exchange listed company. MBIA, Inc.
is not 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
A-10
<PAGE>
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, 1993, MBIA had admitted assets of $3.0 billion
(unaudited), total liabilities of $2.0 billion (unaudited), and total capital
and surplus of $951 million (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. Standard & Poor's Corporation has rated the claims paying ability
of MBIA "AAA". Copies of MBIA Corporation's financial statements prepared in
accordance with statutory accounting practices are available from MBIA
Corporation. The address of MBIA Corporation is 113 King Street, Armonk, New
York 10504.
Effective December 31, 1989, 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 bond issues insured by MBIA "Aaa" and
short-term loans "MIG1," both designated to be of the highest quality.
Standard & Poor's Corporation rates all new issues insured by MBIA "AAA."
Financial Security Assurance. Financial Security Assurance ("Financial
Security" or "FSA") is a monoline insurance company incorporated on March 16,
1984 under the laws of the State of New York. The operations of Financial
Security commenced on July 25, 1985, and Financial Security received its New
York State insurance license on September 23, 1985. Financial Security and its
two wholly owned subsidiaries are licensed to engage in financial guaranty
insurance business in 47 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. In general, financial guaranty insurance consists of the issuance
of a guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of these securities, in consideration for payment
of a premium to the insurer.
Financial Security is approximately 91.6% owned by U S West, Inc. and 8.4%
owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine"). U S
West, Inc. operates businesses involved in communications, data solutions,
marketing services and capital assets, including the provision of telephone
services in 14 states in the western and midwestern United States. Tokio
Marine is the largest property and casualty insurance company in Japan. No
shareholder of Financial Security is obligated to pay any debt of Financial
Security or any claim under any insurance policy issued by Financial Security
or to make any additional contribution to the capital of Financial Security.
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 $222,078,000
(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).
A-11
<PAGE>
Copies of Financial Security's financial statements may be obtained by writing
to Financial Security at 350 Park Avenue, New York, New York, 10022, Attention
Communications Department. Financial Security's 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 reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance
policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc., and "AAA" by Standard & Poor's Corporation, Nippon Investors
Service Inc., Duff & Phelps Inc. and Australian Ratings Pty. Ltd. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company. Capital Guaranty Insurance Company
("Capital Guaranty" or "CGIC") Capital Guaranty Insurance Company 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 Insurance Company is authorized to provide insurance in 49
states, the District of Columbia and three U.S. territories. 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, 1993, Capital Guaranty had $13.6 billion in net exposure
outstanding. The total statutory policyholders' surplus and contingency
reserve of Capital Guaranty was $181,383,432 (unaudited) and the total
admitted assets were $270,021,126 (unaudited) as reported to the Insurance
Department of the State of Maryland as of September 30, 1993.
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) 995-8000.
Because the Municipal Bonds are insured as to the scheduled payment of
principal and interest and on the basis of the financial condition and the
method of operation of the insurance companies referred to above, Standard &
Poor's Corporation has assigned to the each of the Insured Trust Fund's Units
its "AAA" investment rating. These are the highest ratings assigned to
securities by such rating agencies. See "Description of Municipal Bond
Ratings." These ratings should not be construed as an approval of the offering
of the Units by Standard & Poor's Corporation or as a guarantee of the market
value of an Insured Trust Fund or the Units thereof. There is no guarantee
that the "AAA" investment rating will be maintained.
Bonds in an Insured Trust Fund for which insurance has been obtained by the
issuer (all of which were rated "AAA" by Standard & Poor's Corporation and/or
"Aaa" by Moody's Investors Service, Inc.) may or may not have a higher yield
than uninsured bonds rated "AAA" by Standard & Poor's Corporation or "Aaa" by
A-12
<PAGE>
Moody's Investors Service, Inc. In selecting Municipal Bonds for the
portfolios of an Insured Trust Fund, the Sponsor has applied the criteria
hereinbefore described.
Chapman and Cutler, counsel for the Sponsor, has given an opinion to the
effect that the payment of insurance proceeds representing maturing interest
on defaulting municipal obligations paid by Financial Guaranty or another
insurer would be excludable from Federal gross income if, and to the same
extent as, such interest would have been so excludable if paid by the issuer
of the defaulted obligations. See "Federal Tax Status."
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 other mutual fund underwritten or advised by
Kemper Financial Services, Inc., an affiliate of the Sponsor, (the "Kemper
Funds") which are registered in the Unitholder's state of residence, other
than those Kemper Funds sold with a contingent deferred sales charge. Since
the portfolio securities and investment objectives of such Kemper Funds may
differ significantly from that of the Trust Funds, Unitholders should
carefully consider the consequences, including the fact that distributions
from such Kemper Funds may be taxable, before selecting such Kemper Funds for
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 any 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 remain in effect until a subsequent notice is received
by the Program Agent. See "Unitholders--Distributions to Unitholders."
The Program Agent is Investors Fiduciary Trust Company. All inquiries
concerning participation in distribution reinvestment should be directed to
the Kemper Service Company, service agent for the Program Agent, at P.O. Box
419430, Kansas City, Missouri 64173-0216, telephone (800) 422-2848.
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Date of Deposit, the Estimated Long-Term
Return and the Estimated Current Return, if applicable, for each Trust Fund
were as set forth in the "Essential Information" for each Trust. Estimated
Current Return is 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
Trustee, the Sponsor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of the Bonds while the Public Offering
Price will vary with changes in the offering price of the underlying Bonds;
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 Bonds 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 Bonds and the expenses of
the Trust will
A-13
<PAGE>
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.
In order to acquire certain of the Municipal Bonds contracted for by a Trust
Fund, it may be necessary for the Sponsor or Trustee to pay on the dates for
delivery of such Municipal Bonds amounts covering accrued interest on such
Municipal Bonds which exceed the amount which will be made available in the
letter of credit furnished by the Sponsor on the Date of Deposit. The Trustee
has agreed to pay any amounts necessary to cover any such excess and will be
reimbursed therefor, without interest, when funds become available from
interest payments on the Municipal Bonds deposited in that Trust Fund.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of each Trust Fund are offered at the Public
Offering Price thereof. During the initial offering period, the Public
Offering Price per Unit is equal to the aggregate of the offering side
evaluations of the Municipal Bonds in a Trust Fund (as determined, pursuant to
the terms of a contract with the Evaluator, by Muller Data Corporation, a
non-affiliated firm regularly engaged in the business of evaluating, quoting
or appraising comparable securities), plus or minus a pro rata share of (a)
cash, if any, in the Principal Account held or owed by a Trust Fund, (b)
Purchased Interest and (c) Daily Accrued Interest plus the applicable sales
charge referred to in the table below divided by the number of outstanding
Units of such Trust Fund. The Public Offering Price for secondary market
transactions, on the other hand, is based on the bid side evaluations of the
Municipal Bonds in a Trust Fund as determined by Kenny Information Systems,
Inc. plus or minus (a) cash, if any, in the Principal Account held or owned by
the Trust Fund, (b) Purchased Interest and (c) Daily Accrued Interest plus a
sales charge based upon the dollar weighted average maturity of the Trust
Fund.
The sales charge per Unit will be reduced during the initial offering period
pursuant to the following graduated scale:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YEARS TO MATURITY
------------------------------------------------------------------------------------
0 TO 7.49 7.5 TO 14.99 15 OR MORE
------------------------- ------------------------- -------------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
NUMBER OF UNITS PRICE INVESTED PRICE INVESTED PRICE INVESTED
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 to 9,999 Units......... 3.0 % 3.093 % 3.9 % 4.058 % 4.2 % 4.384 %
10,000 to 24,999 Units... 2.8 2.881 3.7 3.842 4.0 4.167
25,000 to 49,999 Units... 2.6 2.669 3.5 3.627 3.8 3.950
50,000 to 99,999 Units... 2.5 2.564 3.3 3.413 3.5 3.627
100,000 or more Units.... 1.8 1.883 2.0 2.001 2.2 2.249
</TABLE>
As indicated above, in connection with secondary market transactions the sales
charge is based upon the dollar weighted average maturity of the Trust Funds
and is determined in accordance with the table set forth below. For purposes
of this computation, Bonds will be deemed to mature on their expressed
maturity dates unless: (a) the 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 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
A-14
<PAGE>
computation will be that different sales charge rates will be applied to the
Trust Funds based upon the dollar weighted average maturity of such Trust
Fund's portfolio, in accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF NET
PUBLIC AMOUNT
YEARS TO MATURITY OFFERING PRICE INVESTED
<S> <C> <C>
-------------- --------------
0 to .99 years.............................. 0.00 % 0.000 %
1 to 3.99 years............................. 2.00 2.041
4 to 7.99 years............................. 3.50 3.627
8 to 14.99 years............................ 4.50 4.712
15 or more years............................ 5.50 5.820
</TABLE>
In connection with secondary market transactions the sales charge per Unit
will be reduced as set forth below:
<TABLE>
<CAPTION>
SECONDARY
-------------------------------------
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
AMOUNT OF INVESTMENT -------------------------------------
SALES CHARGE (% OF PUBLIC OFFERING
PRICE)
<S> <C> <C> <C> <C>
$1,000 to $99,999............................ 3.50 % 4.50 % 5.50 %
$100,000 to $499,999......................... 3.25 4.25 5.00
$500,000 to $999,999......................... 3.00 4.00 4.50
$1,000,000 or more........................... 2.75 3.75 4.00
</TABLE>
- ---------------------------
* If the dollar weighted average maturity of the Trust Fund is from 1 to
3.99 years the sales charge is 2% and 1.5% of the Public Offering Price
for purchases of $1,000 to $249,999 and $250,000 or more, respectively.
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the same
purchaser from the same Underwriter or dealer and for this purpose, purchases
of Units of the Trust Fund will be aggregated with concurrent purchases of
Units of any other unit investment trust that may be offered by the Sponsor.
Additionally, Units purchased in the name of a spouse or child (under 21) of
such purchaser will be deemed to be additional purchases by such purchaser.
The reduced sales charges will also be applicable to a trust or other
fiduciary purchasing for a single trust estate or single fiduciary account.
The Sponsor intends to permit officers, directors and employees of the Sponsor
and Evaluator and, in the sole discretion of the Sponsor, registered
representatives of selling firms to purchase Units of the Trust without a
sales charge, although a transaction processing fee may be imposed on such
trades.
Had the Units of the Trust Funds been available for sale at the opening of
business on the Date of Deposit, the Public Offering Prices would have been as
shown under "Essential Information." The Public Offering Price per Unit of a
Trust Fund on the date of the Prospectus or on any subsequent date will vary
from the amount stated under "Essential Information" in accordance with
fluctuations in the prices of the underlying Municipal Bonds and the amount of
accrued interest on the Units. On the Date of Deposit, pursuant to an
exemptive order from the Securities and Exchange Commission, the Public
Offering Price at which Units will be sold will not exceed the price
determined as of the opening of business on the Date of Deposit as shown under
"Essential Information", however, should the value of the underlying Bonds
decline, purchasers will, of course, be given the benefit of such lower price.
The aggregate bid and offering side evaluations of the Municipal Bonds shall
be determined (a) on the basis of current bid or offering prices of the
Municipal Bonds, (b) if bid or offering prices are not available for any
particular Municipal Bond, on the basis of current bid or offering prices for
comparable bonds, (c) by determining the value of Municipal Bonds on the bid
or offer side of the market by appraisal, or (d) by any combination of the
above. The value of insurance obtained by an issuer of Municipal Bonds is
reflected and included in the market value of such Municipal Bonds.
A-15
<PAGE>
The Evaluator will consider the ability of the insurer of such Bonds, to meet
its commitments. For example, if an Insured Trust were to hold 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 such 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 quality. 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," on each business day commencing
with the Date of Deposit of the Municipal Bonds, effective for all sales made
during the preceding 24-hour period.
The interest on the Municipal Bonds deposited in each Trust Fund, less the
related estimated fees and expenses, is estimated to accrue in the annual
amounts per Unit set forth under "Essential Information." 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 Trust Fund change or
the number of outstanding Units of such Trust Fund changes.
Payment for Units must be made on or before the fifth business day following
purchase. If a Unitholder desires to have certificates representing Units
purchased, such certificates will be delivered as soon as possible following
his written request therefor. For information with respect to redemption of
Units purchased, but as to which certificates requested have not been
received, see "Redemption" below.
PURCHASED AND DAILY ACCRUED INTEREST. Accrued interest consists of two
elements. The first element arises as a result of accrued interest which is
the accumulation of unpaid interest on a bond from the 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 is referred to
herein as "Purchased Interest." Included in the Public Offering Price 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 Settlement Date. The second element of
accrued interest arises because the estimated net interest on the 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 Purchased Interest and
Daily Accrued Interest computed to the settlement date in the case of sale or
liquidation and to the date of tender in the case of redemption in the Trust
Fund.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the initial
Public Offering Price of Units will be determined on the basis of the current
offering prices of the Municipal Bonds in each Trust Fund, the redemption
price per Unit (as well as the secondary market price per Unit) at which Units
may be redeemed (see "Redemption") will be determined on the basis of the
current bid prices of such Bonds. As of the opening of business on the Date of
Deposit, the Public Offering Prices per Unit (based on the offering prices of
the Municipal Bonds in each Trust Fund and including the sales charge)
exceeded the redemption price at which Units could have been redeemed (based
upon the current bid prices of the Municipal Bonds in the Trust Fund) by the
amount shown under "Essential Information." In the past, bid prices on
municipal bonds similar to those in the Trust Funds have been lower than the
offering prices thereof by as much as 3%
A-16
<PAGE>
or more of principal amount in the case of inactively traded municipal bonds
or as little as 1/2 of 1% in the case of actively traded municipal bonds but
the difference between such offering and bid prices may be expected to average
1% to 2% of principal amount. For this reason, among others (including
fluctuations in the market prices of such Bonds and the fact that the Public
Offering Prices include a sales charge), the amount realized by a Unitholder
upon any redemption of Units may be less than the price paid for such Units.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor intends to qualify the Units of the
Insured National Trust for sale in all states and Units of the Insured State
Trusts for sale only in the State for which such Trust Fund is named. Units
will be sold through the Underwriters, through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers at prices which represent discounts from the
Public Offering Price as set forth below. Certain commercial banks are making
Units of the Trust Funds available to their customers on an agency basis. A
portion of the sales charge paid by their customers is retained by or remitted
to the banks in the amounts shown in the table below. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Fund Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to
state law. The Sponsor reserves the right to change the discounts set forth
below from time to time. In addition to such discounts, the Sponsor may, from
time to time, pay or allow an additional discount, in the form of cash or
other compensation, to dealers employing registered representatives who sell,
during a specified time period, a minimum dollar amount of Units of the Trust
and other unit investment trusts underwritten by the Sponsor. The difference
between the discount and the sales charge will be retained by the Sponsor and
the Underwriters.
<TABLE>
<CAPTION>
PRIMARY
-------------------------------------------------------------------------
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 7.49 7.5 TO 14.99 15 OR MORE
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF UNITS DISCOUNT PER UNIT
-------------------------------------------------------------------------
1 to 9,999 Units.................. $0.20 $0.26 $0.30
10,000 to 24,999 Units............ $0.19 $0.25 $0.28
25,000 to 49,999 Units............ $0.18 $0.23 $0.26
50,000 to 99,999 Units............ $0.17 $0.22 $0.24
100,000 or more Units............. $0.10 $0.11 $0.12
</TABLE>
<TABLE>
<CAPTION>
SECONDARY
-------------------------------------
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
-------------------------------------
AMOUNT OF INVESTMENT DISCOUNT PER UNIT
(% OF PUBLIC OFFERING PRICE)
-------------------------------------
<S> <C> <C> <C> <C>
$1,000 to $99,999............................ 2.00 % 3.00 % 4.00 %
$100,000 to $499,999......................... 1.75 2.75 3.50
$500,000 to $999,999......................... 1.50 2.50 3.00
$1,000,000 or more........................... 1.25 2.25 2.50
</TABLE>
- ---------------------------
* If the dollar weighted average maturity of a Trust Fund is from 1 to
3.99 years the concession or agency commission is 1.00% of the Public
Offering Price.
The Underwriters reserve the right to reject, in whole or in part, any order
for the purchase of Units.
A-17
<PAGE>
PROFITS OF SPONSOR AND UNDERWRITERS. As set forth under "Underwriting," the
Underwriters of each Trust Fund will receive gross sales charges equal to the
percentage of the Public Offering Price of the Units of such Trust Fund stated
under "Public Offering Price" and the Sponsor will receive a fixed portion of
such sales charges. In addition, the Underwriters and the Sponsor may realize
a profit (or the Sponsor may realize a loss) resulting from the difference
between the purchase prices of the Municipal Bonds to the Sponsor and the cost
of such Bonds to the Trust Funds, which is based on the offering side
evaluation of the Municipal Bonds on the Date of Deposit. See "The Trust
Funds--Portfolios" and "Underwriting." The Underwriters may also realize
profits or losses with respect to Municipal Bonds deposited in the Trust
Funds, which were acquired from underwriting syndicates of which any of the
Underwriters were members. An underwriter or underwriting syndicate purchases
bonds from the issuer on a negotiated or competitive bid basis, as principal,
with the motive of marketing such bonds to investors at a profit. The
Underwriters of a Trust Fund and the Sponsor may realize additional profits or
losses during the initial offering period on unsold Units as a result of
changes in the daily evaluation of the Municipal Bonds in the Trust Funds.
MARKET FOR UNITS
After the initial offering period, 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 the Trust Funds offered hereby and to
continuously offer to purchase said Units at prices, determined by the
Evaluator, based on the aggregate bid prices of the underlying Municipal Bonds
in such Trust Funds, together with Purchased Interest and Daily Accrued
Interest to the expected dates of settlement. To the extent that a market is
maintained during the initial offering period, the prices at which Units will
be repurchased will be based upon the aggregate offering side evaluation of
the Municipal Bonds in the Trust Funds. The aggregate bid prices of the
underlying Municipal Bonds in each Trust Fund are expected to be less than the
related aggregate offering prices (which is the evaluation method used during
the initial public offering period). Accordingly, Unitholders who wish to
dispose of their Units should inquire of their bank or broker as to current
market prices in order to determine whether there is in existence any price in
excess of the Redemption Price and, if so, the amount thereof.
The offering price of any Units resold by the Sponsor or Underwriters will be
in accord with that described in the currently effective Prospectus describing
such Units. Any profit or loss resulting from the resale of such Units will
belong to the Sponsor and/or the Underwriters. The Sponsor and/or the
Underwriters may suspend or discontinue purchases of Units of any Trust Fund
if the supply of Units exceeds demand, or for other business reasons.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market described
above may cause Units to be redeemed by the Trustee by making a written
request to the Trustee, Investors Fiduciary Trust Company, P.O. Box 419430,
Kansas City, Missouri, 64173-0216 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, properly endorsed
or accompanied by a written instrument or instruments of transfer in form
satisfactory to the Trustee. Unitholders must sign the request, and such
certificate or transfer instrument, exactly as their names appear on the
records of the Trustee and on any certificate representing the Units to be
redeemed. If the amount of the redemption is $25,000 or less and the proceeds
are payable to the Unitholder(s) of record at the address of record, no
signature guarantee is necessary for redemptions by individual account owners
(including joint owners). Additional documentation may be requested, and a
signature guarantee is always required, from corporations, executors,
administrators, trustees, guardians or associations. The signatures must be
guaranteed by a participant in the
A-18
<PAGE>
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 cetificate representing such Units
has been received by the purchasers.
Redemption shall be made by the Trustee on the seventh calendar day following
the day on which a tender for redemption is received, or if the seventh
calendar day is not a business day, on the first business day prior thereto
(the "Redemption Date") by payment of cash equivalent to the Redemption Price
for such Trust Fund, determined as set forth below under "Computation of
Redemption Price," as of the evaluation time stated under "Essential
Information," next following such tender, multiplied by the number of Units
being redeemed. Any Units redeemed shall be cancelled and any undivided
fractional interest 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 Trust Fund at the time of
redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain 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 for such Trust Fund to the extent that funds are
available for such purpose. All other amounts paid on redemption shall be
withdrawn from the Principal Account for such Trust Fund. The Trustee is
empowered to sell Municipal Bonds for a Trust Fund in order to make funds
available for the redemption of Units of such Trust Fund. 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 the Trust Fund will be reduced.
The Trustee is irrevocably authorized in its discretion, if an Underwriter
does not elect to purchase any Unit tendered for redemption, in lieu of
redeeming such Units, to sell such Units in the over-the-counter market for
the account of tendering Unitholders at prices which will return to the
Unitholders amounts in cash, net after brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Price for such
Units. In the event of any such sale, the Trustee shall pay the net proceeds
thereof to the Unitholders on the day they would otherwise be entitled to
receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or during which (as determined by the
Securities and Exchange Commission) trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which disposal by the Trustee of Municipal Bonds is not reasonably practicable
or it is not reasonably practicable to fairly determine the value of the
underlying Municipal Bonds in accordance with the Trust Agreements; or (3) for
such other period as the Securities and Exchange Commission may by order
permit. The Trustee is not liable to any person in any way for any loss or
damage which may result from any such suspension or postponement.
A-19
<PAGE>
COMPUTATION OF REDEMPTION PRICE. The Redemption Price for Units of each Trust
Fund is computed by the Evaluator as of the evaluation time stated under
"Essential Information" 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 the Trust Fund other than cash deposited in
the Trust Fund to purchase Municipal Bonds not applied to the purchase of such
Bonds; (2) the aggregate value of each issue of the Municipal Bonds (including
"when issued" contracts, if any) held in the Trust Fund as determined by the
Evaluator on the basis of bid prices therefor; and (3) interest accrued and
unpaid on the Municipal Bonds in the Trust Fund as of the date of computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust Fund and for which no deductions
have been previously made for the purpose of additions to the Reserve Account
described under "Expenses of the Trust"; (2) an amount representing estimated
accrued expenses of the Trust Fund, including but not limited to fees and
expenses of the Trustee (including legal and auditing fees and any 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 the Trust Fund;
and
C. finally dividing the results of such computation by the number of Units of
the Trust Fund outstanding as of the date thereof.
UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of any Trust Fund will not be evidenced
by certificates unless a Unitholder, the Unitholder's registered broker/dealer
or the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation
statement sent to the Underwriter and broker. Non-receipt of such
certificate(s) must be reported to the Trustee within one year; otherwise, a
2% surety bond fee will be required for replacement.
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 subject to the Trust's minimum investment
requirement of 1 Unit or any whole Unit multiple thereof subject to any
minimum requirement established by the Sponsor from time to time. Any
certificate issued will be numbered serially for identification, issued in
fully registered form and will be transferable only on the books of the
Trustee. The Trustee may require a Unitholder to pay a reasonable fee, to be
determined in the sole discretion of the Trustee, for each certificate
re-issued or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or interchange. The Trustee at
the present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost certificates
will be replaced upon delivery to the Trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the Units), affidavit of
loss, evidence of ownership and payment of expenses incurred.
A-20
<PAGE>
DISTRIBUTIONS TO UNITHOLDERS. Interest Distributions: Interest received by
each Trust Fund, 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 Trust Fund. All other receipts are credited
by the Trustee to a separate Principal Account for the Trust Fund. The Trustee
normally has no cash for distribution to Unitholders until it receives
interest payments on the Bonds in the Trust Fund. Since municipal interest
usually is paid semi-annually, during the initial months of the Trust, the
Interest Account of each Trust Fund, consisting of accrued but uncollected
interest and collected interest (cash), will be predominantly the uncollected
accrued interest that is not available for distribution. On the dates set
forth under "Essential Information" for each Trust, the Trustee will commence
distributions, in part from funds advanced by the Trustee.
Thereafter, assuming the Trust Fund retains its original size and composition,
after deduction of the fees and expenses of the Trustee, the Sponsor and
Evaluator and reimbursements (without interest) to the Trustee for any amounts
advanced to a Trust Fund, the Trustee will normally distribute on each
Interest Distribution Date (the fifteenth of the month) or shortly thereafter
to Unitholders of record of such Trust Fund on the preceding Record Date
(which is the first day of each month). Unitholders of the Trust Funds will
receive an amount substantially equal to one-twelfth of such holders' pro rata
share of the estimated net annual interest income to the Interest Account of
such Trust Fund. However, interest earned at any point in time will be greater
than the amount actually received by the Trustee and distributed to the
Unitholders. Therefore, there will always remain an item of accrued interest
that is added to the daily value of the Units. If Unitholders of a Trust Fund
sell or redeem all or a portion of their Units, they will be paid their
proportionate share of the accrued interest of such Trust Fund to, but not
including, the fifth business day after the date of a sale or to the date of
tender in the case of a redemption.
In order to equalize distributions and keep the undistributed interest income
of the Trust Funds at a low level, all Unitholders of record in such Trust
Fund on the first Record Date will receive an interest distribution on the
first Interest Distribution Date. Because the period of time between the first
Interest Distribution Date and the regular distribution dates may not be a
full period, the first regular distributions may be partial distributions.
Persons who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date following
their purchase of Units. Since interest on Municipal Bonds in the Trust Funds
is payable at varying intervals, usually in semi-annual installments, and
distributions of income are made to Unitholders at different intervals from
receipt of interest, the interest accruing to a Trust Fund may not be equal to
the amount of money received and available for distribution from the Interest
Account. Therefore, on each Distribution Date the amount of interest actually
deposited in the Interest Account of a Trust Fund and available for
distribution may be slightly more or less than the interest distribution made.
In order to eliminate fluctuations in interest distributions resulting from
such variances, the Trustee is authorized by the Trust Agreements to advance
such amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee will be reimbursed, without interest,
for any such advances from funds available in the Interest Account for such
Trust Fund.
Principal Distributions. The Trustee will distribute on each Distribution Date
or shortly thereafter, to each Unitholder of record of the Trust Fund on the
preceding Record Date, an amount substantially equal to such holder's pro rata
share of the cash balance, if any, in the Principal Account of such Trust Fund
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 $.001 per Unit.
A-21
<PAGE>
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will furnish or
cause to be furnished to each Unitholder a statement of the amount of interest
and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit.
The accounts of each Trust Fund are required to be audited annually, at the
Trust Fund's 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 Trust Fund. The accountants' report will
be furnished by the Trustee to any Unitholder of such Trust Fund 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 Trust Fund a statement, covering the
calendar year, setting forth for the applicable Trust Fund:
A. As to the Interest Account:
1. The amount of interest received on the Municipal Bonds and the percentage
of such amount by states and territories in which the issuers of such Bonds
are located;
2. The amount paid from the Interest Account representing accrued interest of
any Units redeemed;
3. The deductions from the Interest Account for applicable taxes, if any, fees
and expenses (including auditing fees) of the Trustee, the Evaluator, and, if
any, of bond counsel;
4. Any amounts credited by the Trustee to the Reserve Account described under
"Expenses of the Trust";
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; and
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of any of the
Municipal Bonds and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
2. The amount paid from the Principal Account representing the principal of
any Units redeemed;
3. The deductions from the Principal Account for payment of applicable taxes,
if any, fees and expenses (including auditing fees) of the Trustee, the
Evaluator, and, if any, of bond counsel;
4. The amount of when-issued interest treated as a return of capital, if any;
5. Any amounts credited by the Trustee to the Reserve Account described under
"Expenses of the Trust";
6. 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 the calendar year; and
C. The following information:
1. A list of the Municipal Bonds as of the last business day of such calendar
year;
2. The number of Units outstanding on the last business day of such calendar
year;
3. The Redemption Price based on the last evaluation made during such calendar
year;
4. The amount actually distributed during such calendar year from the Interest
and Principal Accounts separately stated, expressed both as total dollar
amounts and as dollar amounts per Unit outstanding on the Record Dates for
each such distribution.
A-22
<PAGE>
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the
Trustee for redemption. The death or incapacity of any Unitholder will not
operate to terminate a Trust or any Trust Fund 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 a Trust or any Trust
Fund.
No Unitholder shall have the right to control the operation and management of
any Trust Fund in any manner, except to vote with respect to the amendment of
the Trust Agreements or termination of any Trust Fund.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trust Funds by the purchase,
sale or substitution of Municipal Bonds, except in the special circumstances
noted below and as indicated earlier under "Portfolios" regarding the
substitution of Replacement Bonds for any Failed Bonds. Thus, with the
exception of the redemption or maturity of Municipal Bonds in accordance with
their terms, the assets of the Trust Funds will remain unchanged under normal
circumstances.
The Sponsor may direct the Trustee to dispose of Municipal Bonds the value of
which has been affected by certain adverse events including institution of
certain legal proceedings or decline in price or the occurrence of other
market factors, including advance refunding, so that in the opinion of the
Sponsor the retention of such Bonds in a Trust Fund would be detrimental to
the interest of the Unitholders. The proceeds from any such sales, exclusive
of any portion which represents accrued interest, will be credited to the
Principal Account of such Trust Fund for distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of Muncipal Bonds to issue new obligations in exchange or substitution
for any of such 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 forseeable 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 Trust
Fund for the purpose of redeeming Units of such Trust Fund tendered for
redemption and the payment of expenses.
ADMINISTRATION OF THE TRUSTS
THE TRUSTEE. The Trustee, Investors Fiduciary Trust Company, is a trust
company specializing in investment related services, organized and existing
under the laws of Missouri, having its trust office at 127 West 10th Street,
Kansas City, Missouri 64105. The Trustee is subject to supervision and
examination by the Division of Finance of the State of Missouri and the
Federal Deposit Insurance Corporation. Investors Fiduciary Trust Company is
jointly owned by DST Systems, Inc. and Kemper Financial Services, Inc., an
affiliate of the Sponsor.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting the portfolio of any Trust Fund. For information relating to the
responsibilities of the Trustee under the Trust Agreements, reference is made
to the material set forth under "Unitholders."
A-23
<PAGE>
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 Trust Fund. Such
books and records shall be open to inspection by any Unitholder of such Trust
Fund at all reasonable times during 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 Trust Fund. 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 Trust Funds.
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 60 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 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. In case the Trustee becomes incapable of acting or
is adjudged a bankrupt or is taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor trustee as provided in the 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 such 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. Kemper Unit Investment Trusts, a service of Kemper Securities,
Inc., the Sponsor, also serves as Evaluator. The Evaluator may resign or be
removed by the Trustee in which event the Trustee is to use its best efforts
to appoint a satisfactory successor. Such resignation or removal shall become
effective upon acceptance of appointment by the successor evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within 30
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,
Muller Data Corporation, a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities, provides,
for both the initial offering period and secondary market transactions,
portfolio evaluations of the Bonds in the Trust Funds which are then reviewed
by the Evaluator. In the event the Sponsor is unable to obtain current
evaluations from Muller Data Corporation, 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 with respect to the Trust Funds 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
A-24
<PAGE>
outstanding of such Trust Fund, provided that no such amendment or waiver will
reduce the interest of any Unitholder thereof without the consent of such
Unitholder or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Unitholders of such Trust Fund.
In no event shall any Trust Agreement be amended to increase the number of
Units of a Trust Fund issuable thereunder or to permit, except in accordance
with the provisions of such Trust Agreement, the acquisition of any Municipal
Bonds in addition to or in substitution for those initially deposited in a
Trust Fund. The Trustee shall promptly notify Unitholders of the substance of
any such amendment.
The Trust Agreements provide that the Trust Funds shall terminate upon the
maturity, redemption or other disposition of the last of the Municipal Bonds
held in a Trust Fund. If the value of a Trust Fund shall be less than the
applicable minimum value stated under "Essential Information" (20% of the
original principal amount of a Trust Fund), the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate the Trust
Fund. A Trust Fund may be terminated at any time by the holders of Units
representing 66 2/3% of the Units thereof then outstanding. In the event of
termination of a Trust Fund, written notice thereof will be sent by the
Trustee to all Unitholders of such Trust Fund. Within a reasonable period
after termination, the Trustee will sell any Municipal Bonds remaining in such
Trust Fund and, after paying all expenses and charges incurred by the Trust
Fund, will distribute to Unitholders thereof (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 Trust Fund.
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 TRUSTS
The Sponsor will charge the Trust Funds a surveillance fee for services
performed for the Trust Funds in an amount not to exceed that amount set forth
in "Essential Information" 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
A-25
<PAGE>
Sponsor for providing such services. Such fee shall be based on the total
number of Units of the Trust Fund outstanding as of the January Record Date
for any annual period. The Sponsor will receive a portion of the sales
commissions paid in connection with the purchase of Units and will share in
profits, if any, related to the deposit of Municipal Bonds in the Trust Funds
(see "Underwriting"). The Sponsor and other Underwriters have borne all the
expenses of creating and establishing the Trust including the cost of the
initial preparation, printing and execution of the Prospectus, Trust
Agreements and certificates, legal and accounting expenses, advertising and
selling expenses, payment of closing fees, the expenses of the Trustee,
evaluation fees relating to the deposit and other out-of-pocket expenses.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Municipal Bonds in the Trust Fund at any
time during the period. 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 trust 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. During the first year the Trustee has agreed to
lower its fees and absorb expenses by the amount set forth under "Essential
Information." The Trustee's fee will not be increased in future years in order
to make up this reduction in the Trustee's fee. The Trustee's fee is payable
on or before each Distribution Date.
For evaluation of Municipal Bonds in each Trust Fund, the Evaluator shall
receive a fee, payable monthly, calculated on the basis of that annual rate
set forth under "Essential Information," based upon the largest aggregate
principal amount of Municipal Bonds in such Trust Fund at any time during such
monthly period.
The Trustee's and Evaluator's fees are deducted first from the Interest
Account of the Trust Fund to the extent funds are available and then from the
Principal Account. 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 the Trust Funds:
(a) fees for the Trustee's extraordinary services; (b) expenses of the Trustee
(including legal and auditing expenses and insurance costs for Insured Trust
Funds, but not including any fees and expenses charged by any agent for
custody and safeguarding of Municipal Bonds) and of bond counsel, if any; (c)
various governmental charges; (d) expenses and costs of any action taken by
the Trustee to protect the Trust or any Trust Fund or the rights and interests
of the Unitholders; (e) indemnification of the Trustee for any loss, liability
or expense incurred by it in the administration of the Trust or any Trust Fund
not resulting from gross negligence, bad faith or willful misconduct on its
part; (f) indemnification of the Sponsor for any loss, liability or expense
incurred in acting in that capacity without gross negligence, bad faith or
willful misconduct; and (g) expenditures incurred in contacting Unitholders
upon termination of the Trust Funds. The fees and expenses set forth herein
are payable out of the appropriate Trust Fund and, when owing to the Trustee,
are secured by a lien on such Trust Fund. 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 the Trust Funds shall be deducted from the Interest
Account thereof, or, to the extent funds are not available in such Account,
from the Principal Accounts. The Trustee may withdraw from the Principal
Account or the Interest Account of any Trust Fund such amounts, if any, as it
deems necessary to establish a reserve for any taxes or other governmental
charges or other extraordinary expenses payable out of the Trust Fund. Amounts
so withdrawn shall be credited to a separate account maintained for the Trust
A-26
<PAGE>
Fund known as the Reserve Account and shall not be considered a part of the
Trust Fund when determining the value of the Units until such time as the
Trustee shall return all or any part of such amounts to the appropriate
account.
THE SPONSOR
The Sponsor, Kemper Unit Investment Trusts, with an office at 77 West Wacker
Drive, 5th Floor, Chicago, Illinois 60601, (800) 621-5024, is a service of
Kemper Securities, Inc., which is a wholly-owned subsidiary of Kemper
Financial Companies, Inc. which, in turn, is a wholly-owned subsidiary of
Kemper Corporation. The Sponsor acts as underwriter of a number of other
Kemper unit investment trusts and will act as underwriter of any other unit
investment trust products developed by the Sponsor in the future. As of April
30, 1993, the total stockholder's equity of Kemper Securities, Inc. was
$426,125,017 (unaudited).
If at any time the Sponsor shall fail to perform any of its duties under the
Trust Agreements or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs 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 Trust Agreements and liquidate the Trust
Funds as provided therein, or (c) continue to act as Trustee without
terminating the Trust Agreements.
The foregoing financial information with regard to the Sponsor relates to the
Sponsor only and not to these Trust Funds. Such information is included in
this Prospectus only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations with respect to the Trust Funds. 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 have been passed upon by Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, as counsel for the Sponsor. Special counsel
for the Trust Funds for respective state tax matters are named in the
appropriate state tax sections of "Special Considerations and State Tax
Status."
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related municipal bond portfolios at the
Date of Deposit included in this Prospectus have been audited by Grant
Thornton, independent certified public accountants, as set forth in their
report in the Prospectus, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
A-27
<PAGE>
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
SUMMARY......................................... 2
ESSENTIAL INFORMATION........................... 3
THE TRUST FUNDS................................. 5
General....................................... 5
Series Information............................ 6
Taxable Equivalent Estimated Current Return
Tables...................................... 7
Portfolios.................................... 9
Notes to Portfolios........................... 12
UNDERWRITING.................................... 13
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS................................... 16
STATEMENTS OF CONDITION......................... 17
SPECIAL CONSIDERATIONS AND STATE TAX
STATUS........................................ 18
FEDERAL TAX STATUS.............................. 29
ESTIMATED CASHFLOWS TO UNITHOLDERS.............. 32
DESCRIPTION OF MUNICIPAL BOND RATINGS........... A-1
PORTFOLIOS...................................... A-3
General Trust Information..................... A-5
INSURANCE ON THE PORTFOLIOS OF THE INSURED TRUST
FUNDS......................................... A-9
DISTRIBUTION REINVESTMENT....................... A-13
INTEREST, ESTIMATED LONG-TERM RETURN AND
ESTIMATED CURRENT RETURN...................... A-13
PUBLIC OFFERING OF UNITS........................ A-14
Public Offering Price......................... A-14
Purchased and Daily Accrued Interest.......... A-16
Comparison of Public Offering Price and
Redemption Price............................ A-16
Public Distribution of Units.................. A-17
Profits of Sponsor and Underwriters........... A-18
MARKET FOR UNITS................................ A-18
REDEMPTION...................................... A-18
Computation of Redemption Price............... A-20
UNITHOLDERS..................................... A-20
Ownership of Units............................ A-20
Distributions to Unitholders.................. A-21
Statements to Unitholders..................... A-22
Rights of Unitholders......................... A-23
INVESTMENT SUPERVISION.......................... A-23
ADMINISTRATION OF THE TRUSTS.................... A-23
The Trustee................................... A-23
The Evaluator................................. A-24
Amendment and Termination..................... A-24
Limitations on Liability...................... A-25
EXPENSES OF THE TRUSTS.......................... A-25
THE SPONSOR..................................... A-27
LEGAL OPINIONS.................................. A-27
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........ A-27
</TABLE>
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. UNDER THE SECURITIES
ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE
IS MADE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST, THE TRUSTEE, OR THE SPONSOR. THE TRUST IS
REGISTERED AS A UNIT INVESTMENT TRUST UNDER THE INVESTMENT COMPANY ACT OF
1940. SUCH REGISTRATION DOES NOT IMPLY THAT THE TRUST OR THE UNITS HAVE
BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES
OR ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT
LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
KEMPER
DEFINED
FUNDS
TAX EXEMPT
PROSPECTUS
INSURED NATIONAL SERIES 8
INSURED NEW YORK SERIES 4
VIRGINIA SERIES 1
FEBRUARY 17, 1994
KEMPER UNIT INVESTMENT TRUSTS
<PAGE>
This Registration Statement on Form S-6 comprises the following papers and
documents.
<TABLE>
<C> <S>
The facing sheet of Form S-6.
The cross-reference sheet.
The prospectus.
The signatures.
The following exhibits.
1.1.(a) Form of Trust Indenture and Agreement for the National Series.
1.1.(b) Form of Trust Indenture and Agreement for the State Series.
1.1.1. Standard Terms and Conditions of Trust for the National and State
Series.
1.2. Certificate of Incorporation of Kemper Securities, Inc. Reference is
made to Exhibit 1.2 to the Registration Statement on Form S-6, with
respect to Kemper Government Securities Trust (Registration No. 33-
26754) as filed on February 14, 1989 and Kemper Defined Funds Series 9
(Registration No. 33-56012) as filed on November 3, 1993.
1.3. By-laws of Kemper Securities, Inc. Reference is made to Exhibit 1.3 to
the Registration Statement on Form S-6, with respect to Kemper
Government Securities Trust (Registration No.
33-26754) as filed on February 14, 1989 and Kemper Defined Funds
Series 9 (Registration No. 33-56012) as filed on November 3, 1993.
2.1. Form of Certificate of Ownership (pages two to four, inclusive, of the
Standard Terms and Conditions of Trust included as Exhibit 1.1.1.).
3.1. Opinion of counsel to the Sponsor as to legality of the securities
being registered including a consent to the use of its name under the
headings "Federal Tax Status" and "Legal Opinions" in the Prospectus
and opinion of counsel as to the Virginia and Federal income tax
status of the securities being registered and certain Virginia tax
matters.
3.2. Opinion and consent of special counsel to Insured New York Series 4
for New York tax matters.
4.1. Consent of Moody's Investors Service.
4.2. Consent of Muller Data Corporation.
4.3. Consent of Grant Thornton.
6.1. List of Directors and Officers. Reference is made to Exhibit 6.1 to
the Registration Statement on Form S-6, with respect to Kemper Tax-
Exempt Insured Income Trust, Multi-State Series 51 (Registration No.
33-48544) as filed on July 15, 1992.
7.1. Power of Attorney. Reference is made to Exhibit 7.1 to the
Registration Statement with respect to Kemper Tax-Exempt Insured
Income Trust, Series A-90 and Multi-State Series 65 (Registration No.
33-59086).
</TABLE>
S-1
<PAGE>
SIGNATURES
THE REGISTRANT, KEMPER DEFINED FUNDS SERIES 13 HEREBY IDENTIFIES SERIES A-62
AND MULTI-STATE SERIES 19 OF THE KEMPER TAX-EXEMPT INSURED INCOME TRUST AND
KEMPER DEFINED FUNDS INSURED NATIONAL SERIES 1 FOR PURPOSES OF THE
REPRESENTATIONS REQUIRED BY RULE 487 AND REPRESENTS THE FOLLOWING:
(1) THAT THE PORTFOLIO SECURITIES DEPOSITED IN THE SERIES AS TO THE
SECURITIES OF WHICH THIS REGISTRATION STATEMENT IS BEING FILED DO NOT
DIFFER MATERIALLY IN TYPE OR QUALITY FROM THOSE DEPOSITED IN SUCH PREVIOUS
SERIES;
(2) THAT, EXCEPT TO THE EXTENT NECESSARY TO IDENTIFY THE SPECIFIC
PORTFOLIO SECURITIES DEPOSITED IN, AND TO PROVIDE ESSENTIAL FINANCIAL
INFORMATION FOR, THE SERIES WITH RESPECT TO THE SECURITIES OF WHICH THIS
REGISTRATION STATEMENT IS BEING FILED, THIS REGISTRATION STATEMENT DOES NOT
CONTAIN DISCLOSURES THAT DIFFER IN ANY MATERIAL RESPECT FROM THOSE
CONTAINED IN THE REGISTRATION STATEMENTS FOR SUCH PREVIOUS SERIES AS TO
WHICH THE EFFECTIVE DATE WAS DETERMINED BY THE COMMISSION OR THE STAFF; AND
(3) THAT IT HAS COMPLIED WITH RULE 460 UNDER THE SECURITIES ACT OF 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
KEMPER DEFINED FUNDS SERIES 13 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 16TH DAY
OF FEBRUARY, 1994.
KEMPER DEFINED FUNDS SERIES 13
Registrant
By: KEMPER UNIT INVESTMENT TRUSTS
(a service of Kemper Securities,
Inc.)
