File No. 333-80105 CIK #910952
Securities and Exchange Commission
Washington, D. C. 20549
Post-Effective
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
Ranson Unit Investment Trusts Series 83
Name and executive office address of Depositor:
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
Name and complete address of agent for service:
Robin Pinkerton
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
( X ) Check box if it is proposed that this filing will become
effective at 2:00 p.m. on April 28, 2000 pursuant to paragraph (b) of
Rule 485.
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KEMPER GOVERNMENT SECURITIES TRUST
KEMPER DEFINED FUNDS GNMA PORTFOLIO
KEMPER DEFINED FUNDS U.S. TREASURY PORTFOLIO
EVEREN UNIT INVESTMENT TRUSTS GNMA PORTFOLIO
EVEREN UNIT INVESTMENT TRUSTS U.S TREASURY PORTFOLIO
PART ONE
Each Series of the Kemper Government Securities Trust, GNMA Portfolio,
Kemper Defined Funds GNMA Portfolio and EVEREN Unit Investment Trusts GNMA
Portfolio (collectively, the "GNMA Trust") was formed for the purpose of
obtaining safety of capital and current monthly distributions of interest and
principal through investment in a portfolio consisting of mortgage-backed
Securities of the modified pass-through type. All payments of principal and
interest on the mortgage-backed Securities are fully guaranteed by the
Government National Mortgage Association ("GNMA"). The full faith and credit of
the United States is pledged to the payment of the Securities in the GNMA Trust
but the Units of such Series are not backed by such full faith and credit.
Each Series of the Kemper Government Securities Trust, U.S. Treasury
Portfolio, Kemper Defined Funds U.S. Treasury Portfolio and EVEREN Unit
Investment Trusts U.S. Treasury Portfolio (collectively, the "U.S. Treasury
Portfolio Series") was formed for the purpose of providing safety of capital and
investment flexibility through an investment in a portfolio of interest-bearing
(or in certain Series zero coupon) U.S. Treasury obligations that are backed by
the full faith and credit of the United States Government. Interest income
distributed by the U.S. Treasury Portfolio Series is generally exempt from state
personal income taxes in all states.
Certain Series are available to non-resident aliens and the income from
such Series, provided certain conditions are met, will be exempt from
withholding for U.S. Federal income tax for such foreign investors. A foreign
investor must provide a completed W-8 form to his financial representative or
the trustee to avoid withholding on his account.
Units of the Trusts are not deposits or obligations of, or guaranteed by,
any bank, and are not Federally insured or otherwise protected by the Federal
Deposit Insurance Corporation and involve investment risk including loss of
principal.
SPONSOR: RANSON & ASSOCIATES, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THE
UNITS OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY CONTRARY
REPRESENTATION IS A CRIMINAL OFFENSE.
The investor is advised to read and retain both parts of this Prospectus for
future reference.
The date of this Part One is that date set forth in Part Two of the Prospectus
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TABLE OF CONTENTS
Page
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SUMMARY - GNMA PORTFOLIO 1
GNMA PORTFOLIO 3
The GNMA Trust 3
Risk Factors 3
Portfolios 4
Origination 5
Nature of Ginnie Maes and GNMA Guaranty 6
Life of the Securities and of the Series of the GNMA Trust 7
SUMMARY - U.S. TREASURY PORTFOLIO 8
THE U.S. TREASURY PORTFOLIO SERIES 11
Risk Factors 12
General 12
PORTFOLIO SELECTION 13
THE UNITS 13
ESTIMATED LONG-TERM AND CURRENT RETURNS 14
PUBLIC OFFERING OF UNITS 15
Public Offering Price 15
Public Distribution 19
Profits of Sponsor 20
TAX STATUS OF THE TRUSTS 20
Regulated Investment Companies 20
U.S. Treasury Portfolio Series 23
Kemper Government Securities Trust, GNMA Portfolio (Foreign Investors
Trust) and Kemper Defined Funds, GNMA Portfolio, Series 1 28
RETIREMENT PLANS 34
DISTRIBUTION REINVESTMENT 36
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REDEMPTION 37
Right of Redemption 37
Computation of Redemption Value 39
Postponement of Redemption 39
RIGHTS OF UNITHOLDERS 40
Unitholders 40
Ownership of Units 40
Certain Limitations 40
EXPENSES AND CHARGES 41
Initial Expenses 41
Fees 41
Other Charges 41
DISTRIBUTIONS FROM THE INTEREST, PRINCIPAL AND CAPITAL GAINS ACCOUNTS. 42
GNMA Trust 42
U.S. Treasury Portfolio Series 42
General 43
ADMINISTRATION OF THE TRUST 44
Records and Accounts 44
Portfolio Supervision 44
Reports to Unitholders 45
Amendments 47
Termination 47
RESIGNATION, REMOVAL AND LIABILITY 48
Regarding the Trustee 48
Regarding the Sponsor 48
Regarding the Evaluator 49
MISCELLANEOUS 49
Sponsor 49
Trustee 49
Legal Opinions 50
INDEPENDENT AUDITORS 50
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Essential Information*
Report of Independent Auditors*
Statement of Assets and Liabilities*
Statement of Operations*
Statement of Changes in Net Assets*
Schedule of Investments*
Notes to Schedule of Investments*
Notes to Financial Statements*
*INFORMATION ON THESE ITEMS APPEARS IN PART TWO
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KEMPER GOVERNMENT SECURITIES TRUST
KEMPER DEFINED FUNDS, GNMA PORTFOLIO
KEMPER DEFINED FUNDS, U.S. TREASURY PORTFOLIO
EVEREN UNIT INVESTMENT TRUSTS GNMA PORTFOLIO
SUMMARY - GNMA PORTFOLIO
General. Each Series of the Kemper Government Securities Trust, GNMA
Portfolio, Kemper Defined Funds, GNMA Portfolio and EVEREN Unit Investment
Trusts GNMA Portfolio (each a "GNMA Trust" or "Trust"), is one of a series of
unit investment trusts whose objective is to obtain safety of capital and to
provide current monthly distributions of interest and principal through
investment in a fixed portfolio initially consisting of contracts to purchase
taxable mortgage-backed securities of the modified pass-through type ("Ginnie
Maes" or "Securities"), including so-called "Ginnie Mae II's" (see "GNMA
Portfolios-Origination"), which involve larger pools of mortgages and which have
a central paying agent, fully guaranteed as to principal and interest by the
Government National Mortgage Association ("GNMA"). Certain Series of the GNMA
Trust contain Ginnie Maes which consist of pools of long term (i.e., 30 year)
mortgages on 1- to 4-family dwellings. Other Series contain Ginnie Maes
consisting of pools of mortgages on 1- to 4-family dwellings which have stated
maturity of 15 years (so called "Ginnie Mae Midgets"). See "GNMA Portfolios"
and the "Schedule of Investments" in Part Two. Under certain circumstances, the
Sponsor may direct the Trustee to reinvest certain surplus monies in the
principal account of a Series in additional Ginnie Maes. See "Administration of
the Trust - Portfolio Supervision."
The guaranteed payment of principal and interest afforded by Ginnie Maes
may make an investment in a Series of the GNMA Trust particularly well suited
for purchase by Individual Retirement Accounts, Keogh Plans, pension funds and
other tax-deferred retirement plans. In addition, the ability to buy whole or
fractional Units (minimum purchase $1,000, $250 for IRA accounts) enables such
investors to tailor the dollar amount of their purchases of Units to take
maximum possible advantage of the annual deductions available for contributions
to such plans. Investors should consult with their tax advisers before
investing. See "Retirement Plans."
Monthly Distributions. Monthly distributions of principal, prepayments of
principal, if any, and interest received by a Series of the GNMA Trust will be
paid in cash unless the Unitholder elects to have them automatically reinvested
in any open-end mutual fund underwritten or advised by Zurich Kemper
Investments, Inc. (the "Kemper Funds"), other than those Kemper Funds sold with
a contingent deferred sales charge. Since the portfolio securities and
investment objectives of such Kemper Funds may differ significantly from that of
the GNMA Trusts, Unitholders should carefully consider the consequences before
selecting such Kemper Funds for reinvestment. Any such reinvestment is made at
net asset value, that is, without a sales charge. Investors have the ability to
designate that only principal payments (including prepayments) or only interest
payments or both are to be reinvested. Investors who intend to participate in
the Reinvestment Program should so indicate at the time of their purchase. See
"Distribution Reinvestment." It should be noted by purchasers of Midget Foreign
Investors Trusts that distributions from the reinvestment fund chosen generally
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will be subject to U.S. Federal income tax withholding. Distributions will be
made on or about the last day of each month to Unitholders of record on the 1st
day of such month.
Securities. One or more different issues of Ginnie Maes were deposited in
the GNMA Trust on the Initial Date of Deposit. The current percentage
relationship among the Ginnie Maes in a GNMA Series is shown under "Essential
Information" and "Schedule of Investments" in Part Two.
Risk Factors. An investment in Units of a Series of the GNMA Trust should
be made with an understanding of the risks which an investment in fixed rate
long term debt obligations may entail, including the risk that the value of the
Portfolio and hence of the Units will decline with increases in interest rates.
Because of the shorter average life of the Securities in certain Series of the
GNMA Trust and the lower coupon interest rates on such Securities, the value of
such Series should tend to fluctuate less than longer term obligations. Some or
all of the Securities in a Series of the GNMA Trust may have been purchased at a
market discount.
Estimated Current and Long-Term Returns. The Estimated Current Return
shown under "Essential Information" in Part Two, shows the return based on the
Public Offering Price which includes a sales charge and is computed by dividing
the estimated net annual interest income by the Public Offering Price. The net
annual interest rate will vary with changes in the fees and expenses of the
Trustee, Sponsor and Evaluator and with the exchange, redemption, sale,
scheduled payments, prepayments or maturity of underlying Securities. The
Public Offering Price will also vary with fluctuations in the evaluation of the
underlying Securities and accrued interest, and, in the case of certain Trusts,
with changes in Purchased Interest and Daily Accrued Interest. Therefore, it
can be expected that the Estimated Current Return will fluctuate in the future.
The Estimated Long-Term Return is calculated using a formula which (1) takes
into consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated average life of all of the
Securities in the Trusts and (2) takes into account the expenses and sales
charge associated with each Unit of each Trust. Since the market values and
estimated average life of the Securities and the expenses of the Trusts will
change, it can be expected that the Estimated Long-Term Returns will fluctuate
in the future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated Long-Term Return
reflects the estimated date and amount of principal returned while the Estimated
Current Return calculation includes only the net annual interest rate and Public
Offering Price. See "Estimated Long-Term and Current Returns." The net annual
income is, of course, taxable to a Unitholder. The net annual income is not
taxable for Federal income tax purposes to qualified foreign investors who have
purchased Midget Foreign Investors Trusts. See "Tax Status of the Trusts" and
"Retirement Plans."
Market for Units. The Sponsor, though not obligated to do so, intends to
maintain a market for the Units of the Series of the GNMA Trust based on the
aggregate bid side evaluation of the underlying Securities plus, in the case of
certain Trusts, Purchased Interest and Daily Accrued Interest. If such market
is not maintained, a Unitholder will, nevertheless, be able to dispose of his
Units through redemption at prices based on the aggregate bid side evaluation of
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the underlying Securities in each Series. See "Redemption." Market conditions
may cause such prices to be greater or less than the amount paid for Units.
GNMA PORTFOLIO
The GNMA Trust. Each Series of the GNMA Trust is a "unit investment trust"
created under Missouri or New York law pursuant to a Trust Indenture and
Agreement (hereinafter collectively referred to as the "Indenture").* Ranson &
Associates, Inc. is the Sponsor and Evaluator of the Trusts and is successor
sponsor and evaluator of all unit investment trusts formerly sponsored by EVEREN
Unit Investment Trusts, a service of EVEREN Securities, Inc. The Bank of New
York is the Trustee of the Trusts as successor to Investors Fiduciary Trust
Company.
The purpose and objective of the GNMA Trust is to provide investors with an
appropriate vehicle to obtain safety of capital and monthly distributions of
interest and principal through investment in a fixed portfolio of securities
(the "GNMA Portfolio") consisting of taxable mortgage-backed securities of the
modified pass-through type ("Ginnie Maes") guaranteed by the Government National
Mortgage Association ("GNMA") and backed by the full faith and credit of the
United States. In addition, the Midget Foreign Investors Trusts and GNMA
Foreign Investors Portfolio Series, which are available only to non-resident
alien investors, have an additional purpose of providing income which is exempt
from withholding for U.S. Federal income taxes for such foreign investors. A
foreign investor must provide a completed W-8 Form to his financial
representative or the Trustee to avoid withholding on his account. See "Tax
Status of the Trusts."
As used herein, the term "Securities" means the Ginnie Maes described in
Part Two under "Schedule of Investments."
On the date shown, each Unit represented the fractional undivided interest
in the Securities and estimated net income of the Series of the GNMA Trust set
forth in Part Two under "Essential Information." Because regular payments of
principal are to be received and certain of the Securities from time to time may
be redeemed or will mature in accordance with their terms or may be sold under
certain circumstances described herein, the Series of the GNMA Trust is not
expected to retain its present size and composition. Units will remain
outstanding until redeemed upon tender to the Trustee by any Unitholder (which
may include the Sponsor) or until the termination of a Series of the GNMA Trust
pursuant to the Indenture.
Risk Factors. An investment in Units of a Series of the GNMA Trust should
be made with an understanding of the risks which an investment in fixed rate
long term debt obligations may entail, including the risk that the value of the
GNMA Portfolio and hence of the Units will decline with increases in interest
rates. Because of the shorter average life of the Ginnie Mae Midgets in certain
Series of the GNMA Trust, and the lower coupon interest rate on such Securities,
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* To the extent reference is made to the Indenture, any statements herein are
qualified in their entirety by the provisions of said Indenture.
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the value of the Units of such Series should tend to fluctuate less than that of
Series composed of longer term obligations. The value of the underlying
Securities will fluctuate inversely with changes in interest rates. In
addition, the potential for appreciation of the underlying Securities, which
might otherwise be expected to occur as a result of a decline in interest rates
may be limited or negated by increased principal prepayments on the underlying
mortgages. The high inflation of prior years, together with the fiscal measures
adopted to attempt to deal with it, have resulted in wide fluctuations in
interest rates and, thus, in the value of fixed rate long term debt obligations
generally. The Sponsor cannot predict whether such fluctuations will continue
in the future.
The Securities in the Series of the GNMA Trust were chosen in part on the
basis of their respective stated maturity dates. The ranges of maturity dates
of the Securities contained in a Series of the Trust are shown in Part Two on
the "Schedule of Investments." See "Life of the Securities and of the Series of
the GNMA Trust."
A Series of the GNMA Trust may be an appropriate medium for investors who
desire to participate in a portfolio of taxable fixed income securities offering
the safety of capital provided by securities backed by the full faith and credit
of the United States but who do not wish to invest the minimum $25,000 which is
required for a direct investment in GNMA guaranteed securities.
Portfolios. The GNMA Portfolios of the Series of the GNMA Trust consist of
Ginnie Maes, including so-called Ginnie Mae II's and, in the case of certain
designated Series, Ginnie Mae Midgets, fully guaranteed as to payment of
principal and interest by the Government National Mortgage Association. In
order for Ginnie Maes to be eligible for inclusion in Midget Foreign Investors
Trusts or GNMA Foreign Investors Portfolio Series, evidence must be received by
the Sponsor that the underlying mortgages were originated after July 18, 1984.
Although the Sponsor believes that all the underlying mortgages were originated
after July 18, 1984, to the extent that this is not the case, a Foreign Investor
will be subject to withholding for U.S. Federal income taxes on income derived
from mortgages that were originated on or prior to July 18, 1984. See "Tax
Status of the Trusts." Each group of Ginnie Maes described herein as having a
specified range of maturities includes individual mortgage-backed securities
which have varying ranges of maturities. Each such group of Ginnie Maes is
described as one category of securities because current market conditions accord
no difference in price among the individual Ginnie Mae securities within such
group on the basis of the difference in the maturity dates of each Ginnie Mae.
As long as this market condition prevails, a purchase of Ginnie Maes with the
same coupon rate and a maturity date within the range mentioned above will be
considered an acquisition of the same Security. In the future, however, the
difference in maturity ranges could affect the market value of the individual
Ginnie Maes. At such time, any additional purchases by a GNMA Portfolio Series
of the Trust will take into account the maturities of the individual Securities.
A Series of the GNMA Trust may contain Securities which were acquired at a
market discount. Such Securities trade at less than par value because the
interest rates thereon are lower than interest rates on comparable debt
securities being issued at currently prevailing interest rates. If interest
rates for newly issued and otherwise comparable securities increase, the market
discount of previously issued securities will increase and if interest rates for
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newly issued comparable securities decline, the market discount of previously
issued securities will decrease, other things being equal. Market discount
attributable to interest rate changes does not indicate a lack of market
confidence in the issue.
