<PAGE>
As filed with the Securities and Exchange Commission on January 31, 1997
Registration No. 33-65966
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
___________________
A. Exact Name of Trust:
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
B. Name of depositor:
PRUDENTIAL SECURITIES INCORPORATED
C. Complete address of depositor's principal executive office:
One Seaport Plaza
199 Water Street
New York, New York 10292
D. Name and complete address of agent for service:
Copy to:
LEE B. SPENCER, JR., ESQ. KENNETH W. ORCE, ESQ.
PRUDENTIAL SECURITIES INCORPORATED CAHILL GORDON & REINDEL
One Seaport Plaza 80 Pine Street
199 Water Street New York, New York 10005
New York, New York 10292
It is proposed that this filing will become effective (check appropriate
box).
___
/x_/ immediately upon filing on January 31, 1997 pursuant to paragraph (b);
___
/__/ on January 31, 1997 pursuant to paragraph (b);
___
/__/ 60 days after filing pursuant to paragraph (a);
___
/__/ on (date) pursuant to paragraph (a) of Rule 485.
<PAGE>
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:
(LOGO) Prudential
Securities
- --------------------------------------------------------------------------------
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, 1997
<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 $14.29 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 $14.29 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
A-i
<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
A-ii
<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-8 and B-9). 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
$62,850,000 face amount of Treasury Obligations maturing on November 15,
2008 and 1,429,209 Fund Shares were held in the Trust. The Treasury Obligations
and the Fund Shares represented 51% and 49%, 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 26, 1996(1)
<TABLE>
<S> <C>
AGGREGATE MATURITY VALUE OF TREASURY OBLIGATIONS........................................... $ 62,850,000
AGGREGATE NUMBER OF FUND SHARES............................................................ 1,429,209
NUMBER OF UNITS............................................................................ 4,190,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH UNIT........................ 1/4,190,000th
PUBLIC OFFERING PRICE
Aggregate bid side evaluation of Treasury Obligations in the Trust....................... $29,019,102.00
Aggregate value of Fund Shares(2)........................................................ $27,712,362.51
Aggregate cash value..................................................................... $ 15,107.13
--------------
Total.................................................................................... $56,746,571.64
--------------
--------------
Divided by 4,190,000 Units............................................................... 13.543
Plus sales charge of 5.25% of Public Offering Price (5.540% of net amount invested)(4)... .750
--------------
Public Offering Price per Unit(3)........................................................ 14.293
--------------
--------------
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, $.750 less than
Public Offering Price per Unit)(2)....................................................... $ 13.543
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>
- ------------
(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 26, 1996 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.
- ------------
For an explanation of the management fees paid by the Fund see page B-7.
A-iv
<PAGE>
<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, 1996, and the related statements of operations and changes
in net assets for the years ended September 30, 1996 and 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, 1996 as shown in the statement of financial condition and
schedule of portfolio securities by correspondence with The Chase Manhattan
Bank, 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, 1996 and the results of
its operations and the changes in its net assets for the years ended
September 30, 1996 and 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 7, 1997
New York, New York
</AUDIT-REPORT>
A-1
<PAGE>
STATEMENT OF FINANCIAL CONDITION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1996
<TABLE>
TRUST PROPERTY
<S> <C>
Investments in Securities at market value (amortized cost
$57,536,861 including accreted interest of $5,197,045)
(Note (a) and Schedule of Portfolio Securities Notes (4)
and (5)) $58,250,774
Other receivable 72,902
Receivable for investments sold 260,534
Total 58,584,210
LIABILITIES AND NET ASSETS
Less Liabilities:
Cash overdraft 30,912
Payable to Unit Holders 260,401
Accrued Trust fees and expenses 9,958
Total Liabilities 301,271
Net Assets:
Balance applicable to 4,470,000 Units of fractional
undivided interest issued and outstanding (Note (c)):
Capital, plus net unrealized market appreciation
of $713,912 $58,250,774
Undistributed net investment income (Note (b)) 32,165
Net assets $58,282,939
Net asset value per Unit ($58,282,939 divided by 4,470,000 Units) $ 13.0387
See notes to financial statements
</TABLE>
A-2
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
<CAPTION>
For the period from
For the Years Ended October 20, 1993
September 30, (date of deposit)
1996 1995 to September 30, 1994
<S>
Investment income:
<C> <C> <C>
Interest $2,136,826 $ 2,959,521 $3,060,753
Dividends (Note (a)(5)) 1,246,431 1,642,031 260,592
Other income 81,482 112,631 114,783
3,464,739 4,714,183 3,436,128
Less Expenses:
Trust fees and expenses 44,516 62,908 58,177
Total expenses 44,516 62,908 58,177
Investment income - net 3,420,223 4,651,275 3,377,951
Net gain (loss) on investments:
Realized gain (loss) on securities
sold or redeemed 196,204 (136,609) (208,295)
Capital gain distributions received 2,907,980 2,686,367 440,701
Net unrealized market (deprecia-
tion) appreciation (2,011,260) 10,093,802 (7,368,630)
Net gain (loss) on invest-
ments 1,092,924 12,643,560 (7,136,224)
Net increase (decrease) in net assets
resulting from operations $4,513,147 $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
For the Years Ended October 20, 1993
September 30, (date of deposit)
1996 1995 to September 30, 1994
<S> <C> <C> <C>
Operations:
Investment income - net $ 3,420,223 $ 4,651,275 $3,377,951
Realized gain (loss) on securi-
ties sold or redeemed 196,204 (136,609) (208,295)
Capital gain distributions
received 2,907,980 2,686,367 440,701
Net unrealized market (deprecia-
tion) appreciation (2,011,260) 10,093,802 (7,368,630)
Net increase (decrease)
in net assets resulting
from operations 4,513,147 17,294,835 (3,758,273)
Less Distributions to Unit Holders:
Principal (2,860,096) (2,680,929) (434,720)
Investment income - net (1,274,319) (1,683,264) (234,840)
Total distributions (4,134,415) (4,364,193) (669,560)
Capital share transactions:
Creation of 50,000 Units and
8,270,000 additional Units,
respectively - 530,175 96,881,533
Redemption of 1,720,000 Units,
1,920,000 Units and 310,000
Units, respectively (21,987,445) (23,629,745) (3,520,322)
Income distribution on redemp-
tion (36,366) (14,454) (1,677)
Net capital share trans-
actions (22,023,811) (23,114,024) 93,359,534
Net (decrease) increase in net
assets (21,645,079) (10,183,382) 88,931,701
Net assets:
Beginning of period 79,928,018 90,111,400 1,179,699
End of period (including undis-
tributed net investment income
of $32,165 and undistributed
principal and net investment
income of $47,846 and
$76,591, respectively) $58,282,939 $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, 1996
(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, 1996
(5) Investment Income
Included in dividends is a short-term capital gain distribution
received of $366,956.
(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, 1996 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 (49,211,645)
Net unrealized market appreciation 713,912
Accumulated interest accretion 8,157,100
Net amount applicable to investors $ 58,250,774
</TABLE>
A-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1996
(d) OTHER INFORMATION
<TABLE>
Selected data for a Unit of the Trust during each period:
<CAPTION>
For the period from
For the Years Ended October 20, 1993
September 30, (date of deposit)
1996 1995 to September 30, 1994
<S> <C> <C> <C>
Principal distri-
butions during
period $ .4854 $ .3336 $ .0572
Net investment income
distributions
during period $ .2165 $ .2098 $ .0309
Net asset value at
end of period $13.0387 $12.9124 $11.1801
Trust Units out-
standing at end
of period 4,470,000 6,190,000 8,060,000
</TABLE>
A-7
<PAGE>
<TABLE>
SCHEDULE OF PORTFOLIO SECURITIES
GOVERNMENT SECURITIES EQUITY TRUST SERIES 6
September 30, 1996
<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> 67,050,000 $29,082,938
2. Shares of the Templeton Growth
Fund, Inc. ($19.13 per
Fund Share) <F3> 1,524,717 29,167,836
$58,250,774
</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, 1996
<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,
1996 was determined by the Evaluator on the basis of bid side
evaluations for the Securities. 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, 1996, the net unrealized market appreciation of
Securities was comprised of the following:
Gross unrealized market appreciation $ 3,216,305
Gross unrealized market depreciation (2,502,393)
Net unrealized market appreciation $ 713,912
The amortized cost of the Securities for Federal income tax purposes
was $57,536,862 at September 30, 1996.
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 ``Predecessor Trustee'') and Kenny S&P Evaluation
Services, a division of J.J. Kenny Co., Inc. (the ``Evaluator''). The Chase
Manhattan Bank is the Trustee (the ``Trustee'') of the Trust. 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>
<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>
<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, 1996,
the net assets of the Fund were $8,730,823,934. 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 is the custodian of the Fund's assets. Franklin
Templeton Investor Services, Inc. serves as the Fund's dividend disbursing and
transfer agent. Franklin Templeton Services, 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>
<PAGE>
SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout the periods indicated)
This table summarizes the Fund's financial history.
Class I Shares
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
(For a share outstanding throughout the
year)
Net asset value, beginning of year $ 18.96 $ 18.95 $ 17.47 $ 15.81 $ 16.14 $ 15.23
Income from investment operations:
Net investment income .50 .39 .29 .32 .41 .45
Net realized and unrealized gain 1.34 1.20 2.58 2.97 .92 1.68
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.84 1.59 2.87 3.29 1.33 2.13
---------- ---------- ---------- ---------- ---------- ----------
Distributions:
Dividends from net investment income (.44) (.29) (.27) (.36) (.44) (.54)
Distributions from net realized gains (1.61) (1.29) (1.12) (1.27) (1.22) (.68)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (2.05) (1.58) (1.39) (1.63) (1.66) (1.22)
---------- ---------- ---------- ---------- ---------- ----------
Change in net asset value (.21) .01 1.48 1.66 (.33) .91
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 18.75 $ 18.96 $ 18.95 $ 17.47 $ 15.81 $ 16.14
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total Return* 10.85% 9.51% 17.47% 23.57% 9.22% 15.95%
Ratios/Supplemental Data
Net assets, end of year (000) $8,450,737 $6,964,298 $5,611,560 $4,033,911 $3,268,644 $2,895,684
Ratio of expenses to average net assets 1.09% 1.12% 1.10% 1.03% .88% .75%
Ratio of net investment income to
average net assets 2.87% 2.40% 1.76% 2.10% 2.62% 3.09%
Portfolio turnover rate................. 19.63% 35.21% 27.35% 28.89% 29.46% 30.28%
Average commission rate paid (per share) $ .0146
<CAPTION>
1990 1989 1988 19871
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance
(For a share outstanding throughout the
year)
Net asset value, beginning of year $ 16.62 $ 13.65 $ 17.13 $ 12.87
Income from investment operations:
Net investment income .57 .58 .45 .29
Net realized and unrealized gain (.87) 3.12 (2.41) 3.97
---------- ---------- ---------- ----------
Total from investment operations (.30) 3.70 (1.96) 4.26
---------- ---------- ---------- ----------
Distributions:
Dividends from net investment income (.62) (.48) (.44) --
Distributions from net realized gains (.47) (.25) (1.08) --
---------- ---------- ---------- ----------
Total distributions (1.09) (.73) (1.52) --
---------- ---------- ---------- ----------
Change in net asset value (1.39) 2.97 (3.48) 4.26
---------- ---------- ---------- ----------
Net asset value, end of year $ 15.23 $ 16.62 $ 13.65 $ 17.13
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Return* (2.01)% 28.38% (9.86)% 33.10%
Ratios/Supplemental Data
Net assets, end of year (000) $2,466,684 $2,355,306 $1,572,112 $$1,633,909
Ratio of expenses to average net assets .67% .66% .69% .66%**
Ratio of net investment income to
average net assets 3.70% 4.20% 3.50% 2.99%**
Portfolio turnover rate................. 18.47% 11.55% 11.44% 17.55%
Average commission rate paid (per share)
</TABLE>
- ---------------
1 For the period December 31, 1986 (commencement of operations) through
August 31, 1987. The Fund commenced operations 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.
* Total return does not reflect sales commissions.
** 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>
<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.
Franklin Templeton Services, Inc. (the ``Fund Administrator'') 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 Fund Administrator 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, 1996 the Fund had $1,614,335 (0.019% of its net assets) of 12b-1 fee
carryforwards. 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 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 and market factors. In addition to the factors which
affect the value of individual securities, a shareholder may anticipate that the
value of the shares of the Fund will fluctuate with movements in the broader
equity and bond markets. A decline in the stock market of any country in which
the Fund is invested may also be reflected in declines in the price of shares of
the Fund. Changes in currency valuations will also affect the price of shares of
the Fund. History reflects both decreases and increases in stock markets and
currency valuations, and these may occur unpredictably in the future. The value
of debt securities held by the Fund generally will vary inversely with changes
in prevailing interest 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 developing. 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), foreign investment controls on daily stock market movements,
default in foreign government securities, political or social instability or
diplomatic developments which could affect investment in
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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 U.S. Foreign companies are not generally subject to
uniform accounting or financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S. companies. The
Fund may encounter difficulties or be unable to vote proxies, exercise
shareholder rights, pursue legal remedies, and obtain judgments in foreign
courts.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign countries are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
In many foreign countries, thee is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. There is an increased risk, therefore, of
uninsured loss due to lost, stolen, or counterfeit stock certificates. In
addition, 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 U.S. The Fund may invest in Eastern European
countries, which involves additional risks.
Prior governmental approval of non-domestic investments may be required
under certain circumstances in some developing countries, and the extent of
foreign investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among other
concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries with which they trade.
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risk, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody.
The Fund is authorized to invest in medium quality or high-risk, lower
quality debt securities that are rated between ``BBB'' and ``CCC'' by S&P and
between ``Baa'' and ``Caa'' by 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 without shareholder approval, the Fund
will not invest more than 5% of its total assets in debt securities rated lower
than ``BBB'' by S&P or ``Baa'' 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 known 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 insure, 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
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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 transactions (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories
which should be considered.
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.'')
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.
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The Units
On a recent date, 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 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.
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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.
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
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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 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 1997 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 1997 or
any
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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. The 1997 limitation applies to individual
taxpayers with adjusted gross income in excess of a $121,200 threshold amount
($60,000 for a married taxpayer filing separately). The $121,200 (or $60,000)
threshold amount will be indexed for inflation after 1997. 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.
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.
B-14
<PAGE>
<PAGE>
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 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.
B-15
<PAGE>
<PAGE>
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 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 bid 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.
B-16
<PAGE>
<PAGE>
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 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
B-17
<PAGE>
<PAGE>
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 The Chase Manhattan
Bank, 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
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
B-18
<PAGE>
<PAGE>
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
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B-20
<PAGE>
<PAGE>
Government Securities Equity Trust
REINVESTMENT APPLICATION
I/We hereby authorize and direct The Chase Manhattan Bank 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
P.O. Box 5185
New York, NY 10274-5185
<PAGE>
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<PAGE>
<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>
<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 4 New York Plaza, New York, New York 10004, 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>
<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>
<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>
<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, a New York bank with its principal
executive office at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, New York, New York 10004. The
Trustee is subject to supervision by the Superintendent of Banks of the State of
New York, 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>
<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>
<PAGE>
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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.
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<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-9
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
What are the Fund's Potential Risks?................ B-8
The Units........................................... B-11
Tax Status of the Trust................................. B-11
Retirement Plans........................................ B-14
Public Offering of Units................................ B-14
Public Offering Price............................... B-14
Public Distribution................................. B-15
Secondary Market.................................... B-15
Profit of Sponsor................................... B-16
Volume Discount..................................... B-16
Employee Discount................................... B-16
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-18
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>
Sponsor
Prudential Securities Incorporated
One Seaport Plaza
199 Water Street
New York, New York 10292
Trustee
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
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>
<PAGE>
PROSPECTUS--Part B:
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Note that Part B of this Prospectus may not be distributed unless accompanied by
Part A.
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THE TRUST
Each Trust set forth in Part A is one of a series of similar but separate
unit investment trusts. Unless the context otherwise requires, each trust,
including each trust comprising a Multistate Series, a ``State Trust,''
hereinafter will be referred to as the ``Trust'' or the ``Trusts,'' and as the
context requires, for an insured Trust, the ``Insured Trust.'' Each Trust 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''), The Chase Manhattan Bank (the ``Trustee'') (successor to
United States Trust Company of New York) and Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. (the ``Evaluator''). On the Date of Deposit,
debt obligations and contracts and funds (represented by irrevocable letter(s)
of credit issued by major commercial bank(s)) for the purchase of such debt
obligations (collectively, the ``Securities'') were deposited into the Trust and
evaluated at prices equal to the evaluation of such Securities on the offering
side of the market (which evaluation takes into account any insurance obtained
by the issuers or previous owners of the Securities) as determined by the
Evaluator as of the Date of Deposit. The Trustee then immediately delivered to
the Sponsor certificates of beneficial interest (the ``Certificates'')
representing the units (the ``Units'') comprising the entire ownership of each
Trust which Units the Sponsor, through this Prospectus, is offering for sale to
the public. The holders of Units (the ``Unit Holders'' or ``Unit Holder,'' 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 Securities if they
cannot be sold in the secondary market which the Sponsor, although not obligated
to do so, proposes to maintain. The Sponsor, Prudential Securities Incorporated,
is a wholly-owned, indirect subsidiary of The Prudential Insurance Company of
America. Each Trust has a mandatory termination date set forth under Part
A--``Summary of Essential Information,'' but may be terminated substantially
prior thereto upon the occurrence of certain events, including a reduction in
the value of the Trust below the value set forth under Part A--``Summary of
Essential Information.''
