<PAGE>
Rule 497(b)
Reg. No. 33-65966
CUSIP: 383741600R
Government Securities Equity Trust Series 6
(LOGO)
- --------------------------------------------------------------------------------
The objectives of the Trust are to attempt to obtain safety of capital through
investment in stripped United States Treasury issued notes or bonds paying no
current interest and to attempt to provide for capital appreciation through
investment in Class I shares of the Templeton Growth Fund, Inc. (the ``Fund''),
an open-end, diversified, registered, management investment company. The
objective of the Fund is long-term capital growth through a flexible policy of
investing in stocks and debt obligations of companies and governments of any
nation. Units of the Trust may be suited for purchase by Individual Retirement
Accounts, Keogh Plans and other tax-deferred retirement plans.
- --------------------------------------------------------------------------------
Sponsor:
Prudential Securities (LOGO)
- --------------------------------------------------------------------------------
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 and Retain Prospectus dated
This Prospectus For Future Reference January 31, 1996
<PAGE>
- --------------------------------------------------------------------------------
This Prospectus does not contain all the information with respect to the
investment company set forth in its registration statement and exhibits relating
thereto which have been 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.
- --------------------------------------------------------------------------------
The Trust
Government Securities Equity Trust Series 6 consists of one underlying unit
investment trust (the ``Trust'' or ``GSET'' as the context requires), composed
of stripped United States Treasury issued notes or bonds bearing no current
interest (the ``Treasury Obligations'') and Class I shares (``Fund Shares'') of
the Templeton Growth Fund, Inc. (the ``Fund''), an open-end diversified,
registered, management investment company, or contracts and funds for the
purchase thereof (the Treasury Obligations and the Fund Shares, collectively,
the ``Securities''). The Treasury Obligations held by the Trust mature
approximately fifteen years from the Date of Deposit.
The objectives of the Trust are to attempt to obtain safety of capital
through investment in stripped United States Treasury issued notes or bonds
paying no current interest and to attempt to provide for capital appreciation
through investment in shares of the Fund. The objective of the Fund is long-term
capital growth through a flexible policy of investing in stocks and debt
obligations of companies and governments of any nation. The Fund may purchase
and write covered put and call options on securities indices that are traded on
United States and foreign exchanges; may invest up to 5% of its total assets in
put or call options on securities held in the Fund; may purchase and sell stock
index futures contracts up to an aggregate amount not exceeding 20% of its total
assets but may not at any time commit more than 5% of its total assets to
initial margin deposits on futures contracts; may invest in preferred stocks and
certain debt securities, rated or unrated, such as convertible bonds and bonds
selling at a discount. There is, of course, no assurance that the Trust's
objectives will be achieved.
The Trust is structured to contain a sufficient amount of Treasury
Obligations to insure that an investor will receive, at the maturity of such
Trust, $15.00 per unit. However, an investor holding his Units to Trust maturity
may suffer a loss to the extent the investor's purchase cost of a Unit exceeds
$15.00 since the capital protection is limited to the aggregate maturity value
per Unit of Treasury Obligations. As of the date of the ``Summary of Essential
Information'', the Public Offering Price, including the sales charge, was
approximately $13.62 per Unit and consequently Unit Holders purchasing Units on
such date could anticipate realizing proceeds at maturity of the Treasury
Obligations greater than their initial investment of approximately $13.62 per
Unit. An investor who sells his Units prior to Trust maturity may suffer a loss
to the extent that the price he receives upon the sale of his Units is less than
the purchase price of his Units. The price paid for a Unit may differ from that
set forth herein due to changes in the value of the Securities in the portfolio
subsequent to the date of the Summary of Essential Information. There is no
assurance that a purchaser of Units on the date of the Prospectus or subsequent
to such date will receive, upon termination, the purchase price per Unit. The
Fund has not been structured to generate dividends and therefore dividend
distributions by the Trust are likely to be insignificant. The maximization of
dividend income is not an objective of the Trust. The Trust is ``concentrated''
in Fund Shares, so investors should be aware that the potential for capital
appreciation is directly related to the investment performance of the Fund
itself.
The Sponsor may, from time to time, deposit additional Treasury Obligations
and Fund Shares in the Trust while maintaining the proportionate relationship
between the maturity amount of the Treasury Obligations and the number of Fund
Shares immediately prior to such deposit. Any additional Treasury Obligations
added to the Trust will be United States Treasury notes or bonds substantially
identical to those then held in the Trust.
The Fund
The objective of the Fund is long-term capital growth, which it seeks to
achieve through a flexible policy of investing in stocks and debt obligations of
companies and governments of any nation. The Fund may invest in junk bonds and
may utilize futures and options (see page B-6). Any income realized will be
incidental.
Although the Fund generally invests in common stock it may also invest in
preferred stocks and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount. Whenever, in the judgment of
Templeton Global Advisors Limited (the ``Investment Manager''), market or
economic conditions warrant, the Fund may, for temporary defensive purposes,
invest without limit in U.S. Government securities, bank time deposits in the
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<PAGE>
currency of any major nation and commercial paper which, at the date of the
investment, must be rated A-1 by Standard & Poor's Corporation (``S&P'') or
Prime-1 by Moody's Investors Service, Inc. (``Moody's'') or, if not rated,
issued by a company which, at the date of investment, has an outstanding debt
issue rated AAA or AA by S&P or Aaa or Aa by Moody's, and purchase from banks or
broker-dealers Canadian or U.S. Government Securities with a simultaneous
agreement by the seller to repurchase them within no more than seven days at the
original purchase price plus accrued interest.
Although the Fund will constantly strive to attain the objective of
long-term capital growth, there can be no assurance it will be attained. The
objective of the Fund may not be changed without shareholder approval. There is,
of course, no guarantee that the Fund's investment objective will be achieved.
Investment Risks
Investors should be aware of the risks which an investment in Units of the
Trust may entail. During the life of the Trust, the value of the portfolio
Securities and hence the Units may fluctuate and therefore the Public Offering
Price and Redemption Price per Unit may be more or less than the price paid by
the investor. The value of the Treasury Obligations will fluctuate inversely
with changes in interest rates and the value of Fund Shares will vary as the
value of the underlying portfolio securities of the Fund increases or decreases.
The Treasury Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than securities of comparable quality
which make periodic interest payments. See ``The Trust -Stripped U.S. Treasury
Obligations.'' Although the Trust is structured to return to an initial Unit
Holder his purchase cost of a Unit through the distribution of the Treasury
Obligations' maturity value on the mandatory termination date of the Trust, an
investor will have included the accrual of original issue discount on such
Treasury Obligations in income for federal income tax purposes and will have
paid federal income tax on such accrual. An investor holding his Units to Trust
maturity may suffer a loss to the extent the investor's purchase cost of a Unit
exceeds $15.00 since the capital protection is limited to the aggregate maturity
value per Unit of Treasury Obligations. Similarly, an investor who sells his
Units prior to Trust maturity may suffer a loss to the extent that the price he
receives upon the sale of his Units is less than the purchase price of his
Units.
Distributions
Distributions, if any, of dividends, 12b-1 fee amounts received by the Trust
from the Sponsor in respect of Fund Shares (net of Trust expenses),
distributions of any net capital gains received in respect of Fund Shares and
proceeds of the sale of Fund Shares not used to redeem Units will be made
quarterly on or shortly after the Quarterly Distribution Date to Unit Holders of
record on the Quarterly Record Date immediately preceding such Quarterly
Distribution Date. No distribution will be made if the amount available for
distribution is less than $2.50 per 100 Units (see ``Rights of Unit
Holders--Distributions''). Alternatively, Unit Holders may have their
distributions reinvested (see ``Reinvestment of Trust Distributions''). Accrual
of original issue discount on the Treasury Obligations will not be distributed
on a current basis, although Unit Holders will be subject to income tax at
ordinary income rates as if a current distribution of such amounts had been made
(see ``Tax Status of the Trust'' herein). Upon termination of the Trust, the
Trustee will distribute, upon surrender of Units for cancellation, to each Unit
Holder, his pro rata share of such Trust's net assets including the proceeds of
Fund Shares sold unless a Unit Holder elects to receive Fund Shares pursuant to
an ``in kind'' distribution of the number of Fund Shares attributable to his
Units, in the manner set forth under ``Amendment and Termination of the
Indenture-Termination'' herein. Upon termination, a Unit Holder may invest the
proceeds from the Treasury Obligations in Fund Shares at such shares' net asset
value.
Public Offering Price
The Public Offering Price of the Units during the initial offering period is
equal to the aggregate offering side evaluation of the underlying Treasury
Obligations and the net asset value of the Fund Shares (excluding any sales
charge), divided by the number of Units outstanding plus a sales charge equal to
5.25% of the Public Offering Price (5.541% of the net amount invested) per Unit.
Any cash held by the Trust will be added to the Public Offering Price. After the
initial public offering period, the Public Offering Price of the Units is
computed by adding to the aggregate bid side evaluation of the Treasury
Obligations the aggregate net asset value of Fund Shares in the Trust, dividing
such sum by the number of Units outstanding and then adding a sales charge of
5.25% of the Public Offering Price (5.541% of the net amount invested). Any
money in the Income and Principal Accounts other than money required to redeem
tendered Units will be added to the Public Offering Price. The sales charge is
reduced on a graduated scale for sales involving at least 2,000 Units (see
``Public Offering of Units--Volume Discount''). The minimum purchase is 100
Units except the
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<PAGE>
minimum purchase is 25 Units in the case of Individual Retirement Accounts,
Keogh Plans and other tax-deferred retirement plans.
Secondary Market
The Sponsor, although not obligated to do so, presently intends to maintain
a secondary market to repurchase the Units based on the aggregate bid side
evaluation of the Treasury Obligations and the net asset value of the Fund
Shares (excluding any sales charge on Fund Shares). If such market is not
maintained, a Unit Holder will be able to dispose of his Units through
redemption at prices based on the aggregate bid side evaluation of the Treasury
Obligations and the net asset value of the Fund Shares (see ``Rights of Unit
Holders-Redemption'' herein). Market conditions may cause such prices to be
greater or less than the amount paid for Units and may result in a loss to a
Unit Holder upon the disposition of a Unit.
Special Risk Considerations
An investment in Units of the Trust should be made with an understanding of
the risks entailed in an investment in (i) the stripped United States Treasury
issued notes or bonds bearing no current interest and (ii) a mutual fund which
invests in the type of securities in which the Fund invests. (see Fund Risk
Factors on pages B-9 and B-10). The Trust's objectives are to attempt to obtain
safety of capital through investment in the stripped United States Treasury
issued notes or bonds paying no current interest and to attempt to provide for
capital appreciation through an investment in Fund Shares. The Trust is
``concentrated'' in Fund Shares so investors should be aware that the potential
for capital appreciation is directly related to the investment performance of
the Fund itself. Additionally, changes in the price of the Treasury Obligations
and changes in the net asset value of the Fund Shares will affect the price of
the Trust's Units.
California Investors Only-Sales to individuals in California are restricted
to persons who have (i) annual income of at least $30,000 and a net worth of at
least $30,000, exclusive of home, home furnishings and automobiles or (ii) net
worth of at least $75,000, exclusive of home, home furnishings and automobiles.
Portfolio Summary
$84,750,000 face amount of Treasury Obligations maturing on November 15,
2008 and 1,927,215 Fund Shares were held in the Trust. The Treasury Obligations
and the Fund Shares represented 54% and 46%, respectively, of the total of the
aggregate bid side evaluation of Treasury Obligations in the Trust and the
aggregate value of Fund Shares.
A-iii
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
As of December 27, 1995(1)
<TABLE>
<S> <C>
AGGREGATE MATURITY VALUE OF TREASURY OBLIGATIONS........................................... $84,750,000.00
AGGREGATE NUMBER OF FUND SHARES............................................................ 1,927,215
NUMBER OF UNITS............................................................................ 5,650,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH UNIT........................ 1/5,650,000
PUBLIC OFFERING PRICE
Aggregate bid side evaluation of Treasury Obligations in the Trust....................... $39,575,707.50
Aggregate value of Fund Shares(2)........................................................ $33,360,091.65
Aggregate cash value..................................................................... $ 18,627.31
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Total.................................................................................... $72,954,426.46
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--------------
Divided by 5,650,000 Units............................................................... 12.912
Plus sales charge of 5.25% of Public Offering Price (5.541% of net amount invested)(4)... .715
--------------
Public Offering Price per Unit(3)........................................................ 13.627
--------------
--------------
REDEMPTION AND SPONSOR'S REPURCHASE PRICE PER UNIT (based on bid side evaluation of
underlying Treasury Obligations and net asset value of the Fund Shares, $.715 less than
Public Offering Price per Unit)(2)....................................................... $ 12.912
QUARTERLY RECORD DATES: February 1, May 1, August 1, November 1.
QUARTERLY DISTRIBUTION DATES: February 15, May 15, August 15, November 15.
TRUSTEE'S ANNUAL FEE(5) (including estimated expenses and Evaluator's fee) $1.67 per 100
Units outstanding.
EVALUATOR'S FEE FOR EACH EVALUATION OF TREASURY OBLIGATIONS: $5.00
EVALUATION TIME: 4:00 P.M. New York Time (i.e. the close of regular trading on the New York
Stock Exchange)
MANDATORY TERMINATION DATE: November 15, 2008.
MINIMUM VALUE OF TRUST: The Trust may be terminated if the value of Trust assets at any
time is less than 50,520,000.
DATE OF DEPOSIT: October 20, 1993(1)
</TABLE>
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(1) The Date of Deposit is the date on which the Trust Indenture and
Agreement was signed and the initial deposit of Securities with the Trustee was
made.
(2) Calculated by multiplying aggregate number of Fund Shares by the current
net asset value per share (excluding any sales load on the Fund Shares).
(3) This Public Offering Price is computed as of December 27, 1995 and may
vary from the Public Offering Pace on the date of this Prospectus or any
subsequent date.
(4) Certain transactions are entitled to a reduced sales charge. (See
``Public Offering of Units--Volume Discount''.)
(5) Based on Trust size of 1,000,000 or fewer Units.
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For an explanation of the management fees paid by the Fund see page B-8.
A-iv
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
THE UNIT HOLDERS, SPONSOR AND TRUSTEE
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
We have audited the statement of financial condition and schedule of
portfolio securities of the Government Securities Equity Trust Series 6 as
of September 30, 1995, and the related statements of operations and changes
in net assets for the year ended September 30, 1995 and for the period from
October 20, 1993 (date of deposit) to September 30, 1994. These financial
statements are the responsibility of the Trustee (see Footnote (a)(1)). Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of the securities owned as of
September 30, 1995 as shown in the statement of financial condition and
schedule of portfolio securities by correspondence with The Chase Manhattan
Bank, N.A. (formerly United States Trust Company of New York), the Trustee.
