<PAGE>
As filed with the Securities and Exchange Commission on November 2, 1994
Registration No. 33-
___________________________________________________________________________
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
_____________________
A. Exact Name of Trust:
GOVERNMENT SECURITIES
EQUITY TRUST SERIES 8
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
E. Title and amount of securities being registered:
An indefinite number of Units of GOVERNMENT SECURITIES
EQUITY TRUST SERIES 8
Pursuant to Rule 24f-2 promulgated under
the Investment Company Act of 1940 as amended.
F. Proposed maximum aggregate offering price to the public of the
securities being registered:
<PAGE>
Indefinite
G. Amount of filing fee:
$500 (as required by Rule 24f-2)*
H. Approximate date of proposed sale to public:
As soon as practicable after the effective date
of the registration statement.
__
/__/ Check box if it is proposed that this filing will become effective
on immediately upon filing pursuant to Rule 487.
___________________________________________________________________________
___________________________________________________________________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading In Prospectus
I. Organization and General Information
1. (a) Name of Trust..................... Prospectus front cover
(b) Title of securities issued........ Prospectus front cover
2. Name and address of each depositor.... Sponsor, Prospectus back cover
3. Name and address of trustee........... Trustee
4. Name and address of each principal
underwriter......................... Sponsor
5. State of organization of trust........ The Trust
6. Execution and termination of trust
agreement........................... Summary of Essential
Information; The Trust;
Amendment and Termination of
the Indenture - Termination
7. Changes of Name....................... *
8. Fiscal year........................... *
9. Litigation............................ *
II. General Description of the Trust and
Securities of the Trust
10. (a) Registered or bearer securities... *
(b) Cumulative or distributive
securities........................ *
________________
* Inapplicable, answer negative or not required.
-ii-
<PAGE>
(c) Redemption........................ Rights of Unit Holders --
Redemption
(d) Conversion, transfer, etc......... Rights of Unit Holders --
Redemption
(e) Periodic payment plan............. *
(f) Voting rights..................... *
(g) Notice to certificateholders...... The Trust; Rights of Unit
Holders -- Reports and
Records; Sponsor --
Responsibility; Sponsor --
Resignation; Trustee --
Resignation; Amendment and
Termination of the Indenture
(h) Consents required................. The Trust; Amendment and
Termination of the Indenture
(i) Other provisions.................. Tax Status
11. Type of securities comprising units... Prospectus front cover; The
Trust
12. Certain information regarding
periodic payment certificates....... *
13. (a) Load, fees, expenses, etc......... Summary of Essential
Information; Public Offering
of Units -- Public Offering
Price; Public Offering of
Units -- Profit of Sponsor;
Public Offering of Units --
Volume Discount; Public
Offering of Units -- Employee
Discount; Exchange Option;
Reinvestment Program;
Expenses and Charges
(b) Certain information regarding
periodic payment certificates... *
(c) Certain percentages............... Summary of Essential
Information; Public Offering
of Units -- Public Offering
Price; Public Offering of
Units -- Profit of Sponsor;
Public Offering of Units --
Volume Discount; Public
Offering of Units -- Employee
Discount; Exchange Option
(d) Price differentials............... Public Offering of Units --
Employee Discount
________________
* Inapplicable, answer negative or not required.
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<PAGE>
(e) Certain other fees, etc.
payable by holders.............. Rights of Unit Holders --
Certificates
(f) Certain other profits
receivable by depositor,
principal underwriter, trustee
or affiliated persons........... Rights of Unit Holders --
Redemption -- Purchase by the
Sponsor of Units Tendered for
Redemption
(g) Ratio of annual charges to
income.......................... *
14. Issuance of trust's securities........ The Trust; Rights of Unit
Holders -- Certificates
15. Receipt and handling of payments
from purchasers....................... *
16. Acquisition and disposition of
underlying securities................. The Trust -- Trust Formation;
The Trusts -- Securities
Selection; Rights of Unit
Holders -- Redemption;
Sponsor -- Responsibility
17. Withdrawal or redemption.............. Rights of Unit Holders --
Redemption
18. (a) Receipt, custody and
disposition of income........... Rights of Unit Holders --
Distributions; Rights of Unit
Holders -- Reports and
Records
(b) Reinvestment of distributions..... Reinvestment Program
(c) Reserves or special funds......... Expenses and Charges; Rights of
Unit Holders -- Distributions
(d) Schedule of distributions......... *
19. Records, accounts and reports......... Rights of Unit Holders --
Distributions; Rights of Unit
Holders -- Reports and
Records
20. Certain miscellaneous provisions
________________
* Inapplicable, answer negative or not required.
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<PAGE>
of trust agreement.................. Sponsor -- Limitations on
Liability;
(a) Amendment......................... Sponsor -- Resignation;
(b) Termination....................... Trustee -- Limitations on
Liability;
(c) and (d) Trustee, removal and
successor......................... Trustee -- Resignation;
(e) and (f) Depositor, removal and
successor......................... Amendment and Termination of
the Indenture
21. Loans to security holders............. *
22. Limitation on liability............... The Trust; Sponsor --
Limitations on Liability;
Trustee -- Limitations on
Liability; Evaluator --
Limitations on Liability
23. Bonding arrangements.................. Additional Information --
Item A
24. Other material provisions of
trust agreement..................... *
III. Organization, Personnel and
Affiliated Persons of Depositor
25. Organization of depositor............. Sponsor
26. Fees received by depositor............ *
27. Business of depositor................. Sponsor
28. Certain information as to
officials and affiliated
persons of depositor................ Contents of Registration
Statement -- Part II
29. Companies controlling depositor....... Sponsor
30. Persons controlling depositor......... *
31. Payments by depositor for certain
services rendered to trust.......... *
32. Payments by depositor for
________________
* Inapplicable, answer negative or not required.
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<PAGE>
certain other services rendered
to trust............................ *
33. Remuneration of employees of
depositor for certain services
rendered to trust................... *
34. Remuneration of other persons
for certain services rendered
to trust............................ *
35. Distribution of trust's securities
in states........................... Public Offering of Units --
Public Distribution
36. Suspension of sales of trust's
securities.......................... *
37. Revocation of authority to
distribute.......................... *
38. (a) Method of distribution............ Public Offering of Units
(b) Underwriting agreements........... Public Offering of Units
(c) Selling agreements................ Public Offering of Units
39. (a) Organization of principal
underwriter..................... Sponsor
(b) N.A.S.D. membership of
principal underwriter........... Sponsor
40. Certain fees received by
principal underwriter............... *
41. (a) Business of principal
underwriter..................... Sponsor
(b) Branch offices of principal
underwriter..................... Sponsor
(c) Salesmen of principal
underwriter..................... *
42. Ownership of trust's securities by
certain persons..................... *
43. Certain brokerage commissions
received by principal underwriter... *
________________
* Inapplicable, answer negative or not required.
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44. (a) Method of valuation............... Summary of Essential
Information; Public Offering
of Units -- Public Offering
Price; Public Offering of
Units -- Public Distribution;
Public Offering of Units --
Secondary Markets
(b) Schedule as to offering price..... *
(c) Variation in offering price
to certain persons.............. Public Offering of Units --
Public Distribution; Public
Offering of Units -- Volume
Discount; Public Offering of
Units -- Employee Discount;
Exchange Option
45. Suspension of redemption rights....... *
46. (a) Redemption Valuation.............. Summary of Essential
Information; Rights of Unit
Holders -- Redemption -
Computation of Redemption
Price per Unit
(b) Schedule as to redemption
price........................... *
47. Maintenance of position in
underlying securities............... Public Offering of Unit --
Secondary Market; Rights of
Unit Holders -- Redemption --
Computation of Redemption
Price per Unit; Rights of
Unit Holders -- Redemption --
Purchase by the Sponsor of
Units Tendered for Redemption
IV. Information Concerning
the Trustee or Custodian
48. Organization and regulation
of trustee.......................... Trustee
49. Fees and expenses of trustee.......... Expenses and Charges
50. Trustee's lien........................ Expenses and Charges -- Other
Charges
________________
* Inapplicable, answer negative or not required.
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V. Information Concerning Insurance of
Holders of Securities
51. Insurance of holders of trust's
securities.......................... *
VI. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection
or elimination of underlying
securities...................... Prospectus front cover; The
Trust -- Trust Formation; The
Trust -- Objectives and
Securities Selection; Sponsor
-- Responsibility
(b) Transactions involving
elimination of underlying
securities...................... *
(c) Policy regarding substitution
or elimination of underlying
securities...................... Sponsor -- Responsibility
(d) Fundamental policy not other-
wise covered.................... *
53. Tax status of trust................... Prospectus front cover; Tax
Status
VII. Financial and Statistical Information
54. Trust's securities during last
ten years........................... *
55.
56. Certain information regarding
periodic payment certificates....... *
57.
58.
59. Financial statements
(Instruction 1(c) to Form S-6)...... Statement of Financial
Condition
________________
* Inapplicable, answer negative or not required.
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<PAGE>
Subject to Completion dated November 2, 1994.
Information contained herein is subject to
completion or amendment. A registration statement relating to
these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold nor may
offers to buy them be accepted prior to the time the
registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in
any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of such state.
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
[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 A shares of the Prudential Equity Fund, Inc. (the
"Fund"), an open-end, diversified, registered management
investment company. The objective of the Fund is long-term
capital growth. The Fund will seek to achieve this objective
by investing primarily in common stocks of major, established
corporations which, in the opinion of its investment adviser
(the "Investment Manager"), are believed to be in sound
financial condition and to have prospects of price appreciation
greater than broadly based stock indices. The Fund may also
invest in derivatives, including options on stocks and stock
indices. There can be no assurance that the Fund or the Trust
will achieve its objective. Units of the Trust may be suited
for purchase by Individual Retirement Accounts, Keogh Plans and
other tax-deferred retirement plans.
_______________________________________________________________
Sponsor:
Prudential Securities [LOGO]
_______________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
<PAGE>
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
_______________________________________________________________
Please Read and Retain Prospectus dated , 1994
This Prospectus for Future
Reference.
<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 8 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 A shares ("Fund Shares") of
the Prudential Equity 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 Trust contains Treasury Obligations
maturing approximately years from the Date of
Deposit and Fund Shares.