Holders of Units will be "at risk" with respect to such Securities (i.e.,
may derive either gain or loss from fluctuations in the evaluation of the
Securities) from the date they commit for Units. See "Estimated Long - Term and
Current Returns."
The mortgages underlying a Ginnie Mae may be prepaid at any time without
penalty. A lower or higher return on Units may occur depending on whether the
price at which the respective Ginnie Maes were acquired by a Series of the Trust
is lower or higher than par (which represents the price at which such Ginnie
Maes will be redeemed upon prepayment). Redemption of premium Ginnie Maes at
par pursuant to prepayments of mortgages will operate to lower the current
return on Units outstanding at that time since premium Ginnie Maes normally
carry higher interest coupons than par or discount Ginnie Maes. If mortgage
rates decline in the future, such prepayments may occur with increasing
frequency because, among other reasons, mortgagors may be able to refinance
their outstanding mortgages at lower interest rates. See "Life of the
Securities and of the Series of the GNMA Trust."
Set forth below is a brief description of the current method of origination
of Ginnie Maes; the nature of such securities, including the guaranty of GNMA;
the basis of selection and acquisition of the Ginnie Maes included in the GNMA
Portfolios; and the expected life of the Ginnie Maes in the Series of the GNMA
Trust. The "Schedule of Investments" in Part Two contains information
concerning the coupon rate and range of stated maturities of the Ginnie Maes in
such Series of the GNMA Trust.
Origination. The Ginnie Maes included in the GNMA Portfolios are backed by
the indebtedness secured by underlying mortgage pools of long term mortgages on
1- to 4-family dwellings. In the case of The Midget Foreign Investors Trusts or
GNMA Foreign Investors Portfolio Series, which may be acquired only by qualified
foreign investors, the Sponsor has acquired only pools containing mortgages
which it believes were originated after July 18, 1984. The pool of mortgages
which is to underlie a particular new issue of Ginnie Maes is assembled by the
proposed issuer of such Ginnie Maes. The issuer is typically a mortgage banking
firm, and in every instance must be a mortgagee approved by and in good standing
with the Federal Housing Administration ("FHA"). In addition, GNMA imposes its
own criteria on the eligibility of issuers, including a net worth requirement.
The mortgages which are to comprise a new Ginnie Mae pool may have been
originated by the issuer itself in its capacity as a mortgage lender or may be
acquired by the issuer from a third party. Such third party may be another
mortgage banker, a banking institution, the Veterans Administration ("VA")
(which in certain instances acts as a direct lender and thus originates its own
mortgages) or one of several other governmental agencies. All mortgages in any
given pool will be insured under the National Housing Act, as amended ("FHA-
insured") or Title V of the Housing Act of 1949 ("FMHA-insured") or guaranteed
under the Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of
Title 38, U.S.C. ("VA-guaranteed"). Such mortgages will have a date for the
first scheduled monthly payment of principal that is not more than one year
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prior to the date on which GNMA issues its guaranty commitment as described
below, will have comparable interest rates and maturity dates, and will meet
additional criteria of GNMA. All mortgages in the pools backing the Ginnie Maes
contained in the Portfolios are mortgages on 1- to 4-family dwellings (having a
stated maturity of up to 30 years, except in the case of certain Series
containing Ginnie Mae Midgets, whose stated maturity is 15 years). In general,
the mortgages in these pools provide for monthly payments over the life of the
mortgage (aside from prepayments) designed to repay the principal of the
mortgage over such period, together with interest at the fixed rate of the
unpaid balance.
To obtain GNMA approval of a new pool of mortgages, the issuer will file
with GNMA an application containing information concerning itself, describing
generally the pooled mortgages, and requesting that GNMA approve the issue and
issue its commitment (subject to GNMA's satisfaction with the mortgage documents
and other relevant documentation) to guarantee the timely payment of principal
of and interest on the Ginnie Maes to be issued by the issuer. If the
application is in order, GNMA will issue its commitment and will assign a GNMA
pool number to the pool. Upon completion of the required documentation
(including detailed information as to the underlying mortgages, a custodial
agreement with a Federal or state regulated financial institution satisfactory
to GNMA pursuant to which the underlying mortgages will be held in safekeeping,
and a detailed guaranty agreement between GNMA and the issuer) the issuance of
the Ginnie Maes is permitted. When the Ginnie Maes are issued, GNMA will
endorse its guaranty thereon. The aggregate principal amount of Ginnie Maes
issued will be equal to the then unpaid aggregate principal balances of the
pooled mortgages. The interest rate borne by the Ginnie Maes is currently fixed
at 1/2 of 1% below the interest rate of the pooled 1- to 4-family mortgages, the
differential being applied to the payment of servicing and custodial charges as
well as GNMA's guaranty fee.
Ginnie Mae II's consist of jumbo pools of mortgages consisting of pools of
mortgages from more than one issuer. The major advantage of Ginnie Mae II's
lies in the fact that a central paying agent sends one check to the holder on
the required payment date. This greatly simplifies the current procedure of
collecting distributions from each issuer of a Ginnie Mae, since such
distributions are often received late.
Nature of Ginnie Maes and GNMA Guaranty. All of the Ginnie Maes in the
GNMA Portfolio, including the Ginnie Mae II's, are of the "modified pass-
through" type, i.e., they provide for timely monthly payments to the registered
holders thereof (including the Series of the GNMA Trust) of a pro rata share of
the scheduled principal payments on the underlying mortgages, whether or not
collected by the issuers. Such monthly payments will also include, on a pro
rata basis, any prepayments of principal of such mortgages received and interest
(net of the servicing and other charges described above) on the aggregate unpaid
principal balance of such Ginnie Maes, whether or not the interest on the
underlying mortgage has been collected by the issuers.
The Ginnie Maes in the GNMA Portfolios are guaranteed as to timely payment
of principal and interest by GNMA. Funds received by the issuers on account of
the mortgages backing the Ginnie Maes in the GNMA Portfolios are intended to be
sufficient to make the required payments of principal of and interest on such
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Ginnie Maes but, if such funds are insufficient for that purpose, the guaranty
agreements between the issuers and GNMA require the issuers to make advances
sufficient for such payments. If the issuers fail to make such payments, GNMA
will do so.
GNMA is authorized by Section 306(g) of Title III of the National Housing
Act to guarantee the timely payment of principal of and interest on securities
which are based on or backed by a trust or pool composed of mortgages insured by
FHA, the Farmers' Home Administration ("FMHA") or guaranteed by the VA.
Section 306(g) provides further that the full faith and credit of the United
States is pledged to the payment of all amounts which may be required to be paid
under any guaranty under such subsection. An opinion of an Assistant Attorney
General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit."* GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under such guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages and, except to
the extent of funds received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of nor evidence any recourse against such
issuers, but recourse thereon is solely against GNMA. Holders of Ginnie Maes
(such as the GNMA Trust) have no security interest in or lien on the underlying
mortgages.
The GNMA guaranties referred to herein relate only to payment of principal
of and interest on the Ginnie Maes in the GNMA Portfolios and not to the Units
offered hereby.
Life of the Securities and of the Series of the GNMA Trust. Monthly
payments of principal will be made, and additional prepayments of principal may
be made, to the Series of the GNMA Trust in respect of the mortgages underlying
the Ginnie Maes in the GNMA Portfolios. All of the mortgages in the pools
relating to the Ginnie Maes in the GNMA Portfolios are subject to prepayment
without any significant premium or penalty at the option of the mortgagors.
While the mortgages on 1- to 4-family dwellings underlying the Ginnie Maes have
a stated maturity of up to 30 years (15 years for Ginnie Mae Midgets), it has
been the experience of the mortgage industry that the average life of comparable
mortgages, owing to prepayments, refinancings and payments from foreclosures is
considerably less.
In the mid 1970s, published tables for Ginnie Maes utilized a 12-year
average life assumption for Ginnie Mae pools of 26-30 year mortgages on 1- to
4-family dwellings. This assumption was derived from the FHA experience
relating to prepayments on such mortgages during the period from the mid 1950s
to the mid 1970s. This 12-year average life assumption was calculated in
respect of a period during which mortgage lending rates were fairly stable.
That assumption is probably no longer an accurate measure of the life of Ginnie
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* Any statement in this Prospectus that a particular Security is backed by
the full faith and credit of the United States is based upon the opinion of
an Assistant Attorney General of the United States and should be so
construed.
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Maes or their underlying single family mortgage pools. However, current yield
tables, published in 1981, still utilize the 12-year average life assumption and
Ginnie Maes continue to be traded based on this assumption. Recently, mortgages
issued at high interest rates have experienced accelerated prepayment rates
which would indicate a shorter average life than 12 years.
A number of factors, including homeowner's mobility, change in family size
and mortgage market interest rates will affect the average life of the Ginnie
Maes in the GNMA Portfolios. For example, Ginnie Maes issued during a period of
high interest rates will be backed by a pool of mortgage loans bearing similarly
high rates. In general, during a period of declining interest rates, new
mortgage loans with interest rates lower than those charged during periods of
high rates will become available. To the extent a homeowner has an outstanding
mortgage with a high rate, he may refinance his mortgage at a lower interest
rate or he may rapidly repay his old mortgage. Should this happen, a Ginnie Mae
issued with a high interest rate may experience a rapid prepayment of principal
as the underlying mortgage loans prepay in whole or in part. Accordingly, there
can be no assurance that the prepayment levels which will be actually realized
will conform to the experience of the FHA, other mortgage lenders or other
Ginnie Mae investors.
It is not possible to meaningfully predict prepayment levels regarding the
Ginnie Maes in the GNMA Portfolios. Therefore, the termination of a Series of
the GNMA Trust might be accelerated as a result of prepayments made as described
herein.
In addition to prepayments as described above, sales of Securities in the
GNMA Portfolios under certain permitted circumstances may result in an
accelerated termination of a Series of the GNMA Trust. Also, it is possible
that, in the absence of a secondary market for the Units or otherwise,
redemptions of Units may occur in sufficient numbers to reduce the GNMA
Portfolios to a size resulting in such termination. Early termination of a
Series of the GNMA Trust may have important consequences to the Unitholder,
e.g., to the extent that Units were purchased with a view to an investment of
longer duration, the overall investment program of the investor may require
readjustment; or the overall return on investment may be less or greater than
anticipated, depending, in part, on whether the purchase price paid for Units
represented the payment of an overall premium or a discount, respectively, above
or below the stated principal amounts of the underlying mortgages. In addition,
a capital gain or loss may result for tax purposes from termination of the GNMA
Portfolios.
SUMMARY - U.S. TREASURY PORTFOLIO
Each Kemper Government Securities Trust, U.S. Treasury Portfolio, Kemper
Defined Funds, U.S. Treasury Portfolio and EVEREN Unit Investment Trusts U.S.
Treasury Portfolio (collectively, the "U.S. Treasury Portfolio Series") is a
unit investment trust whose objective is to obtain safety of capital and
investment flexibility as well as current monthly distributions of interest
through investment in a fixed, laddered portfolio consisting of interest-bearing
U.S. Treasury obligations or, in certain U.S. Treasury Portfolio Series,
consisting of some or almost all zero coupon U.S. Treasury obligations (the
"U.S. Treasury Obligations"). The U.S. Treasury Portfolio Series is 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
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<PAGE>
income taxes afforded to direct owners of U.S. obligations. Each U.S. Treasury
Portfolio Series has an additional purpose of providing income which is exempt
from withholding for U.S. Federal income taxes for non-resident alien investors.
A foreign investor must provide a completed W-8 Form to his financial
representative or the Trustee to avoid withholding on his account. The
Securities are direct obligations of the United States and are backed by its
full faith and credit. The value of the Units, the estimated current return and
estimated long-term return to new purchasers will fluctuate with the value of
the portfolio which will generally decrease or increase inversely with changes
in interest rates.
The guaranteed payment of principal and interest afforded by U.S. Treasury
Obligations, and, with respect to those Series which own zero coupon U.S.
Treasury Obligations ("Stripped Treasury Securities"), the additional fact that
no interest distributions will be made prior to maturity of the Stripped
Treasury Securities may make investment in U.S. Treasury Portfolio Series
particularly well suited for purchase by Individual Retirement Accounts, Keogh
Plans, pension funds and other tax-deferred retirement plans. In addition, the
ability to buy Units (minimum purchase $1,000 per Series, $250 for IRA accounts)
at a Public Offering Price of approximately $1.00 per Unit ($10.00 per Unit for
Kemper Defined Funds and EVEREN Unit Investment Trusts) enables such investors
to tailor the dollar amount of their purchases of Units to take maximum possible
advantage of the annual deductions available for contributions to such plans.
Investors should consult with their tax advisers before investing. See
"Retirement Plans."
Monthly Distributions. Monthly distributions of interest received by each
U.S. Treasury Portfolio Series will be paid in cash unless the Unitholder elects
to have them automatically reinvested in any mutual fund underwritten or advised
by Zurich Kemper Investments, Inc. (the "Kemper Funds"), other than those Kemper
Funds sold with a contingent deferred sales charge. Since the portfolio
securities and investment objectives of such Kemper Funds may differ
significantly from that of the U.S. Treasury Portfolio, Unitholders should
carefully consider the consequences before selecting such Kemper Funds for
reinvestment. Any such reinvestment is made at net asset value (that is,
without a sales charge). Investors have the ability to designate that only
principal payments or only interest payments or both are to be reinvested (see
"Reinvestment Program"). Distributions of principal will be made in accordance
with the instructions of the investor in any month the amount in the Principal
Account equals or exceeds $1.00 per 1,000 Units ($1.00 per 100 Units for certain
Trusts). Distributions will be made as specified in Part Two for each Trust.
Stripped Treasury Securities. 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.
Stripped Treasury Securities held by any Series of the U.S. Treasury
Portfolio Series Trust shall consist solely of either of the following types of
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the registered securities: (a) U.S. Treasury debt obligations originally issued
as bearer coupon bonds which have been stripped of their unmatured interest
coupons and (b) coupons which have been stripped from U.S. Treasury bearer
bonds, either of which may be held through the Federal Reserve Bank's book entry
system called "Separate Trading of Registered Interest and Principal of
Securities" ("STRIPS"). The Stripped Treasury Securities are payable in full at
maturity at their stated maturity amount and are not subject to redemption prior
to maturity. In addition, the Stripped Treasury Securities do not make any
periodic payments of interest.
The Stripped Treasury Securities are sold at a substantial discount from
their face amounts payable at maturity. The holder of Stripped Treasury
Securities will be required to include annually in gross income an allocable
portion of the deemed original issue discount, prior to receipt of cash
attributable to that income. Accordingly, any Series owning Stripped Treasury
Securities may not be a suitable investment unless these taxes can be paid from
other funds or unless such Series is purchased by Individual Retirement
Accounts, Keogh plans or other tax-deferred retirement plans. Stripped Treasury
Securities are marketable in substantially the same manner as other discount
Treasury Securities.
Risk Factors. An investment in Units of the U.S. Treasury Portfolio should
be made with an understanding of the risks which an investment in fixed-rate
U.S. Treasury obligations may entail, including the risk that the value of the
portfolio and hence of the Units will decline with increases in interest rates.
Some or all of the Securities in the Trust Fund have been purchased at a market
discount. The current returns (coupon interest rate) of such Securities are
lower than the current returns of similar, comparably rated, Securities issued
at currently prevailing interest rates.
Additionally, an investment in a Series holding Stripped Treasury
Securities should be made with an understanding of the risks which an investment
in debt obligations, most of which were purchased at a deep discount, may
entail, including the risk that the value of the underlying debt obligations and
hence of the Units will decline with increases in interest rates. The market
value of Stripped Treasury Securities, and therefore the value of the Units, may
be subject to greater fluctuations in response to changing interest rates than
debt obligations of comparable maturities which pay interest currently. This
risk is greater when the period to maturity is longer. No distributions of
income are anticipated until maturity of the Stripped Treasury Securities. The
price per Unit will vary in accordance with fluctuations in the values of the
Stripped Treasury Securities, and the distributions could change if Stripped
Treasury Securities are paid or sold, or if the expenses of the Trust change.
The Stripped Treasury Securities will mature at one year intervals in
consecutive years and do not make any periodic payment of income prior to
maturity. Accordingly, it is not anticipated that there will be any periodic
distributions of income.
Because interest on "zero coupon" debt obligations is not distributed on a
current basis but in effect compounded, the value of securities of this type,
including the value of accreted and reinvested interest (and of a trust
comprised of these obligations), is subject to greater fluctuations than of
obligations which distribute income regularly. Accordingly, while the full
faith and the credit of the U.S. government provides a high level of protection
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against credit risks on the Securities, sale of Units before maturity of the
Securities at a time when interest rates have increased would involve greater
risk than in a trust which is invested in debt obligations or comparable
maturity which pay interest currently. This risk is greater when the period to
maturity is longer.