Depositor
/s/ C. Perry Moore
By: _________________________________
C. Perry Moore
S-2
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON FEBRUARY 16, 1994 BY THE
FOLLOWING PERSONS, WHO CONSTITUTE A MAJORITY OF THE BOARD OF DIRECTORS OF
KEMPER SECURITIES, INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
James R. Boris
- -------------------------------------------
James R. Boris Chairman and Chief Executive Officer
Donald F. Eller
- -------------------------------------------
Donald F. Eller Senior Executive Vice President and
Director
Stanley R. Fallis
- -------------------------------------------
Stanley R. Fallis Senior Executive Vice President, Chief
Financial Officer and Director
Frank V. Geremia
- -------------------------------------------
Frank V. Geremia Senior Executive Vice President and
Director
David B. Mathis
- -------------------------------------------
David B. Mathis Director
Robert T. Jackson
- -------------------------------------------
Robert T. Jackson Director
Jay B. Walters
- -------------------------------------------
Jay B. Walters Senior Executive Vice President and
Director
Frederick C. Hosken
- -------------------------------------------
Frederick C. Hosken Senior Executive Vice President and
Director
Charles M. Kierscht
- -------------------------------------------
Charles M. Kierscht Director
Arthur J. McGivern
- -------------------------------------------
Arthur J. McGivern Director
</TABLE>
/s/ C. Perry Moore
_____________________________________
C. Perry Moore
C. PERRY MOORE SIGNS THIS DOCUMENT PURSUANT TO POWER OF ATTORNEY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION WITH (A) AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-6 FOR KEMPER TAX-EXEMPT INSURED INCOME TRUST,
SERIES A-70 AND MULTI-STATE SERIES 28 AND KEMPER TAX-EXEMPT INCOME TRUST,
MULTI-STATE SERIES 42 (REGISTRATION NO. 33-35425), (B) AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-6 FOR KEMPER TAX-EXEMPT INSURED INCOME TRUST,
SERIES A-72 AND MULTI-STATE SERIES 30 (REGISTRATION NO. 33-37178), AND (C)
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-6 FOR KEMPER TAX-EXEMPT
INSURED INCOME TRUST, MULTI-STATE SERIES 51 (REGISTRATION NO. 33-48398).
S-3
<PAGE>
Exhibit 1.1(a)
KEMPER DEFINED FUNDS SERIES 13
(Insured National Series)
TRUST AGREEMENT
This Trust Agreement dated as of February 17, 1994 between Kemper Unit
Investment Trusts, a service of Kemper Securities, Inc., as Depositor, and
Investors Fiduciary Trust Company, as Trustee, sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"Kemper Defined Funds, Series 13 and Subsequent Series (Tax-Exempt Portfolios)
Standard Terms and Conditions of Trust, Effective February 17, 1994" (herein
called the "Standard Terms and Conditions of Trust"), and such provisions as
are set forth in full and such provisions as are incorporated by reference
constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
this instrument.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing tax-exempt obligations listed in the Schedules
hereto have been deposited in trust under this Trust Agreement as indicated
in the Trust named on the attached Schedules.
(b) For the purposes of the definition of the terms "Depositor" and
"Evaluator" in Article I, it is hereby specified that such term shall mean
Kemper Unit Investment Trusts, a service of Kemper Securities, Inc. or its
successors or any successor Depositor appointed.
(c) For the purposes of the definition of the term "Unit" in Article I,
it is hereby specified that the fractional undivided interest in and
ownership of the Trust is the amount set forth in the section captioned
"Essential Information" in
<PAGE>
the final Prospectus of the Trust (the "Prospectus") contained in Amendment
No. 1 to the Trust's Registration Statement (Registration No. 33-52165) as
filed with the Securities and Exchange Commission on February 17, 1994.
(d) For purposes of the definition of the term "Fund" in Article I, it is
hereby specified that such term shall mean the term "Trust" as defined on
page 2 of the Prospectus.
(e) For purposes of the definition of the term "Trust Fund" in Article I,
it is hereby specified that such term shall include the definition of the
term "Trust Fund" as set forth on page 2 of the Prospectus and specifically
shall include Insured National Series 8.
(f) The term "Record Date" shall mean the "Record Dates" set forth under
"Unitholders - Distributions to Unitholders" of the Prospectus.
(g) The terms "Interest Distribution Date" and "Principal Distribution
Date" shall mean the "Interest Distribution Dates" and "Principal
Distribution Dates" set forth under "Unitholders - Distributions to
Unitholders" in the Prospectus.
(h) The term "Initial Date of Deposit" shall mean February 17, 1994.
(i) The term "First Settlement Date" shall mean the "First Settlement
Date" set forth in the section captioned "Essential Information" in the
Prospectus.
(j) The number of Units of the Trust referred to in Section 2.01 is as
set forth in the section captioned "Essential Information" in the
Prospectus.
(k) As contemplated by the last paragraph of Section 3.04, an initial
distribution for the Trust will be made on the Distribution Date and in the
amount set forth in the section captioned "Unitholders - Distributions to
Unitholders" in the Prospectus to all holders of record on the Record Date
set forth thereunder, regardless of the payment option selected.
Thereafter, the amounts distributed shall be calculated in the manner set
forth in Section 3.04.
(l) For the purposes of Section 4.03, the Evaluator shall receive for
evaluation of the Bonds in the Trust a fee, payable monthly, calculated on
the basis of an annual rate of $.30 per $1,000 principal amount of Bonds,
based upon the largest aggregate principal amount of Bonds in the Trust at
any time during such monthly period.
(m) For the purposes of Section 3.13, the Evaluator shall receive for
portfolio surveillance services a fee calculated on the basis of an annual
rate of $.20 per $1,000 principal amount of Bonds, based upon the largest
aggregate principal amount of Bonds in the Trust at any time during such
monthly period.
(n) For the purposes of Section 8.01(g), the liquidation amount is hereby
specified as the amount set forth under "Essential Information - Minimum
-2-
<PAGE>
Value of Trust under which Trust Agreement may be Terminated" in the
Prospectus.
(o) For the purposes of Section 8.05, with the exception of the first
year, the compensation for the Trustee is hereby specified as the amount
set forth under "Essential Information". During the first year, the
Trustee has agreed to lower its fee and to the extent necessary assume and
pay out of its own funds expenses of the Trust by the amount set forth
under "Essential Information" in the Prospectus.
(p) Any monies held to purchase "when-issued" bonds will be held in non-
interest bearing accounts.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed.
KEMPER UNIT INVESTMENT TRUSTS
a service of Kemper Securities, Inc.
Depositor
By C. Perry Moore
----------------------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST COMPANY
By Ron Puett
-----------------------------------------
Operations Officer
<PAGE>
SCHEDULE A
Bonds Initially Deposited
Kemper Defined Funds Series 13
(Insured National Series)
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
<PAGE>
Exhibit 1.1(b)
KEMPER DEFINED FUNDS SERIES 13
(Insured State Series)
TRUST AGREEMENT
This Trust Agreement dated as of February 17, 1994 between Kemper Unit
Investment Trusts, a service of Kemper Securities, Inc., as Depositor, and
Investors Fiduciary Trust Company, as Trustee, sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"Kemper Defined Funds Series 13 and Subsequent Series (Tax-Exempt Portfolios),
Standard Terms and Conditions of Trust, Effective February 17, 1994" (herein
called the "Standard Terms and Conditions of Trust"), and such provisions as are
set forth in full and such provisions as are incorporated by reference
constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in this instrument.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing tax-exempt obligations listed in the
Schedules hereto have been deposited in trust under this Trust
Agreement as indicated in the Trust named on the attached Schedules.
(b) For the purposes of the definition of the terms "Depositor"
and "Evaluator" in Article I, it is hereby specified that such term
shall mean Kemper Unit Investment Trusts, a service of Kemper
Securities, Inc. or its successors or any successor Depositor
appointed.
<PAGE>
(c) For the purposes of the definition of the term "Unit" in
Article I, it is hereby specified that the fractional undivided
interest in and ownership of the Trust is the amount set forth in the
section captioned "Essential Information" in the final Prospectus of
the Trust (the "Prospectus") contained in Amendment No. 1 to the
Trust's Registration Statement (Registration No. 33-52165) as filed
with the Securities and Exchange Commission on February 17, 1994.
(d) For purposes of the definition of the term "Fund" in Article
I, it is hereby specified that such term shall mean the term "Trust"
as defined on page 2 of the Prospectus.
(e) For purposes of the definition of the term "Trust Fund" in
Article I, it is hereby specified that such term shall include the
definition of the term "Trust Fund" as set forth on page 2 of the
Prospectus and specifically includes Insured New York Series 4 and
Virginia Series 1 (the "Insured State Trusts").
(f) The term "Record Date" shall mean the "Record Dates" set
forth under "Unitholders - Distributions to Unitholders" of the
Prospectus.
(g) The terms "Interest Distribution Date" and "Principal
Distribution Date" shall mean the "Interest Distribution Dates" and
"Principal Distribution Dates" set forth under "Unitholders -
Distributions to Unitholders" in the Prospectus.
(h) The term "Initial Date of Deposit" shall mean February 17,
1994.
(i) The term "First Settlement Date" shall mean the "First
Settlement Date" set forth in the section captioned "Essential
Information" in the Prospectus.
(j) The number of Units of the Trust referred to in Section 2.01
is as set forth in the section captioned "Essential Information" in
the Prospectus.
(k) As contemplated by the last paragraph of Section 3.04, an
initial distribution for the Trust will be made on the Distribution
Date and in the amount set forth in the section captioned
"Unitholders - Distributions to Unitholders" in the Prospectus to all
holders of record on the Record Date set forth thereunder, regardless
of the payment option selected. Thereafter, the amounts distributed
shall be calculated in the manner set forth in Section 3.04.
(l) For the purposes of Section 4.03, the Evaluator shall receive
for evaluation of the Bonds in the Trust a fee, payable monthly,
calculated on the basis of an annual rate of $.30 per $1,000 principal
amount of Bonds, based upon the largest aggregate principal amount of
Bonds in the Trust at any time during such monthly period.
(m) For the purposes of Section 3.13, the Evaluator shall receive
for portfolio surveillance services a fee, payable monthly,
calculated on the basis of an annual rate of $.20 per $1,000 principal
amount of Bonds, based upon the
-2-
<PAGE>
largest aggregate principal amount of Bonds in the Trust at any time
during such monthly period.
(n) For the purposes of Section 8.01(g), the liquidation amount
is hereby specified as the amount set forth under "Essential
Information - Minimum Value of Trust under which Trust Agreement may
be Terminated" in the Prospectus.
(o) For the purposes of Section 8.05, with the exception of the
first year, the compensation for the Trustee is hereby specified as
the amount set forth under "Essential Information". During the first
year, the Trustee has agreed to lower its fee and to the extent
necessary assume and pay out of its own funds expenses of the Trust by
the amount set forth under "Essential Information" in the Prospectus.
(p) Any monies held to purchase "when-issued" bonds will be held
in non-interest bearing accounts.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed.
KEMPER UNIT INVESTMENT TRUSTS
a service of Kemper Securities, Inc.
Depositor
By C. Perry Moore
---------------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST COMPANY
By Ron Puett
---------------------------------
Operations Officer
<PAGE>
SCHEDULE A
Bonds Initially Deposited
Kemper Defined Funds Series 13
(Insured State Series)
(Note: Incorporated herein and made a part hereof is the "Portfolio"
as set forth in the Prospectus.)
<PAGE>
EXHIBIT 1.1.1
KEMPER DEFINED FUNDS
SERIES 13 AND SUBSEQUENT SERIES
(TAX-EXEMPT PORTFOLIOS)
STANDARD TERMS AND CONDITIONS OF TRUST
DATED: FEBRUARY 17, 1994
BETWEEN
KEMPER SECURITIES, INC.
Depositor
and
INVESTORS FIDUCIARY TRUST COMPANY
Trustee
<PAGE>
KEMPER DEFINED FUNDS
SERIES 13 AND SUBSEQUENT SERIES
(TAX-EXEMPT PORTFOLIOS)
STANDARD TERMS AND CONDITIONS OF TRUST
FOR SERIES FOR WHICH INVESTORS FIDUCIARY TRUST COMPANY
MAY ACT AS TRUSTEE
EFFECTIVE
FEBRUARY 17, 1994
INDEX
<TABLE>
<CAPTION>
<S> <C>
Article I Definitions.............................................. 2
Agreement............................................................... 2
Bonds................................................................... 2
Business Day............................................................ 2
Certificate............................................................. 2
Contract Obligations.................................................... 5
Depositor............................................................... 5
Evaluation Time......................................................... 5
Evaluator............................................................... 5
Fund.................................................................... 5
Initial Date of Deposit................................................. 5
Insurance............................................................... 5
Insurer................................................................. 6
Interest Account........................................................ 6
Interest Distribution................................................... 6
Interest Distribution Date.............................................. 6
Principal Account....................................................... 6
Principal Distribution Date............................................. 6
Program Agent........................................................... 6
Record Date............................................................. 6
Redemption Date......................................................... 6
Redemption Price........................................................ 6
Reserve Account......................................................... 7
Supplement Trust Agreement.............................................. 7
Trust Agreement......................................................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trust Fund or Trust..................................................... 7
Trust Fund Evaluation................................................... 7
Trustee................................................................. 7
Unit.................................................................... 7
Unitholder.............................................................. 8
Unit Value.............................................................. 8
Article II Deposit of Bonds; Acceptance of Trust; Issuance of
Units; Form of Certificates; Portfolio Insurance......... 8
Section 2.01. Deposit of Bonds...................................... 8
Section 2.02. Acceptance of Trust................................... 9
Section 2.03. Issuance of Units..................................... 9
Section 2.04. Form of Certificates.................................. 10
Section 2.05. Portfolio Insurance................................... 10
Article III Administration of Fund................................... 12
Section 3.01. Certain Moneys to be Credited to Interest Account..... 12
Section 3.02. Certain Moneys to be Credited to Principal Account.... 12
Section 3.03. Establishment of Reserve Account...................... 12
Section 3.04. Certain Deductions and Distributions.................. 13
Section 3.05. Statements and Reports................................ 15
Section 3.06. Extraordinary Sale of Bonds........................... 17
Section 3.07. Refunding Obligations................................. 18
Section 3.08. Counsel............................................... 18
Section 3.09. Action by Trustee Regarding Bonds..................... 18
Section 3.10. Trustee Not Required to Adjust Accounts............... 19
Section 3.11. Notice of Change in Principal Account................. 19
Section 3.12. Limited Replacement of Special Bonds.................. 19
Section 3.13. Compensation of Depositor for Supervisory Services.... 21
Article IV Evaluation of Bonds...................................... 22
Section 4.01. Evaluation of Bonds................................... 22
Section 4.02. Certain Information to be made Available.............. 22
Section 4.03. Compensation of the Evaluator......................... 23
Section 4.04. Liability of the Evaluator............................ 23
Section 4.05. Resignation, Removal and Other Matters Relating to the
Evaluator............................................. 23
Article V Trust Fund Evaluation.................................... 25
Section 5.01. Trust Fund
Evaluation............................................ 25
Section 5.02. Redemption of Units................................... 25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Article VI Issuance; Transfer; Interchange.......................... 27
Section 6.01. Issuance of Certificates.............................. 27
Section 6.02. Transfer of Units..................................... 27
Section 6.03. Replacement of Certificates........................... 28
Section 6.04. Form of Certificate................................... 29
Article VII Depositor................................................ 29
Section 7.01. Certain Matters Regarding Succession.................. 29
Section 7.02. Liability of Depositor and Indemnification............ 29
Article VIII Trustee.................................................. 30
Section 8.01. General Matters Relating to the Trustee............... 30
Section 8.02. Books, Records and Reports............................ 32
Section 8.03. Reports to Securities and Exchange Commission and
Others................................................ 33
Section 8.04. Agreement and List of Bonds on File................... 33
Section 8.05. Compensation of Trustee............................... 33
Section 8.06. Resignation, Discharge or Removal of the Trustee;
Successors............................................ 34
Section 8.07. Qualification of Trustee.............................. 35
Section 8.08. Collateral............................................ 35
Article IX Termination.............................................. 35
Section 9.01. Procedure Upon Termination............................ 35
Section 9.02. Notice to Unitholders................................. 37
Section 9.03. Moneys to be Held in Trust Without Interest........... 37
Section 9.04. Dissolution of Depositor Not to Terminate............. 37
Article X Miscellaneous Provisions................................. 37
Section 10.01. Amendment and Waiver.................................. 37
Section 10.02. Initial Costs......................................... 38
Section 10.03. Registration (Initial and Current) of Units and Fund.. 38
Section 10.04. Certain Matters Relating to Unitholders............... 38
Section 10.05. Missouri Law to Govern................................ 39
Section 10.06. Notices............................................... 39
Section 10.07. Severability.......................................... 40
Section 10.08. Separate and Distinct Series.......................... 40
Execution ................................................................. 42
Acknowledgments ........................................................... 43
</TABLE>
<PAGE>
KEMPER DEFINED FUNDS
SERIES 13 AND SUBSEQUENT SERIES
(TAX-EXEMPT PORTFOLIOS)
STANDARD TERMS AND CONDITIONS OF TRUST
for Series for which Investors Fiduciary Trust Company
may act as Trustee
Effective February 17, 1994
These Standard Terms and Conditions of Trust, Effective February 17, 1994,
are executed between Kemper Securities, Inc., as Depositor, and Investors
Fiduciary Trust Company, as Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust shall be applicable to Series 13
and each Series subsequent to the date hereof of Kemper Defined Funds
(Tax-Exempt Portfolios) for which Investors Fiduciary Trust Company acts as
Trustee as provided in this paragraph. For each such series of Kemper Defined
Funds (Tax-Exempt Portfolios) to which these Standard Terms and Conditions of
Trust are to be applicable, the Depositor and the Trustee shall execute a Trust
Agreement incorporating by reference these Standard Terms and Conditions of
Trust and designating any exclusion from or exception to such incorporation by
reference for the purposes of that series or variation of the terms hereof for
the purposes of that series and specifying for that series (i) the name of each
Trust Fund, (ii) the Bonds deposited in trust for each Trust Fund and the number
of Units delivered for each Trust Fund by the Trustee in exchange for the Bonds
pursuant to Section 2.01, (iii) the fractional undivided interest represented by
each Unit of each Trust Fund, (iv) the Interest Distribution Dates, (v) the
Principal Distribution Dates, (vi) the Record Dates, (vii) the Initial Date of
Deposit for each Trust Fund, (viii) the First Settlement Date, (ix) the
Evaluator's fee, (x) the liquidation amount for purposes of Section 8.01(g),
(xi) the Trustee's fee and (xii) the supervisory fee.
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
Agreement
These Standard Terms and Conditions of Trust and all amendments and
supplements hereto and thereto.
Bonds
The interest-bearing tax-exempt obligations, including Contract Obligations
listed in all Schedules to the Trust Agreement or deposited in the Trust Fund
pursuant to Section 2.01(b) and any obligations received in exchange or
substitution for such obligations pursuant to Sections 3.07 or 3.12 hereof, as
may from time to time continue to be held as a part of any Trust Fund.
Business Day
Any day other than a Saturday, Sunday or a day on which the New York Stock
Exchange is closed.
Certificate
Any one of the Certificates manually executed by the Trustee in substantially
the following form with the blanks appropriately filled in:
-2-
<PAGE>
Face of Certificate
Number Kemper Defined Funds Series Units
Certificate of Beneficial Ownership
This Certifies That _____________________________ is the registered owner of
_______ Unit(s) of fractional undivided interest in Kemper Defined Funds of the
above Series (herein referred to as the "Trust") created under the laws of the
State of Missouri pursuant to the Agreement and the related Trust Agreement, a
copy of which is available at the office of the Trustee. This Certificate is
issued under and is subject to the terms, provisions and conditions of the
aforesaid Agreement and the related Trust Agreement to which the holder of this
Certificate by virtue of the acceptance hereof assents and is bound. This
Certificate is transferable and interchangeable by the registered owner in
person or by his duly authorized attorney at the office of the Trustee upon
surrender of this Certificate properly endorsed or accompanied by a written
instrument of transfer and any other documents that the Trustee may require for
transfer, in form satisfactory to the Trustee, and payment of the fees and
expenses provided in the Trust Agreement.
Witness the facsimile signature of the Depositor and the manual signature of
an authorized signatory of the Trustee.
Dated:
Kemper Securities, Inc., Investors Fiduciary Trust Company,
Depositor Trustee, 127 West 10th Street,
Kansas City, Missouri 64105
By__________________________ By__________________________________
Authorized Signature Authorized Signature
-3-
<PAGE>
Reverse of Certificate
Form of Assignment
For Value Received _______________________________________ hereby sells,
assigns and transfers unto
____________________
____________________
Please Insert Social Security or Other
Identifying Number of Assignee
__________________________
__________________________
the within Certificate and does hereby irrevocably constitute and appoint
___________________________________________________, attorney, to transfer the
within Certificate on the books of the Trustee, with full power of substitution
in the premises.
Dated: __________________________
Notice: The signature to this assignment must correspond with the
name as written upon the face of the Certificate in every particular,
without alteration or enlargement or any change whatever, and 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.
Signature Guaranteed
By ___________________________________
-4-
<PAGE>
Contract Obligations
The Bonds listed in the Schedules of the Trust Agreement which are to be
acquired by any Trust Fund pursuant to contract, contracts for the purchase of
such bonds which have been assigned to the Trustee along with the amount
required for their purchase which have been delivered to the Trustee or Bonds
which the Depositor has contracted to purchase for any Trust Fund pursuant to
Section 3.12 hereof.
Depositor
Kemper Securities, Inc. or its successors or any successor Depositor
appointed as herein provided.
Evaluation Time
Close of business of the Depositor, unless another meaning is assigned to it
in Part II of the Trust Agreement.
Evaluator
Kemper Securities, Inc. or its successors or any successor Evaluator
appointed as herein provided.
Fund
All Trust Funds outstanding under this Agreement.
Initial Date of Deposit
The meaning assigned to it in Part II of the Trust Agreement.
Insurance
"Insurance" shall mean the contract or policy of insurance obtained by the
Fund guaranteeing the payment when due of the principal of and interest on the
Bonds held pursuant and subject to this Agreement, including those Bonds held
pursuant and subject to this Agreement which are also insured by individual
policies of insurance which have been obtained by the issuers of such Bonds,
together with the proceeds, if any, thereof payable to or received by the
Trustee for the benefit of the Fund and the Unitholders thereof except that
Insurance shall not include those Bonds held pursuant and subject to this
Agreement which are insured by individual policies of insurance which have been
obtained by the issuers of such Bonds and which are not also insured by the
Insurance (the "Pre-Insured Bonds").