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. The Fund will seek to achieve this
objective by investing primarily in common stocks of major,
established corporations which, in the opinion of its
investment adviser (the "Investment Manager"), are believed to
be in sound financial condition and to have prospects of price
appreciation greater than broadly based stock indices. There
can be no assurance that the Fund will achieve its investment
objective. The Fund may also invest in options on stocks and
stock indices. The Fund's purchase and sale of put and call
options and related short-term trading may result in a high
portfolio turnover rate. The Fund may also buy and sell stock
index options, futures and options on futures, forward foreign
currency exchange contracts, options on foreign currencies and
futures contracts on foreign currencies and options thereon
pursuant to limits described herein. These various hedging and
income enhancement strategies, including derivatives, may be
considered speculative and may result in higher risks and costs
to the Fund. The Fund may invest up to 30% of its total assets
in foreign securities. Investing in securities of foreign
companies and countries involves certain considerations not
A-1
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typically associated with investing in securities of domestic
companies. In addition, the Fund may invest up to 5% of its
net assets in illiquid securities. 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, $20.00 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 $20.00 since the capital protection is limited to
the aggregate maturity value per Unit of Treasury Obligations.
On the Date of Deposit, the Public Offering Price, including
the sales charge, will be $ per Unit and consequently had
a Unit Holder purchased Units on such date such Unit Holder
could have anticipated realizing proceeds at maturity of the
Treasury Obligations greater than their initial investment of
approximately $15.00 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
Deposit. 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.
Subsequent to the Date of Deposit 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. The Fund seeks to achieve this objective by investing
primarily in common stocks of major, established corporations
which, in the opinion of the Investment Manager, are believed
A-2
<PAGE>
to be in sound financial condition and to have prospects of
price appreciation greater than broadly based stock indices.
There can be no assurance that the Fund will achieve its
objective.
The Fund may also invest in preferred stocks and
bonds which have either attached warrants or a conversion
privilege into common stocks. At times when economic
conditions or general levels of common stock prices are such
that the investment adviser deems it prudent to adopt a
defensive position by reducing or curtailing investments in
common stocks, a larger proportion of the Fund's assets than
usual may be invested in preferred stocks or short-term or
long-term debt instruments (either convertible or
non-convertible). The shares of the Fund are subject to the
risks of common stock investment, and there can be no assurance
that the Fund will achieve its investment objective. The Fund
may invest up to 30% of its assets in foreign securities, which
may involve additional risks. Such investment risks include
future adverse political and economic developments, possible
seizure or nationalization of the company in whose securities
the Fund has invested and possible establishment of exchange
controls or other foreign governmental laws that might
adversely affect the payment of dividends.
The Fund may also engage in various portfolio
strategies, including derivatives, to reduce certain risks of
its investments and to attempt to enhance income. These
strategies include (1) the purchase and writing (i.e., sale) of
put options and call options on equity securities, (2) the
purchase and sale of put and call options on indices, (3) the
purchase and sale of exchange traded stock index futures and
options thereon and (4) the purchase and sale of options on
foreign currencies and futures contracts on foreign currencies
and options thereon. The Fund may engage in these transactions
on securities or commodities exchanges or, in the case of
equity, stock index and foreign currency options, also in the
over-the-counter market. The Fund may also purchase and sell
forward foreign currency exchange contracts. The Fund's
ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations and there
can be no assurance that any of these strategies will succeed.
New financial products and risk management techniques continue
to be developed and the Fund may use these new investments and
techniques to the extent they are consistent with its
investment objective and policies.
Although the Fund will seek the objective of
long-term capital growth, there can be no assurance it will be
A-3
<PAGE>
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."
In addition, the Fund may invest in foreign
securities and derivatives. See "The Trust -- Investment
Policies and Restriction of the Fund" and "The Trust -- Fund
Risk Factors." FOR ADDITIONAL RISK FACTORS RELATING TO
INVESTMENT IN THE FUND SEE PAGES B-8 TO B-21 AND B-29 TO B-30
OF THIS PROSPECTUS.
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
$20.00 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
A-4
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Fund Shares (net of Trust expenses), distributions of any net
capital gains and net investment income 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"). 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". 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 1,667 Units (see "Public
Offering of Units -- Volume Discount"). The minimum purchase
is 100 Units except the minimum purchase is 25 Units in the
A-5
<PAGE>
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"). 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 (see "The Trust -- Stripped U.S.
Treasury Obligations" on pages B-4 and B-5) and (ii) a mutual
fund which invests in the type of securities in which the Fund
invests (see "The Trust -- Investment Policies and Restrictions
of the Fund" on pages B-8 through B-21 and "The Trust -- Fund
Risk Factors" on pages B-29 through B-30). 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.
A-6
<PAGE>
Portfolio Summary as of Date of Deposit
$ face amount of Treasury Obligations
maturing on , 200_ and Fund Shares were held
in the Trust on the Date of Deposit. The Treasury Obligations
and the Fund Shares represented % and %, respectively, of
the total of the aggregate offering side evaluation of Treasury
Obligations in the Trust and the aggregate value of Fund Shares
on the Date of Deposit.
A-7
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
As of , 1994+
AGGREGATE MATURITY VALUE OF TREASURY OBLIGATIONS
INITIALLY DEPOSITED.................................. $
AGGREGATE NUMBER OF FUND SHARES INITIALLY
DEPOSITED............................................
INITIAL NUMBER OF UNITS................................
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST
REPRESENTED BY EACH UNIT............................. 1/ th
PUBLIC OFFERING PRICE
Aggregate offering side evaluation of Treasury
Obligations in the Trust............................. $
Aggregate value of Fund Shares++.....................
Total................................................
Divided by Units.........................
Plus sales charge of 5.25% of Public Offering
Price (5.541% of net amount invested)*...............
Public Offering Price per Unit+++....................
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,++ $ less than Public Offering
Price per Unit)...................................... $
QUARTERLY RECORD DATES: 1, 1,
1, 1.
QUARTERLY DISTRIBUTION DATES: 15,
15, 15, 15.
TRUSTEE'S ANNUAL FEE** (including estimated
expenses and Evaluator's fee) $ 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: , 200
MINIMUM VALUE OF TRUST: The Trust may be
terminated if the value of Trust assets at any
time is less than 40% of the aggregate maturity
values of Treasury Obligations calculated after
the most recent deposit of Treasury Obligations.
A-8
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___________
+ The Date of Deposit. 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.
++ Calculated by multiplying aggregate number of Fund Shares by
the current net asset value per share (excluding any sales
load on the Fund Shares).
+++ This Public Offering Price is computed as of the Date of
Deposit and may vary from the Public Offering Price on the
date of this Prospectus or any subsequent date.
* Certain transactions are entitled to a reduced sales charge.
(See "Public Offering of Units -- Volume Discount.")
** Based on Trust size of 1,000,000 or fewer Units.
__________
For an explanation of the management fees paid by the Fund
(as of December 31, 1993, 0.47% of Fund average net assets),
see pages B-25 and B-26.
A-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNIT HOLDERS, SPONSOR AND TRUSTEE
OF THE GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
We have audited the Statement of Financial Condition
and Schedule of Portfolio Securities of the Government
Securities Equity Trust Series 8 as of , 1994. These
financial statements are the responsibility of the Trustee and
Sponsor (see note (d) to the statement of financial condition).
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
the irrevocable letter of credit for the purchase of
securities, as shown in the Statement of Financial Condition
and Schedule of Portfolio Securities as of , 1994, by
correspondence with United States Trust Company of New York,
the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustee,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Government Securities Equity Trust Series 8 as of
, 1994, in conformity with generally accepted
accounting principles.
New York, N.Y.
, 1994
A-10
<PAGE>
STATEMENT OF FINANCIAL CONDITION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
As of Date of Deposit, , 1994
TRUST PROPERTY
Sponsor's Contracts to Purchase underlying
Securities backed by an irrevocable
letter of credit(a).......................... $
INTEREST OF UNIT HOLDERS
Units of fractional undivided interest
outstanding:
Cost to investors(b)...................... $
Gross underwriting commission(c).......... ____________
Total................................... $
(a) The aggregate value of the Securities
represented by Contracts to Purchase listed under "Schedule of
Portfolio Securities" included herein and their cost to the
Trust are the same. An irrevocable letter of credit drawn on
Mellon Bank, N.A. in the amount of $ has been
deposited with the Trustee for the purchase of Securities
pursuant to contracts to purchase such Securities.
(b) The aggregate Public Offering Price is computed
on the basis set forth under "Public Offering of Units --
Public Offering Price."
(c) The aggregate sales charge of 5.25% of the
Public Offering Price per Unit is computed on the basis set
forth under "Public Offering of Units -- Public Offering
Price."
(d) 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 Treasury Obligation included in the Trust's Schedule
of Portfolio Securities on the basis set forth in "Public
Offering of Units -- Public Offering Price." Under the
Securities Act of 1933, as amended (the "Act"), the Sponsor is
A-11
<PAGE>
deemed to be an issuer of the Trust's 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.
A-12
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
On Date of Deposit, , 1994
Name of
Issuer and Cost of
Title of Securities Represented by Securities
____Contracts to Purchase (1)_____ to Trust(2)
$ Maturity Amount of
Stripped United States Treasury
Obligations maturing on ,
200 ........................................... $
Class A Shares of the Prudential
Equity Fund, Inc. ($ per Fund
Share)......................................... ____________
$____________
__________________
(1) The Treasury Obligations have been purchased at
a discount from their maturity 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
holder receives 100% of the Treasury Obligation maturity
amount.
Shares in the Fund have been valued at their net
asset value as of the Evaluation Time on the Date of Deposit.
The Fund's investment manager is Prudential Mutual Fund
Management, Inc.
All Securities are represented by contracts to
purchase such Securities. The Securities are represented by
regular way contracts for the performance of which an
irrevocable letter of credit has been deposited with the
Trustee. The contracts to purchase Securities were entered
into by the Sponsor on , 1994.
(2) Offering prices of Treasury Obligations are
determined by the Evaluator on the basis stated under "Public
Offering of Units -- Public Offering Price" herein. The
offering side evaluation is greater than the current bid
evaluation of the Treasury Obligations, which is the basis on
A-13
<PAGE>
which Redemption Price per Unit is determined (see: "Rights of
Unit Holders -- Redemption -- Computation of Redemption Price
per Unit" ). The aggregate value of the Treasury Obligations
based on the bid side evaluation of the Treasury Obligations on
the Date of Deposit was $ (which is $ lower than
the aggregate cost of the Treasury Obligations to the Trust
based on the offering side evaluation). The Profit to Sponsor
on deposit totals $ .
A-14
<PAGE>
GOVERNMENT SECURITIES EQUITY TRUST
SERIES 8
THE TRUST
The Government Securities Equity Trust Series 8 (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")1
among Prudential Securities Incorporated (the "Sponsor"),
United States Trust Company of New York (the "Trustee") and
Kenny Information Systems, Inc. (the "Evaluator"). The
Sponsor, Prudential Securities Incorporated, is a wholly-owned,
indirect subsidiary of The Prudential Insurance Company of
America.
