File No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: THE KANSAS TAX-EXEMPT TRUST, SERIES 78
B. Name of Depositor: RANSON CAPITAL CORPORATION
C. Complete address of Depositor's principal executive offices:
120 South Market, Suite 450
Wichita, Kansas 67202
D. Name and complete address of agents for service:
RANSON CAPITAL CORPORATION
Attention: John A. Ranson
120 South Market, Suite 450
Wichita, Kansas 67202
CHAPMAN AND CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title and amount of securities being registered: 1,000* Units
F. Proposed maximum offering price to the public of the securities being
registered ($1,010 per Unit**): $1,010,000
G. Amount of filing fee, computed at one-twenty-ninth of 1 percent of the
proposed maximum aggregate offering price to the public: $348.28
H. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
* 500 Units registered for primary distribution.
500 Units registered for resale by Depositor of Units previously sold in
primary distribution.
** ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE
____________________________________________________________________________
* The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
THE KANSAS TAX-EXEMPT TRUST
SERIES 78
CROSS REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Sponsor Information
3. Name and address of Trustee ) Trustee Information
4. Name and address of principal ) Sponsor Information
underwriter
5. Organization of trust ) Summary of the Trust
6. Execution and termination of ) Summary of the Trust
Trust Indenture and Agreement
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) Description of Trust Portfolio-
) General
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. General information regarding ) General Summary of Information
trust's securities and rights )
of security holders ) Redemption and Repurchase
) of Units
) Description of Trust Portfolio-
) General
) Other Rights of Certificate-
) holders
) Sponsor Information
) Trustee Information
) Tax Status (Federal, State,
) Capital Gains)
11. Type of securities comprising ) Prospectus Front Cover Page
units )
12. Certain information regarding )*
periodic payment certificates )
13. (a) Loan, fees, charges and )
expenses ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Estimated Current Return
) Accrued Interest to Carry
) Public Offering Information
) Expenses of the Trust
(b) Certain information regarding )
periodic payment plan certificates ) *
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Estimated Current Return
) Public Offering Information
) Accrued Interest to Carry
) Sponsor Information
)
(d) Certain other fees, ) Other Rights of Certificate-
expenses or charges ) holders
payable by holders )
(e) Certain profits to be received )
by depositor, principal underwriter, ) Sponsor Information
trustee or any affiliated persons )
(f) Ratio of annual charges to income ) *
14. Issuance of trust's securities ) Summary of the Trust
) Public Offering Information
15. Receipt and handling of payments ) *
from purchasers )
) Trust Administration
16. Acquisition and disposition of ) Summary of the Trust
underlying securities ) Description of Trust Portfolio
) Trustee Information
17. Withdrawal or redemption ) Redemption and Repurchase
) of Units
) Sponsor Information
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Accrued Interest to Carry
) Distributions of Interest and
) Principal
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Expenses of the Trust
) Summary of the Trust
(d) Schedule of distributions ) *
19. records, accounts and reports ) Other Rights of Certificate-
) holders
20. Certain miscellaneous provisions ) Summary of the Trust
of Trust Agreement ) Sponsor Information
) Trustee Information
21. Loans to security holders ) *
22. Limitations on liability ) Summary of the Trust
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of Depositor ) Sponsor Information
26. Fees received by Depositor ) *
27. Business of Depositor ) Sponsor Information
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of Depositor ) *
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35.Distribution of trust's securities ) Prospectus Front Cover Page
by states ) Objectives of the Trust
36.Suspension of sales of trust's ) *
securities )
37.Revocation of authority to ) *
distribute securities )
38. (a) Method of distribution )
(b) Underwriting agreements ) Public Offering Information
(c) Selling agreement )
39. (a) Organization of principal )
underwriter ) Sponsor Information
(b) N.A.S.D. membership by )
principal underwriter )
)
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Sponsor Information
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of the trust ) *
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Public Offering Information
) Accrued Interest to Carry
) Redemption and Repurchase
) of Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering ) Accrued Interest to Carry
price to certain persons ) Public Offering Information
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Estimated Current Return
) Accrued Interest to Carry
) Public Offering Information
) Redemption and Repurchase
) of Units
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Sponsor Information
in underlying securities ) Redemption and Repurchase
) of Units
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of ) Trustee Information
trustee )
49. Fees and expenses of trustee ) Summary of Essential Financial
) Information
) Expenses of the Trust
)
50. Trustee's lien ) Accrued Interest to Carry
) Distribution of Interest and
) Principal
) Expenses of the Trust
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's )
securities ) *
52. (a) Provisions of trust agreement ) Trustee Information
with respect to replacement or ) Description of Trust Portfolio-
elimination of portfolio securities ) Replacement Bonds
(b) Transactions involving )
elimination of underlying securities ) *
(c) Policy regarding substitution or ) Trustee Information
elimination of underlying securities ) Description of Trust Portfolio-
) Replacement Bonds
(d) Fundamental policy not ) *
otherwise covered )
53. Tax status of trust ) Tax Status (Federal, State,
) Capital Gains)
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. )
58. )
59. Financial statements (Instructions ) Report of Allen, Gibbs &
1(c) to Form S-6) ) Houlik, L.C. Independent
) Auditors
) Statement of Net Assets
Preliminary Prospectus Dated September 20, 1995
THE KANSAS TAX-EXEMPT TRUST
1,000 Units Series 78 (A Unit Investment Trust)
The attached final Prospectus for a prior Series of the Trust is hereby used
as a preliminary Prospectus for the above state Series. The narrative
information and structure of the attached final Prospectus will be
substantially the same as that of the final Prospectus for this Series.
Information with respect to pricing, the number of Units, dates and summary
information regarding the characteristics of securities to be deposited in
this Series is not now available and will be different since each Series has
a unique portfolio. Accordingly, the information contained herein with regard
to the previous Series should be considered as being included for
informational purposes only. Ratings of the securities in this Series are
expected to be comparable to those of the securities deposited in the
previous Series. However, the Estimated Current Return for this Series will
depend on the interest rates and offering prices for the securities in this
Series and may vary materially from that of the previous Series.
A registration statement relating to the units of this Series has been filed
with the Securities and Exchange Commission but has not yet become effective.
Information contained herein is subject to completion or amendment. Such
Units may not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This Prospectus shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of the Units in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws
of any such state.
PROSPECTUS THE SERIES 77
KANSAS TAX-EXEMPT TRUST
3,010 UNITS
AVAILABLE ONLY TO KANSAS RESIDENTS
THE TRUST. The Trust initially consists of bonds and delivery statements
relating to contracts to purchase bonds and, thereafter, will consist of a
$2,935,000 aggregate principal amount portfolio comprised of interest bearing
obligations issued by or on behalf of municipalities or other governmental
authorities in the State of Kansas (the "Bonds" or "Securities"). In the
opinion of counsel, interest income to the Trust and to Certificateholders,
with certain exceptions, is exempt under existing law from Federal and Kansas
state income taxes and local Kansas intangible personal property taxes, but
may be subject to the Federal alternative minimum tax and other state and
local taxes. Capital gains, if any, are subject to tax. The objectives of
the Trust include 1) interest income which is exempt from Federal income
taxes, Kansas state income taxes and intangible personal property taxes
levied by Kansas counties, cities and townships, 2) conservation of capital,
and 3) liquidity of investment (see "Objectives of the Trust"). The payment
of interest and the preservation of capital are dependent upon the continuing
ability of the issuers and/or obligors of the Bonds to meet their respective
obligations. Certain of the Bonds are obligations which derive their payment
from mortgage loans. A substantial portion of such bonds will probably be
redeemed prior to their scheduled maturities; any such early redemption will
reduce the aggregate principal amount of the Trust and may also affect the
Estimated Long-Term Return and the Estimated Current Return. The Sponsor has
a limited right to substitute other tax-exempt bonds in the Trust portfolio
in the event of a failed contract. There is no assurance that the Trust's
objectives will be met. The Sponsor of the Trust is Ranson Capital
Corporation, Suite 450, 120 South Market Street, Wichita, Kansas 67202.
PUBLIC OFFERING PRICE. The Public Offering Price of the Units during the
initial offering period is equal to the aggregate offering price of the Bonds
in the portfolio divided by the number of Units outstanding, plus a sales
charge equal to 4.90% of the Public Offering Price (5.152% of the aggregate
offering price of the Bonds). After the initial public offering period, the
secondary market public offering price will be equal to the aggregate bid
price of the Bonds in the portfolio of the Trust divided by the number of
Units outstanding, plus a sales charge of 5.50% of the Public Offering Price
(5.820% of the aggregate bid price of the Bonds). If the Bonds in the Trust
were available for direct purchase by investors, the purchase price of the
Bonds would not include the sales charge included in the Public Offering
Price of the Units. In addition, on transactions entered into on and after
August 23, 1995, there will be added an amount equal to the accrued interest
from August 25, 1995 to the date of settlement (three business days after
order) less distributions from the Interest Account subsequent to August 25,
1995 (the "First Settlement Date"). If Units were available for purchase at
the opening of business on the Date of Deposit, the Public Offering Price per
Unit would have been $999.22. During the initial offering period, the sales
charge is reduced on a graduated scale for sales involving at least 150
Units. See "Public Offering Information." The value of the Bonds will
fluctuate with market and credit conditions, including any changes in
interest rate levels.
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.
Please read this Prospectus and retain it for future reference.
The date of this Prospectus is August 22, 1995.
RANSON CAPITAL CORPORATION
SPONSOR
THE UNITS. Each Unit represents a fractional undivided interest in the
principal and net income of the Trust in the ratio of one Unit for each
$975.08 principal value of Bonds originally deposited in the Trust.
Initially, Units will be offered for sale in the minimum amount of five
Units.
DISTRIBUTIONS. Distributions of interest received by the Trust will be made
on a monthly basis (pro-rated on an annual basis). The first distribution to
Certificateholders will be made on October 1, 1995 to holders of record on
September 15, 1995, and thereafter distributions will be made monthly on the
first day of each month to record holders on the fifteenth day of the
preceding month. Distributions of funds in the Principal Account, if any,
will also be made monthly on the first day of each month to record holders on
the fifteenth day of the preceding month.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return and Estimated Long-Term Return to Certificateholders as of
August 21, 1995, the business day prior to the Date of Deposit, were as set
forth under "Summary of Essential Financial Information." The methods of
calculating Estimated Current Return and Estimated Long-Term Return are set
forth in the footnotes to "Summary of Essential Financial Information."
REDEMPTION AND MARKET FOR UNITS. A Certificateholder may redeem Units at the
office of the Trustee, Investors Fiduciary Trust Company ("IFTC"), at prices
based upon the bid prices of the Bonds. In addition, although not obligated
to do so, the Sponsor intends to maintain a secondary market for the Units at
prices based upon the aggregate bid price of the Bonds in the portfolio of
the Trust (see "Redemption and Repurchase of Units").
