<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1995
REGISTRATION NO. 33-62735
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. EXACT NAME OF TRUST:
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
(ORIGINALLY FILED AS SPIRE DEFINED FUNDS SERIES 38)
B. NAME OF DEPOSITOR:
EVEREN UNIT INVESTMENT TRUSTS,
a service of EVEREN Securities, Inc.
(formerly known as Kemper Unit Investment Trusts,
a service of Kemper Securities, Inc.)
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
EVEREN UNIT INVESTMENT TRUSTS
77 West Wacker Drive, 29th Floor
Chicago, Illinois 60601
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE: Copy to:
ROBERT K. BURKE MARK J. KNEEDY
77 West Wacker Drive, 29th Floor c/o Chapman and Cutler
Chicago, Illinois 60601 111 West Monroe Street
Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE AND AMOUNT OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES BEING REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series An indefinite number of Indefinite $500 (previously paid)
38 Units of Beneficial Inter-
est pursuant to Rule 24f-2
under the Investment Com-
pany Act of 1940
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
[X] Check box if it is proposed that this filing will become effective at
2:00 P.M. on October 5, 1995 pursuant to paragraph (b) of Rule 487.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a) may determine.
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
----------------
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
I. ORGANIZATION AND GENERAL INFORMATION
<C> <S> <C>
1. (a)Name of trust................... Prospectus front cover
(b)Title of securities issued...... Essential Information
2. Name and address of each depositor. General Information--Administration of
the Trusts
3. Name and address of trustee........
4. Name and address of principal The Tax-Exempt Portfolios--
underwriters...................... Underwriting
5. State of organization of trust..... The Trust Funds
6. Execution and termination of trust The Trust Funds; General Information--
agreement......................... Administration of the Trusts
7. Changes of name.................... The Trust Funds
8. Fiscal year........................ *
9. Litigation.........................
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a)Registered or bearer securities. General Information--Unitholders
(b)Cumulative or distributive
securities........................ The Trust Funds
(c)Redemption...................... General Information--Redemption
(d)Conversion, transfer, etc....... General Information--Unitholders;
General Information--Market for Units
(e)Periodic payment plan........... *
(f)Voting rights................... General Information--Unitholders
General Information--Investment
(g)Notice of certificateholders.... Supervision; General Information--
Administration of the Trusts; General
Information--Unitholders
(h)Consents required............... General Information--Unitholders;
General Information--Administration of
the Trusts
(i)Other provisions................ The Tax-Exempt Portfolios--Federal Tax
Status; The U.S. Treasury Portfolio
Series
--Federal Tax Status; The Tax-Exempt
Portfolios--Insurance on the Bonds
Type of securities comprising The Trust Funds; General Information--
11. units............................. Trust Information
12. Certain information regarding peri-
odic payment
certificates...................... *
Essential Information; Public Offering
of Units; General Information--
13. (a) Load, fees, expenses, etc...... Interest, Estimated Long-Term Return
and Estimated Current Return; General
Information--Expenses of the Trusts
</TABLE>
- --------
* Inapplicable, answer negative or not required.
i
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------
<C> <S> <C>
(b)Certain information regarding
periodic payment certifi-
cates....................... *
(c)Certain percentages........... Essential Information; Public Offering
of Units
(d)Certain other fees, etc. pay-
able by holders............. General Information--Unitholders
(e)Certain profits receivable by
depositor, principal under-
writers, trustee or affili- General Information--Expenses of the
ated persons................ Trusts; Public Offering of Units
(f)Ratio of annual charges to in-
come........................ *
The Trust Funds;
14. Issuance of trust's securities... General Information--Unitholders
15. Receipt and handling of payments
from purchasers................. *
16. Acquisition and disposition of The Trust Funds; General Information--
underlying securities........... Trust Information; General
Information--Investment Supervision
General Information--Market for Units;
General Information--Redemption;
17. Withdrawal or redemption......... Public Offering of Units
18. (a)Receipt, custody and disposi-
tion of income.............. General Information--Unitholders
(b)Reinvestment of distributions. General Information--Distribution
Reinvestment
(c)Reserves or special funds..... General Information--Expenses of the
Trusts
(d)Schedule of distributions..... *
General Information--Unitholders;
19. Records, accounts and reports.... General Information--Redemption;
General Information--Administration of
the Trusts
20. Certain miscellaneous provisions
of trust agreement
(a)Amendment..................... General Information--Administration of
the
(b)Termination................... Trusts
(c)and (d) Trustee, removal and General Information--Administration of
successor................... the Trusts
(e)and (f) Depositor, removal and General Information--Administration of
successor................... the Trusts
21. Loans to security holders........ *
22. Limitations on liability......... General Information--Administration of
the Trusts
23. Bonding arrangements............. *
24. Other material provisions of
trust agreement................. *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor........ General Information--Administration of
the Trusts
26. Fees received by depositor....... See Items 13(a) and 13(e)
27. Business of depositor............ General Information--Administration of
the Trusts
28. Certain information as to offi-
cials and affiliated persons of General Information--Administration of
depositor....................... the Trusts
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<C> <S> <C>
29. Voting securities of depos- General Information--Administration of the
itor...................... Trusts
30. Persons controlling deposi-
tor.......................
31. Payment by depositor for
certain services rendered
to trust..................
32. Payment by depositor for *
certain other services
rendered to trust.........
33. Remuneration of employees
of depositor for certain
services rendered to
trust.....................
34. Remuneration of other per-
sons for certain services
rendered to trust.........
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's se- Public Offering of Units
curities by states........
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. General Information--Market for Units;
(c)Selling agreements...... Public Offering of Units; The Tax-Exempt
Portfolios--Underwriting
39. (a)Organization of princi-
pal underwriters..........
(b)N.A.S.D. membership of General Information--Administration
principal underwriters.... of the Trusts
40. Certain fees received by See Items 13(a) and 13(e)
principal underwriters....
41. (a)Business of principal General Information--Administration
underwriters.............. of the Trusts
(b)Branch offices of prin-
cipal underwriters........
(c)Salesmen of principal *
underwriters..............
42. Ownership of trust's secu-
rities by certain persons.
43. Certain brokerage commis-
sions received by princi-
pal underwriters.......... Public Offering of Units
44. (a)Method of valuation..... Public Offering of Units
(b)Schedule as to offering *
price.....................
(c)Variation in offering Public Offering of Units
price to certain persons..
45. Suspension of redemption General Information--Redemption
rights....................
46. (a)Redemption valuation.... General Information--Redemption;
General Information--Market for Units;
Public Offering of Units
(b)Schedule as to redemp- *
tion price................
General Information--Market for Units;
47. Maintenance of position in Public Offering of Units;
underlying securities..... General Information--Redemption
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation General Information--Administration
of trustee................ of the Trusts
49. Fees and expenses of trust-
ee........................
50. Trustee's lien............. General Information--Expenses of the Trusts
</TABLE>
- --------
* Inapplicable, answer negative or not required.
iii
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
<C> <S> <C>
51. Insurance of holders of trust's Cover Page; General Information--
securities.................. Expenses of the Trusts; The Tax-Exempt
Portfolios--Insurance on the Bonds
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement The Trust Funds; General Information--
with respect to selection or Trust Information; General
elimination of underlying se- Information--Investment Supervision
curities.....................
(b) Transactions involving elimi-
nation of underlying securi-
ties......................... *
(c) Policy regarding substitution
or elimination of underlying General Information--Investment
securities................... Supervision; General Information--
Trust Information
(d) Fundamental policy not other-
wise covered................. *
Essential Information; General
Information--Trust Information; The
53. Tax status of Trust.............. U.S. Treasury Portfolio Series--
Federal Tax Status; The Tax-Exempt
Portfolios--Federal Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
Trust's securities during last
54. ten years........................
55.
56. Certain information regarding pe-
riodic payment certificates..... *
57.
58.
59. Financial statements (Instruction
1(c) to Form S-6)............... *
</TABLE>
- --------
* Inapplicable, answer negative or not required.
iv
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
U.S. Treasury Portfolio Series 16 (the "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. Units of
the Trust are rated "AAA" by Standard & Poor's. Interest income, if any,
distributed by the Trust is exempt from state personal income taxes in all
states. U.S. Treasury Portfolio Series 16 may be available to non-resident
aliens and the income from such Trust, 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 inversely with changes in interest rates.
Insured National Series 17 (the "Insured National Trust," a "Tax-Exempt
Portfolio" or an "Insured Trust") was formed for the purpose of gaining
interest income exempt from Federal income taxes while conserving capital and
diversifying risks by investing in an insured, fixed portfolio consisting of
obligations issued by or on behalf of states of the United States or counties,
municipalities, authorities or political subdivisions thereof.
Insured California Series 21 (the "Insured State Trust," a "Tax-Exempt
Portfolio" or an "Insured Trust") was formed for the purpose of gaining
interest income free from Federal income taxes and State and local income
taxes and/or property taxes while conserving capital and diversifying risks by
investing in an insured, fixed portfolio consisting of obligations issued by
or on behalf of the State for which such Trust Fund is named or counties,
municipalities, authorities or political subdivisions thereof.
Units of the Trusts are not deposits or obligations of, or guaranteed by, any
bank, and Units are not federally insured or otherwise protected by the
Federal Deposit Insurance Corporation and involve investment risk including
loss of principal. The use of the term "Insured" in the name of a Trust does
not mean that the Units of the Trust are insured by any governmental or
private organization. The Units are not insured.
Insurance guaranteeing the scheduled payment of principal and interest on all
of the Bonds in the portfolio of each Insured Trust (other than any U.S.
Treasury Obligations) has been obtained directly by the issuer or the Sponsor
from MBIA Insurance Corporation or other insurers. See "Insurance on the
Bonds" for each Insured Trust. Insurance obtained by a Bond issuer is
effective so long as such Bonds are outstanding. THE INSURANCE DOES NOT RELATE
TO THE UNITS OF THE INSURED TRUSTS OFFERED HEREBY OR TO THEIR MARKET VALUE. As
a result of such insurance, the Units of the Insured Trusts have received a
rating of "AAA" by Standard & Poor's, a division of The McGraw-Hill Companies,
("Standard & Poor's"). See "Insurance on the Bonds" for each Insured Trust. No
representation is made as to any insurer's ability to meet its commitments.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future
reference.
THE DATE OF THIS PROSPECTUS IS OCTOBER 5, 1995.
<PAGE>
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust Fund
during the initial offering period is equal to a pro rata share of the
offering prices of the Securities in such Trust Fund plus or minus a pro rata
share of cash, if any, in the Principal Account held or owned by such Trust
Fund, plus accrued interest plus that sales charge indicated under "Essential
Information." The secondary market Public Offering Price per Unit will be
based upon a pro rata share of the bid prices of the Securities in each Trust
Fund plus or minus a pro rata share of cash, if any, in the Principal Account
held or owned by such Trust Fund, plus accrued interest plus the applicable
sales charge indicated under "Public Offering of Units--Public Offering
Price." The sales charge is reduced on a graduated scale for sales involving
at least $100,000 or 10,000 Units and will be applied on whichever basis is
more favorable to the investor. The minimum purchase for each Trust is $1,000.
INTEREST AND PRINCIPAL DISTRIBUTIONS. Distributions of the estimated annual
interest income to be received by each Trust Fund, after deduction of
estimated expenses, will be made monthly. See "Essential Information."
Distributions of funds, if any, in the Principal Account will be made as
provided in "General Information--Unitholders--Distributions to Unitholders."
REINVESTMENT. Each Unitholder of a Trust Fund offered herein may elect to have
distributions of principal or interest or both automatically invested without
charge in shares of certain mutual funds sponsored by Kemper Financial
Services, Inc. See "General Information--Distribution Reinvestment."
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening of
business on the Initial Date of Deposit, the Estimated Long-Term Return and
the Estimated Current Return, if applicable, for each Trust were as set forth
in "Essential Information." The Estimated Current Return is calculated by
dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee, the Sponsor and Evaluator
and with the principal prepayment, redemption, maturity and 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 accrued
interest; therefore, there is no assurance that the present Estimated Current
Return will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and determines
and factors in the relative weightings of, the market values, yields (which
takes into account the amortization of premiums and the accretion of
discounts) and estimated retirements or average lives of all of the Securities
in the applicable Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements or average lives of the Securities and the expenses of a Trust
will change, there is no assurance that the present Estimated Long-Term Return
will be realized in the future. Estimated Current Return and Estimated Long-
Term Return are expected to differ because the calculation of Estimated Long-
Term Return reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only net annual interest income
and Public Offering Price.
MARKET FOR UNITS. After the initial offering period, while under no obligation
to do so, the Sponsor intends to, and certain 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 a Trust plus accrued interest.
RISK FACTORS. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the
inability of the issuer or an insurer to pay the principal of or interest on a
security when due, volatile interest rates, early call provisions, and changes
to the tax status of the Securities. See "The U.S. Treasury Portfolio Series--
Risk Factors" and "The Tax-Exempt Portfolios--Municipal Bond Risk Factors."
2
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
ESSENTIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
SPONSOR AND EVALUATOR: EVEREN UNIT INVESTMENT TRUSTS, A SERVICE OF
EVEREN SECURITIES, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
The income, expense and distribution data set forth below has been calculated
for Unitholders purchasing less than 10,000 Units of a Trust (less than 50,000
Units of a U.S. Treasury Portfolio). Unitholders purchasing 10,000 Units or
more of a Trust (50,000 Units or more of a U.S. Treasury Portfolio) will
receive a slightly higher return because of the reduced sales charge for
larger purchases.
<TABLE>
<CAPTION>
U.S.
TREASURY INSURED INSURED
PORTFOLIO NATIONAL CALIFORNIA
SERIES 16 SERIES 17 SERIES 21
------------ ------------ ------------
<S> <C> <C> <C>
Public Offering Price per
Unit (1)(2)......................... $ 8.953 $ 9.963 $ 10.162
Principal Amount of Securities per
Unit................................ 10.000 $ 10.000 $ 10.000
Estimated Current Return based on
Public Offering Price (3)(4)(5)(6).. -- % 5.41% 5.41%
Estimated Long-Term
Return (3)(4)(5)(6)................. 4.87% 5.47% 5.44%
Estimated Normal Annual Distribution
per Unit (6)........................ None $ 0.53892 $ 0.54933
Principal Amount of Securities....... $ 500,000 $ 4,675,000 $ 2,955,000
Number of Units...................... 50,000 467,500 295,500
Fractional Undivided Interest per
Unit................................ 1/50,000 1/467,500 1/295,500
Calculation of Public Offering Price:
Aggregate Offering Price of
Securities......................... $ 438,916 $ 4,429,728 $ 2,855,679
Aggregate Offering Price of
Securities per Unit................ $ 8.778 $ 9.475 $ 9.664
Plus Sales Charge per Unit (7)...... $ 0.175 $ 0.488 $ 0.498
Public Offering Price per
Unit (1)(2)........................ $ 8.953 $ 9.963 $ 10.162
Redemption Price per Unit............ $ 8.766 $ 9.425 $ 9.614
Sponsor's Initial Repurchase Price
per Unit............................ $ 8.778 $ 9.475 $ 9.664
Excess of Public Offering Price per
Unit over Redemption Price per Unit. $ 0.187 $ 0.538 $ 0.548
Excess of Public Offering Price per
Unit over Sponsor's Initial
Repurchase Price per Unit........... $ 0.175 $ 0.488 $ 0.498
Calculation of Estimated Net Annual
Interest Income per Unit (6):
Estimated Annual Interest Income.... $ 0.00710 $ 0.56360 $ 0.57549
Less: Estimated Annual Expense...... $ 0.00710 $ 0.02468 $ 0.02616
Estimated Net Annual Interest
Income............................. $ 0.00000 $ 0.53892 $ 0.54933
Estimated Daily Rate of Net Interest
Accrual per Unit.................... 0.000000000 $0.001497000 $0.001525920
Minimum Principal Value of the Trust
under which Trust Agreement may be
terminated (8)...................... $ 100,000 $ 935,000 $ 591,000
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made as
of the close of business of the Sponsor (currently 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.
3
<PAGE>
ESSENTIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
U.S.
TREASURY INSURED INSURED
PORTFOLIO NATIONAL CALIFORNIA
SERIES 16 SERIES 17 SERIES 21
--------- --------- ----------
<S> <C> <C> <C>
Trustee's Annual Fee per $1,000 principal amount
of Securities (9).............................. $ 0.550 $ 1.620 $ 1.640
Reduction of Trustee's fee per Unit during the
first year (6)................................. None $0.00018 $0.00014
Estimated annual interest income per Unit during
the first year (6)............................. $0.00710 $0.56342 $0.57535
Interest Payments (10):
First Payment per Unit, representing 20 days... None $0.02994 $0.03052
Estimated Normal Monthly Distribution per Unit. None $0.04491 $0.04578
Estimated Normal Annual Distribution per Unit.. None $0.53892 $0.54933
Sales Charge (7):
As a percentage of Public Offering Price per
Unit.......................................... 1.950% 4.900% 4.900%
As a percentage of net amount invested......... 1.994% 5.150% 5.153%
As a percentage of net amount invested in
earning assets................................ 1.994% 5.150% 5.153%
</TABLE>
<TABLE>
<S> <C>
Date of Trust
Agreements............. October 5, 1995
First Settlement Date... October 11, 1995
Mandatory Termination
Date................... December 31, 2027
Evaluator's Annual
Evaluation Fee--
U.S. Treasury
Portfolio.............. Maximum of $0.10 per $1,000 Principal Amount of Securities
Evaluator's Annual
Evaluation Fee--Tax-
Exempt Portfolios...... Maximum of $0.30 per $1,000 Principal Amount of Securities
Sponsor's Annual
Surveillance Fee--Tax-
Exempt Portfolios...... Maximum of $0.002 per Unit
</TABLE>
- ---------------------
(1) Anyone ordering Units for settlement after the First Settlement Date will
pay accrued interest from such date to the date of settlement (normally
three business days after order) less distributions from the Interest
Account subsequent to the First Settlement Date. For purchases settling on
the First Settlement Date, no accrued interest will be added to the Public
Offering Price.
(2) Many unit investment trusts issue a number of units such that each unit
represents approximately $1,000 principal amount of underlying securities.
The Sponsor, on the other hand, in determining the number of Units for
each Trust has elected not to follow this format but rather to provide
that number of Units which will establish as close as possible as of the
Initial Date of Deposit a Principal Amount of Securities per Unit of $10.
(3) The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Public Offering
of Units--Public Offering Price."
(4) The Estimated Current Returns are calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee, the Sponsor and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and with changes in the
accrued interest; therefore, there is no assurance that the present
Estimated Current Returns indicated above will be realized in the future.
The Estimated Long-Term Returns are calculated using a formula which (1)
takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirement dates of all of the Securities in the applicable Trust and (2)
takes into account the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirement dates of the
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 include
only net annual interest income and Public Offering Price.
(5) This figure is based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Securities. The estimated cash
flows to Unitholders for the Trusts are either set forth under "Estimated
Cash Flows to Unitholders" for each Trust or are available upon request at
no charge from the Sponsor.
4
<PAGE>
(6) During the first year, the Trustee has agreed to reduce its fee (and to
the extent necessary pay expenses of the Trust Funds) in the amounts
stated above. The Trustee has agreed to the foregoing to cover all or a
portion of the interest on any Securities accruing prior to their expected
dates of delivery, since interest will not accrue to the benefit of
Unitholders of a Trust Fund until such Securities are actually delivered
to the Trust Fund. The estimated net annual interest income per Unit will
remain as indicated. See "The Trust Funds" and "General Information--
Interest, Estimated Long-Term Return and Estimated Current Return."
(7) The sales charge as a percentage of the net amount invested in earning
assets will increase as 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.
(8) The minimum principal value of each Trust (other than a Tax-Exempt
Portfolio) under which the Trust Agreement may be terminated is 40% of the
total aggregate principal amount of securities deposited in each such
Trust during the primary offering period. The minimum principal value of
each Tax-Exempt Portfolio under which the Trust Agreement may be
terminated is 20% of the initial aggregate principal amount of securities
deposited in such Trust.
(9) See "General Information--Expenses of the Trusts."
(10) Unitholders will receive interest distributions monthly. The Record Date
is the first day of the month, commencing November 1, 1995, and the
distribution date is the fifteenth day of the month, commencing November
15, 1995.
5
<PAGE>
THE TRUST FUNDS
EVEREN Unit Investment Trusts, Series 38 includes the following separate unit
investment trusts created by the Sponsor under the name EVEREN Unit Investment
Trusts: "U.S. Treasury Portfolio Series 16", "Insured National Series 17," and
"Insured California Series 21" (collectively, the "Trusts" or "Trust Funds").
EVEREN Unit Investment Trusts, Series 38 is the successor to Kemper Defined
Funds Series 37 and previous series. Each of the Trust Funds is separate and
is designated by a different series number. Each of the Trust Funds was
created under the laws of the State of Missouri pursuant to a trust indenture
dated the Initial Date of Deposit (the "Trust Agreements") between EVEREN Unit
Investment Trusts, a service of EVEREN Securities, Inc. (the "Sponsor") and
Investors Fiduciary Trust Company (the "Trustee").*
The 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. The U.S. Treasury Portfolio was 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 value of the
Units, the estimated current return and the estimated long-term return to new
purchasers will fluctuate with the value of the Securities in the portfolio
which will generally decrease or increase inversely with changes in interest
rates.
The Insured National Trust was formed for the purpose of gaining interest
income exempt from Federal income taxes while conserving capital and
diversifying risks by investing in an insured, fixed portfolio consisting of
obligations issued by or on behalf of states of the United States or counties,
municipalities, authorities or political subdivisions thereof.
The Insured State Trust was formed for the purpose of gaining interest income
free from Federal income taxes and State and local income and/or property
taxes while conserving capital and diversifying risks by investing in an
insured, fixed portfolio consisting of obligations issued by or on behalf of
the State for which such Trust Fund is named or counties, municipalities,
authorities or political subdivisions thereof.
There is, of course, no guarantee that the Trust Funds' objectives will be
achieved. Offerees in the states of Illinois, Indiana, Virginia and Washington
may purchase Units of the U.S. Treasury Portfolio and Insured National Trust
only.
As used herein, the terms "Securities" and "Bonds" mean the obligations
initially deposited in the Trusts described under "Portfolio" for each Trust
(including all contracts to purchase such obligations accompanied by an
irrevocable letter of credit sufficient to perform such contracts initially
deposited in the Trusts) and any additional obligations deposited in the
Trusts following the Initial Date of Deposit. As used herein, the term "U.S.
Treasury Obligations" means the obligations (and contracts) included in the
U.S. Treasury Portfolio. As used herein, the terms "Municipal Bonds" and
"Municipal Obligations" mean the obligations (and contracts for the purchase
thereof) included in the Tax-Exempt Portfolios.
- ---------------------
* Reference is made to the Trust Agreements, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreements.
6
<PAGE>
On the Initial Date of Deposit, the Sponsor delivered to the Trustee that
aggregate principal amount of Securities or contracts for the purchase thereof
for deposit in the Trust Funds as set forth under "Essential Information." Of
such principal amount, the amount specified in "Essential Information" was
deposited in each Trust. In exchange for the Securities so deposited, the
Trustee delivered to the Sponsor documentation evidencing the ownership of
that number of Units for each Trust as indicated under "Essential
Information." Each Trust initially consists of delivery statements (i.e.,
contracts) to purchase obligations. The Sponsor has a limited right of
substitution for such Securities in the event of a failed contract. See
"General Information--Trust Information."
Additional Units of each Trust may be issued from time to time following the
Initial Date of Deposit by depositing in the Trust additional Securities or
contracts to purchase thereof together with irrevocable letters of credit or
cash. As additional Units are issued by a Trust as a result of the deposit of
additional Securities by the Sponsor, the aggregate value of the Securities in
the Trust will be increased and the fractional undivided interest in the Trust
represented by each Unit will be decreased. The Sponsor may continue to make
additional deposits of Securities into a Trust following the Initial Date of
Deposit, provided that such additional deposits will be in principal amounts
which will maintain the same original percentage relationship among the
principal amounts of the Securities in such Trust established by the initial
deposit of the Securities. Thus, although additional Units will be issued,
each Unit will continue to represent the same principal amount of each
Security, and the percentage relationship among the principal amount of each
Security in the related Trust will remain the same.
Each Unit initially offered represents that undivided interest in the
appropriate Trust indicated under "Essential Information." To the extent that
any Units are redeemed by the Trustee or additional Units are issued as a
result of additional Securities being deposited by the Sponsor, the fractional
undivided interest in a Trust represented by each unredeemed Unit will
increase or decrease accordingly, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which
may include the Sponsor, or until the termination of the Trust Agreement.
An investment in Units of a Trust Fund should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio and hence of the Units will
decline with increases in interest rates. The value of the underlying
Securities will fluctuate inversely with changes in interest rates. The
uncertain economic conditions of recent years, together with the fiscal
measures adopted to attempt to deal with them, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate debt
obligations generally and long-term obligations in particular. The Sponsor
cannot predict the degree to which such fluctuations will continue in the
future.
7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
We have audited the accompanying statements of condition and the related
portfolios of EVEREN Unit Investment Trusts, Series 38 (U.S. Treasury
Portfolio Series 16, Insured National Series 17 and Insured California Series
21) as of October 5, 1995. The statements of condition and portfolios are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of Securities owned at October 5, 1995 and a
letter of credit deposited to purchase Securities by correspondence with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EVEREN Unit Investment
Trusts, Series 38 (U.S. Treasury Portfolio Series 16, Insured National Series
17 and Insured California Series 21) as of October 5, 1995, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
October 5, 1995
8
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
STATEMENTS OF CONDITION AT THE OPENING OF BUSINESS ON OCTOBER 5, 1995, THE
INITIAL DATE OF DEPOSIT
<TABLE>
<CAPTION>
U.S.