An audit also includes assessing the accounting principles used and the
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Government
Securities Equity Trust Series 6 as of September 30, 1995 and the results of
its operations and the changes in its net assets for the year ended
September 30, 1995 and for the period from October 20, 1993 (date of
deposit) to September 30, 1994 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
January 5, 1996
New York, New York
</AUDIT-REPORT>
A-1
<PAGE>
STATEMENT OF FINANCIAL CONDITION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1995
<TABLE>
TRUST PROPERTY
<S> <C>
Investments in Securities at market value
(amortized cost $77,155,000 including accreted
interest of $4,675,477) (Note (a) and Schedule
of Portfolio Securities Notes (4) and (5)) $79,880,172
Receivable for investments sold 775,255
Other receivable 17,160
Cash 37,679
Total 80,710,266
LIABILITIES AND NET ASSETS
Less Liabilities:
Accrued Trust fees and expenses 6,448
Payable to Unit Holders 775,800
Total Liabilities 782,248
Net Assets:
Balance applicable to 6,190,000 Units of fractional
undivided interest issued and outstanding (Note (c)):
Capital, plus net unrealized market appreciation
of $2,725,172 $79,880,172
Undistributed principal and net investment
income (Note (b)) 47,846
Net assets $79,928,018
Net asset value per Unit ($79,928,018 divided by 6,190,000 Units) $ 12.9124
See notes to financial statements
</TABLE>
A-2
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
<CAPTION>
For the period from
Year Ended October 20, 1993
September 30, (date of deposit)
1995 to September 30, 1994
<S> <C> <C>
Investment income:
Interest $ 2,959,521 $ 3,060,753
Dividends (Note (a)(5)) 1,642,031 260,592
Other income 112,631 114,783
4,714,183 3,436,128
Less Expenses:
Trust fees and expenses 62,908 58,177
Total expenses 62,908 58,177
Investment income - net 4,651,275 3,377,951
Net gain (loss) on investments:
Long-term capital gain distribu-
tions received 2,686,367 440,701
Realized loss on securities sold
or redeemed (136,609) (208,295)
Net unrealized market appreciation
(depreciation) 10,093,802 (7,368,630)
Net gain (loss) on investments 12,643,560 (7,136,224)
Net increase (decrease) in net assets
resulting from operations $17,294,835 $(3,758,273)
See notes to financial statements
</TABLE>
A-3
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
<CAPTION>
For the period from
Year Ended October 20, 1993
September 30, (date of deposit)
1995 to September 30, 1994
<S> <C> <C>
Operations:
Investment income - net $ 4,651,275 $ 3,377,951
Long-term capital gain distribu- 2,686,367 440,701
tions received
Realized loss on securities sold
or redeemed (136,609) (208,295)
Net unrealized market appreciation
(depreciation) 10,093,802 (7,368,630)
Net increase (decrease) in net
assets resulting from
operations 17,294,835 (3,758,273)
Less Distributions to Unit Holders:
Principal (2,680,929) (434,720)
Investment income - net (1,683,264) (234,840)
Total distributions (4,364,193) (669,560)
Capital share transactions:
Creation of 50,000 and 8,270,000 addi-
tional Units, respectively 530,175 96,881,533
Redemption of 1,920,000 and 310,000
Units, respectively (23,629,745) (3,520,322)
Income distribution on redemption (14,454) (1,677)
Net capital share transactions (23,114,024) 93,359,534
Net (decrease) increase in net assets (10,183,382) 88,931,701
Net assets:
Beginning of period 90,111,400 1,179,699
End of period (including undistributed
principal and net investment income
of $47,846 and $76,591, respectively) $79,928,018 $90,111,400
See notes to financial statements
</TABLE>
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1995
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related
data of the Trust and is responsible for establishing and
maintaining a system of internal controls directly related to, and
designed to provide reasonable assurance as to the integrity and
reliability of, financial reporting of the Trust. The Trustee is
also responsible for all estimates and accruals reflected in the
Trust's financial statements. The Evaluator determines the price
for each underlying Security included in the Trust's Schedule of
Portfolio Securities on the basis set forth in Part B of this
Prospectus, "Public Offering of Units - Public Offering Price".
Under the Securities Act of 1933 ("the Act"), as amended, the
Sponsor is deemed to be an issuer of the Trust Units. As such,
the Sponsor has the responsibility of an issuer under the Act with
respect to financial statements of the Trust included in the
Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations of the Zero Coupon
Treasury Obligations, and by calculations based on the net asset
value per share of the Fund, on the last day of trading during the
period. The value on the date of initial deposit (October 20,
1993) represents the cost of investments to the Trust based on the
offering side evaluations and the net asset value per share, of
the Treasury Obligations and Fund Shares, respectively, as of the
close of business on the date of initial deposit. The cost of
investments purchased subsequent to the date of initial deposit is
based on the offering side evaluations and the net asset value per
share, respectively, at the date of purchase. The difference
between the initial cost and face amount of the Treasury
Obligations at the date of purchase is being amortized over the
period to its maturity date using the interest method.
(3) Income Taxes
As a Unit Investment Trust, the Trust is organized as a Grantor
Trust and is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision is required
for such taxes.
(4) Expenses
The Trust pays an annual Trustee's fee, estimated expenses,
Evaluator's fees, and an annual Sponsor's portfolio supervision
fee, and may incur additional charges as explained under "Expenses
and Charges" in Part B of this Prospectus.
A-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1995
(5) Investment Income
Included in dividends is a short-term capital gain distribution
received of $848,930.
(b) DISTRIBUTIONS
Distributions from the income and principal accounts, if any, received
by the Trust are made to Unit Holders on a quarterly basis and
distributions of any net capital gains received in respect of Fund
Shares will be made at least annually to Unit Holders of record.
Income from the amortization of original issue discount on the Zero
Coupon Treasury Obligations will not be distributed on a current basis.
Upon termination of the Trust, the Trustee will distribute, upon
surrender of Units for cancellation, to each Unit Holder his pro rata
share of the Trust's assets, less expenses, in the manner set forth
under "Amendment and Termination of the Trust - Termination" herein.
(c) COST TO INVESTORS
<TABLE>
A reconciliation of the cost of Units to investors to the net amount
applicable to investors as of September 30, 1995 follows:
<S> <C>
Cost to investors $103,767,456
Less: Gross underwriting commissions (sales charge) (5,176,049)
Net cost to investors 98,591,407
Cost of securities sold or redeemed (27,456,681)
Net unrealized market appreciation 2,725,172
Accumulated interest accretion 6,020,274
Net amount applicable to investors $ 79,880,172
</TABLE>
A-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1995
(d) OTHER INFORMATION
<TABLE>
<CAPTION>
Selected data for a Unit of the Trust during the period:
For the period from
Year Ended October 20, 1993
September 30, (date of deposit)
1995 to September 30, 1994
<S> <C> <C>
Capital gain distri-
butions received
during period $ .4340 $ .0580
Principal distri-
butions during
period $ .3336 $ .0572
Net investment income
distributions during
period $ .2098 $ .0309
Net asset value at
end of period $12.9124 $11.1801
Trust Units outstanding at
end of period 6,190,000 8,060,000
</TABLE>
A-7
<PAGE>
<TABLE>
SCHEDULE OF PORTFOLIO SECURITIES
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1995
<CAPTION>
Name of Issuer/Title of Portfolio Face Amount/ Market
Security <F1> Number of Shares Value<F4><F5>
<C> <S> <C> <C>
1. Stripped United States Treasury
Obligations Maturing on
November 15, 2008 <F2> $92,850,000 $39,066,637
2. Shares of the Templeton Growth
Fund, Inc. ($19.33 per
Fund Share) <F3> 2,111,409 40,813,535
$79,880,172
</TABLE>
See notes to Schedule of Portfolio Securities
A-8
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1995
<F1> None of the Securities is redeemable by operation of optional call
provisions.
<F2> The Zero Coupon Treasury Obligations have been purchased at a
discount from their par value because there is no stated interest
income thereon (such Securities are often referred to as zero
coupon Securities). Over the life of the Treasury Obligations
such discount accrues and upon maturity thereof the holders will
receive 100% of the Treasury Obligation maturity amount thereof.
<F3> The Fund's investment manager is Templeton, Galbraith & Hansberger,
Ltd.
<F4> The market value of the Treasury Obligations as of September 30, 1995
was determined by the Evaluator on the basis of bid side evaluations for the
Securities on the last trading date during the period (September 29, 1995).
The market value of the Fund Shares was calculated by multiplying the aggregate
number of shares by the current net asset value per share as of the same
date.
<F5> At September 30, 1995, the net unrealized market appreciation of
Securities was comprised of the following:
Gross unrealized market appreciation $4,876,181
Gross unrealized market depreciation (2,151,009)
Net unrealized market appreciation $2,725,172
The amortized cost of the Securities for Federal income tax
purposes was $77,155,000 at September 30, 1995.
A-9
<PAGE>
GOVERNMENT SECURITIES EQUITY TRUST
SERIES 6
------------------------
THE TRUST
The Government Securities Equity Trust Series 6 (the ``Trust'' or ``GSET''
as the context requires) was created under the laws of the State of New York,
pursuant to a Trust Indenture and Agreement and a related Reference Trust
Agreement dated the Date of Deposit (collectively, the ``Indenture'')* among
Prudential Securities Incorporated (the ``Sponsor''), United States Trust
Company of New York (the ``Trustee'') and Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. (the ``Evaluator''). The Sponsor, Prudential
Securities Incorporated, is a wholly-owned, indirect subsidiary of The
Prudential Insurance Company of America.
The objectives of the Trust are to attempt to obtain safety of capital
through investment in stripped United States Treasury issued notes or bonds
paying no current interest (the ``Treasury Obligations'') and to attempt to
provide for capital appreciation through investment in shares (``Fund Shares'')
of Templeton Growth Fund, Inc. (the ``Fund'') an open-end, diversified,
registered, management investment company. The Fund's investment objective is
long-term capital growth through a flexible policy of investing in stocks and
debt obligations of companies and governments of any nation (the Treasury
Obligations and Fund Shares hereinafter, collectively, referred to as
``Securities''). There is of course no guarantee that the Trust's objectives
will be achieved.
Trust Formation
On the Date of Deposit, the Sponsor deposited with the Trustee the
underlying Securities or confirmations of contracts for the purchase of such
Securities at prices equal to the evaluation of the Treasury Obligations on the
offering side of the market on the Date of Deposit as determined by the
Evaluator and the net asset value of the Fund Shares. The Trust was created
simultaneously with the deposit of the Securities with the Trustee and the
execution of the Indenture. The Trustee then immediately delivered to the
Sponsor certificates of beneficial interest (the ``Certificates'') representing
the units (the ``Units'') comprising the entire ownership of the Trust. Through
this Prospectus, the Sponsor is offering the Units for sale to the Public. The
holders of Units (the ``Unit Holder'' or ``Unit Holders'' as the context
requires) will have the right to have their Units redeemed at a price based on
the aggregate bid side evaluation of the Treasury Obligations as determined by
the Evaluator and the net asset value of the Fund Shares (the ``Redemption
Price''), if the Units cannot be sold in the secondary market which the Sponsor,
although not obligated to, presently intends to maintain. The Trust has a
mandatory termination date set forth under ``Summary of Essential Information,''
but may be terminated prior thereto upon the occurrence of certain events (see
``Amendment and Termination of the Indenture--Termination''), including a
reduction in the value of the Trust below the value set forth under ``Summary
of Essential Information.''
With the deposit of the Securities in the Trust on the Date of Deposit, the
Sponsor established a percentage relationship between the maturity amounts of
Treasury Obligations and the number of Fund Shares in the Portfolio. Subsequent
to the initial deposit of Securities on the Date of Deposit, the Sponsor may,
but is not obligated to, deposit additional Securities (including contracts
together with an irrevocable letter of credit for the purchase thereof) in the
Trust, to receive in exchange therefor additional Units and to offer such Units
to the public by means of this Prospectus. A subsequent deposit by the Sponsor
of Treasury Obligations and Fund Shares will maintain the proportionate
relationship between the maturity amount of Treasury Obligations and the number
of Fund Shares immediately prior to such deposit; the deposited Treasury
Obligations will be substantially identical to those held in the Trust
immediately prior to the subsequent deposit. Each Unit owned by each Unit Holder
will represent the same proportionate interest in the Trust. As additional Units
are issued by the Trust as a result of the deposit of additional Securities by
the Sponsor, the aggregate value of the Securities in the Trust will be
increased and the fractional undivided interest in the Trust represented by each
Unit will be decreased.
On a recent date, each Unit represented the fractional undivided
interest in the Securities and net income of the Trust set forth under ``Summary
of Essential Information.'' The Trust Portfolio has been structured so that a
Unit Holder will receive, at the Mandatory Termination Date of the Trust, an
amount per Unit at least equal to $15.00 even if the value of the Fund Shares
were to decline to zero. Of course, whether or not a Unit Holder makes a profit
or suffers a loss depends
- ------------
* Reference is hereby made to said Indenture and any statements contained herein
are qualified in their entirety by the provisions of said Indenture.
B-1
<PAGE>
on whether his purchase price was less than or exceeded
$15.00 per Unit. A Unit Holder selling his Units prior to the Mandatory
Termination date may suffer a loss to the extent the sale price of his Units is
less than the purchase price. Because certain of the Securities from time to
time may be sold under circumstances described herein and because additional
Securities may be deposited into the Trust from time to time, the Trust is not
expected to retain its present size and composition. If any Units are redeemed
by the Trustee, the number of Securities in the Trust will be reduced by an
amount allocable to redeemed Units and the fractional undivided interest in such
Trust represented by each unredeemed Unit will be increased. Units will remain
outstanding until redeemed upon tender to the Trustee by any Unit Holder (which
may include the Sponsor) or until the termination of the Trust pursuant to the
Indenture.
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units, if Units are available
to fill orders on the day that such price is set. If Units are not available or
are insufficient to fill the order (e.g., if demand for Units exceeds the Units
available for sale and the Sponsor is not yet able to create additional Units)
the investor's order will be rejected by the Sponsor. The number of Units
available may be insufficient to meet demand because of the Sponsor's inability
to or decision not to purchase and deposit Treasury Obligations of the required
type and/or Fund Shares in amounts sufficient to maintain the proportionate
relationship between maturity values of Treasury Obligations and numbers of Fund
Shares of the Fund required to create additional Units. The Sponsor may, if
unable to accept orders on any given day, offer to execute the order as soon as
sufficient Units can be created. An investor will be deemed to place a new order
for that number of Units each day until that order is accepted. The investor's
order will then be executed, when Units are available, at the Public Offering
Price next calculated after such continuing order is accepted. The investor
will, of course, be able to revoke his purchase offer at any time prior to
acceptance by the Sponsor. The Sponsor will execute orders to purchase in the
order it determines that they are received, i.e., orders received first will be
filled first except that indications of interest prior to the effectiveness of
the registration of the offering of trust Units which become orders upon
effectiveness will be accepted according to the order in which the indications
of interest were received.
Neither the Sponsor nor any affiliate of the Sponsor will be liable in any
way for any default, failure or defect in any Securities.
Securities Selection
In selecting Treasury Obligations for deposit in the Trust, the following
factors, among others, were considered by the Sponsor: (i) the prices and yields
of such securities and (ii) the maturities of such securities. In selecting the
Fund Shares for deposit in the Trust, the following factors, among others, were
considered by the Sponsor: (i) the historical performance of the Fund and (ii)
the nature of the underlying Fund portfolio.