2
<TABLE>
<CAPTION>
THE KANSAS TAX-EXEMPT TRUST
SERIES 77
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
As of August 21, 1995, the business day prior to the Date of Deposit
SPONSOR AND EVALUATOR: RANSON CAPITAL CORPORATION
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<S> <C>
Principal Amount of Bonds in Trust $ 2,935,000
Number of Units 3,010
Fractional Undivided Interest in Trust per Unit 1/3,010
Principal Amount (Par Value) of Bonds per Unit(1) $ 975.08
Aggregate Offering Price of Bonds in the Trust $ 2,860,271
Aggregate Offering Price of Bonds per Unit $ 950.26
Plus Sales Charge 4.90% (5.152% of the Aggregate
Offering Price of the Bonds) $ 48.96
Public Offering Price per Unit(2) $ 999.22
Redemption Price per Unit(3) $ 938.51
Sponsor's Initial Repurchase Price per Unit(3)(4) $ 950.26
Excess of Public Offering Price per Unit Over
Redemption Price per Unit $ 60.71
Excess of Public Offering Price per Unit Over
Sponsor's Initial Repurchase Price per Unit $ 48.96
Estimated Annual Interest Income per Unit $ 56.42
Less: Estimated Annual Expense per Unit $ 2.77
Estimated Annual Net Interest Income per Unit $ 53.65
Estimated Daily Rate of Net Interest Income Accrual per Unit $ .1490
Estimated Current Return(5)(6)(7) 5.37%
Estimated Long-Term Return(5)(6)(7) 5.29%
Initial Distribution(October 1, 1995) $2.98 per Unit
First Settlement Date August 25, 1995
Minimum Principal Distribution $1.00 per Unit
Mandatory Termination Date June 1, 2031
Minimum Principal Amount of Bonds of Trust Under Which
Indenture May Be Terminated $587,000
Distribution Dates First day of every month commencing October 1, 1995
Trustee's Annual Fee $1.22 per $1,000 principal amount of Bonds,
exclusive of expenses of the Trust.
Evaluator's Annual Fee $.25 per $1,000 principal amount of Bonds
Annual Audit Fee $.40 per Unit
</TABLE>
[FN]
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 3:00 P.M. Central time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by the Trustee of Units tendered for redemption.
(1) Many unit investment trusts comprised of municipal securities issue a
number of units such that each unit represents approximately $1,000
principal amount of underlying securities. The Sponsor on the other hand
in determining the number of Trust Units has elected not to follow this
format but rather to provide for that number of Units which will
establish as of the Date of Deposit a Public Offering Price per Unit of
approximately $1,000.
3
(2) No accrued interest will be added for any person contracting to
purchase Units on the Date of Deposit. Anyone ordering Units after such
date will pay accrued interest from the First Settlement Date to the date
of settlement (three business days after order) less distributions from
the Interest Account subsequent to the First Settlement Date. A person
will become the owner of Units on the date of settlement provided payment
has been received.
(3) Plus accrued interest to the settlement date in the case of sale or to
the date of tender in the case of redemption.
(4) The Sponsor intends to maintain a secondary market for Units at prices
based on the aggregate bid price of the Bonds in the Trust; however,
during the initial offering period such prices will be based on the
aggregate offering price of the Bonds.
(5) The Estimated Current Return and Estimated Long-Term Return are
increased for transactions entitled to a reduced sales charge (see
"Public Offering Information").
(6) The Estimated Current Return is calculated by dividing the estimated
net annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the offering price of
the underlying Securities; therefore, there is no assurance that the
present Estimated Current Return indicated above will be realized in the
future. The Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of all of the Bonds in the Trust and (2) takes into
account the expenses and sales charge associated with each Trust Unit.
Since the market values and estimated retirements of the Bonds and the
expenses of the Trust will change, there is no assurance that the present
Estimated Long-Term Return as indicated above will be realized in the
future. The Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated Long-Term
Return reflects the estimated date and amount of principal returned while
the Estimated Current Return calculation includes only net annual
interest income and Public Offering Price. Neither rate reflects the
true return to Certificateholders which is lower because neither includes
the effect of the delay in the first payment to Certificateholders.
(7) These figures are based on estimated per Unit cash flows. Estimated
cash flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. The
estimated cash flows for this Trust are set forth under the section
titled "Estimated Cash Flows to Unitholders."
4
SUMMARY OF THE TRUST
The Kansas Tax-Exempt Trust, Series 77 (the "Trust") is one of a series
of unit investment trusts created under the laws of the State of Missouri
pursuant to a Trust Indenture and Agreement, dated August 22, 1995 (the
"Indenture"), between Ranson Capital Corporation, as Sponsor, and Investors
Fiduciary Trust Company, as Trustee.
The Trust consists of a portfolio of interest bearing obligations (or
delivery statements relating to contracts to purchase obligations) issued by
or on behalf of the State of Kansas and political subdivisions,
municipalities and authorities thereof, the interest on which is excludable,
in the opinion of recognized bond counsel, from Federal gross income, and is
exempt from Kansas state income tax (to Kansas residents) and local Kansas
intangible personal property taxes. However, in the case of corporations,
interest on all obligations held by the Trust may be subject to the
alternative minimum tax for Federal income tax purposes. Accordingly, the
Trust may be appropriate only for investors who are not subject to the
alternative minimum tax. See "Tax Status (Federal, State, Capital Gains)."
An investment in the Trust should be made with an understanding of the risks
associated with an investment in such obligations. Fluctuations in interest
rates may cause corresponding fluctuations in the value of the Bonds in the
portfolio. The Sponsor cannot predict whether the value of the Bonds in the
portfolio will increase or decrease.
On the Date of Deposit, the Sponsor deposited with the Trustee an
aggregate of $2,935,000 principal amount of interest-bearing obligations,
including delivery statements relating to contracts for the purchase of
certain such obligations. Upon deposit of such Bonds the Trustee delivered
to the Sponsor a certificate evidencing the ownership of 3,010 Units of the
Trust, which are offered for sale by this Prospectus. Each Unit initially
offered represents a 1/3,010 undivided interest in the Trust. To the extent
that any Units are redeemed by the Trustee, the fractional undivided interest
in the Trust represented by each unredeemed Unit will increase, although the
actual interest in the Trust represented by such fraction will remain
unchanged. Units in the Trust will remain outstanding until redeemed upon
tender to the Trustee by Certificateholders, which may include the Sponsor,
or until the termination of the Indenture.
The Indenture may be amended at any time by consent of Certificateholders
representing at least 51% of the Units of the Trust then outstanding. The
Indenture may also be amended by the Trustee and the Sponsor without the
consent of any of the Certificateholders (1) to cure any ambiguity or to
correct or supplement any provision thereof which may be defective or
inconsistent, or (2) to make such other provisions as shall not adversely
affect the interest of the Certificateholders, provided, however, that the
Indenture may not be amended to increase the number of Units issuable
thereunder or to permit the deposit or acquisition of bonds either in
addition to, or in substitution for any of the Bonds initially deposited in
the Trust except in connection with the limited right of substitution of
Replacement Bonds for failed Bonds (see "Description of Trust Portfolio") and
for the substitution of refunding bonds under certain circumstances. The
Trustee shall advise the Certificateholders of any amendment promptly after
the execution thereof.
The Trust may be terminated at any time by consent of Certificateholders
representing at least 51% of the Units of the Trust then outstanding or by
the Trustee when the value of the Trust, as shown by any semi-annual
evaluation, is less than 20% of the original principal amount of the Trust
and will be liquidated by the Trustee in the event that a sufficient number
of Units not yet sold are tendered for redemption by the Sponsor and the
Underwriters thereby reducing the net worth of the Trust to less than 40% of
5
the principal amount of the Bonds originally deposited in the portfolio. The
Indenture will terminate upon the redemption, sale or other disposition of
the last Bond held in the Trust, but in no event shall it continue beyond the
end of the calendar year preceding the fiftieth anniversary of its execution.
Written notice of any termination specifying the time or times at which
Certificateholders may surrender their certificates for cancellation shall be
given by the Trustee to each Certificateholder at the address appearing on
the registration books of the Trust maintained by the Trustee. The Trustee
will begin to liquidate any Bonds held in the Trust within a reasonable
period of time from said notification and shall deduct from the proceeds any
accrued costs, expenses or indemnities provided by the Indenture, including
any compensation due the Trustee, any costs of liquidation and any amounts
required for payment of any applicable taxes, governmental charges or final
operating costs of the Trust.
The Trustee shall then distribute to Certificateholders their pro rata
shares of the remaining balances in the Principal and Interest Accounts
together with a final distribution statement which will be in substantially
the same form as the annual distribution statement (see "Other Rights of
Certificateholders"). Any amount held by the Trustee in any reserve account
will be distributed when the Trustee determines the reserve is no longer
necessary in the same manner as the final distribution from the Principal and
Interest Accounts (see "Distribution of Interest and Principal").
The Sponsor and the Trustee shall be under no liability to
Certificateholders for taking any action or for refraining from any action in
good faith pursuant to the indenture, or for errors in judgment, but shall be
liable only for their own negligence, lack of good faith, willful misconduct
or reckless disregard of their duties. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the Bonds. In the event of the failure of the Sponsor to act under the
Indenture, the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest thereon
or upon it as Trustee under the Indenture or upon or in respect of the Trust
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction.
Approximately 4% of the aggregate principal amount of the Bonds in the
Trust are "zero coupon" bonds. Zero coupon bonds are purchased at a deep
discount because the buyer receives only the right to receive a final payment
at the maturity of the bond and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not make current
interest payments (such as the zero coupon bonds) is that a fixed yield is
earned not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable
to reinvest the income on such obligation at a rate as high as the implicit
yield on the discount obligation, but at the same time eliminates the
holder's ability to reinvest at higher rates in the future. For this reason,
zero coupon bonds are subject to substantially greater price fluctuations
during periods of changing market interest rates than are securities of
comparable quality which pay interest currently. See also note (6) to "Notes
to Trust Portfolio."
6
DESCRIPTION OF TRUST PORTFOLIO
PORTFOLIO. The Trust consists of 6 obligations of issuers located in the
State of Kansas. Two of the issues in the Trust are general obligations of
the governmental entities issuing them or are backed by the taxing power
thereof representing 27.6% of principal amount of bonds in the Trust. The
remaining issues are payable directly or indirectly from the income of a
specific project or authority and are divided by source of revenue (and
percentage of principal amount to total Trust) as follows: Electric Utility,
2 (44.3%); Education, 1 (23.8%); and Single-Family Housing, 1 (4.3%). The
dollar weighted average maturity of the Bonds in the Trust is 26 years. None
of the issues in the Trust are subject to the alternative minimum tax.
Since the Trust will invest substantially all of its assets in Kansas
municipal securities, the Trust is susceptible to political and economic
factors affecting issuers of Kansas municipal securities. According to the
1990 census, 2,477,574 people lived in Kansas, representing a 4.8% increase
over the 1980 census. Based on these numbers, Kansas ranked thirty-second in
the nation in population size. Based on statistics provided by the Kansas
Department of Commerce, Kansas ranked twenty-first in the nation in terms of
per capita income. Historically, agriculture and mining constituted the
principal industries in Kansas. Since the 1950's however, manufacturing,
governmental services and the services industry have steadily grown and as of
1992 approximately 24% of Kansas workers were in the trade (wholesale and
retail) sector, 23% in the services sector, 20% in the government sector, 15%
in the manufacturing sector, while financial and real estate, farming,
mining, transportation and public utilities, and construction accounted for
the remaining 18% of the work force. The 1992 unemployment rate was 4.2%.
By constitutional mandate, Kansas must operate within a balanced budget and
public debt may only be incurred for extraordinary purposes and then only to
a maximum of $1 million. As of August 31, 1994, the State of Kansas had no
general obligation bonds outstanding.
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions
to which the issuers in the Trust are subject. Additionally, many factors
including national economic, social, and environmental policies and
conditions, which are not within the control of the issuers of Bonds, could
affect or could have an adverse impact on the financial condition of Kansas
and various agencies and political subdivisions located in Kansas. The
Sponsor is unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of the
Bonds acquired by the Trust to pay interest on or principal of the Bonds.
Approximately 44% of the aggregate principal amount of the Bonds consists
of obligations whose revenues are primarily derived from the sale of electric
energy. Utilities are generally subject to extensive regulation by state
utility commissions which, among other things, establish the rates which may
be charged and the appropriate rate of return on an approved asset base. The
problems faced by such issuers include the difficulty in obtaining approval
for timely and adequate rate increases from the governing public utility
commission, the difficulty in financing large construction programs, the
limitations on operations and increased costs and delays attributable to
environmental considerations, increased competition, recent reductions in
estimates of future demand for electricity in certain areas of the country,
the difficulty of the capital market in absorbing utility debt, the
difficulty in obtaining fuel at reasonable prices and the effect of energy
conservation. All of such issuers have been experiencing certain of these
problems in varying degrees. In addition, Federal, state and municipal
governmental authorities may from time to time review existing and impose
additional regulations governing the licensing, construction and operation of
7
nuclear power plants, which may adversely affect the ability of the issuers
of such Bonds to make payments of principal and/or interest on such Bonds.