TREASURY INSURED INSURED
PORTFOLIO NATIONAL CALIFORNIA
SERIES 16 SERIES 17 SERIES 21
----------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT IN SECURITIES
Securities deposited in the Trusts (1)(2).... $ 0 $ 0 $ 0
Contracts to purchase Securities (1)(2)...... 438,916 4,429,728 2,855,679
Accrued interest to First Settlement Date on
Securities (1)(3)........................... 55 69,615 37,661
----------- ---------- ----------
Total....................................... $ 438,971 $4,499,343 $2,893,340
=========== ========== ==========
Number of Units.............................. 50,000 467,500 295,500
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(3).. $ 55 $ 69,615 $ 37,661
Interest of Unitholders--
Cost to investors (4)....................... 447,650 4,657,703 3,002,871
Less: Gross underwriting commission (4)..... 8,734 227,975 147,192
----------- ---------- ----------
Net interest to Unitholders (1)(3)(4)....... 438,916 4,429,728 2,855,679
----------- ---------- ----------
Total..................................... $ 438,971 $4,499,343 $2,893,340
=========== ========== ==========
</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 $7,831,782 which has
been deposited with the Trustee. Of this amount, $7,724,323 relates to the
offering price of Securities to be purchased and $107,459 relates to
accrued interest on such Securities to the expected dates of delivery.
(2) Insurance coverage providing for the timely payment of principal and
interest on the Securities in an Insured Trust has been obtained directly
by the issuer of such Securities or by the Sponsor from MBIA Insurance
Corporation or other insurers.
(3) The Trustee will advance to each Trust the amount of net interest accrued
to the First Settlement Date for distribution to the Sponsor as the
Unitholder of Record.
(4) The aggregate public offering price includes a sales charge for the Trust
as set forth under "Essential Information", assuming all single
transactions involve less than 10,000 Units (less than 50,000 Units for a
U.S. Treasury Portfolio). For single transactions involving 10,000 or more
Units (50,000 or more Units for a U.S. Treasury Portfolio) 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.
9
<PAGE>
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of a Trust 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 such Trust (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 cash, if any, in the
Principal account held or owned by such Trust plus accrued interest plus the
applicable sales charge referred to in the tables below divided by the number
of outstanding Units of such Trust. The Public Offering Price for secondary
market transactions, on the other hand, is based on the aggregate bid side
evaluations of the Securities in a Trust (also, currently, as determined by
Muller Data Corporation), plus or minus cash, if any, in the Principal Account
held or owned by such Trust, plus accrued interest plus a sales charge based
upon the dollar weighted average maturity of such Trust. Investors who
purchase Units through brokers or dealers pursuant to a current management
agreement which by contract or operation of law does not allow such broker or
dealer to earn an additional commission (other than any fee or commission paid
for maintenance of such investor's account under the management agreement) on
such transactions may purchase such Units at the current Public Offering Price
net of the applicable broker or dealer concession. See "Public Offering of
Units--Public Distribution of Units" below.
The sales charge per Unit for U.S. Treasury Portfolio Series which contain
predominantly zero coupon U.S. Treasury Obligations will be reduced pursuant
to the following graduated scale:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YEARS TO MATURITY
-------------------------------------------
0 TO 1.99 2 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.................. 1.70 1.729 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.
For the Tax-Exempt Portfolios, the sales charge per Unit will be reduced
during the initial offering period pursuant to the following graduated scale:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YEARS TO MATURITY
---------------------------------------------------------------------------------------
0 TO 7.49 7.5 TO 9.99 10 TO 14.99 15 OR MORE
--------------------- --------------------- --------------------- ---------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
NUMBER OF UNITS PRICE INVESTED PRICE INVESTED PRICE INVESTED PRICE INVESTED
- --------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 9,999 Units........ 3.0% 3.093% 3.9% 4.058% 4.2% 4.384% 4.9% 5.152%
10,000 to 24,999 Units.. 2.8 2.881 3.7 3.842 4.0 4.167 4.5 4.712
25,000 to 49,999 Units.. 2.6 2.669 3.5 3.627 3.8 3.950 4.3 4.493
50,000 to 99,999 Units.. 2.5 2.564 3.3 3.413 3.5 3.627 3.5 3.627
100,000 or more Units... 2.0 2.041 2.7 2.775 2.8 2.881 3.0 3.093
</TABLE>
10
<PAGE>
As indicated above, in connection with secondary market transactions the sales
charge is based upon the dollar weighted average maturity of a Trust and is
determined in accordance with the tables set forth below. For purposes of this
computation, Securities will be deemed to mature on their expressed maturity
dates unless: (a) the Securities have been called for redemption or funds or
securities have been placed in escrow to redeem them on an earlier call date,
in which case such call date will be deemed to be the date upon which they
mature; or (b) such Securities are subject to a "mandatory tender," in which
case such mandatory tender will be deemed to be the date upon which they
mature. The effect of this method of sales charge computation will be that
different sales charge rates will be applied to a Trust based upon the dollar
weighted average maturity of such Trust's portfolio, in accordance with the
following schedules.
In connection with secondary market transactions of all U.S. Treasury
Portfolios, the sales charge per Unit will be reduced as set forth below:
<TABLE>
<CAPTION>
SECONDARY
----------------------------------------------------------------
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
----------------------------------------------------------------
0-1.99 YEARS 2-2.99 YEARS 3-4.99 YEARS 5-6.99 YEARS 7-9.99 YEARS
DOLLAR AMOUNT OF TRADE ------------ ------------ ------------ ------------ ------------
- ---------------------- 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.
For the Tax-Exempt Portfolios, in connection with secondary market
transactions the sales charge per Unit will be reduced as set forth below:
<TABLE>
<CAPTION>
SECONDARY
---------------------------------------
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
--------- ------------------ ----------
SALES CHARGE (% OF PUBLIC OFFERING
AMOUNT OF INVESTMENT PRICE)
-------------------- ---------------------------------------
<S> <C> <C> <C>
$1,000 to $99,999................. 3.50% 4.50% 5.50%
$100,000 to $499,999.............. 3.25 4.25 5.00
$500,000 to $999,999.............. 3.00 4.00 4.50
$1,000,000 or more................ 2.75 3.75 4.00
</TABLE>
- ---------------------
* If the dollar weighted average maturity of the Trust Fund is from 1 to 3.99
years the sales charge is 2% and 1.5% of the Public Offering Price for
purchases of $1,000 to $249,999 and $250,000 or more, respectively.
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the same
purchaser from the same Underwriter or dealer and for this purpose purchases
of Units of a Trust Fund will be aggregated with concurrent purchases of Units
of any other unit investment trust that may be offered by the Sponsor.
Additionally, Units purchased in the name of a spouse or child (under 21) of
such purchaser will be deemed to be additional purchases by such purchaser.
The reduced sales charges will also be applicable to a trust or other
fiduciary purchasing for a single trust estate or single fiduciary account.
11
<PAGE>
Unitholders of the various series of EVEREN Unit Investment Trusts, Insured
Corporate Series (or its predecessors) who meet the conditions in the next
succeeding sentence may, during the primary offering period of a Corporate
Income Series only, acquire Units of such Corporate Income Series at the
reduced sales charge equivalent to purchases during the initial offering
period of 100,000 or more Units. First, the special sales charge discount only
applies to purchases acquired with funds received from distributions of
unscheduled principal payments in connection with units issued in such series
and, second, the minimum purchase must be at least $1,000.
The Sponsor intends to permit officers, directors and employees of the Sponsor
and Evaluator and at the discretion of the Sponsor registered representatives
of selling firms to purchase Units of a Trust without a sales charge, although
a transaction processing fee may be imposed on such trades.
Had Units of a Trust been available for sale at the opening of business on the
Initial Date of Deposit, the Public Offering Price would have been as shown
under "Essential Information." The Public Offering Price per Unit of a Trust
on the date of this Prospectus or on any subsequent date will vary from the
amount stated under "Essential Information" in accordance with fluctuations in
the prices of the underlying Securities and the amount of accrued interest on
the Units. On the Initial Date of Deposit, pursuant to an exemptive order from
the Securities and Exchange Commission, the Public Offering Price at which
Units will be sold will not exceed the price determined as of the opening of
business on the Initial Date of Deposit as shown under "Essential
Information"; however, should the value of the underlying Securities decline,
purchasers will, of course, be given the benefit of such lower price. The
aggregate bid and offering side evaluations of the Securities shall be
determined (a) on the basis of current bid or offering prices of the
Securities, (b) if bid or offering prices are not available for any particular
Security, on the basis of current bid or offering prices for comparable bonds,
(c) by determining the value of Securities on the bid or offer side of the
market by appraisal, or (d) by any combination of the above.
The foregoing evaluations and computations shall be made as of the evaluation
time stated under "Essential Information," on each business day commencing
with the Initial Date of Deposit of the Securities, effective for all sales
made during the preceding 24-hour period.
The interest on the Securities deposited in a Trust, less the related
estimated fees and expenses, is estimated to accrue in the annual amounts per
Unit set forth under "Essential Information." The amount of net interest
income which accrues per Unit may change as Securities mature or are redeemed,
exchanged or sold, or as the expenses of a Trust change or the number of
outstanding Units of a Trust changes.
Although payment is normally made three business days following the order for
purchase, payments may be made prior thereto. A person will become the owner
of Units on the date of settlement 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 on 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 "General Information--Redemption" below.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest on a
security from the last day on which interest thereon was paid. Interest on
Securities generally is paid semi-annually (monthly in the
12
<PAGE>
case of Ginnie Maes, if any) although a Trust accrues such interest daily.
Because of this, a Trust always has an amount of interest earned but not yet
collected by the Trustee. For this reason, with respect to sales settling
subsequent to the First Settlement Date, the Public Offering Price of Units
will have added to it the proportionate share of accrued interest to the date
of settlement. Unitholders will receive on the next distribution date of a
Trust the amount, if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of Units
to the public, the Trustee will advance the amount of accrued interest as of
the First Settlement Date and the same will be distributed to the Sponsor as
the Unitholder of record as of the First Settlement Date. Consequently, the
amount of accrued interest to be added to the Public Offering Price of Units
will include only accrued interest from the First Settlement Date to the date
of settlement, less any distributions from the Interest Account subsequent to
the First Settlement Date.
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trusts and distributed to Unitholders. Therefore,
there will always remain an item of accrued interest that is added to the
value of the Units. If a Unitholder sells or redeems all or a portion of his
Units, he will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his Units. Since the Trustee has the use of the
funds held in the Interest Account for distributions to Unitholders and since
such Account is non-interest-bearing to Unitholders, the Trustee benefits
thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the Initial
Public Offering Price of Units will be determined on the basis of the current
offering prices of the Securities in a Trust, the redemption price per Unit
(as well as the secondary market price per Unit) at which Units may be
redeemed (see "General Information--Redemption") will be determined on the
basis of the current bid prices of the Securities. As of the opening of
business on the Initial Date of Deposit, the Public Offering Price per Unit
(based on the offering prices of the Securities in a Trust and including the
sales charge) exceeded the redemption price at which Units could have been
redeemed (based upon the current bid prices of the Securities in a Trust) by
the amount shown under "Essential Information." 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.
In the past, bid prices on securities similar to those in the Trust Funds have
been lower than the offering prices thereof by as much as 5% or more of
principal amount in the case of inactively traded bonds or as little as 1/2 of
1% in the case of actively traded bonds, but the difference between such
offering and bid prices may be expected to average 3% to 4% of principal
amount. For this reason, among others (including fluctuations in the market
prices of the Securities and the fact that the Public Offering Price includes
a sales charge), the amount realized by a Unitholder upon any redemption of
Units may be less than the price paid for such Units.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor intends to qualify the Units for
sale in a number of states (except for an Insured State Trust or uninsured
State Trust which will be qualified for sale only in the state for which such
Trust is named). Units will be sold through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers at prices which represent discounts from the
Public Offering Price as set forth below. Certain commercial banks are making
Units of the Trust Funds available to their customers on an agency basis. A
portion of the sales charge paid by their customers is retained by or remitted
to the banks in the amount shown in the tables below. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Fund Units;
13
<PAGE>
however, the Glass-Steagall Act does permit certain agency transactions and
the banking regulators have indicated that these particular agency
transactions are permitted under such Act. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein and banks and financial institutions may be required to register as
dealers pursuant to state law. The Sponsor reserves the right to change the
discounts set forth below from time to time. In addition to such discounts,
the Sponsor may, from time to time, pay or allow an additional discount, in
the form of cash or other compensation, to dealers employing registered
representatives who sell, during a specified time period, a minimum dollar
amount of Units of a Trust and other unit investment trusts created by the
Sponsor. The difference between the discount and the sales charge will be
retained by the Sponsor. For Tax-Exempt Portfolios only, any dealer who sells
at least those amounts of Units set forth under "The Tax-Exempt Portfolios--
Underwriting" on the Initial Date of Deposit will be entitled to a concession
or agency commission equal to the corresponding takedown set forth in that
section for those Units sold on the Initial Date of Deposit.
The primary market concessions and agency commissions for each U.S. Treasury
Portfolio Series which contains predominantly zero coupon U.S. Treasury
Obligations are as follows:
<TABLE>
<CAPTION>
PRIMARY MARKET
-------------------------
REGULAR CONCESSION OR
AGENCY COMMISSION
-------------------------
DOLLAR AMOUNT OF TRADE* 0-1.99 YEARS 2-4.99 YEARS
----------------------- ------------ ------------
<S> <C> <C>
$0 to $499,999.................................. 1.05% 1.20%
$500,000 to $999,999............................ .90 1.10
$1,000,000 to $1,499,000**...................... .70 .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. 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 concessions and agency commissions.
For the Tax-Exempt Portfolios, the primary and secondary market concessions or
agency commissions are as follows:
<TABLE>
<CAPTION>
PRIMARY
--------------------------------------------
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 7.49 7.5 TO 9.99 10 TO 14.99 15 OR MORE
---------------------------------------
NUMBER OF UNITS DISCOUNT PER UNIT
- --------------- --------------------------------------------
<S> <C> <C> <C> <C>
1 to 9,999 Units................... $0.20 $0.27 $0.28 $0.32
10,000 to 24,999 Units............. $0.19 $0.25 $0.27 $0.32
25,000 to 49,999 Units............. $0.18 $0.23 $0.26 $0.32
50,000 to 99,999 Units............. $0.17 $0.22 $0.25 $0.25
100,000 or more Units.............. $0.11 $0.17 $0.18 $0.20
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SECONDARY MARKET
-------------------------------
DOLLAR WEIGHT AVERAGE
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
------------------------------------
DISCOUNT PER UNIT
(PERCENT OF PUBLIC OFFERING
DOLLAR AMOUNT OF TRADE PRICE)
---------------------- -------------------------------
<S> <C> <C> <C>
$1,000 to $99,999......................... 2.00% 3.00% 4.00%
$100,000 to $499,999...................... 1.75 2.75 3.50
$500,000 to $999,999...................... 1.50 2.50 3.00
$1,000,000 or more........................ 1.25 2.25 2.50
</TABLE>
- ---------------------
* If the dollar weighted average maturity of a Trust Fund is from 1 to 3.99
years, the concession or agency commission is 1.00% of the Public Offering
Price.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units.
PROFITS OF SPONSOR AND UNDERWRITERS. In connection with Trusts other than a
Tax-Exempt Portfolio, the Sponsor will receive gross sales charges equal to
the percentage of the Offering Price of the Units of such Trusts stated under
"Public Offering Price" and will pay a fixed portion of such sales charges to
dealers and agents. As set forth under "The Tax-Exempt Portfolios--
Underwriting," the Underwriters of each Tax-Exempt Portfolio will receive
gross sales charges equal to the percentage of the Public Offering Price of
the Units of such Trust Fund stated under "Public Offering Price" and the
Sponsor will receive a fixed portion of such sales charges. In addition, the
Sponsor may realize a profit or a loss resulting from the difference between
the purchase prices of the Securities to the Sponsor and the cost of such
Securities to a Trust Fund, which is based on the offering side evaluation of
the Securities. See "Portfolio" for each Trust. The Sponsor or Underwriters
may also realize profits or losses with respect to Securities deposited in a
Trust which were acquired from underwriting syndicates of which the Sponsor or
any Underwriter was a member. An underwriter or underwriting syndicate
purchases securities from the issuer on a negotiated or competitive bid basis,
as principal, with the motive of marketing such securities to investors at a
profit. The Sponsor and the Underwriters may realize additional profits or
losses during the initial offering period on unsold Units as a result of
changes in the daily evaluation of the Securities in a Trust.
15
<PAGE>
U.
S.
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THE U.S. TREASURY PORTFOLIO SERIES
THE TRUST PORTFOLIO
U.S. Treasury Portfolio Series 16 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 is backed by the full faith and
credit of the United States government. The U.S. Treasury Portfolio Series was
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
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 a
portfolio which will generally increase or decrease inversely with changes in
interest rates.
The U.S. Treasury Portfolio Series may be an appropriate investment vehicle 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.
In selecting U.S. Treasury Obligations for deposit in the U.S. Treasury
Portfolio Series, the following factors, among others were, considered by the
Sponsor: (a) the types of such obligations available; (b) 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 (c) the maturities of such obligations.
RISK FACTORS
The Securities are direct obligations of the United States and are backed by
its full faith and credit although the Units of a Trust are not so backed. The
Securities are not rated but in the opinion of the Sponsor have credit
characteristics comparable to those of securities rated "AAA" by nationally
recognized rating agencies.
An investment in Units of a Trust should be made with an understanding of the
risks which an investment in fixed rate debt obligations may entail, including
the risk that the value of the Securities and hence the Units will decline with
increases in interest rates. The high inflation of past 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 debt
obligations generally. The Sponsor cannot predict whether such fluctuations
will continue in the future. For a discussion of other considerations
associated with an investment in Units, see "General Information--Trust
Information."
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U.S. TREASURY PORTFOLIO SERIES
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38
U.S. TREASURY PORTFOLIO, SERIES 16
PORTFOLIO AS OF THE INITIAL DATE OF DEPOSIT: OCTOBER 5, 1995
<TABLE>
<CAPTION>
COST OF
SECURITIES
FACE TO
AMOUNT COUPON MATURITIES TRUST(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$100,000 0.000% 02/15/97 $ 92,833(2)
100,000 0.000% 08/15/97 90,274(2)
100,000 0.000% 02/15/98 87,475(2)
100,000 0.000% 08/15/98 84,891(2)
96,000 0.000% 02/15/99 79,077(2)
4,000 8.875% 02/15/99 4,366
- -------- --------
$500,000 $438,916
======== ========
</TABLE>
- ---------------------
See "Notes to Portfolios."
NOTES TO PORTFOLIOS:
(1) 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>
U.S.
TREASURY
SERIES
TRUST 16
----- --------
<S> <C>
Cost of Securities to Sponsor...................................... $438,920
Profit or (Loss) to Sponsor........................................ $ 626
Annual Interest Income to Trust.................................... $ 355
Bid Side Value of Securities....................................... $438,291
</TABLE>
(2) 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.
US-2
U.S. TREASURY PORTFOLIO SERIES
<PAGE>
FEDERAL TAX STATUS
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
(1) Each Trust 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 Trust under the Internal Revenue Code of 1986, as
amended (the "Code") and income of such Trust will be treated as the income
of the Unitholders under the Code.
(2) Each Unitholder will have a taxable event when a Trust 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 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. 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 a Trust assets ratably according to value as of the
date of acquisition of the Units. 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.
(3) Certain Trusts may contain "zero coupon" 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 a 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
US-3
U.S. TREASURY PORTFOLIO SERIES
<PAGE>
"de minimis" amount as determined under the Regulation. 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 the
Stripped Treasury Securities, this method will generally result in an
increase 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 generally, 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 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 Trust 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 Trust and to other state and local
taxes (including corporate income or
US-4
U.S. TREASURY PORTFOLIO SERIES
<PAGE>
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 Trust)
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 Trust, 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 Trust 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 Trust 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 by 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.
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
US-5
U.S. TREASURY PORTFOLIO SERIES
<PAGE>
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 a 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 had not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by a
Trust to such Unitholder will be subject to back up withholding.
TAX REPORTING AND REALLOCATION
Because each Trust receives interest and makes monthly distributions based
upon such Trust's expected total collections of interest and any anticipated
expenses, certain tax reporting consequences may arise. Each Trust is required
to report Unitholder information to the Internal Revenue Service ("IRS"),
based upon the actual collection of interest by such Trust on the securities
in such Trust, without regard to such Trust's expenses or to such Trust's
payments to Unitholders during the year. If distributions to Unitholders
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U.S. TREASURY PORTFOLIO SERIES
<PAGE>
exceed interest collected, the difference will be reported as a return of
principal which will reduce a Unitholder's cost basis in its Units (and its
pro rata interest in the securities in the Trust). A Unitholder must include
in taxable income the amount of income reported by a Trust to the IRS
regardless of the amount distributed to such Unitholder. If a Unitholder's
share of taxable income exceeds income distributions made by a Trust to such
Unitholder, such excess is in all likelihood attributable to the payment of
miscellaneous expenses of such Trust which will not be deductible by an
individual Unitholder as an itemized deduction except to the extent that the
total amount of certain itemized deductions, such as investment expenses
(which would include the Unitholder's share of Trust expenses), tax return
preparation fees and employee business expenses, exceeds 2% of such
Unitholder's adjusted gross income. Alternatively, in certain cases, such
excess may represent an increase in the Unitholder's tax basis in the Units
owned. Investors with questions regarding these issues should consult with
their tax advisers.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated distributions of interest
and principal 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 16
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION
----------------- ------------ ------------
<S> <C> <C>
February 28, 1997 $2.00000 $2.00000
August 31, 1997 $2.00000 $2.00000
February 28, 1998 $2.00000 $2.00000
August 31, 1998 $2.00000 $2.00000
February 28, 1999 $2.00000 $2.00000
</TABLE>
US-7
U.S. TREASURY PORTFOLIO SERIES
<PAGE>
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THE TAX-EXEMPT PORTFOLIOS
THE TRUST PORTFOLIO
The Tax-Exempt Portfolios may be appropriate investment vehicles for investors
who desire to participate in a portfolio of tax-exempt fixed income securities
with greater diversification than they might be able to acquire individually.
In addition, Municipal Bonds of the type deposited in the Tax-Exempt
Portfolios are often not available in small amounts.
The selection of Municipal Bonds for each Trust was based largely upon the
experience and judgment of the Sponsor. In making such selections the Sponsor
considered the following factors: (a) Standard & Poor's or Moody's ratings of
the Municipal Bonds; (b) the price of the Municipal Bonds relative to other
issues of similar quality and maturity; (c) the diversification of the
Municipal Bonds as to purpose of issue; (d) the income to the Unitholders of
the Trust; (e) in the case of Insured Trust Funds whether such Bonds were
insured or the availability and cost of insurance for the scheduled payment of
principal and interest on the Municipal Bonds; and (f) the dates of maturity
of the Bonds.
All of the Municipal Bonds in each Trust Fund's portfolio are rated in the
category "BBB" or better (including provisional or conditional ratings) by
Standard & Poor's or "Baa" or better by Moody's. See "Portfolio" for each Tax-
Exempt Portfolio.
All Municipal Bonds deposited in the Trust Funds on the Initial Date of
Deposit were represented by purchase contracts assigned to the Trustee
together with cash, cash equivalents or irrevocable letters of credit issued
by a major commercial bank in the amounts necessary to complete the purchase
thereof. Each Trust consists of that number of Municipal Bonds divided by
purpose of issues (and percentage of principal amount of such Trust) as set
forth in the following table.
SERIES INFORMATION
<TABLE>
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INSURED INSURED
NATIONAL CALIFORNIA
SERIES 17 SERIES 21
--------- ----------
<S> <C> <C>
Number of Obligations..................................... 10 8
Territorial Obligations (1)............................... None None
General Obligation Bonds (2)(3)........................... None 1(12%)
Revenue Bonds (4)(3)...................................... 10(100%) 7(88%)
Revenue Bond Concentrations (3):
Correctional Facilities..................................
Excise Tax Revenue.......................................
Sales Tax Revenue........................................
Electric Systems......................................... 2(21%) 1(17%)
Utilities................................................
Hospital................................................. 3(30%)
Pollution Control........................................
Lease Revenue............................................ 1(17%)
Education................................................ 2(20%) 1(8%)
Wastewater............................................... 1(11%)
Water & Sewer............................................ 2(18%) 2(19%)
Tax Allocation........................................... 2(27%)
Tollroad.................................................
Miscellaneous............................................
Average life of the Municipal Bonds in the Trust (5)...... 28 years 28.5 years
Percentage of "when, as and if issued" or "delayed deliv-
ery" Bonds purchased by the Trust........................ 11% 8%
Syndication (6)........................................... None None
</TABLE>
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<PAGE>
- ---------------------
(1) Municipal Bonds issued by Territories of the United States (which term
includes the Commonwealth of Puerto Rico and the District of Columbia)
generally receive the same tax exempt treatment for both state and Federal
tax purposes as Municipal Bonds issued by political entities in the named
State Trust. See "State Risk Factors and State Tax Status" for each Trust.
(2) General obligation bonds are general obligations of governmental entities
and are backed by the taxing powers of such entities.
(3) The portfolio percentage in parenthesis represents the principal amount of
such Bonds to the total principal amount of Bonds in the Trust. For a
discussion of the risk associated with investments in the bonds of such
issuers, see "Municipal Bond Risk Factors" below.
(4) Revenue bonds are payable from the income of a specific project or
authority and are not supported by an issuer's power to levy taxes.
(5) The average life of the Bonds in a Trust is calculated based upon the
stated maturities of the Bonds in such Trust (or, with respect to Bonds
for which funds or securities have been placed in escrow to redeem such
Bonds on a stated call date, based upon such call date). The average life
of the Bonds in a Trust may increase or decrease from time to time as
Bonds mature or are called or sold.
(6) The Sponsor and/or affiliated Underwriters have participated as either the
sole underwriter or manager or a member of underwriting syndicates from
which approximately that percentage listed above of the aggregate
principal amount of the Bonds in such Trust were acquired.
TE-2
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<PAGE>
TAXABLE EQUIVALENT ESTIMATED CURRENT RETURN TABLES
As of the date of this Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to tax-
exempt estimated current returns under combined Federal and State taxes (where
applicable) using the published Federal and State tax rates (where applicable)
scheduled to be in effect in 1995. They incorporate increased tax rates for
higher income taxpayers that were included in the Revenue Reconciliation Act
of 1993. These tables illustrate approximately what you would have to earn on
taxable investments to equal the tax-exempt estimated current return in your
income tax bracket. For cases in which more than one State bracket falls
within a Federal bracket the highest State bracket is combined with the
Federal bracket. The combined State and Federal tax rates shown reflect the
fact that State tax payments are currently deductible for Federal tax
purposes, and have been rounded to the nearest 1/10 of 1%. The tables do not
show the approximate taxable estimated current returns for individuals that
are subject to the alternative minimum tax. The taxable equivalent estimated
current returns may be somewhat higher than the equivalent returns indicated
in the following tables for those individuals who have adjusted gross incomes
in excess of $114,700. The tables do not reflect the effect of limitations on
itemized deductions and the deduction for personal exemptions. They were
designed to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the marginal Federal tax rate
to approximately 44 percent for taxpayers filing a joint return and entitled
to four personal exemptions and to approximately 41 percent for taxpayers
filing a single return entitled to only one personal exemption. These
limitations are subject to certain maximums, which depend on the number of
exemptions claimed and the total amount of the taxpayer's itemized deductions.