Estimated Current and Long-Term Returns. The Estimated Current Return is
calculated by dividing the estimated net annual interest rate per Unit by the
Public Offering Price. The net estimated annual interest rate per Unit will
vary with changes in the fees and expenses of the Trustee, Sponsor and Evaluator
and with the exchange, redemption, sales, scheduled payments, prepayments or
maturity of underlying Securities in the portfolio. The Public Offering Price
of a Trust will also vary with fluctuations in the evaluation of the underlying
Securities and accrued interest, and in the case of certain Trusts with changes
in the Purchased Interest and Daily Accrued Interest; therefore, there is no
assurance that the present Estimated Current Return will be realized in the
future. The Estimated Long-Term Return is calculated using a formula which
(1) takes into account the amortization of premiums and the accretion of
discounts, the estimated retirements of all the Securities in such Series and
(2) takes into account the expenses and sales charge associated with each Unit
of the Trust. Since the market values and the estimated average lives or
estimated retirements, as the case may be, of the Securities and the expenses of
a Trust will change, it can be expected that the Estimated Long-Term Returns
will fluctuate in the future. Estimated Current Return and Estimated Long-Term
Return are expected to differ because the calculation of the Estimated Long-Term
Return reflects the estimated date and amount of principal returned while the
Estimated Current Return calculation includes only the net annual interest rate
and Public Offering Price.
Market for Units. The Sponsor, though not obligated to do so, after the
initial offering period, intends to maintain a market for the Units based on the
aggregate bid side evaluation of the underlying Securities plus Purchased
Interest, if any, and accrued interest (or Daily Accrued Interest). If such
market is not maintained, a Unitholder will, nevertheless, be able to dispose of
his Units through redemption at prices based on the aggregate bid side
evaluation of the underlying Securities. See "Redemption." Market conditions
may cause such prices to be greater or less than the amount paid for Units.
THE U.S. TREASURY PORTFOLIO SERIES
Each Kemper Government Securities Trust, U.S. Treasury Portfolio, Kemper
Defined Funds, U.S. Treasury Portfolio and EVEREN Unit Investment Trusts U.S.
Treasury Portfolio (collectively, the "U.S. Treasury Portfolio Series") is a
"unit investment trust" created under Missouri or New York law pursuant to a
Trust Indenture and Agreement (hereinafter collectively referred to as the
"Indenture").* Ranson & Associates, Inc. is the Sponsor and Evaluator of the
Trusts and is successor sponsor and evaluator of all unit investment trusts
formerly sponsored by EVEREN Unit Investment Trusts, a service of EVEREN
Securities, Inc. The Bank of New York is the Trustee of the Trusts as successor
to Investors Fiduciary Trust Company.
- --------------------
* To the extent reference is made to the Indenture, any statements herein are
qualified in their entirety by the provisions of said indenture.
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<PAGE>
The objective of the U.S. Treasury Portfolio is to obtain safety of capital
and investment flexibility through investment in a fixed, laddered portfolio
consisting of interest-bearing (or in some cases zero coupon) U.S. Treasury
obligations. The U.S. Treasury Portfolio Series is formed for the purpose of
providing protection against changes in interest rates and also passing through
to Unitholders in all states the exemption from state personal income taxes
afforded to direct owners of U.S. obligations. The Securities are direct
obligations of the United States and are backed by its full faith and credit.
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 the portfolio which will generally decrease or increase inversely
with changes in interest rates. See "Tax Status of the Trusts."
Risk Factors. An investment in Units of the U.S. Treasury Portfolio Series
should be made with an understanding of the risks which an investment in fixed
rate debt obligations may entail, including the risks 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 high inflation of prior years, together with the fiscal
measures adopted to attempt to deal with it, have resulted in wide fluctuations
in interest rates and, thus, in the value of fixed rate long term debt
obligations generally. The Sponsor cannot predict whether such fluctuations
will continue in the future.
In selecting Securities for deposit in the U.S. Treasury Portfolio Series,
the following factors, among others, were considered by the Sponsor: (i) the
prices of the Securities relative to other comparable Securities; (ii) the
maturities of these Securities; and (iii) whether the Securities were issued
after July 18, 1984.
The U.S. Treasury Portfolio Series may be an appropriate medium for
investors who desire to participate in a portfolio of taxable fixed income
securities offering the safety of capital provided by an investment backed by
the full faith and credit of the United States. In addition, many investors may
benefit from the exemption from state and local personal income taxes that will
pass through the U.S. Treasury Portfolio Series to Unitholders in virtually all
states.
Since Unitholders of a Series holding Stripped Treasury Securities will be
required for Federal income tax purposes to include amounts in ordinary gross
income in advance of the receipt of the cash attributable to such income, such
Series may be appropriate only for an account which can pay taxes with other
funds in advance of the receipt of the cash attributable to such income or for
Individual Retirement Accounts, Keogh plans or other tax-deferred retirement
plans.
General. Each Unit in a Series represents the fractional undivided
interest in the U.S. Treasury Portfolio Series as set forth under "Essential
Information" in Part Two. Because certain of the Securities from time to time
may be redeemed or will mature in accordance with their terms or may be sold
under certain circumstances described herein, the U.S. Treasury Portfolio Series
of the Trust is not expected to retain its present size and composition. Units
will remain outstanding until redeemed upon tender to the Trustee by any
Unitholder (which may include the Sponsor) or until the termination of the Trust
pursuant to the Indenture.
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PORTFOLIO SELECTION
In selecting Ginnie Maes and U.S. Treasury Obligations (collectively
referred to herein as the "Portfolio Obligations") for deposit in a Series of
the appropriate Trusts, the following factors, among others, were considered by
the Sponsor: (i) the types of such obligations available; (ii) the prices and
yields of such obligations relative to other comparable obligations including
the extent to which such obligations are trading at a premium or at a discount
from par; and (iii) the maturities of such obligations.
Each Series of the Trusts consists of the unamortized principal amount of
the Portfolio Obligations listed in Part Two under "Schedule of Investments" as
may continue to be held from time to time in such Series together with accrued
and undistributed interest thereon and undistributed cash representing payments
and prepayments of principal and proceeds realized from the disposition of
Portfolio Obligations. Neither the Sponsor nor the Trustee shall be liable in
any way for any default, failure or defect in any of the Securities.
Each series of the Trust may contain "zero coupon" U.S. Treasury
Obligations. See "Schedule of Investments" in Part Two of this Prospectus.
Zero coupon obligations are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the maturity of the
obligations and does not receive any periodic interest payments. The effect of
owning deep discount obligations which do not make current interest payments
(such as the zero coupon obligations) is that a fixed yield is earned not only
on the original investment but also, in effect, on all discount earned during
the life of such income on such obligation at a rate as high as the implicit
yield on the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason, zero coupon
obligations are subject to substantially greater price fluctuations during
periods of changing market interest rates than are securities of comparable
quality which pay interest.
Because regular payments of principal are to be received and certain of the
Portfolio Obligations from time to time may be redeemed or will mature in
accordance with their terms or may be sold under certain circumstances described
herein, the Series of the Trusts are not expected to retain their present size
and composition.
THE UNITS
Each Unit represents the fractional undivided interest in a Series of the
Trusts set forth in Part Two under "Essential Information." If any Units are
redeemed by the Trustee, the principal amount of Portfolio Obligations in such
Series of the Trusts will be reduced by amounts allocable to redeemed Units, and
the fractional undivided interest represented by each Unit in the balance will
be increased. Units will remain outstanding until redeemed upon tender to the
Trustee by any Unitholder (which may include the Sponsor) or until the
termination of the Series of the Trusts. See "Redemption" and "Administration
of the Trust - Termination."
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ESTIMATED LONG-TERM AND CURRENT RETURNS
The Estimated Current Return and Estimated Long-Term Return for each trust
are the amounts set forth in Part Two under "Essential Information" as of the
date shown on that page. Estimated Current Return is calculated by dividing the
estimated net annual interest rate per Unit by the Public Offering Price. The
estimated net annual interest rate per Unit will vary with changes in fees and
expenses of the Trustee, the Sponsor and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Portfolio Obligations
while the Public Offering Price will vary with changes in the offering price of
the underlying Portfolio Obligations and accrued interest, and in the case of
certain Trusts, with changes in Purchased Interest and Daily Accrued Interest;
therefore, there is no assurance that the present Estimated Current Return will
be realized in the future. The Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and, in the case of
GNMA Portfolio Series, the estimated average life of all the Portfolio
Obligations in such Series or, in the case of U.S. Treasury Portfolio Series,
the estimated retirements of all of the Portfolio Obligations in such Series and
(2) takes into account the expenses and sales charge associated with each Trust
Unit. Since the market values and the estimated average lives or estimated
retirements, as the case may be, of the Portfolio Obligations and the expenses
of the Trust will change, there is no assurance that the present Estimated Long-
Term Return will be realized in the future. The Estimated Current Return and
Estimated Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated dates and amounts of principal
returned while the Estimated Current Return calculations include only net annual
interest rates and Public Offering Price. See "Summary - GNMA Portfolio -
Estimated Current and Long-Term Returns" and "Summary - U.S. Treasury Portfolio
- - Estimated Current and Long-Term Returns."
Payments received in respect of the mortgages underlying the Ginnie Maes in
the GNMA Trust Portfolios 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 the
mortgages underlying the Ginnie Maes may be substantially in excess of those
required by the amortization schedules of such mortgages. Therefore, principal
payments in later years may be substantially less since the aggregate unpaid
principal balances of such underlying mortgages may have been greatly reduced.
To the extent that the underlying mortgages bearing higher interest rates in the
GNMA Trust Portfolios are pre-paid faster than the other underlying mortgages,
the net annual interest rate per Unit and the Estimated Current Return on the
Units can be expected to decline. Monthly payments to the Unitholders will
reflect all of the foregoing factors.
In addition to the Public Offering Price, the price of a Unit will include
accrued interest on the Portfolio Obligations from the last Record Date of that
Series of the Trusts to the date of settlement for any purchase. Therefore,
accrued interest will generally be added to the value of the Units. If a
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Unitholder sells all or a portion of his Units, he will receive his
proportionate share of the accrued interest on such Series from the purchaser of
his Units. Similarly, if a Unitholder redeems all or a portion of his Units,
the Redemption Price per Unit will include accrued interest on the Portfolio
Obligations.
PUBLIC OFFERING OF UNITS
Public Offering Price. The Public Offering Price of Units is computed by
adding to the aggregate bid price of the Portfolio Obligations in that Series of
the Trusts as determined by the Evaluator (see below) plus any money in the
Principal Account of such Series other than money required to redeem tendered
Units, plus Purchased Interest, if any, and accrued interest (or Daily Accrued
Interest), then dividing such sum by the number of Units of such Series
outstanding and then adding that sales charge referred to below.
Although under no obligation to do so, the Sponsor intends to permit volume
purchasers of Units to purchase Units at a reduced sales charge. The Sponsor
may at any time change the amount by which the sales charge is reduced or may
discontinue the discount altogether.
The sales charge per Unit for the GNMA Portfolio Series will be reduced
pursuant to the following graduated scale:
<TABLE>
GNMA MIDGET SERIES GNMA SERIES
---------------------- ----------------------
PERCENT OF PERCENT OF
PERCENT OF NET PERCENT OF NET
TICKET OFFERING AMOUNT OFFERING AMOUNT
SIZE PRICE INVESTED PRICE INVESTED
- ------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $100,000 3.50% 3.627% 3.95% 4.112%
$100,000 to $249,999 3.25 3.359 3.70 3.842
$250,000 to $499,999 2.85 2.934 3.35 3.466
$500,000 to $999,999* 2.60 2.669 3.10 3.199
<FN>
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* For any transaction in excess of this amount, contact the Sponsor for the
applicable sales charge.
</TABLE>
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The sales charge per Unit for U.S. Treasury Portfolio Series will be
reduced pursuant to the following graduated scale:
<TABLE>
DOLLAR WEIGHTED AVERAGE YEARS TO MATURITY
0-1.99 2-2.99 3-4.99 5-6.99 7-9.99
YEARS YEARS YEARS YEARS YEARS
-------- ------ ------- ------- -------
TICKET SIZE 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 to $999,999 1.00 1.25 1.50 1.75 2.50
$1,000,000 to $1,499,999* 1.00 1.00 1.25 1.50 2.00
<FN>
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* For any transaction in excess of $1,499,999, please contact the Sponsor for
the applicable sales charge.
</TABLE>
The reduced sales charges as shown on the tables above will apply to all
purchases of Units on any one day by the same person from the same firm, and for
this purpose, purchases of Units of one or more Series of the Trusts will be
aggregated with concurrent purchases of Units of any other unit investment trust
that may be offered by the Sponsor.
Additionally, Units purchased in the name of a spouse or child (under 21)
of such purchaser will be deemed to be additional purchases by such purchaser.
The reduced sales charge is also applicable to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
The Sponsor will also allow purchasers who commit to purchase $1 million or
more of a Series units during a 12 month period to do so at the applicable sales
charge for such series pursuant to a letter of intent, subject to certain
restrictions.
The Sponsor intends to permit officers, directors and employees of the
Sponsor and Evaluator to purchase Units of any Series of the Trusts without a
sales charge, although a transaction processing fee may be imposed on such
trades. The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units and the right to charge the amount of the sales
charge from time to time.
Units may be purchased at the Public Offering Price less the concession the
Sponsor typically allows to dealers and other selling agents for purchases (see
"Public Distribution of Units") by investors who purchase Units through
registered investment advisers, certified financial planners or registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management services, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed.
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In addition to the Public Offering Price, the price of a Unit of a Series
of the Kemper Government Securities Trust will include accrued interest on the
Portfolio Obligations from the last Record Date of that Series of such Trust to
the date of settlement for any purchase. Therefore, accrued interest will
generally be added to the value of the Units of such Trust. If a Unitholder of
the Kemper Government Securities Trust sells all or a portion of his Units, he
will receive his proportionate share of the accrued interest for that Series of
the Trusts from the purchaser of his Units. Similarly, if a Unitholder of the
Kemper Government Securities Trust redeems all or a portion of his Units, the
Redemption Price per Unit will include accrued interest on the Portfolio
Obligations in such Series.
In the case of certain Series of Kemper Defined Funds, the Public Offering
Price includes accrued interest which consists of two elements. The first
element arises as a result of accrued interest which is the accumulation of
unpaid interest on a security from the later of the last day on which interest
thereon was paid or the date of original issuance of the security. Interest on
the Portfolio Obligations in a Trust is paid monthly or semi-annually to the
Trust. The aggregate amount of such accrued interest on the Portfolio
Obligations in a Trust in certain Series of Kemper Defined Funds to the First
Settlement Date of such Trust is referred to herein as "Purchased Interest."
Included in the Public Offering Price of the Trust Units is Purchased Interest.
The second element of accrued interest arises because the estimated net interest
on the Units in a Trust is accounted for daily on an accrual basis (herein
referred to as "Daily Accrued Interest" for purposes of certain Kemper Defined
Funds Trusts). Because of this, the Units always have an amount of interest
earned but not yet paid or reserved for payment. For this reason, the Public
Offering Price of Units in certain Series of Kemper Defined Funds will include
the proportionate share of Daily Accrued Interest to the date of settlement. If
a Unitholder in certain Series of Kemper Defined Funds sells or redeems all or a
portion of his Units or if the Portfolio Obligations are sold or otherwise
removed or if the Trust is liquidated, he will receive at that time his
proportionate share of the Purchased Interest and Daily Accrued Interest
computed to the settlement date in the case of sale or liquidation and to the
date of tender in the case of redemption in the Trust.
In the case of certain other Series of Kemper Defined Funds and all Series
of EVEREN Unit Investment Trusts, the Public Offering Price includes accrued
interest as described in this paragraph. 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
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.
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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.
The Public Offering Price on any date will vary from the amount stated
under "Essential Information" in Part Two due to fluctuations in the valuation
of the underlying Portfolio Obligations in such Series of the Trusts and accrued
interest, and, in the case of certain Trusts, the additions or deletions of
Purchased Interest and Daily Accrued Interest.
The aggregate bid prices of the Portfolio Obligations in a Series of the
Trusts, are determined for each Series of the Trusts by the Evaluator, in the
following manner: (a) on the basis of current bid prices for the Portfolio
Obligations, (b) if bid prices are not available for the Portfolio Obligations,
on the basis of current bid prices for comparable securities, (c) by determining
the value of the Portfolio Obligations on the bid side of the market by
appraisal, or (d) by any combination of the above. The Evaluator may obtain
current price information as to the Portfolio Obligations from investment
dealers or brokers, including the Sponsor. Such evaluations and computations
will be made as of the close of business on each business day and will be
effective for all sales of Units made during the preceding 24-hour period.
Evaluations, for purposes of redemptions by the Trustee, will be made each
business day as of the Evaluation Time stated under "Essential Information" in
Part Two, effective for all redemptions made subsequent to the last preceding
determination.
