File No. 33-55401 CIK #910858
Securities and Exchange Commission
Washington, D. C. 20549
Post-Effective
Amendment No. 6
to
Form S-6
For Registration under the Securities Act of 1933
of Securities of Unit Investment Trusts Registered
on Form N-8B-2
Kemper Defined Funds Series 23
Name and executive office address of Depositor:
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
Name and complete address of agent for service:
Robin Pinkerton
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
( X ) Check box if it is proposed that this filing will become
effective at 2:00 p.m. on December 29, 2000 pursuant to paragraph (b)
of Rule 485.
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KEMPER TAX-EXEMPT INSURED INCOME TRUST
NATIONAL SERIES
KEMPER DEFINED FUNDS
INSURED NATIONAL SERIES
EVEREN UNIT INVESTMENT TRUSTS
INSURED NATIONAL SERIES
PART ONE
The date of this Part One is that date
which is set forth in Part Two of the Prospectus
Kemper Tax-Exempt Insured Income Trust, Kemper Defined Funds Insured
National Series and EVEREN Unit Investment Trusts Insured National Series
(the "Trusts" and each a "Trust") were formed for the purpose of gaining
interest income free from Federal income taxes while conserving capital
and diversifying risks by investing in an insured, fixed portfolio
consisting of obligations issued by or on behalf of states of the United
States or counties, municipalities, authorities or political subdivisions
thereof.
Units of the Trust are not deposits or obligations of, or guaranteed
by, any bank, and Units are not federally insured or otherwise protected
by the Federal Deposit Insurance Corporation and involve investment risk
including loss of principal.
Insurance guaranteeing the scheduled payment of principal and
interest on all of the Municipal Bonds in the portfolio listed in Part
Two has been obtained from an independent company by either the Trust,
the Sponsor or the issuer of the Municipal Bonds involved. Insurance
obtained by the Sponsor or a Municipal Bond issuer is effective so long
as such Bonds are outstanding. The insurance, in any case, does not
relate to the Units offered hereby or to their market value. As a result
of such insurance, the Units of the Trust received on the Date of Deposit
a rating of "AAA" by Standard & Poor's, a Division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's") or "Aaa" by Moody's Investors
Service, Inc. See "Insurance on the Portfolio" and "Description of
Municipal Bond Ratings." No representation is made as to any insurer's
ability to meet its commitments.
This Prospectus is in two parts.
Read and retain both parts for future reference.
SPONSOR: RANSON & ASSOCIATES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
SUMMARY 3
THE TRUST 5
PORTFOLIOS 6
RISK FACTORS 8
INSURANCE ON THE PORTFOLIOS 14
DISTRIBUTION REINVESTMENT 20
INTEREST AND ESTIMATED LONG-TERM
AND CURRENT RETURNS 21
TAX STATUS OF THE TRUST 21
TAX REPORTING AND REALLOCATION 26
PUBLIC OFFERING OF UNITS 26
PUBLIC OFFERING PRICE 26
ACCRUED INTEREST 29
PURCHASED AND DAILY ACCRUED INTEREST 30
ACCRUED INTEREST 30
PUBLIC DISTRIBUTION OF UNITS 31
PROFITS OF SPONSOR 32
MARKET FOR UNITS 32
REDEMPTION 32
COMPUTATION OF REDEMPTION PRICE 34
UNITHOLDERS 34
OWNERSHIP OF UNITS 34
DISTRIBUTIONS TO UNITHOLDERS 35
STATEMENT TO UNITHOLDERS 36
RIGHTS OF UNITHOLDERS 38
INVESTMENT SUPERVISION 38
ADMINISTRATION OF THE TRUST 40
THE TRUSTEE 40
THE EVALUATOR 41
AMENDMENT AND TERMINATION 41
LIMITATIONS ON LIABILITY 42
EXPENSES OF THE TRUST 43
THE SPONSOR 44
LEGAL OPINIONS 45
INDEPENDENT AUDITORS 45
DESCRIPTION OF MUNICIPAL BOND RATINGS 45
Essential Information*
Report of Independent Auditors*
Statement of Assets and Liabilities*
Statement of Operations*
Statement of Changes in Net Assets*
Schedule of Investments*
Notes to Schedules of Investments*
Notes to Financial Statements*
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* INFORMATION ON THESE ITEMS APPEARS IN
PART TWO
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KEMPER TAX-EXEMPT INSURED INCOME TRUST
KEMPER DEFINED FUNDS INSURED NATIONAL SERIES
EVEREN UNIT INVESTMENT TRUSTS INSURED NATIONAL SERIES
SUMMARY
The Trust. Kemper Tax-Exempt Insured Income Trust, Kemper Defined
Funds Insured National Series and EVEREN Unit Investment Trusts Insured
National Series (the "Trusts" and each a "Trust") are each a unit
investment trust consisting of a number of diversified portfolios (the
"Series"), each portfolio consisting of obligations ("Municipal Bonds,"
"Securities" or "Bonds") issued by or on behalf of states of the United
States or counties, municipalities, authorities or political subdivisions
thereof. Ranson & Associates, Inc. is the Sponsor and Evaluator of the
Trusts and is successor sponsor and evaluator of all unit investment
trusts formerly sponsored by EVEREN Unit Investment Trusts, a service of
EVEREN Securities, Inc. The Bank of New York is the Trustee of the
Trusts as successor to Investors Fiduciary Trust Company.
The objective of each Series of the Trust is tax-exempt income and
conservation of capital with diversification of risk through investment
in an insured, fixed portfolio of Municipal Bonds. Interest on certain
Municipal Bonds in certain of the Trusts will be a preference item for
purposes of the alternative minimum tax. Accordingly, such Trusts may be
appropriate only for investors who are not subject to the alternative
minimum tax. There is, of course, no guarantee that the Trusts'
objective will be achieved.
All of the Municipal Bonds in a Series of the Trust were rated in
the category "BBB" or better by Standard & Poor's ("Standard & Poor's")
or "Baa" by Moody's Investors Service, Inc. ("Moody's") on the date such
Series was established (the "Date of Deposit"). Ratings of the Municipal
Bonds may have changed since the Date of Deposit. See "Description of
Municipal Bond Ratings" herein and the "Schedule of Investments" in Part
Two.
The Units, each of which represents a pro rata undivided fractional
interest in the Municipal Bonds deposited in the appropriate Series of
the Trust, are issued and outstanding Units which have been reacquired by
the Sponsor either by purchase of Units tendered to the Trustee for
redemption or by purchase in the open market. No offering is being made
on behalf of the Trust and any profit or loss realized on the sale of
Units will accrue to the Sponsor and/or the firm reselling such Units.
Insurance. Insurance guaranteeing the scheduled payment of
principal and interest on all of the Municipal Bonds in the portfolio of
each Series of the Trust has been obtained by the Trust, the Sponsor or
directly by the issuer from an independent insurance company. Series A
through A-24 of the Kemper Tax-Exempt Insured Income Trust are insured by
AMBAC Indemnity Corporation ("AMBAC Indemnity") and Series A-25 and
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subsequent Series of the Kemper Tax-Exempt Insured Income Trust, Kemper
Defined Funds Insured National Series and EVEREN Unit Investment Trusts
Insured National Series are insured by Financial Guaranty Insurance
Company ("Financial Guaranty"), Municipal Bond Investor Assurance
Corporation ("MBIA") or other insurers. Insurance obtained directly by
the issuer may be from such companies or other insurers. See "Insurance
on the Portfolio" herein and "Schedule of Investments" in Part Two.
Insurance obtained by the Trust remains in effect only while the insured
Municipal Bonds are retained in the Trust, while insurance obtained by a
Municipal Bond issuer is effective so long as such Bonds are outstanding.
Pursuant to an irrevocable commitment of Financial Guaranty, in the event
of a sale of any Bond from Series A-25 or subsequent Series of the Kemper
Tax-Exempt Insured Income Trust covered under the Trust's insurance
policy, the Trustee has the right to obtain permanent insurance for such
Municipal Bond upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Municipal Bond. The
insurance, in either case, does not relate to the Units offered hereby or
to their market value. As a result of such insurance, the Units of each
Series of the Trust received on the original Date of Deposit a rating of
"AAA" from Standard & Poor's. See "Insurance on the Portfolio." No
representation is made as to AMBAC Indemnity's, Financial Guaranty's,
MBIA's or any other insurer's ability to meet its commitments.
Public Offering Price. The Public Offering Price per Unit of a
Series of the Trust is equal to a pro rata share of the aggregate bid
prices of the Municipal Bonds in such Series (plus or minus a pro rata
share of cash, if any, in the Principal Account, held or owned by the
Series) plus Purchased Interest, if any, plus a sales charge shown under
"Public Offering of Units." In addition, there will be added to each
transaction an amount equal to the accrued interest from the last Record
Date of such Series to the date of settlement (three business days after
order)(such amount is referred to as Daily Accrued Interest in the case
of certain Series). The sales charge is reduced on a graduated scale as
indicated under "Public Offering of Units - Public Offering Price."
Interest and Principal Distributions. Distributions of the
estimated annual interest income to be received by a Series of the Trust,
after deduction of estimated expenses, will be made monthly unless the
Unitholder elects to receive such distributions quarterly or semi-
annually. Distributions will be paid on the Distribution Dates to
holders of record of such Series on the Record Dates set forth for the
applicable option. See "Essential Information" in Part Two. The
distribution of funds, if any, in the Principal Account of each Series,
will be made semi-annually to Unitholders of Record on the appropriate
dates. See "Essential Information" in Part Two. Unitholders of Kemper
Defined Funds and EVEREN Unit Investment Trusts receive monthly
distributions of interest and principal.
Reinvestment. Distributions of interest and principal, including
capital gains, if any, made by a Series of the Trust will be paid in cash
unless a Unitholder elects to reinvest such distributions. See
"Distribution Reinvestment."
Estimated Current Return and Estimated Long-Term Return. The
Estimated Current Return is calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price of such
Trust. The estimated net annual interest income per Unit will vary with
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changes in fees and expenses of such Trust and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the bid price of the
underlying Securities and with changes in the Purchased Interest, if any;
therefore, there is no assurance that the present Estimated Current
Return will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and
determines and factors in the relative weightings of, the market values,
yields (which takes into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and
estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Return will be realized in the future. Estimated Current Return and
Estimated Long-Term Return are expected to differ because the calculation
of Estimated Long-Term Return reflects the estimated date and amount of
principal returned while Estimated Current Return calculations include
only net annual interest income and Public Offering Price.
Market for Units. While under no obligation to do so, the Sponsor
intends, subject to change at any time, to maintain a market for the
Units of each Series of the Trust and to continuously offer to repurchase
such Units at prices which are based on the aggregate bid side evaluation
of the Municipal Bonds in such Series of the Trust. If such a market is
not maintained and no other over-the-counter market is available,
Unitholders will still be able to dispose of their Units through
redemption by the Trustee at prices based upon the aggregate bid price of
the Municipal Bonds in such Series of the Trust. See "Redemption."
Risk Factors. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other
factors, the inability of the issuer or an insurer to pay the principal
of or interest on a bond when due, volatile interest rates, early call
provisions, and changes to the tax status of the Municipal Bonds. See
"Portfolios - Risk Factors."
THE TRUST
Each Series of the Trust is one of a series of unit investment
trusts created by the Sponsor under the name Kemper Tax-Exempt Insured
Income Trust, Kemper Defined Funds Insured National Series or EVEREN Unit
Investment Trusts Insured National Series, all of which are similar, and
each of which was created under the laws of the State of Missouri or New
York pursuant to a Trust Agreement* (the "Agreement"). Ranson &
Associates, Inc. is the Sponsor and Evaluator of the Trusts and is
successor sponsor and evaluator of all unit investment trusts formerly
sponsored by EVEREN Unit Investment Trusts, , a ,service of EVEREN
Securities, Inc. , The Bank of ,New York is the Trustee of the ,Trusts as
successor to Investors Fiduciary Trust Company.
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* Reference is made to the Trust Agreement, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreement.
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The objectives of the Trust are tax-exempt income and conservation
of capital with diversification of risk through investment in an insured,
fixed portfolio of Municipal Bonds. Interest on certain Municipal Bonds
in the Trusts will be a preference item for purposes of the alternative
minimum tax. Accordingly, such Trusts may be appropriate only for the
investors who are not subject to the alternative minimum tax. There is,
of course, no guarantee that the Trusts' objectives will be achieved.
A Series of the Trust may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of insured, tax-
exempt, fixed income securities with greater diversification than they
might be able to acquire individually. In addition, Municipal Bonds of
the type deposited in the Trust are often not available in small amounts.
Each Series of the Trust consists of an insured portfolio of
interest bearing obligations issued by or on behalf of states of the
United States or counties, municipalities, authorities or political
subdivisions thereof the interest on which is, in the opinion of bond
counsel to the issuing authorities, exempt from all Federal income taxes
under existing law, but may be subject to state and local taxes.
Proceeds from the maturity, redemption or sale of the Municipal Bonds in
a Series of the Trust, unless used to pay for Units tendered for
redemption, will be distributed to Unitholders of such Series and will
not be utilized to purchase replacement or additional Municipal Bonds for
the Series.
The Units, each of which represents a pro rata undivided fractional
interest in the principal amount of Municipal Bonds deposited in a Series
of the Trust, are issued and outstanding Units which have been reacquired
by the Sponsor either by purchase of Units tendered to the Trustee for
redemption or by purchase in the open market. No offering is being made
on behalf of the Trust or any Series thereof and any profit or loss
realized on the sale of Units will accrue to the Sponsor and/or the firm
reselling such Units. To the extent that Units of a Series of the Trust
are redeemed, the principal amount of Municipal Bonds in such Series will
be reduced and the undivided fractional interest represented by each
outstanding Unit of the Series will increase. See "Redemption."
PORTFOLIOS
In selecting the Municipal Bonds which comprise the portfolio of a
Series of the Trust the following requirements, were deemed to be of
primary importance: (a) a minimum rating of "BBB" by Standard & Poor's
or "Baa" by Moody's Investors Service, Inc. (see "Description of
Municipal Bond Ratings"); (b) the price of the Municipal Bonds relative
to other issues of similar quality and maturity; (c) the diversification
of the Municipal Bonds as to purpose of issue; (d) the income to the
Unitholders of the Series; (e) whether such Municipal Bonds were insured,
or the availability and cost of insurance for the prompt payment of
principal and interest, when due, on the Municipal Bonds; and (f) the
dates of maturity of the Municipal Bonds.
Subsequent to the Date of Deposit, a Municipal Bond may cease to be
rated or its rating may be reduced below the minimum required as of the
Date of Deposit. Neither event requires the elimination of such
investment from the portfolio, but may be considered in the Sponsor's
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determination to direct the Trustee to dispose of the investment. See
"Investment Supervision" herein and "Schedule of Investments" in Part
Two.
The Sponsor may not alter the portfolio of a Series of the Trust,
except that certain of the Municipal Bonds may be sold upon the happening
of certain extraordinary circumstances. See "Investment Supervision."
