<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 1994
REGISTRATION NO. 33-55497
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
ON
FORM S-6
A. EXACT NAME OF TRUST:
KEMPER DEFINED FUNDS SERIES 24
B. NAME OF DEPOSITOR:
KEMPER UNIT INVESTMENT TRUSTS
A SERVICE OF KEMPER SECURITIES, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
KEMPER UNIT INVESTMENT TRUSTS
77 WEST WACKER DRIVE, 29TH FLOOR
CHICAGO, ILLINOIS 60601
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY TO:
C. PERRY MOORE MARK J. KNEEDY
KEMPER UNIT INVESTMENT TRUSTS C/O CHAPMAN AND CUTLER
77 WEST WACKER DRIVE, 29TH FLOOR 111 WEST MONROE STREET
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60603
<TABLE>
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE AND AMOUNT OF SECURITIES AGGREGATE AMOUNT OF
BEING REGISTERED OFFERING REGISTRATION FEE
PRICE
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<S> <C> <C> <C>
Kemper Defined Funds Series 24 An indefinite number of Indefinite $500
units of Beneficial (previously paid)
Interest pursuant to
Rule 24f-2 under the
Investment Company Act
of 1940
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</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
/X/ Check box if it is proposed that this filing will become effective at 2 p.m.
on September 27, 1994 pursuant to paragraph (b) of Rule 487.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
KEMPER DEFINED FUNDS SERIES 24
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CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------- -------------------------------------
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C> <C>
1. (a) Name of trust.............................. Prospectus front cover
(b) Title of securities issued................. Prospectus front cover
2. Name and address of each depositor............. Miscellaneous
3. Name and address of trustee.................... Miscellaneous
4. Name and address of principal underwriters..... Public Offering of Units
5. State of organization of trust................. The Trust Funds
6. Execution and termination of trust............. The Trust Funds; Administration of
the Trust Funds
7. Changes of name................................ *
8. Fiscal year.................................... Tax Status
9. Litigation..................................... *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer securities............ Rights of Unitholders
(b) Cumulative or distributive securities...... Administration of the Trust Funds
(c) Redemption................................. Redemption
(d) Conversion, transfer, etc.................. Rights of Unitholders
(e) Periodic payment plan...................... *
(f) Voting rights.............................. Rights of Unitholders
(g) Notice of certificateholders............... Administration of the Trusts Funds
(h) Consents required.......................... Rights of Unitholders; Administration
of the Trust Funds
(i) Other provisions........................... Tax Status
11. Type of securities comprising units............ The Trust Funds; Portfolios
12. Certain information regarding periodic payment
certificates................................. *
13. (a) Load, fees, expenses, etc.................. Essential Information; Public
Offering of Units; Comparison of
Public Offering Price and
Redemption Value; Estimated Current
Return and Estimated Long-Term
Return; Expenses and Charges
(b) Certain information regarding periodic
payment certificates.................... *
(c) Certain percentages........................ Essential Information; Public
Offering of Units
(d) Certain other fees, etc. payable by
holders...................................... Rights of Unitholders
(e) Certain profits receivable by depositor,
principal, underwriters, trustee or
affiliated persons...................... Expenses and Charges; Public Offering
of Units
(f) Ratio of annual charges to income.......... *
14. Issuance of trust's securities................. The Trust Funds; Rights of
Unitholders
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------- -------------------------------------
<S> <C> <C>
15. Receipt and handling of payments from
purchasers................................... *
16. Acquisition and disposition of underlying
securities................................... The Trust Funds; Administration of
the Trust Funds
17. Withdrawal or redemption....................... Public Offering of Units; Redemption;
Comparison of Public Offering Price
and Redemption Value
18. (a) Receipt, custody and disposition of
income.................................. Administration of the Trust Funds
(b) Reinvestment of distributions.............. Reinvestment Program
(c) Reserves or special funds.................. Expenses and Charges
(d) Schedule of distributions.................. *
19. Records, accounts and reports.................. Administration of the Trust Funds;
Miscellaneous
20. Certain miscellaneous provisions of trust
agreement
(a) Amendment.................................. Administration of the Trust Funds
(b) Termination................................ Administration of the Trust Funds
(c) and (d) Trustee, removal and successor..... Resignation, Removal and Liability
(e) and (f) Depositor, removal and successor... Resignation, Removal and Liability
21. Loans to security holders...................... *
22. Limitations on liability....................... Resignation, Removal and Liability
23. Bonding arrangements........................... *
24. Other material provisions of trust agreement... *
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor...................... Miscellaneous
26. Fees received by depositor..................... See Item 13(a) and 13(e)
27. Business of depositor.......................... Miscellaneous
28. Certain information as to officials and
affiliated persons of depositor.............. Miscellaneous
29. Voting securities of depositor................. Miscellaneous
30. Persons controlling depositor.................. Miscellaneous
31. Payment by depositor for certain services
rendered to trust............................ *
32. Payment by depositor for certain other services
rendered to trust............................ *
33. Remuneration of employees of depositor......... *
34. Remuneration of other persons for certain
services rendered to trust................... *
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of Trust's securities by states... Public Offering of Units
36. Suspension of sales of trust's securities...... *
37. Revocation of authority to distribute.......... *
38. (a) Method of Distribution..................... Public Offering of Units
(b) Underwriting Agreements.................... Public Offering of Units
(c) Selling Agreements......................... Public Offering of Units
39. (a) Organization of principal underwriters..... Miscellaneous
(b) N.A.S.D. membership of principal
underwriters............................... Miscellaneous
40. Certain fees received by principal
underwriters................................. See Items 13(a) and 3(e)
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------- -------------------------------------
<S> <C> <C>
41. (a) Business of principal underwriters......... Miscellaneous
(b) Branch offices of principal underwriters... *
(c) Salesmen of principal underwriters......... *
42. Ownership of trust's securities by certain
persons...................................... *
43. Certain brokerage commissions received by
principal underwriters....................... Public Offering of Units
44. (a) Method of valuation........................ Public Offering of Units; Comparison
of Public Offering Price and
Redemption Value
(b) Schedule as to offering price.............. *
(c) Variation in offering price to
certain persons.............................. Public Offering of Units
45. Suspension of redemption rights................ Redemption
46. (a) Redemption valuation....................... Redemption; Public Offering of Units;
Comparison of Public Offering Price
and Redemption Value
(b) Schedule as to redemption price............ *
47. Maintenance of position in underlying
securities................................... Public Offering of Units; Comparison
of Public Offering Price and
Redemption Value; Redemption
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of trustee......... Administration of the Trust Funds;
Miscellaneous
49. Fees and expenses of trustee................... Expenses and Charges
50. Trustee's lien................................. Expenses and Charges
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of Holders of trust's securities..... *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement with respect
to selection or elimination of underlying
securities................................... The Trust Funds; Portfolios;
Administration of the Trust Funds
(b) Transactions involving elimination of
underlying securities........................ *
(c) Policy regarding substitution or
elimination of underlying securities......... Administration of the Trust Funds
(d) Fundamental policy not otherwise covered... *
53. Tax status of Trust............................ Tax Status
VII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years....... *
55-58. Certain information regarding periodic payment
certificates................................. *
59. Financial statements (Instruction 1(c) to
Form S-6).................................... Statements of Condition; Report of
Independent Certified Public
Accountants
</TABLE>
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* Inapplicable, answer negative or not required
<PAGE> 5
KEMPER DEFINED FUNDS SERIES 24
U.S. TREASURY PORTFOLIO, SERIES 5,
U.S. TREASURY PORTFOLIO, SERIES 6 AND
U.S. TREASURY PORTFOLIO, SERIES 7
(EACH SERIES HEREIN IS A UNIT INVESTMENT TRUST)
Each Series of the GNMA Portfolio, if any, was formed for the purpose of
obtaining safety of capital and current monthly distributions of interest and
principal through investment in a portfolio primarily consisting of
mortgage-backed securities of the modified pass-through type. All payments of
principal and interest on the mortgage-backed securities are fully guaranteed by
the Government National Mortgage Association ("GNMA"). The full faith and credit
of the United States is pledged to the payment of the Securities in each series
of the GNMA Portfolios but the Units themselves of such Series are not backed by
such full faith and credit. Each U.S. Treasury Portfolio was formed for the
purpose of providing safety of capital and investment flexibility through an
investment in a portfolio of U.S. Treasury Obligations that are backed by the
full faith and credit of the United States Government. Interest income
distributed by the U.S. Treasury Portfolio Series is exempt from state personal
income taxes in all states. Certain Series of the Trust may be available to
non-resident aliens and the income from such Series, provided certain conditions
are met, will be exempt from withholding for U.S. Federal income tax for such
foreign investors. A FOREIGN INVESTOR MUST PROVIDE A COMPLETED W-8 FORM TO HIS
FINANCIAL REPRESENTATIVE OR THE TRUSTEE TO AVOID WITHHOLDING ON HIS ACCOUNT. The
value of the Units, the estimated current return and the estimated long-term
return to new purchasers will fluctuate with the value of the portfolio which
will generally decrease or increase inversely with changes in interest rates.
RISK FACTORS. Units of the Trusts are not deposits of, or guaranteed by, any
bank, and Units are not federally insured or otherwise protected by the Federal
Deposit Insurance Corporation and involve investment risk including loss of
principal. For a discussion of the risks associated with an investment in Units
of the Trusts see "The Trust Funds--Risk Factors and Portfolio Information."
Units of the GNMA Portfolio Series and U.S. Treasury Portfolio Series are
particularly well suited for purchase by Individual Retirement Accounts, Keogh
Plans, pension funds and other tax deferred retirement plans. Minimum purchase
for any Series of the Trust: $1,000 ($250 for IRA accounts).
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SPONSOR: KEMPER UNIT INVESTMENT TRUSTS
(A service of Kemper Securities, Inc.)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INVESTOR IS ADVISED TO READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
INQUIRIES ABOUT YOUR ACCOUNT SHOULD BE DIRECTED TO THE TRUSTEE AT
1-800-422-2848.
Prospectus dated September 27, 1994
<PAGE> 6
KEMPER DEFINED FUNDS SERIES 24
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
SPONSOR AND EVALUATOR: KEMPER UNIT INVESTMENT TRUSTS, A SERVICE OF
KEMPER SECURITIES, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<TABLE>
<CAPTION>
U.S. U.S. U.S.
TREASURY TREASURY TREASURY
SERIES 5 SERIES 6 SERIES 7
----------- ----------- -----------
<S> <C> <C> <C>
Public Offering Price per Unit....................................................... $ 10.039 $ 8.945 $ 10.058
Principal Amount of Securities per Unit.............................................. $ 10.000 $ 10.000 $ 10.000
Estimated Current Return based on Public Offering Price(1)(2)(3)..................... 5.23% 0.00% 6.05%
Estimated Long-Term Return(1)(2)(3).................................................. 6.23% 6.26% 6.76%
Principal Amount of Securities....................................................... $1,000,000 $1,000,000 $1,000,000
Number of Units...................................................................... 100,000 100,000 100,000
Fractional Undivided Interest per Unit............................................... 1/100,000 1/100,000 1/100,000
Calculation of Public Offering Price--Less than 10,000 or 50,000 Units, as
applicable:
Aggregate Offering Price of Securities........................................... $ 986,269 $ 877,056 $ 986,194
Aggregate Offering Price of Securities per Unit.................................. $ 9.863 $ 8.771 $ 9.862
Purchased Interest(4)............................................................ $ 0 $ 0 $ 0
Purchased Interest per Unit...................................................... $ 0 $ 0 $ 0
Total Offering Price and Purchased Interest Per Unit(4)........................ $ 9.863 $ 8.771 $ 9.862
Plus Sales Charge per Unit(7).................................................... $ 0.176 $ 0.174 $ 0.196
Public Offering Price per Unit(4).................................................. $ 10.039 $ 8.945 $ 10.058
Redemption Price per Unit............................................................ $ 9.838 $ 8.753 $ 9.837
Sponsor's Initial Repurchase Price per Unit.......................................... $ 9.863 $ 8.771 $ 9.862
Excess of Public Offering Price per Unit over Redemption Price per Unit.............. $ 0.201 $ 0.192 $ 0.221
Excess Public Offering Price per Unit over Sponsor's Initial Repurchase Price per
Unit............................................................................... $ 0.176 $ 0.174 $ 0.196
Calculation of Estimated Net Annual Interest Rate per Unit:
Estimated Annual Interest Rate................................................... 5.3838% 0.1065% 6.2230%
Less: Estimated Annual Expenses expressed as a percentage........................ 0.1350% 0.1065% 0.1350%
----------- ----------- -----------
Estimated Net Annual Interest Rate............................................... 5.2488% 0.0000% 6.0880%
Estimated Daily Rate of Net Interest Accrual per Unit................................ $ 0.001458 $ 0.000000 $ .001691
Trustee's Annual Fee per $1,000 principal amount of Securities(5).................... $ 0.83 $ 0.565 $ 0.83
Trustee's Annual Estimated Expenses per $1,000 principal amount of Securities(5)..... $ 0.17 $ 0.15 $ 0.17
Interest Payments(6):
First Payment per Unit, representing 27 days....................................... $ 0.03937 $ 0.00000 $ 0.04566
Sales Charge(7):
As a percentage of Public Offering Price per Unit.................................. 1.75% 1.95% 1.950%
As a percentage of net amount invested............................................. 1.78% 1.984% 1.987%
As a percentage of net amount invested in earning assets........................... 1.78% 1.984% 1.987%
Type of GNMA Securities.............................................................. NOT APPLICABLE
Estimated Average Life of GNMA Securities............................................ NOT APPLICABLE
Weighted Average Years to Maturity................................................... 2.1 2.1 4.1
Evaluator's Maximum Annual Evaluation Fee per $1,000 Principal Amount of
Securities......................................................................... $ 0.25 $ 0.25 $ 0.25
Sponsor's Maximum Annual Surveillance Fee per $1,000 Principal Amount of
Securities......................................................................... $ 0.10 $ 0.10 $ 0.10
Cusip Numbers........................................................................ 487904260 487905143 487905150
</TABLE>
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Evaluations for purposes of sale, purchase or redemption of Units are made as of
the close of business of the Sponsor (3:15 p.m. Central Time) next following
receipt of an order for a sale or purchase of Units or receipt by Investors
Fiduciary Trust Company of Units tendered for redemption.
2
<PAGE> 7
ESSENTIAL INFORMATION--(CONTINUED)
<TABLE>
<S> <C>
Initial Date of Deposit....................................................... September 27, 1994
First Settlement Date......................................................... October 4, 1994
Mandatory Termination Date.................................................... December 31, 2001
Minimum principal value of the Trust under which Trust Agreement may be
terminated.................................................................. 40% of the initial aggregate principal
amount of Securities deposited in the Trust
</TABLE>
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(1) The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Public Offering of
Units--Public Offering Price."
(2) The Estimated Current Returns are calculated by dividing the estimated net
annual interest rate per Unit by the Public Offering Price. The estimated
net annual interest rate per Unit will vary with changes in fees and
expenses of the Trustee, the Sponsor and the Evaluator and with the
principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities and with changes in the Purchased Interest and
Daily Accrued Interest; therefore, there is no assurance that the present
Estimated Current Returns indicated above will be realized in the future.
The Estimated Long-Term Returns are calculated using a formula which (1)
takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and, in the case of
GNMA Portfolio Series, the estimated average life of all the Securities in
such series or, in the case of US. Treasury Portfolio Series, the estimated
retirement dates of all of the Securities in the applicable series and (2)
takes into account the expenses and sales charge associated with each Trust
Unit. Since the market values and the estimated average lives or estimated
retirement dates, as the case may be, of the Securities and expenses of each
Trust will change, there is no assurance that the present Estimated
Long-Term Returns as indicated above will be realized in the future. The
Estimated Current Returns and Estimated Long-Term Returns are expected to
differ because the calculation of the Estimated Long-Term Returns reflects
the estimated date and amount of principal returned while the Estimated
Current Return calculations includes only the net annual interest rate and
Public Offering Price.
(3) This figure is based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Securities and, in the case of GNMA
Portfolio Series, with changes in the average life assumptions of the GNMA
pools. The estimated cash flows to Unitholders for the Trusts are either set
forth under "Estimated Cash Flows to Unitholders" or are available upon
request at no charge from the Sponsor.
(4) Purchased Interest is the unpaid interest that has accumulated on the
Securities in a Trust from the later of the last payment date on the
Securities or the date of issuance thereof through the First Settlement Date
of such Trust. In addition, anyone ordering Units after the Initial Date of
Deposit will pay Daily Accrued Interest from the later of the First
Settlement Date or the last Record Date for such Trust to the date of
settlement (five business days after order). Daily Accrued Interest is the
estimated daily rate of net interest accrued on the Securities in a Trust.
(5) See "Expenses and Charges."
(6) Unitholders will receive interest distributions monthly. The Record Date is
the first day of the month, commencing November 1, 1994, and the
distribution date is the fifteenth day of the month, commencing November 15,
1994.
(7) The sales charge as a percentage of the net amount invested in earning
assets will increase as Daily Accrued Interest increases. Transactions
subject to quantity discounts (see "Public Offering of Units--Public
Offering Price") will have reduced sales charges, thereby reducing all
percentages in the table.
3
<PAGE> 8
THE TRUST FUNDS
GENERAL
Kemper Defined Funds Series 24, (U.S. Treasury Portfolio, Series 5, U.S.
Treasury Portfolio, Series 6 and U.S. Treasury Portfolio, Series 7) (the
"Trust") is comprised of separate "unit investment trusts" created under
Missouri law pursuant to separate Trust Indentures and Agreements (hereinafter
collectively referred to as the "Indenture")* between Kemper Unit Investment
Trusts, a service of Kemper Securities, Inc. (the "Sponsor") and Investors
Fiduciary Trust Company (the "Trustee"). For information regarding the
relationship between the Sponsor and the Trustee, see "Miscellaneous --
Trustee." On the date of this Prospectus (the "Initial Date of Deposit") the
Sponsor deposited the underlying Securities of the Trust with the Trustee at
prices equal to the valuation of such Securities on the offering side of the
market on such date as determined by the Evaluator, and the Trustee delivered to
the Sponsor units of interest ("Units") representing the entire ownership of
such Series of the Trust. Except as otherwise indicated in the "Portfolios," the
Securities so deposited were represented by purchase contracts assigned to the
Trustee together with an irrevocable letter or letters of credit issued by a
commercial bank or banks in the amount necessary to complete the purchase
thereof. Unitholders of the Trust will have the right to have their Units
redeemed at a price based on the aggregate bid side evaluation of the Securities
in the portfolio of the Trust ("Redemption Price per Unit"), if they cannot be
sold in the over-the-counter market which the Sponsor proposes to maintain. See
"Public Offering of Units -- Secondary Market."
The purpose and objective of each GNMA Portfolio Series of the Trust, if any, is
to provide investors with an appropriate vehicle to obtain safety of capital and
monthly distributions of interest and principal through investment in a fixed
portfolio of securities primarily consisting of taxable mortgage-backed
securities of the modified pass-through type ("Ginnie Maes") guaranteed by the
Government National Mortgage Association ("GNMA") and backed by the full faith
and credit of the United States in the case of GNMA Portfolio Series and an
investment in a fixed, laddered portfolio of interest-bearing U.S. Treasury
Obligations in the case of U.S. Treasury Portfolio Series. In addition, GNMA
Foreign Investors Portfolio Series, if any, which are available only to
non-resident alien investors, have an additional purpose of providing income
which is exempt from withholding for U.S. Federal income taxes for such foreign
investors. A foreign investor must provide a completed W-8 Form to his financial
representative or the Trustee to avoid withholding on his account. See "Tax
Status." The U.S. Treasury Portfolio Series is also formed for the purpose of
providing protection against changes in interest rates and also passing through
to Unitholders in all states the exemption from state personal income taxes
afforded to direct owners of U.S. obligations. The Securities are direct
obligations of the United States and are backed by its full faith and credit.
For all Series of the Trust, value of the Units, the estimated current return
and estimated long-term return to new purchasers will fluctuate with the value
of the Securities included in the portfolio which will generally decrease or
increase inversely with changes in interest rates. See "Tax Status."
As used herein, the term "Securities" or "Portfolio Obligations" means the
Ginnie Maes and zero coupon U.S. Treasury Obligations initially deposited in the
GNMA Portfolio Series of the Trust described herein or the U.S. Treasury
Obligations initially deposited in the U.S. Treasury Portfolio Series of the
Trust and includes all contracts to purchase such Ginnie Maes and U.S. Treasury
Obligations accompanied by an irrevocable letter of credit sufficient to perform
such contracts initially deposited in the Trust Funds and described herein under
"Portfolio" for each Trust and any additional Ginnie Maes and U.S. Treasury
Obligations deposited in the GNMA Portfolio Series or U.S. Treasury Portfolio
Series, respectively, of the Trust following the Initial Date of Deposit.
With the deposit of the Securities in the Trust on the Initial Date of Deposit,
the Sponsor established for each Series a percentage relationship between the
principal amounts of Securities of specified interest rates
- ---------------
* To the extent reference is made to the Indenture, any statements herein are
qualified in their entirety by the provisions of said Indenture.
4
<PAGE> 9
and ranges of maturities in the related Portfolio. From time to time, pursuant
to the Indenture, following the Initial Date of Deposit the Sponsor may deposit
additional Securities in each Series of the Trust and Units may be continuously
offered for sale to the public by means of this Prospectus resulting in a
potential increase in the outstanding number of Units of such Series. Any
additional Securities deposited in each Series of the Trust will maintain as far
as practicable the original percentage relationship between the principal
amounts of Securities of specified interest rates and ranges of maturities in
the original Portfolio of such Series. Precise duplication of this original
percentage relationship may not be possible because fractions of Securities may
not be purchased, but duplication will continue to be the goal in connection
with any such additional Securities. Under certain circumstances, the Sponsor
may also direct the Trustee to reinvest certain surplus monies in the Principal
Account of certain GNMA Portfolio Series in additional Ginnie Maes. See
"Portfolio Selection." See "Administration of the Trust Funds -- Portfolio
Supervision."
