<PAGE>
Reg. No. 333-16795
Rule 497(b)
EQUITY FOCUS
TRUSTS
----------------------
S.T.A.R.T. 1997 SERIES
(SMITH BARNEY'S TOP ANALYST
RECOMMENDATIONS TRUST)
A SMITH BARNEY UNIT INVESTMENT TRUST
SMITH BARNEY
- --------------------------
A Member of TravelersGroup [LOGO]
The Equity Focus Trusts--S.T.A.R.T. 1997 Series is a
unit investment trust that offers investors the
opportunity to purchase Units representing
proportionate interests in a portfolio of 31 equity
securities from among those selected by Smith
Barney's Equity Research Division as "Top Picks" in
nearly 100 industry groups. The value of the Units
will fluctuate with the value of the underlying
securities and the Trust is not appropriate for
investors requiring high current income or
conservation of capital. The minimum purchase is
$1,000 for individual purchases, and $250 for
purchases by Individual Retirement Accounts, Keogh
Plans, pension funds and other tax-deferred
retirement plans.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 13, 1997
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1997 SERIES
INVESTMENT SUMMARY AS OF JANUARY 10, 1997+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
INITIAL NUMBER OF UNITS++.......................................... 1,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT.... 1/1,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)............................
Aggregate value of Securities in Trust............................ $ 970,958
===========
Divided by 1,000,000 Units
(times 1,000).................................................... $ 970.96
Plus sales charge of 2.75% of Public Offering Price (2.828% of the
net amount invested in Securities)*.............................. $ 27.46
-----------
Public Offering Price per 1,000 Units............................. $ 998.42
Plus the amount per 1,000 Units in the Income and Capital Accounts
(see Description of the Trust--Income)........................... $ -0-
-----------
Total (per 1,000 Units)........................................... $ 998.42
===========
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 1,000 UNITS
(based on value of underlying securities)........................ $ 970.96
</TABLE>
DISTRIBUTIONS
Distributions of income, if any, will be made on November 25, to Holders of
record on November 10, 1997 and will be automatically reinvested in
additional Units of this Trust at no extra charge unless the Holder elects to
receive his distribution in cash. A Final Distribution will be made upon
termination of the Trust.
SPONSOR'S PROFIT ON DEPOSIT............................................. $1,100
TRUSTEE'S ANNUAL FEE
$.76 per 1,000 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units
(see Expenses and Charges)
RECORD DAY
November 10, 1997
DISTRIBUTION DAY
November 25, 1997, and upon termination and liquidation of the Trust.
EVALUATION TIME
4:00 P.M New York time.
TRUSTEE AND DISTRIBUTION AGENT
The Chase Manhattan Bank
MINIMUM VALUE OF TRUST
The trust indenture between the Sponsor and the Trustee (the "Indenture") may
be terminated if the net asset value of the Trust is less than $5,000,000,
unless the net asset value of Trust deposits has exceeded $50,000,000. In
that case, the Indenture may be terminated if the net asset value of the
Trust is less than $20,000,000. See Risk Factors, page 3.
MANDATORY TERMINATION OF TRUST
February 27, 1998 (the "Mandatory Termination Date"), or at any earlier time
by the Sponsor with the consent of Holders of 51% of the Units then outstand-
ing.
- ------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on January 10, 1997. Valuation of Securities is based on the
market value per share as of January 10, 1997, as more fully explained in
footnote 4 to Portfolio on page 9. After the Initial Date of Deposit,
Securities quoted on a national securities exchange or the Nasdaq National
Market, or a foreign securities exchange, are valued at the closing sale price
or, if no price exists, at the mean between the closing bid and offer prices.
Securities not so quoted are valued at the mean between bid and offer prices.
++ The Sponsor may create additional Units during the offering period of the
Trust.
* The sales charge will be reduced on a graduated scale in the case of
quantity purchases. See Public Sale of Units--Public Offering Price.
** All redemptions of 250,000 Units or more may, upon request by a redeeming
Holder, be made in kind to the Distribution Agent, who will either forward the
distributed securities to the Holder or sell the securities on behalf of the
redeeming Holder and distribute the proceeds (net of any brokerage commission
or other expenses incurred in the sale) to the Holder. See Redemption.
2
<PAGE>
EQUITY FOCUS TRUSTS: GET READY TO START '97
SMITH BARNEY'S
TOP
ANALYST
RECOMMENDATIONS
TRUST
Why not S.T.A.R.T. each new year with a fresh look at the stock market?
After all, it's a good time to review your stock portfolio -- to see how your
holdings are positioned in view of current market and economic conditions.
Smith Barney can recommend this approach to our clients, because it's a
discipline we have followed for some time. In fact, as each new year
approaches, nearly 100 analysts in our Equity Research Division are asked to
select a stock from the industry or stock area of the market they cover to
become that sector's "Top Pick" for the coming year.
ANNOUNCING S.T.A.R.T. 97
Our analysts have now selected the 1997 list of "Top Picks." The question
is, which selections are best positioned for the coming year? They could be
among the holdings of S.T.A.R.T. '97, a unit investment trust. These stocks
have been "handpicked" by Smith Barney's three equity strategists, A. Marshall
Acuff, Jr., CFA, John L. Manley, Jr., CFA and L. Keith Mullins, who base their
selections on trends they see emerging in the market and the economy. These
strategists selected the S.T.A.R.T. '97 portfolio based upon a selection
process which considered many factors, including without limitation:
attractive value characteristics; strong earnings or signs of improved
earnings momentum; certain investing themes (e.g. technology stocks within the
"Information Superhighway" and companies that might benefit from the aging of
the U.S. population ("Graying of America")); relative strength of large-
capitalization growth stocks; and relative earnings potential of emerging
growth stocks.
The S.T.A.R.T. '97 portfolio will remain fixed over the trust's life of
approximately one year. Then, as the trust reaches its maturity, investors may
have the opportunity to reinvest into the next S.T.A.R.T. series, if
available. Or, they can take the proceeds in cash.
INVESTING MADE EASY
Through this series, growth oriented investors can take a "portfolio
approach," by investing in a broad spectrum of Smith Barney's stock
recommendations, with one easy purchase. Here are just a few key features:
PROFESSIONAL SELECTION AND SUPERVISION
The securities that comprise the S.T.A.R.T. Series are believed by our
research to offer strong potential for growth in the coming 12 months.
A CONVENIENT AND COST-EFFECTIVE PACKAGE
With one easy purchase, you can invest in a diversified portfolio of Smith
Barney's top research recommendations for a low minimum investment of $1,000
($250 for IRAs). Dividends are automatically reinvested, or you can elect to
receive distributions in one convenient check.
LIQUIDITY
Your units can be sold at any time. Since unit prices fluctuate, proceeds
may be more or less than your cost.
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1997 SERIES
INVESTMENT SUMMARY AS OF JANUARY 10, 1997 (CONTINUED)
OBJECTIVE OF THE TRUST -- The objective of the Trust is to provide investors
with the possibility of capital appreciation through a convenient and cost-
effective investment in a fixed portfolio consisting of shares of common stocks
and any similar securities (the "Securities") selected by the Sponsor for the
Trust portfolio (the "Portfolio"). The Sponsor has selected for the Portfolio,
securities which it considers to have the best possibility for capital
appreciation over a period of one year relative to risks and opportunities. The
payment of dividends is not a primary objective of the Trust. Achievement of
the Trust's objective is dependent upon several factors including the financial
condition of the issuers of the Securities and any appreciation of the
Securities. Furthermore, because of various factors, including without
limitation, Trust sales charges and expenses, unequal weightings of securities,
brokerage costs and possible delays in purchasing securities with cash
deposited, investors in the Trust may not realize as high a total return as the
theoretical performance of the underlying securities in the Portfolio.
PORTFOLIO -- The Portfolio contains 31 common stocks issued by companies
engaged primarily in the following industries: consumer staples, 8; consumer
cyclicals, 5; technology, 5; energy, 3; financial, 3; raw & intermediate
materials, 3; capital goods, 2; conglomerate, 1; and utility, 1. One of the
capital goods issues, Nokia Corp., is an American Depositary Receipt. Although
there are certain risks of price volatility associated with investment in
common stocks (particularly with an investment in one or two common stocks),
your risk is reduced because your capital is divided among securities from
different industry groups. (See Risk Factors.)
With the initial deposit of Securities the Sponsor established a
proportionate relationship among the number of shares of each stock deposited
in the Portfolio. During the 90-day period following the Initial Date of
Deposit, the Sponsor may create additional Units by depositing cash (or a bank
letter of credit in lieu of cash) with instructions to purchase Securities,
additional Securities or contracts to purchase additional Securities
maintaining to the extent practicable the original proportionate relationship
among the number of shares of each stock and similar interests in the
Portfolio. Replacement Securities may be acquired under specified conditions.
It may not be possible to maintain the exact original proportionate
relationship among the Securities deposited on the Initial Date of Deposit
because of, among other reasons, purchase requirements, changes in price or the
unavailability of Securities. Any deposits of Securities after the 90-day
period must replicate exactly the proportionate relationship among the number
of shares and similar interests comprising the Portfolio at the end of the
initial 90-day period, subject to certain events discussed under Administration
of the Trust--Trust Supervision. The Sponsor may cease creating Units
(temporarily or permanently) at any time. (See Administration of the Trust --
Trust Supervision.)
RISK FACTORS -- Investment in the Trust should be made with an understanding
that the value of the underlying Securities, and therefore the value of the
Units, will fluctuate, depending on the full range of economic and market
influences which may affect the market value of the Securities, including the
profitability and financial condition of issuers, conditions in a given
issuer's industry, market conditions and values of common stocks generally, the
impact of the Sponsor's buying and selling Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units, and
other factors.
The Trust is not appropriate for investors requiring high current income or
conservation of capital. Securities representing approximately 35% of the value
of the Portfolio have been ranked High Risk by the Sponsor's
3
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1997 SERIES
INVESTMENT SUMMARY AS OF JANUARY 10, 1997 (CONTINUED)
Research Department, described as "low predictability of earnings/dividends;
high price volatility"; Securities representing approximately 3% of the value
of the Portfolio have been ranked Speculative, described as "exceptionally low
predictability of earnings/dividends; highest risk of price volatility."
If cash (or a letter of credit in lieu of cash) is deposited with
instructions to purchase Securities in connection with the issuance of
additional Units during the Public Offering Period, there is the risk that the
price of a Security will increase between the time of the deposit and the time
the Security is purchased resulting in a reduction in the number of shares or
similar interests purchased for the Portfolio. Price fluctuations during the
period from the time of deposit of cash to the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every
Holder's Units, the number of shares or similar interests of each Security
represented by each Unit and the income per Unit received by the Trust. Some of
the Securities may have limited trading volume, and, while the Sponsor will
endeavor to purchase Securities with deposited cash as soon as practicable, it
reserves the right to purchase those Securities over the 20 business days
following each deposit in an effort to reduce the effect of these purchases on
the market price of those securities. This could, however, result in the
Trust's failure to participate in any appreciation of those securities before
the cash is invested. If any cash remains at the end of this period and cannot
be invested in one or more securities at what the Sponsor considers reasonable
prices, it intends to use that cash to purchase each of the other securities in
the original proportionate relationship among those securities. Similarly, at
termination of the Trust, the Sponsor reserves the right to sell Securities
over a period of up to 20 business days to lessen the impact of its sales on
the market price of the Securities. The proceeds received by Holders following
termination of the Trust will reflect the actual sales proceeds received on the
Securities, which will likely differ from the closing sale price on the
Mandatory Termination Date. (See Description of the Trust -- Risk Factors.)
