<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 1997
REGISTRATION NO. 333-28705
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
----------------
A. EXACT NAME OF TRUST:
EQUITY FOCUS TRUSTS
REIT PORTFOLIO SERIES
1997
B. NAME OF DEPOSITOR:
SMITH BARNEY INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE:
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
D. NAMES AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY TO:
LAURIE A. HESSLEIN
SMITH BARNEY INC. MICHAEL R. ROSELLA, ESQ.
388 GREENWICH STREET BATTLE FOWLER LLP
NEW YORK, NEW YORK 10013 75 EAST 55TH STREET
NEW YORK, NEW YORK 10022
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of beneficial interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
No filing fee required.
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
[_] Check box if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE EQUITY FOCUS TRUSTS
REIT PORTFOLIO SERIES 1997
A SMITH BARNEY UNIT INVESTMENT TRUST
SMITHBARNEY
- ----------- The Equity Focus Trusts--REIT Portfolio
Series,1997 is a unit investment trust that
offers investors the opportunity to purchase
A Member of Units representing proportionate interests in a
TravelersGroup[Logo] portfolio of publicly traded domestic real estate
investment trusts ("REITs") primarily for high
current income with a secondary objective of
possible long term capital appreciation. The
value of the Units will fluctuate with the value
of the underlying securities. The minimum
purchase is 20 Units or $300.
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 September 11, 1997
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
NUMBER OF UNITS...................................................... 16,692
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT...... 1/16,692
PUBLIC OFFERING PRICE (per 100 Units)
Aggregate value of Securities in Trust.............................. $ 250,393
=========
Divided by 16,692 Units (times 100)................................. $1,500.08
---------
Public Offering Price* per 100 Units................................ $1,500.08
Plus the amount per 100 Units in the Income and Capital Accounts
(see Description of the Trust--Income)............................. $ 0
---------
Total (per 100 Units)............................................... $1,500.08
=========
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 100 UNITS
(based on value of underlying securities).......................... $1,500.08
</TABLE>
DISTRIBUTIONS
Distributions of net income, if any, will be made on the Distribution Day in
any month to Holders on that Record Day and will be automatically reinvested
in additional Units of this Trust at no extra charge unless the Holder elects
to receive his distributions in cash. A Final Distribution will be made upon
the termination of the Trust.
<TABLE>
<S> <C>
SPONSOR'S PROFIT ON DEPOSIT.......... $226
TRUSTEE'S ANNUAL FEE
$1.14 per 100 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.375 per 100 Units
(see Expenses and Charges)
RECORD DAY
The 10th day of each month.
DISTRIBUTION DAY
</TABLE>
The 25th day of each month, commencing October 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.
See Risk Factors, page 4.
MANDATORY TERMINATION OF TRUST
September 29, 2000 (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 September 10, 1997. Valuation of Securities is based on the
market value per share as of September 10, 1997, as more fully explained in the
footnotes to the Portfolio of the Equity Focus Trusts--REIT Portfolio Series,
1997. After the Initial Date of Deposit Securities quoted on a national
securities exchange or NASDAQ National Market System, 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.
* Subsequent to the initial offering period (which is expected to be only the
date of this prospectus) the maximum sales charge will be 4.00%, subject to
reduction on a graduated scale in the case of quantity purchases. Additionally,
commencing October 1, 1998 the maximum sales charge will be 3.00% and
commencing October 1, 1999 the maximum sales charge will be 2.00%. See Public
Sale of Units--Public Offering Price.
** Subsequent to the 90-day period following the Initial Date of Deposit, all
redemptions of $250,000 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--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997 (CONTINUED)
OBJECTIVE OF THE TRUST -- The objective of the Trust is to attempt to provide
investors with a high level of current dividend income through a convenient and
cost-effective investment in a fixed portfolio consisting of twelve publicly
traded domestic real estate investment trusts (the "Securities") selected by
the Sponsor for the 1997 Trust portfolio (the "Portfolio"). An additional
objective of the Trust is the potential for long-term capital appreciation. The
REITs in the portfolio were selected primarily for their current dividend
yields among REITs that are expected to continue to make dividend payments.
Selection criteria include extensive analysis of historical financial data,
operating cash flow, management expertise, and performance. Achievement of the
Trust's objectives 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 stocks,
brokerage costs and any 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 stocks in the Portfolio.
PORTFOLIO -- The Portfolio contains common stocks issued by 12 different
domestic real estate investment trusts ("REITs"). A REIT is a creation of the
federal income tax law and, therefore, its structure and operation must conform
to certain requirements of the Internal Revenue Code. In general, a REIT must
hold at least 75% of its total assets in real estate assets and distribute at
least 95% of its taxable income (without regard to any net capital gains) on an
annual basis. There are two principal types of REITs: those which hold 75% of
their invested assets in the ownership of real estate and benefit from the
underlying net rental income generated from the properties ("Equity REITs") and
those which hold 75% of their invested assets in mortgages which are secured by
real estate assets and benefit predominantly from the difference between the
interest income on the mortgage loans and the interest expense on the capital
used to finance the loans ("Mortgage REITs"). A third type combines the
investment strategies of the Equity REITs and the Mortgage REITs ("Hybrid
REITs").
The initial purchase of Securities will not necessarily represent equal
dollar amounts of each of the Securities; however, 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 additional Securities, contracts to purchase additional
Securities together with irrevocable letters of credit or cash (or a bank
letter of credit in lieu of cash) with instructions to purchase Securities
maintaining to the extent practicable the original proportionate relationship
among the number of shares of each stock 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 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.)
PORTFOLIO ACQUISITION -- On the Initial Date of Deposit all of the Securities
deposited in the Trust were effected by the Sponsor in open market purchases on
the American or New York Stock Exchanges. Subsequent to the Initial Date of
Deposit, it is expected that all of the Securities in the Trust will be
purchased from the Sponsor in transactions in which the Sponsor will act as
sole underwriter to the issuers of the Securities, except for one which will be
purchased from the Sponsor in a private placement. These transactions will be
effected to the Sponsor at prices below the current market value of the
Securities due to various factors, including size of
3
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997 (CONTINUED)
the purchase, expectation of holding period and cost of issuance. All of the
Securities will be deposited in the Trust based upon their market value as of
the Dates of Deposit. As a result of the Sponsor's ability to purchase these
Securities below market value, the Sponsor will offer Units of the Trust with
no sales charge during the initial offering period. By virtue of buying stock
at below market prices, the Sponsor will realize a profit on the deposit of the
Securities to the Trust in an amount of up to 5% of the market value of these
Securities. Notwithstanding the preceding, the Sponsor may create additional
Units by effecting Securities transactions on the applicable national stock
exchanges.
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 the real estate
industry, market conditions and values of common stocks generally, and other
factors. The Trust is not appropriate for investors requiring conservation of
capital.
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 REITs 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 REITs prior to the purchase of the Securities by the Trust
may cause the Trust to purchase the REITs at a higher price than those buyers
who effect purchases prior to the purchases by the Trust and may also increase
the amount of the profit realized by the Sponsor on the purchase of the
Securities from their issuers. In addition, the issuances of the additional
Securities by the REITs in the transactions underwritten by the Sponsor may, in
certain circumstances, have an adverse impact on the value of the Securities
and the Units.
Since the Trust will consist entirely of shares issued by REITs, a domestic
corporation or business trust which invests primarily in income producing real
estate or real estate related loans or mortgages, an investment in the Trust
will be subject to risks similar to those associated with the direct ownership
of real estate (in addition to securities markets risks) because of its policy
of concentration in the securities of companies in the real estate industry.
These include declines in the value of real estate, illiquidity of real
property investments, risks related to general and local economic conditions,
dependency on management skill, heavy cash flow dependency, possible lack of
availability of mortgage funds, overbuilding, extended vacancies of properties,
increased competition, increases in property taxes and operating expenses,
changes in zoning laws, losses due to costs resulting from the clean-up of
environmental problems, liability to third parties for damages resulting from
environmental problems, casualty or condemnation losses, economic or regulatory
impediments to raising rents, changes in neighborhood values and the appeal of
properties to tenants and changes in interest rates. In addition to these
risks, Equity REITs may be more likely to be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
more likely to be affected by the quality of any credit extended. Further,
Equity and Mortgage REITs are dependent upon the management skills of the
issuers and generally may not be diversified. Equity and Mortgage REITs are
also subject to heavy cash flow dependency, defaults by borrowers and self-
liquidation. In addition, Equity and Mortgage REITs could possibly fail to
qualify for tax free pass-through of income under the Internal Revenue Code of
1986, as amended (the "Code"), or to maintain their exemptions from
registration under the Investment Company Act of 1940 (the "1940 Act"). The
approximate percentage of the aggregate value of the Trust represented by each
type of REIT is as follows: Equity REITs, 89.98%; Mortgage REITs, 0%; and
Hybrid REITs, 10.02%. The above factors may also adversely
4
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997 (CONTINUED)
affect a borrower's or a lessee's ability to meet its obligations to the REIT.
In the event of a default by a borrower or lessee, the REIT may experience
delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting its investments. (See Description
of the Trust--Risk Factors--Real Estate Investment Trusts.)
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
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 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, the Trustee with directions from the Sponsor will endeavor to purchase
Securities with deposited cash as soon as practicable. 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-- General.)
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 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 10).
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.
5
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997 (CONTINUED)
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/Loss on
Deposit. The Sponsor's profit or loss on the deposit of Securities largely
depends on whether the Securities' prices 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. See Portfolio
Acquisition concerning additional profit to the Sponsor on subsequent deposits.
PUBLIC OFFERING PRICE -- The Public Offering Price per 100 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 100, with no sales
charge added during the initial offering period (which is expected to be only
the date of this prospectus). Thereafter, Units are offered at the Public
Offering Price, plus the net amount per Unit in the Income Account, plus a
sales charge of 4.00%* of the Public Offering Price; this results in a sales
charge of 4.167%* 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 20 Units or
$300. 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.
INCOME DISTRIBUTIONS -- Distributions of dividends and capital, if any, will
be made as described under Distributions above and see Administration of the
Trust--Accounts and Distributions. Except for the Final Distribution,
distributions of dividends or capital, or both, will be automatically
reinvested in additional Units of the Trust at their net asset value and each
Holder of Units will participate unless the Holder elects to receive
distributions of dividends or capital, or both, in cash. Whether a distribution
is reinvested or received in cash, the distribution will be taxable to the
Holder. 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). As soon as practicable
after termination of the Trust (generally after seven days), the Trustee will
distribute to each Holder 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).
- ------------
* This sales charge will be reduced on a graduated scale in the case of
quantity purchases. Additionally, sales charges will also be reduced each
succeeding year of the Trust, commencing 1998. See Public Sale of Units --
Public Offering Price.