On the Initial Date of Deposit, each Unit represented the fractional undivided
interest in the Securities and estimated net income of the Series of the Trust
set forth under "Essential Information" in the ratio of 100 Units for each
$1,000 face amount of Securities initially deposited in that Series of the
Trust. Because regular payments of principal are to be received and certain of
the Securities from time to time may be redeemed or will mature in accordance
with their terms or may be sold under certain circumstances described herein and
because additional Securities may be deposited into each Series of the Trust
from time to time, each Series of the Trust is not expected to retain its
present size and composition. Units will remain outstanding until redeemed upon
tender to the Trustee by any Unitholder (which may include the Sponsor) or until
the termination of that Series of the Trust pursuant to the Indenture.
The guaranteed payment of principal and interest afforded by both Ginnie Maes
and U.S. Treasury Obligations may make investment in either type of Trust
particularly well suited for purchase by Individual Retirement Accounts, Keogh
Plans, pension funds and other tax-deferred retirement plans. In addition, the
ability to buy Units (minimum purchase $1,000 per Series, $250 for IRA accounts)
at a Public Offering Price of approximately $10.00 per Unit enables such
investors to tailor the dollar amount of their purchases of Units to take
maximum possible advantage of the annual deductions available for contributions
to such plans. Investors should consult with their tax advisers before
investing. See "Retirement Plans."
Monthly Distributions. Monthly distributions of principal, prepayments of
principal, if any, and interest received by each GNMA Series and distributions
from the U.S. Treasury Portfolio Series will be paid in cash unless the
Unitholder elects to have them automatically reinvested in any open-end mutual
fund registered in such Unitholder's state of residence which is underwritten or
advised by an affiliate of the Sponsor, Kemper Financial Services, Inc. (the
"Kemper Funds"), other than those Kemper Funds sold with a contingent deferred
sales charge. Since the portfolio securities and investment objectives of such
Kemper Funds may differ significantly from that of the GNMA or U.S. Treasury
Portfolios Trust Funds, Unitholders should carefully consider the consequences
before selecting such Kemper Funds for reinvestment. Any such reinvestment is
made at net asset value (that is, without a sales charge). Investors have the
ability to designate that only principal payments (including prepayments) or
only interest payments or both are to be reinvested (see "Reinvestment
Program"). However, because of the small dollar amounts involved and the fact
that the Trust is not required to make a principal distribution unless the
amount in the Principal Account for such Series is equivalent to $1.00 or more
per 100 Units, it is not anticipated that any distribution of principal will be
made until several months after the Initial Date of Deposit. At that time any
principal payments accumulated in an account will be distributed. Once
distributions of principal commence, they will be made in accordance with the
instructions of the investor in any month the amount in the Principal Account
equals or exceeds $1.00 per 100 Units. It should be noted by foreign purchasers
of certain GNMA Portfolios, if offered, that distributions from the reinvestment
fund chosen generally will be subject to U.S. Federal income tax withholding.
Distributions will be made on or about the 15th day of each
5
<PAGE> 10
month to Unitholders of record on the 1st day of such month, commencing with the
first distribution indicated herein under "Essential Information."
Special Considerations. An investment in Units of the GNMA Portfolio Series and
U.S. Treasury Portfolio Series should be made with an understanding of the risks
which an investment in fixed-rate long-term debt obligations and U.S. Treasury
Obligations, respectively, may entail, including the risk that the value of the
portfolio and hence of the Units will decline with increases in interest rates.
Some or all of the Securities in the Trust Fund have been purchased at a market
discount. The current returns (coupon interest rate) of such Securities are
lower than the current returns of similar, comparably rated, securities issued
at currently prevailing interest rates. See "Risk Factors and Portfolio
Information" below.
Estimated Current Return and Estimated Long-Term Return. As of the opening of
business of the Initial Date of Deposit, the Estimated Long-Term Return and
Estimated Current Return, if applicable, for each Trust were as set forth in
"Essential Information." The Estimated Current Return is calculated by dividing
the estimated net annual interest rate per Unit by the Public Offering Price.
The net estimated annual interest rate per Unit will vary with changes in the
fees and expenses of the Trustee, Sponsor and Evaluator and with the exchange,
redemption, sale, scheduled payments, prepayments or maturity of underlying
Securities in the portfolio. The Public Offering Price of the Trust will also
vary with fluctuations in the evaluation of the underlying Securities and with
changes in the Purchased Interest and Daily Accrued Interest; therefore, there
is no assurance that the present Estimated Current Return will be realized in
the future. The Estimated Long-Term Return is calculated using a formula which
(1) takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and, in the case of the
GNMA Portfolio Series, estimated average life of all of the Securities in such
Series, or in the case of the U.S. Treasury Portfolio Series, the estimated
retirements of all the Securities in such Series and (2) takes into account the
expenses and sales charge associated with each Unit of the Trust. Since the
market values and the estimated average lives or estimated retirements, as the
case may be, of the Securities and the expenses of the Trust will change, it can
be expected that the Estimated Long-Term Returns will fluctuate in the future.
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the estimated
date and amount of principal returned while the Estimated Current Return
calculation includes only the net annual interest rate and Public Offering
Price.
Market for Units. After the initial offering period, while under no obligation
to do so, the Sponsor intends to, and certain of the other Underwriters may,
maintain a market for the Units and to offer to repurchase such Units at prices
subject to change at any time which are based on the aggregate bid side
evaluation of the Securities in the Trust Fund plus Purchased Interest and Daily
Accrued Interest.
RISK FACTORS AND PORTFOLIO INFORMATION
THE GNMA PORTFOLIO SERIES
Each GNMA Portfolio Series, if any, is a unit investment trust whose objectives
are to obtain safety of capital and to provide current monthly distributions of
interest and principal through investment in a fixed portfolio initially
consisting primarily of contracts to purchase taxable mortgage-backed securities
of the modified pass-through type ("Ginnie Maes" or "Securities"), including
so-called "Ginnie Mae II's," which involve larger pools of mortgages and which
have a central paying agent, fully guaranteed as to principal and interest by
the Government National Mortgage Association ("GNMA"). All of the Ginnie Maes in
the Trusts consist of pools of long term mortgages on 1-to 4-family dwellings.
Certain GNMA Portfolio Series may also include certain zero coupon U.S. Treasury
Obligations.
6
<PAGE> 11
An investment in Units of the GNMA Trust Fund should be made with an
understanding of the risks which an investment in fixed rate long term 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 Securities will fluctuate inversely with changes in interest
rates. In addition, the potential for appreciation of the underlying Securities,
which might otherwise be expected to occur as a result of a decline in interest
rates, may be limited or negated by increased principal prepayments in respect
of the underlying mortgages. The high inflation of prior years, together with
the fiscal measures adopted to attempt to deal with it, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate long term
debt obligations generally. The Sponsor cannot predict whether such fluctuations
will continue in the future.
The Securities in the Trust Fund were chosen in part on the basis of their
respective stated maturity dates. The ranges of maturity dates of each of the
Securities contained in the Trust are shown on the "Portfolios." The stated
mandatory termination date of the GNMA Portfolios are set forth under "Essential
Information." See "Life of the Securities and of the GNMA Trust Funds" below.
The GNMA Trust Fund may be an appropriate medium for investors who desire to
participate in a portfolio of taxable fixed income securities offering the
safety of capital provided by securities backed by the full faith and credit of
the United States but who do not wish to invest the minimum $25,000 which is
required for a direct investment in GNMA guaranteed securities.
The portfolio of each GNMA Trust Fund initially consists of contracts to
purchase Ginnie Maes, including so-called Ginnie Mae II's, fully guaranteed as
to payments of principal and interest by the Government National Mortgage
Association. In order for the Ginnie Maes to be eligible for inclusion in GNMA
Foreign Investors Portfolio Series, if any, evidence must be received by the
Sponsor that the underlying mortgages were originated after July 18, 1984.
Although the Sponsor believes that all the underlying mortgages were originated
after July 18, 1984, to the extent that this is not the case, a Foreign Investor
will be subject to withholding for U.S. Federal income taxes on income derived
from mortgages that were originated on or prior to July 18, 1984. See "Tax
Status."
Each group of Ginnie Maes described herein as having a specified range of
maturities includes individual mortgage-backed securities which have varying
ranges of maturities within each range specified under "Essential Information."
Each such group of Ginnie Maes is described as one category of securities
because current market conditions accord no difference in price among the
individual Ginnie Mae securities within such group on the basis of the
difference in the maturity dates of each Ginnie Mae. As long as this market
condition prevails, a purchase of Ginnie Maes with the same coupon rate and a
maturity date within the range mentioned above will be considered an acquisition
of the same Security. In the future, however, the difference in maturity ranges
could affect the market value of the individual Ginnie Maes. At such time, any
additional purchases by a GNMA Portfolio Series of the Trust will take into
account the maturities of the individual Securities.
The GNMA Portfolio Series of the Trust may contain Securities which were
acquired at a market discount. Such Securities trade at less than par value
because the interest rates thereon are lower than interest rates on comparable
debt securities being issued at currently prevailing interest rates. If such
interest rates for newly issued and otherwise comparable securities increase,
the market discount of previously issued securities will increase and if such
interest rates for newly issued comparable securities decline, the market
discount of previously issued securities will decrease, other things being
equal. Market discount attributable to interest rate changes does not indicate a
lack of market confidence in the issue.
Unitholders of Units will be "at risk" with respect to such Securities (i.e.,
may derive either gain or loss from fluctuations in the evaluation of the
Securities) from the date they commit for Units. See "Estimated Current Return
and Estimated Long-Term Return."
7
<PAGE> 12
The mortgages underlying a Ginnie Mae may be prepaid at any time without
penalty. A lower or higher return on Units may occur depending on whether the
price at which the respective Ginnie Maes were acquired by the GNMA Portfolio
Series of the Trust is lower or higher than par (which represents the price at
which such Ginnie Maes will be redeemed upon prepayment). Redemption of premium
Ginnie Maes at par pursuant to prepayments of mortgages will operate to lower
the current return on Units of such Series outstanding at that time since
premium Ginnie Maes normally carry higher interest coupons than par or discount
Ginnie Maes. If mortgage rates decline in the future, such prepayments may occur
with increasing frequency because, among other reasons, mortgagors may be able
to refinance their outstanding mortgages at lower interest rates. See "Life of
the Securities and of the GNMA Trust Funds."
Set forth below is a brief description of the current method of origination of
Ginnie Maes; the nature of such securities, including the guaranty of GNMA; the
basis of selection and acquisition of the Ginnie Maes included in the GNMA
portfolio; and the expected life of the Ginnie Maes and GNMA Portfolio Series of
the Trust. The "Portfolios" contain information concerning the coupon rate and
range of stated maturities of the Ginnie Maes in the GNMA Portfolio Series of
the Trust.
Origination. The Ginnie Maes included in the GNMA Portfolio Series are backed by
the indebtedness secured by underlying mortgage pools of long-term mortgages on
1-to 4-family dwellings. In the case of GNMA Foreign Investors Portfolio Series,
which may be acquired only by qualified foreign investors, the Sponsor has
acquired only pools containing mortgages which it believes were originated after
July 18, 1984. The pool of mortgages which is to underlie a particular new issue
of Ginnie Maes is assembled by the proposed issuer of such Ginnie Maes. The
issuer is typically a mortgage banking firm, and in every instance must be a
mortgagee approved by and in good standing with the Federal Housing
Administration ("FHA"). In addition, GNMA imposes its own criteria on the
eligibility of issuers, including a net worth requirement.
The mortgages which are to comprise a new Ginnie Mae pool may have been
originated by the issuer itself in its capacity as a mortgage lender or may be
acquired by the issuer from a third party. Such third party may be another
mortgage banker, a banking institution, the Veterans Administration ("VA")
(which in certain instances acts as a direct lender and thus originates its own
mortgages) or one of several governmental agencies. All mortgages in any given
pool will be insured under the National Housing Act, as amended ("FHA-insured")
or Title V of the Housing Act of 1949 ("FMHA-insured") or guaranteed under the
Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of Title 38,
U.S.C. ("VA-guaranteed"). Such mortgages will have a date for the first
scheduled monthly payment of principal that is not more than one year prior to
the date on which GNMA issues its guaranty commitment as described below, will
have comparable interest rates and maturity dates, and will meet additional
criteria of GNMA. All mortgages in the pools backing the Ginnie Maes contained
in the GNMA Portfolio Series are mortgages on 1-to 4-family dwellings. In
general, the mortgages in these pools provide for monthly payments over the life
of the mortgage (aside from prepayments) designed to repay the principal of the
mortgage over such period, together with interest at the fixed rate of the
unpaid balance.
To obtain GNMA approval of a new pool of mortgages, the issuer will file with
GNMA an application containing information concerning itself, describing
generally the pooled mortgages, and requesting that GNMA approve the issue and
issue its commitment (subject to GNMA's satisfaction with the mortgage documents
and other relevant documentation) to guarantee the timely payment of principal
of and interest on the Ginnie Maes to be issued by the issuer. If the
application is in order, GNMA will issue its commitment and will assign a GNMA
pool number to the pool. Upon completion of the required documentation
(including detailed information as to the underlying mortgages, a custodial
agreement with a Federal or state regulated financial institution satisfactory
to GNMA pursuant to which the underlying mortgages will be held in safekeeping,
and a detailed guaranty agreement between GNMA and the issuer) the issuance of
the Ginnie Maes is permitted. When the Ginnie Maes are issued, GNMA will endorse
its
8
<PAGE> 13
guaranty thereon. The aggregate principal amount of Ginnie Maes issued will be
equal to the then aggregate unpaid principal balances of the pooled mortgages.
The interest rate borne by the Ginnie Maes is currently fixed at 1/2 of 1% below
the interest rate of the pooled 1-to 4-family mortgages, the differential being
applied to the payment of servicing and custodial charges as well as GNMA's
guaranty fee.
Ginnie Mae II's consist of jumbo pools of mortgages consisting of pools of
mortgages from more than one issuer. The major advantage of Ginnie Mae II's lies
in the fact that a central paying agent sends one check to the holder on the
required payment date. This greatly simplifies the current procedure of
collecting distributions from each issuer of a Ginnie Mae, since such
distributions are often received late.
Nature of Ginnie Maes and GNMA Guaranty. All of the Ginnie Maes in the GNMA
Portfolio Series, including the Ginnie Mae II's, are of the "modified
pass-through" type, i.e., they provide for timely monthly payments to the
registered holders thereof (including a GNMA Portfolio Series of the Trust) of a
pro rata share of the scheduled principal payments on the underlying mortgages,
whether or not collected by the issuers. Such monthly payments will also
include, on a pro rata basis, any prepayments of principal of such mortgages
received and interest (net of the servicing and other charges described above)
on the aggregate unpaid principal balance of such Ginnie Maes, whether or not
the interest on the underlying mortgages has been collected by the issuers.
The Ginnie Maes in the GNMA Portfolio Series are guaranteed as to timely payment
of principal and interest by GNMA. Funds received by the issuers on account of
the mortgages backing the Ginnie Maes in the GNMA Portfolio Series are intended
to be sufficient to make the required payments of principal of and interest on
such Ginnie Maes but, if such funds are insufficient for that purpose, the
guaranty agreements between the issuers and GNMA require the issuers to make
advances sufficient for such payments. If the issuers fail to make such
payments, GNMA will do so.
GNMA is authorized by Section 306(g) of Title III of the National Housing Act to
guarantee the timely payment of principal of and interest on securities which
are based on or backed by a trust or pool composed of mortgages insured by FHA,
the Farmers' Home Administration ("FMHA") or guaranteed by the VA. Section
306(g) provides further that the full faith and credit of the United States is
pledged to the payment of all amounts which may be required to be paid under any
guaranty under such subsection. An opinion of an Assistant Attorney General of
the United States, dated December 9, 1969, states that such guaranties
"constitute general obligations of the United States backed by its full faith
and credit."* GNMA is empowered to borrow from the United States Treasury to the
extent necessary to make any payments of principal and interest required under
such guaranties. Ginnie Maes are backed by the aggregate indebtedness secured by
the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages and, except
to the extent of funds received by the issuers on account of such mortgages,
Ginnie Maes do not constitute a liability of nor evidence any recourse against
such issuers, but recourse thereon is solely against GNMA. Holders of Ginnie
Maes (such as the GNMA Portfolio Series of the Trust) have no security interest
in or lien on the underlying mortgages.
The GNMA guaranties referred to herein relate only to payment of principal of
and interest on the Ginnie Maes in the portfolio and not to the Units offered
hereby.
Life of the Securities and of the GNMA Trust Funds. Monthly payments of
principal will be made, and additional prepayments of principal may be made, to
the GNMA Trust Funds in respect of the mortgages underlying the Ginnie Maes in
each GNMA Portfolio Series. All of the mortgages in the pools relating to the
- ---------------
* Any statement in this Prospectus that a particular Security is backed by the
full faith and credit of the United States is based upon the opinion of an
Assistant Attorney General of the United States and should be so construed.
9
<PAGE> 14
Ginnie Maes in each GNMA Portfolio Series are subject to prepayment without any
significant premium or penalty at the option of the mortgagors. It has been the
experience of the mortgage industry that the average life of mortgages
comparable to those contained in the GNMA Portfolio Series, owing to
prepayments, refinancings and payments from foreclosures is considerably less
than the stated maturity for each series set forth in "Essential Information."
In the mid 1970's, published tables for Ginnie Maes utilized a 12 year average
life assumption for Ginnie Mae pools of 26-30 year mortgages on 1-to 4-family
dwellings. This assumption was derived from the FHA experience relating to
prepayments on such mortgages during the period from the mid 1950's to the mid
1970's. This 12 year average life assumption was calculated in respect of a
period during which mortgage lending rates were fairly stable. That assumption
is probably no longer an accurate measure of the life of Ginnie Maes or their
underlying single family mortgage pools. However, current yield tables,
published in 1981, still utilize the 12 year average life assumption and Ginnie
Maes continue to be traded based on this assumption. Recently it has been
observed that mortgages issued at high interest rates have experienced
accelerated prepayment rates which would indicate a shorter average life than 12
years.
A number of factors, including homeowner's mobility, change in family size and
mortgage market interest rates will affect the average life of the Ginnie Maes
in the Trust Funds. For example, Ginnie Maes issued during a period of high
interest rates will be backed by a pool of mortgage loans bearing similarly high
rates. In general, during a period of declining interest rates, new mortgage
loans with interest rates lower than those charged during periods of high rates
will become available. To the extent a homeowner has an outstanding mortgage
with a high rate, he may refinance his mortgage at a lower interest rate or he
may rapidly repay his old mortgage. Should this happen, a Ginnie Mae issued with
a high interest rate may experience a rapid prepayment of principal as the
underlying mortgage loans prepay in whole or in part. Accordingly, there can be
no assurance that the prepayment levels which will be actually realized will
conform to the experience of the FHA, other mortgage lenders or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Maes in the Trust Fund. Therefore, the termination of the
Trust Fund might be accelerated as a result of prepayments made as described
herein.
In addition to prepayments as described above, sales of Securities in the Trust
Fund under certain permitted circumstances may result in an accelerated
termination of the Trust Fund. Also, it is possible that, in the absence of a
secondary market for the Units or otherwise, redemptions of Units may occur in
sufficient numbers to reduce the Trust Fund to a size resulting in such
termination. Early termination of the Trust Fund may have important consequences
to the Unitholder; e.g., to the extent that Units were purchased with a view to
an investment of longer duration, the overall investment program of the investor
may require readjustment; or the overall return on investment may be less or
greater than anticipated, depending in part on whether the purchase price paid
for Units represented the payment of an overall premium or a discount,
respectively, above or below the stated principal amounts of the underlying
mortgages. In addition, a capital gain or loss may result for tax purposes from
termination of a GNMA Portfolio Series.
THE U.S. TREASURY PORTFOLIO SERIES
Each U.S. Treasury Portfolio Series is a unit investment trust whose objective
is to obtain safety of capital and investment flexibility as well as current
monthly distributions of interest through investment in a fixed, laddered
portfolio initially consisting of contracts to purchase interest-bearing U.S.
Treasury obligations (the "U.S. Treasury Obligations"). The U.S. Treasury
Portfolio Series are formed for the purpose of providing protection against
changes in interest rates and also passing through to Unitholders in all states
the exemption from state personal income taxes afforded to direct owners of U.S.
Treasury Obligations. The U.S. Treasury Portfolio Series has an additional
purpose of providing income which is exempt from
10
<PAGE> 15
withholding for U.S. Federal income taxes for non-resident alien investors. A
foreign investor must provide a completed W-8 Form to his financial
representative or the Trustee to avoid withholding on his account. The
Securities are direct obligations of the United States and are backed by its
full faith and credit.
An investment in Units of the U.S. Treasury Portfolio Series 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 fluctuate inversely with changes in interest rates. The high
inflation of prior years, together with the fiscal measures adopted to attempt
to deal with it, have resulted in wide fluctuations in interest rates and, thus,
in the value of fixed rate long term debt obligations generally. The Sponsor
cannot predict whether such fluctuations will continue in the future.
In selecting Securities for deposit in the U.S. Treasury Portfolio Series, the
following factors, among others, were considered by the Sponsor: (i) the prices
of the Securities relative to other comparable Securities; (ii) the maturities
of these Securities; and (iii) whether the Securities were issued after July 18,
1984.
The U.S. Treasury Portfolio Series may be an appropriate medium for investors
who desire to participate in a portfolio of taxable fixed income securities
offering the safety of capital provided by an investment backed by the full
faith and credit of the United States. In addition, many investors may benefit
from the exemption from state and local personal income taxes that will pass
through the U.S. Treasury Portfolio Series to Unitholders in virtually all
states.