Common stocks may be especially susceptible to general stock market movements
and to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. Investors should be aware that there can be
no assurance that the value of the underlying Securities will increase or that
the issuers of the Securities will pay dividends on outstanding shares. Any
distributions of income to Holders will generally depend upon the declaration
of dividends by the issuers of the Securities and the declaration of any
dividends depends upon several factors including the financial condition of the
issuers and general economic conditions.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsor
receives no management fee. Therefore, the adverse financial condition of an
issuer will not necessarily require the sale of Securities from the Portfolio
or mean that the Sponsor will not continue to purchase the Security in order to
create additional Units. Investors should note in particular that the
Securities were selected on the basis of the criteria set forth above under
Objective of the Trust and that the Trust may continue to purchase or hold
Securities originally selected through this process even though the evaluation
of the attractiveness of the Securities may have changed. In the event a public
tender offer is made for a Security or a merger or acquisition is announced
affecting a Security, the Sponsor may instruct the Trustee to tender or sell
the Security on the open market when, in its opinion, it is in the best
interest of the holders of the Units to do so. Although the Portfolio is
regularly reviewed and evaluated and the Sponsor may instruct the Trustee to
sell Securities under certain limited circumstances, Securities will not be
sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. As a result, the amount realized upon the
sale of the Securities may not be the highest price attained by an
4
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1997 SERIES
INVESTMENT SUMMARY AS OF JANUARY 10, 1997 (CONTINUED)
individual Security during the life of the Trust. The Sponsor has currently
assigned certain rankings to the issuers of Securities based on stock
performance expectations and level of risk (see footnote 2 to Portfolio on page
9). These rankings are subject to change. Securities will not necessarily be
sold by the Trust based on a change in rankings, although the Sponsor intends
to review the desirability of holding any Security if its ranking is reduced
below 3. The prices of single shares of each of the Securities in the Trust
vary widely, and the effect of a dollar of fluctuation, either higher or lower,
in security prices will be much greater as a percentage of the lower-price
securities' purchase price than as a percentage of the higher-price securities'
purchase price.
Investors should note that should the size of the Trust be reduced below the
Minimum Value of Trust stated on page 2 the Trust may be terminated at that
time by the Sponsor, well before the Mandatory Termination Date of the Trust.
Any difference between the aggregate prices the Sponsor paid to acquire the
Securities and the aggregate prices at which Securities were initially
deposited in the Trust is noted on page 2 under Sponsor's Profit or (Loss) on
Deposit. The Sponsor's profit or loss on the deposit of Securities largely
depends on whether the prices of the Securities rise in response to the
Sponsor's purchases of possibly large volumes of the Securities for initial and
subsequent deposits in the Trust. The effect of the Sponsor's purchases of
Securities on the prices of the Securities is unpredictable.
FOREIGN SECURITIES AND AMERICAN DEPOSITARY RECEIPTS -- The Trust may contain
Securities of foreign issuers or American Depositary Receipts ("ADRs") for
securities that have been issued by non-United States issuers. These
instruments are subject to special considerations in addition to those
affecting common stocks of United States issuers. For a discussion of special
considerations relating to foreign securities and ADRs, see Description of the
Trust -- Risk Factors; Taxes.
PRIVATE PLACEMENTS; UNDERWRITING -- None of the Securities in the Trust
consists of privately-placed common stocks. Except as indicated under
Portfolio, the Sponsor has not participated as sole underwriter, managing
underwriter or member of an underwriting syndicate from which any of the
Securities in the Trust were acquired.
PUBLIC OFFERING PRICE -- The Public Offering Price per 1,000 Units is equal
to the aggregate value of the underlying Securities and any cash held to
purchase Securities, divided by the number of Units outstanding times 1,000,
plus a sales charge of 2.75%* of the Public Offering Price; this results in a
sales charge of 2.828%* of the net amount invested in underlying Securities.
Units are offered at the Public Offering Price plus the net amount per Unit in
the Income Account (see Public Sale of Units). The minimum purchase is $1,000
(or $250 in the case of purchases by Individual Retirement Accounts, Keogh
plans, pension funds and other tax-deferred retirement plans). Investors should
note that the Public Offering Price of Units varies each business day with the
value of the underlying Securities. There is no "par value" for Units.
- ------------
* This sales charge will be reduced on a graduated scale in the case of
quantity purchases. See Public Sale of Units -- Public Offering Price.
5
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1997 SERIES
INVESTMENT SUMMARY AS OF JANUARY 10, 1997 (CONTINUED)
INCOME DISTRIBUTIONS -- Distributions of dividends (net of expenses) and any
principal received by the Trust will be automatically reinvested in additional
Units of the Trust at no extra charge and each Holder of Units will participate
unless the Holder elects to receive distributions of dividends or principal, or
both, in cash. Holders who reinvest their distributions will receive additional
Units and will therefore own a greater percentage of the Trust than Holders who
receive cash distributions (see Reinvestment Plan). Distribution and Record
Days are shown on page 2. As soon as practicable after termination of the Trust
(generally after seven days), the Trustee will distribute to each Unitholder
his pro rata share of the amount realized on disposition of the Securities
remaining in the Trust plus any other assets then in the Trust, less expenses
of the Trust. The other assets of the Trust will include any dividends,
interest income and net realized capital gains which have not been distributed.
The total distribution may be less than the amount paid for Units.
MARKET FOR UNITS -- The Sponsor, though not obligated to do so, intends from
the commencement of the Trust to maintain a market for Units and continually to
offer to purchase Units from Holders desiring to sell them at a price based on
the aggregate value of the underlying Securities (see Market for Units).
Whenever a market is not maintained, a Holder may be able to dispose of his
Units only through redemption (see Redemption).
FEE TABLE
- --------------------------------------------------------------------------------
THIS FEE TABLE IS INTENDED TO HELP YOU TO UNDERSTAND THE COSTS AND EXPENSES
THAT YOU WILL BEAR DIRECTLY OR INDIRECTLY. SEE PUBLIC SALE OF UNITS AND
EXPENSES AND CHARGES. ALTHOUGH THE TRUST IS A UNIT INVESTMENT TRUST RATHER THAN
A MUTUAL FUND, THIS INFORMATION IS PRESENTED TO PERMIT A COMPARISON OF FEES.
- --------------------------------------------------------------------------------
UNITHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchase (as a percentage of offering
price)................................................................. 2.75%
====
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee........................................................... .078%
Maximum Portfolio Supervision, Bookkeeping and Administrative Fees...... .026%
Organizational Expenses................................................. .101%
Other Operating Expenses................................................ .011%
----
Total................................................................ .216%
====
</TABLE>
The Trust (and therefore the Holders) will bear all or a portion of its
organizational costs--including costs of preparing the registration statement,
the indenture and other closing documents, registering units with the SEC and
the states and the initial audit of the Portfolio--as is common for mutual
funds. Historically, the sponsors of unit investment trusts have paid all the
costs of establishing those trusts. Advertising and selling expenses will be
paid by the Underwriters at no cost to the Trust.
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts, S.T.A.R.T. 1997
Series:
We have audited the accompanying statement of financial condition, including
the portfolio, of Equity Focus Trusts, S.T.A.R.T. 1997 Series, as of January
10, 1997. This financial statement is the responsibility of the Trustee (see
note 5 to the statement of financial condition). Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial condition
is free of material misstatement. An audit of a statement of financial
condition includes examining, on a test basis, evidence supporting the amounts
and disclosures in that statement of financial condition. Our procedures
included confirmation with the Trustee of an irrevocable letter of credit
deposited on January 10, 1997, for the purchase of securities, as shown in the
statement of financial condition and portfolio of securities. An audit of a
statement of financial condition also includes assessing the accounting
principles used and significant estimates made by the Trustee, as well as
evaluating the overall statement of financial condition presentation. We
believe that our audit of the statement of financial condition provides a
reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the financial position of Equity
Focus Trusts, S.T.A.R.T. 1997 Series, as of January 10, 1997, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
January 10, 1997
7
<PAGE>
EQUITY FOCUS TRUSTS
S.T.A.R.T. 1997 SERIES
STATEMENT OF FINANCIAL CONDITION AS OF INITIAL DATE OF DEPOSIT, JANUARY 10,
1997
<TABLE>
<S> <C>
TRUST PROPERTY
Investment in Securities:
Contracts to purchase Securities(1)............................... $ 970,958
Organizational costs(2)........................................... 197,146
----------
Total........................................................... 1,168,104
==========
LIABILITIES
Accrued Expenses(2)................................................ 197,146
----------
INTEREST OF UNITHOLDERS
1,000,000 Units of fractional undivided interest outstanding:
Cost to investors(3).............................................. $ 998,417
Less: Gross underwriting commissions(4)........................... 27,459
----------
Net amount applicable to investors................................ 970,958
----------
Total........................................................... $1,168,104
==========
</TABLE>
- ------------
(1) Aggregate cost to the Trust of the Securities listed under Portfolio on
the Initial Date of Deposit is determined by the Trustee on the basis set
forth in footnote 4 to the Portfolio on page 9. See also the columns
headed Cost of Securities to Trust. An irrevocable letter of credit in the
amount of $1,000,000 has been deposited with the Trustee for the purchase
of Securities. The letter of credit was issued by Morgan Guaranty Trust
Company of New York.
(2) Organizational costs to be paid by the Trust have been deferred and will
be amortized over the life of the Trust. Organizational costs have been
estimated based on projected total assets of $194.5 million. To the extent
the Trust is larger or smaller, the amount paid may vary.
(3) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(4) Assumes a sales charge of 2.75% of Public Offering Price computed on the
basis set forth under Public Sale of Units--Public Offering Price.
(5) 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 other than estimates of
organizational costs, for which the Sponsor is responsible.
