<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1998
REGISTRATION NO. 333-41533
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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
S.T.A.R.T. 1998 SERIES
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.
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<PAGE>
EQUITY FOCUS
TRUSTS
------------------------------------------------
S.T.A.R.T. 1998 SERIES
(SALOMON SMITH BARNEY'S TOP
ANALYST RECOMMENDATIONS TRUST)
A Unit Investment Trust
SalomonSmithBarney The Equity Focus Trusts--S.T.A.R.T. 1998 Series
- -------------------------- is a unit investment trust that offers investors
A Member of TravelersGroup the opportunity to purchase Units representing
[LOGO] proportionate interests in a portfolio of 29
equity securities from among those selected by
Salomon Smith Barney Equity Research as "Top
Picks" in more than 100 industry groups. The
value of the Units will fluctuate with the value
of the underlying securities and the Trust is not
appropriate for investors requiring high current
income or conservation of capital. An investment
in Units of the Trust will be redeemed on the
Special Redemption Date (approximately one year
from the Initial Date of Deposit) unless the
Holder elects in writing to hold Units through
the Mandatory Termination Date of the Trust
(approximately two years from the Initial Date of
Deposit). The minimum purchase is $250.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 15, 1998
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES
INVESTMENT SUMMARY AS OF JANUARY 14, 1998+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
INITIAL NUMBER OF UNITS++.......................................... 1,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT.... 1/1,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)............................
Aggregate value of Securities in Trust............................ $ 990,775
===========
Divided by 1,000,000 Units
(times 1,000).................................................... $ 990.78
Plus sales charge of 2.75% of Public Offering Price (2.778% of the
net amount invested in Securities)*+++........................... $ 27.52
Less Deferred Sales Charge per 1,000 Units........................ 17.50
-----------
Public Offering Price per 1,000 Units............................. $ 1,000.80
Plus the amount per 1,000 Units in the Income and Capital Accounts
(see Description of the Trust--Income)........................... $ -0-
-----------
Total (per 1,000 Units)........................................... $ 1,000.80
===========
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 1,000 UNITS
(based on value of underlying securities)........................ $ 973.28
DISTRIBUTIONS
Distributions of income, if any, will be made on November 25, to Holders of
record on November 10, of each year and will be automatically reinvested in
additional Units of this Trust unless the Holder elects to receive his
distribution in cash. A Final Distribution will be made upon termination of
the Trust.
SPONSOR'S PROFIT ON DEPOSIT........................................ $ 2,286
</TABLE>
<TABLE>
<S> <C>
TRUSTEE'S ANNUAL FEE
$.76 per 1,000 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units
(see Expenses and Charges)
RECORD DAY
November 10 of each year
DISTRIBUTION DAY
</TABLE>
November 25 of each year, and upon termination and liquidation of the Trust.
EVALUATION TIME
4:00 P.M New York time (or earlier close of the New York Stock Exchange).
TRUSTEE AND DISTRIBUTION AGENT
The Chase Manhattan Bank
MINIMUM VALUE OF TRUST
The trust indenture between the Sponsor and the Trustee (the "Indenture") may
be terminated if the net asset value of the Trust is less than $5,000,000,
unless the net asset value of Trust deposits has exceeded $50,000,000. In
that case, the Indenture may be terminated if the net asset value of the
Trust is less than $20,000,000. See Risk Factors, page 3.
SPECIAL REDEMPTION DATE
February 22, 1999 (the "Special Redemption Date").
MANDATORY TERMINATION OF TRUST
January 28, 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.
DEFERRED SALES CHARGE PAYMENT DATES
April 16, 1998 and the first day of each month thereafter commencing May 1,
1998 through January 1, 1999.
- ------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on January 14, 1998. Valuation of Securities is based on the
market value per share as of January 14, 1998, as more fully explained in
footnote 4 to Portfolio on page 12. After the Initial Date of Deposit,
Securities quoted on a national securities exchange or the Nasdaq National
Market, or a foreign securities exchange, are valued at the closing sale price
or, if no price exists, at the mean between the closing bid and offer prices.
Securities not so quoted are valued at the mean between bid and offer prices.
++ The Sponsor may create additional Units during the offering period of the
Trust.
+++ The sales charge will be reduced on a graduated scale in the case of
quantity purchases. See Public Sale of Units--Public Offering Price.
* The sales charge consists of an Initial Sales Charge and a Deferred Sales
Charge. The Initial Sales Charge is computed by deducting the Deferred Sales
Charge imposed prior to the Special Redemption Date ($17.50 per 1,000 Units)
from the aggregate first year sales charge (a maximum of 2.75% of the Public
Offering Price). On January 14, 1998, the Initial Date of Deposit, the Initial
Sales Charge is $10.02 per 1,000 Units (or 1.00% of the Public Offering Price).
The Deferred Sales Charge during the first year of the Trust is paid through
reduction of Trust assets by $1.75 per 1,000 Units on each Deferred Sales
Charge Payment Date. Holders who elect to hold Units after the Special
Redemption Date will be charged an additional deferred sales charge in the
amount of $10.00 per 1,000 Units in ten monthly installments of $1.00 each on
the first day of each month commencing March 1, 1999. This additional deferred
sales charge will not be imposed on Holders who do not elect to hold Units
after the Special Redemption Date. Upon a repurchase, redemption or exchange of
Units before January 1, 1999, any remaining first year Deferred Sales Charge
payments will be deducted from the proceeds.
** This price reflects deductions for remaining Deferred Sales Charge payments
($17.50 per 1,000 Units initially). All redemptions of 250,000 Units or more
may, upon request by a redeeming Holder, be made in kind to the Distribution
Agent, who will either forward the distributed securities to the Holder or sell
the securities on behalf of the redeeming Holder and distribute the proceeds
(net of any brokerage commission or other expenses incurred in the sale) to the
Holder. See Redemption.
2
<PAGE>
HOW TO S.T.A.R.T. '98
A GUIDE FOR INVESTORS
Why not S.T.A.R.T. each new year with a review of your investment portfolio?
After all, it's a good time to see how your assets are divided among stocks,
bonds and other types of investments; and check on how individual holdings fit
into today's economic and market environment.
This approach is not just for our clients; it's a discipline Smith Barney
has followed for some time. In fact, as each new year approaches, our equity
research analysts are asked to select the stock from the industry or stock
area of the market they cover to become that sector's "Top Pick" for the
coming year. And this year, our selection process drew from the combined
resources offered through Smith Barney Inc. and Salomon Brothers Inc, as our
two firms joined forces in December 1997.
ANNOUNCING S.T.A.R.T. '98
Our analysts have now selected the 1998 list of "Top Picks." The question
is, which are best positioned for the new year? They could be among the 29
holdings of S.T.A.R.T. '98, a unit investment trust. These stocks were
"handpicked" by our equity strategists, based on trends they see emerging in
the market and the economy.
S.T.A.R.T. '98
INVESTING MADE EASY
Growth oriented investors can take a "portfolio approach" to the market, and
buy 29 of our top recommendations with one easy purchase. The Trust will
remain fixed over the trusts life. Then, as it reaches maturity, investors may
have the opportunity to reinvest into the next S.T.A.R.T. series at a reduced
sales charge, if it is available. Or, just take the proceeds in cash.
KEY FEATURES AT A GLANCE
PROFESSIONAL SELECTION
Through our extensive resources in equity research, more than 100 industry
groups and stock areas of the market are covered by our analysts, both in
the U.S. and abroad.
A "PORTFOLIO APPROACH" TO INVESTING
With one easy purchase, you can buy 29 of Salomon Smith Barney's top
equity recommendations for the coming year.
A LOW MINIMUM INVESTMENT
All you need is $250 to get started.
LIQUIDITY
Units can be sold at any time. Since unit prices fluctuate, proceeds may
be more or less than your cost.
EXCHANGE OPTION
Approximately one year after the offering, you will have the option to
"roll over" proceeds of the Trust into a new series, if available, at a
reduced sales charge.
ONE-YEAR EXTENSION OPTION
At the end of approximately one year, you will have the option to
participate in a one year extension of the Trust--which could allow for
favorable tax treatment on any long-term capital gains.
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES
INVESTMENT SUMMARY AS OF JANUARY 14, 1998 (CONTINUED)
OBJECTIVE OF THE TRUST -- The objective of the Trust is to provide investors
with the possibility of capital appreciation through a convenient and cost-
effective investment in a fixed portfolio consisting of shares of common stocks
and any similar securities (the "Securities") selected by the Sponsor for the
Trust portfolio (the "Portfolio"). The Sponsor has selected for the Portfolio,
securities which it considers to have the best possibility for capital
appreciation over a period of one year relative to risks and opportunities. The
payment of dividends is not a primary objective of the Trust. Achievement of
the Trust's objective is dependent upon several factors including the financial
condition of the issuers of the Securities and any appreciation of the
Securities. Furthermore, because of various factors, including without
limitation, Trust sales charges and expenses, unequal weightings of securities,
brokerage costs and possible delays in purchasing securities with cash
deposited, investors in the Trust may not realize as high a total return as the
theoretical performance of the underlying securities in the Portfolio.
PORTFOLIO -- The Portfolio contains 29 common stocks issued by companies
engaged primarily in the following industries: consumer cyclicals, 4;
technology, 4; energy, 3; financials, 3; communications equipment and services,
2; conglomerates, 2; consumer staples, 2; health care, 2; raw and intermediate
materials, 2; capital goods, 1; commercial services, 1; office equipment, 1;
transportation, 1; and wholesale/specialty, 1. One of the communications
equipment and services issues, Ericsson (LM) Tel B ADS, is an American
Depositary Shares. Although there are certain risks of price volatility
associated with investment in common stocks (particularly with an investment in
one or two common stocks), your risk is reduced because your capital is divided
among securities from different industry groups. (See Risk Factors.)
With the initial deposit of Securities the Sponsor established a
proportionate relationship among the number of shares of each stock deposited
in the Portfolio. During the 90-day period following the Initial Date of
Deposit, the Sponsor may create additional Units by depositing cash (or a bank
letter of credit in lieu of cash) with instructions to purchase Securities,
additional Securities or contracts to purchase additional Securities
maintaining to the extent practicable the original proportionate relationship
among the number of shares of each stock and similar interests in the
Portfolio. Replacement Securities may be acquired under specified conditions.
It may not be possible to maintain the exact original proportionate
relationship among the Securities deposited on the Initial Date of Deposit
because of, among other reasons, purchase requirements, changes in price or the
unavailability of Securities. Any deposits of Securities after the 90-day
period must replicate exactly the proportionate relationship among the number
of shares and similar interests comprising the Portfolio at the end of the
initial 90-day period, subject to certain events discussed under Administration
of the Trust--Trust Supervision. The Sponsor may cease creating Units
(temporarily or permanently) at any time. (See Administration of the Trust --
Trust Supervision.)
RISK FACTORS -- Investment in the Trust should be made with an understanding
that the value of the underlying Securities, and therefore the value of the
Units, will fluctuate, depending on the full range of economic and market
influences which may affect the market value of the Securities, including the
profitability and financial condition of issuers, conditions in a given
issuer's industry, market conditions and values of common stocks generally, the
impact of the Sponsor's buying and selling Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units, and
other factors.
3
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES
INVESTMENT SUMMARY AS OF JANUARY 14, 1998 (CONTINUED)
The Trust is not appropriate for investors requiring high current income or
conservation of capital. Securities representing approximately 29.84% of the
value of the Portfolio have been ranked High Risk by the Sponsor's Research
Department, described as "low predictability of earnings/dividends; high price
volatility".
If cash (or a letter of credit in lieu of cash) is deposited with
instructions to purchase Securities in connection with the issuance of
additional Units during the Public Offering Period, there is the risk that the
price of a Security will increase between the time of the deposit and the time
the Security is purchased resulting in a reduction in the number of shares or
similar interests purchased for the Portfolio. Price fluctuations during the
period from the time of deposit of cash to the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every
Holder's Units, the number of shares or similar interests of each Security
represented by each Unit and the income per Unit received by the Trust. Some of
the Securities may have limited trading volume, and, while the Sponsor will
endeavor to purchase Securities with deposited cash as soon as practicable, it
reserves the right to purchase those Securities over the 20 business days
following each deposit in an effort to reduce the effect of these purchases on
the market price of those securities. This could, however, result in the
Trust's failure to participate in any appreciation of those securities before
the cash is invested. If any cash remains at the end of this period and cannot
be invested in one or more securities at what the Sponsor considers reasonable
prices, it intends to use that cash to purchase each of the other securities in
the original proportionate relationship among those securities. Similarly, at
termination of the Trust, the Sponsor reserves the right to sell Securities
over a period of up to 20 business days to lessen the impact of its sales on
the market price of the Securities. The proceeds received by Holders following
termination of the Trust will reflect the actual sales proceeds received on the
Securities, which will likely differ from the closing sale price on the
Mandatory Termination Date. (See Description of the Trust -- Risk Factors.)
