<PAGE>
As filed with the Securities and Exchange Commission on May 26, 2000
Registration No. 33-56297
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
POST-EFFECTIVE AMENDMENT NO. 5 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES AC
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
It is proposed that this filing will become effective (check appropriate box).
__
/__/ immediately upon filing on (date) pursuant to paragraph (b);
__
/X_/ on May 31, 2000 pursuant to paragraph (b);
__
/__/ 60 days after filing pursuant to paragraph (a);
__
/__/ on (date) pursuant to paragraph (a) of Rule 485.
<PAGE>
CUSIP: 383H741808R
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 growth of capital. The Fund will seek to
achieve this objective by investing primarily in common stocks of major,
established corporations which the Fund's investment adviser believes are in
sound financial condition and have the potential for price appreciation greater
than broadly-based stock indexes. The Fund may invest in equity-related
securities such as preferred stock and convertible securities. The Fund may use
derivatives, including options on stocks and stock indexes and foreign currency
contracts and futures contracts and related options, for hedging or to improve
the Fund's returns. There can be no assurance that the Fund or the Trust will
achieve its objectives. Units of the Trust may be suited for purchase by
Individual Retirement Accounts, Keogh Plans and other tax-deferred retirement
plans.
- --------------------------------------------------------------------------------
Sponsor:
Prudential Securities (LOGO)
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Please read and retain Prospectus dated
this Prospectus for future reference May 31, 2000
<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 in approximately 6 years 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
growth of capital. The Fund will seek to achieve this objective by investing
primarily in common stocks of major, established corporations which the Fund's
investment adviser believes are in sound financial condition and have the
potential for price appreciation greater than broadly-based stock indexes. There
can be no assurance that the Fund will achieve its investment objective. The
Fund may also invest in options on stocks and stock indexes. The Fund may also
buy and sell futures and options on futures, foreign currency forward contracts,
options on foreign currencies and futures contracts on foreign currencies and
options thereon pursuant to limits described herein. These various hedging and
return enhancement strategies, including the use of derivatives, are considered
speculative and may result in higher risks and costs to the Fund. The Fund's
holdings can vary significantly from broad stock market indexes and, as a
result, the Fund's performance can deviate from the performance of these
indexes. There is, of course, no assurance that the Trust's objectives will be
achieved.
The Trust is structured to contain a sufficient amount of Treasury
Obligations to insure that an investor will receive, at the maturity of such
Trust, $15.00 per unit. However, an investor holding his Units to Trust maturity
may suffer a loss to the extent the investor's purchase cost of a Unit exceeds
$15.00 since the capital protection is limited to the aggregate maturity value
per Unit of Treasury Obligations. An investor who sells his Units prior to Trust
maturity may suffer a loss to the extent that the price he receives upon the
sale of his Units is less than the purchase price of his Units. The price paid
for a Unit may differ from that set forth herein due to changes in the value of
the Securities in the portfolio subsequent to the date of the Summary of
Essential Information. There is no assurance that a purchaser of Units on the
date of the Prospectus or subsequent to such date will receive, upon
termination, the purchase price per Unit. The Fund has not been structured to
generate dividends and therefore dividend distributions by the Trust are likely
to be insignificant. The maximization of dividend income is not an objective of
the Trust. The Trust is 'concentrated' in Fund Shares, so investors should be
aware that the potential for capital appreciation is directly related to the
investment performance of the Fund itself.
The Sponsor may, from time to time, deposit additional Treasury Obligations
and Fund Shares in the Trust while maintaining the proportionate relationship
between the maturity amount of the Treasury Obligations and the number of Fund
Shares immediately prior to such deposit. Any additional Treasury Obligations
added to the Trust will be United States Treasury notes or bonds substantially
identical to those then held in the Trust.
The Fund
The objective of the Fund is long-term growth of capital. The Fund seeks to
achieve this objective by investing primarily in common stocks of major,
established corporations which the Fund's investment adviser believes are in
sound financial condition and have prospects of price appreciation greater than
broadly-based stock indexes. These companies may be small, medium or large
capitalization companies. The Fund's portfolio managers use a blend of
investment styles, investing in stocks that are undervalued, given the company's
earnings, assets, cash flow and dividends, as well as investing in companies
experiencing some or all of the following: a price/earnings ratio lower than
earnings per share growth, strong market position, improving profitability and
distinctive attributes such as unique marketing ability, strong research and
development, new product flow and financial strength. The Fund may also invest
in other equity-related securities including nonconvertible preferred stock,
warrants and rights that can be exercised to obtain stock, investments
A-i
<PAGE>
in various types of business ventures, including partnerships and joint
ventures; real estate investment trusts; American Depositary Receipts (ADRs);
and similar securities. The Fund also may buy convertible securities. These are
securities--like bonds, corporate notes and preferred stock--that the Fund can
convert into the company's common stock or some other equity security.
Generally, the Fund considers selling a security when it has increased in value
to the point where it is no longer undervalued in the opinion of the investment
adviser. The Fund may invest in investment-grade short-term debt obligations
(those rated BBB/Baa or above), including money market instruments. 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 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, currency risk and possible establishment
of exchange controls or other foreign governmental laws that might adversely
affect the value of the Fund's investment or the payment of dividends.
The Fund may also engage in various portfolio strategies, including using
derivatives, to attempt to reduce certain risks of its investments and to
attempt to enhance return. These strategies include (1) the purchase and writing
(that is, sale) of put options and call options on equity securities, (2) the
purchase and sale of put and call options on indexes, (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 foreign currency forward contracts. The Fund, and thus the
investor, may lose money through any unsuccessful use of these strategies. 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 growth of capital,
there can be no assurance it will be attained. The objective of the Fund may not
be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities as defined in the Investment Company Act of 1940,
as amended.
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 will 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.'
Since the Fund invests primarily in common stock, there is the risk that the
price of particular stocks it owns could go down, or the value of the equity
markets or a sector of them could go down. Stock markets are volatile. The
Fund's holdings can vary significantly from broad stock market indexes. As a
result, the Fund's performance can deviate from the performance of these
indexes. In addition, the Fund may invest in foreign securities and derivatives.
See 'The Trust--Investment Policies and Restrictions of the Fund.' FOR
ADDITIONAL RISK FACTORS RELATING TO INVESTMENT IN THE FUND, SEE PART B OF THIS
PROSPECTUS.
Although the Trust is structured to return $15.00 per unit to a Unit Holder
through the distribution of the Treasury Obligations' maturity value on the
mandatory termination date of the Trust, an investor will have included the
accrual of original issue discount on such Treasury Obligations in income for
federal income tax purposes and will have paid federal income tax on such
accrual. An investor holding his Units to Trust maturity may suffer a loss to
the extent the investor's purchase cost of a Unit exceeds $15.00 since the
capital protection is limited to the aggregate maturity value per Unit of
Treasury Obligations. Similarly, an investor who sells his Units prior to Trust
maturity may suffer a loss to the extent that the price he receives upon the
sale of his Units is less than the purchase price of his Units.
A-ii
<PAGE>
Distributions
Distributions, if any, of dividends, 12b-1 fee amounts received by the Trust
from the Sponsor in respect of Fund Shares (net of Trust expenses),
distributions of any net capital gains 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
5.00% of the Public Offering Price (5.263% 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
5.00% of the Public Offering Price (5.263% 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
reduce on a graduated scale for sales involving at least 2,000 Units (see
'Public Offering of Units--Volume Discount'). The minimum purchase is 100 Units
except the minimum purchase is 20 Units in the case of Individual Retirement
Accounts, Keogh Plans and other tax-deferred retirement plans.
Secondary Market
The Sponsor, although not obligated to do so, presently intends to maintain
a secondary market to repurchase the Units based on the aggregate bid side
evaluation of the Treasury Obligations and the net asset value of the Fund
Shares. 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-2 and B-3) 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-5 through B-12 and 'The
Trust--Fund Risk Factors' on page B-15). 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.
Portfolio Summary
$12,450,000 face amount of Treasury Obligations maturing on November 15,
2006 and 333,084 Fund Shares were held in the Trust on May 2, 2000. The Treasury
Obligations and the Fund Shares represented 56.7% and 43.3%, respectively, of
the total of the aggregate offering side evaluation of Treasury Obligations in
the Trust and the aggregate value of Fund Shares on May 2, 2000.
A-iii
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
As of May 2, 2000
<TABLE>
<S> <C>
AGGREGATE MATURITY VALUE OF TREASURY OBLIGATIONS........................................... $ 12,450,000
AGGREGATE NUMBER OF FUND SHARES............................................................ 333,084
NUMBER OF UNITS............................................................................ 830,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH UNIT........................ 1/830,000th
PUBLIC OFFERING PRICE
Aggregate offering side evaluation of Treasury Obligations in the Trust.................. $ 8,189,734.50
Aggregate value of Fund Shares(2)........................................................ 6,265,310.04
Cash value............................................................................... (33,636.21)
--------------
Total.................................................................................... $14,421,408.33
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--------------
Divided by 830,000 Units................................................................. $ 17.375
Plus sales charge of 5.00% of Public Offering Price (5.263% of net amount invested)(4)... .914
--------------
Public Offering Price per Unit(3)........................................................ $ 18.289
--------------
--------------
REDEMPTION AND SPONSOR'S REPURCHASE PRICE PER UNIT (based on bid side evaluation underlying
Treasury Obligations and net asset value of the Fund Shares, $.914 less than Public
Offering Price per Unit)(2).............................................................. $ 17.375
QUARTERLY RECORD DATES: February 1, May 1, August 1, November 1.
QUARTERLY DISTRIBUTION DATES: February 15, May 15, August 15, November 15.
TRUSTEE'S ANNUAL FEE (including estimated expenses and Evaluator's fee) $1.67 per 100 Units
outstanding.
EVALUATOR'S FEE FOR EACH EVALUATION OF TREASURY OBLIGATIONS: $5.00
EVALUATION TIME: 4:15 P.M. New York Time
MANDATORY TERMINATION DATE: November 15, 2006
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.
DATE OF DEPOSIT; February 22, 1995(1)
</TABLE>
- ------------
(1) 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.
(2) Calculated by multiplying the aggregate number of Fund Shares by the
current net asset value per share (excluding any sales load on the Fund Shares).
(3) This Public Offering Price is computed as of May 2, 2000 and may vary
from the Public Offering Price on the date of this Prospectus or any subsequent
date.
(4) Certain transactions are entitled to a reduced sales charge. (See
'Public Offering of Units--Volume Discount.')
- ------------
For an explanation of the management fees paid by the Fund (for the fiscal
year ended December 31, 1999, 0.46% of Fund average net assets), see page B-13.
A-iv
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
THE UNIT HOLDERS, SPONSOR AND TRUSTEE
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
We have audited the statement of financial condition, including the schedule
of portfolio securities, of the Government Securities Equity Trust Series 8
as of January 31, 2000 and the related statements of operations and changes
in net assets for each of the three years in the period then ended. These
financial statements are the responsibility of the Trustee (see Footnote
(a)(1)). Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of January 31, 2000 as shown in the statement of
financial condition and schedule of portfolio securities by correspondence
with The Chase Manhattan Bank, the Trustee. An audit also includes
assessing the accounting principles used and the significant estimates made
by the Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Government
Securities Equity Trust Series 8 as of January 31, 2000, and the results of
its operations and the changes in its net assets for each of the three years
in the period then ended in accordance with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
May 12, 2000
A-1
</AUDIT-REPORT>
<PAGE>
STATEMENT OF FINANCIAL CONDITION
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
January 31, 2000
TRUST PROPERTY
<TABLE>
<S> <C>
Investments in Securities at market value (amortized cost $13,456,928
including accretion of $2,534,002) (Note (a) and Schedule of
Portfolio Securities Notes (4) and (5)) $15,060,695
Other receivable 54,738
Cash 388,615
Total 15,504,048
LIABILITIES AND NET ASSETS
Less Liabilities:
Accrued Trust fees and expenses 5,681
Redemption payable 418,250
Total liabilities 423,931
Net Assets:
Balance applicable to 905,000 Units of fractional
undivided interest outstanding (Note (c)):
Capital, plus unrealized market appreciation
of $1,603,767 $15,060,695
Undistributed principal and net investment income
(Note (b)) 19,422
Net assets $15,080,117
Net asset value per Unit ($15,080,117 divided by 905,000 Units) $ 16.6631
</TABLE>
See notes to financial statements
A-2
<PAGE>
STATEMENTS OF OPERATIONS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
<TABLE>
<CAPTION>
For the years ended January 31,
2000 1999 1998
<S> <C> <C> <C>
Investment income:
Interest $ 688,867 $ 797,898 $ 856,303
Dividends 111,406 211,361 322,023
Other income 29,857 29,788 33,902
Total income 830,130 1,039,047 1,212,228
Less expenses:
Trust fees and expenses 18,232 22,103 22,206
Total expenses 18,232 22,103 22,206
Investment income - net 811,898 1,016,944 1,190,022
Net gain (loss) on investments:
Capital gain distributions received 1,045,434 708,241 564,429
Realized gain on securities sold or
redeemed 1,040,920 1,053,715 821,838
Unrealized market (depreciation) appre-
ciation (3,427,768) (214,220) 1,690,676
Net (loss) gain on investments (1,341,414) 1,547,736 3,076,943
Net (decrease) increase in net assets
resulting from operations $ (529,516) $2,564,680 $4,266,965
</TABLE>
See notes to financial statements
A-3
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
<TABLE>
<CAPTION>
For the years ended January 31,
2000 1999 1998
<S> <C> <C> <C>
Operations:
Investment income - net $ 811,898 $ 1,016,944 $ 1,190,022
Capital gain distributions received 1,045,434 708,241 564,429
Realized gain on securities sold or
redeemed 1,040,920 1,053,715 821,838
Unrealized market (depreciation) appre-
ciation (3,427,768) (214,220) 1,690,676
Net (decrease) increase in net
assets resulting from operations (529,516) 2,564,680 4,266,965
Less Distributions to Unit Holders:
Principal (1,031,915) (753,516) (557,715)
Investment income - net (104,405) (136,033) (341,417)
Total distributions (1,136,320) (889,549) (899,132)
Capital Share Transactions:
Redemption of 300,000 Units, 250,000
Units and 320,000 Units, respectively (5,374,975) (4,549,963) (5,071,177)
Income distribution on redemption (2,296) (1,536) (3,673)
Net capital share transactions (5,377,271) (4,551,499) (5,074,850)
Net decrease in net assets (7,043,107) (2,876,368) (1,707,017)
Net assets:
Beginning of year 22,123,224 24,999,592 26,706,609
End of year (including undistributed prin-
cipal and net investment income of $19,422,
$9,081 and $9,112, respectively) $15,080,117 $22,123,224 $24,999,592
</TABLE>
See notes to financial statements
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
January 31, 2000
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related data
of the Trust and is responsible for establishing and maintaining a
system of internal controls directly related to, and designed to
provide reasonable assurance as to the integrity and reliability
of, financial reporting of the Trust. The Trustee is also
responsible for all estimates and accruals reflected in the Trust's
financial statements. The Evaluator determines the price for each
underlying Security included in the Trust's Schedule of Portfolio
Securities on the basis set forth in Part B of this Prospectus,
"Public Offering of Units - Public Offering Price". Under the
Securities Act of 1933 ("the Act"), as amended, the Sponsor is
deemed to be an issuer of the Trust Units. As such, the Sponsor
has the responsibility of an issuer under the Act with respect to
financial statements of the Trust included in the Registration
Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations of the Zero Coupon
Treasury Obligations, and by calculations based on the net asset
value per share of the mutual fund, on the last day of trading
during the period. The value on the date of initial deposit
(February 22, 1995) represents the cost of investments to the Trust
based on the offering side evaluations and the net asset value per
share, of the Treasury Obligations and mutual fund shares,
respectively, as of the close of business on the date of initial
deposit. The cost of investments purchased subsequent to the date
of initial deposit is based on the offering side evaluations and
the net asset value per share, respectively, at the date of
purchase. The difference between the initial cost and face amount
of the Treasury Obligations at the date of purchase is being
amortized over the period of its maturity date using the interest
method.
(3) Income Taxes
The Trust is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision is required
for such taxes.
(4) Expenses
The Trust pays an annual Trustee's fee, estimated expenses,
Evaluator's fees, and an annual Sponsor's portfolio supervision
fee, and may incur additional charges as explained under "Expenses
and Charges" in Part B of this Prospectus.
A-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
January 31, 2000
(b) DISTRIBUTIONS
Distributions from the income and principal accounts, if any, by the
Trust are made to Unit Holders on a quarterly basis and distributions of
any net capital gains received in respect of the mutual fund shares will
be made at least annually to Unit Holders of record. Income from the
amortization of original issue discount on the Zero Coupon Treasury
Obligations will not be distributed on a current basis. Upon
termination of the Trust, the Trustee will distribute, upon surrender of
Units for cancellation, to each Unit Holder his pro rata share of the
Trust's assets, less expenses, in the manner set forth under "Amendment
and Termination of the Trust - Termination" herein.
(c) COST TO INVESTORS
The cost to investors represents the aggregate initial public offering
price as of the respective dates of deposit exclusive of accrued
interest.
A reconciliation of the cost of Units to investors to the net amount
applicable to investors as of January 31, 2000 follows:
<TABLE>
<S> <C>
Cost to investors $ 27,246,845
Less: Gross underwriting commissions (sales charge) (1,297,469)
Net cost to investors 25,949,376
Cost of securities sold or redeemed, including
interest accretion of $1,816,505 (16,842,955)
Unrealized market appreciation 1,603,767
Accumulated interest accretion 4,350,507
Net amount applicable to investors $ 15,060,695
</TABLE>
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during each year:
<TABLE>
<CAPTION>
For the years ended January 31,
2000 1999 1998
<S> <C> <C> <C>
Principal distributions during year $ 1.0080 $ .5849 $.3806
Net investment income distributions
during year $ .101 $ .1038 $.2284
Net asset value at end of year $16.6631 $18.3595 $17.1819
Trust Units outstanding at end
of year 905,000 1,205,000 1,455,000
</TABLE>
A-6
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
January 31, 2000
<TABLE>
<CAPTION>
Port-
folio Name of Issuer/ Face Amount/ Market Value
No. Title of Portfolio Security <F1> Number of Shares <F4><F5>
<C> <S> <C> <C>
1. Stripped United States Treasury Obligations maturing
on November 15, 2006 <F2> $13,575,000 $ 8,639,673
2. Class A shares of the Prudential Equity Fund, Inc.
($17.68 per Fund Share) <F3> 363,180 6,421,022
$15,060,695
</TABLE>
See notes to schedule of portfolio securities
A-7
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
GOVERNMENT SECURITIES EQUITY TRUST SERIES 8
January 31, 2000
<F1> None of the Securities is redeemable by operation of optional call
provisions.
<F2> The Zero Coupon Treasury Obligations have been purchased at a
discount from their par value because there is no stated interest
income thereon (such Securities are often referred to as zero
coupon securities). Over the life of the Treasury Obligations such
discount accrues and upon maturity thereof the holders will receive
100% of the Treasury Obligation maturity amount thereof.
<F3> The mutual fund's manager is Prudential Investments Fund Management
LLC. The Prudential Investment Corporation, doing business as
Prudential Investments, furnishes investment advisory services in
connection with the management of the mutual fund.
<F4> The market value of the Treasury Obligations as of January 31, 2000
was determined by the Evaluator on the basis of bid side
evaluations for the Securities at such date. The market value of
the mutual fund shares was calculated by multiplying the aggregate
number of shares by the current net asset value per share at such
date.
