<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1998
REGISTRATION NO. 333-60035
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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AMENDMENT NO. 1
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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A. EXACT NAME OF TRUST:
EQUITY FOCUS TRUSTS
EUROPEAN MONETARY UNION PORTFOLIO
B. NAME OF DEPOSITOR:
SALOMON SMITH BARNEY INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE:
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
D. NAMES AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY TO:
LAURIE A. HESSLEIN
MICHAEL R. ROSELLA, ESQ.
SALOMON SMITH BARNEY INC. BATTLE FOWLER LLP
388 GREENWICH STREET 75 EAST 55TH STREET
NEW YORK, NEW YORK 10013 NEW YORK, NEW YORK 10022
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
No filing fee required.
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
[_]Check box if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
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<PAGE>
EQUITY FOCUS TRUSTS
EUROPEAN MONETARY UNION PORTFOLIO
A UNIT INVESTMENT TRUST
The Equity Focus Trusts--European Monetary Union
Portfolio is a unit investment trust that offers
SalomonSmithBarney investors the opportunity to purchase Units
- ------------------ representing proportionate interests in a
A Member of portfolio of international equity securities
TravelersGroup[LOGO] selected by Salomon Smith Barney Equity Research
which are expected to benefit from the
establishment of the European Monetary Union. The
value of the Units of the Trust will fluctuate
with the value of the underlying securities and
with the value of the U.S. dollar relative to the
various foreign currencies represented in the
portfolio. 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 September 16, 1998
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998+
<TABLE>
<S> <C>
SPONSOR
Salomon Smith Barney Inc.
INITIAL NUMBER OF UNITS++......................................... 2,000,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY EACH UNIT... 1/2,000,000
PUBLIC OFFERING PRICE (per 1,000 Units)
Aggregate value of Securities in Trust........................... $ 1,977,638
===========
Divided by 2,000,000 Units (times 1,000)......................... $ 988.82
Plus first year sales charge of 2.75% (2.778% of the net amount
invested in Securities)**+++.................................... $ 27.47
Less first year Deferred Sales Charge per 1,000 Units............ (17.50)
-----------
Public Offering Price per 1,000 Units............................ $ 998.79
Plus the amount per 1,000 Units of Securities for organization
costs*.......................................................... $ 2.24
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).......................................... $ 1,001.03
===========
SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE*** PER 1,000 UNITS
(based on value of underlying securities)........................ $ 991.06
DISTRIBUTIONS
Distributions of income, if any, will be made on the next to last business
day of each year commencing December 30, 1998, to Holders of record on the
immediately prior business day of each year, commencing December 29, 1998,
and will be automatically reinvested in additional Units of the Trust unless
the Holder elects to receive his distribution in cash. A Final Distribution
will be made upon termination of the Trust.
SPONSOR'S PROFIT ON DEPOSIT ...................................... $ 89.57
</TABLE>
TRUSTEE'S ANNUAL FEE
$.86 per 1,000 Units
(see Expenses and Charges)
SPONSOR'S ANNUAL FEE
Maximum of $.25 per 1,000 Units
(see Expenses and Charges)
RECORD DAY
The business day immediately prior to a Distribution
Day.
DISTRIBUTION DAY
On the next to last business day of each year, commencing December 30, 1998
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 5.
SPECIAL REDEMPTION DATE
October 25, 1999 (the "Special Redemption Date")
MANDATORY TERMINATION OF TRUST
September 29, 2000 (the "Mandatory Termination Date"), or at any earlier time
by the Sponsor with the consent of Holders of 51% of the Units then
outstanding.
DEFERRED SALES CHARGE PAYMENT DATES
The first day of each month commencing March 1, 1999 through September 1,
1999 and November 1, 1999 through May 1, 2000.
2
<PAGE>
EQUITY FOCUS TRUSTS--EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998+
- ------------
+ The Initial Date of Deposit. The Trust Indenture was signed and the initial
deposit was made on September 15, 1998. Valuation of the shares of common
stocks (the "Securities") selected by the Sponsor for the Trust portfolio is
based on the market value per share in U.S. dollars as of September 15, 1998,
as more fully explained in footnote 4 to Portfolio on page 13. After the
Initial Date of Deposit, Securities quoted on a foreign securities exchange, or
a national securities exchange or the Nasdaq National Market, 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.
* This amount per 1,000 Units will be invested in Securities during, and
liquidated at the completion of, the initial offering period, to reimburse the
Sponsor for the payment of all or a portion of the estimated costs incurred in
organizing the Trust ("organization costs")--including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the SEC and the states and the initial audit of the
Trust portfolio. These Securities will be purchased maintaining the same
proportionate relationship among all Securities contained in the Trust. The
reimbursement to the Sponsor for the organization costs will be paid from the
assets of the Trust as of the close of the initial offering period. The initial
offering period will be at least 30 days, but will in no event be longer than
six months. As of the date of this prospectus it is expected that the initial
offering period will be 90 days. To the extent the actual organization costs
are less than the estimated amount, only the actual organization costs will be
reimbursed to the Sponsor. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
included in the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust. See Risk Factors for a discussion of the
impact of a decrease in value of the Securities purchased with the Public
Offering Price proceeds intended to be used to reimburse the Sponsor.
** The sales charge consists of an Initial Sales Charge and an annual Deferred
Sales Charge. The Initial Sales Charge is computed by deducting the total
Deferred Sales Charge imposed prior to the Special Redemption Date ($17.50 per
1,000 Units) from the aggregate first year sales charge (a maximum of 2.75% of
the Public Offering Price). On September 15, 1998, the Initial Date of Deposit,
the Initial Sales Charge is $9.97 per 1,000 Units (or 1.00% of the Public
Offering Price). The Deferred Sales Charge during each of the two years of the
Trust is paid through reduction of Trust assets by $2.50 per 1,000 Units on
seven Deferred Sales Charge Payment Dates. As a result, the maximum total sales
charge assessed to Holders who elect to hold Units through the Mandatory
Termination Date of the Trust will be 4.50% of the Public Offering Price. The
second year Deferred Sales Charge will not be imposed on Holders who sell,
redeem or exchange their Units prior to the Special Redemption Date. Upon a
repurchase, redemption or exchange of Units before October 25, 1999, any
remaining first year Deferred Sales Charge payments will be deducted from the
proceeds. Similarly, upon a repurchase, redemption or exchange of Units after
the Special Redemption Date but before September 29, 2000, any remaining second
year Deferred Sales Charge payments will be deducted from the proceeds.
*** As of the close of the initial offering period, the Sponsor's Repurchase
Price and Redemption Price per 1,000 Units for the Trust will be reduced to
reflect the payment of the per 1,000 Unit organization costs to the Sponsor.
Therefore, the amount of the Redemption or Repurchase Price per 1,000 Units
received by a Holder will include the portion representing organization costs
only when such Units are tendered for redemption prior to the close of the
initial offering period. This price reflects deductions for the first year
Deferred Sales Charge payments ($17.50 per 1,000 Units initially). All
redemptions of 250,000 Units or more may, upon request by a redeeming Holder,
be made in kind to the Distribution Agent, who will either forward the
distributed securities to the Holder or sell the securities on behalf of the
redeeming Holder and distribute the proceeds (net of any brokerage commission
or other expenses incurred in the sale) to the Holder. See Redemption.
3
<PAGE>
EUROPEAN MONETARY UNION PORTFOLIO
INVESTOR'S GUIDE
On January 1, 1999 the world's second-largest market for stocks will be
formed when 11 countries in Continental Europe join together in economic and
monetary union. Prices for stocks, bonds and other financial instruments will
be quoted in the euro, a single currency. The European Central Bank will be the
sole monetary authority, and short-term interest rates will become identical
across the region. These are the first steps of European Monetary Union
("EMU"), which will encourage further the free movement of capital--
irrespective of national borders--and mark the beginning of a new era for
investing in the "euro zone."
WHY INVEST IN THE EURO ZONE? In simplest terms, we could say that EMU will
change the supply/demand dynamics of investing in European companies.
________________________________________________________________________________
SUPPLY: STOCK MARKETS ARE LIKELY TO EXPAND
________________________________________________________________________________
Consider this comparison:
. When combined, the 11 nations of EMU are home to more than 295 million
people, compared to 267 million in the U.S.
. They have a Gross Domestic Product of $6.3 trillion--just under that of
the U.S.
. But their aggregate stock market capitalization lags that of the U.S. by
two-thirds.
HOW COULD THIS CHANGE? Until now, equity ownership in Europe has been
characterized by a larger degree of state ownership and cross-ownership by
corporations when compared with the U.S. As for individual investors, our
research shows that Europeans tend to allocate far less of their investment
portfolios to equities than U.S. investors.
As the euro-zone bloc evolves, our analysts believe the amount of stock made
available to the public, and the public appetite for that stock, could increase
from current levels. Should this occur, the "capitalization gap" between
European and U.S. stock markets could narrow while spurring rapid growth in
euro-zone capital markets.
________________________________________________________________________________
DEMAND: DRIVEN BY EUROPE'S "FOUR PILLARS"
________________________________________________________________________________
Our analysts believe that the expanding supply of euro-zone equities for
public ownership will be exceeded by a rapidly growing demand for stock
ownership. The mounting appetite for stocks could be driven by a number of
factors, including what our analysts call "The Four Pillars" supporting a
positive view on Europe.
Earnings Momentum: Europe could be in the acceleration phase of its economic
cycle. On the corporate level, profitability could be enhanced as the cost of
capital declines and companies restructure to compete on a new pan-European
scale.
Low Interest Rates: The advent of a single currency (the euro) and a sole
monetary authority could help sustain the low interest rates, a longer economic
cycle and an attractive environment for stocks.
<PAGE>
A Rising Appetite for Stocks: Should interest rates remain close to their
current historical lows, individual savers now invested in low-yielding cash
equivalents may seek the higher potential returns in equity markets.
Increased Merger & Acquisition Activity: Mergers, takeovers, restructurings
and stock repurchases could be on the rise. This escalation in corporate
activity could be an important source of liquidity and drive higher efficiency
within European corporations.
EUROPEAN MONETARY UNION PORTFOLIO
INVESTING MADE EASY
As the 40-year quest for EMU becomes reality, there are industry groups and
individual companies that will emerge as prime beneficiaries. Of particular
interest to our analysts are stocks within the financial, telecommunications
and technology sectors. But which companies should you own? Why not take a
"portfolio approach" to investing in the euro zone, through the European
Monetary Union Portfolio. And let our analysts identify the most promising
opportunities among stocks that could benefit from economic and monetary unity.
Professional research expertise; diversification and the convenience of one
easy purchase...and all you need is $250 to get started.
SHOULD YOU INVEST IN THE "EMU" PORTFOLIO?
The decision to invest in this unit trust depends, in part, on your
individual tolerance for risk. The Portfolio may not be appropriate for
investors seeking either preservation of capital or high current income, nor
would it be suitable for investors unable to assume the risks of price
volatility and currency fluctuations associated with investing in international
equities.
The Portfolio is designed for growth-oriented investors seeking international
diversification; however, there is no assurance that this investment objective
will be met. In addition, there is no assurance that dividend rates will be
maintained or that stock prices or currency exchange rates will not decline.
Investors should also be aware that there is a higher level of industry
concentration among the financial, telecommunications and technology sectors,
which involves special risks of investing.
<PAGE>
EQUITY FOCUS TRUSTS -- EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
OBJECTIVE OF THE TRUSTS -- The objective of the Equity Focus Trusts --
European Monetary Union 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 for the Trust portfolio (the "Portfolio"). The Sponsor
has selected for the Portfolio international equities which it expects to
benefit from the establishment of the European Monetary Union (the "EMU") and
which it considers to have strong potential for capital appreciation over a
period of two years relative to risks and opportunities. The payment of
dividends is not a primary objective of the Portfolio. The Portfolio may be
considered speculative and therefore may be appropriate only for those
investors able and willing to assume the increased risks of higher price
volatility and currency fluctuations associated with investments in
international equities. The Portfolio should be considered as a vehicle for
investing a portion of an investor's assets in foreign securities and not as a
complete equity investment program. Achievement of the Trust's objectives is
dependent upon several factors including the financial condition of the issuers
of the Securities and any appreciation of the Securities. Furthermore, because
of various factors, including without limitation, Trust sales charges and
expenses, unequal weightings of stocks, brokerage costs and any delays in
purchasing securities with cash deposited, investors in the Trusts may not
realize as high a total return as the theoretical performance of the underlying
stocks in the Portfolio.
PORTFOLIO -- The Portfolio contains 22 common stocks issued by companies
engaged primarily in the following industries: financial, 9 (40.6%);
telecommunications, 6 (27.3%); consumer cyclical, 3 (13.7%); energy, 1 (4.7%);
raw materials, 1 (4.5%); technology, 1 (4.5%); and utilities, 1 (4.7%).
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. Although
the Portfolio is concentrated in the stocks of foreign issuers, it is
diversified among 10 countries. The following countries are represented in the
Portfolio: Austria, 1 (4.6%); Finland, 1 (4.6%); France, 5 (22.5%); Germany, 4
(18.2%); Ireland, 2 (9.0%); Italy, 2 (9.1%); Netherlands, 1 (4.5%); Portugal, 2
(9.1%); Spain, 3 (13.7%); and Switzerland, 1 (4.7%). (See Risk Factors.)
The initial purchase of Securities for the Trust 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 the Trust. During the 90-day period following the Initial Date of
Deposit, the Sponsor may create additional Units of the Trust 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 the
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 Trust 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 the Trust after the
90-day period must replicate exactly the proportionate relationship among the
number of shares comprising the Portfolio at the end of the initial 90-day
period, subject to certain events discussed under Administration of the Trust--
Trust Supervision. The Sponsor may cease creating Units (temporarily or
permanently) at any time. (See Administration of the Trusts--Trust
Supervision.)
4
<PAGE>
EQUITY FOCUS TRUSTS -- EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
RISK FACTORS -- Foreign Securities and American Depositary Receipts -- The
Trust is concentrated in Securities of foreign issuers or American Depositary
Receipts ("ADRs") for securities that have been issued by non-United States
issuers. These instruments are subject to special considerations in addition to
those affecting common stocks of United States issuers. For a discussion of
special considerations relating to foreign securities and ADRs, including
exchange rate fluctuations, see Risk Factors -- Foreign Securities and --
American Depositary Shares and Receipts; Taxes.
Investment in the Trust should be made with an understanding that the value
of the underlying Securities, and therefore the value of the Units, will
fluctuate, depending on the full range of economic and market influences which
may affect the market value of the Securities, including the profitability and
financial condition of issuers, changes in the economies of the various
countries represented in the Portfolio, currency exchange rate fluctuations,
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 Trust or to satisfy redemptions of Units, may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also cause
increased buying activity in certain of the stocks comprising the Portfolio.
After such announcement, investment advisory and brokerage clients of the
Sponsor and its affiliates may purchase individual Securities appearing on the
list during the course of the initial offering period. Such buying activity in
the stock of these companies prior to the purchase of the Securities by the
Trust may cause the Trust to purchase stocks at a higher price than those
buyers who effect purchases prior to purchases by the Trust.
The Trust is not appropriate for investors requiring high current income or
conservation of capital. Securities representing approximately 4.5% of the
value of the Portfolio, have been ranked High Risk by the Sponsor's Research
Department, described as "low predictability of earnings/dividends; high price
volatility".
The Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for the Trust's organization costs
will be purchased in the same proportionate relationship as all the Securities
contained in the Trust. Securities will be sold to reimburse the Sponsor for
the Trust's organization costs at the completion of the initial offering
period, which is expected to be 90 days from the Initial Date of Deposit (a
significantly shorter time period than the life of the Trust). During the
initial offering period, there may be a decrease in the value of the Trust
Securities. To the extent the proceeds from the sale of these Securities are
insufficient to repay the Sponsor for the Trust organization costs, the Trustee
will sell additional Securities to allow the Trust to fully reimburse the
Sponsor. In that event, the net asset value per Unit will be reduced by the
amount of additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed $2.24
per 1,000 Units, this will also result in a greater effective cost per Unit to
Holders for the reimbursement to the Sponsor. When Securities are sold to
reimburse the Sponsor for organization costs, the Trustee will sell such
Securities to an extent which will maintain the same proportionate relationship
among the Securities contained in the Trust as existed prior to such sale.
5
<PAGE>
EQUITY FOCUS TRUSTS -- EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
The Portfolio of the Trust may be concentrated in a 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 movements in the value of Units. The
profitability of financial services companies and banks 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. Competitive pressures and changing demand may have a
substantial effect on the financial condition of companies in the technology
and telecommunications industries. Companies in the technology and
telecommunications industries are subject to governmental regulation and spend
heavily on research and development and are sensitive to the risk of product
obsolescence. (See Risk Factors -- Financials/Banking Industries and --
Technology/Telecommunications Industries.)