-5-
<PAGE>
Insurer
"Insurer" shall mean any insurance company, its successors and assigns, which
is the issuer of the contract or policy of insurance obtained by the Fund
protecting any Trust Fund and the Unitholders thereof against nonpayment when
due of the principal of and interest on any Bond (except for Pre-Insured Bonds)
held by the Trustee as part of the Fund.
Interest Account
The account created pursuant to Section 3.01.
Interest Distribution
The meaning assigned to it in Section 3.04.
Interest Distribution Date
The meaning assigned to it in Part II of the Trust Agreement.
Principal Account
The account created pursuant to Section 3.02.
Principal Distribution Date
The meaning assigned to it in Part II of the Trust Agreement.
Program Agent
Program Agent shall mean Investors Fiduciary Trust Company or its successors,
unless a different Program Agent shall be designated by the Trust Agreement for
a particular Trust Fund.
Record Date
The meaning assigned to it in Part II of the Trust Agreement.
Redemption Date
The meaning assigned to it in Section 5.02.
Redemption Price
The meaning assigned to it in Section 5.02.
-6-
<PAGE>
Reserve Account
The account created pursuant to Section 3.03.
Supplement Trust Agreement
Shall mean an amendment or supplement to the Trust Agreement executed
pursuant to Section 2.01(b) for the purpose of depositing additional Bonds in
the Trust Fund and issuing additional Units.
Trust Agreement
The Trust Agreement for the particular series of Kemper Defined Funds (Tax-
Exempt Portfolios) into which these Standard Terms and Conditions of Trust are
incorporated.
Trust Fund or Trust
Any one of the separate trusts created by this Agreement and a Trust
Agreement which shall consist of the Bonds and all undistributed interest or
other amounts received or accrued thereon and any undistributed cash held in the
Principal and Interest Accounts or otherwise realized from the sale,
liquidation, redemption or maturity thereof, exclusive of any amounts which may
be on deposit in the Reserve Account.
Trust Fund Evaluation
The meaning assigned to it in Section 5.01.
Trustee
Investors Fiduciary Trust Company or its successors or any successor Trustee
appointed as herein provided.
Unit
The fractional undivided interest in and ownership of an individual Trust
Fund equal initially to the fraction specified in Part II of the Trust
Agreement, the denominator of which fraction shall be (1) increased by the
number of any additional Units issued pursuant to Section 2.03 hereof and (2)
decreased by the number of any such Units redeemed as provided in Section 5.02.
Whenever reference is made herein to the "interest" of a Unitholder in the Trust
Fund or in the Interest or Principal Accounts, it shall mean such fractional
undivided interest represented by the number of Units, whether or not evidenced
by a Certificate or Certificates, held of record by such Unitholder in such
Trust Fund.
-7-
<PAGE>
Unitholder
The holder of any Unit as recorded on the books of the Trustee, his legal
representatives and heirs and the successors of any corporation, partnership or
other legal entity which is a holder of any Unit.
Unit Value
The value of the fractional undivided interest in and ownership of any
individual Trust Fund represented by each Unit as determined by a Trust Fund
Evaluation.
Words importing a singular number shall include the plural number in each
case and vice versa, except as the context herein may clearly indicate otherwise
and words importing persons shall include corporations, partnerships and
associations, as well as natural persons. The words "herein", "hereby",
"herewith", "heretofore", and other singular words or phrases or references and
associations shall refer to the Agreement in its entirety.
ARTICLE II
DEPOSIT OF BONDS; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES; PORTFOLIO INSURANCE
Section 2.01. Deposit of Bonds. (a) The Depositor, concurrently with
the execution and delivery hereof, hereby grants and conveys all of its right,
title and interest in and to and hereby conveys to and deposits with the Trustee
in an irrevocable Trust the Bonds (together with accrued and unpaid interest
thereon) and confirmations of contracts to purchase Bonds, including Contract
Obligations, listed in the Schedules to the Trust Agreement duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form, to be held, managed and applied by the Trustee as herein provided
for the benefit of each Unitholder to the extent of such Unitholder's interest
in the Trust Fund. The Depositor hereby also delivers to the Trustee a
certified check or checks, cash or cash equivalents or an irrevocable letter or
letters of credit issued by a commercial bank or banks in an amount necessary to
consummate the purchase of any Bonds or Contract Obligations. In the event any
Bonds have not been delivered to the Trustee on or before the close of business
of the Trustee on the day before the date of expiration of any letter or letters
of credit, the Trustee is hereby directed to draw on such letter or letters of
credit unless the Depositor has either extended or replaced such letter or
letters on or before such close of business.
(b) From time to time following the Initial Date of Deposit for a Trust, the
Depositor is hereby authorized, in its discretion, to assign, convey to and
deposit with the Trustee additional Bonds for such Trust, duly endorsed in blank
or accompanied by all necessary instruments of assignment and transfer in proper
form, to be held, managed and applied by the Trustee as herein provided. Such
deposit of additional Bonds shall be made, in each case, pursuant to an executed
Supplemental Trust Agreement. Any additional Bonds
-8-
<PAGE>
to be deposited must (1) be issued by the same issuer; (2) have the same
original issue date; (3) have the same coupon or interest rate; (4) have the
same maturity date; (5) have the same redemption features; and (6) have other
legal characteristics as the Bonds originally deposited in the Trust on the
Initial Date of Deposit. The Depositor in each case shall ensure that each
deposit of additional Bonds pursuant to this Section shall have the same ratio
of Bonds (based on principal amount) as existed on the Initial Date of Deposit
for each Trust Fund. Any brokerage fees related to the purchase of Bonds
deposited in the Trust Fund after the Initial Date of Deposit shall be an
expense of such Trust Fund.
(c) The Trustee may deposit a certified check or checks, cash or cash
equivalents, or cash drawn on the irrevocable letter or letters of credit
deposited by the Depositor, to purchase Bonds or Contract Obligations in a non-
interest bearing account for the Trust Fund.
(d) In the event that the purchase of Bonds or Contract Obligations pursuant
to any contract shall not be consummated in accordance with said contract, and
the Depositor does not, on or before the third Business Day prior to the next
following Distribution Date, direct the Trustee to utilize monies deposited for
the purchase of Replacement Bonds or Replacement Contract Obligations, the
Trustee shall credit to the Principal Account referred to in Section 3.02 the
monies, or, if applicable, the monies drawn on an irrevocable letter of credit,
deposited by the Depositor for the purpose of such purchase. Such funds shall
be distributed pursuant to Section 3.04 to Unitholders of record as of the
Record Date next following the failure of consummation of such purchase. The
Depositor shall cause to be refunded to each Unitholder his pro rata portion of
the sales charge levied on the sale of Units to such Unitholder attributable to
such Bond or Contract Obligation. The Depositor shall also pay to the Trustee,
for distribution to the Unitholders, interest on such Bond or Contract
Obligation, computed at the coupon rate, to the date such Bond or Contract
Obligations is removed from the Trust Fund.
(e) The Trustee is hereby irrevocably authorized to effect registration or
transfer of the Bonds in fully registered form to the name of the Trustee or to
the name of its nominee.
Section 2.02. Acceptance of Trust. The Trustee hereby accepts the trusts
herein created, and the Trustee declares that it holds and will hold the Trust
Fund as Trustee, in trust upon the trusts herein set forth, for the use and
benefit of the present and future Unitholders and subject to the terms and
conditions of the Trust Agreement and this Agreement.
Section 2.03. Issuance of Units. (a) The Trustee hereby acknowledges receipt
of the deposit of the Bonds listed in the Schedules to the Trust Agreement and
referred to in Section 2.01 hereof and, simultaneously with the receipt of said
deposit, has recorded on its books the ownership, by the Depositor or such other
person or persons as may be indicated by the Depositor, of the aggregate number
of Units specified in the Trust Agreement and has to or on the order of the
Depositor in exchange therefor delivered documentation evidencing the ownership
of the number of Units specified substantially in the form above recited
-9-
<PAGE>
representing the ownership of those Units. The Trustee hereby agrees that on
the date of any Supplemental Trust Agreement, it shall acknowledge that the
additional Bonds identified therein have been deposited with it by recording on
its books the ownership, by the Depositor or such other person or persons as may
be indicated by the Depositor, of the aggregate number of Units to be issued in
respect of such additional Bonds so deposited, and shall, if so requested,
execute documentation substantially in the form above recited representing the
ownership of an aggregate number of those Units.
(b) Under the terms and conditions of the Trust Agreement and this Agreement
and at such times as are permitted by the Trustee, Units may also be held in
certificated form. Unitholders may elect to have their Units held in
certificated form by making a written request to the Trustee requesting such
Certificates; provided, that the Trustee is entitled to specify the minimum
denomination of any Certificate issued. The Trustee shall, at the request of
the holder of any Units held in uncertificated form, issue a new Certificate to
evidence such Units and at such time make an appropriate notation in the
registration books of the Trustee. The rights set forth in this Agreement of
any holder of Units held in certificated form shall be the same as those of any
other Unitholder. Certificates may be transferred as provided in Article VI.
Section 2.04. Form of Certificates. Each Certificate referred to in Section
2.03 is, and each Certificate hereafter issued shall be, in substantially the
form hereinabove recited, numbered serially for identification, in fully
registered form, transferable on the books of the Trustee as herein provided,
executed manually by an authorized signature of the Trustee and by a facsimile
signature of an Authorized Officer of the Depositor and dated the date of
execution and delivery by the Trustee.
Section 2.05. Portfolio Insurance. Concurrently with the delivery to the
Trustee of the Bonds listed in the Schedules to the Trust, the Insurer has
delivered to and deposited with the Trustee the Insurance to protect the Fund
and the Unitholders thereof against nonpayment of principal and interest, when
due, on any Bond or Bonds (except for Pre-Insured Bonds) held by the Trustee in
the portfolio of the Fund.
The Trustee shall take all action deemed necessary or advisable in connection
with the Insurance to continue the Insurance in full force and effect and shall
pay all premiums due thereon, including the initial premium, all in such manner
as in its sole discretion shall appear to result in the most protection and
least expense to such trust.
The Insurance may not be cancelled by the Insurer. However, as of each
Record Date the Trustee shall make the deduction and payment of premiums
prescribed in Section 3.04(a)(6) of this Agreement in order to continue in force
the coverage thus provided. The Insurer's right to the payment of premiums from
funds held by the Trustee in accordance with the terms of the policy is absolute
(except when payment is withheld in good faith by the Trustee in the event of
dispute over the amount thereof), but no failure on the part of the Trustee to
make such payment of premium or installment thereof to the Insurer shall result
in a cancellation of the Insurance or otherwise affect the right of any
Unitholder under the policy to have any amounts of principal and interest paid
by the
-10-
<PAGE>
Insurer to the Trustee to be held as part of the Fund when the same are
not paid when due by the issuer of a Bond or Bonds held by the Trustee as part
of the Fund.
With each payment of premium or installment thereof, the Trustee shall notify
the Insurer of all Bonds (except for Pre-Insured Bonds) which during the
expiring premium period were redeemed from or sold by the Fund.
At all times during the existence of the Fund the Insurance policy shall
provide for payment by the Insurer or its agent to the Trustee of any amounts of
principal and interest due, but not paid, by the issuer of a Bond (except for
Pre-Insured Bonds). The Trustee shall promptly notify the Insurer or its agent
of any nonpayment or threatened nonpayment of principal or interest and the
Insurer or its agent shall within 30 days after receipt of such notice make
payment to the Trustee of all amounts of principal and interest at this time
due, but not paid.
Payments of principal and interest assumed by the Insurer shall be made as
required by the related Bond or Bonds, except in the event of a sale of any such
Bond or Bonds by the Trustee under Section 3.06, 3.07 or 5.02, or a termination
of this Indenture and the trusts created hereby under Section 8.01, prior to the
final maturity of such Bond or Bonds, in each of which events, upon notice from
the Trustee, the Insurer or its agent shall promptly make payment of the accrued
interest on such Bond or Bonds to the Trustee and shall be relieved of further
obligation to the Trustee hereon.
Upon the making of any payment referred to in the preceding paragraphs, the
Insurer shall succeed to the rights of the Trustee under the Bond or Bonds
involved to the extent of the payments made at that time, or any time subsequent
thereto, and shall continue to make all payments required by the terms of such
Bond or Bonds to the extent that funds are not provided therfor by the issuer
thereof. Upon the payment of any amounts by the Insurer or its agent,
occasioned by the nonpayment thereof by the issuer, the Trustee shall execute
and deliver to the Insurer or its agent any receipt, instrument or document
required to evidence the right of the Insurer in the Bond or Bonds involved to
payment of principal and/or interest thereon to the extent of the payments made
by the Insurer or its agent to the Trustee.
With respect to Pre-Insured Bonds in the Fund, the Trustee shall promptly
notify the insurer of the Pre-Insured Bonds of any nonpayment of principal or
interest on such Pre-Insured Bonds and if such insurer should fail to make
payment to the Trustee within 30 days after receipt of such notice, the Trustee
shall take all action against such insurer and/or the issuer deemed necessary to
collect all amounts of principal and interest at this time due, but not
collected.
The Trustee shall also take such action required under Section 5.02 of this
Agreement with respect to Permanent Insurance, as defined in Section 5.02.
-11-
<PAGE>
ARTICLE III
ADMINISTRATION OF FUND
Section 3.01. Certain Moneys to be Credited to Interest Account. The Trustee
shall collect the interest on the Bonds for each Trust Fund as it becomes
payable (including all interest accrued but unpaid prior to the date of deposit
or acquisition of the Bonds hereunder and including that part of the proceeds of
the sale, liquidation, redemption or maturity of any Bonds which represents
accrued interest thereon), and credit such interest to a separate account for
each Trust Fund to be known as the "Interest Account". The Trustee is
authorized to advance out of its own funds and then cause to be deposited in and
credited to the Interest Account of the Trust Fund any amount necessary to
permit the payment of any Interest Distribution out of the Interest Account
required to be made with respect to such Trust Fund by the Trustee on each
Distribution Date; provided, however, that the Trustee shall be entitled to be
reimbursed without interest out of such Trust Fund for any and all amounts
advanced by it pursuant to this Section 3.0l as interest on the Bonds is
collected.
Section 3.02. Certain Moneys to be Credited to Principal Account. (a) With
respect to each Trust Fund all moneys (except moneys held by the Trustee
pursuant to subsection (b) hereof) other than amounts credited to the Interest
Account received by the Trustee in respect of the Bonds under this Agreement
shall be credited to a separate account for each Trust Fund to be known as the
"Principal Account". (b) Moneys and/or irrevocable letters of credit required
to purchase Contract Obligations or deposited to secure such purchases are
hereby declared to be held specially by the Trustee for such purchases and shall
not be deemed to be part of the Principal Account until (i) the Depositor fails
to timely purchase a Contract Obligation and has not given the Failed Contract
Notice (as defined in Section 3.12) at which time the moneys and/or letters of
credit attributable to the Contract Obligation not purchased by the Depositor
shall be credited to the Principal Account; or (ii) the Depositor has given the
Trustee the Failed Contract Notice at which time the moneys and/or letters of
credit attributable to failed contracts referred to in such Notice shall be
credited to the Principal Account; provided, however, that if the Depositor also
notifies the Trustee in the Failed Contract Notice (or by separate notice
delivered concurrently with or prior to the Failed Contract Notice) that it has
purchased or entered into a contract to purchase a New Bond (as defined in
Section 3.12), the Trustee shall not credit such moneys and/or letters of credit
to the Principal Account unless the New Bond shall also have failed or is not
delivered by the Depositor within two business days after the settlement date of
such New Bond, in which event the Trustee shall forthwith credit such moneys
and/or letters of credit to the Principal Account. The Trustee shall in any
case forthwith credit to the Principal Account, and/or cause the Depositor to
deposit in the Principal Account, the difference, if any, between the purchase
price of the failed Contract Obligation and the purchase price of the New Bond,
together with any sales charge and accrued interest applicable to such
difference and distribute such moneys to Unitholders pursuant to Section 3.04.
Section 3.03. Establishment of Reserve Account. From time to time the
Trustee may withdraw from the Interest or Principal Accounts of each Trust Fund
such amounts as it, in its sole discretion, shall deem requisite to establish a
reserve for any applicable taxes or
-12-
<PAGE>
other governmental charges that may be payable out of such Trust Fund or for
indemnification or extraordinary expenses of the Depositor or Trustee pursuant
to Section 7.02, 8.01 or 8.05. Such amounts so withdrawn shall be credited to a
separate account for such Trust Fund which shall be known as the "Reserve
Account." The Trustee shall not be required to distribute to the Unitholders
any of the amounts in the Reserve Account; provided, however, that if it, in its
sole discretion, determines that such amounts are no longer necessary, then it
shall promptly deposit such amounts in the account from which withdrawn, or if
such Trust Fund has been terminated or shall be in the process of termination,
the Trustee, upon such determination, shall distribute to each Unitholder of
such Trust Fund such holder's interest in the Reserve Account in accordance with
Section 9.01.
Section 3.04. Certain Deductions and Distributions. (a) On or before
each Interest Distribution Date as of the close of business on the preceding
Record Date the Trustee shall separately with respect to each Trust Fund to
which such Interest Distribution Date relates:
(1) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to itself
individually (i) the amounts that it is at the time entitled to receive
pursuant to Section 8.05 on account of its services theretofore performed
and expenses theretofore incurred and (ii) the amounts that it is at the
time entitled to receive under the terms of Section 3.01 in reimbursement
of amounts advanced by it pursuant to that Section;
(2) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account the amounts that the
Evaluator is at the time entitled to receive pursuant to Section 4.03 on
account of its services theretofore performed and expenses theretofore
incurred;
(3) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account an amount equal to
unpaid fees and expenses, if any, of bond counsel pursuant to Section 3.08
as certified by the Depositor;
(4) deduct from the Interest Account, or, to the extent funds are not
available in such Account, from the Principal Account and pay to the
Depositor the amounts that the Depositor is at the time entitled to receive
pursuant to Section 3.13 on account of its services theretofore performed
and expenses theretofore incurred;
(5) deduct from the Interest Account, or, to the extent funds are not
available in such Account, from the Principal Account, and reimburse itself
for any other fees and expenses arising from time to time out of the Trust
operations that the Trustee has paid; and
(6) deduct from the Interest Account, or, to the extent funds are not
available in such Account, from the Principal Account and pay to the
Insurer the amount of any premium to which it is at the time entitled to
receive, pursuant to Section 2.05.
-13-
<PAGE>
(b) The Trustee shall for each Trust Fund as of the close of business on the
applicable Record Date compute the amount of the Interest Distribution per Unit
for the next Interest Distribution Date (each such amount being herein called
the "Interest Distribution") (i) by adding to the amount actually received with
respect to interest on the Bonds in the Trust Fund during the period from the
Record Date preceding such Record Date to and including such Record Date the
estimated interest income on the Bonds in the Trust Fund to be received for the
eleven-month period following such Record Date, (ii) by deducting from the
amount determined in accordance with the preceding clause (i) the total of (X)
the sum of the amounts to be deducted from the Interest Account of such Trust
Fund as of such Record Date pursuant to the foregoing provisions of Section
3.04(a) and (Y) the estimated sum of the amounts to be deducted from the
Interest Account of such Trust Fund pursuant to the foregoing provisions of
Section 3.04(a) during the eleven-month period following such Record Date, (iii)
dividing the amount so obtained by 12 (the number of Interest Distribution Dates
per year for such Unit), and (iv) dividing the result of the calculation
performed pursuant to the immediately preceding clause (iii) by the number of
Units outstanding on the applicable Record Date. On or shortly after each
Interest Distribution Date, the Trustee shall distribute with respect to each
Unitholder of the Trust Fund of record at the close of business on the preceding
Record Date an amount substantially equal to the Interest Distribution computed
as of such Record Date.
To the extent that moneys in the Principal Account have not been previously
used to pay for the redemption of Units tendered to a Trust Fund, on the
Principal Distribution Dates each Unitholder shall receive such holder's pro
rata share of the cash balance of the Principal Account of the Trust Fund
computed as of the close of business on the preceding Record Dates for such
Principal Distribution Dates by (i) deducting from such cash balance the total
of (X) cash required to cover contracts to purchase Bonds, (Y) cash required for
the redemption of unredeemed tendered Units and (Z) the sum of the amounts to be
deducted from the Principal Account as of each such Record Date pursuant to the
foregoing provisions of Section 3.04(a) and (ii) dividing the amount so obtained
by the number of Units outstanding on the Record Date immediately preceding such
Principal Distribution Date; provided, however, that if the balance of the
Principal Account on any such Record Date is less than $1.00 per 100 Units
outstanding of the Trust Fund on the Record Date, no distribution from the
Principal Account need be made and, provided further, if such balance is between
$5.00 and $10.00 per 100 Units, distributions will be made on the next April or
October Distribution Date and if such balance exceeds $10.00 per 100 Units, such
amounts will be distributed on the next Distribution Date.
In making the computation of any Unitholder's interest in the balance of the
Interest and Principal Accounts, fractions of less than one cent per Unit shall
be omitted. In addition, the Trustee in its discretion may on any Distribution
Date determine that the amount to be distributed to Unitholders should be more
or less than the amount of the applicable Interest or Principal Distribution per
Unit because of any unusual or extraordinary increase or decrease in the
expenses incurred or expected to be incurred by such Trust Fund.
-14-
<PAGE>
(c) If the Depositor (i) fails to replace any failed Special Bond (as defined
in Section 3.12) or (ii) is unable or fails to enter into any contract for the
purchase of any New Bond in accordance with Section 3.12, the Trustee shall
distribute to all Unitholders the principal, accrued interest and sales charge
attributable to such Special Bonds not more than 30 days after the expiration of
the Purchase Period (as defined in Section 3.12). If any contract for a New
Bond in replacement of a Special Bond shall fail, the Trustee shall distribute
the principal, accrued interest and sales charge attributable to the Special
Bond to the Unitholders not more than 30 days after the date on which the
contract in respect of such New Bond failed. If at the end of the Purchase
Period less than all moneys attributable to a failed Special Bond have been
applied or allocated by the Trustee pursuant to a contract to purchase New
Bonds, the Trustee shall distribute the remaining moneys (i) to Unitholders not
more than 30 days after the end of the Purchase Period to the extent the failed
Special Bond has not been fully replaced by New Bonds or (ii) to the Depositor
to the extent moneys remain after the purchase of the New Bonds, if any, and the
distribution referred to in clause (i).
