<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1998
REGISTRATION NO. 333-49569
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
----------------
A. EXACT NAME OF TRUST:
EQUITY FOCUS TRUSTS--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, NEW YORK 10013
D. NAMES AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY TO:
LAURIE A. HESSLEIN
SMITH BARNEY INC. MICHAEL R. ROSELLA, ESQ.
388 GREENWICH STREET BATTLE FOWLER LLP
NEW YORK, NEW YORK 10013 75 EAST 55TH STREET
NEW YORK, NEW YORK 10022
(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.
[_]CHECK BOX IF IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
IMMEDIATELY UPON FILING PURSUANT TO RULE 487.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EQUITY FOCUS TRUSTS
SECTOR SERIES, 1998-A
ENERGY PORTFOLIO
FINANCIALS PORTFOLIO
HEALTHCARE PORTFOLIO
TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
UNIT INVESTMENT TRUSTS
SALOMON SMITH BARNEY The Equity Focus Trusts--Sector Series, 1998-A
- ------------------------------- consists of four separate unit investment
trusts designated as the Energy Portfolio, the
A Member of TravelersGroup LOGO 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.
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 20, 1998
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
ENERGY PORTFOLIO
INVESTMENT SUMMARY AS OF MAY 19 , 1998+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
INITIAL NUMBER OF UNITS++......................................... 1,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT... 1/1,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)...........................
Aggregate value of Securities in Trust........................... $ 992,906
============
Divided by 1,000,000 Units (times 1,000)......................... $ 992.91
Plus initial sales charge of 1.50% of Public Offering Price
(1.523% of the net amount invested in Securities)*+++........... 15.12
------------
Public Offering Price per 1,000 Units............................ $ 1,008.03
Plus the amount per 1,000 Units in the Income and Capital
Accounts (see Description of the Trust--Income)................. $ 0
------------
Total (per 1,000 Units).......................................... $ 1,008.03
============
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 1,000 UNITS
(based on value of underlying securities)........................ $ 992.91
DISTRIBUTIONS
Distributions of income, if any, will be made on November 25, to Holders of
record on November 10 of each year, and will be automatically reinvested in
additional Units of this Trust unless the Holder elects to receive his
distribution in cash. A Final Distribution will be made upon termination of
the Trust.
</TABLE>
<TABLE>
<S> <C>
SPONSOR'S PROFIT ON DEPOSIT .............................................. $856
TRUSTEE'S ANNUAL FEE
$.82 per 1,000 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units
(see Expenses and Charges)
RECORD DAY
November 10 of each year.
DISTRIBUTION DAY
</TABLE>
November 25 of each year, and upon termination and liquidation of the Trust.
EVALUATION TIME
4:00 P.M. New York time (or earlier close of the New York Stock Exchange).
TRUSTEE AND DISTRIBUTION AGENT
The Chase Manhattan Bank
MINIMUM VALUE OF TRUST
The trust indenture between the Sponsor and the Trustee (the "Indenture") may
be terminated if the net asset value of the Trust is less than $5,000,000,
unless the net asset value of Trust deposits has exceeded $50,000,000. In
that case, the Indenture may be terminated if the net asset value of the
Trust is less than $20,000,000. See Risk Factors, page 7.
MANDATORY TERMINATION OF TRUST
May 31, 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 June 1, 1998 through May 1, 2000.
- ------------
+The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on May 19, 1998. Valuation of Securities is based on the
market value per share as of May 19, 1998, as more fully explained in footnote
4 to Portfolio on page 19. 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 May 19, 1998, the Initial Date of Deposit, the Initial Sales Charge
is $15.12 per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred
Sales Charge of the Trust is paid through a reduction of the net asset value of
the Trust by $1.25 per 1,000 Units on each Deferred Sales Charge Payment Date.
If a Holder's sale or redemption of Units settles before a Deferred Sales
Charge Payment Date, all future deductions of the Deferred Sales Charge will be
waived; this will have the effect of reducing the rate of sales charge for that
Holder.
**All redemptions of 250,000 Units or more may, upon request by a redeeming
Holder, be made in kind to the Distribution Agent, who will either forward the
distributed securities to the Holder or sell the securities on behalf of the
redeeming Holder and distribute the proceeds (net of any brokerage commission
or other expenses incurred in the sale) to the Holder. See Redemption.
2
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
FINANCIALS PORTFOLIO
INVESTMENT SUMMARY AS OF MAY 19, 1998+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
INITIAL NUMBER OF UNITS ++......................................... 1,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT.... 1/1,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)............................
Aggregate value of Securities in Trust............................ $ 988,219
===========
Divided by 1,000,000 Units (times 1,000).......................... $ 988.22
Plus initial sales charge of 1.50% of Public Offering Price
(1.523% of the net amount invested in Securities)*+++............ 15.05
-----------
Public Offering Price per 1,000 Units............................. $ 1,003.27
Plus the amount per 1,000 Units in the Income and Capital Accounts
(see Description of the Trust--Income)........................... $ 0
-----------
Total (per 1,000 Units)........................................... $ 1,003.27
===========
</TABLE>
<TABLE>
<S> <C>
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 1,000 UNITS
(based on value of underlying securities)............................. $988.22
</TABLE>
DISTRIBUTIONS
Distributions of income, if any, will be made on November 25, to Holders of
record on November 10 of each year, and will be automatically reinvested in
additional Units of this Trust unless the Holder elects to receive his
distribution in cash. A Final Distribution will be made upon termination of
the Trust.
<TABLE>
<S> <C>
SPONSOR'S PROFIT ON DEPOSIT........... $36
TRUSTEE'S ANNUAL FEE
$.82 per 1,000 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units
(see Expenses and Charges)
RECORD DAY
November 10 of each year.
DISTRIBUTION DAY
</TABLE>
November 25 of each year, and upon termination and liquidation of the Trust.
EVALUATION TIME
4:00 P.M. New York time (or earlier close of the New York Stock Exchange).
TRUSTEE AND DISTRIBUTION AGENT
The Chase Manhattan Bank
MINIMUM VALUE OF TRUST
The trust indenture between the Sponsor and the Trustee (the "Indenture") may
be terminated if the net asset value of the Trust is less than $5,000,000,
unless the net asset value of Trust deposits has exceeded $50,000,000. In
that case, the Indenture may be terminated if the net asset value of the
Trust is less than $20,000,000. See Risk Factors, page 7.
MANDATORY TERMINATION OF TRUST
May 31, 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 June 1, 1998 through May 1, 2000.
- ------------
+The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on May 19, 1998. Valuation of Securities is based on the
market value per share as of May 19, 1998, as more fully explained in footnote
4 to Portfolio on page 19. 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 May 19, 1998, the Initial Date of Deposit, the Initial Sales Charge
is $15.05 per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred
Sales Charge of the Trust is paid through a reduction of the net asset value of
the Trust by $1.25 per 1,000 Units on each Deferred Sales Charge Payment Date.
If a Holder's sale or redemption of Units settles before a Deferred Sales
Charge Payment Date, all future deductions of the Deferred Sales Charge will be
waived; this will have the effect of reducing the rate of sales charge for that
Holder.
** 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.
3
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
HEALTHCARE PORTFOLIO
INVESTMENT SUMMARY AS OF MAY 19, 1998+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
INITIAL NUMBER OF UNITS++.......................................... 1,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT.... 1/1,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)............................
Aggregate value of Securities in Trust............................ $ 989,931
===========
Divided by 1,000,000 Units (times 1,000).......................... $ 989.93
Plus initial sales charge of 1.50% of Public Offering Price
(1.523% of the net amount invested in Securities)*+++............ 15.08
-----------
Public Offering Price per 1,000 Units............................. $ 1,005.01
-----------
Plus the amount per 1,000 Units in the Income and Capital Accounts
(see Description of the Trust--Income) $ 0
-----------
Total (per 1,000 Units)........................................... $ 1,005.01
===========
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 1,000 UNITS
(based on value of underlying securities)......................... $ 989.93
DISTRIBUTIONS
Distributions of income, if any, will be made on November 25, to Holders of
record on November 10 of each year, and will be automatically reinvested in
additional Units of this Trust unless the Holder elects to receive his
distribution in cash. A Final Distribution will be made upon termination of
the Trust.
</TABLE>
<TABLE>
<S> <C>
SPONSOR'S PROFIT ON DEPOSIT....... $ 2,242
TRUSTEE'S ANNUAL FEE
$.82 per 1,000 Units (see Expenses and
Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units (see
Expenses and Charges)
RECORD DAY
November 10 of each year.
DISTRIBUTION DAY
November 25 of each year, and upon
termination and liquidation of the Trust.
EVALUATION TIME
4:00 P.M. New York time (or earlier close
of the New York Stock Exchange).
TRUSTEE AND DISTRIBUTION AGENT
The Chase Manhattan Bank
MINIMUM VALUE OF TRUST
The trust indenture between the Sponsor
and the Trustee (the "Indenture") may be
terminated if the net asset value of the
Trust is less than $5,000,000, unless the
net asset value of Trust deposits has
exceeded $50,000,000. In that case, the
Indenture may be terminated if the net
asset value of the Trust is less than
$20,000,000. See Risk Factors, page 7.
MANDATORY TERMINATION OF TRUST
May 31, 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
June 1, 1998 through May 1, 2000.
</TABLE>
- ------------
+The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on May 19, 1998. Valuation of Securities is based on the
market value per share as of May 19, 1998, as more fully explained in footnote
4 to Portfolio on page 19. 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 May 19, 1998, the Initial Date of Deposit, the Initial Sales Charge
is $15.08 per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred
Sales Charge of the Trust is paid through a reduction of the net asset value of
the Trust by $1.25 per 1,000 Units on each Deferred Sales Charge Payment Date.
If a Holder's sale or redemption of Units settles before a Deferred Sales
Charge Payment Date, all future deductions of the Deferred Sales Charge will be
waived; this will have the effect of reducing the rate of sales charge for that
Holder.
**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.
4
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
INVESTMENT SUMMARY AS OF MAY 19, 1998+
<TABLE>
<S> <C>
SPONSOR
Smith Barney Inc.
INITIAL NUMBER OF UNITS++.......................................... 1,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST
REPRESENTED BY EACH UNIT.......................................... 1/1,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)............................
Aggregate value of Securities in Trust............................ $ 986,536
===========
Divided by 1,000,000 Units (times 1,000).......................... $ 986.54
Plus initial sales charge of 1.50% of Public Offering Price
(1.523% of the net amount invested in Securities)*+++............ 15.02
-----------
Public Offering Price per 1,000 Units............................. $ 1,001.56
Plus the amount per 1,000 Units in the Income and Capital Accounts
(see Description of the Trust--Income)........................... $ 0
-----------
Total (per 1,000 Units)........................................... $ 1,001.56
===========
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE** PER 1,000 UNITS
(based on value of underlying securities)......................... $ 986.54
DISTRIBUTIONS
Distributions of income, if any, will be made on November 25, to Holders of
record on November 10 of each year, and will be automatically reinvested in
additional Units of this Trust unless the Holder elects to receive his
distribution in cash. A Final Distribution will be made upon termination of
the Trust.
</TABLE>
<TABLE>
<S> <C>
SPONSOR'S LOSS ON DEPOSIT.................................................. $64
</TABLE>
<TABLE>
<S> <C>
TRUSTEE'S ANNUAL FEE
$.82 per 1,000 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units
(see Expenses and Charges)
RECORD DAY
November 10 of each year.
DISTRIBUTION DAY
November 25 of each year, and upon
termination and liquidation of the
Trust.
EVALUATION TIME
4:00 P.M. New York time (or earlier
close of the New York Stock Exchange).
TRUSTEE AND DISTRIBUTION AGENT
The Chase Manhattan Bank
MINIMUM VALUE OF TRUST
The trust indenture between the Sponsor
and the Trustee (the "Indenture") may be
terminated if the net asset value of the
Trust is less than $5,000,000, unless
the net asset value of Trust deposits
has exceeded $50,000,000. In that case,
the Indenture may be terminated if the
net asset value of the Trust is less
than $20,000,000. See Risk Factors, page
7.
MANDATORY TERMINATION OF TRUST
May 31, 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
June 1, 1998 through May 1, 2000.
</TABLE>
- ------------
+The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on May 19, 1998. Valuation of Securities is based on the
market value per share as of May 19, 1998, as more fully explained in footnote
4 to Portfolio on page 19. 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 May 19, 1998, the Initial Date of Deposit, the Initial Sales Charge
is $15.02 per 1,000 Units (or 1.50% of the Public Offering Price). The Deferred
Sales Charge of the Trust is paid through a reduction of the net asset value of
the Trust by $1.25 per 1,000 Units on each Deferred Sales Charge Payment Date.