If cash (or a letter of credit in lieu of cash) is deposited with
instructions to purchase Securities in connection with the issuance of
additional Units during the Public Offering Period, there is the risk that the
price of a Security will increase between the time of the deposit and the time
the Security is purchased resulting in a reduction in the number of shares
purchased for the Portfolio. Price fluctuations during the period from the time
of deposit of cash to the time the Securities are purchased, and payment of
brokerage fees, will affect the value of every Holder's Units, the number of
shares of each Security represented by each Unit and the income per Unit
received by the Trust. Some of the Securities may have limited trading volume.
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 Trust's 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 the Trust,
the Sponsor reserves the right to sell Securities over a period of up to 20
business days to lessen the impact of its sales on the market price of the
Securities. The proceeds received by Holders following termination of the Trust
will reflect the actual sales proceeds received on the Securities, which will
likely differ from the closing sale price on the Mandatory Termination Date.
Common stocks may be especially susceptible to general stock market movements
and to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. Investors should be aware that there can be
no assurance that the value of the underlying Securities will increase or that
the issuers of the Securities will pay dividends on outstanding shares. Any
distributions of income to Holders will generally depend upon the declaration
of dividends by the issuers of the Securities and the declaration of any
dividends depends upon several factors including the financial condition of the
issuers and the general economic conditions.
Unlike a mutual fund, the Portfolios are not actively managed and the Sponsor
receives no management fee. Therefore, the adverse financial condition of an
issuer will not necessarily require the sale of Securities from the Portfolio
or mean that the Sponsor will not continue to purchase the Security in order to
create additional Units. Investors should note in particular that the
Securities were selected on the basis of the criteria set forth above under
Objective of the Trust and that the Trust may continue to purchase or hold
Securities originally
6
<PAGE>
EQUITY FOCUS TRUSTS -- EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
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 the Trust is regularly reviewed and
evaluated and the Sponsor may instruct the Trustee to sell Securities under
certain limited circumstances, Securities will not be sold by the Trust to take
advantage of market fluctuations or changes in anticipated rates of
appreciation. As a result, the amount realized upon the sale of the Securities
may not be the highest price attained by an individual Security during the life
of the Trust. The Sponsor has currently assigned certain rankings to the
issuers of Securities based on stock performance expectations and level of risk
(see footnote 2 to the Portfolio). 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 Trust 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 page 2 for the Portfolio 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 Portfolio, is noted on page 2 under Sponsor's Profit/Loss on
Deposit. The Sponsor's profit or loss on the deposit of Securities largely
depends on whether the Securities' prices rise in response to the Sponsor's
purchases of possibly large volumes of the Securities for initial and
subsequent deposits in the Trust. The effect of the Sponsor's purchases of
Securities on the prices of the Securities is unpredictable.
PRIVATE PLACEMENTS; UNDERWRITING -- None of the Securities in the Trust
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. In addition, during the initial offering
period, the Public Offering Price per 1,000 Units will include an amount
sufficient to reimburse the Sponsor for the payment of all or a portion of the
estimated organization costs (collectively, "organization costs") of the Trust.
The total first year sales charge consists of an Initial Sales Charge and a
Deferred Sales Charge, the total of which equals a maximum of 2.75%* of the
Public Offering Price; this results in a sales charge of 2.778%* of the net
amount invested in underlying Securities. The Initial Sales Charge is computed
by deducting the Deferred Sales Charge ($17.50 per 1,000 Units)
- ------------
* This sales charge will be reduced on a graduated scale in the case of
quantity purchases. See Public Sale of Units -- Public Offering Price.
7
<PAGE>
EQUITY FOCUS TRUSTS -- EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
from the aggregate sales charge (a maximum of 2.75% of the Public Offering
Price). On September 15, 1998 the Initial Sales Charge is $9.97 per 1,000 Units
(1.00% of the Public Offering Price). The Initial Sales Charge is deducted from
the purchase price of a Unit at the time of purchase and paid to the Sponsor;
it may be more or less than 1.00% of the Public Offering Price because of
fluctuations in value of the Securities. The Deferred Sales Charge is paid
through a reduction of the net asset value of the Trust by $2.50 per 1,000
Units on each of the seven monthly Deferred Sales Charge Payment Dates,
commencing on March 1, 1999 through September 1, 1999. In addition, Holders who
elect to hold units subsequent to the Special Redemption Date will be subject
to a deferred sales charge of $17.50 per 1,000 Units which will be imposed
after such date in the manner described under Public Sale of Units--Public
Offering Price. This would increase the total maximum sales charge to 4.50% of
the Public Offering Price to such Holders (assuming a $1,000 Public Offering
Price per 1,000 Units; due to fluctuations in the value of the securities, the
total maximum sales charge may be more than 4.50% of the Public Offering
Price). Units are offered at the Public Offering Price plus the net amount per
Unit in the Income Account. See Public Sale of Units -- Public Offering Price.
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 the Trust will be automatically reinvested in additional Units of the 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 the
Trust than Holders who receive cash distributions (see Reinvestment Plan).
Distribution and Record Days are shown on page 2. As soon as practicable after
termination of the Trust (generally after seven days), the Trustee will
distribute to each Holder his pro rata share of the amount realized on
disposition of the Securities remaining in the Trust plus any other assets then
in the Trust, less expenses of the Trust. The other assets of the Trust will
include any dividends, interest income and net realized capital gains which
have not been distributed. The total distribution may be less than the amount
paid for Units.
MARKET FOR UNITS -- The Sponsor, though not obligated to do so, intends from
the commencement of the Trust to maintain a market for Units and continually to
offer to purchase Units from Holders desiring to sell them at a price based on
the aggregate value of the underlying Securities (see Market for Units).
Whenever a market is not maintained, a Holder may be able to dispose of his
Units only through redemption (see Redemption).
8
<PAGE>
EQUITY FOCUS TRUSTS--EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
FEE TABLE
- --------------------------------------------------------------------------------
THIS FEE TABLE IS INTENDED TO HELP YOU TO UNDERSTAND THE COSTS AND EXPENSES
THAT YOU WILL BEAR DIRECTLY OR INDIRECTLY. SEE PUBLIC SALE OF UNITS AND
EXPENSES AND CHARGES. ALTHOUGH THE TRUST IS A UNIT INVESTMENT TRUST RATHER THAN
A MUTUAL FUND, THIS INFORMATION IS PRESENTED TO PERMIT A COMPARISON OF FEES.
- --------------------------------------------------------------------------------
UNITHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
AS A % OF INITIAL AMOUNTS PER
PUBLIC OFFERING PRICE 1,000 UNITS
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.00%* $10.00
Deferred Sales Charge***.................... 1.75%** 17.50
---- ------
Total Sales Charge......................... 2.75% $27.50
==== ======
Maximum Sales Charge Imposed per year on
Reinvested Dividends....................... 1.75%**** $17.50
==== ======
Reimbursement to Sponsor for Estimated
Organization Costs......................... .224% $ 2.24
==== ======
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<CAPTION>
AMOUNTS PER
AS A % OF NET ASSETS 1,000 UNITS
--------------------- -----------
<S> <C> <C>
Trustee's Fee............................... .087% $ .86
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .025% $ .25
Other Operating Expenses.................... .152% $ 1.50
---- ------
Total...................................... .264% $ 2.61
==== ======
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR PERIOD:
---------------------------------
1 YEAR 2 YEARS
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $1,000 investment, assuming
the Trust's estimated operating annual
expense ratio of .264% and a 5% annual
return on the investment throughout the
periods..................................... $32 $53
</TABLE>
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. The example should not be
considered a representation of past or future expenses or annual rate of
return; the actual expenses and annual rate of return may be more or less than
those assumed for purposes of the example.
- ------------
* The Initial Sales Charge is the difference between 2.75% and the Deferred
Sales Charge ($17.50 per 1,000 Units) and would exceed 1.00% if the Public
Offering Price exceeds $1,000 per 1,000 Units.
** The actual fee is $2.50 per 1,000 Units, irrespective of the purchase or
redemption price, paid on seven monthly Deferred Sales Charge Payment
Dates. If the Holder sells, exchanges or redeems Units before all the
deductions have been made the balance of the Deferred Sales Charge will be
paid from the sales proceeds. If the Unit price exceeds $1.00 per Unit,
the Deferred Sales Charge will be less than 1.75%; if the Unit price is
less than $1.00 per Unit, the Deferred Sales Charge will exceed 1.75%.
*** In addition to the Deferred Sales Charge set forth above, Holders who
elect to hold Units subsequent to the Special Redemption Date will be
subject to a deferred sales charge of $17.50 per 1,000 Units which will be
imposed after such date in the manner described under Public Sale of
Units--Public Offering Price. This would increase the total maximum sales
charge for such Holders to 4.50% of the Public Offering Price (assuming a
$1,000 Public Offering Price per 1,000 Units; due to fluctuations in the
Value of the Securities, the total maximum sales charge may be more than
4.50% of the Public Offering Price).
**** Reinvested dividends will be subject only to the Deferred Sales Charge
remaining at the time of reinvestment which may be more or less than 1.75%
of the Public Offering Price at the time of reinvestment (see Reinvestment
Plan).
9
<PAGE>
EQUITY FOCUS TRUSTS--EUROPEAN MONETARY UNION PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 15, 1998 (CONTINUED)
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts--European Monetary
Union Portfolio.
We have audited the accompanying statement of financial condition, including
the portfolio, of Equity Focus Trusts--European Monetary Union Portfolio as of
September 15, 1998. This financial statement is the responsibility of the
Trustee (see note 6 to the statement of financial condition). Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of financial condition is free
of material misstatement. An audit of a statement of financial condition
includes examining, on a test basis, evidence supporting the amounts and
disclosures in that statement of financial condition. Our procedures included
confirmation with the Trustee of an irrevocable letter of credit deposited on
September 15, 1998, for the purchase of securities, as shown in the statement
of financial condition and portfolio. An audit of a statement of financial
condition also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
statement of financial condition presentation. We believe that our audit of the
statement of financial condition provides a reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the financial position of Equity
Focus Trusts--European Monetary Union Portfolio as of September 15, 1998, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
September 15, 1998
10
<PAGE>
EQUITY FOCUS TRUSTS--EUROPEAN MONETARY UNION PORTFOLIO
STATEMENT OF FINANCIAL CONDITION AS OF INITIAL DATE OF DEPOSIT, SEPTEMBER 15,
1998
<TABLE>
<CAPTION>
TRUST PROPERTY(6)
<S> <C>
Investment in Securities:
Contracts to purchase Securities(1)............................. $1,982,118
----------
Total........................................................... 1,982,118
==========
LIABILITIES
Reimbursement to Sponsor for Organization Costs(2)............... 4,480
Deferred Sales Charge(3)......................................... 35,000
----------
Total........................................................... 39,480
==========
INTEREST OF UNITHOLDERS
2,000,000 Units of fractional undivided interest outstanding:
Cost to investors(4)............................................. $2,002,060
Less: Gross underwriting commissions(5).......................... (54,942)
Less: Reimbursement to Sponsor for Organization Costs(2)......... (4,480)
----------
Net amount applicable to investors............................... 1,942,638
----------
Total............................................................ $1,982,118
==========
</TABLE>
- ------------
(1) Aggregate cost to each Trust of the Securities listed under Portfolio of
the 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 $2,500,000 has been deposited with the Trustee for
the purchase of Securities. The letter of credit was issued by Svenska
Handelsbanken.
(2) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing
the Trust. These costs have been estimated at $2.24 per 1,000 Units. A
payment will be made as of the close of the initial public offering period
to an account maintained by the Trustee from which the obligation of the
investors to the Sponsor will be satisfied. To the extent that actual
organization costs are less than the estimated amount, only the actual
organization costs will be deducted from the assets of the Trust. To the
extent that actual organization costs are greater than the estimated
amount, only the estimated organization costs included in the Public
Offering Price will be reimbursed to the Sponsor and deducted from the
assets of the Trust.
(3) A first year Deferred Sales Charge of $17.50 per 1,000 Units is payable in
seven monthly payments of $2.50 per 1,000 Units (March 1, 1999 to
September 1, 1999. Distributions will be made to an account maintained by
the Trustee from which the Deferred Sales Charge obligation of the
investors to the Sponsor will be satisfied. If Units are redeemed prior to
October 25, 1999 the remaining portion of the first year Deferred Sales
Charge applicable to such Units will be transferred to such account on the
redemption date.
(4) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(5) Assumes a maximum first year sales charge of 2.75% of Public Offering
Price.
(6) The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of the
Trust and is responsible for establishing and maintaining a system of
internal controls directly related to, and designed to provide reasonable
assurance as to the integrity and reliability of, financial reporting of
the Trust. The Trustee is also responsible for all estimates and accruals
reflected in the Trust's financial statements other than estimates of
organizational costs, for which the Sponsor is responsible.
11
<PAGE>
EQUITY FOCUS TRUSTS--EUROPEAN MONETARY UNION PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, SEPTEMBER 15, 1998
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF
STOCK INDUSTRY INVESTMENT NUMBER PERCENT OF SECURITIES
SECURITIES(1) SYMBOL GROUP RANKING(2) OF SHARES(3) NET ASSETS TO TRUST(4)
------------- ------- ------------------ ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
AUSTRIA
Bank Austria AG *# BAUS AV Financial 1-M 1,900 4.63% $ 91,805.15
------
4.63%
------
FINLAND
Nokia Corp. ADS NOK. A Telecommunications 1-M 1,100 4.56% 90,268.75
------
4.56%
------
FRANCE
Alcatel Alsthom ADS # ALA Telecommunications 1-M 2,600 4.57% 90,675.00
AXA-UAP ADS AXA Financial 2-M 1,700 4.53 89,781.25
Elf Aquitaine ADS ELF Energy 1-L 1,500 4.68 92,812.50
Renault SA RNO FP Consumer Cyclical 1-H 1,800 4.49 88,954.74
Societe Generale *# GLE FP Financial 2-M 600 4.22 83,659.86
------
22.49%
------
GERMANY
Daimler-Benz Aktien-
gesellschaft ADS DAI Consumer Cyclical 1-M 1,000 4.63% 91,687.50
Deutsche Telekom ADS # DT Telecommunications 2-M 2,900 4.54 90,081.25
Hoechst AG ADS HOE Raw Materials 1-M 2,100 4.48 88,856.25
SAP Aktiengesellschaft
ADS # SAP Technology 1-M 1,800 4.53 89,775.00
------
18.18%
------
IRELAND
Allied Irish Banks ADS # AIB Financial 2-M 1,100 4.43% 87,862.50
CRH PLC* CRH ID Consumer Cyclical 2-M 7,000 4.56 90,351.10
------
8.99%
------
ITALY
Istituto Mobiliare Ital
ADS IMI Financial 2-M 2,400 4.59% 90,900.00
Telecom Italia Mobile
SPA* TIM IM Telecommunications 1-M 13,600 4.52 89,643.04
------
9.11%
------
NETHERLANDS
ING Groep ADS # ING Financial 1-M 1,600 4.52% 89,600.00
------
4.52%
------
PORTUGAL
Banco Comercial
Portugues, SA BCP PL Financial 1-L 2,900 4.49% 88,968.23
Portugal Telecom ADS PT Telecommunications 2-M 2,000 4.64 92,000.00
------
9.13%
------
SPAIN
Argentaria ADS # AGR Financial 1-L 2,200 4.54% 89,925.00
Gas Natural SDG, S.A. CTG SM Utilities 1-M 1,300 4.70 93,206.88
Telefonica SA ADS # TEF Telecommunications 2-M 800 4.49 88,900.00
------
13.73%
------
SWITZERLAND
UBS AG *# UBSN SW Financial 2-M 300 4.66% 92,403.78
------
4.66%
------ -------------
100.00% $1,982,117.78
====== =============
</TABLE>
12
<PAGE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on September 15, 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 2,000,000 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share based on the U.S. dollar offer side value of the relevant exchange
rate determined by the Trustee as of the Evaluation Time on September 15,
1998. Subsequent to the Initial Date of Deposit, valuation of Securities
is based, for Securities quoted on a foreign securities exchange, or
national securities exchange or NASDAQ National Market System, on the
closing sale prices, or if no price exists, at the mean between the
closing bid and offer prices, or for Securities not so quoted, at the mean
between bid and offer prices on the over-the-counter market. See
Redemption--Computation of Redemption Price Per Unit.
----------------
The following information is unaudited:
* Salomon Smith Barney Inc., including subsidiaries and/or affiliates,
usually maintains a market in the securities of this company.
# Within the last three years, Salomon Smith Barney Inc. including its
subsidiaries, affiliates and/or predecessor firms, have acted as manager
(co-manager) of a public offering of the securities of this company or an
affiliate.