In connection with the Ginnie Maes deposited in the GNMA Trusts, there is a
period of time beginning on the first day of each month, during which the total
amount of payments (including prepayments, if any) of principal for the
preceding month on the various mortgages underlying each of the Ginnie Maes in
the Portfolio of a Series will not yet have been reported by the issuer to GNMA
and made generally available to the public. During this period, the precise
principal amount of the underlying mortgages remaining outstanding for each
Ginnie Mae in the Portfolios, and therefore the precise principal amount of such
Security, will not be known, although the principal amount outstanding for the
preceding month will be known. Therefore, the exact amount of principal to be
acquired by the Trustee as a holder of such Securities which may be distributed
to Unitholders of such Series with the next monthly distribution will not be
known. The Sponsor does not expect that the amounts of such prepayments and the
differences in such principal amounts from month to month will be material in
relation to a Series of the GNMA Trusts due to the number of mortgages
underlying each Ginnie Mae and the number of such Ginnie Maes in each Series of
the GNMA Trusts. However, there can be no assurance that they will not be
material. For purposes of the determination by the Evaluator of the bid prices
of the Ginnie Maes in the GNMA Portfolios and for purposes of calculations of
accrued interest on the Units, during the period in each month prior to the time
when the precise amounts of principal of the Ginnie Maes for the month become
publicly available, the Evaluator will base its evaluations and calculations,
which are the basis for calculations of the Public Offering Price, the Sponsor's
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Repurchase Price and the Redemption Price per Unit, upon the principal amount of
such Series outstanding for the preceding month. The Sponsor expects that the
differences in such principal amounts from month to month will not be material
to each GNMA Portfolio Series of the Trusts. Nevertheless, the Sponsor will
adopt procedures as to pricing and evaluation for the Units of each Series of
the GNMA Trusts, with such modifications, if any, deemed necessary by the
Sponsor for the protection of Unitholders, designed to minimize the impact of
such differences upon the calculation of the Public Offering Price per Unit, the
Sponsor's Repurchase Price per Unit and the Redemption Price per Unit of such
Series.
Public Distribution. The Sponsor has qualified Units for sale in various
states. Units will be sold through dealers who are members of the National
Association of Securities Dealers, Inc. and through others. Such firms receive
a discount from the Public Offering Price as indicated in the tables under
"Profit of Sponsor" below. Certain commercial banks are making Units of the
Trust available to their customers on an agency basis. A portion of the sales
charge paid by their customers is retained by or remitted to the banks in an
amount as indicated in the tables under "Profit of Sponsor" below. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions and the banking
permitted 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 reject, in whole or in part, any
order for the purchase of Units. The Sponsor reserves the right to change the
discounts from time to time. The difference between the discounts and the sales
charge will be retained by the Sponsor.
The Sponsor also reserves the right to change the discounts set forth above
from time to time. In addition to such discounts, the Sponsor may, from time to
time, pay or allow an additional discount, in the form of cash or other
compensation, to dealers employing registered representatives who sell, during a
specified time period, a minimum dollar amount of Units of the Series of the
Trusts and other unit investment trusts underwritten by the Sponsor.
While not obligated to do so, the Sponsor intends, subject to change at any
time, to maintain a market for Units of the Series of the Trusts offered hereby
and to continuously offer to purchase said Units at prices based on the
aggregate bid prices of the underlying Portfolio Obligations in such Series,
together with accrued interest to the expected date of settlement.
The Sponsor may suspend or discontinue purchases of Units at prices based
on the bid prices of Securities in any Series of the Trusts if the supply of
Units exceeds demand, or for other business reasons.
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Profits of Sponsor. Sales of Units may be made to or through dealers or
through others at prices which represent discounts from the Public Offering
Price as set forth below. Discounted rates for the GNMA Portfolio Series are as
follows:
<TABLE>
GNMA
MIDGET GNMA
TICKET SIZE* SERIES SERIES
- ------------ ------ ------
<S> <C> <C>
Less than $100,000 2.10% 2.60%
$100,000 to $249,999 2.10 2.60
$250,000 to $499,999 1.80 2.30
$500,000 to $999,999** 1.55 2.05
<FN>
- --------------------
* The breakpoint is applied on a Unit basis utilizing a breakpoint equivalent
in the above table of $1.00 per Unit for $1 Units and $1000 per 100 Units
for $10 Units.
** For transactions in excess of this amount, contact the Sponsor for the
applicable rates.
</TABLE>
On the sale of Units, the Sponsor will retain the difference between the
discount and the sales charge. The Sponsor may also realize profits or sustain
losses while maintaining a market in the Units, in the amount of any difference
between the prices at which it buys Units and the prices at which Units are
resold after allowing for the discount.
Cash, if any, received by a dealer from Unitholders prior to the settlement
date for a purchase of Units of any Series may be used in such dealer's business
subject to the limitations of Rule 15c3-3 under the Securities Exchange Act of
1934 and may be of benefit to the dealer.
TAX STATUS OF THE TRUSTS
Regulated Investment Companies. In the opinion of Chapman and Cutler,
counsel for the Sponsor, under existing law: Each Series of the GNMA Trusts
(except for Kemper Government Securities Trust GNMA Portfolio (Foreign Investors
Trusts) and Kemper Defined Funds, GNMA Portfolio, Series 1) is an association
taxable as a corporation under the Internal Revenue Code of 1986, as amended
(the "Code") and intends to qualify on a continuing basis for and elect special
Federal income tax treatment as a "regulated investment company" under the Code.
If a Trust so qualifies and timely distributes to Unitholders 90% or more of its
taxable income (without regard to its net capital gain, i.e., the excess of its
net long-term capital gain over its net short-term capital loss), it will not be
subject to Federal income tax on the portion of its taxable income (including
any net capital gain) that it distributes to Unitholders. In addition, to the
extent a Trust timely distributes to Unitholders at least 98% of its taxable
income (including any net capital gain), it will not be subject to the 4% excise
tax on certain undistributed income of "regulated investment companies." Each
Series of the GNMA Portfolio intends to timely distribute its taxable income
(including any net capital gains) to avoid the imposition of Federal income tax
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or the excise tax. Distributions of the entire net investment income of each
Series of such Trusts is required by the Indenture.
Each Trust intends to file its federal income tax return on a calendar
basis. In any taxable year of the Trusts, the distributions of its income,
other than distributions which are designated as capital gain dividends, will,
to the extent of the earnings and profits of such Series, constitute dividends
for Federal income tax purposes which are taxable as ordinary income to
Unitholders. To the extent that the distributions to a Unitholder in any year
exceed the Trust's current and accumulated earnings and profits, they will be
treated as a return of capital and will reduce the Unitholder's basis in his
Units, and to the extent that they exceed his basis, will be treated as a gain
from the sale of his Units as discussed below. Distributions from each Series
of the GNMA Trusts will not be eligible for the 70% dividends received deduction
for corporations. Although distributions generally will be treated as
distributed when paid, distributions declared in October, November or December,
payable to Unitholders of record on a specified date in one of those months and
paid during January of the following year will be treated as having been
distributed by each Series of such Trusts (and received by the Unitholders) on
December 31 of the year such distributions are declared.
Under the Code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses,
will be deductible by individuals only to the extent they exceed 2% of adjusted
gross income. Miscellaneous itemized deductions subject to this limitation
under present law do not include expenses incurred by the GNMA Trusts, as long
as the Units of such Trusts are held by or for 500 or more persons at all times
during the taxable year or another exception is met. In the event the Units of
any Series of a GNMA Trust are held by fewer than 500 persons, additional
taxable income will be realized by the individual Unitholders in excess of the
distributions received from such Series.
Distributions of a Trust's net capital gain which a Trust properly
designates as capital gain dividends will be taxable to Unitholders thereof as
long-term capital gains, regardless of the length of time the Units have been
held by a Unitholder. However, if a Unitholder receives a long-term capital
gain dividend (or is allocated a portion of the Trust's undistributed long-term
capital gain) and sells his Units at a loss prior to holding them for 6 months,
such loss will be recharacterized as long-term capital loss to the extent of
such long-term capital gain received as a dividend or allocated to a Unitholder.
Distributions in partial liquidation, reflecting the proceeds of prepayments,
redemptions, maturities (including monthly mortgage payments of principal) or
sales of Portfolio Obligations from a Series of such Trusts (exclusive of net
capital gain) will not be taxable to Unitholders of such Series to the extent
that they represent a return of capital for tax purposes. The portion of
distributions which represents a return of capital will, however, reduce a
Unitholder's basis in his Units, and to the extent they exceed the basis of his
Units will be taxable as a capital gain. A Unitholder may recognize a taxable
gain or loss when his Units are sold or redeemed. Such gain or loss will
generally constitute either a long-term or short-term capital gain or loss
depending upon the length of time the Unitholder has held his Units. Any loss
on Units held six months or less will be treated as long-term capital loss to
the extent of any long-term capital gains dividends received (or deemed to have
been received) by the Unitholder with respect to such Units. The Internal
Revenue Service Restructuring and Reform Act of 1998 (the "1998 Tax Act")
provides that for taxpayers other than corporations, net capital gain (which is
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defined as net long-term capital gain over net short-term capital loss for the
taxable year) realized from property (with certain exclusions) is generally
subject to a maximum marginal stated tax rate of 20% (10% in the case of certain
taxpayers in the lowest tax bracket). Capital gain or loss is long-term if the
holding period for the asset is more than one year, and is short-term if the
holding period for the asset is one year or less. The date on which a Unit is
acquired (i.e., the "trade date") is excluded for purposes for determining the
holding period of the Unit. The legislation is generally effective
retroactively for amounts properly taken into account on or after January 1,
1998. Capital gains realized from assets held for one year or less are taxed at
the same rates as ordinary income.
Note, however, that the 1998 Tax Act (and the Taxpayer Relief Act of 1997
(the "1997 Act")) provide that the application of the rules described above in
the case of pass-through entities such as the Trusts will be prescribed in
future Treasury Regulations. The Internal Revenue Service has released
preliminary guidance which provides that, in general, pass-through entities such
as the Trusts may designate their capital gains dividends as either a 20% rate
gain distribution, an unrecaptured section 1250 gain distribution, or a 28% rate
gain distribution, depending on the nature of the gain received by the pass-
through entity. Unitholders should consult their own tax advisors as to the tax
rate applicable to capital gain dividends.
The 1997 Act includes other provisions that treat certain other
transactions designed to reduce or eliminate risk of loss and opportunities for
gain (e.g., short sales, offsetting notional principal contracts, futures or
forward contracts or similar transactions) as constructive sales for purposes of
recognition of gain (but not loss) and for purposes of determining the holding
period. Unit holders should consult their own tax advisers with regard to any
such constructive sales rules. In addition, it should be noted that capital
gains may be recharacterized as ordinary income in the case of certain financial
transactions that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unitholders and prospective investors should
consult with their tax advisers regarding the potential effect of this provision
on their investment in Units.
If a Ginnie Mae has been purchased by a GNMA Trust at a market discount
(i.e., for a purchase price less than its stated redemption price at maturity
(or if issued with original issue discount, its "revised issue price")) unless
the amount of market discount is "de minimis" as specified in the Code, each
payment of principal on the GNMA will generally constitute ordinary income to
such Series of the Trust to the extent of any accrued market discount unless the
Trust elects to include the accrued market discount in taxable income as it
accrues. In the case of a Ginnie Mae, the amount of market discount that is
deemed to accrue each month shall generally be the amount of discount that bears
the same ratio to the total amount of remaining market discount that the amount
of interest paid during the accrual period (each month) bears to the total
amount of interest remaining to be paid on the Ginnie Mae as of the beginning of
the accrual period.
Distributions reinvested into additional Units of a Trust will be taxed to
a Unitholder in the manner described above (i.e., as ordinary income, long-term
capital gain or as a return of capital).
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Each Unitholder of each Series of the GNMA Trusts shall receive an annual
statement describing the tax status of the distributions paid by such Series of
such Trust.
Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the Unitholder has not
been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding.
The foregoing discussion relates only to the Federal income tax status of
the Trusts and to the tax treatment of distributions by the Trusts to United
States Unitholders.
A Unitholder who is a foreign investor (i.e., an investor other than a
United States citizen or resident or a United States corporation, partnership,
estate or trust) should be aware that, generally, subject to applicable tax
treaties, distributions from a Trust which constitute dividends for Federal
income tax purposes (other than dividends which the Trust designates as capital
gain dividends) will be subject to United States income taxes, including
withholding taxes. However, distributions received by a foreign investor from a
Trust that are designated by the Trust as capital gain dividends should not be
subject to United States Federal income taxes, including withholding taxes, if
all of the following conditions are met (i) the capital gain dividend is not
effectively connected with the conduct by the foreign investor of a trade or
business within the United States, (ii) the foreign investor (if an individual)
is not present in the United States for 183 days or more during his or her
taxable year, and (iii) the foreign investor provides all certification which
may be required of his status (foreign investors may contact the Sponsor to
obtain a Form W-8 which must be filed with the Trustee and refiled every three
calendar years thereafter). Foreign investors should consult their tax advisers
with respect to United States tax consequences of ownership of Units. Units in
the Trust and Trust distributions may also be subject to state and local
taxation and Unitholders should consult their tax advisers in this regard.
U.S. Treasury Portfolio Series. The following is a general discussion of
certain of the Federal income tax consequences of the purchase, ownership and
disposition of the Units. The summary is limited to investors who hold the
Units as "capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Internal Revenue Code of 1986 (the "Code").
Unitholders should consult their tax advisors in determining the Federal, state,
local and any other tax consequences of the purchase, ownership and disposition
of Units in the U.S. Treasury Portfolio Series. In the opinion of Chapman and
Cutler, counsel for the Sponsor under existing law:
(1) Each Series of the U.S. Treasury Portfolio is not an association
taxable as a corporation for Federal income tax purposes; each Unitholder
will be treated as the owner of a pro rata portion of the U.S. Treasury
Portfolio Series of the Trust under the Code and income of such Series will
be treated as the income of the Unitholders under the Code. Each
Unitholder will be considered to have received his or her pro rata share of
income derived from each Series asset when such income is considered to be
received by each U.S. Treasury Portfolio Series.
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<PAGE>
(2) Each Unitholder will have a taxable event when the U.S. Treasury
Portfolio Series disposes of a U.S. Treasury Obligation, or when the
Unitholder redeems or sells his Units. Unitholders must reduce the tax
basis of their Units for their share of accrued interest received by the
U.S. Treasury Portfolio Series, if any, on U.S. Treasury Obligations
delivered after the Unitholder pay for their Units to the extent that such
interest accrued on such U.S. Treasury Obligations before the date each
U.S. Treasury Portfolio Series acquired ownership of the U.S. Treasury
Obligations (and the amount of this reduction may exceed the amount of
accrued interest paid to the seller) 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 (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with the Unitholder's basis for
his or her fractional interest in the asset disposed of. In the case of a
Unitholder who purchases Units, such basis (before adjustment for earned
original issue discount, amortized bond premium and accrued market discount
(if the Unitholder has elected to include such market discount in income as
it accrues), if any) is determined by apportioning the cost of the Units
among each of the U.S. Treasury Portfolio Series assets ratably according
to value as of the valuation date nearest the date of acquisition of the
Units. The tax basis 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 or less than his original cost.
(3) 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 such Trusts 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. A Trust may
contain certain "zero coupon" Securities (the "Stripped Treasury
Securities") that are treated as bonds that were originally issued at an
original issue discount as of the date a Unitholder purchases a Unit.
Because the Stripped Treasury Securities represent interests in "stripped"
U.S. Treasury bonds, a Unitholder's tax basis for his pro rata portion of
each Stripped Treasury Security held by the Trust (determined at the time
he acquires his Units, in the manner described above) shall be treated as
its "purchase price" by the Unitholder. Original issue discount is
effectively treated as interest for Federal income tax purposes, and the
amount of original issue discount in this case is generally the difference
between the bond's purchase price and its stated redemption price at
maturity. A Unitholder will be required to include in gross income for
each taxable year the sum of his daily portions of original issue discount
attributable to the Stripped Treasury Securities held by the U.S. Treasury
Portfolio Series 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
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it is not less than a "de minimis" amount as determined under the Treasury
Regulation relating to stripped bonds. To the extent that 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
increasing amount of income to the Unitholders each year. Unitholders
should consult their tax advisers regarding the Federal income tax
consequences and accretion of original issue discount.
(4) The Unitholder's aliquot share of the total proceeds received on
the disposition of, or principal paid with respect to, a U.S. Treasury
Obligation held by the U.S. Treasury Portfolio Series 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 basis 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 amounts to less than 0.25% of the obligation's stated redemption
price at maturity times the number of years to maturity. 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 U.S. Treasury Portfolio Series 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. 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.
(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 the applicable Series of the U.S. Treasury
Portfolio Series, including fees of the Trustee, and the Evaluator, but
does not include amortizable bond premium on U.S. Treasury Obligations held
by the U.S. Treasury Portfolio Series.
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<PAGE>
The market discount rules to not apply to stripped Treasury securities
because they are stripped debt instruments subject to special original issue
discount rules. Unit holders should consult their tax advisors as to the amount
of original issue discount which accrues.
If a Unit holder does not elect to annually include accrued market discount
in taxable income as it accrues, deduction for any interest expense incurred by
the Unit holder which is incurred to purchase or carry his Units will be reduced
by such accrued market discount. In general, the portion of any interest
expense which was not currently deductible would ultimately be deductible when
the accrued market discount is included in income. Unit holders should consult
their tax advisors regarding whether an election should be made to include
market discount in income as it accrues and as to the amount of interest expense
which may not be currently deductible.