The Portfolios initially consist of contracts to purchase U.S. Treasury
Obligations fully secured by the full faith and credit of the United States,
certain of which have been purchased at a market discount or premium. Certain
Securities may have been purchased on a when, as and if issued basis. Interest
on these Securities begins accruing to the benefit of holders on their
respective dates of delivery. Unitholders will be "at risk" with respect to
these Securities (i.e. may derive either gain or loss from fluctuations in the
offering side evaluation of the Securities) from the date they commit for Units.
The Trusts consist of the U.S. Treasury Obligations (or contracts to purchase
the Securities) listed in the Portfolios as may continue to be held from time to
time in the Trusts and any additional Securities deposited in the Funds in
connection with the sale of additional Units to the public as described above,
together with the accrued and undistributed interest thereon and undistributed
cash realized from the sale or redemption of Securities (see "Administration of
the Trust Funds--Portfolio Supervision"). Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in any of the
Securities. However, should any contract deposited in connection with the sale
of additional Units fail, the Sponsor shall, on or before the next following
Distribution Date, deposit additional Securities or cause to be refunded the
attributable sales charge, plus the attributable cost of Securities to such U.S.
Treasury Portfolio Series plus accrued interest if any (at the coupon rate of
the relevant Security to the date the Sponsor is notified of the failure).
The Indenture authorizes the Sponsor to increase the size and the number of
Units of the U.S. Treasury Portfolio Series by the deposit of additional
Securities and the issue of a corresponding number of additional Units
subsequent to the Initial Date of Deposit maintaining, as close as practicable,
the original percentage relationship among the principal amounts of Securities
of specified interest rates and maturities.
On the Initial Date of Deposit each Unit represented the fractional undivided
interest in the U.S. Treasury Portfolio Series set forth under "Essential
Information". Thereafter, if any Units are redeemed by the Trustee the face
amount of Securities in the U.S. Treasury Portfolio Series will be reduced by
amounts allocable to redeemed Units, and the fractional undivided interest
represented by each Unit in the balance will be increased. However, if
additional Units are issued by the U.S. Treasury Portfolio Series (through
deposit of Securities by the Sponsor in connection with the sale of additional
Units), the aggregate value of
11
<PAGE> 16
Securities in the U.S. Treasury Portfolio Series will be increased by amounts
allocable to additional Units, and the fractional undivided interest represented
by each Unit in the balance will be decreased. Units will remain outstanding
until redeemed upon tender to the Trustee by any Unitholder (which may include
the Sponsor) or until the termination of the Indenture.
KEMPER DEFINED FUNDS SERIES 24
U.S. TREASURY PORTFOLIO, SERIES 5
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: SEPTEMBER 27, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost of
Securities
Face of
Amount Coupon Maturities Trust(2)
<S> <C> <C> <C>
- -----------
$ 200,000 4.250% 11-30-1995 $ 196,438
200,000 4.250 5-15-1996 194,126
200,000 4.375 11-15-1996 191,938
200,000 6.500 5-15-1997 199,438
170,000 8.875 11-15-1997 179,988
30,000 0.000 11-15-1997 24,341(3)
- ----------- ---------
$ 1,000,000 $ 986,269
========== =========
</TABLE>
SEE "NOTES TO PORTFOLIOS."
KEMPER DEFINED FUNDS SERIES 24
U.S. TREASURY PORTFOLIO, SERIES 6
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: SEPTEMBER 27, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost of
Securities
Face of
Amount Coupon Maturities Trust(2)
<S> <C> <C> <C>
- -----------
$ 200,000 0.000% 11-15-1995 $ 187,508(3)
200,000 0.000 5-15-1996 181,116(3)
200,000 0.000 11-15-1996 174,782(3)
200,000 0.000 5-15-1997 168,406(3)
188,000 0.000 11-15-1997 152,539(3)
12,000 8.875 11-15-1997 12,705
- ----------- ---------
$ 1,000,000 $ 877,056
========== =========
</TABLE>
SEE "NOTES TO PORTFOLIOS."
KEMPER DEFINED FUNDS SERIES 24
U.S. TREASURY PORTFOLIO, SERIES 7
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: SEPTEMBER 27, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost of
Securities
Face of
Amount Coupon Maturities Trust(2)
<S> <C> <C> <C>
- -----------
$ 200,000 4.375% 11-15-1996 $ 191,938
200,000 5.750 10-31-1997 194,500
200,000 5.125 11-30-1998 186,500
200,000 7.875 11-15-1999 206,250
188,000 8.500 11-15-2000 199,280
12,000 0.000 11-15-2000 7,726(3)
- ----------- ---------
$ 1,000,000 $ 986,194
========== =========
</TABLE>
SEE "NOTES TO PORTFOLIOS."
12
<PAGE> 17
NOTES TO PORTFOLIOS
(1) The principal amount of Securities listed as having the range of maturities
shown is an aggregate of individual Securities having varying ranges of
maturities within that shown. They are listed as one category of Securities
with a single range of maturities because of current market conditions that
accord no difference in price among the Securities grouped together on the
basis of the difference in their maturity ranges. At some time in the
future, however, the difference in maturity ranges could affect the market
value of the individual Securities.
(2) Some Securities may be represented by contracts to purchase such Securities.
During the initial offering period, evaluations of Securities are made on
the basis of current offering side evaluations of the Securities. The
aggregate offering price is greater than the aggregate bid price of the
Securities, which is the basis on which Redemption Prices will be determined
for purposes of redemption of Units after the initial offering period. Other
information regarding the Securities in the Trust Funds, at the opening of
business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Annual
Profit or Interest
Cost of Securities (Loss) to Income to Bid Side Value
Trust Fund to Sponsor Sponsor Trust of Securities
- ----------------------------------------------- ------------------ --------- ----------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Series 5......................... $984,160 $ 2,109 $53,838 $983,771
U.S. Treasury Series 6......................... $874,916 $ 2,140 $ 1,065 $875,296
U.S. Treasury Series 7......................... $984,414 $ 1,780 $62,230 $983,678
</TABLE>
(3) This Security has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Securities
which pay no interest are normally described as "zero coupon" bonds. Over
the life of Securities purchased at a deep discount the value of such
Securities will increase such that upon maturity the holders of such
Securities will receive 100% of the principal amount thereof.
------------------------
*In addition to the information as to the GNMA modified pass-through
mortgage-backed Securities set forth under "Portfolios," the Trustee will
furnish Unitholders a statement listing the name of issuer, pool number,
interest rate, maturity date and principal amount for each such Security in the
portfolio upon written request.
------------------------
13
<PAGE> 18
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
KEMPER DEFINED FUNDS SERIES 24 (U.S. TREASURY PORTFOLIO, SERIES 5,
U.S. TREASURY PORTFOLIO, SERIES 6 AND U.S. TREASURY PORTFOLIO, SERIES 7)
We have audited the accompanying statements of condition, including the
portfolios, of Kemper Defined Funds Series 24 (U.S. Treasury Portfolio, Series
5, U.S. Treasury Portfolio, Series 6 and U.S. Treasury Portfolio, Series 7) as
of the opening of business on September 27, 1994. These statements of condition
are the responsibility of the Sponsor. Our responsibility is to express an
opinion on these statements of condition based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements of condition are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements of condition. Our procedures
included confirmation of the letter of credit held by the Trustee on September
27, 1994. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the overall
statements of condition presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statements of condition referred to above present fairly, in
all material respects, the financial position of Kemper Defined Funds Series 24
(U.S. Treasury Portfolio, Series 5, U.S. Treasury Portfolio, Series 6 and U.S.
Treasury Portfolio, Series 7) at the opening of business on September 27, 1994,
in conformity with generally accepted accounting principles.
GRANT THORNTON
Chicago, Illinois
September 27, 1994
14
<PAGE> 19
KEMPER DEFINED FUNDS SERIES 24,
U.S. TREASURY PORTFOLIO, SERIES 5, U.S. TREASURY PORTFOLIO, SERIES 6
AND U.S. TREASURY PORTFOLIO, SERIES 7
STATEMENTS OF CONDITION
AS OF THE OPENING OF BUSINESS ON SEPTEMBER 27, 1994, THE INITIAL DATE OF DEPOSIT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. TREASURY U.S. TREASURY U.S. TREASURY
PORTFOLIO SERIES 5 PORTFOLIO SERIES 6 PORTFOLIO SERIES 7
------------------ ------------------ ------------------
<S> <C> <C> <C>
INVESTMENT IN SECURITIES
Securities deposited in Trust(1)...................... $ 986,269 $ 877,056 $ 986,194
Contracts to purchase Securities(1)................... 0 0 0
Accrued interest to First Settlement Date on
Securities(1)(2).................................... 20,560 414 24,233
------------------ ------------------ ------------------
Total............................................... $1,006,829 $ 877,470 $1,010,427
============= ============= =============
Number of Units....................................... 100,000 100,000 100,000
============= ============= =============
LIABILITIES AND INTEREST OF UNITHOLDERS
Accrued interest payable to Sponsor(1)(2)............. $ 20,560 $ 414 $ 24,233
Interest of Unitholders --
Cost to investors(3)................................ 1,003,900 894,500 1,005,800
Less: Gross underwriting commission(3).............. 17,631 17,444 19,606
------------------ ------------------ ------------------
Net interest to Unitholders(1)(2)(3)................ 986,269 877,056 986,194
------------------ ------------------ ------------------
Total............................................ $1,006,829 $ 877,470 $1,010,427
============= ============= =============
</TABLE>
- -------------------------
NOTES:
(1) The aggregate value of the Securities listed in each Portfolio and their
cost to the Trust are the same. The value of the Securities is determined
by Muller Data Corporation on the bases set forth under "Public Offering of
Units--Public Offering Price." The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $0.00 which has been
deposited with the Trustee. Of this amount, $0.00 relates to the offering
price of Securities to be purchased and $0.00 relates to accrued interest
on such Securities to the expected dates of delivery.
(2) Accrued interest on the underlying Securities represents the interest
accrued as of the First Settlement Date from the later of the last payment
date on the Securities or of the date of issuance thereof. The Trustee may
advance to the Trust a portion of the accrued interest on the underlying
Securities for distribution to the Sponsor as the Unitholder of record as
of the First Settlement Date. A portion of the accrued interest on the
underlying Securities may be payable by investors and is included in the
Public Offering Price. This portion is called Purchased Interest and
represents the difference between Accrued interest to First Settlement Date
on Securities and Accrued interest payable to Sponsor (see "Essential
Information").
(3) The aggregate public offering price includes a sales charge for each Trust
as set forth under "Essential Information," assuming all single
transactions involve less than 10,000 Units in the case of a GNMA Series,
or less than 50,000 Units in the case of a U.S. Treasury Series. For single
transactions involving 10,000 or more Units of a GNMA Series, or 50,000 or
more Units of a U.S. Treasury Series, the sales charge is reduced (see
"Public Offering of Units--Public Offering Price") resulting in an equal
reduction in both the Cost to investors and the Gross underwriting
commission while the Net interest to Unitholders remains unchanged.
15
<PAGE> 20
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per 100 Units estimated distributions of
interest, principal and rebates of Purchased Interest to Unitholders. The tables
assume no changes in Trust expenses, no redemptions or sales of the underlying
U.S. Treasury Obligations prior to maturity and the receipt of all principal due
upon maturity. To the extent the foregoing assumptions change actual
distributions will vary.
U.S. TREASURY PORTFOLIO, SERIES 5
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL PURCHASED INTEREST TOTAL
DATES DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
- ----------------------------------------------- ------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
November 15, 1994.............................. $3.937 $ 3.937
December 15, 1994 to November 15, 1995......... 4.374 4.374
December 15, 1995.............................. 4.374 $200.000 204.374
January 15, 1996 to May 15, 1996............... 3.685 3.685
May 31, 1996................................... 200.000 200.000
June 15, 1996.................................. 3.331 3.331
July 15, 1996 to November 15, 1996............. 2.997 2.997
November 30, 1996.............................. 200.000 200.000
December 15, 1996.............................. 2.632 2.632
January 15, 1997 to May 15, 1997............... 2.287 2.287
May 30, 1997................................... 200.000 200.000
June 15, 1997.................................. 1.745 1.745
July 15, 1997 to November 15, 1997............. 1.223 1.223
November 30, 1997.............................. 0.595 200.000 200.595
</TABLE>
U.S. TREASURY PORTFOLIO, SERIES 6
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL PURCHASED INTEREST TOTAL
DATES DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
- ----------------------------------------------- ------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
November 25, 1995.............................. $200.000 $200.000
May 25, 1996................................... 200.000 200.000
November 25, 1995.............................. 200.000 200.000
May 25, 1995................................... 200.000 200.000
November 25, 1995.............................. 200.000 200.000
</TABLE>
16
<PAGE> 21
U.S. TREASURY PORTFOLIO, SERIES 7
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL PURCHASED INTEREST TOTAL
DATES DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
- -------------------------------------------------- ------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
November 15, 1994................................. $4.566 $ 4.566
December 15, 1994 to November 15, 1996............ 5.073 5.073
November 30, 1996................................. 200.000 200.000
December 15, 1996................................. 4.709 4.709
January 15, 1997 to October 15, 1997.............. 4.364 4.364
November 15, 1997................................. 4.364 200.000 204.364
December 15, 1997 to November 15, 1998............ 3.425 3.425
December 15, 1998................................. 3.425 200.000 203.425
January 15, 1999 to November 15, 1999............. 2.591 2.591
November 30, 1999................................. 200.000 200.000
December 15, 1999................................. 1.934 1.934
January 15, 2000 to November 15, 2000............. 1.298 1.298
November 30, 2000................................. 0.632 200.000 200.632
</TABLE>
17
<PAGE> 22
RATING OF UNITS
Standard & Poor's Corporation ("Standard & Poor's") has rated the Units of each
Series of the Trust "AAA." This is the highest rating assigned by Standard &
Poor's. Standard & Poor's has been compensated by the Sponsor for its services
in rating Units of the Trust Funds.
A Standard & Poor's Corporation's rating (as described by Standard & Poor's) on
the units of an investment trust (hereinafter referred to collectively as
"units" or "trust") is a current assessment of creditworthiness with respect to
the investments held by such trust. This assessment takes into consideration the
financial capacity of the issuers and of any guarantors, insurers, lessees, or
mortgagors with respect to such investments. The assessment, however, does not
take into account the extent to which trust expenses or portfolio asset sales
for less than the trust's purchase price will reduce payment to the Unitholder
of the interest and principal required to be paid on the portfolio assets. In
addition, the rating is not a recommendation to purchase, sell, or hold units,
inasmuch as the rating does not comment as to market price of the units or
suitability for a particular investor.
Trusts rated "AAA" are composed exclusively of assets that are rated "AAA" by
Standard & Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain short-term
investments. Standard & Poor's defines its "AAA" rating for such assets as the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and repay principal is very strong.
PORTFOLIO SELECTION
In selecting Ginnie Maes and U.S. Treasury Obligations for deposit in the
appropriate Trust Funds, the following factors, among others, were considered by
the Sponsor: (i) the types of such obligations available; (ii) the prices and
yields of such obligations relative to other comparable obligations, including
the extent to which such obligations are traded at a premium or at a discount
from par; and (iii) the maturities of such obligations.
Each Series of the Trust consists of such of the unamortized principal amount of
the Portfolio Obligations listed under the appropriate Trust Fund's "Portfolio"
(or contracts to purchase such obligations) as may continue to be held from time
to time in such Series of the Trust and any additional obligations acquired and
held by such Series of the Trust pursuant to the provisions of the Indenture
(including provisions with respect to deposits of Portfolio Obligations in
connection with the issuance of additional Units) together with accrued and
undistributed interest thereon and undistributed cash representing payments and
prepayments of principal and proceeds realized from the disposition of Portfolio
Obligations. Neither the Sponsor nor the Trustee shall be liable in any way for
any default, failure or defect in any of the Portfolio Obligations. However,
should any contract deposited hereunder (or to be deposited in connection with
the issuance of additional Units), fail, the Sponsor shall, on or before the
next following Distribution Date, unless substantially all of the moneys held in
such Series of the Trust to cover such purchase are reinvested in substitute
Portfolio Obligations in accordance with the Indenture, cause to be refunded to
the Unitholders of that Series the attributable sales charge, plus the
attributable cost of the Portfolio Obligations to that Series of the Trust, plus
accrued interest, if any, at the coupon rate of the relevant Portfolio
Obligations to the date the Sponsor is notified of the failure.
Each Series of the Trust may contain "zero coupon" U.S. Treasury Obligations.
See footnote (3) in "Notes to Portfolios." Zero coupon obligations are purchased
at a deep discount because the buyer receives only the right to receive a final
payment at the maturity of the obligations and does not receive any periodic
interest payments. The effect of owning deep discount obligations which do not
make current interest payments (such as the zero coupon obligations) is that a
fixed yield is earned not only on the original
A-1
<PAGE> 23
investment but also, in effect, on all discount earned during the life of such
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 obligations
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality which
pay interest.
Because regular payments of principal are to be received and certain of the
Securities from time to time may be redeemed or will mature in accordance with
their terms or may be sold under certain circumstances described herein, the
GNMA Portfolio Series of the Trust, if any, referred to herein are not expected
to retain their present size and composition.
THE UNITS
On the Initial Date of Deposit, each Unit represented the fractional undivided
interest in the appropriate Series of the Trust set forth for such Series under
"Essential Information" above in the ratio of one Unit for each $10.00 principal
amount of Portfolio Obligations in the Series. Thereafter, if any Units are
redeemed by the Trustee, the principal amount of Portfolio Obligations in such
Series will be reduced by amounts allocable to redeemed Units, and the
fractional undivided interest represented by each Unit in the balance will be
increased. However, if additional Units are issued by a Series of the Trust (in
connection with the deposit by the Sponsor of additional Portfolio Obligations),
the aggregate value of Portfolio Obligations in such Series of the Trust will be
increased by amounts allocable to additional Units, and the fractional undivided
interest represented by each Unit in the balance will be decreased. Units will
remain outstanding until redeemed upon tender to the Trustee by any Unitholder
(which may include the Sponsor) or until the termination of the Series. See
"Redemption" and "Administration of the Trust Funds -- Termination."
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Current Return and the Estimated Long-Term Return for each Series were as set
forth in "Essential Information" for each Trust. Estimated Current Return is
calculated by dividing the estimated net annual interest rate per Unit by the
Public Offering Price. The estimated net annual interest rate per Unit will vary
with changes in fees and expenses of the Trustee, the Sponsor and the Evaluator
and with the principal prepayment, redemption, maturity, exchange or sale of
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and with changes in Purchased
Interest and Daily Accrued Interest; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. The Estimated
Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums and
the accretion of discounts) and, in the case of GNMA Portfolio Series, the
estimated average life of all the Securities in such Series or, in the case of
U.S. Treasury Portfolio Series, the estimated retirements of all of the
Securities in such Series and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and the
estimated average lives or estimated retirements, as the case may be, 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. The
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the estimated
dates and amounts of principal returned while the Estimated Current Return
calculations include only net annual interest rates and Public Offering Price.
Payments received in respect of the mortgages underlying the Ginnie Maes in each
series of the GNMA Portfolio will consist of a portion representing interest and
a portion representing principal. Although the aggregate monthly payment made by
the obligor on each mortgage remains constant (aside from optional prepayments
of principal), in the early years most of each such payment will represent
interest, while in
A-2
<PAGE> 24
later years, the proportion representing interest will decline and the
proportion representing principal will increase. However, by reason of optional
prepayments, principal payments in the earlier years on the mortgages underlying
the Ginnie Maes may be substantially in excess of those required by the
amortization schedules of such mortgages. Therefore, principal payments in later
years may be substantially less since the aggregate unpaid principal balances of
such underlying mortgages may have been greatly reduced. To the extent that the
underlying mortgages bearing higher interest rates in the Trust Funds are
prepaid faster than the other underlying mortgages, the net annual interest rate
per Unit and the Estimated Current Return on the Units of such Series can be
expected to decline. Monthly payments to the Unitholders will reflect all of the
foregoing factors.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of each Trust Fund are offered at the Public
Offering Price thereof. During the initial offering period, the Public Offering
Price per Unit is equal to the aggregate of the offering side evaluations of the
Securities in a Trust Fund (as determined, pursuant to the terms of a contract
with the Evaluator, by Muller Data Corporation, a non-affiliated firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities), plus or minus a pro rata share of (a) cash, if any, in the
Principal Account held or owned by a Trust Fund, (b) Purchased Interest and (c)
Daily Accrued Interest plus the applicable sales charge referred to in the table
below divided by the number of outstanding Units of such Trust Fund. The Public
Offering Price for secondary market transactions, on the other hand, is based on
the bid side evaluations of the Securities in a Trust Fund plus or minus (a)
cash, if any, in the Principal Account held or owned by the Trust Fund, (b)
Purchased Interest and (c) Daily Accrued Interest plus a sales charge based upon
the dollar weighted average maturity of the Trust Fund. The sales charges for
primary sales for each Series of the Trust and for secondary sales of the GNMA
Portfolio Series are set forth in "Essential Information." The sales charges for
secondary sales for the U.S. Treasury Portfolio Series are set forth below.
The sales charge per Unit for GNMA Portfolio Series will be reduced pursuant to
the following graduated scale:
<TABLE>
<CAPTION>
MIDGET TRUST LONG-TERM TRUST
------------------------- -------------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT
TICKET SIZE* PRICE INVESTED PRICE INVESTED
- ----------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $100,000............................. 3.50 3.627 3.95 4.112
$100,000 to $249,999........................... 3.25 3.359 3.70 3.842
$250,000 to $499,999........................... 2.85 2.934 3.35 3.466
$500,000 to $999,999**......................... 2.60 2.669 3.10 3.199
</TABLE>
- ------------
*The breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be applied
on whichever basis is more favorable to the investor.