<F5> At January 31, 2000, the unrealized market appreciation of
Securities was comprised of the following:
<TABLE>
<S> <C>
Gross unrealized market appreciation $1,603,767
Gross unrealized market depreciation -
Unrealized market appreciation $1,603,767
</TABLE>
The amortized cost of the Securities for Federal income tax
purposes was $13,456,928 at January 31, 2000.
A-8
<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')* among
Prudential Securities Incorporated (the 'Sponsor' or 'Prudential Securities'),
United States Trust Company of New York, the predecessor trustee to The Chase
Manhattan Bank (the 'Trustee') and Kenny Information Systems, Inc. (the
'Evaluator'). The Sponsor 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 growth of capital. The Fund seeks to achieve
this objective by investing primarily in common stocks of major, established
corporations which the Fund's investment adviser believes are in sound financial
condition and have the potential for price appreciation greater than
broadly-based stock indexes. The Fund may also invest in other equity-related
securities. There is of course no assurance that the Trust's or the Fund's
objectives will be achieved.
Trust Formation
On the Date of Deposit, the Sponsor deposited with the Trustee the
underlying Securities or confirmations of contracts for the purchase of such
Securities at prices equal to the evaluation of the Treasury Obligations on the
offering side of the market on the Date of Deposit as determined by the
Evaluator and the net asset value of the Fund Shares (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 proportionate 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.
- ------------
* Reference is hereby made to said Indenture and any statements contained
herein are qualified in their entirety by the provisions of said Indenture.
B-1
<PAGE>
On a recent date, each Unit represented the fractional undivided interest in
the Securities and net income of the Trust set forth under 'Summary of Essential
Information.' The Trust Portfolio has been structured so that a Unit Holder will
receive, at the Mandatory Termination Date of the Trust, an amount per Unit at
least equal to $15.00 even if the value of the Fund Shares were to decline to
zero. Of course, whether or not a Unit Holder makes a profit or suffers a loss
depends on whether his purchase price was less than or exceeded $15.00 per Unit.
A Unit Holder selling his Units prior to the Mandatory Termination Date may
suffer a loss to the extent the sale price of his Units is less than the
purchase price. Because certain of the Securities from time to time may be sold
under circumstances described herein and because additional Securities may be
deposited into the Trust from time to time, the Trust is not expected to retain
its present size and composition. If any Units are redeemed by the Trustee, the
number of Securities in the Trust will be reduced by an amount allocable to
redeemed Units and the fractional undivided interest in such Trust represented
by each unredeemed Unit will be increased. Units will remain outstanding until
redeemed upon tender to the Trustee by any Unit Holder (which may include the
Sponsor) or until the termination of the Trust pursuant to the Indenture.
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. 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
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 a recent date 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 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.
B-2
<PAGE>
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 Investments Fund Management LLC. While the Sponsor has
not independently verified this information, it has no reason to believe that
such information is not current 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, 1999, the net
assets of the Fund were approximately $5,003,918,631. The manager of the Fund is
Prudential Investments Fund Management LLC ('PIFM'). The subadviser to the Fund
is The Prudential Investment Corporation, doing business as Prudential
Investments ('PI'), generally referred to throughout this prospectus as the
Fund's investment adviser. It is contemplated that another affiliate of The
Prudential Insurance Corporation of America, Jennison Associates LLC
('Jennison'), will become the Fund's subadvisor during 2000, so references to
the investment advisor include Jennison.
The investment objective of the Fund is long-term growth of capital.
Providing current income is not an objective of the Fund. Any income produced is
expected to be minimal. An investor should not consider purchase of Fund Shares
as equivalent to a complete investment program.
The State Street Bank and Trust Company (the 'Custodian') is the custodian
of the Fund's assets. Prudential Mutual Fund Services LLC (the 'Transfer and
Dividend Disbursing Agent') serves as the Fund's dividend disbursing and
transfer agent. The Fund's prospectus is available to persons interested in
purchasing Units of the Trust 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), if any, 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-3
<PAGE>
FINANCIAL HIGHLIGHTS OF THE FUND
(for a share outstanding throughout the periods indicated)
The following financial highlights contain selected data for a Class A share
of common stock of the Fund, total return, ratios to average net assets and
other supplemental data for the periods indicated.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........... $ 19.76 $ 19.85 $ 17.26 $ 16.44 $ 13.24
Income from investment operations
Net investment income...................... .26 .31 .38 .35 .27
Net realized and unrealized gain on
investments and foreign currencies....... 2.15 1.37 3.70 2.52 3.88
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 2.41 1.68 4.08 2.87 4.15
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income....... (.27) (.28) (.36) (.35) (.27)
Distributions from net realized capital
gains.................................... (2.61) (1.49) (1.13) (1.69) (.68)
Distributions in excess of net investment
income................................... -- -- -- (.01) --
---------- ---------- ---------- ---------- ----------
Total distributions.................... (2.68) (1.77) (1.49) (2.05) (.95)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year................. $ 19.29 $ 19.76 $ 19.85 $ 17.26 $ 16.44
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total ReturnPound:........................... 12.50% 8.41% 23.88% 17.94% 31.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................ $2,240,250 $2,290,659 $1,912,802 $1,443,466 $1,158,111
Average net assets (000)..................... $2,217,410 $2,088,616 $1,709,030 $1,233,792 $ 908,365
Ratios to average net assets:
Expenses, including distribution fees...... .86% .85% .88% .89% .91%
Expenses, excluding distribution fees...... .61% .60% .63% .64% .66%
Net investment income...................... 1.25% 1.41% 1.87% 2.07% 1.82%
Portfolio turnover........................... 9% 25% 13% 19% 18%
</TABLE>
- ---------------
Pound 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.
B-4
<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 the Fund's investment adviser believes are
in sound financial condition and have the potential for price appreciation
greater than broadly-based stock indexes. The Fund may also invest in other
equity-related securities and in investment-grade short-term debt obligations.
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 investment risks. Such 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
value of the Fund's investment or the payment of dividends.
Risk Management and Return Enhancement Strategies
The Fund may also engage in various portfolio strategies, including using
derivatives, to try to reduce certain risks of its investments and to attempt to
enhance return. These strategies include (1) the purchase and writing (that is,
sale) of put options and call options on equity securities, (2) the purchase and
sale of put and call options on indexes, (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 foreign currency forward contracts. The Fund, and thus the
investor, may lose money through any unsuccessful use of these strategies. 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. If new financial products and risk management
techniques are developed, the Fund may use them 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 (that
is, 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 ('OTC options'). 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. There is no limitation on the amount of call options the Fund may write.
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, as the writer of a put option might, therefore, be obligated to
purchase underlying securities for more than their current market 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 only 'covered' call options. A written call option is
covered if, as long as the Fund is obligated under the option, it (i) owns the
security underlying the option or has an absolute and immediate right to acquire
that security without additional consideration (or for additional consideration
held in a segregated account by its custodian) upon conversion or exchange of
other securities in its portfolio or (ii) 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 provided the difference is maintained by the Fund in cash or other
liquid assets 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 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
B-5
<PAGE>
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; conversely, 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,' that is, a put option
acquired for the purpose of protecting a portfolio security from a decline in
market value. In exchange for the 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 indexes, as described below.
Options on Stock Indexes. The Fund may also purchase and write (that is,
sell) put and call options on stock indexes traded on securities exchanges, on
NASDAQ or in the over-the-counter market. Options on stock indexes 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.
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 indexes may have
different multipliers.
The value of an index option depends upon movements in the level of the
index rather than the price of a particular stock. Therefore, 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 movements in the price
of a particular stock. Accordingly, successful use by the Fund of options on
indexes 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.
Unlike stock options, all settlements are in cash, with the result that 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
B-6
<PAGE>
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 indexes 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.
Option Position Limits. Transactions by the Fund in options on securities
and on stock indexes 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 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 foreign
currency forward 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.
Foreign Currency Forward Contracts
The Fund may enter into foreign currency forward 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
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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 or in a different foreign currency (cross-hedge). The
Fund will not speculate in forward contracts. The Fund may not position hedge
(including cross-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 the securities being hedged.
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 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.
Futures Transactions
Stock Index Futures. The Fund may use stock index futures traded on a
commodities exchange or board of trade for certain hedging and risk management
purposes and to attempt to enhance return in accordance with regulations of the
Commodity Futures Trading Commission ('CFTC'). The Fund, and thus its investors,
may lose money through any unsuccessful use of these strategies.
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 certain hedging, return enhancement and risk
management 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 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 may buy and sell futures
contracts on foreign currencies ('futures contracts') and purchase and write
options thereon, for hedging and risk management purposes. 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.'
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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 of 1940 (the 'Investment
Company Act') is exempt 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 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 return 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
experience 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 at any particular time liquid secondary
markets will exist for any particular futures contract or option thereon.
Risks of Hedging and Return Enhancement Strategies
Participation in the options or futures markets 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. The Fund, and thus its
investors, may lose money through any unsuccessful use of these strategies. If
the investment adviser's prediction of movements in the direction of the
securities, foreign currency or 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 these strategies 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 risk that the counterparty may be unable to complete the transaction;
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 assets 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. American Depositary Receipts ('ADRs') and
American Depositary Shares ('ADSs') are not considered foreign securities for
purposes of the limitation. 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 or other 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
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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.
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 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 resale price. The instruments held as collateral are valued daily, and if
the value of the instruments declines, the Fund will require additional
collateral. 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 PIFM
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 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, or other liquid assets having a value
equal to or greater than the Fund's purchase commitments. The securities so
purchased are subject to market fluctuation and 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. 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
its total assets to secure these borrowings.
Securities Lending. The Fund may lend its portfolio securities to brokers or
dealers, banks or other recognized institutional borrowers of securities,
provided that the borrower at all times maintains cash or other liquid assets or
secures an irrevocable letter of credit in favor of the Fund in an amount equal
to at least 100%, determined daily, of the market value of the securities loaned
which are maintained in a segregated account pursuant to applicable regulations.
During the time portfolio securities are on loan, the borrower will pay the Fund
an amount equivalent to any dividend or interest paid on such securities and the
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower. As a matter
of policy, the Fund cannot lend more than 30% of the value of its total assets.
The Fund may pay reasonable administration and custodial fees in connection with
a loan.
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.
Illiquid Securities. The Fund may hold up to 15% of its net assets in
illiquid securities. If the Fund were to exceed this limit, the investment
advisor would take prompt action to reduce the Fund's holdings in illiquid
securities to no more than 15% of its net assets, as required by applicable law.
Illiquid securities include 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 in
securities markets either within or outside of the United States. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (the 'Securities Act')
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and privately placed commercial paper for which there is a readily available
market are treated as liquid only when deemed liquid under procedures
established by the Board of Directors. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a limited time, uninterested in
purchasing Rule 144A securities. 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 OTC options and
the assets used as 'cover' for written OTC 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 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 (i) 67% of the voting shares
represented at a meeting at which more than 50% of the outstanding voting shares
are present in person or represented by proxy, or (ii) more than 50% of the
outstanding voting 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 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 foreign currency forward contracts and collateral
arrangements with respect to the purchase and sale of options, futures
contracts, options on futures contracts and foreign currency forward
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. 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.
7. Act as 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.
8. Make investments for the purpose of exercising control or
management.
9. 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.
10. 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.
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11. Make loans, except through (i) repurchase agreements and (ii) loans
of portfolio securities (limited to 30% of the Fund's total assets). (The
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.)
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 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 ('NAV') per share is the total value 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 National Market System securities is the last sale price as
of the close of the exchange or, in the absence of recorded sales, the mean
between the last bid and asked prices on such day, or at the bid price in the
absence of an asked price. Securities or other assets for which reliable market
quotations are not readily available or for which the pricing agent or principal
market maker does not provide a valuation methodology or provides a valuation or
methodology that, in the judgment of the Manager or investment adviser (or
Valuation Committee or Board of Directors) does not represent fair value, are
valued by the Valuation Committee or Board of Directors in consultation with the
Manager or investment adviser. Should an extraordinary event, which is likely to
affect the value of a security, occur after the close of an exchange on which a
portfolio security is traded, such security will be valued at fair value
considering factors determined in good faith by the investment adviser under
procedures established by and under the general supervision of the Fund's Board
of Directors. Options on stocks and stock indexes traded on national securities
exchanges are valued at the mean between the most recently quoted bid and asked
prices on the respective exchange and futures contracts and options thereon are
valued at their last sale prices as of the close of trading on the applicable
commodities exchange or board of trade. If there were no sales on the applicable
options or commodities exchange, options on stocks and stock indexes and stock
index futures and options thereon are valued at the mean between the most
recently quoted bid and asked prices of the respective exchange or board of
trade. Short-term securities which mature in more than 60 days are valued at
current market quotations as supplied by an independent pricing agent or
principal market maker. Short-term securities which mature in 60 days or less
are valued at amortized cost, unless this is determined not to represent fair
value by the Board of Directors. The Fund will compute its NAV once daily at
4:15 P.M., New York time, 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 NAV. The New York Stock Exchange is
closed on the following holidays: New Year's Day, Martin Luther King, Jr. 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 closes early on any business
day, the NAV shall be determined at the time between such closing and 4:15 p.m.,
New York time. 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 has a Board of Directors which, in addition to overseeing the
actions of PIFM, PI and the Distributor (as defined below), decides upon matters
of general policy. PIFM conducts and supervises the daily business operations of
the Fund. PI furnishes daily investment advisory services.
The manager of the Fund is Prudential Investments Fund Management LLC
('PIFM'), a corporation located at Gateway Center Three, 100 Mulberry Street,
Newark, New Jersey 07102-4077. PIFM and its predecessors have served as manager
or administrator to investment companies since 1987.
For its services, PIFM 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 PIFM, 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
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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 PIFM will be reduced by the amount of such excess. No such
reductions were required during the fiscal year ended December 31, 1999. No
jurisdiction currently limits the Fund's expenses.
In connection with its management of the corporate affairs of the Fund, PIFM
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
PIFM or PI;
(b) all expenses incurred by PIFM 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 PI pursuant to the subadvisory
agreement between PIFM and PI (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 PIFM, (b) the fees
and expenses of Directors who are not affiliated persons of PIFM or PI, (c) the
fees and certain expenses of the Custodian and Transfer and Dividend Disbursing
Agent, including the cost of providing records to PIFM 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 the states, 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
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 Management Agreement provides that PIFM will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the matters
to which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
PIFM has entered into the Subadvisory Agreement with PI. The Subadvisory
Agreement provides that PI will furnish investment advisory services in
connection with the management of the Fund. In connection therewith, PI is
obligated to keep certain books and records of the Fund. PIFM continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises PI's performance of such services. PI is paid by PIFM
at the annual rate of .250 of 1% of the Fund's average daily net assets up to
$500 million, .226 of 1% of average daily net assets between $500 million and $1
billion and .203 of 1% of average daily net assets over $1 billion for
furnishing those services.
The current portfolio managers of the Fund are Thomas R. Jackson, a Managing
Director of PI, who has managed the Fund since 1990, and Philip Schettewi, CFA,
who began co-managing the Fund in May 2000. Mr. Jackson joined PI in 1990 and
has over 30 years of professional equity investment management experience. He
earned a B.A. from Dartmouth College and is a member of the New York Society of
Security Analysts. Mr. Schettewi, Head of Public Equity for Prudential Global
Asset Management ('PGAM'), joined PGAM in May 1999 from Loomis, Sayles &
Company, where he was a Managing Partner, Director and Chief Investment Officer
for almost ten years. He earned a B.A. in economics from the University of
Maryland and has completed graduate course work at George Washington University.
Mr. Schettewi also holds the Chartered Financial Analyst (CFA) designation and
is a member of the Association for Investment Management and Research.
The Fund's Plan of Distribution
Under 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 Investment Management Services LLC ('PIMS'
or 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, brokers or financial institutions which have entered into
agreements with the Distributor, advertising expenses, the cost of printing and
mailing prospectuses to
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potential investors and indirect and overhead costs of the Distributor
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
not 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.
The distribution and/or service fees may also be used by the Distributor to
compensate on a continuing basis brokers in consideration for the distribution,
marketing, administrative and other services and activities provided by brokers
with respect to the promotion of the sale of the Fund's shares and the
maintenance of related shareholder accounts.
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 contractually 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 ended December 31,
1999 and has contractually 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, 2000.
The Fund records all payments made under the Plan as expenses in the
calculation of net investment income. For the fiscal year ended December 31,
1999, the Distributor received payments of $5,543,526 under the Plan, which was
spent primarily on payment of account servicing fees to financial advisors and
other persons who sell Class A shares. The Distributor also received
approximately $910,124 in initial sales charges in connection with the sale of
Class A shares for the year ended December 31, 1999.
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 distribution and service fees 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, PIFM (or one of its affiliates) may make payments out of its own resources
to dealers (including Prudential Securities) 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 issued by the SEC, the Sponsor has agreed to
pay to the Trust the 12b-1 fees it receives 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 SEC issued an exemptive order pursuant to which Fund Shares were
deposited by the Sponsor in the Trust. In the application for such order, the
Sponsor 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
B-14
<PAGE>
anticipating or taking advantage of such opportunities as they 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 Fund's investment adviser will
not always be profitable or prove to have been correct. The Fund's holdings can
vary significantly from broad stock market indexes. As a result, the Fund's
performance can deviate from the performance of these indexes. 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 $15.00 per Unit.
Part of such cash will, however, represent the accrual of taxable original issue
discount on the Treasury Obligations.
A UNIT HOLDER PURCHASING A UNIT ON THE DATE OF THIS PROSPECTUS OR THEREAFTER
MAY RECEIVE TOTAL DISTRIBUTIONS, INCLUDING DISTRIBUTIONS MADE UPON TERMINATION
OF THE TRUST, THAT ARE LESS THAN THE AMOUNT PAID FOR A UNIT.
Sales of Securities in the Portfolio under certain permitted circumstances
may result in an accelerated termination of the Trust. It is also possible that,
in the absence of a secondary market for the Units or otherwise, redemptions of
Units may occur in sufficient numbers to reduce the portfolio to a size
resulting in such termination. In addition, the Trust may be terminated if the
net aggregate value of the Trust is less than 40% of the aggregate maturity
values of the Treasury Obligations calculated immediately after the most recent
deposit of Treasury Obligations in the Trust (see 'Amendment and
Termination--Termination'). Early termination of the Trust may have important
consequences to the Unit Holder; e.g., to the extent that Units were purchased
with a view to an investment of longer duration, the overall investment program
of the investor may require readjustment; or the overall return on investment
may be less than anticipated, and may result in a loss to a Unit Holder.
In the event of the early termination of the Trust, the Trustee will cause
the Fund Shares to be sold and the proceeds thereof distributed to the Unit
Holders in proportion to their respective interests therein, unless a Unit
Holder elects to receive Fund Shares 'in kind' (see 'Amendment and Termination
of the Indenture--Termination'). Proceeds from the sale of the Treasury
Obligations will be paid in cash.
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 a recent date, each Unit represented a fractional undivided interest in
the Securities and the net income of the Trust set forth under 'Summary of
Essential Information.' Thereafter, if any Units are redeemed by the Trustee,
the amount of Securities in the Trust will be reduced by amounts allocable to
redeemed Units, and the fractional undivided interest represented by each Unit
in the balance will be increased, although the actual interest in the Trust
represented by
B-15
<PAGE>
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 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, capital gain of individuals, estates and trusts from Securities
held for more than 1 year, is subject to a maximum nominal tax rate of 20%. Net
capital gain may result in a disallowance of itemized deductions and/or affect a
personal exemption phase-out.
If the Unit Holder sells or redeems a Unit for cash he is deemed thereby to
have disposed of his entire pro rata interest in all Trust assets represented by
the Unit and will have taxable gain or loss measured by the difference between
his per Unit tax basis for such assets, as described above, and the amount
realized.