The Trust consists of such of the Securities listed under ``Schedule of
Portfolio Securities,'' herein as may continue to be held from time to time in
the Trust, newly deposited Securities meeting requirements for creation of
additional Units and undistributed cash receipts from the Fund and proceeds
realized from the disposition of Securities.
Stripped U.S. Treasury Obligations
The Treasury Obligations in the portfolio consist of United States Treasury
Obligations which have been stripped by the United States Treasury of their
unmatured interest coupons or such stripped coupons or receipts or certificates
evidencing such obligations or coupons. The obligor with respect to the Treasury
Obligations is the United States Government. Such Treasury Obligations may
include certificates that represent rights to receive the payments that comprise
a U.S. Government bond.
U.S. Treasury bonds evidence the right to receive a fixed payment at a
future date from the U.S. Government, and are backed by the full faith and
credit of the U.S. Government. The Treasury Obligations can be purchased at a
deep discount because the buyer receives only the right to receive one fixed
payment at a specific date in the future and does not receive any periodic
interest payments. The effect of owning deep discount obligations which do not
make current interest payments 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 the discount obligation. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income on such
obligations 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, the Treasury Obligations are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality which pay interest on
a current basis. Investors should be aware that income in respect of the
accrual of original issue discount on the Treasury Obligations, although not
distributed on a current basis, will be subject to income tax on a current
basis at ordinary income tax rates (see ``Tax Status of the Trust'').
B-2
<PAGE>
The following disclosure concerning the Fund and its affiliates has been
provided by Franklin Templeton Distributors, Inc. While the Sponsor has not
independently verified this information, it has no reason to believe that such
information is not correct in all material respects. No representation is made
herein as to the accuracy or adequacy of such information.
Templeton Growth Fund, Inc.
The portfolio of the Trust also contains Class I shares (the ``Fund
Shares'') of the Templeton Growth Fund, Inc. (the ``Fund''). On August 31, 1995,
the net assets of the Fund were $6,962,275,658. The Fund has retained an
investment manager, Templeton Global Advisors Limited (the ``Investment
Manager'').
The Fund's investment objective is long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments of any nation. Any income realized will be incidental.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount. Whenever, in the judgment of
the Investment Manager, market or economic conditions warrant, the Fund may, for
temporary defensive purposes, invest without limit in U.S. Government
securities, bank time deposits in the currency of any major nation and
commercial paper, and purchase from banks or broker-dealers Canadian or U.S.
Government securities with a simultaneous agreement by the seller to repurchase
them within no more than seven days at the original purchase price plus accrued
interest.
The Fund may invest no more than 5% of its total assets in securities issued
by any one company or government, exclusive of U.S. Government securities.
Although the Fund may invest up to 25% of its assets in a single industry, it
has no present intention of doing so. The Fund may not invest more than 5% of
its assets in warrants (exclusive of warrants acquired in units or attached to
securities) nor more than 10% of its assets in securities with a limited trading
market. The investment objective and policies described above, as well as most
of the investment restrictions which the fund is subject to, cannot be changed
without the approval of holders of Fund Shares (the ``Share-holders''). The Fund
invests for long-term growth of capital and does not intend to place emphasis
upon short-term trading profits. Accordingly, the Fund expects to have a
portfolio turnover rate of less than 50%.
The Fund may also purchase and sell stock index futures contracts up to an
aggregate amount not exceeding 20% of its total assets. In addition, in order to
increase its return or to hedge all or a portion of its portfolio investments,
the Fund may purchase and sell put and call options on securities indices. These
investment techniques are described below and under the heading ``Investment
Strategies and Restrictions'', below.
The Fund may be suitable for the patient investor interested in long-term
capital appreciation. The investor should be willing to accept the risks
associated with investments in domestic and international securities. The Fund
is designed primarily for capital appreciation. Providing current income is not
an objective of the Fund. Any income produced is expected to be minimal. An
investor should not consider a purchase of Fund Shares as equivalent to a
complete investment program.
The Chase Manhattan Bank, N.A. is the custodian of the Fund's assets.
Franklin Templeton Investor Services, Inc. serves as the Fund's dividend
disbursing and transfer agent. Templeton Global Investors, Inc. performs certain
administrative functions for the Fund. The Fund's prospectus is available upon
request.
General Information Regarding the Fund
The Fund intends normally to pay a dividend at least once annually
representing substantially all of its net investment income (which includes,
among other items, dividends and interest) and to distribute at least annually
any net realized capital gains. By so doing and meeting certain diversification
of assets and other requirements of the Internal Revenue Code of 1986, as
amended (the ``Code''), the Fund intends to qualify annually as a regulated
investment company under the Code. The status of the Fund as a regulated
investment company does not involve government supervision of management or of
its investment practices or policies. As a regulated investment company, the
Fund generally will be relieved of liability for United States Federal income
tax on that portion of its net investment income and net realized capital gains
which it distributes to its Shareholders. Amounts not distributed on a timely
basis in accordance with a calendar year distribution requirement also are
subject to a nondeductible 4% excise tax. To prevent application of the excise
tax, the Fund intends to make distributions in accordance with the calendar
year distribution requirement. Any dividend or distribution by the Fund has
the effect of reducing the net asset value per share on the ex-dividend date
by the amount of the dividend or distribution (See ``Net Asset Value of the
Fund Shares'').
B-3
<PAGE>
SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout the periods indicated)
Shown below for the periods indicated are per share income and capital
changes for a share outstanding throughout the periods indicated (``per share
information'') of the Fund.
<TABLE>
<CAPTION>
Year Ended August 31,
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (net of foreign tax
withheld)........................... $ .57 $ .47 $ .48 $ .54 $ .56 $ .67 $ .67 $ .54
-------- -------- -------- -------- -------- -------- -------- --------
Operating expenses (excluding taxes on
income)............................. .18 .18 .16 .13 .11 .10 .09 .09
Income taxes.......................... -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total expenses........................ .18 .18 .16 .13 .11 .10 .09 .09
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income................. .39 .29 .32 .41 .45 .57 .58 .45
Dividends from net investment
income.............................. (.29) (.27) (.36) (.44) (.54) (.62) (.48) (.44)
Net realized and unrealized gain
(loss).............................. 1.20 2.58 2.97 .92 1.68 (.87) 3.12 (2.41)
Distributions from net realized
capital gains....................... (1.29) (1.12) (1.27) (1.22) (.68) (.47) (.25) (1.08)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset
value............................... .01 1.48 1.66 (.33) .91 (1.39) 2.97 (3.48)
Net asset value at beginning of
period.............................. 18.95 17.47 15.81 16.14 15.23 16.62 13.65 17.13
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value at end of period...... $ 18.96 $ 18.95 $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Ratio to average net assets:
Operating expense (excluding taxes
on income)........................ 1.12% 1.10% 1.03% 0.88% 0.75% 0.67% 0.66% 0.69%
Total expenses (including taxes on
income) 1.12% 1.10% 1.03% 0.88% 0.75% 0.67% 0.66% 0.69%
Net investment income............... 2.40% 1.76% 2.10% 2.62% 3.09% 3.70% 4.20% 3.50%
Portfolio turnover rate............... 35.21% 27.35% 28.89% 24.46% 30.28% 18.47% 11.55% 11.44%
Number of shares outstanding at end of
period (000's)...................... 367,397 296,190 230,953 206,707 179,455 162,005 141,682 115,192
<CAPTION>
Pro Forma*
------------
Eight Eight
Months Months
Ended Ended
August 31, December 31,
1987 1986
---------- ------------
<S> <C> <C>
Investment income (net of foreign tax
withheld)........................... $ .35 $ .31
---------- ------------
Operating expenses (excluding taxes on
income)............................. .06 .05
Income taxes.......................... -- .12
---------- ------------
Total expenses........................ .06 .17
---------- ------------
Net investment income................. .29 .14
Dividends from net investment
income.............................. -- (.40)
Net realized and unrealized gain
(loss).............................. 3.97 .28
Distributions from net realized
capital gains....................... -- (.48)
---------- ------------
Net increase (decrease) in net asset
value............................... 4.26 (.46)
Net asset value at beginning of
period.............................. 12.87 13.33
---------- ------------
Net asset value at end of period...... $ 17.13 $ 12.87
---------- ------------
---------- ------------
Ratio to average net assets:
Operating expense (excluding taxes
on income)........................ 0.66%(D 0.83%(D)
Total expenses (including taxes on
income) 0.66%(D) 2.40%(D)
Net investment income............... 2.99%(D) 1.76%(D)
Portfolio turnover rate............... 17.55% 9.50%
Number of shares outstanding at end of
period (000's)...................... 95,376 86,022
</TABLE>
- ------
* The Fund commenced operations on December 31, 1986 as successor in
interest to 58% of Templeton Growth Fund, Ltd. (the ``Canadian Fund'') which
reorganized into two funds on that date. In accordance with the terms of the
reorganization, the Canadian shareholders, representing 42% of the shares
outstanding, remained shareholders of the Canadian Fund and the non-Canadian
shareholders, representing 58% of the shares outstanding, became shareholders
of the Fund. The per share table is presented as if the reorganization took
place as of the inception of the Canadian Fund, 58% of the net assets and
shares outstanding were allocated to the Fund and the Fund continued to
operate in Canada subject to canadian federal and provincial taxes until
December 31, 1986. No other pro forma adjustments have been made for any
changes in operating costs had the reorganization taken place at that date.
Since the table is on the basis of a single share outstanding throughout the
period, the results illustrated, except for the number of shares outstanding
at the end of each year, are the same as those shown for the Canadian Fund.
(D) Annualized.
B-4
<PAGE>
Investment Strategies and Restrictions
Strategies
In pursuit of its objective and policies, the Fund may employ one or more of
the following investment strategies. The application of the Fund's investment
policy will be dependent upon the judgment of the Investment Manager. In
accordance with the judgment of the Investment Manager, the proportions of the
Fund's assets invested in particular industries and countries will vary from
time to time.
In addition, from time to time, the Fund may also engage in the following
investment techniques:
Repurchase Agreements. When the Fund acquires a security from a U.S. bank or
a registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate of the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the seller should
default on its obligation to repurchase the underlying security, the Fund may
experience delay or difficulty in exercising its rights to realize upon the
security and might incur a loss if the value of the security declines, as well
as costs in liquidating the security.
Options on Indices. The Fund may purchase and write (i.e., sell) put and
call options on securities indices that are traded on United States and foreign
exchanges or in the over-the-counter markets. An option on a securities index
permits the purchaser of the option, in return for the premium paid, the right
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may write a
put or a call option only if the option is ``covered.'' This means that so long
as the Fund is obligated as the writer of an option, it will maintain with its
custodian cash or cash equivalents equal to the contract value (in the case of
call options) or exercise price (in the case of put options). The Fund will not
purchase put or call options if the aggregate premium paid for such options
would exceed 5% of its total assets.
Stock Index Futures Contracts. For hedging purposes only, the Fund may
purchase and sell stock index futures contracts up to an aggregate amount not
exceeding 20% of its total assets. A stock index futures contract is an
agreement under which two parties agree to take or make delivery of an amount of
cash based on the difference between the value of a stock index at the beginning
and at the end of the contract period. When the Fund enters into a stock index
futures contract, it must make an initial deposit, known as ``initial margin,''
as a partial guarantee of its performance under the contract. As the value of
the stock index fluctuates, either party to the contract is required to make
additional margin deposits, known as ``variation margin'' to cover any
additional obligation it may have under the contract. In addition, when the Fund
enters into a futures contract, it will segregate assets or ``cover'' its
position in accordance with the 1940 Act. The Fund may not at any time commit
more than 5% of its total assets to initial margin deposits on futures
contracts.
Loans of Portfolio Securities. The Fund may lend to banks and broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets to generate income. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities loaned.
The Fund may terminate the loans at any time and obtain the return of the
securities loaned within five business days. The Fund will continue to receive
any interest or dividends paid on the loaned securities and will continue to
retain any voting rights with respect to the securities.
Investment Restrictions. The Fund has imposed upon itself certain Investment
Restrictions, which together with the investment objective and policies are
fundamental policies except as otherwise indicated. No changes in the Fund's
investment objective and policies or Investment Restrictions (except those which
are not fundamental policies) can be made without approval of the Shareholders.
For this purpose, the provisions of the 1940 Act require the affirmative vote of
the lesser of either (A) 67% or more of the Shares present at a Shareholders'
meeting at which more than 50% of the outstanding Shares are present or
represented by proxy or (B) more than 50% of the outstanding Shares of the Fund.
In accordance with these Restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate (although the Fund
may invest in marketable securities secured by real estate or interests
therein or issued by companies or investment trusts which invest in real
estate or interests therein); invest in interests (other than debentures or
equity stock interests) in oil, gas or other mineral
B-5
<PAGE>
<PAGE>
exploration or development programs; purchase or sell commodity contracts
except stock index futures contracts; invest in other open-end investment
companies or, as an operating policy approved by the Board of Directors,
invest in closed-end investment companies.
2. Purchase or retain securities of any company in which Directors or
Officers of the Fund or of its Investment Manager, individually owning more
than 1/2 of 1% of the securities of such company, in the aggregate own more
than 5% of the securities of such company.
3. Purchase more than 10% of any class of securities of any one
company, including more than 10% of its outstanding voting securities, or
invest in any company for the purpose of exercising control or management.
4. Act as an underwriter; issue senior securities; purchase on margin
or sell short; write, buy or sell puts, calls, straddles or spreads (but the
Fund may make margin payments in connection with, and purchase and sell,
stock index futures contracts and options on securities indices).
5. Loan money, apart from the purchase of a portion of an issue of
publicly distributed bonds, debentures, notes and other evidences of
indebtedness, although the Fund may buy Canadian and United States
Government obligations with a simultaneous agreement by the seller to
repurchase them within no more than seven days at the original purchase pace
plus accrued interest.
6. Borrow money for any purpose other than redeeming its Shares or
purchasing its Shares for cancellation, and then only as a temporary measure
to an amount not exceeding 5% of the value of its total assets, or pledge,
mortgage, or hypothecate its assets to secure such temporary borrowings, and
then only to such extent not exceeding 10% of the value of its total assets
as the Board of Directors of the Fund may by resolution approve. (For the
purposes of this Restriction, collateral arrangements with respect to margin
for stock index futures contracts are not deemed to be a pledge of assets.)
7. Invest more than 5% of the value of the Fund's total assets in
securities of issuers which have been in continuous operation less than
three years.
8. Invest more than 5% of the Fund's total assets in warrants, whether
or not listed on the New York or American Stock Exchange, including no more
than 2% of its total assets which may be invested in warrants that are not
listed on those exchanges. Warrants acquired by the Fund in units or
attached to securities are not included in this Restriction. This
Restriction does not apply to options on securities indices.
9. Invest more than 15% of the Fund's total assets in securities of
foreign issuers that are not listed on a recognized United States or foreign
securities exchange, including no more than 10% of its total assets
(including warrants) which may be invested in securities with a limited
trading market. The Fund's position in the latter type of securities may be
of such size as to affect adversely their liquidity and marketability and
the Fund may not be able to dispose of its holdings in these securities at
the current market price.