(d) Except as provided below, all distributions shall be made by first class
mail to each Unitholder of record at the close of business on the preceding
applicable Record Date at the address of such holder appearing on the
registration books of the Trustee provided, however, that the Trustee shall if
so directed with respect to distributions from the Interest and/or Principal
Account either orally or in writing at the time of purchase of Units or
thereafter in writing signed by the Unitholder and timely received, make such
distributions to the Program Agent. A Unitholder's written notice must be
received by the Program Agent at least ten days prior to the Record Date for the
next Interest Distribution in order to be in effect for such Interest
Distribution and by the last Record Date for distribution of principal in any
year in order to be effective for the following calendar year. All such notices
shall remain in effect until a subsequent notice is received by the Program
Agent. Upon receipt of any such distribution the Program Agent shall purchase
shares (or fractions thereof) in the applicable reinvestment fund as directed by
the Unitholder. The Program Agent shall not be liable to any Unitholder for any
action taken with respect to its duties and responsibilities as Program Agent;
provided, however, that this provision shall not protect the Program Agent
against liability to which it would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder.
(e) Except as provided by the preceding paragraph, Unitholders of record on
the registration books of the Trustee at the close of business on the Record
Date prior to each Distribution Date, shall be entitled to the distribution in
respect of such Distribution Date, and, except as provided in Article VIII, no
liability shall attach to the Trustee by reason of payment to or on the order of
any such Unitholder of record. Nothing herein shall be construed to prevent the
payment of distributions from the Interest and Principal Accounts to any such
Unitholder by means of one check, draft or other proper instrument.
Section 3.05. Statements and Reports. With each distribution from the
Interest or Principal Accounts of each Trust Fund the Trustee shall set forth,
either in the instrument by means of which payment of such distribution is made
or in an accompanying statement, the
-15-
<PAGE>
amount being distributed from each such account expressed as a dollar amount per
Unit of such Trust Fund.; Within a reasonable period of time after the last
business day of each calendar year, the Trustee shall furnish to each person who
at any time during such calendar year was a Unitholder of any individual Trust
Fund a statement for such Trust Fund setting forth with respect to such calendar
year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds and, if
issuers of Bonds are located in more than one jurisdiction, the
percentage of such amount by states and territories in which the
issuers of the Bonds are located;
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.13 and for redemptions pursuant to Section 5.02;
(3) the deductions for applicable taxes and fees and
expenses of the Trustee, the Evaluator, the Depositor and bond
counsel, if any, all as provided under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to Section
3.03, if any;
(5) the balance remaining after such distributions,
deductions and reservations expressed both as a total dollar amount
and as 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 sale, maturity, liquidation or redemption
of any of the Bonds and the net proceeds received therefrom (excluding
any portion thereof credited to the Interest Account);
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.13 and for redemptions pursuant to Section 5.02;
(3) the deductions for payment of applicable taxes and fees
and expenses (including insurance premiums) of the Trustee, the
Evaluator, the Depositor and bond counsel, if any, all as provided
under Section 3.04(a);
(4) the reservations made by the Trustee pursuant to Section
3.03, if any;
(5) the balance remaining after such distributions,
deductions and reservations, expressed both as a total dollar amount
and as a dollar amount per Unit outstanding on the last business day
of such calendar year; and
-16-
<PAGE>
(C) the following information:
(1) a list of the Bonds as of the last business day of such
calendar year;
(2) the number of Units outstanding on the last business day
of such calendar year;
(3) the Unit Value based on the Trust Fund Evaluations made
on the last day of December (or the last business day prior thereto)
of such calendar year; and
(4) the amounts actually distributed to Unitholders during
such calendar year from the Interest and Principal Accounts,
separately stated, expressed both as total dollar amounts and as
dollar amounts per Unit outstanding on the Record Dates for such
distributions.
Section 3.06. Extraordinary Sale of Bonds. The Depositor by written notice
may direct the Trustee to sell Bonds at such price and time and in such manner
as shall be deemed appropriate by the Depositor if the Depositor shall have
determined that any one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the payment of
principal or interest when due and payable;
(b) that any action or proceeding has been instituted at law or in
equity seeking to restrain or enjoin the payment of principal or interest
on any such Bonds, the illegality, irregularity or omission of any
necessary acts or proceedings preliminary to the issuance of such Bonds, or
seeking to restrain or enjoin the performance by the officers or employees
of any such issuing body of an improper or illegal act in connection with
the administration of funds necessary for debt service on such Bonds or
otherwise; or that there exists any other legal question or impediment
affecting such Bonds or the payment of principal or interest on the same;
(c) that there has occurred any breach of covenant or warranty in any
resolution, trust indenture or other document which might adversely affect
either immediately or contingently the payment of principal or interest on
such Bonds, or their general credit standing, or otherwise impair the sound
investment character of such Bonds;
(d) that there has been a default in the payment of principal of,
premium, if any, or interest on any other outstanding obligations of the
issuer or the guarantor of such Bonds; or
(e) that in the case of revenue Bonds, the revenues and income of the
facility or project or other special funds expressly charged and pledged
for payment of principal or interest or both on any such Bonds shall fall
substantially below the
-17-
<PAGE>
estimated revenues or income calculated
by the engineers or other proper officials charged with the acquisition,
construction or operation of such facility or project, so that, in the
opinion of the Depositor, the retention of such Bonds would be detrimental
to the interest of the Unitholders; or
(f) that the price of any such Bond has declined to such an
extent, or such other market or credit factors exist (including the advance
refunding of any such Bonds), that in the opinion of the Depositor the
retention of such Bonds would be detrimental to the interest of the
Unitholders.
Upon receipt of such direction from the Depositor, the Trustee shall
proceed to sell the specified Bonds. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
made pursuant to any such direction or by reason of the failure of the Depositor
to give any such direction, and in the absence of such direction the Trustee
shall have no duty to sell any Bonds under this Section 3.06 except to the
extent otherwise required by Section 3.09. The Depositor shall not be liable
for errors of judgment in directing or failing to direct the Trustee pursuant to
this Section 3.06. This provision, however, shall not protect the Trustee or
Depositor against any liability for which they would otherwise be subject by
reason of wilful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of their reckless disregard of their obligations
and duties hereunder.
Section 3.07. Refunding Obligations. In the event that an offer by the
issuer of any of the Bonds shall be made to issue new obligations in exchange or
substitution for any issue of Bonds pursuant to a plan for the refunding or
refinancing of such Bonds, the Depositor shall instruct the Trustee in writing
to reject such offer and either hold or sell such Bonds, except that if (1) the
issuer is in default with respect to payment of principal or interest or both on
such Bonds or (2) in the opinion of the Depositor given in writing to the
Trustee, the issuer will probably default with respect to payment of principal
or interest or both on such Bonds in the reasonably foreseeable future, the
Depositor shall instruct the Trustee in writing to accept or reject such offer
or take any other action with respect thereto as the Depositor may deem proper.
Any obligations received in exchange shall be deposited hereunder and shall be
subject to the terms and conditions of this Agreement to the same extent as the
Bonds originally deposited hereunder. Within five days after such exchange and
deposit, written notice thereof shall be given by the Trustee, as agent for the
Depositor, to each Unitholder of the affected Trust Fund, including an
identification of the Bonds eliminated and the obligations substituted therefor.
Section 3.08. Counsel. The Depositor may employ from time to time
counsel to act on behalf of any Trust Fund for any legal services in connection
with the Bonds, and any legal matters relating to the possible disposition of
any Bonds pursuant to any provisions hereof. The fees and expenses of such
counsel shall be paid by the Trustee as provided in Section 3.04(a)(3) hereof.
Section 3.09. Action by Trustee Regarding Bonds. (a) In the event
that the Trustee shall have been notified at any time of any action to be taken
or proposed to be taken by
-18-
<PAGE>
holders of the Bonds (including but not limited to
the making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to any amendment or supplement to any
indenture, agreement or other instrument under or pursuant to which the Bonds
have been issued) the Trustee shall promptly notify the Depositor and shall
thereupon take such action or refrain from taking any action as the Depositor
shall in writing direct; provided, however, that if the Depositor shall not
within five business days of the giving of such notice to the Depositor direct
the Trustee to take or refrain from taking any action, the Trustee shall take
such action as it, in its sole discretion, shall deem advisable. The Bonds may,
in the discretion of the Trustee, be interchanged from time to time into either
bearer or registered form without any notification thereof to the Depositor or
the Unitholders and may be registered in the name of the Trustee or the name of
any nominee designated by it.
(b) If at any time the principal of or interest on any of the Bonds shall
not have been duly paid, either pursuant to the Insurance or otherwise, the
Trustee shall notify the Depositor thereof. If within thirty days after such
notification the Depositor has not given any instruction in writing to sell or
to hold or has not taken any action in connection with such Bonds, the Trustee
may, in its discretion, sell such Bonds forthwith, and the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
such sale.
(c) Except as provided in Article VII and Article VIII, neither the
Depositor nor the Trustee shall be liable to any person for any action or
failure to take action with respect to this Section 3.09.
Section 3.10. Trustee Not Required to Adjust Accounts. Nothing in this
Agreement, or otherwise, shall be construed to require the Trustee to make any
adjustments between the Interest Account and the Principal Account by reason of
any premium or discount in respect of any of the Bonds.
Section 3.11. Notice of Change in Principal Account. The Trustee shall
give prompt written notice to the Depositor and the Evaluator of all amounts
credited to or withdrawn from the Principal Account of any Trust Fund pursuant
to any of the provisions of this Article III, and the balance in such Account
after giving effect to the credit or withdrawal.
Section 3.12. Limited Replacement of Special Bonds. If any contract in
respect of Contract Obligations other than a contract to purchase a New Bond (as
defined below), including those purchased on a "when, as and if issued" basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositor or the Trustee (such failed Contract Obligations being herein called
the "Special Bonds"), the Depositor, after it is notified in writing that the
Special Bond will not be delivered by the seller thereof to the Depositor, shall
notify the Trustee (such notice being herein called the "Failed Contract
Notice") of its inability to deliver the failed Special Bond to the Trustee.
Within a maximum of 20 days after giving such Failed Contract Notice (such 20
day period being herein called the "Purchase Period"), the Depositor may, if it
deems such action to be in the best interest of the Trust, purchase, or enter
into a contract to purchase, an obligation to be held as a
-19-
<PAGE>
Bond hereunder
(herein called the "New Bond") as part of the Trust Fund in replacement of the
failed Special Bond, subject to the satisfaction of all of the following
conditions in the case of each purchase or contract to purchase:
(a) The New Bonds (i) shall be tax-exempt bonds issued by
states or political subdivisions and authorities thereof, (ii) shall have a
fixed maturity date (whether or not entitled to the benefits of any
sinking, redemption, purchase or similar fund) not less than the earlier of
the maturity of the Special Bond or ten years after the date of purchase,
(iii) must be purchased at a price that results in a yield to maturity and
a current return at least equal to that of the Special Bonds as of the
Initial Date of Deposit, (iv) shall be payable as to principal and interest
in United States currency, (v) shall not be "when, as if issued" bonds and
(vi) must be eligible to be insured (and when acquired be insured) under
the Insurance.
(b) Each New Bond shall be rated at least "BBB" or better by
Standard & Poor's Corporation or "Baa" or better by Moody's Investors
Service, Inc.
(c) The purchase price of the New Bonds shall not exceed the
amount of funds reserved for the purchase of the Special Bonds.
(d) The Depositor shall furnish a notice to the Trustee (which
may be part of the Failed Contract Notice) in respect of the New Bond
purchased or to be purchased that shall (i) identify the New Bonds, (ii)
state that the contract to purchase, if any, entered into by the Depositor
is satisfactory in form and substance and (iii) state that the foregoing
conditions of clauses (a) and (b) have been satisfied with respect to the
New Bonds.
Upon satisfaction of the foregoing conditions with respect to any New
Bond, the Trustee shall pay the purchase price for the New Bond from the amount
of funds reserved for the purchase of the Special Bonds or, if the Trustee has
credited any moneys and/or letters of credit attributable to the failed Special
Bond to the Principal Account, the Trustee shall pay the purchase price of the
New Bond upon directions from the Depositor from the moneys and/or letters of
credit so credited to the Principal Account. If the Trustee has credited moneys
of the Depositor to the Principal Account, the Trustee shall forthwith return to
the Depositor the portion of such moneys that is not properly distributable to
Unitholders pursuant to Section 3.04.
Whenever a New Bond is acquired by the Depositor pursuant to the
provisions of this Section 3.12, the Trustee shall, within five days thereafter,
mail to all Unitholders notices of such acquisition, including an identification
of the failed Special Bonds and the New Bonds acquired. The purchase price of
the New Bonds shall be paid out of the funds reserved for the purchase of the
failed Special Bonds. Except as provided in Article VIII, the Trustee shall not
be liable or responsible in any way for depreciation or loss incurred by reason
of any purchase made pursuant to any such directions and in the absence of such
directions the Trustee shall have no duty to purchase any New Bonds under this
Agreement. The Depositor shall not be liable for any failure to instruct the
Trustee to purchase any New
-20-
<PAGE>
Bonds or for errors of judgment in respect of this Section 3.12; provided,
however, that this provision shall not protect the Depositor against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder.
Section 3.13. Compensation of Depositor for Supervisory Services. As
compensation for providing supervisory portfolio services under this Agreement,
the Depositor shall receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee in the amount
specified as compensation for the Depositor in Part II of the Trust Agreement,
but in no event shall such compensation when combined with all compensation
received from other series of the Fund or other unit investment trusts sponsored
by the Depositor or its affiliates for providing such supervisory services in
any calendar year exceed the aggregate cost to the Depositor for providing such
services. The rate of such compensation may be increased by the Depositor from
time to time, without the consent or approval of any Unitholder or the Trustee,
by amounts not exceeding the proportionate increase, during the period from the
date of such Trust Agreement to the date of any such increase, in consumer
prices as last published prior to each such date under the classification "All
Services Less Rent of Shelter" in the Consumer Price Index For All Urban
Consumers (CPI-U) U.S. City Average, not seasonally adjusted, base 1982 - 84 =
100, published by the United States Department of Labor. In the event that such
classification ceases to incorporate a significant number of items, or if a
substantial change is made in the method of establishing such classification,
then the classification shall be adjusted in a fair and reasonable manner to the
figure that would have resulted had no substantial change occurred in the manner
of computing such classification. In the event that such classification (or a
successor or substitute index) is not available, such governmental or other
service or publication as shall evaluate the information in substantially the
same manner as the aforesaid classification shall be used in lieu thereof. Such
compensation shall be charged by the Trustee, upon receipt of invoice therefor
from the Depositor, against the Interest and Principal Accounts on or before the
Distribution Date on which such period terminates. If the cash balance in the
Interest and Principal Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.13, the Trustee shall have the power to sell
(i) Bonds from the current list of Bonds designated to be sold pursuant to
Section 5.02 hereof, or (ii) if no such Bonds have been so designated, such
Bonds as the Trustee may see fit to sell in its own discretion, and to apply the
proceeds of any such sale in payment of the amounts payable pursuant to this
Section 3.13. Any moneys payable to the Depositor pursuant to this Section 3.13
shall be secured by a prior lien on the Trust Fund except that such lien shall
be junior and subordinate to any lien in favor of the Trustee under the
provisions of Section 8.08.
-21-
<PAGE>
ARTICLE IV
EVALUATION OF BONDS;
THE EVALUATOR
Section 4.01. Evaluation of Bonds. The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor upon request
the value of each issue of Bonds (treating separate maturities of Bonds as
separate issues) as of the Evaluation Time on the bid side of the market on the
days on which the Trust Fund Evaluation is required by Section 5.01, and, in
addition, as of the Evaluation Time on the bid side of the market if the
secondary market in the Units is maintained based on bid side values or on both
the bid and offering sides, if the Trustee shall so inform the Evaluator from
time to time, such additional evaluation being on each business day commencing
with the date of the Trust Agreement. Such evaluations shall be made (i) on the
basis of current bid or offering prices for the Bonds, (ii) if bid or offering
prices are not available for any Bonds, on the basis of current bid or offering
prices for comparable bonds, (iii) by determining the value of the Bonds on the
bid or offering side of the market by appraisal or (iv) by any Fund, the
Evaluator shall also determine and furnish to the Trustee and the Depositor the
aggregate of (a) the value of all Bonds on the basis of such evaluation and (b)
on the basis of the information furnished to the Evaluator by the Trustee
pursuant to Section 3.11, the amount of cash then held in the Principal Account
which was received by the Trustee after the Record Date preceding such
determination less any amounts held in the Principal Account for distribution to
Unitholders on a subsequent Distribution Date when a Record Date occurs four
business days or less after such determination. For the purposes of the
foregoing, the Evaluator may obtain current bid or offering prices for the Bonds
from investment dealers or brokers (including the Depositor) that customarily
deal in similar bonds or from any other reporting service or sources of
information which the Evaluator deems appropriate.
Insurance obtained for a Trust Fund has no effect, under normal
circumstances, 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 Bond has significantly
deteriorated. The value to be added to such Bonds shall be an amount equal to
the excess, if any, by which the net proceeds realized from the sale of the
Bonds on an insured basis exceeds the sum of (i) the net proceeds realizable
from the sale of the Bonds on an uninsured basis plus (ii) the premium
attributable to the Permanent Insurance. The Sponsor will instruct the Trustee
not to sell such Bonds to effect redemptions or for any other reason but rather
to retain them in the portfolio unless value attributable to the Permanent
Insurance can be realized upon sale. Insurance obtained by the issuer of a Bond
is effective so long as such Bond is outstanding. Therefore, any such insurance
may be considered to represent an element of market value in regard to the Bonds
thus insured, but the exact effect, if any, of this insurance on such market
value cannot be predicted.
Section 4.02. Certain Information to be made Available. For the
purpose of permitting Unitholders to satisfy any reporting requirements of
applicable federal or state tax law, the Evaluator shall make available to the
Trustee and the Trustee shall transmit to
-22-
<PAGE>
any Unitholder upon request any determinations made by the Evaluator pursuant to
Section 4.01 which concern the Trust Fund in which such Unitholder holds Units.
Section 4.03. Compensation of the Evaluator. As compensation for its
services hereunder, the Evaluator shall receive against a statement therefor
submitted to the Trustee on or before each Distribution Date the amount
specified as compensation for the Evaluator in Part II of the Trust Agreement.
The rate of such compensation may be increased by the Evaluator from time to
time, without the consent or approval of any Unitholder or the Depositor, by
amounts not exceeding the proportionate increase, during the period from the
date of such Trust Agreement to the date of any such increase, in consumer
prices as last published prior to each such date under the classification "All
Services Less Rent of Shelter" in the Consumer Price Index For All Urban
Consumers (CPI-U) U.S. City Average, not seasonally adjusted, base 1982 - 84 =
100, published by the United States Department of Labor. In the event that such
classification ceases to incorporate a significant number of items, or if a
substantial change is made in the method of establishing such classification,
then the classification shall be adjusted in a fair and reasonable manner to the
figure that would have resulted had no substantial change occurred in the manner
of computing such classification. In the event that such classification (or a
successor or substitute index) is not available, such governmental or other
service or publication as shall evaluate the information in substantially the
same manner as the aforesaid classification shall be used in lieu thereof. Such
compensation shall be charged by the Trustee, upon receipt of invoice therefor
from the Evaluator, against the Interest and Principal Accounts on or before the
Distribution Date. If the cash balances in the Interest and Principal Accounts
shall be insufficient to provide for amounts payable pursuant to this Section
4.03, the Trustee shall have the power to sell (i) Bonds designated to be sold
pursuant to Section 5.02 hereof or (ii) if no such Bonds have been so
designated, such Securities as the Trustee may see fit to sell in its own
discretion, and to apply the proceeds of any such sale in payment of the amounts
payable pursuant to this Section 4.03. Any moneys payable to the Evaluator
pursuant to this Section 4.03 shall be secured by a prior lien on the Trust Fund
except that such lien shall be junior and subordinate to any lien in favor of
the Trustee under the provisions of Section 8.08.
Section 4.04. Liability of the Evaluator. The Trustee, the Depositor
(if separate from the Evaluator) and the Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The determinations made by the Evaluator hereunder shall be made in
good faith upon the basis of the best information available to it. The
Evaluator shall be under no liability to the Trustee, the Depositor or the
Unitholders for errors in judgment; provided, however, that this provision shall
not protect the Evaluator against any liability to which it would otherwise be
subject by reason of wilful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
Section 4.05. Resignation, Removal and Other Matters Relating to the
Evaluator. (a) The Evaluator may resign and be discharged hereunder, by
executing an instrument in writing resigning as the Evaluator and filing the
same with the Depositor (if separate from the Evaluator) and the Trustee not
less than 60 days before the date specified in such
-23-
<PAGE>
instrument when, subject to Section 4.05(c), such resignation is to take
effect. Upon receiving such notice of resignation, the Depositor (if separate
from the Evaluator) and the Trustee shall use their best efforts to appoint a
successor Evaluator having qualifications and at a rate of compensation
satisfactory to the Depositor (if separate from the Evaluator) and the Trustee.
Such appointment shall be made by written instrument executed by the Depositor
(if separate from the Evaluator) and the Trustee, in duplicate, one copy of
which shall be delivered to the resigning Evaluator and one copy to the
successor Evaluator. The Depositor (if separate from the Evaluator) or the
Trustee may remove the Evaluator at any time upon thirty days' written notice
and appoint a successor Evaluator having qualifications and at a rate of
compensation satisfactory to the Depositor (if separate from the Evaluator) and
the Trustee. Such appointment shall be made by written instrument executed by
the Depositor (if separate from the Evaluator) and the Trustee, in duplicate,
one copy of which shall be delivered to the Evaluator so removed and one copy to
the successor Evaluator. Notice of such resignation or removal and appointment
of a successor Evaluator shall be mailed by the Trustee to each Unitholder.
(b) If the Evaluator resigns and no successor Evaluator shall have been
appointed and have accepted appointment within 30 days after receipt of the
notice of resignation by the Depositor (if appropriate) and the Trustee, the
Evaluator may forthwith apply to a court of competent jurisdiction for the
appointment of a successor Evaluator. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor Evaluator.