6
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997 (CONTINUED)
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>
Sales Charge Imposed on Purchase During the Initial Offering Period ..... 0%
====
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee............................................................ .076%
Maximum Portfolio Supervision, Bookkeeping and Administrative Fees....... .025%
Organizational Expenses.................................................. .029%
Other Operating Expenses................................................. .010%
----
Total................................................................. .140%
====
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
CUMULATIVE
EXPENSES PAID
FOR PERIOD:
----------------
1 2 3
YEAR YEARS YEARS
---- ----- -----
<S> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming the Trust's estimated operating expense
ratio of .140% in the first year and .140% in succeeding
years and a 5% annual return on the investment throughout
the periods................................................. $1 $3 $5
</TABLE>
The Example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. The Example should not be
considered a representation of past or future expenses or annual rate of
return; the actual expenses and annual rate of return may be more or less than
those assumed for purposes of the Example.
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 Sponsor at no cost to the Trust.
7
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
INVESTMENT SUMMARY AS OF SEPTEMBER 10, 1997 (CONTINUED)
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of
Equity Focus Trusts--REIT Portfolio Series, 1997:
We have audited the accompanying statement of financial condition, including
the portfolio, of Equity Focus Trusts--REIT Portfolio Series, 1997 as of
September 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
September 10, 1997, for the purchase of securities, as shown in the statement
of financial condition and portfolio. 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--REIT Portfolio Series, 1997 as of September 10, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
September 10, 1997
8
<PAGE>
EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997
STATEMENT OF FINANCIAL CONDITION AS OF INITIAL DATE OF DEPOSIT, SEPTEMBER 10,
1997
<TABLE>
<S> <C>
TRUST PROPERTY
Investment in Securities:
Contracts to purchase Securities(1)................................. $250,393
Organizational costs(2).............................................. 220,558
--------
Total............................................................. 470,951
========
LIABILITIES
Accrued Expenses(2).................................................. 220,558
--------
INTEREST OF UNITHOLDERS
16,692 Units of fractional undivided interest outstanding:
Cost to investors(3)................................................ $250,393
Less: Gross underwriting commissions(4)............................. 0
--------
Net amount applicable to investors.................................. 250,393
--------
Total............................................................. $470,951
========
</TABLE>
- ------------
(1) Aggregate cost to the Trust of the Securities listed under Portfolio of
Equity Focus Trusts--REIT Portfolio Series, 1997, on the Initial Date of
Deposit is determined by the Trustee on the basis set forth in footnote 4
to the Portfolio of Equity Focus Trusts--REIT Portfolio Series, 1997. See
also the columns headed Cost of Securities to Trust. An irrevocable letter
of credit in the amount of $275,000 has been deposited with the Trustee
for the purchase of Securities. The letter of credit was issued by Bank of
America.
(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 $250 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 no sales charge.
(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.
9
<PAGE>
PORTFOLIO OF EQUITY FOCUS TRUSTS--REIT PORTFOLIO SERIES, 1997 ON THE
INITIAL DATE OF DEPOSIT, SEPTEMBER 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>
Brandywine Realty Trust
# BDN 1M 790 6.98% $ 17,479
Commercial Net Lease Re-
alty # NNN 2M 1,080 7.01 17,550
Developers Diversified
Realty # DDR 1M 510 7.99 20,017
Duke Realty Investments
# DRE 2M 930 7.96 19,937
Equity Residential Prop-
erties Trust # EQR 1M 500 10.03 25,125
First Industrial Realty
Trust # FR 1M 640 8.04 20,120
Franchise Finance Corp.
of America * FFA 2M 960 10.02 25,080
Gables Residential Trust GBP 2M 740 7.94 19,888
General Growth Proper-
ties #+ GGP 2M 580 7.98 19,974
Shurgard Storage Centers
# SHU 2M 730 8.02 20,075
Simon DeBartolo Group # SPG 2M 750 9.98 24,984
TriNet Corporate Realty
Trust # TRI 2M 570 8.05 20,164
------ --------
100.00% $250,393
====== ========
</TABLE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on September 10, 1997.
All contracts for Securities are expected to be settled by the initial
settlement date for the purchase of Units. Smith Barney will act as sole
underwriter in the transactions in which the Trust will subsequently
purchase these Securities, except for General Growth Properties which will
be purchased from the Sponsor in a private placement (see footnote +
below).
(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 16,692 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on September 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 System,
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.
+ Due to restrictions on resale imposed on the Trust, this Security is deemed
to be illiquid and a Restricted Security. See Risk Factors--Real Estate
Investment Trusts--Liquidity.
10
<PAGE>
DESCRIPTION OF THE TRUST
STRUCTURE AND OFFERING
This Series of the 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. On the Initial Date of Deposit, the Sponsor deposited with
the Trustee the Securities, including funds and delivery statements relating
to the contracts for the purchase of the Securities and cash or an irrevocable
letter of credit issued by a major commercial bank in the amount required for
such purchases. Thereafter the Trustee, in exchange for the Securities so
deposited, delivered to the Sponsor certificates evidencing the ownership of
the Units of the Trust. Additional Units of the Trust will be issued in the
amount required to satisfy purchase orders by depositing in the Trust
additional Securities, contracts to purchase additional Securities together
with irrevocable letters of credit or cash (or a bank letter of credit in lieu
of cash) with instructions to purchase 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 additional Securities, contracts to purchase additional Securities
together with irrevocable letters of credit or 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.
During the 90-day period following the Initial Date of Deposit additional
deposits of Securities or cash 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 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 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, if
applicable. 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.
- ------------
* 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>
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.
Subsequent to the 90-day period following the Initial Date of Deposit, the
holders ("Holders") of $250,000 or more 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
The Portfolio is diversified among REITs that the Sponsor believes offer an
opportunity for high current income and potential capital appreciation over
the medium term. The Sponsor believes that these potentially higher yielding
Securities may reflect the risks associated with the real estate market
generally but that the broad diversification among different issuers should
minimize the exposure to any single issuer. However, investors should
carefully review the Portfolio and the objectives of the Trust and consider
their ability to assume the risks involved before investing in the Trust. (See
Description of the Trust--Risk Factors below).
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from corporate
income taxes provided the REIT satisfies the requirements of Sections 856
through 860 of the Internal Revenue Code. The major tests for tax-qualified
status are that the REIT (i) be managed by one or more trustees or directors,
(ii) issue shares of transferable interest to its owners, (iii) have at least
100 shareholders, (iv) have no more than 50% of the shares held by five or
fewer individuals, (v) invest substantially all of its capital in real estate
related assets and derive substantially all of its gross income from real
estate related assets and (vi) distribute at least 95% of its taxable income
to its shareholders each year.
The Securities deposited in the Trust on the initial date of deposit consist
entirely of interests in REITs. There are two principal types of REITs: Equity
REITs which typically hold 75% of their invested assets in the ownership of
real estate and benefit from the underlying net rental income generated from
the properties, and Mortgage REITs, which typically hold 75% of their invested
assets in mortgages which are secured by real estate assets and benefit
predominantly from the difference between the interest income on the mortgage
loans and the interest expense on the capital used to finance the loans. A
third type, Hybrid REITs, combines the investment strategies of the Equity
REITs and the Mortgage REITs.
In addition to being classified according to investment type, REITs may be
categorized further in terms of their specialization by property type (e.g.,
retail, multifamily, healthcare, office, etc.,) or geographic focus
(nationwide, regional or metropolitan area). Additional stratification is then
possible within certain product types (e.g., factory outlets, community
centers, and regional malls are all categories within the retail sector).
Lastly, REITs have a specified length of time before liquidating their
underlying assets.
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 (if applicable) and expenses of the Trust, because the
12
<PAGE>
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, if applicable, which may 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 REITs in the Trust, including
a brief description of its businesses and market sector, and the basis on
which the REIT was selected.
All of the 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.
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 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).
PORTFOLIO ACQUISITION
On the Initial Date of Deposit all of the Securities deposited in the Trust
were acquired by the Sponsor in open market purchases on the American and New
York Stock Exchanges. Subsequent to the Initial Date of Deposit, it is
expected that all of the Securities in the Trust will be purchased from the
Sponsor in transactions in
13
<PAGE>
which the Sponsor will act as sole underwriter to the issuers of the
Securities, except for one which will be purchased from the Sponsor in a
private placement. These transactions will be effected to the Sponsor at
prices below the current market value of the Securities due to various
factors, including the size of the purchase, expectation of holding period and
cost of issuance. All of the Securities will be deposited in the Trust based
upon their market value as of the Dates of Deposit. As a result of the
Sponsor's ability to purchase these Securities below market value, the Sponsor
will offer Units of the Trust with no sales charge during the initial offering
period. By virtue of buying stocks at below market prices, the Sponsor will
realize a profit on the deposit of the Securities to the Trust in an amount of
up to 5% of the market value of these Securities. Notwithstanding the
preceding, the Sponsor may create additional Units by effecting Securities
transactions on the applicable national stock exchanges.
RISK FACTORS--GENERAL
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 Trust is not appropriate
for investors requiring conservation of capital.
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
and may also increase the amount of the profit realized by the Sponsor on the
purchase of the Securities from their issuers. In addition, the issuers of the
additional Securities by the REITs in the transactions underwritten by the
Sponsor may, in certain circumstances, have an adverse impact on the value of
the Securities and the Units.
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
14
<PAGE>
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.
The Trust may purchase Securities that are not registered ("Restricted
Securities") under the Securities Act of 1933 (the "Securities Act"), but can
be offered and sold to "qualified institutional buyers" as that term is
defined in the Securities Act. See "Risk Factors--Real Estate Investment
Trusts--Liquidity" below for the risks inherent in the purchase of Restricted
Securities.
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.
Subsequent to the 90-day period following the Initial Date of Deposit,
however, Holders will 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 (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 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 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 10). 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)
15
<PAGE>
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. 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.
RISK FACTORS--REAL ESTATE INVESTMENT TRUSTS
General. Real estate investment trusts ("REITs") are financial vehicles that
have as their objective the pooling of capital from a number of investors in
order to participate directly in real estate ownership or financing. REITs are
usually managed by separate advisory companies for a fee which is ordinarily
based on a percentage of the assets of the REIT in addition to reimbursement
of operating expenses. Since the Trust will consist entirely of shares issued
by REITs, an investment in the Trust will be subject to varying degrees of
risk generally incident to the ownership of real property (in addition to
securities market risks) and will involve more risk than a portfolio of common
stocks that is not concentrated in a particular industry or group of
industries.* The underlying value of the Trust's Securities and the Trust's
ability to make distributions to its Holders may be adversely affected by
adverse changes in national economic conditions, adverse changes in local
market
conditions due to changes in general or local economic conditions and
neighborhood characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital improvements,
particularly in older properties, changes in real estate tax rates and other
operating expenses, regulatory and economic impediments to raising rents,
adverse changes in governmental rules and fiscal policies, dependency on
management skills, civil unrest, acts of God, including earthquakes and other
natural disasters (which may result in uninsured losses), acts of war, adverse
changes in zoning laws, and other factors which are beyond the control of the
issuers of the REITs in the Trust.
REITs have been compared to bond equivalents (paying to the REIT holder
their pro rata share of the REIT's annual taxable income). In general, the
value of bond equivalents changes as the general levels of interest rates
fluctuate. When interest rates decline, the value of a bond equivalent
portfolio invested at higher yields can be expected to rise. Conversely, when
interest rates rise, the value of a bond equivalent portfolio invested at
lower yields can be expected to decline. Consequently, the value of the REITs
may at times be particularly sensitive to devaluation in the event of rising
interest rates. Equity REITs are less likely to be affected by interest rate
fluctuations than Mortgage REITs and the nature of the underlying assets of an
Equity REIT, i.e., investments in real property, may be considered more
tangible than that of a Mortgage REIT. Equity REITs are more likely to be
adversely affected by changes in the value of the underlying property it owns
than Mortgage REITs.