For example, the limitation on itemized deductions will not cause a taxpayer
to lose more than 80% of his allowable itemized deductions, with certain
exceptions. See "Federal Tax Status" for a more detailed discussion of recent
Federal tax legislation, including a discussion of provisions affecting
corporations.
NATIONAL
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
- ---------------------------- -------------------------------------------
4 5% 5 6% 6 7% 7
1/2% 1/2% 1/2% 1/2%
SINGLE JOINT EQUIVALENT TAXABLE ESTIMATED
RETURN RETURN TAX BRACKET CURRENT RETURN
------ ------ ----------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
23.35 $ 0- 39.00 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
23.35-
56.55 39.00- 94.25 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
56.55-
117.95 94.25-143.60 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
117.95-
256.50 143.60-256.50 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over
256.50 Over 256.50 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
CALIFORNIA
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
- ---------------------------- --------------------------------------------
4% 4 5% 5 6% 6 7%
1/2% 1/2% 1/2%
SINGLE JOINT EQUIVALENT TAXABLE ESTIMATED
RETURN RETURN TAX BRACKET* CURRENT RETURN
------ ------ ------------ --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
23.35 $ 0- 39.00 20.1% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
23.35-
56.55 39.00- 94.25 34.7 6.13 6.89 7.66 8.42 9.19 9.95 10.72
94.25-143.60 37.4 6.39 7.19 7.99 8.79 9.58 10.38 11.18
56.55-
117.95 37.9 6.44 7.25 8.05 8.86 9.66 10.47 11.27
117.95-
214.93 143.60-256.50 42.4 6.94 7.81 8.68 9.55 10.42 11.28 12.15
214.93-
256.50 43.0 7.02 7.89 8.77 9.65 10.53 11.40 12.28
256.50-429.86 45.6 7.35 8.27 9.19 10.11 11.03 11.95 12.87
Over
256.50 Over 429.86 46.2 7.43 8.36 9.29 10.22 11.15 12.08 13.01
</TABLE>
TE-3
TAX-EXEMPT PORTFOLIOS
<PAGE>
- --------
*The State tax rates assumed take into account recent adjustments of tax
brackets based on changes in the Consumer Price Index. The table reflects
California income tax laws that increase State income tax rates for high
income taxpayers. However, the table does not reflect the limitation on
itemized deductions and the phase out of the benefit of the personal exemption
credit and the dependent exemption credit that are imposed by the California
income tax laws in a manner similar to Federal tax law.
TE-4
TAX-EXEMPT PORTFOLIOS
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38 INSURED NATIONAL
SERIES 17
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: OCTOBER 5, 1995
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE,
COUPON RATE AND MATURITY
DATE OF BOND
REPRESENTED BY SPONSOR'S
AGGREGATE CONTRACTS TO PURCHASE REDEMPTION COST OF BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
- ------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 350,000 (P)Municipality of AAA 2003 @ 102 $ 324,674
Metropolitan Seattle
(Seattle, Washington)
Sewer Refunding Revenue
Bonds, Series Z (AMBAC
Insured), 5.45% Due
1/1/2021
445,000 (P)South Dakota Board of AAA 2004 @ 100 392,592
Regents, South Dakota 2018 @ 100 S.F.
State University
Housing and Auxiliary
Facilities Revenue
Bonds, Series 1994A
(MBIA Insured), 5.125%
Due 4/1/2022
500,000 (P)City of Rio Rancho, AAA 2006 @ 100 500,000
New Mexico Water and 2016 @ 100 S.F.
Wastewater System
Bonds, Series 1995A
(FSA Insured), 6% Due
5/15/2022
380,000 (P)Illinois Health AAA 2002 @ 102 363,922
Facilities Authority, 2013 @ 100 S.F.
Central Dupage Health
System Revenue Bonds,
Series 1992 (Wyndemere
Retirement Community
Project) (MBIA
Insured), 5.75% Due
11/1/2022
500,000 (P)Municipal Electric AAA 2003 @ 102 479,950
Authority of Georgia 2015 @ 100 S.F.
(CGIC Insured), 5.7%
Due 1/1/2023
500,000 (P)Wisconsin Health and AAA 2003 @ 102 445,190
Educational Facilities 2013 @ 100 S.F.
Authority Revenue
Bonds, Series 1993
(Aurora Health Care
Obligated Group) (MBIA
Insured), 5.25% Due
8/15/2023
500,000 (P)City of Cedar Rapids, AAA 2003 @ 102 466,245
Iowa, 5.50% Pollution
Control Revenue
Refunding Bonds (Iowa
Electric Light and
Power Company Project),
Series 1993 (MBIA
Insured), 5.5% Due
11/1/2023
500,000 (P)Illinois Health AAA 2003 @ 102 453,390
Facilities Authority 2014 @ 100 S.F.
Revenue Bonds, Series
1993 (SwedishAmerican
Hospital) (AMBAC
Insured), 5.375% Due
11/15/2023
500,000 (P)(S)Certificates of AAA 2005 @ 102 505,220
Participation (1995 2008 @ 100 S.F.
Master Lease Program)
Chino (California)
Unified School District
(FSA Insured), 6.125%
Due 9/1/2026
500,000 (P)Harrison County AAA 2005 @ 102 498,545
Wastewater Management 2026 @ 100 S.F.
District (Mississippi),
Wastewater Treatment
Facilities Revenue
Bonds, Series 1995
(FGIC Insured), 6% Due
2/1/2027
---------- ----------
$4,675,000 $4,429,728
========== ==========
</TABLE>
- --------
See "Notes to Portfolios."
TE-5
TAX-EXEMPT PORTFOLIOS
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38 INSURED CALIFORNIA
SERIES 21
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: OCTOBER 5, 1995
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE,
COUPON RATE AND MATURITY
DATE OF BOND
REPRESENTED BY SPONSOR'S
AGGREGATE CONTRACTS TO PURCHASE REDEMPTION COST OF BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 355,000 (P)Oakland Unified School AAA 2004 @ 102 $ 338,642
District, Alameda 2015 @ 100 S.F.
County, California, 1995
General Obligation
Bonds, Series A
(Election of 1994) (MBIA
Insured), 5.625% Due
8/1/2019
500,000 (P)State Public Works AAA 2005 @ 102 475,430
Board of the State of
California, Lease
Revenue Bonds 1995
Series A, (Department of
Justice Building) (FSA
Insured), 5.625% Due
5/1/2020
450,000 (P)Modesto Irrigation AAA 2005 @ 102 435,042
District Financing 2016 @ 100 S.F.
Authority, Domestic
Water Project Revenue
Bonds, Series 1995C
(AMBAC Insured), 5.75%
Due 9/1/2022
100,000 Eastern Municipal Water AAA 2003 @ 102 89,670
District, Water and 2014 @ 100 S.F.
Sewer Revenue
Certificates of
Participation, Series
1993A (FGIC Insured),
5.25% Due 7/1/2023
300,000 Santa Cruz County Public AAA 2003 @ 102 271,335
Financing Authority, 2016 @ 100 S.F.
Revenue (Tax Allocation)
Bonds, 1993 Series A
(Party Refunding Loan)
(MBIA Insured), 5.3% Due
9/1/2023
500,000 Norwalk Community AAA 2005 @ 102 501,360
Facilities Financing
Authority (Los Angeles
County, California) Tax
Allocation Refunding
Revenue Bonds, 1995
Series A (CGIC Insured),
6.05% Due 9/1/2025
250,000 (S)Certificates of AAA 2005 @ 102 252,610
Participation (1995 2008 @ 100 S.F.
Master Lease Program)
Chino Unified School
District (FSA Insured),
6.125% Due 9/1/2026
500,000 (P)Department of Water AAA 2003 @ 102 491,590
and Power of The City of 2024 @ 100 S.F.
Los Angeles Electric
Plant Refunding Revenue
Bonds, Issue 1993 (MBIA
Insured), 5.875% Due
9/1/2030
---------- ----------
$2,955,000 $2,855,679
========== ==========
</TABLE>
- --------
See "Notes to Portfolios."
TE-6
TAX-EXEMPT PORTFOLIOS
<PAGE>
NOTES TO PORTFOLIO:
All insured Bonds in the Trust Funds are insured only by the insurer indicated
in the description. The insurance was obtained directly by the issuer of the
Bonds or by the Sponsor.
(P) This Bond was issued at an original issue discount.The tax effect of Bonds
issued at an original issue discount is described in "Federal Tax Status."
(S) These Municipal Bonds are "when, as and if issued" or "delayed delivery"
and have expected settlement dates after the "First Settlement Date."
Interest on these Bonds begins accruing to the benefit of Unitholders on
the date of delivery.
(X) This Bond is of the same issue as another Bond in the Trust.
(D) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(1) Contracts to acquire Municipal Bonds were entered into by the Sponsor
between September 12, 1995 and October 3, 1995. All Bonds are represented
by regular way contracts, unless otherwise indicated, for the performance
of which an irrevocable letter of credit has been deposited with the
Trustee.
(2) The ratings have been provided by Muller Data Corporation as reported to
Muller Data Corporation by the respective rating agencies. All ratings
represent Standard & Poor's ratings unless marked with the symbol "*" in
which case the rating represents a Moody's Investors Service, Inc. rating.
A brief description of the applicable Standard & Poor's and Moody's rating
symbols and their meanings is set forth under "Appendix: Description of
Ratings" or under "General Information--Rating of Units." A rating marked
by "[_]" is contingent upon Standard & Poor's receiving final
documentation from the insurer.
(3) There is shown under this heading the year in which each issue of
Municipal Bonds is initially redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to the Trust. In addition, certain Bonds in the portfolio may be
redeemed in whole or in part other than by operation of the stated
redemption or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the
terms and provisions of such Bonds. "S.F." indicates that a sinking fund
is established with respect to an issue of Municipal Bonds.
(4) During the initial offering period, evaluations of Municipal Bonds are
made on the basis of current offering side evaluations of the Municipal
Bonds. The aggregate offering price is greater than the aggregate bid
price of the Municipal Bonds, which is the basis on which Redemption
Prices will be determined for purposes of redemption of Units after the
initial offering period.
(5) Other information regarding the Municipal Bonds in the Trust Funds, at the
opening of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL CALIFORNIA
SERIES 17 SERIES 21
---------- ----------
<S> <C> <C>
Cost of Bonds to Sponsor............................. $4,427,843 $2,866,422
Profit or (Loss) to Sponsor.......................... $1,885 $(10,743)
Annual Interest Income to Trust...................... $263,481 $170,056
Bid Side Value of Bonds.............................. $4,406,354 $2,840,904
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor reflects
underwriting profits or losses received or incurred by the Sponsor through
its participation in underwriting syndicates but such amounts reflect
portfolio hedging transaction costs, hedging gains or losses, certain other
carrying costs and the cost of insurance obtained by the Sponsor, if any,
prior to the Initial Date of Deposit for individual Bonds.
TE-7
TAX-EXEMPT PORTFOLIOS
<PAGE>
MUNICIPAL BOND RISK FACTORS
Certain of the Bonds in the Trust Funds may be general obligations of a
governmental entity that are backed by the taxing power of such entity. All
other Bonds in the Trusts are revenue bonds payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds, on the other hand, are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. There are, of
course, variations in the security of the different Bonds in the Trust Funds,
both within a particular classification and between classifications, depending
on numerous factors.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are derived from services provided by hospitals and other health care
facilities, including nursing homes. Ratings of bonds issued for health care
facilities are often based on feasibility studies that contain projections of
occupancy levels, revenues and expenses. A facility's gross receipts and net
income available for debt service will be affected by future events and
conditions including, among other things, demand for services and the ability
of the facility to provide the services required, physicians' confidence in
the facility, management's capabilities, economic developments in the service
area, competition, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the
cost and possible unavailability of malpractice insurance, the funding of
Medicare, Medicaid and other similar third party payor programs, and
government regulation. Federal legislation has been enacted which implements a
system of prospective Medicare reimbursement which may restrict the flow of
revenues to hospitals and other facilities which are reimbursed for services
provided under the Medicare program. Future legislation or changes in the
areas noted above, among other things, would affect all hospitals to varying
degrees and, accordingly, any adverse changes in these areas may affect the
ability of such issuers to make payments of principal and interest on
Municipal Bonds held in the portfolios of the Trust Funds. Such adverse
changes also may affect the ratings of the Municipal Bonds held in the
portfolios of the Trust Funds.
Certain of the Bonds in the Trust Funds may be single family mortgage revenue
bonds, which are issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income.
Mortgage loans are generally partially or completely prepaid prior to their
final maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these Bonds are subject to
extraordinary mandatory redemption in whole or in part from such prepayments
of mortgage loans, a substantial portion of such Bonds will probably be
redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. The redemption price of such issues may be more or less than the
offering price of such Bonds. Extraordinary mandatory redemption without
premium could also result from the failure of the originating financial
institutions to make mortgage loans in sufficient amounts within a specified
time period or, in some cases, from the sale by the Bond issuer of the
mortgage loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates on mortgage
loans funded from other sources becoming competitive with the interest rates
on the mortgage loans funded with the proceeds of the single family mortgage
revenue bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of principal of
or interest on such mortgage revenue bonds. Single family mortgage revenue
bonds issued after December 31, 1980 were issued under Section 103A of the
Internal Revenue Code of 1954, which Section contains certain ongoing
requirements relating to the use
TE-8
TAX-EXEMPT PORTFOLIOS
<PAGE>
of the proceeds of such Bonds in order for the interest on such Bonds to
retain its tax-exempt status. In each case, the issuer of the Bonds has
covenanted to comply with applicable ongoing requirements and bond counsel to
such issuer has issued an opinion that the interest on the Bonds is exempt
from Federal income tax under existing laws and regulations. There can be no
assurances that the ongoing requirements will be met. The failure to meet
these requirements could cause the interest on the Bonds to become taxable,
possibly retroactively from the date of issuance.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are primarily derived from mortgage loans to housing projects for low
to moderate income families. The ability of such issuers to make debt service
payments will be affected by events and conditions affecting financed
projects, including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income, increases in taxes,
employment and income conditions prevailing in local labor markets, utility
costs and other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the appropriation of
subsidies and social and economic trends affecting the localities in which the
projects are located. The occupancy of housing projects may be adversely
affected by high rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or non-
origination of mortgage loans as well as upon the occurrence of other events.
Certain issuers of single or multi-family housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In connection with the housing Bonds held by
the Trust Funds, the Sponsor has not had any direct communications with any of
the issuers thereof, but at the Initial Date of Deposit it is not aware that
any of the respective issuers of such Bonds are actively considering the
redemption of such Bonds prior to their respective stated initial call dates.
However, there can be no assurance that an issuer of a Bond in the Trusts will
not attempt to so redeem a Bond in the Trust Funds.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are derived from the sale of water and/or sewerage services. Water
and sewerage bonds are generally payable from user fees. Problems faced by
such issuers include the ability to obtain timely and adequate rate increases,
a decline in population resulting in decreased user fees, the difficulty of
financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations, the
increasing difficulty of obtaining or discovering new supplies of fresh water,
the effect of conservation programs and the impact of "no-growth" zoning
ordinances. Issuers may have experienced these problems in varying degrees.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are primarily derived from the sale of electric energy or natural
gas. Utilities are generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which may be
charged and the appropriate rate of return on an approved asset base. The
problems faced by such issuers include the difficulty in obtaining approval
for timely and adequate rate increases from the governing public utility
commission, the difficulty in financing large construction programs, the
limitations on operations and increased costs and delays attributable to
environmental considerations, increased competition, recent reductions in
estimates of future demand for electricity in certain areas of the country,
the difficulty of the capital market in absorbing utility debt, the difficulty
in obtaining fuel at reasonable prices and the effect of energy conservation.
Issuers may have experienced these problems in varying degrees. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing and impose additional regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of such Bonds to make payments of principal and/or
interest on such Bonds.
TE-9
TAX-EXEMPT PORTFOLIOS
<PAGE>
Certain of the Bonds in the Trust Funds may be industrial revenue bonds
("IRBs"), including pollution control revenue bonds, which are tax-exempt
securities issued by states, municipalities, public authorities or similar
entities to finance the cost of acquiring, constructing or improving various
industrial projects. These projects are usually operated by corporate
entities. Issuers are obligated only to pay amounts due on the IRBs to the
extent that funds are available from the unexpended proceeds of the IRBs or
receipts or revenues of the issuer under an arrangement between the issuer and
the corporate operator of a project. The arrangement may be in the form of a
lease, installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to be
sufficient to meet the payments of amounts due on the IRBs. Regardless of the
structure, payment of IRBs is solely dependent upon the creditworthiness of
the corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or industry.
These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from leveraged buy-outs or takeovers. The IRBs in the
Trust Funds may be subject to special or extraordinary redemption provisions
which may provide for redemption at par or, with respect to original issue
discount bonds, at issue price plus the amount of original issue discount
accreted to the redemption date plus, if applicable, a premium. The Sponsor
cannot predict the causes or likelihood of the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or likelihood of
the redemption of IRBs or other Bonds in the Trust Funds prior to the stated
maturity of such Bonds.
Certain of the Bonds in the Trust Funds may be obligations which are payable
from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income
is generally derived from fees received from signatory airlines pursuant to
use agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees. Airport operating income may
therefore be affected by the ability of the airlines to meet their obligations
under the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased competition,
excess capacity, increased costs, deregulation, traffic constraints and other
factors, and several airlines are experiencing severe financial difficulties.
The Sponsor cannot predict what effect these industry conditions may have on
airport revenues which are dependent for payment on the financial condition of
the airlines and their usage of the particular airport facility. Similarly,
payment on Bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges and
rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of
transportation, scarcity of fuel and reduction or loss of rents.
Certain of the Bonds in the Trust Funds may be obligations of issuers which
are, or which govern the operation of, schools, colleges and universities and
whose revenues are derived mainly from ad valorem taxes, or for higher
eduction systems, from tuition, dormitory revenues, grants and endowments.
General problems relating to school bonds include litigation contesting the
state constitutionality of financing public eduction in part from ad valorem
taxes, thereby creating a disparity in educational funds available to schools
in wealthy areas and schools in poor areas. Litigation or legislation on this
issue may affect the sources of funds available for the payment of school
bonds in the Trusts. General problems relating to college and university
obligations would include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to
raise tuition and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state
TE-10
TAX-EXEMPT PORTFOLIOS
<PAGE>
funding and new government legislation or regulations which may adversely
affect the revenues or costs of such issuers. All of such issuers have been
experiencing certain of these problems in varying degrees.
Certain of the Bonds in the Trust Funds may be Urban Redevelopment Bonds
("URBs"). URBs have generally been issued under bond resolutions pursuant to
which the revenues and receipts payable under the arrangements with the
operator of a particular project have been assigned and pledged to purchasers.
In some cases, a mortgage on the underlying project may have been granted as
security for the URBs. Regardless of the structure, payment of the URBs is
solely dependent upon the creditworthiness of the operator of the project.
Certain of the Bonds in the Trust Funds may be lease revenue bonds whose
revenues are derived from lease payments made by a municipality or other
political subdivision which is leasing equipment or property for use in its
operation. The risks associated with owning Bonds of this nature include the
possibility that appropriation of funds for a particular project or equipment
may be discontinued. The Sponsor cannot predict the likelihood of
nonappropriation of funds for these types of lease revenue Bonds.
Certain of the Bonds in the Trust Funds may be sales and/or use tax revenue
bonds whose revenues are derived from the proceeds of a special sales or use
tax. Such taxes are generally subject to continuing Legislature approval.
Payments may be adversely affected by reduction of revenues due to decreased
use of a facility or decreased sales.
Investors should be aware that many of the Bonds in the Trust Funds are
subject to continuing requirements such as the actual use of Bond proceeds or
manner of operation of the project financed from Bond proceeds that may affect
the exemption of interest on such Bonds from Federal income taxation. Although
at the time of issuance of each of the Bonds in the Trusts an opinion of bond
counsel was rendered as to the exemption of interest on such obligations from
Federal income taxation, there can be no assurance that the respective issuers
or other obligors on such obligations will fulfill the various continuing
requirements established upon issuance of the Bonds. A failure to comply with
such requirements may cause a determination that interest on such obligations
is subject to Federal income taxation, perhaps even retroactively from the
date of issuance of such Bonds, thereby reducing the value of the Bonds and
subjecting Unitholders to unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of debts of political
subdivisions or authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of
creditors, which proceedings could result in material and adverse modification
or alteration of the rights of holders of obligations issued by such
subdivisions or authorities.
Certain of the Bonds in the Trust Funds may represent "moral obligations" of a
governmental entity other than the issuer. In the event that the issue of a
Municipal Bond defaults in the repayment thereof, the governmental entity
lawfully may, but is not obligated to, discharge the obligation of the issuer
to repay such Municipal Bond.
STATE RISK FACTORS AND STATE TAX STATUS
None of the special counsel to the various Trust Funds has expressed any
opinion regarding the completeness or materiality of any matters contained in
this Prospectus other than the tax opinions set forth under "Federal Tax
Status." For risks specific to the individual Trusts, see "Risk Factors" for
each Trust.
TE-11
TAX-EXEMPT PORTFOLIOS
<PAGE>
INSURED CALIFORNIA SERIES 21
Risk Factors
As described above, the Trust will invest substantially all of its assets in
California Municipal Obligations. The Trust is therefore susceptible to
political, economic or regulatory factors affecting issuers of California
Municipal Obligations. These include the possible adverse effects of certain
California constitutional amendments, legislative measures, voter initiatives
and other matters that are described below. The following information provides
only a brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are generally
available to investors and are believed to be accurate. No independent
verification has been made of the accuracy or completeness of any of the
following information. It is based in part on information obtained from
various State and local agencies in California or contained in Official
Statements for various California Municipal Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of California Municipal
Obligations held in the portfolio of the Fund or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
California's economy is the largest among the 50 states and one of the largest
in the world. The State's population of almost 32 million represents 12.3% of
the total United States population and grew by 27% in the 1980s. While the
State's substantial population growth during the 1980s stimulated local
economic growth and diversification and sustained a real estate boom between
1984 and 1990, it has increased strains on the State's limited water resources
and its infrastructure. Resultant traffic congestion, school overcrowding and
high housing costs have increased demands for government services and may
impede future economic growth. Population growth has slowed between 1991 and
1993 even while substantial immigration has continued, due to a significant
increase in outmigration by California residents. Generally, the household
incomes of new residents have been substantially lower (and their education
and social service utilization higher) than those of departing households,
which may have a major long-term socioeconomic and fiscal impact. However,
with the California economy improving, the recent net outmigration within the
Continental U.S. is expected to decrease or be reversed.
From mid-1990 to late 1993, the State's economy suffered its worst recession
since the 1930s, with recovery starting later than for the nation as a whole.
The State has experienced the worst job losses of any post-war recession.
Prerecession job levels may not be realized until near the end of the decade.
The largest job losses have been in Southern California, led by declines in
the aerospace and construction industries. Weakness statewide occurred in
manufacturing, construction, services and trade. Additional military base
closures will have further adverse effects on the State's economy later in the
decade.
Since the start of 1994, the California economy has shown signs of steady
recovery and growth. The State Department of Finance reports net job growth,
particularly in construction and related manufacturing, wholesale and retail
trade, transportation, recreation and services. This growth has offset the
continuing but slowing job losses in the aerospace industry and restructuring
of the finance and utility sectors. Unemployment in the State was down
substantially in 1994 from its 10% peak in January, 1994, but still remains
higher than the national average rate. Retail sales were up strongly in 1994
from year-earlier figures. Delay or slowdown in recovery will adversely affect
State revenues.
TE-12
TAX-EXEMPT PORTFOLIOS
<PAGE>
Constitutional Limitations on Taxes and Appropriations
Limitation on Taxes. Certain California municipal obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of
California local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to the rate of inflation, not to exceed 2% per year,
or decline in value, or in the case of new construction or change of ownership
(subject to a number of exemptions). Taxing entities may, however, raise ad
valorem taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13 and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed non-voter approved levy of "general taxes" which
were not dedicated to a specific use. In response to these decisions, the
voters of the State in 1986 adopted an initiative statute which imposed
significant new limits on the ability of local entities to raise or levy
general taxes, except by receiving majority local voter approval. Significant
elements of this initiative, "Proposition 62," have been overturned in recent
court cases. An initiative proposed to re-enact the provisions of Proposition
62 as a constitutional amendment was defeated by the voters in November 1990,
but such a proposal may be renewed in the future.
Appropriations Limits. California and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations limit
imposed. "Appropriations subject to limitation" are authorizations to spend
"proceeds of taxes," which consists of tax revenues and certain other funds,
including proceeds from regulatory licenses, user charges or other fees, to
the extent that such proceeds exceed the cost of providing the product or
service, but "proceeds of taxes" excludes most State subventions to local
governments. No limit is imposed on appropriations of funds which are not
"proceeds of taxes," such as reasonable user charges or fees, and certain
other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for
qualified capital outlay projects, (4) appropriations by the State of post-
1989 increases in gasoline taxes and vehicle weight fees, and (5)
appropriations made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 to follow more closely growth in
California's economy.
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Obligations of the State of California. Under the California Constitution,
debt service on outstanding general obligation bonds is the second charge to
the General Fund after support of the public school system and public
institutions of higher education. Total outstanding general obligation bond
and lease purchase debt of the State increased from $9.4 billion at June 30,
1987 to $23.5 billion at June 30, 1994. In FY1993-94, debt service on general
obligation bonds and lease purchase debt was approximately 5.2% of General
Fund revenues.
Recent Financial Results. The principal sources of General Fund revenues in
1993-94 were the California personal income tax (44% of total revenues), the
sales tax (35%), bank and corporation taxes (12%), and the gross premium tax
on insurance (3%). California maintains a Special Fund for Economic
Uncertainties (the "Economic Uncertainties Fund"), derived from General Fund
revenues, as a reserve to meet cash needs of the General Fund.