13
<PAGE>
DESCRIPTION OF THE TRUST
STRUCTURE AND OFFERING
This Series of the Equity Focus Trusts--European Monetary Union Portfolio
(the "Portfolio" or the "Trust"). The 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 the Trust (a "Unit") represented a
fractional undivided interest in the securities listed under Portfolios (the
"Securities") set forth under Investment Summary. Additional Units of the
Trust will be issued in the amount required to satisfy purchase orders by
depositing in the Trust cash (or a bank letter of credit in lieu of cash) with
instructions to purchase Securities, contracts to purchase Securities together
with irrevocable letters of credit, or additional Securities. On each
settlement date (estimated to be three business days after the applicable date
on which Securities were deposited in the Trust), the Units will be released
for delivery to investors and the deposited Securities will be delivered to
the Trustee. As additional Units are issued by the Trust as a result of the
deposit of cash (or a letter of credit in lieu of cash) with instructions to
purchase additional Securities, the aggregate value of the Securities in 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 Trust.
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
Portfolio of the Trust. The proportionate relationship among the Securities in
the Trust will be adjusted to reflect the occurrence of a stock dividend, a
stock split or a similar event which affects the capital structure of the
issuer of a Security in the Trust but which does not affect the Trust's
percentage ownership of the common stock equity of such issuer at the time of
such event. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date
of Deposit because of, among other reasons, purchase requirements, changes in
prices, brokerage commissions or unavailability of Securities. Replacement
Securities may be acquired under specified conditions when Securities
originally deposited are unavailable (see Administration of the Trust--Trust
Supervision). Units may be continuously offered to the public by means of this
Prospectus (see Public Sale of Units--Public Distribution) resulting in a
potential increase in the number of Units outstanding. Deposits of Additional
Securities subsequent to the 90-day period following the Initial Date of
Deposit must replicate exactly the proportionate relationship among the number
of shares of each of the Securities comprising the 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
page 2 on any day will be based on the aggregate value of the Securities in
the Trust on that day at the Evaluation Time, plus a sales charge. The Public
Offering Price for each of the Trusts will thus vary in the future from that
specified on page 2 of this Prospectus. See Public Sale of Units--Public
Offering Price for a complete description of the pricing of Units.
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units. The Sponsor reserves
the right to accept or reject any purchase order in whole or in part.
- ------------
* 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.
14
<PAGE>
The Sponsor will execute orders to purchase in the order it determines, in
good faith, that they are received, except it is expected that indications of
interest received prior to the effectiveness of the registration of the Trust
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 the Trust will have the right to have
their Units redeemed for the Securities underlying the Units (see Redemption).
If any Units are redeemed, the aggregate value of Securities in the Trust will
be reduced and the fractional undivided interest in the Trust represented by
each remaining Unit will be increased. Units of the Trust will remain
outstanding until redeemed upon request to the Trustee by any Holder (which
may include the Sponsor), or termination of the Indenture (see Administration
of the Trust--Amendment and Termination).
THE PORTFOLIO
Salomon Smith Barney's Equity Focus Trusts are each based on a specific
research investing theme or industry trend identified by analysts of Salomon
Smith Barney Inc., based on an analysis of each company and the industry group
as a whole. The Trust seeks to identify and invest in companies positioned to
capitalize on the establishment of the European Monetary Union ("EMU")
scheduled to begin in January 1999 and continue in phases over the two-year
life of the Trust. EMU members include Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain. In
general, the portfolio is expected to be comprised of large capitalization
companies that are likely to benefit from the broader and more integrated
marketplace, and a more coordinated economic environment. The selections,
which will be identified from the universe of Salomon Smith Barney stock
recommendations, are expected to be diversified by industry group and
geographic location. Salomon Smith Barney European Research has 30 senior
research analysts who follow 400 international equities that fall into 25
industry groups and are located in 25 countries in both developing and
emerging European markets. The Securities included in the Portfolio were
selected by the Sponsor as stocks deemed to have above-average appreciation
potential over the 24 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 Portfolio on page 13). In
selecting Securities for the Trust, the Sponsor has not expressed any belief
as to the potential of these Securities for capital appreciation over a period
longer than two years. 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 Trust for various reasons, including sales
charges and expenses of the Trust, because the Portfolio may not be fully
invested at all times, the stocks are normally purchased or sold at prices
different from the closing price used to determine the Trust's net asset
value, and not all stocks may be weighted in the initial proportions at all
times. Additionally, results of ownership to different Holders will vary
depending on the net asset value of the underlying Securities on the days
Holders bought and sold their Units. Of course, any purchaser of securities,
including Units, will have to pay sales charges or commissions, which will
reduce his/her total return.
Total returns and/or average annualized returns for various periods of
previous series of Equity Focus Trusts and the Trust may be included from time
to time in advertisements and sales literature. As with other
15
<PAGE>
performance data, performance comparisons should not be considered
representative of the Trust's relative performance for any future period.
Advertising and sales literature for the Trust may also include excerpts from
the Sponsor's research reports on one or more of the stocks in the Trust,
including a brief description of its businesses and market sector, and the
basis on which the stock was selected.
All of the 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. Any domestic ADRs are publicly traded either on a
stock exchange or in the over-the-counter market. Most of the contracts to
purchase ADRs deposited initially in the Trust are expected to settle in three
business days, in the ordinary manner for such Securities.
The Trust consists of such Securities as may continue to be held from time
to time in the Trust and any additional and replacement Securities and any
money market instruments acquired and held by such Trust pursuant to the
provisions of the Indenture (including the provisions with respect to the
deposit into the Trust of Securities in connection with the sale of additional
Units to the public) together with undistributed income therefrom and
undistributed and uninvested cash realized from the disposition of Securities
(see Administration of the Trust--Accounts and Distributions; --Trust
Supervision). The Indenture authorizes, but does not require, the Trustee to
invest the net proceeds of the sale of any Securities in eligible money market
instruments to the extent that the proceeds are not required for the
redemption of Units. Any money market instruments acquired by the Trust must
be held until maturity and must mature no later than the next Distribution Day
and the proceeds distributed to Holders at that time. If sufficient Securities
are not available at what the Sponsor considers a reasonable price, excess
cash received on the creation of Units may be held in an interest-bearing
account with the Trustee until that cash can be invested in Securities.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Securities. However, should any
contract deposited hereunder (or to be deposited in connection with the sale
of additional Units) fail, the Sponsor shall, on or before the next following
Distribution Day, cause to be refunded the attributable sales charge, plus the
attributable Cost of Securities to Trust listed under the Portfolio for the
Trust, unless substantially all of the monies held in the Trust to cover the
purchase are reinvested in replacement Securities in accordance with the
Indenture (see Administration of the Trust--Portfolio Supervision).
Because certain of the Securities from time to time may be sold, or their
percentage may be reduced under certain extraordinary circumstances described
below, or because Securities may be distributed in redemption of Units, no
assurance can be given that the Trust will retain for any length of time its
present size (see Redemption; Administration of the Trust--Amendment and
Termination). For Holders who do not redeem their Units, investments in Units
of the Trust will be liquidated on the fixed date specified under Investment
Summary--Mandatory Termination of Trust, and may be liquidated sooner if the
net asset value of 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 the Trust are set forth under Investment
Summary. Income Distributions, if any, will be automatically reinvested in
additional Units of the Trust at no extra charge unless a Holder elects to
receive his distributions in cash (see Reinvestment Plan). Because dividends
on the Securities are not received by the Trust at a constant rate throughout
the year and because the issuers of the Securities may change the schedules or
amounts 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 the Trust and credited to the income account established under the
Indenture (the "Income Account") as of the Record Day.
16
<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 Trust or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also
cause increased buying activity in certain of the stocks comprising the
Portfolio. After such announcement, investment advisory and brokerage clients
of the Sponsor and its affiliates may purchase individual Securities appearing
on the list during the course of the initial offering period. Such buying
activity in the stock of these companies prior to the purchase of the
Securities by the Trust may cause the Trust to purchase stocks at a higher
price than those buyers who effect purchases prior to purchases by the Trust.
The Trust is not appropriate for investors requiring conservation of capital
or high current income. Securities representing approximately 4.5% of the
value of the Portfolio have been ranked High Risk by the Sponsor's Research
Department, described as "low predictability of earnings/dividends; high price
volatility."
The Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for the Trust's organization
costs will be purchased in the same proportionate relationship as all the
Securities contained in the Trust. Securities will be sold to reimburse the
Sponsor for the Trust's organization costs at the completion of the initial
offering period, which is expected to be 90 days from the Initial Date of
Deposit (a significantly shorter time period than the life of the Trust).
During the initial offering period, there may be a decrease in the value of
the Trust Securities. To the extent the proceeds from the sale of these
Securities are insufficient to repay the Sponsor for the Trust organization
costs, the Trustee will sell additional Securities to allow the Trust to fully
reimburse the Sponsor. In that event, the net asset value per Unit will be
reduced by the amount of additional Securities sold. Although the dollar
amount of the reimbursement due to the Sponsor will remain fixed and will
never exceed $2.24 per 1,000 Units, this will result in a greater effective
cost per Unit to Holders for the reimbursement to the Sponsor. When Securities
are sold to reimburse the Sponsor for organization costs, the Trustee will
sell such Securities to an extent which will maintain the same proportionate
relationship among the Securities contained in the Trust as existed prior to
such sale.
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
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be paid before common stock dividends and any cumulative preferred stock
dividend omitted is added to future dividends payable to the holders of
cumulative preferred stock. Preferred stocks are also entitled to rights on
liquidation which are senior to those of common stocks. Moreover, common
stocks do not represent an obligation of the issuer and, therefore, do not
offer any assurance of income or provide the same degree of protection of
capital as do debt securities. The issuance of additional debt securities or
preferred stock will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. The value of common stocks is subject to market fluctuations
for as long as the common stocks remain outstanding, and thus the value of the
Securities in the Portfolio may be expected to fluctuate over the life of the
Trust to values higher or lower than those prevailing on the Initial Date of
Deposit.
Since the Securities are all common stocks, and the income stream produced
by dividend payments thereon is unpredictable, the Sponsor cannot provide any
assurance that dividends will be sufficient to meet any or all expenses of the
Trust. If dividends are insufficient to cover expenses, it is likely 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 Portfolio,
as such, and will not be able to vote the Securities. As the holder of the
Securities, the Trustee will have the right to vote all of the voting stocks
in the Trust and will vote in accordance with the instructions of the Sponsor.
Holders will, however, be able upon request to receive an "in kind"
distribution of the Securities evidenced by their Units if they tender a
minimum of 250,000 Units (see Redemption).
Investors should be aware that the Trust is not a "managed" trust and, as a
result, the adverse financial condition of a company will not result in the
elimination of its securities from the Portfolios of the Trust except under
extraordinary circumstances. Investors should note in particular that the
Securities were selected on the basis of the criteria set forth under
Objective of the Trust in the Investment Summary and that the Trust may
continue to purchase or hold Securities originally selected though this
process even though the evaluation of the attractiveness of the Securities may
have changed. A number of the Securities in the Trust may also be owned by
other clients of the Sponsor. However, because these clients may have
differing investment objectives, the Sponsor may sell certain Securities from
those accounts in instances where a sale by the Trust would be impermissible,
such as to maximize return by taking advantage of market fluctuations. (See
Administration of the Trust--Trust Supervision.) In the event a public tender
offer is made for a Security or a merger or acquisition is announced affecting
a Security, the Sponsor may instruct the Trustee to tender or sell the
Security on the open market when, in its opinion, it is in the best interest
of the holders of the Units to do so. Although the Portfolio is regularly
reviewed and evaluated and the Sponsor may instruct the Trustee to sell
Securities under certain limited circumstances, Securities will not be sold by
the Trust to take advantage of market fluctuations or changes in anticipated
rates of appreciation. As a result, the amount realized upon the sale of the
Securities may not be the highest price attained by an individual Security
during the life of the Trust. The Sponsor has currently assigned certain
rankings to the issuers of Securities based on stock performance expectations
and level of risk (see footnote 2 to the Portfolio on page 13). These rankings
are subject to change. Securities will not necessarily be sold by the Trust
based on a change in rankings, although the Sponsor intends to review the
desirability of holding any Security if its ranking is reduced below 3. The
prices of single shares of each of the Securities in the Trust vary widely,
and the effect of a dollar of fluctuation, either higher or lower, in stock
prices will be much
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greater as a percentage of the lower-priced stocks' purchase price than as a
percentage of the higher-priced stocks' purchase price.
Investors should note that in connection with the issuance of additional
Units during the Public Offering Period set forth in the Investment Summary,
the Sponsor may deposit cash (or a letter of credit in lieu of cash)
with instructions to purchase Securities, additional Securities or contracts
to purchase Securities, in each instance maintaining the original percentage
relationship, subject to adjustment under certain circumstances, among the
number of shares of each Security in the Trust. To the extent the price of a
Security increases or decreases between the time cash is deposited with
instructions to purchase the Security and at the time the cash is used to
purchase the Security, Units may represent less or more of that Security and
more or less of the other Securities in the Trust. In addition, brokerage fees
(if any) incurred in purchasing Securities with cash deposited with
instructions to purchase the Securities will be an expense of the Trust. Price
fluctuations between the time of deposit and the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every
Holder's Units and the Income per Unit received by the Trust.
The Trust may be terminated at any time and all outstanding Units liquidated
if the net asset value of the Trust falls below $5,000,000 and deposits of
Securities in the Trust have not exceeded $50,000,000 at that time. At any
time after deposits in the Trust have exceeded $50,000,000, the Trust may be
so terminated if the net asset value of the Trust falls below $20,000,000.
Investors should note that if the net asset value of the Trust should fall
below the applicable minimum value, the Sponsor may then in its sole
discretion terminate the Trust before the Mandatory Termination Date specified
under Investment Summary.
Foreign Securities. The Trust is concentrated in Securities of non-U.S.
issuers directly or through ADRs. The Securities of certain of the issuers
contained in the Portfolio may be held both directly and 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 Trust,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that could reduce the yield on such securities. Since
the Trust may invest in securities quoted in currencies other than the United
States dollar, changes in foreign currency exchange rates may adversely affect
the value of foreign securities in the Portfolio and the net asset value of
Units of the Trust. Investment in foreign securities may also result in higher
expenses due to the cost of converting foreign currency to United States
dollars, the payment of fixed brokerage commissions on certain foreign
exchanges, which generally are higher than commissions on domestic exchanges,
and expenses relating to foreign custody.
In addition, for the foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer. Also,
foreign issuers are not necessarily subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic issuers. However, the Sponsor anticipates that
adequate information will be available to allow the Sponsor to supervise the
Portfolio as set forth in Administration of the Trust--Portfolio Supervision.
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On the basis of the best information available to the Sponsor at the present
time, none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this
type or because the issues qualify for an exemption, or the Trust, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trust.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of
international securities in the Portfolio and on the ability of the Trust to
satisfy their obligation to redeem Units tendered to the Trustee for
redemption (see Redemption).
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.
Exchange Rate Fluctuation. In recent years, foreign exchange rates have
fluctuated sharply. Income from foreign equity securities held by the Trust,
including those underlying any ADRs held by the Trust, would be payable in the
currency of the country of their issuance. However, the Trust will compute
their income in United States dollars, and the computation of income will be
made on the date of its receipt by the Trust at the foreign exchange rate in
effect on that date. Therefore, if the value of the foreign currency falls
relative to the United States dollar between receipt of the income and its
conversion to United States dollars, the risk of such decline will be borne by
Holders.
The Trustee is required to conduct the Portfolio's foreign exchange
conversions either on a spot (i.e., cash) or forward foreign exchange basis,
whichever will synchronize the currency conversions as exactly as practicable
with the settlement dates of the relevant foreign stock or with the dividend
distribution dates of the Portfolio, as the case may be. Foreign currency
exchange conversions are generally conducted on a principal basis and foreign
exchange dealers realize a profit based upon the difference between the price
at which they are willing to buy a particular currency (bid price) and the
price at which they are willing to sell the currency (offer price). The cost
to the Portfolio of engaging in these foreign currency conversions also varies
with such factors as the currency involved, the length of the contract period
and the market conditions then prevailing. Portfolio evaluations include the
cost of buying or selling a forward foreign exchange contract in the relevant
currency to correspond to the settlement period for purchases and redemptions
of Units.
In May 1998, the participating countries were announced by European Union
ministers, along with the bilateral exchange rates at which the participating
currencies will be "locked-in" upon commencement of EMU. The announcement of
the forward rates was intended to give the financial markets sufficient
warning to avoid a speculative attack on EMU in the run-up to January 1, 1999.
The eleven (11) countries eligible for the first wave of entry are Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal and Spain. On January 1, 1999, EMU will commence. The
exchange rates of the participating countries will be locked-in against each
other and the euro. At this time, the euro will become a currency in its own
right, and participating national currencies will become sub-denominations of
the euro (in the same way that the cent is a sub-denomination of the dollar).