**For any transactions in excess of these amounts, contact the Sponsor for the
applicable sales charge.
The sales charge per Unit for U.S. Treasury Portfolio Series which contain
predominately zero coupon U.S. Treasury Obligations will be reduced pursuant
to the following graduated scale:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
YEARS TO MATURITY
-------------------------
0 TO 4.99
-------------------------
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
TICKET SIZE* PRICE INVESTED
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Less than $500,000.................................................... 1.95 1.989
$500,000 to $999,999.................................................. 1.70 1.729
$1,000,000 to $1,499,999**............................................ 1.30 1.317
</TABLE>
- ------------
*The breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be applied
on whichever basis is more favorable to the investor.
**For any transactions in excess of these amounts, contact the Sponsor for the
applicable sales charge.
A-3
<PAGE> 25
The sales charge per Unit for U.S. Treasury Portfolio Series (other than Series
which contain predominately zero coupon U.S. Treasury Obligations) will be
reduced pursuant to the following graduated scale:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YEARS TO MATURITY
-----------------------------------------------------
0 TO 2.99 3 TO 4.99
------------------------- -------------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT
TICKET SIZE* PRICE INVESTED PRICE INVESTED
- ----------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $500,000............................. 1.75 1.781 1.95 1.989
$500,000 to $999,999........................... 1.50 1.523 1.70 1.729
$1,000,000 to $1,499,999**..................... 1.25 1.266 1.30 1.317
</TABLE>
- ------------
*The breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be applied
on whichever basis is more favorable to the investor.
**For any transactions in excess of these amounts, contact the Sponsor for the
applicable sales charge.
In connection with secondary market transactions of all U.S. Treasury Portfolio
Series, the sales charge per Unit will be reduced as set forth below:
<TABLE>
<CAPTION>
SECONDARY
-----------------------------------------------------------
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY*
-----------------------------------------------------------
0-1.99 2-2.99 3-4.99 5-6.99 7-9.99
DOLLAR AMOUNT OF TRADE YEARS YEARS YEARS YEARS YEARS
- --------------------------------------- ---- ---- ---- ---- -------
SALES CHARGE (PERCENT OF PUBLIC OFFERING PRICE)
<S> <C> <C> <C> <C> <C>
Less than $500,000..................... 1.25% 1.50% 1.75% 2.25% 3.00%
$500,000-$999,999...................... 1.00 1.25 1.50 1.75 2.50
$1,000,000-$1,499,999.................. 1.00 1.00 1.25 1.50 2.00
</TABLE>
- ------------
*For any transaction in excess of $1,499,999 contact the Sponsor for the
applicable sales charge.
The reduced sales charges as shown on the tables above will apply to all
purchases of Units on any one day by the same purchaser from the same firm, and
for this purpose, purchases of Units of these Series 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 will also allow purchasers who commit to purchase $1
million or more of the Series' units during a 12 month period to do so at the
applicable reduced sales charge for such series pursuant to a letter of intent,
subject to certain restrictions.
The Sponsor intends to permit officers, directors and employees of the Sponsor
and Evaluator and, in the sole discretion of the Sponsor, registered
representatives of selling firms to purchase Units of each Series without a
sales charge, although a transaction processing fee may be imposed on such
trades.
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units and the right to change the amount of the sales charge from
time to time.
The Public Offering Price includes accrued interest. Accrued interest consists
of two elements. The first element arises as a result of accrued interest which
is the accumulation of unpaid interest on a security from the later of the last
day on which interest thereon was paid or the date of original issuance of the
security. Interest on the Securities in the Trust Fund is paid monthly or
semi-annually to the Trust. A portion of the aggregate amount of such accrued
interest on the Securities in the Trust to the First Settlement Date of the
Trust is referred to herein as "Purchased Interest." Included in the Public
Offering Price of the Trust Units is the Purchased Interest. In an effort to
reduce the amount of Purchased Interest which would otherwise have to be paid by
Unitholders, the Trustee may advance all or portion of the accrued interest to
the Sponsor
A-4
<PAGE> 26
as the Unitholder of record as of the First Settlement Date. The second element
of accrued interest arises because the estimated net interest on the Units in
the Trust Fund is accounted for daily on an accrual basis (herein referred to as
"Daily Accrued Interest"). Because of this, the Units always have an amount of
interest earned but not yet paid or reserved for payment. For this reason, the
Public Offering Price of Units will include the proportionate share of Daily
Accrued Interest to the date of settlement.
If a Unitholder sells or redeems all or a portion of his Units or if the
Securities are sold or otherwise removed or if the Trust Fund is liquidated, he
will receive at that time his proportionate share of the Purchased Interest and
Daily Accrued Interest computed to the settlement date in the case of sale or
liquidation and to the date of tender in the case of redemption in the Trust
Fund.
The Public Offering Price of any Series on the date of this Prospectus or on any
subsequent date will vary from the Public Offering Price set forth under
"Essential Information" for such Series in accordance with fluctuations in the
valuation of the underlying Portfolio Obligations in such Series of the Trust
and the addition or deletion of Purchased Interest and Daily Accrued Interest.
During the initial offering period and thereafter, the aggregate bid or offering
prices of the Securities in each Series of the Trust, as is appropriate, shall
be determined for the Trust by the Evaluator, in the following manner: (a) on
the basis of current bid or offering prices for the Portfolio Obligations, (b)
if bid or offering prices are not available for the Portfolio Obligations, on
the basis of current bid or offering prices for comparable securities, (c) by
determining the value of the Portfolio Obligations on the bid or offering side
of the market by appraisal, or (d) by any combination of the above. The
Evaluator may obtain current price information as to the Portfolio Obligations
from investment dealers or brokers. Such evaluations and computations will be
made as of the close of business on each business day commencing with the
Initial Date of Deposit of the Portfolio Obligations and will be effective for
all sales of Units made during the preceding 24-hour period. Evaluations, for
purposes of redemptions by the Trustee, will be made each business day as of the
Evaluation Time stated under "Essential Information," for such Series effective
for all redemptions made subsequent to the last preceding determination.
In connection with the Ginnie Maes deposited in the GNMA Portfolio Series of the
Trust, if any, there is a period of time beginning on the first day of each
month, during which the total amount of payments (including prepayments, if any)
of principal for the preceding month on the various mortgages underlying each of
the Securities in the Trust Fund will not yet have been reported by the issuer
to GNMA and made generally available to the public. During this period, the
precise principal amount of the underlying mortgages remaining outstanding for
each Security in the Trust Fund, and therefore the precise principal amount of
such Security, will not be known, although the principal amount outstanding for
the preceding month will be known. Therefore, the exact amount of principal to
be acquired by the Trustee as a holder of such Securities which may be
distributed to Unitholders of such Series with the next monthly distribution
will not be known. The Sponsor does not expect that the amounts of such
prepayments and the differences in such principal amounts from month to month
will be material in relation to the GNMA Portfolio Series due to the number of
mortgages underlying each Security and the number of such Securities in the GNMA
Portfolio Series of the Trust. However, there can be no assurance that they will
not be material. For purposes of the determination by the Evaluator of the
offering prices and bid prices of the Securities in each GNMA Portfolio Series
and for purposes of calculations of accrued interest on the Units, during the
period in each month prior to the time when the precise amounts of principal of
the Ginnie Maes for the month become publicly available, the Evaluator will base
its evaluations and calculations, which are the basis for calculations of the
Public Offering Price, the Sponsor's Repurchase Price in the secondary market
and the Redemption Price per Unit of each GNMA Portfolio Series, upon the
principal amount of such Series outstanding for the preceding month. The Sponsor
expects that the differences in such principal amounts from month to month will
not be material to each GNMA Portfolio Series of the Trust. Nevertheless, the
A-5
<PAGE> 27
Sponsor will adopt procedures as to pricing and evaluation for the Units of each
GNMA Portfolio Series, with such modifications, if any, deemed necessary by the
Sponsor for the protection of Unitholders, designed to minimize the impact of
such differences upon the calculation of the Public Offering Price per Unit, the
Sponsor's Repurchase Price per Unit in the secondary market and the Redemption
Price per Unit of such Series.
On the business day indicated under "Essential Information" the Public Offering
Price per Unit and the Sponsor's Initial Repurchase Price per Unit (based on the
offering side evaluation of the Portfolio Obligations) of the Trust Fund
exceeded the Redemption Price per Unit (based upon the bid side evaluation of
the Portfolio Obligations).
INITIAL PUBLIC DISTRIBUTION. During the initial offering period (i) for Units
issued on the Initial Date of Deposit and (ii) for additional Units issued after
such date in respect of additional Ginnie Maes or U.S. Treasury Obligations
deposited by the Sponsor, Units of each Series will be distributed to the public
at the Public Offering Price, which is based on the offering prices of the
Portfolio Obligations in such Series, plus (a) cash, if any, in the Principal
Account held or owned by a Trust Fund, (b) Purchased Interest and (c) Daily
Accrued Interest, by means of this Prospectus through various dealers and
through others. The initial offering period is 30 days. The initial offering
period may be extended by the Sponsor for up to five additional successive 30
day periods (i.e., until 180 days after the Initial Date of Deposit) for each
Series. Units of a Series reacquired by the Sponsor during the initial offering
period may be resold at the then current Public Offering Price. Upon the
termination of the initial offering period of a Series, unsold Units or Units
acquired by the Sponsor in the secondary market referred to below may be offered
to the public by this Prospectus at the then current Public Offering Price of
such Series, which is based on the bid prices of the Portfolio Obligations, plus
Purchased Interest and Daily Accrued Interest.
The Sponsor intends to qualify Units for sale (in any state in which
qualification is deemed necessary by the Sponsor) through dealers who are
members of the National Association of Securities Dealers, Inc. and through
others. The Sponsor does not intend to qualify Units of any Series for sale in
any foreign country and this Prospectus does not constitute an offer to sell
Units in any country where Units cannot lawfully be sold without registration.
SECONDARY MARKET. After the initial offering period, while not obligated to do
so, the Sponsor intends, subject to change at any time, to maintain a market for
Units of each Series of the Trust offered hereby and to continuously offer to
purchase said Units at prices based on the aggregate bid prices of the
underlying Portfolio Obligations, together with Purchased Interest and Daily
Accrued Interest to the expected date of settlement. To the extent that a
secondary market is maintained during the initial offering period, the prices at
which Units of a Series of the Trust will be repurchased will be based upon the
aggregate offering side evaluation of the Portfolio Obligations in such Series.
The aggregate bid prices of the underlying Portfolio Obligations in each Series
of the Trust, upon which the Sponsor's Repurchase Price and the Redemption Price
are based, are expected to be less than the related aggregate offering prices
(which is the evaluation method used during the initial public offering period).
Accordingly, Unitholders who wish to dispose of their Units should inquire of
their bank or broker as to current market prices in order to determine whether
there is in existence any price in excess of the Redemption Price and, if so,
the amount thereof.
The offering price of any Units acquired by the Sponsor will be in accord with
that described in the currently effective Prospectus describing such Units. Any
profit or loss resulting from the resale of such Units, after allowance of a
discount to the dealer or other entity which makes the sale, will belong to the
Sponsor. The Sponsor may suspend or discontinue purchases of Units of any Series
of the Trust at prices based on the bid prices of the Portfolio Obligations in
such Series if the supply of Units exceeds demand, or for other business
reasons.
A-6
<PAGE> 28
PROFITS OF SPONSOR. Sales of Units may be made to or through dealers or through
others at prices which represent discounts from the Public Offering Price as set
forth below. Discounted rates for each GNMA Portfolio Series are as follows:
<TABLE>
<CAPTION>
MIDGET TRUST
---------------------------------------------------------------------
SECONDARY
PRIMARY MARKET MARKET
--------------------------------------------------------- ---------
VOLUME DISCOUNTS**
--------------------------------------------
FIRM SALES FIRM SALES FIRM SALES
REGULAR OR SALE OR SALE OR SALE
CONCESSION ARRANGEMENTS ARRANGEMENTS ARRANGEMENTS
OR AGENCY ($250,000 TO ($500,000 TO ($1,000,000 OR
DOLLAR AMOUNT OF TRADE* COMMISSION $499,999) $999,999) MORE) ALL SALES
----------------------------------- ---------- ------------ ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
$0 to $99,999...................... 2.10% 2.15% 2.20% 2.25% 2.10%
$100,000 to $249,999............... 2.00 2.05 2.10 2.20 2.10
$250,000 to $499,999............... 1.75 1.80 1.80 1.85 1.80
$500,000 to $999,999***............ 1.50 1.55 1.55 1.60 1.55
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM TRUST
---------------------------------------------------------------------
SECONDARY
PRIMARY MARKET MARKET
--------------------------------------------------------- ---------
VOLUME DISCOUNTS**
--------------------------------------------
FIRM SALES FIRM SALES FIRM SALES
REGULAR OR SALE OR SALE OR SALE
CONCESSION ARRANGEMENTS ARRANGEMENTS ARRANGEMENTS
OR AGENCY ($250,000 TO ($500,000 TO ($1,000,000 OR
DOLLAR AMOUNT OF TRADE* COMMISSION $499,999) $999,999) MORE) ALL SALES
----------------------------------- ---------- ------------ ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
$0 to $99,999...................... 2.50% 2.60% 2.65% 2.70% 2.60%
$100,000 to $249,999............... 2.50 2.55 2.60 2.65 2.60
$250,000 to $499,999............... 2.25 2.30 2.30 2.35 2.30
$500,000 to $999,999***............ 2.00 2.05 2.05 2.10 2.05
</TABLE>
- ------------
*The breakpoint discount are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1,000 per 100 Units.
**Volume discounts will be given to firms who reach cumulative firm sales or
sales arrangement levels of at least $250,000 during the initial one month
period after the Initial Date of Deposit. After a firm has met the minimum
$250,000 volume level, volume discounts will be given on all trades
originated from or by that firm, including those placed prior to reaching the
$250,000 level, and will continue to be given during the entire initial
offering period.
***For any transactions in excess of these amounts, contact the Sponsor for the
applicable rates.
The discounted rates for each U.S. Treasury Portfolio Series which contains
predominately zero coupon U.S. Treasury Obligations are as follows:
<TABLE>
<CAPTION>
PRIMARY
MARKET
------------
REGULAR
CONCESSION
OR AGENCY
COMMISSION
------------
DOLLAR AMOUNT OF TRADE* 0-4.99 YEARS
--------------------------------------------------------------------------------- ------------
<S> <C>
$0 to $499,999................................................................... 1.20%
$500,000 to $999,999............................................................. 1.10
$1,000,000 to $1,499,000**....................................................... .80
</TABLE>
- ------------
*The breakpoint discount are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1,000 per 100 Units. No
volume discount is allowed for these Series, however, sales of these Series
can be combined for the purposes of achieving the volume discount given for
other U.S. Treasury Portfolio Series.
**For any transactions in excess of these amounts, contact the Sponsor for the
applicable rates.
A-7
<PAGE> 29
The discounted rates for each U.S. Treasury Portfolio Series (other than Series
which contain predominately zero coupon U.S. Treasury Obligations) are as
follows:
<TABLE>
<CAPTION>
PRIMARY MARKET
------------------------------------------------------------
VOLUME DISCOUNTS**
----------------------------
REGULAR CONCESSION FIRM SALES OR
OR AGENCY SALE ARRANGEMENTS
COMMISSION ($1,000,000 OR MORE)
---------------------------- ----------------------------
DOLLAR AMOUNT OF TRADE* 0-2.99 YEARS 3-4.99 YEARS 0-2.99 YEARS 3-4.99 YEARS
---------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$0 to $499,999................................ 1.00% 1.10% 1.05% 1.20%
$500,000 to $999,999.......................... .90 1.00 .95 1.10
$1,000,000 to $1,499,000***................... .75 .75 .80 .80
</TABLE>
- ------------
*The breakpoint discounts are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1,000 per 100 Units.
**For U.S. Treasury Portfolio Series other than Series which contain
predominately zero coupon U.S. Treasury Obligations, volume concessions of
up to the amount listed above can be earned as a marketing allowance at the
discretion of the Sponsor during the initial one month period after the
Initial Date of Deposit for firms who reach cumulative firm sales or sales
arrangement levels of at least $1 million. After a firm has met the
respective minimum volume level, volume concessions will be given on all
trades originated from or by that firm, starting on this day of deposit,
including those placed prior to reaching the minimum level, and will
continue to be given during the entire initial offering period. Firm sales
of any primary U.S. Treasury Portfolio Series issued can be combined for the
purposes of achieving the volume discount. Only sales through Kemper qualify
for volume concessions and secondary purchases do not apply. Kemper Unit
Investment Trusts reserves the right to modify or change these parameters at
any time and make the determination of which firms qualify for the marketing
allowance and the amount paid.
***For any transactions in excess of these amounts, contact the Sponsor for the
applicable rates.
The secondary market discounted rates for all U.S. Treasury Portfolio Series are
as follows:
<TABLE>
<CAPTION>
SECONDARY MARKET
--------------------------------------------------------------
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
0-1.99 2-2.99 3-4.99 5-6.99 7-9.99
---------- ---------- ---------- ---------- ----------
--------------------------------------------------------------
DISCOUNT PER UNIT
DOLLAR AMOUNT OF TRADE (PERCENT OF PUBLIC OFFERING PRICE)
--------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $500,000............... .75% 1.00% 1.00% 1.25% 2.00%
$500,000 to $999,999............. .50 .75 .90 1.00 1.75
$1,000,000 to $1,499,999**....... .50 .50 .75 .75 1.50
</TABLE>
- ------------
*The breakpoint discounts are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $1,000 per 100 Units.
**For any transactions in excess of these amounts, contact the Sponsor for the
applicable rates.
The Sponsor reserves the right to change the discounts set forth above from time
to time. In addition to such discounts, the Sponsor may, from time to time, pay
or allow an additional discount, in the form of cash or other compensation, to
dealers employing registered representatives who sell, during a specified time
period, a minimum dollar amount of Units of the Trust and other unit investment
trusts underwritten by the Sponsor.
Certain commercial banks are making Units of each Series 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 amounts shown in
the table above. 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. The Sponsor reserves the right to
change the discounts from time to time. The difference between the discounts and
the sales charge will be retained by the Sponsor.
A-8
<PAGE> 30
The Sponsor also may have realized a profit (or sustained a loss) on the deposit
of the Portfolio Obligations in each Series of the Trust representing the
difference between the cost of the Portfolio Obligations to the Sponsor and the
cost of the Portfolio Obligations to the Trust. See "Portfolios." During the
initial offering period and thereafter to the extent additional Units continue
to be issued and offered for sale to the public, the Sponsor may realize
additional profit or sustain a loss due to daily fluctuations in the offering
prices of the Portfolio Obligations in the Series of the Trust and thus in the
Public Offering Price of Units received by the Sponsor.
The Sponsor may also realize profits or sustain losses while maintaining a
secondary market in the Units of the Series of the Trust, in the amount of any
difference between the prices at which it buys Units and the prices at which
Units are resold after allowing for the discount (such prices include a sales
charge) or the prices at which the Sponsor redeems such Units (based on the bid
side of the Portfolio Obligations in such Series of the Trust), as the case may
be.
Although payment is normally made five business days following the order for
purchase, payment may be made prior thereto. A person will become the owner of
Units on the First Settlement Date or any date of settlement thereafter provided
payment has been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used in the Sponsor's
business and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. If a Unitholder desires to
have certificates representing Units purchased, such certificates will be
delivered as soon as possible following his written request therefor. For
information with respect to redemption of Units purchased, but as to which
certificates requested have not been received, see "Redemption" below.
Cash, if any, received by a dealer from Unitholders prior to the settlement date
for a purchase of Units of any Series may be used in such dealer's business
subject to the limitations of Rule 15c3-3 under the Securities Exchange Act of
1934 and may be of benefit to the dealer.
TAX STATUS
GNMA PORTFOLIO SERIES
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
Each of the GNMA Portfolio Series of the Trust, if any, is an association
taxable as a corporation under the Internal Revenue Code and intends to qualify
for and elect tax treatment as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). By qualifying for and
electing such treatment, such Series of the Trust will not be subject to Federal
income tax on net investment income or net capital gains distributed to
Unitholders of such Series. The Code imposes a 4% excise tax on certain
undistributed income of a regulated investment company that does not timely
distribute certain percentages of its ordinary taxable income and capital gains
by the end of each calendar year. Each Series of the GNMA Portfolio intends to
timely distribute taxable income and capital gains to avoid the imposition of
such tax. Distributions of the entire net investment income of each Series of
the Trust is required by the Indenture.
Distributions from a GNMA Portfolio Series of the Trust, to the extent of the
earnings and profits of such Series, will constitute dividends for Federal
income tax purposes which are taxable as ordinary income to Unitholders.
Distributions of a Series' net investment income and any net short-term capital
gain will be taxable as ordinary income to the Unitholders of such Series.
Distributions from each Series of the Trust will not be eligible for the 70%
dividends received deduction for corporations.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December, payable to Unitholders
of record on a specified date in one of those months and
A-9
<PAGE> 31
paid during January of the following year will be treated as having been
distributed by each GNMA Portfolio Series of the Trust (and received by the
Unitholders) on December 31 of the year such distributions are declared.
Distributions which a GNMA Portfolio Series of the Trust designates as capital
gain dividends will be taxable to Unitholders thereof as long-term capital
gains, regardless of the length of time the Units have been held by a
Unitholder. Distributions in partial liquidation, reflecting the proceeds of
prepayments, redemptions, maturities (including monthly mortgage payments of
principal in GNMA Series) or sales of Portfolio Obligations from a Series of the
Trust (exclusive of net capital gain) will not be taxable to Unitholders of such
Series to the extent that they represent a return of capital for tax purposes.