The tax basis of a Unitholder with respect to his interest in a U.S.
Treasury Obligation is increased by the amount of original issue discount (and
market discount, if the Unitholder elects to include market discount, if any, on
the U.S. Treasury Obligations held by the Trust in income as it accrues) thereon
properly included in the Unitholder's gross income as determined for Federal
income tax purposes and reduced by the amount of any amortized acquisition
premium which the Unitholder has properly elected to amortize under Section 171
of the Code. A Unitholder's tax basis in his Units will equal his tax basis in
is pro rata portion of all of the asset 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 basis 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. The Internal Revenue Service Restructuring and Reform
Act of 1998 (the "1998 Tax Act") provides that for taxpayers other than
corporations, net capital gain (which is defined as net long-term capital gain
over net short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax rate of
20% (10% in the case of certain taxpayers in the lowest tax bracket). Capital
gain or loss is long-term if the holding period for the asset is more than one
year, and is short-term if the holding period for the asset is one year or less.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes for determining the holding period of the Unit. The legislation is
generally effective retroactively for amounts properly taken into account on or
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after January 1, 1998. Capital gains realized from assets held for one year or
less are taxed at the same rates as ordinary income.
If a 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.
In addition, capital gains may be recharacterized 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.
Certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures or forward contracts, or similar transactions) are treated as
constructive sales for purposes of recognition of gain (but not loss) and for
purposes of determining the holding period. Unitholders should consult their
own tax advisors with regard to any such constructive sales rules.
A Unitholder of a U.S. Treasury Portfolio Series who is not a citizen or
resident of the United States or a United States domestic corporation (a
"Foreign Investor") will not be subject to U.S. Federal income taxes, including
withholding taxes on amounts distributed from the U.S. Treasury Portfolio Series
(including any original issue discount) on, or any gain from the sale or other
disposition of, his Units or the sale or disposition of any U.S. Treasury
Obligations by the Trustee, provided that (i) the interest income or gain is not
effectively connected with the conduct by the Foreign Investor of a trade or
business within the United States, (ii) with respect to any gain, the Foreign
Investor (if an individual) is not present in the United States for 183 days or
more during the taxable year, and (iii) the Foreign Investor provides the
required certification of his status and of the matters contained in clauses (i)
and (ii) above, and further provided that the exemption from withholding for
U.S. Federal income taxes for interest on any U.S. Treasury Obligation shall
only apply to the extent the U.S. Treasury Obligation was issued after July 18,
1984.
Unless an applicable treaty exemption applies and proper certification is
made, amounts otherwise distributable by the U.S. Treasury Portfolio Series 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.
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The foregoing discussions relate only to Federal income taxes on
distributions by a Trust. Foreign Unitholders should consult their own tax
advisers with respect to the foreign and United States tax consequences on
ownership of Units.
It should be remembered that even if distributions are reinvested they are
still treated as distributions for income tax purposes.
In addition, Unitholders of Series holding Stripped Treasury Securities 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.
Each Unitholder (other than a foreign investor who has properly provided
the certifications described above) will be requested to provide the
Unitholder's taxpayer identification number to the Trustee and to certify that
the Unitholder has not been notified that payments to the Unitholder are subject
to back-up 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.
The Sponsor believes that Unitholders who are individuals will not be
subject to any state personal income taxes on the interest received by a U.S.
Treasury Portfolio Series and distributed to them. However, Unitholders
(including individuals) may be subject to state and local taxes on any capital
gains (or market discount treated as ordinary income) derived from a U.S.
Treasury Portfolio Series and to other state and local taxes (including
corporate income or franchise taxes, personal property or intangibles taxes, and
estate or inheritance taxes) on their Units or the income derived therefrom. In
addition, individual Unitholders (and any other Unitholders which are not
subject to state and local taxes on the interest income derived from U.S.
Treasury Portfolio Series) will probably not be entitled to a deduction for
state and local tax purposes for their share of the fees and expenses paid by a
U.S. Treasury Portfolio Series, for any amortized bond premium or for any
interest on indebtedness incurred to purchase or carry their Units. Therefore,
even though the Sponsor believes that interest income from a U.S. Treasury
Portfolio Series is exempt from state personal income taxes in all states,
Unitholders should consult their own tax advisers with respect to state and
local taxation of the purchase, ownership and disposition of Units.
Kemper Government Securities Trust, GNMA Portfolio (Foreign Investors
Trust) and Kemper Defined Funds, GNMA Portfolio, Series 1. For purposes of the
following discussion and opinion, it is assumed that interest on the Securities
is included in gross income for Federal income tax purposes and that the
Securities are debt for Federal income tax purposes. In the opinion of Chapman
and Cutler, counsel for the Sponsor:
(1) Each GNMA Portfolio Series is not an association taxable as a
corporation for Federal income tax purposes; each Unitholder will be
treated as the owner of a pro rata portion of the assets of the GNMA
Portfolio Series of the respective Trust under the Code and income of such
Series will be treated as the income of the Unitholders under the Code.
Each Unitholder will be considered to have received his or her pro rata
share of income derived from each GNMA Portfolio Series asset when such
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income is considered to be received by a GNMA Portfolio Series. Each
Unitholder will also be required to include in taxable income tax purposes,
and original issue discount with respect to an interest in any Securities
held by a GNMA Portfolio Series at the same time and in the same manner as
though the Unitholder were the direct owner of such interest.
(2) Each Unitholder will have a taxable event when a GNMA Portfolio
Series disposes of a Security (whether by sale, liquidation, redemption,
payment at maturity or otherwise), or when the Unitholder redeems or sells
his Units. The Unitholders tax basis in a Unit will equal the tax basis in
the Unitholders pro rata portion of all of the assets of a GNMA Portfolio
Series. Such basis is determined (before the adjustments described below)
by apportioning the tax basis for the Units among each of the assets of the
GNMA Portfolio Series according to the value as of the valuation date
nearest the date of the acquisition of the Units. Unitholders must reduce
the tax basis of their Units for their share of accrued interest received
by a GNMA Portfolio Series, if any, on Securities delivered after the
Unitholders pay for their Units to the extent that such interest accrued on
such Securities during the period from the Unitholder's settlement date to
the date such Securities are delivered to such GNMA Portfolio Series and,
consequently, such Unitholder may have an increase in capital gain or
reduction of 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 Securities (whether by sale, payment on maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder
(subject to the various non-recognition provisions of the Code). The
amount of any such gain or loss is measured by comparing the Unitholder's
pro rata share of the total proceeds for such disposition with the
Unitholder's basis for his or her fractional interest in the asset disposed
of. The Unitholder's tax 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 GNMA Portfolio Series assets ratably according to value as of the
valuation date nearest the date of acquisition of the Units. The tax cost
reduction requirements of the Code relating to amortization of bond premium
may, under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to or less
than his original cost.
(3) Each GNMA Portfolio Series contains 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 such Trusts 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 the Trusts are treated as bonds that were
originally issued at an original issue discount as of the date a Unitholder
purchases a Unit. 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
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issue discount is effectively treated as interest for Federal income tax
purposes, and the amount of original issue discount 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 as such
original discount accrues and will, in general, be subject to Federal
income tax with respect to the total amount of such original issue discount
that accrues for such year even though the income is not distributed to the
Unitholders during such year to the extent it is not less than a "de
minimis" amount as determined under the Regulation relating to stripped
bonds. To the extent that 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 increasing amount of income to the Unitholders each
year. Unitholders should consult their tax advisers regarding the Federal
income tax consequences and accretion of original issue discount.
(4) The Unitholder's aliquot share of the total proceeds received on
the disposition of, or principal paid with respect to, a Security 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 Security 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 Security over the Unitholder's
initial tax basis for such pro rata portion, determined at the time such
Unitholder acquires his Units. However, market discount with respect to
any Security will generally be considered zero if it amounts to less than
0.25% of the obligation's stated redemption price at maturity times the
number of years to maturity. 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 Security issued 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. 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.
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(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 the Trust, including fees of the Trustee and
the Evaluator but does not include amortizable bond premium on Securities
held by the Trusts.
The market discount rules do not apply to stripped Treasury Securities
because they are stripped debt instruments subject to special original issue
discount rules. Unitholders should consult their tax advisers as to the amount
of original issue discount which accrues.
If a Unitholder does not elect to annually include accrued market discount
in taxable income as it accrues, deduction for any interest expense incurred by
the Unitholder which is incurred to purchase or carry his Units will be reduced
by such accrued market discount. In general, the portion of any interest
expense which was not currently deductible would ultimately be deductible when
the accrued market discount is included in income. Unitholders should consult
their tax advisers regarding whether an election should be made to include
market discount in income as it accrues and as to the amount of interest expense
which may not be currently deductible.
The tax basis of a Unitholder with respect to his interest in a U.S.
Treasury Obligation is increased by the amount of original issue discount (and
market discount, if the Unitholder elects to include market discount, if any, on
the U.S. Treasury Obligations held by 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 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 thereof. 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 Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998 Tax
Act") provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term capital loss
for the taxable year) realized from property (with certain exclusions) is
subject to a maximum marginal stated tax rate of 20% (10% in the case of certain
taxpayers in the lowest tax bracket). Capital gain or loss is long-term if the
holding period for the asset is more than one year, and is short-term if the
holding period for the asset is one year or less. The date on which a Unit is
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acquired (i.e., the "trade date") is excluded for purposes for determining the
holding period of the Unit. The legislation is generally effective
retroactively for amounts properly taken into account on or after January 1,
1998. Capital gains realized from assets held for one year or less are taxed at
the same rates as ordinary income.
The tax basis 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 a 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.
In addition, capital gains may be recharacterized 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.
Certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures or forward contracts, or similar transactions) are treated as
constructive sales for purposes of recognition of gain (but not loss) and for
purposes of determining the holding period. Unitholders should consult their
own tax advisors with regard to any such constructive sales rules.
"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 included
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.
A Unitholder of a GNMA Portfolio Series who is not a citizen or resident of
the United States or a United States domestic corporation (a "Foreign Investor")
will generally not be subject to U.S. Federal income taxes, including
withholding taxes on amounts distributed from the Trusts (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 Securities 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
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Stripped Treasury Security shall only apply to the extent the Stripped Treasury
Security was issued after July 18, 1984 and for interest on any Ginnie Mae to
the extent the mortgages underlying such Ginnie Mae were originated after
July 18, 1984.
Unless an applicable treaty exemption applies and proper certification is
made, amounts otherwise distributable by the Trusts 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.
The foregoing discussions relate only to Federal income taxes on
distributions by the Trusts; such distributions may also be subject to state and
local taxation. Unitholders should consult their own tax advisers regarding
questions of state and local taxation applicable to the 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 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.
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.
Each Unitholder (other than a foreign investor who has properly provided
the certifications described above) will be requested to provide the
Unitholder's taxpayer identification number to the Trustee and to certify that
the Unitholder has not been notified that payments to the Unitholder are subject
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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.
Foreign Investors Trust - Each Kemper Government Securities Trust, GNMA
Portfolio Series of Midget Foreign Investors Trust, which is available only to
non-resident alien investors, is not an association taxable as a corporation for
Federal income tax purposes and income received by such Series will be treated
as the income of the Unitholders.
A Unitholder of a Series of a Midget Foreign Investors 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 a 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 Ginnie Mae 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 Ginnie Mae shall only apply to the extent the mortgages underlying the
Ginnie Mae were originated after July 18, 1984.
Interest income received by the Trust is subject to withholding taxes under
Section 1441 of the Code prior to distribution of such interest income to each
Unitholder unless the Unitholder 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.
Finally, it should be remembered that even if distributions are reinvested,
they are still treated as distributions for income tax purposes.
RETIREMENT PLANS
As indicated under "Tax Status of the Trusts" above, Unitholders of a U.S.
Treasury Portfolio Series will be required for Federal income tax purposes to
include amounts in ordinary gross income in advance of the receipt of the cash
attributable to such income. Therefore, purchase of Units may be appropriate
only for an account which can pay taxes with other funds in advance of the
receipt of the cash attributable to such income or for Individual Retirement
Accounts, Keogh plans, pension funds and other qualified retirement plans,
certain of which are briefly described below.
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The various Series of the Trusts which are not Foreign Investors Trusts,
may be well suited for purchase by Individual Retirement Accounts, Keogh Plans,
pension funds and other qualified retirement plans, certain of which are briefly
described below.
Generally, capital gains and income received in each of the foregoing plans
are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered
by brokerage firms and other financial institutions. Each Series of the 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 Code, an individual
may make nondeductible contributions to the extent deductible contributions are
not allowed. All distributions from an IRA (other than the return of certain
excess contributions) are treated as ordinary income for Federal income taxation
purposes provided that under the Code an individual need not pay tax on the
return of nondeductible contributions, the amount includable in income for the
taxable year is the portion of the amount withdrawn for the taxable year as the
individual's aggregate nondeductible IRA contributions bear to the aggregate
balance of all IRAs of the individual.
A participant's interest in an IRA must be, or commence to be, distributed
to the participant not later than April 1 of the calendar year following the
year during which the participant attains at 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 statement and trust agreements are available
from the Sponsor upon request.
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Qualified Retirement Plans. Units of a Series of the Trust which are not
Foreign Investors Trusts may be purchased by qualified pension or profit sharing
plans maintained by corporations, partnerships or sole proprietors. The maximum
annual contribution for a participant in a money purchase pension plan or to
paired profit sharing and pension plans is the lesser of 25% of compensation or
$30,000. Prototype plan documents for establishing qualified retirement plans
are available from the Sponsor upon request.
Excess Distributions Tax. In addition to the other taxes due by reason of
a plan distribution, a tax of 15% may apply to certain aggregate distributions
from IRAs, Keogh plans, and corporate retirement plans to the extent such
aggregate taxable distributions exceed specified amounts (generally $150,000, as
adjusted) during a tax year. This 15% tax will not apply to distributions on
account of death, qualified domestic relations orders or amounts eligible for
tax-deferred rollover treatment. In general, for lump sum distributions the
excess distribution over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee has agreed to act as custodian for certain retirement plan
accounts. An annual fee per account, if not paid separately, will be assessed
by the Trustee and paid through the liquidation of shares of the retirement
account. An individual wishing the Trustee to act as custodian must complete a
Ranson UIT/IRA application and forward it along with a check made payable to the
Trustee. Certificates for Individual Retirement Accounts can not be issued.
DISTRIBUTION REINVESTMENT
Each Unitholder of the Trust may elect, at the time of purchase, to have
distributions of principal (including capital gains, if any) or interest or both
automatically invested without charge in shares of any mutual fund registered in
such Unitholder's state of residence which is underwritten or advised by Zurich
Kemper Investments, Inc. (the "Kemper Funds"), other than those Kemper Funds
sold with a contingent deferred sales charge. Since the portfolio securities
and investment objectives of such Kemper Funds may differ significantly from
that of the Trusts, Unitholders should carefully consider the consequences
before selecting such Kemper Funds for reinvestment.
Detailed information with respect to the investment objectives and
management of these Kemper Funds is contained in their respective prospectuses,
which can be obtained from the Sponsor or an investor's financial representative
upon request. An investor should read the appropriate prospectus prior to
making the election to reinvest. Unitholders who desire to have their
distributions automatically reinvested should inform their financial
representative at the time of purchase or should file with the Program Agent
referred to below a written notice of such election.
Unitholders who initially elect to receive distributions in cash may elect
to participate in the reinvestment program by filing with the Program Agent an
election to have such distributions reinvested without charge. The election
must be received by the Program Agent at least ten days prior to the Record Date
applicable to any distribution in order to be in effect for such distribution.
The election to participate in the reinvestment program shall remain in effect
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until a subsequent notice is received in writing by the Program Agent. See
"Administration of the Trust-Distributions from the Interest, Principal and
Capital Gains Accounts."
The Program Agent is the Trustee. All inquiries concerning participation
in the Reinvestment Plan should be directed to the Program Agent at its unit
investment trust office.
Unitholders participating in IRA's, Keogh Plans and other tax deferred
retirement plans, may find it highly advantageous to participate in the
Reinvestment Program in order to keep the monies in the account fully invested
at all times. Should reinvestment be selected, an account with an identical
registration to that established at the time the Trust Units are purchased will
be set up in the reinvestment Fund selected by the investor. Investors should
consult with their plan custodian as to the appropriate disposition of
distributions. If participants in IRA's, Keogh Plans and other tax deferred
retirement plans do not elect a reinvestment option, cash distributions will be
sent to the custodian of the retirement plan and will not be sent to the
investor, since payments to the investor would constitute a distribution from
the plan which would result in tax penalties for premature withdrawals from such
programs. See "Retirement Plans."