From January
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1, 1999, all governments' debt will be issued in euros and intergovernmental
transactions will take place in the single currency. Commercial banking will
be possible in both euros and the national currencies.
Between January 1, 1999 and July 1, 2002, euro notes and coins will
gradually replace the cash of national currencies. Euro cash must be
introduced by January 1, 2002 at the latest. By July 1, 2002, domestic
currencies will no longer be legal tender.
European Risk Factors. The economies of individual European countries may
differ favorably or unfavorably from the U.S. economy in gross national
product, growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. For
a number of years, certain European countries have been seeking economic and
political unification which would reduce barriers between countries, increase
competition among companies, reduce government subsidies in certain industries
and reduce or eliminate currency fluctuations among these European countries.
The Maastricht Treaty on economic and monetary union attempts to provide a
stable monetary framework. However, until the EMU takes effect, which is
intended to occur January 1, 1999, the countries in the European community
will face the need to reinforce monetary cooperation in order to reduce the
risk of a recurrence of tensions between domestic and external policy
objectives. A recent report of the European Monetary Institute, the precursor
of a new, single European central bank, emphasized the need for several
prospective member countries to undergo strenuous cost cutting in the coming
years. It also warned that high rates of unemployment in many European
countries could create a long-term strain on the new currency unless countries
change their labor policies, e.g., rigid work rules and high taxes. No
assurances can be given that the EMU will take effect or that the changes
planned for Europe can be successfully implemented or that these changes will
result in higher market prices for the Securities in the Portfolio.
The risks associated with investing in European Securities may be heightened
in the case of investments in smaller European securities markets because of
risks due to the inexperience of financial intermediaries, the lack of modern
technology, the lack of a sufficient capital base to expand business
operations and the possibility of permanent or temporary termination of
trading and greater spreads between bid and asked prices for securities in
those markets.
Financials/Banking Industries. The Trust may be considered to be
concentrated in common stock of companies engaged in the financial services
and/or banking industries. The financial services and financial services-
related industries will be particularly affected by certain economic,
competitive and regulatory developments. In particular, these European
financial institutions will need to modify fixed assets (i.e. ATM machines)
and will require the technical capability to redenominate into euro accounts
and transactions that are open on January 1, 1999. The profitability of
financial services companies as a group is largely dependent upon the
availability and cost of capital funds which in turn may fluctuate
significantly in response to changes in interest rates and general economic
conditions. Credit losses resulting from financial difficulties of borrowers
can negatively impact the sector. Rising interest rates and inflation may
negatively affect certain financial services companies as the costs of lending
money, attracting deposits and doing business rise. Insurance companies may be
subject to severe price competition. Financial institutions are subject to
regulation and supervision by governmental authorities and changes in
governmental policies may impact the way financial institutions conduct
business. Such governmental regulation may limit both the amounts and types of
loans and other financial commitments they can make, and the interest rates
and fees they can charge. Also, if government regulation which would further
reduce the separation between commercial and investment banking is ultimately
enacted, financial services companies may be significantly affected in terms
of profitability and competition.
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The financial services industry includes credit card issuers, asset
management companies and companies that provide private mortgage insurance,
home equity loans, point-of-sale loans for various durable goods and other
consumer and commercial loans. Companies in the credit card and certain other
businesses are subject to the demands of a competitive market, including
increased use of solicitations, target marketing and pricing competition.
Because of increased competition, some credit card issuers have pursued
customers with lower credit quality and have experienced rising delinquency
rates. Profitability for credit card issuers is largely dependent on the
ability to generate new receivables as well as on their continued ability to
fund themselves by asset securitization, the level of delinquencies and losses
and pricing power. Social, legal and economic factors, including inflation,
unemployment levels and interest rates, may result in changes in market
demand, credit use and payment patterns of customers. No assurance can be
given as to what effect these factors may have on the credit card industry.
Asset management companies also operate in a competitive environment and their
profitability is dependent upon the performance of their funds relative to
that of competing firms and to conditions in the equity and fixed income
markets in general. Companies in other areas of the financial services
industry are dependent on federal housing legislation and other laws and
regulations that affect the demand for home equity loans and mortgage
insurance. These companies are also subject to insurance laws and regulations
in the jurisdictions where they do business. Future changes in laws or
regulations relating to this industry may adversely affect market demand,
restrict premium rates or otherwise impair transactions in this industry.
Companies in this industry are exposed to credit risk and may be adversely
affected by economic events such as national or regional economic recession,
falling housing prices, rising unemployment rates and changes in interest
rates.
The activities of banks and bank holding companies are subject to
comprehensive regulation which is expected to continue to change over the life
of the Trust. In addition, regulators require banks and thrifts to maintain
minimum capital requirements; to the extent additional equity is issued to
meet the requirements, outstanding equity holdings will be diluted. The
enactment of any new legislation or regulations, or any change in
interpretation of enforcement of existing laws or regulations, may affect the
profitability of participants in the banking industry.
Banks are subject to substantial competition from other banking and thrift
institutions and from other financial service institutions for deposits, as
well as corporate and retail customers. To the extent a bank's portfolio is
concentrated in assets related to a particular industry or geographic region,
the bank's operating results will be adversely affected by depressed
conditions in certain markets, including real estate, agriculture and energy.
Profitability, therefore, is subject to significant fluctuation. Banks are
also exposed to the risks of a deflationary economy, which may diminish the
value of a bank's direct investments and contribute to loan defaults if the
value of secured property or other collateral for loans declines.
Technology/Telecommunications Industries. The Trust may be considered to be
concentrated in common stock of companies engaged in technology related and/or
telecommunications industries.
The Trust'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 Trust'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
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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.
Certain companies whose securities are included in the Trust are engaged in
providing local, long-distance and wireless services, in the manufacture of
telecommunications products and in a wide range of other activities including
directory publishing, information systems and the operation of voice, data and
video telecommunications networks.
Payment on common stocks of companies in the telecommunications industry,
including local, long-distance and cellular service, the manufacture of
telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities and the effects of inflation
on the cost of providing services and the rate of technological innovation. To
meet increasing competition, companies may have to commit substantial capital,
particularly in the formulation of new products and services using new
technology. Telecommunications companies are undergoing significant change due
to varying and evolving levels of governmental regulation or deregulation and
other factors. As a result, competitive pressures are intense and the
securities of such companies may be subject to significant price volatility.
The international companies in the Trust consist predominantly of former
government owned telecommunications systems that have been privatized in
states. The Sponsor cannot predict whether such privatization will continue in
the future or what, if any, effect this will have on the Trust.
Liquidity. Since sales of the Securities by the Trust will be effected
largely in foreign securities markets, investors should realize that many of
the Securities may be traded in foreign countries where the securities markets
are not as developed or efficient as those of the United States. Foreign
securities markets, although growing in volume, generally have substantially
less volume than United States markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Fixed brokerage commissions and other transaction
costs on foreign securities exchanges are generally higher than in the United
States and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the
United States. To the extent the liquidity of these foreign facilities markets
becomes impaired, the ability of the Trust to respond to a substantial volume
of requests for redemption of Units received at or about the same time could
be adversely affected. This might occur, for example, as a result of economic
or political turmoil in a country in whose currency the Portfolio had a
substantial portion of its assets invested, or should relations between the
United States and such foreign country deteriorate markedly.
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the
Securities may depend on whether dealers will make a market in the Securities.
There can be no assurance that a market will be made for any of the
Securities, that any market for the Securities will be maintained or of the
liquidity of the Securities in any markets made. In addition, the Trust may be
restricted under the Investment Company Act of 1940 from selling Securities to
the Sponsor. The price at which the Securities may be sold to meet redemptions
and the value of the Units will be adversely affected if trading markets for
the Securities are limited or absent.
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Year 2000 Issue. The Trust, like other businesses and entities, may be
adversely affected if the computer systems used by the Sponsor and Trustee or
other service providers to the 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 Trust's
other service providers. However, there can be no assurance that the Year 2000
Problem will be properly or timely resolved so as to avoid any adverse affects
to the Trust. The Year 2000 Problem may thus also adversely affect issuers of
the Securities contained in the Trust, to varying degrees based upon various
factors. The Sponsor is unable to predict what affect, if any, the Year 2000
Problem will have on such 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. The 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 and any gain or loss resulting
from the conversion of foreign currency into U.S. dollars when such
dividends are received or amounts are converted by the Trust, even if the
Holder does not actually receive such distributions because all or a
portion of them are subject to withholding taxes, used to pay a portion of
the Trust's expenses, or reinvested pursuant to the Reinvestment Plan. An
individual Holder who itemizes deductions will, subject to certain
limitations based on adjusted gross income levels, 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 Trust
that are taxable as ordinary income to Holders will constitute dividends for
Federal income tax purposes but will generally not be eligible for the
dividends-received deduction. That deduction, which is available to
corporations (other than "S" corporations and certain other corporations that
are not eligible for such deduction) and which is not available for purposes
of special taxes such as the accumulated earnings tax and the personal holding
company tax, generally applies only to the extent of dividends received from
domestic corporations. The dividends-received deduction is currently 70%.
Congress from time to time considers proposals to reduce this percentage.
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
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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 the Trust.
Capital gains realized by corporations are generally taxed at the same rate
as ordinary income. However, capital gains realized by noncorporate taxpayers
are taxable at a maximum rate of 20% if the taxpayer has a holding period of
more than one year. The deduction of capital losses is subject to limitations.
The Trust may hold Securities or ADRs of foreign corporations. For United
States income tax purposes, a holder of ADRs is treated as though it were
holding directly the shares of the foreign corporation represented by the
ADRs. Dividends paid by foreign issuers generally will be subject to foreign
withholding tax, which may entitle Holders to a foreign tax credit (or
deduction) against their U.S. income tax liability, subject to the limitations
applicable to the use of the foreign tax credit. Amounts withheld on payments
to the Trust may be greater than the amounts that would be withheld if the
shares were held directly by a U.S. Holder. The trust will report as gross
income earned by U.S. Holders their pro rata shares of such dividends,
including their pro rata shares of any corresponding amounts of foreign tax
withheld and their pro rata shares of any income or loss resulting from
currency conversion transactions. Capital gains attributable to the Units or
the underlying securities may also be subject to taxes by certain of those
jurisdictions.
Under the income tax laws of the State and City of New York, the Trust is
not an association taxable as a corporation and the income of the Trust will
be treated as the income of the Holders in the same manner as for Federal
income tax purposes.
The foregoing discussion relates only to the tax treatment of U.S. Holders
with regard to Federal and certain aspects of New York State and City income
taxes. Holders that are not U.S. citizens or residents ("Foreign Holders")
should be aware that dividend distributions from a Trust attributable to any
dividends received by the Trust from domestic and certain foreign corporations
will be subject to a U.S. 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. However, it is expected that income
earned by Holders who are Foreign Holders will not be U.S. source income and
will not be subject to any U.S. withholding 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 the Trustee will furnish to each Holder of
the Trust a statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security (resulting from redemption or the
sale by the Trust of any Security), and the fees and expenses paid by the
Trust. The Trustee will also furnish an information return to each Holder and
to the Internal Revenue Service.
RETIREMENT PLANS
This Trust may be well suited for purchase by Individual Retirement Accounts
("IRAs"), Keogh plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received in each of the foregoing plans
are exempt from Federal taxation. All distributions from such plans (other
than from certain IRAs known as "Roth IRAs") are generally treated as ordinary
income but may, in some cases, be eligible for special 5 or 10 year averaging
or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh plans and
other tax-deferred retirement plans should consult their plan custodian as to
the appropriate disposition of
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distributions. Investors considering participation in any such plan should
review specific tax laws related thereto and should consult their attorneys or
tax advisers with respect to the establishment and maintenance of any such
plan. Such plans are offered by brokerage firms, including the Sponsor of this
Trust, and other financial institutions. Fees and charges with respect to such
plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in a Trust; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and (c) whether
the assets of the Trust are deemed "plan assets" under ERISA and the
Department of Labor regulations regarding the definition of "plan assets."
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units for the Trust is computed by adding
to the aggregate value of the Securities in the Trust (as determined by the
Trustee) and any cash held to purchase Securities, divided by the number of
Units of the Trust outstanding, the applicable Initial Sales Charge. In
addition, during the initial public offering period a portion of the Public
Offering Price per 1,000 Units also consists of an amount sufficient to
reimburse the Sponsor for the payment of all or a portion of the cost incurred
in organizing and offering the Trust, see Expenses and Changes Initial
Expenses. The total sales charge consists of an Initial Sales Charge and
Deferred Sales Charge equal, in the aggregate, to a maximum charge prior to
the Special Redemption Date of 2.75% of the Pubic Offering Price (2.778% of
the net amount invested in Securities). The Initial Sales Charge is computed
by deducting the Deferred Sales Charge ($17.50 per 1,000 Units) from the
aggregate sales charge prior to the Special Redemption Date. On September 15,
1998, the Initial Sales Charge is $9.97 per 1,000 Units or 1.00% of the Public
Offering Price. The Initial Sales Charge is deducted from the purchase price
of a Unit at the time of purchase and paid to the Sponsor. The Deferred Sales
Charge is a monthly charge of $2.50 per 1,000 Units and is accrued in seven
monthly installments on the Deferred Sales Charge Payment Dates (commencing
March 1, 1999 through September 1, 1999 and will be charged to the Capital
Account. If a Deferred Sales Charge Payment Date is not a business day, the
payment will be charged to the Trust on the next business day. In addition,
Holders who select to hold Units after the Special Redemption Date will be
subject to an additional Deferred Sales Charge of $17.50 per 1,000 Units which
will accrue in seven monthly installments on the Deferred Sales Charge Payment
Dates commencing on November 1, 1999 through May 1, 2000 and will be charged
to the Capital Account. As a result, the maximum total sales charge assessed
to such Holders who elect to hold Units through the Mandatory Termination Date
of the Trust will be 4.50% of the Public Offering Price (4.712% of the net
amount invested in Securities) (assuming a $1,000 Public Offering Price per
1,000 Units; due to fluctuations in the value of the securities, the total
maximum sales charge may be more than 4.5% of the Public Offering Price). To
the extent the entire first year Deferred Sales Charge of $17.50 per 1,000
Units has not been so deducted at the time of repurchase or redemption of
units prior to October 25, 1999 any unpaid amount will be deducted from the
proceeds or in calculating an in kind distribution. Similarly, to the extent
the second year Deferred Sales Charge of 17.50 per 1,000 Units has not been so
deducted at the time of repurchase or redemption of Units after the Special
Redemption Date but prior to September 29, 2000, any unpaid amount will be
deducted from the proceeds or in calculating an in kind distribution. However,
any remaining deferred sales charge will be refunded by the Sponsor when Units
of any European Monetary Union Portfolio are repurchased or redeemed. Units
purchased pursuant to the Reinvestment Plan are subject only to the remaining
applicable Deferred Sales Charge deduction (see Reinvestment Plan).
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Purchasers on September 16, 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 September 16, 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 after receipt of the investor's purchase order. A proportionate
share of the amount in the Income Account (described under Administration of
the Trust--Accounts and Distributions) on the date of delivery of the Units to
the purchaser is added to the Public Offering Price.
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least 50,000 Units. Sales charges are
as follows:
<TABLE>
<CAPTION>
FIRST YEAR CUMULATIVE TWO YEAR
SALES CHARGES SALES CHARGES
--------------------- -------------------------
PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT PERCENT OF NET AMOUNT
NUMBER OF UNITS* PRICE INVESTED OFFERING PRICE INVESTED
- ---------------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Fewer than 50,000.............. 2.75% 2.778% 4.50% 4.712%
50,000 but less than 100,000... 2.50% 2.519% 4.25% 4.439%
100,000 but less than 250,000.. 2.00% 2.005% 3.75% 3.896%
250,000 but less than
1,000,000..................... 1.75% 1.750% 3.50% 3.627%
1,000,000 or more.............. 1.00% 1.000% 2.75% 2.828%
</TABLE>
The above graduated sales charges will apply to all purchases on any one day
by the same purchaser of Units in the amounts stated. Purchases of Units will
not be aggregated with purchases of units of any other series of Equity Focus
Trusts. Units held in the name of the spouse of the purchaser or in the name
of a child of the purchaser under 21 years of age are deemed to be registered
in the name of the purchaser for purposes of calculating the applicable sales
charge. The graduated sales charges are also applicable to a trustee or other
fiduciary purchasing securities for a single trust estate or single fiduciary
account.
Valuation of Securities by the Trustee is made as of the close of business
on the New York Stock Exchange on each business day. Securities quoted on a
foreign securities exchange (based on the U.S. dollar equivalent), national
stock exchange or Nasdaq National Market are valued at the last reported
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.
The holders of units of any affiliated unit investment trust with an initial
sales charge of 1.00% and a one or two year life (the "Exchangeable Series")
may exchange units of the Exchangeable Series for units of the Trust at their
relative net asset values, subject only to the applicable deferred sales
charge. An exchange of Exchangeable Series for Units of the Trust will
generally be a taxable event.