Certain Series of the Trust contain Municipal Bonds which may be
subject to redemption prior to their stated maturity date pursuant to
sinking fund provisions, call provisions or extraordinary optional or
mandatory redemption provisions or otherwise. A sinking fund is a
reserve fund accumulated over a period of time for retirement of debt. A
callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is
a method by which a debt obligation is redeemed at or before maturity, by
the proceeds of a new debt obligation. In general, call provisions are
more likely to be exercised when the offering side valuation is at a
premium over par than when it is at a discount from par. Accordingly,
any such call, redemption, sale or maturity will reduce the size and
diversity of such Series, and the net annual interest income of the
Series and may reduce the Estimated Long-Term Returns and/or Estimated
Current Return. See "Interest and Estimated Long-Term and Current
Returns." Each Trust portfolio contains a listing of the sinking fund
and call provisions, if any, with respect to each of the debt
obligations. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. Generally,
events that may permit the extraordinary optional redemption of Municipal
Bonds or may require the mandatory redemption of Municipal Bonds include
among others: a final determination that the interest on the Municipal
Bonds is taxable; the substantial damage or destruction by fire or other
casualty of the project for which the proceeds of the Municipal Bonds
were used; an exercise by a local, state or Federal governmental unit of
its power of eminent domain to take all or substantially all of the
project for which the proceeds of the Municipal Bonds were used; changes
in the economic availability of raw materials, operating supplies or
facilities or technological or other changes which render the operation
of the project for which the proceeds of the Municipal Bonds were used
uneconomic; changes in law or an administrative or judicial decree which
renders the performance of the agreement under which the proceeds of the
Municipal Bonds were made available to finance the project impossible or
which creates unreasonable burdens or which imposes excessive
liabilities, such as taxes not imposed on the date the Municipal Bonds
are issued on the issuer of the Municipal Bonds or the user of the
proceeds of the Municipal Bonds; an administrative or judicial decree
which requires the cessation of a substantial part of the operations of
the project financed with the proceeds of the Municipal Bonds; an
overestimate of the costs of the project to be financed with proceeds of
the Municipal Bonds resulting in excess proceeds of the Municipal Bonds
which may be applied to redeem Municipal Bonds; or an underestimate of a
source of funds securing the Municipal Bonds resulting in excess funds
which may be applied to redeem Municipal Bonds. The Sponsor is unable to
predict all of the circumstances which may result in such redemption of
an issue of Municipal Bonds.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Municipal Bond.
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Risk Factors. An investment in Units of a Series of the Trust
should be made with an understanding of the risks which an investment in
fixed rate debt obligations may entail, including the risk that the value
of the portfolio and hence of the Units will decline with increases in
interest rates. The value of the underlying Municipal Bonds will
fluctuate inversely with changes in interest rates. The uncertain
economic conditions experienced in the past, together with the fiscal
measures adopted to attempt to deal with them, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate debt
obligations generally and long term obligations in particular. The
Sponsor cannot predict whether such fluctuations will continue in the
future.
Certain Series of the Trust contain Municipal Bonds which are
general obligations of a governmental entity that are backed by the
taxing power of such entity. All other Municipal Bonds in the Series of
the Trust are revenue bonds payable from the income of a specific project
or authority and are not supported by the issuer's power to levy taxes.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
Revenue bonds, on the other hand, are payable only from the revenues
derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue
source. There are, of course, variations in the security of the
different Municipal Bonds in the Series of the Trust, both within a
particular classification and between classifications, depending on
numerous factors.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are derived from services provided
by hospitals and other health care facilities, including nursing homes.
In view of this an investment in such Series should be made with an
understanding of the characteristics of such issuers and the risks that
such an investment may entail. Ratings of bonds issued for health care
facilities are often based on feasibility studies that contain
projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service will be affected
by future events and conditions including, among other things, demand for
services and the ability of the facility to provide the services
required, physicians' confidence in the facility, management
capabilities, economic developments in the service area, competition,
efforts by insurers and governmental agencies to limit rates, legislation
establishing state rate-setting agencies, expenses, the cost and possible
unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party payor programs, and government
regulation. Federal legislation has been enacted which implemented a
system of prospective Medicare reimbursement which may restrict the flow
of revenues to hospitals and other facilities which are reimbursed for
services provided under the Medicare program. Future legislation or
changes in the areas noted above, among other things, would affect all
hospitals to varying degrees and, accordingly, any adverse changes in
these areas may adversely affect the ability of such issuers to make
payment of principal and interest on Municipal Bonds held in such Series.
Such adverse changes also may adversely affect the ratings of the
Municipal Bonds held in such Series of the Trust. Hospitals and other
health care facilities are subject to claims and legal actions by
patients and others in the ordinary course of business. Although these
claims are generally covered by insurance, there can be no assurance that
a claim will not exceed the insurance coverage of a health care facility
or that insurance coverage will be available to a facility. In addition,
a substantial increase in the cost of insurance could adversely affect
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the results of operations of a hospital or other health care facility.
Certain hospital bonds may provide for redemption at par at any time upon
the sale by the issuer of the hospital facilities to a non-affiliated
entity or in other circumstances. For example, certain hospitals may
have the right to call bonds at par if the hospital may legally be
required because of the bonds to perform procedures against specified
religious principles. Certain FHA-insured bonds may provide that all or
a portion of those bonds, otherwise callable at a premium, can be called
at par in certain circumstances. If a hospital defaults upon a bond
obligation, the realization of Medicare and Medicaid receivables may be
uncertain and, if the bond obligation is secured by the hospital
facilities, legal restrictions on the ability to foreclose upon the
facilities and the limited alternative uses to which a hospital can be
put may reduce severely its collateral value.
Certain Series of the Trust contain Municipal Bonds which are single
family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned
by persons of low or moderate income. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default,
condemnation or casualty loss. Because these Municipal Bonds are subject
to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such Municipal
Bonds will probably be redeemed prior to their scheduled maturities or
even prior to their ordinary call dates. The redemption price of such
issues may be more or less than the offering price of such Municipal
Bonds. Extraordinary mandatory redemption without premium could also
result from the failure of the originating financial institutions to make
mortgage loans in sufficient amounts within a specified time period or,
in some cases, from the sale by the Municipal Bond issuer of the mortgage
loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates on mortgage
loans funded from other sources becoming competitive with the interest
rates on the mortgage loans funded with the proceeds of the single family
mortgage revenue bonds. Additionally, unusually high rates of default on
the underlying mortgage loans may reduce revenues available for the
payment of principal of or interest on such mortgage revenue bonds.
Single family mortgage revenue bonds issued after December 31, 1980 were
issued under Section 103A of the Internal Revenue Code, which Section
contains certain ongoing requirements relating to the use of the proceeds
of such Bonds in order for the interest on such Municipal Bonds to retain
its tax-exempt status. In each case, the issuer of the Municipal Bonds
has covenanted to comply with applicable ongoing requirements and bond
counsel to such issuer has issued an opinion that the interest on the
Municipal Bonds is exempt from Federal income tax under existing laws and
regulations. There can be no assurances that the ongoing requirements
will be met. The failure to meet these requirements could cause the
interest on the Municipal Bonds to become taxable, possibly retroactively
from the date of issuance.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are primarily derived from mortgage
loans to housing projects for low to moderate income families. The
ability of such issuers to make debt service payments will be affected by
events and conditions affecting financed projects, including, among other
things, the achievement and maintenance of sufficient occupancy levels
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and adequate rental income, increases in taxes, employment and income
conditions prevailing in local labor markets, utility costs and other
operating expenses, the managerial ability of project managers, changes
in laws and governmental regulations, the appropriation of subsidies and
social and economic trends affecting the localities in which the projects
are located. The occupancy of housing projects may be adversely affected
by high rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features,
including extraordinary mandatory redemption features, upon prepayment,
sale or non-origination of mortgage loans as well as upon the occurrence
of other events. Certain issuers of single or multi-family housing bonds
have considered various ways to redeem bonds they have issued prior to
the stated first redemption dates for such bonds. In connection with the
housing Municipal Bonds held by the Trust, the Sponsor has not had any
direct communications with any of the issuers thereof, but at the initial
Date of Deposit it was not aware that any of the respective issuers of
such Municipal Bonds were actively considering the redemption of such
Municipal Bonds prior to their respective stated initial call dates.
However, there can be no assurance that an issuer of a Municipal Bond in
the Trust will not attempt to so redeem a Municipal Bond in the Trust.
Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are derived from the sale of water
and/or sewerage services. Water and sewerage bonds are generally payable
from user fees. Problems faced by such issuers include the ability to
obtain timely and adequate rate increases, a decline in population
resulting in decreased user fees, the difficulty of financing large
construction programs, the limitations on operations and increased costs
and delays attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh water, the
effect of conservation programs and the impact of "no-growth" zoning
ordinances. Issuers may have experienced these problems in varying
degrees. Because of the relatively short history of solid waste disposal
bond financing, there may be technological risks involved in the
satisfactory construction or operation of the projects exceeding those
associated with most municipal enterprise projects. Increasing
environmental regulation on the federal, state and local level has a
significant impact on waste disposal facilities. While regulation
requires more waste producers to use waste disposal facilities, it also
imposes significant costs on the facilities. These costs include
compliance with frequently changing and complex regulatory requirements,
the cost of obtaining construction and operating permits, the cost of
conforming to prescribed and changing equipment standards and required
methods of operation and the cost of disposing of the waste residue that
remains after the disposal process in an environmentally safe manner. In
addition, waste disposal facilities frequently face substantial
opposition by environmental groups and officials to their location and
operation, to the possible adverse effects upon the public health and the
environment that may be caused by wastes disposed of at the facilities
and to alleged improper operating procedures. Waste disposal facilities
benefit from laws which require waste to be disposed of in a certain
manner but any relaxation of these laws could cause a decline in demand
for the facilities' services. Finally, waste disposal facilities are
concerned with many of the same issues facing utilities insofar as they
derive revenues from the sale of energy to local power utilities.
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Certain Series of the Trust contain Municipal Bonds which are
obligations of issuers whose revenues are primarily derived from the sale
of electric energy or natural gas. Utilities are generally subject to
extensive regulation by state utility commissions which, among other
things, establish the rates which may be charged and the appropriate rate
of return on an approved asset base. The problems faced by such issuers
include the difficulty in obtaining approval for timely and adequate rate
increases from the governing public utility commission, the difficulty in
financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations,
increased competition, recent reductions in estimates of future demand
for electricity in certain areas of the country, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining
fuel at reasonable prices and the effect of energy conservation. Issuers
may have experienced these problems in varying degrees. In addition,
Federal, state and municipal governmental authorities may from time to
time review existing and impose additional regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of such Municipal Bonds to
make payments of principal and/or interest on such Municipal Bonds. The
ability of state and local joint action power agencies to make payments
on bonds they have issued is dependent in large part on payments made to
them pursuant to power supply or similar agreements. Courts in
Washington and Idaho have held that certain agreements between the
Washington Public Power Supply System ("WPPSS") and the WPPSS
participants are unenforceable because the participants did not have the
authority to enter into the agreements. While these decisions are not
specifically applicable to agreements entered into by public entities in
other states, they may cause a reexamination of the legal structure and
economic viability of certain projects financed by joint action power
agencies, which might exacerbate some of the problems referred to above
and possibly lead to legal proceedings questioning the enforceability of
agreements upon which payment of these bonds may depend.
Certain Series of the Trust contain Municipal Bonds which are
industrial revenue bonds ("IRBs"), including pollution control revenue
bonds, which are tax-exempt securities issued by states, municipalities,
public authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. These projects
are usually operated by corporate entities. Issuers are obligated only
to pay amounts due on the IRBs to the extent that funds are available
from the unexpended proceeds of the IRBs or receipts or revenues of the
issuer under an arrangement between the issuer and the corporate operator
of a project. The arrangement may be in the form of a lease, installment
sale agreement, conditional sale agreement or loan agreement, but in each
case the payments to the issuer are designed to be sufficient to meet the
payments of amounts due on the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the
corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have
an adverse impact on the credit quality of the particular company or
industry. These include cyclicality of revenues and earnings, regulatory
and environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from leveraged buy-outs or takeovers. The IRBs
in the Series of the Trust may be subject to special or extraordinary
redemption provisions which may provide for redemption at par or, with
respect to original issue discount bonds, at issue price plus the amount
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of original issue discount accreted to the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other Municipal Bonds in the
Series of the Trust prior to the stated maturity of such Municipal Bonds.
Certain Series of the Trust contain Municipal Bonds which are
obligations which are payable from and secured by revenues derived from
the ownership and operation of facilities such as airports, bridges,
turnpikes, port authorities, convention centers and arenas. The major
portion of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements which
consist of annual payments for leases, occupancy of certain terminal
space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under
the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect
these industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
Municipal Bonds related to other facilities is dependent on revenues from
the projects, such as user fees from ports, tolls on turnpikes and
bridges and rents from buildings. Therefore, payment may be adversely
affected by reduction in revenues due to such factors as increased cost
of maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Certain Series of the Trusts contain Municipal Bonds which are
obligations of issuers which are, or which govern the operation of,
schools, colleges and universities and whose revenues are derived mainly
from ad valorem taxes, or for higher education systems, from tuition,
dormitory revenues, grants and endorsements. General problems relating
to school bonds include litigation contesting the state constitutionality
of financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools in wealthy
areas and schools in poor areas. Litigation or legislation on this issue
may affect the sources of funds available for the payment of school bonds
in the Trusts. General problems relating to college and university
obligations would include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to
raise tuition and fees sufficiently to cover increased operating costs,
the uncertainty of continued receipt of Federal grants and state funding
and new government legislation or regulations which may adversely affect
the revenues or costs of such issuers. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition,
the ability of universities and colleges to meet their obligations is
dependent upon various factors, including the size and diversity of their
sources of revenues, enrollment, reputation, management expertise, the
availability and restrictions on the use of endowments and other funds,
the quality and maintenance costs of campus facilities, and, in the case
of public institutions, the financial condition of the relevant state or
other governmental entity and its policies with respect to education.
The institution's ability to maintain enrollment levels will depend on
such factors as tuition costs, geographic location, geographic diversity
and quality of student body, quality of the faculty and the diversity of
program offerings.
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Certain Series of the Trust contain Municipal Bonds which are Urban
Redevelopment Bonds ("URBs"). URBs have generally been issued under bond
resolutions pursuant to which the revenues and receipts payable under the
arrangements with the operator of a particular project have been assigned
and pledged to purchasers. In some cases, a mortgage on the underlying
project may have been granted as security for the URBs. Regardless of
the structure, payment of the URBs is solely dependent upon the
creditworthiness of the operator of the project.
Certain of the Municipal Bonds in the Trust may be lease revenue
bonds whose revenues are derived from lease payments made by a
municipality or other political subdivision which is leasing equipment or
property for use in its operation. The risks associated with owning
Municipal Bonds of this nature include the possibility that appropriation
of funds for a particular project or equipment may be discontinued. The
Sponsor cannot predict the likelihood of nonappropriation of funds for
these types of lease revenue Municipal Bonds.
Certain Series of the Trust contain "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the payment of
current interest. Zero coupon bonds are purchased at a deep discount
because the buyer receives only the right to receive a final payment at
the maturity of the bond and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not make
current interest payments (such as the zero coupon bonds) is that a fixed
yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being
unable to reinvest the income on such obligation at a rate as high as the
implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the
future. For this reason, zero coupon bonds are subject to substantially
greater price fluctuations during periods of changing market interest
rates than are securities of comparable quality which pay interest
currently. For the Federal tax consequences of original issue discount
bonds such as the zero coupon bonds, see "Tax Status of the Trust."