If a Holder's sale or redemption of Units settles before a Sales Charge Payment
Date, all future deductions of the Deferred Sales Charge will be waived; this
will have the effect of reducing the rate of sales charge for that Holder.
**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.
5
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998 (CONTINUED)
OBJECTIVE OF THE TRUSTS -- The objective of the Equity Focus Trusts -- Sector
Series, 1998-A-Energy Portfolio (the "Energy Portfolio") and the Equity Focus
Trusts--Sector Series, 1998-A-Technology & Telecommunications Portfolio (the
"Technology 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 Energy and Technology
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 Energy and Technology
Portfolios. The objective of the Equity Focus Trusts -- Sector Series, 1998-A-
Financials Portfolio (the "Financials Portfolio") and the Equity Focus Trusts--
Sector Series, 1998-A-Healthcare Portfolio (the "Healthcare Portfolio") is to
provide investors with the possibility of capital appreciation and current
dividend income 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 Financials and Healthcare 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 22 common stocks issued by
companies engaged primarily in the energy industry. British Petrol ADS and Elf
Aquitaine ADS are American Depository Shares. Although there are certain risks
of price volatility associated with investment in common stocks (particularly
with an investment in one or two common stocks), your risk is reduced because
your capital is divided among 22 stocks. (See Risk Factors.)
The Financials Portfolio contains 32 common stocks issued by companies
engaged primarily in the financials industry. 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 32 stocks. (See Risk Factors.)
The Healthcare Portfolio contains 20 common stocks issued by companies
engaged primarily in the health care industry. Novartis AG ADR is an American
Depository Receipt. Although there are certain risks of price volatility
associated with investment in common stocks (particularly with an investment in
one or two common stocks), your risk is reduced because your capital is divided
among 20 stocks. (See Risk Factors.)
The Technology Portfolio contains 20 common stocks issued by companies
engaged primarily in the technology and telecommunications industry. Ericsson
(LM) Tel "B' ADS is an American Depository Share. 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 20 stocks. (See Risk Factors.)
6
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998 (CONTINUED)
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
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 18.66%, 16.32%
and 31.18% of the value of the Financials Portfolio, the Healthcare Portfolio
and the Technology Portfolio, respectively, have been ranked High Risk by
Salomon Smith Barney's Research Department, described as "low predictability of
earnings/dividends; high 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. 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. The profitability of
financial services companies as a group is
7
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998 (CONTINUED)
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. Companies in the healthcare industry are also
susceptible to 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. 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.
(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
8
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998-A (CONTINUED)
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 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.
9
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998 (CONTINUED)
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%; 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 May 19, 1998 the Initial Sales Charge is $15.12, $15.05, $15.08 and $15.02
per 1,000 Units for the Energy Portfolio, the Financials Portfolio, the
Healthcare Portfolio and the Technology Portfolio, respectively (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 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 June 1,
1998 and will be charged on the first day of each month thereafter through May
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 his 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
his Units only through redemption (see Redemption).
- ------------
* This initial sales charge will be reduced on a graduated scale in the case
of quantity purchases. See Public Sale of Units--Public Offering Price.
10
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998 (CONTINUED)
FEE TABLE FOR ENERGY PORTFOLIO AND HEALTHCARE PORTFOLIO
- --------------------------------------------------------------------------------
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 FUND, THIS INFORMATION IS PRESENTED TO PERMIT A COMPARISON OF
FEES.
- --------------------------------------------------------------------------------
UNITHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
AS A % OF INITIAL AMOUNTS PER
PUBLIC OFFERING PRICE 1,000 UNITS
--------------------- -----------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed
on Purchase (as a percentage of
offering price)...................... 1.50%* $15.00
Maximum Deferred Sales Charge......... 3.00%** 30.00
---- ------
Total................................ 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Rein-
vested Dividends .................... 3.00%* $30.00***
==== ======
ESTIMATED ANNUAL TRUST OPERATING EX-
PENSES
(AS A PERCENTAGE OF AVERAGE NET AS-
SETS)
<CAPTION>
AMOUNTS PER
AS A % OF NET ASSETS 1,000 UNITS
--------------------- -----------
<S> <C> <C> <C>
Trustee's Fee......................... .083% $0.82
Maximum Portfolio Supervision, Book-
keeping and Administrative Fees...... .025% $0.25
Organizational Expenses............... .065% $0.64
Other Operating Expenses.............. .021% $0.20
---- ------
Total................................ .194% $1.91
==== ======
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR PERIOD:
--------------------------------------
1 YEAR 2 YEARS
------ -------
<S> <C> <C> <C>
An investor would pay the following
expenses and charges on a $1,000
investment, assuming the Trust's
estimated operating expense ratio of
.194% in the first year and .194% in
the second year and a 5% annual return
on the investment throughout the
periods............................... $32 $49
</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).
11
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
INVESTMENT SUMMARY AS OF MAY 19, 1998 (CONTINUED)
FEE TABLE FOR FINANCIALS PORTFOLIO AND TECHNOLOGY & TELECOMMUNICATIONS
PORTFOLIO
- --------------------------------------------------------------------------------
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 FUND, THIS INFORMATION IS PRESENTED TO PERMIT A COMPARISON OF
FEES.
- --------------------------------------------------------------------------------
UNITHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
AS A % OF INITIAL AMOUNTS PER
PUBLIC OFFERING PRICE 1,000 UNITS
--------------------- -----------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed
on Purchase (as a percentage of
offering price)...................... 1.50%* $15.00
Maximum Deferred Sales Charge......... 3.00%** 30.00
---- ------
Total................................ 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Rein-
vested Dividends .................... 3.00%* $30.00***
==== ======
ESTIMATED ANNUAL TRUST OPERATING EX-
PENSES
(AS A PERCENTAGE OF AVERAGE NET AS-
SETS)
<CAPTION>
AMOUNTS PER
AS A % OF NET ASSETS 1,000 UNITS
--------------------- -----------
<S> <C> <C> <C>
Trustee's Fee......................... .083% $0.82
Maximum Portfolio Supervision, Book-
keeping and Administrative Fees...... .025% $0.25
Organizational Expenses............... .049% $0.49
Other Operating Expenses.............. .016% $0.16
---- ------
Total................................ .173% $1.72
==== ======
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR PERIOD:
--------------------------------------
1 YEAR 2 YEARS
------ -------
<S> <C> <C> <C>
An investor would pay the following
expenses and charges on a $1,000
investment, assuming the Trust's
estimated operating expense ratio of
.173% in the first year and .173% in
the second year and a 5% annual return
on the investment throughout the
periods............................... $32 $49
</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).
12
<PAGE>
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 & Telecommunications Portfolio, as of May 19, 1998. These
financial statements are the responsibility of the Trustee (see note 5 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 May 19, 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 each of the
respective portfolios constituting Equity Focus Trusts--Sector Series, 1998-A,
as of May 19, 1998, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
May 19, 1998
13
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A
STATEMENTS OF FINANCIAL CONDITION AS OF INITIAL DATE OF DEPOSIT, MAY 19, 1998
<TABLE>
<CAPTION>
TECHNOLOGY &
ENERGY FINANCIALS HEALTHCARE TELECOMMUNICATIONS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
TRUST PROPERTY ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Investment in Securities:
Contracts to purchase
Securities(1).......... $ 992,906 $ 988,219 $ 989,931 $ 986,536
Organizational costs(2).. 64,201 73,029 64,326 72,468
---------- ---------- ---------- ----------
Total................... 1,057,107 1,061,248 1,054,257 1,059,004
========== ========== ========== ==========
LIABILITIES
Accrued Expenses(2)...... 64,201 73,029 64,326 72,468
---------- ---------- ---------- ----------
INTEREST OF UNITHOLDERS
1,000,000 Units of
fractional undivided
interest outstanding for
each respective trust:
Cost to investors(3)..... $1,008,026 $1,003,268 $1,005,006 $1,001,563
Less: Gross underwriting
commissions(4).......... 15,120 15,049 15,075 15,023
---------- ---------- ---------- ----------
Net amount applicable to
investors............... 992,906 988,219 989,931 986,536
---------- ---------- ---------- ----------
Total.................... $1,057,107 $1,061,248 $1,054,257 $1,059,004
========== ========== ========== ==========
</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. An irrevocable letter
of credit in the amount of $4,400,000 has been deposited with the Trustee
for the purchase of Securities. The letter of credit was issued by Svenska
Handelsbanken.
(2) Organizational costs to be paid by the Trusts have been deferred and will
be amortized over the life of each of the Trusts. Organizational costs
have been estimated based on projected total assets of $50 million, $75
million, $50 million and $75 million, respectively. To the extent a Trust
is larger or smaller, the amount paid may vary.
(3) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(4) Assumes the initial sales charge at a rate of 1.50% of the Public Offering
Price (1.523% of the net amount invested in the Securities) computed on
the basis set forth under Public Sale of Units--Public Offering Price and
Underwriter's and Sponsor's Profits. A Deferred Sales Charge in the amount
of $1.25 per 1,000 Units is payable by a Trust on behalf of the Holders
out of net asset value of that Trust on each monthly Deferred Sales Charge
Payment Date ($15.00 per year) until the Trust terminates. The maximum
aggregate sales charge for a Holder holding Units over the entire expected
life of a Trust will equal a maximum of 4.50% of the Public Offering Price
(4.520% of the net amount invested). If a Holder's sale or redemption of
Units settles before a Deferred Sales Charge Payment Date, all future
deductions of the Deferred Sales Charge with respect to such Units will be
waived; this will have the effect of reducing the rate of sales charge for
that Holder. The initial portion of the sales charge will be reduced on a
graduated basis for quantity purchases. (See Public Sale of Units--Public
Offering Price.)
(5) The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of 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.