(c) Any successor Evaluator appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the Trustee an instrument accepting such
appointment hereunder, and such successor Evaluator without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
the Evaluator herein and shall be bound by all the terms and conditions of this
Agreement. Any resignation or removal of the Evaluator and appointment of a
successor Evaluator pursuant to this Section 4.05 shall become effective upon
such acceptance of appointment.
(d) Any corporation into which the Evaluator hereunder may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Evaluator hereunder shall be a party, shall be the
successor Evaluator under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which the Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
-24-
<PAGE>
ARTICLE V
TRUST FUND EVALUATION
REDEMPTION OF UNITS
Section 5.01. Trust Fund Evaluation. As of the Evaluation Time next
following any tender by a Unitholder for redemption and on any other business
day desired by it or as may be required hereunder, the Trustee shall as to each
Trust Fund:
Add
(1) cash on hand in the Trust Fund, other than cash held especially
for the purchase of Contract Obligations,
(2) the aggregate value of each issue of the Bonds in the Trust Fund
(including Contract Obligations) on the bid side of the market as
determined by the Evaluator pursuant to Section 4.01, and
(3) accrued but unpaid interest on the Bonds in the Trust Fund at the
close of business on the date of such computation; Deduct
(1) amounts representing any applicable taxes, governmental charges or
other charges pursuant to Section 3.03 payable out of the Trust Fund
and for which no deductions shall have previously been made for the
purpose of addition to the Reserve Account,
(2) amounts representing estimated accrued fees and expenses of the
Trust Fund including but not limited to unpaid fees and expenses of the
Trustee (including legal and auditing expenses), the Evaluator, the
Depositor, the Insurer and bond counsel, and
(3) cash allocated for distribution to Unitholders of the Trust Fund
of record as of the business day prior to the evaluation then being made.
The resulting figure is herein called a "Trust Fund Evaluation."
Section 5.02. Redemption of Units; Sale of Bonds. Any Unitholder may
cause any of his Units to be redeemed by the Trustee, subject to the terms of
this Section 5.02, by making a written request to the Trustee at its principal
trust office, and, in the case of Units evidenced by a Certificate, by tendering
such Certificate to the Trustee at such office, properly endorsed or accompanied
by a written instrument or instruments of transfer in form satisfactory to the
Trustee. Unitholders must sign such written request, and such Certificate or
transfer instrument, exactly as their name appears on the records of the Trustee
and on any Certificate representing the Units to be redeemed. Such signature
must
-25-
<PAGE>
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. Such redemption
shall be made by the Trustee on the seventh calendar day following the day on
which request for redemption is received by the Trustee, provided that if such
seventh calendar day is not a business day, then such Units shall be redeemed on
the first business day prior thereto (such seventh calendar day or first
business day prior thereto being herein called the "Redemption Date"). Subject
to payment by such Unitholder of any tax or other governmental charges which may
be imposed thereon, such redemption is to be made by payment on the Redemption
Date of cash equal to the Unit Value (determined on the basis of the Trust Fund
Evaluation made in accordance with Section 5.0l) multiplied by the number of
Units being redeemed (herein called the "Redemption Price"). The portion of the
Redemption Price which represents interest shall be withdrawn from the Interest
Account of the affected Trust Fund to the extent available. The balance paid on
any redemption including accrued interest, if any, shall be withdrawn from the
Principal Account of the affected Trust to the extent that funds are available
for such purpose. If such available balance shall be insufficient, the Trustee
shall sell from such Trust Fund such Bonds from among those designated for such
purpose by the Depositor as the Trustee in its discretion, shall deem advisable
or necessary. Sales of Bonds by the Trustee shall be made in such manner as the
Trustee shall in the exercise of its fiduciary judgment determine will bring the
best price obtainable for the Trust Fund. In the event that funds are withdrawn
from the Principal Account or Bonds are sold for payment of any portion of the
Redemption Price representing accrued interest, the Principal Account shall be
reimbursed when sufficient funds are next available in the Interest Account for
such funds so applied.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than seven calendar days following the
day on which tender for redemption is made (1) for any period during which the
New York Stock Exchange, Inc. is closed other than customary weekend and holiday
closings; (2) for any period during which (i) trading on the New York Stock
Exchange, Inc. is restricted or (ii) an emergency exists as a result of which
disposal by the Trust Fund of the Bonds is not reasonably practicable or it is
not reasonably practicable fairly to determine in accordance herewith the value
of the Bonds for the purposes of any Trust Fund Evaluation; or (3) for such
other period as the Securities and Exchange Commission may by order permit.
No later than the close of business on the day of tender of any Unit for
redemption by a Unitholder other than the Depositor, the Trustee shall notify
the Depositor of such tender. The Depositor shall have the right to purchase
such Units by notifying the Trustee of its election to make such purchase as
soon as practicable thereafter but in no event subsequent to the close of
business on the second business day after the day on which such Units were
tendered for redemption. Such purchase shall be made by payment for such Units
by the Depositor to the Unitholder not later than the close of business on the
Redemption Date of any amount not less than the Redemption Price which would
otherwise be payable by the Trustee to such Unitholder.
-26-
<PAGE>
Any Unit so purchased by the Depositor may at the option of the Depositor be
tendered to the Trustee for redemption in the manner provided in the first
paragraph of this Section 5.02.
The Depositor shall deliver a current list of Bonds in each Trust Fund to be
sold for the purpose of redemption of Units tendered for redemption and for
payment of expenses hereunder. In connection therewith, the Depositor may
specify the minimum principal amounts of any Bonds to be sold at any one time.
If at any such time the Depositor shall for any reason fail to deliver such a
list, the Trustee, in its sole discretion, may designate a current list of Bonds
in each Trust Fund for such purposes. The net proceeds of any sale of Bonds
which represents interest shall be credited to the Interest Account of the
affected Trust Fund, and the balance of such net proceeds shall be credited to
the Principal Account of such Trust Fund. The Depositor shall also designate on
such list of Bonds designated to be sold, the Bonds upon the sale of which the
Trustee shall obtain permanent insurance (the "Permanent Insurance") from an
Insurer, provided that if the Depositor shall for any reason fail to make such
designation, the Trustee in its sole discretion shall make such designation if
it deems such designation to be in the best interests of Unitholders. The
Trustee is hereby authorized to pay and shall pay out of the proceeds of the
sale of the Bonds which are covered by Permanent Insurance any premium for such
Permanent Insurance and the net proceeds after such deduction shall be credited
to the Principal Account and the net proceeds representing accrued interest
shall be credited to the Interest Account.
Except as provided in Article VII and Article VIII, neither the Depositor nor
the Trustee shall be liable or responsible in any way for depreciation or loss
incurred by reason of any sale or designation of Bonds made pursuant to this
Section 5.02.
Any Certificates evidencing Units redeemed pursuant to this Section 5.02
shall be cancelled by the Trustee and the Unit or Units evidenced by such
Certificates shall be extinguished by such redemptions.
ARTICLE VI
ISSUANCE, TRANSFER, INTERCHANGE
AND REPLACEMENT OF CERTIFICATES
Section 6.01. Issuance of Certificates. Certificates representing Units
held by a Unitholder will not be issued except upon written request by a
Unitholder, or his or her registered broker/dealer, to the Trustee at its
principal trust office. Certificates that have been issued may be returned to
the Trustee at any time and cancelled, without affecting the Unitholder's
interest in the Trust Fund, when accompanied by proper written instructions from
the Unitholder.
Section 6.02. Transfer of Units; Interchange of Certificates. A Unitholder
may transfer any of his Units by making a written request to the Trustee at its
principal trust office and, in the case of Units evidenced by a Certificate, by
presenting and surrendering
-27-
<PAGE>
such Certificate at such office properly endorsed or accompanied by a written
instrument or instruments of transfer in form satisfactory to the Trustee.
Unitholders must sign such written request, and such Certificate of transfer
instrument, exactly as their name appears on the records of the Trustee and on
any Certificate representing the Units to be transferred. Such signature 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. Such transfer
shall thereupon be made on the records of the Trustee and, if appropriate, a new
registered Certificate or Certificates for the same number of Units of the same
Trust Fund shall be issued in exchange and substitution therefor. Certificates
issued pursuant to this Agreement are interchangeable for one or more other
Certificates of the same Trust Fund in an equal aggregate number of Units and
all Certificates issued shall be issued in denominations of one Unit or any
whole multiple thereof as may be requested by the Unitholder. The Trustee may
deem and treat the person in whose name any Unit or Certificate shall be
registered upon the books of the Trustee as the owner of such Unit or
Certificate for all purposes hereunder and the Trustee shall not be affected by
any notice to the contrary. The transfer books maintained by the Trustee for
each Trust Fund for the purpose of this Section 6.02 shall be closed for an
individual Trust Fund as such Trust Fund is terminated pursuant to Article IX
hereof.
A sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such transfer or interchange shall be paid to the
Trustee. A Unitholder may be required to pay such amount as may be specified by
the Trustee and approved by the Depositor) for each new Certificate issued on
any such transfer or interchange.
All Certificates cancelled pursuant to this Agreement, other than those
endorsed for transfer, may be cremated or otherwise destroyed by the Trustee.
Section 6.03. Replacement of Certificates. In case any Certificate shall
become mutilated or be destroyed, stolen or lost, the Trustee shall execute and
deliver a new Certificate in exchange and substitution therefor upon the
Unitholder's furnishing the Trustee with proper identification and satisfactory
indemnity, complying with such other reasonable regulations and conditions as
the Trustee may prescribe and paying such expenses as the Trustee may incur,
provided, however, that if the particular Trust Fund has terminated or is in the
process of termination, the Trustee, in lieu of issuing such new Certificate,
may, upon the terms and conditions set forth herein, make the distributions set
forth in Section 9.01 hereof. Any mutilated Certificate shall be duly
surrendered and cancelled before any duplicate Certificate shall be issued in
exchange and substitution therefor. Any duplicate Certificate issued pursuant
to this Section 6.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time. Upon issuance of
any duplicate Certificate pursuant to this Section 6.03, the Certificate claimed
to have been lost, stolen or destroyed shall become null and void and of no
effect, and any bona fide purchaser thereof shall have only such rights as are
afforded under Article 8 of the
-28-
<PAGE>
Uniform Commercial Code to a holder presenting a Certificate for transfer in
the case of an overissue.
Section 6.04. Form of Certificate. Each Certificate shall be in fully
registered form, shall be numbered serially for identification, shall be
executed in facsimile by the original Depositor of the Trust Fund in question
and manually by an authorized signatory of the Trustee, shall be dated the date
of execution and delivery by the Trustee and shall represent a fractional
undivided interest in the specified Trust Fund, the numerator of which fraction
shall be the number of Units set forth on the face of such Certificate and the
denominator of which shall be the total number of Units of undivided interest of
such Trust Fund outstanding at any such time.
ARTICLE VII
DEPOSITOR
Section 7.01. Certain Matters Regarding Succession. The covenants,
provisions and agreements herein contained shall in every case be binding upon
any successor to the business of any Depositor. In the event of an assignment
by any Depositor to a successor corporation or partnership as permitted by the
next following sentence, such Depositor and, if such Depositor is a partnership,
its partners shall be relieved of all further liability under this Agreement.
Any Depositor may transfer all or substantially all of its assets to a
corporation or partnership which carries on the business of such Depositor, if
at the time of such transfer such successor duly assumes all the obligations of
such Depositor under this Agreement.
Section 7.02. Liability of Depositor and Indemnification. (a) The Depositor
shall not be under any liability to any Trust Fund or the Unitholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment or for depreciation or
loss incurred by reason of the purchase or sale of any Bonds, provided, however,
that this provision shall not protect the Depositor against any liability to
which it would otherwise be subject by reason of wilful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder. The Depositor may
rely in good faith on any paper, order, notice, list, affidavit, receipt,
evaluation, opinion, endorsement, assignment, draft or any other document of any
kind prima facie properly executed and submitted to it by the Trustee, the
Trustee's counsel, the Evaluator or any other person for any matters arising
hereunder. The Depositor shall in no event be deemed to have assumed or
incurred any liability, duty or obligation to any Unitholder, the Evaluator or
the Trustee other than as expressly provided for herein.
(b) Each Trust Fund shall pay and hold the Depositor harmless from and
against any loss, liability or expense incurred in acting as Depositor of such
Trust Fund other than by reason of wilful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. The
-29-
<PAGE>
Depositor shall not be under any obligation to appear in, prosecute or defend
any legal action which in its opinion may involve it in any expense or
liability, provided, however, that the Depositor may in its discretion undertake
any such action which it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties hereto and the interests of
the Unitholders hereunder and, in such event, the legal expenses and costs of
any such action and any liability resulting therefrom shall be expenses, costs
and liabilities of the Trust Fund concerned and shall be paid directly by the
Trustee out of the Interest and Principal Accounts of such Trust Fund.
(c) None of the provisions of this Agreement shall be deemed to protect or
purport to protect the Depositor against any liability to the Trust Fund or to
the Unitholders to which the Depositor would otherwise be subject by reason of
wilful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Depositor's reckless disregard of its obligations
and duties under this Agreement.
ARTICLE VIII
TRUSTEE
Section 8.01. General Matters Relating to the Trustee. (a) All
moneys deposited with or received by the Trustee hereunder shall be held by it
without interest in trust as part of the appropriate Trust Fund or Reserve
Account until required to be disbursed in accordance with the provisions of this
Agreement and such moneys will be segregated in such manner as shall constitute
the segregation and holding thereof in trust within the meaning of the
Investment Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in good
faith on any evaluation, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document whether or not of the same kind, prima facie properly
executed, or the disposition of moneys or Bonds pursuant to this Agreement;
provided, however, that this provision shall not protect the Trustee against any
liability to which it would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder, and
the Trustee may construe any of the provisions of this Agreement insofar as the
same may appear to be ambiguous or inconsistent with any other provisions
hereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto and the Unitholders.
(c) The Trustee shall not be responsible for or in respect of the recitals
herein, the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor, or for the form, character, genuineness, sufficiency,
value or validity of any Bonds (except that the Trustee shall be responsible for
the exercise of due care in determining the genuineness of Bonds delivered to it
pursuant to contracts for the purchase of such Bonds) or for or in respect of
the validity or sufficiency of any Certificates (except for the due execution
thereof by the Trustee) or for the due execution thereof by the Depositor and
the
-30-
<PAGE>
Trustee shall in no event assume or incur any liability, duty or obligation
to any Unitholder or to the Depositor or Evaluator, other than as expressly
provided for herein. The Trustee shall not be responsible for or in respect of
the validity of any signature by or on behalf of the Depositor.
(d) The Trustee shall not be under any obligation to appear in, prosecute or
defend any action which in its opinion may involve it in expense or liability
unless it shall be furnished with such reasonable security and indemnity against
such expense or liability as it may be required, and any pecuniary cost of the
Trustee from such actions shall be deductible ratably from and a ratable charge
against the Trust Funds concerned. The Trustee shall in its discretion
undertake such action as it may deem necessary at any and all times to protect
the Trust Funds and the rights and interests of the Unitholders pursuant to the
terms of this Agreement, provided, however, that the expenses and costs of such
actions, undertakings or proceedings shall be reimbursable to the Trustee
ratably from the Trust Funds concerned.
(e) The Trustee may employ agents, attorneys, accountants and auditors,
including an agent or agents for the purpose of custody and safeguarding Bonds,
and shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable care. The Trustee shall not
be liable in respect of any action taken or suffered under this Agreement in
good faith, in accordance with an opinion of counsel. The fees and expenses
charged by such agents, attorneys, accountants or auditors, except for the fees
and expenses charged by any agent or agents for custody and safeguarding of
Bonds, shall constitute an expense of the Trustee reimbursable from the Interest
and Principal Accounts as set forth in Section 3.04 hereof.
(f) If at any time the Depositor shall fail to undertake or perform any of
the duties which by the terms of this Agreement are affirmatively required by it
to be undertaken or performed, or the Depositor shall be incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Depositor or of
its property shall be appointed, or any public officer shall take charge or
control of the Depositor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case, the Trustee
may do any one or more of the following: (1) appoint a successor Depositor who
shall act hereunder in all respects in place of such Depositor and which may be
compensated, at rates deemed by the Trustee to be reasonable under the
circumstances, by deduction ratably from the Interest Account or, to the extent
funds are not available in such Account, from the Principal Account of the Trust
Funds but no such deduction shall be made exceeding such reasonable amount as
the Securities and Exchange Commission may prescribe in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940; (2) continue to act as
Trustee hereunder without terminating this Agreement; or (3) terminate this
Agreement and the trust created hereby and liquidate the Trust Funds in the
manner provided in Section 9.0l.
(g) If the value of any Trust Fund as shown by any Trust Fund Evaluation
shall be less than the liquidation amount specified in Part II of the Trust
Agreement the Trustee may in its discretion, and shall if so directed by the
Depositor, terminate this Agreement and the
-31-
<PAGE>
trust created hereby, only insofar as it relates to such Trust Fund, and
liquidate such Trust Fund all in the manner provided in Section 9.0l or if by
reason of the aggregate redemption of Units not theretofore sold by the
Depositor and/or one or more of the underwriters such that the net worth of such
Trust Fund is reduced to less than 40% of the aggregate principal amount of
Bonds initially deposited therein, the Trustee shall terminate this Agreement
and the trust created hereby, only insofar as it relates to such Trust Fund, and
liquidate such Trust Fund, all in the manner provided in Section 9.0l.
(h) In no event shall the Trustee be personally liable for any taxes or
other governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon. The Trustee shall be reimbursed and indemnified out of the
Interest and Principal Accounts of the appropriate Trust Fund for all such taxes
and charges, for any tax or charge imposed against the Trustee as Trustee of
such Trust Fund and for any expenses, including counsel fees, which the Trustee
may sustain or incur with respect to such taxes or charges.
(i) Notwithstanding any provisions of this Agreement to the contrary, no
payment to a Depositor or to any principal underwriter (as defined in the
Investment Company Act of 1940) for the Trust Fund or to any affiliated person
(as so defined) or agent of a Depositor or such underwriter shall be allowed the
Trustee as an expense except for payment of such reasonable amounts as the
Securities and Exchange Commission may prescribe as compensation for performing
bookkeeping and other administrative services of a character normally performed
by the Trustee.
Section 8.02. Books, Records and Reports. The Trustee shall keep proper
books of record and account of all the transactions of each Trust under this
Indenture at its corporate trust office including a record of the name and
address of, and the Certificates issued by each Trust and held by, every
Unitholder, and such books and records of each Trust shall be open to inspection
by any Unitholder of such Trust at all reasonable times during the usual
business hours.
Unless the Depositor determines that such an audit is not required, the
account of each Trust shall be audited not less than annually by independent
public accountants designated from time to time by the Depositor and reports of
such accountants shall be furnished by the Trustee, upon request, to
Unitholders. The Trustee, however, in connection with any such audits shall not
be obligated to use Trust assets to pay for such audits in excess of the amounts
indicated in the Prospectus relating to such Trust.
To the extent permitted under the Investment Company Act of 1940 as evidenced
by an opinion of independent counsel to the Depositor, the Trustee shall pay, or
reimburse to the Depositor or others, the costs of the preparation of documents
and information with respect to a Trust required by law or regulation in
connection with the maintenance of a secondary market in units of such Trust.
Such costs may include but are not limited to accounting and legal fees, blue
sky registration and filing fees, printing expenses and other reasonable
expenses related to documents required under federal and state securities laws.
Such costs shall be a Trust expense and the Trustee shall not be obligated to
advance any of its own funds to make such payments.
-32-
<PAGE>
Section 8.03. Reports to Securities and Exchange Commission and Others. The
Trustee shall make such annual or other reports as may from time to time be
required under any applicable state or Federal statute or rule or regulation
thereunder.
Section 8.04. Agreement and List of Bonds on File. The Trustee shall keep a
certified copy or duplicate original of this Agreement on file at its principal
trust office available for inspection by any Unitholder at all reasonable times
during its usual business hours, and the Trustee shall keep and so make
available for inspection a current list of the Bonds in each Trust Fund.
Section 8.05. Compensation of Trustee. The Trustee shall receive at the
times and in the manner set forth in Section 3.04 as compensation for performing
the usual, ordinary, normal and recurring services under this Agreement during
the preceding month an amount equal to the amount specified as compensation for
the Trustee in Part II of the Trust Agreement. The rate of such compensation
may be increased by the Trustee from time to time, without the consent or
approval of any Unitholder or the Depositor, by amounts not exceeding the
proportionate increase, during the period from the date of such Trust Agreement
to the date of any such increase, in consumer prices as last published prior to
each such date under the classification "All Services Less Rent of Shelter" in
the Consumer Price Index For All Urban Consumers (CPI-U) U.S. City Average, not
seasonally adjusted, based 1982 - 84 = 100, published by the United States
Department of Labor. In the event that such classification ceases to
incorporate a significant number of items, or if a substantial change is made in
the method of establishing such classification, then the classification shall be
adjusted in a fair and reasonable manner to the figure that would have resulted
had no substantial change occurred in the manner of computing such
classification. In the event that such classification (or a successor or
substitute index) is not available, such governmental or other service or
publication as shall evaluate the information in substantially the same manner
as the aforesaid classification shall be used in lieu thereof.
The Trustee shall also receive, at the times and in the manner set forth in
Section 3.04, reimbursement for any and all expenses and disbursements incurred
hereunder (except as set forth in Section 8.01(e)), including legal and auditing
expenses and additional compensation for any extraordinary services performed
hereunder, which extraordinary services shall include but not be limited to, all
costs and expenses incurred by the Trustee in making any annual or other reports
pursuant to Section 8.03, or in making any distribution of cash attributable to
failed contracts covering Contract Obligations in accordance with Section 3.04;
provided, however, that the amount of any such charge which has not been finally
determined as of any Distribution Date may be estimated and any necessary
adjustments shall be made in the succeeding period.
The Trustee shall be indemnified ratably from the Trust Funds and held
harmless against any loss, liability or expense incurred without gross
negligence, bad faith, wilful misconduct or reckless disregard of its duties on
the part of the Trustee arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in the premises.