Investors should be aware that many of the Municipal Bonds in the
Series of the Trust are subject to continuing requirements such as the
actual use of Municipal Bond proceeds or manner of operation of the
project financed from Municipal Bond proceeds that may affect the
exemption of interest on such Municipal Bonds from Federal income
taxation. Although at the time of issuance of each of the Municipal
Bonds in the Series of the Trust an opinion of bond counsel was rendered
as to the exemption of interest on such obligations from Federal income
taxation, there can be no assurance that the respective issuer or other
obligors on such obligations will fulfill the various continuing
requirements established upon issuance of the Municipal Bonds. A failure
to comply with such requirements may cause a determination that interest
on such obligations is subject to Federal income taxation, perhaps even
retroactively from the date of issuance of such Municipal Bonds, thereby
reducing the value of the Municipal Bonds and subjecting Unitholders to
unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of debts of
political subdivisions and authorities of states of the United States
provide that, in certain circumstances, such subdivisions or authorities
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may be authorized to initiate bankruptcy proceedings without prior notice
to or consent of creditors, which proceedings could result in material
and adverse modification or alteration of the rights of holders of
obligations issued by such subdivisions or authorities.
Certain issues of the Municipal Bonds in some Series of the Trust
represent "moral obligations" of a governmental entity other than the
issuer. In the event that the issuer of the Municipal Bond defaults in
the repayment thereof, such other governmental entity lawfully may, but
is not obligated to, discharge the obligation of the issuer to repay such
Municipal Bond. If an issuer of moral obligation bonds is unable to meet
its obligations, the repayment of such Municipal Bonds becomes a moral
commitment but not a legal obligation of the state or municipality in
question. Even though the state may be called on to restore any deficits
in capital reserve funds of the agencies or authorities which issued the
bonds, any restoration generally requires appropriation by the State
legislature and accordingly does not constitute a legally enforceable
obligation or debt of the state. The agencies or authorities generally
have no taxing power.
To the best of the Sponsor's knowledge, as of the date of the
Prospectus, there is no litigation pending with respect to any Municipal
Bond which might reasonably be expected to have a material adverse effect
on the Trust or any Series thereof. Although the Sponsor is unable to
predict whether any litigation may be instituted, or if instituted,
whether such litigation might have a material adverse effect on the Trust
or any Series, the Trust received copies of the opinions of bond counsel
given to the issuing authorities at the time of original delivery of each
of the Municipal Bonds to the effect that the Municipal Bonds had been
validly issued and that the interest thereon is exempt from Federal
income taxes.
INSURANCE ON THE PORTFOLIOS
All Municipal Bonds in the portfolios of each Series of the Trust
are insured as to payment of interest and principal, when due, either by
a policy obtained by the Trust, the Sponsor or by the Bond issuer.
Series A through A-24 of the Kemper Tax-Exempt Insured Income Trust are
insured by AMBAC Indemnity and Series A-25 and subsequent Series of the
Kemper Tax-Exempt Insured Income Trust, Kemper Defined Funds Insured
National Series and EVEREN Unit Investment Trusts Insured National Series
are insured by Financial Guaranty, MBIA and other insurers. The
insurance policy obtained by the Trust for a Series is non-cancelable and
will continue in force so long as such Series of the Trust is in
existence, the insurer and/or the reinsures referred to below remain in
business and the Municipal Bonds described in the policy continue to be
held in such Series of the Trust. The premium for any insurance policy
or policies obtained by an issuer of Municipal Bonds has been paid in
advance by such issuer and any such policy or policies are non-cancelable
and will remain in force so long as the Municipal Bonds so insured are
outstanding and the insurer and/or insurers referred to below remain in
business. In those instances where Municipal Bond insurance is obtained
by the Sponsor or the issuer directly from an insurer, no premiums for
insurance are paid by the Trust and such bonds are not covered by the
Trust's policy. Non-payment of premiums on the policy obtained by the
Trust will not result in the cancellation of such insurance but will
force the insurer to take action against the Trustee to recover premium
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payments due it. Premium rates for each issue of Municipal Bonds
protected by the policy obtained by the Trust are fixed for the life of
the appropriate Series of the Trust.
The aforementioned insurance guarantees the scheduled payment of
principal and interest on all of the Municipal Bonds as they fall due.
It does not guarantee the market value of the Municipal Bonds or the
value of the Units of a Series of the Trust. The insurance obtained by
the Trust is only effective as to Municipal Bonds owned by and held in a
Series of the Trust and the price which an individual pays on acquisition
of Units, or receives on redemption or resale of Units, does not, except
as indicated below, include any element of value for the insurance
obtained by the Trust. Unitholders should recognize that in order to
receive any benefit from the portfolio insurance obtained by the Trust
they must be owners of the Units of a Series of the Trust at the time the
Trustee becomes entitled to receive any payment from the insurer for such
Series. Insurance obtained by the issuer of a Municipal Bond is
effective so long as the Municipal Bond is outstanding, whether or not
held by a Series of the Trust.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Municipal Bond from Series A-25 (or any
subsequent Series) of the Kemper Tax-Exempt Insured Income Trust, Kemper
Defined Funds Insured National Series or EVEREN Unit Investment Trusts
covered under the Trust's insurance policy, has the right to obtain
permanent insurance (the "Permanent Insurance") with respect to such
Municipal Bond (i.e., insurance to the maturity of the Municipal Bond
regardless of the identity of the holder thereof) upon the payment of a
single predetermined insurance premium from the proceeds of the sale of
such Municipal Bond. Accordingly, every Municipal Bond in Series A-25
(or subsequent Series) of the Kemper Tax-Exempt Insured Income Trust,
Kemper Defined Funds Insured National Series or EVEREN Unit Investment
Trusts is eligible to be sold on an insured basis. It is expected that
the Trustee will exercise the right to obtain Permanent Insurance with
respect to Municipal Bonds in such Series only if upon such exercise the
Trust would receive net proceeds (i.e., the value of such Municipal Bond
if sold as an insured Municipal Bond less the insurance premium
attributable to the Permanent Insurance) from such sale in excess of the
sale proceeds if such Municipal Bond was sold on an uninsured basis. The
insurance premium with respect to each Municipal Bond is determined based
upon the insurability of each Municipal Bond as of the Date of Deposit
and will not be increased or decreased for any change in the
creditworthiness of such Municipal Bond's issuer.
Insurance obtained by the Trust, under normal circumstances, has no
effect on the price or redemption value of Units. It is the present
intention of the Evaluator to attribute a value to such insurance for the
purpose of computing the price or redemption value of Units only in
circumstances where the credit quality of an underlying Municipal Bond
has significantly deteriorated. Insurance obtained by the issuer of a
Municipal Bond is effective so long as such Municipal Bond is
outstanding. Therefore, any such insurance may be considered to
represent an element of market value in regard to the Municipal Bonds
thus insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted.
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The value to be added to such Municipal Bonds shall be an amount
equal to the excess, if any, by which the net proceeds realized from the
sale of the Municipal Bonds on an insured basis exceeds the sum of
(i) the net proceeds realizable from the sale of the Municipal Bonds on
an uninsured basis plus (ii) in the case of Series A-25 and subsequent
Series of the Kemper Tax-Exempt Insured Income Trust, Kemper Defined
Funds Insured National Series or EVEREN Unit Investment Trusts the
premium attributable to the Permanent Insurance. The portfolio insurance
obtained by the Trust from AMBAC Indemnity for Series A through A-24 of
the Kemper Tax-Exempt Insured Income Trust is applicable only while the
Municipal Bonds remain in the Trust's portfolio. Consequently, the price
received by the Trust upon the disposition of any such Municipal Bond
will reflect a value placed upon it by the market as an uninsured
obligation rather than a value resulting from the insurance. Due to this
fact, the Sponsor will not direct the Trustee to dispose of Municipal
Bonds in Series A through A-24 of the Kemper Tax-Exempt Insured Income
Trust which are in default or imminent danger of default but to retain
such Municipal Bonds in the portfolio so that if a default in the payment
of interest or principal occurs the Trust may realize the benefits of the
insurance.
The Sponsor will instruct the Trustee not to sell Municipal Bonds
from Series A-25 or subsequent Series of the Kemper Tax-Exempt Insured
Income Trust, Kemper Defined Funds Insured National Series or EVEREN Unit
Investment Trusts Insured National Series to effect redemptions or for
any reason but rather to retain them in the portfolio unless value
attributable to the Permanent Insurance can be realized upon sale. See
"Investment Supervision."
Financial Guaranty Insurance Company. Financial Guaranty is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a
Delaware holding company. The Corporation is a wholly-owned subsidiary
is General Electric Capital Corporation ("GECC"). Neither the
Corporation nor GECC is obligated to pay the debt of or the claims
against Financial Guaranty. Financial Guaranty is domiciled in the State
of New York and is subject to regulation by the State of New York
Insurance Department. As of June 30, 1996, the total capital and surplus
of Financial Guaranty was approximately $1,069,597,000. Copies of
Financial Guaranty's financial statements, prepared on the basis of
statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted accounting
principles, may be obtained by writing to Financial Guaranty at 115
Broadway, New York, New York 10006, Attention: Communications Department
or to the New State Insurance Department at 160 West Broadway, 18th
Floor, New York, New York 10013, Attention: Property Companies Bureau
(telephone number (212) 621-0389). Financial Guaranty's telephone number
is (212) 312-3000.
In addition, Financial Guaranty Insurance Company is currently
authorized to write insurance in all 50 states and the District of
Columbia.
The information relating to Financial Guaranty contained above has
been furnished by such corporation. The financial information contained
herein with respect to such corporation is unaudited but appears in
reports or other materials filed with state insurance regulatory
authorities and is subject to audit and review by such authorities. No
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representation is made herein as to the accuracy or adequacy of such
information or as to the absence of material adverse changes in such
information subsequent to the date thereof but the Sponsor is not aware
that the information herein is inaccurate or incomplete.
AMBAC Indemnity Corporation. AMBAC Indemnity Corporation ("AMBAC")
is a Wisconsin-domiciled stock insurance company, regulated by the office
of Commissioner of Insurance of Wisconsin, and licensed to do business in
50 states, the District of Columbia and the Commonwealth of Puerto Rico,
with admitted assets (unaudited) of approximately $2,440,000,000 and
statutory capital (unaudited) of approximately $1,387,000,000 as of
March 31, 1996. Statutory capital consists of statutory contingency
reserve and policyholders' surplus. AMBAC Indemnity is a wholly-owned
subsidiary of AMBAC Inc., a 100% publicly held company. Moody's
Investors Service, Inc. and Standard & Poor's Corporation have both
assigned a AAA claims-paying ability rating to AMBAC. Copies of AMBAC's
financial statements prepared in accordance with statutory accounting
standards are available from AMBAC. The address of AMBAC's
administrative offices and its telephone number are One State Street
Plaza, 17 Floor, New York, New York 10004 and (212) 668-0340. AMBAC has
entered into quota share reinsurance agreements under which a percentage
of the insurance underwritten pursuant to certain municipal bank
insurance programs of AMBAC Indemnity has been and will be assumed by a
number of foreign and domestic unaffiliated reinsures.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA
Corporation") is the principal operating subsidiary of MBIA, Inc., a New
York Stock Exchange listed Company. MBIA, Inc. is obligated to pay the
debts of or claims against MBIA Corporation. MBIA Corporation, which
commenced municipal bond insurance operations on January 5, 1987, is a
limited liability corporation rather than a several liability
association. MBIA Corporation is domiciled in the State of New York and
licensed to do business in all 50 states, the District of Columbia and
the Commonwealth of Puerto Rico.
As of September 30, 1996 MBIA Corporation had admitted assets of
$4.3 billion (unaudited), total liabilities of $2.9 billion (unaudited),
and total capital and surplus of $1.4 billion (unaudited) prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. Standard & Poor's has rated the claims-
paying ability of MBIA "AAA." Copies of MBIA Corporation's financial
statements prepared in accordance with statutory accounting practices are
available from MBIA Corporation. The address of MBIA Corporation is 113
King Street, Armonk, New York 10504.
Effective December 31, 1993, MBIA, Inc. acquired Bond Investors
Group, Inc. On January 5, 1990, the Insurer acquired all of the
outstanding stock of Bond Investors Group, Inc., the parent of BIG, now
known as MBIA Insurance Corp. of Illinois. Through a reinsurance
agreement, BIG has ceded all of its net insured risks, as well as its
unearned premium and contingency reserves, to the Insurer and the Insurer
has reinsured BIG's net outstanding exposure.
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Moody's Investors Service rates all bonds issues insured by MBIA
"Aaa" and short-term loans "MIG1," both designated to be of the highest
quality. Standard & Poor's rates all new issues insured by MBIA "AAA."
Financial Security Assurance, Inc.. Financial Security Assurance
("Financial Security" or "FSA") is a monoline insurance company
incorporated on March 16, 1984 under the laws of the State of New York.
The operations of Financial Security commenced on July 25, 1985, and
Financial Security received its New York State insurance license on
September 23, 1985. Financial Security is licensed to engage in
financial guaranty insurance business in 50 states, the District of
Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business
of writing financial guaranty insurance, principally in respect of asset-
backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write
financial guaranty insurance in respect of municipal and other
obligations and reinsure financial guaranty insurance policies written by
other leading insurance companies. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of
an issuer's securities, thereby enhancing the credit rating of these
securities, in consideration for payment of a premium to the insurer.
Financial Security insures both newly issued securities sold in the
primary market and outstanding securities sold in the secondary market
that satisfy Financial Security's underwriting criteria.
Financial Security is a wholly owned subsidiary of Financial
Security Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange
listed company. Major shareholders of Holdings include Fund American
Enterprises Holdings, Inc., U S WEST Capital Corporation and The Tokio
Marine and Fire Insurance Co., Ltd. No shareholder of Holdings is
obligated to pay any debt of Financial Security or any claim under any
insurance policy issued by Financial Security or to make any additional
contribution to the capital of Financial Security. Financial Security is
domiciled in the State of New York and is subject to regulation by the
State of New York Insurance Department.
As of March 31, 1996 the total policyholders' surplus and
contingency reserves and the total unearned premium reserve,
respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with generally accepted accounting principles,
approximately $650,052,000 (unaudited) and $387,239,000 (unaudited), and
the total shareholders' equity and the unearned premium reserve,
respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with generally accepted accounting principles,
approximately $779,177,000 (unaudited) and $340,226,000 (unaudited).
Copies of Financial Security's financial statements may be obtained
by writing of Financial Security at 350 Park Avenue, New York, New York
10022, attention Communications Department. Financial Security's and its
telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or any of its domestic
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operating insurance company subsidiaries are reinsured among such
companies on an agreed-upon percentage substantially proportional to
their respective capital, surplus and reserves, subject to applicable
statutory risk limitations. In addition, Financial Security reinsures a
portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsures under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply
with certain statutory and rating agency requirements; it does not alter
or limit Financial Security's obligations under any financial guaranty
insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc., and "AAA" by Standard & Poor's, Nippon Investors
Service Inc. and Standard & Poor's (Australia) Pty. Ltd. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to
revision or withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company. Capital Guaranty Insurance
Company ("Capital Guaranty" or "CGIC") is a "Aaa/AAA" rated monoline
stock insurance company incorporated in the State of Maryland, and is a
wholly owned subsidiary of Capital Guaranty Corporation, a Maryland
insurance holding company. Capital Guaranty Corporation is a publicly
owned company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all 50
states, the District of Columbia, the Commonwealth of Puerto Rico, Guam
and the U.S. Virgin Islands. Capital Guaranty focuses on insuring
municipal securities and provides policies which guaranty the timely
payment of principal and interest when due for payment on new issue and
secondary market issue municipal bond transactions. Capital Guaranty's
claims-paying ability is rated "Triple-A" by both Moody's and Standard &
Poor's.