Approximately 24% of the aggregate principal amount of the Bonds consists
of obligations of issuers which are, or which govern the operation of
colleges and universities and whose revenues are derived mainly from tuition,
dormitory revenues, grants and endowments. General problems relating to
college and university obligations would include the prospect of a declining
percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal grants and
state funding and new government legislation or regulations which may
adversely affect the revenues or costs of such issuers. All of such issuers
have been experiencing certain of these problems in varying degrees.
Approximately 4% of the aggregate principal amount of the Bonds in the
Trust consists of obligations which derive their payment from mortgage loans.
No more than 25% of the Trust's total assets will be invested in mortgages
originated by the same financial institution. Certain of the Bonds in the
Trust may be single family mortgage revenue bonds issued for the purpose of
acquiring from originating financial institutions notes secured by mortgages
on residences located within the issuer's boundaries and owned by persons of
low or moderate income. In view of this, an investment in the Trust should
be made with an understanding of the characteristics of such issuers and the
risks which such an investment may entail. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a result
of events such as sale of the mortgaged premises, default, condemnation or
casualty loss. Because these bonds are subject to extraordinary mandatory
redemption in whole or in part from such prepayments on mortgage loans, a
substantial portion of such bonds will probably be redeemed prior to their
scheduled maturities or even prior to their ordinary call dates.
Extraordinary mandatory redemption without premium could also result from the
failure of the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period. Additionally, unusually
high rates of default on the underlying mortgage loans may reduce revenues
available for the payment of principal of or interest on such mortgage
revenue bonds. These bonds were issued under Section 103A of the Internal
Revenue Code, which Section contains certain requirements relating to the use
of the proceeds of such bonds in order for the interest on such bonds to
retain its tax-exempt status. In each case the issuer of the bonds has
covenanted to comply with applicable requirements and bond counsel to such
issuer has issued an opinion that the interest on the bonds is exempt from
Federal income tax under existing laws and regulations. Certain of the Bonds
in the Trust may be obligations of issuers whose revenues are primarily
derived from mortgage loans to housing projects for low to moderate income
families. The ability of such issuers to make debt service payments will be
affected by events and conditions affecting financed projects, including,
among other things, the achievement and maintenance of sufficient occupancy
levels and adequate rental income, increases in taxes, employment and income
conditions prevailing in local labor markets, utility costs and other
operating expenses, the managerial ability of project managers, changes in
laws and governmental regulations, the appropriation of subsidies and social
and economic trends affecting the localities in which the projects are
located. The occupancy of housing projects may be adversely affected by high
rent levels and income limitations imposed under Federal and state programs.
Certain issuers of housing bonds have considered various ways to redeem bonds
they have issued prior to the stated first redemption dates for such bonds.
In one situation an issuer, in reliance on its interpretation of certain
language in the indenture under which one of its bond issues was created,
redeemed all of such issue at par in spite of the fact that such indenture
provided that the first optional redemption was to include a premium over par
and could not occur prior to a later date. In connection with the housing
bonds held by the Trust, the Sponsor at the Date of Deposit is not aware that
8
any of the respective issuers of such Bonds are actively considering the
redemption of such Bonds prior to their respective stated initial call dates.
For a general discussion of the effects of Bond prepayments and redemptions
on Certificateholders who acquired Units at a time when such Bonds were
valued in excess of the principal amount or redemption price of such Bonds,
see "General" below.
REPLACEMENT BONDS. Because certain of the Bonds in the Trust may from
time to time under certain circumstances be sold or redeemed or will mature
in accordance with their terms and because the proceeds from such events will
be distributed to Certificateholders and will not be reinvested, no assurance
can be given that the Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be liable in
any way for any default, failure or defect in any Bond. In the event of a
failure to deliver any Bond that has been purchased for the Trust under a
contract, including any Bonds purchased on a "delayed delivery" basis
("Failed Bonds"), the Sponsor is authorized under the Indenture to direct the
Trustee to acquire other bonds ("Replacement Bonds") to make up the original
corpus of the Trust.
The Replacement Bonds must be purchased within 20 days after delivery of
the notice of the failed contract and the purchase price (exclusive of
accrued interest) may not exceed the amount of funds reserved for the
purchase of the Failed Bonds. The Replacement Bonds (i) must be tax-exempt
bonds issued by the State of Kansas or its political subdivisions, (ii) must
have a fixed maturity date of at least 10 years, (iii) must be purchased at a
price that results in a yield to maturity and in a current return, in each
case as of the Date of Deposit, at least equal to that of the Failed Bonds,
(iv) shall not be "when, as and if issued" bonds and (v) must be rated "BBB-"
or better by Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's" or "S&P") or "Baa3" or better by Moody's Investors
Service, Inc. ("Moody's"). Whenever a Replacement Bond has been acquired for
the Trust, the Trustee shall, within five days thereafter, notify all
Certificateholders of the Trust of the acquisition of the Replacement Bonds
and shall, on the next monthly distribution date which is more than 30 days
thereafter, make a pro rata distribution of the amount, if any, by which the
cost to the Trust of the Failed Bond exceeded the cost of the Replacement
Bond plus accrued interest. Once the original corpus of the Trust is
acquired, the Trustee will have no power to vary the investment of the Trust,
i.e., the Trust will have no managerial power to take advantage of market
variations to improve a Certificateholder's investment.
If the right to limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such
Failed Bonds to all Certificateholders of the Trust and distribute the
principal and accrued interest (at the coupon rate of such Failed Bonds to
the date the Failed Bonds are removed from the Trust) attributable to such
Failed Bonds not more than 30 days after such removal or such earlier time as
the Trustee in its sole discretion deems to be in the interest of the
Certificateholders. In the event a Replacement Bond should not be acquired
by the Trust, the estimated net annual interest income per Unit for the Trust
would be reduced and the Estimated Current Return and Estimated Long-Term
Return thereon might be lowered. In addition, Certificateholders should be
aware that they may not be able at the time of receipt of such principal to
reinvest such proceeds in other securities at a yield equal to or in excess
of the yield which such proceeds were earning to Certificateholders in the
Trust.
GENERAL. Certain of the Bonds in the Trust are subject to redemption
prior to their stated maturity date pursuant to sinking fund provisions, call
provisions or extraordinary optional or mandatory redemption provisions. A
sinking fund is a reserve fund accumulated over a period of time for
9
retirement of debt. A callable debt obligation is one which is subject to
redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a debt obligation is redeemed, at or before
maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation
is at a premium over par than when it is at a discount from par. The
portfolio contains a listing of the sinking fund and call provisions, if any,
with respect to each of the debt obligations. Extraordinary optional
redemptions and mandatory redemptions result from the happening of certain
events. Generally, events that may permit the extraordinary optional
redemption of Bonds or may require the mandatory redemption of Bonds include,
among others: a final determination that the interest on the Bonds is
taxable; the substantial damage or destruction by fire or other casualty of
the project for which the proceeds of the Bonds were used; an exercise by a
local, state or Federal governmental unit of its power of eminent domain to
take all or substantially all of the project for which the proceeds of the
Bonds were used; changes in the economic availability of raw materials,
operating supplies or facilities or technological or other changes which
render the operation of the project for which the proceeds of the Bonds were
used uneconomic; changes in law or an administrative or judicial decree which
renders the performance of the agreement under which the proceeds of the
Bonds were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes,
not imposed on the date the Bonds are issued on the issuer of the Bonds or
the user of the proceeds of the Bonds; an administrative or judicial decree
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the Bonds; an overestimate of the costs of the
project to be financed with the proceeds of the Bonds resulting in excess
proceeds of the Bonds which may be applied to redeem Bonds; or an
underestimate of a source of funds securing the Bonds resulting in excess
funds which may be applied to redeem Bonds. See "Trust Portfolio" and
footnote (3) in "Notes to Trust Portfolio." See also "Portfolio" above for
possible redemptions prior to initial stated call dates. Certain of the
Bonds in the Trust may have been purchased by the Trust at premiums over the
par value (principal amount) of such Bonds (see "Trust Portfolio"). To the
extent Certificateholders acquire their Units at a time Bonds are valued at a
premium over such par value and such Bonds are subsequently redeemed or
prepaid at par or for less than such valuations, Certificateholders will
likely sustain losses in connection with such redemptions or prepayments.
For the tax effects of Bond redemptions generally, see "Tax Status (Federal,
State, Capital Gains)."
To the best knowledge of the Sponsor there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trust. At any time after
the Date of Deposit, litigation may be initiated on a variety of grounds with
respect to Bonds in the Trust. Such litigation, as, for example, suits
challenging the issuance of pollution control revenue bonds under
environmental protection statutes, may affect the validity of such Bonds or
the tax-free nature of the interest thereon. While the outcome of litigation
of such nature can never be entirely predicted, the Trust has received
opinions of bond counsel to the issuing authorities of each Bond on the date
of issuance to the effect that such Bonds have been validly issued and that
the interest thereon is exempt from Federal income tax. In addition, other
factors may arise from time to time which potentially may impair the ability
of issuers to meet obligations undertaken with respect to the Bonds.
OBJECTIVES OF THE TRUST
The Trust has been formed to provide residents of the State of Kansas
interest income which is exempt from Federal and Kansas state income taxes
and from local Kansas intangible personal property taxes. In addition, the
Trust also has objectives which include conservation of capital and liquidity
of investment. There is no assurance that the Trust's objectives will be
met.
10
In selecting Bonds for the Trust, the following facts, among others, were
considered by the Sponsor: (a) either the Standard & Poor's rating of the
Bonds was in no case less than "BBB-" or the Moody's Investors Service, Inc.
rating of the Bonds was in no case less than "Baa3" including provisional or
conditional ratings, respectively, or, if not rated, the Bonds had, in the
opinion of the Sponsor, credit characteristics sufficiently similar to the
credit characteristics of interest-bearing tax-exempt obligations that were
so rated as to be acceptable for acquisition by the Trust (see "Description
of Bond Ratings") and (b) the prices of the Bonds relative to other bonds of
comparable quality and maturity. Medium-quality Bonds (rated BBB or A by S&P
or Baa or A by Moody's) are obligations of issuers that are considered to
possess adequate, but not outstanding, capacities to service the obligations.
Investment in medium-quality debt securities involves greater investment
risk, including the possibility of issuer default or bankruptcy, than
investment in higher-quality debt securities. An economic downturn could
severely disrupt this market and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and interest. During
a period of adverse economic changes, including a period of rising interest
rates, issuers of such bonds may experience difficulty in servicing their
principal and interest payment obligations. Medium quality debt securities
tend to be less marketable than higher-quality debt securities because the
market for them is less broad. During periods of thin trading in these
markets, the spread between bid and asked prices is likely to increase
significantly, and the Trust may have greater difficulty selling the medium-
quality debt securities in its portfolio. Subsequent to the Date of Deposit,
a Bond may cease to be rated or its rating may be reduced below the minimum
required as of the Date of Deposit. Neither event requires elimination of
such Bond from a portfolio but may be considered in the Sponsor's
determination as to whether or not to direct the Trustee to dispose of the
Bond (see "Trustee Information").
