AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-6
------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------
A. EXACT NAME OF TRUST:
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
B. NAME OF DEPOSITOR: SMITH BARNEY INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
SMITH BARNEY INC.
388 GREENWICH STREET, 23RD FLOOR
NEW YORK, NY 10013
D. NAMES AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
LAURIE A. HESSLEIN MICHAEL R. ROSELLA, ESQ.
Smith Barney Inc. Battle Fowler LLP
388 Greenwich Street 75 East 55th Street
New York, New York 10013 New York, New York 10022
(212) 856-6858
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 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 THE PUBLIC:
As soon as practicable after the effective date of the
registration statement.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these Securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or solicitation
of an offer to buy nor shall there be any sale of these Securities in any State
in which such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the Securities Laws of any state.
SUBJECT TO COMPLETION, DATED APRIL 7, 1998
Equity Focus Trusts
Sector Series, 1998-A
Energy Portfolio
Financials Portfolio
Healthcare Portfolio
Technology & Telecommunications Portfolio
Unit Investment Trusts
<TABLE>
<CAPTION>
<S> <C>
SALOMON SMITH BARNEY THE EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
CONSISTS OF FOUR SEPARATE UNIT INVESTMENT TRUSTS
A Member of TravelersGroup DESIGNATED AS THE ENERGY PORTFOLIO, THE FINANCIALS
PORTFOLIO, THE HEALTHCARE PORTFOLIO AND THE TECHNOLOGY
& TELECOMMUNICATIONS PORTFOLIO (COLLECTIVELY, THE
"TRUSTS"). EACH TRUST OFFERS INVESTORS THE OPPORTUNITY
TO PURCHASE UNITS REPRESENTING PROPORTIONATE INTERESTS
IN A PORTFOLIO OF EQUITY SECURITIES SELECTED BY SALOMON
SMITH BARNEY EQUITY RESEARCH FROM THE INDUSTRY SECTOR
FOR WHICH THE PARTICULAR TRUST IS NAMED. THE VALUE OF
THE UNITS OF EACH TRUST WILL FLUCTUATE WITH THE VALUE OF
THE UNDERLYING SECURITIES. THE MINIMUM PURCHASE IS
$250.
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED MAY ___, 1998
READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
696477.1
<PAGE>
<TABLE>
<CAPTION>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
ENERGY PORTFOLIO
INVESTMENT SUMMARY AS OF ________, 1998+
<S> <C>
Sponsor
Smith Barney Inc.
Initial Number of Units ++.........................................................................
Fractional Undivided Interest in Trust
Represented by Each Unit.......................................................................
Public Offering Price (per 1,000 Units)............................................................
Aggregate value of Securities in Trust..........................................................$
=========
Divided by Units
(times 1,000)...............................................................................$
Plus sales charge of 4.50% of Public Offering
Price (4.712% of the net amount
invested in Securities)*+++................................................................$
Less Deferred Sales Charge per 1,000 Units..................................................... ----------
Public Offering Price per 1,000 Units...........................................................$
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).........................................................................$
==========
Sponsor's Repurchase Price and Redemption
Price** per 1,000 Units (based on value of
underlying securities)..........................................................................$
Distributions
Distributions of income, if any, will be made on the _____ day of the last
month of each quarter commencing ______, 1998, to Holders of record on the
_____ day of the last month of each quarter commencing ______, 1998, and
will be automatically reinvested in additional Units of this Trust unless
the Holder elects to receive its distribution in cash. A Final Distribution
will be made upon termination of the Trust.
Sponsor's Profit/Loss On Deposit....................................................................$
Trustee's Annual Fee
$. 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
The __ day of the last month of each quarter
Distribution Day
The __ day of the last month of each quarter, 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 termi nated if the net asset value of the Trust is less than
$5,000,000, unless the net asset value of Trust deposits has exceeded
$50,000,000. In that case, the Indenture may be terminated if the net asset
value of the Trust is less than $20,000,000. See Risk Factors, page 3.
Mandatory Termination of Trust
, 2000 (the "Mandatory Termination Date"), or at any earlier time by
the Sponsor with the consent of Holders of 51% of the Units then
outstanding.
Deferred Sales Charge Payment Dates
The first day of each month commencing
1, 1998 through 1, 2000.
</TABLE>
- -----------------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the
initial deposit was made on , 1998. Valuation of Securities is based on the
market value per share as of , 1998, as more fully explained in footnote 4 to
Portfolio on page 14. 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 Mandatory Termination Date ($30.00 per 1,000 Units)
from the aggregate sales charge (a maximum of 4.50% of the Public Offering
Price). On , 1998, the Initial Date of Deposit, the Initial Sales Charge is $
per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred Sales
Charge of the Trust is paid through reduction of Trust assets by $1.25 per 1,000
Units on each Deferred Sales Charge Payment Date.
** This price reflects deductions for remaining Deferred Sales Charge
payments ($ 30.00 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.
696477.1
2
<PAGE>
<TABLE>
<CAPTION>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
FINANCIALS PORTFOLIO
INVESTMENT SUMMARY AS OF ________, 1998+
<S> <C>
Sponsor
Smith Barney Inc.
Initial Number of Units ++.........................................................................
Fractional Undivided Interest in Trust
Represented by Each Unit.......................................................................1/
Public Offering Price (per 1,000 Units)............................................................
Aggregate value of Securities in Trust..........................................................$
=========
Divided by Units
(times 1,000)...............................................................................$
Plus sales charge of 4.50% of Public Offering
Price (4.712% of the net amount
invested in Securities)*+++................................................................$
Less Deferred Sales Charge per 1,000 Units..................................................... ----------
Public Offering Price per 1,000 Units...........................................................$
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).........................................................................$
==========
Sponsor's Repurchase Price and Redemption
Price** per 1,000 Units (based on value of
underlying securities)..........................................................................$
Distributions
Distributions of income, if any, will be made on the _____ day of the last
month of each quarter commencing ______, 1998, to Holders of record on the
_____ day of the last month of each quarter commencing ______, 1998, and
will be automatically reinvested in additional Units of this Trust unless
the Holder elects to receive its distribution in cash. A Final Distribution
will be made upon termination of the Trust.
Sponsor's Profit/Loss On Deposit....................................................................$
Trustee's Annual Fee
$. 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
The __ day of the last month of each quarter
Distribution Day
The __ day of the last month of each quarter, 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.
Mandatory Termination of Trust
, 2000 (the "Mandatory Termination Date"), or at any earlier time by
the Sponsor with the consent of Holders of 51% of the Units then
outstanding.
Deferred Sales Charge Payment Dates
The first day of each month commencing
1, 1998 through 1, 2000.
</TABLE>
- -----------------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the
initial deposit was made on , 1998. Valuation of Securities is based on the
market value per share as of , 1998, as more fully explained in footnote 4 to
Portfolio on page 15. 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 Mandatory Termination Date ($30.00 per 1,000 Units)
from the aggregate sales charge (a maximum of 4.50% of the Public Offering
Price). On , 1998, the Initial Date of Deposit, the Initial Sales Charge is $
per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred Sales
Charge of the Trust is paid through reduction of Trust assets by $1.25 per 1,000
Units on each Deferred Sales Charge Payment Date.
** This price reflects deductions for remaining Deferred Sales Charge
payments ($30.00 per 1,000 Units initially). All redemptions of 250,000 Units or
more may, upon request by a redeeming Holder, be made in kind to the
Distribution Agent, who will either forward the distributed securities to the
Holder or sell the securities on behalf of the redeeming Holder and distribute
the proceeds (net of any brokerage commission or other expenses incurred in the
sale) to the Holder. See Redemption.
696477.1
3
<PAGE>
<TABLE>
<CAPTION>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
HEALTHCARE PORTFOLIO
INVESTMENT SUMMARY AS OF ________, 1998 +
<S> <C>
Sponsor
Smith Barney Inc.
Initial Number of Units ++.........................................................................
Fractional Undivided Interest in Trust
Represented by Each Unit.......................................................................1/
Public Offering Price (per 1,000 Units)............................................................
Aggregate value of Securities in Trust..........................................................$
=========
Divided by Units
(times 1,000)...............................................................................$
Plus sales charge of 4.50% of Public Offering
Price (4.712% of the net amount
invested in Securities)*+++................................................................$
Less Deferred Sales Charge per 1,000 Units..................................................... ----------
Public Offering Price per 1,000 Units...........................................................$
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).........................................................................$
==========
Sponsor's Repurchase Price and Redemption
Price** per 1,000 Units (based on value of
underlying securities)..........................................................................$
Distributions
Distributions of income, if any, will be made on the _____ day of the last
month of each quarter commencing ______, 1998, to Holders of record on the
_____ day of the last month of each quarter commencing ______, 1998, and
will be automatically reinvested in additional Units of this Trust unless
the Holder elects to receive its distribution in cash. A Final Distribution
will be made upon termination of the Trust.