As of September 30, 1995, Capital Guaranty had more than $19.0
billion in net exposure outstanding (excluding defeased issues). The
total statutory policyholders' surplus and contingency reserve of Capital
Guaranty was $204,642,000 and the total admitted assets were $326,802,226
as reported to the Insurance Department of the State of Maryland as of
September 30, 1995.
Financial statements for Capital Guaranty Insurance Company, that
have been prepared in accordance with statutory insurance accounting
standards, are available upon request. The address of Capital Guaranty's
headquarters is Steuart Tower, 22nd Floor, One Market Plaza, San
Francisco, CA 94105-1413 and the telephone number is (415) 955-8000.
In order to be in a Series of the Trust, Municipal Bonds must be
insured by the issuer thereof or be eligible for the insurance obtained
by the Series of the Trust. In determining eligibility, the company
insuring the portfolio has applied its own standards which correspond
generally to the standards it normally uses in establishing the
insurability of new issues of municipal bonds and which are not
necessarily the criteria used in regard to the selection of Municipal
Bonds by the Sponsor. To the extent the standards of the insurer are
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more restrictive than those of the Sponsor, the previously stated Trust
investment criteria have been limited.
On the date shown under "Essential Information" in Part Two, the
Estimated Long-Term and Current Returns per Unit for the Trust, after
payment of the insurance premium, if any, were as indicated. The
Estimated Long-Term and Current Returns per Unit for a trust with an
identical portfolio without the insurance obtained by the Trust would
have been higher on such date.
An objective of the portfolio insurance obtained by the Trust is to
obtain a higher yield on the portfolio of the Series of the Trust than
would be available if all the Municipal Bonds in such portfolio had
Standard & Poor's "AAA" rating and/or Moody's "Aaa" rating(s), while
having the protection of insurance of prompt payment of interest and
principal, when due, on the Municipal Bonds. There is, of course, no
certainty that this result will be achieved. Municipal Bonds in a Series
of the Trust which have been insured by the issuer (all of which are
rated "AAA" by Standard & Poor's and/or "Aaa" by Moody's) may or may not
have a higher yield than uninsured bonds rated "AAA" by Standard & Poor's
or "Aaa" by Moody's. In selecting such Municipal Bonds for the
portfolio, the Sponsor has applied the criteria described above.
In the event of nonpayment of interest or principal, when due, in
respect of a Municipal Bond, the appropriate insurer shall make such
payment not later than 30 days after it has been notified that such
nonpayment has occurred or is threatened (but not earlier than the date
such payment is due). The insurer, as regards any payment it may make,
will succeed to the rights of the Trustee in respect thereof.
The Internal Revenue Service has issued a letter ruling which holds,
in effect, that insurance proceeds representing maturity interest on
defaulted municipal obligations paid to municipal bond funds
substantially similar to the Trust, under policy provisions substantially
identical to the policies described herein, will be excludable from
Federal gross income under Section 103(a)(1) of the Internal Revenue
Code. Holders of Units in the Trust should discuss with their tax
advisers the degree of reliance which they may place on this letter
ruling. Furthermore, Chapman and Cutler, Counsel for the Sponsor, have
given an opinion to the effect that such payment of proceeds would be
excludable from Federal gross income to the same extent that such
interest would have been so excludable if paid by the issuer of the
defaulted obligations. See "Tax Status of the Trust."
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust Fund may elect to have distributions of
principal (including capital gains, if any) or interest or both
automatically invested without charge in shares of any mutual fund
registered in such Unitholder's state of residence which is underwritten
or advised by Zurich Kemper Investments, Inc. (the "Kemper Funds"), other
than those Kemper Funds sold with a contingent deferred sales charge.
Since the portfolio securities and investment objectives of such Kemper
Funds may differ significantly from that of the Trust Funds, Unitholders
should carefully consider the consequences, including the fact that
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distributions from such Kemper Funds may be taxable, before selecting
such Kemper Funds for reinvestment. Detailed information with respect to
the investment objectives and the management of the Funds is contained in
their respective prospectuses, which can be obtained from and appropriate
Trust Fund Underwriter upon request. An investor should read the
prospectus of the reinvestment fund selected prior to making the election
to reinvest. Unitholders who desire to have such distributions
automatically reinvested should inform their broker at the time of
purchase or should file with the Program Agent referred to below a
written notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Program Agent
an election to have such distributions reinvested without charge. Such
election must be received by the Program Agent at least ten days prior to
the Record Date applicable to any distribution in order to be in effect
for such Record Date. Any such election shall remaining effect until a
subsequent notice is received by the Program Agent (See "Distributions to
Unitholders").
The Program Agent is the Trustee. All inquiries concerning
participation in distribution reinvestment should be directed to the
Program Agent at its unit investment trust division office.
INTEREST AND ESTIMATED LONG-TERM AND CURRENT RETURNS
As of the opening of business on the date indicated therein, the
Estimated Current Returns, if applicable, and the Estimated Long-Term
Returns for the Trust were as set forth under "Essential Information" in
Part Two of this Prospectus. Estimated Current Returns are calculated by
dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will
vary with changes in fees and expenses of the Trust and with the
principal prepayment, redemption, maturity, exchange or sale of
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and with changes in Purchased
Interest, if any; therefore, there is no assurance that the present
Estimated Current Returns will be realized in the future. Estimated Long-
Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and (2) takes into account the expenses
and sales charge associated with the Trust Unit. Since the market values
and estimated retirements of the Securities and the expenses of the Trust
will change, there is no assurance that the present Estimated Long-Term
Returns will be realized in the future. Estimated Current Returns and
Estimated Long-Term Returns are expected to differ because the
calculation of Estimated Long-Term Returns reflects the estimated date
and amount of principal returned while Estimated Current Returns
calculations include only net annual interest income and Public Offering
Price.
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<PAGE>
TAX STATUS OF THE TRUST
All Municipal Bonds in the Trust were accompanied by copies of
opinions of bond counsel given to the issuers thereof at the time of
original delivery of the Municipal Bonds to the effect that the interest
thereon is exempt from all Federal income taxes. In connection with the
offering of Units of the Trust Funds, neither the Sponsor, the Trustee,
the auditors nor their respective counsel have made any review of the
proceedings relating to the issuance of the Municipal Bonds or the basis
for such opinions. Gain realized on the sale or redemption of the
Municipal Bonds by the Trustee or of a Unit by a Unitholder is, however,
includable in gross income for Federal income tax purposes (subject to
various non-recognition provisions of the Internal Revenue Code of 1986,
as amended (the "Code")). Such gain does not include any amounts
received in respect of accrued interest or earned original issue
discount, if any. It should be noted that, as further described below,
accretion of market discount on tax-exempt bonds to taxation as ordinary
income. Market discount can arise based on the price a Trust Fund pays
for Municipal Bonds or the price a Unitholder pays for his or her Units.
In addition, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds, when held by residents of the
state in which the issuers of such bonds are located, from state income
taxes and, where applicable, local income taxes.
In the opinion of Chapman and Cutler, counsel for the Sponsor:
Each series of the Trust is not an association taxable as a
corporation for federal income tax purposes and interest and accrued
original issue discount on Bonds which is excludable from gross
income under the Code will retain its status when distributed to
Unitholders; however, such interest may be taken into account in
computing the alternative minimum tax, an additional tax on branches
of foreign corporations and the environmental tax (the "Superfund
Tax"), as noted below.
Exemption of interest and accrued original issue discount on
any Municipal Bonds for Federal income tax purposes does not
necessarily result in tax-exemption under the laws of the several
states as such laws vary with respect to the taxation of such
securities and in many states all or part of such interest and
accrued original issue discount may be subject to tax.
Each Unitholder is considered to be the owner of a pro rata
portion of each asset of the respective Series of the Trust in the
proportion that the number of Units of such Trust held by him bears
to the total number of Units outstanding of such Trust under subpart
E, subchapter J of chapter 1 of the Code and will have a taxable
event when such Trust disposes of a Bond, or when the Unitholder
redeems or sells his Units. Unitholders must reduce the tax basis
of their Units for their share of accrued interest received by a
Trust, if any, on Bonds delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such Bonds
during the period from the Unitholder's settlement date to the date
such Bonds are delivered to a Trust and, consequently, such
Unitholders may have an increase in taxable gain or reduction in
capital loss upon the disposition of such Units. Gain or loss upon
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<PAGE>
the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the
Units. If the Trustee disposes of Bonds (whether by sale, payment
on maturity, redemption or otherwise), gain or loss is recognized to
the Unitholder (subject to various non-recognition provisions of the
Code). The amount of any such gain or loss is measured by comparing
the Unitholder's pro rata share of the total proceeds from such
disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who
purchases Units, such basis (before adjustment for earned original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust's assets
ratably according to value as of the date of acquisition of the
Units. The basis of each Unit and of each Municipal Bond which was
issued with original issue discount must be increased by the amount
of the accrued original issue discount (and market discount, if the
Unitholder elects to include market discount in income as it
accrues) and the basis of each Unit and of the Unitholder's interest
in each Municipal Bond which was acquired by such Unitholder at a
premium must be reduced by the annual amortization of Municipal Bond
premium. The tax basis reduction requirements of the Code relating
to amortization of bond premium may, under some circumstances,
result in the Unitholder realizing a taxable gain when his Units are
sold or redeemed for an amount equal to his original cost.
Any proceeds paid under individual insurance policies obtained
by issuers of Bonds or under any insurance policies obtained by the
Trust or the Sponsor which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Federal
gross income if, and to the same extent as, such interest would have
been so excludable if paid in the normal course by the issuer of the
defaulted obligations; provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that the
issuer of the obligations, rather than the insurer, will pay debt
service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Municipal Bond,
depending on the date the Municipal Bond was issued. In addition,
special rules apply if the purchase price of a Municipal Bond exceeds the
original issue price plus the amount of original issue discount which
would have previously accrued based upon its issue price (its "adjusted
issue price") to prior owners. The application of these rules will also
vary depending on the value of the Municipal Bond on the date a
Unitholder acquires his Units, and the price the Unitholder pays for his
Units. Unitholders should consult with their tax advisers regarding
these rules and their application.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
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<PAGE>
if any, is attributable to original issue discount not yet accrued)
subject to a statutory "de minimis" rule. Market discount can arise
based on the price a Trust pays for Municipal Bonds or the price a
Unitholder pays for his or her Units. Under the Tax Act, accretion of
market discount is taxable as ordinary income; under prior law the
accretion had been treated as capital gain. Market discount that
accretes while a Trust Fund holds a Municipal Bond would be recognized as
ordinary income by the Unitholders when principal payments are received
on the Municipal Bond, upon sale or at redemption (including early
redemption), or upon sale or redemption of his or her Units, unless a
Unitholder elects to include market discount in taxable income as it
accrues. The market discount rules are complex and Unitholders should
consult their tax advisers regarding these rules and their application.
In the case of certain corporations, the alternative minimum tax and
the Superfund Tax depend upon the corporation's alternative minimum
taxable income, which is the corporation's taxable income with certain
adjustments. One of the adjustment items used in computing the
alternative minimum taxable income and the Superfund Tax of a corporation
(other than an S Corporation, Regulated Investment Company, Real Estate
Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to
its alternative minimum taxable income (before such adjustment item and
the alternative tax net operating loss deduction). "Adjusted current
earnings" includes all tax-exempt interest, including interest on all of
the Bonds in a Trust and tax-exempt original issue discount. Unitholders
should consult their tax advisers with respect to the particular tax
consequences to them including the corporate alternative minimum tax, the
Superfund Tax and the branch profits tax imposed by Section 884 of the
Code.
Counsel for the Sponsor has also advised that under Section 265 of
the Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax purposes.
The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid on
indebtedness incurred to purchase or improve a personal residence or to
purchase goods or services for personal consumption). Also, under
Section 265 of the Code, certain financial institutions that acquire
units would generally not be able to deduct any of the interest expense
attributable to ownership of such Units. On December 7, 1995 the U.S.
Treasury Department released proposed legislation that, if adopted, would
generally extend the financial institution rules to all corporations,
effective for obligations acquired after the date of announcement.
Investors with questions regarding these issues should consult with their
tax advisers.
In the case of certain Municipal Bonds in certain Series of the
Trust, the opinions of bond counsel indicate that interest on such
securities received by a "substantial user" of the facilities being
financed with the proceeds of these securities or persons related
thereto, for periods while such securities are held by such a user or
related person, will not be excludable from Federal gross income,
although interest on such securities received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
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<PAGE>
person who believes that he or she may be a "substantial user" or a
"related person" as so defined should contact his or her tax adviser.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35% effective for long-term capital gains
realized in taxable years beginning on or after January 1, 1993. For
taxpayers other than corporations, net capital gains are subject to a
maximum marginal stated tax rate of 28%. However, it should be noted
that legislative proposals are introduced from time to time that affect
tax rates and could affect relative differences at which ordinary income
and capital gains are taxed. Under the Code, taxpayers must disclose to
the Internal Revenue Service the amount of tax-exempt interest earned
during the year.
All statements of law in the Prospectus concerning exclusion from
gross income for Federal, state or other tax purposes are the opinions of
counsel and are to be so construed.
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Trust Funds of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
Section 86 of the Code, in general, provides that fifty percent of
Social Security benefits are includible in gross income to the extent
that the sum of "modified adjusted gross income" plus fifty percent of
the Social Security benefits received exceeds a "base amount." The base
amount is $25,000 for unmarried taxpayers, $32,000 for married taxpayers
filing a joint return and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Modified adjusted gross income is adjusted gross income determined
without regard to certain otherwise allowable deductions and exclusions
from gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income, they will
be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31,1993, up to eighty-five percent of Social Security benefits
are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus fifty percent of Social Security benefits
received exceeds an "adjusted base amount." The adjusted base amount is
$34,000 for married taxpayers, $44,000 for married taxpayers filing a
joint return and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from the Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount or
the adjusted base amount must include fifty percent or eighty-five
percent, respectively of his Social Security benefits in gross income
whether or not he receives any tax-exempt interest. A taxpayer whose
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<PAGE>
modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security
benefits in gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations subject to either the environmental tax or the branch
profits tax, financial institutions, certain insurance companies, certain
S corporations, individual recipients of Social Security or Railroad
Retirement benefits and taxpayers who may be deemed to have incurred (or
continued) indebtedness to purchase or carry tax-exempt obligations.
Prospective investors should consult their tax advisors as to the
applicability of any collateral consequences. On December 7, 1995, the
U.S. Treasury Department released proposed legislation that, if adopted,
could affect the United States federal income taxation of non-United
States Unitholders and the portion of the Trusts' income allocable to non-
United States Unitholders.
The exemption of interest on state and local obligations for Federal
income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The
laws of the several states vary with respect to the taxation of such
obligations.
TAX REPORTING AND REALLOCATION
Because the Trust receives interest and makes monthly distributions
based upon such Trust's expected total collections of interest and any
anticipated expenses, certain tax reporting consequences may arise. The
Trust is required to report Unitholder information to the Internal
Revenue Service ("IRS"), based upon the actual collection of interest by
such Trust on the securities in such Trust, without regard to such Trust,
without regard to such Trust's expenses or to such Trust's payments to
Unitholders during the year. If distributions to Unitholders exceed
interest collected, the difference will be reported as a return of
principal which will reduce a Unitholder's cost basis in its Units (and
its pro rata interest in the securities in the Trust). A Unitholder must
include in taxable income the amount of income reported by a Trust to the
IRS regardless of the amount distributed to such Unitholder. If a
Unitholder's share of taxable income exceeds income distributions made by
a Trust to such Unitholder, such excess is in all likelihood attributable
to the payment of miscellaneous expenses of such Trust which will not be
deductible by an individual Unitholder as an itemized deduction except to
the extent that the total amount of certain itemized deductions, such as
investments expenses (which would include the Unitholder's share of Trust
expenses), tax return preparation fees and employee business expenses,
exceeds 2% of such Unitholder's adjusted gross income. Alternatively, in
certain cases, such excess may represent an increase in the Unitholder's
tax basis in the Units owned. Investors with questions regarding these
issues should consult with their tax advisors.
