<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1994
REGISTRATION NO. 33-
CIK# 910744
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
REGISTRATION STATEMENT
ON
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 17
B. NAME OF DEPOSITOR:
KEMPER SECURITIES, INC.
(through its Kemper Unit Investment Trusts service)
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
KEMPER UNIT INVESTMENT TRUSTS
77 West Wacker Drive, 5th Floor
Chicago, Illinois 60601
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
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PROPOSED MAXIMUM
TITLE AND AMOUNT OF AGGREGATE OFFERING AMOUNT OF
SECURITIES BEING REGISTERED PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series 17 An indefinite number of Units of Indefinite $500
Beneficial Interest pursuant to
Rule 24f-2 under the Invest-
ment Company Act of 1940
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
/ / CHECK BOX IF IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE AT
ON 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.
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<PAGE> 2
KEMPER DEFINED FUNDS
SERIES 17
------------------
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
<S> <C>
1. (a) Name of trust................................. Prospectus Front Cover
(b) Title of securities issued.................... Essential Information
2. Name and address of each depositor.................
3. Name and address of trustee........................ Administration of the Trust
4. Name and address of principal underwriters......... Administration of the Trust
5. State of organization of trust..................... The Trust Fund
6. Execution and termination of trust agreement....... The Trust Fund; Administration of the
Trust
7. Changes of name.................................... The Trust Fund
8. Fiscal year........................................
9. Litigation......................................... *
<CAPTION>
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
<S> <C>
10. (a) Registered or bearer securities............... Unitholders
(b) Cumulative or distributive securities......... The Trust Fund
(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 Trust;
Unitholders
(h) Consents required............................. Unitholders; Administration of the
Trust
(i) Other provisions.............................. Federal Tax Status
11. Type of securities comprising units................ The Trust Fund; Trust Portfolio
12. Certain information regarding periodic payment
certificates....................................... *
Essential Information; Public
Offering of Units; Interest,
13. (a) Load, fees, expenses, etc..................... Estimated Long-Term Return and
Estimated Current Return; Expenses of
the Trust
(b) Certain information regarding periodic payment
certificates................................ *
(c) Certain percentages........................... Essential Information; Public
Offering of Units
(d) Certain other fees, etc. payable by holders... Unitholders
(e) Certain profits receivable by depositor,
principal underwriters, trustee or
affiliated Expenses of the Trust;
persons..................................... Public Offering of Units
(f) Ratio of annual charges to income............. *
The Trust Fund;
14. Issuance of trust's securities..................... Unitholders
15. Receipt and handling of payments from purchasers... *
</TABLE>
- ---------------
* Inapplicable, answer negative or not required.
i
<PAGE> 3
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- -------------------------------------------------------- -------------------------------------
<S> <C>
The Trust Fund; Trust Portfolio;
16. Acquisition and disposition of underlying Investment Supervision
securities.........................................
Market for Units; Redemption;
17. Withdrawal or redemption........................... Public Offering of Units
18. (a) Receipt, custody and disposition of income.... Unitholders
(b) Reinvestment of distributions................. Distribution Reinvestment
(c) Reserves or special funds..................... Expenses of the Trust
(d) Schedule of distributions..................... *
Unitholders; Redemption;
19. Records, accounts and reports...................... Administration of the Trust
20. Certain miscellaneous provisions of trust agreement
(a) Amendment.....................................
(b) Termination................................... Administration of the Trust
(c) and (d) Trustee, removal and successor........ Administration of the Trust
(e) and (f) Depositor, removal and successor...... Administration of the Trust
21. Loans to security holders.......................... *
22. Limitations on liability........................... Administration of the Trust
23. Bonding arrangements............................... *
24. Other material provisions of trust agreement....... *
<CAPTION>
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
<S> <C>
25. Organization of depositor.......................... Administration of the Trust
26. Fees received by depositor......................... See Items 13(a) and 13(e)
27. Business of depositor.............................. Administration of the Trust
28. Certain information as to officials and affiliated
persons of depositor............................... Administration of the Trust
29. Voting securities of depositor.....................
30. Persons controlling depositor...................... Administration of the Trust
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..................................
<CAPTION>
IV. DISTRIBUTION AND REDEMPTION
<S> <C>
35. Distribution of trust's securities by states....... Public Offering of Units
36. Suspension of sales of trust's securities..........
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 underwriters........
(b) N.A.S.D. membership of principal
underwriters................................ Administration of the Trust
40. Certain fees received by principal underwriters.... See Items 13(a) and 13(e)
41. (a) Business of principal underwriters............ Administration of the Trust
(b) Branch offices of principal underwriters......
(c) Salesmen of principal underwriters............ *
42. Ownership of trust's securities by certain
persons............................................
43. Certain brokerage commissions received by principal
underwriters....................................... Public Offering of Units
</TABLE>
- ---------------
* Inapplicable, answer negative or not required.
ii
<PAGE> 4
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- -------------------------------------------------------- -------------------------------------
<S> <C>
44. (a) Method of valuation........................... Public Offering of Units
(b) Schedule as to offering price................. *
(c) Variation in offering price to certain
persons..................................... Public Offering of Units
45. Suspension of redemption rights.................... Redemption
Redemption; Market for Units;
46. (a) Redemption valuation.......................... Public Offering of Units
(b) Schedule as to redemption price............... *
Market for Units;
47. Maintenance of position in underlying securities... Public Offering of Units;
Redemption
<CAPTION>
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C>
48. Organization and regulation of trustee............. Administration of the Trust
49. Fees and expenses of trustee.......................
50. Trustee's lien..................................... Expenses of the Trust
<CAPTION>
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
<S> <C>
51. Insurance of holders of trust's securities......... Cover Page; Expenses of the Trust
<CAPTION>
VII. POLICY OF REGISTRANT
<S> <C>
52. (a) Provisions of trust agreement with respect to
selection or elimination of underlying
securities.................................. The Trust Fund; Trust Portfolio;
Investment Supervision
(b) Transactions involving elimination of
underlying securities....................... *
(c) Policy regarding substitution or elimination
of underlying securities.................... Investment Supervision
(d) Fundamental policy not otherwise covered...... *
Essential Information;
53. Tax status of Trust................................ Trust Portfolio; Federal Tax Status
<CAPTION>
VIII. FINANCIAL AND STATISTICAL INFORMATION
<S> <C>
54. Trust's securities during last ten years...........
55.
56. Certain information regarding periodic payment *
57. certificates.......................................
58.
59. Financial statements (Instruction 1(c) to Form *
S-6)...............................................
</TABLE>
- ---------------
* Inapplicable, answer negative or not required.
iii
<PAGE> 5
PRELIMINARY PROSPECTUS DATED MARCH 1, 1994
SUBJECT TO CHANGE
KEMPER DEFINED FUNDS
SERIES 17
Kemper Defined Funds Series 17 includes Kemper Defined Funds Corporate Income
Series 2 which was formed for the purpose of providing a high level of current
income through investment in a fixed portfolio consisting primarily of high
yield, high risk dollar denominated foreign and domestic corporate debt
obligations issued after July 18, 1984 if interest thereon is U.S. source
income. The Trust also contains sovereign debt obligations. MOST OF THE
SECURITIES INCLUDED IN THE TRUST ARE COMMONLY KNOWN AS "JUNK BONDS" AND ARE
SUBJECT TO GREATER MARKET FLUCTUATIONS AND POTENTIAL RISK OF LOSS OF INCOME AND
PRINCIPAL THAN ARE INVESTMENTS IN LOWER-YIELDING, HIGHER RATED FIXED INCOME
SECURITIES. THE SECURITIES INCLUDED IN THE TRUST SHOULD BE VIEWED AS SPECULATIVE
AND AN INVESTOR SHOULD REVIEW HIS ABILITY TO ASSUME THE RISKS ASSOCIATED WITH
SPECULATIVE CORPORATE BONDS. THE PAYMENT OF INCOME IS DEPENDENT UPON THE
CONTINUING ABILITY OF THE ISSUERS AND/OR OBLIGORS TO MEET THEIR RESPECTIVE
OBLIGATIONS. SEE "TRUST PORTFOLIO -- RISK FACTORS" ON PAGE A-1.
Units of the Trust are not deposits of, or guaranteed by, any bank, and Units
are not federally insured or otherwise protected by the Federal Deposit
Insurance Corporation and involve investment risk including loss of principal.
For foreign investors who are not United States citizens or residents, interest
income from the Trust may not be subject to federal withholding taxes if certain
conditions are met. See "Federal Tax Status."
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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 , 1994.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
<PAGE> 6
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit during the initial
offering period is equal to a pro rata share of the offering prices of the Bonds
in the Trust plus or minus a pro rata share of (a) cash, if any, in the
Principal Account held or owed by the Trust, (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 Bonds in the Trust plus or minus
a pro rata share of (a) cash, if any, in the Principal Account held or owed by
the Trust (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 during the initial
offering period 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. For secondary market transactions the sales charge is
reduced on a graduated scale as set forth under "Public Offering of
Units--Public Offering Price."
INTEREST AND PRINCIPAL DISTRIBUTIONS. Distributions of the estimated annual
interest income to be received by the Trust, after deduction of estimated
expenses, will be made monthly. See "Unitholders--Distributions to Unitholders"
and "Essential Information." Distributions of funds, if any, in the Principal
Account will be made as provided in "Unitholders--Distributions to Unitholders."
REINVESTMENT. Each Unitholder may elect to have distributions of principal or
interest or both automatically invested without charge in shares of certain
Kemper mutual funds. See "Distribution Reinvestment."
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening of
business on the Initial Date of Deposit, the Estimated Long-Term Return and the
Estimated Current Return for the 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, 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 Returns will
be realized in the future. The 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 take into account the
amortization of premiums and the accretion of discounts) and estimated
retirement dates of all of the Bonds in the Trust and (2) takes into account the
expenses and sales charge associated with each Unit. Since the market values and
estimated retirement dates of the Bonds and the expenses of the Trust will
change, there is no assurance that the present Estimated Long-Term Return will
be realized in the future. The 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 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 Bonds in the Trust Fund plus Purchased
Interest and Daily Accrued Interest.
SPECIAL PORTFOLIO RISK CONSIDERATIONS. The Trust is comprised primarily of
securities rated below investment grade by Standard & Poor's Corporation,
Moody's Investors Service, Inc. or Duff & Phelps Credit Rating Co., which
securities are commonly referred to as "junk bonds." In addition, certain of the
securities in the Trust are obligations of foreign issuers. For special risks
associated with such securities, see "Trust Portfolio--Risk Factors."