10. Invest more than 25% of the Fund's total assets in a single
industry.
11. Invest in ``letter stocks'' or securities on which there are sales
restrictions under a purchase agreement.
12. Participate on a joint or a joint and several basis in any trading
account in securities.
Whenever any investment policy or Investment Restriction states a maximum
percentage of the Fund's assets which may be invested in any security or other
property, it is intended that such maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of such security or
property. The value of the Fund's assets is calculated as described below under
the heading ``Net Asset Value of the Fund Shares.'' Nothing in the investment
policies or Investment Restrictions (except Restrictions 9 and 10) shall be
deemed to prohibit the Fund from purchasing securities pursuant to subscription
rights distributed to the Fund by any issuer of securities held at the time in
its portfolio (as long as such purchase is not contrary to the Fund's status as
a diversified investment company under the 1940 Act).
Net Asset Value of the Fund Shares
The net asset value of the Fund Shares is computed as of the close of
trading on each day the New York Stock Exchange is open for trading (generally
4:00 P.M., New York time), by dividing the value of the Fund's securities plus
any cash and other assets (including accrued interest and dividends receivable)
less all liabilities (including accrued expenses) by the number of Fund Shares
outstanding, adjusted to the nearest whole cent. A security listed or traded on
a recognized
B-6
<PAGE>
stock exchange or NASDAQ is valued at its last sale price on the principal
exchange on which the security is traded. The value of a foreign security is
determined in its national currency as of the close of trading on the foreign
exchange on which it is traded, or as of the closing time of the New York Stock
Exchange, if that is earlier, and that value is then converted into its U.S.
dollar equivalent at the foreign exchange rate in effect at noon, New York time,
on the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked price is used.
Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange, and will therefore not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at fair value as determined by the management and approved in good faith
by the Board of Directors of the Fund. All other securities for which
over-the-counter market quotations are readily available are valued at the mean
between the current bid and asked price. Securities for which market quotations
are not readily available and other assets are valued at fair value as
determined by the management and approved in good faith by the Board of
Directors of the Fund.
The Fund's Investment Manager
The Fund is managed by its Board of Directors and all powers are exercised
by or under authority of the Board.
The Investment Manager of the Fund is Templeton Global Advisors Limited,
Nassau, Bahamas. The Investment Manager is an indirect wholly owned subsidiary
of Franklin Resources, Inc. (``Franklin''). Through its subsidiaries, Franklin
is engaged in various aspects of the financial services industry.
The Investment Manager furnishes the Fund with investment research, advice
and supervision. The Investment Manager does not furnish any overhead items or
facilities for the Fund, although such expenses are paid by some investment
advisers of other investment companies. As compensation for its services, the
Fund pays the Investment Manager a fee, equal on an annual basis to 0.75% of the
average daily net assets of the Fund up to $200 million, reduced to 0.675% of
such net assets in excess of $200 million and further reduced to 0.60% of such
net assets in excess of $1,300 million.
The Investment Manger performs similar services for other funds and accounts
and there may be times when the actions taken with respect to the Fund's
portfolio will differ from those taken by the Investment Manager on behalf of
other funds and accounts. Neither the Investment Manager and its affiliates, its
officers, directors or employees, nor the Officers and Directors of the Fund are
prohibited from investing in securities held by the Fund or other funds and
accounts which are managed or administered by the Investment Manager to the
extent such transactions comply with the Fund's Code of Ethics.
Templeton Global Investors, Inc. (the ``Business Manager'') provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax deferred retirement plans. For its
services, the Business Manager receives a fee equivalent to 0.15% of the average
daily net assets of the Fund during the year, reduced to 0.135% of such net
assets in excess of $200 million, to 0.10% of such assets in excess of $700
million, and to 0.075% of such assets in excess of $1,200 million.
The Fund's Plan of Distribution
The Fund, pursuant to Rule 12b-1 under the 1940 Act, has adopted a
Distribution Plan (the ``Plan''). Under the Plan, the Fund may reimburse the
principal underwriter monthly (subject to a limit of 0.25% per annum of the
Fund's average daily net assets) for Franklin Templeton Distributors, Inc.'s
(``Templeton Distributor'') costs and expenses in connection with any activity
which is primarily intended to result in the sale of Fund Shares. Payments to
Templeton Distributor, could be for various types of activities, including (1)
payments to broker-dealers who provide certain services of value to the Fund's
Shareholders (sometimes referred to as a ``trail fee''); (2) reimbursement of
expenses relating to selling and servicing efforts or of organizing and
conducting sales seminars; (3) payments to employees or agents of the principal
underwriter who engage in or support distribution of Shares; (4) payments of the
costs of preparing, printing and distributing prospectuses and reports to
prospective investors and of printing and advertising expenses; (5) payment of
dealer commissions and wholesaler compensation in connection with sales of Fund
Shares exceeding $1 million (on which the Fund imposes no initial sales charge)
and interest or carrying charges in connection therewith; and (6) such other
similar services as the Fund's Board of Trustees determines to be reasonably
calculated to result in the sale of Shares. Under the Plan, the costs and
expenses not reimbursed in any one given month (including costs and expenses not
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reimbursed because they exceed the limit of 0.25% per annum of the Fund's
average daily net assets) may be reimbursed in subsequent months or years. As of
August 31, 1995 the Fund had no 12b-1 fee carryforward. Pursuant to an exemptive
order application issued by the Securities and Exchange Commission the Sponsor
has agreed to pay to the Trust the 12b-1 fees it receives from Templeton
Distributor with respect to the Fund Shares held by the Trust. Fund Shares held
directly by an investor (other than the Trust) including Fund Shares purchased
pursuant to ``Reinvestment of Trust Distributions'' will, however, be subject to
12b-1 fees (see ``Reinvestment of Trust Distributions'').
Risk of Investment in Units
The Securities and Exchange Commission has issued an exemptive order
pursuant to which Fund Shares will be deposited by the Sponsor in the Trust. In
the application for such order, the Sponsor has agreed to take certain steps to
ensure that the Trust's investment in Fund Shares is equitable to all parties
and particularly that the interests of the Unit Holders are protected.
Accordingly, any sales charges which would otherwise be applicable will be
waived on Fund Shares sold to the Trust, since the Sponsor is receiving the
sales charge on all Units sold. In addition, the Indenture requires the Trustee
to vote all Fund Shares held in the Trust in the same manner and ratio on all
proposals as the vote of owners of Fund Shares not held by the Trust.
The Fund's Shares may appreciate or depreciate in value (or pay dividends)
depending on the full range of economic and market influences affecting the
securities in which the Fund is invested and the success of the Fund's
management in anticipating or taking advantage of such opportunities as may
occur. In addition, in the event of the inability of the Investment Manager to
act and/or claims or actions against the Fund by regulatory agencies or other
persons or entities, the value of the Fund Shares may decline thereby causing a
decline in the value of Units. Termination of the Fund prior to the Termination
Date of the Trust may result in the termination of the Trust sooner than
anticipated. Prior to a purchase of Units, investors should determine that the
aforementioned risks are consistent with their investment objectives.
Fund Risk Factors
All Fund Investments involve risk and there can be no guarantee against loss
resulting from an investment in the Fund, nor can there be any assurance that
the Fund's investment objective will be attained. As with any investment in
securities, the value of, and income from, an investment in the Fund can
decrease as well as increase, depending on a variety of factors which may affect
the values and income generated by the Fund's portfolio securities, including
general economic conditions, market factors and currency exchange rates.
Additionally, investment decisions made by the Investment Manager will not
always be profitable or prove to have been correct. The Fund is not intended as
a complete investment program.
Successful use of stock index futures contracts and options on securities
indices by the Fund is subject to certain special risk considerations. A liquid
stock index option or futures market may not be available when the Fund seeks to
offset adverse market movements. In addition, there may be an imperfect
correlation between movements in the securities included in the index and
movements in the securities in the Fund's portfolio. Successful use of stock
index futures contracts and options on securities indices is further dependent
on the Investment Manager's ability to predict correctly movements in the
direction of the stock markets and no assurance can be given that its judgment
in this respect will be correct.
The Fund has the right to purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investment in
securities of issuers in foreign nations. Some countries may withhold portions
of interest and dividends at the source. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
United States companies. Further, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Further, the settlement
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period of securities transactions in foreign markets may be longer than in
domestic markets. In many foreign countries, there is less government
supervision and regulation of business and industry practices, stock exchanges,
brokers and listed companies than in the United States. The foreign securities
markets of many of the countries in which the Fund may invest may also be
smaller, less liquid, and subject to greater price volatility than those in the
United States.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to Fund Shareholders.
The Fund considers at least annually the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Fund's assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Fund also considers the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories. No assurance can be given that the Fund's appraisal of
the risks will always be correct or that such exchange control restrictions or
political acts of foreign governments might not occur.
The Fund is authorized to invest in medium quality or high risk, lower
quality debt securities that are rated between BBB and as low as CCC by Standard
& Poor's Corporation (``S&P'') and between Baa and as low as Caa by Moody's
Investors Service, Inc. (``Moody's'') or, if unrated, are of equivalent
investment quality as determined by the Investment Manager. As an operating
policy, which may be changed by the Board of Directors without shareholder
approval, the Fund will not invest more than 5% of its total assets in debt
securities rated BBB or lower by S&P or Baa or lower by Moody's. The Board may
consider a change in this operating policy if, in its judgment, economic
conditions change such that a higher level of investment in high risk, lower
quality debt securities would be consistent with the interests of the Fund and
its Shareholders. High risk, lower quality debt securities, commonly referred to
as ``junk bonds,'' are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation and may be in default. Unrated debt
securities are not necessarily of lower quality than rated securities but they
may not be attractive to as many buyers. Regardless of rating levels, all debt
securities considered for purchase (whether rated or unrated) will be carefully
analyzed by the Investment Manager to ensure, to the extent possible, that the
planned investment is sound. The Fund may, from time to time, purchase defaulted
debt securities if, in the opinion of the Investment Manager, the issuer may
resume interest payments in the near future. The Fund will not invest more than
10% of its total assets in defaulted debt securities, which may be illiquid.
The Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. However,
some price spread on currency exchange (to cover service charges) will be
incurred when the Fund converts assets from one currency to another.
The Fund may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Through the Fund's flexible policy, management endeavors to avoid
unfavorable consequences and to take advantage of favorable developments in
particular nations where, from time to time, it places the Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
There are additional risks involved in stock index futures transactions.
These risks relate to the Fund's ability to reduce or eliminate its futures
positions, which will depend upon the liquidity of the secondary markets for
such futures. The Fund intends to purchase or sell futures only on exchanges or
boards of trade where there appears to be an active secondary market, but there
is no assurance that a liquid secondary market will exist for any particular
contract or at any particular time. Use of stock index futures for hedging may
involve risks because of imperfect correlations between movements in the prices
of the stock index futures on the one hand and movements in the prices of the
securities being hedged or of the underlying stock index on the other.
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There are several risks associated with transactions in options on
securities indices. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. If the Fund were unable to close out an option
that it had purchased on a securities index, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If
trading were suspended in an option purchased by the Fund, it would not be able
to close out the option. If restrictions on exercise were imposed, the Fund
might be unable to exercise an option it has purchased. Except to the extent
that a call option on an index written by the Fund is covered by an option on
the same index purchased by the Fund, movements in the index may result in a
loss to the Fund; however, such losses may be mitigated by changes in the value
of the Fund's securities during the period the option was outstanding.
The net asset value of the Fund's Shares, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may be more or less
than the price paid therefor by the Trust. An investment in Units of the Trust
should be made with an understanding of the risks inherent in ownership of Fund
Shares. However, the Sponsor believes that, upon termination of the Trust on the
mandatory termination date, even if the Fund Shares are worthless, the Treasury
Obligations will provide sufficient cash at maturity to equal $15.00 per Unit.
Part of such cash will, however, represent the accrual of taxable original issue
discount on the Treasury Obligations.
A UNIT HOLDER PURCHASING A UNIT ON THE DATE OF THIS PROSPECTUS OR THEREAFTER
MAY RECEIVE TOTAL DISTRIBUTIONS, INCLUDING DISTRIBUTIONS MADE UPON TERMINATION
OF THE TRUST, THAT ARE LESS THAN THE AMOUNT PAID FOR A UNIT.
Sales of Securities in the Portfolio under certain permitted circumstances
may result in an accelerated termination of the Trust. It is also possible that,
in the absence of a secondary market for the Units or otherwise, redemptions of
Units may occur in sufficient numbers to reduce the portfolio to a size
resulting in such termination. In addition, the Trust may be terminated if the
net aggregate value of the Trust is less than 40% of the aggregate maturity
values of the Treasury Obligations calculated immediately after the most recent
deposit of Treasury Obligations in the Trust (see ``Amendment and
Termination--Termination''). Early termination of the Trust may have important
consequences to the Unit Holder; e.g., to the extent that Units were purchased
with a view to an investment of longer duration, the overall investment program
of the investor may require readjustment; or the overall return on investment
may be less than anticipated, and may result in a loss to a Unit Holder.
In the event of the early termination of the Trust, the Trustee will cause
the Fund Shares to be sold and the proceeds thereof distributed to the Unit
Holders in proportion to their respective interests therein, unless a Unit
Holder elects to receive Fund Shares ``in kind.'' (See ``Amendment and
Termination of the Indenture-Termination.'') Proceeds from the sale of the
Treasury Obligations will be paid in cash.
In the event of a notice that any Treasury Obligation will not be delivered
(``Failed Treasury Obligations''), the Sponsor is authorized under the Indenture
to direct the Trustee to acquire other Treasury Obligations (``Replacement
Treasury Obligations'') within a period ending on the earlier of the first
distribution of cash to Trust Unit Holders or 90 days after the Date of Deposit.
The cost of the Replacement Treasury Obligations may not exceed the cost of the
Treasury Obligations which they replace. Any Replacement Treasury Obligation
deposited in the Trust will be substantially identical to every Treasury
Obligation then in the Trust. Whenever a Replacement Treasury Obligation has
been acquired for the Trust, the Trustee shall, within 5 days thereafter, notify
Unit Holders of the acquisition of the Replacement Treasury Obligation.
In the event a contract to purchase Securities fails and Replacement
Treasury Obligations are not acquired, the Trustee will distribute to Unit
Holders the funds attributable to the failed contract. The Sponsor will, in such
case, refund the sales charge applicable to the failed contract. If less than
all the funds attributable to a failed contract are applied to purchase
Replacement Treasury Obligations, the remaining money will be distributed to
Unit Holders.
The Trustee will have no power to vary the investments of the Trust, i.e.,
the Trustee will have no managerial power to take advantage of market variations
to improve a Unit Holder's investment but may dispose of Securities only under
limited circumstances. (See ``Sponsor--Responsibility'').
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To the best of the Sponsor's knowledge there was no litigation pending as of
the Date of Deposit in respect of any Security which might reasonably be
expected to have a material adverse effect on the Trust. At any time after the
Date of Deposit, litigation may be instituted on a variety of grounds with
respect to the Securities. The Sponsor is unable to predict whether any such
litigation may be instituted, or if instituted, whether such litigation might
have a material adverse effect on the Trust.