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<PAGE>
PUBLIC OFFERING OF UNITS
Public Offering Price. Units of each Series of the Trust are
offered at the Public Offering Price, plus accrued interest to the
expected settlement date (Daily Accrued Interest for certain Series).
The Public Offering Price per Unit of a Series is equal to the aggregate
bid side evaluation of the Municipal Bonds in the Series' portfolio (as
determined pursuant to the terms of a contract with the Evaluator, by
Cantor Fitzgerald & Co., a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities),
plus or minus cash, if any, in the Principal Account, held or owned by
the Series, divided by the number of outstanding Units of that Series of
the Trust, plus Purchased Interest, if any, plus the sales charge
applicable. The sales charge is based upon the dollar weighted average
maturity of the Trust and is determined in accordance with the table set
forth below. For purposes of this computation, Municipal Bonds will be
deemed to mature on their expressed maturity dates unless: (a) the
Municipal Bonds have been called for redemption or funds or securities
have been placed in escrow to redeem them on an earlier call date, in
which case such call date will be deemed to be the date upon which they
mature; or (b) such Municipal Bonds are subject to a "mandatory tender,"
in which case such mandatory tender will be deemed to be the date upon
which they mature. The effect of this method of sales charge computation
will be that different sales charge rates will be applied to the Trust
based upon the dollar weighted average maturity of such Trust's
portfolio, in accordance with the following schedule:
<TABLE>
<CAPTION>
PERCENT OF
DOLLAR PUBLIC PERCENT OF NET
WEIGHTED AVERAGE OFFERING AMOUNT
YEARS TO MATURITY PRICE INVESTED
----------------- ------------- --------------
<S> <C> <C>
1 to 3.99 years 2.00% 2.041%
4 to 7.99 years 3.50 3.627
8 to 14.99 years 4.50 4.712
15 or more years 5.50 5.820
</TABLE>
The sales charge per Unit will be reduced as set forth below:
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
--------- ---------- ----------
AMOUNT OF INVESTMENT SALES CHARGE (% OF PUBLIC OFFERING PRICE)
-------------------- -----------------------------------------
<S> <C> <C> <C>
$1,000 to $99,999 3.50% 4.50% 5.50%
$100,000 to $499,999 3.25 4.25 5.00
$500,000 to $999,999 3.00 4.00 4.50
$1,000,000 or more 2.75 3.75 4.00
</TABLE>
-----------------
* If the dollar weighted average maturity of a Trust is from 1 to 3.99
years, the sales charge is 2% and 1.5% of the Public Offering Price for
purchases of $1 to $249,999 and $250,000 or more, respectively.
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The reduced sales charge as shown on the preceding charts will apply
to all purchases of Units on any one day by the same purchases from the
same dealer, and for this purpose, purchases of Units of a Series of the
Trust will be aggregated with concurrent purchases of Units of any other
unit investment trust that may be offered by the Sponsor. Additionally,
Units purchased in the name of a spouse or child (under 21) of such
purchaser will be deemed to be additional purchases by such purchaser.
The reduced sales charge will also be applicable to a trust or other
fiduciary purchasing for a single trust estate or single fiduciary
account.
The Sponsor intends to permit officers, directors and employees of
the Sponsor and Evaluator and, at the discretion of the Sponsor,
registered representatives of selling firms to purchase Units of the
Trusts without a sales charge, although a transaction processing fee may
be imposed on such trades.
Units may be purchased at the Public Offering Price less the
concession the Sponsor typically allows to dealers and other selling
agents for purchases (see "Public Distribution of Units") by investors
who purchase Units through registered investment advisers, certified
financial planners or registered broker-dealers who in each case either
charge periodic fees for financial planning, investment advisory or asset
management services, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap
fee" charge is imposed.
The Public Offering Price on the date shown on the cover page of
Part Two of the Prospectus or on any subsequent date will vary from the
amounts stated under "Essential Information" in Part Two in accordance
with fluctuations in the prices of the underlying Municipal Bonds. The
aggregate bid side evaluation of the Municipal Bonds shall be determined
(a) on the basis of current bid prices of the Municipal Bonds, (b) if bid
prices are not available for any particular Municipal Bond, on the basis
of current bid prices for comparable bonds, (c) by determining the value
of the Municipal Bonds on the bid side of the market by appraisal, or
(d) by any combination of the above. Except as described in "Insurance
on the Portfolios" above, the Evaluator will not attribute any value to
the insurance obtained by the Trust. On the other hand, the value of
insurance obtained by an issuer of Municipal Bonds or by the Sponsor is
reflected and included in the market value of such Municipal Bonds.
In any case, the Evaluator will consider the ability of an insurer
to meet its commitments under the Trust's insurance policy (if any). For
example, if the Trust were to hold the Municipal Bonds of a municipality
which had significantly deteriorated in credit quality, the Evaluator
would first consider in its evaluation the market price of the Municipal
Bonds at their lower credit rating. The Evaluator would also attribute a
value to the insurance feature of the Municipal Bonds which would be
equal to the difference between the market value of such Municipal Bonds
and the market value of bonds of a similar nature which were of
investment grade rating. It is the position of the Sponsor that this is
a fair method of valuing insured Municipal Bonds and reflects a proper
valuation method in accordance with the provisions of the Investment
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<PAGE>
Company Act of 1940. For a description of the circumstances under which
a full or partial suspension of the right of Unitholders to redeem their
Units may occur, see "Redemption."
The foregoing evaluations and computations shall be made as of the
Evaluation Time stated under "Essential Information" in Part Two, on each
business day effective for all sales made during the preceding 24-hour
period, and for purposes of resales and repurchases of Units.
The interest on the Municipal Bonds in each Series of the Trust,
less the estimated fees and expenses, is estimated to accrue in the
annual amounts per Unit set forth under "Essential Information" in Part
Two. The amount of net interest income which accrues per Unit may change
as Municipal Bonds mature or are redeemed, exchanged or sold, or as the
expenses of a Series of the Trust change or as the number of outstanding
Units of such Series changes.
Payment for Units must be made on or before the third business day
following purchase (the "settlement date"). A purchaser becomes the
owner of Units on the settlement date. If a Unitholder desires to have
certificates representing Units purchased, such certificates will be
delivered as soon as possible following his written request therefor.
For information with respect to redemption of Units purchased, but as to
which certificates requested have not been received, see "Redemption"
below.
Accrued Interest. Included in the Public Offering Price of Units of
Kemper Tax-Exempt Insured Income Trust is accrued interest as described
herein. Accrued Interest consists of two elements. The first arises as
a result of accrued interest which is the accumulation of unpaid interest
on a bond from the last day on which interest thereon was paid. Interest
on Bonds in the Trust Funds is actually paid either monthly or semi-
annually to the Trust Fund. However, interest on the Bonds in the Trust
Funds is accounted for daily on an accrual basis. Because of this, a
Trust Fund always has an amount of interest earned but not yet collected
by the Trustee because of coupons that are not yet due. For this reason,
the Public Offering Price of Units will have added to it the
proportionate share of accrued and undistributed interest to the date of
settlement.
The Trustee will advance the amount of accrued interest as of the
First Settlement Date and the same will be distributed to Sponsor. Such
advance will be repaid to the Trustee through the first receipts of
interest received on the Municipal Bonds. Consequently, the amount of
accrued interest to be added to the Public Offering Price of Units will
include only accrued interest arising after the First Settlement Date of
a Trust Fund, less any distributions from the Interest Account subsequent
to this First Settlement Date. Since the First Settlement Date is the
date of settlement for anyone ordering Units on the Date of Deposit, no
accrued interest will be added to the Public Offering Price of Units
ordered on the Date of Deposit.
The second element of accrued interest arises because of the
structure of the Interest Account. The Trustee has no cash for
distribution to Unitholders until it receives interest payments on the
Bonds in a Trust Fund. The Trustee is obligated to provide its own
funds, at times, in order to advance interest distributions. The
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Trustee will recover these advancements when such interest is received.
Interest Account balances are established so that it will not be
necessary on a regular basis for the Trustee to advance its own funds in
connection with such interest distributions. The Interest Account
balances are also structured so that there will generally be positive
cash balances and since the funds held by the Trustee will be used by it
to earn interest thereon, it benefits thereby (see "Expenses of the
Trust").
Accrued interest is computed as of the initial Record Date of the
Trust Funds. On the date of the first distribution of interest to
Unitholders after the First Settlement Date, the interest collected by
the Trustee will be sufficient to repay its advances, to allow for
accrued interest under the monthly, quarterly and semi-annual plans of
distribution and to generate enough cash to commence distributions to
Unitholders. If a Unitholder sells or redeems all or a portion of his
Units or if the Bonds in a Trust Fund are sold or otherwise removed or if
a Trust Fund is liquidated, he will receive at that time his
proportionate share of the accrued interest computed to the settlement
date in the case of sale or liquidation and to the of tender in the case
of redemption in such Trust Fund.
Purchased and Daily Accrued Interest. Included in the Public
Offering Price of Units for Kemper Defined Funds Insured National Series
1-13 is Purchased and Daily Accrued Interest as described herein.
Accrued interest consist of two elements. The first element arises as a
result of accrued interest which is the accumulation of unpaid interest
on a bond from the later of the last day on which interest thereon was
paid or the date of original issuance of the bond. Interest on the
coupon Bonds in the Trust fund is paid semi-annually to the Trust. A
portion of the aggregate amount of such accrued interest on the Bonds in
the Trust to the First Settlement Date of the Trust Units is the
Purchased Interest. In an effort to reduce the amount of Purchased
Interest which would otherwise have to be paid by Unitholders, the
Trustee may advance a portion of the accrued interest to the Sponsor as
the Unitholder of record as of the First Units in the Trust Fund is
accounted for daily on an accrual basis (herein referred to as "Daily
Accrued Interest"). Because of this, the Units always have an amount of
interest earned but not yet paid or reserved for payment. For this
reason, the Public Offering Price of Units will include the proportionate
share of Daily Accrued Interest to the date of settlement.
If a Unitholder sells or redeems all or a portion of his Units or if
the bonds are sold or otherwise removed or if the Trust Fund is
liquidated, he will receive at that time his proportionate share of the
Purchase Interest and Daily Accrued Interest computed to the settlement
date in the case of sale or liquidation and to the date of tender in the
case of redemption in the Trust Fund.
Accrued Interest. Included in the Public Offering Price of Units
for Kemper Defined Funds Insured National Series 14 and subsequent series
and all EVEREN Unit Investment Trusts Insured National Series is accrued
interest as described herein. Accrued interest is the accumulation of
unpaid interest on a security from the last day on which interest thereon
was paid. Interest on Securities generally is paid semi-annually
although a Trust accrues such interest daily. Because of this, a Trust
always has an amount of interest earned but not yet collected by the
Trustee. For this reason, with respect to sales settling subsequent to
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the First Settlement Date, the Public Offering Price of Units will have
added to it the proportionate share of accrued interest to the date of
settlement. Unitholders will receive on the next distribution date of a
Trust the amount, if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering Price in the
sale of Units to the public, the Trustee will advance the amount of
accrued interest as of the First Settlement Date and the same will be
distributed to the Sponsor as the Unitholder of record as of the First
Settlement Date. Consequently, the amount of accrued interest to be
added to the Public Offering Price of Units will include only accrued
interest from the First Settlement Date to the date of settlement, less
any distributions from the Interest Account subsequent to the First
Settlement Date.
Because of the varying interest payment dates of the Securities,
accrued interest at any point in time will be greater than the amount of
interest actually received by the Trusts and distributed to Unitholders.
Therefore, there will always remain an item of accrued interest that is
added to the value of the Units. If a Unitholder sells or redeems all or
a portion of his Units, he will be entitled to receive his proportionate
share of the accrued interest from the purchaser of his Units. Since the
Trustee has the use of the funds held in the Interest Account for
distributions to Unitholders and since such Account is non-interest-
bearing to Unitholders, the Trustee benefits thereby.
Public Distribution of Units. The Sponsor has qualified Units for
sale in all states. Units will be sold through dealers who are members
of the National Association of Securities Dealers, Inc. and through
others. Sales may be made to or through dealers at prices which
represent discounts from the Public Offering Price as set forth in the
table below. Certain commercial banks are making Units of the Trust
available to their customers on an agency basis. A portion of the sales
charge paid by their customers is retained by or remitted to the banks,
in the amount shown in the table below. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units; however, the Glass-
Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this
issue may differ from the interpretations of Federal law expressed herein
and banks and financial institutions may be required to register as
dealers pursuant to state law.
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<PAGE>
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
--------- ---------- ----------
AMOUNT OF INVESTMENT Discount per Unit (% of Public Offering Price)
-------------------- ----------------------------------------------
<S> <C> <C> <C>
$1,000 to $99,999 2.00% 3.00% 4.00%
$100,000 to $499,999 1.75 2.75 3.50
$500,000 to $999,999 1.50 2.50 3.00
$1,000,000 or more 1.25 2.25 2.50
</TABLE>
---------------------
* If the dollar weighted average maturity of a Trust is from 1 to 3.99
years, the concession or agency commission is 1.00% of the Public
Offering Price.
In addition to such discounts, the Sponsor may, from time to time,
pay or allow an additional discount, in the form of cash or other
compensation, to dealers employing registered representatives who sell,
during a specified time period, a minimum dollar amount of Units of the
Trusts and other unit investment trusts underwritten by the Sponsor.
The Sponsor reserves the right to change the levels of discounts at
any time. The difference between the discount and the sales charge will
be retained by the Sponsor.
The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units.
Profits of Sponsor. The Sponsor will retain a portion of the sales
charge on each Unit sold, representing the difference between the Public
Offering Price of the Units and the discounts allowed to firms selling
such Units. The Sponsor may realize additional profit or loss as a
result of the possible change in the daily evaluation of the Municipal
Bonds in the Trust, since the value of its inventory of Units may
increase or decrease.
MARKET FOR UNITS
While not obligated to do so, the Sponsor intends to, and certain of
the Underwriters may, subject to change at any time, maintain a market
for Units of each Series of the Trust offered hereby and to continuously
offer to purchase said Units at prices, as determined by the Evaluator,
based on the aggregate bid prices of the underlying Municipal Bonds of
such Series, together with accrued interest to the expected date of
settlement. Unitholders who wish to dispose of their Units should
inquire of their broker or bank as to the current market price of the
Units in order to determine whether there is in existence any price in
excess of the Redemption Price and, if so, the amount thereof.
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REDEMPTION
A Unitholder who does not dispose of Units in the secondary market
described above may cause their Units to be redeemed by the Trustee by
making a written request to the Trustee, The Bank of New York, 101
Barclay Street, New York, New York 10286 and, in the case of Units
evidenced by a certificate, by tendering such certificate to the Trustee,
properly endorsed or accompanied by a written instrument or instruments
of transfer in form satisfactory to the Trustee. Unitholders must sign
the request, and such certificate or transfer instrument, exactly as
their names appear on the records of the Trustee and on any certificate
representing the Units to be redeemed. If the amount of the redemption
is $25,000 or less and the proceeds are payable to the Unitholder(s) of
record at the address of record, no signature guarantee is necessary for
redemptions by individual account owners (including joint owners).