The objectives of the Trust are to attempt to obtain
safety of capital through investment in stripped United States
Treasury issued notes or bonds paying no current interest (the
"Treasury Obligations") and to attempt to provide for capital
appreciation through investment in Class A shares ("Fund
Shares") of Prudential Equity Fund, Inc. (the "Fund"), an
open-end, diversified, registered management investment company
(the Treasury Obligations and Fund Shares hereinafter,
collectively, referred to as "Securities"). The Fund's
investment objective is long-term capital growth. The Fund
seeks to achieve this objective by investing primarily in
common stocks of major, established corporations which, in the
opinion of its investment adviser (the "Investment Manager"),
are believed to be in sound financial condition and to have
prospects of price appreciation greater than broadly based
stock indices. The Fund may also invest in preferred stocks
and bonds which have either attached warrants or a conversion
privilege into common stocks and in options on stocks and stock
indices. There is of course no assurance 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
_________________________
1 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>
side of the market on the Date of Deposit as determined by the
Evaluator and the net asset value of the Fund Shares (see
"Schedule of Portfolio Securities"). 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.
B-2
<PAGE>
On the Date of Deposit, 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 $20.00 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 on whether his purchase price was less than or
exceeded $20.00 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.
Notwithstanding the availability of the above-
mentioned irrevocable letter(s) of credit, it is expected that
the Sponsor will pay for the Securities as the contracts for
their purchase become due. A substantial portion of such
contracts have not become due by the date of this Prospectus.
To the extent Units are sold prior to the settlement of such
contracts, the Sponsor will receive the purchase price of such
Units prior to the time at which it pays for Securities
pursuant to such contracts and have the use of such funds
during this period.
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
B-3
<PAGE>
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.
On the Date of Deposit the Trust consisted of the
Securities listed under "Schedule of Portfolio Securities" or
contracts to acquire such Securities together with a letter of
credit to provide the amount necessary to complete the purchase
of such Securities. 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
B-4
<PAGE>
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").
The following disclosure concerning the Fund and its
affiliates has been provided by Prudential Mutual Fund
Management, 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.
Prudential Equity Fund, Inc.
The portfolio of the Trust also contains Class A
shares (the "Fund Shares") of Prudential Equity Fund, Inc. (the
"Fund"). On December 31, 1993, the net assets of the Fund were
approximately $2,027,169,000. The manager of the Fund is
Prudential Mutual Fund Management, Inc. (the "Investment
Manager"). The subadviser to the Fund is The Prudential
Investment Corporation ("PIC").
B-5
<PAGE>
The investment objective of the Fund is long-term
capital growth. The Fund is designed primarily for capital
growth. 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 State Street Bank and Trust Company is the
custodian of the Fund's assets. Prudential Mutual Fund
Services, Inc. serves as the Fund's dividend disbursing and
transfer agent. The Fund's prospectus is available upon
request.
General Information Regarding the Fund
The Fund intends normally to pay semi-annual
dividends 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 Fund shareholders. Amounts not distributed
on a timely basis in accordance with a calendar year
distribution requirement 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-6
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the periods indicated)
Shown below for the periods indicated are per share income and
capital changes for a Class A share outstanding throughout the periods
indicated ("per share information") of the Fund.
January 22,
1990}
through
Year ended December 31,_
December 31,
1993 1992 1991
____1990____
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 12.07 $11.39 $_9.84 $
11.25}}
Income from investment operations
Net investment income.................. 0.23 0.24 0.27
.31
Net realized and unrealized gain (loss)
on investment transactions......... _2.42 _1.30 _2.09
_(.15)}}
Total from investment operations....... 2.65 1.54 _2.36
__.16}}
Less distributions
Dividends from net investment income... (.22) (.23) (.24)
(.35)
Distributions from net realized
capital gains...................... _(.70) _(.63) _(.57)
(1.22)
Total distributions.................. _(.92) (.86) (.81)
(1.57)
Net asset value, end of period........... $13.80 $12.07 $11.39
$_9.84
Total Return#:........................... 22.14% 13.65% 24.55%
.29%}}
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).......... $232,535 $136,834 $82,845
$30,264
Average net assets (000)................. $190,778 $111,489 $57,845
$27,371
Ratios to average net assets:
Expenses, including distribution
fees............................. .91% .94% .97%
1.01%*
Expenses, excluding distribution
fees............................. .71% .74% .77%
.84%*
Net investment income............... 1.71% 1.91% 2.36%
2.86%*
Portfolio turnover....................... 21% 22% 19%
76%
</TABLE>
________________________________
* Annualized.
} Commencement of offering of Class A Shares.
# Total return does not consider the effects of sales loads. Total return
is
calculated assuming a purchase of shares on the first day and a sale on
the last day
of each period reported and includes reinvestment of dividends and
distributions.
Total returns for periods of less than a full year are not annualized.
}} Restated.
B-7
<PAGE>
Investment Policies and Restrictions of the Fund
The Fund's investment objective is long-term growth
of capital. The Fund will seek to achieve this objective by
investing primarily in common stocks of major, established
corporations which, in the opinion of the Fund's investment
adviser, are believed to be in sound financial condition and
have prospects of price appreciation greater than broadly based
stock indices. The Fund may also invest in preferred stocks
and bonds which have either attached warrants or a conversion
privilege into common stocks. At times when economic
conditions or general levels of common stock prices are such
that the investment adviser deems it prudent to adopt a
defensive position by reducing or curtailing investments in
common stocks, a larger proportion of the Fund's assets than
usual may be invested in preferred stocks or short-term or
long-term debt instruments (either convertible or non-conver-
tible). The shares of the Fund are subject to the risks of
common stock investment, and there can be no assurance that the
Fund will achieve its investment objective. The Fund may
invest up to 30% of its assets in foreign securities, which may
involve additional risks. Such investment risks include future
adverse political and economic developments, possible seizure
or nationalization of the company in whose securities the Fund
has invested and possible establishment of exchange controls or
other foreign governmental laws that might adversely affect the
payment of dividends.
Hedging and Income Enhancement Strategies
The Fund may also engage in various portfolio
strategies, including derivatives, to reduce certain risks of
its investments and to attempt to enhance income. These
strategies include (1) the purchase and writing (i.e., sale) of
put options and call options on equity securities, (2) the
purchase and sale of put and call options on indices, (3) the
purchase and sale of exchange traded stock index futures and
options thereon and (4) the purchase and sale of options on
foreign currencies and futures contracts on foreign currencies
and options thereon. The Fund may engage in these transactions
on securities or commodities exchanges or, in the case of
equity, stock index and foreign currency options, also in the
over-the-counter market. The Fund may also purchase and sell
forward foreign currency exchange contracts. The Fund's
ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations and there
can be no assurance that any of these strategies will succeed.
New financial products and risk management techniques continue
to be developed and the Fund may use these new investments and
B-8
<PAGE>
techniques to the extent they are consistent with its
investment objective and policies.
Options Transactions
Options on Equity Securities. The Fund intends to
purchase and write (i.e., sell) put and call options on equity
securities that are traded on securities exchanges, on NASDAQ
(NASDAQ options) or in the over-the-counter market. A call
option is a short-term contract (having a duration of nine
months or less) pursuant to which the purchaser, in return for
a premium paid, has the right to buy the security underlying
the option at a specified exercise price at any time during the
term of the option or, in the case of a European-style option,
at the expiration of the option. The writer of the call option
receives a premium and has the obligation, if the option is
exercised, to deliver the underlying security against payment
of the exercise price. A put option is a similar contract
which gives the purchaser, who pays a premium, the right to
sell the underlying security at a specified price during the
term of the option. The writer of the put, who receives the
premium, has the obligation to buy the underlying security upon
exercise at the exercise price. The Fund will purchase put
options only when its investment adviser perceives significant
short-term risk, but substantial long-term appreciation, in the
underlying security.
The Fund will write call options only if they are
covered. A call option is covered if the Fund holds on a
share-for-share basis a call on the same security as the call
written by the Fund where the exercise price of the call held
is equal to or less than the exercise price of the call written
or greater than the exercise price of the call written if the
difference is maintained by the Fund in cash, Treasury bills or
other high grade short-term obligations in a segregated account
with its custodian. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of
the exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply
and demand and interest rates.
If the writer of an option wishes to terminate the
obligation, he or she may effect a "closing purchase
transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of
the purchase is that the writer's position will be cancelled by
the clearing corporation. However, a writer may not effect a
closing purchase transaction after he or she has been notified
of the exercise of an option. Similarly, an investor who is
B-9
<PAGE>
the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished
by selling an option of the same series as the option
previously purchased. There is no guarantee that either a
closing purchase or a closing sale transaction can be effected.
To secure the obligation to deliver the underlying security in
the case of a call option, the writer of an exchange-traded
option or a NASDAQ option is required to pledge for the benefit
of the broker the underlying security or other assets in
accordance with the rules of The Options Clearing Corporation
(OCC), an institution created to interpose itself between
buyers and sellers of options. Technically, the OCC assumes
the other side of every purchase and sale transaction on an
exchange and, by doing so, guarantees the transaction.
In the case of OTC options, it is not possible to
effect a closing transaction in the same manner as exchange-
traded options because a clearing corporation is not interposed
between the buyer and seller of the option. In order to
terminate the obligation represented by an OTC option, the Fund
would need to agree to the termination of the obligation
represented by an OTC option with the counterparty thereto.
Any such cancellation, if agreed to, may require the Fund to
pay a premium to the counterparty. Alternatively, the Fund
could write an OTC put option in effect to close its position
on an OTC call option or write a call option to close its
position on an OTC put option. However, the Fund would remain
exposed to each counterparty's credit risk on the call or put
option until such option is exercised or expires. There is no
guarantee that the Fund will be able to write put or call
options, as the case may be, that will effectively close an
existing position.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction
is more than the premium received from writing the option or is
less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally
reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call
option is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Fund.
The Fund may also purchase a "protective put," i.e.,
a put option acquired for the purpose of protecting a portfolio
security from a decline in market value. In exchange for the
B-10
<PAGE>
premium paid for the put option, the Fund acquires the right to
sell the underlying security at the exercise price of the put
regardless of the extent to which the underlying security
declines in value. The loss to the Fund is limited to the
premium paid for, and transaction costs in connection with, the
put plus the initial excess, if any, of the market price of the
underlying security over the exercise price. However, if the
market price of the security underlying the put rises, the
profit the Fund realizes on the sale of the security will be
reduced by the premium paid for the put option less any amount
(net of transaction costs) for which the put may be sold.