Sponsor's Profit/Loss On Deposit....................................................................$
Trustee's Annual Fee
$. 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
The ___ day of the last month of each quarter
Distribution Day
The __ day of the last month of each quarter, 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.
Mandatory Termination of Trust
, 2000 (the "Mandatory Termination Date"), or at any earlier time by
the Sponsor with the consent of Holders of 51% of the Units then
outstanding.
Deferred Sales Charge Payment Dates
The first day of each month commencing
1, 1998 through 1, 2000.
</TABLE>
- -----------------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the
initial deposit was made on , 1998. Valuation of Securities is based on the
market value per share as of , 1998, as more fully explained in footnote 4 to
Portfolio on page 16. 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 Mandatory Termination Date ($30.00 per 1,000 Units)
from the aggregate sales charge (a maximum of 4.50% of the Public Offering
Price). On , 1998, the Initial Date of Deposit, the Initial Sales Charge is $
per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred Sales
Charge of the Trust is paid through reduction of Trust assets by $1.25 per 1,000
Units on each Deferred Sales Charge Payment Date.
** This price reflects deductions for remaining Deferred Sales Charge
payments ($30.00 per 1,000 Units initially). All redemptions of Units or more
may, upon request by a redeeming Holder, be made in kind to the Distribution
Agent, who will either forward the distributed securities to the Holder or sell
the securities on behalf of the redeeming Holder and distribute the proceeds
(net of any brokerage commission or other expenses incurred in the sale) to the
Holder. See Redemption.
696477.1
4
<PAGE>
<TABLE>
<CAPTION>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
INVESTMENT SUMMARY AS OF ________, 1998+0
<S> <C>
Sponsor
Smith Barney Inc.
Initial Number of Units ++.........................................................................
Fractional Undivided Interest in Trust
Represented by Each Unit.......................................................................1/
Public Offering Price (per 1,000 Units)............................................................
Aggregate value of Securities in Trust..........................................................$
=========
Divided by Units
(times 1,000)...............................................................................$
Plus sales charge of 4.50% of Public Offering
Price (4.712% of the net amount
invested in Securities)*+++................................................................$
Less Deferred Sales Charge per 1,000 Units..................................................... ----------
Public Offering Price per 1,000 Units...........................................................$
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).........................................................................$
==========
Sponsor's Repurchase Price and Redemption
Price** per 1,000 Units (based on value of
underlying securities)..........................................................................$
Distributions
Distributions of income, if any, will be made on the _____ day of the last
month of each quarter commencing ______, 1998, to Holders of record on the
_____ day of the last month of each quarter commencing ______, 1998, and
will be automatically reinvested in additional Units of this Trust unless
the Holder elects to receive its distribution in cash. A Final Distribution
will be made upon termination of the Trust.
Sponsor's Profit/Loss On Deposit....................................................................$
Trustee's Annual Fee
$. 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
of each year
Distribution Day
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.
Mandatory Termination of Trust
, 2000 (the "Mandatory Termination Date"), or at any earlier time by
the Sponsor with the consent of Holders of 51% of the Units then
outstanding.
Deferred Sales Charge Payment Dates
The first day of each month commencing
1, 1998 through 1, 2000.
</TABLE>
- -----------------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the
initial deposit was made on , 1998. Valuation of Securities is based on the
market value per share as of , 1998, as more fully explained in footnote 4 to
Portfolio on page 17. 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 Mandatory Termination Date ($30.00 per 1,000 Units)
from the aggregate sales charge (a maximum of 4.50% of the Public Offering
Price). On , 1998, the Initial Date of Deposit, the Initial Sales Charge is $
per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred Sales
Charge of the Trust is paid through reduction of Trust assets by $1.25 per 1,000
Units on each Deferred Sales Charge Payment Date.
** This price reflects deductions for remaining Deferred Sales Charge
payments ($30.00 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.
696477.1
5
<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
Objective of the Trusts -- The objective of the Equity Focus Trusts -
Sector Series, 1998-A Portfolio (the " Portfolio") and the Equity Focus Trusts -
Sector Series, 1998-A- Portfolio (the " Portfolio") is to provide investors with
the possibility of capital appreciation through a convenient and cost-effective
investment in fixed portfolios consisting of shares of the common stocks (the
"Securities") selected by the Sponsor. The Sponsor has selected for the
Portfolios stocks which it considers to have strong potential 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 Portfolio and Portfolio.
The objective of the Equity Focus Trusts - Sector Series, 1998-A - Portfolio
(the " Portfolio") and the Equity Focus Trusts - Sector Series, 1998-A Portfolio
(the " Portfolio") is to provide investors with the possibility of maximizing
their total return through a convenient and cost-effective investment in fixed
portfolios consisting of shares of Securities selected by the Sponsor. The
Sponsor has selected for the Portfolios stocks which it considers to have the
strong potential for capital appreciation and current dividend income over a
period of one year relative to risks and opportunities. The Energy Portfolio,
the Financials Portfolio, the Healthcare Portfolio and the Technology Portfolio
are collectively referred to herein as the "Trusts" or as the "Portfolios".
Achievement of each of the Trust's objectives is dependent upon several factors
including the financial condition of the issuers of the Securities and any
appreciation of the Securities. Furthermore, because of various factors,
including without limitation, Trust sales charges and expenses, unequal
weightings of stocks, brokerage costs and any delays in purchasing securities
with cash deposited, investors in the Trusts may not realize as high a total
return as the theoretical performance of the underlying stocks in their
respective Portfolios.
Portfolios -- The Energy Portfolio contains common stocks issued by
companies engaged primarily in the energy industry. The issue is a foreign
issue. 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
stocks. (See Risk Factors.)
The Financials Portfolio contains common stocks issued by companies
engaged primarily in the financials industry. The issue is a foreign issue.
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 stocks. (See Risk
Factors.)
The Healthcare Portfolio contains common stocks issued by companies
engaged primarily in the health care industry. The issue is a foreign issue.
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 stocks. (See Risk
Factors.)
The Technology Portfolio contains common stocks issued by companies
engaged primarily in the technology and telecommunications industry. The issue
is a foreign issue. 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 stocks. (See Risk Factors.)
The initial purchase of Securities for the Trusts will not necessarily
represent equal dollar amounts of each of the Securities; however, with the
initial deposit of Securities, the Sponsor established a proportionate
relationship among the number of shares of each stock deposited in the Portfolio
of a Trust. During the 90-day period following the Initial Date of Deposit, the
Sponsor may create additional Units of each of the Trusts 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
696477.1
6
<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
proportionate relationship among the number of shares of each stock in the
Portfolio of a Trust. Replacement Securities may be acquired under specified
conditions. It may not be possible to maintain the exact original proportionate
relationship among the Securities deposited in the Trusts 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 in a Trust after
the 90-day period must replicate exactly the proportionate relationship among
the number of shares comprising that Portfolio at the end of the initial 90-day
period, subject to certain events discussed under Administration of the
Trusts--Trust Supervision. The Sponsor may cease creating Units (temporarily or
permanently) at any time. (See Administration of the Trusts--Trust Supervision.)
Risk Factors--Investment in the Trusts 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, and
other factors.
The Sponsor's buying and selling of the Securities, especially during
the initial offering of Units of the Trusts 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 Trusts may also cause
increased buying activity in certain of the stocks comprising each of the
Portfolios. 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 a 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 Trusts are not appropriate for investors requiring high current
income or conservation of capital. Securities representing approximately %, %, %
and % of the value of the Energy Portfolio, the Financials Portfolio, the
Healthcare Portfolio and the Technology Portfolio, respectively, have been
ranked High Risk by the Sponsor's Research Department, described as "low
predictability of earnings/dividends; high price volatility". Securities
representing approximately %, %, %, and % of the value of the Energy Portfolio,
the Financials Portfolio, the Healthcare Portfolio and the Technology Portfolio,
respectively, have been ranked Speculative by the Sponsor's Research Department,
described as "exceptionally low predictability of earnings/dividends; highest
risk of price volatility."
Each Portfolio's holdings will be concentrated in a single, specific
industry or service sector. Compared to the broad market, an individual sector
may be more strongly affected by changes in the economic climate; broad market
shifts; moves in a particular, dominant stock; or regulatory changes. Investors
should be prepared for volatile short-term movement in the value of Units.
Investors in the technology sector must be aware that competitive pressures and
changing domestic and international demand may have a substantial effect on the
financial condition of companies in the technology industry. Companies in the
technology industry spend heavily on research and development and are sensitive
to the risk of product obsolescence. The profitability of financial services
companies as a group is largely dependent upon the availability and cost of
capital funds which in turn may fluctuate significantly in response to changes
in interest rates and general economic conditions. Additionally, investors in
the financial services sector should be aware that if government regulations are
enacted which would further reduce the separation between commercial and
investment banking, financial services companies may be significantly affected
in terms of profitability and competition. The energy industry may be subject to
broad risks resulting from governmental regulation, financing difficulties,
supply and demand of services or fuel, and special risks associated with
environmental conservation. Companies in the healthcare industry are also
susceptible to
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
rapid obsolescence of products and services due to scientific advances. Further,
changes in government regulation may also have an adverse impact on the
healthcare industry. (See Risk Factors).