The Units
On the Date of Deposit, each Unit represented a fractional undivided
interest in the Securities and the net income of the Trust set forth under
``Summary of Essential Information.'' Thereafter, if any Units are redeemed by
the Trustee, the amount of Securities in the Trust will be reduced by amounts
allocable to redeemed Units, and the fractional undivided interest represented
by each Unit in the balance will be increased, although the actual interest in
the Trust represented by each Unit will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by any Unit Holder (which
may include the Sponsor) or until the termination of the Trust itself (see
``Rights of Unit Holders-Redemption'' and ``Amendment and Termination of the
Indenture--Termination,'' herein).
TAX STATUS OF THE TRUST
In the opinion of Messrs. Cahill Gordon & Reindel, counsel for the Sponsor,
under existing law:
The Trust is not an association taxable as a corporation for United
States federal income tax purposes and income of the Trust will be treated
as income of the Unit Holders in the manner set forth below. Each Unit
Holder will be considered the owner of a pro rata portion of each asset of
the Trust under the grantor trust rules of Sections 671-678 of the Internal
Revenue Code of 1986, as amended (the ``Code'').
Each Unit Holder will be required to include in his gross income, as
determined for federal income tax purposes, original issue discount with
respect to his pro rata portion of the Treasury Obligations held by the
Trust at the same time and in the same manner as though the Unit Holder were
the direct owner of such pro rata portion. Each Unit Holder will be
considered to have received the distributions paid on his pro rata portion
of the Fund Shares held in the Trust (including such portion of such
distributions used to pay fees and expenses of the Trust) when such
distributions are received or deemed to be received by the Trust. An
individual Unit Holder who itemizes deductions will be entitled to an
itemized deduction for his pro rata share of fees and expenses paid by the
Trust as though such fees and expenses were paid directly by the Unit
Holder, but only to the extent that this amount together with the Unit
Holder's other miscellaneous deductions exceeds 2% of his adjusted gross
income. A corporate Unit Holder will not be subject to this 2% floor.
Each Unit Holder will have a taxable event when a Security is disposed
of (whether by sale, exchange, redemption, or payment at maturity) or when
the Unit Holder redeems or sells his Units. The total tax cost of each Unit
to a Unit Holder must be allocated among the assets held in the Trust in
proportion to the relative fair market values thereof on the date the Unit
Holder purchases his Units.
The tax basis of a Unit Holder with respect to his interest in a Treasury
Obligation will be increased by the amount of original issue discount thereon
properly included in the Unit Holder's gross income as determined for Federal
income tax purposes.
The amount of gain recognized by a Unit Holder on a disposition of Fund
Shares or Treasury Obligations by the Trust will be equal to the difference
between such Unit Holder's pro rata portion of the gross proceeds realized by
the Trust on the disposition and the Unit Holder's tax basis in his pro rata
portion of the Fund Shares or Treasury Obligations disposed of, determined as
described in the preceding paragraphs. Any such gain recognized on a sale or
exchange and any such loss will be capital gain or loss, except that gain or
loss recognized by a financial institution with respect to a Treasury Obligation
or by a dealer with respect to Fund Shares or Treasury Obligations will be
ordinary income or loss. Any capital gain or loss arising from the disposition
of a Unit Holder's pro rata interest in a Security will be long-term capital
gain or loss if the Unit Holder has held his Units and the Trust has held the
Security for more than one year. A capital loss due to sale or redemption of a
Unit Holder's interest with respect to Fund Shares held in the Trust will be
treated as a long term capital loss to the extent of any long term capital gains
derived by the Unit Holder from such interest if the Unit Holder has held such
interest for six months or less. The holding period for this purpose will be
determined by applying the rules of Sections 246(c)(3) and (4) of the Code.
Under the Code, net capital gain (i.e., the excess of net long-term capital gain
over net short-term capital loss) of individuals, estates and trusts is subject
to a maximum nominal
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tax rate of 28%. Such net capital gain may, however, result in a disallowance of
itemized deductions and/or affect a personal exemption phase-out.
If the Unit Holder sells or redeems a Unit for cash he is deemed thereby to
have disposed of his entire pro rata interest in all Trust assets represented by
the Unit and will have taxable gain or loss measured by the difference between
his per Unit tax basis for such assets, as described above, and the amount
realized.
Each Unit Holder's interest in each Treasury Obligation is treated as an
interest in an original issue discount obligation. The original issue discount
on each Treasury Obligation will be taxed as ordinary income for Federal income
tax purposes and will be equal to the excess of the maturity value of the Unit
Holder's interest in the Treasury Obligation over its cost to the Unit Holder. A
Unit Holder will be required to include in gross income for each taxable year a
portion of this original issue discount and will be subject to income tax
thereon even though the income is not distributed. Original issue discount is
treated for Federal income tax purposes as income earned under a constant
interest formula which takes into account the semi-annual compounding of accrued
interest, resulting in an increasing amount of original issue discount accruing
in each year.
A Unit Holder who is neither a citizen nor a resident of the United States
and is not a United States domestic corporation (a ``foreign Unit Holder'') will
not generally be subject to United States federal income taxes, including
withholding taxes, on his pro rata share of the original issue discount on the
Treasury Obligations held in the Trust, any gain from the sale or other
disposition of his, her or its pro rata interest in a Treasury Obligation or
Fund Share held in the Trust, any undistributed gain retained by the Fund and
designated by the Fund to be taken into account by its shareholders or any
capital gain dividend received by the Trust from the Fund, which original issue
discount is not effectively connected with the conduct by the foreign Unit
Holder of a trade or business within the United States and which gain is either
(I) not from sources within the United States or (II) not so effectively
connected, provided that;
(a) with respect to original issue discount (i) the Treasury Obligations
are in registered form and were issued after July 18, 1984, and (ii) the
foreign Unit Holder is not a controlled foreign corporation related (within
the meaning of Section 864(d)(4) of the Code) to The Prudential Insurance
Company of America;
(b) with respect to any U.S.-source capital gain, the foreign Unit
Holder (if an individual) is not present in the United States for 183 days
or more during his or her taxable year in which the gain was realized and so
certifies; and
(c) the foreign Unit Holder provides the required certifications
regarding (i) his, her or its status, (ii) in the case of U.S.-source
income, the fact that the original issue discount or gain is not effectively
connected with the conduct by the foreign Unit Holder of a trade or business
within the United States, and (iii) if determined to be required, the
controlled foreign corporation matter mentioned in clause (a)(ii) above.
Fund distributions paid to foreign Unit Holders either directly or through the
Trust and not constituting income effectively connected with the conduct of a
trade or business within the United States by the distributee will be subject to
United States federal withholding taxes at a 30% rate or a lesser rate
established by treaty unless the Fund distribution is a capital gain dividend.
Foreign Unit Holders should consult their own tax counsel with respect to United
States tax consequences of ownership of Units.
Each Unit Holder (other than a foreign Unit Holder who has properly provided
the certifications described in the preceding paragraph) will be requested to
provide the Unit Holder's taxpayer identification number to the Trustee and to
certify that the Unit Holder has not been notified that payments to the Unit
Holder are subject to back-up withholding. If the taxpayer identification number
and an appropriate certification are not provided when requested, a 31% back-up
withholding will apply.
The Fund has elected to qualify for and intends to remain qualified as a
regulated investment company under the Code and to meet applicable requirements
with respect to its gross income, diversification of holdings and distributions
so that the Fund (but not the Trust Unit Holders) will be relieved of Federal
income tax on the amounts distributed by the Fund to the Trust. Such
distributions may include taxable net investment income, net capital gain and
the unreinvested proceeds of sales of securities held by the Fund. It is also
possible for the Fund to retain net capital gains for investment, in which event
the Fund will be subject to federal income tax on the retained amount; but may,
as a regulated investment company, designate the retained amount as
undistributed capital gains in a notice to those persons who were its
shareholders (including the Trust and thus its Unit Holders) at the close of the
Fund's taxable year.
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If the Fund were to so retain any net capital gains for investment, its
shareholders (including Trust Unit Holders) (a) would be required to include in
gross income for tax purposes, as long-term capital gains, their proportionate
shares of the undistributed net capital gain of the Fund, and (b) would be
deemed to have paid their proportionate shares of the tax paid by the Fund on
the undistributed net capital gain so that the amount of tax deemed paid by each
such shareholder would be credited against the shareholder's United States
federal income tax liability and a refund could be claimed to the extent that
credits exceeded such liability. For United States federal income tax purposes,
the basis of shares of the Fund owned by a shareholder of the Fund (including a
Trust Unit Holder) would be increased by an amount equal to 65% of the amount of
undistributed capital gains required to be so included in computing such Fund
shareholder's long-term capital gains.
Capital gain distributions, if any, made by the Fund, as a regulated
investment company, are taxable as long-term capital gain, regardless of how
long the Fund shareholder (including a Trust Unit Holder) has held the Fund's
shares, and are not eligible for the dividends received deduction available to
corporations. Other dividend distributions by the Fund may, depending upon
circumstances, be eligible for such dividends received deduction, in whole or in
part.
Generally, dividends paid by the Fund, as a regulated investment company,
are treated as received by the Trust, and thus its Unit Holders, in the taxable
year in which the distribution is made by the Fund; however, any dividend
declared by the Fund in October, November or December of any calendar year,
payable to shareholders of record on a specified date in such a month and
actually paid during January of the following year, will be treated as received
on December 31 of the preceding year.
Non-taxable Fund distributions reduce the Unit Holder's tax cost basis with
respect to his interest in Fund Shares held by the Trust and are treated as a
gain from the sale of such interest if and to the extent that such distributions
exceed the tax cost basis of the Unit Holder with respect to his interest in
Fund Shares held by the Trust.
Income received by the Fund may be subject to withholding and other taxes
imposed by foreign jurisdictions. In some instances, these taxes are limited by
treaty between the United States and the relevant foreign jurisdiction. Treaty
benefits may be available to the Fund to the same extent as they would be to
individual U.S. shareholders. However, in some situations the Fund will be
eligible for such benefits only if it can establish that a minimum specified
percentage of the capital of the Fund is owned directly or indirectly by
individual residents or citizens of the United States.
If more than 50% of the value of the Fund's total assets at the close of a
taxable year for which the Fund qualifies as a regulated investment company
consists of stock or securities in foreign corporations and the Fund so elects,
the Fund will forego any claim to a deduction or credit for any foreign income
taxes paid or accrued during the taxable year by the Fund but the amount of such
taxes will be allowed as an addition to the Fund's dividends paid deduction for
such year. In such a case, each Fund shareholder (including a Trust Unit Holder)
is required to include in gross income and treat as paid by him his
proportionate share of such taxes and to treat as gross income from sources
within the respective foreign countries the sum of his proportionate share of
such taxes and the portion of any dividend paid by the Fund which represents
income derived from sources within foreign countries. The Fund expects to
qualify for and intends to make this election.
Each Fund shareholder (including a Trust Unit Holder) who is a citizen or
resident of the United States will be entitled either to (i) deduct the amount
of such foreign taxes (if in the case of a Fund shareholder who is an
individual, he itemizes deductions), or (ii) subject to applicable limitations,
credit the amount of such taxes against the Fund shareholder's U.S. federal
income tax liability. A Fund shareholder (including a Trust Unit Holder) who is
a non-resident alien individual or which is a foreign corporation will be
entitled to a deduction or credit of the foreign tax only if the income received
from the Fund is effectively connected with the conduct of a trade or business
within the United States. Fund shareholders should be aware that, for purposes
of computing applicable limitations on the foreign tax credit, dividends and
interest received by the Fund in respect of securities of foreign issuers are
expected to give rise to foreign source income but that gains from the sale or
exchange of such securities will be treated as U.S. source income. Because
availability of the foreign tax credit and application of the foreign tax credit
limitation depends on the particular circumstances of each Fund shareholder
(including a Trust Unit Holder) each Unit Holder should consult his own tax
adviser in this regard.
The Code places a floor of 2% of adjusted gross income on miscellaneous
itemized deductions, including investment expenses, of individuals (and estates
and trusts other than grantor trusts, to the extent provided in regulations).
The Code also directs the Secretary of the Treasury to issue regulations
prohibiting indirect deductions through a mutual fund or other pass-through
entity of amounts not allowable as a deduction under this rule if paid or
incurred directly by such an
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investor, but such regulations are not to apply to indirect deductions through a
``publicly offered regulated investment company,'' which the Fund is believed to
be. The 2% floor rule will, however, apply in any event to investment expenses
of the Trust, as opposed to the Fund, and affected Unit Holders should aggregate
such expenses with their other miscellaneous deductions in applying the 2% rule.
The Fund will file its 1996 information returns as a ``publicly offered
regulated investment company.'' The Trust cannot predict whether or not the Fund
will qualify as a ``publicly offered regulated investment company'' for 1996 or
any later year. The term ``publicly offered regulated investment company'' is
defined as meaning a regulated investment company the shares of which are
``continuously offered'' or regularly traded on an established securities market
or ``held by or for no fewer than 500 persons at all times during the taxable
year.''
In addition, under the Code, the allowable amount of certain itemized
deductions claimed by individual taxpayers, including investment expenses, is
subject to an overall limitation applicable to taxable years beginning on or
before December 31, 1996. The 1993 limitation applies to individual taxpayers
with adjusted gross income in excess of a $117,950 threshold amount ($58,975 for
a married taxpayer filing separately). The $117,950 (or $58,975) threshold
amount will be indexed for inflation after 1996. The overall limitation reduces
the otherwise allowable amount of the affected itemized deductions by the lesser
of (i) 3% of the adjusted gross income in excess of the threshold amount or (ii)
80% of the amount of the otherwise allowable affected itemized deductions. The
other limitations contained in the Code on the deduction of itemized expenses,
including the 2% floor described above, are applied prior to this overall
limitation.
The Code also imposes a 4% excise tax on untaxed undistributed income of
regulated investment companies. If the Fund distributes in each calendar year an
amount equal to the sum of at least 98% of its ordinary income for such calendar
year and 98% of its capital gain net income for the 12 month period ended on
October 31 of each calendar year (or on December 31 if the Fund qualifies to so
elect and does so) and distributes an amount equal to the 2% balances not later
than the close of the succeeding calendar year, the Fund will not be subject to
this 4% excise tax. For purposes of this excise tax, any net long-term capital
gain in excess of net short-term capital loss retained by the Fund for any
fiscal year ending on or before the close of the calendar year but designated as
undistributed capital gains taxable to shareholders as described above is
treated as if distributed to the Fund's shareholders.
The Fund may invest in passive foreign investment companies, various options
and futures contracts and hedging transactions and may be subject to foreign
currency fluctuations, all of which have unique Federal income tax consequences.
Such investments and currency fluctuations may affect the character, timing and
amount of gain or ordinary income to be recognized by persons holding Fund
Shares.
Interest paid by a Unit Holder other than a corporation on indebtedness
properly allocable to Units will be deductible as investment interest to the
extent permitted by Section 163(d) of the Code.