Each Unit Holder's interest in each Treasury Obligation is treated as an
interest in an original issue discount obligation. The original issue discount
on each Treasury Obligation will be taxed as ordinary income for federal income
tax purposes and will be equal to the excess of the maturity value of the Unit
Holder's interest in the Treasury Obligation over its cost to the Unit Holder. A
Unit Holder will be required to include in gross income for each taxable year a
portion of this original issue discount and will be subject to income tax
thereon even though the income is not distributed. Original issue discount is
treated for federal income tax purposes as income earned under a constant
interest formula
B-16
<PAGE>
which takes into account the semi-annual compounding of accrued interest,
resulting in an increasing amount of original issue discount accruing in each
year.
A Unit Holder who is neither a citizen nor a resident of the United States
and is not a United States domestic corporation (a 'foreign Unit Holder') will
not generally be subject to United States federal income taxes, including
withholding taxes, on his pro rata share of the original issue discount on the
Treasury Obligations held in the Trust, any gain from the sale or other
disposition of his, her or its pro rata interest in a Treasury Obligation or
Fund Share held in the Trust, any undistributed gain retained by the Fund and
designated by the Fund to be taken into account by its shareholders or any
capital gain dividend received by the Trust from the Fund, which original issue
discount is not effectively connected with the conduct by the foreign Unit
Holder of a trade or business within the United States and which gain is either
(I) not from sources within the United States or (II) not so effectively
connected, provided that:
(a) with respect to original issue discount (i) the Treasury Obligations
are in registered form and were issued after July 18, 1984, and (ii) the
foreign Unit Holder is not a controlled foreign corporation related (within
the meaning of Section 864(d)(4) of the Code) to The Prudential Insurance
Company of America;
(b) with respect to any U.S.-source capital gain, the foreign Unit
Holder (if an individual) is not present in the United States for 183 days
or more during his or her taxable year in which the gain was realized and so
certifies; and
(c) the foreign Unit Holder provides the required certifications
regarding (i) his, her or its status, (ii) in the case of U.S.-source
income, the fact that the original issue discount or gain is not effectively
connected with the conduct by the foreign Unit Holder of a trade or business
within the United States, and (iii) if determined to be required, the
controlled foreign corporation matter mentioned in clause (a)(ii) above.
Fund distributions paid to foreign Unit Holders either directly or through
the Trust and not constituting income effectively connected with the conduct of
a trade or business within the United States by the distributee will be subject
to United States federal withholding taxes at a 30% rate or a lesser rate
established by treaty unless the Fund distribution is a capital gain dividend.
Foreign Unit Holders should consult their own tax counsel with respect to United
States tax consequences of ownership of Units.
Each Unit Holder (other than a foreign Unit Holder who has properly provided
the certifications described in the preceding paragraph) will be requested to
provide the Unit Holder's taxpayer identification number to the Trustee and to
certify that the Unit Holder has not been notified that payments to the Unit
Holder are subject to back-up withholding. If the taxpayer identification number
and an appropriate certification are not provided as required, 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 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 the difference
between the amount of undistributed capital gains required to be so included in
computing such Fund shareholder's long-term capital gains and the tax deemed
paid on such undistributed capital gains by such shareholder in respect of such
shares.
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
B-17
<PAGE>
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.
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 the
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 Trust cannot predict
whether or not the Fund will qualify as a 'publicly offered regulated investment
company.'
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 $117,950 threshold amount ($58,975 for a
married taxpayer filing separately). The $117,950 (or $58,975) threshold amount
will be indexed for inflation after 1996. The overall limitation reduces the
otherwise allowable amount of the affected itemized deductions by the lesser of
(i) 3% of the adjusted gross income in excess of the threshold amount or (ii)
80% of the amount of 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 a least 98% of its ordinary income for such calendar
year and 98% of its capital gain net income for the 12 month period ended on
October 31 of each calendar year (or on December 31 if the Fund qualifies to so
elect and does so) and distributes an amount equal to the 2% balances not later
than the close of the succeeding calendar year, the Fund will not be subject to
this 4% excise tax. For purposes of this excise tax, any net long-term capital
gain in excess of net short-term capital loss retained by the Fund for any
fiscal year ending on or before the close of the calendar year but designated as
undistributed capital gains taxable to shareholders as described above is
treated as if distributed to the Fund's shareholders.
The Fund may invest in passive foreign investment companies, various options
and futures contracts and hedging transactions and may be subject to foreign
currency fluctuations, all of which have unique federal income tax consequences.
Such investments and currency fluctuations may affect the character, timing and
amount of gain or ordinary income to be recognized by persons holding Fund
Shares.
Interest paid by a Unit Holder other than a corporation on indebtedness
properly allocable to Units will be deductible as investment interest to the
extent permitted by Section 163(d) of the Code.
As of the end of each calendar year, the Trustee will furnish to each Unit
Holder an annual statement containing information relating to the dividends
(including capital gain dividends) received or deemed received, rebated 12b-1
fees received from the Sponsor, discount accrued on the Securities, the gross
proceeds received by the Trust from the
B-18
<PAGE>
disposition of any Security (resulting from redemption or payment at maturity of
any Security or the sale by the Trust of any Security), and the fees and
expenses paid by the Trust.
The foregoing discussion relates only to United States federal income taxes.
Unit Holders may be subject to state, local or foreign taxation.
Investors should consult their tax counsel for advice with respect to their
own particular tax situations.
RETIREMENT PLANS
Units in the Trust may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans.
Investors considering participation in any such plan should review the laws
specifically related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such plan.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price of the Units during the initial offering period is
computed by adding to the aggregate offering side evaluation of the Treasury
Obligations the aggregate net asset value of Fund Shares in the Trust, dividing
such sum by the number of Units outstanding and then adding a sales charge of
5.00% of the Public Offering Price (5.263% 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 5.00% of the Public Offering Price (5.263% of the net amount
invested). Money in the Income and Principal Accounts other than money required
to redeem previously tendered Units will be added to the Public Offering Price.
The Public Offering Price on the date of this Prospectus or on any
subsequent date will vary from the Public Offering Price set forth in the
'Summary of Essential Information' in accordance with fluctuations in the value
of the Treasury Obligations and net asset value of the Fund Shares in the Trust.
The Public Offering Price shall be determined for the Trust by the Evaluator
in the following manner: the aggregate value of the Units shall be determined
during the initial offering period on the basis of the offering prices of the
Treasury Obligations (determined by the Evaluator) and the net asset value of
the Fund Shares as determined by 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 a recent date, the Public Offering Price per Unit (based on the offering
side evaluation of the Treasury Obligations and the net asset value of the Fund
Shares in the Trust) exceeded the Redemption Price and the Sponsor's 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
B-19
<PAGE>
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.
Secondary Market
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units and to continuously offer to repurchase
Units from Unit Holders at the applicable Sponsor's Repurchase Price (see
'Summary of Essential Information'). The Sponsor's Repurchase Price is computed
by adding to the aggregate of the bid side evaluation of the Treasury
Obligations the net asset value of Fund Shares in the Trust, and cash on hand in
the Trust and dividends receivable on Fund Shares (other than cash deposited by
the Sponsor for the purchase of Securities) deducting therefrom amounts required
to redeem previously tendered Units and amounts required for distribution to
Unit Holders of record as of a date prior to the evaluation, accrued expenses of
the Trustee, Evaluator, and counsel, taxes and governmental charges, if any, and
any Reserve Account and then dividing the resulting sum by the number of Units
outstanding, as of the date of such computation. There is no sales charge
incurred when a Unit Holder sells Units back to the Sponsor. Any Units
repurchased by the Sponsor at the Sponsor's Repurchase Price may be reoffered to
the public by 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.' 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. During the initial offering period, to the extent
additional Units continue to be issued and offered for sale to the public, the
Sponsor may realize additional profit (or sustain a loss) due to daily
fluctuations in the offering prices of the Treasury Obligations and in the net
asset value of the Fund Shares in the Trust and thus in the Public Offering
Price of Units received by the Sponsor. Cash, if any, received by the Sponsor
from the Unit Holders prior to the settlement date for purchase of Units or
prior to the payment for Securities upon their delivery may be used in the
Sponsor's business to the extent permitted by applicable regulations and may be
of benefit to the Sponsor.
The Sponsor may also realize profits (or sustain losses) while maintaining a
secondary market in the Units, in the amount of any difference between the
prices at which the Sponsor buys Units and the prices at which the Sponsor
resells such Units or the prices at which the Sponsor redeems such Units, as the
case may be.
Volume Discount
Although under no obligation to do so, the Sponsor intends to permit volume
purchasers of Units to purchase Units at a reduced sales charge. The Sponsor may
at any time upon prior notice to Unit Holders change the amount by which the
sales charge is reduced, or may discontinue the discount altogether.
The sales charges for the Trust in the primary and secondary market will be
reduced pursuant to the following graduated scale for sales to any person of at
least 2,000 Units.
B-20
<PAGE>
<TABLE>
<CAPTION>
Sales Charge
Primary and Secondary Market
-----------------------------------------
Percent Percent
of Public of Net
Offering Amount Dealer
Number of Units Price Invested Concession
- -------------------------------------------------------------------- ---------- -------- ----------
<S> <C> <C> <C>
Less than 2,000 Units............................................... 5.00% 5.263% 65%
2,000-7,999 Units................................................... 4.75% 4.986% 65%
8,000-19,999 Units.................................................. 4.25% 4.358% 70%
20,000-39,999 Units................................................. 3.75% 3.896% 73%
40,000-79,999 Units................................................. 3.00% 3.092% 75%
80,000 Units or more................................................ 2.00% 2.041% 75%
</TABLE>
The reduced sales charges as shown on the chart above will apply to such
purchases of Units in any fourteen-day period which qualify for the volume
discount by the same person, including a partnership or corporation, other than
a dealer, in the amounts stated herein, and for this purpose, purchases of Units
of this Trust will be aggregated with concurrent purchases of Units of any other
trust that may be offered by the Sponsor.
Units held in the name of the purchaser's spouse or in the name of a
purchaser's child under the age of 21 are deemed for the purposes hereof to be
registered in the name of the purchaser. The reduced sales charges are also
applicable to a trustee or other fiduciary, including a partnership or
corporation, purchasing Units for a single trust estate or single fiduciary
account.
Employee Discount
The Sponsor intends, at the discretion of the Sponsor, to permit employees
of Prudential Securities 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 family of unit investment trusts (except
Series of Government Securities Equity Trust) or for any units of any additional
trusts that may from time to time be made available for such exchange by the
Sponsor (collectively referred to as the 'Exchange Trusts'). Such units may be
acquired at prices based on reduced sales charges per unit. The purpose of such
reduced sales charge is to permit the Sponsor to pass on to the Unit Holder who
wishes to exchange Units the cost savings resulting from such exchange of Units.
The cost savings result from reductions in the time and expense related to
advice, financial planning and operational expense required for the Exchange
Option.
Exchange Trusts may have different investment objectives; a Unit Holder
should read the prospectus for the applicable Exchange Trust carefully to
determine its investment objective prior to exercise of this option.
This option will be available provided the Sponsor maintains a secondary
market in both the Units of this Series and units of the applicable Exchange
Trust and provided that units of the applicable Exchange Trust are available for
sale and are lawfully qualified for sale in the jurisdiction in which the Unit
Holder is a resident. While it is the Sponsor's present intention to maintain a
secondary market for the units of all such trusts, there is no obligation on its
part to do so. Therefore, there is no assurance that a market for units will in
fact exist on any given date on which a Unit Holder wishes to sell or exchange
his Units; thus there is no assurance that the Exchange Option will be available
to any Unit Holder. The Sponsor reserves the right to modify, suspend or
terminate this option at any time without further notice to Unit Holders. In the
event the Exchange Option is not available to a Unit Holder at the time he
wishes to exercise it, the Unit Holder will be immediately notified and no
action will be taken with respect to his Units without further instruction from
the Unit Holder.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to exchange his Units for one or more units of the Exchange Trusts.
If units of the applicable outstanding series of the Exchange Trust are at that
time available for sale, the Unit Holder may select the series or group of
series for which he desires his Units to be exchanged.
B-21
<PAGE>
The Unit Holder will be provided with a current prospectus or prospectuses
relating to each series in which he indicates interest.
Units of the Exchange Trust trading in the secondary market maintained by
the Sponsor, if so maintained, will be sold to the Unit Holder at a price equal
to the evaluation price per unit of the securities in that portfolio and the
applicable sales charge of $15 per unit of the Exchange Trust. The reduced sales
charge for units of any Exchange Trust acquired during the initial offering
period for such units will result in a price for such units equal to the
offering side evaluation per unit of the securities in the Exchange Trust's
portfolio plus accrued interest plus a reduced sales charge of $25 per Exchange
Trust unit. The reduced sales charge for a unit holder of an Exchange Trust
exchanging into this series of Government Securities Equity Trust will be $.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 the same number of units at the
same time in the regular secondary market maintained by the Sponsor, the price
would be $3,968.68 [$3,800 for the units and $168.68 for the 4.25% sales charge
(4.439% of the net amount invested)].
Federal Income Tax Consequences
An exchange of Units pursuant to the Exchange Option will constitute a
'taxable event' under the Code, i.e., a Unit Holder will recognize gain or loss
at the time of the exchange except that upon 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 the Internal Revenue Service may seek to disallow any loss incurred
upon such exchange to the extent that the underlying securities in each trust
are substantially identical and the purchase of units of an Exchange Trust takes
place less than thirty-one days after the sale of the Units. Unit Holders are
advised to consult their own tax advisors as to the tax consequences of
exchanging Units in their particular case. In particular, Unit Holders who
exchange Units of this Series of the Government Securities Equity Trust for
units of any other series of Exchange Trusts within 91 days of acquisition of
the Units should consult their tax 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 The Chase Manhattan
Bank, acting as distribution agent, to invest such amounts on behalf of the
participating Unit Holder in Fund Shares at such shares' net asset value, which
shares will be subject to 12b-1 expenses. Investment in Fund Shares is
conditioned upon their lawful qualification for sale in the jurisdiction in
which the Unit Holder resides. There can be no assurance, however, that such
qualification will be obtained.
B-22
<PAGE>
The appropriate prospectus will be sent to the Unit Holder. A Unit Holder's
election to participate in a reinvestment program will apply to all Units of the
Trust owned by such Unit Holder. The Unit Holder should read the prospectus for
the reinvestment program carefully before deciding to participate.
EXPENSES AND CHARGES
Initial Expenses
All expenses and charges incurred prior to or in the establishment of the
Trust were incurred by the Sponsor and 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 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-23
<PAGE>
Government Securities Equity Trust
REINVESTMENT APPLICATION
I/We hereby authorize and direct The Chase Manhattan Bank (National Association)
to apply all distributions that I/we have elected to be reinvested as a
registered unitholder(s) of a Government Securities Equity Trust Series towards
the purchase of additional shares of the 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.
<TABLE>
<S> <C>
Name(s) in Which Unit Trust is Registered
Social Security or Tax Identification Number
Signature DATE
Signature of Joint Tenant (if any) DATE
My/Our Brokerage Firm Is:
My/Our Account Number Is:
</TABLE>
Forward application to: The Chase Manhattan Bank
P.O. Box 834
New York, NY 10003
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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 Holder of record as of
the immediately preceding Quarterly Record Date will be made on the next
following Quarterly Distribution Date and shall consist of an amount
substantially equal to such Unit Holder's pro rata share of the distributable
cash balances in the Income Account and the Principal Account, if any, computed
as of the close of business on such Quarterly Record Date. No quarterly
distribution will be made if the amount available for distribution is less than
$2.50 per 100 Units, except that, no less than once a year, on a Quarterly
Distribution Date, the Trustee shall distribute the entire cash balances in the
Principal and Income Accounts. All funds collected or received will be held by
the Trustee in trust without interest to Unit Holders as part of the Trust until
required to be disbursed in accordance with the provisions of the Indenture.
Such funds will be segregated by separate recordation on the trust ledger of the
Trustee so long as such practice preserves a valid preference of Unit Holders
under the bankruptcy laws of the United States, or if such preference is not
preserved, the Trustee shall handle such funds in such other manner as shall
constitute the segregation and holding thereof in trust within the meaning of
the Investment Company Act of 1940, as the same may be from time to time
amended. To the extent permitted by the Indenture and applicable banking
regulations, such funds are available for use by the Trustee pursuant to normal
banking procedures.
The Trustee is authorized by the Indenture to withdraw from the Principal
Account to the extent funds are not sufficient in the Income Account such
amounts as it deems necessary to establish a reserve for any taxes or other
governmental charges that may be payable out of the Trust, which amounts will be
credited to a separate Reserve Account. If the Trustee determines that the
amount in the Reserve Account is greater than the amount necessary for payment
of any taxes or other governmental charges, it will promptly recredit the excess
to the Account from which it was withdrawn. In addition, the Trustee may
withdraw from the Income Account, to the extent available, that portion of the
Redemption Price which represents income.
The balance paid on any redemption, including income, if any, shall be
withdrawn from the Principal Account of the Trust to the extent that funds are
available. If such available balance is insufficient, the Trustee is empowered
to sell Securities in order to provide moneys for redemption of Units tendered
(see 'Rights of Unit Holders--Redemption').
B-24
<PAGE>
Reports and Records
With each distribution, the Trustee will furnish to the Unit Holders a
statement of the amount of dividends and other receipts, if any, distributed,
expressed in each case as a dollar amount per Unit.
Within a reasonable time after the end of each calendar year, the Trustee
will furnish to each person who was a Unit Holder of record at any time during
the calendar year a statement setting forth: (1) as to the Income Account:
dividends and other cash amounts received, deductions for payment of applicable
taxes and for fees and expenses of the Trust, redemptions of Units, and the
balances 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 of 4 New York Plaza, New York, New York 10004, upon delivery of a
request for redemption and the Certificates for the Units requested to be
redeemed and payment of any relevant tax. At the present time there are no
specific taxes related to the redemption of the Units. No redemption fee will be
charged by the Sponsor or the Trustee. Units redeemed by the Trustee will 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 constitute a taxable event for the Unit Holder under the Code
(see 'Tax Status of the Trust').
B-25
<PAGE>
Purchase by the Sponsor of Units Tendered for Redemption
The Indenture requires that the Trustee notify the Sponsor of any tender of
Units for redemption. So long as the Sponsor is maintaining a bid in the
secondary market, the Sponsor, prior to the close of business on the second
succeeding business day, may purchase any Units tendered to the Trustee for
redemption at the price so bid by making payment therefor to the Unit Holder in
an amount not less than the Redemption Price and not later than the day on which
the Units would otherwise have been redeemed by the Trustee, i.e., the Unit
Holder will receive the Redemption Price from the Sponsor within 7 days of the
date of tender (see 'Public Offering of Units--Secondary Market'). Units held by
the Sponsor may be tendered to the Trustee for redemption as any other Units.
The price of any Units resold by the Sponsor will be the Public Offering Price
determined in the manner provided in this Prospectus (see 'Public Offering of
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 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 price 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. 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 ('Prudential Securities') 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, 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 has acted as principal underwriter and managing
underwriter of other investment companies. In addition to participating as a
member of various selling groups or as an agent of other investment companies,
Prudential Securities 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.
B-26
<PAGE>
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.
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 The Chase Manhattan Bank, a national banking association with
its principal executive office at 270 Park Avenue, New York, New York, 10017 and
its unit investment trust office at 4 New York Plaza, New York, New York 10004.
The Trustee is subject to supervision by the Comptroller of the Currency, the
Federal Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System. In connection with the storage and handling of certain
Securities deposited in the Trust, the Trustee may use the services of The
Depository Trust Company. These services may include safekeeping of the
Securities and coupon-clipping, computer book-entry transfer and institutional
delivery services. The Depository Trust Company is a limited purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System and a clearing agency registered under the Securities
Exchange Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any moneys, Securities or
Certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents except in cases of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. In addition, the Indenture provides that the Trustee
shall not be personally liable for any taxes or other governmental charges
imposed upon or in respect of the Trust which the Trustee may be required to pay
under current or future laws of the United States or any other taxing authority
having jurisdiction.