Similar principles apply to the purchase of puts on stock
indices, as described below.
Options on Stock Indices. The Fund may also purchase
and write (i.e., sell) put and call options on stock indices
traded on securities exchanges, on NASDAQ or in the over-the-
counter market. Options on stock indices are similar to
options on stock except that, rather than the right to take or
make delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level
of the stock index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index
and the exercise price of the option expressed in dollars times
a specified multiple (the multiplier). The writer of the
option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all
settlements are in cash, and gain or loss depends on price
movements in the stock market generally (or in a particular
industry or segment of the market) rather than price movements
in individual stocks.
The multiplier for an index option performs a
function similar to the unit of trading for a stock option. It
determines the total dollar value per contract of each point in
the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on
different indices may have different multipliers.
Because the value of an index option depends upon
movements in the level of the index rather than the price of a
particular stock, whether the Fund will realize a gain or loss
on the purchase or sale of an option on an index depends upon
movements in the level of stock prices in the stock market
generally or in an industry or market segment rather than
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movements in the price of a particular stock. Accordingly,
successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict
correctly movements in the direction of the stock market
generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of
individual stocks. The Fund's investment adviser currently
uses these techniques in conjunction with the management of
other mutual funds.
Because exercises of index options are settled in
cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on
specific stocks, cannot provide in advance for, or cover, its
potential settlement obligations by acquiring and holding the
underlying securities. In addition, unless the Fund has other
liquid assets which are sufficient to satisfy the exercise of a
call, the Fund would be required to liquidate portfolio
securities or borrow in order to satisfy the exercise.
The Fund's successful use of options on indices
depends upon the investment adviser's ability to predict the
direction of the market and is subject to various additional
risks. The correlation between movements in the index and the
price of the securities being written against is imperfect and
the risk from imperfect correlation increases as the
composition of the Fund's portfolio diverges from the
composition of the relevant index. Accordingly, a decrease in
the value of the securities being written against may not be
wholly offset by a gain on the exercise of a stock index put
option held by the Fund. Likewise, if a stock index call
option written by the Fund is exercised, the Fund may incur a
loss on the transaction which is not offset, wholly or in part,
by an increase in the value of the securities being written
against, which securities may, depending on market
circumstances, decline in value.
Options Position Limits. Transactions by the Fund in
options on securities and on stock indices will be subject to
limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ)
governing the maximum number of options in each class which may
be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options
are written on the same or different exchanges, boards of trade
or other trading facilities or are held or written in one or
more accounts or through one or more brokers. Thus, the number
of options which the Fund may write or purchase may be affected
by options written or purchased by other investment advisory
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clients of the Fund's investment adviser. An exchange, board
of trade or other trading facility may order the liquidation of
positions found to be in excess of these limits, and it may
impose certain other sanctions.
Options on Foreign Currencies. The Fund is permitted
to purchase and write put and call options on foreign
currencies and on futures contracts on foreign currencies
traded on securities exchanges or boards of trade (foreign and
domestic) for hedging purposes in a manner similar to that in
which forward foreign currency exchange contracts and futures
contracts on foreign currencies will be employed. Options on
foreign currencies and on futures contracts on foreign
currencies are similar to options on stock, except that the
Fund has the right to take or make delivery of a specified
amount of foreign currency, rather than stock.
The Fund may purchase and write options to hedge the
Fund's portfolio securities denominated in foreign currencies.
If there is a decline in the dollar value of a foreign currency
in which the Fund's portfolio securities are denominated, the
dollar value of such securities will decline even though the
foreign currency value remains the same. To hedge against the
decline of the foreign currency, the Fund may purchase put
options on futures contracts on such foreign currency. If the
value of the foreign currency declines, the gain realized on
the put option would offset, in whole or in part, the adverse
effect such decline would have on the value of the portfolio
securities. Alternatively, the Fund may write a call option on
a futures contract on the foreign currency. If the value of
the foreign currency declines, the option would not be
exercised and the decline in the value of the portfolio
securities denominated in such foreign currency would be offset
in part by the premium the Fund received for the option.
If, on the other hand, the investment adviser
anticipates purchasing a foreign security and also anticipates
a rise in the value of such foreign currency (thereby
increasing the cost of such security), the Fund may purchase
call options on the foreign currency. The purchase of such
options could offset, at least partially, the effects of the
adverse movements of the exchange rates. Alternatively, the
Fund could write a put option on the currency and, if the
exchange rates move as anticipated, the option would expire
unexercised.
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<PAGE>
Forward Foreign Currency Exchange Contracts
The Fund may enter into forward foreign currency
exchange contracts to protect the value of its portfolio
against future changes in the level of currency exchange rates.
A forward contract on foreign currency is an obligation to
purchase or sell a specific currency at a future date, which
may be any fixed number of days agreed upon by the parties from
the date of the contract at a price set on the date of the
contract. These contracts are traded in the interbank market
conducted directly between currency traders (typically large
commercial banks) and their customers. A forward contract
generally has no deposit requirements, and no commissions are
charged for such trades.
The Fund may not use forward contracts to generate
income, although the use of such contracts may incidentally
generate income. There is no limitation on the value of
forward contracts into which the Fund may enter. However, the
Fund's dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of a forward
contract with respect to specific receivables or payables of
the Fund generally arising in connection with the purchase or
sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is
the sale of a foreign currency with respect to portfolio
security positions denominated or quoted in that currency. The
Fund will not speculate in forward contracts. The Fund may not
position hedge with respect to a particular currency for an
amount greater than the aggregate market value (determined at
the time of making any sale of a forward contract) of
securities held in its portfolio denominated or quoted in, or
currently convertible into, such currency.
When the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or
when the Fund anticipates the receipt in a foreign currency of
dividends or interest payments on a security which it holds,
the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a
forward contract for a fixed amount of dollars for the purchase
or sale of the amount of foreign currency involved in the
underlying transaction, the Fund will be able to protect itself
against possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the
security is purchased or sold, or on which the dividend or
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interest payment is declared, and the date on which such
payments are made or received. Additionally, when the
investment adviser believes that the currency of a particular
foreign country may suffer a substantial decline against the
U.S. dollar, the Fund may enter into a forward contract, for a
fixed amount of dollars, to sell the amount of foreign currency
approximating the value of some or all of the portfolio
securities of the Fund denominated in such foreign currency.
Requirements under the Code for qualification as a regulated
investment company may limit the Fund's ability to engage in
transactions in forward contracts.
Futures Transactions
Stock Index Futures. The Fund may use stock index
futures traded on a commodities exchange or board of trade for
hedging, income enhancement and risk reduction purposes.
A stock index futures contract is an agreement in
which the writer (or seller) of the contract agrees to deliver
to the buyer an amount of cash equal to a specific dollar
amount times the difference between the value of a specific
stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is
made. When the futures contract is entered into, each party
deposits with a broker or in a segregated custodial account
approximately 5% of the contract amount, called the "initial
margin." Subsequent payments to and from the broker, called
"variation margin," will be made on a daily basis as the price
of the underlying stock index fluctuates, making the long and
short positions in the futures contracts more or less valuable,
a process known as "marked to market."
Options on Stock Index Futures. The Fund may also
purchase and write options on stock index futures for hedging,
income enhancement and risk reduction purposes. In the case of
options on stock index futures, the holder of the option pays a
premium and receives the right, upon exercise of the option at
a specified price during the option period, to assume a
position in a stock index futures contract (a long position if
the option is a call and a short position if the option is a
put). If the option is exercised by the holder before the last
trading day during the option period, the option writer
delivers the futures position, as well as any balance in the
writer's futures margin account, which represents the amount by
which the market price of the stock index futures contract at
exercise exceeds, in the case of a call, or is less than, in
the case of a put, the exercise price of the option on the
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<PAGE>
stock index future. If it is exercised on the last trading
day, the option writer delivers to the option holder cash in an
amount equal to the difference between the option exercise
price and the closing level of the relevant index on the date
the option expires.
Futures Contracts on Foreign Currencies. The Fund is
permitted to buy and sell futures contracts on foreign
currencies (futures contracts) such as the European Currency
Unit and purchase and write options thereon for hedging and
risk reduction purposes. A European Currency Unit is a basket
of specified amounts of the currencies of certain member states
of the European Economic Community, a Western European economic
cooperative organization including, inter alia, France,
Germany, The Netherlands and the United Kingdom. The Fund will
engage in transactions in only those futures contracts and
options thereon that are traded on a commodities exchange or a
board of trade. A "sale" of a futures contract on foreign
currency means the assumption of a contractual obligation to
deliver the specified amount of foreign currency at a specified
price in a specified future month. A "purchase" of a futures
contract means the assumption of a contractual obligation to
acquire the currency called for by the contract at a specified
price in a specified future month. At the time a futures
contract is purchased or sold, the Fund must allocate cash or
securities as a deposit payment (initial margin). Thereafter,
the futures contract is valued daily and the payment of
"variation margin" may be required, resulting in the Fund's
paying or receiving cash that reflects any decline or increase,
respectively, in the contract's value, a process known as
"marked to market."
Limitations on Purchases and Sales of Futures
Contracts and Options Thereon. Under the regulations of the
Commodity Exchange Act, an investment company registered under
the Investment Company Act is excluded from the definition of
"commodity pool operator," subject to compliance with certain
conditions. The exemption is conditioned upon the Fund's
purchasing and selling futures contracts and options thereon
for bona fide hedging transactions, except that the Fund may
purchase and sell futures contracts and options thereon for any
other purpose to the extent that the aggregate initial margin
and option premiums do not exceed 5% of the liquidation value
of the Fund's total assets. The Fund intends to engage in
futures transactions and options thereon in accordance with the
regulations of the CFTC. The Fund intends to purchase and sell
stock index futures and options thereon as a hedge against
changes, resulting from market conditions, in the value of
securities which are held in the Fund's portfolio or which the
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<PAGE>
Fund intends to purchase. The Fund intends to purchase and
sell futures contracts on foreign currencies and options
thereon as a hedge against changes in the value of the
currencies to which the Fund is subject or to which the Fund
expects to be subject in connection with future purchases. The
Fund also intends to purchase and sell stock index futures and
options thereon and futures contracts on foreign currencies and
options thereon when they are economically appropriate for the
reduction of risks inherent in the ongoing management of the
Fund. The Fund also intends to purchase and sell stock index
futures and options thereon for income enhancement.