- ------------
* A Trust is considered to be "concentrated" in a particular industry when the
Securities in that industry constitute 25% or more of the total asset value
of the portfolio.
16
<PAGE>
REITs may concentrate investments in specific geographic areas or in
specific property types, i.e., hotels, shopping malls, residential complexes,
and office buildings; the impact of economic conditions on REITs can also be
expected to vary with geographic location and property type. Variations in
rental income and space
availability and vacancy rates in terms of supply and demand are additional
factors affecting real estate generally and REITs in particular. In addition,
investors should be aware that REITs may not be diversified and are subject to
the risks of financing projects. REITs are also subject to defaults by
borrowers, self-liquidation, the market's perception of the REIT industry
generally, and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code, and to maintain exemption from the
Investment Company Act of 1940. A default by a borrower or lessee may cause
the REIT to experience delays in enforcing its rights as mortgagee or lessor
and to incur significant costs related to protecting its investments.
Uninsured Losses. The issuer of REITs generally maintains comprehensive
insurance on presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, there are certain
types of losses, generally of a catastrophic nature, such as earthquakes and
floods, that may be uninsurable or not economically insurable, as to which the
REITs properties are at risk in their particular locales. The management of
REIT issuers use their discretion in determining amounts, coverage limits and
deductibility provisions of insurance, with a view to requiring appropriate
insurance on their investments at a reasonable cost and on suitable terms.
This may result in insurance coverage that in the event of a substantial loss
would not be sufficient to pay the full current market value or current
replacement cost of the lost investment. Inflation, changes in building codes
and ordinances, environmental considerations, and other factors also might
make it infeasible to use insurance proceeds to replace a facility after it
has been damaged or destroyed. Under such circumstances, the insurance
proceeds received by REITs might not be adequate to restore its economic
position with respect to such property.
Environmental Liability. Under various federal, state, and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such property.
Such laws often impose liability whether or not the owner or operator caused
or knew of the presence of such hazardous or toxic substances and
whether or not the storage of such substances was in violation of a tenant's
lease. In addition, the presence of hazardous or toxic substances, or the
failure to remediate such property properly, may adversely affect the owner's
ability to borrow using such real property as collateral. No assurance can be
given that one or more of the REITs in the Trust may not be presently liable
or potentially liable for any such costs in connection with real estate assets
they presently own or subsequently acquire while such REITs are held in the
Trust.
Americans with Disabilities Act. Under the Americans with Disabilities Act
of 1990 (the "ADA"), all public accommodations are required to meet certain
federal requirements related to physical access and use by disabled persons.
In the event that any of the REITs in the Trust invest in or hold mortgages in
real estate properties subject to the ADA, a determination that any such
properties are not in compliance with the ADA could result in imposition of
fines or an award of damages to private litigants. If any of the REITs in the
Trust were required to make modifications to comply with the ADA, the REIT's
ability to make expected distributions to the Trust could be adversely
affected, thus adversely affecting the ability of the Trust to make
distributions to Certificateholders.
Property Taxes. Real estate generally is subject to real property taxes. The
real property taxes on the properties underlying the REITs in the Trust may
increase or decrease as property tax rates change and as the properties are
assessed or reassessed by taxing authorities.
17
<PAGE>
Liquidity. Although the Securities in the Trust, except for Restricted
Securities held by the Trust, if any, themselves are listed on a national
securities exchange or NASDAQ National Market System and are liquid, real
estate investments, the primary holdings of each of the Securities in the
Trust, are relatively illiquid. Therefore, the ability of the issuers of the
Securities in the Trust to vary their portfolios in response to changes in
economic and other conditions will be limited and, hence, may adversely affect
the value of the Units. There can be no assurance that any issuer of a
Security will be able to dispose of its underlying real estate assets when
they find disposition advantageous or necessary or that the sale price of any
disposition will recoup or exceed the amount of their investment.
The Trust may purchase securities that are not registered ("Restricted
Securities") under the Securities Act, but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act.
Since it is not possible to predict with assurance exactly how this market for
Restricted Securities sold and offered under Rule 144A will develop, the
Sponsor will carefully monitor the Trust's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and
availability of information. This investment could have the effect of
increasing the level of illiquidity in the Trust to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
Restricted Securities.
INCOME
The estimated net annual income per Unit is determined by subtracting from
the estimated annual dividend income of the Securities in the Portfolio the
estimated annual expenses (total estimated annual Trustee's,
Sponsor's and administrative fees and expenses) and dividing by the number of
Units outstanding. The actual net annual income per Unit will vary from
estimates as the issuers of the Securities change their dividend rates or as
the expenses of the Trust change.
There is no assurance that any dividends will be declared or paid in the
future on the Securities.
Record Days and Distribution Days are set forth under Investment Summary. It
is anticipated that an amount equal to approximately one-twelfth of the amount
of net annual income per Unit estimated to be received by the Trust will be
distributed on or shortly after each Distribution Day to the Holders of record
on the preceeding Record Day (see Administration of the Trust--Accounts and
Distributions). Because dividends on the Securities are not received by the
Trust at a constant rate throughout the year and because the issuers of the
Securities may change the schedules or amounts of dividend payments, any
distributions, whether reinvested or paid in cash, may be more or less than
the amount of dividend income actually received by the Trust and credited to
the income account established under the Indenture (the "Income Account") as
of the Record Day. In order to eliminate fluctuations in monthly distributions
resulting from such variances, the Trustee is required by the Indenture to
advance such amounts as may be necessary to provide monthly distributions of
approximately equal amounts of expected net annual income, subject to
quarterly adjustments by the Trustee to reflect dividends actually being paid
to the Trust and credited to the Income Account. The Trustee will be
reimbursed, without interest, for any such advances from funds available from
the Income Account on the next ensuing Record Day.
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.
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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). In order
for a Holder who purchases Units on the Initial Date of Deposit to determine
the fair market value of his pro rata portion of each Security on such date,
see Cost of Securities to Trust under Portfolio.
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 not be eligible
for the dividends-received deduction for corporations.
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. A reduced tax rate may apply to gains derived
from assets held for more than 18 months. The deduction of capital losses is
subject to limitations.
The Trust will own shares in REITs, entities that have elected and qualified
for the special tax treatment applicable to "regulated investment companies."
A number of complex requirements must be satisfied in order for REIT status to
be maintained. If the REIT distributes 95% or more of its real estate
investment trust taxable income, subject to certain adjustments, to its
shareholders, it will not be subject to Federal income tax on the amounts so
distributed. Moreover, if the REIT distributes at least 85% of its ordinary
income and 95% of its capital gain net income it will not be subject to the 4%
excise tax on certain undistributed income of REITs. Distributions by the REIT
from its earnings and profits to its shareholders will be taxable as ordinary
income to such shareholders. Distributions of the REIT's net capital gain,
which are designated as capital gain dividends by the REIT, will be taxable to
its shareholders as long-term capital gain, regardless of the length of time
the shareholders have held their investment in the REIT.
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.
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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.
* * *
After the end of each fiscal year, the Trustee will furnish to each Holder
an annual 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 annual information returns 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.
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. Five year
averaging will not apply to distributions after December 31, 1999. Ten year
averaging has been preserved in very limited circumstances. 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."
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
During the initial offering period (which is expected to be only the date of
this prospectus), 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, with no sales charge. For most investors the commissions to
purchase and sell the stocks directly would exceed the Trust's expenses.
Orders for Units received by the Sponsor on September 11, 1997 (the first day
Units will be available to the public) will be made at $15.00 per Unit. To
allow Units to be priced at $15.00, the Units outstanding as of the Evaluation
Time on September 11, 1997 (all of which are held by the Sponsor) will be
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<PAGE>
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.
After the initial offering period (which is expected to be only the date of
this prospectus), the Public Offering Price of the Units of the Trust will be
determined by adding to the aggregate value of the Securities in the Trust a
sales charge equal to 4.0% of the Public Offering Price (4.167% of the net
amount invested, plus a pro rata portion of the amounts, if any, in the Income
Account. The sales charge applicable to quantity purchases is reduced on a
graduated scale for sales to any purchaser of at least $50,000. Sales charges
(until October 1, 1998) are as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- ---------------- ---------- ----------
<S> <C> <C>
Fewer than $50,000........................................ 4.00% 4.167%
$50,000 but less than $100,000............................ 3.50 3.627
$100,000 but less than $250,000........................... 3.00 3.093
$250,000 but less than $500,000........................... 2.50 2.564
$500,000 but less than $1,000,000......................... 2.00 2.041
$1,000,000 or more........................................ 1.50 1.523
</TABLE>
Commencing October 1, 1998 the sales charge will be reduced as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- ---------------- ---------- ----------
<S> <C> <C>
Fewer than $50,000........................................ 3.000% 3.093%
$50,000 but less than $100,000............................ 2.625 2.696
$100,000 but less than $250,000........................... 2.250 2.302
$250,000 but less than $500,000........................... 1.875 1.911
$500,000 but less than $1,000,000......................... 1.500 1.523
$1,000,000 or more........................................ 1.125 1.138
Commencing October 1, 1999, the sales charge will be reduced as follows:
<CAPTION>
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- ---------------- ---------- ----------
<S> <C> <C>
Fewer than $50,000........................................ 2.00% 2.041%
$50,000 but less than $100,000............................ 1.75 1.781
$100,000 but less than $250,000........................... 1.50 1.523
$250,000 but less than $500,000........................... 1.25 1.266
$500,000 but less than $1,000,000......................... 1.00 1.010
$1,000,000 or more........................................ 0.75 0.756
</TABLE>
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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. 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 System 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 in the secondary market 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 at no sales
charge. 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
On the Initial Date of Deposit, the Sponsor 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
Securities to the Trust (which is based on the aggregate value of the
Securities on the 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 will also realize
a profit in an amount of up to 5% of the market value of the Securities by
virtue of buying such Securities in underwritten transactions at prices below
their market value (see Description of the Trust--Portfolio Acquisition). 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 has adopted an internal policy whereby
an allocation of sales credit to a financial consultant may be reversed if
Units are sold within 30 days of the effective date of the Trust.
The Sponsor also receives an annual fee at the maximum rate of $.375 per 100
Units for the administrative and other services which it provides during the
life of the Trust (see Expenses and Charges -- Fees). The
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<PAGE>
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 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
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<PAGE>
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).
Subsequent to the 90-day period following the Initial Date of Deposit, the
Trustee will redeem Units "in kind" upon request of a redeeming Holder if the
Holder tenders at least $250,000 (the "In Kind Distribution"). 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 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).