Responsibility
The Trustee shall not be liable for any default, failure or defect in any
Security or for any depreciation or loss by reason of any such sale of Fund
Shares or by reason of the failure of the Sponsor to give directions to the
Trustee.
Additionally, the Trustee may sell Securities designated by the Sponsor, or
if not so directed, in its own discretion, for the purpose of redeeming Units
tendered for redemption. Fund Shares will be sold first unless the Sponsor is
able to sell Treasury Obligations and Fund Shares in the proportionate
relationship between the maturity values of the Treasury Obligations and the
number of Fund Shares.
B-27
<PAGE>
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 the information relating to the responsibilities of the Trustee under
the Indenture, reference is also made to the material set forth under 'Rights of
Unit Holders' and 'Sponsor--Resignation.'
Resignation
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Indenture. The Sponsor may also remove the Trustee for any
other reason that the Sponsor determines to be in the best interest of the Unit
Holders. Such resignation or removal shall become effective upon the acceptance
of appointment by the successor trustee. If upon resignation of a trustee no
successor has been appointed and has accepted the appointment within thirty days
after notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of a
trustee becomes effective only when the successor trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor trustee. A successor trustee has the same rights and duties as the
original trustee except to the extent, if any, that the Indenture is modified as
permitted by its terms.
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a division of J.J. Kenny
Co., Inc., with main offices located at 65 Broadway, New York, New York 10006.
Limitations on Liability
The Trustee, Sponsor and Unit Holders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Indenture shall be made in good faith
upon the basis of the best information available to it; provided, however, that
the Evaluator shall be under no liability to the Trustee, Sponsor or Unit
Holders for errors in judgment. The Evaluator shall, however, be liable for its
own willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties under the Indenture.
Responsibility
The Indenture requires the Evaluator to evaluate the Treasury Obligations on
the basis of their bid prices on the last business day of June and December in
each year, on the day on which any Unit is tendered for redemption and on any
other day such evaluation is desired by the Trustee or is requested by the
Sponsor. For information relating to the responsibility of the Evaluator to
evaluate the Treasury Obligations, see 'Public Offering of Units--Public
Offering Price.'
Resignation
The Evaluator may resign or may be removed by the Sponsor, and the Sponsor
is to use its best efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment by the
successor Evaluator. If upon resignation of the Evaluator no successor accepts
appointment within thirty days after notice of resignation, the Evaluator may
apply to a court of competent jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE INDENTURE
Amendment
The Indenture may be amended by the Trustee and the Sponsor without the
consent of Unit Holders (a) to cure any ambiguity or to correct or supplement
any provision thereof which may be defective or inconsistent, (b) to change any
provision thereof as may be required by the Securities and Exchange Commission
or any successor governmental agency, and (c) to make such other provisions as
shall not adversely affect the interest of the Unit Holders; provided that the
Indenture may also be amended by the Sponsor and the Trustee with the consent of
Unit Holders evidencing 51% of the Units at the time outstanding for the
purposes of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the rights
of Unit Holders. In no event shall the Indenture be amended so as to increase
the number of Units issuable thereunder except as the result of the additional
B-28
<PAGE>
deposits of Securities, to permit the deposit of Securities after the Date of
Deposit except in accordance with the terms and conditions of the Indenture as
initially adopted, to permit any other acquisition of securities or other
property by the Trustee either in addition to or in substitution for any of the
Securities on hand in the Trust or to permit the Trustee to vary the investment
of the Unit Holders or to empower the Trustee to engage in business or to engage
in investment activities not specifically authorized in the Indenture as
originally adopted; or so as to adversely affect the characterization of the
Trust as a grantor trust for Federal income tax purposes. In the event of any
amendment, the Trustee is obligated to promptly notify all Unit Holders of the
substance of such amendment.
Termination
The Trust may be terminated at any time by the consent of the holders of 51%
of the Units or by the Trustee upon the direction of the Sponsor when the
aggregate net value of all Trust assets as shown by an evaluation made as
described under 'Evaluator--Responsibility' is less than 40% of the aggregate
maturity values of the Treasury Obligations deposited in the Trust on the Date
of Deposit and subsequent thereto calculated after the most recent deposit of
Treasury Obligations in the Trust or if there has been a material change in the
Fund's objectives or if Replacement Treasury Obligations are not acquired.
However, in no event may the Trust continue beyond the Mandatory Termination
Date set forth under 'Summary of Essential Information.' In the event of
termination, written notice thereof will be sent by the Trustee to all Unit
Holders.
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 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 Cahill
Gordon & Reindel, 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.
B-29
<PAGE>
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any
representations with respect to this investment company not contained in this
Prospectus; and any information or representation not contained herein must not
be relied upon as having been authorized. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state to
any person to whom it is not lawful to make such offer in such state.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES EQUITY TRUST
Series 8
Table of Contents
Page
-----
<S> <C>
Summary of Essential Information........................ A-iv
Independent Auditors' Report............................ A-1
Statement of Financial Condition........................ A-2
Schedule of Portfolio Securities........................ A-7
The Trust............................................... B-1
Trust Formation..................................... B-1
Securities Selection................................ B-2
Stripped U.S. Treasury Obligations.................. B-2
Prudential Equity Fund, Inc......................... B-3
General Information Regarding the Fund.............. B-3
Investment Policies and Restrictions of the Fund.... B-5
Net Asset Value of the Fund Shares.................. B-12
The Fund's Investment Manager....................... B-12
The Fund's Plan of Distribution..................... B-13
Risk of Investment in Units......................... B-14
Fund Risk Factors................................... B-15
The Units........................................... B-15
Tax Status of the Trust................................. B-16
Retirement Plans........................................ B-19
Public Offering of Units................................ B-19
Public Offering Price............................... B-19
Public Distribution................................. B-19
Secondary Market.................................... B-20
Profit of Sponsor................................... B-20
Volume Discount..................................... B-20
Employee Discount................................... B-21
Exchange Option......................................... B-21
Federal Income Tax Consequences..................... B-22
Reinvestment of Trust Distributions..................... B-22
Expenses and Charges.................................... B-23
Initial Expenses.................................... B-23
Fees................................................ B-23
Other Charges....................................... B-23
Rights of Unit Holders.................................. B-24
Certificates........................................ B-24
Certain Limitations................................. B-24
Distributions....................................... B-24
Reports and Records................................. B-25
Redemption.......................................... B-25
Comparison of Public Offering Price and Redemption
Price................................................... B-26
Sponsor................................................. B-26
Limitations on Liability............................ B-27
Responsibility...................................... B-27
Resignation......................................... B-27
Trustee................................................. B-27
Limitations on Liability............................ B-27
Responsibility...................................... B-27
Resignation......................................... B-28
Evaluator............................................... B-28
Limitations on Liability............................ B-28
Responsibility...................................... B-28
Resignation......................................... B-28
Amendment and Termination of the Indenture.............. B-28
Amendment........................................... B-28
Termination......................................... B-29
Tax Impact of In Kind Distribution Upon
Termination......................................... B-29
Legal Opinions.......................................... B-29
Independent Auditors.................................... B-29
</TABLE>
(LOGO)
Sponsor
Prudential Securities Incorporated
One Seaport Plaza
199 Water Street
New York, New York 10292
Trustee
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Evaluator
Kenny S&P Evaluation Services,
a division of
J.J. Kenny Co., Inc.
65 Broadway
New York, New York 10006
Fund Shares
Prudential Equity Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
<PAGE>
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Prospectus.
Signatures.
Consent of independent public accountants and consent of evaluator; all
other consents were previously filed.
The following Exhibits:
****Ex-3.(i) - Certificate of Incorporation of Prudential
Securities Incorporated dated March 29,
1993.
***Ex-3.(ii) - Revised By-Laws of Prudential Securities
Incorporated as amended through
September 28, 1998.
*Ex-4.a - Trust Indenture and Agreement dated May
16, 1989.
*Ex-23 - Consent of Kenny S&P Evaluation Services,
a division of J.J. Kenny Co., Inc. (as
evaluator)
**Ex-24 - Powers of Attorney executed by a majority
of the Board of Directors of Prudential
Securities Incorporated.
****Ex-99 - Information as to Officers and Directors
of Prudential Securities Incorporated is
incorporated by reference to Schedules A
and D of Form BD filed by Prudential
Securities Incorporated pursuant to
Rules 15b-1 and 15b3-1 under the
Securities Exchange Act of 1934 (1934
Act File No. 8-27154).
****Ex-99.2 - Affiliations of Sponsor with other
investment companies.
****Ex-99.3 - Broker's Blanket Policies, Standard Form
No. 14 in the aggregate amount of
$62,500,000.
*****Ex-99.4 - Investment Advisory Agreement.
- --------------------
* Filed herewith.
II-1
** Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust,
Series 172, Registration No. 33-54681 (filed October 13, 1994), National
Equity Trust, Top Ten Portfolio Series 3, Registration No. 333-15919 (filed
January 31, 1997) and National Equity Trust, Low Five Portfolio Series 17,
Registration No. 333-44543 (filed January 20, 1998).
*** Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust,
Series 186, Registration No. 33-54697 (filed August 9, 1996) and National
Equity Trust, S&P 500 Strategy Trust Series 2, Registration No. 333-39521
(filed October 14, 1998).
**** Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Equity Trust, Low
Five Portfolio Series 31, Registration No. 333-96071 (filed February 3,
2000).
*****Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust,
Series 164, Registration No. 33-66108 (filed February 28, 2000).
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Government Securities Equity Trust Series 8 certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of New York, and State of New York on the
25th day of May, 2000.
Government Securities Equity Trust Series 8
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By the following persons,1 who constitute a majority
of the Board of Directors of Prudential Securities
Incorporated
A. Laurence Norton, Jr.
Leland B. Paton
Martin Pfinsgraff
Vincent T. Pica II
James D. Price
Hardwick Simmons
Lee B. Spencer, Jr.
By /s/ Kenneth Swankie
(Kenneth Swankie,
Senior Vice President,
Manger Unit Investment
Manger Trust Department,
as authorized signatory for
Prudential Securities Incorporated
and Attorney-in-Fact for the persons
listed above)
___________________________
1 Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of its name in the Prospectus included
in this Registration Statement is contained in its opinion filed as Exhibit
5 to this Registration Statement.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in the Post Effective Amendment No. 5 to Registration
Statement No. 33-56297 of the Government Securities Equity Trust Series 8 of
our report dated May 12, 2000 appearing in the Prospectus, which is a part
of such Registration Statement, and to the reference to our Firm under the
heading "Auditors" in such Prospectus.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
May 24, 2000
II-5
<PAGE>
===============================================================================
GOVERNMENT SECURITIES EQUITY TRUST
TRUST INDENTURE AND AGREEMENT
for all series formed on or subsequent to the
effective date specified below
Among
PRUDENTIAL-BACHE SECURITIES INC.
As Depositor
UNITED STATES TRUST COMPANY OF NEW YORK
As Trustee
STANDARD & POOR'S CORPORATION
As Evaluator
------------------------------------
Dated: May 16, 1989
===============================================================================
<PAGE>
TRUST INDENTURE AND AGREEMENT
GOVERNMENT SECURITIES EQUITY TRUST
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
ARTICLE II
DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES
Section 2.01. Deposit of Securities.................................12
Section 2.02. Acceptance of Trust...................................12
Section 2.03. Issue of Units........................................12
Section 2.04. Form of Certificates..................................13
Section 2.05. Deposit of Additional Securities......................13
Section 2.06. Register of Units.....................................13
ARTICLE III
ADMINISTRATION OF TRUST
Section 3.01. Initial Costs.........................................14
Section 3.02. Income Account........................................14
Section 3.03. Principal Account.....................................14
Section 3.04. Reserve Account.......................................14
Section 3.05. Distribution........................ .................15
Section 3.06. Distribution Statements...............................17
Section 3.07. Replacement Securities................................19
Section 3.08. Sale of Securities................... ................19
Section 3.09. Notice and Sale by Trustee............................20
Section 3.10. Notice to Depositor...................................20
Section 3.11. Trustee Not to Amortize...............................21
<PAGE>
Page
ARTICLE IV
EVALUATION OF SECURITIES; EVALUATOR
Section 4.01. Evaluation by Evaluator...............................21
Section 4.02. Tax Reports...........................................21
Section 4.03. Evaluator's Compensation.............. ...............22
Section 4.04. Liability of Evaluator................................22
Section 4.05. Successor Evaluator...................................22
ARTICLE V
TRUST EVALUATION; REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES
Section 5.01. Trust Evaluation....................... ..............23
Section 5.02. Redemptions by Trustee; Purchases by Depositor........24
Section 5.03. Transfer or Interchange of Certificates...............26
Section 5.04. Certificates Mutilated, Destroyed, Stolen-or Lost.....26
ARTICLE VI
TRUSTEE
Section 6.01. General Definition of Trustee's Liabilities, Rights and
Duties................................................27
Section 6.02. Books, Records and Reports........ ..............30
Section 6.03. Indenture and List of Securities on File..............31
Section 6.04. Compensation..........................................31
Section 6.05. Removal and Resignation of Trustee; Successor.........32
Section 6.06. Qualifications of Trustee.............................34
ARTICLE VII
RIGHTS OF UNIT HOLDERS
Section 7.01. Beneficiaries of Trust................................34
Section 7.02. Rights, Terms and Conditions..........................34
-ii-
<PAGE>
Page
ARTICLE VIII
DEPOSITOR
Section 8.01. Liabilities; Power of Attorney.............. .........35
Section 8.02. Discharge.............................................35
Section 8.03. Successors............................................36
Section 8.04. Resignation...........................................37
Section 8.05. Additional Depositors.................................37
Section 8.06. Exclusions from Liability.............................37
ARTICLE IX
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.01. Amendments....................... ....................38
Section 9.02. Notice of Amendment...................................39
Section 9.03. Termination...........................................39
Section 9.04. Construction..........................................41
Section 9.05. Registration of Units.................................41
Section 9.06. Written Notice........................................41
Section 9.07. Severability..................... ....................42
Section 9.08. Dissolution of Depositors Not to Terminate............42
Section 9.09. Name..................................................42
EXECUTION......................................................... ........43
ACKNOWLEDGMENTS............................................................44
- - - - - - - - - - - - -
This Table of Contents does not constitute part of the Indenture.
-iii-
<PAGE>
TRUST INDENTURE AND AGREEMENT dated May 16, 1989 among PRUDENTIAL-BACHE
SECURITIES INC. as Depositor, United States Trust Company of New York as
Trustee, and Standard & Poor's Corporation as Evaluator.
WITNESSETH that:
WHEREAS, Prudential-Bache Securities Inc., the Trustee and the Evaluator
are entering into this Trust Indenture and Agreement for the purpose of
establishing certain of the terms, covenants and conditions of the Government
Securities Equity Trust Series 1, and each subsequent Series which may be
established from time to time hereafter, incorporating by reference the terms
hereof; and
WHEREAS, for the Government Securities Equity Trust Series 1, and each
subsequent Series of the Government Securities Equity Trust, to which this Trust
Indenture and Agreement is applicable, the Depositor, the Trustee, and the
Evaluator shall execute a separate Reference Trust Agreement incorporating by
reference this Trust Indenture and Agreement and effecting any amendment,
supplement or variation from or to such incorporation by reference with respect
to the related series, and specifying for that series: (i) the United States
Treasury obligations and Fund Shares deposited in trust and the number of Units
delivered by the Trustee in exchange for the United States Treasury Obligations
and Fund Shares pursuant to Section 2.03; (ii) the initial fractional undivided
interest represented by each Unit in each Trust; (iii) the first Settlement
Date; (iv) the first Quarterly Computation Date; (v) the first Quarterly
Distribution Date; (vi) the first Quarterly Record Date; (vii) the name of the
Depositor; and (viii) any other change or addition contemplated or permitted by
this Trust Indenture and Agreement; and
WHEREAS, the Depositor will acquire and, concurrently with the execution
and delivery of the appropriate Reference Trust Agreement, will deposit in trust
with the Trustee the United States Treasury Obligations and Fund Shares to be
listed in the Schedules thereto, all to be held by the Trustee in trust upon the
terms and conditions hereinafter set forth as amended, supplemented or varied by
such Reference Trust Agreement, for the use and benefit of all registered
holders of units of fractional undivided interest in the Trust to which such
Reference Trust Agreement relates; and
WHEREAS, concurrently with the receipt of the aforesaid deposit, the
Trustee will record on its books the ownership by the Depositor thereof of units
of fractional undivided interest in such Securities and in the Income Account
and the Principal Account maintained under this Indenture in the manner
hereinafter provided (which units of fractional undivided interest so recorded
respectively will represent in the aggregate 110% of the beneficial interest
established hereby in such Securities, Income Account and Principal Account) and
will execute in the name of the Depositor thereof certificates representing the
ownership of the
<PAGE>
-2-
aggregate number of Units specified in such Reference Trust
Agreement (hereinafter called the "Certificates"); and
WHEREAS, the form of the Certificates shall be substantially as follows:
<PAGE>
-3-
No. ______ ________ Units
CERTIFICATE OF OWNERSHIP
--evidencing--
An Undivided Interest
--in the--
GOVERNMENT SECURITIES EQUITY TRUST
SERIES
CUSIP
[-----------]
[-----------]
This is to certify that _______ is the owner and registered holder of this
Certificate evidencing the ownership of Unit(s) of undivided interest in the
Series of the Government Securities Equity Trust that is specified on the face
hereof (hereinafter called the "Trust"). The Trust was created by the Trust
Indenture and Agreement applicable to this Series of the Government Securities
Equity Trust, as amended, supplemented or varied by the Reference Trust
Agreement applicable to this Series of the Government Securities Equity Trust
(such Trust Indenture and Agreement as amended, supplemented or varied by such
Reference Trust Agreement being hereinafter called the "Indenture"), among
PRUDENTIAL-BACHE SECURITIES INC. (hereinafter called the 'Depositor"), United
States Trust Company of New York (hereinafter called the "Trustee") and Standard
& Poor's Corporation (hereinafter called the "Evaluator"). The Trust consists of
(1) such of the United States Treasury Obligations (hereinafter called the
"Treasury Obligations") and mutual fund shares (hereinafter called the "Fund
Shares") listed in the Schedule of the Reference Trust Agreement relating to the
Trust, and contracts for the purchase of such securities and certified checks,
cash or an irrevocable letter of credit issued by a commercial bank, or a
combination thereof in the amount required for such purpose (collectively
referred to as the "Securities") and such of the Additional Securities that may
be deposited in the Trust, and any other securities that may be deposited in the
Trust as Replacement Securities, as may from time to time continue to be held as
part of the Trust and (2) such cash amounts as from time to time may be held in
the Income Account and the Principal Account for the Trust maintained under the
Indenture in the manner described in this Certificate.
<PAGE>
-4-
At any given time this Certificate shall represent a fractional undivided
interest in the Trust, the numerator of which fraction shall be the number of
Units set forth on the face hereof and the denominator of which shall be the sum
of the total of all Units of the Trust which are outstanding at such time.
The Depositor hereby grants and conveys all of its right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture, all the terms, conditions and covenants of which
are incorporated herein as if fully set forth at length.