Common stocks may be especially susceptible to general stock market movements
and to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. Investors should be aware that there can be
no assurance that the value of the underlying Securities will increase or that
the issuers of the Securities will pay dividends on outstanding shares. Any
distributions of income to Holders will generally depend upon the declaration
of dividends by the issuers of the Securities and the declaration of any
dividends depends upon several factors including the financial condition of the
issuers and general economic conditions.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsor
receives no management fee. Therefore, the adverse financial condition of an
issuer will not necessarily require the sale of Securities from the Portfolio
or mean that the Sponsor will not continue to purchase the Security in order to
create additional Units. Investors should note in particular that the
Securities were selected on the basis of the criteria set forth above under
Objective of the Trust and that the Trust may continue to purchase or hold
Securities originally selected through this process even though the evaluation
of the attractiveness of the Securities may have changed. In the event a public
tender offer is made for a Security or a merger or acquisition is announced
affecting a Security, the Sponsor may instruct the Trustee to tender or sell
the Security on the open market when, in its opinion, it is in the best
interest of the holders of the Units to do so. Although the Portfolio is
regularly reviewed and evaluated and the Sponsor may instruct the Trustee to
sell Securities under certain limited circumstances, Securities will not be
sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. As a result, the amount realized upon the
sale of the Securities may not be the highest price attained by an
4
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES
INVESTMENT SUMMARY AS OF JANUARY 14, 1998 (CONTINUED)
individual Security during the life of the Trust. The Sponsor has currently
assigned certain rankings to the issuers of Securities based on stock
performance expectations and level of risk (see footnote 2 to Portfolio on page
12). These rankings are subject to change. Securities will not necessarily be
sold by the Trust based on a change in rankings, although the Sponsor intends
to review the desirability of holding any Security if its ranking is reduced
below 3. The prices of single shares of each of the Securities in the Trust
vary widely, and the effect of a dollar of fluctuation, either higher or lower,
in security prices will be much greater as a percentage of the lower-price
securities' purchase price than as a percentage of the higher-price securities'
purchase price.
An investment in Units of the Trust will terminate approximately one year
from the Initial Date of Deposit unless the Holder elects in writing to remain
invested in the Trust through the Mandatory Termination Date. If a Holder makes
no election by the Special Redemption Date, the Holder's Units will be redeemed
on such date and such Holder will receive cash representing their pro rata
portion of the Trust's assets. In the event that a Holder realizes capital
gains upon the sale or redemption of their Units prior to holding such Units
for more than 18 months, such Holder will not benefit from the reduced federal
long-term capital gains rate of 20%. Investors should note that should the size
of the Trust be reduced below the Minimum Value of Trust stated on page 2 as a
result of this redemption process, or otherwise, the Trust may be terminated at
that time by the Sponsor, well before the Mandatory Termination Date of the
Trust. This could cause a Holder who elects to hold Units after the Special
Redemption Date to receive a distribution of proceeds prior to holding such
Units for more than 18 months notwithstanding such election. As an additional
result of the redemption process and the fact that the Trust has certain fixed
expenses, those Holders who elect to hold Units after the Special Redemption
Date may bear higher annual trust operating expenses per Unit than those during
the first year of the Trust.
Any difference between the aggregate prices the Sponsor paid to acquire the
Securities and the aggregate prices at which Securities were initially
deposited in the Trust is noted on page 2 under Sponsor's Profit or (Loss) on
Deposit. The Sponsor's profit or loss on the deposit of Securities largely
depends on whether the prices of the Securities rise in response to the
Sponsor's purchases of possibly large volumes of the Securities for initial and
subsequent deposits in the Trust. The effect of the Sponsor's purchases of
Securities on the prices of the Securities is unpredictable.
FOREIGN SECURITIES AND AMERICAN DEPOSITARY SHARES -- The Trust may contain
Securities of foreign issuers or American Depositary Shares ("ADSs") for
securities that have been issued by non-United States issuers. These
instruments are subject to special considerations in addition to those
affecting common stocks of United States issuers. For a discussion of special
considerations relating to foreign securities and ADSs, see Description of the
Trust -- Risk Factors; Taxes.
PRIVATE PLACEMENTS; UNDERWRITING -- None of the Securities in the Trust
consists of privately-placed common stocks. Except as indicated under
Portfolio, the Sponsor has not participated as sole underwriter, managing
underwriter or member of an underwriting syndicate from which any of the
Securities in the Trust were acquired.
PUBLIC OFFERING PRICE -- The Public Offering Price per 1,000 Units is equal
to the aggregate value of the underlying Securities and any cash held to
purchase Securities, divided by the number of Units outstanding times 1,000,
plus the applicable sales charge. The total sales charge consists of an Initial
Sales Charge and a Deferred
5
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES
INVESTMENT SUMMARY AS OF JANUARY 14, 1998 (CONTINUED)
Sales Charge, the total of which equals a maximum of 2.75%* of the Public
Offering Price; this results in a sales charge of 2.778%* of the net amount
invested in underlying Securities. The Initial Sales Charge is computed by
deducting the Deferred Sales Charge ($17.50 per 1,000 Units) from the aggregate
sales charge. On January 14, 1998 the Initial Sales Charge is $10.02 per 1,000
Units (1.00% of the Public Offering Price). The Initial Sales Charge is
deducted from the purchase price of a Unit at the time of purchase and paid to
the Sponsor, it may be more or less than 1.00% of the Public Offering Price
because of fluctuations in value of the Securities. The Deferred Sales Charge
is paid through a reduction of the net asset value of the Trust by $1.75 per
1,000 Units on each of the ten monthly Deferred Sales Charge Payment Dates,
commencing on April 16, 1998 and will be charged on the first day of each month
thereafter from May 1, 1998 through January 1, 1999. In addition, Holders who
elect to hold Units subsequent to the Special Redemption Date will be subject
to a deferred sales charge of $10.00 per 1,000 Units which will be imposed
after such date in the manner described under Public Sale of Units--Public
Offering Price. This would increase the total maximum sales charge to 3.75% of
the Public Offering Price. 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 $250. 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 (net of expenses) and any
principal received by the Trust will be automatically reinvested in additional
Units of the Trust at no extra charge and each Holder of Units will participate
unless the Holder elects to receive distributions of dividends or principal, or
both, in cash. Holders who reinvest their distributions will receive additional
Units and will therefore own a greater percentage of the Trust than Holders who
receive cash distributions (see Reinvestment Plan). Distribution and Record
Days are shown on page 2. As soon as practicable after termination of the Trust
(generally after seven days), the Trustee will distribute to each Unitholder
his pro rata share of the amount realized on disposition of the Securities
remaining in the Trust plus any other assets then in the Trust, less expenses
of the Trust. The other assets of the Trust will include any dividends,
interest income and net realized capital gains which have not been distributed.
The total distribution may be less than the amount paid for Units.
MARKET FOR UNITS -- The Sponsor, though not obligated to do so, intends from
the commencement of the Trust to maintain a market for Units and continually to
offer to purchase Units from Holders desiring to sell them at a price based on
the aggregate value of the underlying Securities (see Market for Units).
Whenever a market is not maintained, a Holder may be able to dispose of his
Units only through redemption (see Redemption).
TERMINATION -- An investment in Units of the Trust will terminate on or
before the Special Redemption Date (approximately thirteen months from the
Initial Date of Deposit) unless a Holder elects in writing to remain invested
in the Trust through the Mandatory Termination Date (approximately two years
from the Initial Date of Deposit). Approximately one year from the Initial Date
of Deposit (but no later than the Special Redemption
- ------------
* This sales charge will be reduced on a graduated scale in the case of
quantity purchases. See Public Sale of Units -- Public Offering Price.
6
<PAGE>
EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES
INVESTMENT SUMMARY AS OF JANUARY 14, 1998 (CONTINUED)
Date) and at the termination of the Trust, Holders will be given three options
in receiving their terminating distributions: (1) to receive their pro rata
share of the underlying Securities in-kind, if they own at least 250,000 Units;
(2) to receive cash upon liquidation of their pro rata share of the underlying
Securities; or (3) to invest the amount of cash they would have received upon
the liquidation of their pro rata share of the underlying Securities in units
of a future series of the Equity Focus Trusts, S.T.A.R.T. Series (if one is
offered) at a reduced sales charge (see Exchange and Rollover Privileges). In
addition, on or before the Special Redemption Date the Holder may elect to
continue to hold their Units through the Mandatory Termination Date or earlier
termination of the Trust. Holders who make no election by the Special
Redemption Date will have their Units redeemed and will receive a cash
distribution of the proceeds. See Administration of the Trust -- Amendment and
Termination.
7
<PAGE>
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>
<CAPTION>
AS A % OF INITIAL AMOUNTS PER
PUBLIC OFFERING PRICE 1,000 UNITS
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price).................................... 1.00%* $10.00
Deferred Sales Charge***................... 1.75%** 17.50
----- ------
Total.................................... 2.75% $27.50
===== ======
Maximum Sales Charge Imposed per year on
Reinvested Dividends...................... 1.75% $17.50****
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<CAPTION>
AS A % AMOUNTS PER
OF NET ASSETS 1,000 UNITS
--------------------- -----------
<S> <C> <C>
Trustee's Fee.............................. .077% $ 0.76
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees................... .025% $ 0.25
Organizational Expenses.................... .089% $ 0.88
Other Operating Expenses................... .011% $ 0.11
----- ------
Total.................................... .202% $ 2.00
===== ======
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR PERIOD:
---------------------------------
1 2
YEAR YEARS
---- -----
<S> <C> <C>
An investor would pay the following expenses
and charges on a $1,000 investment,
assuming the Trust's estimated operating
expense ratio of .202% in the first year
and .113% in the second year and a 5%
annual return on the investment throughout
the periods................................ $ 30 $ 41
</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 Underwriters at no cost to the Trust.
- ------------
* The Initial Sales Charge is the difference between 2.75% and the Deferred
Sales Charge ($17.50 per 1,000 Units) and would exceed 1.00% if the Public
Offering Price exceeds $1,000 per 1,000 Units.
** The actual fee is $1.75 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge Payment
Date. If the Holder sells, exchanges or redeems Units before all of these
deductions have been made, the balance of the Deferred Sales Charge will
be paid from the sales proceeds. If the Unit price exceeds $1.00 per Unit,
the Deferred Sales Charge will be less than 1.75%; if the Unit price is
less than $1.00 per Unit, the Deferred Sales Charge will exceed 1.75%.
Holders who do not elect to hold Units subsequent to the Special
Redemption Date will be subject only to this 1.75% Deferred Sales Charge
imposed during the first year of the Trust.
*** In addition to the Deferred Sales Charge set forth above, Holders who
elect to hold Units subsequent to the Special Redemption Date will be
subject to a deferred sales charge of $10.00 per 1,000 Units which will be
imposed after such date in the manner described under Public Sale of
Units--Public Offering Price. This would increase the total maximum sales
charge for such Holders to 3.75% of the Public Offering Price.
**** Reinvested dividends will be subject only to the Deferred Sales Charge
remaining at the time of reinvestment which may be more or less than 1.75%
of the Public Offering Price at the time of reinvestment (see Reinvestment
Plan).
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts, S.T.A.R.T. 1998
Series:
We have audited the accompanying statement of financial condition, including
the portfolio, of Equity Focus Trusts, S.T.A.R.T. 1998 Series, as of January
14, 1998. This financial statement is the responsibility of the Trustee (see
note 6 to the statement of financial condition). Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial condition
is free of material misstatement. An audit of a statement of financial
condition includes examining, on a test basis, evidence supporting the amounts
and disclosures in that statement of financial condition. Our procedures
included confirmation with the Trustee of an irrevocable letter of credit
deposited on January 14, 1998, for the purchase of securities, as shown in the
statement of financial condition and portfolio of securities. An audit of a
statement of financial condition also includes assessing the accounting
principles used and significant estimates made by the Trustee, as well as
evaluating the overall statement of financial condition presentation. We
believe that our audit of the statement of financial condition provides a
reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the financial position of Equity
Focus Trusts, S.T.A.R.T. 1998 Series, as of January 14, 1998, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
January 14, 1998
9
<PAGE>
EQUITY FOCUS TRUSTS
S.T.A.R.T. 1998 SERIES
STATEMENT OF FINANCIAL CONDITION AS OF INITIAL DATE OF DEPOSIT, JANUARY 14,
1998
<TABLE>
<S> <C>
TRUST PROPERTY
Investment in Securities:
Contracts to purchase Securities(1)............................... $ 990,775
Organizational costs(2)........................................... 176,044
----------
Total........................................................... 1,166,819
==========
LIABILITIES
Accrued Expenses(2)................................................ 176,044
Deferred Sales Charge(3)........................................... 17,514
----------
193,558
----------
INTEREST OF UNITHOLDERS
1,000,000 Units of fractional undivided interest outstanding:
Cost to investors(4).............................................. $1,000,783
Less: Gross underwriting commissions(5)........................... 27,522
----------
Net amount applicable to investors................................ 973,261
----------
Total........................................................... $1,166,819
==========
</TABLE>
- ------------
(1) Aggregate cost to the Trust of the Securities listed under Portfolio on
the Initial Date of Deposit is determined by the Trustee on the basis set
forth in footnote 4 to the Portfolio on page 12. See also the columns
headed Cost of Securities to Trust. An irrevocable letter of credit in the
amount of $2,000,000 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 first year of the Trust. Organizational costs have
been estimated based on projected total assets of $198 million. To the
extent the Trust is larger or smaller, the amount paid may vary.