In Kind Distributions on redemption of a minimum of $250,000 will be held by
The Chase Manhattan Bank 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 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
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<PAGE>
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 each 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 System, 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 the life of the Trust. Any balance of the
expenses incurred in establishing the Trust, as well as advertising and
selling expenses, will be paid by the Sponsor 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 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
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<PAGE>
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 of record,
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 Holder elects to receive his distribution
in cash, any monthly income distribution for each 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 one-twelfth of the Holder's pro rata share of
the distributable balance in the Income Account as of such
26
<PAGE>
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. No distribution need be made from the Capital
Account if the balance therein is less than an amount sufficient to distribute
$7.50 per 100 Units. 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 may 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
27
<PAGE>
in total assets, except that certificates of deposit or time deposits of
smaller domestic banks may be held provided 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
28
<PAGE>
or additional shares of Securities received in a non-taxable stock dividend or
stock split, shall be retained or disposed of by the Trustee as provided in
the Indenture. The proceeds of any disposition shall be credited to the Income
or Capital Account of the Trust.
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 the end of December in each year (normally
within 20 to 60 days), the Trustee will furnish to each person who at any time
during the preceding period from January 1 through December 31 (a "Trust
Year") was a Holder of record 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 on the last business day of such Trust
Year; (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
29
<PAGE>
balance remaining after such distribution and deductions, expressed both as a
total dollar amount and as a dollar amount per Unit outstanding on the last
business day of such Trust Year; (3) a list of the Securities held and the
number of Units outstanding on the last business day of such Trust Year; (4)
the Redemption Price per Unit based upon the computation thereof made on the
thirtieth day of June (or the last business day prior thereto) of such Trust
Year; and (5) amounts actually distributed during such Trust Year 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.
BOOK-ENTRY UNITS
Ownership of Units of the Trust will not be evidenced by certificates. All
evidence of ownership of the Units will be recorded in book-entry form either
at Depository Trust Company ("DTC") through an investor's broker's account or
through registration of the Units on the books of the Trustee. Units held
through DTC will be deposited by the Sponsor with DTC in the Sponsor's DTC
account and registered in the nominee name CEDE & CO. Individual purchases of
beneficial ownership interest in the Trust will be made in book-entry form
through DTC or the Trustee. Ownership and transfer of Units will be evidenced
and accomplished directly and indirectly by book-entries made by DTC and its
participants if the Units are evidenced at DTC, or otherwise will be evidenced
and accomplished by book-entries made by the Trustee. DTC will record
ownership and transfer of the Units among DTC participants and forward all
notices and credit all payments received in respect of the Units held by the
DTC participants. Beneficial owners of Units will receive written confirmation
of their purchases and sale from the broker-dealer or bank from whom their
purchase was made. Units are transferable by making a written request properly
accompanied by a written instrument or instruments of transfer which should be
sent registered or certified mail for the protection of the Unit Holder.
Holders must sign such written request exactly as their names appear on the
records of the Trusts. Such signatures must be guaranteed by a commercial bank
or trust company, savings and loan association or by a member firm of a
national securities exchange.
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
30
<PAGE>
Holders of 51% of the Units. The Trustee shall deliver written notice of any
termination to each Holder of record 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 nominee Holder
appearing on the record books of the Trustee.
EXCHANGE AND ROLLOVER PRIVILEGES
Holders may exchange their Units of this Trust into units of any then
outstanding series of the REIT Portfolio Series (an "Exchange Series") at
their relative net asset values, subject only to a reduced sales load (as
disclosed in the prospectus for the Exchange Series). The exchange option
described above will also be available to investors in the Trust who elect to
purchase units of an Exchange Series within 60 days of their liquidation of
Units in the Trust.
Holders who retain their Units until the termination of the Trust, may
reinvest their terminating distributions into units of a subsequent series of
the REIT Portfolio Series (the "New Series") provided one is offered. 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.
Under the exchange and rollover privilege, the Sponsor's repurchase price
would be based upon the market value of the Securities in the Trust portfolio
and units in the Exchange Series or New Series will be sold to the Holder at a
price based on the aggregate market price of the securities in the portfolio
of the Exchange Series or New Series. Exercise of the exchange or rollover
privilege by Holders is subject to the following conditions: (i) the Sponsor
must have units available of an Exchange Series or New Series during initial
public offering or, if such period is completed, must be maintaining a
secondary market in the units of the available Exchange Series or New Series
and such units must be available in the Sponsor's secondary market account at
the time of the Holder's elections; and (ii) exchange will be effected only in
whole units. Holders will not be permitted to advance any funds in excess of
their redemption in order to complete the exchange. Any excess proceeds
received from the Holder for exchange will be remitted to such Holder.
It is expected that the terms of the Exchange Series or New Series will be
substantially the same as the terms of the Trust described in this Prospectus,
and that similar reinvestment programs will be offered with respect to all
subsequent series of the Trust. The availability of these options do not
constitute a solicitation of an offer to purchase units of an Exchange Series
or a New Series or any other security. A Holder's election to participate in
either of these options will be treated as an indication of interest only.
Holders should contact their financial professionals to find out what suitable
Exchange or New Series is available and to obtain a prospectus. Holders may
acquire units of those Series which are lawfully for sale in states where they
reside and only those Exchange Series in which the Sponsor is maintaining a
secondary market. At any time prior to the exchange by the Holder of units of
an Exchange Series, or the purchase by a Holder of units of a New Series, such
Holder may change his investment strategy and receive his terminating
distribution. An election of either of these options will not prevent the
Holder from recognizing taxable gain or loss (except in the case of loss, if
and to the extent the Exchange or New Series, as the case may be, 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 reserves the right to
modify, suspend or terminate either or both of these reinvestment privileges
at any time.
31
<PAGE>
REINVESTMENT PLAN
Distributions of dividend income, capital gains or both, 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 two 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 in cash 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.
Holders participating in the Reinvestment Plan will be taxed on their
reinvested distributions in the manner described in Taxes above even though
distributions are automatically reinvested in the Trust.
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
32
<PAGE>
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 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 shown 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.
33
<PAGE>
THE EQUITY FOCUS TRUSTS
REIT PORTFOLIO SERIES 1997
A SMITH BARNEY UNIT INVESTMENT TRUST
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 8
Statement of Financial Condition 9
Portfolio 10
Description of the Trust 11
Taxes 18
Public Sale of Units 20
Market for Units 23
Redemption 23
Expenses and Charges 25
Administration of the Trust 26
Exchange and Rollover Privilege 31
Reinvestment Plan 32
Resignation, Removal and Limitations on Liability 32
Miscellaneous 33
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPONSOR: TRUSTEE: INDEPENDENT ACCOUNTANTS:
<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.
- --------------------------------------------------------------------------------
UT 6365
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A. The following information relating to the Depositor is incorporated by
reference to the SEC filings indicated and made a part of this Registration
Statement.
<TABLE>
<CAPTION>
SEC FILE OR
IDENTIFICATION NUMBER
---------------------
<C> <S> <C>
I. Bonding Arrangements and Date of Organization of
the Depositor filed pursuant to Items A and B of
Part II of the Registration Statement on Form S-6
under the Securities Act of 1933: 2-67446
II. Information as to Officers and Directors of the
Depositor filed pursuant to Schedules A and D of
Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934: 8-12324
III. Charter documents of the Depositor filed as
Exhibits to the Registration Statement on Form S-
6 under the Securities Act of 1933 (Charter, By-
Laws): 2-52898
B. The Internal Revenue Service Employer Identification Numbers of the
Sponsor and Trustee are as follows:
Smith Barney Inc. 13-1912900
The Chase Manhattan Bank, Trustee 13-4994650
</TABLE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
THE REGISTRATION STATEMENT ON FORM S-6 IS COMPRISED OF THE FOLLOWING PAPERS
AND DOCUMENTS:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-
Reference Sheet to the Registration Statement of The Uncommon Values
Unit Trust, 1985 Series, 1933 Act File No. 2-97046).
The Prospectus.
Additional Information not included in the Prospectus (Part II).
The undertaking to file reports.
The signatures.
Written Consents of the following persons:
KPMG Peat Marwick LLP (included in Exhibit 5.1)
Battle Fowler LLP (included in Exhibit 3.1)
The following exhibits:
<TABLE>
<C> <S>
*1.1 -- Form of Reference Trust Indenture.
2.1 -- Form of Standard Terms and Conditions of Trust (incorporated by
reference to Exhibit 2.1 to the Registration Statement of The
Uncommon Values Unit Trust, 1985 Series, 1933 Act File No. 2-97046).
*3.1 -- Opinion of counsel as to the legality of securities being issued
including their consent to the use of their name under the headings
"Taxes" and "Miscellaneous --Legal Opinion" in the Prospectus.
*5.1 -- Consent of KPMG Peat Marwick LLP to the use of their name under the
heading "Miscellaneous --Auditors" in the Prospectus.
</TABLE>
- --------
* Filed herewith.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of New
York and State of New York on the 11th day of September, 1997.
SIGNATURES APPEAR ON PAGE II-4
A majority of the members of the Board of Directors of Smith Barney Inc. has
signed this Amendment to the Registration Statement pursuant to Powers of
Attorney authorizing the person signing this Registration Statement to do so
on behalf of such members.
II-3
<PAGE>
SMITH BARNEY UNIT TRUSTS (REGISTRANT)
SMITH BARNEY INC.
(DEPOSITOR)
By the following persons* who constitute a majority of the Board of Directors
of Smith Barney Inc.:
Steven D. Black
James S. Boshart III
Robert A. Case
James Dimon
Robert Druskin
Robert H. Lessin
William J. Mills, II
Michael B. Panitch
Paul Underwood
/s/ Kevin Kopczynski
By___________________________________
Kevin Kopczynski (As authorized
signatory for Smith Barney Inc.
and Attorney-in-fact for the
persons listed above)
- --------
* Pursuant to Powers of Attorney filed under the 1933 Act file Numbers 33-
56722, 33-51999 and 333-21047.
II-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Statements of Financial Conditions and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0001040580
<NAME> REIT PORTFOLIO SERIES
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-10-1997
<PERIOD-END> SEP-10-1997
<INVESTMENTS-AT-COST> 250393
<INVESTMENTS-AT-VALUE> 250393
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 220558
<TOTAL-ASSETS> 470951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 220558
<TOTAL-LIABILITIES> 220558
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 250393
<SHARES-COMMON-STOCK> 16692
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 250393
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16692
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 250393
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 1.1
EQUITY FOCUS TRUSTS
REIT PORTFOLIO SERIES
1997
REFERENCE TRUST INDENTURE
Dated as of September 10, 1997
This Trust Indenture between Smith Barney Inc., as Sponsor, and The Chase
Manhattan Bank, as Trustee (the "Indenture") sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"The Uncommon Values Unit Trust, Standard Terms and Conditions of Trust for
Series formed on or subsequent to July 2, 1985" as amended as of June 27, 1994
(the "Standard Terms and Conditions of Trust") and such provisions as are set
forth in full herein and such provisions as are incorporated by reference
constitute a single instrument. All references herein to Articles and Sections
are to Articles and Sections of the Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Sponsor and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained in
the Standard Terms and Conditions of Trust are herein incorporated by reference
in their entirety and shall be deemed to be a part of this instrument as fully
and to the same extent as though said provisions had been set forth in full in
this instrument, except that all references to "Shearson Lehman Brothers, Inc."
shall be deleted and replaced by "Smith Barney Inc." and further, that The Chase
Manhattan Bank shall, by executing this Trust Indenture, be deemed to be the
Trustee and a party to said Standard Terms and Conditions of Trust for all
purposes of this Trust.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
<PAGE>
The following special terms and conditions are hereby agreed to:
(a) The Securities (including Contract Securities) listed in the Prospectus
relating to the 1997 Series shall be shares of common stock, which securities
have been deposited with (or assigned to) the Trustee under this Indenture.