- ------------
* The breakpoint sales charges are also applied on a dollar basis utilizing a
breakpoint equivalent in the above table of $1.00 per Unit and will be applied
on whichever basis is more favorable to the investor.
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<PAGE>
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 the Trust for sale in all states of
the United States where qualification is deemed necessary through the Sponsor
and dealers who are members of the National Association of Securities Dealers,
Inc. Sales to dealers, if any, will initially be made at prices which
represent a concession from the Public Offering Price per Unit to be
established at the time of sale by the Sponsor.
UNDERWRITER'S AND SPONSOR'S PROFITS
The Sponsor, as sole underwriter, receives a gross underwriting commission
equal to the sales charge of 4.50% of the Public Offering Price (4.712% of the
Public Offering Price) subject to reduction on a graduated scale basis in the
case of volume purchases, and subject to reduction for purchasers as described
under Public Offering Price above.
On the Initial Date of Deposit, the Sponsor also realized a profit or loss
on deposit of the Securities into the Trust in the amount set forth under
Investment Summary, which equals the difference between the cost of the
Securities to the Trust (which is based on the aggregate value of the
Securities on the Date of Deposit) and the purchase price of such Securities
to the Sponsor. In the event that subsequent deposits are effected by the
Sponsor with the deposit of Securities (as opposed to cash or a letter of
credit) with respect to the sale of additional Units to the public, the
Sponsor similarly may realize a profit or loss. The Sponsor also may realize
profits or sustain losses as a result of fluctuations after the Initial Date
of Deposit in the aggregate value of the Securities and hence of the Public
Offering Price received by the Sponsor for Units. Cash, if any, made available
by buyers of Units to the Sponsor prior to the settlement dates for purchase
of Units may be used in the Sponsor's business and may be of benefit to the
Sponsor.
The Sponsor also receives an annual fee at the maximum rate of $.25 per
1,000 Units for the administrative and other services which it provides during
the life of the Trust (see Expenses and Charges -- Fees). The Sponsor has not
participated as sole underwriter or manager or member of any underwriting
syndicate from which any of the Securities in the Portfolios on the Initial
Date of Deposit were acquired, except as indicated under Portfolio.
In maintaining a market for the Units (see Market for Units), the Sponsor
will also realize profits or sustain losses in the amount of any difference
between the prices at which it buys Units (based on the aggregate value of the
Securities) and the prices at which it resells such Units (which include the
sales charge) or the prices at which the Securities are sold after it redeems
such Units, as the case may be.
MARKET FOR UNITS
While the Sponsor is not obligated to do so, its intention is to maintain a
market for Units and offer continuously to purchase Units from the Initial
Date of Deposit at prices, subject to change at any time, which will be
computed by adding (1) the aggregate value of Securities in the Trust, (2)
amounts in the Trust including
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<PAGE>
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 the Trust not previously deducted, (b) accrued fees and
expenses of the Trustee (including legal and auditing expenses), the Sponsor
and counsel to the Trust and certain other expenses and (c) amounts for
distribution to Holders of record as of a date prior to the evaluation; and
dividing the result of such computation by the number of Units outstanding as
of 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 the
Trust on the date on which the Units of the Trust are tendered for redemption
(see Redemption).
The Sponsor may, of course, redeem any Units it has purchased in the
secondary market to the extent that it determines that it is undesirable to
continue to hold such Units in its inventory. Factors which the Sponsor will
consider in making such a determination will include the number of units of
all series of unit trusts which it has in its inventory, the saleability of
such units and its estimate of the time required to sell such units and
general market conditions. For a description of certain consequences of such
redemption for the remaining Holders, see Redemption.
REDEMPTION
Units may be redeemed by the Trustee at its corporate trust office upon
payment of any relevant tax without any other fee, accompanied by a written
instrument or instruments of transfer with the signature guaranteed by a
national bank or trust company, a member firm of any of the New York, Midwest
or Pacific Stock Exchanges, or in such other manner as may be acceptable to
the Trustee. In certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions (see Administration of the Trust--Accounts and
Distribution). The Securities to be sold will be selected by the Trustee from
those designated on the current list provided by the Sponsor for this purpose.
Provision is made in the Indenture under which the Sponsor may, but need not,
specify minimum amounts in which blocks of Securities are to be sold in order
to obtain the best price for the Trust. While these minimum amounts may vary
from time to time in accordance with market conditions, the Sponsor believes
that the minimum amounts which would be specified would be a sufficient number
of shares to obtain institutional rates of brokerage commissions (generally
between 1,000 and 5,000 shares).
The Trustee will redeem Units "in kind" upon request of a redeeming Holder
if the Holder tenders at least 250,000 Units. Thus, a Holder tendering at
least 250,000 Units 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
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<PAGE>
each of the Securities in the amounts and the appropriate proportions
represented by the fractional undivided interest in the Trust of the Units
tendered for redemption (based upon the Redemption Price per Unit), except
that with respect to any foreign Security not held in ADR form, the value of
that Security will be distributed in cash.
In Kind Distributions on redemption of a minimum of 250,000 Units will be
held by the Chase Manhattan Bank, as Distribution Agent, for the account, and
for disposition in accordance with the instructions of, the tendering Holder
as follows:
(a) If the tendering Holder requests cash payment, the Distribution Agent
shall sell the In Kind Distribution as of the close of business on the date
of tender and remit to the Holder not later than seven calendar days
thereafter the net proceeds of sale, after deducting brokerage commissions
and transfer taxes, if any, on the sale. The Distribution Agent may sell
the Securities through the Sponsor, and the Sponsor may charge brokerage
commissions on those sales. Since these proceeds will be net of brokerage
commissions, Holders who wish to receive cash for their Units should always
offer them for sale to the Sponsor in the secondary market before seeking
redemption by the Trustee. The Trustee may offer Units tendered for
redemption and cash liquidation to it to the Sponsor on behalf of any
Holder to obtain this more favorable price for the Holder.
(b) If the tendering Holder requests distribution in kind, the
Distribution Agent (or the Sponsor acting on behalf of the Distribution
Agent) shall sell any portion of the In Kind Distribution represented by
fractional interests in accordance with the foregoing and distribute net
cash proceeds to the tendering Holder together with certificates
representing whole shares of each of the Securities that comprise the In
Kind Distribution. (The Trustee may, however, offer the Sponsor the
opportunity to purchase the tendered Units in exchange for the numbers of
shares of each Security and cash, if any, which the Holder is entitled to
receive. The tax consequences to the Holder would be identical in either
case.)
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available (an
explanation of such Account is set forth under Administration of the Trust--
Accounts and Distributions). In addition, in implementing the redemption
procedures described above, the Trustee and the Distribution Agent shall make
any adjustments necessary to reflect differences between the Redemption Price
of the Units and the value of the In Kind Distribution as of the date of
tender. To the extent that Securities are distributed in kind, the size of the
Trust will be reduced.
A Holder may tender Units for redemption on any weekday (a "Tender Day")
which is not one of the following: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving or Christmas. The right of redemption may be 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
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<PAGE>
Unit for redemption on any Tender Day, and on any other business day desired
by the Trustee or the Sponsor, by adding (1) the aggregate value of the
Securities determined by the Trustee, (2) amounts in the Trust including
dividends receivable on stocks trading ex-dividend (with appropriate
adjustments to reflect monthly distributions made to Holders) and (3) all
other assets in the Trust; deducting therefrom the sum of (a) taxes or other
governmental charges against the Trust not previously deducted, (b) accrued
fees and expenses of the Trustee (including legal and auditing expenses), the
Sponsor and counsel to the Trust and certain other expenses and (c) amounts
for distribution to Holders of record as of a date prior to the evaluation;
and dividing the result of such computation by the number of Units outstanding
as of the date thereof. As of the close of the initial public offering period
the Redemption Price per 1,000 Units will be reduced to reflect the payment of
the per 1,000 Unit organization costs to the Sponsor.
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 foreign
securities exchange, or a national securities exchange or NASDAQ National
Market System, such evaluation shall generally be based on the closing sale
price on such exchange (unless the Trustee deems such price inappropriate as a
basis for evaluation) or, if there is no closing sale price on such exchange,
at the mean between the closing offering and bid side evaluation. If the
Securities are not so listed or, if so listed and the principal market
therefor is other than on such exchange, such evaluation shall generally be
made by the Trustee in good faith based at the mean between current bid and
offer prices on the over-the-counter market (unless the Trustee deems such
mean inappropriate as a basis for evaluation) or, if bid and offer prices are
not available, (1) on the basis of the mean between current bid and offer
prices for comparable securities, (2) by the Trustee's appraising the value of
the Securities in good faith at the mean between the bid side and the offer
side of the market or (3) by any combination thereof.
EXPENSES AND CHARGES
Initial Expenses -- Investors will reimburse the Sponsor on a per 1,000
Units basis, for all or a portion of the estimated costs incurred in
organizing the Trust--including the cost of the initial preparation, printing
and execution of the registration statement and the indenture, Federal and
State registration fees, the initial fees and expenses of the Trustee, legal
expenses and any other out-of-pocket costs. The estimated organization costs
will be paid from the assets of the Trust as of the close of the initial
public offering period. To the extent that actual organization costs are less
than the estimated amount, only the actual organization costs will be deducted
from the assets of the Trust. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
included in the Public Offering Price will be reimbursed to the Sponsor. Any
balance of the expenses incurred in establishing the Trust, as well as
advertising and selling expenses, will be paid by the Underwriters at no cost
to the Trust.
Fees -- The Trustee's and Sponsor's fees are set forth under Investment
Summary. The Trustee receives for its services as Trustee and Distribution
Agent payable in monthly installments, the amount set forth under Investment
Summary. The Trustee's fee (in respect of services as Trustee), payable
monthly, is based on the largest number of Units outstanding during the
preceding month. Certain regular and recurring expenses of the Trust,
including certain mailing and printing expenses and the costs of foreign
custody of Securities, are borne by the Trust. The Trustee receives benefits
to the extent that it holds funds on deposit in the various non-interest
bearing accounts created under the Indenture. The Sponsor's fee, which is
earned for trust supervisory services, is based on the largest number of Units
outstanding during the year. The Sponsor's fee, which is not to exceed the
maximum amount set forth under Investment Summary, may exceed the actual costs
of providing supervisory services for the Trust, but at no time will the total
amount the Sponsor receives for trust supervisory services
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<PAGE>
rendered to all series of Salomon Smith Barney Unit Trusts in any calendar
year exceed the aggregate cost to it of supplying these services in that year.
In addition, the Sponsor may also be reimbursed for bookkeeping or other
administrative services provided to the Trust in amounts not exceeding its
cost of providing those services. The fees of the Trustee and Sponsor may be
increased without approval of Holders in proportion to increases under the
classification "All Services Less Rent" in the Consumer Price Index published
by the United States Department of Labor.
Other Charges -- These include: (1) fees of the Trustee for extraordinary
services (for example, making distributions due to failure of contracts for
Securities), (2) expenses of the Trustee incurred for the benefit of the Trust
(including legal and auditing expenses) and expenses of counsel designated by
the Sponsor, (3) various governmental charges and fees and expenses for
maintaining the Trust's registration statement current with Federal and State
authorities, (4) expenses and costs of action taken by the Sponsor, in its
discretion, or the Trustee, in its discretion, to protect the Trust and the
rights and interests of Holders (for example, expenses in exercising the
Trust's rights under the underlying Securities), (5) indemnification of the
Trustee for any losses, liabilities and expenses incurred without gross
negligence, bad faith or 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
the Trust. The amounts of these charges and fees are secured by a lien on the
Trust.
Payment of Expenses -- Funds necessary for the payment of the above fees
will be obtained in the following manner: (1) first, by deductions from the
Capital Accounts (see below); (2) to the extent the Capital Account funds are
insufficient, by distribution from the Income Accounts (see below) (which will
reduce income distributions from the Accounts); (3) to the extent the Income
and Capital Accounts are insufficient, by selling Securities from the
Portfolios and using the proceeds to pay the expenses (thereby reducing the
net asset value of the Units).
Since the Securities are all common stocks, and the income stream produced
by dividend payments thereon is unpredictable (see Description of the Trust--
Risk Factors), the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of the Trust. If dividends are
insufficient to cover expenses, it is likely that Securities will have to be
sold to meet Trust expenses. Any such sales may result in capital gains or
losses to Holders. See Description of the Trust--Taxes.
ADMINISTRATION OF THE TRUST
RECORDS
The Trustee keeps records of the transactions of the Trust at its corporate
trust office including names, addresses and holdings of all Holders of record,
a current list of the Securities and a copy of the Indenture. Such records are
available to Holders for inspection at reasonable times during business hours.
ACCOUNTS AND DISTRIBUTIONS
Dividends payable to the Trust are credited by the Trustee to an Income
Account, as of the date on which the Trust is entitled to receive such
dividends as a holder of record of the Securities. All other receipts (i.e.,
return of capital, stock dividends, if any, and gains) will be credited by the
Trustee to a Capital Account. If a Holder elects to receive 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
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<PAGE>
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 Trust. Funds held by the
Trustee in the various accounts created under the Indenture do not bear
interest. Distributions of amounts necessary to pay the Deferred Sales Charge
will be made from the Capital Account to an account maintained by the Trustee
for purposes of satisfying investors' sales charge obligations. Although the
Sponsor may collect the Deferred Sales Charge monthly, to keep Units more
fully invested the Sponsor currently does not anticipate Sales of Securities
to pay the Deferred Sales Charge until after the last Deferred Sales Charge
Payment Date. Proceeds of the disposition of any Securities not used to pay
the Deferred Sales Charge or to redeem Units will be held in the Capital
Account and distributed on the Final Distribution upon termination of the
Trust.
Purchases at Market Discount -- Certain of the shareholder dividend
reinvestment, stock purchase or similar plans maintained by issuers of the
Securities offer shares pursuant to such plans at a discount from market
value. Subject to any applicable regulations and plan restrictions, the
Sponsor intends to direct the Trustee to participate in any such plans to the
greatest extent possible taking into account the Securities held by the Trust
in the issuers offering such plans. In such event, the Indenture requires that
the Trustee forthwith distribute in kind to the Distribution Agent the
Securities received upon any such reinvestment to be held for the accounts of
the Holders in proportion to their respective interests in the Trust. It is
anticipated that Securities so distributed shall immediately be sold.
Therefore, the cash received upon such sale, after deducting sales commissions
and transfer taxes, if any, will be used for cash distributions to Holders.
The Trustee will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in securities held in the Trust are
generally made in brokerage transactions (as distinguished from principal
transactions) and the Sponsor or any of its affiliates may act as brokers
therein if the Trustee expects thereby to obtain the most favorable prices and
execution. The furnishing of statistical and research information to the
Trustee by any of the securities dealers through which transactions are
executed will not be considered in placing securities transactions.
TRUST SUPERVISION
The Trust is a unit investment trust which normally follows a buy and hold
investment strategy and is not actively managed. However, the Portfolio is
regularly reviewed. Traditional methods of investment management for a managed
fund (such as a mutual fund) typically involve frequent changes in a portfolio
of securities on the basis of economic, financial and market analysis. The
Portfolio of the Trust, however, will not be actively managed and therefore
the adverse financial condition of an issuer will not necessarily require the
sale of its Securities from the Portfolio. However, while it is the intention
of the Sponsor to continue the Trust's investment in the Securities in the
original proportions, it has the power but not the obligation to direct the
disposition of the Securities upon institution of certain legal proceedings,
default under certain documents adversely affecting future declaration or
payment of anticipated dividends, or a substantial decline in price or the
occurrence of materially adverse credit factors that, in the opinion of the
Sponsor, would make the retention of the Securities detrimental to the
interests of the Holders. The Sponsor intends to review the desirability of
retaining in the Portfolio any Security if its Investment Rating is reduced
below 3 by the Sponsor's Research Department. The
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<PAGE>
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 the Trust's aggregate holding of certificates of
deposit or time deposits issued by the Trustee may not exceed the insurance
coverage of such obligations and (ii) U.S. treasury notes or bills.
In the event a public tender offer is made for a Security or a merger or
acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when in its opinion
it is in the best interest of the Holders of the Units to do so. In addition,
the Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new Securities in exchange or
substitution for any Securities except that the Sponsor may instruct the
Trustee to accept or reject such an offer to take any other action with
respect thereto as the Sponsor may deem proper if (1) the issuer failed to
declare or pay anticipated dividends with respect to such Securities or (2) in
the written opinion of the Sponsor the issuer will probably fail to declare or
pay anticipated dividends with respect to such Securities in the reasonably
foreseeable future. Any Securities so received in exchange or substitution
shall be sold unless the Sponsor directs that they be held by the Trustee
subject to the terms and conditions of the Indenture to the same extent as
Securities originally deposited thereunder. If a Security is eliminated from a
Portfolio and no replacement security is acquired, the Trustee shall within a
reasonable period of time thereafter notify Holders of the Trust of the sale
of the Security. Except as stated in this and the following paragraphs, the
Trust may not acquire any securities other than (1) the Securities and (2)
securities resulting from stock dividends, stock splits and other capital
changes of the issuers of the Securities.