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to
local public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about
33%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse economic,
fiscal, and budget conditions. The economic recession seriously affected State
tax revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget with
the largest programs supported by the General Fund (education, health, welfare
and corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. These structural concerns will
be exacerbated in coming years by the expected need to substantially increase
capital and operating funds for corrections as a result of a "Three Strikes"
law enacted in 1994.
Recent Budgets. As a result a result of these factors, among others, from the
late 1980's until 1992-93, the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years, and
the State accumulated and sustained a budget deficit in the budget reserve,
the Special Fund for Economic Uncertainties ("SFEU") approaching $2.8 billion
at its peak at June 30, 1993. Starting in the 1990-91 Fiscal Year and for each
year thereafter, each budget required multibillion dollar actions to bring
projected revenues and expenditures into balance and to close large "budget
gaps" which were identified. The Legislature and Governor eventually agreed on
a number of different steps to produce Budget Acts in the years 1991-92 to
1994-95, including:
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and funding from the State to local
governments, coupled with some reduction in mandates on local government;
. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to
local school districts, thereby reducing State funding for schools;
. reduction in growth of support for higher education programs, coupled
with increases in student fees;
. revenue increases (particularly in the 1991-92 Fiscal Year budget), most
of which were for a short duration;
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. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less
federal aid than the State Administration has requested); and
. various one-time adjustments and accounting changes.
Despite these budget actions, the effects of the recession led to large,
unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of the 1993-94 Fiscal Year, the accumulated deficit was
so large (almost $2.8 billion) that it was impractical to budget to retire it
in one year, so a two-year program was implemented, using the issuance of
revenue anticipation warrants to carry a portion of the deficit over the end
of the fiscal year. When the economy failed to recover sufficiently in 1993-
94, a second two-year plan was implemented in 1994-95, to carry the final
retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy by late 1993, finally led to the restoration of
positive financial results. While General Fund revenues and expenditures were
essentially equal in FY 1992-93 (following two years of excess expenditures
over revenues), the General Fund had positive operating results in FY 1993-94
and 1994-95, which have reduced the accumulated budget deficit to around $600
million as of June 30, 1995.
A consequence of the accumulated budget deficits in the early 1990's, together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its
ongoing obligations. When the Legislature and the Governor failed to adopt a
budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed
the State to carry out its normal annual cash flow borrowing to replenish its
cash reserves, the State Controller was forced to issue registered warrants
("IOUs") to pay a variety of obligations representing prior years' or
continuing appropriations, and mandates from court orders. Available funds
were used to make constitutionally-mandated payments, such as debt service on
bonds and warrants. Between July 1 and September 4, 1992 the State Controller
issued a total of approximately $3.8 billion of registered warrants. After
that date, all remaining outstanding registered warrants (about $2.9 billion)
were called for redemption from proceeds of the issuance of 1992 Interim Notes
after the budget was adopted.
The State's cash condition became so serious in late spring of 1992 that the
State Controller was required to issue revenue anticipation warrants maturing
in the following fiscal year in order to pay the State's continuing
obligations. The State was forced to rely increasingly on external debt
markets to meet its cash needs, as a succession of notes and warrants (both
forms of short-term cash flow financing) were issued in the period from June
1992 to July 1994, often needed to pay previously-maturing notes or warrants.
These borrowings were used also in part to spread out the repayment of the
accumulated budget deficit over the end of a fiscal year.
The State issued $7.0 billion of short-term debt in July, 1994 to meet its
cash flow needs and to finance the deferral of part of the accumulated budget
deficit to the 1995-96 fiscal year. In order to assure repayment of the $4
billion, 22-month part of this borrowing, the State enacted legislation (the
"Trigger Law") which can lead to automatic, across-the-board cuts in General
Fund expenditures in either the 1994-95 or 1995-96 fiscal years if cash flow
projections made at certain times during those years show deterioration from
the projections made in July 1994 when the borrowings were made. On November
15, 1994, the State Controller as part of the Trigger Law reported that the
cash position of the General
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Fund on June 30, 1995 would be about $580 million better than earlier
projected, so no automatic budget adjustments were required in 1994-95. The
Controller's report showed that loss of federal funds was offset by higher
revenues, lower expenditures, and certain other increases in cash resources.
Current Budget. For the first time in four years, the State entered the 1995-
96 fiscal year with strengthening revenues based on an improving economy. The
major feature of the Governor's proposed Budget, a 15% phased tax cut, was
rejected by the Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34 days
after the start of the fiscal year. The Budget Act projects General Fund
revenues and transfers of $44.1 billion. Expenditures are budgeted at $43.4
billion. The Department of Finance projects that, after repaying the last of
the carryover budget deficit, there will be a positive balance of less than
$30 million in the budget reserve, the Special Fund for Economic
Uncertainties, at June 30, 1996, providing no margin for adverse results
during the year.
The Department of Finance projects cash flow borrowings in the 1995-96 Fiscal
Year will be the smallest in many years, comprising about $2 billion of notes
to be issued in April, 1996, and maturing by June 30, 1996. With full payment
of $4 billion of revenue anticipation warrants on April 25, 1996, the
Department sees no further need for borrowing over the end of the fiscal year.
The Department projects that available cash resources to pay State obligations
will be almost $2 billion at June 30, 1996. This "cushion" will be re-examined
by the State Controller on October 15, 1995, in the third step in the Budget
Adjustment Law process. If the Controller believes the available cash
resources on June 30, 1996 will, in fact, be zero or less, her report would
start a process which could lead to automatic budget cuts starting in
December, 1995.
The principal features of the 1995-96 Budget Act, in addition to those noted
above, are additional cuts in health and welfare expenditures (some of which
are subject to approvals or waivers by the federal government); assumed
further federal aid for illegal immigrant costs; and an increase in per-pupil
funding for public schools and community colleges, the first such significant
increase in four years.
The State's difficult financial condition for the current and upcoming budget
years will result in continued pressure upon almost all local governments,
particularly school districts and counties which depend on State aid. Despite
efforts in recent years to increase taxes and reduce governmental
expenditures, there can be no assurance that the State will not face budget
gaps in the future.
Bond Rating. State general obligation bonds ratings were reduced in July, 1994
to "A1" by Moody's and "A" by S&P. Both of these ratings were reduced from
"AAA" levels which the State held until late 1991. There can be no assurance
that such ratings will be maintained in the future. It should be noted that
the creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
Legal Proceedings. The State is involved in certain legal proceedings
(described in the State's recent financial statements) that, if decided
against the State, may require the State to make significant future
expenditures or may substantially impair revenues. Trial courts have recently
entered tentative decisions or injunctions which would overturn several parts
of the state's recent budget compromises. The matters covered by these
lawsuits include a deferral of payments by the State to the Public Employees
Retirement System, reductions in welfare payments, and the use of certain
cigarette tax funds for health costs. All of these cases are subject to
further proceedings and appeals, and if the State eventually loses, the final
remedies may not have to be implemented in one year.
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Obligations of Other Issuers
Other Issuers of California Municipal Obligations. There are a number of state
agencies, instrumentalities and political subdivisions of the State that issue
Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of the
obligations backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments declined
more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of
the State's General Fund surplus to local agencies, the reallocation of
certain State revenues to local agencies and the assumption of certain
governmental functions by the State to assist municipal issuers to raise
revenues. Through 1990-91, local assistance (including public schools)
accounted for approximately 75% of General Fund spending. To reduce State
General Fund support for school districts, the 1992-93 and 1993-94 Budget Acts
caused local governments to transfer $3.9 billion of property tax revenues to
school districts, representing loss of all of the post-Proposition 13
"bailout" aid. The largest share of these transfers came from counties, and
the balance from cities, special districts and redevelopment agencies. In
order to make up this shortfall, the Legislature proposed and voters approved
in 1993 dedicating 0.5% of the sales tax to counties and cities for public
safety purposes. In addition, the Legislature has changed laws to relieve
local governments of certain mandates, allowing them to reduce costs.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or other
fiscal considerations, the absolute level, or the rate of growth, of State
assistance to local governments may be further reduced. Any such reductions in
State aid could compound the serious fiscal constraints already experienced by
many local governments, particularly counties. At least one rural county
(Butte) publicly announced that it might enter bankruptcy proceedings in
August 1990, although such plans were put off after the Governor approved
legislation to provide additional funds for the county. Other counties have
also indicated that their budgetary condition is extremely grave. The Richmond
Unified School District (Contra Costa County) entered bankruptcy proceedings
in May 1991 but the proceedings have been dismissed. Los Angeles County, the
largest in the State, has reported severe fiscal problems, leading to a
nominal $1.2 billion deficit in its $11 billion budget for the 1995-96 Fiscal
Year. To balance the budget, the County has imposed severe cuts in services,
particularly for health care. The Legislature is considering actions to help
alleviate the County's fiscal problems, but none were completed before August
15, 1995. As a result of its bankruptcy proceedings (discussed further below),
Orange County also has implemented stringent cuts in services and has laid off
workers.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a
slowdown in real estate sales activity. In many cases, such bonds are secured
by land which is undeveloped at the time of issuance but anticipated to be
developed within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby increasing
the risk of a default on the bonds. Because the special assessments or taxes
securing these bonds are not the personal liability of the owners of the
property assessed, the lien on the property is the only security for the
bonds. Moreover, in most cases the issuer of these bonds is not required to
make payments on the bonds in the event of delinquency in the payment of
assessments or taxes, except from amounts, if any, in a reserve fund
established for the bonds.
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California Long-Term Lease Obligations. Certain California long-term lease
obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be no
remedies available to the holders of the certificates evidencing the lease
obligation in the event abatement occurs. The most common cases of abatement
are failure to complete construction of the facility before the end of the
period during which lease payments have been capitalized and uninsured
casualty losses to the facility (e.g., due to earthquake). In the event
abatement occurs with respect to a lease obligation, lease payments may be
interrupted (if all available insurance proceeds and reserves are exhausted)
and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were
taken over by a State receiver (including a brief period under bankruptcy
court protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the District's lease. The trial court has
upheld the validity of the lease and the case has been settled. Any ultimate
judgment in any future case against the position asserted by the Trustee in
the Richmond case may have adverse implication for lease transactions of a
similar nature by other California entities.
Other Considerations. The repayment of industrial development securities
secured by real property may be affected by California laws limiting
foreclosure rights of creditors. Securities backed by health care and hospital
revenues may be affected by changes in State regulations governing cost
reimbursements to health care providers under Medi-Cal (the State's Medicaid
program), including risks related to the policy of awarding exclusive
contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g., because of a major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after the
enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are the
issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which
any such legislation will be enacted. Nor is it presently possible to
determine the impact of any such legislation on California Municipal
Obligations in
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which the Fund may invest, future allocations of state revenues to local
governments or the abilities of state or local governments to pay the interest
on, or repay the principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Northern California in 1989 and Southern California in
1994 experienced major earthquakes causing billions of dollars in damages. The
federal government provided more than $13 billion in aid for both earthquakes,
and neither event is expected to have any long-term negative economic impact.
Any California Municipal Obligation in the California Insured Trust could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained
by the inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its contracts of
insurance in the event of widespread losses; or (iii) the Federal or State
government to appropriate sufficient funds within their respective budget
limitations.
On January 17, 1994, a major earthquake with an estimated magnitude of 6.8 on
the Richter scale struck the Los Angeles area, causing significant property
damage to public and private facilities, presently estimated at $15-20
billion. While over $9.5 billion of federal aid, and a projected $1.9 billion
of State aid, plus insurance proceeds, will reimburse much of that loss, there
will be some ultimate loss of wealth and income in the region, in addition to
costs of the disruption caused by the event. Short-term economic projections
are generally neutral, as the infusion of aid will restore billions of dollars
to the local economy within a few months; already the local construction
industry has picked up. Although the earthquake will hinder recovery from the
recession in Southern California, already hard-hit, its long-term impact is
not expected to be material in the context of the overall wealth of the
region. Almost five years after the event, there are few remaining effects of
the 1989 Loma Prieta earthquake in northern California (which, however, caused
less severe damage than Northridge).
On December 7, 1994, Orange County, California (the "County"), together with
its pooled investment fund (the "Pools") filed for protection under Chapter 9
of the federal Bankruptcy Code, after reports that the Pools had suffered
significant market losses in its investments caused a liquidity crisis for the
Pools and the County. More than 180 other public entities, most but not all
located in the County, were also depositors in the Pooled Fund. The County
estimated the Pools' loss at about $1.64 billion, or 23% of its initial
deposits of around $7.5 billion. Many of the entities which kept moneys in the
Pools, including the County, faced cash flow difficulties because of the
bankruptcy filing and may be required to reduce programs or capital projects.
Moody's and Standard & Poor's have suspended, reduced to below investment
grade levels, or placed on "Credit Watch" various securities of the County and
the entities participating in the Pools.
On May 2, 1995, the Bankruptcy Court approved a settlement agreement covering
claims of the other participating entities against the County and the Pools.
Most participants have received in cash 80% (90% for school districts) of
their Pools' investment; the balance is to be paid in the future. The County
succeeded in deferring, by consent, until June 30, 1996, the repayment of $800
million of short-term obligations due in July and August, 1995; these notes
are, however, considered to be in default by Moody's and S&P. On June 27,
1995, County voters turned down a proposal for a temporary 0.5% increase in
the local sales tax, making the County's fiscal recovery much harder.
The State of California has no obligation with respect to any obligations or
securities of the County or any of the other participating entities, although
under existing legal precedents, the State may be obligated to ensure that
school districts have sufficient funds to operate. All school districts were
able to meet their obligations in the 1994-95 Fiscal Year.
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California Tax Status
In the opinion of Orrick, Herrington & Sutcliffe, special California tax
counsel to Insured California Series 21 (the "Insured California Trust"), under
existing law:
The Insured California Trust is not an association taxable as a corporation
and the income of the Insured California Trust will be treated as the
income of the Unitholders under the income tax laws of California;
Amounts treated as interest on the underlying Bonds in the Insured
California Trust which are exempt from tax under California personal income
tax and property tax laws when received by the Insured California Trust
will, under such laws, retain their status as tax-exempt interest when
distributed to Unitholders. However, interest on the underlying Bonds
attributed to a Unitholder which is a corporation subject to the California
franchise tax laws may be includable in its gross income for purposes of
determining its California franchise tax. Further, certain interest which
is attributable to a Unitholder subject to the California personal income
tax and which is treated as an item of tax preference for purposes of the
federal alternative minimum tax pursuant to Section 57(a)(5) of the
Internal Revenue Code of 1986 may also be treated as an item of tax
preference that must be taken into account in computing such Unitholder's
alternative minimum taxable income for purposes of the California
alternative minimum tax enacted by 1987 California Statutes, chapter 1138.
However, because of the provisions of the California Constitution exempting
the interest on bonds issued by the State of California or by local
governments within the state, from taxes levied on income, the application
of the new California alternative minimum tax to interest otherwise exempt
from the California personal income tax in some cases may be unclear;
Under California income tax law, each Unitholder in the Insured California
Trust will have a taxable event when the Insured California Trust disposes
of a Bond (whether by sale, exchange, redemption, or payment at maturity)
or when the Unitholder redeems or sells units. Because of the requirement
that tax cost basis be reduced to reflect amortization of bond premium,
under some circumstances a Unitholder may realize taxable gains when Units
are sold or redeemed for an amount equal to, or less than, their original
cost. The total cost of each Unit in the Insured California Trust to a
Unitholder is allocated among each of the Bond issues held in the Insured
California Trust (in accordance with the proportion of the Insured
California Trust comprised by each Bond issue) in order to determine his
per Unit tax cost for each Bond issue; and the tax cost reduction
requirements relating to amortization of bond premium will apply separately
to the per Unit cost of each Bond issue. Unitholders' bases in their Units,
and the bases for their fractional interest in each Insured California
Trust asset, may have to be adjusted for their pro rata share of accrued
interest received, if any, on Bonds delivered after the Unitholders'
respective settlement dates;
Under the California personal property tax laws, bonds (including the Bonds
in the Insured California Trust) or any interest therein is exempt from
such tax;
Under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry Units
of the Insured California Trust is not deductible for the purposes of the
California personal income tax. While there presently is no California
authority interpreting this provision, Section 17280(b)(2) directs the
California Franchise Tax Board to prescribe regulations determining the
proper allocation and apportionment if interest costs for this purpose. The
Franchise Tax Board has not yet proposed or prescribed such regulations. In
interpreting the generally similar Federal provision, the Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (although the Service has
not contended that a deduction for interest on indebtedness incurred to
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purchase or improve a personal residence or to purchase goods or services
for personal consumption will be disallowed). In the absence of conflicting
regulations or other California authority, the California Franchise Tax
Board generally has interpreted California statutory tax provisions in
accordance with Internal Revenue Service interpretations of similar Federal
provisions.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exemption of interest thereon from Federal
income tax and California personal income tax are rendered by bond counsel
to the respective issuing authorities and we have relied solely upon such
opinions, or, as to securities not yet delivered, forms of such opinions
contained in official statements relating to such securities. Except in
certain instances in which Orrick, Herrington & Sutcliffe acted as bond
counsel to issuers of Bonds in the Insured California Trust, and as such
made a review of proceedings relating to the issuance of certain Bonds at
the time of their issuance, Orrick, Herrington & Sutcliffe has not made any
review for the Trust of the proceedings relating to the issuance of the
Bonds in the Insured California Trust or of the basis for such opinions.
For a discussion of Federal tax matters relating to distributions from the
Trust Fund, see "Federal Tax Status."
INSURANCE ON THE BONDS
All Municipal Bonds in the portfolios of the Insured Trusts are insured as to
the scheduled payment of interest and principal by the issuer or the Sponsor
from MBIA Insurance Corporation ("MBIA Corporation") or other insurers. See
"Portfolios" and the Notes thereto. The premium for any insurance policy or
policies obtained by an issuer of Municipal Bonds or the Sponsor has been paid
in advance by such issuer or the Sponsor and any such policy or policies are
non-cancellable and will remain in force so long as the Municipal Bonds so
insured are outstanding and the insurer and/or insurers thereof remain in
business. Where Municipal Bond insurance is obtained by the issuer or the
Sponsor directly from MBIA Corporation or another insurer, no premiums for
insurance are paid by an Insured Trust Fund. If the provider of an original
issuance insurance policy is unable to meet its obligations under such policy
or if the rating assigned to the claims-paying ability of any such insurer
deteriorates, no other insurer has an obligation to insure any issue adversely
affected by either of the above described events.
The aforementioned insurance guarantees the scheduled payment of principal and
interest on all of the Municipal Bonds in an Insured Trust Fund. It does not
guarantee the market value of the Municipal Bonds or the value of the Units of
the Insured Trust Fund. Insurance obtained by the issuer of a Municipal Bond or
the Sponsor is effective so long as the Bond is outstanding, whether or not
held by an Insured Trust Fund. Therefore, any such insurance may be considered
to represent an element of market value in regard to the Bonds thus insured,
but the exact effect, if any, of this insurance on such market value cannot be
predicted.
Financial Guaranty Insurance Company. Financial Guaranty is a wholly-owned
subsidiary of FGIC Corporation (the "Corporation"), a Delaware holding company.
The Corporation is a wholly-owned subsidiary of General Electric Capital
Corporation ("GECC"). Neither the Corporation nor GECC is obligated to pay the
debts or the claims against Financial Guaranty. Financial Guaranty is domiciled
in the State of New York and is subject to regulation by the State of New York
Insurance Department. As of June 30, 1995, the total capital and surplus of
Financial Guaranty was approximately $978,500,000. Copies of Financial
Guaranty's financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared on the basis
of generally accepted
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<PAGE>
accounting principles, may be obtained by writing to Financial Guaranty at 115
Broadway, New York, New York 10006, Attention: Communications Department
(telephone number is (212) 312-3000) or to the New York State Insurance
Department at 160 West Broadway, 18th Floor, New York, New York 10013,
Attention: Property Companies Bureau (telephone number (212) 621-0389).
In addition, Financial Guaranty Insurance Company is currently authorized to
write insurance in all 50 states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained herein with
respect to such corporation is unaudited but appears in reports or other
materials filed with state insurance regulatory authorities and is subject to
audit and review by such authorities. No representation is made herein as to
the accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof but the
Sponsor is not aware that the information herein is inaccurate or incomplete.
AMBAC Indemnity Corporation. AMBAC Indemnity Corporation ("AMBAC") is a
Wisconsin-domiciled stock insurance company, regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin, and licensed to do
business in 50 states, the District of Columbia and the Commonwealth of Puerto
Rico, with admitted assets (unaudited) of approximately $2,145,000,000 and
statutory capital (unaudited) of approximately $782,000,000 as of December 31,
1994. Statutory capital consists of AMBAC policyholders' surplus and statutory
contingency reserve. AMBAC is a wholly owned subsidiary of AMBAC Inc., a 100%
publicly-held company. Moody's Investors Service, Inc. and Standard & Poor's
have both assigned a AAA claims-paying ability rating to AMBAC. Copies of
AMBAC's financial statements prepared in accordance with statutory accounting
standards are available from AMBAC. The address of AMBAC's administrative
offices and its telephone number are One State Street Plaza, 17th Floor, New
York, New York 10004 and (212) 668-0340. AMBAC has entered into quota share
reinsurance agreements under which a percentage of the insurance underwritten
pursuant to certain municipal bond insurance programs of AMBAC has been and
will be assumed by a number of foreign and domestic unaffiliated reinsurers.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA Corporation") is
the principal operating subsidiary of MBIA, Inc., a New York Stock Exchange
listed company. MBIA, Inc. is not obligated to pay the debts of or claims
against MBIA Corporation. MBIA Corporation, which commenced municipal bond
insurance operations on January 5, 1987, is a limited liability corporation
rather than a several liability association. MBIA Corporation is domiciled in
the State of New York and licensed to do business in all 50 states, the
District of Columbia and the Commonwealth of the Northern Mariana Islands, the
Commonwealth of Puerto Rico, the Virgin Islands of the United States and the
Territory of Guam.
As of March 31, 1995 MBIA Corporation had admitted assets of $3.5 billion
(unaudited), total liabilities of $2.4 billion (unaudited), and total capital
and surplus of $1.1 billion (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, MBIA, Inc. had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. Standard & Poor's has rated the claims paying ability of MBIA,
Inc. "AAA". Copies of MBIA Corporation's financial statements prepared in
accordance with statutory accounting practices are available from MBIA
Corporation. The address of MBIA Corporation is 113 King Street, Armonk, New
York 10504.
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<PAGE>
Effective December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc. On
January 5, 1990, the Insurer acquired all of the outstanding stock of Bond
Investors Group, Inc., the parent of BIG, now known as MBIA Insurance Corp. of
Illinois. Through a reinsurance agreement, BIG has ceded all of its net insured
risks, as well as its unearned premium and contingency reserves, to the Insurer
and the Insurer has reinsured BIG's net outstanding exposure.
Moody's Investors Service rates all bond issues insured by MBIA, Inc. "Aaa" and
short-term loans "MIG1," both designated to be of the highest quality. Standard
& Poor's rates all new issues insured by MBIA, Inc. "AAA."
Financial Security Assurance. Financial Security Assurance ("Financial
Security" or "FSA") is a monoline insurance company incorporated on March 16,
1984 under the laws of the State of New York. The operations of Financial
Security commenced on July 25, 1985, and Financial Security received its New
York State insurance license on September 23, 1985. Financial Security and its
two wholly owned subsidiaries are licensed to engage in financial guaranty
insurance business in 49 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the business
of writing financial guaranty insurance, principally in respect of asset-backed
and other collateralized securities offered in domestic and foreign markets.
Financial Security and its subsidiaries also write financial guaranty insurance
in respect of municipal and other obligations and reinsure financial guaranty
insurance policies written by other leading insurance companies. In general,
financial guaranty insurance consists of the issuance of a guaranty of
scheduled payments of an issuer's securities, thereby enhancing the credit
rating of these securities, in consideration for payment of a premium to the
insurer.
Financial Security is approximately 91.6% owned by U S West, Inc. and 8.4%
owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine").
Neither U S West, Inc. nor Tokio Marine is obligated to pay the debts of or the
claims against Financial Security. Financial Security is domiciled in the State
of New York and is subject to regulation by the State of New York Insurance
Department.
As of March 31, 1993, the total policyholders' surplus and contingency reserves
and the total unearned premium reserve, respectively, of Financial Security and
its consolidated subsidiaries were, in accordance with statutory accounting
principles, approximately $479,110,000 (unaudited) and $220,078,000
(unaudited), and the total shareholders' equity and the unearned premium
reserve, respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with generally accepted accounting principles,
approximately $628,119,000 (unaudited) and $202,493,000 (unaudited).
Copies of Financial Security's financial statements may be obtained by writing
to Financial Security at 350 Park Avenue, New York, New York, 10022, Attention
Communications Department. Financial Security's telephone number is (212) 826-
0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written by Financial Security or either of its subsidiaries are
reinsured among such companies at an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance policy.
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<PAGE>
Financial Security's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc., and "AAA" by Standard & Poor's, Nippon Investors Service Inc.,
Duff & Phelps Inc. and Australian Ratings Pty. Ltd. Such ratings reflect only
the views of the respective rating agencies, are not recommendations to buy,
sell or hold securities and are subject to revision or withdrawal at any time
by such rating agencies.
Capital Guaranty Insurance Company. Capital Guaranty Insurance Company
("Capital Guaranty" or "CGIC") is a "Aaa/AAA" rated monoline stock insurance
company incorporated in the State of Maryland, and is a wholly owned subsidiary
of Capital Guaranty Corporation, a Maryland insurance holding company. Capital
Guaranty Corporation is a publicly owned company whose shares are traded on the
New York Stock Exchange.
Capital Guaranty Insurance Company is authorized to provide insurance in all 50
states, the District of Columbia, the Commonwealth of Puerto Rico, Guam and the
U.S. Virgin Islands. Capital Guaranty focuses on insuring municipal securities
and provides policies which guaranty the timely payment of principal and
interest when due for payment on new issue and secondary market issue municipal
bond transactions. Capital Guaranty's claims-paying ability is rated "Triple-A"
by both Moody's and Standard & Poor's.