The Portfolio of each of the Trusts may contain Securities of issuers
with market capitalizations of $1 billion or less. Investing in such small
capitalization stocks may involve greater risks than investing in medium ($1
billion to $5 billion) or large (over $5 billion) capitalization stocks, since
they can be subject to more abrupt or erratic price movements. Investors should
note that definitions of what constitutes small, medium or large capitalization
stocks vary and, therefore, characterizations of these companies by persons
utilizing other definitions of these categories may be different than those
applied by the Trusts. (See Risk Factors--Small Capitalization Stock.)
If cash (or a letter of credit in lieu of cash) is deposited with
instructions to purchase Securities in connection with the issuance of
additional Units during the Public Offering Period, there is the risk that the
price of a Security will increase between the time of the deposit and the time
the Security is purchased resulting in a reduction in the number of shares
purchased for a Portfolio. Price fluctuations during the period from the time of
deposit of cash to the time the Securities are purchased, and payment of
brokerage fees, will affect the value of every Holder's Units, the number of
shares of each Security represented by each Unit and the income per Unit
received by each of the Trusts. Some of the Securities may have limited trading
volume. The Trustee, with directions from the Sponsor, will endeavor to purchase
Securities with deposited cash as soon as practicable, reserving 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
stocks. This could, however, result in the Trusts' failure to participate in any
appreciation of those stocks before the cash is invested. If any cash remains at
the end of this period and cannot be invested in one or more stocks 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 each of the Trusts, 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 each of the Trusts 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 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 the general economic conditions.
Unlike a mutual fund, the Portfolios are 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 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 Trusts and that each of the Trusts 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 of each of the Trusts
is regularly reviewed and evaluated and the Sponsor may instruct the Trustee to
sell Securities under certain
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
limited circumstances, Securities will not be sold by either Trust to take
advantage of market fluctuations or changes in anticipated rates of
appreciation. As a result, the amount realized upon the sale of the Securities
may not be the highest price attained by an individual Security during the life
of a 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 each of the Portfolios). These rankings are subject to change.
Securities will not necessarily be sold by a 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 Trusts vary widely, and the effect of a dollar
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 should the size of a Trust be reduced below
the Minimum Value of Trust stated on pages 2 through 5 for the Energy Portfolio,
the Financials Portfolio, the Healthcare Portfolio and the Technology Portfolio,
respectively, that Trust may be terminated at that time by the Sponsor, well
before the Mandatory Termination Date of such 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 Energy Portfolio, the Financials Portfolio, the
Healthcare Portfolio and the Technology Portfolio is noted on pages 2 through 5,
respectively, under Sponsor's Profit/Loss on Deposit. The Sponsor's profit or
loss on the deposit of Securities largely depends on whether the Securities'
prices rise in response to the Sponsor's purchases of possibly large volumes of
the Securities for initial and subsequent deposits in each of the Trusts. The
effect of the Sponsor's purchases of Securities on the prices of the Securities
is unpredictable.
Foreign Securities and American Depository Receipts -- The Trusts may
contain Securities of foreign issuers or American Depository Receipts ("ADRs")
for securities that have been issued by non-United States issuers. These
instruments are subject to special considerations in addition to those affecting
common stocks of United States issuers. For a discussion of special
considerations relating to foreign securities and ADRs, see Description of the
Trusts -- Risk Factors; Taxes.
Private Placements; Underwriting -- None of the Securities in either
of the Trusts consists of privately-placed common stocks. Except as indicated
under Portfolios, the Sponsor has not participated as sole underwriter, managing
underwriter or member of an underwriting syndicate from which any of the
Securities in the Trusts 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 Sales Charge, the total of which equals a maximum of
4.50%* of the Public Offering Price; this results in a sales charge of 4.712%*
of the net amount invested in underlying Securities. The Initial Sales Charge is
computed by deducting the Deferred Sales Charge ($30.00 per 1,000 Units) from
the aggregate sales charge. On , 1998 the Initial Sales Charge is $ per 1,000
Units (1.50% 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
- ---------------------
* This sales charge will be reduced on a graduated scale in the case of
quantity purchases. See Public Sale of Units -- Public Offering Price.
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
be more or less than 1.50% 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 $1.25 per 1,000 Units on each
of the twenty-four monthly Deferred Sales Charge Payment Dates, commencing on ,
1998 and will be charged on the first day of each month thereafter from 1, 1998
through 1, 2000. 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.
Distributions -- Distributions of dividends (net of expenses) and any
other receipts (i.e., return of capital, stock dividends, if any, and gains)
received by each of the Trusts will be automatically reinvested in additional
Units of the respective Trust, subject only to the Deferred Sales Charge, and
each Holder of Units will participate unless the Holder elects to receive
distributions of dividends or other receipts, or both, in cash. Holders who
reinvest their distributions will receive additional Units and will therefore
own a greater percentage of a Trust than Holders who receive cash distributions
(see Reinvestment Plan). Distributions are expected to be made for the Energy
Portfolio, the Financials Portfolio, the Healthcare Portfolio and the Technology
Portfolio on each Distribution Day to Holders of record on the immediately prior
Record Day, as stated on pages 2 through 5, respectively. As soon as practicable
after termination of a Trust (generally after seven days), the Trustee will
distribute to each Holder its pro rata share of the amount realized on
disposition of the Securities remaining in that Trust plus any other assets then
in the Trust, less expenses of the Trust. The other assets of the Trusts 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 each of the Trusts 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 its Units only through redemption (see Redemption).
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
FEE TABLE
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses that
you will bear directly or indirectly. See Public Sale of Units and Expenses and
Charges. Although each Trust is a unit investment trust rather than a mutual
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unitholder Transaction Expenses
<S> <C> <C>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------------- --------------------------
Maximum Initial Sales Charge Imposed on Purchase (as a percentage
of offering price)........................................... 1.50%* $15.0
Deferred Sales Charge........................................ 3.00%** 30.00
---- -----
Total..................................................... 4.50 $45.00
==== =====
Maximum Sales Charge Imposed on Reinvested Dividends......... 3.00% $30.00***
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Amounts per
As a % of Net Assets 1,000 Units
--------------------------- --------------------------
Trustee's Fee................................................ . % $
Maximum Portfolio Supervision, Bookkeeping and Administrative Fees . % $
Organizational Expenses...................................... . % $
Other Operating Expenses..................................... . % $
Total..................................................... . % $
Cumulative Expenses
Paid for Period
------------------------------------------------------
1 2
Year Years
---- -----
An investor would pay the following expenses and charges on a $1,000
investment, assuming the Trust's estimated operating expense ratio of
.__% in the first year and .__% in the second year and a 5% annual return
on the investment throughout the periods........................ $ __ $ __
</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.
Each of the Trusts (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 Portfolios--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 Trusts.
- -------------------
* The Initial Sales Charge is the difference between 4.50% and the
Deferred Sales Charge ($30.00 per 1,000 Units) and would exceed 1.50%
if the Public Offering Price exceeds $1,000 per 1,000 Units.
** The actual fee is $1.25 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge
Payment Date. If the Unit price exceeds $1.00 per Unit, the Deferred
Sales Charge will be less than 3.00%; if the Unit price is less than
$1.00 per Unit, the Deferred Sales Charge will exceed 3.00%.
*** Reinvested dividends will be subject only to the Deferred Sales Charge
remaining at the time of reinvestment which may be more or less than
3.00% of the Public Offering Price at the time of reinvestment (see
Reinvestment Plan).
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF , 1998 (CONTINUED)
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts--Sector Series:
1998-A
We have audited the accompanying statements of financial condition,
including the portfolios of Equity Focus Trusts--Sector Series, 1998-A,
consisting of the Energy Portfolio, the Financials Portfolio, the Healthcare
Portfolio and the Technology Portfolio, as of _______, 1998. These financial
statements are the responsibility of the Trustee (see note 6 to the statement of
financial condition). Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the statements of financial condition are
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
______, 1998, for the purchase of securities, as shown in the statements of
financial condition and portfolios 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 audits of the
statements of financial condition provide a reasonable basis for our opinion.