REDEMPTION
Right of Redemption. It may be possible, in some cases, for Units to be
sold in the over-the-counter market for a higher price than the Redemption Value
for such Units. Therefore, a Unitholder who wishes to dispose of his Units is
advised to inquire through his financial representative as to current market
prices for Units in order to determine if there is an over-the-counter price in
excess of Redemption Value per Unit or the Sponsor's Repurchase Price for such
Series of the Trust.
A Unitholder who does not dispose of Units in the secondary market
described above may cause Units to be redeemed by the Trustee by making a
written request to the Trustee, The Bank of New York, 101 Barclay Street, New
York, New York 10286 and, in the case of Units evidenced by a certificate, by
tendering such certificate to the Trustee, properly endorsed or accompanied by a
written instrument or instruments of transfer in 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
redemption by individual account owners (including joint owners) or fiduciary
accounts where the fiduciary is named in the account registration. Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, trustees, guardians or
associations. If required, the signatures must be guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to or in substitution for STAMP as may
be accepted by the Trustee. A certificate should only be sent by registered or
certified mail for the protection of the Unitholder. Since tender of the
certificate is required for redemption when one has been issued, Units
represented by a certificate cannot be redeemed until the certificate
representing such Units has been received by the purchaser.
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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 Value of such Series, determined as
set forth below under "Computation of Redemption Value," next following such
tender, multiplied by the number of Units of such Series being redeemed. Any
Units redeemed shall be cancelled and any undivided fractional interest in such
Series of the Trusts extinguished. The price received upon redemption might be
more or less than the amount paid by the Unitholder depending on the value of
the Portfolio Obligations in the Portfolio of the Series at the time of
redemption.
During the period in which the Sponsor maintains a market for Units, the
Sponsor has the right to repurchase any Unit presented for tender to the Trustee
for redemption no later than the close of business on the second business day
following such presentation.
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to repurchase any Unit tendered for redemption or if the Sponsor
itself tenders Units for redemption, in lieu of redeeming Units presented for
tender at the Redemption Value, to sell such Units in the over-the-counter
market for the account of a tendering Unitholder at prices which will return to
the Unitholder monies, net after brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Value for such Units. In the
event of any such sale, the Trustee will pay the net proceeds thereof to the
Unitholder on the day he would otherwise be entitled to receive payment of the
Redemption Value.
Any amounts to be paid on redemption representing interest shall be
withdrawn from the Interest Account of such Series to the extent funds are
available. All other amounts paid on redemption shall be withdrawn from the
Principal Account of such Series. The Trustee is authorized by the Indenture to
sell Portfolio Obligations from a Series in order to provide funds for
redemption. To the extent Portfolio Obligations are sold, the size of that
Series of the Trusts will be reduced. Portfolio Obligations will be sold by the
Trustee so as to maintain, as closely as practicable, the original percentage
relationship between the principal amounts of the Portfolio Obligations in such
Series. The Portfolio Obligations to be sold for purposes of redeeming Units
will be selected from a list supplied by the Sponsor. The Portfolio Obligations
will be chosen for this list by the Sponsor on the basis of such market and
credit factors as it may determine are in the best interests of such Series of
the Trust. Provision is made under the Indenture for the Sponsor to specify
minimum face amounts in which blocks of Portfolio Obligations are to be sold in
order to obtain the best price available. While such minimum amounts may vary
from time to time in accordance with market conditions, it is anticipated that
the minimum face amounts which would be specified would range from $25,000 to
$100,000. Sales may be required at a time when the Portfolio Obligations would
not otherwise be sold and might result in lower prices than might otherwise be
realized. Moreover, due to the minimum principal amount in which Portfolio
Obligations may be required to be sold, the proceeds of such sales may exceed
the amount necessary for payment of Units redeemed. To the extent not used to
meet other redemption requests in such Series, such excess proceeds will be
distributed pro rata to all remaining Unitholders of record of such Series,
unless reinvested in substitute Portfolio Obligations. See "Administration of
the Trust - Portfolio Supervision."
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Computation of Redemption Value. The value of a Unit of a Series of the
Trust is determined as of the Evaluation Time stated under "Essential
Information" in Part Two (a) semiannually, on June 30 and December 31 of each
year (or the last business day prior thereto), (b) on any business day as of the
Evaluation Time next following the tender of any Unit and (c) on any other
business day desired by the Sponsor or the Trustee,
(1) by adding:
a. The aggregate bid side evaluation of the Portfolio
Obligations in a Series of the Trust, as determined by the Evaluator;
b. Cash on hand in such Series of the Trusts, other than money
deposited to purchase contract obligations or money credited to the
Reserve Account; and
c. Accrued but unpaid interest on the Portfolio Obligations in
such Series to the redemption date.
(2) and then deducting from the resulting figure: amounts
representing any applicable taxes or governmental charges payable by such
Series of the Trusts for the purpose of making an addition to the reserve
account (as defined in the Indenture), amounts representing estimated
accrued expenses (including audit fees) of the Series, amounts representing
unpaid fees and expenses of the Trustee, the Sponsor (if applicable),
counsel and the Evaluator and monies held for distribution to Unitholders
of record of such Series as of the business day prior to the evaluation
being made on the days or dates set forth above;
(3) and then dividing the result of the above computation by the
total number of Units of such Series outstanding on the date of evaluation.
The resulting figure equals the Redemption Value for each Unit of such
Series. The Evaluator will determine the aggregate current bid price
evaluation of the Portfolio Obligations in each Series of the Trusts as set
forth under "Public Offering of Units - Public Offering Price."
Postponement of Redemption. The right of redemption of any Series may be
suspended and payment of the Redemption Value per Unit postponed for more than
seven calendar days following a tender of Units for redemption for any period
(as determined by the Securities and Exchange Commission) during which the New
York Stock Exchange is closed, other than for customary weekend and holiday
closings, or during which trading on that Exchange is restricted or an emergency
exists as a result of which disposal or evaluation of the Portfolio Obligations
is not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee is not liable to any
person in any way for any loss or damage which may result from any such
suspension or postponement.
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RIGHTS OF UNITHOLDERS
Unitholders. A Unitholder is deemed to be a beneficiary of the Series of
the Trusts which he purchased and is vested with all right, title and interest
in the appropriate Series of the Trusts, each of which was created by the
Indenture. A Unitholder may at any time tender his Units to the Trustee for
redemption.
Ownership of Units. Ownership of Units of a Series of the Trusts will not
be evidenced by Certificates unless a Unitholder or the Unitholder's registered
broker/dealer makes a written request to the Trustee. Units are transferable by
making a written request to the Trustee and, in the case of Units evidenced by a
certificate, by presenting and surrendering such certificate to the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer which should be sent registered or certified mail for the protection of
the Unitholder. Unitholders must sign such written request, and such
certificate or transfer instrument, exactly as their names appear on the records
of the Trustee and on any certificate representing the Units to be transferred.
Such signatures must be guaranteed by a participant in the Securities Transfer
Agents Medallion Program ("STAMP") or such other signature guarantee program in
addition to or in substitution for STAMP as may be accepted by the Trustee.
Certificates will be issued in denominations of 1,000 Units (100 Units for
Kemper Defined Funds and EVEREN Unit Investment Trusts) or any whole number of
Units in excess thereof. The Trustee may require a Unitholder to pay a
reasonable fee, to be determined in the sole discretion of the Trustee, for each
certificate reissued or transferred and to pay any governmental charge that may
be imposed in connection with each such transfer or exchange. The Trustee at
the present time does not intend to charge for the normal transfer or exchange
of certificates. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity (generally
amounting to 3% of the market value of the Units), affidavit of loss, if
appropriate, evidence of ownership and payment of expenses incurred. Any
mutilated certificate must be presented to the Trustee before a substitute
certificate will be issued.
Certain Limitations. The death or incapacity of any Unitholder (or the
dissolution of the Sponsor) will not operate to terminate the Trusts or any
Series thereof nor entitle the legal representatives or heirs of such Unitholder
to claim an accounting or to take any other action or proceeding in any court
for a partition or winding up of the Trusts or any Series thereof.
No Unitholder shall have the right to vote except with respect to removal
of the Trustee or amendment and termination of the Trust or of the Series of
which they are a Unitholder. See "Administration of the Trust - Amendment" and
"Administration of the Trust - Termination." Unitholders shall have no right to
control the operation or administration of the Trust or any Series thereof in
any manner, except upon the vote of Unitholders representing 66-2/3% of the
Units of a Series outstanding for purposes of amendment, termination or
discharge of the Trustee, all as provided in the Indenture; however, no
Unitholder shall ever be under any liability to any third party for any action
taken by the Trustee, Evaluator or Sponsor.
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EXPENSES AND CHARGES
Initial Expenses. All expenses and charges incurred prior to or in
establishment of the Series of the Trusts, including the cost of the initial
preparation, printing and execution of the Indenture and the certificate, the
initial fees of the Trustee and the Evaluator, initial legal and auditing
expenses, the cost of the preparation and printing of the Prospectus and all
other advertising and selling expenses were paid by the Sponsor.
Fees. The Sponsor will receive no fee from the Trusts or any Series
thereof for its services as such. However, the Sponsor does receive a portfolio
surveillance fee, which is earned for portfolio supervisory services, at the
rate set forth under "Essential Information" in Part Two for the appropriate
Series, computed monthly on the basis of the largest principal amount of
Portfolio Obligations in such Series of the Trusts at any time during the
preceding month. The portfolio surveillance fee, which may not exceed the
amount set forth under "Essential Information" in Part Two, may exceed the
actual costs of providing portfolio supervisory services for these Series of the
Trusts, but at no time will the total amount the Sponsor receives for
supervisory services rendered to all unit investment trusts sponsored by the
Sponsor in any calendar year exceed the aggregate cost of providing such
services in that year.
The Trustee will receive for its services under the Indenture the fee set
forth in Part Two under "Essential Information," computed monthly on the basis
of the largest principal amount of Portfolio Obligations in such Series at any
time during the preceding month. In no event will the Trustee be paid less than
$2,000 per Series in any one year.
For evaluation of Portfolio Obligations in a Series of the Trusts, the
Evaluator shall receive the fee set forth in Part Two under "Essential
Information," computed monthly on the basis of the largest aggregate principal
amount of Portfolio Obligations in such Series at any time during the preceding
month.
The Trustee's fees, Sponsor's portfolio surveillance fees and the
Evaluator's fees are payable monthly on or before each Distribution Date from
the Interest Account of each Series to the extent funds are available and
thereafter from the Principal Account of such Series. Any of such fees may be
increased without approval of the Unitholders in proportion to increases under
the category "All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor or if such category is no
longer published, in a comparable category. The Trustee also receives benefits
to the extent that it holds funds on deposits in various non-interest bearing
accounts created under the Indenture.
Other Charges. The following additional charges are or may be incurred by
a Series of the Trusts as more fully described in the Indenture: (a) fees of
the Trustee for extraordinary services, (b) expenses of the Trustee (including
legal and auditing expenses, but not including any fees and expenses charged by
any agent for custody and safeguarding the Portfolio Obligations) and of counsel
designated by the Sponsor, (c) various governmental charges, (d) expenses and
costs of any action taken by the Trustee to protect the Series of the Trusts and
the rights and interests of the Unitholders thereof, (e) indemnification of the
Trustee for any loss, liability or expense incurred by it in the administration
of the Series of the Trusts without gross negligence, bad faith, willful
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malfeasance or willful misconduct on its part or reckless disregard of its
obligations and duties, (f) indemnification of the Sponsor for any losses,
liabilities and expenses incurred in acting as Sponsor under the Indenture
without gross negligence, bad faith, willful malfeasance or willful misconduct
or reckless disregard of its obligations and duties, and (g) expenditures
incurred in contacting Unitholders upon termination of such Series of the
Trusts.
The fees and expenses set forth herein are payable out of a Series of the
Trusts and when so paid by or owing to the Trustee are secured by a lien on such
Series. If the balances in the Interest and Principal Accounts are insufficient
to provide for amounts payable by any Series of the Trusts, the Trustee has the
power to sell Portfolio Obligations from such Series to pay such amounts. To
the extent Portfolio Obligations are sold, the size of that Series of the Trusts
will be reduced and the proportions of the types of Portfolio Obligations will
change. Such sales might be required at a time when Portfolio Obligations would
not otherwise be sold and might result in lower prices than might otherwise be
realized. Moreover, due to the minimum principal amount in which Portfolio
Obligations may be required to be sold, the proceeds of such sales may exceed
the amount necessary for the payment of such fees and expenses.
DISTRIBUTIONS FROM THE INTEREST, PRINCIPAL AND CAPITAL GAINS ACCOUNTS.
GNMA Trust. The terms of the Ginnie Maes provide for payment to the
holders thereof (including the Series of the GNMA Trust) on the fifteenth day of
each month (the 25th day in the case of Ginnie Mae II's) 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 each Series on
the Securities therein as it becomes payable and credit such interest to a
separate Interest Account created by the Indenture for such Series.
Distributions will be made to each Unitholder of record of each Series of
the GNMA Trust on the appropriate Distribution Date and will consist of an
amount substantially equal to such Unitholder's pro rata share of the cash
balances in the Interest Account, the Principal Account and the Capital Gains
Account, if any, of such Series computed as of the close of business on the
preceding Record Date.
U.S. Treasury Portfolio Series. The terms of the U.S. Treasury Obligations
(other than Stripped Treasury Securities) provide for semi-annual payments of
interest on or about the 15th day of the designated months. Interest received
by a U.S. Treasury Portfolio Series, including any portion of the proceeds from
a disposition of the U.S. Treasury Obligations which represents accrued
interest, is credited by the Trustee to the Interest Account for such Trust
Fund. All other receipts are credited by the Trustee to a separate Principal
Account for such Trust Fund.
Since interest on the U.S. Treasury Obligations (other than Stripped
Treasury Securities) in U.S. Treasury Portfolio Series is payable in semi-annual
installments, and distributions of income are made to Unitholders at different
intervals from receipt of interest, the interest accruing to Unitholders in the
U.S. Treasury Portfolio Series may not be equal to the amount of money received
and available for distribution from the Interest Account. Therefore, on each
Distribution Date the amount of interest actually deposited in the Interest
Account of a U.S. Treasury Portfolio Series and available for distribution may
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be slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such variances,
the Trustee is authorized by the Indenture to advance such amounts as may be
necessary to provide interest distributions of approximately equal amounts. The
Trustee will be reimbursed, without interest, for any such advances from funds
available in the Interest Account for such U.S. Treasury Portfolio Series.
Stripped Treasury Securities are sold at a deep discount because the buyer
of those securities obtains only the right to receive a future fixed payment on
the security and not any rights to periodic interest payments thereon.
Purchasers of these Securities acquire, in effect, discount obligations that are
economically identical to the "zero-coupon bonds" that have been issued by
corporations. Zero coupon bonds are debt obligations which do not make any
periodic payments of interest prior to maturity and accordingly are issued at a
deep discount.
Under generally accepted accounting principles, a holder of a security
purchased at a discount normally must report as an item of income for financial
accounting purposes the portion of the discount attributable to the applicable
reporting period. The calculation of this attributable income would be made on
the "interest" method which generally will result in a lesser amount of
includable income in earlier periods and a correspondingly larger amount in
later periods. For Federal income tax purposes, the inclusion will be on a
basis that reflects the effective compounding of accrued but unpaid interest
effectively represented by the discount. Although this treatment is similar to
the "interest" method described above, the "interest" method may differ to the
extent that generally accepted accounting principles permit or require the
inclusion of interest on the basis of a compounding period other than the semi-
annual period. See "Tax Status of the Trusts."
The Trustee will distribute on each Distribution Date or shortly
thereafter, to each Unitholder of record of U.S. Treasury Portfolio Series 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 U.S.
Treasury Portfolio Series computed as of the close of business on the preceding
Record Date. However, no distribution will be required if the balance in the
Principal Account is less than $1.00 per 1,000 Units (or in the case of certain
Trusts, less than $1.00 per 100 Units). Notwithstanding the foregoing, the
Trustee will make a distribution to Unitholders of all principal relating to
maturing Treasury Obligations within seven business days of the date of each
such maturity.
General. Distributions for an IRA, Keogh or other tax-deferred retirement
plan will not be sent to the individual Unitholder. These distributions will go
directly to the custodian of the plan to avoid the penalties associated with
premature withdrawals from such accounts. See "Retirement Plans."
All funds collected or received will be held by the Trustee in trust,
without interest to Unitholders, as part of the appropriate Series of the Trusts
or the Reserve Account for such Series referred to below until required to be
disbursed in accordance with the provisions of the Indenture. Such funds will
be segregated on the trust ledger of the Trustee so long as such practice
preserves a valid preference of Unitholders of such Series under the bankruptcy
laws of the United States, or if such preference is not preserved, the Trustee
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shall handle such funds in such other manner as shall constitute the segregation
and holding thereof in trust within the meaning of the Investment Company Act of
1940, as the same may from time to time be amended. To the extent permitted by
the Indenture and applicable banking regulations, such funds are available for
use by the Trustee pursuant to normal banking procedures.
The first distribution for persons who purchase Units between a Record Date
and a Distribution Date will be made on the second Distribution Date following
their purchase of Units.