As of the end of each calendar year, the Trustee will furnish to each Unit
Holder an annual statement containing information relating to the dividends
(including capital gain dividends) received or deemed received, rebated 12b-1
fees received from the Sponsor, discount accrued on the Securities, the gross
proceeds received by the Trust from the disposition of any Security (resulting
from redemption or payment at maturity of any Security or the sale by the Trust
of any Security), and the fees and expenses paid by the Trust.
The foregoing discussion relates only to United States federal income taxes.
Unit Holders may be subject to state, local or foreign taxation.
Investors should consult their tax counsel for advice with respect to their
own particular tax situations.
RETIREMENT PLANS
Units in the Trust may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans.
Investors considering participation in any such plan should review the laws
specifically related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such plan.
B-14
<PAGE>
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price of the Units during the initial offering period is
computed by adding to the aggregate offering side evaluation of the Treasury
Obligations the aggregate net asset value of Fund Shares in the Trust, dividing
such sum by the number of Units outstanding and then adding a sales charge of
5.25% of the Public Offering Price (5.541% of the net amount invested). Money in
the Income and Principal Accounts other than money required to redeem previously
tendered Units will be added to the Public Offering Price.
After the initial public offering period, the Public Offering Price of the
Units will be computed by adding to the aggregate bid side evaluation of the
Treasury Obligations the aggregate net asset value of Fund Shares in the Trust,
dividing such sum by the number of Units outstanding and then adding a sales
charge of 5.25% of the Public Offering Price (5.541 % of the net amount
invested). Money in the Income and Principal Accounts other than money required
to redeem previously tendered Units will be added to the Public Offering Price.
The Public Offering Price on the date of this Prospectus or on any
subsequent date will vary from the Public Offering Price set forth in the
``Summary of Essential Information'' in accordance with fluctuations in the
value of the Treasury Obligations and net asset value of the Fund Shares in
the Trust.
The Public Offering Price shall be determined for the Trust by the Evaluator
in the following manner: the aggregate value of the Units shall be determined
during the initial offering period on the basis of the offering prices of the
Treasury Obligations (determined by the Evaluator) and the net asset value of
the Fund Shares as determined by Templeton Growth Fund, Inc., and following the
initial offering period on the basis of the bid prices for the Treasury
Obligations (determined by the Evaluator) and the net asset value of the Fund
Shares as determined by Templeton Growth Fund, Inc.
Public Distribution
During the initial public offering period (i) for Units issued on the Date
of Deposit and (ii) for additional Units issued after such date in respect of
additional deposits of Securities, Units will be distributed to the public by
the Sponsor and through dealers at the Public Offering Price, calculated on each
business day. The initial offering period is 30 days unless all Units are sold
prior thereto, whereupon the initial public offering period will terminate. The
initial public offering period may be extended by the Sponsor so long as
additional deposits are being made or Units remain unsold. Upon termination of
the initial offering period in each case unsold Units or Units acquired by the
Sponsor in the secondary market referred to below may be offered to the public
by this Prospectus at the then current Public Offering Price calculated daily.
The Sponsor intends to qualify Units in states selected by the Sponsor for
sale by the Sponsor and through dealers who are members of the National
Association of Securities Dealers, Inc. Sales to dealers will be made at prices
which include a concession of 68% per Unit, but subject to change from time to
time at the discretion of the Sponsor. (Such price does not include volume
purchase discounts, which are available only to non-dealer purchasers). The
Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
A dealer will receive a concession of 75% of the sales charge per Unit upon
a sale to such dealer of 40,000 or more Units.
Secondary Market
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units and to continuously offer to repurchase
Units from Unit Holders at the applicable Sponsor's Repurchase Price (see
``Summary of Essential Information''). The Sponsor's Repurchase Price is
computed by adding to the aggregate of the bid side evaluation of the Treasury
Obligations the net asset value of Fund Shares in the Trust, and cash on hand in
the Trust and dividends receivable on Fund Shares (other than cash deposited by
the Sponsor for the purchase of Securities) deducting therefrom amounts required
to redeem previously tendered Units and amounts required for distribution to
Unit Holders of record as of a date prior to the evaluation, accrued expenses
of the Trustee, Evaluator, and counsel, taxes and governmental charges, if any,
and any Reserve Account and then dividing the resulting sum by the number of
Units outstanding, as of the date of such computation. There is no sales charge
incurred when a Unit Holder sells Units back to the Sponsor. Any Units
repurchased by the Sponsor at the Sponsor's Repurchase Price may be reoffered
to the public by
B-15
<PAGE>
the Sponsor at the then current Public Offering Price. Any profit or loss
resulting from the resale of such Units will be for the account of the Sponsor.
If the supply of Units exceeds demand (or for any other business reason),
the Sponsor may, at any time, occasionally, from time to time, or permanently,
discontinue the repurchase of Units of this Series at the Sponsor's Repurchase
Price, without notice. In such event, although under no obligation to do so, the
Sponsor may, as a service to Unit Holders, offer to repurchase Units at the
``Redemption Price,'' a price based on the current bid prices for the Treasury
Obligations and the net asset value of the Fund Shares. Alternatively, Unit
Holders may redeem their Units through the Trustee.
Profit of Sponsor
The Sponsor receives a sales charge on the Units as indicated herein in the
chart below under ``Volume Discount.'' Templeton Distributor will reimburse the
Sponsor for expenses incurred by the Sponsor in connection with the creation of
the Trust and the offering of units of the Trust in an amount not to exceed
$300,000. On the sale of Units to dealers, the Sponsor will retain the
difference between the dealer concession and the sales charge (see ``Public
Distribution,'' herein).
The Sponsor may have also realized a profit (or sustained a loss) on the
deposit of the Treasury Obligations in the Trust representing the difference
between the cost of the Treasury Obligations to the Sponsor and the cost of the
Treasury Obligations to the Trust. The Sponsor will deposit all Fund Shares into
the Trust at net asset value. (For a description of such profit (or loss) and
the amount of such difference see ``Schedule of Portfolio Securities,'' herein.)
During the initial offering period, to the extent additional Units continue to
be issued and offered for sale to the public, the Sponsor may realize additional
profit (or sustain a loss) due to daily fluctuations in the offering prices of
the Treasury Obligations and in the net asset value of the Fund Shares in the
Trust and thus in the Public Offering Price of Units received by the Sponsor.
Cash, if any, received by the Sponsor from the Unit Holders prior to the
settlement date for purchase of Units or prior to the payment for Securities
upon their delivery may be used in the Sponsor's business to the extent
permitted by applicable regulations and may be of benefit to the Sponsor.
The Sponsor may also realize profits (or sustain losses) while maintaining a
secondary market in the Units, in the amount of any difference between the
prices at which the Sponsor buys Units and the prices at which the Sponsor
resells such Units or the prices at which the Sponsor redeems such Units, as the
case may be.
Volume Discount
Although under no obligation to do so, the Sponsor intends to permit volume
purchasers of Units to purchase Units at a reduced sales charge. The Sponsor may
at any time upon prior notice to Unit Holders change the amount by which the
sales charge is reduced, or may discontinue the discount altogether.
The sales charges for the Trust in the primary and secondary market will be
reduced pursuant to the following graduated scale for sales to any person of at
least 2,000 Units.
<TABLE>
<CAPTION>
Sales Charge, Primary
and Secondary Market
------------------------
Percent Percent
of Public of Net
Offering Amount
Number of Units Price Invested
---------------------------------------------------------------- ---------- --------
<S> <C> <C>
Less than 2,000 Units........................................... 5.25% 5.541%
2,000-7,999 Units............................................... 5.00% 5.263%
8,000-19,999 Units.............................................. 4.50% 4.712%
20,000-39,999 Units............................................. 4.00% 4.167%
40,000-79,999 Units............................................. 3.00% 3.092%
80,000 or more Units............................................ 2.00% 2.041%
</TABLE>
The reduced sales charges as shown on the chart above will apply to such
purchases of Units in any fourteen-day period which qualify for the volume
discount by the same person, including a partnership or corporation, other than
a dealer, in the amounts stated herein, and for this purpose, purchases of Units
of this Trust will be aggregated with concurrent purchases of Units of any other
trust that may be offered by the Sponsor.
Units held in the name of the purchaser's spouse or in the name of a
purchaser's child under the age of 21 are deemed for the purposes hereof to be
registered in the name of the purchaser. The reduced sales charges are also
applicable to a
B-16<PAGE>
<PAGE>
trustee or other fiduciary, including a partnership or corporation, purchasing
Units for a single trust estate or single fiduciary account.
Employee Discount
The Sponsor intends, at the discretion of the Sponsor, to permit employees
of Prudential Securities Incorporated and its subsidiaries and affiliates to
purchase Units of the Trust at a price based on the offering side evaluation of
the Treasury Obligations and the net asset value of Fund Shares in the Trust
plus a reduced sales charge of $5.00 per 100 Units, subject to a limit of 5% of
the Units.
EXCHANGE OPTION
Unit Holders may elect to exchange any or all of their Units of this Series
of the Government Securities Equity Trust for units of one or more of any other
series in the Prudential Securities Incorporated family of unit investment
trusts (except Series of Government Securities Equity Trust) or for any units of
any additional trusts that may from time to time be made available for such
exchange by the Sponsor (collectively referred to as the ``Exchange Trusts'').
Such units may be acquired at prices based on reduced sales charges per unit.
The purpose of such reduced sales charge is to permit the Sponsor to pass on to
the Unit Holder who wishes to exchange Units the cost savings resulting from
such exchange of Units. The cost savings result from reductions in the time and
expense related to advice, financial planning and operational expense required
for the Exchange Option.
Exchange Trusts may have different investment objectives; a Unit Holder
should read the prospectus for the applicable Exchange Trust carefully to
determine its investment objective prior to exercise of this option.
This option will be available provided the Sponsor maintains a secondary
market in both the Units of this series and units of the applicable Exchange
Trust and provided that units of the applicable Exchange Trust are available for
sale and are lawfully qualified for sale in the jurisdiction in which the Unit
Holder is a resident. While it is the Sponsor's present intention to maintain a
secondary market for the units of all such trusts, there is no obligation on its
part to do so. Therefore, there is no assurance that a market for units will in
fact exist on any given date on which a Unit Holder wishes to sell or exchange
his Units; thus there is no assurance that the Exchange Option will be available
to any Unit Holder. The Sponsor reserves the right to modify, suspend or
terminate this option at any time without further notice to Unit Holders. In the
event the Exchange Option is not available to a Unit Holder at the time he
wishes to exercise it, the Unit Holder will be immediately notified and no
action will be taken with respect to his Units without further instruction from
the Unit Holder.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to exchange his Units for one or more units of the Exchange Trusts.
If units of the applicable outstanding series of the Exchange Trust are at that
time available for sale, the Unit Holder may select the series or group of
series for which he desires his Units to be exchanged. The Unit Holder will be
provided with a current prospectus or prospectuses relating to each series in
which he indicates interest.
Units of the Exchange Trust trading in the secondary market maintained by
the Sponsor, if so maintained, will be sold to the Unit Holder at a price equal
to the evaluation price per unit of the securities in that portfolio and the
applicable sales charge of $15 per unit of the Exchange Trust. The reduced sales
charge for units of any Exchange Trust acquired during the initial offering
period for such units will result in a price for such units equal to the
offering side evaluation per unit of the securities in the Exchange Trust's
portfolio plus accrued interest plus a reduced sales charge of $25 per Exchange
Trust unit. The reduced sales charge for a unit holder of an Exchange Trust
exchanging into this series of Government Securities Equity Trust will be $.20
per Unit for Units purchased in the secondary market and $.30 per Unit for Units
purchased during the initial offering period. Exchange transactions will be
effected only in whole units; thus, any proceeds not used to acquire whole units
will be paid to the exchanging Unit Holder unless the Unit Holder adds the
amount of cash necessary to purchase one additional whole Exchange Trust unit.
Owners of units of any registered unit investment trust, other than
Prudential Securities Incorporated sponsored trusts, which was initially offered
at a minimum applicable sales charge of 3.0% of the public offering price
exclusive of any applicable sales charge discounts, may elect to apply the
cash proceeds of sale or redemption of those units directly to acquire units
of any Exchange Trust trading in the secondary market at the reduced sales
charge of $20 per Unit, subject to the terms and conditions applicable to the
Exchange Option. To exercise this option, the owner should notify his retail
broker. He will be given a prospectus of each series in which he indicates
interest, units of which are available. The
B-17
<PAGE>
Sponsor reserves the right to modify, suspend or terminate the option at any
time without further notice, including the right to increase the reduced sales
charge applicable to this option (but not in excess of $5 more per unit than
the corresponding fee then charged for a unit of an Exchange Trust which is
being exchanged).
For example, assume that a Unit Holder, who has three units of a Trust with
a 4.25% sales charge and a current price of $1,100 per unit, sells his units and
exchanges the proceeds for units of a series of an Exchange Trust with a current
price of $950 per unit and an ordinary sales charge of 4.25%. The proceeds from
the Unit Holder's units will aggregate $3,300. Since only whole units of an
Exchange Trust may be purchased under the Exchange Option, the Holder would be
able to acquire four units in the Exchange Trust for a total cost of $3,860
($3,800 for units and $60 for the $15 per unit sales charge) by adding an extra
$560 in cash. Were the Unit Holder to acquire the same number of units at the
same time in the regular secondary market maintained by the Sponsor, the price
would be $3,968.68 [$3,800 for the units and $168.68 for the 4.25% sales charge
(4.439% of the net amount invested)].
Federal Income Tax Consequences
An exchange of Units pursuant to the Exchange Option will constitute a
``taxable event'' under the Code, i.e., a Unit Holder will recognize gain or
loss at the time of the exchange except that upon exchange of Units of this
series of the Government Securities Equity Trust for units of any other series
of the Exchange Trusts which are grantor trusts for U.S. federal income tax
purposes the Internal Revenue Service may seek to disallow any loss incurred
upon such exchange to the extent that the underlying securities in each trust
are substantially identical and the purchase of units of an Exchange Trust takes
place less than thirty-one days after the sale of the Units. Unit Holders are
advised to consult their own tax advisors as to the tax consequences of
exchanging Units in their particular case. In particular, Unit Holders who
exchange Units of this series of the Government Securities Equity Trust for
units of any other series of Exchange Trusts within 91 days of acquisition of
the Units should consult their tax advisers as to the possible application of
Section 852(f) of the Code to the exchange.
REINVESTMENT OF TRUST DISTRIBUTIONS
Distributions by the Trust, if any, of dividend income received by the
Trust, 12b-1 fee amounts paid by the Sponsor, distributions of any net capital
gains received in respect of Fund Shares and proceeds of the sale of Fund Shares
not used to redeem Units will be made quarterly on or shortly after the
Quarterly Distribution Date to Unit Holders of record on the Quarterly Record
Date immediately preceding such Quarterly Distribution Date. A Unit Holder will
receive such amounts in cash unless such Unit Holder directs United States Trust
Company of New York, acting as distribution agent, to invest such amounts on
behalf of the participating Unit Holder in Fund Shares at such shares' net asset
value which shares will be subject to 12b-1 expenses. Investment in Fund Shares
is conditioned upon their lawful qualification for sale in the jurisdiction in
which the Unit Holder resides. There can be no assurance, however, that such
qualification will be obtained.