The Sponsor is authorized to direct the Trustee to acquire replacement
Securities ("Replacement Securities") to replace any Securities, for which
purchase contracts have failed ("Failed Securities"), or, in connection with
the deposit of Additional Securities, when Securities of an issue originally
deposited are unavailable at the time of subsequent deposit, as described more
fully below. Replacement Securities that are replacing Failed Securities will
be deposited into the Trust within 110 days of the date of deposit of the
contracts that have failed at a purchase price that does not exceed the amount
of funds reserved for the purchase of Failed Securities. The Replacement
Securities shall satisfy certain conditions specified in the Indenture
including, among other conditions, requirements that the Replacement
Securities shall be publicly-traded common stocks; shall be issued by an
issuer subject to or exempt from the reporting requirements under Section 13
or 15(d) of the Securities Exchange Act of 1934 (or similar provisions of
law); shall not result in more than 10% of the Trust consisting of securities
of a single issuer (or of two or more issuers which are Affiliated Persons as
this term is defined in the Investment Company Act of 1940) which are not
registered and are not being registered under the Securities Act of 1933 or
result in the Trust owning more than 50% of any single issue which has been
registered under the Securities Act of 1933; and shall have, in the opinion of
the Sponsor, characteristics sufficiently similar to the characteristics of
the other Securities in the Trust as to be acceptable for acquisition by the
Trust. Whenever a Replacement Security has been acquired for the Trust, the
Trustee shall, on the next Distribution Day that is more than 30 days
thereafter, make a pro rata distribution of the amount, if any, by
34
<PAGE>
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 the Trust.
The Indenture also authorized the Sponsor to increase the size and number of
Units of the Trust by the deposit of cash (or a letter of credit) with
instructions to purchase Additional Securities, contracts to purchase
Additional Securities, or Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent
to the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising the Portfolio at the end of the initial 90-
day period.
With respect to deposits of cash (or a letter of credit) with instructions
to purchase Additional Securities, Additional Securities or contracts to
purchase Additional Securities, in connection with creating additional Units
of the Trust during the 90-day period following the Initial Date of Deposit,
the Sponsor may specify minimum amounts of additional Securities to be
deposited or purchased. If a deposit is not sufficient to acquire minimum
amounts of each Security, Additional Securities may be acquired in the order
of the Security most under-represented immediately before the deposit when
compared to the Original Proportionate Relationship. If Securities of an issue
originally deposited are unavailable at the time of subsequent deposit or
cannot be purchased at reasonable prices or their purchase is prohibited or
restricted by law, regulation or policies applicable to the Trust or the
Sponsor, the Sponsor may (1) deposit cash or a letter of credit with
instructions to purchase the Security when practicable (provided that it
becomes available within 110 days after the Initial Date of Deposit) or (2)
deposit (or instruct the Trustee to purchase) Securities of one or more other
issues originally deposited or (3) deposit or instruct the Trustee to
purchase) a Replacement Security that will meet the conditions described
above. Any funds held to acquire Additional or Replacement Securities which
have not been used to purchase Securities at the end of the 90-day period
beginning with the Initial Date of Deposit, shall be used to purchase
Securities as described above or shall be distributed to Holders together with
the attributable sales charge.
REPORTS TO HOLDERS
The Trustee will furnish Holders with each distribution a statement of the
amount of income and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Within a
reasonable period of time after the end of 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
35
<PAGE>
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 the Trust will not be evidenced by certificates. All
evidence of ownership of the Units will be recorded in book-entry form either
at Depository Trust Company ("DTC") through an investor's broker's account or
through registration of the Units on the books of the Trustee. Units held
through DTC will be deposited by the Sponsor with DTC in the Sponsor's DTC
account and registered in the nominee name CEDE & CO. Individual purchases of
beneficial ownership interest in the Trust will be made in book-entry form
through DTC or the Trustee. Ownership and transfer of Units will be evidenced
and accomplished 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 purchase 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 Trust.
Such signatures must be guaranteed by a commercial bank or trust company,
savings and loan association or by a member firm of a national securities
exchange.
AMENDMENT AND TERMINATION
The Sponsor may amend the Indenture, with the consent of the Trustee but
without the consent of any of the Holders, (1) to cure any ambiguity or to
correct or supplement any provision thereof which may be defective or
inconsistent, (2) to change any provision thereof as may be required by the
SEC or any successor governmental agency and (3) to make such other provisions
as shall not materially adversely affect the interest of the Holders (as
determined in good faith by the Sponsor). The Indenture may also be amended in
any respect by the Sponsor and the Trustee, or any of the provisions thereof
may be waived, with the consent of the Holders of 51% of the Units, provided
that no such amendment or waiver will reduce the interest in the Trust of any
Holder without the consent of such Holder or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of all
Holders. The Indenture will terminate upon the earlier of the disposition of
the last Security held thereunder or the Mandatory Termination Date specified
under Investment Summary. The Indenture may also be terminated by the Sponsor
if the value of the Trust is less than the minimum value set forth under
Investment Summary (as described under Description of the Trust--Risk Factors)
and may be terminated at any time by written instrument executed by the
Sponsor and consented to by Holders of 51% of the Units. The Trustee shall
deliver written notice of any termination to each Holder 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.
36
<PAGE>
An investment in Units of the Trust will terminate on or before the
(approximately two years from the Initial Date of Deposit). At the termination
of the Trust, Holders will be given three options in receiving their
terminating distributions: (1) to receive their pro rata share of the
underlying Securities in-kind, if they own at least 250,000 Units; (2) to
receive cash upon the liquidation of their pro rata share of the underlying
Securities; or (3) to invest the amount of cash they would have received upon
the liquidation of their pro rata share of the underlying Securities in units
of a future series of the Equity Focus Trust, European Monetary Union
Portfolio (if one is offered) at a reduced sales charge (see Exchange and
Rollover Privileges).
EXCHANGE AND ROLLOVER PRIVILEGES
Holders may exchange their Units of the Trust into units of any then
outstanding series of Equity Focus Trusts--European Monetary Union Portfolio
(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 Trust who elect to purchase units of an Exchange Series
within 60 days of their liquidation of Units in the Trust.
Holders who retain their Units until the termination of the Trust may
reinvest their terminating distributions into units of a subsequent series of
Equity Focus Trusts--European Monetary Union Portfolio (the "New Series"),
provided one is offered. Such purchaser may be entitled to a reduced sales
load (as disclosed in the prospectus for the New Series) upon the purchase of
units of the New Series.
Under the exchange and rollover privilege, the Sponsor's repurchase price
would be based upon the market value of the Securities in the Trust portfolio
and units in the Exchange Series or New Series will be sold to the Holder at a
price based on the aggregate market price of the securities in the portfolio
of the Exchange Series or New Series. Exercise of the exchange or rollover
privilege by Holders is subject to the following conditions: (i) the Sponsor
must have units available of an Exchange Series or New Series during initial
public offering or, if such period is completed, must be maintaining a
secondary market in the units of the available Exchange Series or New Series
and such units must be available in the Sponsor's secondary market account at
the time of the Holder's elections; and (ii) exchange will be effected only in
whole units. Holders will not be permitted to advance any funds in excess of
their redemption in order to complete the exchange. Any excess proceeds
received from the Holder for exchange will be remitted to such holder.
It is expected that the terms of the Exchange Series or New Series will be
substantially the same as the terms of the Trust described in this Prospectus,
and that similar reinvestment programs will be offered with respect to all
subsequent series of the Trust. The availability of these options does 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 the Trust) as a result of the liquidation, even
though no cash will be distributed to pay any taxes. Holders should consult
their own tax advisers in this regard. The Sponsor reserves the right to
modify, suspend or terminate either or both of these reinvestment privileges
at any time.
37
<PAGE>
REINVESTMENT PLAN
Distributions of income and/or principal, if any, on Units held in street
name through Salomon Smith Barney Inc. or directly in the name of the Holder,
unless the Holder notifies its financial consultant at Salomon 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 Salomon 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 the Trust at the Sponsor's Repurchase Price (the
net asset value per Unit without any sales charge) in effect at the close of
business on the Distribution Day. These may be either previously issued Units
repurchased by the Sponsor or newly issued Units created upon the deposit of
additional Securities in the Trust (see Description of the Trust--Structure
and Offering). Each participant will receive an account statement reflecting
any purchase or sale of Units under the Reinvestment Plan.
The costs of the Reinvestment Plan will be borne by the Sponsor, at no cost
to the Trust. The Sponsor reserves the right to amend, modify or terminate the
Reinvestment Plan at any time without prior notice.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units
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 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.
38
<PAGE>
The Sponsor shall be under no liability to the Trust or to the Holders for
taking any action or for refraining from taking any action in good faith or
for errors in judgment and shall not be liable or responsible in any way for
depreciation of any Security or Units or loss incurred in the sale of any
Security or Units. This provision, however, shall not protect the Sponsor in
cases of wilful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties. The Sponsor may transfer all or substantially
all of its assets to a corporation or partnership which carries on its
business and duly assumes all of its obligations under the Indenture and in
such event it shall be relieved of all further liability under the Indenture.
MISCELLANEOUS
TRUSTEE
The name and address of the Trustee are shown on the back cover of this
prospectus. The Trustee is subject to supervision and examination by the
Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System. In connection with the storage and handling of certain Stocks
deposited in the Trust, the Trustee may use the services of The Depository
Trust Company. These services may include safekeeping of the Stocks, computer
book-entry transfer and institutional delivery services. The Depository Trust
Company is a limited purpose trust company organized under the Banking Law of
the State of New York, a member of the Federal Reserve System and a clearing
agency registered under the Securities Exchange Act of 1934. Also, in
connection with the storage and handling of certain foreign Securities
deposited in the Trust, the Trustee may use the services of Cedel Bank S.A.
("Cedel"). Cedel currently offers clearing and settlement, custody, cash
management and financing collateral management and communications services for
international securities. Cedel provides these custody services through a
network of local financial institutions. Cedel is a fully licensed Luxembourg
bank and is headquartered in Luxembourg.
LEGAL OPINION
The legality of the Units has been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, as special counsel for the Sponsor.
AUDITORS
The Statement of Financial Condition and the Portfolio included in this
Prospectus have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their report with respect thereto, and is so included herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
SPONSOR
Salomon Smith Barney Inc. ("Salomon Smith Barney"), was incorporated in
Delaware in 1960 and traces its history through predecessor partnerships to
1873. On September 1, 1998, Salomon Brothers Inc. merged with and into Smith
Barney Inc. ("Smith Barney") with Smith Barney surviving the merger and
changing its name to Salomon Smith Barney Inc. The merger of Salomon Brothers
Inc. and Smith Barney followed the merger of their parent companies in
November 1997. Salomon 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. Salomon
Smith Barney is an indirect wholly-owned subsidiary of The Travelers Inc. The
Sponsor or an affiliate is investment adviser, principal underwriter or
distributor of more than 60 open-end investment companies and investment
manager of 12 closed-end investment companies. Salomon 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.
39
<PAGE>
EQUITY FOCUS TRUSTS
EUROPEAN MONETARY UNION PORTFOLIO
A UNIT INVESTMENT TRUST
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 10
Statement of Financial Condition 11
Portfolio 12
Description of the Trust 14
Risk Factors 17
Taxes 24
Public Sale of Units 26
Market for Units 28
Redemption 29
Expenses and Charges 31
Administration of the Trust 32
Exchange and Rollover Privileges 37
Reinvestment Plan 38
Resignation, Removal and Limitations on Liability 38
Miscellaneous 39
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPONSOR: TRUSTEE: INDEPENDENT ACCOUNTANTS:
<S> <C> <C>
Salomon 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>
- --------------------------------------------------------------------------------
SalomonSmithBarney
------------------
A Member of TravelersGroup[LOGO]
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
WITH RESPECT TO THE TRUST, 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.
- --------------------------------------------------------------------------------
SALOMON SMITH BARNEY IS THE SERVICE MARK USED BY SALOMON SMITH BARNEY INC.
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A. The following information relating to the Depositor is incorporated by
reference to the SEC filings indicated and made a part of this Registration
Statement.
<TABLE>
<CAPTION>
SEC FILE OR
IDENTIFICATION NUMBER
---------------------
<C> <S> <C>
I. Bonding Arrangements and Date of Organization of
the Depositor filed pursuant to Items A and B of
Part II of the Registration Statement on Form S-6
under the Securities Act of 1933: 2-67446
II. Information as to Officers and Directors of the
Depositor filed pursuant to Schedules A and D of
Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934: 8-12324
III. Charter documents of the Depositor filed as
Exhibits to the Registration Statement on Form S-
6 under the Securities Act of 1933 (Charter, By-
Laws): 2-52898
B. The Internal Revenue Service Employer Identification Numbers of the
Sponsor and Trustee are as follows:
Smith Barney Inc. 13-1912900
The Chase Manhattan Bank, Trustee 13-4994650
</TABLE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
THE REGISTRATION STATEMENT ON FORM S-6 IS COMPRISED OF THE FOLLOWING PAPERS
AND DOCUMENTS:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-
Reference Sheet to the Registration Statement of The Uncommon Values
Unit Trust, 1985 Series, 1933 Act File No. 2-97046).
The Prospectus.
Additional Information not included in the Prospectus (Part II).
The undertaking to file reports.
The signatures.
Written Consents of the following persons:
KPMG Peat Marwick LLP (included in Exhibit 5.1)
Battle Fowler LLP (included in Exhibit 3.1)
The following exhibits:
<TABLE>
<C> <S>
*1.1 -- Form of Reference Trust Indenture.
2.1 -- Form of Standard Terms and Conditions of Trust (incorporated by
reference to Exhibit 2.1 to the Registration Statement of The
Uncommon Values Unit Trust, 1985 Series, 1933 Act File No. 2-97046).
*3.1 -- Opinion of counsel as to the legality of securities being issued
including their consent to the use of their name under the headings
"Taxes" and "Miscellaneous --Legal Opinion" in the Prospectus.
*5.1 -- Consent of KPMG Peat Marwick LLP to the use of their name under the
heading "Miscellaneous --Auditors" in the Prospectus.
</TABLE>
- ------------
* Filed herewith.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or Amendment thereto to be signed
on its behalf by the undersigned thereunto duly authorized in the City of New
York and State of New York on the 16th day of September 1998.
SIGNATURES APPEAR ON PAGE II-4
A majority of the members of the Board of Directors of Salomon Smith Barney
Inc. has signed this Registration Statement or Amendment thereto pursuant to
Powers of Attorney authorizing the person signing this Registration Statement
or Amendment to the Registration Statement to do so on behalf of such members.
II-3
<PAGE>
SALOMON SMITH BARNEY UNIT TRUSTS
(REGISTRANT)
SALOMON SMITH BARNEY INC.
(DEPOSITOR)
By the following persons* who constitute a majority of the Board of Directors
of Smith Barney Inc.:
James Dimon
Deryck C. Maughan
/s/ Kevin Kopczynski
By___________________________________
Kevin Kopczynski
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-fact for the
persons listed above)
- ------------
* Pursuant to Powers of Attorney filed under the 1933 Act file Numbers 33-
56722, 33-51999 and 333-41765.
II-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Statements of Financial Conditions and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0001066625
<NAME> EMU PORTFOLIO
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-15-1998
<PERIOD-END> SEP-15-1998
<INVESTMENTS-AT-COST> 1,982,118
<INVESTMENTS-AT-VALUE> 1,982,118
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,982,118
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,480
<TOTAL-LIABILITIES> 39,480
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,942,638
<SHARES-COMMON-STOCK> 2,000,000
<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> 1,942,638
<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> 2,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,942,638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 1.1
EQUITY FOCUS TRUSTS
EUROPEAN MONETARY UNION PORTFOLIO
REFERENCE TRUST INDENTURE
Dated as of September 15, 1998
This Trust Indenture between Salomon 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 "Salomon Smith Barney
Inc." and all references to Boston Safe Deposit and Trust Company or United
States Trust Company of New York shall be deleted and replaced by The Chase
Manhattan Bank; and further, that The Chase Manhattan Bank shall, by executing
this Trust Indenture, be deemed to be the Trustee and a party to said Standard
Terms and Conditions of Trust for all purposes of this Trust.
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Securities (including Contract Securities) listed in the Prospectus
relating to the European Monetary Union Portfolio shall be shares of common
stock, which securities have been deposited with (or assigned to) the Trustee
under this Indenture.