Subject to the provisions contained in the Standard Terms and Conditions of
Trust, any new Securities deposited in the Trust Fund pursuant to Section 3.06
will be those which, assuming consummation of the particular transaction, will
maintain the same proportionate relationship among the number of shares of each
of the various Securities in the Trust Fund as exists among the Securities in
the Trust Fund immediately preceding any such deposit or distribution, subject,
however, to any change in such proportionate relationship in accordance with
Sections 3.05, 3.08, 3.11, 3.12 or 5.02.
(b) In all places in the Standard Terms and Conditions of Trust where the
words "Monthly Income Distribution" appear, these words shall be deleted and
replaced by "Income Distribution".
(c) The definition of "Distribution Agency Agreement" and all references
thereto shall be deleted.
(d) The definition of "Distribution Day" shall be deleted and replaced by the
following:
"The day designated as such in the Prospectus under the heading 'Investment
Summary'."
(e) In the definition of Evaluation Time, the words "Part II of the Reference
Trust Indenture" shall be changed to read: "the Prospectus."
(f) Section 2.02 is hereby amended by adding the following sentence as the
second sentence of Section 2.02: "Effective as of the Evaluation Time on
September 11, 1997, in the event that the aggregate value of Securities in the
Trust has increased since the evaluation on September 10, 1997, the Trustee
shall issue such number of additional Units to the Holder of outstanding Units
as of the close of business on September 10, 1997 that the price per Unit
computed as of the Evaluation Time on September 11, 1997, plus the maximum
applicable sales charge shall equal $15 per Unit (based on the number of Units
out- standing as of said Evaluation Time, including the additional Units issued
pursuant to this sentence); in the event that the aggregate value of Securities
in the Trust Fund has decreased since the evaluation on September 10, 1997,
there will be a reverse split of the outstanding Units, and said Holder will
surrender to the Trustee for cancellation such number of Units, that the price
per Unit computed as of the Evaluation Time on September 11, 1997 plus the
maximum applicable sales charge shall equal $15 per Unit (based on the number of
Units outstanding as of said Evaluation Time, reflecting cancellation of Units
pursuant to this sentence)."
(g) The third and fourth paragraphs of Section 3.04 shall be deleted and
replaced by the following four paragraphs:
"The Income Distribution shall be calculated as follows: The Trustee shall
as of each Record Day compute the amount distributable to Holders on the next
Distribution Day (the
<PAGE>
"Income Distribution"), which amount, subject to the limitations on the
Trustee's advances set forth in Section 3.01(b), shall be equal to the cash
balance of the Income Account plus any amount receivable on obligations
purchased pursuant to Section 3.06(j) on or before the following Distribution
Day less accrued and unpaid expenses of the Trust fund and any amounts payable
from the Income Account in respect of Units tendered for redemption prior to
such Record Day divided by the number of Units outstanding on such Record Day;
provided, however, that as of the Record Date occurring in the month of December
of each calendar year, the Trustee shall advance to the Income Account, and
shall include in the cash balance thereof, the amount of any dividends not
received as of such Record Date which are payable to the Trust Fund prior to the
end of the calendar year, and provided further that the Trustee may increase or
decrease the amount of the resulting calculation in order to reflect the
differences in Income actually received or fees, expenses, losses, liabilities
or advances actually incurred or made in any prior period from the amounts
estimated therefor. The Trustee shall be entitled to be reimbursed, without
interest, for any and all amounts advanced by it pursuant to the preceding
sentence, or otherwise hereunder, from funds subsequently received by the Trust
Fund as income on any of the Securities. The Trustee shall be deemed to be the
beneficial owner of the income of the Trust Fund to the extent such income is
required to reimburse the Trustee for amounts advanced by it pursuant to this
Section and to such extent shall have a lien on the assets of the Trust Fund
prior to the interest of the Holders.
"Subject to the provisions of the succeeding two paragraphs, distributions
shall be made as follows: on or shortly after each Distribution Day the Trustee
shall distribute by check mailed to each Holder of record at the close of
business on the preceding Record Day, at the post office address of the Holder
appearing on the record books of the Trustee or by any other means mutually
agreed upon by the Holder and the Trustee, an amount substantially equal to the
Income Distribution in respect of such Distribution Day, plus the Holder's pro
rata share of the cash balance of the Capital Account (but not including cash
required to purchase Contract Securities or held for reinvestment in Substitute
Securities pursuant to Section 3.11) computed as of the close of business on the
preceding Record Day; provided, however, that the Trustee in its discretion may
on any Distribution Day determine that the amount of the Income Distribution per
Unit because of any unusual or extraordinary increase or decrease in the
expenses incurred or expected to be incurred by the Trust Fund. In making the
computation of such Holder's interest in the balance of the Income Capital
Accounts, fractions of less than one cent per unit may be omitted.
"In the event that the Sponsor adopts a Reinvestment Plan the cash
distributions to Holders shall be automatically reinvested by the Sponsor in
additional Units of the Trust. Units of the Trust purchased under the
Reinvestment Plan shall be purchased at the Sponsor's Repurchase Price (the net
asset value per Unit without a sales charge) in effect at the close of business
on the Distribution Day. The Units purchased may be either previously issued
Units repurchased by the Sponsor or newly created Units created upon the deposit
of additional Securities in the Trust. The cost of the Reinvestment Plan will
be borne by the Sponsor, at no additional cost to the Trust or individual
Holders. Holders will receive an account statement reflecting any purchase of
Units under the Reinvestment Plan. The Sponsor reserves the right to amend,
modify or terminate the Reinvestment Plan at any time without prior notice.
<PAGE>
"A Holder may elect not to participate in the Reinvestment Plan by notifying
his financial consultant at Smith Barney Inc. or by notifying the Trustee in
writing by ten days prior to the Distribution Day, which election may be
modified or terminated by similar notice. The Sponsor shall promptly inform the
Trustee of any election or modification or termination thereof received by it
from a Holder and the Trustee shall be authorized conclusively to rely on any
notice so received from the Sponsor. In the event the Holder elects not to
participate in the Reinvestment Plan, or in the event that the Sponsor does not
adopt or terminates a Reinvestment Plan, the Trustee shall distribute the amount
described above by check mailed to each Holder of record at the close of
business on the preceding Record Day, at the post office address of the Holder
appearing on the record books of the Trustee or by any other means mutually
agreed upon by the Holder and the Trustee."
(h) Section 3.06 is amended in its entirety to read as follows:
"SECTION 3.06. Deposit of Additional Securities. (a) The Sponsor, from
time to time during the 90-day period following the Initial Date of Deposit, may
deposit with the Trustee additional Securities (or may assign contracts for the
purchase of additional Securities and deposit a letter of credit, in an amount
sufficient to cover the purchase price of the additional Securities to be
deposited) ('Additional Securities') or cash (or a letter of credit in lieu of
cash) with instructions to purchase additional Securities, together with cash
equal to a pro rata portion of the Trust Fund Cash Evaluation (as defined in
Section 5.01(b)) bearing the same ratio to the Units created by the Deposit as
the Trust Fund Cash Evaluation bears to the Units outstanding immediately prior
to the deposit. The Trustee shall execute and deliver to or on the order of the
Sponsor in exchange therefor the number of Units specified in a Deposit
Certificate delivered in connection therewith. Additional Securities shall, if
deposited on or prior to the 90th day following the Date of Deposit, maintain,
to the extent practicable the original proportionate relationship among the
number of shares of each Security in the Trust Fund established on the Initial
Date of Deposit (the 'Original Proportionate Relationship'), adjusted, if
appropriate, to reflect (1) the deposit of Substitute Securities pursuant to
Section 3.11, (2) sale of securities pursuant to Section 3.08, 3.12 or 5.02 and
(3) the occurrence of any stock dividends, stock splits, redemptions,
acquisition of shares through dividend reinvestment plans or similar events.
Additional Securities deposited or purchased with cash or a letter of credit
deposited may be purchased in round lots, and if the amount of the deposit is
insufficient to acquire round lots of each Security to be acquired, Additional
Securities may be deposited (or acquired with cash or a letter of credit
deposited) in the order of the Security in the Trust Fund most under-represented
immediately before the deposit with respect to the Original Proportionate
Relationship. All instructions to purchase Additional Securities pursuant to
this Section shall be in writing and shall direct the Trustee to perform
contracts to purchase Additional Securities which the Sponsor shall have entered
into and assigned to the Trustee.
<PAGE>
"(b) If Securities of an issue of Securities originally deposited (an
'Original Issue') are unavailable or cannot be purchased at reasonable prices or
their purchase is prohibited or restricted by law, regulation or policies
applicable to the Trust Fund or the Sponsor at the time of a subsequent deposit
under Subsection 3.06(a), in lieu of the portion of the deposit that would
otherwise be represented by those Securities, the Sponsor may (1) deposit (or
instruct the Trustee to purchase) (i) Securities of another Original Issue or
(ii) 'Replacement Securities' complying with the conditions of paragraphs (c)
and (d) of this Section, or (2) deposit cash or a letter of credit with
instructions to acquire the Securities of the Original Issue when practicable.
Any cash or letter of credit deposited under this Subsection 3.06(b) to acquire
Securities of an Original Issue or Replacement Securities which at the end of
the 90 day period following the Date of Deposit has not been used to purchase
Securities shall be used to purchase Securities in accordance with this
Subsection 3.06(b), provided that if an instruction to purchase an Additional
Security or a Replacement Security has not been given and such cash or letter of
credit remain in the Trust Fund after 110 days from the Date of Deposit, the
amount thereof shall be distributed, together with the attributable sales
charge, at the time and in the manner specified in Section 3.11 regarding failed
contracts.
"(c) Replacement Securities shall meet all the conditions applicable to
Substitute Securities in Section 3.11.
"(d) In addition to the requirements specified in paragraph (c), Replacement
Security must:
"(i) be publicly-traded common stock;
"(ii) 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 provision of law); and
"(iii) have characteristics sufficiently similar to the
characteristics of the other Securities in the Trust Fund as to be acceptable
for acquisition by the Trust Fund.