8
<PAGE>
PORTFOLIO OF EQUITY FOCUS TRUSTS--S.T.A.R.T. 1997 SERIES ON THE INITIAL
DATE OF DEPOSIT, JANUARY 10, 1997
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF
STOCK INVESTMENT NUMBER PERCENT OF SECURITIES
SECURITIES(1) SYMBOL RANKING(2) OF SHARES(3) NET ASSETS TO TRUST(4)
------------- ------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
American Express #....... AXP 1-M 550 3.25% $ 31,556
Amgen Inc.*.............. AMGN 1-S 600 3.40 33,038
Applied Materials*....... AMAT 1-H 800 3.45 33,500
Century Telephone Enter-
prise #................. CTL 1-M 1,000 3.26 31,625
Chase Manhattan #........ CMB 1-H 350 3.16 30,713
Cisco Systems*........... CSCO 1-M 450 3.18 30,881
ConAgra Inc. #........... CAG 1-L 600 3.12 30,300
Dollar Tree Stores*#..... DLTR 1-H 700 3.01 29,225
Dresser Industries....... DI 1-M 900 3.24 31,500
DuPont (E.I.) de Nemours. DD 1-M 300 3.28 31,800
EMC Corp. #.............. EMC 1-M 900 3.24 31,500
General Electric......... GE 1-L 300 3.13 30,413
General Motors........... GM 1-M 500 3.15 30,563
HBO & Co.* #............. HBOC 1-H 450 3.25 31,556
IMC Global............... IGL 1-H 800 3.29 31,900
Informix Corp.*.......... IFMX 1-H 1,500 3.28 31,875
Intel Corp.*............. INTC 1-H 200 2.98 28,900
Lilly (Eli) & Co. ....... LLY 1-M 400 3.15 30,550
MascoTech, Inc. #........ MSX 1-M 1,600 3.07 29,800
MedPartners Inc. #....... MDM 1-H 1,500 3.32 32,250
Nokia Corp. ADS*......... NOK.A 1-M 500 3.27 31,750
Paychex, Inc.*........... PAYX 1-H 600 3.07 29,850
Petro-Canada Variable
Vtg. ................... PCZ 1-M 1,900 3.08 29,925
Philip Morris Cos. ...... MO 1-H 300 3.49 33,900
Staples Inc.*............ SPLS 1-H 1,600 3.28 31,800
St. Jude Medical......... STJ 1-M 800 3.39 32,900
Temple-Inland............ TIN 1-M 550 3.15 30,594
Textron, Inc. #.......... TXT 1-M 350 3.33 32,331
Tiffany & Co. ........... TIF 1-M 800 3.08 29,900
USF&G Corp. ............. FG 1-M 1,500 3.30 32,063
Williams Cos. Inc. ...... WMB 1-M 800 3.35 32,500
------ --------
100.00% $970,958
====== ========
</TABLE>
9
<PAGE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on January 10, 1997.
All contracts for domestic Securities are expected to be settled by the
initial settlement date for the purchase of Units.
(2) Smith Barney has assigned these rankings according to the following
system, which uses two codes: a letter for the level of risk (L,M,H,S or
V) and a number for performance expectation (1-5).
RISK assesses predictability of earnings/dividends and stock price volatility:
L (Low Risk): highly predictable earnings/dividends, low price volatility
M (Moderate Risk): moderately predictable earnings/dividends, moderate
price volatility
H (High Risk): low predictability of earnings/dividends, high price
volatility
S (Speculative): exceptionally low predictability of earnings/dividends,
highest risk of price volatility
V (Venture): Risk and return consistent with venture capital, suitable only
for well-diversified portfolios
PERFORMANCE rankings indicate the expected total return (capital gain or loss
plus dividends) over the next 12-18 months, assuming an unchanged, or "flat"
market; performance expectations depend on the risk category assigned to the
stock, as shown in the following chart.
<TABLE>
<CAPTION>
LOW RISK MODERATE RISK HIGH RISK SPECULATIVE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1 (Buy) Over 15% Over 20% Over 25% Over 30%
2 (Outperform) 5% to 15% 5% to 20% 10% to 25% 10% to 30%
3 (Neutral) -5% to 5% -5% to 5% -10% to 10% -10% to 10%
4 (Underperform) -5% to -15% -5% to -15% -10% to -20% -10% to -20%
5 (Sell) -15% or worse -15% or worse -20% or worse -20% or worse
</TABLE>
These rankings represent current opinions of Smith Barney research analysts
and are, of course, subject to change; no assurance can be given that the
stocks will perform as expected. These rankings have not been audited by KPMG
Peat Marwick LLP.
(3) Per 1,000,000 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on January 10, 1997. Subsequent to the
Initial Date of Deposit, valuation of Securities is based, for Securities
quoted on a national securities exchange or Nasdaq National Market, or a
foreign securities exchange, on the closing sale prices, or if no price
exists, at the mean between the closing bid and offer prices, or for
Securities not so quoted, at the mean between bid and offer prices on the
over-the-counter market. See Redemption--Computation of Redemption Price
Per Unit.
----------------
The following information is unaudited:
*Smith Barney usually maintains a market in the securities of this company.
# Within the last three years, Smith Barney or one of its affiliates was the
manager (co-manager) of a public offering of the securities of this company
or an affiliate.
10
<PAGE>
DESCRIPTION OF THE TRUST
STRUCTURE AND OFFERING
This Series of Equity Focus Trusts (the "Trust") is a "unit investment
trust" created under New York law by a Trust Indenture (the "Indenture")*
between the Sponsor and the Trustee. On the date of this Prospectus, each unit
of the Trust (a "Unit") represented a fractional undivided interest in the
securities listed under Portfolio (the "Securities") set forth under
Investment Summary. Additional Units of the Trust will be issued in the amount
required to satisfy purchase orders by depositing in the Trust cash (or a bank
letter of credit in lieu of cash) with instructions to purchase Securities,
contracts to purchase Securities together with irrevocable letters of credit,
or additional Securities. On each settlement date (estimated to be three
business days after the applicable date on which Securities were deposited in
the Trust), the Units will be released for delivery to investors and the
deposited Securities will be delivered to the Trustee. As additional Units are
issued by the Trust as a result of the deposit of cash (or a letter of credit
in lieu of cash) with instructions to purchase additional Securities, 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. There is no limit on the time period during which the Sponsor may
continue to make additional deposits of Securities into the Trust.
Additional deposits of cash or Securities in connection with the issuance
and sale of additional Units will maintain to the extent practicable the
original proportionate relationship among the number of shares of and other
interests representing each Security. The proportionate relationship among the
Securities in the Trust will be adjusted to reflect the occurrence of a stock
dividend, a stock split or a similar event which affects the capital structure
of the issuer of a Security in the Trust but which does not affect the Trust's
percentage ownership of the common stock equity of such issuer at the time of
such event. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date
of Deposit because of, among other reasons, purchase requirements, changes in
prices, brokerage commissions or unavailability of Securities. Replacement
Securities may be acquired under specified conditions when Securities
originally deposited are unavailable (see Administration of the Trust --Trust
Supervision). Units may be continuously offered to the public by means of this
Prospectus (see Public Sale of Units -- Public Distribution) resulting in a
potential increase in the number of Units outstanding. Deposits of Additional
Securities subsequent to the 90-day period following the Initial Date of
Deposit must replicate exactly the proportionate relationship among the number
of shares of and other interests representing each of the Securities
comprising the Portfolio at the end of the initial 90-day period.
The Public Offering Price of Units prior to the Evaluation Time specified on
page 2 on any day will be based on the aggregate value of the Securities in
the Trust on that day at the Evaluation Time, plus a sales charge. The Public
Offering Price will thus vary in the future from that specified on page 2 of
this Prospectus. See Public Sale of Units -- Public Offering Price for a
complete description of the pricing of Units.
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units. The Sponsor reserves
the right to accept or reject any purchase order in whole or in part.
The Sponsor will execute orders to purchase in the order it determines, in
good faith, that they are received, except it is expected that indications of
interest received prior to the effectiveness of the registration of the Trust
which become orders upon effectiveness will be accepted according to the order
in which the indications of interest were received. The Sponsor may accept or
reject any purchase order in whole or in part.
- ------------
* To the extent references in this Prospectus are to articles and sections of
the Indenture, which is incorporated by reference into this Prospectus, the
statements made herein are qualified in their entirety by such reference.
11
<PAGE>
The holders ("Holders") of Units will have the right to have their Units
redeemed for the Securities underlying the Units (see Redemption). If any
Units are redeemed, the aggregate value of Securities in the Trust will be
reduced and the fractional undivided interest in the Trust represented by each
remaining Unit will be increased. Units will remain outstanding until redeemed
upon request to the Trustee by any Holder (which may include the Sponsor), or
termination of the Indenture (see Administration of the Trust -- Amendment and
Termination).
THE PORTFOLIO
Smith Barney's Equity Focus Trusts are each based on a specific research
investing theme or industry trend identified by Smith Barney Equity Research
analysts, based on an analysis of each company and the industry group as a
whole. The Securities in the Portfolio were identified by Smith Barney's
Equity Research Division, which is staffed by 98 investment analysts, who
currently follow equities issued by more than 1,300 companies (both domestic
and foreign) in nearly 100 industry groups or stock areas of the market. Each
analyst selected a stock from the industry or stock area of the market they
cover to become that sector's "Top Pick" for the coming year. The Stocks
included in the Portfolio were selected by the Sponsor as having above average
appreciation potential over the next 12 months following the selection of the
Portfolio.
The results of ownership of Units will differ from the results of ownership
of the underlying Securities of the Trust for various reasons, including sales
charges and expenses of the Trust, because the Portfolio may not be fully
invested at all times, the stocks are normally purchased or sold at prices
different from the closing price used to determine the Trust's net asset
value, and not all stocks may be weighted in the initial proportions at all
times. Additionally, results of ownership to different Holders will vary
depending on the net asset value of the underlying Securities on the days
Holders bought and sold their Units. Of course, any purchaser of securities,
including Units, will have to pay sales charges or commissions, which will
reduce his total return.
Advertising and sales literature for the Trust may include excerpts from the
Sponsor's research reports on one or more of the stocks in the Trust,
including a brief description of its businesses and market sector, and the
basis on which the stock was selected. In selecting Securities for the Trust,
the Sponsor has not expressed any belief as to the potential of these
Securities for capital appreciation over a period longer than one year. There
is, of course, no assurance that any of the Securities in the Trust will
appreciate in value, and indeed any or all of the Securities may depreciate in
value at any time in the future. See Description of the Trust -- Risk Factors.
All of the domestic Securities are publicly traded either on a stock
exchange or in the over-the-counter market. Most of the contracts to purchase
Securities deposited initially in the Trust are expected to settle in three
business days, in the ordinary manner for such Securities. Any foreign
Securities are publicly traded on a variety of foreign stock exchanges.
Settlement of contracts for foreign Securities varies by country and may take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
The Trust consists of such Securities as may continue to be held from time
to time in the Trust and any additional and replacement Securities and any
money market instruments acquired and held by the Trust pursuant to the
provisions of the Indenture (including the provisions with respect to the
deposit into the Trust of Securities in connection with the sale of additional
Units to the public) together with undistributed income therefrom and
undistributed and uninvested cash realized from the disposition of Securities
(see Administration of the Trust -- Accounts and Distributions; -- Trust
Supervision). The Indenture authorizes, but does not require, the Trustee to
invest the net proceeds of the sale of any Securities in eligible money market
instruments to the extent that the proceeds are not required for the
redemption of Units. Any money market instruments acquired by the Trust must
be held until maturity and must mature no later than the next Distribution Day
and the proceeds distributed
12
<PAGE>
to Holders at that time. If sufficient Securities are not available at what
the Sponsor considers a reasonable price, excess cash received on the creation
of Units may be held in an interest-bearing account with the Trustee until
that cash can be invested in Securities. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in any of the
Securities. However, should any contract deposited hereunder (or to be
deposited in connection with the sale of additional Units) fail, the Sponsor
shall, on or before the next following Distribution Day, cause to be refunded
the attributable sales charge, plus the attributable Cost of Securities to
Trust listed under Portfolio, unless substantially all of the monies held in
the Trust to cover the purchase are reinvested in replacement Securities in
accordance with the Indenture (see Administration of the Trust -- Portfolio
Supervision).