In our opinion, the statements of financial condition referred to
above present fairly, in all material respects, the financial position of Equity
Focus Trusts--Sector Series, 1998-A as of ______, 1998, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
, 1998
696477.1
12
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
Statements of Financial Condition as of Initial Date of Deposit, , 1998
<TABLE>
<CAPTION>
Energy Financials Healthcare Technology
Portfolio Portfolio Portfolio Portfolio
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
TRUST PROPERTY
Investment in Securities:
Contracts to purchase Securities(1).......... $ $ $ $
Organizational costs(2)......................... -------- -------- -------- --------
Total........................................ ======== ======== ======== ========
LIABILITIES
Accrued Expenses(2)............................. -------- -------- -------- --------
Deferred Sales Charge(3)........................ -------- -------- -------- --------
INTEREST OF UNITHOLDERS
Units, Units, Units and
Units, respectively, of fractional undivided
interest outstanding:
Cost to investors(4)............................ $ $ $ $
Less: Gross underwriting commissions(5)........ -------- -------- -------- --------
Net amount applicable to investors.............. -------- -------- -------- --------
Total $ $ $ $
======== ======== ======== ========
</TABLE>
(1) Aggregate cost to each Trust of the Securities listed under Portfolio
of such Trust, on the Initial Date of Deposit, is determined by the
Trustee on the basis set forth in footnote 4 to the Portfolio of such
Trust. See also the columns headed Cost of Securities to Trust.
Irrevocable letters of credit in the amount of $ have been deposited
with the Trustee for the purchase of Securities. The letters of credit
were issued by .
(2) Organizational costs to be paid by the Trusts have been deferred and
will be amortized over the first year of each of the Trusts.
Organizational costs have been estimated based on projected total
assets of $ , $ , $ and $ million, respectively. To the extent a Trust
is larger or smaller, the amount paid may vary.
(3) A Deferred Sales Charge is payable in twenty-four monthly payments of
$1.25 per 1,000 Units commencing on ________, 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.
(4) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(5) Assumes a maximum sales charge of 4.50% of Public Offering Price
computed on the basis set forth under Public Sale of Units --Public
Offering Price.
(6) The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of
each of the Trusts 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 each of the Trusts. The Trustee is also
responsible for all estimates and accruals reflected in each of the
Trusts' financial statements other than estimates of organizational
costs, for which Sponsor is responsible.
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
ENERGY PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1998
<TABLE>
<CAPTION>
Cost of
Stock Investment Number of Percent of Securities
Securities(1) Symbol Ranking(2) Shares(3) Net Assets to Trust(4)
- ------------- ------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
------ --------
100.00% $
======= =======
</TABLE>
- ----------------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on ,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 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on , 1998. Subsequent to the Initial Date
of Deposit, valuation of Securities is based, for Securities quoted on a
national securities exchange or NASDAQ National Market System, or a foreign
securities exchange, on the closing sale prices, or if no price exists, at
the mean between the closing bid and offer prices, or for Securities not so
quoted, at the mean between bid and offer prices on the over-the-counter
market. See Redemption--Computation of Redemption Price Per Unit.
--------------------------
The following information is unaudited:
* Smith Barney Inc. and/or Salomon Brothers Inc, including subsidiaries
and/or affiliates, usually maintains 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
(co-manager) of a public offering of the securities of this company or an
affiliate.
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
FINANCIALS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1998
<TABLE>
<CAPTION>
Cost of
Stock Investment Number of Percent of Securities
Securities(1) Symbol Ranking(2) Shares(3) Net Assets to Trust(4)
- ------------- ------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
------ --------
100.00% $
======= =======
</TABLE>
- ----------------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on ,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 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on , 1998. Subsequent to the Initial Date
of Deposit, valuation of Securities is based, for Securities quoted on a
national securities exchange or NASDAQ National Market System, or a foreign
securities exchange, on the closing sale prices, or if no price exists, at
the mean between the closing bid and offer prices, or for Securities not so
quoted, at the mean between bid and offer prices on the over-the-counter
market. See Redemption--Computation of Redemption Price Per Unit.
--------------------------
The following information is unaudited:
* Smith Barney Inc. and/or Salomon Brothers Inc, including subsidiaries
and/or affiliates, usually maintains 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
(co-manager) of a public offering of the securities of this company or an
affiliate.
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
HEALTHCARE PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1998
<TABLE>
<CAPTION>
Cost of
Stock Investment Number of Percent of Securities
Securities(1) Symbol Ranking(2) Shares(3) Net Assets to Trust(4)
- ------------- ------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
------ --------
100.00% $
======= =======
</TABLE>
- ----------------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on ,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 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on , 1998. Subsequent to the Initial Date
of Deposit, valuation of Securities is based, for Securities quoted on a
national securities exchange or NASDAQ National Market System, or a foreign
securities exchange, on the closing sale prices, or if no price exists, at
the mean between the closing bid and offer prices, or for Securities not so
quoted, at the mean between bid and offer prices on the over-the-counter
market. See Redemption--Computation of Redemption Price Per Unit.
--------------------------
The following information is unaudited:
* Smith Barney Inc. and/or Salomon Brothers Inc, including subsidiaries
and/or affiliates, usually maintains 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
(co-manager) of a public offering of the securities of this company or an
affiliate.
696477.1
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<PAGE>
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1998
<TABLE>
<CAPTION>
Cost of
Stock Investment Number of Percent of Securities
Securities(1) Symbol Ranking(2) Shares(3) Net Assets to Trust(4)
- ------------- ------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
------ --------
100.00% $
======= =======
</TABLE>
- ----------------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on ,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 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on , 1998. Subsequent to the Initial Date
of Deposit, valuation of Securities is based, for Securities quoted on a
national securities exchange or NASDAQ National Market System, or a foreign
securities exchange, on the closing sale prices, or if no price exists, at
the mean between the closing bid and offer prices, or for Securities not so
quoted, at the mean between bid and offer prices on the over-the-counter
market. See Redemption--Computation of Redemption Price Per Unit.
--------------------------
The following information is unaudited:
* Smith Barney Inc. and/or Salomon Brothers Inc, including subsidiaries
and/or affiliates, usually maintains 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
(co-manager) of a public offering of the securities of this company or an
affiliate.
696477.1
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<PAGE>
DESCRIPTION OF THE TRUSTS
Structure and Offering
This Series of the Equity Focus Trusts--Sector Series consists of four
"unit investment trusts" designated as the Energy Portfolio, the Financials
Portfolio, the Healthcare Portfolio and the Technology Portfolio (the
"Portfolios" or the "Trusts"). Each Trust was 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 a Trust (a "Unit") represented a
fractional undivided interest in the securities listed under Portfolios (the
"Securities") set forth under Investment Summary. Additional Units of a Trust
will be issued in the amount required to satisfy purchase orders by depositing
in such 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 a 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 Trusts 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 each of the Trusts will be
increased and the fractional undivided interest in the Trusts 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
Trusts.
During the 90-day period following the Initial Date of Deposit
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 each Security in the
Portfolios of each of the Trusts. The proportionate relationship among the
Securities in each of the Trusts 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 a Trust but which does not affect that
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 Trusts--Trust Supervision).
Units may be continuously offered to the public by means of this Prospectus (see
Public Sale of Units--Public Distribution) resulting in a potential increase in
the number of Units outstanding. Deposits of Additional Securities subsequent to
the 90- day period following the Initial Date of Deposit must replicate exactly
the proportionate relationship among the number of shares of each of the
Securities comprising the Portfolios of each of the Trusts at the end of the
initial 90-day period.
The Public Offering Price of Units prior to the Evaluation Time
specified on pages 2 through 5 on any day will be based on the aggregate value
of the Securities in a Trust on that day at the Evaluation Time, plus a sales
charge. The Public Offering Price for each of the Trusts will thus vary in the
future from that specified on pages 2 through 5 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.
- ----------------------
*
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.
696477.1
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<PAGE>
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 Trusts
which become orders upon effectiveness will be accepted according to the order
in which the indications of interest were received and except further that
orders from such indications of interest that are made pursuant to the exchange
privilege (see Exchange and Rollover Privileges herein) will be accepted before
any other orders for Units. The Sponsor may accept or reject any purchase order
in whole or in part.
The holders ("Holders") of Units of either of the Trusts 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 a
Trust will be reduced and the fractional undivided interest in such Trust
represented by each remaining Unit will be increased. Units of each of the
Trusts 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 Trusts -- Amendment and Termination).
The Portfolios
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. The Sponsor's Research Department is staffed by over
100 investment analysts, who currently follow equities issued by more than 1,600
companies (both domestic and foreign) in 86 industry groups or stock areas of
the market. The Securities included in the Portfolios were selected by the
Sponsor as stocks deemed to have above-average appreciation potential over the
12 months following the selection of a Portfolio. The investment rankings by
Smith Barney normally pertain to an outlook for a 12-18 month period (see
footnote 2 to the Portfolios on pages 14 through 17). In selecting Securities
for each of the Trusts, 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 Risk Factors.
The results of ownership of Units will differ from the results of
ownership of the underlying Securities of the Trusts for various reasons,
including sales charges and expenses of the Trusts, because the Portfolios 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 each 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 its total return.