As of December 31, 1994, Capital Guaranty had more than $15.7 billion in net
exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$196,529,000 and the total admitted assets were $303,723,316 as reported to the
Insurance Department of the State of Maryland as of December 31, 1994.
Financial statements for Capital Guaranty Insurance Company, that have been
prepared in accordance with statutory insurance accounting standards, are
available upon request. The address of Capital Guaranty's headquarters is
Steuart Tower, 22nd Floor, One Market Plaza, San Francisco, CA 94105-1413 and
the telephone number is (415) 995-8000.
Chapman and Cutler, counsel for the Sponsor, has given an opinion to the effect
that the payment of insurance proceeds representing maturing interest on
defaulting municipal obligations paid by Financial Guaranty or another insurer
would be excludable from Federal gross income if, and to the same extent as,
such interest would have been so excludable if paid by the issuer of the
defaulted obligations. See "Federal Tax Status."
FEDERAL TAX STATUS
All Municipal Bonds deposited in the Trust Fund will be accompanied by copies
of opinions of bond counsel to the issuers thereof, given at the time of
original delivery of the Municipal Bonds, to the effect that the interest
thereon is excludable from gross income for Federal income tax purposes. In
connection with the offering of Units of the Trust Fund, neither the Sponsor,
the Trustee, the auditors nor their respective counsel have made any review of
the proceedings relating to the issuance of the Municipal Bonds or the basis
for such opinions. Gain realized on the sale or redemption of the Municipal
Bonds by the Trustee or of a Unit by a Unitholder is, however, includable in
gross income for Federal income tax purposes. Such gain does not include any
amounts received in respect of accrued interest or accrued original issue
discount, if any. It should be noted that, as further described below,
accretion of market discount on tax-exempt bonds is subject to taxation as
ordinary income. Market discount can arise based on the price a Trust Fund pays
for Municipal Bonds or the price a Unitholder pays for his or her Units. In
addition, bond counsel to the issuing authorities rendered opinions as to the
exemption of interest on such Bonds, when held by residents of the state in
which the issuers of such bonds are located, from state income taxes and, where
applicable, local income taxes.
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<PAGE>
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
The Trust Fund is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Internal Revenue Code
of 1986 (the "Code") will retain its status when distributed to
Unitholders, except to the extent such interest is subject to the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"), as noted
below.
Exemption of interest and accrued original issue discount on any Municipal
Bonds for Federal income tax purposes does not necessarily result in tax-
exemption under the laws of the several states as such laws vary with
respect to the taxation of such securities and in many states all or part
of such interest and accrued original issue discount may be subject to tax.
Each Unitholder is considered to be the owner of a pro rata portion of each
asset of the respective Trust Fund in the proportion that the number of
Units of such Trust Fund held by him bears to the total number of Units
outstanding of such Trust Fund under subpart E, subchapter J of chapter 1
of the Code and will have a taxable event when such Trust Fund disposes of
a Bond, or when the Unitholder redeems or sells his Units. Unitholders must
reduce the tax basis of their Units for their share of accrued interest
received by a Trust Fund, if any, on Bonds delivered after the date the
Unitholders pay for their Units to the extent that such interest accrued on
such Bonds during the period from the Unitholder's settlement date to the
date such Bonds are delivered to a Trust Fund and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of
Bonds (whether by sale, payment on maturity, redemption or otherwise), gain
or loss is recognized to the Unitholder. The amount of any such gain or
loss is measured by comparing the Unitholder's pro rata share of the total
proceeds from such disposition with the Unitholder's basis for his or her
fractional interest in the asset disposed of. In the case of a Unitholder
who purchases Units, such basis (before adjustment for earned original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust Fund's assets
ratably according to their value as of the date of acquisition of the
Units. The basis of each Unit and of each Municipal Bond which was issued
with original issue discount must be increased by the amount of the accrued
original issue discount and the basis of each Unit and of the Unitholder's
interest in each Municipal Bond which was acquired by such Unitholder at a
premium must be reduced by the annual amortization of Municipal Bond
premium. The tax cost reduction requirements of the Code relating to
amortization of bond premium may, under some circumstances, result in the
Unitholder realizing a taxable gain when his Units are sold or redeemed for
an amount equal to or less than his original cost.
Any insurance proceeds paid under individual policies obtained by issuers
of Bonds which represent maturing interest on defaulted obligations held by
the Trustee will be excludable from Federal gross income if, and to the
same extent as, such interest would have been so excludable if paid in the
normal course by the issuer of the defaulted obligations provided that, at
the time such policies are purchased, the amounts paid for such policies
are reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will pay debt
service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules governing the
accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant
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<PAGE>
compound interest rate or ratably over the term of the Municipal Bond,
depending on the date the Municipal Bond was issued. In addition, special rules
apply if the purchase price of a Municipal Bond exceeds the original issue
price plus the amount of original issue discount which would have previously
accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the
Municipal Bond on the date a Unitholder acquires his Units, and the price the
Unitholder pays for his Units. Investors with questions regarding these Code
sections should consult with their tax advisers.
The Revenue Reconciliation Act of 1993 (the "Tax Act") subjects tax-exempt
bonds to the market discount rules of the Code effective for bonds purchased
after April 30, 1993. In general, market discount is the amount (if any) by
which the stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable to
original issue discount not yet accrued) subject to a statutory de minimis
rule. Market discount can arise based on the price a Trust Fund pays for
Municipal Bonds or the price a Unitholder pays for his or her Units. Under the
Tax Act, accretion of market discount is taxable as ordinary income; under
prior law the accretion had been treated as capital gain. Market discount that
accretes while a Trust Fund holds a Municipal Bond would be recognized as
ordinary income by the Unitholders when principal payments are received on the
Municipal Bond, upon sale or at redemption (including early redemption), or
upon the sale or redemption of his or her Units, unless a Unitholder elects to
include market discount in taxable income as it accrues. The market discount
rules are complex and Unitholders should consult their tax advisers regarding
these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax depend upon the corporation's alternative minimum taxable income,
which is the corporation's taxable income with certain adjustments. One of the
adjustment items used in computing the alternative minimum taxable income and
the Superfund Tax of a corporation (other than an S Corporation, Regulated
Investment Company, Real Estate Investment Trust, or REMIC) is an amount equal
to 75% of the excess of such corporation's "adjusted current earnings" over an
amount equal to its alternative minimum taxable income (before such adjustment
item and the alternative tax net operating loss deduction). "Adjusted current
earnings" includes all tax-exempt interest, including interest on all of the
Bonds in a Trust Fund and tax-exempt original issue discount. Unitholders are
urged to consult their tax advisers with respect to the particular tax
consequences to them including the corporate alternative minimum tax, the
Superfund Tax and the branch profits tax imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust Fund is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase or
improve a personal residence or to purchase goods or services for personal
consumption). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of
the interest expense attributable to ownership of such Units. Investors with
questions regarding these issues should consult with their tax advisers.
In the case of certain Municipal Bonds in a Trust Fund, the opinions of bond
counsel indicate that interest on such Municipal Bonds received by a
"substantial user" of the facilities being financed with the proceeds of these
Municipal Bonds or persons related thereto, for periods while such Municipal
Bonds are held by such a user or related person, will not be excludable from
Federal gross income, although
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<PAGE>
interest on such Municipal Bonds received by others would be excludable from
Federal gross income. "Substantial user" and "related person" are defined under
U.S. Treasury Regulations. Any person who believes that he or she may be a
"substantial user" or a "related person" as so defined should contact his or
her tax adviser.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35% effective for long-term capital gains realized in taxable
years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
Under existing law, the Trust Fund is not an association taxable as
corporations and the income of the Trust Fund will be treated as the income of
the Unitholders under the income tax laws of the State of Missouri.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are to
be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Trust Fund of the proceedings relating to the issuance of the Bonds or of the
basis for such opinions.
Section 86 of the Code, in general, provides that fifty percent of Social
Security benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus fifty percent of the Social Security
benefits received exceeds a "base amount". The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85 percent of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus
fifty percent of Social Security benefits received exceeds an "adjusted base
amount." The adjusted base amount is $34,000 for unmarried taxpayers, $44,000
for married taxpayers filing a joint return and zero for married taxpayers who
do not live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from the Trust Fund, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his or her Social Security
benefits in gross income whether or not he or she receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after inclusion of
tax-exempt interest) does not exceed the base amount need not include any
Social Security benefits in gross income.
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<PAGE>
For a discussion of the state tax status of income earned on Units of a state
trust, see the discussion of tax status for the applicable trust. Except as
noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption under the income or other tax laws of any state or city. The laws of
the several states vary with respect to the taxation of such obligations.
TAX REPORTING AND REALLOCATION
Because the Trust receives interest and makes monthly distributions based upon
such Trust's expected total collections of interest and any anticipated
expenses, certain tax reporting consequences may arise. The Trust is required
to report Unitholder information to the Internal Revenue Service ("IRS"), based
upon the actual collection of interest by such Trust on the securities in such
Trust, without regard to such Trust's expenses or to such Trust's payments to
Unitholders during the year. If distributions to Unitholders exceed interest
collected, the difference will be reported as a return of principal which will
reduce a Unitholder's cost basis in its Units (and its pro rata interest in the
securities in the Trust). A Unitholder must include in taxable income the
amount of income reported by a Trust to the IRS regardless of the amount
distributed to such Unitholder. If a Unitholder's share of taxable income
exceeds income distributions made by a Trust to such Unitholder, such excess is
in all likelihood attributable to the payment of miscellaneous expenses of such
Trust which will not be deductible by an individual Unitholder as an itemized
deduction except to the extent that the total amount of certain itemized
deductions, such as investments expenses (which would include the Unitholder's
share of Trust expenses), tax return preparation fees and employee business
expenses, exceeds 2% of such Unitholder's adjusted gross income. Alternatively,
in certain cases, such excess may represent an increase in the Unitholder's tax
basis in the Units owned. Investors with questions regarding these issues
should consult with their tax advisers.
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<PAGE>
UNDERWRITING
The Underwriters named below have severally purchased Units of the Trusts in
the following respective amounts:
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL CALIFORNIA
FIRM NAME SERIES 17 SERIES 21
--------- --------- ----------
<S> <C> <C>
*EVEREN Unit Investment Trusts............................. 347,500 235,500
*EVEREN Securities, Inc.................................... 50,000 50,000
Advest, Inc................................................ 10,000
Fidelity Capital Markets................................... 10,000
Gruntal & Co., Inc......................................... 10,000 10,000
Nathan & Lewis Securities, Inc............................. 10,000
Pershing................................................... 10,000
Rauscher Pierce Refsnes, Inc............................... 10,000
Stifel Nicolaus & Co., Inc................................. 10,000
------- -------
TOTAL UNITS:............................................... 467,500 295,500
======= =======
</TABLE>
Underwriter Addresses:
*EVEREN Unit Investment Trusts, 77 West Wacker Drive, 29th Floor, Chicago, IL
60601-1994
*EVEREN Securities, Inc., 77 West Wacker Drive, 28th Floor, Chicago, IL 60601-
1994
Advest, Inc., One Commercial Plaza, 280 Trumbull Street, Hartford, CT 06103
Fidelity Capital Markets, a division of National Financial Services
Corporation, 161 Devonshire Street, D4, Boston, MA 02110
Gruntal & Co., Inc., 14 Wall Street, 14th Floor, New York, NY 10005
Nathan & Lewis Securities, Inc., 1140 6th Avenue, 4th Floor, New York, NY
10036
Pershing, One Pershing Plaza, 7th Floor, Jersey City, NJ 07399
Rauscher Pierce Refsnes, Inc., 2500 RPR Tower, Dallas, TX 75201
Stifel Nicolaus & Co., Inc., 500 North Broadway, St. Louis, MO 63102
- ------------------
*EVEREN Capital Corporation owns or has a controlling interest in EVEREN Unit
Investment Trusts (the Trusts' Sponsor and Evaluator) and EVEREN Securities,
Inc. EVEREN Unit Investment Trusts is a service of EVEREN Securities, Inc. For
additional information about the Underwriters, see "Underwriting."
The Underwriters acquired the Units of the Trust Funds at a price per Unit
equal to the Public Offering Prices set forth under "Essential Information"
less the Underwriters' takedown. The amount of the Underwriters' takedown for
Trusts with a weighted average maturity less than 7.5 years for each Unit is
$.22 for those firms committing for 10,000 to 24,999 Units, $.22 plus 50% of
any net portfolio profit for those firms committing for 25,000 to 99,999 Units
and $.23 plus 50% of any net portfolio profit for those firms committing for
100,000 or more Units. The amount of the Underwriters' takedown for Trusts
with a weighted average maturity between 7.5 and 9.99 years for each Unit is
$.28 for those firms committing for 10,000 to 24,999 Units, $.28 plus 50% of
any net portfolio profits for those firms committing for 25,000 to 49,999
Units, $.29 plus 50% of any net portfolio profit for those firms committing
for 50,000 to 99,999 Units and $.30 plus 50% of any net portfolio profit for
those firms committing for 100,000 or more Units. The amount of the
Underwriters' takedown for Trusts with a weighted average maturity 10 to 14.99
years for each Unit is $.30 for those firms committing for 10,000 to 24,999
Units, $.30 plus 50% of any net portfolio profits for those firms committing
for 25,000 to 49,999 Units, $.31 plus 50% of any net portfolio profit for
those firms committing for 50,000 to 99,999 Units and $.32 plus 50% of any net
portfolio profit for those firms committing for 100,000 or more Units. The
amount of the Underwriters' takedown for Trusts with a weighted average
maturity greater than 14.99 years for each Unit is $.36 for 10,000 to 24,999
Units, $.36 plus 50% of any net portfolio profit for those firms committing
for 25,000
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<PAGE>
to 49,999 Units, $.37 plus 50% of any net portfolio profit for those firms
committing for 50,000 to 99,999 Units and $.38 plus 50% of any net portfolio
profit for those firms committing for 100,000 or more Units. In connection with
any quantity discounts (see "Public Offering of Units--Public Offering Price"),
the Sponsor and the applicable Underwriter will each receive reduced
concessions as a result of the reduced sales charges to the investor. In
addition to such discounts, the Sponsor may, from time to time, pay or allow an
additional discount, in the form of cash or other compensation, to dealers who
underwrite additional Units of a Trust or who sell, during a specified time
period, a minimum dollar amount of Units of a Trust and other unit investment
trusts underwritten by the Sponsor. The Underwriting Agreement provides that
the Sponsor will select and purchase the Municipal Bonds for deposit in the
Trust Funds on its own behalf and on behalf of the other Underwriters.
The Underwriting Agreement provides that a public offering of the Units of the
Trust Funds will be made by the Underwriters at the Public Offering Price
described in the Prospectus. Units may also be sold to or through dealers, who
are members of the National Association of Securities Dealers, Inc., and others
at prices representing discounts from the Public Offering Price. However,
resales of Units of the Trust Funds to the public will be made at the Public
Offering Price thereof.
Underwriters and broker-dealers of the Trusts, banks and/or others are eligible
to participate in a program in which such firms receive from the Sponsor a
nominal award for each of their representatives who have sold a minimum number
of Units of unit investment trusts created by the Sponsor during a specified
time period. In addition, at various times the Sponsor may implement other
programs under which the sales forces of Underwriters, brokers, dealers, banks
and/or others may be eligible to win other nominal awards for certain sales
efforts, or under which the Sponsor will reallow to any such Underwriters,
brokers, dealers, banks and/or others that sponsor sales contests or
recognition programs conforming to criteria established by the Sponsor, or
participate in sales programs sponsored by the Sponsor, an amount not exceeding
the total applicable sales charges on the sales generated by such persons at
the public offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria established by
the Sponsor pay fees to qualifying underwriters, brokers, dealers, banks or
others for certain services or activities which are primarily intended to
result in sales of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts. These programs
will not change the price Unitholders pay for their Units or the amount that
the Trusts will receive from the Units sold. Approximately every eighteen
months the Sponsor holds a business seminar which is open to Underwriters that
sell units of trusts it sponsors. The Sponsor pays substantially all costs
associated with the seminar, excluding Underwriter travel costs. Each
Underwriter is invited to send a certain number of representatives based on the
gross number of units such firm underwrites during a designated time period.
TAX-EXEMPT PORTFOLIOS
TE-30
<PAGE>
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the estimated monthly distributions of interest and
principal to Unitholders on a per Unit basis. The tables assume no changes in
expenses, no changes in the current interest rates, no exchanges, redemptions,
sales or prepayments of the underlying Securities prior to maturity or
expected retirement date and the receipt of principal upon maturity or
expected retirement date. To the extent the foregoing assumptions change
actual distributions will vary.
INSURED NATIONAL SERIES 17
Monthly
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Nov 15, 1995 $0.02994 $0.02994
Dec 15, 1995 to Aug 15, 2007 $0.04491 $0.04491
Sep 15, 2007 $0.04491 $1.06952 $1.11443
Oct 15, 2007 to Dec 15, 2020 $0.03961 $0.03961
Jan 15, 2021 $0.03961 $0.74866 $0.78827
Feb 15, 2021 to Mar 15, 2022 $0.03631 $0.03631
Apr 15, 2022 $0.03631 $0.95187 $0.98818
May 15, 2022 $0.03241 $0.03241
Jun 15, 2022 $0.02974 $1.06952 $1.09926
Jul 15, 2022 to Oct 15, 2022 $0.02721 $0.02721
Nov 15, 2022 $0.02721 $0.81283 $0.84004
Dec 15, 2022 $0.02341 $0.02341
Jan 15, 2023 $0.02341 $1.06952 $1.09293
Feb 15, 2023 to Aug 15, 2023 $0.01851 $0.01851
Sep 15, 2023 $0.01617 $1.06952 $1.08569
Oct 15, 2023 $0.01401 $0.01401
Nov 15, 2023 $0.01401 $1.06952 $1.08353
Dec 15, 2023 $0.00691 $1.06952 $1.07643
Jan 15, 2024 to Jan 15, 2027 $0.00471 $0.00471
Feb 15, 2027 $0.00471 $1.06952 $1.07423
</TABLE>
INSURED CALIFORNIA SERIES 21
Monthly
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Nov 15, 1995 $0.03052 $0.03052
Dec 15, 1995 to Aug 15, 2007 $0.04578 $0.04578
Sep 15, 2007 $0.04578 $0.84602 $0.89180
Oct 15, 2007 to Aug 15, 2009 $0.04158 $0.04158
Sep 15, 2009 $0.04158 $1.69205 $1.73363
Oct 15, 2009 to Jul 15, 2019 $0.03328 $0.03328
Aug 15, 2019 $0.03328 $1.20135 $1.23463
Sep 15, 2019 to Apr 15, 2020 $0.02788 $0.02788
May 15, 2020 $0.02788 $1.69205 $1.71993
Jun 15, 2020 to Aug 15, 2022 $0.02018 $0.02018
Sep 15, 2022 $0.02018 $1.52284 $1.54302
Oct 15, 2022 to Jun 15, 2023 $0.01308 $0.01308
Jul 15, 2023 $0.01308 $0.33841 $0.35149
Aug 15, 2023 $0.01168 $0.01168
Sep 15, 2023 $0.01168 $1.01523 $1.02691
Oct 15, 2023 to Aug 15, 2030 $0.00738 $0.00738
Sep 15, 2030 $0.00738 $1.69205 $1.69943
</TABLE>
TAX-EXEMPT PORTFOLIOS
TE-31
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GENERAL INFORMATION
RATING OF UNITS
Standard & Poor's has rated the Units of any U.S. Treasury Portfolio Series or
GNMA Portfolio Series "AAA." Because the Securities in an Insured Trust Fund
in a Tax-Exempt Portfolio Series or an Insured Corporate Series are insured as
to the scheduled payment of principal and interest and on the basis of the
financial condition and the method of operation of the insurance companies
referred to in "Insurance on the Bonds" for each such Trust, Standard & Poor's
has also rated the Units of any Insured Trust Fund "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 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.
Securities in an Insured Trust Fund for which insurance has been obtained by
the Issuer or the Sponsor (all of which were rated "AAA" by Standard & Poor's
and/or "Aaa" by Moody's Investors Service, Inc.) may or may not have a higher
yield than uninsured Securities rated "AAA" by Standard & Poor's or "Aaa" by
Moody's Investors Service, Inc. In selecting Securities for the portfolios of
an Insured Trust Fund, the Sponsor has applied the criteria hereinbefore
described.
TRUST INFORMATION
Because certain of the Securities in certain of the Trusts may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can be
given that a Trust will retain for any length of time its present size and
composition. Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Security. In the event of a failure
to deliver any Security that has been purchased for a Trust under a contract,
including those securities purchased on a "when, as and if issued" basis
("Failed Securities"), the Sponsor is authorized under the Trust Agreement to
direct the Trustee to acquire other securities ("Replacement Securities") to
make up the original corpus of such Trust.
Securities in certain of the Trust Funds may have been purchased on a "when,
as and if issued" or delayed delivery basis with delivery expected to take
place after the First Settlement Date. See "Notes to Portfolios" for each
Trust. Accordingly, the delivery of such Securities may be delayed or may not
occur. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of
GI-1
GENERAL INFORMATION
<PAGE>
delivery. To the extent any Municipal Bonds in a Tax-Exempt Portfolio are
actually delivered to such Trust after their respective expected dates of
delivery, Unitholders who purchase Units in such Trust prior to the date such
"when, as and if issued" or "delayed delivery" Municipal Bonds are actually
delivered to the Trustee would, to the extent such income is not offset by a
reduction in the Trustee's fee (or, to the extent necessary, other expenses),
be required to reduce their tax basis in their Units of such Trust since the
interest accruing on such Municipal Bonds during the interval between their
purchase of Units and the actual delivery of such Municipal Bonds would, for
tax purposes, be considered a non-taxable return of principal rather than as
tax-exempt interest. The result of such adjustment, if necessary, would be,
during the first year only, that the Estimated Long-Term Returns may be, and
the Estimated Current Returns would be, slightly lower than those shown
herein, assuming such Trust portfolios and estimated annual expenses do not
vary. See footnote (4) to "Essential Information." Unitholders of all Trusts
will be "at risk" with respect to any "when, as and if issued" or "delayed
delivery" Securities included in their respective Trust (i.e., may derive
either gain or loss from fluctuations in the evaluation of such Securities)
from the date they commit for Units.
The Replacement Securities must be purchased within 20 days after delivery of
the notice that a contract to deliver a Security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities (i) must be payable in
United States currency, (ii) must be purchased at a price that results in a
yield to maturity and a current return at least equal to that of the Failed
Securities as of the Initial Date of Deposit, (iii) shall not be "when, as and
if issued" or restricted securities, (iv) must satisfy any rating criteria for
Securities originally included in such Trust, (v) not cause the Units of such
Trust to cease to be rated AAA by Standard & Poor's. if the Units were so
rated on the Initial Date of Deposit and (vi) in the case of Insured Trust
Funds must be insured prior to acquisition by a Trust. In connection with an
Insured Corporate Series only, Replacement Securities also must (i) be
intermediate or long-term, as applicable, corporate bonds, debentures, notes
or other straight debt obligations (whether secured or unsecured and whether
senior or subordinated) without equity or other conversion features, with
fixed maturity dates substantially the same as those of the Failed Securities
having no warrants or subscription privileges attached, (ii) be issued after
July 18, 1984 if interest thereon is United States source income and (iii)
have a fixed maturity of at least 10 years. In connection with a Corporate
Income Series only, Replacement Securities also must (i) be corporate bonds,
debentures, notes or other straight debt obligations (whether secured or
unsecured and whether senior or subordinated) without equity or other
conversion features, with fixed maturity dates substantially the same as those
of the Failed Securities having no warrants or subscription privileges
attached, (ii) be issued after July 18, 1984 and (iii) have a fixed maturity
of at least 6 years. In connection with a Tax-Exempt Portfolio only,
Replacement Securities must also (i) be tax-exempt bonds issued by the
appropriate state or counties, municipalities, authorities or political
subdivisions thereof and (ii) have a fixed maturity date of at least 3 years
if the bonds are to be deposited in a trust other than a long-term trust or at
least 10 years if the bonds are to be deposited in a long-term trust. Whenever
a Replacement Security is acquired for a Trust, the Trustee shall, within five
days thereafter, notify all Unitholders of the Trust of the acquisition of the
Replacement Security and shall, on the next monthly distribution date which is
more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to the Trust of the Failed Security exceeded the cost
of the Replacement Security. Once all of the Securities in a Trust are
acquired, the Trustee will have no power to vary the investments of the Trust,
i.e., the Trustee will have no managerial power to take advantage of market
variations to improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs is
not utilized to acquire Replacement Securities in the event of a failed
contract, the Sponsor will refund the sales charge
GI-2
GENERAL INFORMATION
<PAGE>
attributable to such Failed Securities to all Unitholders of the Trust Fund
and the Trustee will distribute the principal and accrued interest
attributable to such Failed Securities not more than 30 days after the date on
which the Trustee would have been required to purchase a Replacement Security.
In addition, Unitholders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other securities
at a yield equal to or in excess of the yield which such proceeds would have
earned for Unitholders of such Trust Fund.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid to
Unitholders of the Trust Fund to the date the Sponsor removes the Failed
Securities from the Trust Fund if the Sponsor determines not to purchase a
Replacement Security or to the date of substitution if a Replacement Security
is purchased. All such interest paid to Unitholders which accrued after the
date of settlement for a purchase of Units will be paid by the Sponsor. In the
event a Replacement Security could not be acquired by a Trust, the net annual
interest income per Unit for such Trust would be reduced and the Estimated
Current Return and Estimated Long-Term Return might be lowered.
Subsequent to the Initial Date of Deposit, a Security may cease to be rated or
its rating may be reduced below any minimum required as of the Initial Date of
Deposit. Neither event requires the elimination of such investment from a
Trust, but may be considered in the Sponsor's determination to direct the
Trustee to dispose of such investment. See "General Information--Investment
Supervision."
The Sponsor may not alter the portfolio of a Trust except upon the happening
of certain extraordinary circumstances. See "General Information--Investment
Supervision." Certain of the Securities may be subject to optional call or
mandatory redemption pursuant to sinking fund provisions, in each case prior
to their stated maturity. A bond subject to optional call is one which is
subject to redemption or refunding prior to maturity at the option of the
issuer, often at a premium over par. A refunding is a method by which a bond
issue is redeemed, at or before maturity, by the proceeds of a new bond issue.