The Fund's successful use of futures contracts and
options thereon depends upon the investment adviser's ability
to predict the direction of the market and is subject to
various additional risks. The correlation between movements in
the price of a futures contract and the price of the securities
being hedged is imperfect and there is a risk that the value of
the securities being hedged may increase or decrease at a
greater rate than the related futures contract, resulting in
losses to the Fund. The use of these instruments will hedge
only the currency risks associated with investments in foreign
securities, not market risks. Certain futures exchanges or
boards of trade have established daily limits on the amount
that the price of a futures contract or option thereon may
vary, either up or down, from the previous day's settlement
price. These daily limits may restrict the Fund's ability to
purchase or sell certain futures contracts or options thereon
on any particular day. In addition, if the Fund purchases
futures to hedge against market advances before it can invest
in common stock in an advantageous manner and the market
declines, the Fund might create a loss on the futures contract.
In addition, the ability of the Fund to close out a futures
position or an option depends on a liquid secondary market.
There is no assurance that liquid secondary markets will exist
for any particular futures contract or option thereon at any
particular time.
The Fund's ability to enter into futures contracts
and options thereon may also be limited by the requirements of
the Code for qualification as a regulated investment company.
Risks of Hedging and Income Enhancement Strategies
Participation in the options or futures market and in
currency exchange transactions involves investment risks and
transaction costs to which the Fund would not be subject absent
the use of these strategies. If the investment adviser's
prediction of movements in the direction of the securities,
B-17
<PAGE>
foreign currency and interest rate markets is inaccurate, the
adverse consequences to the Fund may leave the Fund in a worse
position than if such strategies were not used. Risks inherent
in the use of options, foreign currency and futures contracts
and options on futures contracts include (1) dependence on the
investment adviser's ability to predict correctly movements in
the direction of interest rates, securities prices and currency
markets; (2) imperfect correlation between the price of options
and futures contracts and options thereon and movements in the
prices of the securities or currencies being hedged; (3) the
fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) the
possible absence of a liquid secondary market for any
particular instrument at any time; (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax
consequences; and (6) the possible inability of the Fund to
purchase or sell a portfolio security at a time that otherwise
would be favorable for it to do so, or the possible need for
the Fund to sell a portfolio security at a disadvantageous
time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions.
Other Investments and Policies
Foreign Investments
The Fund may invest up to 30% of its total assets in
securities of foreign issuers. Investing in securities of
foreign companies and countries involves certain considerations
and risks which are not typically associated with investing in
securities of domestic companies. Foreign companies are not
generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to
U.S. companies. There may also be less government supervision
and regulation of foreign securities exchanges, brokers and
public companies than exists in the United States. Dividends
and interest paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net
return on such investments as compared to dividends and
interest paid to the Fund by domestic companies. There may be
the possibility of expropriations, confiscatory taxation,
political, economic or social instability or diplomatic
developments which could affect assets of the Fund held in
foreign countries. In addition, a portfolio of foreign
securities may be adversely affected by fluctuations in the
relative rates of exchange between the currencies of different
nations and by exchange control regulations.
B-18
<PAGE>
There may be less publicly available information
about foreign companies and governments compared to reports and
ratings published about U.S. companies. Foreign securities
markets have substantially less volume than, for example, the
New York Stock Exchange and securities of some foreign
companies are less liquid and more volatile than securities of
comparable U.S. companies. Brokerage commissions and other
transaction costs of foreign securities exchanges are generally
higher than in the United States.
Repurchase Agreements
The Fund may on occasion enter into repurchase
agreements, whereby the seller of a security agrees to
repurchase that security from the Fund at a mutually agreed-
upon time and price. The repurchase date is usually quite
short, possibly overnight or a few days, although it may extend
over a number of months. The resale price is in excess of the
purchase price, reflecting an agreed-upon rate of return
effective for the period of time the Fund's money is invested
in the repurchase agreement. The Fund's repurchase agreements
will at all times be fully collateralized in an amount at least
equal to the purchase price, including accrued interest earned
on the underlying securities. The instruments held as
collateral are valued daily, and if the value of the
instruments declines, the Fund will require additional
collateral in order to maintain its fully collateralized
position. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund
may incur a loss. The Fund participates in a joint repurchase
account with other investment companies managed by the
Investment Manager pursuant to an order of the Securities and
Exchange Commission (SEC).
When-Issued and Delayed Delivery Securities
The Fund may purchase or sell securities on a when-
issued or delayed delivery basis. When-issued or delayed
delivery transactions arise when securities are purchased or
sold by the Fund with payment and delivery taking place as much
as a month or more in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at
the time of entering into the transaction. The Fund's
Custodian will maintain, in a segregated account of the Fund,
cash, U.S. Government securities or other liquid high-grade
debt obligations having a value equal to or greater than the
Fund's purchase commitments; the Custodian will likewise
segregate securities sold on a delayed delivery basis. The
securities so purchased are subject to market fluctuation and
B-19
<PAGE>
no interest accrues to the purchaser during the period between
purchase and settlement. At the time of delivery of the
securities the value may be more or less than the purchase
price and an increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the
Fund's net asset value.
Borrowing and Securities Lending
The Fund may borrow an amount equal to no more than
20% of the value of its total assets (calculated when the loan
is made) for temporary, extraordinary or emergency purposes or
for the clearance of transactions. The Fund may pledge up to
20% of its total assets to secure these borrowings.
The Fund does not presently intend to lend
securities, except to the extent that the entry into repurchase
agreements may be considered securities lending.
Short Sales Against-the-Box
The Fund may make short sales of securities or
maintain a short position, provided that at all times when a
short position is open the Fund owns an equal amount of such
securities or securities convertible into or exchangeable for,
without payment of any further consideration, an equal amount
of the securities of the same issuer as the securities sold
short (a short sale against-the-box), and that not more than
25% of the Fund's net assets (determined at the time of the
short sale) may be subject to such sales. Short sales will be
made primarily to defer realization of gain or loss for federal
tax purposes; a gain or loss in the Fund's long position will
be offset by a gain or loss in its short position. The Fund
does not intend to have more than 5% of its net assets
(determined at the time of the short sale) subject to short
sales against-the-box during the coming year.
Illiquid Securities
The Fund may invest up to 5% of its net assets in
illiquid securities including repurchase agreements which have
a maturity of longer than seven days, securities with legal or
contractual restrictions on resale (restricted securities) and
securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended (the Securities Act), and
privately placed commercial paper that have a readily available
market are not considered illiquid for purposes of this
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limitation. The investment adviser will monitor the liquidity
of such restricted securities under the supervision of the
Board of Directors. Repurchase agreements subject to demand
are deemed to have a maturity equal to the applicable notice
period.
The staff of the SEC has taken the position that
purchased over-the-counter options and the assets used as
"cover" for written over-the-counter options are illiquid
securities unless the Fund and the counterparty have provided
for the Fund, at the Fund's option, to unwind the OTC option.
The exercise of such an option ordinarily would involve the
payment by the Fund of an amount designed to reflect the
counterparty's economic loss from an early termination, but
does not allow the Fund to treat the assets used as "cover" as
"liquid."
Investment Restrictions. The following restrictions
are fundamental policies. Fundamental policies are those which
cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A
"majority of the Fund's outstanding voting securities" means
the lesser of (1) 67% of the Fund's shares represented at a
meeting at which more than 50% of the outstanding shares are
present in person or represented by proxy, or (2) more than 50%
of the Fund's outstanding shares.
The Fund may not:
1. Purchase any security (other than obligations of
the U.S. Government, its agencies or instrumentalities) if as a
result with respect to 75% of the Fund's total assets, more
than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer.
2. Make short sales of securities except short
sales against-the-box (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions).
3. Concentrate its investments in any one industry
(no more than 25% of the Fund's total assets will be invested
in any one industry).
4. Issue senior securities, borrow money or pledge
its assets, except that the Fund may borrow up to 20% of the
value of its total assets (calculated when the loan is made)
for temporary, extraordinary or emergency purposes or for the
clearance of transactions. The Fund may pledge up to 20% of
the value of its total assets to secure such borrowings. For
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the purpose of this restriction, obligations of the Fund to
Directors pursuant to deferred compensation arrangements, the
purchase or sale of securities on a when-issued or delayed
delivery basis, the purchase and sale of options, futures
contracts and forward foreign currency exchange contracts and
collateral arrangements with respect to the purchase and sale
of options, futures contracts, options on futures contracts and
forward foreign currency exchange contracts are not deemed to
be the issuance of a senior security or a pledge of assets.
5. Purchase any security if as a result the Fund
would then hold more than 10% of the outstanding voting
securities of any one issuer.
6. Purchase any security if as a result the Fund
would then have more than 5% of its total assets (taken at
current value) invested in securities of companies (including
predecessors) less than three years old.
7. Buy or sell commodities or commodity contracts
or real estate or interests in real estate except that the Fund
may purchase and sell stock index futures contracts, options
thereon and forward foreign currency exchange contracts and
securities which are secured by real estate and securities of
companies which invest or deal in real estate.
8. Act as an underwriter except to the extent that,
in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under certain federal
securities laws.
9. Make investments for the purpose of exercising
control or management.
10. Invest in securities of other investment
companies, except by purchases in the open market involving
only customary brokerage commissions and as a result of which
not more than 10% of its total assets (taken at current value)
would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.
11. Invest in interests in oil, gas or other mineral
exploration or development programs, although it may invest in
the common stock of companies which invest in or sponsor such
programs.
12. Make loans, except through (i) repurchase
agreements and (ii) loans of portfolio securities (such loans
being limited to 10% of the Fund's total assets). (The
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purchase of a portion of an issue of securities distributed
publicly, whether or not the purchase is made on the original
issuance, is not considered the making of a loan.)
In order to comply with certain state "blue sky"
restrictions, the Fund will not as a matter of operating
policy:
1. Invest in oil, gas and mineral leases.
2. Purchase warrants if as a result the Fund would
then have more than 5% of its net assets (determined at the
time of investment) invested in warrants. Warrants will be
valued at the lower of cost or market and investments in
warrants which are not listed on the New York Stock Exchange or
American Stock Exchange will be limited to 2% of the Fund's net
assets (determined at the time of investment). For the purpose
of this limitation, warrants acquired in units or attached to
securities are deemed to be without value.
3. Invest in securities of any issuer if, to the
knowledge of the Fund, any officer or Director of the Fund or
the Fund's Investment Manager or subadviser owns more than 1/2
of 1% of the outstanding securities of such issuer, and such
officers and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such
issuer.