Total returns and/or average annualized returns for various periods of
previous series of Equity Focus Trusts and the Trusts may be included from time
to time in advertisements and sales literature. Trust performance may be
compared to performance of the Standard & Poor's Energy Composite, Standard &
Poor's Financials Index, Standard & Poor's Health Care Composite and Standard &
Poor's Technology Index. As with other performance data, performance comparisons
should not be considered representative of a Trust's relative performance for
any future period. Advertising and sales literature for the Trusts may also
include excerpts from the Sponsor's research reports on one or more of the
stocks in the Trusts, including a brief description of its businesses and market
sector, and the basis on which the stock was selected.
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 each of the Trusts 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.
696477.1
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<PAGE>
Each of the Trusts consists of such Securities as may continue to be
held from time to time in that Trust and any additional and replacement
Securities and any money market instruments acquired and held by such Trust
pursuant to the provisions of the Indenture (including the provisions with
respect to the deposit into the Trusts 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 Trusts -- 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 a Trust must be
held until maturity and must mature no later than the next Distribution Day and
the proceeds distributed to Holders at that time. If sufficient Securities are
not available at what the Sponsor considers a reasonable price, excess cash
received on the creation of Units may be held in an interest-bearing account
with the Trustee until that cash can be invested in Securities. Neither the
Sponsor nor the Trustee shall be liable in any way for any default, failure or
defect in any of the Securities. However, should any contract deposited
hereunder (or to be deposited in connection with the sale of additional Units)
fail, the Sponsor shall, on or before the next following Distribution Day, cause
to be refunded the attributable sales charge, plus the attributable Cost of
Securities to Trust listed under the Portfolio for the relevant Trust, unless
substantially all of the monies held in such Trust to cover the purchase are
reinvested in replacement Securities in accordance with the Indenture (see
Administration of the Trusts -- 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 either of the Trusts will retain for any
length of time its present size (see Redemption; Administration of the Trusts --
Amendment and Termination). For Holders who do not redeem their Units,
investments in Units of a 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 a Trust falls below that specified
under Investment Summary -- Minimum Value of Trust (see Risk Factors).
Income
There is no assurance that dividends will be declared or paid in the
future on the Securities.
Record and Distribution Days for each of the Trusts are set forth under
Investment Summary. Income Distributions, if any, will be automatically
reinvested in additional Units of the appropriate Trust at no extra charge
unless a Holder elects to receive its distributions in cash (see Reinvestment
Plan). Because dividends on the Securities are not received by the Trusts at a
constant rate throughout the year and because the issuers of the Securities may
change the schedules or amounts or dividend payments, any distributions, whether
reinvested or paid in cash, may be more or less than the amount of dividend
income actually received by a Trust and credited to the income account
established under the Indenture (the "Income Account") as of the Record Day.
696477.1
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<PAGE>
RISK FACTORS
General
An investment in Units should be made with an understanding of the
risks which an investment in common stocks entails, including the risk that the
financial condition of the issuers of the Securities or the general condition of
the common stock market may worsen and the value of the Securities and therefore
the value of the Units may decline. Common stocks are especially susceptible to
general stock market movements and to volatile increases and decreases in value
as market confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors including expectations regarding government
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises.
The Sponsor's buying and selling of the Securities, especially during
the initial offering of Units of the Trusts 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 Trusts may also cause
increased buying activity in certain of the stocks comprising each of the
Portfolios. 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 Trusts may cause the Trusts to purchase stocks at a higher price than
those buyers who effect purchases prior to purchases by a Trust.
The Trusts are not appropriate for investors requiring conservation of
capital or high current income. Securities representing approximately %, %, %
and % of the value of the Energy Portfolio, the Financials Portfolio, the
Healthcare Portfolio and the Technology Portfolio, respectively, have been
ranked High Risk by the Sponsor's Research Department, described as "low
predictability of earnings/dividends; high price volatility." Securities
representing approximately %, %, %, and % of the value of the Energy Portfolio,
the Financials Portfolio, the Healthcare Portfolio and the Technology Portfolio,
respectively, have been ranked Speculative by the Sponsor's Research Department,
described as "exceptionally low predictability of earnings/dividends; highest
risk of price volatility."
Each Trust's holdings will be concentrated in a single, specific
industry or service sector. Compared to the broad market, an individual sector
may be more strongly affected by changes in the economic climate; broad market
shifts; moves in a particular, dominant stock; or regulatory changes. Investors
should be prepared for volatile short-term movement in the value of Units.
Shareholders of common stocks have rights to receive payments from the
issuers of those common stocks that are generally subordinate to those of
creditors or holders of debt obligations or preferred stocks of such issuers.
Shareholders of common stocks of the type held by the Trusts 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
696477.1
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<PAGE>
stocks are subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Securities in the Portfolios may
be expected to fluctuate over the life of the Trusts 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 a Trust. If dividends are insufficient to cover expenses, it is
likely the 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 Trust--Taxes.
Holders will be unable to dispose of any of the Securities in the
Portfolios, 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 each of the Trusts 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 Trusts are not "managed" trusts and,
as a result, the adverse financial condition of a company will not result in the
elimination of its securities from the Portfolios of either of the Trusts 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 Trusts in the Investment Summary and that the Trusts may continue to
purchase or hold Securities originally selected though this process even through
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 a Trust would be impermissible, such as to maximize
return by taking advantage of market fluctuations. (See Administration of the
Trusts -- 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 each 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 Trusts to take advantage of
market fluctuations or changes in anticipated rates of appreciation. As a
result, the amount realized upon the sale of the Securities may not be the
highest price attained by an individual Security during the life of the Trusts.
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
Portfolios on pages 14 through 17). These rankings are subject to change.
Securities will not necessarily be sold by a 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 Trusts 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 a 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 such 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 Trusts. 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 each of the Trusts.
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<PAGE>
A 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 a Trust have exceeded $50,000,000, the Trust may
be so terminated if the net asset value of the Trust falls below $20,000,000.
Investors should note that if the net asset value of a Trust should fall below
the applicable minimum value, the Sponsor may then in its sole discretion
terminate the Trust before the Mandatory Termination Date specified under
Investment Summary.
Small Capitalization Stock. Investing in small capitalization stocks
may involve greater risk than investing in medium and large capitalization
stocks, since they can be subject to more abrupt or erratic price movements.
Small market capitalization companies ("Small-Cap Companies") are those with
market capitalizations of $1 billion or less at the time of the Trusts'
investment. Many Small-Cap Companies will have had their securities publicly
traded, if at all, for only a short period of time and will not have had the
opportunity to establish a reliable trading pattern through economic cycles. The
price volatility of Small-Cap Companies is relatively higher than larger, older
and more mature companies. The greater price volatility of Small-Cap Companies
may result from the fact that there may be less market liquidity, less
information publicly available or fewer investors who monitor the activities of
these companies. In addition, the market prices of these securities may exhibit
more sensitivity to changes in industry or general economic conditions. Some
Small-Cap Companies will not have been in existence long enough to experience
economic cycles or to demonstrate whether they are sufficiently well managed to
survive downturns or inflationary periods. Further, a variety of factors may
affect the success of a company's business beyond the ability of its management
to prepare or compensate for them, including domestic and international
political developments, government trade and fiscal policies, patterns of trade
and war or other military conflict which may affect industries or markets or the
economy generally.
Foreign Securities. The Trusts may hold Securities of non-U.S. issuers
directly 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 other
regulatory practices and requirements comparable to those applicable to domestic
companies. Moreover, securities of many foreign companies may be less liquid and
their prices more volatile than those of securities of comparable domestic
companies. In addition, with respect to certain foreign countries, there is the
possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Trusts,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that could reduce the yield on such securities. Since
the Trusts 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 Portfolios and the net asset value of
Units of the Trusts. 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 each Portfolio
as set forth in Administration of the Trusts--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
696477.1
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<PAGE>
the Trusts 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 Trusts, 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
Trusts.
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 Portfolios and on the ability of each of the
Trusts to satisfy their 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 Trusts,
including those underlying any ADRs held by a Trust, would be payable in the
currency of the country of their issuance. However, the Trusts will compute
their income in United States dollars, and the computation of income will be
made on the date of its receipt by the Trusts 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 its
conversion to United States dollars, 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.
Energy Portfolio
The Energy Trust is particularly subject to risks that are inherent to
the utility industry, including difficulty in obtaining an adequate return on
invested capital, difficulty in financing large construction programs during an
inflationary period, restrictions on operations and increased cost and delays
attributable to environmental considerations and regulation, difficulty in
raising capital in adequate amounts on reasonable terms in periods of high
inflation and unsettled capital markets, increased costs and reduced
availability of certain types of fuel, occasional reduced availability and high
costs of natural gas for resales, the effects of energy conservation, the
effects of a national energy policy and lengthy delays and greatly increased
costs and other problems associated with the design, construction, licensing,
regulation and operation of nuclear facilities for electric generation,
including, among other considerations, the problems associated with the use of
radioactive materials and the disposal of radioactive wastes. There are
substantial differences between the regulatory practices and policies of various
jurisdictions, and any given regulatory agency may periodically make major
shifts in policy. There is no assurance that regulatory authorities will grant
rate increases in the future or that such increases will be adequate to permit
the payment of dividends on common stocks. Additionally, existing and possible
future regulatory legislation may make it even more difficult for these
utilities to obtain adequate relief. Certain of the issuers of securities held
by the Energy Portfolio may own or operate nuclear generating facilities.