The Trust consists of a portfolio of fixed rate, long-term debt
obligations. An investment in the Trust should be made with an understanding
of the risks associated with an investment in such obligations. Fluctuations
in interest rates may cause corresponding fluctuations in the value of the
Bonds in the portfolio. The Sponsor cannot predict whether the value of the
Bonds in the portfolio will increase or decrease.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the business day prior to the Date of Deposit, the Estimated
Current Return and the Estimated Long-Term Return were as set forth in
"Summary of Essential Financial Information." Estimated Current Return is
calculated by dividing the estimated net annual interest income per Unit by
the Public Offering Price. The estimated net annual interest income per Unit
will vary with changes in fees and expenses of the Trustee and the Evaluator
and with the principal prepayment, redemption, maturity, exchange or sale of
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities; therefore, there is no assurance
that the present Estimated Current Return will be realized in the future.
Estimated Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the
Securities in the Trust and (2) takes into account the expenses and sales
charge associated with the Trust Unit. Since the market values and estimated
retirements of the Securities and the expenses of the Trust will change,
there is no assurance that the present Estimated Long-Term Return will be
realized in the future. Estimated Current Return and Estimated Long-Term
Return are expected to differ because the calculation of Estimated Long-Term
Return reflects the estimated date and amount of principal returned while the
Estimated Current Return calculation includes only net annual interest income
11
and Public Offering Price. Neither rate reflects the true return to
Certificateholders which is lower because neither includes the effect of the
delay in the first payment to Certificateholders.
In order to acquire certain of the Bonds contracted for by the Sponsor
for deposit in the Trust, it may be necessary for the Sponsor or Trustee to
pay on the settlement dates for delivery of such Bonds amounts covering
accrued interest on such Bonds which exceed (1) the amounts paid by
Certificateholders and (2) the amounts which will be made available through
cash furnished by the Sponsor on the Date of Deposit, which amount of cash
may exceed the interest which would accrue to the First Settlement Date. The
Trustee has agreed to pay any amounts necessary to cover any such excess and
will be reimbursed therefor, without interest, when funds become available
from interest payments on the particular Bonds with respect to which such
payments may have been made.
PUBLIC OFFERING INFORMATION
Units in the Trust are offered at the Public Offering Price which during
the initial public offering period is based on the offering prices of the
Bonds in the Trust plus a sales charge of 4.90% of the Public Offering Price
(equivalent to 5.152% of the aggregate offering price of the Bonds in the
portfolio) and which in the secondary market is based on the bid prices of
the Bonds in the portfolio and includes a sales charge of 5.50% of the Public
Offering Price (equivalent to 5.82% of the aggregate bid price of the Bonds
in the portfolio) plus accrued and undistributed interest to the settlement
date. The initial public offering period shall terminate upon the sale to
the public of all the Units in the Trust. Upon termination of the initial
offering period, any unsold Units and any Units repurchased in the secondary
market may be offered by this Prospectus at the secondary Public Offering
Price in the manner described herein. The sales charge applicable to
quantity purchases is reduced during the initial public offering period on a
graduated basis to any person acquiring at least 150 Units as follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF
SALES CHARGE REDUCTION
NUMBER OF UNITS PURCHASED PER UNIT
<S> <C>
150-249 Units $ 2.50
250-499 Units 5.00
500-799 Units 7.75
800 or more Units 10.00
</TABLE>
Any reduced sales charge shall be the responsibility of the selling
dealer. The reduced sales charge will apply on all purchases of Units in the
Trust made by the same person on any one day from any one dealer. Units
purchased in the name of the spouse of a purchaser or in the name of a child
of any such purchaser under 21 years of age will be deemed for the purposes
of calculating the applicable sales charge to be a single
purchase by the purchaser. The reduced sales charges will also be applicable
to a trustee or other fiduciary purchasing Units for a single trust estate or
single fiduciary account.
Although payment is normally made three business days following the order
for purchase, payment may be made prior thereto. A person will become the
owner of Units on the date of settlement provided payment has been received.
Cash, if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934.
12
During the initial offering period, Units will be distributed to the
public through the Underwriters and through certain dealers. Underwriters
will acquire Units from the Sponsor at the concessions set forth under
"Underwriting." Dealers will be allowed a concession during the initial
offering period equal to 3.25% of the Public Offering Price. In the
secondary market such concession will amount to 4.5% of the Public Offering
Price.
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 allowing a
concession equal to that shown above for dealers. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Units; however, the Glass-
Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act.
To facilitate the handling of transactions during the initial public
offering period, sales of Units shall normally be limited to transactions
involving a minimum of five Units. Further purchases may be made in
multiples of one Unit. The minimum purchase in the secondary market will be
one Unit.
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units and to change the amount of the concession to
dealers, set forth below, from time to time.
ACCRUED INTEREST
Accrued interest which is the accumulation of unpaid interest on a bond
from the last day on which interest thereon was paid. Interest on Bonds in
the Trust is paid to the Trustee either monthly or semi-annually. However,
interest on the Bonds in the Trust is accounted for daily on an accrual
basis. Because of this, the Trust always has an amount of interest earned
but not yet collected by the Trustee because of coupons that are not yet due.
For this reason, 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 and undistributed interest to the date of
settlement. Certificateholders will receive on the next distribution date of
the 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 Certificateholder of record on such date. Consequently,
the amount of accrued interest to be added to the Public Offering Price of
Units will include only accrued interest arising after the First Settlement
Date of the Trust, less any distributions from the Interest Account
subsequent to this First Settlement Date. Since the First Settlement Date is
the date of settlement for anyone ordering Units on the Date of Deposit, no
accrued interest will be added to the Public Offering Price of Units ordered
on the Date of Deposit.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trust and distributed to Certificateholders.
Therefore, there will always remain an item of accrued interest that is added
to the value of the Units. If a Certificateholder 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 use of the funds held in the Interest Account for distributions to
Certificateholders and since such Account is non-interest-bearing to
Certificateholders, the Trustee benefits thereby.
13
REDEMPTION AND REPURCHASE OF UNITS
Certificateholders may redeem all or a portion of their Units by tender
to the Trustee, at its corporate office in Kansas City, Missouri, of the
certificates representing Units to be redeemed, duly endorsed or accompanied
by proper instruments of transfer with signature guaranteed. In order to
effect a redemption of Units, Certificateholders must tender their
certificates to the Trustee or provide satisfactory indemnity required in
connection with lost, stolen or destroyed certificates. No redemption fee
will be charged. On the third business day following such tender, the
Certificateholder will be entitled to receive in cash for each Unit tendered
an amount equal to the redemption price per Unit as next computed after
receipt by the Trustee of such tender of Units as determined by the bid price
of the Bonds in the Trust on the date of tender (the "Redemption Price") plus
accrued interest to, but not including, the date of redemption. The price
received upon redemption may be more or less than the amount paid by the
Certificateholder depending on the value of the Bonds on the date of tender.
The value of the Bonds will fluctuate with market and credit conditions,
including any changes in interest rate levels.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. In addition, the Trustee is empowered, with certain
recommendations allowed by the Sponsor, to sell Bonds in the portfolio of the
Trust to make funds available for redemption. Units redeemed shall be
cancelled and not be available for reissuance.
The recognized date of tender is deemed to be the date on which Units are
received in proper form by the Trustee prior to 3:00 p.m. Central time.
Units received by the Trustee after 3:00 p.m. will be deemed to have their
recognized date of tender on the next business day on which the New York
Stock Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that date (see "Evaluation of the Trust").
To the extent that Bonds in the portfolio of the Trust are sold to meet
redemptions, the size and diversity of the Trust will be reduced. Such sales
may occur at a time when Bonds might not otherwise be sold which may result
in lower prices received on the Bonds than might be realized under normal
trading conditions.
Under regulations issued by the Internal Revenue Service, the Trustee
will be required to withhold a specified percentage of the principal amount
of a Unit redemption if the Trustee has not been furnished the redeeming
Certificateholder's tax identification number in the manner required by such
regulations. Any amount so withheld is transmitted to the Internal Revenue
Service and may be recovered by the Certificateholder only when filing his or
her tax return. Under normal circumstances the Trustee obtains the
Certificateholder's tax identification number from the selling broker at the
time the certificate is issued, and this number is printed on the certificate
and on distribution statements. If a Certificateholder's tax identification
number does not appear on the certificate or statements, or if it is
incorrect, the Certificateholder should contact the Trustee before presenting
a certificate for redemption to determine what action, if any, is required to
avoid this back-up withholding.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
14
an emergency exists, as a result of which disposal or evaluation of the Bonds
is not reasonably practicable, or for such other periods as the Securities
and Exchange Commission may by order permit.
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's repurchase price in the secondary market at
that time equals or exceeds the redemption price, it may repurchase such
Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the tendering
Certificateholder not later than the day on which payment would otherwise
have been made by the Trustee. The secondary market Public Offering Price of
any Units thus acquired by the Sponsor will be in accord with the procedure
described in the then currently effective prospectus relating to such Units.
Units held by the Sponsor may be tendered to the Trustee for redemption. Any
profit or loss resulting from the resale or redemption of such Units will
belong to the Sponsor.
Although not obligated to do so, the Sponsor intends to maintain a market
for the Units offered hereby and to offer continuously to purchase such Units
at prices, subject to change at any time, based upon the aggregate bid prices
of the Bonds in the portfolio plus interest accrued to the date of settlement
plus any principal cash on hand, less any amounts representing taxes or other
governmental charges payable out of the Trust and less any accrued Trust
expenses. If the supply of Units exceeds demand or if some other business
reason warrants it, the Sponsor may either discontinue all purchases of Units
or discontinue purchases of Units at such prices. In the event that a market
is not maintained for the Units and the Certificateholder cannot find another
purchaser, a Certificateholder desiring to dispose of his Units may be able
to dispose of such Units only by tendering them to the Trustee for redemption
at the redemption price, which is based upon the aggregate bid price of the
Bonds in the portfolio. The aggregate bid prices of the underlying Bonds in
the Trust are expected to be less than the related aggregate offering prices.
A Certificateholder who wishes to dispose of his Units should inquire of his
broker as to current market prices in order to determine whether there is in
existence any price in excess of the redemption price and, if so, the amount
thereof.
DISTRIBUTION OF INTEREST AND PRINCIPAL
Interest received by the Trust, including that part of the proceeds from
the disposition of Bonds, if any, which represents accrued interest, is
credited by the Trustee to the Interest Account. Any other receipts are
credited to the Principal Account. Interest received by the Trust will be
distributed on or shortly after the first day of each month on a pro rata
basis to Certificateholders of record as of the preceding record date (which
is the fifteenth day of the month next preceding the distribution). All
distributions will be net of applicable expenses. The pro rata share of cash
in the Principal Account will be computed on the fifteenth day of each month
and will be distributed to the Certificateholders as of the first day of the
next succeeding month. Such principal distribution may be combined with any
interest distribution due to the Certificateholder at that time. Proceeds
received from the disposition of any of the Bonds in the portfolio of the
Trust after each record date and prior to the following distribution date
will be held in the Principal Account and not distributed until the next
distribution date. The Trustee is not required to pay interest on funds held
in the Principal or Interest Accounts (but may itself earn interest thereon
and therefore benefit from the use of such funds) nor to make a distribution
from the Principal Account unless the amount available for distribution shall
equal at least $1.00 per Unit.
The distribution to the Certificateholders as of each record date after
the First Settlement Date will be made on the following distribution date or
shortly thereafter and shall consist of an amount substantially equal to the
15
Certificateholder's pro rata share of the estimated annual income after
deducting estimated expenses. Because interest payments are not received by
the Trust at a constant rate throughout the year, such interest distribution
may be more or less than the amount credited to the Interest Account as of
the record date. For the purpose of minimizing fluctuations in the
distributions from the Interest Account, the Trustee is authorized to advance
such amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee shall be reimbursed, without
interest, for any such advances from funds in the Interest Account on the
ensuing record date. A person who purchases Units will commence receiving
distributions only after such person becomes a record owner. Notification to
the Trustee of the transfer of Units is the responsibility of the purchaser,
but in the normal course of business such notice is provided by the selling
broker/dealer.