A bond subject to sinking fund redemption is one which is subject to partial
call from time to time at par with proceeds from a fund accumulated for the
scheduled retirement of a portion of an issue to maturity. Special or
extraordinary redemption provisions may provide for redemption at par of all
or a portion of an issue upon the occurrence of certain circumstances, which
may be prior to the optional call dates shown under "Portfolio" for each
Trust. Redemption pursuant to optional call provisions is more likely to
occur, and redemption pursuant to special or extraordinary redemption
provisions may occur, when the Securities have an offering side evaluation
which represents a premium over par, that is, when they are able to be
refinanced at a lower cost. The proceeds from any such call or redemption
pursuant to sinking fund provisions, as well as proceeds from the sale of
Securities and from Securities which mature in accordance with their terms
from a Trust, unless utilized to pay for Units tendered for redemption, will
be distributed to Unitholders of such Trust and will not be used to purchase
additional Securities for such Trust. Accordingly, any such call, redemption,
sale or maturity will reduce the size and diversity of a Trust and the net
annual interest income of such Trust and may reduce the Estimated Current
Return and the Estimated Long-Term Return. See "General Information--Interest,
Estimated Long-Term Return and Estimated Current Return." The call,
redemption, sale or maturity of Securities also may have tax consequences to a
Unitholder. See "Federal Tax Status" for each Trust. Information with respect
to the call provisions and maturity dates of the Securities is contained in
"Portfolio" for each Trust.
Each Unit of a Trust represents an undivided fractional interest in the
Securities deposited therein, in the ratio shown under "Essential
Information." Units may be purchased and certificates, if requested, will be
issued in denominations of one Unit or any multiple or fraction thereof,
subject to each Trust's minimum investment requirement of one Unit. Fractions
of Units will be computed to three decimal points. To the
GI-3
GENERAL INFORMATION
<PAGE>
extent that Units of a Trust are redeemed, the principal amount of Securities
in such Trust will be reduced and the undivided fractional interest
represented by each outstanding Unit of such Trust will increase. See "General
Information--Redemption."
Certain of the Securities in certain of the Trusts may have been acquired at a
market discount from par value at maturity. The coupon interest rates on the
discount securities at the time they were purchased and deposited in the
Trusts were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly issued
comparable securities increase, the market discount of previously issued
securities will become greater, and if such interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Investors should also
note that the value of securities purchased at a market discount will increase
in value faster than securities purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value of
securities purchased at a market discount will decrease faster than securities
purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium securities and the prepayment
benefit for lower yielding, discount securities will be reduced. A discount
security held to maturity will have a larger portion of its total return in
the form of taxable income and capital gain and loss in the form of tax-exempt
interest income than a comparable security newly issued at current market
rates. See "Federal Tax Status." Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue. Neither
the Sponsor nor the Trustee shall be liable in any way for any default,
failure or defect in any of the Securities.
Certain of the Securities in certain of the Trust Funds may be "zero coupon"
bonds, i.e., an original issue discount bond that does not provide for the
payment of current interest. Zero coupon bonds are purchased at a deep
discount because the buyer receives only the right to receive a final payment
at the maturity of the bond and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not make current
interest payments (such as the zero coupon bonds) is that a fixed yield is
earned not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to reinvest
the income on such obligation at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are securities of comparable quality which pay
interest currently. For the Federal tax consequences of original issue
discount securities such as the zero coupon bonds, see "Federal Tax Status"
for each Trust.
To the best of the Sponsor's knowledge, there is no litigation pending as of
the Initial Date of Deposit in respect of any Security which might reasonably
be expected to have a material adverse effect on the Trust Funds. At any time
after the Initial Date of Deposit, litigation may be instituted on a variety
of grounds with respect to the Securities. The Sponsor is unable to predict
whether any such litigation may be instituted, or if instituted, whether such
litigation might have a material adverse effect on the Trust Funds. The
Sponsor and the Trustee shall not be liable in any way for any default,
failure or defect in any Security.
RETIREMENT PLANS
Units of the Trusts (other than a Tax-Exempt Portfolio) 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.
GI-4
GENERAL INFORMATION
<PAGE>
Generally, capital gains and income received under each of the foregoing plans
are deferred from federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan. Such plans are
offered by brokerage firms and other financial institutions. The Trusts will
waive the $1,000 minimum investment requirement for IRA accounts. The minimum
investment is $250 for tax-deferred plans such as IRA accounts. Fees and
charges with respect to such plans may vary.
Individual Retirement Account--IRA. Any individual under age 70 1/2 may
contribute the lesser of $2,000 or 100% of compensation to an IRA annually.
Such contributions are fully deductible if the individual (and spouse if
filing jointly) are not covered by a retirement plan at work. The deductible
amount an individual may contribute to an IRA will be reduced $10 for each $50
of adjusted gross income over $25,000 ($40,000 if married, filing jointly or
$0 if married, filing separately), if either an individual or their spouse (if
married, filing jointly) is an active participant in an employer maintained
retirement plan. Thus, if an individual has adjusted gross income over $35,000
($50,000 if married, filing jointly or $0 if married, filing separately) and
if an individual or their spouse is an active participant in an employer
maintained retirement plan, no IRA deduction is permitted. Under the Internal
Revenue Code of 1986, as amended (the "Code"), an individual may make
nondeductible contributions to the extent deductible contributions are not
allowed. All distributions from an IRA (other than the return of certain
excess contributions) are treated as ordinary income for federal income
taxation purposes provided that under the Code an individual need not pay tax
on the return of nondeductible contributions. The amount includable in income
for the taxable year is the portion of the amount withdrawn for the taxable
year as the individual's aggregate deductible IRA contributions bear to the
aggregate balance of all IRAs of the individual.
A participant's interest in an IRA must be, or commence to be, distributed to
the participant not later than April 1 of the calendar year following the year
during which the participant attains age 70 1/2. Distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability, or where the amount distributed is to be rolled over to another
IRA, or where the distributions are taken as a series of substantially equal
periodic payments over the participant's life or life expectancy (or the joint
lives or life expectancies of the participant and the designated beneficiary)
are generally subject to a surtax in an amount equal to 10% of the
distribution. The amount of such periodic payments may not be modified before
the later of five years or attainment of age 59 1/2. Excess contributions are
subject to an annual 6% excise tax.
IRA applications, disclosure statements and trust agreements are available
from the Sponsor upon request.
Qualified Retirement Plans. Units of a Trust may be purchased by qualified
pension or profit sharing plans maintained by corporations, partnerships or
sole proprietors. The maximum annual contribution for a participant in a money
purchase pension plan or to paired profit sharing and pension plans is the
lesser of 25% of compensation or $30,000. Prototype plan documents for
establishing qualified retirement plans are available from the Sponsor upon
request.
Excess Distributions Tax. In addition to the other taxes due by reason of a
plan distribution, a tax of 15% may apply to certain aggregate distributions
from IRAs, Keogh plans, and corporate retirement plans to the extent such
aggregate taxable distributions exceed specified amounts (generally $150,000,
as adjusted) during a tax year. This 15% tax will not apply to distributions
on account of death, qualified
GI-5
GENERAL INFORMATION
<PAGE>
domestic relations orders or amounts eligible for tax-deferred rollover
treatment. In general, for lump sum distributions the excess distributions
over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee, Investors Fiduciary Trust Company, has agreed to act as custodian
for certain retirement plan accounts. An annual fee of $12.00 per account, if
not paid separately, will be assessed by the Trustee and paid through the
liquidation of shares of the reinvestment account. An individual wishing the
Trustee to act as custodian must complete an EVEREN UIT/IRA application and
forward it along with a check made payable to Investors Fiduciary Trust
Company. Certificates for Individual Retirement Accounts cannot be issued.
DISTRIBUTION REINVESTMENT
Each Unitholder of a 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 which is registered in such
Unitholder's state of residence and is underwritten or advised by Kemper
Financial Services, Inc. (the "Kemper Funds"), other than those Kemper Funds
sold with a contingent deferred sales charge.
If individuals indicate they wish to participate in the Reinvestment Program
but do not designate a reinvestment fund, the Program Agent referred to below
will contact such individuals to determine which reinvestment fund or funds
they wish to elect. Since the portfolio securities and investment objectives
of such Kemper Funds generally will differ significantly from that of the
Trusts, Unitholders should carefully consider the consequences before
selecting such Kemper Funds for reinvestment. Detailed information with
respect to the investment objectives and the management of the Funds is
contained in their respective prospectuses, which can be obtained from the
Sponsor upon request. An investor should read the prospectus of the
reinvestment fund selected prior to making the election to reinvest.
Unitholders who desire to have such distributions automatically reinvested
should inform their broker at the time of purchase or should file with the
Program Agent a written notice of election.
Unitholders who are receiving distributions in cash may elect to participate
in distribution reinvestment by filing with the Program Agent an election to
have such distributions reinvested without charge. Such election must be
received by the Program Agent at least ten days prior to the Record Date
applicable to any distribution in order to be in effect for such Record Date.
Any such election shall remain in effect until a subsequent notice is received
by the Program Agent. See "General Information--Unitholders--Distributions to
Unitholders."
The Program Agent is Investors Fiduciary Trust Company. All inquiries
concerning participation in distribution reinvestment should be directed to
the Program Agent at P.O. Box 419430, Kansas City, Missouri 64173-0216,
telephone (816) 474-8786.
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each
Trust were as set forth in the "Essential Information" for each Trust.
Estimated Current Return is calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net
annual interest income per Unit will vary with changes in fees and expenses of
the Trustee, the Sponsor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of the Securities while the Public
Offering Price will
GI-6
GENERAL INFORMATION
<PAGE>
vary with changes in the offering price of the underlying Securities and
accrued interest; therefore, there is no assurance that the present Estimated
Current Return will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and determines
and factors in the relative weightings of, the market values, yields (which
takes into account the amortization of premiums and the accretion of
discounts) and estimated retirements or average life of all of the Securities
in a Trust and (2) takes into account the expenses and sales charge associated
with each Trust Unit. Since the market values and estimated retirements of the
Securities and the expenses of a Trust will change, there is no assurance that
the present Estimated Long-Term Return will be realized in the future.
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of Estimated Long-Term Return reflects the estimated
date and amount of principal returned while Estimated Current Return
calculations include only net annual interest income and Public Offering
Price.
In order to acquire certain of the Securities contracted for by a Trust, it
may be necessary for the Sponsor or Trustee to pay on the dates for delivery
of such Securities amounts covering accrued interest on such Securities which
exceed the amount which will be made available in the letter of credit
furnished by the Sponsor on the Initial Date of Deposit. The Trustee has
agreed to pay any amounts necessary to cover any such excess and will be
reimbursed therefor, without interest, when funds become available from
interest payments on the Securities deposited in that Trust.
Payments received in respect of mortgages underlying Ginnie Maes in each
series of a 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 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
mortgages underlying 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 a
GNMA Portfolio are prepaid faster than the other underlying mortgages, the net
annual interest rate per Unit and the Estimated Current Return on the Units of
a GNMA Portfolio can be expected to decline. Monthly payments to the
Unitholders of a GNMA Portfolio will reflect all of these factors.
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the Sponsor
intends to, and certain of the Underwriters may, subject to change at any
time, maintain a market for Units of the Trust Funds offered hereby and to
continuously offer to purchase said Units at prices, determined by the
Evaluator, based on the aggregate bid prices of the underlying Securities in
such Trusts, together with accrued interest to the expected dates of
settlement. To the extent that a market is maintained during the initial
offering period, the prices at which Units will be repurchased will be based
upon the aggregate offering side evaluation of the Securities in the Trusts.
The aggregate bid prices of the underlying Securities in each Trust are
expected to be less than the related aggregate offering prices (which is the
evaluation method used during the initial public offering period).
Accordingly, Unitholders who wish to dispose of their Units should inquire of
their bank or broker as to current market prices in order to determine whether
there is in existence any price in excess of the Redemption Price and, if so,
the amount thereof.
The offering price of any Units resold by the Sponsor or Underwriters will be
in accord with that described in the currently effective Prospectus describing
such Units. Any profit or loss resulting from the
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resale of such Units will belong to the Sponsor and/or the Underwriters. The
Sponsor and/or the Underwriters may suspend or discontinue purchases of Units
of any Trust if the supply of Units exceeds demand, or for other business
reasons.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market described
above may cause Units to be redeemed by the Trustee by making a written
request to the Trustee, Investors Fiduciary Trust Company, P.O. Box 419430,
Kansas City, Missouri, 64173-0216 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, properly endorsed
or accompanied by a written instrument or instruments of transfer in a form
satisfactory to the Trustee. Unitholders must sign the request, and such
certificate or transfer instrument, exactly as their names appear on the
records of the Trustee and on any certificate representing the Units to be
redeemed. If the amount of the redemption is $25,000 or less and the proceeds
are payable to the Unitholder(s) of record at the address of record, no
signature guarantee is necessary for redemptions by individual account owners
(including joint owners). Additional documentation may be requested, and a
signature guarantee is always required, from corporations, executors,
administrators, trustees, guardians or associations. The signatures must be
guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other guarantee program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. A certificate
should only be sent by registered or certified mail for the protection of the
Unitholder. Since tender of the certificate is required for redemption when
one has been issued, Units represented by a certificate cannot be redeemed
until the certificate representing such Units has been received by the
purchasers.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "Redemption Date")
by payment of cash equivalent to the Redemption Price for such Trust,
determined as set forth below under "Computation of Redemption Price," as of
the evaluation time stated under "Essential Information," next following such
tender, multiplied by the number of Units being redeemed. Any Units redeemed
shall be cancelled and any undivided fractional interest in the Trust
extinguished. The price received upon redemption might be more or less than
the amount paid by the Unitholder depending on the value of the Securities in
the Trust at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, any time a Unitholder elects to tender Units
for redemption, such Unitholder should make sure that the Trustee has been
provided a certified tax identification number in order to avoid this possible
"back-up withholding." In the event the Trustee has not been previously
provided such number, one must be provided at the time redemption is
requested.
Any amounts paid on redemption representing interest shall be withdrawn from
the Interest Account for such Trust to the extent that funds are available for
such purpose. All other amounts paid on redemption shall be withdrawn from the
Principal Account for such Trust. The Trustee is empowered to sell Securities
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for a Trust in order to make funds available for the redemption of Units of
such Trust. Such sale may be required when Securities would not otherwise be
sold and might result in lower prices than might otherwise be realized. To the
extent Securities are sold, the size and diversity of a Trust will be reduced.
In the case of a U.S. Treasury Portfolio or a GNMA Portfolio, Securities will
be sold by the Trustee so as to maintain, as closely as practicable, the
original percentage relationship between the principal amounts of the
Securities in such Trusts. The Securities to be sold for purposes of redeeming
Units will be selected from a list supplied by the Sponsor. The Securities
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 Trusts.
Provision is made under the related Trust Agreements for the Sponsor to
specify minimum face amounts in which blocks of Securities 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 Securities 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 U.S. Treasury
Obligations and Ginnie Maes 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 Trusts, such excess
proceeds will be distributed pro rata to all remaining Unitholders of record
of such Trusts, unless reinvested in substitute Securities. See "General
Information--Investment Supervision."
The Trustee is irrevocably authorized in its discretion, if an Underwriter
does not elect to purchase any Unit tendered for redemption, in lieu of
redeeming such Units, to sell such Units in the over-the-counter market for
the account of tendering Unitholders at prices which will return to the
Unitholders amounts in cash, net after brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Price for such
Units. In the event of any such sale, the Trustee shall pay the net proceeds
thereof to the Unitholders on the day they would otherwise be entitled to
receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or during which (as determined by the
Securities and Exchange Commission) trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which disposal by the Trustee of Securities is not reasonably practicable or
it is not reasonably practicable to fairly determine the value of the
underlying Securities in accordance with the Trust Agreements; or (3) for such
other period as the Securities and Exchange Commission may by order permit.
The Trustee is not liable to any person in any way for any loss or damage
which may result from any such suspension or postponement.
Computation of Redemption Price. The Redemption Price for Units of each Trust
is computed by the Evaluator as of the evaluation time stated under "Essential
Information" next occurring after the tendering of a Unit for redemption and
on any other business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash deposited in the
Trust to purchase Securities not applied to the purchase of such Securities;
(2) the aggregate value of each issue of the Securities (including "when
issued" contracts, if any) held in the Trust as determined by the Evaluator on
the basis of bid prices therefor; and (3) interest accrued and unpaid on the
Securities in the Trust as of the date of computation;
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B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust and for which no deductions have
been previously made for the purpose of additions to the Reserve Account
described under "General Information--Expenses of the Trusts"; (2) an amount
representing estimated accrued expenses of the Trust, including but not
limited to fees and expenses of the Trustee (including legal and auditing fees
and any insurance costs), the Evaluator, the Sponsor and bond counsel, if any;
(3) cash held for distribution to Unitholders of record as of the business day
prior to the evaluation being made; and (4) other liabilities incurred by the
Trust; and
C. finally dividing the results of such computation by the number of Units of
the Trust outstanding as of the date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of any Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation
statement sent to the Underwriter and broker. Non-receipt of such
certificate(s) must be reported to the Trustee within one year; otherwise, a
2% surety bond fee will be required for replacement.
Units are transferable by making a written request to the Trustee and, in the
case of Units evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unitholder. Unitholders must sign
such written request, and such certificate or transfer instrument, exactly as
their names appear on the records of the Trustee and on any certificate
representing the Units to be transferred. Such signatures must be guaranteed
by a participant in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guarantee program in addition to, or in substitution
for, STAMP, as may be accepted by the Trustee.
Units may be purchased and certificates, if requested will be issued in
denominations of one Unit subject to each Trust's minimum investment
requirement of 100 Units or any whole Unit multiple thereof subject to any
minimum requirement established by the Sponsor from time to time. Any
certificate issued will be numbered serially for identification, issued in
fully registered form and will be transferable only on the books of the
Trustee. The Trustee may require a Unitholder to pay a reasonable fee, to be
determined in the sole discretion of the Trustee, for each certificate re-
issued or transferred and to pay any governmental charge that may be imposed
in connection with each such transfer or interchange. The Trustee at the
present time does not intend to charge for the normal transfer or interchange
of certificates. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity (generally
amounting to 3% of the market value of the Units), affidavit of loss, evidence
of ownership and payment of expenses incurred.
Distributions to Unitholders. Interest received by each Trust, including any
portion of the proceeds from a disposition of Securities which represents
accrued interest, is credited by the Trustee to the Interest Account for such
Trust. All other receipts are credited by the Trustee to a separate Principal
Account for the Trust. The Trustee normally has no cash for distribution to
Unitholders until it receives interest payments on the Securities in the
Trust. Since interest usually is paid semi-annually (monthly in the case of a
GNMA Portfolio), during the initial months of the Trusts, the Interest Account
of each Trust, consisting of accrued but uncollected interest and collected
interest (cash), will be predominantly the uncollected accrued interest that
is not available for distribution. On the dates set forth under "Essential
Information" for each Trust, the Trustee will commence distributions, in part
from funds advanced by the Trustee.
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Thereafter, assuming the Trust retains its original size and composition,
after deduction of the fees and expenses of the Trustee, the Sponsor and
Evaluator and reimbursements (without interest) to the Trustee for any amounts
advanced to a Trust, the Trustee will normally distribute on each Interest
Distribution Date (the fifteenth of the month) or shortly thereafter to
Unitholders of record of such Trust on the preceding Record Date (which is the
first day of each month). Unitholders of the Trusts will receive an amount
substantially equal to one-twelfth of such holders' pro rata share of the
estimated net annual interest income to the Interest Account of such Trust.
However, interest earned at any point in time will be greater than the amount
actually received by the Trustee and distributed to the Unitholders.
Therefore, there will always remain an item of accrued interest that is added
to the daily value of the Units. If Unitholders of a Trust sell or redeem all
or a portion of their Units, they will be paid their proportionate share of
the accrued interest of such Trust to, but not including, the third business
day after the date of a sale or to the date of tender in the case of a
redemption.
In order to equalize distributions and keep the undistributed interest income
of the Trusts at a low level, all Unitholders of record in such Trust on the
first Record Date will receive an interest distribution on the first Interest
Distribution Date. Because the period of time between the first Interest
Distribution Date and the regular distribution dates may not be a full period,
the first regular distributions may be partial distributions.
Unitholders of a U.S. Treasury Portfolio which contains Stripped Treasury
Securities should note that 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 "Federal Tax Status" for the U.S. Treasury Portfolios,
if any.
Persons who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date following
their purchase of Units. Since interest on Bonds in the Trusts is payable at
varying intervals, usually in semi-annual installments, and distributions of
income are made to Unitholders at different intervals from receipt of
interest, the interest accruing to a Trust may not be equal to the amount of
money received and available for distribution from the Interest Account.
Therefore, on each Distribution Date the amount of interest actually deposited
in the Interest Account of a Trust and available for distribution may be
slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such
variances, the Trustee is authorized by the Trust Agreements to advance such
amounts as may be necessary to provide interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest, for any such
advances from funds available in the Interest Account for such Trust.
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The Trustee will distribute on each Distribution Date or shortly thereafter,
to each Unitholder of record of a Trust on the preceding Record Date, an
amount substantially equal to such holder's pro rata share of the cash
balance, if any, in the Principal Account of such Trust 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 $.01 per
Unit. Notwithstanding the foregoing, the Trustee will make a distribution to
Unitholders of all principal relating to maturing U.S. Treasury Obligations in
any U.S. Treasury Portfolio or GNMA Portfolio within twelve business days of
the date of such maturity.
In connection with GNMA Portfolios only, the terms of the Ginnie Maes provide
for payment to the holders thereof (including a GNMA Portfolio) 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 a GNMA Portfolio on the Securities
therein as it becomes payable and credit such interest to a separate Interest
Account for such GNMA Portfolio created by the Indenture. Distributions will
be made to each Unitholder of record of a GNMA Portfolio 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 GNMA Portfolio, computed as of the close of business on the
preceding Record Date.
Statements to Unitholders. With each distribution, the Trustee will furnish or
cause to be furnished to each Unitholder a statement of the amount of interest
and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit.
The accounts of each Trust are required to be audited annually, at the Trust's
expense, by independent auditors designated by the Sponsor, unless the Sponsor
determines that such an audit would not be in the best interest of the
Unitholders of such Trust. The accountants' report will be furnished by the
Trustee to any Unitholder of such Trust upon written request. Within a
reasonable period of time after the end of each calendar year, the Trustee
shall furnish to each person who at any time during the calendar year was a
Unitholder of a Trust a statement, covering the calendar year, setting forth
for the applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities (and for Tax-Exempt
Portfolios, the percentage of such amount by states and territories in which
the issuers of such Securities are located);
2. The amount paid from the Interest Account representing accrued interest of
any Units redeemed;
3. The deductions from the Interest Account for applicable taxes, if any, fees
and expenses (including auditing fees) of the Trustee, the Sponsor, the
Evaluator, and, if any, of bond counsel;
4. Any amounts credited by the Trustee to the Reserve Account described under
"General Information--Expenses of the Trusts";
5. The net amount remaining after such payments and deductions, expressed both
as a total dollar amount and a dollar amount per Unit outstanding on the last
business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of any of the
Securities and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
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2. The amount paid from the Principal Account representing the principal of
any Units redeemed;
3. The deductions from the Principal Account for payment of applicable taxes,
if any, fees and expenses (including auditing fees) of the Trustee, the
Sponsor, the Evaluator, and, if any, of bond counsel;
4. The amount of when-issued interest treated as a return of capital, if any;
5. Any amounts credited by the Trustee to the Reserve Account described under
"General Information--Expenses of the Trusts";
6. The net amount remaining after distributions of principal and deductions,
expressed both as a dollar amount and as a dollar amount per Unit outstanding
on the last business day of the calendar year; and
C. The following information:
1. A list of the Securities as of the last business day of such calendar year;
2. The number of Units outstanding on the last business day of such calendar
year;
3. The Redemption Price based on the last evaluation made during such calendar
year;
4. The amount actually distributed during such calendar year from the Interest
and Principal Accounts (and Capital Gains Account, if applicable) separately
stated, expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Dates for each such distribution.
Rights of Unitholders. A Unitholder may at any time tender Units to the
Trustee for redemption. The death or incapacity of any Unitholder will not
operate to terminate a Trust nor entitle legal representatives or heirs to
claim an accounting or to bring any action or proceeding in any court for
partition or winding up of a Trust.
No Unitholder shall have the right to control the operation and management of
any Trust in any manner, except to vote with respect to the amendment of the
Trust Agreements or termination of any Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trusts by the purchase, sale
or substitution of Securities, except in the special circumstances noted below
and as indicated earlier under "General Information--Trust Information"
regarding the substitution of Replacement Securities for any Failed
Securities. Thus, with the exception of the redemption or maturity of
Securities in accordance with their terms, the assets of the Trusts will
remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value of which
has been affected by certain adverse events including institution of certain
legal proceedings or decline in price or the occurrence of other market
factors, including advance refunding, so that in the opinion of the Sponsor
the retention of such Securities in a Trust would be detrimental to the
interest of the Unitholders. The proceeds from any such sales, exclusive of
any portion which represents accrued interest, will be credited to the
Principal Account of such Trust for distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of Securities to issue new obligations in exchange or substitution for
any of such Securities pursuant to a refunding financing plan, except that the
Sponsor may instruct the Trustee to accept or reject such an offer or to take
any other action with respect thereto as the Sponsor may deem proper if (1)
the issuer is in default with respect to such Securities or (2) in the written
opinion of the Sponsor the issuer will probably default with
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respect to such Securities in the reasonably forseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after deposit of
obligations in exchange or substitution for underlying Securities, the Trustee
is required to give notice thereof to each Unitholder, identifying the
Securities eliminated and the Securities substituted therefor.
The Trustee may sell Securities, designated by the Sponsor, from a Trust for
the purpose of redeeming Units of such Trust tendered for redemption and the
payment of expenses.