Governmental authorities may from time to time review existing policies, and
impose additional requirements governing the licensing, construction and
operation of nuclear power plants. Moreover, price disparities within selected
utility groups and discrepancies in relation to averages and indices have
occurred frequently for reasons not directly related to the general movements or
price trends of utility common stocks. Causes of these discrepancies include
changes in the overall demand for and supply of various securities (including
the potentially depressing effect of new stock offerings), and changes in
investment objectives, market expectations or cash requirements of other
purchasers and sellers of securities.
696477.1
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<PAGE>
Financials Portfolio
The financial services and financial services-related industries will
be particularly affected by certain economic, competitive and regulatory
developments. The profitability of financial services companies as a group is
largely dependent upon the availability and cost of capital funds which in turn
may fluctuate significantly in response to changes in interest rates and general
economic conditions. Credit losses resulting from financial difficulties of
borrowers can negatively impact the sector. Rising interest rates and inflation
may negatively affect certain financial services companies as the costs of
lending money, attracting deposits and doing business rise. Insurance companies
may be subject to severe price competition. Financial institutions are subject
to regulation and supervision by governmental authorities and changes in
governmental policies may impact the way financial institutions conduct
business. Such governmental regulation may limit both the amounts and types of
loans and other financial commitments they can make, and the interest rates and
fees they can charge. Also, if government regulation which would further reduce
the separation between commercial and investment banking is ultimately enacted,
financial services companies may be significantly affected in terms of
profitability and competition.
Healthcare Portfolio
Companies in the health care industry are, generally, subject to
governmental regulation and approval of their products and services, which could
have a significant effect on their price and availability. Furthermore, the
types of products or services produced or provided by these companies may
quickly become obsolete. The costs of providing health care services are subject
to increase as a result of, among other factors, changes in medical technology
and increased labor costs. In addition, health care facility construction and
operation is subject to federal, state and local regulation relating to the
adequacy of medical care, equipment, personnel, operating policies and
procedures, rate-setting, and compliance with building codes and environmental
laws. Facilities are subject to periodic inspection by governmental and other
authorities to assure continued compliance with the various standards necessary
for licensing and accreditation. These regulatory requirements are subject to
change and, to comply, it may be necessary for a hospital or other health care
facility to incur substantial capital expenditures or increased operating
expenses to effect changes in its facilities, equipment, personnel and services.
Additionally, a number of legislative proposals concerning healthcare have been
introduced in the U.S. Congress in recent years or have been reported to be
under consideration. These proposals span a wide range of topics, including cost
controls, national health insurance, incentives for competition in the provision
of health care services, tax incentives and penalties related to health care
insurance premiums, and promotion of prepaid healthcare plans. Any of these
proposals, if enacted, may have an adverse effect on the health care industry.
Technology Portfolio
The Technology Portfolio's investments in securities of technology
related companies present certain risks that may not exist to the same degree in
other types of investments. Technology stocks, in general, tend to be relatively
volatile as compared to other types of investments. Any such volatility will be
reflected in the value of the Technology Portfolio's Units. The technology and
science areas may be subject to greater governmental regulation than many other
areas and changes in governmental policies and the need for regulatory approvals
may have a material adverse effect on these areas. Additionally, companies in
these areas may be subject to risks of developing technologies, competitive
pressures and other factors and are dependent upon consumer and business
acceptance as new technologies evolve. Competitive pressures may have a
significant effect on the financial condition of companies in the technology
sector. For example, if technology continues to advance at an accelerated rate,
and the number of companies and product offerings continues to expand, these
companies could become increasingly sensitive to short product cycles and
aggressive pricing. Further, companies in the technology industry spend heavily
on research and development and are subject to the risk that their products or
services may not prove commercially successful or may become obsolete quickly.
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The Technology Portfolio may be susceptible to factors affecting the
communications industry. The communications industry is subject to governmental
regulation and the products and services of communications companies may be
subject to rapid obsolescence. These factors could affect the value of the
Technology Portfolio's Units. Telephone companies in the United States, for
example, are subject to both state and federal regulations affecting permitted
rates of returns and the kinds of services that may be offered. In addition,
federal communications laws regarding the cable television industry have
recently been amended to eliminate government regulation of cable television
rates where competition is present and allow rates to be dictated by market
conditions. In the absence of competition, however, rates shall be regulated by
federal and state governments to protect the interest of subscribers. Certain
types of companies represented in the Technology Portfolio may be engaged in
fierce competition for a share of the market of their products. As a result,
competitive pressures are intense and the stocks are subject to rapid price
volatility. While the Technology Portfolio may include securities of established
suppliers of traditional communication products and services, this Trust may
invest in smaller communications companies which may benefit from the
development of new products and services. These smaller companies may present
greater opportunities for capital appreciation, and may also involve greater
risk than large, established issuers. Such smaller companies may have limited
product lines, market or financial resources, and their securities may trade
less frequently and in limited volume than the securities of larger, more
established companies. As a result, the prices of the securities of such smaller
companies may fluctuate to a greater degree than the prices of securities of
other issuers.
TAXES
The following discussion addresses only the tax consequences of Units
held as capital assets and does not address the tax consequences of Units held
by dealers, financial institutions or insurance companies.
In the opinion of Battle Fowler LLP, special counsel for the Sponsor, under
existing law:
1. Each Trust is not an association taxable as a corporation
for Federal income tax purposes, and income received by a 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 a 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 its tax cost for each Security
represented by its Units by allocating the total cost for its Units,
including the sales charge, among each Security in a Trust represented
by its Units (in proportion to the fair market values thereof on the
date the Holder purchases its Units).
3. A Holder will be considered to have received all of the
dividends paid on its pro rata portion of each Security when such
dividends are received by a Trust even if the Holder does not actually
receive such distributions but rather reinvests its dividend
distributions pursuant to the Reinvestment Plan. An individual Holder
who itemizes deductions will be entitled to deduct its pro rata share
of fees and expenses paid by a Trust only to the extent that this
amount togther with the Holder's other miscellaneous deductions exceeds
2% of its adjusted gross income.
Distributions with respect to corporate equity securities held by the
Trusts 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 by a Trust from domestic corporations.
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The dividends-received deduction is currently 70%. However, Congress
from time to time considers proposals to reduce this percentage, 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 a 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 its
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 its basis for the same
Securities (previously represented by its Units) prior to such redemption or
exchange, and its holding period for such Securities will include the period
during which it held its Units. However, a Holder will have a taxable gain or
loss, which will be a capital gain or loss except in the case of a dealer, when
the Holder (or its 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 its Units or when the
Trustee sells the Securities from a 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.
Each of the Trusts may hold Securities or ADRs of foreign corporations.
For United States income tax purposes, a holder of ADRs is treated as though it
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, each Trust
is not an association taxable as a corporation and the income of a 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 divided distributions from a 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.
* * *
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After the end of each fiscal year for each of the Trusts, the Trustee
will furnish to each Holder of that Trust 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
These Trusts 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 these Trusts, and other financial institutions. Fees
and charges with respect to such plans may vary.
Before investing in a Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan) should
consider among other things (a) whether the investment is prudent under the
Employee Retirement Income Security Act of 1974 ("ERISA"), taking into account
the needs of the plan and all of the facts and circumstances of the investment
in a Trust; (b) whether the investment satisfies the diversification requirement
of Section 404(a)(1)(C) of ERISA; and (c) whether the assets of a 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 for each of the Trusts is
computed by adding to the aggregate value of the Securities in a Trust (as
determined by the Trustee) and any cash held to purchase Securities, divided by
the number of Units of the Trust 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 4.50% of the Pubic Offering Price (4.712% of the net
amount invested in Securities). The Initial Sales Charge is computed by
deducting the Deferred Sales Charge ($30.00 per 1,000 Units) from the aggregate
sales charge. On , 1998, the Initial Sales Charge is per 1,000 Units or 1.50% 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 $1.25 per 1,000 Units and is
accrued in 24 monthly installments commencing on , 1998 and will be charged to
the Capital Account on the first day of each month thereafter from 1, 1998
through 1, 2000. 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. However, any
remaining deferred sales charge will be refunded by the Sponsor when Units of
any Sector Series are repurchased or redeemed. Units purchased pursuant to the
Reinvestment Plan are subject only to the remaining applicable Deferred Sales
Charge deduction (see Reinvestment Plan).