The registered holder of this Certificate is entitled at any time upon
tender of this Certificate to the Trustee at its corporate trust office in the
City of New York, and upon payment of any tax or other governmental charges, to
receive, on the seventh calendar day following the day on which such tender is
made, or, if such calendar day is not a business day, on the first business day
prior to such calendar day, an amount in cash equal to the evaluation of the
fractional undivided interest in the Trust evidenced by this Certificate, upon
the basis provided for in the Indenture. The right of redemption may be
suspended and the date of payment may be postponed for any period during which
the New York Stock Exchange is closed or trading on that Exchange is restricted,
for any period during which an emergency exists so that disposal of the
Securities held in the Trust is not reasonably practicable or it is not
reasonably practicable to determine fairly the value of such Securities, or for
such other periods as the Securities and Exchange Commission may by order
permit.
Dividend income and l2b-1 fee rebate amounts received by the Trustee as
part of the Trust shall be credited by the Trustee to the Income Account of the
Trust. The fractional undivided interest represented by this Certificate in the
balance in the Income Account of the Trust (after the deductions referred to
below) shall be computed as of the Quarterly Computation Date and paid on or
shortly after the Quarterly Distribution Date to Unit Holders of record on the
Quarterly Record Date immediately preceding the Quarterly Distribution Date. The
next computation shall be made as of the next succeeding Quarterly Computation
Date, and thereafter as of each succeeding Quarterly Computation Date.
All monies (other than dividend income and 12b-1 fee rebate amounts)
received by the Trustee as part of the Trust (including amounts received from
the sale, liquidation, redemption or maturity of any Securities held in the
Trust) shall be credited by the Trustee to a separate Principal Account. The
fractional undivided interest represented by this Certificate in the cash
balance in the Principal Account of the Trust (after the deductions referred to
below) shall be computed quarterly as of the Quarterly Computation Date. An
amount in cash equal to the sum of said fractional undivided interest in the
Income and Principal Accounts, shall be distributed on the Quarterly
Distribution Date or within a reasonable period of time thereafter, to Unit
Holders of record on the Quarterly Record Date immediately preceding the
<PAGE>
-5-
Quarterly Distribution Date. Notwithstanding the foregoing, the Trustee shall
not be required to make a distribution unless the aggregate cash balance
available for distribution in the Income and Principal Accounts is at least
$2.50 per 110 Units. However, not less than once per year, on a Quarterly
Distribution Date, the Trustee shall distribute the entire cash balance in the
Income and Principal Accounts available for distribution unless the Trustee
receives the agreement of the Depositor to forego a distribution.
Distributions from the Income and Principal Accounts shall be made by mail
at the post office address of the holder hereof appearing in the registration
books of the Trustee.
From time to time deductions shall be made from the Income Account and
Principal Account, as more fully set forth in the Indenture, for redemptions of
Units, compensation of the Trustee and Evaluator, reimbursement of certain
expenses incurred by or on behalf of the Trustee, certain legal expenses and
payment of, or the establishment of a reserve for, applicable taxes, if any.
Within a reasonable period of time after the end of each calendar year, but
not later than the time required by any applicable law, the Trustee shall
furnish to the registered holder of this Certificate a statement setting forth,
among other things, the amounts received and deductions therefrom and the
amounts distributed during the preceding year in respect of dividend income,
capital gain, and sales, redemptions, liquidation, or maturities of Securities
held in the Trust.
This Certificate shall be transferable by the registered holder hereof by
presentation and surrender hereof at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of the Trust are
interchangeable for one or more Certificates in an equal aggregate number of
units of undivided interest in the Trust at the corporate trust office of the
Trustee, in denominations of a single unit of undivided interest or any multiple
thereof.
The holder hereof may be required to pay a charge of $2.00 per Certificate
issued in connection with the transfer or interchange of this Certificate and
will be required to pay any tax or other governmental charge that may be imposed
in connection with the transfer, interchange or other surrender of this
Certificate.
The holder of this Certificate, by virtue of the acceptance hereof, assents
to and shall be bound by the terms of the Indenture, a copy of which is on file
and available for inspection at the corporate trust office of the Trustee, to
which reference is made for all the terms, conditions and covenants thereof.
<PAGE>
-6-
The Trustee may deem and treat the person in whose name this Certificate is
registered upon the books of the Trustee as the owner hereof for all purposes
and the Trustee shall not be affected by any notice to the contrary.
The Trust shall terminate upon the maturity, redemption, sale or other
disposition of the last Security held therein, provided, however, that in no
event shall the Indenture and the Trust continue beyond the date set forth in
Part II of the Reference Trust Agreement. The Indenture also provides that the
Trust may be terminated at any time by the written consent of the holders of 51%
of the units of undivided interest in the Trust and under certain circumstances
which include a decrease in the aggregate value of the Trust assets to less than
40% of the maturity amounts of the Treasury Obligations calculated after the
most recent deposit of the Treasury Obligations in the Trust. Upon any
termination, the Trustee shall fully liquidate the Securities then held, if any
(unless the Unit Holder notifies the Trustee, in writing, of an election to
receive Fund Shares in-kind, in which event the Trustee shall distribute to the
Unit Holder such amount of Fund-Shares in-kind), and distribute pro rata the
cash and property then held in the Trust upon surrender of the Certificates, all
in the manner provided in the Indenture. Upon termination, the Trustee shall be
under no further obligation with respect to the Trust, except to hold the funds
in trust without interest until distribution as aforesaid and shall have no duty
upon any such termination to communicate with the holder hereof other than by
mail at the address of such holder appearing in the registration books of the
Trustee.
This Certificate shall not become valid or binding for any purpose until
properly executed by the Trustee under the Indenture.
IN WITNESS WHEREOF, Prudential-Bache Securities Inc. has caused this
Certificate to be executed in facsimile by its Senior Vice President; and United
States Trust Company of New York, as Trustee, has caused this Certificate to be
executed in its corporate name by an authorized officer.
Dated:
PRUDENTIAL-BACHE SECURITIES
INC., DEPOSITOR
By:____________________________
Senior Vice President
<PAGE>
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UNITED STATES TRUST COMPANY OF
NEW YORK, TRUSTEE
By:___________________________
Authorized Officer
<PAGE>
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The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common UNIF GIFT MIN ACT _____ Custodian ______
(Cust) (Minor)
TEN ENT as tenants by the under Uniform Gifts to Minors
entireties
JT TEN as joint tenants with right Act________________________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received ___________________________________________________________
Please insert Social Security or Other
Identifying Number of Assignee
[ ]
hereby sells, assigns and transfers unto________________________________________
the within Certificate and does hereby irrevocably constitute and appoint ______
______________________________________________________________ attorney, to
transfer the within Certificate on the books of the Trustee, with full power of
substitution in the premises.
Dated:
------------------------------------
The signature(s) to this assignment
must correspond with the name(s) as
written upon the face of the
certificate without alteration or
enlargement or any change whatever.
Signature guarantee should be made
by the Depositor, a member of the
New York, American, Midwest or
Pacific Stock Exchange, or by a
<PAGE>
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commercial bank or trust company
having its principal office or
correspondent in the City of New
York.
Signature Guarantee
------------------------------------
------------------------------------
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee and the Evaluator agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Whenever used in this Indenture the following words and
phrases, unless the context clearly indicates otherwise, shall have the
following meanings:
(1) "Additional Securities" shall mean such Securities (as defined herein) as
are listed in Supplementary Schedules of the Reference Trust Agreement and
which have been deposited to effect an increase over the number of Units
initially specified in Part II of the Reference Trust Agreement.
(2) "Additional Units" shall mean such Units (as defined herein) as are issued
in respect of Additional Securities.
(3) "Basic Agreement" shall mean this Trust Indenture and Agreement dated as
indicated on the cover page hereof as originally executed, or if amended as
hereinafter provided, as so amended, exclusive of the terms contained in
any related Reference Trust Agreement.
(4) "Business day" shall mean any day other than a Saturday or Sunday or, in
the City of New York, a legal holiday, or a day on which banking
institutions are authorized by law to close.
(5) "Certificate" shall mean any one of the certificates executed by the
Trustee and the Depositor evidencing ownership of an undivided fractional
interest in the Trust.
<PAGE>
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(6) "Contract Securities" shall mean Securities which are to be acquired by the
Trust pursuant to contracts which have been assigned to the Trustee,
including (i) Securities listed in the Schedule to the Reference Trust
Agreement and Supplementary Schedules thereto and (ii) Securities which the
Depositor has contracted to purchase for the Trust pursuant to Section
3.07.
(7) "Depositor" of the Trust shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(8) "Evaluation Time" shall mean 4:15 P.M. New York Time.
(9) "Evaluator" shall mean Standard & Poor's Corporation or any corporation
into which such firm may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which such
firm shall be a party, or any firm succeeding to all or substantially all
of the business of such firm; or any successor evaluator as hereinafter
provided for.
(10) "Fund" shall mean the mutual fund set forth in Part II of the Reference
Trust Agreement.
(11) "Fund Shares" shall mean shares of the Fund set forth in Part II of the
Reference Trust Agreement relating to such Trust or contracts and funds for
the purchase thereof.
(12) "Indenture" shall mean the Basic Agreement, as further amended,
supplemented or varied by the Reference Trust Agreement.
(13) "Quarterly Computation Date" of a Trust shall have the meaning assigned to
it in Part II of the Reference Trust Agreement relating to such Trust.
(14) "Quarterly Distribution Date" of a Trust shall have the meaning assigned to
it in Part II of the Reference Trust Agreement relating to such Trust.
(15) "Quarterly Record Date" of a Trust shall have the meaning assigned to it in
Part II of the Reference Trust Agreement relating to such Trust.
(16) "Reference Trust Agreement" shall mean a supplement to the Basic Agreement,
the purpose of which shall be to amend, supplement and/or vary certain of
the terms contained in the Basic Agreement. Each Reference Trust Agreement
together with the Basic Agreement to the extent that such Reference Trust
Agreement incorporates it by reference, defines all the terms, rights and
duties relevant to the series of the Government Securities Equity Trust, to
which such Reference Trust Agreement relates.
<PAGE>
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(17) "Replacement Treasury Obligation" shall mean a Treasury Obligation
purchased by the Trustee pursuant to Section 3.07 hereof.
(18) "Securities" shall mean both the Fund Shares and the United States Treasury
Obligations deposited in trust and listed on a schedule attached to the
Reference Trust Agreement and on any supplemental schedule thereto,
including contracts for the purchase of such securities, and certified
checks, cash or an irrevocable letter of credit issued by a commercial
bank, or a combination thereof in the amount required for such purpose.
(19) "Trust" shall mean the trust created by this Indenture, which trust shall
be denominated as indicated in Part II of the Reference Trust Agreement
relating to such trust and which shall consist of the Securities held
pursuant and subject to this Indenture together with all undistributed
dividend income or other amounts received or accrued thereon, and any
undistributed net capital gains and proceeds realized from the disposition
of Securities.
(20) "Trustee" shall mean United States Trust Company of New York, or any
successor trustee as hereinafter provided for.
(21) "Unit" shall represent a fractional undivided interest in and ownership of
the Trust initially equal to the fraction specified for the Trust in Part
II of the Reference Trust Agreement relating to the Trust. From time to
time, the denominator of each of these fractions shall be decreased by the
number of any such Units redeemed as provided in Section 5.02 hereof and
increased by the number of any Additional Units created pursuant to Section
2.05 hereof.
(22) "Unit Holder" shall mean the registered holder of any unit as recorded on
the books of the Trustee, his legal representatives and heirs and the
successors of any other legal entity which is a registered holder of any
unit and as such shall be deemed a beneficiary of the Trust created by this
Indenture to the extent of his pro rata share thereof.
(23) "United States Treasury Obligations" ("Treasury Obligation(s)") shall mean
debt obligations of the government of the United States or agencies thereof
or obligations of an entity the payment of which is guaranteed by the full
faith and credit of the United States, which have been stripped of their
unmatured interest coupons or such coupons or receipts or certificates
evidencing such obligations or coupons or contracts and funds for the
purchase thereof. The obligor or guarantor of each obligation is the U.S.
Government. Such obligations may include certificates that represent
ownership of the payments that comprise a U.S. government bond.
<PAGE>
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(24) Words importing the singular number shall include the plural number in each
case and vice versa, and words importing persons shall include
corporations, and associations, as well as natural persons.
(25) The words "herein", "hereby", "herewith", "hereof", "hereinafter",
"hereunder", "hereinabove", "hereafter", "heretofore" and similar words or
phrases of reference and association shall refer to this indenture in its
entirety.
(26) "12b-1 fee rebate" shall mean, where applicable, an amount of money
received by the Trustee in respect of l2b-1 fees assessed on particular
Fund Shares held by the Trust.
ARTICLE II
DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST;
ISSUANCE OF UNITS; FORM OF CERTIFICATES
Section 2.01. Deposit of Securities: The Depositor, concurrently with the
execution and delivery of the Reference Trust Agreement, has deposited with the
Trustee in trust the Securities listed in the Schedule or Schedules attached to
such Reference Trust Agreement in bearer form or duly endorsed in blank or
accompanied by all necessary instruments of assignment and transfer in proper
form to be held, administered and applied by the Trustee as herein provided. The
Depositor shall deliver the Securities listed on said Schedule or Schedules to
the Trustee which were not actually delivered concurrently with the execution
and delivery of the Reference Trust Agreement within 90 days after said
execution and delivery or, if Section 3.07 applies, within such shorter period
as if specified in Section 3.07.
Section 2.02. Acceptance of Trust: The Trustee hereby accepts the Trust
created by this Indenture for the use and benefit of the Unit Holders in the
Trust, subject to the terms and conditions of this Indenture.
Section 2.03. Issue of Units: By executing the Reference Trust Agreement,
the Trustee will thereby acknowledge receipt of the deposit relating to the
Trust to which such Reference Trust Agreement relates, referred to in Section
2.01, and simultaneously with the receipt of said deposit, will execute
Certificates substantially in the form above recited representing the ownership
of all Units of the Trust as specified in Part II of the Reference Trust
Agreement and deliver same to the Depositor.
<PAGE>
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The Trusts created by this Indenture are separate and distinct trusts for
all purposes and the assets of one such trust may not be commingled with the
assets of any other nor shall the expenses of any such trust be charge against
the other. The Certificates representing the ownership of a fractional undivided
interest in one Trust shall not be exchangeable for certificates representing
the ownership of an undivided fractional interest in any other.
Section 2.04. Form of Certificates: Each Certificate referred to in Section
2.03 shall be in substantially the form hereinabove recited, numbered serially
for identification in fully registered form, transferable only on the books of
the Trustee as herein provided, executed manually by an authorized officer of
the Trustee and in facsimile by a Senior Vice President of the Depositor of the
Trust to which the Certificate relates, and dated the date of execution and
delivery by the Trustee.
Section 2.05. Deposit of Additional Securities: From time to time and in
the discretion of the Depositor, the Depositor may make deposits of Additional
Securities, provided that the proportional relationship between the maturity
amount of the Treasury Obligations and the number of Fund Shares immediately
prior to such deposit is maintained; also provided that any additional Treasury
Obligations are substantially identical with those then held in the Trust. Each
deposit of Additional Securities shall be listed in and made in accordance with
a Supplementary Schedule to the Reference Trust Agreement stating the date of
such deposit and the number of Additional Units being issued therefor. The
Trustee shall acknowledge in such Supplementary Schedule receipt of the deposit,
and simultaneously with the receipt of said deposit, reflect the aggregate
number of Additional Units specified in such Supplementary Schedule by executing
Certificates representing the ownership of such Units and deliver same to the
Depositor. Such Additional Securities shall be held, administered and applied by
the Trustee in the same manner as herein provided for the Securities. The
execution by the Depositor in connection with the deposit of Additional
Securities of a Supplementary Schedule to the Reference Trust Agreement shall
constitute the approval by the Depositor as satisfactory in form and substance
of the contracts to be entered into or assumed by the Trustee with regard to any
Additional Securities listed on such Supplementary Schedule and authorization to
the Trustee on behalf of the Trust to enter into or assume such contracts and
otherwise to carry out the terms and provisions thereof or to take other
appropriate action in order to complete the deposit of the Additional Securities
covered thereby into the Trust.
Section 2.06. Register of Units: A register shall be kept by the Trustee
containing the names and addresses of Unit Holders and the number of Units owned
by each Unit Holder, and in which all issues, exchanges, transfers and
cancellations of Units shall be recorded.
<PAGE>
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ARTICLE III
Administration of Trust
Section 3.01. Initial Costs: With respect to each Trust, the cost of the
initial preparation, printing and execution of the Certificates and this
Indenture, and other reasonable expenses in connection therewith shall be paid
by the Depositor and/or such other entity as the Depositor shall determine;
provided, however, that the liability on the part of the Depositor for such
initial costs, fees and expenses shall not include any fees, costs or other
expenses incurred in connection herewith after the execution and delivery of
this Indenture, and the deposit relating to the Trust, referred to in Section
2.01.
Section 3.02. Income Account: The Trustee shall collect the dividend income
on (the Securities in the Trust as such are paid, and all 12b-1 fee rebate
amounts, and credit such amounts to a separate account to be known as the
"Income Account."
Section 3.03. Principal Account: The Securities in the Trust and all
monies, including capital gains paid on the Fund Shares, other than amounts
credited to the Income Account for the Trust, received by the Trustee in respect
of the Securities in the Trust shall be credited to a separate account for the
Trust to be known as the "Principal Account" for the Trust.
Section 3.04. Reserve Account: From time to time the Trustee shall withdraw
from the Principal Account to the extent funds on deposit in the Income Account
are not sufficient such amounts as it, in its sole discretion, shall deem
requisite to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Such amounts so withdrawn shall be
credited to a separate account for the Trust which shall be known as the
"Reserve Account." The Trustee shall not be required to distribute to the Unit
Holders any of the amounts in the Reserve Account; provided, however, that if it
shall, in its sole discretion, determine that such amounts are no longer
necessary for payment of any applicable taxes or other governmental charges,
then it shall promptly deposit such amounts in the account from which it was
withdrawn or, if such Trust has been terminated or is in the process of
termination, the Trustee shall distribute to each Unit Holder thereof such
holder's interest in the Reserve Account of such Trust in accordance with
Section 9.03.
<PAGE>
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Section 3.05. Distribution: As of each Quarterly Computation Date for the
Trust, the Trustee shall:
(a) deduct from the Income Account, or, to the extent funds are not available
in such Account, from the Principal Account and pay to itself individually
the amounts that it is at the time entitled to receive on account of its
services theretofore performed and its expenses, losses and liabilities
theretofore incurred pursuant to Section 6.04;
(b) deduct from the Income Account, or, to the extent funds are not available
in such Account, from the Principal Account and pay to the Evaluator the
amount that it is at the time entitled to receive pursuant to Section 4.03;
and
(c) deduct from the Income Account, or, to the extent funds are not available
in such Income Account, from the Principal Account, an amount equal to the
unpaid fees and expenses, if any, including registration charges, Blue Sky
fees, printing costs, attorneys' fees, auditing costs and other
miscellaneous out-of-pocket expenses, as certified by the Depositor,
incurred in keeping the registration of the Units and the Trust on a
current basis pursuant to Section 9.05, provided, however, that no portion
of such amount shall be deducted or paid unless the payment thereof from
the Trust is at that time lawful. if the cash dividend, 12b-1 fee rebate
and capital gains distributions to the Trust are insufficient to provide
for amounts payable pursuant to paragraphs (a), (b), and (c) of this
Section 3.05, the Trustee has the power to sell Fund Shares (not Treasury
Obligations) to pay such amounts.