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account and, to the extent funds are not sufficient therein, from
the Principal Account, amounts necessary to pay the expenses of the Trust
(see "Expenses of the Trust"). The Trustee may also withdraw from said
accounts an amount, if deemed necessary, to fund a reserve for any
governmental charges or anticipated Trust expenses which may be payable out
of the Trust. Amounts so withdrawn will not be considered a part of the
Trust's assets until such time as the Trustee shall return all or part of the
amount withdrawn to the appropriate accounts. In addition, the Trustee may
withdraw from the Interest and Principal Accounts such amounts as may be
necessary to cover purchases of Replacement Bonds and redemptions of Units by
the Trustee (see "Description of Trust Portfolio" and "Redemption and
Repurchase of Units").
Funds which are available for future distributions, redemptions and
payment of expenses are held in accounts which are non-interest bearing to
Certificateholders and are available for use by the Trustee pursuant to
normal banking procedures.
DISTRIBUTION REINVESTMENT OPTION
The Sponsor has entered into arrangements with Ranson Managed Portfolios
- The Kansas Municipal Fund (the "Kansas Municipal Fund") and Ranson Managed
Portfolios - The Kansas Insured Municipal Fund - Limited Maturity (the
"Kansas Insured Municipal Fund") which permit any Unitholder of the Trust to
elect to have each distribution of interest income or principal, including
capital gains, on his Units automatically reinvested in shares of the Kansas
Municipal Fund or the Kansas Insured Municipal Fund, respectively. The
investment objective of the Kansas Municipal Fund and the Kansas Insured
Municipal Fund is to provide its shareholders with a high level of current
income exempt from both federal income tax and Kansas income tax as is
consistent with preservation of capital. The objectives and policies of the
Kansas Municipal Fund and the Kansas Insured Municipal Fund are presented in
more detail in the Kansas Municipal Fund and the Kansas Insured Municipal
Fund prospectuses, respectively. Unitholders should contact the broker from
whom they obtained this Prospectus to obtain a current prospectus for the
Kansas Municipal Fund and the Kansas Insured Municipal Fund, or they may
obtain a current prospectus by contacting Ranson Capital Corporation at (800)
345-2363.
Unitholders will be able to reinvest their distributions of interest
income or principal in the Kansas Municipal Fund and the Kansas Insured
Municipal Fund with no sales charge and no minimum investment.
A Unitholder may at any time, by so notifying the Trustee in writing,
elect to terminate his participation in the Distribution Reinvestment Option
and receive future distributions on his Units in cash. There will be no
16
charge or other penalty for such termination. The Sponsor, the Kansas
Municipal Fund and the Kansas Insured Municipal Fund each have the right to
terminate the Distribution Reinvestment Option, in whole or in part.
TAX STATUS (FEDERAL, STATE, CAPITAL GAINS)
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof, to the exemption of interest thereon from Federal and
Kansas income taxation and to the exemption from local Kansas intangible
personal property taxes were rendered by bond counsel to the respective
issuing authorities. Gain realized on the sale or redemption of the Bonds by
the Trustee or of a Unit by a Certificateholder is, however, includable in
gross income for Federal and Kansas state income tax purposes. It should be
noted in this connection that such gain does not include any amounts received
in respect of accrued interest or earned original issue discount, if any. It
should be noted that under recently enacted legislation described below, that
subjects accretion of market discount on tax-exempt bonds to taxation as
ordinary income, gain realized on the sale or redemption of Bonds by the
Trustee or of Units by a Certificateholder that would have been treated as
capital gain under prior law is treated as ordinary income to the extent it
is attributable to accretion of market discount. Market discount can arise
based on the price the Trust pays for Bonds or the price a Certificateholder
pays for his Units. Neither the Sponsor nor its counsel have made any
special review for the Trust of the proceedings relating to the issuance of
the Bonds or of the bases for such opinions.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
1) the Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
the Bonds which is excludable from gross income under the Internal
Revenue Code of 1986 (the "Code") will retain its status when distributed
to Certificateholders. A Certificateholder's share of the interest on
certain Bonds in the Trust will be included as an item of tax preference
for both individuals and corporations subject to the alternative minimum
tax ("AMT Bonds"). In the case of certain corporations owning Units,
interest and accrued original issue discount with respect to Bonds other
than AMT Bonds held by the Trust may be subject to the alternative
minimum tax, an additional tax on branches of foreign corporations and
the environmental tax (the "Superfund Tax").
2) exemption of interest and accrued original issue discount on any
Bonds for Federal income tax purposes does not necessarily result in tax
exemption under the laws of the several states as such laws vary with
respect to the taxation of such bonds and in many states all or a part of
such interest and accrued original issue discount may be subject to tax;
and
3) each Certificateholder is considered to be the owner of a pro rata
portion of the Trust under subpart E, subchapter J of Chapter 1 of the
Code and will have a taxable event when the Trust disposes of a Bond or
when the Certificateholder redeems or sells Units. Gain or loss upon the
sale or redemption of units is measured by comparing the proceeds of such
sale or redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Certificateholder. The
amount of any such gain or loss is measured by comparing the
Certificateholder's pro rata share of the total proceeds from such
disposition with the Certificateholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Certificateholder
who purchases Units, such basis (before adjustment for earned original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets ratably
17
according to value as of the date of acquisition of the Units. The basis
of each Unit and of each Bond 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 Bond which was purchased
by the Trust at a premium must be reduced by the annual amortization of
Bond premium. The tax cost reduction requirements of said Code relating
to amortization of bond premium may, under some circumstances, result in
the Certificateholder realizing a taxable gain when his Units are sold or
redeemed for an amount equal to his original cost. A Certificateholder
will realize a taxable gain when his Units are sold or redeemed for an
amount greater than his adjusted basis in his Units at the time of such
sale or redemption.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide that
original issue discount accrues either on the basis of a constant compound
interest rate or ratably over the term of the Bond, depending on the date the
Bond was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue
discount which accrued to prior owners. The application of these rules will
also vary depending on the value of the Bond on the date a Certificateholder
acquires his Units and the price the Certificateholder pays for his Units.
Investors with questions regarding these Code sections should consult with
their tax advisers.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount
(if any) by which the stated redemption price at maturity exceeds an
Investor's purchase price (except to the extent that such difference, if any,
is attributable to original issue discount not yet accrued) subject to a
statutory de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had been treated
as capital gain. Market discount that accretes while the Trust holds a Bond
would be recognized as ordinary income by the Certificateholders when
principal payments are received on the Bond, upon sale or at redemption
(including early redemption) or upon the sale or redemption of the Units,
unless a Certificateholder elects to include market discount in taxable
income as it accrues. The market discount rules are complex and
Certificateholders should consult their tax advisers regarding these rules
and their application.
Interest on certain "specified private activity bonds" held by the Trust
will be treated as an item of tax preference for purposes of computing the
alternative minimum tax of all Certificateholders of the Trust, including
individuals. As a result, such interest income may be subject to the
alternative minimum tax. The Trust will annually supply Certificateholders
with information regarding the amount of Trust income attributable to those
"specified private activity bonds" held by the Trust that give rise to a
specific item of tax preference. Certificateholders should consult their tax
adviser regarding the potential application of the alternative minimum tax
and the impact of a portion of the Trust's income being characterized as a
tax preference.
For purposes of computing the alternative minimum tax for individuals and
corporations and the Superfund Tax for corporations, interest on certain
private activity bonds (which includes most industrial and housing revenue
bonds) issued on or after August 8, 1986 such as the AMT Bonds, is included
as an item of tax preference.
In the case of corporations, for taxable years beginning after December
31, 1986, the alternative minimum tax and the Superfund Tax depend upon the
corporation's alternative minimum taxable income, which is the corporation's
18
taxable income with certain adjustments. One of the adjustment items used in
computing the alternative minimum taxable income and the Superfund Tax of a
corporation (other than an S Corporation, Regulated Investment Company, Real
Estate Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to its
alternative minimum taxable income (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax-exempt interest, including interest on the Bonds in the
Trust. Corporate Certificateholders are urged to consult their tax advisers
with respect to the particular tax consequences to them, including the
corporate alternative minimum tax, Superfund Tax and the branch profits tax
imposed by Section 884 of the Code.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry obligations, the interest on which is wholly exempt from
Federal income taxes, is not deductible. Because each Certificateholder is
treated for Federal income tax purposes as the owner of a pro rata share of
the Bonds owned by the Trust, interest on borrowed funds used to purchase or
carry Units of the Trust will not be deductible for Federal income tax
purposes. Under rules used by the Internal Revenue Service for determining
when borrowed funds are considered used for the purpose of purchasing or
carrying particular assets, the purchase of Units may be considered to have
been made with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units. However, these rules generally do not
apply to interest paid on indebtedness incurred for expenditures of a
personal nature such as a mortgage incurred to purchase or improve a personal
residence. Federally tax-exempt income, including income on Units of the
Trust, will be taken into consideration in computing the portion, if any, of
social security benefits received that will be included in a taxpayer's gross
income subject to Federal income tax. It should be noted that under the Tax
Act, the proportion of social security benefits subject to inclusion in
taxable income has been raised for taxable years starting in 1994. Under
Section 265 of the Code, certain financial institutions that acquire Units
would generally not be able to deduct any of the interest expense
attributable to ownership of such Units. Investors with questions regarding
these issues should consult with their tax advisers.
For taxpayers other than corporations, net capital gains are subject to a
maximum rate of 28 percent. However, it should be noted that legislative
proposals are made from time to time that affect tax rates and could affect
relative differences at which ordinary income and capital gains are taxed.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
In the case of certain of the Bonds in the Trust, the opinions of bond
counsel indicate that interest on such securities received by a "substantial
user" of the facilities being financed with the proceeds of these securities,
or persons related thereto, for periods while such securities are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such securities received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under U.S. Treasury Regulations. Any person who believes
that he or she may be a "substantial user" or a "related person" as so
defined should contact his or her tax adviser.
In the opinion of Chapman and Cutler, counsel for the Sponsor, assuming
interest on the Bonds is excludable from gross income under Section 103 of
the Internal Revenue Code of 1986 as amended, under existing Kansas law;
19
The Trust is not an association taxable as a corporation for Kansas
income tax purposes;
Each Certificateholder of the Trust will be treated as the owner of a pro
rata portion of the Trust, and the income and deductions of the Trust will
therefore be treated as income of the Certificateholder under Kansas law;
Interest on Bonds issued after December 31, 1987 by the State of Kansas
or any of its political subdivisions will be exempt from income taxation
imposed on individuals, corporations and fiduciaries (other than insurance
companies, banks, trust companies or savings and loan associations) however,
interest on Bonds issued prior to January 1, 1988 by the State of Kansas or
any of its political subdivisions will not be exempt from income taxation
imposed on individuals, corporations and fiduciaries (other than insurance
companies, banks, trust companies or savings and loan associations) unless
the laws of the State of Kansas authorizing the issuance of such Bonds
specifically exempt the interest on the Bonds from income taxation by the
State of Kansas;
Interest on Bonds issued by the State of Kansas or any of its political
subdivisions will be subject to the tax imposed on banks, trust companies and
savings and loan associations under Article 11, Chapter 79 of the Kansas
statutes;
Interest on Bonds issued by the State of Kansas or any of its political
subdivisions will be subject to the tax imposed on insurance companies under
Article 40, Chapter 28 of the Kansas statutes unless the laws of the State of
Kansas authorizing the issuance of such Bonds specifically exempt the
interest on the Bonds from income taxation by the State of Kansas; interest
on the Bonds which is exempt from Kansas income taxation when received by the
Trust will continue to be exempt when distributed to a Certificateholder
(other than a bank, trust company or savings and loan association);
Each Certificateholder of the Trust will recognize gain or loss for
Kansas income tax purposes if the Trustee disposes of a Bond (whether by
sale, exchange, payment on maturity, retirement or otherwise) or if the
Certificateholder redeems or sells Units of the Trust to the extent that such
transaction results in a recognized gain or loss for federal income tax
purposes;
Interest received by the Trust on the Bonds is exempt from intangibles
taxation imposed by any counties, cities and townships pursuant to present
Kansas law; and
No opinion is expressed regarding whether the gross earnings derived from
the Units is subject to intangibles taxation imposed by counties, cities and
townships pursuant to present Kansas law.