-33-
<PAGE>
The Trustee's normal and extraordinary compensation and reimbursement of the
above-mentioned expenses and losses shall be charged by the Trustee against the
Interest and Principal Accounts of the appropriate Trust Funds in accordance
with Section 3.04 on or before each Distribution Date. If the balances in the
Interest and Principal Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 8.05, the Trustee shall have the power to sell
Bonds in the manner provided in Section 5.02 hereof. The Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
any sale of Bonds made pursuant to this Section 8.05.
Section 8.06. Resignation, Discharge or Removal of the Trustee; Successors.
(a) The Trustee may resign and be discharged of the trust created by this
Agreement by executing an instrument in writing resigning as Trustee of such
trust, filing the same with the Depositor and mailing a copy of a notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such instrument when, subject to Section 8.06(c), such
resignation is to take effect. Upon receiving such notice of resignation, the
Depositor shall use its best efforts promptly to appoint a successor Trustee in
the manner and meeting the qualifications hereinafter provided, by written
instrument or instruments delivered to the resigning Trustee and the successor
Trustee. Notice of such appointment of a successor Trustee shall be mailed
promptly after acceptance of such appointment by the successor Trustee to each
Unitholder then of record. In case at any time the Trustee shall not meet the
requirements set forth in Section 8.07 hereof, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, the Depositor may remove the
Trustee and appoint a successor Trustee by written instrument or instruments
delivered to the Trustee so removed and the successor Trustee, provided that a
notice of such removal and appointment of a successor Trustee shall be mailed by
the successor Trustee promptly after acceptance of such appointment to each
Unitholder then of record.
(b) In case at any time the Trustee shall resign and no successor Trustee
shall have been appointed within thirty days after notice of resignation has
been received by the Depositor, the retiring Trustee may forthwith apply to a
court of competent jurisdiction for the appointment of a successor Trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(c) Any successor Trustee appointed hereunder shall execute and acknowledge
to the Depositor and the retiring Trustee an instrument accepting such
appointment hereunder, and such successor Trustee without any further act, deed
or conveyance shall become vested with all rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee herein and shall be bound by all the terms and conditions of this
Agreement. Upon the request of such successor Trustee, the retiring Trustee
shall, upon payment of all amounts due the retiring Trustee, execute and deliver
an instrument acknowledged by it transferring to such successor Trustee all the
rights and powers of the retiring Trustee; and the retiring Trustee shall
transfer, deliver and pay over to the successor Trustee all Bonds and moneys at
the time held by it hereunder, if any, together with all necessary instruments
of transfer and assignment or other documents properly
-34-
<PAGE>
executed necessary to effect such transfer and such of the records or copies
thereof maintained by the retiring Trustee in the administration hereof as may
be requested by the successor Trustee and shall thereupon be discharged from all
duties and responsibilities under this Agreement. Any resignation or removal of
a Trustee and appointment of a successor Trustee pursuant to this Section 8.06
shall become effective upon such acceptance of appointment by the successor
Trustee.
(d) Any corporation into which a Trustee hereunder may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which such Trustee hereunder shall be a party, shall be the
successor Trustee under this Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
Section 8.07. Qualification of Trustee. The Trustee and any successor
Trustee shall be a corporation organized under laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers and
has at all times an aggregate capital, surplus and undivided profits of not less
than $5,000,000.
Section 8.08. Collateral. As collateral security for the prompt payment to
the Trustee of all reimbursement to which the Trustee is entitled hereunder and
of all sums at any time owed to or payable to the Trustee hereunder (including,
without limitation, the prompt reimbursement of the Trustee for any sums that it
may from time to time in its discretion advance to the account of the Trust
Fund), the Trustee is hereby granted a first and prior lien and security
interest in and to the Trust Fund and all Bonds now or hereafter included
therein, including (without limitation) those Bonds listed in the Schedules to
the Trust Agreement, together with all Bonds, obligations, Contract Obligations
and instruments received in exchange or substitution therefor and all proceeds
thereof and all additions and substitutions.
ARTICLE IX
TERMINATION
Section 9.01. Procedure Upon Termination. This Agreement and the trust
created hereby shall terminate as to an individual Trust Fund upon the maturity,
redemption, sale or other disposition, as the case may be, of the last Bond held
hereunder in such Trust Fund, unless sooner terminated as hereinbefore
specified, and may be terminated at any time by written instrument executed by
the Depositor and consented to by holders of Units representing 66-2/3% of the
Units of such Trust Fund then outstanding under this Agreement; provided, that
in no event shall this trust continue with respect to such Trust Fund beyond
January l of the fiftieth year after the creation of this trust.
-35-
<PAGE>
This Agreement and the trust created hereby shall be terminated as to the
entire Fund upon the maturity, redemption, sale or other disposition, as the
case may be, of the last Bond held hereunder, in the last maturing Trust Fund,
unless sooner terminated as hereinbefore specified, and may be terminated at any
time by written instrument executed by the Depositor and consented to by holders
of Units representing 66-2/3% of all Units then outstanding under this
Agreement; provided that in no event shall this trust continue beyond December
31 of the year following the termination of the last Trust Fund; and provided
further that in connection with any such liquidation it shall not be necessary
for the Trustee to dispose of any Bond or Bonds if retention of such Bond or
Bonds, until due, shall be deemed to be in the best interests of Unitholders,
including, but not limited to, situations in which a Bond or Bonds insured by
the Insurance are in default, situations in which Bond or Bonds insured by the
Insurance reflect a deteriorated market price resulting from a deterioration in
credit quality and situations in which a Bond or Bonds mature after the
mandatory termination date.
Written notice of any termination, specifying the time or times at which any
Unitholder holding Certificates may surrender such Certificates for cancellation
and the date, determined by the Trustee, upon which the transfer books of the
Trustee, maintained pursuant to Section 8.02, shall be closed with respect to
the terminated Trust Fund or the entire Fund, as the case may be, shall be given
by the Trustee to Unitholders of such terminated Trust Fund or all Unitholders,
as the case may be.
Within a reasonable period of time after the termination of the entire Fund,
the Trustee shall sell all of the Bonds then held, if any, and shall:
(a) deduct from the Interest Account or to the extent that funds are not
available in such Account, from the Principal Account of every Trust Fund
separately and pay to itself individually an amount equal to the sum of (1)
its accrued compensation for its ordinary services in connection with such
Trust Fund, (2) any compensation due it for its extraordinary services in
connection with such Trust Fund and (3) any other expenses and
disbursements in connection with such Trust Fund as provided herein;
(b) deduct from the Interest Account or to the extent that funds are not
available in such account, from the Principal Account of every Trust Fund
separately and pay accrued and unpaid fees in connection with such Trust
Fund of the Evaluator, the Depositor and bond counsel, if any;
(c) deduct from the Interest Account, or to the extent that funds are
not available from such Account, from the Principal Account of every Trust
Fund separately any amounts which it in its sole discretion shall deem
requisite to be deposited in the Reserve Account to provide for any
applicable taxes or other governmental charges that may be payable out of
such Trust Fund;
(d) distribute to each Unitholder (upon surrender for cancellation of
his Certificate or Certificates, if issued) such Unitholder's interest in
the balances of the
-36-
<PAGE>
Interest, Principal, and, on the conditions set forth in Section 3.03
hereof, the Reserve Accounts of the Trust Fund in which he holds Units,
provided that such distribution shall be made to Unitholders of record as
of the date of such computation and shall be distributed to them within
five days or shortly thereafter;
(e) together with such distribution to each Unitholder as provided for
in paragraph (d), furnish to each such Unitholder a final statement as of
the date of the computation of the amount distributable to Unitholders of
the same Trust Fund, setting forth the data and information in
substantially the form and manner provided for in Section 3.05 hereof.
Section 9.02. Notice to Unitholders. In the event that all of the
Unitholders holding Certificates shall not surrender their Certificates for
cancellation within six months after the time specified in the applicable,
above-mentioned notice, the Trustee shall give a second written notice to the
remaining Unitholders to surrender their Certificates for cancellation and
receive the liquidating distribution with respect thereto. If within one year
after the second notice all the Certificates issued shall not have been
surrendered for cancellation, the Trustee may take appropriate steps or may
appoint an agent to take appropriate steps, to contact the remaining Unitholders
concerning surrender of their Certificates and the cost thereof shall be paid
out of the moneys and other assets which remain in the affected Trust Fund.
Section 9.03. Moneys to be Held in Trust Without Interest. The Trustee
shall be under no liability with respect to moneys in the Interest, Principal
and Reserve Accounts upon termination, except to hold the same in trust without
interest.
Section 9.04. Dissolution of Depositor Not to Terminate. The dissolution of
the Depositor shall not, subject to Section 8.01(f), operate to terminate this
Agreement or the Fund or any individual Trust Fund.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Amendment and Waiver. This Agreement may be amended from
time to time by the Depositor and the Trustee without the consent of any of the
Unitholders (a) to cure any ambiguity or to correct or supplement any provisions
contained herein which may be defective or inconsistent with any other provision
contained herein; (b) to change any provision hereof as may be required by the
Securities and Exchange Commission or any successor governmental agency
exercising similar authority; or (c) to make such other provisions in regard to
matters or questions arising hereunder as shall not adversely affect the
interest of the Unitholders (as determined in good faith by the Depositor and
the Trustee). This Agreement may also be amended from time to time by the
Depositor and the Trustee (or the performance of any of the provisions of this
Agreement may be waived) with the consent of holders of Units representing
66-2/3% of the Units at the time
-37-
<PAGE>
outstanding under the Trust Agreement of the individual Trust Fund or Trust
Funds affected for the purpose of adding any provisions of this Agreement or of
modifying in any manner the rights of the holders of Units of such Trust Fund or
Trust Funds; provided, however, that in no event may any amendment be made which
would (a) alter the rights to the Unitholders as against each other, (b) provide
the Trustee with the power to engage in business or investment activities other
than as specifically provided in this Agreement or (c) adversely affect the
characterization of the Trust as a grantor trust for federal income tax
purposes; provided, further, that the consent of 100% of the Unitholders of any
individual Trust Fund is required to amend this Agreement (a) to increase the
number of Units of such Trust Fund issuable hereunder above the number of Units
specified in Part II of the Trust Agreement or such lesser amount as may be
outstanding at any time during the term of this Agreement, (b) to permit, in
addition to acquisitions permitted under Sections 3.07 and 3.12 hereof, the
acquisition hereunder of any Bonds for such Trust Fund different from those
specified in the Schedules to the Trust Agreement, (c) to reduce the aforesaid
percentage of Units the holders of which are required to consent to certain
amendments and (d) to reduce the interest in such Trust Fund represented by any
Units of such Trust Fund.
Promptly after the execution of any amendment the Trustee shall furnish
written notification of the substance of such amendment to each Unitholder then
of record affected thereby.
It shall not be necessary for the consent of Unitholders under this Section
10.01 or under Section 9.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Unitholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
Section 10.02. Initial Costs. The cost of the initial preparation, printing
and execution of any Certificates and this Agreement, the initial fees of the
Trustee and the Trustee's counsel and other reasonable expenses in connection
therewith (including stamp taxes on original issuance of the Units and penalties
and interest, if any) together with all of the cost of registering the Units and
the Fund under the Securities Act of 1933 and the Investment Company Act of
1940, respectively, shall be paid by the Depositor.
Section 10.03. Registration (Initial and Current) of Units and Fund. The
Depositor agrees and undertakes on its own part to register the Units and the
Fund with the Securities and Exchange Commission and under the Blue Sky laws of
such states as the Depositor may select.
Section 10.04. Certain Matters Relating to Unitholders. (a) The death or
incapacity of any Unitholder shall not operate to terminate this Agreement, the
Fund or the Trust Fund in which he holds Units nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Fund or such Trust
Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them. Each Unitholder expressly waives any right he
may have under any rule of law, or the provisions of any statute, or otherwise,
to require the Trustee at any time
-38-
<PAGE>
to account, in any manner other than as expressly provided in this Agreement, in
respect of the Bonds or moneys from time to time received, held and applied by
the Trustee hereunder.
(b) No Unitholder shall have any right to vote except as provided in
Sections 9.01 and 10.01 or in any manner otherwise to control the operation of
the Fund or the obligations of the parties hereto, nor shall anything set forth
in this Agreement or the Trust Agreement or contained in the terms of any
Certificates which may have been issued be construed so as to constitute the
Unitholders from time to time as partners or members of an association; nor
shall any Unitholder ever be under any liability to any third persons by reason
of any action taken by the parties to this Agreement, or for any other cause
whatsoever.
(c) By the purchase and acceptance or other lawful delivery and acceptance
of any Unit, whether certificated or not, the Unitholder shall be deemed to be a
beneficiary of the Trust created by this Agreement and the Trust Agreement and
vested with all right, title and interest in the Trust Fund therein created to
the extent of the Unit or Units set forth whether evidenced by such Certificate
or held in uncertificated form, subject to the terms and conditions of this
Agreement and the Trust Agreement.
(d) A Unitholder may at any time tender his Units or his Certificate(s) if
held in certificated form (including any temporary Certificate or other evidence
of ownership of Units of the Trust Fund, issued by the Trustee or the Depositor)
to the Trustee for redemption, subject to and in accordance with Section 5.02.
Section 10.05. Missouri Law to Govern. This Agreement is executed and
delivered in the State of Missouri, and all laws or rules of construction of
such State, except for provisions with respect to choice of law, shall govern
the rights of the parties hereto and the Unitholders and the interpretation of
the provisions hereof.
Section 10.06. Notices. Any notice, demand, direction or instruction to be
given to the Depositor hereunder shall be in writing and shall be duly given if
mailed, first class with proper postage prepaid, or delivered to the Depositor
at 120 South Riverside Plaza, Chicago, Illinois 60606, or at such other address
as shall be specified in Part II of the Trust Agreement or by the Depositor to
the other parties hereto in writing. Any notice, demand, direction or
instruction to be given to the Trustee shall be in writing and shall be duly
given if mailed, first class with proper postage prepaid, or delivered to the
principal trust office of the Trustee at 127 West 10th Street, Kansas City,
Missouri 64105, or such other address as shall be specified to the other parties
hereto by the Trustee in writing. Any notice, demand, direction or instruction
to be given to the Evaluator hereunder shall be in writing and shall be duly
given if mailed, first class with proper postage prepaid, or delivered to the
Evaluator at 120 South Riverside Plaza, Chicago, Illinois 60606, or at such
other address as shall be specified by the Evaluator to the other parties hereto
in writing. Any notice to be given to a Unitholder shall be duly given if
mailed, first class with proper postage prepaid, or delivered to each Unitholder
at the address of such holder appearing on the registration books of the
Trustee.
-39-
<PAGE>
Section 10.07. Severability. If any one or more of the covenants,
agreements, provisions or terms shall be for any reason whatsoever held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of any Certificates or the rights of the holders
thereof.
Section 10.08. Separate and Distinct Series. Each series of Kemper Defined
Funds (Tax-Exempt Portfolios), to which these Standard Terms and Conditions of
Trust shall be applicable shall, for all financial and administrative purposes,
be considered separate and distinct from every other series, and neither the
assets of nor the expenses of any one series shall be applied or charged against
any other series.
-40-
<PAGE>
In Witness Whereof, the parties hereto have caused these Standard Terms and
Conditions of Trust, Effective February 17, 1994 to be duly executed.
Kemper Securities, Inc.
Depositor
By___________________________________
Senior Vice President
Investors Fiduciary Trust Company,
Trustee
By___________________________________
Operations Officer
-41-
<PAGE>
EXHIBIT 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
February 17, 1994
Kemper Unit Investment Trusts
77 West Wacker Drive, 5th Floor
Chicago, Illinois 60601
Re: Kemper Defined Funds Series 13
------------------------------
Gentlemen:
We have served as counsel for Kemper Unit Investment Trusts, as Sponsor and
Depositor of Kemper Defined Funds Series 13 (the "Fund"), in connection with the
preparation, execution and delivery of Trust Agreements dated the date of this
opinion between Kemper Unit Investment Trusts, as Depositor, and Investors
Fiduciary Trust Company, as Trustee, pursuant to which the Depositor has
delivered to and deposited the Bonds listed in the Schedules to each Trust
Agreement with the Trustee and pursuant to which the Trustee has issued to or on
the order of the Depositor a certificate or certificates representing all the
Units of fractional undivided interest in, and ownership of, the Fund, created
under said Trust Agreements.
In connection therewith we have examined such pertinent records and documents
and matters of law as we have deemed necessary in order to enable us to express
the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreements and the
execution and issuance of certificates evidencing the Units of the
Fund have been duly authorized; and
2. The certificates evidencing the Units of the Fund, when duly
executed and delivered by the Depositor and the Trustee in accordance
with the aforementioned Trust Agreements, will constitute valid and
binding obligations of the Fund and the Depositor in accordance with
the terms thereof.
<PAGE>
-2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-52165) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
<PAGE>
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
February 17, 1994
Kemper Unit Investment Trusts
77 West Wacker Drive, 5th Floor
Chicago, Illinois 60601
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Re: Kemper Defined Funds Series 13
------------------------------
Gentlemen:
We have acted as counsel for Kemper Unit Investment Trusts, Depositor
of Kemper Defined Funds Series 13 (the "Fund"), in connection with the issuance
of Units of fractional undivided interest in the several Trusts of said Fund
under Trust Agreements dated February 17, 1994 (the "Indenture") between Kemper
Unit Investment Trusts, as Depositor and Evaluator and Investors Fiduciary Trust
Company, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we have
deemed pertinent.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation but
will be governed by the provisions of subchapter J (relating to
trusts) of chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Certificateholder will be considered as owning a pro rata
share of each asset of the respective 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, income of each Trust will be treated as income
of each Certificateholder of the respective Trust in the proportion
described, and an item of Trust income will have the same character in
the hands of a Certificateholder as it would have in the hands of the
Trustee. Accordingly, to the extent that the income of a Trust
consists of
<PAGE>
-2-
interest and original issue discount excludable from gross income
under Section 103 of the Code, such income will be excludable from
Federal gross income of the Certificateholders, except in the case of
a Certificateholder who is a substantial user (or a person related to
such user) of a facility financed through issuance of any industrial
development bonds or certain private activity bonds held by the
respective Trust. In the case of such Certificateholder (and no
other) interest received and original issue discount with respect to
his Units attributable to such industrial development bonds or such
private activity bonds is includable in his gross income. In the case
of certain corporations, interest on the Bonds is included in
computing the alternative minimum tax pursuant to Section 56(c) of the
Code, the environmental tax (the "Superfund Tax") imposed by Section
59A of the Code, and the branch profits tax imposed by Section 884 of
the Code with respect to U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a Certificateholder upon
redemption or sale of his Units. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the adjusted
basis of the Units represented by his Certificate. Before adjustment,
such basis would normally be cost if the Certificateholder had
acquired his Units by purchase, plus his aliquot share of advances by
the Trustee to the Trust to pay interest on Bonds delivered after the
Certificateholder's settlement date to the extent that such interest
accrued on the Bonds during the period from the Certificateholder's
settlement date to the date such Bonds are delivered to the respective
Trust, but only to the extent that such advances are to be repaid to
the Trustee out of interest received by such Trust with respect to
such Bonds. In addition, such basis will be increased by the
Certificateholder's aliquot share of the accrued original issue
discount with respect to each Bond held by the Fund with respect to
which there was an original issue discount at the time the Bond was
issued and reduced by the annual amortization of bond premium, if any,
on Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is
recognized to the Certificateholder and the amount thereof is measured
by comparing the Certificateholder's aliquot share of the total
proceeds from the transaction with his basis for his fractional
interest in the asset disposed of. Such basis is ascertained by
apportioning the tax basis for his Units among each of the Trust
assets (as of the date on which his Units were acquired) ratably
according to their values as of the valuation date nearest the date on
which he purchased such Units. A Certificateholder's basis in his
Units and of his fractional interest in each Trust asset must be
reduced by the amount of his aliquot share of interest received by the
Trust, if any, on bonds delivered after the Certificateholder's
settlement date to the extent that such interest accrued on the Bonds
during the
<PAGE>
-3-
period from the Certificateholder's settlement date to the date such
Bonds are delivered to the Trust, must be reduced by the annual
amortization of bond premium, if any, on Bonds held by the Trust and
must be increased by the Certificateholder's share of the accrued
original issue discount with respect to each Bond which, at the time
the Bond was issued, had original issue discount.
(v) In the case of any Bond held by the Trust where the "stated
redemption price at maturity" exceeds the "issue price", such excess
shall be original issue discount. With respect to each Unitholder,
upon the purchase of his Units subsequent to the original issuance of
Bonds held by the Trust, Section 1272(a)(7) of the Code provides for a
reduction in the accrued "daily portion" of such original issue
discount upon the purchase of a Bond subsequent to the Bond's original
issue, under certain circumstances. In the case of any Bond held by
the Trust the interest on which is excludable from gross income under
Section 103 of the Code, any original issue discount which accrues
with respect thereto will be treated as interest which is excludable
from gross income under Section 103 of the Code.
(vi) Certain bonds in the portfolios of certain of the Trusts have
been insured by the issuers thereof against default in the prompt
payment of principal and interest. Insurance has been obtained for
such bonds, or, in the case of a commitment, the bonds will be
ultimately insured under the terms of such an insurance policy, which
are designated as issuer insured bonds on the portfolio pages of the
respective Trusts in the prospectus for the Fund, by the issuer of
such bonds. Insurance obtained by the issuer is effective so long as
such bonds remain outstanding. For each of these bonds, we have been
advised that the aggregate principal amount of such bonds listed on
the portfolio page for the respective Trust was acquired by the
applicable Trust and is part of the series of such bonds listed on the
portfolio page for the respective Trust in the aggregate principal
amount listed on the portfolio page for the respective Trust. Based
upon the assumption that the bonds acquired by the applicable Trust
are part of the series covered by an insurance policy or, in the case
of a commitment, will be ultimately insured under the terms of such an
insurance policy, it is our opinion that any amounts received by the
applicable Trust representing maturing interest on such bonds will be
excludable from federal gross income if, and to the same extent as,
such interest would have been so excludable if paid in normal course
by the Issuer notwithstanding the source of the payment is from policy
proceeds. Paragraph (ii) of this opinion is accordingly applicable to
such payment.
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
<PAGE>
-4-
Bond, depending on the date the Bond was issued. In addition, special rules
apply if the purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which accrued to prior owners. The
application of these rules will also vary depending on the value of the bond on
the date a Certificateholder acquires his Units, and the price the
Certificateholder pays for his Units.