The objectives of each Trust are the providing of interest income which, in
the opinion of counsel is, with certain exceptions, exempt from all Federal
income taxes under existing law through investment in a fixed portfolio of
Securities (the ``Portfolio'') consisting primarily of investment grade
long-term (or intermediate term if so designated in Part A or with maturities as
designated in Part A) state, municipal and public authority (``Issuers'') debt
obligations, and the conservation of capital and, for a Trust with a deferred
sales charge (``DSC'') feature, the payment of the DSC from the interest
payments, if any, on, and the principal paid at the maturity of the Securities
held by the Trust for purposes of paying the DSC. In addition, in the opinion of
counsel, interest income of each State Trust is exempt, to the extent indicated,
from state and any local income taxes in the State for which such State Trust is
named. The Securities in the Portfolio of each Trust were, as of the Date of
Deposit, rated in the category of ``BBB'' or better by Standard & Poor's
Corporation, ``Baa'' or better by Moody's Investors Service or ``BBB'' or better
by Fitch Investors Service, Inc. or if not rated had comparable credit
characteristics in the opinion of The Prudential Investment Corporation, the
Sponsor's affiliate. There is, of course, no guarantee that the Trust's
objectives will be achieved. Subsequent to the Date of Deposit, a Security in
the Trust may cease to be rated or the rating assigned may be reduced below the
minimum requirements of such Trust for the acquisition of Securities. Although
such events may be considered by the Sponsor in determining whether to direct
the Trustee to dispose of the Security (see ``Sponsor--Responsibility,''
herein), such events do not automatically require the elimination of such
Security from the Portfolio. An investment in the Trust should be made with an
understanding of the risks which an investment in fixed rate debt obligations
may entail, including the risk that the value of the Units will decline with
increases in interest rates.
On a recent date, a Unit of the Trust represented the fractional undivided
interest in the Securities and net income of such Trust set forth under Part
A--``Summary of Essential Information'' in the ratio of 1 Unit for each
approximately $1,000 face amount of Securities initially deposited in such
Trust. If any Units are redeemed by the Trustee, the face amount 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
- ------------
* 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>
<PAGE>
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.
Certain of the Securities in the Portfolio of the Trust are valued at prices
in excess of prices at which such Securities may be redeemed in the future. (See
Part A--``Schedule of Portfolio Securities'' for information relating to the
particular series described therein.) To the extent that a Security is redeemed
(or sold) at a price which is less than the valuation of such Security on the
date a Unit Holder acquired his Units, the proceeds distributable to such Unit
Holder in respect of such redemption (or sale) will be less than that portion of
the purchase price for such Units which was attributable to such Security
(representing a loss of capital to such Unit Holder). Such proceeds, however,
may be more or less than the valuation of such Security at the time of such
redemption (or sale). Similarly, certain of the Securities in the Trust may be
valued at a price in excess of their face value at maturity (i.e., such
Securities were valued at a premium above par). (See Part A--``Schedule of
Portfolio Securities'' for information relating to the particular series
described therein.) The proceeds distributable to a Unit Holder upon the
maturity of a Security which was valued at a premium on the date he acquired his
Units will be less than that portion of the purchase price for such Units which
was attributable to such Security (representing a loss of capital to such Unit
Holder).
The Portfolio of the Trust may consist of Securities the current market
value of some of which were below face value. A primary reason for the market
value of such Securities being less than face value at maturity is that the
interest coupons of such Securities are at lower rates than the current market
interest rate for comparably rated debt securities, even though at the time of
the issuance of such Securities the interest coupons thereon generally
represented then prevailing interest rates on comparably rated debt securities
then newly issued. The current yields (coupon interest income as a percentage of
market price, ignoring any original issue discount) of such Securities are lower
than the current yields (computed on the same basis) of comparably rated debt
securities of similar type newly issued at currently prevailing interest rates.
Securities selling at market discounts tend to increase in market value as they
approach maturity when the principal amount is payable. A market discount
tax-exempt Security held to maturity will have a larger portion of its total
return in the form of taxable income or gain and less in the form of tax-exempt
income than a comparable Security bearing interest at current market rates.
Under the provisions of the Internal Revenue Code in effect on the date of this
Prospectus, any gain attributable to market discount will not be recognized
until maturity, redemption or sale of the Securities or Units. The current yield
of such discounted securities carrying the same coupon interest rate and which
are otherwise comparable tends to be higher for securities with longer periods
to maturity than it is for those with shorter periods to maturity because the
market value of such securities with a longer period to maturity tends to be
less than the market value of such a bond with a shorter period to maturity. If
currently prevailing interest rates for newly issued and otherwise comparable
securities increase, the market discount of previously issued bonds will become
deeper and if such currently prevailing interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Market discount
attributable to interest rate changes does not indicate a lack of market
confidence in the issue.
Portfolio Summary
The Securities in the Portfolio of the Trust consist of Securities issued by
or on behalf of states, counties, municipalities or other political subdivisions
of the United States or issued by or on behalf of the Commonwealth of Puerto
Rico or possessions of the United States, or municipalities or other political
subdivisions thereof. The interest on such Securities is, with certain
exceptions, or upon their delivery will be, in each instance, in the opinion of
recognized bond counsel to the Issuer of such Securities or by ruling of the
Internal Revenue Service, exempt from all Federal income taxes under existing
law (but may be subject to state and local taxation). In the case of State
Trusts, the Securities are obligations of the specified state or counties,
municipalities, authorities or political subdivisions thereof or of the
Commonwealth of Puerto Rico or possessions of the United States, interest on
which will, in the opinion of recognized bond counsel to the issuing
governmental authorities, be exempt under existing law from Federal and the
specified state and local income taxes to the extent indicated. (See ``Tax
Status.'') Capital gains, if any, will be subject to Federal income tax and,
generally, to state and/or local income taxes.
The Portfolio of the Trust may contain Securities that are general
obligations of governmental entities and/or bonds that are guaranteed by
governmental entities. Such general obligations and guarantees are backed by the
taxing power of the respective entities. The ability of the issuer of a general
obligation bond to meet its obligation depends largely upon its economic
condition. Many issuers rely upon ad valorem real property taxes as a source of
revenue. Proposals in the form of state legislative or voter initiatives to
limit ad valorem real property taxes have been introduced in various states. It
is not presently possible to predict the impact of these or future proposals, if
adopted, on states, local governments or
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school districts or on their abilities to make future payments of their
outstanding debt obligations. The remaining issues are payable from the income
of specific projects or authorities and are not supported by the issuer's power
to levy taxes. This latter group of issues contains Securities that are also
supported by the moral obligations of governmental entities. In the event of a
deficiency in the debt service reserve funds of moral obligation Securities, the
governmental entity having the moral commitment may (but is not legally
obligated to) satisfy such deficiency. However, in the event of a deficiency in
the debt service reserve funds of Securities not backed by such moral
obligations, no such moral commitment of a governmental entity exists.
The Portfolio of the Trust may contain zero coupon bond(s) (including bonds
known as multiplier bonds, money multiplier bonds, capital appreciation bonds,
capital accumulator bonds, compound interest bonds, and discount maturity
payment bonds) or one or more other Securities which were issued with an
``original issue discount.'' ``Original issue discount'' bonds are acquired at
prices which represent a discount from face amount, principally because such
bonds bear interest at rates which are lower than currently-prevailing market
rates. A discounted bond held to maturity will have a larger portion of its
total return in the form of capital gain and less in the form of tax-exempt
income than a comparable bond bearing interest at current market rates. Zero
coupon bonds do not provide for the payment of any current interest and provide
for payment at maturity at face value unless sooner sold or redeemed. Zero
coupon bonds may be subject to more price volatility than conventional bonds,
i.e., the market value of zero coupon bonds is subject to greater fluctuation in
response to changes in interest rates than is the market value of bonds which
pay interest currently. Zero coupon bonds generally are subject to redemption at
compound accreted value based on par value at maturity. Because the issuer is
not obligated to make current interest payments, zero coupon bonds may be less
likely to be redeemed than coupon bonds issued at a similar interest rate. While
some types of zero coupon bonds, such as multipliers and capital appreciation
bonds, define par as the initial offering price rather than the maturity value,
they share the basic zero coupon bond features of (1) not paying interest on a
semi-annual basis and (2) providing for the reinvestment of the bond's
semi-annual earnings at the bond's stated yield to maturity. In addition, in the
event the portfolio is valued at less than the optional termination value, the
Trust may terminate at a time when the only Securities in the portfolio are zero
coupon bonds. The sale of such zero coupon bonds at such time may result in a
loss to Unit Holders.
The Portfolio of the Trust may contain Securities of housing authorities
payable from revenues derived by state housing finance agencies or municipal
housing authorities from repayments on mortgage and home improvement loans made
by such agencies. Since housing authority obligations, which are not general
obligations of a particular state, are generally supported to a large extent by
Federal housing subsidy programs, the failure of a housing authority to meet the
qualifications required for coverage under the Federal programs, or any legal or
administrative determination that the coverage of such Federal programs is not
available to a housing authority, could result in a decrease or elimination of
subsidies available for payment of principal and interest on such housing
authority's obligations. Weaknesses in Federal housing subsidy programs and
their administration may result in a decrease in subsidies available for payment
of principal and interest on housing authority bonds. Repayment of housing loans
and home improvement loans in a timely manner is dependent on factors affecting
the housing market generally and upon the underwriting and management ability of
the individual agencies (i.e., the initial soundness of the loan and the
effective use of available remedies should there be a default in loan payments).
Economic developments, including failure or inability to increase rentals,
fluctuations in interest rates and increasing construction and operating costs
may also have an adverse impact on revenues of housing authorities. In the case
of some housing authorities, inability to obtain additional financing could also
reduce revenues available to pay existing obligations.
The Portfolio of the Trust may contain Securities which are subject to the
requirements of Section 103A of the Internal Revenue Code of 1954, as amended,
(the ``1954 Code''), or Section 143 of the Internal Revenue Code of 1986, as
amended (the ``1986 Code'' or the ``Code''). Sections 103A and 143 provide that
obligations issued to provide single family housing will be exempt from Federal
income taxation if all of the proceeds of the issue (exclusive of issuance costs
and a reasonably required reserve) are used to make or acquire loans which meet
requirements including certain requirements which must be satisfied after
issuance. If proceeds of the issue are not used to acquire such loans, the
issuer may be required to redeem all or a portion of such issue from such
uncommitted proceeds to maintain the issue's tax exemption. Bond counsel to each
such issuer has issued an opinion that the interest on such Securities was
exempt from Federal income tax at the time the Securities were issued. The
failure of the issuers of such Securities to meet certain ongoing compliance
requirements imposed by Sections 103A and 143 could render the interest on such
Securities subject to Federal income taxation, possibly from the date of their
issuance. If interest on such Securities in a Trust is deemed to be subject to
Federal income taxation, the loss of tax-exempt status can be expected to
adversely affect the market value
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of such Securities. In this event and under the terms of the Indenture the
Sponsor may direct the sale of such Securities. The sale of such Securities in
such circumstances is likely to result in a loss to the Trust.
The Portfolio of the Trust may include certain housing authority obligations
whose tax exemption depends upon qualification under Section 103(b)(4)(A) of the
1954 Code, or Section 142 of the 1986 Code, and appropriate Treasury
Regulations. Both Sections require that specified minimum percentages of the
units in each rental housing project financed by tax-exempt debt are to be
continuously occupied by low or moderate income tenants for specified periods.
Department of the Treasury Regulations issued under Section 103(b)(4)(A) of the
1954 Code provide that in order to prevent possible retroactive Federal income
taxation of interest on such Securities certain conditions must be met. The
regulations provide, however, that such retroactive taxation will not occur if
the issuer corrects any non-compliance occurring after the issuance of the
Securities within a reasonable period after such non-compliance is first
discovered or should have been discovered by the issuer. Similar regulations are
expected to be issued under 1986 Code Section 142. If the interest on any of the
Securities in the Trust that are housing securities should ultimately be deemed
to be taxable, the Sponsor may instruct the Trustee to sell such Securities and,
since they would be sold as taxable securities, it is expected that such
Securities would have to be sold at a substantial discount from the current
market price of a comparable tax-exempt security.
The Portfolio of the Trust may contain Securities which contain provisions
which require the issuer to redeem such obligations at par from unused proceeds
of the issue within a stated period which typically does not exceed three years
from the date of issuance of such Securities. In periods in which interest rates
decline there may be increased redemptions of housing securities pursuant to
such redemption provisions. Such an increase in redemptions may occur because
conventional mortgage loans may have become available at interest rates equal to
or less than the interest rates charged on the mortgage loans previously made
available from the proceeds of such housing securities. Therefore, some issuers
of such housing securities may have experienced insufficient demand to complete
mortgage loan originations for all of the money made available from such
securities. In addition, mortgage loans made with the proceeds of housing
securities, in general, do not carry prepayment penalties and therefore certain
mortgage loans may be prepaid earlier than their maturity dates. If the issuers
of such housing securities are unable to or choose not to reloan these monies,
they will generally redeem housing securities in an amount approximately equal
to such prepayments. The Sponsor is unable to predict at this time whether such
redemptions will be made at a high rate. The disposition of such Securities may
result in a loss to the Trust.
The Portfolio of the Trust may contain Securities in the hospital facilities
category that are payable from revenues derived from hospitals and health care
facilities which, generally, were constructed or are being constructed from the
proceeds of such Securities. The continuing availability of sufficient revenues
is dependent upon several factors affecting all such facilities generally,
including, among other factors, the ability of the facilities to provide the
services required by patients, changes in Medicare and Medicaid reimbursement
regulations, the success of efforts by the states and the Federal government to
limit the cost of health care, changes in contracts between health care
institutions and public or private insurers, the timely completion of the
construction of projects and achieving and maintaining projected rates of
utilization. Additionally, a major portion of hospital revenues typically is
derived from Federal or state programs such as Medicare and Medicaid and from
Blue Cross and other insurers. The future solvency of the Medicare trust fund is
periodically subject to question. Changes in the compensation and reimbursement
formulas of these governmental programs or in the rates of insurers may reduce
revenues available for the payment of principal of, or interest on, hospital
revenue bonds. Governmental legislation or regulations and other factors, such
as the inability to obtain sufficient malpractice insurance, may also adversely
impact upon the revenues or costs of hospitals and may also adversely affect the
ratings of hospital revenue bonds held in the Trust. Future actions by the
Federal government with respect to Medicare and by the Federal and State
governments with respect to Medicaid, reducing the total amount of funds
available for either or both of these programs or changing the reimbursement
regulations, or their interpretations, could adversely affect the amount of
reimbursement available to hospital facilities. A number of additional
legislative proposals concerning health care are typically under review by the
United States Congress at any given time. These proposals span a wide range of
topics, including cost control, national health insurance, incentives for
competition in the provision of health care services, tax incentives and
penalties related to health care insurance premiums and promotion of prepaid
health care plans. The Sponsor is unable to predict the effect of these
proposals, if enacted, on any of the Securities in the Portfolio of the Trust.
The Portfolio of the Trust may contain Securities in the power and electric
facilities category payable from revenues derived from power facilities, which
generally include revenues from the sale of electricity generated and
distributed by
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power agencies using hydro-electric, nuclear, fossil or other power sources. The
ability of the issuers of such Securities to make payments of principal of, or
interest on, such obligations is dependent, among other things, upon the
continuing ability of such issuers to derive sufficient revenues from their
operations to meet debt service requirements. General problems of the power and
electric utility industry include difficulty in financing large construction
programs during an inflationary period, restrictions on operations and increased
cost and delays attributable to environmental considerations, uncertain
technical and cost factors relating to the construction and operation of nuclear
power generating facilities, the difficulty of the capital markets in absorbing
utility debt and equity securities, the availability of fuel for electric
generation at reasonable prices, the steady rise in fuel costs and the costs
associated with conversion to alternate fuel sources such as coal. Some of the
issuers of Securities in the Portfolio may own or operate nuclear facilities for
electric generation. Additional considerations in the case of such issuers
include the problems associated with the use and disposal of radioactive
materials and wastes, and other problems associated with construction,
licensing, regulation and operation of such facilities. In addition, Federal,
state or municipal governmental authorities may from time to time impose
additional regulations or take other governmental action which might cause
delays in the licensing, construction or operation of nuclear power plants, or
the suspension of operation of such plants which have been or are being financed
by proceeds of certain of the Securities held in the Portfolio of the Trust.