14
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A ENERGY PORTFOLIO ON THE INITIAL
DATE OF DEPOSIT, MAY 19, 1998
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF
STOCK INVESTMENT NUMBER PERCENT OF SECURITIES
SECURITIES(1) SYMBOL RANKING(2) OF SHARES(3) NET ASSETS TO TRUST(4)
------------- ------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
DOMESTIC OILS
-------------
Atlantic Richfield ARC 2L 500 3.96% $ 39,281
Murphy Oil MUR 2L 600 3.06 30,413
Phillips Petroleum P 2L 600 3.09 30,713
Tosco Corp. TOS 1M 300 1.02 10,125
------
11.13%
------
INTERNATIONAL OILS
------------------
British Petrol ADS BP 1L 1,000 9.18% 91,188
Chevron Corp. CHV 2L 600 4.97 49,313
Elf Aquitaine ADS ELF 1L 700 5.04 50,006
Exxon Corp. XON 1L 1,200 8.74 86,775
Mobil Corp. MOB 1L 1,100 9.02 89,513
Royal Dutch Petrol (New) RD 2L 1,600 9.11 90,500
Texaco Inc. TX 1L 1,500 8.90 88,406
------
54.96%
------
OILFIELD SERVICES &
DRILLING
-------------------
EVI Inc. EVI 1M 400 2.08% 20,650
Halliburton Co. HAL 2L 1,400 7.15 70,963
Noble Drilling Corp. NE 1M 600 1.92 19,050
R&B Falcon FLC 1M 600 1.83 18,188
Schlumberger Ltd SLB 1L 1,200 9.68 96,150
------
22.66%
------
OTHER
-----
Anadarko Petroleum APC 2M 150 1.01% 10,068
El Paso Natural Gas EPG 1M 300 1.13 11,193
KN Energy # KNE 1M 200 1.14 11,324
MCN Energy Gp. MCN 1M 300 1.12 11,156
Vintage Petroleum VPI 2M 500 0.91 9,031
Williams Cos. # WMB 1M 1,900 5.94 58,900
------
11.25%
------ --------
100.00% $992,906
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
15
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A FINANCIALS PORTFOLIO ON THE
INITIAL DATE OF DEPOSIT, MAY 19, 1998
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF
STOCK INVESTMENT NUMBER PERCENT OF SECURITIES
SECURITIES(1) SYMBOL RANKING(2) OF SHARES(3) NET ASSETS TO TRUST(4)
------------- ------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
FINANCIAL SERVICES
------------------
Federal Nat'l Mtge# FNM 1M 1,100 6.56% $ 64,831
Federal Home Loan FRE 1M 1,100 5.05 49,913
------
11.61%
------
INSURANCE-MULTILINE
-------------------
American Int'l Group AIG 2L 450 5.84% 57,684
------
5.84%
------
INSURANCE-PROPERTY
CASUALTY
------------------
Allstate Corp. ALL 1M 600 5.90% 58,350
Chubb Corp. CB 1L 500 3.85 38,031
EXEL Limited XL 1M 400 3.06 30,225
General Re Corp. GRN 1L 50 1.12 11,044
SAFECO Corp.* SAFC 1M 200 0.96 9,469
------
14.89%
------
LIFE INSURANCE
--------------
Allmerica Financial AFC 1M 300 1.95% 19,313
Equitable Cos. EQ 1M 400 2.78 27,475
------
4.73%
------
MONEY CENTER BANKS
------------------
BankAmerica Corp.# BAC 1M 500 4.21% 41,625
Chase Manhattan# CMB 1H 500 7.33 72,406
First Chicago NBD FCN 1M 300 2.72 26,850
NationsBank Corp# NB 1M 600 4.61 45,563
------
18.87%
------
PERSONAL LOANS/INSURANCE
BROKER
- ------------------------
Associates First Capital
"A' AFS 2M 150 1.17% 11,597
Capital One Financial COF 1H 100 1.02 10,088
Providian Financial PVN 2M 200 1.22 12,025
------
3.41%
------
REGIONAL BANKS
--------------
AmSouth Bancorp# ASO 2M 500 2.04% 20,125
BankBoston Corp. BKB 1H 300 3.35 33,131
Crestar Financial CF 2H 300 1.78 17,625
Fifth Third Bancorp*# FITB 2L 800 4.10 40,525
First Tenn Natl* FTEN 1M 600 2.04 20,175
First Union Corp.# FTU 1M 700 4.10 40,556
Marshall & Ilsley* MRIS 1M 500 2.79 27,531
Nat'l City Corp.# NCC 1M 600 4.20 41,400
Nat'l Commerce Bancorp* NCBC 1M 400 1.78 17,600
Norwest Corp.# NOB 2L 800 3.12 30,850
U.S. Bancorp (New) USB 1M 1,000 4.05 40,063
------
33.35%
------
SAVINGS & LOANS
---------------
Ahmanson (H F) & Co.# AHM 1H 200 1.58% 15,574
Charter One Finl* COFI 1M 300 2.12 20,981
Dime Bancorp* DME 1H 500 1.42 14,031
Washington Mutual* WAMU 1H 300 2.18 21,563
------
7.30%
------ --------
100.00% $988,219
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
16
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A HEALTHCARE PORTFOLIO ON THE
INITIAL DATE OF DEPOSIT, MAY 19, 1998
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF
STOCK INVESTMENT NUMBER PERCENT OF SECURITIES
SECURITIES(1) SYMBOL RANKING(2) OF SHARES(3) NET ASSETS TO TRUST(4)
------------- ------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
BIOTECHNOLOGY
-------------
Amgen Inc* AMGN 1H 500 3.14% $ 31,063
------
3.14%
------
DEVICES & SUPPLIES
------------------
Abbott Laboratories ABT 2L 800 6.07% 60,050
Johnson & Johnson JNJ 2L 1,000 7.14 70,688
Medtronic, Inc MDT 1M 900 4.72 46,688
STERIS Corp. *# STRL 1H 300 1.72 17,025
Stryker SYK 2M 700 2.80 27,694
St. Jude Medical STJ 2M 500 1.92 19,094
------
24.37%
------
HEALTHCARE INFORMATION
TECHNOLOGY
----------------------
HBO & Co. *# HBOC 1H 200 1.23% 12,175
------
1.23%
------
HOSPITAL MANAGEMENT
-------------------
Health Management Assoc. HMA 2M 300 0.98% 9,731
------
0.98%
------
LONG TERM CARE
--------------
Beverly Enterprises
(New) BEV 1M 700 1.05% 10,413
HEALTHSOUTH Corp. # HRC 1M 700 1.99 19,688
------
3.04%
------
MANAGED CARE
------------
Aetna Inc. AET 1M 200 1.59% 15,700
Wellpoint Health Net-
works WLP 1H 200 1.39 13,713
------
2.98%
------
MEDICAL SUPPLIES
DISTRIBUTION
----------------
Cardinal Health CAH 1M 100 0.91% 8,988
------
0.91%
------
PHARMACEUTICALS
---------------
Bristol-Myers Squibb BMY 1M 900 10.11% 100,069
Lilly (Eli) LLY 2H 1,300 8.84 87,505
Novartis AG ADR * NVTSY 2M 1,100 9.15 90,612
Pfizer, Inc. PFE 1M 1,000 11.40 112,874
Schering-Plough SGP 1M 1,300 11.85 117,324
Warner-Lambert WLA 1M 600 12.00 118,837
------
63.35%
------ --------
100.00% $989,931
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
17
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1998-A TECHNOLOGY & TELECOMMUNICATIONS
PORTFOLIO ON THE INITIAL DATE OF DEPOSIT, MAY 19, 1998
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF
STOCK INVESTMENT NUMBER PERCENT OF SECURITIES
SECURITIES(1) SYMBOL RANKING(2) OF SHARES(3) NET ASSETS TO TRUST(4)
------------- ------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS EQUIPMENT
MANUFACTURERS
------------------------
Advanced Fibre Communi-
cation* AFCI 1H 600 2.45% $ 24,150
Ericsson (LM) Tel "B'
ADS* ERICY 1M 900 4.90 48,375
Lucent Technologies LU 2M 300 2.19 21,638
Motorola, Inc. MOT 1M 400 2.26 22,250
Tellabs, Inc.* TLAB 1M 700 5.11 50,378
------
16.91%
------
DATA NETWORKING
---------------
3Com Corp* COMS 2H 1,700 5.07% 50,044
Cisco Systems* CSCO 1M 900 7.33 72,352
------
12.40%
------
TECHNOLOGY-ELECTRONICS
----------------------
Hewlett-Packard# HWP 2M 700 4.72% 46,550
------
4.72%
------
TECHNOLOGY-HARDWARE
-------------------
Compaq Computer CPQ 1H 1,300 3.95% 39,000
EMC Corp. EMC 1M 1,100 4.93 48,675
Int'l Business Machines# IBM 1M 600 7.59 74,925
Sun Microsystems*# SUNW 1M 1,200 5.16 50,925
------
21.63%
------
TECHNOLOGY-OFFICE
EQUIPMENT
-----------------
Xerox Corp# XRX 1M 500 5.41% 53,375
------
5.41%
------
TECHNOLOGY-
SEMICONDUCTORS
--------------
Altera Corp.*# ALTR 1H 1,300 5.08% 50,132
Applied Materials* AMAT 1H 700 2.64 26,031
Intel Corp.* INTC 1H 900 7.26 71,606
Texas Instruments TXN 1H 800 4.73 46,650
------
19.71%
------
TECHNOLOGY-SERVICES
-------------------
First Data# FDC 1M 1,400 5.10% 50,312
------
5.10%
------
TECHNOLOGY-SOFTWARE
-------------------
Microsoft Corp.* MSFT 1M 1,300 11.41% 112,450
------
11.41%
------
TELEPHONE-LONG DISTANCE
-----------------------
WorldCom Inc.*# WCOM 1M 600 2.71% 26,718
------
2.71%
------ --------
100.00% $986,536
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
18
<PAGE>
NOTES TO PORTFOLIOS OF SECURITIES
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on May 19, 1998. All
contracts for domestic Securities are expected to be settled by the
initial settlement date for the purchase of Units.
(2) Salomon Smith Barney has assigned these rankings according to the
following system, which uses two codes: a letter for the level of risk
(L,M,H,S or V) and a number for performance expectation (1-5).
RISK assesses predictability of earnings/dividends and stock price volatility:
L (Low Risk): highly predictable earnings/dividends, low price volatility
M (Moderate Risk): moderately predictable earnings/dividends, moderate
price volatility
H (High Risk): low predictability of earnings/dividends, high price
volatility
S (Speculative): exceptionally low predictability of earnings/dividends,
highest risk of price volatility
V (Venture): Risk and return consistent with venture capital, suitable only
for well-diversified portfolios
PERFORMANCE rankings indicate the expected total return (capital gain or loss
plus dividends) over the next 12-18 months, assuming an unchanged, or "flat"
market; performance expectations depend on the risk category assigned to the
stock, as shown in the following chart.
<TABLE>
<CAPTION>
LOW RISK MODERATE RISK HIGH RISK SPECULATIVE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1 (Buy) Over 15% Over 20% Over 25% Over 30%
2 (Outperform) 5% to 15% 5% to 20% 10% to 25% 10% to 30%
3 (Neutral) -5% to 5% -5% to 5% -10% to 10% -10% to 10%
4 (Underperform) -5% to -15% -5% to -15% -10% to -20% -10% to -20%
5 (Sell) -15% or worse -15% or worse -20% or worse -20% or worse
</TABLE>
These rankings represent current opinions of Salomon Smith Barney research
analysts and are, of course, subject to change; no assurance can be given that
the stocks will perform as expected. These rankings have not been audited by
KPMG Peat Marwick LLP.
(3) Per 1,000,000 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on May 19, 1998. Subsequent to the Initial
Date of Deposit, Securities are valued, for Securities quoted on a
national securities exchange or NASDAQ National Market System, or a
foreign securities exchange, at the closing sale prices, or if no price
exists, at the mean between the closing bid and offer prices, and 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.
19
<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.
- ------------
* 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.
20
<PAGE>
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units. The Sponsor reserves
the right to accept or reject any purchase order in whole or in part.
The Sponsor will execute orders to purchase in the order it determines, in
good faith, that they are received, except it is expected that indications of
interest received prior to the effectiveness of the registration of the 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. Salomon Smith Barney'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 Salomon Smith Barney normally pertain to an outlook for
a 12-18 month period (see footnote 2 to the Portfolios on page 19). 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 his 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
21
<PAGE>
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.
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 his 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.
22
<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 18.66%,
16.32% and 31.18% of the value of the Financials Portfolio, the Healthcare
Portfolio and the Technology Portfolio, respectively, have been ranked High
Risk by Salomon Smith Barney's Research Department, described as "low
predictability of earnings/dividends; high 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
23
<PAGE>
of the issuer and, therefore, do not offer any assurance of income or provide
the same degree of protection of capital as do debt securities. The issuance
of additional debt securities or preferred stock will create prior claims for
payment of principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its
common stock or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. The value of common stocks are
subject to market fluctuations for as long as the common stocks remain
outstanding, and thus the value of the Securities in the 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 page 19). 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)
24
<PAGE>
with instructions to purchase Securities, additional Securities or contracts
to purchase Securities, in each instance maintaining the original percentage
relationship, subject to adjustment under certain circumstances, among the
number of shares of each Security in 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.
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
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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 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.
Year 2000 Issue. The Trusts, like other businesses and entities, could be
adversely affected if the computer systems used by the Sponsor and Trustee or
other service providers to a Trust do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Sponsor and Trustee are taking steps
that they believe are reasonably designed to address the Year 2000 Problem
with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by the Trusts' other service
providers. However, there can be no assurance that the Year 2000 Problem will
be properly or timely resolved so to avoid any adverse impact to each Trust.
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ENERGY PORTFOLIO
The Energy Portfolio 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.
The Energy Portfolio may be considered to be concentrated in common stocks
of companies engaged in refining and marketing oil and related products.
According to the U.S. Department of Commerce, the factors which will most
likely shape the industry include the price and availability of oil from the
Middle East, changes in United States environmental policies and the continued
decline in U.S. production of crude oil. Possible effects of these factors may
be increased U.S. and world dependence on oil from the Organization of
Petroleum Exporting Countries ("OPEC") and highly uncertain and potentially
more volatile oil prices and a higher rate of growth for natural gas
production than for other fuels. Factors which the Sponsor believes may
increase the profitability of oil and petroleum operations include increasing
demand for oil and petroleum products as a result of the continued increases
in annual miles driven and the improvement in refinery operating margins
caused by increases in average domestic refinery utilization rates. The
existence of surplus crude oil production capacity and the willingness to
adjust production levels are the two principal requirements for stable crude
oil markets. Without excess capacity, supply disruptions in some countries
cannot be compensated for by others.
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.
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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.
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
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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 together 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.
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
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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. A credit or deduction for such taxes may be available in
determining a Holder's Federal income tax liability.
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.
* * *
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.