The appropriate prospectus will be sent to the Unit Holder. A Unit Holder's
election to participate in a reinvestment program will apply to all Units of the
Trust owned by such Unit Holder. The Unit Holder should read the prospectus for
the reinvestment program carefully before deciding to participate.
EXPENSES AND CHARGES
Initial Expenses
All expenses and charges incurred prior to or in the establishment of the
Trust were incurred by the Sponsor and Templeton Distributor.
Fees
The Trustee will receive for its services under the Indenture an annual fee
in the amount set forth in the ``Summary of Essential Information.''
For each evaluation of the Treasury Obligations in the Trust, the Evaluator
shall receive a fee as set forth in the ``Summary of Essential Information.''
The Trustee's fees and the Evaluator's fees are payable quarterly on or
before each Distribution Date from the Income Account, to the extent funds are
available therein and thereafter from the Principal Account. Any of such fees
B-18
<PAGE>
may be increased without approval of the Unit Holders in proportion to increases
under the classification ``All Services Less Rent'' in the Consumer Price Index
published by the United States Department of Labor. The Trustee also receives
benefits to the extent that it holds funds on deposit in various non-interest
bearing accounts created under the Agreement.
Other Charges
The following additional charges are or may be incurred by the Trust as more
fully described in the Indenture: (a) fees of the Trustee for extraordinary
services, (b) expenses of the Trustee (including legal and auditing expenses)
and of counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trust and
the rights and interests of the Unit Holders, (e) indemnification of the Trustee
for any loss, liability or expenses incurred by it in the administration of the
Trust without gross negligence, bad faith, willful misfeasance or willful
misconduct on its part or reckless disregard of its obligations and duties, (f)
indemnification of the Sponsor for any losses, liabilities and expenses incurred
in acting as Sponsor or Depositor under the Indenture without gross negligence,
bad faith, willful misfeasance or willful misconduct or reckless disregard of
its obligations and duties, (g) expenditures incurred in contacting Unit Holders
upon termination of the Trust and (h) to the extent then lawful, expenses
(including legal, auditing and printing expenses) of maintaining registration or
qualification of the Units and/or the Trust under Federal or State securities
laws subsequent to initial registration so long as the Sponsor is maintaining a
market for the Units. The accounts of the Trust will be audited not less
frequently than annually by independent public accountants selected by the
Sponsor. The cost of such audit will be an expense of the Trust.
The fees and expenses set forth herein are payable out of the Trust and when
paid by or owing to the Trustee are secured by a lien on the Trust. If the cash
dividend, capital gains distributions and 12b-1 fee payments made by the Sponsor
to the Trust are insufficient to provide for amounts payable by the Trust, the
Trustee has the power to sell Fund Shares (not Treasury Obligations) to pay such
amounts. To the extent Fund Shares are sold, the size of the Trust will be
reduced and the proportions of the types of Securities will change. Such sales
might be required at a time when Fund Shares would not otherwise be sold and
might result in lower prices than might otherwise be realized. Moreover, due to
the minimum amount in which Fund Shares may be required to be sold, the proceeds
of such sales may exceed the amount necessary for the payment of such fees and
expenses. If the cash dividends, capital gains distributions and 12b-1 fee
payments made by the Sponsor to the Trust and proceeds of Fund Shares sold after
deducting the ordinary expenses are insufficient to pay the extraordinary
expenses of the Trust the Trustee has the power to sell Treasury Obligations to
pay such extraordinary expenses.
B-19
<PAGE>
Government Securities Equity Trust
REINVESTMENT APPLICATION
I/We hereby authorize and direct The Chase Manhattan Bank (National
Association) to apply all distributions that I/we have elected to be reinvested
as a registered unitholder(s) of a Government Securities Equity Trust Series
towards the purchase of additional shares of the Templeton Growth Fund, Inc.
I/We hold Government Securities Equity Trust Series 6
(This Series can only reinvest into the Templeton Growth Fund, Inc.)
The authorization shall continue in effect until written notice of
revocation is given by the certificate holder or his personal representatives.
<TABLE>
<S> <C>
Name(s) in Which Unit Trust is Registered
Social Security or Tax Identification Number
Signature DATE
Signature of Joint Tenant (if any) DATE
My/Our Brokerage Firm Is:
My/Our Account Number Is:
</TABLE>
Forward application to: The Chase Manhattan Bank (National
Association)
P.O. Box 834
New York, NY 10003
B-20
<PAGE>
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates executed by the
Trustee and the Sponsor. Certificates are transferable or interchangeable upon
presentation at the corporate trust office of the Trustee, properly endorsed or
accompanied by an instrument of transfer satisfactory to the Trustee and
executed by the Unit Holder or his authorized attorney, together with the
payment of $2.00, if required by the Trustee (not currently required), or such
other amount as may be determined by the Trustee and approved by the Sponsor,
and any other tax or governmental charge imposed upon the transfer of
Certificates. The Trustee will replace any mutilated, lost, stolen or destroyed
Certificate upon proper identification, satisfactory indemnity and payment of
charges incurred. Any mutilated Certificate must be presented to the Trustee
before any substitute Certificate will be issued.
Certain Limitations
The death or incapacity of any Unit Holder will not operate to terminate the
Trust nor entitle the legal representatives or heirs of such Unit Holder to
claim an accounting or to take any other action or proceeding in any court for a
partition or winding up of the Trust.
No Unit Holder shall have the right to vote except with respect to removal
of the Trustee or amendment and termination of the Trust as prescribed in the
Indenture (see ``Administration of the Trust--Amendment'' and ``Administration
of the Trust--Termination,'' herein). Unit Holders shall have no right to
control the operation or administration of the Trust in any manner.
Distributions
The terms of the Treasury Obligations do not provide for periodic payment to
the holders thereof of the annual accrual of discount. To the extent that
dividends, distributions and/or 12b-1 fee payments from the Sponsor become
payable with respect to the Fund Shares held in the Trust, the Trustee will
collect such amounts as they become payable and credit such amounts to a
separate Income Account created pursuant to the Indenture. All other moneys
received by the Trustee with respect to the Fund Shares shall be credited to the
Principal Account. Quarterly distributions to each Unit Holder of record as of
the immediately preceding Quarterly Record Date will be made on the next
following Quarterly Distribution Date and shall consist of an amount
substantially equal to such Unit Holder's pro rata share of the distributable
cash balances in the Income Account and the Principal Account, if any, computed
as of the close of business on such Quarterly Record Date. No quarterly
distribution will be made if the amount available for distribution is less than
$2.50 per 100 Units except that, no less than once a year, on a Quarterly
Distribution Date, the Trustee shall distribute the entire cash balances in the
Principal and Income Accounts. All funds collected or received will be held by
the Trustee in trust without interest to Unit Holders as part of the Trust until
required to be disbursed in accordance with the provisions of the Indenture.
Such funds will be segregated by separate recordation on the trust ledger of the
Trustee so long as such practice preserves a valid preference of Unit Holders
under the bankruptcy laws of the United States, or if such preference is not
preserved, the Trustee shall handle such funds in such other manner as shall
constitute the segregation and holding thereof in trust within the meaning of
the Investment Company Act of 1940, as the same may be from time to time
amended. To the extent permitted by the Indenture and applicable banking
regulations, such funds are available for use by the Trustee pursuant to normal
banking procedures.
The Trustee is authorized by the Indenture to withdraw from the Principal
Account to the extent funds are not sufficient in the Income Account such
amounts as it deems necessary to establish a reserve for any taxes or other
governmental charges that may be payable out of the Trust, which amounts will be
credited to a separate Reserve Account. If the Trustee determines that the
amount in the Reserve Account is greater than the amount necessary for payment
of any taxes or other governmental charges, it will promptly recredit the excess
to the Account from which it was withdrawn. In addition, the Trustee may
withdraw from the Income Account, to the extent available, that portion of the
Redemption Price which represents income.
The balance paid on any redemption, including income, if any, shall be
withdrawn from the Principal Account of the Trust to the extent that funds are
available. If such available balance is insufficient, the Trustee is empowered
to sell Securities in order to provide moneys for redemption of Units tendered.
(See ``Rights of Unit Holders--Redemption'').
B-21
<PAGE>
Reports and Records
With each distribution, the Trustee will furnish to the Unit Holders a
statement of the amount of dividends and other receipts, if any, distributed,
expressed in each case as a dollar amount per Unit.
Within a reasonable time after the end of each calendar year, the Trustee
will furnish to each person who was a Unit Holder of record at any time during
the calendar year a statement setting forth: (1) as to the Income Account:
dividends and other cash amounts received, deductions for payment of applicable
taxes and for fees and expenses of the Trust, redemptions of Units, 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; (2) as to
the Principal Account: the dates of disposition and identity of any Securities
and the net proceeds received therefrom, deductions for payments of applicable
taxes and for fees and expenses of the Trust and redemptions of Units, 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 Securities held and the number of Units outstanding on the last business
day of such calendar year; (4) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; (5) amounts actually
distributed during such calendar year from the Income 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 on
the last business day of such calendar year; and (6) an annual report of
original issue discount accrual.
The Trustee shall keep available for inspection by Unit Holders at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee, including records of the names and addresses of Unit
Holders, a current list of Securities in the portfolio and a copy of the
Indenture.
Redemption
Tender of Units
Units may be tendered to the Trustee for redemption at its corporate trust
office at 770 Broadway, New York, New York 10003, upon delivery of a request for
redemption and the Certificates for the Units requested to be redeemed and
payment of any relevant tax. At the present time there are no specific taxes
related to the redemption of the Units. No redemption fee will be charged by the
Sponsor or the Trustee. Units redeemed by the Trustee will he canceled.
Certificates for Units to be redeemed must be properly endorsed or
accompanied by a written instrument of transfer, although redemptions without
the necessity of Certificate presentation will be effected for record Unit
Holders for whom Certificates have not been issued. Unit Holders must sign
exactly as their name appears on the face of the Certificate with the signature
guaranteed by an officer of a national bank or trust company or by a member firm
of either the New York, Midwest or Pacific Stock Exchanges or other financial
institution acceptable to the Trustee, if any. 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.
Within seven calendar days following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto, the Unit
Holder will be entitled to receive in cash an amount for each Unit tendered
equal to the Redemption Price per Unit computed as of the Evaluation Time set
forth in the ``Summary of Essential Information'' on the date of tender (see
``Redemption-Computation of Redemption Price per Unit''). The ``date of tender''
is deemed to be the date on which Units are received by the Trustee, except that
as regards Units received after the Evaluation time, the date of tender is the
next day on which such 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 day.
There is no sales charge incurred when a Unit Holder tenders his Units to
the Trustee for redemption. All amounts paid on redemption representing Income
will be withdrawn from the Income Account to the extent moneys are available;
all other amounts will be paid from the Principal Account. The Trustee is
required by the Indenture to sell Fund Shares and Treasury Obligations, to the
extent possible in the same ratio as the ratio of Fund Shares and Treasury
Obligations then held in the Trust, in order to provide moneys for redemption of
Units tendered. To the extent Securities are sold, the size of the Trust will be
reduced. Such sales could result in a loss to the Trust. The redemption of a
Unit for cash will constitute a taxable event for the Unit Holder under the Code
(see ``Tax Status of the Trust'').
B-22
<PAGE>
Purchase by the Sponsor of Units Tendered for Redemption
The Indenture requires that the Trustee notify the Sponsor of any tender of
Units for redemption. So long as the Sponsor is maintaining a bid in the
secondary market, the Sponsor, prior to the close of business on the second
succeeding business day, may purchase any Units tendered to the Trustee for
redemption at the price so bid by making payment therefor to the Unit Holder in
an amount not less than the Redemption Price and not later than the day on which
the Units would otherwise have been redeemed by the Trustee, i.e., the Unit
Holder will receive the Redemption Price from the Sponsor within 7 days of the
date of tender (see ``Public Offering of Units--Secondary Market''). Units held
by the Sponsor may be tendered to the Trustee for redemption as any other Units.
The price of any Units resold by the Sponsor will be the Public Offering Price
determined in the manner provided in this Prospectus (see ``Public Offering of
Unit--Public Offering Price''). Any profit resulting from the resale of such
Units will belong to the Sponsor which likewise will bear any loss resulting
from a reduction in the offering or redemption price subsequent to its
acquisition of such Units (see ``Public Offering of Units-Profit of Sponsor'').
Computation of Redemption Price per Unit
The Redemption Price per Unit is determined as of the Evaluation Time on the
date any such determination is made. The Redemption Price is each Unit's pro
rata share, determined by the Trustee of the sum of:
(1) the aggregate bid side evaluation of the Treasury Obligations in the
Trust, as determined by the Evaluator and the net asset value of the Fund
Shares in the Trust determined as of the Evaluation Time set forth in the
``Summary of Essential Information''; and
(2) cash on hand in the Trust and dividends receivable on Fund Shares
(other than cash deposited by the Sponsor for the purchase of Securities);
less amounts representing (a) accrued taxes and governmental charges payable out
of the Trust, (b) the accrued expenses of the Trust, and (c) cash held with
respect to previously tendered Units or for distribution to Unit Holders of
record as of a date prior to the evaluation, and (d) any Reserve Account
(``Redemption Price'').
The right of redemption may be suspended and payment of the Redemption Price
per Unit postponed for more than seven calendar days following a tender of Units
for redemption for any period during which the New York Stock Exchange is
closed, other than for weekend and holiday closing, or trading on that Exchange
is restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Neither the Trustee nor
the Sponsor is liable to any person or in any way for any loss or damage that
may result from any such suspension or postponement.
SPONSOR
Prudential Securities Incorporated is a Delaware corporation and is engaged
in the underwriting, securities and commodities brokerage business and is a
member of the New York Stock Exchange, Inc., other major securities exchanges
and commodity exchanges and the National Association of Securities Dealers, Inc.
Prudential Securities Incorporated, a wholly-owned subsidiary of Prudential
Securities Group Inc. and an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America, is engaged in the investment advisory business.
Prudential Securities Incorporated has acted as principal underwriter and
managing underwriter of other investment companies. In addition to participating
as a member of various selling groups or as an agent of other investment
companies, Prudential Securities Incorporated executes orders on behalf of
investment companies for the purchase and sale of securities of such companies
and sells securities to such companies in its capacity as a broker or dealer in
securities.