2
<PAGE> 7
KEMPER DEFINED FUNDS
SERIES 17
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
SPONSOR AND EVALUATOR: KEMPER UNIT INVESTMENT TRUSTS, A SERVICE OF
KEMPER SECURITIES, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Public Offering Price per Unit(1)(2)....................................... $
Principal Amount of Bonds per Unit......................................... $
Estimated Current Return based on Public Offering Price(3)(4)(5)........... %
Estimated Long-Term Return(3)(4)(5)........................................ %
Estimated Normal Annual Distribution per Unit.............................. $
Principal Amount of Bonds.................................................. $
Number of Units............................................................
Fractional Undivided Interest per Unit.....................................
Calculation of Public Offering Price--Less than 10,000 Units:
Aggregate Offering Price of Bonds...................................... $
Aggregate Offering Price of Bonds per Unit............................. $
Purchased Interest(1).................................................. $
Purchased Interest per Unit............................................ $
Total Offering Price and Purchased Interest Per Unit(1).............. $
Plus Sales Charge per Unit(6).......................................... $
Public Offering Price per Unit(1)(2)..................................... $
Redemption Price per Unit.................................................. $
Sponsor's Initial Repurchase Price per Unit................................ $
Excess of Public Offering Price per Unit over Redemption Price per Unit.... $
Excess Public Offering Price per Unit over Sponsor's Initial Repurchase
Price per Unit........................................................... $
Calculation of Estimated Net Annual Interest Income per Unit:
Estimated Annual Interest Income....................................... $
Less: Estimated Annual Expense......................................... $
Estimated Net Annual Interest Income................................... $
Estimated Daily Rate of Net Interest Accrual per Unit...................... $
Trustee's Annual Fee per $1,000 principal amount of Bonds(7)............... $
Interest Payments(8):
First Payment per Unit, representing days.............................. $
Estimated Normal Monthly Distribution per Unit...........................
Estimated Normal Annual Distribution per Unit............................
Sales Charge(6):
As a percentage of Public Offering Price per Unit........................ %
As a percentage of net amount invested................................... %
As a percentage of net amount invested in earning assets................. %
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.
Date of Trust Agreement and Initial Date of Deposit...................... , 1994
First Settlement Date.................................................... , 1994
Mandatory Termination Date............................................... December 31, 2005
Evaluator's Annual Evaluation Fee........................................ Maximum of $0.30 per $1,000 principal
amount of Bonds
Sponsor's Annual Surveillance Fee........................................ Maximum of $0.25 per $1,000 principal
amount of Bonds
Minimum principal value of the Trust under which Trust Agreement may be
terminated............................................................. 40% of the initial aggregate principal
amount of Bonds deposited in the Trust
</TABLE>
3
<PAGE> 8
ESSENTIAL INFORMATION--(CONTINUED)
- ---------------
(1) Purchased interest is a portion of the unpaid interest that has accumulated
on the Bonds in the Trust from the later of the last payment date on the
Bonds or the date of issuance thereof through the First Settlement Date of
the 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 the 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 the Trust.
(2) Many unit investment trusts comprised of 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 the 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 $10.00 principal amount of underlying
securities per unit.
(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 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 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
indicated above will be realized in the future. The 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 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 the Trust will change, there is no assurance
that the present Estimated Long-Term Return as indicated above will be
realized in the future. The Estimated Current Return and Estimated Long-Term
Return are expected to differ because the calculation of the Estimated Long-
Term Return 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 Trust are either set forth under "Estimated Cash Flows to Unitholders" or
are available upon request at no charge from the Sponsor.
(6) 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.
(7) See "Expenses of the Trust."
(8) Unitholders will receive interest distributions monthly. The Record Date is
the first day of the month, commencing May 1, 1994, and the distribution date
is the fifteenth day of the month, commencing May 15, 1994.
4
<PAGE> 9
THE TRUST FUND
GENERAL
Kemper Defined Funds Series 17 is a unit investment trust created by the Sponsor
under the name Kemper Defined Funds. This Series includes one unit investment
trust entitled Kemper Corporate Income Trust Series 2 ("Strategic Dollar Trust")
(the "Trust" or "Trust Fund") and was created under the laws of the State of
Missouri pursuant to a trust indenture (the "Trust Agreement") dated the date of
this Prospectus (the "Initial Date of Deposit") between Kemper Unit Investment
Trusts, a service of Kemper Securities, Inc. (the "Sponsor"), and Investors
Fiduciary Trust Company (the "Trustee").*
The Trust was formed for the purpose of providing a high level of current income
through investment in a fixed portfolio consisting primarily of high yield, high
risk dollar denominated foreign and domestic corporate debt obligations issued
after July 18, 1984 and sovereign debt obligations (collectively, the
"Obligations" or "Bonds"). There is, of course, no guarantee that the Trust
Fund's objective will be achieved.
The Trust Fund may be an appropriate investment vehicle for investors who desire
to participate in a portfolio of intermediate term taxable fixed income
securities issued primarily by foreign and domestic corporate obligors with
greater diversification than investors might be able to acquire individually.
Diversification of the Trust assets will not eliminate the risk of loss always
inherent in the ownership of securities. In addition, Bonds of the type
deposited in the Trust Fund often are not available in small amounts.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee the
aggregate principal amount of Bonds indicated under "Essential Information" or
contracts for the purchase thereof for deposit in the Trust Fund along with an
irrevocable letter of credit issued by a major commercial bank in the amount
required for such purchases. In exchange for the Bonds (and contracts) so
deposited, the Trustee delivered to the Sponsor documentation evidencing the
ownership of that number of Units indicated under "Essential Information." The
Trust Fund initially consists entirely of delivery statements (i.e., contracts)
to purchase obligations.
Additional Units of the Trust may be issued at any time up to one year from the
Initial Date of Deposit by depositing in the Trust additional Bonds or contracts
to purchase Bonds together with irrevocable letters of credit or cash. As
additional Units are issued by the Trust as a result of the deposit of
additional Bonds by the Sponsor, the aggregate value of the Bonds in the Trust
will be increased and the fractional undivided interest in the Trust represented
by each Unit will be decreased. The Sponsor may continue to make additional
deposits of Bonds into the Trust for a period of up to 90 days following the
Initial Date of Deposit, provided that such additional deposits will be in
principal amounts which will maintain the same original percentage relationship
among the principal amounts of the Bonds in the Trust established by the initial
deposit of the Bonds. Thus, although additional Units will be issued, each Unit
will continue to represent the same principal amount of each Bond, and the
percentage relationship among the principal amount of each Bond in the Trust
will remain the same.
Each Unit initially offered represents that undivided interest in the Trust
involved indicated under "Essential Information." To the extent that any Units
are redeemed by the Trustee or additional Units are issued as a result of
additional Bonds being deposited by the Sponsor, the fractional undivided
interest in the Trust represented by each unredeemed Unit will increase or
decrease accordingly, although the actual interest in the Trust represented by
such fraction will remain unchanged. Units will remain outstanding until
redeemed upon tender to the Trustee by Unitholders, which may include the
Sponsor, or until the termination of the Trust Agreement.
- ---------------
* Reference is made to the Trust Agreement, and any statements contained herein
are qualified in their entirety by the provisions of the Trust Agreement.
5
<PAGE> 10
An investment in Units 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 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. The Sponsor cannot predict the degree to which
such fluctuations will continue in the future. The Trust is comprised primarily
of securities rated below investment grade by Standard & Poor's Corporation,
Moody's Investor Service, Inc., or Duff & Phelps Credit Rating Co., which
securities are commonly referred to as "junk bonds." For special risks
associated with such securities, see "Trust Portfolio--Risk Factors."
TRUST INFORMATION
<TABLE>
<S> <C> <C>
Number of Bonds.................................................................
Debt Obligations(1):
U.S. Corporate................................................................ ( %)
Foreign Corporate.............................................................
Foreign Sovereign............................................................. ( %)
Average life of the Bonds in the Trust(2)....................................... years
Percentage of "when, and as if issued" or "delayed delivery" Bonds purchased by
the Trust.....................................................................
Syndication(3)..................................................................
</TABLE>
- -------------------------
(1) 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 "Trust Portfolio."
(2) The average life of the Bonds in the Trust is calculated based upon the
stated maturities of the Bonds in the 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 the Trust may increase or decrease from time to time as Bonds mature or
are called or sold.
(3) The Sponsor and its affiliates 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 the Trust were acquired.
6
<PAGE> 11
KEMPER DEFINED FUNDS SERIES 17
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1994
<TABLE>
<CAPTION>
RATING(2)
-----------------------------
AGGREGATE STANDARD DUFF REDEMPTION COST OF BONDS
PRINCIPAL NAME OF ISSUER(1)(5) MOODY'S & POOR'S & PHELPS PROVISIONS(3) TO TRUST(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
- ---------------
See "Notes to Portfolio."
7
<PAGE> 12
NOTES TO PORTFOLIO:
* These Bonds are "when, as and if issued" or "delayed delivery" and have
expected settlement dates after the "First Settlement Date."
(1) Contracts to acquire Bonds were entered into by the Sponsor between
and . 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) A brief description of the applicable Standard & Poor's Corporation, Moody's
Investors Service, Inc. and Duff & Phelps Credit Rating Co. rating symbols
and their meanings is set forth under "Description of Ratings." "N.R."
indicates that the issue has not been rated by that rating agency.
(3) There is shown under this heading the year in which each issue of Bonds is
initially or currently 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 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 that issue of
Bonds.
(4) During the initial offering period, evaluations of Bonds are made on the
basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
PROFIT
OR ANNUAL
COST OF (LOSS) INTEREST BID SIDE
BONDS TO TO INCOME VALUE
SPONSOR SPONSOR TO TRUST OF BONDS
---------- -------- --------- ----------
<S> <C> <C> <C> <C>
Corporate Income Series 2..... $ $ $ $
</TABLE>
The Cost of Bonds to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, and certain
other carrying costs.
"+" indicates that such Bond has been issued by a partnership. All other
Bonds have been issued by corporate issuers.
(6) This Bond was issued at an original issue discount. The tax effect of Bonds
issued at an original issue discount is described in "Federal Tax Status".
This Bond has been purchased at a deep discount from the par value because
there is little or no stated interest income thereon. Bonds which pay no
interest are normally described as "zero coupon" bonds. Over the life of
bonds purchased at a deep discount the value of such bonds will increase
such that upon maturity the holders of such bonds will receive 100% of the
principal amount thereof. Approximately % of the aggregate principal
amount of the Bonds in the Trust were issued at an original issue discount.
8
<PAGE> 13
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
KEMPER DEFINED FUNDS
We have audited the accompanying statement of condition and the related
portfolio of Kemper Defined Funds Series 17 as of . The statement
of condition and portfolio 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 a letter of credit deposited to purchase 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 17
as of , in conformity with generally accepted accounting
principles.