4. Invest in securities of companies having a
record, together with predecessors, of less than three years of
continuous operation, or securities of issuers which are
restricted as to disposition, if more than 15% of its total
assets would be invested in such securities. This restriction
shall not apply to mortgage-backed securities, asset-backed
securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
5. Invest more than 5% of its total assets in
securities of unseasoned issuers, including their predecessors,
which have been in operation for less than three years, and in
equity securities of issuers which are not readily marketable.
The Fund may not purchase securities on margin,
except for such short-term credits as are necessary for the
clearance of purchases and sales of portfolio securities.
Whenever any fundamental investment policy or
investment restriction states a maximum percentage of the
Fund's assets, it is intended that if the percentage limitation
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is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values
will not be considered a violation of such policy. However, in
the event that the Fund's asset coverage for borrowings falls
below 300%, the Fund will take prompt action to reduce its
borrowings, as required by applicable law.
Net Asset Value of the Fund Shares
The net asset value per share is the net worth of the
Fund (assets, including securities at value, minus liabilities)
divided by the number of shares outstanding. The value of
investments listed on national securities exchanges and NASDAQ
equity securities is based on the last sale price as of the
close of the New York Stock Exchange (which is currently 4:00
P.M., New York time) or, in the absence of recorded sales, at
the average of readily available closing bid and asked prices
on such exchanges. Unlisted securities are valued at the
average of the quoted bid and asked prices in the
over-the-counter market. Securities or other assets for which
market quotations are not readily available are valued by
appraisal at their fair value as determined in good faith by
the Manager under procedures established by and under the
general supervision of the Fund's Board of Directors. Options
on stocks and stock indices traded on national securities
exchanges are valued as of the close of options trading on such
exchanges (which is currently 4:10 P.M., New York time) and
stock index futures and options thereon, which are traded on
commodities exchanges, are valued at their last sale price as
of the close of such commodities exchanges (which is currently
4:15 P.M., New York time). If there were no sales on the
applicable options or commodities exchange, options on stocks
and stock indices and stock index futures and options thereon
are valued at the average of the quoted bid and asked prices as
of the close of the respective exchange. Short-term securities
which mature in more than 60 days are valued at current market
quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost, if their term to maturity
from date of purchase was 60 days or less, or by amortizing
their value on the 61st day prior to maturity, if their term to
maturity from date of purchase exceeded 60 days, unless this is
determined not to represent fair value by the Board of
Directors. The Fund will compute its net asset value once
daily at 4:15 P.M., New York time, using the prices obtained at
the time indicated above on each day the New York Stock
Exchange is open for trading except on days on which no orders
to purchase, sell or redeem Fund shares have been received or
days on which changes in the value of the Fund's portfolio
securities do not affect the net asset value. The New York
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Stock Exchange is closed on the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
In the event that the New York Stock Exchange or the
national securities exchanges on which stock options are traded
adopt different trading hours on either a permanent or
temporary basis, the Board of Directors of the Fund will
reconsider the time at which net asset value is computed. In
addition, the Fund may compute its net asset value as of any
time permitted pursuant to any exemption, order or statement of
the SEC or its staff.
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 Prudential
Mutual Fund Management, Inc. (the "Investment Manager"), a
corporation located at One Seaport Plaza, New York, NY. The
Investment Manager is an indirect wholly owned subsidiary of
The Prudential Insurance Company of America ("Prudential
Insurance"). Through its subsidiaries, Prudential Insurance is
engaged in various aspects of the insurance and financial
services industry.
For its services, the Investment Manager receives,
pursuant to the Management Agreement with the Fund (the
"Management Agreement"), a fee at an annual rate of .50 of 1%
of the Fund's average daily net assets up to and including $500
million, .475 of 1% of the Fund's average daily net assets from
$500 million to $1 billion and .45 of 1% of the Fund's average
daily net assets in excess of $1 billion. The fee is computed
daily and payable monthly. The Management Agreement also
provides that, in the event the expenses of the Fund (including
the fees of the Investment Manager, but excluding interest,
taxes, brokerage commissions, distribution fees and litigation
and indemnification expenses and other extraordinary expenses
not incurred in the ordinary course of the Fund's business) for
any fiscal year exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statutes or
regulations of any jurisdiction in which the Fund's shares are
qualified for offer and sale, the compensation due to the
Investment Manager will be reduced by the amount of such
excess. Reductions in excess of the total compensation payable
to the Investment Manager will be paid by the Investment
Manager to the Fund. No such reductions were required during
the fiscal year ended December 31, 1993. Currently, the Fund
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believes that the most restrictive expense limitation of state
securities commissions is 2>% of the Fund's average daily net
assets up to $30 million, 2% of the next $70 million of such
assets and 1>% of such assets in excess of $100 million.
In connection with its management of the corporate
affairs of the Fund, the Investment Manager bears the following
expenses:
(a) the salaries and expenses of all of its and the
Fund's personnel except the fees and expenses of Directors who
are not affiliated persons of the Investment Manager or the
Fund's investment adviser;
(b) all expenses incurred by the Investment Manager
or by the Fund in connection with managing the ordinary course
of the Fund's business, other than those assumed by the Fund as
described below; and
(c) the costs and expenses payable to the Prudential
Investment Corporation (PIC) pursuant to the subadvisory
agreement between the Investment Manager and PIC (the
"Subadvisory Agreement").
Under the terms of the Management Agreement, the Fund
is responsible for the payment of the following expenses:
(a) the fees payable to the Manager, (b) the fees and expenses
of Directors who are not affiliated persons of the Manager or
the Fund's investment adviser, (c) the fees and certain
expenses of the custodian and Transfer and Dividend Disbursing
Agent, including the cost of providing records to the Manager
in connection with its obligation of maintaining required
records of the Fund and of pricing the Fund's shares, (d) the
charges and expenses of legal counsel and independent
accountants for the Fund, (e) brokerage commissions and any
issue or transfer taxes chargeable to the Fund in connection
with its securities transactions, (f) all taxes and corporate
fees payable by the Fund to governmental agencies, (g) the fees
of any trade associations of which the Fund may be a member,
(h) the cost of stock certificates representing shares of the
Fund, (i) the cost of fidelity and liability insurance, (j) the
fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the SEC and in
registering the Fund and qualifying its shares under state
securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for such
purposes, (k) allocable communications expenses with respect to
investor services and all expenses of shareholders' and
Directors' meetings and of preparing, printing and mailing
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reports, proxy statements and prospectuses to shareholders in
the amount necessary for distribution to shareholders,
(l) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of
the Fund's business and (m) distribution fees.
The Investment Manager has entered into the
Subadvisory Agreement with PIC. The Subadvisory Agreement
provides that PIC will furnish investment advisory services in
connection with the management of the Fund. In connection
therewith, PIC is obligated to keep certain books and records
of the Fund. The Investment Manager continues to have
responsibility for all investment advisory services pursuant to
the Management Agreement and supervises PIC's performance of
such services. PIC is reimbursed by the Investment Manager for
the reasonable costs and expenses incurred by PIC in furnishing
those services.
The Fund's Plan of Distribution
Pursuant to a Distribution and Service Plan (the
"Plan") adopted by the Fund under Rule 12b-1 under the
Investment Company Act and a distribution agreement (the
"Distribution Agreement"), Prudential Mutual Fund Distributors,
Inc. (the "Distributor") incurs the expenses of distributing
the Fund's Class A shares. These expenses include commissions
and account servicing fees paid to, or on account of, financial
advisers of Prudential Securities Incorporated and
representatives of Pruco Securities Corporation, commissions
and account servicing fees paid to, or on account of, other
broker-dealers or financial institutions (other than national
banks) which have entered into agreements with the Distributor,
advertising expenses, the cost of printing and mailing
prospectuses to potential investors and indirect and overhead
costs of Prudential Securities Incorporated associated with the
sale of Fund Shares, including lease, utility, communications
and sales promotion expenses.
Under the Plan, the Fund is obligated to pay
distribution and/or service fees to the Distributor as
compensation for its distribution and service activities, not
as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service
fees, the Fund will be obligated to pay any additional
expenses. If the Distributor's expenses are less than such
distribution and service fees, it will retain its full fees and
realize a profit.
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<PAGE>
Under the Plan, the Fund may pay the Distributor for
its distribution-related activities with respect to Class A
shares at an annual rate of up to .30 of 1% of the average
daily net assets of the Class A shares. The Plan provides that
(i) up to .25 of 1% of the average daily net assets of the
Class A shares may be used to pay for personal service and/or
the maintenance of shareholder accounts (service fee) and
(ii) total distribution fees (including the service fee of .25
of 1%) may not exceed .30 of 1% of the average daily net assets
of the Class A shares. The Distributor has agreed to limit its
distribution-related fees payable under the Plan to .25 of 1%
of the average daily net assets of the Class A shares for the
fiscal year ending December 31, 1994.
For the fiscal year ended December 31, 1993, the
Distributor received payments of $381,556, under the Plan.
This amount was primarily expended for payment of account
servicing fees to financial advisers and other persons who sell
Class A shares. For the fiscal year ended December 31, 1993,
the Distributor also received approximately $2,373,000 in
initial sales charges.
The Plan provides that it shall continue in effect
from year to year provided that a majority of the Board of
Directors of the Fund, including a majority of the Directors
who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any
agreement related to the Plan (the Rule 12b-1 Directors), vote
annually to continue the Plan. The Plan may be terminated at
any time by vote of a majority of the Rule 12b-1 Directors or
of a majority of the outstanding Class A shares of the Fund.
The Fund will not be obligated to pay expenses incurred under
the Plan if it is terminated or not continued.
In addition to distribution and service fees paid by
the Fund under the Plan, the Investment Manager (or one of its
affiliates) may make payments out of its own resources to
dealers and other persons who distribute shares of the Fund.
Such payments may be calculated by reference to the net asset
value of shares sold by such persons or otherwise.
The Distributor is subject to the rule of the
National Association of Securities Dealers, Inc. governing
maximum sales charges.
Pursuant to an exemptive order application currently
before the Securities and Exchange Commission, the Sponsor has
agreed to pay to the Trust the 12b-1 fees it receives from the
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Distributor with respect to 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 is currently
reviewing 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. The Sponsor will receive a 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 adviser to act and/or claims or
actions against the Fund by regulatory agencies or other
persons or entities, the value of the Fund Shares may decline
thereby causing a decline in the value of Units. Termination
of the Fund prior to the Termination Date of the Trust may
result in the termination of the Trust sooner than anticipated.
Prior to a purchase of Units, investors should determine that
the aforementioned risks are consistent with their investment
objectives.