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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 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 May 19, 1998, the Initial
Sales Charge is $15.12, $15.05, $15.08 and $15.02 per 1,000 Units for the
Energy Portfolio, the Financials Portfolio, the Healthcare Portfolio and the
Technology Portfolio, respectively, 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 June 1, 1998 and will be charged to the Capital Account on the
first day of each month thereafter through May 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. If a Holder's sale or redemption of Units
settles before a Deferred Sales Charge Payment Date, all future deductions of
the Deferred Sales Charge will be waived. Units purchased pursuant to the
Reinvestment Plan are subject only to the remaining applicable Deferred Sales
Charge deduction (see Reinvestment Plan).
Purchasers on May 20, 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 May 20, 1998 (all of which are held by the Sponsor)
will be split (or split in reverse). The Public Offering Price on any
subsequent date will vary from the Public Offering Price on the date of the
initial Prospectus (set forth under Investment Summary) in accordance with
fluctuations in the aggregate value of the underlying Securities. Units will
be sold to investors at the Public Offering Price next determined
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after receipt of the investor's purchase order. A proportionate share of the
amount in the Income Account (described under Administration of the Trust--
Accounts and Distributions) on the date of delivery of the Units to the
purchaser is added to the Public Offering Price.
The initial 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>
INITIAL
SALES CHARGE
---------------------
PERCENT OF PERCENT OF MAXIMUM DOLLAR
OFFERING NET AMOUNT AMOUNT DEFERRED
NUMBER OF UNITS* PRICE INVESTED PER 1,000 UNITS
- ---------------- ---------- ---------- ---------------
<S> <C> <C> <C>
Fewer than 50,000......................... 1.50% 1.523% $30.00
50,000 but less than 100,000.............. 1.25 1.266 30.00
100,000 but less than 250,000............. 1.00 1.010 30.00
250,000 but less than 1,000,000........... .50 .503 30.00
1,000,000 or more......................... 0 0 30.00
</TABLE>
The above graduated sales charges will apply to all purchases in the
aggregate of one or more of Trusts 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.
- ------------
* The reduced sales charge is also applied on a dollar basis utilizing a
breakpoint equivalent in the above table of $1,000 for 1,000 Units, etc.
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UNDERWRITER'S AND SPONSOR'S PROFITS
The Sponsor, as sole underwriter, receives a gross underwriting commission
equal to the initial sales charge of 1.50% 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) and the monthly Deferred Sales Charge of $1.25 per 1,000
Units.
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) 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).
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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.
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 this heading),
not later than the seventh calendar day following such tender (or if the
seventh calendar day is not a business day, on the first business day prior
thereto), to receive in kind an amount per Unit equal to the Redemption Price
per Unit (computed as described in Redemption--Computation of Redemption Price
per Unit) as determined as of the day of tender. The Redemption Price per Unit
for in kind distributions (the "In Kind Distribution") will take the form of
the distribution of whole and fractional shares of each of the Securities in
the amounts and the appropriate proportions represented by the fractional
undivided interest in 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
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commissions, Holders who wish to receive cash for their Units should always
offer them for sale to the Sponsor in the secondary market before seeking
redemption by the Trustee. The Trustee may offer Units tendered for
redemption and cash liquidation to it to the Sponsor on behalf of any
Holder to obtain this more favorable price for the Holder.
(b) If the tendering Holder requests distribution in kind, the
Distribution Agent (or the Sponsor acting on behalf of the Distribution
Agent) shall sell any portion of the In Kind Distribution represented by
fractional interests in accordance with the foregoing and distribute net
cash proceeds to the tendering Holder together with certificates
representing whole shares of each of the Securities that comprise the In
Kind Distribution. (The Trustee may, however, offer the Sponsor the
opportunity to purchase the tendered Units in exchange for the numbers of
shares of each Security and cash, if any, which the Holder is entitled to
receive. The tax consequences to the Holder would be identical in either
case.)
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available (an
explanation of such Account is set forth under Administration of the 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, President's Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving or Christmas. The right of redemption may be suspended
and payment postponed for any period, determined by the Securities and
Exchange Commission ("SEC"), (1) during which the New York Stock Exchange,
Inc. is closed other than for customary weekend and holiday closings, (2)
during which the trading on that Exchange is restricted or an emergency exists
as a result of which disposal or evaluation of the Securities is not
reasonably practicable or (3) for such periods as the SEC may by order permit.
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on 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
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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 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
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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). Payment of the Deferred Sales Charge will
be made in the manner described under Administration of the Trusts--Accounts
and Distributions below.
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. Distributions of amounts necessary to pay the Deferred Sales Charge
will be made from the Capital Account to an account maintained by the Trustee
for purposes of satisfying investors' sales charge obligations. Although the
Sponsor may collect the Deferred Sales Charge monthly, to keep Units more
fully invested the Sponsor currently does not anticipate sales of Securities
to pay the Deferred Sales Charge until after the last Deferred Sales Charge
Payment Date. Proceeds of the disposition of any Securities not used to pay
the Deferred Sales Charge or to redeem Units will be held in the Capital
Account and distributed on the Final Distribution upon termination of the
appropriate Trust.
Purchases at Market Discount -- Certain of the shareholder dividend
reinvestment, stock purchase or similar plans maintained by issuers of the
Securities offer shares pursuant to such plans at a discount from market
value. Subject to any applicable regulations and plan restrictions, the
Sponsor intends to direct the Trustee to
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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 Salomon Smith Barney'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
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exchange or substitution for any Securities except that the Sponsor may
instruct the Trustee to accept or reject such an offer to take any other
action with respect thereto as the Sponsor may deem proper if (1) the issuer
failed to declare or pay anticipated dividends with respect to such Securities
or (2) in the written opinion of the Sponsor the issuer will probably fail to
declare or pay anticipated dividends with respect to such Securities in the
reasonably foreseeable future. Any Securities so received in exchange or
substitution shall be sold unless the Sponsor directs that they be held by the
Trustee subject to the terms and conditions of the Indenture to the same
extent as Securities originally deposited thereunder. If a Security is
eliminated from 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 this 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
this term is defined in the Investment Company Act of 1940) which are not
registered and are not being registered under the Securities Act of 1933 or
result in 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.
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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) 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
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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 (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.
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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 this
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
liquidation, even though no cash will be distributed to pay any taxes. Holders
should consult their own tax advisers in this regard. The Sponsor reserves the
right to modify, suspend or terminate either or both of these reinvestment
privileges at any time.
REINVESTMENT PLAN
Distributions of income and/or principal, if any, on Units held in street
name through Smith Barney Inc. or directly in the name of the Holder, unless
the Holder notifies 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.
42
<PAGE>
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 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 this
prospectus. The Trustee is subject to supervision and examination by the
Comptroller of the Currency, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System. In connection with the
storage and handling of certain Stocks deposited in the 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.
43
<PAGE>
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 this
Prospectus have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their report with respect thereto, and is so included herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
SPONSOR
Smith Barney Inc. ("Smith Barney"), was incorporated in Delaware in 1960 and
traces its 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.
44
<PAGE>
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
<TABLE>
<S> <C>
Investment Summary 2
Independent Auditors' Report 13
Statements of Financial Condition 14
Portfolios 15
Description of the Trusts 20
Risk Factors 23
Taxes 29
Public Sale of Units 31
Market for Units 33
Redemption 34
Expenses and Charges 36
Administration of the Trusts 37
Exchange and Rollover Privileges 41
Reinvestment Plan 42
Resignation, Removal and Limitations on Liability 43
Miscellaneous 43
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPONSOR: TRUSTEE: INDEPENDENT ACCOUNTANTS:
<S> <C> <C>
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
</TABLE>
- --------------------------------------------------------------------------------
SALOMON SMITH BARNEY
-------------------------------
A Member of TravelersGroup LOGO
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
WITH RESPECT TO THE TRUSTS, NOT CONTAINED IN THIS PROSPECTUS; AND ANY
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO
WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
- --------------------------------------------------------------------------------
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A.The following information relating to the Depositor is incorporated by
reference to the SEC filings indicated and made a part of this Registration
Statement.
<TABLE>
<CAPTION>
SEC FILE OR
IDENTIFICATION NUMBER
---------------------
<C> <S> <C>
I. Bonding Arrangements and Date of Organization
of the Depositor filed pursuant to Items A and
B of Part II of the Registration Statement on
Form S-6 under the Securities Act of 1933:
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,
By-Laws):
Smith Barney Inc. 33-65332, 33-36037
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
<PAGE>
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:
To be filed with Amendment to Registration Statement.
<TABLE>
<C> <C> <S>
*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.
</TABLE>
- ------------
* Filed herewith.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of 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
20th day of May, 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.
II-3
<PAGE>
SMITH BARNEY UNIT TRUSTS (REGISTRANT)
SMITH BARNEY INC.
(DEPOSITOR)
By the following persons*, who constitute a majority of the Board of
Directors of Smith Barney Inc.:
James Dimon
Deryck C. Maughan
/s/ Kevin Kopczynski
By___________________________________
Kevin Kopczynski
(As authorized signatory for Smith
Barney Inc. and Attorney-in-fact
for the persons listed above)
- ------------
* Pursuant to Powers of Attorney filed as exhibits to Registration Statement
Nos. 33-56722, 33-51999 and 333-41765.
II-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Statements
of Financial Conditions and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> ENERGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-19-1998
<PERIOD-END> MAY-19-1998
<INVESTMENTS-AT-COST> 992,906
<INVESTMENTS-AT-VALUE> 992,906
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 64,201
<TOTAL-ASSETS> 1,057,107
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 64,201
<TOTAL-LIABILITIES> 64,201
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 992,906
<SHARES-COMMON-STOCK> 1,000,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 992,906
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 992,906
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Statements
of Financial Conditions and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> FINANCIALS PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-19-1998
<PERIOD-END> MAY-19-1998
<INVESTMENTS-AT-COST> 988,219
<INVESTMENTS-AT-VALUE> 988,219
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 73,029
<TOTAL-ASSETS> 1,061,248
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,029
<TOTAL-LIABILITIES> 73,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 988,219
<SHARES-COMMON-STOCK> 1,000,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 988,219
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 988,219
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Statements
of Financial Conditions and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> HEALTHCARE PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-19-1998
<PERIOD-END> MAY-19-1998
<INVESTMENTS-AT-COST> 989,931
<INVESTMENTS-AT-VALUE> 989,931
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 64,326
<TOTAL-ASSETS> 1,054,257
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 64,326
<TOTAL-LIABILITIES> 64,326
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 989,931
<SHARES-COMMON-STOCK> 1,000,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 989,931
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 989,931
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Statements
of Financial Conditions and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> TECHNOLOGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-19-1998
<PERIOD-END> MAY-19-1998
<INVESTMENTS-AT-COST> 986,536
<INVESTMENTS-AT-VALUE> 986,536
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 72,468
<TOTAL-ASSETS> 1,059,004
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,468
<TOTAL-LIABILITIES> 72,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 986,536
<SHARES-COMMON-STOCK> 1,000,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 986,536
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 986,536
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.1.1.1
EQUITY FOCUS TRUSTS - SECTOR SERIES, 1998-A
__________________ Portfolio
FORM OF
REFERENCE TRUST INDENTURE
Dated as of May 19, 1998
This Trust Indenture between Smith Barney Inc., as Sponsor,
and The Chase Manhattan Bank, as Trustee (the "Indenture") sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "The Uncommon Values Unit Trust, Standard Terms and Conditions
of Trust for Series formed on or subsequent to July 2, 1985" as amended as of
June 27, 1994 (the "Standard Terms and Conditions of Trust") and such provisions
as are set forth in full herein and such provisions as are incorporated by
reference constitute a single instrument. All references herein to Articles and
Sections are to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Sponsor and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the
provisions contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a part of
this instrument as fully and to the same extent as though said provisions had
been set forth in full in this instrument, except that all references to
"Shearson Lehman Brothers, Inc." shall be deleted and replaced by "Smith Barney
Inc." and all references to Boston Safe Deposit and Trust Company or United
States Trust Company of New York shall be deleted and replaced by The Chase
Manhattan Bank, and further, that The Chase Manhattan Bank shall, by executing
this Trust Indenture, be deemed to be the Trustee and a party to said Standard
Terms and Conditions of Trust for all purposes of this Trust.