GRANT THORNTON
Chicago, Illinois
9
<PAGE> 14
KEMPER DEFINED FUNDS,
SERIES 17
STATEMENT OF CONDITION
AT THE OPENING OF BUSINESS ON , THE INITIAL DATE OF DEPOSIT
<TABLE>
<CAPTION>
CORPORATE
INCOME
SERIES 1
----------
<S> <C>
INVESTMENT IN BONDS
Contracts to purchase Bonds(1)......................................................................... $
Accrued interest to the First Settlement Date(1)(2)....................................................
----------
Total................................................................................................ $
----------
----------
Units of fractional undivided interest outstanding:
----------
----------
LIABILITIES AND INTEREST OF UNITHOLDERS
Accrued interest payable to Sponsor(1)(2).............................................................. $
Interest of Unitholders--
Cost to investors(3).................................................................................
Less: Gross underwriting commission(3)...............................................................
----------
Net interest to Unitholders(1)(2)(3).................................................................
----------
Total.............................................................................................. $
----------
----------
</TABLE>
- ---------------
NOTES:
(1) The aggregate value of the Bonds listed in the portfolio and their cost to
the Trust are the same. The value of the Bonds is determined by Muller Data
Corporation on the bases set forth under "Public Offering of Units--Public
Offering Price." The contracts to purchase Bonds are collateralized by an
irrevocable letter of credit of $ , issued by Chemical Bank N.A.,
which has been deposited with the Trustee. Of this amount, $ relates
to the offering price of Bonds to be purchased and $ relates to accrued
interest on such Bonds to the expected dates of delivery.
(2) Accrued interest on the underlying 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 will advance to the Trust
a portion of the accrued interest on the underlying 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 Bonds ($ ) is payable
by investors and is included in the Public Offering Price. This portion is
called Purchased Interest.
(3) The aggregate public offering price includes a sales charge 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.
10
<PAGE> 15
COMPENSATION FOR FOREIGN WITHHOLDING TAX
Certain of the Bonds are subject to non-U.S. ("foreign") withholding taxes.
Certain issuers of Bonds which are subject to foreign withholding taxes have
generally agreed, subject to certain exceptions, to make additional payments
("Additional Payments") which together with other payments are intended to
compensate the holder of the Bond for the imposition of certain withholding
taxes. However, both the calculation of the Additional Payment and whether the
Additional Payment compensates the holder of the Bond for any related penalties,
interest or other charges imposed in connection with any applicable foreign
withholding taxes are likely to differ from Bond to Bond. Moreover, the
Additional Payment is itself treated as taxable income to Unitholders for U.S.
income tax purposes. The Additional Payment may not be based upon a "gross-up"
formula which would otherwise compensate an investor for the tax liability
triggered by the receipt of the Additional Payment. For any of these reasons, an
investor may not be adequately compensated for the actual foreign withholding
tax liabilities incurred. If the Trust obtains a certificate from an issuer
evidencing payment of foreign withholding taxes with respect to a Bond, the
Trust will so notify Unitholders. A Unitholder is required to include in his
gross income the entire amount of interest paid on his pro rata portion of the
Bond including the amount of tax withheld therefrom and the amount of any
Additional Payment. However, if the foreign tax withheld constitutes an income
tax for which U.S. foreign tax credits may be taken, the Unitholder may be able
to obtain applicable foreign tax credits (subject to statutory limitations) or
deductions. [See "Federal Tax Status".]
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
The Trust is not an association taxable as a corporation for United States
Federal income tax purposes.
Each Unitholder will be considered the owner of a pro rata portion of each of
the Trust assets for Federal income tax purposes under Subpart E, Subchapter J
of Chapter 1 of the Internal Revenue Code (the "Code"). Each Unitholder will be
considered to have received his pro rata share of interest derived from each
Trust asset when such interest is received by the Trust. Each Unitholder will
also be required to include in taxable income for Federal income tax purposes,
original issue discount with respect to his interest in any Bonds held by the
Trust at the same time and in the same manner as though the Unitholder were the
direct owner of such interest.
Each Unitholder will have a taxable event when a Bond is disposed of (whether by
sale, exchange, redemption, or payment at maturity) or when the Unitholder
redeems or sells his Units. The cost of the Units to a Unitholder on the date
such Units are purchased is allocated among the Bonds held in the Trust (in
accordance with the proportion of the fair market values of such Bonds) in order
to determine his tax basis for his pro rata portion in each Bond. Unitholders
must reduce the tax basis of their Units for their share of accrued interest
received, if any, on Bonds delivered after the date the Unitholders pay for
their Units 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, gain or loss is recognized to the Unitholder. The amount of
any such gain or loss is measured by comparing the Unitholder's pro rata share
of the total proceeds from such disposition with his basis for his fractional
interest in the asset disposed of. The basis of each Unit and of each Bond which
was issued with original issue discount (including the U.S. Treasury
obligations) must be increased by the amount of accrued original issue discount
and the basis of each Unit and of each Bond which was purchased by the Trust at
a premium must be reduced by the annual amortization of bond premium which the
Unitholder has properly elected to amortize under Section 171 of the Code. 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
11
<PAGE> 16
sold or redeemed for an amount equal to or less than his original cost. The U.S.
Treasury obligations held by the Trust are treated as bonds that were originally
issued at an original issue discount provided, pursuant to a Treasury Regulation
(the "Regulation") issued on December 28, 1992, that the amount of original
issue discount determined under Section 1286 of the Code is not less than a "de
minimis" amount as determined thereunder (as discussed below under "Original
Issue Discount"). Because the U.S. Treasury obligations represent interests in
"stripped" U.S. Treasury bonds, a Unitholder's initial cost for his pro rata
portion of each U.S. Treasury obligation held by the Trust (determined at the
time he acquires his Units, in the manner described above) shall be treated as
its "purchase price" by the Unitholder. Original issue discount is effectively
treated as interest for Federal income tax purposes, and the amount of original
issue discount in this case is generally the difference between the Bond's
purchase price and its stated redemption price at maturity. A Unitholder will be
required to include in gross income for each taxable year the sum of his daily
portions of original issue discount attributable to the U.S. Treasury
obligations held by the Trust as such original issue discount accrues and will,
in general, be subject to Federal income tax with respect to the total amount of
such original issue discount that accrues for such year even though the income
is not distributed to the Unitholders during such year to the extent it is not
less than a "de minimis" amount as determined under the Regulation. In general,
original issue discount accrues daily under a constant interest rate method
which takes into account the semi-annual compounding of accrued interest. In the
case of the U.S. Treasury obligations, this method will generally result in an
increasing amount of income to the Unitholders each year. Unitholders should
consult their tax advisers regarding the Federal income tax consequences and
accretion of original issue discount.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him, subject to the following limitation. It should be noted that as a result
of the Tax Reform Act of 1986, certain miscellaneous itemized deductions, such
as investment expenses, tax return preparation fees and employee business
expenses will be deductible by an individual only to the extent they exceed 2%
of such individual's adjusted gross income. Temporary regulations have been
issued which require Unitholders to treat certain expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
Acquisition Premium. If a Unitholder's tax basis of his pro rata portion in any
Bonds held by the Trust exceeds the amount payable by the issuer of the Bond
with respect to such pro rata interest upon the maturity of the Bond, such
excess would be considered "acquisition premium" which may be amortized by the
Unitholder at the Unitholder's election as provided in Section 171 of the Code.
Unitholders should consult their tax advisors regarding whether such election
should be made and the manner of amortizing acquisition premium.
Original Issue Discount. Certain of the Bonds of the Trust may have been
acquired with "original issue discount." In the case of any Bonds of the Trust
acquired with "original issue discount" that exceeds a "de minimis" amount as
specified in the Code or in the case of the U.S. Treasury obligations as
specified in the Regulation, such discount is includable in taxable income of
the Unitholders on an accrual basis computed daily, without regard to when
payments of interest on such Bonds are received. The Code provides a complex set
of rules regarding the accrual of original issue discount. These rules provide
that original issue discount generally accrues on the basis of a constant
compound interest rate over the term of the Bonds. Unitholders should consult
their tax advisers and to the amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the Bond by
the Trust exceeds its original issue price plus the amount of original issue
discount which would have previously accrued based upon its issue price (its
"adjusted issue price"). Similarly these special rules would apply to a
Unitholder if the tax basis of his pro rata portion of a Bond issued with
original issue discount exceeds his pro rata portion of its adjusted issue
price. Unitholders should also consult their tax advisers regarding these
special rules.
12
<PAGE> 17
It is possible that a Corporate Bond that has been issued at an original issue
discount may be characterized as a "high-yield discount obligation" within the
meaning of Section 163(e)(5) of the Code. To the extent that such an obligation
is issued at a yield in excess of six percentage points over the applicable
Federal rate, a portion of the original issue discount on such obligation will
be characterized as a distribution on stock (e.g., dividends) for purposes of
the dividends received deduction which is available to certain corporations with
respect to certain dividends received by such corporation.
Market Discount. If a Unitholder's tax basis in his pro rata portion of Bonds
is less than the allocable portion of such Bond's stated redemption price at
maturity (or, if issued with original issue discount, the allocable portion of
its "revised issue price"), such difference will constitute market discount
unless the amount of market discount is "de minimis" as specified in the Code.
Market discount accrues daily computed on a straight line basis, unless the
Unitholder elects to calculate accrued market discount under a constant yield
method. The market discount rules do not apply to the U.S. Treasury obligations
because they are stripped debt instruments subject to special original issue
discount rules as discussed above. Unitholders should consult their tax advisors
as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Bonds, on the sale, maturity or disposition of
such Bonds by the Trust, and on the sale by a Unitholder of Units, unless a
Unitholder elects to include the accrued market discount in taxable income as
such discount accrues. If a Unitholder does not elect to annually include
accrued market discount in taxable income as it accrues, deductions for any
interest expense incurred by the Unitholder which is incurred to purchase or
carry his Units will be reduced by such accrued market discount. In general, the
portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in income.
Unitholders should consult their tax advisers regarding whether an election
should be made to include market discount in income as it accrues and as to the
amount of interest expense which may not be currently deductible.
Computation of the Unitholder's Tax Basis. The tax basis of a Unitholder with
respect to his interest in a Bond is increased by the amount of original issue
discount (and market discount, if the Unitholder elects to include market
discount, if any, on the Bonds held by the Trust in income as it accrues)
thereon properly included in the Unitholder's gross income as determined for
Federal income tax purposes and reduced by the amount of any amortized
acquisition premium which the Unitholder has properly elected to amortize under
Section 171 of the Code. A Unitholder's tax basis in his Units will equal his
tax basis in his pro rata portion of all of the assets of the Trust.