In addition, in the opinion of Chapman and Cutler, under Missouri law, as
presently enacted and construed:
(i) The Trust is not an association taxable as a corporation for Missouri
income tax purposes.
(ii) The Certificateholders of the Trust will be treated as the owners of a
pro rata portion of the Trust and the income of The Trust will therefore be
treated as income of the Certificateholders under Missouri law.
(iii) The Trust will not be subject to the Kansas City, Missouri Earnings
and Profits Tax and each Certificateholder's share of The Trust will not
generally be subject to the Kansas City, Missouri Earnings and Profits Tax or
20
the City of St. Louis Earnings Tax (except in the case of certain
Certificateholders, including corporations, otherwise subject to the St.
Louis City Earnings Tax).
All statements of law in the Prospectus concerning exemption from
Federal, state or other taxes are the opinion of counsel and are to be so
construed.
EXPENSES OF THE TRUST
The Sponsor has borne the costs of establishing the Trust, including the
cost of initial preparation, printing and execution of the Indenture and the
certificates, legal and accounting expenses, advertising expenses, selling
expenses, expenses of the Trustee, initial fees for evaluations and other
out-of-pocket expenses, at no cost to the Trust. The Sponsor will not
receive any fees in connection with activities relating to the Trust.
However, for regularly evaluating the portfolio of the Trust, the Evaluator
(which is the Sponsor) will receive that minimum annual fee set forth under
"Summary of Essential Financial Information" which fee is based on the
largest aggregate amount of Bonds in the Trust at any time during such
period. This fee may exceed the actual costs of providing such evaluation
services for this Trust, but at no time will the total amount received for
evaluation services rendered to unit investment trust of which Ranson Capital
Corporation is the Sponsor in any calendar year exceed the aggregate cost to
the Sponsor of supplying such services in such year.
The Trustee will receive for ordinary services an annual fee from the
Trust set forth under "Summary of Essential Financial Information" which fee
is based on the largest aggregate amount of Bonds in the Trust at any time
during such period. Both the Trustee's fee and the evaluation fee paid to
the Sponsor may be adjusted without prior approval from Certificateholders,
provided that all adjustments upward will not exceed the cumulative
percentage increase of the United States Department of Labor's Consumer Price
Index or, if such index is no longer published, in a comparable index. In
addition, the Trustee's fee may be periodically adjusted in response to
fluctuations in short-term interest rates (reflecting the cost to the Trustee
of advancing funds to the Trust to meet scheduled distributions). Since the
Trustee has the use of the funds being held in the Principal and Interest
Accounts for future distributions, payment of expenses and redemptions and
since such Accounts are non-interest bearing to Certificateholders, the
Trustee benefits thereby. Part of the Trustee's compensation for its
services to the Trust is expected to result from the use of these funds. For
a discussion of the services rendered by the Trustee pursuant to its
obligations under the Indenture, see "Trustee Information" and "Other Rights
of Certificateholders."
The following is a summary of expenses of the Trust which, when owed to
the Trustee, are secured by a lien on the assets of the Trust: 1) the
expenses and costs of any action undertaken by the Trustee to protect the
Trust and the rights and interests of the Certificateholders; 2) any taxes
and other governmental charges upon the Bonds or any part of the Trust (no
such taxes or charges are currently being levied, or, to the knowledge of the
Sponsor, contemplated); 3) amounts payable to the Trustee as fees for
ordinary recurring services and for extraordinary non-recurring services
rendered pursuant to the Indenture and all disbursements and expenses
including counsel fees (including fees of counsel which the Trustee may
retain) and auditing fees sustained or incurred by the Trustee in connection
therewith; and 4) any losses or liabilities accruing to the Trustee without
negligence, bad faith or willful misconduct on its part. The Trustee is
empowered to sell Bonds in order to pay these amounts if funds are not
available in the Interest and Principal Accounts. Costs of disbursement
(including postage, checks and handling) of interest, principal and
redemption distributions will be paid by the Trustee and will not be charged
to the Trust.
21
EVALUATION OF THE TRUST
As of the opening of business on the Date of Deposit, the price of the
Units was determined on the basis of an initial evaluation of the Bonds in
the Trust prepared by Stern Brothers & Co., a firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities. After
the opening of business on the Date of Deposit and during the period of
initial public offering, the Evaluator, Ranson Capital Corporation, will
appraise or cause to be appraised daily the value of the underlying Bonds as
of 3:00 P.M. Central time on days the New York Stock Exchange is open and
will adjust the Public Offering Price of the Units commensurate with such
appraisal. Such Public Offering Price will be effective for all orders
received at or prior to 3:00 P.M. Central time on each such day. Orders
received by the Trustee or Sponsor for purchases, sales or redemptions after
that time, or on a day when the New York Stock Exchange is closed, will be
held until the next determination of price. While the Trustee has the power
to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which
determines the Redemption Price per Unit on a daily basis on days the New
York Stock Exchange is open (and on any other days on which Sponsor secondary
market transactions or redemptions occur). Each evaluation of the Trust has
been and will be determined on the basis of cash on hand in the Trust or
money in the process of being collected, the value of the Bonds in the
portfolio of the Trust based on the bid prices of the Bonds and interest
accrued thereon not subject to collection less any taxes or governmental
charges payable, any accrued expenses of the Trust and any cash held for
distribution to Certificateholders. The result of that computation is then
divided by the number of Units outstanding as of the date thereof to
determine the per Unit value of the Trust.
The Evaluator may determine the value of the Bonds in the portfolio of
the Trust (1) on the basis of current bid prices of the Bonds obtained from
dealers or brokers who customarily deal in bonds comparable to those held in
the Trust; (2) if bid prices are not available for any of the Bonds, on the
basis of bid prices for comparable bonds; (3) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluating,
quoting or appraising comparable bonds; or (4) by any combination of the
above. Although the Unit value is based on the bid prices of the Bonds, the
Units are sold initially to the public at the Public Offering Price based on
the offering prices of the Bonds.
The initial or primary Public Offering Price of the Units and the
Sponsor's initial repurchase price per Unit are based on the offering price
per Unit of the underlying Bonds plus the applicable sales charge and
interest accrued but undistributed. The secondary market Public Offering
Price and the Redemption Price per Unit are based on the bid price per Unit
of the Bonds in the portfolio of the Trust plus the applicable sales charge
and accrued interest. The offering price of Bonds in the portfolio of the
Trust may be expected to range from 1%-2% more than the bid price of such
Bonds. On the Date of Deposit, the offering side evaluation of the Bonds in
the portfolio of the Trust was higher than the bid side evaluation of such
Bonds by 1.3% of the aggregate principal amount of such Bonds.
OTHER RIGHTS OF CERTIFICATEHOLDERS
The Trustee shall furnish Certificateholders in connection with each
distribution a statement of the amount of interest and, if any, the amount of
other receipts (received since the preceding distribution) being distributed,
expressed in each case as a dollar amount representing the pro rata share of
each Unit outstanding. Within a reasonable period of time after the end of
each calendar year, the Trustee shall furnish to each person who at any time
during the calendar year was a registered Certificateholder a statement (1)
as to the Interest Account: interest received (including amounts representing
22
interest received upon any disposition of Bonds), deductions for fees and
expenses of the Trust, for purchases of Replacement Bonds and for redemptions
of Units, if any, and the balance remaining after such distributions and
deductions, expressed in each case both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (2) as to the Principal Account: the
dates of disposition of any Bonds and the net proceeds received therefrom
(excluding any portion representing accrued interest), the amount paid for
purchases of Replacement Bonds and for redemptions of Units, if any,
deductions for payment of applicable taxes and fees and expenses of the
Trustee, and the balance remaining after such distributions and deductions
expressed both as a total dollar amount and as a dollar amount representing
the pro rata share of each Unit outstanding on the last business day of such
calendar year; (3) a list of the Bonds held and the number of Units
outstanding on the last business day of such calendar year; (4) the
Redemption Price based upon the last computation thereof made during such
calendar year; and (5) amounts actually distributed during such calendar year
from the Interest Account and from the Principal Account, separately stated,
expressed both as total dollar amounts and as dollar amounts representing the
pro rata share of each Unit outstanding.
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. The
Trustee shall not be required, however, to cause such an audit to be
performed if its cost to the Trust shall exceed $.50 per Unit on an annual
basis. Certificateholders may obtain a copy of such audited financial
statements upon request.
In order to comply with Federal and state tax reporting requirements,
Certificateholders will be furnished, upon request to the Trustee,
evaluations of the Bonds in the Trust furnished to it by the Evaluator.
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust is evidenced by separate registered
certificates executed by the Trustee and the Sponsor. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed
or accompanied by a written instrument or instruments of transfer. A
Certificateholder must sign exactly as his name appears on the face of the
certificate with the signature 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. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates of corporate
authority. Certificates will be issued in denominations of one Unit or any
multiple thereof. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity, evidence of
ownership and payment of expenses incurred. Mutilated certificates must be
surrendered to the Trustee for replacement. Although no such charge is now
made or contemplated, the Trustee may require a Certificateholder to pay a
reasonable fee to be determined by 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 interchange.
SPONSOR INFORMATION
Ranson Capital Corporation, an investment banking firm created in 1990 by
a number of former employees of Ranson & Company, Inc., Sponsor of Series 1 -
50 of The Kansas Tax-Exempt Trust, is the Sponsor of the Trust. Ranson &
Company, Inc. was originally organized in Kansas in 1935 as the Ranson-
Davidson Company. In 1955, S. H. Ranson, Jr. purchased the Davidson interest
and the name was changed to Ranson & Company, Inc. During its fifty year
23
history, the Company has been active in public and corporate finance and has
sold bonds and mutual funds and maintained secondary market activities
relating thereto. At present, Ranson Capital Corporation, which is a member
of the National Association of Securities Dealers, Inc., is the investment
advisor to the Kansas Municipal Fund, the Kansas Insured Municipal Fund -
Limited Maturity and the Nebraska Municipal Fund and serves as the financial
advisor and as an underwriter for issuers in the Midwest and Southwest,
especially in Kansas, Missouri and Texas.
The Company's offices are currently located at 120 South Market, Suite
450, Wichita, Kansas 67202. As of July 31, 1995, the total unaudited
stockholders' equity of Ranson Capital Corporation was $887,604 (This
paragraph relates only to the Sponsor and not to any Series of The Kansas
Tax-Exempt Trust or to any other dealer. The information is included herein
only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by
the Sponsor upon request.)
Dealers will purchase the Units from the Sponsor on the Date of Deposit
at a price equal to the Public Offering Price per Unit less that percentage
indicated under "Public Offering Information." Any reduced sales charge for
quantity purchases as described under "Public Offering Information" will be
the responsibility of the dealer. In addition to that portion of the sales
commission retained by the Sponsor, the Sponsor will realize a profit or
sustain a loss, as the case may be, as a result of the difference between the
price paid for the Bonds by the Sponsor and the cost of such Bonds to the
Trust (which is based on the aggregate offering price of the Bonds in the
portfolio of the Trust on the Date of Deposit as determined by Stern Brothers
& Co.). See "Trust Portfolio." The Sponsor may also realize profits or
sustain losses with respect to Bonds deposited in the Trust which were
acquired by the Sponsor from underwriting syndicates of which it was a
member. The Sponsor has participated as sole underwriter or as manager or as
a member of the underwriting syndicate from which 8% of the aggregate
principal amount of the Bonds in the portfolio of the Trust were acquired.