Purchasers on , 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 , 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
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the aggregate value of the underlying Securities. Units will be sold to
investors at the Public Offering Price next determined after receipt of the
investor's purchase order. A proportionate share of the amount in the Income
Account (described under Administration of the Trust--Accounts and
Distributions) on the date of delivery of the Units to the purchaser is added to
the Public Offering Price.
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 Net Amount
Number of Units Offering Price Invested
- --------------- -------------- ----------
<S> <C> <C>
Fewer than 50,000..................................................... 4.50% 4.712%
50,000 but less than 100,000.......................................... 4.25 4.439
100,000 but less than 250,000......................................... 4.00 4.167
250,000 but less than 1,000,000....................................... 3.50 3.627
1,000,000 or more..................................................... 3.00 3.093
</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. 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 national stock exchange or Nasdaq National Market are valued at the closing
sale price, or, if no closing sales price exists, at the mean between the
closing bid and offer prices. Securities not so quoted are valued at the mean
between bid and offer prices.
Employees of the Sponsor and its subsidiaries, affiliates and
employee-related accounts may purchase Units pursuant to employee benefit plans,
at a price equal to the aggregate value of the Securities in the Trust divided
by the number of Units outstanding 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 Trusts, and may also be
distributed through dealers.
The Sponsor intends to qualify Units of each of the Trusts for sale in
all states of the United States where qualification is deemed necessary through
the Sponsor and dealers who are members of the National Association of
Securities Dealers, Inc. Sales to dealers, if any, will initially be made at
prices which represent a concession from the Public Offering Price per Unit to
be established at the time of sale by the Sponsor.
Underwriter's and Sponsor's Profits
The Sponsor, as sole underwriter, receives a gross underwriting
commission equal to the sales charge of 4.50% of the Public Offering Price
(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 each of the Trusts in the amount set
forth under Investment Summary, which equals the difference between the cost of
the Securities to a Trust (which is based on the aggregate value of the
Securities on the Date of Deposit)
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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 each of the Trusts (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 Portfolios on the
Initial Date of Deposit were acquired, except as indicated under Portfolios.
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 a Trust, (2) amounts
in a Trust including dividends receivable on stocks trading ex-dividend and (3)
all other assets in a Trust; deducting therefrom the sum of (a) taxes or other
governmental charges against a Trust not previously deducted, (b) accrued fees
and expenses of the Trustee (including legal and auditing expenses), the Sponsor
and counsel to a 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
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 Portfolios 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 a Trust on the date on which
the Units of such Trust 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 saleability of such
units and its estimate of the time required to sell such units and general
market conditions. For a description of certain consequences of such redemption
for the remaining Holders, see Redemption.
REDEMPTION
Units may be redeemed by the Trustee at its corporate trust office upon
payment of any relevant tax without any other fee, accompanied by a written
instrument or instruments of transfer with the signature guaranteed by a
national bank or trust company, a member firm of any of the New York, Midwest or
Pacific Stock Exchanges, or in such other manner as may be acceptable to the
Trustee. In certain instances the Trustee may require additional documents such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
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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 Trusts --
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 a 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 its 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 a 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 Chase Manhattan Bank, as Distribution Agent, for the account, and
for disposition in accordance with the instructions of, the tendering Holder as
follows:
(a) If the tendering Holder requests cash payment, the Distribution
Agent shall sell the In Kind Distribution as of the close of business on the
date of tender and remit to the Holder not later than seven calendar days
thereafter the net proceeds of sale, after deducting brokerage commissions and
transfer taxes, if any, on the sale. The Distribution Agent may sell the
Securities through the Sponsor, and the Sponsor may charge brokerage commissions
on those sales. Since these proceeds will be net of brokerage commissions,
Holders who wish to receive cash for their Units should always offer them for
sale to the Sponsor in the secondary market before seeking redemption by the
Trustee. The Trustee may offer Units tendered for redemption and cash
liquidation to it to the Sponsor on behalf of any Holder to obtain its 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 Trusts --
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 that Trust will
be reduced.
A Holder may tender Units for redemption on any weekday (a "Tender
Day") which is not one of the following: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving or Christmas. The right of redemption may be
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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 each June 30 and December 31 (or the last business day prior
thereto), as of the Evaluation Time next following the tender of any Unit for
redemption on any Tender Day, and on any other business day desired by the
Trustee or the Sponsor, by adding (1) the aggregate value of the Securities
determined by the Trustee, (2) amounts in a 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 a Trust; deducting
therefrom the sum of (a) taxes or other governmental charges against a Trust not
previously deducted, (b) accrued fees and expenses of the Trustee (including
legal and auditing expenses), the Sponsor and counsel to a Trust and certain
other expenses and (c) amounts for distribution to Holders of record as of a
date prior to the evaluation; and dividing the result of such computation by the
number of Units outstanding as of the date thereof.
The aggregate value of the Securities shall be determined by the
Trustee in good faith in the following manner: if the Securities are listed on a
national securities exchange or NASDAQ National Market System, 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 each of the Trusts, 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 Trusts and
amortized over one year. Any balance of the expenses incurred in establishing
the Trusts, as well as advertising and selling expenses, will be paid by the
Underwriters at no cost to the Trusts.
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 Trusts, including certain mailing and
printing expenses, are borne by the Trusts. 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 the Trusts, 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
Trusts in
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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 Trusts (including legal and auditing expenses) and expenses of counsel
designated by the Sponsor, (3) various governmental charges and fees and
expenses for maintaining the Trusts' 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 Trusts and the
rights and interests of Holders (for example, expenses in exercising a 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 willful misconduct on its part, (6) indemnification of the Sponsor for
any losses, liabilities and expenses incurred without gross negligence, bad
faith, willful misconduct or reckless disregard of their duties and (7)
expenditures incurred in contacting Holders upon termination of each Trust. The
amounts of these charges and fees are secured by a lien on the Trusts.
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
Capital Accounts (see below); (2) to the extent the Capital Account funds are
insufficient, by distribution from the Income Accounts (see below) (which will
reduce income distributions from the Accounts); (3) to the extent the Income and
Capital Accounts are insufficient, by selling Securities from the Portfolios 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
Trusts -- Risk Factors), the Sponsor cannot provide any assurance that dividends
will be sufficient to meet any or all expenses of the Trusts. 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 Trusts -- Taxes.
ADMINISTRATION OF THE TRUSTS
Records
The Trustee keeps records of the transactions of each of the Trusts at
its corporate trust office including names, addresses and holdings of all
Holders of record, a current list of the Securities and a copy of the Indenture.
Such records are available to Holders for inspection at reasonable times during
business hours.
Accounts and Distributions
Dividends payable to a 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 its 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. No distribution need be made
from the Capital Account if the balance therein is less than an amount
sufficient to distribute $5.00 per 1,000 Units. The Trustee may withdraw from
the Income Account, from time to time, such amounts as it deems requisite to
establish a reserve for any taxes or other governmental charges that may be
payable out of the Trusts. Funds held by the Trustee in the various accounts
created under the Indenture do not bear interest.
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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 Trusts 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 a 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 Trusts are generally made in brokerage transactions (as distinguished from
principal transactions) and the Sponsor or any of its affiliates may act as
brokers therein if the Trustee expects thereby to obtain the most favorable
prices and execution. The furnishing of statistical and research information to
the Trustee by any of the securities dealers through which transactions are
executed will not be considered in placing securities transactions.
Trust Supervision
Each of the Trusts is a unit investment trust which normally follows a
buy and hold investment strategy and is not actively managed. However, each
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 each of the Trusts, 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 such Portfolio. However,
while it is the intention of the Sponsor to continue a 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 a 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 having fixed final maturity dates no later than the next
Distribution Day (at which time the proceeds from the maturity of said
instrument shall be distributed to Holders) which are selected by the Sponsor
and 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 a Trust's aggregate holding of certificates of deposit or time deposits
issued by the Trustee may not exceed the insurance coverage of such obligations
and (ii) U.S. treasury notes or bills.
In the event a public tender offer is made for a Security or a merger
or acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when in its opinion it
is in the best interest of the Holders of the Units to do so. In addition, the
Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new Securities in exchange or
substitution for any Securities except that the Sponsor may instruct the Trustee
to accept or reject such an offer to take any other action with respect thereto
as the Sponsor may deem proper if (1) the issuer failed to declare or pay
anticipated dividends with respect to such Securities or (2) in the written
opinion of the Sponsor the issuer will probably fail to declare or pay
anticipated dividends with respect to such Securities in the reasonably
foreseeable future. Any Securities so received in exchange or substitution shall
be sold unless the Sponsor directs that they
696477.1
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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 a Portfolio and no replacement security is acquired, the Trustee
shall within a reasonable period of time thereafter notify Holders of that Trust
of the sale of the Security. Except as stated in its and the following
paragraphs, the Trusts 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 a 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 a Trust consisting of securities of a single issuer (or of two or
more issuers which are Affiliated Persons as its 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 a 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 that
Trust as to be acceptable for acquisition by such Trust. Whenever a Replacement
Security has been acquired for a 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 that 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 Portfolios 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 of by the Trustee
as provided in the Indenture. The proceeds of any disposition shall be credited
to the Income or Capital Account of a Trust.