Such delays, suspensions or other action may affect the payment of interest on,
or the repayment of the principal amount of, such Securities. The Clean Air Act
Amendments of 1990 provide for attainment and maintenance of health protective
national ambient air quality standards. The goal of the law is to cut acid rain
pollutants by half, sharply reduce urban smog and eliminate most of the toxic
chemical emissions from industrial plants by the turn of the century. As
enacted, the law affects nearly all electric power facilities that burn oil or
coal. Greenhouse effect bills and hazardous waste bills may further increase the
cost of utility service. The Sponsor is unable to predict the ultimate form that
any such regulations or other governmental action may take or when such
legislation may be enacted or the resulting impact on the Securities in the
Portfolio of the Trust.
The Portfolio of the Trust may contain Securities which are in the
industrial revenue facilities category. Industrial Revenue Bonds (``IRBs'') are
tax-exempt securities issued by states, municipalities or public authorities to
finance the cost of acquiring, constructing or improving various projects,
including pollution control, environmental improvement, industrial or special
airport facilities. IRBs are payable from the income of specific facilities or
from payments made by private corporations to the state authorities issuing such
bonds. (See ``Tax Status.'')
The Portfolio of the Trust may contain Securities which are in the water and
sewer facilities category. Bonds in the water and sewer facilities category
include securities issued to finance public water and sewer projects for water
management and supply and sewer control and securities issued by public issuers
on behalf of private corporations for such projects. These bonds are payable
from the income of specific facilities or from payments made by such private
corporations to the state authorities issuing such bonds. The income of such
facilities is generated from the payment of user fees. The ability of state and
local water and sewer authorities to meet their obligations may be affected by
failure of municipalities to utilize fully the facilities constructed by these
authorities, economic or population decline and resulting decline in revenue
from user charges, rising construction and maintenance costs and delays in
construction of facilities, impact of environmental requirements, the difficulty
of obtaining or discovering new supplies of fresh water, the effect of
conservation programs and the impact of ``no growth'' zoning ordinances.
The Portfolio of the Trust may contain Securities which are in the revenue
obligations of universities and schools category. The ability of universities
and schools to meet their obligations is dependent upon various factors,
including the revenues, costs, and enrollment levels of the institutions. In
addition, their ability may be affected by declines in enrollment and tuition
revenue, the availability of Federal, state and alumni financial support, the
method and validity, under state constitutions, of present systems of financing
public education, fluctuations in interest rates and construction costs,
increased maintenance and energy costs, failure or inability to raise tuition or
room charges and adverse results of endowment fund investments.
The Portfolio of the Trust may contain Securities in the pollution control
facilities category. Bonds in the pollution control facilities category include
securities issued to finance public water, sewage or solid waste treatment
facilities and securities issued by a public issuer on behalf of a private
corporation to provide facilities for the treatment of air, water and solid
waste pollution. These Securities are payable from the income of specific
facilities, state authorities or from payments made by such private
corporations.
The Portfolio of the Trust may contain Securities which are in the
redevelopment facilities category. The purpose of redevelopment is to revitalize
deteriorated and/or underdeveloped areas within a community. As new construction
progresses, property values normally increase significantly and the ultimate
result is a proportionate increase in ad
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valorem property tax revenues. However, if, due to various economic factors, the
assessed valuation is reduced, such reduction may result in insufficient tax
revenues, which could in turn impair the ability of the issuer to make payments
of principal and/or interest on the bonds when due. A reduction in property tax
rates or delinquencies in the payment of property taxes could have a similar
adverse effect.
The Portfolio of the Trust may contain Securities in the resource recovery
category. The issuers of such Securities are municipalities or agencies or
authorities thereof that have allocated the proceeds of the issue towards the
construction and operation of a resource recovery facility operated by a
corporate operator. Payments on the bonds are dependent upon the
creditworthiness of the corporate operator of the particular project. The
operation of such facilities typically depends upon the delivery thereto of
specified quantities of solid waste from which refuse-derived fuel can be
extracted and in turn converted into electricity or steam by the facility. The
operation of the facility may be limited or totally curtailed from operating
because of failure to comply with governmental regulations concerning the
environment, failure to obtain necessary environmental permits, zoning permits
and other municipal ordinances or inability to maintain or renew such permits
because of an inability to comply with changes in government environmental
regulations. If the resource recovery facility is unable to operate or cannot
operate at full capacity, the corporate operator of such facility will be unable
to generate revenues necessary to cover payments on the resource recovery bonds.
Furthermore, the corporate operator's revenue is typically derived from the sale
of the power generated by the facility to a power agency or company under a
power purchase agreement. The continued flow and level of payments made by the
corporate operator might therefore depend upon the financial condition of the
purchaser under such a power agreement and the operator's continued ability to
generate the minimum amount of power required to be delivered thereunder. Such a
purchaser may be subject to the various general problems and risks associated
with the power industry and the regulatory environment in which it operates. A
decline in price of the extracted materials or the electricity or steam created
by the facility may also result in insufficient revenues generated by the
corporate operator as will an increase in its operating costs. Finally there may
be technological risks that become apparent in the long run that are not
presently apparent because of the relatively short history of these facilities
which risks may involve the successful construction or operation of such
facilities.
The Portfolio of the Trust may contain Securities of issuers in the
transportation facilities category. Bonds in the transportation facilities
category may be used to finance capital projects in connection with bridges,
highways, airports, tunnels, bus terminals, ports or other property owned by
transportation authorities. These bonds are generally payable from the income of
the specific facilities, existing facilities or future sales of bonds. The risks
of an investment in such bonds include a deterioration of national and regional
economic conditions, including fuel availability and costs, labor and equipment
costs and the nature of governmental regulations with respect to transportation,
commerce, energy, safety and environmental protection. Revenue of toll
facilities may be affected by lower costs of alternative modes of transportation
or construction and operation in its vicinity of another transportation facility
which could alter established transportation patterns. Other risks include
reductions in various Federal programs and a shift in local demographic trends.
The Portfolio of the Trust may contain Securities which are in the special
tax bond category. Special tax bonds are payable from and secured by the
revenues derived by a municipality from a particular tax. Special tax bonds are
not secured by the general tax revenues of the municipality and they do not
represent general obligations of the municipality. Therefore, the ability of the
issuers of special tax bonds to pay interest and/or principal on special tax
bonds may be adversely affected by the inability to collect all or part of the
special tax due to various factors including: a general decline in the local
economy or population, inability or failure to pay the special tax, failure to
develop property backing certain special tax bonds for reasons including
prohibitions or restraints on development such as failure to receive regulatory
agency approval for development and fluctuations in the real estate market, a
decline in the value of projects backing certain tax bonds, natural disasters or
environmental hazards.
The Portfolio of the Trust may contain Securities which are in the tax
allocation bond category. These Securities are typically secured by incremental
tax revenues collected on property within the areas where redevelopment
projects, financed by bond proceeds are located (``project areas''). Such
payments are expected to be made from projected increases in tax revenues
derived from higher assessed values of property resulting from development in
the particular project area and not from an increase in tax rates. Special risk
considerations include: reduction of, or a less than anticipated increase in,
taxable values of property in the project area, caused either by economic
factors beyond the Issuer's control (such as a relocation out of the project
area by one or more major property owners) or by destruction of property due to
natural or other disasters; successful appeals by property owners of assessed
valuations; substantial
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delinquencies in the payment of property taxes; or imposition of any
constitutional or legislative property tax rate decrease.
The Portfolio of the Trust may contain Securities secured in whole or in
part by governmental payments, pursuant to a lease agreement, service contract,
installment sale or other agreement. A governmental entity that enters into such
an agreement cannot obligate future governments to make payments thereunder, but
generally has covenanted to take such action as is necessary to include all such
payments due under such agreement in its annual budgets and to make the
appropriations therefor. However, a budgetary imbalance in future fiscal years
could affect the ability and willingness of the governing legislative body to
appropriate, and the availability of monies to make, the payments provided for
under such agreement. The failure of a governmental entity to meet its
obligations under such an agreement could result in an insufficient amount of
funds to cover the debt service on the Securities.
The Portfolio of the Trust may contain Securities in the certificates of
participation category. Each certificate represents an undivided and
proportionate interest in lease or installment purchase payments to be made by
governmental entities (which are the participants) to a third party for the use
and possession or acquisition of a particular project or equipment. Each payment
is divided into an interest portion and a principal portion, the interest
portion of which constitutes tax-exempt interest in the opinion of special
counsel retained in connection with the issue. The third party assigns its
rights to the payments to a trustee for the benefit of the certificate holders.
The amounts paid to the trustee by the participants are used to make the
payments of principal and interest due with respect to the certificates. The
obligation of a participant to make the payments does not constitute an
obligation for which the participant is obligated to levy or pledge any form of
taxation.
The Portfolio of the Trust may contain obligations of issuers located in the
Commonwealth of Puerto Rico. The ability of the issuers of such bonds to meet
their obligations may be affected by the economic and social problems facing
Puerto Rico. Unemployment in Puerto Rico remains high by United States
standards. The island's per capita personal income has been lower than in any
state of the United States. Transfer payments from the United States Government
under various social welfare programs (such as food stamps, social security and
veterans' benefits) contribute significantly to personal income.
The economy of Puerto Rico is closely integrated with that of the mainland
United States and is largely dependent for its development on U.S. policies and
programs that could be eliminated by the U.S. Congress. Aid for Puerto Rico's
economy has traditionally depended heavily on Federal programs which may not
always be available. An adverse effect on the Puerto Rican economy could result
from other U.S. policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such as food stamps,
curtailment of military spending and policies which could lead to a stronger
dollar. Growth in the Puerto Rican economy will depend on several factors
including the state of the U.S. economy.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors, medical
products, textiles and petrochemicals), agriculture (largely sugar), tourism and
the service sector (including finance, insurance, and real estate). Since Puerto
Rico is an island and is heavily dependent upon imports and exports, maritime
and air transportation are of basic importance to its economy. The manufacturing
and service sectors generate the largest portion of gross product. Most of the
island's manufacturing output is shipped to the mainland United States, which is
also the chief source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. The finance, insurance
and real estate components of this sector have recently experienced the most
growth. The level of tourism is affected by various factors, including the
strength of the U.S. dollar. During periods when the dollar is strong, tourism
in foreign countries becomes relatively more attractive.
The government sector of the Commonwealth plays an important role in the
economy of the island. Since World War II, the economic importance of
agriculture for Puerto Rico, particularly in the dominance of sugar production,
has declined. Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal maintenance
of sugar prices, the discontinuation of which could severely affect Puerto Rican
sugar production.
The Puerto Rican economy is affected by a number of Commonwealth and Federal
investment incentive programs. For example, Section 936 of the Internal Revenue
Code generally provides deferral of Federal income taxes for U.S. companies
operating on the island until profits are repatriated. No assessment can be made
as to whether or not Section 936 and other incentive programs will be continued.
It is expected that the elimination of Section 936, if it occurred, would have a
strongly negative impact on Puerto Rico's economy.
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There have for many years been two major viewpoints in Puerto Rico with
respect to the island's relationship to the United States, one essentially
favoring the existing commonwealth status (but with modifications providing for
greater local autonomy), and the other favoring statehood. A third viewpoint
favors independence from the United States. The Sponsor cannot predict what
effect, if any, a change in the relationship between Puerto Rico and the United
States would have on the issuers' ability to meet their obligations.
Each Trust consists of the Securities listed under Part A--``Schedule of
Portfolio Securities'' herein, as long as such Securities may continue to be
held from time to time in the Trust (including certain securities deposited in
the Trust in exchange or substitution for any Securities pursuant to the
Indenture) together with accrued and undistributed interest thereon and
undistributed and uninvested cash realized from the disposition of Securities.
BECAUSE CERTAIN OF THE SECURITIES FROM TIME TO TIME MAY BE REDEEMED OR WILL
MATURE IN ACCORDANCE WITH THEIR TERMS OR MAY BE SOLD UNDER CERTAIN CIRCUMSTANCES
DESCRIBED HEREIN, NO ASSURANCE CAN BE GIVEN THAT THE TRUST WILL RETAIN FOR ANY
LENGTH OF TIME ITS PRESENT SIZE AND COMPOSITION. THE TRUSTEE HAS NOT
PARTICIPATED IN THE SELECTION OF SECURITIES FOR THE TRUST, AND NEITHER THE
SPONSOR NOR THE TRUSTEE WILL BE LIABLE IN ANY WAY FOR ANY DEFAULT, FAILURE OR
DEFECT IN ANY SECURITIES.
To the best knowledge of the Sponsor, there was no material litigation
pending as of the Date of Deposit in respect of any Securities which might
reasonably be expected to have a material adverse effect upon the Trust. At any
time after the Date of Deposit, litigation may be initiated on a variety of
grounds with respect to Securities in the Trust. Such litigation may affect the
validity of such Securities or the tax-free nature of the interest thereon.
Although the outcome of litigation of such nature cannot be predicted, opinions
of bond counsel are delivered with respect to each Security on the date of
issuance to the effect that such Security has been validly issued and that the
interest thereon is exempt from Federal income tax under then existing law. If
legal proceedings are instituted after the Date of Deposit seeking, among other
things, to restrain or enjoin the payment of principal or interest on any of the
Securities or attacking their validity or the authorization or existence of the
issuer, the Sponsor may, in accordance with the Indenture, direct the Trustee to
sell such Securities and distribute the proceeds of such sale to Unit Holders.
In addition, other factors may arise from time to time which potentially may
impair the ability of issuers to meet obligations undertaken with respect to
Securities (e.g., state legislative proposals or voter initiatives to limit ad
valorem real property taxes).
Under the Federal Bankruptcy Code, political subdivisions, public agencies
or other instrumentalities of any state (including municipalities) which are
insolvent or unable to meet their debts as they mature and which meet certain
other conditions may file a petition in Federal bankruptcy court. Generally, the
filing of such a petition operates as a stay of any proceeding to enforce a
claim against the debtor. The Federal Bankruptcy Code also requires the debtor
to file a plan for the adjustment of its debts which may modify or alter the
rights of creditors. Under such a plan the Federal bankruptcy court may permit
the debtor to issue certificates of indebtedness which have priority over
existing creditors and which could be secured. Any plan of adjustment confirmed
by the court must be approved by the requisite majorities of creditors of
different classes. If confirmed by the bankruptcy court, the plan would be
binding upon all creditors affected by it. The Sponsor is unable to predict the
effect these bankruptcy provisions may have on the Trust.
Most of the Securities are subject to redemption prior to their stated
maturity dates pursuant to optional refunding redemption and/or sinking fund
provisions. In general, optional refunding redemption provisions are more likely
to be exercised when the evaluation of a Security is at a premium over par than
when it is at a discount from par. Generally, the evaluation of Securities will
be at a premium over par when market interest rates fall below the coupon rate
on such Securities. In addition, certain Securities may be redeemed in whole or
in part other than by operation of the stated redemption or sinking fund
provisions under certain unusual or extraordinary circumstances specified in the
instruments setting forth the terms and provisions of such Securities. The
redemption of a Security at par may result in a loss to the Trust. See Part
A--``Schedule of Portfolio Securities'' for those Securities in the Portfolio of
a Trust which as of the date of such schedule were evaluated in excess of par.
Certain Securities in the Portfolio may be subject to sinking fund provisions
during the life of a Trust. Such provisions are designed to redeem a significant
portion of an issue of Securities gradually over the life of such issue.
Particular bonds of an issue of Securities to be redeemed are generally chosen
by lot. The ``Schedule of Portfolio Securities'' herein contains a listing of
the optional refunding and sinking fund redemption provisions, if any, with
respect to each of the Securities.
BECAUSE THE REDEMPTION PRICE AND THE SPONSOR'S REPURCHASE PRICE ARE BASED ON
BID PRICES FOR THE SECURITIES, THEY MAY BE LESS THAN THE PRICE PAID BY A UNIT
HOLDER PURCHASING IN THE PRIMARY MARKET (OFFERING PRICES ARE NORMALLY HIGHER
THAN BID
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PRICES). DUE TO FLUCTUATIONS IN THE MARKET PRICE OF THE SECURITIES IN THE
PORTFOLIO AND THE FACT THAT THE PUBLIC OFFERING PRICE INCLUDES A SALES CHARGE,
AMONG OTHER FACTORS, THE AMOUNT REALIZED BY A UNIT HOLDER UPON THE REDEMPTION OR
SALE OF UNITS MAY BE LESS THAN THE PRICE PAID FOR SUCH UNITS BY THE HOLDER. (SEE
``RIGHTS OF UNIT HOLDERS--REDEMPTION--COMPUTATION OF REDEMPTION PRICE PER
UNIT,'' HEREIN.)