"(e) The Sponsor, from time to time after the 90 day period following the
Date of Deposit, may deposit with the Trustee Additional Securities or cash (or
a letter of credit in lieu of cash) with instructions to purchase Additional
Securities, together with cash equal to a pro rata portion of the Trust Fund
Cash Evaluation (as defined in Section 5.01(b)) bearing the same ratio to the
Units created by the deposit as the Trust Fund Cash Evaluation bears to the
Units outstanding immediately prior to the deposit and the Trustee shall execute
and deliver to or on the order of the Sponsor in exchange therefor the number of
Units specified in a Deposit Certificate delivered in connection therewith. Such
Additional Securities shall meet each of the conditions set forth in Subsections
3.06(c) and 3.06(d) above but must maintain exactly the proportionate
relationship existing among the number of shares of each Security in the Trust
Fund on the 90th day following the Initial Date of Deposit, adjusted, if
appropriate, to reflect (1) the deposit of Substitute Securities pursuant to
Section 3.11, (2) sale of securities pursuant to Section 3.08, 3.12 or 5.02 and
(3) the occurrence of any stock dividends, stock splits, redemptions,
acquisition of shares through dividend reinvestment plans or similar events.
<PAGE>
"(f) Execution of a Deposit Certificate shall be deemed a certification by
the Sponsor that the purchase of the Securities specified in such Deposit
Certificate complies with the conditions specified in this section, as
applicable. The Deposit Certificate shall be deemed to restate the
representations, agreements and certifications of the Sponsor made in Sections
6-8, inclusive, of the Memorandum of Closing for the Trust Fund to which the
deposit relates as though the representations, agreements and certifications
were made with respect to the Deposit Certificate and the deposit of Securities
with the Trustee. The Deposit Certificate shall also be deemed to constitute,
for value received, the sale, assignment and transfer to the Trustee of all
right, title and interest in and to the Additional Securities identified in the
Deposit Certificate and to irrevocably constitute and appoint the Trustee the
Sponsor's attorney in all matters respecting such Securities with full power of
substitution in the premises. The Deposit Certificate shall include an
acknowledgment by the Trustee that it has delivered to the Sponsor the number of
Units specified in the Deposit Certificate. Any Additional Securities received
by the Trustee shall be deposited in the Trust Fund and shall be subject to the
terms and conditions of this Indenture to the same extent as the securities
originally deposited hereunder. Any contract to purchase Additional Securities
pursuant to this Section 3.06 that is declared by the Sponsor to have failed due
to reasons beyond the control of the Sponsor or the Trustee, shall be
immediately replaced by the Sponsor with a contract to purchase Substitute
Securities pursuant to Section 3.11.
"(g) The Trustee shall cause to be delivered to the Sponsor within a
reasonable period of time after the end of each calendar year a certificate of
the Trustee as to the Additional Securities received by the Trustee for deposit
in the Trust Fund and the number of Units issued in exchange therefor, during
the calendar year. Within a reasonable time after receipt of such certificate,
the Sponsor shall acknowledge in writing the receipt of such certificate and
shall certify it as complete and correct or shall indicate to the Trustee in
writing any differences between the Sponsor's records of the Securities
transactions and the issuance of Units and Trustee's certificate.
"(h) The Trustee shall have no responsibility or liability for any loss or
depreciation resulting from any purchase made pursuant to the Sponsor's
instructions and in the absence thereof shall have no duty to purchase any
securities. The Trustee shall have no responsibility or liability for
maintaining the composition of the Trust Fund.
"(i) Cash delivered to the Trustee for purchase of Securities pursuant to
this section shall be on deposit with the Trustee or any Custodian or sub-
custodian specified in Section 8.01(a) and shall bear interest for the benefit
of the Trust Fund at the Federal Funds rate adjusted daily as
<PAGE>
reported in the New York Times under the caption 'Key Rates'.
"(j) The Sponsor may direct the Trustee, with part or all of the proceeds
from the sale of Securities, to the extent not required for redemption of Units,
to purchase one or more debt obligations for deposit in the Trust, provided that
each such debt obligation (1) is an "Eligible Security" as defined in paragraph
(a)(5) of Rule 2a-7 pursuant to the Investment Company Act of 1940 or in the
opinion of the Sponsor has comparable credit characteristics, and (2) has a
fixed final maturity date no later than the next Distribution Day. The proceeds
from the maturity of any said debt obligation shall be distributed to Holders on
said Distribution Day."
(i) Section 3.09 shall be amended in its entirety to read as follows:
"Section 3.09. Reorganization or Similar Event. In the event that an offer
by the issuer of any of the Securities or any other party shall be made to issue
new Securities in exchange or substitution for any Securities, the Trustee shall
reject such offer, except that if (1) the issuer failed to declare or pay
anticipated dividends with respect to such Securities or (2) in the opinion of
the Sponsor, given in writing to the Trustee, the issuer will probably fail to
declare or pay anticipated dividends with respect to such Securities in the
reasonably foreseeable future, the Sponsor shall instruct the Trustee in writing
to accept or reject such offer and to take any other action with respect thereto
as the Sponsor may deem proper. However, should any exchange or substitution be
affected notwithstanding such rejection or without an initial offer, any
Securities, cash and/or property received in exchange shall be deposited
hereunder and shall be sold, if securities or property, by the Trustee pursuant
to the Sponsor's direction, unless the Sponsor advises the Trustee to retain
such securities or property. The cash then remaining shall be distributed to
Holders on the next Distribution Day not fewer than 31 days from the date the
exchange consideration was received and otherwise in the manner set forth in
Section 3.04 regarding distributions from the Capital Account. This section
shall apply, but its application shall not be limited, to public tender offers,
mergers, acquisitions, reorganizations and recapitalization. Neither the
Sponsor nor the Trustee shall be liable to any person for action or failure to
take action pursuant to the terms of this Section 3.09."
(j) For purposes of Section 3.11(b), the term "25%" shall be replaced by
"10%".
(k) Section 3.11(d) shall be deleted and replaced by the following paragraph:
"(d) The Replacement Securities must be deposited into the Trust Fund within
110 days of the date of deposit of the Failed Contract Securities."
(l) Article THREE shall be amended to add a new Section 3.16 as follows:
"SECTION 3.16. Foreign Exchange Transactions. The Sponsor shall direct the
Trustee with respect to the circumstances under which foreign exchange
transactions are to be entered into and with respect to the method whereby
calculation of U.S. dollar equivalents for purpose of net asset value
computations or otherwise are to be made, in order to convert amounts receivable
<PAGE>
in respect of Securities in foreign currencies into U.S. dollars."
(m) Article THREE shall be amended to add a new Section 3.17 as follows:
"SECTION 3.17 Extraordinary Distributions. Any property received by the
Trustees after July 1, 1996 in a form other than cash or additional shares of
the Securities or of a Substitute Security received in a non-taxable stock split
or stock dividend, which shall be retained by the Trust, shall be dealt with in
the manner described in Section 3.09 and shall be retained or disposed by the
Trustee according to those provisions, provided, however, that no property shall
be retained which the Trustee determines shall adversely affect its duties
hereunder. The proceeds of any disposition shall be credited to the Income or
Capital Account of the Trust, as the Sponsor may direct.
"The Trust is intended to be treated as a fixed investment (i.e., grantor)
trust for income tax purposes, and its powers shall be limited in accordance
with the restrictions imposed on such trusts by Treas. Reg. Section 301.7701-4."
(n) Section 5.02 shall be amended in its entirety to read as follows:
"SECTION 5.02. Redemption of Units. (a) 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 Day or Christmas; provided that any
tender received after the Evaluation Time or received on a day which is not a
Tender Day shall be deemed to be made as of the next succeeding Tender Day. Any
Unit tendered by a Holder or his duly authorized attorney for redemption at the
Trustee's Office (effected by tender of such documents as the Trustee shall
reasonably require and, in the case of certificated Units, by the related
Certificate) shall be redeemed and canceled by the Trustee on the third Business
Day following the Tender Day (the "Redemption Date").
"(b) Subject to deduction of any tax or other governmental charges due
thereon, redemption is to be made by payment of cash equal to the Unit Value as
of the Evaluation Time next following the tender plus any Accrued Income per
Unit from, and including, the day next following such Evaluation Time to, but
not including, the day of payment to the redeeming Holder, multiplied by the
number of Units being redeemed (the "Redemption Price"). The portion of the
Redemption Price representing the pro rata share of the cash on hand in the
Income Account and such Accrued Income shall be withdrawn from the Income
Account to the extent funds are available for such purpose. The balance of the
Redemption Price, including Accrued Income to the extent unavailable in the
Income Account, shall be withdrawn from the Capital Account to the extent that
funds are available for such purpose; if the available balance in the Capital
Account shall be insufficient, the Trustee shall sell Securities from among
those designated for such purpose by the Sponsors on the current list as
provided in subsection (d) below, in such amounts as shall be necessary for the
purposes of such redemption; provided, however, that no amount in the Capital
Account may be used for any redemption unless the Sponsor so directs in writing.
Instead, Units shall be redeemed by the Trustee's segregating on the books of
the Trust those Securities selected from among those designated on such current
list
<PAGE>
by the Sponsor for the account of the Holder (to the extent the value thereof is
equal to the Redemption Price (less any cash distributed from the Income and
Capital Accounts as directed by the Sponsor)). The Trustee shall sell the
Securities, any portion of which have been segregated as provided below, or
collect the redemption proceeds thereof and distribute such sale or redemption
proceeds (1) to the Holder, to the extent described in the immediately preceding
sentence, and (2) to the Capital Account, to the extent of any balance of the
sale or redemption proceeds; provided that if the Sponsor contemplates any
further deposit of Additional Securities into the Trust in accordance with
Section 3.06, the Securities to be segregated shall be selected by the Sponsor
so as to maintain, to the extent practicable, the proportionate relationship
among the number of shares of each Security then existing. In the event that
funds are withdrawn from the Capital Account or Securities are sold for payment
of any portion of the Redemption Price representing Accrued Income, the Capital
Account shall be reimbursed when sufficient funds are available in the Income
Account. As used in this Section 5.02, "Accrued Income" shall mean net accrued
but unpaid interest on Securities or interest earned on Funds deposited for
purchase of Securities as provided in Section 3.06(i) and with respect to Common
Stocks and Preferred Stocks, net dividends declared but unpaid but, except as
otherwise instructed by the Sponsors, only for the period commencing three
Business Days prior to the record date therefor and ending on the date received
by the Trustee.
"(c) If the Prospectus for the Trust provides for in- kind redemption, a
Holder who satisfies any requirements specified in such Prospectus for in-kind
redemption may, in lieu of redeeming Units in the manner provided in subsection
(b) above, redeem Units and request that a distribution in kind be made by the
Trustee to the Distribution Agent of (1) Securities (the "Securities
Distribution") equal to the fractional undivided interest represented by each
Unit in all Securities in the Trust to the extent of the Unit Value of the Units
redeemed plus (2) an amount in cash (the "Cash Distribution") equal to the Unit
Value less the value of the Securities Distribution, determined as of the
Evaluation Time next following the tender, multiplied by the number of Units
being redeemed (such Securities Distribution and Cash Distribution in the
aggregate being referred to herein as the "Redemption Distribution"). In making
a Cash Distribu- tion to the Distribution Agent the Trustee shall withdraw the
Holder's pro rata share of the cash in the Income Account and Capital Account
from such accounts to the extent that funds are available for such purpose.