(3) A first year Deferred Sales Charge is payable in ten monthly payments of
$1.75 per 1,000 Units commencing on April 16, 1998. Distributions will be
made to an account maintained by the Trustee from which the Deferred Sales
Charge obligation of the investors to the Sponsor will be satisfied. If
Units are redeemed prior to January 1, 1999 the remaining portion of the
first year Deferred Sales Charge applicable to such Units will be
transferred to such account on the redemption date.
(4) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(5) Assumes the maximum first year Sales Charge per 1,000 Units of 2.75% of
the Public Offering Price.
(6) 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.
10
<PAGE>
PORTFOLIO OF EQUITY FOCUS TRUSTS--S.T.A.R.T. 1998 SERIES ON THE INITIAL
DATE OF DEPOSIT, JANUARY 14, 1998
-----------------------------------------------------------------------------
<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> <C>
Altera Corporation*# ALTR 1-H 1,100 3.60% $ 35,681
Cable Design Technolo-
gies# CDT 1-H 1,200 3.22 31,950
Colgate-Palmolive CL 2-L 500 3.50 34,719
Crompton & Knowles CNK 1-M 1,300 3.48 34,531
Disney (Walt) Co. DIS 1-M 350 3.41 33,797
El Paso Natural Gas EPG 1-M 500 3.22 31,906
Ericsson (LM) Tel B ADS* ERICY 1-M 900 3.45 34,144
Federal National Mort-
gage# FNM 1-M 600 3.62 35,850
First Union Corp.# FTU 1-M 700 3.50 34,650
Fluor Corp. FLR 1-H 900 3.61 35,775
Ford Motor F 2-M 700 3.43 33,950
General Electric GE 1-L 450 3.38 33,469
HBO & Co.*# HBOC 1-H 700 3.29 32,550
International Business
Machines# IBM 1-M 350 3.63 35,984
Lilly (Eli) LLY 1-M 500 3.45 34,156
Mead Corp. MEA 1-M 1,200 3.54 35,100
Mirage Resorts# MIR 1-M 1,600 3.61 35,800
Noble Drilling Corp. NE 1-M 1,400 3.63 35,962
NOVA Corp.# NIS 1-H 1,300 3.08 30,550
Phillip Morris Companies MO 1-H 700 3.32 32,900
Public Storage# PSA 1-M 1,100 3.55 35,131
Schlumberger Ltd SLB 1-L 450 3.34 33,131
Tel-Save Holdings*# TALK 1-H 1,300 3.38 33,475
Textron, Inc.# TXT 1-M 600 3.57 35,363
Thermo Electron TMO 1-M 900 3.68 36,450
UAL Corp. UAL 1-M 400 3.56 35,250
U.S. Office Products*# OFIS 1-H 1,700 3.25 32,194
U.S.A. Floral Products*# ROSI 1-H 1,900 3.09 30,638
Wal-Mart Stores WMT 1-L 900 3.61 35,719
------ --------
100.00% $990,775
====== ========
</TABLE>
11
<PAGE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on January 14, 1998.
All contracts for domestic Securities are expected to be settled by the
initial settlement date for the purchase of Units.
(2) Salomon 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 Salomon Smith Barney research
analysts and are, of course, subject to change; no assurance can be given that
the stocks will perform as expected. These rankings have not been audited by
KPMG Peat Marwick LLP.
(3) Per 1,000,000 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on January 14, 1998. Subsequent to the
Initial Date of Deposit, Securities are valued, for Securities quoted on a
national securities exchange or Nasdaq National Market, or a foreign
securities exchange, at 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 Inc. and/or Salomon Brothers Inc, including subsidiaries and/or
affiliates usually makes a market in the securities of this company.
# Within the last three years, Smith Barney Inc. and/or Salomon Brothers Inc,
including subsidiaries and/or affiliates have acted as manager or co-
manager of a public offering of the securities of this company or an
affiliate.
12
<PAGE>
DESCRIPTION OF THE TRUST
STRUCTURE AND OFFERING
This Series of Equity Focus Trusts (the "Trust") is a "unit investment
trust" created under New York law by a Trust Indenture (the "Indenture")*
between the Sponsor and the Trustee. On the date of this Prospectus, each unit
of the Trust (a "Unit") represented a fractional undivided interest in the
securities listed under Portfolio (the "Securities") set forth under
Investment Summary. Additional Units of the Trust will be issued in the amount
required to satisfy purchase orders by depositing in the Trust cash (or a bank
letter of credit in lieu of cash) with instructions to purchase Securities,
contracts to purchase Securities together with irrevocable letters of credit,
or additional Securities. On each settlement date (estimated to be three
business days after the applicable date on which Securities were deposited in
the Trust), the Units will be released for delivery to investors and the
deposited Securities will be delivered to the Trustee. As additional Units are
issued by the Trust as a result of the deposit of cash (or a letter of credit
in lieu of cash) with instructions to purchase additional Securities, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. There is no limit on the time period during which the Sponsor may
continue to make additional deposits of Securities into the Trust.
Additional deposits of cash or Securities in connection with the issuance
and sale of additional Units will maintain to the extent practicable the
original proportionate relationship among the number of shares of and other
interests representing each Security. The proportionate relationship among the
Securities in the Trust will be adjusted to reflect the occurrence of a stock
dividend, a stock split or a similar event which affects the capital structure
of the issuer of a Security in the Trust but which does not affect the Trust's
percentage ownership of the common stock equity of such issuer at the time of
such event. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date
of Deposit because of, among other reasons, purchase requirements, changes in
prices, brokerage commissions or unavailability of Securities. Replacement
Securities may be acquired under specified conditions when Securities
originally deposited are unavailable (see Administration of the Trust --Trust
Supervision). Units may be continuously offered to the public by means of this
Prospectus (see Public Sale of Units -- Public Distribution) resulting in a
potential increase in the number of Units outstanding. Deposits of Additional
Securities subsequent to the 90-day period following the Initial Date of
Deposit must replicate exactly the proportionate relationship among the number
of shares of and other interests representing each of the Securities
comprising the Portfolio at the end of the initial 90-day period.
The Public Offering Price of Units prior to the Evaluation Time specified on
page 2 on any day will be based on the aggregate value of the Securities in
the Trust on that day at the Evaluation Time, plus a sales charge. The Public
Offering Price will thus vary in the future from that specified on page 2 of
this Prospectus. See Public Sale of Units -- Public Offering Price for a
complete description of the pricing of Units.
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units. The Sponsor reserves
the right to accept or reject any purchase order in whole or in part.
The Sponsor will execute orders to purchase in the order it determines, in
good faith, that they are received, except it is expected that indications of
interest received prior to the effectiveness of the registration of the Trust
which become orders upon effectiveness will be accepted according to the order
in which the indications of interest were received. The Sponsor may accept or
reject any purchase order in whole or in part.
- ------------
* To the extent references in this Prospectus are to articles and sections of
the Indenture, which is incorporated by reference into this Prospectus, the
statements made herein are qualified in their entirety by such reference.
13
<PAGE>
The holders ("Holders") of Units will have the right to have their Units
redeemed for the Securities underlying the Units (see Redemption). If any
Units are redeemed, the aggregate value of Securities in the Trust will be
reduced and the fractional undivided interest in the Trust represented by each
remaining Unit will be increased. Units will remain outstanding until redeemed
upon request to the Trustee by any Holder (which may include the Sponsor), or
termination of the Indenture (see Administration of the Trust -- Amendment and
Termination).
THE PORTFOLIO
Smith Barney's Equity Focus Trusts are each based on a specific research
investing theme or industry trend identified by analysts of Smith Barney Inc.
and Salomon Brothers Inc, both under the common control of Salomon Smith
Barney Holdings, Inc., based on an analysis of each company and the industry
group as a whole. Each analyst selected a stock from the industry or stock
area of the market they cover to become that sector's "Top Pick" for the
coming year. The Stocks included in the Portfolio were selected by the Sponsor
as having above average appreciation potential over the next 12 months
following the selection of the Portfolio.
The results of ownership of Units will differ from the results of ownership
of the underlying Securities of the Trust for various reasons, including sales
charges and expenses of the Trust, because the Portfolio may not be fully
invested at all times, the stocks are normally purchased or sold at prices
different from the closing price used to determine the Trust's net asset
value, and not all stocks may be weighted in the initial proportions at all
times. Additionally, results of ownership to different Holders will vary
depending on the net asset value of the underlying Securities on the days
Holders bought and sold their Units. Of course, any purchaser of securities,
including Units, will have to pay sales charges or commissions, which will
reduce his total return.
Advertising and sales literature for the Trust may include excerpts from the
Sponsor's research reports on one or more of the stocks in the Trust,
including a brief description of its businesses and market sector, and the
basis on which the stock was selected. In selecting Securities for the Trust,
the Sponsor has not expressed any belief as to the potential of these
Securities for capital appreciation over a period longer than one year. There
is, of course, no assurance that any of the Securities in the Trust will
appreciate in value, and indeed any or all of the Securities may depreciate in
value at any time in the future. See Description of the Trust -- Risk Factors.
All of the domestic Securities are publicly traded either on a stock
exchange or in the over-the-counter market. Most of the contracts to purchase
Securities deposited initially in the Trust are expected to settle in three
business days, in the ordinary manner for such Securities. Any foreign
Securities are publicly traded on a variety of foreign stock exchanges.
Settlement of contracts for foreign Securities varies by country and may take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
The Trust consists of such Securities as may continue to be held from time
to time in the Trust and any additional and replacement Securities and any
money market instruments acquired and held by the Trust pursuant to the
provisions of the Indenture (including the provisions with respect to the
deposit into the Trust of Securities in connection with the sale of additional
Units to the public) together with undistributed income therefrom and
undistributed and uninvested cash realized from the disposition of Securities
(see Administration of the Trust -- Accounts and Distributions; -- Trust
Supervision). The Indenture authorizes, but does not require, the Trustee to
invest the net proceeds of the sale of any Securities in eligible money market
instruments to the extent that the proceeds are not required for the
redemption of Units. Any money market instruments acquired by the Trust must
be held until maturity and must mature no later than the next Distribution Day
and the proceeds distributed
14
<PAGE>
to Holders at that time. If sufficient Securities are not available at what
the Sponsor considers a reasonable price, excess cash received on the creation
of Units may be held in an interest-bearing account with the Trustee until
that cash can be invested in Securities. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in any of the
Securities. However, should any contract deposited hereunder (or to be
deposited in connection with the sale of additional Units) fail, the Sponsor
shall, on or before the next following Distribution Day, cause to be refunded
the attributable sales charge, plus the attributable Cost of Securities to
Trust listed under Portfolio, unless substantially all of the monies held in
the Trust to cover the purchase are reinvested in replacement Securities in
accordance with the Indenture (see Administration of the Trust -- Portfolio
Supervision).
Because certain of the Securities from time to time may be sold, or their
percentage may be reduced under certain extraordinary circumstances described
below, or because Securities may be distributed in redemption of Units, no
assurance can be given that the Trust will retain for any length of time its
present size (see Redemption; Administration of the Trust -- Amendment and
Termination). For Holders who do not redeem their Units, investments in Units
of the Trust will be liquidated on the fixed date specified under Investment
Summary -- Mandatory Termination of Trust, and may be liquidated sooner if the
net asset value of the Trust falls below that specified under Investment
Summary -- Minimum Value of Trust (see Risk Factors).
INCOME
There is no assurance that any dividends will be declared or paid in the
future on the Securities.
Record and Distribution Days are set forth under Investment Summary. Income
Distributions, if any, will be automatically reinvested in additional Units of
the Trust at no extra charge unless a Holder elects to receive his
distributions in cash (see Reinvestment Plan).