Because the Trusts do not include any "specified private activity"
bonds within the meaning of Section 57(a)(5) of the Code issued on or after
August 8, 1986, none of the Trust Fund's interest income shall be treated as an
item of tax preference when computing the alternative minimum tax. In the case
of corporations, for taxable years beginning after December 31, 1986, the
alternative minimum tax and the Superfund Tax depend upon the corporation's
alternative minimum taxable income ("AMTI") which is the corporation's taxable
income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items
used in computing AMTI and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust or
REMIC) for taxable years beginning after 1989, is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trust, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all
taxpayers are required to disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable
year of 100 percent of the otherwise deductible interest on indebtedness
incurred or continued by financial institutions, to which either Section 585 or
Section 593 of the Code applies, to purchase or carry obligations acquired after
August 7, 1986, the interest on which is exempt from Federal income taxes for
such taxable year. Under rules prescribed by Section 265, the amount of
interest otherwise deductible by such financial institutions in any taxable year
which is deemed to be attributable to tax-exempt obligations acquired after
August 7, 1986, will be the amount that bears the same ratio to the interest
deduction otherwise allowable (determined without regard to Section 265) to the
taxpayer for the taxable year as the taxpayer's average adjusted basis (within
the meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer,
unless such financial institution can otherwise establish, under regulations, to
be prescribed by the Secretary of the Treasury, the amount of interest on
indebtedness incurred or continued to purchase or carry such obligations.
We also call attention to the fact that, under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or carry Units
is not deductible for Federal
<PAGE>
-5-
income tax purposes. Under rules used by the Internal Revenue Service for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of Units may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the Tax Act") was recently
enacted. The Tax Act subjects tax-exempt bonds to the market discount rules of
the Code effective for bonds purchased after April 30, 1993. In general, market
discount is the amount (if any) by which the stated redemption price at maturity
exceeds an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued). Market
discount can arise based on the price a Trust pays for Bonds or the price a
Certificateholder 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
holds a Bond would be recognized as ordinary income by the Certificateholders
when principal payments are received on the Bonds, upon sale or at redemption
(including early redemption), or upon the sale or redemption of his or her
Units, unless a Certificateholder elects to include market discount in taxable
income as it accrues.
We have also examined the income tax law of the Commonwealth of
Virginia ("Virginia"), which is based upon the Federal Law, to determine its
applicability to the Virginia Trust (the "Virginia Trust") being created as
part of the Fund and to the holders of Units in the Virginia Trust who are
residents of the Commonwealth of Virginia ("Virginia Unitholders").
The assets of the Virginia Trust will consist of interest-bearing
obligations issued by or on behalf of Virginia ("Virginia") or counties,
municipalities, authorities or political subdivisions thereof (the "Bonds").
Although we express no opinion with respect to the issuance of the Bonds, in
rendering our opinion expressed herein, we have assumed that: (i) the Bonds were
validly issued, (ii) the interest thereon is excludable from gross income for
federal income tax purposes and (iii) the interest thereon is exempt from income
tax imposed by Virginia that is applicable to individuals and corporations (the
"Virginia Income Tax"). This opinion does not address the taxation of persons
other than full time residents of Virginia. Based upon the foregoing it is our
opinion that under Virginia income tax law, as presently enacted and construed:
(a) The Virginia Trust is not an association taxable as a
corporation for Virginia income tax purposes and each Unitholder of the
Virginia Trust will be treated as the owner of a pro rata portion of the
assets held by the Virginia Trust and
<PAGE>
-6-
the income of such portion of the assets held by the Virginia Trust will be
treated as income of the Unitholder for purposes of the Virginia Income
Tax.
(b) Income on the Bonds which is exempt from Virginia Income Tax
when received by the Virginia Trust, and which would be exempt from
Virginia Income Tax if received directly by a Unitholder, will retain its
status as exempt from such tax when received by the Virginia Trust and
distributed to such Unitholder.
(c) Each Unitholder will recognize gain or loss for purposes of
the Virginia Income Tax if the Trustee disposes of a bond (whether by
redemption, sale or otherwise) or if the Unitholder redeems or sells Units
of the Virginia Trust to the extent that such a transaction results in a
recognized gain or loss to such Unitholder for federal income tax purposes,
except as described in this paragraph. Virginia law provides that all
income from certain tax-exempt obligations issued under the laws of
Virginia, including any profits made from the sale of such Bonds, shall be
exempt from all taxation by Virginia. Although we express no opinion, the
Virginia Department of Taxation has indicated that the gains recognized for
federal income tax purposes on such tax-exempt obligations would not be
subject to Virginia Income Taxation. Accordingly, any such gain relating
to the disposition of any Bond that would not be subject to Virginia Income
Tax if the Bond was held directly by a Unitholder will retain its tax-
exempt status for purposes of the Virginia Income Tax when the Bond is
disposed of by the Virginia Trust or when the Unitholder is deemed to have
disposed of his pro rata portion of such Bond upon the disposition of his
Unit provided that such gain can be determined with reasonable certainty
and subtantiated.
(d) The Virginia Income Tax does not permit a deduction of
interest paid on indebtedness incurred or continued to purchase or carry
Units in the Virginia Trust to the extent that interest income related to
the Ownership of Units is exempt from Virginia Income Tax.
In the case of Unitholders subject to the Virginia Bank Franchise Tax, the
income derived by such a Unitholder from his pro rata portion of the Bonds held
by the Virginia Trust may affect the determination of such Unitholder's Bank
Franchise Tax. Prospective investors should consult their tax advisors.
We have not examined any of the Bonds to be deposited and held in the
Virginia
Trust or the proceedings for the issuance thereof or the opinions of the bond
counsel with respect thereto, and therefore express no opinion as to the
exemption from Virginia Income Tax of interest on the Virginia Bonds if received
directly by a Unitholder. In addition, we express no opinion with respect to
any taxes or items other than those described above.
<PAGE>
-7-
We have also examined the laws of the State of Missouri to determine
their applicability to the Fund. It is our opinion that under Missouri law, as
presently enacted and construed:
(i) Each Trust is not an association taxable as a corporation for
Missouri income tax purposes.
(ii) The Unitholders of each Trust will be treated as the owners of a
pro rata portion of each Trust and the income of each Trust will therefore
be treated as income of the Unitholders under Missouri law.
(iii) Each Trust will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of each
Trust will not generally be subject to the Kansas City, Missouri Earnings
and Profits Tax or the City of St. Louis Earnings Tax (except in the case
of certain Unitholders, including corporations, otherwise subject to the
St. Louis City Earnings Tax).
The scope of this opinion is expressly limited to the matters set
forth herein, and, except as expressly set forth above, we express no opinion
with respect to any other taxes, including state or local taxes or collateral
tax consequences with respect to the purchase, ownership and disposition of
Units.
Very truly yours,
CHAPMAN AND CUTLER
<PAGE>
EXHIBIT 3.2
TANNER PROPP & FARBER
99 Park Avenue
New York, New York 10016
February 17, 1994
Kemper Defined Funds,
Series 13
c/o Chapman & Cutler
Ill West Monroe Street
Chicago, IL 60603
Attn: Mark Kneedy, Esq.
Dear Sirs:
We have acted as special counsel for the Kemper Defined Funds, Series 13
(the "Fund"), which includes, among others, the Insured New York Series 4 Trust
(the "Trust") for the purposes of determining the applicability of certain New
York taxes under the circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"), dated
as of today (the "Date of Deposit") among Kemper Unit Investment Trust, a
service of Kemper Securities Group, Inc. (the "Depositor"), Kemper Unit
Investment Trust, a service of Kemper Securities Group, Inc., as Evaluator, and
Investors Fiduciary Trust Company as Trustee (the "Trustee"). As described in
the prospectus relating to the Fund dated today to be filed as an amendment to a
registration statement previously filed with the Securities and Exchange
Commission (file number 33-52165) under the Securities Act of 1933, as amended
(the "Prospectus" and the "Registration Statement"), the objectives of the Fund
are the generation of income exempt from Federal taxation and as regards the
Trust exempt from the income tax of New York State and New York City. No
opinion is expressed herein with regard to the Federal or State tax aspects of
the bonds, the Fund, or any other trusts in the Fund, other than the Trust.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee with
respect to the Trust, the total principal amount of interest bearing obligations
and/or contracts for the purchase thereof together with an irrevocable letter of
credit in the amount required for the purchase price and accrued interest, if
any, and an insurance policy purchased by the Depositor evidencing the insurance
guaranteeing the timely payment of principal and interest
<PAGE>
Kemper Tax Exempt
February 17, 1994
Page 2
of the obligations comprising the corpus of the Trust other than those
obligations the timely payment of principal and interest of which are guaranteed
by an insurance policy purchased by the issuer thereof or a prior owner, which
may be the Depositor prior to the Date of Deposit.
We understand with respect to the obligations described in the preceding
paragraph that all insurance, whether purchased by the Depositor, a prior owner
or the issuer, provides, or will provide, that the amount paid by the insurer in
respect of any bond may not exceed the amount of principal and interest due on
the bond and such payment will in no event relieve the issuer from its
continuing obligation to pay such defaulted principal and interest in accordance
with the terms of the obligation.
The Trustee will not participate in the selection of the obligations to be
deposited in the Trust, and, upon the receipt thereof, will deliver to the
Depositor a registered certificate for the number of Units representing the
entire capital of the Trust as more fully set forth in the Prospectus and the
Registration Statement. The Units, which are represented by certificates
("Certificates"), will be offered to the public by the Prospectus upon the
effectiveness of the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will consist
primarily of crediting the appropriate accounts with interest received by the
Trust and with the proceeds from the disposition of obligations held in the
Trust and the distribution of such interest and proceeds to the Unit holders of
the Trust. The Trustee will also maintain records of the registered holders of
Certificates representing an interest in the Trust and administer the redemption
of Units by such Certificate holders and may perform certain administrative
functions with respect to an automatic investment option.
Generally, obligations held in the Fund may be removed therefrom by the
Trustee only upon redemption prior to their stated maturity, at the direction of
the Depositor in the event of an advance refunding or upon the occurrence of
certain other specified events which adversely affect the sound investment
character of the Fund, such as default by the issuer in payment of interest or
principal on the obligation and no provision for payment is made therefor either
pursuant to insurance or otherwise and the Depositor fails to instruct the
Trustee, within thirty (30) days after notification, to hold such obligation.
Prior to the termination of the Fund, the Trustee is empowered to sell
Bonds, from a list furnished by the Depositor, only for the purpose of redeeming
Units tendered to it and of paying expenses for which funds are not available.
The Trustee does not have the power to vary the investment of any Unit holder in
the Fund, and under no circumstances may the proceeds of sale of any obligations
held by the Fund be used to purchase new obligations to be held therein.
<PAGE>
Kemper Tax Exempt
February 17, 1994
Page 3
Article 9-A of the New York Tax Law imposes a franchise tax on business
corporations, and, for purposes of that Article, Section 208(l) defines the term
"corporation" to include, among other things, "any business conducted by a
trustee or trustees wherein interest or ownership is evidenced by certificate or
other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in which interest or
ownership is evidenced by certificate or other written instrument includes,
but is not limited to, an association commonly referred to as a "business
trust" or "Massachusetts trust". In determining whether a trustee or
trustees are conducting a business, the form of the agreement is of
significance but is not controlling. The actual activities of the trustee
or trustees, not their purposes and powers, will be regarded as decisive
factors in determining whether a trust is subject to tax under Article 9-A.
The mere investment of funds and the collection of income therefrom, with
incidental replacement of securities and reinvestment of funds, does not
constitute the conduct of a business in the case of a business conducted by
a trustee or trustees. 20 NYCRR 1-2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be subject
to the franchise tax have also delineated the general rule that where a trustee
merely invests funds and collects and distributes the income therefrom, the
trust is not engaged in business and is not subject to the franchise tax.
Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept. 1948), order
resettled 274 A.D. 1083, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an opinion of the Attorney General of the State of New York, 47 N.Y.
Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making up
the trust only upon the happening of certain specified events or the existence
of certain specified conditions, the trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell obligations
contained in the corpus of the Fund and reinvest the proceeds therefrom.
Further, the power to sell such obligations is limited to circumstances in which
the creditworthiness or soundness of the obligation is in question or in which
cash is needed to pay redeeming Unit holders or to pay expenses, or where the
Fund is liquidated pursuant to the termination of the Indenture. Only in
circumstances in which the issuer of an obligation attempts to refinance it can
the Trustee exchange an obligation for a new security. In substance, the
Trustee will merely collect and
<PAGE>
Kemper Tax Exempt
February 17, 1994
Page 4
distribute income and will not reinvest any income or proceeds, and the Trustee
has no power to vary the investment of any Unit holder in the Fund.
Under Subpart E of Part 1, Subchapter J of Chapter I of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust will be
deemed to be the owner of the trust under certain circumstances, and therefore
taxable on his proportionate interest in the income thereof. Where this Federal
tax rule applies, the income attributed to the grantor will also be income to
him for New York income tax purposes. See TSB-M-78(9)(c), New York Department
of Taxation and Finance, June 23, 1978.
Article 22 (Personal Income Tax) of the New York Tax Law imposes a tax on a
New York State resident individual's State adjusted gross income. Such amount
is defined by Section 612 as his Federal adjusted gross income, with an addition
for interest income on the obligations of a state or political subdivision of a
state other than New York, if excluded from his federal adjusted gross income.
Such amount is defined by Section T46-112 of the Administrative Code of The City
of New York as his Federal adjusted gross income, with an addition for interest
income on the obligations of a state or political subdivision of a state other
than New York, if excluded from his federal adjusted gross income. 48 U.S.C.
Section 745 exempts interest on a bond issued by the Government of Puerto Rico
or a political subdivision thereof from tax of the United States, of any state,
and of any state's county, municipality, or municipal subdivision thereof. 48
U.S.C. Section 1423a exempts interest on a bond issued by the Government of Guam
or by its authority from taxation by the United States, any state or political
subdivision. The Trust holds only obligations issued by New York State or a
political subdivision thereof or by the Government of Puerto Rico or a political
subdivision thereof, or by the Government of Guam or by its authority.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder of the Trust will be
considered as owning a share of each asset of the Trust in the proportion that
the number of Units held by such holder bears to the total number of Units
outstanding and the income of the Trust will be treated as the income of each
Unit holder of the Trust in said proportion pursuant to Subpart E of Part 1,
Subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and Cutler,
counsel for the Depositor, dated today, upon which we specifically rely, we are
of the opinion that under existing laws, rulings, and court decisions
interpreting the laws of the State and City of New York:
1. The Trust will not constitute an association taxable as a
corporation under New York law, and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax.
<PAGE>
Kemper Tax Exempt
February 17, 1994
Page 5
2. The income of the Trust will be treated as the income of the Unit
holders under the income tax laws of the State and City of New York.
3. Resident individuals of New York State and City will not be subject
to the State or City personal income taxes on interest income on their
proportionate shares of interest income earned by the Trust on any
obligation of New York State or a political subdivision thereof or of the
Government of Puerto Rico or a political subdivision thereof or of the
Government of Guam or by its authority, to the extent such income is
excludable from Federal gross income under Code Section 103.
4. Any amounts paid under an insurance policy purchased by the
Depositor and deposited with the Trustee, as more fully described above,
representing maturing interest on defaulted obligations held by the Trustee
will not be subject to New York State or City income taxes if, and to the
same extent as, such amounts would have been excludable from New York State
or City income taxes if paid by the issuer. Paragraph 3 of this opinion is
accordingly applicable to such policy proceeds representing maturing
interest.
5. Any amounts paid under an insurance policy purchased by the
issuer of an obligation or a prior owner, as more fully described
above, representing maturing interest on such defaulting obligation held by
the Trustee will not be subject to New York State or City income taxes if,
and to the same extent as, such amounts would have been excludable from New
York State or City income taxes if paid by the issuer. Paragraph 3 of this
opinion is accordingly applicable to such policy proceeds representing
maturing interest.
6. Resident individuals of New York State and City who hold Units will
recognize gain or loss, if any, under the State or City personal income tax
law if the Trustee disposes of a Fund asset. The amount of such gain or
loss is measured by comparing the Unit holder's aliquot share of the total
proceeds from the transaction with his basis for his fractional interest in
the asset disposed of. Such basis is ascertained by apportioning the tax
basis for his Units among each of the Trust's assets (as of the date on
which his Units were acquired) ratably according to their values as of the
valuation date nearest the date on which he purchased such Units. A Unit
holder's basis in his Units and of his fractional interest in the Trust's
assets must be reduced by the amount of his aliquot share of interest
received by the Trust, if any, on bonds delivered after the settlement date
to the extent that such interest accrued on the Bonds during the period
from the Unit holder's settlement date to the date such Bonds are delivered
to tile Trust and must be adjusted for amortization of bond premium or
accretion of original issue discount, if any, on tax-exempt obligations
held by the Trust.
<PAGE>
Kemper Tax Exempt
February 17, 1994
Page 6
7. Resident individuals of New York State and City who hold Units will
recognize gain or loss, if any, under the State or City personal income tax
law if the Unit holder sells or redeems any Units. Such gain or loss is
measured by comparing the proceeds of such redemption or sale with the
adjusted basis of the Units redeemed or sold. Before adjustment, such
basis would normally be cost if the Unit holder had acquired his Units by
purchase, plus his aliquot share of advances by the Trustee to the Trust to
pay interest on Bonds delivered after the Unit holder's settlement date to
the extent that such interest accrued on the Bonds during the period from
the settlement date to the date such Bonds are delivered to the Trust, but
only to the extent that such advances are to be repaid to the Trustee out
of interest received by the Trust with respect to such Bonds.
8. Unit holders who are not residents of New York State are not
subject to the personal income tax law thereof with respect to any interest
or gain derived from the Trust or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business, trade, profession or occupation
carried on in New York State.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and the
reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
Tanner Propp & Farber
<PAGE>
EXHIBIT 4.1
Consent of Moody's Investors Service
Laura Levenstein 99 Church Street
Vice President New York, NY 10007
Structured Ratings 212-553-0319
Public Finance Department
February 17, 1994
Mr. Mike Thoms
Kemper Securities Group, Inc.
Unit Investment Trust
77 West Wacker Drive-5th Floor
Chicago, IL 60601
Re: Kemper Defined Funds, Insured National Series 8, Insured New York
Series 4, and Virginia Series 1.
Dear Mr. Thoms:
Please be advised that once Moody's Investors Service has independently verified
the existence of insurance policies on all Bonds expected to be included in the
Trusts, we will assign Aaa ratings to the Units in the series of Trusts
described above. The ratings on the Units will reflect the portfolios of the
Trusts, which will be composed solely of securities covered by bond insurance
policies. The insurance companies issuing the policies are all rated Aaa by
Moody's.
Insurance guarantying the payments of principal and interest, when due, on the
Bonds in the portfolio of the Trust has been obtained from an insurance company
either by the Trust, by the Issuer of the Bonds involved, by a prior owner of
the Bonds or by the Sponsor prior to the deposit of such Bonds in the Trust. It
is important to note that the insurance relates only to the Bonds in the Trust
and does not directly insure the Units or assure payment of the market value
thereof. While as a result of such insurance the Units of the Trust will receive
a rating of "Aaa" by Moody's Investors Service, Moody's has indicated that
this rating is not a recommendation to buy, hold or sell Units. This rating
reflects Moody's determination that the Bonds in the portfolio of the Trust are
judged to be of the best quality. This rating does not reflect a determination
by Moody's that the Unitholder will receive all principal and interest payable
on such Bonds through their nominal maturity. This is due to the possibility
that the Trust may, for a variety of reasons, dispose of such Bonds, including
sales to meet redemptions, to pay expenses of the Trustee, to wind up the Trust
when the value of the Bonds in the Trust falls below a certain minimum amount
and for other reasons specified in the Indenture. Accordingly, while the "Aaa"
rating reflects that such Bonds in the portfolio carry the smallest degree of
credit risk and they are generally considered to be "gilt edged", this rating
does not assure a Unitholder that it will receive all principal and interest
payable on such Bonds through their nominal maturity.
<PAGE>
Page 2
This letter evidences our consent to the use of the name of Moody's Investors
Service in connection with the rating assigned to the Units in the registration
statement or prospectus relating to the Units or the Trusts. However, this
letter should not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name of Moody's
Investors Service in connection with the ratings assigned to the securities
contained in the Trust. You are hereby authorized to file a copy of this letter
with the Securities and Exchange Commission.
Please send us copies of the prospectus as soon as it is available, as well as
any mini-prospectus or other sales materials.
Please do not hesitate to call should you have any additional questions or
requests.
Sincerely,
Laura Levenstein
<PAGE>
Exhibit 4.2
Consent of Muller Data Corporation,
90 Fifth Avenue,
New York, New York 10011
Kemper Capital Markets, Inc.
Unit Investment Trusts
77 West Wacker Drive-5th Floor
Chicago, Illinois 60601-1994
RE: Kemper Defined Funds Insured National Series 8
Kemper Defined Funds Insured New York Series 4
Kemper Defined Funds Virginia Series 1
Gentlemen:
We have examined Registration Statement File No. 33-52165 for the above
captioned trust. We hereby acknowledge that Muller Data Corporation is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Registration Statement of the reference to Muller Data Corporation as evaluator.
In addition, we hereby confirm that the ratings indicated in the Registration
Statement for the respective bonds comprising the trust portfolio are the
ratings indicated in our Muniview data base as of the date of the Evaluation
Report.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
/s/ Neil Edelstein
- ----------------------
Neil Edelstein,
Executive Vice President
NE/tg
<PAGE>
EXHIBIT 4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
-------------------------------------------------
We have issued our report dated February 17, 1994 on the statements of
condition and related bond portfolio of Kemper Defined Funds Series 13 (Insured
National Series 8, Insured New York Series 4 and Virginia Series 1) as of
February 17, 1994 contained in the Registration Statement on Form S-6 and in the
Prospectus. We consent to the use of our report in the Registration Statement
and in the Prospectus and to the use of our name as it appears under the caption
"Other Matters-Independent Certified Public Accountants".
GRANT THORNTON
Chicago, Illinois
February 17, 1994