Recognition of Taxable Gain or Loss Upon Disposition of Obligations by the Trust
or Disposition of Units. A Unitholder will recognize taxable capital gain (or
loss) when all or part of his pro rata interest in a Bond is disposed of in a
taxable transaction for an amount greater (or less) than his tax basis therefor.
Any gain recognized on a sale or exchange and not constituting a realization of
accrued "market discount," and any loss will, under current law, generally be
capital gain or loss except in the case of a dealer or financial institution. As
previously discussed, gain realized on the disposition of the interest of a
Unitholder in any Bond deemed to have been acquired with market discount will be
treated as ordinary income to the extent the gain does not exceed the amount of
accrued market discount not previously taken into income. Any capital gain or
loss arising from the disposition of a Bond by the Trust or the disposition of
Units by a Unitholder will be short-term capital gain or loss unless the
Unitholder has held his Units for more than one year in which case such capital
gain or loss will be long-term. For taxpayers other than corporations, net
capital gains are 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. The tax cost reduction requirements
of the Code relating to amortization
13
<PAGE> 18
of bond premium may under some circumstances, result in the Unitholder realizing
taxable gain when his Units are sold or redeemed for an amount equal to or less
than his original cost.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed of
his entire pro rata interest in all Trust assets including his pro rata portion
of all of the Bonds represented by the Unit. This may result in a portion of the
gain, if any, on such sale being taxable as ordinary income under the market
discount rules (assuming no election was made by the Unitholder to include
market discount in income as it accrues) as previously discussed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates on
ordinary income while capital gains remain subject to a 28 percent maximum
stated rate. Because some or all capital gains are taxed at a comparatively
lower rate under the Tax Act, the Tax Act includes a provision that
recharacterizes capital gains as ordinary income in the case of certain
financial transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the potential effect
of this provision on their investment in Units.
Foreign Investors. A Unitholder who is a foreign investor (i.e., an investor
other than a U.S. citizen or resident or a U.S. corporation, partnership, estate
or trust) will not be subject to United States federal income taxes, including
withholding taxes, on interest income on, or any gain from the sale or other
disposition of, his pro rata interest in any Bond or the sale of his Units
provided that all of the following conditions are met: (i) the interest income
or gain is not effectively connected with the conduct by the foreign investor of
a trade or business within the United States, (ii) the interest is United States
source income (which is the case for most securities issued by United States
issuers), the Bond is issued after July 18, 1984 (which is the case for each
Bond held by the Trust), the foreign investor does not own, directly or
indirectly, 10% or more of the total combined voting power of all classes of
voting stock of the issuer of the Bond and the foreign investor is not a
controlled foreign corporation related (within the meaning of Section 864(d)(4)
of the Code) to the issuer of the Bond, (iii) with respect to any gain, the
foreign investor (if an individual) is not present in the United States for 183
days or more during his or her taxable year and (iv) the foreign investor
provides all certification which may be required of his status. Foreign
investors should consult their tax advisers with respect to United States tax
consequences of ownership of Units.
It should be noted that the Tax Act includes a provision which eliminates the
exemption from United States taxation, including withholding taxes, for certain
"contingent interest." The provision applies to interest received after December
31, 1993. No opinion is expressed herein regarding the potential applicability
of this provision and whether United States taxation or withholding taxes could
be imposed with respect to income derived from the Units as a result thereof.
Unitholders and prospective investors should consult with their tax advisers
regarding the potential effect of this provision on their investment in Units.
General. Each Unitholder (other than a foreign investor who has properly
provided the certifications described in the preceding paragraph) will be
requested to provide the Unitholder's taxpayer identification number to the
Trustee and to certify that the Unitholder has not been notified that payments
to the Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder will be subject to
back-up withholding.
The foregoing discussion relates only to United States Federal income taxes;
Unitholders may be subject to state and local taxation in other jurisdictions
(including a foreign investor's country of residence). Unitholders should
consult their tax advisers regarding potential state, local, or foreign taxation
with respect to the Units.
14
<PAGE> 19
ESTIMATED CASH FLOWS TO UNITHOLDERS
The table below sets forth the estimated distributions of interest, principal
and rebates of Purchased Interest to Unitholders on a per 100 Units basis. The
table assumes no changes in expenses, no changes in the current interest rates,
no exchanges, redemptions, sales or prepayments of the underlying Bonds 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.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL PURCHASED INTEREST TOTAL
DATES DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
- -------------------------------------------- ------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
</TABLE>
15
<PAGE> 20
TRUST PORTFOLIO
PORTFOLIO SELECTION
The selection of Bonds for the Trust Fund was based largely upon the experience
and judgment of the Sponsor. In making such selections the Sponsor considered
the following factors: (a) the price of the Bonds relative to other issues of
similar quality and maturity; (b) the present rating and credit quality of the
issuers of the Bonds and the potential improvement in the credit quality of such
issuers; (c) the diversification of the Bonds as to location of issuer; (d) the
income to the Unitholders of the Trust; (e) whether the Bonds were issued after
July 18, 1984; and (f) the stated maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust other than the
U.S. Treasury obligations are rated "Ba" or better by Moody's Investors Service,
Inc. or "BB" or better by Standard & Poor's Corporation or Duff & Phelps Credit
Rating Co. See "Description of Ratings" and "The Trust Fund -- Portfolio."
Subsequent to the Initial Date of Deposit, a Bond may cease to be so rated. If
this should occur, the Trust would not be required to eliminate the Bond from
the Trust, but such event may be considered in the Sponsor's determination to
direct the Trustee to dispose of such investment. See "Investment Supervision."
RISK FACTORS
General. An investment in Units of the Trust should be made with an
understanding of the risks that an investment in "high yield", high risk, fixed
rate, foreign and domestic corporate debt obligations or "junk bonds" may
entail, including increased credit risks and the risk that the value of the
Units will decline, and may decline precipitously, with increases in interest
rates. In recent years there have been wide fluctuations in interest rates and
thus in the value of fixed-rate, debt obligations generally. Securities such as
those included in the Trust are, under most circumstances, subject to greater
market fluctuations and risk of loss of income and principal than are
investments in lower-yielding, higher rated securities, and their value may
decline precipitously because of increases in interest rates not only because
the increases in rates generally decrease values but also because increased
rates may indicate a slowdown in the economy and a decrease in the value of
assets generally that may adversely affect the credit of issuers of high yield,
high risk securities resulting in a higher incidence of defaults among high
yield, high risk securities. A slowdown in the economy, or a development
adversely affecting an issuer's creditworthiness, may result in the issuer being
unable to maintain earnings or sell assets at the rate and at the prices,
respectively, that are required to produce sufficient cash flow to meet its
interest and principal requirements. For an issuer that has outstanding both
senior commercial bank debt and subordinated high yield, high risk securities,
an increase in interest rates will increase that issuer's interest expense
insofar as the interest rate on the bank debt is fluctuating. However, many
leveraged issuers enter into interest rate protection agreements to fix or cap
the interest rate on a large portion of their bank debt. This reduces exposure
to increasing rates but reduces the benefit to the issuer of declining rates.
The Sponsor cannot predict future economic policies or their consequences or,
therefore, the course or extent of any similar market fluctuations in the
future. The portfolio consists of Obligations that, in many cases, do not have
the benefit of convenants that would prevent the issuer from engaging in capital
restructurings or borrowing transactions in connection with corporate
acquisitions, leveraged buy outs or restructurings that could have the effect of
reducing the ability of the issuer to meet its obligations and might result in
the ratings of the Obligations and the value of the underlying portfolio being
reduced.
The Obligations in the Trust consist exclusively of "high yield, high risk"
corporate bonds. "High yield" or "junk" bonds, the generic names for corporate
bonds rated below BBB by Standard & Poor's Corporation or Duff & Phelps Credit
Rating Co. or below Baa by Moody's Investor Service, Inc., are frequently issued
by corporations in the growth stage of their development, by established
companies whose operations or industries are depressed or by highly leveraged
companies purchased in leveraged buyout transactions. The
A-1
<PAGE> 21
market for high yield bonds is very specialized and investors in it have been
predominantly financial institutions. High yield bonds are generally not listed
on a national securities exchange. Trading of high yield bonds, therefore, takes
place primarily in over-the-counter markets which consist of groups of dealer
firms that are typically major securities firms. Because the high yield bond
market is a dealer market, rather than an auction market, no single obtainable
price for a given bond prevails at any given time. Prices are determined by
negotiation between traders. The existence of a liquid trading market for the
Obligations may depend on whether dealers will make a market in the Obligations.
There can be no assurance that a market will be made for any of the Obligations,
that any market for the Obligations will be maintained or of the liquidity of
the Obligations in any markets made. Not all dealers maintain markets in all
high yield bonds. Therefore, since there are fewer traders in these bonds than
there are in "investment grade" bonds, the bid-offer spread is usually greater
for high yield bonds than it is for investment grade bonds. The price at which
the Securities may be sold to meet redemptions and the value of the Trust will
be adversely affected if trading markets for the Obligations are limited or
absent. If the rate of redemptions is great, the value of the Trust may decline
to a level that requires liquidation (see "Administration of the
Trust -- Amendment and Termination").
Lower-rated securities tend to offer higher yields than higher-rated securities
with the same maturities because the creditworthiness of the issuers of
lower-rated securities may not be as strong as that of other issuers. Moreover,
if an Obligation is recharacterized as equity by the Internal Revenue Service
for Federal income tax purposes, the issuer's interest deduction with respect to
the Obligation will be disallowed and this disallowance may adversely affect the
issuer's credit rating. Because investors generally perceive that there are
greater risks associated with the lower-rated securities in the Trust, the
yields and prices of these securities tend to fluctuate more than higher-rated
securities with changes in the perceived quality of the credit of their issuers.
In addition, the market value of high yield, high risk, fixed-income securities
may fluctuate more than the market value of higher-rated securities since high
yield, high risk, fixed-income securities tend to reflect short-term credit
development to a greater extent than higher-rated securities. Lower-rated
securities generally involve greater risks of loss of income and principal than
higher-rated securities. Issuers of lower-rated securities may possess less
creditworthiness characteristics than issuers of higher-rated securities and,
especially in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders, owners of
property leased to the issuer or others which, if sustained, would make it more
difficult for the issuers to meet their payment obligations. High yield, high
risk bonds are also affected by variables such as interest rates, inflation
rates and real growth in the economy. Therefore, investors should consider
carefully the relative risks associated with investment in securities which
carry lower ratings.