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Securities (including Contract Securities) listed in the
Prospectus relating to Equity Focus Trusts - Sector Series, 1998-A,
_____________________ Portfolio shall be shares of common stock, which
securities have been deposited with (or assigned to) the Trustee under this
Indenture. Subject to the provisions contained in the Standard Terms and
Conditions of Trust, any new Securities deposited in the Trust Fund pursuant to
Section 3.06 will be those which, assuming consummation of the particular
transaction, will maintain the same proportionate relationship among the number
of shares of each of the various Securities in the Trust Fund as exists among
the Securities in the Trust Fund immediately preceding any such deposit or
distribution, subject, however, to any change in such proportionate relationship
in accordance with Sections 3.05, 3.08, 3.11, 3.12 or 5.02.
(b) In all places in the Standard Terms and Conditions of Trust where
the words "Monthly Income Distribution" appear, these words shall be deleted and
replaced by "Income Distribution".
(c) The definition of "Distribution Agency Agreement" and all
references thereto shall be deleted.
(d) The definition of "Distribution Day" shall be deleted and
replaced by the following:
"The day designated as such in the Prospectus under the
heading 'Investment Summary'."
(e) In the definition of Evaluation Time, the words "Part II of the
Reference Trust Indenture" shall be changed to read: "the Prospectus."
(f) Section 2.02 is hereby amended by adding the following sentence
as the second sentence of Section 2.02: "Effective as of the Evaluation Time on
May 20, 1998, in the event that the aggregate value of Securities in the Trust
has increased since the evaluation on May 19, 1998, the Trustee shall issue such
number of additional Units to the Holder of outstanding Units as of the close of
business on May 19, 1998, that the price per Unit computed as of the Evaluation
Time on May 20, 1998, plus the maximum applicable sales charge shall equal $1
per Unit (based on the number of Units outstanding as of said Evaluation Time,
including the additional Units issued pursuant to this sentence);
-2-
<PAGE>
in the event that the aggregate value of Securities in the Trust Fund has
decreased since the evaluation on May 19, 1998, there will be a reverse split of
the outstanding Units, and said Holder will surrender to the Trustee for
cancellation such number of Units, that the price per Unit computed as of the
Evaluation Time on May 20, 1998 plus the maximum applicable sales charge shall
equal $1 per Unit (based on the number of Units outstanding as of said
Evaluation Time, reflecting cancellation of Units pursuant to this sentence)."
(g) The third and fourth paragraphs of Section 3.04 shall be deleted and
replaced by the following four paragraphs:
"The Income Distribution shall be calculated as follows:
The Trustee shall as of each Record Day compute the amount
distributable to Holders on the next Distribution Day (the "Income
Distribution"), which amount, subject to the limitations on the
Trustee's advances set forth in Section 3.01(b), shall be equal to
the cash balance of the Income Account plus any amount receivable on
obligations purchased pursuant to Section 3.06(j) on or before the
following Distribution Day less accrued and unpaid expenses of the
Trust Fund and any amounts payable from the Income Account in respect
of Units tendered for redemption prior to such Record Day divided by
the number of Units outstanding on such Record Day; provided,
however, that as of the Record Date occurring in the month of
December of each calendar year, the Trustee shall advance to the
Income Account, and shall include in the cash balance thereof, the
amount of any dividends not received as of such Record Date which are
payable to the Trust Fund prior to the end of the calendar year, and
provided further that the Trustee may increase or decrease the amount
of the resulting calculation in order to reflect the differences in
Income actually received or fees, expenses, losses, liabilities or
advances actually incurred or made in any prior period from the
amounts estimated therefor. The Trustee shall withhold from a
Holder's Income Distribution any portion of the Deferred Sales Charge
deductible therefrom pursuant to Section 3.18 hereof. The Trustee
shall be entitled to be reimbursed, without interest, for any and all
amounts advanced by it pursuant to the preceding sentence, or
otherwise hereunder, from funds subsequently received by the Trust
Fund as income on any of the Securities. The Trustee shall be deemed
to be the beneficial owner of the income of the Trust Fund to the
extent such income is required to reimburse the Trustee for amounts
advanced by it pursuant to this Section and to such extent shall have
a lien on the assets of the Trust Fund prior to the interest of the
Holders.
"Subject to the provisions of the succeeding two paragraphs,
distributions shall be made as follows: on or
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<PAGE>
shortly after each Distribution Day the Trustee shall distribute by
check mailed to each Holder of record at the close of business on the
preceding Record Day, at the post office address of the Holder
appearing on the record books of the Trustee or by any other means
mutually agreed upon by the Holder and the Trustee, an amount
substantially equal to the Income Distribution in respect of such
Distribution Day, plus the Holder's pro rata share of the cash
balance of the Capital Account (but not including cash required to
purchase Contract Securities or held for reinvestment in Substitute
Securities pursuant to Section 3.11) computed as of the close of
business on the preceding Record Day; provided, however, that the
-------- -------
Trustee in its discretion may on any Distribution Day determine that
the amount of the Income Distribution per Unit because of any unusual
or extraordinary increase or decrease in the expenses incurred or
expected to be incurred by the Trust Fund. In making the computation
of such Holder's interest in the balance of the Income Capital
Accounts, fractions of less than one cent per unit may be omitted.
"In the event that the Sponsor adopts a Reinvestment Plan
the cash distributions to Holders shall be automatically reinvested
by the Sponsor in additional Units of the Trust. Units of the Trust
purchased under the Reinvestment Plan shall be purchased at the
Sponsor's Repurchase Price (the net asset value per Unit without a
sales charge) in effect at the close of business on the Distribution
Day. The Units purchased may be either previously issued Units
repurchased by the Sponsor or newly created Units created upon the
deposit of additional Securities in the Trust. The cost of the
Reinvestment Plan will be borne by the Sponsor, at no additional cost
to the Trust or individual Holders. Holders will receive an account
statement reflecting any purchase of Units under the Reinvestment
Plan. The Sponsor reserves the right to amend, modify or terminate
the Reinvestment Plan at any time without prior notice.
"A Holder may elect not to participate in the Reinvestment
Plan by notifying his financial consultant at Smith Barney Inc. or by
notifying the Trustee in writing by ten days prior to the
Distribution Day, which election may be modified or terminated by
similar notice. The Sponsor shall promptly inform the Trustee of any
election or modification or termination thereof received by it from a
Holder and the Trustee shall be authorized conclusively to rely on
any notice so received from the Sponsor. In the event the Holder
elects not to participate in the Reinvestment Plan, or in the event
that the Sponsor does not adopt or terminates a Reinvestment Plan,
the Trustee shall distribute the amount described above by check
mailed to
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<PAGE>
each Holder of record at the close of business on the preceding Record Day, at
the post office address of the Holder appearing on the record books of the
Trustee or by any other means mutually agreed upon by the Holder and the
Trustee."
(h) Section 3.06 is amended to read as follows:
"SECTION 3.06. Deposit of Additional Securities. (a) Subject to the
--------------------------------
requirements set forth below in this Section, the Sponsor may, on any Business
Day (the "Trade Date"), subscribe for Additional Units as follows:
(1) Prior to the Evaluation Time on the Trade Date, the
Sponsor shall provide notice (the "Subscription Notice") to
the Trustee, by telecopy or by written communication, of
the Sponsor's intention to subscribe for Additional Units.
The Subscription Notice shall identify the additional
Securities to be acquired ("Additional Securities") (unless
such Additional Securities are a precise replication of the
then existing portfolio) and shall either (i) specify the
quantity of Additional Securities to be deposited by the
Sponsor on the settlement date for such subscription or
(ii) instruct the Trustee to purchase Additional Securities
with an aggregate value as specified in the Subscription
Notice.
(2) Promptly following the Evaluation Time on such Business
Day, the Sponsor shall verify with the Trustee, by
telecopy, the number of Additional Units to be created.
(3) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver the Additional
Units created thereby (which time shall not be later than
the time by which the Trustee is required to settle any
contracts for the purchase of Additional Securities entered
into by the Trustee pursuant to the instruction of the
Sponsor referred to in subparagraph (1) above), the Sponsor
shall deposit with the Trustee (i) any Additional
Securities specified in the Subscription Notice (or
contracts to purchase such Additional Securities together
with cash or a letter of credit in the amount necessary to
settle such contracts) or (ii) cash or a letter of credit
in the amount equal to the aggregate value of the
Additional Securities specified in the Subscription Notice,
together with, in each case, cash equal to a pro rata
portion of the Trust Fund Cash Evaluation (as defined in
Section 5.01(b) bearing the same ratio to the Units created
by the deposit as the Trust Fund Cash
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<PAGE>
Evaluation bears to the Units outstanding immediately prior
to the deposit. Each deposit made during the 90 days
following the deposit made pursuant to this Section 3.06
hereof shall replicate, to the extent practicable, the
original proportionate relationship among the number of
shares of each Security in the Trust Fund established on
the Initial Date of Deposit (the "Original Proportionate
Relationship"), adjusted, if appropriate, to reflect (1)
the deposit of Substitute Securities pursuant to Section
3.11, (2) sale of securities pursuant to Section 3.08, 3.12
or 5.02 and (3) the occurrence of any stock dividends,
stock splits, redemptions, acquisition of shares through
dividend reinvestment plans or similar events. Each deposit
made after the 90 days following the deposit made pursuant
to this Section 3.06 hereof (except for deposits made to
replace Failed Securities if such deposits occur within 20
days from the date of a failure occurring within such
initial 90 day period) shall maintain exactly the
proportionate relationship existing among the Securities as
of the expiration of such 90 day period adjusted as
provided in the preceding sentence.
(4) On the settlement date for a subscription, the Trustee
shall, in exchange for the Securities and cash or letter of
credit described above, issue and deliver to or on the
order of the Sponsor the number of Units verified by the
Sponsor with the Trustee.
(5) Each deposit of Additional Securities, shall be listed
in a Deposit Certificate delivered to the Sponsor stating
the date of such deposit and the number of Additional Units
being issued therefor. The Trustee shall acknowledge in
such Deposit Certificate the receipt of the deposit and the
number of Additional Units issued in respect thereof. The
Additional Securities shall be held, administered and
applied by the Trustee in the same manner as herein
provided for the Securities.
(6) Additional Securities deposited or purchased with cash
or a letter of credit deposited may be purchased in round
lots, and if the amount of the deposit is insufficient to
acquire round lots of each Security to be acquired,
Additional Securities may be deposited (or acquired with
cash or a letter of credit deposited) in the order of the
Security in the Trust Fund most under-represented
immediately before the deposit with respect to the Original
Proportionate Relationship.
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<PAGE>
(7) All instructions to purchase Additional Securities
pursuant to this Section shall be in writing and shall
direct the Trustee to perform contracts to purchase
Additional Securities which the Sponsor shall have entered
into and assigned to the Trustee.
(8) Notwithstanding the preceding, in the event that the
Sponsor's Subscription Notice shall instruct the Trustee to
purchase Additional Securities in an amount which, when
added to the purchase amount of all other unsettled
contracts entered into by the Trustee, exceeds 50% of the
value of the Securities then held (taking into account the
value of contracts to purchase Securities only to the
extent that there has been deposited with the Trustee cash
or an irrevocable letter of credit in an amount sufficient
to settle their purchase), the Sponsor shall deposit with
the Trustee concurrently with the Subscription Notice cash
or an irrevocable letter of credit in an amount such that,
when added to 50% of the value of the Securities then held
(determined as above) the aggregate value shall be not less
than the purchase amount of the securities to be purchased
pursuant to such Subscription Notice.
"(b) If Securities of an issue of Securities originally
deposited (an 'Original Issue') are unavailable or cannot be
purchased at reasonable prices or their purchase is prohibited or
restricted by law, regulation or policies applicable to the Trust
Fund or the Sponsor at the time of a subsequent deposit under
Subsection 3.06(a), in lieu of the portion of the deposit that would
otherwise be represented by those Securities, the Sponsor may (1)
deposit (or instruct the Trustee to purchase) (i) Securities of
another Original Issue or (ii) 'Replacement Securities' complying
with the conditions of paragraphs (c) and (d) of this Section, or (2)
deposit cash or a letter of credit with instructions to acquire the
Securities of the Original Issue when practicable. Any cash or letter
of credit deposited under this Subsection 3.06(b) to acquire
Securities of an Original Issue or Replacement Securities which at
the end of the 90 day period following the Date of Deposit has not
been used to purchase Securities shall be used to purchase Securities
in accordance with this Subsection 3.06(b), provided that if an
instruction to purchase an Additional Security or a Replacement
Security has not been given and such cash or letter of credit remain
in the Trust Fund after 110 days from the Date of Deposit, the amount
thereof shall be distributed, together with the attributable sales
charge, at the time and in the manner specified in Section 3.11
regarding failed contracts.