RISK FACTORS
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that the
financial condition of the issuers of the Securities or the general condition
of the common stock market may worsen and the value of the Securities and
therefore the value of the Units may decline. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises.
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also
cause increased buying activity in certain of the stocks comprising the
Portfolio. After such announcement, investment advisory and brokerage clients
of the Sponsor and its affiliates may purchase individual Securities appearing
on the list during the course of the initial offering period. Such buying
activity in the stock of these companies prior to the purchase of the
Securities by the Trust may cause the Trust to purchase stocks at a higher
price than those buyers who effect purchases prior to purchases by the Trust.
The Trust is not appropriate for investors requiring conservation of capital
or high current income. Securities representing approximately 29.84% of the
value of the Portfolio have been ranked High Risk by the Sponsor's Research
Department, described as "low predictability of earnings/dividends; high price
volatility."
15
<PAGE>
Shareholders of common stocks have rights to receive payments from the
issuers of those common stocks that are generally subordinate to those of
creditors or holders of debt obligations or preferred stocks of such issuers.
Shareholders of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared by the
issuer's board of directors and have a right to participate in amounts
available for distribution by the issuer only after all other claims on the
issuer have been paid or provided for. By contrast, holders of preference
stocks have the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, normally on a cumulative basis,
but generally do not participate in other amounts available for distribution
by the issuing corporation. Cumulative preferred stock dividends must be paid
before common stock dividends and any cumulative preferred stock dividend
omitted is added to future dividends payable to the holders of cumulative
preferred stock. Preferred stocks are also entitled to rights on liquidation
which are senior to those of common stocks. Moreover, common stocks do not
represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock or the rights of holders of
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks are subject to market fluctuations for
as long as the common stocks remain outstanding, and thus the value of the
Securities in the Portfolio may be expected to fluctuate over the life of the
Trust to values higher or lower than those prevailing on the Initial Date of
Deposit.
Since the Securities are all common stocks, and the income stream produced
by dividend payments thereon is unpredictable, the Sponsor cannot provide any
assurance that dividends will be sufficient to meet any or all expenses of the
Trust. If dividends are insufficient to cover expenses, it is likely that
Securities will have to be sold to meet Trust expenses. See Expenses and
Charges -- Payment of Expenses. Any such sales may result in capital gains or
losses to Holders. See Description of the Trust -- Taxes.
Holders will be unable to dispose of any of the Securities in the Portfolio,
as such, and will not be able to vote the Securities. As the holder of the
Securities, the Trustee will have the right to vote all of the voting stocks
in the Trust and will vote in accordance with the instructions of the Sponsor.
Holders will, however, be able upon request to receive an "in kind"
distribution of the Securities evidenced by their Units if they tender a
minimum of 250,000 Units (see Redemption).
Investors should be aware that the Trust is not a "managed" trust and, as a
result, the adverse financial condition of a company will not result in the
elimination of its securities from the portfolio of the Trust (the
"Portfolio") except under extraordinary circumstances. Investors should note
in particular that the Securities were selected on the basis of the criteria
set forth under Objective of the Trust in the Investment Summary and that the
Trust may continue to purchase or hold Securities originally selected through
this process even though the evaluation of the attractiveness of the
Securities may have changed. A number of the Securities in the Trust may also
be owned by other clients of the Sponsor. However, because these clients may
have differing investment objectives, the Sponsor may sell certain Securities
from those accounts in instances where a sale by the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations. (See Administration of the Trust -- Trust Supervision.) In the
event a public tender offer is made for a Security or a merger or acquisition
is announced affecting a Security, the Sponsor may instruct the Trustee to
tender or sell the Security on the open market when, in its opinion, it is in
the best interest of the holders of the Units to do so. Although the Portfolio
is regularly reviewed and evaluated and the Sponsor may instruct the Trustee
to sell Securities under certain limited circumstances, Securities will not be
sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. As a result, the amount realized upon the
sale
16
<PAGE>
of the Securities may not be the highest price attained by an individual
Security during the life of the Trust. The Sponsor has currently assigned
certain rankings to the issuers of Securities based on stock performance
expectations and level of risk (see footnote 2 to the Portfolio on page 12).
These rankings are subject to change. Securities will not necessarily be sold
by the Trust based on a change in rankings, although the Sponsor intends to
review the desirability of holding any Security if its ranking is reduced
below 3. The prices of single shares of each of the Securities in the Trust
vary widely, and the effect of a dollar of fluctuation, either higher or
lower, in stock prices will be much greater as a percentage of the lower-price
stocks' purchase price than as a percentage of the higher-price stocks'
purchase price.
Investors should note that in connection with the issuance of additional
Units during the Public Offering Period set forth in the Investment Summary,
the Sponsor may deposit cash (or a letter of credit in lieu of cash) with
instructions to purchase Securities, additional Securities or contracts to
purchase Securities, in each instance maintaining the original percentage
relationship, subject to adjustment under certain circumstances, among the
number of shares of each Security in the Trust. To the extent the price of a
Security increases or decreases between the time cash is deposited with
instructions to purchase the Security at the time the cash is used to purchase
the Security, Units may represent less or more of that Security and more or
less of the other Securities in the Trust. In addition, brokerage fees (if
any) incurred in purchasing Securities with cash deposited with instructions
to purchase the Securities will be an expense of the Trust. Price fluctuations
between the time of deposit and the time the Securities are purchased, and
payment of brokerage fees, will affect the value of every Holder's Units and
the Income per Unit received by the Trust.
The Trust may be terminated at any time and all outstanding Units liquidated
if the net asset value of the Trust falls below $5,000,000 and deposits of
Securities in the Trust have not exceeded $50,000,000 at that time. At any
time after deposits in the Trust have exceeded $50,000,000, the Trust may be
so terminated if the net asset value of the Trust falls below $20,000,000. An
investment in Units of the Trust will terminate approximately one year from
the Initial Date of Deposit unless the Holder elects in writing to remain
invested in the Trust through the Mandatory Termination Date. If a Holder
makes no election by the Special Redemption Date, the Holder's Units will be
redeemed on such date and such Holder will receive cash representing their pro
rata portion of the Trust's assets. In the event that a Holder realizes
capital gains upon the sale or redemption of their Units prior to holding such
Units for more than 18 months, such Holder will not benefit from the reduced
federal long-term capital gains rate of 20%. Investors should note that if the
net asset value of the Trust should fall below the applicable minimum value as
a result of this redemption process, or otherwise, the Sponsor may then in its
sole discretion terminate the Trust before the Mandatory Termination Date
specified under Investment Summary. This could cause a Holder who elects to
hold Units after the Special Redemption Date to receive a distribution of
proceeds prior to holding such Units for more than 18 months notwithstanding
such selection. In such circumstances, the Holders will not be assessed any
portion of the second year deferred sales charge of $10.00 per 1,000 Units
which would accrue after the date of early termination. As an additional
result of the redemption process and the fact that the Trust has certain fixed
expenses, those Holders who elect to hold Units after the Special Redemption
Date may bear higher annual trust operating expenses per Unit than those
during the first year of the Trust.
Foreign Securities. The Trust may hold Securities of non-U.S. issuers or
through ADRs. There are certain risks involved in investing in securities of
foreign companies, which are in addition to the usual risks inherent in United
States investments. These risks include those resulting from fluctuations in
currency exchange rates, revaluation of currencies, future adverse political
and economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers and the lack of uniform
accounting, auditing and financial reporting standards or of other regulatory
practices and requirements comparable to those applicable to domestic
companies. Moreover,
17
<PAGE>
securities of many foreign companies may be less liquid and their prices more
volatile than those of securities of comparable domestic companies. In
addition, with respect to certain foreign countries, there is the possibility
of expropriation, nationalization, confiscatory taxation and limitations on
the use or removal of funds or other assets of the Trust, including the
withholding of dividends. Foreign securities may be subject to foreign
government taxes that could reduce the yield on such securities. Since the
Trust may invest in securities quoted in currencies other than the United
States dollar, changes in foreign currency exchange rates may adversely affect
the value of foreign securities in the Portfolio and the net asset value of
Units of the Trust. Investment in foreign securities may also result in higher
expenses due to the cost of converting foreign currency to United States
dollars, the payment of fixed brokerage commissions on certain foreign
exchanges, which generally are higher than commissions on domestic exchanges,
and expenses relating to foreign custody.
In addition, for the foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer. Also,
foreign issuers are not necessarily subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic issuers. However, the Sponsor anticipates that
adequate information will be available to allow the Sponsor to supervise the
Portfolio as set forth in Administration of the Trust -- Portfolio
Supervision.
On the basis of the best information available to the Sponsor at the present
time none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this
type or because the issues qualify for an exemption, or the Trust, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trust.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of
international securities in the Portfolio and on the ability of the Trust to
satisfy its obligation to redeem Units tendered to the Trustee for redemption
(see Redemption).
Exchange Rate Fluctuation. In recent years, foreign exchange rates have
fluctuated sharply. Income from foreign equity securities held by the Trust,
including those underlying any ADRs held by the Trust, would be payable in the
currency of the country of their issuance. However, the Trust will compute its
income in United States dollars, and the computation of income will be made on
the date of its receipt by the Trust at the foreign exchange rate in effect on
that date. Therefore, if the value of the foreign currency falls relative to
the United States dollar between receipt of the income and the making of Trust
distributions, the risk of such decline will be borne by Holders. In addition,
the cost of converting such foreign currency to United States dollars would
also reduce the return to the Holder.
American Depositary Shares and Receipts. American Depositary Shares
("ADSs"), and receipts therefor ("ADRs"), are issued by an American bank or
trust company to evidence ownership of underlying securities issued by a
foreign corporation. These instruments may not necessarily be denominated in
the same currency as the securities into which they may be converted.
Generally, ADSs and ADRs are designed for use in the United States securities
markets. For purposes of this Prospectus, the term ADR generally includes
ADSs.
TAXES
The following discussion addresses only the tax consequences of Units held
as capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
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In the opinion of Battle Fowler LLP, special counsel for the Sponsor, under
existing law:
1. 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.
2. 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).
3. 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 that are taxable as ordinary income to Holders will constitute
dividends for Federal income tax purposes but will be eligible for the
dividends-received deduction for corporations (other than corporations such as
"S" corporations which are not eligible for such deduction because of their
special characteristics and other than for purposes of special taxes such as
the accumulated earnings tax and the personal holding company tax) only to the
extent of dividends received from domestic corporations by the Trust.
The dividends-received deduction is currently 70%. However, Congress from
time to time considers proposals to reduce the rate, and enactment of such a
proposal would adversely affect the after-tax return to investors who can take
advantage of the deduction. Holders are urged to consult their own tax
advisers.
Section 246 and 246A of the Code contain limitations on the eligibility of
dividends for the corporate dividends-received deduction (in addition to the
limitation discussed above). Depending upon the corporate Holder's
circumstances (including generally whether it held its Units for at least 45
days during the 90 day period beginning on the date that is 45 days before the
date on which the shares with respect to which the dividend is paid becomes
ex-dividend with respect to such dividend and whether its Units are debt
financed), these limitations may be applicable to dividends received by a
Holder from the Trust which would otherwise qualify for the dividends-received
deduction under the principles discussed above. Accordingly, Holders should
consult their own tax advisers in this regard. A corporate Holder should be
aware that the receipt of dividend income for which the dividends received
deduction is available may give rise to an alternative minimum tax liability
(or increase an existing liability) because the dividend income will be
included in the corporation's "adjusted current earnings" for purposes of the
adjustment to alternative minimum taxable income required by Section 56(g) of
the Code.
A distribution of Securities by the Trustee to a Holder (or to his agent,
including the Distribution Agent) upon redemption of Units 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
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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 realized by corporations are generally taxed at the same rate
as ordinary income. However, capital gains realized by noncorporate taxpayers
are taxable at a maximum rate of 28% if the taxpayer has a holding period of
more than 12 months and at a maximum rate of 20% if the taxpayer has a holding
period of more than 18 months. The deduction of capital losses is subject to
limitations.
The Trust may hold Securities or ADRs of foreign corporations. For United
States income tax purposes, a holder of ADRs is treated as though he were
holding directly the shares of the foreign corporation represented by the
ADRs. Dividends paid by foreign issuers generally will be subject to
withholding tax.
Under the income tax laws of the State and City of New York, the Trust is
not an association taxable as a corporation and the income of the Trust will
be treated as the income of the Holders in the same manner as for Federal
income tax purposes.
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, and under certain
circumstances gain from the disposition of Securities or Units may also be
subject to Federal income tax. Holders may be subject to taxation in New York
or in other jurisdictions (including a Foreign Holder's country of residence)
and should consult their own tax advisers in this regard.