The portion of distributions which represents a return of capital will, however,
reduce a Unitholder's basis in his Units, and to the extent they exceed the
basis of his Units will be taxable as a capital gain. A Unitholder will realize
a taxable gain or loss when his Units are sold or redeemed for an amount
different from his original cost after reduction for previous distributions to
the extent that they represented a return of capital. Such gain or loss will
constitute either a long-term or short-term capital gain or loss depending upon
the length of time the Unitholder has held his Units. Any loss of Units held six
months or less will be treated as long-term capital loss to the extent of any
long-term capital gains dividends received (or deemed to have been received) by
the Unitholder with respect to such Units. For taxpayers other than
corporations, net capital gains are presently subject to a maximum stated
marginal 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. A capital loss
is long-term if the asset is held for more than one year and short-term if held
for one year or less.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by a GNMA Portfolio Series as long
as the Units of such GNMA Portfolio Series are held by or for 500 or more
persons at all times during the taxable year. In the event the Units of a GNMA
Portfolio Series are held by fewer than 500 persons, additional taxable income
will be realized by the individual (and other noncorporate) Unitholders in
excess of the distributions received from such GNMA Portfolio Series.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on ordinary
income while capital gains remain subject to a 28% maximum stated rate. Because
some or all capital gains are taxed at a comparatively lower rate under the Act,
the Act includes a provision that recharacterizes capital gains as ordinary
income in the case of certain financial transactions that are "conversion
transactions" effective for transactions entered into after April 30, 1993.
Unitholders and prospective investors should consult with their tax advisers
regarding the potential effect of this provision on their investment in Units.
If a Ginnie Mae has been purchased by a GNMA Portfolio Series of the Trust at a
market discount (i.e., for a purchase price less than its outstanding principal
amount) unless the amount of market discount is "de minimis" as specified in the
Code, each payment of principal on the Ginnie Mae will constitute ordinary
income to such Series of the Trust to the extent of any accrued market discount.
In the case of a Ginnie Mae, the amount of market discount that is deemed to
accrue each month shall generally be the amount of discount that bears the same
ratio to the total amount of remaining market discount that the amount of
interest paid during the accrual period (each month) bears to the total amount
of interest remaining to be paid on the Ginnie Mae as of the beginning of the
accrual period.
A-10
<PAGE> 32
The market discount rules do not apply to stripped U.S. Treasury Obligations
because they are stripped debt instruments subject to special original issue
discount rules. Unitholders should consult their tax advisers as to the amount
of original issue discount which accrues.
Additional Units of a GNMA Portfolio Series of the Trust may be issued after the
Initial Date of Deposit in respect of additional Portfolio Obligations deposited
in such Series by the Sponsor. Because of possible market interest rate
fluctuations, the purchase price to a Series of the Trust of such additional
Portfolio Obligations may differ from the purchase price of the Ginnie Maes in
the Trust Fund thereof on the Initial Date of Deposit. If interest rates decline
and such additional Portfolio Obligations are purchased at a higher price than
the Portfolio Obligations originally deposited, then the amounts includable in
the taxable income of such Series of the Trust in proportion to the asset value
of that Series of the Trust will be reduced for all Unitholders thereof, not
just the Unitholders of such additional Units. Conversely, if interest rates
rise and such additional Portfolio Obligations are purchased at a lower price
than the Portfolio Obligations originally deposited, then the amounts includable
in the taxable income of such Series of the Trust in proportion to the asset
value of that Series of the Trust will be increased for all Unitholders thereof,
not just the Unitholders of such additional Units.
Each Unitholder of each Series of the Trust shall receive an annual statement
describing the tax status of the distributions paid by such Series of the Trust.
Foreign Unitholders should consult their own tax advisers with respect to the
foreign and United States tax consequences or ownership of Units.
It should be remembered that even if distributions are reinvested, they are
still treated as distributions for income tax purposes.
U.S. TREASURY PORTFOLIO SERIES
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
(1) Each U.S. Treasury Portfolio Series is not an association taxable as a
corporation for Federal income tax purposes and each Unitholder will be treated
as the owner of a pro rata portion of such Series of the Trust under the Code
and income of such Series will be treated as the income of the Unitholders under
the Code.
(2) Each Unitholder will have a taxable event when a U.S. Treasury Portfolio
Series disposes of a U.S. Treasury Obligation, 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 U.S. Treasury Portfolio Series, if any,
on U.S. Treasury Obligations delivered after the Unitholders pay for their Units
to the extent that such interest accrued on such U.S. Treasury Obligations
during the period from the Unitholder's settlement date to the date such U.S.
Treasury Obligations are delivered to a U.S. Treasury Portfolio Series and,
consequently, such Unitholders may have an increase in taxable gain or reduction
in capital loss upon the disposition of such Units. Gain or loss upon the sale
or redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of U.S.
Treasury Obligations (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unitholder. The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of the
total 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, amortized bond premium and accrued market discount (if the Unitholder
has elected to include such market discount in income as it accrues), if any) is
determined by apportioning the cost of the Units among each of the U.S. Treasury
Portfolio Series assets ratably according to value as of the date of acquisition
of the Units. The tax cost reduction requirements of said Code relating to
A-11
<PAGE> 33
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.
(3) Certain U.S. Treasury Portfolio Series contain Stripped Treasury Securities.
The basis of each Unit and of each U.S. Treasury Obligation which was issued
with original issue discount must be increased by the amount of accrued original
issue discount and the basis of each Unit and of each U.S. Treasury Obligation
which was purchased by the Trust at a premium must be reduced by the annual
amortization of bond premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. The Stripped Treasury Securities held by
a Trust are treated as bonds that were originally issued at an original issue
discount provided, pursuant to a Treasury Regulation (the "Regulation") issued
on December 28, 1992, that the amount of original issue discount determined
under Section 1286 of the Code is not less than a "de minimis" amount as
determined thereunder. Because the Stripped Treasury Securities represent
interests in "stripped" U.S. Treasury bonds, a Unitholder's initial cost for his
pro rata portion of each Stripped Treasury Security held by a Trust (determined
at the time he acquires his Units, in the manner described above) will be
treated as its "purchase price" by the Unitholder. Original issue discount is
effectively treated as interest for Federal income tax purposes, and the amount
of original issue discount in this case is generally the difference between the
bond's purchase price and its stated redemption price at maturity. A Unitholder
will be required to include in gross income for each taxable year the sum of his
daily portions of original issue discount attributable to the Stripped Treasury
Securities held by a Trust as such original issue discount accrues and will, in
general, be subject to Federal income tax with respect to the total amount of
such original issue discount that accrues for such year even though the income
is not distributed to the Unitholders during such year to the extent it is not
less than a "de minimis" amount as determined under the Regulation. In general,
original issue discount accrues daily under a constant interest rate method
which takes into account the semi-annual compounding of accrued interest. In the
case of the Stripped Treasury Securities, this method will generally result in
an increasing amount of income to the Unitholders each year. Unitholders should
consult their tax advisers regarding the Federal income tax consequences and
accretion of original issue discount.
(4) The Unitholder's aliquot share of the total proceeds received on the
disposition of, or principal paid with respect to, a U.S. Treasury Obligation
held by a Trust will constitute ordinary income (which will be treated as
interest income for most purposes) to the extent it does not exceed the accrued
market discount on such U.S. Treasury Obligation that has not previously been
included in taxable income by such Unitholder. A Unitholder may generally elect
to include market discount in income as such discount accrues. In general,
market discount is the excess, if any, of the Unitholder's pro rata portion of
the outstanding principal balance of a U.S. Treasury Obligation over the
Unitholder's initial tax cost for such pro rata portion, determined at the time
such Unitholder acquires his Units. However, market discount with respect to any
U.S. Treasury Obligation will generally be considered zero if it does not exceed
the statutorily defined "de minimis" amount. The market discount rules do not
apply to Stripped Treasury Securities because they are stripped debt instruments
subject to special original issue discount rules as discussed above. If a
Unitholder sells his Units, gain, if any, will constitute ordinary income to the
extent of the aggregate of the accrued market discount on the Unitholder's pro
rata portion of each U.S. Treasury Obligation that is held by a Trust that has
not previously been included in taxable income by such Unitholder. In general,
market discount accrues on a ratable basis unless the Unitholder elects to
accrue such discount on a constant interest rate basis. However, a Unitholder
should consult his own tax adviser regarding the accrual of market discount. The
deduction by a Unitholder for any interest expense incurred to purchase or carry
Units will be reduced by the amount of any accrued market discount that has not
yet been included in taxable income by such Unitholder. In general, the portion
of any interest expense which is not currently deductible would be ultimately
deductible when the accrued market discount is included in income.
(5) The Code provides that "miscellaneous itemized deductions" are allowable
only to the extent that they exceed two percent of an individual taxpayer's
adjusted gross income. Miscellaneous itemized
A-12
<PAGE> 34
deductions subject to this limitation under present law include a Unitholder's
pro rata share of expenses paid by a Trust, including fees of the Trustee and
the Evaluator but does not include amortizable bond premium on U.S. Treasury
Obligations held by a Trust.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated rate
for taxpayers other than corporations. Because some or all capital gains are
taxed at a comparatively lower rate under the Tax Act, the Tax Act includes a
provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the potential effect
of this provision on their investment in Units.
The Sponsor believes that Unitholders who are individuals will not be subject to
any state personal income taxes on the interest received by a U.S. Treasury
Portfolio Series and distributed to them. However, Unitholders (including
individuals) may be subject to state and local taxes on any capital gains (or
market discount treated as ordinary income) derived from a U.S. Treasury
Portfolio Series and to other state and local taxes (including corporate income
or franchise taxes, personal property or intangibles taxes, and estate or
inheritance taxes) on their Units or the income derived therefrom. In addition,
individual Unitholders (and any other Unitholders which are not subject to state
and local taxes on the interest income derived from a U.S. Treasury Portfolio
Series) will probably not be entitled to a deduction for state and local tax
purposes for their share of the fees and expenses paid by a U.S. Treasury
Portfolio Series, for any amortized bond premium or for any interest on
indebtedness incurred to purchase or carry their Units. Therefore, even though
the Sponsor believes that interest income from a U.S. Treasury Portfolio Series
is exempt from state personal income taxes in all states Unitholders should
consult their own tax advisers with respect to state and local taxation.
A Unitholder of a U.S. Treasury Portfolio Series who is not a citizen or
resident of the United States or a United States domestic corporation (a
"Foreign Investor") will not be subject to U.S. Federal income taxes, including
withholding taxes on amounts distributed from such Trust (including any original
issue discount) on, or any gain from the sale or other disposition of, his Units
or the sale or disposition of any U.S. Treasury Obligations by the Trustee,
provided that (i) the interest income or gain is not effectively connected with
the conduct by the Foreign Investor of a trade or business within the United
States, (ii) with respect to any gain, the Foreign Investor (if an individual)
is not present in the United States for 183 days or more during the taxable
year, and (iii) the Foreign Investor provides the required certification of his
status and of the matters contained in clauses (i) and (ii) above, and further
provided that the exemption from withholding for U.S. Federal income taxes for
interest on any U.S. Treasury Obligation shall only apply to the extent the U.S.
Treasury Obligation was issued after July 18, 1984.
Unless an applicable treaty exemption applies and proper certification is made,
amounts otherwise distributable by the Trust to a Foreign Investor will
generally be subject to withholding taxes under Section 1441 of the Code unless
the Unitholder timely provides his financial representative or the Trustee with
a statement that (i) is signed by the Unitholder under penalties of perjury,
(ii) certifies that such Unitholder is not a United States person, or in the
case of an individual, that he is neither a citizen nor a resident of the United
States, and (iii) provides the name and address of the Unitholder. The statement
may be made, at the option of the person otherwise required to withhold, on Form
W-8 or on a substitute form that is substantially similar to Form W-8. If the
information provided on the statement changes, the beneficial owner must so
inform the person otherwise required to withhold within 30 days of such change.
Foreign Unitholders should consult their own tax advisers with respect to the
foreign and United States tax consequences or ownership of Units.
A-13
<PAGE> 35
It should be remembered that even if distributions are reinvested, they are
still treated as distributions for income tax purposes.
It should also be remembered that Unitholders may be required for Federal income
tax purposes to include amounts in ordinary gross income in advance of the
receipt of the cash attributable to such income.
The market discount rules do not apply to stripped U.S. Treasury Obligations
because they are stripped debt instruments subject to special original issue
discount rules. Unitholders should consult their tax advisers as to the amount
of original issue discount which accrues.
If a Unitholder does not elect to annually include accrued market discount in
taxable income as it accrues, deduction for any interest expense incurred by the
Unitholder which is incurred to purchase or carry his Units will be reduced by
such accrued market discount. In general, the portion of any interest expense
which was not currently deductible would ultimately be deductible when the
accrued market discount is included in income. Unitholders should consult their
tax advisers regarding whether an election should be made to include market
discount in income as it accrues and as to the amount of interest expense which
may not be currently deductible.
The tax basis of a Unitholder with respect to his interest in a U.S. Treasury
Obligation is increased by the amount of original issue discount (and market
discount, if the Unitholder elects to include market discount, if any, on the
U.S. Treasury Obligations held by the Trust in income as it accrues) thereon
properly included in the Unitholder's gross income as determined for Federal
income tax purposes and reduced by the amount of any amortized acquisition
premium which the Unitholder has properly elected to amortize under Section 171
of the Code. A Unitholder's tax basis in his Units will equal his tax basis in
his pro rata portion of all of the assets of the Trust.
A Unitholder will recognize taxable capital gain (or loss) when all or part of
his pro rata interest in a U.S. Treasury Obligation is disposed of in a taxable
transaction for an amount greater (or less) than his tax basis therefor. Any
gain recognized on a sale or exchange and not constituting a realization of
accrued "market discount," and any loss will, under current law, generally be
capital gain or loss except in the case of a dealer or financial institution. As
previously discussed, gain realized on the disposition of the interest of a
Unitholder in any U.S. Treasury Obligation deemed to have been acquired with
market discount will be treated as ordinary income to the extent the gain does
not exceed the amount of accrued market discount not previously taken into
income. Any capital gain or loss arising from the disposition of a U.S. Treasury
Obligation by the Trust or the disposition of Units by a Unitholder will be
short-term capital gain or loss unless the Unitholder has held his Units for
more than one year in which case such capital gain or loss will be long-term.
The tax cost reduction requirements of the Code relating to amortization of bond
premium may under some circumstances, result in the Unitholder realizing taxable
gain when his Units are sold or redeemed for an amount equal to or less than his
original cost.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed of
his entire pro rata interest in all Trust assets including his pro rata portion
of the U.S. Treasury Obligations represented by the Unit. This may result in a
portion of the gain, if any, on such sale being taxable as ordinary income under
the market discount rules (assuming no election was made by the Unitholder to
include market discount in income as it accrues) as previously discussed.
Each Unitholder (other than a foreign investor who has properly provided the
certifications described above) will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the Unitholder
has not been notified that payments to the Unitholder are subject to back-up
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withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by a Trust to such
Unitholder will be subject to back-up withholding.
RETIREMENT PLANS
As indicated under "Tax Status" above, Unitholders of U.S. Treasury Portfolio
Series will be required for Federal income tax purposes to include amounts in
ordinary gross income in advance of the receipt of the cash attributable to such
income. Therefore, purchase of Units may be appropriate only for an account
which can pay taxes with other funds in advance of the receipt of the cash
attributable to such income or for Individual Retirement Accounts, Keogh plans,
pension funds and other qualified retirement plans, certain of which are briefly
described below.
Additionally, GNMA Portfolio Series may be well suited for purchase by
Individual Retirement Accounts, Keogh Plans, pension funds and other qualified
retirement plans, certain of which are briefly described below.
Generally, capital gains and income received under each of the foregoing plans
are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered by
brokerage firms and other financial institutions. Each Series of the Trust will
waive the $1,000 minimum investment requirement for IRA accounts. The minimum
investment is $250 for tax-deferred plans such as IRA accounts. Fees and charges
with respect to such plans may vary.
Individual Retirement Account -- IRA. Any individual under age 70 1/2 may
contribute the lesser of $2,000 or 100% of compensation to an IRA annually. Such
contributions are fully deductible if the individual (and spouse if filing
jointly) are not covered by a retirement plan at work. The deductible amount an
individual may contribute to an IRA will be reduced $10 for each $50 of adjusted
gross income over $25,000 ($40,000 if married, filing jointly or $0 if married,
filing separately), if either an individual or their spouse (if married, filing
jointly) is an active participant in an employer maintained retirement plan.
Thus, if an individual has adjusted gross income over $35,000 ($50,000 if
married, filing jointly or $0 if married, filing separately) and if an
individual or their spouse is an active participant in an employer maintained
retirement plan, no IRA deduction is permitted. Under the Code, an individual
may make nondeductible contributions to the extent deductible contributions are
not allowed. All distributions from an IRA (other than the return of certain
excess contributions) are treated as ordinary income for Federal income taxation
purposes provided that under the Code an individual need not pay tax on the
return of nondeductible contributions, the amount includable in income for the
taxable year is the portion of the amount withdrawn for the taxable year as the
individual's aggregate nondeductible IRA contributions bear to the aggregate
balance of all IRAs of the individual.
A participant's interest in an IRA must be, or commence to be, distributed to
the participant not later than April 1 of the calendar year following the year
during which the participant attains age 70 1/2. Distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability, or where the amount distributed is to be rolled over to another IRA,
or where the distributions are taken as a series of substantially equal periodic
payments over the participant's life or life expectancy (or the joint lives or
life expectancies of the participant and the designated beneficiary) are
generally subject to a surtax in an amount equal to 10% of the distribution. The
amount of such periodic payments may not be modified before the later of five
years or attainment of age 59 1/2. Excess contributions are subject to an annual
6% excise tax.
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IRA applications, disclosure statements and trust agreements are available from
the Sponsor upon request.
Qualified Retirement Plans. Units of the GNMA Portfolio Series and the U.S.
Treasury Portfolio Series may be purchased by qualified pension or profit
sharing plans maintained by corporations, partnerships or sole proprietors. The
maximum annual contribution for a participant in a money purchase pension plan
or to paired profit sharing and pension plans is the lesser of 25% of
compensation or $30,000. Prototype plan documents for establishing qualified
retirement plans are available from the Sponsor upon request.
Excess Distributions Tax. In addition to the other taxes due by reason of a
plan distribution, a tax of 15% may apply to certain aggregate distributions
from IRAs, Keogh plans, and corporate retirement plans to the extent such
aggregate taxable distributions exceed specified amounts (generally $150,000, as
adjusted) during a tax year. This 15% tax will not apply to distributions on
account of death, qualified domestic relations orders or amounts rolled over to
an eligible plan. In general, for lump sum distributions the excess distribution
over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee, Investors Fiduciary Trust Company ("IFTC"), has agreed to act as
custodian for certain retirement plan accounts. An annual fee of $12.00 per
account, if not paid separately, will be assessed by the Trustee and paid
through the liquidation of shares of the reinvestment account. An individual
wishing IFTC to act as custodian must complete a Kemper UIT/IRA application and
forward it along with a check made payable to Investors Fiduciary Trust Company.
Certificates for Individual Retirement Accounts can not be issued.
REINVESTMENT PROGRAM
Each Unitholder of the Trust may elect to have distributions of principal
(including capital gains, if any) or interest or both automatically invested
without charge in shares of any mutual fund registered in such Unitholder's
state of residence which is underwritten or advised by an affiliate of the
Sponsor, Kemper Financial Services, 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 before selecting such Kemper funds for reinvestment.
Detailed information with respect to the investment objectives and management of
these Kemper Funds is contained in their respective prospectuses, which can be
obtained from the Sponsor or an investor's financial representative upon
request. An investor should read the appropriate prospectus prior to making the
election to reinvest. Unitholders who desire to have their distributions
automatically reinvested should inform their financial representative at the
time of purchase or should file with the Program Agent referred to below a
written notice of such election.
Unitholders who initially elect to receive distributions in cash may elect to
participate in the reinvestment program by filing with the Program Agent an
election to have such distributions reinvested without charge. The 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 distribution.
The election to participate in the reinvestment program shall remain in effect
until a subsequent notice is received in writing by the Program Agent. See
"Administration of the Trust Funds -- Distributions from the Interest, Principal
and Capital Gains Accounts."
The Program Agent is Investors Fiduciary Trust Company. All inquiries concerning
participation in distribution reinvestment should be directed to the Program
Agent at P.O. Box 419430, Kansas City, Missouri 64173-0216, telephone
816-474-8786.
Unitholders of each Series of the Trust participating in IRAs, Keogh Plans and
other tax deferred retirement plans, may find it highly advantageous to
participate in the Reinvestment Program in order to keep the monies
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in the account fully invested at all times. Should reinvestment be selected, an
account with an identical registration to that established at the time the Trust
Units are purchased will be set up in the reinvestment fund selected by the
investor. Investors should consult with their plan custodian as to the
appropriate disposition of distributions. If participants in IRAs, Keogh plans
and other tax deferred retirement plans do not elect a reinvestment option, cash
distributions will be sent to the custodian of the retirement plan and not to
the investors, since payments to the investors would constitute a distribution
from the plan which would result in tax penalties for premature withdrawals from
such programs. See "Retirement Plans."
REDEMPTION
RIGHT OF REDEMPTION. It may be possible, in some cases, for Units of a Series of
the Trust to be sold in the over-the-counter market for a higher price than the
Redemption Value for such Units. Therefore, a Unitholder who wishes to dispose
of his Units is advised to inquire through his financial representative as to
current market prices for Units in order to determine if there is an
over-the-counter price in excess of the Redemption Value per Unit or the
Sponsor's Repurchase Price for such Series of the Trust.