Because certain of the Securities from time to time may be sold, or their
percentage may be reduced under certain extraordinary circumstances described
below, or because Securities may be distributed in redemption of Units, no
assurance can be given that the Trust will retain for any length of time its
present size (see Redemption; Administration of the Trust -- Amendment and
Termination). For Holders who do not redeem their Units, investments in Units
of the Trust will be liquidated on the fixed date specified under Investment
Summary -- Mandatory Termination of Trust, and may be liquidated sooner if the
net asset value of the Trust falls below that specified under Investment
Summary -- Minimum Value of Trust (see Risk Factors).
INCOME
There is no assurance that any dividends will be declared or paid in the
future on the Securities.
Record and Distribution Days are set forth under Investment Summary. Income
Distributions, if any, will be automatically reinvested in additional Units of
the Trust at no extra charge unless a Holder elects to receive his
distributions in cash (see Reinvestment Plan).
RISK FACTORS
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that the
financial condition of the issuers of the Securities or the general condition
of the common stock market may worsen and the value of the Securities and
therefore the value of the Units may decline. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises.
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also
cause increased buying activity in certain of the stocks comprising the
Portfolio. After such announcement, investment advisory and brokerage clients
of the Sponsor and its affiliates may purchase individual Securities appearing
on the list during the course of the initial offering period. Such buying
activity in the stock of these companies prior to the purchase of the
Securities by the Trust may cause the Trust to purchase stocks at a higher
price than those buyers who effect purchases prior to purchases by the Trust.
The Trust is not appropriate for investors requiring conservation of capital
or high current income. Securities representing approximately 35% of the value
of the Portfolio have been ranked High Risk by the Sponsor's Research
Department, described as "low predictability of earnings/dividends; high price
volatility"; an additional approximate 3% of the Securities have been ranked
Speculative, described as "exceptionally low predictability of
earnings/dividends; highest risk of price volatility."
13
<PAGE>
Shareholders of common stocks have rights to receive payments from the
issuers of those common stocks that are generally subordinate to those of
creditors or holders of debt obligations or preferred stocks of such issuers.
Shareholders of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared by the
issuer's board of directors and have a right to participate in amounts
available for distribution by the issuer only after all other claims on the
issuer have been paid or provided for. By contrast, holders of preference
stocks have the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, normally on a cumulative basis,
but generally do not participate in other amounts available for distribution
by the issuing corporation. Cumulative preferred stock dividends must be paid
before common stock dividends and any cumulative preferred stock dividend
omitted is added to future dividends payable to the holders of cumulative
preferred stock. Preferred stocks are also entitled to rights on liquidation
which are senior to those of common stocks. Moreover, common stocks do not
represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock or the rights of holders of
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks are subject to market fluctuations for
as long as the common stocks remain outstanding, and thus the value of the
Securities in the Portfolio may be expected to fluctuate over the life of the
Trust to values higher or lower than those prevailing on the Initial Date of
Deposit.
Since the Securities are all common stocks, and the income stream produced
by dividend payments thereon is unpredictable, the Sponsor cannot provide any
assurance that dividends will be sufficient to meet any or all expenses of the
Trust. If dividends are insufficient to cover expenses, it is likely that
Securities will have to be sold to meet Trust expenses. See Expenses and
Charges -- Payment of Expenses. Any such sales may result in capital gains or
losses to Holders. See Description of the Trust -- Taxes.
Holders will be unable to dispose of any of the Securities in the Portfolio,
as such, and will not be able to vote the Securities. As the holder of the
Securities, the Trustee will have the right to vote all of the voting stocks
in the Trust and will vote in accordance with the instructions of the Sponsor.
Holders will, however, be able upon request to receive an "in kind"
distribution of the Securities evidenced by their Units if they tender a
minimum of 250,000 Units (see Redemption).
Investors should be aware that the Trust is not a "managed" trust and, as a
result, the adverse financial condition of a company will not result in the
elimination of its securities from the portfolio of the Trust (the
"Portfolio") except under extraordinary circumstances. Investors should note
in particular that the Securities were selected on the basis of the criteria
set forth under Objective of the Trust in the Investment Summary and that the
Trust may continue to purchase or hold Securities originally selected through
this process even though the evaluation of the attractiveness of the
Securities may have changed. A number of the Securities in the Trust may also
be owned by other clients of the Sponsor. However, because these clients may
have differing investment objectives, the Sponsor may sell certain Securities
from those accounts in instances where a sale by the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations. (See Administration of the Trust -- Trust Supervision.) In the
event a public tender offer is made for a Security or a merger or acquisition
is announced affecting a Security, the Sponsor may instruct the Trustee to
tender or sell the Security on the open market when, in its opinion, it is in
the best interest of the holders of the Units to do so. Although the Portfolio
is regularly reviewed and evaluated and the Sponsor may instruct the Trustee
to sell Securities under certain limited circumstances, Securities will not be
sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. As a result, the amount realized upon the
sale
14
<PAGE>
of the Securities may not be the highest price attained by an individual
Security during the life of the Trust. The Sponsor has currently assigned
certain rankings to the issuers of Securities based on stock performance
expectations and level of risk (see footnote 2 to the Portfolio on page 9).
These rankings are subject to change. Securities will not necessarily be sold
by the Trust based on a change in rankings, although the Sponsor intends to
review the desirability of holding any Security if its ranking is reduced
below 3. The prices of single shares of each of the Securities in the Trust
vary widely, and the effect of a dollar of fluctuation, either higher or
lower, in stock prices will be much greater as a percentage of the lower-price
stocks' purchase price than as a percentage of the higher-price stocks'
purchase price.
Investors should note that in connection with the issuance of additional
Units during the Public Offering Period set forth in the Investment Summary,
the Sponsor may deposit cash (or a letter of credit in lieu of cash) with
instructions to purchase Securities, additional Securities or contracts to
purchase Securities, in each instance maintaining the original percentage
relationship, subject to adjustment under certain circumstances, among the
number of shares of each Security in the Trust. To the extent the price of a
Security increases or decreases between the time cash is deposited with
instructions to purchase the Security at the time the cash is used to purchase
the Security, Units may represent less or more of that Security and more or
less of the other Securities in the Trust. In addition, brokerage fees (if
any) incurred in purchasing Securities with cash deposited with instructions
to purchase the Securities will be an expense of the Trust. Price fluctuations
between the time of deposit and the time the Securities are purchased, and
payment of brokerage fees, will affect the value of every Holder's Units and
the Income per Unit received by the Trust.
The Trust may be terminated at any time and all outstanding Units liquidated
if the net asset value of the Trust falls below $5,000,000 and deposits of
Securities in the Trust have not exceeded $50,000,000 at that time. At any
time after deposits in the Trust have exceeded $50,000,000, the Trust may be
so terminated if the net asset value of the Trust falls below $20,000,000.
Investors should note that if the net asset value of the Trust should fall
below the applicable minimum value, the Sponsor may then in its sole
discretion terminate the Trust before the Mandatory Termination Date specified
under Investment Summary.
Foreign Securities. The Trust may hold Securities of non-U.S. issuers or
through ADRs. There are certain risks involved in investing in securities of
foreign companies, which are in addition to the usual risks inherent in United
States investments. These risks include those resulting from fluctuations in
currency exchange rates, revaluation of currencies, future adverse political
and economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers and the lack of uniform
accounting, auditing and financial reporting standards or of other regulatory
practices and requirements comparable to those applicable to domestic
companies. Moreover, securities of many foreign companies may be less liquid
and their prices more volatile than those of securities of comparable domestic
companies. In addition, with respect to certain foreign countries, there is
the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Trust,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that could reduce the yield on such securities. Since
the Trust may invest in securities quoted in currencies other than the United
States dollar, changes in foreign currency exchange rates may adversely affect
the value of foreign securities in the Portfolio and the net asset value of
Units of the Trust. Investment in foreign securities may also result in higher
expenses due to the cost of converting foreign currency to United States
dollars, the payment of fixed brokerage commissions on certain foreign
exchanges, which generally are higher than commissions on domestic exchanges,
and expenses relating to foreign custody.
In addition, for the foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer.
15
<PAGE>
Also, foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, the Sponsor
anticipates that adequate information will be available to allow the Sponsor
to supervise the Portfolio as set forth in Administration of the Trust --
Portfolio Supervision.
On the basis of the best information available to the Sponsor at the present
time none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this
type or because the issues qualify for an exemption, or the Trust, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trust.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of
international securities in the Portfolio and on the ability of the Trust to
satisfy its obligation to redeem Units tendered to the Trustee for redemption
(see Redemption).
Exchange Rate Fluctuation. In recent years, foreign exchange rates have
fluctuated sharply. Income from foreign equity securities held by the Trust,
including those underlying any ADRs held by the Trust, would be payable in the
currency of the country of their issuance. However, the Trust will compute its
income in United States dollars, and the computation of income will be made on
the date of its receipt by the Trust at the foreign exchange rate in effect on
that date. Therefore, if the value of the foreign currency falls relative to
the United States dollar between receipt of the income and the making of Trust
distributions, the risk of such decline will be borne by Holders. In addition,
the cost of converting such foreign currency to United States dollars would
also reduce the return to the Holder.
American Depositary Shares and Receipts. American Depositary Shares
("ADSs"), and receipts therefor ("ADRs"), are issued by an American bank or
trust company to evidence ownership of underlying securities issued by a
foreign corporation. These instruments may not necessarily be denominated in
the same currency as the securities into which they may be converted.
Generally, ADSs and ADRs are designed for use in the United States securities
markets. For purposes of this Prospectus, the term ADR generally includes
ADSs.
TAXES
The following discussion addresses only the tax consequences of Units held
as capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
In the opinion of Battle Fowler LLP, special counsel for the Sponsor, under
existing law:
The Trust is not an association taxable as a corporation for Federal income
tax purposes, and income received by the Trust will be treated as income of
the Holders in the manner set forth below.
Each Holder will be considered the owner of a pro rata portion of each
Security in the Trust under the grantor trust rules of Sections 671-679 of the
Internal Revenue Code of 1986, as amended (the "Code"). A Holder should
determine his tax cost for each Security represented by his Units by
allocating the total cost for his Units, including the sales charge, among
each Security in the Trust represented by his Units (in proportion to the fair
market values thereof on the date the Holder purchases his Units).