* * *
At termination of the Trust, the Trustee will furnish to each Holder a
statement containing information relating to the dividends received by the
Trust on the Securities, the gross proceeds received by the Trust from the
disposition of any Security (resulting from redemption or the sale by the
Trust of any Security), and the fees and expenses paid by the Trust. The
Trustee will also furnish an information return to each Holder and to the
Internal Revenue Service.
RETIREMENT PLANS
This Trust may be well suited for purchase by Individual Retirement Accounts
("IRAs"), Keogh plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received in each of the foregoing plans
are exempt from Federal taxation. All distributions from such plans (other
than from certain IRAs known as "Roth IRAs") are generally treated as ordinary
income but may, in some cases, be eligible for special 5 or 10 year averaging
or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh plans and
other tax-deferred retirement plans should consult their plan custodian as to
the appropriate disposition of distributions. Investors considering
participation in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Such plans are offered by
brokerage firms, including the Sponsor of this Trust, and other financial
institutions. Fees and charges with respect to such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan
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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
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, the applicable Initial Sales Charge. The total sales charge
consists of an Initial Sales Charge and a Deferred Sales Charge equal, in the
aggregate, to a maximum charge prior to the Special Redemption Date of 2.75%
of the Public Offering Price (2.778% of the net amount invested in
Securities). The Initial Sales Charge is computed by deducting the Deferred
Sales Charge ($17.50 per 1,000 Units) from the aggregate sales charge. On the
January 14, 1998, the Initial Sales Charge is $10.02 per 1,000 Units or 1.00%
of the Public Offering Price. The Initial Sales Charge is deducted from the
purchase price of a Unit at the time of purchase and paid to the Sponsor. The
Deferred Sales Charge is a monthly charge of $1.75 per 1,000 Units and is
accrued in ten monthly installments commencing on April 16, 1998 and will be
charged to the Capital Account on the first day of each month thereafter from
May 1, 1998 through January 1, 1999. If a Deferred Sales Charge Payment Date
is not a business day, the payment will be charged to the Trust on the next
business day. In addition, Holders who elect to hold Units after the Special
Redemption Date will be subject to an additional deferred sales charge of
$10.00 per 1,000 Units which will accrue in ten monthly installments of $1.00
per 1,000 Units commencing on March 1, 1999 and will be charged to the Capital
Account on the first day of each month thereafter through December 1, 1999. As
a result, the maximum total sales charge assessed to such Holders who elect to
hold Units through the Mandatory Termination Date of the Trust will be 3.75%
of the Public Offering Price (3.788% of the net amount invested in
Securities). To the extent the entire first year Deferred Sales Charge of
$17.50 per 1,000 Units has not been so deducted at the time of repurchase or
redemption of Units prior to January 1, 1999 any unpaid amount will be
deducted from the proceeds or in calculating an in kind distribution. For
Holders who elect to hold Units subsequent to the Special Redemption Date, to
the extent the second year deferred sales charge of $10.00 per 1,000 Units has
not been so deducted at the time of repurchase or redemption of Units after
the Special Redemption Date but prior to December 1, 1999, any unpaid amount
will be deducted from the proceeds or in calculating an in kind distribution.
However, any remaining deferred sales charge will be refunded by the Sponsor
when Units of any S.T.A.R.T. Series held at the time of the death (including
the death of a single joint tenant with rights of survivorship) or disability
(as defined in the Internal Revenue Code of 1986) of a Holder are repurchased
or redeemed. The Sponsor may require receipt of satisfactory proof of the
death or disability before releasing the portion of the proceeds representing
the amount waived. Units purchased pursuant to the Reinvestment Plan are
subject only to any remaining applicable deferred sales charge deduction (see
Reinvestment Plan).
Purchasers on January 15, 1998 (the first day Units will be available to the
public) will be able to purchase Units at $1.00 each (including the initial
sales charge). To allow Units to be priced at $1.00, the Units outstanding as
of the Evaluation Time on January 15, 1998 (all of which are held by the
Sponsor) will be split (or split in reverse). The Public Offering Price on any
subsequent date will vary from the Public Offering Price on the date of the
initial Prospectus (set forth under Investment Summary) in accordance with
fluctuations in the aggregate value of the underlying Securities. Units will
be sold to investors at the Public Offering Price next determined
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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.
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least 50,000 Units. Sales charges are
as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
NUMBER OF UNITS PRICE INVESTED
- --------------- ---------- ----------
<S> <C> <C>
Fewer than 50,000......................................... 2.75% 2.778%
50,000 but less than 100,000.............................. 2.50 2.519
100,000 but less than 250,000............................. 2.00 2.005
250,000 but less than 1,000,000........................... 1.75 1.750
1,000,000 or more......................................... 1.00 1.000
</TABLE>
The above graduated sales charges will apply to all purchases on any one day
by the same purchaser of Units in the amounts stated. Purchases of Units will
not be aggregated with purchases of units of any other series of Equity Focus
Trusts. A single purchaser of S.T.A.R.T. units will be entitled to aggregate
that purchase with purchase of units of one or more of any Select Series
Portfolios to determine the applicable sales charge on the S.T.A.R.T. units
(but not the Select Series units). Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed to be registered in the name of the purchaser for purposes of
calculating the applicable sales charge. The graduated sales charges are also
applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account.
Valuation of Securities by the Trustee is made as of the close of business
on the New York Stock Exchange on each business day. Securities quoted on a
national stock exchange or Nasdaq National Market are valued at the closing
sales price, or, if no closing sales price exists, at the mean between the
closing bid and offer prices. Securities not so quoted are valued at the mean
between bid and offer prices.
The holders of units of Equity Focus Trusts, S.T.A.R.T. 1997 Series (the
"Prior Series") may exchange units of the Prior Series for Units of the Trust
at their relative net asset values, subject only to the applicable deferred
sales charge. An exchange of a Prior Series for Units of the Trust will
generally be a taxable event. The exchange option described above will also be
available to investors in the Prior Series who elect to purchase Units of the
Trust within 60 days of their liquidation of units in the Prior Series (see
Exchange and Rollover Privileges).
Employees of the Sponsor and its subsidiaries, affiliates and employee-
related accounts may purchase Units pursuant to employee benefit plans, at a
price equal to the aggregate value of the Securities in the Trust divided by
the number of Units outstanding only subject to the applicable deferred 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.
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UNDERWRITER'S AND SPONSOR'S PROFITS
The Sponsor, as sole underwriter, receives a gross underwriting commission
equal to the sales charge of 2.75% of the Public Offering Price (3.75% of the
Public Offering Price with respect to sales to Holders who elect to hold Units
after the Special Redemption Date) subject to reduction on a graduated scale
basis in the case of volume purchases, and subject to reduction for purchasers
as described under Public Offering Price above.
On the Initial Date of Deposit, the Sponsor also realized a profit or loss
on deposit of the Securities into the Trust in the amount set forth under
Investment Summary, which equals the difference between the cost of the
Securities to the Trust (which is based on the aggregate value of the
Securities on the Initial Date of Deposit) and the purchase price of such
Securities to the Sponsor. In the event that subsequent deposits are effected
by the Sponsor with the deposit of Securities (as opposed to cash or a letter
of credit) with respect to the sale of additional Units to the public, the
Sponsor similarly may realize a profit or loss. The Sponsor also may realize
profits or sustain losses as a result of fluctuations after the Initial Date
of Deposit in the aggregate value of the Securities and hence of the Public
Offering Price received by the Sponsor for Units. Cash, if any, made available
by buyers of Units to the Sponsor prior to the settlement dates for purchase
of Units may be used in the Sponsor's business and may be of benefit to the
Sponsor.
The Sponsor also receives an annual fee at the maximum rate of $.25 per
1,000 Units for the administrative and other services which it provides during
the life of the Trust (see Expenses and Charges -- Fees). The Sponsor has not
participated as sole underwriter or manager or member of any underwriting
syndicate from which any of the Securities in the Portfolio on the Initial
Date of Deposit were acquired, except as indicated under Portfolio.
In maintaining a market for the Units (see Market for Units), the Sponsor
will also realize profits or sustain losses in the amount of any difference
between the prices at which it buys Units (based on the aggregate value of the
Securities) and the prices at which it resells such Units (which include the
sales charge) or the prices at which the Securities are sold after it redeems
such Units, as the case may be.
MARKET FOR UNITS
While the Sponsor is not obligated to do so, its intention is to maintain a
market for Units and offer continuously to purchase Units from the Initial
Date of Deposit at prices, subject to change at any time, which will be
computed by adding (1) the aggregate value of Securities in the Trust, (2)
amounts in the Trust including dividends receivable on stocks trading ex-
dividend and (3) all other assets in the Trust; deducting therefrom the sum of
(a) taxes or other governmental charges against the Trust not previously
deducted, (b) accrued fees and expenses of the Trustee (including legal and
auditing expenses), the Sponsor and counsel to the Trust and certain other
expenses and (c) amounts for distribution to Holders of record as of a date
prior to the evaluation; and dividing the result of such computation by the
number of Units outstanding as of the date of computation. The Sponsor may
discontinue purchases of Units if the supply of Units exceeds demand or for
any other business reason. The Sponsor, of course, does not in any way
guarantee the enforceability, marketability or price of any Securities in the
Portfolio or of the Units. On any given day, however, the price offered by the
Sponsor for the purchase of Units shall be an amount not less than the
Redemption Price per Unit, based on the aggregate value of Securities in the
Trust on the date on which the Units are tendered for redemption (see
Redemption).
The Sponsor may, of course, redeem any Units it has purchased in the
secondary market to the extent that it determines that it is undesirable to
continue to hold such Units in its inventory. Factors which the Sponsor will
consider in making such a determination will include the number of units of
all series of unit trusts which it has in its inventory, the salability of
such units and its estimate of the time required to sell such units and
general market conditions. For a description of certain consequences of such
redemption for the remaining Holders, see Redemption.
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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,
American 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.
An investment in Units of the Trust will be redeemed on the Special
Redemption Date unless a Holder elects in writing to remain invested in the
Trust through the Mandatory Termination Date. The Trustee will provide written
notice and a form of election prior to the Special Redemption Date to Holders
of the Trust giving Holders the option to (1) have their Units redeemed and
reinvest the proceeds into a subsequent series of the Trust, (2) receive an
"in kind" distribution of underlying Securities in the Trust, if they own at
least 250,000 Units, (3) receive cash distribution of their pro rata share of
the underlying Securities or (4) continue to hold their Units through the
Mandatory Termination Date. Holders who do not affirmatively elect in writing
by the Special Redemption Date any of these options will have their Units
redeemed on the Special Redemption Date and will receive a cash distribution
equal to the Redemption Price per Unit on such date.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions (see Administration of the Trust --Accounts and
Distribution). The Securities to be sold will be selected by the Trustee from
those designated on the current list provided by the Sponsor for this purpose.
Provision is made in the Indenture under which the Sponsor may, but need not,
specify minimum amounts in which blocks of Securities are to be sold in order
to obtain the best price for the Trust. While these minimum amounts may vary
from time to time in accordance with market conditions, the Sponsor believes
that the minimum amounts which would be specified would be a sufficient number
of shares to obtain institutional rates of brokerage commissions (generally
between 1,000 and 5,000 shares).
The Trustee will redeem Units "in kind" upon request of a redeeming Holder
if the Holder tenders at least 250,000 Units. Thus, a Holder will be able
(except during a period described in the last paragraph under this heading),
not later than the seventh calendar day following such tender (or if the
seventh calendar day is not a business day on the first business day prior
thereto), to receive in kind an amount per Unit equal to the Redemption Price
per Unit (computed as described in Redemption -- Computation of Redemption
Price per Unit) as determined as of the day of tender. The Redemption Price
per Unit for in kind distributions (the "In Kind Distribution") will take the
form of the distribution of whole and fractional shares of each of the
Securities in the amounts and the appropriate proportions represented by the
fractional undivided interest in the Trust of the Units tendered for
redemption (based upon the Redemption Price per Unit), except that with
respect to any foreign Security not held in ADR form, the value of that
Security will be distributed in cash.
In Kind Distributions on redemption of a minimum of 250,000 Units will be
held by the Trustee, as Distribution Agent, for the account, and for
disposition in accordance with the instructions of, the tendering Holder as
follows:
(a) If the tendering Holder requests cash payment, the Distribution Agent
shall sell the In Kind Distribution as of the close of business on the date of
tender and remit to the Holder not later than seven calendar days
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<PAGE>
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.