Additional documentation may be requested, and a signature guarantee is
always required, from corporations, executors, administrators, trustees,
guardians or associations. The signatures must be guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("STAMP")
or such other guarantee program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. A certificate should only be
sent by registered or certified mail for the protection of the
Unitholder. Since tender of the certificate is required for redemption
when one has been issued, Units represented by a certificate cannot be
redeemed until the certificate representing such Units has been received
by the purchaser.
Redemption shall be made by the Trustee on the third business day
following the day on which a tender for redemption is received (the
"Redemption Date"), by payment of cash equivalent to the Redemption Price
for that Series of the Trust, determined as set forth below under
"Computation of Redemption Price," as of the evaluation time stated under
"Essential Information" in Part Two, next following such tender,
multiplied by the number of Units being redeemed. Any Units redeemed
shall be cancelled and any undivided fractional in the Trust Fund
extinguished. The price received upon redemption might be more or less
than the amount paid by the Unitholder depending on the value of the
Municipal Bonds in the portfolio at the time of redemption. Any Units
redeemed shall be cancelled and any undivided fractional interest in that
Series of the Trust will be extinguished.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the principal
amount of a Unit redemption if the Trustee has not been furnished the
redeeming Unitholder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to the
Internal Revenue Service and may be recovered by the Unitholder only when
filing a tax return. Under normal circumstances the Trustee obtains the
Unitholder's tax identification number from the selling broker. However,
any time a Unitholder elects to tender Units for redemption, such
Unitholder should make sure that the Trustee has been provided a
certified tax identification number in order to avoid this possible "back-
up withholding." In the event the Trustee has not been previously
provided such number, one must be provided at the time redemption is
requested.
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Any amounts paid on redemption representing interest shall be
withdrawn from the Interest Account of such Series to the extent that
funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Principal Account of such Series.
The Trustee is empowered to sell Municipal Bonds from the portfolio of a
Series in order to make funds available for the redemption of Units of
such Series. Such sale may be required when Municipal Bonds would not
otherwise be sold and might result in lower prices than might otherwise
be realized. To the extent Municipal Bonds are sold, the size and
diversity of that Series of the Trust will be reduced.
The Trustee is irrevocably authorized in its discretion, if an
Underwriter does not elect to purchase any Units tendered for redemption,
in lieu of redeeming such Units, to sell such Units in the over-the-
counter market for the account of tendering Unitholders at prices which
will return to such Unitholders amounts in cash, net after brokerage
commissions, transfer taxes and other charges, equal to or in excess of
the Redemption Price for such Units. In the event of any such sale, the
Trustee shall pay the net proceeds thereof to the Unitholders on the day
they would otherwise be entitled to receive payment of the Redemption
Price.
The right of redemption may be suspended and payment postponed
(1) for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or during which (as
determined by the Securities and Exchange Commission) trading on the New
York Stock Exchange is restricted; (2) for any period during which an
emergency exists as a result of which disposal by the Trustee of
Municipal Bonds is not reasonably practicable or it is not reasonably
practicable to fairly determine the value of the underlying Municipal
Bonds in accordance with the Trust Agreements; or (3) for such other
period as the Securities and Exchange Commission may by order permit.
Because insurance obtained by certain Series of the Trust terminates as
to Bonds which are sold by the Trustee and because the insurance obtained
by such Series of the Trust does not have a realizable cash value which
can be used by the Trustee to meet redemptions of Units, under certain
circumstances the Sponsor may apply to the Securities and Exchange
Commission for an order permitting a full or partial suspension of the
right of Unitholders to redeem their Units if a significant portion of
the Bonds in the portfolio is in default in payment of principal or
interest or in significant risk of such default. The Trustee is not
liable to any person or in any way for any loss or damage which may
result from any such suspension or postponement.
Computation of Redemption Price. The Redemption Price for Units of
each Series of the Trust is computed by the Evaluator as of the
evaluation time stated under "Essential Information" in Part Two next
occurring after the tendering of a Unit for redemption and on any other
business day desired by it, by:
A. adding (1) the cash on hand in such Series of the Trust
other than cash depositor in the Trust Funds to purchase Municipal
Bonds not applied to the purchase of such Bonds; (2) the aggregate
value of the Municipal Bonds held in such Series of the Trust, as
determined by the Evaluator on the basis of bid prices therefor; and
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(3) interest accrued and unpaid on the Municipal Bonds in that
Series of the Trust as of the date of computation; and
B. deducting therefrom (1) amounts representing any
applicable taxes or governmental charges payable out of that Series
of the Trust and for which no deductions have been previously made
for the purpose of additions to the Reserve Account described under
"Expenses of the Trust"; (2) amounts representing estimated accrued
expenses of that Series of the Trust including, but not limited to,
fees and expenses of the Trustee (including legal and auditing fees
and insurance costs), the Evaluator, the Sponsor and bond counsel,
if any; (3) cash held for distribution to Unitholders of record as
of the business day prior to the evaluation being made; and
(4) other liabilities incurred by such Series of the Trust; and
C. finally, dividing the results of such computation by the
number of Units of such Series of the Trust outstanding as of the
date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of a Trust will not be
evidenced by certificates unless a Unitholder, the Unitholder's
registered broker/dealer or the clearing agent makes a written request to
the Trustee. Units are transferable by making a written request to the
Trustee and, in the case of Units evidenced by a certificate, by
presenting and surrendering such certificate to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer which should be sent registered or certified mail for the
protection of the Unitholder. Unitholders must sign such written
request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate
representing the Units to be transferred. Such signatures must be
guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other signature guarantee program in addition
to, or in substitution for, STAMP, as may be accepted by the Trustee.
Units may be purchased and certificates, if requested, will be
issued in denominations of one Unit or any multiple thereof subject to
any minimum investment requirement established by the Sponsor from time
to time. Any Certificate issued will be numbered serially for
identification, issued in fully registered form and will be transferable
only on the books of the Trustee. The Trustee may require a Unitholder
to pay a reasonable fee, to be determined in the sole discretion of the
Trustee, for each certificate re-issued or transferred, and to pay any
governmental charge that may be imposed in connection with each such
transfer or interchange. The Trustee at the present time does not intend
to charge for the normal transfer or interchange of certificates.
Destroyed, stolen, mutilated or lost certificates will be replaced upon
delivery to the Trustee of satisfactory indemnity (generally amounting to
3% of the market value of the Units), affidavit of loss, evidence of
ownership and payment of expenses incurred.
Distributions to Unitholders. Interest received by a Series of the
Trust, including any portion of the proceeds from a disposition of
Municipal Bonds which represents accrued interest, is credited by the
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Trustee to the Interest Account for such Series. All other receipts are
credited by the Trustee to a separate Principal Account for such Series.
During each year the distributions to the Unitholders of each Series of
the Trust as of each Record Date (see "Essential Information" in Part
Two) will be made on the following Distribution Date or shortly
thereafter and shall consist of an amount substantially equal to one-
twelfth, one-fourth or one-half (depending on the distribution option
selected except in Series of Kemper Defined Funds and EVEREN Unit
Investment Trusts in which case only monthly distributions are available)
of such Unitholders' pro rata share of the estimated net annual interest
income to the Interest Account for such Series of the Trust. However, the
interest to which Unitholders of a Series of the Trust are entitled will
at most times exceed the amount available for distribution, there will
almost always remain an item of accrued interest that is added to the
daily value of the Units of such Series. If Unitholders of a Series sell
or redeem all or a portion of their Units they will be paid their
proportionate share of the accrued interest of such Series to, but not
including, the fifth business day after the date of sale or to the date
of tender in the case of a redemption.
Persons who purchase Units between a Record Date and a Distribution
Date will receive their first distribution on the Second Distribution
Date following the purchase of their Units. Since interest on Municipal
Bonds in each Series of the Trust is payable at varying intervals,
usually in semiannual installments, and distributions of income are made
to Unitholders of a Series of the Trust at what may be different
intervals from receipt of interest, the interest accruing to such Series
of the Trust may not be equal to the amount of money received and
available for distribution from the Interest Account of such Series.
Therefore, on each Distribution Date the amount of interest actually on
deposit in the Interest Account and available for distribution may be
slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such
variances, the Trustee is authorized by the Agreement to advance such
amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee will be reimbursed, without
interest, for any such advances from funds available in the Interest
Account of such Series.
Unitholders purchasing Units will initially receive distributions in
accordance with the election of the prior owner. Unitholders desiring to
change their distribution option, if applicable, may do so by sending
written notice to the Trustee, together with their certificate (if one
was issued). Certificates should only be sent by registered or certified
mail to minimize the possibility of loss. If written notice and any
certificate are received by the Trustee not later than January 1 of a
year, the change will become effective on January 2 for distributions
commencing with February 15 of that year. If notice is not received by
the Trustee, the Unitholder will be deemed to have elected to continue
with the same option for the subsequent twelve months.
The Trustee will distribute on each semi-annual Distribution Date
(or in the case of Kemper Defined Funds and EVEREN Unit Investment
Trusts, on each Distribution Date) or shortly thereafter, to each
Unitholder of Record of the Trust on the preceding Record Date, an amount
substantially equal to such Unitholder's pro rata share of the cash
balance, if any, in the Principal Account of such Trust computed as of
the close of business on the preceding Record Date. However, no
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distribution will be required if the balance in the Principal Account is
less than $1.00 per Unit (or $.001 per Unit for certain Series). Except
for Series of Kemper Tax-Exempt Insured Income Trust, if such balance is
between $5.00 and $10.00 per Unit, distributions will be made on each
quarterly Distribution Date; and if such balance exceeds $10.00 per Unit,
such amounts will be distributed on the next monthly Distribution Date.
Statement to Unitholders. With each distribution, the Trustee will
furnish or cause to be furnished each Unitholder a statement of the
amount of interest and the amount of other receipts, if any, which are
being distributed, expressed in each case as a dollar amount per Unit.
The accounts of each Series of the Trust are required to be audited
annually, at the Series' expense, by independent auditors designated by
the Sponsor, unless the Trustee determines that such an audit would not
be in the best interest of the Unitholders of such Series of the Trust.
The accountants' report will be furnished by the Trustee to any
Unitholder of such Series of the Trust upon written request.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each person who at any time during the
calendar year was a Unitholder of a Series of the Trust a statement
covering the calendar year, setting forth:
A. As to the Interest Account:
1. The amount of interest received on the Municipal
Bonds in such Series and the percentage of such amount by
states and territories in which the issuers of such Municipal
Bonds are located;
2. The amount paid from the Interest Account of such
Series representing accrued interest of any Units redeemed;
3. The deductions from the Interest Account of such
Series for applicable taxes, if any, fees and expenses
(including insurance costs and auditing fees) of the Trustee,
the Evaluator, the Sponsor and bond counsel, if any;
4. Any amounts credited by the Trustee to a Reserve
Account for such Series described under "Expenses of the
Trust"; and
5. The net amount remaining after such payments and
deductions, expressed both as a total dollar amount and a
dollar amount per Unit outstanding on the last business day of
such calendar year.
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B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption
of any of the Municipal Bonds in such Series and the net
proceeds received therefrom excluding any portion credited to
the Interest Account;
2. The amount paid from the Principal Account of such
Series representing the principal of any Units redeemed;
3. The deductions from the Principal Account of such
Series for payment of applicable taxes, if any, fees and
expenses (including insurance costs and auditing expenses) of
the Trustee, the Evaluator, the Sponsor and of bond counsel, if
any;
4. Any amounts credited by the Trustee to a Reserve
Account for such Series described under "Expenses of the
Trust"; and
5. The net amount remaining after distributions of
principal and deductions, expressed both as a dollar amount and
as a dollar amount per Unit outstanding on the last business
day of such calendar year.
C. The following information:
1. A list of the Municipal Bonds in such Series as of
the last business day of such calendar year;
2. The number of Units of such Series outstanding on the
last business day of such calendar year;
3. The Redemption Price of such Series based on the last
Trust Evaluation made during such calendar year; and
4. The amount actually distributed during such calendar
year from the Interest and Principal Accounts of such Series
separately stated, expressed both as total dollar amounts and
as dollar amounts per Unit of such Series outstanding on the
Record Date for each such distribution.
Rights of Unitholders. A Unitholder may at any time tender Units to
the Trustee for redemption. No Unitholder of a Series shall have the
right to control the operation and management of such Series or of the
Trust in any manner, except to vote with respect to amendment of the
Trust Agreements or termination of such Series of the Trust. The death
or incapacity of any Unitholder will not operate to terminate the Series
or the Trust nor entitle legal representatives or heirs to claim an
accounting or to bring any action or proceeding in any court for
partition or winding up of such Series or the Trust.
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INVESTMENT SUPERVISION
The Sponsor may not alter the portfolio of the Trust by the
purchase, sale or substitution of Municipal Bonds, except in the special
circumstances noted below. Thus, with the exception of the redemption or
maturity of Municipal Bonds in accordance with their terms, and/or the
sale of Municipal Bonds to meet redemption requests, the assets of the
Trust will remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Municipal Bonds the
value of which has been affected by certain adverse events, including
institution of certain legal proceedings, a decline in their price or the
occurrence of other market factors, including advance refunding, so that
in the opinion of the Sponsor the retention of such Municipal Bonds in a
Series of the Trust would be detrimental to the interest of the
Unitholders of such Series. The proceeds from any such sales, exclusive
of any portion which represents accrued interest, will be credited to the
Principal Account for distribution to the Unitholders.
The portfolio insurance obtained by the Trust from AMBAC Indemnity
for Series A through A-24 of the Kemper Tax-Exempt Insured Income Trust
is applicable only while the Municipal Bonds remain in the portfolio of a
Series of the Trust. Consequently, the price received by such Series of
the Trust upon the disposition of any such Municipal Bond will reflect a
value placed upon it by the market as an uninsured obligation rather than
a value resulting from the insurance. Due to this fact, the Sponsor will
not direct the Trustee to dispose of Municipal Bonds in Series A
through A-24 of the Kemper Tax-Exempt Insured Income Trust which are in
default or imminent danger of default but to retain such Municipal Bonds
in the portfolio so that if a default in the payment of interest or
principal occurs, the Trust may realize the benefits of the insurance.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, at the time of the sale of a Municipal Bond covered under the
Trust's insurance policy with respect to Series A-25 and subsequent
Series of the Kemper Tax-Exempt Insured Income Trust, has the right to
obtain permanent insurance with respect to such Municipal Bond (i.e.,
insurance to maturity of the Municipal Bond regardless of the identity of
the holder thereof) (the "Permanent Insurance") upon the payment of a
single predetermined insurance premium from the proceeds of the sale of
such Municipal Bond. Accordingly, every Municipal Bond in such Series of
the Trust is eligible to be sold on an insured basis. It is expected
that the Trustee will exercise the right to obtain Permanent Insurance
for Municipal Bonds in Series A-25 and subsequent Series of the Kemper
Tax-Exempt Insured Income Trust only if upon such exercise a Series of
the Trust would receive net proceeds (i.e., the value of such Municipal
Bond if sold as an insured bond less the insurance premium attributable
to the Permanent Insurance) from such sale in excess of the sale proceeds
if such Municipal Bond were sold on an uninsured basis. The insurance
premium with respect to each Municipal Bond in such Series is determined
based upon the insurability of each Municipal Bond as of the initial Date
of Deposit and will not be increased or decreased for any change in the
creditworthiness of such Municipal Bond's issuer.