16
<PAGE>
A Holder will be considered to have received all of the dividends paid on
his pro rata portion of each Security when such dividends are received by the
Trust even if the Holder does not actually receive such distributions but
rather reinvests his dividend distributions pursuant to the Reinvestment Plan.
An individual Holder who itemizes deductions will be entitled to deduct his
pro rata share of fees and expenses paid by the Trust only to the extent that
this amount together with the Holder's other miscellaneous deductions exceeds
2% of his adjusted gross income.
Distributions which are taxable as ordinary income to Holders will
constitute dividends for Federal income tax purposes but will be eligible for
the dividends-received deduction for corporations (other than corporations
such as "S" corporations which are not eligible for such deduction because of
their special characteristics and other than for purposes of special taxes
such as the accumulated earnings tax and the personal holding company tax)
only to the extent of dividends received from domestic corporations by the
Trust.
The dividends-received deduction is currently 70%. However, Congress from
time to time considers proposals to reduce the rate, and enactment of such a
proposal would adversely affect the after-tax return to investors who can take
advantage of the deduction. Holders are urged to consult their own tax
advisers.
Section 246 and 246A of the Code contain limitations on the eligibility of
dividends for the corporate dividends-received deduction (in addition to the
limitation discussed above). Depending upon the corporate Holder's
circumstances (including whether it has a 45-day holding period for his Units
and whether its Units are debt financed), these limitations may be applicable
to dividends received by a Holder from the Trust which would otherwise qualify
for the dividends-received deduction under the principles discussed above.
Accordingly, Holders should consult their own tax advisers in this regard. A
corporate Holder should be aware that the receipt of dividend income for which
the dividends received deduction is available may give rise to an alternative
minimum tax liability (or increase an existing liability) because the dividend
income will be included in the corporation's "adjusted current earnings" for
purposes of the adjustment to alternative minimum taxable income required by
Section 56(g) of the Code.
A distribution of Securities by the Trustee to a Holder (or to his agent,
including the Distribution Agent) upon redemption of Units (or an exchange of
Units for Securities by the Holder with the Sponsor) will not be a taxable
event to the Holder or to other Holders. The redeeming or exchanging Holder's
basis for such Securities will be equal to his basis for the same Securities
(previously represented by his Units) prior to such redemption or exchange,
and his holding period for such Securities will include the period during
which he held his Units. However, a Holder will have a taxable gain or loss,
which will be a capital gain or loss except in the case of a dealer, when the
Holder (or his agent, including the Distribution Agent) sells the Securities
so received in redemption, when a redeeming or exchanging Holder receives cash
in lieu of fractional shares, when the Holder sells his Units or when the
Trustee sells the Securities from the Trust. Capital gains are generally taxed
at the same rate as ordinary income. However, the excess of net long-term
capital gains over net short-term capital losses may be taxed at a lower rate
than ordinary income for certain noncorporate taxpayers. A capital gain or
loss is long-term if the asset is held for more than one year and short-term
if held for one year or less. The deduction of capital losses is subject to
limitations.
The Trust may hold Securities or ADRs of foreign corporations. For United
States income tax purposes, a holder of ADRs is treated as though he were
holding directly the shares of the foreign corporation represented by the
ADRs. Dividends paid by foreign issuers generally will be subject to
withholding tax.
Under the income tax laws of the State and City of New York, the Trust is
not an association taxable as a corporation and the income of the Trust will
be treated as the income of the Holders in the same manner as for Federal
income tax purposes.
17
<PAGE>
The foregoing discussion relates only to the tax treatment of U.S. Holders
with regard to Federal and certain aspects of New York State and City income
taxes. Holders that are not U.S. citizens or residents ("Foreign Holders")
should be aware that dividend distributions from the Trust will be subject to
a withholding tax of 30%, or a lower treaty rate. Holders may be subject to
taxation in New York or in other jurisdictions (including a Foreign Holder's
country of residence) and should consult their own tax advisers in this
regard.
* * *
At termination of the Trust, the Trustee will furnish to each Holder a
statement containing information relating to the dividends received by the
Trust on the Securities, the gross proceeds received by the Trust from the
disposition of any Security (resulting from redemption or the sale by the
Trust of any Security), and the fees and expenses paid by the Trust. The
Trustee will also furnish an information return to each Holder and to the
Internal Revenue Service.
RETIREMENT PLANS
This Trust may be well suited for purchase by Individual Retirement Accounts
("IRAs"), Keogh plans, pension funds and other qualified retirement plans,
certain of which are briefly described below. Generally, capital gains and
income received in each of the foregoing plans are exempt from Federal
taxation. All distributions from such plans are generally treated as ordinary
income but may, in some cases, be eligible for special 5 or 10 year averaging
or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh plans and
other tax-deferred retirement plans should consult their plan custodian as to
the appropriate disposition of distributions. Investors considering
participation in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Such plans are offered by
brokerage firms, including the Sponsor of this Trust, and other financial
institutions. Fees and charges with respect to such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in the Trust; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and (c) whether
the assets of the Trust are deemed "plan assets" under ERISA and the
Department of Labor regulations regarding the definition of "plan assets."
Retirement Plans for the Self-Employed -- Keogh Plans. Units of the Trust
may be purchased by retirement plans established for self-employed
individuals, partnerships or unincorporated companies ("Keogh plans").
Qualified individuals may generally make annual tax-deductible contributions
up to the lesser of 20% of annual compensation or $30,000 in a Keogh plan. The
assets of the plan must be held in a qualified trust or other arrangement
which meets the requirements of the Code. Generally there are penalties for
premature distributions from a plan before attainment of age 59 1/2, except in
the case of a participant's death or disability and certain other limited
circumstances. Keogh plan participants may also establish separate IRAs (see
below) to which they may contribute up to an additional $2,000 per year
($2,250 in a spousal account).
Individual Retirement Account -- IRA.
Any individual (including one covered by employer retirement plan) can
establish an IRA or make use of a qualified IRA arrangement set up by an
employer or union for the purchase of Units of the Trust. Any individual can
make a contribution to an IRA equal to the lesser of $2,000 ($2,250 in a
spousal account) or 100% of earned income; such investment must be made in
cash. However, the deductible amount an individual may contribute will be
reduced if the individual or the individual's spouse (in the case of a married
individual) participates in a
18
<PAGE>
qualified retirement plan and the individual's adjusted gross income exceeds
$25,000 (in the case of a single individual) or $40,000 (in the case of
married individuals filing a joint return). Special rules apply in the case of
married individuals living together who file separate returns. Generally,
there are penalties for premature distributions from an IRA before the
attainment of age 59 1/2, except in the case of the participant's death or
disability and certain other circumstances.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing plan
established for employees of a corporation may purchase Units of the Trusts.
Recent Legislation. As a result of the enactment of the Small Business,
Health Insurance and Welfare Reform Acts of 1996 (the "'96 Act"), certain of
the foregoing provisions have been amended. Pertinent provisions of the '96
Act are described below:
Generally. Five year averaging will not apply to distributions after
December 31, 1999. Ten year averaging has been preserved in very limited
circumstances.
IRAs. Beginning January 1, 1997, a non-working spouse may be eligible to
establish an IRA and contribute up to $2,000, provided the combined income of
both spouses is at least equal to the amount contributed by both spouses to
IRAs.
SIMPLE Plans. The '96 Act provides for a new type of retirement plan, a
savings incentive match plan for employees (a "SIMPLE Plan"), which may be
adopted by certain employers that employ not more than 100 employees.
Participants in a SIMPLE Plan are permitted to contribute up to $6,000 to the
Plan on a pre-tax basis and the employer makes either matching contributions
not in excess of 3 percent of compensation or non-elective contributions equal
to 2 percent of compensation. SIMPLE Plans are subject to distribution rules
similar to IRAs, except there is a 25 percent early withdrawal penalty for
withdrawals made during the first 2 years of participation. Units of the Trust
may be purchased by SIMPLE Plans.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is computed by adding to the
aggregate value of the Securities in the Trust (as determined by the Trustee)
and any cash held to purchase Securities, divided by the number of Units
outstanding, a sales charge of 2.828% thereof. This sales charge is equal to a
gross underwriting profit of 2.75% of the Public Offering Price and is subject
to change by the Sponsor at any time. For most investors the commissions to
purchase and sell the stocks directly would exceed the Trust's 2.75% sales
charge and expenses. Purchasers on January 13, 1997 (the first day Units will
be available to the public) will be able to purchase Units at $1.00 each
(including the sales charge). To allow Units to be priced at $1.00, the Units
outstanding as of the Evaluation Time on January 13, 1997 (all of which are
held by the Sponsor) will be split (or split in reverse). The Public Offering
Price on any subsequent date will vary from the Public Offering Price on the
date of the initial Prospectus (set forth under Investment Summary) in
accordance with fluctuations in the aggregate value of the underlying
Securities. Units will be sold to investors at the Public Offering Price next
determined after receipt of the investor's purchase order. A proportionate
share of the amount in the Income Account (described under Administration of
the Trust -- Accounts and Distributions) on the date of delivery of the Units
to the purchaser is added to the Public Offering Price.
19
<PAGE>
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least 50,000 Units. Sales charges are
as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
NUMBER OF UNITS PRICE INVESTED
- --------------- ---------- ----------
<S> <C> <C>
Fewer than 50,000......................................... 2.75% 2.828%
50,000 but less than 100,000.............................. 2.50 2.564
100,000 but less than 250,000............................. 2.25 2.302
250,000 but less than 500,000............................. 2.00 2.041
500,000 but less than 1,000,000........................... 1.50 1.523
1,000,000 or more......................................... 1.00 1.010
</TABLE>
The above graduated sales charges will apply to all purchases on any one day
by the same purchaser of Units in the amounts stated. Purchases of Units will
not be aggregated with purchases of units of any other series of Equity Focus
Trusts. A single purchaser of START units will be entitled to aggregate that
purchase with purchase of units of one or more of the Select Ten Portfolios
(1997 Series J) to determine the applicable sales charge on the START units
(but not the Select Ten units). Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed to be registered in the name of the purchaser for purposes of
calculating the applicable sales charge. The graduated sales charges are also
applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account.
Valuation of Securities by the Trustee is made as of the close of business
on the New York Stock Exchange on each business day. Securities quoted on a
national stock exchange or Nasdaq National Market are valued at the closing
sales price, or, if no closing sales price exists, at the mean between the
closing bid and offer prices. Securities not so quoted are valued at the mean
between bid and offer prices.
Employees of the Sponsor and its subsidiaries, affiliates and employee-
related accounts may purchase Units pursuant to employee benefit plans, at a
price equal to the aggregate value of the Securities in the Trust divided by
the number of Units outstanding plus a reduced sales charge of .5%. Sales to
these plans involve less selling effort and expense than sales to employee
groups of other companies.
PUBLIC DISTRIBUTION
Units will be distributed to the public at the Public Offering Price through
the Sponsor, as sole underwriter of the Trust, and may also be distributed
through dealers.