Unit Holders of a Trust not designated as Insured should omit the following
and continue with ``Objectives and Securities Selection.'' All of the Securities
in any Series not identified as insured are not insured and the following
section ``Insurance on the Securities in the Portfolio of an Insured Trust'' is
inapplicable to such Series.
Insurance on the Securities in the Portfolio of an Insured Trust
Certain of the Securities in an Insured Trust are insured to maturity by
AMBAC, CapMAC, ConnieLee, FSA, MBIA, MBIAC, BIGID and/or Financial Guaranty (the
``Insurance Companies'') at the cost of the issuer of such Security and the
remainder of the Securities are insured by Financial Guaranty under a Portfolio
Insurance policy obtained by such Insured Trust (see Part A--``Portfolio Summary
as of Date of Deposit'' for the percentage of the Securities in a Trust insured
by insurance obtained by the issuer and the percentage for which a Trust
purchased Portfolio Insurance). The respective insurance policies are
noncancellable and, except in the case of any Portfolio Insurance, will continue
in force so long as Securities are outstanding and the insurers remain in
business. The insurance policies guarantee the scheduled payment of principal
and interest on the Securities but do not guarantee the market value of the
Securities covered by each policy or the value of the Units. The value of any
insurance obtained by the issuer of a Security is reflected and included in the
market value of such Security. In the event the issuer of an insured Security
defaults in payment of interest or principal the insurance company insuring the
Security will be required to pay to the Trustee any interest or principal
payments due. Payment under the insurance policies is to be made in respect of
principal of and interest on Securities covered thereby which becomes due for
payment but is unpaid. Each such policy provides for payment of the defaulted
principal or interest due to a trustee or paying agent. In turn, such trustee
or paying agent will make payment to the bondholder (in this case, the Trustee)
upon presentation of satisfactory evidence of such bondholder's right to receive
such payment. The single premium for any insurance policy or policies obtained
by an issuer of Securities has been paid in advance by such issuer and any such
policy or policies are noncancellable and will continue in force so long as the
Securities so insured are outstanding. Insurance is not a substitute for the
basic credit of an issuer, but supplements the existing credit and provides
additional security. Contracts to purchase Securities are not covered by
insurance although Securities underlying such contracts are covered by insurance
upon physical delivery to the Trust.
A description of each of the insurers follows:
AMBAC Indemnity Corporation
AMBAC Indemnity Corporation (``AMBAC Indemnity'') is a Wisconsin-domiciled
stock insurance company, regulated by the Office of the Commissioner of
Insurance of the State of Wisconsin. Such regulation, however, is no guarantee
that AMBAC Indemnity will be able to perform on its contracts of insurance in
the event a claim should be made thereunder at some time in the future. AMBAC
Indemnity is licensed to do business in 50 states, the District of Columbia and
the Commonwealth of Puerto Rico, with admitted assets of approximately
$2,440,000,000 (unaudited) and statutory capital of approximately $1,387,000,000
(unaudited) as of March 31, 1996. Statutory capital consists of statutory
contingency reserve and AMBAC Indemnity's policyholders' surplus. AMBAC
Indemnity is a wholly owned subsidiary of AMBAC, Inc., a 100% publicly-held
company. Moody's Investors Service, Inc., Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., and Fitch Investors Service, LP
have each assigned a triple-A claims-paying ability rating to AMBAC Indemnity.
The address of the administrative offices of AMBAC Indemnity is One State Street
Plaza, New York, New York 10004.
Capital Markets Assurance Corporation
Capital Markets Assurance Corporation (``CapMAC'') is a New York-domiciled
monoline stock insurance company which engages only in the business of financial
guarantee and surety insurance. CapMAC is licensed in 50 states in addition to
the District of Columbia, the Commonwealth of Puerto Rico and the territory of
Guam. CapMAC insures structured asset-backed, corporate, municipal and other
financial obligations in the U.S. and international markets. CapMAC also
provides financial guarantee reinsurance for structured asset-backed, corporate,
municipal and other financial obligations written by other major insurance
companies. CapMAC is wholly owned by CapMAC Holdings Inc.
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D Securities originally insured by BIGI have been reinsured by MBIAC pursuant to
reinsurance agreements.
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(``Holdings''). Neither CapMAC Holdings Inc. nor any of its stockholders is
obligated to pay any claims under any surety bond issued by CapMAC or any debts
of CapMAC or to make additional capital contributions. As of June 30, 1996 and
December 31, 1995, CapMAC had statutory capital (policy holders surplus and
contingency reserve) of $250.2 million and $239.9 million, respectively.
CapMAC's claims-paying ability is rated triple-A by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services, A Division of The McGraw-Hill
Companies, Inc., and Duff & Phelps Credit Rating Co., and Nippon Investors
Service, Inc., a Japanese rating agency. Such ratings reflect only the views of
the respective ratings agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by such rating
agencies. The address of CapMAC is 885 Third Avenue, New York, New York 10022.
Connie Lee Insurance Co.
Connie Lee Insurance Co. (``ConnieLee''), a Wisconsin stock insurance
company, is a wholly owned subsidiary of the College Construction Loan Insurance
Association, an insurance holding company authorized and established by Congress
as a private corporation under the laws of the District of Columbia. The
legislation establishing the company stipulated that it provide a mix of direct
insurance and reinsurance business to issuers incurring debt obligations for an
``educational facilities purpose.'' The enabling legislation calls for ConnieLee
to provide credit enhancement services to colleges, universities, teaching
hospitals, and other educational institutions. As of March 31, 1996
policyholders' surplus (unaudited) was $111,462,000, stockholders' equity
(unaudited) was $161,352,000 and total assets (unaudited) were $258,462,000.
Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies,
Inc., has rated the claims-paying ability of ConnieLee ``AAA.'' The address of
ConnieLee is 2445 M Street, N.W., Washington, D.C. 20037.
Financial Security Assurance
Financial Security Assurance (``FSA'') is a monoline insurance company
incorporated in 1984 under the laws of the State of New York. Financial Security
is a wholly owned subsidiary of Financial Security Assurance Holdings Ltd.
(``Holdings''), a New York Stock Exchange listed company. Major shareholders of
Holdings include Fund American Enterprises Holdings, Inc., US West Capital
Corporation and The Tokio Marine and Fire Insurance Co., Ltd. No shareholder of
Holdings is obligated to pay any debt of FSA or any claim under any insurance
policy issued by FSA or to make any additional contribution to the capital of
FSA. FSA is licensed to engage in financial guaranty insurance business in all
50 states, the District of Columbia and Puerto Rico.
FSA and its subsidiaries are engaged in the business of writing financial
guaranty insurance, principally in respect of securities offered in domestic and
foreign markets. FSA and its subsidiaries principally insure asset-backed,
collateralized and municipal securities. Financial Security insures both newly
issued securities sold in the primary market and outstanding securities sold in
the secondary market that satisfy Financial Security's underwriting criteria.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by FSA or either of its
subsidiaries are reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective capital, surplus and reserves,
subject to applicable statutory risk limitations. In addition, FSA reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by FSA as a risk
management device and to comply with certain statutory and rating agency
requirements; it does not alter or limit FSA's obligations under any financial
guaranty insurance policy.
On December 20, 1995, Capital Guaranty Corporation merged with a subsidiary
of Financial Security Assurance Holdings Ltd. In connection with such merger,
(i) CGIC, the principal operating subsidiary of Capital Guaranty Corporation,
became a wholly-owned subsidiary of FSA, the principal operating subsidiary of
Financial Security Assurance Holdings Ltd., and (ii) the corporate name of CGIC
was changed to Financial Security Assurance of Maryland Inc.
As of June 30, 1996, the unearned premium reserve of FSA was $351,180,000
(unaudited) and its total shareholder's equity was $785,072,000 (unaudited).
FSA's claims-paying ability is rated ``Aaa'' by Moody's Investors Service, Inc.
and ``AAA'' by Standard & Poor's Corporation. The principal executive offices of
Financial Security are located at 350 Park Avenue, New York New York 10022.
MBIA
The insurance companies comprising MBIA and their respective percentage
liabilities are as follows: The Aetna Casualty and Surety Company, (33%);
Fireman's Fund Insurance Company, (30%); The Travelers Indemnity Company, (15%);
Cigna Property and Casualty Company, (12%); and The Continental Insurance
Company, (10%). As a several
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obligor, each such insurance company will be obligated only to the extent of its
percentage of any claim under the MBIA policy and will not be obligated to pay
any unpaid obligation of any other member of MBIA. Each insurance company's
participation is backed by all of its assets. However, each insurance company is
a multiline insurer involved in several lines of insurance other than municipal
bond insurance, and the assets of each insurance company also secure all of its
other insurance policy and surety bond obligations. The total New York statutory
assets of the participating insurance companies as of March 31, 1995 was
$35,133,937,000, the statutory liabilities were $28,100,583,000 and
policyholder's surplus was $7,033,354,000. Standard & Poor's Corporation rates
all new issues insured by MBIA ``AAA'' and Moody's Investors Service rates all
bond issues insured by MBIA ``Aaa''. The address of MBIA is 113 King Street,
Armonk, New York 10504.
MBIAC
MBIAC (MBIA Insurance Corporation ``MBIAC'') is the principal operating
subsidiary of MBIA, Inc. Neither MBIA, Inc. nor its shareholders are obligated
to pay the debts of or claims against MBIAC. MBIAC is a limited liability
corporation rather than a several liability association. MBIAC is domiciled in
the State of New York and licensed to do business in all 50 states, the District
of Columbia and the Commonwealth of Puerto Rico.
As of March 31, 1996, MBIAC had admitted assets (unaudited) of $4.0 billion,
total liabilities (unaudited) of $2.7 billion, and total capital and surplus
(unaudited) of $1.3 billion, determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. Standard
& Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. rates
all new issues insured by MBIAC and Moody's Investors Service rates all bond
issues insured by MBIAC ``AAA'' and ``Aaa,'' respectively. The address of MBIAC
is 113 King Street, Armonk, New York 10504.
Portfolio Insurance
In an effort to protect Unit Holders against delay in payment of interest
and against principal loss, insurance (``Portfolio Insurance'') may be obtained
by an Insured Trust from Financial Guaranty for those Securities not insured by
the issuer, guaranteeing the scheduled payment of interest and principal with
respect to certain of the Securities deposited in and delivered to an Insured
Trust. Any Portfolio Insurance policy obtained by an Insured Trust will be
noncancellable and will continue in force so long as an Insured Trust is in
existence and the securities described in the policy continue to be held by an
Insured Trust (see Part A--``Schedule of Portfolio Securities'') and Financial
Guaranty remains in business. As a result of any such Portfolio Insurance and
any Insurance obtained by the issuer from the Insurance Companies the Units of
an Insured Trust were rated AAA by Standard & Poor's Corporation as of the Date
of Deposit. (See ``Bond Ratings.'') Portfolio Insurance obtained by an Insured
Trust is effective only while the Securities thus insured are held in an Insured
Trust.
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. If an
issue is accepted for insurance, a noncancellable policy for the scheduled
payment of interest and principal on the Security is issued by the Insurance
Company. A single premium is paid by the issuer for Securities insured by the
issuer. A monthly premium is paid by an Insured Trust for the Portfolio
Insurance obtained by such Insured Trust. Upon the sale of a Security from an
Insured Trust, the Trustee, pursuant to an irrevocable commitment of Financial
Guaranty, has the right to obtain permanent insurance (i.e., insurance to
maturity of the Security regardless of the identity of the holder thereof)
(``Permanent Insurance'') with respect to such Security upon the payment of a
single predetermined insurance premium from the proceeds of the sale of such
Security. An Insured Trust will obtain and pay a premium for the Permanent
Insurance upon the sale of a Security if the Sponsor determines that such sale
will result in a net realization greater than would the sale of such Security
without the purchase of such Permanent Insurance. Accordingly, any Security
covered by Portfolio Insurance in an Insured Trust is eligible to be sold on an
insured basis. The premium for any Permanent Insurance with respect to a
Security is determined based upon the insurability of such Security as of the
Date of Deposit and will not be increased or decreased thereafter. Standard &
Poor's Corporation and Moody's Investors Service have rated the claims-paying
ability of Financial Guaranty ``AAA'' and ``Aaa,'' respectively.
Neither the Public Offering Price nor any evaluation of Units for purposes
of repurchases or redemptions reflects any element of value for any Portfolio
Insurance obtained and any Permanent Insurance obtainable by an Insured Trust
unless a Security is in default in payment of principal or interest or in
significant risk of such default. The value of any Permanent Insurance will be
equal to the difference between (i) the market value of defaulted Securities
assuming the exercise of the right to obtain Permanent Insurance (less the
insurance premium attributable to the purchase of Permanent Insurance) and (ii)
the market value of such defaulted Securities not covered by Permanent
Insurance. In
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addition, the Evaluator will consider the ability of Financial Guaranty to meet
its commitments under an Insured Trust's insurance policy, including the
commitments to issue Permanent Insurance.
Nonpayment of premiums on a Portfolio Insurance policy obtained by an
Insured Trust will not result in the cancellation of the insurance but will
permit Financial Guaranty to take action against the Insured Trust to recover
premium payments due it. Premium rates for each issue of Securities protected by
Portfolio Insurance obtained by an Insured Trust are fixed for the life of an
Insured Trust.
Under the provisions of a Financial Guaranty insurance policy, Financial
Guaranty unconditionally and irrevocably agrees to pay to Citibank, N.A., or its
successor, as its agent (the ``Fiscal Agent''), that portion of the principal of
and interest on a Security which shall become due for payment but shall be
unpaid by reason of nonpayment by the issuer of the Security and which has not
been paid by insurance of the Security obtained by the issuer. The term ``due
for payment'' means, when referring to the principal of a Security, its stated
maturity date or the date on which it shall have been called for mandatory
sinking fund redemption and does not refer to any earlier date on which payment
is due by reason of call for redemption (other than by mandatory sinking fund
redemption), acceleration or other advancement of maturity. When used in
reference to interest on a Security, the term ``due for payment'' means the
stated date for payment of interest. When, however, the interest on a Security
shall have been determined (as provided in the underlying documentation relating
to such Security) to be subject to Federal income taxation, the term ``due for
payment'' also means, (i) when referring to the principal of such Security, the
date on which such Security has been called for mandatory redemption as a result
of such determination of taxability, and (ii) when referring to interest on such
Security, the accrued interest at the rate provided in such documentation to the
date on which such Security has been called for such mandatory redemption,
together with any applicable redemption premium.
Financial Guaranty will make any such payments to the Fiscal Agent on the
date such principal or interest becomes due for payment or on the business day
next following the day on which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse to the Trustee
the face amount of principal and interest which is then due for payment but is
unpaid by reason of nonpayment by the issuer but only upon receipt by the Fiscal
Agent of (i) evidence of the Trustee's right to receive payment of the principal
or interest due for payment and (ii) evidence, including any appropriate
instruments of assignment, that all of the rights to payment of such principal
or interest due for payment shall thereupon vest in Financial Guaranty. Upon any
such disbursement, Financial Guaranty shall become the owner of the Security,
appurtenant coupon or right to payment of principal or interest on such
Security, and shall succeed to all of the Trustee's rights thereunder, including
the right to payment thereof.
In determining whether to insure bonds, Financial Guaranty applies its own
standards which are not necessarily the same as the criteria used in regard to
the selection of bonds by the Sponsor. Financial Guaranty's determination to
issue insurance with respect to a bond is made prior to or on the date of
deposit of a bond in an Insured Trust. Any Portfolio Insurance obtained by an
Insured Trust covers certain Securities deposited in an Insured Trust and
physically delivered to the Trustee or a custodian for an Insured Trust in the
case of bearer bonds or registered in the name of the Trustee or its nominee or
delivered along with an assignment in the case of registered bonds, or
registered in the name of the Trustee or its nominee in the case of Securities
held in book-entry form. Contracts to purchase Securities are not covered by
insurance obtained by an Insured Trust although Securities underlying such
contracts are covered by insurance upon physical delivery to the Trust.