The value of the Units reflects the value of the portfolio securities, including
the value (if any) of securities in default. Should the issuer of any Obligation
default in the payment of principal or interest, the Trust may incur additional
expenses seeking payment on the defaulted Obligation. Because amounts (if any)
recovered by the Trust in payment under the defaulted Obligation may not be
reflected in the value of the Units until actually received by the Trust, and
depending upon when a Unitholder purchases or sells his Units, it is possible
that a Unitholder would bear a portion of the cost of recovery without receiving
any portion of the payment recovered.
High yield, high risk bonds are generally subordinated obligations. The payment
of principal (and premium, if any), interest and sinking fund requirements with
respect to subordinated obligations of an issuer is subordinated in right of
payment to the payment of senior obligations of the issuer. Senior obligations
generally include most, if not all, significant debt obligations of an issuer,
whether existing at the time of issuance of subordinated debt or created
thereafter. Upon any distribution of the assets of an issuer with subordinated
obligations upon dissolution, total or partial liquidation or reorganization of
or similar proceeding relating to the issuer, the holders of senior indebtedness
will be entitled to receive payment in full before holders of subordinated
indebtedness will be entitled to receive any payment. Moreover, generally no
A-2
<PAGE> 22
payment with respect to subordinated indebtedness may be made while there exists
a default with respect to any senior indebtedness. Thus, in the event of
insolvency, holders of senior indebtedness of an issuer generally will recover
more, ratably, than holders of subordinated indebtedness of that issuer.
Obligations that are rated lower than BBB by Standard & Poor's or Duff & Phelps
or Baa by Moody's, respectively, should be considered speculative as such
ratings indicate a quality of less than investment grade. Investors should
carefully review the objective of the Trust and consider their ability to assume
the risks involved before making an investment in the Trust. See "Description of
Ratings" for a description of speculative ratings issued by Standard & Poor's,
Duff & Phelps and Moody's.
Foreign Issuers. % of the Bonds in the Trust are invested in securities of
foreign issuers. It is appropriate for investors in the Trust to consider
certain investment risks that distinguish investments in Bonds of foreign
issuers from those of domestic issuers. Those investment risks include future
political and economic developments, the possible imposition of withholding
taxes on interest income payable on the Bonds held in the portfolio, the
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions (including expropriation, burdensome or confiscatory taxation and
moratoriums) which might adversely affect the payment or receipt of payment of
amounts due on the Bonds. Investors should realize that, although the Trust
invests in U.S. dollar denominated investments, the foreign issuers which
operate internationally are subject to currency risks. The value of Bonds can be
adversely affected by political or social instability and unfavorable diplomatic
or other negative developments. In addition, because many foreign issuers are
not subject to the reporting requirements of the Securities Exchange Act of
1934, there may be less publicly available information about the foreign issuer
than a U.S. domestic issuer. Foreign issuers also are not necessarily subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. domestic issuers.
Liquidity. The Bonds in the Trust may not have been registered under the
Securities Act of 1933 and may not be exempt from the registration requirements
of the Act. Most of the Bonds will not be listed on a securities exchange.
Whether or not the Bonds are listed, the principal trading market for the Bonds
will generally be in the over-the-counter market. As a result, the existence of
a liquid trading market for the Bonds may depend on whether dealers will make a
market in the Bonds. There can be no assurance that a market will be made for
any of the Bonds, that any market for the Bonds will be maintained, or of the
liquidity of the Bonds in any markets made. The price at which the Bonds may be
sold to meet redemptions and the value of the Trust will be adversely affected
if trading markets for the Bonds are limited or absent. The trust may also
contain non-exempt Bonds in registered form which have been purchased on a
private placement basis. Sales of these Bonds may not be practicable outside the
United States, but can generally be made to U.S. institutions in the private
placement market which may not be as liquid as the general U.S. securities
market. Since the private placement market is less liquid, the prices received
may be less than would have been received had the markets been broader.
Exchange Controls. On the basis of the best information available to the Sponsor
at the present time none of the Bonds is subject to exchange control
restrictions under existing law which would materially interfere with payment to
the Trust of amounts due on the Bonds. However, there can be no assurance that
exchange control regulations might not be adopted in the future which might
adversely affect payments to the Trust. In addition, the adoption of exchange
control regulations and other legal restrictions could have an adverse impact on
the marketability of the Bonds in the Trust and on the ability of the Trust to
satisfy its obligation to redeem Units tendered to the Trustee for redemption.
Jurisdiction Over, and U.S. Judgments Concerning, Foreign Obligors. Non-U.S
issuers of the Bonds will generally not have submitted to the jurisdiction of
U.S. courts for purposes of lawsuits relating to those Bonds. If the Trust
contains Bonds of such an issuer, the Trust as a holder of those obligations may
not be able to assert its
A-3
<PAGE> 23
rights in U.S. courts under the documents pursuant to which the Bonds are
issued. Even if the Trust obtains a U.S. judgment against a foreign obligor,
there can be no assurance that the judgment will be enforced by a court in the
country in which the foreign obligor is located. In addition, a judgment for
money damages by a court in the United States if obtained, will ordinarily be
rendered only in U.S. dollars. It is not clear, however, whether, in granting a
judgment, the rate of conversion of the applicable foreign currency into U.S.
dollars would be determined with reference to the due date or the date the
judgment is rendered. Courts in other countries may have rules that are similar
to, or different from, the rules of the U.S. courts.
GENERAL TRUST INFORMATION
Because certain of the Bonds in the Trust may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with their terms
and because the proceeds from such events will be distributed to Unitholders and
will not be reinvested, no assurance can be given that the Trust will retain for
any length of time its present size and composition. Neither the Sponsor nor the
Trustee shall be liable in any way for any default, failure or defect in any
Bond. In the event of a failure to deliver any Bond that has been purchased for
the Trust under a contract, including those securities purchased on a "when, as
and if issued" basis ("Failed Obligations"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other securities ("Replacement
Obligations") to make up the original corpus of the Trust.
The Replacement Obligations must be purchased within 20 days after delivery of
the notice of the failed contract and the purchase price may not exceed the
amount of funds reserved for the purchase of the Failed Obligations. The
Replacement Obligations shall (i) be corporate bonds, debentures, notes or other
straight debt obligations (whether secured or unsecured and whether senior or
subordinated) without equity or other conversion features, with fixed maturity
dates substantially the same as those of the Failed Obligations having no
warrants or subscription privileges attached; (ii) be payable in United States
currency; (iii) not be when, as and if issued obligations or restricted
securities; (iv) be issued after July 18, 1984 if interest thereon is United
States source income; and (v) must have a fixed maturity date approximately the
maturity date of the Failed Obligation; (vi) 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 Initial Date of Deposit. Whenever a Replacement
Obligation has been acquired for the Trust, the Trustee shall, within five days
thereafter, notify all Unitholders of the Trust of the acquisition of the
Replacement Obligation and shall, on the next monthly distribution date which is
more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to the Trust of the Failed Obligation exceeded the cost
of the Replacement Obligation. Once the original corpus of the Trust is
acquired, the Trustee will have no power to vary the investment of the Trust;
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 paragraph shall
not be utilized to acquire Replacement Obligations in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Obligations to all Unitholders of the Trust and distribute the principal,
Purchased Interest and Daily Accrued Interest (at the coupon rate of such Failed
Obligations to the date the Failed Obligations are removed from the Trust)
attributable to such Failed Obligations not more than 30 days after such removal
or such earlier time as the Trustee in its sole discretion deems to be in the
interest of the Unitholders. In the event a Replacement Obligation should not be
acquired by the Trust, the estimated net annual interest income per Unit for the
Trust would be reduced and the Estimated Current Return and the Estimated
Long-Term Return thereon might be lowered. In addition, Unitholders should be
aware that they may not be able at the time of receipt of such principal to
reinvest such proceeds in other securities at a yield equal to or in excess of
the yield which such proceeds were earning to Unitholders in the Trust.
The Sponsor may not alter the portfolio of the Trust Fund except upon the
happening of certain extraordinary circumstances. See "Investment Supervision."
Certain of the Bonds may be subject to optional call or mandatory redemption
pursuant to sinking fund provisions, in each case prior to their stated
maturity. A bond
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<PAGE> 24
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 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
Fund--Portfolio." 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 Bonds and from Bonds which
mature in accordance with their terms, unless utilized to pay for Units tendered
for redemption, will be distributed to Unitholders and will not be used to
purchase additional Bonds for the Trust. Accordingly, any such call, redemption,
sale or maturity will reduce the size and diversity of the Trust and the net
annual interest income 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 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 Bonds is contained
in "The Trust Fund--Portfolio."
To the best of the Sponsor's knowledge, there is no litigation pending as of the
Initial Date of Deposit in respect of any Bond which might reasonably be
expected to have a material adverse effect on the Trust Fund. At any time after
the Initial Date of Deposit, litigation may be instituted on a variety of
grounds with respect to the Bonds. 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 the Trust Fund. The Sponsor and the
Trustee shall not be liable in any way for any default, failure or defect in any
Bond.
RETIREMENT PLANS
Units of the Trust Fund may be well suited for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans,
certain of which are briefly described below.
Generally, capital gains and income received under each of the foregoing plans
are deferred from federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered by
brokerage firms and other financial institutions. The Trust Fund will waive the
$1,000 minimum investment requirement for IRA accounts. The minimum investment
is $250 for tax-deferred plans such as IRA accounts. Fees and charges with
respect to such plans may vary.
Individual Retirement Account--IRA. Any individual under age 70 1/2 may
contribute the lesser of $2,000 or 100% of compensation to an IRA annually. Such
contributions are fully deductible if the individual (and spouse if filing
jointly) are not covered by a retirement plan at work. The deductible amount an
individual may contribute to an IRA will be reduced $10 for each $50 of adjusted
gross income over $25,000 ($40,000 if married, filing jointly or $0 if married,
filing separately), if either an individual or their spouse (if married, filing
jointly) is an active participant in an employer maintained retirement plan.
Thus, if an individual has adjusted gross income over $35,000 ($50,000 if
married, filing jointly or $0 if married, filing separately) and if an
individual or their spouse is an active participant in an employer maintained
retirement plan, no IRA deduction is permitted. Under the Internal Revenue Code
of 1986, as amended (the "Code"), an individual may make nondeductible
contributions to the extent deductible contributions are not allowed. All
A-5
<PAGE> 25
distributions from an IRA (other than the return of certain excess
contributions) are treated as ordinary income for federal income taxation
purposes provided that under the Code an individual need not pay tax on the
return of nondeductible contributions. The amount includable in income for the
taxable year is the portion of the amount withdrawn for the taxable year as the
individual's aggregate deductible IRA contributions bear to the aggregate
balance of all IRAs of the individual.