The Sponsor intends to qualify Units for sale in all states of the United
States where qualification is deemed necessary through the Sponsor and dealers
who are members of the National Association of Securities Dealers, Inc. Sales
to dealers, if any, will initially be made at prices which represent a
concession from the Public Offering Price per Unit to be established at the
time of sale by the Sponsor.
UNDERWRITER'S AND SPONSOR'S PROFITS
The Sponsor, as sole underwriter, receives a gross underwriting commission
equal to the sales charge of 2.75% of the Public Offering Price (subject to
reduction on a graduated scale basis in the case of volume purchases).
On the Initial Date of Deposit, the Sponsor also realized a profit or loss
on deposit of the Securities into the Trust in the amount set forth under
Investment Summary, which equals the difference between the cost of the
20
<PAGE>
Securities to the Trust (which is based on the aggregate value of the
Securities on the Initial Date of Deposit) and the purchase price of such
Securities to the Sponsor. In the event that subsequent deposits are effected
by the Sponsor with the deposit of Securities (as opposed to cash or a letter
of credit) with respect to the sale of additional Units to the public, the
Sponsor similarly may realize a profit or loss. The Sponsor also may realize
profits or sustain losses as a result of fluctuations after the Initial Date
of Deposit in the aggregate value of the Securities and hence of the Public
Offering Price received by the Sponsor for Units. Cash, if any, made available
by buyers of Units to the Sponsor prior to the settlement dates for purchase
of Units may be used in the Sponsor's business and may be of benefit to the
Sponsor.
The Sponsor also receives an annual fee at the maximum rate of $.25 per
1,000 Units for the administrative and other services which it provides during
the life of the Trust (see Expenses and Charges -- Fees). The Sponsor has not
participated as sole underwriter or manager or member of any underwriting
syndicate from which any of the Securities in the Portfolio on the Initial
Date of Deposit were acquired, except as indicated under Portfolio.
In maintaining a market for the Units (see Market for Units), the Sponsor
will also realize profits or sustain losses in the amount of any difference
between the prices at which it buys Units (based on the aggregate value of the
Securities) and the prices at which it resells such Units (which include the
sales charge) or the prices at which the Securities are sold after it redeems
such Units, as the case may be.
MARKET FOR UNITS
While the Sponsor is not obligated to do so, its intention is to maintain a
market for Units and offer continuously to purchase Units from the Initial
Date of Deposit at prices, subject to change at any time, which will be
computed by adding (1) the aggregate value of Securities in the Trust, (2)
amounts in the Trust including dividends receivable on stocks trading ex-
dividend and (3) all other assets in the Trust; deducting therefrom the sum of
(a) taxes or other governmental charges against the Trust not previously
deducted, (b) accrued fees and expenses of the Trustee (including legal and
auditing expenses), the Sponsor and counsel to the Trust and certain other
expenses and (c) amounts for distribution to Holders of record as of a date
prior to the evaluation; and dividing the result of such computation by the
number of Units outstanding as of the date of computation. The Sponsor may
discontinue purchases of Units if the supply of Units exceeds demand or for
any other business reason. The Sponsor, of course, does not in any way
guarantee the enforceability, marketability or price of any Securities in the
Portfolio or of the Units. On any given day, however, the price offered by the
Sponsor for the purchase of Units shall be an amount not less than the
Redemption Price per Unit, based on the aggregate value of Securities in the
Trust on the date on which the Units are tendered for redemption (see
Redemption).
The Sponsor may, of course, redeem any Units it has purchased in the
secondary market to the extent that it determines that it is undesirable to
continue to hold such Units in its inventory. Factors which the Sponsor will
consider in making such a determination will include the number of units of
all series of unit trusts which it has in its inventory, the salability of
such units and its estimate of the time required to sell such units and
general market conditions. For a description of certain consequences of such
redemption for the remaining Holders, see Redemption.
REDEMPTION
Units may be redeemed by the Trustee at its corporate trust office upon
payment of any relevant tax without any other fee, accompanied by a written
instrument or instruments of transfer with the signature guaranteed by a
national bank or trust company, a member firm of any of the New York, Midwest
or Pacific Stock Exchanges, or in such other manner as may be acceptable to
the Trustee. In certain instances the Trustee may require additional
21
<PAGE>
documents such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates of corporate
authority.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions (see Administration of the Trust --Accounts and
Distribution). The Securities to be sold will be selected by the Trustee from
those designated on the current list provided by the Sponsor for this purpose.
Provision is made in the Indenture under which the Sponsor may, but need not,
specify minimum amounts in which blocks of Securities are to be sold in order
to obtain the best price for the Trust. While these minimum amounts may vary
from time to time in accordance with market conditions, the Sponsor believes
that the minimum amounts which would be specified would be a sufficient number
of shares to obtain institutional rates of brokerage commissions (generally
between 1,000 and 5,000 shares).
The Trustee will redeem Units "in kind" upon request of a redeeming Holder
if the Holder tenders at least 250,000 Units. Thus, a Holder will be able
(except during a period described in the last paragraph under this heading),
not later than the seventh calendar day following such tender (or if the
seventh calendar day is not a business day on the first business day prior
thereto), to receive in kind an amount per Unit equal to the Redemption Price
per Unit (computed as described in Redemption -- Computation of Redemption
Price per Unit) as determined as of the day of tender. The Redemption Price
per Unit for in kind distributions (the "In Kind Distribution") will take the
form of the distribution of whole and fractional shares of each of the
Securities in the amounts and the appropriate proportions represented by the
fractional undivided interest in the Trust of the Units tendered for
redemption (based upon the Redemption Price per Unit), except that with
respect to any foreign Security not held in ADR form, the value of that
Security will be distributed in cash.
In Kind Distributions on redemption of a minimum of 250,000 Units will be
held by the Trustee, as Distribution Agent, for the account, and for
disposition in accordance with the instructions of, the tendering Holder as
follows:
(a) If the tendering Holder requests cash payment, the Distribution Agent
shall sell the In Kind Distribution as of the close of business on the date of
tender and remit to the Holder not later than seven calendar days thereafter
the net proceeds of sale, after deducting brokerage commissions and transfer
taxes, if any, on the sale. The Distribution Agent may sell the Securities
through the Sponsor, and the Sponsor may charge brokerage commissions on those
sales. Since these proceeds will be net of brokerage commissions, Holders who
wish to receive cash for their Units should always offer them for sale to the
Sponsor in the secondary market before seeking redemption by the Trustee. The
Trustee may offer Units tendered for redemption and cash liquidation to it to
the Sponsor on behalf of any Holder to obtain this more favorable price for
the Holder.
(b) If the tendering Holder requests distribution in kind, the Distribution
Agent (or the Sponsor acting on behalf of the Distribution Agent) shall sell
any portion of the In Kind Distribution represented by fractional interests in
accordance with the foregoing and distribute net cash proceeds to the
tendering Holder together with certificates representing whole shares of each
of the Securities that comprise the In Kind Distribution. (The Trustee may,
however, offer the Sponsor the opportunity to purchase the tendered Units in
exchange for the numbers of shares of each Security and cash, if any, which
the Holder is entitled to receive. The tax consequences to the Holder would be
identical in either case.)
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available (an
explanation of such Account is set forth under Administration of the Trust --
Accounts and Distributions). In addition, in implementing the redemption
procedures described above, the
22
<PAGE>
Trustee and the Distribution Agent shall make any adjustments necessary to
reflect differences between the Redemption Price of the Units and the value of
the In Kind Distribution as of the date of tender. To the extent that
Securities are distributed in kind, the size of the Trust will be reduced.
A Holder may tender Units for redemption on any weekday (a "Tender Day")
which is not one of the following: New Year's Day, Washington's Birthday, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving or
Christmas. The right of redemption may be suspended and payment postponed for
any period, determined by the Securities and Exchange Commission ("SEC"), (1)
during which the New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings, (2) during which the trading on that
Exchange is restricted or an emergency exists as a result of which disposal or
evaluation of the Securities is not reasonably practicable or (3) for such
periods as the SEC may by order permit.
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on June 30 and December 31 (or the last business day prior thereto), as
of the Evaluation Time next following the tender of any Unit for redemption on
any Tender Day, and on any other business day desired by the Trustee or the
Sponsor, by adding (1) the aggregate value of the Securities determined by the
Trustee, (2) amounts in the Trust including dividends receivable on stocks
trading ex-dividend (with appropriate adjustments to reflect monthly
distributions made to Holders) and (3) all other assets in the Trust;
deducting therefrom the sum of (a) taxes or other governmental charges against
the Trust not previously deducted, (b) accrued fees and expenses of the
Trustee (including legal and auditing expenses), the Sponsor and counsel to
the Trust and certain other expenses and (c) amounts for distribution to
Holders of record as of a date prior to the evaluation; and dividing the
result of such computation by the number of Units outstanding as of the date
thereof.
The aggregate value of the Securities shall be determined by the Trustee in
good faith in the following manner: if the Securities are listed on a national
securities exchange or Nasdaq National Market, or a foreign securities
exchange, such evaluation shall generally be based on the closing sale price
on such exchange (unless the Trustee deems such price inappropriate as a basis
for evaluation) or, if there is no closing sale price on such exchange, at the
mean between the closing offering and bid side evaluation. If the Securities
are not so listed or, if so listed and the principal market therefor is other
than on such exchange, such evaluation shall generally be made by the Trustee
in good faith based at the mean between current bid and offer prices on the
over-the-counter market (unless the Trustee deems such mean inappropriate as a
basis for evaluation) or, if bid and offer prices are not available, (1) on
the basis of the mean between current bid and offer prices for comparable
securities, (2) by the Trustee's appraising the value of the Securities in
good faith at the mean between the bid side and the offer side of the market
or (3) by any combination thereof.
EXPENSES AND CHARGES
Initial Expenses -- All or some portion of the expenses incurred in
establishing the Trust, including the cost of the initial preparation,
printing and execution of the registration statement and the indenture,
Federal and State registration fees, the initial fees and expenses of the
Trustee, legal expenses and any other out-of-pocket expenses, will be paid by
the Trust and amortized over one year. Any balance of the expenses incurred in
establishing the Trust, as well as advertising and selling expenses, will be
paid by the Underwriters at no cost to the Trust.
Fees -- The Trustee's and Sponsor's fees are set forth under Investment
Summary. The Trustee receives for its services as Trustee and Distribution
Agent payable in monthly installments, the amount set forth under Investment
Summary. The Trustee's fee (in respect of services as Trustee), payable
monthly, is based on the
23
<PAGE>
largest number of Units outstanding during the preceding month. Certain
regular and recurring expenses of the Trust, including certain mailing and
printing expenses, are borne by the Trust. The Trustee receives benefits to
the extent that it holds funds on deposit in the various non-interest bearing
accounts created under the Indenture. The Sponsor's fee, which is earned for
trust supervisory services, is based on the largest number of Units
outstanding during the year. The Sponsor's fee, which is not to exceed the
maximum amount set forth under Investment Summary, may exceed the actual costs
of providing supervisory services for this Trust, but at no time will the
total amount the Sponsor receives for trust supervisory services rendered to
all series of Smith Barney Unit Trusts in any calendar year exceed the
aggregate cost to it of supplying these services in that year. In addition,
the Sponsor may also be reimbursed for bookkeeping or other administrative
services provided to the Trust in amounts not exceeding its cost of providing
those services. The fees of the Trustee and Sponsor may be increased without
approval of 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.