The Sponsor may realize additional profit or loss during the initial offering
period as a result of the possible fluctuations in the market value of the
Bonds in the Trust after the Date of Deposit.
As stated under "Redemption and Repurchase of Units," the Sponsor intends
to maintain a secondary market for the Units of the Trust. In so maintaining
a market, the Sponsor will also realize profits or sustain losses in the
amount of any difference between the price at which Units are purchased and
the price at which Units are resold (which price is based on the bid prices
of the Bonds in the Trust and includes a sales charge of 5.50%). In
addition, the Sponsor will also realize profits or sustain losses resulting
from a redemption of such repurchased Units at a price above or below the
purchase price for such Units.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and
Exchange Commission, (ii) terminate the Indenture and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Indenture.
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TRUSTEE INFORMATION
The Trustee, Investors Fiduciary Trust Company, is a trust company
specializing in investment related services, organized and existing under the
laws of Missouri, having its trust office at 127 West 10th Street, Kansas
City, Missouri 64105. The Trustee is subject to supervision and examination
by the Division of Finance of the State of Missouri and the Federal Deposit
Insurance Corporation. The Trustee is a wholly owned subsidiary of State
Street Boston Corporation.
The duties of the Trustee are primarily ministerial in nature. It did
not participate in the selection of Bonds for the Trust portfolio. The
Trustee is empowered to sell, for the purpose of redeeming Units tendered by
any Certificateholder and for the payment of expenses for which funds may not
be available, such of the Bonds as are designated by the Sponsor as the
Trustee in its sole discretion may deem necessary. The Sponsor is empowered,
but not obligated, to direct the Trustee to dispose of Bonds upon default in
payment of principal or interest, institution of certain legal proceedings,
default under other documents adversely affecting debt service, default in
payment of principal or interest on other obligations of the same issuer,
decline in projected income pledged for debt service on revenue bonds or
decline in price or the occurrence of other market or credit factors,
including advance refunding (i.e., the issuance of refunding securities and
the deposit of the proceeds thereof in trust or escrow to retire the refunded
securities on their respective redemption dates), so that in the opinion of
the Sponsor the retention of such Bonds would be detrimental to the interest
of the Certificateholders. The Sponsor is required to instruct the Trustee
to reject any offer made by an issuer of any of the Bonds to issue new
obligations in exchange or substitution for any Bond pursuant to a refunding
or refinancing plan, except that the Sponsor may instruct the Trustee to
accept or reject such an offer or to take any other action with respect
thereto as the Sponsor may deem proper if (1) the issuer is in default with
respect to such Bond or (2) in the written opinion of the Sponsor the issuer
will probably default with respect to such Bond in the reasonably foreseeable
future. Any obligation so received in exchange or substitution will be held
by the Trustee subject to the terms and conditions of the Indenture to the
same extent as Bonds originally deposited thereunder. Within five days after
the deposit of obligations in exchange or substitution for underlying Bonds,
the Trustee is required to give notice thereof to each Certificateholder,
identifying the Bonds eliminated and the Bonds substituted therefor. Except
as stated herein and under "Description of Trust Portfolio" regarding the
substitution of Replacement Bonds for Failed Bonds, the acquisition by the
Trust of any securities other than the Bonds initially deposited is not
permitted.
If any default in the payment of principal or interest on any Bond occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bond within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion
sell the defaulted Bond and not be liable for any depreciation or loss
thereby incurred.
In accordance with the Indenture, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the certificates issued by
the Trust to, every Certificateholder of the Trust. Such books and records
shall be open to inspection by any Certificateholder 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 is required to keep a
25
certified copy or duplicate original of the Indenture on file in its office
available for inspection at all reasonable times during the usual business
hours by any Certificateholder, together with a current list of the Bonds
held in the Trust.
Under the Indenture, the Trustee or any successor trustee may resign and
be discharged of the trust created by the Indenture by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all
Certificateholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The
Sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee
has been appointed and has accepted the appointment within 30 days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The Sponsor may remove the
Trustee and appoint a successor trustee as provided in the Indenture at any
time or without cause. Notice of such removal and appointment shall be
mailed to each Certificateholder by the Sponsor. Upon execution of a written
acceptance of such appointment by such successor trustee, all the rights,
powers, duties and obligations of the original trustee shall vest in the
successor. The 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.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the successor
trustee. The Trustee must be a corporation organized under the laws of the
United States, or any state thereof, be authorized under such laws to
exercise trust powers and have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
UNDERWRITING
<TABLE>
The Underwriters named below have severally purchased Units in the
following respective amounts from the Sponsor.
<CAPTION>
NAME ADDRESS UNITS
<S> <C> <C>
Edward D. Jones & Co. 201 Progress Parkway 1,500
Maryland Heights, Missouri 63043
Ranson Capital Corporation 120 S. Market, Suite 450 1,310
Wichita, Kansas 67202
B. C. Christopher 4717 Grand Avenue 100
Division of Fahnestock & Co., Inc. Kansas City, Missouri 64112
Fidelity Capital Markets, 164 Northern Avenue, zt3 100
a Division of National Financial Boston, MA 02210
Services Corporation
</TABLE>
26
Underwriters and broker-dealers of the Trust are eligible to participate
in a program in which such firms receive from the Sponsor a nominal award for
each of their registered representatives who have sold a minimum number of
units of unit investment trusts created by the Sponsor during a specified
time period. In addition, at various times the Sponsor may implement other
programs under which the sales force of an Underwriter, broker or dealer may
be eligible to win other nominal awards for certain sales efforts, or under
which the Sponsor will reallow to any such Underwriter, broker or dealer that
sponsors sales contests or recognition programs conforming to criteria
established by the Sponsor, or participates in sales programs sponsored by
the Sponsor, an amount not exceeding the total applicable sales charges on
the sales generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time pursuant
to objective criteria established by the Sponsor pay fees to qualifying
Underwriters, brokers or dealers for certain services or activities which are
primarily intended to result in sales of Units of the Trust. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trust. These programs will not change the price Unitholders pay for
their Units or the amount that the Trust will receive from the Units sold.
Units may also be sold to dealers at prices representing the per Unit
concession stated under "Public Offering Information." However, resales of
Units by such dealers to the public will be made at the Public Offering Price
described in the Prospectus. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units and the right to change
the amount of the concession from time to time Underwriters will acquire
Units from the Sponsor based on the amount of Units underwritten. The
concessions from the Public Offering Price will be as set forth in the
following table:
<TABLE>
<CAPTION>
100-249 250-499 Units 500-999 Units 1,000 or More Units
Underwritten Underwritten Underwritten Underwritten
<C> <C> <C> <C>
3.50% 3.60% 3.80% 4.00%
</TABLE>
In addition, the Sponsor has agreed to provide Underwriters with an
additional concession of $2.50 per Unit for committing to underwrite a total
of 1,500 or more Units.
LEGAL AND AUDITING MATTERS
The legality of the Units offered hereby and certain matters relating to
Federal and Kansas tax law have been passed upon by Chapman and Cutler,
Chicago, Illinois as special counsel for the Sponsor.
The statement of net assets, including the Trust portfolio, of the Trust
at the opening of business on August 22, 1995, the Date of Deposit, appearing
in this Prospectus and Registration Statement has been audited by Allen,
Gibbs & Houlik, L.C., independent auditors, as set forth in their report
appearing elsewhere herein, and is included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. A
description of the applicable Standard & Poor's rating symbols and their
meanings follows:
27
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
debt obligation. This assessment may take into consideration obligators such
as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1) Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
2) Nature of and provisions of the obligation;
3) Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the issuance of the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
28
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise his
own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal
amount of those bonds where the underlying deposit collateral is fully
insured by the Federal Savings & Loan Insurance Corp. or the Federal Deposit
Insurance Corp.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Their safety is so absolute that, with the occasional exception of oversupply
in a few specific instances, characteristically, their market value is
affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities. Their market value is virtually immune to all
but money market influences, with the occasional exception of oversupply in
few specific instances.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to some degree
by economic performance during a sustained period of depressed business
conditions, but, during periods of normalcy, A-rated bonds frequently move in
parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
Baa-Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected or poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well. The market value of
Baa-rated bonds is more sensitive to changes in economic circumstances, and
aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations move in parallel with Aaa, Aa and A obligations during
periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Con. (--)-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
29
are bonds secured by a) earnings of projects under construction, b) earnings
of projects unseasoned in operation experience, c) rentals which begin when
facilities are completed, or d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature
upon completion of construction or elimination of basis of condition.
TAX-EXEMPT/TAXABLE ESTIMATED CURRENT RETURN EQUIVALENTS
As of the date of this Prospectus, the following table shows the
approximate taxable estimated current returns for individuals that are
equivalent to tax-exempt estimated current returns under combined Federal and
state taxes, using the published 1995 Federal and Kansas tax rates*. The
table incorporates increased tax rates for higher-income taxpayers that were
included in the Revenue Reconciliation Act of 1993. The combined Federal and
state tax brackets shown reflect the fact that state tax payments are
deductible for Federal tax purposes and that no deduction of the Federal tax
is claimed for state purposes. The table illustrates approximately what you
would have to earn on taxable investments to equal tax-exempt estimated
current returns in your income tax bracket under present tax law. Locate your
income (after deductions and exemptions), then locate your tax bracket based
on joint or single tax filing. Read across to the equivalent
taxable estimated current return you would need to match tax-free income.
The taxable equivalent estimated current returns may be somewhat higher than
the equivalent returns indicated in the table below for those individuals who
have Adjusted Gross Income in excess of $114,700.
<TABLE>
<CAPTION>
Taxable Income Tax-Exempt Estimated Current Return
Single Joint
Return Return Tax 41/2% 5% 51/2% 6% 61/2% 7% 71/2%
In thousands Bracket Equivalent Taxable Estimated Current Returns
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 23.35 21.40% 5.73% 6.36% 7.00% 7.63% 8.27% 8.91% 9.54%
$ 0 - 39.00 20.30 5.65 6.27 6.90 7.53 8.16 8.78 9.41
23.35- 56.55 33.60 6.78 7.53 8.28 9.04 9.79 10.54 11.30
39.00 - 94.25 32.60 6.68 7.42 8.16 8.90 9.64 10.39 11.13
56.55- 117.95 36.40 7.08 7.86 8.65 9.43 10.22 11.01 11.79
94.25- 143.60 35.50 6.98 7.75 8.53 9.30 10.08 10.85 11.63
117.95- 256.50 41.00 7.63 8.47 9.32 10.17 11.02 11.86 12.71
143.60- 256.50 40.10 7.51 8.35 9.18 10.02 10.85 11.69 12.52
Over 256.50 44.30 8.08 8.98 9.87 10.77 11.67 12.57 13.46
Over 256.50 43.50 7.96 8.85 9.73 10.62 11.50 12.39 13.27
</TABLE>
[FN]
* The table does not reflect the effect of two adjustments designed to
phase-out the advantage of itemized deductions and personal exemptions for
higher income taxpayers. These adjustments, in effect, increase the
marginal Federal tax rate above the stated marginal tax rate by eliminating
a portion of claimed itemized deductions and potentially eliminating
entirely the effect of personal exemptions in determining Taxable Income.
The total impact of the adjustments, which will vary from taxpayer to
taxpayer, is dependent upon the itemized deductions and personal exemptions
claimed.
30
A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales material compare the then current estimated returns on
the Trust and return over specified periods on other similar Ranson Capital
Corporation sponsored unit investment trusts with returns on taxable
investments such as corporate or U.S. Government bonds, bank CDs and money
market accounts or money market funds, each of which has investment
characteristics that may differ from those of the Trust. U.S. Government
bonds, for example, are backed by the full faith and credit of the U.S.