The Trustee is irrevocably authorized in its discretion, if the Sponsor does
not elect to purchase a Unit tendered for redemption or if the Sponsor tenders
a Unit 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 prices
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 for such Unit. The Trustee will pay the net proceeds
of any such sale to the Holder on the day he would otherwise be entitled to
receive payment of the Redemption Price.
A Holder may tender Units for redemption on any weekday (a "Tender Day")
which is not one of the following: New Year's Day, Martin Luther King, Jr.
Day, Washington's Birthday, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving or Christmas. The right of redemption may be
suspended and payment postponed for any period, determined by the Securities
and Exchange Commission ("SEC"), (1) during which the New York Stock Exchange,
Inc. is closed other than for customary weekend and holiday closings, (2)
during which the trading on that Exchange is restricted or an emergency exists
as a result of which disposal or evaluation of the Securities is not
reasonably practicable or (3) for such periods as the SEC may by order permit.
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on June 30 and December 31 (or the last business day prior thereto), as
of the Evaluation Time next following the tender of any Unit for redemption on
any Tender Day, and on any other business day desired by the Trustee or the
Sponsor, by adding (1) the aggregate value of the Securities determined by the
Trustee, (2) amounts in the Trust including dividends receivable on stocks
trading ex-dividend (with appropriate adjustments to reflect monthly
distributions made to Holders) and (3) all other assets in the Trust;
deducting therefrom the sum of (a) taxes or other governmental
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<PAGE>
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, (c) any remaining
deferred sales charge payments (however, Holders who terminate their
investment on or prior to the Special Redemption Date will not be assessed the
additional deferred sales charge of $10.00 per 1,000 Units; Holders who elect
to hold Units after the Special Redemption Date will be assessed any remaining
additional deferred sales charge payments upon the sale or redemption of their
Units) and (d) amounts for distribution to Holders of record as of a date
prior to the evaluation; and dividing the result of such computation by the
number of Units outstanding as of the date thereof.
The aggregate value of the Securities shall be determined by the Trustee in
good faith in the following manner: if the Securities are listed on a national
securities exchange or Nasdaq National Market, or a foreign securities
exchange, such evaluation shall generally be based on the closing sale price
on such exchange (unless the Trustee deems such price inappropriate as a basis
for evaluation) or, if there is no closing sale price on such exchange, at the
mean between the closing offering and bid side evaluation. If the Securities
are not so listed or, if so listed and the principal market therefor is other
than on such exchange, such evaluation shall generally be made by the Trustee
in good faith based at the mean between current bid and offer prices on the
over-the-counter market (unless the Trustee deems such mean inappropriate as a
basis for evaluation) or, if bid and offer prices are not available, (1) on
the basis of the mean between current bid and offer prices for comparable
securities, (2) by the Trustee's appraising the value of the Securities in
good faith at the mean between the bid side and the offer side of the market
or (3) by any combination thereof.
EXPENSES AND CHARGES
Initial Expenses -- All or some portion of the expenses incurred in
establishing the Trust, including the cost of the initial preparation,
printing and execution of the registration statement and the indenture,
Federal and State registration fees, the initial fees and expenses of the
Trustee, legal expenses and any other out-of-pocket expenses, will be paid by
the Trust and amortized over one year. Any balance of the expenses incurred in
establishing the Trust, as well as advertising and selling expenses, will be
paid by the Underwriters at no cost to the Trust.
Fees -- The Trustee's and Sponsor's fees are set forth under Investment
Summary. The Trustee receives for its services as Trustee and Distribution
Agent payable in monthly installments, the amount set forth under Investment
Summary. The Trustee's fee (in respect of services as Trustee), payable
monthly, is based on the largest number of Units outstanding during the
preceding month. Certain regular and recurring expenses of the Trust,
including certain mailing and printing expenses, are borne by the Trust. The
Trustee receives benefits to the extent that it holds funds on deposit in the
various non-interest bearing accounts created under the Indenture. The
Sponsor's fee, which is earned for trust supervisory services, is based on the
largest number of Units outstanding during the year. The Sponsor's fee, which
is not to exceed the maximum amount set forth under Investment Summary, may
exceed the actual costs of providing supervisory services for this Trust, but
at no time will the total amount the Sponsor receives for trust supervisory
services rendered to all series of Smith Barney Unit Trusts in any calendar
year exceed the aggregate cost to it of supplying these services in that year.
In addition, the Sponsor may also be reimbursed for bookkeeping or other
administrative services provided to the Trust in amounts not exceeding its
cost of providing those services. The fees of the Trustee and Sponsor may be
increased without approval of Holders in proportion to increases under the
classification "All Services Less Rent" in the Consumer Price Index published
by the United States Department of Labor.
Other Charges -- These include: (1) fees of the Trustee for extraordinary
services (for example, making distributions due to failure of contracts for
Securities), (2) expenses of the Trustee incurred for the benefit of the
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Trust (including legal and auditing expenses) and expenses of counsel
designated by the Sponsor, (3) various governmental charges and fees and
expenses for maintaining the Trust's registration statement current with
Federal and State authorities, (4) expenses and costs of action taken by the
Sponsor, in its discretion, or the Trustee, in its discretion, to protect the
Trust and the rights and interests of Holders (for example, expenses in
exercising the Trust's rights under the underlying Securities), (5)
indemnification of the Trustee for any losses, liabilities and expenses
incurred without gross negligence, bad faith or wilful misconduct on its part,
(6) indemnification of the Sponsor for any losses, liabilities and expenses
incurred without gross negligence, bad faith, wilful misconduct or reckless
disregard of their duties and (7) expenditures incurred in contacting Holders
upon termination of the Trust. The amounts of these charges and fees are
secured by a lien on the Trust.
Payment of Expenses -- Funds necessary for the payment of the above fees
will be obtained in the following manner: (1) first, by deductions from the
Income Account (see below) (which will reduce income distributions from the
Account); (2) to the extent the Income Account funds are insufficient, by
distribution from the Capital Account (see below); (3) to the extent the
Income and Capital Accounts are insufficient, by selling Securities from the
Portfolio and using the proceeds to pay the expenses (thereby reducing the net
asset value of the Units).
Since the Securities are all common stocks, and the income stream produced
by dividend payments thereon is unpredictable (see Description of the Trust --
Risk Factors), the Sponsor cannot provide any assurance that dividends will
be sufficient to meet any or all expenses of the Trust. If dividends are
insufficient to cover expenses, it is likely that Securities will have to be
sold to meet Trust expenses. Any such sales may result in capital gains or
losses to Holders. See Description of the Trust -- Taxes.
ADMINISTRATION OF THE TRUST
RECORDS
The Trustee keeps records of the transactions of the Trust at its corporate
trust office including names, addresses and holdings of all Holders, a current
list of the Securities and a copy of the Indenture. Such records are available
to Holders for inspection at reasonable times during business hours.
ACCOUNTS AND DISTRIBUTIONS
Dividends payable to the Trust are credited by the Trustee to an Income
Account, as of the date on which the Trust is entitled to receive such
dividends as a holder of record of the Securities. All other receipts (i.e.,
return of capital, stock dividends, if any, and gains) will be credited by the
Trustee to a Capital Account. If a Holder elects to receive his distribution
in cash, any income distribution for the Holder as of each Record Day will be
made on the following Distribution Day or shortly thereafter and shall consist
of an amount equal to the Holder's pro rata share of the distributable balance
in the Income Account as of such Record Day, after deducting estimated
expenses. The first distribution for persons who purchase Units between a
Record Day and a Distribution Day will be made on the second Distribution Day
following their purchase of Units. In addition, amounts from the Capital
Account may be distributed from time to time to Holders of record. The Trustee
may withdraw from the Income Account, from time to time, such amounts as it
deems requisite to establish a reserve for any taxes or other governmental
charges that may be payable out of the Trust. Funds held by the Trustee in the
various accounts created under the Indenture do not bear interest.
Distributions of amounts necessary to pay the Deferred Sales Charge will be
made from the Capital Account to an account maintained by the Trustee for
purposes of satisfying investors' sales charge obligations. Although the
Sponsor may collect the Deferred Sales
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Charge monthly, to keep Units more fully invested the Sponsor currently does
not anticipate Sales of Securities to pay the Deferred Sales Charge until
after the last Deferred Sales Charge Payment Date. Proceeds of the disposition
of any Securities not used to pay the Deferred Sales Charge or to redeem Units
will be held in the Capital Account and distributed on the Final Distribution
upon termination of the Trust.
Purchases at Market Discount -- Certain of the shareholder dividend
reinvestment, stock purchase or similar plans maintained by issuers of the
Securities offer shares pursuant to such plans at a discount from market
value. Subject to any applicable regulations and plan restrictions, the
Sponsor intends to direct the Trustee to participate in any such plans to the
greatest extent possible taking into account the Securities held by the Trust
in the issuers offering such plans. In such event, the Indenture requires that
the Trustee forthwith distribute in kind to the Distribution Agent the
Securities received upon any such reinvestment to be held for the accounts of
the Holders in proportion to their respective interests in the Trust. It is
anticipated that Securities so distributed shall immediately be sold.
Therefore, the cash received upon such sale, after deducting sales commissions
and transfer taxes, if any, will be used for cash distributions to Holders.
The Trustee will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in securities held in the Trust are
generally made in brokerage transactions as distinguished from principal
transactions. The furnishing of statistical and research information to the
Trustee by any of the securities dealers through which transactions are
executed will not be considered in placing securities transactions.
TRUST SUPERVISION
The Trust is a unit investment trust which normally follows a buy and hold
investment strategy and is not actively managed. However, the Portfolio is
regularly reviewed. Traditional methods of investment management for a managed
fund (such as a mutual fund) typically involve frequent changes in a portfolio
of securities on the basis of economic, financial and market analyses. The
Portfolio of the Trust, however, will not be actively managed and therefore
the adverse financial condition of an issuer will not necessarily require the
sale of its Securities from the Portfolio. However, while it is the intention
of the Sponsor to continue the Trust's investment in the Securities in the
original proportions, it has the power but not the obligation to direct the
disposition of the Securities upon institution of certain legal proceedings,
default under certain documents adversely affecting future declaration or
payment of anticipated dividends, or a substantial decline in price or the
occurrence of materially adverse credit factors that, in the opinion of the
Sponsor, would make the retention of the Securities detrimental to the
interests of the Holders. The Sponsor intends to review the desirability of
retaining in the Portfolio any Security if its Investment Rating is reduced
below 3 by the Sponsor's Research Department. The Sponsor is authorized under
the Indenture to direct the Trustee to invest the proceeds of any sale of
Securities not required for redemption of Units in eligible money market
instruments selected by the Sponsor which will include only the following
instruments:
(i) negotiable certificates of deposit or time deposits of domestic banks
which are members of the Federal Deposit Insurance Corporation and which have,
together with their branches or subsidiaries, more than $2 billion in total
assets, except that certificates of deposit or time deposits of smaller
domestic banks may be held provided 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.
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In the event a public tender offer is made for a Security or a merger or
acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when in its opinion
it is in the best interest of the Holders of the Units to do so. In addition,
the Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new Securities in exchange or
substitution for any Securities except that the Sponsor may instruct the
Trustee to accept or reject such an offer to take any other action with
respect thereto as the Sponsor may deem proper if (1) the issuer failed to
declare or pay anticipated dividends with respect to such Securities or (2) in
the written opinion of the Sponsor the issuer will probably fail to declare or
pay anticipated dividends with respect to such Securities in the reasonably
foreseeable future. Any Securities so received in exchange or substitution
shall be sold unless the Sponsor directs that they be held by the Trustee
subject to the terms and conditions of the Indenture to the same extent as
Securities originally deposited thereunder. If a Security is eliminated from
the Portfolio and no replacement security is acquired, the Trustee shall
within a reasonable period of time thereafter notify Holders of the sale of
the Security. Except as stated in this and the following paragraphs, the Trust
may not acquire any securities other than (1) the Securities and (2)
securities resulting from stock dividends, stock splits and other capital
changes of the issuers of the Securities.