A Unitholder who does not dispose of Units in the secondary market described
above may cause Units to be redeemed by the Trustee by making a written request
to the Trustee, Investors Fiduciary Trust Company, P.O. Box 419430, Kansas City,
Missouri 64173-0216 and, in the case of Units evidenced by a certificate, by
tendering such certificate to the Trustee, properly endorsed or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Trustee. Unitholders must sign the request, and such certificate or transfer
instrument, exactly as their names appear on the records of the Trustee and on
any certificate representing the Units to be redeemed. If the amount of the
redemption is $25,000 or less and the proceeds are payable to the Unitholder(s)
of record at the address of record, no signature guarantee is necessary for
redemption by individual account owners (including joint owners) or fiduciary
accounts where the fiduciary is named in the account registration. Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, Trustees, guardians or
associations. If required, the 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. 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 seventh calendar day following
the day on which a tender for redemption is received, or if the seventh calendar
day is not a business day, on the first business day prior thereto (the
"Redemption Date") by payment of cash equivalent to the Redemption Value,
determined as set forth below under "Computation of Redemption Value," as of the
evaluation time stated under "Essential Information," for the appropriate Series
next following such tender, multiplied by the number of Units of such Series
being redeemed. Any Units redeemed shall be cancelled and any undivided
fractional interest in such Series of the Trust extinguished. The price received
upon redemption might be more or less than the amount paid by the Unitholder
depending on the value of the Portfolio Obligations in such Series at the time
of redemption.
During the period in which the Sponsor maintains a secondary market for Units of
a Series of the Trust, the Sponsor has the right to repurchase any Unit
presented for tender to the Trustee for redemption no later than the close of
business on the second business day following such presentation.
The Trustee is irrevocably authorized in its discretion, if the Sponsor does not
elect to repurchase any Unit tendered for redemption or if the Sponsor itself
tenders Units for redemption, in lieu of redeeming Units presented for tender at
the Redemption Value, to sell such Units in the over-the-counter market for the
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account of a tendering Unitholder at prices which will return to the Unitholder
monies, net after brokerage commissions, transfer taxes and other charges, equal
to or in excess of the Redemption Value for such Units. In the event of any such
sale, the Trustee will pay the net proceeds thereof to the Unitholder on the day
he would otherwise be entitled to receive payment of the Redemption Value.
Any amounts to be paid on redemption representing interest shall be withdrawn
from the Interest Account of such Series to the extent funds are available. All
other amounts paid on redemption shall be withdrawn from the Principal Account
of such Series. The Trustee is authorized by the Indenture to sell Portfolio
Obligations in order to provide funds for redemption. To the extent Portfolio
Obligations are sold, the size of that Series of the Trust will be reduced.
Portfolio Obligations will be sold by the Trustee so as to maintain, as closely
as practicable, the original percentage relationship between the principal
amounts of the Portfolio Obligations in such Series. The Portfolio Obligations
to be sold for purposes of redeeming Units will be selected from a list supplied
by the Sponsor. The Portfolio Obligations will be chosen for this list by the
Sponsor on the basis of such market and credit factors as it may determine are
in the best interests of such Series of the Trust. Provision is made under the
Indenture for the Sponsor to specify minimum face amounts in which blocks of
Portfolio Obligations are to be sold in order to obtain the best price
available. While such minimum amounts may vary from time to time in accordance
with market conditions, it is anticipated that the minimum face amounts which
would be specified would range from $25,000 to $100,000. Sales may be required
at a time when the Portfolio Obligations would not otherwise be sold and might
result in lower prices than might otherwise be realized. Moreover, due to the
minimum principal amount in which Portfolio Obligations may be required to be
sold, the proceeds of such sales may exceed the amount necessary for payment of
Units redeemed. To the extent not used to meet other redemption requests in such
Series, such excess proceeds will be distributed pro rata to all remaining
Unitholders of record of such Trust, unless reinvested in substitute Portfolio
Obligations. See "Administration of the Trust Funds -- Portfolio Supervision."
COMPUTATION OF REDEMPTION VALUE. The value of each Series of the Trust is
determined as of the Evaluation Time stated under "Essential Information" for
the appropriate Series above (a) semiannually, on June 30 and December 31 of
each year (or the last business day prior thereto), (b) on any business day as
of the Evaluation Time next following the tender of any Unit and (c) on any
other business day desired by the Sponsor or the Trustee, (1) by adding:
a. The aggregate bid side evaluation of the Portfolio Obligations in
such Series of the Trust, as determined by the Evaluator;
b. Cash on hand in such Series of the Trust, other than money
deposited to purchase contract obligations or money credited to the Reserve
Account; and
c. Accrued but unpaid interest on the Portfolio Obligations in such
Series of the Trust to the redemption date.
(2) and then deducting from the resulting figure: amounts representing any
applicable taxes or governmental charges payable by such Series of the Trust for
the purpose of making an addition to the reserve account (as defined in the
Indenture, the "Reserve Account"), amounts representing estimated accrued
expenses (including audit fees) of such Series of the Trust, amounts
representing unpaid fees and expenses of the Trustee, Sponsor (if applicable),
counsel and the Evaluator and monies held for distribution to Unitholders of
record of such Series as of the business day prior to the evaluation being made
on the days or dates set forth above;
(3) and then dividing the result of the above computation by the total number of
Units of such Series outstanding on the date of evaluation. The resulting figure
equals the Redemption Value for each Unit of
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such Series. The Evaluator will determine the aggregate current bid price
evaluation of the Securities in each Series of the Trust as set forth under
"Public Offering of Units -- Public Offering Price."
POSTPONEMENT OF REDEMPTION. The right of redemption of any Series may be
suspended and payment of the Redemption Value per Unit postponed for more than
seven calendar days following a tender of Units for redemption for any period
(as determined by the Securities and Exchange Commission) during which the New
York Stock Exchange is closed, other than for customary weekend and holiday
closings, or during which trading on that Exchange is restricted or an emergency
exists as a result of which disposal or evaluation of the Portfolio Obligations
is not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee is not liable to any person
or in any way for any loss or damage that may result from any such suspension or
postponement.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION VALUE
The Public Offering Price of Units of each Series of the Trust in the initial
offering period is determined on the basis of current offering prices for the
Portfolio Obligations in such Series (see "Public Offering of Units," herein),
while the Redemption Value and Sponsor's Repurchase Price for Units of such
Series is determined on the basis of current bid prices for the Portfolio
Obligations. On the business day indicated under "Essential Information" for the
appropriate Series, the Public Offering Price (which includes a sales charge) of
each Series exceeded the Redemption Value thereof by the amount indicated under
"Essential Information" for such Series. The bid prices for the Portfolio
Obligations may be expected to be less than the offering prices. Under current
market conditions the bid prices for Ginnie Maes are expected to be
approximately 1/4 to 1/2 of 1% lower in the case of such Securities backed by
mortgages on 1-to 4-family dwellings. Under current market conditions the bid
prices for U.S. Treasury Obligations are expected to be approximately 1/8 to
1/4 of 1% lower than the offer price of such obligations. On the business day
indicated under "Essential Information" for the appropriate Series the bid side
evaluation was lower than the offering side evaluation by the amount set forth
in the "Portfolio" for the appropriate Series. For this reason, among others
(including fluctuations in the market prices of such Portfolio Obligations and
the fact that the Public Offering Price of each Series includes the sales
charge), the amount realized by a Unitholder upon any redemption of Units may be
less than the price paid by him for such Units.
RIGHTS OF UNITHOLDERS
UNITHOLDERS. A Unitholder is deemed to be a beneficiary of the Series of the
Trust which he purchased and is vested with all right, title and interest in the
appropriate Series of the Trust, each of which was created by the Indenture. A
Unitholder may at any time tender his Units to the Trustee for redemption.
OWNERSHIP OF UNITS. Ownership of Units of a Series of the Trust will not be
evidenced by certificates unless a Unitholder or the Unitholder's registered
broker/dealer makes a written request to the Trustee. Units are transferable by
making a written request to the Trustee and, in the case of Units evidenced by a
certificate, by presenting and surrendering such certificate to the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer which should be sent 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 guarantee program in addition to, or
in substitution for, STAMP, as may be accepted by the Trustee.
Certificates will be issued in denominations of 100 Units or any number of Units
in excess thereof. 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
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imposed in connection with each such transfer or exchange. The Trustee at the
present time does not intend to charge for the normal transfer or exchange 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, if appropriate,
evidence of ownership and payment of expenses incurred. Any mutilated
certificate must be presented to the Trustee before a substitute certificate
will be issued.
CERTAIN LIMITATIONS. The death or incapacity of any Unitholder (or the
dissolution of the Sponsor) will not operate to terminate the Trust or any
Series thereof nor entitle the legal representatives or heirs of such Unitholder
to claim an accounting or to take any other action or proceeding in any court
for a partition or winding up of the Trust or any Series thereof.
No Unitholder shall have the right to vote except with respect to removal of the
Trustee or amendment and termination of the Trust or of the Series of which they
are a Unitholder. See "Administration of the Trust Funds -- Amendment" and
"Administration of the Trust Funds -- Termination." Unitholders shall have no
right to control the operation or administration of the Trust or any Series
thereof in any manner, except upon the vote of Unitholders representing 66 2/3%
of the Units of a Series outstanding for purposes of amendment, termination or
discharge of the Trustee, all as provided in the Indenture; however, no
Unitholder shall ever be under any liability to any third party for any action
taken by the Trustee, Evaluator or Sponsor.
EXPENSES AND CHARGES
INITIAL EXPENSES. All expenses and charges incurred prior to or in establishment
of the Trust, including the cost of the initial preparation, printing and
execution of the Indenture and the certificates, the initial fees of the Trustee
and the Evaluator, initial legal and auditing expenses, the cost of the
preparation and printing of this Prospectus and all other advertising and
selling expenses have been, or will be, paid by the Sponsor.
FEES. The Sponsor will receive no fee from the Trust for its services as such.
However, in the case of each Series of the Trust, the Sponsor does receive a
portfolio surveillance fee, which is earned for portfolio supervisory services,
at the rate set forth under "Essential Information" for the appropriate Series
per $1,000 principal amount of Portfolio Obligations in such Series of the
Trust, computed monthly on the basis of the largest principal amount of
Portfolio Obligations in such Series of the Trust at any time during the
preceding month. The portfolio surveillance fee, which may not exceed the amount
set forth under "Essential Information" may exceed the actual costs of providing
portfolio supervisory services for these Series of the Trust, but at no time
will the total amount the Sponsor receives for supervisory services rendered to
all unit investment trusts sponsored by the Sponsor in any calendar year exceed
the aggregate cost of providing such services in that year.
The Trustee will receive for its services under the Indenture the fee set forth
under "Essential Information" for the appropriate Series per $1,000 principal
amount of Portfolio Obligations in such Series of the Trust, computed monthly on
the basis of the largest principal amount of Portfolio Obligations in such
Series of the Trust at any time during the preceding month. In no event will the
Trustee be paid less than $2,000 per Series in any one year.
For evaluation of Portfolio Obligations in a Series, the Evaluator shall receive
the fee set forth under "Essential Information" for the appropriate Series per
$1,000 principal amount of Portfolio Obligations in such Series of the Trust,
computed monthly on the basis of the largest aggregate principal amount of
Portfolio Obligations in such Series of the Trust at any time during the
preceding month.
The Trustee's fees, Sponsor's portfolio surveillance fees and the Evaluator's
fees are payable monthly on or before each Distribution Date from the Interest
Account to the extent funds are available and thereafter from the Principal
Account. Any of such fees may be increased without approval of the Unitholders
in
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proportion to increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index published by the United States Department of Labor
or if such category is no longer published, in a comparable category. The
Trustee also receives benefits to the extent that it holds funds on deposit in
various non-interest bearing accounts created under the Indenture.
OTHER CHARGES. The following additional charges are or may be incurred by the
Trust or any Series thereof as more fully described in the Indenture: (a) fees
of the Trustee for extraordinary services, (b) expenses of the Trustee
(including legal and auditing expenses, but not including any fees and expenses
charged by any agent for custody and safeguarding the Portfolio Obligations) and
of counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trust or a
Series of the Trust and the rights and interests of the Unitholders thereof, (e)
indemnification of the Trustee for any loss, liability or expense incurred by it
in the administration of the Trust or any Series thereof without gross
negligence, bad faith, wilful malfeasance or wilful misconduct on its part or
reckless disregard of its obligations and duties, (f) indemnification of the
Sponsor for any losses, liabilities and expenses incurred in acting as Sponsor
under the Indenture without gross negligence, bad faith, wilful malfeasance or
wilful misconduct or reckless disregard of its obligations and duties, and (g)
expenditures incurred in contacting Unitholders upon termination of the Trust or
any Series thereof.
The fees and expenses set forth herein are payable out of each Series of the
Trust and when so paid by or owing to the Trustee are secured by a lien on such
Series. If the balances in the Interest and Principal Accounts are insufficient
to provide for amounts payable by any Series of the Trust, the Trustee has the
power to sell Portfolio Obligations from such Series to pay such amounts. To the
extent Portfolio Obligations are sold, the size of such Series of the Trust will
be reduced and the proportions of the types of Portfolio Obligations will
change. Such sales might be required at a time when Portfolio Obligations would
not otherwise be sold and might result in lower prices than might otherwise be
realized. Moreover, due to the minimum principal amount in which Portfolio
Obligations may be required to be sold, the proceeds of such sales may exceed
the amount necessary for the payment of such fees and expenses.
ADMINISTRATION OF THE TRUST FUNDS
RECORDS AND ACCOUNTS. In accordance with the Indenture, 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
of the Trust. Such books and records shall be open to inspection by any
Unitholder of such Series at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or Federal statute, rule or
regulation. The Trustee shall keep a certified copy or duplicate original of the
Indenture 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 Securities held in each Series of the Trust. Pursuant to the Indenture, the
Trustee may employ one or more agents for the purpose of custody and
safeguarding of the Portfolio Obligations comprising the Trust Funds.
DISTRIBUTIONS FROM THE INTEREST, PRINCIPAL AND CAPITAL GAINS ACCOUNTS.
Ginnie Mae Series. The terms of the Ginnie Maes provide for payment to the
holders thereof (including each Series of the Trust) on the fifteenth day of
each month of amounts collected by or due to the issuers thereof with respect to
the underlying mortgages during the preceding month.
The Trustee will collect the interest due the Series on the Securities therein
as it becomes payable and credit such interest to a separate Interest Account
for such Series created by the Indenture.
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Distributions will be made to each Unitholder of record of each Series of the
Trust on the appropriate Distribution Date (see "Essential Information") and
will consist of an amount substantially equal to such Unitholder's pro rata
share of the cash balances, if any, in the Interest Account, the Principal
Account and any Capital Gains Account of such Series, computed as of the close
of business on the preceding Record Date.
U.S. Treasury Portfolio Series. Except for the Stripped Treasury Securities
included in each Series, the terms of the U.S. Treasury Obligations provide for
semi-annual payments of interest on the 15th day of the month. Interest received
by a Series of the U.S. Treasury Portfolio is credited by the Trustee to the
Interest Account for such Trust Fund. All other receipts are credited by the
Trustee to a separate Principal Account for such Trust Fund. Since interest on
the U.S. Treasury Obligations in U.S. Treasury Portfolio Series is payable in
semi-annual installments, and distributions of income are made to Unitholders at
different intervals from receipt of interest, the interest accruing to U.S.
Treasury Portfolio Series may not be equal to the amount of money received and
available for distribution from the Interest Account. Therefore, on each
Distribution Date the amount of interest actually deposited in the Interest
Account of U.S. Treasury Portfolio Series 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 Indenture to advance such amounts as may be
necessary to provide interest distributions of approximately equal amounts. The
Trustee will be reimbursed, without interest, for any such advances from funds
available in the Interest Account for U.S. Treasury Portfolio Series.
Stripped Treasury Securities are sold at a deep discount because the buyer of
those securities obtains only the right to receive a future fixed payment on the
security and not any rights to periodic interest payments thereon. Purchasers of
these Securities acquire, in effect, discount obligations that are economically
identical to the "zero-coupon bonds" that have been issued by corporations. Zero
coupon bonds are debt obligations which do not make any periodic payments of
interest prior to maturity and accordingly are issued at a deep discount.
Under generally accepted accounting principles, a holder of a security purchased
at a discount normally must report as an item of income for financial accounting
purposes the portion of the discount attributable to the applicable reporting
period. The calculation of this attributable income would be made on the
"interest" method which generally will result in a lesser amount of includible
income in earlier periods and a correspondingly larger amount in later periods.
For Federal income tax purposes, the inclusion will be on a basis that reflects
the effective compounding of accrued but unpaid interest effectively represented
by the discount. Although this treatment is similar to the "interest" method
described above, the "interest" method may differ to the extent that generally
accepted accounting principles permit or require the inclusion of interest on
the basis of a compounding period other than the semi-annual period. See "Tax
Status."
The Trustee will distribute on each Distribution Date or shortly thereafter, to
each Unitholder of record of a Series of the U.S. Treasury Portfolio on the
preceding Record Date, an amount substantially equal to such holder's pro rata
share of the cash balance, if any, in the Principal Account of the related U.S.
Treasury Portfolio computed as of the close of business on the preceding Record
Date. However, no distribution will be required if the balance in the Principal
Account is less than $1.00 per 100 Units. Notwithstanding the foregoing, the
Trustee will make a distribution to Unitholders of all principal relating to
maturing Treasury Obligations within seven business days of the date of each
such maturity.
General. Distributions for an IRA, Keogh or other tax-deferred retirement plan
will not be sent to the individual Unitholder. These distributions will go
directly to the custodian of the plan to avoid the penalties associated with
premature withdrawals from such accounts. See "Retirement Plans."
A-22
<PAGE> 44
All funds collected or received will be held by the Trustee in trust, without
interest to Unitholders, as part of the appropriate Series of the Trust or the
Reserve Accounts referred to below until required to be disbursed in accordance
with the provisions of the Indenture. Such funds will be segregated on the trust
ledger of the Trustee so long as such practice preserves a valid preference of
Unitholders of such Series of the Trust under the bankruptcy laws of the United
States, or if such preference is not preserved, the Trustee shall handle such
funds in such other manner as shall constitute the segregation and holding
thereof in trust within the meaning of the Investment Company Act of 1940, as
the same may be from time to time amended. To the extent permitted by the
Indenture and applicable banking regulations, such funds are available for use
by the Trustee pursuant to normal banking procedures.
The first distribution, if any, for persons who purchase Units between a Record
Date and a Distribution Date will be made on the second Distribution Date
following their purchase of Units.
The Trustee is authorized by the Indenture to withdraw from the Principal and/or
Interest Accounts of each Series such amounts as it deems necessary to establish
a reserve for any taxes or other governmental charges that may be payable out of
such Series of the Trust, which amounts will be deposited in a separate Reserve
Account. If the Trustee determines that the amount in the Reserve Account is
greater than the amount necessary for payment of any taxes or other governmental
charges, it will promptly deposit the excess back into the Account from which it
was withdrawn.
PORTFOLIO SUPERVISION. The Indenture permits the Sponsor to direct the Trustee
to dispose of any Portfolio Obligation in a Series of the Trust upon the
happening of any of the following events:
1. Default in the payment of principal or interest on any of the
Portfolio Obligations when due and payable,
2. Institution of legal proceedings seeking to restrain or enjoin the
payment of any of the Portfolio Obligations or attacking their validity,
3. A breach of covenant or warranty which could adversely affect the
payment of debt service on the Portfolio Obligations,
4. Default in the payment of principal or interest on any other
outstanding obligation guaranteed or backed by the full faith and credit of
the United States of America,
5. A decline in market price to such an extent, or such other market
credit or other factors exist, as in the opinion of the Sponsor would make
retention of any of the Portfolio Obligations detrimental to the Trust or
any Series thereof and to the interests of the Unitholders,
6. An offer is made to refund or refinance any of the Portfolio
Obligations in the Trust Funds, or
7. Termination of the Trust or any Series thereof.
The Trustee shall also sell any Portfolio Obligation in a Series of the Trust if
there is a default in the payment of principal and interest on such Portfolio
Obligation and no provision for payment is made therefore and the Sponsor fails
to instruct the Trustee to sell or hold such Portfolio Obligation within thirty
days after notice to the Sponsor from the Trustee of such default. The Trustee
shall not be liable for any depreciation or loss by reason of any sale of
Portfolio Obligations or by reason of the failure of the Sponsor to give
directions to the Trustee.
Amounts received by a Series of the Trust upon the sale of any Portfolio
Obligation under the conditions set forth above will be deposited in the
Principal Account, Interest Account or Capital Gains Account for such Series, as
appropriate, when received and pursuant to the Sponsor's instructions will be
distributed by the Trustee on the next Distribution Date to Unitholders of
record of such Series on the Record Date prior to such Distribution Date.
A-23
<PAGE> 45
REPORTS TO UNITHOLDERS. With each distribution, the Trustee will furnish or
cause to be furnished to the Unitholders of such Series a statement of the
amount of interest and other receipts, if any, 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 Trust's expense, by independent certified public accountants designated by
the Sponsor, unless the Trustee determines that such an audit would not be in
the best interest of the Unitholders. The accountants' report will be furnished
by the Trustee to any Unitholder of such Series upon written request.
Within a reasonable period of time after the end of each calendar year, the
Trustee will furnish to each person who at any time during such calendar year
was a Unitholder of record of a Series of the Trust a statement setting forth
for the applicable Series:
1. As to the Interest Account:
(a) the amount of interest received on the Portfolio Obligations,
including amounts received as a portion of the proceeds of any disposition
of Portfolio Obligations;
(b) the amount paid from the Interest Account representing accrued
interest for any Units redeemed and amounts paid or reserved for purchases
of substitute Portfolio Obligations;
(c) the deductions from the Interest Account for applicable taxes or
other governmental charges, if any, and fees and expenses of the Trustee
(including auditing fees), the Sponsor, the Evaluator and counsel;
(d) the deductions from the Interest Account for payment into the
Reserve Account; and
(e) the net amount remaining after such payments and deductions
expressed both as a total dollar amount and as a dollar amount per 100
Units outstanding on the last business day of such calendar year.