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<PAGE>
"(c) Replacement Securities shall meet all the conditions
applicable to Substitute Securities in Section 3.11.
"(d) In addition to the requirements specified in paragraph
(c), Replacement Security must:
"(i) be publicly-traded common stock;
"(ii) be issued by an issuer subject to or
exempt from the reporting requirements under Section 13 or
15(d) of the Securities Exchange Act of 1934 (or similar
provision of law); and
"(iii) have characteristics sufficiently
similar to the characteristics of the other Securities in
the Trust Fund as to be acceptable for acquisition by the
Trust Fund.
"(e) The Sponsor may, simultaneously with the Subscription
Notice provided in Section 3.06(a), deliver to the Trustee the
Additional Securities or cash or letter of credit in the aggregate
value of the Additional Securities to be purchased pursuant to the
Sponsor's instruction, as specified in the Subscription Notice,
together with cash equal to the pro rata portion of the Trust Fund
Cash Evaluation allocable to the Additional Units to be created, all
in the amounts and in the manner provided by the preceding paragraphs
of this Section, and the Trustee shall, promptly following the
Evaluation Time on such day, deliver to the Sponsor the Additional
Units created in respect of such deposit.
"(f) Execution of a Deposit Certificate shall be deemed a
certification by the Sponsor that the purchase of the Securities
specified in such Deposit Certificate complies with the conditions
specified in this section, as applicable. The Deposit Certificate
shall be deemed to restate the representations, agreements and
certifications of the Sponsor made in Sections 6-8, inclusive, of the
Closing Memorandum for the Trust Fund to which the deposit relates as
though the representations, agreements and certifications were made
with respect to the Deposit Certificate and the deposit of Securities
with the Trustee. The Deposit Certificate shall also be deemed to
constitute, for value received, the sale, assignment and transfer to
the Trustee of all right, title and interest in and to the Additional
Securities identified in the Deposit Certificate and to irrevocably
constitute and appoint the Trustee the Sponsor's attorney in all
matters respecting such Securities with full power of substitution in
the premises. The Deposit Certificate shall include an acknowledgment
by the
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<PAGE>
Trustee that it has delivered to the Sponsor the number of Units
specified in the Deposit Certificate. Any Additional Securities
received by the Trustee shall be deposited in the Trust Fund and
shall be subject to the terms and conditions of this Indenture to the
same extent as the securities originally deposited hereunder. Any
contract to purchase Additional Securities pursuant to this Section
3.06 that is declared by the Sponsor to have failed due to reasons
beyond the control of the Sponsor or the Trustee, shall be
immediately replaced by the Sponsor with a contract to purchase
Substitute Securities pursuant to Section 3.11.
"(g) The Trustee shall cause to be delivered to the Sponsor
within a reasonable period of time after the end of each calendar
year a certificate of the Trustee as to the Additional Securities
received by the Trustee for deposit in the Trust Fund and the number
of Units issued in exchange therefor, during the calendar year.
Within a reasonable time after receipt of such certificate, the
Sponsor shall acknowledge in writing the receipt of such certificate
and shall certify it as complete and correct or shall indicate to the
Trustee in writing any differences between the Sponsor's records of
the Securities transactions and the issuance of Units and Trustee's
certificate.
"(h) The Trustee shall have no responsibility or liability
for any loss or depreciation resulting from any purchase made
pursuant to the Sponsor's instructions and in the absence thereof
shall have no duty to purchase any securities. The Trustee shall have
no responsibility or liability for maintaining the composition of the
Trust Fund.
"(i) Cash delivered to the Trustee for purchase of
Securities pursuant to this section shall be on deposit with the
Trustee or any Custodian or sub-custodian specified in Section
8.01(a) and shall bear interest for the benefit of the Trust Fund at
the Federal Funds rate adjusted daily as reported in the New York
--------
Times under the caption 'Key Rates'.
-----
"(j) The Sponsor may direct the Trustee, with part or all
of the proceeds from the sale of Securities, to the extent not
required for redemption of Units, to purchase one or more debt
obligations for deposit in the Trust, provided that each such debt
obligation (1) is an "Eligible Security" as defined in paragraph
(a)(5) of Rule 2a-7 pursuant to the Investment Company Act of 1940 or
in the opinion of the Sponsor has comparable credit characteristics,
and (2) has a fixed final maturity date no later than the next
Distribution Day. The proceeds from the maturity of any said debt
obligation shall be distributed to Holders on said Distribution Day."
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<PAGE>
(i) Section 3.07(b)(2) shall be deleted and replaced by the following
paragraph:
"(2) the deductions for payment of applicable
taxes and fees and expenses of the Trustee and
Sponsor and of counsel pursuant to Section 3.10,
accrued organizational expenses and Deferred
Sales Charge, if any;"
(j) Section 3.08 shall be amended to add a new paragraph (e),
immediately following paragraph (d), as follows:
"(e) that there has been a public tender offer made for a
Security or a merger or acquisition is announced affecting a
Security, and that in the opinion of the Sponsor the sale or tender
of the Security is in the best interest of the Holders."
(k) Section 3.09 shall be amended in its entirety to read as follows:
"Section 3.09. Reorganization or Similar Event. In the
-------------------------------
event that an offer by the issuer of any of the Securities or any
other party shall be made to issue new Securities in exchange or
substitution for any Securities, the Trustee shall reject such offer,
except that if (1) the issuer failed to declare or pay anticipated
dividends with respect to such Securities or (2) in the opinion of
the Sponsor, given in writing to the Trustee, the issuer will
probably fail to declare or pay anticipated dividends with respect to
such Securities in the reasonably foreseeable future, the Sponsor
shall instruct the Trustee in writing to accept or reject such offer
and to take any other action with respect thereto as the Sponsor may
deem proper. However, should any exchange or substitution be affected
notwithstanding such rejection or without an initial offer, any
Securities, cash and/or property received in exchange shall be
deposited hereunder and shall be sold, if securities or property, by
the Trustee pursuant to the Sponsor's direction, unless the Sponsor
advises the Trustee to retain such securities or property. The cash
then remaining shall be distributed to Holders on the next
Distribution Day not fewer than 31 days from the date the exchange
consideration was received and otherwise in the manner set forth in
Section 3.04 regarding distributions from the Capital Account. This
section shall apply, but its application shall not be limited, to
public tender offers, mergers, acquisitions, reorganizations and
recapitalization. Neither the Sponsor nor the Trustee shall be liable
to any person for action or failure to take action pursuant to the
terms of this Section 3.09."
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<PAGE>
(l) For purposes of Section 3.11(b), the term "25%" shall be replaced
by "10%".
(m) Section 3.11(d) shall be deleted and replaced by the following
paragraph:
"(d) The Replacement Securities must be deposited into the
Trust Fund within 110 days of the date of deposit of the Failed
Contract Securities."
(n) Article THREE shall be amended to add a new Section 3.16 as
follows:
"SECTION 3.16. Foreign Exchange Transactions. The Sponsor
-----------------------------
shall direct the Trustee with respect to the circumstances under which foreign
exchange transactions are to be entered into and with respect to the method
whereby calculation of U.S. dollar equivalents for purpose of net asset value
computations or otherwise are to be made, in order to convert amounts receivable
in respect of Securities in foreign currencies into U.S. dollars."
(o) Article THREE shall be amended to add a new Section 3.17 as
follows:
"SECTION 3.17 Extraordinary Distributions. Any property
---------------------------
received by the Trustees after May 20, 1998 in a form other than cash
or additional shares of the Securities or of a Substitute Security
received in a non-taxable stock split or stock dividend, which shall
be retained by the Trust, shall be dealt with in the manner described
in Section 3.09 and shall be retained or disposed by the Trustee
according to those provisions, provided, however, that no property
shall be retained which the Trustee determines shall adversely affect
its duties hereunder. The proceeds of any disposition shall be
credited to the Income or Capital Account of the Trust, as the
Sponsor may direct.
"The Trust is intended to be treated as a fixed investment
(i.e., grantor) trust for income tax purposes, and its powers shall be limited
in accordance with the restrictions imposed on such trusts by Treas. Reg.
Section 301.7701-4."
(p) Article THREE shall be amended to add a new Section 3.18 as
follows:
"SECTION 3.18. Deferred Sales Charge: The Trustee shall, on
---------------------
the dates specified in and as permitted by the prospectus, withdraw
from the Income Account, the Capital Account and/or distributions to
be made therefrom, as such accounts or distributions are designated
in the Prospectus as
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<PAGE>
the source of the payments of the Deferred Sales Charge, an amount
per Unit specified in the Prospectus and credit such amount to a
special, non-Trust account maintained at the Trustee out of which the
Deferred Sales Charge will be distributed to the Sponsor. If the
balances in the Income and Capital Accounts are insufficient to make
any withdrawal designated to be made therefrom, the Trustee shall, as
directed by the Sponsor, either advance funds in an amount equal to
the proposed withdrawal and be entitled to reimbursement of such
advance upon the deposit of additional monies in the Income Account
or the Capital Account, sell Securities and credit the proceeds
thereof to such special Sponsor's account or credit Securities in
kind to such special Sponsor's Account provided, however, that the
--------
Trustee shall not be required to advance an aggregate amount in
excess of $15,000 pursuant to this Section. Such directions shall
identify the Securities, if any, to be sold or distributed in kind
and shall contain, if the Trustee is directed by the Sponsor to sell
a Security, instructions as to execution of such sales. If a Holder
redeems Units prior to full payment of the Deferred Sales Charge, the
Trustee shall, if so provided in the Prospectus, on the Redemption
Date, withhold from the Redemption Price payment to such Holder an
amount equal to the unpaid portion of the Deferred Sales Charge and
distribute such amount to such special Sponsor's Account or, if the
Sponsor shall purchase such Unit pursuant to the terms of Section
5.02 hereof, the Sponsor shall pay the Redemption Price for such Unit
less the unpaid portion of the Deferred Sales Charge. If the
Prospectus provides for a waiver or refund of any portion of the
Deferred Sales Charge under specified circumstances (such as, for
example, in connection with a redemption or sale of Units following
the death or disability of the Holder), the Trustee shall deduct and
pay to the Sponsor the full amount of the Deferred Sales Charge
chargeable upon the redemption in the absence of such waiver or
refund and the Sponsor shall pay to the affected Holder the amount of
such waiver or refund; the Trustee shall have no responsibility to
the affected Holder with respect to the amount to be so refunded. The
Sponsor may at any time instruct the Trustee to distribute to the
Sponsor cash or Securities previously credited to the special
Sponsor's Account."
(q) Section 5.02 shall be amended in its entirety to read as follows:
"SECTION 5.02. Redemption of Units. (a) A Holder may tender
-------------------
Units for redemption on any weekday (a "Tender Day") which is not one
of the following: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving Day or Christmas; provided that any
--------
tender received after
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<PAGE>
the Evaluation Time or received on a day which is not a Tender Day
shall be deemed to be made as of the next succeeding Tender Day. Any
Unit tendered by a Holder or his duly authorized attorney for
redemption at the Trustee's Office (effected by tender of such
documents as the Trustee shall reasonably require and, in the case of
certificated Units, by the related Certificate) shall be redeemed and
canceled by the Trustee on the third Business Day following the
Tender Day (the "Redemption Date").