A participant's interest in an IRA must be, or commence to be, distributed to
the participant not later than April 1 of the calendar year following the year
during which the participant attains age 70 1/2. Distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability, or where the amount distributed is to be rolled over to another IRA,
or where the distributions are taken as a series of substantially equal periodic
payments over the participant's life or life expectancy (or the joint lives or
life expectancies of the participant and the designated beneficiary) are
generally subject to a surtax in an amount equal to 10% of the distribution. The
amount of such periodic payments may not be modified before the later of five
years or attainment of age 59 1/2. Excess contributions are subject to an annual
6% excise tax.
IRA applications, disclosure statements and trust agreements are available from
the Sponsor upon request.
Qualified Retirement Plans. Units of the Trust may be purchased by qualified
pension or profit sharing plans maintained by corporations, partnerships or sole
proprietors. The maximum annual contribution for a participant in a money
purchase pension plan or to paired profit sharing and pension plans is the
lesser of 25% of compensation or $30,000. Prototype plan documents for
establishing qualified retirement plans are available from the Sponsor upon
request.
Excess Distributions Tax. In addition to the other taxes due by reason of a
plan distribution, a tax of 15% may apply to certain aggregate distributions
from IRAs, Keogh plans, and corporate retirement plans to the extent such
aggregate taxable distributions exceed specified amounts (generally $150,000, as
adjusted) during a tax year. This 15% tax will not apply to distributions on
account of death, qualified domestic relations orders or amounts eligible for
tax-deferred rollover treatment. In general, for lump sum distributions the
excess distributions over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee, Investors Fiduciary Trust Company, has agreed to act as custodian
for certain retirement plan accounts. An annual fee of $12.00 per account, if
not paid separately, will be assessed by the Trustee and paid through the
liquidation of shares of the reinvestment account. An individual wishing the
Trustee to act as custodian must complete a Kemper UIT/IRA application and
forward it along with a check made payable to Investors Fiduciary Trust Company.
Certificates for Individual Retirement Accounts cannot be issued.
DISTRIBUTION REINVESTMENT
Each Unitholder of the Trust may elect to have distributions of principal
(including capital gains, if any) or interest or both automatically invested
without charge in shares of any open-end mutual fund underwritten or advised by
an affiliate of the Sponsor, Kemper Financial Services, Inc. (the "Kemper
Funds"), other than those Kemper Funds sold with a contingent deferred sales
charge.
If individuals indicate they wish to participate in the Reinvestment Program but
do not designate a reinvestment fund, the Program Agent referred to below will
contact such individuals to determine which reinvestment fund or funds they wish
to elect. Since the portfolio securities and investment objectives of such
Kemper Funds generally will differ significantly from that of the Trust Fund,
Unitholders should carefully consider the consequences before selecting such
Kemper Funds for reinvestment. Detailed information with respect to the
investment objectives and the management of the Funds is contained in their
respective prospectuses, which can be obtained from the Sponsor 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
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<PAGE> 26
such distributions automatically reinvested should inform their broker at the
time of purchase or should file with the Program Agent 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 Program
Agent at P.O. Box 419430, Kansas City, Missouri 64173-0216, telephone (816)
474-8786.
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return for the Trust Fund were as set
forth in the "Essential Information." 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 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 retirements of all 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 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 Bonds contracted for by the Trust Fund, it
may be necessary for the Sponsor or Trustee to pay on the dates for delivery of
such Bonds amounts covering accrued interest on such Bonds which exceed the
amount which will be made available in the letter of credit furnished by the
Sponsor on the Initial 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
Bonds.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of the 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
Bonds in the 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 the 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 the Trust Fund. The Public
Offering Price for secondary market transactions, on the other hand, is based on
the aggregate bid side evaluations of the Bonds in the Trust Fund (also,
currently, as determined by Muller Data Corporation, plus or minus (a) cash, if
any, in the Principal Account held or owned by the Trust Fund,
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<PAGE> 27
(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
----------------------------------------------------
7.5 TO 14.99 15 OR MORE
------------------------ ------------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT
NUMBER OF UNITS PRICE INVESTED PRICE INVESTED
- --------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1 to 9,999 Units................................... 3.9% 4.058% 4.2% 4.384%
10,000 to 24,999 Units............................. 3.7 3.842 4.0 4.167
25,000 to 49,999 Units............................. 3.5 3.627 3.8 3.950
50,000 to 99,999 Units............................. 3.3 3.413 3.5 3.627
100,000 or more Units.............................. 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 Fund 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 computation will be that different sales charge rates will be
applied to the Trust Fund based upon the dollar weighted average maturity of the
Trust Fund's portfolio, in accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENT PERCENT
OF OF
PUBLIC NET
DOLLAR WEIGHTED AVERAGE OFFERING AMOUNT
YEARS TO MATURITY 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
-----------------------------
DOLLAR WEIGHTED AVERAGE YEARS
TO MATURITY*
4 TO 8 TO 15 OR
7.99 14.99 MORE
-----------------------------
SALES CHARGE (PERCENT OF
DOLLAR AMOUNT OF TRADE PUBLIC OFFERING PRICE)
------------------------------
<S> <C> <C> <C>
$1,000 to $99,999............................. 3.50% 4.50% 5.50%
$100,000 to $499,999.......................... 3.25 4.25 5.00
$500,000 to $999,999.......................... 3.00 4.00 4.50
$1,000,000 or more............................ 2.75 3.75 4.00
</TABLE>
- ---------------
* If the dollar weighted average maturity of the Trust 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.
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<PAGE> 28
The reduced sales charges will also be applicable to a trust or other fiduciary
purchasing for a single trust estate or single fiduciary account.
Unitholders of the various series of Kemper Insured Corporate Trust and Kemper
Defined Funds Insured Corporate Series who meet the conditions in the next
succeeding sentence may, during the primary offering period of the Trust,
acquire Units of the Trust at the reduced sales charge equivalent to purchases
during the initial offering period of 100,000 or more Units. First, the special
sales charge discount only applies to purchases acquired with funds received
from distributions of unscheduled principal payments in connection with units
issued in such series and, second, the minimum purchase must be at least $1,000.
The Sponsor intends to permit officers, directors and employees of the Sponsor
and Evaluator and at the discussion 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 Units of the Trust Fund been available for sale at the opening of business
on the Initial Date of Deposit, the Public Offering Price would have been as
shown under "Essential Information." The Public Offering Price per Unit of the
Trust Fund on the date of this 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 Bonds and the amount of accrued
interest on the Units. On the Initial 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 Initial 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 Bonds shall be determined (a)
on the basis of current bid or offering prices of the Bonds, (b) if bid or
offering prices are not available for any particular Bond, on the basis of
current bid or offering prices for comparable bonds, (c) by determining the
value of Bonds on the bid or offer side of the market by appraisal, or (d) by
any combination of the above.
The foregoing evaluations and computations shall be made as of the evaluation
time stated under "Essential Information," on each business day commencing with
the Initial Date of Deposit of the Bonds, effective for all sales made during
the preceding 24-hour period.
The interest on the Bonds deposited in the 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 Bonds mature or are redeemed, exchanged or
sold, or as the expenses of the Trust Fund change or the number of outstanding
Units of the Trust Fund changes.
Although payment is normally made five business days following the order for
purchase, payment may be made prior thereto. A person will become the owner of
Units on the First Settlement Date or any date of settlement thereafter provided
payment has been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used in the Sponsor's
business and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. 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
A-9
<PAGE> 29
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 Bonds in the Trust, 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 the
Bonds. As of the opening of business on the Initial Date of Deposit, the Public
Offering Price per Unit (based on the offering prices of the Bonds in the Trust
and including the sales charge) exceeded the redemption price at which Units
could have been redeemed (based upon the current bid prices of the Bonds in the
Trust) by the amount shown under "Essential Information." In the past, bid
prices on bonds similar to those in the Trust Fund have been lower than the
offering prices thereof by as much as 3% or more of principal amount in the case
of inactively traded bonds or as little as 1/2 of 1% in the case of actively
traded 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 the Bonds and the fact that the
Public Offering Price includes 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 for sale
in a number of states. Units will be sold through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers at prices which represent discounts from the
Public Offering Price as set forth below. Certain commercial banks are making
Units of the Trust Fund 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
A-10
<PAGE> 30
period, a minimum dollar amount of Units of the Trust and other unit investment
trusts created by the Sponsor. The difference between the discount and the sales
charge will be retained by the Sponsor.
<TABLE>
<CAPTION>
PRIMARY MARKET
-----------------------------------------------------------------
VOLUME DISCOUNTS PER UNIT*
------------------------------------------------
FIRM SALES OR FIRM SALES OR FIRM SALES OR
REGULAR SALE SALE SALE
CONCESSION ARRANGEMENTS ARRANGEMENTS ARRANGEMENTS
OR AGENCY 25,000 TO 50,000 TO 100,000 OR
COMMISSION 49,999 99,999 MORE
-----------------------------------------------------------------
WEIGHTED AVERAGE YEARS TO MATURITY
7.5 TO 15 OR 7.5 TO 15 OR 7.5 TO 15 OR 7.5 TO 15 OR
NUMBER OF $10 UNITS 14.99 MORE 14.99 MORE 14.99 MORE 14.99 MORE
- --------------------------------------- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 9,999 Units....................... 2.70% 3.00% 2.80% 3.10% 2.90% 3.20% 3.00% 3.30%
10,000 to 24,999 Units................. 2.50 2.80 2.60 2.90 2.70 3.00 2.80 3.10
25,000 to 49,999 Units................. 2.30 2.60 2.40 2.70 2.50 2.80 2.60 2.90
50,000 to 99,999....................... 2.20 2.40 2.30 2.60 2.30 2.60 2.30 2.60
100,000 or more Units.................. 1.10 1.20 1.20 1.30 1.20 1.30 1.20 1.30
</TABLE>
- -------------------------
*Volume concessions can be earned during the initial one month period after the
Initial Date of Deposit by firms who reach cumulative firm sales or sales
arrangement levels of at least $250,000. After a firm has met the minimum
$250,000 volume level, volume concessions will be given on all trades
originated from or by that firm, including those placed prior to reaching the
$250,000 level, and will continue to be given during the entire initial
offering period. Firm sales of any corporate trust series issued simultaneously
can be combined for the purposes of achieving the volume discount. Only sales
through Kemper qualify for volume discounts and secondary purchases do not
apply. Kemper Unit Investment Trusts reserves the right to modify or change
those parameters at any time with respect to any party and may offer these
concessions only for direct marketing and advertising of unit investment trusts
sponsored by Kemper Unit Investment Trusts.