On each Quarterly Distribution Date or within a reasonable period of time
thereafter, the Trustee shall provide the following distribution elections: (1)
distributions by mail to each Unit Holder of record at the close of business on
the immediately preceding Quarterly Record Date at his post office address as
shown on the books of the Trustee of such Unit Holder's pro rata share of the
balance of the Income Account, computed as of the preceding Quarterly
Computation Date for the Trust, plus such Unit Holder's pro rata share of the
distributable cash balance of the Principal Account of the Trust, computed as of
the preceding Quarterly Record Date for the Trust, except as reduced by (x) any
amounts deducted pursuant to Paragraphs (a), (b) and (c) of this Section 3.05
and (y) any amounts needed to redeem Units pursuant to Section 5.02 hereof, (2)
investment of the amount otherwise distributable pursuant to election (1) above
in Fund Shares, or (3) distributions to be made to the designated agent for any
other investment program, when, as and if, available to the Unit Holder through
the Depositor. If no election is offered by the Depositor or if no election is
specified by the Unit Holder at the time of purchase of any Unit, distributions,
if any, shall be made by mail to the Unit Holder as provided in (1) above. Once
a distribution election has been chosen by the Unit Holder, such election shall
remain in effect until changed by the Unit Holder. Such change of election may
be made by notification thereof to the Trustee. A transferee of any Unit may
make his distribution election in the manner as set forth above. The Trustee
shall be entitled to receive in writing a notification from the Unit Holder as
to his or her change of address. Notwithstanding the foregoing, the Trustee
shall not be required to make a distribution unless the aggregate cash balance
available for distribution in the Income and Principal Accounts is at least
$2.50 per 110 Units. However, not less than once per year, on a Quarterly
Distribution Date, the Trustee shall distribute the entire cash balance in the
Income and Principal Accounts available for distribution unless the Trustee
receives the agreement of the Depositor to forego a distribution.
<PAGE>
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If the Depositor fails to replace any failed Treasury Obligation in
accordance with Section 3.07, the Trustee shall distribute to all Unit Holders
the cost to the Trust attributable to such Treasury Obligation not later than
the next Quarterly Distribution Date and, to the extent funds are provided by
the Depositor, will at such time distribute on behalf of the Depositor the sales
charges attributable to such Treasury Obligation.
If less than all monies attributable to a failed Treasury Obligation have
been applied by the Trustee to purchase Replacement Treasury Obligations, the
Trustee shall distribute the remaining monies to Unit Holders not later than the
next Quarterly Distribution Date.
All amounts (i) permitted to be withdrawn from the Principal Account under
this Indenture in order to satisfy obligations which, pursuant to the terms
hereof, are first to be paid out of the income Account to the extent funds are
available, or (ii) permitted to be withdrawn from the Principal Account pursuant
to Section 5.02 hereof, may be made only from the balance in the Principal
Account after excluding capital amounts being held for distribution to Unit
Holders of record on the Record Date for a prior Quarterly Distribution Date
pursuant to the following paragraph. The Principal Account shall be reimbursed
for any such amounts described in clause (i) of the preceding sentence when
sufficient funds are next available in the Income Account after giving effect to
the payment from the Income Account of all amounts otherwise required to be
deducted therefrom at that time.
The amounts to be so distributed to each Unit Holder of the Trust shall be
that pro rata share of the cash balance of the Income and Principal Accounts of
the Trust, computed as set forth above, as shall be represented by the Units
registered in the name of such Unit Holder.
In the computation of each such share, fractions of less than one cent
shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Income Account or the Principal Account of the Trust
shall be held in the same manner as other amounts subsequently deposited in each
of such Income or Principal Accounts, respectively.
<PAGE>
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For the purpose of distribution as herein provided, the holders of record
on the registration books of the Trustee at the close of business on each
Quarterly Record Date shall be conclusively entitled to such distribution, and
no liability shall attach to the Trustee by reason of payment to any such
registered Unit Holder of record. Nothing herein shall be construed to prevent
the payment of amounts from the Income Account and the Principal Account of the
Trust to individual Unit Holders by means of one check, draft or other proper
instrument, provided that the appropriate statement of such distribution shall
be furnished therewith as provided in Section 3.06 hereof.
Section 3.06. Distribution Statements: With each distribution, if any, from
the Income or Principal Accounts of the Trust the Trustee shall set forth,
either in the instrument by means of which payment of such distribution is made
or in an accompanying statement, the amount being distributed from each such
account expressed as a dollar amount per Unit.
Within a reasonable period of time after the last business day of each
calendar year, but not later than required by law, the Trustee shall furnish to
each person who at any time during such calendar year was a Unit Holder of the
Trust a statement setting forth, with respect to such calendar year:
(A) as to the Income Account of the Trust:
(1) the amount of dividends received on the Fund Shares,
(2) the deductions for payment of applicable taxes, or other government
charges, if any, compensation of the Evaluator and fees and expenses of the
Trustee, and transfers to the Reserve Account, and any expenses paid by the
Trust pursuant to Section 3.05 hereof,
(3) all l2b-1 fee rebate amounts,
(4) any other amount credited or deducted from the Income Account, and
(5) the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount per Unit outstanding
on the last business day of such calendar year;
(B) as to the Principal Account of the Trust:
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(1) the dates of the sale, maturity, liquidation or redemption of any of the
Securities, the identity of such Securities and the net proceeds received
therefrom, excluding any portion thereof credited to the Income Account,
(2) the amount paid for purchases of Replacement Treasury Obligations pursuant
to Section 3.07, and for redemptions pursuant to Section 5.02,
(3) the deductions for payment of applicable taxes and other governmental
charges, if any, compensation of the Evaluator and fees and expenses of the
Trustee, transfers to the Reserve Account and any other expenses paid by
the Trust under Section 3.05 hereof,
(4) the amount credited to or deducted from the Principal Account on account of
distributions of capital gains, if any, on Fund Shares, and
(5) any other amount credited to or deducted from the Principal Amount, and
(6) the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount per Unit outstanding
on the last business day of such calendar year; and
(C) the following information:
(1) a list of the Securities held in the Trust as of the last business day of
such calendar year,
(2) the number of Units of such Trust outstanding on the last business day of
the calendar year,
(3) the Unit Value (as defined in Section 5.01) based on the last evaluation of
such Trust made during such calendar year, and
(4) the amounts actually distributed during such calendar year from the Income
and Principal Accounts of the Trust, separately stated, expressed both as
total dollar amounts and as dollar amounts per Unit outstanding on the
record dates for such distributions.
<PAGE>
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Section 3.07. Replacement Securities: In the event that any Contract Security is
not delivered due to any occurrence, act or event beyond the control of the
Depositor and of the Trustee (such a Contract Security being herein called
a "Special Security"), the Depositor shall notify the Trustee in writing of
such failed contract and may instruct the Trustee to purchase Replacement
Securities which have been selected by the Depositor having a cost not in
excess of the cost of the Special Securities not so delivered. To be
eligible for inclusion in the Trust, the Replacement Securities which the
Depositor selects must: M in the case of Treasury Obligations be
substantially identical to every Treasury Obligation then in the Trust; and
(ii) be purchased within twenty days after delivery of the Trustee or to
the of notice of the failed contract Depositor, whichever occurs first. Any
Replacement Securities received by the Trustee shall be deposited hereunder
and shall be subject to the terms and conditions of this Indenture to the
same extent as other Securities deposited hereunder. No such deposit of
Replacement Securities shall be made after the earlier of (i) 90 days after
the date of execution and delivery of the applicable Reference Trust
Agreement or (ii) the first Quarterly Record Date to occur after the date
of execution and delivery of the applicable Reference Trust Agreement.
Whenever a Replacement Security is acquired by the Depositor pursuant to
the provisions of this Section 3.07, the Trustee shall, within five days
thereafter, mail to all Unit Holders notices of such acquisition, including an
identification of the Special Security and the Replacement Security acquired.
The purchase price of a Replacement Security shall be paid out of the funds in
the Principal Account attributable to the Special Security which it replaces.
The Trustee shall not or loss be liable or responsible in any way for
depreciation incurred by reason of any purchase made pursuant to any such
instructions from the Depositor and in the absence of such instructions the
Trustee shall have no duty to purchase any Replacement Securities under this
Indenture. The Depositor shall not be liable for any failure to instruct the
Trustee to purchase any Replacement Security or for errors of judgment in
selecting any Replacement Security. The Trustee shall have no duty or
responsibility with respect to the selection of any Replacement Security.
Section 3.08. Sale of Securities: In order to maintain the sound investment
character of the Trust, the Depositor may by written notice direct the Trustee
to sell or liquidate Securities at such price and time and in such manner as
shall be determined by the Depositor, provided that the Depositor has
determined, with respect to the Securities to be sold, that any one or more of
the following conditions exist:
(a) that there has been a default by the issuer of the Securities in
payment of declared dividends or redemption of Fund Shares;
<PAGE>
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(b) that any action or proceeding has been instituted in law or equity
seeking to restrain or enjoin the payment under any such Securities, or
attacking the validity of any of the Securities, or that there exists any other
legal question or impediment affecting such Securities or the payment of
dividends on the same;
(c) that there has been a default in the payment of principal or interest
on any outstanding obligations of the issuer of any of the Securities;
(d) that there has been a decline in market price of any such Securities to
such an extent, or such other market or credit factor exists, that in the
opinion of the Depositor the retention of such Securities would be detrimental
to the Trust and to the interests of the Unit Holders; and
Upon receipt of such direction from the Depositor, upon which the Trustee
shall rely, the Trustee shall proceed to sell the specified Securities in
accordance with such direction, and upon receipt of the proceeds of any such
sale, after deducting therefrom any fees and expenses of the Trustee, any
brokerage charges, taxes or other governmental charges, shall deposit such
proceeds in the Principal Account. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
made pursuant to any such direction or by reason of the failure of the Depositor
to give any such direction, and in the absence of such direction the Trustee
shall have no duty to sell any Securities under this Section 3.08.
Section 3.09. Notice and Sale by Trustee: If at any time there has been a
failure to pay a declared dividend on the Fund Shares the Trustee shall notify
the Depositor thereof. If within thirty days after such notification the
Depositor has not given any written instruction to sell or to hold or has not
taken any other action in connection with such Fund Shares, the Trustee shall
sell such Fund Shares forthwith, and the Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of such sale.
Section 3.10. Notice to Depositor: In the event that the Trustee shall have
been notified at any time of any action to be taken or proposed to be taken by
holders of the Securities in a Trust (including but not limited to the making of
any demand, direction, request, giving of any notice, consent or waiver or the
voting with respect to any amendment or supplement to any indenture, resolution,
agreement or other instrument under or pursuant to which the Securities have
been issued) the Trustee shall promptly notify the Depositor and shall thereupon
take such action or refrain from taking any action (not inconsistent with its
duties as Trustee) as the Depositor shall in writing direct; provided, however,
that the Trustee shall vote the Fund Shares as closely as possible, in the same
manner and the same general proportion, as the shares of such Fund held by
owners other than the Trust are voted; and provided, further however, that if
the Depositor shall not within five business days of the giving of such notice
to the Depositor direct the Trustee to take or refrain from taking any action,
the Trustee shall take such action as it, in its sole discretion, shall deem
advisable. Neither the Depositor nor the Trustee shall be liable to any person
for any action or failure to take action with respect to this section.
<PAGE>
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Section 3.11. Trustee Not to Amortize: Nothing in this Indenture, or
otherwise, shall be construed to require the Trustee to make any adjustments
between the Interest Account and the Principal Account of the Trust by reason of
any premium or discount in respect of any of the Securities except as required
by any applicable law or accounting practice.
ARTICLE IV
Evaluation of Securities; Evaluator
Section 4.01. Evaluation by Evaluator: The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor upon request
the per Unit value of the Securities in the Trust as of the Evaluation Time on
the bid side of the market on the days on which the Trustee shall make the Trust
Evaluation required by Section 5.01 and, in addition, (i) as of the Evaluation
Time on the offering side of the market each business day during the initial
public offering period, (ii) if and as long as requested by the Depositor on the
offering side of the market on each business day following such initial public
offering period, and (iii) on any other day requested by the Depositor or the
Trustee. In making the evaluations the Evaluator may determine the value of each
issue of the securities in the Trust by the following methods or any combination
thereof which it deems appropriate: (i) on the basis of current bid or offering
prices of such securities as obtained from investment dealers or brokers
(including the Depositor) who customarily deal in securities comparable to those
held by the Trust, or (ii) if bid or offering prices are not available for any
of such securities, on the basis of bid or offering prices for comparable
securities, or (iii) by appraisal or (iv) by any combination of the above. The
Evaluator shall also make a per Unit evaluation of the Securities deposited in
the Trust as of the times said Securities are deposited under this Indenture.
Such evaluation shall be made on the same basis as set forth above and shall be
based upon offering prices of said Securities. The Evaluator's determination of
the offering price of the Securities of the Trust on the date of deposit shall
be included in the Schedules attached to the Reference Trust Agreement.
Section 4.02. Tax Reports: For the purpose of aiding Unit Holders to
satisfy any reporting requirements of applicable Federal or state tax law, the
Evaluator shall make available to the Trustee and the Trustee shall transmit to
any Unit Holder upon written request of such Unit Holder any determinations made
by the Evaluator pursuant to Section 4.01.
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Section 4.03. Evaluator's Compensation: As compensation for its services
hereunder, the Evaluator, with respect to each series, shall receive against a
statement therefor submitted to the Trustee quarterly on or before each
Quarterly Distribution Date from the Income Account to the extent funds are
available and thereafter from the Principal Account the amount as set forth in
the Summary of Essential Information in the Prospectus for each evaluation of
the series, provided, however, that if at any time the fee of the Trustee shall
have been increased pursuant to Section 6.04, the compensation of the Evaluator
hereunder shall at the same time be ratably increased.
Section 4.04. Liability of Evaluator: The Trustee, Depositor and Unit
Holders may rely on any evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof. The determinations made by the
Evaluator hereunder shall be made in good faith upon the basis of the best
information available to it. The Evaluator shall be under no liability to the
Trustee, the Depositor or Unit Holders for errors in judgment; provided,
however, that this provision shall not protect the Evaluator against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder.
Section 4.05. Successor Evaluator: (a) The Evaluator may resign and be
discharged hereunder, by executing an instrument in writing resigning as
Evaluator and filing the same with the Depositor and the Trustee, not less than
60 days before the date specified in such instrument when, subject to Section
4.05(e), such resignation is to take effect. Upon receiving such notice of
resignation, the Depositor and the Trustee shall use their best efforts to
appoint a successor evaluator having qualifications and at a rate of
compensation satisfactory to the Depositor and the Trustee. Such appointment
shall be made by written instrument executed by the Depositor and the Trustee,
in duplicate, one copy of which shall be delivered to the resigning Evaluator
and one copy to the successor evaluator. The Depositor may remove the Evaluator
at any time upon 30 days' written notice and appoint a successor evaluator
having qualifications and at a rate of compensation satisfactory to the
Depositor. Such appointment shall be made by written instrument executed by the
Depositor, in duplicate, one copy of which shall be delivered by the Evaluator
so removed and one copy to the successor evaluator. Notice of such resignation
or removal and appointment of a successor evaluator shall be mailed by the
Trustee to each Unit Holder.
(b) Any successor evaluator appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the Trustee an instrument accepting such
appointment hereunder, and such successor evaluator without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
Evaluator herein and shall be bound by all the terms and conditions of this
Agreement.
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(c) In case at any time the Evaluator shall resign and no successor
evaluator shall have been appointed and have accepted appointment within 30 days
after notice of resignation has been received by the Depositor and the Trustee,
the Evaluator may forthwith apply to a court of competent jurisdiction for the
appointment of a successor evaluator. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
evaluator.
(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Evaluator hereunder shall be a party, or any
corporation succeeding to all or substantially all of the business of the
Evaluator hereunder, shall be the successor evaluator under this Agreement
without the execution or filing of any paper, instrument or further act to be
done on the part of the parties hereto, anything herein, or in any agreement
relating to such merger or consolidation, by which the Evaluator may seek to
retain certain powers, rights and privileges theretofore obtaining for any
period of time following such merger or consolidation, to the contrary
notwithstanding.
(e) Any resignation or removal of the Evaluator and appointment of a
successor evaluator pursuant to this Section shall become effective upon
acceptance of appointment by the successor evaluator as provided in subsection
(b) hereof.
ARTICLE V
Trust Evaluation; Redemption, Purchase, Transfer,
Interchange or Replacement of Certificates
Section 5.01. Trust Evaluation: The Trustee shall make an evaluation of the
Trust as of 4:15 p.m. New York Time, (i) on the last business day of each of the
months of June and December, (ii) on the day on which any Unit of the Trust is
tendered for redemption, and (iii) on any other day desired by the Trustee or
requested by the Depositor. Such evaluations shall take into account and itemize
separately (1) the cash on hand in the Trust (other than monies on deposit in
the Reserve Account, funds deposited on the date hereof by the Depositor for the
purchase of Securities and not theretofore credited to the Principal Account
pursuant to Section 3.03 and funds in the Principal Account with respect to
which contracts for the purchase of the Replacement Securities have been entered
into pursuant to Section 3.07), (2) the value of each Security in the Trust on
the bid side of the market as determined by the Evaluator pursuant to Section
4.01, and (3) all other assets of the Trust. For each such evaluation there
shall be deducted from the sum of the above (i) amounts representing any
applicable taxes or governmental charges payable out of the Trust and for which
no deductions shall have previously been made for the purpose of addition to the
Reserve Account, (ii) amounts representing accrued expenses of the Trust
including but not limited to unpaid fees and expenses of the Trustee and the
Evaluator and expenses of the Trust (including legal and auditing expenses), in
each case as reported by the Trustee to the Evaluator on or prior to the date of
evaluation and (ii) cash held for distribution to Unit Holders of record as of a
date prior to the evaluation then being made. The value of the pro rata share of
each Unit of the Trust determined on the basis of any such evaluation shall be
referred to herein as the "Unit Value".
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The Trustee shall promptly advise the Depositor of each determination of
Unit Value made by it as above provided, and, shall promptly furnish to the
Depositor with such information regarding the Principal, Income and Reserve
Accounts as the Depositor may reasonably request.
Section 5.02. Redemptions by Trustee; Purchases by Depositor: Any Unit
evidenced by a Certificate tendered for redemption by a Unit Holder or his duly
authorized attorney to the Trustee at its corporate trust office in the City of
New York, shall be redeemed by the Trustee on the seventh calendar day following
the day on which tender for redemption is made, provided that if such day of
redemption is not a business day, then such Unit shall be redeemed on the first
business day prior thereto (being herein called the "Redemption Date"). Subject
to payment by such Unit Holder of any tax or other governmental charges which
may be imposed thereon, redemption of such Unit is to be made by payment on the
Redemption Date of cash equivalent to the Unit Value, determined by the Trustee
as of 4:15 p.m. on the date of tender. Units received for redemption by the
Trustee on any day after 4:15 p.m. will be held by the trustee until the next
day on which the New York Stock Exchange is open for trading and will be deemed
to have been tendered on such day for redemption at the Redemption Price
computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositor, suspend the right of redemption for Units of the Trust or postpone
the date of payment of the Redemption Price therefor for more than seven
calendar days following the day on which tender for redemption is made (1) for
any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which trading on the New York
Stock Exchange is restricted; (2) for any period during which an emergency
exists, as a result of which disposal by the Trust of the Securities is not
reasonably practicable or it is not reasonably practicable to determine fairly
in accordance herewith the value of the Securities; or (3) for such other period
as the Securities and Exchange Commission may by order permit, and the Trustee
shall not be liable to any person or in any way for any loss or damage which may
result from any such suspension or postponement.
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Not later than the close of business on the day of tender of a Unit for
redemption by a Unit Folder other than the Depositor, the Trustee shall notify
the Depositor of such tender or such mandatory redemption. Such Depositor shall
have the right to purchase such Unit by notifying the Trustee of its election to
make such purchase as soon as practicable thereafter but in no event subsequent
to the close of business on the second business day after the day on which such
Unit was tendered for redemption. Such purchase shall be made by payment for
such Unit by the Depositor to the Unit Holder not later than the close of
business on the Redemption Date of an amount not less than the Redemption Price
which would otherwise be payable by the Trustee to such Unit Holder.