"Upon receipt of a Redemption Distribution the Distribution Agent shall hold
such distribution for the account of the tendering Holder. Securities shall be
held in the name of the Distribution Agent or its nominee and cash shall be held
in a non-interest bearing account. Upon receipt of proper instructions from the
tendering Holder, the Distribution Agent shall deliver the Redemption Distri-
bution pursuant to such directions (except that if any securities received are
available only in book entry form, unless the tendering Holder designates an
agent to hold such securities in its name which agent is, or clears through, a
member of the depository for those securities, the Distribution Agent shall sell
those securities and distribute the cash proceeds, net of transaction costs, if
any) as soon as practical, as directed by such tendering Holder upon payment of
such reasonable fees set by the Trustee or the Distribution Agent to cover the
cost of delivery, including costs for shipping, handling and insurance.
<PAGE>
"Notwithstanding anything herein to the contrary, in the event that any such
tender of Units pursuant to this Section 5.02(c) would result in the
disposition, by the Trustee or the Distribution Agent, of less than a whole
Security, the Trustee or Distribution Agent shall distribute cash in lieu
thereof and sell such Securities as directed by the Sponsor as required to make
such cash available.
"(d) From time to time or at the request of the Trustee, the Sponsor shall
deliver to the Trustee and maintain a current list of Securities to be sold upon
the redemption of Units. Once Units have been tendered for redemption, the
Sponsor shall designate which of such Securities are to be sold. In connection
therewith, the Sponsor may specify the minimum number of shares of any
Securities to be sold at any one time and the date and manner in which such sale
is to be made by the Trustee. If the Sponsor fails to deliver such a list or
designate Securities to be sold, the Trustee, in its sole discretion, may, or
may hire an agent to, establish a current list of Securities for such purposes
and designate which Securities are to be sold. In connection with any sale of
Securities pursuant to this Section 5.02, the Sponsor shall furnish the Trustee
with any documents necessary for the transfer of such Securities or compliance
with transfer restrictions, if any, on such Securities.
"(e) The Trustee shall, when selling Securities, use its reasonable best
efforts to secure the best price obtainable for the Trust taking into account
any minimum number of shares or value limitations on sales that have been
specified by the Sponsor. The Trustee shall place orders with brokers (which
may include the Sponsor and its affiliates) or dealers with which it may
reasonably expect to obtain the most favorable price and execution of orders.
"In the event that it is necessary to sell any Securities other than by the
above means, and if the Sponsor shall so direct in writing accompanied by any
documents necessary to transfer such Securities or to comply with transfer
restrictions, if any, on such Security, the Trustee shall transfer any such
Securities to a participation trust with a trustee selected by the Sponsor
(which may include the Trustee, but the Trustee shall have no obligation to act
as such and may receive additional compensation for so acting) to be governed by
a trust indenture in exchange for certificates of participation in such trust
and shall then sell such certificates of participation in the manner directed by
the Sponsor. The Trustee shall be entitled to receive such written notice and
may act in reliance thereon. In the event that the moneys received upon the
sale of such certificates exceeds the amount needed to pay the Redemption Price,
the Trustee shall credit such excess to the Capital Account or the Income
Account, as appropriate, in proportion to the amounts that represent the
principal and accrued interest on the Security transferred to such participation
trust. Sales of certificates of participation in any such trust by the Trustee
shall be made in such manner as the Sponsor shall determine should realize the
best price for the Trust.
"In the event that funds are withdrawn from the Capital Account or
Securities are sold for payment of any portion of the Redemption Price
representing Accrued Income, the Capital Account shall be reimbursed when
sufficient funds are available in the Income Account.
"(f) The Trustee may, in its discretion, and shall when so directed by the
Sponsor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption
<PAGE>
Price beyond the Redemption Date (1) for any period during which the New York
Stock Exchange is closed other than customary weekend and holiday closings; (2)
for any period during which (as determined by the Securities and Exchange
Commission by rule, regulation or order) (A) trading on the New York Stock
Exchange is restricted or (B) an emergency exists as a result of which disposal
by the Trust of Securities is not reasonably practicable or it is not reasonably
practicable fairly to determine the Trust Value; or (3) for such other periods
as the Securities and Exchange Commission may by order permit. Subject to
Section 22 of the Investment Company Act, the right of redemption shall
terminate upon the earlier of the Termination Date or the giving of notice of
termination to Holders by the Trustee pursuant to Section 9.01.
"(g) Not later than the close of business on the day of tender of a Unit for
redemption by a Holder other than the Sponsor, the Trustee shall notify the
Sponsors of such tender. The Sponsor shall have the right to purchase such Unit
by notifying the Trustee of its election to make such purchase as soon as
practicable thereafter but in no event subsequent to (1) the close of business
on the second Business Day after the day on which such Unit was tendered for
redemption or (2) in the case of a tender for redemption by check, the
Redemption Date. Such purchase shall be made by payment for such Unit by the
Sponsor (1) to the Trustee on behalf of the Holder in the case of a tender for
redemption other than by check, and (2) to the Trustee in the case of a tender
for redemption by check, in either case not later than the close of business on
the Redemption Date of an amount not less than the Redemption Price which would
otherwise be payable by the Trustee to such Holder. So long as the Sponsor is
maintaining a bid in the secondary market at no less than the Redemption Price,
the Sponsor will repurchase any Unit so tendered to the Trustee for redemption.
Any Unit purchased by the Sponsor from the Trustee may at the option of the
Sponsor be tendered to the Trustee for redemption in the manner provided in
subsection (a) of this Section 5.02. The Trustee is hereby irrevocably
authorized in its discretion, but without obligation, in the event that the
Sponsor does not elect to purchase any Unit tendered to the Trustee for
redemption, or in the event that a Unit is being tendered by the Sponsor for
redemption, in lieu of redeeming such Unit, to sell such Unit in the over- the-
counter market for the account of the tendering Holder at a price which will
return to the Holder an amount in cash, net after deducting brokerage
commissions, transfer taxes and other charges, equal to or in excess of the
Redemption Price which such Holder would otherwise be entitled to receive on
redemption pursuant to this Section 5.02. The Trustee shall pay to the Holder
the net proceeds of any such sale no later than the day the Holder would
otherwise be entitled to receive payment of the Redemption Price hereunder.
"(h) Neither the Sponsors, the Trustee nor any Distribution Agent shall be
liable or responsible in any way for depreciation or loss incurred by reason of
any sale of Securities made pursuant to this Section 5.02."
(o) Section 4.01 shall be amended to read in its entirety as follows:
"Section 4.01 Evaluation of Securities. The Trustee shall determine
separately and promptly furnish to the Sponsor upon request the value of each
issue of Securities as of the Evaluation Time on the basis set forth in this
Section on the days on which the Trust Fund Evaluation is required by Section
5.01. If the Securities are listed on a national or foreign
<PAGE>
securities exchange or NASDAQ National Market System, the evaluation shall be
determined on the basis of the last reported sales price on the exchange, if
any, where the Securities are principally traded (unless the Trustee deems such
price inappropriate as a basis for valuation) or, if there is no sale price on
such exchange, at the mean between the closing bid and offering prices. If the
Securities are not so listed or, if so listed but the principal market therefor
is not on any such exchange, the evaluation shall be based on the last reported
sale prices on the over-the-counter market (unless the Trustee deems such prices
inappropriate as a basis for valuations) or, if no such sale prices are
available, (1) on the basis of the mean between current bid and offering prices
for the Securities, (2) if bid and offering prices are not available for any
Securities, on the basis of the mean between current bid and offering prices for
comparable securities, (3) by determining the value of the Securities at the
mean between the bid and offering sides of the market by appraisal or (4) by any
combination of the above. The Trustee may obtain current bid and offering prices
for the Securities from investment dealers or brokers (including the Sponsor)
that customarily deal in similar securities or from any other reporting service
or source of information which the Trustee deems appropriate. With respect to
any Security which is not listed on a national exchange, the Sponsor and the
Trustee shall, from time to time, designate one or more reporting services or
other sources of information on which the Trustee shall be authorized to rely in
evaluating such Security, and the Trustee shall have no liability for any errors
contained in the information so received. The cost thereof shall be an expense
reimbursable to the Trustee from the Income and Capital Accounts.
"For each evaluation, the Trustee shall also determine and furnish to the
Sponsor the aggregate of (a) the value of all Securities on the basis of such
evaluation and (b) cash on hand in the Trust Fund (other than cash held
specially for the purpose of Contract Securities).
"Until the Sponsor notifies the Trustee that there will be no further
deposits of Additional Securities, in making the evaluations specified in this
Section 4.01 and in Section 5.01, the Trustee shall value purchase contracts as
the Securities to be acquired thereunder, and sale contracts as the proceeds
thereof (with corresponding deductions from cash and number of shares of
Securities, respectively), as of the day on which such contracts are entered
into. Following such notification, in making the evaluations specified in this
Section 4.01 and in Section 5.01, the Trustee shall value all contracts for
purchase or sale of Securities as Securities or cash, respectively (with
corresponding deductions from cash or number of shares), as of the first
business day following the day on which contracts are entered into."
(p) Section 5.01(a) shall be amended to read as follows:
"(a) As of the Evaluation Time (x) on each December 31 and June 30 (or the
last Business Day prior thereto) commencing with the first such day which is
more than six months after the date of the Reference Trust Indenture, (y) on any
business day as of the Evaluation Time next following the tender of any Unit for
redemption, and (z) on any other Business Day desired by it or requested by the
Sponsor, the Trustee shall:
"(1) Add
<PAGE>
"(A) cash on hand in the Trust Fund, other than cash held specially for
the purchase of Contract Securities,
"(B) the aggregate value of each issue of Securities other than
Contract Securities, and
"(C) any interest and dividends receivable on stocks trading ex
dividend, and
"(D) amounts representing organizational expenses paid from the Trust
less amounts representing accrued organizational expenses of the Trust, plus
"(E) all other assets of the Trust; and
"(2) Deduct
"(A) amounts representing any applicable taxes or governmental charges
payable out of the Trust Fund and for which no deductions shall have previously
been made for the purpose of addition to the Reserve Account,
"(B) amounts representing estimated accrued fees and expenses of the
Trust Fund including but not limited to unpaid fees and expenses of the Trustee
(including legal and auditing expenses), the Sponsor and of counsel pursuant to
Section 3.10, and
"(C) cash allocated for distribution to Holders of record, or
redemption of Units, as of a date prior to the evaluation then being made.
"The resulting figure is herein called a 'Trust Fund Evaluation'. Until the
Sponsor has informed the Trustee that there will be no further deposits of
Additional Securities pursuant to Section 3.06, the Sponsor shall provide the
Trustee estimates of (i) the total organizational expenses to be borne by the
Trust pursuant to Section 10.02, (ii) the total number of Units to be issued in
connection with the initial deposit and all anticipated deposits of Additional
Securities and (iii) the period or periods over which such expenses are to be
amortized, separately stated with respect to each such amortization period. For
purposes of calculating the Trust Fund Evaluation and Unit Value, the Trustee
shall treat all such anticipated expenses as having been paid and all
liabilities therefor as having been incurred, and all units as having been
issued, respectively, on the date of the Reference Trust Agreement, and, in
connection with each such calculation, shall take into account a pro rata
portion of such expenses (and of any liability for advances made by the Trustee
for the payment thereof) based on the actual number of Units issued as of the
date of such calculation. In the event the Trustee is informed by the Sponsor
of a revision in its estimate of total expenses, total Units or period of
amortization, and upon the conclusion of the deposit of Additional Securities or
initial offering period, the Trustee shall base calculations made thereafter on
such revised estimates or actual expenses or period or amortization,
respectively, but such adjustment shall not affect calculations made prior
thereto and no adjustment shall be made in respect thereof."