(b) In all places in the Standard Terms and Conditions of Trust where the
words "Monthly Income Distribution" appear, these words shall be deleted and
replaced by "Income Distribution".
(c) The definition of "Distribution Agency Agreement" and all references
thereto shall be deleted.
(d) The definition of "Distribution Day" shall be deleted and replaced by
the following:
"The day designated as such in the Prospectus under the heading
'Investment Summary'."
(e) In the definition of Evaluation Time, the words "Part II of the
Reference Trust Indenture" shall be changed to read: "the Prospectus."
(f) Section 2.02 is hereby amended by adding the following sentence as the
second sentence of Section 2.02: "Effective as of the Evaluation Time on
September 16, 1998 in the event that the aggregate value of Securities in the
Trust has increased since the evaluation on September 15, 1998, the Trustee
shall issue such number of additional Units to the Holder of outstanding Units
as of the close of business on September 15, 1998, that the price per Unit
computed as of the Evaluation Time on September 16, 1998, plus the maximum
applicable sales charge shall equal $1 per Unit (based on the number of Units
outstanding as of said Evaluation Time, including the additional Units issued
pursuant to this sentence); in the event that the aggregate value of Securities
in the Trust Fund has decreased since the evaluation on September 15, 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 September 16, 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)."
<PAGE>
(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 second preceding sentence, or
otherwise hereunder, from funds subsequently received by the Trust Fund as
income on any of the Securities. The Trustee shall be deemed to be the
beneficial owner of the income of the Trust Fund to the extent such income
is required to reimburse the Trustee for amounts advanced by it pursuant to
this Section and to such extent shall have a lien on the assets of the
Trust Fund prior to the interest of the Holders.
"Subject to the provisions of the succeeding two paragraphs,
distributions shall be made as follows: on or shortly after each
Distribution Day the Trustee shall distribute by check mailed to each
Holder of record at the close of business on the preceding Record Day, at
the post office address of the Holder appearing on the record books of the
Trustee or by any other means mutually agreed upon by the Holder and the
Trustee, an amount substantially equal to the Income Distribution in
respect of such Distribution Day, plus the Holder's pro rata share of the
cash balance of the Capital Account (but not including cash required to
purchase Contract Securities or held for reinvestment in Substitute
Securities pursuant to Section 3.11) computed as of the
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<PAGE>
close of business on the preceding Record Day; provided, however, that the
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Trustee in its discretion may on any Distribution Day determine that the
amount of the Income Distribution per Unit should be adjusted because of
any unusual or extraordinary increase or decrease in the expenses incurred
or expected to be incurred by the Trust Fund. In making the computation of
such Holder's interest in the balance of the Income Capital Accounts,
fractions of less than one cent per unit may be omitted.
"In the event that the Sponsor adopts a Reinvestment Plan the cash
distributions to Holders shall be automatically reinvested by the Sponsor
in additional Units of the Trust. Units of the Trust purchased under the
Reinvestment Plan shall be purchased at the Sponsor's Repurchase Price (the
net asset value per Unit without a sales charge) in effect at the close of
business on the Distribution Day. The Units purchased may be either
previously issued Units repurchased by the Sponsor or newly created Units
created upon the deposit of additional Securities in the Trust. The cost
of the Reinvestment Plan will be borne by the Sponsor, at no additional
cost to the Trust or individual Holders. Holders will receive an account
statement reflecting any purchase of Units under the Reinvestment Plan.
The Sponsor reserves the right to amend, modify or terminate the
Reinvestment Plan at any time without prior notice.
"A Holder may elect not to participate in the Reinvestment Plan by
notifying his financial consultant at Smith Barney Inc. or by notifying the
Trustee in writing by ten days prior to the Distribution Day, which
election may be modified or terminated by similar notice. The Sponsor
shall promptly inform the Trustee of any election or modification or
termination thereof received by it from a Holder and the Trustee shall be
authorized conclusively to rely on any notice so received from the Sponsor.
In the event the Holder elects not to participate in the Reinvestment Plan,
or in the event that the Sponsor does not adopt or terminates a
Reinvestment Plan, the Trustee shall distribute the amount described above
by check mailed to each Holder of record at the close of business on the
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:
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<PAGE>
(1) Prior to the Evaluation Time on the Trade Date, the Sponsor shall
provide notice (the "Subscription Notice") to the Trustee, by telecopy
or by written communication, of the Sponsor's intention to subscribe
for Additional Units. The Subscription Notice shall identify the
additional Securities to be acquired ("Additional Securities") (unless
such Additional Securities are a precise replication of the then
existing portfolio) and shall either (i) specify the quantity of
Additional Securities to be deposited by the Sponsor on the settlement
date for such subscription or (ii) instruct the Trustee to purchase
Additional Securities with an aggregate value as specified in the
Subscription Notice.
(2) Promptly following the Evaluation Time on such Business Day, the
Sponsor shall verify with the Trustee, by telecopy, the number of
Additional Units to be created.
(3) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver the Additional Units
created thereby (which time shall not be later than the time by which
the Trustee is required to settle any contracts for the purchase of
Additional Securities entered into by the Trustee pursuant to the
instruction of the Sponsor referred to in subparagraphs (1) above),
the Sponsor shall deposit with the Trustee (i) any Additional
Securities specified in the Subscription Notice (or contracts to
purchase such Additional Securities together with cash or a letter of
credit in the amount necessary to settle such contracts) or (ii) cash
or a letter of credit in the amount equal to the aggregate value of
the Additional Securities specified in the Subscription Notice,
together with, in each case, cash equal to a pro rata portion of the
Trust Fund Cash Evaluation (as defined in Section 5.01(b), bearing the
same ratio to the Units created by the deposit as the Trust Fund Cash
Evaluation 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
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
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<PAGE>
deposit made after the 90 days following the deposit made pursuant to
this Section 3.06 (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 days period) shall maintain
exactly the proportionate relationship existing among the Securities
as of the expiration of such 90 day period adjusted as provided in the
preceding sentence.
(4) On the settlement date for a subscription, the Trustee shall, in
exchange for the Securities and cash 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.
(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
-6-
<PAGE>
their purchase), the Sponsor shall deposit with the Trustee
concurrently with the Subscription Notice such that, when added to 50%
of the value of the Securities then held (determined as above) the
aggregate value shall be not less than the purchase amount of the
securities to be purchased pursuant to such Subscription Notice.
"(b) If Securities of an issue of Securities originally deposited (an
'Original Issue') are unavailable or cannot be purchased at reasonable
prices or their purchase is prohibited or restricted by law, regulation or
policies applicable to the Trust Fund or the Sponsor at the time of a
subsequent deposit under Subsection 3.06(a), in lieu of the portion of the
deposit that would otherwise be represented by those Securities, the
Sponsor may (1) deposit (or instruct the Trustee to purchase) (i)
Securities of another Original Issue or (ii) 'Replacement Securities'
complying with the conditions of paragraphs (c) and (d) of this Section, or
(2) deposit cash or a letter of credit with instructions to acquire the
Securities of the Original Issue when practicable. Any cash or letter of
credit deposited under this Subsection 3.06(b) to acquire Securities of an
Original Issue or Replacement Securities which at the end of the 90 day
period following the Date of Deposit has not been used to purchase
Securities shall be used to purchase Securities in accordance with this
Subsection 3.06(b), provided that if an instruction to purchase an
Additional Security or a Replacement Security has not been given and such
cash or letter of credit remain in the Trust Fund after 110 days from the
Date of Deposit, the amount thereof shall be distributed, together with the
attributable sales charge, at the time and in the manner specified in
Section 3.11 regarding failed contracts.
"(c) Replacement Securities shall meet all the conditions applicable
to Substitute Securities in Section 3.11.
"(d) A Replacement Security must:
"(i) be publicly-traded common stock;
"(ii) be issued by an issuer subject to or exempt from the
reporting requirements under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (or similar provision of law); and
"(iii) have characteristics sufficiently similar to the
characteristics of the other Securities in the Trust Fund as to be
acceptable for acquisition by the Trust Fund.
-7-
<PAGE>
"(e) The Sponsor may, simultaneously with the Subscription Notice
provided in Section 3.06 (a), deliver to the Trustee the Additional
Securities or cash or letter of credit in the aggregate value of the
Additional Securities to be purchased pursuant to the Sponsor's
instruction, as specified in the Subscription Notice, together with cash
equal to the pro rata portion of the Trust Fund Cash Evaluation allocable
to the Additional Units to be created, all in the amounts and in the manner
provided by the preceding paragraphs of this Section, and the Trustee
shall, promptly following the Evaluation Time on such day, deliver to the
Sponsor the Additional Units created in respect of such deposit.
"(f) Execution of a Deposit Certificate shall be deemed a
certification by the Sponsor that the purchase of the Securities specified
in such Deposit Certificate complies with the conditions specified in this
section, as applicable. The Deposit Certificate shall be deemed to restate
the representations, agreements and certifications of the Sponsor made in
Sections 6-8, inclusive, of the Closing Memorandum for the Trust Fund to
which the deposit relates as though the representations, agreements and
certifications were made with respect to the Deposit Certificate and the
deposit of Securities with the Trustee. The Deposit Certificate shall also
be deemed to constitute, for value received, the sale, assignment and
transfer to the Trustee of all right, title and interest in and to the
Additional Securities identified in the Deposit Certificate and to
irrevocably constitute and appoint the Trustee the Sponsor's attorney in
all matters respecting such Securities with full power of substitution in
the premises. The Deposit Certificate shall include an acknowledgment by
the Trustee that it has delivered to the Sponsor the number of 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
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<PAGE>
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."
(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 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:
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<PAGE>
"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
effected 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 recapitalizations. 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."
(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 Currency Exchange. Unless the Sponsor shall
-------------------------
otherwise direct, whenever funds are received by the Trustee in foreign
currency, upon the receipt thereof or, if such funds are to be received in
respect of a sale of Securities, concurrently with the contract of the sale
for the Security (in the latter case the foreign exchange contract to have
a settlement date coincident with the relevant contract of sale for the
Security), the Trustee shall enter into a foreign exchange contract for the
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<PAGE>
conversion of such funds to U.S. Dollars pursuant to the instruction of the
Sponsor. The Trustee shall have no liability for any loss or depreciation
resulting from action taken pursuant to such instruction."
(o) Article THREE shall be amended to add a new Section 3.17 as follows:
"SECTION 3.17 Extraordinary Distributions. Any property received by
---------------------------
the Trustees after January 15, 1998 in a form other than cash or additional
shares of the Securities or of a Substitute Security received in a non-
taxable stock split or stock dividend, which shall be retained by the
Trust, shall be dealt with in the manner described in Section 3.09 and
shall be retained or disposed by the Trustee according to those provisions,
provided, however, that no property shall be retained which the Trustee
determines shall adversely affect its duties hereunder. The proceeds of
any disposition shall be credited to the Income or Capital Account of the
Trust, as the Sponsor may direct.
"The Trust is intended to be treated as a fixed investment (i.e.,
grantor) trust for income tax purposes, and its powers shall be limited in
accordance with the restrictions imposed on such trusts by Treas. Reg.
Section 301.7701-4."
(p) Article THREE shall be amended to add a new Section 3.18 as follows:
"SECTION 3.18. Deferred Sales Charge: The Trustee shall, on the
---------------------
dates specified in and as permitted by the prospectus, withdraw from the
Income Account, the Capital Account and/or distributions to be made
therefrom, as such accounts or distributions are designated in the
Prospectus as the source of the payments of the Deferred Sales Charge, an
amount per Unit specified in the Prospectus and credit such amount to a
special, non-Trust account maintained at the Trustee out of which the
Deferred Sales Charge will be distributed to the Sponsor. If the balances
in the Income and Capital Accounts are insufficient to make any withdrawal
designated to be made therefrom, the Trustee shall, as directed by the
Sponsor, either advance funds in an amount equal to the proposed withdrawal
and be entitled to reimbursement of such advance upon the deposit of
additional monies in the Income Account or the Capital Account, sell
Securities and credit the proceeds thereof to such special Sponsor's
account or credit Securities in kind to such special Sponsor's Account
provided, however, that the Trustee shall not be required to advance an
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aggregate amount in excess of $15,000 pursuant to this Section. Such
directions shall identify the Securities, if any, to be sold
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<PAGE>
or distributed in kind and shall contain, if the Trustee is directed by the
Sponsor to sell a Security, instructions as to execution of such sales. If
a Holder redeems Units prior to full payment of the Deferred Sales Charge,
the Trustee shall, if so provided in the Prospectus, on the Redemption
Date, withhold from the Redemption Price payment to such Holder an amount
equal to the unpaid portion of the Deferred Sales Charge and distribute
such amount to such special Sponsor's Account or, if the Sponsor shall
purchase such Unit pursuant to the terms of Section 5.02 hereof, the
Sponsor shall pay the Redemption Price for such Unit less the unpaid
portion of the Deferred Sales Charge. If the Prospectus provides for a
waiver or refund of any portion of the Deferred Sales Charge under
specified circumstances (such as, for example, in connection with a
redemption or sale of Units following the death or disability of the
Holder), the Trustee shall deduct and pay to the Sponsor the full amount of
the Deferred Sales Charge chargeable upon the redemption in the absence of
such waiver or refund and the Sponsor shall pay to the affected Holder the
amount of such waiver or refund; the Trustee shall have no responsibility
to the affected Holder with respect to the amount to be so refunded. The
Sponsor may at any time instruct the Trustee to distribute to the Sponsor
cash or Securities previously credited to the special Sponsor's Account."
(q) Section 4.01 shall be amended to read in its entirety as follows:
"Section 4.01 Evaluation of Securities. The Trustee shall determine
------------------------
separately and promptly furnish to the Sponsor upon request the value of
each issue of Securities as of the Evaluation Time on the basis set forth
in this Section on the days on which the Trust Fund Evaluation is required
by Section 5.01. If the Securities are listed on a national or foreign
securities exchange or NASDAQ National Market System, the evaluation shall
be determined on the basis of the last reported sales price on the
exchange, if any, where the Securities are principally traded (unless the
Trustee deems such price inappropriate as a basis for valuation) or, if
there is no sale price on such exchange, at the mean between the closing
bid and offering prices. If the Securities are not so listed or, if so
listed but the principal market therefor is not on any such exchange, the
evaluation shall be based on the last reported sale prices on the over-the-
counter market (unless the Trustee deems such prices inappropriate as a
basis for valuations) or, if no such sale prices are available, (1) on the
basis of the mean between current bid and offering prices for the
Securities, (2) if bid and offering prices are not available for any
Securities, on the basis of the mean between current bid and offering
prices for comparable securities, (3) by determining the value of the
Securities at the mean between
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<PAGE>
the bid and offering sides of the market by appraisal or (4) by any
combination of the above. If such prices are in a currency other than U.S.
dollars, the evaluation of such Security shall be converted to U.S. dollars
based on current offering side exchange rates, unless the Security is in
the form of an American Depositary Share or Receipt, in which case the
Evaluations shall be based upon the U.S. dollar prices in the market for
American Depositary Shares or Receipts (unless the Evaluator deems such
prices inappropriate as a basis for valuation); provided, however, that
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after the initial offering period, and both during and after the initial
offering period for purposes of the Trust Fund Evaluation required by
Section 5.01(a) in determining Unit Value and Redemption Price, evaluations
shall be based upon the bid side value of the relevant currency exchange
rate expressed in U.S. dollars. 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."
(r) Section 5.01(a) shall be amended to read as follows:
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<PAGE>
"(a) As of the Evaluation Time (x) on each December 31 and June 30
(or the last Business Day prior thereto) commencing with the first such day
which is more than six months after the date of the Reference Trust
Indenture, (y) on any business day as of the Evaluation Time next following
the tender of any Unit for redemption, and (z) on any other Business Day
desired by it or requested by the Sponsor, the Trustee shall:
"(1) Add
"(A) cash on hand in the Trust Fund, other than cash held
specially for the purchase of Contract Securities,
"(B) the aggregate value of each issue of Securities other
than Contract Securities, and
"(C) any interest and dividends receivable on stocks
trading ex dividend, and
"(D) 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'.
Amounts receivable by the Trust in a foreign currency shall be reported to
the Evaluator who shall convert the same to U.S. dollars based on current
exchange rates, in the same manner as provided in Section 4.01 for the
conversion of the valuation of foreign Securities, and the Evaluator shall
report such conversion with each evaluation made pursuant to Section 4.01."
(s) Section 5.02 shall be amended in its entirety to read as follows:
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<PAGE>
"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, Presidents Day,
Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day or Christmas; provided that any tender received after the
--------
Evaluation Time or received on a day which is not a Tender Day shall be
deemed to be made as of the next succeeding Tender Day. Any Unit tendered
by a Holder or his duly authorized attorney for redemption at the Trustee's
Office (effected by tender of such documents as the Trustee shall
reasonably require and, in the case of certificated Units, by the related
Certificate) shall be redeemed and canceled by the Trustee on the third
Business Day following the Tender Day (the "Redemption Date").