<TABLE>
<CAPTION>
SECONDARY MARKET
------------------------------
DOLLAR WEIGHTED AVERAGE
YEARS TO MATURITY*
4 TO 8 TO 15 OR
7.99 14.99 MORE
------------------------------
DISCOUNT PER UNIT
DOLLAR AMOUNT OF TRADE (PERCENT OF PUBLIC OFFERING PRICE)
---------------------- ----------------------------------
<S> <C> <C> <C>
$1,000 to $99,999................................. 2.00% 3.00% 4.00%
$100,000 to $499,999.............................. 1.75 2.75 3.50
$500,000 to $999,999.............................. 1.50 2.50 3.00
$1,000,000 or more................................ 1.25 2.25 2.50
</TABLE>
- ---------------
* If the dollar weighted average maturity of the Trust Fund is from 1 to 3.99
years, the concession or agency commission is 1.00% of the Public Offering
Price.
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
PROFITS OF SPONSOR. The Sponsor will receive gross sales charges equal to the
percentage of the Public Offering Price of the Units of the Trust stated under
"Public Offering Price" and will pay a fixed portion of such sales charges to
dealers and agents. In addition, the Sponsor may realize a profit or a loss
resulting from the difference between the purchase prices of the Bonds to the
Sponsor and the cost of such Bonds to the Trust Fund, which is based on the
offering side evaluation of the Bonds. See "The Trust Fund--Portfolio." The
Sponsor may also realize profits or losses with respect to Bonds deposited in
the Trust which were acquired from underwriting syndicates of which the Sponsor
was a member. 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 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 Bonds in the Trust.
A-11
<PAGE> 31
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the Sponsor
intends to, subject to change at any time, maintain a market for Units of the
Trust offered hereby and to continuously offer to purchase said Units at prices,
determined by the Evaluator, based on the aggregate bid prices of the underlying
Bonds, 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 Bonds in the Trust.
The aggregate bid prices of the underlying Bonds 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 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 will be in accord with
that described in the currently effective prospectus describing such Units. Any
profit or loss resulting from the resale of such Units will belong to the
Sponsor. The Sponsor may suspend or discontinue purchases of Units 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
Securities Transfer Agents Medallion Program ("STAMP") or such other signature
guaranty program in addition to, or in substitution for, STAMP, as may be
accepted by the Trustee. A certificate should only be sent by registered or
certified mail for the protection of the Unitholder. Since tender of the
certificate is required for redemption when one has been issued, Units
represented by a certificate cannot be redeemed until the certificate
representing such Units has been received by the 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 the
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 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
A-12
<PAGE> 32
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 "backup 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 to the extent that funds are available for such purpose. All
other amounts paid on redemption shall be withdrawn from the Principal Account.
The Trustee is empowered to sell Bonds in order to make funds available for the
redemption of Units. Such sale may be required when Bonds would not otherwise be
sold and might result in lower prices than might otherwise be realized. To the
extent Bonds are sold, the size and diversity of a Trust Fund will be reduced.
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 Bonds is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying Bonds in
accordance with the Trust Agreement; or (3) for such other period as the
Securities and Exchange Commission may by order permit. The Trustee is not
liable to any person in any way for any loss or damage which may result from any
such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price for Units 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 other than cash deposited in the
Trust to purchase Bonds not applied to the purchase of such Bonds; (2) the
aggregate value of each issue of the Bonds (including "when issued" contracts,
if any) held in the Trust as determined by the Evaluator on the basis of bid
prices therefor; and (3) Purchased and Daily Accrued Interest;
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), the Sponsor and the
Evaluator; (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 the Trust will not be evidenced by
certificates unless a Unitholder or the Unitholder's registered broker/dealer
makes a written request to the Trustee.
Units are transferable by making a written request to the Trustee and, in the
case of Units evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent by registered or
certified mail for the protection of the Unitholder. Unitholders must sign such
written request, and such certificate or transfer instrument (if applicable),
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
A-13
<PAGE> 33
Transfer Agents Medallion Program ("STAMP") or such other signature guaranty
program in addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. In certain instances the Trustee may require additional documents such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
Units may be purchased and certificates, if requested, will be issued in
denominations of one Unit or any whole Unit multiple thereof subject to any
minimum investment requirement established by the Sponsor from time to time.
However, in connection with qualified plans in which Investors Fiduciary Trust
Company acts as trustee, fractional units (to three decimal places) will be
permitted. Any certificate issued will be numbered serially for identification,
issued in fully registered form and will be transferable only on the books of
the Trustee. The Trustee may require a Unitholder to pay a reasonable fee, to be
determined in the sole discretion of the Trustee, for each certificate re-issued
or transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. The Trustee at the present
time does not intend to charge for the normal transfer or interchange of
certificates. Destroyed, stolen, mutilated or lost certificates will be replaced
upon delivery to the Trustee of satisfactory indemnity (generally amounting to
3% of the market value of the Units), affidavit of loss, evidence of ownership
and payment of expenses incurred.
DISTRIBUTIONS TO UNITHOLDERS. Interest Distributions: Interest received by the
Trust, including any portion of the proceeds from a disposition of Bonds which
represents accrued interest, is credited by the Trustee to the Interest Account.
All other receipts are credited by the Trustee to a separate Principal Account.
The Trustee normally has no cash for distribution to Unitholders until it
receives interest payments on the Bonds in the Trust Fund. Since interest
usually is paid semi-annually, during the initial months of the Trust, the
Interest Account, 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 date set forth under "Essential
Information," 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, Sponsor and Evaluator
and reimbursements (without interest) to the Trustee for any amounts advanced to
the 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 the Trust Fund on the preceding Record Date (the first
day of each month). Unitholders 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.
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 the Bonds 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 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 Agreement to advance such amounts as may be necessary to provide interest
distributions of approximately equal amounts. The Trustee will be reimbursed,
without interest, for any such advances from funds available in the Interest
Account.
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 computed as of the
close of business on the preceding Record Date. However, no distribution will be
required if the balance in the Principal Account is less than $1.00 per 100
Units.
A-14
<PAGE> 34
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 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. The
accountants' report will be furnished by the Trustee to any Unitholder 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 a statement, covering the calender year,
setting forth:
A. As to the Interest Account: (1) The amount of interest received on the Bonds,
including amounts received as a portion of the proceeds of any disposition of
the Bonds; (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 Sponsor and the Evaluator; (4) any amounts credited by the Trustee
to the Reserve Account described under "Expenses of the Trust"; and (5) the net
amount remaining after such payments and deductions, expressed both as a total
dollar amount and a dollar amount per Unit outstanding on the last business day
of such calendar year; and B. As to the Principal Account: (1) The dates of the
maturity, liquidation or redemption of any of the 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 Sponsor and the Evaluator; (4) any amounts credited by the Trustee
to the Reserve Account described under "Expenses of the Trust"; and (5) the net
amount remaining after distributions of principal and deductions, expressed both
as a dollar amount and as a dollar amount per Unit outstanding on the last
business day of the calendar year; and 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
Redemption Price based on the last evaluation made during such calendar year;
and (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.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the Trustee
for redemption. The death or incapacity of any Unitholder will not operate to
terminate the Trust 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 the Trust.
No Unitholder shall have the right to control the operation and management of
the Trust in any manner, except to vote with respect to the amendment of the
Trust Agreement or termination of the Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolio of the Trust by the purchase, sale or
substitution of Bonds, except in the special circumstances noted below and as
indicated earlier under "Trust Portfolio" regarding the substitution of
Replacement Bonds for any Failed Bonds. Thus, with the exception of the
redemption or maturity of Bonds in accordance with their terms, the assets of
the Trust Fund will remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of 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
A-15
<PAGE> 35
in the 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 the Trust Fund for
distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of Bonds to issue new obligations in exchange or substitution for any of
such Bonds pursuant to a refunding or refinancing plan, except that the Sponsor
may instruct the Trustee to accept or reject such an offer or to take any other
action with respect thereto as the Sponsor may deem proper if (1) the issuer is
in default with respect to such Bonds or (2) in the written opinion of the
Sponsor the issuer will probably default with respect to such Bonds in the
reasonably foreseeable future. Any obligation so received in exchange or
substitution will be held by the Trustee subject to the terms and conditions of
the Trust Agreement to the same extent as Bonds originally deposited thereunder.
Within five days after the deposit of obligations in exchange or substitution
for underlying Bonds, the Trustee is required to give notice thereof to each
Unitholder, identifying the Bonds eliminated and the Bonds substituted therefor.
The Trustee may sell Bonds, designated by the Sponsor, from the Trust Fund for
the purpose of redeeming Units of the Trust Fund tendered for redemption and the
payment of expenses.
ADMINISTRATION OF THE TRUST
THE TRUSTEE. The Trustee, Investors Fiduciary Trust Company, is a trust company
specializing in investment related services, organized and existing under the
laws of Missouri, having its trust office at 127 West 10th Street, Kansas City,
Missouri 64105. The Trustee is subject to supervision and examination by the
Division of Finance of the State of Missouri and the Federal Deposit Insurance
Corporation. Investors Fiduciary Trust Company is jointly owned by DST Systems,
Inc. and Kemper Financial Services, Inc., an affiliate of the Sponsor.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting the portfolio of any Trust. For information relating to the
responsibilities of the Trustee under the Trust Agreement, reference is made to
the material set forth under "Unitholders."
In accordance with the Trust Agreement, the Trustee shall keep records of all
transactions at its office. Such records shall include the name and address of,
and the number of Units held by, every Unitholder of the Trust. Such books and
records shall be open to inspection by any Unitholder of the 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 Agreement on file in its office available for
inspection at all reasonable times during usual business hours by any
Unitholder, together with a current list of the Bonds held in the Trust Fund.
Pursuant to the Trust Agreement, the Trustee may employ one or more agents for
the purpose of custody and safeguarding of the Bonds comprising the Trust Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of the trust created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of resignation
to all Unitholders 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
Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor.
A-16
<PAGE> 36
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 must be a corporation organized under
the laws of the United States, or any state thereof, be authorized under such
laws to exercise trust powers and have at all times an aggregate capital,
surplus and undivided profits of not less than $5,000,000.
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 Agreement 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 Agreement and liquidate the Trust Fund as
provided therein or (c) continue to act as Trustee without terminating the Trust
Agreement.
The foregoing financial information with regard to the Sponsor relates only to
the Sponsor and not to the Trust Fund. 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 Fund. More comprehensive financial
information can be obtained upon request from the Sponsor.