Other Charges -- These include: (1) fees of the Trustee for extraordinary
services (for example, making distributions due to failure of contracts for
Securities), (2) expenses of the Trustee incurred for the benefit of the Trust
(including legal and auditing expenses) and expenses of counsel designated by
the Sponsor, (3) various governmental charges and fees and expenses for
maintaining the Trust's registration statement current with Federal and State
authorities, (4) expenses and costs of action taken by the Sponsor, in its
discretion, or the Trustee, in its discretion, to protect the Trust and the
rights and interests of Holders (for example, expenses in exercising the
Trust's rights under the underlying Securities), (5) indemnification of the
Trustee for any losses, liabilities and expenses incurred without gross
negligence, bad faith or wilful misconduct on its part, (6) indemnification of
the Sponsor for any losses, liabilities and expenses incurred without gross
negligence, bad faith, wilful misconduct or reckless disregard of their duties
and (7) expenditures incurred in contacting Holders upon termination of the
Trust. The amounts of these charges and fees are secured by a lien on the
Trust.
Payment of Expenses -- Funds necessary for the payment of the above fees
will be obtained in the following manner: (1) first, by deductions from the
Income Account (see below) (which will reduce income distributions from the
Account); (2) to the extent the Income Account funds are insufficient, by
distribution from the Capital Account (see below); (3) to the extent the
Income and Capital Accounts are insufficient, by selling Securities from the
Portfolio and using the proceeds to pay the expenses (thereby reducing the net
asset value of the Units).
Since the Securities are all common stocks, and the income stream produced
by dividend payments thereon is unpredictable (see Description of the Trust --
Risk Factors), the Sponsor cannot provide any assurance that dividends will
be sufficient to meet any or all expenses of the Trust. If dividends are
insufficient to cover expenses, it is likely that Securities will have to be
sold to meet Trust expenses. Any such sales may result in capital gains or
losses to Holders. See Description of the Trust -- Taxes.
ADMINISTRATION OF THE TRUST
RECORDS
The Trustee keeps records of the transactions of the Trust at its corporate
trust office including names, addresses and holdings of all Holders, a current
list of the Securities and a copy of the Indenture. Such records are available
to Holders for inspection at reasonable times during business hours.
ACCOUNTS AND DISTRIBUTIONS
Dividends payable to the Trust are credited by the Trustee to an Income
Account, as of the date on which the Trust is entitled to receive such
dividends as a holder of record of the Securities. All other receipts (i.e.,
return of capital, stock dividends, if any, and gains) will be credited by the
Trustee to a Capital Account. If a
24
<PAGE>
Holder elects to receive his distribution in cash, any income distribution for
the Holder as of each Record Day will be made on the following Distribution
Day or shortly thereafter and shall consist of an amount equal to the Holder's
pro rata share of the distributable balance in the Income Account as of such
Record Day, after deducting estimated expenses. The first distribution for
persons who purchase Units between a Record Day and a Distribution Day will be
made on the second Distribution Day following their purchase of Units. In
addition, amounts from the Capital Account may be distributed from time to
time to Holders of record. The Trustee may withdraw from the Income Account,
from time to time, such amounts as it deems requisite to establish a reserve
for any taxes or other governmental charges that may be payable out of the
Trust. Funds held by the Trustee in the various accounts created under the
Indenture do not bear interest.
Purchases at Market Discount -- Certain of the shareholder dividend
reinvestment, stock purchase or similar plans maintained by issuers of the
Securities offer shares pursuant to such plans at a discount from market
value. Subject to any applicable regulations and plan restrictions, the
Sponsor intends to direct the Trustee to participate in any such plans to the
greatest extent possible taking into account the Securities held by the Trust
in the issuers offering such plans. In such event, the Indenture requires that
the Trustee forthwith distribute in kind to the Distribution Agent the
Securities received upon any such reinvestment to be held for the accounts of
the Holders in proportion to their respective interests in the Trust. It is
anticipated that Securities so distributed shall immediately be sold.
Therefore, the cash received upon such sale, after deducting sales commissions
and transfer taxes, if any, will be used for cash distributions to Holders.
The Trustee will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in securities held in the Trust are
generally made in brokerage transactions (as distinguished from principal
transactions) and the Sponsor or any of its affiliates may act as brokers
therein if the Trustee expects thereby to obtain the most favorable prices and
execution. The furnishing of statistical and research information to the
Trustee by any of the securities dealers through which transactions are
executed will not be considered in placing securities transactions.
TRUST SUPERVISION
The Trust is a unit investment trust which normally follows a buy and hold
investment strategy and is not actively managed. However, the Portfolio is
regularly reviewed. Traditional methods of investment management for a managed
fund (such as a mutual fund) typically involve frequent changes in a portfolio
of securities on the basis of economic, financial and market analyses. The
Portfolio of the Trust, however, will not be actively managed and therefore
the adverse financial condition of an issuer will not necessarily require the
sale of its Securities from the Portfolio. However, while it is the intention
of the Sponsor to continue the Trust's investment in the Securities in the
original proportions, it has the power but not the obligation to direct the
disposition of the Securities upon institution of certain legal proceedings,
default under certain documents adversely affecting future declaration or
payment of anticipated dividends, or a substantial decline in price or the
occurrence of materially adverse credit factors that, in the opinion of the
Sponsor, would make the retention of the Securities detrimental to the
interests of the Holders. The Sponsor intends to review the desirability of
retaining in the Portfolio any Security if its Investment Rating is reduced
below 3 by the Sponsor's Research Department. The Sponsor is authorized under
the Indenture to direct the Trustee to invest the proceeds of any sale of
Securities not required for redemption of Units in eligible money market
instruments selected by the Sponsor which will include only the following
instruments:
(i) negotiable certificates of deposit or time deposits of domestic banks
which are members of the Federal Deposit Insurance Corporation and which have,
together with their branches or subsidiaries, more than $2 billion in total
assets, except that certificates of deposit or time deposits of smaller
domestic banks may be held provided
25
<PAGE>
the deposit does not exceed the insurance coverage on the instrument (which
currently is $100,000), and provided further that the Trust's aggregate
holding of certificates of deposit or time deposits issued by the Trustee may
not exceed the insurance coverage of such obligations and (ii) U.S. Treasury
notes or bills.
In the event a public tender offer is made for a Security or a merger or
acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when in its opinion
it is in the best interest of the Holders of the Units to do so. In addition,
the Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new Securities in exchange or
substitution for any Securities except that the Sponsor may instruct the
Trustee to accept or reject such an offer to take any other action with
respect thereto as the Sponsor may deem proper if (1) the issuer failed to
declare or pay anticipated dividends with respect to such Securities or (2) in
the written opinion of the Sponsor the issuer will probably fail to declare or
pay anticipated dividends with respect to such Securities in the reasonably
foreseeable future. Any Securities so received in exchange or substitution
shall be sold unless the Sponsor directs that they be held by the Trustee
subject to the terms and conditions of the Indenture to the same extent as
Securities originally deposited thereunder. If a Security is eliminated from
the Portfolio and no replacement security is acquired, the Trustee shall
within a reasonable period of time thereafter notify Holders of the sale of
the Security. Except as stated in this and the following paragraphs, the Trust
may not acquire any securities other than (1) the Securities and (2)
securities resulting from stock dividends, stock splits and other capital
changes of the issuers of the Securities.
The Sponsor is authorized to direct the Trustee to acquire replacement
Securities ("Replacement Securities") to replace any Securities, for which
purchase contracts have failed ("Failed Securities"), or, in connection with
the deposit of Additional Securities, when Securities of an issue originally
deposited are unavailable at the time of subsequent deposit, as described more
fully below. Replacement Securities that are replacing Failed Securities will
be deposited into the Trust within 110 days of the date of deposit of the
contracts that have failed at a purchase price that does not exceed the amount
of funds reserved for the purchase of Failed Securities. The Replacement
Securities shall satisfy certain conditions specified in the Indenture
including, among other conditions, requirements that the Replacement
Securities shall be publicly-traded common stocks; shall be issued by an
issuer subject to or exempt from the reporting requirements under Section 13
or 15(d) of the Securities Exchange Act of 1934 (or similar provisions of
law); shall not result in more than 10% of the Trust consisting of securities
of a single issuer (or of two or more issuers which are Affiliated Persons as
this term is defined in the Investment Company Act of 1940) which are not
registered and are not being registered under the Securities Act of 1933 or
result in the Trust owning more than 50% of any single issue which has been
registered under the Securities Act of 1933; and shall have, in the opinion of
the Sponsor, characteristics sufficiently similar to the characteristics of
the other Securities in the Trust as to be acceptable for acquisition by the
Trust. Whenever a Security has been eliminated by the Trust and a Replacement
Security is deposited, the Trustee shall within five days after the deposit of
the Replacement Security notify all Holders of the sale of the Security
eliminated and the acquisition of the Replacement Security. Whenever a
Replacement Security has been acquired for the Trust, the Trustee shall, on
the next Distribution Day that is more than 30 days thereafter, make a pro
rata distribution of the amount, if any, by which the cost to the Trust of the
Failed Security exceeded the cost of the Replacement Security. If Replacement
Securities are not acquired, the Sponsor will, on or before the next following
Distribution Day, cause to be refunded the attributable sales charge, plus the
attributable Cost of Securities to Trust listed under Portfolio plus income
attributable to the Failed Security. Any property received by the Trustee
after the Initial Date of Deposit as a distribution on any of the Securities
in a form other than cash or additional shares of the Securities received in a
non-taxable stock dividend or stock split, shall be retained or disposed by
the Trustee as provided in the Indenture. The proceeds of any disposition
shall be credited to the Income or Capital Account of the Indenture.
26
<PAGE>
The Indenture also authorizes the Sponsor to increase the size and number of
Units of the Trust by the deposit of cash (or a letter of credit) with
instructions to purchase Additional Securities, contracts to purchase
Additional Securities or, Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent
to the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising the Portfolio at the end of the initial 90-
day period.