"(b) Subject to deduction of any tax or other governmental charges due
thereon, redemption is to be made by payment of cash equal to the Unit
Value as of the Evaluation Time next following the tender plus any Accrued
Income per Unit from, and including, the day next following such Evaluation
Time to, but not including, the day of payment to the redeeming Holder,
multiplied by the number of Units being redeemed (the "Redemption Price").
The portion of the Redemption Price representing the pro rata share of the
cash on hand in the Income Account and such Accrued Income shall be
withdrawn from the Income Account to the extent funds are available for
such purpose. The balance of the Redemption Price, including Accrued
Income to the extent unavailable in the Income Account, shall be withdrawn
from the Capital Account to the extent that funds are available for such
purpose; if the available balance in the Capital Account shall be
insufficient, the Trustee shall sell Securities from among those designated
for such purpose by the Sponsor on the current list as provided in
subsection (d) below, in such amounts as shall be necessary for the
purposes of such redemption; provided, however, that no amount in the
-------- -------
Capital Account may be used for any redemption unless the Sponsor so
directs in writing. Instead, Units shall be redeemed by the Trustee's
segregating on the books of the Trust those Securities selected from among
those designated on such current list by the Sponsor for the account of the
Holder (to the extent the value thereof is equal to the Redemption Price
(less any cash distributed from the Income and Capital Accounts as directed
by the Sponsor)). The Trustee shall sell the Securities, any portion of
which have been segregated as provided below, or collect the redemption
proceeds thereof and distribute such sale or redemption proceeds (1) to the
Holder, to the extent described in the immediately preceding sentence, and
(2) to the Capital Account, to the extent of any balance of the sale or
redemption proceeds; provided that if the Sponsor contemplates any further
--------
deposit of Additional Securities
-15-
<PAGE>
into the Trust in accordance with Section 3.06, the Securities to be
segregated shall be selected by the Sponsor so as to maintain, to the
extent practicable, the proportionate relationship among the number of
shares of each Security then existing. In the event that funds are
withdrawn from the Capital Account or Securities are sold for payment of
any portion of the Redemption Price representing Accrued Income, the
Capital Account shall be reimbursed when sufficient funds are available in
the Income Account. As used in this Section 5.02, "Accrued Income" shall
mean net accrued but unpaid interest on Securities or interest earned on
Funds deposited for purchase of Securities as provided in Section 3.06(i)
and with respect to Common Stocks and Preferred Stocks, net dividends
declared but unpaid but, except as otherwise instructed by the Sponsor,
only for the period commencing three Business Days prior to the record date
therefor and ending on the date received by the Trustee.
"(c) If the Prospectus for the Trust provides for in-kind redemption,
a Holder who satisfies any requirements specified in such Prospectus for
in-kind redemption may, in lieu of redeeming Units in the manner provided
in subsection (b) above, redeem Units and request that a distribution in
kind be made by the Trustee to the Distribution Agent of (1) Securities
(the "Securities Distribution") equal to the fractional undivided interest
represented by each Unit in all Securities in the Trust to the extent of
the Unit Value of the Units redeemed plus (2) an amount in cash (the "Cash
Distribution") equal to the Unit Value less the value of the Securities
Distribution, determined as of the Evaluation Time next following the
tender, multiplied by the number of Units being redeemed (such Securities
Distribution and Cash Distribution in the aggregate being referred to
herein as the "Redemption Distribution"). In making a Cash 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
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<PAGE>
distribute the cash proceeds, net of transaction costs, if any) as soon as
practical, as directed by such tendering Holder upon payment of such
reasonable fees set by the Trustee or the Distribution Agent to cover the
cost of delivery, including costs for shipping, handling and insurance.
"Notwithstanding anything herein to the contrary, in the event that
any such tender of Units pursuant to this Section 5.02(c) would result in
the disposition, by the Trustee or the Distribution Agent, of less than a
whole 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
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<PAGE>
certificates of participation in such trust and shall then sell such
certificates of participation in the manner directed by the Sponsor. The
Trustee shall be entitled to receive such written notice and may act in
reliance thereon. In the event that the moneys received upon the sale of
such certificates exceed 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 Sponsor of such tender. The Sponsor shall have the right to
purchase such Unit by notifying the Trustee of its election to make such
purchase as soon as practicable thereafter but in no event subsequent to
(1) the close of business on the second Business Day after the day on which
such Unit was tendered for redemption or (2) in the case of a tender for
redemption by check, the Redemption Date. Such purchase shall be made by
payment for such Unit by the Sponsor (1) to the Trustee on behalf of the
Holder in the case of a tender for redemption other than by check, and (2)
to the Trustee in
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<PAGE>
the case of a tender for redemption by check, in either case not later than
the close of business on the Redemption Date of an amount not less than the
Redemption Price which would otherwise be payable by the Trustee to such
Holder. So long as the Sponsor is maintaining a bid in the secondary
market at no less than the Redemption Price, the Sponsor will repurchase
any Unit so tendered to the Trustee for redemption. Any Unit purchased by
the Sponsor from the Trustee may at the option of the Sponsor be tendered
to the Trustee for redemption in the manner provided in subsection (a) of
this Section 5.02. The Trustee is hereby irrevocably authorized in its
discretion, but without obligation, in the event that the Sponsor does not
elect to purchase any Unit tendered to the Trustee for redemption, or in
the event that a Unit is being tendered by the Sponsor for redemption, in
lieu of redeeming such Unit, to sell such Unit in the over-the-counter
market for the account of the tendering Holder at a price which will return
to the Holder an amount in cash, net after deducting brokerage commissions,
transfer taxes and other charges, equal to or in excess of the Redemption
Price which such Holder would otherwise be entitled to receive on
redemption pursuant to this Section 5.02. The Trustee shall pay to the
Holder the net proceeds of any such sale no later than the day the Holder
would otherwise be entitled to receive payment of the Redemption Price
hereunder.
"(h) Neither the Sponsor, the Trustee nor any Distribution Agent shall
be liable or responsible in any way for depreciation or loss incurred by
reason of any sale of Securities made pursuant to this Section 5.02."
(t) Section 5.03 and all references thereto are deleted.
(u) 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:
Paragraph (e) shall be amended in its entirety to read as follows:
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<PAGE>
"(e) (i) Subject to the provisions of subparagraphs (II) and (III) of
this paragraph, the Trustee may employ agents, sub-custodians, attorneys,
accountants and auditors and shall not be answerable for the default or
misconduct of any such agents, sub-custodians, attorneys, accountants or
auditors if such agents, sub-custodians, attorneys, accountants or auditors
shall have been selected with reasonable care. The Trustee shall be fully
protected in respect of any action under this Indenture taken or suffered
in good faith by the Trustee in accordance with the opinion of counsel,
which may be counsel to the Sponsor acceptable to the Trustee, provided,
however, that this disclaimer of liability shall not (i) excuse the Trustee
from the responsibilities specified in subparagraph II below or (ii) limit
the obligation of the Trustee to indemnify the Trust under subparagraph III
below. The fees and expenses charged by such agents, sub-custodians,
attorneys, accountants or auditors shall constitute an expense of the Trust
reimbursable from the Income and Capital Accounts of the affected Trust as
set forth in Section 8.05 hereof.
(ii) The Trustee may place and maintain in the care of an eligible
foreign custodian (which is employed by the Trustee as a sub-custodian as
contemplated by subparagraph (I) of this paragraph (e) and which may be an
affiliate or subsidiary of the Trustee or any other entity in which the
Trustee may have an ownership interest) the Trust's foreign securities,
cash and cash equivalents in amounts reasonably necessary to effect the
Trust's foreign securities transactions, provided that the Trustee hereby
agrees to perform all the duties assigned by rule 17f-5 as now in effect or
as it may be amended in the future, to the boards of management investment
companies. The Trustee's duties under the preceding sentence will not be
delegated.
As used in this subparagraph (II),
(1) "foreign securities" include: securities issued and sold
primarily outside the United States by a foreign government, a national of
any foreign country or a corporation or other organization incorporated or
organized under the laws of any foreign country and securities issued or
guaranteed by the government of the United States or by any state or any
political subdivision thereof or by any agency thereof or by any entity
organized under the laws of the United States or of any state thereof which
have been issued and sold primarily outside the United States.
(2) "eligible foreign custodian" means
(a) The following securities depositories and clearing agencies
which operate transnational systems for the central handling of securities
or equivalent book
-20-
<PAGE>
entries which, by appropriate exemptive order issued by the Securities and
Exchange Commission, have been qualified as eligible foreign custodians for
the Trust but only for so long as such exemptive order continues in effect:
Morgan Guaranty Trust Company of New York, Brussels, Belgium, in its
capacity as operator of the Euroclear System ("Euroclear"), and Cedel Bank,
S.A. ("Cedel").
(b) Any other entity that shall have been qualified as an
eligible foreign custodian for the foreign securities of the Trust by the
Securities and Exchange Commission by exemptive order, rule or other
appropriate action, commencing on such date as it shall have been so
qualified but only for so long as such exemptive order, rule or other
appropriate action continues in effect.
(III) The Trustee will indemnify and hold the Trust harmless from and
against any loss occurring as a result of an eligible foreign custodian's
willful misfeasance, reckless disregard, bad faith, or gross negligence in
performing custodian duties."
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."
(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."
-21-
<PAGE>
(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. Subject to reimbursement as
----------------------------
hereinafter provided, the cost of organizing the Trust and sale of the
Trust Units shall be borne by the Depositor, provided, however, that the
-------- -------
liability on the part of the Depositor under this section shall not include
any fees or other expenses incurred in connection with the administration
of the Trust subsequent to the deposit referred to in Section 2.01. Upon
notification from the Depositor that the primary offering period is
concluded, the Trustee shall withdraw from the Account or Accounts
specified in the Prospectus or, if no Account is therein specified, from
the Principal Account, and pay to the Depositor the Depositor's
reimbursable expenses of organizing the Trust and sale of the Trust Units
in an amount certified to the Trustee by the Depositor. If the balance of
the Principal Account is insufficient to make such withdrawal, the Trustee
shall, as directed by the Depositor, sell Securities identified by the
Depositor, or distribute to the Depositor Securities having a value, as
determined under Section 4.01 as of the date of distribution, sufficient
for such reimbursement. The reimbursement provided for in this section
shall be for the account of the Unitholders of record at the conclusion of
the primary offering period and shall not be reflected in the computation
of Unit Value prior thereto. As used herein, the Depositor's reimbursable
expenses of organizing the Trust and sale of the Trust Units shall include
the cost of the initial preparation and typesetting of the registration
statement, prospectuses (including preliminary prospectuses), the
indenture, and other documents relating to the Trust, SEC and state blue
sky registration fees and
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<PAGE>
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. Any cash which the Depositor has identified as
to be used for reimbursement of expenses pursuant to this Section shall be
reserved by the Trustee for such purpose and shall not be subject to
distribution or, unless the Depositor otherwise directs, used for payment
of redemptions in excess of the per-Unit amount allocable to Units tendered
for redemption."
This Indenture shall be deemed effective when executed and delivered by the
Sponsor and the Trustee.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture to
be duly executed
SMITH BARNEY INC.
Sponsor
By: /s/ Kevin E. Kopczynski
-------------------------
First Vice President
<PAGE>
THE CHASE MANHATTAN BANK, TRUSTEE
By: /s/ Robert Ionesco
----------------------------
Vice President
(SEAL)
ATTEST:
By: /s/ Rachelle Cohen
----------------------------
<PAGE>
Exhibit 3.1
September 15, 1998
Salomon Smith Barney Inc.
Unit Trust Department
388 Greenwich Street, 23rd Floor
New York, New York 10013
Re: Equity Focus Trusts-European Monetary Union Portfolio
-----------------------------------------------------
Dear Sirs:
We have acted as special counsel for Salomon Smith Barney Inc. as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Equity Focus
Trusts-European Monetary Union Portfolio (the "Trust") in connection with the
deposit of securities (the "Securities") therein pursuant to the Trust Agreement
referred to below, by which the Trust was created and under which the units of
fractional undivided interest (the "Units") have been issued. Pursuant to the
Trust Agreement the Depositor has transferred to the Trust certain securities
and contracts to purchase certain securities together with irrevocable letters
of credit to be held by the Trustee upon the terms and conditions set forth in
the Trust Agreement. (All securities to be acquired by the Trust are
collectively referred to as the "Securities".)
In connection with our representation, we have examined the originals
or certified copies of the following documents relating to the creation of the
Trust, the deposit of the Securities and the issuance and sale of the Units:
(a) the Standard Terms and Condition of Trust dated July 2, 1985, as amended as
of June 27, 1994, and the Reference Trust Indenture of even date herewith
relating to the Trust (collectively, the "Trust Agreement") between the
Depositor and The Chase Manhattan Bank as Trustee; (b) the Closing Memorandum
relating to the deposit of the Securities in the Trust; (c) the Notification of
Registration on Form N-8A and the Registration Statement on Form N-8B-2, as
amended, relating to the Trust, as filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Investment Company Act of 1940
(the
<PAGE>
Smith Barney Inc. 2
September 15, 1998
"1940 Act"); (d) the Registration Statement on Form S-6 (Registration No. 333-
60035) filed with the Commission pursuant to the Securities Act of 1933 (the
"1933 Act"), and Amendment No. 1 thereto (said Registration Statement, as
amended by said Amendment No. 1 being herein called the "Registration
Statement"); (e) the proposed form of final prospectus (the "Prospectus")
relating to the Units, which is expected to be filed with the Commission on or
about September 16, 1998; (f) resolutions of the Executive Committees of the
Depositor authorizing the execution and delivery by the Depositor of the Trust
Agreement and the consummation of the transactions contemplated thereby; (g) the
Certificates of Incorporation and By-laws of the Depositor, each certified to by
an authorized officer of the Depositor as of a recent date; (h) a certificate of
an authorized officer of the Depositor with respect to certain factual matters
contained therein ("Officers Certificate"); and (i) certificates or telegrams of
public officials as to matters set forth upon therein.
We have assumed the genuineness of all agreements, instruments and
documents submitted to us as originals and the conformity to originals of all
copies thereof submitted to us. We have also assumed the genuineness of all
signatures and the legal capacity of all persons executing agreements,
instruments and documents examined or relied upon by us.
Where matters are stated to be "to the best of our knowledge" or
"known to us," our knowledge is limited to the actual knowledge of those
attorneys in our office who have performed services for the Trust, their review
of documents provided to us by the Depositor in connection with this engagement
and inquiries of officers of the Depositor, the results of which are reflected
in the Officers Certificate. We have not independently verified the accuracy of
the matters set forth in the written statements or certificates upon which we
have relied. We have not reviewed the financial statements, compilation of the
Securities held by the Trust, or other financial or statistical data contained
in the Registration Statement and the Prospectus, as to which we understand you
have been furnished with the reports of the accountants appearing in the
Registration Statement and the Prospectus. In addition, we have made no
specific inquiry as to whether any stop order or investigatory proceedings have
been commenced with respect to the Registration Statement or the Depositor nor
have we reviewed court or governmental agency dockets.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by
<PAGE>
Smith Barney Inc.
September 15, 1998 3
bankruptcy, reorganization, moratorium, insolvency and other laws of general
application relating to or affecting the enforceability of creditors' rights,
and (ii) to limitations under equitable principles governing the availability of
equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the
State of New York and we do not hold ourselves out as experts in or express any
opinion as to the laws of other states or jurisdictions except as to matters of
Federal and Delaware corporate law. No opinion is expressed as to the effect
that the law of any other jurisdiction might have upon the subject matter of the
opinions expressed herein under applicable conflicts of law principles, rules or
regulations or otherwise.
Based on and subject to the foregoing, we are of the opinion that:
(1) The Trust Agreement has been duly authorized and executed and
delivered by an authorized officer of the Depositor and is valid and binding
obligations of the Depositor in accordance with its terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by the Depositor and such Certificates when
executed by the Depositor and the Trustee in accordance with the provisions of
the Certificates and the Trust Agreement and issued for the consideration
contemplated therein, will constitute fractional undivided interests in the
Trust, and will be entitled to the benefits of the Trust Agreement. Upon
payment of the consideration for the Units as provided in the Trust Agreement
and the Registration Statement, the Units will be fully paid and non-assessable
by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Taxes" and "Legal Opinion". This
opinion is intended solely for the benefit of the addressee in connection with
the issuance of the Units of the Trust and may not be relied upon in any other
manner or by any other person without our express written consent.
Very truly yours,
Battle Fowler LLP
<PAGE>
EXHIBIT 5.1
CONSENT OF INDEPENDENT AUDITORS
The Sponsor, Trustee and Unit Holders of
Equity Focus Trusts - European Monetary Union Portfolio
We consent to the use of our report dated September 15, 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
September 15, 1998