Insurance obtained by an Insured Trust or by the Security issuer does not
guarantee the market value of the Securities or the value of the Units. Any
Portfolio Insurance obtained by an Insured Trust is effective only as to
Securities owned by and held in such Insured Trust. In the event of a sale of
any such Security by the Trustee, the Portfolio Insurance terminates as to such
Security on the date of sale but the Trustee may exercise the right to obtain
Permanent Insurance with respect to the Security upon the payment of an
insurance premium from the proceeds of the sale of such Security. Except as
indicated below, Portfolio Insurance obtained by an Insured Trust has no effect
on the price or redemption value of Units. The Evaluator will attribute a value
to the Portfolio Insurance obtained by an Insured Trust (including the right to
obtain Permanent Insurance) for the purpose of computing the price or redemption
value of Units only if the Securities covered by such insurance are in default
in payment of principal or interest or, in the Sponsor's opinion, in significant
risk of such default. (See ``Public Offering of Units--Public Offering Price.'')
Insurance obtained by the issuer of a Security is effective so long as such
Security is outstanding. Such insurance may be considered to represent an
element of market value in regard to the Securities thus insured.
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A contract of Portfolio Insurance relating to an Insured Trust and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and the Trust. Otherwise neither Financial Guaranty nor its
parent, FGIC Corporation, or any affiliate thereof has any significant
relationship, direct or indirect, with a Trust or the Sponsor, except that the
Sponsor has in the past and may from time to time in the future, in the normal
course of its business, participate as sole underwriter or as manager or as a
member of underwriting syndicates in the distribution of new issues of municipal
bonds in which the investors or the affiliates of FGIC Corporation have or will
be participants or for which a policy of insurance guaranteeing the scheduled
payment of interest and principal has been obtained from Financial Guaranty.
Neither an Insured Trust nor the Units nor the Portfolio is insured directly or
indirectly by FGIC Corporation.
The purpose of any Portfolio Insurance obtained by an Insured Trust is to
obtain a higher yield on the Securities in the Portfolio than would be available
if all the Securities in such Portfolio had the Standard & Poor's Corporation
``AAA,'' Moody's Investors Service ``Aaa'' and/or Fitch Investors Service, Inc.
``AAA'' rating(s) and, at the same time, to have the protection of Portfolio
Insurance with respect to scheduled payment of interest and principal on the
Securities. There is, of course, no certainty that such purpose will be
realized.
Financial Guaranty
Financial Guaranty Insurance Company (``Financial Guaranty'') is a
wholly-owned subsidiary of FGIC Corporation (the ``Corporation''), a Delaware
holding company. Financial Guaranty, domiciled in the State of New York,
commenced its business of providing insurance and financial guarantees for a
variety of investment instruments in January 1984. The Corporation is a
subsidiary of General Electric Capital Corporation. The Corporation and General
Electric Capital Corporation are not obligated to pay the debts of or the claims
against Financial Guaranty.
Financial Guaranty, in addition to providing insurance for the payment of
interest on and principal of municipal bonds and notes held in unit investment
trust portfolios, provides insurance for all or portions of new issues of
municipal bonds and notes and municipal bonds and notes held by mutual funds.
Financial Guaranty expects to provide other forms of financial guaranties in the
future. It is also authorized to write fire, property damage liability,
workmen's compensation and employer's liability and fidelity and surety
insurance. As of March 31, 1996, the total capital and surplus of Financial
Guaranty was approximately $1,032,675,000 as reported to the State of New York
Insurance Department. Although the Sponsor has not undertaken an independent
investigation of Financial Guaranty, the Sponsor is not aware that the
information herein is inaccurate or incomplete.
Financial Guaranty is currently licensed or otherwise authorized to provide
insurance in all 50 states and the District of Columbia, files reports with
state insurance regulatory agencies and is subject to audit and review by such
authorities. Financial Guaranty is also subject to regulation by the State of
New York Insurance Department. Such regulation, however, is no guarantee that
Financial Guaranty will be able to perform on its commitments or contracts of
insurance in the event claims should be made thereunder at some time in the
future. Fitch Investors Service, Inc., Standard & Poor's Ratings Services, A
Division of The McGraw-Hill Companies, Inc. and Moody's Investors Service have
rated the claims paying ability of Financial Guaranty ``AAA,'' ``AAA'' and
``Aaa,'' respectively. The address of Financial Guaranty is 115 Broadway, New
York, New York 10006.
The information relating to the above referenced insurers has been furnished
by publicly available sources including the respective issuers. The financial
information contained herein with respect to Financial Guaranty is unaudited but
appears in reports or other materials filed with state insurance regulatory
authorities and is subject to audit and review by such authorities. No
representation is made herein as to the accuracy or adequacy of such information
or as to the absence of material adverse changes in such information subsequent
to the date thereof, but the Sponsor is not aware that the information herein is
inaccurate or incomplete.
Because the Securities in an Insured Trust are insured by the Insurance
Companies as to the scheduled payment of principal and interest and on the basis
of the financial condition and the method of operation of the Insurance
Companies, Standard & Poor's Corporation has assigned a ``AAA'' investment
rating to Units of an Insured Trust. This is the highest rating assigned to
securities by Standard & Poor's Corporation. (See ``Bond Ratings.'') The
obtaining of this rating by an Insured Trust should not be construed as an
approval of the offering of the Units by Standard & Poor's Corporation or as a
guarantee of the market value of an Insured Trust or the Units. Standard &
Poor's Corporation has indicated that this rating is not a recommendation to
buy, hold or sell Units nor does it take into account the extent to which
expenses of an Insured Trust or sales by an Insured Trust of Securities for less
than the purchase price paid by an Insured Trust will reduce payment to Unit
Holders of the interest and principal required to be paid on the insured
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Securities. There is no guarantee that the ``AAA'' investment rating with
respect to the Securities or Units will be maintained.
Objectives and Securities Selection
The objectives of each Trust are the providing of interest income which, in
the opinion of counsel is, under existing law, excludable from gross income for
Federal income tax purposes through investment in a fixed portfolio consisting
primarily of investment grade long-term (or intermediate term if so designated
in Part A or with maturities as designated in Part A) state, municipal and
public authority debt obligations, and the conservation of capital and, in the
case of a Trust with a deferred sales charge feature ``DSC,'' the payment of the
DSC from the interest payments, if any, on, and the principal paid at the
maturity of the Securities deposited to pay the DSC. There is, of course, no
guarantee that a Trust's objectives will be achieved.
The Prudential Insurance Company of America, the indirect parent of the
Sponsor, or a division or subsidiary thereof (collectively, ``Prudential'') has
selected and negotiated for the Securities purchased by the Sponsor. In
selecting Securities for a Trust, Prudential considered factors established by
the Sponsor including, among others, the following: (a) ratings as of the Date
of Deposit in the category of ``BBB'' or better by Standard & Poor's Corporation
or ``Baa'' or better by Moody's Investors Service or ``BBB'' or better by Fitch
Investors Service, Inc. (see ``Bond Ratings'') or comparable credit
characteristics in the opinion of Prudential, (b) maturities or mandatory
payment dates consistent with the life and objectives of a Trust, (c) yields of
the Securities relative to other securities of comparable quality and maturity,
(d) the availability and cost of, rating of the claims paying ability of an
insurer of, insurance of the scheduled payment of principal and interest, when
due, on the Securities in an Insured Trust, and (e) diversification of the
Securities as to purpose and location of Issuer (purpose only in the case of
State Trusts).
Prudential, for selecting and negotiating the purchase of the Securities,
will receive from the Sponsor a fee based on the face amount of Securities
selected and a portion of the Sponsor's net profit on the Date of Deposit.
The Trust may contain Securities which were acquired through the Sponsor's
participation as sole underwriter or manager or as a member of the underwriting
syndicate for such Securities. (See Part A--``Portfolio Summary.'') An
underwriter typically purchases securities, such as the Securities in each
Trust, from the issuer on a negotiated or competitive bid basis in order to
market such securities to investors at a profit.
The yields on Securities of the type deposited in each Trust are dependent
on a variety of factors, including interest rates, general conditions of the
municipal bond market, size of a particular offering, the maturity of the
obligation and rating of the issue. The ratings represent the opinions of the
rating organizations as to the quality of the securities which they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, securities with the same maturity,
coupon and rating may have different yields, while securities of the same
maturity and coupon with different ratings may have the same yield.
Estimated Annual Income Per Unit
On a recent date the Estimated Net Annual Income per Unit of the Trust was
the amount set forth above under Part A--``Summary of Essential Information.''
This figure is computed by dividing the aggregate net annual interest income
(i.e., less estimated annual fees and expenses of the Sponsor, the Trustee,
counsel and the Evaluator), ignoring any original issue discount, by the number
of Units outstanding. Thereafter, the net annual interest income per Unit for
the Trust will change whenever Securities mature, are redeemed or are sold, or
as the expenses of the Trust change. The fees of the Trustee, the Sponsor,
counsel and the Evaluator are subject to change without the consent of Unit
Holders, to the extent provided under ``Expenses and Charges.''
Interest on the Securities, less estimated expenses of the Trust, is
expected to accrue at the daily rate shown under Part A--``Summary of Essential
Information.'' This rate will change as Securities mature, are redeemed or are
sold, or as the expenses of the Trust change.
The Public Offering Price will vary due to fluctuations in the offering
and/or bid prices of the Securities and the net annual interest income per Unit
may change as Securities mature, are redeemed or are sold or as the expenses of
the Trust change.
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TAX STATUS
In the opinion of bond counsel to the issuing governmental authorities,
interest income on the Securities comprising the Portfolio of the Trust is
(except in certain instances depending upon the Unit Holder, as described below)
exempt from Federal income tax under the provisions of the Internal Revenue Code
as in effect at the date of issuance. In the case of Securities issued at a time
when the 1954 Code was in effect, redesignation of the Code as the Internal
Revenue Code of 1986 (the ``Code'' or the ``1986 Code'') has not adversely
affected the exemption from Federal income tax of interest income on such
Securities. Gain (exclusive of any earned original issue discount) realized on
sale or redemption of the Securities or on sale of a Unit is, however,
includible in gross income for Federal income tax purposes and for state and
local income tax purposes generally. (It should be noted in this connection that
such gain does not include any amounts received in respect of accrued interest.)
Such gain may be capital gain or ordinary income and if capital gain may be long
or short-term depending upon the facts and circumstances. Securities selling at
market discount tend to increase in market value as they approach maturity when
the principal amount is payable, thus increasing the potential for taxable gain
on their maturity, redemption or sale.
In the opinion of Messrs. Cahill Gordon & Reindel, special counsel for the
Sponsor, under existing law:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and interest on an underlying Security which is exempt
from Federal income tax under the Code when received by the Trust will
retain its status as tax exempt interest for Federal income tax purposes to
the Unit Holders.
Each Unit Holder will be considered the owner of a pro rata portion of
the Trust's assets under Sections 671-678 of the Code. Each Unit Holder will
be considered to have received a pro rata share of interest derived from the
Trust's assets when it is received by the Trust and each Unit Holder will
have a taxable event when an underlying Security is disposed of (whether by
sale, exchange, redemption, or payment at maturity) or when the Unit Holder
redeems or sells Units. The total tax cost of each Unit will equal the cost
of Units (including the up-front sales charge) plus the amount of
organizational expenses borne by the Unit Holder and the portion of the
deferred sales charge paid from interest on the DSC Payment Securities. The
total tax cost of each Unit to a Unit Holder is allocated among each of the
underlying Securities (in accordance with the proportion of the Trust's
assets comprised by each Security) in order to determine the Unit Holder's
per Unit tax cost for each Security, and the tax cost reduction requirements
of the Code relating to amortization of bond premium will apply separately
to the per Unit tax cost of each Security. Therefore, under some
circumstances a Unit Holder may realize taxable gains when Units are sold or
redeemed for an amount equal to or less than the Unit Holder's original
cost. The relevant tax reporting forms sent to Unit Holders will reflect the
actual amount paid to them net of any deferred sales charge. Accordingly,
Unit Holders should not increase the total cost for their Units by the
amount of the principal of DSC Payment Securities used to pay a portion of
the deferred sales charge.
When a contract to acquire an underlying Security is settled after the
Unit Holder's settlement date for a Unit, the Unit Holder's proportionate
share of the interest accrued on the underlying Security on the Security
settlement date will exceed the portion of the purchase price that was
allocable to interest accrued on the Unit settlement date. A Unit Holder
will not be subject to Federal income tax on the Unit Holder's proportionate
share of the interest which accrues during the period between the Unit
settlement date and the Security settlement date either when such interest
is received by the Trust or when it is distributed to the Unit Holder.
Under the income tax laws of the State and City of New York, the income of
the Trust will be treated as the income of its Unit Holders.
If the proceeds received by the Trust upon the sale or redemption of an
underlying Security exceed a Unit Holder's adjusted tax cost allocable to the
Security disposed of, that Unit Holder will realize a taxable gain to the extent
of such excess. Conversely, if the proceeds received by the Trust upon the sale
or redemption of an underlying Security are less than a Unit Holder's adjusted
tax cost allocable to the Security disposed of, that Unit Holder will realize a
loss for tax purposes to the extent of such difference.
Any gain recognized on a sale or exchange of a Unit Holder's pro rata
interest in a Security, and not constituting a realization of accrued ``market
discount,'' and any loss will be a capital gain or loss, except in the case of a
dealer or financial institution. Gain realized on the disposition of the
interest of a Unit Holder in a market discount Security is treated as ordinary
income to the extent the gain does not exceed the accrued market discount. A
Unit Holder has an interest in a market discount Security in a case in which the
tax cost for the Unit Holder's pro rata interest in the Security
B-15
<PAGE>
<PAGE>
is less than the stated redemption price thereof at maturity (or the issue price
plus original issue discount accrued up to the acquisition date, in the case of
an original issue discount Security). If the market discount is less than .25%
of the stated redemption price of the Security at maturity multiplied by the
number of complete years to maturity, the market discount shall be considered to
be zero. Any capital gain or loss arising from the disposition of a Unit
Holder's pro rata interest in a Security will be a long-term capital gain or
loss if the Unit Holder has held his or her Units and the Trust has held the
Security for more than one year. 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 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.
Opinions relating to the validity of the underlying Securities and the
exemption of interest thereon from Federal income tax are rendered by bond
counsel to the issuing governmental authorities. It is the view of The
Prudential Investment Corporation, which is an affiliate of the Sponsor, that
interest on the Securities will not be a tax preference item unless otherwise
indicated on the ``Schedule of Portfolio Securities'' as Securities the interest
on which is in the opinion of bond counsel, treated as a tax preference item for
alternative minimum tax purposes. See ``Schedule of Portfolio Securities.''
Neither the Sponsor nor its counsel have made any review of proceedings relating
to the issuance of underlying Securities or the bases for bond counsel's
opinions or the view of The Prudential Investment Corporation, the Sponsor's
affiliate. The Sponsor and its counsel are, however, aware of nothing which
would indicate to the contrary.
Furthermore, exemption of interest on a Security from regular income tax
requires that the issuer of the Security (or other user of the Security
proceeds) meet certain ongoing compliance requirements. Failure to meet these
requirements could result in loss of the exemption and such loss of exemption
could apply retroactively from the date of issuance. A Security may provide that
if a loss of exemption is determined to have occurred, the Security is
immediately due and payable; and, in the case of a secured Security, that the
security can be reached if the Security is not then paid. If such a loss of
exemption were to occur and the Security did not contain such an acceleration
clause, or if the acceleration did not in fact result in payment of the
Security, the affected Security would likely be sold as a taxable bond. Sale of
a Security as a taxable bond would likely result in a realization of proceeds
less than the cost of the Security.
In the case of certain of the underlying Securities comprising the Portfolio
of the Trust, the opinions of bond counsel indicate that although interest on
such underlying Securities is generally exempt from Federal income tax, such
underlying Securities are ``industrial development bonds'' under the 1954 Code
or ``private activity bonds'' under the 1986 Code as those terms are defined in
the relevant Code provisions, and interest on such underlying Securities will
not be exempt from Federal income tax for any period during which such
underlying Securities are held by a ``substantial user'' of the facilities
financed by the proceeds of such underlying Securities (or a ``related person''
to such a ``substantial user''). In the opinion of Messrs. Cahill Gordon &
Reindel, interest attributable to such underlying Securities (although not
subject to Federal income tax to the Trust), if received by the Trust for the
account of a Unit Holder who is such a ``substantial user'' or ``related
person,'' will be taxable (i.e., not tax exempt) to the same extent as if such
underlying Securities were held directly by the Unit Holder as owner. No
investigation as to the users or of the facilities financed by the underlying
Securities has been made by the Sponsor or its counsel. Investors should consult
their tax counsel for advice with respect to the effect of these provisions on
their particular tax situations.
In the case of an Insured Trust, assuming that the insurance policies and
any related agreements described in ``Insurance on the Securities in the
Portfolio of an Insured Trust'' have been validly issued, are of standard form
with respect to subrogation and do not relieve the issuer of the Security of its
obligations thereunder, and provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable, customary and
consistent with the reasonable expectation that the issuer of the Securities,
rather than the insurer, will pay debt service on the Securities, Messrs. Cahill
Gordon & Reindel are of the opinion that proceeds received under the insurance
policies representing matured interest on a defaulted obligation will be
excludable from Federal gross income if, and to the same extent, such interest
would have been so excludable if paid by the issuer of such defaulted
obligation.