2. As to the Principal Account:
(a) the dates of the sale, maturity, liquidation or redemption of any
of the Portfolio Obligations and the net proceeds received therefrom,
excluding any portion credited to the Interest Account;
(b) the amount paid from the Principal Account representing the
principal of any Units redeemed and amounts paid or reserved for purchases
of substitute Portfolio Obligations;
(c) the deductions from the Principal Account, if any, for payment of
applicable taxes or other governmental charges, fees and expenses of the
Trustee (including auditing fees), the Sponsor, the Evaluator and counsel;
(d) the deductions from the Principal Account for payment into the
Reserve Account; and
(e) the net amount remaining after such payments and deductions
expressed both as a total dollar amount and as a dollar amount per 100
Units outstanding on the last business day of such calendar year.
3. The following information:
(a) a list of the Portfolio Obligations, as appropriate, as of the
last business day of such calendar year grouped by coupon and maturity
range;
(b) the number of Units outstanding on the last business day of such
calendar year;
(c) the Unit Value (as defined in the Indenture) based on the last
Trust evaluation made during such calendar year; and
(d) the amounts actually distributed during such calendar year from
the Interest, Principal and Capital Gains Accounts, separately stated,
expressed both as total dollar amounts and as dollar amounts per 100 Units
outstanding on the Record Dates for such distributions.
A-24
<PAGE> 46
AMENDMENT. The Indenture may be amended by the Trustee and the Sponsor without
the consent of Unitholders (a) to cure any ambiguity or to correct or supplement
any provision thereof which may be defective or inconsistent, (b) to change any
provision thereof as may be required by the Securities and Exchange Commission
or any successor governmental agency, and (c) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee); provided, however, that the
Indenture may also be amended with respect to any Series by the Sponsor and the
Trustee (or the performance of any of the provisions of the Indenture may be
waived) with the consent of holders of Units representing 66 2/3% of the Units
then outstanding of such Series for the purposes of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of Unitholders thereof. However, the
Indenture may not be amended, without the consent of the holders of all Units of
a Series then outstanding, so as (1) to permit, except in accordance with the
terms and conditions of the Indenture, the acquisition of any Portfolio
Obligations other than those specified in the Indenture, or (2) to reduce the
aforesaid percentage of Units of a Series the holders of which are required to
consent to certain of such amendments and may not be amended so as to reduce the
interest in such Series represented by Units without the consent of the holder
of such Units. The Trustee shall promptly notify Unitholders of the substance of
any such amendment.
TERMINATION. The Indenture provides that a Series of the Trust will terminate
shortly after the maturity, redemption, sale or other disposition of the last of
the Portfolio Obligations held in such Series. See "Essential Information" for
each Series. If the value of a Series of the Trust as shown by an evaluation is
less than forty percent (40%) of the par value of the Portfolio Obligations
deposited in such Series, the Trustee shall, if directed by the Sponsor in
writing, terminate such Series of the Trust. The Trust or any Series thereof may
also be terminated at any time by the written consent of holders of Units
representing 66 2/3% of the Units then outstanding of such Series.
Upon termination, the Trustee will sell the Portfolio Obligations then held in
the appropriate Series of the Trust and credit the moneys derived from such sale
to the Principal, Capital Gains and Interest Accounts thereof. The Trustee will
then, after deduction of any fees and expenses of such Series and payment into
the Reserve Account of any amount required for taxes or other governmental
charges that may be payable by such series of the Trust, distribute to each
Unitholder of such Series, only upon surrender for cancellation of his
certificate, if issued, after due notice of such termination, such Unitholder's
pro rata share in the Interest, Capital Gains and Principal Accounts. The sale
of Portfolio Obligations in a Series of the Trust upon termination may result in
a lower amount than might otherwise be realized if such sale were not required
at such time. For this reason, among others, the amount realized by a Unitholder
upon termination may be less than the principal amount of Portfolio Obligations
represented by the Units held by such Unitholder.
RESIGNATION, REMOVAL AND LIABILITY
REGARDING THE TRUSTEE. The Trustee shall be under no liability for any action
taken in good faith in reliance on prima facie properly executed documents or
for the disposition of moneys or Securities from any Series of the Trust, nor
shall the Trustee be liable or responsible in any way for depreciation or loss
incurred by reason of the disposition of any Portfolio Obligations by the
Trustee. However, the Trustee shall be liable for wilful malfeasance, wilful
misconduct, bad faith or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under the
Indenture. In the event of a failure of the Sponsor to act, the Trustee may act
under the Indenture and shall not be liable for any action taken by it in good
faith. The Trustee shall not be personally liable for any taxes or other
governmental charges imposed upon the Trust or any Series thereof or in respect
of the Portfolio Obligations or the interest
A-25
<PAGE> 47
thereon. The Indenture also contains other customary provisions limiting the
liability of the Trustee and providing for the indemnification of the Trustee
for any loss or claim accruing to it without gross negligence, bad faith, wilful
misconduct, wilful malfeasance or reckless disregard of its duties and
obligations under the Indenture on its part.
The Trustee or any successor may resign by executing an instrument in writing,
filing the same with the Sponsor and mailing a copy of such notice or
resignation to all Unitholders then of record. Upon receiving such notice the
Sponsor will use its best efforts to appoint a successor Trustee promptly. If
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If within 30 days of the resignation
of a Trustee no successor has been appointed or, if appointed, has not accepted
the appointment, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of a
Trustee becomes effective only when the successor Trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor Trustee.
REGARDING THE SPONSOR. The Sponsor shall be under no liability to the Trust or
to Unitholders for taking any action or for refraining from any action in good
faith or for errors in judgment, nor shall the Sponsor be liable or responsible
in any way for depreciation or loss incurred by reason of the disposition of any
Portfolio Obligations. The Sponsor will, however, be liable for its own wilful
malfeasance, wilful misconduct, bad faith, gross negligence or reckless
disregard of its duties and obligations under the Indenture.
If at any time the Sponsor shall resign under the Indenture or shall fail or be
incapable of performing its duties thereunder or shall become bankrupt or its
affairs are taken over by public authorities, the Indenture directs the Trustee
to either (1) appoint a successor Sponsor or Sponsors at rates of compensation
deemed reasonable by the Trustee not exceeding amounts prescribed by the
Securities and Exchange Commission, or (2) continue to act as Sponsor itself
without terminating the Indenture.
REGARDING THE EVALUATOR. The Trustee, Sponsor and Unitholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the indenture 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, Sponsor or Unitholders for errors in judgment. The Evaluator shall,
however, be liable for its own wilful malfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties under the Indenture.
The Evaluator may resign or may be removed by the Sponsor and the Trustee, and
the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Evaluator. If upon resignation of
the Evaluator no successor accepts appointment within thirty days after notice
of resignation, the Evaluator may apply to a court of competent jurisdiction for
the appointment of a successor.
MISCELLANEOUS
SPONSOR. The Sponsor, Kemper Unit Investment Trusts, with an office at 77 West
Wacker Drive, 29th Floor, Chicago, Illinois 60601 (800)621-5024, is a service of
Kemper Securities, Inc., which is a wholly owned subsidiary of Kemper Financial
Companies, Inc. which, in turn, is a wholly-owned subsidiary of Kemper
Corporation. The Sponsor will act as underwriter of any other unit investment
trust products developed by the Sponsor in the future. As of January 31, 1994,
the total stockholder's equity of Kemper Securities, Inc. was $261,673,436
(unaudited).
The foregoing information with regard to the Sponsor relates to the Sponsor only
and not to the Trust. Such information is included in this Prospectus only for
the purpose of informing investors as to the financial
A-26
<PAGE> 48
responsibility of the Sponsor and its ability to carry out its contractual
obligations shown herein. More comprehensive financial information can be
obtained from the Sponsor upon request.
TRUSTEE. The Trustee, Investors Fiduciary Trust Company, is a trust company
specializing in investment related services, organized and existing under the
laws of Missouri, having its trust office at 127 West 10th Street, Kansas City,
Missouri 64105. The Trustee is subject to supervision and examination by the
Division of Finance of the State of Missouri and the Federal Deposit Insurance
Corporation. Investors Fiduciary Trust Company is jointly owned by DST Systems,
Inc. and Kemper Financial Services, Inc., an affiliate of the Sponsor.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting any of the Securities in the Trust Funds. For information relating to
the responsibilities of the Trustee under the Indenture, reference is made to
the material set forth under "Administration of the Trust Funds."
LEGAL OPINION. The legality of the Units offered hereby and certain matters
relating to Federal tax law have been passed upon by Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date of
Deposit included in this Prospectus and the Registration Statement have been
audited by Grant Thornton, independent certified public accountants, as set
forth in their report herein, and are included in reliance upon such report and
upon the authority of such firm as experts in accounting and auditing.
A-27
<PAGE> 49
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KEMPER
DEFINED
FUNDS.
GOVERNMENT
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
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PROSPECTUS
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U.S. TREASURY PORTFOLIO
SERIES 5 - SHORT
U.S. TREASURY PORTFOLIO
SERIES 6 - SHORT
U.S. TREASURY PORTFOLIO
SERIES 7 - INTERMEDIATE
SEPTEMBER 27, 1994
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KEMPER UNIT INVESTMENT TRUSTS
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<PAGE> 50
<TABLE>
<CAPTION>
CONTENTS PAGE
----
<S> <C>
ESSENTIAL INFORMATION.......................... 2
THE TRUST FUNDS................................ 4
General...................................... 4
Risk Factors and Portfolio Information....... 6
GNMA Portfolio Series...................... 6
U.S. Treasury Portfolio Series............. 10
PORTFOLIOS..................................... 12
NOTES TO PORTFOLIOS............................ 13
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS.................................. 14
STATEMENTS OF CONDITION........................ 15
ESTIMATED CASH FLOWS TO UNITHOLDERS............ 16
RATING OF UNITS................................ A-1
PORTFOLIO SELECTION............................ A-1
THE UNITS...................................... A-2
ESTIMATED CURRENT RETURN AND ESTIMATED
LONG-TERM RETURN............................. A-2
PUBLIC OFFERING OF UNITS....................... A-3
Public Offering Price........................ A-3
Initial Public Distribution.................. A-6
Secondary Market............................. A-6
Profits of Sponsor........................... A-7
TAX STATUS..................................... A-9
RETIREMENT PLANS............................... A-15
REINVESTMENT PROGRAM........................... A-16
REDEMPTION..................................... A-17
Right of Redemption.......................... A-17
Computation of Redemption Value.............. A-18
Postponement of Redemption................... A-19
COMPARISON OF PUBLIC OFFERING PRICE AND
REDEMPTION VALUE............................. A-19
RIGHTS OF UNITHOLDERS.......................... A-19
Unitholders.................................. A-19
Ownership of Units........................... A-19
Certain Limitations.......................... A-20
EXPENSES AND CHARGES........................... A-20
Initial Expenses............................. A-20
Fees......................................... A-20
Other Charges................................ A-21
ADMINISTRATION OF THE TRUST FUNDS.............. A-21
Records and Accounts......................... A-21
Distributions from the Interest, Principal
and Capital Gains Accounts................. A-21
Portfolio Supervision........................ A-23
Reports to Unitholders....................... A-24
Amendment.................................... A-25
Termination.................................. A-25
RESIGNATION, REMOVAL AND LIABILITY............. A-25
Regarding the Trustee........................ A-25
Regarding the Sponsor........................ A-26
Regarding the Evaluator...................... A-26
MISCELLANEOUS.................................. A-26
Sponsor...................................... A-26
Trustee...................................... A-27
Legal Opinion................................ A-27
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....... A-27
</TABLE>
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THIS PROSPECTUS DOES NOT CONTAIN ALL
OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS
RELATING THERETO, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE
SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, AND
TO WHICH REFERENCE IS MADE.
- --------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS AND ANY INFORMATION
OR REPRESENTATION NOT CONTAINED
HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST,
THE TRUSTEE, OR THE SPONSOR. THE
TRUST IS REGISTERED AS A UNIT
INVESTMENT TRUST UNDER THE
INVESTMENT COMPANY ACT OF 1940. SUCH
REGISTRATION DOES NOT IMPLY THAT THE
TRUST OR THE UNITS HAVE BEEN
GUARANTEED, SPONSORED, RECOMMENDED
OR APPROVED BY THE UNITED STATES OR
ANY STATE OR ANY AGENCY OR OFFICER
THEREOF.
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THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN
ANY STATE TO ANY PERSON TO WHOM IT
IS NOT LAWFUL TO MAKE SUCH OFFER IN
SUCH STATE.
<PAGE> 51
CONTENTS OF REGISTRATION STATEMENT
This Amended Registration Statement comprises the following papers and
documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The following exhibits:
<TABLE>
<S> <C> <C>
1.1 (a) -- Form of Trust Indenture and Agreement for U.S. Treasury Portfolio, Series 5, U.S.
Treasury Portfolio, Series 6 and U.S. Treasury Portfolio, Series 7.
1.1.1 (a) -- Standard Terms and Conditions of Trust for U.S. Treasury Portfolio, Series 5, U.S.
Treasury Portfolio, Series 6 and U.S. Treasury Portfolio, Series 7. Reference is made
to Exhibit 1.1.1(a) to the Registration Statement on Form S-6 with respect to Kemper
Government Securities Trust (Registration No. 33-26754) as filed on February 14,
1989.
1.2 -- Certificate of Incorporation of Kemper Securities, Inc. Reference is made to Exhibit
1.2 to the Registration Statement on Form S-6, with respect to Kemper Government
Securities Trust (Registration No. 33-26754) as filed on February 14, 1989 and Kemper
Defined Funds Series 9 (Registration No. 33-56012) as filed on November 3, 1993.
1.3 -- By-laws of Kemper Securities, Inc. Reference is made to Exhibit 1.3 to the
Registration Statement on Form S-6, with respect to Kemper Government Securities
Trust (Registration No. 33-26754) as filed on February 14, 1989 and Kemper Defined
Funds Series 9 (Registration No. 33-56012) as filed on November 3, 1993.
2.1 -- Form of Certificate of Ownership (pages three to nine, inclusive, of the Standard
Terms and Conditions of Trust included as Exhibits 1.1.1(a), 1.1.1(b)).
3.1 -- Opinion of counsel to the Sponsor as to legality of the securities being registered
including a consent to the use of its name under the headings "Tax Status" and "Legal
Opinions" in the Prospectus and opinion of counsel as to Federal income tax status of
the securities included in the Trust.
4.1 -- Consent of Standard & Poor's Corporation.
4.2 -- Consent of Muller Data Corporation.
4.3 -- Consent of Grant Thornton.
6.1 -- List of Officers and Directors of Depositor. Reference is made to Exhibit 6.1 to the
Registration Statement on Form S-6 with respect to Kemper Tax-Exempt Insured Income
Trust, Multi-State Series 51 (Registration No. 33-48398) as filed on July 15, 1992.
7.1 -- Power of Attorney. Reference is made to Exhibit 7.1 to the Registration Statement
with respect to Kemper Tax-Exempt Insured Income Trust, Series A-90 and Multi-State
Series 65 (Registration No. 33-59086) as filed May 12, 1993.
EX-27 -- Financial Data Schedules for the U.S. Treasury Portfolio Series.
</TABLE>
S-1
<PAGE> 52
SIGNATURES
The Registrant, Kemper Defined Funds Series 24 hereby identifies Kemper
Government Securities Trust, Series 39 (GNMA Portfolio), Series 40 (GNMA
Portfolio) and Series 41 (U.S. Treasury Portfolio) and Kemper Defined Funds
Insured National Series 1 for purposes of the representations required by Rule
487 and represents the following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not
differ materially in type or quality from those deposited in such previous
series;
(2) that, except to the extent necessary to identify the specific
portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those
contained in the registration statements for such previous series as to
which the effective date was determined by the Commission or the Staff; and
(3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Kemper Defined Funds Series 24 has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, in the City
of Chicago, and State of Illinois, on the 27th day of September, 1994.
KEMPER DEFINED FUNDS SERIES 24
Registrant
By: KEMPER SECURITIES, INC.
Depositor
By: /s/ MICHAEL J. THOMS
Michael J. Thoms
S-2
<PAGE> 53
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on September 27, 1994 by the following persons,
who constitute a majority of the Board of Directors of Kemper Securities, Inc.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------- ----------------------------------------------
<S> <C>
JAMES R. BORIS Chairman and Chief Executive Officer
- -----------------------------------------------
James R. Boris
DONALD F. ELLER Senior Executive Vice President and Director
- -----------------------------------------------
Donald F. Eller
STANLEY R. FALLIS Senior Executive Vice President, Chief
- ----------------------------------------------- Financial Officer and Director
Stanley R. Fallis
FRANK V. GEREMIA Senior Executive Vice President and Director
- -----------------------------------------------
Frank V. Geremia
DAVID B. MATHIS Director
- -----------------------------------------------
David B. Mathis
ROBERT T. JACKSON Director
- -----------------------------------------------
Robert T. Jackson
JAY B. WALTERS Senior Executive Vice President and Director
- -----------------------------------------------
Jay B. Walters
CHARLES M. KIERSCHT Director
- -----------------------------------------------
Charles M. Kierscht
ARTHUR J. McGIVERN Director
- -----------------------------------------------
Arthur J. McGivern
/s/ MICHAEL J. THOMS
----------------------------------------------
Michael J. Thoms
</TABLE>
Michael J. Thoms signs this document pursuant to a Power of Attorney filed with
the Securities and Exchange Commission with (a) Amendment No. 1 to the
Registration Statement on Form S-6 for Kemper Tax-Exempt Insured Income Trust,
Series A-70 and Multi-State Series 28 and Kemper Tax-Exempt Income Trust,
Multi-State Series 42 (Registration No. 33-35425), (b) Amendment No. 1 to the
Registration Statement on Form S-6 for Kemper Tax-Exempt Insured Income Trust,
Series A-72 and Multi-State Series 30 (Registration No. 33-37178), (c) Amendment
No. 1 to the Registration Statement on Form S-6 for Kemper Tax Exempt Insured
Income Trust, Multi-State Series 51 (Registration No. 33-48398) and (d)
Amendment No. 1 to the Registration Statement on Form S-6 for Kemper Tax-Exempt
Insured Income Trust, Series A-90 and Multi-State Series 65 (Registration No.
33-59086) as filed on May 12, 1993.
S-3
<PAGE> 1
Exhibit 4.1
Standard & Poor's Ratings Group
Municipal Finance Department
25 Broadway
New York, New York 10004-1064
Telephone 212/208-1767
Fax 212/412-0460
Richard P. Larkin
Managing Director
September 27, 1994
Mr. Michael J. Thomas
Vice President of Operations
Kemper Unit Investment Trusts
77 West Wacker Drive
Chicago, IL 60601-1994
Re: Kemper Defined Funds Series 24, U.S. Treasury Portfolio Series 5
(SEC Reg. #33-55497)
Dear Mr. Thomas:
Pursuant to your request for a Standard & Poor's rating on the units of
the above captioned trust, we have reviewed the information presented to us and
have assigned an "AAA" rating to the units in the trust. The rating is a
direct reflection of the portfolio of the trust, which will be composed solely
of U.S. Treasury Debt Obligations fully guaranteed as to principal and interest
by the full faith and credit of the United States.
You have permission to use the name of Standard & Poor's Ratings Group
and the above-assigned rating in connection with your dissemination of
information relating to these units, provided that it is understood that the
rating is not a "market" rating nor a recommendation to buy, hold, or sell the
units of the trust. Further, it should be understood the rating does not take
into account the extent to which fund expenses or portfolio asset sales for
less than the fund's purchase price will reduce payment to the unit holders of
the interest and principal required to be paid on the portfolio assets. S&P
reserves the right to advise its own clients, subscribers, and the public of
the rating. S&P relies on the sponsor and its counsel, accountants, and other
experts for the accuracy and completeness of the information submitted in
connection with the rating. S&P does not independently verify the truth or
accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Ratings Group and the above-assigned rating in the registration
statement or prospectus relating to the units or the trust. However, this
letter should not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name of Standard &
Poor's Ratings Group in connection with the ratings assigned to the securities
contained in the trust. You are hereby authorized to file a copy of this
letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made
to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you.
Our bill will be sent to you within one month. If we can be of further help,
please do not hesitate to call upon us.
Sincerely,
/s/ Richard P. Larkin
Richard P. Larkin
RPL:jmj
<PAGE> 2
Standard & Poor's Ratings Group
Municipal Finance Department
25 Broadway
New York, New York 10004-1064
Telephone 212/208-1767
Fax 212/412-0460
Richard P. Larkin
Managing Director
September 27, 1994
Mr. Michael J. Thoms
Vice President of Operations
Kemper Unit Investment Trusts
77 West Wacker Drive
Chicago, IL 60601-1994
Re: Kemper Defined Funds Series 24, U.S. Treasury Portfolio Series 6
(SEC Reg. #33-55497)
Dear Mr. Thoms:
Pursuant to your request for a Standard & Poor's rating on the units of
the above captioned trust, we have reviewed the information presented to us and
have assigned an "AAA" rating to the units in the trust. The rating is a
direct reflection of the portfolio of the trust, which will be composed solely
of U.S. Treasury Debt Obligations fully guaranteed as to principal and interest
by the full faith and credit of the United States.