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The Trustee is permitted to utilize the option to obtain Permanent
Insurance available on Series A-25 and subsequent Series of the Kemper
Tax-Exempt Insured Income Trust only in circumstances where the value
added to the Municipal Bonds exceeds the costs of acquiring such
Permanent Insurance. Unless such Permanent Insurance may be obtained at
an acceptable price, the Sponsor will not direct the Trustee to dispose
of Municipal Bonds which are in default or imminent danger of default but
to retain such Municipal Bonds in the portfolio so that the Trust may
realize the benefits of the insurance on the portfolio.
The Sponsor is required to instruct the Trustee to reject any offer
made by an issuer of Municipal Bonds to issue new obligations in exchange
or substitution for any of such Municipal Bonds pursuant to a refunding
financing plan except that the Sponsor may instruct the Trustee to accept
or reject such an offer or to take any other action with respect thereto
as the Sponsor may deem proper if (1) the issuer is in default with
respect to such Bonds or (2) in the written opinion of the Sponsor the
issuer will probably default with respect to such Bonds in the reasonably
foreseeable future. Any obligation so received in exchange or
substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations
in exchange or substitution for underlying Bonds, the Trustee is required
to give notice thereof to each Unitholder, identifying the Bonds
eliminated and the Bonds substituted therefor.
The Trustee may sell Municipal Bonds designated by the Sponsor from
a Series of the Trust for the purpose of redeeming Units of such Series
tendered for redemption and the payment of expenses. See "Redemption."
ADMINISTRATION OF THE TRUST
The Trustee. The Trustee is The Bank of New York, a trust company
organized under the laws of New York. The Bank of New York has its unit
investment trust division offices at 101 Barclay Street, New York, New
York 10286, telephone 1-800-701-8178. The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State
of New York and the Board of Governors of the Federal Reserve System, and
its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The Trustee, whose duties are ministerial in nature, has not
participated in selecting the portfolio of any Series of the Trust. For
information relating to the responsibilities of the Trustee under the
Agreement, reference is made to the material set forth under
"Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep
records of all transactions at its office. Such records shall include
the name and address of, and the number of Units held by, every
Unitholder of each Series. The books and records with respect to a
Series of the Trust shall be open to inspection by any Unitholder of such
Series at all reasonable times during the usual business hours. The
Trustee shall make such annual or other reports as may from time to time
be required under any applicable state or Federal statute, rule or
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regulation. The Trustee shall keep a certified copy or duplicate
original of the Trust Agreements on file in its office available for
inspection at all reasonable times during usual business hours by any
Unitholder, together with a current list of the Municipal Bonds held in
each Series of the Trust. Pursuant to the Trust Agreements, the Trustee
may employ one or more agents for the purpose of custody and safeguarding
of Municipal Bonds comprising the portfolios.
Under the Trust Agreements, the Trustee or any successor trustee may
resign and be discharged of its duties created by the Trust Agreements by
executing an instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than sixty days
before the date specified in such notice when such resignation is to take
effect. The Sponsor upon receiving notice of such resignation is
obligated to appoint a successor trustee promptly. If, upon such
resignation, no successor trustee has been appointed and has accepted the
appointment within thirty days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may at any time remove the Trustee with or
without cause and appoint a successor trustee as provided in the Trust
Agreements. Notice of such removal and appointment shall be mailed to
each Unitholder by the Sponsor. Upon execution of a written acceptance
of such appointment by a successor trustee, all the rights, powers,
duties and obligations of the original Trustee shall vest in the
successor. The Trustee shall be a corporation organized under the laws
of the United States or any state thereof, which is authorized under such
laws to exercise trust powers. The Trustee shall have at all times an
aggregate capital, surplus and undivided profits of not less than
$5,000,000.
The Evaluator. Ranson & Associates, Inc., the Sponsor, also serves
as Evaluator. The Evaluator may resign or be removed by the Trustee, in
which event the Trustee is to use its best efforts to appoint a
satisfactory successor. Such resignation or removal shall become
effective upon acceptance of appointment by the successor evaluator. If,
upon resignation of the Evaluator, no successor has accepted appointment
within thirty days after notice of resignation, the Evaluator may apply
to a court of competent jurisdiction for the appointment of a successor.
Notice of such resignation or removal and appointment shall be mailed by
the Trustee to each Unitholder. At the present time, pursuant to a
contract with the Evaluator, Cantor Fitzgerald & Co., a non-affiliated
firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities, provides portfolio evaluations of the
Municipal Bonds in the Trust which are then reviewed by the Evaluator.
In the event the Sponsor is unable to obtain current evaluations from
Cantor Fitzgerald & Co., it may make its own evaluations or it may
utilize the services of any other non-affiliated evaluator or evaluators
it deems appropriate.
Amendment and Termination. The Trust Agreements may be amended by
the Trustee and the Sponsor without the consent of any of the
Unitholders: (1) to cure any ambiguity or to correct or supplement any
provision which may be defective or inconsistent; (2) to change any
provision thereof as may be required by the Securities and Exchange
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Commission or any successor governmental agency; or (3) to make such
provisions as shall not adversely affect the interests of the
Unitholders. The Trust Agreements may also be amended in any respect by
the Sponsor and the Trustee, or any of the provisions thereof may be
waived, with the consent of the holders of Units representing 66-2/3% of
the Units then outstanding, provided that no such amendment or waiver
will reduce the interest in a Series of the Trust of any Unitholder
without the consent of such Unitholder or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent
of all Unitholders. In no event shall the Trust Agreements be amended to
increase the number of Units issuable thereunder or to permit, except in
accordance with the provisions of the Trust Agreements, the acquisition
of any Municipal Bonds in addition to or in substitution for those in the
Trust. The Trustee shall promptly notify Unitholders of the substance of
any such amendment.
The Trust Agreements provide that a Series of the Trust shall
terminate upon the maturity, redemption or other disposition, of the last
of the Municipal Bonds held in such Series. If the value of a Series of
the Trust shall be less than the applicable minimum Trust value stated
under "Essential Information" in Part Two the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate such
Series of the Trust. A Series of the Trust may be terminated at any time
by the holders of Units representing 66-2/3% of the Units of such Series
then outstanding. In the event of termination, written notice thereof
will be sent by the Trustee to all Unitholders of such Series. Within a
reasonable period after termination, the Trustee will sell any Municipal
Bonds remaining in such Series of the Trust and, after paying all
expenses and charges incurred by such Series of the Trust, will
distribute to Unitholders of such Series (upon surrender for cancellation
of certificates for Units, if issued) their pro rata share of the
balances remaining in the Interest and Principal Accounts of such Series.
Notwithstanding the foregoing, in connection with final
distributions to Unitholders, it should be noted that because the
portfolio insurance obtained by Series A through A-24 of the Kemper Tax-
Exempt Insured Income Trust is applicable only while Bonds so insured are
held by such Series of the Trust, the price to be received by such Series
of the Trust upon the disposition of any such Bond which is in default by
reason of nonpayment of principal or interest, will not reflect any value
based on such insurance. Therefore, in connection with any liquidation
of such Series it shall not be necessary for the Trustee to, and the
Trustee does not currently intend to, dispose of any Bond or Bonds if
retention of such Bond or Bonds, until due, shall be deemed to be in the
best interest of Unitholders, including, but not limited to situations in
which a Bond or Bonds so insured are in default and situations in which a
Bond or Bonds so insured have a deteriorated market price resulting from
a significant risk of default. All proceeds received, less applicable
expenses, from insurance on defaulted Bonds not disposed of at the date
of termination will ultimately be distributed to Unitholders of record as
of such date of termination as soon as practicable after the date such
defaulted Bond or Bonds become due and applicable insurance proceeds have
been received by the Trustee.
LIMITATIONS ON LIABILITY.
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<PAGE>
The Sponsor. The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the Trust Agreements,
but will be under no liability to the Unitholders for taking any action
or refraining from any action in good faith pursuant to the Trust
Agreements or for errors in judgment, except in cases of its own gross
negligence, bad faith or willful misconduct. The Sponsor shall not be
liable or responsible in any way for depreciation or loss incurred by
reason of the sale of any Municipal Bonds.
The Trustee. The Trust Agreements provide that the Trustee shall be
under no liability for any action taken in good faith in reliance upon
prima facie properly executed documents or for the disposition of monies,
Municipal Bonds, or certificates except by reason of its own negligence,
bad faith or willful misconduct, nor shall the Trustee be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Municipal Bonds. In the event that the
Sponsor shall fail to act, the Trustee may act and shall not be liable
for any such action taken by it in good faith. The Trustee shall not be
personally liable for any taxes or other governmental charges imposed
upon or in respect of the Municipal Bonds or upon the interest thereon.
In addition, the Trust Agreements contain other customary provisions
limiting the liability of the Trustee.
The Evaluator. The Trustee and Unitholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility
for the accuracy thereof. The Trust Agreements provide that the
determinations made by the Evaluator shall be made in good faith upon the
basis of the best information available to it, provided, however, that
the Evaluator shall be under no liability to the Trustee or Unitholders
for errors in judgment, but shall be liable only for its gross
negligence, lack of good faith or willful misconduct.
EXPENSES OF THE TRUST
The Sponsor will charge each Series a surveillance fee for services
performed for such Series in an amount not to exceed that amount set
forth in "Essential Information" in Part Two but in no event will such
compensation, when combined with all compensation received from other
unit investment trusts for which the Sponsor both acts as sponsor and
provides portfolio surveillance, exceed the aggregate cost to the Sponsor
for providing such services. Such fee shall be based on the total number
of Units of each Series outstanding as of the January Record Date for any
annual period. The Sponsor paid all the expenses of creating and
establishing the Trust, including the cost of the initial preparation,
printing and execution of the Prospectus, Agreement and the certificates,
legal and accounting expenses, advertising and selling expenses, payment
of closing fees, expenses of the Trustee, initial evaluation fees and
other out-of-pocket expenses.
The Trustee receives for its services a fee calculated on the basis
of the annual rate set forth under "Essential Information" in Part Two,
based on the largest aggregate principal amount of Municipal Bonds in
such Series at any time during the monthly, quarterly or semi-annual
period, as appropriate. Funds that are available for future
distributions, redemptions and payment of expenses are held in accounts
which are non-interest bearing to Unitholders and are available for use
by the Trustee pursuant to normal banking procedures; however, the
Trustee is also authorized by the Trust Agreements to make from time to
-43-
<PAGE>
time certain non-interest bearing advances to the Trust Funds. The
Trustee also receives indirect benefits to the extent that it holds funds
on deposit in the various non-interest bearing accounts created pursuant
to the Agreement; however, the Trustee is also authorized by the
Agreement to make from time to time certain non-interest bearing advances
to the Trust. See "Unitholders-Distributions to Unitholders."
For evaluation of Municipal Bonds in a Series of the Trust, the
Evaluator receives a fee, payable monthly, calculated on the basis of an
annual rate as set forth under "Essential Information" in Part Two, based
upon the largest aggregate principal amount of Municipal Bonds in such
Series of the Trust at any time during such monthly period.
The Trustee's and Evaluator's fees are payable monthly on or before
each Distribution Date by deductions from the Interest Account of each
Series to the extent funds are available and then from the Principal
Account of such Series. Such fees may be increased without approval of
Unitholders by amounts not exceeding a proportionate increase in the
Consumer Price Index entitled "All Services Less Rent of Shelter,"
published by the United States Department of Labor, or any equivalent
index substituted therefor.
The following additional charges are or may be incurred by a Series
of the Trust: (a) fees for the Trustee's extraordinary services;
(b) expenses of the Trustee (including legal and auditing expenses and
insurance costs, but not including any fees and expenses charged by any
agent for custody and safeguarding of Municipal Bonds) and of bond
counsel, if any; (c) various governmental charges; (d) expenses and costs
of any action taken by the Trustee to protect the Trust or such Series,
or the rights and interests of the Unitholders; (e) indemnification of
the Trustee for any loss, liability or expense incurred by it in the
administration of such Series of the Trust without gross negligence, bad
faith or willful misconduct on its part; (f) indemnification of the
Sponsor for any loss, liability or expense incurred in acting in that
capacity without gross negligence, bad faith or willful misconduct; and
(g) expenditures incurred in contacting Unitholders upon termination of
the Series. The fees and expenses set forth herein are payable out of
such Series of the Trust and, when owed to the Trustee, are secured by a
lien on the assets of the Series of the Trust. Fees or charges relating
to the Trust shall be allocated to each Trust Fund in the same ratio as
the principal amount of such Trust Fund bears to the total principal
amount of all Trust Funds in the Trust. Fees or charges relating solely
to a particular Trust Fund shall be charged only to such Trust Fund.
Fees and expenses of a Series of the Trust shall be deducted from
the Interest Account of such Series, or, to the extent funds are not
available in such Account, from the Principal Account of such Series.
The Trustee may withdraw from the Principal Account or the Interest
Account of such Series such amounts, if any, as it deems necessary to
establish a reserve for any taxes or other governmental charges or other
extraordinary expenses payable out of that Series of the Trust. Amounts
so withdrawn shall be credited to a separate account maintained for such
Series known as the Reserve Account and shall not be considered a part of
such Series when determining the value of the Units of such Series until
such time as the Trustee shall return all or any part of such amounts to
the appropriate account.
-44-
<PAGE>
THE SPONSOR
Ranson & Associates, Inc., the Sponsor of the Trusts, is an
investment banking firm created in 1995 by a number of former owners and
employees of Ranson Capital Corporation. On November 26, 1996, Ranson &
Associates, Inc. purchased all existing unit investment trusts sponsored
by EVEREN Securities, Inc. Accordingly, Ranson & Associates is the
successor sponsor to unit investment trusts formerly sponsored by EVEREN
Unit Investment Trusts, a service of EVEREN Securities, Inc. Ranson &
Associates, is also the sponsor and successor sponsor of Series of The
Kansas Tax-Exempt Trust and Multi-State Series of The Ranson Municipal
Trust. Ranson & Associates, Inc. is the successor to a series of
companies, the first of which was originally organized in Kansas in 1935.
During its history, Ranson & Associates, Inc. and its predecessors have
been active in public and corporate finance and have sold bonds and unit
investment trusts and maintained secondary market activities relating
thereto. At present, Ranson & Associates, Inc., which is a member of the
National Association of Securities Dealers, Inc., is the sponsor to each
of the above-named unit investment trusts and serves as the financial
advisor and as an underwriter for issuers in the Midwest and Southwest,
especially in Kansas, Missouri and Texas. The Company's offices are
located at 250 North Rock Road, Suite 150, Wichita, Kansas 67206-2241.
If at any time the Sponsor shall of fail to perform any of its
duties under the Agreement or shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or its affairs are taken over by
public authorities, then the Trustee may (a) appoint a successor sponsor
at rates of compensation deemed by the Trustee to be reasonable and not
exceeding such reasonable amounts as may be prescribed by the Securities
and Exchange Commission, or (b) terminate the Agreement and liquidate the
Trust or any Series thereof as provided therein or (c) continue to act as
Trustee without terminating the Agreement.