The Trustee is authorized by the Indenture to withdraw from the Principal
and/or Interest Accounts of each Series such amounts as it deems necessary to
establish a reserve for any taxes or other governmental charges that may be
payable out of such Series of the Trust, which amounts will be deposited in a
separate Reserve Account. If the Trustee determines that the amount in the
Reserve Account is greater than the amount necessary for payment of any taxes or
other governmental charges, it will promptly deposit the excess back in the
Account from which it was withdrawn.
ADMINISTRATION OF THE TRUST
Records and Accounts. In accordance with the Indenture, the Trustee shall
keep records of all transactions at its office. Such records shall include the
name and address of, and the number of Units held by, each Unitholder of each
Series of the Trusts. Such books and records shall be open to inspection by any
Unitholder of such Series at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or Federal statute, rule or
regulation. The Trustee shall keep a certified copy or duplicate original of
the Indenture on file in its office available for inspection at all reasonable
times during usual business hours by any Unitholder of such Series, together
with a current list of the Portfolio Obligations held in each Series of the
Trusts. Pursuant to the Indenture, the Trustee may employ one or more agents
for the purpose of custody and safeguarding of the Portfolio Obligations
comprising the Portfolios.
Portfolio Supervision. The Indenture permits the Sponsor to direct the
Trustee to dispose of any Portfolio Obligation in a Series of the Trusts upon
the happening of any of the following events:
(1) Default in the payment of principal or interest on any of the
Portfolio Obligations when due and payable,
(2) Institution of legal proceedings seeking to restrain or enjoin
the payment of any of the Portfolio Obligations or attacking their
validity,
(3) A breach of covenant or warranty which could adversely affect the
payment of debt service on the Portfolio Obligations,
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(4) Default in the payment of principal or interest on any other
outstanding obligation guaranteed or backed by the full faith and credit of
the United States of America,
(5) A decline in market price to such an extent or such other market
credit or other factors exist, as in the opinion of the Sponsor would make
retention of any of the Portfolio Obligations detrimental to the Trusts or
any Series thereof and to the interests of the Unitholders,
(6) An offer is made to refund or refinance any of the Portfolio
Obligations, or
(7) Termination of the Trusts or any Series thereof.
The Trustee shall also sell any Portfolio Obligation in a Series of the
Trusts if there is a default in the payment of principal and interest on such
Portfolio Obligation and no provision for payment is made therefor and the
Sponsor fails to instruct the Trustee to sell or hold such Portfolio Obligation
within thirty days after notice to the Sponsor from the Trustee of such default.
The Trustee shall not be liable for any depreciation or loss by reason of any
sale of Portfolio Obligations or by reason of the failure of the Sponsor to give
directions to the Trustee.
Amounts received by a Series of the Trusts upon the sale of any Portfolio
Obligation under the conditions set forth above will be deposited in the
Principal Account, Interest Account or Capital Gains Account for such Series, as
appropriate, when received and pursuant to the Sponsor's instructions will be
either distributed by the Trustee on the next Distribution Date to Unitholders
of record of such Series on the Record Date prior to such Distribution Date.
Reports to Unitholders. With each distribution, the Trustee will furnish
or cause to be furnished to the Unitholders of each Series a statement of the
amount of interest and other receipts, if any, distributed, expressed in each
case as a dollar amount per Unit of such Series.
The accounts of each Series of the Trusts are required to be audited
annually, at such Series' expense, by independent certified public accountants
designated by the Sponsor, unless the Trustee determines that such an audit
would not be in the best interest of the Unitholders of that Series of the
Trust. The accountants' report will be furnished by the Trustee to any
Unitholder of such Series upon written request.
Within a reasonable period of time after the end of each calendar year, the
Trustee will furnish to each person who at any time during such calendar year
was a Unitholder of record of a Series of the Trusts a statement setting forth
for the applicable Series:
(1) As to the Interest Account for such Series:
(a) the amount of interest received on the Portfolio
Obligations, including amounts received as a portion of the proceeds
of any disposition of Portfolio Obligations;
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(b) the amount paid from the Interest Account representing
accrued interest for any Units redeemed and amounts paid or reserved
for purchases of substitute Portfolio Obligations;
(c) the deductions from the Interest Account for applicable
taxes or other governmental charges, if any, and fees and expenses of
the Trustee (including auditing fees), the Sponsor, the Evaluator and
counsel;
(d) the deductions from the Interest Account for payment into
the Reserve Account; and
(e) the net amount remaining after such payments and deductions
expressed both as a total dollar amount and as a dollar amount per
Unit or appropriate multiple thereof outstanding on the last business
day of such calendar year.
(2) As to the Principal Account for such Series:
(a) the dates of the sale, maturity, liquidation or redemption
of any of the Portfolio Obligations and the net proceeds received
therefrom, excluding any portion credited to the Interest Account;
(b) the amount paid from the Principal Account representing the
principal of any Units redeemed and amounts paid or reserved for
purchases of substitute Portfolio Obligations;
(c) the deductions from the Principal Account, if any, for
payment of applicable taxes or other governmental charges, fees and
expenses of the Trustee (including auditing fees), the Sponsor, the
Evaluator and counsel;
(d) the deductions from the Principal Account for payment into
the Reserve Account; and
(e) the net amounts remaining after such payments and deductions
expressed both as a total dollar amount and as a dollar amount per
Unit or appropriate multiple thereof outstanding on the last business
day of such calendar year.
(3) The following information with respect to such Series:
(a) a list of the Portfolio Obligations, as appropriate, as of
the last business day of such calendar year grouped by coupon and
maturity range;
(b) the number of Units outstanding on the last business day of
such calendar year;
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(c) the Unit Value (as defined in the Indenture) based on the
last Trust evaluation made during such calendar year; and
(d) the amounts actually distributed during such calendar year
from the Interest and Principal Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per Unit or
appropriate multiple thereof outstanding on the Record Dates for such
distributions.
Amendments. The Indenture and the Agreement with respect to each Series
may be amended by the Trustee and the Sponsor without the consent of Unitholders
(a) to cure any ambiguity or to correct or supplement any provision thereof
which may be defective or inconsistent, (b) to change any provision thereof as
may be required by the Securities and Exchange Commission or any successor
governmental agency, (c) for those Trusts that have qualified as "regulated
investment companies," to add or change any provision thereof which may be
necessary or advisable for the continuing qualification as a regulated
investment company under the Internal Revenue Code of 1986 and (d) to make such
other provisions as shall not adversely affect the interest of the Unitholders
(as determined in good faith by the Sponsor and the Trustee); provided, however,
that the Indenture may also be amended with respect to any Series by the Sponsor
and the Trustee (or the performance of any of the provisions of the Indenture
may be waived) with the consent of holders of Units representing 66-2/3% of the
Units then outstanding of such Series for the purposes of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture of such Series or of modifying in any manner the rights of Unitholders
thereof. However, the Indenture may not be amended, without the consent of the
holders of all Units of a Series then outstanding, so as (1) to permit, except
in accordance with the terms and conditions of the Indenture, the acquisition of
any Portfolio Obligations other than those specified in the Indenture, or (2) to
reduce the aforesaid percentage of Units of a Series the holders of which are
required to consent to certain of such amendments and may not be amended so as
to reduce the interest in such Series represented by Units without the consent
of the holder of such Units. The Trustee shall promptly notify Unitholders of
the substance of any such amendment.
Termination. The Indenture provides that a Series of the Trusts will
terminate after the maturity, redemption, sale or other disposition of the last
of the Portfolio Obligations held in such Series. If the value of a Series of
the Trusts, as shown by an evaluation, is less than forty percent (40%) of the
par value of the Portfolio Obligations deposited in such Series of the Trust,
the Trustee shall, if directed by the Sponsor in writing, terminate such Series.
A Series of the Trust may also be terminated at any time by the written consent
of holders of 66-2/3% of the Units of such Series outstanding.
Upon termination, the Trustee will sell the Portfolio Obligations then held
in the appropriate Series of the Trust and credit the moneys derived from such
sale to the Principal Capital Gains and Interest Accounts thereof. The Trustee
will then, after deduction of any fees and expenses of such Series and payment
into the Reserve Account of any amount required for taxes or other governmental
charges that may be payable by such Series, distribute to each Unitholder of
such Series, only upon surrender for cancellation of his certificate, if issued,
after due notice of such termination, such Unitholder's pro rata share in the
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Interest, Capital Gains and Principal Accounts for such Series. The sale of
Portfolio Obligations in a Series of the Trusts upon termination may result in a
lower amount than might otherwise be realized if such sale were not required at
such time. For this reason, among others, the amount realized by a Unitholder
upon termination may be less than the principal amount of Portfolio Obligations
represented by the Units held by such Unitholder.
RESIGNATION, REMOVAL AND LIABILITY
Regarding the Trustee. The Trustee shall be under no liability for any
action taken in good faith in reliance on prima facie properly executed
documents or for the disposition of moneys or Portfolio Obligations from any
Series of the Trust, nor shall the Trustee be liable or responsible in any way
for depreciation or loss incurred by reason of the disposition of any Portfolio
Obligations by the Trustee. However, the Trustee shall be liable for willful
malfeasance, willful misconduct, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under the Indenture. In the event of a failure of the
Sponsor to act, the Trustee may act under the Indenture and shall not be liable
for any action taken by it in good faith. The Trustee shall not be personally
liable for any taxes or other governmental charges imposed upon a Series of the
Trust or in respect of the Portfolio Obligations or the interest thereon. The
Indenture also contains other customary provisions limiting the liability of the
Trustee and providing for the indemnification of the Trustee for any loss or
claim accruing to it without gross negligence, bad faith, willful misconduct,
willful malfeasance or reckless disregard of its duties and obligations under
the Indenture on its part.
The Trustee or any successor may resign by executing an instrument in
writing, filing the same with the Sponsor and mailing a copy of such notice or
resignation to all Unitholders then of record. Upon receiving such notice the
Sponsor will use its best efforts to appoint a successor Trustee promptly. The
Sponsor may at any time remove the Trustee with or without cause and appoint a
successor as provided in the Indenture. If within 30 days of the resignation of
a Trustee no successor has been appointed or, if appointed, has not accepted the
appointment, the retiring Trustee may apply to a court of competent jurisdiction
for the appointment of a successor. The resignation or removal of a Trustee
becomes effective only when the successor Trustee accepts its appointment as
such or when a court of competent jurisdiction appoints a successor Trustee.
Regarding the Sponsor. The Sponsor shall be under no liability to the
Series of the Trust or to Unitholders for taking any action or for refraining
from any action in good faith or for errors in judgment, nor shall the Sponsor
be liable or responsible in any way for depreciation or loss incurred by reason
of the disposition of any Portfolio Obligation. The Sponsor will, however, be
liable for its own willful malfeasance, willful misconduct, bad faith, gross
negligence or reckless disregard of its duties and obligations under the
Indenture.
If at any time the Sponsor shall resign under the Indenture or shall fail
or be incapable of performing its duties thereunder or shall become bankrupt or
its affairs are taken over by public authorities, the Indenture directs the
Trustee to either (1) appoint a successor sponsor or sponsors at rates of
compensation deemed reasonable by the Trustee and not exceeding amounts
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<PAGE>
prescribed by the Securities and Exchange Commission or (2) continue to act as
sponsor itself without terminating the Indenture.
Regarding the Evaluator. The Trustee, Sponsor and Unitholders may rely on
any evaluation furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the Indenture shall
be made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor or Unitholders for errors in judgment. The Evaluator shall,
however, be liable for its own willful malfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties under the Indenture.
The Evaluator may resign or may be removed by the Sponsor and the Trustee,
and the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Evaluator. If upon resignation
of the Evaluator no successor accepts appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
MISCELLANEOUS
Sponsor. Ranson & Associates, Inc., the Sponsor of the Trusts, is an
investment banking firm created in 1995 by a number of former owners and
employees of Ranson Capital Corporation. On November 26, 1996, Ranson &
Associates, Inc. purchased all existing unit investment trusts sponsored by
EVEREN Securities, Inc. Accordingly, Ranson & Associates, Inc. is the successor
sponsor to unit investment trusts formerly sponsored by EVEREN Unit Investment
Trusts, a service of EVEREN Securities, Inc. Ranson & Associates, Inc. is also
the sponsor and successor sponsor of Series of The Kansas Tax-Exempt Trust and
Multi-State Series of The Ranson Municipal Trust. Ranson & Associates, Inc. is
the successor to a series of companies, the first of which was originally
organized in Kansas in 1935. During its history, Ranson & Associates, Inc. and
its predecessors have been active in public and corporate finance and have sold
bonds and unit investment trusts and maintained secondary market activities
relating thereto. At present, Ranson & Associates, Inc., which is a member of
the National Association of Securities Dealers, Inc., is the Sponsor to each of
the above-named unit investment trusts and serves as the financial advisor and
as an underwriter for Kansas municipalities. The Sponsor's offices are located
at 250 North Rock Road, Suite 150, Wichita, Kansas 67206-2241.
The foregoing information with regard to the Sponsor relates to the Sponsor
only and not to any Series of the Trust. 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 shown herein. More comprehensive financial information can be
obtained from the Sponsor upon request.
Trustee. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, telephone 1-
800-701-8178. The Bank of New York is subject to supervision and examination by
-49-
<PAGE>
the Superintendent of Banks of the State of New York and the Board of Governors
of the Federal Reserve System, and its deposits are insured by the Federal
Deposit Insurance Corporation to the extent permitted by law.
The Trustee, whose duties are ministerial in nature, has not participated
in selecting the Portfolio Obligations. For information relating to the
responsibilities of the Trustee under the Indenture, reference is made to the
material set forth under "Administration of the Trust."
Legal Opinions. The legality of the Units offered hereby and certain
matters relating to Federal tax law were originally passed upon by Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as counsel for the
Sponsor.
INDEPENDENT AUDITORS
The financial statements appearing in Part Two of this Prospectus and
Registration Statement, with information pertaining to the specific Series of
the Trusts to which such statements relate, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report appearing in Part Two
and are included in reliance upon such report given upon the authority of such
firm as experts in auditing and accounting.
-50-
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Part Two
Dated April 28, 2000
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NOTE: Part Two of this Prospectus May Not Be Distributed Unless Accompanied by
Part One.
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Essential Information
As of December 31, 1999
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
General Information
Principal Amount of Securities $3,000,000
Number of Units 300,000
Fractional Undivided Interest in the Trust per Unit 1/300,000
Principal Amount of Securities per Unit $10.000
Calculation of Public Offering Price:
Aggregate Value of Securities in the Trust $2,890,503
Aggregate Value of Securities per Unit $9.635
Principal Cash per Unit (1) $-
Accrued Interest per Unit through settlement date of January 5, 2000 $.006
Total Price including Accrued Interest per Unit $9.641
Sales Charge of 1.95% of Public Offering Price
(1.989% of net amount invested) per Unit $.192
Public Offering Price per Unit $9.833
Redemption Price per Unit $9.641
Calculation of Estimated Net Annual Interest Income per Unit:
Estimated Annual Interest Income $.5888
Less: Estimated Annual Expense $.0183
Estimated Net Annual Interest Income $.5705
Daily Rate at which Estimated Annual Interest Income Accrues per Unit $.001585
Estimated Current Return Based on Public Offering Price (2) 5.80%
Estimated Long-Term Return (2) 6.03%
1. This amount, if any, represents principal cash or overdraft which is an
asset or liability of the Trust and is included in the Public Offering Price.
2. The Estimated Current Return and Estimated Long-Term Return will vary with
changes in the Public Offering Price and there is no assurance that such returns
on the date hereof will be applicable on a subsequent date of purchase.
These estimated returns are increased for transactions entitled to a reduced
sales charge (see "Public Offering of Units - Public Offering Price" - Part
One).
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Essential Information (continued)
As of December 31, 1999
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
Record and Distribution Date Record Date is the first of each month
and distributions to Unitholders on
such record dates will be made on the
15th day of the month.
Distribution Dates No distribution (other than capital
gains distributions) need be made from
the Principal Account if the balance
therein, excluding capital gains, is
less than $1.00 per 100 Units.
Trustee's Annual Fee
(including estimated expenses) $1.00 per 100 Units (includes $1.28 of
Trustee's annual fee per $1,000
principal amount of underlying
Securities and $.13 of out-of-pocket
expenses per 100 Units).
Evaluator's Annual Fee $.10 per $1,000 principal amount of
underlying Securities.
Surveillance Fee $.15 per $1,000 principal amount of
underlying Securities.
Date of Trust Agreement
and Initial Deposit June 23, 1999
Mandatory Termination Date July 1, 2032
Discretionary Liquidation Amount The Trust may be terminated if the
value thereof is less than $200,000
(40% of the par value of the
Securities deposited in the Trust).