Any Unit so purchased by the Depositor may at the option of the Depositor
be tendered to the Trustee for redemption at the corporate trust office of the
Trustee in the manner provided in the first paragraph of this Section 5.02.
If the Depositor does not elect to purchase any Unit of the Trust tendered
to the Trustee for redemption, or if a Unit is being tendered by the Depositor
for redemption, that portion of the Redemption Price which represents income
shall be withdrawn from the Income Account of the Trust to the extent available.
The balance paid on any redemption, including accrued and unpaid interest, if
any, shall be withdrawn from the Principal Account of the Trust to the extent
that funds are available for such purpose. If such available balance shall be
insufficient the Trustee shall sell or redeem such of the Securities held in the
Trust as are currently designated for such purposes by the Depositor as the
Trustee in its sole discretion shall deem necessary. The Trustee shall sell, to
the extent possible, Fund Shares and Treasury Obligations in the same ratio as
the ratio of Fund Shares and Treasury Obligations then held in the Trust. To the
extent the sale of Securities in such ratio is not in the best interest of the
Unit Holders, Fund Shares shall be sold prior to the sale of Treasury
Obligations. In the event that funds are withdrawn from the Principal Account
for payment of amounts representing income, the Principal Account shall be
reimbursed for such funds so withdrawn when sufficient funds are next available
in the Income Account.
The Depositor shall maintain with the Trustee a current list of Securities
held in the Trust designated to be sold for the purpose of redemption of Units
of the Trust, and for payment of expenses hereunder, provided that if the
Depositor shall for any reason fail to maintain such a list, the Trustee, in its
sole discretion, may designate a current list of Securities for such purposes.
The net proceeds of any sales of Securities from such list representing
principal shall be credited to the Principal Account of the Trust.
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The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of any sale or redemptions of Securities made
pursuant to this Section 5.02.
Certificates evidencing Units redeemed pursuant to this Section 5.02 shall
be cancelled by the Trustee, and any Unit or Units redeemed pursuant to this
Section 5.02 shall be terminated by such redemption.
Section 5.03. Transfer or Interchange of Certificates: A Certificate (and
the Units it represents) may be transferred by the registered holder thereof by
presentation and surrender of such Certificate at the corporate trust office of
the Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Trustee and executed by the
Unit Holder or his authorized attorney, whereupon a new registered Certificate
or Certificates for the same number of Units of the Trust executed by the
Trustee and the Depositor will be issued in exchange and substitution therefor.
Certificates issued pursuant to this Indenture are interchangeable for one or
more other Certificates in an equal aggregate number of Units of the Trust and
all Certificates issued shall be issued in denominations of one unit or any
integral multiple thereof as may be requested by the Unit Holder.
The Trustee may deem and treat the person in whose name any Certificate
shall be registered upon the books of the Trustee as the owner of such
Certificate for all purposes hereunder, and the Trustee shall not be affected by
any notice to the contrary, nor be liable to any person or in any way for so
deeming and treating the person in whose name any Certificate shall be so
registered.
A sum sufficient to pay any tax or other governmental charge that may be
imposed in connection with any such transfer or interchange shall be paid by the
Unit Holder to the Trustee. The Trustee may require a Unit Holder to pay $2.00
for each new Certificate issued on any such transfer or interchange.
All Certificates cancelled pursuant to this Indenture shall be disposed of
by the Trustee without liability on its part.
Section 5.04. Certificates Mutilated, Destroyed, Stolen-or Lost: in case
any Certificate shall become mutilated or be destroyed, stolen or lost, the
Trustee shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Unit Holder's furnishing the Trustee with proper
identification and indemnity satisfactory to the Trustee, complying with such
other reasonable regulations and conditions as the Trustee may prescribe and
paying such expenses as the Trustee may incur. Any mutilated Certificate shall
be duly surrendered and cancelled before any new Certificate shall be issued in
exchange and substitution therefor. Upon the issuance of any new Certificate a
sum sufficient to pay any tax or other governmental charge will be imposed and
payment of the fees and expenses of the Trustee may be required. Any such new
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
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In the event the Trust has terminated or is in the process of termination,
the Trustee may, instead of issuing a new Certificate in exchange and
substitution for any Certificate which shall have become mutilated or shall have
been destroyed, stolen or lost, make the distributions in respect of each
mutilated, destroyed, stolen or lost Certificate (without surrender thereof
except in the case of a mutilated Certificate) as provided in Section 9.03
hereof if the Trustee is furnished with such security or indemnity as it may
require to save it harmless, and in the case of destruction, loss or theft of a
Certificate, evidence to the satisfaction of the Trustee of the destruction,
loss or theft of such Certificate and of the ownership thereof.
ARTICLE VI
Trustee
Section 6.01. General Definition of Trustee's Liabilities, Rights and
Duties: in addition to and notwithstanding the other duties, rights, privileges
and liabilities of the Trustee as elsewhere set forth herein, the liabilities of
the Trustee are further defined as follows:
(a) all monies deposited with or received by the Trustee hereunder shall be
held by it without interest in trust as part of the Trust or the Reserve Account
until required to be disbursed in accordance with the Provisions of this
Indenture and such moneys will be segregated by separate recordation on the
trust ledger of the Trustee so long as such Practice preserves a valid reference
under applicable law, or if such preference is not so preserved the Trustee
shall handle such moneys in such other manner as shall constitute the
segregation and holding hereof in Investment Company Act of 1940; as part of the
Trustee's compensation the Trustee may benefit from cash balances in the income
and Principal Accounts, as provided in Section 6.04;
(b) the Trustee shall be under no liability for any action taken in good
faith on any appraisal, paper, order, list, demand, request, consent, affidavit,
notice, opinion, direction, evaluation, endorsement, assignment, resolution,
draft or other document whether or not of the same kind prima facie properly
executed, or for the disposition of monies, any of the Securities, Units or
Certificates issued pursuant to this Indenture, or in respect of any evaluation
which it is required to make or is required or permitted to have made by others
under this Indenture or otherwise, except by reason of its own willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder;
provided, however, that the Trustee shall not in any event be liable or
responsible for any of the provisions of this Indenture, insofar as the same may
appear to be ambiguous or inconsistent with any other provisions hereof, may be
concurred in by the parties to the Indenture and such an interpretation shall be
binding upon the parties to the Indenture. The parties to the Indenture shall be
under no liability for any good faith interpretation of the Indenture;
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(c) the Trustee shall not be responsible for or in respect of the recitals
herein, the validity or sufficiency of this Indenture or for the due execution
hereof by the Depositor or the Evaluator, or for the form, character,
genuineness, sufficiency, value or validity of any Securities or for or in
respect of the validity of sufficiency of the Certificates or of the due
execution thereof by the Depositor, and the Trustee shall in no event assume or
incur any liability, duty or obligation to any Unit Holder or the Depositor
other than as expressly provided for herein. The Trustee shall not be
responsible for or in respect of the validity of any signatures by or on behalf
of the Depositor or the Evaluator;
(d) the Trustee shall not be under any obligation to appear in, prosecute
or defend any action, which in its opinion may involve it in expense or
liability, unless as often as required by the Trustee, it shall be furnished
with reasonable security and indemnity against such expense or liability, and
any pecuniary cost of the Trustee from such actions shall be deductible from and
a charge against the income and Principal Accounts of the Trust. Subject to the
foregoing the Trustee shall in its discretion undertake such action as it may
deem necessary at any and all times to protect the Trust and the rights and
interests of the Unit Holders pursuant to the terms of this Indenture; provided,
however, that the expenses and costs of such actions, undertakings or
proceedings shall be reimbursable to the Trustee from the Income and Principal
Accounts, and the payment of such costs and expenses shall be secured by a lien
on the Trust prior to the interests of the Unit Holders;
(e) the Trustee may employ agents, attorneys, accountants and auditors and
shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable that if the Trustee chooses to
care; provided, however, employ the Depository Trust Company in connection with
the storage and handling of, and the furnishing of administrative services in
connection with the Securities, the Trustee will be answerable for any default
or misconduct of the Depository Trust Company and its employees and agents as
fully and to the same extent as if such default or misconduct had been committed
or occasioned by the Trustee. The Trustee shall be fully protected in respect of
any action under this Agreement taken, or suffered, in good faith by the
Trustee, in accordance with the opinion of its counsel. The accounts of the
Trusts shall be audited not less frequently than annually by independent
certified public accountants designated from time to time by the Depositor, and
the reports of such accountants shall be furnished by the Trustee to Unit
Holders upon request. The fees and expenses charged by such agents, attorneys,
accountants or auditors shall constitute an expense of the Trustee reimbursable
from the Income and Principal Accounts of the Trust as set forth in Section 6.04
hereof;
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(f) if at any time there is only one Depositor acting hereunder and such
Depositor shall resign pursuant to Section 8.04 or shall fail to undertake or
perform any of the duties which by the terms of this Agreement are required by
it to be undertaken or performed or the Depositor shall be dissolved or become
incapable of acting or shall be adjudged bankrupt or insolvent, or a receiver of
the Depositor or of its property should be a pointed, or any public officer
shall take charge or control of the Depositor or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then in any such
case, the Trustee may: (1) appoint a successor depositor who shall act hereunder
in all respects in place or the Depositor which successor shall be satisfactory
to the Trustee, and which may be compensated semiannually, at rates deemed by
the Trustee to be reasonable under the circumstances, by deduction from the
Income Account of the Trust or, to the extent funds are not available in such
Account, from the Principal Account of the Trust but no such deduction shall be
made exceeding such reasonable amount as the Securities and Exchange Commission
may prescribe in accordance with Section 26(a)(2)(C) of the Investment Company
Act of 1940, or (2) act as Depositor itself without terminating the Trust, or
(3) terminate the Indenture and the Trust created hereby and liquidate the Trust
in the manner provided in Section 9.03;
(g) if the aggregate net value of all Trust assets as shown by any
evaluation by the Trustee pursuant to Section 5.01 hereof is less than 40% of
the aggregate maturity amounts of the Treasury Obligations deposited in the
Trust calculated after the most recent deposit of Treasury obligations in the
Trust (without reduction for disposition of Treasury Obligations), or if
Replacement Treasury Obligations are not acquired, or if there has been a
material change in the Fund's objectives, the Trustee shall when so directed by
the Depositor, terminate this Indenture and the and the trust created hereby and
liquidate the Trust, all in the manner provided in Section 9.03;
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(h) the Trustee is authorized and empowered to execute and file on behalf
of the Trust any and all documents, in connection with consents to service of
process, required to be filed under the securities laws of the various States in
order to permit the sale of Units of the Trust in such States by the Depositor;
(i) in no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee hereunder or upon or in respect of the
Trust which it may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction in
the premises. For all such taxes and charges and for any expenses which the
Trustee may sustain or incur with respect to such taxes or charges, the Trustee
shall be reimbursed and indemnified out of the Reserve Account and/or the Income
and Principal Accounts of the Trust, and the payment of such amounts so paid by
the Trustee shall be secured by a lien on the Trust prior to the interests of
the Unit Holders;
(j) the Trustee except by reason of its own gross negligence, lack of good
faith or willful misconduct in the performance of its duties hereunder shall not
be liable for any action taken, omitted or suffered to be taken by it in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture;
(k) the Trustee shall sell Fund Shares for the purpose of payment of
expenses hereunder to the extent that the Income Account amounts are
insufficient to pay such expenses. The net proceeds of any such sales of Fund
Shares, to the extent not used for payment of expenses, shall be credited to the
Principal Account;
(l) so long as shall be required by Section 26(a)(2)(C) of the Investment
Company Act of 1940, no payment to the Depositor or to any principal underwriter
(as defined in such Act) for the Trust or to any affiliated person (as so
defined) or agent of the Depositor or such underwriter shall be allowed the
Trustee as an expense except for payment not in excess of such reasonable
amounts as the Securities and Exchange Commission may prescribe as compensation
for performing bookkeeping and other administrative services of a character
normally performed by the Trustee itself.
Section 6.02. Books, Records and Reports: The Trustee shall keep proper
books of record and account of all the transactions under this Indenture at its
corporate trust office including a record of the name and address of, the Units
held by, and the Certificates issued by the Trust and held by, every Unit
Holder, and the books and records shall be open to inspection by any Unit Holder
of the Trust at all reasonable times during the usual business hours of the
Trustee at its corporate office.
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The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute or rule or
regulation thereunder.
Section 6.03. Indenture and List of Securities on File: The Trustee shall
keep a certified copy in duplicate original of this Indenture (including the
Reference Trust Agreement) on file at its corporate trust office available for
inspection at all reasonable times during the usual business hours by any Unit
Holder, together with a current list of the Securities in the Trust.
Section 6.04. Compensation: For services performed under this Indenture the
Trustee shall receive as compensation such amount as specified in the Reference
Trust Agreement. Such compensation shall be payable quarterly in an amount equal
to one-fourth of the estimated annual compensation of the Trustee on or before
each Quarterly Distribution Date from the Income Account to the extent monies
are available and thereafter from the Principal Account and shall be computed on
the basis of the greatest amount of Units in the Trust at any time during the
previous quarter with respect to which such compensation is being computed. The
Trustee may from time to time adjust its computation set forth above; provided,
however, that the total adjustment upward does not, at the effective time of
such adjustment, exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the United States
Department of Labor Consumer Price Index entitled "All Services Less Rent" or,
if such Index is no longer published, in a similar index to be determined by the
Trustee and the Depositor. The consent or concurrence of any Unit Holder
hereunder shall not be required for any such adjustment or increase. Such
compensation shall be deemed to provide only for the usual normal and proper
functions undertaken as Trustee pursuant to this Indenture. In addition to the
foregoing compensation, as part of the Trustee's compensation for ordinary
services performed under this Indenture, the Trustee is entitled to the benefits
to the Trustee that may result from positive balances in the Income and
Principal Accounts. In addition, the Trustee may charge, to the extent then
lawful, the Income and Principal Accounts of the Trust for any and all expenses
(including but not limited to 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 Depositor is maintaining a market for the Units and including the fees of
counsel which may be retained by the Trustee in connection with its activities
hereunder, and disbursements incurred hereunder and additional compensation for
any extraordinary services performed by the Trustee hereunder and various
governmental charges, expenses and costs of any action taken by the Trustee to
protect the Trust and the rights and interests of Unit Holders, expenses of
indemnification or the Depositor for any losses, liabilities and expenses in
acting as Depositor under the Indenture without gross negligence, bad faith,
willful misfeasance or willful misconduct or disregard of its obligations and
duties, expenses incurred in contacting Unit Holders upon termination of the
Trust and the cost of independent public accountant auditors of the Trust. The
Trustee shall be indemnified by the Trust and held harmless against any loss or
liability accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of the Trust, including the costs and expenses (including counsel
fees) of defending itself against any claim of liability in the premises. If the
cash balances in the Income and Principal Accounts of the Trust shall be
insufficient to provide for amounts payable pursuant to paragraphs (a), (b) and
(c) of Section 3.05 hereof, the Trustee shall have the power to sell Fund Shares
of the Trust. 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
the Fund Shares without right to reimbursement for such amounts paid. If the
aggregate cash balances of the Income and Principal Accounts plus the proceeds
of the sale of the Fund Shares after deducting ordinary trust expenses are
insufficient to pay extraordinary trust expenses, the Trustee shall have the
power to sell Treasury Obligations of the Trust. The Trustee shall not be liable
or responsible in any way for depreciation or loss incurred by reason of any
sale of Securities made pursuant to this Section 6.04. Any monies payable to the
Trustee pursuant to this Section shall be secured by a lien on the Trust prior
to the interests of the Unit Holders.
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Section 6.05. Removal and Resignation of Trustee; Successor: The following
provisions shall govern the removal and resignation of the Trustee and the
appointment of any successor trustee:
(a) the Trustee or any trustee or trustees hereafter appointed may resign
and be discharged of the trusts created by this Indenture, by executing an
instrument in writing resigning as Trustee of the Trust and filing the same with
the Depositor and mailing a copy of a notice of resignation to all Unit Holders
then of record, not less than sixty days before the date specified in such
instrument when, subject to Section 6.05(e), such resignation is to take effect.
Upon receiving such notice of resignation, the Depositor shall promptly appoint
a successor trustee as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the resigning Trustee and one
copy to the successor trustee. If at any time the Trustee shall become incapable
of acting, or shall have an order of relief entered with respect to it, or shall
be adjudicated a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purposes of rehabilitation,
conservation or liquidation, or if the Depositor determines that removal of the
Trustee is in the best interest of the Unit Holders, then in any such case the
Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which shall be delivered to the Trustee so
removed and one copy to the successor trustee; provided that a notice of such
removal and appointment of a successor trustee shall be mailed by the Depositor
to each Unit Holder then of record;
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(b) any successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor and to the retiring Trustee an instrument accepting
such appointment hereunder, and such successor trustee without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
Trustee herein and shall be bound by all the terms and conditions of this
Indenture. Upon the request of such successor trustee, the retiring Trustee
shall, upon payment of any amounts due the retiring Trustee, or provision
therefor to the satisfaction of such retiring Trustee, execute and deliver an
instrument acknowledged by them transferring to such successor trustee all the
rights and powers of the retiring Trustee; and the retiring Trustee shall
transfer, deliver and pay over to the successor trustee all Securities and
monies at the time held by it hereunder, together with all necessary instruments
of transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained by the
retiring Trustee in the administration hereof as may be requested by the
successor trustee, and shall thereupon be discharged from all duties and
responsibilities under this Indenture. The retiring Trustee shall, nevertheless
retain a lien upon all Securities and monies at the time held by thereunder to
secure any amounts then due the retiring Trustee;
(c) in case at any time the Trustee shall resign and no successor trustee
shall have been appointed and have accepted appointment within thirty days after
notice of resignation has been received by the Depositor, the retiring Trustee
may forthwith apply to a court of competent jurisdiction for the appointment of
a successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee;
(d) any corporation into which any trustee hereunder may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which any trustee hereunder shall be a party, shall be the
successor trustee under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger to retain certain
powers, rights and privileges theretofore obtaining for any period of time
following such merger or consolidation, to the contrary notwithstanding;
(e) any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to this Section shall become effective upon
acceptance of appointment by the successor trustee as provided in subsection (b)
hereof.
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Section 6.06. Qualifications of Trustee: The Trustee shall be a corporation
organized and doing business under the laws of the United States or the State of
New York, which is authorized under such laws to exercise corporate trust powers
and having at all times an aggregate capital, surplus, and undivided profits of
not less than $5,000,000 and having its principal office and place of business
in the Borough of Manhattan, the City and State of New York.
ARTICLE VII
Rights of Unit Holders
Section 7.01. Beneficiaries of Trust: By the purchase and acceptance or
other lawful delivery and acceptance of a Unit of the Trust the Unit Holder
shall be deemed to be a beneficiary of such Trust and vested with all rights,
title and interest in the Trust attributable to such Unit, subject to the terms
and conditions of this Indenture and of the Certificate evidencing such Unit.