Prudential Securities is distributor for Prudential Government Securities
Trust (Intermediate Term Series), The Target Portfolio Trust, and for Class B
shares of The BlackRock Government Income Trust and Prudential Adjustable Rate
Securities Fund, Inc., and for Class B and C shares of Global Utility Fund,
Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Allocation Fund, Prudential California Municipal Fund (California
Income Series and California Series), Prudential Europe Growth Fund, Inc.,
Prudential Equity Fund, Inc., Prudential Equity Income Fund, Prudential Global
Fund, Inc., Prudential Global Genesis Fund, Inc., Prudential Global Natural
Resources Fund, Inc., Prudential GNMA Fund, Inc., Prudential Government Income
Fund, Inc., Prudential Growth Opportunity Fund, Inc., Prudential High Yield
Fund, Inc., Prudential IncomeVertible(R) Plus Fund, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund, Inc.,
Prudential Municipal Bond Fund,
B-23
<PAGE>
Prudential Municipal Series Fund (except Connecticut Money Market Series,
Massachusetts Money Market Series, New York Money Market Series and New Jersey
Money Market Series), Prudential National Municipals Fund, Inc., Prudential
Pacific Growth Fund, Inc., Prudential Short-Term Global Income Fund, Inc.,
Prudential Strategist Fund, Inc., Prudential Structured Maturity Fund, Inc.,
Prudential U.S. Government Fund and Prudential Utility Fund, Inc.
On October 21, 1993, Prudential Securities Incorporated entered into an
omnibus settlement with the Securities and Exchange Commission (``SEC''), state
securities regulators (with the exception of the Texas Securities Commissioner
who joined the settlement on January 18, 1994) and the National Association of
Securities Dealers, Inc. (``NASD'') to resolve allegations that from 1980
through 1990 Prudential Securities Incorporated sold certain limited partnership
interests in violation of securities laws to persons for whom such securities
were not suitable and misrepresented the safety, potential returns and liquidity
of these investments. Without admitting or denying the allegations asserted
against it, Prudential Securities Incorporated consented to the entry of an SEC
Administrative Order which stated that the conduct of Prudential Securities
Incorporated violated the federal securities laws, directed Prudential
Securities Incorporated to cease and desist from violating the federal
securities laws, pay civil penalties, and adopt certain remedial measures to
address the violations.
Pursuant to the terms of the SEC settlement, Prudential Securities
Incorporated agreed to the imposition of a $10,000,000 civil penalty,
established a settlement fund in the amount of $330,000,000 and procedures to
resolve legitimate claims for compensatory damages by purchasers of the
partnership interests. Prudential Securities Incorporated has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. The
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. Prudential Securities Incorporated
consented to a censure and to the payment of a $5,000,000 fine in settling the
NASD action.
In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that Prudential
Securities Incorporated committed fraud in connection with the sale of certain
limited partnership interests in violation of federal securities laws. An
agreement was simultaneously filed to defer prosecution of these charges for a
period of three years from the signing of the agreement, provided that
Prudential Securities Incorporated complies with the terms of the agreement. If,
upon completion of the three year period, Prudential Securities Incorporated has
complied with the terms of the agreement, no prosecution will be instituted by
the United States for the offenses charged in the complaint. If on the other
hand, during the course of the three year period, Prudential Securities
Incorporated violates the terms of the agreement, the U.S. Attorney can then
elect to pursue these charges. Under the terms of the agreement, Prudential
Securities Incorporated agreed, among other things, to pay an additional
$330,000,000 into the fund established by the SEC to pay restitution to
investors who purchased certain Prudential Securities Incorporated limited
partnership interests.
Limitations on Liability
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Indenture, but will be under no liability to Unit
Holders for taking any action or refraining from any action in good faith or for
errors in judgment or responsible in any way for any default, failure or defect
in any Security or for depreciation or loss incurred by reason of the sale of
any Securities, except in cases of willful misfeasance, bad faith, gross
negligence or reckless disregard for its obligations and duties (see
``Sponsor--Responsibility'').
Responsibility
The Trust is not a managed registered investment company. Securities will
not be sold by the Trustee to take advantage of ordinary market fluctuations.
Although the Sponsor and Trustee do not presently intend to dispose of
Securities, the Indenture permits the Sponsor to direct the Trustee to dispose
of any Security in the Trust for the purpose of redeeming Units tendered for
redemption and to dispose of Fund Shares to pay Trust expenses.
The proceeds resulting from the disposition of any Security in the Trust
will be distributed as set forth under ``Rights of Unit
Holders---Distributions'' to the extent such proceeds are not utilized for the
purpose of redeeming Units or paying Trust expenses.
B-24
<PAGE>
Resignation
If at any time the Sponsor shall resign under the Indenture or shall fail or
be incapable of performing its duties thereunder or shall become bankrupt or its
affairs are taken over by public authorities, the Indenture directs the Trustee
to either (1) appoint a successor Sponsor or Sponsors at rates of compensation
deemed reasonable by the Trustee not exceeding amounts prescribed by the
Securities and Exchange Commission, (2) act as Sponsor itself without
terminating the Trust or (3) terminate the Trust. The Trustee will promptly
notify Unit Holders of any such action.
TRUSTEE
The Trustee is The Chase Manhattan Bank (National Association), a national
banking association with its principal executive office at 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at 770
Broadway, New York, New York 10003. The Trustee is subject to supervision by the
Comptroller of the Currency, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System. In connection with the storage
and handling of certain Securities deposited in the Trust, the Trustee may use
the services of The Depository Trust Company. These services may include
safekeeping of the Securities and coupon-clipping, computer book-entry transfer
and institutional delivery services. The Depository Trust Company is a limited
purpose trust company organized under the Banking Law of the State of New York,
a member of the Federal Reserve System and a clearing agency registered under
the Securities Exchange Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any moneys, Securities or
Certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents except in cases of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. In addition, the Indenture provides that the Trustee
shall not be personally liable for any taxes or other governmental charges
imposed upon or in respect of the Trust which the Trustee may be required to pay
under current or future laws of the United States or any other taxing authority
having jurisdiction.
Responsibility
The Trustee shall not be liable for any default, failure or defect in any
Security or for any depreciation or loss by reason of any such sale of Fund
Shares or by reason of the failure of the Sponsor to give directions to the
Trustee.
Additionally, the Trustee may sell Securities designated by the Sponsor, or
if not so directed, in its own discretion, for the purpose of redeeming Units
tendered for redemption. Fund Shares will be sold first unless the Sponsor is
able to sell Treasury Obligations and Fund Shares in the proportionate
relationship between the maturity values of the Treasury Obligations and the
number of Fund Shares.
Amounts received by the Trust upon the sale of any Security under the
conditions set forth above will be deposited in the Principal Account when
received and to the extent not used for the redemption of Units will be
distributable by the Trustee to Unit Holders of record on the Quarterly Record
Date next prior to a Quarterly Distribution Date.
For information relating to the responsibilities of the Trustee under the
Indenture, reference is also made to the material set forth under ``Rights of
Unit Holders'' and ``Sponsor--Resignation.''
Resignation
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Indenture. The Sponsor may also remove the Trustee for any
other reason that the Sponsor determines to be in the best interest of the Unit
Holders. Such resignation or removal shall become effective upon the acceptance
of appointment by the successor trustee. If upon resignation of a trustee no
successor has been appointed and has accepted the appointment within thirty days
after notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The 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. A successor trustee has the same rights and duties as the
original trustee except to the extent, if any, that the Indenture is modified as
permitted by its terms.
B-25
<PAGE>
<PAGE>
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a division of J.J. Kenny
Co., Inc., with main offices located at 65 Broadway, New York, New York 10006.
Limitations on Liability
The Trustee, Sponsor and Unit Holders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Indenture shall be made in good faith
upon the basis of the best information available to it; provided, however, that
the Evaluator shall be under no liability to the Trustee, Sponsor or Unit
Holders for errors in judgment. The Evaluator shall, however, be liable for its
own willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties under the Indenture.
Responsibility
The Indenture requires the Evaluator to evaluate the Treasury Obligations on
the basis of their bid prices on the last business day of June and December in
each year, on the day on which any Unit is tendered for redemption and on any
other day such evaluation is desired by the Trustee or is requested by the
Sponsor. For information relating to the responsibility of the Evaluator to
evaluate the Treasury Obligations, see ``Public Offering of Units--Public
Offering Price.''
Resignation
The Evaluator may resign or may be removed by the Sponsor, and the Sponsor
is to use its best efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment by the
successor Evaluator. If upon resignation of the Evaluator no successor accepts
appointment within thirty days after notice of resignation, the Evaluator may
apply to a court of competent jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE INDENTURE
Amendment
The Indenture may be amended by the Trustee and the Sponsor without the
consent of Unit Holders (a) to cure any ambiguity or to correct or supplement
any provision thereof which may be defective or inconsistent, (b) to change any
provision thereof as may be required by the Securities and Exchange Commission
or any successor governmental agency, and (c) to make such other provisions as
shall not adversely affect the interest of the Unit Holders; provided that the
Indenture may also be amended by the Sponsor and the Trustee with the consent of
Unit Holders evidencing 51% of the Units at the time outstanding for the
purposes of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the rights
of Unit Holders. In no event shall the Indenture be amended, so as to increase
the number of Units issuable thereunder except as the result of the additional
deposits of Securities, to permit the deposit of Securities after the Date of
Deposit except in accordance with the terms and conditions of the Indenture as
initially adopted, to permit any other acquisition of securities or other
property by the Trustee either in addition to or in substitution for any of the
Securities on hand in the Trust or to permit the Trustee to vary the investment
of the Unit Holders or to empower the Trustee to engage in business or to engage
in investment activities not specifically authorized in the Indenture as
originally adopted; or so as to adversely affect the characterization of the
Trust as a grantor trust for Federal income tax purposes. In the event of any
amendment the Trustee is obligated to promptly notify all Unit Holders of the
substance of such amendment.
Termination
The Trust may be terminated at any time by the consent of the holders of 51%
of the Units or by the Trustee upon the direction of the Sponsor when the
aggregate net value of all Trust assets as shown by an evaluation made as
described under ``Evaluator--Responsibility'' is less than 40% of the aggregate
maturity values of the Treasury Obligations deposited in the Trust on the Date
of Deposit and subsequent thereto calculated after the most recent deposit of
Treasury Obligations in the Trust or if there has been a material change in the
Fund's objectives or if Replacement Treasury Obligations are not acquired.
However in no event may the Trust continue beyond the Mandatory Termination Date
set forth under ``Summary of Essential Information.'' In the event of
termination, written notice thereof will be sent by the Trustee to all Unit
Holders.
B-26
<PAGE>
Within a reasonable period after termination, the Trustee will sell any
Securities remaining in the Trust (other than Fund Shares for which an in kind
distribution has been requested) and, after paying all expenses and charges
incurred by a Trust, will distribute to each Unit Holder, upon surrender for
cancellation of his Certificate for Units, his pro rata share of: (i) the amount
realized upon disposition of the Fund Shares unless the Unit Holder notifies the
Trustee in writing of his preference for distribution ``in kind,'' (ii) the
amount realized upon the disposition or maturity of the Treasury Obligations and
(iii) any other assets of the Trust. A Unit Holder may invest the proceeds of
the Treasury Obligations in Fund Shares at such shares' net asset value, which
shall be subject to 12b-1 expenses. The sale of the Securities in the Trust upon
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time and, therefore, the amount realized by
a Unit Holder on termination may be less than the principal amount of Treasury
Obligations represented by the Units held by such Unit Holder.
Tax Impact of In Kind Distribution Upon Termination
Under the position taken by the Internal Revenue Service in Revenue Ruling
90-7, a distribution by the Trustee to a Unit Holder (or to his agent) of his
pro rata share of the Fund Shares in kind upon termination of the Trust will not
be a taxable event to the Unit Holder. Such Unit Holder's basis for Fund Shares
so distributed (other than any Fund Shares purchased with his pro rata share of
the proceeds of Treasury Obligations) will be equal to his basis for the same
Fund Shares (previously represented by his Units) prior to such distribution and
his holding period for such Fund Shares will be the shorter of the period during
which he held his Units and the period for which the Securities were held in the
Trust. A Unit Holder will have a taxable gain or loss, which will be a capital
gain or loss except in the case of a dealer or a financial institution, when the
Unit Holder disposes of such Securities in a taxable transfer.
LEGAL OPINIONS
The legality of the Units offered hereby has been passed upon by Messrs.
Cahill Gordon & Reindel, a partnership including a professional corporation, 80
Pine Street, New York, New York 10005, as special counsel for the Sponsor.
INDEPENDENT AUDITORS
The Statement of Financial Condition and Schedule of Portfolio Securities of
the Government Securities Equity Trust included in this Prospectus have been
examined by Deloitte & Touche LLP, certified public accountants, as stated in
their report appearing herein, and are included in reliance upon such report
given upon the authority of that firm as experts in accounting and auditing.
B-27
<PAGE>
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any
representations with respect to this investment company not contained in this
Prospectus; and any information or representation not contained herein must not
be relied upon as having been authorized. 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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES EQUITY TRUST
Series 6
Table of Contents
Page
-----
<S> <C>
Summary of Essential Information........................ A-iv
Independent Auditors' Report............................ A-1
Statement of Financial Condition........................ A-2
Schedule of Portfolio Securities........................ A-8
The Trust............................................... B-1
Trust Formation..................................... B-1
Securities Selection................................ B-2
Stripped U.S. Treasury Obligations.................. B-2
Templeton Growth Fund, Inc.......................... B-3
General Information Regarding the Fund.............. B-3
Investment Strategies and Restrictions.............. B-5
Net Asset Value of the Fund Shares.................. B-6
The Fund's Investment Manager....................... B-7
The Fund's Plan of Distribution..................... B-7
Risk of Investment in Units......................... B-8
Fund Risk Factors................................... B-8
The Units........................................... B-11
Tax Status of the Trust................................. B-11
Retirement Plans........................................ B-14
Public Offering of Units................................ B-15
Public Offering Price............................... B-15
Public Distribution................................. B-15
Secondary Market.................................... B-15
Profit of Sponsor................................... B-16
Volume Discount..................................... B-16
Employee Discount................................... B-17
Exchange Option......................................... B-17
Federal Income Tax Consequences..................... B-18
Reinvestment of Trust Distributions..................... B-18
Expenses and Charges.................................... B-18
Initial Expenses.................................... B-18
Fees................................................ B-18
Other Charges....................................... B-19
Rights of Unit Holders.................................. B-21
Certificates........................................ B-21
Certain Limitations................................. B-21
Distributions....................................... B-21
Reports and Records................................. B-22
Redemption.......................................... B-22
Sponsor................................................. B-23
Limitations on Liability............................ B-24
Responsibility...................................... B-24
Resignation......................................... B-25
Trustee................................................. B-25
Limitations on Liability............................ B-25
Responsibility...................................... B-25
Resignation......................................... B-25
Evaluator............................................... B-26
Limitations on Liability............................ B-26
Responsibility...................................... B-26
Resignation......................................... B-26
Amendment and Termination of the Indenture.............. B-26
Amendment........................................... B-26
Termination......................................... B-26
Tax Impact of In Kind Distribution Upon
Termination......................................... B-27
Legal Opinions.......................................... B-27
Independent Auditors.................................... B-27
</TABLE>
(LOGO)
Sponsor
Prudential Securities Incorporated
One Seaport Plaza
199 Water Street
New York, New York 10292
Trustee
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Evaluator
Kenny S&P Evaluation
Services, a division of
J.J. Kenny Co., Inc.
65 Broadway
New York, New York 10006
Fund Shares
Templeton Growth
Fund, Inc.
700 Central Avenue
St. Petersburg, FL 33701-3628
<PAGE>
<PAGE>