You have permission to use the name of Standard & Poor's Ratings Group
and the above-assigned rating in connection with your dissemination of
information relating to these units, provided that it is understood that the
rating is not a "market" rating nor a recommendation to buy, hold, or sell the
units of the trust. Further, it should be understood the rating does not take
into account the extent to which fund expenses or portfolio asset sales for
less than the fund's purchase price will reduce payment to the unit holders of
the interest and principal required to be paid on the portfolio assets. S&P
reserves the right to advise its own clients, subscribers, and the public of
the rating. S&P relies on the sponsor and its counsel, accountants, and other
experts for the accuracy and completeness of the information submitted in
connection with the rating. S&P does not independently verify the truth or
accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Ratings Group and the above-assigned rating in the registration
statement or prospectus relating to the units or the trust. However, this
letter should not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name of Standard &
Poor's Ratings Group in connection with the ratings assigned to the securities
contained in the trust. You are hereby authorized to file a copy of this
letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made
to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you.
Our bill will be sent to you within one month. If we can be of further help,
please do not hesitate to call upon us.
Sincerely,
/s/ Richard P. Larkin
Richard P. Larkin
RPL:jmj
<PAGE> 3
Standard & Poor's Ratings Group
Municipal Finance Department
25 Broadway
New York, New York 10004-1064
Telephone 212/208-1767
Fax 212/412-0460
Richard P. Larkin
Managing Director
September 27, 1994
Mr. Michael J. Thoms
Vice President of Operations
Kemper Unit Investment Trusts
77 West Wacker Drive
Chicago, IL 60601-1994
Re: Kemper Defined Funds Series 24, U.S. Treasury Portfolio Series 7
(SEC Reg. #33-55497)
Dear Mr. Thoms:
Pursuant to your request for a Standard & Poor's rating on the units of
the above captioned trust, we have reviewed the information presented to us and
have assigned an "AAA" rating to the units in the trust. The rating is a
direct reflection of the portfolio of the trust, which will be composed solely
of U.S. Treasury Debt Obligations fully guaranteed as to principal and interest
by the full faith and credit of the United States.
You have permission to use the name of Standard & Poor's Ratings Group
and the above-assigned rating in connection with your dissemination of
information relating to these units, provided that it is understood that the
rating is not a "market" rating nor a recommendation to buy, hold, or sell the
units of the trust. Further, it should be understood the rating does not take
into account the extent to which fund expenses or portfolio asset sales for
less than the fund's purchase price will reduce payment to the unit holders of
the interest and principal required to be paid on the portfolio assets. S&P
reserves the right to advise its own clients, subscribers, and the public of
the rating. S&P relies on the sponsor and its counsel, accountants, and other
experts for the accuracy and completeness of the information submitted in
connection with the rating. S&P does not independently verify the truth or
accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Ratings Group and the above-assigned rating in the registration
statement or prospectus relating to the units or the trust. However, this
letter should not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name of Standard &
Poor's Ratings Group in connection with the ratings assigned to the securities
contained in the trust. You are hereby authorized to file a copy of this
letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made
to us, we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you.
Our bill will be sent to you within one month. If we can be of further help,
please do not hesitate to call upon us.
Sincerely,
/s/ Richard P. Larkin
Richard P. Larkin
RPL:jmj
<PAGE> 1
Exhibit 4.2
MULLER DATA CORPORATION
- --------------------------------------------------------------------------
A Thomson Financial Services Company
Kemper Capital Markets, Inc.
Unit Investment Trusts
77 West Wacker Drive - 28th Floor
Chicago, Illinois 60601-1994
RE: Kemper Defined Funds
U.S. Treasury Series 5
Kemper Defined Funds
U.S. Treasury Series 6
Kemper Defined Funds
U.S. Treasury Series 7
Gentlemen:
We have examined Registration Statement File No. 33-55497 for the above
captioned trust. We hereby acknowledge that Muller Data Corporation is
currently acting as the evaluator for the trust. We hereby consent to the use
in the Registration Statement of the reference to Muller Data Corporation as
evaluator.
In addition, we hereby confirm that the ratings indicated in the Registration
Statement for the respective bonds comprising the trust portfolio are the
ratings indicated in our Muniview data base as of the date of the Evaluation
Report.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
/s/ MARIO BUSCEMI
Mario Buscemi
Senior Vice President
NE/tg
395 Hudson Street - New York - NY 10014-3622 - Telephone (212) 807-3800
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Amendment
Number 1 to Form S-6 and is qualified in its entirety by reference to such
Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> U.S. TREASURY PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-27-1994
<PERIOD-END> SEP-27-1994
<INVESTMENTS-AT-COST> 986,269
<INVESTMENTS-AT-VALUE> 986,269
<RECEIVABLES> 20,560
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,006,829
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,560
<TOTAL-LIABILITIES> 20,560
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 986,269
<SHARES-COMMON-STOCK> 100,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 986,269
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 00
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Amendment
Number 1 to Form S-6 and is qualified in its entirety by such Amendment to Form
S-6.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> U.S. TREASURY SERIES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-27-1994
<PERIOD-END> SEP-27-1994
<INVESTMENTS-AT-COST> 877,052
<INVESTMENTS-AT-VALUE> 877,052
<RECEIVABLES> 414
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 877,470
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 414
<TOTAL-LIABILITIES> 414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 877,056
<SHARES-COMMON-STOCK> 100,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 877,056
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Amendment
Number 1 to Form S-6 and is qualified in its entirety by reference to such
Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> US TREASURY SERIES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-27-1994
<PERIOD-END> SEP-27-1994
<INVESTMENTS-AT-COST> 986,194
<INVESTMENTS-AT-VALUE> 986,194
<RECEIVABLES> 24,233
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,010,427
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,233
<TOTAL-LIABILITIES> 24,233
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 986,194
<SHARES-COMMON-STOCK> 100,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 986,194
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
MEMORANDUM
KEMPER DEFINED FUNDS SERIES 24
The Prospectus and the Indenture filed with Amendment No. 1 of the
Registration Statement on Form S-6 have been revised to reflect information
regarding the deposit of securities on September 27, 1994, and to set forth
certain statistical data based thereon and certain minor corrections and
completions. An effort has been made to set forth below each of the changes
and also to reflect same in the marked counterparts of the Prospectus submitted
with the Amendment.
THE PROSPECTUS
Page 1. The date of the prospectus and series number has been changed.
Page 2-3. The "Essential Information" section has been completed.
Page 12. The Portfolios have been completed.
Page 14. The Report of Independent Certified Public Accountants has
been completed.
Page 15. The Statements of Condition have been completed.
Back cover. The date and series number have been completed.
<PAGE> 1
EXHIBIT 99.1.1(a)
TRUST AGREEMENT
KEMPER DEFINED FUNDS SERIES 24
U.S. TREASURY PORTFOLIO, SERIES 5,
U.S. TREASURY PORTFOLIO, SERIES 6 AND
U.S. TREASURY PORTFOLIO, SERIES 7
This Trust Agreement dated as of September 27, 1994 between Kemper Unit
Investment Trusts, a service of Kemper Securities, Inc., as Depositor, and
Investors Fiduciary Trust Company, as Trustee, sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"Kemper Government Securities Trust, Standard Terms and Conditions of Trust,
Effective February 14, 1989" (herein called the "Standard Terms and Conditions
of Trust"), and such provisions as are set forth in full and such provisions as
are incorporated by reference constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
A. The Securities deposited in each Trust pursuant to Section 2.01
of this Trust Agreement are set forth in the Schedules hereto.
B. The aggregate number of Units outstanding for and the initial
fractional undivided interest in and ownership of U.S. Treasury
Portfolio,
<PAGE> 2
Series 5, U.S. Treasury Portfolio, Series 6 and U.S. Treasury
Portfolio, Series 7 on the Initial Date of Deposit are those amounts
set forth in the section captioned "Essential Information" in the final
Prospectus of the Trust (the "Prospectus") contained in Amendment No. 1
to the Trust's Registration Statement (Registration No. 33-55497) as
filed with Securities and Exchange Commission on September 27, 1994.
Documents representing this number of Units for each Trust are being
delivered by the Trustee to the Depositor pursuant to Section 2.03 of
this Trust Agreement.
C. The Percentage Ratios required to be set forth by Section
1.02 of this Trust Agreement are those amounts set forth under
"Portfolio" for each Trust in the Prospectus.
D. Distribution Dates for each U.S. Treasury Portfolio Series
shall mean the "Distribution Dates" set forth under "Administration of
the Trust Funds - Distributions from the Interest, Principal and Capital
Gains Accounts" of the Prospectus, commencing with that "Distribution
Date" set forth in the footnotes to the section captioned "Essential
Information" in the Prospectus.
E. Record Dates for each U.S. Treasury Portfolio Series shall
mean the "Record Dates" set forth under "Administration of the Trust
Funds - Distributions from the Interest, Principal and Capital Gains
Accounts" of the Prospectus, commencing with that "Record Date" set
forth in the footnotes to the section captioned "Essential Information"
in the Prospectus.
F. The Discretionary Liquidation Amount for the Trust shall be
forty per centum (40%) of the face value of the Securities deposited in
each Trust pursuant to Section 2.01 of this Trust Agreement.
G. The Mandatory Termination Date for the Trust shall be the
"Mandatory Termination Date" set forth under the section captioned
"Essential Information" set forth in the Prospectus.
H. The Evaluator's compensation as referred to in Section 4.03
of this Trust Agreement shall be an annual fee of 0.25 per $1,000
principal amount of Securities for each U.S. Treasury Portfolio Series
payable monthly.
I. The Trustee's Compensation Rate pursuant to Secion 6.04 of
this Trust Agreement shall be for each U.S. Treasury Portfolio Series
that annual fee set forth under the section captioned "Essential
Information" in the Prospectus; however, in no event shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
-2-
<PAGE> 3
J. The Initial Date of Deposit for each Trust shall mean the
"Initial Date of Deposit" set forth under the section captioned "Essential
Information" in the Prospectus.
K. The minimum principal amount of any Securities to be sold by
the Trustee pursuant to Section 5.02(d) of this Trust Agreement for the
redemption of Units shall be $25,000.
L. The U.S. Treasury Portfolio Series have not elected to be
treated as Regulated Investment Companies under the Internal Revenue Code.
M. The Depositor's surveillance fee referred to in Section 3.17 of
this Trust Agreement shall be an annual fee of $.10 per $1,000 principal amount
of Securities for each U.S. Treasury Portfolio Series.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed.
KEMPER UNIT INVESTMENT TRUSTS,
A service of Kemper Securities, Inc.
Depositor
By C. Perry Moore
--------------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST
COMPANY
Trustee
By Ron Puett
--------------------------------
Operations Officer
<PAGE> 5
SCHEDULE TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
KEMPER DEFINED FUNDS SERIES 24
U.S. TREASURY PORTFOLIO, SERIES 5,
U.S. TREASURY PORTFOLIO, SERIES 6 AND
U.S. TREASURY PORTFOLIO, SERIES 7
(Note: Incorporated herein and made a part hereof for the Fund is the
"Portfolio" for each Trust as set forth in the Prospectus.)
<PAGE> 1
EXHIBIT 99.3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
September 27, 1994
Kemper Unit Investment Trusts
77 West Wacker Drive
Chicago, Illinois 60601
Re: Kemper Defined Funds Series 24
Gentlemen:
We have served as counsel for Kemper Unit Investment Trusts, a service
of Kemper Securities, Inc., as Sponsor and Depositor of Kemper Defined Funds
Series 24 (the "Fund") in connection with the preparation, execution and
delivery of the Trust Agreement dated the date of this opinion between Kemper
Unit Investment Trusts, as Depositor, and Investors Fiduciary Trust Company, as
Trustee, pursuant to which the Depositor has delivered to and deposited the
Securities listed in the Schedules to each Trust Agreement with the Trustee and
pursuant to which the Trustee has issued to or on the order of the Depositor
certificates representing Units of fractional undivided interest in and
ownership of each Trust in the Fund (hereinafter referred to as the "Units"),
created under said Trust Agreements.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of each Trust Agreement and
the execution and issuance of certificates evidencing the Units in each
Trust in the Fund have been duly authorized; and
2. The certificates evidencing the Units in each Trust in
the Fund, when duly executed and delivered by the Depositor and the
Trustee in accordance with the aforementioned Trust Agreements, will
constitute valid and binding obligations of such Trusts and the
Depositor in accordance with the terms thereof.
<PAGE> 2
-2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-55497) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
<PAGE> 3
EXHIBIT 99.3.1 (CONT)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
September 27, 1994
Kemper Unit Investment Trusts
77 West Wacker Drive
Chicago, Illinois 60601
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Re: Kemper Defined Funds Series 24
U.S. Treasury Portfolio, Series 5, U.S. Treasury Portfolio, Series 6
and U.S. Treasury Portfolio, Series 7
Gentlemen:
We have acted as counsel for Kemper Unit Investment Trusts, a service
of Kemper Securities, Inc., Depositor of Kemper Defined Funds Series 24, U.S.
Treasury Portfolio, Series 5, U.S. Treasury Portfolio, Series 6 and U.S.
Treasury Portfolio, Series 7 (the "Trusts"), in connection with the issuance of
Units of fractional undivided interest in the Trusts, under a Trust Agreement,
dated September 27, 1994 (the "Indenture"), between Kemper Unit Investment
Trusts, as Depositor, and Investors Fiduciary Trust Company, as Trustee.
In this connection, we have examined the Registration Statement, the
form of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we have
deemed pertinent.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a
corporation but will be governed by the provisions of Subchapter J
(relating to Trusts) of Chapter 1, Internal Revenue Code of 1986 (the
"Code").
(ii) Each Unitholder will be considered the owner of a pro
rata portion of each U.S. Treasury Obligation in the respective Trust
and will be considered to have received the interest on his pro rata
portion of each U.S. Treasury Obligation when interest on such U.S.
Treasury Obligation is received by the respective Trust. Each
Unitholder will also be required to include in taxable income for
federal income tax
<PAGE> 4
-2-
purposes, original issue discount with respect to his interest
in any U.S. Treasury Obligation held by a Trust which was issued with
original issue discount at the same time and in the same manner as
though the Unitholder were the direct owner of such interest. Original
issue discount will be treated as zero with respect to the U.S.
Treasury Obligations if it is "de minimis" within the meaning of
Section 1273 of the Code and, based upon a Treasury Regulation (the
"Regulation") which was issued on December 28, 1992 regarding the
stripped bond rules of the Code, original issue discount with respect
to a Stripped Treasury Security will be treated as zero if it is "de
minimis" as determined thereunder.
(iii) Each Unitholder will be considered the owner of a pro
rata portion of each asset in the respective Trust. The total cost to
a Unitholder of his Units, including sales charges, is allocated among
his pro rata portion of each asset held by a Trust (in proportion to
the fair market values thereof on the date the Unitholder purchases
Units) in order to determine his initial tax basis for his pro rata
portion of each asset held by a Trust. The basis of each Unit and of
each U.S. Treasury Obligation which was issued with original issue
discount must be increasd by the amount of accrued original issue
discount and the basis of each Unit and of each U.S. Treasury
Obligation which was purchased by the Trust at a premium must be
reduced by the annual amortization of bond premium which the Unitholder
has properly elected to amortize under Section 171 of the Code. The
Stripped Treasury Securities are treated as bonds that were originally
issued at an original issue discount. Because the Stripped Treasury
Securities represent interest in "stripped" U.S. Treasury bonds, a
Unitholder's initial cost for his pro rata portion of each Stripped
Treasury Security held by a Trust (determined at the time he acquires
his units, in the manner described above) shall be treated as its
"purchase price" by the Unitholder. Under the special rules relating
to stripped bonds, original issue discount applicable to the Stripped
Treasury Securities is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount in this
case is generally the difference between the bond's purchase price and
its stated redemption price at maturity. A Unitholder will be required
to include in gross income for each taxable year the sum of his daily
portions of original issue discount attributable to the Stripped
Treasury Securities held by the Trusts as such original issue discount
accrues and will in general be subject to Federal income tax with
respect to the total amount of such original issue discount that
accrues for such year even though the income is not distributed to the
Unitholders during such year to the extent it is greater than or equal
to the "de minimis" amount described above. To the extent the amount
of such discount is less than the respective "de minimis" amount, such
discount shall be treated as zero. In general, original issue discount
accrues daily under a constant interest rate method which takes into
account the semi-annual compounding of accrued interest. In the case
of Stripped Treasury Securities this method will generally result in an
increasing amount of income to the Unitholders each year. A
Unitholder's tax basis for his pro rata portion of each asset held by a
Trust may be subject to adjustment as discussed in paragraph (v)
hereof.
<PAGE> 5
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(iv) The Unitholder's aliquot share of the total
proceeds received on the disposition of, or principal paid with respect
to, a U.S. Treasury Obligation held by a Trust will constitute ordinary
income (which will be treated as interest income for most purposes) to
the extent it does not exceed the accrued market discount on such U.S.
Treasury Obligation that has not previously been included in taxable
income by such Unitholder. A Unitholder may generally elect to include
market discount in income as such discount accrues. In general, market
discount is the excess, if any, of the Unitholder's pro rata portion of
the outstanding principal balance of a U.S. Treasury Obligation over
the Unitholder's initial tax cost for such pro rata portion, determined
at the time such Unitholder acquires his Units. However, market
discount with respect to any U.S. Treasury Obligation will generally be
considered zero if it does not exceed the statutorily defined "de
minimis" amount. The market discount rules do not apply to Stripped
Treasury Securities because they are stripped debt instruments subject
to special original issue discount rules as discussed above. If a
Unitholder sells his Units, gain, if any, will constitute ordinary
income to the extent of the aggregate of the accrued market discount on
the Unitholder's pro rata portion of each U.S. Treasury Obligation that
is held by the Trusts that has not previously been included in taxable
income by such Unitholder. In general, market discount accrues on a
ratable basis unless the Unitholder elects to accrue such discount on a
constant interest rate basis. However, no opinion is expressed herein
regarding the precise manner in which market discount accrues. The
deduction by a Unitholder for any interest expense incurred to purchase
or carry Units will be reduced by the amount of any accrued market
discount that has not yet been included in taxable income by such
Unitholder. In general, the portion of any interest expense which is
not currently deductible would be ultimately deductible when the accrued
market discount is included in income.
(v) As discussed in paragraph (iv) hereof, if a Unitholder
sells his Units, gain, if any, will constitute ordinary income to the
extent of the aggregate of the accrued market discount (which has not
previously been included in such Unitholder's taxable income) with
respect to the Unitholder's pro rata portion of each U.S. Treasury
Obligation held by a Trust. Any other gains (or losses) will be
capital gains (or losses) except in the case of a dealer or a financial
institution, and will be long-term if the Unitholder has held his Units
for more than one year. A Unitholder will recognize taxable gains (or
losses) (a) upon redemption or sale of his Units, (b) if the Trustee
disposes of an asset or (c) upon receipt by the Trustee of payments of
principal on the U.S. Treasury Obligations. The amount of any such
gain (or loss) is measured by comparing the Unitholder's pro rata share
of the total proceeds from the transaction with his adjusted tax basis
in his Units or his pro rata interest in the asset as the case may be,
and then reducing such gain, if any, to the extent characterized as
ordinary income resulting from accrued market discount as discussed
above. A Unitholder's tax basis in his Units and his pro rata portion
of each of the underlying assets of a Trust may be adjusted to reflect
the accrual of market discount (if the Unitholder has elected to
include such discount in income as it accrues), original issue
<PAGE> 6
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discount and amortized bond premium, if any. The tax cost reduction
requirements of said 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. In addition, Unitholders must reduce the tax basis
of their Units and their pro rata portion of the underlying assets of a
Trust for their share of accrued interest received by a Trust, if any,
on U.S. Treasury Obligations delivered after the Unitholders pay for
their Units to the extent that such interest accrued on such U.S.
Treasury Obligations during the period from the Unitholder's settlement
date to the date such U.S. Treasury Obligations 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 or such U.S. Treasury Obligations.
(vi) The Code provides that "miscellaneous itemized deductions"
are allowable only to the extent that they exceed two percent of an
individual taxpayer's adjusted gross income. Miscellaneous itemized
deductions subject to this limitation under present law include a
Unitholder's pro rata share of expenses paid by the Trust, including
fees of the Trustee and the Evaluator but does not include amortizable
bond premium on U.S. Treasury Obligations held by the Trust.
For taxable years beginning after December 31, 1986 and before January
1, 1996, certain corporations may be subject to the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code. Interest received from,
and gains recognized from the disposition of, a Security by the Trusts or the
sale of Units by a Unitholder will be included by such corporations in the
computation of the Superfund Tax.
A Unitholder who is a foreign investor (i.e., an investor other than a
U.S. citizen or resident or U.S. corporation, partnership, estate or trust)
will not be subject to United States Federal income taxes, including
withholding taxes on interest income (including any original issue discount)
on, or any gain from the sale or other disposition or redemption of a U.S.
Treasury Obligation held by the Trust or the sale of his Units provided that
all of the following conditions are met:
(i) the interest income or gain is not effectively connected
with the conduct by the foreign investor of a trade or business within
the United States;
(ii) with respect to any gain, the foreign investor (if an
individual) is not present in the United States for 183 days or more
during his or her taxable year;
(iii) the U.S. Treasury Obligation was issued after July 18,
1984; and
(iv) the foreign investor provides all certification which may
be required of his status and of the matters contained in clauses (i)
and (ii) above.
<PAGE> 7
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The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including state or local taxes or collateral tax
consequences with respect to the purchase, ownership and disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement (File No. 33-55497) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
<PAGE> 1
EXHIBIT 99.4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We have issued our report dated September 27, 1994 on the statements of
condition and related portfolios of Kemper Defined Funds Series 24 (U.S.
Treasury Portfolio, Series 5, U.S. Treasury Portfolio, Series 6 and U.S.
Treasury Portfolio, Series 7) as of September 27, 1994 contained in the
Registration Statement on Form S-6 and in the Prospectus. We consent to the use
of our report in the Registration Statement and in the Prospectus and to the use
of our name as it appears under the caption "Independent Certified Public
Accountants."
GRANT THORNTON
Chicago, Illinois
September 27, 1994