---------------
"(b) Subject to deduction of any tax or other governmental
charges due thereon, redemption is to be made by payment of cash
equal to the Unit Value as of the Evaluation Time next following the
tender plus any Accrued Income per Unit from, and including, the day
next following such Evaluation Time to, but not including, the day of
payment to the redeeming Holder, multiplied by the number of Units
being redeemed (the "Redemption Price"). The portion of the
----------------
Redemption Price representing the pro rata share of the cash on hand
in the Income Account and such Accrued Income shall be withdrawn from
the Income Account to the extent funds are available for such
purpose. The balance of the Redemption Price, including Accrued
Income to the extent unavailable in the Income Account, shall be
withdrawn from the Capital Account to the extent that funds are
available for such purpose; if the available balance in the Capital
Account shall be insufficient, the Trustee shall sell Securities from
among those designated for such purpose by the Sponsors on the
current list as provided in subsection (d) below, in such amounts as
shall be necessary for the purposes of such redemption; provided,
--------
however, that no amount in the Capital Account may be used for any
-------
redemption unless the Sponsor so directs in writing. Instead, Units
shall be redeemed by the Trustee's segregating on the books of the
Trust those Securities selected from among those designated on such
current list by the Sponsor for the account of the Holder (to the
extent the value thereof is equal to the Redemption Price (less any
cash distributed from the Income and Capital Accounts as directed by
the Sponsor)). The Trustee shall sell the Securities, any portion of
which have been segregated as provided below, or collect the
redemption proceeds thereof and distribute such sale or redemption
proceeds (1) to the Holder, to the extent described in the
immediately preceding sentence, and (2) to the Capital Account, to
the extent of any balance of the sale or redemption proceeds;
provided that if the Sponsor contemplates any further deposit of
--------
Additional Securities into the Trust in accordance with Section 3.06,
the Securities to be segregated shall be selected by the Sponsor so
as to maintain, to the extent practicable, the proportionate
relationship among the number of shares of each Security then
existing. In the event that funds are
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<PAGE>
withdrawn from the Capital Account or Securities are sold for payment
of any portion of the Redemption Price representing Accrued Income,
the Capital Account shall be reimbursed when sufficient funds are
available in the Income Account. As used in this Section 5.02,
"Accrued Income" shall mean net accrued but unpaid interest on
Securities or interest earned on Funds deposited for purchase of
Securities as provided in Section 3.06(i) and with respect to Common
Stocks and Preferred Stocks, net dividends declared but unpaid but,
except as otherwise instructed by the Sponsors, only for the period
commencing three Business Days prior to the record date therefor and
ending on the date received by the Trustee.
"(c) If the Prospectus for the Trust provides for in-kind
redemption, a Holder who satisfies any requirements specified in such
Prospectus for in-kind redemption may, in lieu of redeeming Units in
the manner provided in subsection (b) above, redeem Units and request
that a distribution in kind be made by the Trustee to the
Distribution Agent of (1) Securities (the "Securities Distribution")
-----------------------
equal to the fractional undivided interest represented by each Unit
in all Securities in the Trust to the extent of the Unit Value of the
Units redeemed plus (2) an amount in cash (the "Cash Distribution")
-----------------
equal to the Unit Value less the value of the Securities
Distribution, determined as of the Evaluation Time next following the
tender, multiplied by the number of Units being redeemed (such
Securities Distribution and Cash Distribution in the aggregate being
referred to herein as the "Redemption Distribution"). In making a
-----------------------
Cash Distribution to the Distribution Agent the Trustee shall
withdraw the Holder's pro rata share of the cash in the Income
Account and Capital Account from such accounts to the extent that
funds are available for such purpose.
"Upon receipt of a Redemption Distribution the Distribution
Agent shall hold such distribution for the account of the tendering
Holder. Securities shall be held in the name of the Distribution
Agent or its nominee and cash shall be held in a non-interest bearing
account. Upon receipt of proper instructions from the tendering
Holder, the Distribution Agent shall deliver the Redemption
Distribution pursuant to such directions (except that if any
securities received are available only in book entry form, unless the
tendering Holder designates an agent to hold such securities in its
name which agent is, or clears through, a member of the depository
for those securities, the Distribution Agent shall sell those
securities and distribute the cash proceeds, net of transaction
costs, if any) as soon as practical, as directed by such tendering
Holder upon payment of such reasonable fees set by the Trustee or the
Distribution Agent to cover the cost of
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<PAGE>
delivery, including costs for shipping, handling and insurance.
"Notwithstanding anything herein to the contrary, in the
event that any such tender of Units pursuant to this Section 5.02(c)
would result in the disposition, by the Trustee or the Distribution
Agent, of less than a whole Security, the Trustee or Distribution
Agent shall distribute cash in lieu thereof and sell such Securities
as directed by the Sponsor as required to make such cash available.
"(d) From time to time or at the request of the Trustee,
the Sponsor shall deliver to the Trustee and maintain a current list
of Securities to be sold upon the redemption of Units. Once Units
have been tendered for redemption, the Sponsor shall designate which
of such Securities are to be sold. In connection therewith, the
Sponsor may specify the minimum number of shares of any Securities to
be sold at any one time and the date and manner in which such sale is
to be made by the Trustee. If the Sponsor fails to deliver such a
list or designate Securities to be sold, the Trustee, in its sole
discretion, may, or may hire an agent to, establish a current list of
Securities for such purposes and designate which Securities are to be
sold. In connection with any sale of Securities pursuant to this
Section 5.02, the Sponsor shall furnish the Trustee with any
documents necessary for the transfer of such Securities or compliance
with transfer restrictions, if any, on such Securities.
"(e) The Trustee shall, when selling Securities, use its
reasonable best efforts to secure the best price obtainable for the
Trust taking into account any minimum number of shares or value
limitations on sales that have been specified by the Sponsor. The
Trustee shall place orders with brokers (which may include the
Sponsor and its affiliates) or dealers with which it may reasonably
expect to obtain the most favorable price and execution of orders.
"In the event that it is necessary to sell any Securities
other than by the above means, and if the Sponsor shall so direct in
writing accompanied by any documents necessary to transfer such
Securities or to comply with transfer restrictions, if any, on such
Security, the Trustee shall transfer any such Securities to a
participation trust with a trustee selected by the Sponsor (which may
include the Trustee, but the Trustee shall have no obligation to act
as such and may receive additional compensation for so acting) to be
governed by a trust indenture in exchange for certificates of
participation in such trust and shall then sell such certificates of
participation in the manner directed by the Sponsor. The Trustee
shall be entitled to
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<PAGE>
receive such written notice and may act in reliance thereon. In the
event that the moneys received upon the sale of such certificates
exceeds the amount needed to pay the Redemption Price, the Trustee
shall credit such excess to the Capital Account or the Income
Account, as appropriate, in proportion to the amounts that represent
the principal and accrued interest on the Security transferred to
such participation trust. Sales of certificates of participation in
any such trust by the Trustee shall be made in such manner as the
Sponsor shall determine should realize the best price for the Trust.
"In the event that funds are withdrawn from the Capital
Account or Securities are sold for payment of any portion of the
Redemption Price representing Accrued Income, the Capital Account
shall be reimbursed when sufficient funds are available in the Income
Account.
"(f) The Trustee may, in its discretion, and shall when so
directed by the Sponsor in writing, suspend the right of redemption
or postpone the date of payment of the Redemption Price beyond the
Redemption Date (1) for any period during which the New York Stock
Exchange is closed other than customary weekend and holiday closings;
(2) for any period during which (as determined by the Securities and
Exchange Commission by rule, regulation or order) (A) trading on the
New York Stock Exchange is restricted or (B) an emergency exists as a
result of which disposal by the Trust of Securities is not reasonably
practicable or it is not reasonably practicable fairly to determine
the Trust Value; or (3) for such other periods as the Securities and
Exchange Commission may by order permit. Subject to Section 22 of the
Investment Company Act, the right of redemption shall terminate upon
the earlier of the Termination Date or the giving of notice of
termination to Holders by the Trustee pursuant to Section 9.01.
"(g) Not later than the close of business on the day of
tender of a Unit for redemption by a Holder other than the Sponsor,
the Trustee shall notify the Sponsors of such tender. The Sponsor
shall have the right to purchase such Unit by notifying the Trustee
of its election to make such purchase as soon as practicable
thereafter but in no event subsequent to (1) the close of business on
the second Business Day after the day on which such Unit was tendered
for redemption or (2) in the case of a tender for redemption by
check, the Redemption Date. Such purchase shall be made by payment
for such Unit by the Sponsor (1) to the Trustee on behalf of the
Holder in the case of a tender for redemption other than by check,
and (2) to the Trustee in the case of a tender for redemption by
check, in either case not later than the close of business on the
Redemption Date
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of an amount not less than the Redemption Price which would otherwise
be payable by the Trustee to such Holder. So long as the Sponsor is
maintaining a bid in the secondary market at no less than the
Redemption Price, the Sponsor will repurchase any Unit so tendered to
the Trustee for redemption. Any Unit purchased by the Sponsor from
the Trustee may at the option of the Sponsor be tendered to the
Trustee for redemption in the manner provided in subsection (a) of
this Section 5.02. The Trustee is hereby irrevocably authorized in
its discretion, but without obligation, in the event that the Sponsor
does not elect to purchase any Unit tendered to the Trustee for
redemption, or in the event that a Unit is being tendered by the
Sponsor for redemption, in lieu of redeeming such Unit, to sell such
Unit in the over-the-counter market for the account of the tendering
Holder at a price which will return to the Holder an amount in cash,
net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price which such
Holder would otherwise be entitled to receive on redemption pursuant
to this Section 5.02. The Trustee shall pay to the Holder the net
proceeds of any such sale no later than the day the Holder would
otherwise be entitled to receive payment of the Redemption Price
hereunder.
"(h) Neither the Sponsors, the Trustee nor any Distribution
Agent shall be liable or responsible in any way for depreciation or
loss incurred by reason of any sale of Securities made pursuant to
this Section 5.02."
(r) Section 4.01 shall be amended to read in its entirety as follows:
"Section 4.01 Evaluation of Securities. The Trustee shall
------------------------
determine separately and promptly furnish to the Sponsor upon request
the value of each issue of Securities as of the Evaluation Time on
the basis set forth in this Section on the days on which the Trust
Fund Evaluation is required by Section 5.01. If the Securities are
listed on a national or foreign securities exchange or NASDAQ
National Market System, the evaluation shall be determined on the
basis of the last reported sales price on the exchange, if any, where
the Securities are principally traded (unless the Trustee deems such
price inappropriate as a basis for valuation) or, if there is no sale
price on such exchange, at the mean between the closing bid and
offering prices. If the Securities are not so listed or, if so listed
but the principal market therefor is not on any such exchange, the
evaluation shall be based on the last reported sale prices on the
over-the-counter market (unless the Trustee deems such prices
inappropriate as a basis for valuations) or, if no such sale prices
are available, (1) on the basis of the
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mean between current bid and offering prices for the Securities, (2)
if bid and offering prices are not available for any Securities, on
the basis of the mean between current bid and offering prices for
comparable securities, (3) by determining the value of the Securities
at the mean between the bid and offering sides of the market by
appraisal or (4) by any combination of the above. The Trustee may
obtain current bid and offering prices for the Securities from
investment dealers or brokers (including the Sponsor) that
customarily deal in similar securities or from any other reporting
service or source of information which the Trustee deems appropriate.
With respect to any Security which is not listed on a national
exchange, the Sponsor and the Trustee shall, from time to time,
designate one or more reporting services or other sources of
information on which the Trustee shall be authorized to rely in
evaluating such Security, and the Trustee shall have no liability for
any errors contained in the information so received. The cost thereof
shall be an expense reimbursable to the Trustee from the Income and
Capital Accounts.
"For each evaluation, the Trustee shall also determine and
furnish to the Sponsor the aggregate of (a) the value of all
Securities on the basis of such evaluation and (b) cash on hand in
the Trust Fund (other than cash held specially for the purpose of
Contract Securities).
"Until the Sponsor notifies the Trustee that there will be
no further deposits of Additional Securities, in making the
evaluations specified in this Section 4.01 and in Section 5.01, the
Trustee shall value purchase contracts as the Securities to be
acquired thereunder, and sale contracts as the proceeds thereof (with
corresponding deductions from cash and number of shares of
Securities, respectively), as of the day on which such contracts are
entered into. Following such notification, in making the evaluations
specified in this Section 4.01 and in Section 5.01, the Trustee shall
value all contracts for purchase or sale of Securities as Securities
or cash, respectively (with corresponding deductions from cash or
number of shares), as of the first business day following the day on
which contracts are entered into."
(s) Section 5.01(a) shall be amended to read as follows:
"(a) As of the Evaluation Time (x) on each December 31 and
June 30 (or the last Business Day prior thereto) commencing with the
first such day which is more than six months after the date of the
Reference Trust Indenture, (y) on any business day as of the
Evaluation Time next following the tender of any Unit for redemption,
and (z) on any other
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<PAGE>
Business Day desired by it or requested by the Sponsor, the Trustee
shall:
"(1) Add
"(A) cash on hand in the Trust Fund,
other than cash held specially for the purchase
of Contract Securities,
"(B) the aggregate value of each issue
of Securities other than Contract Securities,
and
"(C) any interest and dividends receivable
on stocks trading ex dividend, and
"(D) amounts representing organizational
expenses paid from the Trust less amounts
representing accrued organizational expenses of
the Trust, plus
"(E) all other assets of the Trust; and
"(2) Deduct
"(A) amounts representing any applicable
taxes or governmental charges payable out of the
Trust Fund and for which no deductions shall have
previously been made for the purpose of addition
to the Reserve Account,
"(B) amounts representing estimated
accrued fees and expenses of the Trust Fund
including but not limited to unpaid fees and
expenses of the Trustee (including legal and
auditing expenses), the Sponsor and of counsel
pursuant to Section 3.10, and
"(C) cash allocated for distribution
to Holders of record, or redemption of Units, as
of a date prior to the evaluation then being
made.