Persons in receipt of Social Security benefits should be aware that a
portion of such Social Security benefits may be includible in gross income. For
a taxpayer whose modified adjusted gross income plus one-half of his or her
Social Security benefits does not exceed $34,000 ($44,000 for married taxpayers
filing a joint return), the includible amount is the lesser of (i) one-half of
the Social Security benefits or (ii) one-half of the amount by which the sum of
``modified adjusted gross income'' plus one-half of the Social Security benefits
exceeds $25,000 in the case of unmarried taxpayers and $32,000 in the case of
married taxpayers filing a joint return. All other taxpayers receiving Social
Security benefits are required to include up to 85% of their Social Security
benefits in income.
B-16
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<PAGE>
Modified adjusted gross income is adjusted gross income determined without
regard to certain otherwise allowable deductions and exclusions from gross
income, plus tax exempt interest on municipal obligations including interest on
the Securities. To the extent that Social Security benefits are includible in
gross income they will be treated as any other item of gross income and
therefore may be taxable.
Investors should also consult their tax counsel for advice with respect to
the effect, if any, on the tax cost of Units to a Unit Holder in cases in which
a contract to acquire a Security is settled after the settlement date for such
Units and the Unit Holder's proportionate share of the interest accrued on the
underlying Security on the Security settlement date will exceed the portion of
the purchase price allocable to interest accrued on the Unit settlement date. In
such cases, the Unit Holder may have an adjustment to the tax basis in the Units
for interest accruing on such Securities during the interval between purchase of
Units and delivery of Securities.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL INCOME TAX
PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER ANY OTHER FEDERAL TAX
LAW OR UNDER THE INCOME OR OTHER TAX LAWS OF ANY STATE OR CITY. THE LAWS OF THE
SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF SUCH OBLIGATIONS. (See
``Rights of Unit Holders--Reports and Records.'')
The Portfolio of the Trust may contain zero coupon bond(s) or one or more
other Securities which were originally issued at a discount (``original issue
discount''). In general, original issue discount can be defined as the
difference between the price at which a Security was issued and its stated
redemption price at maturity. If the original issue discount is less than .25%
of the stated redemption price of the Security at maturity multiplied by the
number of complete years to maturity, the original issue discount shall be
considered to be zero. In the case of a Security issued before September 4,
1982, original issue discount is deemed to accrue (be ``earned'') as tax-exempt
interest ratably over the period from the date of issuance of the Security to
the date of maturity and is apportioned among the original holder of the
obligation and subsequent purchasers in accordance with a ratio the numerator of
which is the number of calendar days the obligation was owned by the holder and
the denominator of which is the total number of calendar days from the date of
issuance of the obligation to its date of maturity. Gain or loss upon the
disposition of an original issue discount Security in a Portfolio is measured by
the difference between the amount realized upon disposition of and the amount
paid for such obligation. A holder is entitled, however, to exclude from gross
income that portion of such gain attributable to accrued interest and the
``earned'' portion of original issue discount.
In the case of a Security issued after September 3, 1982, original issue
discount is deemed to accrue on a constant interest method which corresponds, in
general, to the economic accrual of interest (adjusted to eliminate
proportionately on an elapsed-time basis any excess of the amount paid for the
Security over the sum of the issue price and the accrued original issue discount
on the acquisition date). The tax basis in the Security is increased by the
amount of original issue discount that is deemed to accrue while the Security is
held. The difference between the amount realized on a disposition of the
Security (ex currently accrued interest) and the adjusted tax basis of the
Security will give rise to taxable gain or deductible loss upon a disposition of
the Security by the Trust (or a sale or redemption of Units by a Unit Holder).
The Code provides, generally, that adjustments to taxable income to produce
alternative minimum taxable income for corporations will include 75% of the
amount by which adjusted current earnings (which would include tax-exempt
interest) of the taxpayer exceeds the alternative minimum taxable income of the
taxpayer before any amount is added to alternative minimum taxable income
because of this adjustment.
For Federal income tax purposes, Trust expenses allocable to producing or
collecting Trust interest income are not deductible because the interest income
derived by the Trust is exempt from Federal income tax. A state or local income
tax may provide for a deduction for the portion of such Trust expenses
attributable to the production or collection of income derived by the Trust and
taxed by the state or locality. The effect on any such deductions of the Code
rules whereby investment expenses and other miscellaneous deductions are
deductible only to the extent in excess of 2% of adjusted gross income would
depend upon the law of the particular state or locality involved.
The Code also imposes an additional 12/100% ($12.00 per $10,000)
environmental tax on the alternative minimum taxable income (determined without
regard to any alternative tax net operating loss deduction) of a corporation in
excess of $2,000,000 for each taxable year beginning before January 1, 1996. The
Clinton Administration has proposed to extend the environmental tax, most
recently in the Revenue Reconciliation Bill of 1996, which was released on March
19, 1996, to taxable years after December 31, 1995 and before January 1, 2007.
The bill has not been introduced in either house of Congress. The environmental
tax is an excise tax and is deductible for United States Federal income tax
purposes (but not
B-17
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<PAGE>
for purposes of the environmental tax itself). Although the environmental tax is
based on alternative minimum taxable income, the environmental tax must be paid
in addition to any Federal income taxes payable by the corporation.
From time to time proposals have been introduced before Congress the purpose
of which is to restrict or eliminate the Federal income tax exemption for
interest on securities similar to the Securities in the Trust or to require
treatment of such interest as a ``tax preference'' for alternative minimum tax
purposes, and it can be expected that similar proposals may be introduced in the
future. The Trust and the Sponsor cannot predict what legislation, if any, in
respect of the tax status of interest on Securities may be proposed by the
Executive Branch or by members of Congress, nor can they predict which
proposals, if any, might be enacted or whether any legislation if enacted would
apply to the Securities in the Trust. At any time Congress may have under
consideration various proposals to revise the tax system in the United States
including current proposals to impose a flat tax system. Any flat tax system may
have the effect of reducing or eliminating the benefit presently received in
connection with the receipt of interest on municipal debt obligations as
compared to the receipt of interest on other obligations. Moreover, a flat tax
system, if implemented, may have an adverse effect on the value of the
Securities held in the portfolio of the Trust. The Sponsor cannot predict
whether a flat tax or similar system will be enacted nor can it predict the
impact any such system would have on the portfolio of the Trust.
In addition, investors should be aware that no deduction is allowed for
Federal income tax purposes for interest on indebtedness incurred or continued
to purchase or carry Units in the Trust. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of the Units.
All taxpayers are required to report for informational purposes on their
Federal income tax returns the amount of tax-exempt interest they receive.
State risk factors, including opinions of special State counsels with
respect to certain state tax aspects of an investment in Units of a State Trust
are discussed in Part C, if applicable.
New York Trust
In the opinion of Messrs. Cahill Gordon & Reindel, special New York counsel
on New York tax matters, under existing law:
Under the income tax laws of the State and City of New York, the income
of each Trust will be treated as the income of its Unit Holders.
Interest on the underlying debt obligations which is exempt from tax
under the laws of the State and City of New York when received by the New
York Trust will retain its status as tax-exempt interest to its Unit
Holders. (Interest on the underlying obligations in the New York Trust is,
however, not excludable from income in determining the amount of the
income-based (i) New York State franchise taxes on business and financial
corporations or (ii) the New York City general corporation tax and the New
York City financial corporation tax.) The minimum income taxes imposed by
New York State and New York City on individuals, estates and trusts exclude
from their taxable bases the Federal tax preference item with respect to
tax-exempt interest.
Non-residents of New York City will not be subject to the City personal
income tax on gains derived with respect to their Units. Non-residents of
the State will not be subject to New York State personal income tax on such
gains unless the Units are employed in a business, trade or occupation
carried on in New York State. A New York State or City resident should
determine his basis and holding period for his Units in the same manner for
New York State and City personal income tax purposes as for Federal income
tax purposes.
Investors should consult their own tax advisors with respect to the
applicability of the foregoing general comments to their own particular
situations and as respects state and local tax consequences of an investment in
Units.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price of Units during the initial public offering period
is computed by adding to the aggregate offering price of the Securities in a
Trust, any money in the Principal Account other than money required to redeem
tendered Units, dividing such sum by the number of Units outstanding, and then
adding a sales charge of 4.75% of the
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<PAGE>
Public Offering Price (in the case of a Trust with a DSC feature, 4.9% of the
offering price of the Securities subject to a sales charge plus the total sales
charge (5.152% of the offering side evaluation of such Securities)) in the case
of a trust composed of long term securities (4.987% of the net amount invested)
or a sales charge of 3.00% of the Public Offering Price in the case of an
Intermediate Term Trust (3.093% of the net amount invested) or such other sales
charge as is designated in Part A. For purchases settling after the first
settlement date (including purchases of Units created after the initial date of
deposit) a proportionate share of accrued and undistributed interest on the
Securities from such date to the settlement date for Units is also added to the
Public Offering Price. After the initial public offering period the Public
Offering Price of the Units will be determined by adding to the Evaluator's
determination of the aggregate bid price of the Securities per Unit a sales
charge as set forth under Secondary Market Sales Charge herein. A proportionate
share of accrued and undistributed interest on the Securities (other than DSC
Payment Securities) to the settlement date for Units purchased and of cash on
hand in the Trust is also added to the Public Offering Price.
The Public Offering Price on the date of this Prospectus or any subsequent
date may vary from the Public Offering Price set forth in the Part A--``Summary
of Essential Information'' in accordance with fluctuations in the evaluation of
the underlying Securities in the Trust.
The aggregate bid or offering prices of the Securities in the Trust, as is
appropriate, shall be determined for the Trust by the Evaluator as of the
Evaluation Time, in the following manner: (a) on the basis of current bid or
offering prices for the Securities as obtained from investment dealers or
brokers (including the Sponsor) who customarily deal in securities comparable to
those held in the Trust, (b) if there is no market for such securities and bid
or offering prices are not available, on the basis of prices for comparable
securities, (c) by determining the value of the Securities on the bid or
offering side of the market by appraisal, or (d) by any combination of the
above. Unless a Security covered by Portfolio Insurance is in default in payment
of principal or interest or in significant risk of such default, the Evaluator
will not attribute any value to the Portfolio Insurance obtained by an Insured
Trust or to an Insured Trust's right to secure Permanent Insurance with respect
to such Security in the event of a sale of such Security. The value of insurance
to maturity obtained by the issuer of a Security or by the Sponsor on the Date
of Deposit is reflected and included in the market value of such Security. The
Public Offering Price will be effective for all sales of Units made during the
preceding 24-hour period. Following the initial public offering period,
determinations of the aggregate bid price of the Securities, for purposes of
secondary market transactions by the Sponsor and redemptions by the Trustee,
will be made each business day as of the Evaluation Time, effective for all
sales or redemptions made subsequent to the last preceding determination. (See
``Rights of Unit Holders--Redemption.'') The difference between the bid and
offering prices of the Securities may be expected to average approximately
1 1/2% of principal amount. In the case of actively traded securities, the
difference may be as little as 1/2 of 1%, and in the case of inactively traded
securities such difference will usually not exceed 3%. The price at which Units
may be repurchased by the Sponsor in the secondary market could be less than the
price paid by the Unit Holder (such repurchase price will be reduced by any
unpaid DSC). For information relating to the calculation of the Redemption
Price, which, like the Public Offering Price in the secondary market, is based
upon the aggregate bid price of the underlying Securities and which may be
expected to be less than the aggregate offering price, see ``Rights of Unit
Holders--Redemption--Computation of Redemption Price per Unit.''
Public Distribution
Upon the termination of the initial public offering period, 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, plus accrued interest.
Sales to dealers will initially be made at prices which include a concession
per Unit as set forth below, but subject to change from time to time at the
discretion of the Sponsor. The Sponsor reserves the right to reject, in whole or
in part, any order for the purchase of Units.
The dealer concession per Unit in the secondary market will generally be 65%
of the sales charge per Unit. Sales to dealers utilizing the service of Wexford
Clearing Services Corporation will be made at prices which include a concession
of 70% of the total sales charge per Unit. However, the Sponsor may negotiate a
different concession (either higher or lower) with dealers on a case-by-case
basis. In addition to such discounts, the Sponsor may, from time to time, pay or
allow an additional discount in the form of cash or other compensation, to
dealers who underwrite additional Units of a Trust or who sell, during a
specified time period, a minimum dollar amount of Units of a Trust and other
unit investment trusts underwritten by the Sponsor.
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<PAGE>
Sales will be made only with respect to whole Units, and the Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units.
In addition, sales of Units may be made pursuant to distribution
arrangements with certain banks which are acting as agents for their customers.
These banks are making Units of the Trust available to their customers on an
agency basis. A portion of the sales charge paid by these customers is retained
by or remitted to the banks in amounts comparable to the aforementioned dealers'
concessions. The Glass-Steagall Act prohibits banks from underwriting certain
securities, including Units of the Trust; however, this Act does permit certain
agency transactions, and banking regulators have not indicated that these
particular agency transactions are impermissible under this Act. In certain
states, any bank making Units available must be registered as a broker-dealer in
that state.
Secondary Market
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units of each Trust and to continuously offer to
repurchase Units from Unit Holders at the applicable Sponsor's Repurchase Price
(See Part A--``Summary of Essential Information'') based upon each Unit's pro
rata share of the aggregate value of the Securities determined (by the
Evaluator) on the basis of the bid side of the market (less any unpaid DSC). Any
Units repurchased by the Sponsor at the Sponsor's Repurchase Price may be
reoffered to the public by the Sponsor at the then current Public Offering
Price, plus accrued interest. Any profit or loss resulting from the resale of
such Units will belong to 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. In such event, Unit Holders (including the
Sponsor) may redeem their Units through the Trustee at the Redemption Price,
which is based upon the aggregate bid price of the Securities and which may be
expected to be less than the aggregate offering price. (See ``Rights of Unit
Holders--Redemption--Computation of Redemption Price per Unit.'') If the Sponsor
repurchases Units in the secondary market at the ``Redemption Price,'' it may
reoffer these Units in the secondary market at the ``Public Offering Price,'' or
the Sponsor may tender Units so purchased to the Trustee for redemption. In no
event will the price offered by the Sponsor for the repurchase of Units be less
than the current Redemption Price for those Units. (See ``Rights of Unit
Holders--Redemption.'')
Sponsor's and Underwriters' Profits
The Sponsor receives a sales charge as set forth in the table below in the
secondary market. 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.)
In addition, the Sponsor may realize profits (or sustain losses) due to
daily fluctuations in the bid prices of the Securities 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 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 (based on the bid side evaluation of the
Securities in a Trust) and the prices at which the Sponsor resells such Units or
the prices at which the Sponsor redeems such Units (also based on the bid side
evaluation of the Securities in the Trust), as the case may be.
Secondary Market Sales Charge
The sales charge per Unit in the secondary market will be computed by
multiplying the Evaluator's determination of the bid side evaluation of each
Security by a sales charge determined in accordance with the table set forth
below based upon the number of years remaining to the maturity of each such
Security, totalling all such calculations, and dividing this total by the number
of Units then outstanding. In calculating the date of maturity, a Security will
be considered to mature on its stated maturity date unless: (a) the Security has
been called for redemption or funds or securities have been placed in escrow to
redeem it on an earlier call date, in which case the call date will be deemed
the date on which such Security matures; or (b) the Security is subject to a
mandatory tender, in which case the mandatory tender date will be deemed the
date on which such Security matures.
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<PAGE>
<TABLE>
<CAPTION>
(As Percent
(As Percent of Public
of Bid Side Offering
Time to Maturity Evaluation) Price)(1)
- -------------------------- ------------ ----------------
<S> <C> <C>
Less than six months...... 0% 0%
Six months to 1 year...... 0.756% 0.75%
Over 1 year to 2 years.... 1.523% 1.50%
Over 2 years to 4 years... 2.564% 2.50%
Over 4 years to 8 years... 3.627% 3.50%
Over 8 years to 15
years..................... 4.712% 4.50%
Over 15 years............. 5.820% 5.50%
</TABLE>
- ---------------
(1) Units subject to DSC--as a percent of the bid side evaluation of the
Securities on which a sales charge is imposed plus the total sales charge.
The up-front sales charge will equal the difference between the amount of
the total secondary market sales charge and any unpaid DSC remaining and,
therefore, as the amount of the unpaid DSC declines, the amount of the
up-front sales charge will increase.
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 change the amount by which the sales charge is reduced, or
discontinue the discount altogether.
The sales charge per Unit will be reduced pursuant to the following
graduated scale for sales to any person of at least 100 Units in the secondary
market.