ADMINISTRATION OF THE TRUSTS
The Trustee. The Trustee, Investors Fiduciary Trust Company, is a trust
company specializing in investment related services, organized and existing
under the laws of Missouri, having its trust office at 127 West 10th Street,
Kansas City, Missouri 64105. The Trustee is subject to supervision and
examination by the Division of Finance of the State of Missouri and the
Federal Deposit Insurance Corporation. Investors Fiduciary Trust Company is
owned by State Street Boston Corporation.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting the portfolio of any Trust. For information relating to the
responsibilities of the Trustee under the Trust Agreements, reference is made
to the material set forth under "General Information--Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep records of all
transactions at its office. Such records shall include the name and address
of, and the number of Units held by, every Unitholder of each Trust. Such
books and records shall be open to inspection by any Unitholder of such Trust
at all reasonable times during usual business hours. The Trustee shall make
such annual or other reports as may from time to time be required under any
applicable state or Federal statute, rule or regulation. The Trustee shall
keep a certified copy or duplicate original of the Trust Agreements on file in
its office available for inspection at all reasonable times during usual
business hours by any Unitholder, together with a current list of the
Securities held in each Trust. Pursuant to the Trust Agreements, the Trustee
may employ one or more agents for the purpose of custody and safeguarding of
Securities comprising the Trusts.
Under the Trust Agreements, the Trustee or any successor trustee may resign
and be discharged of its duties created by the Trust Agreements by executing
an instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of resignation
to all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may at any time remove the Trustee,
with or without cause, and appoint a successor trustee as provided in the
Trust Agreements. Notice of such removal and appointment shall be mailed to
each Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original Trustee shall vest in the successor. The Trustee
shall be a corporation organized under the laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers.
The Trustee shall have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
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<PAGE>
The Evaluator. EVEREN Unit Investment Trusts, a service of EVEREN Securities,
Inc., the Sponsor, also serves as Evaluator. The Evaluator may resign or be
removed by the Trustee in which event the Trustee is to use its best efforts
to appoint a satisfactory successor. Such resignation or removal shall become
effective upon acceptance of appointment by the successor evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within 30
days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to each
Unitholder. At the present time, pursuant to a contract with the Evaluator,
Muller Data Corporation, a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities, provides,
for both the initial offering period and secondary market transactions,
portfolio evaluations of the Securities in the Trusts which are then reviewed
by the Evaluator. In the event the Sponsor is unable to obtain current
evaluations from Muller Data Corporation, it may make its own evaluations or
it may utilize the services of any other non-affiliated evaluator or
evaluators it deems appropriate.
Amendment and Termination. The Trust Agreements may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or
(3) to make such provisions as shall not adversely affect the interests of the
Unitholders. The Trust Agreements with respect to the Trusts may also be
amended in any respect by the Sponsor and the Trustee, or any of the
provisions thereof may be waived, with the consent of the holders of Units
representing 66 2/3% of the Units then outstanding of such Trust, provided
that no such amendment or waiver will reduce the interest of any Unitholder
thereof without the consent of such Unitholder or reduce the percentage of
Units required to consent to any such amendment or waiver without the consent
of all Unitholders of such Trust. In no event shall any Trust Agreement be
amended to increase the number of Units of a Trust issuable thereunder or to
permit, except in accordance with the provisions of such Trust Agreement, the
acquisition of any Securities in addition to or in substitution for those
initially deposited in a Trust. The Trustee shall promptly notify Unitholders
of the substance of any such amendment.
The Trust Agreements provide that the Trusts shall terminate upon the
maturity, redemption or other disposition of the last of the Securities held
in a Trust. If the value of a Trust shall be less than the applicable minimum
value stated under "Essential Information," the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate the Trust. A
Trust may be terminated at any time by the holders of Units representing 66
2/3% of the Units thereof then outstanding. In the event of termination of a
Trust, written notice thereof will be sent by the Trustee to all Unitholders
of such Trust. Within a reasonable period after termination, the Trustee will
sell any Securities remaining in such Trust and, after paying all expenses and
charges incurred by the Trust, will distribute to Unitholders thereof (upon
surrender for cancellation of certificates for Units, if issued) their pro
rata share of the balances remaining in the Interest and Principal Accounts
(and Capital Gains Account, if applicable) of such Trust.
Limitations on Liability. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the
Trust Agreements, but will be under no liability to the Unitholders for taking
any action or refraining from any action in good faith pursuant to the Trust
Agreements or for errors in judgment, except in cases of its own gross
negligence, bad faith or willful misconduct. The Sponsor shall not be liable
or responsible in any way for depreciation or loss incurred by reason of the
sale of any Securities.
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The Trustee: The Trust Agreements provide that the Trustee shall be under no
liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies, Securities or
certificates except by reason of its own gross negligence, bad faith or
willful misconduct, nor shall the Trustee be liable or responsible in any way
for depreciation or loss incurred by reason of the sale by the Trustee of any
Securities. In the event that the Sponsor shall fail to act, the Trustee may
act and shall not be liable for any such action taken by it in good faith. The
Trustee shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon. In addition, the Trust Agreements contain other customary provisions
limiting the liability of the Trustee.
The Evaluator: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The Trust Agreements provide that the determinations made by the
Evaluator shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee or Unitholders for errors in judgment, but shall be
liable only for its gross negligence, lack of good faith or willful
misconduct.
EXPENSES OF THE TRUSTS
The Sponsor will charge the Trusts a surveillance fee for services performed
for the Trusts in an amount not to exceed that amount set forth in "Essential
Information" but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the Sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the Sponsor for providing such services. Such fee shall be based on
the total number of Units of the related Trust outstanding as of the January
Record Date for any annual period. The Sponsor will receive a portion of the
sales commissions paid in connection with the purchase of Units and will share
in profits, if any, related to the deposit of Securities in the Trusts. The
Sponsor and other Underwriters have borne all the expenses of creating and
establishing the Trusts including the cost of the initial preparation,
printing and execution of the Prospectus, Trust Agreements and certificates,
legal and accounting expenses, advertising and selling expenses, payment of
closing fees, the expenses of the Trustee, evaluation fees relating to the
deposit and other out-of-pocket expenses.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Securities in a Trust at any time during
the period. In no event shall the Trustee be paid less than $2,000 per Trust
in any one year. Funds that are available for future distributions,
redemptions and payment of expenses are held in accounts which are non-
interest bearing to Unitholders and are available for use by the Trustee
pursuant to normal trust procedures; however, the Trustee is also authorized
by the Trust Agreements to make from time to time certain non-interest bearing
advances to the Trusts. During the first year the Trustee has agreed to lower
its fees and absorb expenses by the amount set forth under "Essential
Information." The Trustee's fee will not be increased in future years in order
to make up this reduction in the Trustee's fee. The Trustee's fee is payable
on or before each Distribution Date.
For evaluation of Securities in each Trust, the Evaluator shall receive a fee,
payable monthly, calculated on the basis of that annual rate set forth under
"Essential Information," based upon the largest aggregate principal amount of
Securities in such Trust at any time during such monthly period.
GI-16
GENERAL INFORMATION
<PAGE>
The Trustee's and Evaluator's fees are deducted first from the Interest
Account of a Trust to the extent funds are available and then from the
Principal Account. Such fees may be increased without approval of Unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index
entitled "All Services Less Rent of Shelter," published by the United States
Department of Labor, or any equivalent index substituted therefor. In
addition, the Trustee's fee may be periodically adjusted in response to
fluctuations in short-term interest rates (reflecting the cost to the Trustee
of advancing funds to a Trust to meet scheduled distributions).
The following additional charges are or may be incurred by the Trusts: (a)
fees for the Trustee's extraordinary services; (b) expenses of the Trustee
(including legal and auditing expenses and insurance costs for Insured Trust
Funds, but not including any fees and expenses charged by any agent for
custody and safeguarding of Securities) and of bond counsel, if any; (c)
various governmental charges; (d) expenses and costs of any action taken by
the Trustee to protect a Trust or the rights and interests of the Unitholders;
(e) indemnification of the Trustee for any loss, liability or expense incurred
by it in the administration of a Trust not resulting from gross negligence,
bad faith or willful misconduct on its part; (f) indemnification of the
Sponsor for any loss, liability or expense incurred in acting in that capacity
without gross negligence, bad faith or willful misconduct; and (g)
expenditures incurred in contacting Unitholders upon termination of the
Trusts. The fees and expenses set forth herein are payable out of the
appropriate Trust and, when owing to the Trustee, are secured by a lien on
such Trust. Fees or charges relating to a Trust shall be allocated to each
Trust in the same ratio as the principal amount of such Trust bears to the
total principal amount of all Trusts. Fees or charges relating solely to a
particular Trust shall be charged only to such Trust.
Fees and expenses of the Trusts shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from the
Principal Accounts. The Trustee may withdraw from the Principal Account or the
interest Account of any Trust such amounts, if any, as it deems necessary to
establish a reserve for any taxes or other governmental charges or other
extraordinary expenses payable out of the Trust. Amounts so withdrawn shall be
credited to a separate account maintained for a Trust known as the Reserve
Account and shall not be considered a part of the Trust when determining the
value of the Units until such time as the Trustee shall return all or any part
of such amounts to the appropriate account.
THE SPONSOR
The Sponsor, EVEREN Unit Investment Trusts (formerly known as Kemper Unit
Investment Trusts), with an office at 77 West Wacker Drive, 29th Floor,
Chicago, Illinois 60601, (800) 621-5024, is a service of EVEREN Securities,
Inc. (formerly known as "Kemper Securities, Inc."), which is a wholly-owned
subsidiary of EVEREN Capital Corporation. The Sponsor acts as underwriter of a
number of other unit investment trusts and will act as underwriter of any
other unit investment trust products developed by the Sponsor in the future.
As of December 31, 1994, the total stockholder's equity of EVEREN Securities,
Inc. (then known as "Kemper Securities, Inc.") was $252,676,937.
If at any time the Sponsor shall fail to perform any of its duties under the
Trust Agreements or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the Trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, or (b) terminate the Trust Agreements and liquidate the Trusts as
provided therein, or (c) continue to act as Trustee without terminating the
Trust Agreements.
GI-17
GENERAL INFORMATION
<PAGE>
The foregoing financial information with regard to the Sponsor relates to the
Sponsor only and not to these Trusts. Such information is included in this
Prospectus only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations with respect to the Trusts. More comprehensive financial
information can be obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date of
Deposit included in this Prospectus have been audited by Grant Thornton LLP,
independent certified public accountants, as set forth in their report in the
Prospectus, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
GI-18
GENERAL INFORMATION
<PAGE>
<TABLE>
<CAPTION>
PAGE
CONTENTS -----
<S> <C>
SUMMARY................................................................... 2
ESSENTIAL INFORMATION..................................................... 3
THE TRUST FUNDS........................................................... 6
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS............................................................. 8
STATEMENTS OF CONDITION................................................... 9
PUBLIC OFFERING OF UNITS.................................................. 10
Public Offering Price.................................................... 10
Accrued Interest......................................................... 12
Comparison of Public Offering Price and Redemption Price................. 13
Public Distribution of Units............................................. 13
Profits of Sponsor and Underwriters...................................... 15
THE U.S. TREASURY PORTFOLIO SERIES........................................ US-1
The Trust Portfolio...................................................... US-1
Risk Factors............................................................. US-1
Portfolios............................................................... US-2
Notes to Portfolios...................................................... US-2
Federal Tax Status....................................................... US-3
Tax Reporting and Reallocation........................................... US-6
Estimated Cash Flows to Unitholders...................................... US-7
THE TAX-EXEMPT PORTFOLIOS................................................. TE-1
The Trust Portfolio...................................................... TE-1
Series Information....................................................... TE-1
Taxable Equivalent Estimated Current Return Tables....................... TE-3
Portfolio................................................................ TE-5
Notes to Portfolio....................................................... TE-7
Municipal Bond Risk Factors.............................................. TE-8
State Risk Factors and State Tax Status.................................. TE-11
Insurance on the Bonds................................................... TE-21
Federal Tax Status....................................................... TE-24
Tax Reporting and Reallocation........................................... TE-28
Underwriting............................................................. TE-29
Estimated Cash Flows to Unitholders...................................... TE-31
GENERAL INFORMATION....................................................... GI-1
Rating of Units.......................................................... GI-1
Trust Information........................................................ GI-1
Retirement Plans......................................................... GI-4
Distribution Reinvestment................................................ GI-6
Interest, Estimated Long-Term Return and Estimated Current Return........ GI-6
Market For Units......................................................... GI-7
Redemption............................................................... GI-8
Unitholders.............................................................. GI-10
Investment Supervision................................................... GI-13
Administration of the Trusts............................................. GI-14
Expenses of the Trusts................................................... GI-16
The Sponsor.............................................................. GI-17
Legal Opinions........................................................... GI-18
Independent Certified Public Accountants................................. GI-18
</TABLE>
-----------------------------------
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS MADE.
-----------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUSTS, THE TRUSTEE, OR THE SPONSOR. THE TRUSTS ARE REGISTERED AS UNIT
INVESTMENT TRUSTS UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION
DOES NOT IMPLY THAT THE TRUSTS OR THE UNITS HAVE BEEN GUARANTEED, SPONSORED,
RECOMMENDED OR APPROVED BY THE UNITED STATES OR ANY STATE OR ANY AGENCY OR
OFFICER THEREOF.
-----------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE.
<PAGE>
This Registration Statement on Form S-6 comprises the following papers and
documents.
<TABLE>
<C> <S>
The facing sheet of Form S-6.
The cross-reference sheet.
The prospectus.
The signatures.
The following exhibits.
1.1(a). Form of Trust Indenture and Agreement for U.S. Treasury Portfolio.
1.1(b). Form of Trust Indenture and Agreement for the Insured National
Series.
1.1(c). Form of Trust Indenture and Agreement for the Insured State Trust.
1.1.1(a). Standard Terms and Conditions of Trust for the U.S. Treasury
Portfolio. Reference is made to Exhibit 1.1.1 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.
1.1.1(b). Standard Terms and Conditions of Trust for the Insured National
Trust. Reference is made to Exhibit 1.1.1 to the Registration
Statement on Form S-6 with respect to Kemper Defined Funds Series 13
(Registration No. 33-52165) as filed on February 17, 1994.
1.1.1(c). Standard Terms and Conditions of Trust for the Insured State Trust.
Reference is made to Exhibit 1.1.1 to the Registration Statement on
Form S-6 with respect to Kemper Defined Funds Series 13
(Registration No. 33-52165) as filed on February 17, 1994.
2.1. Form of Certificate of Ownership (pages two to four, inclusive, of
the Standard Terms and Conditions of Trust included as Exhibit
1.1.1).
3.1. Opinion of counsel to the Sponsor as to legality of the securities
being registered including a consent to the use of its name under
the headings "Federal Tax Status" for each Trust and "Legal
Opinions" in the Prospectus and opinion of counsel as to the Federal
income tax status of the securities being registered and certain
Missouri tax matters.
3.2. Opinion and consent of special counsel to Insured California Series
21 for California tax matters.
4.1. Consent of Standard & Poor's.
4.2. Consent of Muller Data Corporation.
4.3. Consent of Grant Thornton LLP.
Ex-27. Financial Data Schedules.
</TABLE>
S-1
<PAGE>
SIGNATURES
THE REGISTRANT, EVEREN UNIT INVESTMENT TRUSTS, SERIES 38 HEREBY IDENTIFIES
SERIES 1 OF THE KEMPER GOVERNMENT SECURITIES TRUST, SERIES 39 (GNMA
PORTFOLIO), SERIES 40 (GNMA PORTFOLIO) AND SERIES 41 (U.S. TREASURY PORTFOLIO)
AND MULTI-STATE SERIES 19 OF THE KEMPER TAX-EXEMPT INSURED INCOME TRUST AND
KEMPER DEFINED FUNDS INSURED NATIONAL SERIES 1 FOR PURPOSES OF THE
REPRESENTATIONS REQUIRED BY RULE 487 AND REPRESENTS THE FOLLOWING:
(1) THAT THE PORTFOLIO SECURITIES DEPOSITED IN THE SERIES AS TO THE
SECURITIES OF WHICH THIS REGISTRATION STATEMENT IS BEING FILED DO NOT
DIFFER MATERIALLY IN TYPE OR QUALITY FROM THOSE DEPOSITED IN SUCH PREVIOUS
SERIES;
(2) THAT, EXCEPT TO THE EXTENT NECESSARY TO IDENTIFY THE SPECIFIC
PORTFOLIO SECURITIES DEPOSITED IN, AND TO PROVIDE ESSENTIAL FINANCIAL
INFORMATION FOR, THE SERIES WITH RESPECT TO THE SECURITIES OF WHICH THIS
REGISTRATION STATEMENT IS BEING FILED, THIS REGISTRATION STATEMENT DOES NOT
CONTAIN DISCLOSURES THAT DIFFER IN ANY MATERIAL RESPECT FROM THOSE
CONTAINED IN THE REGISTRATION STATEMENTS FOR SUCH PREVIOUS SERIES AS TO
WHICH THE EFFECTIVE DATE WAS DETERMINED BY THE COMMISSION OR THE STAFF; AND
(3) THAT IT HAS COMPLIED WITH RULE 460 UNDER THE SECURITIES ACT OF 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EVEREN UNIT INVESTMENT TRUSTS, SERIES 38 HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON
THE 5TH DAY OF OCTOBER, 1995.
EVEREN UNIT INVESTMENT TRUSTS,
SERIES 38
Registrant
By: EVEREN UNIT INVESTMENT TRUSTS,
a service of EVEREN Securities,
Inc.
Depositor
/s/ Michael J. Thoms
By: _________________________________
Michael J. Thoms
S-2
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON OCTOBER 5, 1995 BY THE
FOLLOWING PERSONS, WHO CONSTITUTE A MAJORITY OF THE BOARD OF DIRECTORS OF
EVEREN SECURITIES, INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
James R. Boris
- -------------------------------------------
James R. Boris Chairman and Chief Executive Officer
Stephen G. McConahey
- -------------------------------------------
Stephen G. McConahey President and Chief Operating Officer
Frank V. Geremia
- -------------------------------------------
Frank V. Geremia Senior Executive Vice President
David M. Greene
- -------------------------------------------
David M. Greene Senior Executive Vice President
Thomas R. Reedy
- -------------------------------------------
Thomas R. Reedy Senior Executive Vice President and
Director
Janet L. Reali
- -------------------------------------------
Janet L. Reali Executive Vice President, Corporate Counsel
and Secretary
Daniel D. Williams
- -------------------------------------------
Daniel D. Williams Executive Vice President and Treasurer
</TABLE>
/s/ Michael J. Thoms
_____________________________________
Michael J. Thoms
MICHAEL J. THOMS SIGNS THIS DOCUMENT PURSUANT TO A POWER OF ATTORNEY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WITH AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-6 FOR KEMPER DEFINED FUNDS SERIES 28
(REGISTRATION NO. 33-56779).
S-3
<TABLE> <S> <C>
<PAGE>
<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 Number 1 to Form S-6.
</LEGEND>
<SERIES>
<NAME> U.S. TREASURY
<NUMBER> 16
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> OCT-05-1995
<PERIOD-END> OCT-05-1995
<INVESTMENTS-AT-COST> 438,916
<INVESTMENTS-AT-VALUE> 438,916
<RECEIVABLES> 55
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 438,971
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55
<TOTAL-LIABILITIES> 55
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 438,916
<SHARES-COMMON-STOCK> 50,000
<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> 438,916
<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>
<PAGE>
<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 Number 1 to Form S-6.
</LEGEND>
<SERIES>
<NAME> INSURED NATIONAL
<NUMBER> 17
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> OCT-05-1995
<PERIOD-END> OCT-05-1995
<INVESTMENTS-AT-COST> 4,429,728
<INVESTMENTS-AT-VALUE> 4,429,728
<RECEIVABLES> 69,615
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,499,343
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,615
<TOTAL-LIABILITIES> 69,615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,429,728
<SHARES-COMMON-STOCK> 467,500
<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> 4,429,728
<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>
<PAGE>
<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 Number 1 to Form S-6.
</LEGEND>
<SERIES>
<NAME> INSURED CALIFORNIA
<NUMBER> 21
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> OCT-05-1995
<PERIOD-END> OCT-05-1995
<INVESTMENTS-AT-COST> 2,855,679
<INVESTMENTS-AT-VALUE> 2,855,679
<RECEIVABLES> 37,661
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,893,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,661
<TOTAL-LIABILITIES> 37,661
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,855,679
<SHARES-COMMON-STOCK> 295,500
<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> 2,855,679
<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>
Exhibit 1.1(A)
Everen Unit Investment Trust Series 38
U.S. Treasury Portfolio, Series 16
TRUST AGREEMENT
This Trust Agreement dated as of October 5, 1995 between Everen Unit
Investment Trusts, a service of Everen 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,
Series 16 on the Initial Date of Deposit is that amount set forth in the
section captioned "Essential Information" in the final Prospectus of the
Trust (the
<PAGE>
"Prospectus") contained in Amendment No. 1 to the Trust's Registration
Statement (Registration No. 33-62735) as filed with the Securities and
Exchange Commission on October 5, 1995. 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 reflected under "The U.S. Treasury
Portfolio Series - Portfolio" in the Prospectus.
D. Distribution Dates for the U.S. Treasury Portfolio Series shall
mean the "Distribution Dates" set forth under "Unitholders--Distributions
to Unitholders" in 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 "Unitholders - Distributions to Unitholders"
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 0.10 per $1,000 principal amount
of Securities for the U.S. Treasury Portfolio Series payable monthly.
I. The Trustee's Compensation Rate pursuant to Section 6.04 of this
Trust Agreement shall be for the 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. Notwithstanding anything to the contrary in Section 8.05, the
Trustees fee may be periodically adjusted in response to fluctuations in
short-term interest rates (reflecting the cost to the Trustee of advancing
funds to the Trust to meet scheduled distributions).
-2-
<PAGE>
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 has 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 the U.S. Treasury Portfolio Series.
N. The following sentence shall appear as the last sentence of Section
6.06(a):
"In addition, the Depositor may at any time remove the Trustee, with
or without cause, and appoint a successor trustee having qualifications and
at a rate of compensation satisfactory to the Depositor."
O. Notwithstanding anything to the contrary in Section 3.05 of this
Trust Agreement, if the balance of the Principal Account on any Record Date
is less than $.01 per Unit of the Trust Fund outstanding on such Record
Date, no distribution from the Principal Account need be made.
Notwithstanding the preceding sentence, a distribution of the balance of
the Principal Account, after any deductions set forth in Section 3.05,
shall be made no less than annually.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
EVEREN UNIT INVESTMENT TRUSTS,
A service of Everen Securities, Inc.,
Depositor
By Robert K. Burke
------------------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST
COMPANY, Trustee
By Ron Puett
------------------------------------
Operations Officer
<PAGE>
SCHEDULE TO TRUST AGREEMENT
Securities Initially Deposited
Everen Unit Investment Trusts Series 38
U.S. Treasury Portfolio, Series 16
(Note: Incorporated herein and made a part hereof for the Fund is the
"The U.S. Treasury Portfolio Series - Portfolio" for the Trust as set forth in
the Prospectus.)
<PAGE>
Exhibit 1.1(B)
Everen Unit investment Trust Series 38
(Insured National Series)
TRUST AGREEMENT
This Trust Agreement dated as of October 5, 1995 between Everen Unit
Investment Trusts, a service of Everen Securities, Inc., as Depositor, and
Investors Fiduciary Trust Company, as Trustee, sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"Kemper Defined Funds Series 13 and Subsequent Series, Standard Terms and
Conditions of Trust, Effective February 17, 1994" (herein called the "Standard
Terms and Conditions of Trust"), and such provisions as are set forth in full
and such provisions as are incorporated by reference constitute a single
instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
this instrument.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing tax-exempt obligations listed in the Schedules
hereto have been deposited in trust under this Trust Agreement as indicated
in the Trust named on the attached Schedules.
(b) For the purposes of the definition of the terms "Depositor" and
"Evaluator" in Article I, it is hereby specified that such term shall mean
Everen Unit Investment Trusts, a service of Everen Securities, Inc. or its
successors or any successor Depositor appointed.
(c) For the purposes of the definition of the term "Unit" in Article I,
it is hereby specified that the fractional undivided interest in and
ownership of the
<PAGE>
Trust is the amount set forth in the section captioned "Essential
Information" in the final Prospectus of the Trust (the "Prospectus")
contained in Amendment No. 1 to the Trust's Registration Statement
(Registration No. 33-62735) as filed with the Securities and Exchange
Commission on October 5, 1995.
(d) For purposes of the definition of the term "Fund" in Article I, it
is hereby specified that such term shall mean the term "Trust" as defined
on page 6 of the Prospectus.
(e) For purposes of the definition of the term "Trust Fund" in Article
I, it is hereby specified that such term shall include the definition of
the term "Trust Fund" as set forth on page 6 of the Prospectus and
specifically shall include Insured National Series 17.
(f) The term "Record Date" shall mean the "Record Dates" set forth
under "Unitholders - Distributions to Unitholders" of the Prospectus.
(g) The terms "Interest Distribution Date" and "Principal Distribution
Date" shall mean the "Interest Distribution Dates" and "Principal
Distribution Dates" set forth under "Unitholders - Distributions to
Unitholders" in the Prospectus.
(h) The number of Units of the Trust referred to in Section 2.01 is as
set forth in the section captioned "Essential Information" in the
Prospectus.
(i) As contemplated by Section 3.04, an initial distribution for the
Trust will be made on the Distribution Date and in the amount set forth in
the section captioned "Unitholders - Distributions to Unitholders" in the
Prospectus to all holders of record on the Record Date set forth
thereunder. Thereafter, the amounts distributed shall be calculated in the
manner set forth in Section 3.04.
(j) For the purposes of Section 4.03, the Evaluator shall receive for
evaluation of the Bonds in the Trust a fee, payable monthly, calculated on
the basis of an annual rate of $.30 per $1,000 principal amount of Bonds,
based upon the largest aggregate principal amount of Bonds in the Trust at
any time during such monthly period.
(k) For the purposes of Section 3.13, the Depositor shall receive for
portfolio surveillance services a fee calculated on the basis of an annual
rate of $.20 per $1,000 principal amount of Bonds, based upon the largest
aggregate principal amount of Bonds in the Trust at any time during such
monthly period.
(l) For the purposes of Section 8.01(g), the liquidation amount is
hereby specified as the amount set forth under "Essential Information -
Minimum
-2-
<PAGE>
Value of Trust under which Trust Agreement may be Terminated" in the
Prospectus.
(m) For the purposes of Section 8.05, with the exception of the first
year, the compensation for the Trustee is hereby specified as the amount
set forth under "Essential Information". During the first year, the Trustee
has agreed to lower its fee and to the extent necessary assume and pay out
of its own funds expenses of the Trust by the amount set forth under
"Essential Information" in the Prospectus.