Fund Risk Factors
All Fund Investments involve risk and there can be no
guarantee against loss resulting from an investment in the
Fund, nor can there be any assurance that the Fund's investment
objective will be attained. As with any investment in
securities, the value of, and income from, an investment in the
Fund can decrease as well as increase, depending on a variety
of factors which may affect the values and income generated by
the Fund's portfolio securities, including general economic
conditions, market factors and currency exchange rates.
Additionally, investment decisions made by the Investment
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Manager will not always be profitable or prove to have been
correct. The Fund is not intended as a complete investment
program.
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
$20.00 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.
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<PAGE>
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.
The Units
On the Date of Deposit, each Unit represented a
fractional undivided interest in the Securities and the net
income of the Trust set forth under "Summary of Essential
Information." Thereafter, if any Units are redeemed by the
Trustee, the amount of Securities in the Trust will be reduced
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<PAGE>
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").
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
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<PAGE>
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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<PAGE>
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
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<PAGE>
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 and net capital gain from 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
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<PAGE>
so that the amount of tax deemed paid by each such shareholder
would be credited against the shareholder's United States
federal income tax liability and a refund could be claimed to
the extent that credits exceeded such liability. For United
States federal income tax purposes, the basis of shares of the
Fund owned by a shareholder of the Fund (including a Trust Unit
Holder) would be increased by an amount equal to 65% of the
amount of undistributed capital gains required to be so
included in computing such Fund shareholder's long-term capital
gains.
Capital gain distributions, if any, made by the Fund,
as a regulated investment company, are taxable as long-term
capital gain, regardless of how long the Fund shareholder
(including a Trust Unit Holder) has held the Fund's shares, and
are not eligible for the dividends received deduction available
to corporations. Other dividend distributions by the Fund may,
depending upon the 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.
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<PAGE>
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 1994 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 1994 or any
later year. The term "publicly offered regulated investment
company" is defined as meaning a regulated investment company
the shares of which are "continuously offered" or regularly
traded on an established securities market or "held by or for
no fewer than 500 persons at all times during the taxable
year."
In addition, under the Code, the allowable amount of
certain itemized deductions claimed by individual taxpayers,
including investment expenses, is subject to an overall
limitation applicable to individual taxpayers with adjusted
gross income in excess of a $111,800 threshold amount ($55,900
for a married taxpayer filing separately). The $111,800 (or
$55,900) threshold amount will be indexed for inflation after
1994. 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
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<PAGE>
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
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<PAGE>
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.
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 as of the Date of Deposit 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 the Fund, 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 the Fund.
On the Date of Deposit, the Public Offering Price per
Unit (based on the offering side evaluation of the Treasury
Obligations and the net asset value of Fund Shares in the
Trust) exceeded the Redemption Price and the Sponsor's
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<PAGE>
Secondary Market Repurchase Price per Unit (each based upon the
bid side evaluation of the Treasury Obligations and the net
asset value of Fund Shares in the Trust) by the amounts set
forth in "Summary of Essential Information."
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% of the sales charge
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 the sales
charge per Unit as set forth under Volume Discount herein.
Sales by a dealer will be aggregated with the dealer receiving
the greatest concession level for all Units sold by such dealer
up to a maximum of 75% of the sales load. In addition, a
dealer who purchases 33,334 or more Units on the initial date
of the offering, for such initial purchase only, will receive a
dealer concession of 78% of the sales charge.
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
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<PAGE>
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.
Profit of Sponsor
The Sponsor receives a sales charge on the Units as
indicated herein in the chart below under "Volume Discount."
The 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 $ . On the sale of Units to dealers, the Sponsor
will retain the difference between the dealer concession and
the sales charge (see "Public Distribution").
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
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description of such profit (or loss) and the amount of such
difference, see "Schedule of Portfolio Securities.") 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 1,667
Units.
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Sales Charge
Primary and Secondary
Market
Percent Percent
of Public of Net
Offering Amount Dealer
Number of Units Price Invested Concession
Less than 1,667 Units 5.25% 5.541% 65%
1,667-6,666 Units 5.00% 5.263% 65%
6,667-16,666 Units 4.50% 4.712% 70%
16,667-33,333 Units 4.00% 4.167% 73%
33,334-66,666 Units 3.00% 3.092% 75%
66,667 Units or more 2.00% 2.041% 75%
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 offering side
evaluation of the Treasury Obligations and the net asset value
of Fund Shares in the Trust plus a reduced sales charge of
$5.00 per 100 Units, subject to a limit of 5% of the Units.
EXCHANGE OPTION
Unit Holders may elect to exchange any or all of
their Units of this Series of the Government Securities Equity
Trust for units of one or more of any other series in the
Prudential Securities Incorporated family of unit investment
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<PAGE>
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
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<PAGE>
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 $.23 per Unit for
Units purchased in the secondary market and $.37 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
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<PAGE>
the same number of units at the same time in the regular
secondary market maintained by the Sponsor, the price would be
$3,968.68 [$3,800 for the units and $168.68 for the 4.25% sales
charge (4.439% of the net amount invested)].
Federal Income Tax Consequences
An exchange of Units pursuant to the Exchange Option
will generally constitute a "taxable event" under the Code,
i.e., a Unit Holder will recognize gain or loss at the time of
the exchange. However, an 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
United States federal income tax purposes will not constitute a
taxable event to the extent that the underlying securities in
each trust do not differ materially in kind or extent. 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 advisors as to the
possible application of Section 852(f) of the Code to the
exchange.
REINVESTMENT OF TRUST DISTRIBUTIONS
Distributions by the Trust, if any, of dividend
income received by the Trust, 12b-1 fee amounts paid by the
Sponsor, distributions of any net capital gains received in
respect of Fund Shares and proceeds of the sale of Fund Shares
not used to redeem Units will be made quarterly on or shortly
after the Quarterly Distribution Date to Unit Holders of record
on the Quarterly Record Date immediately preceding such
Quarterly Distribution Date. A Unit Holder will receive such
amounts in cash unless such Unit Holder directs United States
Trust Company of New York, acting as distribution agent, to
invest such amounts on behalf of the participating Unit Holder
in Fund Shares at such shares' net asset value, which shares
will be subject to 12b-1 expenses. Investment in Fund Shares
is conditioned upon their lawful qualification for sale in the
jurisdiction in which the Unit Holder resides. There can be no
assurance, however, that such qualification will be obtained.
The appropriate prospectus will be sent to the Unit
Holder. A Unit Holder's election to participate in a
reinvestment program will apply to all Units of the Trust owned
by such Unit Holder. The Unit Holder should read the
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<PAGE>
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 the
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 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
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<PAGE>
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-48
<PAGE>
GOVERNMENT SECURITIES EQUITY TRUST
REINVESTMENT APPLICATION
I/We hereby authorize and direct United States Trust
Company of New York 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 Prudential Equity Fund, Inc.
I/We hold Government Securities Equity Trust Series 8
(This Series can only reinvest into the Prudential Equity Fund,
Inc.)
The authorization shall continue in effect until
written notice of revocation is given by the certificate holder
or his personal representatives.
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:
Forward application to: United States Trust Company
of New York
P.O. Box 888 - Cooper Station
New York, NY 10276
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<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"). 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
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<PAGE>
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").
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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 unit investment trust office at 770 Broadway, New York,
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New York 10003, upon delivery of a request for redemption and
the Certificates for the Units requested to be redeemed and
payment of any relevant tax. At the present time there are no
specific taxes related to the redemption of the Units. No
redemption fee will be charged by the Sponsor or the Trustee.
Units redeemed by the Trustee will 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 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
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constitute a taxable event for the Unit Holder under the Code
(see "Tax Status of the 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, 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 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 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
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<PAGE>
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.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE
While the Public Offering Price of Units during the
initial offering period is determined on the basis of the
current offering prices of the Treasury Obligations and the net
asset value of Fund Shares, the Public Offering Price of Units
in the secondary market and the Redemption Price of Units are
determined on the basis of the current bid prices of the
Treasury Obligations and the net asset value of the Fund
Shares. On the Date of Deposit, the Public Offering Price
(which includes a sales charge) exceeded the Redemption Price
by the amount indicated under "Summary of Essential
Information." The bid prices for the Securities are expected
to be less than the offering prices. The amount realized by a
Unit Holder upon any redemption of Units may be less than the
price paid by him for such Units.
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
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<PAGE>
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 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, Global Utility Fund,
Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund), Prudential Adjustable Rate Securities Fund, Inc.,
Prudential Allocation Fund, Prudential California Municipal
Fund (California Income and California Series), Prudential
Europe Growth Fund, Prudential Equity Fund, Prudential Equity
Income Fund, Prudential Global Fund, Prudential Global Genesis
Fund, Prudential Global Natural Resources Fund, Prudential GNMA
Fund, Prudential Government Income Fund, Prudential Growth
Opportunity Fund, Prudential High Yield Fund, Prudential
IncomeVertible\ Plus Fund, Inc., Prudential Intermediate Global
Income Fund, Inc., 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, Prudential Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Prudential Strategist Fund,
Prudential Structured Maturity Fund, Prudential U.S. Government
Fund and Prudential Utility Fund.
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 taking any action in good
faith or for errors in judgment and will not be 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.
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<PAGE>
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.
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
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 United States Trust Company of New
York, with its principal place of business at 114 West 47th
Street, New York, New York 10036 and a unit investment trust
office at 770 Broadway, New York, New York 10003. United
States Trust Company of New York has, since its establishment
in 1853, engaged primarily in the management of trust and
agency accounts for individuals and corporations. The Trustee
is a member of the New York Clearing House Association and is
subject to supervision and examination 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.
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<PAGE>
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
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<PAGE>
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.
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a
division of Kenny Information Systems, 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."
B-59
<PAGE>
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
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<PAGE>
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.
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 the 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
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<PAGE>
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 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.
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<PAGE>
No person is authorized to give any information or to make any
representations with respect to this investment company not contained in this
Prospectus; and any information or representation not contained herein must not
be
relied upon as having been authorized. This Prospectus does not constitute an
offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to
whom it is not lawful to make such offer in such state.