<TABLE>
<CAPTION>
% of
Number of Units Sales Charge
------------------------------- ------------
<S> <C>
Less than 100 Units............ 100%
100-249 Units.................. 90%
250-499 Units.................. 80%
500-749 Units.................. 75%
750-999 Units.................. 70%
1,000 Units or More............ 65%
</TABLE>
The respective reduced sales charges as shown on each of the above charts
will apply to all purchases of Units in any fourteen day period by the same
person in the amounts stated herein, and for this purpose, purchases of Units of
the 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, in the name of a
purchaser's child under the age of 21 or in the name of an entity controlled by
the purchaser are deemed for the purposes hereof to be acquired by the
purchaser. The reduced sales charges are also applicable to a trustee or other
fiduciary purchasing Units for a single trust estate or single fiduciary
account.
Employee Discount
The Sponsor intends to permit employees of Prudential Securities
Incorporated and its subsidiaries and affiliates to purchase Units of the Trust
at a price equal to the bid side evaluation of the Securities in the Trust
divided by the number of Units outstanding plus a reduced sales charge of $5.00
per Unit (or in the case of Units subject to DSC, the remaining DSC), subject to
a limit of 5% of the Units of a Trust at the discretion of the Sponsor.
EXCHANGE OPTION
Unit Holders may elect to exchange any or all of their Units of this series
of the National Municipal Trust for units of one or more of any other series in
the Prudential Securities Incorporated family of unit investment trusts or
certain 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 charges is to permit the Sponsor to pass on to
the Unit Holder who wishes to exchange Units the cost
B-21
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<PAGE>
savings resulting from such exchange of Units. The cost savings result from
reductions in 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 the investment objective
prior to the exercise of this option.
This option will be available 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 resides. 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 case of Units subject to a DSC, sixty days'
notice will be given prior to the date of the termination of, or material
amendment to, the Exchange Option except that no notice need be given under
certain circumstances). 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.
Exchanges will be effected in whole units only. If the proceeds from the
Units being surrendered are less than the cost of a whole number of units being
acquired, the exchanging Unit Holder will be permitted to add cash in an amount
to round up to the next highest number of whole units. When units held for less
than five months are exchanged for units with a higher regular sales charge, the
sales charge will be the greater of (a) the reduced sales charge or (b) the
difference between the sales charge paid in acquiring the units being exchanged
and the regular sales charge for the quantity of units being acquired,
determined as of the date of the exchange.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to use the proceeds from the sale of his Units to purchase units of
one or more 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 aggregate bid side evaluation per unit of the securities in that
portfolio plus accrued interest and the applicable sales charge of $15* per
unit. Excess proceeds not used to acquire whole units will be paid to the
exchanging Unit Holder. Owners of units of any registered unit investment trust
other than National Municipal Trust 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. The
reduced sales charge for Units of any Exchange Trust acquired during the initial
offering period for such Units will be sold at a price equal to the offering
side evaluation per unit of the securities in the portfolio plus accrued
interest plus a reduced sales charge of $25* per unit. 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 of which units are available. The 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 4.75% 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 4.75%. 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 $3,989.50 [$3,800 for the units and $189.50 for the 4.75% sales charge
(4.987% of the net amount invested)].
- ------------
* In the case of Units subject to a DSC, the exchange sales charge will be the
remaining DSC if greater than the applicable reduced sales charge ($15, $20 or
$25) or if the remaining DSC is less than applicable reduced sales charge, the
Unit will be subject to the remaining DSC and the sales charge payable at the
time of the exchange will be the difference between the amount of the reduced
sales charge and the remaining DSC.
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<PAGE>
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 exchange, except that upon an exchange of Units of this
series of the National Municipal Trust for units of any other series of 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
urged to consult their own tax advisors as to the tax consequences to them of
exchanging Units in particular cases.
REINVESTMENT PROGRAM
Distributions of interest and principal, if any, are made to Unit Holders
monthly or semiannually. A Unit Holder will have the option of either receiving
his monthly or semiannual income check from the Trustee or reinvesting the
distribution in an open-end diversified management investment company offered by
the Sponsor or by one of the Underwriters whose investment objective is to
attain for investors the highest level of current income that is exempt from
Federal income taxes, consistent with liquidity and the preservation of capital.
Participation in any such fund is conditioned on such fund's 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.
Upon enrollment in the reinvestment program, the Trustee will direct monthly or
semiannual interest distributions and principal distributions, if any, to the
designated fund. This Reinvestment Program does not involve insured securities.
The appropriate prospectus will be sent to the Unit Holder. A Unit Holder's
election to participate in this reinvestment program will apply to all Units of
the Trust owned by such Unit Holder. The Unit Holder should read the prospectus
for the fund carefully before deciding to participate. The Sponsor may terminate
or modify the reinvestment program at any time without further notice to Unit
Holders.
EXPENSES AND CHARGES
Expenses
For Trusts with a date of deposit after June 26, 1995, all or a portion of
the organizational expenses and charges incurred in connection with the
establishment of the Trust including the cost of the preparation, printing and
execution of the Indenture, the Certificates, Registration Statement and other
documents relating to the Trust, Federal and State registration fees and costs,
the initial fees and expenses of the Trustee, and legal and auditing expenses
and other out-of-pocket expenses will be paid by the Trust. Historically, the
costs of establishing unit investment trusts have been borne by a trust's
sponsor. Advertising and selling expenses will be paid by the Sponsor and the
Underwriters, if any, at no cost to the Trust.
Fees
The Portfolio supervision fee (the ``Supervision Fee'') which is earned for
Portfolio supervisory services, is based upon the aggregate face amount of
Securities in the Trust at the beginning of each calendar year.
The Supervision Fee, which is not to exceed the amount (set forth in Part
A--``Summary of Essential Information'') per $1,000 face amount of Securities in
the Trust, may exceed the actual costs of providing Portfolio supervisory
services for such Trust, but at no time will the total amount the Sponsor and/or
an affiliate thereof receive for Portfolio supervisory services rendered to all
series of National Municipal Trust and Prudential Unit Trusts in any calendar
year exceed the aggregate cost to it of supplying such services in such year.
For a description of the Portfolio supervisory services to be provided by the
Sponsor and/or an affiliate thereof, see ``Sponsor--Responsibility.'' The
Supervision Fee will be paid to the Sponsor by the Trust. The Prudential
Insurance Company of America, the indirect parent of the Sponsor, or a division
or subsidiary thereof, has agreed to advise the Sponsor regarding the Sponsor's
Portfolio supervisory services and will be compensated by the Sponsor for such
advisory services.
For its service as Trustee under the Indenture, the Trustee receives an
annual fee in the amount set forth under Part A--``Summary of Essential
Information.''
For each evaluation of the Securities in a Trust, the Evaluator will receive
a fee in the amount set forth under Part A--``Summary of Essential
Information.''
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B-24
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<PAGE>
AUTHORIZATION FOR REINVESTMENT
NATIONAL MUNICIPAL TRUST
D I hereby elect to participate in the Reinvestment Program to the extent
E indicated below and do authorize The Chase Manhattan Bank, Trustee, to
T direct distributions as indicated below to the Prudential Tax Free Money
A Fund, Inc. where such amounts shall immediately be invested into shares
C of the fund.
H
The foregoing authorization is subject in all respects to the terms and
H conditions of participation set forth in the National Municipal Trust
E prospectus and shall remain in effect until such time as I notify The
R Chase Manhattan Bank to the contrary in writing.
E
(fold here)
A -----------------------------------------------------------------------
N Soc. Sec./Tax I.D. No.: ___________________________
D
Series / / Please reinvest all NMT series which I/we own
M / / Please list below the specific series I/we wish
A to reinvest
I
L ----------------------------------------------
----------------------------------------------
T
O ----------------------------------------------
Check One / / Reinvest Interest
A / / Reinvest Principal
D / / Reinvest Both Interest and Principal
D
R Exact registration as it
E appears on your Units: _______________________________________
S
S ---------------------------------------
O ---------------------------------------
N
Street address: _______________________________________
T City, State, Zip Code: _______________________________________
H Unit Holder Signature(s): ______________________ Date:________
E (all joint holders must sign)
R
E
V
E
R
S
E
<PAGE>
REINVESTMENT ADDRESS
The Chase Manhattan Bank
Attn: Dividend Reinvestment--Dept. A
P.O. Box 834
New York, N.Y. 10003
<PAGE>
The Supervision Fee accrues quarterly but is paid annually, and the
Trustee's fees and the Trust expenses and the Evaluator's fees are payable
monthly on or before each Distribution Date from the Interest Account, to the
extent funds are available, and thereafter from the Principal Account. Any of
such fees may be increased without approval of the 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 Indenture.
The cost of the Portfolio Insurance obtained by an Insured Trust is an
annual amount set forth in Part A--``Summary of Essential Information'' and is
payable so long as such Insured Trust retains the Securities thus insured.
Premiums for the Portfolio Insurance are payable monthly in advance by the
Trustee on behalf of an Insured Trust.
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 a Trust and the
rights and interests of the Unit Holders, (e) indemnification of the Trustee for
any losses, liabilities or expenses incurred by it in the administration of a
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 so long as the Sponsor is maintaining a market for the Units.
The fees and expenses set forth herein for the Trust are payable out of such
Trust and when so paid by or owing to the Trustee are secured by a lien on such
Trust. If the balances in the Interest and Principal Accounts are insufficient
to provide for amounts payable by a Trust, the Trustee has the power to sell
Securities to pay such amounts. To the extent Securities are sold, the size of
such Trust will be reduced and the proportions of the types of Securities will
change. Such sales might be required at a time when Securities would not
otherwise be sold and might result in lower prices than might otherwise be
realized. Moreover, due to the minimum principal amount in which Securities may
be required to be sold, the proceeds of such sales may exceed the amount
necessary for the payment of such fees and expenses.
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates executed by the
Trustee and the Sponsor. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unit Holder may be required to pay $2.00 per certificate reissued or
transferred, and will be required to pay any governmental charge that may be
imposed in connection with each such transfer or interchange. For new
certificates issued to replace destroyed, stolen or lost certificates, the Unit
Holder must furnish indemnity satisfactory to the Trustee and must pay such
expenses as the Trustee may incur. Mutilated Certificates should be surrendered
to the Trustee for replacement.
Distribution of Interest and Principal
Interest and principal received by the Trust will be distributed on each
Distribution Date on a pro rata basis to Unit Holders of record as of the
preceding Record Date unless distributed to the Sponsor in payment of the DSC.
Record dates for monthly distributions will be the tenth day of each month,
record dates for quarterly distributions will be the tenth day of January,
April, July and October, and record dates for semi-annual distributions will
be the tenth day of January and July. All distributions will be net of
applicable expenses, funds required for the redemption of Units and, if
applicable, reimbursements to the Trustee for interest payments advanced to
Unit Holders on previous monthly Distribution Dates. (See ``Summary of
Essential Information,'' ``Expenses and Charges'' and ``Rights of Unit
Holders--Redemption.'')
The Trustee will credit to the Interest Account all interest received by the
Trust, including that part of the proceeds of any disposition of Securities
which represents accrued interest. Other receipts will be credited to the
Principal Account. The pro rata share of the Interest Account and the pro rata
share of cash in the Principal Account represented by each Unit will be computed
by the Trustee each month as of the Record Date. (See ``Summary of Essential
Information'' in Part A.) Proceeds received from the disposition of any of the
Securities subsequent to a Record Date and prior to the next succeeding
Distribution Date will be held in the Principal Account and will not be
distributed until the following
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<PAGE>
Distribution Date. The distribution to Unit Holders as of each Record Date will
be made on the following Distribution Date or shortly thereafter and shall
consist of an amount substantially equal to one-twelfth of such Unit Holders'
pro rata share of the estimated annual income to be credited to the Interest
Account after deducting estimated expenses (the ``Interest Distribution'' plus
such Unit Holders' pro rata share of the cash balance in the Principal Account
computed as of the close of business on the preceding Record Date. Persons who
purchase Units between a Record Date and a Distribution Date will receive their
first distribution on the second Distribution Date following their purchase of
Units. No distribution need be made from the Principal Account if the balance
therein is less than an amount sufficient to distribute $5.00 per Unit. The
Interest Distribution per Unit will be in the amount shown under ``Summary of
Essential Information'' in Part A and will change as the income and expenses of
the Trust change and as Securities are exchanged, redeemed, paid down or sold.
Normally, interest on the Securities in the Portfolio is paid on a
semiannual basis. Because interest is not received by a Trust at a constant rate
throughout the year, any Monthly Interest Distribution may be more or less than
the amount credited to the Interest Account as of the Record Date. In order to
eliminate fluctuations in monthly interest distributions resulting from such
variances the Trustee is required by the Indenture to advance such amounts as
may be necessary to provide monthly interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest, for any such
advance from funds available from the Interest Account on the next ensuing
Record Date or Record Dates, as the case may be. If all or a portion of the
Securities for which advances have been made subsequently fail to pay interest
when due, the Trustee may recoup advances made by it in anticipation of receipt
of interest payments on such Securities by reducing the amount otherwise
distributable per Unit with respect to one or more Monthly Interest
Distributions. If units are redeemed subsequent to such advances by the Trustee,
but prior to receipt by the Trustee of actual notice of such failure to pay
interest, the amount of which was so advanced by the Trustee, each remaining
Unit Holder will be subject to a greater pro rata reduction in his Monthly
Interest Distribution than would have occurred absent such redemptions. Funds
which are available for future distributions, payments of expenses and
redemptions are in accounts which are non-interest bearing to Unit Holders and
are available for use by The Chase Manhattan Bank pursuant to normal banking
procedures. In addition, because of the varying interest payment dates of the
Securities comprising the Trust's Portfolio, accrued interest at any point in
time will be greater than the amount of interest actually received by the Trust
and distributed to Unit Holders. This excess accrued but undistributed amount
will be added to the value of the Units on any purchase. If a Unit Holder sells
all or a portion of his Units a portion of his sale proceeds will be allocable
to his proportionate share of the accrued interest. Similarly, if a Unit Holder
redeems all or a portion of his Units, the Redemption Price per Unit which he is
entitled to receive from the Trustee will include accrued interest. (See
``Rights of Unit Holders--Redemption--Computation of Redemption Price per
Unit.'')
Unit Holders purchasing Units in the secondary market will initially receive
distributions in accordance with the monthly or semi-annual distribution
election of the prior owner. In November of each year, the Trustee will furnish
each Unit Holder a card to be returned to the Trustee by December 20 of such
year if the Unit Holder desires to change such Unit Holder's plan of
distribution. Unit Holders desiring to change the plan of distribution in which
they are participating may so indicate on the card and return same, together
with their Certificate to the Trustee. If the card and Certificate are returned
to the Trustee, the change will become effective on December 21 of such year for
the ensuing twelve months. If the card and Certificate are not returned to the
Trustee, the Unit Holder will be deemed to have elected to continue with the
same plan for the following twelve months.
As of the tenth day of each month the Trustee will deduct from the Interest
Account and, to the extent funds are not sufficient therein, from the Principal
Account, amounts necessary to pay the expenses of the Trust. (See ``Expenses and
Charges.'') The Trustee may also withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of the Trust. Amounts so withdrawn shall not be considered a part of
a Trust's assets for purposes of determining the amount of distributions until
such time as the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from the Interest
Account and the Principal Account such amounts as may be necessary to cover
redemption of Units by the Trustee. (See ``Rights of Unit
Holders--Redemption.'') The Trustee is also entitled to withdraw from the
Interest Account, and, to the extent funds are not sufficient therein, from the
Principal Account, on one or more record dates as may be appropriate, amounts
sufficient to recoup advances which the Trustee has made in anticipation of the
receipt by the Trust of interest in respect of Securities which subsequently
fail to pay interest when due.
B-26
<PAGE>
<PAGE>
Reports and Records
The Trustee shall furnish Unit Holders in connection with each distribution
a statement of the amount of interest, if any, and the amount of other receipts,
if any, which are being distributed, expressed in each case as a dollar amount
per Unit. In the event that the Issuer of any of the Securities fails to make
payment when due of any interest or principal and such failure results in a
change in the amount which would otherwise be distributed as a distribution, the
Trustee will, with the first such distribution following such failure, set forth
in an accompanying statement, the Issuer and the Securities, the amount of the
reduction in the distribution per Unit resulting from such failure, the
percentage of the aggregate face amount of Securities which such Security
represents and, to the extent then determined, information regarding any
disposition or legal action with respect to such Security. Within a reasonable
time after the end of each calendar year, the Trustee will furnish to each
person who at any time during the calendar year was a Unit Holder of record, a
statement: (1) as to the Interest Account: interest received (including amounts
representing interest received upon any disposition of Securities), and, if the
Issuers of the Securities are located in different states or possessions or in
the Commonwealth of Puerto Rico, the percentage of such interest by such states
or other jurisdictions, deductions for payment of applicable taxes and for fees
and expenses of the Trust, deferred sales charge, 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 of any Securities and the net
proceeds received therefrom (excluding any portion representing interest and any
premium paid to obtain Permanent Insurance), deductions for payments of
applicable taxes and for fees and expenses of the Trust and redemptions of
Units, deferred sales charge, 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; and (5) amounts actually distributed during such calendar
year from the Interest Account and from the Principal Account, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year. The accounts of the Trust shall be audited not less
frequently than annually by independent certified public accountants designated
by the Sponsor, and the report of such accountants will be furnished by the
Trustee to Unit Holders upon request. 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, certificates issued or held, 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 unit investment
trust office at 770 Broadway, New York, New York 10003, upon 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 be cancelled.