(n) Any monies held to purchase "when-issued" bonds will be held in
non-interest bearing accounts.
(o) The term First Settlement Date" shall mean the "First Settlement
Date" set forth under the section captioned "Essential Information" in the
Prospectus.
(p) The fourth sentence of Section 8.06(a) is hereby eliminated and the
last sentence of such Section shall be restated as follows:
The Depositor may at any time remove the Trustee, with or without
cause, and appoint a successor Trustee by written instrument or
instruments delivered to the Trustee so removed and the successor
Trustee, provided that a notice of such removal and appointment of a
successor Trustee shall be mailed by the successor Trustee promptly
after acceptance of such appointment to each Unitholder then or
record.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
EVEREN UNIT INVESTMENT TRUSTS
a service of Everen Securities, Inc.,
Depositor
By Robert K. Burke
-------------------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST
COMPANY, Trustee
By Ron Puett
--------------------------------------
Operations Officer
<PAGE>
SCHEDULE A
Bonds Initially Deposited
Everen Unit Investment Trusts Series 38
(Insured National Series)
(Note: Incorporated herein and made a part hereof is the "Portfolio" as set
forth in the Prospectus.)
<PAGE>
Exhibit 1.1(C)
Everen Unit Investment Trusts Series 38
TRUST AGREEMENT
This Trust Agreement dated as of October 5, 1995 between Everen Unit
Investment Trusts, a service of Everen Securities, Inc., as Depositor, and
Investors Fiduciary Trust Company, as Trustee, sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"Kemper Defined Funds Series 13 and Subsequent Series (Tax-Exempt Portfolios),
Standard Terms and Conditions of Trust, Effective February 17, 1994" (herein
called the "Standard Terms and Conditions of Trust"), and such provisions as are
set forth in full and such provisions as are incorporated by reference
constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
this instrument.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing tax-exempt obligations listed in the
Schedules hereto have been deposited in trust under this Trust Agreement as
indicated in the Trust named on the attached Schedules.
(b) For the purposes of the definitions of the terms "Depositor" and
"Evaluator" in Article I, it is hereby specified that such term shall mean
Everen Unit Investment Trusts, a service of Everen Securities, Inc. or its
successors or any successor Depositor appointed.
<PAGE>
(c) For the purposes of the definition of the term "Unit" in Article
I, it is hereby specified that the fractional undivided interest in and
ownership of the Trust is the amount set forth in the section captioned
"Essential Information" in the final Prospectus of the Trust (the
"Prospectus") contained in Amendment No. 1 to the Trust's Registration
Statement (Registration No. 33-62735) as filed with the Securities and
Exchange Commission on October 5, 1995.
(d) For purposes of the definition of the term "Fund" in Article I, it
is hereby specified that such term shall mean the term "Trust" as defined
on page 6 of the Prospectus.
(e) For purposes of the definition of the term "Trust Fund" in Article
I, it is hereby specified that such term specifically shall include Insured
California Series 21 (the "Insured State Trust").
(f) The term "Record Date" shall mean the "Record Dates" set forth
under "Unitholders - Distributions to Unitholders" of the Prospectus.
(g) The terms "Interest Distribution Date" and "Principal Distribution
Date" shall mean the "Interest Distribution Dates" and "Principal
Distribution Dates" set forth under "Unitholders - Distributions to
Unitholders" in the Prospectus.
(h) The number of Units of the Trust referred to in Section 2.01 is as
set forth in the section captioned "Essential Information" in the
Prospectus.
(i) As contemplated by the last paragraph of Section 3.04, an initial
distribution for the Trust will be made on the Distribution Date and in the
amount set forth in the section captioned "Unitholders - Distributions to
Unitholders" in the Prospectus to all holders of record on the Record Date
set forth thereunder, regardless of the payment option selected.
Thereafter, the amounts distributed shall be calculated in the manner set
forth in Section 3.04. Notwithstanding anything to the contrary in Section
3.04, Unitholders may not elect to receive distributions on a quarterly or
semiannual basis.
(j) For the purposes of Section 4.03, the Evaluator shall receive for
evaluation of the Bonds in the Trust a fee, payable monthly, calculated on
the basis of an annual rate of $.30 per $1,000 principal amount of Bonds,
based upon the largest aggregate principal amount of Bonds in the Trust at
any time during such monthly period.
(k) For the purposes of Section 3.13, the Sponsor shall receive for
portfolio surveillance services a fee, payable monthly, calculated on the
basis of an annual rate of $.20 per $1,000 principal amount of Bonds, based
upon the
-2-
<PAGE>
largest aggregate principal amount of Bonds in the Trust at any time during
such monthly period.
(l) For the purposes of Section 8.01(g), the liquidation amount is
hereby specified as the amount set forth under "Essential Information -
Minimum Value of Trust under which Trust Agreement may be Terminated" in
the Prospectus.
(m) For the purposes of Section 8.05, with the exception of the first
year, the compensation for the Trustee is hereby specified as the amount
set forth under "Essential Information" 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. During the first year,
the Trustee has agreed to lower its fee and to the extent necessary assume
and pay out of its own funds expenses of the Trust by the amount set forth
under "Essential Information" in the Prospectus. Notwithstanding anything
to the contrary in Section 8.05, the Trustee's fee may be periodically
adjusted in response to fluctuations in short-term interest rates
(reflecting the cost to the Trustee of advancing funds to the Trust to meet
scheduled distributions).
(n) Any monies held to purchase "when-issued" bonds will be held in
non-interest bearing accounts.
(o) The term "First Settlement Date" shall mean the "First Settlement
Date" as set forth under the section captioned "Essential Information" in
the Prospectus.
(p) The fourth sentence of Section 8.06(a) is hereby deleted and
replaced with the following:
"The Depositor may at any time remove the Trustee, with or without
cause, and appoint a successor trustee having qualifications and at a rate
of compensation satisfactory to the Depositor."
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
EVEREN UNIT INVESTMENT TRUSTS
a service of Everen Securities, Inc.,
Depositor
By Robert K. Burke
----------------------------------
Senior Vice President
INVESTORS FIDUCIARY TRUST
COMPANY, Trustee
By Ron Puett
-----------------------------------
Operations Officer
<PAGE>
SCHEDULE A
Bonds Initially Deposited
Everen Unit Investment Trusts Series 38
(Insured California Series 21)
(Note: Incorporated herein and made a part hereof is the "The Tax-Exempt
Portfolio Series - Portfolio" as set forth in the Prospectus.)
<PAGE>
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
October 5, 1995
Everen Unit Investment Trusts,
a service of Everen Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Re: Everen Unit Investment Trusts Series 38
---------------------------------------
Gentlemen:
We have served as counsel for Everen Unit Investment Trusts, a service of
Everen Securities, Inc., as Sponsor and Depositor of Everen Unit Investment
Trusts Series 38 (the "Fund"), in connection with the preparation, execution and
delivery of the Trust Agreements dated the date of this opinion between Everen
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 the Trust Agreements with the Trustee and
pursuant to which the Trustee has issued to or on the order of the Depositor a
certificate or certificates representing all the Units of fractional undivided
interest in, and ownership of, the Fund, created under said Trust Agreements.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreements and the execution
and issuance of certificates evidencing the Units of the Fund have been duly
authorized; and
2. The certificates evidencing the Units of the Fund, when duly executed
and delivered by the Depositor and the Trustee in accordance with the
aforementioned Trust Agreement, will constitute a valid and binding obligation
of the Fund and the Depositor in accordance with the terms thereof.
<PAGE>
-2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-62735) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
<PAGE>
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
October 5, 1995
Everen Unit Investment Trusts
a service of Everen Securities, Inc.
77 West Wacker Drive, 29th Floor
Chicago, Illinois 60601
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64405
Re: Everen Unit Investment Trusts Series 38
(Insured National Series 17 and Insured California Series 21)
Gentlemen:
We have acted as counsel for Everen Unit Investment Trusts, Depositor of
Everen Unit Investment Trusts Series 38 (Insured National Series 17 and Insured
California Series 21) (collectively, the "Fund" and each a "Trust Fund"), in
connection with the issuance of Units of fractional undivided interest in the
Trust Fund of said Fund under the Trust Agreement dated October 5, 1995 (the
"Indenture") between Everen Unit Investment Trusts, as Depositor and Evaluator
and Investors Fiduciary Trust Company, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust Fund 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 as owning a pro rata share of
each asset of the respective Trust Fund in the proportion that the number of
Units
<PAGE>
-2-
of such Trust Fund held by him bears to the total number of Units outstanding
of such Trust Fund. Under subpart E, subchapter J of chapter 1 of the Code,
income of each Trust Fund will be treated as income of each Unitholder of the
respective Trust Fund in the proportion described, and an item of Trust Fund
income will have the same character in the hands of a Unitholder as it would
have in the hands of the Trustee. Accordingly, to the extent that the income
of a Trust Fund consists of interest and original issue discount excludable
from gross income under Section 103 of the Code, such income will be
excludable from Federal gross income of the Unitholders, except in the case
of a Unitholder who is a substantial user (or a person related to such user)
of a facility financed through issuance of any industrial development bonds
or certain private activity bonds held by the respective Trust Fund. In the
case of such Unitholder (and no other) interest received with respect to his
Units attributable to such industrial development bonds or such private
activity bonds is includable in his gross income. In the case of certain
corporations, interest on the Bonds is included in computing the alternative
minimum tax pursuant to Section 56(c) of the Code, the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code, and the branch profits
tax imposed by Section 884 of the Code with respect to U.S. branches of
foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon redemption or
sale of his Units. Such gain or loss is measured by comparing the proceeds of
such redemption or sale with the adjusted basis of the Units represented by
his Unit. Before adjustment, such basis would normally be cost if the
Unitholder had acquired his Units by purchase, plus his aliquot share of
advances by the Trustee to a Trust Fund to pay interest on Bonds delivered
after the Unitholder's settlement date to the extent that such interest
accrued on the Bonds during the period from the Unitholder's settlement date
to the date such Bonds are delivered to the respective Trust Fund, but only
to the extent that such advances are to be repaid to the Trustee out of
interest received by such Trust Fund with respect to such Bonds. In addition,
such basis will be increased by the Unitholder's aliquot share of the accrued
original issue discount with respect to each Bond held by a Trust Fund with
respect to which there was an original issue discount at the time the Bond
was issued and reduced by the annual amortization of bond premium, if any, on
Bonds held by the Trust Fund.
(iv) If the Trustee disposes of a Trust Fund asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is recognized to
the Unitholder and the amount thereof is measured by comparing the
Unitholder's aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of. Such basis is
ascertained by apportioning the tax basis for his Units among each of the
Trust Fund assets (as of the date on which his Units were acquired) ratably
according to their values
<PAGE>
-3-
as of the valuation date nearest the date on which he purchased such Units. A
Unitholder's basis in his Units and of his fractional interest in each Trust
Fund asset must be reduced by the amount of his aliquot share of interest
received by the Trust Fund, if any, on bonds delivered after the Unitholder's
settlement date to the extent that such interest accrued on the Bonds during
the period from the Unitholder's settlement date to the date such Bonds are
delivered to the Trust Fund, must be reduced by the annual amortization of
bond premium, if any, on Bonds held by the Trust Fund and must be increased
by the Unitholder's share of the accrued original issue discount with respect
to each Bond which, at the time the Bond was issued, had original issue
discount.
(v) In the case of any Bond held by the Trust Fund where the "stated
redemption price at maturity" exceeds the "issue price", such excess shall be
original issue discount. With respect to each Unitholder, upon the purchase
of his Units subsequent to the original issuance of Bonds held by the Trust
Fund, Section 1272(a)(7) of the Code provides for a reduction in the accrued
"daily portion" of such original issue discount upon the purchase of a Bond
subsequent to the Bond's original issue, under certain circumstances. In the
case of any Bond held by the Trust Fund the interest on which is excludable
from gross income under Section 103 of the Code, any original issue discount
which accrues with respect thereto will be treated as interest which is
excludable from gross income under Section 103 of the Code.
(vi) Certain bonds in the portfolios of certain of the Trust Fund have
been insured by the issuers thereof against default in the prompt payment of
principal and interest. Insurance has been obtained for such bonds, or, in
the case of a commitment, the bonds will be ultimately insured under the
terms of such an insurance policy, which are designated as issuer insured
bonds on the portfolio pages of the respective Trust Fund in the prospectus
for a Trust Fund, by the issuer of such bonds. Insurance obtained by the
issuer is effective so long as such bonds remain outstanding. For each of
these bonds, we have been advised that the aggregate principal amount of such
bonds listed on the portfolio page for the respective Trust Fund was acquired
by the applicable Trust Fund and are part of the series of such bonds listed
on the portfolio page for the respective Trust Fund in the aggregate
principal amount listed on the portfolio page for the respective Trust Fund.
Based upon the assumption that the bonds acquired by the applicable Trust
Fund are part of the series covered by an insurance policy or, in the case of
a commitment, will be ultimately insured under the terms of such an insurance
policy, it is our opinion that any amounts received by the applicable Trust
Fund representing maturing interest on such bonds will be excludable from
federal gross income if, and to the same extent as, such interest would have
been so excludable if paid in normal course by the Issuer provided that, at
the time such policies are purchased, the amounts paid
<PAGE>
-4-
for such policies are reasonable, customary and consistent with the
reasonable expectation that the Issuer of the bonds, rather than the insurer,
will pay debt service on the bonds. Paragraph (ii) of this opinion is
accordingly applicable to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued.
In addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the bond on
the date a Unitholder acquires his Units, and the price the Unitholder pays for
his Units.
Because the Trust Funds do not include any "private activity" bonds within
the meaning of Section 57 (a)(5) of the Code issued on or after August 8, 1986,
none of the Trust Funds' interest income shall be treated as an item of tax
preference when computing the alternative minimum tax. In the case of
corporations, for taxable years beginning after December 31, 1986, the
alternative minimum tax and the Superfund Tax depend upon the corporation's
alternative minimum taxable income ("AMTI") which is the corporation's taxable
income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used in
computing AMTI and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust or
REMIC) for taxable years beginning after 1989, is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in a Trust Fund, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers are
required to disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year of
100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, the interest on which is exempt from Federal income taxes for such taxable
year. Under rules prescribed by Section 265, the amount of interest otherwise
deductible by such financial institutions in any taxable year which is deemed to
be attributable to tax-exempt obligations acquired after August 7, 1986,
<PAGE>
-5-
will be the amount that bears the same ratio to the interest deduction otherwise
allowable (determined without regard to Section 265) to the taxpayer for the
taxable year as the taxpayer's average adjusted basis (within the meaning of
Section 1016) of tax-exempt obligations acquired after August 7, 1986, bears to
such average adjusted basis for all assets of the taxpayer, unless such
financial institution can otherwise establish, under regulations, to be
prescribed by the Secretary of the Treasury, the amount of interest on
indebtedness incurred or continued to purchase or carry such obligations.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued) subject to a statutory
de minimis rule. Market discount can arise based on the price a Trust Fund
pays for Bonds or the price a Unitholder pays for his or her Units. Under the
Tax Act, accretion of market discount is taxable as ordinary income; under prior
law, the accretion had been treated as capital gain. Market discount that
accretes while a Trust Fund holds a Bond would be recognized as ordinary income
by the Unitholders when principal payments are received on the Bonds, upon sale
or at redemption (including early redemption), or upon the sale or redemption of
his or her Units, unless a Unitholder elects to include market discount in
taxable income as it accrues.
We have also examined the laws of the State of Missouri to determine their
applicability to the Fund. It is our opinion that under Missouri law, as
presently enacted and construed:
(i) Each Trust Fund is not an association taxable as a corporation for
Missouri income tax purposes.
(ii) The Unitholders of each Trust Fund will be treated as the owners of
a pro rata portion of each Trust Fund and the income of each Trust Fund will
therefore be treated as income of the Unitholders under Missouri law.
<PAGE>
-6-
(iii) Each Trust Fund will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of each Trust
will not generally be subject to the Kansas City, Missouri Earnings and
Profits Tax or the City of St. Louis Earnings Tax (except in the case of
certain Unitholders, including corporations, otherwise subject to the St.
Louis City Earnings Tax).
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including state or local taxes or collateral tax
consequences with respect to the purchase, ownership and disposition of Units.
Very truly yours,
CHAPMAN AND CUTLER
MJK/ch
<PAGE>
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
October 5, 1995
Everen Unit Investment Trusts
77 West Wacker Drive
Chicago, Illinois 60601
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Re: Everen Unit Investment Trusts Series 38
U.S. Treasury Portfolio, Series 16
Gentlemen:
We have acted as counsel for Everen Unit Investment Trusts, a service of
Everen Securities, Inc., Depositor of Everen Unit Investment Trusts Series 38,
U.S. Treasury Portfolio, Series 16 (the "Trust Fund"), in connection with the
issuance of Units of fractional undivided interest in the Trust Funds, under a
Trust Agreement, dated October 5, 1995 (the "Indenture"), between Everen Unit
Investment Trust Funds, 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) The Trust Fund is not an association taxable as a corporation
but will be governed by the provisions of Subchapter J (relating to Trust
Funds) 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 Trust Fund 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 Trust Fund. Each Unitholder will also be required to
include in taxable income for federal income tax purposes, original issue
discount with respect to his interest in any U.S. Treasury Obligation held
by the Trust Fund which was issued with original issue discount at the
<PAGE>
-2-
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 Trust Fund. The total cost to a Unitholder of
his Units, including sales charges, is allocated among his pro rata portion
of each asset held by the Trust Fund (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 the Trust Fund. 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
Fund 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 interests in "stripped" U.S.
Treasury bonds, a Unitholder's initial cost for his pro rata portion of
each Stripped Treasury Security held by the Trust Fund (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 Trust Fund 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 the
Trust Fund may be subject to adjustment as discussed in paragraph (v)
hereof.
<PAGE>
-3-
(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 the Trust Fund 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 Trust Fund 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 deducible 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 the
Trust Fund. 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 the Trust Fund may be
adjusted to reflect the accrual of market discount (if the Unitholder has
elected to include such discount in income as it
<PAGE>
-4-
accrues), original issue 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
the Trust Fund for their share of accrued interest received by the Trust
Fund, 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 the Trust
Fund 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 Fund, including fees of the Trustee and the
Evaluator but does not include amortizable bond premium on U.S. Treasury
Obligations held by the Trust Fund.
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 Trust Fund 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 Fund 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>
-5-
We have also examined the laws of the State of Missouri to determine
their applicability to the Trust Fund. It is our opinion that under Missouri
law, as presently enacted and construed:
(i) The Trust Fund is not an association taxable as a corporation for
Missouri income tax purposes.
(ii) The Unitholders of the Trust Fund will be treated as the owners
of a pro rata portion of the Trust Fund and the income of the Trust Fund
will therefore be treated as income of the Unitholders under Missouri law.
(iii) The Trust Fund will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of the Trust
Fund will not generally be subject to the Kansas City, Missouri Earnings
and Profits Tax or the City of St. Louis Earnings Tax (except in the case
of certain Unitholders, including corporations, otherwise subject to the
St. Louis City Earnings Tax).
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including state or local taxes or collateral tax
consequences with respect to the purchase, ownership and disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-62735) 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>
Exhibit 3.2
ORRICK, HERRINGTON & SUTCLIFFE
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
October 5, 1995
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Re: Everen Unit Investment Trusts Series 38
Insured California Series 21
Dear Sirs:
We have acted as special California counsel for Everen Unit Investment
Trust, a Service of Everen Securities, Inc., as Depositor of Everen Unit
Investment Trusts Series 38--Insured California Series 21 (the "Fund"), in
connection with the issuance under the Trust Indenture and Agreement dated
August 17, 1995, between Everen Unit Investment Trust, a Service of Everen
Securities, Inc., as Depositor, and Investors Fiduciary Trust Company, as
Trustee, of 295,500 Units of fractional undivided interest in the Fund (the
"Units") in exchange for certain bonds, as well as "regular-way" and "when-
issued" contracts for the purchase of bonds (such bonds and contracts are
hereinafter referred to collectively as the "Securities").
In connection therewith, we have examined such corporate records,
certificates and other documents and such questions of law as we have deemed
necessary or appropriate for the purpose of this opinion, and, on the basis of
such examination, and upon existing provisions of the Revenue and Taxation Code
of the State of California, we are of the opinion that:
1. The Fund is not an association taxable as a corporation and the
income of the Fund will be treated as the income of the certificateholders
under the income tax laws of California.
2. Amounts treated as interest on the underlying securities which
are exempt from tax under California personal income tax and property tax
laws when received by the Fund will, under such laws, retain their status
as tax-exempt interest when distributed to certificateholders. However,
interest on the underlying securities attributed to a certificateholder
which is a corporation subject to the California franchise tax laws may be
includable in its gross income for purposes of determining its California
franchise tax.
<PAGE>
Investors Fiduciary Trust Company
August 17, 1995
Page 2
3. Under California income tax law, each certificateholder in the
Fund will have a taxable event when the Fund disposes of a security
(whether by sale, exchange, redemption, or payment at maturity) or when the
certificateholder redeems or sells Units. Because of the requirement that
tax cost basis be reduced to reflect amortization of bond premium, under
some circumstances a certificateholder may realize taxable gain when Units
are sold or redeemed for an amount equal to, or less than, their original
cost. The total tax cost of each Unit to a certificateholder is allocated
among each of the bond issues held in the Fund (in accordance with the
proportion of the Fund comprised by each bond issue) in order to determine
his per unit tax cost for each bond issue; and the tax cost reduction
requirements relating to amortization of bond premium will apply separately
to the per unit cost of each bond issue. Certificateholders' bases in
their Units, and the bases for their fractional interest in each Fund
asset, may have to be adjusted for their pro rata share of accrued interest
received, if any, on securities delivered after the certificateholders'
respective settlement dates.
4. Under the California personal property tax laws, bonds (including
the Securities) or any interest therein is exempt from such tax.
5. Any proceeds paid under the insurance policy, if any, issued to
the Trustee of the Fund with respect to the Securities which represent
maturing interest on defaulted obligations held by the Trustee will be
exempt from California personal income tax if, and to the same extent as,
such interest would have been so exempt if paid by the issuer of the
defaulted obligations.
6. Under Section 17280(b)(2) of the California Revenue and Taxation
Code, interest on indebtedness incurred or continued to purchase or carry
Units of the Fund is not deductible for the purposes of the California
personal income tax. While there presently is no California authority
interpreting this provision, Section 17280(b)(2) directs the California
Franchise Tax Board to prescribe regulations determining the proper
allocation and apportionment of interest costs for this purpose. The
Franchise Tax Board has not yet proposed or prescribed such regulations.
In interpreting the generally similar Federal provision, the Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (although the
Service has not contended that a deduction for interest on indebtedness
incurred to purchase or improve a personal residence or to purchase goods
or services for personal consumption will be disallowed). In the absence
of conflicting regulations or other California authority, the California
Franchise Tax Board generally has interpreted California statutory tax
provisions in accord with Internal Revenue Service interpretations of
similar Federal provisions.
Opinions relating to the validity of securities and the exemption of
interest thereon from State of California income tax are rendered by bond
counsel to the issuing authority at the time securities are issued and we have
relied solely upon such opinions, or as to
<PAGE>
Investors Fiduciary Trust Company
August 17, 1995
Page 3
securities not yet delivered, forms of such opinions contained in official
statements relating to such securities. Except in certain instances in which we
acted as bond counsel to issuers of securities, and as such made a review of
proceedings relating to the issuance of certain securities at the time of their
issuance, we have not made any review of proceedings relating to the issuance of
securities or the bases of bond counsels' opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (SEC No. 33-62735) 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,
Orrick, Herrington & Sutcliffe
<PAGE>
EXHIBIT 4.1
STANDARD & POOR'S,
A DIVISION OF McGRAW-HILL, INC.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-1740
FAX 212/208-8262
Sanford B. Bragg
Managing Director
Managed Funds Ratings Services
Everen Unit Investment Trusts
77 West Wacker Drive - 29th Floor
Chicago, IL 60601
Re: Everen Unit Investment Trusts Series 38, containing: U.S. Treasury
Portfolio Series 16, Insured National Series 17, and Insured California
Series 21
Pursuant to your request for a Standard & Poor's rating on the
insured units of the above-captioned trust, SEC #33-62735 we have reviewed the
information presented to us and have assigned a 'AAA' rating to the units of the
trusts. The ratings are direct reflections of the portfolios of the trusts,
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 and the
above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings are not
"market" ratings nor recommendations to buy, hold, or sell the units of the
trusts or the securities contained in the trusts. Further, it should be
understood the rating on the units 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 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 ratings. 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 ratings. 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 in connection with the rating assigned to the units in the registration
statement or prospectus relating to the units or the trusts. However, this
letter should not be construed as a consent by us, within the meaning of Section
7 of the Securities Act of 1933, to the use of the name of Standard & Poor's
Ratings Group in connection with the ratings assigned to the securities
contained in the trusts. 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.
<PAGE>
We are pleased to have had the opportunity to be of service to you.
If we can be of further help, please do not hesitate to call upon us.
Sincerely,
/s/ Sanford Bragg/WD
<PAGE>
Exhibit 4.2
Consent of Muller Data Corporation,
90 Fifth Avenue,
New York, New York 10011
Everen Unit Investment Trusts
77 West Wacker Drive-29th Floor
Chicago, Illinois 60601-1994
RE: Everen Unit Investment Trusts U.S. Treasury Portfolio Series 16
Everen Unit Investment Trusts Insured National Series 17
Everen Unit Investment Trusts Insured California Series 21
Gentlemen:
We have examined Registration Statement File No. 33-62735 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 S. Buscemi
- ----------------------
Mario S. Buscemi,
Executive Vice President
NE/tg
<PAGE>
EXHIBIT 4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
-------------------------------------------------
We have issued our report dated October 5, 1995 on the statements of
condition and related portfolios of Everen Unit Investment Trusts Series 38
(U.S. Treasury Portfolio Series 16, Insured National Series 17 and Insured
California Series 21) as of October 5, 1995 contained in the Registration
Statement on Form S-6 and in the Prospectus. We consent to the use of our
report in the Registration Statement and in the Prospectus and to the use of our
name as it appears under the caption "Other Matters-Independent Certified Public
Accountants".
GRANT THORNTON LLP
Chicago, Illinois
October 5, 1995