The Sponsor is authorized to direct the Trustee to acquire replacement
Securities ("Replacement Securities") to replace any Securities, for which
purchase contracts have failed ("Failed Securities"), or, in connection with
the deposit of Additional Securities, when Securities of an issue originally
deposited are unavailable at the time of subsequent deposit, as described more
fully below. Replacement Securities that are replacing Failed Securities will
be deposited into the Trust within 110 days of the date of deposit of the
contracts that have failed at a purchase price that does not exceed the amount
of funds reserved for the purchase of Failed Securities. The Replacement
Securities shall satisfy certain conditions specified in the Indenture
including, among other conditions, requirements that the Replacement
Securities shall be publicly-traded common stocks; shall be issued by an
issuer subject to or exempt from the reporting requirements under Section 13
or 15(d) of the Securities Exchange Act of 1934 (or similar provisions of
law); shall not result in more than 10% of the Trust consisting of securities
of a single issuer (or of two or more issuers which are Affiliated Persons as
this term is defined in the Investment Company Act of 1940) which are not
registered and are not being registered under the Securities Act of 1933 or
result in the Trust owning more than 50% of any single issue which has been
registered under the Securities Act of 1933; and shall have, in the opinion of
the Sponsor, characteristics sufficiently similar to the characteristics of
the other Securities in the Trust as to be acceptable for acquisition by the
Trust. Whenever a Security has been eliminated by the Trust and a Replacement
Security is deposited, the Trustee shall within five days after the deposit of
the Replacement Security notify all Holders of the sale of the Security
eliminated and the acquisition of the Replacement Security. Whenever a
Replacement Security has been acquired for the Trust, the Trustee shall, on
the next Distribution Day that is more than 30 days thereafter, make a pro
rata distribution of the amount, if any, by which the cost to the Trust of the
Failed Security exceeded the cost of the Replacement Security. If Replacement
Securities are not acquired, the Sponsor will, on or before the next following
Distribution Day, cause to be refunded the attributable sales charge, plus the
attributable Cost of Securities to Trust listed under Portfolio plus income
attributable to the Failed Security. Any property received by the Trustee
after the Initial Date of Deposit as a distribution on any of the Securities
in a form other than cash or additional shares of the Securities received in a
non-taxable stock dividend or stock split, shall be retained or disposed by
the Trustee as provided in the Indenture. The proceeds of any disposition
shall be credited to the Income or Capital Account of the Indenture.
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
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Additional Securities or, Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent
to the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising the Portfolio at the end of the initial 90-
day period.
With respect to deposits of cash (or a letter of credit) with instructions
to purchase Additional Securities), Additional Securities or contracts to
purchase Additional Securities, in connection with creating additional Units
of the Trust during the 90-day period following the Initial Date of Deposit,
the Sponsor may specify minimum amounts of additional Securities to be
deposited or purchased. If a deposit is not sufficient to acquire minimum
amounts of each Security, Additional Securities may be acquired in the order
of the Security most under-represented immediately before the deposit when
compared to the Original Proportionate Relationship. If Securities of an issue
originally deposited are unavailable at the time of subsequent deposit or
cannot be purchased at reasonable prices or their purchase is prohibited or
restricted by law, regulation or policies applicable to the Trust or the
Sponsor, the Sponsor may (1) deposit cash or a letter of credit with
instructions to purchase the Security when practicable (provided that it
becomes available within 110 days after the Initial Date of Deposit) or (2)
deposit (or instruct the Trustee to purchase) Securities of one or more other
issues originally deposited or (3) deposit (or instruct the Trustee to
purchase) a Replacement Security that will meet the conditions described
above. Any funds held to acquire Additional or Replacement Securities which
have not been used to purchase Securities at the end of the 90-day period
beginning with the Initial Date of Deposit, shall be used to purchase
Securities as described above or shall be distributed to Holders together with
the attributable sales charge.
REPORTS TO HOLDERS
The Trustee will furnish Holders with each distribution a statement of the
amount of income and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Within a
reasonable period of time after termination of the Trust (normally within 20
to 60 days), the Trustee will furnish to each person who at any time was a
Holder of record of Trust Units a statement (1) as to the Income Account:
income received; deductions for applicable taxes and for fees and expenses of
the Trustee and counsel, and certain other expenses; amounts paid in
connection with redemptions of Units and the balance remaining after such
distributions and deductions, expressed in each case both as a total dollar
amount and as a dollar amount per Unit outstanding at termination; (2) as to
the Capital Account: the disposition of any Securities (other than pursuant to
In Kind Distributions) and the net proceeds received therefrom; the results of
In Kind Distributions in connection with redemption of Units; deductions for
payment of applicable taxes and for fees and expenses of the Trustee and
counsel and certain other expenses, to the extent that the Income Account is
insufficient, and the balance remaining after such distribution and
deductions, expressed both as a total dollar amount and as a dollar amount per
Unit outstanding at termination; (3) a list of the Securities held and the
number of Units outstanding at termination; (4) the price per Unit based upon
the computation thereof made at termination and (5) amounts actually
distributed from the Income Account expressed both as total dollar amounts and
as dollar amounts per Unit outstanding on the record dates for such
distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
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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 Holders of 51% of the Units. The Trustee shall
deliver written notice of any termination to each Holder within a reasonable
period of time prior to the termination. Within a reasonable period of time
after such termination, the Trustee must sell all of the Securities then held
and distribute to each Holder, after deductions of accrued and unpaid fees,
taxes and governmental and other charges, such Holder's interest in the Income
and Capital Accounts. Such distribution will normally be made by mailing a
check in the amount of each Holder's interest in such accounts to the address
of such Holder appearing on the record books of the Trustee.
An investment in Units of the Trust will terminate on or before the Special
Redemption Date (approximately thirteen months from the Initial Date of
Deposit) unless a Holder elects in writing to remain invested in the Trust
through the Mandatory Termination Date (approximately two years from the
Initial Date of Deposit). Approximately one year from the Initial Date of
Deposit (but no later than the Special Redemption Date) and at the termination
of the Trust, Holders will be given three options in receiving their
terminating distributions: (1) to receive their pro rata share of the
underlying Securities in-kind, if they own at least 250,000 Units; (2) to
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receive cash upon the liquidation of their pro rata share of the underlying
Securities; or (3) to invest the amount of cash they would have received upon
the liquidation of their pro rata share of the underlying Securities in units
of a future series of the Equity Focus Trust, S.T.A.R.T. Series (if one is
offered) at a reduced sales charge (see Exchange and Rollover Privileges). In
addition, on or before the Special Redemption Date the Holder may elect to
continue to hold their Units through the Mandatory Termination Date or earlier
termination of the Trust. Holders who make no election at the Special
Redemption Date will have their Units redeemed and will receive a cash
distribution of the proceeds. Holders who elect to remain invested in the
Trust through the Mandatory Termination Date will not receive an interest in a
new investment. Such Holders will continue to hold the same Units and remain
invested in the Trust until the Mandatory Termination Date, such earlier
termination of the Trust or until the Holder sells or redeems the Units.
EXCHANGE AND ROLLOVER PRIVILEGES
Holders may exchange their Units of this Trust into units of any then
outstanding series of Equity Focus Trusts, S.T.A.R.T. 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
Equity Focus Trusts, S.T.A.R.T. 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 nay 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
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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.
REINVESTMENT PLAN
Distributions of income and/or principal, if any, on Units held in street
name through Smith Barney Inc. or directly in the name of the Holder, unless
the Holder notifies his financial consultant at Smith Barney Inc. or the
Trustee, respectively, to the contrary, will be reinvested automatically in
additional Units of the Trust subject to that portion of the applicable
deferred sales charge remaining at the time of reinvestment, pursuant to the
Trust's "Reinvestment Plan". If the Holder does not wish to participate in the
Reinvestment Plan, the Holder must notify his financial consultant at Smith
Barney Inc. or the Trustee at least ten business days prior to the
Distribution Day to which that election is to apply. The election may be
modified or terminated by similar notice.
Distributions being reinvested will be paid to the Sponsor, who will use
them to purchase Units of the Trust at the Sponsor's Repurchase Price (the net
asset value per Unit without any sales charge) in effect at the close of
business on the Distribution Day. These may be either previously issued Units
repurchased by the Sponsor or newly issued Units created upon the deposit of
additional Securities in the Trust (see Description of the Trust--Structure
and Offering). Each participant will receive an account statement reflecting
any purchase or sale of Units under the Reinvestment Plan.
The costs of the Reinvestment Plan will be borne by the Sponsor, at no cost
to the Trust. The Sponsor reserves the right to amend, modify or terminate the
Reinvestment Plan at any time without prior notice.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units
at any time, or by the Sponsor without the consent of any of the Holders if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor. In case of such
resignation or removal the Sponsor is to use its best efforts to appoint a
successor promptly and if upon resignation of the Trustee no successor has
accepted appointment within thirty days after notification, the Trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The Trustee shall be under no liability for any action taken in good faith in
reliance on prima facie properly executed documents or for the disposition of
monies or Securities, nor shall it be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Security. This
provision, however, shall not protect the Trustee in cases of wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for
any taxes or other governmental charges imposed upon or in respect of the
Securities or upon the interest thereon. In addition, the Indenture contains
other customary provisions limiting the liability of the Trustee.
SPONSOR
The Sponsor may resign at any time if a successor Sponsor is appointed by
the Trustee in accordance with the Indenture. Any new Sponsor must have a
minimum net worth of $2,000,000 and must serve at rates of compensation deemed
by the Trustee to be reasonable and as may not exceed amounts prescribed by
the SEC. If the Sponsor fails to perform its duties or becomes incapable of
acting or becomes bankrupt or its affairs are
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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 show on the back cover of this
prospectus. The Trustee is subject to supervision and examination by the
Comptroller of the Currency, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System. In connection with the
storage and handling of certain Stocks deposited in the Trust, the Trustee may
use the services of The Depository Trust Company. These services may include
safekeeping of the Stocks, computer book-entry transfer and institutional
delivery services. The Depository Trust Company is a limited purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System and a clearing agency registered under the
Securities Exchange Act of 1934.
LEGAL OPINION
The legality of the Units has been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, as special counsel for the Sponsor.
AUDITORS
The Statement of Financial Condition and the Portfolio included in this
Prospectus have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their report with respect thereto, and is so included herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
SPONSOR
Smith Barney Inc. ("Smith Barney"), was incorporated in Delaware in 1960 and
traces its history through predecessor partnerships to 1873. Smith Barney, an
investment banking and securities broker-dealer firm, is a member of the New
York Stock Exchange, Inc. and other major securities and commodities
exchanges, the National Association of Securities Dealers, Inc. and the
Securities Industry Association. Smith Barney is an indirect wholly-owned
subsidiary of The Travelers Inc. The name Salomon Smith Barney is a service
mark of Smith Barney. Smith Barney and Salomon Brothers Inc are affiliated but
separately registered broker/dealers under common control of Salomon Smith
Barney Holdings Inc. Salomon Brothers Inc and Salomon Smith Barney Holdings
Inc. have been licensed to use the Salomon Smith Barney service mark. 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.
34
<PAGE>
EQUITY FOCUS
TRUSTS
---------------------------------
S.T.A.R.T. 1998 SERIES
PROSPECTUS
This Prospectus does not contain all of the information with respect to the
investment company set forth in its registration statements and exhibits
relating thereto which have been filed with the Securities and Exchange
Commission, Washington, D.C. under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<S> <C>
Investment Summary 2
Independent Auditors' Report 9
Statement of Financial Condition 10
Portfolio 11
Description of the Trust 13
Risk Factors 15
Taxes 18
Public Sale of Units 21
Market for Units 23
Redemption 24
Expenses and Charges 26
Administration of the Trust 27
Exchange and Rollover Privileges 32
Reinvestment Plan 33
Resignation, Removal and Limitations on Liability 33
Miscellaneous 34
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPONSOR: TRUSTEE: INDEPENDENT AUDITORS:
<S> <C> <C>
Smith Barney Inc. The Chase Manhattan Bank KPMG Peat Marwick LLP
388 Greenwich Street Unit Investment Trust Department 345 Park Avenue
23rd Floor 4 New York Plaza New York, New York 10154
New York, New York 10013 New York, New York 10004
(212) 816-4000 (800) 354-6565
</TABLE>
- --------------------------------------------------------------------------------
SalomonSmithBarney
--------------------------------
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.
- --------------------------------------------------------------------------------
UT6434
SALOMON SMITH BARNEY IS THE SERVICE MARK USED BY SALOMON BROTHERS INC AND SMITH
BARNEY INC., AFFILIATED BUT SEPARATELY REGISTERED BROKER/DEALERS UNDER COMMON
CONTROL OF SALOMON SMITH BARNEY HOLDINGS INC.
<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 (incorporated by reference to
Exhibit 1.1 to the Registration Statement of Equity Focus Trusts,
S.T.A.R.T. 1996 Series, 1933 Act File No. 33-64939).
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 Registration Statement or Amendment thereto to be signed
on its behalf by the undersigned thereunto duly authorized in the City of New
York and State of New York on the 15th day of January 1998.
SIGNATURES APPEAR ON PAGE II-4
A majority of the members of the Board of Directors of Smith Barney Inc. has
signed this Registration Statement or Amendment thereto pursuant to Powers of
Attorney authorizing the person signing this Registration Statement or
Amendment to the 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.:
James Dimon
Deryck C. Maughan
/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 333-41765.