<PAGE>
Report of Independent Auditors
Unitholders
Ranson Defined Funds
U. S. Treasury Portfolio Series 21
We have audited the accompanying statement of assets and liabilities of Ranson
Defined Funds U. S. Treasury Portfolio Series 21, including the schedule of
investments, as of December 31, 1999, and the related statements of operations
and changes in net assets for the period from June 23, 1999 (Date of Deposit) to
December 31, 1999. These financial statements are the responsibility of the
Trust's sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments owned as of December 31,
1999, by correspondence with the custodial bank. An audit also includes
assessing the accounting principles used and significant estimates made by the
sponsor, as well as evaluating the overall financial statement presentation. We
believe that our 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 Ranson Defined Funds U. S.
Treasury Portfolio Series 21 at December 31, 1999, and the results of its
operations and changes in its net assets for the period indicated above in
conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
April 14, 2000
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Statement of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Government Securities, at value (cost $2,957,524) $2,890,503
Interest receivable 22,569
---------
Total assets 2,913,072
Liabilities and net assets
Cash overdraft 7,013
Accrued liabilities 2,703
---------
9,716
Net assets, applicable to 300,000 Units outstanding:
Cost of Trust assets, exclusive of interest $2,957,524
Unrealized depreciation (67,021)
Distributable funds 12,853
--------- ---------
Net assets $2,903,356
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Statement of Operations
<TABLE>
<CAPTION>
Period from
June 23,
1999 to
December 31,
1999
<S> <C>
---------
Investment income - interest $65,320
Expenses:
Trustee's fees and related expenses 3,957
Evaluator's and surveillance fees 203
---------
Total expenses 4,160
---------
Net investment income 61,160
Unrealized depreciation during the period (67,021)
---------
Net increase in net assets resulting from operations $(5,861)
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Period from
June 23,
1999 to
December 31,
1999
<S> <C>
---------
Operations:
Net investment income $61,160
Unrealized depreciation on investments during the period (67,021)
---------
Net decrease in net assets resulting from operations (5,861)
Distributions to Unitholders:
Net investment income (44,212)
Capital transactions:
Issuance of 300,000 Units 2,953,429
---------
Total increase in net assets 2,903,356
Net assets:
At the beginning of the period -
---------
At the end of the period (including distributable funds applicable
to Trust Units of $12,853 at December 31, 1999) $2,903,356
=========
Trust Units outstanding at the end of the period 300,000
=========
Net asset value per Unit at the end of the period $9.68
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Schedule of Investments
December 31, 1999
U.S. Treasury Securities
<CAPTION>
Principal Maturity
Amount Coupon Date Value (2)
<C> <C> <C> <C>
--------- --- --- ---
$600,000 7.250% 5/15/2004 $618,750
600,000 6.500% 5/15/2005 600,564
300,000 6.875% 5/15/2006 305,439
300,000 0.000% 5/15/2006 198,186 (1)
600,000 6.625% 5/15/2007 602.814
600,000 5.625% 5/15/2008 564,750
--------- ---------
$3,000,000 $2,890,503
========= =========
</TABLE>
Notes to Schedule of Investments
1. This Security has been purchased at a discount from the par value because
there is no stated interest income thereon. Such Security is normally
described as "zero coupon" Security. Over the life of this Security the
value increases, so that upon maturity, the holders of this Security will
receive 100% of the principal amount thereof.
2. See Note 1 to the accompanying financial statements for a description of
the method of determining cost and value.
See accompanying notes to financial statements.
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Notes to Financial Statements
1. Significant Accounting Policies
Trust Sponsor and Evaluator
Ranson & Associates, Inc, serves as the Trust's sponsor and evaluator.
Valuation of Securities
As of the date of the of the financial Statements and during the Trust's primary
offering period, Government Securities are stated at offering prices as
determined by Ranson & Associates, Inc.. At the end of the primary period
(June 23, 2000) and thereafter, the Securities will be stated at bid prices as
determined by Ranson & Associates, Inc. The aggregate bid prices of the
Securities are determined by the Evaluator based on (a) current bid prices of
the Securities, (b) current bid prices for comparable securities, (c) appraisal,
or (d) any combination of the above.
Cost of Securities
Cost of the Trust's Government Securities is based on the offering prices of the
Securities on the dates of deposit of such Securities acquired during the
primary sales period, plus amortization of original issue discount for the zero
coupon obligations. The premium or discount for the fixed rate obligations is
not being amortized. Realized gain (loss) from Security transactions is
reported on an identified cost basis.
Investment Income
Interest income consists of amortization of the original issue discount on the
zero coupon obligation and interest accrued as earned on the fixed rate
obligations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Trust's sponsor to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from such
estimates.
2. Unrealized Appreciation and Depreciation
Following is an analysis of net unrealized depreciation at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $399,306
Gross unrealized depreciation (466,327)
----------
Net unrealized depreciation $(67,021)
=========
</TABLE>
3. Federal Income Taxes
The Trust is not an association taxable as a corporation for federal income tax
purposes. Each Unitholder is considered to be the owner of a pro rata portion
of the Trust under Subpart E, Subchapter J of Chapter 1 of the Internal Revenue
Code of 1986, as amended. Accordingly, no provision has been made for federal
income taxes.
<PAGE>
Ranson Defined Funds
U.S. Treasury Portfolio Series 21
Notes to Financial Statements (continued)
4. Other Information
Cost to Investors
The cost to original investors of Units of the Trust was based on the aggregate
offering price of the Bonds on the date of an investor's purchase, plus a sales
charge of 1.95% of the Public Offering Price (equivalent to 1.989% of the net
amount invested). The Public Offering Price for secondary market transactions
is based on the aggregate bid price of the Bonds plus or minus a pro rata share
of cash or overdraft in the Principal Account, if any, on the date of an
investor's purchase, plus a sales charge of 1.95% of the Public Offering Price
(equivalent to 1.989% of the net amount invested).
Distributions
Distributions of net investment income to Unitholders are declared and paid
monthly. Income distribution per Unit on a record date basis is $.24 for the
period ended December 31, 1999.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated April 14, 2000, in this Post-Effective
Amendment to the Registration Statement (Form S-6) and related Prospectus of
Ranson Defined Funds U. S. Treasury Portfolio Series 21 dated April 28, 2000.
Ernst & Young LLP
Kansas City, Missouri
April 28, 2000
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Part Two
Dated April 28, 2000
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NOTE: Part Two of this Prospectus May Not Be Distributed Unless Accompanied by
Part One.
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Essential Information
As of December 31, 1999
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
General Information
Principal Amount of Securities $4,783,562
Number of Units 492,457
Fractional Undivided Interest in the Trust per Unit 1/492,457
Principal Amount of Securities per Unit $9.714
Calculation of Public Offering Price:
Aggregate Value of Securities in the Trust $4,506,274
Aggregate Value of Securities per Unit $9.151
Principal Cash per Unit (1) $-
Accrued Interest per Unit through settlement date of January 5, 2000 $.007
Total Price including Accrued Interest per Unit $9.158
Sales Charge of 3.95% of Public Offering Price
(4.112% of net amount invested) per Unit $.377
Public Offering Price per Unit $9.535
Redemption Price per Unit $9.158
Calculation of Estimated Net Annual Interest Income per Unit:
Estimated Annual Interest Income $.6666
Less: Estimated Annual Expense $.0158
Estimated Net Annual Interest Income $.6508
Daily Rate at which Estimated Annual Interest Income Accrues per Unit $.001808
Estimated Current Return Based on Public Offering Price (2) 6.83%
Estimated Long-Term Return (2) 6.97%
1. This amount, if any, represents principal cash or overdraft which is an
asset or liability of the Trust and is included in the Public Offering Price.
2. The Estimated Current Return and Estimated Long-Term Return will vary with
changes in the Public Offering Price and there is no assurance that such returns
on the date hereof will be applicable on a subsequent date of purchase.
These estimated returns are increased for transactions entitled to a reduced
sales charge (see "Public Offering of Units - Public Offering Price" - Part
One).
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Essential Information (continued)
As of December 31, 1999
Sponsor and Evaluator: Ranson & Associates, Inc.
Trustee: The Bank of New York Co.
Record and Distribution Date Record Date is the first of each month
and distributions to Unitholders on
such record dates will be made on the
15th day of the month.
Distribution Dates No distribution (other than capital
gains distributions) need be made from
the Principal Account if the balance
therein, excluding capital gains, is
less than $1.00 per 100 Units.
Trustee's Annual Fee
(including estimated expenses) $1.00 per 100 Units (includes $.86 of
Trustee's annual fee per $1,000
principal amount of underlying
Securities and $.09 of out-of-pocket
expenses per 100 Units).
Evaluator's Annual Fee $.20 per $1,000 principal amount of
underlying Securities.
Surveillance Fee $.25 per $1,000 principal amount of
underlying Securities.
Date of Trust Agreement
and Initial Deposit June 23, 1999
Mandatory Termination Date July 1, 2032
Discretionary Liquidation Amount The Trust may be terminated if the
value thereof is less than $1,913,000
(40% of the par value of the
Securities deposited in the Trust).
<PAGE>
Report of Independent Auditors
Unitholders
Ranson Defined Funds
GNMA Portfolio Series 12
We have audited the accompanying statement of assets and liabilities of Ranson
Defined Funds GNMA Portfolio Series 12, including the schedule of investments,
as of December 31, 1999, and the related statements of operations and changes in
net assets for the period from June 23, 1999 (Date of Deposit) to December 31,
1999. These financial statements are the responsibility of the Trust's
sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments owned as of December 31,
1999, by correspondence with the custodial bank. An audit also includes
assessing the accounting principles used and significant estimates made by the
sponsor, as well as evaluating the overall financial statement presentation. We
believe that our 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 Ranson Defined Funds GNMA
Portfolio Series 12 at December 31, 1999, and the results of its operations and
changes in its net assets for the period indicated above in conformity with
accounting principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
April 14, 2000
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Statement of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Securities, at value (cost $4,571,896) $4,506,274
Interest receivable 27,991
Cash 34,629
---------
Total assets 4,568,894
Liabilities and net assets
Accrued liabilities 3,160
Net assets, applicable to 492,457 Units outstanding:
Cost of Trust assets, exclusive of interest $4,571,896
Unrealized depreciation (65,622)
Distributable funds 59,460
--------- ---------
Net assets $4,565,734
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Statement of Operations
<TABLE>
<CAPTION>
Period from
June 23,
1999 to
December 31,
1999
<S> <C>
---------
Investment income - interest $125,228
Expenses:
Trustee's fees and related expenses 4,769
Evaluator's and portfolio surveillance fees 243
---------
Total expenses 5,012
---------
Net investment income 120,216
Realized and unrealized loss on investments:
Realized loss on investments (529)
Unrealized depreciation during the period (65,622)
---------
Net loss on investments (66,151)
---------
Net increase in net assets resulting from operations $54,065
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Period from
June 23,
1999 to
December 31,
1999
<S> <C>
---------
Operations:
Net investment income $120,216
Realized loss on investments (529)
Unrealized depreciation on investments during the period (65,622)
---------
Net increase in net assets resulting from operations 54,065
Distributions to Unitholders:
Net investment income (89,873)
Principal from investment transactions (65,456)
Tax return of capital -
---------
Total distributions to Unitholders (155,329)
Capital transactions:
Issuance of 476,457 of Units 4,666,998
---------
Total increase in net assets 4,565,734
Net assets:
At the beginning of the period -
---------
At the end of the period (including distributable
funds applicable to Trusts Units of $59,460 at
December 31, 1999. $4,565,734
=========
Trust Units outstanding at the end of the period 492,457
=========
Net asset value per Unit at the end of the period $9.27
=========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Ranson Defined Funds
GNMA Portfolio Series 12
Schedule of Investments
December 31, 1999
<CAPTION>
Principal Range of Stated
Amount Coupon Maturities Value (3)
<C> <C> <C> <C>
--------- --- ---------- ----------
GNMA Modified Pass-
Through Mortgage-Backed
Securities (2) $4,478,562 7.50% 6/20/29-11/20/29 $4,418,370
U.S. Treasury Strip (1) 305,000 0.00% 5/15/18 87,904
---------- ----------
$4,783,562 $4,506,274
========= =========
</TABLE>
Notes to Schedule of Investments
This U.S. Treasury Bond has been purchased at a discount from the par
value because there is no stated interest income thereon. Such Bond is normally
described as a "zero coupon" Bond. Over the life of the Bond the Value
increases, so that upon maturity, the holders of the Bond will receive 100% of
the principal amount thereof.
The principal amount of GNMA Mortgage-Backed Securities listed as having the
range of maturities shown is an aggregate of individual Securities having
varying stated maturities within that shown. They are listed as one category of
Securities with a single range of maturities because current market conditions
do not accord a significant difference in price among the Securities grouped
together on the basis of the differences in their stated maturities. At some
time in the future, however, the differences in stated maturities could affect
the market value of the individual Securities.
3. See Note 1 to the accompanying financial statements for a description of the
method of determining cost and value.
See accompanying notes to financial statements.
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Notes to Financial Statements
1. Significant Accounting Policies
Trust Sponsor and Evaluator
Ranson & Associates, Inc., serves as the Trust's sponsor and evaluator.
Valuation of Securities
As of the date of the financial statements and during the Trust's primary
offering period, the Trusts' Securities are stated at offering prices as
determined by Ranson & Associates, Inc. At the end of the primary period (June
23, 2000) and thereafter, the Trust's securities will be stated at bid prices as
determined by Ranson & Associates, Inc. The aggregate bid prices of the
Securities are determined by the Evaluator based on (a) current bid prices of
the Securities, (b) current bid prices for comparable securities, (c) appraisal,
or (d) any combination of the above.
Cost of Securities
Cost of the Trust's Securities is based on the offering prices of the Securities
on the dates of deposit of such Securities acquired during the primary sales
period, plus amortization of original issue discount of the zero coupon
obligation. The premium or discount, for the mortgage-backed Securities is
recognized as an adjustment of realized gain (loss) on a pro rata basis as
principal repayments are received. Realized gain (loss) from Security
transactions is reported on an identified cost basis.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States sponsor to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from such estimates.
Investment Income
Interest income consists of amortization of original issue discount for the zero
coupon obligation and interest accrued as earned on the fixed rate obligations.
2. Unrealized Appreciation and Depreciation
Following is an analysis of net unrealized depreciation at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $-
Gross unrealized depreciation (65,622)
----------
Net unrealized depreciation $(65,622)
=========
</TABLE>
3. Federal Income Taxes
The Trust is organized as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). It is the Trust's
policy to comply with the special provisions of the Code available to regulated
investment companies. Such provisions were complied with and, therefore, no
federal income tax provision is required. The accumulated net realized capital
loss on sales of investments for federal income tax purposes at December 31,
1999, amounting to $529 is available to offset future taxable gains. If not
applied, the carryover expires in 2007.
<PAGE>
Ranson Defined Funds
GNMA Portfolio Series 12
Notes to Financial Statements (continued)
4. Other Information
Cost to Investors
The cost to original investors of Units of the Trust was based on the aggregate
offering price of the Securities on the date of an investor's purchase plus or
minus a pro rata share of cash or overdraft in the Principal Account and daily
accrued interest, plus a sales charge of 3.95% of the Public Offering Price
(equivalent to 4.112% of the net amount invested). The Public Offering Price
for secondary market transactions is based on the aggregate bid prices of the
Securities plus or minus a pro rata share of cash or overdraft in the Principal
Account and daily accrued interest on the date of an investor's purchase, plus a
sales charge of 3.95% of the Public Offering Price (equivalent to 4.112% of the
net amount invested).
Distributions
Distributions of net investment income to Unitholders are declared and paid
monthly. Income distributions per Unit on a record date basis, are $.29 per unit
for the period ended December 31, 1999. In addition, distribution of principal
related to the sale or call of securities is $.17 per unit for the period ended
December 31, 1999.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated April 14, 2000, in this Post-Effective
Amendment to the Registration Statement (Form S-6) and related Prospectus of
Ranson Defined Funds GNMA Portfolio Series 12 dated April 28, 2000.
Ernst & Young LLP
Kansas City, Missouri
April 28, 2000
<PAGE>
Contents of Post-Effective Amendment
To Registration Statement
This Post-Effective amendment to the Registration Statement comprises the
following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, The Registrant,
Ranson Unit Investment Trusts Series 83, certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wichita, and State of Kansas, on the
28th day of April, 2000.
Ranson Unit Investment Trusts Series 83
Registrant
By: Ranson & Associates, Inc.
Depositor
By: Robin Pinkerton
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on April 28, 2000 by the
following persons, who constitute a majority of the Board of Directors of Ranson
& Associates, Inc.
Signature Title
Douglas K. Rogers Executive Vice and President and Director
Douglas K. Rogers
Alex R. Meitzner Chairman of the Board and Director
Alex R. Meitzner
Robin K. Pinkerton President, Secretary, Treasurer and
Robin K. Pinkerton Director
Robin Pinkerton
An executed copy of each of the related powers of attorney was filed with
the Securities and Exchange Commission in connection with the Registration
Statement on Form S-6 of The Kansas Tax-Exempt Trust, Series 51 (File No. 33-
46376) and Series 52 (File No. 33-47687) and the same are hereby incorporated
herein by this reference.