"The resulting figure is herein called a 'Trust Fund
Evaluation'. Until the Sponsor has informed the Trustee that there
will be no further deposits of Additional Securities pursuant to
Section 3.06, the Sponsor shall provide the Trustee estimates of (i)
the total organizational expenses to be borne by the Trust pursuant
to Section 10.02, (ii) the total number of Units to be issued in
connection with the initial deposit and all anticipated deposits of
Additional Securities and (iii) the period or periods over which such
expenses are to be amortized, separately stated with respect to each
such amortization
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<PAGE>
period. For purposes of calculating the Trust Fund Evaluation and
Unit Value, the Trustee shall treat all such anticipated expenses as
having been paid and all liabilities therefor as having been
incurred, and all units as having been issued, respectively, on the
date of the Reference Trust Agreement, and, in connection with each
such calculation, shall take into account a pro rata portion of such
expenses (and of any liability for advances made by the Trustee for
the payment thereof) based on the actual number of Units issued as of
the date of such calculation. In the event the Trustee is informed by
the Sponsor of a revision in its estimate of total expenses, total
Units or period of amortization, and upon the conclusion of the
deposit of Additional Securities or initial offering period, the
Trustee shall base calculations made thereafter on such revised
estimates or actual expenses or period or amortization, respectively,
but such adjustment shall not affect calculations made prior thereto
and no adjustment shall be made in respect thereof."
(t) Section 5.03 and all references thereto are deleted.
(u) For purposes of Section 7.03 the amount per year as compensation
for the Sponsor is hereby specified as the amount set forth under Investment
Summary in the Prospectus as Sponsor's Annual Fee.
(v) Section 8.01(b) shall be amended by adding the
following to the clause ending prior to the proviso beginning in
the seventh line:
"or in respect of any evaluation which it is required to
make, or required or permitted to have made by others under this
Indenture, or otherwise."
(w) Section 8.01 shall also be amended as follows:
In paragraph (e), the word "sub-custodians" shall be inserted
following the word "attorneys" each time it appears and the following
sentence is added at the end of such paragraph:
"The Trustee is specifically authorized to employ Citibank, N.A.,
as a sub-custodian of the Trustee with respect to any
non-U.S. Securities held in the Trust Fund."
Paragraph (g)(2) shall be amended to read as follows:
"(2) The liquidation amount referred to in clause (1) shall
be (i) $500,000 unless and until deposits to the Trust Fund exceed
$50,000,000 in asset value, and (ii) thereafter $20,000,000."
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<PAGE>
(x) Section 8.01 shall be amended to add new paragraphs (j), (k) and
(l) as follows:
"(j) All provisions of paragraphs (b), (c), (d), (e) and
(h) of this Section 8.01 shall be deemed to apply to the Distribution
Agent as fully and to the same extent as the Trustee.
"(k) The Trustee in its individual or any other capacity
may become owner or pledgee or, or be an underwriter or dealer in
respect of, stock, bonds or other obligations issued by the same
issuer (or affiliate of such issuer) or any obligor of any Securities
at any time held as part of the Trust and may deal in any manner with
the same or with the issuer (or an affiliate of the issuer) with the
same rights and powers as if it were not the Trustee hereunder.
"(l) The Trust may include a letter or letters of credit
for the purchase of Contract Securities issued by the Trustee in its
individual capacity for the account of the Sponsor, and the Trustee
may otherwise deal with the Sponsor with the same rights and powers
as if it were not the Trustee hereunder."
(y) Section 8.05(d) shall be amended to add the following sentence in
lieu of that added at the conclusion of such paragraph by the Amendment dated
June 27, 1994:
The provisions of this paragraph shall be deemed to apply
to the Distribution Agent in respect of any loss, liability or
expense arising out of or in connection with such Agent's actions
hereunder to the same extent as such provisions apply to the Trustee
with respect to its acceptance and administration of the Trust.
(z) For purposes of Section 8.05, the amount per year specified as
compensation for the Trustee is hereby specified as the amount set forth under
Investment Summary in the Prospectus as Trustee's Annual Fee.
(aa) For purposes of Section 9.01, the Termination Date shall be the
dates specified in the Prospectus under Mandatory Termination of Trust in the
Investment Summary.
(bb) Section 10.02 shall be amended to read as follows:
"Section 10.02. Initial Cost. To the extent not borne by
------------
the Sponsor, the expenses incurred in establishing a Trust, including
the cost of the initial preparation and typesetting of the
registration statement, prospectuses (including preliminary
prospectuses), the indenture, and
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<PAGE>
other documents relating to a Trust, SEC and state blue sky
registration fees, the costs of the initial valuation of the
portfolio and audit of a Trust, the initial fees and expenses of the
Trustee, and legal and other out-of-pocket expenses related thereto,
but not including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred in the
preparation and printing of brochures and other advertising materials
and any other selling expenses, shall be borne by the Trust. Such
expenses shall be paid from the Income Account or, to the extent
funds are not available in such Account, from the Capital Account. To
the extent the funds in the Income and Capital Accounts of the Trust
shall be insufficient to pay the expenses borne by the Trust
specified in this Section 10.02, the Trustee shall advance out of its
own funds and cause to be deposited and credited to the Income
Account such amount as may be required to permit payment of such
expenses. The Trustee shall be reimbursed for such advance on each
Record Date from funds on hand in the Income Account or, to the
extent funds are not available in such Account, from the Capital
Account in the amount deemed to have accrued as of such Record Date
as provided in the following sentence (less prior payments on account
of such advances, if any), and the provisions of Section 8.04 with
respect to the reimbursement of disbursements for Trust expenses,
including, without limitation, the lien in favor of the Trustee
therefor and the authority to sell Securities as needed to fund such
reimbursement, shall apply to the expenses paid and amounts advanced
pursuant to this Section. For the purposes of the preceding sentence
and the addition provided in clause (1)(D) of Section 5.01, the
expenses borne by the Trust pursuant to this Section shall be deemed
to have been paid on the date of the Reference Trust Agreement and to
accrue at a daily rate over the time period specified for their
amortization by the Sponsor pursuant to Section 5.01; provided,
--------
however, that nothing herein shall be deemed to prevent, and the
Trustee shall be entitled to, full reimbursement for any advances
made pursuant to this Section no later than the termination of the
Trust. For purposes of this Section 10.02, the Trustee may rely on
the written estimates of such expenses provided by the Sponsor
pursuant to Section 5.01."
This Indenture shall be deemed effective when executed and delivered
by the Sponsor and the Trustee.
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<PAGE>
Exhibit 99.3.1
[Letterhead of Battle Fowler LLP]
May 19, 1998
Smith Barney Inc.
Unit Trust Department
388 Greenwich Street, 23rd Floor
New York, New York 10013
Re: Equity Focus Trusts - Sector Series, 1998-A
-------------------------------------------
Dear Sirs:
We have acted as special counsel for Smith Barney Inc. as Depositor,
Sponsor and Principal Underwriter (the "Depositor") of Equity Focus Trusts -
Sector Series, 1998-A (the "Trusts") in connection with the deposit of
securities (the "Securities") therein pursuant to the Trust Agreements referred
to below, by which the Trusts were created and under which the units of
fractional undivided interest (the "Units") have been issued. Pursuant to the
Trust Agreements the Depositor has transferred to the Trusts certain securities
and contracts to purchase certain securities together with irrevocable letters
of credit to be held by the Trustee upon the terms and conditions set forth in
the Trust Agreement. (All securities to be acquired by the Trusts are
collectively referred to as the "Securities".)
In connection with our representation, we have examined the originals or
certified copies of the following documents relating to the creation of the
Trusts, the deposit of the Securities and the issuance and sale of the Units:
(a) the Standard Terms and Condition of Trust dated July 2, 1985, as amended on
June 27, 1994, and the Reference Trust Indentures of even date herewith relating
to the Trusts (collectively, the "Trust Agreement") between the Depositor and
The Chase Manhattan Bank as Trustee; (b) the Closing Memorandum relating to the
deposit of the Securities in the Trusts; (c) the Notification of Registration on
Form N-8A and the Registration Statement on Form N-8B-2, as amended, relating to
the Trusts, as filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "1940 Act");
(d) the Registration Statement on Form S-6 (Registration No. 333-49569) filed
with the Commission pursuant to the Securities Act of 1933 (the "1933 Act"),
Pre-Effective Amendment
<PAGE>
BATTLE FOWLER LLP PAGE 2
Smith Barney Inc.
May 19, 1998
No. 1 thereto, and Amendment No. 2 thereto (said Registration Statement, as
amended by said Amendment Nos. 1 and 2 being herein called the "Registration
Statement"); (e) the proposed form of final prospectus (the "Prospectus")
relating to the Units, which is expected to be filed with the Commission on or
about May 20, 1998; (f) resolutions of the Executive Committees of the Depositor
authorizing the execution and delivery by the Depositor of the Trust Agreements
and the consummation of the transactions contemplated thereby; (g) the
Certificates of Incorporation and By-laws of the Depositor, each certified to by
an authorized officer of the Depositor as of a recent date; (h) a certificate of
an authorized officer of the Depositor with respect to certain factual matters
contained therein ("Officers Certificate"); and (i) certificates or telegrams of
public officials as to matters set forth upon therein.
We have assumed the genuineness of all agreements, instruments and
documents submitted to us as originals and the conformity to originals of all
copies thereof submitted to us. We have also assumed the genuineness of all
signatures and the legal capacity of all persons executing agreements,
instruments and documents examined or relied upon by us.
Where matters are stated to be "to the best of our knowledge" or "known to
us," our knowledge is limited to the actual knowledge of those attorneys in our
office who have performed services for the Trusts, their review of documents
provided to us by the Depositor in connection with this engagement and inquiries
of officers of the Depositor, the results of which are reflected in the Officers
Certificate. We have not independently verified the accuracy of the matters set
forth in the written statements or certificates upon which we have relied. We
have not reviewed the financial statements, compilation of the Securities held
by the Trusts, or other financial or statistical data contained in the
Registration Statement and the Prospectus, as to which we understand you have
been furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus. In addition, we have made no specific inquiry as
to whether any stop order or investigatory proceedings have been commenced with
respect to the Registration Statement or the Depositor nor have we reviewed
court or governmental agency dockets.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations under
equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the
State of New York and we do not hold ourselves
<PAGE>
BATTLE FOWLER LLP PAGE 3
Smith Barney Inc.
May 19, 1998
out as experts in or express any opinion as to the laws of other states or
jurisdictions except as to matters of Federal and Delaware corporate law. No
opinion is expressed as to the effect that the law of any other jurisdiction
might have upon the subject matter of the opinions expressed herein under
applicable conflicts of law principles, rules or regulations or otherwise.
Based on and subject to the foregoing, we are of the opinion that:
(1) The Trust Agreements have been duly authorized and executed and
delivered by an authorized officer of the Depositor and are valid and binding
obligations of the Depositor in accordance with their respective terms.
(2) The execution and delivery of the Certificates evidencing the Units
has been duly authorized by the Depositor and such Certificates when executed by
the Depositor and the Trustee in accordance with the provisions of the
Certificates and the respective Trust Agreements and issued for the
consideration contemplated therein, will constitute fractional undivided
interests in their respective Trusts, and will be entitled to the benefits of
the respective Trust Agreements. Upon payment of the consideration for the
Units as provided in the Trust Agreements and the Registration Statement, the
Units will be fully paid and non-assessable by the Trusts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Taxes" and "Legal Opinion". This
opinion is intended solely for the benefit of the addressee in connection with
the issuance of the Units of the Trust and may not be relied upon in any other
manner or by any other person without our express written consent.
Very truly yours,
Battle Fowler LLP
<PAGE>
EXHIBIT 99.5.1
CONSENT OF INDEPENDENT AUDITORS
The Sponsor, Trustee and Unit Holders of
Equity Focus Trusts - SECTOR SERIES, 1998-A
We consent to the use of our report dated May 19, 1998 included herein and
to the reference to our firm under the heading "Auditors" in the Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
May 19, 1998