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> 0001050579
<NAME> S.T.A.R.T. 1998 SERIES
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-14-1998
<PERIOD-END> JAN-14-1998
<INVESTMENTS-AT-COST> 990,775
<INVESTMENTS-AT-VALUE> 990,775
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 176,044
<TOTAL-ASSETS> 1,116,819
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 193,558
<TOTAL-LIABILITIES> 193,558
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 973,261
<SHARES-COMMON-STOCK> 1,000,000
<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> 973,261
<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> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 973,261
<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
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 1.1
EQUITY FOCUS TRUSTS
S.T.A.R.T. 1998 SERIES
REFERENCE TRUST INDENTURE
Dated as of January 14, 1998
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
all references to Boston Safe Deposit and Trust Company or United States Trust
Company of New York shall be deleted and replaced by The Chase Manhattan Bank;
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.
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Securities (including Contract Securities) listed in the Prospectus
relating to the S.T.A.R.T. 1998 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
January 15, 1998 in the event that the aggregate value of Securities in the
Trust has increased since the evaluation on January 14, 1998, the Trustee shall
issue such number of additional Units to the Holder of outstanding Units as of
the close of business on January 14, 1998, that the price per Unit computed as
of the Evaluation Time on January 15, 1998, plus the maximum applicable sales
charge shall equal $1 per Unit (based on the number of Units outstanding as of
said Evaluation Time, including the additional Units issued pursuant to this
sentence); in the event that the aggregate value of Securities in
-2-
<PAGE>
the Trust Fund has decreased since the evaluation on January 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 January 15, 1998 plus the maximum
applicable sales charge shall equal $1 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 "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 withhold
from a Holder's Income Distribution any portion of the Deferred Sales
Charge deductible therefrom pursuant to Section 3.18 hereof. 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
-3-
<PAGE>
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.
"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
-4-
<PAGE>
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 to read as follows:
"SECTION 3.06. Deposit of Additional Securities. (a) Subject to the
--------------------------------
requirements set forth below in this Section, the Sponsor may, on any
Business Day (the "Trade Date"), subscribe for Additional Units as follows:
(1) Prior to the Evaluation Time on the Trade Date, the Sponsor shall
provide notice (the "Subscription Notice") to the Trustee, by telecopy
or by written communication, of the Sponsor's intention to subscribe
for Additional Units. The Subscription Notice shall identify the
additional Securities to be acquired ("Additional Securities") (unless
such Additional Securities are a precise replication of the then
existing portfolio) and shall either (i) specify the quantity of
Additional Securities to be deposited by the Sponsor on the settlement
date for such subscription or (ii) instruct the Trustee to purchase
Additional Securities with an aggregate value as specified in the
Subscription Notice.
(2) Promptly following the Evaluation Time on such Business Day, the
Sponsor shall verify with the Trustee, by telecopy, the number of
Additional Units to be created.
(3) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver the Additional Units
created thereby (which time shall not be later than the time by which
the Trustee is required to settle any contracts for the purchase of
Additional Securities entered into by the Trustee pursuant to the
instruction of the Sponsor referred to in subparagraphs (1) above),
the Sponsor shall deposit with the Trustee (i) any Additional
Securities specified in the Subscription Notice (or contracts to
purchase such Additional Securities together with cash or a letter of
credit in the amount necessary to settle such contracts) or (ii) cash
or a letter of credit in the amount equal to the aggregate value of
the Additional Securities specified in the Subscription Notice,
together with, in each case, 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 nears to the Units outstanding immediately
-5-
<PAGE>
prior to the deposit. Each deposit made during the 90 fays following
the deposit made pursuant to this Section 3.06 hereof shall replicate,
to the extent practicable, the original proportionate relationship
among the 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. Each deposit made after
the 90 days following the deposit made pursuant to this Section 3.06
hereof (except for deposits made to replace Failed Securities if such
deposits occur within 20 days from the date of a failure occurring
within 20 days from the date of a failure occurring within such
initial 90 days period) shall maintain exactly the proportionate
relationship existing among the Securities as of the expiration of
such 90 day period adjusted as provided in the preceding sentence.
(4) On the settlement date for a subscription, the Trustee shall, in
exchange for the Securities and cash on letter of credit described
above, issue and deliver to or on the order of the Sponsor the number
of Units verified by the Sponsor with the Trustee.
(5) Each deposit of Additional Securities, shall be listed in a
Deposit Certificate delivered to the Sponsor stating the date of such
deposit and the number of Additional Units being issued therefor. The
Trustee shall acknowledge in such Deposit Certificate the receipt of
the deposit and the number of Additional Units issued in respect
thereof. The Additional Securities shall be held, administered and
applied by the Trustee in the same manner as herein provided for the
Securities.
(6) 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 Find most under-represented immediately before
the deposit with respect to the Original Proportionate Relationship.
-6-
<PAGE>
(7) 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.
(8) Notwithstanding the preceding, in the event that he Sponsor's
Subscription Notice shall instruct the Trustee to purchase Additional
Securities in an amount which, when added to the purchase amount of
all other unsettled contracts entered into by the Trustee, exceeds 50%
of the value of the Securities then held (taking into account the
value of contracts to purchase Securities only to the extent that
there has been deposited with the Trustee cash or an irrevocable
letter of credit in an amount sufficient to settle their purchase),
the Sponsor shall deposit with the Trustee concurrently with the
Subscription Notice such that, when added to 50% of the value of the
Securities then held (determined as above) the aggregate value shall
be not less than the purchase amount of the securities to be purchased
pursuant to such Subscription Notice.
"(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.
-7-
<PAGE>
"(c) Replacement Securities shall meet all the conditions applicable
to Substitute Securities in Section 3.11.
"(d) A 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 may, simultaneously with the Subscription Notice
provided in Section 3.06 (a), deliver to the Trustee the Additional
Securities or cash or letter of credit in the aggregate value of the
Additional Securities to be purchased pursuant to the Sponsor's
instruction, as specified in the Subscription Notice, together with cash
equal to the pro rata portion of the Trust Fund Cash Evaluation allocable
to the Additional Units to be created, all in the amounts and in the manner
provided by the preceding paragraphs of this Section, and the Trustee
shall, promptly following the Evaluation Time on such day, deliver to the
Sponsor the Additional Units created in respect of such deposit.
"(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 Closing Memorandum 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
-8-
<PAGE>
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
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."
-9-
<PAGE>
(i) Section 3.07(b)(2) shall be deleted and replaced by the following
paragraph:
"(2) the deductions for payment of applicable taxes and fees and
expenses of the Trustee and Sponsor and of counsel pursuant to
Section 3.10, accrued organizational expenses and Deferred Sales
Charge, if any;"
(j) Section 3.08 shall be amended to add a new paragraph (e), immediately
following paragraph (d), as follows:
"(e) that there has been a public tender offer made for a Security or
a merger or acquisition is announced affecting a Security, and that in the
opinion of the Sponsor the sale or tender of the Security is in the best
interest of the Holders."
(k) 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."
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<PAGE>
(l) For purposes of Section 3.11(b), the term "25%" shall be replaced by
"10%".
(m) 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."
(n) 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 in respect of Securities in foreign currencies into U.S.
dollars."
(o) 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 January 15, 1998 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."
(p) Article THREE shall be amended to add a new Section 3.18 as follows:
"SECTION 3.18. Deferred Sales Charge: The Trustee shall, on the
---------------------
dates specified in and as permitted by the prospectus, withdraw from the
Income Account, the Capital Account and/or distributions to be made
therefrom, as such
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<PAGE>
accounts or distributions are designated in the Prospectus as the source of
the payments of the Deferred Sales Charge, an amount per Unit specified in
the Prospectus and credit such amount to a special, non-Trust account
maintained at the Trustee out of which the Deferred Sales Charge will be
distributed to the Sponsor. If the balances in the Income and Capital
Accounts are insufficient to make any withdrawal designated to be made
therefrom, the Trustee shall, as directed by the Sponsor, either advance
funds in an amount equal to the proposed withdrawal and be entitled to
reimbursement of such advance upon the deposit of additional monies in the
Income Account or the Capital Account, sell Securities and credit the
proceeds thereof to such special Sponsor's account or credit Securities in
kind to such special Sponsor's Account provided, however, that the Trustee
--------
shall not be required to advance an aggregate amount in excess of $15,000
pursuant to this Section. Such directions shall identify the Securities, if
any, to be sold or distributed in kind and shall contain, if the Trustee is
directed by the Sponsor to sell a Security, instructions as to execution of
such sales. If a Holder redeems Units prior to full payment of the Deferred
Sales Charge, the Trustee shall, if so provided in the Prospectus, on the
Redemption Date, withhold from the Redemption Price payment to such Holder
an amount equal to the unpaid portion of the Deferred Sales Charge and
distribute such amount to such special Sponsor's Account or, if the Sponsor
shall purchase such Unit pursuant to the terms of Section 5.02 hereof, the
Sponsor shall pay the Redemption Price for such Unit less the unpaid
portion of the Deferred Sales Charge. If the Prospectus provides for a
waiver or refund of any portion of the Deferred Sales Charge under
specified circumstances (such as, for example, in connection with a
redemption or sale of Units following the death or disability of the
Holder), the Trustee shall deduct and pay to the Sponsor the full amount of
the Deferred Sales Charge chargeable upon the redemption in the absence of
such waiver or refund and the Sponsor shall pay to the affected Holder the
amount of such waiver or refund; the Trustee shall have no responsibility
to the affected Holder with respect to the amount to be so refunded. The
Sponsor may at any time instruct the Trustee to distribute to the Sponsor
cash or Securities previously credited to the special Sponsor's Account."
(q) 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
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<PAGE>
required by Section 5.01. If the Securities are listed on a national or
foreign 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
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<PAGE>
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."
(r) 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
"(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
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<PAGE>
"(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 Depositor has informed the Trustee that there will be no further
deposits of Additional Securities pursuant to Section 3.06, the Depositor
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 Depositor
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."
(s) 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, Martin Luther King, Jr. 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
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<PAGE>
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 Sponsor 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 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
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<PAGE>
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 Sponsor, 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.
"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
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<PAGE>
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
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<PAGE>
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 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 Sponsor 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
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<PAGE>
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 Sponsor, 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."
(t) Section 5.03 and all references thereto are deleted.
(u) Article FIVE shall be amended to add a new Section 5.05 as follows:
"SECTION 5.05. Special Redemption of Units. Any Holder who does not
---------------------------
notify the Trustee prior to the Evaluation Time on the Special Redemption
Date specified in the Prospectus (the "Special Redemption Date") that he
does not elect to have his Units redeemed as provided in this sentence
shall be deemed to have tendered such Units for redemption prior to the
Evaluation Time on such Special Redemption Date and to have elected to
receive a cash distribution, such redemption to be effected in accordance
with Section 5.02(b) hereof. The Trustee shall, not later than 30 days
prior to the Special Redemption Date, mail to Holders a notice of the
election provided by this section."
(v) 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.
(w) Section 8.01(b) shall be amended by adding the following to the clause
ending prior to the proviso beginning in the seventh line:
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<PAGE>
"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."
(x) 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."
(y) 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."
(z) 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:
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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.
(aa) 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.
(bb) 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.
(cc) Section 10.02 shall be amended to read as follows:
"Section 10.02. Initial Cost. To the extent not borne by the
----------------------------
Depositor, 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 8.05 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.
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<PAGE>
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 Indenture 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.
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<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 Porazzo
----------------------------
Vice President
(SEAL)
ATTEST:
By: /s/ Rachelle Cohen
----------------------------
<PAGE>
EXHIBIT 3.1
[LETTERHEAD OF BATTLE FOWLER LLP]
January 14, 1998
Smith Barney Inc.
Unit Trust Department
388 Greenwich Street, 23rd Floor
New York, New York 10013
Re: Equity Focus Trusts - S.T.A.R.T. 1998 Series
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Dear Sirs:
We have acted as special counsel for Smith Barney Inc. as Depositor,
Sponsor and Principal Underwriter (the "Depositor") of Equity Focus Trusts -
S.T.A.R.T. 1998 SERIES (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 Exchange
Commission (the "Commission") pursuant to the Investment Company Act of 1940
(the
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BATTLE FOWLER LLP 2
Smith Barney Inc.
January 14, 1998
"1940 Act"); (d) the Registration Statement on Form S-6 (Registration No.
333-41533) 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 January 15, 1998; (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
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BATTLE FOWLER LLP 3
Smith Barney Inc.
January 14, 1998
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.
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
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EXHIBIT 5.1
CONSENT OF INDEPENDENT AUDITORS
The Sponsor, Trustee and Unit Holders of
Equity Focus Trusts - S.T.A.R.T. 1998 Series
We consent to the use of our report dated January 14, 1998 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
January 14, 1998