THE EVALUATOR. 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 Fund 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 Agreement may be amended by the Trustee and
the Sponsor without the consent of any of the Unitholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or (3)
to make such provisions as shall not adversely affect the interests of the
Unitholders (as determined in good faith by the Sponsor and the Trustee). The
Trust Agreement may also be amended in any respect by the Sponsor and the
Trustee, or any of the provisions thereof may be waived, with the consent of the
holders of Units representing 66 2/3% of the Units then outstanding of the 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 the Trust. Except in accordance with the
provisions of the Trust Agreement, in no event shall the Trust Agreement be
amended to increase the number of Units of the Trust issuable thereunder or to
permit the acquisition of
A-17
<PAGE> 37
any Bonds in addition to or in substitution for those initially deposited in the
Trust Fund (other than as provided in the Trust Agreement). The Trustee shall
promptly notify Unitholders of the substance of any such amendment.
The Trust Agreement provides that the Trust Fund shall terminate upon the
maturity, redemption or other disposition of the last of the Bonds held in the
Trust Fund, but in no event later than the Mandatory Termination Date set forth
under "Essential Information." If the value of the Trust Fund shall be less than
the applicable minimum value stated under "Essential Information" (40% of the
aggregate principal amount of Bonds deposited in the Trust), the Trustee may, in
its discretion, and shall, when so directed by the Sponsor, terminate the Trust
Fund. The 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 the Trust Fund, written notice thereof will be sent by the
Trustee to all Unitholders of the Trust Fund. Within a reasonable period after
termination, the Trustee will sell any Bonds remaining in the 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 the Trust Fund.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the performance
of its obligations arising from its responsibilities under the Trust Agreement,
but will be under no liability to the Unitholders for taking any action or
refraining from any action in good faith pursuant to the Trust Agreement or for
errors in judgment, except in cases of its own gross negligence, bad faith or
willful misfeasance in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under the Trust Agreement. The
Sponsor shall not be liable or responsible in any way for depreciation or loss
incurred by reason of the sale of any Bonds.
The Trustee. The Trust Agreement provides that the Trustee shall be under no
liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies, Bonds or
certificates except by reason of its own gross negligence, bad faith or willful
misfeasance in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the Trust Agreement. The Trustee
shall not be liable or responsible in any way for depreciation or loss incurred
by reason of the sale by the Trustee of any 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 Bonds
or upon the interest thereon.
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 Agreement provides that the determinations made by the Evaluator shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the Trustee
or Unitholders for errors in judgment, but shall be liable only for its gross
negligence, bad faith or willful misfeasance in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
Trust Agreement.
EXPENSES OF THE TRUST
The Sponsor will not charge the Trust any fees for services performed as
Sponsor, except that the Sponsor shall receive an annual surveillance fee, which
is not to exceed the amount set forth under "Essential Information," for
providing portfolio surveillance services for the Trust. Such fee (which is
based on the largest number of Units outstanding during each year) may exceed
the actual costs of providing such surveillance services for the Trust, but at
no time will the total amount received for portfolio surveillance services
rendered to the Trust and to any other unit investment trusts sponsored by the
Sponsor for which it provides portfolio surveillance services in any calendar
year exceed the aggregate cost to the Sponsor of supplying such services
A-18
<PAGE> 38
in such year. The foregoing fees may be increased without approval of the
Unitholders by amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index published by the
United States Department of Labor or, if such category is no longer published,
in a comparable category. The Sponsor will receive a portion of the sales
commissions paid in connection with the purchase of Units and will retain the
profits, if any, related to the deposit of Bonds in the Trust Fund. The Sponsor
has borne all the expenses of creating and establishing the Trust including the
cost of the initial preparation, printing and execution of the Prospectus, Trust
Agreement 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 the fee set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of 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 banking
procedures; however, the Trustee is also authorized by the Trust Agreement to
make from time to time certain non-interest bearing advances to the Trust Fund.
The Trustee's fee is payable on or before each Distribution Date. See
"Unitholders -- Distributions to Unitholders."
For evaluation of the Bonds, 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 Bonds in the
Trust Fund at any time during such monthly period.
The Trustee's fees, the Evaluator's fees and the surveillance fees are deducted
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 Fund: (a)
fees for the Trustee's extraordinary services; (b) expenses of the Trustee
(including legal and auditing expenses, but not including any fees and expenses
charged by any agent for custody and safeguarding of Bonds); (c) various
governmental charges; (d) expenses and costs of any action taken by the Trustee
to protect the Trust 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 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 Fund. The fees and expenses
set forth herein are payable out of the Trust and, when owing to the Trustee,
are secured by a lien on the Trust.
Fees and expenses of the Trust Fund shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from the
Principal Account. The Trustee may withdraw from the Principal Account or the
Interest Account such amounts, if any, as it deems necessary to establish a
reserve for any taxes or other governmental charges or other extraordinary
expenses payable out of the Trust. Amounts so withdrawn shall be credited to a
separate account maintained for the Trust 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.
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.
A-19
<PAGE> 39
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statement of condition and the related bond portfolio at the Initial 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.
DESCRIPTION OF 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 & 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.
Bonds rated 'BB,' 'B,' 'CCC,' 'CC,' and 'C' are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal.
'BB' indicates the least degree of speculation and 'C,' the highest degree of
speculation. While such Bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
- ---------------
* As described by the rating company itself.
A-20
<PAGE> 40
BB -- Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments.
B -- Bonds rated B have greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC -- Bonds rated CCC have a current identifiable vulnerability to default, and
is dependent on favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC -- The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C -- The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
D -- Bonds are rated D when the issue is in payment default, or the obligor has
filed for bankruptcy. The D rating is used when interest or principal payments
are not made on the date due, even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during such grace
period.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC. -- A brief description of the applicable Moody's
Investors Service, Inc. rating symbols and their meanings follow:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Their safety is so absolute
that with the occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities. Their market value is virtually immune to all but money market
influences, with the occasional exception of oversupply in a few specific
instances.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. The market
value of A-rated bonds may be influenced to some degree by economic performance
during a sustained period
A-21
<PAGE> 41
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.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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
conditions 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.
DUFF & PHELPS CREDIT RATING CO. -- A brief description of the applicable Duff &
Phelps Credit Rating Co. rating symbols and their meanings follow:
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
A-22
<PAGE> 42
AA -- High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
A -- Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.
BBB -- Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB -- Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B -- Below investment grade and possessing risk that obligations will not be met
when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC -- Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
A-23
<PAGE> 43
<TABLE>
<CAPTION>
CONTENTS PAGE
----
<S> <C>
SUMMARY........................................ 2
ESSENTIAL INFORMATION.......................... 3
THE TRUST FUND................................. 5
General...................................... 5
Trust Information............................ 6
Portfolio.................................... 7
Notes to Portfolio........................... 8
REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS.... 9
STATEMENT OF CONDITION......................... 10
COMPENSATION FOR FOREIGN WITHHOLDING TAX....... 11
FEDERAL TAX STATUS............................. 11
ESTIMATED CASH FLOWS TO UNITHOLDERS............ 15
TRUST PORTFOLIO................................ A-1
RETIREMENT PLANS............................... A-5
DISTRIBUTION REINVESTMENT...................... A-6
INTEREST, ESTIMATED LONG-TERM RETURN AND
ESTIMATED CURRENT RETURN..................... A-7
PUBLIC OFFERING OF UNITS....................... A-7
Public Offering Price........................ A-7
Purchased and Daily Accrued Interest......... A-9
Comparison of Public Offering Price and
Redemption Price........................... A-10
Public Distribution of Units................. A-10
Profits of Sponsor........................... A-11
MARKET FOR UNITS............................... A-12
REDEMPTION..................................... A-12
UNITHOLDERS.................................... A-13
Ownership of Units........................... A-13
Distributions to Unitholders................. A-14
Statements to Unitholders.................... A-15
Rights of Unitholders........................ A-15
INVESTMENT SUPERVISION......................... A-15
ADMINISTRATION OF THE TRUST.................... A-16
The Trustee.................................. A-16
The Sponsor.................................. A-17
The Evaluator................................ A-17
Amendment and Termination.................... A-17
Limitations on Liability..................... A-18
EXPENSES OF THE TRUST.......................... A-18
LEGAL OPINIONS................................. A-19
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....... A-20
DESCRIPTION OF RATINGS......................... A-20
</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.
<PAGE> 44
This Registration Statement on Form S-6 comprises the following papers and
documents.
<TABLE>
<CAPTION>
The facing sheet of Form S-6.
<S> <C>
The cross-reference sheet.
The prospectus.
The signatures.
The following exhibits.
1.1. Form of Trust Indenture and Agreement for Series 17 (to be filed by
Amendment).
1.1.1 Standard Terms and Conditions of Trust for Corporate Income Series 2.
Reference is made to Exhibit 1.1.1 to the Registration Statement on Form
S-6 with respect to Kemper Defined Funds Series 9 (Registration No.
33-56012) as filed on November 3, 1993.
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 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 Defined
Funds Series 9 (Registration No. 33-56012) as filed on November 3, 1993.
2.1. Form of Certificate of Ownership (pages three to nine, 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 Federal income tax status of the securities being
registered (to be filed by Amendment).
4.1. Consent of Muller Data Corporation (to be filed by Amendment).
4.2. Consent of Grant Thornton (to be filed by Amendment).
</TABLE>
S-1
<PAGE> 45
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
KEMPER DEFINED FUNDS SERIES 17, HAS DULY CAUSED THIS 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 25TH DAY OF FEBRUARY, 1994.
KEMPER DEFINED FUNDS
SERIES 17
Registrant
By: KEMPER SECURITIES, INC.
Depositor
By: /s/ C. PERRY MOORE
C. Perry Moore
S-2
<PAGE> 46
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON FEBRUARY 25, 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 Chairman and Chief Executive Officer
- ---------------------------------------------
James R. Boris
JAMES P. FITZGERALD Executive Vice President and
- --------------------------------------------- Director
James P. Fitzgerald
STANLEY R. FALLIS Executive Vice President, Chief Financial
- --------------------------------------------- Officer and Director
Stanley R. Fallis
FRANK V. GEREMIA Executive Vice President and Director
- ---------------------------------------------
Frank V. Geremia
DAVID B. MATHIS Director
- ---------------------------------------------
David B. Mathis
ROBERT T. JACKSON Director
- ---------------------------------------------
Robert T. Jackson
JAY B. WALTERS Director
- ---------------------------------------------
Jay B. Walters
FREDERICK C. HOSKEN Director
- ---------------------------------------------
Frederick C. Hosken
JEFFREY H. KAHN Director
- ---------------------------------------------
Jeffrey H. Kahn
CHARLES M. KIERSCHT Director
- ---------------------------------------------
Charles M. Kierscht
ARTHUR J. MCGIVERN Director
- ---------------------------------------------
Arthur J. McGivern
/s/ C. PERRY MOORE
---------------------------------------------
C. Perry Moore
</TABLE>
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