GOVERNMENT SECURITIES EQUITY TRUST
Series 8
Table of Contents Page
Summary of Essential Information A-7
Independent Auditors' Report A-9
Statement of Financial Condition A-10
Schedule of Portfolio Securities A-12 [LOGO]
The Trust B-1
Trust Formation B-1
Securities Selection B-4
Stripped U.S. Treasury Obligations B-4
Prudential Equity Fund, Inc. B-5
General Information Regarding the Fund B-6
Investment Policies and Restrictions
of the Fund B-8 Sponsor
Net Asset Value of the Fund Shares B-24
The Fund's Investment Manager B-25 Prudential Securities
Incorporated
The Fund's Plan of Distribution B-27
Risk of Investment in Units B-28 One Seaport Plaza
Fund Risk Factors B-29 199 Water Street
The Units B-31 New York, New York 10292
Tax Status of the Trust B-32
Retirement Plans B-38
Public Offering of Units B-39 Trustee
Public Offering Price B-39
Public Distribution B-40 United States Trust
Secondary Market B-40 Company of New York
Profit of Sponsor B-41
Volume Discount B-42 114 West 47th Street
Employee Discount B-43 New York, New York 10036
Exchange Option B-43
Federal Income Tax Consequences B-46
Reinvestment of Trust Distributions B-46 Evaluator
Expenses and Charges B-47
Initial Expenses B-47 Kenny Information
Fees B-47 Systems, Inc.
Other Charges B-47
Rights of Unit Holders B-50 65 Broadway
Certificates B-50 New York, New York 10006
Certain Limitations B-50
<PAGE>
Distributions B-50 Fund Shares
Reports and Records B-52
Redemption B-52 Prudential Equity Fund,
Inc.
Comparison of Public Offering Price and
Redemption Price B-55 One Seaport Plaza
Sponsor B-55 New York, New York 10292
Limitations on Liability B-56
Responsibility B-56
Resignation B-57
Trustee B-57
Limitations on Liability B-58
Responsibility B-58
Resignation B-58
Evaluator B-59
Limitations on Liability B-59
Responsibility B-59
Resignation B-60
Amendment and Termination of the Indenture B-60
Amendment B-60
Termination B-60
Tax Impact of In Kind Distribution
Upon Termination B-61
Legal Opinions B-62
Independent Auditors B-62
<PAGE>
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
Item A-Bonding Arrangements
The employees of Prudential Securities Incorporated
are covered under Broker's Blanket Policies, Standard Form No.
14 in the aggregate amount of $62,500,000.
Item B-Contents of Registration Statement
This Registration Statement on Form S-6 comprises the
following papers and documents:
The cross-reference sheet.
The Prospectus.
Signatures.
Written consents of the following persons:
Cahill Gordon & Reindel (included in
Exhibit 5).
Deloitte & Touche LLP.(2)
Kenny S&P Evaluation Services, a division
of Kenny Information Systems, Inc. (as
Evaluator)(included in Exhibit 23).
The following Exhibits:
(4) Ex-3.(i) - Certificate of Incorporation of
Prudential Securities Incorporated dated
March 29, 1993.
(4) Ex-3.(ii) - Revised By-Laws of Prudential Securities
Incorporated as amended through March 5,
1993.
(5) Ex-4.a - Trust Indenture and Agreement dated May
16, 1989.
(1) Ex-4.b - Draft of Reference Trust Agreement.
(2) Ex-5 - Opinion of counsel as to the legality of
the securities being registered.
(2) Ex-23 - Consent of Kenny S&P Evaluation Services,
a division of Kenny Information Systems,
Inc. (as Evaluator).
(6) Ex-24 - Powers of Attorney executed by a majority
of the Board of Directors of Prudential
Securities Incorporated.
(2) Ex-27 - Financial Data Schedule
Ex-99.1 - 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
II-1
<PAGE>
Rules 15b1-1 and 15b3-1 under the
Securities Exchange Act of 1934 (1934 Act
File No. 8-16267).
(3) Ex-99.2 - Affiliations of Sponsor with other
investment companies.
(3) Ex-99.3 - Broker's Blanket Policies, Standard Form
No. 14 in the aggregate amount of
$62,500,000.
__________________________
(1) Filed herewith.
(2) To be filed by amendment.
(3) 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.
(4) 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.
(5) 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.
(6) Incorporated by reference to exhibits 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant, Government Securities Equity Trust Series
8, 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 2nd day of November, 1994.
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By /s/ KENNETH SWANKIE
Kenneth Swankie
First Vice President
Manager- Unit Investment Trust Department
By the following persons,* who constitute a
majority of the Board of Directors of
Prudential Securities Incorporated
ALAN D. HOGAN
GEORGE A. MURRAY
JOHN P. MURRAY
LELAND B. PATON
VINCENT T. PICA
RICHARD A. REDEKER
HARDWICK SIMMONS
LEE B. SPENCER, JR.
By /s/ KENNETH SWANKIE_________________
(Kenneth Swankie, First 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 Cahill Gordon & Reindel 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
To be filed by Amendment.
II-5
<PAGE>
EX-4.B
Executed in 7 Parts
Counterpart No. ( )
GOVERNMENT SECURITIES EQUITY TRUST
SERIES 8
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated , 1994 among
Prudential Securities Incorporated, as Depositor, United States
Trust Company of New York, as Trustee, and Kenny Information
Systems, Inc., as Evaluator, sets forth certain provisions in
full and incorporates other provisions by reference to the
document entitled "Government Securities Equity Trust, Trust
Indenture and Agreement" (the "Basic Agreement") dated May 16,
1989. Such provisions as are incorporated by reference
constitute a single instrument (the "Indenture").
WITNESSETH THAT :
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, and
the Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the
provisions contained in the Basic Agreement are herein
incorporated by reference in their entirety and shall be deemed
to be a part of this instrument as fully and to the same extent
as though said provisions had been set forth in full in this
<PAGE>
instrument except that the Basic Agreement is hereby amended in
the following manner:
(a) Reference to Standard & Poor's Corporation in its
capacity as Evaluator is replaced by Kenny S&P
Evaluation Services, a division of Kenny Information
Systems, Inc., throughout the Basic Agreement.
(b) Reference to Prudential-Bache Securities Inc. in its
capacity as Depositor is replaced by Prudential
Securities Incorporated throughout the Basic
Agreement.
(c) Article I, entitled "Definitions", Section 1.01,
paragraph (8) "Evaluation Time" shall be amended by
replacing "4:15 P.M. New York Time" with "as of the
close of regular trading on the New York Stock
Exchange (ordinarily 4:00 P.M. New York Time)" and
all references to "4:15 p.m." and "4:15 p.m. New York
Time" will be replaced by "the Evaluation Time" (as
defined in Article I, Section 1.01, paragraph (8))
throughout the Basic Agreement.
(d) Article II, entitled "Administration of Trust",
Section 2.05 Deposit of Additional Securities shall
be amended by adding the following sentence after the
third sentence:
"The parties hereto agree that a Supplementary
Schedule to the Reference Trust Agreement may be
delivered by telecopier and that such delivery shall
have the same force and effect as the delivery of an
original executed document."
(e) Article III, entitled "Administration of Trust",
Section 3.04 Reserve Account shall be amended by
adding "(a)" at the beginning of the first sentence
and by adding the following paragraph:
"(b) The Trustee also shall be entitled from
time to time to withdraw from the cash on deposit in
the Principal Account such amounts as it and the
Depositor shall jointly deem necessary to establish a
reserve for any applicable expenses that may be or
become payable out of the Trust. Such amounts so
withdrawn shall be credited to a separate account
which shall be known as the "Reserve Expense
Account". The Trustee shall not be required to
distribute to the Unit Holders any of the amounts in
the Reserve Expense Account; provided, however, that
<PAGE>
if it shall, in its sole discretion, determine that
such amounts are no longer necessary to reserve for
payment of any applicable expenses, then it shall
promptly deposit such amounts in the account from
which withdrawn or if the Trust shall have terminated
or shall be in the process of termination, the
Trustee shall distribute the same in accordance with
Section 9.03 to each Unit Holder according to such
Holder's interest in the Reserve Expense Account."
(f) Article VI, entitled "Trustee", Section 6.04
Compensation shall be amended by deleting the
following sentence from the text:
"In the event the proceeds of such sale are
insufficient to pay ordinary expenses of the Trust,
such deficit shall be paid by the distributor of Fund
Shares without right to reimbursement for such
amounts paid"
(g) Article IX, entitled "Additional Covenants;
Miscellaneous Provisions", Section 9.03 Termination
shall be amended by adding the words "and any amounts
which the Trustee and Depositor have jointly agreed
to deposit in the Reserve Expense Account" after the
words "other governmental charges" in paragraph
(a)(iii), and by adding the words ", Reserve Expense"
after the word "Reserve" in the paragraph immediately
following paragraph (e).
(h) The last sentence of the second paragraph of Section
3.05 is amended to add the following after the word
"Date":
"and, if so directed by the Depositor, on one
additional date in following receipt by the
Trustee of a distribution on the Fund
Shares, such date to be designated by the Depositor,
to Unit Holders of record on a date designated by the
Depositor"
* * * * *
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are
hereby agreed to:
<PAGE>
(a) The Trust is denominated Government
Securities Equity Trust Series 8.
(b) The term "Fund" shall mean shares ("Fund
Shares") of the Prudential Equity Fund, Inc.
(c) The contracts for the purchase of Treasury
Obligations and Fund Shares listed in Schedule A
hereto are those which, subject to the terms of this
Indenture, have been or are to be deposited in trust
under this Indenture as of the date hereof.
(d) The term "Depositor" shall mean Prudential
Securities Incorporated.
(e) The aggregate number of Units referred to
in Sections 2.03 and 9.01 of the Basic Agreement is
as of the date hereof.
(f) A Unit of the Trust is hereby declared
initially equal to 1/ th of the Trust.
(g) The term "First Settlement Date" shall mean
, 1994.
(h) The terms "Quarterly Computation Date" and
"Quarterly Record Date" shall mean 1, 1,
1 and 1.
(i) The term "Quarterly Distribution Date"
shall mean 15, 15, 15 and
15.
(j) The term "Termination Date" shall mean
, 200_.
(k) The Trustee's Annual Fee shall be: $0.
(per 100 Units) for 5,000,000 and above units
outstanding; $0. (per 100 Units) for 3,000,000 -
4,999,999 units outstanding; $0. (per 100 Units)
for 1,500,000 - 2,999,999 units outstanding; $
(per 100 Units) for 1,499,999 and below units
outstanding. In calculating the Trustee's Annual
Fee, the fee applicable to the number of units
outstanding shall apply to all units outstanding.
(l) For purposes of this Series -- Government
Securities Equity Trust Series 8 -- the form of
Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this
<PAGE>
Series and such of the Special Terms and Conditions
of Trust set forth herein as may be appropriate.
[Signatures and acknowledgments on separate pages]
<PAGE>
The "Schedule of Portfolio Securities" included in
Part A of the prospectus included in this registration
statement is hereby incorporated herein as Schedule A hereto.