<PAGE>
(q) Section 5.03 and all references thereto are deleted.
(r) For purposes of Section 7.03 the amount per year as compensation for the
Sponsor is hereby specified as the amount set forth under Investment Summary in
the Prospectus as Sponsor's Annual Fee.
(s) Section 8.01(b) shall be amended by adding the following to the clause
ending prior to the proviso beginning in the seventh line:
"or in respect of any evaluation which it is required to make, or required
or permitted to have made by others under this Indenture, or otherwise."
(t) Section 8.01 shall also be amended as follows:
In paragraph (e), the word "sub-custodians" shall be inserted following the
word "attorneys" each time it appears and the following sentence is added at the
end of such para- graph:
"The Trustee is specifically authorized to employ Citibank, N.A., as a sub-
custodian of the Trustee with respect to any non-U.S. Securities held in the
Trust Fund."
Paragraph (g)(2) shall be amended to read as follows:
"(2) The liquidation amount referred to in clause (1) shall be (i) $500,000
unless and until deposits to the Trust Fund exceed $50,000,000 in asset value,
and (ii) thereafter $20,000,000."
(u) Section 8.01 shall be amended to add new paragraphs (j), (k) and (l) as
follows:
"(j) All provisions of paragraphs (b), (c), (d), (e) and (h) of this Section
8.01 shall be deemed to apply to the Distribution Agent as fully and to the same
extent as the Trustee.
"(k) The Trustee in its individual or any other capacity may become owner or
pledgee or, or be an underwriter or dealer in respect of, stock, bonds or other
obligations issued by the same issuer (or affiliate of such issuer) or any
obligor of any Securities at any time held as part of the Trust and may deal in
any manner with the same or with the issuer (or an affiliate of the issuer) with
the same rights and powers as if it were not the Trustee hereunder.
"(l) The Trust may include a letter or letters of credit for the purchase of
Contract Securities issued by the Trustee in its individual capacity for the
account of the Sponsor, and the Trustee may otherwise deal with the Sponsor with
the same rights and powers as if it were not the Trustee hereunder."
(v) Section 8.05(d) shall be amended to add the following sentence in lieu of
that added at the conclusion of such paragraph by the Amendment dated June 27,
1994:
<PAGE>
The provisions of this paragraph shall be deemed to apply to the
Distribution Agent in respect of any loss, liability or expense arising out of
or in connection with such Agent's actions hereunder to the same extent as such
provisions apply to the Trustee with respect to its acceptance and
administration of the Trust.
(w) For purposes of Section 8.05, the amount per year specified as
compensation for the Trustee is hereby specified as the amount set forth under
Investment Summary in the Prospectus as Trustee's Annual Fee.
(x) For purposes of Section 9.01, the Termination Date shall be the dates
specified in the Prospectus under Mandatory Termination of Trust in the
Investment Summary.
(y) Section 10.02 shall be amended to read as follows:
"Section 10.02. Initial Cost. To the extent not borne by the Sponsor, the
expenses incurred in establishing a Trust, including the cost of the initial
preparation and typesetting of the registration statement, prospectuses
(including preliminary prospectuses), the indenture, and other documents
relating to a Trust, SEC and state blue sky registration fees, the costs of the
initial valuation of the portfolio and audit of a Trust, the initial fees and
expenses of the Trustee, and legal and other out-of-pocket expenses related
thereto, but not including the expenses incurred in the printing of preliminary
prospectuses and prospectuses, expenses incurred in the preparation and printing
of brochures and other advertising materials and any other selling expenses,
shall be borne by the Trust. Such expenses shall be paid from the Income
Account or, to the extent funds are not available in such Account, from the
Capital Account. To the extent the funds in the Income and Capital Accounts of
the Trust shall be insufficient to pay the expenses borne by the Trust specified
in this Section 10.02, the Trustee shall advance out of its own funds and cause
to be deposited and credited to the Income Account such amount as may be
required to permit payment of such expenses. The Trustee shall be reimbursed
for such advance on each Record Date from funds on hand in the Income Account
or, to the extent funds are not available in such Account, from the Capital
Account in the amount deemed to have accrued as of such Record Date as provided
in the following sentence (less prior payments on account of such advances, if
any), and the provisions of Section 8.04 with respect to the reimbursement of
disbursements for Trust expenses, including, without limitation, the lien in
favor of the Trustee therefor and the authority to sell Securities as needed to
fund such reimbursement, shall apply to the expenses paid and amounts advanced
pursuant to this Section. For the purposes of the preceding sentence and the
addition provided in clause (1)(D) of Section 5.01, the expenses borne by the
Trust pursuant to this Section shall be deemed to have been paid on the date of
the Reference Trust Agreement and to accrue at a daily rate over the time period
specified for their amortization by the Sponsor pursuant to Section 5.01;
provided, however, that nothing herein shall be deemed to prevent, and the
Trustee shall be entitled to, full reimbursement for any advances made pursuant
to this Section no later than the termination of the Trust. For purposes of this
Section 10.02, the Trustee may rely on the written estimates of such expenses
provided by the Sponsor pursuant to Section 5.01."
This Indenture shall be deemed effective when executed and delivered by the
Sponsor and the Trustee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture
to be duly executed.
SMITH BARNEY INC.
Sponsor
By: /s/ Kevin E. Kopczynski
------------------------
First Vice President
<PAGE>
THE CHASE MANHATTAN BANK, Trustee
By: /s/ Thomas Porrazzo
------------------------------
Vice President
(SEAL)
ATTEST:
By: /s/ Robert Ionescu
-----------------------
<PAGE>
Exhibit 3.1
September 10, 1997
Smith Barney Inc.
Unit Trust Department
388 Greenwich Street, 23rd Floor
New York, New York 10013
Re: Equity Focus Trusts - REIT Portfolio Series, 1997
Dear Sirs:
We have acted as special counsel for Smith Barney Inc. as Depositor,
Sponsor and Principal Underwriter (the "Depositor") of Equity Focus Trusts -
REIT Portfolio Series, 1997(the "Trust") in connection with the deposit of
securities (the "Securities") therein pursuant to the Trust Agreement referred
to below, by which the Trust was created and under which the units of fractional
undivided interest (the "Units") have been issued. Pursuant to the Trust
Agreement the Depositor has transferred to the Trust certain securities and
contracts to purchase certain securities together with irrevocable letters of
credit to be held by the Trustee upon the terms and conditions set forth in the
Trust Agreement. (All securities to be acquired by the Trust are collectively
referred to as the "Securities".)
In connection with our representation, we have examined the originals or
certified copies of the following documents relating to the creation of the
Trust, the deposit of the Securities and the issuance and sale of the Units: (a)
the Standard Terms and Condition of Trust dated July 2, 1985, as amended on June
27, 1994, and the Reference Trust Indenture of even date herewith relating to
the Trust (collectively, the "Trust Agreement") between the Depositor and The
Chase Manhattan Bank as Trustee; (b) the Closing Memorandum relating to the
deposit of the Securities in the Trust; (c) the Notification of Registration on
Form N-8A and the Registration Statement on Form N-8B-2, as amended, relating to
the Trust, as filed with the Securities and
<PAGE>
Exchange Commission (the "Commission") pursuant to the Investment Company Act of
1940 (the "1940 Act"); (d) the Registration Statement on Form S-6 (Registration
No. 333-28705) filed with the Commission pursuant to the Securities Act of 1933
(the "1933 Act"), and Amendment No. 1 thereto (said Registration Statement, as
amended by said Amendment No. 1 being herein called the "Registration
Statement"); (e) the proposed form of final prospectus (the "Prospectus")
relating to the Units, which is expected to be filed with the Commission on or
about September 11, 1997; (f) resolutions of the Executive Committees of the
Depositor authorizing the execution and delivery by the Depositor of the Trust
Agreement and the consummation of the transactions contemplated thereby; (g) the
Certificates of Incorporation and By-laws of the Depositor, each certified to by
an authorized officer of the Depositor as of a recent date; (h) a certificate of
an authorized officer of the Depositor with respect to certain factual matters
contained therein ("Officers Certificate"); and (i) certificates or telegrams of
public officials as to matters set forth upon therein.
We have assumed the genuineness of all agreements, instruments and documents
submitted to us as originals and the conformity to originals of all copies
thereof submitted to us. We have also assumed the genuineness of all signatures
and the legal capacity of all persons executing agreements, instruments and
documents examined or relied upon by us.
Where matters are stated to be "to the best of our knowledge" or "known to
us," our knowledge is limited to the actual knowledge of those attorneys in our
office who have performed services for the Trust, their review of documents
provided to us by the Depositor in connection with this engagement and inquiries
of officers of the Depositor, the results of which are reflected in the Officers
Certificate. We have not independently verified the accuracy of the matters set
forth in the written statements or certificates upon which we have relied. We
have not reviewed the financial statements, compilation of the Securities held
by the Trust, or other financial or statistical data contained in the
Registration Statement and the Prospectus, as to which we understand you have
been furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus. In addition, we have made no specific inquiry as
to whether any stop order or investigatory proceedings have been commenced with
respect to the Registration Statement or the Depositor nor have we reviewed
court or governmental agency dockets.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations under
equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the State
of New York and we do not hold ourselves out as experts in or express any
opinion as to the laws of other states or jurisdictions except as to matters of
Federal and Delaware corporate law. No opinion is expressed as to the effect
that the law of any other jurisdiction might have upon the subject matter of the
opinions expressed herein under applicable conflicts of law principles, rules or
regulations or otherwise.
<PAGE>
Based on and subject to the foregoing, we are of the opinion that:
(1) The Trust Agreement has been duly authorized and executed and delivered
by an authorized officer of the Depositor and is valid and binding obligations
of the Depositor in accordance with its terms.
(2) The execution and delivery of the Certificates evidencing the Units has
been duly authorized by the Depositor and such Certificates when executed by the
Depositor and the Trustee in accordance with the provisions of the Certificates
and the Trust Agreement and issued for the consideration contemplated therein,
will constitute fractional undivided interests in the Trust, and will be
entitled to the benefits of the Trust Agreement. Upon payment of the
consideration for the Units as provided in the Trust Agreement and the
Registration Statement, the Units will be fully paid and non-assessable by the
Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Taxes" and "Legal Opinion". This
opinion is intended solely for the benefit of the addressee in connection with
the issuance of the Units of the Trust and may not be relied upon in any other
manner or by any other person without our express written consent.
Very truly yours,
Battle Fowler LLP
<PAGE>
EXHIBIT 99.5.1
CONSENT OF INDEPENDENT AUDITORS
The Sponsor, Trustee and Unit Holders of
Equity Focus Trust - REIT Porfolio Series, 1997:
We consent to the use of our report dated September 10, 1997 included
herein and to the reference to our firm under the heading "Auditors" in the
Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
September 10, 1997