With respect to deposits of cash (or a letter of credit) with instructions
to purchase Additional Securities), Additional Securities or contracts to
purchase Additional Securities, in connection with creating additional Units
of the Trust during the 90-day period following the Initial Date of Deposit,
the Sponsor may specify minimum amounts of additional Securities to be
deposited or purchased. If a deposit is not sufficient to acquire minimum
amounts of each Security, Additional Securities may be acquired in the order
of the Security most under-represented immediately before the deposit when
compared to the Original Proportionate Relationship. If Securities of an issue
originally deposited are unavailable at the time of subsequent deposit or
cannot be purchased at reasonable prices or their purchase is prohibited or
restricted by law, regulation or policies applicable to the Trust or the
Sponsor, the Sponsor may (1) deposit cash or a letter of credit with
instructions to purchase the Security when practicable (provided that it
becomes available within 110 days after the Initial Date of Deposit) or (2)
deposit (or instruct the Trustee to purchase) Securities of one or more other
issues originally deposited or (3) deposit (or instruct the Trustee to
purchase) a Replacement Security that will meet the conditions described
above. Any funds held to acquire Additional or Replacement Securities which
have not been used to purchase Securities at the end of the 90-day period
beginning with the Initial Date of Deposit, shall be used to purchase
Securities as described above or shall be distributed to Holders together with
the attributable sales charge.
REPORTS TO HOLDERS
The Trustee will furnish Holders with each distribution a statement of the
amount of income and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Within a
reasonable period of time after termination of the Trust (normally within 20
to 60 days), the Trustee will furnish to each person who at any time was a
Holder of record of Trust Units a statement (1) as to the Income Account:
income received; deductions for applicable taxes and for fees and expenses of
the Trustee and counsel, and certain other expenses; amounts paid in
connection with redemptions of Units and the balance remaining after such
distributions and deductions, expressed in each case both as a total dollar
amount and as a dollar amount per Unit outstanding at termination; (2) as to
the Capital Account: the disposition of any Securities (other than pursuant to
In Kind Distributions) and the net proceeds received therefrom; the results of
In Kind Distributions in connection with redemption of Units; deductions for
payment of applicable taxes and for fees and expenses of the Trustee and
counsel and certain other expenses, to the extent that the Income Account is
insufficient, and the balance remaining after such distribution and
deductions, expressed both as a total dollar amount and as a dollar amount per
Unit outstanding at termination; (3) a list of the Securities held and the
number of Units outstanding at termination; (4) the price per Unit based upon
the computation thereof made at termination and (5) amounts actually
distributed from the Income Account expressed both as total dollar amounts and
as dollar amounts per Unit outstanding on the record dates for such
distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
27
<PAGE>
UNCERTIFICATED UNITS
All Holders are required to hold their Units in uncertificated form and in
"street name" by their broker, dealer or financial institution at the
Depository Trust Company ("DTC"). Units are transferable between accounts of
brokers, dealers and financial institutions that are members of DTC.
AMENDMENT AND TERMINATION
The Sponsor may amend the Indenture, with the consent of the Trustee but
without the consent of any of the Holders, (1) to cure any ambiguity or to
correct or supplement any provision thereof which may be defective or
inconsistent, (2) to change any provision thereof as may be required by the
SEC or any successor governmental agency and (3) to make such other provisions
as shall not materially adversely affect the interest of the Holders (as
determined in good faith by the Sponsor). The Indenture may also be amended in
any respect by the Sponsor and the Trustee, or any of the provisions thereof
may be waived, with the consent of the Holders of 51% of the Units, provided
that no such amendment or waiver will reduce the interest in the Trust of any
Holder without the consent of such Holder or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of all
Holders. The Indenture will terminate upon the earlier of the disposition of
the last Security held thereunder or the Mandatory Termination Date specified
under Investment Summary. The Indenture may also be terminated by the Sponsor
if the value of the Trust is less than the minimum value set forth under
Investment Summary (as described under Description of the Trust -- Risk
Factors) and may be terminated at any time by written instrument executed by
the Sponsor and consented to by Holders of 51% of the Units. The Trustee shall
deliver written notice of any termination to each Holder within a reasonable
period of time prior to the termination. Within a reasonable period of time
after such termination, the Trustee must sell all of the Securities then held
and distribute to each Holder, after deductions of accrued and unpaid fees,
taxes and governmental and other charges, such Holder's interest in the Income
and Capital Accounts. Such distribution will normally be made by mailing a
check in the amount of each Holder's interest in such accounts to the address
of such Holder appearing on the record books of the Trustee.
ROLLOVER PRIVILEGE
Holders may reinvest their terminating distributions into units of a
subsequent series of the Equity Focus Trusts, S.T.A.R.T. Series (the "New
Series") provided one is offered. Upon receipt by the Trust of an appropriate
exemptive order from the Securities and Exchange Commission, such purchaser
may be entitled to a reduced sales load (as disclosed in the prospectus for
the New Series) upon the purchase of units of the New Series. It is expected
that the terms of the New Series will be substantially the same as the terms
of the Trust described in this Prospectus, and that a similar reinvestment
program will be offered with respect to all subsequent series of the Trust,
thus giving Holders a yearly opportunity to elect to "rollover" their
terminating distributions into a New Series. The availability of this option
does not constitute a solicitation of an offer to purchase Units of a New
Series or any other security. A Holder's election to participate in this
option will be treated as an indication of interest only. At any time prior to
the purchase by the Holder of units of a New Series such Holder may change his
investment strategy and receive, in cash, his terminating distribution. An
election of this option will not prevent the Holder from recognizing taxable
gain or loss (except in the case of a loss, if and to the extent the New
Series is treated as substantially identical to the Trust) as a result of the
liquidation, even though no cash will be distributed to pay any taxes. Holders
should consult their own tax advisers in this regard. The Sponsor intends to
coordinate the date of deposit of future series so that the terminating trust
will terminate contemporaneously with the creation of a New Series. The
Sponsor reserves the right to modify, suspend or terminate the reinvestment
privilege at any time.
28
<PAGE>
REINVESTMENT PLAN
Distributions of income and/or principal, if any, on Units held in street
name through Smith Barney Inc. or directly in the name of the Holder, unless
the Holder notifies his financial consultant at Smith Barney Inc. or the
Trustee, respectively, to the contrary, will be reinvested automatically in
additional Units of the Trust at no extra charge pursuant to the Trust's
"Reinvestment Plan". If the Holder does not wish to participate in the
Reinvestment Plan, the Holder must notify his financial consultant at Smith
Barney Inc. or the Trustee at least ten business days prior to the
Distribution Day to which that election is to apply. The election may be
modified or terminated by similar notice.
Distributions being reinvested will be paid to the Sponsor, who will use
them to purchase Units of the Trust at the Sponsor's Repurchase Price (the net
asset value per Unit without any sales charge) in effect at the close of
business on the Distribution Day. These may be either previously issued Units
repurchased by the Sponsor or newly issued Units created upon the deposit of
additional Securities in the Trust (see Description of the Trust--Structure
and Offering). Each participant will receive an account statement reflecting
any purchase or sale of Units under the Reinvestment Plan.
The costs of the Reinvestment Plan will be borne by the Sponsor, at no cost
to the Trust. The Sponsor reserves the right to amend, modify or terminate the
Reinvestment Plan at any time without prior notice.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units
at any time, or by the Sponsor without the consent of any of the Holders if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor. In case of such
resignation or removal the Sponsor is to use its best efforts to appoint a
successor promptly and if upon resignation of the Trustee no successor has
accepted appointment within thirty days after notification, the Trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The Trustee shall be under no liability for any action taken in good faith in
reliance on prima facie properly executed documents or for the disposition of
monies or Securities, nor shall it be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Security. This
provision, however, shall not protect the Trustee in cases of wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for
any taxes or other governmental charges imposed upon or in respect of the
Securities or upon the interest thereon. In addition, the Indenture contains
other customary provisions limiting the liability of the Trustee.
SPONSOR
The Sponsor may resign at any time if a successor Sponsor is appointed by
the Trustee in accordance with the Indenture. Any new Sponsor must have a
minimum net worth of $2,000,000 and must serve at rates of compensation deemed
by the Trustee to be reasonable and as may not exceed amounts prescribed by
the SEC. If the Sponsor fails to perform its duties or becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public
authorities, then the Trustee may (1) appoint a successor Sponsor at rates of
compensation
29
<PAGE>
deemed by the Trustee to be reasonable and as may not exceed amounts
prescribed by the SEC, (2) terminate the Indenture and liquidate the Trust or
(3) continue to act as Trustee without terminating the Indenture.
The Sponsor shall be under no liability to the Trust or to the Holders for
taking any action or for refraining from taking any action in good faith or
for errors in judgment and shall not be liable or responsible in any way for
depreciation of any Security or Units or loss incurred in the sale of any
Security or Units. This provision, however, shall not protect the Sponsor in
cases of wilful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties. The Sponsor may transfer all or substantially
all of its assets to a corporation or partnership which carries on its
business and duly assumes all of its obligations under the Indenture and in
such event it shall be relieved of all further liability under the Indenture.
MISCELLANEOUS
TRUSTEE
The name and address of the Trustee are show on the back cover of this
prospectus. The Trustee is subject to supervision and examination 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 Stocks deposited in the Trust, the Trustee may
use the services of The Depository Trust Company. These services may include
safekeeping of the Stocks, 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.
LEGAL OPINION
The legality of the Units has been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, as special counsel for the Sponsor.
AUDITORS
The Statement of Financial Condition and the Portfolio included in this
Prospectus have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their report with respect thereto, and is so included herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
SPONSOR
Smith Barney Inc. ("Smith Barney"), was incorporated in Delaware in 1960 and
traces its history through predecessor partnerships to 1873. Smith Barney, an
investment banking and securities broker-dealer firm, is a member of the New
York Stock Exchange, Inc. and other major securities and commodities
exchanges, the National Association of Securities Dealers, Inc. and the
Securities Industry Association. Smith Barney is an indirect wholly-owned
subsidiary of The Travelers Inc. The Sponsor or an affiliate is investment
adviser, principal underwriter or distributor of more than 60 open-end
investment companies and investment manager of 12 closed-end investment
companies. Smith Barney also sponsors all Series of Corporate Securities
Trust, Government Securities Trust, Harris, Upham Tax-Exempt Fund and Tax
Exempt Securities Trust, and acts as co-sponsor of most Series of Defined
Asset Funds.
30
<PAGE>
EQUITY FOCUS
TRUSTS
-------------------------
A SMITH BARNEY UNIT TRUST
S.T.A.R.T. 1997 SERIES
PROSPECTUS
This Prospectus does not contain all of the information with respect to the
investment company set forth in its registration statements 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.
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<S> <C>
Investment Summary 2
Independent Auditors' Report 7
Statement of Financial Condition 8
Portfolio 9
Description of the Trust 11
Risk Factors 13
Taxes 16
Public Sale of Units 19
Market for Units 21
Redemption 21
Expenses and Charges 23
Administration of the Trust 24
Reinvestment Plan 29
Resignation, Removal and Limitations on Liability 29
Miscellaneous 30
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPONSOR: TRUSTEE: INDEPENDENT AUDITORS:
<S> <C> <C>
Smith Barney Inc. The Chase Manhattan Bank KPMG Peat Marwick LLP
388 Greenwich Street Unit Investment Trust Department 345 Park Avenue
23rd Floor 4 New York Plaza New York, New York 10154
New York, New York 10013 New York, New York 10004
(212) 816-4000 (800) 354-6565
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY
--------------------------
A Member of TravelersGroup [LOGO]
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
UT6319