Section 7.02. Rights, Terms and Conditions: In addition to the other rights
and powers set forth in the other provisions and conditions of this Indenture,
the Unit Holders shall have the following rights and powers and shall be subject
to the following terms and conditions:
(a) a Unit Holder may at any time tender his Units to the Trustee for
redemption in accordance with Section 5.02;
(b) the death or incapacity of any Unit Holder shall not operate to
terminate this indenture or the Trust, nor entitle his legal representatives or
heirs to claim an accounting or to take any action or proceeding in any court of
competent jurisdiction for a partition or winding up of the Trust, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them. Each Unit Holder expressly waives any right he may have under any rule of
law, or the provisions of any statute, or otherwise, to require the Trustee at
any time to account, in any manner other than as expressly provided in this
Indenture, in respect of the Securities or monies from time to time received,
held and applied by the Trustee hereunder;
(c) no Unit Holder shall have any right to vote or in any manner otherwise
control the operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Unit Holders from time
to time as partners or members of any association; nor shall any Unit Holder
ever be under any liability to any third persons by reason of any action taken
by the parties to this Indenture, or any other cause whatsoever.
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ARTICLE VIII
Depositor
Section 8.01. Liabilities; Power of Attorney: The Depositor, or the
Depositors if there be more than one, shall be severally liable in accordance
herewith for the obligations imposed upon and undertaken by the Depositor
hereunder, provided, however, that, without in any way affecting or diminishing
such several liability, each Depositor of the Trust shall indemnify the other
Depositors thereof and hold such other Depositors harmless from and against any
and all costs, expenses and liabilities (including attorneys' fees) which such
other Depositors may suffer or incur as a result of or by reason of any act or
failure to act hereunder on the part or the indemnifying Depositor. At all times
prior to the termination of the Trust and while the Depositors thereof shall
continue to act jointly hereunder, there shall be maintained on file with the
Trustee a power of attorney executed in favor of one Depositor by the other
Depositors constituting and appointing the nonexecuting Depositor the true and
lawful agent and attorney-in-fact of the executing Depositors to execute and
deliver for and on behalf of the executing Depositors any and all notices,
opinions, certificates, lists, demands, directions, instruments, or other
documents provided or permitted to be executed or delivered by the Depositors
hereunder in connection with the Trust or to take any other action in respect
hereof. Such power of attorney shall continue in effect as to the executing
Depositors until written notice of revocation thereof has been given by such
executing Depositors to the Trustee. Prior to receipt of such notice of
revocation the Trustee shall be entitled to rely conclusively upon such power of
attorney as authorizing the non-executing Depositor to give any notice, opinion,
certificate, list, demand, direction, instrument or other document provided for
or permitted hereunder or to take any other action in respect hereof on behalf
of the executing Depositors as to which such power of attorney is in effect.
Section 8.02. Discharge: If there be more than one Depositor, the following
provisions shall provide for the discharge of a Depositor and the liability of
the Depositors in the event of the discharge of a Depositor:
(a) in the event that any Depositor shall fail to undertake or perform any of
the duties which by the terms of this Agreement are required by it to be
undertaken or performed and such failure shall continue for 30 days after
notice to the Depositors from the Trustee or if any Depositor shall become
incapable of acting or shall have any order of relief entered with respect
to it, or a receiver of the property of any Depositor shall be appointed or
any public officer shall take charge or control of any Depositor or its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then such Depositor shall forthwith be and shall be deemed to
be discharged forever as a Depositor hereunder and thereupon the remaining
Depositors shall act hereunder without the necessity of any other or
further action on its part or on the part of the Trustee;
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(b) in the event that the power of attorney referred to in Section 8.01 shall
be revoked by written notice given by an executing Depositor and it shall
not be replaced within one business day by another power of attorney
conforming with the requirements of said Section 8.01 the Depositors of the
Trust shall be deemed to have been unable to reach agreement with respect
to action to be taken jointly by them hereunder in connection with the
Trust and thereupon the Depositor which has revoked the power of attorney
executed by it shall be discharged hereunder upon the expiration of such
one-day period and thereupon the other Depositors shall act hereunder
without the necessity of any other or further action on their part or on
the part of the Trustee;
(c) notwithstanding the discharge of a Depositor of the Trust in accordance
with this Section 8.02, such Depositor shall continue to be fully liable in
accordance with the provisions hereof in respect of action taken or
refrained from under this Agreement by the Depositors before the date of
such discharge or by the undis-charged Depositors before or after the date
of such discharge, as fully and to the same extent as if no discharge has
occurred.
Section 8.03. Successors: The covenants, provisions and agreements herein
contained shall in every case be binding upon any successor or successors to any
Depositor and shall be binding upon the General Partners of any Depositor which
may be a partnership and upon the capital interest of the limited partners of
any Depositor which may be a partnership. In the event of the death, resignation
or withdrawal of any partner of any Depositor which may be a partnership, the
partner so dying, resigning or withdrawing shall be relieved of all further
liability hereunder if at the time of such death, resignation or withdrawal such
Depositor maintains a net worth (determined in accordance with generally
accepted accounting principles) of at least $1,000,000. In the event of an
assignment by any Depositor to a successor corporation or a Partnership as
permitted by the next following sentence, such Depositor and, if such Depositor
is a partnership, its partners shall be relieved of all further liability under
this Agreement. Any Depositor may transfer all or substantially all of its
assets to a corporation or partnership which carries on the business of such
Depositor, if at the time of such transfer such successor duly assumes all the
obligations of such Depositor under this Agreement.
<PAGE>
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Section 8.04. Resignation: If at any time any Depositor of the Trust shall
desire to resign its position as such a Depositor hereunder, the Depositor
desiring to resign may resign by delivering to the Trustee an instrument
executed by such resigning Depositor and upon such delivery, the resigning
Depositor shall be discharged and shall no longer be liable in any manner
hereunder except as to acts or omissions occurring prior to such delivery;
provided, however, that concurrently with or subsequent to such resignation the
Trustee may appoint a new Depositor to act and to assume the duties of the
resigning Depositor by an instrument executed by the Trustee and the new
Depositor. Such new Depositor shall not be under any liability hereunder for
occurrences or omissions prior to the effective time of execution of such
instrument.
Section 8.05. Additional Depositors: The Depositor of the Trust and the
Trustee may at any time appoint one or more corporations or partnerships to act
as new Depositor of such Trust, in addition to those currently serving, by an
instrument executed by such Depositor, the Trustee, and such corporations or
partnerships; provided, however, that at the time of such execution each new
Depositor maintains a net worth (determined in accordance with generally
accepted accounting principles) of at least $1,000,000. Upon such execution, a
new Depositor shall be deemed to be a depositor for all purposes under this
Indenture, and the covenants, provisions and agreements herein contained shall
in every case be binding upon such new Depositor and shall be binding upon the
General Partner of any such new Depositor which may be a partnership and upon
the capital interest of the limited partners of any such new Depositor which may
be a partnership, but such new Depositor shall not be liable hereunder or
occurrences or omissions prior to the effective time of execution of such
instrument.
Section 8.06. Exclusions from Liability: The following provisions shall
provide for certain exclusions from the liability of the Depositor:
(a) no Depositor of the Trust shall be under any liability to any other
Depositor of the Trust, such Trust or the Unit Holders thereof, for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment or liable or responsible in any way
for depreciation or loss incurred by reason of the acquisition or sale of any
Securities; provided, however, that this provision shall not protect the
Depositor against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence or by reason of its
reckless disregard of its obligations and duties hereunder. The Depositor of the
Trust may rely in good faith on any paper, order, notice, list, affidavit,
receipt, evaluation, opinion, endorsement, assignment, draft or any other
document of any kind prima facie properly executed and submitted to them, or any
of them, by any other Depositor of the Trust, the Trustee, the Evaluator or any
other person. The Depositor shall in no event be deemed to have assumed or
incurred any liability, duty, or obligation to any Unit Holder, the Evaluator or
the Trustee other than as expressly provided for herein;
<PAGE>
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(b) the Depositor shall not be under any obligation to appear in, prosecute
or defend any legal action which in its opinion may involve it in any expense or
liability; provided, however, that the Depositor may in its discretion undertake
any such action which it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties hereto and the interests of
the Unit Holders hereunder;
(c) none of the provisions of this Agreement shall be deemed to protect or
purport to protect the Depositor of the Trust against any liability to the Trust
or to the Unit Holders thereof or to each other (if there is more than one
Depositor) to which the Depositor would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
duties of the Depositor, or by reason of the Depositor's reckless disregard of
the obligations and duties of the Depositor under this Agreement.
ARTICLE IX
Additional Covenants; Miscellaneous Provisions
Section 9.01. Amendments: This Indenture may be amended from time to time
by the parties hereto or their respective successors, without the consent of any
of the Unit Holders (a) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision contained herein; or (b) to change any provision hereof as may be
required by the Securities and Exchange Commission or any successor governmental
agency exercising similar authority; or (c) to make such other provision in
regard to matters or questions arising hereunder as shall not adversely affect
the interests of the Unit Holders; provided, that the Indenture may also be
amended by the Depositor and the Trustee (or the Performance of any of the
provisions of the Indenture may be waived) with the consent of Unit Holders
evidencing 51% of the Units at the time outstanding under the Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating any
or the provisions of the Indenture or of modifying in any manner the rights of
Unit Holders; provided, further, that this Indenture (including any Reference
Trust Agreement) may not be amended (nor may any provision thereof be waived) so
as to (1) permit an increase in the number of Units issuable except as the
result of the deposit of Additional Securities, as herein provided, or to reduce
the relative interest in the Trust of any Unit Holder without his consent (2)
permit the deposit or acquisition of Securities or other property either in
addition to or in substitution for any of the Securities on hand in the Trust
except in the manner permitted by the Trust Indenture as in effect on the Date
of Deposit, or to provide the Trustee with the power to engage in business or
investment. activities not specifically authorized in this Indenture as
originally adopted or (3) adversely affect the characterization of the Trust as
a grantor trust for federal income tax purposes.
<PAGE>
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Section 9.02. Notice of Amendment: Promptly after the execution of any
amendment the Trustee shall furnish written notification of the substance of
such amendment to all Unit Holders then of record at their addresses appearing
on the registration books of the Trustee.
Section 9.03. Termination: The Trust shall terminate upon the maturity,
redemption, sale or other disposition as the case may be of the last Security
held in the Trust unless sooner terminated upon the direction of the Depositor
to the Trustee. The Trust may be terminated upon the direction of the Depositor
when the aggregate net of all Trust assets as shown in the Evaluator's
evaluation is less than 40% of the aggregate maturity amounts of the Treasury
Obligations deposited in the Trust calculated after the most recent deposit of
Treasury Obligations in the Trust (without reduction for disposition of Treasury
obligations), or if Replacement Treasury obligations are not acquired, or if
there is a material change in the Fund's investment objectives as hereinbefore
specified and may be terminated at any time by the written consent of the
Holders of Fifty One per cent of the Units of the Trust; provided, that in no
event shall the Trust continue beyond the Termination Date as set forth in Part
II of the Reference Trust Agreement. Written notice of any termination,
specifying the time or times at which the Unit Holders of such Trust may
surrender any Certificates they hold for cancellation shall be given by the
Trustee to each Unit Holder at his address appearing on the registration books
of the Trustee.
(a) Within a reasonable period of time after termination of the Trust the
Trustee shall liquidate such Securities of the Trust then held, if any, as it
shall deem necessary for payment of Trust expenses, to the extent the amounts in
the Income and Principal Accounts are insufficient, and shall:
(i) deduct from the Income Account of the Trust or, to the extent that
funds are not available in such Account, from the Principal Account of the Trust
and pay to itself individually an amount equal to the sum of (1) its accrued
compensation for its ordinary recurring services in connection with the Trust,
(2) any compensation due it for its extraordinary services and (3) any costs,
expenses or indemnities in connection with the Trust as provided herein;
(ii) deduct from the Income Account of the Trust or, to the extent that
funds are not available in such Account, from the Principal Account of the Trust
and pay any unpaid fee and expenses of the Evaluator in connection with the
Trust;
<PAGE>
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(iii) deduct from the Income Account of the Trust or the Principal Account
of the Trust any amounts which may be required to be deposited in the Reserve
Account of the Trust to provide for payment of any applicable taxes or other
governmental charges and any other amounts which may be required to meet
expenses incurred under this Indenture in connection with the Trust.
(b) The Trustee shall fully liquidate the remaining Treasury Obligations
and shall, upon each Unit Holder's surrender for cancellation of his Certificate
or Certificates, distribute to each Unit Holder such Unit Holder's pro rata
interest in the balance of the Income Account and Principal Account of the Trust
and the proceeds of such liquidation.
The amounts to be so distributed to each Unit Holder shall be the pro rata
share of the balance of the total Income and Principal Accounts of the Trust as
shall be represented by the Units therein held by such Unit Holder.
(c) A Unit Holder may notify the Trustee in writing on or before the
Evaluation Time on the Termination Date as to whether such Unit Holder desires:
1) to receive his pro rata share of the Fund Shares in-kind; or 2) to receive
the cash proceeds from the sale of his pro rata share of the Fund Shares. The
Trustee shall liquidate all Fund Shares not distributed in-kind. Unit Holders
who do not notify the Trustee of their election will receive cash from the sale
of their pro rata share of Fund Shares (option 2). In any case, Unit Holders
will receive their pro rata share of the Treasury Obligations and any other
assets of the Trust in cash.
(d) A Unit Holder choosing in-kind distribution of Fund Shares will receive
such distribution no later than the seventh calendar day after the Termination
Date (or if such day is not a Business Day, then the first Business Day prior
thereto), subject to payment by such Unit Holder of any tax or governmental
charges which may be imposed thereon. This distribution shall consist of such
Unit Holder's pro rata portion in whole shares of the Fund Shares held in the
Trust as of the Termination Date. Fractional share entitlement will be
distributed in cash.
(e) Together with such distribution to each Unit Holder as provided for in
(b) of this Section, the Trustee shall furnish to each such Unit Holder a final
distribution statement as of the date of computation of the amount distributable
to Unit Holders, setting forth the information in substantially the form and
manner provided for in Section 3.06 hereof.
<PAGE>
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The Trustee shall be under no liability with respect to monies held by it
in the Income, Reserve and Principal Accounts upon termination except to hold
the same in trust without interest until disposed of in accordance with the
terms of this Indenture.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, postpone the Termination Date (1) for any period during
which the New York Stock Exchange is closed other than customary weekend and
holiday closings; (2) for any period during which (as determined by the
Securities and Exchange Commission by rule, regulation or order) (i) trading on
the New York Stock Exchange is restricted or (ii) an emergency exists as a
result of which disposal by the Trust of the Securities is not reasonably
practicable or it is not reasonably practicable fairly to determine in
accordance herewith the value of the Securities for the purposes of any Trust
Evaluation; or (3) for such other periods as the Securities and Exchange
Commission may by order permit.
In the event that all of the Unit Holders who hold Certificates of the
Trust shall not surrender their Certificates for cancellation within six months
after the time specified in the above-mentioned written notice, the Trustee
shall give a second written notice to the remaining holders of Certificates to
surrender their Certificates for cancellation and receive the liquidation
distribution with respect thereto. If within one year after the second notice
all the Certificates shall not have been surrendered for cancellation, the
Trustee may take steps, or may appoint an agent to take appropriate steps, to
contact the remaining holders of Certificates concerning surrender of their
Certificates and the cost thereof shall be paid out of the monies and other
assets which remain in trust hereunder.
Section 9.04. Construction: This Indenture is delivered in the State of New
York, and all laws or rules of construction of such State shall govern the
rights of the parties hereto and the Unit Holders and the interpretation of the
provisions hereof. Headings and titles herein are for convenience only and
should not influence such interpretation.
Section 9.05. Registration of Units: The Depositor agrees and undertakes on
its own part to register the units with the Securities and Exchange Commission
or other applicable governmental agency pursuant to applicable federal or state
statutes, if such registration shall be required, and to do all things that may
be necessary or required to comply with this provision during the term of each
Trust which refers to this Indenture and the Trustee shall incur no liability or
be under any obligation or expense in connection therewith.
Section 9.06. Written Notice: Any notice, demand, direction or instruction
to be given to the Depositor hereunder shall be in writing and shall be duly
given if mailed or delivered to the Depositor c/o Prudential-Bache Securities
Inc. at One Seaport Plaza, New York, New York 11292 or at such other address as
shall be specified by the Depositor to the other parties hereto in writing. Any
notice, demand, direction or instruction to be given to the Trustee shall be in
writing and shall be duly given if mailed or delivered to the corporate trust
office of the Trustee, 45 Wall Street, New York, New York 11005 Attention:
Corporate Trust and Agency Division or such other address as shall be specified
to the other parties by the Trustee in writing. Any notice, demand, direction or
instruction to be given to the Evaluator shall be in writing and shall be duly
given if mailed or delivered to the Evaluator, Attention: Vice President, Bond
Department, 25 Broadway, New York, New York 11004 or such other address as shall
be specified to the other parties hereto by the Evaluator in writing. Any notice
to be given to the Unit Holders shall be duly given if mailed or delivered to
each Unit Holder at the address of such holder appearing on the registration
books of the Trustee.
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Section 9.07. Severability: If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to any
express provision of law or contrary to policy of express law, though not
expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Indenture and shall in no way affect the validity or
enforceability of the other provisions of this Indenture or of the Certificates,
or the rights of the Unit Holders.
Section 9.08. Dissolution of Depositors Not to Terminate: The dissolution
of one or all of the Depositors (if more than one) from or for any cause
whatsoever shall not operate to terminate this Indenture insofar as the duties
and obligations of the Trustee and Evaluator are concerned.
Section 9.09. Name: Depositor reserves the right to use the name
"Government Securities Equity Trust," with a distinguishing series number or
name, without the consent of the Trustee.
IN WITNESS WHEREOF, Prudential-Bache Securities Inc. has caused this Trust
Indenture and Agreement to be executed by one of its Senior Vice Presidents and
its corporate seal to be hereto affixed and attested by its Assistant Secretary;
United States Trust Company of New York has caused this Trust Indenture and
Agreement to be executed by one of its Assistant vice Presidents and its
corporate seal to be hereto affixed and attested by one of its Assistant
Secretaries and Standard & Poor's Corporation has caused this Trust Indenture
and Agreement to be executed by facsimile signature by one of its Group Vice
Presidents or Assistant Vice Presidents and its corporate seal to be hereto
affixed and attested by facsimile signature by one of its Vice Presidents or
Secretaries; all as of the day, month and year first above written.
<PAGE>
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PRUDENTIAL-BACHE SECURITIES INC.,
Depositor
By__________________________________
Senior Vice-President
(SEAL)
ATTEST:
By___________________________
Assistant Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By______________________________
Assistant Vice President
(SEAL)
ATTEST:
By___________________________
Assistant Secretary
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, CARLOS R. LUCIANO, a Notary Public in and for the said County in the
State aforesaid, do hereby certify that JOHN A. McGUIRE and Wm. Hausser
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be the Assistant Vice
President and Assistant Secretary, respectively, of United States Trust Company
of New York, a corporation, appeared before me this day in person, and
acknowledged that they signed, sealed with the corporate seal of United States
Trust Company of New York, and delivered the said instrument as their free and
voluntary act as such Assistant Vice President and Assistant Secretary,
respectively, and as the free and voluntary act of said United States Trust
Company of New York for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 12th day of May, 1989.
-----------------------
Notary Public
(SEAL)
STANDARD & POOR'S CORPORATION
Evaluator
By_________________________________
Title: Vice President
(SEAL)
ATTEST
By ____________________________
Title: Vice President
<PAGE>
Letterhead of Kenny S&P Evaluation Services
(a division of J.J. Kenny Co., Inc.)
May 25, 2000
Prudential Securities Incorporated
1 New York Plaza
New York, NY 10292
Re: Government Securities Equity Trust
Post-Effective Amendment No. 5
Government Securities Equity Trust Series 8
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-56297 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Registration Statement of the references to Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the Trust portfolio are the ratings currently indicated in our
KENNYBASE database as of the date of the evaluation report.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange commission.
Sincerely,
Frank A. Ciccotto
Frank A. Ciccotto
Vice President