Government and bank CDs and money market accounts are insured by an agency of
the federal government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics of
the Trust are described more fully elsewhere in this Prospectus.
31
REPORT OF ALLEN, GIBBS & HOULIK, L.C.
INDEPENDENT AUDITORS
CERTIFICATEHOLDERS
THE KANSAS TAX-EXEMPT TRUST
SERIES 77
We have audited the accompanying statement of net assets, including
the Trust portfolio, of The Kansas Tax-Exempt Trust, Series 77, as of the
opening of business on August 22, 1995, the Date of Deposit. This
statement of net assets is the responsibility of the Trust's Sponsor. Our
responsibility is to express an opinion on this statement of net assets
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement of
net assets. Our procedures included confirmation of the Bonds held by the
Trustee at the opening of business on August 22, 1995. An audit also
includes assessing the accounting principles used and significant estimates
made by the Trust's Sponsor, as well as evaluating the overall statement of
net assets presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of The Kansas Tax-
Exempt Trust, Series 77 at the opening of business on August 22, 1995, in
conformity with generally accepted accounting principles.
ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
August 22, 1995
<TABLE>
THE KANSAS TAX-EXEMPT TRUST
<CAPTION>
SERIES 77
STATEMENT OF NET ASSETS
AT THE OPENING OF BUSINESS ON AUGUST 22, 1995, THE DATE OF DEPOSIT
<S> <C>
TRUST PROPERTY
Investment in securities-
Bonds deposited in Trust (1) $ 2,860,271
Accrued interest to Date of Deposit on Bonds (2) 42,603
____________
2,902,874
Less distributions payable (2) 42,603
____________
Net assets, applicable to 3,010 outstanding Units of
fractional undivided interest $ 2,860,271
INTEREST OF CERTIFICATEHOLDERS
Cost to investors (3) $ 3,007,645
Less sales charge (3) 147,374
____________
Net proceeds to the Trust, equal to net assets $ 2,860,271
</TABLE>
[FN]
NOTES:
(1) Aggregate cost to the Trust of the Bonds listed in the Trust Portfolio
is based on offering side evaluations determined by Stern Brothers & Co.
(2) Pursuant to the Indenture, the Trustee will advance funds in the
amount of $44,018 representing the accrued interest to August 25, 1995
(the "First Settlement Date") and such advance will be distributed to the
Sponsor.
(3) The aggregate cost to investors (exclusive of interest) includes a
sales charge computed at the rate of 4.90% of the Public Offering Price
(equivalent to 5.152% of the net amount invested) assuming no reduction
of sales charge for quantity purchases.
32
<TABLE>
THE KANSAS TAX-EXEMPT TRUST, SERIES 77
TRUST PORTFOLIO AT THE OPENING OF BUSINESS ON August 22, 1995, THE DATE OF DEPOSIT
<CAPTION>
NAME OF ISSUER, TITLE, COUPON RATE
AND MATURITY DATE OF BONDS DEPOSITED
AGGREGATE IN TRUST OR REPRESENTED BY SPONSOR'S REDEMPTION COST OF BONDS
PRINCIPAL CONTRACTS TO PURCHASE BONDS(1)(5) RATINGS(2) PROVISION(3) TO TRUST(4)
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
$@@ 560,000 Unified School District No. 339 Jefferson County, AAA 2005 @ 100 510,149
Kansas (Jefferson County North) General Obligation
School Improvement Bonds, Series 1995 (MBIA
Insured) 5.00%, Due 10/1/2013
@@ 250,000 Unified School District No. 233 Johnson County Aaa# 2004 @ 100 246,250
Kansas (Olathe) General Obligation School
Improvement Bonds, Series 1994 (AMBAC Insured)
5.625%, Due 9/1/2014
125,000 Reno County, Kansas Sedgwick County, Kansas Finney Aaa# Noncallable 36,965(6)
County, Kansas Single Family Mortgage Revenue Bonds
(Multiple Originators and Servicers), 1984 Series A
(MBIA Insured) 0.00%, Due 4/1/2016
700,000 Kansas Development Finance Authority Energy AAA 2003 @ 102 700,000
Conservation Revenue Bonds, (Kansas Board of
Regents-Wichita State University Housing System
Renovation Project), Series F 1995, (AMBAC
Insured) 5.875%, Due 6/1/2021
@@ 700,000 City of Kansas City, Kansas Utility System Refunding AAA 2004 @ 102 729,533
and Improvement Revenue Bonds, Series 1994 (Financial 2006 @ 100
Guaranty Insured) 6.375%, Due 9/1/2023
@@ 600,000 City of Burlington, Kansas Pollution Control AAA 2001 @ 102 637,374
Refunding Revenue Bonds, Series 1991 (Kansas 2005 @ 100
Gas and Electric Company) (MBIA Insured) 7.00%,
Due 6/1/2031
___________ ___________
$2,935,000 $2,860,271
</TABLE>
[FN]
See "Notes to Trust Portfolio."
33
NOTES TO TRUST PORTFOLIO:
(1) Contracts to acquire Bonds were entered into by the Sponsor during the
period May 30, 1995 through August 17, 1995. All Bonds are represented
by regular way contracts, unless otherwise indicated, for the performance
of which cash or an irrevocable letter of credit has been deposited with
the Trustee.
(2) Securities ratings represent the latest published ratings by Standard
& Poor's, unless marked with a "#" in which case the rating is by Moody's
or unless marked with a "&&" in which case the Sponsor expects Standard &
Poor's or Moody's, upon the receipt of an insurance policy obtained by
the issuer, to issue a AAA rating. A brief description of the applicable
Standard & Poor's or Moody's rating symbols and their meanings is set
forth under "Description of Bond Ratings." "N/R" indicates that no
rating has been provided for such Bonds; in the opinion of the Sponsor,
these Bonds have credit characteristics sufficiently similar to the
credit characteristics of interest-bearing tax-exempt obligations that
were so rated as to be acceptable for acquisition by the Trust. "**"
indicates rating is contingent upon receipt by Standard & Poor's or
Moody's of final documentation.
(3) There is shown under this heading the year in which each issue of
Bonds is initially redeemable and the redemption price for that year or,
if currently redeemable, the redemption price in 1995 unless otherwise
indicated, each issue continues to be redeemable at declining prices
thereafter, but not below par value. The prices at which the Bonds may be
redeemed or called prior to maturity may or may not include a premium
and, in certain cases, may be less than the cost of the Bonds to the
Trust. In addition, certain Bonds in the Trust portfolio may be redeemed
in whole or in part other than by operation of the stated redemption or
sinking fund provisions under certain unusual or extraordinary
circumstances specified in the instruments setting forth the terms and
provisions of such Bonds. "S.F." indicates a sinking fund is established
with respect to an issue of Bonds.
(4) During the initial offering period, evaluations of the Bonds are made
on the basis of current offering side evaluations of the Bonds. The
aggregate offering price is greater than the aggregate bid price of the
Bonds, which is the basis on which Redemption Prices will be determined
for purposes of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Cost of Bonds Profit To Annual Interest Bid Side Value
To Sponsor Sponsor Income To Trust Of Bonds
_____________ ________ ______________ _____________
<C> <C> <C> <C>
$2,849,186 $11,085 $169,813 $2,824,910
</TABLE>
(6) This Bond has been purchased at a discount from the par value because
there is no stated interest income thereon. Such bonds are normally
described as "zero coupon" bonds. Over the life of such bonds the value
increases such that upon maturity the holders of such bonds will receive
100% of the principal amount thereof. Approximately 4% of the aggregate
principal amount of the Bonds in the Trust are "zero coupon" bonds.
%% This Bond is the same issue as another Bond in the portfolio.
@@ This Bond was issued at an original issue discount.
* This Bond is represented by a "when, as and if issued" or "delayed
delivery" contract and has an expected settlement date after the "First
Settlement Date" of the Trust. Interest on this Bond begins accruing to
the benefit of Unitholders on the date of delivery.
34
ESTIMATED CASH FLOWS TO UNITHOLDERS
The table below sets forth the per Unit estimated monthly distribution of
interest and principal to Unitholders. The table assumes no changes in
expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Bonds prior to maturity
or expected retirement date and the receipt of principal upon maturity or
expected retirement date. To the extent the foregoing assumptions change,
actual distributions will vary.
<TABLE>
SERIES 77
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
__________________ ____________ ____________ ____________
<S> <C> <C> <C>
October 1995 $2.98 $ 0.00 $ 2.98
November 1995 - May 2001 4.47 0.00 4.47
June 2001 4.47 203.32 207.79
July 2001 - August 2006 3.35 0.00 3.35
September 2006 3.35 232.56 235.91
October 2006 - September 2013 2.15 0.00 2.15
October 2013 2.15 186.05 188.20
November 2013 - August 2014 1.41 0.00 1.41
September 2014 1.41 83.06 84.47
October 2014 - March 2016 1.04 0.00 1.04
April 2016 1.04 41.53 42.57
May 2016 - May 2021 1.05 0.00 1.05
June 2021 1.05 232.56 233.61
</TABLE>
35
No person is authorized to give any information or to make any
representations not contained in this Prospectus; and any information or
representation not contained herein must not be relied upon as having been
authorized by the Trust, the Sponsor or any dealer. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, securities
in any state to any person to whom it is not lawful to make such offer in
such state.
This Prospectus contains information concerning the Trust and the Sponsor,
but does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities
Act of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
TITLE PAGE
_____ ____
<S> <C>
General Summary of Information 1
Summary of Essential Financial Information 3
Summary of the Trust 5
Description of Trust Portfolio 7
Objectives of the Trust 10
Estimated Current Return and Estimated Long-Term Return 11
Public Offering Information 12
Accrued Interest 13
Redemption and Repurchase of Units 14
Distribution of Interest and Principal 15
Distribution Reinvestment Option 16
Tax Status (Federal, State, Capital Gains) 17
Expenses of the Trust 21
Evaluation of the Trust 22
Other Rights of Certificateholders 22
Sponsor Information 23
Trustee Information 25
Underwriting 26
Legal and Auditing Matters 27
Description of Bond Ratings 27
Tax-Exempt/Taxable Estimated Current Return Equivalents 30
Report of Allen, Gibbs & Houlik, L.C. Independent Auditors 32
Statement of Net Assets 32
Trust Portfolio 33
Notes to Trust Portfolio 34
Estimated Cash Flows to Unitholders 35
</TABLE>
36
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, evaluator,
rating services and legal counsel
The following exhibits:
1.1 Trust Agreement between Ranson Capital Corporation, as Depositor, and
Investors Fiduciary Trust Company, as Trustee (to be supplied by
amendment).
3.1 Opinion and consent of Chapman and Cutler, special counsel to the
Depositor, as to legality of securities being registered (to be
supplied by amendment).
3.2 Opinion of Chapman and Cutler, special counsel to the Depositor, as to
Federal and Kansas tax status of securities being registered
(to be supplied by amendment).
4.1 Consent of Stern Brothers & Co., special evaluator (to be supplied
by amendment).
4.2 Consent of Allen, Gibbs & Houlik, L.C. (to be supplied by amendment).
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
The Kansas Tax-Exempt Trust, Series 78 has duly caused this 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 20th day of
September, 1995.
THE KANSAS TAX-EXEMPT TRUST, SERIES 78
(Registrant)
By RANSON CAPITAL CORPORATION
(Depositor)
Attest John A. Ranson
____________________
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on September 20, 1995.
Signature Title )
John A. Ranson President, Chief Executive
__________________ Officer and Director
Alex R. Meitzner Executive Vice President
__________________ and Director
Robin K. Pinkerton Secretary, Treasurer and
__________________ Director ) John A. Ranson
___________________
___________________________________________________________________________
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.
S-2