The Indenture also authorized the Sponsor to increase the size and
number of Units of the Trusts by the deposit of cash (or a letter of credit)
with instructions to purchase Additional Securities, contracts to purchase
Additional Securities, or Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising a 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 a 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 Trusts 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)
696477.1
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deposit or instruct the Trustee to purchase) a Replacement Security that will
meet the conditions described above. Any funds held to acquire Additional or
Replacement Securities which have not been used to purchase Securities at the
end of the 90-day period beginning with the Initial Date of Deposit, shall be
used to purchase Securities as described above or shall be distributed to
Holders together with the attributable sales charge.
Reports to Holders
The Trustee will furnish Holders with each distribution a statement of
the amount of income and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Within a
reasonable period of time after the end of each calendar year, the Trustee will
furnish to each person who at any time during the calendar year was a Holder of
record a statement (1) as to the Income Account: income received; deductions for
applicable taxes and for fees and expenses of the Trustee and counsel, and
certain other expenses; amounts paid in connection with redemptions of Units and
the balance remaining after such distributions and deductions, expressed in each
case both as a total dollar amount and as a dollar amount per Unit outstanding
on the last business day of such calendar year; (2) as to the Capital Account:
the disposition of any Securities (other than pursuant to In Kind Distributions)
and the net proceeds received therefrom; the results of In Kind Distributions in
connection with redemption of Units; deductions for payment of applicable taxes
and for fees and expenses of the Trustee and counsel and certain other expenses,
to the extent that the Income Account is insufficient, and the balance remaining
after such distribution and deductions, expressed both as a total dollar amount
and as a dollar amount per Unit outstanding on the last business day of such
calendar year; (3) a list of the Securities held and the number of Units
outstanding on the last business day of such calendar year; (4) the Redemption
Price per Unit based upon the last computation thereof made during such calendar
year; and (5) amounts actually distributed during such calendar year from the
Income Account expressed both as total dollar amounts and as dollar amounts per
Unit outstanding on the record dates for such distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
Book-Entry Units
Ownership of Units of a 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 a Trust will be made in book-entry form through
DTC or the Trustee. Ownership and transfer of Units will be evidenced and
accomplished 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
696477.1
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(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 a 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 Trusts-- 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 of record within a reasonable period of
time prior to the termination. Within a reasonable period of time after such
termination, the Trustee must sell all of the Securities then held and
distribute to each Holder, after deductions of accrued and unpaid fees, taxes
and governmental and other charges, such Holder's interest in the Income and
Capital Accounts. Such distribution will normally be made by mailing a check in
the amount of each Holder's interest in such accounts to the address of such
nominee Holder appearing on the record books of the Trustee.
EXCHANGE AND ROLLOVER PRIVILEGES
Holders may exchange their Units of a Trust into units of any then
outstanding series of Equity Focus Trusts--Sector Series (an "Exchange Series")
at their relative net asset values, subject only to the remaining deferred sales
charge (as disclosed in the prospectus for the Exchange Series). The exchange
option described above will also be available to investors in the Trusts who
elect to purchase units of an Exchange Series within 60 days of their
liquidation of Units in a Trust.
Holders who retain their Units until the termination of a Trust, may
reinvest their terminating distributions into units of a subsequent series of
Equity Focus Trusts--Sector 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 a 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 Trusts described in its
Prospectus, and that similar reinvestment programs will be offered with respect
to all subsequent series of the Trusts. The availability of these options do not
constitute a solicitation of an offer to purchase units of an Exchange Series or
a New Series or any other security. A Holder's election to participate in either
of these options will be treated as an indication of interest only. Holders
should contact their financial professionals to find out what suitable Exchange
or New Series is available and to obtain a prospectus. Holders may acquire units
of those Series which are lawfully for sale in states where they reside and only
those Exchange Series in which the Sponsor is maintaining a secondary market. At
any time prior to the exchange by the Holder of units of an Exchange Series, or
the purchase by a Holder of units of a New Series, such Holder may change its
investment strategy and receive its 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 a Trust) as a result of the
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liquidation, even though no cash will be distributed to pay any taxes. Holders
should consult their own tax advisers in its 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 its financial consultant at Smith Barney Inc. or the
Trustee, respectively, to the contrary, will be reinvested automatically in
additional Units of the Trust in which the Holder is making such reinvestment at
no extra charge pursuant to the Trust's "Reinvestment Plan". If the Holder does
not wish to participate in the Reinvestment Plan, the Holder must notify its
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 in cash to the Sponsor, who
will use them to purchase Units of that 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 Trusts--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 either of the Trusts. 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 of
a trust 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 it be under no liability for any action taken in good faith in
reliance on prima facie properly executed documents or for the disposition of
monies or Securities, nor shall it be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Security. This
provision, however, shall not protect the Trustee in cases of wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the Securities
or upon the interest thereon. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee.
Sponsor
The Sponsor may resign at any time if a successor Sponsor is appointed
by the Trustee in accordance with the Indenture. Any new Sponsor must have a
minimum net worth of $2,000,000 and must serve at rates of compensation deemed
by the Trustee to be reasonable and as may not exceed amounts prescribed by the
SEC. If the Sponsor fails to perform its duties or becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, then
the Trustee may (1) appoint a successor Sponsor at rates of compensation
696477.1
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deemed by the Trustee to be reasonable and as may not exceed amounts prescribed
by the SEC, (2) terminate the Indentures and liquidate the Trusts or (3)
continue to act as Trustee without terminating the Indenture.
The Sponsor shall be under no liability to the Trusts or to the Holders
for taking any action or for refraining from taking any action in good faith or
for errors in judgment and shall not be liable or responsible in any way for
depreciation of any Security or Units or loss incurred in the sale of any
Security or Units. This provision, however, shall not protect the Sponsor in
cases of wilful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties. The Sponsor may transfer all or substantially all
of its assets to a corporation or partnership which carries on its business and
duly assumes all of its obligations under the Indenture and in such event it
shall be relieved of all further liability under the Indenture.
MISCELLANEOUS
Trustee
The name and address of the Trustee are shown on the back cover of its
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 Trusts, 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 Statements of Financial Condition and the Portfolios included in
its 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 story 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.
696477.1
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Equity Focus Trusts
Sector Series, 1998-A
Energy Portfolio
Financials Portfolio
Healthcare Portfolio
Technology & Telecommunications Portfolio
Unit Investment Trusts
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
Investment Summary
Independent Auditors' Report
Statements of Financial Condition
Portfolios
Description of the Trusts
Risk Factors
Taxes
Public Sale of Units
Market for Units
Redemption
Expenses and Charges
Administration of the Trusts
Exchange and Rollover Privileges
Reinvestment Plan
Resignation, Removal and Limitations on Liability
Miscellaneous
- --------------------------------------------------------------------------------
Sponsor: Trustee: Independent Accountants:
Smith Barney Inc. The Chase Manhattan Bank KPMG Peat Marwick LLP
388 Greenwich Street 4 New York Plaza 345 Park Avenue
23rd Floor New York, New York 10004 New York, New York 10154
New York, New York 10013 (800) 354-6565
(212) 816-4000
- --------------------------------------------------------------------------------
SALOMON SMITH BARNEY
--------------------
A Member of TravelersGroup
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any representations
with respect to the Trusts, not contained in its 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.
- --------------------------------------------------------------------------------
696477.1
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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>
<S> <C> <C>
SEC FILE OR
IDENTIFICATION NO.
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:
Smith Barney Inc. 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:
Smith Barney Inc. 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, ByLaws):
33-65332, 33-36037
Smith Barney Inc.
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 13-4994650
- -------------------------------------------------------------------------- -----------------------------------------
</TABLE>
II-1
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CONTENTS OF REGISTRATION STATEMENT
The Registration Statement on Form S-6 comprises 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 as of the following persons: KPMG Peat Marwick LLP
(included in Exhibit 5.1) Battle Fowler LLP (included in
Exhibit 3.1)
The following exhibits:
*1.1.1 -- Form of Reference Trust Indenture.
2.1 -- Form of Standard Terms and Conditions of Trust
(incorporated by reference to Exhibit 2.1 to the
Registration Statement of The Uncommon Values Unit
Trust, 1985 Series, 1933 Act File No. 33-97046).
*3.1 -- Opinion of counsel as to the legality of the
securities being issued including their consent to
the use of their names under the headings "Taxes" and
"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.
- --------
* To be filed with Amendment to Registration Statement.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO
DULY AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 7TH DAY OF
APRIL, 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 to the Registration
Statement 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.
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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
By: /s/GINA LEMON
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-Fact for the persons listed above)
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* Pursuant to Powers of Attorney filed as exhibits to Registration
Statement Nos. 33-56722, 33-51999 and 333-42679.
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