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. 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 three business days following such tender, or if the third business
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'' in Part A 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 first day after such date on which the New York Stock
Exchange is open for trading, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day.
B-27
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<PAGE>
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal Account.
All other amounts paid on redemption shall be withdrawn from the Principal
Account. The Trustee is empowered to sell Securities in order to make funds
available for redemption. Such sales, if required, could result in a sale of
Securities by the Trustee at a loss. To the extent Securities are sold, the size
and diversity of the Trust will be reduced.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or trading on that Exchange is restricted or during which (as
determined by the Securities and Exchange Commission by rule or regulation) an
emergency exists as a result of which disposal or evaluation of the underlying
Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission has by order permitted. The Trustee is not
liable to any person or in any way for any loss or damage that may result from
any such suspension or postponement.
Computation of Redemption Price per Unit
The Redemption Price per Unit (``Redemption Price'') of the Trust is
determined by the Trustee on the basis of the bid prices of the Securities in
the Trust (or contracts for Securities to be acquired by the Trust) as of the
Evaluation Time on the date any such determination is made. The Redemption Price
per Unit is each Unit's pro rata share, determined by the Trustee, of: (1) the
aggregate value of the Securities in the Trust (or contracts for securities to
be acquired by the Trust) on the bid side of the market (determined by the
Evaluator as set forth below), (2) cash on hand in the Trust, and accrued and
unpaid interest on the Securities as of the date of computation, less (a)
amounts representing taxes or governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust, (c) any unpaid DSC and (d) cash held for
distribution to Unit Holders of record as of a date prior to the evaluation.
Accrued interest payable in respect of the Units from the date of tender to, but
not including, the third business day thereafter also comprises a part of the
Redemption Price per Unit. The Evaluator may determine the value of the
Securities in the Trust (1) on the basis of current bid prices for the
Securities, (2) if bid prices are not available for any Securities, on the basis
of current bid prices for comparable securities, (3) by appraisal, or (4) by any
combination of the above. In determining the Redemption Price per Unit no value
will be attributed to the Portfolio Insurance obtained by an Insured Trust on a
Security or to an Insured Trust's right to obtain Permanent Insurance on such
Security in the event of its sale of such Security, unless such Security is in
default in payment of principal or interest or in significant risk of such
default. Securities insured under a policy obtained by the issuer thereof or by
the Sponsor on the Date of Deposit are entitled to the benefits of such
insurance at all times and such benefits are reflected and included in the
market value of such Securities. (See ``The Trust--Insurance on the Securities
in the Portfolio of an Insured Trust.'')
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, will 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 not later than the day on which the
Units would otherwise have been redeemed by the Trustee. (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 Units--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 lower Public Offering or Redemption Price subsequent to
its acquisition of such Units. (See ``Public Offering of Units--Profit of
Sponsor.'')
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
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<PAGE>
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 Incorporated 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 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, Prudential Multi-Sector Fund, Inc., Prudential
Municipal Bond Fund, 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 Income 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 liable or responsible in any way for depreciation or loss
incurred by reason of the sale of any Securities, except in case of its own
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. (See ``Sponsor--Responsibility.'')
B-29
<PAGE>
<PAGE>
Responsibility
The Trust is a unit investment trust and is not actively managed. The
Indenture, however, permits the Sponsor to direct the Trustee to dispose of any
Security in the Trust upon the happening of certain events including the payment
of the DSC, including without limitation, the following:
1. Default in the payment of principal or interest on any Security when
due and payable,
2. Institution of legal proceedings seeking to restrain or enjoin the
payment of any Security or attacking their validity,
3. A breach of covenant or warranty which could adversely affect the
payment of debt service on the Security,
4. Default in the payment of principal or interest on any other
outstanding obligations of the same Issuer of any Security,
5. In the case of a Security that is a revenue bond, a fall in revenues,
based upon official reports, substantially below the estimated revenues
calculated to be necessary to pay principal and interest,
6. A decline in market price to such an extent, or such other market or
credit factor, as in the opinion of the Sponsor would make retention of
a Security detrimental to the Trust and to the interests of the Unit
Holders,
7. Refunding or refinancing of the Security, as set forth in the
Indenture, or
8. The loss of Federal income tax exemption with respect to interest on
the Security and,
in the case of an Insured Trust, a determination by the Sponsor that any
insurance that may be applicable to the Security cannot be relied upon to
maintain the interests of such Insured Trust to at least as great an extent as
such disposition. An Insured Trust will obtain and pay a premium for the
Permanent Insurance upon the sale of a Security if the Sponsor determines that
such sale and payment of premium will result in a net realization of such
Insured Trust greater than would the sale of such Security without the purchase
of such Permanent Insurance.
The Sponsor and/or an affiliate thereof intend to continuously monitor
developments affecting the Securities in each Trust in order to determine
whether the Trustee should be directed to dispose of any such Securities.
It is the responsibility of the Sponsor to instruct the Trustee to reject
any offer made by an Issuer of any of the Securities to issue new obligations in
exchange and substitution for any Security pursuant to a refunding or
refinancing plan, except that the Sponsor may instruct the Trustee to accept
such an offer or to take any other action with respect thereto as the Sponsor
may deem proper if the Issuer is in default with respect to such Security or in
the judgment of the Sponsor the Issuer will probably default in respect to such
Security in the foreseeable future.
Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Indenture to the same extent
as Securities originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for any of the underlying
Securities, the Trustee is required to give notice thereof to each Unit Holder,
identifying the Securities eliminated and the Securities substituted therefor.
Except as stated in this and the preceding paragraph, the acquisition by the
Trust of any securities other than the Securities initially deposited and any
additional Securities supplementally deposited in the Trust (see ``The Trust''
herein), and/or a Replacement Security is prohibited.
Resignation
If at any time the Sponsor shall resign under the Indenture or shall fail to
perform or be incapable of performing its duties thereunder or shall become
bankrupt or if its affairs are taken over by public authorities, the Indenture
directs the Trustee to either (1) appoint a successor Sponsor or Sponsors at
rates of compensation deemed reasonable by the Trustee not exceeding amounts
prescribed by the Securities and Exchange Commission, or (2) terminate the
Trust. The Trustee will promptly notify Unit Holders of any such action.
TRUSTEE
The Trustee is The Chase Manhattan Bank, a New York Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 and its
unit investment trust office at 770 Broadway, New York, New York 10003. The
Trustee is subject to supervision by the Superintendent of Banks of the State of
New York, 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 a Trust, the Trustee may use the services of the
Depository Trust Company.
B-30
<PAGE>
<PAGE>
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 authority having
jurisdiction.
Responsibility
For information relating to the responsibilities of the Trustee under the
Indenture, reference is 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 in the
event that the Sponsor determines that the Trustee has materially failed to
perform its duties under the Indenture and the interest of Unit Holders has been
substantially impaired as a result, and such failure has continued for a period
of sixty days following the Trustee's receipt of notice of such determination by
the Sponsor. 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 or, if appointed, has not 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.
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, the Sponsor, or Unit
Holders for errors in judgment. This provision shall not protect the Evaluator
in cases of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Responsibility
The Indenture requires the Evaluator to evaluate the Securities in a Trust
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 Securities on the basis of their offering or bid prices as
appropriate, see ``Public Offering of Units--Public Offering Price.''
Resignation
The Evaluator may resign or may be removed by the Sponsor, and in such
event, 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 a successor evaluator. If upon resignation of the
Evaluator no successor has accepted appointment within thirty days after notice
of resignation, the Evaluator may apply to a court of competent jurisdiction for
the appointment of a successor.
B-31
<PAGE>
<PAGE>
AMENDMENT AND TERMINATION OF THE INDENTURE
Amendment
The Sponsor and the Trustee have the power to amend the Indenture without
the consent of any of the Unit Holders when such an amendment is: (1) to cure
any ambiguity or to correct or supplement any provision of the Indenture which
may be defective or inconsistent with any other provision contained therein, or
(2) to make such other provisions as shall not adversely affect the interests of
the Unit Holders; provided, that the Indenture may also be amended by the
Sponsor and the Trustee (or the performance of any of the provisions of the
Indenture may be waived) with the consent of Unit Holders owning 51% of the
Units of the Trust 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, however, shall the Indenture be amended to increase the number of Units
issuable thereunder, to permit the deposit or acquisition of securities or other
property either in addition to or in substitution for any of the Securities
initially deposited in the Trust, except for the substitution of certain
refunding securities for such Securities as initially provided in the Indenture,
or to provide the Trustee with the power to engage in business or 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 notify promptly 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 value
of the Trust as shown on the last business day of June or December in any year
is less than 40% of the principal amount of the Securities initially deposited
therein supplemented by the deposit of additional Securities, if any. However,
in no event may the Trust continue beyond the Mandatory Termination Date set
forth under ``Summary of Essential Information in Part A.'' In the event of
termination, written notice thereof will be sent by the Trustee to all Unit
Holders. Within a reasonable period after termination, the Trustee will sell any
Securities remaining in a Trust, 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 the balances
remaining in the Interest and Principal Accounts. The sale of 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. For this reason, among
others, the amount realized by a Unit Holder upon termination may be less than
the principal amount of Securities represented by the Units held by such Unit
Holder.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have 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.
AUDITORS
The financial statements of the Trusts included in this Prospectus have been
audited 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.
BOND RATINGSD
All ratings except those identified otherwise are by Standard & Poor's
Corporation.
Standard & Poor's Corporation
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment of creditworthiness may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
- ------------
D As described by the rating agencies.
B-32
<PAGE>
<PAGE>
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal, and in the majority of instances they differ from AAA issues only in
small degrees.
A--Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse affects of changes in
circumstances and economic conditions than bonds in higher-rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in the higher-rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from ``AA'' to ``BBB'' may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Provisional Ratings: The letter ``p'' following a rating indicates the
rating is provisional. A provisional rating assumes the successful completion of
the project being financed by the issuance of the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion. Accordingly, the investor should exercise his own judgment with
respect to such likelihood and risk.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA, AA, A, BBB, commonly known as ``Investment Grade'' ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states impose certain rating or other standards for
obligations eligible for investment by savings banks, trust companies, insurance
companies and fiduciaries generally.
Conditional rating(s), indicated by ``Con'' are given to bonds for which the
continuance of the security rating is contingent upon Standard & Poor's receipt
of an executed copy of the escrow agreement or closing documentation confirming
investments and cash flows and/or the security rating is conditional upon the
issuance of insurance by the respective insurance company.
Moody's Investors Service
A brief description of the applicable Moody's Investors Service's rating
symbols and their meanings is as follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
``gilt edge.'' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. Aa bonds are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
B-33
<PAGE>
<PAGE>
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Those municipal bonds in the Aa, A and Baa groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1 and Baa1. In addition, Moody's applies numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category. Although Industrial Revenue Bonds and Environmental
Control Revenue Bonds are tax-exempt issues, they are included in the corporate
bond rating system.
Conditional ratings, indicated by ``Con'' are given to bonds for which the
security depends upon the completion of some act or the fulfillment of some
condition. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. A parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Fitch Investors Service, Inc.
A brief description of the applicable Fitch Investors Service, Inc. rating
symbols and their meanings is as follows:
AAA--Bonds which are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds which are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong although not quite as strong as bonds rated AAA.
A--Bonds which are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds which are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that these bonds will fall
below investment grade is higher than for bonds with higher ratings.
Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the ``AAA'', ``DDD'', ``DD'' or ``D''
categories.
Conditional--A conditional rating is premised on the successful completion
of a project or the occurrence of a specific event.
- ------------
NR--Not rated (credit characteristics comparable to A or better (BBB or better
in the case of an insured trust) in the opinion of the Sponsor's affiliate on
the Date of Deposit).
B-34
<PAGE>
This Post-Effective Amendment to the Registration Statement on
Form S-6 comprises the following papers and documents:
The facing sheet on Form S-6.
The Prospectus.
Signatures.
Consent of independent public accountants and consent of
evaluator; all other consents were previously filed.
The following Exhibits:
***Ex-3.(i) - Certificate of Incorporation of
Prudential Securities Incorporated
dated March 29, 1993.
*******Ex-3.(ii) - Revised By-Laws of Prudential
Securities Incorporated as amended
through June 21, 1996.
**Ex-4.a - Trust Indenture and Agreement dated
May 16, 1989.
*Ex-23 - Consent of Kenny S&P Evaluation
Services, a division of J.J. Kenny
Co., Inc. (as evaluator).
****Ex-24 - Powers of Attorney executed by a
majority of the Board of Directors
of Prudential Securities
Incorporated.
*Ex-27 - Financial Data Schedule.
Ex-99 - Information as to Officers and
Directors of Prudential Securities
Incorporated is incorporated by
reference to Schedules A and D of
Form BD filed by Prudential
Securities Incorporated pursuant to
Rules l5b1-1 and l5b3-1 under the
Securities Exchange Act of 1934
(1934 Act File No. 8-16267).
*****Ex-99.2 - Affiliations of Sponsor with other
investment companies.
*****Ex-99.3 - Broker's Blanket Policies, Standard
Form No. 14 in the aggregate amount
of $62,500,000.
******Ex-99.4 - Investment Advisory Agreement.
_________________________
* Filed herewith.
II-1
<PAGE>
** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
Government Securities Equity Trust Series 1, Registration
No. 33-25710.
*** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
Government Securities Equity Trust Series 5, Registration
No. 33-57992.
**** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
National Municipal Trust, Series 172, Registration
No. 33-54681.
***** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
Prudential Unit Trusts, Insured Tax-Exempt Series 1,
Registration No. 2-89263.
****** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
National Municipal Trust, Insured Series 43, Registration No.
33-29314.
******* Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
National Municipal Trust, Series 186, Registration
No. 33-54697.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Government Securities Equity Trust Series 6 certifies that it
meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Registration Statement or amendment thereto to be signed
on its behalf by the undersigned thereunto duly authorized, in the City of
New York, and State of New York on the 30th day of January, 1997.
Government Securities Equity Trust Series 6
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By the following persons,* who
constitute a majority of the
Board of Directors of Prudential
Securities Incorporated
Alan D. Hogan
Leland B. Paton
Vincent T. Pica II
Hardwick Simmons
Lee B. Spencer, Jr.
By __/s/ Kenneth Swankie_____________
(Kenneth Swankie,
Senior Vice President,
Manager-Unit Investment
Trust Department, as
authorized signatory for
Prudential Securities
Incorporated and Attorney-
in-Fact for the persons
listed above)
_____________________
* Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of its name in the Prospectus
included in this Registration Statement is contained in its opinion filed
as Exhibit 5 to this Registration Statement.
II-4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 7, 1997, accompanying the
financial statements of the Government Securities Equity Trust Series 6
included herein and to the reference to our Firm as experts under the
heading "Auditors" in the prospectus which is a part of this registration
statement.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
January 30, 1997
New York, New York
II-5
<PAGE>
Exhibit 23
Letterhead of Kenny S&P Evaluation Services
(a division of J.J. Kenny Co., Inc.)
January 31, 1997
Prudential Securities Incorporated
1 New York Plaza
New York, NY 10292
Re: Government Securities Equity Trust
Post-Effective Amendment No. 3
Government Securities Equity Trust Series 6
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-65966 for the above-
captioned trust. We hereby acknowledge that Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc. is
currently acting as the evaluator for the trust. We hereby
consent to the use in the Registration Statement of the
references to Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the Registration
Statement for the respective bonds comprising the trust
portfolio are the ratings currently indicated in our KENNYBASE
database as of the date of the evaluation report.
You are hereby authorized to file a copy of this
letter with the Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
Frank A. Ciccotto
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR GOVERNMENT SECURITIES EQUITY TRUST
SERIES 6 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0000907009
<NAME> GOVERNMENT SECURITIES EQUITY TRUST
SERIES 6
<SERIES>
<NAME> GOVERNMENT SECURITIES EQUITY TRUST
SERIES 6
<NUMBER> 1
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-1-1995
<PERIOD-END> Sep-30-1996
<INVESTMENTS-AT-COST> 57,536,862
<INVESTMENTS-AT-VALUE> 58,250,774
<RECEIVABLES> 333,436
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,584,210
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</TABLE>