The foregoing financial information with regard to the Sponsor
relates to the Sponsor only and not to this Trust or any Series. Such
information is included in this Prospectus only for the purposes of
informing investors as to the financial responsibility of the Sponsor and
its ability to carry out its contractual obligations with respect to the
Series of the Trust. More comprehensive financial information can be
obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters
relating to Federal tax law were originally passed upon by Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of investments,
appearing in Part Two of this Prospectus and Registration Statement, with
information pertaining to the specific Series of the Trust to which such
statement relates, has been audited by Ernst & Young LLP, independent
-45-
<PAGE>
auditors, as set forth in their report appearing in Part Two and is
included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
DESCRIPTION OF MUNICIPAL BOND RATINGS*
Standard & Poor's - A brief description of the applicable Standard
& Poor's rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer
and obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement, under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
--------------
* As published by the rating companies.
-46-
<PAGE>
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.
Moody's Investors Service, Inc. - A brief description of the
applicable Moody's Investors Service, Inc. rating symbols and their
meanings follow:
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Their safety is so absolute that with the
occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make the long term
risks appear somewhat larger than in Aaa securities. Their market value
is virtually immune to all but money market influences, with the
occasional exception of oversupply in a few specific instances.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future. The market value of A-rated bonds may
be influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of normalcy,
A-rated bonds frequently move in parallel with Aaa and Aa obligations,
with the occasional exception of oversupply in a few specific instances.
-47-
<PAGE>
A1 - Bonds which are rated A1 offer the maximum in security within
their quality group, can be bought for possible upgrading in quality, and
additionally, afford the investor an opportunity to gauge more precisely
the relative attractiveness of offerings in the market place.
Baa - Bonds which are rated Baa are considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and, in fact, have
speculative characteristics as well. The market value of Baa-rated bonds
is more sensitive to changes in economic circumstances and, aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations move in parallel with Aaa, Aa and A obligations during
periods of economic normalcy, except in instances of oversupply.
Conditional Ratings: Bonds rated "Con(-)" are ones for which the
security depends upon the completion of some act or the fulfillment of
some condition. These are bonds secured by (a) earnings of projects
under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals which begin when facilities are completed, or
(d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in certain areas of its
bond rating system. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
-48-
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Part Two
Dated December 28, 2000
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NOTE: Part Two of this Prospectus May Not Be Distributed Unless Accompanied by
Part One.
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Essential Information
As of August 31, 2000
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Municipal Bonds $2,345,000
Number of Units 567,156.533
Fractional Undivided Interest in the Trust per Unit 1/567,156.533
Principal Amount of Municipal Bonds per Unit $4.135
Public Offering Price:
Aggregate Bid Price of Municipal Bonds in the Portfolio $2,372,340
Aggregate Bid Price of Municipal Bonds per Unit $4.183
Cash per Unit (1) $(.007)
Pricing accrued interest to date of settlement $.003
Sales Charge of 2.041% (2.00% of Public Offering Price) $.085
Public Offering Price per Unit (inclusive of
accrued interest) (2) $4.264
Redemption Price per Unit (inclusive of accrued interest) $4.179
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $.085
Minimum Value of the Trust under which Trust Agreement
may be terminated $2,000,000
</TABLE>
Date of Trust September 14, 1994
Mandatory Termination Date December 31, 2003
Evaluations for purpose of sale, purchase or redemption of Units are made as of
the close of business of the Sponsor next following receipt of an order for a
sale or purchase of Units or receipt by The Bank of New York Co. of Units
tendered for redemption.
[FN]
1. This amount, if any, represents principal cash or overdraft which is an
asset or liability of the Trust and is included in the Public Offering Price.
2. Units are offered at the Public Offering Price which includes interest to
the date of settlement (three business days after purchase).
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Essential Information (continued)
As of August 31, 2000
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
<TABLE>
<CAPTION>
Special Information Based on Distributions
<S> <C>
---------
Calculation of Estimated Net Annual
Interest Income per Unit:
Estimated Annual Interest Income $.215232
Less: Estimated Annual Expense .014921
---------
Estimated Net Annual Interest Income $.200311
=========
Calculation of Interest Distribution per Unit:
Estimated Net Annual Interest Income $.200311
Divided by 12 $.016693
Estimated Daily Rate of Net Interest Accrual per Unit $.000556
Estimated Current Return Based on Public
Offering Price (exclusive of accrued interest) (3) 4.70%
Estimated Long-Term Return (3) 2.42%
Trustee's Annual Fees per $1,000 Principal Amount $1.400200
Evaluation Fees per $1,000 Principal Amount $.300000
Trustee's Miscellaneous Expenses per Unit $.004128
Surveillance Fees per 100 Units $.200000
</TABLE>
Record and Computation Dates: First day of the month.
Distribution Dates: Fifteenth day of the month.
[FN]
3. The Estimated Long-Term Return and Estimated Current Return will vary. For
detailed explanation, see Part One of this prospectus.
<PAGE>
Report of Independent Auditors
Unitholders
Kemper Defined Funds
Insured National
Series 12
We have audited the accompanying statement of assets and liabilities of Kemper
Defined Funds Insured National Series 12, including the schedule of investments,
as of August 31, 2000, and the related statements of operations and changes in
net assets for each of the three years in the period then ended. These
financial statements are the responsibility of the Trust's sponsor. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments owned as of August 31, 2000,
by correspondence with the custodial bank. An audit also includes assessing the
accounting principles used and significant estimates made by the sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kemper Defined Funds Insured
National Series 12 at August 31, 2000, and the results of its operations and
changes in its net assets for the periods indicated above in conformity with
accounting principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
December 14, 2000
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Statement of Assets and Liabilities
August 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Municipal Bonds, at value (cost $2,346,008) $2,372,340
Interest receivable 25,095
---------
Total assets 2,397,435
Liabilities and net assets
Cash overdraft 19,723
Accrued liabilities 1,859
---------
21,582
Net assets, applicable to 567,157 Units outstanding:
Cost of Trust assets, exclusive of interest $2,346,008
Unrealized appreciation 26,332
Distributable funds 3,513
--------- ---------
Net assets $2,375,853
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Statements of Operations
<TABLE>
<CAPTION>
Year ended August 31
2000 1999 1998
<S> <C> <C> <C>
--------- --------- ---------
Investment income - interest $186,479 $271,341 $367,155
Expenses:
Trustee's fees and related expenses 8,243 10,905 12,605
Evaluator's and portfolio
surveillance fees 2,333 2,932 3,728
--------- --------- ---------
Total expenses 10,576 13,837 16,333
--------- --------- ---------
Net investment income 175,903 257,504 350,822
Realized and unrealized gain (loss)
on investments:
Realized gain on investments 4,930 11,065 9,822
Unrealized appreciation (depreciation)
during the year (48,930) (96,522) 157,966
--------- --------- ---------
Net gain (loss) on investments (44,000) (85,457) 167,788
--------- --------- ---------
Net increase in net assets resulting
from operations $131,903 $172,047 $518,610
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended August 31
2000 1999 1998
<S> <C> <C> <C>
--------- --------- ---------
Operations:
Net investment income $175,903 $257,504 $350,822
Realized gain on investments 4,930 11,065 9,822
Unrealized appreciation (depreciation)
on investments during the year (48,930) (96,522) 157,966
--------- --------- ---------
Net increase in net assets resulting
from operations 131,903 172,047 518,610
Distributions to Unitholders:
Net investment income (187,461) (261,692) (358,441)
Principal from investment transactions (2,263,494) - (1,456,262)
--------- --------- ---------
Total distributions to Unitholders (2,450,955) (261,692) (1,814,703)
Capital transactions:
Redemption of Units (252,107) (889,638) (645,953)
--------- --------- ---------
Total decrease in net assets (2,571,159) (979,283) (1,942,046)
Net assets:
At the beginning of the year 4,947,012 5,926,295 7,868,341
--------- --------- ---------
At the end of the year (including
distributable funds applicable to
Trust Units of $3,513, $(2,643)
and $1,264 at August 31, 2000,
1999 and 1998, respectively) $2,375,853 $4,947,012 $5,926,295
========= ========= =========
Trust Units outstanding at the end of
the year 567,157 607,744 715,953
========= ========= =========
Net asset value per Unit at the end of
the year $4.189 $8.140 $8.277
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Kemper Defined Funds
Insured National
Series 12
Schedule of Investments
August 31, 2000
<CAPTION>
Coupon Maturity Redemption Principal
Name of Issuer and Title of Bond (6) (7) Rate Date Provisions(2) Rating(1) Amount Value(3)
<S> <C> <C> <C> <C> <C> <C>
--------------------- --- --- ----- --- --------- ---
Incorporated County of Los Alamos, New Mexico, 5.400% 7/01/2002 Non-Callable AAA $1,205,000 $1,227,244
Utility System Revenue Bonds, Series 1994A.
Insured by FGIC.
#District of Columbia, Washington, D.C., 5.000 6/01/2001 Non-Callable AAA 570,000 572,343
General Obligation Refunding Bonds,
Series 1994A. Insured by FGIC.
+District of Columbia, Washington, D.C., General 5.000 6/01/2001 AAA 570,000 572,753
Obligation Refunding Bonds, Series 1994A.
Insured by FGIC.
--------- ---------
$2,345,000 $2,372,340
========= =========
</TABLE>
[FN]
See accompanying notes to Schedule of Investments.
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Notes to Schedule of Investments
1. All ratings are by Standard & Poor's Corporation, unless marked with the
symbol "*", in which case the rating is by Moody's Investors Service, Inc. The
symbol "NR" indicates Bonds for which no rating is available.
2. There is shown under this heading the year in which each issue of Bonds is
initially redeemable and the redemption price for that year or, if currently
redeemable, the redemption price currently in effect; unless otherwise
indicated, each issue continues to be redeemable at declining prices thereafter,
but not below par value. In addition, certain Bonds in the Portfolio may be
redeemed in whole or in part other than by operation of the stated redemption or
sinking fund provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds. "S.F." indicates a sinking fund is established with respect to an issue
of Bonds. Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed Bonds
have a valuation which represents a premium over the call price or par.
To the extent that the Bonds were deposited in the Trust at a price higher
than the price at which they are redeemed, this will represent a loss of capital
when compared with the original Public Offering Price of the Units. To the
extent that the Bonds were acquired at a price lower than the redemption price,
this may represent an increase in capital when compared with the original Public
Offering Price of the Units. Distributions of net income will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Bonds and, unless utilized to pay for Units tendered for
redemption, there will be distributed to Unitholders the principal amount and
any premium received on such redemption. In this event the estimated current
return and estimated long-term return may be affected by such redemptions.
3. See Note 1 to the accompanying financial statements for a description of the
method of determining cost and value.
4. Insurance on the Bonds in the Trust was obtained by the issuers of such
Bonds.
5. The security preceeded by (#) is of the same issue as another Bond in the
Trust.
6. The security preceded by (+) is secured by, and payable from, escrowed U.S.
Government securities.
See accompanying notes to financial statements.
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Notes to Financial Statements
1. Significant Accounting Policies
Trust Sponsor and Evaluator
Ranson & Associates, Inc. serves as the Trust's sponsor and evaluator.
Valuation of Municipal Bonds
Municipal Bonds (Bonds) are stated at bid prices as determined by Ranson &
Associates, Inc., the "Evaluator" of the Trust. The aggregate bid prices of the
Bonds are determined by the Evaluator based on (a) current bid prices of the
Bonds, (b) current bid prices for comparable bonds, (c) appraisal, (d)
insurance, or (e) any combination of the above (See Note 4 - Insurance).
Cost of Municipal Bonds
Cost of the Trust's Bonds was based on the offering prices of the Bonds on
September 14, 1994 (Date of Deposit). The premium or discount (including any
original issue discount) existing at September 14, 1994, is not being
amortized. Realized gain (loss) from Bond transactions is reported on an
identified cost basis.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Trust's sponsor to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from such
estimates.
2. Unrealized Appreciation and Depreciation
Following is an analysis of net unrealized appreciation at August 31, 2000:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $26,332
Gross unrealized depreciation -
----------
Net unrealized appreciation $26,332
=========
</TABLE>
3. Federal Income Taxes
The Trust is not an association taxable as a corporation for federal income tax
purposes. Each Unitholder is considered to be the owner of a pro rata portion
of the Trust under Subpart E, Subchapter J of Chapter 1 of the Internal Revenue
Code of 1986, as amended. Accordingly, no provision has been made for federal
income taxes.
<PAGE>
Kemper Defined Funds
Insured National
Series 12
Notes to Financial Statements (continued)
4. Other Information
Cost to Investors
The cost to original investors of Units of the Trust was based on the aggregate
offering price of the Bonds on the date of an investor's purchase, plus a sales
charge of 3.00% of the Public Offering Price (equivalent to 3.093% of the net
amount invested). The Public Offering Price for secondary market transactions
is based on the aggregate bid price of the Bonds plus or minus a pro rata share
of cash or overdraft in the Principal Account, if any, and daily accrued
interest on the date of an investor's purchase, plus a sales charge of 2.00% of
the Public Offering Price (equivalent to 2.041% of the net amount invested).
Insurance
Insurance guaranteeing the payment of all principal and interest on the Bonds in
the portfolio has been obtained from independent companies by the respective
issuers of such Bonds. Insurance obtained by a Bond issuer is effective as long
as such Bonds are outstanding. As a result of such insurance, the Units of the
Trust have received a rating of "AAA" by Standard & Poor's Corporation. No
representation is made as to any insurer's ability to meet its commitments.
Distributions
Distributions of net investment income to Unitholders are declared and paid
monthly. Income distributions, on a record date basis, are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
Distribution August 31, 2000 August 31, 1999 August 31, 1998
Plan Per Unit Total Per Unit Total Per Unit Total
----- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Monthly $.316 $186,898 $.391 $259,493 $.475 $357,196
</TABLE>
In addition, the Trust redeemed Units with proceeds from the sale of Bonds as
follows:
<TABLE>
<CAPTION>
Year ended August 31
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Principal portion $252,107 $889,638 $645,953
Net interest accrued 563 2,199 1,245
---------- ---------- ----------
$252,670 $891,837 $647,198
========= ========= =========
Units 40,587 108,209 66,615
========= ========= =========
</TABLE>
In addition, distribution of principal related to the sale or call of securities
is $3.86 and $1.98 per Unit for the years ended August 31, 2000 and 1998,
respectively.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated December 14, 2000, in this Post-Effective
Amendment to the Registration Statement (Form S-6) and related Prospectus of
Kemper Defined Funds Insured National Series 12 dated December 28, 2000.
Ernst & Young LLP
Kansas City, Missouri
December 28, 2000
<PAGE>
Contents of Post-Effective Amendment
To Registration Statement
This Post-Effective amendment to the Registration Statement comprises the
following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, The Registrant,
Kemper Defined Funds Series 23, certifies that it meets all of the requirements
for effectiveness of this registration statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Wichita, and State of Kansas, on the 29th day of
December, 2000.
Kemper Defined Funds Series 23
Registrant
By: Ranson & Associates, Inc.
Depositor
By: Robin Pinkerton
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on December 29, 2000 by the
following persons, who constitute a majority of the Board of Directors of Ranson
& Associates, Inc.
Signature Title
Douglas K. Rogers Executive Vice and President and Director
Douglas K. Rogers
Alex R. Meitzner Chairman of the Board and Director
Alex R. Meitzner
Robin K. Pinkerton President, Secretary, Treasurer and
Robin K. Pinkerton Director
Robin Pinkerton
An executed copy of each of the related powers of attorney was filed with
the Securities and Exchange Commission in connection with the Registration
Statement on Form S-6 of The Kansas Tax-Exempt Trust, Series 51 (File No. 33-
46376) and Series 52 (File No. 33-47687) and the same are hereby incorporated
herein by this reference.
